Exhibit 2.1
[conformed copy]
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PEOPLE'S BANK,
NORWICH FINANCIAL CORP.
AND
THE NORWICH SAVINGS SOCIETY
DATED AS OF SEPTEMBER 3, 1997
TABLE OF CONTENTS
ARTICLE I - THE MERGER............................................1
1.01 The Merger.............................................1
1.02 Effective Time.........................................2
1.03 Effects of the Merger..................................2
1.04 Conversion of Target Holding Company Stock.............2
1.05 Election Procedures....................................3
1.06 Adjustments to the Merger Consideration................6
1.07 Adjustments for Dilution and Other Matters.............8
1.08 Exchange Procedures....................................8
1.09 Dissenting Shares......................................9
1.10 Options...............................................10
1.11 No Fractional Shares..................................10
1.12 Tax Consequences......................................10
ARTICLE II - CORPORATE GOVERNANCE................................10
2.01 Other Matters.........................................10
2.02 Directors.............................................11
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF TARGET
HOLDING COMPANY AND TARGET BANK............................11
3.01 Corporate Organization................................11
3.02 Capitalization........................................13
3.03 Authority; No Violation...............................14
3.04 Consents and Approvals................................16
3.05 Financial Statements..................................16
3.06 Absence of Certain Changes or Events..................17
3.07 Legal Proceedings.....................................17
3.08 Compliance with Applicable Law........................18
3.09 Taxes.................................................18
3.10 Employee Benefit and Other Plans......................19
3.11 Certain Contracts.....................................21
3.12 Target Holding Company Reports........................22
3.13 Environmental Matters.................................23
3.14 Target Holding Company Information....................23
3.15 Insurance.............................................24
3.16 Broker's Fees.........................................24
3.17 Agreements with Regulatory Agencies...................24
3.18 Material Interests of Certain Persons.................24
3.19 Labor Matters.........................................24
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3.20 Takeover Laws; Article XVII of Target Holding
Company Certificate...................................25
3.21 Allowance for Loan Losses.............................25
3.22 Risk Management Instruments...........................25
3.23 Properties............................................26
3.24 Rights Agreement......................................26
3.25 Other Liabilities.....................................27
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF
THE BANK...................................................27
4.01 Corporate Organization................................27
4.02 Capitalization........................................27
4.03 Authority; No Violation...............................28
4.04 Consents and Approvals................................28
4.05 Financial Statements..................................29
4.06 Broker's Fees.........................................30
4.07 Absence of Certain Changes or Events..................30
4.08 Legal Proceedings.....................................30
4.09 FDIC Reports..........................................30
4.10 Bank Information......................................30
4.11 Compliance With Applicable Law........................31
4.12 Agreements with Regulatory Agencies...................31
4.13 Regulatory Approvals..................................31
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS............31
5.01 Covenants of Target Holding Company and Target Bank...31
5.02 Covenants of the Bank.................................34
ARTICLE VI - ADDITIONAL AGREEMENTS...............................35
6.01 Regulatory Matters....................................35
6.02 Access to Information.................................36
6.03 Shareholder Approval..................................37
6.04 Legal Conditions to Merger............................38
6.05 Stock Listing.........................................38
6.06 Employee Benefit Plans................................38
6.07 Interim Financial Statements..........................41
6.08 Additional Agreements.................................41
6.09 Disclosure Supplements................................41
6.10 Current Information...................................42
6.11 Public Announcements..................................42
6.12 Indemnification.......................................42
6.13 No Solicitation.......................................44
6.14 Offering Circular.....................................44
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6.15 Dividends.............................................44
ARTICLE VII - CONDITIONS PRECEDENT...............................45
7.01 Conditions to Each Party's Obligations Under
This Agreement........................................45
7.02 Conditions to the Obligations of the Bank Under This
Agreement.............................................45
7.03 Conditions to the Obligations of Target
Holding Company and Target Bank Under This
Agreement.............................................47
ARTICLE VIII - CLOSING...........................................48
8.01 Time and Place........................................48
8.02 Deliveries at the Closing.............................48
ARTICLE IX - TERMINATION AND AMENDMENT...........................48
9.01 Termination...........................................48
9.02 Effect of Termination.................................51
9.03 Amendment.............................................51
9.04 Extension; Waiver.....................................51
ARTICLE X - MISCELLANEOUS........................................52
10.01 Payment to Target Holding Company....................52
10.02 Expenses.............................................52
10.03 Non-Survival of Representations and Warranties.......52
10.04 Notification of Certain Matters......................53
10.05 Notices..............................................53
10.06 Parties in Interest..................................54
10.07 Complete Agreement...................................54
10.08 Counterparts.........................................54
10.09 Governing Law........................................55
10.10 Interpretation.......................................55
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 3,
1997, by and among People's Bank, a Connecticut stock savings
bank (the "Bank"), Norwich Financial Corp., a Delaware
corporation ("Target Holding Company") and The Norwich Savings
Society, a Connecticut stock savings bank and a wholly-owned
subsidiary of Target Holding Company ("Target Bank").
WHEREAS, the Boards of Directors of the Bank, Target
Holding Company and Target Bank have determined that it is in the
best interests of their respective companies and of the
shareholders of the Bank and Target Holding Company to consummate
the business combination transaction provided for herein in which
Target Holding Company and Target Bank will, subject to the terms
and conditions set forth herein, merge with and into the Bank
(the "Merger"); and
WHEREAS, in order to protect the integrity of this
Agreement, (i) the Bank and Target Holding Company are entering
into, as of the date of this Agreement, a stock option agreement
(the "Stock Option Agreement"), providing for the issuance by
Target Holding Company of shares of Target Holding Company Common
Stock in certain events, as set forth therein, (ii) the Bank and
Target Holding Company are entering into, as of the date of this
Agreement, a termination fee agreement (the "Fee Letter"),
providing for the payment by Target Holding Company of a fee to
the Bank upon certain events set forth therein, and (iii)
People's Mutual Holdings, a Connecticut mutual bank holding
company, has by a letter agreement of even date herewith (the
"Support Agreement") agreed, subject to the terms thereof, to
vote its shares of Bank Common Stock in favor of the Merger
(subject to the terms and conditions of this Agreement) at any
meeting of shareholders of the Bank called to consider and take
action with respect thereto; and
WHEREAS, the parties desire to make certain
representations, warranties and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and
intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE MERGER
1.01 The Merger. Subject to the terms and conditions of
this Agreement, in accordance with applicable law, at the
Effective Time (as defined in Section 1.02 hereof), Target
Holding Company and Target Bank shall merge with and into the
Bank. The Bank shall be the surviving entity (hereinafter
sometimes called the "Surviving Bank") in the Merger, and shall
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continue its corporate existence and operate as a Connecticut
stock savings bank under the laws of the State of Connecticut.
Upon consummation of the Merger, the separate corporate existence
of each of Target Holding Company and Target Bank shall
terminate. Each outstanding share of stock of Target Bank
immediately prior to the Effective Time shall be cancelled and
extinguished with no payment being made therefor, and each
outstanding share of stock of Target Holding Company immediately
prior to the Effective Time shall be converted into the right to
receive payment in the Merger as provided in Section 1.04 below.
The name of the Surviving Bank shall be "People's Bank" at the
Effective Time.
1.02 Effective Time. The Merger shall become effective (the
"Effective Time") upon the later of (i) the filing with the
Secretary of State of the State of Delaware of a Certificate of
Merger (the "Delaware Secretary" and the "Delaware Certificate of
Merger"), (ii) the filing with the Secretary of State of the
State of Connecticut of a Certificate of Merger (the "Connecticut
Secretary" and the "Connecticut Certificate of Merger") together
with the approval of the Merger by the Banking Commissioner of
the State of Connecticut (the "Commissioner") along with a copy
of this Agreement, or (iii) such later date as provided for in
the Delaware Certificate of Merger and the Connecticut
Certificate of Merger.
1.03 Effects of the Merger. At and after the Effective
Time, the Merger shall have the effects set forth in Sections
33-820 and 36a-125 of the Connecticut General Statutes (the
"CGS") and Subchapter IX of The Delaware General Corporation Law
(the "DGCL"). The Surviving Bank will not have or exercise any
powers other than those now exercised or exercisable by the Bank
or Target Bank.
1.04 Conversion of Target Holding Company Stock. At the
Effective Time, by virtue of the Merger and without any action on
the part of the Bank, Target Holding Company, the Target Bank or
the holder of any of the following securities:
(a) Each share of the common stock, without par value, of
the Bank ("Bank Common Stock") issued and outstanding immediately
prior to the Effective Time shall remain outstanding and shall be
unchanged after the Merger, except to the extent a holder of
shares of Bank Common Stock shall become entitled to payment of
the fair value of such shares under the Connecticut Business
Corporation Act.
(b) Each share of the common stock, par value $.01 per
share ("Target Holding Company Common Stock"), of the Target
Holding Company issued and outstanding immediately prior to the
Effective Time, including each attached right (a "Right") issued
pursuant to the Rights Agreement, dated as of November 21, 1989,
as amended (the "Preferred Stock Rights Plan"), between the
Target Holding Company and the Rights Agent named therein, shall
cease to be outstanding and (except for (i) shares held by Target
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Holding Company as treasury shares, (ii) shares owned or
held by any direct or indirect subsidiary of Target Holding
Company (other than such shares held as security for an
obligation to Target Holding Company or such subsidiary), (iii)
shares held by the Bank other than in a fiduciary or trust
capacity for the benefit of third parties, and (iv) Dissenting
Shares (as defined in Section 1.09)) shall be converted into and
become the right to receive, at the election of the holder
thereof, either:
(A) 1.0310 (the "Exchange Ratio," which Exchange Ratio
shall be subject to adjustment pursuant to Section 1.06) shares
of Bank Common Stock (as so adjusted pursuant to Section 1.06,
the "Per Share Stock Consideration"); or
(B) $28.74 in cash (as adjusted pursuant to Section
1.06, the "Per Share Cash Consideration"); provided, however,
that the aggregate number of shares of Bank Common Stock that
shall be issued in the Merger shall be equal to 2,945,594 (the
"Stock Amount") (subject to adjustment pursuant to Section 1.06),
and the aggregate amount of cash that shall be paid in the Merger
shall be equal to $81,671,000 (as adjusted pursuant to Section
1.06(a), the "Base Cash Consideration") plus any Cash Adjustment
as defined in Section 1.06, minus the Aggregate Option Settlement
Amount (as defined in Section 1.06); and provided further, that
the above elections shall be subject to the operation of Section
1.05.
(c) Each share of preferred stock, par value $.01, of
Target Holding Company shall automatically be canceled and shall
cease to exist with no payment being made therefor.
(d) (i) All shares of Target Holding Company Common Stock
that are held by Target Holding Company as treasury shares, (ii)
all shares of Target Holding Company Common Stock that are owned
or held directly or indirectly by any direct or indirect
subsidiary of Target Holding Company (other than such shares held
as security for an obligation to Target Holding Company or such
subsidiary), and (iii) all shares of Target Holding Company
Common Stock held by the Bank other than in a fiduciary or trust
capacity for the benefit of third parties shall be canceled and
shall cease to exist and no stock of the Bank or other
consideration shall be delivered in exchange therefor.
1.05 Election Procedures. Election forms and other
appropriate and customary transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and
title to the certificates theretofore representing Target Holding
Company Common Stock ("Certificates") shall pass, only upon
proper delivery of such Certificates to an exchange agent
designated by the Bank (the "Exchange Agent")) in such form as
the Bank and Target Holding Company shall mutually agree
("Election Forms") shall be mailed 30 days prior to the
anticipated Effective Time or on such other earlier date as
Target Holding Company and the Bank shall mutually agree
("Mailing Date") to each holder of record of Target Holding
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Company Common Stock as of five business days prior to the
Mailing Date ("Election Form Record Date").
Each Election Form shall permit the holder (or the
beneficial owner through appropriate and customary documentation
and instructions) either (i) to elect to receive only Bank Common
Stock with respect to such holder's Target Holding Company Common
Stock ("Stock Election Shares"); (ii) to elect to receive only
cash with respect to such holder's Target Holding Company Common
Stock ("Cash Election Shares"); or (iii) to indicate that such
holder makes no election ("No Election Shares"). Dissenting
Shares (as defined below) shall be treated as No Election Shares.
Any Target Holding Company Common Stock with respect to
which the holder (or the beneficial owner, as the case may be)
shall not have submitted to the Exchange Agent an effective,
properly completed Election Form on or before 5:00 p.m. on the
25th day following the Mailing Date (or such other time and date
as the Bank and Target Holding Company may mutually agree) (the
"Election Deadline") shall also be deemed to be No Election
Shares.
Any such election shall have been properly made only if the
Exchange Agent shall have actually received a properly completed
Election Form by the Election Deadline. An Election Form shall be
deemed properly completed only if accompanied by one or more
Certificates (or customary affidavits and indemnification
regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares
of Target Holding Company Common Stock covered by such Election
Form, together with duly executed transmittal materials included
in the Election Form. Any Election Form may be revoked or changed
by the person submitting such Election Form at or prior to the
Election Deadline. In the event an Election Form is revoked prior
to the Election Deadline, the shares of Target Holding Company
Common Stock represented by such Election Form shall become No
Election Shares and the Bank shall cause the Certificates to be
promptly returned without charge to the person submitting the
Election Form upon written request to that effect from the person
who submitted the Election Form. Subject to the terms of this
Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election,
revocation or change has been properly or timely made and to
disregard immaterial defects in the Election Forms, and any good
faith decisions of the Exchange Agent regarding such matters
shall be binding and conclusive. Neither Bank nor the Exchange
Agent shall be under any obligation to notify any person of any
defect in an Election Form.
Within five business days after the Election Deadline,
unless the Effective Time has not yet occurred, in which case as
soon after the Effective Time as practicable, the Bank shall
cause the Exchange Agent to effect the allocation among the
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holders of Target Holding Company Common Stock of rights to
receive Bank Common Stock and/or cash in the Merger in accordance
with the Election Forms, subject to the following procedures.
(i) Stock Elections Less Than the Stock Amount. If the
number of shares of Bank Common Stock that would be issued upon
conversion in the Merger of the Stock Election Shares is less
than the Stock Amount, then:
(A) all Stock Election Shares shall be converted
into the right to receive the Per Share Stock
Consideration,
(B) the Exchange Agent shall then select first
from among the No Election Shares and then (if
necessary) from among the Cash Election Shares, by a
pro rata selection process (as described below), a
sufficient number of shares ("Stock Designated
Shares"), such that the number of shares of Bank
Common Stock that will be issued in the Merger equals
as closely as practicable the Stock Amount, and all
Stock Designated Shares shall be converted into the
right to receive the Per Share Stock Consideration,
and
(C) the Cash Election Shares and the No Election
Shares which are not Stock Designated Shares shall be
converted into the right to receive the Per Share Cash
Consideration.
(ii) Stock Elections More Than the Stock Amount. If the
number of shares of Bank Common Stock that would be issued upon
conversion in the Merger of the Stock Election Shares is greater
than the Stock Amount, then:
(A) all Cash Election Shares and No Election
Shares shall be converted into the right to receive
the Per Share Cash Consideration,
(B) the Exchange Agent shall then select from
among the Stock Election Shares, by a pro rata
selection process (as described below), a sufficient
number of shares ("Cash Designated Shares") such that
the number of shares of Bank Common Stock that will be
issued in the Merger equals as closely as practicable
the Stock Amount, and all Cash Designated Shares shall
be converted into the right to receive the Per Share
Cash Consideration, and
(C) the Stock Election Shares which are not Cash
Designated Shares shall be converted into the right to
receive the Per Share Stock Consideration.
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(iii) Stock Elections Equal to the Stock Amount. If the
number of shares of Bank Common Stock that would be issued upon
conversion into Bank Common Stock of the Stock Election Shares is
equal or nearly equal (as determined by the Exchange Agent) to
the Stock Amount, then subparagraphs (i) and (ii) above and
subparagraph (iv) below shall not apply and all Stock Election
Shares shall be converted into the right to receive the Per Share
Stock Consideration, and all Cash Election Shares and No Election
Shares shall be converted into the right to receive the Per Share
Cash Consideration; or
(iv) Stock Elections and No Elections Equal to the Stock
Amount. If the number of shares of Bank Common Stock that would
be issued upon the conversion into Bank Common Stock of the Stock
Election Shares and No Election Shares would equal or nearly
equal (as determined by the Exchange Agent) the Stock Amount,
then subparagraphs (i), (ii) and (iii) above shall not apply, and
all Cash Election Shares shall be converted into the right to
receive the Per Share Cash Consideration and all Stock Election
Shares and No Election Shares shall be converted into the right
to receive the Per Share Stock Consideration.
The pro rata selection process to be used by the Exchange
Agent shall consist of such equitable proration processes as
shall be mutually determined by Bank and Target Holding Company.
1.06 Adjustments to the Merger Consideration. (a) The Stock
Amount shall be adjusted as of the end of the ten (10)
consecutive trading-day period (the "Valuation Period") during
which the shares of Bank Common Stock are traded on the NASDAQ
Stock Market National Market System ("NASDAQ") ending on the date
on which the last of the regulatory approvals required for the
consummation of the Merger occurs (the "Valuation Date"). If the
Valuation Period Market Value of Bank Common Stock is less than
$27.875, the Stock Amount shall be equal to the amount obtained
by (A) multiplying 2,945,594 by $27.875 and (B) dividing the
product thereof by the Floor Value. If the Valuation Period
Market Value is greater than $27.875, the Stock Amount shall be
equal to the amount obtained by (A) multiplying 2,945,594 by
$27.875 and (B) dividing the product thereof by the Ceiling
Value. Notwithstanding the foregoing, if the Valuation Period
Market Value shall be below the Floor Value, the Bank may in its
discretion increase the Stock Amount and decrease the Base Cash
Consideration so long as (i) the Average Per Share Consideration
shall remain equal to that resulting from the application of the
preceding sentence and (ii) the percentage of the Aggregate
Consideration accounted for by cash shall not be less than that
which would exist if the Valuation Period Market Value were equal
to the Floor Value.
(b) Based on the revised Stock Amount calculated under
Section 1.06(a), the Per Share Stock Consideration and Per Share
Cash Consideration shall be adjusted as follows. The Per Share
Stock Consideration shall be adjusted by adjusting the Exchange
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Ratio such that the product of the Exchange Ratio (rounded
to the nearest 1/1000th of a share) and the Valuation Period
Market Value shall equal the Average Per Share Consideration. The
Per Share Cash Consideration shall be adjusted to equal the
Average Per Share Consideration.
(c) For purposes of this Section 1.06, the following
definitions shall apply:
"Aggregate Consideration" shall mean (x) the product of (i)
the Stock Amount (as adjusted in Section 1.06(a)) times (ii) the
Valuation Period Market Value, plus (y) the Base Cash
Consideration plus the Cash Adjustment, if any, minus (z) the
Aggregate Option Settlement Amount.
"Aggregate Option Settlement Amount" means, as determined
on the Valuation Date, (i) (x) the number of unexercised Options
times (y) the Fully Diluted Per Share Consideration minus (ii)
the aggregate exercise price of all unexercised Options.
"Average Per Share Consideration" shall mean the Aggregate
Consideration divided by the Valuation Period Share Number
(rounded to the nearest cent).
"Cash Adjustment" means the aggregate exercise price
received by Target Holding Company in respect of all Options
exercised prior to the Valuation Date.
"Ceiling Value" shall mean the lesser of (a) the Valuation
Period Market Value and (b) $29.27.
"Floor Value" shall mean the greater of (a) the Valuation
Period Market Value and (b) $26.48.
"Fully Diluted Common Stock Number" means, as determined on
the Valuation Date, the sum of (a) the Valuation Period Share
Number and (b) the number of shares of Target Holding Company
Common Stock issuable upon exercise of all unexercised Options.
"Fully Diluted Per Share Consideration" means, as
determined on the Valuation Date, (i) (x) the product of the
Stock Amount (as adjusted in Section 1.06(a)) and the Valuation
Period Market Value, plus (y) the Base Cash Consideration (plus
the Cash Adjustment, if any) plus (z) the aggregate exercise
price of all unexercised Options divided by (ii) the Fully
Diluted Common Stock Number.
"Valuation Period Market Value" shall mean the average of
the closing sale prices for the Bank Common Stock as reported on
NASDAQ (as reported in The Wall Street Journal or in the absence
thereof, by another authoritative source) during the Valuation
Period.
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"Unexercised Options" shall refer to in the money Options.
"Valuation Period Share Number" shall mean the total number
of shares of Target Holding Company Common Stock outstanding, or
in respect of which an Option has been exercised (other than
shares referred to in Section 1.04(d)), on the Valuation Date.
1.07 Adjustments for Dilution and Other Matters. If prior
to the Effective Time, and subject to the provisions of Article
V, (i) Target Holding Company shall declare a stock dividend or
distribution upon or subdivide, split up, reclassify or combine
the Target Holding Company Common Stock, or declare a dividend or
make a distribution on the Target Holding Company Common Stock in
any security convertible into or exchangeable for Target Holding
Company Common Stock, or (ii) the Bank shall declare a stock
dividend or distribution upon or subdivide, split up, reclassify
or combine the Bank Common Stock or declare a dividend or make a
distribution on the Bank Common Stock in any security convertible
into or exchangeable for Bank Common Stock, appropriate
adjustment or adjustments will be made to the Per Share Cash
Consideration, the Per Share Stock Consideration and the Stock
Amount.
1.08 Exchange Procedures. (a) Subject to Section 1.07, each
previous holder of a Certificate that has surrendered such
Certificate together with duly executed transmittal materials
included in the Election Form to the Bank or, at the election of
the Bank, the Exchange Agent, pursuant to Section 1.05 will, upon
acceptance thereof by the Bank or the Exchange Agent, be entitled
to a certificate or certificates representing the number of full
shares of Bank Common Stock or cash into which the Certificate so
surrendered shall have been converted pursuant to this Agreement
and any distribution theretofore declared and not yet paid with
respect to such shares of Bank Common Stock, all without
interest.
(b) The Exchange Agent shall accept Certificates upon
compliance with such reasonable terms and conditions as the Bank
or the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with customary exchange practices.
Certificates shall be appropriately endorsed or accompanied by
such instruments of transfer as the Bank or the Exchange Agent
may reasonably require.
(c) Each outstanding Certificate shall until duly
surrendered to the Bank or the Exchange Agent be deemed to
evidence ownership of the consideration into which the stock
previously represented by such Certificate shall have been
converted pursuant to this Agreement.
(d) After the Effective Time, holders of Certificates shall
cease to have rights with respect to the stock previously
represented by such Certificates, and their sole rights shall be
to exchange such Certificates for the consideration provided for
in this Agreement. After the Effective Time, there shall be no
further transfer on the records of Target Holding Company of
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Certificates, and if such Certificates are presented to Target
Holding Company for transfer, they shall be canceled against
delivery of the consideration provided therefor in this
Agreement. The Bank shall not be obligated to deliver the
consideration to which any former holder of Target Holding
Company Common Stock is entitled as a result of the Merger until
such holder surrenders the Certificates as provided herein. No
dividends declared will be remitted to any person entitled to
receive Bank Common Stock under this Agreement and such person
shall not be entitled to vote such Bank Common Stock or otherwise
receive property in respect thereof as set forth in Section
36a-125(h) of the C.G.S., until such person surrenders the
Certificate representing the right to receive such Bank Common
Stock, at which time such dividends shall be remitted to such
person, without interest and less any taxes that may have been
imposed thereon. Certificates surrendered for exchange by any
person constituting an "affiliate" of Target Holding Company for
purposes of Rule 145 of the Securities Act of 1933, as amended
(together with the rules and regulations thereunder, the
"Securities Act"), shall not be exchanged for certificates
representing Bank Common Stock until the Bank has received a
written agreement from such person in a form reasonably
acceptable to the parties. The Target Holding Company shall cause
each person who may be deemed to be an affiliate for such purpose
to execute and deliver to the Bank an agreement in such form on
or before the date of mailing of the Joint Proxy Statement.
Neither the Exchange Agent nor any party to this Agreement nor
any affiliate thereof shall be liable to any holder of stock
represented by any Certificate for any consideration paid to a
public official pursuant to applicable abandoned property,
escheat or similar laws. The Bank and the Exchange Agent shall be
entitled to rely upon the stock transfer books of Target Holding
Company to establish the identity of those persons entitled to
receive consideration specified in this Agreement, which books
shall be conclusive with respect thereto. In the event of a
dispute with respect to ownership of stock represented by any
Certificate, the Bank and the Exchange Agent shall be entitled to
deposit any consideration represented thereby in escrow with an
independent third party (including by means of an interpleader
action) and thereafter be relieved with respect to any claims
thereto.
1.09 Dissenting Shares. (a) "Dissenting Shares" means any
shares of Target Holding Company Common Stock held by any holder
who duly demands appraisal under the DGCL at or prior to the
Target Holding Company meeting approving the Merger. Any holders
of Dissenting Shares shall be entitled to payment for such shares
only to the extent permitted by and in accordance with the
provisions of the DGCL; provided, however, that for purposes of
Section 1.05, Dissenting Shares shall be deemed to be No Election
Shares.
(b) Target Holding Company shall give the Bank (i) prompt
notice of any written objections to the Merger and any written
demands for the payment of the fair value of any shares,
withdrawals of such demands, and any other instruments served
pursuant to the DGCL received by Target Holding Company and (ii)
the opportunity to direct all negotiations and proceedings with
respect to such demands under the DGCL. Target Holding Company
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shall not voluntarily make any payment with respect to any
demands for payment of fair value and shall not, except with the
prior written consent of the Bank, settle or offer to settle any
such demands.
1.10 Options. Each holder of an outstanding and exercisable
option on the Valuation Date to purchase shares of Target Holding
Company Common Stock heretofore granted under an employee or
Director stock option plan, program or arrangement of Target
Holding Company (such options, "Options" and all such plans,
"Stock Option Plans") (i) may not exercise such Option on or
after the Valuation Date and (ii) will be entitled to receive in
settlement for each Option so held a cash payment from the Bank
in an amount equal to the excess, if any, of the Average Per
Share Consideration over the per share exercise price of such
Option, multiplied by the number of shares of Target Holding
Company Common Stock covered by such Option. All such Options
shall be canceled and of no further effect as of the Effective
Time.
1.11 No Fractional Shares. Notwithstanding any other
provision of this Agreement, neither certificates nor scrip for
fractional shares of Bank Common Stock shall be issued in the
Merger. Each holder who otherwise would have been entitled to a
fraction of a share of Bank Common Stock shall receive in lieu
thereof cash (without interest) in an amount determined by
multiplying the fractional share interest to which such holder
would otherwise be entitled by the closing sale price for the
Bank Common Stock as reported on NASDAQ (as reported in The Wall
Street Journal) for the trading day immediately preceding the
Effective Time. No such holder shall be entitled to dividends,
voting rights or any other rights of any fractional share.
1.12 Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"),
and that this Agreement shall constitute a "plan of
reorganization" for purposes of Section 368 of the Code.
ARTICLE II
CORPORATE GOVERNANCE
2.01 Other Matters. At and after the Effective Time: (i)
the Surviving Bank's main office shall be located in Bridgeport,
Connecticut, (ii) except as provided in Section 2.02 below, the
Directors and officers of the Bank holding office immediately
prior to the Effective Time shall be the Surviving Bank's
Directors and officers, (iii) the Articles of Incorporation and
Bylaws of the Bank existing immediately prior to the Effective
Time shall be the Articles of Incorporation and Bylaws of the
Surviving Bank, (iv) the authorized capital stock of the
Surviving Bank at the Effective Time shall consist of 100,000,000
shares of common stock, without par value, and 10,000,000 shares
of preferred stock, without par value, and (v) the
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minimum number of Directors of the Surviving Bank shall be 9 and
the maximum number of Directors of the Surviving Bank shall be 16
as set forth in the Bylaws of the Surviving Bank defined in
clause (iii) of this Section 2.01.
2.02 Directors. At the Effective Time, the Bank shall take
such action as shall be necessary to cause one director of Target
Holding Company, to be selected by the Board of Directors of the
Bank, to serve as an additional member of the Board of Directors
of the Bank (with an initial term ending not earlier than at the
1998 annual meeting and subject to reelection thereat for a full
three-year term). The non-employee Directors of Target Holding
Company serving immediately prior to the Effective Time will be
invited to serve on an advisory board to the Bank for the
southeastern region of Connecticut after the Merger with an
initial term ending at the 1998 annual meeting and subject to
reelection annually.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
HOLDING COMPANY AND TARGET BANK
Target Holding Company and Target Bank hereby jointly and
severally represent and warrant to the Bank as follows:
3.01 Corporate Organization.
(a) Target Holding Company is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. Target Holding Company has the
corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business
and is in 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 or leased by it makes such
licensing or qualification necessary. Target Holding Company is
duly registered as a bank holding company under the Bank Holding
Company Act (the "BHC Act"). The copies of Target Holding
Company's Certificate of Incorporation and Bylaws, each certified
by its Secretary as of the date of this Agreement, which are
being delivered to the Company herewith, are complete and correct
copies in effect as of the date of this Agreement.
(b) Except as listed on the attached Schedule 3.01(b)
of the Disclosure Schedule being provided concurrently herewith
(the "Disclosure Schedule"), Target Holding Company does not have
any direct or indirect wholly-owned Subsidiaries or capital stock
or other equity ownership interest in any corporation,
partnership or other entity which totals 5% or
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more of such entity's total equity. Except as disclosed on
Schedule 3.01(b), Target Holding Company or Target Bank, as the
case may be, owns, directly or indirectly, at least 99% of the
issued and outstanding capital stock of each of its respective
Subsidiaries, and no equity securities of any of such
Subsidiaries are or may become required to be issued (other than
to Target Holding Company or Target Bank) by reason of any
outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or
issuance of any shares of such Subsidiary's capital stock. There
are no contracts, commitments, understandings or arrangements by
which any of such Subsidiaries is or may be bound to sell or
otherwise transfer any shares of the capital stock of any such
Subsidiary (other than to Target Holding Company or Target Bank),
there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such
shares (other than to Target Holding Company or Target Bank), and
all of the shares of capital stock of each such subsidiary held
by Target Holding Company or Target Bank are fully paid and
nonassessable and are owned by Target Holding Company or Target
Bank free and clear of any charge, mortgage, pledge, security
interest, restriction, claim, lien or encumbrance. Neither Target
Holding Company nor Target Bank owns (other than in a bona fide
fiduciary capacity or in satisfaction of a debt previously
contracted) beneficially, directly or indirectly, any shares of
any equity securities or similar interests of any person, or any
interests in a partnership or joint venture of any kind other
than as set forth in Schedule 3.01(b). Each Subsidiary of Target
Holding Company and Target Bank has been duly organized and is
validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do
business and in good standing in the jurisdictions where its
ownership or leasing of property or the conduct of its business
requires it to be so qualified. Each of such Subsidiaries has in
effect all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties
and assets and to carry on its business as it is now conducted.
As used in this Agreement, the word "Subsidiary," when used in
respect to any party, means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is
consolidated with such party for financial statement purposes.
(c) Target Bank is a capital stock savings bank duly
organized, validly existing and in good standing under the
banking laws of the State of Connecticut. Target Bank has the
corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now
being conducted. Target Bank has all necessary federal, state and
local banking authorizations to own or lease its properties and
assets and to carry on its business as it is being conducted. The
accounts of depositors of Target Bank are insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation (the "FDIC") in accordance with law and with the
regulations of the FDIC and all premiums and assessments required
in connection therewith have been paid. The copies of Target
Bank's Certificate of Incorporation and Bylaws, each certified by
its Secretary as of the date of this Agreement, which
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are being delivered to the Company herewith, are complete and
correct copies in effect as of the date of this Agreement.
(d) The minute books of Target Holding Company and
Target Bank and their Subsidiaries, respectively, copies of which
have been previously delivered or made available to the Bank,
contain complete and accurate records of all meetings through
July 31, 1997, and other corporate actions of their respective
shareholders and Board of Directors (including committees of
their respective Boards of Directors).
3.02 Capitalization.
(a) The authorized capital stock of Target Holding
Company consists solely of 26,000,000 shares, consisting of
25,000,000 shares of Target Holding Company Common Stock, $.01
par value, and 1,000,000 shares of preferred stock, $.01 par
value ("Preferred Stock"). As of the date of this Agreement,
there are 5,432,341 shares of Target Holding Company Common Stock
issued and outstanding, 521,540 shares held in Target Holding
Company's treasury, and (except as described below) no shares
reserved for issuance upon exercise of outstanding Options. There
are no Options which have been exercised in respect of which
shares are not issued and outstanding on the date hereof. The
aggregate number of Options outstanding and unexercised as of the
date hereof under all of Target Holding Company's Stock Option
Plans is 446,050. At the date of this Agreement, no shares of
preferred stock are outstanding and no shares of Target Holding
Company Preferred Stock have heretofore been issued or are
outstanding. All issued and outstanding shares of Target Holding
Company Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. Except for 446,050 shares
of Target Holding Company Common Stock reserved for issuance upon
exercise of outstanding stock options that have been granted
pursuant to Target Holding Company's Stock Option Plans, and
125,000 shares of Preferred Stock reserved for issuance upon
exercise of the Rights (the "Target Holding Company Rights")
distributed to holders of Target Holding Company Common Stock
pursuant to the Preferred Stock Rights Plan (as described in
Target Holding Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996) of Target Holding Company,
Target Holding Company does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or
issuance of any shares of Target Holding Company capital stock or
any security representing the right to purchase or otherwise
receive any capital stock of Target Holding Company, except
pursuant to this Agreement or the Stock Option Agreement. None of
the shares of capital stock of Target Holding Company has been
issued in violation of the preemptive rights of any person.
(b) The authorized capital stock of Target Bank
consists of 50,000,000 shares, consisting of 45,000,000 shares of
common stock, $1.00 par value ("Target Bank Common
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Stock"), and 5,000,000 shares of preferred stock, no par value.
As of the date of this Agreement, there are 5,747,451 shares of
Target Bank Common Stock issued and outstanding, all of which are
held by Target Holding Company, and no shares held in Target
Bank's treasury or reserved for issuance. At the date of this
Agreement, no shares of preferred stock are outstanding or
reserved for issuance and no shares of Target Bank preferred
stock have heretofore been issued or are outstanding. All issued
and outstanding shares of Target Bank Common Stock have been duly
authorized and validly issued and are fully paid and
nonassessable. Target Bank does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or
issuance of any shares of Target Bank capital stock or any
security representing the right to purchase or otherwise receive
any capital stock of Target Bank. None of the shares of capital
stock of Target Bank are subject to any preemptive rights or were
issued in violation of the preemptive rights or subscription
rights of any person.
3.03 Authority; No Violation.
(a) Target Holding Company has all necessary corporate
power and authority to execute and deliver this Agreement, the
Stock Option Agreement and the Fee Letter and to consummate the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the Stock Option Agreement and the
Fee Letter by Target Holding Company and the consummation by
Target Holding Company of the transactions contemplated by this
Agreement have been duly and validly approved by the Board of
Directors of Target Holding Company (including with respect to
all actions to be taken by Target Holding Company in its capacity
as shareholder of Target Bank). The Board of Directors of Target
Holding Company has directed that this Agreement and the Merger
and the transactions contemplated hereby be submitted to Target
Holding Company's shareholders for consideration at a meeting of
such shareholders and, except for the adoption of this Agreement
by the requisite vote of Target Holding Company's shareholders,
no other corporate proceedings on the part of Target Holding
Company are necessary to approve this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Target Holding Company
and (assuming adoption of the Agreement by the requisite vote of
Target Holding Company's shareholders, and due authorization,
execution and delivery by the Bank) constitutes a legal, valid
and binding obligation of Target Holding Company, enforceable
against Target Holding Company in accordance with its terms,
except as enforcement may be limited by general principles of
equity, whether applied in a court of law or a court of equity,
and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Neither the execution and delivery of this
Agreement, the Stock Option Agreement or the Fee Letter by Target
Holding Company, nor the consummation by Target
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Holding Company of the transactions contemplated hereby or
thereby, nor compliance by Target Holding Company with any of the
terms or provisions hereof or thereof, will (i) violate any
provision of the Certificate of Incorporation or Bylaws of Target
Holding Company or (ii) assuming that the consents and approvals
referred to in Section 3.04 hereof are duly obtained, (x) violate
any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Target Holding Company
or any of its Subsidiaries, or (y) violate, result in a breach of
any provision of, constitute a default under, or result in the
creation of any material lien, pledge, security interest, charge
or other encumbrance upon any of the properties or assets of
Target Holding Company under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to
which Target Holding Company is a party, or by which it or any of
its properties or assets may be bound or affected. The Stock
Option Agreement and the Fee Letter do not violate any provisions
of the Certificate of Incorporation or Bylaws of Target Holding
Company.
(c) Target Bank has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated thereby. Target Holding Company in
its capacity as sole shareholder of Target Bank has held all
meetings, taken all votes and taken all other corporate action
necessary to effect approval of this Agreement and the
transactions contemplated hereby by Target Bank. No other
corporate proceedings on the part of Target Bank are necessary to
consummate the transactions contemplated thereby. The Agreement
has been duly and validly executed and delivered by Target Bank
and will (assuming due authorization, execution and delivery by
the Bank) constitute a legal, valid and binding obligation of
Target Bank, enforceable against Target Bank in accordance with
its terms, except as enforcement may be limited by general
principles of equity, whether applied in a court of law or a
court of equity, and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(d) Neither the execution and delivery of this
Agreement by Target Bank, nor the consummation by Target Bank of
the transactions contemplated thereby, nor compliance by Target
Bank with any of the terms or provisions thereof, will (i)
violate any provision of the Certificate of Incorporation or
Bylaws of Target Bank or (ii) assuming that the consents and
approvals referred to in Section 3.04 hereof are duly obtained,
(x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Target
Bank or any of its Subsidiaries, or (y) violate, result in a
breach of any provision of, constitute a default under, or result
in the creation of any material lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets
of Target Bank under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which
Target Bank is a party, or by which it or any of its properties
or assets may be bound or affected.
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3.04 Consents and Approvals. Except for (i) the filing of
applications and notices or requests for waivers, as applicable,
with the Board of Governors of the Federal Reserve System (the
"FRB") under the BHC Act, and approval of such applications and
notices or granting of such waivers, (ii) the filing of
applications and notices, as applicable, with the FDIC under the
Bank Merger Act and approval of such applications and notices,
(iii) the filing of applications with the Commissioner under
Sections 36a-125 and 36a-184 of the CGS, and approvals of such
applications, (iv) the approval of the Merger and this Agreement
by the requisite vote of the shareholders of Target Holding
Company, (v) the filing of the Connecticut Certificate of Merger
with the Connecticut Secretary, (vi) the filing of the Delaware
Certificate of Merger with the Delaware Secretary, (vii) the
filing of the Commissioner's approval of the Merger with the
Connecticut Secretary, (viii) the filing of this Agreement with
the Connecticut Secretary, and (ix) such filings, authorizations
or approvals as may be set forth in Schedule 3.04, no consents or
approvals of or filings or registrations with any governmental
entity or with any third party or under any law, rule,
regulations, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument are necessary in
connection with the execution and delivery by Target Holding
Company and Target Bank of this Agreement and the consummation by
Target Holding Company and Target Bank of the Merger and the
other transactions contemplated hereby.
3.05 Financial Statements. Target Holding Company has
previously delivered to the Bank copies of (a) the consolidated
balance sheets of Target Holding Company and its Subsidiaries as
of December 31 for each of the two fiscal years 1995 and 1996 and
the related consolidated statements of income, changes in
shareholders' equity and cash flows for the fiscal years 1995 and
1996, as included in Target Holding Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 filed with
the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and (b) the unaudited consolidated balance sheets of Target
Holding Company and its Subsidiaries as of June 30, 1997, and the
related unaudited consolidated statements of income, changes in
shareholders' equity and cash flows for the six month period then
ended as reported in Target Holding Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1997 filed with the SEC
under the Exchange Act. The June 30, 1997 consolidated balance
sheet of Target Holding Company (including the related notes,
where applicable) fairly presents in all material respects the
consolidated financial position of Target Holding Company and its
Subsidiaries as of the date thereof, and the other financial
statements referred to in this Section 3.05 (including the
related notes where applicable) fairly present in all material
respects the results of the consolidated operations and changes
in shareholders' equity and consolidated financial position of
Target Holding Company and its Subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth;
each of the foregoing financial statements (including the related
notes, where applicable) ("Financial Statements") complies in all
material respects with the applicable accounting requirements and
with the published rules and regulations of the SEC
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with respect thereto, and each of such statements (including the
related notes, where applicable) has been prepared in accordance
with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q. Without limiting the
generality of the foregoing, the financial statements as of, and
for, the six month period ending June 30, 1997 were prepared on a
basis consistent with Target Holding Company's audited financials
for the year ended December 31, 1996. The books and records of
Target Holding Company have been, and are being, maintained in
all material respects in accordance with applicable legal and
accounting requirements and reflect only valid transactions.
3.06 Absence of Certain Changes or Events. Except as may be
reflected in the Target Holding Company's Form 10-Q for the six
months ended June 30, 1997 or set forth in Schedule 3.06, since
December 31, 1996:
(a) there has not been any material adverse change in
the Target Holding Company and its Subsidiaries, their
businesses or operations taken as a whole;
(b) there has not been any incurrence by the Target
Holding Company or Target Bank of any liability that has
had, or to the knowledge of the Target Holding Company or
Target Bank, could reasonably be expected to have, a
material adverse effect on the Target Holding Company and
its Subsidiaries taken as a whole; and
(c) there has not been any change in any of the
accounting methods or practices of the Target Holding
Company or any of its Subsidiaries other than changes
required by applicable law or GAAP.
3.07 Legal Proceedings. There are no pending or to the
knowledge of Target Holding Company or Target Bank, threatened,
legal, administrative, arbitral or other proceedings, claims,
actions or governmental investigations of any nature against
Target Holding Company or Target Bank or any Subsidiary thereof,
as to which there is, in the judgment of the Target Holding
Company or Target Bank, a reasonable likelihood of adverse
determination and which if adversely determined, would,
individually or in the aggregate, (i) have a material adverse
effect on Target Holding Company or Target Bank and their
Subsidiaries, or their business or operations taken as a whole,
or (ii) as of the date hereof, prevent or materially and
adversely affect Target Holding Company's or Target Bank's
ability to consummate the transactions contemplated hereby. Set
forth in Schedule 3.07 hereto is a list of any pending or to the
knowledge of the Target Holding Company or Target Bank,
threatened, legal, administrative, arbitral or other proceeding,
claim, action or governmental investigation of any nature against
the Target Holding Company or Target Bank or any Subsidiary
thereof which involves a claim of $100,000 or more.
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3.08 Compliance with Applicable Law. Each of Target Holding
Company, Target Bank and each of their Subsidiaries holds, and
has at all times held, all material licenses, franchises, permits
and authorizations necessary for the lawful conduct of its
respective business under and pursuant to all, and has complied
with and is not in default under any, applicable law, statute,
order, rule or regulation of any governmental entity relating to
Target Holding Company, Target Bank or any of their Subsidiaries,
except where the failure to hold such license, franchise, permit
or authorization or such noncompliance or default would not have
a material adverse effect on Target Holding Company or Target
Bank, and neither Target Holding Company, Target Bank nor any of
their Subsidiaries has received notice of any material violations
of any of the above.
3.09 Taxes. Target Holding Company and its Subsidiaries
have properly and accurately completed and duly filed in correct
form and in a timely manner all federal, state, local and foreign
information and tax returns required to be filed by them (all
such returns being accurate and complete in all material
respects) and have duly paid or made provisions for the payment
of all taxes and other charges which have been incurred or are
due or claimed to be due from them by federal, state, local or
foreign taxing authorities (including, without limitation, those
due in respect of its properties, income, business, capital
stock, deposits, franchises, licenses, sales and payrolls). The
amounts set up as reserves for taxes on the Financial Statements
for the period ended December 31, 1996 are, with such exceptions
as are not material, sufficient in the aggregate for the payment
of all unpaid federal, state, local and foreign taxes (including
any interest or penalties thereon and including reserves for
local real estate or other property taxes in an amount which is
at least as great as the amount of such taxes paid in any prior
year), whether or not disputed, accrued or applicable for the
period ended December 31, 1996 or for any year or period prior
thereto, and for which Target Holding Company or any Subsidiary
may be liable in its own right or as transferee of the assets of,
or successor to, any corporation, person, association,
partnership, joint venture or other entity. The federal and state
income tax returns of Target Holding Company and its Subsidiaries
are not presently being examined by the Internal Revenue Service
or the Department of Revenue Services, nor have Target Holding
Company or any Subsidiary been notified of a pending examination.
To the best of Target Holding Company's knowledge, there are no
pending or threatened questions relating to, or claims asserted
for, taxes or assessments upon Target Holding Company or any
Subsidiary nor has Target Holding Company or any Subsidiary given
or been requested to give any waivers extending the statutory
period of limitation applicable to any federal, state, local or
foreign income tax return for any period other than that given in
prior years for which the years are now closed. Proper and
accurate amounts have been withheld by Target Holding Company and
its Subsidiaries from their employees for all prior periods in
compliance with the tax withholding provisions of applicable
federal, state and local laws; federal, state, local and foreign
returns, accurate and complete in all material respects, have
been filed by Target Holding Company and its Subsidiaries for all
periods for which returns were due with respect to income tax
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withholding, Social Security, property, sales, retirement plan
and unemployment taxes; and the amounts shown on such returns to
be due and payable have been paid in full or adequate provision
therefor has been included by Target Holding Company in its
consolidated financial statements as of December 31, 1996. Target
Holding Company and Target Bank have no reason to believe that
any conditions exist that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section
368(a) of the Code.
3.10 Employee Benefit and Other Plans.
Schedule 3.10 contains a complete list of all bonus,
vacation, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock appreciation and
stock option plans, all employment or severance contracts, all
medical, dental, disability, severance, health and life plans,
all other employee benefit and fringe benefit plans, contracts or
arrangements and any "change of control" or similar provisions in
any plan, contract or arrangement maintained or contributed to by
Target Holding Company, Target Bank and their respective
Subsidiaries for the benefit of officers, former officers,
employees, former employees, directors, former directors, or the
beneficiaries of any of the foregoing (collectively,
"Compensation and Benefit Plans").
(a) True and complete copies of each of Target Holding
Company's and Target Bank's Compensation and Benefit Plans,
including, but not limited to, any trust instruments and/or
insurance contracts, if any, and all amendments thereto have been
supplied or made available to the Bank.
(b) Each of Target Holding Company's, Target Bank's
and their respective Subsidiaries' Compensation and Benefit Plans
has been administered in accordance with the terms thereof. All
"employee benefit plans" within the meaning of Section 3(3) of
ERISA, other than "multiemployer plans" within the meaning of
Section 3(37) of ERISA ("Multiemployer Plans"), covering
employees or former employees of Target Holding Company, Target
Bank and their respective Subsidiaries ("Plans"), to the extent
subject to ERISA, are in compliance with ERISA, the Code, the Age
Discrimination in Employment Act and all other applicable laws.
Each Compensation and Benefit Plan of Target Holding Company,
Target Bank and their respective Subsidiaries which is an
"employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service
as set forth in Schedule 3.10(b) and neither Target Holding
Company nor Target Bank is aware of any circumstances reasonably
likely to result in a determination by the IRS that any such plan
is not qualified. There is no pending or, to the knowledge of
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Target Holding Company or Target Bank, threatened litigation or
governmental audit, examination or investigation relating to the
Plans.
(c) No liability under Title IV of ERISA has been or
is expected to be incurred by Target Holding Company, Target Bank
or their respective Subsidiaries with respect to any ongoing,
frozen or terminated "single-employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained
by any of them, or the single-employer plan of any entity which
is considered one employer with Target Holding Company, Target
Bank or their respective Subsidiaries under Section 4001(a)(14)
of ERISA or Section 414 of the Code (an "ERISA Affiliate").
Neither Target Holding Company, Target Bank nor their respective
Subsidiaries nor any ERISA Affiliate of Target Holding Company,
Target Bank or their respective Subsidiaries presently
contributes to a Multiemployer Plan or a multiple employer plan
(as described in Section 4064(a) of ERISA), nor have they
contributed to such a plan within this calendar year or any of
the preceding five calendar years. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plan of Target Holding
Company, Target Bank or their respective Subsidiaries or by any
ERISA Affiliate within the past 12 months.
(d) All contributions, premiums and payments required
to have been made under the terms of any Compensation and Benefit
Plan of Target Holding Company, Target Bank or their respective
Subsidiaries have been made. Neither any Pension Plan of Target
Holding Company, Target Bank or their respective Subsidiaries nor
any single-employer plan of an ERISA Affiliate of Target Holding
Company, Target Bank or their respective Subsidiaries has an
"accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither Target Holding Company, Target Bank nor their respective
Subsidiaries has provided, or is required to provide, security to
any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(e) Under each Pension Plan of Target Holding Company,
Target Bank or their respective Subsidiaries which is a
single-employer plan, as of June 30, 1996, the actuarially
determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the
basis of the actuarial assumptions contained in the Pension
Plan's June 30, 1996 actuarial valuation) did not exceed the then
current value of the assets of such Pension Plan. Target Holding
Company and Target Bank will make the minimum funding
contribution to such Pension Plan in 1997 with respect to the
actuarial valuation as of June 30, 1997.
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(f) Except as set forth in Schedule 3.10(f), neither
Target Holding Company, Target Bank nor their respective
Subsidiaries has any obligations under any Compensation and
Benefit Plans to provide benefits, including death or medical
benefits, with respect to employees of Target Holding Company,
Target Bank or their respective Subsidiaries beyond their
retirement or other termination of service other than (A)
coverage mandated by Part 6 of Title I of ERISA or Section 4980B
of the Code, (B) retirement or death benefits under any employee
pension benefit plan (as defined under Section 3(2) of ERISA),
(C) disability benefits under any employee welfare plan that have
been fully provided for by insurance or otherwise, or (D)
benefits in the nature of severance pay.
(g) Except as set forth in Schedule 3.10(g), neither
the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
current or former director or employee of Target Holding Company,
Target Bank or their respective Subsidiaries under any
Compensation and Benefit Plan or otherwise from Target Holding
Company, Target Bank or their respective Subsidiaries, (ii)
increase any benefits otherwise payable under any Compensation
and Benefit Plan or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
3.11 Certain Contracts.
(a) Except as set forth in Schedule 3.11(a), or as
filed as an Exhibit to a report on Form 10-K for the fiscal year
ended December 31, 1996, neither Target Holding Company, Target
Bank nor any Subsidiary is a party to or bound by, nor have any
bids or proposals been made by or to Target Holding Company,
Target Bank or any Subsidiary with respect to, any written or
oral, express or, to the best of Target Holding Company's or
Target Bank's knowledge, implied:
(1) contract with or arrangement for any
Director, officer, employee, former employee, agent or
consultant with respect to employment, salary, bonus,
percentage or incentive compensation, pension,
deferred compensation or retirement payments, or any
profit sharing, stock option, stock purchase or other
employee benefit plan or arrangement;
(2) collective bargaining or union contract or
agreement;
(3) contract or agreement for the future purchase
by it of any materials, equipment, services, or
supplies, which continues for a period of more than 12
months (including periods covered by any option to
renew by either
-22-
party), or which provides for a price in excess of the
prevailing market price or is in excess of normal
operating requirements over its remaining term;
(4) contract containing covenants purporting to limit
its freedom to compete;
(5) contract or commitment to which present or
former Directors or officers of Target Holding
Company, Target Bank or any Subsidiary or any of their
"affiliates" or "associates" (as such terms are
defined in the rules and regulations promulgated under
the Securities Act) are parties; or
(6) "material contract" within the meaning of
Item 601(b)(10) of the SEC's Regulation S-K required
to be filed as exhibits to Target Holding Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and Quarterly Reports on Form 10-Q
for the quarterly period ended June 30, 1997.
(b) Except as set forth in Schedule 3.11(b), neither
Target Holding Company, Target Bank nor any Subsidiary has
committed a default with respect to any material contract,
agreement or commitment to which it is a party, by which its
respective assets, business or operations may be bound or
affected or under which it or its respective assets, business or
operations receives benefits, and neither Target Holding Company,
Target Bank nor any Subsidiary has received notice of any such
default, nor has Target Holding Company, Target Bank or any
Subsidiary knowledge of any facts or circumstances which would
reasonably indicate that Target Holding Company, Target Bank or
any Subsidiary will be or may be in such default under any such
contract, agreement, arrangement, commitment or other instrument
subsequent to the date hereof.
3.12 Target Holding Company Reports. Target Holding Company
has previously delivered or will deliver to, or made or will make
available for inspection by, the Bank an accurate and complete
copy of each registration statement in the form in which it
became effective, final prospectus and definitive proxy statement
filed by Target Holding Company with the SEC, pursuant to the
Securities Act or Exchange Act since January 1, 1993, and each
communication concerning the financial condition of Target
Holding Company mailed by Target Holding Company to its
shareholders since January 1, 1993, and each annual report on
Form 10-K, quarterly report on Form 10-Q, current report on Form
8-K filed with the SEC for and since the year ended December 31,
1992 and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed
by Target Holding Company or any of its Subsidiaries subsequent
to December 31, 1993 under the Securities Act, or under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form filed,
or to be filed, with the SEC. The most recently mailed prospectus,
-23-
report, communication and proxy statement did not contain,
and no other registration statement, prospectus, report, proxy
statement or communication has contained, as of their respective
dates, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading. Target
Holding Company has timely filed all material reports,
registrations and statements, together with any amendment
required to be filed since January 1, 1993 with any applicable
regulatory authority, including, but not limited to, (i) the SEC,
(ii) the FDIC, (iii) any state regulatory authority or (iv) any
self-regulatory organization and has paid all fees and
assessments due and payable in connection therewith.
3.13 Environmental Matters. Except as set forth in
Schedule 3.13:
(a) As used in this Agreement, "Environmental Laws"
means all applicable local, state and federal environmental,
health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Clean Water Act, the Federal Clean Air Act, and the
Occupational Safety and Health Act, each as amended, the
regulations promulgated thereunder, and their state counterparts.
(b) Neither the conduct nor operation of Target
Holding Company, Target Bank or any of their respective
Subsidiaries nor any condition of any property presently or
previously owned, leased or operated by any of them violates or
violated in any material respect Environmental Laws and no
condition has existed or event has occurred with respect to any
of them or any such property that, with notice or the passage of
time, or both, is reasonably likely to result in any material
liability under Environmental Laws. Neither Target Holding
Company nor Target Bank nor any of their respective Subsidiaries
has received any notice from any person or entity that it or its
Subsidiaries or the operation or condition of any property ever
owned, leased, operated, held as collateral or held as a
fiduciary by any of them are or were in any material respect in
violation of or otherwise are alleged to have material liability
under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or
other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or
originating from any such property.
3.14 Target Holding Company Information. No representation
or warranty contained in this Agreement, and no statement or
information contained in any certificate, list or other writing
furnished to the Bank pursuant to the provisions hereof,
including without limitation for inclusion in any regulatory
application, filing or report, contains or will contain any
untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein
not misleading. No
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information material to the Merger and which is necessary to
make the representations and warranties herein contained not
misleading, has been withheld from, or has not been delivered in
writing to, the Bank.
3.15 Insurance. Each of Target Holding Company, Target Bank
and their respective Subsidiaries is presently insured, and since
January 1, 1995, has been insured, for reasonable amounts against
such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured.
Set forth in Schedule 3.15 is an accurate and complete list of
all policies of insurance, including the amounts thereof, owned
by Target Holding Company, Target Bank or any Subsidiary or in
which Target Holding Company, Target Bank or any Subsidiary is
named as the insured party. All such policies are valid,
outstanding and enforceable.
3.16 Broker's Fees. Neither Target Holding Company, Target
Bank nor any Subsidiary, nor any of their respective officers,
Directors or employees has employed any broker or finder or
incurred any liability for any broker's fees, commissions or
finder's fees in connection with the transactions contemplated
herein, except as disclosed in the attached Schedule 3.16.
3.17 Agreements with Regulatory Agencies. Except as set
forth in Schedule 3.17, neither Target Holding Company, Target
Bank nor any Subsidiary is subject to any cease and desist or
other order issued by, or is a party to any written agreement,
consent agreement or memorandum of understanding with, or has
received an extraordinary supervisory letter from (any such
order, agreement, memorandum or letter, a "Regulatory
Agreement"), any regulatory agency or other governmental entity,
nor has Target Holding Company, Target Bank or any Subsidiary
been notified by any regulatory agency or other governmental
entity that it is considering issuing or requesting any
Regulatory Agreement.
3.18 Material Interests of Certain Persons. Except as
disclosed in Target Holding Company's proxy statement for its
1997 annual meeting of shareholders, no officer or Director of
Target Holding Company, or any "associate" (as such term is
defined in Rule 14a-l under the Exchange Act) of any such officer
or Director, has any material interest in any material contract
or property (real or personal), tangible or intangible, used in
or pertaining to the business of Target Holding Company that
would be required to be disclosed in a proxy statement to
shareholders under Regulation 14A of the Exchange Act, other than
this Agreement.
3.19 Labor Matters. Neither Target Holding Company nor
Target Bank nor any of their respective Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor
organization, nor is Target Holding Company, Target Bank or any
of their respective Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiaries has committed an
-25-
unfair labor practice (within the meaning of the National
Labor Relations Act) or seeking to compel it or such Subsidiaries
to bargain with any labor organization as to wages and conditions
of employment, nor is there any strike or other labor dispute
involving Target Holding Company, Target Bank or any of their
respective Subsidiaries pending, or to the knowledge of Target
Holding Company or Target Bank, threatened, nor is Target Holding
Company, Target Bank or any of their respective Subsidiaries
aware of any activity involving it or its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in
other organizational activity.
3.20 Takeover Laws; Article XVII of Target Holding Company
Certificate. Target Holding Company and Target Bank have taken
all action required to be taken by each of them in order to
exempt this Agreement, the Stock Option Agreement and the Fee
Letter, and the transactions contemplated hereby and thereby
from, and this Agreement, the Stock Option Agreement and the Fee
Letter and the transactions contemplated hereby and thereby are
exempt from, the requirements of any "moratorium", "control
share", "fair price" or other antitakeover laws and regulations
of any state (collectively, "Takeover Laws"), including, without
limitation (i) the State of Delaware in the case of the
representations and warranties of Target Holding Company,
including Section 203 of the DGCL, and (ii) the State of
Connecticut in the case of the representations and warranties of
Target Bank. The transactions contemplated by this Agreement and
the Stock Option Agreement and the Fee Letter have been duly
approved by the Target Holding Company Board for purposes of
Article XVII of the Target Holding Company Certificate of
Incorporation.
3.21 Allowance for Loan Losses. The allowance for loan
losses (the "Allowance") shown on the consolidated statement of
financial condition of Target Holding Company and Target Bank set
forth in the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 referred to in Section 3.05 is, and the
Allowance shown on each consolidated statement of financial
condition of Target Holding Company and Target Bank set forth in
any document filed with the SEC referred to in Section 3.12 or in
any financial reports submitted to any Regulatory Authority filed
subsequent to such Annual Report is, in each case as of the dates
thereof, adequate as determined in accordance with GAAP, and
Target Holding Company has established appropriate reserves in
accordance with GAAP in such financial statements for all other
extensions of credit (including letters of credit and commitments
to make loans or extend credit) by Target Holding Company and
Target Bank and for the off balance sheet exposures of Target
Holding Company and Target Bank.
3.22 Risk Management Instruments. Except as disclosed in
Schedule 3.22, none of Target Holding Company, Target Bank nor
any of their respective Subsidiaries is a party to or has agreed
to enter into an exchange-traded or over-the-counter swap,
forward, future, option, cap, floor or collar financial contract,
or any other contract not included on its statement of financial
condition which is a financial derivative contract (including
-26-
various combinations thereof) (each a "Derivatives Contract").
All Derivatives Contracts and other interest rate risk manage-
ment arrangements, whether entered into for account of
Target Holding Company or Target Bank, or for the account of one
or more of its Subsidiaries or their customers, were entered into
(i) in accordance with prudent banking practices and all
applicable laws, rules, regulations and regulatory policies and
(ii) with counterparties believed to be financially responsible
at the time; and each of them constitutes the valid and legally
binding obligation of Target Holding Company, Target Bank, or
their respective Subsidiaries, as the case may be, enforceable in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer, and similar laws of general
applicability relating to or affecting creditors' rights or by
general equity principles), and are in full force and effect.
None of Target Holding Company, Target Bank nor any of their
respective Subsidiaries, nor to their knowledge any other party
thereto, is in breach of any of its obligations under any such
agreement or arrangement.
3.23 Properties. Except as set forth in Schedule 3.23, all
buildings, and all fixtures, equipment and other property and
assets held under leases or subleases by Target Holding Company,
Target Bank or any of their respective Subsidiaries are held
under valid instruments enforceable in accordance with their
respective terms. All of the equipment of Target Holding Company,
Target Bank and their respective Subsidiaries in regular use has
been well maintained and is in good serviceable condition,
reasonable wear and tear excepted. Except as set forth in
Schedule 3.23, and except for liens arising in the ordinary
course of business after the date hereof, Target Holding Company,
Target Bank and their respective Subsidiaries have good and
marketable title, free and clear of all liens, to all of their
properties and assets, whether tangible or intangible, real,
personal, or mixed, reflected in their financial statements as
being owned by Target Holding Company, Target Bank or their
respective Subsidiaries as of the date hereof. Each of Target
Holding Company, Target Bank and their respective Subsidiaries
has insurable title (subject only to standard title insurance
policy exceptions as determined by customary practices in the
area in which such properties are located) to its owned real
properties (other than real estate owned as a result of
foreclosure, transfer in lieu of foreclosure or other transfer in
satisfaction of a debtor's obligation previously contracted).
3.24 Rights Agreement. Target Holding Company has taken all
action (including adopting an amendment specifying that the Bank
is not an "Acquiring Person" or "Adverse Person" within the
meaning of such plan or terminating the Preferred Stock Rights
Plan) so that the entering into of this Agreement and the
consummation of the transactions contemplated hereby do not and
will not result in the grant of any rights to any person under
the Preferred Stock Rights Plan or enable or require Target
Holding Company Rights to be exercised, distributed or triggered.
-27-
3.25 Other Liabilities. Except as set forth in Schedule
3.25, neither Target Holding Company nor Target Bank nor any of
their respective Subsidiaries has any material obligations or
liabilities (contingent or otherwise) except obligations and
liabilities (i) which are fully accrued or reserved against in
the consolidated financial statements of Target Holding Company
and its Subsidiaries (or otherwise reflected in Target Holding
Company's Form 10-Q for the six months ended June 30, 1997), or
(ii) which were incurred after June 30, 1997 in the ordinary
course of business consistent with past practice.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE BANK
The Bank hereby represents and warrants to Target Holding
Company as follows:
4.01 Corporate Organization.
The Bank is a Connecticut chartered stock savings bank duly
organized, validly existing and in good standing under the laws
of the State of Connecticut. The Bank has the corporate power and
authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted. The Bank has
all necessary federal, state and local banking authorization to
own or lease its properties and assets and to carry on its
business as it is being conducted. The accounts of depositors of
the Bank are insured by the BIF of the FDIC in accordance with
law and with the regulations of the FDIC and all premiums and
assessments required in connection therewith have been paid. The
copies of the Bank's Articles of Incorporation and Bylaws, each
certified by its Secretary as of the date of this Agreement,
which are being delivered to Target Holding Company herewith, are
complete and correct copies in effect as of the date of this
Agreement. Except as set forth in Schedule 4.01, the Bank does
not have any wholly-owned Subsidiaries.
4.02 Capitalization.
The authorized capital stock of the Bank consists of
110,000,000 shares, consisting of 100,000,000 shares of common
stock, without par value ("Bank Common Stock"), and 10,000,000
shares of preferred stock, without par value. As of the date of
this Agreement, there are 61,125,869 shares of Bank Common Stock
issued and outstanding, 36,450,000 of which are held by People's
Mutual Holdings, no shares are held in the Bank's treasury and
638,026 shares are reserved for issuance. At the date of this
Agreement, no shares of preferred stock are outstanding or
reserved for issuance and no shares of Bank preferred stock are
-28-
outstanding. All issued and outstanding shares of Bank Common
Stock have been duly authorized and validly issued and are fully
paid and nonassessable.
4.03 Authority; No Violation.
(a) The Bank has all necessary corporate power and
authority to execute and deliver this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
Stock Option Agreement by the Bank and the consummation by the
Bank of the transactions contemplated hereby and thereby have
been duly and validly approved by the Bank, and no other
corporate proceedings on the part of the Bank are necessary to
consummate the transactions contemplated hereby or thereby, other
than the approval of the Merger and this Agreement by the
shareholders of the Bank. This Agreement and the Stock Option
Agreement have been duly and validly executed and delivered by
the Bank and (assuming due authorization, execution and delivery
by the other parties hereto and thereto) constitute valid and
binding obligations of the Bank, enforceable against the Bank in
accordance with the terms thereof, except as enforcement may be
limited by general principles of equity, whether applied in a
court of law or a court of equity, and by bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies
generally.
(b) Neither the execution and delivery of this
Agreement or the Stock Option Agreement by the Bank nor the
consummation by the Bank of the transactions contemplated hereby
or thereby, nor compliance by the Bank with any of the terms or
provisions hereof or thereof, will (i) violate any provision of
the Articles of Incorporation or Bylaws of the Bank or (ii)
assuming that the consents and approvals referred to in Section
4.04 are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to the Bank or any of its Subsidiaries, or (y)
violate, result in a breach of any provision of, constitute a
default under, or result in the creation of any material lien,
pledge, security interest, charge or other encumbrance upon any
of the respective properties or assets of the Bank or any of its
Subsidiaries under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the
Bank or any of Subsidiaries is a party, or by which they or any
of their respective properties or assets may be bound or
affected.
4.04 Consents and Approvals. Except for (i) the filing of
applications and notices or requests for waivers, as applicable,
with the FRB under the BHC Act, and approval of such applications
and notices or granting of such waivers, (ii) the filing of
applications and notices, as applicable, with the FDIC under the
Bank Merger Act and approval of such applications and notices,
(iii) the filing of applications with the Commissioner under
Sections 36a-125 and 36a-184 of the CGS and approvals of such
applications, (iv) the approval of the Merger and this
-29-
Agreement by the requisite vote of the shareholders of the Bank,
(v) the filing with the FDIC of the Proxy Statement and the
resolution of any comments of the FDIC received with respect to
the Offering Circular for the Bank Common Stock to be issued in
connection with the Merger, (vi) the filing of the Connecticut
Certificate of Merger, together with the Commissioner's approval
of the Merger and this Agreement with the Connecticut Secretary,
(vii) the filing of the Delaware Certificate of Merger with the
Delaware Secretary, (viii) any state securities law filings or
approvals and (ix) such filings, authorizations or approvals as
may be set forth in Schedule 4.04, no consents or approvals of or
filings or registrations with any governmental entity or with any
third party are necessary in connection with the execution and
delivery by the Bank of this Agreement and the consummation by
the Bank of the Merger and the other transactions contemplated
hereby.
4.05 Financial Statements. The Bank has previously
delivered to Target Holding Company copies of (a) the
consolidated balance sheets of the Bank and its Subsidiaries as
of December 31 for the fiscal years 1995 and 1996 and the related
consolidated statements of income, changes in shareholders'
equity and cash flows for the fiscal years 1995 and 1996, as
reported in the Bank's Annual Report on Form F-2 for the fiscal
year ended December 31, 1996 filed with the FDIC under the
Exchange Act, and (b) the unaudited consolidated balance sheet of
the Bank and its Subsidiaries as of June 30, 1997 and the related
unaudited consolidated statement of income, changes in
shareholders' equity and cash flows for the six-month period then
ended as reported in the Bank's Quarterly Report on Form F-4 for
the period ended June 30, 1997 filed with the FDIC under the
Exchange Act. The June 30, 1997 consolidated balance sheet of the
Bank (including the related notes, where applicable) fairly
presents in all material respects the consolidated financial
position of the Bank and its Subsidiaries as of the date thereof,
and the other financial statements referred to in this Section
4.05 (including the related notes where applicable) fairly
present in all material respects the results of the consolidated
operations and changes in shareholders' equity and consolidated
financial position of the Bank and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein
set forth; each of such statements (including the related notes,
where applicable) complies in all material respects with the
applicable accounting requirements and with the published rules
and regulations of the FDIC with respect thereto, and each of
such statements (including the related notes, where applicable)
has been prepared in accordance with regulatory accounting
principles consistently applied during the periods involved,
except as indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form F-4. Without limiting
the generality of the foregoing, the financial statements as of,
and for, the six-month period ending June 30, 1997 were prepared
on a basis consistent with the Bank's audited financials for the
year ended December 31, 1996. The books and records of the Bank
have been, and are being, maintained in all material respects in
accordance with applicable legal and accounting requirements and
reflect only valid transactions.
-30-
4.06 Broker's Fees. Neither the Bank, nor any Subsidiary,
nor any of their respective officers or Directors, has employed
any broker or finder or incurred any liability for any broker's
fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement, except as disclosed
in the attached Schedule 4.06.
4.07 Absence of Certain Changes or Events. Except as may be
reflected in the Bank's Form F-4 for the six months ended June
30, 1997 or set forth in Schedule 4.07, since December 31, 1996:
(a) there has not been any material adverse change in the
Bank and its Subsidiaries, their businesses or operations taken
as a whole;
(b) there has not been any incurrence by the Bank of
any liability that has had, or to the knowledge of the
Bank, could reasonably be expected to have, a material
adverse effect on the Bank and its Subsidiaries taken as a
whole; and
(c) there has not been any change in any of the
accounting methods or practices of the Bank or any of its
Subsidiaries other than changes required by applicable law
or regulatory accounting principles.
4.08 Legal Proceedings. Except as described in the Bank's
Form F-2 for the year ended December 31, 1996, there are no
pending or to the knowledge of the Bank, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or
governmental investigations of any nature against the Bank or any
Subsidiary, as to which there is, in the judgment of the Bank, a
reasonable likelihood of adverse determination and which if
adversely determined, would, individually or in the aggregate,
(i) have a material adverse effect on the Bank or any
Subsidiaries, or their business or operations taken as a whole,
or (ii) as of the date hereof, prevent or materially and
adversely affect the Bank's ability to consummate the
transactions contemplated hereby.
4.09 FDIC Reports. The Bank has previously made available
to Target Holding Company a true and complete, in all material
respects, copy of each (a) final offering circular, report,
schedule and definitive proxy statement filed since January 1,
1994 by the Bank with the FDIC pursuant to the Exchange Act (the
"Bank Reports") and, as of their respective dates, no such Bank
Reports contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading.
4.10 Bank Information. The information provided in writing
by the Bank for inclusion in the Proxy Statement will not contain
-31-
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light
of the circumstances in which they are made, not misleading.
4.11 Compliance With Applicable Law. The Bank and each of
its Subsidiaries holds, and has at all times held, all material
licenses, franchises, permits and authorizations necessary for
the lawful conduct of its respective business under and pursuant
to all, and has complied with and is not in default under any,
applicable law, statute, order, rule or regulation of any
governmental entity relating to the Bank or any of its
Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such non-compliance or
default would not have a material adverse effect on the Bank, and
neither the Bank nor any of its Subsidiaries has received notice
of any material violations of, any of the above.
4.12 Agreements with Regulatory Agencies. Neither the Bank
nor any of its Subsidiaries is subject to, is a party to, or has
received any, Regulatory Agreement with or from any regulatory
agency or other governmental entity, nor has the Bank or any of
the Subsidiaries been notified by any regulatory agency or other
governmental entity that it is considering issuing or requesting
any Regulatory Agreement.
4.13 Regulatory Approvals. The Bank, as of the date hereof,
is not aware of any reason why the regulatory approvals required
to be obtained by it to consummate the Merger would not be
obtained within a time frame customary for transactions of the
nature contemplated hereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01 Covenants of Target Holding Company and Target Bank.
During the period from the date of this Agreement to the
Effective Time, each of Target Holding Company and Target Bank
will conduct its business, and will cause each Subsidiary to
conduct its business, only in the ordinary course consistent with
past practice and consistent with prudent business and/or banking
practice, will use all reasonable efforts to preserve and
maintain the properties and investment practices of Target
Holding Company and those of its Subsidiaries wherever located,
and will comply in all material respects with all laws applicable
to it and its Subsidiaries or to the conduct of their respective
businesses. Each of Target Holding Company and Target Bank will
use all reasonable efforts to preserve intact its business
organization and that of its Subsidiaries, to keep available the
present services of its employees of Target Holding Company and
those of its Subsidiaries, and to preserve the goodwill of its
customers and those of its Subsidiaries and others with whom
business relationships exist. Each of Target Holding
-32-
Company and Target Bank will, from the date hereof until at least
through the consummation of the transactions contemplated by this
Agreement, keep all insurance policies set forth in Schedule 3.15
in full force and effect. In addition, Target Holding Company and
Target Bank agree to take all action and to cause their
respective Subsidiaries to take all action requested by the Bank
to avoid any accrual of benefits on or after the Effective Time
under any Compensation and Benefit Plans described in Section
3.10, including termination of any such Compensation and Benefit
Plans as of the Effective Time; provided, however, that any such
request by the Bank to cease accruals under or terminate any
Pension Plan subject to Section 204(h) of the Code shall be made
not less than 45 days before the effective date of such cessation
of accruals or termination. At the request of the Bank, Target
Holding Company and Target Bank agree to give any notices of
termination necessary to effect no later than July 31, 1998 the
termination of any of their existing service contracts. Each of
Target Holding Company and Target Bank agrees that from the date
hereof to the consummation of the Merger, and except as otherwise
consented to or approved by a duly authorized officer of the Bank
in writing or as permitted or required by this Agreement, neither
Target Holding Company, Target Bank nor any Subsidiary will:
(a) change any provision of its Certificate of
Incorporation or Bylaws or similar governing documents;
(b) change the number of issued shares of its capital
stock, or issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character
relating to its authorized or issued capital stock, or any
securities convertible into shares of such stock, or split,
combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of
its capital stock or redeem or otherwise acquire the Rights or
any shares of its capital stock, except as necessary to secure
its position pursuant to a debt previously contracted; provided,
however, that Target Holding Company may issue and deliver shares
of Target Holding Company Common Stock upon the due exercise of
Options outstanding on the date hereof and receipt of payment
thereunder;
(c) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire any assets, other than in connection with
foreclosures, settlements in lieu of foreclosure or troubled loan
or debt restructurings in the ordinary course of business, which
would be material to Target Holding Company, Target Bank or such
Subsidiary;
(d) take any action that is intended to or would
result in any of its representations and warranties set forth in
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this Agreement being or becoming untrue in any material
respect, or in any of the conditions to the Merger set forth in
Article VII not being satisfied, or in a violation of any
provision of this Agreement except, in every case, as may be
required by applicable law;
(e) make any material change in its methods of
accounting in effect at December 31, 1996, except as required by
changes in GAAP or regulatory accounting principles as concurred
in by Target Bank's independent auditors;
(f) take or cause to be taken any action which would,
or may reasonably be expected to, significantly delay or
otherwise adversely affect the regulatory approvals required to
consummate the Merger;
(g) terminate the employment of, or decrease in any
material respect, the duties, obligations, responsibilities, or
position of the President, Executive Vice President or any Senior
Vice President of Target Holding Company, Target Bank or any
Subsidiary;
(h) except as set forth in Schedule 5.01(h), enter
into or amend any written employment, consulting, severance or
similar agreements or arrangements with any of its directors,
officers or employees, or grant any salary or wage increase or
increase any employee benefit (including incentive or bonus
payments), except (i) for normal individual increases in
compensation to employees in the ordinary course of business
consistent with past practice, (ii) for other changes as are
provided for herein or as may be required by law, (iii) to
satisfy contractual obligations existing as of the date hereof
and, if material, set forth in the Disclosure Schedule, or (iv)
for additional grants of awards to newly hired employees
consistent with past practice;
(i) except as set forth in Schedule 5.01(i), enter
into or amend (except (A) as may be required by applicable law or
(B) to satisfy contractual obligations existing as of the date
hereof and, if material, set forth in the Disclosure Schedule)
any pension, retirement, stock option, stock purchase, savings,
profit sharing, deferred compensation, consulting, bonus, group
insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related
thereto, in respect of any of its directors, officers or other
employees, including without limitation taking any action that
accelerates the vesting or exercise of any benefits payable
thereunder;
(j) sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue any portion of its assets, business or
properties, which is material to it and its Subsidiaries taken as
a whole, or acquire (other than by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in
each case in the ordinary and usual course of business consistent
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with past practice) all or any portion of, the assets,
business or properties of any other entity which is material to
it and its Subsidiaries taken as a whole;
(k) except in the ordinary course of business
consistent with past practice, enter into or terminate any
material contract, agreement or lease, or amend or modify in a
material respect any of its existing material contracts,
agreements or leases;
(l) except in the ordinary course of business
consistent with past practice, settle any claim, action or
proceeding involving money damages that is material to it and its
Subsidiaries, taken as a whole;
(m) except as required by applicable law or
regulation, (i) implement or adopt any material change in its
interest rate risk management policies, procedures or practices;
(ii) fail to follow its existing policies or practices with
respect to managing its exposure to interest rate risk; or (iii)
fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk;
(n) incur any additional borrowings (deposits,
including certificates of deposit, shall not be deemed to be
borrowings within the meaning of this section), other than under
its existing line of credit with a Federal Home Loan Bank or
pledge any of its assets to secure any borrowings other than as
required pursuant to the terms of its borrowings in effect as of
the date hereof; or
(o) agree to do any of the foregoing.
5.02 Covenants of the Bank. During the period from the date
of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior
written consent of Target Holding Company, which shall not be
unreasonably withheld, the Bank shall not, and shall not permit
any of its Subsidiaries to:
(a) take any action that is intended or would result
in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or in
any of the conditions to the Merger set forth in Article VII not
being satisfied, or in a violation of any provision of this
Agreement, or would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code; except, in every case, as
may be required by applicable law;
(b) make a material change in its methods of
accounting in effect at December 31, 1996, except in accordance
with changes in GAAP or regulatory accounting principles as
concurred in by the Company's independent certified public
accountants;
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(c) take or cause to be taken any action which would,
or may reasonably be expected to, significantly delay or
otherwise adversely affect the regulatory approvals required to
consummate the Merger; or
(d) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Regulatory Matters.
(a) The Bank and Target Holding Company shall promptly
prepare and file with the FDIC and the SEC, respectively, a joint
proxy statement for the meetings of their respective shareholders
called for the purpose of approving this Agreement (the "Proxy
Statement"). Each of the Bank and Target Holding Company shall
use their reasonable best efforts to have the Proxy Statement
approved as promptly as practicable after such filing, and each
shall thereafter promptly mail the Proxy Statement to its
shareholders.
(b) The parties hereto shall cooperate with each other
and use their best efforts to prepare and file promptly all
necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable
all permits, consents, waivers, approvals and authorizations of
all third parties and governmental entities which are necessary
or advisable to consummate the transactions contemplated by this
Agreement. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits,
consents, waivers, approvals and authorizations of all third
parties and governmental entities necessary or advisable to
consummate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated herein.
(c) The Bank and Target Holding Company shall, upon
request, furnish each other with all information concerning
themselves, their respective Subsidiaries, directors, officers
and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement or
any other statement, filing, notice or application made by or on
behalf of the Bank, Target Holding Company or any of their
respective Subsidiaries to any governmental entity in connection
with the Merger and the other transactions contemplated hereby.
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(d) The Bank, on the one hand, and Target Holding
Company and Target Bank, on the other hand, shall promptly
furnish each other with copies of written communications received
by such party, as the case may be, or any of their respective
Subsidiaries from, or (other than confidential information in
respect of the Bank) delivered by any of the foregoing to, any
governmental entity in respect of the transactions contemplated
hereby.
6.02 Access to Information.
(a) Upon reasonable notice and subject to applicable
laws relating to the exchange of information, Target Holding
Company shall afford to the officers, employees, accountants,
counsel and other representatives of the Bank, access, during
normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments and
records relating to the ownership, operation, obligations and
liabilities of Target Holding Company and its Subsidiaries,
including, but not limited to, their respective books of account
(including general ledgers), tax records, minute books of
Directors' and shareholders' meetings, Certificate of
Incorporation, Bylaws, contracts and agreements, public filings
with any regulatory authority, plans affecting its employees, and
any other business activities or prospects in which the Bank may
have a reasonable interest. During such period, Target Holding
Company shall make available to the Bank (i) a copy of each
report, schedule, and other document filed or received by Target
Holding Company or any Subsidiary during such period pursuant to
the requirements of federal securities laws or federal or state
banking laws and (ii) all other information concerning their
respective businesses, properties and personnel as the Bank may
reasonably request (other than information which Target Holding
Company or any Subsidiary is not permitted to disclose under
applicable law). As to information which Target Holding Company
or any Subsidiary is not permitted by law to disclose, Target
Holding Company will, upon request from the Bank, use all
reasonable efforts to obtain any consent, approval or waiver that
may be required for such disclosure.
(b) Neither Target Holding Company nor Target Bank
shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the
rights of the customers of such party, jeopardize the
attorney-client privilege of the institution in possession or
control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The
parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(c) All information furnished pursuant to this
Agreement shall be held in confidence to the extent required by,
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and in accordance with, the provisions of the
confidentiality agreements, dated July 14 and August 29, 1997
among the Bank, Target Holding Company and Xxxxx, Xxxxxxxx &
Xxxxx, Inc. (the "Confidentiality Agreements").
6.03 Shareholder Approval.
(a) Target Holding Company shall take all steps
necessary to duly call, give notice of, convene and hold a
meeting of its shareholders to be held as soon as is reasonably
practicable for the purpose of voting upon the approval of this
Agreement and the Merger and the transactions contemplated hereby
and thereby (the "Target Shareholder Meeting"). Subject to the
remainder of this Section 6.03(a), Target Holding Company will,
through its Board of Directors, recommend to its shareholders
approval of this Agreement and the Merger and the transactions
contemplated hereby and thereby and such other matters as may be
submitted to its shareholders in connection with this Agreement.
Except as expressly permitted by this Section 6.03, the Board of
Directors of Target Holding Company shall not fail to recommend,
or withdraw, modify, or change or propose publicly to withdraw,
modify, or change in a manner adverse to the Bank, the approval
or recommendation by such Board of Directors of the Merger or the
adoption and approval of the matters to be considered at the
Target Shareholder Meeting. The Board of Directors may fail to
recommend or withdraw, modify or change the recommendation of the
Merger in a manner adverse to the Bank if the Board determines in
its good faith judgment, based as to legal matters on the advice
of its outside legal counsel, that the making of such
recommendation, or the failure to withdraw, modify or change its
recommendation, would constitute a breach of the fiduciary duties
of the Board of Directors under applicable law. Notwithstanding
the foregoing, in the event that there is pending, or has been a
public announcement of, a Takeover Proposal (as defined in
Section 6.13), the Board of Directors may not withdraw, modify or
change its approval or recommendation of the Merger or the
approval of the matters to be considered at the Target
Shareholders Meeting unless (i) the Target Holding Company is not
in breach of any of the material terms of this Agreement, (ii)
the Board determines in its good faith judgment, based as to
legal matters on the advice of its outside legal counsel, that
the making of such recommendation, or the failure to withdraw,
modify or change its recommendation, would constitute a breach of
the fiduciary duties of the Board of Directors under applicable
law, and (iii) the Bank does not, within 10 business days of
delivery of any such Takeover Proposal to the Bank by Target
Holding Company, offer to increase either or both of the Per
Share Stock Consideration and Per Share Cash Consideration to
provide at least substantially the same value as the economic
terms as set forth in such Takeover Proposal (provided that the
Bank may substitute cash for any non-cash consideration (or vice
versa) provided for under such Takeover Proposal so long as a
substantially equivalent economic value is provided to the
shareholders of Target Holding Company). Nothing in this Section
6.03(a) shall modify the obligations of Target Holding Company
and Target Bank under Section 6.13 hereof.
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(b) The Bank shall take all steps necessary to duly
call, give notice of, convene and hold a meeting of its
shareholders to be held as soon as is reasonably practicable for
the purpose of voting upon the approval of this Agreement and the
transactions contemplated hereby. Subject to the remainder of
this Section 6.03(b), the Bank will, through its Board of
Directors, recommend to its shareholders approval of this
Agreement and the transactions contemplated hereby and such other
matters as may be submitted to its shareholders in connection
with this Agreement. The Board of Directors may fail to make such
recommendation, or withdraw, modify or change any such
recommendation in a manner adverse to Target Holding Company, if
such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the
making of such recommendation, or the failure to withdraw, modify
or change its recommendation, would constitute a breach of the
fiduciary duties of the members of such Board of Directors under
applicable law.
6.04 Legal Conditions to Merger. Subject to the other
provisions of this Agreement (including, without limitation,
Sections 7.02(c) and 9.01), each of the Bank and Target Holding
Company shall, and the Bank and Target Holding Company shall
cause each of their respective Subsidiaries to, use its best
efforts (a) to take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal
requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger, and, subject to the
conditions set forth in Article VII hereof, to consummate the
transactions contemplated by this Agreement, and (b) to obtain
(and to cooperate with the other party to obtain) any consent,
waiver, authorization, order or approval of, or any exemption by,
any governmental entity and any other third party which is
required to be obtained by Target Holding Company or the Bank or
any of their respective Subsidiaries in connection with the
Merger, and the other transactions contemplated by this
Agreement.
6.05 Stock Listing. The Bank shall take all reasonable
steps to cause the shares of Bank Common Stock to be issued in
the Merger to be approved for inclusion for quotation on the
NASDAQ National Market System, subject to official notice of
issuance, prior to the Effective Time.
6.06 Employee Benefit Plans.
(a) From and after the Effective Time and subject to
applicable law (and except as provided in (b) below), the Bank
shall provide the employees of Target Holding Company, Target
Bank and its Subsidiaries who are offered employment with the
Bank or any of its Subsidiaries, and who accept such employment,
with benefits comparable to those provided to its own employees
in similar positions and with comparable terms of service with
the Bank or its Subsidiaries, as reasonably determined by the
Bank and its Subsidiaries.
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(b) A description of employee benefits provided by the
Bank is set forth on Schedule 6.06(b) attached hereto. There is
no collective bargaining agreement applicable to the employees of
the Bank. For the purpose of satisfying the waiting period for
eligibility, vesting requirements and service requirements for
any early retirement or disability benefits in the Bank's Pension
Plans (but such prior service shall not be considered for benefit
accrual or other purposes) the Bank shall amend to the extent
necessary its Pension Plans to provide that the time period of
employment with Target Holding Company or Target Bank, and any
period of service required to be taken into account under the
terms of the Pension Plans maintained by Target Holding Company
and Target Bank as in effect at the Effective Time, including,
without limitation, service with the Bank of Mystic and SECONN,
will be considered as employment with the Bank for such purposes.
Except for benefits provided under the Enhanced Senior Pension
Plan, all benefits provided from and after the Effective Time to
employees of Target Holding Company, Target Bank and its
Subsidiaries under any Pension Plan maintained by the Bank or
with respect to which the Bank or any successor to the Bank may
have a liability shall not be offset by any benefits accrued by
employees of Target Holding Company, Target Bank or its
Subsidiaries before the Effective Time. All optional forms of
benefit, within the meaning of Section 411(d)(6) of the Code,
available under any Pension Plan maintained by Target Holding
Company, Target Bank or its Subsidiaries before the Effective
Time shall be retained with respect to benefits accrued under any
such Pension Plan. In addition, the Bank agrees not to amend the
terms of any Pension Plan maintained by Target Holding Company,
Target Bank or its Subsidiaries with respect to which accruals
have ceased or which has been terminated, except for such changes
as may be required by law or changes solely affecting the
administration of such Pension Plan or changes necessary to
maintain the continued qualification of such Pension Plan or an
amendment solely to merge such Pension Plan into a Pension Plan
maintained by the Bank. In the event of any merger as of or after
the Effective Time of Target Bank's Thrift Plan into a Pension
Plan maintained by the Bank, the promissory notes with respect to
participant loans outstanding from accounts transferred in
connection with such merger shall be transferred to the Pension
Plan maintained by the Bank and shall not become due and payable
by reason of the merger. In addition, the time period of
employment and employee status (full-time, part-time, temporary,
etc.) with Target Holding Company or Target Bank and any period
of service taken into account under the benefits programs
maintained by Target Holding Company or Target Bank at the
Effective Time will be considered along with employee status with
the Bank for the purpose of determining earned vacation and
eligibility for all of the Bank's other benefits programs.
(c) The Bank will use reasonable efforts to determine
as soon as is reasonably practicable those employees of Target
Bank to whom it will extend offers of employment following the
Effective Time and will use its best efforts to communicate such
decisions to Target Bank no later than 60 days before the
Effective Time. The Bank and Target Bank will cooperate up to the
Effective Time in any effort to minimize any loss of Target Bank
employment, including consideration for employment vacancies
occurring at the Bank; but
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nothing herein shall create any legal obligation on the part of
the Bank to hire Target Bank employees.
(d) In the event that the Bank does not offer a Target
Bank employee a position following the Effective Time that is
comparable as to compensation and responsibilities and does not
require such employee to commute to the employee's primary place
of employment, a distance greater than (i) such Target Bank
Employee's current commute at the Effective Time; or (ii) 25
miles, except neither such limit shall apply if a position is
offered at any one of the Target Bank's facilities in existence
at the Effective Time, and such employee has remained employed by
Target Bank until the Effective Time, then such Target Bank
employee shall be paid as follows. Target Holding Company or
Target Bank, or if either Target Holding Company or Target Bank
does not, the Bank, will pay each such employee, in one lump sum
subject to applicable withholding, two (2) weeks salary for each
full year of employment with Target Bank (plus a fraction for any
partial year based on the number of full months completed);
provided that employees in grades one through nine will receive a
minimum benefit of 2 weeks' salary, employees in grades 10 and
above will receive a minimum benefit of 4 weeks' salary and
officers will receive a minimum benefit of 8 weeks' salary
subject, however, in each case, to such employee's having
executed and delivered a general release of all claims and
potential claims relating to such employee's employment and/or
the failure of the Bank to retain such employee, in form and
substance satisfactory to Target Holding Company, Target Bank and
the Bank. For any Target Bank employee whose compensation is
based in whole or in part upon commissions, the severance pay
described in this section will be calculated using the average
weekly gross earnings paid to said employee over the twelve (12)
month period immediately preceding the Effective Time. Target
Bank employees who remain employed with Target Bank until the
Effective Time and are offered and accept positions with the Bank
following the Effective Time, but who are terminated from such
positions by the Bank for any reason except cause within one year
following the Effective Time, will also receive from the Bank
severance pay on the terms set forth above including execution of
a general release of all claims and potential claims in form and
substance satisfactory to the Bank. Any such employee terminated
thereafter would be paid only in accordance with the Bank's then
existing severance policy, if any. Target Bank employees who are
terminated will be paid in full for all accrued vacation and
personal days.
(e) Target Bank shall pay the annual bonuses for 1997,
normally paid to employees following year end, in December 1997
and such bonuses shall be calculated without reduction or offset
for expenses and costs arising in connection with transactions
contemplated by this Agreement. In no event shall such bonuses
exceed $210,000 in the aggregate.
(f) Target Bank employees mutually agreed upon by the
Bank, Target Holding Company and Target Bank who the Bank has
determined to terminate but who remain employed with Target Bank
until after the Effective Time and until their agreed upon
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release date in order to effect an orderly transition in
connection with the Merger will be paid a retention bonus in an
amount to be determined by the mutual agreement of Target Holding
Company, Target Bank and the Bank. Any such Target Bank employees
who remain employed after the Effective Time but terminate prior
to their agreed upon release date will be paid a share of such
retention bonus as mutually agreed by the Bank, Target Holding
Company and Target Bank.
(g) The Bank shall continue to maintain the 1995
Non-Qualified Deferred Compensation Plan for the benefit of the
directors of Target Holding Company and Target Bank and the rabbi
trust related thereto on the same or substantially similar terms
until all of the directors participating in such plan and related
rabbi trust have been paid in full the benefits accrued under
said plan over the ten-year payment period specified in said
plan.
(h) The Bank, Target Holding Company and Target Bank
will use their best efforts to negotiate and resolve as soon as
administratively practicable the matters set forth in Schedule
6.06(h).
6.07 Interim Financial Statements. As soon as reasonably
available, but in no event later than 45 days after the end of
each fiscal quarter ending after the date of this Agreement and
prior to the Effective Time, the Bank will deliver to Target
Holding Company and Target Holding Company will deliver to the
Bank their respective Quarterly Reports and any current reports,
as filed with the FDIC and the SEC under the Exchange Act,
respectively.
6.08 Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to
carry out the purpose of this Agreement, or to vest the Bank with
full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger,
the proper officers and Directors of each party to this Agreement
and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by, and at the sole expense
of, the Bank.
6.09 Disclosure Supplements. From time to time prior to the
Effective Time, each party will promptly supplement or amend the
Schedules delivered in connection with the execution of this
Agreement to reflect any matter which, if existing, occurring or
known at the date of this Agreement, would have been required to
be set forth or described in such Schedules or which is necessary
to correct any information in such Schedules which has been
rendered inaccurate thereby. No supplement or amendment to such
Schedules shall have any effect for the purposes of determining
satisfaction of the conditions set forth in Sections 7.02(a) or
7.03(a) hereof, as the case may be, or the compliance by Target
Holding Company or the Bank as the case may be, with the
respective covenants set forth in Sections 5.01 and 5.02 hereof.
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6.10 Current Information. During the period from the date
of this Agreement to the Effective Time, Target Holding Company
will cause one or more of its designated representatives, and any
other representative reasonably requested by the Bank, to be
available, upon the reasonable request of the Bank, to confer on
a regular and frequent basis with representatives of the Bank and
to report the general status of the ongoing operations of Target
Holding Company and its Subsidiaries. Target Holding Company and
its Subsidiaries will promptly notify the Bank of any significant
change in the normal course of business of Target Holding Company
and its Subsidiaries or in the operation of their properties, and
of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or
the institution or the threat of any significant litigation
involving Target Holding Company or any Subsidiary and will keep
the Bank reasonably informed of such events and permit the Bank
access to all significant materials prepared in connection
therewith. With respect to any regulatory examination of Target
Bank, including any such examination currently in progress or
that may be commenced prior to the Effective Time, Target Holding
Company will keep the Bank advised of all reports, preliminary or
otherwise, received from examiners, but only to the extent
permitted by law and otherwise subject to applicable disclosure
laws, will provide the Bank with a copy of any such written
report, and will use all reasonable efforts to obtain any
consent, approval or waiver that may be required for such
disclosure.
6.11 Public Announcements. Except to the extent required
otherwise by the securities laws or any Connecticut or federal
banking laws, with respect to which Target Holding Company and
the Bank may act upon the advice of their respective legal
counsel, neither Target Holding Company, nor the Bank, nor any of
their respective Subsidiaries, shall issue any press release or
otherwise make any public statement with respect to this
Agreement or any of the transactions contemplated hereby prior to
the Effective Time without obtaining the consent to or approval
thereof from the other party, which consent or approval shall not
be unreasonably withheld.
6.12 Indemnification.
(a) Following the Effective Date and without
limitation as to time, the Bank shall indemnify, defend and hold
harmless the present and former directors and officers of Target
Holding Company and Target Bank (each, an "Indemnified Party")
against all costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of actions
or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by
this Agreement) to the fullest extent that the Bank is permitted
to indemnify its directors and officers under the laws of the
State of Connecticut and the Bank's Articles of Incorporation
("Bank Articles") and by-laws as in effect on the date hereof;
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provided that any determination required to be made with respect to
whether an officer's or director's conduct complies with the
standards set forth under Connecticut law, the Bank Articles and
the Bank's by-laws shall be made by independent counsel (which
shall not be counsel that provides material services to the Bank)
selected by the Bank and reasonably acceptable to such officer or
director; and provided, further, that in the absence of
applicable state judicial precedent to the contrary, such
counsel, in making such determination, shall presume such
officer's or director's conduct complied with such standard and
the Bank shall have the burden to demonstrate that such officer's
or director's conduct failed to comply with such standard.
(b) For a period of six years from the Effective Time,
the Bank shall provide that portion of director's and officer's
liability insurance that serves to reimburse the present and
former officers and directors of Target Holding Company and
Target Bank (determined as of the Effective Time) (as opposed to
Target Holding Company or Target Bank) with respect to claims
against such directors and officers arising from facts or events
which occurred before the Effective Time, which insurance shall
contain at least the same coverage and amounts, and contain terms
and conditions no less advantageous, as that coverage currently
provided by Target Holding Company or Target Bank, as applicable;
provided, however, that in no event shall the Bank be required to
expend more than 200% of the current amount expended by Target
Holding Company or Target Bank, as applicable (the "Insurance
Amount") to maintain or procure all such directors and officers
insurance coverage; provided, further, that if the Bank is unable
to maintain or obtain the insurance called for by this Section
6.12(b), the Bank shall obtain as much comparable insurance as is
available for the Insurance Amount; provided, further, that
officers and directors of Target Holding Company or Target Bank
may be required to make application and provide customary
representations and warranties to the Bank's insurance carrier
for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim
indemnification under Section 6.12(a), upon learning of any
claim, action, suit, proceeding or investigation described above,
shall promptly notify the Bank thereof; provided that the failure
so to notify shall not affect the obligations of the Bank under
Section 6.12(a) unless and to the extent such failure materially
increases the Bank's liability under such subsection (a).
(d) If the Bank or any of its successors or assigns
shall consolidate with or merge into any other entity and shall
not be the continuing or surviving entity of such consolidation
or merger or shall transfer all or substantially all of its
assets to any entity, then and in each case, proper provision
shall be made so that the successors and assigns of the Bank
shall assume the obligations set forth in this Section 6.12.
(e) The Bank shall pay all reasonable costs, including
attorneys' fees, that may be incurred by any Indemnified Party in
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enforcing the indemnity and other obligations provided for
in this Section 6.12. The rights of each Indemnified Party
hereunder shall be in addition to any other rights such
Indemnified Party may have under applicable law.
6.13 No Solicitation. Each of Target Holding Company and
Target Bank shall not, and shall cause its Subsidiaries and its
Subsidiaries' officers, directors, agents, advisors and
affiliates not to, solicit or encourage inquiries or proposals
with respect to, or engage in any negotiations concerning, or
provide any confidential information to, or have any discussions
with, any person relating to, any Takeover Proposal; shall
immediately cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this
Agreement with any parties other than the Bank, with respect to
any of the foregoing; and shall promptly (within 24 hours) advise
the Bank following the receipt by it of any Takeover Proposal and
the substance thereof (including the identity of the person
making such Takeover Proposal), and advise the Bank of any
developments with respect to such Takeover Proposal immediately
upon the occurrence thereof. Notwithstanding the foregoing, the
Board of Directors of the Target Holding Company, on behalf of
the Target Holding Company, may furnish or cause to be furnished
information and may participate in discussions and negotiations
directly or through its representatives if such Board of
Directors determines in its good faith judgment, based as to
legal matters on the advice of its outside legal counsel, that
the failure to provide such information or participate in such
negotiations and discussions would constitute a breach of the
fiduciary duties of the Board of Directors under applicable law.
"Takeover Proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation or other business
combination involving the Target Holding Company, Target Bank or
any of their Subsidiaries, or any proposal or offer to acquire in
any manner a substantial equity interest in, or a substantial
portion of the assets or deposits of, Target Holding Company or
Target Bank other than the transactions contemplated by this
Agreement and the Stock Option Agreement.
6.14 Offering Circular. Each of the Bank and Target Holding
Company agrees to cooperate in the preparation of an offering
circular (the "Offering Circular") to be filed by the Bank with
the FDIC in connection with the issuance of the Bank Common Stock
in the Merger, and each of Target Holding Company and Target Bank
agrees to furnish to the Bank all information concerning Target
Holding Company and Target Bank, its Subsidiaries, officers,
directors and stockholders as may be reasonably requested in
connection therewith.
6.15 Dividends.
(a) Target Holding Company agrees that it will not
declare or pay any cash dividend (or any special dividend) to
shareholders during the first quarter of 1998. Notwithstanding
Section 5.01(b) hereof, during the second quarter of 1998 Target
Holding Company may declare and pay a cash dividend in an amount
per share equal to the ordinary cash dividend paid in May 1997,
using a declaration and payment schedule consistent therewith.
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(b) Subject to Section 6.15(a), with respect to the
dividend to be paid by Target Holding Company during the second
quarter of 1998 Target Holding Company shall coordinate with the
Bank the declaration of any dividends in respect of Target
Holding Company Common Stock and the record date and payment date
relating thereto, it being the intention of the parties hereto
that holders of Target Holding Company Common Stock shall not
receive more than one dividend or except as otherwise provided
above in this Section 6.15, fail to receive one dividend, for
such calendar quarter with respect to their shares of Target
Holding Company Common Stock (including any shares of Bank Common
Stock any such holder receives in exchange therefor in the
Merger).
ARTICLE VII
CONDITIONS PRECEDENT
7.01 Conditions to Each Party's Obligations Under This
Agreement. The respective obligations of each party under this
Agreement shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions, none of which may be
waived:
(a) This Agreement and the Merger and the transactions
contemplated hereby and thereby shall have been approved and
adopted by the affirmative votes of the respective holders of at
least two-thirds of each class of the outstanding shares of the
Bank, and a majority of the outstanding shares of Target Holding
Company, respectively.
(b) This Agreement and the transactions contemplated
hereby shall have been approved by, or waivers shall have been
received from, each regulatory authority having appropriate
jurisdiction and all appropriate waiting periods shall have
expired.
(c) Neither the Bank nor Target Holding Company nor
any of their respective Subsidiaries shall be subject to any
order, decree or injunction of a court or agency of competent
jurisdiction which prevents or delays the consummation of the
Merger.
7.02 Conditions to the Obligations of the Bank Under This
Agreement. The obligations of the Bank under this Agreement shall
be further subject to the satisfaction, at or prior to the
Effective Time, of the following conditions, any one or more of
which may be waived by the Bank:
(a) Each of the obligations of Target Holding Company
and Target Bank required to be performed by it at or prior to the
Effective Time pursuant to the terms of this Agreement shall have
been duly performed and complied with in all material respects
-46-
and the representations and warranties of Target Holding Company and
Target Bank contained in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as
of the Effective Time as though made at and as of the Effective
Time (except as otherwise contemplated by this Agreement), and
the Bank shall have received a certificate to that effect dated
the Effective Time signed by the President and by the Chief
Financial Officer of each of Target Holding Company and Target
Bank.
(b) All action required to be taken by, or on the part
of, Target Holding Company and Target Bank to authorize the
execution, delivery and performance of this Agreement by Target
Holding Company and Target Bank and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken by the Board of Directors and shareholders of Target
Holding Company and Target Bank.
(c) Any and all permits, approvals and waivers of
governmental bodies and regulatory authorities and material
consents and authorizations of other third parties shall have
been obtained by Target Holding Company and Target Bank and the
Bank which are required with respect to and are necessary in
connection with the consummation of the Merger and the other
transactions contemplated hereby; provided, however, that the
condition set forth in this Section 7.02(c) to the Bank's
obligation to effect the Merger shall not be met if any such
permit, approval or waiver is, in the reasonable judgment of the
Bank, subject to any condition or requirement which the Bank
determines to be materially adverse or materially burdensome or
to substantially deprive the Bank of the benefits which it
anticipates to receive in the Merger or the other transactions
contemplated by this Agreement (a "Burdensome Condition").
(d) The Bank shall have received an opinion, dated the
date of Closing, from counsel to Target Holding Company, in form
and substance reasonably satisfactory to the Bank covering
matters customarily covered in opinions of counsel in
transactions of this type.
(e) The Bank shall have received at the time of
execution of this Agreement, in form and substance reasonably
satisfactory to the Bank, an opinion from Xxxxxxx Xxxxx & Co., or
such other investment banker as may be selected by the Bank, that
the terms of the Merger are fair to the Bank from a financial
point of view.
(f) The Bank shall have received an opinion from its
tax counsel to the effect that, for federal income tax purposes,
(i) the transactions described in this Agreement will qualify for
treatment as a tax-free reorganization under Section 368 of the
Code; (ii) no gain or loss will be recognized by the Bank upon
the Merger; and (iii) such other matters as the Bank reasonably
deems appropriate and necessary.
-47-
Target Holding Company and its Subsidiaries will furnish
the Bank with such certificates of their officers or others and
such other documents as the Bank may reasonably request.
7.03 Conditions to the Obligations of Target Holding
Company and Target Bank Under This Agreement. The obligations of
Target Holding Company and Target Bank under this Agreement shall
be further subject to the satisfaction, at or prior to the
Effective Time, of the following conditions, any one or more of
which may be waived by Target Holding Company and Target Bank:
(a) Each of the obligations of the Bank required to be
performed by it at or prior to the Effective Time pursuant to
this Agreement shall have been performed and complied with in all
material respects and the representations and warranties of the
Bank contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the
Effective Time as though made at and as of the Effective Time
(except as otherwise contemplated by this Agreement), and Target
Holding Company shall have received a certificate to that effect
dated the Effective Time signed by the President and Chief
Financial Officer of the Bank.
(b) All action required to be taken by, or on the part
of the Bank to authorize the execution, delivery and performance
of this Agreement by the Bank and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken by the Board of Directors of the Bank and the shareholders
of the Bank.
(c) Target Holding Company and Target Bank shall have
received an opinion, dated the date of Closing, from counsel to
the Bank, in form and substance reasonably satisfactory to Target
Holding Company and Target Bank covering matters customarily
covered in opinions of counsel in transactions of this type.
(d) Target Holding Company shall have received at the
time of execution of this Agreement, in form and substance
reasonably satisfactory to Target Holding Company, an opinion
from Xxxxx, Xxxxxxxx & Xxxxx, Inc., or such other investment
banker as may be selected by Target Holding Company, that the
terms of the Merger are fair to Target Holding Company and its
shareholders from a financial point of view.
(e) Target Holding Company shall have received an
opinion from its tax counsel to the effect that, for federal
income tax purposes, (i) the transactions described in this
Agreement will qualify for treatment as a tax-free reorganization
under Section 368 of the Code; (ii) no gain or loss will be
recognized by Target Holding Company or Target Bank upon the
Merger; (iii) no gain or loss will be recognized by the
shareholders of Target Holding Company with respect to the stock
portion of the consideration received upon consummation of the
-48-
Merger; and (iv) such other matters as Target Holding Company
reasonably deems appropriate and necessary.
(f) The shares of Bank Common Stock to be issued in
the Merger shall be approved for inclusion for quotation on the
NASDAQ National Market System, subject to official notice of
issuance.
The Bank will furnish Target Holding Company with such
certificates of its officers or others and such other documents
as Target Holding Company may reasonably request.
ARTICLE VIII
CLOSING
8.01 Time and Place. Subject to the satisfaction of the
conditions of Article VII hereof, the closing (the "Closing") of
the transactions contemplated hereby shall take place at the
offices of Pullman & Xxxxxx, LLC, Bridgeport, Connecticut, at
10:00 A.M., on the third business day after the date on which (or
at the election of the Bank, the last day of the month in which)
all of the conditions contained in Article VII, to the extent not
waived, are satisfied; or at such other place, at such other
time, or on such other date as the Bank and Target Holding
Company may mutually agree upon for the Closing to take place
(the "Closing Date").
8.02 Deliveries at the Closing. At the Closing, there shall
be delivered to the Bank and Target Holding Company the opinions,
certificates, and other documents and instruments required to be
delivered under Article VII hereof.
ARTICLE IX
TERMINATION AND AMENDMENT
9.01 Termination. Notwithstanding any other provision of
this Agreement, this Agreement may be terminated at any time
prior to the Effective Time (whether before or after the approval
of this Agreement and the transactions contemplated hereby by the
shareholders of the Bank or Target Holding Company):
(a) by mutual consent of the Bank and Target Holding
Company 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;
-49-
(b) by either the Bank or Target Holding Company upon
written notice to the other party (i) 45 days after the date on
which any request or application for a regulatory permit,
approval or waiver required to consummate the Merger shall have
been denied or withdrawn at the request or recommendation of the
governmental entity which must grant such requisite regulatory
approval or (ii) 45 days after the date on which the Bank
determines that any such permit, approval or waiver is subject to
a Burdensome Condition, unless within the 45 day period following
such denial, withdrawal or determination a petition for rehearing
or an amended application has been filed with the applicable
governmental entity; provided, however, that no party shall have
the right to terminate this Agreement pursuant to this Section
9.01(b) if such denial or request or recommendation for
withdrawal shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe in any material
respect the covenants and agreements of such party set forth
herein;
(c) by either the Bank or Target Holding Company if
the Merger shall not have been consummated on or before June 30,
1998, time being of the essence, 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
in any material respect the covenants and agreements of such
party set forth herein;
(d) by Target Holding Company if (i) there shall have
occurred a material adverse change in the business, operations,
assets, or financial condition of the Bank taken as a whole from
that disclosed by the Bank in the Bank's quarterly report on Form
F-4 for the six months ended June 30, 1997; (ii) there is a
material breach in any representation, warranty, covenant,
agreement or obligation of the Bank hereunder and such breach
shall not have been or cannot be remedied within 30 days after
receipt by the Bank of notice in writing from Target Holding
Company to the Bank specifying the nature of such breach and
requesting that it be remedied; (iii) the Board of Directors of
the Bank shall have failed to recommend or shall have withdrawn,
modified or changed in a manner adverse to Target Holding Company
its recommendation of, this Agreement and the Merger and the
transactions contemplated hereby and thereby; or (iv) any
approval of the stockholders of the Bank contemplated by this
Agreement shall not have been obtained by reason of the failure
to obtain the required vote at a duly held meeting of
stockholders or at any adjournment or postponement thereof; or
(e) by the Bank, if (i) there shall have occurred a
material adverse change in the business, operations, assets or
financial condition of Target Holding Company and its
Subsidiaries taken as a whole from that disclosed by Target
Holding Company in Target Holding Company's quarterly report on
Form 10-Q for the six months ended June 30, 1997; (ii) there is a
material breach in any representation, warranty, covenant,
agreement or obligation of Target Holding Company hereunder and
such breach shall not have been or cannot be remedied within 30
days after receipt by Target Holding Company of notice in writing
-50-
from the Bank specifying the nature of such breach and
requesting that it be remedied; (iii) the Board of Directors of
Target Holding Company shall have failed to recommend or shall
have withdrawn, modified or changed in a manner adverse to the
Bank its recommendation of, this Agreement and the Merger and the
transactions contemplated hereby and thereby; or (iv) any
approval of the stockholders of Target Holding Company
contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote at a duly held
meeting of stockholders or at any adjournment or postponement
thereof;
(f) by the Bank if any waiver of the FRB which is
requested with respect to the consummation of the Merger and the
other transactions contemplated hereby shall have been denied,
shall contain a Burdensome Condition, or in the Bank's reasonable
judgment, after consultation with outside counsel, is unlikely to
be received without the imposition of a Burdensome Condition; or
(g) by Target Holding Company, if (either before or
after the approval of this Agreement and the transactions
contemplated hereby by the shareholders of Target Holding
Company) its Board of Directors so determines by a vote of a
majority of the members of its entire Board, at any time during
the ten-day period commencing with the Determination Date, if the
Valuation Period Market Value on the Determination Date shall be
less than $20.91.
Notwithstanding the foregoing, if Target Holding Company
elects to exercise its termination right pursuant to this
subsection (g), it shall give prompt written notice to the Bank
(provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned ten-day period).
During the seven-day period commencing with its receipt of such
notice, the Bank shall have the option of increasing the
consideration to be received by holders of Target Holding Company
Common Stock hereunder by increasing the Aggregate Consideration
(whether by means of increasing the Stock Amount or the cash
portion of the Aggregate Consideration) such that the Aggregate
Consideration shall be at least equal to an amount equal to (a)
the Threshold Stock Value plus (b) the Base Cash Consideration
plus the Cash Adjustment, if any, minus (c) the Aggregate Option
Settlement Amount. If the Bank makes an election contemplated by
the preceding sentences, within such seven-day period, it shall
give prompt written notice to Target Holding Company of such
election and the revised Exchange Ratio, whereupon no termination
shall have occurred pursuant to this subsection (g) and this
Agreement shall remain in effect in accordance with its terms
(except as the Exchange Ratio shall have been so modified), and
any references in this Agreement to "Exchange Ratio" shall
thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this subsection (g).
For purposes of this subsection (g), the following
terms shall have the meanings indicated:
-51-
"Determination Date" means the date on which the last
of the regulatory approvals required for consummation of the
Merger shall have occurred.
"Stock Value" means the Stock Amount (determined after
giving effect to Section 1.06) times the Valuation Period Market
Value.
"Threshold Stock Value" means the Stock Value determined
at a Valuation Period Market Value equal to $20.91.
9.02 Effect of Termination. In the event of termination of
this Agreement by either the Bank or Target Holding Company as
provided in Section 9.01, this Agreement shall forthwith become
void and have no further effect except (i) Sections 6.02(c),
6.12, 9.02, 10.01 and 10.02 shall survive any termination of this
Agreement, (ii) the Stock Option Agreement and the Fee Letter
shall survive and be subject to the termination and other
provisions thereof, and (iii) notwithstanding anything to the
contrary contained in this Agreement, no party shall be relieved
or released from any liabilities or damages arising out of its
breach of any representation, warranty, or other provision of
this Agreement.
9.03 Amendment. Subject to compliance with applicable law,
this Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at
any time before or after approval of the matters presented in
connection with the Merger by the shareholders of Target Holding
Company or the Bank; provided, however, that after any approval
of the transactions contemplated by this Agreement by Target
Holding Company's shareholders, there may not be, without further
approval of such shareholders, any amendment of this Agreement
which reduces the amount or changes the form of the consideration
to be delivered to Target Holding Company's shareholders
hereunder in any material respect other than as contemplated by
this Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
9.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their
respective Board of Directors, may, to the extent legally
allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions
contained herein (other than those contained in Section 7.01);
provided, however, that after any approval of this Agreement and
the transactions contemplated hereby by Target Holding Company's
shareholders, there may not be, without further approval of such
shareholders, any extension or waiver of this Agreement or any
portion thereof which reduces the amount or changes the form of
the consideration to be delivered to Target Holding Company's
shareholders hereunder in any material respect other than as
-52-
contemplated by this Agreement. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid
only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X
MISCELLANEOUS
10.01 Payment to Target Holding Company.
(a) If the Bank shall terminate this Agreement pursuant to
Section 9.01(f) hereof, or otherwise because any requested waiver
of the FRB shall not have been received or shall contain a
Burdensome Condition, the Bank shall pay to Target Holding
Company a cash fee as follows: (i) $5 million if such termination
shall occur on or prior to March 3, 1998; (ii) $8 million if such
termination shall occur from March 4, 1998 through and including
June 2, 1998; or (iii) $9 million if such termination shall occur
from June 3, 1998 through and including June 30, 1998.
(b) If Target Holding Company shall terminate this
Agreement pursuant to Section 9.01(c) hereof and as of June 30,
1998 any requested waiver of the FRB shall not have been received
or shall contain a Burdensome Condition, the Bank shall pay to
Target Holding Company a cash fee of $9 million; provided,
however, that no fee shall be payable under this Section 10.01(b)
if any fee is payable under Section 10.01(a) hereof.
(c) Any fee payable pursuant to Section 10.01(a) or (b)
hereof shall be payable in immediately available funds on or
before the second business day following termination of this
Agreement by the Bank or the second business day following the
Bank's receipt of written notice from Target Holding Company
effecting termination of this Agreement.
10.02 Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby, including, without limitation, attorney, accountant, and
investment banker fees and expenses, shall be paid by the party
incurring such costs and expenses, provided, however, that
printing expenses and SEC and FDIC filing and registration fees
shall be shared equally between Target Holding Company and the
Bank.
10.03 Non-Survival of Representations and Warranties. The
respective representations and warranties of the Bank, Target
Bank and Target Holding Company contained in this Agreement or in
any instrument or certificate delivered pursuant hereto by the
Bank or Target Holding Company shall expire on and be terminated
and extinguished at the Effective Time; provided, however,
that after the Effective Time, any such representation or warranty of
-53-
the Bank or Target Holding Company or Target Bank shall not be
deemed to be terminated or extinguished so as to deprive the Bank
of any defense at law or in equity which it would otherwise have
to any claim against it by any person, firm, corporation or other
legal entity, including, without limitation, any shareholder or
former shareholder of Target Holding Company.
10.04 Notification of Certain Matters. Target Holding
Company shall give prompt notice to the Bank and the Bank shall
give prompt notice to Target Holding Company, of (i) the
occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the
Effective Time, and (ii) any material failure of Target Holding
Company or the Bank, as the case may be, or of any officer,
Director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that no such
notifications shall affect the representations or warranties of
the parties or the conditions to the obligations of the parties
hereunder.
10.05 Notices. All notices or other communications hereunder
shall be in writing and shall be deemed given if delivered
personally or mailed by prepaid certified first class mail
(return receipt requested) or by recognized overnight delivery
service addressed as follows:
(a) If to the Bank, to:
Xxxxxxx X. Xxxxxxxx, Esq.
Executive Vice President
and General Counsel
People's Bank
000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
-54-
(b) If to Target Holding Company or Target Bank, to:
Norwich Financial Corp.
0 Xxxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Xx.
President and Chief Executive Officer
Copy to:
Day, Xxxxx & Xxxxxx
CityPlace I
Xxxxxxxx, XX 00000
Attention: Xxxx X. XxXxxxxxx, Esq.
or such other address as shall be furnished in writing by either
party, and any such notice or communication shall be deemed to
have been given as of the date of receipt.
10.06 Parties in Interest. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that
neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either party hereto
without the prior written consent of the other party, and that
nothing in this Agreement, except Section 6.12, is intended to
confer, expressly or by implication, upon any other person any
rights or remedies under or by reason of this Agreement. If any
provision or part of this Agreement is deemed unenforceable, the
enforceability of the other provisions and parts shall not be
affected.
10.07 Complete Agreement. This Agreement, the Stock Option
Agreement, the Fee Letter and the documents and other writings
referred to herein or delivered pursuant thereto, contain the
entire agreement and understanding of the parties with respect to
its subject matter, other than the Confidentiality Agreements.
There are no restrictions, agreements, premises, warranties,
covenants or undertakings other than those expressly set forth
herein or therein. Except as set forth in the first sentence of
this Section 10.07, this Agreement supersedes all prior
agreements and understandings between the parties, both written
and oral, with respect to its subject matter.
10.08 Counterparts. This Agreement may be executed in one or
more counterparts all of which shall be considered one and the
same agreement and each of which shall be deemed an original.
-55-
10.09 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut
without regard to the conflict of law principles thereof (except
to the extent that mandatory provisions of federal law or of the
State of Delaware with respect to Target Holding Company are
applicable).
10.10 Interpretation. The Article and Section headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. 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. When the words "include" or "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 Bank, Target
Holding Company, Target Bank or any of their respective
Subsidiaries or affiliates to take any action which would violate
applicable law (whether statutory or common law), rule or
regulation.
-56-
IN WITNESS WHEREOF, the Bank, Target Holding Company and
Target Bank have caused this Agreement to be executed by their
duly authorized officers as of the day and year first above
written and each of the Bank and Target Bank have caused this
Agreement to be executed by a majority of its directors as
required pursuant to Section 36a-125 of the CGS.
PEOPLE'S BANK
By /s/ Xxxxx X.X. Xxxxxx
----------------------
Xxxxx X.X. Xxxxxx
Its President and
Chief Executive Officer
Attest:
/s/ Xxxxxx X. Xxxxx
--------------------------
Secretary
NORWICH FINANCIAL CORP.
By /s/ Xxxxxx X. Xxxxxx, Xx.
-------------------------
Xxxxxx X. Xxxxxx, Xx.
Its President and
Chief Executive Officer
Attest:
/s/ Xxxxxx X. Xxxxxxx
--------------------------
Secretary
-57-
THE NORWICH SAVINGS SOCIETY
By /s/ Xxxxxx X. Xxxxxx, Xx.
-------------------------
Xxxxxx X. Xxxxxx, Xx.
Its President and
Chief Executive Officer
Attest:
/s/ Xxxxxx X. Xxxxxxx
--------------------------
Secretary
We hereby confirm, as of this 3rd day of September, 1997,
our approval of the foregoing Agreement and Plan of Merger by and
among Norwich Financial Corp., the Norwich Savings Society and
People's Bank.
DIRECTORS OF ACQUIROR BANK
/s/ Xxxxx X. Xxxxx /s/ Xxxxxx X. Xxxxxx
------------------------- ---------------------------
Xxxxx X. Xxxxx Xxxxxx X. Xxxxxx
/s/ Xxxxx X.X. Xxxxxx /s/ Xxxxx Xxxx Xxxxxxxxx
------------------------- ---------------------------
Xxxxx E.A. Xxxxxx Xxxxx Xxxx Xxxxxxxxx
/s/ Xxxxxx X. Xxxxxx /s/ Xxxx Xxxxxxx
------------------------- ---------------------------
Xxxxxx X. Xxxxxx Xxxx Xxxxxxx
/s/ Xxxxxx X. Xxxxxx /s/ Xxxx X. XxXxxxxxx
------------------------- ---------------------------
Xxxxxx X. Xxxxxx Xxxx X. XxXxxxxxx
/s/ Xxxxxx X. Xxxxxx /s/ Xxxx X. XxXxxxxx
------------------------- ---------------------------
Xxxxxx X. Xxxxxx Xxxx X. XxXxxxxx
/s/ Xxxxx Xxxxxxxx /s/ Xxxxx X. Xxxxxx
------------------------- ---------------------------
Xxxxx Xxxxxxxx Xxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxxx, Xx.
------------------------- ---------------------------
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxxx, Xx.
We hereby confirm, as of this 3rd day of September, 1997,
our approval of the foregoing Agreement and Plan of Merger by and
among Norwich Financial Corp., The Norwich Savings Society and
People's Bank.
DIRECTORS OF TARGET HOLDING COMPANY
AND TARGET BANK
/s/ Xxxxxx X. Xxxxxx, Xx. /s/ Xxxxxxx X. Xxxxxx
------------------------- ---------------------------
Xxxxxx X. Xxxxxx, Xx. Xxxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxx /s/ Xxxxxxxx X. Xxxxxx, Xx.
------------------------- ---------------------------
Xxxxxxx X. Xxxxx Xxxxxxxx X. Xxxxxx, Xx.
/s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxxxx X. Xxxx
------------------------- ---------------------------
Xxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxx
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxx X. Xxxxxx
------------------------- ---------------------------
Xxxxxx X. Xxxxxxx Xxxx X. Xxxxxx
