EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 22, 2002
BETWEEN
BANKNORTH GROUP, INC.,
AND
AMERICAN FINANCIAL HOLDINGS, INC.
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TABLE OF CONTENTS
RECITALS
ARTICLE I
CERTAIN DEFINITIONS
Page No.
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1.01. Certain Definitions....................................... 1
ARTICLE II
THE MERGER
2.01. The Merger................................................ 9
2.02. Effective Date and Effective Time; Closing................ 10
ARTICLE III
CONSIDERATION; ELECTION AND EXCHANGE PROCEDURES
3.01. Effect on Capital Stock................................... 10
3.02. Election Procedures....................................... 12
3.03. Exchange Procedures....................................... 14
3.04. No Fractional Shares...................................... 16
3.05. Company Options........................................... 17
3.06. Company Restricted Shares................................. 17
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01. Forbearances of the Company............................... 18
4.02. Forbearances of Parent.................................... 21
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Disclosure Schedules...................................... 21
5.02. Standard.................................................. 21
5.03. Representations and Warranties of the Company............. 21
5.04. Representations and Warranties of Parent.................. 34
(i)
ARTICLE VI
COVENANTS
Page No.
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6.01. Reasonable Best Efforts..................................... 39
6.02. Shareholder Approval........................................ 39
6.03. Registration Statement...................................... 39
6.04. Regulatory Filings.......................................... 40
6.05. Press Releases.............................................. 41
6.06. Access; Information......................................... 41
6.07. Affiliates.................................................. 42
6.08. Acquisition Proposals....................................... 42
6.09. Certain Policies............................................ 43
6.10. Nasdaq Listing.............................................. 43
6.11. Indemnification............................................. 43
6.12. Benefit Plans............................................... 45
6.13. Bank Merger................................................. 46
6.14. Coordination of Dividends................................... 46
6.15. Directorship................................................ 46
6.16. Other Agreements............................................ 46
6.17. Notification of Certain Matters............................. 47
6.18 Section 16 Matters.......................................... 47
6.19. Advisory Board.............................................. 47
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01. Conditions to Each Party's Obligation to Effect the Merger.. 47
7.02. Conditions to Obligation of the Company..................... 48
7.03. Conditions to Obligations of Parent......................... 49
ARTICLE VIII
TERMINATION
8.01. Termination................................................. 50
8.02. Effect of Termination and Abandonment....................... 52
ARTICLE IX
MISCELLANEOUS
9.01. Survival.................................................... 53
9.02. Waiver; Amendment........................................... 53
9.03. Counterparts................................................ 53
(ii)
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9.04. Governing Law............................................... 53
9.05. Expenses.................................................... 53
9.06. Notices..................................................... 54
9.07. Entire Understanding; No Third Party Beneficiaries.......... 55
9.08. Severability................................................ 55
9.09. Enforcement of the Agreement................................ 55
9.10. Interpretation.............................................. 55
9.11. Assignment.................................................. 56
9.12. Alternative Structure....................................... 56
ANNEX A Form of Shareholder Agreement
ANNEX B Form of Executive Agreement among Parent, the Company, the
Company Bank and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇ ▇. ▇▇▇▇▇
ANNEX C Form of Consulting Agreement between Parent and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(iii)
AGREEMENT AND PLAN OF MERGER, dated as of August 22, 2002 (this
"Agreement"), between Banknorth Group, Inc. ("Parent") and American Financial
Holdings, Inc. (the "Company").
RECITALS
A. The Company. The Company is a Delaware corporation, having its
principal place of business in New Britain, Connecticut.
B. Parent. Parent is a Maine corporation, having its principal place
of business in Portland, Maine.
C. Intention of the Parties. It is the intention of the parties to
this Agreement that the Merger provided for herein be treated as a
"reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
D. Board Action. The respective Boards of Directors of each of Parent
and the Company have determined that it is in the best interests of their
respective companies and their shareholders to consummate the Merger provided
for herein.
E. Shareholder Agreements. As a material inducement to Parent to
enter into this Agreement, and simultaneously with, the execution of this
Agreement, each Shareholder (as defined herein) is entering into an agreement,
in the form of Annex A hereto (collectively, the "Shareholder Agreements")
pursuant to which they have agreed, among other things, to vote their shares of
Company Common Stock in favor of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01. Certain Definitions. The following terms are used in this
Agreement with the meanings set forth below:
"Acquisition Proposal" means any proposal or offer with respect
to any of the following (other than the transactions contemplated
hereunder) involving the Company or any of its Subsidiaries: (i) any
merger, consolidation, share exchange, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 10% or more of its consolidated assets
in a single transaction or series of transactions; (iii) any tender
offer or exchange offer for 10% or more of the outstanding shares of its
capital stock or the filing of a registration statement under the
Securities Act in connection therewith; or (iv) any public announcement
of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
"Acquisition Transaction" means any of the following (other than
the transaction contemplated hereunder) involving the Company or any of
its Subsidiaries: (i) any merger, consolidation, share exchange,
business combination or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 10% or more
of its consolidated assets in a single transaction or series of
transactions; or (iii) any tender offer or exchange offer for 10% or
more of the outstanding shares of its capital stock or the filing of a
registration statement under the Securities Act in connection therewith.
"Aggregate Cash Consideration" has the meaning set forth in
Section 3.02(d)(i).
"Agreement" means this Agreement, as amended or modified from
time to time in accordance with Section 9.02.
"Average Share Price" means the average of the per share closing
sale prices of the Parent Common Stock on Nasdaq (as reported by an
authoritative source) for the ten trading-day period ending on (and
including) the Determination Date, rounded to the nearest whole cent.
"Articles of Merger" has the meaning set forth in Section
2.02(a).
"Bank Insurance Fund" means the Bank Insurance Fund maintained by
the FDIC.
"Bank Merger Agreement" has the meaning set forth in Section
6.13.
"Bank Merger" has the meaning set forth in Section 6.13.
"Bank Secrecy Act" means the Bank Secrecy Act of 1970, as
amended.
"Benefit Plans" has the meaning set forth in Section 5.03(m).
"Business Day" means Monday through Friday of each week, except a
legal holiday recognized as such by the U.S. Government or any day on
which banking institutions in the State of Maine or the State of
Connecticut are authorized or obligated to close.
"Capital Change" has the meaning set forth in Section 3.01(d).
"Certificates" has the meaning set forth in Section 3.02(a).
"Certificate of Merger" has the meaning set forth in Section
2.02(a).
"Closing" and "Closing Date" have the meanings set forth in
Section 2.02(b).
"Code" has the meaning set forth in the recitals to this
Agreement.
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"Community Reinvestment Act" means the Community Reinvestment Act
of 1977, as amended.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Company Affiliates" has the meaning set forth in Section 6.07.
"Company Articles" means the Certificate of Incorporation of the
Company.
"Company Bank" means American Savings Bank, a Connecticut-
chartered savings bank.
"Company Board" means the Board of Directors of the Company.
"Company Bylaws" means the Bylaws of the Company.
"Company Common Stock" means the common stock, $0.01 par value
per share, of the Company.
"Company Bank Severance Plan" means the Company Bank Employee
Severance Compensation Plan, as amended on or prior to the date hereof.
"Company Group" means any "affiliated group" (as defined in
Section 1504(a) of the Code without regard to the limitations contained
in Section 1504(b) of the Code) that includes the Company and its
Subsidiaries or any predecessor of or any successor to the Company (or
to another such predecessor or successor).
"Company Loan Property" has the meaning set forth in Section
5.03(o)(i).
"Company Meeting" has the meaning set forth in Section 6.02.
"Company Preferred Stock" means the preferred stock, $0.01 par
value per share, of the Company.
"Company Stock" means, collectively, the Company Common Stock and
the Company Preferred Stock.
"Company Options" means the options to acquire Company Common
Stock issued under the Company Stock Option Plan.
"Company Regulatory Authorities" has the meaning set forth in
Section 5.03(i).
"Company Restricted Share" has the meaning set forth in Section
3.06.
"Company Stock Option Plans" means the Company's 2000 Stock-Based
Incentive Plan, as amended, the American Bank of Connecticut 1984
Incentive Stock Option Plan, the American Bank of Connecticut 1993
Incentive Stock Option Plan, the American Bank of Connecticut 1998
Incentive Stock Option Plan and the American Bank of Connecticut
Directors Stock Option Plan.
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"Connecticut Bank Commissioner" means the Commissioner of
Banking of the State of Connecticut.
"Derivatives Contract" has the meaning set forth in Section
5.03(q).
"Determination Date" means the date on which the last required
approval of a Governmental Authority is obtained with respect to the
Transactions, all statutory waiting periods in respect thereof have
expired and all other conditions to the consummation of the Merger
specified in Article VII hereof (other than the delivery of
certificates, opinions and other instruments and documents to be
delivered at the Closing) have been satisfied or waived.
"DGCL" means the Delaware General Corporation Law, as amended.
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenting Shareholders" and "Dissenting Shares" have the
meanings set forth in Section 3.01(b).
"Effective Date" has the meaning set forth in Section 2.02(a).
"Effective Time" has the meaning set forth in Section 2.02(a).
"Election Deadline" has the meaning set forth in Section 3.02(b).
"Election Form" has the meaning set forth in Section 3.02(a).
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Laws" has the meaning set forth in Section
5.03(o).
"Equal Credit Opportunity Act" means the Equal Credit
Opportunity Act, as amended.
"Equity Investment" means (i) an Equity Security; and (ii) an
ownership interest in any company or other entity, any membership
interest that includes a voting right in any company or other entity,
any interest in real estate; and any investment or transaction which in
substance falls into any of these categories even though it may be
structured as some other form of investment or transaction.
"Equity Security" means any stock (other than adjustable-rate
preferred stock, money market (auction rate) preferred stock or other
instrument determined by the OCC to have the character of debt
securities), certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, preorganization
certificate or subscription, transferable share, investment contract, or
voting-trust certificate; any security convertible into such a security;
any security carrying any warrant or right to subscribe to or purchase
any such security; and any certificate of interest or participation in,
temporary or interim certificate for, or receipt for any of the
foregoing.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" has the meaning set forth in Section
5.03(m)(iii).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.02(a).
"Exchange Ratio" has the meaning set forth in Section
3.01(a)(iii), subject to adjustment pursuant to Section 3.01(d) and
8.01(i).
"Executive Agreements" has the meaning set forth in Section 6.16.
"Fair Housing Act" means the Fair Housing Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Act" means the Federal Reserve Act, as amended.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System.
"GAAP" means accounting principles generally accepted in the
United States of America.
"Governmental Authority" means any federal, state or local court,
administrative agency or commission or other governmental authority or
instrumentality.
"Hazardous Substance" has the meaning set forth in Section
5.03(o).
"Indemnified Parties" and "Indemnifying Party" have the meanings
set forth in Section 6.11(a).
"Insurance Amount" has the meaning set forth in Section 6.11(c).
"Insurance Policies" has the meaning set forth in Section
5.03(w).
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien or encumbrance.
"Loans" has the meaning set forth in Section 4.01(r).
"Maine Superintendent" means the Superintendent of the Bureau of
Banking of the State of Maine.
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"Material Adverse Effect" means, with respect to Parent or the
Company any effect that (i) is material and adverse to the financial
position, results of operations or business of Parent and its
Subsidiaries taken as a whole or the Company and its Subsidiaries taken
as a whole, as the case may be, or (ii) would materially impair the
ability of any of Parent and its Subsidiaries or the Company and its
Subsidiaries to perform their respective obligations under this
Agreement or the Bank Merger Agreement or otherwise materially impede
the consummation of the Transactions; provided, however, that Material
Adverse Effect shall not be deemed to include the impact of (a) changes
in banking and similar laws of general applicability or interpretations
thereof by Governmental Authorities, (b) changes in GAAP or regulatory
accounting requirements applicable to banks and their holding companies
generally, (c) changes in general economic conditions (including changes
in interest rates) affecting banks and their holding companies
generally, (d) any modifications or changes to valuation policies and
practices, or expenses incurred, in connection with the Transactions or
restructuring charges taken in connection with the Transactions, in each
case in accordance with GAAP, and (e) with respect to the Company, the
effects of any action or omission taken with the prior consent of Parent
or as otherwise contemplated by the Agreement.
"Material Contracts" has the meaning set forth in Section
5.03(k)(i).
"MBCA" means the Maine Business Corporation Act, as amended.
"Merger" has the meaning set forth in Section 2.01(a).
"Merger Consideration" has the meaning set forth in Section
3.01(a)(iii).
"Nasdaq" means The Nasdaq Stock Market, Inc.'s National Market or
such national securities exchange on which the Parent Common Stock may
be listed.
"Nasdaq Bank Average Index" means the average closing values of
the Nasdaq Bank Index for the ten trading-day period ending on (and
including) the Determination Date.
"Nasdaq Bank Starting Index" means $2,305.86, the closing value
of the Nasdaq Bank Index on July 31, 2002.
"National Bank Act" means the National Bank Act, as amended.
"National Labor Relations Act" means the National Labor Relations
Act, as amended.
"OCC" means the Office of the Comptroller of the Currency.
"OREO" means other real estate owned.
"Parent" has the meaning set forth in the preamble to this
Agreement.
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"Parent Articles" means the Amended and Restated Articles of
Incorporation of Parent, as amended.
"Parent Benefits Plans" has the meaning set forth in Section
6.12(a).
"Parent Board" means the Board of Directors of Parent.
"Parent Bylaws" means the Bylaws of Parent, as amended.
"Parent Common Stock" means the common stock, $0.01 par value per
share, of Parent and, unless the context otherwise requires, related
Parent Rights.
"Parent Bank" means Banknorth, National Association and any
successor thereto.
"Parent Preferred Stock" means the preferred stock, $0.01 par
value per share, of Parent.
"Parent Rights" means the rights attached to shares of Parent
Common Stock pursuant to the Parent Rights Agreement.
"Parent Rights Agreement" means the Stockholder Rights Agreement,
dated as of September 12, 1989 and amended and restated as of July 27,
1999 and as of July 25, 2000, between Parent and American Stock Transfer
& Trust Company, as Rights Agent.
"Parent Regulatory Authorities" has the meaning set forth in
Section 5.04(k).
"Pension Plan" has the meaning set forth in Section 5.03(m)(ii).
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust, limited liability
company or unincorporated organization.
"Previously Disclosed" by a party shall mean information set
forth in a section of its Disclosure Schedule corresponding to the
section of this Agreement where such term is used.
"Proxy Statement" has the meaning set forth in Section 6.03(a).
"Registration Statement" has the meaning set forth in Section
6.03(a).
"Rights" means, with respect to any Person, warrants, options,
rights, convertible securities and other arrangements or commitments
which obligate the Person to issue or dispose of any of its capital
stock or other ownership interests.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in Sections 5.03(g) and
5.04(g) in the case of the Company and Parent, respectively.
7
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Shareholder Agreements" has the meaning set forth in the
recitals to this Agreement.
"Shareholders" means each director of the Company.
"Starting Price" means $25.44, the closing price of a share of
Parent Common Stock on July 31, 2002.
"Stock Conversion Number" has the meaning set forth in Section
3.02(a).
"Stock Election Number" has the meaning set forth in Section
3.02(a).
"Subsidiary" and "Significant Subsidiary" have the meanings
ascribed to those terms in Rule 1-02 of Regulation S-X of the SEC.
"Superior Proposal" has the meaning set forth in Section 6.08.
"Surviving Corporation" has the meaning set forth in Section
2.01(a).
"Tax" and "Taxes" mean all federal, state, local or foreign
income, gross income, gains, gross receipts, sales, use, ad valorem,
goods and services, capital, production, transfer, franchise, windfall
profits, license, withholding, payroll, employment, disability, employer
health, excise, estimated, severance, stamp, occupation, property,
environmental, custom duties, unemployment or other taxes of any kind
whatsoever, together with any interest, additions or penalties thereto
and any interest in respect of such interest and penalties.
"Tax Returns" means any return, declaration or other report
(including elections, declarations, schedules, estimates and information
returns) with respect to any Taxes.
"Transactions" means the Merger, the Bank Merger and any other
transaction contemplated by this Agreement.
"Treasury Stock" means shares of Company Stock held by the
Company or any of its Subsidiaries or by Parent or any of its
Subsidiaries, in each case other than in a fiduciary (including
custodial or agency) capacity or as a result of debts previously
contracted in good faith.
8
ARTICLE II
THE MERGER
2.01 The Merger.
(a) The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Company shall merge with and into Parent
in accordance with the applicable provisions of the MBCA and the DGCL (the
"Merger"), the separate corporate existence of the Company shall cease and
Parent shall survive and continue to exist as a corporation incorporated under
the MBCA (Parent, as the surviving corporation in the Merger, sometimes being
referred to herein as the "Surviving Corporation").
(b) Name. The name of the Surviving Corporation shall be "Banknorth
Group, Inc."
(c) Articles and Bylaws. The articles of incorporation and bylaws of
the Surviving Corporation immediately after the Merger shall be the Parent
Articles and the Parent Bylaws as in effect immediately prior to the Merger.
(d) Directors and Executive Officers of the Surviving Corporation.
The directors of the Surviving Corporation immediately after the Merger shall be
the directors of Parent immediately prior to the Merger plus the person
appointed or elected as a director pursuant to Section 6.15 hereof, each of whom
shall serve until such time as their successors shall be duly elected and
qualified. The executive officers of the Surviving Corporation immediately after
the Merger shall be the executive officers of Parent immediately prior to the
Merger, each of whom shall serve until such time as their successors shall be
duly elected and qualified.
(e) Authorized Capital Stock. The authorized capital stock of the
Surviving Corporation upon consummation of the Merger shall be as set forth in
the Parent Articles immediately prior to the Merger.
(f) Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the MBCA and the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of the Company shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
(g) Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider that any further assignments or assurances
in law or any other acts are necessary or desirable to (i) vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its right, title
or interest in, to or under any of the rights, properties or assets of the
Company acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger, or (ii) otherwise carry out the purposes of
this Agreement, the Company, and its proper officers and directors, shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such proper deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and
9
possession of such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement, and the proper officers
and directors of the Surviving Corporation are fully authorized in the name of
the Surviving Corporation or otherwise to take any and all such action.
2.02 Effective Date and Effective Time; Closing.
(a) Subject to the satisfaction or waiver of the conditions set forth
in Article VII (other than those conditions that by their nature are to be
satisfied at the consummation of the Merger, but subject to the fulfillment or
waiver of those conditions), the parties shall cause articles of merger relating
to the Merger (the "Articles of Merger") to be filed with the Secretary of State
of the State of Maine pursuant to the MBCA and a certificate of merger (the
"Certificate of Merger") to be filed with the Secretary of State of the State of
Delaware pursuant to the DGCL on (i) a date selected by Parent after such
satisfaction or waiver which is no later than the later of (A) five Business
Days after such satisfaction or waiver or (B) the first month end following such
satisfaction or waiver, or (ii) such other date to which the parties may
mutually agree in writing, provided that in no event shall Articles of Merger or
a Certificate of Merger be filed, or the Merger consummated, prior to January 1,
2003. The Merger provided for herein shall become effective upon such filings or
on such date as may be specified therein. The date of such filings or such later
effective date is herein called the "Effective Date." The "Effective Time" of
the Merger shall be the time of such filings or as set forth in such filings.
(b) A closing (the "Closing") shall take place immediately prior to
the Effective Time at 10:00 a.m., Eastern Time, at the principal offices of
Parent in Portland, Maine, or at such other place, at such other time, or on
such other date as the parties may mutually agree upon (such date, the "Closing
Date"). At the Closing, there shall be delivered to Parent and the Company the
opinions, certificates and other documents required to be delivered under
Article VII hereof.
ARTICLE III
CONSIDERATION; ELECTION AND EXCHANGE PROCEDURES
3.01. Effect on Capital Stock.
(a) At the Effective Time, automatically by virtue of the Merger and
without any action on the part of any Person:
(i) each share of Parent Common Stock that is issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding and shall be unchanged by the Merger;
(ii) each share of Company Common Stock held as Treasury Stock
immediately prior to the Effective Time shall be cancelled and retired
at the Effective Time and no consideration shall be issued in exchange
therefor; and
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(iii) each outstanding share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury
Stock and any Dissenting Shares) shall become and be converted into, as
provided in and subject to the limitations set forth in this Agreement,
the right to receive at the election of the holder thereof, as provided
in Section 3.02, (i) $32.00 in cash, without interest (the "Cash
Consideration"), or (ii) 1.220 shares (the "Exchange Ratio") of Parent
Common Stock (the "Stock Consideration"). The Cash Consideration and the
Stock Consideration are sometimes referred to herein collectively as the
"Merger Consideration."
(b) Each outstanding share of Company Common Stock the holder of
which has perfected his right to dissent under Section 262 of the DGCL and has
not effectively withdrawn or lost such right as of the Effective Time (the
"Dissenting Shares") shall not be converted into or represent a right to receive
the Merger Consideration hereunder, and the holder thereof shall be entitled
only to such rights as are granted by applicable law. The Company shall give
Parent prompt notice upon receipt by the Company of any such demands for payment
of the fair value of such shares of Company Common Stock and of withdrawals of
such notice and any other instruments provided pursuant to applicable law (any
shareholder duly making such demand being hereinafter called a "Dissenting
Shareholder"). The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment, or waive any failure to timely deliver a
written demand for appraisal or the taking of any other action by such
Dissenting Shareholder as may be necessary to perfect appraisal rights under
applicable law. Any payments made in respect of Dissenting Shares shall be made
by the Surviving Corporation.
(c) If any Dissenting Shareholder shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to such payment at or prior
to the Effective Time, such holder's shares of Company Common Stock shall be
converted into a right to receive the Merger Consideration in accordance with
the applicable provisions of this Agreement. If such holder shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment after the Effective Time, each share of Company Common Stock of such
holder shall be converted on a share by share basis into either the right to
receive the Cash Consideration or the Stock Consideration as Parent shall
determine in its sole discretion.
(d) The Exchange Ratio shall be subject to appropriate adjustments in
the event that, subsequent to the date of this Agreement but prior to the
Effective Time, the outstanding Parent Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities through reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other like changes in Parent's
capitalization (a "Capital Change"). In addition, if Parent enters into an
agreement pursuant to which shares of Parent Common Stock would be converted,
prior to the Effective Time, into shares or other securities or obligations of
another corporation, proper provision shall be made in such agreement so that
each Company stockholder shall be entitled to receive at the Effective Time such
number of shares or other securities or amount of obligations of such other
corporation as such stockholder would be entitled to receive if the Effective
Time had occurred immediately prior to the consummation of such conversion.
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3.02. Election Procedures.
(a) An election form and other appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to certificates evidencing shares of Company Common Stock (the
"Certificates") shall pass, only upon proper delivery of such Certificates to an
unaffiliated bank or trust company designated by Parent and reasonably
satisfactory to the Company (the "Exchange Agent")) in such form as the Company
and Parent shall mutually agree (the "Election Form"), shall be mailed no later
than 15 days prior to the anticipated Effective Time or on such earlier date as
Parent and the Company may mutually agree (the "Mailing Date") to each holder of
record of Company Common Stock as of five Business Days prior to the Mailing
Date (the "Election Form Record Date"). Each Election Form shall permit each
holder of record of Company Common Stock as of the Election Form Record Date (or
in the case of nominee record holders, the beneficial owner through proper
instructions and documentation) to (i) elect to receive the Cash Consideration
for all of such holder's shares (a "Cash Election"), (ii) elect to receive the
Stock Consideration for all of such holder's shares (a "Stock Election"), (iii)
elect to receive the Cash Consideration with respect to some of such holder's
shares and the Stock Consideration with respect to such holder's remaining
shares (a "Mixed Election") or (iv) make no election the receipt of the Cash
Consideration or the Stock Consideration (a "Non-Election"), provided that,
notwithstanding any other provision of this Agreement, other than paragraph (e)
of this Section 3.02, 50% of the total number of shares of Company Common Stock
issued and outstanding at the Effective Time, including any Dissenting Shares
but excluding any Treasury Stock (the "Stock Conversion Number"), shall be
converted into the Stock Consideration and the remaining outstanding shares of
Company Common Stock shall be converted into the Cash Consideration. Holders of
record of shares of Company Common Stock who hold such shares as nominees,
trustees or in other representative capacities (a "Representative") may submit
multiple Election Forms, provided that such Representative certifies that each
such Election Form covers all the shares of Company Common Stock held by that
Representative for a particular beneficial owner. Shares of Company Common Stock
as to which a Cash Election has been made (including pursuant to a Mixed
Election) are referred to herein as "Cash Election Shares." Shares of Company
Common Stock as to which a Stock Election has been made (including pursuant to a
Mixed Election) are referred to herein as "Stock Election Shares." Shares of
Company Common Stock as to which no election has been made are referred to
herein as "Non-Election Shares." The aggregate number of shares of Company
Common Stock with respect to which a Stock Election has been made is referred to
herein as the "Stock Election Number." Any Dissenting Shares shall be deemed to
be Cash Election Shares, and with respect to such shares the holders thereof
shall in no event receive consideration comprised of Parent Common Stock.
(b) To be effective, a properly completed Election Form shall be
submitted to the Exchange Agent on or before 5:00 p.m., New York City time, on
the 20th calendar day following but not including the Mailing Date (or such
other time and date as Parent and the Company may mutually agree) (the "Election
Deadline").
(c) 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
12
shares of Company Common Stock covered by such Election Form, together with duly
executed transmittal materials included with the Election Form. If a holder of
Company Common Stock either (i) does not submit a properly completed Election
Form in a timely fashion or (ii) revokes the holder's Election Form prior to the
Election Deadline, the shares of Company Common Stock held by such holder shall
be designated Non-Election Shares. Parent shall cause the Certificates described
in clause (ii) of the immediately preceding sentence 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 any
Election Form, and any good faith decisions of the Exchange Agent regarding such
matters shall be binding and conclusive. Neither Parent nor the Exchange Agent
shall be under any obligation to notify any Person of any defect in an Election
Form.
(d) Within five Business Days after the later to occur of the
Election Deadline or the Effective Time, Parent shall cause the Exchange Agent
to effect the allocation among holders of Company Common Stock of rights to
receive the Cash Consideration and the Stock Consideration as follows:
(i) If the Stock Election Number exceeds the Stock Conversion
Number, then all Cash Election Shares and all Non-Election Shares shall
be converted into the right to receive the Cash Consideration, and each
holder of Stock Election Shares will be entitled to receive the Stock
Consideration in respect of that number of Stock Election Shares equal
to the product obtained by multiplying (x) the number of Stock Election
Shares held by such holder by (y) a fraction, the numerator of which is
the Stock Conversion Number and the denominator of which is the Stock
Election Number, with the remaining number of such holder's Stock
Election Shares being converted into the right to receive the Cash
Consideration;
(ii) If the Stock Election Number is less than the Stock
Conversion Number (the amount by which the Stock Conversion Number
exceeds the Stock Election Number being referred to herein as the
"Shortfall Number"), then all Stock Election Shares shall be converted
into the right to receive the Stock Consideration and the Non-Election
Shares and Cash Election Shares shall be treated in the following
manner:
(A) if the Shortfall Number is less than or equal to the number
of Non-Election Shares, then all Cash Election Shares shall be
converted into the right to receive the Cash Consideration and
each holder of Non-Election Shares shall receive the Stock
Consideration in respect of that number of Non- Election Shares
equal to the product obtained by multiplying (x) the number of
Non-Election Shares held by such holder by (y) a fraction, the
numerator of which is the Shortfall Number and the denominator of
which is the total number of Non-Election Shares, with the
remaining number of such holder's Non-Election Shares being
converted into the right to receive the Cash Consideration; or
(B) if the Shortfall Number exceeds the number of Non- Election
Shares, then
13
all Non-Election Shares shall be converted into the right to
receive the Stock Consideration, and each holder of Cash Election
Shares shall receive the Stock Consideration in respect of that
number of Cash Election Shares equal to the product obtained by
multiplying (x) the number of Cash Election Shares held by such
holder by (y) a fraction, the numerator of which is the amount by
which (1) the Shortfall Number exceeds (2) the total number of
Non-Election Shares and the denominator of which is the total
number of Cash Election Shares, with the remaining number of such
holder's Cash Election Shares being converted into the right to
receive the Cash Consideration.
(e) If the tax opinion referred to in Section 7.01(f) cannot be
rendered because the counsel or auditors charged with providing
such opinion reasonably determines that the Merger may not
satisfy the continuity of interest requirements applicable to
reorganizations under Section 368(a) of the Code, then Parent
shall reduce the number of shares of Company Common Stock
entitled to receive the Cash Consideration and correspondingly
increase the number of shares of Company Common Stock entitled to
receive the Stock Consideration by the minimum amount necessary
to enable such tax opinion to be rendered.
3.03. Exchange Procedures.
(a) Immediately prior to the Effective Time, for the benefit of the
holders of Certificates, (i) Parent shall reserve for issuance a sufficient
number of shares of Parent Common Stock and deliver to the Exchange Agent
certificates evidencing such number of shares of Parent Common Stock issuable
and (ii) Parent shall deliver, or cause Parent Bank to deliver, to the Exchange
Agent an amount of cash sufficient to pay the aggregate amount of cash payable
pursuant to this Article III in exchange for Certificates representing
outstanding shares of Company Common Stock (such cash and certificates for
shares of Parent Common Stock, together with any dividends or distributions with
respect thereto, are hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall not be entitled to vote or exercise any rights of ownership
with respect to the shares of Parent Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares for the account of
the persons entitled thereto.
(b) As soon as practicable after the Effective Time, and provided
that the Company has delivered, or caused to be delivered, to the Exchange Agent
all information which is necessary for the Exchange Agent to perform its
obligations as specified herein, the Exchange Agent shall mail to each holder of
record of a Certificate or Certificates who has not previously surrendered such
Certificate or Certificates with an Election Form, a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration into
which the shares of Company Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to Sections 3.01 and 3.02 of
this Agreement. Upon proper surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with a properly completed letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
14
receive in exchange therefor, as applicable, (i) a certificate representing that
number of shares of Parent Common Stock (if any) to which such former holder of
Company Common Stock shall have become entitled pursuant to this Agreement, (ii)
a check representing that amount of cash (if any) to which such former holder of
Company Common Stock shall have become entitled pursuant to this Agreement
and/or (iii) a check representing the amount of cash (if any) payable in lieu of
a fractional share of Parent Common Stock which such former holder has the right
to receive in respect of the Certificate surrendered pursuant to this Agreement,
and the Certificate so surrendered shall forthwith be cancelled. Until
surrendered as contemplated by this Section 3.03(b), each Certificate (other
than Certificates representing Treasury Stock or Dissenting Shares) shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration provided in Sections 3.01
and 3.02 and any unpaid dividends and distributions thereon as provided in
paragraph (c) of this Section 3.03. No interest shall be paid or accrued on any
cash constituting Merger Consideration (including any cash in lieu of fractional
shares) and any unpaid dividends and distributions, if any, payable to holders
of Certificates.
(c) No dividends or other distributions with a record date after the
Effective Time with respect to Parent Common Stock shall be paid to the holder
of any unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Section 3.03. After the surrender of a
Certificate in accordance with this Section 3.03, the record holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which theretofore had become payable with respect to
shares of Parent Common Stock represented by such Certificate.
(d) The Exchange Agent and Parent, as the case may be, shall not be
obligated to deliver cash and/or a certificate or certificates representing
shares of Parent Common Stock to which a holder of Company Common Stock would
otherwise be entitled as a result of the Merger until such holder surrenders the
Certificate or Certificates representing the shares of Company Common Stock for
exchange as provided in this Section 3.03, or, in default thereof, an
appropriate affidavit of loss and indemnity agreement and/or a bond in an amount
as may be required in each case by Parent. If any certificates evidencing shares
of Parent Common Stock are to be issued in a name other than that in which the
Certificate evidencing Company Common Stock surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the Certificate
so surrendered shall be properly endorsed or accompanied by an executed form of
assignment separate from the Certificate and otherwise in proper form for
transfer and that the person requesting such exchange pay to the Exchange Agent
any transfer or other tax required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered or otherwise establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
(e) At and after the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no transfers on the stock transfer
books of the Company of the shares of Company Stock which were issued and
outstanding immediately prior to the Effective Time. At the Effective Time,
holders of Company Stock shall cease to be, and shall have no rights as,
shareholders of the Company other than to receive the consideration provided
under this Article III. On or after the Effective Time, any Certificates
presented to Parent or the Exchange Agent
15
shall be cancelled and exchanged for certificates representing shares of Parent
Common Stock and/or the payment of cash as provided herein, subject to
applicable law in the case of Dissenting Shares.
(f) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of the Company for six months after the Effective Time (as well as
any proceeds from any investment thereof) shall be delivered by the Exchange
Agent to Parent. Any shareholders of Company who have not theretofore complied
with Section 3.03(b) shall thereafter look only to Parent for the Merger
Consideration deliverable in respect of each share of Company Common Stock such
shareholder holds as determined pursuant to this Agreement, in each case without
any interest thereon. If outstanding Certificates for shares of Company Common
Stock are not surrendered or the payment for them is not claimed prior to the
date on which such shares of Parent Common Stock or cash would otherwise escheat
to or become the property of any governmental unit or agency, the unclaimed
items shall, to the extent permitted by abandoned property and any other
applicable law, become the property of Parent (and to the extent not in its
possession shall be delivered to it), free and clear of all claims or interest
of any Person previously entitled to such property. Neither the Exchange Agent
nor any party to this Agreement 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. Parent and
the Exchange Agent shall be entitled to rely upon the stock transfer books of
the Company to establish the identity of those persons entitled to receive the
Merger 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, Parent and the Exchange Agent
shall be entitled to deposit any Merger Consideration represented thereby in
escrow with an independent third party and thereafter be relieved with respect
to any claims thereto.
(g) Parent (through the Exchange Agent, if applicable) shall be
entitled to deduct and withhold from any amounts otherwise payable pursuant to
this Agreement to any holder of shares of Company Common Stock such amounts as
Parent is required to deduct and withhold under applicable law. Any amounts so
withheld shall be treated for all purposes of this Agreement as having been paid
to the holder of Company Common Stock in respect of which such deduction and
withholding was made by Parent.
(h) Notwithstanding any other provision of this Agreement to the
contrary, Certificates surrendered for exchange by any Company Affiliate shall
not be exchanged for certificates representing shares of Parent Common Stock to
which such Company Affiliate may be entitled pursuant to the terms of this
Agreement until Parent has received a written agreement from such person as
specified in Section 6.07.
3.04. No Fractional Shares. Notwithstanding any other provision of this
Agreement to the contrary, neither certificates nor scrip for fractional shares
of Parent Common Stock shall be issued in the Merger. Each holder who otherwise
would have been entitled to a fraction of a share of Parent 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 (after taking into account all shares of the Company Common Stock
owned by such
16
holder at the Effective Time) by the Average Share Price. No such holder shall
be entitled to dividends, voting rights or any other rights in respect of any
fractional share.
3.05. Company Options.
(a) At the Effective Time, each Company Option which is outstanding
and unexercised immediately prior to the Effective Time, whether or not then
vested and exercisable, shall cease to represent a right to acquire shares of
Company Common Stock and shall be converted automatically into an option to
purchase shares of Parent Common Stock, and Parent shall assume each Company
Option, in accordance with the terms of the applicable Company Stock Option Plan
and stock option or other agreement by which it is evidenced, except that from
and after the Effective Time, (i) Parent and the Human Resources Committee of
its Board of Directors shall be substituted for the Company and the committee of
the Company's Board of Directors (including, if applicable, the entire Board of
Directors of the Company) administering the Company Stock Option Plans, (ii)
each Company Option assumed by Parent may be exercised solely for shares of
Parent Common Stock, (iii) the number of shares of Parent Common Stock subject
to such Company Option shall be equal to the number of shares of Company Common
Stock subject to such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, provided that any fractional shares of Parent
Common Stock resulting from such multiplication shall be rounded down to the
nearest share, and (iv) the per share exercise price under each such Company
Option shall be adjusted by dividing the per share exercise price under each
such Company Option by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent. Notwithstanding clauses (iii) and (iv)
of the preceding sentence, each Company Option which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option within the meaning of Section 424(h) of the
Code. Parent and the Company agree to take all necessary steps to effect the
foregoing provisions of this Section 3.05(a).
(b) Within five Business Days after the Effective Time, Parent shall
file a registration statement on Form S-3 or Form S-8, as the case may be (or
any successor or other appropriate forms), with respect to the shares of Parent
Common Stock subject to the options referred to in paragraph (a) of this Section
3.05 and shall use its reasonable best efforts to maintain the current status of
the prospectus or prospectuses contained therein for so long as such options
remain outstanding in the case of a Form S-8 or, in the case of a Form S-3,
until the shares subject to such options may be sold without a further holding
period under Rule 144 under the Securities Act.
3.06. Company Restricted Shares. At the Effective Time, each unvested
restricted share of Company Common Stock granted under the Company Stock Option
Plans (each a "Company Restricted Share"), as Previously Disclosed by the
Company to Parent, which is outstanding immediately prior to the Effective Time
shall vest and become free of restrictions to the extent provided by the terms
thereof. Each holder of a Company Restricted Share shall have the same rights to
receive the Merger Consideration as are provided to other holders of Company
Common Stock pursuant to Sections 3.01-3.04.
17
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01. Forbearances of the Company. From the date hereof until the
Effective Time, except as expressly contemplated or permitted by this Agreement
or as Previously Disclosed, without the prior written consent of Parent, the
Company will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct its business other than in the ordinary
and usual course consistent with past practice or fail to use reasonable best
efforts to preserve its business organization, keep available the present
services of its employees and preserve for itself and Parent the goodwill of the
customers of the Company and its Subsidiaries and others with whom business
relations exist.
(b) Capital Stock. Other than pursuant to Rights set forth on
Schedule 4.01(b) of the Company's Disclosure Schedule and outstanding on the
date hereof, (i) issue, sell or otherwise permit to become outstanding, or
authorize the creation of, any additional shares of stock or any Rights or (ii)
permit any additional shares of stock to become subject to grants of employee or
director stock options or other Rights.
(c) Dividends; Etc. (a) Make, declare, pay or set aside for payment
any dividend on or in respect of, or declare or make any distribution on any
shares of Company Stock, other than (A) subject to Section 6.14 hereof, regular
quarterly cash dividends at a rate not in excess of $0.18 per share on the
Company Common Stock and (B) dividends from wholly-owned Subsidiaries to the
Company or another wholly-owned Subsidiary of the Company or (b) directly or
indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise
acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of the Company or its
Subsidiaries 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, provided that no such increase shall
result in an annual adjustment of more than 4%, (ii) for other changes that are
required by applicable law, (iii) to satisfy contractual obligations existing as
of the date hereof and set forth in Schedule 4.01(d) of the Company's Disclosure
Schedule, (iv) for grants of awards to newly-hired employees consistent with
past practice or (v) for bonuses awarded to certain executive officers under the
Company Bank's Executive Incentive Plan in the ordinary course of business
consistent with past practice for services rendered in 2002 and payable by the
Company Bank on or before December 31, 2002.
(e) Hiring. Hire any person as an employee of the Company or any of
its Subsidiaries or promote any employee, except (i) to satisfy contractual
obligations existing as of the date hereof and set forth on Schedule 4.01(e) of
the Company's Disclosure Schedule and (ii) persons hired to fill any vacancies
arising after the date hereof and whose employment is
18
terminable at the will of the Company or a Subsidiary of the Company, as
applicable, other than any person to be hired who would have a base salary,
including any guaranteed bonus or any similar bonus, considered on an annual
basis of more than $50,000.
(f) Benefit Plans. Except (i) as may be required by applicable law,
(ii) to satisfy contractual obligations existing as of the date hereof and set
forth on Schedule 4.01(f) of the Company's Disclosure Schedule or (iii) for
termination of the Company Bank's Stock-Based Deferred Compensation Plan and
Cash-Based Deferred Compensation Plan, either in total or with respect to the
participation of any participant or class of participants, enter into,
establish, adopt or amend 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 (or similar arrangement) related thereto, in
respect of any director, officer or employee of the Company or its Subsidiaries
or take any action to accelerate the vesting or exercisability of stock options,
restricted stock or other compensation or benefits payable thereunder.
Notwithstanding anything to the contrary contained in this Agreement, prior to
the Closing Date, the Company and its Subsidiaries shall be permitted to make
contributions in an amount sufficient to cover regularly scheduled debt service
with respect to the Company Bank's employee stock ownership plan.
(g) Dispositions. Sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue any of its assets, deposits, business or properties
except in the ordinary course of business consistent with past practice and in a
transaction that, together with all other such transactions, is not material to
the Company and its Subsidiaries taken as a whole.
(h) Acquisitions. 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 with past practice) all or any portion of
the assets, business, deposits or properties of any other entity.
(i) Capital Expenditures. Make any capital expenditures other than
capital expenditures in the ordinary course of business consistent with past
practice in amounts not exceeding $50,000 individually or $250,000 in the
aggregate.
(j) Governing Documents. Amend the Company Articles or Company Bylaws
or the articles of incorporation or bylaws (or equivalent documents) of any
Subsidiary of the Company.
(k) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required by
changes in laws or regulations or GAAP.
(l) Contracts. Except in the ordinary course of business consistent
with past practice or as otherwise permitted under this Section 4.01, enter into
or terminate any Material Contract or amend or modify in any material respect
any of its existing Material Contracts.
(m) Claims. Enter into any settlement or similar agreement with
respect to any action, suit, proceeding, order or investigation to which the
Company or any of its Subsidiaries is or becomes a party after the date of this
Agreement, which settlement, agreement or action involves
19
payment by the Company and its Subsidiaries of an amount which exceeds $50,000
and/or would impose any material restriction on the business of the Company or
create precedent for claims that are reasonably likely to be material to the
Company and its Subsidiaries taken as a whole.
(n) Banking Operations. Enter into any new material line of business;
change its material lending, investment, underwriting, risk and asset liability
management and other material banking and operating policies, except as required
by applicable law, regulation or policies imposed by any Governmental Authority;
or file any application or make any contract with respect to branching or site
location or branching or site relocation.
(o) Derivatives Contracts. Enter into any Derivatives Contract,
except in the ordinary course of business consistent with past practice.
(p) Indebtedness. Incur any indebtedness for borrowed money (other
than deposits, federal funds purchased, borrowings from the Federal Home Loan
Bank of Boston and securities sold under agreements to repurchase, in each case
in the ordinary course of business consistent with past practice) or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other Person, other than in the ordinary course of business
consistent with past practice.
(q) Investment Securities. Acquire (other than by way of foreclosures
or acquisitions in a bona fide fiduciary capacity or in satisfaction of debts
previously contracted in good faith, in each case in the ordinary course of
business consistent with past practice) (i) any debt security or Equity
Investment of a type or in an amount that is not permissible for a national bank
or (ii) any other debt security other than in the ordinary course of business
consistent with past practice.
(r) Loans. Make any loan, loan commitment, letter of credit or other
extension of credit (collectively, "Loans") other than in the ordinary course of
business consistent with past practice.
(s) Investments in Real Estate. Make any investment or commitment to
invest in real estate or in any real estate development project (other than by
way of foreclosure or acquisitions in a bona fide fiduciary capacity or in
satisfaction of a debt previously contracted in good faith, in each case in the
ordinary course of business consistent with past practice).
(t) Adverse Actions. (i) Take any action that 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 or (ii) take any action that is
intended or is reasonably likely to result in (x) any of its representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect at any time at or prior to the Effective Time, (y) any of the conditions
to the Merger set forth in Article VII not being satisfied or (z) a material
violation of any provision of this Agreement or the Bank Merger Agreement,
except, in each case, as may be required by applicable law or regulation.
(u) Commitments. Enter into any contract with respect to, or
otherwise agree or commit to do, any of the foregoing.
20
4.02 Forbearances of Parent. From the date hereof until the Effective
Time, except as expressly contemplated or permitted by this Agreement, without
the prior written consent of the Company, Parent will not, and will cause each
of its Subsidiaries not to:
(a) Adverse Actions. (i) Take any action that 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 or (ii) take any action that is
intended or is reasonably likely to result in (x) any of its representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect at any time at or prior to the Effective Time, (y) any of the conditions
to the Merger set forth in Article VII not being satisfied or (z) a material
violation of any provision of this Agreement or the Bank Merger Agreement,
except, in each case, as may be required by applicable law or regulation.
(b) Commitments. Enter into any contract with respect to, or
otherwise agree or commit to do, any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Disclosure Schedules. On or prior to the date hereof, Parent has
delivered to the Company a schedule and the Company has delivered to Parent a
schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof or
as an exception to one or more representations or warranties contained in
Section 5.03 or 5.04 or to one or more of its covenants contained in Article IV;
provided, however, that (a) no such item is required to be set forth in a
Disclosure Schedule as an exception to a representation or warranty if its
absence would not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard established by
Section 5.02 and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or fact, event or
circumstance or that, absent such inclusion in the Disclosure Schedule, such
item is or would be reasonably likely to result in a Material Adverse Effect.
5.02. Standard. No representation or warranty of the Company or Parent
contained in Sections 5.03 or 5.04, respectively, shall be deemed untrue or
incorrect, and no party hereto shall be deemed to have breached a representation
or warranty, as a consequence of the existence of any fact, event or
circumstance unless such fact, circumstance or event, individually or taken
together with all other facts, events or circumstances inconsistent with any
representation or warranty contained in Section 5.03 or 5.04, has had or is
reasonably likely to have a Material Adverse Effect on the party making such
representation or warranty.
5.03. Representations and Warranties of the Company. Subject to
Sections 5.01 and 5.02 and except as Previously Disclosed, the Company hereby
represents and warrants to Parent:
21
(a) Organization, Standing and Authority. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is duly qualified to do business and is in good standing
in each jurisdiction where its ownership or leasing of property or assets or the
conduct of its business requires it to be so qualified. The Company 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 now conducted.
(b) Company Capital Stock. The authorized capital stock of the
Company consists solely of 120,000,000 shares of Company Common Stock, of which
21,364,545 shares are outstanding as of the date hereof, and 10,000,000 shares
of Company Preferred Stock, of which no shares are outstanding. As of the date
hereof, 7,455,084 shares of the Company Common Stock were held in treasury by
the Company or otherwise directly or indirectly owned by the Company. The
outstanding shares of Company Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable, and none of the outstanding shares
of Company Common Stock have been issued in violation of the preemptive rights
of any Person. Section 5.03(b) of the Company's Disclosure Schedule sets forth
for (i) each Company Stock Option, the name of the grantee, the date of the
grant, the type of grant, the status of the option grant as qualified or
non-qualified under Section 422 of the Code, the number of shares of Company
Common Stock subject to each option, the number of shares of Company Common
Stock subject to options that are currently exercisable and the exercise price
per share and (ii) each Restricted Share, the name of the grantee, the date of
grant and the applicable vesting schedule and terms. Except as set forth in the
preceding sentence, there are no shares of Company Stock reserved for issuance,
the Company does not have any Rights issued or outstanding with respect to
Company Stock and the Company does not have any commitment to authorize, issue
or sell any Company Stock or Rights.
(c) Subsidiaries.
(i) (A) The Company has Previously Disclosed a list of all of
its Subsidiaries together with the jurisdiction of organization of each
such Subsidiary, (B) the Company owns, directly or indirectly, all the
issued and outstanding equity securities of each of its Subsidiaries,
(C) no equity securities of any of its Subsidiaries are or may become
required to be issued (other than to the Company) by reason of any Right
or otherwise, (D) there are no contracts, commitments, understandings or
arrangements by which any of its Subsidiaries is or may be bound to sell
or otherwise transfer any of its equity securities (other than to the
Company or any of its wholly-owned Subsidiaries), (E) there are no
contracts, commitments, understandings, or arrangements relating to the
Company's rights to vote or to dispose of such securities and (F) all
the equity securities of the Company's Subsidiaries held by the Company
or its Subsidiaries are fully paid and non-assessable and are owned by
the Company or its Subsidiaries free and clear of any Liens.
(ii) Except for securities and other interests held in a
fiduciary capacity and beneficially owned by third parties or taken in
consideration of debts previously contracted, the Company does not own
beneficially, directly or indirectly, any equity securities or similar
interests of any Person or any interest in a partnership or joint
venture of any kind other than its Subsidiaries and stock in the Federal
Home Loan Bank of Boston.
22
(iii) Each of the Company's Subsidiaries 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.
(iv) The deposit accounts of the Company Bank are insured by the
Bank Insurance Fund in the manner and to the maximum extent provided by
applicable law, and the Company Bank has paid all deposit insurance
premiums and assessments required by applicable laws and regulations.
(d) Corporate Power. Each of the Company and its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and the Company has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the Transactions, subject to receipt of
all necessary approvals of Governmental Authorities and the approval of the
Company's shareholders of this Agreement.
(e) Corporate Authority. Subject to the approval of this Agreement by
the holders of the outstanding Company Common Stock, this Agreement and the
Transactions have been authorized by all necessary corporate action of the
Company and the Company Board on or prior to the date hereof. The Company has
duly executed and delivered this Agreement and, assuming due authorization,
execution and delivery by Parent, this Agreement is a valid and legally binding
obligation of the Company, enforceable in accordance with its terms (except as
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).
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or waivers by, or filings or
registrations with, any Governmental Authority or with any third party
are required to be made or obtained by the Company or any of its
Subsidiaries in connection with the execution, delivery or performance
by the Company or the Company Bank of this Agreement and the Bank Merger
Agreement, as applicable, or to consummate the Transactions, except for
(A) filings of applications or notices with, and approvals or waivers
by, the Federal Reserve Board, the OCC, the Connecticut Bank
Commissioner and the Maine Superintendent, as required, (B) filings with
the SEC and state securities authorities, as applicable, in connection
with the submission of this Agreement for the approval of the holders of
Company Common Stock and the issuance of Parent Common Stock in the
Merger, (C) the filing of Articles of Merger with the Secretary of State
of the State of Maine pursuant to the MBCA and the filing of a
Certificate of Merger with the Secretary of State of the State of
Delaware pursuant to the DGCL, (D) the approval of this Agreement by the
holders of the outstanding shares of Company Common Stock and (E) such
corporate approvals and such consents or approvals of, or waivers by, or
filings or registrations with, certain of the foregoing federal and
state banking agencies in connection with the Bank Merger. As of the
date hereof, the Company is not aware of any reason why the approvals
set forth above and referred to in Section 7.01(b) will not be received
in a
23
timely manner and without the imposition of a condition, restriction or
requirement of the type described in Section 7.01(b).
(ii) Subject to receipt, or the making, of the consents,
approvals, waivers and filings referred to in the preceding paragraph
and the expiration of related waiting periods, the execution, delivery
and performance of this Agreement and the Bank Merger Agreement by the
Company and the Company Bank, as applicable, and the consummation of the
Transactions do not and will not (A) constitute a breach or violation
of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation
or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries or any
of their respective properties is subject or bound, (B) constitute a
breach or violation of, or a default under, the articles of association
or bylaws (or similar governing documents) of the Company or any of its
Subsidiaries or (C) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument.
(g) Financial Reports; Undisclosed Liabilities.
(i) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2001 and all other reports, registration
statements, definitive proxy statements or information statements filed
or to be filed by it subsequent to December 31, 1999 under the
Securities Act or the Exchange Act, in the form filed or to be filed
with the SEC (collectively, the Company's "SEC Documents"), as of the
date filed or to be filed, (A) complied or will comply in all material
respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (B) did not
and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, except that information as of a later
date shall be deemed to modify information as of an earlier date; and
each of the consolidated balance sheets contained in any such SEC
Document (including the related notes and schedules thereto) fairly
presents, or will fairly present, the consolidated financial position of
the Company and its Subsidiaries as of its date, and each of the
consolidated statements of income and changes in shareholders' equity
and cash flows or equivalent statements in such SEC Documents (including
any related notes and schedules thereto) fairly presents, or will fairly
present, the consolidated results of operations, changes in
shareholders' equity and changes in cash flows, as the case may be, of
the Company and its Subsidiaries for the periods to which they relate,
in each case in accordance with GAAP consistently applied during the
periods involved, except in each case as may be noted therein.
(ii) Since June 30, 2002, neither the Company nor any of its
Subsidiaries has incurred any liability other than in the ordinary
course of business consistent with past practice (excluding the
incurrence of expenses related to this Agreement and the transactions
contemplated hereby).
24
(iii) Since June 30, 2002, (A) the Company and its Subsidiaries
have conducted their respective businesses in the ordinary and usual
course consistent with past practice (excluding the incurrence of
expenses related to this Agreement and the Transactions) and (B) no
event has occurred or circumstance arisen that, individually or taken
together with all other facts, circumstances and events (described in
any paragraph of this Section 5.03 or otherwise), is reasonably likely
to have a Material Adverse Effect with respect to the Company.
(iv) No agreement pursuant to which any loans or other assets
have been or shall be sold by the Company or its Subsidiaries entitled
the buyer of such loans or other assets, unless there is material breach
of a representation or covenant by the Company or its Subsidiaries, to
cause the Company or its Subsidiaries to repurchase such loan or other
asset or the buyer to pursue any other form of recourse against the
Company or its Subsidiaries. Except for regular quarterly cash dividends
not in excess of $0.18 per share on the Company Common Stock and the
issuance of shares of Company Common Stock in connection with the
acquisition of American Bank of Connecticut, since December 31, 1999, no
cash, stock or other dividend or any other distribution with respect to
the Company Stock has been declared, set aside or paid. No shares of
Company Stock have been purchased, redeemed or otherwise acquired,
directly or indirectly, by the Company since June 30, 2002, and no
agreements have been made to do the foregoing.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against the Company or any of its
Subsidiaries and, to the Company's knowledge, no such litigation, claim or other
proceeding has been threatened and there are no facts which could reasonably
give rise to such litigation, claim or other proceeding.
(i) Regulatory Matters.
(i) Neither the Company nor any of its Subsidiaries nor any of
any of their respective properties is a party to or is subject to any
order, decree, agreement, memorandum of understanding or similar
arrangement with, or a commitment letter or similar submission to, or
extraordinary supervisory letter from, any federal or state governmental
agency or authority charged with the supervision or regulation of
financial institutions or issuers of securities or engaged in the
insurance of deposits or the supervision or regulation of it
(collectively, the "Company Regulatory Authorities"). The Company and
its Subsidiaries have paid all assessments made or imposed by any
Company Regulatory Authority.
(ii) Neither the Company nor any its Subsidiaries has been
advised by, or has any knowledge of facts which could give rise to an
advisory notice by, any Company Regulatory Authority that such Company
Regulatory Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such
order, decree, agreement, memorandum of understanding, commitment
letter, supervisory letter or similar submission.
(j) Compliance With Laws. Each of the Company and its Subsidiaries:
25
(i) is in material compliance with all applicable federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto or to the employees
conducting such businesses, including, without limitation, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment
Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act and all
other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
them to own or lease their properties and to conduct their businesses as
presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to the
Company's knowledge, no suspension or cancellation of any of them is
threatened; and
(iii) has received, since December 31, 1999, no notification or
communication from any Governmental Authority (A) asserting that the
Company or any of its Subsidiaries is not in compliance with any of the
statutes, regulations or ordinances which such Governmental Authority
enforces or (B) threatening to revoke any license, franchise, permit or
governmental authorization (nor, to the Company's knowledge, do any
grounds for any of the foregoing exist).
(k) Material Contracts; Defaults.
(i) Except for documents listed as exhibits to the Company's
SEC Documents and for this Agreement, including the Annexes hereto,
neither the Company nor any of its Subsidiaries is a party to, bound by
or subject to any agreement, contract, arrangement, commitment or
understanding (whether written or oral) (i) with respect to the
employment of any directors, officers, employees or consultants, (ii)
which would entitle any present or former director, officer, employee or
agent of the Company or its Subsidiaries to indemnification from the
Company or its Subsidiaries, (iii) which is a material contract (as
defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed
after the date of this Agreement that has not been filed or incorporated
by reference in the Company's SEC Documents, (iv) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on 60 days or less notice and involving the
payment of more than $50,000 per annum or (v) which materially restricts
the conduct of any business by the Company or any of its Subsidiaries
(collectively, "Material Contracts"). The Company has previously
delivered or made available to Parent true and correct copies of each
such document.
(ii) Neither the Company nor any of its Subsidiaries is in
material default under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument 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, to the Company's knowledge, there has
not occurred
26
any event that, with the lapse of time or the giving of notice or both,
would constitute such a default. No power of attorney or similar
authorization given directly or indirectly by the Company or any of its
Subsidiaries is currently outstanding.
(l) No Brokers. No action has been taken by the Company or any of its
Subsidiaries that would give rise to any valid claim against any party hereto
for a brokerage commission, finder's fee or other like payment with respect to
the Transactions, excluding a Previously Disclosed fee to be paid to Sandler
▇'▇▇▇▇▇ & Partners, L.P.
(m) Employee Benefit Plans.
(i) All benefit and compensation plans, contracts, policies or
arrangements covering current or former employees of the Company and its
Subsidiaries (the "Employees") and current or former directors of the
Company including, but not limited to, "employee benefit plans" within
the meaning of Section 3(3) of ERISA, and deferred compensation, stock
option, stock purchase, stock appreciation rights, stock based,
incentive and bonus plans (the "Benefits Plans"), are Previously
Disclosed in the Disclosure Schedule. True and complete copies of all
Benefit Plans including, but not limited to, any trust instruments and
insurance contracts forming a part of any Benefit Plans and all
amendments thereto have been provided or made available to Parent.
(ii) All Benefits Plans other than "multiemployer plans" within
the meaning of Section 3(37) of ERISA, covering Employees, to the extent
subject to ERISA, are in substantial compliance with ERISA. Each Benefit
Plan which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "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, and the Company
is not aware of any circumstances likely to result in revocation of any
such favorable determination letter or the loss of the qualification of
such Pension Plan under Section 401(a) of the Code. There is no material
pending or, to the Company's knowledge, threatened litigation relating
to the Benefits Plans. Neither the Company nor any of its Subsidiaries
has engaged in a transaction with respect to any Benefit Plan or Pension
Plan that, assuming the taxable period of such transaction expired as of
the date hereof, could subject the Company or any of its Subsidiaries to
a tax or penalty imposed by either Section 4975 of the Code or Section
502(i) of ERISA in an amount which would be material.
(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any of its
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
the Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). Neither the Company nor any of its Subsidiaries has
incurred, and neither expects to incur, any withdrawal liability with
respect to a multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). 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
27
Pension Plan or by any ERISA Affiliate within the 12-month period ending
on the date hereof or will be required to be filed in connection with
the transactions contemplated by this Agreement.
(iv) All contributions required to be made under the terms of
any Benefit Plan have been timely made or have been reflected on the
financial statements of the Company included in the Company's SEC
Documents. Neither any Pension Plan nor any single-employer plan of an
ERISA Affiliate has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA and no ERISA Affiliate has an outstanding funding waiver. Neither
the Company nor any of its 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.
(v) Under each Pension Plan which is a single-employer plan,
as of the last day of the most recent plan year ended prior to the date
hereof, 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 most recent actuarial valuation), did not exceed the then
current value of the assets of such Pension Plan, and there has been no
material change in the financial condition of such Plan since the last
day of the most recent plan year.
(vi) Neither the Company nor any of its Subsidiaries has any
obligations for retiree health and life benefits under any Benefit Plan,
other than coverage as may be required under Section 4980B of the Code
or Part 6 of Title I of ERISA, or under the continuation of coverage
provisions of the laws of any state or locality. The Company or any of
its Subsidiaries may amend or terminate any such Benefit Plan at any
time without incurring any liability thereunder.
(vii) None of the execution of this Agreement, shareholder
approval of this Agreement or consummation of the transactions
contemplated by this Agreement, including the Annexes hereto, will (A)
entitle any employees of the Company or any of its Subsidiaries to
severance pay or any increase in severance pay upon any termination of
employment after the date hereof, (B) accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the
Benefit Plans, (C) result in any breach or violation of, or a default
under, any of the Benefit Plans or (D) result in any payment that would
be a "parachute payment" to a "disqualified individual" as those terms
are defined in Section 280G of the Code, without regard to whether such
payment is reasonable compensation for personal services performed or to
be performed in the future.
(viii) On or prior to the date hereof, the Board of Directors of
the Company Bank has duly and validly approved amendments to Sections
4.1 and 4.2 of the Company Bank Severance Plan, as well as amended and
restated Section 4.5 of the Company Bank Severance Plan, in each case in
the form Previously Disclosed by the Company to Parent, and each such
amendment to the Company Bank Severance Plan is a valid and legally
28
binding obligation of the Company Bank which is enforceable in
accordance with its terms against each Participant in the Company Bank
Severance Plan (as defined therein), including without limitation each
Participant who has been designated as a Designated Officer (as defined
in the Company Bank Severance Plan) thereunder.
(n) Labor Matters. Neither the Company nor any of its 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 the
Company or any of its Subsidiaries the subject of a proceeding asserting that it
has committed an unfair labor practice (within the meaning of the National Labor
Relations Act) or seeking to compel the Company or any of its Subsidiaries to
bargain with any labor organization as to wages or conditions of employment, nor
is there any strike or other labor dispute involving it or any of its
Subsidiaries pending or, to the Company's knowledge, threatened, nor is the
Company or any of its Subsidiaries aware of any activity involving its employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(o) Environmental Matters.
(i) The Company and its Subsidiaries are in compliance with
applicable Environmental Laws; (ii) to the Company's knowledge, no real
property (including buildings or other structures) currently or formerly
owned or operated by the Company or any of its Subsidiaries, or any
property in which the Company or any of its Subsidiaries has held a
security interest, Lien or a fiduciary or management role ("Company Loan
Property"), has been contaminated with, or has had any release of, any
Hazardous Substance except in compliance with Environmental Laws; (iii)
to the Company's knowledge, neither the Company nor any of its
Subsidiaries could be deemed the owner or operator of, or has
participated in the management regarding Hazardous Substances of, any
Company Loan Property which has been contaminated with, or has had any
release of, any Hazardous Substance except in compliance with
Environmental Laws; (iv) to the Company's knowledge, neither the Company
nor any of its Subsidiaries has any liability for any Hazardous
Substance disposal or contamination on any third party property; (v)
neither the Company nor any of its Subsidiaries has received any notice,
demand letter, claim or request for information alleging any violation
of, or liability under, any Environmental Law; (vi) neither the Company
nor any of its Subsidiaries is subject to any order, decree, injunction
or other agreement with any Governmental Authority or any third party
relating to any Environmental Law; (vii) to the Company's knowledge,
there are no circumstances or conditions (including the presence of
asbestos, underground storage tanks, lead products, polychlorinated
biphenyls, prior manufacturing operations, dry-cleaning, or automotive
services) involving the Company or any of its Subsidiaries, any
currently or formerly owned or operated property, or any Company Loan
Property, that could reasonably be expected to result in any claims,
liability or investigations against the Company or any of its
Subsidiaries, result in any restrictions on the ownership, use, or
transfer of any property pursuant to any Environmental Law, or adversely
affect the value of any Company Loan Property; and (viii) the Company
has Previously Disclosed or made available to Parent copies of all
environmental reports, studies, sampling data, correspondence and
filings in its possession or reasonably
29
available to it relating to the Company, its Subsidiaries and any
currently or formerly owned or operated property or any Company Loan
Property.
As used herein, the term "Environmental Laws" means any federal,
state or local law, regulation, order, decree, permit, authorization,
opinion or agency requirement relating to: (A) the protection or
restoration of the environment, health, safety, or natural resources,
(B) the handling, use, presence, disposal, release or threatened release
of any Hazardous Substance or (C) wetlands, indoor air, pollution,
contamination or any injury or threat of injury to persons or property
in connection with any Hazardous Substance; and the term "Hazardous
Substance" means any substance that is: (A) listed, classified or
regulated pursuant to any Environmental Law, (B) any petroleum product
or by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or radon or
(C) any other substance which is the subject of regulatory action by any
Governmental Authority in connection with any Environmental Law.
(p) Tax Matters.
(i)(A) All Tax Returns that are required to be filed on or before
the Effective Date (taking into account any extensions of time within
which to file which have not expired) by or with respect to the Company
Group have been or will be timely filed on or before the Effective Date,
(B) all such Tax Returns are or will be true and complete in all
material respects, (C) all Taxes shown to be due on the Tax Returns
referred to in clause (A) have been or will be timely paid in full, (D)
the Tax Returns referred to in clause (A) have been examined by the
Internal Revenue Service or the appropriate Tax authority or the period
for assessment of the Taxes in respect of which such Tax Returns were
required to be filed has expired, (E) all deficiencies asserted or
assessments made as a result of examinations conducted by any taxing
authority have been paid in full, (F) no material issues that have been
raised by the relevant taxing authority in connection with the
examination of any of the Tax Returns referred to in clause (A) are
currently pending and (G) no member of the Company Group has waived any
statutes of limitation with respect to any Taxes of the Company or any
of its Subsidiaries.
(ii) The Company has made available to Parent true and correct
copies of the United States federal income Tax Returns filed by the
Company and its Subsidiaries for each of the three most recent fiscal
years ended on or before December 31, 2001.
(iii) Neither the Company nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes that
accrued on or before the end of the most recent period covered by the
Company's SEC Documents filed prior to the date hereof in excess of the
amounts accrued with respect thereto that are reflected in the financial
statements included in the Company's SEC Documents filed on or prior to
the date hereof.
(iv) Neither the Company nor any of its Subsidiaries is a party
to any Tax allocation or sharing agreement, is or has been a member of
an affiliated group filing consolidated or combined Tax Returns (other
than a group the common parent of which
30
is or was the Company) or otherwise has any liability for the Taxes of
any Person (other than the Company and its Subsidiaries).
(v) No closing agreements, private letter rulings, technical
advice memoranda or similar agreement or rulings have been entered into
or issued by any taxing authority with respect to the Company and its
Subsidiaries.
(vi) Neither the Company nor any of its Subsidiaries maintains
any compensation plans, programs or arrangements the payments under
which would not reasonably be expected to be deductible as a result of
the limitations under Section 162(m) of the Code and the regulations
issued thereunder.
(vii) As of the date hereof, the Company has 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.
(viii) (A) No Tax is required to be withheld pursuant to Section
1445 of the Code as a result of the Transactions and (B) all Taxes that
the Company or any of its Subsidiaries is or was required by law to
withhold or collect have been duly withheld or collected and, to the
extent required by applicable law, have been paid to the proper
Governmental Authority or other Person.
(q) Risk Management Instruments. Neither the Company nor any of its
Subsidiaries is a party or has agreed to enter into an exchange traded or
over-the-counter equity, interest rate, foreign exchange or other swap, forward,
future, option, cap, floor or collar or any other contract that is not included
on the balance sheet and is a derivatives contract (including various
combinations thereof) (each, a "Derivatives Contract") or owns securities that
(i) are referred to generically as "structured notes," "high risk mortgage
derivatives," "capped floating rate notes" or "capped floating rate mortgage
derivatives" or (ii) are likely to have changes in value as a result of interest
or exchange rate changes that significantly exceed normal changes in value
attributable to interest or exchange rate changes, except for those Derivatives
Contracts and other instruments legally purchased or entered into in the
ordinary course of business, consistent with safe and sound banking practices
and regulatory guidance. All of such Derivatives Contracts or other instruments,
are legal, valid and binding obligations of the Company or any of its
Subsidiaries enforceable in accordance with their 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 applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting creditors' rights and
remedies generally), and are in full force and effect. The Company and its
Subsidiaries have duly performed in all material respects all of their material
obligations thereunder to the extent that such obligations to perform have
accrued; and, to the Company's knowledge, there are no breaches, violations or
defaults or allegations or assertions of such by any party thereunder which
would have or would reasonably be expected to have a Material Adverse Effect on
the Company.
31
(r) Loans; Nonperforming and Classified Assets.
(i) Each Loan on the books and records of the Company and its
Subsidiaries, was made and has been serviced in all material respects in
accordance with customary lending standards in the ordinary course of
business, is evidenced in all material respects by appropriate and
sufficient documentation and, to the knowledge of the Company,
constitutes the legal, valid and binding obligation of the obligor named
therein, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws of general applicability relating to or affecting creditor's rights
or by general equity principles.
(ii) The Company has Previously Disclosed as to the Company and
each Company Subsidiary as of the latest practicable date: (i) any
written or, to the Company's knowledge, oral Loan under the terms of
which the obligor is 60 or more days delinquent in payment of principal
or interest, or to the Company's knowledge, in default of any other
material provision thereof; (ii) each Loan which has been classified as
"substandard," "doubtful," "loss" or "special mention" (or words of
similar import) by the Company, a Company Subsidiary or an applicable
regulatory authority (it being understood that no representation is
being made that the FDIC or the Connecticut Bank Commissioner would
agree with the loan classifications established by the Company); (iii) a
listing of the OREO acquired by foreclosure or by deed-in-lieu thereof,
including the book value thereof; and (iv) each Loan with any director,
executive officer or five percent or greater shareholder of the Company
or a Company Subsidiary, or to the best knowledge of the Company, any
Person controlling, controlled by or under common control with any of
the foregoing.
(s) Properties. All real and personal property owned by the Company
or a Subsidiary of the Company or presently used by any of them in its
respective business is in an adequate condition (ordinary wear and tear
excepted) and is sufficient to carry on its business in the ordinary course of
business consistent with its past practices. The Company has good and marketable
title free and clear of all Liens to all of the material properties and assets,
real and personal, reflected on the consolidated statement of financial
condition of the Company as of June 30, 2002 included in the Company's SEC
Documents or acquired after such date, other than properties sold by the Company
in the ordinary course of business, except (i) Liens for current taxes and
assessments not yet due or payable (ii) pledges to secure deposits and other
Liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent and (iv) as reflected on the consolidated
statement of financial condition of the Company as of June 30, 2002 included in
the Company's SEC Documents. All real and personal property which is material to
the Company's business on a consolidated basis and leased or licensed by the
Company or a Subsidiary of the Company is held pursuant to leases or licenses
which are valid and enforceable in accordance with their respective terms and
such leases will not terminate or lapse due to action or inaction of the Company
prior to the Effective Time.
(t) Intellectual Property. The Company and each Subsidiary of the
Company owns or possesses valid and binding licenses and other rights to use
without payment of any material amount all material patents, copyrights, trade
secrets, trade names, service marks and trademarks
32
used in its businesses, all of which have been Previously Disclosed by the
Company, and none of the Company or any of its Subsidiaries has received any
notice of conflict with respect thereto that asserts the right of others. The
Company and each of its Subsidiaries have performed in all material respects all
the obligations required to be performed by them and are not in default under
any contract, agreement, arrangement or commitment relating to any of the
foregoing.
(u) Fiduciary Accounts. The Company and each of its Subsidiaries has
properly administered all accounts for which it acts as a fiduciary, including
but not limited to accounts for which it serves as a trustee, agent, custodian,
personal representative, guardian, conservator or investment advisor, in
accordance with the terms of the governing documents and applicable laws and
regulations. Neither the Company nor any of its Subsidiaries, nor, to the
knowledge of the Company or any of its Subsidiaries, any of their respective
directors, officers or employees, has committed any breach of trust with respect
to any fiduciary account and the records for each such fiduciary account are
true and correct and accurately reflect the assets of such fiduciary account.
(v) Books and Records. The books and records of the Company and its
Subsidiaries are being maintained in material compliance with applicable legal
and accounting requirements, and such books and records accurately reflect in
all material respects all dealings and transactions in respect of the business,
assets, liabilities and affairs of the Company and its Subsidiaries.
(w) Insurance. The Company has Previously Disclosed all of the
material insurance policies, binders, or bonds currently maintained by the
Company or any of its Subsidiaries ("Insurance Policies"). The Company and its
Subsidiaries are insured with reputable insurers against such risks and in such
amounts as the management of the Company reasonably has determined to be prudent
in accordance with industry practices. All the Insurance Policies are in full
force and effect; the Company and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely fashion.
(x) Allowance For Loan Losses. The Company's allowance for loan
losses is, and shall be as of the Effective Date, in compliance with the
Company's existing methodology for determining the adequacy of its allowance for
loan losses as well as the standards established by applicable Governmental
Authorities and the Financial Accounting Standards Board and is and shall be
adequate under all such standards.
(y) Transactions With Affiliates. All "covered transactions" between
a Company Bank and an "affiliate" within the meaning of Sections 23A and 23B of
the Federal Reserve Act have been in compliance with such provisions.
(z) Required Vote; Antitakeover Provisions.
(i) The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock is necessary to approve and
adopt this Agreement and the Transactions on behalf of the Company. No
other vote of the shareholders of the Company is required by law, the
Company Articles, the Company Bylaws or otherwise to approve this
Agreement and the Transactions.
33
(ii) Based on the representation and warranty of Parent
contained in Section 5.04(m), no "control share acquisition," "business
combination moratorium," "fair price" or other form of antitakeover
statute or regulation is applicable to this Agreement or the
Transactions. Without limiting the foregoing, the Company Board has
approved this Agreement and the Transactions and taken all other
requisite action such that the provisions of the Company Articles
relating to special voting requirements for certain business
combinations will not apply to this Agreement or the Transactions.
(aa) Fairness Opinion. The Company Board has received the written
opinion of Sandler ▇'▇▇▇▇▇ & Partners, L.P. to the effect that as of the date
hereof the Merger Consideration is fair to the holders of Company Common Stock
from a financial point of view.
(bb) Transactions in Securities. Neither the Company nor, to the
Company's knowledge, (a) any director or officer of the Company or the Company's
Subsidiaries covered by the Company's ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ policy, (b) any person
related to any such director or officer by blood, marriage or adoption and
residing in the same household and (c) any person who has been knowingly
provided material nonpublic information by any one or more of these persons, has
purchased or sold, or caused to be purchased or sold, any shares of Company
Common Stock or other securities issued by the Company (i) during any period
when the Company was in possession of material nonpublic information or (ii) in
violation of any applicable provision of the Exchange Act.
(cc) Disclosure. The representations and warranties contained in this
Section 5.03, when considered as a whole, do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements and information contained in this Section 5.03 not misleading.
5.04. Representations and Warranties of Parent. Subject to Sections
5.01 and 5.02 and except as Previously Disclosed, Parent hereby represents and
warrants to the Company as follows:
(a) Organization, Standing and Authority. Parent is duly organized,
validly existing and in good standing under the laws of the State of Maine.
Parent is duly qualified to do business and is in good standing in each
jurisdiction where its ownership or leasing of property or assets or the conduct
of its business requires it to be so qualified. Parent 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.
(b) Parent Stock.
(i) As of the date hereof, the authorized capital stock of
Parent consists solely of 400,000,000 shares of Parent Common Stock, of
which 147,964,345 shares were outstanding as of the date hereof, and
5,000,000 shares of Parent Preferred Stock, of which no shares were
outstanding as of the date hereof. The outstanding shares of Parent
Common Stock have been duly authorized and validly issued and are fully
paid and non-assessable, and none of the shares of Parent Common Stock
have been issued in violation of the preemptive rights of any Person. As
of the date hereof, there are no Rights
34
authorized, issued or outstanding with respect to the capital stock of
Parent, except for (i) shares of Parent Common Stock issuable pursuant
to the Parent Benefits Plans, (ii) shares of Parent Common Stock and/or
Parent Preferred Stock issuable upon the exercise of Parent Rights,
(iii) shares of Parent Common Stock issuable in connection with the
pending acquisition of ▇▇▇▇▇▇ Bancorp, Inc. and (iv) by virtue of this
Agreement.
(ii) The shares of Parent Common Stock to be issued in exchange
for shares of Company Common Stock in the Merger, when issued in
accordance with the terms of this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and the issuance thereof is
not subject to any preemptive right.
(c) Subsidiaries.
(i) As of the date hereof, the only subsidiary of Parent which
constitutes a Significant Subsidiary is the Parent Bank. The Parent Bank
has been duly organized and is validly existing in good standing under
the laws of the United States 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.
The Parent Bank is duly licensed by the OCC and its deposits are insured
by the FDIC in the manner and to the maximum extent provided by law.
(ii) As of the date hereof, (A) Parent owns, directly or
indirectly, all the issued and outstanding equity securities of the
Parent Bank, (B) no equity securities of the Parent Bank are or may
become required to be issued (other than to Parent) by reason of any
Right or otherwise, (C) there are no contracts, commitments,
understandings or arrangements by which the Parent Bank is or may be
bound to sell or otherwise transfer any of its equity securities (other
than to Parent or any of its wholly-owned Subsidiaries) and (D) there
are no contracts, commitments, understandings, or arrangements relating
to Parent's rights to vote or to dispose of such securities.
(d) Corporate Power. Each of Parent and the Parent Bank has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets. Parent has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the Transactions, subject to the receipt of all
necessary approvals of Governmental Authorities.
(e) Corporate Authority. This Agreement and the Transactions have
been authorized by all necessary corporate action of Parent and the Parent
Board. This Agreement has been duly executed and delivered by Parent and,
assuming due authorization, execution and delivery by the Company, this
Agreement is a valid and legally binding agreement of Parent enforceable in
accordance with its terms (except as 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).
35
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or waivers by, or filings or
registrations with, any Governmental Authority or with any third party
are required to be made or obtained by Parent or any of its Subsidiaries
in connection with the execution, delivery or performance by Parent and
the Parent Bank of this Agreement and the Bank Merger Agreement, as
applicable, or to consummate the Transactions, except for (A) filings of
applications or notices with and approvals or waivers by the Federal
Reserve Board, the OCC, the Connecticut Bank Commissioner and the Maine
Superintendent, as required, (B) filings with the SEC and state
securities authorities, as applicable, in connection with the submission
of this Agreement for the approval of the holders of Company Common
Stock and the issuance of Parent Common Stock in the Merger, (C) the
approval of the listing on Nasdaq of the Parent Common Stock to be
issued in the Merger, (D) the filing of Articles of Merger with the
Secretary of State of the State of Maine pursuant to the MBCA and the
filing of a Certificate of Merger with the Secretary of State of the
State of Delaware pursuant to the DGCL and (E) such corporate approvals
and such consents or approvals of, or waivers by, or filings or
registrations with, certain of the foregoing federal and state banking
agencies in connection with the Bank Merger. As of the date hereof,
Parent is not aware of any reason why the approvals set forth above and
referred to in Section 7.01(b) will not be received in a timely manner
and without the imposition of a condition, restriction or requirement of
the type described in Section 7.01(b).
(ii) Subject to receipt, or the making, of the consents,
approvals, waivers and filings referred to in the preceding paragraph
and expiration of the related waiting periods, the execution, delivery
and performance of this Agreement and the Bank Merger Agreement by
Parent and the Parent Bank, as applicable, and the consummation of the
Transactions do not and will not (A) constitute a breach or violation
of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation
or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of Parent or of any of its
Subsidiaries or to which Parent or any of its Subsidiaries or properties
is subject or bound, (B) constitute a breach or violation of, or a
default under, the articles of incorporation or bylaws (or similar
governing documents) of Parent or any of its Subsidiaries or (C) require
any consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license, agreement, indenture or
instrument.
(g) Financial Reports and SEC Documents; Material Adverse Effect.
(i) Parent's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 and all other reports, registration statements,
definitive proxy statements or information statements filed or to be
filed by it subsequent to December 31, 1999 under the Securities Act or
under the Exchange Act, in the form filed or to be filed with the SEC
(collectively, Parent's "SEC Documents"), as of the date filed or to be
filed, (A) complied or will comply in all material respects as to form
with the applicable requirements under the Securities Act or the
Exchange Act, as the case may be, and (B) did not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in
36
the light of the circumstances under which they were made, not
misleading, except that information as of a later date shall be deemed
to modify information as of an earlier date; and each of the
consolidated balance sheets contained in or incorporated by reference
into any such SEC Document (including the related notes and schedules
thereto) fairly presents, or will fairly present, the consolidated
financial position of Parent and its Subsidiaries as of its date, and
each of the consolidated statements of income and changes in
shareholders' equity and cash flows or equivalent statements in such SEC
Documents (including any related notes and schedules thereto) fairly
presents, or will fairly present, the consolidated results of
operations, changes in shareholders' equity and changes in cash flows,
as the case may be, of Parent and its Subsidiaries for the periods to
which they relate, in each case in accordance with GAAP consistently
applied during the periods involved, except in each case as may be noted
therein.
(ii) Since June 30, 2002, no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of this Section
5.04 or otherwise), is reasonably likely to have a Material Adverse
Effect with respect to Parent.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against Parent or its Subsidiaries and,
to Parent's knowledge, no such litigation, claim or other proceeding has been
threatened and there are no facts which could reasonably give rise to such
litigation, claim or other proceeding.
(i) No Brokers. No action has been taken by Parent or its
Subsidiaries that would give rise to any valid claim against any party hereto
for a brokerage commission, finder's fee or other like payment with respect to
the Transactions, excluding a Previously Disclosed fee to be paid to ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
(j) Tax Matters. As of the date hereof, Parent does not have any
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.
(k) Regulatory Matters.
(i) Neither Parent nor any of its Subsidiaries nor any of any
of their respective properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, or extraordinary
supervisory letter from, any federal or state governmental agency or
authority charged with the supervision or regulation of financial
institutions or issuers of securities or engaged in the insurance of
deposits or the supervision or regulation of it (collectively, the
"Parent Regulatory Authorities"). Parent and its Subsidiaries have paid
all assessments made or imposed by any Parent Regulatory Authority.
(ii) Neither Parent nor any its Subsidiaries has been advised
by, and does not have any knowledge of facts which could give rise to an
advisory notice by, any Parent Regulatory Authority that such Parent
Regulatory Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or
37
requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar
submission.
(l) Compliance With Laws. Each of Parent and its Subsidiaries:
(i) is in material compliance with all applicable federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto or to the employees
conducting such businesses, including, without limitation, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment
Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act and all
other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
them to own or lease their properties and to conduct their businesses as
presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to
Parent's knowledge, no suspension or cancellation of any of them is
threatened; and
(iii) has received, since December 31, 1999, no notification or
communication from any Governmental Authority (A) asserting that Parent
or any of its Subsidiaries is not in compliance with any of the
statutes, regulations or ordinances which such Governmental Authority
enforces or (B) threatening to revoke any license, franchise, permit or
governmental authorization (nor, to Parent's knowledge, do any grounds
for any of the foregoing exist).
(m) Ownership of Company Common Stock. None of Parent or any of its
Subsidiaries, or to Parent's knowledge, any of its other affiliates or
associates (as such terms are defined under the Exchange Act), owns beneficially
or of record, directly or indirectly, or is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, shares of Company Common Stock (other than shares held in a
fiduciary capacity that are beneficially owned by third parties or as a result
of debts previously contracted) which in the aggregate represent 5% or more of
the outstanding Company Common Stock.
(n) Financial Ability. On the Effective Date and through the date of
payment of the aggregate amount of cash payable pursuant to Article III hereof,
Parent or Parent Bank will have all funds necessary to consummate the Merger and
pay the aggregate amount of cash to be paid to holders of Company Common Stock
pursuant to Sections 3.01 and 3.02 hereof. Each of Parent and Parent Bank is,
and immediately following completion of the Transactions will be, in compliance
with all capital requirements applicable to it.
(o) Disclosure. The representations and warranties contained in this
Section 5.04, when considered as a whole, do not contain any untrue statement of
a material fact or omit to
38
state any material fact necessary in order to make the statements and
information contained in this Section 5.04 not misleading.
ARTICLE VI
COVENANTS
6.01. Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each of the Company and Parent agrees to use its reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws, so as to permit consummation of the Transactions as promptly as
practicable and otherwise to enable consummation of the Transactions, including
the satisfaction of the conditions set forth in Article VII hereof, and shall
cooperate fully with the other party hereto to that end.
6.02 Shareholder Approval. The Company agrees to take, in accordance
with applicable law and the Company Articles and Company Bylaws, all action
necessary to convene as soon as reasonably practicable a special meeting of its
shareholders to consider and vote upon the approval of this Agreement and any
other matters required to be approved by the Company's shareholders for
consummation of the Transactions (including any adjournment or postponement, the
"Company Meeting"). Except with the prior approval of Parent, no other matters
shall be submitted for the approval of the Company shareholders at the Company
Meeting. The Company Board shall at all times prior to and during such meeting
recommend such approval and shall take all reasonable lawful action to solicit
such approval by its shareholders; provided that nothing in this Agreement shall
prevent the Company Board from withholding, withdrawing, amending or modifying
its recommendation if the Company Board determines, after consultation with its
outside counsel, that such action is legally required in order for the directors
to comply with their fiduciary duties to the Company shareholders under
applicable law; provided, further, that Section 6.08 shall govern the
withholding, withdrawing, amending or modifying of such recommendation in the
circumstances described therein.
6.03. Registration Statement.
(a) Parent agrees to prepare a registration statement on Form S-4 or
other applicable form (the "Registration Statement") to be filed by Parent with
the SEC in connection with the issuance of Parent Common Stock in the Merger
(including the proxy statement and prospectus and other proxy solicitation
materials of the Company constituting a part thereof (the "Proxy Statement") and
all related documents). The Company shall prepare and furnish such information
relating to it and its directors, officers and shareholders as may be reasonably
required in connection with the above referenced documents based on its
knowledge of and access to the information required for said documents, and the
Company, and its legal, financial and accounting advisors, shall have the right
to review and comment on such Registration Statement prior to its filing. The
Company agrees to cooperate with Parent and Parent's counsel and accountants in
requesting and obtaining appropriate opinions, consents and letters from its
financial advisor and independent auditor in connection with the Registration
Statement and the Proxy Statement. Provided that the Company has cooperated as
described above, Parent agrees to file, or cause to be filed, the Registration
Statement and the Proxy Statement with the SEC as
39
promptly as reasonably practicable. Each of the Company and Parent agrees to use
its reasonable best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as reasonably practicable after
the filing thereof. Parent also agrees to use its reasonable best efforts to
obtain all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement. After the
Registration Statement is declared effective under the Securities Act, the
Company shall promptly mail at its expense the Proxy Statement to its
shareholders.
(b) Each of the Company and Parent agrees that none of the information
supplied or to be supplied by it for inclusion or incorporation by reference in
(i) the Registration Statement shall, at the time the Registration Statement and
each amendment or supplement thereto, if any, becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Proxy Statement and any amendment
or supplement thereto shall, at the date(s) of mailing to shareholders and at
the time of the Company Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. Each of the Company and Parent
further agrees that if such party shall become aware prior to the Effective Date
of any information furnished by such party that would cause any of the
statements in the Registration Statement or the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, to
promptly inform the other parties thereof and to take the necessary steps to
correct the Registration Statement or the Proxy Statement.
(c) Parent agrees to advise the Company, promptly after Parent receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of Parent Common Stock for offering or
sale in any jurisdiction, of the initiation or, to the extent Parent is aware
thereof, threat of any proceeding for any such purpose, or of any request by the
SEC for the amendment or supplement of the Registration Statement or for
additional information.
6.04. Regulatory Filings.
(a) Each of Parent and the Company and their respective Subsidiaries
shall cooperate and use their respective reasonable best efforts to prepare all
documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to consummate the Transactions and any other transactions contemplated
by this Agreement (including the consolidation of any Company branches with
Parent Bank branches or the closure of any Company branches, in each case as
Parent in its sole discretion shall deem necessary; provided, however, that in
no event shall such branch closures or consolidations be deemed a condition to
Parent's obligation hereunder to consummate the Merger) and the Bank Merger
Agreement; and any initial filings with Governmental Authorities shall be made
by Parent as soon as reasonably practicable after the execution hereof. Each of
Parent and the Company shall have the right to review and comment in advance,
and to the extent practicable each shall consult with the other, in each case
subject to applicable laws relating to the exchange of information, with respect
to all written information submitted to any
40
third party or any Governmental Authority in connection with the Transactions.
In exercising the foregoing right, each of such parties agrees to act reasonably
and as promptly as practicable. Each party hereto agrees that it shall consult
with the other parties hereto with respect to the obtaining of all permits,
consents, approvals, waivers and authorizations of all third parties and
Governmental Authorities necessary or advisable to consummate the Transactions,
and each party shall keep the other parties apprised of the status of material
matters relating to completion of the Transactions.
(b) Each party agrees, upon request, to furnish the other parties with
all information concerning itself, its Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other parties or any of their respective Subsidiaries to any third party or
Governmental Authority.
6.05. Press Releases. The Company and Parent shall consult with each
other before issuing any press release with respect to the Transactions or this
Agreement and shall not issue any such press release or make any such public
statements without the prior consent of the other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party (but after such consultation, to the extent
practicable in the circumstances), issue such press release or make such public
statements as may upon the advice of outside counsel be required by law or the
rules or regulations of Nasdaq. The Company and Parent shall cooperate to
develop all public announcement materials and make appropriate management
available at presentations related to the Transactions as reasonably requested
by the other party.
6.06. Access; Information.
(a) The Company agrees that upon reasonable notice and subject to
applicable laws relating to the exchange of information, it shall afford Parent
and Parent's officers, employees, counsel, accountants and other authorized
representatives such access during normal business hours throughout the period
prior to the Effective Time to the books, records (including, without
limitation, Tax Returns and work papers of independent auditors), properties and
personnel of the Company and the Company Bank and to such other information
relating to the Company or the Company Bank as Parent may reasonably request
and, during such period, it shall furnish promptly to Parent all information
concerning the business, properties and personnel of the Company or the Company
Bank as Parent may reasonably request.
(b) Parent agrees that upon reasonable notice and subject to applicable
laws relating to the exchange of information, it shall afford the Company and
its authorized representatives such access to Parent's personnel as the Company
may reasonably request.
(c) Each party agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to this Section
6.06 (as well as any other information obtained prior to the date hereof in
connection with the entering into of this Agreement) for any purpose unrelated
to the consummation of the Transactions. Subject to the requirements of law,
each party shall keep confidential, and shall cause its representatives to keep
confidential, all information and documents obtained pursuant to this Section
6.06 (as well as any other
41
information obtained prior to the date hereof in connection with the entering
into of this Agreement) unless such information (i) was already known to such
party, (ii) becomes available to such party from other sources not known by such
party to be bound by a confidentiality obligation, (iii) is disclosed with the
prior written approval of the party to which such information pertains or (iv)
is or becomes readily ascertainable from publicly available sources. In the
event that this Agreement is terminated or the Transactions shall otherwise fail
to be consummated, each party shall promptly cause all copies of documents or
extracts thereof containing information and data as to another party hereto to
be returned to the party which furnished the same. No investigation by any party
of the business and affairs of any other party shall affect or be deemed to
modify or waive any representation, warranty, covenant or agreement in this
Agreement, or the conditions to any party's obligation to consummate the
Transactions.
6.07. Affiliates. The Company shall use its reasonable best efforts to
identify those persons who may be deemed to be "affiliates" of the Company
within the meaning of Rule 145 promulgated by the SEC under the Securities Act
(the "Company Affiliates") and to cause each person so identified to deliver to
Parent as soon as practicable, and in any event prior to the date of the Company
Meeting, a written agreement to comply with the requirements of Rule 145 under
the Securities Act in connection with the sale or other transfer of Parent
Common Stock received in the Merger, which agreement shall be in a form
reasonably satisfactory to the Company.
6.08. Acquisition Proposals. The Company agrees that neither it nor any
of its Subsidiaries shall, and that it shall direct and use its reasonable best
efforts to cause its and each such Subsidiary's directors, officers, employees,
agents and representatives not to, directly or indirectly, initiate, solicit,
knowingly encourage or otherwise facilitate any inquiries or the making of any
proposal or offer with respect to an Acquisition Proposal. The Company further
agrees that neither the Company nor any of its Subsidiaries shall, and that it
shall direct and use its reasonable best efforts to cause its and each such
Subsidiary's directors, officers, employees, agents and representatives not to,
directly or indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any Person
relating to an Acquisition Proposal, or otherwise knowingly facilitate any
effort or attempt to make or implement an Acquisition Proposal; provided,
however, that nothing contained in this Agreement shall prevent the Company or
the Company Board from (A) complying with its disclosure obligations under
federal or state law; (B) providing information in response to a request
therefor by a Person who has made an unsolicited bona fide written Acquisition
Proposal if the Company Board receives from the Person so requesting such
information an executed confidentiality agreement; (C) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal or (D) recommending such an Acquisition
Proposal to the shareholders of the Company, if and only to the extent that, in
each such case referred to in clause (B), (C) or (D) above, (i) the Company
Board determines in good faith (after consultation with outside legal counsel)
that such action would be required in order for its directors to comply with
their respective fiduciary duties under applicable law and (ii) the Company
Board determines in good faith (after consultation with its financial advisor)
that such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposal and the Person making the proposal and would, if consummated,
result in a transaction more favorable to the Company's shareholders
42
from a financial point of view than the Merger. An Acquisition Proposal which is
received and considered by the Company in compliance with this Section 6.08 and
which meets the requirements set forth in clause (D) of the preceding sentence
is herein referred to as a "Superior Proposal." The Company agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposals. The Company agrees that it will notify Parent
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, the Company or any of its
representatives.
6.09. Certain Policies. Prior to the Effective Date, each of the
Company and its Subsidiaries shall, consistent with GAAP, the rules and
regulations of the SEC and applicable banking laws and regulations, modify or
change its loan, OREO, accrual, reserve, tax, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) so as to be applied on a basis that is consistent with that of Parent;
provided, however, that no such modifications or changes need be made prior to
the satisfaction of the conditions set forth in Sections 7.01(a) and 7.01(b);
and further provided that in any event, no accrual or reserve made by the
Company or any of its Subsidiaries pursuant to this Section 6.09 shall
constitute or be deemed to be a breach, violation of or failure to satisfy any
representation, warranty, covenant, agreement, condition or other provision of
this Agreement or otherwise be considered in determining whether any such
breach, violation or failure to satisfy shall have occurred. The recording of
any such adjustments shall not be deemed to imply any misstatement of previously
furnished financial statements or information and shall not be construed as
concurrence of the Company or its management with any such adjustments.
6.10. Nasdaq Listing. Parent agrees to use its reasonable best efforts
to list, prior to the Effective Date, on the Nasdaq the shares of Parent Common
Stock to be issued in connection with the Merger.
6.11. Indemnification.
(a) From and after the Effective Time, Parent (the "Indemnifying
Party") shall indemnify and hold harmless each present and former director,
officer and employee of the Company or a Company Subsidiary, as applicable,
determined as of the Effective Time (the "Indemnified Parties") against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, arising in whole or in part out of or pertaining to
the fact that he or she was a director, officer, employee, fiduciary or agent of
the Company or any Company Subsidiary or is or was serving at the request of the
Company or any of the Company Subsidiaries as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust or
other enterprise, including without limitation matters related to the
negotiation, execution and performance of this Agreement or consummation of the
Transactions, to the fullest extent which such Indemnified Parties would be
entitled under the Company Articles and Company Bylaws or equivalent documents
of any Company Subsidiary, as applicable, or any agreement, arrangement or
understanding which has been Previously
43
Disclosed by the Company pursuant to this Section, in each case as in effect on
the date hereof. Without limiting the foregoing, Parent also agrees that
limitations on liability existing in favor of the Indemnified Parties as
provided in the Company Articles and Company Bylaws or similar governing
documents of the Company Subsidiaries as in effect on the date hereof with
respect to matters occurring prior to the Effective Time shall survive the
Merger and the Bank Merger and shall continue in full force and effect from and
after the Effective Time.
(b) Any Indemnified Party wishing to claim indemnification under this
Section 6.11, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not actually prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction), (ii)
the Indemnified Parties will cooperate in the defense of any such matter, (iii)
the Indemnifying Party shall not be liable for any settlement effected without
its prior written consent and (iv) the Indemnifying Party shall have no
obligation hereunder in the event that a federal or state banking agency or a
court of competent jurisdiction shall determine that indemnification of an
Indemnified Party in the manner contemplated hereby is prohibited by applicable
laws and regulations.
(c) Prior the Effective Time, Parent shall cause the persons serving as
directors and officers of the Company immediately prior to the Effective Time to
be covered by the directors' and officers' liability insurance policy maintained
by the Company (provided that Parent may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
not materially less advantageous than such policy or single premium tail
coverage with policy limits equal to the Company's existing coverage limits)
with respect to acts or omissions occurring prior to the Effective Time which
were committed by such directors and officers in their capacities as such,
provided that in no event shall Parent be required to expend for any one year an
amount in excess of 150% of the annual premium currently paid by the Company for
such insurance (the "Insurance Amount"), and further provided that if Parent is
unable to maintain or obtain the insurance called for by this Section 6.11(c) as
a result of the preceding provision, Parent shall use its reasonable best
efforts to obtain the most advantageous coverage as is available for the
Insurance Amount.
(d) If Parent 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 other entity, then and in each case, proper provision
shall be made so that the successors and assigns of Parent shall assume the
obligations set forth in this Section 6.11.
44
6.12 Benefit Plans.
(a) As soon as administratively practicable after the Effective Time,
Parent shall take all reasonable action so that employees of the Company and its
Subsidiaries shall be entitled to participate in each employee benefit plan,
program or arrangement of Parent of general applicability (the "Parent Benefits
Plans") to the same extent as similarly-situated employees of Parent and its
Subsidiaries (it being understood that inclusion of the employees of the Company
and its Subsidiaries in the Parent Benefits Plans may occur at different times
with respect to different plans), provided, however, that nothing contained
herein shall require Parent or any of its Subsidiaries to make any grants to any
former employee of the Company or its Subsidiaries under any discretionary
equity compensation plan of Parent. Parent shall cause each Parent Benefits Plan
in which employees of the Company and its Subsidiaries are eligible to
participate to recognize, for purposes of determining eligibility to participate
in, the vesting of benefits and for all other purposes (but not for accrual of
pension benefits) under the Parent Benefit Plans, the service of such employees
with the Company and its Subsidiaries to the same extent as such service was
credited for such purpose by the Company, provided, however, that such service
shall not be recognized to the extent that such recognition would result in a
duplication of benefits. Nothing herein shall limit the ability of Parent to
amend or terminate any of the Company's Benefits Plans in accordance with their
terms at any time.
(b) At and following the Effective Time, Parent shall honor, and the
Surviving Corporation shall continue to be obligated to perform, in accordance
with their terms, all benefit obligations to, and contractual rights of, current
and former employees of the Company existing as of the Effective Date, as well
as all employment, severance, deferred compensation or "change-in-control"
agreements, plans or policies of the Company which are Previously Disclosed,
subject in each case as the same may be modified or terminated with respect to
certain executive officers of the Company pursuant to an Executive Agreement.
Parent acknowledges that the consummation of the Merger will constitute a
"change-in-control" of the Company for purposes of any employee benefit plans,
agreements and arrangements of the Company.
(c) If employees of the Company or any of its Subsidiaries become
eligible to participate in a medical, dental or health plan of Parent, Parent
shall cause each such plan to (i) waive any preexisting condition limitations to
the extent such conditions covered under the applicable medical, health or
dental plans of Parent, (ii) provide full credit for under such plans any
deductibles, co-payment and out-of-pocket expenses incurred by the employees and
their beneficiaries during the portion of the calendar year prior to such
participation and (iii) waive any waiting period limitation or evidence of
insurability requirement which would otherwise be applicable to such employee on
or after the Effective Time to the extent such employee had satisfied any
similar limitation or requirement under an analogous Plan prior to the Effective
Time.
(d) For a period of six months following the Effective Time, Parent
shall provide all employees of the Company and its Subsidiaries whose employment
was terminated other than for cause, disability or retirement at or following
the Effective Time, and who so desires, job counseling and outplacement
assistance services in accordance with Parent's employment policies and
practices, shall assist such employees in locating new employment and shall
notify
45
all such employees who want to be so notified of opportunities for
positions with Parent or any of its Subsidiaries for which Parent reasonably
believes such persons are qualified and shall consider any application for such
positions submitted by such persons, provided, however, that any decision to
offer employment to any such person shall be made in the sole discretion of
Parent.
(e) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of Parent or a Parent Subsidiary as of the
Effective Time, and Parent or a Parent Subsidiary will use its reasonable best
efforts to give such persons (other than any such person who is party to an
employment agreement, a severance agreement or a special termination agreement)
at least four weeks prior written notice of any job elimination after the
Effective Time for a period of 90 days following the Effective Time. Subject to
such four-week notice requirement, Parent or a Parent Subsidiary shall have no
obligation to continue the employment of any such person and nothing contained
herein shall give any employee of the Company or a Company Subsidiary the right
to continue employment with Parent or a Parent Subsidiary after the Effective
Time. An employee of the Company or a Company Subsidiary (other than an employee
who is party to an employment agreement, a severance agreement or a special
termination agreement) whose employment is involuntarily terminated other than
for cause following the Effective Time shall be entitled to receive severance
payments in accordance with, and to the extent provided in, the Company
Severance Plan.
6.13. Bank Merger. Parent and the Company agree to take all action
necessary and appropriate, including causing the entering into of an appropriate
merger agreement (the "Bank Merger Agreement"), to cause the Company Bank to
merge with and into the Parent Bank (the "Bank Merger") in accordance with
applicable laws and regulations and the terms of the Bank Merger Agreement and
as soon as practicable after consummation of the Merger.
6.14 Coordination of Dividends. After the date of this Agreement, the
Company shall coordinate the declaration of any dividends in respect of the
Company Common Stock and the record dates and payment dates relating thereto
with that of the Parent Common Stock, it being the intention of the parties that
the holders of Parent Common Stock or Company Common Stock shall not receive
more than one dividend, or fail to receive one dividend, for any single calendar
quarter with respect to their shares of Parent Common Stock and/or Company
Common Stock and any shares of Parent Common Stock any holder of Company Common
Stock receives in exchange therefor in the Merger.
6.15. Directorship. Parent agrees to take all action necessary to
appoint or elect, effective as of the Effective Time, one non-employee director
of the Company as of the date hereof who is designated by Parent and who meets
the director qualification requirements set forth in the Parent Bylaws.
6.16. Other Agreements.
(a) Concurrently with the execution of this Agreement by the Company
and Parent, Parent, the Company, the Company Bank and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
46
and ▇▇▇▇ ▇. ▇▇▇▇▇ shall enter into an Executive Agreement in the form of Annex B
hereto (individually an "Executive Agreement" and collectively the "Executive
Agreements").
(b) Concurrently with the execution of this Agreement by the Company
and Parent, Parent and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall enter into a Consulting Agreement
in the form of Annex C hereto.
6.17. Notification of Certain Matters. Each of the Company and Parent
shall give prompt notice to the other of any fact, event or circumstance known
to it that (i) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
6.18. Section 16 Matters. Prior to the Effective Time, Parent and the
Company shall take all such steps as may be required to cause any dispositions
of Company Common Stock (including derivative securities with respect to Company
Common Stock) or acquisitions of Parent Common Stock resulting from the
transactions contemplated by this Agreement by each individual who is subject to
the reporting requirements of Section 16(a) of the Exchange Act with respect to
the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
6.19 Advisory Board. Parent agrees to cause Parent Bank to take all
action necessary to appoint or elect, as of the Effective Time, all non-employee
directors of the Company as of the date hereof (excluding the director to be
appointed to the Parent Board pursuant to Section 6.15) to the Connecticut-based
board of advisory directors of Parent Bank. Such directors shall be eligible to
receive compensation for services in their capacity as such in accordance with
the policies of Parent Bank in effect from time to time.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of the parties hereto to consummate the Merger is
subject to the fulfillment or, to the extent permitted by applicable law,
written waiver by the parties hereto prior to the Closing Date of each of the
following conditions:
(a) Shareholder Approval. This Agreement shall have been duly approved
by the requisite vote of the holders of outstanding shares of Company Common
Stock.
(b) Regulatory Approvals. All regulatory approvals required to
consummate the Transactions shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof shall have
expired and no such approvals shall contain any conditions, restrictions or
requirements which the Parent Board reasonably determines in good faith would,
individually or in the aggregate, materially reduce the benefits of the
Transactions to
47
such a degree that Parent, in its good faith judgment, would not have entered
into this Agreement had such conditions, restrictions or requirements been known
at the date hereof.
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
Transactions.
(d) Registration Statement; Blue Sky Laws. The Registration Statement
shall have become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been initiated by the SEC
and not withdrawn; and Parent shall have received all required approvals by
state securities or "blue sky" authorities with respect to the Transactions.
(e) Listing. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing on the Nasdaq.
(f) Tax Opinion. Each of Parent and the Company shall have received the
written opinion of Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., in form and substance
reasonably satisfactory to both the Company and Parent, dated as of the
Effective Date, substantially to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Merger will be
treated for Federal income tax purposes as constituting a reorganization within
the meaning of Section 368(a)(1)(A) of the Code. If such legal counsel does not
render such opinion, this condition may be satisfied if KPMG LLP, independent
auditors of Parent and the Company, renders such opinion, relying on such facts,
representations and assumptions. In rendering such opinion, such counsel or
auditors may require and rely upon representations and covenants, including
those contained in certificates of officers of Parent, the Company and others,
reasonably satisfactory in form and substance to such counsel.
7.02. Conditions to Obligation of the Company. The obligation of the
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company prior to the Closing Date of each of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Parent set forth in this Agreement, subject in all cases to the standard set
forth in Section 5.02, shall be true and correct as of the date of this
Agreement and as of the Effective Date as though made on and as of the Effective
Date (except that representations and warranties that by their terms speak as of
the date of this Agreement or some other date shall be true and correct as of
such date), and the Company shall have received a certificate, dated the
Effective Date, signed on behalf of Parent by the Chief Executive Officer and
the Chief Financial Officer of Parent to such effect.
(b) Performance of Obligations of Parent. Parent shall have performed
in all material respects all obligations required to be performed by them under
this Agreement at or prior to the Effective Time, and the Company shall have
received a certificate, dated the Effective Date, signed on behalf of Parent by
the Chief Executive Officer and the Chief Financial Officer of Parent to such
effect.
48
(c) Deposit of Merger Consideration. Parent shall have deposited with
the Exchange Agent the Merger Consideration to be paid to holders of Company
Common Stock pursuant to Article III hereof.
(d) Other Actions. Parent shall have furnished the Company with such
certificates of its respective officers or others and such other documents to
evidence fulfillment of the conditions set forth in Sections 7.01 and 7.02 as
the Company may reasonably request.
7.03. Conditions to Obligations of Parent. The obligations of Parent to
consummate the Merger are also subject to the fulfillment or written waiver by
Parent prior to the Closing Date of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement, subject in all cases to the standard
set forth in Section 5.02, shall be true and correct as of the date of this
Agreement and as of the Effective Date as though made on and as of the Effective
Date (except that representations and warranties that by their terms speak as of
the date of this Agreement or some other date shall be true and correct as of
such date), and Parent shall have received a certificate, dated the Effective
Date, signed on behalf of the Company by the Chief Executive Officer and the
Chief Financial Officer of the Company to such effect.
(b) Performance of Obligations of Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Parent shall have
received a certificate, dated the Effective Date, signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company to such effect.
(c) Shareholder Agreements. Shareholder Agreements, in the form
attached as Annex A hereto, shall have been executed and delivered by each
Shareholder in connection with the Company's execution and delivery of this
Agreement.
(d) Executive Agreements. Executive Agreements, in the form attached as
Annex B hereto, shall have been duly executed and delivered by the Company, the
Company Bank and each executive officer of the Company who is a party thereto,
and the Company, the Company Bank and each such executive officer shall have
performed in all material respects all obligations required to be performed by
such party thereunder at or prior to the Effective Time.
(e) Dissenting Shares. Dissenting Shares shall not represent 10% or
more of the outstanding Company Common Stock.
(f) Other Actions. The Company shall have furnished Parent with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 7.01 and 7.03 as Parent may
reasonably request.
49
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the
Transactions may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Parent and the Company if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) Breach. At any time prior to the Effective Time, by Parent or the
Company if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event of: (i) a breach by Parent or the
Company, as the case may be, of any representation or warranty contained herein
(subject to the standard set forth in Section 5.02), which breach cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party or parties of such breach; or (ii) a breach by Parent or the
Company, as the case may be, of any of the covenants or agreements contained
herein, which breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party or parties of such breach, which
breach (whether under (i) or (ii)) would be reasonably expected, individually or
in the aggregate with other breaches, to result in a Material Adverse Effect
with respect to Parent or the Company, as the case may be.
(c) Delay. At any time prior to the Effective Time, by Parent or the
Company if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Transactions are not
consummated by July 31, 2003, except to the extent that the failure of the
Merger then to be consummated arises out of or results from the knowing action
or inaction of (i) the party seeking to terminate pursuant to this Section
8.01(c) or (ii) any of the Shareholders (if the Company is the party seeking to
terminate), which action or inaction is in violation of its obligations under
this Agreement or, in the case of the Shareholders, his, her or its obligations
under the relevant Shareholder Agreement.
(d) No Regulatory Approval. By the Company or Parent, if its Board of
Directors so determines by a vote of a majority of the members of its entire
Board, in the event the approval of any Governmental Authority required for
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been denied by final nonappealable action of such
Governmental Authority or an application therefor shall have been permanently
withdrawn at the request of a Governmental Authority.
(e) No Shareholder Approval. By either Parent or the Company if any
approval of the shareholders of the Company contemplated by this Agreement shall
not have been obtained by reason of the failure to obtain the required vote at
the Company Meeting.
(f) Failure to Recommend. At any time prior to the Company Meeting, by
Parent if (i) the Company shall have breached Section 6.08, (ii) the Company
Board shall have failed to make its recommendation referred to in Section 6.02,
withdrawn such recommendation or modified or changed such recommendation in a
manner adverse in any respect to the interests of
50
Parent or (iii) the Company shall have materially breached its obligations under
Section 6.02 by failing to call, give notice of, convene and hold the Company
Meeting in accordance with Section 6.02.
(g) Certain Tender or Exchange Offers. By Parent if a tender offer or
exchange offer for 20% or more of the outstanding shares of Company Common Stock
is commenced (other than by Parent or a Subsidiary thereof), and the Company
Board recommends that the shareholders of the Company tender their shares in
such tender or exchange offer or otherwise fails to recommend that such
shareholders reject such tender offer or exchange offer within the ten-Business
Day period specified in Rule 14e-2(a) under the Exchange Act.
(h) Superior Proposal. At any time prior to the Company Meeting, by the
Company in order to concurrently enter into an acquisition agreement or similar
agreement (each, an "Acquisition Agreement") with respect to a Superior Proposal
which has been received and considered by the Company and the Company Board in
compliance with Section 6.08 hereof, provided, however, that this Agreement may
be terminated by the Company pursuant to this Section 8.01(h) only after the
fifth Business Day following Parent's receipt of written notice from the Company
advising Parent that the Company is prepared to enter into an Acquisition
Agreement with respect to a Superior Proposal, and only if, during such
five-Business Day period, Parent does not, in its sole discretion, make an offer
to the Company that the Company Board determines in good faith, after
consultation with its financial and legal advisors, is at least as favorable as
the Superior Proposal.
(i) Possible Adjustment. By the Company, if the Company Board so
determines by the vote of a majority of all of its members, at any time during
the three-day period commencing with the Determination Date, if both the
following conditions are satisfied:
(1) the Average Share Price shall be less than 80.0% of the Starting
Price (as the same may be adjusted to reflect any Capital Change); and
(2) (i) the number obtained by dividing the Average Share Price by the
Starting Price (such number being referred to herein as the "Parent Ratio")
shall be less than (ii) the number obtained by dividing the Nasdaq Bank
Average Index by the Nasdaq Bank Starting Index and multiplying the
quotient in this clause by 0.80 (such number being referred to herein as
the "Index Ratio");
subject, however, to the following three sentences. If the Company elects to
exercise its termination right pursuant to the immediately preceding sentence,
it shall give written notice to Parent (provided that such notice of election to
terminate may be withdrawn at any time within the aforementioned three-day
period). During the two-day period commencing with its receipt of such notice,
Parent shall have the option of increasing the consideration to be received by
the holders of Company Common Stock hereunder by adjusting the Exchange Ratio to
equal the lesser of (i) a number equal to a quotient (rounded to the nearest one
ten-thousandth), the numerator of which is the product of the Starting Price,
0.80, and the Exchange Ratio (as then in effect) and the denominator of which is
the Average Share Price, and (ii) a number equal to a quotient (rounded to the
nearest one ten-thousandth), the numerator of which is the Index Ratio
multiplied by the Exchange Ratio (as then in effect) and the denominator of
which is the Parent
51
Ratio. If Parent makes an election contemplated by the preceding sentence
within such three-day period, it shall give prompt written notice to the Company
of such election and the revised Exchange Ratio, whereupon no termination shall
have occurred pursuant to this Section 8.01(i) 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 Section 8.01(i).
8.02 Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article VIII, no party to this Agreement shall
have any liability or further obligation to any other party hereunder except (i)
as set forth in this Section 8.02 and Section 9.01 and (ii) that termination
will not relieve a breaching party from liability for any willful breach of any
covenant, agreement, representation or warranty of this Agreement giving rise to
such termination.
(b) In recognition of the efforts, expenses and other opportunities
foregone by Parent while structuring and pursuing the Merger, the parties hereto
agree that the Company shall pay to Parent a termination fee of $28.0 million
(the "Termination Fee") in the manner set forth below if:
(i) this Agreement is terminated by Parent pursuant to
Section 8.01(f) or (g);
(ii) this Agreement is terminated by (A) Parent pursuant to
Section 8.01(b), (B) by either Parent or the Company pursuant to
Section 8.01(c), or (C) by either Parent or the Company pursuant to
Section 8.01(e) (other than by reason of any breach by Parent or the
Company, respectively), and in the case of any termination pursuant to
clause (A), (B) or (C) an Acquisition Proposal shall have been publicly
announced or otherwise communicated or made known to the senior
management of the Company or the Company Board (or any Person shall
have publicly announced, communicated or made known an intention,
whether or not conditional, to make an Acquisition Proposal) at any
time after the date of this Agreement and prior to the taking of the
vote of the shareholders of the Company contemplated by this Agreement
at the Company Meeting, in the case of clause (C), or the date of
termination of this Agreement, in the case of clause (A) or (B); or
(iii) this Agreement is terminated by the Company pursuant to
Section 8.01(h).
In the event the Termination Fee shall become payable pursuant to
Section 8.02(b)(i) or (ii), (x) the Company shall pay to Parent an amount equal
to $5.0 million on the first Business Day following termination of this
Agreement, and (y) if within 18 months after such termination the Company or a
Subsidiary of the Company enters into any agreement with respect to, or
consummates, any Acquisition Transaction, the Company shall pay to Parent the
Termination Fee (net of any payment made pursuant to clause (x) above) on the
date of execution of such agreement or consummation of the Acquisition
Transaction. In the event the Termination Fee shall become payable pursuant to
Section 8.02(b)(iii), the Company shall pay to Parent the entire Termination Fee
within two Business Days following the date of termination of this Agreement.
52
Any amount that becomes payable pursuant to this Section 8.02(b) shall be paid
by wire transfer of immediately available funds to an account designated by
Parent.
(c) The Company and Parent agree that the agreement contained in
paragraph (b) of this Section 8.02 is an integral part of the transactions
contemplated by this Agreement, that without such agreement Parent would not
have entered into this Agreement and that such amounts do not constitute a
penalty or liquidated damages in the event of a breach of this Agreement by the
Company. If the Company fails to pay Parent the amounts due under paragraph (b)
above within the time periods specified therein, the Company shall pay the costs
and expenses (including reasonable legal fees and expenses) incurred by Parent
in connection with any action in which Parent prevails, including the filing of
any lawsuit, taken to collect payment of such amounts, together with interest on
the amount of any such unpaid amounts at the prime lending rate prevailing
during such period as published in The Wall Street Journal, calculated on a
daily basis from the date such amounts were required to be paid until the date
of actual payment.
ARTICLE IX
MISCELLANEOUS
9.01. Survival. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective Time (other
than agreements or covenants contained herein that by their express terms are to
be performed after the Effective Time) or the termination of this Agreement if
this Agreement is terminated prior to the Effective Time (other than Sections
6.06(c), 8.02 and, excepting Section 9.12 hereof, this Article IX, which shall
survive any such termination). Notwithstanding anything in the foregoing to the
contrary, no representations, warranties, agreements and covenants contained in
this Agreement shall be deemed to be terminated or extinguished so as to deprive
a party hereto or any of its affiliates of any defense at law or in equity which
otherwise would be available against the claims of any Person, including without
limitation any shareholder or former shareholder.
9.02. Waiver; Amendment. Prior to the Effective Time, any provision of
this Agreement may be (i) waived by the party benefited by the provision or (ii)
amended or modified at any time, by an agreement in writing among the parties
hereto executed in the same manner as this Agreement, except that after the
Company Meeting no amendment shall be made which by law requires further
approval by the shareholders of the Company without obtaining such approval.
9.03. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Maine applicable to
contracts made and to be performed entirely within such State.
9.05 Expenses. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby,
including fees and expenses of its own financial consultants, accountants and
counsel and, in the case of Parent, the registration fee
53
to be paid to the SEC in connection with the Registration Statement, except that
expenses of printing the Proxy Statement shall be shared equally between the
Company and Parent, and provided further that nothing contained herein shall
limit either party's rights to recover any liabilities or damages arising out of
the other party's willful breach of any provision of this Agreement.
9.06. Notices. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to the Company to:
American Financial Holdings, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman, President and
Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Parent to:
Banknorth Group, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Chairman, President
and Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
54
With a copy to:
Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
12th Floor, The ▇▇▇▇▇▇ Building
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
9.07. Entire Understanding; No Third Party Beneficiaries. This
Agreement and the Shareholder Agreements represent the entire understanding of
the parties hereto and thereto with reference to the Transactions, and this
Agreement and the Shareholder Agreements supersede any and all other oral or
written agreements heretofore made. Except for the Indemnified Parties' right to
enforce Parent's obligation under Section 6.11, which are expressly intended to
be for the irrevocable benefit of, and shall be enforceable by, each Indemnified
Party and his or her heirs and representatives, nothing in this Agreement,
expressed or implied, is intended to confer upon any Person, other than the
parties hereto or their respective successors, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
9.08. Severability. Except to the extent that application of this
Section 9.08 would have a Material Adverse Effect on the Company or Parent, any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable. In all such cases, the parties shall use their reasonable best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the original purposes and intents of this Agreement.
9.09. Enforcement of the Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.10. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." Whenever the words "as of the date
hereof" are used in this Agreement, they shall be deemed to mean the day and
year first above written (August 22, 2002).
55
9.11. Assignment. No party may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of the other party. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
9.12. Alternative Structure. Notwithstanding any provision of this
Agreement to the contrary, Parent may at any time modify the structure of the
acquisition of the Company set forth herein, subject to the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed, provided that (i) the Merger Consideration to be paid to the holders of
Company Common Stock is not thereby changed in kind or reduced in amount as a
result of such modification, (ii) such modification will not adversely affect
the tax treatment of the Company's shareholders as a result of receiving the
Merger Consideration and (iii) such modification will not materially delay or
jeopardize receipt of any required approvals of Governmental Authorities.
[Signature page to follow]
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
BANKNORTH GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
AMERICAN FINANCIAL HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, President and Chief
Executive Officer
57
ANNEX A
SHAREHOLDER AGREEMENT
Shareholder Agreement (the "Agreement"), dated as of August 22, 2002,
by and between _________, a shareholder ("Shareholder") of American Financial
Holdings, Inc., a Delaware corporation (the "Company"), and Banknorth Group,
Inc., a Maine corporation ("Parent"). All terms used herein and not defined
herein shall have the meanings assigned thereto in the Merger Agreement (defined
below).
WHEREAS, Parent and the Company are entering into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which the Company will merge with and into Parent on the terms and conditions
set forth therein and, in connection therewith, outstanding shares of Company
Common Stock will be converted into shares of Parent Common Stock and/or cash in
the manner set forth therein; and
WHEREAS, Shareholder owns the shares of Company Common Stock identified
on Annex I hereto (such shares, together with all shares of Company Common Stock
subsequently acquired by Shareholder during the term of this Agreement, being
referred to as the "Shares"); and
WHEREAS, in order to induce Parent to enter into the Merger Agreement,
Shareholder, solely in such Shareholder's capacity as a shareholder of the
Company and not in any other capacity, has agreed to enter into and perform this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Agreement to Vote Shares. Shareholder agrees that at any meeting of
the shareholders of the Company, or in connection with any written consent of
the shareholders of the Company, Shareholder shall:
(i) appear at each such meeting or otherwise cause the Shares
to be counted as present thereat for purposes of calculating a quorum;
and
(ii) vote (or cause to be voted), in person or by proxy, or
deliver a written consent (or cause a consent to be delivered)
covering, all the Shares (whether acquired heretofore or hereafter)
that are beneficially owned by Shareholder or as to which Shareholder
has, directly or indirectly, the right to vote or direct the voting,
(x) in favor of adoption and approval of the Merger Agreement and the
Merger and any other action requested by Parent in furtherance thereof;
(y) against any action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or
agreement of the Company contained in the Merger Agreement or of
Shareholder contained in this Agreement; and (z) against any
Acquisition Proposal or any other action, agreement or transaction that
is intended, or could reasonably be expected, to
materially impede, interfere or be inconsistent with, delay, postpone,
discourage or materially and adversely affect consummation of the
Merger or this Agreement.
2. No Transfers. Except with respect to a Shareholder who executed an
Executive Agreement and in such case only to the extent contemplated therein,
prior to the Company Meeting, Shareholder agrees not to, directly or indirectly,
sell transfer, pledge, assign or otherwise dispose of, or enter into any
contract option, commitment or other arrangement or understanding with respect
to the sale, transfer, pledge, assignment or other disposition of, any of the
Shares. In the case of any transfer by operation of law, this Agreement shall be
binding upon and inure to the transferee(s). Any transfer or other disposition
in violation of the terms of this Section 2 shall be null and void.
3. Representations and Warranties of Shareholder. Shareholder
represents and warrants to and agrees with Parent as follows:
A. Capacity. Shareholder has all requisite capacity and authority to
enter into and perform his, her or its obligations under this Agreement.
B. Binding Agreement. This Agreement constitutes the valid and legally
binding obligation of Shareholder, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
C. Non-Contravention. The execution and delivery of this Agreement by
Shareholder does not, and the performance by Shareholder of his, her or its
obligations hereunder and the consummation by Shareholder of the
transactions contemplated hereby will not, violate or conflict with, or
constitute a default under, any agreement, instrument, contract or other
obligation or any order, arbitration award, judgment or decree to which
Shareholder is a party or by which Shareholder is bound, or any statute,
rule or regulation to which Shareholder is subject or, in the event that
Shareholder is a corporation, partnership, trust or other entity, any
charter, bylaw or other organizational document of Shareholder.
D. Ownership of Shares. Shareholder has good title to all of the Shares
as of the date hereof, and, except as set forth on Annex I hereto, the
Shares are so owned free and clear of any liens, security interests,
charges or other encumbrances.
4. Specific Performance and Remedies. Shareholder acknowledges that it
will be impossible to measure in money the damage to Parent if Shareholder fails
to comply with the obligations imposed by this Agreement and that, in the event
of any such failure, Parent will not have an adequate remedy at law or in
equity. Accordingly, Shareholder agrees that injunctive relief or other
equitable remedy, in addition to remedies at law or in damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that Parent has an adequate remedy at law. Shareholder
agrees that Shareholder will not seek, and agrees to waive any requirement for,
the securing or posting of a bond in connection with Parent's seeking or
obtaining such equitable relief. In addition, after discussing the matter with
Shareholder, Parent shall have the right to inform any third party that Parent
reasonably believes
2
to be, or to be contemplating, participating with Shareholder or receiving from
Shareholder assistance in violation of this Agreement, of the terms of this
Agreement and of the rights of Parent hereunder, and that participation by any
such persons with Shareholder in activities in violation of Shareholder's
agreement with Parent set forth in this Agreement may give rise to claims by
Parent against such third party.
5. Term of Agreement; Termination.
A. The term of this Agreement shall commence on the date hereof.
B. This Agreement shall terminate upon the date, if any, of termination
of the Merger Agreement in accordance with its terms. Upon such
termination, no party shall have any further obligations or liabilities
hereunder; provided, however, such termination shall not relieve any party
from liability for any willful breach of this Agreement prior to such
termination.
C. If the Merger Agreement is not terminated in accordance with its
terms, this Agreement (except for the provisions of Sections 3 and 8, which
shall survive the Effective Time) shall terminate upon the Effective Time.
Upon such termination, no party shall have any further obligations or
liabilities under this Agreement.
6. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by each party hereto. No waiver of any provisions
hereof by either party shall be deemed a waiver of any other provisions hereof
by any such party, nor shall any such waiver be deemed a continuing waiver of
any provision hereof by such party.
7. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission and on the next business day when sent by a
reputable overnight courier service to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
If to Parent:
Banknorth Group, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Chairman, President and
Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
3
With a copy to:
Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Shareholder:
------------------------
------------------------
------------------------
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
8. Miscellaneous.
A. Severability. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid
or unenforceable by a court of competent jurisdiction, such provision or
application shall be unenforceable only to the extent of such invalidity
or unenforceability, and the remainder of the provision held invalid or
unenforceable and the application of such provision to persons or
circumstances, other than the party as to which it is held invalid, and
the remainder of this Agreement, shall not be affected.
B. Capacity. The covenants contained herein shall apply to Shareholder
solely in his or her capacity as a shareholder of the Company, and no
covenant contained herein shall apply to Shareholder in his or her capacity
as a director, officer or employee of the Company or in any other capacity.
Nothing contained in this Agreement shall be deemed to apply to, or limit
in any manner, the obligations of the Shareholder to comply with his or her
fiduciary duties as a director of the Company.
C. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
D. Headings. All Section headings herein are for convenience of
reference only and are not part of this Agreement, and no construction
or reference shall be derived therefrom.
4
E. Choice of Law. This Agreement shall be deemed a contract made under,
and for all purposes shall be construed in accordance with, the laws of
the State of Maine, without reference to its conflicts of law
principles.
9. Attorney's Fees. The prevailing party or parties in any litigation,
arbitration, mediation, bankruptcy, insolvency or other proceeding
("Proceeding") relating to the enforcement or interpretation of this Agreement
may recover from the unsuccessful party or parties all fees and disbursements of
counsel (including expert witness and other consultants' fees and costs)
relating to or arising out of (a) the Proceeding (whether or not the Proceeding
proceeds to judgment), and (b) any post-judgment or post-award proceeding
including, without limitation, one to enforce or collect any judgment or award
resulting from the Proceeding. All such judgments and awards shall contain a
specific provision for the recovery of all such subsequently incurred costs,
expenses, and fees and disbursements of counsel.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
BANKNORTH GROUP, INC.
By: ______________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman, President and Chief
Executive Officer
[SHAREHOLDER]
------------------------------------------
(Signature)
5
ANNEX I
Shareholder Agreement
Shares of Company
Common Stock
Beneficially Owned
Name of (exclusive of unexercised Options on Company
Shareholder stock options) Common Stock
----------- ------------------------- ------------------------
6
ANNEX B
EXECUTIVE AGREEMENT
Executive Agreement (the "Agreement"), dated as of August 22, 2002, by
and among Banknorth Group, Inc. ("Banknorth"), American Financial Holdings, Inc.
( the "Company"), American Savings Bank (the "Bank"), a wholly-owned subsidiary
of the Company, and ____________ (the "Executive").
WITNESSETH
WHEREAS, the Executive is a director and/or an executive officer of the
Company and the Bank; and
WHEREAS, each of the Company and the Bank (collectively, the
"Employers") are party to an Employment Agreement with the Executive, dated as
of _________ __, ____ and amended as of ____________ __, 2002 (the "Company
Employment Agreement" and the "Bank Employment Agreement," respectively, and
together the "Employment Agreements"); and
WHEREAS, Banknorth and the Company are entering into an Agreement and
Plan of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant
to which the Company will merge with and into Banknorth on the terms and
conditions set forth therein (the "Merger") and, in connection therewith,
outstanding shares of Company Common Stock will be converted into shares of
Banknorth Common Stock and/or cash in the manner set forth therein; and
WHEREAS, as an inducement to Banknorth to enter into the Merger
Agreement, the Employers and the Executive desire to set forth the status of the
Executive's employment relationships with the Company and the Bank as of the
Effective Time (as defined in the Merger Agreement), the benefits the Executive
will be entitled to receive upon termination of such employment relationships
and certain noncompetition and other obligations of the Executive following the
Effective Time;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, the parties hereto agree as follows:
1. Termination of Employment and Directorships. At the Effective Time,
the Executive shall cease to be a director and an executive officer of the
Company and the Bank, as applicable, and any other employment and consulting
relationships between the Executive and any of the Company, the Bank and each
other direct or indirect subsidiary of the Company, and any membership by the
Executive on the boards of directors of the Company, the Bank and each other
such subsidiary, shall be terminated. Without limiting the foregoing, the
Employers and the Executive agree that at the Effective Time the Employment
Agreements shall be automatically terminated without the necessity of any
further action on the part of either party thereto, with the result that each
Employment Agreement shall be null and void and no party thereto or any heir,
successor or assignee thereof shall have any continuing rights or obligations
thereunder.
2. Payment to the Executive. In consideration of the terminations
provided in paragraph (a) of Section 1 and the other obligations of the
Executive set forth herein, and subject to the provisions of Section 8 (b)
hereof, at the Effective Time, the Company shall pay to the Executive a cash
amount equal to $____________(the "Cash Payment"),(1) less applicable
withholdings pursuant to Section 12 hereof. The Executive agrees that the
payment of the Cash Amount shall be in full satisfaction of all obligations of
the Company and the Bank to the Executive pursuant to the Company Employment
Agreement and the Bank Employment Agreement, including without limitation
Sections 5(b), (c), (d), (e), (f) and (g) of each such agreement.
3. No Effect on Employee Benefit Plans. Except as provided in the
following sentence or as otherwise expressly provided in this Agreement, the
termination of the Executive's directorships and employment pursuant to this
Agreement shall have no special effect on the rights and obligations of the
Executive and the Employers under any employee benefit plan of the Employers
pursuant to which the Executive has any accrued rights or is entitled to any
benefits or payments (the "Employee Benefit Plans"). Notwithstanding any other
provision of this Agreement, the Employment Agreements or any other agreement,
employee benefit plan, policy or resolutions of the board of directors of the
Company or the Bank to the contrary, and in consideration of the Cash Payment
and the other obligations of Banknorth set forth herein, the Employers and the
Executive agree that the Executive shall not be entitled to receive any benefit
pursuant to Section 4.02 of the American Savings Bank Supplemental Executive
Retirement Plan, as amended (the "SERP"). The Employers and the Executive
acknowledge and agree that the foregoing sentence shall constitute an amendment
to the SERP which satisfies the requirements of Section 10 thereof and any other
applicable requirements.
4. Certain Actions in 2002.
(a) The Executive hereby agrees to take the following actions between
the date hereof and December 31, 2002, it being the intention of the parties
hereto that any such action shall be fully effective and consummated no later
than December 31, 2002:
(i) exercise all vested nonqualified stock options granted to
the Executive under the Company's 2000 Stock-Based Incentive Plan, as
amended (the "Incentive Plan");
(ii) both exercise all vested incentive stock options granted
to the Executive under the Incentive Plan and effect a sale of the
shares of Company common stock acquired upon such exercise in a manner
that will constitute a "disqualifying disposition" of such shares for
purposes of Section 421(b) of the Code;
(iii) withdraw all cash and stock compensation which has
previously been deferred by the Executive to a period or periods after
2002 pursuant to the Bank's Stock-
-----------
(1) The one-time payments are estimated to be as follows: ▇▇▇▇▇▇ - $6,000,000;
▇▇▇▇▇▇▇ - $2,200,000; ▇▇▇▇▇ - $1,000,000; ▇▇▇▇▇▇▇ - $1,875,000; ▇▇▇▇▇ -
$1,000,000; Pasqualoni - $1,000,000; ▇▇▇▇▇▇▇▇ - $1,000,000; and Young -
$723,524.
2
Based Deferred Compensation Plan and the Bank's Cash-Based Deferred
Compensation Plan (collectively, the "Deferred Compensation Plans"); and
(iv) accept payment in December 2002 of any cash bonus to
which the Executive may be entitled to receive pursuant to the Company's
Executive Incentive Plan for services rendered in 2002 and which
otherwise would be payable in the ordinary course by the Company to the
Executive in January 2003.
(b) The Company and the Bank agree to take such actions as may be
necessary or advisable by them in order to permit the Executive to take the
actions set forth in Section 4(a) and have them be fully effective and
consummated no later than December 31, 2002, including without limitation (i)
promptly processing all exercises of stock options by the Executive under the
Incentive Plan, (ii) terminating the Deferred Compensation Plans or the
participation of a class of participants therein which includes the Executive
and (iii) accelerating the payment of any cash bonus to which the Executive may
be entitled to receive pursuant to the Company's Executive Incentive Plan for
services rendered in 2002 to December 2002.
5. Non-Compete; Confidentiality.
(a) The Executive agrees that during the one-year period(2) following
consummation of the Merger the Executive will not, directly or indirectly, (i)
become a director, officer, employee, principal, agent, consultant or
independent contractor of any insured depository institution, trust company or
parent holding company of any such institution or company which has an office in
the State of Connecticut (a "Competing Business"), provided, however, that this
provision shall not prohibit the Executive from owning bonds, non-voting
preferred stock or up to five percent (5%) of the outstanding common stock of
any such entity if such common stock is publicly traded, (ii) solicit or induce,
or cause others to solicit or induce, any employee of Banknorth or any of its
subsidiaries to leave the employment of such entities or (iii) solicit (whether
by mail, telephone, personal meeting or any other means) any customer of
Banknorth or any of its subsidiaries to transact business with any other entity,
whether or not a Competing Business, or to reduce or refrain from doing any
business with Banknorth or its subsidiaries, or interfere with or damage (or
attempt to interfere with or damage) any relationship between Banknorth or its
subsidiaries and any such customers.
(b) Except as required by law or regulation (including without
limitation in connection with any judicial or administrative process or
proceeding), the Executive shall keep secret and confidential and shall not
disclose to any third party (other than the Company, Banknorth or any of their
respective subsidiaries) in any fashion or for any purpose whatsoever any
information regarding the Company, Banknorth or any of their respective
subsidiaries which is not available to the general public to which the Executive
had access at any time during the course of the Executive's employment by the
Company or any of its subsidiaries, including, without limitation, any such
information relating to: business or operations; plans, strategies, prospects or
objectives; products, technology, processes or specifications; research and
development operations or plans; customers and customer lists; distribution,
sales, service,
-----------
(2) Three-year period in the case of the agreement with ▇▇. ▇▇▇▇▇▇.
3
support and marketing practices and operations; financial condition, results of
operations and prospects; operational strengths and weaknesses; and personnel
and compensation policies and procedures.
(c) The Executive agrees that damages at law will be an insufficient
remedy to Banknorth in the event that the Executive violates any of the
provisions of paragraph (a) or (b) of this Section 5, and that Banknorth may
apply for and, upon the requisite showing, have injunctive relief in any court
of competent jurisdiction to restrain the breach or threatened or attempted
breach of or otherwise to specifically enforce any of the covenants contained in
paragraph (a) or (b) of this Section 5. The Executive hereby consents to any
injunction (temporary or otherwise) which may be issued against the Executive
and to any other court order which may be issued against the Executive from
violating, or directing the Executive to comply with, any of the covenants in
paragraph (a) or (b) of this Section 5. The Executive also agrees that such
remedies shall be in addition to any and all remedies, including damages,
available to Banknorth against the Executive for such breaches or threatened or
attempted breaches.
(d) In addition to Banknorth's rights set forth in paragraph (c) of this
Section 5, in the event that the Executive shall violate the terms and
conditions of paragraphs (a) or (b) of this Section 5, Banknorth and its
subsidiaries may terminate any payments or benefits of any type and regardless
of source payable by Banknorth or its subsidiaries, if applicable, to the
Executive, other than with respect to payments or benefits to the Executive
under plans or arrangements that are covered by the Employee Retirement Income
Security Act of 1974, as amended.
6. Release.
(a) For, and in consideration of the commitments made herein by
Banknorth, the Executive, for himself and for his heirs and assigns, does hereby
release completely and forever discharge Banknorth and its subsidiaries, the
Company and its subsidiaries and the affiliates, stockholders, attorneys,
officers, directors, agents, employees, successors, assigns and any other party
associated with Banknorth or any of its subsidiaries or with the Company or any
of its subsidiaries (the "Released Parties"), to the fullest extent permitted by
applicable law, from any and all claims, rights, demands, actions, liabilities,
obligations, causes of action of any and all kind, nature and character
whatsoever, known or unknown, in any way connected with his employment by the
Company or any of its subsidiaries (including in each case predecessors
thereof), either as a director, officer or employee, or termination of such
employment. Notwithstanding the foregoing, the Executive does not release
Banknorth from any obligations of Banknorth to the Executive under (i) the
Employee Benefit Plans (except as provided in the second sentence of Section 3
with respect to the SERP), (ii) Section 6.11 of the Merger Agreement and (iii)
this Agreement.
(b) For and in consideration of the commitments made herein by the
Executive, including without limitation the releases in paragraph (a) above,
Banknorth, for itself, and for its successors and assigns does hereby release
completely and forever discharge the Executive and his heirs and assigns, to the
fullest extent permitted by applicable law, from any and all claims, rights,
demands, actions, liabilities, obligations, causes of action of any and all
kind, nature and character whatsoever, known or unknown, in any way connected
with the Executive's
4
employment by the Company or any of its subsidiaries (including predecessors
thereof), either as a director, officer or employee. Notwithstanding anything in
the foregoing to the contrary, Banknorth does not release the Executive from
claims arising out of (i) any breach by the Executive of any law or regulation
by the Executive during the term of and related to his employment by the Company
or any of its subsidiaries (including in each case predecessors thereof), either
as a director, officer or employee, (ii) fraud or willful misconduct by the
Executive in his capacity as a director, officer or employee of the Company or
the Bank (including in each case predecessors thereof) or (iii) breach of this
Agreement.
7. Representations and Warranties.
(a) The parties hereto represent and warrant to each other that they
have carefully read this Agreement and consulted with respect thereto with their
respective counsel and that each of them fully understands the content of this
Agreement and its legal effect.
(b) The Company and the Bank represent and warrant to each other party
hereto that (i) this Agreement and all actions of the Company and the Bank
contemplated hereby have been authorized by all necessary corporate action of
the Company and the Bank and (ii) the Company and the Bank have duly executed
and delivered a copy of this Agreement and, assuming due authorization,
execution and delivery of this Agreement by Banknorth and due execution and
delivery of this Agreement by the Executive, this Agreement is a valid and
legally binding obligation of the Company and the Bank, enforceable against the
Company and the Bank in accordance with its terms.
(c) Banknorth represents and warrants to each other party hereto that
(i) this Agreement and all actions of Banknorth contemplated hereby have been
authorized by all necessary corporate action of Banknorth and (ii) Banknorth has
duly executed and delivered a copy of this Agreement and, assuming due
authorization, execution and delivery of this Agreement by the Company and the
Bank and due execution and delivery of this Agreement by the Executive, this
Agreement is a valid and legally binding obligation of Banknorth, enforceable
against Banknorth in accordance with its terms.
(d) The Executive Officer represents and warrants to each other party
hereto that this Agreement is a valid and legally binding obligation of the
Executive which is enforceable against the Executive in accordance with its
terms.
8. Limitations on Benefits.
(a) The parties hereto acknowledge and agree that the compensation and
benefits to be provided to the Executive upon termination of the Executive's
employment in connection with the Merger shall be pursuant to this Agreement and
not the Employment Agreements and, accordingly, each of the Company, the Bank
and the Executive hereby agrees to take no action which would result in the
payment of any compensation to the Executive by the Company or the Bank pursuant
to Section 4 or Section 5 of the Employment Agreements.
(b) Notwithstanding any other provision of this Agreement to the
contrary, the parties
5
hereto agree that in the event that the Cash Payment, either alone or together
with other payments and benefits to which the Executive has the right to receive
from Banknorth, the Company and the Bank, would result in any of the Cash
Payment being non-deductible to Banknorth, the Company or the Bank pursuant to
Section 280G of the Code and subject to the excise tax imposed under Section
4999 of the Code, the Cash Payment shall be reduced by the minimum amount
necessary in order to prevent such result. The parties agree that the
determination of any reduction in the Cash Payment pursuant to this Section 8(b)
shall be based upon an analysis prepared by KPMG LLP, which shall be paid for by
Banknorth. Nothing contained herein shall result in a reduction of the Cash
Payment under any circumstances other than as specified in this Section 8(b), or
a reduction in the Cash Payment below zero.
9. Certain Additional Payments by Banknorth.
(a) Provided that the Company, the Bank and the Executive have fully
complied with their respective obligations under Section 4 of this Agreement,
and except as set forth below, in the event it shall be determined that any
payment or distribution by Banknorth, the Company or the Bank to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG LLP or
such other certified public accounting firm as may be designated by Banknorth
and reasonably acceptable to the Executive (the "Accounting Firm"). All fees and
expenses of the Accounting Firm shall be borne solely by Banknorth. Any Gross-Up
Payment, as determined pursuant to this Section 9, shall be paid by Banknorth to
the Executive within five days of the due date for the payment of any Excise
Tax. Any determination by the Accounting Firm shall be binding upon Banknorth
and the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by Banknorth should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Banknorth exhausts
its remedies pursuant to Section 9(c) and the Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by Banknorth to or for the benefit of the Executive.
6
(c) The Executive shall notify Banknorth in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
Banknorth of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than five business days after the Executive is informed
in writing of such claim and shall apprise Banknorth of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to Banknorth (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If
Banknorth notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give Banknorth any information reasonably requested by
Banknorth relating to such claim;
(ii) take such action in connection with contesting such claim as
Banknorth shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by Banknorth;
(iii) cooperate with Banknorth in good faith in order effectively to
contest such claim; and
(iv) permit Banknorth to participate in any proceedings relating to
such claim;
provided, however, that Banknorth shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), Banknorth shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and ▇▇▇ for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Banknorth shall determine;
provided, however, that if Banknorth directs the Executive to pay such claim and
▇▇▇ for a refund, Banknorth shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Banknorth's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
7
authority.
(d) If, after the receipt by the Executive of an amount advanced by
Banknorth pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to
Banknorth's complying with the requirements of Section 9(c)) promptly pay to
Banknorth the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by Banknorth pursuant to Section 9(c), a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and Banknorth does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Successors and Assigns. This Agreement will inure to the benefit of
and be binding upon the Executive and his assigns, and upon Banknorth, the
Company and the Bank, including any successor thereto by merger or consolidation
or any other change in form or any other person or firm or corporation to which
all or substantially all of the assets and business of Banknorth, the Company or
the Bank may be sold or otherwise transferred. This Agreement may not be
assigned by any party hereto without the written consent of the other parties.
11. Notices. Any communication to a party required or permitted under
this Agreement, including any notice, direction, designation, consent,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is delivered personally, or five (5) days
after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, addressed to such party at the address listed below or
at such other address as one such party may by written notice specify to the
other party or parties, as applicable:
If to the Executive, to the Executive's attention at:
American Financial Holdings, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Banknorth:
Banknorth Group, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
12. Withholding. Banknorth may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
8
13. Entire Agreement; Severability.
(a) This Agreement contains the entire agreement of the parties relating
to the subject matter hereof and from and after the Effective Time shall
supersede in its entirety any and all prior agreements or understandings,
whether written or oral, between the Employers and the Executive relating to the
subject matter hereof, including without limitation the Employment Agreements.
In reaching this Agreement, no party has relied upon any representation or
promise except those set forth herein [and as set forth in the Consulting
Agreement, dated as of the date hereof, between Banknorth and the Executive].(3)
(b) Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable. In all such cases, the parties shall use their
reasonable best efforts to substitute a valid, legal and enforceable provision
which, insofar as practicable, implements the original purposes and intents of
this Agreement.
14. Amendment; Waiver.
(a) This Agreement may not be amended, supplemented or modified except
by an instrument in writing signed by each party hereto.
(b) Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same Agreement.
16. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Maine
applicable to agreements made and entirely to be performed within such
jurisdiction.
17. Headings. The headings of sections in this Agreement are for
convenience of reference only and are not intended to qualify the meaning of any
section. Any reference to a section number shall refer to a section of this
Agreement, unless otherwise stated.
-----------
(3) Bracketed language to be included only in the Executive Agreement with ▇▇.
▇▇▇▇▇▇.
9
18. Gender. References herein to the masculine gender shall be deemed to
refer to the feminine gender where appropriate.
19. Termination. This Agreement shall terminate upon the date, if any,
of termination of the Merger Agreement in accordance with its terms. Upon such
termination, no party shall have any further obligations or liabilities
hereunder, provided, however, that any such termination shall not relieve any
party from liability for any willful breach of this Agreement prior to such
termination.
20. Effect of Shareholder Agreement. Banknorth acknowledges and agrees
that Section 2 of the Shareholder Agreement entered into with the Executive on
even date herewith shall not apply to the Executive's disposition of shares of
Company Common Stock (as such term is defined in the Shareholder Agreement) in
connection with a cashless exercise of Company stock options or the sale of
Company Common Stock received in connection with the distribution of the
Executive's interest in the Bank's Stock-Based Deferred Compensation Plan.(4)
[Signature page to follow]
-----------
(4) This section to be included only in the Executive Agreement with ▇▇. ▇▇▇▇▇▇.
10
IN WITNESS WHEREOF, each of the undersigned has entered into this
Agreement as of the day and year first above written.
BANKNORTH GROUP, INC.
By:________________________________
Name:
Title:
AMERICAN FINANCIAL HOLDINGS, INC.
By:________________________________
Name:
Title:
AMERICAN SAVINGS BANK
By:________________________________
Name:
Title:
-----------------------------------
Name of Executive:
11
ANNEX C
CONSULTING AGREEMENT
Consulting Agreement (the "Agreement"), dated as of August 22, 2002,
between Banknorth Group, Inc. ("Banknorth") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the
"Executive").
WITNESSETH:
WHEREAS, Banknorth and American Financial Holdings, Inc. (the "Company")
are entering into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which the Company will merge with and into
Banknorth (the "Merger") on the terms and conditions set forth therein and, in
connection therewith, outstanding shares of Company common stock will be
converted into shares of Banknorth common stock and/or cash in the manner set
forth therein; and
WHEREAS, the Executive will no longer serve as President and Chief
Executive Officer of the Company upon consummation of the Merger; and
WHEREAS, the Merger will significantly extend Banknorth's existing
markets in Connecticut; and
WHEREAS, Banknorth desires to have the Executive undertake, and the
Executive is willing to undertake, certain advisory and consulting obligations
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the parties hereto agree as
follows:
1. Advisory Board; Consultancy.
(a) Banknorth agrees to take all action necessary to cause Banknorth,
National Association ("Banknorth, NA"), a wholly-owned subsidiary of Banknorth,
to appoint or elect, effective as of the effective time of the Merger (the
"Effective Time"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Chairman of the Connecticut-based board
of advisory directors of Banknorth, NA (the "Advisory Board").
(b) Subject to the terms and conditions set forth herein, during the
two-year period following the Effective Time (the "Consulting Period"), the
Executive undertakes to provide his personal advice and counsel to Banknorth
regarding its operations, customer relationships, growth and expansion
opportunities and other business matters that may arise in connection with
Banknorth's business and operations in the State of Connecticut (collectively,
the "Consulting Services").
(i) In no event shall the Executive be required to provide
Consulting Services hereunder for more than 20 hours per week or 80
hours in any calendar month during the Consulting Period.
(ii) The Executive shall provide Consulting Services as may be
reasonably requested by the Chief Executive Officer of Banknorth or his
designee from time to time and at mutually agreeable times. It is
contemplated that the Consulting Services will include, without
limitation, monthly meetings or teleconferences between the Executive
and the Chief Executive Officer of Banknorth; efforts by the Executive
to enhance Banknorth's business activities in the State of Connecticut,
including without limitation meeting with existing and potential
customers of Banknorth located in this state; attendance at certain
public functions in the State of Connecticut on behalf of Banknorth and
its subsidiaries; attendance at certain meetings of the Board of
Directors of Banknorth to report on the business activities of
Banknorth in Connecticut, and attendance at certain functions of
Banknorth. Consulting Services may be provided in person,
telephonically, electronically or by correspondence to the extent
appropriate under the circumstances.
(iii) The Executive shall provide the Consulting Services in
the State of Connecticut, including without limitation the market areas
of the Company prior to its acquisition by Banknorth, provided that the
Executive may be required to provide Consulting Services at the
executive offices of Banknorth located in Portland, Maine up to not
more than two times per month during the Consulting Period.
(c) Banknorth shall reimburse the Executive or otherwise provide for or
pay for all reasonable expenses incurred by the Executive at the request of
Banknorth, subject to such reasonable documentation as may be requested by
Banknorth. If such expenses are paid in the first instance by the Executive,
Banknorth shall reimburse the Executive therefor upon receipt of such reasonable
documentation as may be requested by Banknorth.
(d) During the Consulting Period, Banknorth shall provide the Executive
with life insurance coverage not less than $500,000 at Banknorth's expense. In
addition, the Executive shall be provided with health insurance at a level which
is similar to that provided to executive officers of Banknorth during the
Consulting Period at Banknorth's expense. Following the Consulting Period, the
Executive shall have the option of continuing such coverage through age 65 at
his own expense.
(e) During the Consulting Period, the Executive shall be treated as an
independent contractor and shall not be deemed to be an employee of Banknorth or
any subsidiary or other affiliate of Banknorth for any purpose.
2
2. Payments and Benefits.
(a) In consideration of the Executive's service as Chairman of the
Advisory Board, the consulting services of the Executive to be provided by the
Executive hereunder and the obligations of the Executive under Section 3 hereof,
Banknorth agrees to pay, or to cause Banknorth, NA to pay, to the Executive
$250,000 per year during the Consulting Period, which shall be payable during
each year of the Consulting Period in two equal installments, with the first
payment on the first day of the applicable year of the Consulting Period and the
second payment on the same date six months later. The Executive acknowledges and
agrees that the foregoing compensation shall be the only compensation to be
provided to the Executive for his service as a member of the Advisory Board and
for the provision of consulting services hereunder.
(b) Payments to the Executive under this Section 2 may be paid by
Banknorth or Banknorth, NA by check mailed to the address of the Executive set
forth in Section 5 hereof or at such other address as the Executive may notify
Banknorth in accordance with the terms of such section.
(c) If any payment pursuant to this Section 2 is required to be made on
a day which is not a business day, payment shall be made on the first business
day thereafter, and no interest shall accrue on any such payment for the
intervening period. For purposes of this Agreement, the term "business day"
means any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of Maine or the State of Connecticut are authorized by
law, regulation or executive order to remain closed.
3. Non-Compete; Confidentiality.
(a) The Executive agrees that during the three-year period following
consummation of the Merger the Executive will not, directly or indirectly, (i)
become a director, officer, employee, principal, agent, consultant or
independent contractor of any insured depository institution, trust company or
parent holding company of any such institution or company which has an office in
the State of Connecticut (a "Competing Business"), provided, however, that this
provision shall not prohibit the Executive from owning bonds, non-voting
preferred stock or up to five percent (5%) of the outstanding common stock of
any such entity if such common stock is publicly traded, (ii) solicit or induce,
or cause others to solicit or induce, any employee of Banknorth or any of its
subsidiaries to leave the employment of such entities or (iii) solicit (whether
by mail, telephone, personal meeting or any other means) any customer of
Banknorth or any of its subsidiaries to transact business with any other entity,
whether or not a Competing Business, or to reduce or refrain from doing any
business with Banknorth or its subsidiaries, or interfere with or damage (or
attempt to interfere with or damage) any relationship between Banknorth or its
subsidiaries and any such customers.
3
(b) Except as required by law or regulation (including without
limitation in connection with any judicial or administrative process or
proceeding), the Executive shall keep secret and confidential and shall not
disclose to any third party (other than the Company, Banknorth or any of their
respective subsidiaries) in any fashion or for any purpose whatsoever any
information regarding the Company, Banknorth or any of their respective
subsidiaries which is not available to the general public to which the Executive
had access at any time during the course of the Executive's employment by the
Company or any of its subsidiaries, including, without limitation, any such
information relating to: business or operations; plans, strategies, prospects or
objectives; products, technology, processes or specifications; research and
development operations or plans; customers and customer lists; distribution,
sales, service, support and marketing practices and operations; financial
condition, results of operations and prospects; operational strengths and
weaknesses; and personnel and compensation policies and procedures.
(c) The Executive agrees that damages at law will be an insufficient
remedy to Banknorth in the event that the Executive violates any of the
provisions of paragraph (a) or (b) of this Section 3, and that Banknorth may
apply for and, upon the requisite showing, have injunctive relief in any court
of competent jurisdiction to restrain the breach or threatened or attempted
breach of or otherwise to specifically enforce any of the covenants contained in
paragraph (a) or (b) of this Section 3. The Executive hereby consents to any
injunction (temporary or otherwise) which may be issued against the Executive
and to any other court order which may be issued against the Executive from
violating, or directing the Executive to comply with, any of the covenants in
paragraph (a) or (b) of this Section 5. The Executive also agrees that such
remedies shall be in addition to any and all remedies, including damages,
available to Banknorth against the Executive for such breaches or threatened or
attempted breaches.
(d) In addition to Banknorth's rights set forth in paragraph (c) of this
Section 3, in the event that the Executive shall violate the terms and
conditions of paragraphs (a) or (b) of this Section 3, Banknorth and its
subsidiaries may terminate any payments or benefits of any type and regardless
of source payable by Banknorth or its subsidiaries, if applicable, to the
Executive, other than with respect to payments or benefits to the Executive
under plans or arrangements that are covered by the Employee Retirement Income
Security Act of 1974, as amended.
4. Representations and Warranties. Banknorth and the Executive represent
and warrant to each other that they have carefully read this Agreement and
consulted with respect thereto with their respective counsel and that each of
them fully understands the content of this Agreement and its legal effect. Each
party hereto also represents and warrants that this Agreement is a legal, valid
and binding obligation of such party which is enforceable against it in
accordance with its terms.
5. Successors and Assigns. This Agreement will inure to the benefit of
and be binding upon the Executive and his assigns and upon Banknorth, including
any successor to Banknorth by merger or consolidation or any other change in
form or any other person or firm or corporation to which all or substantially
all of the assets and business of Banknorth may be sold
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or otherwise transferred. This Agreement may not be assigned by any party hereto
without the written consent of the other party.
6. Notices. Any communication to a party required or permitted under
this Agreement, including any notice, direction, designation, consent,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is delivered personally, or five (5) days
after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, addressed to such party at the address listed below or
at such other address as one such party may by written notice specify to the
other party or parties, as applicable:
If to the Executive:
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If to Banknorth:
Banknorth Group, Inc.
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Attention: General Counsel
7. Withholding. Banknorth may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
8. Entire Agreement; Severability.
(a) This Agreement incorporates the entire understanding between the
parties relating to the subject matter hereof, recites the sole consideration
for the promises exchanged and supersedes any prior agreements between Banknorth
and the Executive with respect to the subject matter hereof. In reaching this
Agreement, no party has relied upon any representation or promise except those
set forth herein.
(b) Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable. In all such cases, the parties shall use their
reasonable best efforts to substitute a valid, legal and
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enforceable provision which, insofar as practicable, implements the original
purposes and intents of this.
9. Amendment; Waiver.
(a) This Agreement may not be amended, supplemented or modified except
by an instrument in writing signed by each party hereto.
(b) Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
11. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Maine applicable to
agreements made and entirely to be performed within such jurisdiction.
12. Headings. The headings of sections in this Agreement are for
convenience of reference only and are not intended to qualify the meaning of any
section. Any reference to a section number shall refer to a section of this
Agreement, unless otherwise stated.
13. Effectiveness. Notwithstanding anything to be contrary contained in
this Agreement, the effectiveness of this Agreement shall be subject to
consummation of the Merger in accordance with the terms of the Merger Agreement,
as the same may be amended by the parties thereto in accordance with its terms.
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IN WITNESS WHEREOF, Banknorth and the Executive have entered into this
Agreement as of the day and year first above written.
BANKNORTH GROUP, INC.
By:
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Name:
Title:
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