UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1996
Commission file number 33-47248
WEETAMOE BANCORP
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3061936
----------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Slade's Ferry Avenue
Somerset, Massachusetts 02726
----------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
(508) 675-2121
--------------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common stock ($.01 par value) 2,754,912.280 shares as of March 31, 1996.
Traditional Small Business Disclosure Format:
Yes [X] No [ ]
PART I
ITEM 1
Financial Statements
- --------------------
WEETAMOE BANCORP
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 7,242,998 $ 9,039,970
Federal funds sold 17,000,000 9,500,000
Investment securities 19,269,613 21,835,682
Securities available for sale 28,715,110 36,730,660
Federal Home Loan Bank Stock 495,400 290,700
Loans (net) 151,237,104 148,069,415
Premises and equipment 3,662,061 3,700,054
Other real estate owned 350,000 633,467
Accrued interest receivable 1,653,452 1,820,323
Other assets 1,805,460 1,801,383
------------ ------------
TOTAL ASSETS $231,431,198 $233,421,654
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits $210,600,012 $214,220,689
Short term borrowings 1,392,782 741,773
Other liabilities 1,268,231 632,467
------------ ------------
TOTAL LIABILITIES $213,261,025 $215,594,929
STOCKHOLDERS' EQUITY:
Common stock 27,549 26,172
Paid in capital 14,323,953 13,136,923
Retained earnings 3,926,883 4,630,608
Net unrealized gain (loss) on investments
in available for sale securities (108,212) 33,022
------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ 18,170,173 $ 17,826,725
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $231,431,198 $233,421,654
============ ============
</TABLE>
CONSOLIDATED STATEMENT OF INCOME AND EXPENSE
(UNAUDITED)
3 MONTHS ENDING MARCH 31,
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $ 3,466,793 $ 3,007,984
Interest and dividends on investments 821,134 674,524
Other interest 161,537 39,149
--------------------------
Total interest and dividend income 4,449,464 3,721,657
--------------------------
INTEREST EXPENSE:
Interest on deposits 2,142,373 1,448,476
Interest on other borrowed funds 13,143 22,646
--------------------------
Total interest expense 2,155,516 1,471,122
--------------------------
Net interest and dividend income 2,293,948 2,250,535
--------------------------
PROVISION FOR LOAN LOSSES 150,000 150,000
Net interest and dividend income after
provision for loan losses 2,143,948 2,100,535
--------------------------
OTHER INCOME:
Service charges on deposit accounts 202,545 188,916
Security gains (losses) net 50,795 (29,403)
Other income 68,828 64,822
--------------------------
Total other income 322,168 224,335
--------------------------
OTHER EXPENSE:
Salaries and employee benefits 973,747 977,474
Occupancy expense 135,226 117,474
Equipment expense 104,693 103,196
Gain on sale of other real estate owned (657) 0
Write down of other real estate owned 30,000 14,578
Other expense 363,699 441,887
--------------------------
Total other expense 1,606,708 1,654,609
--------------------------
Income before income taxes 859,408 670,261
Income taxes 323,648 254,552
--------------------------
NET INCOME $ 535,760 $ 415,709
==========================
Earnings per share $ 0.19 $ 0.15
==========================
Average shares outstanding(1) 2,753,224 2,725,599
==========================
<FN>
- -------------------
<F1> Adjusted for 5% stock dividend issued in 1996.
</FN>
</TABLE>
WEETAMOE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarters Ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Interest and dividends received $ 4,458,930 $ 3,795,801
Service charges and other income received 271,373 253,738
Interest paid (2,154,338) (1,435,860)
Cash paid to suppliers and employees (1,536,627) (1,576,412)
Income taxes paid (111,650) (224,083)
------------------------------
Net cash provided by operating activities $ 927,688 $ 813,184
------------------------------
Cash flows from investing activities:
Proceeds from sale of other real estate owned $ 254,124 $ 0
Proceeds from sales of securities available for sale 185,954 1,291,486
Purchases of securities available for sale (141,257) (312,022)
Proceeds from maturities of securities available for sale 7,904,129 0
Proceeds from maturities of investment securities 5,445,264 2,080,245
Purchases of investment securities (2,935,536) (1,195,253)
Purchases of Federal Home Loan Bank stock (204,700) 0
Net (increase) decrease in loans (3,229,132) (2,021,515)
Capital expenditures (62,585) (32,648)
Recoveries of previously charged-off loans 5,967 9,377
Increase (decrease) in other liabilities 488,810 58,832
(Increase) decrease in federal funds sold (7,500,000) (8,500,000)
(Increase) decrease in other assets 85,048 454,894
------------------------------
Net cash provided by (used in) investing activities $ 296,086 $ (8,166,604)
------------------------------
Cash flows from financing activities:
Proceeds from issuance of stock $ 62,460 $ 51,749
Net increase (decrease) in demand deposits, NOW, money
market and savings accounts (3,906,369) (5,416,966)
Net increase (decrease) in time deposits 285,692 14,487,155
Net (decrease) increase in short-term borrowings 651,009 (820,328)
Dividends paid (113,538) (94,086)
Decrease in notes payable 0 0
------------------------------
Net cash provided by (used in) financing activities $ (3,020,746) $ 8,207,524
------------------------------
Net increase in cash and cash equivalents (1,796,972) 854,104
Cash and cash equivalents at beginning of period 9,039,970 7,438,167
------------------------------
Cash and cash equivalents at end of period $ 7,242,998 $ 8,292,271
==============================
Non-cash investing activities:
Transfers to other real estate owned $ 0 $ 0
==============================
Origination of loans for the sale of other real estate owned $ 110,000 $ 0
==============================
</TABLE>
WEETAMOE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarters Ended March 31, 1996 and 1995
(Unaudited)
(Continued)
Reconciliation of net income to net cash used in operating activities:
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Net income $ 535,760 $ 415,709
------------------------------
Adjustments to reconcile net income to net cash used in
operating activities:
Amortization of organization cost 0 3,440
Depreciation and amortization 100,578 104,080
Provision for loan losses 150,000 150,000
Increase (decrease) in taxes payable 211,998 30,469
Decrease in interest receivable 166,871 69,683
Increase in interest payable 1,178 35,262
Increase (decrease) in accrued expenses (50,797) 51,406
Decrease in prepaid expenses (9,043) (95,307)
Accretion, net of amortization of investment securities (42,409) 2,713
Accretion, net of amortization of securities available
for sale (20,473) (8,613)
(Gain) Loss on sale of securities available for sale, net (50,795) 29,403
Change in unearned income (94,523) 10,361
Writedown of Other Real Estate Owned 30,000 14,578
Loss (Gain) on sales of other real estate owned (657) 0
------------------------------
Total adjustments $ 391,928 $ 397,475
------------------------------
Net cash used in operating activities $ 927,688 $ 813,184
==============================
</TABLE>
WEETAMOE BANCORP AND SUBSIDIARY, SLADE'S FERRY TRUST COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10QSB and, accordingly, do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
management of Weetamoe Bancorp, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
Note B - Accounting Policies
- ----------------------------
The accounting principles followed by Weetamoe Bancorp and subsidiary and the
methods of applying these principles which materially affect the determination
of financial position, results of operations, or changes in financial position
are consistent with those used at year end 1995.
The consolidated financial statements of Weetamoe Bancorp include its
wholly-owned subsidiary, Slade's Ferry Trust Company, and its subsidiaries, the
Slade's Ferry Realty Trust and the Slade's Ferry Securities Corporation. All
significant intercompany balances have been eliminated.
ITEM 2
Management's Discussion and Analysis
- ------------------------------------
Financial Condition
- -------------------
A slight decrease in assets occurred during the first quarter in 1996. This
decline was attributed to a reduction in deposits, which were at peak levels at
year end 1995. Under normal conditions, it has been the trend for deposits to
either stabilize or decline during the first three months of the new year. As a
result of the decrease in deposits, assets at March 31, 1996 were down by $2.0
Million to $231.4 Million, when compared to $233.4 Million reported on December
31, 1995.
On March 20, 1996 Weetamoe Bancorp ("the Company") entered into a letter of
intent with Fairbank, Inc., a Massachusetts corporation ("Fairbank"), for the
acquisition of Fairbank and its wholly owned subsidiary, the National Bank of
Fairhaven, by the Company's wholly owned subsidiary, Slade's Ferry Bank. On
April 5, the Company and Fairbank executed a definitive agreement and plan of
merger for the acquisition. The agreement provides for a purchase price of
$8,558,800 to be paid in cash without any issuance of Weetamoe Bancorp stock. As
a result of the proposed transaction, the National Bank of Fairhaven's two
banking offices would become branches of Slade's Ferry Bank which would be the
surviving bank.
The National Bank of Fairhaven had assets of approximately $65 Million at year
end 1995, while Slade's Ferry Bank ended the year at $233 Million. The combined
entity with assets of almost $300 Million would operate nine full time banking
offices serving Fairhaven, New Bedford, Fall River, Somerset, Swansea, Seekonk
and surrounding towns.
The acquisition is subject to approval by Fairbank's stockholders and approvals
by federal and state banking regulators.
Subject to receipt of all regulatory approvals, the acquisition is expected to
be completed on or before September 30, 1996.
In preparation for this cash outlay, management has increased its liquidity
level by utilizing proceeds from securities that have matured in the investment
portfolio. These funds have been reinvested primarily in the Federal Funds Sold
category or into short term treasuries. The combination of the increase in
loans, the decline in deposits, and providing for the anticipated cash
requirements for the merger resulted in a decrease in the investment portfolio.
Investment Securities and Securities Available for Sale combined were down by
$10.6 Million at the end of the first quarter to $48.0 Million, from $58.6
Million reported at year end 1995.
Federal Funds Sold was up by $7.5 Million to $17.0 Million from $9.5 Million at
year end. The current level of the Federal Funds Sold category provides for any
unusual decline in deposits, anticipated loan demand, and the cash necessary to
consummate the acquisition of the National Bank of Fairhaven.
An improved loan demand, combined with a business development program, has
resulted in an increase in loans. Loans at March 31, 1996 were up by $3.2
Million to $154.3 Million, when compared to $151.1 Million at December 31, 1995.
Other Real Estate Owned, which is real estate acquired through foreclosure, was
down by $283,467 from $633,467 at year end. At present, there is one remaining
parcel of foreclosed property representing a balance of $350,000.
Deposits at March 31, 1996 were down by $3.6 Million to $210.6 Million, when
compared to $214.2 Million at December 31, 1995. The decreases were noted
primarily in the demand, NOW account, and money market account segments, with a
combined decline of $4.6 Million, offset by combined increases in savings
accounts and time deposits of $1.0 Million.
Nonaccrual loans at March 31, 1996 were $2,751,460, up slightly by $56,347 from
$2,695,113 reported at December 31, 1995. Loans that have become nonaccrual
during the first quarter of 1996 amounted to $140,830. Offsetting the addition
to nonaccrual loans was $84,483 through receipt of payments. The Company does
not foresee this increase in nonaccrual loans as a trend. Economic conditions in
the area have improved slightly, and it is not anticipated that any increase in
the nonaccrual category will be of a material nature.
Loans past due 90 days or more but still accruing increased by $494,058 on March
31, 1996 to $517,186 from $23,128 reported on December 31, 1995. The Company
continues to accrue on these loans due to the assets that are collateralizing
such loans.
INFORMATION WITH RESPECT TO NONACCRUAL AND PAST DUE LOANS
AT MARCH 31, 1996 AND 1995 AND DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
(Dollars in Thousands)
At March 31 At December 31
---------------- ---------------
1996 1995 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Nonaccrual Loans $2,751 $3,974 $2,695 $3,238
Loans 90 days or more past due and still accruing 517 718 23 204
Real estate acquired by foreclosure
or substantively repossessed 350 540 633 888
Percentage of nonaccrual loans to total loans 1.78% 2.87% 1.78% 2.38%
Percentage of nonaccrual loans and real estate
acquired by foreclosure or substantively
repossessed to total assets 1.34% 2.57% 1.42% 2.13%
Percentage of allowance for possible loan losses .96% .62% .93% .71%
to nonaccrual loans
</TABLE>
The $2.7 Million nonaccrual loans consist of $2.1 Million of real estate
mortgages, $.5 Million attributed to commercial loans, and $.1 Million
attributed to consumer loans. Of the total nonaccrual loans outstanding,
$281,588 are restructured at March 31, 1996.
INFORMATION WITH RESPECT TO NONACCRUAL AND RESTRUCTURED LOANS
AT MARCH 31, 1996 AND 1995 AND DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
(Dollars in Thousands)
At March 31 At December 31
---------------- --------------
1996 1995 1995 1994
------ ------ ------ ----
<S> <C> <C> <C> <C>
Nonaccrual Loans $2,751 $3,974 $2,695 $3,238
Interest income that would have been recorded
under original terms 62 78 243 242
Interest income recorded during the period 3 0 21 19
</TABLE>
The Company stops accruing interest on a loan once it becomes past due 90 days
or more unless there is adequate collateral and the financial condition of the
borrower is sufficient. When a loan is placed on a nonaccrual status, all
previously accrued but unpaid interest is reversed and charged against current
income. Interest is thereafter recognized only when payments are received and
the loan becomes current.
Loans in the nonaccrual category will remain until the possibility of collection
no longer exists, the loan is paid off or becomes current. When a loan is
determined to be uncollectible, it is then charged off against the Allowance for
Possible Loan Losses.
Statement of Financial Accounting Standards No. 114 "Accounting by Creditors for
Impairment of a Loan" was adopted by the Company as of January 1, 1995.
Statement 114 applies to all loans except large groups of smaller-balance
homogenous loans that are collectively evaluated for impairment, loans measured
at fair value or at a lower of cost or fair value, leases, and debt securities
as defined in Statement 115. Statement 114 requires that impaired loans be
valued at the present value of expected future cash flows discounted at the
loan's effective interest rate or as a practical expedient, at the loan's
observable market value of the collateral if the loan is collateral dependent.
Included in the $2,751,460 nonaccrual loans are $2,296,377 which the Company has
determined to be impaired, for which $1,970,822 have a related allowance for
credit losses of $513,762 and $325,555 have no related allowance for credit
losses.
The Company has $800,000 of potential problem loans for which payments are
presently current. However, the borrowers are experiencing financial difficulty.
These loans are subject to management's attention and their classification is
reviewed quarterly.
ANALYSIS OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
(Dollars in Thousands)
Three Months Years Ended
At March 31 At December 31
---------------- ----------------
1996 1995 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at January 1 $2,498 $2,306 $1,954 $1,954
Charge Offs:
Commercial --- --- 184 22
Real Estate - Construction --- --- --- ---
Real Estate - Mortgage --- --- 79 246
Installment/Consumer 2 2 134 93
------------------------------------
2 2 397 361
Recoveries:
Commercial 1 --- 1 51
Real Estate - Construction --- --- --- ---
Real Estate - Mortgage --- 5 16 2
Installment/Consumer 5 4 22 15
------------------------------------
6 9 39 68
------------------------------------
Net Charge Offs (4) 7 358 293
------------------------------------
Additions Charged to Operations 150 150 550 645
Balance at End of Period $2,651 $2,463 $2,498 $2,306
====================================
Ratio of Net Charge Offs to Average
Loans Outstanding (0.003%) 0.05% 0.25% 0.23%
</TABLE>
The Allowance for Possible Loan Losses at March 31, 1996 was $2,651,500,
compared to $2,497,774 at year end 1995. The Allowance for Possible Loan Losses
as a percent of outstanding loans was 1.72% at March 31, 1996, and 1.65% at
December 31, 1995.
The Bank provided $550,000 in 1995, $645,000 in 1994, and $150,000 as of March
31, 1996 to the Allowance for Possible Loan Losses. Loans charged off were
$396,639 in 1995, $361,811 in 1994, and $2,240 as of March 31, 1996. Recoveries
on loans previously charged off were $39,553 in 1995, $68,808 in 1994, and
$5,966 as of March 31, 1996. Management believes that the Allowance for Loan
Losses of $2,651,500 is adequate to absorb any losses in the foreseeable future,
due to the Bank's strong collateral position and the current asset quality.
The percentages of the Allowance for Possible Loan Losses to nonaccrual loans
improved to .96% at March 31, 1996 from .93% and .71% reported at years ending
1995 and 1994, respectively. The average ratio of peer group banks with assets
of $100-$300 Million for years 1995 and 1994 were 3.59% and 3.45% respectively.
Ratio of peer groups for March 31, 1996 were not available.
The level of the Allowance for Possible Loan Losses is evaluated by management
and encompasses several factors, which include but are not limited to, recent
trends in the nonperforming loans, the adequacy of the assets which
collateralize the nonperforming loans, current economic conditions in the market
area, and various other external and internal factors.
This table shows an allocation of the allowance for loan losses as of the end of
each of the periods indicated.
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 December 31, 1994
----------------------- ----------------------- -----------------------
Percent of Percent of Percent of
Loans in Loans in Loans in
Each Each Each
Category Category Category
to Total to Total to Total
Amount Loans Amount Loans Amount Loans
---------- ---------- ---------- ---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial $ 756(1) 11.11% $ 597(1) 11.35% $ 588 12.82%
Real estate - Construction 56 6.33% 40 4.55% 14 1.68%
Real estate - mortgage 1,524(2) 78.87% 1,581(2) 80.04% 1,374 81.03%
Consumer 315(3) 3.69% 280 4.06% 330 4.47%
----------------------------------------------------------------------
$2,651 100.00% $2,498 100.00% $2,306 100.00%
======================================================================
<FN>
- --------------------
<F1> Includes specifically reserved for impaired loans of $269,762 as of March
31, 1996 and $214,542 as of December 31, 1995 as required by Financial
Accounting Standard No. 114, Accounting for Impairment of Loans.
<F2> Includes specifically reserved for impaired loans of $184,000 as of March
31, 1996 and $240,500 as of December 31, 1995 as required by Financial
Accounting Standard No. 114, Accounting for Impairment of Loans.
<F3> Includes specifically reserved for impaired loans of $60,000 as of March
31, 1996 as required by Financial Accounting Standard No. 114, Accounting
for Impairment of Loans.
</FN>
</TABLE>
The loan portfolio's largest segment of loans is commercial real estate loans,
which represent 47.55% of gross loans. Residential real estate, which is the
second largest segment of the loan portfolio, represents 31.32% of gross loans.
The Company requires a loan to value ratio of 80% in both commercial and
residential mortgages. These mortgages are secured by real properties which have
a readily ascertainable value.
Generally, commercial real estate loans have a higher degree of credit risk than
residential real estate loans because they depend primarily on the success of
the business. When granting these loans, the Company evaluates the financial
statements of the borrower(s), the location of the real estate, the quality of
management, and general economic and competitive conditions. When granting a
residential mortgage, the Company reviews the borrower(s) repayment history on
past debts, and assesses the borrower(s) ability to meet existing obligations
and payments on the proposed loans.
Commercial loans consist of loans predominantly collateralized by inventory,
furniture and fixtures, and accounts receivable. In assessing the collateral for
this type of loan, management applies a 40% liquidation value to inventories,
25% to furniture, fixtures and equipment; and 60% to accounts receivable.
Commercial loans represent 11.11% of the loan portfolio.
Consumer loans are generally unsecured credits and represent 3.69% of the total
loan portfolio. These loans have a higher degree of risk then residential
mortgage loans. The underlying collateral of a secured consumer loan tends to
depreciate in value. Consumer loans are typically made based on the borrower's
ability to repay the loan through continued financial stability. The Company
endeavors to minimize risk by reviewing the borrower's repayment history on past
debts, and assessing the borrower's ability to meet existing obligations on the
proposed loans.
The allocation of the Allowance for Loan Losses is based on management's
judgement of potential losses in the respective portfolios. While management has
allocated reserves to various portfolio segments, the Allowance is general in
nature and is available for the portfolio in its entirety.
Results of Operations
- ---------------------
Net interest income increased by $43,413 to $2,293,948 on March 31, 1996 when
compared to $2,250,535 earned during the same period in the previous year.
Interest earned was up by $727,807 during the three month period primarily due
to a larger loan and investment portfolio, when compared to the prior year. This
increase was offset by an increase in interest expense which is attributable to
a larger deposit base in the current quarter compared to the same period in the
previous year.
The provision for loan losses is a charge against earnings, which in turn funds
the Allowance for Possible Loan Losses. The Company's provision for the three
months ending March 31, 1996 was $150,000. During the same period in the prior
year, the provision was also $150,000.
Other income was up by $97,833 to $322,168 on March 31, 1996 when compared to
$224,335 earned in the same period of the previous year. Service charges on
deposit accounts increased by $13,629, which is attributed to a larger customer
base. Gains realized on sale of securities for the three months amounted to
$50,795 compared to a loss of $29,403 realized in the three months of the prior
year. Other miscellaneous income reflected an increase of $4,006 due to normal
business operations.
Total Other Expense decreased by $47,901 to $1,606,708 reported during the first
quarter of 1996, compared to $1,654,609 reported for the same period in 1995.
The largest decrease occurred in Other Expense which declined by $78,188 due to
the significant reduction of F.D.I.C. deposit insurance premiums that occurred
in late 1995. This reduction in assessment fees was offset by expense attributed
to collection and repossession.
Income before income taxes for the first quarter in 1996 was $859,408, up by
$189,147 from $670,261 reported during the same period in 1995. Applicable taxes
for the current period was $323,648 and $254,552 for the same period in the
previous year. This resulted in net income for the three months ending March 31,
1996 of $535,760, up by $120,051. Earnings per share were up by $.04 per share
to $.19 per share from $.15 earned per share during the same quarter in 1995.
Liquidity
- ---------
The Company's principal sources of funds are customer deposits, loan
amortization, loan payoffs, and the maturities of investment securities. Through
these sources, funds are provided for customer withdrawals from their deposit
accounts, loan originations, draw-downs on loan commitments, acquisition of
investment securities and other normal business activities. Investors' capital
also provides a source of funding.
The largest source of funds is provided by depositors. The largest component of
the Company's deposit base is reflected in the Time Deposit category. The
Company does not participate in brokered deposits. Deposits are obtained from
consumers and commercial customers within the Bank's community reinvestment
area, being Bristol County, Massachusetts and several abutting towns in Rhode
Island.
The Company also has the ability to borrow funds from correspondent banks, the
Federal Home Loan Bank, as well as the Federal Reserve Bank of Boston by
pledging various investment securities as collateral. The Company did not borrow
during the first quarter of the current year. During the first quarter of 1995,
the Company borrowed for 25 days with an average borrowing of $2.0 Million.
There were no other borrowings during 1995. However, tax payments made by our
customers which are owed to the Federal Reserve Bank Treasury Tax and Loan
account are classified as borrowed funds.
Excess available funds are invested on a daily basis as Federal Funds Sold and
can be withdrawn daily. The Bank attempts through its cash management strategies
to maintain a minimum level of Federal Funds Sold to further enhance its
liquidity.
Liquidity represents the ability of the Bank to meet its funding requirements.
In assessing the appropriate level of liquidity, the Bank considers deposit
levels, lending requirements, and investment maturities in light of prevailing
economic conditions. Through this assessment, the Bank manages its liquidity
level to optimize earnings and respond to fluctuations in customer borrowing
needs.
At March 31, 1996, the Bank's liquidity ratio stood at 34.3% as compared to
36.0% at December 31, 1995. The liquidity ratio is determined by dividing the
Bank's short term assets (cash and due from banks, interest bearing deposits due
from other banks, securities, and federal funds sold) by the Bank's total
deposits. Management believes the Bank's liquidity to be adequate to meet the
current and presently foreseeable needs of the Bank.
The comparison of cash flows for three months ending March 31, 1996 and 1995
indicates that cash flows, as a result of operating activities, increased by
$114,504 during the current period compared to the same period in the previous
year. There was an increase in interest and dividends received of $663,129, an
increase in service charges of $17,635, and decreases in cash paid to suppliers
and employees of $39,785, and income taxes paid of $112,433. These were offset
by an increase in interest paid of $718,478.
Cash provided by investing activities during the three month period ending March
31, 1996 was $.3 Million which was comprised of an increase in Federal Funds
Sold of $7.5 Million, an increase in loans of $3.2 Million and purchase of
securities of $3.3 Million. This was offset by proceeds from securities that had
matured or were sold of $13.5 Million.
During the same period in the prior year, net cash used for investing activities
was $8.2 Million which was comprised of an increase in Federal Funds Sold of
$8.5 Million, an increase in loans of $2.0 Million and purchase of securities of
$1.5 Million. This was offset by sale of securities of $1.3 Million and proceeds
from securities that matured of $2.1 million.
Cash used in financing activities during the period ending March 31, 1996 was
$3.0 Million, primarily due to the decrease in the balance of demand, NOW, money
market and savings accounts of $3.9 Million. This was partially offset by an
increase in short term borrowings of $.7 Million and an increase in time
deposits of $.3 Million.
During the three month period ending March 31, 1995, cash provided by financing
activities was $8.2 Million, primarily due to an influx of funds in the time
deposit category of $14.5 Million offset by a decrease in demand, NOW, money
market accounts and savings accounts of $5.4 Million.
Capital
- -------
As of March 31, 1996, the Company had total capital of $18,170,173. This
represents an increase of $343,448 from $17,826,725 reported on December 31,
1995. The increase in capital was a combination of several factors. Additions
consisted of three months earnings of $535,760, transactions originating through
the Dividend Reinvestment Program whereby 1,492.674 shares were issued for cash
contributions of $12,700 and 5,765.920 shares were issued for $49,760 in lieu of
cash dividend payments. These additions were offset by dividends paid of
$110,178 and cash dividends paid in lieu of fractional shares of $3,360 as a
result of the 5% stock dividend issued in January of 1996.
Also, affecting capital is the adjustment that reflects net unrealized gains or
losses, net of taxes, on securities classified as Available-for-Sale. On
December 31, 1995 the Available-for-Sale portfolio had unrealized gains, net of
taxes, of $33,022, and on March 31, 1996, as a result of current market values,
the portfolio reflects unrealized losses, net of taxes, of $141,234 which is an
adjustment from capital.
Paid in Capital increased by $1,187,030 of which $1,124,643 was a transfer from
retained earnings representing a 5.0% stock dividend paid on January 1, 1996 and
$62,387 attributed to transactions resulting from cash contributions and
reinvestment of cash dividends associated with the Dividend Reinvestment
Program.
Federal Banking regulators have adopted Risk Based and Leverage Capital
requirements, which were phased in and fully implemented on December 31, 1992.
Under the requirements, a minimum level of capital will vary among banks based
on safety and soundness of operations.
Risk Based Capital ratios are calculated with reference to risk-weighted assets,
which include both on and off balance sheet exposure. At December 31, 1993, the
minimum regulatory capital level for Risk Based Capital was 4.0% for Tier 1
capital, 8.0% for total capital, and 4.0% for Leverage Capital (Tier 1 as a
percentage of total assets).
At March 31, 1996 the actual Risk Based Capital of the Bank was $18,196,991 for
Tier 1 Capital, exceeding the minimum requirements of $6,339,414 by $11,857,577.
Total Capital of $20,178,058 exceeded the minimum requirements of $12,678,828 by
$7,499,230 and Leverage Capital of $18,196,991 exceeded the minimum requirements
of $9,258,000 by $8,938,991.
ITEM 4
Submission of Matters to a Vote of Security Holders
- ---------------------------------------------------
The Annual Meeting of the stockholders of the Weetamoe Bancorp was held on March
11, 1996.
Proposal One - Election of Clerk/Secretary
- ------------------------------------------
The following individual, was reelected by the stockholders to serve as
Clerk/Secretary until the next annual meeting of the stockholders, and until his
successor is elected and qualified.
Votes
--------------------------------------------------------------------
Nominee For Against
--------------------------------------------------------------------
Attorney Peter G. Collias 1,688,651.385 7,257.894
Proposal Two - Election of Class One Directors
- ----------------------------------------------
The following four individuals were re-elected to serve as directors of the
Company until the 1999 Annual Meeting of stockholders and until their successors
are elected or qualified.
Votes
---------------------------------------------------------------------
Nominee For Against
---------------------------------------------------------------------
Donald T. Corrigan 1,691,135.003 4,774.276
Peter Paskowski 1,691,135.003 4,774.276
Kenneth R. Rezendes 1,691,135.003 4,774.276
Charles Veloza 1,680,311.426 15,597.853
The following additional directors continued their terms in office after the
meeting:
Thomas B. Almy Francis A. Macomber
James D. Carey Majed Mouded, MD
Peter G. Collias Bernard T. Shuman
Edward S. Machado William J. Sullivan
Proposal Three - Amendment of Articles of Organization to Increase Authorized
Shares.
- --------------------------------------------------------------------------------
To amend the Corporation's Articles of Organization to increase the number of
authorized shares of Common Stock of the Corporation, par value $.01 per share,
from 3,000,000 to 5,000,000 shares.
For Against
---------------------------------------------
1,663,512.447 32,396.832
Proposal Four - Approval of 1996 Stock Option Plan
- --------------------------------------------------
To submit for stockholder approval a 1996 Stock Option Plan (the "Plan"). The
purpose of the Plan is to encourage ownership of the Corporation's Common Stock
by key employees and non-employee directors and to provide additional incentive
for them to promote the success of the business.
For Against
---------------------------------------------
1,642,370.919 53,538.360
Proposal Five - Amendment of Bylaws to change Annual Stockholders Meeting date.
- -------------------------------------------------------------------------------
To amend the bylaws of the Corporation to change the Stockholders Annual Meeting
date from the second Monday in March to the second Monday in April commencing in
1997.
For Against
---------------------------------------------
1,686,205.295 9,703.984
ITEM 5
Other Matters
- -------------
The Board of Directors declared a five percent stock dividend on the Company's
common stock to stockholders of record on January 8, 1996, paid on January 31,
1996. The stock dividend resulted in the distribution of 130,469 shares. The par
value of the common stock remained at $.01. Accordingly, $1,304.69 and
$1,124,642.78 were transferred from Retained Earnings to Common Stock and
Paid-In-Capital respectively.
ITEM 6
Exhibits and Reports on Form 8-K
- --------------------------------
(a) Exhibits: See exhibit index.
(b) Reports on Form 8-K: A report on Form 8-K was filed, reporting on Item 5.
No financial statements were filed. The date of the report was March 20,
1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
WEETAMOE BANCORP
(Registrant)
May 10, 1996 /s/ Kenneth R. Rezendes
- ----------------------------- ------------------------------------
(Date) (Signature) Kenneth R. Rezendes
President
May 10, 1996 /s/ James D. Carey
- ----------------------------- ------------------------------------
(Date) (Signature) James D. Carey
Executive Vice President
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ------------------------------------------------------------------
<C> <S> <C>
3.1 Articles of Incorporation of Weetamoe Bancorp as amended *
3.2 Bylaws of Weetamoe Bancorp as amended *
10.1 Agreement and Plan of Merger by and between Weetamoe
Bancorp and Fairbank, Inc.
10.2 Weetamoe Bancorp 1996 Stock Option Plan
<FN>
- -------------------
<F1> * Incorporated by reference to the Registrant's Form 10K-SB for the fiscal
year ended December 31, 1995.
</FN>
</TABLE>
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WEETAMOE BANCORP
AND
FAIRBANK, INC.
DATED AS OF APRIL 5, 1996
TABLE OF CONTENTS
<TABLE>
<S> <C> <S> <C>
ARTICLE I - THE MERGER 1
1.01 The Merger 1
1.02 Effective Time 2
1.03 Effects of the Merger 2
1.04 Conversion of Fairbank Common Stock 2
1.05 Dissenters' Rights 3
1.06 Other Matters 3
ARTICLE II - EXCHANGE OF SHARES 3
2.01 The Company or Bank to Make Merger Consideration Available 3
2.02 Payment for Shares 4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF FAIRBANK 5
3.01 Corporate Organization 5
3.02 Capitalization 6
3.03 Authority; No Violation 7
3.04 Consents and Approvals 8
3.05 Financial Statements 8
3.06 Absence of Undisclosed Liabilities 9
3.07 Absence of Certain Changes or Events 9
3.08 Loan Portfolio 11
3.09 Investments 11
3.10 Title to Properties 12
3.11 Leases 12
3.12 Legal Proceedings 13
3.13 Compliance with Applicable Laws 13
3.14 Taxes 13
3.15 Employee Benefit and Other Plans 14
3.16 Contracts and Commitments; No Defaults 15
3.17 Environmental Matters 16
3.18 Fairbank Information 17
3.19 Insurance 17
3.20 Broker's Fees 17
3.21 Agreements with Regulatory Agencies 17
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY 18
4.01 Corporate Organization 18
4.02 Capitalization. 18
4.03 Authority; No Violation 19
4.04 Consents and Approvals 20
4.05 Financial Statements 20
4.06 Broker's Fees 21
4.07 Absence of Certain Changes or Events 21
4.08 Legal Proceedings 21
4.09 Company Information 22
4.10 Compliance With Applicable Law 22
4.11 Agreements with Regulatory Agencies 22
4.12 Regulatory Approvals 22
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS 22
5.01 Covenants of Fairbank 22
5.02 Covenants of the Company 25
ARTICLE VI - ADDITIONAL AGREEMENTS 26
6.01 Regulatory Matters. 26
6.02 Access to Information 27
6.03 Shareholder Approval 28
6.04 Legal Conditions to Merger 28
6.05 Fairbank and Target Employees 28
6.06 Additional Agreements 29
6.07 Disclosure Supplements 29
6.08 Current Information 29
6.09 Environmental Assessment 30
6.10 Public Announcements 30
6.11 Execution and Authorization of Bank Merger Agreement 30
ARTICLE VII - CONDITIONS PRECEDENT 31
7.01 Conditions to Each Party's Obligations Under This Agreement 31
7.02 Conditions to the Obligations of the Company Under This Agreement 31
7.03 Conditions to the Obligations of Fairbank Under This Agreement 33
ARTICLE VIII - CLOSING 34
8.01 Time and Place 34
8.02 Deliveries at the Closing 34
ARTICLE IX - TERMINATION AND AMENDMENT 34
9.01 Termination 34
9.02 Effect of Termination 36
9.03 Amendment 36
9.04 Extension; Waiver 36
ARTICLE X - MISCELLANEOUS 37
10.01 Expenses 37
10.02 "Unauthorized Action;" Liquidated Damages Under Certain
Circumstances 37
10.03 Non-Survival of Representations and Warranties 37
10.04 Notification of Certain Matters 38
10.05 Notices 38
10.06 Parties in Interest 39
10.07 Complete Agreement 39
10.08 Counterparts 40
10.09 Governing Law 40
10.10 Headings 40
</TABLE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 5, 1996, by and between
Weetamoe Bancorp, a Massachusetts corporation (the "Company") and Fairbank,
Inc., a Massachusetts corporation ("Fairbank").
WHEREAS, the Boards of Directors of the Company and Fairbank have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transaction provided
for herein in which New Sub, as defined in Section 1.01 of this Agreement, will,
subject to the terms and conditions set forth herein, merge with and into
Fairbank (the "Merger"); and
WHEREAS, subject to the provisions of Section 6.11 of this Agreement,
as soon as practicable after the execution and delivery of this Agreement,
Slade's Ferry Bank, a Massachusetts chartered trust company and a wholly-owned
subsidiary of the Company (the "Bank," and sometimes referred to herein as the
"Resulting Bank"), and National Bank of Fairhaven, a national bank and a
wholly-owned subsidiary of Fairbank ("Target"), will enter into a Bank Agreement
and Plan of Merger (the "Bank Merger Agreement") providing for the merger (the
"Bank Merger") of Target with and into the Bank, and it is intended that the
Bank Merger be consummated immediately following the consummation of the Merger;
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with Chapter 156B of the Massachusetts General Laws (the "M.G.L."),
at the Effective Time (as defined in Section 1.02 hereof), the Company shall
acquire all of the outstanding capital stock of Fairbank in a transaction
whereby SFB New Sub, Inc., a corporation to be organized by the Bank under the
laws of the Commonwealth of Massachusetts as a wholly-owned subsidiary of the
Bank ("New Sub") shall merge with and into Fairbank (the "Merger"). Fairbank
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. Upon consummation of the Merger,
the separate corporate existence of New Sub shall terminate. Each outstanding
share of stock of New Sub immediately prior to the Effective Time shall be
converted into one share of stock of the Surviving Corporation at the Effective
Time and shall remain outstanding after the Effective Time. Each outstanding
share of stock of Fairbank immediately prior to the Effective Time shall be
converted into the right to receive payment in the Merger as provided in Section
1.04 below. The name of the Surviving Corporation shall become "SFB New Sub,
Inc." at the Effective Time. The Company or the Bank may dissolve New Sub
following the Effective Time of the Merger.
1.02 Effective Time. The Merger shall become effective as set forth in the
certificate of merger which shall be filed with the Secretary of State of the
Commonwealth of Massachusetts (the "Massachusetts Certificate of Merger" and the
"Massachusetts Secretary") on the Closing Date (as defined in Section 8.01
hereof). The term "Effective Time" shall be the date and time when the Merger
becomes effective, as set forth in the Massachusetts Certificate of Merger.
1.03 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in Chapter 156B, Section 80 of the M.G.L.
1.04 Conversion of Fairbank Common Stock.
(a) At the Effective Time, each share of the common stock, no par
value, of Fairbank ("Fairbank Common Stock") issued and outstanding
immediately prior to the Effective Time (except for (i) shares held by
Fairbank as treasury shares, (ii) shares owned by any direct or indirect
subsidiary of Fairbank other than such shares held as security for an
obligation to Fairbank or such subsidiary and as to which Fairbank or such
subsidiary has an immediate right of sale, (iii) shares held by the
Company or the Bank other than in a fiduciary or trust capacity for the
benefit of third parties, and (iv) shares as to which dissenters' rights
have been perfected) shall, by virtue of this Agreement and without any
action on the part of the holder thereof, be converted into and
exchangeable for $193.31 in cash ("Per Share Merger Consideration") to be
paid by the Company or the Bank as hereinafter provided.
(b) At the Effective Time, all of the shares of Fairbank Common
Stock converted into cash pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist,
and each certificate (each a "Certificate") previously representing any
such shares of Fairbank Common Stock shall thereafter represent the right
to receive the Per Share Merger Consideration into which the share of
Fairbank Common Stock represented by such Certificate has been converted
pursuant to this Section 1.04. Certificates previously representing shares
of Fairbank Common Stock shall be exchanged for the Per Share Merger
Consideration upon the surrender of such Certificates in accordance with
Section 2.02 hereof, without any interest thereon.
(c) At the Effective Time, (i) all shares of Fairbank Common Stock
that are owned by Fairbank as treasury shares, (ii) all shares of Fairbank
Common Stock that are owned directly or indirectly by any subsidiary of
Fairbank, and (iii) shares of Fairbank Common Stock held by the Company or
the Bank other than in a fiduciary or trust capacity for the benefit of
third parties shall be cancelled and shall cease to exist and no
consideration shall be delivered in exchange therefor.
1.05 Dissenters' Rights. Notwithstanding anything in this Agreement to the
contrary and unless otherwise provided by applicable law, shares of Fairbank
Common Stock which are issued and outstanding immediately prior to the Effective
Time and which are owned by shareholders who, pursuant to applicable law, (a)
file with Fairbank, before the taking of the vote of Fairbank's shareholders on
the Merger, written objection to the Merger stating an intention to demand
payment for their shares, if the Merger is effected, and (b) whose shares are
not voted in favor of the Merger (the "Dissenting Shares"), shall not be
converted into Per Share Merger Consideration as provided in Section 1.04,
unless and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost their right of appraisal and payment under
applicable law, but shall be entitled to payment of the appraised value of such
Dissenting Shares in accordance with the provisions of Chapter 156B of the
M.G.L. If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right of appraisal, Fairbank Common Stock of such holder
shall thereupon be deemed to have been converted into the right to receive and
become exchangeable for, at the Effective Time, Per Share Merger Consideration
determined pursuant to Section 1.04 hereof.
1.06 Other Matters. At and after the Effective Time: (i) the Surviving
Corporation's main office shall be located in Somerset, Massachusetts, (ii) the
Directors and officers of New Sub holding office immediately prior to the
Effective Time shall be the Surviving Corporation's Directors and officers,
(iii) the Certificate of Incorporation and Bylaws of New Sub existing
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, (iv) the capital stock of
the Surviving Corporation at the Effective Time shall be as provided in the
Certificate of Incorporation of New Sub, and (v) the minimum and maximum number
of Directors of the Surviving Corporation shall be as set forth in the
Certificate of Incorporation and Bylaws of the Surviving Corporation.
ARTICLE II
EXCHANGE OF SHARES
2.01 The Company or Bank to Make Merger Consideration Available. At the
Effective Time, the Company shall deposit, or shall cause the Bank to deposit,
with a bank or trust company selected by the Company (and reasonably acceptable
to Fairbank) (the "Exchange Agent"), for the benefit of the holders of
Certificates, for exchange in accordance with this Article II, cash sufficient
to pay the merger consideration provided for in Section 1.04 (the "Merger
Consideration") (such cash being hereinafter referred to as the "Exchange Fund")
to be paid pursuant to Section 1.04 in exchange for outstanding shares of
Fairbank Common Stock. The Exchange Fund shall be invested by the Exchange
Agent, as directed by the Company or the Bank in writing, (i) solely in U.S.
Treasury obligations, or (ii) a mutual fund or similar investment pool which
invests its assets substantially in U.S. Treasury obligations, or which invests
its assets in repurchase agreements which are collateralized or secured by U.S.
Treasury obligations, and any net earnings with respect thereto shall be paid to
the Company or the Bank as and when requested by the Company or the Bank. If for
any reason (including losses) the Exchange Fund is inadequate to pay the amounts
to which holders of shares of Fairbank Common Stock shall be entitled under this
Agreement, the Company shall be liable for the payment thereof.
2.02 Payment for Shares.
(a) As soon as practicable after the Effective Time, and in no event
later than three business days thereafter, the Exchange Agent shall mail
to each holder of record of a Certificate or Certificates a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates in exchange for Merger
Consideration into which the shares of Fairbank Common Stock represented
by such Certificate or Certificates shall have been converted pursuant to
this Agreement. Upon surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificates shall be
entitled to receive in exchange therefor a check representing the amount
of cash to which such holder of Fairbank Common Stock shall have become
entitled pursuant to the provisions of Article I hereof, and the
Certificate so surrendered shall forthwith be cancelled. No interest will
be paid or accrued on any cash payable hereunder or on unpaid dividends
and distributions, if any, payable to holders of Certificates.
(b) At the Effective Time and until so surrendered and exchanged,
each such Certificate shall represent solely the right to receive Per
Share Merger Consideration as provided for in this Agreement. If Merger
Consideration (or any portion thereof) is to be delivered to any person
other than the person in whose name the Certificate representing shares of
Fairbank Common Stock surrendered in exchange therefor is registered, it
shall be a condition to such exchange that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and
that the person requesting such exchange shall pay to the Exchange Agent
any transfer or other taxes required by reason of the payment of Merger
Consideration to a person other than the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
(c) After the Effective Time, there shall be no transfers on the
stock transfer books of Fairbank of the shares of Fairbank Common Stock
which were issued and outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be cancelled and
exchanged for Merger Consideration as provided in this Article II.
(d) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Fairbank for 12 months after the Effective Time shall be
paid to the Company or the Bank (depending on which made the original
deposit). Any shareholders of Fairbank who have not theretofore complied
with this Article II shall thereafter look only to the Company or the Bank
for payment of Per Share Merger Consideration deliverable in respect of
each share of Fairbank Common Stock such shareholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of the Company, the Bank, Fairbank,
the Exchange Agent or any other person shall be liable to any former
holder of shares of Fairbank Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(e) In the event that 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 Company, the posting by such person of a bond in such amount as the
Company may reasonably direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate, the Per
Share Merger Consideration deliverable in respect thereof pursuant to this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FAIRBANK
Fairbank hereby represents and warrants to the Company as follows:
3.01 Corporate Organization.
(a) Fairbank is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts.
Fairbank has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary. Fairbank is duly
registered as a bank holding company under the Bank Holding Company Act
(the "BHC Act"). The copies of Fairbank's Certificate of Incorporation and
Bylaws, each certified by its Secretary, which are being delivered to the
Company herewith, are complete and correct copies of such documents as in
effect as of the date of this Agreement. Except as listed on the attached
Schedule 3.01(a), Fairbank does not have any direct or indirect
wholly-owned subsidiaries or capital stock or other equity ownership
interest in any corporation, partnership or other entity which totals 5%
or more of such entity's total equity. As used in this Agreement, the word
"Subsidiary," when used in respect to any party, means any corporation,
partnership or other organization, whether incorporated or unincorporated,
which is consolidated with such party for financial statement purposes.
(b) Target is a national banking association duly organized, validly
existing and in good standing under the laws of the United States. Target
has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted. Target has all necessary federal, state and local banking
authorization to own or lease its properties and assets and to carry on
its business as it is being conducted. The accounts of depositors of
Target are insured by the Bank Insurance Fund ("BIF") of the Federal
Deposit Insurance Corporation (the "FDIC") in accordance with law and with
the regulations of the FDIC and all premiums and assessments required in
connection therewith have been paid. The copies of Target's Certificate of
Incorporation and Bylaws, each certified by its Secretary as of the date
of this Agreement, which are being delivered to the Company herewith, are
complete and correct copies in effect as of the date of this Agreement.
(c) As of the date of this Agreement, to the best knowledge and
belief of the Boards of Directors of Fairbank and Target, the minute books
of Fairbank and Target, respectively, contain complete and accurate
records of all meetings through March 15, 1996, and other corporate
actions of their respective shareholders and Board of Directors (including
committees of their respective Board of Directors).
3.02 Capitalization.
(a) The authorized capital stock of Fairbank consists of 70,000
shares of Fairbank Common Stock and 100 shares of preferred stock, no par
value ("Preferred Stock"). As of the date of this Agreement, there were
44,275 shares of Fairbank Common Stock issued and outstanding and no
shares reserved for issuance upon exercise of stock options. At the date
of this Agreement, 10 shares of Preferred Stock are outstanding, each of
which shares of Preferred Stock shall be repurchased by Fairbank at the
Closing for $100 per share. All issued and outstanding shares of Fairbank
Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable. Fairbank does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any
shares of Fairbank capital stock or any security representing the right to
purchase or otherwise receive any capital stock of Fairbank. None of the
shares of capital stock of Fairbank has been issued in violation of the
preemptive rights of any person.
(b) The authorized capital stock of Target consists of 100,000
shares of common stock, $8.00 par value ("Target Common Stock"), and no
shares of preferred stock. As of the date of this Agreement, there were
72,500 shares of Target Common Stock issued and outstanding, all of which
are owned by Fairbank, and no shares held in Target's treasury or reserved
for issuance. All issued and outstanding shares of Target Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable.
3.03 Authority; No Violation.
(a) Fairbank has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
Fairbank and the consummation by Fairbank of the transactions contemplated
by this Agreement have been duly and validly approved by the Board of
Directors of Fairbank. The Board of Directors of Fairbank has directed
that this Agreement and the transactions contemplated hereby be submitted
to Fairbank's shareholders for consideration at a meeting of such
shareholders and, except for the adoption of this Agreement by the
requisite vote of Fairbank's shareholders, no other corporate proceedings
on the part of Fairbank are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Fairbank and (assuming adoption
of the Agreement by the requisite vote of Fairbank's shareholders, due
authorization, execution and delivery by the Company, and receipt of
necessary regulatory approvals) constitutes a valid and binding obligation
of Fairbank, enforceable against Fairbank in accordance with its terms,
except as enforcement may be limited by general principles of equity,
whether applied in a court of law or a court of equity, and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies
generally.
(b) Neither the execution and delivery of this Agreement by
Fairbank, nor the consummation by Fairbank of the transactions
contemplated hereby, nor compliance by Fairbank with any of the terms or
provisions hereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of Fairbank or (ii) assuming that the consents and
approvals referred to in Section 3.04 hereof are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Fairbank or any of its
Subsidiaries, or (y) except as set forth in Schedule 3.03(b), violate,
result in a breach of any provision of, constitute a default under, or
result in the creation of any material lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of
Fairbank under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Fairbank is a party, or by which
it or any of its properties or assets may be bound or affected.
(c) Target has all necessary corporate power and authority to
execute and deliver the Bank Merger Agreement and to consummate the
transactions contemplated thereby. Upon the due and valid approval of the
Bank Merger Agreement by the Board of Directors of Target and by Fairbank
as the sole shareholder of Target, no other corporate proceedings on the
part of Target will be necessary to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and
delivery by Target, will be duly and validly executed and delivered by
Target and will (assuming due authorization, execution and delivery by the
Bank) constitute a valid and binding obligation of Target, enforceable
against Target in accordance with its terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(d) Neither the execution and delivery of the Bank Merger Agreement
by Target, nor the consummation by Target of the transactions contemplated
thereby, nor compliance by Target with any of the terms or provisions
thereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of Target or (ii) assuming that the consents and
approvals referred to in Section 3.04 hereof are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Target or any of its
Subsidiaries, or (y) except as set forth in Schedule 3.03(d), violate,
result in a breach of any provision of, constitute a default under, or
result in the creation of any material lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of Target
under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Target is a party, or by which it or any
of its properties or assets may be bound or affected.
3.04 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "FRB") under the BHC Act and the Federal Reserve Act (the "FRA") and
approval of such applications and notices, (ii) the filing of applications and
notices, as applicable, with the Office of the Comptroller of the Currency (the
"OCC") under the National Bank Act and approval of such applications and
notices, (iii) the filing of applications and notices, as applicable, with the
FDIC under the Bank Merger Act and approval of such applications and notices,
(iv) the filing of applications with the Commissioner of Banks of the
Commonwealth of Massachusetts (the "Commissioner") under Chapter 172, Section 36
of the M.G.L. and the Board of Bank Incorporation of the Commonwealth of
Massachusetts (the "Board") under Chapter 167A, Sections 2 and 4 of the M.G.L.
and approvals of such applications, (v) the approval of this Agreement by the
requisite vote of the shareholders of Fairbank, (vi) the filing of the
Massachusetts Certificate of Merger with the Massachusetts Secretary, (vii)
filings and approvals required by the Bank Merger Agreement, and (viii) such
filings, authorizations or approvals as may be set forth in Schedule 3.04, no
consents or approvals of or filings or registrations with any governmental
entity or with any third party are necessary in connection with (a) the
execution and delivery by Fairbank of this Agreement and the consummation by
Fairbank of the Merger and the other transactions contemplated hereby, and (b)
the execution and delivery by Target of the Bank Merger Agreement and the
consummation by Target of the Bank Merger and the other transactions
contemplated thereby.
3.05 Financial Statements. Fairbank has previously delivered to the
Company copies of the consolidated balance sheets of Fairbank and its
Subsidiaries as of December 31 for each of the three fiscal years 1993, 1994 and
1995 and the related consolidated statements of income, changes in shareholders'
equity and cash flows for the fiscal years 1993 through 1995, inclusive (the
"Financial Statements"). The Financial Statements (including the related notes
where applicable) are true and complete and fairly present in all material
respects the results of the consolidated operations and changes in shareholders'
equity and consolidated financial position of Fairbank and its Subsidiaries for
the respective fiscal periods or as of the respective dates therein set forth;
each of the Financial Statements (including the related notes, where applicable)
complies in all material respects with the applicable accounting requirements,
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. The books and records of
Fairbank have been, and are being, maintained in all material respects in
accordance with applicable legal and accounting requirements and reflect only
valid transactions.
3.06 Absence of Undisclosed Liabilities. Except for the transactions
contemplated by this Agreement and as set forth in Schedule 3.06, neither
Fairbank nor any Subsidiary has incurred any liability (contingent or otherwise)
that is material to Fairbank or such Subsidiary or that, when combined with all
similar liabilities, would be material to Fairbank or such Subsidiary, except as
disclosed in the notes to Fairbank's December 31, 1995 consolidated balance
sheet.
3.07 Absence of Certain Changes or Events.
(a) Except as set forth in Schedule 3.07(a) or elsewhere in the
Schedules delivered by Fairbank, since December 31, 1995, there has not
been:
(1) any material adverse change in the business, operations,
properties, assets or financial condition of Fairbank or any
Subsidiary and no fact or condition exists which Fairbank believes
will cause such a material adverse change in the future;
(2) any loss (for purposes of this subsection 3.07(a)(2),
"loss" shall not mean a loan loss), damage, destruction or other
casualty materially and adversely affecting any of the significant
properties, assets or business of Fairbank or any Subsidiary
(whether or not covered by insurance);
(3) any increase in the compensation payable by Fairbank or
any Subsidiary to any of its employees whose total compensation
after such increase was in excess of $30,000 per annum, or to any of
its Directors, officers, agents, consultants, or any bonus, service
award or other like benefit granted, made or accrued to the credit
of any such Director, officer, agent, consultant or employee, or any
welfare, pension, retirement, severance or similar payment or
arrangement made or agreed to by Fairbank or any Subsidiary for the
benefit of any such Director, officer, agent, consultant or
employee, except for those granted in the ordinary course of
business and consistent with past practice;
(4) any change in any method of accounting or accounting
practice of Fairbank or any Subsidiary;
(5) any rescheduling or having a moratorium on payments, or
writing off as uncollectible of any individual loan of Fairbank or
any Subsidiary in excess of $25,000, or loans in the aggregate in
excess of $100,000; or
(6) any agreement or understanding, whether in writing or
otherwise, of Fairbank or any Subsidiary to do any of the foregoing.
(b) Except as set forth in Schedule 3.07(b), since December 31,
1995, neither Fairbank nor any Subsidiary has:
(1) issued or sold any promissory notes, stock, bonds or other
corporate securities of which it is the issuer;
(2) declared, paid or set aside for payment any dividend or
other distribution (whether in cash, stock or property) in respect
of its capital stock;
(3) split, combined or reclassified any shares of its capital
stock, or redeemed, purchased or otherwise acquired any shares of
its capital stock or other securities;
(4) sold, assigned, encumbered or transferred any of its
assets (real, personal or mixed, tangible or intangible), cancelled
any debts or claims or waived any rights of substantial value,
except, in each case, in the ordinary course of business;
(5) entered into or amended any collective bargaining
agreement or suffered any material strike, work stoppage, slow down,
or other labor disturbance;
(6) amended its Certificate of Incorporation or Bylaws, or any
provision thereof, or proposed any such amendment;
(7) borrowed or agreed to borrow any funds or incurred, or
become subject to, any obligation or liability (absolute or
contingent), except for borrowings from the Federal Reserve Bank of
Boston or other borrowings in the ordinary course of business;
(8) waived any rights of value which in the aggregate are
material considering the business of Fairbank and its Subsidiaries
taken as a whole;
(9) made any material investment or commitment therefor in any
person, corporation, association, partnership, joint venture or
other entity;
(10) permitted the occurrence of any change or event within
its control which would render any of its representations and
warranties contained herein untrue in any material respect at and as
of the Effective Time;
(11) incurred any liability that has had, or to the knowledge
of Fairbank or any Subsidiary, any liability that could reasonably
be expected to have, a material adverse effect on Fairbank or any
Subsidiary, or their business or operations taken as a whole; or
(12) entered into any other transaction other than in the
ordinary course of business or in connection with the transactions
contemplated by this Agreement.
3.08 Loan Portfolio. Except as set forth in Schedule 3.08, all evidences
of indebtedness reflected as assets of Fairbank and its Subsidiaries in
Fairbank's 1995 Financial Statements are in all respects binding obligations of
the respective primary obligors named therein and no material amount thereof is
subject to any defenses known to Fairbank or any Subsidiary which may be
asserted against Fairbank or any Subsidiary. Except as set forth on Schedule
3.08, Fairbank has delivered to the Company a true and complete list and brief
description of all real property (other than personal residences) in which
Fairbank or any Subsidiary has an interest as creditor or mortgagee securing an
amount or amounts greater than $250,000 to one borrower, or a series of related
borrowers. Except as set forth in such list, there are no outstanding loans held
by Fairbank or any Subsidiary with an unpaid balance of $50,000 or more in which
a default has occurred and is continuing. For the purposes hereof, "default"
shall include but not be limited to a failure of an obligor to make any payments
with respect to any loans for 60 days or more past the due date for such
payment. Schedule 3.08 sets forth (i) all of the loans in the original principal
amount in excess of $100,000 of Fairbank or any Subsidiary that as of the date
of this Agreement are classified by Fairbank or such Subsidiary or any bank
regulatory examiner as "Special Mention," "Substandard," "Doubtful," "Loss" or
"Classified," together with the aggregate principal amount of and accrued and
unpaid interest on such loans by category. To the best of its knowledge, the
amount established by Fairbank and its Subsidiaries as a reserve for loan losses
on the date hereof is sufficient in all material respects to cover losses in the
loan portfolio as it now exists.
3.09 Investments.
(a) Except as set forth in Schedule 3.09, Fairbank has no
Subsidiaries and no equity interest or other investment, direct or
indirect, in any corporation, partnership, joint venture or other entity
other than interests that have been pledged to Fairbank or a Subsidiary as
collateral for loans or obligations made by Fairbank or a Subsidiary in
the ordinary course of its lending business. To the extent any such
interest has been foreclosed or otherwise thereafter become owned by
Fairbank or a Subsidiary, no filing with any regulatory authority is
necessary.
(b) Except as disclosed in the notes to Fairbank's December 31, 1995
consolidated balance sheet or on Schedule 3.09 and except for pledges to
secure public funds or for other purposes required by law, none of the
investments reflected under the heading "Investment Securities" in
Fairbank's 1995 Balance Sheet which are owned by Fairbank or a Subsidiary
at the Effective Time and none of the investments made by Fairbank or a
Subsidiary since December 31, 1995 are subject to any investment or other
restriction, whether contractual or statutory, which materially impairs
the ability of the holder freely to dispose thereof in the open market at
any time.
3.10 Title to Properties. Except as set forth in Schedule 3.10, Fairbank
and its Subsidiaries have good, valid and marketable title to, (a) all their
respective owned real properties, and (b) all other properties and assets
reflected in the 1995 Balance Sheet or acquired since December 31, 1995, other
than any of such properties or assets which have been sold or otherwise disposed
of since December 31, 1995 in the ordinary course of business and consistent
with past practice. Except as set forth in Schedule 3.10, all of such properties
and assets are free and clear of title defects and obligations, mortgages,
pledges, liens, claims, charges, security interests or other encumbrances of any
nature whatsoever, including, without limitation, leases, options to purchase,
conditional sales contracts, collateral security arrangements and other title or
interest retention arrangements, and are not, in the case of owned real
property, subject to any easements, building use restrictions, exceptions,
reservations or limitations of any nature whatsoever except those having no
material adverse effect upon the operations of Fairbank or any Subsidiary or
which would involve no material expense to correct or remove. All personal
property material to the business, operations or financial condition of Fairbank
or any Subsidiary, and all buildings, structures and fixtures used by Fairbank
or any Subsidiary in the conduct of their respective business, are, to the best
knowledge of Fairbank, in good operating condition and have been properly
maintained. Except as set forth in Schedule 3.10, neither Fairbank nor any
Subsidiary has received any notification of any violation (which has not been
cured) of any building, zoning or other law, ordinance or regulation in respect
of such property or structures or the use thereof by Fairbank or any Subsidiary.
3.11 Leases. Except as listed in Schedule 3.11, Fairbank has delivered to
the Company an accurate and complete list of all leases pursuant to which
Fairbank or any Subsidiary, as lessee, leases real or personal property,
including, without limitation, all leases of computer or computer services and
all arrangements for time-sharing or other data processing services, describing
for each lease the financial obligations of Fairbank or any Subsidiary under
such lease, its expiration date and renewal terms. Except as set forth in
Schedule 3.11, (a) all such leases are valid and binding and are enforceable in
accordance with their terms, and (b) to the best knowledge of Fairbank, there
exists on the part of Fairbank or any Subsidiary no event of default or event,
occurrence, condition or act which with the giving of notice, the lapse of time
or the happening of any further event or condition would become a default under
any such lease.
3.12 Legal Proceedings. Except as set forth in the attached Schedule 3.12,
neither Fairbank nor any Subsidiary is a party to any, and there are no, pending
or, to the best knowledge of Fairbank and its Subsidiaries, threatened legal,
administrative, arbitration or other proceedings, claims, actions, suits or
governmental investigations against, or of a nature that may result in a
material monetary claim or charge against, Fairbank, any Subsidiary, or any of
the current officers or Directors of any of them, or challenging the validity or
propriety of the transactions contemplated in this Agreement; and there is not
known to Fairbank any reasonable basis for any such proceedings, claim, action
or governmental investigation. Without limiting the generality of the foregoing,
Schedule 3.12 includes a complete list and summary description of all pending or
threatened litigation involving any claim against Target, whether directly or by
counterclaim, involving a "lender liability" cause of action. Neither Fairbank
nor any Subsidiary is a party to any order, judgment or decree which will, or
might reasonably be expected to, affect its business, operations, properties,
assets, financial condition, prospects or results of operations or its ability
to acquire any property or conduct business in any area in which it presently
does business. Set forth in Schedule 3.12 hereto is also a listing of any and
all class actions or shareholders' actions pending or, to the best knowledge of
Fairbank, threatened against Fairbank, any of its Subsidiaries, or any of the
officers or Directors of Fairbank or any of its Subsidiaries, regardless of the
amount in controversy.
3.13 Compliance with Applicable Laws. Fairbank and each of its
Subsidiaries holds, and have at all times held, all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of the
businesses of Fairbank and its Subsidiaries. Except as previously disclosed to
the Company as set forth in Schedule 3.13, Fairbank and its Subsidiaries have
complied in all materials respects with and are not in default in any material
respect under, any applicable law, statute, order, rule, regulation, policy and
guideline of any federal, state or local governmental authority relating to it,
and which may materially affect the business, operations or financial condition
of Fairbank or any Subsidiary, and have not received notice of violation of, and
do not know of any violations of, any of the above. No suspension or
cancellation of any material license, franchise, permit or authorization is
threatened.
3.14 Taxes. Fairbank and its Subsidiaries have properly and accurately
completed and duly filed in correct form all federal, state and local
information and tax returns required to be filed by them (all such returns being
accurate and complete in all respects) and have duly paid or made provisions for
the payment of all taxes and other charges which have been incurred or are due
or claimed to be due from them by federal, state or local taxing authorities
(including, without limitation, those due in respect of its properties, income,
business, capital stock, deposits, franchises, licenses, sales and payrolls).
The amounts set up as reserves for taxes on the 1995 Balance Sheet are, to the
best of Fairbank's knowledge, sufficient in the aggregate for the payment of all
unpaid federal, state and local taxes, whether or not disputed, accrued or
applicable for the period ended December 31, 1995 or for any year or period
prior thereto, and for which Fairbank or any Subsidiary may be liable in its own
right or as transferee of the assets of, or successor to, any corporation,
person, association, partnership, joint venture or other entity. To the best of
Fairbank's knowledge, there are no pending questions relating to, or claims
asserted for, taxes or assessments upon Fairbank or any Subsidiary nor has
Fairbank or any Subsidiary been requested to give any waivers extending the
statutory period of limitation applicable to any federal, state or local income
tax return for any period. Proper and accurate amounts have been withheld by
Fairbank and its Subsidiaries from their employees for all prior periods in
compliance with the tax withholding provisions of applicable federal, state and
local laws. Federal, state and local returns, accurate and complete in all
material respects, have been filed by Fairbank and its Subsidiaries for all
periods for which returns were due with respect to income tax withholding,
Social Security, property, sales, retirement plan and unemployment taxes; and
the amounts shown on such returns to be due and payable have been paid in full
or adequate provision therefor has been included by Fairbank in its consolidated
financial statements as of December 31, 1995.
3.15 Employee Benefit and Other Plans. Except as set forth in Schedule
3.15, neither Fairbank nor any Subsidiary maintains nor contributes to any
"employee pension benefit plan" or "employee welfare benefit plan," as such
terms are defined in Section 3 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). With respect to any such plan listed on Schedule
3.15, Fairbank and its Subsidiaries are in compliance with, and such plans
comply with, ERISA. In this connection, (i) no "reportable event" has occurred
and is continuing with respect to any such plans; (ii) the statements of assets
and liabilities of such plans as of the close of the most recent plan year for
which financial statements are available, and the statements of changes in fund
balance and in financial position, or the statements of changes in net assets
available for each plan's benefits, for the plan year then ended, fairly present
the financial condition of such plan for such plan year; (iii) except as
disclosed in the annual reports of the plans, no "prohibited transaction" (as
defined in Section 406 of ERISA) resulting in material liability of Fairbank or
any Subsidiary has occurred with respect to the plans; (iv) no breach of
fiduciary responsibility under Part 4 of Title I of ERISA resulting in material
liability of Fairbank or any Subsidiary has occurred with respect to the plans;
(v) all contributions required to be made to the plans have been made; (vi) no
waiver of the minimum funding standards under ERISA or the Code is in effect or
has been applied for with respect to the plans; (vii) as of the latest valuation
date, the present value of the assets of all plans listed on the attached
Schedule 3.15 which are subject to Title IV of ERISA (other than "Multiemployer
Plans," as defined in Section 3 of ERISA), exceeds the present value of all
vested accrued benefits under such plans, based upon actuarial assumptions
currently utilized for such plans; (viii) neither Fairbank nor any Subsidiary
currently maintains or contributes to a Multiemployer Plan; (ix) each of the
plans listed on the attached Schedule 3.15 which is intended to be a qualified
plan within the meaning of Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified to the extent required under current
law, and Fairbank is not aware of any fact or circumstance which would adversely
affect the qualified status of any such plan; and (x) no liability under Title
IV of ERISA has been incurred by Fairbank or any Subsidiary that has not been
satisfied in full.
3.16 Contracts and Commitments; No Defaults.
(a) Set forth in or attached to Schedule 3.16(a) are true and
correct copies of the following documents or summary descriptions (lists
of agency and date in the case of regulatory reports with respect to which
the contents are confidential) of the following information relating to
Fairbank and its Subsidiaries:
(1) any bank regulatory agency reports since January 1, 1994
or other communication relating to such examination of Fairbank or
any Subsidiary which have been made available to Fairbank or any
Subsidiary;
(2) the name of each bank with which Fairbank or any
Subsidiary has an account or safekeeping or custodial arrangement or
correspondent relationship and the names of all persons who are
authorized with respect thereto;
(3) all mortgages, indentures, promissory notes, deeds of
trust, loan or credit agreements or similar instruments under which
Fairbank or any Subsidiary is indebted in an amount greater than
$100,000 for borrowed money or the price of purchased property,
accompanied by copies thereof including all amendments or
modifications of any thereof; and
(4) any pending application, including any documents or
materials relating thereto, which has been filed by Fairbank or any
Subsidiary with any bank regulatory authority in order to obtain the
approval of such bank regulatory authority for the establishment of
a new branch bank or for any other purpose.
(b) Except as set forth in Schedule 3.16(b), neither Fairbank nor
any Subsidiary is a party to or bound by any:
(1) contract with or arrangement for any Director, officer,
employee, former employee, agent or consultant with respect to
employment, salary, bonus, percentage or incentive compensation,
pension, deferred compensation or retirement payments, or any profit
sharing, stock option, stock purchase or other employee benefit plan
or arrangement;
(2) collective bargaining or union contract or agreement;
(3) contract, commitment or arrangement for the borrowing of
money or for obtaining a line of credit (except for federal funds
purchases);
(4) contract or agreement for the future purchase by it of any
materials, equipment, services, or supplies, which continues for a
period of more than 12 months (including periods covered by any
option to renew by either party), or which provides for a price
materially in excess of the prevailing market price;
(5) contract containing covenants purporting to limit its
freedom to compete;
(6) contract or commitment for the acquisition, construction
or refurbishment of any owned real property, branch or significant
equipment;
(7) contract or commitment upon which its total business is
substantially dependent; or
(8) agreement or arrangement for the sale of any of Fairbank's
stock or significant tangible assets.
(c) Except as set forth in Schedule 3.16(c), neither Fairbank nor
any Subsidiary has committed a default with respect to any material
contract, agreement or commitment to which it is a party, and neither
Fairbank nor any Subsidiary has received notice of any such default, nor
has Fairbank or any Subsidiary knowledge of any facts or circumstances
which would reasonably indicate that Fairbank or any Subsidiary will be or
may be in such default under any such contract, agreement, arrangement,
commitment or other instrument subsequent to the date hereof.
3.17 Environmental Matters. Except as set forth in Schedule 3.17:
(a) To the best knowledge and belief of the Board of Directors of
Fairbank and Target, Fairbank and its Subsidiaries are in compliance, and
have in the last three years been in compliance, with all applicable laws,
rules, regulations, standards and requirements adopted or enforced by the
United States Environmental Protection Agency (the "EPA") and of state and
local agencies with jurisdiction over pollution or protection of the
environment, except where such noncompliance or violations could not
reasonably be expected to have a material adverse effect on Fairbank taken
as a whole; and
(b) There is no suit, claim, action or proceeding pending before any
court or governmental entity (and, to the best of Fairbank's knowledge, no
basis exists for the assertion or commencement thereof) in which Fairbank
or any Subsidiary has been named as a defendant (i) for alleged
noncompliance with any environmental law, rule or regulation or (ii)
relating to the release into the environment of any Hazardous Material (as
hereinafter defined) or oil at or on a site presently or formerly owned,
leased, or operated by Fairbank or any Subsidiary or to Fairbank's
knowledge, on a site with respect to which Fairbank or any Subsidiary has
made a commercial real estate loan and has a mortgage or security interest
in, except where such noncompliance or release would not have a material
adverse effect on Fairbank taken as a whole. "Hazardous Material" means
any pollutant, contaminant, or hazardous substance under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601 et seq., or any similar state law.
3.18 Fairbank Information. No representation or warranty contained in this
Agreement, including the Schedules hereto, and no statement or information
contained in any certificate, list or other writing furnished to the Company
pursuant to the provisions hereof, including without limitation for inclusion in
any regulatory application, filing or report, contains or will contain any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements herein or therein not misleading. No information
material to the Merger and which is necessary to make the representations and
warranties herein contained not misleading, has been withheld from, or has not
been delivered in writing to, the Company.
3.19 Insurance. Set forth in Schedule 3.19 is an accurate and complete
list of all policies of insurance, including the amounts thereof, owned by
Fairbank or any Subsidiary or in which Fairbank or any Subsidiary is named as
the insured party. All such policies are valid, outstanding and enforceable.
3.20 Broker's Fees. Neither Fairbank nor any Subsidiary, nor any of their
respective officers, Directors or employees has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with the transactions contemplated herein, except as disclosed in the
attached Schedule 3.20.
3.21 Agreements with Regulatory Agencies. Except as set forth in Schedule
3.21, neither Fairbank nor any Subsidiary is subject to any cease and desist or
other order issued by, or is a party to any written agreement, consent agreement
or memorandum of understanding (each a "Regulatory Agreement") with any
regulatory agency or other governmental entity that restricts in any material
respect the conduct of its business or that relates to its capital adequacy, its
credit policies or its management, nor has Fairbank or any Subsidiary been
notified by any regulatory agency or other governmental entity that it is
considering issuing or requesting any Regulatory Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Fairbank as follows:
4.01 Corporate Organization.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts.
The Company has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary. The Company is duly
registered as a bank holding company under the BHC Act. The copies of the
Certificate of Incorporation and Bylaws of the Company, each certified by
its Secretary, which are being delivered to Fairbank herewith, are
complete and correct copies of such documents as in effect as of the date
of this Agreement.
(b) The Bank is a state-chartered capital stock trust company duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. The Bank has the corporate power and
authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted. The Bank has all necessary
federal, state and local banking authorization to own or lease its
properties and assets and to carry on its business as it is being
conducted. The accounts of depositors of the Bank are insured by the BIF
of the FDIC in accordance with law and with the regulations of the FDIC
and all premiums and assessments required in connection therewith have
been paid. The copies of the Bank's Certificate of Incorporation and
Bylaws, each certified by its Secretary as of the date of this Agreement,
which are being delivered to Fairbank herewith, are complete and correct
copies in effect as of the date of this Agreement.
4.02 Capitalization.
(a) The authorized capital stock of the Company consists of
5,000,000 shares of Company Common Stock, and no shares of preferred
stock. As of the date of this Agreement, there were 2,754,912.280 shares
of Company Common Stock issued and outstanding, no shares held in the
Company's treasury, and (except as described below) no shares reserved for
issuance upon exercise of outstanding stock options. All issued and
outstanding shares of Company Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. Except for 250,000
shares of Company Common Stock reserved for issuance upon exercise of
outstanding stock options that have been granted pursuant to the Company's
Stock Option Plans and 100,000 shares of Company Common Stock reserved for
issuance pursuant to the Company's Dividend Reinvestment Plan, the Company
does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of Company capital stock or any
security representing the right to purchase or otherwise receive any
capital stock of the Company. None of the shares of capital stock of the
Company has been issued in violation of the preemptive rights of any
person.
(b) The authorized capital stock of the Bank consists of 2,000,000
shares of common stock, $2.50 par value ("Bank Common Stock"), and no
shares of preferred stock. As of the date of this Agreement, there were
700,000 shares of Bank Common Stock issued and outstanding, all of which
are held by the Company, and no shares held in the Bank's treasury or
reserved for issuance. All issued and outstanding shares of Bank Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable.
4.03 Authority; No Violation.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of the Company, and no other corporate proceedings on the part
of the Company are necessary to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
the Company and (assuming due authorization, execution and delivery by
Fairbank) constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied
in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions
contemplated hereby, nor compliance by the Company with any of the terms
or provisions hereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of the Company or (ii) assuming that the consents
and approvals referred to in Section 4.03 are duly obtained, (x) violate
any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to the Company or any of its Subsidiaries,
or (y) violate, result in a breach of any provision of, constitute a
default under, or result in the creation of any material lien, pledge,
security interest, charge or other encumbrance upon any of the respective
properties or assets of the Company or any of its Subsidiaries under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party, or
by which they or any of their respective properties or assets may be bound
or affected.
(c) The Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. Upon the due and valid approval of the Bank Merger
Agreement by the Company as the sole shareholder of the Bank, no other
corporate proceedings on the part of the Bank will be necessary to
consummate the transactions contemplated thereby. The Bank Merger
Agreement, upon execution and delivery by Target, will be duly and validly
executed and delivered by the Bank and will (assuming due authorization,
execution and delivery by Target) constitute a valid and binding
obligation of the Bank, enforceable against the Bank in accordance with
its terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(d) Neither the execution and delivery of the Bank Merger Agreement
by the Bank, nor the consummation by the Bank of the transactions
contemplated thereby, nor compliance by the Bank with any of the terms or
provisions thereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of the Bank or (ii) assuming that the consents and
approvals referred to in Section 4.03 hereof are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to the Bank or any of its
Subsidiaries, or (y) violate, result in a breach of any provision of,
constitute a default under, or result in the creation of any material
lien, pledge, security interest, charge or other encumbrance upon any of
the properties or assets of the Bank under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Bank is a
party, or by which it or any of its properties or assets may be bound or
affected.
4.04 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the FRB under the BHC Act and the FRA and approval
of such applications and notices, (ii) the filing of applications and notices,
as applicable, with the FDIC under the Bank Merger Act and approval of such
applications and notices, (iii) the filing of applications with the Commissioner
and the Board under Chapter 172, Section 36 and Chapter 167A, Sections 2 and 4
of the M.G.L. and approvals of such applications, (iv) the filing of the
Massachusetts Certificate of Merger with the Massachusetts Secretary of State,
(v) filings and approvals required by the Bank Merger Agreement, and (vi) such
filings, authorizations or approvals as may be set forth in Schedule 4.04, no
consents or approvals of or filings or registrations with any governmental
entity or with any third party are necessary in connection with (a) the
execution and delivery by the Company of this Agreement and the consummation by
the Company of the Merger and the other transactions contemplated hereby, and
(b) the execution and delivery by the Bank of the Bank Merger Agreement and the
consummation by the Bank of the Bank Merger and the other transactions
contemplated thereby. The affirmative vote of the holders of the outstanding
shares of Company Common Stock is not required to approve this Agreement or the
transactions contemplated hereby.
4.05 Financial Statements. The Company has previously delivered to
Fairbank copies of the consolidated balance sheets of the Company and its
Subsidiaries as of December 31 for the fiscal years 1994 and 1995 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the fiscal years 1994 and 1995 (the "Financial Statements"). The
Financial Statements (including the related notes where applicable) are true and
complete and fairly present in all material respects the results of the
consolidated operations and changes in shareholders' equity and consolidated
financial position of the Company and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of the Financial
Statements (including the related notes, where applicable) complies in all
material respects with the applicable accounting requirements, and each of the
Financial 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. The books and records of the
Company have been, and are being, maintained in all material respects in
accordance with applicable legal and accounting requirements and reflect only
valid transactions.
4.06 Broker's Fees. Neither the Company nor any Subsidiary, nor any of
their respective officers or Directors, has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated herein, except as disclosed
in SCHEDULE 4.06.
4.07 Absence of Certain Changes or Events. Except as set forth in SCHEDULE
4.07, since December 31, 1995
(a) there has not been any material adverse change in the Company
and its Subsidiaries, their businesses or operations taken as a whole;
(b) there has not been any incurrence by the Company of any
liability that has had, or to the knowledge of the Company, could
reasonably be expected to have, a material adverse effect on the Company's
and its Subsidiaries' ability to consummate the transactions contemplated
hereby; and
(c) there has not been any change in any of the accounting methods
or practices of the Company or any of its Subsidiaries other than changes
required by applicable law or generally accepted accounting principles.
4.08 Legal Proceedings. There are no pending or to the knowledge of the
Company, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental investigations of any nature against the Company
or any Subsidiary of the Company, as to which there is, in the judgment of the
Company, a reasonable likelihood of adverse determination and which if adversely
determined, would, individually or in the aggregate, as of the date hereof,
prevent or materially and adversely affect the Company's ability to consummate
the transactions contemplated hereby. Set forth in Schedule 4.08 hereto is a
list of any pending or to the knowledge of the Company, threatened, legal,
administrative, arbitral or other proceeding, claim, action or governmental
investigation of any nature against the Company or any Subsidiary of the Company
which involves a claim of $50,000 or more.
4.09 Company Information. The information provided in writing by the
Company for inclusion in the Proxy Statement (as defined in Section 6.01(a))
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.
4.10 Compliance With Applicable Law. The Company and each of its
Subsidiaries holds, and have at all times held, all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of their
respective businesses. The Company and its Subsidiaries have complied in all
material respects with and are not in default in any material respect under any,
applicable law, statute, order, rule or regulation of any governmental entity
relating to the Company or any of its Subsidiaries, except where the failure to
hold such license, franchise, permit or authorization or such noncompliance or
default would not have a material adverse effect on the Company, and neither the
Company nor any of its Subsidiaries has received notice of violation of any
material violations of any of the above.
4.11 Agreements with Regulatory Agencies. Neither the Company nor any of
its Subsidiaries is subject to any cease and desist or other order issued by, or
is a party to any written agreement, consent agreement or memorandum of
understanding (each a "Regulatory Agreement") with any regulatory agency or
other governmental entity that restricts in any material respect its ability to
consummate the transactions contemplated hereby or that relates in any manner to
its capital adequacy, its credit policies or its management, nor has the Company
or any of its Subsidiaries been notified by any regulatory agency of other
governmental entity that it is considering issuing or requesting any Regulatory
Agreement.
4.12 Regulatory Approvals. The Company is not, as of the date hereof,
aware of any reason why the regulatory approvals required to be obtained by it
or any of its Subsidiaries to consummate the Merger would not be satisfied
within the time frame customary for transactions of the nature contemplated
thereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01 Covenants of Fairbank. During the period from the date of this
Agreement to the Effective Time, Fairbank will conduct its business, and will
cause each Subsidiary to conduct its business, only in the ordinary course and
consistent with prudent business and/or banking practice, will use all
reasonable efforts to preserve the properties of Fairbank and its Subsidiaries
wherever located, and will comply in all material respects with all laws
applicable to Fairbank and its Subsidiaries or to the conduct of their
respective businesses, or to the transactions contemplated by this Agreement.
Fairbank agrees not to take any action or permit anything to be done that would
be contrary to or in breach of the conditions or provisions of this Agreement.
Fairbank will use all reasonable efforts to preserve intact the business of
Fairbank and its Subsidiaries, to keep available the present services of the
employees of Fairbank and its Subsidiaries, and to preserve the goodwill of the
customers of Fairbank and its Subsidiaries and others with whom business
relationships exist. Fairbank will, from the date hereof until at least through
the consummation of the transactions contemplated by this Agreement, keep all
insurance policies set forth in SCHEDULE 3.19 in full force and effect. In
addition, Fairbank agrees that from the date hereof to the consummation of the
Merger, and except as otherwise consented to or approved by a duly authorized
officer of the Company in writing, which consent shall not be unreasonably
withheld, or as permitted or required by this Agreement, neither Fairbank nor
any Subsidiary will:
(a) enter into or amend any contract or arrangement of the nature
required to be set forth in SCHEDULE 3.16;
(b) change any provision of its Certificate of Incorporation or
Bylaws or similar governing documents;
(c) change the number of issued shares of its capital stock, or
issue or grant any option, warrant, call, commitment, subscription, right
to purchase or agreement of any character relating to its authorized or
issued capital stock, or any securities convertible into shares of such
stock, or split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or redeem or otherwise acquire any shares of its capital
stock, except as may be necessary to secure its position pursuant to a
debt previously contracted;
(d) make unsecured loans in excess of $15,000 for any individual
loan or in excess of $200,000 in the aggregate;
(e) make any secured loan or loans, other than conforming
residential mortgage loans, in an aggregate amount to any one borrower
(including members of his/her immediate family or affiliates of such
borrower) in excess of $200,000, except for loans sold to investors;
(f) make any loans to any Director or employee of Fairbank or any
Subsidiary, or any member or affiliate of their respective families,
except within the limits of binding commitments and lines of credit as in
effect on the date of this Agreement;
(g) other than with respect to residential mortgage loans, renew or
otherwise reinstate any loan that has been in default for a period of 60
days or more which, when added to any loans outstanding to the families or
affiliates of any maker or surety of the defaulted loans (whether or not
such other loans are in default) has a balance outstanding in excess of
$100,000, except that Fairbank or any Subsidiary may accept payments for
the purpose of bringing loans current, so long as there is no amendment or
restructuring of the loans;
(h) offer rates on deposits more than 0.50% in excess of the average
of those offered by similarly chartered institutions in its market area at
the time that such rates are to be offered, or offer loan pricing which is
materially below its competitors in the local market.
(i) hire or retain any new employees, consultants or contractors, or
increase the compensation of current employees, consultants or
contractors, except that Fairbank and its Subsidiaries may hire
replacements for current employees who are not officers or managers if
such employees cease to be employees of Fairbank or a Subsidiary;
(j) make any capital expenditures in excess of $10,000;
(k) enter into any real property lease or any lease of personal
property or extend or modify any existing lease of real or personal
property;
(l) acquire or agree to acquire, by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire any assets, other than in connection with
foreclosures, settlements in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business, which would be material
to Fairbank or such Subsidiary;
(m) take any action that is intended or would result in any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect, or in any of the conditions to
the Merger set forth in Article VII not being satisfied, or in a violation
of any provision of this Agreement except, in every case, as may be
required by applicable law;
(n) change its methods of accounting in effect at December 31, 1995,
except as required by changes in GAAP or regulatory accounting principles
as concurred to by Fairbank's independent auditors;
(o) take or cause to be taken any action which would, or may
reasonably be expected to, significantly delay or otherwise adversely
affect the regulatory approvals required to consummate the Merger;
(p) other than activities in the ordinary course of business
consistent with prior practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose
of, any of its material assets, properties or other rights or agreements;
(q) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible for
the obligations of any other individual, corporation or other entity;
(r) file any application to open, relocate or terminate the
operations of any banking office;
(s) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other
than in connection with foreclosures, settlements in lieu of foreclosure
or troubled loan or debt restructurings in the ordinary course of
business;
(t) purchase or sell loans in bulk;
(u) foreclose upon or take deed or title to any commercial real
estate without first conducting a Phase I environmental assessment of the
property; or foreclose upon such commercial real estate if such
environmental assessment indicates the presence of hazardous material in
amounts which, if such foreclosure were to occur, would be reasonably
likely to result in a material adverse effect on Fairbank or any
Subsidiary, or its business and operations taken as a whole;
(v) terminate the employment of, or change in any material respect,
the duties, obligations, responsibilities, or position of any senior
officer of Fairbank or any Subsidiary; or
(w) agree to do any of the foregoing.
5.02 Covenants of the Company. During the period from the date of this
Agreement to the Effective Time, except as expressly contemplated or permitted
by this Agreement or with the prior written consent of Fairbank, which shall not
be unreasonably withheld, the Company and its Subsidiaries shall carry on their
respective businesses in the ordinary course consistent with past practice and
use all reasonable efforts to preserve intact their present business
organizations and relationships. Without limiting the generality of the
foregoing and as otherwise contemplated by this Agreement or consented to in
writing by Fairbank, which shall not be unreasonably withheld, the Company shall
not, and shall not permit any of its Subsidiaries to:
(a) take any action that is intended or would result in any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect, or in any of the conditions to
the Merger set forth in Article VII not being satisfied, or in a violation
of any provision of this Agreement, except, in every case, as may be
required by applicable law;
(b) change its methods of accounting in effect at December 31, 1995,
except in accordance with changes in GAAP or regulatory accounting
principles as concurred to by the Company's independent certified public
accountants;
(c) take or cause to be taken any action which would, or may
reasonably be expected to, significantly delay or otherwise adversely
affect the regulatory approvals required to consummate the Merger; or
(d) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Regulatory Matters.
(a) Fairbank shall promptly prepare a proxy statement for the
meeting of its shareholders called for the purpose of approving this
Agreement (the "Proxy Statement") and Fairbank shall thereafter promptly
mail the Proxy Statement to its shareholders.
(b) The parties hereto shall cooperate with each other and use their
best efforts to prepare and file promptly all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and
authorizations of all third parties and governmental entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the Bank Merger).
The parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and governmental entities necessary or
advisable to consummate the transactions contemplated by this Agreement
and each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated herein.
(c) The Company and Fairbank 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 statement, filing, notice or application made by or on behalf
of the Company, Fairbank or any of their respective Subsidiaries to any
governmental entity in connection with the Merger or the Bank Merger and
the other transactions contemplated hereby.
(d) The Company and Fairbank shall promptly furnish each other with
copies of written communications received by the Company or Fairbank, 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.
6.02 Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating
to the exchange of information, Fairbank shall afford to the officers,
employees, accountants, counsel and other representatives of the Company,
access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and
records relating to the ownership, operation, obligations and liabilities
of Fairbank and its Subsidiaries, including, but not limited to, their
respective books of account (including general ledgers), tax records,
minute books of Directors' and shareholders' meetings, Certificate of
Incorporation, Bylaws, contracts and agreements, public filings with any
regulatory authority, plans affecting its employees, and any other
business activities or prospects in which the Company may have an
interest. During such period, Fairbank shall make available to the Company
(i) a copy of each report, schedule, and other document filed or received
by Fairbank or any Subsidiary during such period pursuant to the
requirements of federal or state banking laws and (ii) all other
information concerning their respective businesses, properties and
personnel as the Company may reasonably request (other than information
which Fairbank or any Subsidiary is not permitted to disclose under
applicable law). As to information which Fairbank or any Subsidiary is not
permitted by law to disclose, Fairbank will, upon request from the
Company, use all reasonable efforts to obtain any consent, approval or
waiver that may be required for such disclosure.
(b) Upon reasonable notice and subject to applicable laws relating
to the exchange of information, the Company shall, and shall cause its
Subsidiaries to, afford to the officers, employees, accountants, counsel
and other representatives of Fairbank, access, during normal business
hours during the period prior to the Effective Time, to such information
regarding the Company and its Subsidiaries as shall be reasonably
necessary to confirm that the representations and warranties of the
Company contained herein are true and correct and that the covenants of
the Company contained herein have been performed in all material respects.
As to information which the Company or any Subsidiary is not permitted by
law to disclose, the Company will, upon request from Fairbank, use all
reasonable efforts to obtain any consent, approval or waiver that may be
required for such disclosure.
(c) Neither the Company nor any of its Subsidiaries, nor Fairbank
nor Target, shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of the customers of such party, 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.
(d) Each of the Company, Bank, Fairbank and Target will hold, and
shall cause its counsel, independent certified public accountants,
appraisers and investment bankers to hold, in confidence any confidential
data or information made available to it in connection with this Agreement
using the same standard of care to protect such confidential data or
information as is used to protect its own confidential information. If the
transactions contemplated by this Agreement are not consummated, each of
the parties agrees that it shall return or cause to be returned to the
party providing such information all written materials and all copies
thereof that were supplied to it and that contain any such confidential
data or information.
6.03 Shareholder Approval.
(a) Fairbank shall take all steps necessary to duly call, give
notice of, convene and hold a meeting of its shareholders to be held as
soon as is reasonably practicable for the purpose of voting upon the
approval of this Agreement. Fairbank will, through its Board of Directors,
recommend to its shareholders approval of this Agreement and the
transactions contemplated hereby and such other matters as may be
submitted to its shareholders in connection with this Agreement; provided,
however, that nothing contained in this Section 6.03 or elsewhere in this
Agreement shall prohibit Fairbank's Board of Directors from failing to
make such recommendation or modifying or withdrawing its recommendation,
if such Board shall have concluded in good faith with the advice of
counsel and in consideration of the requirements of Section 10.02 of this
Agreement that such action is required to prevent such Board from
breaching its fiduciary duties to the shareholders of Fairbank, and no
such action shall constitute a breach of this Agreement.
(b) The Company, as sole shareholder of the Bank, and Fairbank, as sole
shareholder of Target, shall take all steps necessary to duly call, give notice
of, convene and hold a meeting of the shareholder(s) of the Bank and Target,
respectively, (or take action by written consent) for the purpose of voting upon
the approval of the Bank Merger Agreement.
6.04 Legal Conditions to Merger. Each of the Company and Fairbank shall,
and the Company and Fairbank shall cause each of their respective Subsidiaries
to, use its 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, the Bank Merger, and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this Agreement and the
Bank Merger 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 Fairbank or the Company or any of their respective Subsidiaries in
connection with the Merger and the Bank Merger, and the other transactions
contemplated by this Agreement and the Bank Merger Agreement.
6.05 Fairbank and Target Employees. All employees of Target on the Closing
Date shall become employees of Bank at their current salary levels and, except
as provided herein, entitled to all rights and privileges of similarly situated
employees of Bank. The Closing Date shall be considered the beginning date of
employment of such employees by the Bank and such employees shall be subject to
the Bank's performance criteria. Such employees shall be entitled to all
benefits of employees so newly hired available to the Bank's employees
thereafter; provided that the Bank will waive any eligibility period for (i)
medical and health insurance and (ii) group life insurance. Other than officers
who are parties to change-in-control severance agreements with Fairbank and
Target, all officers of Target will have the same title with Bank and will have
commensurate responsibilities to their present duties.
6.06 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purpose 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, and the Resulting Bank with full title to all properties,
assets, rights, approvals, immunities and franchises of any of the parties to
the Bank Merger, the proper officers and Directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary action
as may be reasonably requested by, and at the sole expense of, the Company.
6.07 Disclosure Supplements. From time to time prior to the Effective
Time, each party will promptly supplement or amend the Schedules delivered in
connection with the execution of this Agreement to reflect any matter which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such Schedules or which is necessary to
correct any information in such Schedules which has been rendered inaccurate
thereby. No supplement or amendment to such Schedules shall have any effect for
the purposes of determining satisfaction of the conditions set forth in Sections
7.02(a) or 7.03(a) hereof, as the case may be, or the compliance by Fairbank or
the Company, as the case may be, with the respective covenants set forth in
Sections 5.01 and 5.02 hereof.
6.08 Current Information.
(a) During the period from the date of this Agreement to the
Effective Time, Fairbank will cause one or more of its designated
representatives, and any other representative reasonably requested by the
Company, to be available, upon the reasonable request of the Company, to
confer on a regular basis with representatives of the Company and to
report the general status of the ongoing operations of Fairbank and its
Subsidiaries. Fairbank and its Subsidiaries will promptly notify the
Company of any significant change in the normal course of business of
Fairbank and its Subsidiaries, financial or otherwise, or in the operation
of their properties, and of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated)
or the institution or the threat of any significant litigation involving
Fairbank or any Subsidiary and will keep the Company reasonably informed
of such events and permit the Company access to all significant materials
prepared in connection therewith.
(b) The Company will promptly notify Fairbank of any material change
in the normal course of business of the Company or any of its Subsidiaries
and of any governmental complaints, investigations or hearings, or the
institution of significant litigation involving the Company or any of its
Subsidiaries, and will keep Fairbank reasonably informed of such events.
6.09 Environmental Assessment. Fairbank agrees, to the extent it is
legally permitted, to allow the Company, its agents and representatives, at the
Company's expense, to conduct an environmental site assessment of any real
property owned (including assets held as other real estate owned) or leased by
Fairbank or any Subsidiary, and agrees to cooperate in providing information and
other assistance to the Company, its agents and representatives in connection
therewith, including, without limitation, providing access and entry onto such
real property for the purpose of making appropriate environmental and related
inspections. An environmental site assessment may include sampling and intrusive
studies if the Company's representative deems them advisable in light of the
current standards. Fairbank shall be entitled, as a condition to its obligations
hereunder, to be indemnified to its reasonable satisfaction from and against any
loss or damage incurred from the conducting of any such site assessment (but not
the findings thereof). The Company shall contract for any site assessment
desired by it not later than 30 days after the later of the date hereof or, with
respect to property acquired after the date hereof, the date Fairbank notified
the Company of such acquisition.
6.10 Public Announcements. Except to the extent required otherwise by the
securities laws or any state or federal banking laws, with respect to which
Fairbank and the Company may act upon the advice of their respective legal
counsel, neither Fairbank, nor the Company or any of its Subsidiaries, shall
issue any press release or otherwise make any public statement with respect to
this Agreement or any of the transactions contemplated hereby prior to the
Effective Time without obtaining the consent to or approval thereof from the
other party, which consent or approval shall not be unreasonably withheld.
6.11 Execution and Authorization of Bank Merger Agreement.
(a) Not later than 30 days following the date of this Agreement, (i)
the Company shall (x) cause the Board of Directors of the Bank to approve
the Bank Merger Agreement, (y) cause the Bank to execute and deliver the
Bank Merger Agreement, and (z) approve the Bank Merger Agreement as the
sole shareholder of the Bank, and (ii) Fairbank shall (x) cause the Board
of Directors of Target to approve the Bank Merger Agreement, (y) cause
Target to execute and deliver the Bank Merger Agreement, and (z) approve
the Bank Merger Agreement as the sole shareholder of Target. The Bank
Merger Agreement shall contain terms that are normal and customary in
light of the transactions contemplated hereby and necessary to carry out
the purposes of this Agreement and will terminate upon termination of this
Agreement.
(b) Not later than 30 days following the date of this Agreement, the
Company or the Bank shall (i) cause the formation of New Sub to occur,
(ii) cause the Board of Directors of New Sub to approve the Merger
Agreement, (iii) cause New Sub to execute and deliver the Merger Agreement
and (iv) approve the Merger Agreement as the sole shareholder of New Sub.
(c) Notwithstanding the provisions of subsections (a) and (b) above,
the Company shall have the option to elect to defer for such period as it
deems advisable, or elect to eliminate in its entirety, the Bank Merger
Agreement, in which case all references in this Agreement to such document
shall be deemed modified as appropriate.
ARTICLE VII
CONDITIONS PRECEDENT
7.01 Conditions to Each Party's Obligations Under This Agreement. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
none of which may be waived:
(a) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the affirmative vote of the holders of
at least two-thirds of the outstanding shares of Fairbank Common Stock.
(b) This Agreement and the Bank Merger Agreement, and the
transactions contemplated hereby and thereby shall have been approved by
the FRB, the OCC, the Commissioner, the Board, the FDIC, and by any other
regulatory authority having appropriate jurisdiction, none of such
approvals shall contain any term or condition which would (i) have a
material adverse effect on the business, operations, properties, assets or
financial condition of any party to this Agreement or the Bank Merger
Agreement, or the Surviving Corporation or the Resulting Bank, or (ii)
otherwise materially impair the value of any of the foregoing, and all
appropriate waiting periods shall have expired.
(c) Neither the Company nor Fairbank nor any of their respective
Subsidiaries shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction which prevents or delays the
consummation of the Merger or the Bank Merger.
7.02 Conditions to the Obligations of the Company Under This Agreement.
The obligations of the Company under this Agreement shall be further subject to
the satisfaction, at or prior to the Effective Time, of the following
conditions, any one or more of which may be waived by the Company:
(a) Each of the obligations of Fairbank required to be performed by
it at or prior to the Effective Time pursuant to the terms of this
Agreement shall have been duly performed and complied with in all material
respects and the representations and warranties of Fairbank contained in
this Agreement shall be true and correct in all material respects as of
the date of this Agreement and as of the Effective Time as though made at
and as of the Effective Time (except as otherwise contemplated by this
Agreement), and the Company shall have received a certificate to that
effect signed by the Chief Executive Officer and by the Chief Financial
Officer of Fairbank.
(b) All action required to be taken by, or on the part of, Fairbank
to authorize the execution, delivery and performance of this Agreement by
Fairbank and the consummation of the transactions contemplated hereby
shall have been duly and validly taken by the Board of Directors of
Fairbank and Fairbank shareholders and the Company shall have received
certified copies of the resolutions evidencing such authorization.
(c) The Company shall have received certificates as of a day as
close as practicable to the date of the Effective Time from appropriate
authorities as to the good standing of, and of the payment of franchise
taxes, if any, in Massachusetts by Fairbank.
(d) Any and all permits and approvals of governmental bodies and
material consents (including all consents of landlords) and authorizations
of other third parties shall have been obtained by Fairbank and the
Company which are required with respect to and are necessary in connection
with (i) the consummation of the Merger and the other transactions
contemplated hereby, (ii) the ownership by the Surviving Corporation of
all of the properties and assets of Fairbank, (iii) the conduct by the
Surviving Corporation of the business of Fairbank as conducted by Fairbank
at the Effective Time, (iv) the consummation of the Bank Merger and the
other transactions contemplated by the Bank Merger Agreement, (v) the
ownership by the Resulting Bank of all of the properties and assets of
Target, or (vi) the conduct by the Resulting Bank of the business of
Target as conducted by Target at the Effective Time.
(e) The Company shall have received an opinion, dated the date of
Closing, from counsel to Fairbank, in form and substance reasonably
satisfactory to the Company, on the matters set forth on EXHIBIT 7.02(e)
hereto.
(f) The Company shall have received from Shatswell, MacLeod & Co.,
independent public accountants, a letter dated as of the Closing Date, in
form and substance reasonably satisfactory to the Company, on the matters
set forth on Exhibit 7.02(f) hereto.
(g) Neither the Company nor Fairbank shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
would impose limitations on the ability of the Surviving Corporation to
exercise full rights of ownership of the assets or business of Fairbank
and no action, suit, proceeding or investigation shall be pending or
threatened which, in the opinion of counsel to the Company, is reasonably
likely to result in any such order, decree or injunction.
(h) The Company shall have received the results of any environmental
site assessment contracted for in accordance with Section 6.09 hereof, and
based upon such environmental site assessment, not more than $50,000 shall
be needed to be expended to correct any deficiency cited in such
assessment and, in the case of property used for Target bank operations,
it shall not be necessary to cease using the cited location for a period
in excess of 30 days in order to complete such corrections, provided,
that, as to any deficiency that can be corrected reasonably promptly and
before the Effective Time, Target shall have the option of correcting such
deficiency.
(i) The real property leases to which Fairbank or any Subsidiary is
a party shall have remained in full force and effect as of the Effective
Time and shall not have been terminated by reason of the consummation of
the Merger.
(j) There shall not be shareholders of Fairbank holding ten percent
(10%) or more of the outstanding shares of Fairbank Common Stock that have
properly exercised their rights of appraisal pursuant to Chapter 156B of
the M.G.L.
Fairbank and its Subsidiaries will furnish the Company with such
certificates of their officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 7.02 as the Company may
reasonably request.
7.03 Conditions to the Obligations of Fairbank Under This Agreement. The
obligations of Fairbank under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any one or more of which may be waived by Fairbank:
(a) Each of the obligations of the Company required to be performed
by it at or prior to the Effective Time performed and complied with and
the representations and warranties of the Company contained in this
Agreement shall be true and correct in all respects as of the date of this
Agreement and as of the Effective Time as though made at and as of the
Effective Time (except as otherwise contemplated by this Agreement), and
Fairbank shall have received a certificate to that effect signed by the
Chief Executive Officer and Chief Financial Officer of the Company.
(b) All action required to be taken by, or on the part of, the
Company to authorize the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors of the Company, and Fairbank shall have received certified
copies of the resolutions evidencing such authorization.
(c) The conditions in Section 7.02(d) shall have been satisfied.
(d) Fairbank shall have received at the time of execution of this
Agreement, and again within five days prior to mailing of the Proxy
Statement, in form and substance reasonably satisfactory to Fairbank, an
opinion from Bank Analysis Center, Inc., or such other investment banker
as may be selected by Fairbank, that the terms of the Merger are fair to
Fairbank and its shareholders from a financial point of view.
(e) Fairbank shall have received an opinion, dated the date of
Closing, from counsel to the Company, in form and substance reasonably
satisfactory to Fairbank, on the matters set forth on Exhibit 7.03(e)
hereof.
The Company will furnish Fairbank with such certificates of its officers
or others and such other documents to evidence fulfillment of the conditions set
forth in this Section 7.03 as Fairbank may reasonably request.
ARTICLE VIII
CLOSING
8.01 Time and Place. Subject to the satisfaction of the conditions of
Article VII hereof, the closing (the "Closing") of the transactions contemplated
hereby shall take place at such location as shall be agreed to by the parties,
at 9:00 A.M., on the third business day after the date on which all of the
conditions contained in Article VII, to the extent not waived, are satisfied; or
at such other place, at such other time, or on such other date as the Company
and Fairbank may mutually agree upon for the Closing to take place (the "Closing
Date"), time being of the essence; and the Company and Fairbank agree to use
their reasonable best efforts such that the Closing shall occur on or before
September 30, 1996.
8.02 Deliveries at the Closing. At the Closing, there shall be delivered
to the Company and Fairbank the opinions, certificates, and other documents and
instruments required to be delivered under Articles VI and VII hereof.
ARTICLE IX
TERMINATION AND AMENDMENT
9.01 Termination. Notwithstanding any other provision of this Agreement,
this Agreement, and with it the Bank Merger Agreement, may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the shareholders of Fairbank:
(a) by mutual consent of the Company and Fairbank in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either the Company or Fairbank upon written notice to the
other party (i) 45 days after the date on which any request or application
for a regulatory approval required to consummate the Merger or the Bank
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 45 day period following such denial
or withdrawal a petition for rehearing or an amended application has been
filed with the applicable governmental entity; provided, however, that no
party shall have the right to terminate this Agreement pursuant to this
Section 9.01(b) 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;
(c) by either the Company or Fairbank if the Merger shall not have
been consummated on or before September 30, 1996, time being of the
essence, unless the failure of the Closing to occur by such date shall be
due to (i) the failure of the party seeking to terminate this Agreement to
perform or observe in any material respect the covenants and agreements of
such party set forth herein, or (ii) delay in obtaining any necessary
governmental approval unless such delay is due to the failure of the party
seeking to terminate this Agreement to perform or observe in any material
respect the covenants and agreements of such party set forth herein;
(d) by either the Company or Fairbank if the approval of the
shareholders of Fairbank 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 shareholders or at any adjournment or
postponement thereof;
(e) by either the Company or Fairbank (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall
have been a material breach of any of the representations or warranties
set forth in this Agreement on the part of the other party, which breach
is not cured within 45 days following written notice to the party
committing such breach, or which breach, by its nature, cannot be cured
prior to the Closing;
(f) by either the Company or Fairbank (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 45 days following receipt by the breaching
party of written notice of such breach from the other party hereto;
(g) by the Company or Fairbank, if it shall have determined that the
Merger has become imprudent by reason of the institution, or threat of
institution, by any governmental agency of any litigation or proceeding to
restrain or prohibit the consummation of the Merger or the Bank Merger; or
(h) by the Company if, in order to obtain any required permit,
consent, approval or authorization of any governmental authority having
jurisdiction, the Company or the Resulting Bank will be required to agree
to, or will be subjected to, a limitation upon its activities following
the Effective Time which the Company reasonably regards as materially
adverse.
9.02 Effect of Termination. In the event of termination of this Agreement
by either the Company or Fairbank as provided in Section 9.01, this Agreement,
and with it the Bank Merger Agreement, shall forthwith become void and have no
further effect except (i) Sections 6.02(d), 9.02, 10.02 and 10.03, shall survive
any termination of this Agreement, and (ii) notwithstanding anything to the
contrary contained in this Agreement, no party shall be relieved or released
from any liabilities or damages arising out of its breach of any representation,
warranty, or other provision of this Agreement.
9.03 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the shareholders of Fairbank;
provided, however, that after any approval of the transactions contemplated by
this Agreement by Fairbank's shareholders, there may not be, without further
approval of such shareholders, any amendment of this Agreement which reduces the
amount or changes the form of the consideration to be delivered to Fairbank's
shareholders hereunder in any material respect other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.04 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein (other than Section
7.01); provided, however, that after any approval of the transactions
contemplated by this Agreement by Fairbank's shareholders, there may not be,
without further approval of such shareholders, any extension or waiver of this
Agreement or any portion thereof which reduces the amount or changes the form of
the consideration to be delivered to Fairbank's shareholders hereunder in any
material respect other than as contemplated by this Agreement. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party, but such
extension or waiver shall not operate as a waiver of, or estoppel with respect
to, any subsequent or other failure.
ARTICLE X
MISCELLANEOUS
10.01 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, attorney, accountant, and
investment banker fees and expenses, shall be paid by the party incurring such
costs and expenses. The fees of Bank Analysis Center and Day, Berry & Howard in
connection with this Agreement and the transactions contemplated hereby shall be
paid by Fairbank on or prior to the Closing Date.
10.02 "Unauthorized Action;" Liquidated Damages Under Certain
Circumstances.
(a) Fairbank shall not solicit, approve or recommend to its
shareholders, or undertake or enter into with or without shareholder
approval, either as the surviving or disappearing or the acquiring or
acquired corporation, any other merger, consolidation, asset acquisition,
tender offer or other takeover transaction, or furnish or cause to be
furnished any information concerning the business, properties or assets of
Fairbank or any Subsidiary to any person or entity, other than the
Company, interested in any such transaction (except for Directors and
executive officers of Fairbank and such other persons as may be required
by law), and Fairbank will not authorize or permit Target or any officer,
Director, employee, investment banker or other representative directly or
indirectly to, solicit, encourage or support any offer from any person or
entity (other than the Company) to acquire substantially all of the assets
of Fairbank or Target, to acquire 10% or more of the outstanding stock of
Fairbank or Target, to enter into an agreement to merge with Fairbank or
Target, or to take any other action that would have substantially the same
effect as the foregoing (hereinafter a "Takeover Transaction"), without
the written consent of the Company (any such solicitation, approval,
undertaking, authorization, permission or other action referred to in this
sentence being sometimes referred to as an "unauthorized action").
(b) If either Fairbank or the Company fails to perform any material
covenant or agreement in this Agreement, or if any material representation
or warranty by Fairbank or the Company is determined to be materially
untrue (the party which fails to perform or which makes the untrue
representation or warranty being referred to as a "Breaching Party"), and
if at the time of the failure or untrue representation or warranty by the
Breaching Party, the other party is not a Breaching Party (the
"Non-Breaching Party"), and if the Agreement is thereafter terminated
prior to the Effective Time, then the Breaching Party shall on demand pay
to the Non-Breaching Party as liquidated damages the sum of $500,000.
10.03 Non-Survival of Representations and Warranties. The respective
representations and warranties of the Company and Fairbank contained in this
Agreement or in any instrument or certificate delivered pursuant hereto by the
Company or Fairbank shall expire on and be terminated and extinguished at the
Effective Time; provided, however, that after the Effective Time, any such
representation or warranty of the Company or Fairbank shall not be deemed to be
terminated or extinguished so as to deprive the Company of any defense at law or
in equity which it would otherwise have to any claim against it by any person,
firm, corporation or other legal entity.
10.04 Notification of Certain Matters.
(a) Fairbank shall give prompt notice to the Company and the Company
shall give prompt notice to Fairbank, of (i) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time, and (ii) any material failure of Fairbank or the Company,
as the case may be, or of any officer, Director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder, provided, however, that no
such notifications shall affect the representations or warranties of the
parties or the conditions to the obligations of the parties hereunder.
(b) Fairbank agrees to notify the Company by telephone within 24
hours of receipt of any inquiry with respect to a proposed merger,
consolidation, assets acquisition, tender offer or other takeover
transaction with another person or receipt of a request for information
from the FRB, the OCC, the FDIC, the Commissioner, the Board, or other
governmental authority with respect to a proposed acquisition of Fairbank
or Target by another party. Fairbank will promptly communicate to the
Company the terms of any such proposal, discussion, negotiation, or
inquiry, including the identity of the party making such proposal or
inquiry and will immediately provide the Company with a copy of any
written documents reflecting the foregoing.
10.05 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by prepaid
certified first class mail (return receipt requested) or by recognized overnight
delivery service addressed as follows:
(a) If to the Company, to:
Weetamoe Bancorp
100 Slade's Ferry Avenue
Somerset, MA 02726
Attention: Chief Executive Officer
Copies to:
Law Offices of Peter G. Collias
84 North Main Street
P.O. Box 2519
Fall River, MA 02722-2519
and to:
McGowan, Engel, Tucker, Garrett & Schultz
One International Place
Suite 701
Boston, MA 02110-2636
Attention: Thomas H. Tucker, Esq.
(b) If to Fairbank, to:
Fairbank, Inc.
75 Huttleston Avenue
Fairhaven, MA 02719
Attention: Chief Executive Officer
Copy to:
Day, Berry & Howard
CityPlace I
Hartford, CT 06103
Attention: Robert M. Taylor, III, Esq.
or such other address as shall be furnished in writing by either party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
10.06 Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either party hereto
without the prior written consent of the other party, and that nothing in this
Agreement is intended to confer, expressly or by implication, upon any other
person any rights or remedies under or by reason of this Agreement. If any
provision or part of this Agreement is deemed unenforceable, the
unenforceability of the other provisions and parts shall not be affected.
10.07 Complete Agreement. This Agreement, including the documents and
other writings referred to herein or delivered pursuant thereto, contains the
entire agreement and understanding of the parties with respect to its subject
matter, other than the Confidentiality Agreement. There are no restrictions,
agreements, premises, warranties, covenants or undertakings other than those
expressly set forth herein or therein. This Agreement supersedes all prior
agreements and understandings between the parties, both written and oral, with
respect to its subject matter.
10.08 Counterparts. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.09 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
10.10 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the Company and Fairbank have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
WEETAMOE BANCORP
By /s/ JAMES D. CAREY
--------------------------------------
James D. Carey
Its Executive Vice President
Attest:
- -----------------------------
Secretary
FAIRBANK, INC.
By /s/ DAVID J. MCINTIRE
--------------------------------------
David J. McIntire
Its Chairman
Attest:
/s/ EDWARD BERNARDO JR.
- -----------------------------
Secretary
AGREEMENT OF NEW SUB
New Sub, being duly authorized, hereby agrees to the provisions of the
above Agreement and Plan of Merger.
Attest: NEW SUB
By
- ------------------------------ -------------------------------------
James D. Carey
Secretary Its Chief Executive Officer
Schedule 3.01(a)
Subsidiaries and Equity Ownership
1. Fairbank, Inc. owns 100% of the outstanding common stock of the National
Bank of Fairhaven.
Schedule 3.03(b)
Notes or Agreements of Fairbank
1. Fairbank, Inc. is a party to a Loan Agreement with Fleet National Bank
dated November 25, 1994 (as amended). Section 5.2(c) of the Loan Agreement
prohibits the merger of Fairbank without the prior written consent of
Fleet. Fairbank intends to repay the Loan Agreement on or prior to the
Closing Date.
Schedule 3.03(d)
Notes or Agreements of Target
None.
Schedule 3.04
Consents and Approvals
None.
Schedule 3.06
Undisclosed Liabilities
None.
Schedule 3.07(a)
Certain Changes or Events
1. On March 27, 1996 the Loan Committee of National Bank of Fairhaven
recommended a $35,000 charge off of a loan to James Killoran. It is
anticipated that the Board of Directors will act on this recommendation at
its next or a subsequent meeting of the Board of Directors.
Schedule 3.07(b)
Certain Changes or Events
1. National Bank of Fairhaven will continue to make quarterly dividends to
Fairbank, Inc. to pay the Fleet Loan Agreement referenced in Schedule
3.03(b). On March 28, 1996, a $125,000 dividend was declared for this
purpose.
2. National Bank of Fairhaven has entered into an agreement to sell an
ATM/night depository currently in storage to Cambridge Savings Bank.
Schedule 3.08
Loan Portfolio
1. List of loans in amounts greater than $250,000 dated March 26, 1996 is
attached.
2. Problem Loan Report dated February 29, 1996 is attached.
3. Non-Accrual Report dated February 29, 1996 is attached.
Schedule 3.09
Investments
None.
Schedule 3.10
Title To Properties
1. National Bank of Fairhaven has acquired a parcel of Other Real Estate
Owned located at 35 Summer Street in Fairhaven. The former use of such
property was in noncompliance with local zoning restrictions.
Schedule 3.11
Leases
None.
Schedule 3.12
Legal Proceedings
1. National Bank of Fairhaven is a defendant in a lawsuit, Alda DosSantos v.
N.B. Fairhaven, resulting from an alleged slip and fall injury at the New
Bedford branch.
2. In connection with a collection matter involving 639 County Street Assoc.,
a borrower of the Bank, a claim of unfair business practices under
Massachusetts law has been asserted.
3. Fairbank, Inc. may be subject to claims or potential liability resulting
from the business and activities of Fairbank Mortgage Co., a former
subsidiary that was sold to Centerbank, Waterbury, Connecticut, in
December, 1987.
4. Fairbank, Inc. and National Bank of Fairhaven may be subject to claims or
potential liability resulting from the termination of employment of Gary
P. Fealy.
Schedule 3.13
Compliance with Applicable Law
1. Section 23A and 23B of the Federal Reserve Act.
2. Fair lending laws.
Schedule 3.15
Employee Benefit and Other Plans
1. National Bank of Fairhaven maintains the National Bank of Fairhaven Profit
Sharing Plan.
Schedule 3.16(a)
Contracts and Commitments
1. OCC Reports of Examination dated November 8, 1994 and November 22, 1995.
2. Federal Reserve Board Bank Holding Company Reports dated April 14, 1994
and October 31, 1994.
3. List of Correspondent Banks attached.
4. The Fleet Loan Agreement referenced in Schedule 3.03(b).
Schedule 3.16(b)
Contracts and Commitments
1. Fairbank, Inc. and National Bank of Fairhaven are parties to
Change-in-Control Severance Agreements dated November 7, 1995 (as amended)
with Wayne M. Frost, Edward Bernardo, Jr., Gary P. Fealy, and Fatima
Rapoza.
Schedule 3.16(c)
Contracts and Commitments; No Defaults
None.
Schedule 3.17
Environmental Matters
None.
Schedule 3.19
Insurance
1. A list of insurance policies is attached.
Schedule 3.20
Broker's Fees
1. The contract between Bank Analysis Center and Fairbank, Inc. dated March
14, 1995 is attached.
Schedule 3.21
Agreements with Regulatory Agencies
1. 1988 Federal Reserve Board Memorandum of Understanding.
2. February 1994 Letter Commitment with OCC.
Schedule 4.04
Consents and Approvals
None.
Schedule 4.06
Broker's Fees
None.
Schedule 4.07
Certain Changes or Events
None.
Schedule 4.08
Legal Proceedings
None.
Exhibit 7.02(e)
Form of Opinion
[To be provided.]
Exhibit 7.02(f)
Accountant's Letter
[To be provided.]
Exhibit 7.03(e)
Form of Opinion
[To be provided.]
WEETAMOE BANCORP
STOCK OPTION PLAN
1. Purpose of plan. This Stock Option Plan (the "Plan"), is intended to
encourage ownership of shares of Weetamoe Bancorp (the "Corporation") by key
employees (including officers) and non-employee Directors of the Corporation and
its subsidiaries and to provide additional incentive for them to promote the
success of the business.
2. Shares subject to plan. There will be reserved for use upon the
exercise of options to be granted from time to time under the Plan ("Options"),
an aggregate of 250,000 Common Shares, of the par value of $.01 per share (the
"Common Shares"), of the Corporation, which shares may be in whole or in part,
as the Board of Directors of the Corporation (the "Board of Directors"), shall
from time to time determine, authorized but unissued Common Shares or issued
Common Shares which shall have been reacquired by the Corporation. For purposes
of the Plan, the "Plan Year" shall be the 12-month period ending on each
February 28. Options shall not be granted in any Plan Year for in excess of an
aggregate of 50,000 Common Shares under both the Discretionary Grant and the
Automatic Grant Programs hereunder; provided, however, that, if an Option shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares covered thereby shall (unless the Plan shall have been
terminated) be added to the shares otherwise available for Options which may be
granted in accordance with the terms of the Plan.
3. Administration of plan. The Board of Directors shall appoint a Stock
Option Plan Committee (the "Committee"), which shall consist of not less than
three members of the Board of Directors. Subject to the provisions of the Plan,
the Committee shall have plenary authority in its discretion to administer the
Discretionary Grant Program, including to determine the employees (including
officers) of the Corporation and its subsidiaries to whom Options shall be
granted, the number of shares to be covered by each of the Options, the time or
times at which Options shall be granted, the date or dates on which the option
is to become exercisable and the remaining provisions of the option grant. The
Committee shall also have the authority to interpret the Plan and to prescribe,
amend, and rescind rules and regulations relating to it.
The Automatic Grant Program shall be administered by the Committee but all
grants under that program will be made in strict compliance with the express
provisions of that program and no administrative discretion will be exercised by
the Committee with respect to grants made under that program.
The Board of Directors may from time to time appoint members of the
Committee in substitution for or in addition to members previously appointed and
may fill vacancies, however caused, in the Committee. The Committee shall select
one of its members as its chairman and shall hold its meetings at such times and
places as it shall deem advisable. A majority of its members shall constitute a
quorum. All action of the Committee shall be taken by a majority of its members.
Any action may be taken by a written instrument signed by a majority of the
members and action so taken shall be fully as effective as if it had been taken
by a vote of a majority of the members at a meeting duly called and held. The
Committee shall make such rules and regulations for the conduct of its business
as it shall deem advisable. No Board member may serve on the Committee if he or
she has received an option grant or stock award under the Option Plan other than
pursuant to the Automatic Grant Program, or under any other stock plan of the
Corporation or its parent or subsidiary within the twelve months preceding
his/her appointment to the Committee.
4. Discretionary Grant Program.
(a) Subject to the overall limitations on the number of shares for
which options may be granted set forth in paragraph 2, options under this
program may be granted in each Plan Year to such eligible persons for such
number of shares as the Committee in its discretion determines
appropriate. All options granted hereunder must be granted and exercised
within ten years from the date the Plan is adopted by the Corporation or
approved by the stockholders, whichever is earlier, and the option price
may not be less than the fair market value of the stock at the time the
option is granted. Options granted under this program will be incentive
stock options designed to meet the requirements of Section 422 of the
Internal Revenue Code.
(b) Key employees (including officers) of the Corporation or its
subsidiaries (whether now existing or subsequently established) are
eligible to receive option grants under the Discretionary Option Grant
Program. Only employee Board members (other than Board members serving on
the Committee) are eligible to participate in the Discretionary Option
Grant Program. In making any determination as to persons to whom Options
shall be granted and as to the number of shares to be covered by such
Options, the Committee shall take into account the duties of the
respective person, their present and potential contributions to the
success of the Corporation, and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.
(c) An employee granted an option under this program (a "Grantee")
must remain an employee of the Corporation or its subsidiaries from the
time the option is granted until three months before the option is
exercised. Once a Grantee's employment is terminated, other than by death
or disability, the Grantee must exercise any option he has a right to
exercise within three months of the date of his termination of employment
or the option will automatically expire. If a Grantee's employment is
terminated as a result of his permanent and total disability, such Grantee
shall have one year from the date of termination to exercise any option he
has a right to exercise or it will automatically expire. If a Grantee's
employment is terminated by the Grantee's death, the option may be
exercised according to its terms by the personal representative of the
Grantee's estate or the person to whom the option is transferred by the
Grantee's will or the laws of inheritance. Under no circumstances can an
option be exercised after the specified expiration of the option term.
(d) Stock that has been purchased by exercise of an option granted
under the Discretionary Option Program can not be sold, exchanged or
disposed of by gift for at least two years from the date the option was
granted and one year from the date the option was exercised and the stock
was transferred to him.
(e) The shares of Common Stock acquired upon the exercise of one or
more options may be subject to repurchase by the Company at the original
exercise price paid per share upon the Grantee's cessation of service
prior to vesting in such shares. The Committee has complete discretion in
establishing the vesting schedule to be in effect for any such unvested
shares and may cancel the Company's outstanding repurchase rights with
respect to those shares at any time, thereby accelerating the vesting of
the shares subject to the canceled rights.
(f) Subject to the general conditions stated below and the express
provisions of the Plan, the Committee has full authority to determine the
eligible individuals who are to receive grants under the Discretionary
Option Grant Program, the number of shares to be covered by each granted
option, the date or dates on which the option is to become exercisable,
the maximum term for which the option is to remain outstanding and the
remaining provisions of the option grant.
5. Automatic Grant Program.
(a) An Option for 2,000 shares of Common Stock shall be granted each
Plan Year on the day after the Annual Shareholders' Meeting or any Special
Meeting in lieu thereof to each eligible non-employee director of the
Corporation or its subsidiaries (the "Grantee"). All grants under this
program will be non-statutory options which are not intended to satisfy
the requirements of Section 422 of the Internal Revenue Code.
(b) Eligibility for participation under this program is limited to
non-employee directors of the Corporation or its subsidiaries who have
completed three (3) full years of service as directors as of the date of
issuance of the Option. Any employee director of the Corporation or its
subsidiaries who ceases to be an employee but remains as a director shall
be eligible under this program, provided he otherwise qualifies, in the
first Plan year commencing after the termination of his employment with
the Corporation or its subsidiaries.
In no event shall an Option be granted to any person who,
immediately after such Option is granted, owns (as defined in Sections 422
and 424 of the Internal Revenue Code of 1986) shares possessing more than
10 percent of the total combined voting power or value of all classes of
shares of the Corporation or of its parent or any subsidiary corporation.
(c) Each option granted under the Automatic Option Grant Program
will be subject to the following terms and conditions:
(i) The exercise price per share will be equal to 100% of the fair
market value per share of Common Stock on the automatic grant
date.
(ii) Each option will have a maximum term of five years measured
from the grant date.
(iii) Each option will be immediately exercisable for all the option
shares, but any purchased shares will be subject to repurchase
by the Corporation, at the exercise price paid per share, upon
the Grantee's cessation of Board service prior to vesting in
such shares.
(iv) The shares subject to each 2,000 share grant will vest (and
the Corporation's repurchase rights will lapse) in three equal
annual installments over the Grantee's period of Board
service, with the first such installment to vest upon the
completion of one year of Board service measured from the
automatic grant date.
(v) The option will remain exercisable for a six-month period
following the Grantee's cessation of Board service for any
reason other than death or permanent disability. Should the
Grantee die within such six-month period, then each such
option will remain exercisable for a twelve-month period
following such Grantee's death and may be exercised by the
personal representative of the Grantee's estate or the person
to whom the option is transferred by the Grantee's will or the
laws of inheritance. In no event, however, may the option be
exercised after the expiration date of the option term. During
the applicable exercise period, the option may not be
exercised for more than the number of shares (if any) in which
the Grantee is vested at the time of cessation of Board
service.
(vi) Should the Grantee die or become permanently disabled while
serving as a Board member, then the shares of Common Stock
subject to each automatic option grant held by that individual
Grantee will immediately vest in full, and those vested shares
may be purchased at any time within the twelve month period
following the date of the Grantee's cessation of Board
service.
(vii) The shares subject to each automatic option grant will
immediately vest upon a Corporate Transaction (as such term in
defined below) or a hostile take-over of the Corporation
effected through a tender offer for more than 50% of the
Company's outstanding voting stock or one or more contested
elections for Board membership.
(viii)Upon the successful completion of a hostile tender offer for
securities possessing more than 50% of the Corporation's
outstanding voting stock, each automatic option grant which
has been outstanding for at least six months may be
surrendered to the Corporation for a cash distribution per
surrendered option share in an amount equal to the excess of
(i) the highest price per share of Common Stock paid in such
hostile tender offer over (ii) the exercise price payable for
such share.
The remaining terms and conditions of the option will in general conform
to the general terms and conditions set forth in paragraph 8 and will be
incorporated into the option agreement evidencing the automatic grant.
6. Stock Appreciation Rights. Two types of stock appreciation rights are
authorized for issuance under the Discretionary Option Grant Program: (i) tandem
rights, which require the option holder to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of such option
for an appreciation distribution and (ii) limited rights, which are
automatically exercised upon the occurrence of a hostile takeover.
The appreciation distribution payable by the Corporation upon the exercise
of a tandem stock appreciation right will be equal in amount to the excess of
(i) the fair market value (on the exercise date) of the shares of Common Stock
in which the Grantee is at the time vested under the surrendered option over
(ii) the aggregate exercise price payable for such shares. Such appreciation
distribution may, at the Committee's discretion be made in shares of Common
Stock valued at fair market value on the exercise date, in cash or in a
combination of cash and Common Stock.
One or more officers or directors of the Company subject to the
short-swing profit restrictions of the Federal securities laws may, at the
discretion of the Committee, be granted limited stock appreciation rights in
connection with their option grants under the Discretionary Option Grant
Program. Any option with such a limited stock appreciation right in effect for
at least six (6) months will automatically be canceled, to the extent
exercisable for one or more vested option shares, upon the successful completion
of a hostile tender offer for more than 50% of the Corporation's outstanding
voting stock. In return, the officer will be entitled to a cash distribution
from the Corporation in an amount per cancelled option share equal to the excess
of (i) the highest price per share of Common Stock paid in the tender offer over
(ii) the option exercise price.
7. Acceleration of Options/Termination of Repurchase Rights. Upon the
occurrence of any of the following transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state of the Corporation's incorporation;
(ii) the sale, transfer, or other disposition of all, or
substantially all, of the Corporation's assets; or
(iii) any reverse merger in which the Corporation is the surviving
entity, but in which fifty percent (50%) or more of the Corporation's
outstanding voting stock is transferred to holders different from those
who held the stock immediately prior to such merger;
each outstanding option under the Discretionary Option Grant Program will,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares at the time subject to such option. No
such acceleration will occur, however, if (i) the option is either to be assumed
by the successor corporation or replaced by a comparable option to purchase
shares of the capital stock of the successor corporation or (ii) the
acceleration of the option is subject to other limitations imposed by the
Committee at the time of grant. Immediately following the consummation of the
Corporate Transaction, all outstanding options will terminate and cease to be
exercisable, except to the extent assumed by the successor corporation.
The Corporation's outstanding repurchase rights under the Discretionary
Option Grant Program will also terminate and all shares subject to such
repurchase rights will immediately vest, upon the occurrence of any such
Corporate Transaction, except to the extent (i) the repurchase rights are
expressly assigned to the successor corporation or (ii) such accelerated vesting
is subject to other limitations imposed by the Committee at the time the
underlying options were granted.
8. General Terms and Conditions.
(a) All options are non-transferable and are exercisable only by the
individual to whom it was granted except upon the individual's death when
the option may be exercised by the personal representative of that
individual's estate or the person to whom the option is transferred as
established by will or under law at the individual's death.
(b) No option may be granted to any person who at the time of the
option grant, owns stock with more than ten percent of the total combined
voting power of all classes of stock of the Corporation or any parent
subsidiary. No person eligible to participate herein shall be granted
Options to purchase Common Shares which are exercisable during any one
calendar year, to the extent that the fair market value of such shares
(determined at the time of the grant of the Option) exceeds $100,000 in
any calendar year, except and to the extent that the Options shall have
accumulated over a period in excess of one year.
(c) The option price of all options shall be not less than the fair
market value of the stock at the time the option is granted. The fair
market value shall be determined to be the average of the closing bid and
ask prices for the stock as quoted by A. G. Edwards & Sons, Inc., the
market maker for the Corporation's common stock.
(d) Should an option expire or terminate for any reason prior to
exercise in full, the shares subject to the portion of the option not so
exercised will be available for subsequent options grants under the Option
Plan. Shares subject to any options surrendered or canceled in accordance
with the stock appreciation right provisions of the Option Plan will not
be available for subsequent grants.
(e) No Grantee shall have any shareholder rights with respect to any
option shares until the Grantee has exercised the option and paid the
purchase price.
(f) The exercise price of an option may be paid in whole or in part
with shares of Weetamoe common stock owned by the Grantee.
9. Changes in Capitalization. In the event any change is made to the
Common Stock issuable under the Option Plan by reason of any stock split, stock
dividend, combination of shares, exchange of shares or other change affecting
the outstanding Common Stock as a class without the Company's receipt of
consideration, appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the Option Plan, (ii) the maximum
number and/or class of securities for which any one individual may be granted
stock options and separately exercisable stock appreciation rights under the
Option Plan, (iii) the number and/or class of securities for which option grants
will subsequently be made under the Automatic Option Grant Program to each
non-employee Board member, and (iv) the class and/or number of securities and
exercise price per share in effect under each outstanding option.
Each outstanding option which is assumed in connection with a Corporate
Transaction will be appropriately adjusted to apply and pertain to the number
and class of securities which would otherwise have been issued in consummation
of such Corporate Transaction, to the option holder had the option been
exercised immediately prior to the Corporate Transaction. Appropriate
adjustments will also be made to the option price payable per share and to the
class and number of securities available for future issuance under the Option
Plan on both an aggregate and a per-participant basis.
10. Option Plan Amendments. The Board may amend or modify the Option Plan
in any or all respects whatsoever. However, the Board may not, without the
approval of the Corporation's shareholders, (i) materially increase the maximum
number of shares issuable under the Option Plan (except in connection with
certain changes in capitalization), (ii) materially modify the eligibility
requirements for option grants, or (iii) otherwise materially increase the
benefits accruing to participants under the Option Plan.
Unless sooner terminated by the Board, the Option Plan will in all events
terminate on March 11, 2006. Any options outstanding at the time of such
termination will remain in force in accordance with the provisions of the
instruments evidencing such grants.
11. Effectiveness of plan. The Plan shall become effective on such date as
the Board of Directors shall determine, but only after: (a) the shareholders of
the Corporation shall, by the affirmative vote of a majority in interest of the
Common Shares, have approved the Plan; (b) any amendment to the Corporation's
Articles of Organization necessary to increase the number of authorized Common
Shares to accommodate shares set aside under the plan has been filed with the
Massachusetts Secretary of State's Office; (c) the Common Shares reserved for
the purposes of the Plan shall have been registered under the Securities Act of
1993 as amended; and (d) the Board of Directors shall have been advised by
counsel that all applicable legal requirements have been complied with.
12. Time of granting options. Nothing contained in the Plan or in any
resolution adopted or to be adopted by the Board of Directors or the
stockholders of the Corporation nor any action taken by the Committee shall
constitute the granting of any Option. The granting of an Option shall take
place only when a written option agreement shall have been duly executed and
delivered by or on behalf of the Corporation and by the Grantee to whom such
Option shall be granted.
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