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EXHIBIT 10.2 DRAFT ESOP LOAN COMMITMENT LETTER AND ESOP LOAN DOCUMENTS
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FORM OF
BAY STATE FEDERAL SAVINGS BANK
EMPLOYEE STOCK OWNERSHIP TRUST
LOAN AND SECURITY AGREEMENT
Bay State Federal Savings Bank.
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_______________ , 1997
Gentlemen:
The undersigned,________________________ ("Trustee"), not
individually but solely as Trustee under the Bay State Federal Savings Bank
Employee Stock Ownership Trust (the "Trust") effective ____________ (the
"Borrower"), applies to you for your commitment, subject to all of the terms and
conditions hereof and on the basis of the representations hereinafter set forth,
to make a loan available to the Borrower as hereinafter set forth. Bay State
Funding Corp. is hereinafter referred to as the "Lender". The term "Bank" as
used herein refers to the sponsoring employer of the Bay State Federal Savings
Bank Employee Stock Ownership Plan (the "ESOP").
SECTION ONE. THE TERM LOAN.
1.1 AMOUNT AND TERMS. Subject to and upon the terms and conditions
herein set forth, the Lender agrees to lend amounts to the Borrower from time to
time during the period of this agreement up to but not including _________(the
"Maturity Date") in an aggregate principal amount sufficient to permit the
Borrower to acquire a number of shares ("Shares") of common stock, par value
$0.01 ("Common Stock") of Bay State Bancorp, Inc., a Delaware corporation, and
the Holding Company of the Bank, equal to 8% of the Shares issued in connection
with the conversion of the Bank from the mutual to stock form ("Loan Amount").
The Loan is intended to be an "exempt loan" as described in Section
4975(d) of the Internal Revenue Code of 1986, as amended (the "Code"), as
defined in Section 54.4975-7(b) of the Treasury Regulations (the "Regulations"),
as described in Section 408(b)(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and as described in Department of Labor
Regulations Section 2550.408b-3 (collectively, the "Exempt Loan Rules").
1.2 THE NOTE. The disbursement of the Loan pursuant to Section 1.1
hereof shall be made against and evidenced by a promissory note of the Borrower
in the form annexed hereto as Exhibit A (the "Note"), such Note to bear interest
as hereinafter provided, and to mature in
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twenty (20) equal annual installments consisting of both principal and interest
amortized over a twenty (20) year period in an amount sufficient to repay all
borrowed amounts plus interest, commencing on __________________ and on the last
day of each and every ___________ each year thereafter, except that the final
installment in the amount of all principal and interest not sooner paid shall be
due on________________, the final maturity thereof.
Without regard to the principal amount of the Note stated on its
face, the actual principal amount at any time outstanding and owed by the
Borrower on account of the Note shall be the amount of the disbursement of the
Loan made by the Lender under Section 1.1 hereof less all payments of principal
actually received by the Lender. The amount of such disbursement made by the
Lender and any repayments of principal thereof shall be recorded by the Lender
on its books or records or, at its option, endorsed on the reverse side of the
Note by the Lender and the unpaid principal balance at any time so recorded or
endorsed by the Lender shall be prima facie evidence in any court or other
proceedings brought to enforce the Note of the principal amount remaining unpaid
thereon.
1.3 EXEMPT LOAN RULES. Notwithstanding anything to the contrary
contained in this Loan and Security Agreement (the "Agreement") or in the Note,
the Borrower shall be obligated to make repayments of the Loan only to the
extent that such repayments when added to the repayments theretofore made during
the applicable plan year would not exceed an amount which would cause the
limitations of Section 415 of the Code to be exceeded for any ESOP participant.
Except as set forth in the next succeeding sentence and to the
extent permitted by applicable law, including, without limitation, the Exempt
Loan Rules, the principal amount of the Loan and any interest thereon shall be
payable solely from contributions (other than contributions of employer
securities) made to the Trust in accordance with the ESOP, and cash dividends
received on the Shares, to enable the Borrower to pay its obligations under the
Loan and from earnings attributable to the Shares and the investment of such
contributions and dividends.
The Lender acknowledges and agrees that it shall have no other
recourse against the Borrower for repayment of the Loan and that it shall have
no recourse against assets of the ESOP included in the Trust other than pursuant
to Sections 3 and 8 hereof.
SECTION TWO. INTEREST AND FEES.
2.1 INTEREST RATE. The Loan shall bear interest (which the Borrower
hereby promises to pay) prior to maturity (whether by lapse of time,
acceleration or otherwise) at a rate per annum equal at all times to the
Interest Rate as defined in Section 10.3 hereof.
2.2 BASIS AND PAYMENT DATES. All interest accruing on the Note prior
to maturity shall be due and payable on a annual basis on the last day of each
year (commencing ____________) and at maturity (unless prepaid in whole prior to
such date, then on the date of
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such prepayment in whole) and interest accruing after maturity shall be due and
payable upon demand. All interest on the Note shall be computed on the basis of
a year of 360 days.
SECTION THREE. COLLATERAL.
3.1 GRANT OF SECURITY INTEREST-PLEDGED SHARES. The Borrower hereby
grants, pledges and assigns to the Lender all Shares of the issued and
outstanding common stock, par value $.01 per share all of which were either (i)
purchased by the Borrower from the proceeds of the disbursement of the Loan;
(ii) acquired by the Borrower with the proceeds of a prior exempt loan within
the meaning of Section 54.4975-7(b) of the Regulations, and pledged as
collateral for such prior exempt loan, where the balance of such prior exempt
loan has been repaid with the proceeds of the disbursement of the Loan (the
"Pledged Shares" being hereinafter referred to as the "Collateral"). The Pledged
Shares shall be evidenced by a stock certificate. The assignment and pledge
herein granted and provided for is made and given to secure and shall secure the
prompt payment of principal of and interest on the Note as and when the same
becomes due and payable and the payment, observance and performance of any and
all obligations and liabilities arising under or provided for in this Agreement
or the Note or any of them in each instance as the same may be amended or
modified and whether now existing or hereafter arising.
3.2 FURTHER ASSURANCES. The Borrower covenants and agrees that it
will at any time and from time to time as requested by the Lender execute and
deliver such further instruments and do and perform such other acts as the
Lender may reasonably deem necessary or desirable to provide for or perfect the
lien of the Lender in the Collateral hereunder.
3.3 VOTING. Upon the occurrence of a Default or an Event of Default
hereunder, the Lender shall have the right to transfer the Collateral or any
part thereof into its name or into the name of its nominee. The Lender shall not
be entitled to vote the Pledged Shares unless and until an Event of Default has
occurred and so long as the same shall not have been waived by the Lender.
3.4 PARTIAL RELEASES. The Lender agrees, provided always that no
Default or Event of Default shall have occurred and be continuing, as promptly
as is practicable after__________ in each year (the period commencing__________
and ending____________ and each subsequent 12-month period ending on_________
being hereinafter referred to as a "Plan Year"), to release that number of
Pledged Shares then being held to secure the Loan which is equal to the number
of such Pledged Shares held as of the last day of the Plan Year multiplied by a
fraction, the numerator of which is the aggregate amount of all principal and
interest payments made on the Note during the Plan Year and the denominator of
which is the sum of the numerator plus the unpaid principal and interest of the
Note as of the last day of such Plan Year.
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SECTION FOUR. PAYMENTS.
4.1 PLACE AND APPLICATION. All payments of principal, interest, fees
and all other amounts payable hereunder shall be made to the Lender at ▇▇▇▇
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at such other place for the account of the Lender as the Lender may from time to
time in writing specify to the Borrower) in immediately available and freely
transferable funds at the place of payment. All payments shall be paid in full
without setoff or counterclaim and without reduction for and free from any and
all taxes, levies, duties, fees, charges, deductions, withholdings, restrictions
or conditions of any nature imposed by any government or any political
subdivision or taxing authority thereof.
4.2 PREPAYMENTS. The Borrower shall have the privilege of prepaying
in whole or in part the Note at any time upon giving three (3) Business Days'
prior notice to the Lender, each such prepayment to be made by the payment of
the principal amount to be prepaid and accrued interest thereon to the date
fixed for prepayment. All such prepayments shall be made without premium or
penalty. Prepayments shall first be applied to the several installments of the
Note in the inverse order of their respective maturities.
SECTION FIVE. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Lender as follows:
5.1 The Trust is a duly organized, validly existing employee stock
ownership trust.
5.2 The proceeds of the disbursement of the Loan shall be applied in
their entirety to the payment of the purchase price for the Pledged Shares.
5.3 The Borrower has full right, power and authority to enter into
this Agreement, to make the borrowings hereunder provided for, to issue the Note
in evidence thereof and to perform each and all of the matters and things herein
and therein provided for and this Agreement does not, and the Note when issued
will not, nor will the performance or observance by the Borrower of any of the
matters or things herein or therein provided, contravene any provision of law or
the Trust or any other covenant or agreement affecting the Trust or any of its
assets. As of the date of the disbursement of the Loan, the Pledged Shares will
be fully paid and non-assessable and the Pledged Shares will be owned by the
Borrower free and clear of all liens, charges and encumbrances whatsoever,
except for any lien of Lender provided for herein.
5.4 Except as disclosed to the Lender in writing, there is no
litigation or governmental proceeding pending, nor to the knowledge of the
Borrower threatened, against the ESOP and Trust.
5.5 The ESOP and Trust have no material liabilities, whether
absolute or contingent, except for those heretofore disclosed to the Lender.
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SECTION SIX. REPRESENTATIONS AND WARRANTIES OF THE LENDER
The Lender represents and warrants that:
6.1 The Lender is a corporation duly organized under the laws of the
State of Delaware, and is validly existing and in good standing under the laws
of the State of Delaware. The Lender has full power and authority and legal
right to make and perform this Agreement.
6.2 The execution, delivery and performance by the Lender of this
Agreement have been duly authorized by all necessary action by the Lender and is
not and will not violate any provisions of law applicable to the Lender, any
rules, regulations or orders applicable to the Lender or any judgments or
decrees binding upon the Lender. This Agreement is a valid and legally binding
obligation of the Lender enforceable against the Lender in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting credits' rights generally
and the general principles of equity (regardless of whether considered in a
proceeding at law or in equity).
6.3 No authorizations, approvals or consents of, and no filings or
registrations with, any governmental regulatory authority or agency are required
for the execution, delivery or performance by the Lender of this Agreement, or
any transaction contemplated hereby, or for the validity or enforceability
against the Lender hereof except as have already been received or accomplished.
6.4 The execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated hereby will not violate, conflict
with or constitute a default under (i) any of the provisions of the Lender's
Certificate of Incorporation or Bylaws, (ii) any provision of any agreement,
instrument, order, arbitration award, judgment or decree to which the Lender is
a party or by which it is or its assets are bound (iii) any statute, rule or
regulation of any federal, state or local government or agency applicable to the
Lender, except in any such case (i), (ii), (iii) above, for any such conflicts,
violations, defaults which either individually or in the aggregate do not have a
material adverse effect on the business properties of the Lender and its
subsidiaries, taken as a whole.
6.5 The Bank has taken such actions as are required by applicable
law to be taken by it to establish the ESOP and the Trust.
6.6 There is no action, suit, investigation or proceeding pending,
or to the best knowledge of the Bank, threatened against or affecting the ESOP
before any court or governmental department, agency or instrumentality.
6.7 The Loan will be an "exempt loan" as that term is defined under
Section 54.4975-7(b)(1)(iii) of the Regulations, provided the ESOP Committee
determines that the interest rate is not more than reasonable; and the
transactions contemplated by this Agreement
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are not "prohibited transactions" within the meaning of Section 4975 of the Code
or Section 406(a) of ERISA.
6.8 Except as otherwise provided in this Agreement, the Shares are
not subject to any restriction on transfer under applicable Federal securities
law and may be freely traded over-the-counter.
SECTION SEVEN. CONDITIONS PRECEDENT.
The obligation of the Lender to make the Loan shall be subject to
satisfaction of the following conditions precedent:
7.1 The Lender shall have received executed originals of this
Agreement and the Note duly signed and properly completed.
7.2 The Lender shall have received either (i) the certificate
evidencing all the Pledged Shares together with duly executed blank stock power
therefore or (ii) if such Pledged Shares are not yet available, a duly executed
agreement to pledge such stock in the form attached hereto as Exhibit B (in
which event such certificate and stock power will be delivered within 6 days of
the date of the Lender makes the Loan).
7.3 The Lender shall have received copies (executed or certified, as
may be appropriate) of all legal documents or proceedings taken in connection
with the execution and delivery of this Agreement and the Note.
SECTION EIGHT. COVENANTS.
Borrower covenants and agrees that so long as any amount remains
unpaid on the Note or the Commitment is outstanding, except to the extent
compliance in any case or cases is waived in writing by the Lender:
8.1 COMPLIANCE. The Borrower will comply with all requirements of
the Code, ERISA and any other law, rule or regulation applicable to it as such
laws, rules or regulations affect the ESOP or the Trust.
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8.2 REPORTS.
(a) The Borrower will maintain a system of accounting
for the ESOP and the Trust in accordance with sound accounting
practice and will, from time to time, furnish to the Lender and its
duly authorized representatives, such information and data with
respect to the financial condition of the ESOP and the Trust as the
Lender may reasonably request.
(b) Without any request the Borrower will furnish to the
Lender promptly after knowledge thereof shall have come to the
attention of the Borrower, written notice of the occurrence of any
Default or Event of Default hereunder or of any threatened or
pending litigation or governmental proceeding against the Plan or
the Trust.
8.3 DETERMINATION LETTER. The Bank shall apply for a determination
letter from the Internal Revenue Service that the Plan and the Trust, taken
together, qualify as an employee stock ownership plan for purposes of Section
4975(e)(7) of the Code and the rules and regulations thereunder.
SECTION NINE. EVENTS OF DEFAULT AND REMEDIES.
9.1 EVENT OF DEFAULT. Any one or more of the following shall
constitute an Event of Default hereunder:
(a) The Borrower shall default in the payment of
principal and/or interest in respect of the Note or any other
amounts payable under this Agreement when due;
(b) Any representation, warranty or statement made by
the Borrower herein or in connection with the making of the Loan
proves to be incorrect in any material respect as of the date of the
issuance or making thereof;
(c) The Borrower shall default in the due performance or
observance by it of any term, covenant or agreement (other than
those referred to in subparts (a) and (b), inclusive, of this
Section 9.1) contained in this Agreement and such default shall
continue unremedied for a period of 30 days after notice to the
Borrower by the Lender or any other holder of the Note;
(d) The ESOP shall be terminated prior to the expiration
of the term of this Agreement.
9.2 LIMITATIONS ON USE OF TRUST ASSETS. When any Event of Default
described in subsections (a) to (c), of Section 9.1 has occurred and is
continuing, the Lender or the holder of the Note shall have no rights to assets
of the Trust other than (i) contributions (other than contributions of employer
securities) that are made by the Lender to enable the Borrower to meet
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its obligations pursuant to the Loan, cash dividends received by the Borrower on
the Shares and earnings attributable to the investment of such contributions and
dividends and (ii) the Pledged Stock; provided further, however, that the value
of Trust assets transferred to the Lender as a result of an Event of Default
shall not exceed the amount of the repayment then in default, and, provided
further, that so long as the Lender is a "party in interest" within the meaning
of ERISA Section 3(14) or a "disqualified person" within the meaning of Section
4975(e)(2) of the Code, a transfer of Trust assets upon default shall be made
only if, and to the extent of, the Borrower's failure to meet the loan's payment
schedule.
9.3 RIGHTS UPON AN EVENT OF DEFAULT. When any Event of Default has
occurred and is continuing the Lender may, in addition to such other rights or
remedies as it may have, then or at any time or times thereafter exercise with
respect to the Collateral any and all of the rights, options and remedies of a
secured party under the Uniform Commercial Code of New York (the "UCC")
including without limitation the sale of all or any part of the Collateral at
any brokers' board or any public or private sale, provided, however that the
Lender shall only be able to exercise such rights and remedies to the extent of
all interest and principal payments which are due and payable as of the date of
the Event of Default and provided further that prior to such exercise the Lender
shall release from the Collateral so much thereof as it would have been required
to release under Section 3.4 hereof if the period from the previous __________
__ to the date of such release constituted a Plan Year and no Event of Default
had occurred. The net proceeds of any such sale, after deducting all costs and
expenses incurred in the collection, protection, sale and delivery of the
Collateral (which expenses Borrower promises to pay) shall be applied first to
the payment of any costs and expenses incurred by the Lender in selling or
otherwise disposing of the Collateral, second, to the payment of the principal
of and the interest on the Note, and, third, ratably as among any other items of
the indebtedness hereby secured. Any surplus remaining after the full payment
and satisfaction of the foregoing shall be returned to the Borrower or to
whomsoever a court of competent jurisdiction shall determine to be entitled
thereto. Any requirement of said UCC as to reasonable notice shall be met by the
Lender personally delivering or mailing notice (by certified mail - return
receipt requested) to the Borrower at its address as provided in Section 11.6
hereof at least ten (10) days prior to the event giving rise to the requirement
of such notice. In connection with any offer, solicitation or sale of the
Collateral, the Lender may restrict bidders and otherwise proceed in whatever
manner it reasonably believes appropriate in order to comply or assure
compliance with applicable legal requirements pertaining to the offer and sale
of securities of the same type as the Collateral.
9.4 ERISA RESTRICTIONS. The number of shares of Pledged Stock as to
which the Lender may exercise the rights set forth in this Section 9 may not
exceed that number of shares (then remaining subject to pledge hereunder) which
is then equal in current value to the amount in default under the Note. The
remedies set forth in this Section 9 may only be exercised to the extent
consistent with the restrictions on remedies set forth in Section 408(b)(3) of
ERISA and the regulations thereunder and Section 4975(d)(3) of the Code and the
regulations thereunder.
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SECTION TEN. DEFINITIONS.
10.1 The term "Business Day" shall mean any day on which savings
institutions are generally open for business in Massachusetts other than a
Saturday or Sunday.
10.2 The term "Event of Default" shall mean any event condition
specified as such in Section 9.1 hereof and the term "Default" shall mean any
event or condition which, with the lapse of time, the giving of notice, or both
would constitute an Event of Default.
Capitalized terms defined elsewhere in this Agreement shall have the
meanings as defined in all provisions hereof.
10.3 The term "Interest Rate" shall mean prime rate as published in
the Wall Street Journal on____________________
SECTION ELEVEN. MISCELLANEOUS.
11.1 HOLIDAYS. If any principal of the Note shall fall due on
Saturday, Sunday or on another day which is a legal holiday for savings
institutions in the Commonwealth of Massachusetts interest at the rate the Note
bears for the period prior to maturity shall continue to accrue on such
principal from the stated due date thereof to and including the next succeeding
Business Day on which the same is payable.
11.2 NO WAIVER, CUMULATIVE REMEDIES. No delay or failure on the part
of the Lender or the part of the holder of the Note in the exercise of any power
or right shall preclude any other or further exercise thereof, or the exercise
of any other power or right, and the rights and remedies hereunder of the Lender
and of any holder of the Note are cumulative to, and not exclusive of, any
rights or remedies which any of them would otherwise have.
11.3 AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of this Agreement or of the Note nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Lender, and then such consent,
modification or waiver shall be effective only in the specific instance and for
the specific purpose for which given. No notice to or demand on the Borrower in
any case shall entitle the Borrower to any other further notice or demand in
similar or other circumstances.
11.4. SURVIVAL OF REPRESENTATIONS. All representations and
warranties made herein or in certificates given in connection with the Loan
shall survive the execution and delivery of this Agreement and of the Note, and
shall continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder.
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11.5 PAYMENTS. So long as the Lender is the holder of the Note, the
Borrower will promptly and punctually pay the principal of and interest on the
Note without presentment of the Note and without any notation of any such
payment being made on the Note.
11.6 ADDRESSES FOR NOTICES. All communications provided for herein
shall be in writing and shall be deemed to have been given or made when served
personally or when deposited in the United States mail addressed, if to the
Borrower at_____________________________________ Trust Officer; if to the Lender
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other address
as shall be designated by any party hereto in a written notice to each other
party pursuant to this Section 11.6.
11.7 HEADINGS. Article and Section headings used in this Agreement
are for convenience or reference only and are not a part of this Agreement for
any other purpose.
11.8 SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such unenforceability without impairing the
enforceability of the remaining provisions hereof affecting the enforceability
of such provision in any other jurisdiction.
11.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by different parties hereto on separate counterparts, and all
such counterparts taken together shall be deemed to constitute one and the same
instrument.
11.10 BINDING NATURE, GOVERNING LAW, ETC. This Agreement shall be
binding upon the Borrower and its successors and assigns and shall inure to the
benefit of the Lender and the benefit of its successors and assigns, including
any subsequent holder of the Note. To the extent not preempted by Federal law,
this Agreement and the rights and duties of the parties hereto shall be
construed and determined in accordance with the laws of the Commonwealth of
Massachusetts without regard to principles of conflicts of laws. This Agreement
constitutes the entire understanding of the parties with respect to the subject
matter hereof and any prior agreements, whether written or oral, with respect
thereto are superseded hereby.
11.11 CONCERNING THE BORROWER. The term "Borrower" as used herein
shall mean and include the undersigned as Trustee of the Trust and its
successors in trust not individually but solely as Trustee under that certain
Bay State Federal Savings Bank Employee Stock Ownership Trust
effective___________________, by and between the undersigned and Bay State
Federal Savings Bank and this Agreement shall be binding upon the undersigned
and its successors and assigns and upon the trust estate. The undersigned
assumes no personal or individual liability or responsibility for payment of the
indebtedness evidenced by the Note or for observance or performance of the
covenants and agreements herein contained or for the truthfulness of the
representations and warranties herein contained, the undersigned having executed
this Agreement and the Note solely in its capacity as trustee as aforesaid to
bind the undersigned, its successors in trust and the trust estates.
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11.12 LIMITED LIABILITY. Anything contained herein or in the Note to
the contrary notwithstanding, the sole and only recourse of the Lender and any
other holder of the Note for payment of the obligations hereunder and under the
Note , as against the Borrower for the payment of the obligations hereunder and
under the Note shall be to (i) the Collateral, (ii) contributions, other than
employer securities not constituting Collateral hereunder, made to the ESOP and
the Trust by sponsoring employers to enable the Borrower to meet its obligations
hereunder and under the Note, and (iii) earnings attributable to the Pledged
Shares and to the investment of such employer contributions, but only to the
extent of the failure of the Borrower to meet the payment schedule of the Loan
provided for herein. The Trust assets may be transferred to Lender upon the
occurrence of a Default or an Event of Default hereunder only upon and to the
extent of the failure of the Plan to meet the payment schedule of the Loan. In
no event may the value of the Trust assets so transferred exceed the amount of
the default.
11.13 ▇▇▇▇▇▇'S DUTY OF CARE. It is agreed and understood that the
Lender's duty with respect to the Collateral shall be solely to use reasonable
care in the custody and preservation of the Collateral in the Lender's
possession, which shall not include any steps necessary to preserve rights
against prior parties.
All provisions in this Agreement shall be construed so as to
maintain (i) the ESOP as a qualified leveraged employee stock ownership plan
under Sections 401(a) and 4975(e)(7) of the Code, (ii) the Trust as exempt from
taxation under Section 501(a) of the Code, and (iii) the Loan as an "exempt
loan" under the Exempt Loan Rules.
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Upon your acceptance hereof in the manner hereinafter set forth,
this Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of this ___ day of__________________
_________________, and its successors in
trust, as Trustee under that certain Bay
State Federal Savings Bank Employee
Stock Ownership Trust effective
______________ by and between the
undersigned and Bay State Federal
Savings Bank .
By___________________________________
Accepted and agreed to at Brookline, Massachusetts as of the date
last above written.
By___________________________________
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EXHIBIT A
PROMISSORY NOTE
Amount sufficient to satisfy the Loan Amount _________, 199__
Brookline, Massachusetts
For VALUE RECEIVED, the undersigned,_______________, not
individually but solely as Trustee under that certain Bay State Federal Savings
Bank Employee Stock Ownership Trust effective ______________ by and between the
undersigned ("Borrower") and Bay State Federal Savings Bank promises to pay to
the order of Bay State Funding Corp., (the "Lender") at its office at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the aggregate unpaid principal
amount of all loan amounts or advances under the loan made to the Borrower under
Section 1.1 of the Loan and Security Agreement hereinafter referred to in ______
(___) consecutive annual equal installments, consisting of both principal and
interest, amortized over a ______ (____) year period in an amount sufficient to
repay all borrowed amounts plus interest, payable annually on ________________,
and on the last business day of each and every_________ in each year thereafter,
except that the final installment in the amount of all principal and interest
not sooner paid shall be due on ______________, the final maturity hereof.
The Borrower promises to pay interest (computed on the basis of a
year of 360 days) at said office on the balance of principal from time to time
remaining outstanding and unpaid hereon at the rate per annum equal at all times
to the Interest Rate as defined in Section 10.3 of the Loan and Security
Agreement (as defined below) on the last business day of each and every January,
commencing ______________, and in each year thereafter and on the final maturity
date of this Note. On demand, the Borrower promises to pay interest on any
overdue principal hereof (whether by lapse of time, acceleration, or otherwise)
until paid at the stated rate.
This Note is issued under the terms and provisions of that certain
Bay State Federal Savings Bank Employee Stock Ownership Trust Loan and Security
Agreement bearing even date herewith by and between the Borrower and the Lender
(the "Loan and Security Agreement") and this Note and the holder hereof are
entitled to all the benefits and security provided for by or referred to in such
Loan and Security Agreement.
This Note may be declared due prior to its express maturity and
voluntary prepayments may be made hereon, all in the events, on the terms and in
the manner as provided in such Loan and Security Agreement.
Recourse for the payment of this Note has been limited by the
provisions of the Loan and Security Agreement and this Note is expressly made
subject to such provisions. This Note shall be governed by and construed in
accordance with the laws of Massachusetts without regard to principles of
conflicts of laws. The Borrower hereby waives presentment for payment and
demand.
15
Upon the occurrence of an Event of Default as such term is defined
in the Loan and Security Agreement at the option of the Lender, all amounts
payable by the Borrower to the Lender under the terms of this Note may
immediately become due and payable by the Borrower to the Lender pursuant to the
provisions of Section 9.2 of the Loan and Security Agreement, and the Lender
shall have all of the rights, powers, and remedies available under the terms of
this Note, any of the other documents evidencing and securing this Loan and all
applicable laws. The Borrower and all endorsers, guarantors, and other parties
who may now or in the future be primarily or secondarily liable for the payment
of the indebtedness evidenced by this Note hereby severally waive presentment,
protest and demand, notice of protest, notice of demand and of dishonor and
non-payment of this Note and expressly agree that this Note any payment
hereunder may be extended from time to time without in any way affecting the
liability of the Borrower, guarantors and endorsers.
________________and its successors in
trust, as Trustee under that certain Bay
State Federal Savings Bank Employee
Stock Ownership Trust effective
_____________ by and between the
undersigned and Bay State Federal
Savings Bank
By:___________________________
16
EXHIBIT B
SECURITY AGREEMENT
INSTRUMENTS OR NEGOTIABLE DOCUMENTS TO BE DEPOSITED
For new value contemporaneously given by Bay State Funding, Corp.,
("Lender") to the undersigned ("Borrower"), the receipt whereof is hereby
acknowledged, the Borrower does hereby grant a security interest to said Lender
in the instruments or negotiable documents hereafter described ("Collateral"),
in all of which Collateral the Borrower warrants that the Borrower has good,
valid and effective rights to the ownership and possession thereof and to the
grant of the security interest hereby made:
All Shares of the common stock, par value $.01 per share, of Bay State
Bancorp, Inc., a Delaware corporation, acquired with the proceeds of
the Loan Amount.
▇▇▇▇▇▇▇▇ agrees to deliver said collateral to said ▇▇▇▇▇▇ not later
than the close of business on ________________, said date being
within____ days from the date hereof.
Said security interest secures the payment of all indebtedness and
liabilities as undertaken in the Loan and Security Agreement to which this is a
part, now existing or hereafter arising, and the Lender has all the rights with
respect to said ▇▇▇▇▇▇▇▇▇▇ and said security interest as more fully set forth in
the form of secured note or notes executed and delivered by the undersigned to
said Lender prior hereto or contemporaneously herewith.
This agreement, including matters of interpretation and construction,
and the rights of the Lender and the duties and obligations of the debt
hereunder are to be determined in accordance with the laws of the Commonwealth
of Massachusetts, particularly the Uniform Commercial Code, except where
preempted by federal law.
Dated at Brookline, Massachusetts the ____ day of ____________.
____________________, and its successors
in trust, as Trustee under that certain
Bay State Federal Savings Bank Employee
Stock Ownership Trust effective
_____________ by and between the
undersigned and Bay State Federal
Savings Bank.
By:_________________________________
17
[BAY STATE FUNDING CORP. LETTERHEAD]
________ ____, 1997
▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
Bay State Federal Savings Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇:
This letter confirms Bay State Funding Corp.'s commitment to fund a
leveraged ESOP in an amount up to $________. The commitment is subject to the
following terms and conditions:
1. Lender: Bay State Funding Corp. (the "Company").
2. Borrower: Bay State Federal Savings Bank Employee Stock
Ownership Plan.
3. Trustee: ______________________________.
4. Security: Unallocated shares of stock of the Company held in
the Bay State Federal Savings Bank Employee Stock Ownership
Plan.
5. Maturity: Up to _____ years from takedown.
6. Amortization: Equal principal payments on quarterly,
semi-annual or annual basis; specific amount to be set prior
to takedown upon determination of total loan disbursements.
7. Pricing:
a. [8%] or [the Prime Rate as published in the Wall
Street Journal on the date of the loan transaction].
8. Interest Payments:
a. Quarterly, semi-annual or annual 360 or 365 day
basis.
18
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
________________, 1997
Page 2
9. Funding: In full by _______________, unless such date is
waived by the Company.
10. Prepayment: Voluntary prepayments are permitted at any time.
11. Conditions Precedent to Closing: Receipt by the Company of all
supporting loan documents in a form and with terms and
conditions satisfactory to the Company and its counsel.
Consummation of the transaction will also be contingent upon
no material adverse change occurring in the condition of Bay
State Federal Savings Bank or the Company.
12. Closing Date: Not later than _____________, unless such date
is waived by the Company.
If the terms and conditions are agreeable to you, please indicate your
acceptance by signing the enclosed copy and returning it to my attention.
Sincerely,
Accepted on Behalf of
Bay State Federal Savings Bank
By: _________________________________ Date: _____________________
▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer