EXHIBIT 1.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June 21,
1999, by and between CITIZENS FINANCIAL GROUP, INC., a Delaware corporation (the
"Buyer") and UST CORP., a Massachusetts corporation (the "Seller").
WHEREAS, the Boards of Directors of the Buyer and the Seller have
determined that it is in the best interests of their respective stockholders and
other constituencies, as well as the communities they serve, to consummate, and
have approved, the business combination transactions provided for herein, in
which the Buyer will, subject to the terms and conditions set forth herein,
acquire the Seller;
WHEREAS, following the execution and delivery of this Agreement, the
Buyer shall take such action as is appropriate to form a subsidiary to be
organized as a corporation (the "Merger Sub") under the MBCL, and to cause the
Merger Sub to become a party to this Agreement, pursuant to which the Merger Sub
shall merge (the "Merger") with and into the Seller, upon the terms and subject
to the conditions set forth herein (the Seller and the Merger Sub being the
constituent corporations of the Merger);
WHEREAS, following the execution and delivery of this Agreement,
Citizens Bank of Massachusetts, a Massachusetts chartered stock savings bank and
subsidiary of the Buyer (the "Buyer Bank" and also sometimes referred to herein
as the "Surviving Bank"), shall enter into an Agreement and Plan of Merger (the
"Bank Merger Agreement") with USTrust, a Massachusetts chartered trust company
and subsidiary of the Seller (the "Seller Bank"), substantially in the form of
Exhibit I hereto, providing for the merger of the Seller Bank with and into the
Buyer Bank (the "Bank Merger") under the MGL, promptly following the
consummation of the Merger;
WHEREAS, as a condition and inducement to the Buyer to enter into, and
after the execution of, this Agreement, the Buyer and the Seller are entering
into the Seller Option Agreement (the "Seller Option Agreement"), attached
hereto as Exhibit II, pursuant to which the Seller has granted an option to
purchase shares of its common stock (the "Seller Option") to the Buyer; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and to prescribe certain conditions
to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
in accordance with the MBCL, at the Effective Time (as defined in Section 1.2
hereof), the Merger Sub shall merge with and into the Seller. The Seller 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 as a subsidiary of the Buyer. Upon
consummation of the Merger, the separate corporate existence of the Merger Sub
shall terminate.
1.2 Effective Time. The Merger shall become effective as set forth in
the articles of merger (the "Articles of Merger") which shall be submitted for
filing to the Secretary of State of The Commonwealth of Massachusetts pursuant
to Section 78(a) of the MBCL on the Closing Date (as defined in Section 9.1
hereof). The term "Effective Time" shall be the date and time when the Merger
becomes effective, as set forth in the Articles of Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in this Agreement and in Section 80 of the
MBCL.
1.4 Conversion of Seller Common Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the Merger Sub, the Seller
or the holder of any of the shares of the Seller Common Stock (as defined
below):
(a) Each share of the common stock, par value $0.625 per share, of the
Seller ("Seller Common Stock") issued and outstanding immediately prior to the
Effective Time (other than shares of Seller Common Stock held (x) in the
Seller's treasury or (y) directly or indirectly by the Buyer or the Seller or
any of their respective subsidiaries (except for Trust Account Shares and DPC
shares, as such terms are defined below) shall become and be converted
automatically into the right to receive in cash from the Buyer an amount equal
to $32.00 (the "Fixed Consideration"); provided, however, that:
(i) in the event that, (A) at any time prior to the Effective
Time, the Buyer or any Affiliate of the Buyer submits a bid or other
offer to acquire any assets or liabilities proposed to be divested in
connection with the merger of Fleet Financial Group, Inc. and
BankBoston Corporation (the "Branch Divestiture"), (B) the Effective
Time does not occur on or prior to January 31, 2000, (C) the condition
contained in Section 7.1(a) is satisfied and (D) the failure of the
Effective Time to have occurred on or prior to January 31, 2000 is not
attributable to acts or omissions by the Seller; then the Fixed
Consideration shall be adjusted upwards by an amount determined by (1)
multiplying (a) the Fixed Consideration by (b) 6%, rounded at the date
the foregoing calculation is made at the Effective Time, to the nearest
$.01, then (2) dividing the product determined pursuant to clause (1)
by 365 and then (3) multiplying the amount obtained after the
application of clauses (1) and (2) by the
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number of calendar days in the period commencing on February 1, 2000
through and including the Closing Date; or alternatively,
(ii) in the event that, (A) prior to the Effective Time, the
Buyer or any Affiliate of the Buyer does not submit a bid or other
offer to acquire any assets or liabilities in the Branch Divestiture,
(B) the Effective Time does not occur on or prior to February 29, 2000,
(C) the condition contained in Section 7.1(a) is satisfied, and (D) the
failure of the Effective Time to have occurred on or prior to February
29, 2000 is not attributable to acts or omissions by the Seller; then
the Fixed Consideration shall be adjusted upwards by an amount
determined by (1) multiplying (a) the Fixed Consideration by (b) 6%,
rounded at the date the foregoing calculation is made at the Effective
Time, to the nearest $.01, then (2) dividing the product determined
pursuant to clause (1) by 365 and then (3) multiplying the amount
obtained after the application of clauses (1) and (2) by the number of
calendar days in the period commencing on March 1, 2000 through and
including the Closing Date.
The Fixed Consideration, to the extent adjusted as provided above, is referred
to herein as the "Merger Consideration."
(b) All of the shares of Seller Common Stock converted into the Merger
Consideration pursuant to this Article I shall no longer be outstanding and
shall automatically be canceled and shall cease to exist as of the Effective
Time, and each certificate (each a "Certificate") previously representing any
such shares of Seller Common Stock shall thereafter represent the right to
receive the Merger Consideration. Certificates previously representing shares of
Seller Common Stock shall be exchanged for the Merger Consideration upon the
surrender of such Certificates in accordance with Section 2.2 hereof, without
any interest thereon.
(c) At the Effective Time, all shares of Seller Common Stock that are
owned by the Seller as treasury stock and all shares of Seller Common Stock that
are owned directly or indirectly by the Buyer or the Seller or any of their
respective subsidiaries (other than shares of Seller Common Stock held directly
or indirectly in trust accounts, managed accounts and the like or otherwise held
in a fiduciary capacity that are beneficially owned by third parties (any such
shares, whether held directly or indirectly by the Buyer or the Seller, as the
case may be, being referred to herein as "Trust Account Shares") and other than
any shares of Seller Common Stock held by the Buyer or the Seller or any of
their respective subsidiaries in respect of a debt previously contracted (any
such shares of Seller Common Stock which are similarly held, whether held
directly or indirectly by the Buyer or the Seller or any of their respective
subsidiaries, being referred to herein as "DPC Shares")) shall be canceled and
shall cease to exist and no consideration shall be delivered in exchange
therefor.
(d) Notwithstanding anything in this Agreement to the contrary, shares
of Seller Common Stock which are outstanding immediately prior to the Effective
Time, the holders of which shall have delivered to the Seller a written demand
for appraisal of such shares in
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the manner provided in the applicable provisions of the MBCL ("Dissenting
Shares"), shall not be converted into the right to receive, or be exchangeable
for, the Merger Consideration otherwise payable in exchange for such shares of
the Seller Common Stock pursuant to this Section 1.4 but, instead, the holders
thereof shall be entitled to payment of the appraised value of such Dissenting
Shares in accordance with the provisions of the MBCL; provided, however, that
(i) if any holder of Dissenting Shares shall subsequently deliver a written
withdrawal of his demand for appraisal of such shares or (ii) if: any holder
fails to establish his entitlement to appraisal rights as provided in Sections
86 through 98 of the MBCL, such holder or holders (as the case may be) shall
forfeit the right to appraisal of such shares of Seller Common Stock and each of
such shares shall thereupon be deemed to have been converted into the right to
receive, and to have become exchangeable for, as of the Effective Time, the
Merger Consideration otherwise payable in exchange for such shares of Seller
Common Stock pursuant to this Section 1.4, without any interest thereon.
(e) The Seller shall give the Buyer (i) prompt notice of any objections
filed pursuant to Sections 86 through 98 of the MBCL received by the Seller,
withdrawals of such objections, and any other instruments served in connection
with such objections pursuant to the MBCL and received by the Seller, and (ii)
the opportunity to direct all negotiations and proceedings with respect to
objections under the MBCL consistent with the obligations of the Seller
thereunder. The Seller shall not, except with the prior written consent of the
Buyer, (x) make any payment with respect to any such objection, (y) offer to
settle or settle any such objections or (z) waive any failure to timely deliver
a written objection in accordance with the MBCL.
1.5 Merger Sub Common Stock. At and after the Effective Time, each
share of common stock, par value $.01 per share, of the Merger Sub issued and
outstanding immediately prior to the Effective Time shall become and be
converted automatically into one share of common stock of the Surviving
Corporation.
1.6 Employee Stock Options. Prior to the Effective Time, the Seller
shall take all such action as is necessary to terminate The UST Corp. Stock
Compensation Plan, The 0000 Xxxx Xxxxxx Community Bancorp, Inc. Stock Option
Plan, The 1995 Affiliated Community Bancorp. Inc. Stock Option Plan, The 1986
Lexington Savings Bank Stock Option and Stock Appreciation Rights Plan, The 1994
Lexington Savings Bank Stock Option Plan, The Somerset Savings Bank 1986
Incentive Stock Option Plan, The Somerset Savings Bank 1995 Equity Incentive
Plan, The 1995 UST Director's Stock Option Plan and The 1996 UST Director's
Stock Option Plan, each as amended to date (collectively, the "Seller Stock
Option Plans"), and shall provide written notice to each holder of a then
outstanding stock option to purchase shares of Seller Common Stock pursuant to
the Seller Stock Option Plans (whether or not such stock option is then vested
or exercisable), that such stock option shall be, as at the date of such notice,
exercisable in full and that such stock option shall terminate at the Effective
Time and that, if such stock option is not exercised or otherwise terminated
before the Effective Time, such holder shall be entitled to receive in
cancellation of such option a cash payment from the Seller at the Closing in an
amount equal to the excess of the
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Merger Consideration over the per share exercise price of such stock option,
multiplied by the number of shares of Seller Common Stock covered by such stock
option, subject to any required withholding of taxes. Subject to the foregoing,
the Seller Stock Option Plans and all options issued thereunder shall terminate
at the Effective Time. The Seller hereby represents and warrants to the Buyer
that the maximum number of shares of Seller Common Stock subject to issuance
pursuant to the exercise of stock options issued and outstanding under the
Seller Stock Option Plans is not and shall not be at or prior to the Effective
Time more than 2,386,818.
1.7 Articles of Organization. Unless otherwise provided by the Buyer,
at the Effective Time, the Articles of Organization of the Seller, as in effect
at the Effective Time, shall be the Articles of Organization of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.8 By-Laws. At the Effective Time, the By-Laws of the Buyer, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.9 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of Organization
and By-laws of the Surviving Corporation, and the officers of Merger Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
ARTICLE II
EXCHANGE OF SHARES
2.1 Buyer to Deposit Aggregate Merger Consideration. At or prior to the
Effective Time, the Buyer shall pay, or shall cause to be paid, to a bank or
trust company selected by the Buyer and reasonably acceptable to the Seller
(which may be a subsidiary or other Affiliate of the Buyer) (the "Exchange
Agent"), for the benefit of the holders of Certificates, for exchange in
accordance with this Article II, such amount of cash as is sufficient to pay the
aggregate Merger Consideration which holders of Seller Common Stock are entitled
to receive pursuant to Section 1.4 hereof.
2.2 Exchange of Shares.
(a) As soon as practicable after the Effective Time, and in no event
later than two business days thereafter, the Buyer shall cause the Exchange
Agent to mail to each holder of record of a Certificate or Certificates a form
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration into
which the shares
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of Seller Common Stock represented by such Certificate or Certificates shall
have been converted pursuant to this Agreement. Upon proper surrender of a
Certificate for exchange and cancellation to the Exchange Agent, together with
such properly completed letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor, the Merger
Consideration, and the Certificate so surrendered shall forthwith be canceled.
No interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Seller, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.
(b) At any time following the sixth month after the Effective Time, the
Buyer or the Surviving Corporation shall be entitled to require the Exchange
Agent to deliver to it any funds which had been made available to the Exchange
Agent and not disbursed to holders of shares of Seller Common Stock (including,
without limitation, all interest and other income received by the Exchange Agent
in respect of all funds made available to it), and thereafter such holders shall
be entitled to look to the Buyer and the Surviving Corporation only as general
creditors thereof with respect to any Merger Consideration that may be payable
upon due surrender of the Certificates held by them.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of the Seller of the shares of Seller Common Stock which were
issued and outstanding immediately prior to the Effective Time. From and after
the Effective Time, the holders of shares of Seller Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares except as otherwise provided herein or by applicable law.
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be canceled and
exchanged for the Merger Consideration as provided in this Article II.
(d) Neither the Buyer nor the Seller nor any other person shall be
liable to any former holder of shares of Seller Common Stock for any shares or
any dividends or distributions with respect thereto or any Merger Consideration
delivered in respect of any such shares properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon receipt of appropriate evidence as to such loss, theft or
destruction and to the ownership of such Certificate by the person claiming such
Certificate to be lost, stolen or destroyed, and the receipt by the Buyer of
appropriate and customary indemnification, the Buyer will issue
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in exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration, as determined in accordance with this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
3.1. Corporate Organization.
(a) The Buyer is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of Delaware. The Buyer has
all requisite corporate power and authority to own, lease or operate all of its
properties and assets and to carry on its business as it is now being conducted.
The Buyer is duly licensed or qualified to do business and is in corporate good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned, leased or
operated by it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified and in good standing would not result in,
with respect to the Buyer, a Material Adverse Effect. The Buyer is a bank
holding company registered with the Federal Reserve Board under the BHCA.
(b) The Buyer Bank is a stock savings bank duly organized, validly
existing and in corporate good standing under the laws of The Commonwealth of
Massachusetts. The Buyer Bank has all requisite corporate power and authority to
own, lease or operate all of its properties and assets and to carry on its
business as it is now being conducted. The Buyer Bank is duly licensed or
qualified to do business and is in corporate good standing in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned, leased or operated by it makes such
licensing or qualification necessary, except where the failure to be so licensed
or qualified and in corporate good standing, would not result in, with respect
to the Buyer Bank, a Material Adverse Effect. The deposit accounts of the Buyer
Bank are insured by the FDIC to the fullest extent permitted by law, and all
premiums and assessments required in connection therewith have been paid by the
Buyer.
3.2. Authority; No Violation.
(a) The Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly and validly approved by the Board of Directors of the
Buyer. No other corporate proceedings on the part of the Buyer are necessary to
consummate the Merger. This Agreement and the other Transaction Documents have
been duly and validly executed and delivered by the Buyer and (assuming
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due authorization, execution and delivery by the Seller), constitute the valid
and binding obligation of the Buyer enforceable against the Buyer in accordance
with their respective terms.
(b) The Buyer Bank has all requisite corporate power and authority to
execute and deliver the Bank Merger Agreement, to perform its obligations
thereunder and to consummate the transactions contemplated thereby. The
execution and delivery of the Bank Merger Agreement and the consummation of the
transactions contemplated thereby have been duly and validly approved by the
Board of Directors of the Buyer Bank. Except for the adoption of the Bank Merger
Agreement by the Buyer Bank's stockholders, no other corporate proceedings on
the part of the Buyer Bank are necessary to authorize the Bank Merger Agreement
or the performance of the Buyer Bank's obligations thereunder or to consummate
the Bank Merger. The Bank Merger Agreement, upon execution and delivery by the
Buyer Bank, will be duly and validly executed and delivered by the Buyer Bank,
and (assuming due authorization, execution and delivery by the Seller Bank) will
constitute, the valid and binding obligation of the Buyer Bank, enforceable
against the Buyer Bank in accordance with its terms. The Buyer shall cause the
Bank Merger Agreement to be approved by the stockholders of the Buyer Bank prior
to the Effective Time.
(c) Neither the execution and delivery of this Agreement or the other
Transaction Documents by the Buyer nor the consummation by the Buyer of the
transactions contemplated hereby or thereby; nor the execution and delivery of
the Bank Merger Agreement by the Buyer Bank, nor the consummation by the Buyer
Bank of the transactions contemplated thereby; nor compliance by the Buyer or
the Buyer Bank with any of the terms or provisions hereof or thereof,, will (i)
assuming that the consents and approvals referred to in Section 3.3 hereof are
duly obtained, violate in any respect any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the Buyer
or the Buyer Bank, or (ii) violate, conflict with, or result in a breach of, any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of the Buyer or the Buyer Bank
under any of the terms, conditions or provisions of (A) the Articles of
Organization or other charter document of like nature or By-Laws of the Buyer or
the Buyer Bank, or (B) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Buyer
or the Buyer Bank is a party as issuer, guarantor or obligor, or by which it or
any of its properties or assets may be bound or affected, except, in the case of
clause (ii)(B) above, for such violations, conflicts, breaches or defaults which
either individually or in the aggregate will not have a Material Adverse Effect
on the Buyer or the Buyer Bank.
3.3. Consents and Approvals. Except for consents, waivers,
notifications or approvals of, or filings or registrations with, the FDIC, the
Federal Reserve Board, the Massachusetts Commissioner, the MBBI, the
Massachusetts Depositors Insurance Fund
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("DIF"), the Massachusetts Housing Partnership Fund ("MHPF"), the Secretary of
State of The Commonwealth of Massachusetts, the DOJ, The London Stock Exchange
Limited, and the Financial Services Authority and other foreign bank regulatory
approvals, no consents, waivers or approvals of or filings or registrations with
any public body or authority are necessary, and no consents or approvals of any
third parties are necessary, in connection with (a) the execution and delivery
by the Buyer or the Buyer Bank of this Agreement and the Bank Merger Agreement
or (b) the consummation by the Buyer or the Buyer Bank of the Merger or the Bank
Merger. Neither the Buyer nor the Buyer Bank has any knowledge of any fact or
circumstance relating to the Buyer or its subsidiaries or other Affiliates,
including related to the Year 2000 Problem, that is reasonably likely to
materially impede or delay receipt of any consents of regulatory or governmental
authorities.
3.4. Financial Statements. The Buyer has made available to the Seller
copies of (a) the consolidated balance sheets of the Buyer and its subsidiaries
as of September 30 for the fiscal years 1997 and 1998, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1996 through 1998, inclusive, accompanied by the
audit report of PricewaterhouseCoopers LLP, independent public accountants for
the Buyer, and (b) the unaudited consolidated balance sheet of the Buyer and its
subsidiaries as of March 31, 1999, and the related unaudited consolidated
statements of income and changes in stockholders' equity for the six (6) months
ended March 31, 1999 and March 31, 1998. The September 30, 1998 consolidated
balance sheet of the Buyer (including the related notes, where applicable) and
the other financial statements referred to herein (including the related notes,
where applicable) fairly present the consolidated financial position and results
of the consolidated operations and cash flows and changes in stockholders'
equity of the Buyer and its subsidiaries for the respective fiscal periods or as
of the respective dates therein set forth; and each of such statements
(including the related notes, where applicable) has been prepared in accordance
with GAAP consistently applied during the periods involved, except as otherwise
set forth in the notes thereto (subject, in the case of unaudited interim
statements, to normal year-end adjustments).
3.5. Broker's Fees. Neither the Buyer nor any of its officers,
directors, employees, Affiliates or agents has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with any of the transactions contemplated by this Agreement, except
for the fees incurred in connection with the engagement of Xxxxxxx, Xxxxx &
Company and for legal, accounting and other professional fees payable in
connection with the Merger. The Buyer will be responsible for the payment of all
such fees.
3.6. Legal Proceedings. There is no claim, suit, action, proceeding or
investigation of any nature pending or, to the best knowledge of the Buyer,
threatened, against the Buyer or any subsidiary or other Affiliate of the Buyer
or challenging the validity or propriety of the transactions contemplated by
this Agreement, and which, if adversely determined, would, individually or in
the aggregate, materially adversely affect the Buyer's or the Buyer Bank's
ability to perform its respective obligations under this Agreement or the
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Bank Merger Agreement, nor is there any judgment, decree, injunction, rule or
order of any legal or administrative body or arbitrator outstanding against the
Buyer or any subsidiary or other Affiliate of the Buyer having, or which insofar
as reasonably can be foreseen, in the future could have, any such effect.
3.7. Capital; Availability of Funds. On the date hereof, the Buyer is,
and on the Closing Date, the Buyer will be, "adequately capitalized" as such
term is defined in the rules and regulations promulgated by the Federal Reserve
Board. Buyer will have available to it, at the Effective Time, sources of
capital and financing sufficient to pay the aggregate Merger Consideration and
to pay any other amounts payable pursuant to this Agreement and to effect the
transactions contemplated hereby.
3.8. Buyer Information. The information relating to the Buyer, its
subsidiaries and other Affiliates to be contained in the Proxy Statement, as
described in Section 6.1 hereof, and any other documents filed with the SEC in
connection herewith, to the extent such information is provided in writing by
the Buyer, will not, on the date the Proxy Statement (or any supplement or
amendment thereto) is first mailed to stockholders of the Seller or on the date
of the Seller Stockholders Meeting, contain any untrue statement of a material
fact or omit to state a material fact necessary to make such information not
misleading at the time and in light of the circumstances under which such
statement is made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
4.1 Corporate Organization.
(a) The Seller is a corporation duly organized, validly existing and in
good standing under the laws of The Commonwealth of Massachusetts. The Seller
has all requisite corporate power and authority to own, lease or operate all of
its properties and assets and to carry on its business as it is now being
conducted. The Seller is duly licensed or qualified to do business and is in
corporate good standing in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets owned,
leased or operated by it makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified and in corporate good standing
would not, individually or in the aggregate, result in any Material Adverse
Effect on the Seller. The Seller is a bank holding company registered with the
Federal Reserve Board under the BHCA. The Articles of Organization and By-Laws
of the Seller, copies of which have previously been made available to the Buyer,
are true, complete and correct copies of such documents in effect as of the date
of this Agreement. The Seller is not in violation of any provision of its
Articles of Organization or By-Laws. The minute books of the Seller contain in
all material respects true and complete records of all meetings held and
corporate actions
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taken since January 1, 1996 of the Seller's stockholders and Board of Directors
(including committees of the Seller's Board of Directors).
(b) Each Significant Subsidiary of the Seller is duly organized,
validly existing and in corporate good standing under the laws of the
jurisdiction of its incorporation. Each Significant Subsidiary of the Seller has
all requisite corporate power and authority to own, lease or operate all of its
properties and assets and to carry on its business as it is now being conducted.
Each Significant Subsidiary of the Seller 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, leased, or
operated by it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified and in good standing would not
individually or in the aggregate, result in any Material Adverse Effect on the
Seller.
(c) Except as set forth in Section 4.1(c) of the Seller Disclosure
Schedule, the Seller has no subsidiaries and no Equity Investments (other than
investments in such subsidiaries).
(d) The Articles of Organization and By-Laws or equivalent
organizational documents of each Significant Subsidiary, copies of which have
previously been made available to the Buyer are true, correct and complete
copies of such documents in effect as of the date of this Agreement. Neither the
Seller nor any of its subsidiaries is in violation of any provision of its
Articles of Organization or equivalent organizational documents or of its
By-laws. The minute books of each of the subsidiaries of the Seller which are
banks contain in all material respects true and complete records of all meetings
held and corporate actions taken since January 1, 1996 of their respective
stockholders and boards of directors (including committees of their respective
boards of directors).
4.2 Capitalization.
(a) The authorized capital stock of the Seller consists of 75,000,000
shares of Seller Common Stock and 4,000,000 shares of preferred stock, par value
$1.00 per share ("Seller Preferred Stock"). As of the date hereof, there are
42,728,031 shares of Seller Common Stock and no shares of Seller Preferred Stock
issued and outstanding. As of the date hereof, there are 13,758 shares of Seller
Common Stock and no shares of Seller Preferred Stock held in the treasury of the
Seller. Except for Trust Account Shares and DPC Shares, no shares of Seller
Common Stock are held by the Seller's subsidiaries. In addition, as of the date
hereof, there were 2,386,818 shares of Seller Common Stock reserved for issuance
upon exercise of outstanding stock options. All issued and outstanding shares of
Seller Common Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except (i) for rights issuable to holders of
Seller Common Stock in accordance with the Seller Rights Agreement, (ii) as
provided in the Seller Option Agreement, (iii) as referred to in this Section
4.2 (which includes director and employee stock options) or (iv) as reflected in
Section 4.2(a) of the Seller Disclosure Schedule, the
11
Seller does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments, rights agreements or agreements of any character
calling for the Seller to issue, deliver or sell, or cause to be issued,
delivered or sold any shares of Seller Common Stock or Seller Preferred Stock or
any other equity security of the Seller or any subsidiary of the Seller or any
securities convertible into, exchangeable for or representing the right to
subscribe for, purchase or otherwise receive any shares of Seller Common Stock
or Seller Preferred Stock or any other equity security of the Seller or any
subsidiary of the Seller or obligating the Seller or any such subsidiary to
grant, extend or enter into any such subscriptions, options, warrants, calls,
commitments, rights agreements or agreements. Except as set forth in Section
4.2(a) of the Seller Disclosure Schedule, there are no outstanding contractual
obligations of the Seller to repurchase, redeem or otherwise acquire any shares
of capital stock of, or other equity interests in, the Seller or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any subsidiary of the Seller. Section 4.2 of the Seller
Disclosure Schedule sets forth (i) the names of the optionees, the date of each
option to purchase shares of Seller Common Stock granted, the number of shares
subject to each such option, the expiration date of each such option, and the
price at which each such option may be exercised under the Seller Option Plans
and (ii) the names of the grantees, the date of each grant of Restricted Common
Stock, the number of shares of Restricted Common Stock granted, the vesting
period of each such grant, and the consideration paid or payable by the grantee
in respect of each shares of such Restricted Common Stock.
(b) The authorized capital stock of the Seller Bank consists of 300,000
shares of Common Stock, par value $47.50 per share ("Bank Common Stock"). As of
the date hereof, (i) 181,446 shares of Bank Common Stock are issued and
outstanding, all of which are owned directly or indirectly by the Seller, all of
which are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof, (ii) no shares of Bank Common Stock are held in the treasury of the
Seller Bank, and (iii) no shares of Bank Common Stock are held by any of
Seller's subsidiaries. Each share of Bank Common Stock owned by the Seller or
any of its subsidiaries is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
the Seller's or any of its subsidiaries' voting rights, charges and other
encumbrances of any nature whatsoever.
(c) Section 4.2(c) of the Seller Disclosure Schedule lists each of the
subsidiaries of the Seller on the date of this Agreement and indicates for each
such subsidiary as of such date: (i) the percentage and type of equity
securities owned or controlled by the Seller; (ii) the jurisdiction of
incorporation; and (iii) whether or not such subsidiary is a member of the
Federal Reserve System. Each of the subsidiaries of the Seller which is an
"insured depository institution" as defined in the FDIA and applicable
regulations thereunder, has its deposits insured by the Bank Insurance Fund and
the Savings Association Insurance Fund of the FDIC in accordance with the FDIA
to the fullest extent permitted by law, and each such subsidiary has paid all
premiums and assessments and filed all reports required by the FDIA. As of the
date hereof, no proceedings for the revocation or termination of such
12
deposit insurance are pending or, to the best knowledge of the Seller,
threatened. No subsidiary of the Seller has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments, rights agreements or
agreements of any character calling for a subsidiary of the Seller to issue
deliver or sell, or cause to be issued, delivered or sold any equity security of
the Seller or of any subsidiary of the Seller or any securities convertible
into, exchangeable for or representing the right to subscribe for, purchase or
otherwise receive any such equity security or obligating a subsidiary of the
Seller to grant, extend or enter into any such subscriptions, options, warrants,
calls, commitments, rights agreements or agreements. There are no outstanding
contractual obligations of any subsidiary of the Seller to repurchase, redeem or
otherwise acquire any shares of capital stock of, or other equity interests in,
the Seller or any such subsidiary or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any such
subsidiary of the Seller. All of the shares of capital stock of each of the
subsidiaries of the Seller held by the Seller are fully paid and nonassessable
and, except for directors' qualifying shares, are owned by the Seller free and
clear of any claim, lien, encumbrance or agreement with respect thereto.
4.3 Authority; No Violation.
(a) The Seller has all requisite corporate power and authority to
execute and deliver this Agreement and the other Transaction Documents and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the other Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the [unanimous] vote of the Board of Directors of the
Seller. The Board of Directors of the Seller has directed that this Agreement
and the transactions contemplated hereby, including the Merger, be submitted to
the stockholders of the Seller for approval at a meeting of such stockholders
and, except for the adoption of this Agreement by the Seller's stockholders, no
other corporate action and no other corporate proceedings on the part of the
Seller are necessary to authorize this Agreement and the other Transaction
Documents or to consummate the Merger. This Agreement and the other Transaction
Documents have been duly and validly executed and delivered by the Seller and
(assuming due authorization, execution and delivery by the Buyer) constitute the
valid and binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms.
(b) The Seller Bank has full corporate power and authority to execute
and deliver the Bank Merger Agreement, to perform its obligations thereunder and
to consummate the transactions contemplated thereby. The execution and delivery
of the Bank Merger Agreement, the performance of its obligations thereunder and
the consummation of the transactions contemplated thereby have been duly and
validly approved by the unanimous action of the Board of Directors of the Seller
Bank. Except for adoption of the Bank Merger Agreement by the Seller Bank's
stockholders, no other corporate action and no other corporate proceedings on
the part of the Seller Bank are necessary to authorize the Bank Merger Agreement
or the performance of the Seller Bank's obligations thereunder or to consummate
the transactions contemplated thereby. The Bank Merger Agreement, upon
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execution and delivery by the Seller Bank, will be duly and validly executed and
delivered by the Seller Bank and will constitute a legal, valid and binding
obligation of the Seller Bank, enforceable against the Seller Bank in accordance
with its terms. Seller shall cause the Bank Merger Agreement to be approved by
the stockholders of the Seller Bank prior to the Effective Time.
(c) Neither the execution and delivery of this Agreement or the other
Transaction Documents by the Seller nor the consummation by the Seller of the
transactions contemplated hereby or thereby; nor the execution and delivery of
the Bank Merger Agreement by the Seller Bank, nor the consummation by the Seller
Bank of the transactions contemplated thereby; nor compliance by the Seller or
the Seller Bank with any of the terms or provisions hereof or thereof, will (i)
assuming that the consents and approvals referred to in Section 4.4 hereof are
duly obtained, violate any statute, law, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to the Seller or any of
its subsidiaries or by which any property or asset of the Seller or any of its
subsidiaries is bound or affected, or (ii) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of the Seller
or any of its subsidiaries under any of the terms, conditions or provisions of
(A) the Articles of Organization or other charter document of like nature or
By-laws of the Seller or any of its subsidiaries, or (B) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Seller is a party as issuer, guarantor or
obligor, or by which they or any of their respective properties or assets may be
bound or affected, except, in the case of clause (ii)(B) above, for such
violations, conflicts, breaches or defaults which either individually or in the
aggregate would not have a Material Adverse Effect on the Seller.
4.4 Consents and Approvals.
(a) Except for consents, waivers or approvals of, or filings or
registrations with, or notifications to, the Federal Reserve Board, the FDIC,
the Massachusetts Commissioner, the MBBI, the DIF, the MHPF, the Securities and
Exchange Commission (the "SEC"), the Secretary of State of The Commonwealth of
Massachusetts, NASDAQ, and the DOJ, no consents, waivers or approvals of or
filings or registrations with any public body or authority are necessary, and no
consents or approvals of any third parties (which term does not include the
Board of Directors or the stockholders of the Seller or the Seller Bank) are
necessary, in connection with (a) the execution and delivery by the Seller of
this Agreement and the execution and delivery of the Bank Merger Agreement by
the Seller Bank, or (b) the consummation by the Seller of the Merger or by the
Seller Bank of the Bank Merger. The affirmative vote of holders of two-thirds of
the outstanding shares of Seller Common Stock is the only vote of the holders of
any shares or series of capital stock or other securities of the Seller
necessary to approve this Agreement and the Merger. The affirmative vote of
two-thirds of the outstanding shares of Bank Common Stock is the only vote of
the holders
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of any shares or series of capital stock or other securities of the Seller Bank
necessary to approve the Bank Merger. The Seller has no knowledge of any fact or
circumstance relating to the Seller or its subsidiaries, including related to
the Year 2000 Problem, that is reasonably likely to materially impede or delay
receipt of any consents of regulatory or governmental authorities.
(b) The execution and delivery of this Agreement by the Seller, and the
execution and delivery of the Bank Merger Agreement by the Seller Bank, does not
require any consent, approval, authorization or permit of, or filing with or
notification to, any third party, except where the failure to obtain any such
consent, approval, authorization or permit, or to make any such filing or
notification, would not have a Material Adverse Effect on the Seller or prevent
consummation of the Merger or the Bank Merger.
4.5 Financial Statements. The Seller has made available to the Buyer
copies of (a) the consolidated balance sheets of the Seller and its subsidiaries
as of December 31 for the fiscal years 1997 and 1998, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1996 through 1998, inclusive, as reported in the
Annual Reports of the Seller on Form 10-K for the fiscal year ended December 31,
1998 filed with the SEC under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), accompanied by the audit report of Xxxxxx Xxxxxxxx LLP,
independent public accountants for the Seller, and (b) the unaudited
consolidated balance sheet of the Seller and its subsidiaries as of March 31,
1999, the related unaudited consolidated statements of income and changes in
stockholders' equity for the three (3) months ended March 31, 1999 and March 31,
1998 and the related unaudited consolidated statements of cash flows for the
three (3) months ended March 31, 1999 and March 31, 1998, all as reported in the
Seller's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
filed with the SEC under the Exchange Act. The December 31, 1998 consolidated
balance sheet ("Seller Balance Sheet") of the Seller (including the related
notes, where applicable) and the other financial statements referred to herein
(including the related notes, where applicable) fairly present, and the
financial statements to be included in any reports or statements (including
reports on Forms 10-Q and 10-K) to be filed by the Seller with the SEC after the
date hereof will fairly present, the consolidated financial position and results
of the consolidated operations and cash flows and changes in stockholders'
equity of the Seller and its subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth; and each of such statements
(including the related notes, where applicable) has been and will be prepared in
accordance with GAAP consistently applied during the periods involved, except as
otherwise set forth in the notes thereto (subject, in the case of unaudited
interim statements, to normal year-end adjustments). Each of the consolidated
financial statements of the Seller and its subsidiaries, including, in each
case, the notes thereto, made available to the Buyer comply, and the financial
statements to be filed with the SEC by the Seller after the date hereof will
comply, with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto. The books and records of the Seller
and its subsidiaries have been, and are being, maintained in accordance with
GAAP and applicable legal and regulatory requirements.
15
4.6 Broker's Fees. Neither the Seller nor any of its officers,
directors, employees, Affiliates or agents has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with any of the transactions contemplated by this Agreement, except
for the fees incurred in connection with the engagement of Xxx-Xxxx, Xxxxxx Inc.
("FPK") and for legal, accounting and other professional fees payable in
connection with the Merger. The Seller will be responsible for the payment of
all such fees. The fee payable to FPK in connection with the transactions
contemplated by this Agreement is as described in an engagement letter between
the Seller and FPK, a true and complete copy of which has heretofore been
furnished to the Buyer. The Seller has previously received the opinion of FPK to
the effect that, as of the date of such opinion, the Merger Consideration to be
received by the stockholders of the Seller pursuant to the Merger is fair to
such stockholders, and such opinion has not been amended or rescinded as of the
date of this Agreement.
4.7 Absence of Certain Changes or Events. Except as disclosed in the
Seller's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, in
any Current Reports of the Seller on Form 8-K filed prior to the date of this
Agreement, in Section 4.7 of the Seller Disclosure Schedule, in the Seller's
proxy statement filed with respect to its 1999 Annual Meeting of stockholders,
or as otherwise expressly permitted by this Agreement, since December 31, 1998,
the Seller and its subsidiaries have not incurred any material liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise and
whether due or to become due), except in the ordinary course of their business
consistent with their past practices, nor has there been (a) any change in the
business, assets, financial condition or results of operations of the Seller or
any of its subsidiaries which has had, or is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Seller or any
Significant Subsidiary of the Seller, (b) any change by the Seller or any of its
subsidiaries in its accounting methods, principles or practices, other than
changes required by applicable law or GAAP or regulatory accounting, (c) any
declaration, setting aside or payment of any dividend or distribution in respect
of any capital stock of the Seller or any of its subsidiaries or any redemption,
purchase or other acquisition of any of its securities, other than in the
ordinary course of business consistent with past practice, (d) any increase in
or establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any directors, officers or employees of the Seller or any of
its subsidiaries, or any grant of severance or termination pay, or any contract
or arrangement entered into to make or grant any severance or termination pay,
any payment of any bonus, or the taking of any action not in the ordinary course
of business with respect to the compensation or employment of directors,
officers or employees of the Seller or any of its subsidiaries, (e) any material
acquisition or disposition of any assets or properties, or any contract for any
such acquisition or disposition entered into, or (f) any material lease of real
or personal property entered into, other than in connection with foreclosed
property or in the ordinary course of business consistent with past practice.
16
4.8 Legal Proceedings. There is no claim, suit, action, proceeding or
investigation of any nature pending or, to the best knowledge of the Seller,
threatened, against the Seller or any subsidiary of the Seller or challenging
the validity or propriety of the transactions contemplated by this Agreement,
which, if adversely determined, would, individually or in the aggregate, have a
Material Adverse Effect on the Seller or otherwise materially adversely affect
the Seller's or the Seller Bank's ability to perform its obligations under this
Agreement or the Bank Merger Agreement, nor is there any judgment, decree,
injunction, rule, award or order of any legal or administrative body or
arbitrator outstanding against the Seller or any subsidiary of the Seller
having, or which insofar as reasonably can be foreseen, in the future could
have, any such effect. Seller has furnished to the Buyer copies of all attorney
responses to the request of the independent auditors for the Seller and its
subsidiaries in so far as they relate to loss contingencies of the Seller and
its subsidiaries as of December 31, 1998 and a written list of, and documents
relating to, all claims, suits, actions, proceedings or investigations pending
against Seller or any of its subsidiaries.
4.9 Reports. Since January 1, 1996, the Seller and its subsidiaries
have timely filed, and subsequent to the date hereof will timely file, all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that were and are required to be filed with (a)
the SEC, including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, proxy
statements and all other communications mailed by the Seller to its stockholders
since January 1, 1996 (and copies of all such reports, registrations statements
and communications have been or will be delivered by the Seller to the Buyer),
(b) the Federal Reserve Board, (c) the FDIC, and (d) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, no such representation is made as to filings which are not
material) (all such reports and statements are collectively referred to herein
as the "Seller Reports") and has paid all fees and assessments due and payable
in connection with any of the foregoing. As of their respective dates, the
Seller Reports complied and, with respect to filings made after the date of this
Agreement, will at the date of filing comply, in all material respects with all
of the statutes, rules and regulations enforced or promulgated by the regulatory
authority with which they were filed and did not contain and, with respect to
filings made after the date of this Agreement, will not at the date of filing
contain, any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as set forth in Section 4.9 of the Seller Disclosure
Schedule, none of the Seller's subsidiaries is required to file any form, report
or other document with the SEC. The Seller has made available to the Buyer true
and complete copies of all amendments and modifications that have not been filed
by the Seller with the SEC to all agreements, documents and other instruments
that previously had been filed by the Seller with the SEC and are currently in
effect. Except for normal periodic examinations and examinations related to the
Year 2000 Problem (the "Bank Examinations") conducted by the FRB, the FDIC, the
Massachusetts Commissioner or any other Bank Regulator in the regular course of
the business of the Seller and its subsidiaries,
17
since January 1, 1998, no Bank Regulator has initiated any proceeding or, to the
best knowledge of the Seller, investigation into the business or operations of
the Seller or any of its subsidiaries.
4.10 Agreements with Banking Authorities. Neither the Seller nor any of
its subsidiaries is a party to any commitment, letter (other than letters
addressed to regulated depository institutions generally), written agreement,
memorandum of understanding, order to cease and desist with, is subject to any
order or directive specifically naming or referring to Seller or any of its
subsidiaries by, has been required to adopt any board resolution by, any federal
or state governmental entity charged with the supervision or regulation of banks
or bank holding companies or engaged in the insurance of bank deposits which is
currently in effect and restricts materially the conduct of its business, or in
any manner relates to its capital adequacy, loan loss allowances or reserves,
credit policies, management or overall safety and soundness or such entity's
ability to perform its obligations hereunder, and neither the Seller nor any of
its subsidiaries has received written notification from any such federal or
state governmental entity that any such Person may be requested to enter into,
or otherwise be subject to, any such commitment, letter, written agreement,
memorandum of understanding or cease and desist order. Neither the Seller nor
any of its subsidiaries has been informed by any Bank Regulator that it is
contemplating issuing or requesting any such order, directive, agreement,
memorandum of understanding, commitment letter or similar submission. Neither
the Seller nor any of its subsidiaries is a party to any agreement or
arrangement entered into in connection with the consummation of a federally
assisted acquisition of a depository institution pursuant to which the Seller or
any of its subsidiaries is entitled to receive financial assistance or
indemnification from any governmental agency.
4.11 Absence of Undisclosed Liabilities. Except for those liabilities
that are fully reflected or reserved against on the Seller Balance Sheet and for
liabilities incurred in the ordinary course of business consistent with past
practice, since December 31, 1998, neither the Seller nor any of its
subsidiaries has incurred any obligation or liability (contingent or otherwise)
that, either alone or when combined with all similar liabilities, has had, or
could reasonably be expected to have, a Material Adverse Effect on the Seller.
4.12 Compliance with Applicable Law. Each of the Seller and each
Significant Subsidiary thereof holds all material licenses, franchises, permits
and authorizations necessary for the lawful conduct of its business, and each of
the Seller and each Significant Subsidiary thereof has complied with and is not
in violation of or default in any material respect under any, applicable law,
statute, order, rule, regulation or policy of, or agreement with, any federal,
state or local governmental agency or authority relating to the Seller or such
Significant Subsidiary, other than where such default or noncompliance will not
result in, or create the possibility of resulting in any Material Adverse Effect
on the Seller or any Significant Subsidiary of the Seller, and neither the
Seller nor any Significant Subsidiary of the Seller has received any notice of
any violation of any such law, statute, order, rule, regulation, policy or
agreement, or commencement of any proceeding in connection with any such
violation, and does not know of any violation of, any such law, statute, order,
rule,
18
regulation, policy or agreement which would have such a result.
4.13 Taxes and Tax Returns. Except as set forth in Section 4.13 of the
Disclosure Schedule:
(a) Except where the failure to do so would not have a Material Adverse
Effect on the Seller Companies as a whole, the Seller and each of its
subsidiaries (referred to for purposes of this Section 4.13, collectively, as
the "Seller Companies") have, since December 31, 1992, timely filed in correct
form all Tax Returns that were required to be filed by any of them on or prior
to the date hereof (the "Filed Tax Returns"), and have paid all Taxes shown as
being due thereon.
(b) No assessment that has not been settled or otherwise resolved has
been made with respect to Taxes not shown on the Filed Tax Returns, other than
such additional Taxes as are being contested in good faith or which if
determined adversely to the Seller Companies would not have a Material Adverse
Effect on the Seller Companies as a whole. The Income Tax Returns of the Seller
Companies have been examined by the Internal Revenue Service ("IRS") or other
taxing authority, as applicable, for all years through 1994 and any liability
with respect thereto has been satisfied. There are no material disputes pending
or written claims asserted for Taxes or assessments upon any Seller Company, nor
has any Seller Company been requested to give any currently effective waivers
extending the statutory period of limitation applicable to any Federal, state,
county or local income tax return for any period. No deficiency in Taxes or
other proposed adjustment that has not been settled or otherwise resolved has
been asserted in writing by any taxing authority against any of the Seller
Companies, which if determined adversely to the Seller Companies would have a
Material Adverse Effect on the Seller Companies as a whole. No material Tax
Return of any of the Seller Companies is now under examination by any applicable
taxing authority. There are no material liens for Taxes (other than current
Taxes not yet due and payable) on any of the assets of any Seller Company,
except for such liens for Taxes that would not have a Material Adverse Effect on
the Seller Companies as a whole.
(c) Adequate provision has been made on the Seller Balance Sheet for
all Taxes of the Seller Companies in respect of all periods through the date
hereof.
(d) Except with respect to intra-Seller Company agreements made or
required under the federal consolidated tax return regulations, none of the
Seller Companies is a party to or bound by any Tax indemnification, Tax
allocation or Tax sharing agreement with any person or entity or has any current
or potential contractual obligation to indemnify any other person or entity with
respect to Taxes.
(e) None of the Seller Companies has filed or been included in a
combined, consolidated or unitary income Tax Return (including any consolidated
federal income Tax Return) other than one of which one of the Seller Companies
was the parent.
(f) Except as set forth in Section 4.13(f) of the Seller Disclosure
Schedule, none
19
of the Seller Companies has made any payment, is obligated to make any payment,
or is a party to any agreement that could obligate it to make any payment that
will not be deductible under Code Section 162(m) or Code Section 280G.
4.14 Labor. No work stoppage involving the Seller or any of its
subsidiaries is pending or, to the best knowledge of the Seller's management,
threatened. Neither the Seller nor any of its subsidiaries is involved in, or,
to the best knowledge of the Seller's management, threatened with or affected
by, any dispute, arbitration, lawsuit or administrative proceeding relating to
labor or employment matters which might reasonably be expected to interfere in
any material respect with the respective business activities of the Seller or
any of its subsidiaries. No employees of the Seller or any of its subsidiaries
are represented by any labor union, and, to the best knowledge of the Seller's
management, no labor union is attempting to organize employees of the Seller or
any of its subsidiaries.
4.15 Employees.
(a) Except as set forth in Section 4.15(a) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries maintains or
contributes to any "employee pension benefit plan" (the "Seller Pension Plans"),
as such term is defined in Section 3(2) of ERISA, "employee welfare benefit
plan" (the "Seller Benefit Plans"), as such term is defined in Section 3(1) of
ERISA, stock option plan, stock purchase plan, deferred compensation plan, other
employee benefit plan for employees of the Seller or any of its subsidiaries, or
any other plan, program or arrangement of the same or similar nature that
provides benefits to non-employee directors of the Seller or any of its
subsidiaries (collectively, the "Seller Other Plans").
(b) The Seller shall have made available to the Buyer complete and
accurate copies of each of the following with respect to each of the Seller
Pension Plans, the Seller Benefit Plans and the Seller Other Plans: (i) plan
document; (ii) trust agreement or insurance contract, if any; (iii) most recent
IRS determination letter, if any; (iv) most recent actuarial report, if any; (v)
most recent annual report on Form 5500; and (vi) summary plan description.
(c) Except as set forth in Section 4.15(c) of the Seller Disclosure
Schedule, the current value of the assets of each of the Seller Pension Plans
subject to Title IV of ERISA exceeds that plan's "Benefit Liabilities" as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if that plan terminated in accordance with all
applicable legal requirements.
(d) Except as set forth in Section 4.15(d) of the Seller Disclosure
Schedule, to the best knowledge of the Seller, each of the Seller Pension Plans
and each of the Seller Benefit Plans, which are maintained or contributed to by
the Seller, has been administered in compliance with its terms in all material
respects and is in compliance in all material respects with the applicable
provisions of ERISA (including, but not limited to, the funding and prohibited
transactions provisions thereof), the Code and other applicable laws.
20
(e) To the best knowledge of the Seller, there has been no reportable
event within the meaning of Section 4043(b) of ERISA or any waived funding
deficiency within the meaning of Section 412(d)(3) (or any predecessor section)
of the Code with respect to any Seller Pension Plan.
(f) To the best knowledge of the Seller, each of the Seller Pension
Plans which is intended to be a qualified plan within the meaning of Section
401(a) of the Code is so qualified and has received a favorable determination
letter from the IRS that such Plan meets the requirements of Section 401(a) of
the Code and that the trust associated with such Seller Pension Plan is tax
exempt under Section 501(a) of the Code, and the Seller is not aware of any fact
or circumstance which would adversely affect the qualified status of any such
plan.
(g) The Seller has made or provided for all contributions to the Seller
Pension Plans required thereunder.
(h) Except as set forth in Section 4.15(h) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries is party to or
maintains any contract or other arrangement with any employee or group of
employees, providing severance payments, stock or stock-equivalent payments or
post-employment benefits of any kind or providing that any otherwise disclosed
plan, program or arrangement will irrevocably continue, with respect to any or
all of its participants, for any period of time.
(i) Except as set forth in Section 4.15(i) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries has ever (i) maintained
any "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA, or
(ii) provided healthcare or any other non-pension benefits to any employees
after their employment is terminated (other than as required by Part 6 of
Subtitle B of Title I of ERISA or state health continuation laws) or has ever
promised to provide such post-termination benefits.
(j) Except as set forth in Section 4.15(j) of the Seller Disclosure
Schedule, no law suits, governmental administrative proceedings, claims (other
than routine claims for benefits) or complaints to, or by, any person or
governmental entity have been filed, are pending, or to the best knowledge of
the Seller, threatened with respect to any Seller Pension Plan, Seller Benefit
Plan or Seller Other Plan. Seller has previously delivered to the Buyer all
correspondence between the Seller and any Governmental Authority related to the
matter set forth in Section 4.15(j) of the Seller Disclosure Schedule. There is
no other material correspondence between the Seller and any Governmental
Authority related to any other Seller Benefit Plan.
4.16 Capitalization. The Seller and each of the subsidiaries of the
Seller which are "insured depository institutions" are "adequately capitalized"
as such term is defined in the rules and regulations promulgated by the Federal
Reserve Board and the FDIC.
4.17 Year 2000. Section 4.17 of the Seller Disclosure Schedule sets
forth the "mission-critical" computer systems (as such term is commonly used in
regulations and
21
tradeorganization guidelines with respect to the Year 2000 Problem (as defined
below)) owned or utilized by the Seller and its subsidiaries (the "Seller
Mission Critical Systems"). Seller has taken all steps necessary to ensure that
all of such Seller Mission Critical Systems will not, or Seller has received
written assurances from the applicable third-party service providers with
respect to each Seller Mission Critical System that each of such Seller Mission
Critical Systems will not, contain any material deficiencies relating generally
to formatting for entering dates (commonly referred to and referred herein as
the "Year 2000 Problem") and each Seller Mission Critical System is in
compliance in all material respects with all regulations and trade organization
guidelines concerning the Year 2000 Problem, including, without limitation, all
Interagency Statements issued by the Federal Financial Institutions Examination
Council, as well as separate issuances by any regulatory agency having
jurisdiction over Seller or any of its subsidiaries with respect to the Year
2000 Problem. Section 4.17 of the Seller Disclosure Schedule indicates which
such Seller Mission Critical Systems are licensed by the Seller from a
third-party service provider. To the best knowledge of the Seller, all of
Seller's and its subsidiaries' other computer systems ("Non- Mission Critical
Systems") are in compliance in all material respects with all regulations and
trade organization guidelines concerning the Year 2000 Problem. Except as set
forth in Section 4.17 of the Seller Disclosure Schedule, the Seller is not aware
of any material expense that it will incur prior to December 31, 1999 in
connection with the Year 2000 Problem. Neither the Seller nor any of its
subsidiaries is aware of any inability on the part of any customer, insurance
company or service provider with which the Seller or any subsidiary of the
Seller transacts business to timely remedy any deficiencies of its own in
respect of the Year 2000 Problem, which inability, individually or in the
aggregate, reasonably could be expected to have a Material Adverse Effect on the
Seller.
4.18 Material Agreements.
(a) Except as set forth in any of the Seller Disclosure Schedules or
the index of exhibits in the Seller's Annual Reports on Forms 10-K for the years
ended December 31, 1998, 1997 and 1996, except for this Agreement and the other
Transaction Documents, neither the Seller nor any of its subsidiaries is a party
to or is bound by (a) any agreement, arrangement, or commitment that is material
to the financial condition, results of operations or business of the Seller,
except those entered into in the ordinary course of business; (b) any written
(or oral, if material) agreement, arrangement, or commitment relating to the
employment, including without limitation, employment as a consultant of any
person or the election or retention in office or severance of any present or
former director or officer of the Seller or any of its subsidiaries; (c) any
contract, agreement, or understanding with any labor union; (d) any agreement by
and among the Seller, any subsidiary of the Seller and/or any Affiliate thereof;
(e) any contract or agreement or amendment thereto that would be required to be
filed as an Exhibit to a Form 10-K filed by the Seller as of the date hereof
that has not been filed as an Exhibit to the Form 10-K filed by it for 1998; (f)
any agreement, arrangement, or commitment (whether written or oral) which, upon
the consummation of the transactions contemplated by this Agreement or the Bank
Merger Agreement, will result in any payment (whether of severance pay or
otherwise) becoming due from the Seller or any
22
of its subsidiaries to any officer or employee thereof, (g) any agreement,
arrangement or commitment (whether written or oral) which materially restricts
the conduct of any line of business by the Seller or any of its subsidiaries, or
(h) any agreement, arrangement or commitment (whether written or oral)
(including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan) any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. The Seller has previously
delivered to the Buyer true and complete copies of all employment, consulting
and deferred compensation agreements which are in writing and to which the
Seller or any of its subsidiaries is a party. Each contract, arrangement,
commitment or understanding of the type described in this Section, whether or
not set forth in Section 4.18 of the Seller Disclosure Schedule, is referred to
herein as a "Seller Contract."
(b) (i) To the best knowledge of the Seller, each Seller Contract
listed on such Seller Disclosure Schedule is legal, valid and binding upon the
Seller or Seller subsidiary, as the case may be, and in full force and effect,
(ii) the Seller and each Seller subsidiary has in all material respects
performed all obligations required to be performed by it to date under each such
Seller Contract, and (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a material default on
the part of the Seller or any Seller subsidiary under any such Seller Contract.
4.19 Property and Leases
(a) Each of the Seller and each Seller subsidiary has good and
marketable title to all the real property and all other property owned by it and
included in the Seller Balance Sheet, free and clear of all mortgages, pledges,
liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind
(collectively, "Liens"), other than (A) Liens that secure liabilities that are
reflected in the Seller Balance Sheet or incurred in the ordinary course of
business after the date of the Seller Balance Sheet, (B) Liens for current taxes
and assessments not yet past due or which are being contested in good faith, (C)
inchoate mechanics' and materialmen's Liens for construction in progress, (D)
workmen's, repairmen's, warehousemen's and carriers' Liens arising in the
ordinary course of business of the Seller or any of its subsidiaries consistent
with past practice, (E) all matters of record, Liens and other imperfections of
title and encumbrances which, either individually or in the aggregate, would not
be material, and (F) those items that secure public or statutory obligations or
any discount with, borrowing from, or obligations to any Federal Reserve Bank or
Federal Home Loan Bank, interbank credit facilities, or any transaction by any
Seller subsidiary acting in a fiduciary capacity (collectively, "Permitted
Liens").
(b) All leases of real property leased for the use or benefit of the
Seller or any of its subsidiaries to which any of the foregoing is a party
requiring rental payments in excess of $5,000,000 during the period of the
lease, and all amendments and modifications thereto,
23
are in full force and effect, and there exists no material default under any
such lease by the Seller or any of its subsidiaries nor, to the best knowledge
of the Seller, any event which with notice or lapse of time or both would
constitute a material default thereunder by the Seller or any other Seller
subsidiaries, except for such defaults which, individually, or in the aggregate,
would not result in the forfeiture of the use or occupancy of the property
covered by such lease or in a material liability to the Seller.
4.20 Loan Portfolio. To the best knowledge of the Seller, all of the
loan agreements, notes or borrowing arrangements with respect to loans in excess
of $2,500,000 in original principal amount (collectively, "Loans") originated
and held currently and at the Effective Time by the Seller or any of its
subsidiaries, and any other Loans purchased and held currently and at the
Effective Time by the Seller or any of its subsidiaries, were solicited,
originated and exist, and will exist at the Effective Time, in material
compliance with all applicable loan policies of the Seller or such subsidiary.
The information (including electronic information and information contained on
tapes and computer disks) with respect to all loans of the Seller and its
subsidiaries furnished to the Buyer by the Seller is true and complete in all
material respects.
4.21 Investment Securities. Except for pledges to secure public and
trust deposits, Federal Reserve borrowings, repurchase agreements and reverse
repurchase agreements entered into in arms'-length transactions pursuant to
normal commercial terms and conditions and other pledges required by law, none
of the investments reflected in the consolidated balance sheet of the Seller and
its subsidiaries included in its Annual Report on Form 10-K for the period ended
December 31, 1998, and none of the material investments made by the Seller or
any of its subsidiaries since December 31, 1998, is subject to any restriction
(contractual, statutory or otherwise) that would materially impair the ability
of the entity holding such investment freely to dispose of such investment at
any time.
4.22 Derivative Transactions. Neither the Seller nor any or its
subsidiaries is engaged in transactions in or involving forwards, futures,
options on futures, swaps or similar derivative instruments except as agent on
the order and for the account of others other than Federal Home Loan Bank
advances or in connection with mortgage loan secondary market activities in the
ordinary course of business consistent with the Seller Bank's past practices.
4.23 Insurance. Section 4.23(a) of the Seller Disclosure Schedule sets
forth a summary of all material policies of insurance of the Seller and its
subsidiaries currently in effect, which summary is accurate and complete in all
material respects. All of the policies relating to insurance maintained by the
Seller or any of its subsidiaries with respect to its material properties and
the conduct of its business in any material respect (or any comparable policies
entered into as a replacement therefor) are in full force and effect and,
neither the Seller nor any of its subsidiaries has received any notice of
cancellation with respect thereto. Except as set forth in Section 4.23(b) of the
Seller Disclosure Schedule, all life insurance policies on the lives of any of
the current and former officers and directors of the Seller or any of its
subsidiaries which are maintained by the Seller or any such subsidiary which are
24
otherwise included as assets on the books of the Seller or such subsidiary (i)
are, or will at the Effective Time be, owned by the Seller or such subsidiary,
as the case may be, free and clear of any claims thereon by the officers or
members of their families, except with respect to the death benefits thereunder,
as to which the Seller or such subsidiary agree that there will not be an
amendment prior to the Effective Time without the consent of the Buyer, and (ii)
are accounted for properly as assets on the books of the Seller or such
subsidiary in accordance with GAAP in all material respects.
4.24 Environmental Matters.
(a) Except as set forth in the Environmental Reports, each of the
Seller and its subsidiaries and, to the best knowledge of the Seller, the Loan
Properties (each as hereinafter defined), are, and have been, in compliance with
all applicable environmental laws and with all rules, regulations, standards and
requirements of the United States Environmental Protection Agency (the "EPA")
and of state and local agencies with jurisdiction over pollution or protection
of the environment, except in each case as have not been or would not be
material.
(b) There is no suit, claim, action or proceeding pending or, to the
best knowledge of the Seller threatened, before any Governmental Authority or
other forum in which the Seller or any of its subsidiaries has been or, with
respect to threatened proceedings, may be, named as a defendant, responsible
party or potentially responsible party (i) for alleged noncompliance (including
by any predecessor), with any environmental law, rule, regulation, standard or
requirement or (ii) relating to the release into or presence in the Environment
(as hereinafter defined) of any Hazardous Materials (as hereinafter defined) or
Oil (as hereinafter defined) occurring at or on a site owned, leased or operated
by the Seller or any of its subsidiaries, except in each case as have not been
or would not be material.
(c) To the best knowledge of Seller, there is no suit, claim, action or
proceeding pending or threatened, before any Governmental Authority or other
forum in which any Loan Property has been or, with respect to threatened
proceedings, may be, named as a defendant, responsible party or potentially
responsible party (i) for alleged noncompliance (including by any predecessor)
with any environmental law, rule, regulation, standard or requirement or (ii)
relating to the release into or presence in the Environment of any Hazardous
Material or Oil whether or not occurring at or on a site owned, leased or
operated by a Loan Property, except in each case as have not been or would not
be material.
(d) Except as set forth in Section 4.24(d) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries, nor to their best
knowledge or any Loan Property, has received any written notice regarding a
matter on which a suit, claim, action or proceeding as described in subsection
(b) or (c) of this Section 4.24 could reasonably be based, except in each case
as have not been or would not be material. No facts or circumstances have come
to the Seller's attention which have caused it to believe that a material suit,
claim, action or proceeding as described in subsection (b) or (c) of this
Section 4.24 could reasonably be expected to occur.
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(e) During the period of (i) the Seller's or any of its subsidiaries'
ownership or operation of any of their respective current properties or (ii) the
Seller's or any of its subsidiaries' holding of a security interest in a Loan
Property, to the best knowledge of Seller, there has been no release or presence
of Hazardous Material or Oil in, on, under or affecting such property or Loan
Property, except where such release or presence is not or would not, either
individually or in the aggregate, be material. To the best knowledge of the
Seller, prior to the period of (x) the Seller's or any of its subsidiaries'
ownership or operation of any of their respective current properties or any
previously owned or operated properties, or (y) the Seller's or any of its
subsidiaries' holding of a security interest in a Loan Property, there was no
release or presence of Hazardous Material or Oil in, on, under or affecting any
such property or Loan Property, except where such release or presence is not or
would not, either individually or in the aggregate, be material.
(f) Neither Seller nor any of its subsidiaries is an owner or operator
of any Loan Property and there are no Participation Facilities.
(g) The following definitions apply for purposes of this Section 4.24:
(i) "Loan Property" means any property in which the Seller or any of its
subsidiaries holds a security interest, and, where required by the context (as a
result of foreclosure), said term means the owner or operator of such property;
(ii) "Participation Facility" means any facility in which the Seller or any of
its subsidiaries participates or has participated in the management and, where
required by the context, said term means the owner or operator of such property;
(iii) "Hazardous Material" means any pollutant, contaminant, or hazardous
substance or hazardous material as defined in or pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss.9601 et
seq., or any other federal, state, or local environmental law, regulation, or
requirement; (iv) "Oil" means oil or petroleum of any kind or origin or in any
form, as defined in or pursuant to the Federal Clean Water Act, 33 U.S.C. ss.
1251 et seq., or any other federal, state, or local environmental law,
regulation, or requirement; and (v) "Environment" means any soil, surface
waters, groundwaters, stream sediments, surface or subsurface strata, and
ambient air, and any other environmental medium.
4.25 Administration of Fiduciary Accounts. Each of the Seller and its
subsidiaries has properly administered in all material respects all accounts for
which it acts as a fiduciary, including, but not limited to, accounts for which
it serves as a trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor, in accordance with the terms of the governing
documents and applicable law. The accountings for each such fiduciary account
are true and correct in all material respects and accurately reflects the assets
of such fiduciary account.
4.26 Investment Management Activities. Except as set forth in Section
4.26 of the Seller Disclosure Schedule, none of the Seller or any of its
subsidiaries is required to be registered as an investment adviser, a broker,
dealer, a commodity trading adviser, a commodity pool operator, a futures
commission merchant, an introducing broker, a
26
registered representative or associated person, a counseling officer, an
insurance agent, a sales person or in any similar capacity with the SEC, The
Commodity Futures Trading Commission, the National Futures Association, the
securities commission of any state or any self-regulatory body. The Seller and
each of its subsidiaries has performed and administered in all material respects
all of its investment management or investment advisory accounts in accordance
with the terms and conditions of the governing documents for such account and
with applicable law. The accountings for each such investment management and
investment advisory account are true and correct in all material respects and
accurately reflect the assets of such fiduciary accounts.
4.27 Recent Acquisitions. Except (i) as set forth Section 4.27 of the
Seller Disclosure Schedule and (ii) for the obligation to (x) maintain directors
and officers liability insurance policies for the benefit of certain officers
and directors of entities which either the Seller or a subsidiary has acquired
(whether by merger, stock acquisition, acquisition of assets or otherwise), and
(y) indemnify such parties for certain liabilities arising in connection with
their service as officers or directors of such entities, neither the Seller nor
any of its subsidiaries has any liability or obligation of any nature (whether
accrued, absolute, contingent, or otherwise and whether or due or to become due)
arising out of or relating to any such acquisition which has not been adequately
provided for, reflected or disclosed in the SEC Reports or the Seller Balance
Sheet.
4.28 Seller Rights Agreement. Seller has taken all necessary action so
that the entering into of this Agreement, the Bank Merger Agreement and the
Seller Option Agreement and the transactions contemplated hereby and thereby do
not and will not result in the grant of any rights to any person under the
Seller Rights Agreement or enable or require the Seller rights issuable
thereunder to be exercised, distributed or triggered. The Seller has adopted an
amendment to the Seller Rights Agreement in the form of Exhibit III attached
hereto.
4.29 State Takeover Laws. The Board of Directors of the Seller has
approved the transactions contemplated by this Agreement, the Bank Merger
Agreement and the Seller Option Agreement and taken all other requisite action
such that the provisions of Ch. 110F of the Massachusetts General Laws and the
provisions of the Seller's Articles of Organization relating to special voting
requirements for certain business combinations will not apply to this Agreement
or the Seller Option Agreement or any of the transactions contemplated hereby or
thereby.
4.30 Proxy Statement; Seller Information. The information relating to
the Seller and its subsidiaries to be contained in the Proxy Statement as
described in Section 6.1 hereof, and any other documents filed with the SEC in
connection herewith, will not, on the date the Proxy Statement is first mailed
to stockholders of the Seller or at the time of the Seller Stockholders Meeting,
contain any statement which is false or misleading with respect to any material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not false or misleading at the
time and in light of the
27
circumstances under which such statement is made. The Proxy Statement will
comply in all material respects as to form with the requirements of the Exchange
Act and the rules and regulations thereunder.
4.31 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in any certificate, list or other writing,
including but not necessarily limited to the Seller Disclosure Schedule,
furnished to the Seller pursuant to the provisions hereof, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein not
misleading. To the best knowledge of the Seller, all information material to the
Merger and the transactions contemplated by this Agreement, or which is
necessary to make the representations and warranties herein contained not
misleading, has been disclosed in writing to the Seller.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective Time. During the
period from the date of this Agreement to the Effective Time, except as
expressly contemplated or permitted by this Agreement, the Bank Merger Agreement
or the Seller Option Agreement, the Seller shall, and shall cause each of its
subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course consistent with past practice, (ii) use reasonable best efforts to
maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees, including without limitation, implementing a retention program in
furtherance thereof, which program shall be proposed by the Buyer after
consultation with the Seller; provided, that if the Merger shall not be
consummated, the Buyer shall reimburse the Seller for the cost of any retention
bonuses paid to or earned by the employees prior thereto pursuant to such
program, and (iii) take no action which would materially adversely affect or
materially delay the ability of the Seller to obtain any necessary approvals of
any Governmental Authority required for the transactions contemplated hereby or
to perform its covenants and agreements under this Agreement, the Bank Merger
Agreement or the Seller Option Agreement.
5.2 Seller Forbearances. During the period from the date of this
Agreement to the Effective Time, except as set forth in Section 5.2 of the
Seller Disclosure Schedule and, except as expressly contemplated or permitted by
this Agreement the Bank Merger Agreement or the Seller Option Agreement (and the
Buyer acknowledges that any action taken by the Seller or any of its
subsidiaries prior to the Effective Time which is expressly permitted or
required by this Agreement shall not be deemed a breach of any representation,
warranty, agreement or covenant herein), the Seller shall not, and the Seller
shall not permit any of its subsidiaries to, without the prior written consent
of the Buyer, which consent shall not be unreasonably withheld:
28
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness and indebtedness of
the Seller or any of its subsidiaries to the Seller or any of its subsidiaries;
it being understood and agreed that incurrence of indebtedness in the ordinary
course of business shall include, without limitation, the creation of deposit
liabilities, Federal Home Loan Bank borrowings, purchases of federal funds,
sales of certificates of deposit and entering into repurchase agreements),
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other entity, or
make any loan or advance;
(b) adjust, split, combine or reclassify any shares of its capital
stock or issue any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, make, declare or pay any dividend or make any
other distribution on, whether payable in cash, stock, property or otherwise, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock, or grant any stock appreciation rights or
grant any individual, corporation or other entity any right to acquire any
shares or its capital stock (except for (i) regular quarterly cash dividends in
respect of each full fiscal quarter following the date hereof at a rate not in
excess of $.15 per share of Seller Common Stock and consistent with past
practice, (ii) dividends paid by any of the wholly owned subsidiaries of the
Seller to the Seller or any of its wholly-owned subsidiaries, and (iii) a
special one-time cash dividend in respect of any partial fiscal quarter
following the date hereof and prior to the Effective Date, declared and payable
prior to the Effective Time in an amount equal to the per share number
determined by multiplying .15 by a fraction, the numerator of which is the
number of calendar days from the beginning of the last fiscal quarter during
which the Effective Time is to occur, to the payment date of the special
dividend referred to herein and the denominator of which is the total number of
days in the quarter during which the Effective Time is to occur, and in respect
of which no regular quarterly dividend has been declared or paid, which special
dividend shall be payable if (A) prior to the Effective Time, the Buyer or any
Affiliate of the Buyer submits a bid or other offer to acquire any assets or
liabilities in the Branch Divestiture and the Effective Time has not occurred on
or before January 31, 2000, or, alternatively, (B) prior to the Effective Time,
neither the Buyer nor any Affiliate of the Buyer submits a bid or other offer to
acquire any assets or liabilities in the Branch Divestiture and the Effective
Time does not occur on or before February 29, 2000); or issue, sell pledge or
encumber any additional shares of capital stock or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest, except up to a maximum of
2,386,818 shares of Seller Common Stock pursuant to the exercise of stock
options or warrants outstanding as of the date of this Agreement or except
pursuant to the Seller Rights Agreement;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity other
than a direct or indirect wholly-owned subsidiary, or cancel, release or assign
any indebtedness to any such person or any claims held by any such person,
except in the ordinary course of business consistent with
29
past practice or pursuant to contracts or agreements in force at the date of
this Agreement;
(d) except for transactions in the ordinary course of business
consistent with past practice, make any material investment either by purchase
of stock or securities, contributions to capital, property transfers, or
purchase of any property or assets of any other individual, corporation or other
entity other than a wholly owned subsidiary thereof, or commitment to make such
an investment, and, in any event regardless of whether consistent with past
practice, make any such investment or commitment to make such an investment
which is in excess of $5.0 million; provided, however, that the terms of this
Section 5.2(d) shall not apply to the Seller's investment securities portfolio
or gap position, each of which is expressly covered by Section 5.2(i) hereof;
(e) except for transactions in the ordinary course of business
consistent with past practice, enter into, terminate or renew any material
contract or agreement, or make any change in any of its material contracts;
(f) (i) adopt, amend, renew or terminate any Plan or any agreement,
arrangement or plan between the Seller or any of its subsidiaries and one or
more of its current or former directors, officers or employees; (ii) enter into,
modify or renew any employment, severance or other agreement with any director,
officer or employee of the Seller or any of its subsidiaries; (iii) establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund policy or arrangement providing for any benefit to any
director, officer or employee; or (iv) increase in any manner the compensation
or fringe benefits of any of its employees or pay any pension or retirement
allowance not required by any existing plan or agreement to any such employees
or become a party to, amend or commit itself to any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment agreement with
or for the benefit of any employee, in all cases, other than in the ordinary
course of business consistent with past practice; provided, that,
notwithstanding anything to the contrary set forth in this Agreement, prior to
the Closing Date, the Seller shall be permitted (A) in consultation with the
Buyer, to determine bonuses to be paid to employees of the Seller and its
subsidiaries for the 1999 fiscal year, which bonuses (other than those bonuses
to be paid to employees of United States Trust Company) shall be determined in
the ordinary course of business and consistent with the Seller's Annual
Incentive Plan for Senior Officers and the 1998 Officer and Non-Officer Bonus
Programs, true and correct copies of each of which have been provided to the
Buyer, in each case as modified in the manner described in Section 5.2(f) of the
Seller Disclosure Schedule; provided, further, however, that in no event shall
the aggregate bonuses paid by the Seller to its employees pursuant to this
Section 5.2(f)(A) exceed 110% of the aggregate bonuses paid by the Seller to its
employees for the 1998 fiscal year; provided, further, that such bonuses shall
be paid in the manner described in Section 5.2(f)(A) of the Seller Disclosure
Schedule, and (B) to grant salary increases to its employees (other than those
employees of the Seller who are officers) at the regular review date of such
non-officer employees in an aggregate amount for all such non-officer
30
employees not to exceed three percent (3%) of the current annualized base
salaries of such non-officer employees or constitute more than a ten percent
(10%) increase with respect to any one such employee;
(g) settle any claim, action or proceeding, except in the ordinary
course of business consistent with past practice;
(h) amend its Articles of Organization or its By-Laws;
(i) other than after prior consultation with the Buyer, or in the
ordinary course of business, restructure or materially change its investment
securities portfolio or its gap position, through purchases, sales or otherwise,
or the manner in which the portfolio is classified or reported;
(j) enter into any new line of business or file any application to
relocate or terminate the operations of any banking office of the Seller or any
of its subsidiaries or, other than after prior consultation with Buyer,
materially expand the business currently conducted by the Seller and its
subsidiaries;
(k) acquire or agree to acquire, by merging or consolidating with, or
by purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, other business
organization or any division thereof or any material amount of assets;
(l) except as provided in Section 5.8 hereof, incur or commit to any
capital expenditures or any obligations or liabilities in connection therewith,
other than capital expenditures and such related obligations or liabilities
incurred or committed with respect to the Medford operations facility described
in Section 5.8 hereof, or in the ordinary and usual course of business
consistent with past practice, and in all cases the Seller agrees to obtain the
consent of the Buyer with respect to capital expenditures that individually
exceed $250,000 or cumulatively exceed $5,000,000;
(m) take any action with respect to accounting methods, principles or
practices, other than changes required by applicable law or GAAP or regulatory
accounting as concurred in by the Seller's independent accountants; or make any
tax election or settle or compromise any federal, state, local or foreign tax
liability;
(n) make any new or additional equity investment in real estate or
commitment to make such an investment in real estate or in any real estate
development project, other than in connection with foreclosures, settlements in
lieu of foreclosure or troubled loan or debt restructurings in the ordinary
course of business consistent with past practice;
(o) change in any material respect its loan policies, except as
required by regulatory authorities;
31
(p) enter into or renew, amend or terminate, or give notice of a
proposed renewal, amendment or termination of or make any commitment with
respect to, (i) any lease, contract, agreement or commitment for office space,
operations space or branch space to which the Seller or any of its subsidiaries
is a party or by which the Seller or any of its subsidiaries or their respective
properties is bound; or (ii) regardless of whether consistent with past
practices, any lease, contract, agreement or commitment involving an aggregate
payment by or to the Seller or any of its subsidiaries of more than $1,000,000
or having a term of one year or more from the date of execution;
(q) commit any act or omission which constitutes a material breach or
default by the Seller or any of its subsidiaries under any Regulatory Agreement
or under any material contract or material license to which any of them is a
party or by which any of them or their respective properties is bound;
(r) engage in any activity that would result in the disqualification of
Affiliated Community Bancorp, Inc. as a security corporation, as described in
Section 38B(b) of Chapter 63 of the MGL;
(s) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Effective Time, 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; or
(t) authorize or agree to, or make any commitment to, take any of the
actions prohibited by this Section 5.2.
5.3 Buyer Forbearances. During the period from the date of this
Agreement to the Effective Time, except as expressly contemplated or permitted
by this Agreement, the Buyer and its Affiliates shall not, and the Buyer shall
not permit any of its subsidiaries to, without the prior written consent of the
Seller:
(a) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Effective Time, or in any of the conditions of the Merger set forth in Article
VII of this Agreement not being satisfied or in a violation of any provision of
this Agreement;
(b) take any action that is intended or may reasonably be expected to
materially adversely affect or, except with respect to bidding or entering into
an agreement to acquire any assets or liabilities proposed to be divested in
connection with the merger of Fleet Financial Group, Inc. and BankBoston
Corporation, materially delay its ability to obtain any necessary approvals of
any Governmental Authority required for the transactions contemplated hereby or
to perform its covenants and agreements under this Agreement;
32
(c) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.3.
5.4 System Conversions. From and after the date hereof, the Buyer and
the Seller shall meet on a regular basis to discuss and plan for the conversion
of the Seller's and its subsidiaries' data processing and related electronic
informational systems to those used by the Buyer and its subsidiaries, which
planning shall include, but not be limited to, discussion of the possible
termination by the Seller of third-party service provider arrangements effective
at the Effective Time or at a date thereafter, non-renewal of personal property
leases and software licenses used by the Seller or any of its subsidiaries in
connection with its systems operations, retention of outside consultants and
additional employees to assist with the conversion, and outsourcing, as
appropriate, of proprietary or self-provided system services, it being
understood that the Seller shall not be obligated to take any such action prior
to the Effective Time and, unless the Seller otherwise agrees, no conversion
shall take place prior to the Effective Time. In the event that the Seller or
any of its subsidiaries takes, at the request of the Buyer, any action relative
to third parties to facilitate the conversion that results in the imposition of
any termination fees, expenses or charges, the Buyer shall indemnify the Seller
and its subsidiaries for any such fees, expenses and charges, and the costs of
reversing the conversion process, if for any reason the Merger is not
consummated in accordance with the terms of this Agreement.
5.5 Certain Changes and Adjustments. Prior to the Closing, the Buyer
and the Seller shall consult with each other concerning the Seller Bank's loan,
litigation and real estate valuation policies and practices (including loan
classifications and levels of reserves) and the Buyer Bank's plans with respect
to the foregoing after the Effective Time; provided, however, that neither the
Seller nor the Seller Bank shall be obligated to take any action pursuant to
this Section which is inconsistent with GAAP and, in any event, unless and until
the Buyer acknowledges, and the Seller and the Seller Bank are satisfied, that
all conditions to Seller's obligation to consummate the Merger have been
satisfied and that the Buyer intends to consummate the Merger in accordance with
the terms of this Agreement. No action taken by the Seller or the Seller Bank
pursuant to this Section or the consequences resulting therefrom shall be deemed
to be a breach of any representation, warranty, agreement or covenant herein or
constitute a Material Adverse Effect. In the event that the Seller or any of its
subsidiaries takes, at the request of the Buyer, any action pursuant to this
Section 5.5, the Buyer shall indemnify the Seller and its subsidiaries for any
fees, expenses and charges, and the costs of reversing the action taken, if for
any reason the Merger is not consummated in accordance with the terms of this
Agreement.
5.6 Branches. Prior to the Effective Time, the Buyer and the Seller
shall consult and cooperate with each other concerning alignment of the Buyer
Bank's and the Seller Bank's branches following the Effective Time, and the
Seller will, if requested by the Buyer, cooperate with the Buyer to cause Seller
Bank to prepare and file applications for branch closings with all appropriate
Bank Regulators after all of the Requisite Regulatory Approvals have been
obtained (without regard to any applicable waiting periods). If for any reason
the
33
Merger is not consummated in accordance with the terms of this Agreement, the
Buyer will reimburse the Seller for any fees or expenses incurred in connection
with the preparation and filing of such applications at the request of the
Buyer.
5.7 Servicing. The Seller agrees that upon the expiration of any of the
Seller's or its subsidiaries' 401(k) servicing agreements prior to the Closing,
it will enter into a new 401(k) servicing agreement with the same service
provider as the Buyer, provided, however, that the Seller or its subsidiaries
shall not be obligated to do so unless the terms of such new agreement are
comparable to or not materially less favorable than terms then available to the
Seller. If requested by the Buyer, the Seller shall, and shall cause certain of
its subsidiaries to, provide notices of termination with respect to certain
other servicing arrangements of the Seller or its subsidiaries existing as of
the date hereof; provided, however, that, if for any reason the Merger is not
consummated in accordance with the terms of this Agreement, the Buyer shall
indemnify the Seller and its subsidiaries for any fees, expenses, charges, and
the costs of reversing the action taken or entering into a new servicing
agreement on terms substantially similar to the servicing arrangements so
terminated pursuant to this Section 5.7.
5.8 Medford Operations Facility. From and after the date hereof, the
Buyer and the Seller shall consult and cooperate with each other with respect to
the completion of the building of the Seller's Medford operations facility and
the parties shall use their reasonable best efforts to continue utilizing for
the completion and renovation of such facility those contractors to whom
commitments to complete work in such facility have already been made by the
Seller as of the date hereof; provided, however, that the Seller shall not enter
into any new commitments with respect to capital expenditures on such facility
without the consent of the Buyer; provided, further, that in the event that the
Merger is not consummated in accordance with the terms of this Agreement, at the
Seller's option, within thirty (30) days of the Seller's written request, the
Buyer shall purchase the Medford operations facility from the Seller at a cash
purchase price equal to the net book value of such facility as of the date of
purchase and upon such other terms and conditions as are conventional for the
sale of similar commercial real estate.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters; Consents.
(a) The Seller will as promptly as practicable, take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders (the "Seller Stockholders Meeting") to be held as soon as possible
following clearance by the SEC of the Seller Proxy Statement, for the purpose of
approving this Agreement and the Merger.
(b) The Seller's Board of Directors has adopted a resolution
recommending approval and adoption of this Agreement and the Merger by the
Seller's stockholders, and except as provided in the next sentence, the Board of
Directors of the Seller shall at all times
34
recommend approval and adoption of this Agreement and the Merger by the Seller's
stockholders. The Board of Directors of the Seller shall be permitted to
withdraw or modify in a manner adverse to the Buyer (or not to continue to make)
its recommendation to its stockholders if, but only if, (a) in the opinion of
the Seller's outside counsel, such action is required, in response to an
unsolicited bona fide written Superior Proposal, in order for the Board of
Directors of the Seller to comply with its fiduciary duties under applicable
law, (b) the Seller has given the Buyer five (5) business days' prior notice of
the receipt of such Superior Proposal and the Seller's Board of Directors has
considered any proposed changes to this Agreement (if any) proposed by the
Buyer, and (c) the Seller has fully and completely complied with Section 6.2
hereof. For the purposes of this Agreement, "Superior Proposal" shall mean any
bona fide Acquisition Transaction for at least a majority of the outstanding
shares of the Seller Common Stock on terms the Board of Directors of the Seller
determines in its good faith judgment (taking into account the advice of a
financial advisor of nationally recognized reputation, taking into account all
the terms and conditions of the Acquisition Transaction, including any break-up
fees, expense reimbursement provisions and conditions to consummation) are in
the aggregate more favorable and provide greater value to all the Seller's
stockholders than this Agreement and the Merger taken as a whole. For purposes
of this Agreement, "Acquisition Transaction" means any offer or proposal for, or
any indication of interest in (w) a merger or consolidation, or any similar
transaction, involving the Seller or any Significant Subsidiary of the Seller,
(x) a purchase, lease or other acquisition or assumption of all or a substantial
portion of the assets or deposits of the Seller or all or substantially all of
the assets or deposits of any Significant Subsidiary of the Seller, (y) a
purchase or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of beneficial ownership (the term "beneficial ownership"
for purposes of this Agreement having the meaning assigned thereto in Section
13(d) of the Exchange Act, and the rules and regulations thereunder) of
securities representing 10% or more of the voting power of the Seller or more
than 25% of any Significant Subsidiary of the Seller, or (z) any substantially
similar transaction.
(c) As soon as practicable after the date hereof, and in any event by
July 15, 1999, the Seller shall prepare and file the Seller Proxy Statement with
the SEC under the Exchange Act and shall use its reasonable best efforts to have
the Seller Proxy Statement cleared by the SEC. The Buyer and the Seller shall
cooperate with each other in the preparation of the Seller Proxy Statement and
the Seller shall notify the Buyer promptly of the receipt of any comments of the
SEC with respect to the Seller Proxy Statement and of any requests by the SEC
for any amendment or supplement thereto or for additional information and shall
provide to the Buyer promptly copies of all correspondence between the Seller or
any representative of the Seller and the SEC. The Seller shall give the Buyer
and its counsel the opportunity to review the Seller Proxy Statement prior to
its being filed with the SEC and shall give the Buyer and its counsel the
opportunity to review all amendments and supplements to the Seller Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC. Each of the
Buyer and the Seller agrees to use its reasonable best efforts, after
consultation with the other party hereto, to respond promptly to all such
comments of and
35
requests by the SEC and to cause the Seller Proxy Statement and all required
amendments and supplements thereto to be mailed to the holders of Seller Common
Stock entitled to vote at the Seller Stockholders Meeting referred to in Section
6.1(a) hereof at the earliest practicable time.
(d) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger and the Bank Merger), and
to comply with the terms and conditions of all such permits, consents, approvals
and authorizations of all such Governmental Authorities. The Buyer and the
Seller shall have the right to review in advance, and, to the extent
practicable, each will consult the other on, in each case subject to applicable
laws relating to the exchange of information, all the information relating to
the Buyer or the Seller, as the case may be, and any of their respective
subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Authority in connection with
the transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities 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.
(e) The Buyer and the Seller shall, upon request, furnish each other
with all information concerning themselves, their subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Seller Proxy Statement or any other
statement, filing, notice or application made by or on behalf of any Affiliate
of the Buyer, the Buyer or the Seller or any of their respective subsidiaries to
any Governmental Authority in connection with the Merger, the Bank Merger and
the other transactions contemplated by this Agreement.
(f) The Buyer and the Seller shall promptly advise each other upon
receiving (and the Buyer shall so advise with respect to communications received
by any Affiliate of the Buyer) any communication from any Governmental Authority
whose consent or approval is required for consummation of the transactions
contemplated by this Agreement that causes such party to believe that there is a
reasonable likelihood that any Requisite Regulatory Approval will not be
obtained or that the receipt of any such approval will be materially delayed.
6.2 No Solicitation. Unless and until this Agreement shall have been
properly terminated by either party pursuant to Section 8.1 hereof, neither the
Seller nor any of its subsidiaries or Affiliates shall (and the Seller shall use
its reasonable best efforts to cause its
36
representatives, including, but not limited to, investment bankers, attorneys
and accountants, not to), directly or indirectly, encourage, solicit, initiate
or take any action to facilitate, any inquires or the making of an offer or
proposal regarding, or participate in any discussions or negotiations with, or
provide any information to, any Person (other than the Buyer and its Affiliates
or representatives), concerning any Acquisition Transaction provided, that the
Seller may, in response to an unsolicited written offer or proposal regarding an
Acquisition Transaction, furnish non-public information with respect to the
Seller and its subsidiaries to the third party making such written offer or
proposal and may participate in negotiations regarding such written offer or
proposal if (A) the Seller's Board of Directors determines in good faith based
on the written advice of outside counsel of the Seller that such action is
required for the Seller's Board of Directors to comply with the fiduciary duties
applicable to directors under applicable law and (B) the Seller has received
from such third party an executed confidentiality agreement with terms not
materially less favorable to the Seller than those contained in the
Confidentiality Agreement with the Buyer. Notwithstanding the foregoing, nothing
contained in this Section 6.2 shall prohibit the Seller or its Board of
Directors from taking and disclosing to the Seller's stockholders a position
with respect to a tender offer by a third party pursuant to Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act or from making such disclosure to
the Seller's stockholders which, in the judgment of the Board of Directors as
determined in good faith and as advised in writing by outside counsel, may be
required under applicable law. The Seller will immediately communicate to the
Buyer the terms of any proposal, discussion, negotiation or inquiry relating to
an Acquisition Transaction and the identity of the party making such proposal or
inquiry which it may receive in respect of any such transaction (which shall
mean that any such communication shall be delivered no less promptly than by
telephone within 24 hours of the Seller's receipt of any such proposal or
inquiry) or its receipt of any request for information from the Federal Reserve
Board, the DOJ, or any other Governmental Authority with respect to a proposed
Acquisition Transaction. The Seller agrees not to release any third party from,
or waive any provision of, any confidentiality or standstill agreement to which
the Seller or the Seller Bank is a party regarding an Acquisition Transaction.
6.3 Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating to
the exchange of information, each of the Buyer and the Seller, for the purposes
of verifying the representations and warranties of the other and relating to the
Merger and the other matters contemplated by this Agreement, shall, and shall
cause each of their respective subsidiaries to, afford to the officers,
employees, accountants, counsel and other representatives of the other party,
access, during normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments and records, and,
during such period, each of the Buyer and the Seller shall, and shall cause
their respective subsidiaries to, make available to the other party (i) a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws or federal or state banking laws (other than reports or
documents which the Buyer or the Seller, as the case may be, is not permitted to
disclose under
37
applicable law) and (ii) all other information concerning its business,
properties and personnel as such party may reasonably request. Neither the Buyer
nor the Seller nor any of their respective subsidiaries shall be required to
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of the Buyer's or the Seller's, as the
case may be, customers, jeopardize the attorney-client privilege of the
institution in possession or control of such information or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) All information furnished by any party hereto to the other or its
representatives pursuant hereto shall be treated as the sole property of the
party providing the information and, if the Merger shall not occur, the party
being furnished such information shall return to the other party all of such
written information and all documents, notes, summaries or other materials
containing, reflecting or referring to, or derived from, such information. The
parties hereto shall, and shall use their reasonable best efforts to cause their
representatives to, keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential shall
continue for five years from the date the proposed Merger is abandoned and shall
not apply to (i) any information which (x) was already in the possession of the
party being furnished such information prior to the disclosure thereof by the
other party, (y) was then generally known to the public, or (z) was disclosed to
the party being furnished such information by a third party not bound by an
obligation of confidentiality; or (ii) disclosures made as required by law.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
6.4 Legal Conditions to Merger. Each of the Buyer and its Affiliates
and the Seller shall, and the Seller shall cause its subsidiaries to, use their
reasonable best efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
that may be imposed on such party or its subsidiaries with respect to the Merger
and, subject to the conditions set forth in Article VII hereof, to consummate
the transactions contemplated by this Agreement, and (b) to obtain (and to
cooperate with the other party to obtain) any material consent, authorization,
order or approval of, or any exemption by, any Governmental Authority and any
other third party that is required to be obtained by the Buyer or the Seller or
any of their respective subsidiaries in connection with the Merger, the Bank
Merger and the other transactions contemplated by this Agreement.
6.5 Employment and Benefit Matters.
(a) From and after the Effective Time, the Buyer agrees to provide the
employees of the Seller and its subsidiaries (the "Seller Employees") who remain
employed after the Effective Time (collectively, the "Transferred Seller
Employees") with the types and levels
38
of employee benefits maintained by the Buyer for similarly situated employees of
the Buyer. The Buyer will treat, and cause its applicable benefit plans to
treat, the service of Seller Employees with Seller or any subsidiary of Seller
as service rendered to the Buyer or any Affiliate of Buyer for purposes of
eligibility to participate, vesting and for other appropriate benefits
including, but not limited to, applicability of minimum waiting periods for
participation, but not for benefit accrual (including minimum pension amount)
attributable to any period before the Effective Time. Without limiting the
foregoing, the Buyer shall not treat any employee of the Seller or any of its
subsidiaries as a "new" employee for purposes of any exclusions under any health
or similar plan of the Buyer for a pre-existing medical condition, and will make
appropriate arrangements with its insurance carrier(s) to ensure such result.
(b) Compensation Arrangements. Following the Effective Time, the Buyer
shall honor and shall cause its subsidiaries to honor in accordance with their
terms all individual employment, termination, severance, change in control,
post-employment and other compensation agreements, arrangements and plans
existing prior to the execution of this Agreement, which are between the Seller
or any subsidiary of the Seller and any director, officer or employee thereof,
and the Buyer will not, and will not cause any of its subsidiaries to, challenge
the validity of any obligation of the Seller or any subsidiary of the Seller
under, any employment, severance, change in control, post-employment,
consulting, supplemental retirement or such other compensation, contract or
arrangement with any current or former director, officer or employee of the
Seller. Notwithstanding the terms of this Agreement or any plan to the contrary,
prior to the Effective Time, the Seller shall be permitted to cause one or more
trusts to be formed and to fund such trusts, the purpose of which will be to
fund all obligations which may be payable after the Effective Time to employees
of the Seller under the Seller's Senior Executive Plan and such other plans of
the Seller set forth in Section 6.5(b) of the Seller Disclosure Schedule.
(c) Continuation of Plans. Notwithstanding anything to the contrary
contained herein, the Buyer shall have sole discretion with respect to the
determination as to whether or when to terminate, merge or continue any employee
benefit plans and programs of the Seller; provided, however, that the Buyer
shall continue to maintain the Seller plans (other than stock based or incentive
plans or stock funds in retirement plans) until the Seller Employees are
permitted to participate in the Buyer's plans. Nothing in this Agreement shall
alter or limit the Buyer's obligations, if any, under ERISA, as amended by the
Consolidated Omnibus Budget Reconciliation Act of 1985 and/or the Health
Insurance Portability and Accountability Act of 1996 with respect to the rights
of Seller Employees and their qualified beneficiaries in connection with the
group health plan maintained by the Seller as of the Effective Time.
(d) Severance Obligations. For a period of one (1) year after the
Closing Date, the Buyer will provide all Seller Employees who are not otherwise
covered by a specific termination, severance or change in control agreement with
a severance plan with provisions which are at least as favorable in the
aggregate to any Seller Employee whose employment
39
is terminated after the Effective Time as the severance plan or policy currently
maintained by the Seller or any Seller subsidiary for such employee as disclosed
in Section 4.15(a) of the Seller Disclosure Schedule. Any Seller Employee whose
position is terminated on or prior to the Effective Time shall be entitled to
severance benefits in accordance with the severance plan or policy currently
maintained by the Seller or any subsidiary of the Seller for such employee.
(e) The provisions of this Section 6.5 respecting the Buyer's agreement
to honor the contracts, arrangements, commitments and understandings referred to
in Section 6.5(b) are intended to be for the benefit of and enforceable by the
persons referred to therein or the parties to these agreements, respectively,
and their heirs and representatives.
(f) Notwithstanding anything to the contrary contained in this
Agreement, in no event shall the Seller or any of its subsidiaries take any
action or make any payments that would result, either individually or in the
aggregate, in the payment of an "excess parachute payment" within the meaning of
Section 280G of the Code or that would result, either individually or in the
aggregate, in payments that would be nondeductible pursuant to Section 162(m) of
the Code.
6.6 Directors' and Officers' Indemnification and Insurance.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer or employee of Seller or any of its subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director, officer or employee of the Seller, any of the
Seller's subsidiaries or any of their respective predecessors or (ii) this
Agreement, the Seller Option Agreement or any of the transactions contemplated
hereby or thereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto. It is understood and agreed that after
the Effective Time, the Buyer shall indemnify and hold harmless, as and to the
fullest extent permitted by law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted of arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with the Buyer; provided, however, that (1) the Buyer shall have
the right to assume the defense thereof and upon such assumption the Buyer or
the Buyer Bank shall not be liable
40
to any Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by any Indemnified Party in connection with the
defense thereof, except that if the Buyer elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises the Indemnified Parties
that there are issues which raise conflicts of interest between the Buyer and
the Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with the Buyer, and the Buyer shall pay
the reasonable fees and expenses of such counsel for the Indemnified Parties,
(2) the Buyer shall be obligated pursuant to this paragraph to pay for only one
firm of counsel for all Indemnified Parties, (3) the Buyer shall not be liable
for any settlement effected without its prior written consent (which consent
shall not be unreasonably withheld) and (4) the Buyer shall have no obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim Indemnification under this Section 6.6, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify the Buyer
thereof, provided that the failure to so notify shall not affect the obligations
of the Buyer under this Section 6.6 except to the extent such failure to notify
materially prejudices the Buyer. The Buyer's obligations under this Section 6.6
shall continue in full force and effect for a period of six (6) years from the
Effective Time; provided, however, that all rights to indemnification in respect
of any claim (a "Claim") asserted or made within such period shall continue
until the final disposition of such Claim.
(b) The Buyer shall maintain the Seller's (including its subsidiaries')
existing directors' and officers' liability insurance (the "D&O Insurance")
covering persons who are currently covered by the Seller's D&O Insurance for a
period of six (6) years after the Effective Time on terms no less favorable than
those in effect on the date hereof and shall at the Effective Time provide
evidence of such extension of coverage to the Seller; provided, however, that
the Buyer may substitute therefor policies providing substantially comparable
coverage and containing terms and conditions no less favorable than those in
effect on the date hereof. In connection with the foregoing, the Seller agrees
to provide such insurer or substitute insurer with such representations as such
insurer may request with respect to the reporting of any prior claims.
(c) In the event the Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the Buyer
assume the obligations set forth in this section.
(d) The provisions of this Section 6.6 are intended to be for the
benefit of, and enforceable by, each Indemnified Party and his or her heirs and
representatives, and nothing herein shall affect any indemnification rights that
any Indemnified Party and his or her heirs
41
and representatives may have under the charter or by-laws of the Seller or any
of its subsidiaries, any contract or applicable law.
6.7 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation or the Surviving Bank with full
title to all properties, assets, rights, approvals, immunities and franchises of
any of the parties to the Merger or the 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 Buyer.
6.8 Advice of Changes. The Buyer and the Seller shall each promptly
advise the other party of any change or event having a Material Adverse Effect
on it or which it believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
6.9 Update of Disclosure Schedules. From time to time prior to the
Effective Time, the Seller will promptly supplement or amend the Seller
Disclosure Schedule to reflect any matter which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in the Seller Disclosure Schedule or which is necessary to correct any
information in the Seller Disclosure Schedule which has been rendered inaccurate
thereby. No supplement or amendment to the Seller Disclosure Schedule shall have
any effect for the purpose of determining satisfaction of the conditions set
forth in Section 7.2(b) hereof or compliance by the Seller with the covenants
set forth in Article V hereof.
6.10 Current Information.
(a) As soon as practicable, the Seller will furnish to the Buyer copies
of all such financial statements and reports as it or any of its subsidiaries
shall send to its stockholders, the SEC or any other Governmental Authority, to
the extent any such reports furnished to any such Governmental Authority are not
confidential and except as legally prohibited thereby, and will furnish to the
Buyer such additional financial data as the Buyer may reasonably request.
(b) Promptly upon receipt thereof, the Seller will furnish to the Buyer
copies of all internal control reports submitted to the Seller and its
subsidiaries by independent auditors in connection with each annual, interim or
special audit of the books of the Seller and its subsidiaries made by such
auditors.
(c) The Seller will promptly notify the Buyer of any material change in
the normal course of business or in the operation of the properties of the
Seller or any of its subsidiaries and of any governmental complaints,
investigations or hearings (or
42
communications indicating that the same may be contemplated), or the institution
or the threat of material litigation involving the Seller or any of its
subsidiaries, and will keep the Buyer reasonably informed of such events.
6.11 Liaison Committee. During the period from the date of this
Agreement to the Effective Time, the Seller will make available one or more of
its designated representatives (a) to confer on a regular and frequent basis
(not less than monthly) with representatives of the Buyer to report on (i) the
general status of the ongoing operations of the Seller and its subsidiaries,
(ii) the status of, and the action proposed to be taken with respect to, those
loans held by the Seller or any of its subsidiaries which, either individually
or in combination with one or more other loans to the same borrower thereunder,
have an aggregate outstanding principal amount of $5,000,000 or more and are
classified or non-performing assets, and (iii) the status of, and the action
proposed to be taken with respect to, foreclosed property and other real estate
owned, and (b) to communicate with respect to the manner in which the business
of the Seller and its subsidiaries are conducted and the disposition of certain
assets after the Effective Time, Year 2000 preparedness, the type and mix of
products and services, personnel matters, branch alignment, branch closings, the
granting of credit, and problem loan management, reserve adequacy and
accounting. In order to facilitate the foregoing, the Seller and the Buyer shall
promptly establish a liaison committee (the "Liaison Committee"), which will be
chaired by an officer designated by the Buyer and which will meet on a regular
basis to discuss these matters and may establish sub-committees from
time-to-time to pursue various issues. In addition, during the period from the
date of this Agreement to the Effective Time, on the date that the Seller Bank
delivers to the members of its senior credit committee applicable information
and reports for the next upcoming meeting of such committee, the Seller shall
provide to a designated representative of the Buyer located in Boston,
Massachusetts access to the same information and reports as are provided to the
Seller Bank's senior credit committee members with respect to new loans and
extensions of credit proposed to be made by the Seller Bank in excess of
$5,000,000. The representative designated by the Buyer shall also be allowed to
attend the Seller Bank's senior credit committee meetings and be a non-voting
observer thereof. The Seller, if requested by the Buyer, will assist the Buyer
to prepare to sell a portion of its single family residential mortgage loans and
mortgage loan servicing rights following the Effective Time; provided, that
Buyer shall indemnify the Seller and its subsidiaries for any fees, expenses and
charges incurred by Seller in connection therewith if the Merger is not
consummated in accordance with the terms of this Agreement.
6.12 Bank Merger. Unless otherwise determined by the Buyer prior to the
Closing, at the effective time of the Bank Merger the Articles of Organization
and By-Laws of the Buyer Bank, as in effect immediately prior thereto, shall be
the Articles of Organization and By-Laws of the Surviving Bank until thereafter
amended as provided by law and such Articles of Organization and By-Laws. The
directors and officers of the Buyer Bank immediately prior to the effective time
of the Bank Merger shall be the directors and officers of the Surviving Bank,
each to hold office in accordance with the Articles of Organization and By-Laws
of the Surviving Bank and until their respective successors are duly elected or
43
appointed and qualified.
6.13 Organization of the Merger Sub
(a) Prior to the Effective Time, the Buyer will take any and all
necessary action to cause (i) the Merger Sub to be organized, (ii) the Merger
Sub to become a direct wholly owned subsidiary of the Buyer, (iii) the directors
and stockholders of the Merger Sub to approve the transactions contemplated by
this Agreement, (iv) the Merger Sub to execute one or more counterparts to this
Agreement and to deliver at least one such counterpart so executed to the
Seller, whereupon the Merger Sub shall become a party to and be bound by this
Agreement, and (v) the Merger Sub to take all necessary action to complete the
transactions contemplated hereby subject to the terms and conditions hereof.
(b) On and as of the date the Merger Sub becomes a party to this
Agreement, the Buyer and the Merger Sub shall, jointly and severally, represent
and warrant to the Seller and the Bank as follows:
(i) The Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts and all of its outstanding capital stock are owned,
directly, by the Buyer. Since the date of its organization, the Merger
Sub has not engaged in any activities other than in connection with or
as contemplated by this Agreement;
(ii) The Merger Sub has all necessary corporate power and
authority to enter into this Agreement and to carry on its obligations
hereunder. The execution and delivery of this Agreement by the Merger
Sub and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
the Merger Sub and will not (A) conflict with or violate the Articles
of Organization or By-laws of the Merger Sub or (B) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable
to the Merger Sub or by which any of its properties or assets is bound
or affected; and
(iii) The Merger Sub has executed and delivered this Agreement
and this Agreement constitutes the legal, valid and binding obligation
of the Merger Sub enforceable against the Merger Sub in accordance with
its terms.
6.14 Community Commitments. From and after the Effective Time, Buyer
shall use its reasonable efforts to continue the community commitments
undertaken by the Buyer Bank and the Seller Bank prior to the date hereof in the
communities currently served by each of the Buyer Bank and the Seller Bank.
6.15 Consolidation of Corporate Structure. The parties hereto hereby
agree that prior to the consummation of the transactions contemplated hereby, at
the Buyer's request, the Seller shall, subject to the receipt of all required
regulatory approvals and consents with respect to such actions, take the
following actions:
44
(a) As promptly as practicable after the date hereof, the Seller shall
contribute (i) all of the shares of Bank Common Stock which Seller holds and
(ii) all of the shares of the capital stock or other equity securities issued by
United States Trust Company to Affiliated Community Bancorp, Inc., the Seller's
wholly-owned subsidiary.
(b) On or before the date which is ten (10) days prior to the Closing
Date, the Seller shall cause each subsidiary of the Seller Bank identified by
the Buyer prior to the Closing Date to be liquidated.
(c) On or prior to the date which is ten (10) days prior to the Closing
Date, but subsequent to the liquidation of the subsidiaries referred to in
Section 6.15(b) immediately above, the Seller shall cause Seller Bank to declare
and pay a cash dividend (the "Special Dividend") to Affiliated Community
Bancorp, Inc. in an amount equal to the lesser of (i) the maximum amount that
Seller Bank may pay as a dividend to its shareholders without being required to
include in its gross income amounts charged against the reserves identified in
Section 593(e)(1)(B) or (C) of the Code, and (ii) an amount designated in
writing by the Buyer.
(d) Subsequent to the declaration and payment of the Special Dividend
and not less than three (3) days prior to the Closing Date, the Seller shall
cause Affiliated Community Bancorp, Inc. to liquidate into the Seller.
(e) In the event that the Merger is not consummated in accordance with
the terms hereof, the Buyer shall indemnify the Seller for any and all costs and
expenses incurred by the Seller with respect to the actions taken pursuant to
this Section 6.15.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligations To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholder's Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the requisite affirmative vote
of the holders of the outstanding shares of Seller Common Stock present and
voting at the Seller Stockholders Meeting in accordance with applicable law.
(b) Other Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all such waiting
periods being referred to herein as the "Requisite Regulatory Approvals").
45
(c) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger, the Bank Merger or any of the other transactions contemplated by this
Agreement shall be in effect. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Authority which prohibits, materially restricts or makes illegal
consummation of the Merger or the Bank Merger.
7.2 Conditions to the Obligations of the Buyer. The obligation of the
Buyer to effect the Merger is also subject to the satisfaction or waiver by the
Buyer, at or prior to the Effective Time, of the following conditions:
(a) Absence of Material Adverse Changes. There shall not have occurred
any change in the business, assets, financial condition or results of operations
of the Seller or any of its subsidiaries which has had, or is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on the
Seller and its subsidiaries taken as a whole.
(b) Representations and Warranties. The representations and warranties
of Seller contained in this Agreement that are qualified as to materiality shall
be true and correct and any such representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Effective Time (or if made as of a
specified date, only as of such date) The Buyer shall have received a
certificate to the foregoing effect signed by the chairman or president and the
chief financial officer of the Seller.
(c) Performance of Obligations of the Seller. The Seller shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Buyer shall
have received a certificate signed on behalf of the Seller by the chairman or
president and the chief financial officer to such effect.
(d) Consents Under Agreements. The consent, approval or waiver of each
person (other than Requisite Regulatory Approvals contemplated in Section
7.1(b)) whose consent or approval shall be required in order to permit the
lawful consummation of the Merger and the Bank Merger shall have been obtained,
other than such consents or approvals, the failure of which to obtain would not
have a Material Adverse Effect on Seller or Buyer after the Effective Time.
(e) Stockholders Agreements. Agreements, substantially in the form
attached as Exhibit IV hereto, shall have been executed and delivered by at
least 80% of the directors of the Seller and all of the senior executive
officers of the Seller set forth in Section 7.2(e) of the Seller Disclosure
Schedule.
7.3 Conditions to the Obligations of the Seller. The obligation of the
Seller to effect the Merger is also subject to the satisfaction or waiver by the
Seller, at or prior to the Effective Time, of the following conditions:
46
(a) Representations and Warranties. The representations and warranties
of the Buyer contained in this Agreement that are qualified as to materiality
shall be true and correct and any such representations and warranties that are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Effective Time (or if made
as of a specified date, only as of such date). The Seller shall have received a
certificate to the foregoing effect signed by the chairman or president and the
chief financial officer of the Buyer.
(b) Performance of Obligations of the Buyer. The Buyer shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Seller shall
have received a certificate signed on behalf of the Buyer by the chairman or
president and the chief financial officer to such effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of this Agreement and the
transactions contemplated hereby by the stockholders of the Seller:
(a) by mutual consent of the Seller and the Buyer 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 Board of Directors of the Buyer or the Board of
Directors of the Seller if any Governmental Authority that must grant a
Requisite Regulatory Approval has denied approval of the Merger and such denial
has become final and nonappealable or any Governmental Authority of competent
jurisdiction shall have issued a final nonappealable order permanently enjoining
or otherwise prohibiting the consummation of the transactions contemplated by
this Agreement;
(c) by either the Board of Directors of the Buyer or the Board of
Directors of the Seller if the Merger shall not have been consummated on or
before March 31, 2000, unless the failure of the Closing to occur by such date
shall be due to the failure of the party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such party set forth herein;
(d) by either the Board of Directors of the Buyer or the Board of
Directors of the Seller (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein or in the Seller Option Agreement), in the event of a material
breach by the other party of any representation, warranty, covenant or other
agreement contained herein or in the Seller Option Agreement which breach is not
cured after thirty (30) days written notice thereof is given to the party
committing such breach;
47
(e) by either the Buyer or the Seller if the approval of the Seller's
stockholders 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 such party's stockholders or at any adjournment thereof;
(f) by the Buyer, if the Board of Directors of the Seller shall not
have publicly recommended to the stockholders of the Seller that such
stockholders vote in favor of the approval of this Agreement, the Merger and the
other transactions contemplated hereby or shall have withdrawn, modified or
amended such recommendation in a manner materially adverse to the Buyer; or
(g) by the Buyer, if the Seller determines to negotiate with, or
disclose any nonpublic information relating to the Seller or any of its
subsidiaries or afford access to their properties, books or records to, any
Person in connection with an Acquisition Transaction.
8.2 Effect of Termination.
(a) In the event of termination of this Agreement by either the Buyer
or the Seller as provided in Section 8.1, this Agreement shall forthwith become
void and have no effect, and none of the Buyer, the Seller, any of their
respective subsidiaries or any of the officers or directors of any of them shall
have any liability of any nature whatsoever hereunder, or in connection with the
transactions contemplated hereby, except that (i) Sections 6.3(b), 8.2, 9.2 and
9.3 and all obligations of the Buyer to indemnify or reimburse the Seller under
Article V and Section 6.15 hereof and all other obligations of the parties
intended to be performed after the termination of this Agreement shall survive
any termination of this Agreement; provided, however, that, notwithstanding
anything to the contrary herein, all obligations of the Buyer to indemnify or
reimburse the Seller under Article V and Section 6.15 hereof shall terminate in
the event that this Agreement is terminated by the Buyer pursuant to Sections
8.1(f) or (g) hereof; provided, further however, that the preceding proviso
shall not apply upon a termination of this Agreement by the Buyer pursuant to
Section 8.1(g) hereof in the event that the Buyer has, as of such date of
termination, bid or made an offer to purchase any assets or liabilities to be
sold in connection with the Branch Divestiture unless the Buyer shall have
revoked or withdrawn such bid or offer, and (ii) notwithstanding anything to the
contrary contained in this Agreement, neither the Buyer nor the Seller shall be
relieved or released from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.
(b) If this Agreement is terminated as a result of any breach of a
representation, warranty, covenant or other agreement which is caused by the
willful breach of a party hereto, such party shall be liable to the other party
for all out-of-pocket costs and expenses, including, without limitation, the
reasonable fees and expenses of lawyers, accountants and investment bankers,
incurred by such other party in connection with the entering into of this
Agreement and the carrying out of any and all acts contemplated hereunder
("Expenses"). The payment of Expenses is not an exclusive remedy, but is in
addition to any other rights or remedies available to the parties hereto at law
or in equity.
48
8.3 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 Merger by the stockholders of the Buyer
and the Seller; provided, however, that after any approval of the transactions
contemplated by this Agreement by the stockholders of the Seller, there may not
be, without further approval of such stockholders, any amendment of this
Agreement that changes the amount or the form of the consideration to be
delivered hereunder to the holders of Seller Common Stock, other than as
contemplated by this Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein; provided, however,
that after any approval of the transactions contemplated by this Agreement by
the stockholders of the Seller, there may not be, without further approval of
such stockholders, any extension or waiver of this Agreement or any portion
thereof which reduces the amount or changes the form of the consideration to be
delivered to the holders of Seller Common Stock hereunder, other than as
contemplated by this Agreement. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
MISCELLANEOUS
9.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date
and at a place to be specified by the parties, which shall be no later than five
business days after the satisfaction or waiver (subject to applicable law) of
the latest to occur of the conditions set forth in Article VII hereof, unless
extended by mutual agreement of the parties (the "Closing Date"); provided,
however, that in no event shall the Closing take place prior to January 3, 2000,
which at the Buyer's discretion may be extended to a date no later than January
31, 2000.
9.2 Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement (other than the Seller
Option Agreement, which shall
49
terminate in accordance with their terms) shall survive the Effective Time,
except for Sections 5.2(f), 6.5 and 6.6 which by its terms applies in whole or
in part after the Effective Time.
9.3 Expenses. Except as may otherwise be agreed to hereunder or in
other writing by the parties, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
9.4 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by prepaid
registered or certified mail (return receipt requested) or by telecopy, cable,
telegram or telex addressed as follows:
(a) If to Buyer, to: Citizens Financial Group, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxx X. Xxxx
Chairman, President
and Chief Executive
Officer
and to: Citizens Financial Group, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
Senior Vice President,
General Counsel and
Secretary
Tel: 000-000-0000
Fax: 000-000-0000
with required copies to: Xxxxxxx, Procter & Xxxx LLP
Xxx Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Pisa, P.C.
Tel: 000-000-0000
Fax: 000-000-0000
(b) If to Seller, to: UST Corp.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx
President and Chief
Executive Officer
and to: UST Corp.
00 Xxxxx Xxxxxx
00
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Executive Vice President,
General Counsel and Clerk
Tel: 000-000-0000
Fax: 000-000-0000
with required copies to: Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq. and
Xxxxxxx X. Xxxxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
9.5 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require the
Seller or the Buyer or any their respective subsidiaries or Affiliates to take
any action which would violate applicable law, rule or regulation. The phrases
"the date of this Agreement," "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to be June 21, 1999.
9.6 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.7 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof other than the Seller Option
Agreement.
9.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts, without regard to
any applicable conflicts of law principles.
9.9 Severability. In the event that any one or more provisions of this
Agreement
51
shall for any reason be held invalid, illegal or unenforceable in any respect,
by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and the
parties shall use their reasonable best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the original
purposes and intents of this Agreement.
9.10 Publicity. Except as otherwise required by applicable law or the
rules of the NASD, neither the Buyer nor the Seller shall, or shall permit any
of its subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the consent of the party, which consent shall not be unreasonably withheld.
9.11 Assignment; Reliance of Other Parties. Neither this Agreement nor
any of the rights, interests or obligations shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except as otherwise
specifically provided in Sections 6.5(b) and 6.6, and with respect to the
bonuses referred to in Section 5.2(f) hereof, this Agreement (including the
documents and instruments referred to herein) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
9.12 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
9.13 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, the Buyer shall be
entitled to revise the structure of the Merger, the Bank Merger and the other
transactions contemplated hereby and thereby, provided that, each of the
transactions comprising such revised structure shall (i) not subject the
stockholders of Seller, Seller or any of its subsidiaries to adverse tax
consequences, (ii) change the amount or form of consideration to be received by
the stockholders of Seller, (iii) alter to the detriment of the Seller or its
stockholders the benefits to be received by the Seller's stockholders hereunder,
(iv) jeopardize the receipt of any required regulatory approvals relating to the
consummation of the Merger or the Bank Merger, or (v) reduce the obligations of
the Buyer or the Buyer Bank hereunder or under the Bank Merger Agreement. This
Agreement and any related documents shall be appropriately amended in order to
reflect any such revised structure.
9.14 Definitions. Except as otherwise provided herein or as otherwise
clearly
52
required by the context, the following terms shall have the respective meanings
indicated when used in this Agreement:
"Affiliate" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. As used in
this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") means the possession, directly
or indirectly, of power to direct or cause the direction of the management and
policies of a Person whether through the ownership of voting securities, by
contract or otherwise.
"associate" shall have the meaning ascribed thereto in Rule 14a-1 under
the Securities Exchange of 1934, as amended.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Bank Examinations" shall have the meaning ascribed thereto in Section
4.9 hereof.
"Bank Regulator" shall mean and include, any pertinent federal or state
Governmental Authority changed with the supervision of banks or bank holding
companies or engaged in the insurance of bank deposits, including without
limitation, the FRB, the FDIC, the Massachusetts Commissioner and the MBBI.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"DOJ" shall mean the United States Department of Justice.
"EPA" shall have the meaning ascribed thereto in Section 4.24.
"Equity Investment" shall have the meaning set forth for such term as
of the date hereof in the FDIC's rules and regulations regarding activities and
investments of insured state banks at 12 C.F.R.ss.362.2(k).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or the Federal Reserve Bank of Boston, as applicable.
"GAAP" shall mean generally accepted accounting principles and
practices in effect from time to time within the United States applied
consistently throughout the period
53
involved.
"Governmental Authority" shall mean any United States federal, state or
local governmental commission, board or other regulatory authority or agency,
including courts and other judicial bodies.
"IRS" shall mean the United States Internal Revenue Service.
"Liens" shall have the meaning ascribed to such term in Section 4.19
hereof.
"Loans" shall have the meaning ascribed to such term in Section 4.20
herein.
"MBBI" shall mean the Massachusetts Board of Bank Incorporation.
"MBCL" shall mean the Massachusetts Business Corporation Law.
"MGL" shall mean the Massachusetts General Laws.
"Massachusetts Commissioner" shall mean the Commissioner of Banks of
The Commonwealth of Massachusetts.
"Material Adverse Effect" shall mean, with respect to any Person, a
change or effect that is or is reasonably likely to be materially adverse to the
business, results of operations or financial condition of such Person taken as a
whole; provided, however, that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in laws and regulations or interpretations
thereof by Governmental Authorities generally applicable to depository
institutions and their holding companies (including changes in insurance deposit
assessment rates and special assessments with respect thereto), (b) changes in
GAAP or regulatory accounting principles generally applicable to financial
institutions and their holding companies, (c) actions and omissions of the
Seller taken with the prior written consent of the Buyer, and (d) the direct
effects of compliance with this Agreement on the operating performance of the
parties including expenses incurred by the parties hereto in consummating the
transactions contemplated by this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Market System of the National
Association of Securities Dealers Automated Quotation System.
"Permitted Liens" shall have the meaning ascribed to such term in
Section 4.19.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other legal entity,
or any governmental agency or political subdivision thereof.
54
"Public Announcement" shall mean a written press release, public
announcement or public information disclosure by the Seller or the Buyer or any
of their subsidiaries relating to the Merger or the other transactions
contemplated hereby.
"Records" means all records and original documents in the Seller's
possession which pertain to and are utilized by the Seller or any of its
subsidiaries to administer, reflect, monitor, evidence or record information
respecting its business and operations, including but not limited to all records
and documents relating to (a) corporate, regulatory, supervisory and litigation
matters, (b) tax planning and payment of taxes, (c) personnel and employment
matters, and (d) the business or conduct of the business of the Seller or any of
its subsidiaries.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Contract" shall have the meaning ascribed to such term in
Section 4.18 hereof.
"Seller Disclosure Schedule" shall mean the disclosure schedule
relating to the Seller delivered to Buyer together herewith.
"Seller Rights Agreement" shall mean that certain Rights Agreement
which was adopted by the Seller on September 19, 1995, as amended.
"Seller Stock Option Plans" shall have the meaning ascribed thereto in
Section 2.10 hereof.
"Significant Subsidiary" shall mean those subsidiaries set forth in
Section 9.14 of the Seller Disclosure Schedule.
"Stockholders Agreements" shall mean those certain Stockholder
Agreements dated as of the date hereof respectively between the Buyer and
members of the Seller's board of directors and executive management and
substantially in the form attached hereto as Exhibit B.
"subsidiaries" shall mean, when used with reference to a party, any
corporation or other organization, whether incorporated or unincorporated, of
which such party or any other subsidiary of such party is a general partner
(excluding partnerships the general partnership interests of which held by such
party or any subsidiary of such party do not have a majority of the voting
interests in such partnership), or, with respect to such corporation or other
organization, at least twenty percent of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions is directly or indirectly owned
or controlled by such party or by any one or more of its subsidiaries, or by
such party and one or more of its subsidiaries.
55
"Tax" shall mean any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, intangibles, social security,
unemployment, disability, payroll, license, employee or other tax or levy, of
any kind whatsoever, including any interest, penalties or additions to tax in
respect of the foregoing.
"Tax Return" shall mean any return, declaration, report, claim for
refund, information return or other document (including any related or
supporting estimates, elections, schedules, statements or information) filed or
required to be filed in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
"Transaction Documents" shall mean this Agreement, the Bank Merger
Agreement and the Seller Option Agreement.
56
IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement
to be executed as a sealed instrument by their duly authorized officers as of
the day and year first above written.
CITIZENS FINANCIAL GROUP, INC.
By: /s/ Xxxxxxxx X. Xxxx
----------------------------
Name: Xxxxxxxx X. Xxxx
Title: Chairman, President and Chief
Executive Officer
Attest:
By: /s/ Xxxxxxx Xxxxxxx
----------------------------
/s/ Xxxx X. Xxxxxxxx Name: Xxxxxxx Xxxxxxx
----------------------- Title: Senior Vice President and Treasurer
Secretary
UST CORP.
By: /s/ Xxxx X. Xxxxxxxx
----------------------------
Name: Xxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
Attest:
By: /s/ Xxxxx X. Xxxx
----------------------------
/s/ Xxxx Xxxxxxx Name: Xxxxx X. Xxxx
----------------------- Title: Treasurer
Clerk
57
