UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
Of the Securities Exchange Act of 1934, as amended
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[X] Confidential, for use of the (S) 240.14a-11(c) or (S) 240.14a-12
Commission only (as permitted
by Rule 14A-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
HOME PORT BANCORP, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant):
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(1)(1) and 0-11.
(1) Title of each class of securities to which transaction applied:
Common Stock, par value 0.01 per share plus outstanding options.
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(2) Aggregate number of securities to which transaction applies:
1,841,890 shares of Common Stock plus outstanding options.
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing is
calculated and state how it was determined):
$68,465,710, which includes consideration to be paid to outstanding option
holders, based upon the stated consideration in the Agreement and Plan of Merger
dated July 20, 2000.
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(4) Proposed maximum aggregate value of transaction: .
(see line 3 above)
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(5) Total fee paid:
$13,693.14 per Exchange Act Rule 0-11(c)(2).
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[_] Fee paid previously with preliminary materials.
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[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HOME PORT BANCORP, INC.
104 Pleasant Street
Nantucket, Massachusetts 02554
September __, 2000
Dear Shareholder:
You are cordially invited to attend the special meeting of shareholders of Home
Port Bancorp, Inc., a Delaware corporation and the holding company for Nantucket
Bank, to be held at ____________________Nantucket, Massachusetts at 10:00 a.m.
(local time) on October ___, 2000.
The attached Notice of Special Meeting of Shareholders and proxy statement
describe the formal business to be transacted at the special meeting. The
purpose of the special meeting is to consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Merger by and between Seacoast
Financial Services Corporation ("Seacoast") and Home Port Bancorp, Inc. ("Home
Port") dated as of July 20, 2000, which provides that Home Port will be acquired
by and merged with Seacoast, with Seacoast continuing as the surviving
corporation. In the merger, each share of Home Port's common stock outstanding
at the time of the merger would be converted into the right to receive an amount
of cash equal to $37.00. The accompanying proxy statement more fully describes
the proposed merger, and contains business, financial and other information
regarding Home Port.
Consummation of the merger is subject to certain conditions, including the
approval of all applicable regulatory authorities and Home Port shareholders.
The Board of Directors believes that the proposed merger is in the best
interests of Home Port and its shareholders, and has unanimously approved the
merger agreement and the merger. The Board of Directors unanimously recommends
that you vote "FOR" approval and adoption of the merger agreement.
You are urged to carefully read the accompanying proxy statement, which provides
important information regarding the merger and related matters.
Your vote is important, regardless of the number of shares that you own. In
order for the merger to be consummated, the merger agreement must be approved by
the holders of a majority of the outstanding shares of common stock entitled to
vote. Consequently, a failure to vote, a vote to abstain or a failure to
instruct your broker or bank how to vote will have the same effect as a vote
against the merger agreement. On behalf of the Board of Directors, I urge you to
sign, date and return the enclosed proxy card in the enclosed postage-paid
envelope as soon as possible, even if you currently plan to attend the special
meeting. This will not prevent you from voting in person, but will assure that
your vote is counted if you are not able to attend the special meting. Executed
proxies with no instructions indicated on such proxies will be voted "FOR"
approval and adoption of the merger agreement.
We look forward to seeing you at this important special meeting. If you have any
questions regarding the special meeting or the proposed merger, you are
encouraged to call William P. Hourihan at (508) 228-0580.
Karl L. Meyer
Chairman, President and Chief Executive Officer
<PAGE>
HOME PORT BANCORP, INC.
104 Pleasant Street
Nantucket, Massachusetts 02554
(508) 228-0580
NOTICE OF SPECIAL METING OF SHAREHOLDERS
To Be Held October ___, 2000
A special meeting of the shareholders of Home Port Bancorp, Inc. (the "Company")
will be held at _______________ Nantucket, Massachusetts at 10 a.m. (local time)
for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger dated as of July 20, 2000 by and between Seacoast Financial
Services Corporation and Home Port Bancorp, Inc. pursuant to which Home Port
Bancorp will be acquired by and merged with Seacoast and the shareholders of
Home Port Bancorp will receive cash of $37.00 per share in exchange for their
shares of common stock in Home Port Bancorp.
2. To transact such other business as may properly come before the special
meeting or any adjournment or postponement hereof.
The Board of Directors has fixed August 25, 2000, as the record date for the
determination of shareholders entitled to vote at the special meeting. Only
shareholders of record at the close of business on such date are entitled to
notice of and to vote at the special meeting and any adjournment or postponement
of the special meeting.
You are requested to read the proxy statement and voting instructions on the
proxy card, and then vote by promptly marking, signing, dating and returning the
accompanying proxy card in the enclosed, self-addressed, stamped envelope so
that the necessary quorum may be represented at the special meeting.
The Board of Directors of Home Port unanimously recommends that shareholders
vote "FOR" approval of the merger agreement.
By Order of the Board of Directors,
Robert J. McKay, Secretary
Nantucket, Massachusetts
September ___, 2000
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
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THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
HOME PORT BANCORP, INC.
104 Pleasant Street
Nantucket, Massachusetts 02554
(508) 228-0580
PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS
To Be Held October ___, 2000
This proxy statement and the accompanying proxy are solicited by the Board of
Directors of Home Port from holders of outstanding shares of its common stock,
par value $0.01 per share. The proxies will be voted at Home Port's special
meeting of shareholders to be held on October ___, 2000, at the time and place
and for the purpose set forth in the accompanying Notice of Special Meeting of
Shareholders and at any adjournments or postponements of the special meeting.
This proxy statement and the accompanying proxy are first being mailed to
shareholders on or about September ___, 2000.
At the special meeting, shareholders will consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Merger by and between Home Port and
Seacoast, dated as of July 20, 2000, attached hereto as Annex A (the "merger
agreement"), pursuant to which Home Port will be acquired by and merged with
Seacoast. As a result of the merger, Seacoast will continue as the surviving
corporation. In the merger, each share of Home Port's common stock outstanding
at the time of the merger would be converted into the right to receive an amount
of cash equal to $37.00. For a discussion of the consideration to be received by
Home Port's shareholders in the merger, see "The Proposed Merger--Purchase
Price."
Consummation of the merger is conditioned upon, among other things, approval and
adoption of the merger agreement by the requisite vote of Home Port's
shareholders and the receipt of all requisite regulatory approvals and consents.
For further information concerning the terms and conditions of the merger, see
"The Merger Agreement."
The Board of Directors knows of no additional matters that will be presented for
consideration at the special meeting. No persons have been authorized to give
any information or to make any representations other than those contained in
this proxy statement in connection with the solicitation of proxies made hereby,
and, if given or made, such information or representations must not be relied
upon as having been authorized by Home Port or any other person.
The delivery of this Proxy Statement shall not, under any circumstances, create
any implication that there has been no change in the information set forth
herein or in the affairs of Home Port since the date hereof.
<PAGE>
TABLE OF CONTENTS
Page
FORWARD-LOOKING STATEMENTS -- CAUTIONARY STATEMENTS.........................1
SUMMARY.....................................................................6
Parties to the Merger..............................................6
The Meeting........................................................6
THE MEETING................................................................14
Time, Place and Date of the Meeting...............................14
Purpose of the Meeting............................................14
Record Date; Voting Rights; Proxies...............................14
THE MERGER.................................................................15
Background of the Merger..........................................15
Reasons for the Merger; Recommendation of the Board...............19
Opinion of Home Port's Financial Advisor..........................21
Voting Agreement..................................................27
Accounting Treatment of the Merger................................27
No Appraisal and Dissenters' Rights...............................28
Other Interests of Home Port and Nantucket Bank Directors
and Officers in the Merger........................................28
Karl L. Meyer Consulting Agreements...............................28
Employment Agreements.............................................29
Option Vesting....................................................30
Counsel for Home Port.............................................30
Board of Directors and Management of Nantucket Bank
Following the Merger..............................................30
Directors and Officers Indemnification and Insurance..............30
Stock Option Agreement............................................30
THE MERGER AGREEMENT.......................................................34
General 34
Merger Consideration..............................................34
Exchange of Stock Certificates....................................34
Representations and Warranties....................................35
Covenants and Agreements..........................................36
Conditions to Complete the Merger.................................39
Termination; Expenses.............................................40
Amendment; Waiver.................................................43
Survival of Provisions............................................43
Status of Regulatory Approvals and Other Information..............44
FEDERAL INCOME TAX CONSEQUENCES............................................44
TAX CONSEQUENCES OF THE MERGER.............................................45
BACKUP WITHHOLDING.........................................................45
OTHER TAX CONSEQUENCES.....................................................45
Risk that the Merger will not be Consummated......................45
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF............................46
DESCRIPTION OF BUSINESS....................................................49
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General...........................................................49
Lending Activities................................................50
Investment Activities.............................................53
Sources of Funds..................................................53
Subsidiaries of the Bank..........................................54
Supervision, Regulation and Operating Powers......................54
Competition.......................................................56
Employees.........................................................57
MARKET PRICES AND DIVIDENDS................................................57
INFORMATION REGARDING SEACOAST.............................................58
AVAILABLE INFORMATION......................................................58
OTHER BUSINESS.............................................................58
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..............................F-1
ANNEX A Agreement and Plan of Merger...................................A-1
ANNEX B Opinion of Sandler, O'Neill & Partners, L.P....................B-1
ANNEX C Stock Option Agreement.........................................C-1
ANNEX D Consulting Agreement...........................................D-1
ANNEX E Form of Employment Agreements..................................E-1
<PAGE>
FORWARD-LOOKING STATEMENTS -- CAUTIONARY STATEMENTS
This proxy statement contains certain forward-looking statements and information
relating to Home Port and its subsidiary that are based on the beliefs of Home
Port's management as well as assumptions made by and information currently
available to Home Port's management. When used in this proxy statement, the
words "anticipate," "believe," "estimate," "expect" and "intend" and words or
phrases of similar import, as they relate to Home Port or its subsidiary or Home
Port management, are intended to identify forward-looking statements. Such
statements reflect the current view of Home Port with respect to future events
and are subject to certain risks, uncertainties and assumptions related to
certain factors including, without limitation, competitive factors, general
economic conditions, customer relations, the interest rate environment,
governmental regulation and supervision, nonperforming asset levels, loan
concentrations, changes in industry practices, one time events and other factors
described herein. Based upon changing conditions, should any one or more of
these risks or uncertainties materialize, or should any underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended.
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to address briefly some
commonly asked questions regarding the merger. These questions and answers may
not address all questions that may be important to you as a Home Port
shareholder. Please refer to the more detailed information contained elsewhere
in this proxy statement and the appendices to this proxy statement.
Q. When and where is the special meeting?
A. The special meeting will take place on ________,
October ___, 2000, at 10:00 a.m., local time, at ___________________,
Nantucket, Massachusetts.
Q. Who is soliciting the proxy?
A. The Board of Directors of Home Port.
Q. What am I being asked to vote upon?
A. Your Board of Directors is asking you to vote to approve a merger
agreement which provides that Home Port will be acquired by and merged
with Seacoast, with Seacoast being the surviving corporation in the
merger. The merger agreement is attached to this proxy statement as
Annex A. We encourage you to read the merger agreement as it is the
legal document that governs the merger.
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Q. If the merger is completed, what will I receive for my Home Port common
stock?
A. If the merger is completed, you will receive $37.00 in cash for each
share of our common stock you own.
Q. Will I owe taxes as a result of the merger?
A. The merger will be a taxable transaction for all holders of our common
stock. As a result, the cash you receive in the merger for your shares
of the common stock will be subject to United States income tax and
also may be taxed under applicable state, local and other tax laws. In
general, you will recognize gain or loss equal to the difference
between (1) the amount of cash you receive and (2) the tax basis of
your shares of Home Port common stock.
Q. Why is your Board of Directors recommending the merger?
A. We believe the merger represents a unique opportunity for our
shareholders to realize a fair price for their shares; stockholders of
Home Port will receive approximately a 46% premium over the $25.3125
closing price on July 20, 2000, the last day of trading prior to our
announcement that we had entered into the merger agreement. We also
believe that a merger with Seacoast is the best opportunity for the
interests of the Nantucket Bank constituencies to be served. Our Board
of Directors believes that the merger is fair to, and in the best
interests of, Home Port and its shareholders. Our Board of Directors
has received a written fairness opinion from Sandler O'Neill &
Partners, L.P. (the "Sandler Opinion") that the $37.00 per share in
cash to be received by our shareholders pursuant to the merger
agreement is fair from a financial point of view to Home Port and our
shareholders.
Q. Does the Board of Directors or do officers of Home Port have any
special interest in the outcome of the vote?
A. As described in the proxy statement, the members of our Board of
Directors and officers of Home Port have certain interests in the
merger that are different from or in addition to your interests, which
may create possible conflicts of interest.
Q. What stockholder vote is required to adopt the merger agreement and the
merger?
A. Under Delaware law, a majority of the outstanding shares of common
stock entitled to vote must adopt the merger agreement and the merger.
Q. What happens if I do not instruct a broker holding my shares as to how
to vote them or I abstain from voting?
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A. The proposal to adopt the merger agreement is considered a
"non-discretionary" item. As a result, brokerage firms who own shares
in "street name" for customers who are the beneficial owners of those
shares may not vote in their discretion on behalf of their clients if
their clients have not furnished voting instructions. Shareholders who
abstain from voting, but who are present in person or have executed a
proxy, and broker "non-votes" will be considered in determining the
presence of a quorum at the special meeting but will not be counted as
votes cast for the merger agreement. Because the proposal to adopt the
merger agreement is required to be approved by the holders of a
majority of the outstanding shares of Home Port common stock,
abstentions and broker "non-votes" will have the same effect as a vote
against this proposal at the special meeting. Therefore, you should
instruct your broker on how to vote your shares, using the instructions
which will be provided to you by your broker prior to the special
meeting.
Q. Can I vote shares at the meeting that are held by a broker as nominee?
A. If you would like to attend the special meeting and your shares are
held by a broker, bank or other nominee, you must bring to the special
meeting a recent brokerage statement or letter from the nominee
confirming your beneficial ownership of the shares of common stock. You
must also bring a form of personal identification. In order to vote
your shares at the special meeting you must obtain from each nominee a
proxy issued in your name.
Q. Who is entitled to vote at the special meeting?
A. Holders of record of our common stock as of the close of business on
August 25, 2000, are entitled to vote at the special meeting. Each
shareholder has one vote for each share of our common stock owned.
Q. Do I need to attend the special meeting in person?
A. No. It is not necessary for you to attend the special meeting in order
to vote your shares, although you are welcome to attend.
Q. Is the merger subject to regulatory approval?
A. Yes. The merger is subject to the approval by the Board of Governors of
the Federal Reserve System ("Federal Reserve") and the Massachusetts
Board of Bank Incorporation. There can be no assurance that such
regulatory approvals will be obtained, and, if obtained, there can be
no assurance as to the date of any such approvals.
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Q. When is the merger expected to be completed?
A. We are working toward completing the merger as quickly as possible. The
merger cannot be completed until a number of conditions are satisfied.
If adopted by the shareholders, we currently expect the merger to be
completed on or before December 31, 2000.
Q. What do I need to do now?
A. After you have carefully read this proxy statement, please complete,
sign and mail your proxy card in the enclosed return envelope as soon
as possible. That way, your shares can be represented at the special
meeting. If your shares are held by a broker as nominee, you should
receive a proxy card from your broker. Home Port shareholders must
return their proxy cards before the special meeting or attend the
special meeting in person in order for their votes to be counted at the
special meeting. Your proxy materials include detailed information on
how to vote.
Q. Can I change my vote after I have mailed my proxy card?
A. Yes. You can change your vote at any time before your proxy is voted at
the special meeting. You may revoke your proxy by notifying our
Secretary in writing or by submitting a new proxy, in each case, dated
after the date of the proxy being revoked. In addition, your proxy may
be revoked by attending the special meeting and voting in person.
However, simply attending the special meeting will not revoke your
proxy. If you have instructed a broker to vote your shares, you must
follow the instructions received from your broker to change your vote.
Q. Should I send in my Home Port stock certificates now?
A. No. Seacoast will send you written instructions for exchanging your
stock certificates. You must return your stock certificates as
described in the instructions. You will receive your cash payment as
soon as practicable upon receipt of your stock certificates, together
with the documents requested in the instructions, after consummation of
the merger.
Q. Where can I find more information about Home Port and Seacoast?
A. Both companies file periodic reports and other information with the
Securities and Exchange Commission. You may read and copy this
information at the Commission's public reference facilities at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the Commission at 1-800-SEC-0330 for information about
these facilities. This information is also available at the Internet
site maintained by the Commission at http://www.sec.gov and at the
offices of The Nasdaq Stock Market, Inc., 1735 K Street, Washington,
D.C. 20006.
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Q. Who can help answer my questions?
A. If you have questions about the merger after reading this proxy
statement, you should contact William P. Hourihan at (508) 228-0580.
Q. Will any other matters be voted on at the special meeting?
A. No other matters are expected to be voted on at the special meeting.
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SUMMARY
The following is a brief summary of the material information relating to the
merger contained elsewhere in this proxy statement. This proxy statement is
qualified in its entirety by the more detailed information contained elsewhere
in this proxy statement and the appendices to this proxy statement. The
"Company," "we" "us" or "our" refers to Home Port Bancorp, Inc. "Seacoast"
refers to Seacoast Financial Services Corporation. Nantucket Bank refers to Home
Port's wholly owned bank subsidiary, Nantucket Bank. Capitalized terms not
otherwise defined below have the meanings ascribed to them elsewhere in this
proxy statement. Shareholders are urged to read this proxy statement and its
appendices in their entirety.
Parties to the Merger
HomePort (page 50) Home Port is a bank holding company incorporated in
Delaware subject to supervision by the Federal Reserve. Home
Port owns all of the common stock of Nantucket Bank, which
operates full-service banking locations on the island of
Nantucket. Home Port's executive and administrative offices
are located at 104 Pleasant Street, Nantucket, Massachusetts
02554, and its telephone number at that location is 508 228
0580.
Seacoast (page 58) Seacoast is a Massachusetts corporation and a bank holding
company subject to supervision by the Federal Reserve.
Seacoast owns all of the outstanding shares of common stock
of Compass Bank for Savings, which operates full-service
banking offices in Southeastern Massachusetts and on
Martha's Vineyard. Seacoast's executive and administrative
offices are located at One Compass Place, New Bedford,
Massachusetts 02740, and its telephone number at that
location is 508-984-6000.
The Meeting
Time, Place and Date of the
Meeting (page 14)
The special meeting will be held at 10:00 a.m., local time,
on October ___, 2000 at ____________Nantucket,
Massachusetts.
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Record Date and
Shareholders Entitled to
Vote (page 15)
You are entitled to vote at the special meeting if you owned
shares of our common stock at the close of business on
August 25, 2000, the record date for the special meeting.
You will have one vote for each share of our common stock
you owned on the record date. There are approximately
1,841,890 shares of Home Port common stock entitled to be
voted held by approximately ______ shareholders of record.
Purpose of the Meeting
(page 15)
You will be asked to consider and vote upon a proposal to
approve the merger agreement and the merger, providing for
the acquisition of Home Port by, and merger into, Seacoast
and the payment to shareholders of Home Port of $37.00 per
share of common stock in Home Port.
Vote Required; Voting
Agreement (page 14 & 28)
Approval of the merger requires the affirmative vote of the
holders of a majority of our outstanding shares of common
stock. Our directors and officers, together with their
respective affiliates, collectively own approximately
365,351 shares of Home Port's common stock, or 19.84% of the
total currently outstanding shares. The directors of Home
Port, owning 338,020 shares or 18.35% of the total currently
outstanding shares, have executed an agreement to vote as a
stockholder FOR the merger and against any alternative
transaction. Failure to vote FOR the merger, either by not
returning the enclosed proxy card or by checking the ABSTAIN
box on the proxy card, will have the same effect as a vote
AGAINST the merger. The completion of the merger depends
upon satisfaction of a number of conditions, including,
among other things:
o approval of the merger agreement by the shareholders of
Home Port holding not less than a majority of the
outstanding shares of common stock;
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o receipt of all applicable regulatory approvals; and
o unless waived by the non-breaching party, that the
representations and warranties of each of Home Port and
Seacoast set forth in the Merger Agreement be true and
correct in all material respects, it being understood
that such representations and warranties shall be deemed
to be true and correct unless the failure of such
representations warranties to be true and correct would
have a material adverse effect on Home Port or Seacoast.
Solicitation of Proxies (page 15)
We will pay all of the costs of soliciting proxies from our
shareholders. In addition to soliciting proxies by mail, our
directors, officers and employees, without receiving
additional compensation, may solicit proxies by personal
interview, mail, telephone and facsimile. Arrangements will
also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation materials
to the beneficial owners of shares held of record by such
persons, and we will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them. Home Port has
engaged Innisfree M&A Incorporated to assist in the
solicitation of proxies at a cost of $6,000 plus the
reimbursement of certain expenses.
Reasons for the Merger (page 18)
In arriving at our determination that the merger is fair to,
and in the best interests of, our shareholders, the Board of
Directors considered a number of factors, including, without
limitation, the following:
o The merger represents an opportunity for our
shareholders to realize a premium over recent market
prices for their shares;
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o In the opinion of our financial advisor, the price per
share of common stock to be received by you is fair from
a financial point of view;
o Our shares are somewhat illiquid and there is no
assurance that our shares will appreciate in the future;
o The terms of the merger respect the interests of the
customers and other constituencies of Nantucket Bank;
and
o We have explored strategic alternatives and believe that
the merger offers a unique opportunity to maximize the
value of our common stock, while respecting the
interests of Home Port's shareholders, employees,
customers, suppliers, and the Nantucket community.
Recommendations of the
Board of Directors (page 18)
Our Board of Directors has determined that the terms of the
merger are fair to, and in the best interest of, our
shareholders, and has unanimously approved the merger
agreement. Our Board of Directors unanimously recommends
that you approve the merger agreement and the merger.
Opinion of Financial Advisor
(page __)
On July 20, 2000, Sandler O'Neill & Partners, L.P.
("Sandler"), our financial advisor, delivered its written
opinion (the "Sandler Opinion") to our Board of Directors
that, as of the date of such Opinion, the consideration to
be received by our shareholders in the merger is fair from a
financial point of view. The full text of the Sandler
Opinion, which has been updated through the date of this
proxy statement and which sets forth the assumptions made,
general procedures followed, matters considered and
limitations on the review undertaken in connection with the
opinion, is attached to this proxy statement as Annex B. You
should read the Sandler Opinion carefully and in its
entirety.
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Interests of Certain Persons
in the Merger (page 29)
Our officers and directors have interests in the merger as
employees and directors that are different from, or in
addition to, your interests as shareholders.
The Merger Agreement
Effective Time of the Merger
(page 3 & 35)
The merger will become effective upon the filing of Articles
of Merger with the Secretary of State of the State of
Delaware and The Commonwealth of Massachusetts. The filing
is expected to occur on or before December 31, 2000 after
approval of the merger agreement by our shareholders at the
special meeting, and satisfaction or waiver of the other
conditions to the merger contained in the merger agreement.
We cannot assure you that all conditions to the merger
contained in the merger agreement will be satisfied or
waived.
Representations and Warranties of
Home Port and Seacoast (page 36)
The merger agreement contains various customary
representations and warranties made by each of the parties
to the merger agreement.
Covenants of Home Port and
Seacoast; Conduct of Business
Prior to the Merger (page 37)
The merger agreement contains various customary covenants
made by Home Port, including a covenant that during the
period from the date of the merger agreement until
consummation of the merger, Home Port will conduct its
business in the usual and ordinary course. The merger
agreement also provides that Home Port will not pay any
dividends in 2000 except for dividends declared and paid in
February and May.
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Conditions to Consummation of
the Merger (page 39)
The completion of the merger depends upon satisfaction of a
number of conditions, including, among other things:
o approval of the merger agreement by the shareholders of
Home Port holding not less than a majority of the
outstanding shares of common stock;
o receipt of all applicable regulatory approvals including
those of the Board of Governors of the Federal Reserve
System and the Massachusetts Board of Bank
Incorporation;
o that unless waived by the non-breaching party, the
representations and warranties of each of Home Port and
Seacoast set forth in the Merger Agreement be true and
correct in all material respects, it being understood
that such representations and warranties shall be deemed
to be true and correct unless the failure of such
representations warranties to be true and correct would
have a material adverse effect on Home Port or Seacoast;
and
o that unless waived, no court or governmental authority
has prohibited the merger.
No Negotiations with Others (page 38)
Subject to certain exceptions, Home Port cannot,
directly or indirectly:
o Encourage, solicit, initiate, entertain, discuss or
negotiate with any corporation, partnership, person or
other entity concerning any merger, tender offer,
takeover offer, sale of substantial assets or similar
transaction; or
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o provide any information to or cooperate with any
corporation, partnership, person or other entity
concerning a merger, tender offer, takeover offer, sale
of substantial assets, sale of shares of capital stock
or similar transaction.
Termination of Merger Agreement;
Termination Fee (page 41)
The merger agreement provides that the merger agreement and
the merger may be terminated by the mutual consent of the
parties, or by either party if not consummated by March 31,
2001 (unless such date is extended by mutual agreement) or
upon the occurrence or non-occurrence of certain events.
Subject to certain qualifications, the parties have agreed
that the defaulting party will pay the other party a
termination fee equal to $3,500,000 if the merger agreement
is terminated in connection with certain events. Such
termination fee would be payable by Home Port if (i) the
merger agreement is terminated prior to shareholder approval
of it, or because the Home Port Board does not publicly
recommend that shareholders approve it, and (ii) Home Port
enters into an acquisition agreement with a third party, or
the Home Port Board recommends or does not oppose an
acquisition agreement with a third party (See "The Merger
Agreement"). Either party would have to pay the termination
fee to the other in the event that the other terminates the
Merger Agreement following a material breach by the
defaulting party of any representation, warranty, covenant
or agreement made by the defaulting party in the merger
agreement, and such breach was caused by the defaulting
party's willful conduct or gross negligence.
Stock Option Granted to
Seacoast (page 31)
As a condition to Seacoast's willingness to enter into the
merger agreement, Home Port granted Seacoast an option to
purchase up to 366,536 shares of Home Port Common Stock at
an exercise price of $37.00 per share, a copy of which is
attached to this proxy statement as Annex C.
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The number of shares for which the option is exercisable
represents approximately 19.9% of Home Port's currently
issued and outstanding common stock. The option is only
exercisable upon the occurrence of certain specified events
that would ordinarily be associated with an acquisition or
potential acquisition of Home Port by a third party.
Certain Federal Income Tax
Consequences (page 45)
As a result of the merger, you will generally recognize a
gain or loss for United States income tax purposes measured
by the difference between the cash received pursuant to the
merger agreement and your adjusted tax basis in the shares
of Home Port's common stock exchanged for such cash. You
should consult with your tax advisor as to the specific tax
consequences of the merger to you, including the
applicability and effect of federal, state, local, foreign
and other tax laws.
Accounting Treatment (page 28)
The merger will be accounted for as a "purchase" in
accordance with generally accepted accounting principles.
Consequently, the aggregate consideration paid by Seacoast
in connection with the merger will be allocated to Home
Port's assets and liabilities based upon their fair values,
with any excess being treated as goodwill.
Recent Prices of Company
Common Stock (page 2)
Home Port's common stock is traded on the Nasdaq National
Market System ("NASDAQ") under the symbol "HPBC." The
closing price per share for the common stock as reported on
the NASDAQ on July 20, 2000, the last full trading day prior
to the public announcement that we executed the merger
agreement with Seacoast, was $25.3125.
Management Ownership (page 47)
As of August 1, 2000, our directors and executive officers
owned, in the aggregate, 365,351 shares of our outstanding
common stock, representing an aggregate of approximately
19.84% of our outstanding shares.
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<PAGE>
THE MEETING
Time, Place and Date of the Meeting
The Special Meeting will be held at 10:00 a.m., local time, on October ___, 2000
at _____________ at Nantucket, Massachusetts.
Purpose of the Meeting
At the special meeting, you will be asked to consider and vote upon a proposal
to approve the merger agreement, the merger and the other transactions
contemplated by the merger agreement. You also may be asked to vote upon such
other matters as may properly come before the special meeting, which may include
a proposal to adjourn the special meeting. Any such adjournment or adjournments
could be used for the purpose of allowing additional time for the management of
Home Port to solicit additional votes to approve the merger agreement.
Record Date; Voting Rights; Proxies
The close of business on August 25, 2000 has been fixed by Home Port as the
record date for the determination of holders of common stock entitled to notice
of and to vote at the special meeting and any adjournment or adjournments. At
the close of business on the record date, there were __________ shares of common
stock outstanding and entitled to vote. You are entitled to vote at the special
meeting if you owned shares of common stock as of the close of business on the
record date. You will have one vote for each share of common stock that you
owned on that date.
The proxy statement is accompanied by a form of proxy. Each proxy returned to
Home Port by a holder of Home Port common stock on the record date will be voted
in accordance with the instructions indicated thereon. If no instructions are
indicated, the proxy will be voted "FOR" approval of the merger agreement.
Proxies marked "FOR" approval of the merger agreement and executed but unmarked
proxies will be voted in the discretion of the persons named in the accompanying
form of proxy as to any proposed adjournment of the special meeting. Proxies
that are voted against approval of the merger agreement will not be voted in
favor of any motion to adjourn the special meeting to solicit more votes in
favor of approval of the merger agreement.
You may change your vote at any time before your proxy is voted at the
shareholders meeting. You can do so in one or more of the following ways:
-- You can send a written notice to William P. Hourihan, a
Senior Vice President of Home Port at the address below
stating that you are revoking your earlier dated proxy.
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<PAGE>
-- You can complete a new proxy card and send it to William
P. Hourihan, a Senior Vice President of Home Port at the
address below in which case the new proxy card will
automatically replace any earlier dated proxy card that
you returned.
-- You can attend the special meeting and vote in person.
You should send your written notice that you are revoking your proxy, request
for a new proxy card or completed new proxy card to Home Port at the following
address:
HomePort Bancorp, Inc. 104 Pleasant Street, Nantucket,
Massachusetts 02554 Attention: William P. Hourihan,
Senior Vice President.
Your attendance at the special meeting will not, in and of
itself, constitute revocation of your proxy.
THE MERGER
Background of the Merger
Members of the Board of Directors of Home Port Bancorp, Inc. (the
"Board") expressed concern at the regularly scheduled 1999 July and October
Board meetings with respect to the low valuation and trading volume of Home
Port's stock, which factors created a lack of liquidity for shareholders in the
public securities marketplace. Members of the Board also discussed the fact that
expansion through acquisitions would be difficult. In November of 1999, Karl L.
Meyer, Home Port's Chairman, President and Chief Executive Officer, ("Mr.
Meyer") telephoned Paul R. Haklisch of Sandler O'Neill & Partners, L.P.
("Sandler O'Neill"), an investment banking firm experienced in advising small
banks, and the two met in person on December 1, 1999. The topic of discussion on
each occasion was the consideration of strategic alternatives and the
possibility of a business combination. Mr. Meyer requested that Sandler O'Neill
make a presentation to the Board regarding such topics.
At the regularly scheduled January 31, 2000 Board meeting, Mr. Haklisch
of Sandler O'Neill made a presentation to the Board during which he described:
(i) the historic and current ranges of trading prices of capital
stock of small to mid-sized publicly held New England banks;
(ii) the effects of lack of liquidity on shareholders of "small cap"
banks (under $500 million of capitalized equity value) including
stock trading prices;
(iii) additional resources that could be available to Nantucket Bank in
the event of a merger with a larger bank;
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<PAGE>
(iv) potential parties that might wish to acquire or merge with Home
Port; and
(v) the potential effects of a merger of Home Port on employees,
customers and other constituencies of Nantucket Bank.
The Board authorized Mr. Meyer to enter into an engagement letter
appointing Sandler O'Neill to act as Home Port's investment advisor to assist
the Board in its determination of whether to enter into a strategic transaction
with another bank. An engagement letter containing confidentiality provisions
was executed on February 11, 2000. Sandler O'Neill was instructed to make
discreet inquiries of parties that appeared to be good candidates to enter into
a transaction with Home Port. Sandler O'Neill was also instructed that under no
circumstances was it to disclose Home Port's possible interest in effecting a
transaction, except on a one-to-one basis to specific banks pre-cleared by Mr.
Meyer.
Sandler O'Neill introduced Mr. Meyer to Kevin Champagne ("Mr.
Champagne"), Chairman of Seacoast Financial Services Corporation ("Seacoast") on
February 8, 2000 to discuss a possible transaction between Home Port and
Seacoast. On February 14, 2000, Home Port and Seacoast entered into a
Confidentiality Agreement, pursuant to which Seacoast was furnished financial
and other information relating to the operations of Home Port and its wholly
owned subsidiary, Nantucket Bank.
Mr. Meyer met with Mr. Champagne again on March 15, 2000. In a
telephone conversation on April 3, 2000, Mr. Champagne indicated to Mr. Meyer
that Seacoast was willing to make an offer including consideration to Home Port
shareholders split equally between stock and cash, and at a price of $36.50 per
share of Home Port stock. Mr. Champagne also indicated that the issuance of
Seacoast shares would require regulatory approval that involved some
uncertainty. Mr. Meyer did not encourage Mr. Champagne to make an offer on such
terms.
At the regularly scheduled Board Meeting on May 12, 2000, Mr. Meyer
informed the Directors of the discussions to date with Seacoast and that he had
not encouraged Seacoast to make an offer containing the terms conveyed by Mr.
Champagne on April 3.
Having received informal encouragement from the Board to continue
discussions with Seacoast, Mr. Meyer met again with Mr. Champagne on May 17,
2000. On June 14, 2000, Mr. Champagne wrote to Mr. Meyer and set forth "a
non-binding expression of interest" with respect to a possible merger of Home
Port into Seacoast, pursuant to which all Home Port shareholders would receive
$37 per share in cash (the "Seacoast Proposal"). The Seacoast Proposal set a
deadline of June 23, 2000 for response. Mr. Meyer called a special meeting of
the Home Port Board for June 20, 2000 for the purpose of discussing and
responding to the Seacoast Proposal. At the June 20, 2000 meeting of the Board,
each director expressed his views with respect to the Seacoast Proposal. The
Board discussed: (i) the effect of a merger with Seacoast on Home Port's
shareholders, employees, customers, suppliers, and the Nantucket community; (ii)
the low trading volume and illiquidity of Home Port stock; (iii) the advantages
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<PAGE>
and disadvantages of a cash-only transaction as compared to a combination of
cash and stock transaction; (iv) Seacoast's proposed requirement that Home Port
omit payment of two quarterly dividends; (v) the effect of the proposed "lockup
and standstill" provisions; (vi) the governing structure under which Nantucket
Bank would continue to operate in the event of a transaction with Seacoast and
(vii) the pricing of the Home Port stock at $37 per share. It was agreed by the
Board that further information should be developed by management and Sandler
O'Neill and reviewed by the Board, which would then reconvene. Mr. Meyer
obtained an extension of the June 23, 2000 deadline set in the Seacoast Proposal
for response to June 27, 2000.
On June 22, 2000 Mr. Meyer transmitted to the Board additional
information for consideration in developing a response to the Seacoast Proposal.
The additional information included (i) an analysis of "comparable Year 2000
transactions" prepared by Sandler O'Neill; (ii) an analysis of prices at which
Home Port stock had traded during the prior five year period as compared to
earnings and book value; (iii) a pro forma analysis of a merger with Seacoast
prepared by Sandler O'Neill and (v) information prepared by management in
connection with an unsolicited prior proposal of merger received from another
bank in October 1999, which had offered a partial cash/partial stock transaction
with an aggregate value less than the Seacoast Proposal.
On June 26, 2000, following deliberations of the Board at a special
meeting, the Board authorized Mr. Meyer to advise Seacoast (i) of Home Port's
interest in proceeding with the Seacoast Proposal, (ii) the necessity of
clarification of certain terms and conditions, including Seacoast's future plans
for operation of Nantucket Bank, and (iii) that the Home Port Executive
Committee, acting with advice of counsel, was prepared to enter into definitive
discussions regarding the merger of Home Port pursuant to the Seacoast Proposal.
The Executive Committee, consisting of Messrs. Meyer, Read and DiGiovanna,
assisted by Home Port's Treasurer, John Sweeney, were instructed to evaluate and
report to the Board terms upon which a merger with Seacoast could be consummated
including: (i) a representation from Seacoast regarding continuation of local
Nantucket Bank management; (ii) appropriate lock-up and liquidated damages
provisions; (iii) other terms affecting the Nantucket community and (iv)
employment agreements with key Nantucket Bank executives.
On July 6, 2000 the Executive Committee and legal counsel for Home
Port, accompanied by the President of Nantucket Bank, William Hourihan, and John
Sweeney, Treasurer of Home Port, as well as representatives of Sandler O'Neill,
met and discussed potential terms of an agreement with Seacoast which would be
acceptable to Home Port. Following that meeting the Home Port representatives
met with representatives of Seacoast and negotiated terms of a merger agreement
between Home Port and Seacoast pursuant to which Seacoast would acquire all of
the issued and outstanding stock of Home Port by effecting a statutory merger of
Home Port into Seacoast (the "merger"). It was determined at the meeting with
Seacoast that the Home Port Executive Committee would recommend a transaction
with Seacoast pursuant to which:
1) Home Port shareholders would receive $37 cash per share;
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<PAGE>
2) Contracts with key employees of Nantucket Bank would be honored;
3) Existing directors of Nantucket Bank would continue for some
period of time after completion of the Merger;
4) Appropriate lock-up and termination fees would be negotiated by
counsel for the parties; and
5) Home Port would agree not to pay any dividends in 2000 (other
than dividends declared and paid in February and May).
Between July 6, 2000 and July 20, 2000, the parties and their
respective financial and legal advisors further discussed and negotiated the
terms and conditions of the merger agreement and other related agreements,
including a stock option agreement with Seacoast, a consulting agreement between
Mr. Meyer and Seacoast and new employment agreements with officers of Nantucket
Bank. During this time period Seacoast conducted and also completed its due
diligence.
On July 20, 2000, the parties resolved all of the material open issues.
A special meeting of the Home Port Board was held on July 20, 2000, to discuss
the merger and merger agreement and related documents which had been delivered
to Board Members. Messrs. Paul Haklisch and Mathew Drukker of Sandler O'Neill
were present. Sandler O'Neill made an oral and visual presentation to the Board,
discussing in detail the past and projected performance of Home Port common
stock, and comparing the pricing of transactions similar to the merger proposed
with Seacoast. After detailed questioning by the Board, Sandler O'Neill
delivered its opinion to the Board that the terms of the merger were fair to
Home Port shareholders from a financial point of view. A full discussion of the
Board members ensued. Legal counsel for Home Port then commented in detail
regarding the proposed terms and conditions of the merger agreement and a time
table for its completion. Legal counsel responded to numerous questions raised
by the Directors concerning a variety of contingencies that could occur should
Home Port enter into the merger agreement and related agreements as proposed.
Mr. Meyer excused himself from the latter part of the meeting and the
Board discussed the consulting agreement proposed by Seacoast between Mr. Meyer
and Seacoast and termination of his existing consulting agreement with Home
Port. The Board determined that the proposed consulting agreement with Seacoast
appears to be a requirement of Seacoast in order to assure a successful
transition of management of Nantucket Bank from Home Port to Seacoast. The Board
also determined that the consideration payable under the proposed consulting
agreement was a matter of arms' length dealings between Mr. Meyer and Seacoast.
Mr. Meyer's existing consulting agreement with Home Port provides that upon
consummation of the merger Mr. Meyer has the right to terminate his consulting
agreement and receive a payment equal to the amount payable for the remainder of
its term. It was determined to approve any termination payments that might be
due to Mr. Meyer under his consulting agreement with Home Port on the proviso
that the total amount to be paid to him would not constitute an "excess
parachute payment" that is non-deductible for federal income tax purposes under
the provisions of Section 280G of the Internal Revenue Code of 1986. Mr. Meyer
then returned to the meeting and agreed that he would waive rights to that
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portion of the payment made in termination of his consulting agreement with Home
Port to the extent required to avoid causing such payment to be classified as a
non-deductible excess parachute payment. The Board then unanimously voted to
approve the merger and merger agreement and related documents by adoption of
appropriate resolutions. Mr. Meyer was authorized to execute the merger
agreement and related documents on behalf of Home Port. Following the close of
trading of NASDAQ on July 20, 2000, authorized officers of Home Port and
Seacoast executed and delivered the merger agreement and the stock option
agreement.
Reasons for the Merger; Recommendation of the Board
It is the strong desire of the Board and management of Home Port that
shareholder values be protected and enhanced. While Home Port's performance in
recent years has been, and its prospects for its immediate future as a
stand-alone entity appear promising, the Board of Directors believes that a sale
to a larger bank holding company will provide Home Port's shareholders with an
immediate significant premium over book value and the price at which the stock
had traded in the recent past. Further, the Board believes a merger with
Seacoast will provide Nantucket Bank and the constituencies which it serves with
more and better resources for the future in ways that are unlikely to be
achieved by Home Port as a stand-alone bank. Despite the attractive operating
performance of Home Port, the Board of Home Port believes that publicly traded
shares of companies of the size and in the industry in which Home Port
participates will not in the foreseeable future trade at values that are an
attractive multiple of earnings per share. The depression of stock price affects
the shareholders of such entities by decreasing the value of their investment
and by providing the companies with less valuable currency with which to grow.
For these reasons, as described above, the Board of Directors
determined to explore strategic alternatives, and on July 20, 2000, after due
consideration, unanimously:
(i) determined that the merger agreement and the merger and related
transactions are fair to and in the best interests of the
shareholders of Home Port;
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(ii) approved the merger agreement, the merger and related
transactions; and
(iii) determined to recommend that the shareholders of Home Port
approve the merger agreement and merger. Accordingly, the Board
recommends that the shareholders vote "FOR" the approval of the
merger agreement and merger.
In approving the transaction and making these recommendations, the
Board consulted with Home Port and Nantucket Bank key management, as well as its
outside legal counsel and the Board's financial advisor, and considered the
following material factors:
(i) all the reasons described above;
(ii) the possibility of remaining as a stand-alone bank or seeking
additional proposals;
(iii) the terms and conditions of the merger agreement, including the
conditions to closing and the termination fees payable under
certain circumstances;
(iv) the analyses and presentation of Sandler O'Neill and its written
opinion to the effect that, as of July 20, 2000 and based upon
and subject to the various assumptions made and matters
considered as set forth in its opinion, the consideration
proposed to be paid by Seacoast in the merger is fair from a
financial point of view to the shareholders of Home Port;
(v) the market value, book value, earnings per share, and dividends
paid to holders of Home Port common stock;
(vi) the high costs of continuing as a small, independent, publicly
traded company in an increasingly complex competitive and
regulatory environment;
(vii) the fact that approval of the merger agreement requires the
affirmative vote of a majority of the shares of Home Port common
stock outstanding and entitled to vote, consisting in large part
of persons other than members of Home Port management; and
(viii) that while the merger is likely to be completed, there are risks
associated with obtaining necessary regulatory approvals, and, as
a result of certain conditions to the completion of the merger,
it is possible that the merger may not be completed even if
approved by the shareholders.
In view of the wide variety of factors considered in connection with
its evaluation of the merger and the complexity of these matters, the Board did
not find it useful to and did not attempt to quantify, rank or otherwise assign
relative weights to these factors. The Board relied on the experience and
expertise of Sandler O'Neill, its financial advisor, for quantitative analysis
of the financial terms of the merger. See "Opinion of Home Port's Financial
Advisor". The Board also relied on its thorough discussions with and questioning
of Home Port's management and its legal, financial and accounting advisors. The
Board members considered all these factors as a whole and overall considered the
factors to be favorable to support their respective determinations. In
considering such factors, individual members of the Board may have given
different weight to different factors.
In reviewing the provisions of the merger agreement relating to the
requirement that Home Port pay to Seacoast a termination fee of $3,500,000 if,
for certain specified reasons, the merger is not consummated, the Board of
Directors was aware that the existence of such provision would make it more
expensive for a third party to offer a price that was in excess of Seacoast's
proposal. The Board of Directors was aware that the provision might
significantly deter a potential competing acquirer from making an offer. The
Board of Directors was also aware that Seacoast required the provision as a
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condition to entering into the merger agreement. See "The Merger Agreement -
Termination; Expenses."
The foregoing discussion of the information and factors considered by
the Board is not intended to be exhaustive but is believed to include all
material factors considered by them.
Opinion of Home Port's Financial Advisor
By letter agreement dated as of February 11, 2000, Home Port retained
Sandler O'Neill as an independent financial advisor in connection with Home
Port's consideration of a possible business combination. Sandler O'Neill is a
nationally recognized investment banking firm whose principal business specialty
is financial institutions. In the ordinary course of its investment banking
business, Sandler O'Neill is regularly engaged in the valuation of financial
institutions and their securities in connection with mergers and acquisitions
and other corporate transactions.
Sandler O'Neill acted as financial advisor to Home Port in connection
with the merger and participated in certain of the negotiations leading to the
merger agreement. At the request of the Home Port Board, representatives of
Sandler O'Neill attended the July 20, 2000 meeting at which the Board considered
and approved the merger agreement. At the meeting, Sandler O'Neill delivered to
the Home Port Board its written opinion that, as of such date, the merger
consideration was fair to the Home Port shareholders from a financial point of
view. Sandler O'Neill has also delivered to the Home Port Board a written
opinion dated the date of this Proxy Statement which is substantially identical
to the July 20, 2000 opinion. The full text of Sandler O'Neill's opinion is
attached as Annex B to this Proxy Statement. The opinion outlines the procedures
followed, assumptions made, matters considered and qualifications and
limitations on the review undertaken by Sandler O'Neill in rendering the
opinion. The opinion is incorporated by reference into this description and this
description is qualified in its entirety by reference to the opinion. Home Port
shareholders are urged to carefully read the opinion in connection with their
consideration of the proposed merger.
Sandler O'Neill's opinion was directed to the Home Port Board and was
provided to the Board for its information in considering the merger. The opinion
is directed only to the fairness of the consideration to Home Port shareholders
from a financial point of view. It does not address the underlying business
decision of Home Port to engage in the merger or any other aspect of the merger
and is not a recommendation to any Home Port shareholder as to how such
shareholder should vote at the Special Meeting with respect to the merger or any
other related matter.
In rendering its July 20, 2000 opinion, Sandler O'Neill performed a
variety of financial analyses. The following is a summary of the material
analyses performed by Sandler O'Neill, but is not a complete description of all
the analyses underlying Sandler O'Neill's opinion. The preparation of a fairness
opinion is a complex process involving subjective judgments as to the most
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appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances. The process, therefore, is not
necessarily susceptible to a partial analysis or summary description. Sandler
O'Neill believes that its analyses must be considered as a whole and that
selecting portions of the factors and analyses considered without considering
all factors and analyses, or attempting to ascribe relative weights to some or
all such factors and analyses, could create an incomplete view of the evaluation
process underlying its opinion. Also, no company included in Sandler O'Neill's
comparative analyses described below is identical to Home Port and no
transaction is identical to the merger. Accordingly, an analysis of comparable
companies or transactions involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading values or
merger transaction values, as the case may be, of Home Port or the companies to
which it is being compared.
The earnings projections for Home Port relied upon by Sandler O'Neill
in its analyses were reviewed with management and were based upon internal
projections of Home Port for the years ending December 31, 2000 and 2001. For
fiscal years after 2001, Sandler O'Neill assumed, with Home Port's consent, an
annual growth rate on earning assets of 8%. The earnings projections furnished
to Sandler O'Neill were prepared by the senior management of Home Port for
internal purposes only and not with a view towards public disclosure. These
projections were based on numerous variables and assumptions which are
inherently uncertain and, accordingly, actual results could vary materially from
those set forth in such projections.
In performing its analyses, Sandler O'Neill also made numerous
assumptions with respect to industry performance, business and economic
conditions and various other matters, many of which cannot be predicted and are
beyond the control of Home Port, Seacoast and Sandler O'Neill. The analyses
performed by Sandler O'Neill are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Sandler O'Neill prepared its analyses solely for purposes of
rendering its opinion and provided such analyses to the Home Port Board at the
July 20th meeting. Estimates on the values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Such estimates are inherently subject to
uncertainty and actual values may be materially different. Accordingly, Sandler
O'Neill's analyses do not necessarily reflect the value of Home Port's common
stock or the prices at which Home Port's common stock may be sold at any time.
Summary of Proposal. Sandler O'Neill reviewed the financial terms of
the proposed transaction. Based upon the per share consideration of $37.00 and
Home Port's June 30, 2000 financial information, Sandler O'Neill calculated the
following ratios:
Transaction value/Book value 2.35x
Transaction value/Last twelve months' EPS 12.67x
Tangible book premium/core deposits (1) 18.24%
-------------------------
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(1) Assumes 5% non-core deposits.
The aggregate transaction value was approximately $68.5 million, based upon 1.85
million diluted shares of Home Port's common stock outstanding, which was
determined using the treasury stock method at the per share transaction value.
For purposes of Sandler O'Neill's analyses, earnings per share were based on
diluted earnings per share. Sandler O'Neill noted that the transaction value
represented a 46.5% premium over the July 19, 2000 closing price of Home Port's
common stock of $25.25.
Stock Trading History. Sandler O'Neill reviewed the history of the
reported trading prices and volume of Home Port's common stock and the
relationship between the movements in the prices of Home Port's common stock to
movements in certain stock indices, including the Standard & Poor's 500 Index,
the NASDAQ Bank Index and the median performance of a composite group of
publicly traded New England savings institutions selected by Sandler O'Neill.
During the one year period ended July 17, 2000, Home Port's common stock
underperformed the S&P 500 but outperformed each of the other indices to which
it was compared.
Beginning Index Value Ending Index Value
July 16, 1999 July 17, 2000
---------------------- -----------------------
Home Port 100.00% 102.59%
Home Port Composite Group 100.00 85.81
Nasdaq Bank Index 100.00 84.17
S&P 500 Index 100.00 105.71
Comparable Company Analysis. Sandler O'Neill used publicly available
information to compare selected financial and market trading information for
Home Port and two groups of selected financial institutions. The first group
consisted of Home Port and the following sixteen publicly traded New England
savings institutions (the "Regional Group"):
<TABLE>
<CAPTION>
<S> <C> <C>
Bancorp Connecticut, Inc. Lawrence Savings Bank Ipswich Bancshares, Inc.
Woronoco Bancorp, Inc. Central Bancorp, Inc. Mystic Financial, Inc.
Bay State Bancorp NewMil Bancorp, Inc. First Coastal Corp.
New Hampshire Thrift Alliance Bancorp of New Mayflower Cooperative Bank
Bancshares, Inc. England
Hingham Institution for Savings Falmouth Bancorp, Inc.
Northeast Bancorp
Warren Bancorp, Inc.
</TABLE>
Sandler O'Neill also compared Home Port to a group of nine publicly
traded savings institutions which had a return on average equity (based on last
twelve months' earnings) of greater than 13% and a price-to-tangible book value
of greater than 120% (the "High Performing Group"). The High Performing Group
was comprised of Home Port and the following nine institutions:
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First Bell Bancorp, Inc. WVS Financial Corp.
American Bank of Connecticut Essex Bancorp, Inc.
Coastal Financial Corp. First Georgia Holding, Inc.
Bancorp Connecticut, Inc. Mayflower Co-Operative Bank
Warren Bancorp, Inc.
The analysis compared publicly available financial information for Home
Port and the median data for each of the Regional Group and Highly Valued Group
as of and for each of the years ended December 31, 1995 through December 31,
1999 and as of and for the twelve months ended March 31, 2000. The table below
sets forth the comparative data as of and for the twelve months ended March 31,
2000.
--------------------------------------------------------------------------------
Home Port Regional High Performing
Bancorp Group Group
------------ ------------ ---------------
Total Assets
Tangible equity/total assets $ 328,455 $ 383,719 $ 413,011
Net loans/total assets 83.97% 73.48% 67.72%
Gross loans/total deposits 125.38% 94.89% 94.88%
Total borrowings/total assets 22.56% 22.56% 22.99%
Non-performing assets/total assets 0.00% 0.13% 0.21%
Loan loss reserve/gross loans 1.44% 1.21% 1.36%
Net interest margin 4.34% 3.83% 3.62%
Non-interest income/average assets 0.51% 0.42% 0.50%
Non-interest expense/average assets 2.02% 2.62% 2.22%
Efficiency ratio 43.32% 64.59% 53.47%
Return on average assets 1.70% 0.97% 1.15%
Return on average equity 20.13% 11.88% 16.02%
Price/tangible book value per share 166.37% 97.11% 158.66%
Price/earnings per share 8.86x 9.60x 9.00x
Dividend yield 3.54% 3.31% 3.88%
Dividend payout ratio 31.36% 30.30% 42.96%
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed
certain other transactions announced from January 1, 2000 to July 15, 2000
involving publicly traded savings institutions as acquired institutions with
transaction values greater than $15 million. Sandler O'Neill reviewed 21
transactions announced nationwide, nine transactions announced in the Mid
Atlantic and New England region, and seven transactions announced nationwide
involving an all cash consideration. Sandler O'Neill reviewed the multiples of
transaction value to last twelve months' earnings, transaction value to book
value and premium to market price and computed high, low, mean and median
multiples and premiums for the respective groups of transactions.
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<PAGE>
These multiples were applied to Home Port's financial information as of and for
the last twelve months ended June 30, 2000. Sandler O'Neill also analyzed
certain relative pricing multiples for the same groups of transactions. The
relative multiples were determined by dividing the absolute transaction
multiples by the relevant trading multiples of the buyers. Sandler O'Neill then
calculated current relative implied price/earnings and price/book multiples by
applying the relative multiples to Seacoast's current trading multiples of 9.69x
last twelve months' earnings and 88.21% of book value. As illustrated in the
following table, Sandler O'Neill derived an imputed range of values per share of
Home Port's common stock of $13.71 to $54.14 based upon the median multiples for
Nationwide Transactions, $19.63 to $54.14 based upon the median multiples for
Regional Transactions and $23.79 to $64.63 based upon the median multiples for
Cash Transactions.
<TABLE>
<CAPTION>
Nationwide Regional Cash
------------------------ ----------------- --------------------
Median Implied Median Implied Median Implied
Multiple Value Multiple Value Multiple Value
<S> <C> <C> <C> <C> <C> <C>
Deal price/LTM EPS 18.55x $54.14 18.55x $54.14 22.15x $64.63
Relative Price/LTM EPS 14.68x $42.85 15.21x $44.39 14.49x $42.30
Deal price/Book Value 1.43x $22.55 1.52x $23.98 1.51x $23.79
Relative Price/Book Value 0.87x $13.71 1.24x $19.63 1.56x $24.58
Premium to Market 39.57% $35.69 35.26% $35.26 53.28% $39.09
</TABLE>
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of Home Port through December 31, 2003 under various
circumstances, assuming Home Port's current dividend payout ratio and that Home
Port performed in accordance with the earnings forecasts reviewed with
management. To approximate the terminal value of Home Port common stock at
December 31, 2003, Sandler O'Neill applied price/earnings multiples ranging from
7x to 22x and multiples of tangible book value ranging from 125% to 250%. The
dividend income streams and terminal values were then discounted to present
values using different discount rates ranging from 9% to 15% chosen to reflect
different assumptions regarding required rates of return of holders or
prospective buyers of Home Port common stock. As illustrated in the following
table, this analysis indicated an imputed range of values per share of Home Port
common stock of $21.29 to $59.39 when applying the price/earnings multiples and
$22.40 to $49.48 when applying multiples of tangible book value.
<TABLE>
<CAPTION>
Price/Earnings Multiples Tangible Book Value Multiples
Discount Rate 7x 13x 16x 22x 1.25x 1.75x 2.00x 2.50x
-------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9% $25.35 $43.73 $52.92 $71.31 $26.69 $35.81 $40.36 $49.48
11 23.88 41.14 49.76 67.01 25.14 33.70 37.85 46.53
13 22.53 38.74 46.84 63.05 23.72 31.75 35.77 43.81
15 21.29 36.53 44.15 59.39 22.40 29.96 33.74 41.29
</TABLE>
In connection with its analysis, Sandler O'Neill considered and
discussed with the Home Port Board how the present value analysis would be
affected by changes in the underlying assumptions, including variations with
respect to the growth rate of assets, net income and dividend payout ratio.
Sandler O'Neill noted that the discounted dividend stream and terminal value
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<PAGE>
analysis is a widely used valuation methodology, but the results of such
methodology are highly dependent upon the numerous assumptions that must be
made, and the results thereof are not necessarily indicative of actual values or
future results.
In connection with rendering its July 20, 2000 opinion, Sandler O'Neill
reviewed, among other things: (1) the merger agreement and exhibits thereto; (2)
certain publicly available financial statements and other historical financial
information of Home Port that they deemed relevant; (3) certain publicly
available financial statements of Seacoast that they deemed relevant; (4)
certain internal financial analyses and forecasts of Home Port prepared by and
reviewed with management of Home Port and the views of senior management of Home
Port, based on certain limited discussions with certain members of senior
management, regarding Home Port's business, financial condition, results of
operations and future prospects; (5) the publicly reported historical price and
trading activity for Home Port's common stock, including a comparison of certain
financial and stock market information for Home Port with similar publicly
available information for certain other companies the securities of which are
publicly traded; (6) the financial terms of recent business combinations in the
savings institution industry, to the extent publicly available; (7) the current
market environment generally and the banking environment in particular; and (8)
such other information, financial studies, analyses and investigations and
financial, economic and market criteria as they considered relevant.
In connection with rendering the opinion included as Annex B to this
Proxy Statement, Sandler O'Neill confirmed the appropriateness of its reliance
on the analyses used to render its July 20, 2000 opinion by performing
procedures to update certain of such analyses and by reviewing the assumptions
upon which such analyses were based and the other factors considered in
rendering its opinion.
In performing its reviews and analyses, Sandler O'Neill assumed and
relied upon the accuracy and completeness of all the financial information,
analyses and other information that was publicly available or otherwise
furnished to, reviewed by or discussed with it, and Sandler O'Neill did not
assume any responsibility or liability for independently verifying the accuracy
or completeness of any of such information. Sandler O'Neill did not make an
independent evaluation or appraisal of the assets, the collateral securing
assets or the liabilities, contingent or otherwise, of Home Port or Seacoast or
any of their respective subsidiaries, or the collectibility of any such assets,
nor was it furnished with any such evaluations or appraisals. Sandler O'Neill is
not an expert in the evaluation of allowances for loan losses and it has not
made an independent evaluation of the adequacy of the allowance for loan losses
of Home Port or Seacoast, nor has it reviewed any individual credit files
relating to Home Port or Seacoast. With Home Port's consent, Sandler O'Neill has
assumed that the respective allowances for loan losses for both Home Port and
Seacoast are adequate to cover such losses. In addition, Sandler O'Neill has not
conducted any physical inspection of the properties or facilities of Home Port
or Seacoast. With respect to the financial projections prepared by and reviewed
with Home Port's management and used by Sandler O'Neill in its analyses, Sandler
O'Neill assumed that they reflected the best currently available estimates and
judgments of the management of the future financial performance of Home Port and
that such performance will be achieved. Sandler O'Neill expressed no opinion as
to such financial projections or the assumptions on which they were based.
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<PAGE>
Sandler O'Neill's opinion was necessarily based upon market, economic
and other conditions as they existed on, and could be evaluated as of, the date
of its opinion. Sandler O'Neill assumed, in all respects material to its
analysis, that all of the representations and warranties contained in the merger
agreement and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be performed by
such party under such agreements and that the conditions precedent in the merger
agreement are not waived. Sandler O'Neill also assumed, with Home Port's
consent, that there has been no material change in Home Port's and Seacoast's
assets, financial condition, results of operations, business or prospects since
the date of the last financial statements made available to them, that Home Port
and Seacoast will remain as going concerns for all periods relevant to its
analyses, and that the merger will be accounted for as a purchase transaction
and will not be a taxable transaction at the corporate level for federal income
tax purposes.
Home Port has agreed to pay Sandler O'Neill a transaction fee of
approximately $856,250 in connection with the merger, which will become due and
payable upon closing of the merger. Home Port has also agreed to reimburse
Sandler O'Neill for its reasonable out-of-pocket expenses incurred in connection
with its engagement and to indemnify Sandler O'Neill and its affiliates and
their respective partners, directors, officers, employees, agents, and
controlling persons against certain expenses and liabilities, including
liabilities under securities laws.
In the ordinary course of its business as a broker-dealer, Sandler
O'Neill may purchase securities from and sell securities to Home Port and
Seacoast and may actively trade the equity securities of Home Port and Seacoast
and their respective affiliates for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Voting Agreement
Each of the directors of Home Port has executed a voting agreement pursuant to
which each such director has agreed to vote all of his shares of Home Port stock
in favor of the merger at the special meeting of shareholders. As a result,
holders of 18.35% of the outstanding shares of Home Port are contractually bound
to vote in favor of the merger.
Accounting Treatment of the Merger
United States generally accepted accounting principles require that Seacoast use
the purchase method of accounting to account for the merger. The total purchase
price will be allocated to the assets acquired and liabilities assumed, based on
their fair values. To the extent that this purchase price exceeds the fair value
of the net tangible assets acquired at the effective time of the merger,
Seacoast will allocate the excess purchase price to intangible assets, including
goodwill.
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<PAGE>
No Appraisal and Dissenters' Rights
The holders of Home Port's common stock do not have appraisal rights under
Delaware law in connection with the merger.
Other Interests of Home Port and Nantucket Bank Directors and Officers in the
Merger
In considering the recommendation of the Home Port Board with respect to the
merger, holders of Home Port common stock should be aware that members of the
Home Port Board and management team have interests in the merger that are
different from, or additional to, the interests of the shareholders of Home Port
generally. The Home Port Board was aware of these interests and considered them,
among other matters, in approving the merger agreement and the matters and
transactions contemplated thereby, including the merger.
As of June 30, 2000, the directors and executive officers of Home Port
beneficially owned an aggregate of approximately 365,361 shares of Company
common stock. Pursuant to the terms of the merger agreement, Home Port's
directors and executive officers will receive the same consideration for their
shares of Home Port common stock as other Home Port shareholders.
Karl L. Meyer Consulting Agreements
Home Port's existing consulting agreement with Karl L. Meyer, in effect since
May 1, 1998, provides that Mr. Meyer act as Chairman, President and Chief
Executive Officer of Home Port as an independent consultant (the "Consulting
Agreement"). The compensation payable to Mr. Meyer under the Consulting
Agreement is presently $120,000 per year, plus reasonable expenses. The
Consulting Agreement is for a three-year term annually extended for one year if
prior notice is not given 90 days before expiration of each annual anniversary
date. The current term expires on April 30, 2003. The Consulting Agreement
further provides that upon a "change of control" of Home Port, such as the
merger, Mr. Meyer will be entitled to terminate the Consulting Agreement and
receive an amount equal to the amount otherwise payable to him as compensation
during the period commencing on the effective date of the "change of control"
and ending on the date of the unexpired term. Assuming the merger is effective
on October 31, 2000, Mr. Meyer would be entitled to receive, should he elect to
terminate the Consulting Agreement, two and one half years of compensation, or
$300,000. However, the merger agreement provides that no payments may be made by
Home Port which would be treated as "excess parachute payments" under the
provisions of Section 280G of the Internal Revenue Code of 1986. Mr. Meyer has
agreed to limit any payments due to him under the Consulting Agreement to
whatever amount may be necessary (approximately $240,000) in order to avoid
application of Section 280G.
The June 14, 2000 Seacoast Proposal and the merger agreement require that Mr.
Meyer enter into a three year consulting and non-competition agreement with
Seacoast for the purpose of assisting Seacoast in overseeing the management and
policies of Nantucket Bank just as Home Port has overseen operations of
Nantucket Bank as its parent (the "Seacoast Consulting Agreement"). The Seacoast
Consulting Agreement provides that Mr. Meyer will consult on-site up to five
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<PAGE>
days per month. Mr. Meyer will be paid $150,000 per year by Seacoast for his
services. A copy of the Consulting Agreement is attached as Annex D.
Employment Agreements
On May 31, 2000, the Home Port Compensation Committee, consisting of Messrs.
DiGiovanna, McKay and Jones, met with independent employee benefits advisors who
had been engaged to assist the Committee in evaluating employee benefit plans.
Among the actions taken at that meeting was the unanimous recommendation that
the existing employment agreements with Nantucket Bank's three top executives
(William Hourihan, President, John Sweeney, Treasurer and Levin Waters, Senior
Vice President) be amended to include provisions for extending the terms of
their employment agreements to three years upon a change of control of Home
Port. The resolution of the Compensation Committee was approved by the full
Board at its meeting of July 20, 2000, and on the same day, Nantucket Bank and
Messrs. Hourihan, Sweeney and Waters executed amendments to their respective
employment agreements (the "Amendments"). The Amendments provide that upon a
change of control of 25% or more of the capital stock of Home Port, the existing
employment agreements convert from one year terms to three year terms. The
Amendments also provide that if within two years of such change in control, the
duties of the employees are changed or such employees are required to perform
their services outside of the Island of Nantucket, they may terminate their
contracts "for cause" and thereby be entitled to receive three times their base
annualized compensation for the prior five years of service, as defined in
Section 280G of the Internal Revenue Code of 1986.
The terms of the merger agreement require that Messrs. Hourihan, Sweeney and
Waters, and Daniel P. Neath enter into new employment agreements with Nantucket
Bank that are satisfactory to Seacoast and become effective upon the Merger (the
"New Employment Agreements"). The New Employment Agreements will supersede the
Amendments. The compensation payable under the New Employment Agreements is
identical to that payable under the existing employment agreements. The New
Employment Agreements additionally provide for employee benefits programs
equivalent to those Seacoast provides to its executives. The New Employment
Agreements provide for a three year term for Mr. Hourihan, and a two year term
for each of Mr. Sweeney, Mr. Neath and Mr. Waters. The New Employment Agreements
also provide for "change of control" provisions similar to those set forth in
the Amendments except that in the case of Messrs. Sweeney, Neath and Waters the
compensation payable following a "change of control" is two years instead of
three years.
The New Employment Agreements waive the "change of control" provisions with
respect to the Seacoast Merger. The New Employment Agreements do provide that
each of Messrs. Hourihan, Sweeney and Waters will retain their current positions
and salaries at Nantucket Bank and not be required to substantially perform
their services outside of the Island of Nantucket. The form of Employment
Agreement for each of Messrs. Hourihan, Neath, Sweeney and Waters is attached as
Annex E.
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<PAGE>
Option Vesting
Each of the Directors of Home Port who is not an officer of Home Port
has options to purchase 5,000 shares of common stock of Home Port. The exercise
price of the options in the case of Messrs. DiGiovanna, Jones, Read and McKay is
$26.474 per share and in the case of Mr. Trevisani is $22.322 per share. In
connection with the merger, all options to purchase Home Port common stock shall
be deemed fully vested and all option holders will receive the merger
consideration ($37 per share) net of any purchase price payable for their
options.
Counsel for Home Port
Gadsby Hannah LLP are legal counsel for Home Port generally and are acting as
Home Port's legal counsel in connection with the proposed merger with Seacoast
and the special meeting of Home Port shareholders called herewith. Mr. Robert
Trevisani is a partner of Gadsby Hannah LLP. He is also a director, stockholder
and option holder of Home Port. (See "Voting Securities and Principal Holders
Thereof").
Board of Directors and Management of Nantucket Bank Following the Merger
The members of the Board of Directors and the officers of Nantucket Bank in
office immediately prior to the effective time of the merger will continue to
hold their respective offices with Nantucket Bank following this merger. One of
the directors of Nantucket Bank who is a resident of Nantucket will be named a
director of Seacoast upon the Merger.
Directors and Officers Indemnification and Insurance. The merger agreement
provides that Seacoast will, for a period of six years from the effective time
of the merger, indemnify the directors and officers of Home Port to the same
extent they were indemnified by Home Port prior to the merger under Home Port's
charter and/or bylaws. The merger agreement provides that, Seacoast will
maintain, for a period of six years from the effective time of the merger,
subject to certain limitations and so long as available in the marketplace, the
same directors' and officers' liability insurance currently maintained by Home
Port, or substitute policies having terms and conditions that are no less
favorable, as to coverage and amounts, than those of Home Port's existing policy
for directors and officers.
Stock Option Agreement
We have summarized below the material terms of the stock option agreement. We
urge all Home Port shareholders to read the stock option agreement, a copy of
which is attached to this document as Annex C, in its entirety for a complete
description of its terms.
As a condition to Seacoast's willingness to enter into the merger agreement,
Home Port entered into the Stock Option Agreement with Seacoast, dated as of
July 20, 2000. Under the stock option agreement, Home Port granted Seacoast an
option to purchase 366,536 shares of Home Port common stock, which is
approximately 19.9% of the number of shares of Home Port common stock
30
<PAGE>
outstanding as of July 20, 2000 or, after giving effect to the exercise of the
option would be approximately 16.6% of Home Port's issued and outstanding common
stock. The option may be exercised only upon the occurrence of certain events
related to an acquisition of Home Port by a third party. The exercise price of
the option is $37.00 per share, provided that both the number of shares of Home
Port common stock issuable to Seacoast under the option and the exercise price
are subject to adjustment under specified circumstances.
Arrangements, such as the stock option agreement, are often entered into in
connection with corporate mergers and acquisitions in an effort to increase the
likelihood that the transactions will be completed in accordance with their
terms, and to compensate recipients of options for their efforts and expenses,
losses and lost opportunity costs if transactions are not completed due to
circumstances involving an acquisition or potential acquisition of option
issuers by third parties. The stock option agreement may have the effect of
discouraging offers by third parties to acquire Home Port prior to the merger
even if those persons are prepared to pay more than the price Seacoast has
agreed to pay.
The option becomes exercisable by Seacoast if an initial triggering event and a
subsequent triggering event occur prior to the termination of the option. An
initial triggering event generally includes any of the following events:
- Home Port or any of its subsidiaries enters into an agreement
to engage in an "acquisition transaction" with any "person"
(as defined in Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act), or the Board of Home Port recommends that its
shareholders approve or accept, or the Board fails to publicly
oppose, any acquisition transaction;
- Home Port or any of its subsidiaries proposes or publicly
announces its intention to engage in an acquisition
transaction, or the Board of Home Port publicly withdraws or
modifies, or announces its intention to withdraw or modify,
its recommendation that its shareholders approve the merger
agreement;
- the shareholders of Home Port vote not to approve the merger,
or a shareholders' meeting is not held as required by the
merger agreement or is canceled, if, prior to the meeting, any
person has proposed to Home Port or its shareholders by public
announcement or written communication that is or becomes
subject to public disclosure to engage in an acquisition
transaction;
- any person, other than Seacoast or its subsidiaries, acting in
a fiduciary capacity in the ordinary course of its business
acquires beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares
of Home Port common stock;
- any person has made a bona fide proposal to Home Port or its
shareholders by public announcement or written communication
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<PAGE>
that is or becomes subject to public disclosure to engage in
an acquisition transaction;
- after an overture is made by a person to Home Port or its
shareholders to engage in an acquisition transaction, Home
Port breaches any covenant or obligation contained in the
merger agreement and the breach would entitle Seacoast to
terminate the merger agreement and is not cured prior to the
date Seacoast gives Home Port notice that it is exercising its
option; or
- any person files an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory
authority, whether in draft or final form, for approval to
engage in an acquisition transaction.
The term subsequent triggering event means either of the following events or
transactions:
- the acquisition by any person of beneficial ownership of 20%
or more of the then outstanding Company common stock; or
- the occurrence of the first initial triggering event described
above, except that the applicable percentage of voting
securities of Home Port or Nantucket Bank that will constitute
the occurrence of an acquisition transaction will be 20%,
rather than 10% as described above.
For the purposes of the stock option agreement, the occurrence of any of the
following events or substantially similar events without the prior written
consent of Seacoast is considered an acquisition transaction:
- a merger, consolidation or similar transaction involving a
third party and Company or Nantucket Bank unless the voting
securities of Home Port or Nantucket Bank prior to the
transaction represent at least 65% of the surviving entity's
voting securities;
- the disposition by sale, lease, exchange or otherwise, of a
substantial portion of the assets of Home Port or Nantucket
Bank to a third party; or
- the issuance, sale or other disposition of, including by way
of merger, consolidation, or share exchange, securities
representing 10% or more of the voting power of Home Port or
Nantucket Bank to a third party.
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<PAGE>
The parties have agreed that the occurrence of certain events would eliminate
the necessity of the option. Accordingly, the stock option agreement provides
that the option will terminate upon the earliest to occur of any of the
following events:
- the effective time of the merger;
- termination of the merger agreement prior to the occurrence of
any of the initial triggering events listed above, except if
Seacoast terminates the merger agreement as a result of
material breach by Home Port of any of its representations,
warranties, covenants or agreements; or
- 12 months after termination of the merger agreement subsequent
to the occurrence of any of the initial triggering events
listed above or if the termination is by Seacoast as a result
of a material breach by Home Port of any of its
representations, warranties, covenants or agreements.
Upon the occurrence of a "repurchase event," the stock option agreement also
provides that Seacoast may require Home Port to repurchase the option. A
repurchase event will be deemed to have occurred upon the consummation of a
merger, consolidation or similar transaction involving Home Port or the
acquisition by any party of all or a substantial portion of Home Port's assets
or the acquisition by any person of 50% or more of Home Port's common stock.
However, no repurchase event can occur unless a subsequent triggering event has
occurred. If a repurchase event occurs, then Seacoast has the right to require
Home Port to repurchase the option at an aggregate price equal to the product of
the number of shares of Home Port common stock subject to the option multiplied
by the amount the "market/offer" price exceeds $37.00. The market/offer price
equals the highest of:
- the price per share at which a third party has made a tender
or exchange offer for shares of Home Port common stock;
- the price per share to be paid by any third party for shares
of Home Port common stock pursuant to an agreement with Home
Port;
- the highest closing price for shares of Home Port common stock
within the six-month period preceding the date of the request
for repurchase; and
- in the event of a sale of all or a substantial portion of Home
Port's assets, the sum of the price paid for the assets and
the current market value of Home Port's remaining assets, as
determined by a nationally recognized investment banking firm
selected by Seacoast, divided by the number of outstanding
shares of Home Port common stock at the time of sale.
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<PAGE>
At any time after the occurrence of a subsequent triggering event and before the
termination of the option, if Home Port has securities registered under the
Securities Exchange Act, Seacoast will have registration rights, including two
demand registration rights, relating to the shares of Home Port common stock
issued under or issuable pursuant to the option.
Neither Seacoast nor Home Port may assign its rights or obligations under the
stock option agreement without the prior written consent of the other party,
except that Seacoast may assign the stock option agreement to an affiliate and,
within 90 days after the occurrence of a subsequent triggering event, unless the
90 day period is extended in accordance with the terms of the stock option
agreement, Seacoast may generally assign its rights under the stock option
agreement to third parties.
To the best knowledge of Home Port and Seacoast, no event giving rise to any
rights to exercise the option has occurred as of the date of this proxy
statement.
THE MERGER AGREEMENT
The following is a description of the material terms of the merger agreement. A
copy of the merger agreement is attached to this proxy statement as Annex A. All
Home Port shareholders are urged to read the entire merger agreement for a
complete description of the terms and conditions of the merger.
General
The merger agreement provides that Home Port will be acquired by and merged with
Seacoast. Upon completion of the merger, the separate corporate existence of
Home Port will cease and Seacoast will survive and continue its corporate
existence. Nantucket Bank, currently a wholly-owned subsidiary of Home Port,
will continue its corporate existence as a wholly-owned subsidiary of Seacoast.
Subject to the satisfaction or waiver of conditions set forth in the merger
agreement and described in "Conditions to the Merger," the merger will become
effective upon the filing of articles of merger and a certificate of merger in
Massachusetts and Delaware, respectively, or at such later time specified
therein.
Merger Consideration
In the merger, each share of Home Port's common stock issued and outstanding
(other than shares of Home Port Common Stock held in Home Port's treasury or
held by Home Port or Seacoast or any of their respective subsidiaries) will
convert into and entitle its holder to receive $37.00 in cash.
Exchange of Stock Certificates
As soon as practicable but no later than three business days after the effective
time of the merger, the exchange agent will mail to each holder of record of
shares of Home Port common stock a letter of transmittal as well as instructions
for surrendering common stock certificates.
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<PAGE>
Upon surrender of a certificate representing shares of Home Port's common stock
to the exchange agent and delivery of a properly executed letter of transmittal,
the holder will be entitled to a check representing the amount of cash to which
the holder is entitled. All surrendered certificates will then be canceled. The
holders of Home Port's common stock will not be entitled to receive interest on
any funds to be received in the merger.
Holders of Home Port's common stock should not send in stock certificates until
they receive transmittal materials from the exchange agent.
Representations and Warranties
In the merger agreement, Home Port and Seacoast each made representations and
warranties concerning their business and assets which were subject to exceptions
disclosed by the appropriate party. The representations and warranties of each
of Home Port and Seacoast must be true and correct in all material respects as
of the closing date of the merger, or else the other party may choose not to
complete the merger, subject to identified exceptions.
Home Port made representations and warranties in the merger agreement with
respect to the following matters, among others:
- noncontravention of certain governing documents, agreements or
governmental orders;
- consents and approvals from governmental and regulatory
authorities and third parties;
- compliance with applicable law;
- Securities and Exchange Commission and bank regulatory reports
and filings;
- financial statements;
- absence of certain changes or events since December 31, 1999;
- absence of litigation;
- employees and employee benefit programs;
- properties and leases;
- taxes and tax returns;
- loan portfolio;
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<PAGE>
- investment securities;
- derivative transactions;
- insurance;
- environmental matters;
- interested party transactions;
- the accuracy of information contained in this proxy
statement/prospectus and other documents;
- state takeover laws; and
- disclosure.
In addition, Home Port made similar representations and warranties as to
Nantucket Bank.
Seacoast made representations and warranties in the merger agreement with
respect to the following matters, among others:
- noncontravention of certain governing documents, agreements or
governmental orders;
- necessary consents, approvals, licenses and permits from
governmental and regulatory authorities and third parties;
- compliance with applicable law;
- financial statements;
- absence of certain changes or events since December 31, 1999;
- absence of litigation;
- accuracy of information provided for inclusion in this proxy
statement; and
- capital.
Covenants and Agreements
The merger agreement contains various covenants and agreements that govern the
actions of Home Port and Seacoast prior to the effective time of the merger.
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Home Port has agreed that prior to the merger, Home Port and Nantucket Bank will
conduct business only in the ordinary course and consistent with past practice
and will use reasonable best efforts to preserve intact the business
organization, personnel and goodwill of Home Port and Nantucket Bank. Home Port
has agreed that except for dividends declared in February and May, it will not
declare dividends during 2000.
In addition, Home Port has agreed that it will not and will cause its
subsidiaries to not, through directors, officers or agents, except as may be
required under the directors' fiduciary duties:
- solicit or initiate the submission of any proposal relating to
any acquisition of any material portion of its assets or any
equity interest in Home Port or Nantucket Bank;
- solicit or initiate the submission of any proposal relating to
any business combination with Home Port or its subsidiaries;
or
- participate in any negotiations regarding, or furnish to any
other person any information with respect to, or otherwise
cooperate in any way with any other person to do or seek, any
of the foregoing.
Home Port has agreed to notify Seacoast promptly if any such proposal or offer
is made and has agreed to indicate the identity of the person making any
proposal or offer and the terms and conditions of any proposal or offer.
Seacoast has agreed that prior to the effective time of the merger it will not,
nor will it permit any of its subsidiaries to, take any action that would cause
a breach of any of its representations, warranties, covenants or obligations
under the merger agreement or the stock option agreement.
Home Port has agreed that prior to the effective time of the merger it will
confer at least monthly with representatives of Buyer to report on:
- the general status of Home Port's and Nantucket Bank's
operations;
- loans exceeding $250,000 in aggregate original principal that
are classified or non- performing assets; and
- foreclosed property and other real estate owned by Home Port
or Nantucket Bank.
Home Port also has agreed that prior to the effective time of the merger to
cooperate and communicate with respect to the manner in which the business of
Home Port and Nantucket Bank is conducted, including but not limited to:
- the disposition of certain assets after the merger;
- the type and mix of products and services;
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- personnel matters;
- branches;
- the granting of credit;
- problem loan management;
- reserve adequacy;
- securities investments; and
- accounting.
Until the merger, Home Port shall permit Seacoast to review new extensions of
credit, renewals and restructurings having an original principal amount of
$200,000 or more, and information detailing overall asset quality. Home Port
shall also ensure that Nantucket Bank allows a Seacoast officer to attend (but
not vote at) credit committee meetings.
Seacoast and Home Port have each agreed to cooperate and use their reasonable
best efforts to effect all filings and to obtain as promptly as applicable all
permits, consents, approvals and authorizations of all third parties and
regulatory authorities necessary to consummate the merger, including any
approvals required by the Federal Reserve Board and the regulatory authorities
of The Commonwealth of Massachusetts.
The parties intend that after the merger Seacoast will provide Nantucket Bank
employees the types and levels of employee benefits substantially equivalent to
those maintained by Nantucket Bank prior to the merger. Seacoast will have sole
discretion to terminate or continue any employee benefit plans of Home Port and
its subsidiaries after Nantucket Bank employees are covered by Seacoast employee
plans benefit.
Seacoast has agreed that the directors of Nantucket Bank immediately prior to
the effective time of the merger will remain as directors for a period of one
year following the merger (or until their term of office expires, whichever is
later), except that the Board of Nantucket Bank will be expanded by up to three
members who will be designated by Seacoast.
Each of Home Port's directors has entered into a voting agreement that provides
that each will vote all shares that such person is entitled to vote at the
special meeting in favor of approving the merger and the transactions
contemplated thereby. In addition, each director has agreed not to sell or
dispose of any owned or subsequently acquired shares, with certain exceptions.
The voting agreement will continue in effect until the earlier of the effective
time of the merger or the termination of the merger agreement in accordance with
its terms.
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Conditions to Complete the Merger
The obligations of each of Seacoast and Home Port to complete the merger are
subject to the satisfaction or waiver of conditions, including:
- obtaining the requisite vote of the shareholders of Home Port;
- obtaining all governmental approvals required to complete the
merger;
- the absence of orders, injunctions, decrees, laws, statutes or
regulations enjoining, preventing or making illegal the
completion of the merger;
- that each of the representations and warranties of the other
party in the merger agreement will be true and correct in all
material respects as of the effective date of the merger with
the same effect as though all representations and warranties
had been made as of that date except for representations and
warranties made as of a specified date which will be true and
correct as of the specified date;
- that the other party will have performed, in all material
respects, all of its obligations to be performed, and
complied, in all material respects, with all of its agreements
and covenants, in each case, on or prior to the effective date
of the merger;
- that each of Seacoast and Home Port will have received a
certificate dated as of the effective date of the merger
signed by the Chief Executive Officer and Chief Financial
Officer of the other party to the effect that the conditions
above have been satisfied; and
- each of Seacoast and Home Port will have received an opinion
of Sandler O'Neill and Partners, L.P. that the shareholders of
Home Port are receiving fair consideration for the merger from
a financial point of view.
In addition, the obligations of Seacoast to complete the merger are subject to
the satisfaction or waiver of the following conditions:
- Home Port and Nantucket Bank have obtained all necessary third
party consents and approvals;
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- none of the requisite regulatory approvals impose any
condition upon Seacoast or Home Port, any of their
subsidiaries or the surviving corporation such that Seacoast
reasonably determines that the condition would materially
impair the value of Home Port or Nantucket Bank to Seacoast;
- Mr. Meyer's Consulting Agreement dated May 1, 1998 shall have
been terminated and he shall have entered into a new
Consulting Agreement with Seacoast; and
- Messrs. Hourihan, Sweeney, Neath and Waters, each currently
officers of Nantucket Bank, have entered into new employment
agreements with Nantucket Bank.
Termination; Expenses
The merger agreement may be terminated at any time prior to the effective time
of the merger, whether before or after approval by Home Port shareholders, as
follows:
- by mutual written consent of Seacoast and Home Port if
approved by a majority of the Board of Directors of each;
- by either Seacoast or Home Port if any of the following
occurs:
(1) the merger is not completed by March 31, 2001
or a later date as mutually agreed to, except
that the party whose failure to fulfill any
material obligation in the merger agreement is
the cause of the merger not being complete may
not terminate the agreement,
(2) Home Port shareholders do not approve the
merger agreement at the Home Port stockholder
meeting, provided that Home Port may not
terminate the agreement if the failure to
obtain stockholder approval was due to the
material breach by Home Port of its covenants
regarding the stockholder meeting,
(3) any governmental entity has issued a final,
nonappealable order which enjoins or otherwise
prohibits the completion of the transactions
contemplated by the merger agreement,
(4) 90 days pass after a requisite regulatory
approval is denied or withdrawn at the request
of the governmental authority, unless within
that 90 day period an amended application has
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been filed with the applicable governmental
authority; except that no party has the right
to terminate the merger agreement pursuant to
this provision if the denial or withdrawal is
due to the failure of the party seeking
termination to perform or observe the
agreements and covenants of that party in the
merger agreement, or
(5) the other party is in material breach of any
representation, warranty, covenant or agreement
on the part of the other party which is not
cured within 30 days after the terminating
party has given written notice of the breach to
the breaching party, but only if the
terminating party itself is not then in
material breach of any representation,
warranty, covenant or other agreement contained
in the merger agreement; or
- by Seacoast if the Home Port Board does not publicly recommend
that Home Port shareholders approve the merger, or if after
making a recommendation to approve the merger the Home Port
Board withdraws, modifies or amends its recommendation to Home
Port's shareholders in a manner adverse to Seacoast.
If the merger agreement is terminated because of a breach of any representation,
warranty, covenant or other agreement which is caused by gross negligence or is
a willful breach, the breaching party will be liable to the other party for all
out-of-pocket costs and expenses up to $500,000, including reasonable fees and
expenses for legal, accounting and financial advisors.
As a condition to Seacoast's willingness to enter into the merger agreement,
Home Port agreed to pay liquidated damages to Seacoast equal to $3,500,000, less
the amount of any other payments made by Home Port to Seacoast as a result of a
breach by Home Port which is caused by its willful conduct or its gross
negligence, if any of the following occurs:
- Seacoast or Home Port terminates the merger agreement because
Home Port fails to obtain the required stockholder approval at
the Home Port stockholder meeting or if the Home Port
stockholder meeting is not held prior to the termination of
the merger agreement; or
- Seacoast terminates the merger agreement because the Home Port
Board fails to publicly recommend that Home Port shareholders
approve the merger, or if after making a recommendation, the
Home Port Board withdraws, modifies or amends its
recommendation in a manner adverse to Seacoast;
and within twelve months of any termination:
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- Home Port enters into an agreement to engage in an alternative
"acquisition transaction" with a third party; or
- the Home Port Board approves, or recommends to its
shareholders to approve or accept, or fails to publicly
oppose, an alternative acquisition transaction with a third
party.
Further, Home Port shall be obligated to make the liquidated damages payment if
Seacoast terminates the merger agreement because Home Port is in material breach
of any of the representations, warranties, covenants or agreements made by it in
the merger agreement, and such breach was caused by willful conduct or gross
negligence of Home Port.
In addition, if Seacoast terminates the merger agreement because Home Port's
shareholders do not approve the merger, or a meeting is not held, or the Home
Port Board fails to recommend approval of the merger, or if after the Home Port
Board recommends the merger, the Board withdraws, modifies or amends its
recommendation in a manner which is adverse to Seacoast, Home Port will be
obligated to make the liquidated damages payment to Seacoast if at the time of
termination a third party has, by public announcement or written communication
that will become the subject of public disclosure, made a bona fide proposal to
Home Port or its shareholders to engage in an alternative acquisition
transaction.
For purposes of the merger agreement, "acquisition transaction" means the
occurrence of any of the following:
- a merger, consolidation or other similar transaction involving
Home Port or Nantucket Bank;
- the disposition by sale, lease or exchange of 24.9% or more of
the consolidated assets of Home Port and its subsidiaries in a
single transaction or series of transactions;
- the issuance, sale or other disposition of securities
representing 24.9% of the voting power of Home Port or
Nantucket Bank;
- the commencement of a tender or exchange offer for 24.9% or
more of the voting power of Home Port capital stock or 24.9%
of Nantucket Bank's of its subsidiary's capital stock; or
- any acquisition by any person of beneficial ownership or the
right to acquire beneficial ownership, or the formation of any
"group" (as defined in Section 13(d) of the Securities
Exchange Act) which beneficially owns, or has the right to
acquire beneficial ownership of, 24.9% or more of then
outstanding shares of Company common stock.
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As a condition to Home Port's willingness to enter into the merger agreement,
Seacoast agreed to pay liquidated damages to Home Port equal to $3,500,000, less
the amount of any other payments made by Seacoast to Home Port as a result of a
breach by Seacoast which is caused by its willful conduct or its gross
negligence, if Home Port terminates the merger agreement because Seacoast is in
material breach of any of the representations, warranties, covenants or
agreements made by it in the merger agreement, and such breach was caused by
willful conduct or gross negligence of Seacoast.
Except as provided above, Seacoast and Home Port will each bear its own expenses
in connection with the merger agreement and the transactions contemplated
thereby.
Amendment; Waiver
Subject to compliance with applicable law, prior to the effective time of the
merger, the parties may amend or waive any provision of the merger agreement at
any time by an agreement in writing, as long as the Board of Directors of each
party approves the action; except that after Home Port shareholders have
approved the merger, no amendment or waiver may be made that would reduce the
amount or change the type of consideration into which each share of Home Port
common stock will be converted at the effective time of the merger.
Survival of Provisions
If any of the parties terminates the merger agreement before the effective time
of the merger, provisions of the merger agreement regarding the following
matters will survive and remain effective:
- confidentiality of information obtained in connection with the
merger agreement;
- liability of the companies to each other as a result of the
termination of the merger agreement; and
- expenses.
After the effective time of the merger, provisions of the merger agreement
regarding the following matters will survive and remain effective:
- the provision of benefits to Home Port employees;
- indemnification of, and maintenance of insurance for,
directors and officers;
- additional agreements entered into after the effective time of
the merger;
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- employee severance and retention obligations of Seacoast; and
- election of directors of Nantucket Bank following the merger.
Status of Regulatory Approvals and Other Information
Seacoast and Home Port will promptly file all applications and notices and will
promptly take other appropriate action with respect to any requisite approvals
or other action of any governmental authority. The merger agreement provides
that the obligation of each of Seacoast and Home Port to complete the merger is
conditioned upon the receipt of all requisite regulatory approvals, including
the approvals of the Federal Reserve Board and the Massachusetts Board of Bank
Incorporation. There can be no assurance that any governmental agency will
approve or take any required action with respect to the merger, and, if the
approvals are received or action is taken, there can be no assurance as to the
date of the approvals or action, that the approvals or action will not be
conditioned upon matters that would cause the parties to mutually consent to
abandon the merger, or that no action will be brought challenging the approvals
or action, or if a challenge is made, its result.
Seacoast and Home Port are not aware of any governmental approvals or actions
that may be required for completion of the merger other than as described above.
Should any other approval or action be required, Seacoast and Home Port
currently contemplate that approval or action would be sought.
The merger cannot proceed in the absence of the requisite regulatory approvals.
Home Port may not obtain regulatory approvals on time or at all. Similarly the
Department of Justice or other governmental authorities may challenge the
merger.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of United States federal income tax
consequences of the merger to Home Port and its shareholders. The following
discussion is based upon current provisions of the Internal Revenue Code,
existing temporary and final regulations thereunder and current administrative
rulings and court decisions, all of which are subject to change, possibly on a
retroactive basis. No attempt has been made to comment on all United States
federal income tax consequences of the merger that may be relevant to
shareholders of Home Port. The tax discussion set forth below is included for
general information only. It is not intended to be, nor should it be construed
to be, legal or tax advice to a particular stockholder of Home Port.
The following discussion may not apply to particular categories of holders of
shares of Home Port common stock subject to special treatment under the Code,
such as insurance companies, financial institutions, broker-dealers, tax-exempt
organizations, individual retirement and other tax-deferred accounts, banks,
persons subject to the alternative minimum tax, persons who hold Home Port
capital stock as part of a straddle, hedging or conversion transaction, persons
whose functional currency is other than the United States dollar, persons
eligible for tax treaty benefits, foreign corporations, foreign partnerships,
and other foreign entities, individuals who are not citizens or residents of the
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United States, and holders whose shares were acquired pursuant to the exercise
of an employee stock option or otherwise as compensation. Shareholders of Home
Port are urged to consult their tax advisors to determine the specific tax
consequences of the merger, including any state, local or other tax consequences
of the merger.
TAX CONSEQUENCES OF THE MERGER
The Merger will not have a tax impact upon Home Port. In general, each
shareholder of Home Port will recognize gain or loss, equal to the difference
between the cash such stockholder received in the merger and such stockholder's
adjusted basis in his or her shares of Home Port common stock.
This gain or loss will constitute capital gain or loss from the sale of stock if
the stockholder holds Home Port common stock as a capital asset at the effective
time of the merger, and will be long term capital gain or short term capital
gain depending on the holding period.
BACKUP WITHHOLDING
Under the backup withholding rules, a Home Port stockholder may be subject to
backup withholding at the rate of 31% with respect to cash received in exchange
for Home Port common stock unless such holder is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact, or
provides a taxpayer identification number, certifies that the holder is not
subject to backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A stockholder that does not
provide a correct taxpayer identification number may also be subject to
penalties imposed by the Internal Revenue Service. Any amount paid as a backup
withholding will be creditable against the stockholder's income tax liability
provided that applicable filings are made with the IRS.
OTHER TAX CONSEQUENCES
The state and local tax treatment of the merger may not conform to the federal
income tax consequences discussed above. Consequently, Home Port shareholders
should consult their own tax advisors regarding the treatment of the merger
under state, local, and other tax laws.
Risk that the Merger Will Not Be Consummated
Consummation of the merger is subject to a number of conditions,
including, without limitation, receipt of the required stockholder approval,
regulatory approvals, and the absence of an injunction or other order
restraining consummation of the transactions contemplated by the merger
agreement. See "The Merger - Terms and Conditions of the Merger and the Merger
Agreement." Therefore, even if the requisite stockholder approval is obtained,
there can be no assurance that the merger will be consummated.
It is expected that if the merger agreement is not adopted by the
shareholders, or if the merger is not consummated for any other reason, Home
Port's current management, under the direction of the Board of Directors, will
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continue to manage Home Port as an on-going business. No other transaction is
currently being considered by Home Port as an alternative to the merger.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record as of the close of business on August 25, 2000 are
entitled to one vote for each share then held. On that date, Home Port had
approximately 1,841,890 shares of common stock issued and outstanding (the
"Common Stock").
The following table sets forth, as of August 25, 2000, the shares of
Common Stock beneficially owned by each Director of Home Port, the most highly
compensated executive officers, all executive officers and Directors as a group,
and each person who was the beneficial owner of more than 5% of Home Port's
Common Stock, based on information supplied by its transfer agent and filings
made with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934. Persons and groups owning in excess of 5% of Home Port's
Common Stock are required to file certain reports regarding such ownership
pursuant to the Securities Exchange Act of 1934.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
Of Beneficial Owners Shares of Common
Beneficial Ownership (1) Stock Outstanding
------------------------------------------------------------------------------------------------
<S> <C> <C>
Karl L. Meyer 164,500 (2) 8.93%
Director, President and CEO
60 Arch Street
Greenwich, CT 06830
William P. Hourihan, Jr. 28,328 (3) 1.54%
Director and Senior Vice President
16 Hawthorne Lane
Nantucket, MA 02554
Philip W. Read 4,248 (4) *
Director
14 Sherburne Turnpike
Nantucket, MA 02554-3422
Charles F. DiGiovanna 19,900 (5) 1.08%
Director
170 Dolphin Cove Quay
Stamford, CT 06902
Charles H. Jones, Jr. 112,000 (6) 6.08%
Director
1801 South Flagler Drive
West Palm Beach, FL 33401
Robert A. Trevisani 21,975 (7) 1.19%
Director
45 Cliff Road
Weston, MA 02493
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Robert J. McKay 14,000 (8) *
Director and Secretary
7 Stanwich Road
Greenwich, CT 06830
John M. Sweeney 1,100 *
Treasurer & Chief Financial Officer
14 Pine Crest Drive
Nantucket, MA 02554
------------------------------------------------------------------------------------------------
All Executive Officers and 365,351 19.84%
Directors as a group (8 persons)
Fidelity Management & (9)
Research Corp.
One Federal Street 149,100 8.09%
Boston, MA 02109
Ruane, Cunniff & Co., Inc. (9) 111,250 6.04%
1370 Avenue of the Americas
New York, NY 10014
Edge Partners, L.P. (9) 110,000 5.97%
1129 Broad Street
Shrewsbury, NY 07702
*= less than 1%
</TABLE>
(1) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person shown in the
table.
(2) Includes 7,500 shares held by Mr. Meyer as a custodian or trustee for his
son, over which shares Mr. Meyer effectively exercises sole or shared
voting and investment power.
(3) Includes 2,731 shares of Common Stock owned by Mr. Hourihan's spouse.
(4) Includes 1,948 shares of Common Stock jointly held by Mr. Read and his
wife. Also includes 300 shares of Common Stock jointly owned by Mr. Read
with his mother in which he has a beneficial interest. Also includes an
aggregate of 1,000 shares of Common Stock issuable upon the exercise of a
stock option. Excludes 3,000 shares of Common Stock issuable upon the
exercise of stock options that have not yet vested.
(5) Includes an aggregate of 2,000 shares of Common Stock issuable upon the
exercise of a stock option. Excludes 3,000 shares of Common Stock issuable
upon the exercise of stock options that have not yet vested.
(6) Includes an aggregate of 2,000 shares of Common Stock issuable upon the
exercise of a stock option. Excludes 3,000 shares of Common Stock issuable
upon the exercise of stock options that have not yet vested. Includes an
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aggregate of 110,000 shares of Common Stock that are owned by Edge
Partners, L.P., a partnership in which Edge Capital Management, Inc., is
Managing Partner. Mr. Jones is an officer of Edge Capital Management, Inc.
(7) Includes 8,000 shares of Common Stock held by Commonwealth Charitable Fund,
Inc. ("CCF"), of which Mr. Trevisani is the President and a Director. Mr.
Trevisani has voting control over CCF's shares, but disclaims any
beneficial ownership in them. Also includes 700 shares held jointly by Mr.
Trevisani with his mother, over which he exercises voting control but
disclaims any beneficial interest therein. Includes an aggregate of 1,000
shares of Common Stock issuable upon the exercise of a stock option.
Excludes 4,000 shares of Common Stock issuable upon the exercise of stock
options that have not yet vested.
(8) Includes an aggregate of 2,000 shares of Common Stock issuable upon the
exercise of a stock option. Excludes 3,000 shares of Common Stock issuable
upon the exercise of stock options that have not yet vested. Does not
include 5,300 shares of Common Stock owned by Mr. McKay's spouse, in which
Mr. McKay disclaims beneficial ownership.
(9) Based solely on filings made by the person, entity or group with the
Securities and Exchange Commission.
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DESCRIPTION OF BUSINESS
General
Home Port. Home Port was incorporated under the laws of the State of Delaware on
November 12, 1987 for the purpose of becoming a holding company. On August 30,
1988, Home Port acquired all of the common stock of Nantucket Bank (the "Bank"
or "Nantucket Bank") following the Bank's conversion from a Massachusetts
chartered mutual savings bank to a Massachusetts chartered stock savings bank.
Home Port is currently a single bank holding company registered under the
Federal Bank Holding Company Act. As of December 31, 1999, the assets of Home
Port on an unconsolidated basis consisted principally of the capital stock of
the Bank. Home Port is subject to the regulations of, and periodic examinations
by, the Federal Reserve Bank, the Commissioner of Banks of the Commonwealth of
Massachusetts (the "Commissioner") and the Federal Deposit Insurance Corporation
("FDIC"). Home Port's activities are conducted solely in Nantucket through its
subsidiary, Nantucket Bank.
At June 30, 2000, Home Port had, on a consolidated basis, total assets of $339.3
million, total deposits of $227.7 million, total loans, net of unearned income,
of $282.8 million and total shareholders' equity of $29.1 million.
The Bank. The Bank is a Massachusetts chartered savings bank, organized in 1834.
The Bank conducts its business through three full-service offices and one
automated teller facility, all of which are located on the island of Nantucket,
Massachusetts. The Bank's deposits are insured by the Bank Insurance Fund of the
FDIC up to $100,000 per account and the Depositors Insurance Fund, a private
deposit insuring company, for deposits in excess of $100,000. The Bank is
subject to competition from other financial institutions. The Bank is subject to
the regulations of, and periodic examinations by, the FDIC and the Massachusetts
Division of Banks.
The Bank provides a full range of banking services to individual and corporate
customers on the island of Nantucket. The Bank's primary services consist of
attracting deposits from consumers and businesses on Nantucket and originating
loans on Nantucket real estate, including both residential and commercial
properties. Due to the seasonal tourist-related economy on Nantucket, the Bank's
deposits generally peak during the summer months. The Bank's real estate lending
business is generally not impacted by the seasonal economy. The Bank also grants
commercial business loans and consumer loans. Commercial business loans normally
peak in the spring, as merchants borrow to finance inventory and other purchases
in advance of the tourist season. The Bank routinely sells residential mortgage
loans in the secondary market, normally retaining the servicing rights. The Bank
invests a portion of its funds in money market instruments, federal government
and agency securities and corporate bonds. The Bank utilizes the Federal Home
Loan Bank of Boston ("FHLB") as an additional source of funds.
The Nantucket Real Estate Market. The Nantucket real estate market has been very
strong in recent years. Total real estate sales on Nantucket totaled $470
million in 1999, $401 million in 1998 and $318 million in 1997. During 1999, the
median price of a home on Nantucket was $600,000 compared to $450,000 in 1998
and $400,000 in 1997.
Deterioration in the local or national economies could have a negative impact on
the Nantucket real estate market. A downturn in the Nantucket real estate market
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<PAGE>
could result in an increase in loan delinquencies for the Bank, which could have
a negative effect on Home Port's results of operations due to the possibility of
additional loan loss provisions and reduced interest income.
Lending Activities
Residential Real Estate Lending. The Bank makes conventional mortgage loans to
single family residential properties with original loan-to-value ratios up to
80% of the appraised value of the property securing the loan. These residential
properties serve as the primary or secondary homes of the borrowers. The Bank
also originates loans on one to four family dwellings and loans for the
construction of residential housing for owner occupying borrowers, also with
original loan-to-value ratios up to 80% of the property's appraised value.
Residential mortgage loans made by the Bank have traditionally been long-term
loans made for periods of up to 30 years at either fixed or adjustable rates of
interest. It has generally been the Bank's policy to sell most of its longer
term (greater than 10 years) fixed rate loans and a portion of its adjustable
rate loans, while retaining the servicing rights. The Bank's Asset/Liability
Committee ("ALCO"), which is comprised of the Bank's senior management and
certain other officers, reviews this policy from time to time as part of the
Bank's overall asset/liability management program.
The majority of long-term fixed rate loans are originated using underwriting
standards and standard documentation allowing their sale to FHLMC. The Bank also
offers jumbo fixed and variable rate mortgages. The underwriting standards for
jumbo loans are similar to those used for non-jumbo mortgages. The Bank sells a
portion of its jumbo mortgages.
The majority of the Bank's loan originations are adjustable rate residential
mortgage loans. The interest rate on these loans may either adjust on an annual
basis, or feature an initial period from three to ten years during which the
interest rate is fixed. Generally, interest rates adjust on an annual basis
after any initial fixed rate term. During 1999, most adjustable rate loan
originations featured an initial fixed rate term. Adjustable rate loans may have
limitations on the amount of the adjustment of 2.0% per adjustment and 6.0% over
the life of the loan, and on the periods within which the adjustments may be
made. Rate adjustments on residential mortgage loans are generally tied to the
weekly average yield on U.S. Treasury securities adjusted to constant maturities
of one year. Despite the benefits of adjustable rate mortgage loans to the
Bank's asset/liability management program, they do pose potential additional
risks, primarily because as interest rates rise, the underlying payments by the
borrowers rise, increasing the potential for default, while at the same time the
marketability of the underlying property may be adversely affected by higher
interest rates. The history of the one year Treasury bill index, as of the last
business day of each year for the last three years, shows that this index has
fluctuated from 5.53% in 1997 to 4.52% in 1998 and 5.85% in 1999.
The Bank may at times offer adjustable rate mortgage loans with an initial
discount, as is customary in the marketplace. This pricing decision is based on
management's decision to remain competitive while at the same time assuring
prudent underwriting guidelines. In this respect, the Bank underwrites loans as
if fully indexed, or within maximum limitations established in secondary market
guidelines, with a view toward minimizing potential losses resulting from
increased costs to the borrowers.
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Construction loans on residential properties are made to individuals for the
construction of their primary or secondary homes. Construction loans are made
for up to 80% of the appraised value of the property upon completion.
Construction loan funds are periodically disbursed as pre-specified stages of
construction are attained. Residential construction loans, which are typically
made for a period of 30 years, require monthly interest payments during
construction and begin to amortize after the construction phase has been
completed, at which time they automatically convert into permanent mortgage
loans.
Under a program that has been in existence since 1993, the Bank offers loans on
one to four family primary dwellings for first time home buyers with original
loan to value ratios up to 90%. These loans are made for periods up to 30 years
for existing dwellings and up to 31 years for the construction of a primary
dwelling.
Commercial Real Estate Lending. The Bank originates permanent and construction
loans on commercial real estate. These loans mainly consist of mortgages on
investment properties and properties utilized by retail and small service
businesses such as restaurants, guest houses and retailers. The Bank lends for
speculative real estate construction activities on a limited basis and closely
monitors these loans. At December 31, 1999, such loans accounted for $3.2
million, or 1.2%, of the total loan portfolio (excluding loans held for sale).
The Bank's current policy limits commercial real estate loans (including both
permanent and construction) to 30% of the total loan portfolio. At December 31,
1999 commercial real estate loans totaled 20.4% of the Bank's loan portfolio
(including loans held for sale) as compared to 20.6% at the end of 1998.
During 1998 and 1999 most commercial real estate loans were granted for up to
75% of the appraised value of the property. Most of these loans were for terms
from 6 months to 20 years at interest rates adjustable from one to three year
periods at the Bank's sole discretion, or to a specific spread over the prime
rate published in the Wall Street Journal. This policy has enabled the Bank to
adjust the interest rate yield on the commercial real estate portfolio to
compensate for changes in costs of funds, credit risk and balance relationships
maintained by the borrowers. The periodic adjustable rate feature of this
portfolio can enhance the Bank's liquidity by sale of these loans to
participants when deemed advisable. Protection of the Bank's interest in the
real estate collateral is covered by use of title, fire, casualty and flood
insurance in applicable amounts.
Commercial real estate lending may entail significant additional risks compared
to residential mortgage lending. Loan size typically may be larger. Payment
experience on such loans can be more easily influenced by adverse conditions in
the economy or in the real estate market. Construction financing involves a
higher degree of risk of loss than long term financing on improved occupied real
estate. Property values at completion of construction or development can be
influenced by underestimation of construction costs. The Bank may be required to
advance funds beyond the original commitment in order to finish the development.
If projected cash flows or value of the property proves to be inaccurate because
of unanticipated construction costs or lower than expected sales volume, the
project may have a value that is insufficient to assure full repayment.
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Construction loans on commercial properties are extended to individuals,
unincorporated small business borrowers or to their companies, partnerships,
trusts or other business entities formed to hold title to the business property.
Such loans are made for periods up to 21 years with interest only during the
construction period (usually nine to twelve months) and regular amortization
thereafter. Funds are disbursed as prespecified stages of construction are
completed.
Commercial Business Loans. The Bank offers a wide variety of commercial loan
services, including short and long-term business loans, lines of credit and
letters of credit. The principal market for these loans is small to medium size
businesses in Nantucket. Most commercial business loans are written generally
for terms of 30 to 180 days or under one year as a line of credit. Longer-term
commercial business loans are granted up to five years and are subject to daily
or monthly rate adjustments based on the prime rate as published in the Wall
Street Journal. These interest rate sensitive loans allow the Bank to maintain
an interest rate spread over its cost of funds. The interest rate paid by
individual customers over the base rate is determined by the lenders and Bank
management after consideration of the degree of credit risk, term of the loan,
the borrower's overall relationships, the size of the loan and other pertinent
criteria. These loans may be advanced on an unsecured basis or may be secured by
real estate, inventory or other business assets. Loans to commercial businesses
may entail significant additional risks compared to residential mortgage
lending. These loans are subject to changes in the local and regional economy as
well as changes in particular industries and lines of business. Analyzing the
unique factors and risks affecting each business requires expertise and
experience which is different from that needed for loans secured by real estate.
Frequently, the arrangement involves both business services and consumer
products, particularly residential real estate loans.
Consumer Lending. The Bank offers a variety of consumer loans, including second
mortgage loans, home equity loans, automobile loans, secured and unsecured
personal loans and boat loans. These loans are made at both fixed and adjustable
rates of interest. They vary in terms depending on the type of the loan. Second
mortgage loans have terms of up to 15 years, and provide for annual interest
rate adjustments, while other consumer loans have shorter terms and/or fixed
rates of interest.
Loan Solicitation and Processing. Loan originations come from a number of
sources. Most real estate loans are attributable to referrals from existing
customers, real estate brokers and builders as well as walk-in customers and
depositors. Commercial business loan originations are generally obtained through
officer calls, existing customers and business relationships and referrals.
Consumer loans generally result from existing depositors.
Each loan originated by the Bank is underwritten by personnel of the Bank, with
individual lending officers, a committee of loan officers and the Bank's
Executive Committee having the authority to approve loans up to various limits.
Independent appraisers are used to appraise the property intended to secure real
estate loans. The Bank's underwriting criteria are designed to minimize the
risks of each loan. There are detailed guidelines concerning the types of loans
that may be made, the nature of the collateral required, the information that
must be obtained concerning the loan applicant and follow-up inspections of
collateral after the loan is made.
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Income from Lending Activities. Interest rates charged by the Bank on its loans
are determined by market interest rates, the Bank's strategic plans and goals,
the availability of funds to lend, the demand for loans and competitive loan
rates offered in its lending area.
In addition to interest earned on loans, the Bank receives loan origination fees
for originating real estate loans. Loan origination fees are a percentage of the
principal amount of the loan and are charged to the borrower for the creation of
the loan. Currently, the Bank generally charges fees of up to 1% on permanent
residential mortgage loans (2% is charged on certain residential loans), 1/2% to
1% on residential construction loans and 1% to 1 1/2% on commercial real estate
loans. For accounting purposes, the Bank defers loan origination fees net of
direct underwriting costs and amortizes the balance over the life of the loans.
On loans written at a discounted initial rate, net origination fees are
amortized over the period of discount. The Bank also receives other fees and
charges relating to loans, which include loan application fees, late payment
charges and fees collected in connection with loan modifications. These fees and
charges do not constitute a material source of income for the Bank.
Investment Activities
Interest income from short-term investments (consisting of federal funds sold
and interest bearing deposits in banks) and securities held to maturity and
available for sale provides an additional significant source of income for the
Bank. The Bank's securities portfolio consists of United States Government and
agency obligations, short-term corporate bonds, notes and debentures and state
and municipal obligations and mortgage backed securities, collateralized
mortgage obligations and real estate mortgage investment conduits ("REMICS").
From time to time the Bank may invest in mutual funds or equity securities of
various corporations and other issuers. It is the Bank's current policy to limit
to 5% of its investment portfolio the amount invested in equity securities and
to avoid concentration of equity investments in any one industry.
Home Port's primary objective with respect to its securities portfolio is to
provide liquidity and income, consistent with prudent consideration for risk,
maturity and overall diversification. The Bank's President and Chief Financial
Officer are generally charged with executing the Bank's investment policy on a
daily basis. They have discretion generally to buy and sell securities within
the guidelines of the current plan. All transactions outside of the scope of the
current plan must be discussed with and approved by the Bank's Executive
Committee. All funds not needed to meet the daily investment requirements are
invested in either federal funds or money market instruments. All transactions
are ratified by the Bank's Board of Directors.
Sources of Funds
General. Savings accounts, checking accounts and other types of deposits have
historically constituted the primary source of funds for the Bank. In addition
to deposits, the Bank obtains funds from FHLB borrowings, scheduled loan
repayments, loan prepayments and loan sales. Scheduled loan repayments are a
relatively stable source of funds while deposit inflows and outflows and loan
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prepayments vary widely and are influenced by prevailing interest rates and
general and local economic conditions. Dividends from the Bank represent the
only source of liquidity for Home Port.
Deposits. The Bank offers a broad selection of deposit instruments to the
general public, including NOW accounts, regular savings accounts, money market
checking accounts, fixed and variable rate time accounts, IRA and Keogh
retirement accounts and commercial checking accounts. In the past the Bank has
utilized brokered deposits, however, at December 31, 1998 and 1999 brokered
deposits totaled less than 1/2 of 1% of total deposits. The Bank's management
determines the interest rates offered on deposit accounts based on the Bank's
strategic plans and goals, U.S. Government treasury rates, borrowing rates,
competition, liquidity needs and the expected volatility of existing deposits.
Borrowings. The Bank is a member of the FHLB of Boston. This membership enables
the Bank to borrow from the FHLB, which helps address the inherent problem on
Nantucket Island of a deposit base which is unable to fund loan demand. The Bank
also utilizes borrowings to reduce interest rate risk.
Subsidiaries of the Bank
The Bank has two subsidiaries, N.B. Securities, Inc., which has been classified
as a securities corporation under the laws of the Commonwealth of Massachusetts
to take advantage of the tax benefits available to such corporations and N.
Realty Corp., which has elected to be taxed as a real estate investment trust.
Supervision, Regulation and Operating Powers
General. Home Port and the Bank are extensively regulated under federal and
state law. Home Port, as a Delaware corporation, is subject to regulation by the
Secretary of the State of Delaware and the rights of its shareholders are
governed by the General Corporation Law of the State of Delaware.
Federal Bank Holding Company Act Regulation. On August 30, 1988, Home Port
became a registered bank holding company after receiving approval from the Board
of Governors of the Federal Reserve Board System ("FRB"). As a result, its
activities are subject to certain limitations, which are described below, and
transactions between the Bank and Home Port or its other affiliates are also
subject to certain restrictions.
Under the Bank Holding Company Act, a bank holding company must obtain FRB
approval before it acquires direct or indirect ownership or control of any
voting shares of any bank if, after such acquisition, it will own or control
directly or indirectly more than 5% of the voting stock of such bank, unless it
already owns a majority of the voting stock of such bank. FRB approval must also
be obtained before a bank holding company acquires all or substantially all of
the assets of a bank or merges or consolidates with another bank holding
company. Any acquisition, directly or indirectly, by a bank holding company or
its subsidiaries of any voting shares of, or interest in, or all or
substantially all, of the assets of any bank located outside of the state in
which the operations of the bank holding company's banking subsidiaries are
principally conducted, may not be approved by the FRB unless the laws of the
state in which the bank to be acquired is located specifically, authorizes such
an acquisition.
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The Bank Holding Company Act and regulations adopted thereunder limit the
activities of a bank holding company and its subsidiaries to the business of
banking or of managing or controlling banks, and to such other activities as the
FRB may determine to be so closely related to banking as to be a proper incident
thereto. The activities of Home Port and its non-bank subsidiaries are subject
to these legal and regulatory limitations under the Bank Holding Company Act and
the FRB's regulations thereunder.
In addition to the statutory and regulatory restrictions on the non-bank
activities of Home Port, the FRB has taken the position that it has the
authority, under its general supervisory authority over bank holding companies
and their subsidiaries, to prevent activities of a bank holding company's
subsidiaries that the FRB regards as unsafe or unsound, or to require a bank
holding company to maintain a higher level of capital to support such
activities. In this connection, the FRB has expressed serious reservations about
applications by bank holding companies to acquire savings banks that are engaged
directly or through subsidiaries in real estate development activities.
Financial Modernization. Effective March 11, 2000, pursuant to authority granted
under the Gramm-Leach-Bliley Act ("GLB Act"), a bank holding company may elect
to become a financial holding company ("FHC") which may affiliate with
securities firms and insurance companies and engage in other activities that are
financial in nature. The GLB Act defines "financial in nature" to include
securities underwriting, dealing and market making; sponsoring mutual funds and
investment companies; insurance underwriting and agency; merchant banking
activities; and activities that the Federal Reserve has determined to be closely
related to banking. Under the GLB Act, a bank holding company may become a FHC
by filing a declaration with the FRB if each of its subsidiary banks is well
capitalized under the FDICIA prompt corrective action provisions, is well
managed, and has at least a satisfactory rating under the Community Reinvestment
Act of 1977 ("CRA"). No prior regulatory approval will be required for a FHC to
acquire a company, other than a bank or savings association, engaged in
activities permitted under the GLB Act. Most of the provisions of the GLB Act
require the applicable regulators to adopt regulations in order to implement
these provisions. The GLB Act does not significantly alter the regulatory
environment under which Home Port and the Bank currently operate, as described
above.
Because the legislation is so very new and the changes are radical, Home Port
cannot yet determine how it will be affected by the GLB Act. Home Port has not,
at this time, made any decision with respect to whether it will elect to become
a FHC under the GLB Act.
Massachusetts Banking Laws and Supervision. Massachusetts chartered savings
banks such as the Bank are regulated and supervised by the Commissioner. The
Commissioner is required to examine each state-chartered bank at least once
every two years. The approval of the Commissioner is required to establish or
close branches, merge with other banks, form a bank holding company and
undertake many other activities. Massachusetts statutes and regulations govern
among other things, investment powers, lending powers, deposit activities,
maintenance of surplus and reserve accounts, the distribution of earnings, the
payment of dividends, issuance of capital stock, branching, acquisitions,
mergers, and consolidations.
Any Massachusetts bank that does not operate in accordance with the regulations,
policies and directives of the Commissioner may be subject to sanctions for
non-compliance. The Commissioner may under certain circumstances suspend or
remove trustees, directors or officers who have violated the law, conducted the
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bank's business in a manner which is unsafe, unsound or contrary to the
depositors' interests, or been negligent in the performance of their duties.
Deposit Insurance. The Bank's deposit accounts are insured by the Bank Insurance
Fund of the FDIC to a maximum of $100,000 per separately insured account, and
deposits in excess of that amount in each separately insured account are insured
by the Depositors Insurance Fund.
Pursuant to section 7 of the Federal Deposit Insurance Act (12 USC 1817), as
amended, the FDIC has incorporated a risk based deposit insurance assessment.
Under this risk based system, the assessment rate for an insured depository
depends on the assessment risk determined by the institutions capital level and
supervisory evaluations. Institutions are assigned to one of three capital
groups - well capitalized, adequately capitalized or undercapitalized.
Any FDIC-insured bank which does not operate in accordance with FDIC
regulations, policies and directives may be sanctioned for non-compliance.
Proceedings may be instituted against any FDIC-insured bank or any director or
trustee, officer or employee of such bank who engaged in unsafe or unsound
practices, including the violation of applicable laws and regulations. The FDIC
has the authority to terminate insurance of accounts pursuant to the procedures
established for that purpose or impose civil money penalties.
All Massachusetts chartered savings banks are required to be members of the
Depositors Insurance Fund ("DIF"). The DIF maintains a private deposit insurance
fund which insures all deposits in member banks which are not covered by federal
insurance, which, in the case of the Bank, are its deposits in excess of
$100,000 per insured account. In 1999 and 1998, the Bank's premium for this
insurance was assessed at an annual rate of 1/50 of 1% of insured deposits.
Competition
The Bank faces strong competition from other banks, mortgage banking companies
and other financial service providers, many of which have substantially greater
resources than the Bank.
The Bank's most direct competition for deposits primarily comes from other banks
located on Nantucket Island and in southeastern Massachusetts, credit unions,
mutual funds and government securities. The Bank competes for deposits
principally by offering depositors convenient branch hours and locations,
efficient and attentive service, a wide variety of deposit programs, automated
teller machines and competitive interest rates. It does not rely upon any single
individual, group or entity for a material portion of its deposits.
Competition for real estate loans comes primarily from other banks, mortgage
banking companies and other institutional lenders. The Bank competes for loan
origination primarily based on the efficiency and quality of service that it
provides as well as the interest rates and loan fees that it charges. The
competition for loans varies depending on factors which include, among others,
the general availability of lendable funds and credit, general and local
economic conditions, current interest rate levels, conditions in the mortgage
market and other factors which are not readily predictable.
In addition to competing with other savings banks and financial services
organizations based in Massachusetts, the Bank has and is expected to face
increased competition from major commercial banks headquartered outside of
Massachusetts as a result of the interstate banking laws which currently permit
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banks nationwide to enter the Bank's market area and compete with it for
deposits and loan originations.
Employees
As of December 31, 1999, Home Port and Bank had 68 full-time-equivalent
employees. None of these employees is represented by a collective bargaining
agreement. Home Port believes its employee relations are good.
MARKET PRICES AND DIVIDENDS
Home Port's common stock trades on NASDAQ under the symbol "HPBC." The following
table sets forth, for the periods indicated, the high and low sales prices for
the common stock as quoted on NASDAQ and the amount of cash dividends paid per
share.
Common Stock
------------
Cash
Dividends
High Low Per Share
---- --- ---------
Year Ended December 31, 1999
First Quarter $25 1/2 $22 3/8 $ .20
Second Quarter 26 21 1/8 .20
Third Quarter 26 3/4 24 .20
Fourth Quarter 27 24 1/4 .25
Year Ended December 31, 1998
First Quarter $28 3/4 $21 1/2 $ .20
Second Quarter 28 23 3/8 .20
Third Quarter 27 19 1/8 .20
Fourth Quarter 25 19 1/8 .20
Year Ending December 31, 2000
First Quarter $27 $19 1/4 $ .25
Second Quarter 25 1/4 21 1/2 .25
Third Quarter (through July 28) 36 1/8 23 --
The closing price per share for the common stock as reported on NASDAQ on July
20, 2000, the last full trading day prior to the public announcement of the
proposed merger, was $25.3125. As of the record date, August 25, 2000, there
were approximately 1,841,890 holders of record of the common stock.
Pursuant to the terms of the merger agreement, Home Port will not declare
additional dividends payable in the year 2000.
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INFORMATION REGARDING SEACOAST
Seacoast is a Massachusetts corporation, incorporated on March 14, 1885, and
registered under the Bank Holding Company Act of 1956, as amended (the "BHCA")
for the purpose of qualifying and acting as a bank holding company. The
principal offices of Seacoast are located in New Bedford, Massachusetts.
Seacoast owns all the outstanding shares of common of Compass Bank, a subsidiary
bank organized and domiciled in Massachusetts.
Seacoast, through Compass Bank, engages in the business of banking and other
activities permissible for bank holding companies under the BHCA. Compass Bank
is primarily engaged in commercial and consumer banking with customers located
primarily in the Eastern Massachusetts area. At June 30, 2000, Seacoast, through
Compass Bank, operated 37 full-service banking locations in Massachusetts.
At June 30, 2000, Seacoast had (on a consolidated basis) total assets of
$2,341.2 million, total deposits of $1,660.9 million and shareholders' equity of
$276.5 million.
AVAILABLE INFORMATION
Home Port is subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith files reports, proxy
statements, and other information with the Securities and Exchange Commission.
Such reports, proxy statements and other information can be inspected and copies
at the public reference facilities of the Commission located at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, DC 10549, and the Commission's
Regional offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C., 20549 or by calling the Commission at
1-800-SEC-0330. In addition, the Commission maintains a World Wide Web site at
http://www.sec.gov, which contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
commission, including Home Port.
OTHER BUSINESS
No other business may be presented for consideration at the special meeting
other than as stated in the accompanying Notice of Special Meeting of
Shareholders.
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Execution Copy
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
By and Between
SEACOAST FINANCIAL SERVICES CORPORATION
And
HOME PORT BANCORP, INC.
Dated as of July 20, 2000
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Article I Definitions.......................................................1
1.01 CERTAIN DEFINITIONS.................................................1
1.02 OTHER DEFINITIONAL MATTERS..........................................4
Article II THE MERGER.......................................................4
2.01 THE MERGER..........................................................4
2.02 EFFECTIVE TIME......................................................5
2.03 EFFECT OF THE MERGER................................................5
2.04 CORPORATE CHARTER...................................................5
2.05 BY-LAWS.............................................................5
2.06 DIRECTORS AND OFFICERS..............................................5
2.07 TAX CONSEQUENCES....................................................5
2.08 NANTUCKET BANK......................................................5
Article III CONVERSION OF SECURITIES........................................6
3.01 CONVERSION OF SECURITIES............................................6
3.02 STOCK OPTIONS.......................................................6
3.03 PAYMENT PROCEDURES..................................................6
3.04 RETURN OF EXCHANGE FUND.............................................7
3.05 LOST OR STOLEN CERTIFICATES.........................................8
Article IV REPRESENTATIONS AND WARRANTIES OF THE SELLER.....................8
4.01 ORGANIZATION AND QUALIFICATION; SELLER'S SUBSIDIARIES...............8
4.02 CORPORATE CHARTER; BY-LAWS; CORPORATE RECORDS.......................9
4.03 CAPITALIZATION......................................................9
4.04 AUTHORITY..........................................................10
4.05 NO CONFLICT........................................................10
4.06 CONSENTS AND APPROVALS.............................................10
4.07 COMPLIANCE.........................................................11
4.08 REPORTS............................................................11
4.09 FINANCIAL STATEMENTS...............................................12
4.10 ABSENCE OF CERTAIN CHANGES OR EVENTS...............................13
4.11 ABSENCE OF LITIGATION..............................................14
4.12 EMPLOYEE BENEFIT PROGRAMS..........................................14
4.13 LABOR MATTERS......................................................17
4.14 PROPERTY AND LEASES................................................17
4.15 TAXES AND TAX RETURNS..............................................18
4.16 CERTAIN CONTRACTS..................................................20
4.17 LOAN PORTFOLIO.....................................................21
4.18 INVESTMENT SECURITIES..............................................22
4.19 DERIVATIVE TRANSACTIONS............................................22
4.20 INSURANCE..........................................................22
4.21 ENVIRONMENTAL MATTERS..............................................23
4.22 INTELLECTUAL PROPERTY..............................................24
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4.23 FIDUCIARY ACCOUNTS.................................................24
4.24 AGREEMENTS WITH BANK REGULATORS....................................24
4.25 MATERIAL INTERESTS OF CERTAIN PERSONS..............................25
4.26 BROKERS' FEES; OPINIONS............................................25
4.27 PROXY STATEMENT....................................................25
4.28 SELLER INFORMATION.................................................26
4.29 STATE TAKEOVER LAWS................................................26
4.30 DISCLOSURE.........................................................26
Article V REPRESENTATIONS AND WARRANTIES OF THE BUYER......................26
5.01 CORPORATE ORGANIZATION.............................................26
5.02 AUTHORITY..........................................................26
5.03 NO CONFLICT........................................................27
5.04 CONSENTS AND APPROVALS.............................................27
5.05 COMPLIANCE.........................................................27
5.06 FINANCIAL STATEMENTS...............................................28
5.07 ABSENCE OF LITIGATION..............................................28
5.08 AGREEMENTS WITH BANK REGULATORS....................................28
5.09 BUYER INFORMATION..................................................29
5.10 CAPITAL, FINANCING.................................................29
Article VI CONDUCT OF BUSINESS PENDING THE MERGER..........................29
6.01 COVENANTS OF THE SELLER............................................29
6.02 CERTAIN CHANGES AND ADJUSTMENTS....................................32
6.03 PAYMENT OF DIVIDENDS...............................................32
6.04 COVENANT OF THE BUYER..............................................33
Article VII ADDITIONAL AGREEMENTS..........................................33
7.01 REGULATORY MATTERS.................................................33
7.02 ACCESS TO INFORMATION..............................................34
7.03 STOCKHOLDER MEETING................................................36
7.04 LEGAL CONDITIONS TO MERGER.........................................36
7.05 NO SOLICITATION....................................................36
7.06 EMPLOYEE BENEFIT MATTERS...........................................37
7.06(a) Provision of Benefits........................................37
7.06(b) New Employment Agreements....................................37
7.06(c) Consultant Agreement.........................................37
7.06(d) Continuation of Plans........................................37
7.06(e) Parachute Payments...........................................37
7.07 DIRECTORS' AND OFFICERS' INSURANCE.................................37
7.08 FINANCIAL AND OTHER STATEMENTS.....................................37
7.09 FURTHER ACTION.....................................................37
7.10 PUBLIC ANNOUNCEMENTS...............................................37
7.11 ADDITIONAL AGREEMENTS..............................................37
7.12 UPDATE OF DISCLOSURE SCHEDULES.....................................37
7.13 CURRENT INFORMATION................................................37
7.14 DIRECTORS OF SELLER'S BANK.........................................37
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7.15 VOTING AGREEMENTS..................................................37
Article VIII CONDITIONS TO THE MERGER......................................37
8.01 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER........37
8.01(a) Stockholder Approval.........................................37
8.01(b) Regulatory Approvals.........................................37
8.01(c) No Orders, Injunctions or Restraints; Illegality.............37
8.02 CONDITIONS TO OBLIGATIONS OF THE BUYER.............................37
8.02(a) Representations and Warranties...............................37
8.02(b) Agreements and Covenants.....................................37
8.02(c) Consents Under Agreements....................................37
8.02(d) No Burdensome Condition......................................37
8.02(e) Investment Banker Opinion....................................37
8.02(f) Employment Agreements........................................37
8.02(g) Consultant Agreement.........................................37
8.02(h) Voting Agreements............................................37
8.02(i) Termination of Certain Existing Agreements...................37
8.02(j) Tax Opinion..................................................37
8.02(k) No Parachute Payments........................................37
8.03 CONDITIONS TO OBLIGATIONS OF THE SELLER............................37
8.03(a) Representations and Warranties...............................37
8.03(b) Agreements and Covenants.....................................37
8.03(c) Investment Banker Opinion....................................37
Article IX TERMINATION, AMENDMENT AND WAIVER...............................37
9.01 TERMINATION........................................................37
9.02 EFFECT OF TERMINATION; EXPENSES....................................37
9.03 SELLER SPECIAL PAYMENT.............................................37
9.04 BUYER SPECIAL PAYMENT..............................................37
9.05 AMENDMENT..........................................................37
9.06 WAIVER.............................................................37
Article X GENERAL PROVISIONS...............................................37
10.01 CLOSING...........................................................37
10.02 ALTERNATIVE STRUCTURE.............................................37
10.03 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS........37
10.04 NOTICES...........................................................37
10.05 SEVERABILITY......................................................37
10.06 ENTIRE AGREEMENT..................................................37
10.07 NO THIRD PARTY BENEFICIARIES......................................37
10.08 ASSIGNMENT........................................................37
10.09 PARTIES IN INTEREST...............................................37
10.10 SPECIFIC PERFORMANCE..............................................37
10.11 GOVERNING LAW.....................................................37
10.12 HEADINGS..........................................................37
10.13 INTERPRETATION....................................................37
10.14 COUNTERPARTS......................................................37
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 20, 2000 (this
"Agreement"), by and between SEACOAST FINANCIAL SERVICES CORPORATION, a
Massachusetts corporation (the "Buyer"), and HOME PORT BANCORP, INC., a Delaware
corporation (the "Seller").
WHEREAS, the Boards of Directors of the Buyer and the Seller have each
determined that it is in the best interests of their respective companies and
their stockholders for the Seller to merge with and into the Buyer (the
"Merger"), subject to the terms and conditions set forth herein;
WHEREAS, as a condition and inducement to the Buyer to enter into, and
after the execution of, this Agreement, the Buyer and the Seller are entering
into the Stock Option Agreement (the "Stock Option Agreement"), attached hereto
as Exhibit 1, pursuant to which the Seller has granted an option (the "Stock
Option") to purchase shares of the "Seller Common Stock" (as defined in Section
1.01(v)) to the Buyer; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and to prescribe certain conditions
to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Buyer and Seller agree as follows:
Article I. Definitions
1.01. Certain Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person, including, without limitation,
any partnership or joint venture in which the person (either alone, or through
or together with any subsidiary) has, directly or indirectly, an interest of 15%
or more (provided that such 15% threshold shall be 10% for purposes of the
definition of Acquisition Transaction (as set forth in Section 1.01(b)) and for
purposes of Section 9.03(a)).
(b) "Acquisition Transaction" shall mean (i) a merger, consolidation or
similar transaction involving the Seller, the Seller's Bank or any of Seller's
Subsidiaries, (ii) the disposition, by sale, lease, exchange or otherwise, of
assets of the Seller, the Seller's Bank or any of Seller's Subsidiaries
representing 24.9% or more of the consolidated assets of the Seller, the
Seller's Bank and Seller's Subsidiaries, in a single transaction or series of
transactions, other than sales of mortgages into the secondary market in the
ordinary course of business consistent with past practice, (iii) the issuance,
sale or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 24.9% or more of
the voting power of the Seller, the Seller's Bank or any of Seller's
Subsidiaries, (iv) any person (other than the Buyer or any affiliate of the
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Buyer) shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act) or shall have filed a registration statement under the Securities
Act, with respect to, a tender offer or exchange offer to purchase any shares of
Seller Common Stock such that, upon consummation of such offer, such person
would own or control 24.9% or more of the then outstanding shares of Seller
Common Stock, or (v) any person (other than the Buyer or any affiliate of the
Buyer) shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of, or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which shall have acquired beneficial ownership of, or the
right to acquire beneficial ownership of, 24.9% or more of the then outstanding
shares of Seller Common Stock.
(c) "beneficial owner" with respect to any shares of Seller Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially
owns, directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding or
(iii) which are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or associates or person with whom
such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares.
(d) "business day" means any day on which the principal offices of the
FDIC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of Boston.
(e) "Buyer Special Payment" shall have the meaning defined in Section
9.04(a).
(f) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise.
(g) "Corporate Charter" shall mean a corporation's Articles of
Organization, Certificate of Incorporation, or equivalent organizational
documents.
(h) "Employment Agreements" shall have the meaning defined in Section
7.06(b).
(i) "Existing Consulting Agreement" shall have the meaning defined in
Section 7.06(c).
(j) "Existing Employment Agreements" shall have the meaning defined in
Section 7.06(b).
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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(l) "Expenses" shall have the meaning defined in Section 9.02(b).
(m) "Expiration Date" shall have the meaning defined in Section
9.01(b).
(n) "Investment Banker" shall have the meaning defined in Section 4.26.
(o) "knowledge" as used herein in the context of the Seller shall mean
knowledge of any of Karl Meyer, William Hourihan, John Sweeney or any member of
the Board of Directors of the Seller and as used herein in the context of the
Buyer shall mean knowledge of the Buyer or its subsidiaries.
(p) "Material Adverse Effect" shall have the following meanings in this
Agreement:
(i) When used in connection with the Seller, the Seller's Bank, or
any of the Seller's Subsidiaries, the term "Material Adverse
Effect" means any change or effect that is or would be materially
adverse to (i) the business, assets, liabilities, financial
condition or results of operations of the Seller, the Seller's Bank
and the Seller's Subsidiaries taken as a whole, other than any such
change or effect attributable to or resulting from (x) changes in
interest rates or general economic conditions affecting banks
generally, (y) changes in federal or state banking or tax laws or
regulations affecting banks generally or (z) changes in generally
accepted or regulatory accounting principles applicable to banks or
their holding companies generally; or (ii) the ability of the
Seller, the Seller's Bank or the Seller's Subsidiaries to
consummate the transactions contemplated hereby; and
(ii) When used in connection with the Buyer or the Buyer's Bank,
the term "Material Adverse Effect" means any change or effect that
is or would be materially adverse to (i) the business, assets,
liabilities, financial condition or results of operations of the
Buyer and the Buyer's Bank taken as a whole, other than any such
change or effect attributable to or resulting from (x) changes in
interest rates or general economic conditions affecting banks
generally, (y) changes in federal or state banking or tax laws or
regulations affecting banks generally or (z) changes in generally
accepted or regulatory accounting principles applicable to banks or
their holding companies generally; or (ii) the ability of the Buyer
to consummate the transactions contemplated hereby.
(q) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government.
(r) "Requisite Regulatory Approvals" shall have the meaning defined in
Section 8.01(b).
(s) "Securities Act" shall mean the Securities Act of 1933, as amended.
(t) "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.
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(u) "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 SEC promulgated thereunder.
(v) "Seller Common Stock" means the common stock, par value $.01 per
share, of the Seller.
(w) "Seller Disclosure Schedule" shall have the meaning defined in the
preamble to Article IV.
(x) "Seller Financial Statements" shall mean (i) the audited
consolidated balance sheets (including related notes and schedules, if any) of
Seller as of December 31, 1997, 1998 and 1999 and the consolidated statements of
operations, changes in stockholders' equity and cash flows (including related
notes and schedules, if any) of Seller for each of the three years ended
December 31, 1997, 1998 and 1999 as filed by Seller, in its Securities Documents
and (ii) the unaudited consolidated financial statements of the Seller, the
Seller's Bank and the Seller's Subsidiaries as of June 30, 2000 and June 30,
1999, and the related unaudited consolidated statements of income, changes in
stockholders' equity and cash flows for the six month periods then ended.
(y) "Seller's Bank" shall have the meaning defined in Section 4.01(a).
(z) "Seller's Subsidiaries" shall have the meaning defined in Section
4.01(a).
(aa) "Seller Special Payment" shall have the meaning defined in Section
9.03(a).
(bb) "subsidiary" or "subsidiaries" of the Surviving Corporation, the
Buyer, the Seller or any other person means an affiliate controlled by such
person, directly or indirectly, through one or more intermediaries, except as
otherwise defined herein.
(cc) "Surviving Corporation" shall have the meaning defined in Section
2.01.
1.02. Other Definitional Matters. Unless the context otherwise requires, a
term defined anywhere in this Agreement has the same meaning throughout; all
references to "the Agreement" or "this Agreement" are to this Agreement as
modified, supplemented or amended from time to time; and terms defined in the
singular shall have a comparable meaning when used in the plural, and vice
versa.
Article II. THE MERGER
2.01. The Merger. Subject to the terms and conditions of this Agreement,
in accordance with the Delaware General Corporation Law (the "DGCL") and the
Massachusetts Business Corporation Law (the "MBCL"), at the Effective Time (as
defined in Section 2.02 hereof), the Seller shall merge with and into the Buyer.
Buyer shall be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") in the Merger, and shall continue its corporate
existence under the laws of The Commonwealth of Massachusetts. The name of the
Surviving Corporation shall continue to be Seacoast Financial Services
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Corporation. Upon consummation of the Merger, the separate corporate existence
of the Seller shall terminate.
2.02. Effective Time. As promptly as practicable after all of the
conditions set forth in Article VIII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same, the Buyer
and the Seller shall duly execute and file a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware
(the "Delaware Secretary"), in accordance with the DGCL, and articles of merger
(the "Articles of Merger") with the Secretary of State of The Commonwealth of
Massachusetts (the "Massachusetts Secretary"), in accordance with the MBCL. The
Merger shall become effective on the date (the "Effective Date") and at such
time (the "Effective Time") as set forth in the Certificate of Merger and the
Articles of Merger.
2.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided herein and in the applicable provisions of the DGCL
and the MBCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Buyer and the Seller shall vest in the Surviving Corporation,
and all debts, liabilities, obligations, restrictions, disabilities and duties
of the Buyer and the Seller shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
2.04. Corporate Charter. Unless otherwise determined by the Buyer prior to
the Effective Time, at the Effective Time, the Corporate Charter of the Buyer as
in effect immediately prior to the Effective Time shall be the Corporate Charter
of the Surviving Corporation until thereafter further amended as provided by law
and such Corporate Charter.
2.05. By-Laws. Unless otherwise determined by the Buyer prior to the
Effective Time, the By-Laws of the Buyer, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Corporate Charter of the Surviving
Corporation and such By-Laws.
2.06. Directors and Officers. The directors of the Buyer immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Corporate Charter and
By-Laws of the Surviving Corporation, and the officers of the Buyer immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
2.07. Tax Consequences. It is intended by the parties that the Merger
shall constitute a reorganization within the meaning of Section 368(a) of the
Code, and that this Agreement shall constitute a "plan of reorganization" for
the purposes of Section 368 of the Code.
2.08. Nantucket Bank. The Buyer confirms that it will maintain Nantucket
Bank in existence as a separate subsidiary for a period of at least two years
following the Effective Time; provided, however, that in no event shall the
foregoing prevent the Buyer from taking any action in the reasonable best
interests of the Buyer or in accordance with or based upon regulatory
considerations, safe and sound banking practices, or the fiduciary duties of the
Buyer's directors.
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Article III. CONVERSION OF SECURITIES
3.01. Conversion of Securities.
(a) At the Effective Time, each share of the Seller Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
Seller Common Stock to be cancelled pursuant to Section 3.01(b)) shall be
converted into the right to receive cash in the amount of $37.00 (the "Merger
Consideration") pursuant to the procedures set forth in Section 3.03.
(b) At the Effective Time, all shares of Seller Common Stock that are
owned by the Seller as treasury stock and all shares of Seller Common Stock that
are owned directly or indirectly by the Buyer or the Seller or any of their
respective subsidiaries (other than shares of Seller Common Stock held directly
or indirectly in trust accounts, managed accounts and the like or otherwise held
in a fiduciary capacity that are beneficially owned by third parties (referred
to herein as "Trust Account Shares") and other than any shares of Seller Common
Stock held by Buyer or the Seller or any of their respective subsidiaries in
respect of a debt previously contracted (referred to herein as "DPC Shares"))
shall be canceled and shall cease to exist.
(c) As a result of the Merger and without any action on the part of the
holders thereof, all shares of Seller Common Stock shall cease to be
outstanding, shall be canceled and retired and shall cease to exist and each
holder of a certificate (a "Certificate" and, collectively, the "Certificates")
representing any shares of Seller Common Stock (other than those shares of
Seller Common Stock to be canceled pursuant to Section 3.01(b)) shall thereafter
cease to have any rights with respect to such shares of Seller Common Stock,
except the right to receive, without interest, the Merger Consideration upon the
surrender of such Certificate.
3.02. Stock Options. Prior to the Effective Time, the Seller shall, in
accordance with the terms of the Home Port Directors' Restricted Stock Option
Plan (the "Director Option Plan"), provide written notice to each holder of a
then outstanding stock option to purchase shares pursuant to the Director Option
Plan (whether or not such stock option is then vested or exercisable), that such
stock option shall be, as at the date of such notice, exercisable in full and
that such stock option will terminate at the Effective Time and that, if such
stock option is not exercised or otherwise terminated before the Effective Time,
such holder shall be entitled to receive in cancellation of such option a cash
payment from the Seller at the Closing in an amount equal to the excess of the
Merger Consideration over the per share exercise price of such stock option,
multiplied by the number of shares covered by such stock option, subject to any
required withholding of taxes. Subject to the foregoing, the Director Option
Plan and all options issued thereunder shall terminate at the Effective Time.
The Seller hereby represents and warrants to Purchaser that the maximum number
of shares subject to issuance pursuant to the exercise of stock options issued
and outstanding under the Director Option Plan is not and shall not be at or
prior to the Effective Time more than 30,000.
3.03. Payment Procedures.
(a) Immediately prior to the Effective Time, (i) the Buyer shall
deposit, or shall cause to be deposited, with a bank or trust company selected
by the Buyer and reasonably acceptable to the Seller on or prior to the
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Effective Time (the "Paying Agent"), for the benefit of the holders of shares of
Seller Common Stock, for exchange in accordance with this Article III, cash in
an amount equal to the total Merger Consideration (such cash shall hereinafter
be referred to as the "Exchange Fund").
(b) As soon as practicable after the Effective Time, and in no event
later than three business days thereafter (which date shall be referred to as
the "Mailing Date"), Buyer shall cause the Paying Agent to mail to each holder
of record of a Certificate or Certificates at the Effective Time a form letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent) (the "Transmittal Form") containing
instructions for use in effecting the surrender of the Certificates. The Seller
shall have the right to approve the Transmittal Form.
(c) Each Transmittal Form shall permit the holder (or in the case of
nominee record holders, the beneficial owner through appropriate and customary
documentation and instructions) to receive the Merger Consideration for each
share of Seller Common Stock. A Transmittal Form shall be deemed properly
completed only if accompanied by one or more Certificates representing all
shares of Seller Common Stock covered by such Transmittal Form, together with
duly executed transmittal materials included with the Transmittal Form. Neither
the Buyer nor the Paying Agent shall be under any obligation to notify any
person of any defect in a Transmittal Form.
(d) Upon surrender of a Certificate for exchange and cancellation to
the Paying Agent, together with the Transmittal Form, duly executed, the holder
of such Certificates shall be entitled to receive in exchange therefor a check
representing the amount of cash which such holder has the right to receive in
respect of the Certificate surrendered pursuant to the provisions of Article II
and Article III.
(e) At and after the Effective Time, there shall be no transfers on the
stock transfer books of the Seller of the shares of Seller Common Stock which
were outstanding immediately prior to the Effective Time and if, after the
Effective Time, Certificates are presented for transfer, they shall be canceled
against delivery of the Merger Consideration as hereinabove provided.
(f) The provisions of Section 3.01 and Section 3.03 assume that there
will be 1,871,890 shares of Seller Common Stock outstanding or issuable upon the
exercise of options or warrants or otherwise, at the Effective Time. If there is
any change in this number as of the Effective Time, the provisions of Section
3.01 and Section 3.03, including the Merger Consideration will be appropriately
adjusted.
3.04. Return of Exchange Fund. Any portion of the Exchange Fund that
remains unclaimed by the former stockholders of the Seller six months after the
Effective Time shall be delivered to the Buyer. Any former stockholders of the
Seller who have not theretofore complied with this Article III shall thereafter
look only to the Buyer for payment of any consideration payable as a result of
the Merger pursuant to this Agreement, without any interest thereon. None of the
Buyer, the Seller, the Paying Agent or any other person shall be liable to any
former holder of shares of Seller Common Stock for any shares of stock or cash
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
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3.05. Lost or Stolen Certificates. In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Buyer, the posting by such person of a bond in such reasonable
amount as the Buyer may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Paying Agent or the Buyer will
issue in exchange for such lost, stolen or destroyed Certificate the cash to
which such person is entitled).
Article IV. REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth in a specific section of the Disclosure Schedule
previously delivered by the Seller to the Buyer (the "Seller Disclosure
Schedule"), the Seller hereby represents and warrants to the Buyer as follows:
4.01. Organization and Qualification; Seller's Subsidiaries.
(a) The Seller is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Delaware and a bank holding
company registered with the Board of Governors of the Federal Reserve System
(the "FRB") under the Bank Holding Company Act of 1956, as amended. Seller is
duly qualified to do business and is in good standing as a foreign corporation
in The Commonwealth of Massachusetts. Nantucket Bank is a state chartered
savings bank and wholly-owned subsidiary of the Seller (the "Seller's Bank"),
duly organized and validly existing under the laws of The Commonwealth of
Massachusetts. The deposit accounts of the Seller's Bank are insured by the
Federal Deposit Insurance Corporation (the "FDIC") to the fullest extent
permitted by law and all premiums and assessments required in connection
therewith have been paid by the Seller's Bank. Each subsidiary (as defined in
Section 1.01(bb)) of the Seller (other than the Seller's Bank) (collectively,
the "Seller's Subsidiaries") is a corporation or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. The Seller, the Seller's Bank and each of the
Seller's Subsidiaries each has the requisite power and authority and all
necessary governmental approvals to own, lease and operate all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business and is in good standing in each
jurisdiction where the nature of the business conducted by it or the character
or location of the properties and assets owned, leased or operated by it makes
such licensing or qualification necessary, except where the failure to have
obtained such approval or to be so licensed or qualified and be in good standing
would not, either individually or in the aggregate, have a Material Adverse
Effect.
(b) A true and complete list of all the Seller's Subsidiaries, together
with the jurisdiction of incorporation or organization of each Subsidiary and
the percentage of the outstanding capital stock or other ownership interest by
the Seller or the Seller's Bank of each Subsidiary, is set forth in Section 4.01
of the Seller Disclosure Schedule. Except as set forth in Section 4.01 of the
Seller Disclosure Schedule, neither the Seller nor the Seller's Bank directly or
indirectly owns five percent or more of the capital stock or other equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
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4.02. Corporate Charter; By-Laws; Corporate Records. The Seller has
heretofore made available to the Buyer a complete and correct copy of the
Corporate Charter and the By-Laws or equivalent organizational documents, each
as amended to date, of the Seller, the Seller's Bank and each of the Seller's
Subsidiaries. Such Corporate Charter, By-Laws and equivalent organizational
documents are in full force and effect. None of the Seller, the Seller's Bank or
any of the Seller's Subsidiaries is in violation of any provision of its
Corporate Charter or equivalent organizational documents or of its By-Laws. The
minute books of the Seller, the Seller's Bank and each of the Seller's
Subsidiaries contain in all material respects true and correct records of all
meetings held or true and complete records of all other corporate actions taken
since January 1, 1997 of their respective stockholders and boards of directors
(including committees of their respective boards of directors).
4.03. Capitalization.
(a) The authorized capital stock of the Seller consists of 10,000,000
shares of Seller Common Stock and 2,000,000 shares of serial Preferred Stock
("Seller Preferred Stock"), par value $.01 per share. As of the date hereof, (i)
1,841,890 shares of Seller Common Stock are issued and outstanding, all of which
are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof, (ii) 483,604 shares of Seller Common Stock are held in the treasury of
the Seller, (iii) no shares of Seller Common Stock are held by Seller's Bank or
any of the Seller's Subsidiaries, (iv) no shares of Seller Preferred Stock have
been issued or are outstanding, and (v) 366,536 shares of Seller Common Stock
are reserved for future issuance pursuant to the Stock Option Agreement. Each
issued and outstanding share of capital stock of each Subsidiary is duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. Each
share of capital stock of each Subsidiary owned by the Seller or the Seller's
Bank or any of the other Seller's Subsidiaries is free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Seller's, the Seller's Bank's or such other Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever.
(b) The authorized capital stock of the Seller's Bank consists of
1,000,000 shares of common stock, par value $1.00 per share (the "Seller's Bank
Common Stock") and 500,000 shares of serial Preferred Stock ("Seller's Bank
Preferred Stock"). As of the date hereof, (i) 100,000 shares of Seller's Bank
Common Stock are issued and outstanding, all of which are owned by the Seller
free and clear of any encumbrance or lien (except for directors' qualifying
shares, if any) and all of which are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof, (ii) no shares of the Seller's Bank Common
Stock are held in the treasury of the Seller's Bank or are held by any of the
Seller's Subsidiaries, and (iii) no shares of Seller's Bank Preferred Stock have
been issued or are outstanding.
(c) Except for the Stock Option Agreement and for options to acquire
not more than 30,000 shares of Seller Common Stock pursuant to the Director
Option Plan, a schedule of which is set forth at Section 4.03 of the Seller
Disclosure Schedule, there are no outstanding subscriptions, options, warrants,
calls or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Seller, the Seller's
Bank or any of the Seller's Subsidiaries or obligating the Seller, the Seller's
Bank or any of the Seller's Subsidiaries to issue or sell any shares of capital
stock of, or other equity interests in, the Seller, the Seller's Bank or any of
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the Seller's Subsidiaries. There are no outstanding contractual obligations of
the Seller, the Seller's Bank or any of the Seller's Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of, or other equity
interests in, the Seller, the Seller's Bank or any of the Seller's Subsidiaries
or to provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary.
4.04. Authority. The Seller has full corporate power and authority to
execute and deliver this Agreement and, subject to the approval of the Seller's
stockholders, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by unanimous vote of the
Board of Directors of the Seller (the "Seller Board"). The Seller Board has
directed that this Agreement and the transactions contemplated hereby be
submitted to the Seller's stockholders for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by the requisite
vote of the Seller's stockholders, no other corporate proceedings on the part of
the Seller are necessary to approve this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Seller and constitutes a valid and binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms.
4.05. No Conflict. Neither the execution, delivery and performance of this
Agreement by the Seller, nor the consummation by the Seller of the transactions
contemplated hereby, nor compliance by the Seller with any of the terms or
provisions hereof, will (i) conflict with, violate or result in a breach of any
provision of the Corporate Charter or By-Laws of the Seller or the articles of
organization, by-laws or equivalent organizational documents of the Seller's
Bank or any of the Seller's Subsidiaries, (ii) conflict with, violate or result
in a breach of any statute, code, ordinance, rule, regulation, order, writ,
judgment, injunction or decree applicable to the Seller, the Seller's Bank or
any of the Seller's Subsidiaries, or by which any property or asset of the
Seller, the Seller's Bank or any of the Seller's Subsidiaries is bound or
affected, or (iii) conflict with, violate or result in a breach of any
provisions of or the loss of any benefit under, constitute a default (or an
event, which, with notice or lapse of time, or both, would constitute a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien, pledge, security interest,
charge or other encumbrance on any property or asset of the Seller, the Seller's
Bank or any of the Seller's Subsidiaries pursuant to any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Seller, the Seller's Bank or any of the Seller's
Subsidiaries is a party, or by which the Seller, the Seller's Bank or any of the
Seller's Subsidiaries is bound or affected, except, in the case of clause (iii)
above, for any such conflicts, violations, breaches, defaults or other
occurrences which would not, either individually or in the aggregate, have a
Material Adverse Effect.
4.06. Consents and Approvals. The execution, delivery and performance of
this Agreement by the Seller does not require any consent, approval,
authorization or permit of, or filing with or notification to, any court,
administrative agency or commission or other governmental or regulatory
authority or instrumentality, domestic or foreign, including, without
limitation, any Bank Regulator (each a "Governmental Entity") or with any third
party, except (i) for applicable requirements, if any, of the Exchange Act,
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state takeover laws, and filing and recordation of appropriate merger documents
as required by the laws of The Commonwealth of Massachusetts and the State of
Delaware, (ii) for consents and approvals of or filings, registrations or
negotiations with the FRB, the FDIC, the Massachusetts Board of Bank
Incorporation (the "BBI"), and the Massachusetts Housing Partnership Fund, (iii)
the filings required by this Agreement and (iv) where failure to obtain any such
consent, approval, authorization or permit, or to make any such filing or
notification, would not prevent or significantly delay consummation of the
Merger or otherwise prevent the Seller from performing its obligations under
this Agreement, or would not, either individually or in the aggregate, have a
Material Adverse Effect. The Seller is not aware of any reason why the
approvals, consents and waivers of Governmental Entities referred to herein and
in Section 8.01(b) should not be obtained.
4.07. Compliance. The Seller, the Seller's Bank and each of the Seller's
Subsidiaries hold all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to, and have complied with and are not in conflict with, or in default
or violation of, (a) any statute, code, ordinance, law, rule, regulation, order,
writ, judgment, injunction or decree, published policies and guidelines of any
Governmental Entity, applicable to the Seller, the Seller's Bank or any of the
Seller's Subsidiaries or by which any property or asset of the Seller, the
Seller's Bank or any of the Seller's Subsidiaries is bound or affected or (b)
any note, bond, mortgage, indenture, deed of trust, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Seller, the Seller's Bank or any of the Seller's Subsidiaries is a party or by
which the Seller, the Seller's Bank or any of the Seller's Subsidiaries or any
property or asset of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries is bound or affected, except for any such non-compliance,
conflicts, defaults or violations that would not, either individually or in the
aggregate, have a Material Adverse Effect; and none of the Seller, the Seller's
Bank or any of the Seller's Subsidiaries knows of, or has received notice of,
any material violations of any of the above. Without limiting the generality of
the foregoing, none of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries has been advised of the existence of any facts or circumstances
which would cause the Seller's Bank to be deemed not to be in satisfactory
compliance with the Community Reinvestment Act of 1977, as amended, and the
regulations promulgated thereunder.
4.08. Reports.
(a) Since January 1, 1997, the Seller has timely filed with the SEC 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) The Seller, the Seller's Bank and each of the Seller's Subsidiaries
has timely filed and made available to the Buyer true and complete copies of all
forms, reports and documents required to be filed by each of them with all
appropriate federal or state governmental or regulatory authorities charged with
the supervision of banks or bank holding companies or engaged in the insurance
of bank deposits, including without limitation, the Commissioner of Banks of The
Commonwealth of Massachusetts (the "Massachusetts Commissioner"), the FRB, and
the FDIC (collectively, the "Bank Regulators") since January 1, 1997, and have
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paid all fees and assessments due and payable in connection therewith. Such
reports as of their respective date of filing complied in all material respects
with the requirements of all laws, rules and regulations enforced or promulgated
by such Bank Regulators. Except for normal periodic examinations conducted by
the FDIC, the Massachusetts Commissioner or any other Bank Regulator in the
regular course of the business of the Seller, the Seller's Bank and the Seller's
Subsidiaries (the "Bank Examinations"), no Bank Regulator has initiated any
proceeding or, to the knowledge of the Seller, investigation into the business
or operations of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries since December 31, 1996. The Seller, the Seller's Bank and the
Seller's Subsidiaries have not received any objection from any regulatory agency
to any of their responses to any violation, criticism or exception by any Bank
Regulator with respect to any report or statement relating to any examinations,
which objection remains unresolved.
4.09. Financial Statements.
(a) The Seller has previously made available to the Buyer, for copying,
originals of the Seller Financial Statements, which, in the case of the audited
statements, are accompanied by the audit report of KPMG LLP, independent public
accountants for the Seller. Each of the Seller Financial Statements referred to
in this Section 4.09 (including the related notes, where applicable) fairly
presents (subject, in the case of the unaudited statements, to audit adjustments
normal in nature and amount and the addition of customary notes), and the
financial statements referred to in Section 7.08 hereof each will fairly
present, the results of the consolidated operations and changes in stockholders'
equity and consolidated financial position of the Seller, the Seller's Bank and
the Seller's Subsidiaries for the respective periods or as of the respective
dates therein set forth; each of the Seller Financial Statements (including the
related notes, where applicable) has been prepared, and the financial statements
referred to in Section 7.08 hereof will be prepared, in accordance with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except as indicated in the notes thereto or, in the case
of unaudited statements, as permitted by Form 10-Q under the Exchange Act. The
audits of the Seller, the Seller's Bank and the Seller's Subsidiaries have been
conducted in all material respects in accordance with generally accepted
auditing standards. Without limiting the generality of the foregoing, (x) the
allowance for possible loan losses included in the Seller Financial Statements
was, and the allowance for possible loan losses to be included in the financial
statements referred to in Section 7.08 hereof will be, determined in accordance
with GAAP and is, and will be, adequate to provide for losses relating to or
inherent in the loan and lease portfolios of the Seller, the Seller's Bank and
the Seller's Subsidiaries (including without limitation commitments to extend
credit), and (y) the Other Real Estate Owned ("OREO") included in the Seller
Financial Statements was, and the OREO included in the financial statements
referred to in Section 7.08 hereof will be, carried net of reserves at the lower
of cost or market value in accordance with GAAP or the regulations or other
requirements of the FDIC and the Massachusetts Commissioner. The books and
records of the Seller, the Seller's Bank and the Seller's Subsidiaries are true
and complete in all material respects and have been, and are being, maintained
in all material respects in accordance with applicable legal and accounting
requirements.
(b) The consolidated balance sheet of the Seller, the Seller's Bank and
the Seller's Subsidiaries as of December 31, 1999 and as of June 30, 2000,
including the notes thereto, each makes adequate provision for all material
liabilities and obligations of every nature (whether accrued, absolute,
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contingent or otherwise and whether due or to become due) of the Seller, the
Seller's Bank and the Seller's Subsidiaries as of December 31, 1999 and as of
June 30, 1999, respectively, and except as and to the extent set forth on such
consolidated balance sheet, none of the Seller, the Seller's Bank or any of the
Seller's Subsidiaries has any material liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise and whether due or to become
due) which would be required to be reflected or disclosed on a balance sheet, or
in the notes thereto, prepared in accordance with GAAP.
(c) To the knowledge of the Seller, no facts or circumstances exist
which would give the Seller reason to believe that a material liability or
obligation that, in accordance with GAAP applied on a consistent basis, should
have been reflected or disclosed on such balance sheet, was not so reflected or
disclosed.
4.10. Absence of Certain Changes or Events. Since December 31, 1999,
except as contemplated by this Agreement, the Seller, the Seller's Bank and the
Seller's Subsidiaries have conducted their businesses only in the ordinary
course and in manners consistent with past practice and, since December 31,
1999, except as set forth in Section 4.10 of the Seller Disclosure Schedule,
there has not been (a) either individually or in the aggregate, any Material
Adverse Effect, (b) any material damage, destruction or loss with respect to any
property or asset of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries, (c) any change by the Seller, the Seller's Bank or any of the
Seller's Subsidiaries in its accounting methods, principles or practices, other
than changes required by applicable law or GAAP or regulatory accounting as
concurred in by the Seller's independent accountants, (d) any revaluation by the
Seller, the Seller's Bank or any of the Seller's Subsidiaries of any asset,
including, without limitation, any writing down of the value of inventory or
writing off of notes or accounts receivable, other than in the ordinary course
of business consistent with past practice, (e) any entry by the Seller, the
Seller's Bank or any of the Seller's Subsidiaries into any contract or
commitment (other than with respect to Loans, as hereinafter defined) of more
than $200,000, (f) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Seller, the Seller's Bank or
any of the Seller's Subsidiaries except in the ordinary course of business in an
amount consistent with past practice or any redemption, purchase or other
acquisition of any of its securities, (g) except as would have been permitted by
Section 6.01(b)(ix) hereof, any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any directors, officers or
employees of the Seller, the Seller's Bank or any of the Seller's Subsidiaries,
or any grant of severance or termination pay, or any contract or arrangement
entered into to make or grant any severance or termination pay, any payment of
any bonus, or the taking of any other material action not in the ordinary course
of business with respect to the compensation or employment of directors,
officers or employees of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries, (h) any strike, work stoppage, slowdown or other labor
disturbance, (i) any material election made by the Seller, the Seller's Bank or
any of the Seller's Subsidiaries for federal or state income tax purposes, (j)
any change in the credit policies or procedures of the Seller, the Seller's Bank
or any of the Seller's Subsidiaries, the effect of which was or is to make any
such policy or procedure materially less restrictive in any material respect,
(k) any material liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise and whether due or to become due), including
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without limiting the generality of the foregoing, liabilities as guarantor under
any guarantees or liabilities for taxes, other than in the ordinary course of
business consistent with past practice, (l) any forgiveness or cancellation of
any indebtedness or contractual obligation other than in the ordinary course of
business consistent with past practice, (m) except with respect to funds
borrowed by the Seller, the Seller's Bank or any of the Seller's Subsidiaries,
any mortgage, pledge, lien or lease of any assets, tangible or intangible, of
the Seller, the Seller's Bank or any of the Seller's Subsidiaries with a value
in excess of $25,000 in the aggregate (n) any acquisition or disposition of any
assets or properties having a value in excess of $100,000, or any contract for
any such acquisition or disposition entered into, or (o) any lease of real or
personal property entered into, other than in connection with foreclosed
property or in the ordinary course of business consistent with past practice.
4.11. Absence of Litigation. None of the Seller, the Seller's Bank or any
of the Seller's Subsidiaries is a party to any, and there are no pending, or to
the knowledge of the Seller, threatened legal, administrative, arbitral or other
claims, actions, proceedings or investigations of any nature, against the
Seller, the Seller's Bank or any of the Seller's Subsidiaries or any property or
asset of the Seller, the Seller's Bank or any of the Seller's Subsidiaries,
before any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign, which, either individually or in the
aggregate, would have a Material Adverse Effect and no facts or circumstances
have come to the Seller's attention which have caused it to believe that a
material claim, action, proceeding or investigation against or affecting the
Seller, the Seller's Bank or any of the Seller's Subsidiaries could reasonably
be expected to occur. None of the Seller, the Seller's Bank or any of the
Seller's Subsidiaries, or any property or asset of the Seller, the Seller's Bank
or any of the Seller's Subsidiaries, is subject to any order, writ, judgment,
injunction, decree, determination or award which restricts its ability to
conduct business in any area in which it presently does business or has or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
4.12. Employee Benefit Programs.
(a) Section 4.12(a) of the Seller Disclosure Schedule sets forth a list
of every material Employee Program that has been maintained by the Seller, the
Seller's Bank or an Affiliate at any time during the three years preceding this
Agreement.
(b) Each Employee Program which has ever been maintained by the Seller,
the Seller's Bank or an Affiliate and which has been intended to qualify under
Section 401(a) or 501(c)(9) of the Internal Revenue Code of 1986, as amended
(the "Code"), has received a favorable determination or approval letter from the
Internal Revenue Service ("IRS") regarding its qualification under such section
and has, in fact, been qualified under the applicable section of the Code from
the effective date of such Employee Program through and including the Closing
Date (or, if earlier, the date that all of such Employee Program's assets were
distributed). No event or omission has occurred which would cause any Employee
Program to lose its qualification or otherwise fail to satisfy the relevant
requirements to provide tax-favored benefits under the applicable Code Section
(including without limitation Code Sections 105, 125, 401(a) and 501(c)(9)).
Each asset held under any such Employee Program may be liquidated or terminated
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without the imposition of any redemption fee, surrender charge or comparable
liability. No partial termination (within the meaning of Section 411(d)(3) of
the Code) has occurred with respect to any Employee Program that is qualified
under Section 401(a) of the Code.
(c) None of the Seller, the Seller's Bank or any Affiliate knows, nor
should any of them reasonably know, of any material failure of any party to
comply with any laws applicable with respect to the Employee Programs that are
currently maintained by the Seller, the Seller's Bank or any Affiliate. With
respect to any Employee Program currently maintained by the Seller, the Seller's
Bank or any Affiliate, there has been no (i) "prohibited transaction," as
defined in Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Code Section 4975, (ii) material failure to comply with
any provision of ERISA, other applicable law, or any agreement, or (iii)
non-deductible contribution, which, in the case of any of (i), (ii), or (iii),
could subject the Seller, the Seller's Bank or any Affiliate to material
liability either directly or indirectly (including, without limitation, through
any obligation of indemnification or contribution) for any damages, penalties,
or taxes, or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any such Employee Program. All payments and/or contributions required
to have been made (under the provisions of any agreements or other governing
documents or applicable law) with respect to all Employee Programs ever
maintained by the Seller, the Seller's Bank or any Affiliate, for all periods
prior to the Closing Date, either have been made or have been accrued (and all
such unpaid but accrued amounts are described on Section 4.12(c) of the Seller
Disclosure Schedule).
(d) None of the Seller, the Seller's Bank nor any Affiliate has
incurred any liability under title IV of ERISA which has not been paid in full
prior to the Closing. There has been no "accumulated funding deficiency"
(whether or not waived) with respect to any Employee Program ever maintained by
the Seller, the Seller's Bank or any Affiliate and subject to Code Section 412
or ERISA Section 302. With respect to any Employee Program maintained by the
Seller, the Seller's Bank or an Affiliate and subject to title IV of ERISA,
there has been no (nor will be any as a result of the transaction contemplated
by this Agreement) (i) "reportable event," within the meaning of ERISA Section
4043, or the regulations thereunder (for which notice the notice requirement is
not waived under 29 C.F.R. Part 2615) and (ii) no event or condition which
presents a material risk of plan termination or any other event that may cause
the Seller, the Seller's Bank or any Affiliate to incur liability or have a lien
imposed on its assets under title IV of ERISA. No Employee Program maintained by
the Seller, the Seller's Bank or an Affiliate and subject to title IV of ERISA
(other than a Multiemployer Plan) has any "unfunded benefit liabilities" within
the meaning of ERISA Section 4001(a)(18), as of the Closing Date. Neither the
Seller, the Seller's Bank nor any Affiliate has ever maintained a Multiemployer
Plan. None of the Employee Programs ever maintained by the Seller, the Seller's
Bank or any Affiliate has ever provided health care or any other non-pension
benefits to any employees after their employment is terminated (other than as
required by part 6 of subtitle B of title I of ERISA) or has ever promised to
provide such post-termination benefits.
(e) With respect to each Employee Program maintained by the Seller, the
Seller's Bank or any Subsidiary within the three years preceding the Closing
Date, complete and correct copies of the following documents (if applicable to
such Employee Program) have previously been delivered to the Buyer: (i) all
documents embodying or governing such Employee Program, and any funding medium
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for the Employee Program (including, without limitation, trust agreements) as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code Section 401(a) or 501(c)(9), and any applications for determination or
approval subsequently filed with the IRS; (iii) the three most recently filed
IRS Forms 5500, with all applicable schedules and accountants' opinions attached
thereto; (iv) the three most recent actuarial valuation reports completed with
respect to such Employee Program; (v) the summary plan description for such
Employee Program (or other descriptions of such Employee Program provided to
employees) and all modifications thereto; (vi) any insurance policy (including
any fiduciary liability insurance policy or fidelity bond) related to such
Employee Program; (vii) any registration statement or other filing made pursuant
to any federal or state securities law and (viii) all correspondence to and from
any state or federal agency within the last six years with respect to such
Employee Program.
(f) Each Employee Program required to be listed on Section 4.12(a) of
the Seller Disclosure Schedule may be amended, terminated, or otherwise modified
by the Seller, the Seller's Bank or the Affiliate to the greatest extent
permitted by applicable law, including the elimination of any and all future
benefit accruals under any Employee Program and no employee communications or
provision of any Employee Program document has failed to effectively reserve the
right of the Seller, the Seller's Bank or the Affiliate to so amend, terminate
or otherwise modify such Employee Program.
(g) Each Employee Program currently maintained by the Seller or the
Seller's Bank (including each non-qualified deferred compensation arrangement)
is maintained in compliance with all applicable requirements of federal and
state securities laws including (without limitation, if applicable) the
requirements that the offering of interests in such Employee Program be
registered under the Securities Act of 1933 and/or state "Blue Sky" laws.
(h) Each Employee Program currently maintained by the Seller, the
Seller's Bank or an Affiliate has complied with the applicable notification and
other applicable requirements of the Consolidated Omnibus Budget Reconciliation
Act of 1985, Health Insurance Portability and Accountability Act of 1996, the
Newborns' and Mothers' Health Protection Act of 1996, the Mental Health Parity
Act of 1996, and the Women's Health and Cancer Rights Act of 1998.
(i) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans within the
meaning of ERISA Section 3(3), including, but not limited to, multiple
employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes
and employee benefit plans (such as foreign or excess benefit plans)
which are not subject to ERISA; (B) all stock option plans, stock
purchase plans, bonus or incentive award plans, severance pay policies
or agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements (including any informal arrangements) not
described in (A) above, including without limitation, any arrangement
intended to comply with Code Section 120, 125, 127, 129 or 137; and (C)
all plans or arrangements providing compensation to employee and
non-employee directors. In the case of an Employee Program funded
through a trust described in Code Section 401(a) or an organization
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described in Code Section 501(c)(9), or any other funding vehicle, each
reference to such Employee Program shall include a reference to such
trust, organization or other vehicle.
(ii) An entity "maintains" an Employee Program if such entity sponsors,
contributes to, or provides benefits under or through such Employee
Program, or has any obligation (by agreement or under applicable law) to
contribute to or provide benefits under or through such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" of the Seller if it would have ever
been considered a single employer with the Seller under ERISA Section
4001(b) or part of the same "controlled group" as the Seller for
purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means an employee pension or welfare benefit
plan to which more than one unaffiliated employer contributes and which
is maintained pursuant to one or more collective bargaining agreements.
4.13. Labor Matters. No work stoppage involving the Seller, the Seller's
Bank or any of the Seller's Subsidiaries is pending or, to the knowledge of the
Seller, threatened. None of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries is involved in, or, to the knowledge of the Seller, threatened with
or affected by, any dispute, arbitration, lawsuit or administrative proceeding
relating to labor or employment matters which might reasonably be expected to
interfere in any material respect with the respective business activities of the
Seller, the Seller's Bank or any of the Seller's Subsidiaries. No employees of
the Seller, the Seller's Bank or any of the Seller's Subsidiaries are
represented by any labor union, and, to the knowledge of the Seller, no labor
union is attempting to organize employees of the Seller, the Seller's Bank or
any of the Seller's Subsidiaries.
4.14. Property and Leases.
(a) The Seller, the Seller's Bank and each of the Seller's Subsidiaries
each has good and marketable title to all the real property and all other
property owned by it and included in the consolidated balance sheet of the
Seller, the Seller's Bank and the Seller's Subsidiaries included in audited
financial statements for the period ended December 31, 1999. Each parcel of real
property, and each item of personal property, owned or leased by the Seller, the
Seller's Bank or any of the Seller's Subsidiaries (i) is owned or leased free
and clear of all mortgages, pledges, liens, security interests, conditional and
installment sale agreements, encumbrances, charges or other claims of third
parties of any kind (collectively, "Liens"), other than (A) Liens for current
taxes and assessments not yet past due or which are being contested in good
faith, (B) inchoate mechanics' and materialmen's Liens for construction in
progress, (C) workmen's, repairmen's, warehousemen's and carriers' Liens arising
in the ordinary course of business of the Seller, the Seller's Bank or such
Subsidiary consistent with past practice, (D) all matters of record, Liens and
other imperfections of title and encumbrances which, either individually or in
the aggregate, would not be material, and (E) those items that secure public or
statutory obligations or any discount with, borrowing from, or obligations to
any Federal Reserve Bank or Federal Home Loan Bank, interbank credit facilities,
or any transaction by a Subsidiary acting in a fiduciary capacity (collectively,
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"Permitted Liens"), and (ii) is neither subject to any governmental decree or
order to be sold nor is being condemned, expropriated or otherwise taken by any
public authority with or without payment of compensation therefor, nor, to the
knowledge of the Seller, has any such condemnation, expropriation or taking been
proposed. None of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries has received any notice of violation of any applicable zoning
regulation, ordinance or other law, order, regulation or requirement relating to
its properties.
(b) All leases of real property leased for the use or benefit of the
Seller, the Seller's Bank or any of the Seller's Subsidiaries to which the
Seller, the Seller's Bank or any of the Seller's Subsidiaries is a party
requiring rental payments in excess of $25,000 during the period of the lease,
and all amendments and modifications thereto, are in full force and effect, and
there exists no default under any such lease by the Seller, the Seller's Bank or
any of the Seller's Subsidiaries, nor, to the knowledge of the Seller, any event
which with notice or lapse of time or both would constitute a material default
thereunder by the Seller, the Seller's Bank or any of the Seller's Subsidiaries.
4.15. Taxes and Tax Returns. To the knowledge of Seller and except as set
forth in Section 4.15 of the Seller Disclosure Schedules:
(a) Each of the Seller, the Seller's Bank and the Seller's Subsidiaries
has filed all Tax Returns that it was required to file. All such Tax Returns
were correct and complete in all respects. All Taxes owed by Seller, the
Seller's Bank and the Seller's Subsidiaries (whether or not shown on any Tax
Return) have been paid. None of the Seller, the Seller's Bank or the Seller's
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where the Seller, the Seller's Bank or the Seller's Subsidiaries do
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of the
Seller, the Seller's Bank or the Seller's Subsidiaries that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) Each of the Seller, the Seller's Bank and the Seller's Subsidiaries
has withheld and paid all material Taxes required to have been withheld and paid
in connection with amounts paid or owing or credited to the account of any
customer, employee, independent contractor, creditor, stockholder, or other
third party.
(c) No director or officer (or employee responsible for Tax matters) of
the Seller, the Seller's Bank or the Seller's Subsidiaries expects any authority
to assess any additional material Taxes for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax Liability of
the Seller, the Seller's Bank or the Seller's Subsidiaries either (A) claimed or
raised by any authority in writing or (B) as to which any of the directors and
officers (and employees responsible for Tax matters) of the Seller, the Seller's
Bank or the Seller's Subsidiaries has knowledge based upon personal contact with
any agent of such authority. Section 4.15(c) of the Seller Disclosure Schedule
lists all federal, state, local, and foreign income Tax Returns filed with
respect to the Seller, the Seller's Bank or the Seller's Subsidiaries for
taxable periods ending on or after December 31, 1992, indicates those income Tax
Returns that have been audited, and indicates those income Tax Returns that
currently are the subject of audit. The Seller has delivered to the Buyer
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correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Seller, the Seller's Bank or the Seller's Subsidiaries since December 31, 1992.
(d) None of the Seller, the Seller's Bank or any Subsidiary has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(e) None of the Seller, the Seller's Bank or any Seller's Subsidiary
has filed a consent under Section 341(f) of the Code, concerning collapsible
corporations. No property of the Seller, the Seller's Bank or any Seller's
Subsidiary is property that the Seller, the Seller's Bank or any Subsidiary is
or will be required to be treated as being owned by another person pursuant to
the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954 (as in
effect prior to the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Code Section 168(h). None of the Seller, the Seller's Bank
or any Seller's Subsidiary has been required to include in income any adjustment
pursuant to Code Section 481 by reason of a voluntary change in accounting
method initiated by the Seller, the Seller's Bank or any Seller's Subsidiary.
None of the Seller, the Seller's Bank or any Seller's Subsidiary has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code Section 280G or Code Section 162(m). None of the
Seller, the Seller's Bank or any Seller's Subsidiary has been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). None of
the Seller, the Seller's Bank or any Seller's Subsidiary is a party to any Tax
allocation or sharing agreement. None of the Seller, the Seller's Bank or any
Seller's Subsidiary (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Seller) or (B) has any Liability for the Taxes of any person
(other than the Seller, the Seller's Bank or any Subsidiary) under Treasury
Regulations Section 1.1506-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(f) The unpaid Taxes of the Seller, the Seller's Bank and each
Subsidiary (A) did not, as of December 31, 1999, exceed by any material amount
the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the unaudited consolidated balance sheet of Seller and its
Seller's Subsidiaries as of December 31, 1999 (rather than in any notes thereto)
and (B) do not exceed by any material amount that reserve as adjusted for the
passage of time through the Closing Date.
(g) For purposes of this Section 4.15
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued
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or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and
payable, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the
borrowing of money.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, net worth, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not, and includes
amounts for which the Seller, the Seller's Bank or any Subsidiary is
liable in its own right or as transferee of the assets of, or successor
to, any corporation, person, association, partnership, joint venture,
or other entity.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment
thereof.
4.16. Certain Contracts.
(a) Except as set forth in Section 4.16(a) of the Seller Disclosure
Schedule, none of the Seller, the Seller's Bank or any Subsidiary is a party to
or bound by any contract, arrangement, commitment or understanding (whether
written or oral): (i) with respect to the employment of any director, officer,
employee or consultant, (ii) which, upon the consummation of the transactions
contemplated by this Agreement, will result in any payment (whether of severance
pay or otherwise) becoming due from the Seller, the Seller's Bank, or any of its
Seller's Subsidiaries to any officer or employee thereof, (iii) which is a
material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC)
to be performed after the date of this Agreement, (iv) which is a consulting or
other agreement (including agreements entered into in the ordinary course and
data processing, software programming and licensing contracts) not terminable on
60 days or less notice involving the payment of more than $50,000 per annum, (v)
which materially restricts the conduct of any line of business by the Seller,
the Seller's Bank, or any of the Seller's Subsidiaries, (vi) with or to a labor
union or guild (including any collective bargaining agreement), or (vii)
(including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan) any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. The Seller has previously
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delivered to the Buyer true and complete copies of all employment, consulting
and deferred compensation agreements which are in writing and to which the
Seller, the Seller's Bank or any of the Seller's Subsidiaries is a party. Each
contract, arrangement, commitment or understanding of the type described in this
Section, whether or not set forth in Section 4.16(a) of the Seller Disclosure
Schedule, is referred to herein as a "Seller Contract".
(b) Except as set forth in Section 4.16(b) of the Seller Disclosure
Schedule, (i) to the knowledge of the Seller, each Seller Contract is legal,
valid and binding upon the Seller, the Seller's Bank or such Subsidiary, as the
case may be, and in full force and effect, (ii) the Seller, the Seller's Bank
and each of the Seller's Subsidiaries has in all material respects performed all
obligations required to be performed by it to date under each such Seller
Contract, and (iii) no event or condition exists which constitutes or, after
notice or lapse of time or both, would constitute, a material default on the
part of the Seller, the Seller's Bank or any of the Seller's Subsidiaries under
any such Seller Contract.
4.17. Loan Portfolio. Except as set forth in Section 4.17 of the Seller
Disclosure Schedule, none of the Seller, the Seller's Bank or any Subsidiary is
a party to any written or oral (a) loan agreement, note or borrowing arrangement
(including, without limitation, leases and credit enhancements) (collectively,
"Loans") as to which the obligor is, as of the date of this Agreement, over 90
days delinquent in payment of principal or interest, or (b) Loan with any
director, executive officer or, to the knowledge of the Seller, five percent
stockholder of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries, or to the knowledge of the Seller, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. To the knowledge of the Seller, all of the Loans originated and held
on the date hereof and at the Effective Time by the Seller, the Seller's Bank
and the Seller's Subsidiaries, and any other Loans purchased and held currently
and at the Effective Time by the Seller, the Seller's Bank and the Seller's
Subsidiaries, were solicited, originated and exist, and will exist at the
Effective Time, in material compliance with all applicable loan policies and
procedures of the Seller, the Seller's Bank and the Seller's Subsidiaries.
Section 4.17 of the Seller Disclosure Schedule sets forth as of the date hereof,
(i) all of the Loans in original principal amount in excess of $50,000 of the
Seller, the Seller's Bank or any of the Seller's Subsidiaries that as of the
date of this Agreement are classified as "Other Loans Specially Mentioned,"
"Special Mention," "Substandard," "Doubtful," "Loss," "Classified,"
"Criticized," "Watch list" or words of similar import, together with the
principal amount of and accrued and unpaid interest on each such Loan and the
identity of the obligor thereunder, and (ii) by category of Loan (i.e.,
commercial, consumer, etc.), all of the other Loans of the Seller, the Seller's
Bank and the Seller's Subsidiaries that as of the date of this Agreement are
classified as such, together with the aggregate principal amount of such Loans
by category, it being understood that no representation is being made that the
FDIC or the Massachusetts Commissioner would agree with the loan classifications
contained in Section 4.17 of the Seller Disclosure Schedule. The Seller shall
promptly inform the Buyer in writing of any Loan the original principal balance
of which exceeds $50,000 that becomes classified in the manner described in this
Section 4.17, or any Loan the classification of which is materially and
adversely changed at any time after the date of this Agreement. The information
(including electronic information and information contained on tapes and
computer disks) with respect to the Loans furnished to Buyer by the Seller is
true and complete in all material respects.
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4.18. Investment Securities. Section 4.18 of the Seller Disclosure
Schedule sets forth the book and market value as of June 30, 2000 of the
investment securities, mortgage backed securities and securities held for sale
by the Seller, the Seller's Bank and the Seller's Subsidiaries. Section 4.18 of
the Seller Disclosure Schedule also sets forth the names of all the joint
ventures in which the Seller, the Seller's Bank or any of the Seller's
Subsidiaries has an investment (whether or not such joint ventures remain
active). Except for pledges to secure public and trust deposits, Federal Reserve
borrowings, repurchase agreements and reverse repurchase agreements entered into
in arms-length transactions pursuant to normal commercial terms and conditions
and other pledges required by law, none of the investments reflected in the
Seller Balance Sheet for the period ended December 31, 1999, and none of the
material investments made by the Seller, the Seller's Bank or any of the
Seller's Subsidiaries since December 31, 1999, is subject to any restriction
(contractual, statutory or otherwise) that would materially impair the ability
of the entity holding such investment freely to dispose of such investment at
any time. The Seller and the Seller's Bank have (i) properly reported as such
any investment securities which are required under GAAP to be classified as
"available for sale" at the lower of cost or market, and (ii) accounted for any
decline in the market value of its marketable equity securities portfolio in
accordance with Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 12 and Staff Accounting Bulletin No. 59, including
without limitation the recognition through the Seller's consolidated statement
of operations of any unrealized loss with respect to any individual marketable
equity security as a realized loss in the accounting period in which a decline
in the market value of such security is determined to be "other than temporary."
4.19. Derivative Transactions. None of the Seller, the Seller's Bank or
the Seller's Subsidiaries is engaged in transactions in or involving forwards,
futures, options on futures, swaps or similar off-balance sheet derivative
instruments except as agent on the order and for the account of others other
than Federal Home Loan Bank advances or in connection with mortgage loan
secondary market activities in the ordinary course of business consistent with
the Seller's Bank's past practices.
4.20. Insurance. The Seller has made available to the Buyer true and
complete copies of all material policies of insurance of the Seller, the
Seller's Bank and the Seller's Subsidiaries currently in effect. All of the
policies relating to insurance maintained by each of the Seller, the Seller's
Bank and the Seller's Subsidiaries with respect to its material properties and
the conduct of its business in any material respect (or any comparable policies
entered into as a replacement therefor) are in full force and effect and none of
the Seller, the Seller's Bank or the Seller's Subsidiaries has received any
notice of cancellation with respect thereto. All life insurance policies on the
lives of any of the current and former officers of the Seller or the Seller's
Bank which are maintained by the Seller or the Seller's Bank or which are
otherwise included as assets on the books of the Seller or the Seller's Bank (i)
are, or will at the Effective Time be, owned by the Seller or the Seller's Bank,
free and clear of any claims thereon by the officers or members of their
families, except with respect to the death benefits thereunder, as to which the
Seller and the Seller's Bank agree that there will not be an amendment prior to
the Effective Time without the consent of the Buyer, and (ii) are accounted for
properly as assets on the books of the Seller or the Seller's Bank, as
applicable, in accordance with GAAP in all material respects. None of the
Seller, the Seller's Bank or the Seller's Subsidiaries has any material
liability for unpaid premiums or premium adjustments not properly reflected on
the Seller's consolidated financial statements described in Section 4.09 and
Section 7.08.
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4.21. Environmental Matters. Each of the Seller, the Seller's Bank and the
Seller's Subsidiaries and, to the knowledge of the Seller, makes the following
representations without independent investigation for the purposes of this
Agreement:
(a) The Participation Facilities and the Loan Properties (each defined
below), are, and have been, in material compliance with all applicable
environmental laws and with all rules, regulations, standards and requirements
of the United States Environmental Protection Agency (the "EPA") and of state
and local agencies with jurisdiction over pollution or protection of the
environment.
(b) There is no suit, claim, action or proceeding pending or, to the
knowledge of the Seller, threatened, before the EPA or any other Governmental
Entity or other forum in which the Seller, the Seller's Bank or any of the
Seller's Subsidiaries or any Participation Facility has been or, with respect to
threatened proceedings, may be, named as a defendant, responsible party or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor), with any environmental law, rule, regulation, standard or
requirement or (ii) relating to the release into or presence in the Environment
(as defined below) of any Hazardous Materials (as defined below) or Oil (as
defined below) whether or not occurring at or on a site owned, leased or
operated by the Seller, the Seller's Bank or any of the Seller's Subsidiaries or
any Participation Facility except as have not been or are not reasonably likely
to be, either individually or in the aggregate, material.
(c) To the knowledge of the Seller, the Seller's Bank and the Seller's
Subsidiaries, there is no suit, claim, action or proceeding pending or
threatened, before the EPA or any other Governmental Entity or other forum in
which any Loan Property has been or, with respect to threatened proceedings, may
be, named as a defendant, responsible party or potentially responsible party (i)
for alleged noncompliance (including by any predecessor) with any environmental
law, rule, regulation, standard or requirement or (ii) relating to the release
into or presence in the Environment of any Hazardous Material or Oil whether or
not occurring at or on a site owned, leased or operated by a Loan Property,
except where such noncompliance or release has not been or is not reasonably
likely to be, either individually or in the aggregate, material.
(d) None of the Seller, the Seller's Bank, any of the Seller's
Subsidiaries, nor to their knowledge any Participation Facility or any Loan
Property, has received any notice regarding a matter on which a suit, claim,
action or proceeding as described in subsection (b) or (c) of this Section 4.21
could reasonably be based. No facts or circumstances have come to the Seller's
attention which have caused it to believe that a material suit, claim, action or
proceeding as described in subsection (b) or (c) of this Section 4.21 could
reasonably be expected to occur.
(e) During the period of (i) the Seller's, the Seller's Bank's or any
of the Seller's Subsidiaries' ownership or operation of any of their respective
current properties, (ii) the Seller's, the Seller's Bank's or any of the
Seller's Subsidiaries' participation in the management of any Participation
Facility, or (iii) the Seller's, the Seller's Bank's or any of the Seller's
Subsidiaries' holding of a security interest in a Loan Property, there has been
no release or presence in the Environment of Hazardous Material or Oil in, on,
under or affecting such property or, to the knowledge of the Seller, such
Participation Facility or Loan Property, except where such release or presence
is not or is not reasonably like to be, either individually or in the aggregate,
material. To the knowledge of the Seller, prior to the period of (x) the
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Seller's, the Seller's Bank's or any of the Seller's Subsidiaries' ownership or
operation of any of their respective current properties or any previously owned
or operated properties, (y) the Seller's, the Seller's Bank's or any of the
Seller's Subsidiaries' participation in the management of any Participation
Facility, or (z) the Seller's, the Seller's Bank's or any of the Seller's
Subsidiaries' holding of a security interest in a Loan Property, there was no
release or presence of Hazardous Material or Oil in, on, under or affecting any
such property, Participation Facility or Loan Property, except where such
release or presence is not or is not reasonably likely to be, either
individually or in the aggregate, material.
(f) The following definitions apply for purposes of this Section 4.21:
(i) "Loan Property" means any property in which the Seller, the Seller's Bank or
any of the Seller's Subsidiaries holds a security interest, and, where required
by the context, said term means the owner or operator of such property; (ii)
"Participation Facility" means any facility in which the Seller, the Seller's
Bank or any of the Seller's Subsidiaries participates or has participated in the
management and, where required by the context, said term means the owner or
operator of such property; (iii) "Hazardous Material" means any pollutant,
contaminant, or hazardous substance or hazardous material as defined in or
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. ss.9601 et seq., or any other federal, state, or local
environmental law, regulation, or requirement; (iv) "Oil" means oil or petroleum
of any kind or origin or in any form, as defined in or pursuant to the Federal
Clean Water Act, 33 U.S.C. ss. 1251 et seq., or any other federal, state, or
local environmental law, regulation, or requirement; and (v) "Environment" means
any soil, surface waters, groundwaters, stream sediments, surface or subsurface
strata, and ambient air, and any other environmental medium.
4.22. Intellectual Property. The Seller, the Seller's Bank and each of the
Seller's Subsidiaries owns or possesses valid and binding licenses and other
rights to use without payment of any material amount all material patents,
copyrights, trade secrets, trade names, service marks and trademarks used in its
businesses, and none of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries has received any notice of conflict with respect thereto that
asserts the right of others. The Seller, the Seller's Bank and each of the
Seller's Subsidiaries have performed in all material respects all the
obligations required to be performed by them and are not in default under any
contract, agreement, arrangement or commitment relating to any of the foregoing.
4.23. Fiduciary Accounts. The Seller, the Seller's Bank and the Seller's
Subsidiaries each has properly administered in all material respects all
accounts for which it acts as a fiduciary, including but not limited to accounts
for which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of the
governing documents and applicable law. The Seller, the Seller's Bank and the
Seller's Subsidiaries have maintained adequate and complete books and records
concerning all fiduciary accounts for at least seven years prior to the date
hereof or such longer period as may be required by applicable law. None of the
Seller, the Seller's Bank, the Seller's Subsidiaries or their respective
officers, directors or employees has committed any breach of trust with respect
to any fiduciary account. The accountings for each such fiduciary account are
true and correct in all material respects and accurately reflects the assets of
such fiduciary account.
4.24. Agreements with Bank Regulators. None of the Seller, the Seller's
Bank or any of the Seller's Subsidiaries is a party to any written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
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undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, any Bank Regulator which restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, its loan loss allowances or reserves, its credit policies or its
management, nor has the Seller, the Seller's Bank or any Subsidiary been
informed by any Bank Regulator that it is contemplating issuing or requesting
any such order, directive, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission. None of the Seller,
the Seller's Bank or any of the Seller's Subsidiaries is a party to any
agreement or arrangement entered into in connection with the consummation of a
federally assisted acquisition of a depository institution pursuant to which the
Seller, the Seller's Bank or any of the Seller's Subsidiaries is entitled to
receive financial assistance or indemnification from any governmental agency.
4.25. Material Interests of Certain Persons. No officer or director of the
Seller, the Seller's Bank or any of the Seller's Subsidiaries, or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of
any such officer or director, has any material interest in any material contract
or property (real or personal), tangible or intangible, used in or pertaining to
the business of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries that would be required to be disclosed in a proxy statement to
stockholders under Regulation 14A of the Exchange Act.
4.26. Brokers' Fees; Opinions. No broker, finder or investment banker,
other than Sandler, O'Neill & Partners, L.P. (the "Investment Banker"), is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement or the Stock Option
Agreement based upon arrangements made by or on behalf of the Seller. The fee
payable to the Investment Banker in connection with the transactions
contemplated by this Agreement is as described in an engagement letter between
the Seller and the Investment Banker, a true and complete copy of which has
heretofore been furnished to the Buyer. The Seller has previously received the
opinion of the Investment Banker to the effect that, as of the date of such
opinion, the Merger Consideration to be received by the stockholders of the
Seller pursuant to the Merger is fair, from a financial point of view, to such
stockholders, and such opinion has not been amended or rescinded as of the date
of this Agreement.
4.27. Proxy Statement. The information contained in the proxy statement to
be sent to the stockholders of the Seller in connection with the Stockholders'
Meeting (the "Proxy Statement") will not, on the date the Proxy Statement (or
any amendment or supplement thereto) is first mailed to stockholders of the
Seller or at the time of the Stockholders' Meeting, contain any statement which,
at such time and in light of the circumstances under which it is made, is false
or misleading with respect to any material fact, or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Stockholders' Meeting which shall have become false or misleading.
Notwithstanding the foregoing, the Seller makes no representation or warranty
with respect to any information to be supplied by the Buyer which is contained
in any of the foregoing documents. The Proxy Statement will comply in all
material respects as to form and content with the requirements of the Exchange
Act and the rules and regulations thereunder.
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4.28. Seller Information. The information supplied by the Seller or the
Seller's Bank for inclusion in the Proxy Statement will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading.
4.29. State Takeover Laws. The Board of Directors of the Seller has
approved the transactions contemplated by this Agreement and the Stock Option
Agreement and taken all other requisite action such that the provisions of Ch.
110F of the Massachusetts General Laws and applicable provisions of the DGCL and
the provisions of the Seller's Corporate Charter relating to special voting
requirements for certain business combinations will not apply to this Agreement
or the Stock Option Agreement or any of the transactions contemplated hereby or
thereby.
4.30. Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in any Schedule, certificate, list or
other writing furnished to the Buyer pursuant to the provisions hereof, contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances in which they are made, not misleading.
No information believed by the Seller to be material to the Merger and which is
necessary to make the representations and warranties herein contained, taken as
a whole, not misleading, to the knowledge of the Seller, has been withheld from,
or has not been delivered in writing to, the Buyer.
Article V. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller that:
5.01. Corporate Organization. The Buyer is a corporation, duly organized,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts and a bank holding company registered with the FRB under the Bank
Holding Company Act of 1956, as amended. Compass Bank is a savings bank and
wholly-owned (except for directors qualifying shares) subsidiary of the Buyer
(the "Buyer's Bank") duly organized and validly existing under the laws of The
Commonwealth of Massachusetts. The deposit accounts of the Buyer's Bank are
insured by the FDIC to the fullest extent permitted by law and all premiums and
assessments required in connection therewith have been paid by the Buyer's Bank.
The Buyer and the Buyer's Bank each has the requisite power and authority and
all necessary governmental approvals to own, lease and operate all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business and is in good standing in each
jurisdiction where the nature of the business conducted by it or the character
or location of the properties and assets owned, leased or operated by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified and be in good standing would not, either individually or
in the aggregate, have a Material Adverse Effect.
5.02. Authority. The Buyer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of the Buyer (the "Buyer Board"). This
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Agreement has been duly and validly executed and delivered by the Buyer and
constitutes a valid and binding obligation of the Buyer, enforceable against the
Buyer in accordance with its terms.
5.03. No Conflict. Neither the execution, delivery and performance of this
Agreement by the Buyer, nor the consummation by the Buyer of the transactions
contemplated hereby, nor compliance by the Buyer with any of the terms or
provisions hereof, will (i) conflict with, violate or result in a breach of any
provision of the Corporate Charter or By-Laws of the Buyer or the articles of
organization or by-laws of the Buyer's Bank, (ii) conflict with, violate or
result in a breach of any statute, code, ordinance, rule, regulation, order,
writ, judgment, injunction or decree applicable to the Buyer or the Buyer's
Bank, or by which any property or asset of the Buyer or the Buyer's Bank is
bound or affected, or (iii) conflict with, violate or result in a breach of any
provisions of or the loss of any benefit under, constitute a default (or an
event, which, with notice or lapse of time, or both, would constitute a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien, pledge, security interest,
charge or other encumbrance on any property or asset of the Buyer or the Buyer's
Bank pursuant to any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Buyer or the Buyer's
Bank is a party, or by which the Buyer or the Buyer's Bank is bound or affected,
except, in the case of clause (iii) above, for any such conflicts, violations,
breaches, defaults or other occurrences which would not, either individually or
in the aggregate, have a Material Adverse Effect.
5.04. Consents and Approvals. The execution, delivery and performance of this
Agreement by the Buyer does not require any consent, approval, authorization or
permit of, or filing with or notification to any Governmental Entity or with any
third party, except (i) for the applicable requirements, if any, of the Exchange
Act, state takeover laws, and filing and recordation of appropriate merger
documents as required by the laws of the Commonwealth of Massachusetts and the
State of Delaware, (ii) for consents and approvals of or filings, registrations
or negotiations with the FRB, the FDIC, the BBI, and the Massachusetts Housing
Partnership Fund, (iii) the filings required by this Agreement and (iv) where
failure to obtain any such consent, approval, authorization or permit, or to
make any such filing or notification, would not prevent or significantly delay
consummation of the Merger or otherwise prevent the Buyer from performing its
obligations under this Agreement, or would not, either individually or in the
aggregate, have a Material Adverse Effect. The Buyer is not aware of any reason
why the approvals, consents and waivers of Governmental Entities referred to
herein and in Section 8.01(b) should not be obtained.
5.05. Compliance. The Buyer and the Buyer's Bank hold, and have at all times
within the last six years, held, all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in conflict with,
or in default or violation of, (a) any statute, code, ordinance, law, rule,
regulation, order, writ, judgment, injunction or decree, published policies and
guidelines of any Governmental Entity, applicable to the Buyer or the Buyer's
Bank or by which any property or asset of the Buyer or the Buyer's Bank is bound
or affected or (b) any note, bond, mortgage, indenture, deed of trust, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Buyer or the Buyer's Bank is a party or by which the Buyer or the
Buyer's Bank or any property or asset of the Buyer or the Buyer's Bank is bound
or affected, except for any such non-compliance, conflicts, defaults or
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violations that would not, either individually or in the aggregate, have a
Material Adverse Effect; and neither the Buyer nor the Buyer's Bank knows of, or
has received notice of, any violation of any of the above. Without limiting the
generality of the foregoing, neither the Buyer nor the Buyer's Bank has been
advised of the existence of any facts or circumstances which would cause the
Buyer's Bank to be deemed not to be in satisfactory compliance with the
Community Reinvestment Act of 1977, as amended, and the regulations promulgated
thereunder.
5.06. Financial Statements. The Buyer has previously made available to the
Seller copies of (i) the consolidated balance sheets of the Buyer and its
subsidiaries as of December 31 for the fiscal years 1998 and 1999 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the fiscal years 1997 through 1999, inclusive, as reported in the
Buyer's 1999 Annual Report on Form 10-K, and (ii) the unaudited consolidated
financial statements of the Buyer and its subsidiaries as of March 31, 2000 and
March 31, 1999 as reported on the Buyer's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000, and the related unaudited consolidated statements
of income, changes in stockholders' equity and cash flows for the three month
period then ended. The December 31, 1999 consolidated balance sheet of the Buyer
(including the related notes, where applicable) fairly presents in all material
respects the consolidated financial position of the Buyer and its subsidiaries
as of the date thereof, and the other financial statements referred to in this
Section 5.06 (including the related notes where applicable) fairly present in
all material respects, (subject, in the case of the unaudited statements, to
audit adjustments normal in nature and amount and the addition of customary
notes) in all material respects, the results of the consolidated operations and
changes in shareholders' equity and consolidated financial position of the Buyer
for the respective fiscal periods or as of the respective dates therein set
forth and each of such statements (including the related notes, where
applicable) has been prepared in accordance with GAAP consistently applied
during the periods involved, except as indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q under the Exchange Act.
5.07. Absence of Litigation. Neither the Buyer nor any of its subsidiaries is a
party to any, and there are no pending, or to the knowledge of the Buyer,
threatened legal, administrative, arbitral or other claims, actions, proceedings
or investigations of any nature, against the Buyer or any of its subsidiaries or
any property or asset of the Buyer or any of its subsidiaries, before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, which, either individually or in the aggregate, would have
a Material Adverse Effect and no facts or circumstances have come to the Buyer's
attention which have caused it to believe that a material claim, action,
proceeding or investigation against or affecting the Buyer or any of its
subsidiaries could reasonably be expected to occur. Neither the Buyer nor its
subsidiaries, or any property or asset of the Buyer or any of its subsidiaries,
is subject to any order, writ, judgment, injunction, decree, determination or
award which restricts its ability to conduct business in any area in which it
presently does business or has or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
5.08. Agreements with Bank Regulators. Neither the Buyer nor the Buyer's
Bank is a party to any written agreement or memorandum of understanding with, or
a party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary supervisory letter
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from, any Bank Regulator which restricts materially the conduct of its business,
or in any manner relates to its capital adequacy, its loan loss allowances or
reserves, its credit policies or its management, nor has the Buyer or the
Buyer's Bank been informed by any Bank Regulator that it is contemplating
issuing or requesting any such order, directive, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
submission. Neither the Buyer nor the Buyer's Bank is a party to any agreement
or arrangement entered into in connection with the consummation of a federally
assisted acquisition of a depository institution pursuant to which the Buyer or
the Buyer's Bank is entitled to receive financial assistance or indemnification
from any governmental agency.
5.09. Buyer Information. The information supplied by the Buyer or the Buyer's
Bank for inclusion in the Proxy Statement (or any amendments or supplements
thereto) will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading.
5.10. Capital, Financing. On the date hereof, the Buyer is, at a minimum,
"adequately capitalized," as such term is defined in the rules and regulations
promulgated by the FRB and the FDIC, as the case may be. The Buyer will have
available to it sources of capital and financing sufficient to fulfill its cash
obligations hereunder.
Article VI. CONDUCT OF BUSINESS PENDING THE MERGER
6.01. Covenants of the Seller.
(a) The Seller covenants and agrees that, except as contemplated by
this Agreement, between the date of this Agreement and the Effective Time,
unless the Buyer shall otherwise agree in writing, the business of the Seller,
the Seller's Bank and the Seller's Subsidiaries shall be conducted only in, and
the Seller, the Seller's Bank and the Seller's Subsidiaries shall not take any
action except in, the usual, regular and ordinary course of business and in a
manner consistent with prudent banking practice and generally to conduct their
business in substantially the same way as heretofore conducted, and without
limiting the foregoing, to continue to operate in the same geographic markets
serving the same market segments and without significant increase in the rate of
growth of the Seller's, the Seller's Bank's or the Seller's Subsidiaries' loan
portfolio. The Seller shall use its reasonable best efforts to preserve
substantially intact the business organization of the Seller, the Seller's Bank
and the Seller's Subsidiaries, to keep available the present services of the
officers, employees and consultants of the Seller, the Seller's Bank and the
Seller's Subsidiaries and to preserve the current relationships and goodwill of
the Seller, the Seller's Bank and the Seller's Subsidiaries with customers,
suppliers and other persons with which the Seller, the Seller's Bank or any of
the Seller's Subsidiaries have business relationships, including without
limitation, implementing a deposit retention program in furtherance thereof.
(b) By way of amplification and not limitation of clause (a) above,
except as contemplated by this Agreement and the Stock Option Agreement, the
Seller shall not, nor shall the Seller permit the Seller's Bank or any of the
Seller's Subsidiaries, between the date of this Agreement and the Effective
Time, directly or indirectly to do, or publicly announce an intention to do, any
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of the following without the prior written consent of the Buyer through its
representative, its Chief Executive Officer (which consent shall not be
unreasonably withheld):
(i) amend or otherwise change its Corporate Charter or By-laws or
equivalent organizational documents;
(ii) issue, deliver, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, delivery, sale, pledge, disposition, grant or
encumbrance of, any shares of capital stock of any class of the Seller,
the Seller's Bank or any of the Seller's Subsidiaries, or any options,
warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest, of
the Seller, the Seller's Bank or any of the Seller's Subsidiaries, or
enter into any agreement with respect to any of the foregoing;
(iii) split, combine or reclassify any shares of its capital stock
or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock, except upon the exercise or fulfillment of rights or options
issued or existing pursuant to employee benefit plans, programs or
arrangements, all to the extent outstanding and in existence on the
date of this Agreement;
(iv) repurchase, redeem or otherwise acquire any shares of the
capital stock of the Seller, the Seller's Bank or any of the Seller's
Subsidiaries, or any securities convertible into or exercisable for any
shares of the capital stock of the Seller, the Seller's Bank or any of
the Seller's Subsidiaries;
(v) enter into any new line of business or materially expand the
business currently conducted by the Seller, the Seller's Bank and the
Seller's Subsidiaries or file any application to relocate or terminate
the operations of any banking office of the Seller's Bank;
(vi) acquire or agree to acquire, by merging or consolidating with,
or by purchasing an equity interest in or a portion of the assets of,
or by any other manner, any business or any corporation, partnership,
other business organization or any division thereof or any material
amount of assets;
(vii) except for advances from the Federal Home Loan Bank in an
amount not to exceed $90 million outstanding at any one time, incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any individual, corporation or
other entity, or make any loan or advance, other than in the ordinary
course of business consistent with past practice;
(viii) authorize any single capital expenditure which is in excess
of $25,000 or capital expenditures which are, in the aggregate, in
excess of $50,000 for the Seller, the Seller's Bank and the Seller's
Subsidiaries taken as a whole, except for written contractual
commitments entered into prior to the date of this Agreement as
disclosed in the Seller Disclosure Schedule;
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(ix) (A) except as required by applicable law, (x) adopt, amend,
renew or terminate any plan or any agreement, arrangement, plan or
policy between the Seller, the Seller's Bank or any of the Seller's
Subsidiaries and one or more of its current or former directors,
officers or employees, or (y) increase in any manner the compensation
or fringe benefits of any director, officer or employee or pay any
benefit not required by any plan or agreement as in effect as of the
date hereof (including, without limitation, the granting of stock
options, stock appreciation rights, restricted stock, restricted stock
units or performance units or shares); or (B) enter into, modify or
renew any employment, severance or other agreement with any director,
officer or employee of the Seller, the Seller's Bank or any of the
Seller's Subsidiaries, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement providing for any benefit
to any director, officer or employee;
(x) take any action with respect to accounting methods, principles
or practices, other than changes required by applicable law or GAAP or
regulatory accounting as concurred in by the Seller's independent
accountants;
(xi) make any tax election or settle or compromise any federal,
state, local or foreign tax liability;
(xii) pay, discharge or satisfy any claim, liability or obligation,
other than the payment, discharge or satisfaction, in the ordinary
course of business and consistent with past practice;
(xiii) make any new or additional equity investment or commitment to
make such an investment in real estate or in any real estate
development project, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business consistent with past
practice;
(xiv) sell any securities in its investment portfolio, except in the
ordinary course of business, or engage in transactions in or involving
forwards, futures, options on futures, swaps or similar derivative
instruments;
(xv) sell, lease, encumber, assign or otherwise dispose of, or agree
to sell, lease, encumber, assign or otherwise dispose of, any of its
material assets, properties or other rights or agreements or purchase
or sell any loans in bulk;
(xvi) take any action that is intended or reasonably can be expected
to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect, or any
of the conditions to the consummation of the Merger and the other
transactions contemplated by this Agreement set forth in Article VIII
not being satisfied in any material respect, or in any material
violation of any provision of this Agreement or the Stock Option
Agreement, except, in every case, as may be required by applicable law;
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(xvii) commit any act or omission which constitutes a material
breach or default by the Seller, the Seller's Bank or any of the
Seller's Subsidiaries under any Regulatory Agreement or under any
material contract or material license to which any of them is a party
or by which any of them or their respective properties is bound;
(xviii) foreclose upon or take a deed or title to any commercial
real estate without first conducting a Phase I environmental assessment
of the property or foreclose upon any commercial real estate if such
environmental assessment indicates the presence of Hazardous Material
in amounts which, if such foreclosure were to occur, would be material;
(xix) enter into or renew, amend or terminate, or give notice of a
proposed renewal, amendment or termination of or make any commitment
with respect to, (A) any contract, agreement or lease for office space,
operations space or branch space to which the Seller, the Seller's Bank
or any of the Seller's Subsidiaries is a party or by which the Seller,
the Seller's Bank or any of the Seller's Subsidiaries or its respective
properties is bound; (B) any lease, contract or agreement other than in
the ordinary course of business consistent with past practice including
renewals of leases to existing tenants of the Seller, the Seller's Bank
or any Subsidiary; (C) regardless of whether consistent with past
practices, any lease, contract, agreement or commitment, other than
Loans, involving an aggregate payment by or to the Seller, the Seller's
Bank or any of the Seller's Subsidiaries of more than $50,000 or
requiring performance by the Seller, the Seller's Bank or any of the
Seller's Subsidiaries of any obligations at any time more than one year
after the time of execution;
(xx) change in any material respect its loan policies or procedures,
except as required by regulatory authorities; or
(xxi) agree to do any of the foregoing.
6.02. Certain Changes and Adjustments. Prior to the Closing (as defined in
Section 10.01 hereof), the Buyer and the Seller shall consult and cooperate with
each other concerning the Seller's Bank's loan, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) to reflect Buyer's plans with respect to the conduct of the Seller's
Bank's business following the Merger; provided, however, that the Seller and the
Seller's Bank shall not be obligated to take any action pursuant to this Section
which is inconsistent with GAAP and unless and until the Buyer acknowledges, and
the Seller and the Seller's Bank are satisfied, that all conditions to Seller's
obligation to consummate the Merger have been satisfied. No action taken by the
Seller or the Seller's Bank pursuant to this Section or the consequences
resulting therefrom shall be deemed to be a breach of any representation,
warranty, agreement or covenant herein or constitute a Material Adverse Effect.
6.03. Payment of Dividends. During the period from the date of this
Agreement and continuing through December 31, 2000, the Seller shall not make
any distribution (by way of dividend or otherwise) with respect to its capital
stock. During the period from January 1, 2000 through the Effective Time, the
Seller shall not make any distribution (by way of dividend or otherwise) with
respect to its capital stock except for the declaration and payment of regular
quarterly dividends in February and May, each in the amount of $0.25 per share
of Common Stock. The Seller represents that during calendar year 2000 the only
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distributions it has made or declared with respect to its capital stock are two
regular dividends, each in the amount of $0.25 per share of Common Stock.
6.04. Covenant of the Buyer. During the period from the date of this
Agreement and continuing until the Effective Time, the Buyer shall not, and
shall not permit any of its subsidiaries to, take any action that is intended or
which reasonably can be expected to result in any of its representations and
warranties set forth in this Agreement being untrue in any material respect, or
in any of the conditions to the Merger or other transactions contemplated in
this Agreement as set forth in Article VIII not being satisfied in any material
respect, or in a material violation of any provision of this Agreement or the
Stock Option Agreement, except, in every case, as may be required by applicable
law.
Article VII. ADDITIONAL AGREEMENTS
7.01. Regulatory Matters.
(a) The Seller shall promptly prepare and file with the SEC the Proxy
Statement. The Seller shall make the draft Proxy Statement available to the
Buyer for review promptly after preparation thereof, and shall respond to all of
the Buyer's comments and suggestions for revisions to such Proxy Statement.
Promptly after completion of the Proxy Statement, the Seller shall mail the
Proxy Statement to its shareholders.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger). The Seller and the Buyer
shall have the right to review in advance, and to the extent practicable each
will consult with the other on, in each case subject to applicable laws relating
to the exchange of information, all the information relating to the Seller or
the Buyer, as the case may be, and any of their respective subsidiaries, which
appear in any filing made with or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein. Each of the Buyer and the Seller represents and warrants to
the other that it is not aware of any reason why the approvals, consents and
waivers of Governmental Entities referred to herein and in Section 4.06 and
Section 5.04 should not be obtained.
(c) The Buyer and the Seller shall, upon request, furnish each other
with all information concerning themselves, their respective subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement or any other
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statement, filing, notice or application made by or on behalf of the Buyer, the
Seller or any of their respective subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated hereby.
(d) The Buyer and the Seller shall promptly furnish each other with
copies of written communications received by the Buyer or the Seller, as the
case may be, or any of their respective subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
7.02. Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating to
the exchange of information, the Seller shall, and shall cause the Seller's Bank
and each of the Seller's Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the Buyer, access, during
normal business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
the Seller shall, and shall cause the Seller's Bank and the Seller's
Subsidiaries to, make available to the Buyer all other information concerning
its business, properties and personnel as the Buyer may reasonably request
(other than information which the Seller is not permitted to disclose under
applicable law). Neither the Seller nor the Seller's Bank nor any of the
Seller's Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of the Seller's, the Seller's Bank's or the Seller's Subsidiaries'
customers, jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Without limiting the generality of the foregoing, the Seller shall
cooperate with the Buyer in compiling the following with respect to each of the
Seller, the Seller's Bank and each Subsidiary (or, in the case of clause (B)
below, with respect to the Seller's Bank and each Subsidiary) as of the most
recent practicable date (as well as on an estimated pro forma basis as of the
Effective Date giving effect to the consummation of the transactions
contemplated hereby): (A) the basis of the Seller, the Seller's Bank and each
Subsidiary in its assets; (B) the basis of the stockholder(s) of the Seller's
Bank and each Subsidiary in its stock, or the amount of any excess loss account
(as defined in Treasury Regulations Section 1.1502-19); (C) the amount of any
net operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to the Seller, the
Seller's Bank and any Subsidiary; and (D) the amount of any deferred gain or
loss allocable to the Seller, the Seller's Bank or any Subsidiary arising out of
any deferred intercompany transaction (as defined in Treasury Regulations
Section 1.1502-13).
(c) All information furnished by the Seller to the Buyer or its
representatives pursuant hereto shall be treated as the sole property of the
Seller and, if the Merger shall not occur, the Buyer and its representatives
shall return to the Seller or destroy all of such written information and all
documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. The Buyer shall, and shall use
its reasonable efforts to cause its representatives to, keep confidential all
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such information, and shall not directly or indirectly use such information for
any competitive or other commercial purpose. The obligation to keep such
information confidential shall continue from the date the proposed Merger is
abandoned and shall not apply to (i) any information which (x) was already in
the Buyer's possession prior to the disclosure thereof by the Seller; (y) was
then generally known to the public; or (z) was disclosed to the Buyer by a third
party not bound by an obligation of confidentiality or (ii) disclosures made as
required by law. It is further agreed that, if in the absence of a protective
order or the receipt of a waiver hereunder the Buyer is nonetheless, in the
opinion of its counsel, compelled to disclose information concerning the Seller
to any tribunal or governmental body or agency or else stand liable for contempt
or suffer other censure or penalty, the Buyer may disclose such information to
such tribunal or governmental body or agency without liability hereunder.
(d) Upon reasonable notice and subject to applicable laws relating to
the exchange of information, Buyer shall, and shall cause the Buyer's Bank and
its subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the Seller and the Seller's Bank, access, during normal
business hours during the period prior to the Effective Time, to such
information regarding the Buyer and its subsidiaries as shall be reasonably
necessary for the Seller to fulfill its obligations pursuant to this Agreement
to prepare the Proxy Statement or which may be reasonably necessary for the
Seller to confirm that the representations and warranties of the Buyer contained
herein are true and correct and that the covenants of the Buyer contained herein
have been performed in all material respects. Neither the Buyer nor any of its
subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of the
Buyer's customers, jeopardize the attorney-client privilege of the institution
in possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(e) All information furnished by the Buyer to the Seller or its
representatives pursuant hereto shall be treated as the sole property of the
Buyer and, if the Merger shall not occur, the Seller and its representatives
shall return to the Buyer or destroy all of such written information and all
documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. The Seller shall, and shall use
its reasonable efforts to cause its representatives to, keep confidential all
such information, and shall not directly or indirectly use such information for
any competitive or other commercial purpose. The obligation to keep such
information confidential shall continue from the date the proposed Merger is
abandoned and shall not apply to (i) any information which (x) was already in
the Seller's possession prior to the disclosure thereof by the Buyer; (y) was
then generally known to the public; or (z) was disclosed to the Seller by a
third party not bound by an obligation of confidentiality or (ii) disclosures
made as required by law. It is further agreed that, if in the absence of a
protective order or the receipt of a waiver hereunder the Seller is nonetheless,
in the opinion of its counsel, compelled to disclose information concerning the
Buyer to any tribunal or governmental body or agency or else stand liable for
contempt or suffer other censure or penalty, the Seller may disclose such
information to such tribunal or governmental body or agency without liability
hereunder.
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(f) No investigation by any of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein or any condition to the obligations of the parties hereto.
7.03. Stockholder Meeting. The Seller shall take all steps necessary to
duly call, give notice of, convene and hold a meeting of its stockholders to be
held as soon as is reasonably practicable for the purpose of voting upon the
approval of this Agreement. The Seller will, through its Board of Directors,
recommend to its stockholders approval of this Agreement and the transactions
contemplated hereby and such other matters as may be submitted to its
stockholders in connection with this Agreement; provided, however, that nothing
contained in this Section 7.03 shall prohibit the Seller's Board of Directors
from failing to call such a meeting, adjourning such a meeting or failing to
make such recommendation or modifying or withdrawing its recommendation, if such
Board shall have concluded in good faith with the advice of counsel that such
action is required to prevent such Board from breaching its fiduciary duties to
the stockholders of the Seller.
7.04. Legal Conditions to Merger. Each of the Buyer and the Seller shall,
and shall cause each of its subsidiaries to, use its reasonable best efforts (a)
to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
or its subsidiaries with respect to the Merger and, subject to the conditions
set forth in Article VIII hereof, to consummate the transactions contemplated by
this Agreement and (b) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party which is required to be
obtained by the Seller or the Buyer or any of their respective subsidiaries in
connection with the Merger and the other transactions contemplated by this
Agreement.
7.05. No Solicitation. The Seller shall not and shall cause the Seller's
Bank and the Seller's Subsidiaries to not, directly or indirectly, through any
officer, director, agent or otherwise, solicit or initiate the submission of any
proposal or offer from any person relating to any acquisition or purchase of all
or (other than in the ordinary course of business) any material portion of the
assets of, or any equity interest in, the Seller, the Seller's Bank or the
Seller's Subsidiaries or any business combination with the Seller, the Seller's
Bank or the Seller's Subsidiaries or, except to the extent determined by the
Seller Board, with the advice of its independent counsel, to be required by
fiduciary obligations under applicable law, participate in any negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate,
any effort or attempt by any other person to do or seek any of the foregoing.
The Seller immediately shall cease and cause to be terminated and shall cause
the Seller's Bank and the Seller's Subsidiaries to cease and cause to be
terminated all existing discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Seller shall notify the
Buyer and cause the Seller's Bank or the Seller's Subsidiaries to notify the
Buyer promptly if any such proposal or offer, or any inquiry or contact with any
person with respect thereto, is made and shall, in any such notice to the Buyer,
indicate in reasonable detail the terms and conditions of such proposal, offer,
inquiry or contact. The Seller agrees and shall cause the Seller's Bank and the
Seller's Subsidiaries not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Seller,
the Seller's Bank or the Seller's Subsidiaries is a party.
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7.06. Employee Benefit Matters.
(a) Provision of Benefits. As soon as practicable after the Effective
Time, the Buyer agrees to provide the employees of the Seller's Bank with types
and levels of employee benefits that, in the aggregate, are substantially
equivalent to those maintained by the Seller for similarly situated employees.
(b) New Employment Agreements. The Buyer has prepared employment
agreements (commencing as of the Effective Date) to be entered into between
Seller's Bank and each of William P. Hourihan, Daniel P. Neath, John M. Sweeney
and Levin L. Waters V in the form attached hereto as Exhibit 7.06(b) (the
"Employment Agreements"). As of the date of this Agreement the Seller's Bank and
the following individuals have entered into Employment Agreements: Messrs
Hourihan, Sweeney and Waters. The Seller agrees to cause the Seller's Bank to
cause the existing employment agreements ("Existing Employment Agreements")
between each of the four foregoing individuals and the Seller's Bank to be
terminated by mutual consent and without cost or expense to the Seller's Bank or
any party to this Agreement immediately prior to the Effective Time.
(c) Consultant Agreement. As of the date of this Agreement, the Seller
has caused the consulting agreement dated as of May 1, 1998 between the Seller
and Karl Meyer ("Existing Consulting Agreement") to be terminated (such
termination to be effective as of the Effective Date) by mutual consent and has
agreed to make a lump sum payment to Mr. Meyer on the Effective Date in an
amount that would not result in the payment of an "excess parachute payment"
within the meaning of Section 280G of the Code. Not later than fifteen days
after the date of this Agreement Buyer and Mr. Meyer will enter into a mutually
acceptable three-year agreement (commencing as of the Effective Date) pursuant
to which Mr. Meyer would serve as a consultant with respect to Nantucket Bank
("Consultant Agreement"). Once agreed upon, the Consultant Agreement will be
attached hereto as Exhibit 7.06(c).
(d) Continuation of Plans. Notwithstanding anything to the contrary
contained herein, the Buyer shall have sole discretion with respect to the
determination as to whether or when to terminate, merge or continue any employee
benefit plans and programs of the Seller, the Seller's Bank or any of the
Seller's Subsidiaries; provided, however, that the Buyer shall continue to
maintain such plans (other than stock based or incentive plans or stock funds in
retirement plans) until the Seller Employees are permitted to participate in the
Buyer's or its Affiliates' plans. As of the date of this Agreement such Buyer
plans provide for employee benefits in the aggregate no less beneficial than
those made available by the Seller.
(e) Parachute Payments. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall the Seller or any of the Seller's
Subsidiaries take any action or make any payments that would result, either
individually or in the aggregate, in the payment of an "excess parachute
payment" within the meaning of Section 280G of the Code or that would result,
either individually or in the aggregate, in payments that would be nondeductible
pursuant to Section 162(m) of the Code.
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7.07. Directors' and Officers' Insurance.
(a) The Buyer shall use its reasonable best efforts to maintain in
effect for six years from the Effective Time, if available, the current
directors' and officers' liability insurance policy maintained by the Seller
(provided that the Buyer may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Buyer be required to expend
pursuant to this Section 7.07(a) more than the amount equal to 150% of the
current annual amount expended by the Seller to maintain or procure insurance
coverage pursuant hereto. In connection with the foregoing, the Seller agrees to
provide such insurer or substitute insurer with such representations as such
insurer may request with respect to the reporting of any prior claims.
(b) The Buyer agrees to indemnify current and former directors or
officers of the Seller to the same extent that such directors or officers are
entitled to indemnification as of the date of this Agreement under the Seller's
Corporate Charter and/or By-laws to the full extent permitted under applicable
law for a period of six years from the Effective Time, provided that in the
event that any claim is asserted or made by such current or former director or
officer within such six year period, the right to indemnification in respect of
such claim shall continue until the disposition of such claim. The provisions of
this Section 7.07 are specifically for the benefit of those present and former
directors and officers entitled to indemnification as of the date of this
Agreement under the Seller's By-Laws.
(c) In the event that the Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving bank or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of the Buyer shall assume the obligations set forth in
this Section 7.07.
7.08. Financial and Other Statements. Notwithstanding anything to the
contrary in Section 7.02, during the term of this Agreement, the Seller shall
provide to the Buyer the following documents and information:
(a) As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter ending after the date of this Agreement,
the Seller will deliver to the Buyer the Seller Bank's quarterly Call Report as
filed with the appropriate Bank Regulator. As soon as reasonably available, but
in no event more than 90 days after the end of each fiscal year ending after the
date of this Agreement, the Seller will deliver to the Buyer the Seller Bank's
consolidated and audited financial statements for the fiscal year then ended.
(b) Promptly upon receipt thereof, the Seller will furnish to the Buyer
copies of all internal control reports submitted to the Seller or the Seller's
Bank by independent auditors in connection with each annual, interim or special
audit of the books of the Seller or the Seller's Bank made by such auditors.
(c) As soon as practicable, the Seller and the Seller's Bank will
furnish to the Buyer copies of all such financial statements and reports as they
shall send to their stockholder(s), the SEC, the Massachusetts Commissioner, the
FDIC, the FRB, or any other regulatory authority, to the extent any such reports
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furnished to any such regulatory authority are not confidential and except as
legally prohibited under applicable laws and regulations, and all press
releases.
(d) With reasonable promptness, the Seller and the Seller's Bank will
furnish to the Buyer such additional financial data as the Buyer may reasonably
request.
7.09. Further Action. The Buyer and the Seller each shall, and shall cause
their subsidiaries to, use reasonable best efforts (a) to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its subsidiaries with
respect to the Merger and, subject to the conditions set forth in Article VIII
hereof, to consummate the transactions contemplated by this Agreement and (b) to
obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by the Seller
or the Buyer or any of their respective subsidiaries in connection with the
Merger and any of the other transactions contemplated by this Agreement.
7.10. Public Announcements. Except as otherwise required by law or the
rules of NASDAQ, so long as this Agreement is in effect, neither the Buyer nor
the Seller shall, or shall they permit any of their subsidiaries to, issue or
cause the publication of any press release or other public announcement with
respect to, or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
7.11. Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective subsidiaries shall take all such necessary action
as may be reasonably requested by the Buyer.
7.12. Update of Disclosure Schedules. From time to time prior to the
Effective Time, the Seller will promptly supplement or amend the Seller
Disclosure Schedule to reflect any matter which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in the Seller Disclosure Schedule or which is necessary to correct any
information in the Seller Disclosure Schedule which has been rendered inaccurate
thereby. No supplement or amendment to the Seller Disclosure Schedule shall have
any effect for the purpose of determining satisfaction of the conditions set
forth in Section 8.02(a) hereof or the compliance by the Seller with the
covenants set forth in Article VI and Article VII hereof.
7.13. Current Information.
(a) During the period from the date of this Agreement to the Effective
Time, the Seller will cause one or more of its designated representatives (i) to
confer on a regular and frequent basis (at least monthly) with representatives
of Buyer to report on (x) the general status of the ongoing operations of the
Seller and the Seller's Bank, (y) the status of, and the action proposed to be
taken with respect to, those Loans held by the Seller or the Seller's Bank
which, either individually or in combination with one or more other Loans to the
same borrower thereunder, have an aggregate original principal amount of
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$250,000 or more and are classified or non- performing assets, and (z) the
status of, and the action proposed to be taken with respect to, foreclosed
property and other real estate owned by the Seller or the Seller's Bank, and
(ii) to cooperate and communicate with respect to the manner in which the
business of the Seller and the Seller's Bank is conducted, including but not
limited to, the disposition of certain assets after the Effective Time, the type
and mix of products and services, personnel matters, branches, the granting of
credit, and problem loan management, reserve adequacy, securities investments
and accounting. During the period from the date of this Agreement to the
Effective Time, the Seller and the Seller's Bank shall provide the Buyer with
sufficient information to review new extensions of credit, renewals and
restructurings having an original principal amount of $200,000 and information
detailing overall asset quality. The Seller shall also ensure that the Seller's
Bank allows the Buyer to designate one of its officers to attend the Seller's
Bank credit committee meetings and be a non-voting attendee thereof.
(b) The Seller and the Seller's Bank will promptly notify the Buyer of
any material change in the normal course of business or in the operation of the
properties of the Seller or the Seller's Bank and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of litigation
involving them and will keep the Buyer reasonably informed of such events.
(c) To the extent not covered by paragraphs (a) and (b) above, the
Seller and the Seller's Bank shall give prompt notice to the Buyer, and the
Buyer shall give prompt notice to the Seller, of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
reasonably likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect, and (ii) any
failure of the Seller, the Seller's Bank or the Buyer, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that the delivery of
any notice pursuant to this paragraph (c) shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.14. Directors of Seller's Bank. As sole stockholder of Seller's Bank
immediately following the Effective Time, the Buyer agrees to ensure that the
Directors of the Seller's Bank immediately prior to the Effective Time shall be
the Directors of the Seller's Bank for a period of one year (or until their term
of office expires, whichever is later) following the Effective Time; provided,
however, that immediately following the Effective Time, the number of members of
the Board of Directors of the Seller's Bank shall be expanded by up to three
members and the vacancies so created shall immediately thereafter be filled by a
person or persons designated by the Buyer. The Seller and the Buyer agree to
cause the Seller's Bank to hold regular meetings of its Board of Directors not
more than one time per month. Loan Committee meetings, which shall not be
considered meetings of the Board of Directors, may be held as frequently as the
Seller's Bank deems appropriate.
7.15. Voting Agreements. The Seller agrees to cause each of its directors
and officers to execute and deliver (individually, and to the extent applicable
in their respective capacities as trustee) concurrently with the execution of
this Agreement a voting agreement in the form of Exhibit 7.15 hereto.
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Article VIII. CONDITIONS TO THE MERGER
8.01. Conditions to Each Party's Obligations to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the affirmative vote
of the stockholders of the Seller to the extent required by Delaware Law and the
Corporate Charter of the Seller;
(b) Regulatory Approvals. All necessary approvals, authorizations and
consents of all Governmental Entities required to consummate the Merger shall
have been obtained and remain in full force and effect, and all waiting periods
relating to such approvals, authorizations and consents shall have expired or
been terminated (all such approvals and the expiration of all such waiting
periods being referred to herein as the "Requisite Regulatory Approvals").
(c) No Orders, Injunctions or Restraints; Illegality. No order,
injunction or decree (whether temporary, preliminary or permanent) issued by
federal or state governmental authority or other agency or commission or federal
or state court of competent jurisdiction or other legal restraint or prohibition
(an "Injunction") preventing the consummation of the Merger or any of the other
transactions contemplated by this Agreement shall be in effect and no proceeding
initiated by any governmental entity seeking an Injunction shall be pending. No
statute, rule, regulation, order, injunction or decree (whether temporary,
preliminary or permanent) shall have been enacted, entered, promulgated or
enforced by any federal or state governmental authority or other agency or
commission or federal or state court of competent jurisdiction, which prohibits,
restricts or makes illegal the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
8.02. Conditions to Obligations of the Buyer. The obligation of the Buyer
to effect the Merger is also subject to the satisfaction or waiver by the Buyer
at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Seller in this Agreement which is qualified as to materiality
shall be true and correct and each such representation or warranty that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement, as applicable, and (except to the extent such
representations and warranties speak as of an earlier date) as of the Effective
Time, it being understood that such representations and warranties shall be
deemed to be true and correct in all material respects unless the failure or
failures of such representations and warranties to be so true and correct
represent, either individually or in the aggregate, a Material Adverse Effect on
the Seller, provided, however, that for purposes of determining satisfaction of
this condition, no effect shall be given to an exception in such representations
and warranties relating to materiality, a Material Adverse Effect or the
knowledge of the Seller. The Buyer shall have received a certificate to such
effect signed by the Chief Executive Officer and the Chief Financial Officer of
the Seller dated as of the Effective Date.
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(b) Agreements and Covenants. The Seller shall have performed in all
material respects all obligations and complied in all material respects with all
agreements or covenants of the Seller to be performed or complied with by it at
or prior to the Effective Date under this Agreement, and the Buyer shall have
received a certificate to such effect signed by the Chief Executive Officer and
Chief Financial Officer of the Seller dated as of the Effective Date.
(c) Consents Under Agreements. The consent, approval or waiver of each
person (other than Requisite Regulatory Approvals contemplated in Section
7.01(c)) whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of the Seller or any of its Seller's Subsidiaries
under any loan or credit agreement, note mortgage, indenture, lease, license or
other agreement or instrument shall have been obtained, and none of such
permits, consents, waivers, clearances, approvals and authorizations shall
contain any term or condition which would materially impair the value of the
Seller to the Buyer.
(d) No Burdensome Condition. The Seller and the Seller's Subsidiaries
shall have resolved all violations, criticisms or exceptions by any Bank
Regulator with respect to any Bank Examination; and none of the Requisite
Regulatory Approvals shall impose any term, condition or restriction upon the
Buyer, the Seller, the Surviving Corporation, or any of their respective
subsidiaries that the Buyer reasonably determines would materially impair the
value of the Seller to the Buyer or be materially burdensome (a "Burdensome
Condition").
(e) Investment Banker Opinion. The Buyer shall have received a copy of
the opinion of the Seller's Investment Banker, dated as of the date of this
Agreement, that the Merger Consideration to be received by the stockholders of
the Seller pursuant to the Merger is fair to such shareholders from a financial
point of view.
(f) Employment Agreements. The Employment Agreements shall have been
executed and delivered by the stipulated parties thereto and be in full force
and effect.
(g) Consultant Agreement. The Consultant Agreement shall have been
executed and delivered by the stipulated parties thereto and be in full force
and effect.
(h) Voting Agreements. The Voting Agreements shall have been executed
and delivered by the stipulated parties thereto and be in full force and effect.
(i) Termination of Certain Existing Agreements. The Existing Employment
Agreements shall each have been terminated without cost to Seller's Bank or any
party to this Agreement, and the Existing Consulting Agreement shall have been
terminated in consideration of the payment described in Section 7.06(c).
(j) Tax Opinion. The Buyer shall have received the opinion of Foley,
Hoag & Eliot LLP, dated as of the Effective Date, that the Merger constitutes a
tax-free reorganization described in section 368(a)(1) of the Code.
(k) No Parachute Payments. Neither Seller or any of the Seller's
Subsidiaries shall have taken any action or made any payments that would result,
either individually or in the aggregate, in the payment of an "excess parachute
payment" within the meaning of Section 280G of the Code or that would result,
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either individually or in the aggregate, in payments that would be nondeductible
pursuant to Section 162(m) of the Code.
8.03. Conditions to Obligations of the Seller. The obligations of the
Seller to effect the Merger are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Buyer in this Agreement which is qualified as to materiality
shall be true and correct and each such representation or warranty that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement, as applicable, and (except to the extent such
representations and warranties speak as of an earlier date) as of the Effective
Date, it being understood that such representations and warranties shall be
deemed to be true and correct in all material respects unless the failure or
failures of such representations and warranties to be so true and correct
represent, either individually or in the aggregate, a Material Adverse Effect on
the Seller, provided, however, that for purposes of determining satisfaction of
this condition, no effect shall be given to an exception in such representations
and warranties relating to materiality, a Material Adverse Effect or the
knowledge of the Seller. The Seller shall have received a certificate signed by
the Chief Executive Officer and Chief Financial Officer of the Buyer to such
effect dated as of the Effective Date.
(b) Agreements and Covenants. The Buyer shall have performed in all
material respects all obligations and complied in all material respects with all
of the respective agreements or covenants to be performed or complied by such
party under this Agreement and the Seller shall have received a certificate
signed by the Chief Executive Officer and Chief Financial Officer of the Buyer
to such effect dated as of the Effective Date.
(c) Investment Banker Opinion. The Seller shall have received the
opinion of the Seller's Investment Bankers, dated as of the date of this
Agreement, that the Merger Consideration to be received by the stockholders of
the Seller pursuant to the Merger is fair to such shareholders from a financial
point of view.
Article IX. TERMINATION, AMENDMENT AND WAIVER
9.01. Termination. This Agreement may be terminated and the Merger and the
other transactions contemplated by this Agreement may be abandoned at any time
prior to the Effective Time, notwithstanding any requisite approval and adoption
of this Agreement and the transactions contemplated in this Agreement by the
stockholders of the Seller:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Buyer and the Seller;
(b) by either the Buyer or the Seller if (i) the Effective Time shall
not have occurred on or before March 31, 2001 or such later date as the parties
may have agreed upon in writing (the "Expiration Date"); provided, however, that
the right to terminate this Agreement under this Section 9.01(b) shall not be
available to any party whose failure to fulfill any material obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
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(c) by either the Buyer or the Seller (i) ninety days after the date on
which any request or application for a regulatory approval required to
consummate the Merger shall have been denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such requisite
regulatory approval, unless within the ninety day period following such denial
or withdrawal a petition for rehearing or an amended application has been filed
with such Governmental Entity; provided, however, that no party shall have the
right to terminate this Agreement pursuant to this Section 9.01(c) (i) if such
denial or request or recommendation for withdrawal shall be due to the failure
of the party seeking to terminate this Agreement to perform or observe the
covenants and agreements of such party set forth herein or (ii) if any court of
competent jurisdiction or other governmental authority shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(d) by either the Buyer or the Seller (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the representations or warranties set forth in this Agreement on the
part of the other party, which breach by its nature cannot be cured prior to the
Effective Time or within thirty business days following receipt by the breaching
party of written notice of such breach from the other party hereto (for purposes
of this Section 9.01(d) a material breach shall be deemed to be a breach which
has, either individually or in the aggregate, a Material Adverse Effect on the
party making such representations or warranties or on the business, operations,
financial condition, property or assets of the combined enterprise or which
materially adversely affects consummation of the Merger and the other
transactions contemplated hereby, provided, however, that no effect shall be
given to any qualification relating to materiality, a Material Adverse Effect or
knowledge in such representations and warranties);
(e) by either the Buyer or the Seller (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the covenants or agreements set forth in this Agreement on the part of
the other party, which breach shall not have been cured within thirty business
days following receipt by the breaching party of written notice of such breach
from the other party hereto (for purposes of this Section 9.01(e) a material
breach shall be deemed to be a failure which has, either individually or in the
aggregate, a Material Adverse Effect on the party so failing or on the business,
operations, financial condition, property or assets of the combined enterprise
or which materially and adversely affects consummation of the Merger and the
other transactions contemplated hereby, provided, however, that no effect shall
be given to any qualification relating to materiality in any such covenant);
(f) by either the Buyer or the Seller (provided, that if the
terminating party is the Seller, the Seller shall not be in material breach of
any of its obligations under Section 7.03) if any approval of the stockholders
of the Seller required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of stockholders or at any adjournment or postponement thereof, or by the
Buyer, if such meeting of stockholders shall not have been held or shall have
been canceled prior to the Expiration Date; or
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(g) by the Buyer, if the Seller Board shall not have publicly
recommended to the stockholders of the Seller that such stockholders vote in
favor of the approval of this Agreement, the Merger and the other transactions
contemplated hereby or shall have withdrawn or modified such recommendation in a
manner adverse to the Buyer.
9.02. Effect of Termination; Expenses.
(a) In the event of the termination of this Agreement pursuant to
Section 9.01, this Agreement shall forthwith become void (except as set forth in
Section 10.03), and there shall be no liability on the part of any party hereto,
except (i) each party shall remain liable in any action at law or otherwise for
any liabilities or damages arising out of its gross negligence or willful breach
of any provision of this Agreement, (ii) as otherwise provided in this Section
9.02, and (iii) as provided in Section 9.03 and Section 9.04.
(b) If this Agreement is terminated as a result of any breach of a
representation, warranty, covenant or other agreement which is caused by the
gross negligence or willful breach of a party hereto, such party shall be liable
to the other party for all out-of-pocket costs and expenses (but in no event in
an amount in excess of $500,000), including, without limitation, the reasonable
fees and expenses of lawyers, accountants and investment bankers, incurred by
such other party in connection with the entering into of this Agreement and the
carrying out of any and all acts contemplated hereunder ("Expenses"). The
payment of Expenses is not an exclusive remedy, but is in addition to any other
rights or remedies available to the parties hereto at law or in equity.
(c) Except as otherwise provided in this Section 9.02 or in Section
9.03 or Section 9.04, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby and thereby shall be paid by
the party incurring such expenses, whether or not any of the transactions
contemplated by this Agreement is consummated.
9.03. Seller Special Payment.
(a) Payment Amount. As a condition of the Buyer's willingness, and in
order to induce the Buyer, to enter into this Agreement and to reimburse the
Buyer for incurring the damages, costs and expenses related to entering into
this Agreement and consummating the transactions contemplated by this Agreement,
the Seller will make a cash payment to the Buyer, as liquidated damages and in
lieu of any other rights or remedies under this Agreement, in the amount of
$3,500,000 (the "Seller Special Payment") if and only if:
(i) (x) the Buyer or the Seller has terminated this Agreement
pursuant to Section 9.01(f), or (y) the Buyer has terminated this
Agreement pursuant to Section 9.01(g), and the events described in
clause (A) or (B), below, shall have taken place:
(A) within twelve months of any such termination or other event
specified in (i) above, (a) the Seller or the Seller's Bank shall have
entered into an agreement to engage in an Acquisition Transaction (as
defined in Section 1.01(b)) with any person other than the Buyer or
any affiliate of the Buyer or (b) the Seller Board or any committee
thereof shall have authorized, approved, recommended, publicly
proposed or failed to publicly oppose an Acquisition Transaction or
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recommended that stockholders of the Seller authorize, approve or
accept any Acquisition Transaction with any person other than the
Buyer or any affiliate of the Buyer, or
(B) at the time of such termination or event giving rise to such
termination, it shall have been publicly announced that any person
(other than the Buyer or any affiliate of the Buyer) shall have (a)
made, or disclosed an intention to make, a bona fide offer to engage
in an Acquisition Transaction, or (b) filed an application (or given a
notice), whether in draft or final form, under the BHC Act or the
Change in Bank Control Act of 1978, for approval to engage in an
Acquisition Transaction;
or
(ii) the Buyer has terminated this Agreement pursuant to Section
9.01(d) or Section 9.01(e) and the breach of the representation,
warranty, covenant or agreement under Section 9.01(d) or Section
9.01(e) was caused by the willful conduct or gross negligence of the
Seller.
(b) Payment Required. Any payment required under this Section 9.03 will
be (i) payable by the Seller to the Buyer (by wire transfer of immediately
available funds to an account designated by the Buyer) within five business days
after demand by the Buyer and (ii) net of any other payments made by the Seller
to the Buyer pursuant to the provisions of Section 9.02(b). In the event of a
termination under circumstances that would trigger a payment under this Section
9.03, any standstill provisions contained in the Confidentiality Agreement shall
terminate.
(c) Exclusivity of Remedy. Notwithstanding anything to the contrary set
forth in this Agreement, if the Seller pays or causes to be paid to the Buyer
the Seller Special Payment, neither the Seller nor any affiliate will have any
further obligations or liabilities to the Buyer or the Buyer Bank or any other
person with respect to this Agreement or the transactions contemplated by this
Agreement, it being understood, however, that payment of the Seller Special
Payment shall not have any effect on the respective rights and obligations of
the parties pursuant to the Stock Option Agreement.
9.04. Buyer Special Payment.
(a) Payment Amount. As a condition of the Seller's willingness to, and
in order to induce the Seller to, enter into this Agreement, and to reimburse
the Seller for incurring the damages, costs and expenses related to entering
into this Agreement and consummating the transactions contemplated by this
Agreement, the Buyer hereby agrees to pay to the Seller, as liquidated damages
and in lieu of any other rights or remedies under this Agreement, a cash payment
in the amount of $3,500,000 (the "Buyer Special Payment") if and only if the
Seller has terminated this Agreement in accordance with Section 9.01(d) or
Section 9.01(e) and the breach of the representation, warranty, covenant or
agreement under Section 9.01(d) or Section 9.01(e) was caused by the willful
conduct or gross negligence of the Buyer.
(b) Payments Required. Any payment required to be made under this
Section 9.04 shall be (i) paid by the Buyer to the Seller by wire transfer of
immediately available funds to an account designated by the Seller within five
business days after demand by the Seller and (ii) net of any other payments made
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by the Buyer to the Seller pursuant to the provisions of Section 9.02(b).
(c) Exclusivity of Remedy. Notwithstanding anything to the contrary set
forth in this Agreement, if the Buyer pays or causes to be paid to the Seller
the Buyer Special Payment, neither the Buyer nor any affiliate will have any
further obligations or liabilities to the Seller or the Seller Bank or any other
person with respect to this Agreement or the transactions contemplated by this
Agreement, it being understood, however, that payment of the Buyer Special
Payment shall not have any effect on the respective rights and obligations of
the parties pursuant to the Stock Option Agreement.
9.05. Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after the approval and
adoption of this Agreement and the transactions contemplated hereby, no
amendment may be made which would reduce the amount or change the type of
consideration into which each share of Seller Common Stock shall be converted
upon consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
9.06. Waiver. At any time prior to the Effective Time, any party hereto
may (i) extend the time for the performance of any obligation or other act of
any other party hereto, (ii) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein; provided, however, that after the approval and adoption of this
Agreement and the approval of the transactions contemplated hereby by the
stockholders of the Seller there may not be, without further approval of such
stockholders, any extension or waiver of this Agreement or any portion thereof
which would reduce the amount or change the form of the consideration into which
each Share shall be converted upon consummation of the Merger delivered to the
Seller's stockholders hereunder other than as contemplated by this Agreement.
Any such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby, but such extension
or waiver or failure to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
Article X. GENERAL PROVISIONS
10.01. Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 9:00 a.m. on a date to
be specified by the parties, within ten business days after the satisfaction or
waiver (subject to applicable law) of the latest to occur of the conditions set
forth in Section 8.01 (the "Closing Date"), at the offices of Foley, Hoag &
Eliot LLP, One Post Office Square, Boston, Massachusetts 02109, unless another
time, date or place is agreed to in writing by the parties hereto.
10.02. Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, the Buyer shall be
entitled to revise the structure of the Merger and the other transactions
contemplated hereby and thereby, provided that (i) there are no material adverse
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federal or state income tax consequences to the Seller and its stockholders as a
result of the modification; (ii) the consideration to be paid to the holders of
shares of Seller Common Stock under this Agreement is not thereby changed in
kind or reduced in amount; (iii) there are no material adverse changes to the
benefits and other arrangements provided to or on behalf of the Seller's
directors, officers and other employees; and (iv) such modification will not be
likely to delay materially or jeopardize receipt of any required regulatory
approvals or other consents and approvals relating to the consummation of the
Merger. This Agreement and any related documents shall be appropriately amended
in order to reflect any such revised structure.
10.03. Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Section
9.01, as the case may be, except that the agreements set forth in Article II and
Article III and Sections 7.06, Section 7.07 and Section 7.14 shall survive the
Effective Time indefinitely and those set forth in Sections 7.02(c) and in
Section 7.02(e), Article IX and Article X hereof shall survive termination
indefinitely.
10.04. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 10.04):
if to the Buyer:
Seacoast Financial Services Corporation
One Compass Place
New Bedford, Massachusetts 02740
Facsimile: (508) 996-3318
Attention: Kevin G. Champagne
President and Chief Executive Officer
with a copy to:
Foley Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Facsimile: (617) 832-7000
Attention: Peter W. Coogan
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if to the Seller:
Home Port Bancorp, Inc.
60 Arch Street
Greenwich, Connecticut 06080
Facsimile: (203) 661-3179
Attention: Karl L. Meyer
President and Chief Executive Officer
with a copy to:
Gadsby Hannah LLP
225 Franklin Street
Boston, Massachusetts 02110
Facsimile: (617) 345-7050
Attention: Robert A. Trevisani
10.05. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated by this Agreement is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement be consummated as
originally contemplated to the fullest extent possible.
10.06. Entire Agreement. This Agreement (including the Disclosure
Schedules and Exhibits) and the Stock Option Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof except
for the Confidentiality Agreement.
10.07. No Third Party Beneficiaries. This Agreement, together with the
other documents and instruments referred to herein and therein, between Buyer
and Seller is not intended to confer any rights or remedies upon any person
other than the parties hereto.
10.08. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
10.09. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement (other
than Section 7.06), express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
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10.10. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.11. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any state or federal court sitting in the City of Boston.
10.12. Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.13. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits, Annexes or Schedules, such reference shall be to a Section
of or Exhibit, Annex or Schedule to this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to be July 20, 2000.
10.14. Counterparts. This Agreement may be executed (including by
facsimile) in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement
to be executed as a sealed instrument as of the date first written above by
their respective officers thereunto duly authorized.
HOME PORT BANCORP, INC.
By: /s/ Karl L. Meyer
------------------------------------
Title:President and Chief Executive
Officer
Attest:
By: /s/ Robert J. McKay
-------------------------------
Secretary
By: /s/ John M. Sweeney
------------------------------------
Title:Chief Financial Officer and
Treasurer
SEACOAST FINANCIAL SERVICES
CORPORATION
By: /s/ Kevin G. Champagne
------------------------------------
Title:President and Chief Executive
Officer
Attest:
By: /s/ J. Louis LeBlanc
-------------------------------
Clerk
By: /s/ Francis S. Mascianica, Jr.
------------------------------------
Title:Chief Financial Officer and
Treasurer
<PAGE>
ANNEX B
OPINION OF SANDLER O'NEILL & PARTNERS, L.P.
[Date], 2000
Board of Directors
Home Port Bancorp, Inc.
104 Pleasant Street
Nantucket, MA 02554
Gentlemen:
Home Port Bancorp, Inc. ("Home Port") and Seacoast Financial Services
Corporation ("Seacoast") have entered into an Agreement and Plan of Merger,
dated as of July 20, 2000 (the "Agreement"), pursuant to which Home Port will be
merged with and into Seacoast (the "Merger"). Upon consummation of the Merger,
each share of Home Port common stock, par value $.01 per share, issued and
outstanding immediately prior to the Merger (the "Home Port Shares"), other than
certain shares specified in the Agreement, will be converted into the right to
receive $37.00 in cash, without interest (the "Merger Consideration"). The terms
and conditions of the Merger are more fully set forth in the Agreement. You have
requested our opinion as to the fairness, from a financial point of view, of the
Merger Consideration to be received by the holders of Home Port Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) certain publicly available
financial statements and other historical financial information of Home Port
that we deemed relevant; (iii) certain publicly available financial statements
of Seacoast that we deemed relevant; (iv) certain internal financial analyses
and forecasts of Home Port prepared by and reviewed with management of Home Port
and the views of senior management of Home Port, based on certain limited
discussions with certain members of senior management, regarding Home Port's
business, financial condition, results of operations and future prospects; (v)
the publicly reported historical price and trading activity for Home Port's
common stock, including a comparison of certain financial and stock market
information for Home Port with similar publicly available information for
certain other companies the securities of which are publicly traded; (vi) the
financial terms of recent business combinations in the savings institution
industry, to the extent publicly available; (vii) the current market environment
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generally and the banking environment in particular; and (viii) such other
information, financial studies, analyses and investigations and financial,
economic and market criteria as we considered relevant.
In performing our review, we have assumed and relied upon the accuracy
and completeness of all the financial information, analyses and other
information that was publicly available or otherwise furnished to, reviewed by
or discussed with us, and we do not assume any responsibility or liability for
independently verifying the accuracy or completeness thereof. We did not make an
independent evaluation or appraisal of the specific assets, the collateral
securing assets or the liabilities (contingent or otherwise) of Home Port or
Seacoast or any of their subsidiaries, or the collectibility of any such assets,
nor have we been furnished with any such evaluations or appraisals. We did not
make an independent evaluation of the adequacy of the allowance for loan losses
of Home Port or Seacoast nor have we reviewed any individual credit files
relating to Home Port or Seacoast and, with your permission, we have assumed
that their respective allowances for loan losses are adequate to cover such
losses. With respect to the financial projections prepared by and reviewed with
Home Port's management, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of such
management of the future financial performance of Home Port and that such
performance will be achieved, and we express no opinion as to such financial
projections or the assumptions on which they are based. We have also assumed
that there has been no material change in Home Port's or Seacoast's assets,
financial condition, results of operations, business or prospects since the date
of the most recent financial statements made available to us. We have assumed in
all respects material to our analysis that Home Port and Seacoast will remain as
going concerns for all periods relevant to our analyses, that all of the
representations and warranties contained in the Agreement and all related
agreements are true and correct, that each party to such agreements will perform
all of the covenants required to be performed by such party under such
agreements and that the conditions precedent in the Agreement are not waived.
Our opinion is necessarily based on financial, economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Events occurring after the date hereof could materially
affect this opinion. We have not undertaken to update, revise, reaffirm or
withdraw this opinion or otherwise comment upon events occurring after the date
hereof. We are expressing no opinion herein as to the prices at which Home
Port's common stock will trade at any time.
We have acted as Home Port's financial advisor in connection with the
Merger and will receive a fee for our services, which is contingent upon
consummation of the Merger. In the ordinary course of our business as a
broker-dealer, we may also purchase securities from and sell securities to Home
Port and Seacoast. We may also actively trade the equity securities of Home Port
and Seacoast for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of Home Port in
connection with its consideration of the Merger and does not constitute a
recommendation to any shareholder of Home Port as to how such shareholder should
vote at any meeting of shareholders called to consider and vote upon the Merger.
Our opinion is not to be quoted or referred to, in whole or in part, in a
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registration statement, prospectus, proxy statement or in any other document,
nor shall this opinion be used for any other purposes, without Sandler O'Neill's
prior written consent; provided, however, that we hereby consent to the
inclusion of this opinion as an annex to Home Port's Proxy Statement dated the
date hereof and to the references to this opinion therein.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Merger Consideration to be received by the holders of Home
Port Shares is fair to such shareholders from a financial point of view.
Very truly yours,
/s/ SANDLER O'NEILL & PARTNERS, L.P.
------------------------------------
SANDLER O'NEILL & PARTNERS, L.P.
3
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Execution Copy
ANNEX C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 20, 2000, between HOME PORT
BANCORP, INC., a Delaware corporation ("Issuer"), and SEACOAST FINANCIAL
SERVICES CORPORATION, a Massachusetts corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined in Section 2(a)):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Certain Definitions.
(a) "1934 Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
(b) "Acquisition Transaction" shall mean (w) a merger or consolidation,
or any similar transaction, involving Issuer or any Significant Subsidiary (as
defined in Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other acquisition (including
by way of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer or any Significant
Subsidiary of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any (i) merger, consolidation, or similar
transaction involving Issuer or any Significant Subsidiary in which the voting
securities of Issuer outstanding immediately prior thereto continue to represent
(by either remaining outstanding or being converted into the voting securities
of the surviving entity of any such transaction) at least 65% of the combined
voting power of the voting securities of the Issuer or the surviving entity
outstanding immediately after the consummation of such merger, consolidation, or
similar transaction, or (ii) any merger, consolidation, purchase or similar
transaction involving only the Issuer and one or more of its Subsidiaries or
involving only any two or more of such Subsidiaries, be deemed to be an
Acquisition Transaction, provided any such transaction is not entered into in
violation of the terms of the Merger Agreement.
(c) The term "beneficial ownership" shall have the meaning assigned
thereto in Section 13(d) of the 1934 Act.
(d) "Exercise Termination Event" shall mean each of the following:
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(i) the Effective Time (as defined in the Merger Agreement) of the
Merger;
(ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence
of an Initial Triggering Event except a termination by Grantee pursuant
to Sections 9.01(d) or 9.01(e) of the Merger Agreement (unless the
breach by Issuer giving rise to such right of termination is non-
volitional); or
(iii) the passage of twelve months after termination of the Merger
Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Sections
9.01(d) or 9.01(e) of the Merger Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional).
(e) "Holder" shall mean the holder or holders of the Option.
(f) "Initial Triggering Event" shall mean any of the following events
or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition Transaction (as
defined in Section 1(b)) with any person other than Grantee or any of
its Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the stockholders of
Issuer approve or accept any Acquisition Transaction or shall have
failed to publicly oppose an Acquisition Transaction, in each case with
any person other than Grantee or a Grantee Subsidiary;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or the Board of Directors of
Issuer shall have publicly withdrawn or modified, or publicly announced
its intention to withdraw or modify, in any manner adverse to Grantee,
its recommendation that the stockholders of Issuer approve the
transactions contemplated by the Merger Agreement;
(iii) The shareholders of Issuer shall have voted and failed to
approve and adopt the Merger Agreement and the Merger at a meeting
which has been held for that purpose or any adjournment or postponement
thereof, or such meeting shall not have been held in violation of the
Merger Agreement or shall have been canceled prior to termination of
the Merger Agreement if, prior to such meeting (or if such meeting
shall not have been held or shall have been canceled, prior to such
termination), any person (other than the Grantee or a Grantee
Subsidiary) shall have made a proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the
subject of public disclosure to engage in an Acquisition Transaction;
(iv) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course
of its business shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 15% or more of the outstanding
shares of Common Stock;
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(v) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(vi) After an overture is made by a person other than Grantee or any
Grantee Subsidiary to Issuer or its stockholders to engage in an
Acquisition Transaction, Issuer shall have breached any covenant or
obligation contained in the Merger Agreement and such breach (x) would
entitle Grantee to terminate the Merger Agreement and (y) shall not
have been cured prior to the Notice Date (as defined in Section 3(c));
or
(vii) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with
the Federal Reserve Board, or other federal or state bank regulatory
authority, whether in draft or final form, for approval to engage in an
Acquisition Transaction.
(g) "Last Triggering Event" shall mean the last Initial Triggering
Event to expire.
(h) The term "market/offer price" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with Issuer, or (iii) in the event of a
sale of all or a substantial portion of Issuer's assets, the sum of the price
paid in such sale for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized investment banking
firm selected by the Holder, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder and
reasonably acceptable to the Issuer.
(i) The term "person" shall have the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the 1934 Act.
(j) "Subsequent Triggering Event" shall mean either of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or
more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
Section 1(f)(i), except that the percentage referred to in the
definition of Acquisition Transaction in clause (y) of Section 1(b)
shall be 20%.
2. Grant of Option.
(a) Option. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 366,536 fully paid and nonassessable shares of Issuer's common stock, par
value $.01 per share ("Common Stock"), at a price of $37.00 per share (the
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"Option Price"); provided further that in no event shall the number of shares of
Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's
issued and outstanding shares of Common Stock without giving effect to any
shares subject to or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) Issuance of Additional Shares of Common Stock. In the event that
any additional shares of Common Stock are issued or otherwise become outstanding
after the date of this Agreement (other than pursuant to this Agreement), the
number of shares of Common Stock subject to the Option shall be increased so
that, after such issuance, it equals 19.9% of the number of shares of Common
Stock then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 2(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
3. Exercise of Option.
(a) Preconditions to Exercise. The Holder (as defined in Section 1(e))
may exercise the Option, in whole or part, and from time to time (but not more
than an aggregate of three times), if, but only if, both an Initial Triggering
Event (as defined in Section 1(f)) and a Subsequent Triggering Event (as defined
in Section 1(j)) shall have occurred prior to the occurrence of an Exercise
Termination Event (as defined in Section 1(d)); provided that the Holder shall
have sent the written notice of such exercise (as provided in Section 3(c))
within 50 days following such Subsequent Triggering Event.
(b) Notification by Issuer as to Certain Events. Issuer shall notify
Grantee promptly in writing of the occurrence of any Initial Triggering Event or
Subsequent Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of the Holder to exercise the Option.
(c) Notice of Exercise of Option. In the event the Holder is entitled
to and wishes to exercise the Option, it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice Date") specifying (i)
the total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 20 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided that if prior notification to or approval of the Federal Reserve Board
or any other regulatory agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that otherwise would
run pursuant to this sentence shall run instead from the date on which any
required notification periods (including any extensions thereof) have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods (including any extensions thereof) shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(d) Payment of Exercise Price. At the closing referred to in Section
3(c), the Holder shall pay to Issuer the aggregate purchase price for the shares
of Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
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provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(e) Delivery of Certificates. At such closing, simultaneously with the
delivery of immediately available funds as provided in Section 3(d), Issuer
shall deliver to the Holder a certificate or certificates representing the
number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer a copy of this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
(f) Restrictive Legend. Certificates for Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(g) Holder of Record. Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under Section 3(c) and the
tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges imposed upon Issuer that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 3 in
the name of the Holder or its permitted assignee.
4. Certain Agreements of the Issuer. Issuer agrees: (i) that it shall at
all times maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Common Stock so that the Option may be exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to purchase
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Common Stock; (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. sec. 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any other federal or state regulatory authority is necessary
before the Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such information to the
Federal Reserve Board or such other federal or state regulatory authority as
they may require) in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the rights of the
Holder against dilution.
5. Surrender and Exchange. Subject to the provisions of Section 12, this
Agreement (and the Option granted hereby) are exchangeable, without expense, at
the option of the Holder, upon presentation and surrender of this Agreement at
the principal office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase, on the same
terms and subject to the same conditions as are set forth herein, in the
aggregate the same number of shares of Common Stock purchasable hereunder. The
terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
6. Further Adjustment in Number of Shares Purchasable. In addition to the
adjustment in the number of shares of Common Stock that are purchasable upon
exercise of the Option pursuant to Section 2(b) of this Agreement, the number of
shares of Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as provided in
this Section 6. In the event of any change in, or distributions in respect of,
the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalization, combinations, subdivisions, conversions, exchanges of shares,
distributions on or in respect of the Common Stock (whether or not the same
would be prohibited under the terms of the Merger Agreement), or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6
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7. Registration. The obligations set forth in this Section 7 shall apply
during such time as securities of the Issuer (or its successors or assigns) are
registered under the 1934 Act. Upon the occurrence of a Subsequent Triggering
Event that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee delivered within 50 day after such Subsequent Triggering
Event (whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf registration statement
under the 1933 Act covering the resale of this Option and any shares issued
pursuant to this Option and the issuance of any shares issuable pursuant to this
Option to the extent then permitted under the rules, regulations or policies of
the SEC and, to the extent not so permitted, the resale of such shares issuable
pursuant to this Option. The Issuer shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of this Option and any shares of
Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee. Issuer
will use its reasonable best efforts to cause such registration statement first
to become effective and then to remain effective for such period not in excess
of 180 days from the day such registration statement first becomes effective or
such longer time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by Grantee for
registration of the Option or Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of Common
Stock, and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering, the inclusion of the Holder's Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered by Issuer,
the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; and provided, however, that after
any such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate; and
provided further, however, that if such reduction occurs, then the Issuer shall
file a registration statement for the balance as promptly as practical and no
reduction shall thereafter occur. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for the Issuer. Upon
receiving any request under this Section 7 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be entitled to
registration rights under this Section 7, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall Issuer be obligated to effect more than two registrations
pursuant to this Section 7 by reason of the fact that there shall be more than
one Grantee as a result of any assignment or division of this Agreement.
8. Substitute Option.
(a) In the event that prior to an Exercise Termination Event, Issuer shall enter
into an agreement (i) to consolidate with or merge into any person, other than
Grantee or one of its Subsidiaries, and shall not be the continuing or surviving
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corporation of such consolidation or merger, (ii) to permit any person, other
than Grantee or one of its Subsidiaries, to merge into Issuer and Issuer shall
be the continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Common Stock shall be changed into or exchanged
for stock or other securities of any other person or cash or any other property
or the then outstanding shares of Common Stock shall after such merger represent
less than 50% of the outstanding voting shares and voting share equivalents of
the merged company, or (iii) to sell or otherwise transfer all or substantially
all of its assets to any person, other than Grantee or one of its Subsidiaries,
then, and in each such case, the agreement governing such transaction shall make
proper provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or
(y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(3) "Assigned Value" shall mean the market/offer price, as defined
in Section 1(h).
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher
than the closing price of the shares of Substitute Common Stock on the
day preceding such consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
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by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing provisions of this
Section 8, shall the Substitute Option be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the shares of Substitute Common Stock outstanding prior
to exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm selected
by the Holder, and reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in Section
8(a) unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder.
9. Extension of Time. The 50-day period for exercise of certain rights
under Sections 3, 7 and 12 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, and for the
expiration of all statutory waiting periods; and (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise.
10. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
11. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
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(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
12. No Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except Grantee may assign the Option to an affiliate or in connection
with a merger in which it is not the surviving entity or in connection with a
sale of all or substantially all of its assets.
13. Reasonable Best Efforts. Each of Grantee and Issuer will use its best
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation making application
to list the shares of Common Stock issuable hereunder on the NASDAQ National
Stock Market upon official notice of issuance and applying to the Federal
Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder.
14. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be enforceable by
either party hereto through injunctive or other equitable relief.
15. Severability. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire the full number of
shares of Common Stock provided in Section 2(a) hereof (as adjusted pursuant to
Section 2(b) or 6 hereof), it is the express intention of Issuer to allow the
Holder to acquire such lesser number of shares as may be permissible, without
any amendment or modification hereof.
16. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
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17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
19. Costs and Expenses. Except as otherwise expressly provided herein,
each of the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
20. Entire Agreement. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
21. Capitalized Terms. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the Merger Agreement.
* * *
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
HOME PORT BANCORP, INC.
By: /s/ Karl L. Meyer
---------------------------------------------
Name: Karl L. Meyer
Title: President and Chief Executive Officer
SEACOAST FINANCIAL SERVICES CORPORATION
By: /s/ Kevin G. Champagne
-----------------------------------------
Name: Kevin G. Champagne
Title: President and Chief Executive Officer
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ANNEX D
CONSULTING AGREEMENT
This CONSULTING AGREEMENT dated as of May 1, 1998 by and between HOME
PORT BANCORP, Inc., a Delaware corporation with principal offices at 104
Pleasant Street, Nantucket, Massachusetts 02554 (the "Company") and KARL L.
MEYER. an individual having an office at 60 Arch Street, Greenwich, Connecticut
06830 ("Consultant").
WHEREAS, Consultant has heretofore provided services to the Company as
President, Chief Executive Officer and Chairman of the Board of Directors; and
WHEREAS, commencing in the year 1992 when Consultant initiated his term
as President and Chief Executive Officer and Chairman of the Company has in each
year achieved substantial growth and a return on equity that has averaged more
than fifteen (15) percent per year, and
WHEREAS, the Company wishes to continue to retain the services of
Consultant upon the terms, conditions and provisions of this Agreement; and
WHEREAS, Consultant desires to continue to provide services to the
Company in accordance with the terms, conditions and provisions of this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the Company and Consultant hereby agree as follows:
1. Chairman, President and Chief Executive Officer. Consultant hereby
agrees to provide consulting services to the Company in the capacity of
President, Chief Executive Officer and Chairman of the Board of Directors. The
services to be performed by Consultant hereunder shall be substantially similar
in substance and manner of performance as performed by Consultant as Chairman of
the Board and President of Home Port during the three years preceding the date
of this Agreement. Nothing herein shall prohibit Consultant from engaging in
other business activities provided that such activities do not materially
interfere with the discharge of his duties hereunder.
2. Term. The initial term of employment under this Agreement shall be
for the three year period commencing May 1, 1998, and ending on April 30, 2001.
The initial term shall automatically be extended for a one-year period beyond
the then effective expiration date on May 1 of each year ("Annual Anniversary
Date") commencing on May 1, 1999 unless the Company shall give written notice to
Consultant more than ninety (90) days prior to an Annual Anniversary Date of its
intention not to continue this Agreement. Any such written notice shall not
effect any prior extensions of the term hereunder.
3. Compensation. Consultant shall receive a consulting fee of $120,000
per annum, payable no less often than monthly, in arrears.
<PAGE>
4. Expenses. The Company shall reimburse the Consultant for expenses
incurred in the performance of his duties hereunder, including:
(a) office expenses of $1,000 per month to be paid monthly, in advance,
on the first day of each month; and
(b) all other reasonable business expenses within twenty (20) days of
receipt by the Company from Consultant of appropriate itemization of such
expenses.
5. Termination.
(a) Termination for Cause. The Company, by majority vote of the Board
of Directors (excluding Consultant), may terminate Consultant's services
hereunder at any time for Cause, upon written notice specifying the reasons.
Consultant shall not be entitled to compensation additional to that due up to
the effective date of such termination. As used herein, the term "Cause" shall
mean:
(i) the commission by Consultant of any act of
embezzlement, fraud, larceny, theft, or other willful
misconduct or gross negligence in connection with the
performance of Consultant's duties, which adversely
affects the affairs of the Company; or
(ii) Consultant's conviction of a felony, or conviction of
a misdemeanor involving moral turpitude; or
(iii) a material breach of the terms of this Agreement
which continues for fifteen (15) days after the
Company has given written notice to Consultant
specifying in reasonable detail the material breach.
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(b) Resignation. Consultant may at any time during the term of this
Agreement, including any automatic renewal hereof, resign, effective thirty (30)
days' after providing written notice to the Company of his intention to resign.
Excepting only the resignation of Consultant following a Change of Control as
specified under Section 5 (e), Consultant shall not be entitled to any
compensation additional to that due up to the effective date of such
resignation. Consultant agrees to continue to perform his duties hereunder, and
otherwise assist the Company in an orderly transition, during such thirty (30)
day period.
(c) Death or Disability. This Agreement shall terminate upon the death
of Consultant . The Company may terminate Consultant's services hereunder at
such time during the term of this Agreement Consultant shall become disabled and
is unable to perform services hereunder, with reasonable accommodation, for a
continuous period of six (6) months. The determination of Consultant's
disability for purposes of this Section 5(c) shall be made by a qualified
physician acceptable to both parties.
(d) Additional Compensation. In the event of termination of this
Agreement due to the death or disability of Consultant, as provided in Section
5(c) above, the Company, within sixty (60) days of such termination, shall pay
to Consultant or Consultant's legal representative in a lump sum, an amount
equal to twelve (12) months compensation at the monthly rate of compensation in
effect at the time of such termination, plus reimbursement for expenses incurred
by Consultant through the date of such termination.
(e) Change in Control. In the event that Consultant elects to resign
within two years of a Change in Control, the Company shall pay Consultant a lump
sum payment consisting of the aggregate amount payable to Consultant had he
continued to provide services under this Agreement for the remainder of the term
and at the rate of compensation in effect on the date of his resignation under
this Section 5(e). A "Change in Control" shall have occurred upon the occurrence
of any of the following events:
(i) failure, at any annual or special meeting of the
Company's shareholders following an "election
contest" subject to Rule 14a-11 (as promulgated under
the Securities Exchange Act of 1934), of any of the
persons nominated by the Company to win election to
the Board; or
(ii) consummation of a "tender offer" (within the meaning
of Rule 14d-2 as promulgated under the Securities
Exchange Act of 1934) for stock of the Company; or
(iii) the Company or any subsidiary thereof is merged or
consolidated or reorganized into or with another
corporation or other legal person, and as a result of
such merger, consolidation or reorganization, less
than a majority of the combined voting power of the
then-outstanding securities of such surviving,
resulting or reorganized corporation or person
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immediately after such transaction, is held in the
aggregate by the holders of securities entitled to
vote generally in the election of directors of the
Company immediately prior to such transaction; or
(iv) the acquisition by any "person" (as such term is used
in sections 13(d) and 14(d) of the Securities
Exchange Act of 1934), other than the Company,
directly or indirectly, of "beneficial ownership" (as
such term is defined in Rule 13d-3 as promulgated
under the Securities Exchange Act of 1934) or the
right which, through the passage of time, would
permit the holder to acquire "beneficial ownership"
of securities representing 20% or more of the total
number of votes that may be cast for the election of
directors of the Company.
(v) the failure of the shareholders of the Company to
elect Consultant as a member its board of directors
or the failure of the Company's board of directors to
nominate and appoint Consultant as Chairman of the
Board of Directors, President, and Chief Executive
Officer of the Company excepting only if such failure
is due to the refusal by Consultant to serve as a
member of the Board of Directors of the Company or as
Chairman of the Board or President.
6. Independent Contractor. Consultant acknowledges that, for all
purposes, he will be acting as an independent contractor and not as an employee.
7. Board of Directors. The Company shall use its best efforts to elect
Consultant to the Board of Directors during the term hereof. The Board of
Directors of the Company has reviewed and approved the terms of this Agreement.
8. Assignment. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of their respective heirs,
successors and representatives, and shall also bind and inure to the benefit of
any successor of the Company by reorganization, merger or consolidation, or any
assignee of a majority or more of the business of the Company.
9. Costs of Enforcement. In the event any dispute shall arise between
the Employee and the Corporation as to the terms or interpretation of this
Agreement, including this Paragraph 9, whether instituted by formal legal
proceedings or otherwise, including any action taken by Employee to enforce the
terms of this Paragraph 9 or in defending against any action taken by the
Corporation, the Corporation shall reimburse Employee for all costs and
expenses, including reasonable attorneys' fees, arising from such dispute,
proceedings or actions, notwithstanding the ultimate outcome thereof, except if
it is finally adjudicated that Consultant willfully and materially breached the
terms hereof, in which case Consultant shall repay the Company any amounts so
advanced. Such reimbursement shall be paid within ten (10) days of Employee
furnishing to the Corporation written evidence, which may be in the form, among
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<PAGE>
other things, of a cancelled check or receipt, of any costs or expenses incurred
by Employee. Any such request for reimbursement by Employee shall be made no
more frequently than at thirty (30) day intervals.
10. Notices. Any notice required or permitted to be given hereunder
shall be by certified mail, return receipt requested, and effective when
received. It shall be sufficient if said notice is personally delivered or sent
by telefax to the recipient at the address set forth in this Agreement or at
such other address as a party may by notice specify to the other.
11. Modifications and Amendments. This Agreement, and any extensions
hereof, may be modified or amended only by a writing signed by the parties
hereto.
12. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and incorporates all prior understandings, oral or written.
13. Waivers. No waiver of any provision or entitlement contained in
this Agreement shall be effective unless in writing signed by the parties
hereto. A waiver by either party of any particular provision of this Agreement
shall not constitute a waiver of any other provision.
14. Governing Law. This Agreement shall be construed under the laws of
the Commonwealth of Massachusetts.
15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
a sealed instrument as of the day and year first above written.
HOME PORT BANCORP, INC.:
By:
---------------------------------------
Name: Charles H. DiGiovanna
Title: Chairman: Compensation Committee
CONSULTANT:
-----------------
Karl L. Meyer
5
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ANNEX E
FORM OF EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 20th day of July, 2000, by and among NANTUCKET
BANK, a Massachusetts chartered savings bank, with its executive offices in
Nantucket, Massachusetts (the "Bank"), SEACOAST FINANCIAL SERVICES CORPORATION,
a Massachusetts corporation (the "Holding Company") which will, as of the
Effective Date, become the parent company for the Bank (the Bank and the Holding
Company shall be hereinafter collectively referred to as the "Employers"), and
[Executive] of Nantucket, Massachusetts (the "Executive").
WITNESSETH
WHEREAS, the Bank desires to continue to provide for the Executive's
employment by the Bank after the acquisition of the Bank's corporate parent Home
Port Bancorp, Inc. ("Home Port") by the Holding Company;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Bank and the Executive agree as follows:
Article 1. Employment. The Executive shall serve the Bank as a Senior
Executive Officer. In such position, the Executive shall have such duties,
responsibilities and authorities as may be determined and designated from time
to time by the Board of Directors. The Executive shall serve under the direction
and supervision of and report to the Chief Executive Officer. The Executive
shall not be required to perform any duties and responsibilities which would
result in a noncompliance with or violation of any applicable law or regulation.
In addition to serving as a Senior Executive Officer of the Bank, the Executive
also agrees to serve during the Term of Employment (as defined in Article 2) as
a Senior Executive Officer of the Holding Company if requested to do so. Unless
otherwise determined by the Board of Directors of the Holding Company, the
Executive shall not be entitled to compensation in addition to the compensation
set forth in Article 3 of this Agreement as a result of serving as an officer of
the Holding Company. The Executive shall be principally located in Nantucket,
Massachusetts but shall be available to visit other offices of the Holding
Company or its affiliates as reasonably appropriate to conduct the business of
the Bank.
Article 2. Effective Date and Term. The effective date (the "Effective
Date") of this Agreement shall be the effective date of the acquisition
("Acquisition") of Home Port by the Holding Company pursuant to that certain
Agreement and Plan of Merger dated as of the date hereof by and between the
Holding Company and Home Port (the "Merger Agreement"). The initial term of the
Executive's employment hereunder shall be for three years from the Effective
Date. The parties intend that, at any point in time during the Executive's
employment hereunder, the then- remaining term of his employment under this
Agreement shall be two years. Accordingly, the term of employment shall be
automatically extended by one day for each day that the Executive remains
employed by the Bank, unless the Executive elects not to continue to extend the
term of this Agreement by giving written notice in accordance with Section 7.2
of this Agreement, or the Board elects not to continue to extend the term of
this Agreement (in which event the provisions of Section 7.1 shall apply). The
last day of such term as so extended from time to time, is herein sometimes
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referred to as the "Expiration Date" and the time period from the Effective Date
through the Expiration Date shall be the "Term of Employment". At least once in
each calendar year the Board will review the Agreement and Executive's
performance for purposes of determining whether to continue to extend the
Agreement and the rationale and results thereof shall be included in the minutes
of the Board's meeting. The Board shall give notice to the Executive reasonably
promptly after such review if it has determined not to continue to extend this
Agreement.
Article 3. Compensation and Benefits. The compensation and benefits
payable to the Executive under this Agreement shall be as follows:
3.1 Salary. For all services rendered by the Executive to the Bank
and its affiliates, the Executive shall be entitled to receive a base salary at
the rate of $[145,000-80,500] per year, subject to increase from time to time in
accordance with the usual practices of the Bank with respect to review of
compensation of its senior executives. In addition, if the Board increases the
Executive's annual base salary at any time before the Expiration Date, such
increased annual base salary shall become a floor below which such annual base
salary shall not fall at any future time during the Term of Employment without
the Executive's written consent, provided, however, that such increased salary
may be reduced (but not below the level originally in effect on the Effective
Date) on a basis consistent with and concurrently with across-the-board salary
reductions based on the Employers' financial performance similarly affecting all
senior management personnel of the Bank and its affiliates. The Executive's
salary shall be payable in periodic installments in accordance with the Bank's
usual practice for its senior executives.
3.2 Regular Benefits. The Executive shall also be entitled to
participate in any and all employee benefit plans, medical insurance plans,
disability income plans, retirement plans, bonus incentive plans, and other
benefit plans from time to time in effect for senior executives of the Bank.
Such participation shall be subject to (i) the terms of the applicable plan
documents, (ii) generally applicable policies of the Bank and (iii) the
discretion of the Board of Directors of the Bank or any administrative or other
committee provided for in or contemplated by such plan.
3.3 Business Expenses. The Bank shall reimburse the Executive for
all reasonable travel and other business expenses incurred by him in the
performance of his duties and responsibilities, subject to such reasonable
requirements with respect to substantiation and documentation as may be
specified by the Bank.
3.4 Vacation. The Executive shall be entitled to not less than four
(4) weeks of vacation per year, to be taken at such times and intervals as shall
be determined by the Executive with the approval of the Bank, which approval
shall not be unreasonably withheld.
3.5 General. Nothing paid to the Executive under any plan, policy or
arrangement currently in effect or made available in the future shall be deemed
to be in lieu of other compensation to the Executive as described in this
Agreement.
Article 4. Extent of Service. During the Term of Employment, the
Executive shall, subject to the direction and supervision of the Board of
Directors of the Bank, devote his full time, best efforts and business judgment,
skill and knowledge to the advancement of the Employers' interests and to the
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discharge of his duties and responsibilities hereunder. He shall not engage in
any other business activity, except as may be approved by the Board of
Directors; provided, however, that nothing herein shall be construed as
preventing the Executive from:
(a) investing his assets in such form or manner as shall not require any
material services on his part in the operations or affairs of the
companies or the other entities in which such investments are made; or
(b) serving on the board of directors of any company not in competition with
either Employer, provided that the Executive shall not render any
material services with respect to the operations or affairs of any such
company; or
(c) engaging in religious, charitable or other community or non-profit
activities which do not impair his ability to fulfill his duties and
responsibilities under this Agreement.
Article 5. Termination Upon Death. In the event of the Executive's
death during the Term of Employment, the Executive's employment shall terminate
on the date of his death. The Bank shall pay to the Executive's beneficiary
designated in writing to the Bank prior to his death (or to his estate, if he
fails to make such designation), (i) any base salary or other compensation
earned (together with a pro rata portion of the bonus payable with respect to
the year in which death occurred) but not paid to Executive prior to the date of
death, plus (ii) the base salary that Executive would have earned for a period
of six months following his death, plus (iii) any death benefits that Executive
is entitled to under the Bank's policies in effect on Executive's date of death.
The foregoing bonus payments shall be payable at the time of payment of similar
bonus payments made to other executives of the Bank and shall be computed on the
assumption that all the Executive's individual goals (if any) under any
applicable bonus plans were achieved. In addition, the Bank shall continue in
effect the medical benefits of the Executive and Executive's dependents, or any
of the same, at the level in effect on, and at the same out-of-pocket cost to
the Executive as of, the date of death for a six month period commencing on the
date of death (or, if such continuation is not permitted by applicable law or if
the Board so determines in its sole discretion, the Bank shall provide the
economic equivalent in lieu thereof).
Article 6. Termination by the Bank or the Holding Company for Cause.
6.1 Cause Termination. The Executive's employment hereunder may be
terminated by the Bank or the Holding Company without further liability on the
part of the Bank or the Holding Company, effective immediately, by a two-thirds
vote of all of the members of the Board of Directors of the Bank or the Holding
Company for Cause (as such term is defined in Section 6.2) by written notice to
the Executive setting forth in reasonable detail the nature of such Cause. Upon
the taking of such a vote, thereupon the Term of Employment (if not already
expired) shall end.
6.2 Definition of "Cause." Termination for "Cause" shall mean
(a) deliberate dishonesty with respect to the Bank or any
subsidiary or affiliate thereof;
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(b) committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Bank or any subsidiary or
affiliate thereof; or
(c) conviction of a crime involving moral turpitude.
6.3 Termination of Obligations. In the event of termination pursuant
to this Article 6, all obligations of the Employers under this Agreement shall
terminate as of the date indicated, but vested rights of the parties hereunder
shall not be affected.
Article 7. Termination by the Executive
7.1 Termination by the Executive for Good Reason. The Executive
shall be entitled to terminate his employment hereunder for Good Reason (as
defined in Section 7.4) effective immediately by giving written notice to the
Board of Directors. Upon any such termination, the Term of Employment (if not
already expired) shall end, and the Executive shall be entitled to receive the
benefits set forth in Article 9.
7.2 Other Voluntary Termination by the Executive. During the Term of
Employment, the Executive may effect, upon sixty (60) days prior written notice
to the Bank, a Voluntary Termination of his employment hereunder and thereupon
the Term of Employment (if not already expired) shall end. A "Voluntary
Termination" shall mean a termination of employment by the Executive on his own
initiative other than (a) a termination due to death or becoming Disabled (as
defined in Article 11), (b) a termination for Good Reason, (c) a termination due
to Retirement (as defined in Section 7.3), or (d) a termination as a result of
the normal expiration of the full Term of Employment. If, during the Term of
Employment, the Executive's employment is so terminated due to Voluntary
Termination, the Term of Employment shall thereupon end and the Employers shall
pay to the Executive the amounts provided for in Section 9.1.
7.3 Termination Due to Retirement. "Retirement" means the
termination of the Executive's employment with the Bank for any reason by the
Executive at any time after the Executive attains "Retirement Age" (as
hereinafter defined). "Retirement Age" shall mean the earliest to occur of (x)
age 65, (y) (if applicable) any lesser age at which the Executive is entitled to
retire from the Employers and receive retirement benefits under the Employers'
qualified pension plan, and (z) an age of 62 or greater at which the Employers
permit the Executive to retire. The Executive may terminate the Executive's
employment hereunder due to Retirement upon thirty (30) days prior written
notice to the Bank. If, during the Term of Employment, the Executive's
employment is so terminated due to Retirement, the Term of Employment shall
thereupon end and the Executive shall be entitled to (i) the amounts provided
for in Section 9.1, (ii) continuation of the Executive's medical benefits at the
level in effect on, and at the same out-of-pocket cost to the Executive as of,
the date of termination for the one-year period following the termination of the
Executive's employment due to Retirement (or, if such continuation is not
permitted by applicable law or if the Board so determines in its sole
discretion, the Bank shall provide the economic equivalent in lieu thereof), and
(iii) any other compensation and benefits as may be provided in accordance with
the terms and provisions of any applicable plans and programs, if any, of the
Bank.
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7.4 Definition of "Good Reason." For purposes of this Agreement, the
term "Good Reason" shall mean any of the following:
(a) the failure of the Board of Directors to elect the Executive
as a Senior Executive Officer, or to continue the Executive as a
Senior Executive Officer;
(b) a material breach by the Employers of the provisions of
Section 3.1, which breach shall have continued for thirty (30) days
after written notice from the Executive to the Employers specifying
the nature of such failure or breach; and
(c) a determination by the Board not to continue to extend the
term of this Agreement as provided in Article 2.
In addition, "Good Reason" shall include the following events but only
if they shall occur within two years following a "Change in Control"
(which term shall have the meaning defined in Section 7.5):
(d) the failure by the Employers to continue to provide the
Executive with benefits substantially similar to those available to
the Executive under any of the life insurance, medical, health and
accident, or disability plans or any other material benefit plans in
which the Executive was participating at the time of the Change in
Control, or the taking of any action by the Employers which would
directly or indirectly materially reduce any of such benefits, or the
failure by the Employers to provide the Executive with the number of
paid vacation days to which the Executive is entitled on the basis of
years of service with the Employers in accordance with the Employers'
normal vacation policy in effect at the time of the Change in Control;
(e) A reasonable determination by the Executive that, as a result
of a Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the Executive
immediately prior to such Change in Control;
(f) A reasonable determination by the Executive that, as a result
of a Change in Control, his working conditions have significantly
worsened; or
(g) the failure of the Employers to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement.
7.5 Definition of "Change in Control."
(a) A "Change in Control" shall be deemed to have occurred if any of
the following events shall occur after the Effective Date:
(1) If there has occurred after the Effective Date a change in
control which the Holding Company would be required to report in
response to Item 1 of Form 8-K promulgated under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), or, if such
regulation is no longer in effect, any regulations promulgated by the
Securities and Exchange Commission pursuant to the 1934 Act which are
intended to serve similar purposes;
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(2) When any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the 1934 Act) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities of the Holding Company representing
twenty-five percent (25%) or more of the total number of votes that may
be cast for the election of directors of the Holding Company;
(3) During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the
Holding Company, and any new director (other than a director designated
by a person who has entered into an agreement with the Holding Company
to effect a transaction described in Section 7.5(a)(2), 7.5(a)(4), or
7.5(a)(5) of this Agreement) whose election by the Board or nomination
for election by the Holding Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority of the Board of
Directors of the Holding Company;
(4) The stockholders of the Holding Company approve a merger,
share exchange or consolidation ("merger or consolidation") of the
Holding Company with any other corporation, other than (a) a merger or
consolidation which would result in the voting securities of the
Holding Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 70% of the
combined voting power of the voting securities of the Holding Company
or such surviving entity outstanding immediately after such merger or
consolidation or (b) a merger or consolidation effected to implement a
recapitalization of the Holding Company (or similar transaction) in
which no "person" acquires more than 30% of the combined voting power
of the Holding Company's then outstanding securities; or
(5) The stockholders of the Holding Company approve a plan of
complete liquidation of the Holding Company or an agreement for the
sale or disposition by the Holding Company of all or substantially all
of the Holding Company's assets.
(b) Notwithstanding any other provisions hereof, the parties agree
that neither the Acquisition of the Bank by the Holding Company nor any
of the other transactions contemplated by the Merger Agreement shall
constitute a Change in Control under this Agreement.
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Article 8. Termination Without Cause. The Executive's employment may be
terminated without Cause by a two-thirds vote of all of the members of the Board
of Directors on written notice to the Executive. Upon such notice the Term of
Employment (if not already expired) shall end, provided, however, that the Bank
shall have the obligation upon any such termination to make the payments to the
Executive provided for under Article 9 of this Agreement.
Article 9. Certain Termination Benefits. In the event of termination of
employment pursuant to Section 7.1 or Article 8, the Executive shall be entitled
to each of the following benefits:
9.1 Earnings to Date of Termination. An amount equal to the sum of
(a) base salary or other compensation earned through the date of termination,
plus (b) all accrued vacation, plus (c) any deferred compensation.
9.2 Pro-Rata Bonus. An amount equal to the Executive's pro rata
share (based on the portion of the fiscal year during which the Executive was
employed) of the highest annual bonus paid during the three fiscal years
preceding the termination of employment.
9.3 Payment of Severance Benefit. For the period subsequent to the
date of termination until the Expiration Date, the Bank will pay to the
Executive, in installments no less frequently than monthly, a severance benefit
at an annual rate determined by adding together (a) the Executive's annual base
salary as of the date of termination of employment and (b) the highest annual
bonus paid to the Executive during the three fiscal years preceding the
termination of employment.
9.4 Benefit Continuation. For the period subsequent to the date of
termination until the Expiration Date, the Executive shall continue to receive
the disability and medical benefits described in Section 3.2 existing on the
date of termination at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of termination.
9.5 Pension Adjustment. An amount equal to the excess of (a) the
actuarial value of the benefits which the Executive would have accrued under the
Employers' qualified defined benefit pension plan and non-qualified supplemental
retirement plan if the Executive's employment had continued for a period of two
years following his date of termination, over (b) the actuarial equivalent of
the Executive's actual benefit under the defined benefit pension plan and the
non-qualified supplemental retirement plan. The foregoing amount shall be paid
in installments, as provided in Section 9.3.
Article 10. Adjustment for Unavailability of Benefits. If, in spite of
the provisions of Article 9, benefits or service credits under any benefit plan
provided by a third party shall not be payable or provided under any such plan
to the Executive, or to the Executive's dependents, beneficiaries or estate,
because the Executive is no longer deemed to be an employee of the Bank, the
Bank shall pay or provide for payment of such benefits and service credits for
such benefits to the Executive, or to the Executive's dependents, beneficiaries
or estate.
Article 11. Disability. If, due to physical or mental illness, the
Executive shall be disabled so as to be unable to perform substantially all of
his duties and responsibilities hereunder, the Bank, acting through its Board of
Directors, may designate another executive to act in his place during the period
of his disability. Notwithstanding any such designation, the Executive shall
continue to receive his full salary and benefits under Article 3 of this
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Agreement until the earlier of (x) the Expiration Date or (y) the date on which
he becomes eligible for disability income under the Employer's disability income
plan (at which time the Executive shall be considered to be "Disabled"). While
receiving disability payments under such plan, the Executive shall receive a
salary from the Bank which when combined with the Executive's disability income
payments will equal 60% of the Executive's prior salary from the Bank, and shall
continue to participate in the Employers' benefit plans and to receive other
benefits as specified in Section 3.2 until the Expiration Date, with all such
benefits to be at the level in effect on, and at the same out-of-pocket cost to
the Executive as of, the date of disability. In the absence of a disability
income plan at the time of such disability, the Bank shall pay the Executive
benefits equal to those the Executive would have received if the Bank's current
disability plan were in effect at such time. Upon the Executive being able to
return to full-time employment after being Disabled but before the expiration of
the Term of Employment, the Executive shall be offered an equivalent available
position and otherwise be subject to the provisions of this Agreement. Nothing
contained in this Article 11 shall preclude the Bank from terminating the
Executive's employment without Cause, subject to its payment of benefits as
provided in Article 9.
Article 12. Confidential Information. The Executive will not disclose
to any other person (except as required by applicable law or in connection with
the performance of his duties and responsibilities hereunder), or use for his
own benefit or gain, any confidential information of either Employer obtained by
him incident to his employment with the Bank. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities (such as lending relationships, financial
product developments, or possible acquisitions or dispositions of business or
facilities) which have been discussed or considered by the management of either
Employer but does not include any information which has become part of the
public domain by means other than the Executive's nonobservance of his
obligations hereunder.
Article 13. No Mitigation; No Offset. In the event of any termination
of employment under this Agreement, the Executive shall be under no obligation
to seek other employment or to mitigate damages, and there shall be no offset
against any amounts due to him under this Agreement for any reason, including,
without limitation, on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Any amounts due under this
Agreement are in the nature of severance payments or liquidated damages, or
both, and are not in the nature of a penalty.
Article 14. Miscellaneous.
14.1 Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants which would affect the
performance of his obligations hereunder.
14.2 Withholding. All payments made by the Bank under this Agreement
shall be net of any tax or other amounts required to be withheld by the Bank
under applicable law.
14.3 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this Agreement or the breach thereof shall be settled by
arbitration in accordance with the laws of the Commonwealth of Massachusetts by
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three arbitrators, one of whom shall be appointed by the Bank, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 14.3. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel or incur other
costs and expenses in connection with the enforcement of any or all of the
Executive's rights under this Agreement, the Bank shall pay (or the Executive
shall be entitled to recover from the Bank, as the case may be) the Executive's
reasonable attorneys' fees and other reasonable costs and expenses in connection
with the enforcement of said rights (including the enforcement of any
arbitration award in court) regardless of the final outcome, unless and to the
extent the arbitrators shall determine that under the circumstances recovery by
the Executive of all or a part of any such fees and costs and expenses would be
unjust.
14.4 Interpretation. The recitals hereto constitute an integral part
of this Agreement. References to Sections include subsections, which are part of
the related Article and Section (e.g., a section numbered "Section 5.5" would be
part of "Article 5" and references to "Section 5.5" would also refer to material
contained in the subsection described as "Section 5.5(a)").
14.5 Assignment; Successors and Assigns, etc. Neither the Bank nor
the Executive may make any assignment of this Agreement or any interest herein,
by operation of law or otherwise, without the prior written consent of the other
party and without such consent any attempted transfer or assignment shall be
null and of no effect; provided, however, that the Bank may assign its rights
and obligations under this Agreement without the consent of the Executive in the
event either Employer shall hereafter effect a reorganization, consolidate with
or merge into any other person, or transfer all or substantially all of its
properties or assets to any other person. This Agreement shall inure to the
benefit of and be binding upon the Bank and the Executive, and their respective
successors, executors, administrators, heirs and permitted assigns. In the event
of the Executive's death prior to the completion by the Bank of all payments due
him under this Agreement, the Bank shall continue such payments to the
Executive's beneficiary designated in writing to the Bank prior to his death (or
to his estate, if he fails to make such designation).
14.6 Enforceability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14.7 Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
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subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
14.8 Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, to the Executive at such address as the Executive has filed in writing
with the Bank or, in the case of the Bank, at its main office, attention of the
Board of Directors.
14.9 Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by duly authorized
representatives of the Holding Company.
14.10 Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
14.11 Noncompetition.
(a) While Employed. During such time as the Executive is employed
hereunder, the Executive will not compete with the banking or any
other business conducted by the Bank or any affiliate, nor will he
attempt to hire any employee of the Bank or any affiliate, assist in
such hiring by any other person, encourage any such employee to
terminate his or her relationship with the Bank or any affiliate, or
solicit or encourage any customer of the Bank or any affiliate to
terminate its relationship with the Bank or any affiliate or to
conduct with any other person any business or activity which such
customer conducts or could conduct with the Bank or any affiliate.
(b) Post-Employment. During the two year period following
termination of his employment for any reason, the Executive will not
attempt to hire any employee of the Bank or any affiliate, assist in
such hiring by any other person, or encourage any such employee to
terminate his or her relationship with the Bank or any affiliate, or
solicit or encourage any customer of the Bank or any affiliate to
terminate its relationship with the Bank or any affiliate or to
conduct with any other person any business or activity which such
customer conducts or could conduct with the Bank or any affiliate.
During any time period in which the Executive is receiving
compensation pursuant to Article 9, the Executive will not compete on
the Island of Nantucket or from an office within 50 miles of the
Bank's main office with the banking or any other business conducted by
the Bank or any affiliate. The provisions of the previous sentence
shall also be binding on the Executive during the two year period
following the date of termination of the Executive's employment by for
Cause. The non competition provisions of this Section shall not
preclude the Executive from becoming employed at an office located
more than 50 miles from the main office of the Bank by a bank that
also has an office on Nantucket.
14.12 Definition of Affiliate. For purposes of this Agreement, an
"affiliate" of a specified person means a person who directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with, such specified person.
14.13 Agreement of No Effect Before Effective Date. This Agreement
is intended become effective if and only if the Acquisition takes place under
the Merger Agreement, and this Agreement shall terminate and be of no force or
effect if the Acquisition is not consummated under such Merger Agreement..
* * * *
[Signature Pages Follow]
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Bank, by its duly authorized officer, and by the Executive, as
of the date first above written.
ATTEST: NANTUCKET BANK
-----------------
By:_________________________
Title:______________________
[Seal]
WITNESS EXECUTIVE
-----------------
-------------------------
[Executive]
The undersigned hereby unconditionally
guarantees the obligations of the Bank
under the foregoing Agreement.
SEACOAST FINANCIAL SERVICES
CORPORATION
By:___________________________
Title:_________________________
[Seal]
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REVOCABLE PROXY
HOME PORT BANCORP, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER , 2000
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Charles H. Jones, Jr. and Robert J. McKay,
or either of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote as
designated herein all the shares of Common Stock of Home Port Bancorp,
Inc. held of record by the undersigned on October , 2000, at the Special
Meeting of Shareholders to be held on October , 2000 or any adjournment or
adjournments thereof.
1. To consider and vote upon a proposal to approve and adopt an agreement
and plan of merger dated as of July 20, 2000 by and between Seacoast Financial
Services Corporation and Home Port Bancorp, Inc. pursuant to which Home Port
Bancorp will be acquired by and merged with Seacoast and the shareholders of
Home Port Bancorp will receive cash of $37.00 per share in exchange for their
shares of common stock in Home Port Bancorp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is given, this
proxy will be voted "FOR" Proposal 1.
Please sign exactly as your name appears on this card. When shares are
held as joint tenants, both tenants should sign. If a corporation,
please sign in full corporate name by the President or other authorized
officer. If a partnership, please sign in partnership name by authorized
partner.
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Please be sure to sign and date this Proxy in the box below.
-----------------------------------------
Date
-----------------------------------------
Stockholder sign above
-----------------------------------------
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope
provided.
HOME PORT BANCORP, INC.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
