AGREEMENT AND PLAN
OF REORGANIZATION
BY AND AMONG
GRANITE STATE BANKSHARES, INC.
GRANITE BANK
and
PRIMARY BANK
APRIL 29, 1997
AGREEMENT AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . . . . .1
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions. . . . . . . . . . . . . . . . . . . .1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PRIMARY BANK
Section 2.01 Organization . . . . . . . . . . . . . . . . . . .6
Section 2.02 Capitalization . . . . . . . . . . . . . . . . . .6
Section 2.03 Authority; No Violation. . . . . . . . . . . . . .7
Section 2.04 Consents . . . . . . . . . . . . . . . . . . . . .8
Section 2.05 Financial Statements . . . . . . . . . . . . . . .9
Section 2.06 Taxes. . . . . . . . . . . . . . . . . . . . . . .9
Section 2.07 No Material Adverse Effect . . . . . . . . . . . 10
Section 2.08 Contracts. . . . . . . . . . . . . . . . . . . . 10
Section 2.09 Ownership of Property; Insurance Coverage. . . . 11
Section 2.10 Legal Proceedings. . . . . . . . . . . . . . . . 12
Section 2.11 Compliance With Applicable Law . . . . . . . . . 12
Section 2.12 ERISA. . . . . . . . . . . . . . . . . . . . . . 13
Section 2.13 Brokers, Finders and Financial Advisors. . . . . 14
Section 2.14 Environmental Matters. . . . . . . . . . . . . . 14
Section 2.15 Loan Portfolio . . . . . . . . . . . . . . . . . 14
Section 2.16 Information to be Supplied . . . . . . . . . . . 15
Section 2.17 Securities Documents . . . . . . . . . . . . . . 15
Section 2.18 Related Party Transactions . . . . . . . . . . . 15
Section 2.19 Schedule of Termination Benefits . . . . . . . . 15
Section 2.20 Loans. . . . . . . . . . . . . . . . . . . . . . 16
Section 2.21 Antitakeover Provisions Inapplicable . . . . . . 16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GRANITE STATE
Section 3.01 Organization . . . . . . . . . . . . . . . . . . 16
Section 3.02 Capitalization . . . . . . . . . . . . . . . . . 17
Section 3.03 Authority; No Violation. . . . . . . . . . . . . 18
Section 3.04 Consents . . . . . . . . . . . . . . . . . . . . 19
Section 3.05 Financial Statements . . . . . . . . . . . . . . 19
Section 3.06 Taxes. . . . . . . . . . . . . . . . . . . . . . 20
Section 3.07 No Material Adverse Effect . . . . . . . . . . . 20
Section 3.08 Ownership of Property; Insurance Coverage. . . . 20
Section 3.09 Legal Proceedings. . . . . . . . . . . . . . . . 20
Section 3.10 Compliance With Applicable Law . . . . . . . . . 21
Section 3.11 Information to be Supplied . . . . . . . . . . . 21
Section 3.12 ERISA and Employment Arrangements. . . . . . . . 22
Section 3.13 Securities Documents . . . . . . . . . . . . . . 22
Section 3.14 Environmental Matters. . . . . . . . . . . . . . 23
Section 3.15 Loan Portfolio . . . . . . . . . . . . . . . . . 23
Section 3.16 Brokers, Finders and Financial Advisors. . . . . 23
Section 3.17 Loans. . . . . . . . . . . . . . . . . . . . . . 23
Section 3.18 Antitakeover Provisions Inapplicable. . . . . . . 24
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of Primary Bank's Business . . . . . . . 24
Section 4.02 Access; Confidentiality. . . . . . . . . . . . . 27
Section 4.03 Regulatory Matters and Consents. . . . . . . . . 28
Section 4.04 Taking of Necessary Action . . . . . . . . . . . 29
Section 4.05 Certain Agreements . . . . . . . . . . . . . . . 29
Section 4.06 No Other Bids and Related Matters. . . . . . . . 31
Section 4.07 Duty to Advise; Duty to Update
Primary Bank's Disclosure Schedule . . . . . . . 32
Section 4.08 Conduct of Granite State's Business. . . . . . . 32
Section 4.09 Board and Committee Minutes. . . . . . . . . . . 33
Section 4.10 Undertakings by Granite State and Primary Bank . 33
Section 4.11 Employee and Termination Benefits;
Directors and Management . . . . . . . . . . . . 35
Section 4.12 Duty to Advise; Duty to Update
Granite State's Disclosure Schedule . . . . . . 37
Section 4.13 Affiliate Letter . . . . . . . . . . . . . . . . 37
ARTICLE V
CONDITIONS
Section 5.01 Conditions to Primary Bank's Obligations
under this Agreement.. . . . . . . . . . . . . . 37
Section 5.02 Conditions to Granite State's Obligations
under this Agreement. . . . . . . . . . . . . . 39
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. . . . . . . . . . . . . . . . . . . 41
Section 6.02 Effect of Termination. . . . . . . . . . . . . . 42
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses . . . . . . . . . . . . . . . . . . . . 42
Section 7.02 Non-Survival of Representations and Warranties . 42
Section 7.03 Amendment, Extension and Waiver. . . . . . . . . 42
Section 7.04 Entire Agreement . . . . . . . . . . . . . . . . 43
Section 7.05 No Assignment. . . . . . . . . . . . . . . . . . 43
Section 7.06 Notices. . . . . . . . . . . . . . . . . . . . . 43
Section 7.07 Captions . . . . . . . . . . . . . . . . . . . . 44
Section 7.08 Counterparts . . . . . . . . . . . . . . . . . . 44
Section 7.09 Severability . . . . . . . . . . . . . . . . . . 44
Section 7.10 Governing Law. . . . . . . . . . . . . . . . . . 44
Annex A Agreement and Plan of Merger
Exhibit 1 Granite State Directors' Agreement
Exhibit 2 Primary Bank's Affiliate Agreement
Exhibit 3 Stock Option Agreement
Exhibit 4 Form of Opinion of Granite State's Counsel
Exhibit 5 Form of Tax Opinion of Granite State's Counsel
Exhibit 6 Form of Opinion of Primary Bank's Counsel
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement"), dated as of April 29, 1997, is by and among PRIMARY
BANK ("Primary Bank"), a New Hampshire guaranty (stock) savings bank,
GRANITE BANK ("Granite Bank"), a New Hampshire bank, and
GRANITE STATE BANKSHARES, INC. ("Granite State"), a New
Hampshire corporation and a registered bank holding company under the
Bank Holding Company Act of 1956, as amended.
WITNESSETH
WHEREAS, the Boards of Directors of the respective parties hereto
deem it advisable and in the best interests of the respective stockholders to
consummate the business combination transaction contemplated herein in
which Primary Bank, subject to the terms and conditions set forth herein,
shall be merged with and into Granite Bank (the "Merger") pursuant to an
Agreement and Plan of Merger in the form attached hereto as Annex A
("Plan of Merger"); and
WHEREAS, in connection with the execution of this Reorganization
Agreement, Primary Bank and Granite State have entered into a Stock
Option Agreement (the "Stock Option Agreement") dated as of even date
herewith pursuant to which Primary Bank will grant Granite State the right
to purchase certain shares of Primary Bank Common Stock; and
WHEREAS, the parties hereto desire to provide for certain
undertakings, conditions, representations, warranties and covenants in
connection with Merger, and the other transactions contemplated by this
Agreement, the Plan of Merger and the Stock Option Agreement
(collectively, the "Merger Documents").
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties and covenants herein contained and
intending to be legally bound hereby, the parties hereto do hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions. Except as otherwise provided herein, as
used in this Agreement, the following terms shall have the indicated
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Affiliate" means, with respect to any Person, any Person who
directly, or indirectly, through one or more intermediaries, controls,
or is controlled by, or is under common control with, such Person and,
without limiting the generality of the foregoing, includes any
executive officer or director of such Person and any Affiliate of such
executive officer or director.
"Agreement" means this agreement, and any amendment or
supplement hereto.
"Applicable Exchange Ratio" shall have the meaning given to
such term in the Plan of Merger.
"Applications" means the applications for regulatory approval
which are required by the transactions contemplated hereby.
"BHC Act" means the Bank Holding Company Act of 1956, as
amended.
"Closing Date" means the date determined by Granite State, in
its sole discretion, upon five (5) days prior written notice to Primary
Bank, but in no event later than thirty (30) days after the last
condition precedent pursuant to this Agreement has been fulfilled or
waived (including the expiration of any applicable waiting period), or
such other date as Granite State and Primary Bank shall agree.
"Commissioner" shall mean the New Hampshire State Bank
Commissioner.
"Effective Date" means the date upon which the articles of
merger or share exchange are filed with the appropriate New
Hampshire authorities, and shall be the same as the Closing Date.
"Environmental Laws" means any Federal or state law, statute,
rule, regulation, code, order, judgement, decree, injunction, common
law or agreement with any Federal or state governmental authority
relating to (i) the protection, preservation or restoration of the
environment (including air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal
life or any other natural resource), (ii) human health or safety, or
(iii) exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of, hazardous substances, in each case as amended and now
in effect.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated from time to time
thereunder.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"FRB" means the Board of Governors of the Federal Reserve
System or the Federal Reserve Bank of Boston, as applicable.
"GAAP" means generally accepted accounting principles as in
effect at the relevant date and consistently applied.
"Granite State Common Stock" has the meaning given to that
term in Section 3.02(a) of this Agreement.
"Granite State Disclosure Schedules" means the disclosure
schedules delivered by Granite State to Primary Bank pursuant to
Article III of this Agreement.
"Granite State Financials" means (i) the audited consolidated
financial statements of Granite State as of December 31, 1996 and for
the three years ended December 31, 1996, including the notes thereto,
(ii) the unaudited interim consolidated financial statements of Granite
State as of each calendar quarter thereafter included in Securities
Documents filed by Granite State, and (iii) the preliminary unaudited
consolidated financial statements of Granite State as of March 31,
1997, including the preliminary notes thereto.
"Granite State Option" means the option granted to Granite State
to acquire shares of Primary Bank Common Stock referenced in the
recitals to this Agreement.
"Granite State Regulatory Reports" means the Annual Reports
of Granite State on Form FR Y-6, any Current Report of Granite State
on Form FR Y-9C and FR Y-LP filed with the FRB from December
31, 1995 through the Closing Date and the Reports of Condition and
Income of Granite Bank and accompanying schedules for each
calendar quarter, beginning with the quarter ended December 31,
1995, through the Closing Date.
"Granite State Subsidiary" means any corporation, 50% or more
of the capital stock of which is owned, either directly or indirectly, by
Granite State or Granite Bank, except any corporation the stock of
which is held as security by Granite Bank in the ordinary course of its
lending activities.
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
"Material Adverse Effect" shall mean, with respect to Granite
State or Primary Bank, any adverse effect on its assets, financial
condition or results of operations which is material to its assets,
financial condition or results of operations on a consolidated basis,
except for any material adverse effect caused by (i) any change in the
value of the respective investment portfolios of Granite State or
Primary Bank resulting from a change in interest rates generally or (ii)
any individual or combination of changes occurring after the date
hereof in any federal or state law, rule or regulation or in GAAP,
which change(s) affect(s) financial institutions generally, including
any changes affecting the Bank Insurance Fund or the Savings
Association Insurance Fund.
"Merger" means the merger of Primary Bank with and into
Granite Bank, with Granite Bank surviving such merger, contemplated
by the Plan of Merger.
"Person" means any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Plan of Merger" is the Agreement and Plan of Merger by and
between Primary Bank and Granite Bank.
"Primary Bank Common Stock" means the common stock of
Primary Bank described in Section 2.02(a).
"Primary Bank Disclosure Schedules" means the disclosure
schedules delivered by Primary Bank to Granite State pursuant to
Article II of this Agreement.
"Primary Bank Financials" means (i) the audited consolidated
financial statements of Primary Bank as of December 31, 1996 and for
the three years ended December 31, 1996, including the notes thereto,
(ii) the unaudited interim consolidated financial statements of Primary
Bank as of each calendar quarter thereafter included in Securities
Documents filed by Primary Bank and (iii) the unaudited preliminary
consolidated financial statements of Primary Bank as of March 31,
1997, including the preliminary notes thereto.
"Primary Bank's knowledge" or similar terms with respect to
Primary Bank, means the actual knowledge of the following
individuals: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.,
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
"Primary Bank Regulatory Reports" means the Reports of
Condition and Income of Primary Bank and accompanying schedules
for each calendar quarter, beginning with the quarter ended December
31, 1995, through the Closing Date.
"Primary Bank Subsidiary" means any corporation, 50% or more
of the capital stock of which is owned, either directly or indirectly, by
Primary Bank, except any corporation the stock of which is held in the
ordinary course of the lending activities of Primary Bank.
"Prospectus/Proxy Statement" means the prospectus/proxy
statement, together with any supplements thereto, to be transmitted to
holders of Primary Bank Common Stock and Granite State Common
Stock in connection with the transactions contemplated by this
Agreement.
"Registration Statement" means the registration statement on
Form S-4, including any pre-effective or post-effective amendments
or supplements thereto, as filed with the SEC under the Securities Act
with respect to the Granite State Common Stock to be issued in
connection with the transactions contemplated by this Agreement.
"Regulatory Agreement" has the meaning given to that term in
Section 2.11 of this Agreement.
"Regulatory Authority" means any agency or department of any
federal or state government, including without limitation the
Commissioner, the FDIC, the FRB, the SEC or the respective staffs
thereof.
"Rights" means warrants, options, rights, convertible securities
and other capital stock equivalents which obligate an entity to issue its
securities.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated from time to time
thereunder.
"Securities Documents" means all registration statements,
schedules, statements, forms, reports, proxy material, and other
documents required to be filed under the Securities Laws.
"Securities Laws" means the Securities Act and the Exchange
Act and the rules and regulations promulgated from time to time
thereunder.
"Subsidiary" means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by another
entity, except any corporation the stock of which is held as security by
either Granite Bank or Primary Bank, as the case may be, in the
ordinary course of its lending activities.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PRIMARY BANK
Primary Bank represents and warrants to Granite State that the
statements contained in this Article II are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Article II), except as set forth in
the Primary Bank Disclosure Schedules delivered by Primary Bank to
Granite State on the date hereof. Primary Bank has made a good faith effort
to ensure that the disclosure on each schedule of the Primary Bank
Disclosure Schedules corresponds to the section reference herein. However,
for purposes of the Primary Bank Disclosure Schedules, any item disclosed
on any schedule therein is deemed to be fully disclosed with respect to all
schedules under which such item may be relevant.
Section 2.01 Organization.
(a) Primary Bank is a duly organized guaranty (stock) savings bank,
validly existing and in good standing under the laws of New Hampshire,
with full corporate power and authority to carry on its business as now
conducted and is duly licensed or qualified to do business in the states of
the United States and foreign jurisdictions where its ownership or leasing
of property or the conduct of its business requires such qualification, except
where the failure to be so licensed or qualified would not have a Material
Adverse Effect on Primary Bank.
(b) There are no Primary Bank Subsidiaries other than those
identified in the Primary Bank Disclosure Schedule 2.01.
(c) The deposits of Primary Bank are insured by the Bank Insurance
Fund of the FDIC to the maximum extent provided in the FDIA, and
Primary Bank has paid all premium assessments that have come due and has
filed all material reports required by the FDIA. Primary Bank is a member
in good standing of the Federal Home Loan Bank of Boston and owns the
requisite amount of stock therein.
(d) Except as disclosed in Primary Bank Disclosure Schedule 2.01,
the respective minute books of Primary Bank and each Primary Bank
Subsidiary accurately record, in all material respects, all material corporate
actions of their respective shareholders and boards of directors (including
committees) through the date of this Agreement.
(e) Prior to the date of this Agreement, Primary Bank has delivered
to Granite State true and correct copies of the articles of agreement and
bylaws of Primary Bank.
Section 2.02 Capitalization.
(a) The authorized capital stock of Primary Bank consists of
(a) 5,000,000 shares of common stock, $0.01 par value ("Primary Bank
Common Stock"), of which 2,085,958 shares are outstanding, validly
issued, fully paid and nonassessable and free of preemptive rights, and
(b) 1,000,000 shares of preferred stock, $0.01 par value, none of which are
issued or outstanding. Neither Primary Bank nor any Primary Bank
Subsidiary has or is bound by any subscription, option, warrant, call,
commitment, agreement, plan or other Right of any character relating to the
purchase, sale or issuance or voting of, or right to receive dividends or
other distributions on any shares of Primary Bank Common Stock, Primary Bank
preferred stock or any other security of Primary Bank or any securities
representing the right to vote, purchase or otherwise receive any shares of
Primary Bank Common Stock, Primary Bank preferred stock or any other
security of Primary Bank, other than shares issuable under the Granite State
Option and other than as set forth in reasonable detail in the Primary Bank
Disclosure Schedule 2.02. Primary Bank Disclosure Schedule 2.02 sets
forth the name of each holder of options to purchase Primary Bank
Common Stock, the number of shares each such individual may acquire
pursuant to the exercise of such options, and the exercise price relating to
the options held. Primary Bank Disclosure Schedule 2.02 also sets forth the
names of the holders of any unvested awards of Primary Bank Common
Stock under the Peterborough Savings Bank Recognition and Retention
Plan for Outside Directors and the Peterborough Savings Bank Recognition
and Retention Plan for Officers and Employees, the number of shares
underlying such awards, and the vesting periods relating thereto.
(b) Except as set forth in the Primary Bank Disclosure Schedule 2.02,
neither Primary Bank, nor any Primary Bank Subsidiary, owns any equity
interest, directly or indirectly, in any other company or controls any
other company, except for equity interests held by Primary Bank in a
fiduciary capacity, and equity interests owned in connection with the
commercial lending activities of Primary Bank. There are no subscriptions,
options, warrants, calls, commitments, agreements or other Rights
outstanding and held by Primary Bank with respect to any other company's
capital stock or the equity of any other Person.
(c) To Primary Bank's knowledge, no Person or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act), is the beneficial
owner (as defined in Section 13(d) of the Exchange Act) of 5% or more of
the outstanding shares of Primary Bank Common Stock, except as disclosed
in the Primary Bank Disclosure Schedule 2.02.
Section 2.03 Authority; No Violation.
(a) Primary Bank has full corporate power and authority to execute
and deliver this Agreement and, subject to the approval by the requisite vote
of the shareholders of Primary Bank and the approvals of the Regulatory
Authorities described in Section 3.04 hereof, to complete the transactions
contemplated hereby. Primary Bank has full corporate power and authority
to execute and deliver the Plan of Merger and, subject to the approval by the
requisite vote of the shareholders of Primary Bank and the approvals of the
Regulatory Authorities described in Section 3.04 hereof, to consummate the
Merger. The execution and delivery of this Agreement by Primary Bank and
the completion by Primary Bank of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of Primary
Bank and, except for approval by the requisite vote of the shareholders of
Primary Bank, no other corporate proceedings on the part of Primary Bank
are necessary to approve this Agreement, the Plan of Merger, and complete
the transactions contemplated hereby and thereby. This Agreement has been
duly and validly executed and delivered by Primary Bank and, subject to
approval of the requisite vote of the shareholders of Primary Bank and
receipt of the required approvals from Regulatory Authorities described in
Section 3.04 hereof (and assuming the due authorization, execution and
delivery by both Granite State and Granite Bank), constitutes the valid and
binding obligation of Primary Bank, enforceable against Primary Bank in
accordance with its terms, subject to applicable conservatorship or
receivership provisions of the FDIA, or insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity. The Plan of Merger, upon its execution and
delivery by Primary Bank concurrently with the execution and delivery of
this Agreement, and subject to approval of the requisite vote of the
shareholders of Primary Bank and receipt of the required approvals from
Regulatory Authorities described in Section 3.04 hereof (and assuming the
due authorization, execution and delivery by both Granite State and Granite
Bank), will constitute the valid and binding obligation of Primary Bank,
enforceable against Primary Bank in accordance with its terms, subject to
applicable conservatorship or receivership provisions of the FDIA, or
insolvency and similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by Primary
Bank, (B) the execution and delivery of the Plan of Merger by Primary
Bank, (C) subject to receipt of approvals from the Regulatory Authorities
referred to in Section 3.04 hereof and Primary Bank's and Granite State's
compliance with any conditions contained therein, the completion of the
transactions contemplated hereby, and (D) compliance by Primary Bank
with any of the terms or provisions hereof or of the Plan of Merger, will not
(i) conflict with or result in a breach of any provision of the articles of
agreement or bylaws of Primary Bank or any Primary Bank Subsidiary; (ii)
assuming that the consents and approvals referred to in Section 3.04 hereof
are duly obtained, violate any statute, code, ordinance, rule, regulation, or
to Primary Bank's knowledge, judgment, order, writ, decree or injunction
applicable to Primary Bank or any Primary Bank Subsidiary or any of their
respective properties or assets; or (iii) except as set forth in the Primary
Bank Disclosure Schedule 2.03, violate, conflict with, result in a breach of
any provisions of, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of Primary
Bank or any Primary Bank Subsidiary under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement, commitment or other instrument or obligation to which
Primary Bank or any Primary Bank Subsidiary is a party, or by which they
or any of their respective properties or assets may be bound or affected,
except for such violations, conflicts, breaches or defaults under clause (ii)
or (iii) hereof which, either individually or in the aggregate, will not have
a Material Adverse Effect on Primary Bank and its Subsidiaries taken as a
whole.
Section 2.04 Consents. Except for the consents, waivers, approvals,
filings and registrations from or with the Regulatory Authorities referred to
in Section 3.04 hereof and compliance with any conditions contained
therein, and the approval of this Agreement and the Plan of Merger by the
requisite vote of the shareholders of Primary Bank, and by the requisite vote
of the Primary Bank Board of Directors, no consents, waivers or approvals
of, or filings or registrations with, any governmental authority are
necessary, and, to Primary Bank's knowledge, no consents, waivers or approvals
of, or filings or registrations with, any other third parties are necessary,
in connection with (a) the execution and delivery of this Agreement or the
Plan of Merger by Primary Bank, and (b) the completion by Primary Bank of the
transactions contemplated hereby or by the Plan of Merger.
Section 2.05 Financial Statements.
(a) Primary Bank has previously delivered to Granite State the
Primary Bank Regulatory Reports. The Primary Bank Regulatory Reports
have been, or will be, prepared in all material respects in accordance with
applicable regulatory accounting principles and practices throughout the
periods covered by such statements, and fairly present, or will fairly present
in all material respects, the consolidated financial position, results of
operations and changes in shareholders' equity of Primary Bank as of and
for the periods ended on the dates thereof, in accordance with applicable
regulatory accounting principles applied on a consistent basis.
(b) Primary Bank has previously delivered to Granite State the
Primary Bank Financials. The Primary Bank Financials have been, or will
be, prepared in accordance with GAAP, and (including the related notes
where applicable) fairly present, or will fairly present, in each case in all
material respects (subject in the case of the unaudited interim statements to
normal year-end adjustments), the consolidated financial position, results
of operations and cash flows of Primary Bank and the Primary Bank
Subsidiaries as of and for the respective periods ending on the dates thereof,
in accordance with GAAP applied on a consistent basis during the periods
involved, except as indicated in the notes thereto, or in the case of
unaudited statements, as permitted by Form F-4.
(c) At the date of each balance sheet included in the Primary Bank
Financials or the Primary Bank Regulatory Reports, Primary Bank did not
have, or will not have any liabilities, obligations or loss contingencies of
any nature (whether absolute, accrued, contingent or otherwise) of a type
required to be reflected in such Primary Bank Financials or Primary Bank
Regulatory Reports or in the footnotes thereto which are not fully reflected
or reserved against therein or fully disclosed in a footnote thereto, except
for liabilities, obligations and loss contingencies which are not material
individually or in the aggregate and which are incurred in the ordinary
course of business, consistent with past practice and except for liabilities,
obligations and loss contingencies which are within the subject matter of a
specific representation and warranty herein and subject, in the case of any
unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
Section 2.06 Taxes. Primary Bank and the Primary Bank Subsidiaries
are members of the same affiliated group within the meaning of IRC Section
1504(a). Primary Bank has duly filed all federal, state and material local tax
returns required to be filed by or with respect to Primary Bank and all
Primary Bank Subsidiaries on or prior to the Closing Date (all such returns
being accurate and correct in all material respects) and has duly paid or will
pay, or made or will make, provisions for the payment of all material
federal, state and local taxes which have been incurred by or are due or
claimed to be due from Primary Bank and any Primary Bank Subsidiary by
any taxing authority or pursuant to any written tax sharing agreement on or
prior to the Closing Date other than taxes or other charges which (i) are not
delinquent, (ii) are being contested in good faith, or (iii) have not yet been
fully determined.
Section 2.07. No Material Adverse Effect. Primary Bank and the
Primary Bank Subsidiaries, taken as a whole, have not suffered any Material
Adverse Effect since December 31, 1996.
Section 2.08. Contracts.
(a) Except as described in the footnotes to the audited consolidated
financial statements of Primary Bank as of December 31, 1996, and for the
three years ended December 31, 1996, or in Primary Bank Disclosure
Schedule 2.08(a), neither Primary Bank nor any Primary Bank Subsidiary
is a party to or subject to: (i) any employment, consulting or severance
contract or material arrangement with any past or present officer, director
or employee of Primary Bank or any Primary Bank Subsidiary, except for
"at will" arrangements; (ii) any plan, material arrangement or contract
providing for bonuses, pensions, options, deferred compensation, retirement
payments, profit sharing or similar material arrangements for or with any
past or present officers, directors or employees of Primary Bank or any
Primary Bank Subsidiary; (iii) any collective bargaining agreement with any
labor union relating to employees of Primary Bank or any Primary Bank
Subsidiary; (iv) any agreement which by its terms limits the payment of
dividends by Primary Bank; (v) any instrument evidencing or related to
material indebtedness for borrowed money whether directly or indirectly, by
way of purchase money obligation, conditional sale, lease purchase,
guaranty or otherwise, in respect of which Primary Bank or any Primary
Bank Subsidiary is an obligor to any person, which instrument evidences or
relates to indebtedness other than deposits, repurchase agreements, Primary
Bank acceptances, Federal Home Loan Bank of Boston advances, and
"treasury tax and loan" accounts established in the ordinary course of
business and transactions in "federal funds" or which contains financial
covenants or other restrictions (other than those relating to the payment of
principal and interest when due) which would be applicable on or after the
Closing Date to Granite State or any Granite State Subsidiary; or (vi) any
contract (other than this Agreement) limiting the freedom, in any material
respect, of Primary Bank to engage in any type of banking or bank-related
business which Primary Bank is permitted to engage in under applicable law
as of the date of this Agreement.
(b) True and correct copies of agreements, plans, arrangements and
instruments referred to in Section 2.08(a), have been provided to Granite
State on or before the date hereof, are listed on Primary Bank Disclosure
Schedule 2.08(a) and are in full force and effect on the date hereof and
neither Primary Bank nor any Primary Bank Subsidiary (nor, to the
knowledge of Primary Bank, any other party to any such contract, plan,
arrangement or instrument) has breached any provision of, or is in default
in any respect under any term of, any such contract, plan, arrangement or
instrument which breach has resulted in or will result in a Material Adverse
Effect with respect to Primary Bank. Except as set forth in the Primary Bank
Disclosure Schedule 2.08(b), no party to any material contract, plan,
arrangement or instrument will have the right to terminate any or all of the
provisions of any such contract, plan, arrangement or instrument as a result
of the execution of, and the transactions contemplated by, this Agreement.
Except as set forth in Primary Bank Disclosure Schedule 2.08(b), none of
the employees (including officers) of Primary Bank, possess the right to
terminate their employment as a result of the execution of this Agreement.
Except as set forth in Primary Bank Disclosure Schedule 2.08(b), no plan,
employment agreement, termination agreement, or similar agreement or
arrangement to which Primary Bank or any Primary Bank Subsidiary is a
party or under which Primary Bank or any Primary Bank Subsidiary may be
liable contains provisions which permit an employee or independent
contractor to terminate it without cause and continue to accrue future
benefits thereunder. Except as set forth in Primary Bank Disclosure
Schedule 2.08(b), no such agreement, plan or arrangement (x) provides for
acceleration in the vesting of benefits or payments due thereunder upon the
occurrence of a change in ownership or control of Primary Bank or any
Primary Bank Subsidiary absent the occurrence of a subsequent event; or (y)
requires Primary Bank or any Primary Bank Subsidiary to provide a benefit
in the form of Primary Bank Common Stock or determined by reference to
the value of Primary Bank Common Stock. No such agreement, plan or
arrangement with respect to officers of Primary Bank, or to Primary Bank's
knowledge, to its employees, provides for benefits which may cause the
disallowance of a federal income tax deduction under IRC Section 280G.
No limited rights (as such term is defined in the Primary Bank stock option
plans identified in Disclosure Schedule 2.08(a)) have been granted with
respect to any employee or director stock option that is outstanding as of the
date of this Agreement.
Section 2.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in Primary Bank Disclosure Schedule 2.09,
Primary Bank and the Primary Bank Subsidiaries have good and, as to real
property, marketable title to all material assets and properties owned by
Primary Bank or any Primary Bank Subsidiary in the conduct of their
businesses, whether such assets and properties are real or personal, tangible
or intangible, including assets and property reflected in the balance sheets
contained in the Primary Bank Regulatory Reports and in the Primary Bank
Financials or acquired subsequent thereto (except to the extent that such
assets and properties have been disposed of in the ordinary course of
business, since the date of such balance sheets), subject to no material
encumbrances, liens, mortgages, security interests or pledges, except (i)
those items which secure liabilities for public or statutory obligations or
any discount with, borrowing from or other obligations to any Federal Reserve
Bank or any Federal Home Loan Bank, inter-bank credit facilities, or any
transaction by a Primary Bank Subsidiary acting in a fiduciary capacity, (ii)
statutory liens for amounts not yet delinquent or which are being contested
in good faith, and (iii) items permitted under Article IV. Primary Bank and
the Primary Bank Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by Primary Bank and
its Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them. Except as
disclosed in Primary Bank Disclosure Schedule 2.09, such existing leases
and commitments to lease constitute or will constitute operating leases for
both tax and financial accounting purposes and the lease expense and
minimum rental commitments with respect to such leases and lease
commitments are as disclosed in the Notes to the Primary Bank Financials.
(b) With respect to all material agreements pursuant to which
Primary Bank or any Primary Bank Subsidiary has purchased securities
subject to an agreement to resell, if any, Primary Bank or such Primary
Bank Subsidiary, as the case may be, has a lien or security interest (which
to Primary Bank's knowledge is a valid, perfected first lien) in the
securities or other collateral securing the repurchase agreement, and the
value of such collateral equals or exceeds the amount of the debt secured
thereby.
(c) Primary Bank currently maintains insurance considered by
Primary Bank to be reasonable for their respective operations and similar in
scope and coverage to that customarily maintained by other businesses
similarly engaged in a similar location, in accordance with good business
practice. Primary Bank has not received notice from any insurance carrier
that (i) such insurance will be canceled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to such policies of
insurance will be substantially increased. There are presently no material
claims pending under such policies of insurance and no notices have been
given by Primary Bank under such policies. All such insurance is valid and
enforceable and in full force and effect, and within the last three years
Primary Bank has received each type of insurance coverage for which it has
applied and during such periods has not been denied indemnification for
any material claims submitted under any of its insurance policies.
Section 2.10 Legal Proceedings. Except as disclosed in Primary Bank
Disclosure Schedule 2.10, neither Primary Bank nor any Primary Bank
Subsidiary is a party to any, and there are no pending or, to the best of
Primary Bank's knowledge, threatened legal, administrative, arbitration or
other proceedings, claims (whether asserted or unasserted), actions or
governmental investigations or inquiries of any nature (i) against Primary
Bank or any Primary Bank Subsidiary, (ii) to which Primary Bank or any
Primary Bank Subsidiary's assets are or may be subject, (iii) challenging the
validity or propriety of any of the transactions contemplated by this
Agreement, or (iv) which could adversely affect the ability of Primary Bank
to perform under this Agreement, except for any proceedings, claims,
actions, investigations or inquiries referred to in clauses (i) or (ii) which,
if adversely determined, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect on Primary Bank and
the Primary Bank Subsidiaries, taken as a whole.
Section 2.11 Compliance With Applicable Law.
(a) Primary Bank and Primary Bank Subsidiaries hold all licenses,
franchises, permits and authorizations necessary for the lawful conduct of
their respective businesses under, and have complied in all material respects
with, applicable laws, statutes, orders, rules or regulations of any federal,
state or local governmental authority relating to them, other than where such
failure to hold or such noncompliance will neither result in a limitation in
any material respect on the conduct of their respective businesses nor
otherwise have a Material Adverse Effect on Primary Bank and the Primary
Bank Subsidiaries, taken as a whole.
(b) Except as disclosed in Primary Bank Disclosure Schedule 2.11,
neither Primary Bank nor any Primary Bank Subsidiary has received any
notification or communication from any Regulatory Authority (i) asserting
that Primary Bank or any Primary Bank Subsidiary is not in material
compliance with any of the statutes, regulations or ordinances which such
Regulatory Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material to
Primary Bank or any Primary Bank Subsidiary; (iii) requiring or threatening
to require Primary Bank or any Primary Bank Subsidiary, or indicating that
Primary Bank or any Primary Bank Subsidiary may be required, to enter into
a cease and desist order, agreement or memorandum of understanding or
any other agreement with any federal or state governmental agency or
authority which is charged with the supervision or regulation of banks or
engages in the insurance of bank deposits restricting or limiting, or
purporting to restrict or limit, in any material respect the operations of
Primary Bank or any Primary Bank Subsidiary, including without limitation
any restriction on the payment of dividends; or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit, in any manner the
operations of Primary Bank or any Primary Bank Subsidiary, including
without limitation any restriction on the payment of dividends (any such
notice, communication, memorandum, agreement or order described in this
sentence is hereinafter referred to as a "Regulatory Agreement"). Neither
Primary Bank nor any Primary Bank Subsidiary has consented to or entered
into any currently effective Regulatory Agreement, except as set forth in
Primary Bank Disclosure Schedule 2.11.
Section 2.12 ERISA. Primary Bank has previously delivered to Granite
State true and complete copies of all employee pension benefit plans within
the meaning of ERISA Section 3(2), profit sharing plans, stock purchase
plans, deferred compensation and supplemental income plans, supplemental
executive retirement plans, employment agreements, annual or long term
incentive plans, settlement plans, policies and agreements, group insurance
plans, and all other employee welfare benefit plans within the meaning of
ERISA Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans) and all other employee
benefit plans, policies, agreements and arrangements, all of which are set
forth in Primary Bank Disclosure Schedule 2.12, maintained or contributed
to for the benefit of the employees or former employees (including retired
employees) and any beneficiaries thereof or directors or former directors of
Primary Bank or any Primary Bank Subsidiary, together with (i) the most
recent actuarial (if any) and financial reports relating to those plans which
constitute "qualified plans" under IRC Section 401(a), (ii) the most recent
annual reports relating to such plans filed by them, respectively, with any
government agency, and (iii) all rulings and determination letters which
pertain to any such plans. Neither Primary Bank nor any Primary Bank
Subsidiary maintains or has maintained within the last six (6) years any
pension plan subject to Title IV of ERISA. Neither Primary Bank, any
Primary Bank Subsidiary nor any other pension plan maintained by Primary
Bank or any Primary Bank Subsidiary, has incurred, directly or indirectly,
within the past six (6) years any liability to the IRS with respect to any
pension plan qualified under IRC Section 401(a) which liability has resulted
in or will result in a Material Adverse Effect with respect to Primary Bank.
Neither Primary Bank nor any Primary Bank Subsidiary has incurred or is
subject to any liability under ERISA Section 4201 for a complete or partial
withdrawal from a multi-employer plan. All "employee benefit plans," as
defined in ERISA Section 3(3), comply and within the past six (6) years
have complied in all material respects with (i) relevant provisions of ERISA
and (ii) in the case of plans intended to qualify for favorable income tax
treatment, provisions of the IRC relevant to such treatment. No prohibited
transaction (which shall mean any transaction prohibited by ERISA Section
406 and not exempt under ERISA Section 408 or any transaction prohibited
under IRC Section 4975) has occurred within the past six (6) years with
respect to any employee benefit plan maintained by Primary Bank or any
Primary Bank Subsidiary which would result in the imposition, directly or
indirectly, of an excise tax under IRC 4975 or other penalty under ERISA
or the IRC, which, individually or in the aggregate, has resulted in or will
result in a Material Adverse Effect with respect to Primary Bank. Primary
Bank and the Primary Bank Subsidiaries provide continuation coverage
under group health plans for separating employees and "qualified
beneficiaries" in accordance with the provisions of IRC Section 4980B(f).
Such group health plans are in compliance in all material respects with
Section 1862(b)(1) of the Social Security Act. With respect to the
outstanding loan to Primary Bank's employee stock ownership plan, as of
March 31, 1997, the principal amount outstanding does not exceed
$300,000.
Section 2.13 Brokers, Finders and Financial Advisors. Except for
Primary Bank's engagement of Northeast Capital and Advisory, Inc.
("Northeast Capital") in connection with transactions contemplated by this
Agreement, neither Primary Bank nor any Primary Bank Subsidiary, nor any
of their respective officers, directors, employees or agents, has employed
any broker, finder or financial advisor in connection with the transactions
contemplated by this Agreement or the Plan of Merger, or, except for its
commitments disclosed in Primary Bank Disclosure Schedule 2.13, incurred
any liability or commitment for any fees or commissions to any such person
in connection with the transactions contemplated by this Agreement or the
Plan of Merger, which has not been reflected in the Primary Bank
Financials.
Section 2.14. Environmental Matters. To the knowledge of Primary
Bank, neither Primary Bank nor any Primary Bank Subsidiary, nor any
properties owned or operated by Primary Bank or any Primary Bank
Subsidiary has been or is in violation of or liable under any Environmental
Law which violation or liability, individually or in the aggregate, has
resulted, or will result, in a Material Adverse Effect with respect to Primary
Bank and its Subsidiaries taken as a whole. There are no actions, suits or
proceedings, or demands, claims, notices or, to Primary Bank's knowledge,
investigations (including without limitation notices, demand letters or
requests for information from any environmental agency) instituted or
pending, or to the knowledge of Primary Bank, threatened, relating to the
liability of any property owned or operated by Primary Bank or any Primary
Bank Subsidiary under any Environmental Law. Primary Bank Disclosure
Schedule 2.14 identifies all material reports, studies, sampling data,
permits, and governmental filings in the possession of or reasonably available
to Primary Bank or any Primary Bank Subsidiary concerning the
Environmental Laws and Primary Bank or any Primary Bank Subsidiary or
any of their current or former properties or operations.
Section 2.15. Loan Portfolio. The allowance for loan losses reflected,
and to be reflected, in the Primary Bank Regulatory Reports, and shown,
and to be shown, on the balance sheets contained in the Primary Bank
Financials have been, and will be, established in accordance with the
requirements of GAAP and all applicable regulatory criteria. Primary Bank
Disclosure Schedule 2.15 sets forth all loans that are classified by Primary
Bank or any state or federal bank regulatory or supervisory authority as
"Special Mention," "Substandard," "Doubtful," "Loss" or "Classified,"
together with the aggregate principal amount of and accrued and unpaid
interest on such loans, by category.
Section 2.16. Information to be Supplied. The information to be
supplied by Primary Bank for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein not misleading. The
information supplied, or to be supplied, by Primary Bank for inclusion in
the Applications will, at the time such documents are filed with any
Regulatory Authority, be accurate in all material aspects.
Section 2.17. Securities Documents. Primary Bank has delivered to
Granite State copies of its (i) annual reports on Form F-2 for the years ended
December 31, 1996, 1995 and 1994, (ii) quarterly reports on Form F-4 for
the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996
and (iii) proxy materials used or for use in connection with its meetings of
shareholders held in 1996, 1995 and 1994. Such reports and such proxy
materials complied, at the time filed with the FDIC, in all material respects,
with the FDIC rules and regulations under the Exchange Act.
Section 2.18. Related Party Transactions. Except as disclosed in
Primary Bank Disclosure Schedule 2.18, or as described in Primary Bank's
Proxy Statement distributed in connection with the 1997 annual meeting of
shareholders (which has previously been provided to Granite State), Primary
Bank is not a party to any transaction (including any loan or other credit
accommodation) with any Affiliate of Primary Bank (except a Primary Bank
Subsidiary). Except as disclosed in Primary Bank Disclosure Schedule 2.18,
all such transactions (a) were made in the ordinary course of business, (b)
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other Persons, and (c) did not involve more than the normal risk of
collectability or present other unfavorable features. Except as set forth on
Primary Bank Disclosure Schedule 2.18, no loan or credit accommodation
to any Affiliate of Primary Bank is presently in default or, during the three
year period prior to the date of this Agreement, has been in default or has
been restructured, modified or extended. Primary Bank has not been
notified that principal and interest with respect to any such loan or other
credit accommodation will not be paid when due or that the loan grade
classification accorded such loan or credit accommodation by Primary Bank
is inappropriate.
Section 2.19. Schedule of Termination Benefits. Primary Bank
Disclosure Schedule 2.19 includes a schedule of all termination benefits and
related payments that would be payable to the individuals identified thereon,
excluding any options to acquire Primary Bank Common Stock granted to
such individuals, under any and all employment agreements, special
termination agreements, supplemental executive retirement plans, deferred
bonus plans, deferred compensation plans, salary continuation plans, or any
compensation arrangement, or other pension benefit or welfare benefit plan
maintained by Primary Bank solely for the benefit of officers or directors of
Primary Bank or Primary Bank Subsidiaries (the "Benefits Schedule"),
assuming their employment or service is terminated as of December 31,
1997 and the Closing Date occurs prior to such termination. No other
individuals are entitled to benefits under any such plans.
Section 2.20. Loans. Each loan reflected as an asset in the Primary
Bank Financial Statements (i) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and correct in all material
respects, (ii) to the extent secured, to Primary Bank's knowledge has been
secured by valid liens and security interests which have to Primary Bank's
knowledge been perfected, and (iii) is the legal, valid and binding obligation
of the obligor named therein, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles, in each case other than loans as to which the
failure to satisfy the foregoing standards would not have a Material Adverse
Effect on Primary Bank and the Primary Bank Subsidiaries taken as a whole.
Section 2.21. Antitakeover Provisions Inapplicable. Except as set
forth on Primary Bank Disclosure Schedule 2.21, the transactions
contemplated by this Agreement are not subject to any applicable state
takeover law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GRANITE STATE
Granite State represents and warrants to Primary Bank that the
statements contained in this Article III are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted
for the date of this Agreement throughout this Article III), except as set
forth in the Granite State Disclosure Schedules delivered by Granite State
to Primary Bank on the date hereof. Granite State has made a good faith
effort to ensure that the disclosure on each schedule of the Granite State
Disclosure Schedules corresponds to the section reference herein. However,
for purposes of the Granite State Disclosure Schedules, any item disclosed
on any schedule therein is deemed to be fully disclosed with respect to all
schedules under which such item may be relevant.
Section 3.01. Organization.
(a) Granite State is a duly organized corporation, validly existing
and in good standing under the laws of New Hampshire, with full corporate
power and authority to carry on its business as now conducted and is duly
licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the
conduct of its business requires such qualification, except where the failure
to be so licensed or qualified would not have a Material Adverse Effect on
Granite State. Granite State is registered as a bank holding company under
the BHC Act. Granite State has made available to Primary Bank true and
correct copies of its articles of agreement and bylaws.
(b) Granite Bank is duly organized and validly existing as a bank
under the laws of the State of New Hampshire. Granite Bank has the
corporate power and authority to carry on its business and operations as now
being conducted, and to own and operate the properties and assets now
owned and being operated by it, and is duly licensed or qualified to do
business in the states of the United States and foreign jurisdictions where
its ownership or leasing of property or the conduct of its business requires
such qualification, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on Granite State.
(c) The deposits of Granite Bank are insured by the FDIC to the
maximum extent provided in the FDIA, and Granite Bank has paid all
premium assessments that have come due and has filed all reports required
by the FDIA. Granite Bank is a member in good standing of the Federal
Home Loan Bank of Boston and owns the requisite amount of stock therein.
(d) Except as disclosed in Granite State Disclosure Schedule
3.01(d), the respective minute books of Granite State and Granite Bank
accurately record in all material respects all material corporate action of
their respective shareholders and boards of directors (including committees)
through the date of this Agreement.
(e) Prior to the date of this Agreement, Granite State has delivered
to Primary Bank true and correct copies of the articles of agreement and the
bylaws of Granite State and Granite Bank, respectively, as in effect on the
date hereof.
Section 3.02 Capitalization.
(a) The authorized capital stock of Granite State consists of (a)
12,500,000 shares of common stock, par value $1.00 per share ("Granite
State Common Stock"), of which, at the date of this Agreement, 2,632,473
shares are validly issued, fully paid and nonassessable and 613,457 shares
are held by Granite State as treasury stock, and (b) 7,500,000 shares of
preferred stock, par value $1.00 per share, of which, at the date of this
Agreement, no shares of were issued and outstanding. No shares of Granite
State Common Stock were issued in violation of any preemptive rights.
Granite State has no Rights authorized, issued or outstanding, other than (i)
options to acquire 258,160 shares of Granite State Common Stock are
reserved for issuance and authorized under Granite State's employee benefit
plans and stock option plans, and (ii) shares issuable as a result of the
3-for-2 stock split to be paid by Granite State on May 9, 1997.
(b) To Granite State's knowledge, except as disclosed in Granite
State's proxy statement dated March 24, 1997, no Person or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act) is the beneficial
owner (as defined in Section 13(d) of the Exchange Act) of 5% or more of
the outstanding shares of Granite State Common Stock.
(c) Granite State owns all of the capital stock of Granite Bank, free
and clear of any lien or encumbrance. Except for the Granite State
Subsidiaries, Granite State does not possess, directly or indirectly, any
material equity interest in any corporation, except for equity interests held
in the investment portfolios of Granite State Subsidiaries, equity interests
held by Granite State Subsidiaries in a fiduciary capacity, and equity
interests held in connection with the lending activities of Granite State
Subsidiaries.
Section 3.03 Authority; No Violation.
(a) Granite State has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. Granite Bank has full corporate power and authority
to execute and deliver the Plan of Merger and to consummate the Bank
Merger. The execution and delivery of this Agreement by Granite State and
the completion by Granite State of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of Granite
State and, except for approval of the shareholders of Granite State, no other
corporate proceedings on the part of Granite State are necessary to complete
the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Granite State and, subject to approval by
the shareholders of Granite State and receipt of the required approvals of
Regulatory Authorities described in Section 3.04 hereof, constitutes the
valid and binding obligation of Granite State and Granite Bank, enforceable
against Granite State and Granite Bank in accordance with its terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and as to Granite Bank, the conservatorship or receivership
provisions of the FDIA, and subject, as to enforceability, to general
principles of equity. The Plan of Merger, upon its execution and delivery by
Granite Bank concurrently with the execution and delivery of this
Agreement, will constitute the valid and binding obligation of Granite Bank,
enforceable against Granite Bank in accordance with its terms, subject to
applicable conservatorship and receivership provisions of the FDIA, or
insolvency and similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by Granite State
and Granite Bank, (B) the execution and delivery of the Plan of Merger by
Granite Bank, (C) subject to receipt of approvals from the Regulatory
Authorities referred to in Section 3.04 hereof and Primary Bank's and
Granite State's compliance with any conditions contained therein, the
consummation of the transactions contemplated hereby, and (D) compliance
by Granite State or Granite Bank with any of the terms or provisions hereof
or of the Plan of Merger will not (i) conflict with or result in a breach of
any provision of the articles of agreement or bylaws of Granite State or any
Granite State Subsidiary or the articles of agreement and bylaws of Granite
Bank; (ii) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Granite State or any Granite
State Subsidiary or any of their respective properties or assets; or (iii)
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default), under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration
or the creation of any lien, security interest, charge or other encumbrance
upon any of the properties or assets of Granite State or Granite Bank under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other investment or
obligation to which Granite State or Granite Bank is a party, or by which
they or any of their respective properties or assets may be bound or affected,
except for such violations, conflicts, breaches or defaults under clause (ii)
or (iii) hereof which, either individually or in the aggregate, will not have
a Material Adverse Effect on Granite State.
Section 3.04. Consents. Except for consents, approvals, filings and
registrations from or with the Commissioner, the FRB, the FDIC and SEC,
and state "blue sky" authorities, and compliance with any conditions
contained therein, and the approval of this Agreement by the shareholders
of Granite State in accordance with Nasdaq requirements applicable to it,
and the approval of the Plan of Merger by Granite State as sole shareholder
of Granite Bank under the FDIA, and by the Granite Bank Board of
Directors, the filing of articles of merger with the Secretary of State of the
State of New Hampshire pursuant to the New Hampshire Revised Statutes
Annotated, no consents or approvals of, or filings or registrations with, any
public body or authority are necessary, and no consents or approvals of any
third parties are necessary, or will be, in connection with (a) the execution
and delivery of this Agreement by Granite State or the Plan of Merger by
Granite Bank, and (b) the completion by Granite State of the transactions
contemplated hereby or by Granite Bank of the Bank Merger. Granite State
has no reason to believe that (i) any required consents or approvals will not
be received or will be received with conditions, limitations or restrictions
unacceptable to it or which would adversely impact Granite State's ability
to complete the transactions contemplated by this Agreement or that (ii) any
public body or authority, the consent or approval of which is not required
or any filing with which is not required, will object to the completion of the
transactions contemplated by this Agreement.
Section 3.05. Financial Statements.
(a) Granite State has previously delivered, or will deliver, to Primary
Bank the Granite State Regulatory Reports. The Granite State Regulatory
Reports have been, or will be, prepared in accordance with applicable
regulatory accounting principles and practices and fairly present, or will
fairly present, the consolidated financial position, results of operations and
changes in shareholders' equity of Granite State as of and for the periods
ending on the dates thereof, in accordance with applicable regulatory
accounting principles. Granite State will make the Granite State Regulatory
Reports available to Primary Bank for inspection.
(b) Granite State has previously delivered to Primary Bank the
Granite State Financials. The Granite State Financials have been, or will be,
prepared in accordance with GAAP and practices applied on a consistent
basis throughout the periods covered by such statements, and (including the
related notes where applicable) fairly present, or will fairly present
(subject in the case of the unaudited interim statements to normal year-end
adjustments), the consolidated financial position, results of operations and
cash flows of Granite State and the Granite State Subsidiaries as of and for
the respective periods ending on the dates thereof, in accordance with
GAAP applied on a consistent basis during the periods involved, except as
indicated in the notes thereto, or in the case of unaudited statements, as
permitted by Form 10-Q.
(c) At the date of each balance sheet included in the Granite State
Financials, Granite State did not have any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued, contingent or
otherwise) of a type required to be reflected in such Granite State Financials
or in the footnotes thereto which are not fully reflected or reserved against
therein or disclosed in a footnote thereto, except for liabilities,
obligations or loss contingencies which are not material in the aggregate and
which are incurred in the ordinary course of business, consistent with past
practice, and except for liabilities, obligations or loss contingencies which
are within the subject matter of a specific representation and warranty herein
and subject, in the case of any unaudited statements, to normal recurring
audit adjustments and the absence of footnotes.
Section 3.06. Taxes. Granite State and the Granite State Subsidiaries
are members of the same affiliated group within the meaning of IRC Section
1504(a). Granite State has duly filed, and will file, all federal, state and
local tax returns required to be filed by or with respect to Granite State and
all Granite State Subsidiaries on or prior to the Closing Date (all such
returns being accurate and correct in all material respects) and has duly paid
or will pay, or made or will make, provisions for the payment of all federal,
state and local taxes which have been incurred by or are due or claimed to be
due from Granite State and any Granite State Subsidiary by any taxing
authority or pursuant to any tax sharing agreement or arrangement (written or
oral) on or prior to the Closing Date other than taxes which (i) are not
delinquent or (ii) are being contested in good faith.
Section 3.07. No Material Adverse Effect. Granite State has not
suffered any Material Adverse Effect since December 31, 1996.
Section 3.08. Ownership of Property; Insurance Coverage.
(a) Granite State and the Granite State Subsidiaries have good and,
as to real property, marketable title to all material assets and properties
owned by Granite State or any of its Subsidiaries in the conduct of their
businesses, whether such assets and properties are real or personal, tangible
or intangible, including assets and property reflected in the balance sheets
contained in the Granite State Financials or acquired subsequent thereto
(except to the extent that such assets and properties have been disposed of
for fair value, in the ordinary course of business, since the date of such
balance sheets), subject to no material encumbrances, liens, mortgages,
security interests or pledges, except (i) those items that secure liabilities
for borrowed money and that are described in the Granite State Disclosure
Schedule or described in Section 4.01(v) of Article IV hereof, and (ii)
statutory liens for amounts not yet delinquent or which are being contested
in good faith. Granite State and the Granite State Subsidiaries, as lessee,
have the right under valid and subsisting leases of real and personal
properties used by Granite State and its Subsidiaries in the conduct of their
businesses to occupy and use all such properties as presently occupied and
used by each of them.
(b) Granite State and the Granite State Subsidiaries currently maintain
insurance in amounts considered by Granite State to be reasonable for their
respective operations, and such insurance is similar in scope and coverage
to that maintained by other businesses similarly engaged. Neither Granite
State nor any Granite State Subsidiary has received notice from any
insurance carrier that (i) such insurance will be cancelled or that coverage
thereunder will be reduced or eliminated or (ii) premium costs with respect
to such insurance will be substantially increased.
Section 3.09. Legal Proceedings. Neither Granite State nor any
Granite State Subsidiary is a party to any, and there are no pending or, to
the best of Granite State's knowledge, threatened legal, administrative,
arbitration or other proceedings, claims, actions or governmental
investigations or inquiries of any nature (i) against Granite State or any
Granite State Subsidiary, (ii) to which Granite State's or any Granite State
Subsidiary's assets are or may be subject, (iii) challenging the validity or
propriety of any of the transactions contemplated by this Agreement, or (iv)
which could adversely affect the ability of Granite State to perform under
this Agreement, except for any proceedings, claims, actions, investigations
or inquiries referred to in clauses (i) or (ii) which, individually or in the
aggregate, could not be reasonably expected to have a Material Adverse
Effect on Granite State and the Granite State Subsidiaries taken as a whole.
Section 3.10. Compliance With Applicable Law.
(a) Granite State and the Granite State Subsidiaries hold all licenses,
franchises, permits and authorizations necessary for the lawful conduct of
their businesses under, and have complied in all material respects with,
applicable laws, statutes, orders, rules or regulations of any federal, state
or local governmental authority relating to them, other than where such
failure to hold or such noncompliance will neither result in a limitation in
any material respect on the conduct of their businesses nor otherwise have a
Material Adverse Effect on the assets, business, financial condition,
business prospects or results of operations of Granite State and its
Subsidiaries taken as a whole.
(b) Neither Granite State nor any Granite State Subsidiary has
received any notification or communication from any Regulatory Authority
(i) asserting that Granite State or any Granite State Subsidiary is not in
compliance with any of the statutes, regulations or ordinances which such
Regulatory Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material to Granite
State or any Granite State Subsidiary; (iii) requiring or threatening to
require Granite State or any Granite State Subsidiary, or indicating that
Granite State or any Granite State Subsidiary may be required, to enter into
a cease and desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting, or purporting to restrict or limit,
in any manner the operations of Granite State or any Granite State Subsidiary,
including without limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to direct, restrict or
limit, in any manner the operations of Granite State or any Granite State
Subsidiary, including without limitation any restriction on the payment of
dividends (any such notice, communication, memorandum, agreement or
order described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither Granite State nor any Granite State Subsidiary is a
party to, nor has consented to any Regulatory Agreement.
Section 3.11. Information to be Supplied. The information to be
supplied by Granite State for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein not misleading. The
information supplied, or to be supplied, by Granite State for inclusion in the
Applications will, at the time such documents are filed with any Regulatory
Authority, be accurate in all material aspects.
Section 3.12. ERISA and Employment Arrangements. Granite State has
previously made available to Primary Bank true and complete copies of the
employee pension benefit plans within the meaning of ERISA Section 3(2),
profit sharing plans, stock purchase plans, deferred compensation and
supplemental income plans, supplemental executive retirement plans,
employment and special termination agreements, annual incentive plans,
group insurance plans, and all other employee welfare benefit plans within
the meaning of ERISA Section 3(1) (including vacation pay, sick leave,
short-term disability, long-term disability, and medical plans), and all other
employee benefit plans, policies, agreements and arrangements, all of which
are set forth on the Granite State Disclosure Schedule, maintained or
contributed to for the benefit of the employees or former employees
(including retired employees) and any beneficiaries thereof or directors or
former directors of Granite State or any Granite State Subsidiary, together
with (i) the most recent actuarial (if any) and financial reports relating to
those plans which constitute "qualified plans" under IRC Section 401(a), (ii)
the most recent annual reports relating to such plans filed by them,
respectively, with any government agency, and (iii) all rulings and
determination letters which pertain to any such plans. Neither Granite State
nor any Granite State Subsidiary, and no pension plan maintained by
Granite State or any Granite State Subsidiary, has incurred, directly or
indirectly, within the past six (6) years any liability under Title IV of
ERISA (including to the Pension Benefit Guaranty Corporation) or to the IRS
with respect to any pension plan qualified under IRC Section 401(a) which
liability has resulted in or will result in a Material Adverse Effect with
respect to Granite State, except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully
paid, nor has any reportable event under ERISA Section 4043 occurred with
respect to any such pension plan. With respect to each of such plans that is
subject to Title IV of ERISA, the present value of the accrued benefits
under such plan, based upon the actuarial assumptions used for funding
purposes in the plan's most recent actuarial report did not, as of its latest
valuation date, exceed the then current value of the assets of such plan
allocable to such accrued benefits. Neither Granite State nor any Granite
State Subsidiary has incurred any liability under ERISA Section 4201 for a
complete or partial withdrawal from a multi-employer plan. All "employee
benefit plans," as defined in ERISA Section 3(3), comply and in the past six
(6) years have complied in all material respects with (i) relevant provisions
of ERISA, and (ii) in the case of plans intended to qualify for favorable
income tax treatment, provisions of the IRC relevant to such treatment. No
prohibited transaction (which shall mean any transaction prohibited by
ERISA Section 406 and not exempt under ERISA Section 408 or any
transaction prohibited under IRC Section 4975) has occurred within the past
six (6) years with respect to any employee benefit plan maintained by
Granite State or any Granite State Subsidiary that would result in the
imposition, directly or indirectly, of an excise tax under IRC Section 4975
or other penalty under ERISA or the IRC, which individually or in the
aggregate, has resulted in or will result in a Material Adverse Effect with
respect to Granite State. Granite State and the Granite State Subsidiaries
provide continuation coverage under group health plans for separating
employees in accordance with the provisions of IRC Section 4980B(f). Such
group health plans are in compliance with Section 1862(b)(1) of the Social
Security Act.
Section 3.13. Securities Documents. Granite State has delivered, or
will deliver, to Primary Bank copies of its (i) annual reports on SEC Form
10-K for the years ended December 31, 1996, 1995, and 1994, (ii) quarterly
reports on SEC Form 10-Q for the quarters ended March 31, 1996, June 30,
1996 and September 30, 1996, and (iii) proxy statement dated March 24,
1997 used in connection with its annual meeting of shareholders held in
April 1997. Such reports and such proxy materials complied, at the time
filed with the SEC, in all material respects, with the Exchange Act and the
applicable rules and regulations of the SEC.
Section 3.14. Environmental Matters. To the knowledge of Granite
State, neither Granite State nor any Granite State Subsidiary, nor any
properties owned or operated by Granite State or any Granite State
Subsidiary has been or is in violation of or liable under any Environmental
Law which violation or liability, individually or in the aggregate, has
resulted, or will result, in a Material Adverse Effect with respect to Granite
State and its Subsidiaries taken as a whole. There are no actions, suits or
proceedings, or demands, claims, notices or, to Granite State's knowledge,
investigations (including without limitation notices, demand letters or
requests for information from any environmental agency) instituted or
pending, or to the knowledge of Granite State, threatened, relating to the
liability of any property owned or operated by Granite State or any Granite
State Subsidiary under any Environmental Law.
Section 3.15. Loan Portfolio. The allowance for loan losses reflected,
and to be reflected, in the Granite State Regulatory Reports, and shown, and
to be shown, on the balance sheets contained in the Granite State Financials
have been, and will be, established in accordance with the requirements of
GAAP and all applicable regulatory criteria.
Section 3.16. Brokers, Finders and Financial Advisors. Except for
Granite State's engagement of Friedman, Billings, ▇▇▇▇▇▇ & Co. ("FBR")
in connection with transactions contemplated by this Agreement, neither
Granite State nor any Granite State Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement or the Plan of Merger, or, except for its commitments disclosed
in Granite State Disclosure Schedule 3.16, incurred any liability or
commitment for any fees or commissions to any such person in connection
with the transactions contemplated by this Agreement or the Plan of Merger,
which has not been reflected in the Granite State Financials.
Section 3.17. Loans. Each loan reflected as an asset in the Granite
State Financial Statements (i) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and correct (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of
the obligor named therein, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, in each case other than loans as to which the failure to satisfy
the foregoing standards would not have a Material Adverse Effect on Granite
State. All loan transactions with Affiliates (a) were made in the ordinary
course of business, (b) were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other Persons, and (c) did not involve more
than the normal risk of collectability or present other unfavorable features.
Section 3.18. Antitakeover Provisions Inapplicable. Except as set
forth on Granite State Disclosure Schedule 3.18, the transactions
contemplated by this Agreement are not subject to any applicable state
takeover law.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01. Conduct of Primary Bank's Business.
(a) From the date of this Agreement to the Closing Date, Primary
Bank will conduct its business and engage in transactions, including
extensions of credit, only in the ordinary course and consistent with past
practice and policies, except as otherwise required or contemplated by this
Agreement or with the written consent of Granite State. Primary Bank will
use its reasonable good faith efforts, to (i) preserve its business
organizations intact, (ii) maintain good relationships with employees, and
(iii) preserve for itself the good will of customers of Primary Bank and
others with whom business relationships exist. From the date hereof to the
Closing Date, except as otherwise consented to or approved by Granite State
in writing or as contemplated or required by this Agreement, Primary Bank
will not, and Primary Bank will not permit any Primary Bank Subsidiary to:
(i) amend or change any provision of its articles of agreement,
charter, or bylaws;
(ii) change the number of authorized or issued shares of its capital
stock or issue or grant any option, warrant, call, commitment, subscription,
Right or agreement of any character relating to its authorized or issued
capital stock or any securities convertible into shares of such stock, or
split, combine or reclassify any shares of capital stock, or declare, set
aside or pay any dividend or other distribution in respect of capital stock,
or redeem or otherwise acquire any shares of capital stock, except that
(A) Primary Bank may issue shares of Primary Bank Common Stock upon the valid
exercise, in accordance with the information set forth in Primary Bank
Disclosure Schedule 2.02, of presently outstanding options to acquire Primary
Bank Common Stock under the Primary Bank Stock Option Plans;
(iii) except pursuant to the arrangements set forth in Primary Bank
Disclosure Schedule 4.01, grant any severance or termination pay (other
than pursuant to written policies or written agreements of Primary Bank in
effect on the date hereof and provided to Granite State prior to the date
hereof) to, or enter into any new or amend any existing employment
agreement with, or increase the compensation of (except for normal
increases in the ordinary course of business consistent in timing and amount
with past practice), any employee, officer or director of Primary Bank or any
Primary Bank Subsidiary; provided that Primary Bank, in its sole discretion,
may enter severance arrangements with, or adopt a severance policy with
respect to, employees or officers of Primary Bank in connection with
employment terminations to result from the Merger after the Effective Date,
provided that the total costs of such severance payments shall not exceed
$600,000 (excluding payments to be made pursuant to the terms of
employment or special termination agreements currently in effect).
(iv) merge or consolidate Primary Bank or any Primary Bank
Subsidiary with any other corporation; sell or lease all or any substantial
portion of the assets or business of Primary Bank or any Primary Bank
Subsidiary; make any acquisition of all or any substantial portion of the
business or assets of any other person, firm, association, corporation or
business organization other than in connection with foreclosures,
settlements in lieu of foreclosure, troubled loan or debt restructuring, or
the collection of any loan or credit arrangement between Primary Bank, or any
Primary Bank Subsidiary, and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit the
revocation or surrender by any Primary Bank Subsidiary of its certificate of
authority to maintain, or file an application for the relocation of, any
existing branch office, or file an application for a certificate of authority
to establish a new branch office;
(v) sell or otherwise dispose of the capital stock of Primary Bank or
sell or otherwise dispose of any asset of Primary Bank or of any Primary
Bank Subsidiary other than in the ordinary course of business consistent
with past practice; subject any asset of Primary Bank or of any Primary
Bank Subsidiary to a lien, pledge, security interest or other encumbrance
(other than in connection with deposits, repurchase agreements, Primary
Bank acceptances, advances from the Federal Home Loan Bank of Boston,
"treasury tax and loan" accounts established in the ordinary course of
business and transactions in "federal funds" and the satisfaction of legal
requirements in the exercise of trust powers) other than in the ordinary
course of business consistent with past practice; incur any indebtedness for
borrowed money (or guarantee any indebtedness for borrowed money),
except in the ordinary course of business consistent with past practice;
(vi) take any action which would result in any of the representations
and warranties of Primary Bank set forth in this Agreement becoming
untrue as of any date after the date hereof or in any of the conditions set
forth in Article V hereof not being satisfied, except in each case as may be
required by applicable law;
(vii) change any method, practice or principle of accounting, except
as may be required from time to time by GAAP (without regard to any
optional early adoption date) or any Regulatory Authority responsible for
regulating Primary Bank;
(viii) waive, release, grant or transfer any material rights of value or
modify or change in any material respect any existing material agreement
or indebtedness to which Primary Bank or any Primary Bank Subsidiary is
a party, other than in the ordinary course of business, consistent with past
practice;
(ix) implement any pension, retirement, profit sharing, bonus,
welfare benefit or similar plan or arrangement that was not in effect on the
date of this Agreement, or materially amend any existing plan or
arrangement except to the extent such amendments do not result in an
increase in cost; contribute to any pension, retirement, profit sharing,
bonus, welfare benefit or similar plan or arrangement other than in amounts
and in a manner consistent with past practice;
(x) purchase any security for its investment portfolio not rated "A"
or higher by either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investor
Services, Inc.;
(xi) fail to review with a representative of Granite State on a regular
basis proposed loans or other credit facility commitments (including without
limitation, lines of credit and letters of credit, but excluding loans to be
secured by mortgages on one- to four-family residential real estate) to any
borrower or group of affiliated borrowers in excess of $350,000, or any
increase, compromise, extension, renewal or modification of any existing
loan or commitment outstanding in excess of $350,000;
(xii) except as set forth on the Primary Bank Disclosure Schedule,
enter into, renew, extend or modify any other transaction with any Affiliate;
(xiii) enter into any interest rate swap or similar commitment,
agreement or arrangement;
(xiv) except for the execution of this Agreement, take any action that
would give rise to a right of payment to any individual under any
employment agreement;
(xv) intentionally and knowingly take any action that would preclude
satisfaction of the condition to closing contained in Section 5.02(k) relating
to financial accounting treatment of the Merger;
(xvi) change its lending, investment, asset/liability management or
other material banking policies in any material respect except as may be
required by changes in applicable law or regulations or in response to
examination comments by a Regulatory Authority; or
(xvii) agree to do any of the foregoing.
For purposes of this Section 4.01, unless provided for in a business
plan, budget or similar document delivered to Granite State prior to the date
of this Agreement, it shall not be considered in the ordinary course of
business for Primary Bank or any Primary Bank Subsidiary to do any of the
following: (i) make any capital expenditure of $50,000 or more not
disclosed on Primary Bank Disclosure Schedule 4.01, without the prior
written consent of Granite State; (ii) except as set forth in Primary Bank
Disclosure Schedule 4.01, make any sale, assignment, transfer, pledge,
hypothecation or other disposition of any assets having a book or market
value, whichever is greater, in the aggregate in excess of $1,000,000, other
than pledges of assets to secure government deposits, to exercise trust
powers, sales of assets received in satisfaction of debts previously
contracted in the normal course of business, issuance of loans, sales of
previously purchased government guaranteed loans, or transactions in the
investment securities portfolio by Primary Bank or a Primary Bank
Subsidiary or repurchase agreements made, in each case, in the ordinary
course of business; or (iii) undertake or enter any lease, contract or other
commitment for its account, other than in the normal course of providing
credit to customers as part of its banking business, involving a payment by
Primary Bank or any Primary Bank Subsidiary of more than $50,000
annually, or containing a material financial commitment and extending
beyond 12 months from the date hereof.
Section 4.02. Access; Confidentiality.
(a) From the date of this Agreement through the Closing Date,
Primary Bank or Granite State, as the case may be, shall afford to, and shall
cause each Primary Bank Subsidiary or Granite State Subsidiary to afford
to, the other party and its authorized agents and representatives, access to
their respective properties, assets, books and records and personnel, during
normal business hours and after reasonable notice; and the officers of
Primary Bank and Granite State will furnish any person making such
investigation on behalf of the other party with such financial and operating
data and other information with respect to the businesses, properties, assets,
books and records and personnel as the person making such investigation
shall from time to time reasonably request. None of the parties or their
respective subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of their respective customers, jeopardize the attorney-client privilege
of the institution or company in possession or control of such information
or contravene any law, rule, regulation, order, judgment, decree, fiduciary
duty or binding agreement entered into prior to the date of this Agreement.
The parties hereto will make appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentence
apply. The parties will hold all such information delivered in confidence to
the extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated April 7, 1997, among Primary Bank,
Granite State and Granite Bank (the "Confidentiality Agreement").
(b) Primary Bank and Granite State each agree to conduct such
investigation and discussions hereunder in a manner so as not to interfere
unreasonably with normal operations and customer and employee
relationships of the other party.
(c) In addition to the access permitted by subparagraph (a) above,
from the date of this Agreement through the Closing Date, Primary Bank
shall permit employees of Granite State reasonable access to information
relating to problem loans, loan restructurings and loan work-outs of Primary
Bank. Granite State shall have the right, however, at Granite State's expense,
to cause Primary Bank or any Primary Bank Subsidiary to obtain an
appraisal by an independent third party experienced in such matters, and
mutually satisfactory to Granite State and Primary Bank, of the assets or
property securing any loan made by Primary Bank or any Primary Bank
Subsidiary, provided that such appraisal does not unreasonably delay any
such loan restructuring or loan work-out.
(d) If the transactions contemplated by this Agreement shall not be
consummated, Primary Bank and Granite State will each destroy or return
all documents and records obtained from the other party or its
representatives, during the course of its investigation and will cause all
information with respect to the other party obtained pursuant to this
Agreement or preliminarily thereto to be kept confidential, except to the
extent such information becomes public through no fault of the party to whom
the information was provided or any of its representatives or agents and
except to the extent disclosure of any such information is legally required.
Primary Bank and Granite State shall each give prompt written notice to
the other party of any contemplated disclosure where such disclosure is so
legally required.
Section 4.03. Regulatory Matters and Consents.
(a) Granite State and Primary Bank will prepare all Applications and
make all filings for, and use their best efforts to obtain as promptly as
practicable after the date hereof, all necessary permits, consents, approvals,
waivers and authorizations of all Regulatory Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement.
(b) Primary Bank will furnish Granite State with all information
concerning Primary Bank and Primary Bank Subsidiaries as may be
necessary or advisable in connection with any Application or filing made by
or on behalf of Granite State to any Regulatory Authority in connection with
the transactions contemplated by this Agreement.
(c) Granite State and Primary Bank will promptly furnish each other
with copies of all material written communications to, or received by them
from any Regulatory Authority in respect of the transactions contemplated
hereby, except information which is filed by either party which is designated
as confidential.
(d) The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities. Granite State
will furnish Primary Bank with (i) copies of all Applications prior to filing
with any Regulatory Authority and provide Primary Bank a reasonable
opportunity to suggest changes to such Applications, which suggested
changes Granite State may, in its reasonable discretion accept or reject, (ii)
copies of all Applications filed by Granite State and (iii) copies of all
documents filed by Granite State under the Securities Exchange Act of
1934, as amended.
(e) Primary Bank will cooperate with Granite State in the foregoing
matters and will furnish Granite State with all information concerning
Primary Bank and Primary Bank Subsidiaries as may be necessary or
advisable in connection with any Application or filing (including the
Registration Statement and any report filed with the SEC) made by or on
behalf of Granite State to any Regulatory Authority in connection with the
transactions contemplated by this Agreement, and such information will be
accurate and complete in all material respects. In connection therewith,
Primary Bank will provide certificates and other documents reasonably
requested by Granite State.
Section 4.04. Taking of Necessary Action.
(a) Granite State and Primary Bank shall each use its best efforts in
good faith, and each of them shall cause its Subsidiaries to use their best
efforts in good faith, to (i) furnish such information as may be required in
connection with the preparation of the documents referred to in Section 4.03
of this Agreement, and (ii) take or cause to be taken all action necessary or
desirable on its part using its best efforts so as to permit completion of the
Merger including, without limitation, (A) obtaining the consent or approval
of each individual, partnership, corporation, association or other business
or professional entity whose consent or approval is required or desirable for
consummation of the transactions contemplated hereby (including
assignment of leases without any change in terms), provided that neither
Primary Bank nor any Primary Bank Subsidiary shall agree to make any
payments or modifications to agreements in connection therewith without
the prior written consent of Granite State, and (B) requesting the delivery
of appropriate opinions, consents and letters from its counsel and
independent auditors. No party hereto shall take, or cause, or to the best of
its ability permit to be taken, any action that would substantially impair the
prospects of completing the Merger pursuant to this Agreement and the Plan
of Merger; provided that nothing herein contained shall preclude Granite
State or Primary Bank from exercising its rights under this Agreement or
the Option Agreement.
(b) Granite State shall promptly prepare, subject to the review and
consent of Primary Bank with respect to matters relating to the transactions
contemplated by this Agreement, a Prospectus/Proxy Statement to be filed
by Granite State with the SEC and to be mailed to their respective
shareholders in connection with the meetings of their respective
shareholders and transactions contemplated hereby, which Prospectus/Proxy
statement shall conform to all applicable legal requirements. Granite State
shall, as promptly as practicable following the preparation thereof, file the
Registration Statement with the SEC and Primary Bank and Granite State
shall use all reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filing. Granite State will advise Primary Bank, promptly after Granite State
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 the
shares of capital stock issuable pursuant to the Registration Statement, or
the initiation or 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. Granite State shall use its best
efforts to obtain, prior to the effective date of the Registration Statement,
all necessary state securities laws or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement. Granite
State will provide Primary Bank with as many copies of such Registration
Statement and all amendments thereto promptly upon the filing thereof as
Primary Bank may reasonably request.
Section 4.05. Certain Agreements.
(a) From and after the Effective Time through the sixth anniversary
thereof, Granite State agrees to indemnify, defend and hold harmless each
present and former director and officer of Primary Bank and its Subsidiaries
determined as of the Closing Date (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses (including reasonable attorneys'
fees and expenses), liabilities, judgments or amounts paid in settlement
(with the approval of Granite State, which approval shall not be
unreasonably withheld) or in connection with any claim, action, suit,
proceeding or investigation arising out of matters existing or occurring at or
prior to the Effective Time (a "Claim") in which an Indemnified Party is, or
is threatened to be made, a party or a witness based in whole or in part on,
or arising in whole or in part out of, the fact that such person is or was a
director or officer of Primary Bank or any of its subsidiaries, regardless of
whether such Claim is asserted or claimed prior to, at or after the Closing
Date, to the fullest extent to which directors and officers of Primary Bank
are entitled under New Hampshire law, Primary Bank's articles of
agreement and bylaws, or other applicable law as in effect on the date
hereof (and Granite State shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to
the extent permissible to a New Hampshire corporation under New
Hampshire law and Primary Bank's articles of agreement and bylaws as in
effect on the date hereof; provided, that the person to whom expenses are
advanced provides an undertaking to repay such expenses if it is ultimately
determined that such person is not entitled to indemnification). All rights
to indemnification in respect of a Claim asserted or made within the period
described in the preceding sentence shall continue until the final disposition
of such Claim.
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.05(a), upon learning of any Claim, shall promptly notify Granite
State, but the failure to so notify shall not relieve Granite State of any
liability it may have to such Indemnified Party except to the extent that such
failure materially prejudices Granite State. In the event of any Claim,
(1) Granite State shall have the right to assume the defense thereof (with
counsel reasonably satisfactory to the Indemnified Party) and 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 Granite State elects not
to assume such defense or counsel for the Indemnified Parties advises that
there are issues which raise conflicts of interest between Granite State and
the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Granite State shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received, (2) the Indemnified Parties will cooperate in the
defense of any such Claim and (3) Granite State shall not be liable for any
settlement effected without its prior written consent (which consent shall
not unreasonably be withheld).
(c) Granite State shall use its best efforts to cause the persons
serving as officers and directors of Primary Bank immediately prior to the
Effective Time to be covered for a period of three years from the Effective
Time by the directors' and officers' liability insurance policy maintained by
Primary Bank (provided that Granite State may substitute therefor policies
of at least the same coverage and amounts containing terms and conditions
which are not less advantageous than such policy) with respect to acts or
omissions occurring prior to the Effective Time which were committed by
such officers and directors in their capacity as such; provided, however, that
in no event shall Granite State be required to expend more than $30,000
annually (the "Insurance Amount") to maintain or procure insurance
coverage pursuant hereto; and provided, further, that if Granite State is
unable to maintain or obtain the insurance called for by this Section 4.05(c),
Granite State shall use all reasonable efforts to obtain as much comparable
insurance as is available for the Insurance Amount.
(d) In the event Granite State or any of is successors or assigns
(1) consolidates with or merges into any other Person and shall not continue
or survive such consolidation or merger, or (2) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in
each such case, to the extent necessary, proper provision shall be made so
that the successors and assigns of Granite State assume the obligations set
forth in this Section 4.05.
(e) The provisions of this Section 4.05 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
(f) Granite State agrees to honor and Granite State agrees to cause
Granite Bank to honor all terms and conditions of all existing employment
contracts and special termination agreements disclosed in the Primary Bank
Disclosure Schedules. Except as otherwise provided herein, and unless
otherwise agreed to in writing by the affected officer and employee, Granite
State agrees for itself and the Granite State Subsidiaries that the
consummation of the transactions contemplated hereby is a "Change in
Control" as defined in the employment and special termination agreements
entered into between Primary Bank and certain officers and employees as
disclosed on the Primary Bank Disclosure Schedule, and represents that the
consummation of the transactions contemplated hereby is not a "Change in
Control" as defined in the employment and special termination agreements
entered into between Granite State and certain officers and employees
thereof.
Section 4.06. No Other Bids and Related Matters. Primary Bank will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal (as hereinafter defined), will enforce
any confidentiality agreements and will take the necessary steps to inform
the appropriate individuals or entities referred to in the first sentence of
this Section 4.06 of the obligations undertaken in this Section 4.06. Primary
Bank agrees that neither Primary Bank nor any of its Subsidiaries shall, and
that Primary Bank and its Subsidiaries shall direct and use all reasonable
efforts to cause their respective directors, officers, employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its subsidiaries) not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase
of all or any substantial part of the assets or any equity securities of,
Primary Bank or any of its Subsidiaries (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
discussions or negotiations with, or provide any confidential information or
data to, any Person relating to an Acquisition Proposal; provided, that, if
Primary Bank is not otherwise in violation of this Section 4.06, the Board of
Directors of Primary Bank may furnish or cause to be furnished information to
any third party and may participate in such discussions and negotiations
directly or through its representatives if such Board of Directors, after
having consulted with and considered the written advice of ▇▇▇▇▇▇▇,
Procter & ▇▇▇▇ LLP, counsel to Primary Bank, has determined that there is a
reasonable basis to conclude that the failure to provide such information or
participate in such other negotiations and discussions would constitute a
breach of their fiduciary duties under New Hampshire law. If any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, Primary Bank or any of its subsidiaries, Primary Bank will
immediately notify Granite State. Nothing contained in this Section 4.06
shall be deemed to prohibit Primary Bank from (i) taking or disclosing to
shareholders any position necessary in order to comply with the filing and
disclosure requirements of Section 14(d)(9) of the Exchange Act and the
related rules and regulations of the SEC, and (ii) making any disclosure to
the shareholders of Primary Bank which the Board of Directors of Primary
Bank, after having consulted with and considered the written advice of
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel to Primary Bank, has reasonably
determined is required in order to comply with Primary Bank's fiduciary
duties to its shareholders under applicable law.
Section 4.07. Duty to Advise; Duty to Update Primary Bank's
Disclosure Schedule. Primary Bank shall promptly advise Granite State of
any change or event having a Material Adverse Effect on it or on any
Primary Bank Subsidiary or which it believes would or would be reasonably
likely to cause or constitute a material breach of any of its representations,
warranties or covenants set forth herein. Primary Bank shall update Primary
Bank's Disclosure Schedule as promptly as practicable after the occurrence
of an event or fact which, if such event or fact had occurred prior to the
date of this Agreement, would have been disclosed in the Primary Bank
Disclosure Schedule. The delivery of such updated Schedule shall not
relieve Primary Bank from any breach or violation of this Agreement and
shall not have any effect for the purposes of determining the satisfaction of
the condition set forth in Sections 5.02(c) hereof.
Section 4.08. Conduct of Granite State's Business.
(a) From the date of this Agreement to the Closing Date, Granite
State will use its best efforts to (x) preserve its business organizations
intact, (y) maintain good relationships with employees, and (z) preserve for
itself the goodwill of customers of Granite Bank. From the date of this
Agreement to the Closing Date, neither Granite State nor Granite Bank will
(i) amend its articles of agreement or bylaws in any manner inconsistent
with the prompt and timely consummation of the transactions contemplated
by this Agreement, (ii) issue any equity securities except in connection with
the exercise of any employee or director stock options, (iii) take any action
which would result in any of the representations and warranties of Granite
State or Granite Bank set forth in this Agreement becoming untrue as of any
date after the date hereof or in any of the conditions set forth in Article V
hereof not being satisfied, except in each case as may be required by
applicable law, (iv) intentionally and knowingly take any action that would
preclude satisfaction of the condition to closing contained in Section 5.02(k)
relating to financial accounting treatment of the Merger; or (v) agree to do
any of the foregoing.
(b) From the date of this Agreement through the Closing Date,
Granite State will not, nor will it permit Granite Bank to, enter into any
agreement to acquire or sell any material branch office (excluding the de
novo establishment of a branch office), or to acquire all or substantially all
of the capital stock of, merge with, or purchase substantially all the assets
and assume substantially all the liabilities of, any other company (an
"Acquisition"), unless the prior written consent of Primary Bank is
obtained.
Section 4.09. Board and Committee Minutes. Granite State and
Primary Bank shall each provide to the other, within thirty (30) days after
any meeting of their respective Board of Directors, or any committee
thereof, or any senior management committee, a copy of the minutes of such
meeting, except that with respect to any meeting held within thirty (30) days
of the Closing Date, such minutes shall be provided to each party prior to
the Closing Date.
Section 4.10. Undertakings by Granite State and Primary Bank.
(a) From and after the date of this Agreement:
(i) Voting by Directors. Granite State and Primary Bank shall
recommend to all members of their respective Board of Directors to vote all
shares of Primary Bank Common Stock, or Granite State Common Stock,
as the case may be, beneficially owned by each such director in favor of this
Agreement. As promptly as practicable following execution of this
Agreement, Granite State's Directors shall enter into the agreement set forth
as Exhibit 2 to this Agreement;
(ii) Proxy Solicitor. Granite State and Primary Bank shall each
retain a proxy solicitor in connection with the solicitation of shareholder
approval of this Agreement;
(iii) Timely Review. If requested by Granite State at Granite
State's sole expense, Primary Bank shall cause its independent certified
public accountants to perform a review of its unaudited consolidated
financial statements as of the end of any calendar quarter, in accordance
with Statement of Auditing Standards No. 36, and to issue their report on
such financial statements as soon as is practicable thereafter;
(iv) Outside Service Bureau Contracts. If requested to do so by
Granite State, Primary Bank shall use its best efforts to obtain an extension
of any contract with an outside service bureau or other vendor of services
to Primary Bank, on terms and conditions mutually acceptable to Primary
Bank and Granite State;
(v) Committee Meetings. Primary Bank shall permit a
representative of Granite State, who is reasonably acceptable to Primary
Bank, to attend all committee meetings of Primary Bank and Primary Bank
management including, without limitation, any loan or asset/liability
committee. Primary Bank shall respond reasonably and in good faith to any
request of Granite State to permit a representative of Granite State, who is
reasonably acceptable to Primary Bank, to attend any meeting of Primary
Bank's Board of Directors or the Executive Committee thereof;
(vi) List of Nonperforming Assets. Primary Bank and Granite
State shall provide the other, within ten (10) days of the end of each
calendar month, a written list of nonperforming assets (the term
"nonperforming assets," for purposes of this subsection, means (i) loans that
are "troubled debt restructuring" as defined in Statement of Financial
Accounting Standards No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructuring," (ii) loans on nonaccrual, (iii) real estate
owned, and (iv) all loans ninety (90) days or more past due) as of the end of
such month; and
(vii) Reserves and Merger-Related Costs. On or before the
Effective Date, Primary Bank shall establish such additional accruals and
reserves as may be necessary to conform the accounting reserve practices
and methods (including credit loss practices and methods) of Primary Bank
to those of Granite State (as such practices and methods are to be applied
to Primary Bank from and after the Closing Date) and Granite State's plans
with respect to the conduct of the business of Primary Bank following the
Merger and otherwise to reflect Merger-related expenses and costs incurred
by Primary Bank, provided, however, that Primary Bank shall not be
required to take such action unless Granite State agrees in writing that all
conditions to closing set forth in Section 5.02 have been satisfied or waived
(except for the expiration of any applicable waiting periods); prior to the
delivery by Granite State of the writing referred to in the preceding clause,
Primary Bank shall provide Granite State a written statement, certified
without personal liability by the chief executive officer of Primary Bank and
dated the date of such writing, that the representation made in Section 2.15
hereof is true as of such date or, alternatively, setting forth in detail the
circumstances that prevent such representation from being true as of such
date; and no accrual or reserve made by Primary Bank or any Primary Bank
Subsidiary pursuant to this subsection, or any litigation or regulatory
proceeding arising out of any such accrual or reserve, shall constitute or be
deemed to be a breach or violation of any representation, warranty,
covenant, condition or other provision of this Agreement or to constitute a
termination event within the meaning of Section 6.01(d) hereof.
(b) From and after the date of this Agreement, Granite State and
Primary Bank shall each:
(i) Shareholders Meetings. Submit this Agreement to its
shareholders for approval at a meeting to be held as soon as practicable, and
use their respective best efforts to cause their Boards of Director to
recommend approval of this Agreement to their respective shareholders.
The Board of Directors of Primary Bank may fail to make such a
recommendation, or withdraw, modify or change any such recommendation
only if such Board of Directors, after having consulted with and considered
the written advice of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel to Primary
Bank, has determined that there is a reasonable basis to conclude that the
making of such recommendation, or the failure so to withdraw, modify or
change its recommendation, would constitute a breach of the fiduciary
duties of such directors under New Hampshire law, and such failure,
withdrawal, modification or change will not constitute a breach of this
Agreement;
(ii) Filings and Approvals. Cooperate with the other in the
preparation and filing, as soon as practicable, of (A) the Applications, (B)
the Registration Statement and related filings under state securities laws
covering the Granite State Common Stock and related Granite State Stock
Purchase Rights to be issued pursuant to the Merger, (C) all other
documents necessary to obtain any other approvals and consents required
to effect the completion of the Merger, and (D) all other documents
contemplated by this Agreement;
(iii) Identification of Primary Bank's Affiliates. Cooperate with
the other and use its best efforts to identify those persons who may be
deemed to be Affiliates of Primary Bank;
(iv) Public Announcements. Cooperate and cause its respective
officers, directors, employees and agents to cooperate in good faith,
consistent with their respective legal obligations, in the preparation and
distribution of, and agree upon the form and substance of, any press release
related to this Agreement and the transactions contemplated hereby, and any
other public disclosures related thereto, including without limitation
communications to Primary Bank shareholders, Primary Bank's internal
announcements and customer disclosures, but nothing contained herein
shall prohibit either party from making any disclosure which its counsel
deems necessary, provided that the disclosing party notifies the other party
reasonably in advance of the timing and contents of such disclosure;
(v) Maintenance of Insurance. Maintain, and cause their
respective Subsidiaries to maintain, insurance in such amounts as are
reasonable to cover such risks as are customary in relation to the character
and location of its properties and the nature of its business;
(vi) Maintenance of Books and Records. Maintain, and cause
their respective Subsidiaries to maintain, books of account and records in
accordance with generally accepted accounting principles applied on a basis
consistent with those principles used in preparing the financial statements
heretofore delivered;
(vii) Delivery of Securities Documents. Deliver to the other,
copies of all Securities Documents simultaneously with the filing thereof;
(viii) Taxes. File all federal, state, and local tax returns
required to be filed by them or their respective Subsidiaries on or before the
date such returns are due (including any extensions) and pay all taxes shown
to be due on such returns on or before the date such payment is due; or
Section 4.11. Employee and Termination Benefits; Directors and
Management.
(a) Employee Benefits. On and after the Effective Date, the
employee pension and welfare benefit plans of Granite State and Primary
Bank may, at Granite State's election and subject to the requirements of the
IRC, continue to be maintained separately or consolidated. In the event of
a consolidation of any or all of such plans or in the event of termination of
the Primary Bank benefit plans, Primary Bank and Primary Bank employees
shall receive credit for service with Primary Bank under any Granite State
benefit plan, or new Granite State benefit plan in which such employees
would be eligible to enroll for purposes of eligibility and vesting
determination (but not for benefit accrual purposes).Granite State and/or
Granite Bank shall make available to Primary Bank employees who become
employed by Granite State or a Granite subsidiary, employer-provided
health coverage on the same basis as it provides such coverage to Granite
State or Granite Bank employees. In the event of any termination of or
consolidation of any Primary Bank health plan with any Granite State health
plan, all employees of Primary Bank who become full-time employees of
Granite State or Granite Bank, who were eligible for continued coverage
under the terminated or consolidated plan shall have immediate coverage of
any pre-existing condition. In the event of a termination or consolidation
of any Primary Bank health plan, terminated Primary Bank employees and
qualified beneficiaries or retained Primary Bank employees who do not
satisfy the Granite State conditions for employer-provided coverage, will
have the right to continue coverage under group health plans of Granite
State and/or Granite State subsidiaries in accordance with IRC Section
4980B(f).
(b) Upon the Effective Date, ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the President
and Chief Executive Officer of Primary Bank, shall become President of
Granite Bank and shall be offered a 3-year employment agreement with
Granite Bank on terms no less favorable than the contract between Primary
Bank and ▇▇. ▇▇▇▇▇ in effect as of the date of this Agreement, and which
shall provide that ▇▇. ▇▇▇▇▇ is not entitled to any payments under his
employment agreement in effect as of the date hereof as a result of this
Agreement and the Merger. Upon the Effective Date, ▇▇. ▇▇▇▇▇ shall be
granted an incentive stock option by Granite State to purchase 5,000 shares
of Granite State Common Stock at an exercise price equal to the Granite
State Market Value, which option shall be exercisable in equal instalments
over a five year period and which shall vest immediately upon a change in
control of Granite State. In addition, ▇▇. ▇▇▇▇▇ will be entitled to
participate in a Supplemental Executive Retirement Plan that will provide
him with benefits to which he would have been entitled under any tax
qualified employee pension plan sponsored by Granite Bank but for the
limitations imposed by Sections 401(a)(17), 415(b)(1)(A) and 415(c)(1)(A)
of the IRC. Upon the Effective Date, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice
President of Primary Bank, shall become a Senior Vice President of Granite
Bank, and shall be offered an employment agreement substantially
equivalent to the contract between Primary Bank and ▇▇. ▇▇▇▇▇▇▇▇ in
effect as of the date of this Agreement, which employment agreement shall
terminate two years from the Effective Date, shall provide a severance
payment upon termination equal to two year's salary , and which shall
provide that no payments thereunder (or under the existing employment and
special termination agreement between Primary Bank and ▇▇. ▇▇▇▇▇▇▇▇)
are due ▇▇. ▇▇▇▇▇▇▇▇ as a result of this Agreement and the Merger. Upon
the Effective Date, ▇▇. ▇▇▇▇▇▇▇▇ shall also be provided a special
termination agreement substantially in the form currently provided to the
executive officers of Granite State. If the Effective Date occurs in calendar
year 1997, Messrs. ▇▇▇▇▇ and Monaghan shall be entitled to participate in
the Granite Bank senior officer incentive compensation bonus plan for 1997
on the same basis as other senior officers of Granite Bank. Other employees
of Primary Bank shall be entitled to pro rata bonus payments under the
Primary Bank bonus or incentive plan in effect on the date hereof in
amounts accrued by Primary Bank through the Effective Date and consistent
with past practice.
(c) Prior to or at the Effective Date, three directors of Primary Bank
to be designated by Primary Bank (one of whom shall be ▇▇. ▇▇▇▇▇), after
consultation with and the consent of Granite State (which consent shall not
be unreasonably withheld), shall be elected to the Board of Directors of
Granite State effective upon the Effective Date, and shall be divided evenly
among the classes.
(d) Prior to or at the Effective Date, four directors of Primary Bank
to be designated by Primary Bank (one of whom shall be ▇▇. ▇▇▇▇▇), after
consultation with and the consent of Granite State and Granite Bank (which
consent shall not be unreasonably withheld), shall be elected to the Board
of Directors of Granite Bank effective upon the Effective Date and shall be
divided as nearly equally among the classes as is practicable.
Section 4.12. Duty to Advise; Duty to Update Granite State's
Disclosure Schedule. Granite State shall promptly advise Primary Bank of
any change or event having a Material Adverse Effect on it or on any
Granite State Subsidiary or which it believes would or would be reasonably
likely to cause or constitute a material breach of any of its representations,
warranties or covenants set forth herein. Granite State shall update Granite
State's Disclosure Schedules as promptly as practicable after the occurrence
of an event or fact which, if such event or fact had occurred prior to the
date of this Agreement, would have been disclosed in the Granite State
Disclosure Schedule. The delivery of such updated Schedule shall not
relieve Granite State from any breach or violation of this Agreement and
shall not have any effect for the purposes of determining the satisfaction of
the condition set forth in Sections 5.01(c) hereof.
Section 4.13. Affiliate Letter. No later than five days after the date of
this Agreement, Primary Bank shall use its best efforts to cause to be
delivered to Granite State the Letter Agreement attached hereto as Exhibit
1, executed by each director and officer set forth thereon.
ARTICLE V
CONDITIONS
Section 5.01. Conditions to Primary Bank's Obligations under this
Agreement. The obligations of Primary Bank hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Primary Bank pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, Granite State and Granite Bank to authorize the execution,
delivery and performance of this Agreement and the Plan of Merger,
respectively, and the consummation of the transactions contemplated by this
Agreement and the Plan of Merger, shall have been duly and validly taken
by Granite State and Granite Bank; and Primary Bank shall have received
certified copies of the resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of Granite State
required by this Agreement to be performed by Granite State at or prior to
the Closing Date shall have been duly performed and complied with in all
respects, except where the failure to perform or comply with any obligation
or covenant would not, either individually or in the aggregate, result in a
Material Adverse Effect with respect to Granite State;
(c) Representations and Warranties. The representations and
warranties of Granite State set forth in this Agreement shall be true and
correct, as of the date of this Agreement, and as of the Closing Date as
though made on and as of the Closing Date, except as to any representation
or warranty (i) which specifically relates to an earlier date or (ii) where
the breach of the representation or warranty would not, either individually or
in the aggregate, constitute a Material Adverse Effect with respect to Granite
State and Granite Bank;
(d) Approvals of Regulatory Authorities. Granite State shall have
received all required approvals of Regulatory Authorities of the Merger
(without the imposition of any conditions that are in Granite State's
reasonable judgement unduly burdensome) and delivered copies thereof to
Primary Bank; and all notice and waiting periods required thereunder shall
have expired or been terminated. For purposes of this paragraph, a
divestiture by Granite Bank of its Peterborough, New Hampshire branch
that is required as a condition to any regulatory approval shall not be
deemed unduly burdensome;
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since December 31, 1996, there
shall not have occurred any Material Adverse Effect with respect to Granite
State;
(g) Officer's Certificate. Granite State shall have delivered to
Primary Bank a certificate, dated the Closing Date and signed, without
personal liability, by its chairman of the board or president, to the effect
that the conditions set forth in subsections (a) through (f) of this
Section 5.01 and Section 5.02(m) have been satisfied, to the best knowledge of
the officer executing the same;
(h) Opinion of Granite State's Counsel. Primary Bank shall have
received an opinion of ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.,
counsel to Granite State, dated the Closing Date, in form and substance
reasonably satisfactory to Primary Bank and its counsel to the effect set
forth on Exhibit 4 attached hereto;
(i) Registration Statement. The Registration Statement shall be
effective under the Securities Act and no proceedings shall be pending or
threatened by the SEC to suspend the effectiveness of the Registration
Statement; and all required approvals by state securities or "blue sky"
authorities with respect to the transactions contemplated by this Agreement,
shall have been obtained;
(j) Tax Opinion. Primary Bank shall have received an opinion of
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. substantially to the effect
set forth on Exhibit 5 attached hereto;
(k) Approval of Primary Bank's Shareholders. This Agreement shall
have been approved by the shareholders of Primary Bank by such vote as is
required under applicable New Hampshire law, Primary Bank's articles of
agreement and bylaws, and under Nasdaq requirements applicable to it; and
(l) Investment Banking Opinion. Primary Bank shall have received
the written opinion from Northeast Capital on or before the date of this
Agreement and updated in writing as of a date within five (5) days of
mailing the Prospectus/Proxy Statement, to the effect that the consideration
to be received by shareholders of Primary Bank pursuant to this Agreement
is fair, from a financial point of view, to such shareholders.
(m) Stock Exchange Listing. The shares of Granite State Common
Stock which shall be issued to the shareholders of Primary Bank upon
consummation of the Merger shall have been authorized for listing on the
Nasdaq National Market System, subject to official notice of issuance.
Section 5.02. Conditions to Granite State's Obligations under this
Agreement. The obligations of Granite State hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Granite State pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, Primary Bank to authorize the execution, delivery and
performance of this Agreement and the Plan of Merger, respectively, and
the consummation of the transactions contemplated by this Agreement and
the Plan of Merger, shall have been duly and validly taken by Primary Bank;
and Granite State shall have received certified copies of the resolutions
evidencing such authorizations;
(b) Covenants. The obligations and covenants of Primary Bank,
required by this Agreement to be performed by it at or prior to the Closing
Date shall have been duly performed and complied with in all respects,
except where the failure to perform or comply with any obligation or
covenant would not, either individually or in the aggregate, result in a
Material Adverse Effect with respect to Primary Bank;
(c) Representations and Warranties. The representations and
warranties of Primary Bank set forth in this Agreement shall be true and
correct as of the date of this Agreement, and as of the Closing Date as
though made on and as of the Closing Date, except as to any representation
or warranty (i) which specifically relates to an earlier date or (ii) where
the breach of the representation or warranty would not, either individually or
in the aggregate, result in a Material Adverse Effect with respect to Primary
Bank;
(d) Approvals of Regulatory Authorities. Granite State shall have
received all required approvals of Regulatory Authorities of the Merger
(without the imposition of any conditions that are in Granite State's
reasonable judgement unduly burdensome) and delivered copies thereof to
Primary Bank; and all notice and waiting periods required thereunder shall
have expired or been terminated. For purposes of this paragraph, a
divestiture by Granite Bank of its Peterborough branch that is required as
a condition to any regulatory approval shall not be deemed unduly
burdensome;
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since December 31, 1996, there
shall not have occurred any Material Adverse Effect with respect to Primary
Bank.
(g) Officer's Certificate. Primary Bank shall have delivered to
Granite State a certificate, dated the Closing Date and signed, without
personal liability, by its chairman of the board or president, to the effect
that the conditions set forth in subsections (a) through (f) of this
Section 5.02 and Section 5.01(k) have been satisfied, to the best knowledge of
the officer executing the same;
(h) Opinions of Primary Bank's Counsel. Granite State shall have
received an opinion of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel to Primary
Bank, dated the Closing Date, in form and substance reasonably satisfactory
to Granite State and its counsel to the effect set forth on Exhibit 7 attached
hereto;
(i) Registration Statement. The Registration Statement shall be
effective under the Securities Act and no proceedings shall be pending or
threatened by the SEC to suspend the effectiveness of the Registration
Statement; and all required approvals by state securities or "blue sky"
authorities with respect to the transactions contemplated by this Agreement,
shall have been obtained;
(j) Tax Opinion. Granite State shall have received an opinion of
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., its counsel, substantially
to the effect set forth on Exhibit 5 attached hereto;
(k) Pooling Letter. Granite State shall have received (i) an opinion
from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP to the effect that the merger will be treated as a
"pooling of interest," as defined by GAAP, for financial accounting
purposes and (ii) a letter, in a form satisfactory to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
from Primary Bank representing to Granite State that they have not entered
into any transaction or are aware of any events or circumstance that would
preclude the Merger from being treated as a "pooling of interest" for
financial accounting purposes and (iii) a letter, in a form satisfactory to
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, from Primary Bank's independent auditor representing
that they are not aware of any transactions or of any events or circumstances
that would preclude the Merger from being treated as a "pooling of interest"
for financial accounting purposes;
(l) Liquidation Account. Neither the Merger or consummation of
the Plan of Merger shall require Granite State or Primary Bank to distribute
to depositors the liquidation account established by Primary Bank in
connection with its conversion from mutual to stock form;
(m) Approval of Granite State's Shareholders. This Agreement shall
have been approved by the shareholders of Granite State by such vote as is
required under Granite State's articles of incorporation and bylaws or under
Nasdaq requirements applicable to it; and
(n) Investment Banking Opinion. Granite State shall have received
the written opinion from FBR on or before the date of this Agreement and
updated in writing as of a date within five (5) days of mailing the
Prospectus/Proxy Statement to the effect that the Merger is fair to Granite
State.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. This Agreement may be terminated on or
at any time prior to the Closing Date:
(a) By the mutual written consent of the parties hereto;
(b) By Granite State or Primary Bank:
(i) if there shall have been any breach of any representation,
warranty, covenant or other obligation of Granite State which results in a
Material Adverse Effect with respect to Granite State, on the one hand, or
of Primary Bank which results in a Material Adverse Effect with respect to
Primary Bank, on the other hand, and such breach cannot be, or shall not
have been, remedied within 30 days after receipt by such other party of
notice in writing specifying the nature of such breach and requesting that it
be remedied;
(ii) if the Closing Date shall not have occurred on or before
February 29, 1998, unless the failure of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe its agreements set forth in this Agreement required to be performed
or observed by such party on or before the Closing Date; or
(iii) if either party has been informed in writing by a Regulatory
Authority whose approval or consent has been requested that such approval
or consent is unlikely to be granted (except any approval or consent
conditioned upon divestiture of the Peterborough branches of Granite
Bank), unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe its
agreements set forth herein required to be performed or observed by such
party on or before the Closing Date; or
(iv) by either Granite State or Primary Bank if any approval of
the shareholders of Granite State or Primary Bank required for the
consummation of the Merger shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of shareholders or
at any adjournment or postponement thereof.
(c) By Primary Bank (i) if on the Closing Date the Granite State
Market Value on the Determination Date shall be less than $20.30 (or
$15.53 after giving effect to the Granite State three-for-two stock split
payable in the form of a dividend on May 9, 1997); (ii) if and after it enters
into an agreement relating to a Superior Acquisition Proposal (for purposes
of this Agreement, a "Superior Acquisition Proposal" means any bona fide
Acquisition Proposal, the terms of which the Primary Bank Board of
Directors determines in good faith after receiving the advice of Primary
Bank's counsel and financial advisor to be more favorable to Primary
Bank's stockholders than the Merger), provided that Primary Bank is in
compliance with Section 4.06; or (iii) following a vote by the Primary Bank
Board of Directors to withdraw, modify or change its recommendation of
approval of the Merger to the Primary Bank stockholders as provided by
Section 4.10(b)(i).
Section 6.02. Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 6.01 hereof,
this Agreement shall forthwith become void (other than Section 4.02(d),
Section 4.10(b)(iii) and Section 7.01 hereof, which shall remain in full force
and effect), and there shall be no further liability on the part of Granite
State or Primary Bank to the other, except for any liability arising out of
any uncured willful breach of any covenant or other agreement contained in
this Agreement or any fraudulent breach of a representation or warranty.
(b) Any termination of this Agreement by Primary Bank pursuant to
Section 6.01(b)(i) (ii) or (iii) hereof based on a breach of a representation
or warranty, or the breach of a covenant, by Granite State that is caused by
the willful misconduct or gross negligence of Granite State, Granite State
shall pay Primary Bank for all out-of-pocket costs and expenses, including,
without limitation, reasonable legal, accounting and investment banking
fees and expenses, incurred by Primary Bank in connection with the
entering into this Agreement and the carrying out of any and all acts
contemplated hereunder up to a maximum of $584,000.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Expenses. Except for the cost of printing and mailing the
Proxy Statement/Prospectus which shall be shared equally, each party hereto
shall bear and pay all costs and expenses incurred by it in connection with
the transactions contemplated hereby, including fees and expenses of its
own financial consultants, accountants and counsel.
Section 7.02. Non-Survival of Representations and Warranties. All
representations, warranties and, except to the extent specifically provided
otherwise herein, agreements and covenants, other than those covenants set
forth in Sections 4.05, and 4.11(a), (c), (d) and (e) which will survive the
Merger, shall terminate on the Closing Date.
Section 7.03. Amendment, Extension and Waiver. Subject to
applicable law, at any time prior to the consummation of the transactions
contemplated by this Agreement, the parties may (a) amend this Agreement,
(b) extend the time for the performance of any of the obligations or other
acts of either party hereto, (c) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant
hereto, or (d) waive compliance with any of the agreements or conditions
contained in Articles IV and V hereof or otherwise. This Agreement may
not be amended except by an instrument in writing authorized by the
respective Boards of Directors and signed, by duly authorized officers, on
behalf of the parties hereto. Any agreement on the part of a party hereto to
any extension or waiver shall be valid only if set forth in an instrument in
writing signed by a duly authorized officer on behalf of such party, but such
waiver or failure to insist on strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
Section 7.04. Entire Agreement. This Agreement, including the
documents and other writings referred to herein or delivered pursuant
hereto, contains the entire agreement and understanding of the parties with
respect to its subject matter. This Agreement supersedes all prior
arrangements and understandings between the parties, both written or oral
with respect to its subject matter. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors;
provided, however, that nothing in this Agreement, expressed or implied,
is intended to confer upon any party, other than the parties hereto and their
respective successors, any rights, remedies, obligations or liabilities other
than pursuant to Sections 1.02(d)(i) and (iii), 1.02(g), 4.05, and 4.11(a) and
(c) with respect to indemnification, employee benefits and certain other
matters, and provided, further, that any such rights, remedies, obligations or
liabilities conferred pursuant to Sections 4.11(a) and (c) shall terminate and
expire one (1) year from the Effective Date.
Section 7.05. No Assignment. Neither party hereto may assign any of
its rights or obligations hereunder to any other person, without the prior
written consent of the other party hereto.
Section 7.06. Notices. All notices or other communications hereunder
shall be in writing and shall be deemed given if delivered personally, mailed
by prepaid registered or certified mail (return receipt requested), or sent by
telecopy, addressed as follows:
(a) If to Granite State, to:
Granite State Bankshares, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief
Executive Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Primary Bank, to:
Primary Bank
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 7.07. Captions. The captions contained in this Agreement are
for reference purposes only and are not part of this Agreement.
Section 7.08. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.
Section 7.09. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted by
law.
Section 7.10. Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic internal law (including the
law of conflicts of law) of the State of New Hampshire.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
GRANITE STATE BANKSHARES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief
Executive Officer
GRANITE BANK
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief
Executive Officer
PRIMARY BANK
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President and
Chief Executive Officer
ANNEX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Plan of
Merger"), dated as of April 29, 1997, is by and between Primary Bank, a
New Hampshire guaranty (stock) savings bank ("Primary Bank"), and
GRANITE BANK ("Granite Bank"), a New Hampshire bank, and is joined
in by GRANITE STATE BANKSHARES, INC. ("Granite State"), a New
Hampshire corporation and a registered bank holding company under the
Bank Holding Act of 1956, as amended, and parent corporation of Granite
Bank.
WITNESSETH
WHEREAS, the respective Boards of Directors of Primary Bank,
Granite Bank and Granite State deem the merger of Primary Bank with and
into Granite Bank, under and pursuant to the terms and conditions herein set
forth or referred to, desirable and in the best interests of the respective
corporations and their respective shareholders, and the respective Boards of
Directors of Primary Bank, Granite Bank and Granite State have adopted
resolutions approving this Plan of Merger and a related Agreement and Plan
of Reorganization dated as of even date herewith (the "Reorganization
Agreement").
WHEREAS, Granite State, the sole shareholder of Granite Bank, has
consented to and joined in this Plan of Merger and has entered into the
Reorganization Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE 1.
MERGER
Subject to the terms and conditions of this Plan of Merger, on the
Effective Date (as hereinafter defined), Primary Bank shall be merged with
and into Granite Bank, pursuant to the provisions of, and with the effect
provided in, Title 35 of the New Hampshire Revised Statutes Annotated
(the "Bank Merger"). On the Effective Date, the separate existence of
Primary Bank shall cease and Granite Bank, as the surviving entity, shall
continue unaffected and unimpaired by the Bank Merger (Granite Bank, as
existing on and after the Effective Date, being hereinafter sometimes
referred to as the "Surviving Bank").
ARTICLE 2.
ARTICLES OF AGREEMENT AND BY-LAWS
The Amended and Restated Articles of Agreement and the By-laws of
Granite Bank in effect immediately prior to the Effective Date shall be the
Articles of Agreement and the By-laws of the Surviving Bank, amended as
set forth below, in each case until amended in accordance with applicable
law. The Articles of Agreement of the Surviving Bank shall be amended
effective upon the Effective Date to add the following paragraph to the end
of existing Article VI:
"The Bank shall assume the Liquidation Account (the
"Liquidation Account") initially established and maintained by
Primary Bank for the benefit of Primary Bank's Eligible Account
Holders as of July 28, 1993 ("eligible savers"). Notwithstanding
any provision of these Articles or of the By-laws of the Bank to
the contrary, in the event of a complete liquidation of the Bank,
it shall comply with the Plan of Conversion with respect to the
amount and the priorities on liquidation of each of the Bank's
eligible savers' inchoate interest in the Liquidation Account, to
the extent it is still in existence; provided, that an eligible saver's
inchoate interest in the Liquidation Account shall not entitle
such eligible saver to any voting rights at meetings of the Bank's
shareholders."
ARTICLE 3.
DIRECTORS AND OFFICERS
The directors of Granite Bank immediately prior to the Effective Date,
together with four directors of Primary Bank to be designated by Primary
Bank in accordance with Section 4.11(e) of the Reorganization Agreement,
will be the directors of the Surviving Bank on the Effective Date. The
officers of Granite Bank immediately prior to the Effective Date shall be the
officers of the Surviving Bank on the Effective Date, except then ▇▇.
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, if he is the President and Chief Executive Officer of
Primary Bank immediately prior to the Effective Date, shall become the
President of the Surviving Bank on the Effective Date, and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, if he is a Senior Vice President of Primary Bank immediately
prior to the Effective Date, shall become a Senior Vice President of the
Surviving Bank on the Effective Date.
ARTICLE 4.
CONVERSION AND EXCHANGE OF PRIMARY BANKS SHARES;
FRACTIONAL SHARE INTERESTS
4.1. On the Effective Date (as hereinafter defined), each share of
common stock of Primary Bank, par value $0.01 per share ("Primary Bank
Common Stock"), outstanding immediately prior to the Effective Date
(except as provided in Articles 5, 6 and 8 of this Agreement), shall be
converted without any action on the part of the holder thereof into an
amount of common stock, par value $1.00 per share, of Granite State
("Granite State Common Stock") equal to one share multiplied by the
Exchange Ratio as determined below (rounded to the nearest four decimal
places).
4.2. As used herein, the term "Granite State Market Value" shall
mean the average of the inside closing bid price of Granite State Common
Stock on the Nasdaq National Market System (as reported by The Wall
Street Journal) for each of the twenty (20) consecutive trading days ending
on the fifth business day before the Effective Date.
4.3. (a) For purposes of this Plan of Merger, the Exchange Ratio shall
be:
(i) if the Granite State Market Value determined as of the Effective
Date is greater than or equal to $20.30 and less than or equal to $25.375,
then that number of shares of fully paid and nonassessable shares of Granite
State Common Stock, equal to $25.25 divided by the Granite State Market
Value determined as of the Effective Date;
(ii) if the Granite State Market Value determined as of the Effective
Date is greater than $25.375 and less than or equal to $27.278, then .9951
shares of Granite State Common Stock;
(iii) if the Granite State Market Value determined as of the Effective
Date is greater than $27.278, then that number of shares of fully paid and
nonassessable shares of Granite State Common Stock, equal to $27.278
divided by the Granite State Market Value determined as of the Effective
Date; or
(iv) if the Granite State Market Price determined as of the Effective
Date is less than $20.30, then 1.2438 shares of fully paid and nonassessable
shares of Granite State Common Stock, subject to the termination
provisions of Section 6.01(c)(i) of the Reorganization Agreement.
(b) Notwithstanding the provisions of the preceding
subparagraph (a), in the event that before the Effective Date an
announcement is made with respect to a business combination involving the
merger or acquisition of Granite State or a substantial portion of its assets
(a "GS Acquisition"), the Exchange Ratio shall be that set forth in (a)(ii)
above (as adjusted pursuant to Section 4.7 herein). In addition, any GS
Acquisition shall not be consummated prior to the Merger and the
transactions contemplated by this Agreement.
4.4. On the Effective Date, all shares of Primary Bank Common
Stock held in the treasury of Primary Bank or owned beneficially by any
subsidiary of Primary Bank other than in a fiduciary capacity or in
connection with a debt previously contracted and all shares of Primary Bank
Common Stock owned by Granite State or owned beneficially by any
subsidiary of Granite State other than in a fiduciary capacity or in
connection with a debt previously contracted shall be canceled and no cash,
stock or other property shall be delivered in exchange therefor.
4.5. (a) Prior to the Effective Date, Granite State shall appoint a
bank, trust company or other stock transfer agent selected by Granite State
and agreed to by Primary Bank as the exchange agent (the "Exchange
Agent") to effect the exchange of certificates evidencing shares of Primary
Bank Common Stock (any such certificate being hereinafter referred to as
a "Certificate") for shares of Granite State Common Stock to be received in
the share exchange. On the Effective Date, Granite State shall have granted
the Exchange Agent the requisite power and authority to effect for and on
behalf of Granite State the issuance of the number of shares of Granite State
Common Stock issuable in the share exchange.
(b) Within five business days after the Effective Date, the
Exchange Agent shall mail to each holder of record of Primary Bank
Common Stock as of the Effective Date a notice of consummation of the
share exchange and a form of transmittal letter pursuant to which each such
shareholder shall transmit the Certificate or Certificates, or, in lieu
thereof, such evidence of lost, stolen or mutilated Certificate or
Certificates and such surety bond as the Exchange Agent may reasonably require
in accordance with customary exchange practices. Primary Bank shareholders
who satisfy such requirements for lost, stolen or mutilated certificates shall
for purposes of the exchange procedures set forth herein be deemed to have
submitted Certificates for Primary Bank Common Stock. As soon as practicable
after surrender of such Certificate to the Exchange Agent with a properly
completed transmittal letter, the Exchange Agent will promptly mail by first
class mail to such shareholder a certificate or certificates representing the
number of full shares of Granite State Common Stock into which the shares
of Primary Bank Common Stock evidenced by the Certificate surrendered
shall have been converted pursuant to this Plan of Merger.
(c) The Exchange Agent shall accept such Certificates upon
compliance with such reasonable terms and conditions as the Exchange
Agent may impose to effect an orderly exchange thereof in accordance with
customary exchange practices. Until so surrendered, each Certificate shall
be deemed for all purposes to evidence ownership of the number of shares
of Granite State Common Stock into which the shares represented by such
Certificates have been changed or converted as aforesaid. No dividends or
other distributions declared after the Effective Date with respect to Granite
State Common Stock shall be paid to the holder of any unsurrendered
Certificate until the holder thereof shall surrender such Certificate in
accordance with this Article 4. After the surrender of a Certificate in
accordance with this Article 4, 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
Granite State Common Stock represented by such Certificate.
(d) No transfer taxes shall be payable by any shareholders of
Primary Bank in respect of the issuance of certificates for Granite State
Common Stock and no expenses shall be imposed on any shareholder of
Primary Bank in connection with the conversion of shares of Primary Bank
Common Stock into shares of Granite State Common Stock and the delivery
of such shares to the former holder of Primary Bank Common Stock entitled
thereto, except that, if any certificate for shares of Granite State Common
Stock is to be issued in a name other than that in which a Certificate or
Certificates for shares of Primary Bank Common Stock surrendered shall
have been registered, it shall be a condition to such issuance that the person
requesting such issuance shall pay to Granite State any transfer taxes
payable by reason thereof or of any prior transfer of such surrendered
Certificate or Certificates or establish to the reasonable satisfaction of the
Exchange Agent that such taxes have been paid or are not payable.
(e) Certificates surrendered for exchange by any person who is an
"affiliate" of Primary Bank for purposes of Rule 145(c) under the Securities
Act of 1933, as amended, shall not be exchanged for Certificates
representing shares of Granite State Common Stock until Granite State has
received the written agreement of such person contemplated by Section 4.9
of the Reorganization Agreement. If any Certificate for shares of Primary
Bank Common Stock is to be issued in a name other than that in which a
certificate surrendered for exchange is issued, the Certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and the
person requesting such exchange shall affix any requisite stock transfer tax
stamps to the Certificate surrendered or provide funds for their purchase or
establish to the reasonable satisfaction of Granite State or its agent that
such taxes are not payable.
4.6. Upon the Effective Date, the stock transfer books of Primary
Bank shall be closed and no transfer of Primary Bank Common Stock shall
thereafter be made or recognized. Any other provision of this Plan of
Merger notwithstanding, neither Granite State or its agent nor any party to
the share exchange shall be liable to a holder of Primary Bank Common
Stock for any amount paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
4.7. In the event that, between the date hereof and prior to the
Effective Date, the outstanding shares of Granite State Common Stock or
Primary Bank Common Stock shall have been increased, decreased or
changed into or exchanged for a different number or kind of shares or
securities by reorganization, recapitalization, reclassification, stock split
or other like changes in the capitalization of Granite State or Primary Bank,
or if a stock dividend is declared on Granite State Common Stock or Primary
Bank Common Stock with a record date (as to a stock split, the pay date)
within such period, then an appropriate and proportionate adjustment shall
be made in the number and kind of shares of Granite State Common Stock
to be thereafter delivered pursuant to this Plan of Merger, and the dollar
amounts and the Exchange Ratio set forth in Section 4.3 of this Article 4,
so that each shareholder of Primary Bank shall be entitled to receive such
number of shares of Granite State Common Stock or other securities as such
shareholder would have received pursuant to such reorganization,
recapitalization, reclassification, stock split, exchange of shares or
readjustment or other like changes in the capitalization of Granite State or
Primary Bank, or as a result of a stock dividend on Granite State Common
Stock or Primary Bank Common Stock, had the record (or pay) date therefor
been immediately following the Effective Date. In accordance with the
foregoing, and as result of the three for two stock split (to be effected in
the form of a stock dividend) (the "Stock Split") declared by Granite State
which is to be paid on May 9, 1997 to stockholders of record on April 25,
1997, the Exchange Ratio, after giving effect to the Stock Split, shall be
determined as follows:
(i) if the Granite State Market Value determined as of the Effective
Date is greater than or equal to $13.533 and less than or equal to $16.917,
then that number of shares of fully paid and nonassessable shares of Granite
State Common Stock, equal to $25.25 divided by the Granite State Market
Value determined as of the Effective Date;
(ii) if the Granite State Market Value determined as of the Effective
Date is greater than or equal to $16.917 and less than or equal to $18.185,
then 1.493 shares of Granite State Common Stock;
(iii) if the Granite State Market Value determined as of the Effective
Date is greater than $18.185, then that number of shares of fully paid and
nonassessable shares of Granite State Common Stock, equal to $18.185
divided by the Granite State Market Value determined as of the Effective
Date; or
(iv) if the Granite State Market Price determined as of the Effective
Date is less than $13.533, then 1.86 shares of fully paid and nonassessable
shares of Granite State Common Stock, subject to the termination
provisions of Section 6.01(c)(i) of the Reorganization Agreement.
4.8. Notwithstanding any other provision hereof, each holder of
shares, or of options to purchase shares, of Primary Bank Common Stock
who would otherwise have been entitled to receive a fraction of a share of
Granite State Common Stock (after taking into account all Certificates
delivered by such holder or all shares such holder is entitled to receive in
accordance with Article 4 hereof) shall receive (by check from the
Exchange Agent, mailed to the shareholder with the certificate(s) for
Granite State Common Stock which such holder is to receive pursuant to the
share exchange), in lieu thereof, cash in an amount equal to such fractional
part of a share of Granite State Common Stock multiplied by the "market
value" of such Common Stock. The "market value" of one share of Granite
State Common Stock shall be the closing price of Granite State Common
Stock on the Nasdaq National Market System (as reported by The Wall
Street Journal) on the last business day preceding the Effective Date. No
such holder shall be entitled to dividends, voting rights or any other
shareholder right in respect of any fractional share.
ARTICLE 5.
DISSENTERS' RIGHTS
Notwithstanding anything in this Plan of Merger to the contrary and
unless otherwise provided by applicable New Hampshire law, shares of
Primary Bank Common Stock that are issued and outstanding immediately
prior to the Effective Date and that are owned by stockholders who,
pursuant to applicable New Hampshire law, (1) deliver to Primary Bank
before the taking of the vote of Primary Bank's stockholders on the Plan of
Merger a written notice of their intent to demand payment for their shares
of Primary Bank Common Stock if the share exchange is effectuated, and
(2) do not vote their shares in favor of this Plan of Merger (the "Dissenting
Shares"), shall not be converted into the right to receive, or be exchangeable
for, shares of Granite State Common Stock, but, instead, the holders of such
Dissenting Shares shall be entitled to payment of the fair value of such
Dissenting Shares, plus accrued interest, in accordance with applicable New
Hampshire law. If any holders of Primary Bank Common Stock shall have
failed to perfect or shall have effectively withdrawn, waived or lost the
right to dissent from the share exchange and to receive the fair value of such
shares as provided under applicable New Hampshire law, the shares of
Primary Bank Common Stock held by such holder shall be deemed to have
been converted into and be exchangeable for shares of Granite State
Common Stock on the Effective Date.
ARTICLE 6.
STOCK OPTIONS
On the Effective Date, each then outstanding stock option to purchase
Primary Bank Common Stock ("Primary Bank Stock Options") pursuant to
the employee and director stock option plans identified in Primary Bank
Disclosure Schedules to the Reorganization Agreement (collectively, the
"Primary Bank Stock Option Plans") (it being understood that the aggregate
number of shares of Primary Bank Common Stock subject to purchase
pursuant to the exercise of such Primary Bank Stock Options is not and
shall not be more than 355,523), whether vested or unvested, will be
assumed by Granite State. Each Primary Bank Stock Option so assumed by
Granite State under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Primary Bank Stock
Option Plans immediately prior to the Effective Date, except that (i) such
Primary Bank Stock Options shall be exercisable (when vested) for that
number of whole shares of Granite State Common Stock equal to the
product of the number of shares of Primary Bank Common Stock covered
by the Primary Bank Stock Option multiplied by the Exchange Ratio,
provided that any fractional share of Granite State Common Stock resulting
from such multiplication shall be rounded up to the nearest share; (ii) the
exercise price per share of Granite State Common Stock shall be equal to
the exercise price per share of Primary Bank Common Stock of such
Primary Bank Stock Option, divided by the Exchange Ratio, provided that
such exercise price shall be rounded down to the nearest cent; and (iii) that
the holder of all Primary Bank Stock Options whose employment or
affiliation is terminated as a result of the Merger (except termination of
employment for cause) shall have two years from the Closing Date to
exercise the Primary Bank Stock Options. It is the intention of the parties
that the Primary Bank Options assumed by Granite State qualify following
the Effective Date as incentive stock options as defined in Section 422 of
the Internal Revenue Code of 1986, as amended to the extent that the
Primary Bank Options qualified as incentive stock options immediately
prior to the Effective Date. Promptly following the Effective Date, Granite
State shall reserve for issuance such number of shares of Granite State
Common Stock as shall be necessary to be issued pursuant to the exercise
of the options assumed by Granite State pursuant to this Article 6, and
Granite State shall file a registration statement on Form S-8 to register the
shares of Granite State Common Stock issuable in connection therewith.
ARTICLE 7.
CAPITAL
The shares of capital stock of Granite Bank issued and outstanding
immediately prior to the Effective Date shall be the shares of the Surviving
Bank issued and outstanding on the Effective Date.
ARTICLE 8.
CANCELLATION OF PRIMARY BANK STOCK
Each share of Primary Bank capital stock issued and outstanding
immediately prior to the Effective Date shall, by virtue of the Bank Merger,
be canceled on the Effective Date, and no cash, stock or other property shall
be delivered in exchange therefor.
ARTICLE 9.
EFFECTIVE DATE OF THE MERGER
Certificates or articles of merger evidencing the transactions
contemplated herein shall be delivered to the New Hampshire Secretary of
State in accordance with applicable New Hampshire law. The Bank Merger
shall be effective at the time and on the date specified in such certificates
or articles of merger (such date and time being herein referred to as the
"Effective Date").
ARTICLE 10.
CONDITIONS PRECEDENT
The obligations of Primary Bank and Granite Bank to effect the Bank
Merger as herein provided shall be subject to satisfaction, unless duly
waived, of the conditions set forth in the Reorganization Agreement.
ARTICLE 11.
TERMINATION
Anything contained in this Plan of Merger to the contrary
notwithstanding, this Plan of Merger shall be terminated and the Bank
Merger abandoned as provided in the Reorganization Agreement.
ARTICLE 12.
MISCELLANEOUS
12.1. This Plan of Merger may be amended or supplemented at any
time prior to the Effective Date by mutual agreement of the parties hereto.
Any such amendment or supplement must be in writing and approved by the
parties' respective Boards of Directors and/or by officers authorized thereby.
12.2. Any notice or other communication required or permitted under
this Plan of Merger shall be given, and shall be effective, in accordance with
the provisions of the Reorganization Agreement.
12.3. The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Plan of Merger.
12.4. This Plan of Merger shall be governed by and construed in
accordance with the laws of New Hampshire applicable to the internal
affairs of Primary Bank and Granite Bank.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have caused this Agreement and Plan of Merger to be
executed in counterparts by their duly authorized officers and their
corporate seals to be hereunto affixed and attested by their officers
thereunto duly authorized, all as of the day and year first above written.
PRIMARY BANK
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
GRANITE BANK
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
JOINED IN BY:
GRANITE STATE BANKSHARES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
EXHIBIT 1
April 29, 1997
Granite State Bankshares, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
Granite State Bankshares, Inc. ("Granite State") and Primary Bank
("Primary Bank") desire to enter into an agreement dated April 29, 1997
("Agreement"), pursuant to which, subject to the terms and conditions set
forth therein, (a) Primary Bank will merge with and into Granite Bank with
Granite Bank surviving the merger, and (b) shareholders of Primary Bank
will receive common stock of Granite State in exchange for common stock
of Primary Bank outstanding on the closing date (the foregoing, collectively,
referred to herein as the "Merger").
Granite State has required, as a condition to its execution and delivery
to Primary Bank of the Agreement, that the undersigned, being directors,
executive officers and major shareholders of Primary Bank, execute and
deliver to Granite State this Letter Agreement.
Each of the undersigned, in order to induce Granite State to execute
and deliver to Primary Bank the Agreement, hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of Primary Bank called to vote for approval of the Merger so
that all shares of common stock of Primary Bank then owned by the
undersigned will be counted for the purpose of determining the presence of
a quorum at such meetings and to vote all such shares (i) in favor of
approval and adoption of the Agreement and the transactions contemplated
thereby (including any amendments or modifications of the terms thereof
approved by the Board of Directors of Primary Bank), and (ii) against
approval or adoption of any other merger, business combination,
recapitalization, partial liquidation or similar transaction involving Primary
Bank;
(b) Agrees not to vote or execute any written consent to rescind or
amend in any manner any prior vote or written consent, as a shareholder of
Primary Bank, to approve or adopt the Agreement;
(c) Agrees to use reasonable best efforts to cause the Merger to be
consummated;
(d) Agrees not to sell, transfer or otherwise dispose of any common
stock of Primary Bank on or prior to the record date for the meeting of
Primary Bank shareholders to vote on the Merger;
(e) Except as permitted by Section 4.06 of the Agreement, agrees
not to solicit, initiate or engage in any negotiations or discussions with any
party other than Granite State with respect to any offer, sale, transfer or
other disposition of, any shares of common stock of Primary Bank now or
hereafter owned by the undersigned;
(f) Agrees not to offer, sell, transfer or otherwise dispose of any
shares of common stock of Granite State received in the Merger, except (i)
at such time as a registration statement under the Securities Act of 1933, as
amended ("Securities Act") covering sales of such Granite State common
stock is effective and a prospectus is made available under the Securities
Act, (ii) within the limits, and in accordance with the applicable provisions
of, Rule 145(d) under the Securities Act, or (iii) in a transaction which, in
the opinion of counsel satisfactory to Granite State or as described in a
"no-action" or interpretive letter from the staff of the Securities and
Exchange Commission ("SEC"), is not required to be registered under the
Securities Act; and acknowledges and agrees that Granite State is under no
obligation to register the sale, transfer or other disposition of Granite
State common stock by the undersigned or on behalf of the undersigned, or to
take any other action necessary to make an exemption from registration
available;
(g) Notwithstanding the foregoing, agrees not to sell, or in any other
way reduce the risk of the undersigned relative to, any shares of common
stock of Primary Bank or of common stock of Granite State, during the
period commencing thirty days prior to the effective date of the Merger and
ending on the date on which financial results covering at least thirty days of
post-Merger combined operations of Granite State and Primary Bank have
been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies;
(h) Agrees that Granite State shall not be bound by any attempted
sale of any shares of Granite State common stock, and Granite State's
transfer agent shall be given an appropriate stop transfer order and shall not
be required to register any such attempted sale, unless the sale has
been effected in compliance with the terms of this Letter Agreement; and
further agrees that the certificate representing shares of Granite State
common stock owned by the undersigned may be endorsed with a restrictive
legend consistent with the terms of this Letter Agreement;
(i) Acknowledges and agrees that the provisions of subparagraphs
(f), (g) and (h) hereof also apply to shares of Granite State common stock
received in the Merger (or any shares of Primary Bank common stock or of
Granite State common stock, whether or not received in the Merger, for the
period referred to in subparagraph (g) above) owned by (i) his or her spouse,
(ii) any of his or her relatives or relatives of his or her spouse occupying
his or her home, (iii) any trust or estate in which he or she, his or her
spouse, or any such relative owns at least a 10% beneficial interest or of
which any of them serves as trustee, executor or in any similar capacity, and
(iv) any corporation or other organization in which the undersigned, any
affiliate of the undersigned, his or her spouse, or any such relative owns at
least 10% of any class of equity securities or of the equity interest;
(j) Represents that the undersigned has no plan or intention to sell,
exchange, or otherwise dispose of any shares of common stock of Granite
State to be received in the Merger prior to expiration of the time period
referred to in subparagraph (g) hereof; and
(k) Represents that the undersigned has the capacity to enter into
this Letter Agreement and that it is a valid and binding obligation
enforceable against the undersigned in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights and general
equitable principles.
The obligations set forth herein shall terminate concurrently with any
termination of the Agreement.
____________________________
This Letter Agreement may be executed in two or more counterparts,
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the
same Letter Agreement.
____________________________
This Letter Agreement shall terminate concurrently with any
termination of the Agreement in accordance with its terms.
____________________________
The undersigned intend to be legally bound hereby.
Sincerely,
-----------------------------------
Name
-----------------------------------
Title
EXHIBIT 2
April 29, 1997
Primary Bank
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Granite State Bankshares, Inc. ("Granite State") and Primary Bank
("Primary Bank") desire to enter into an agreement dated April 29, 1997
("Agreement"), pursuant to which, subject to the terms and conditions set
forth therein, (a) Primary Bank will merge with and into Granite Bank with
Granite Bank surviving the merger, and (b) shareholders of Primary Bank
will receive common stock of Granite State in exchange for common stock
of Primary Bank outstanding on the closing date (the foregoing, collectively,
referred to herein as the "Merger").
Primary Bank has requested, as a condition to its execution and
delivery to Granite State of the Agreement, that the undersigned, being
directors and executive officers of Granite State, execute and deliver to
Primary Bank this Letter Agreement.
Each of the undersigned, in order to induce Primary Bank to execute
and deliver to Granite State the Agreement, hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of Granite State called to vote for approval of the Merger so
that all shares of common stock of Granite State then owned by the
undersigned will be counted for the purpose of determining the presence of
a quorum at such meetings and to vote all such shares (i) in favor of
approval and adoption of the Agreement and the transactions contemplated
thereby (including any amendments or modifications of the terms thereof
approved by the Board of Directors of Granite State), and (ii) against
approval or adoption of any other merger, business combination,
recapitalization, partial liquidation or similar transaction involving Granite
State;
(b) Agrees not to vote or execute any written consent to rescind or
amend in any manner any prior vote or written consent, as a shareholder of
Granite State, to approve or adopt the Agreement;
(c) Agrees to use reasonable best efforts to cause the Merger to be
consummated;
(d) Agrees not to sell, transfer or otherwise dispose of any common
stock of Granite State on or prior to the record date for the meeting of
Granite State shareholders to vote on the Merger;
(e) Agrees not to sell, or in any other way reduce the risk of the
undersigned relative to, any shares of common stock of Granite State or of
common stock of Primary Bank, during the period commencing thirty days
prior to the effective date of the Merger and ending on the date on which
financial results covering at least thirty days of post-Merger combined
operations of Granite State and Primary Bank have been published within
the meaning of Section 201.01 of the Securities and Exchange
Commission's Codification of Financial Reporting Policies; and
(f) Represents that the undersigned has the capacity to enter into
this Letter Agreement and that it is a valid and binding obligation
enforceable against the undersigned in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights and general
equitable principles.
The obligations set forth herein shall terminate concurrently with any
termination of the Agreement.
____________________________
This Letter Agreement may be executed in two or more counterparts,
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the
same Letter Agreement.
____________________________
This Letter Agreement shall terminate concurrently with any
termination of the Agreement in accordance with its terms.
____________________________
The undersigned intend to be legally bound hereby.
Sincerely,
----------------------------------
Name
----------------------------------
Title
EXHIBIT 3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated April 29, 1997, between
Primary Bank, a New Hampshire savings bank ("Issuer") and Granite State
Bankshares, Inc., a New Hampshire corporation ("Grantee"). Capitalized
terms used herein without definition have the meanings specified in the
Reorganization Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Reorganization dated April 29, 1997 (the "Reorganization
Agreement"), which agreement has been executed by the parties hereto prior
to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the
Reorganization Agreement and in consideration therefor, Issuer has agreed
to grant Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Reorganization
Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof,
up to 269,088 fully paid and nonassessable shares of its common stock, par
value $0.01 per share ("Common Stock"), at a price of $22.75 per share
(such price, as adjusted if applicable, the "Option Price"); provided,
however, that in the event Issuer issues or agrees to issue any shares of
Common Stock (other than as permitted under the Reorganization
Agreement) at a price less than $22.75 per share, such Option Price shall be
equal to such lesser price. The number of shares of Common Stock that may
be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement or the Reorganization Agreement ),
the number of shares of Common Stock subject to the Option shall be
increased so that, after such issuance, it equals 12.9% of the number of
shares of Common Stock then issued and outstanding without giving effect
to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Reorganization
Agreement.
(c) In the event that Primary Bank enters into an agreement as to a
Superior Acquisition Proposal (as defined in Section 6.01(c) of the
Reorganization Agreement), the total number of shares of Primary Bank
Common Stock issuable pursuant to Section 1(a) above shall be reduced so
that the aggregate dollar value of the difference between (x) the aggregate
Option Price to be paid by Granite State, and (x) the aggregate Applicable
Price (as defined in Section 8(c) hereof), shall not exceed $2.5 million.
2. (a) The holder or holders of the Option (including Grantee or
any subsequent transferee(s)) (the "Holder") may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall
have sent the written notice of such exercise (as provided in subsection (e)
of this Section 2) within 180 days following the first such Subsequent
Triggering Event. Each of the following shall be an Exercise Termination
Event: (i) the Company Merger Effective Time (as defined in the Reorganization
Agreement); (ii) termination of the Reorganization Agreement in accordance
with the provisions thereof if such termination occurs prior to the occurrence
of an Initial Triggering Event; or (iii) the passage of twelve months after
termination of the Reorganization Agreement if such termination follows
or occurs at the same time as the occurrence of an Initial Triggering Event.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes
of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, and the
rules and regulations thereunder (the "1934 Act")) other than Grantee
or any of its Subsidiaries (each a "Grantee Subsidiary"). For purposes
of this Agreement, "Acquisition Transaction" shall mean (x) a merger
or consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the SEC) of Issuer, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Issuer or any
Significant Subsidiary of Issuer, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of beneficial ownership of securities representing 25% or
more of the voting power of Issuer or any Significant Subsidiary of
Issuer, provided that the term "Acquisition Transaction" does not
include any internal merger or consolidation involving only Issuer
and/or Issuer Subsidiaries;
(ii) (A) Any person other than Grantee, or any Grantee
Subsidiary, or any Issuer Subsidiary acting in a fiduciary capacity
(collectively, "Excluded Persons"), alone or together with such
person's affiliates and associates (as such terms are defined in Rule
12b-2 under the ▇▇▇▇ ▇▇▇) shall have acquired beneficial ownership
or the right to acquire beneficial ownership of 25% or more of the
outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Option Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder) or (B) any group (as such term is
defined in Section 13(d)(3) of the 1934 Act), other than a group of
which only Excluded Persons are members, shall have been formed
that beneficially owns 25% or more of the shares of Common Stock
then outstanding;
(iii) The Board of Directors of Issuer shall have failed to
recommend to its stockholders the adoption of the Reorganization
Agreement or shall have withdrawn, modified or changed its
recommendation in a manner adverse to Grantee;
(iv) After a proposal is made by a third party (other than an
Excluded Person) to Issuer to engage in an Acquisition Transaction,
Issuer shall have intentionally and knowingly breached any
representation, warranty, covenant or agreement contained in the
Reorganization Agreement and such breach (x) would entitle Grantee
to terminate the Reorganization Agreement pursuant to Section
6.01(b) therein (without regard to any grace period provided for
therein) and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(v) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given
its prior written consent, shall have filed an application or notice with
any federal or state bank regulatory authority ("Regulatory
Authority"), for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than an Excluded Person
of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (i) of subsection (b) of this Section 2.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together,
a "Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which is herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice
Date for the closing of such purchase (the "Closing Date"); provided that if
prior notification to or approval of any Regulatory Authority is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval and shall expeditiously process the same
and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification periods
have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of
the Option shall be deemed to occur on the Notice Date relating thereto.
(f) At each closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated
by Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should
be exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of record of the shares
of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually
delivered to the Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section
18a and regulations promulgated thereunder and (y) in the event, under the
Change in Bank Control Act of 1978, as amended, or any state banking law,
prior approval of or notice to to any state regulatory authority is necessary
before the Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such information to the
any Regulatory Authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of
Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office of
Issuer, for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase, on the same terms
and subject to the same conditions as are set forth herein, in the aggregate
the same number of shares of Common Stock purchasable hereunder. The
terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered
shall constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall
at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant
to Section 1 of this Agreement, in the event of any change in Common
Stock by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares, distributions,
or the like, the type and number, and/or the price, of shares of Common
Stock purchasable upon exercise hereof shall be appropriately adjusted, and
proper provision shall be made in the agreements governing such
transaction so that the Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of the Common Stock if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable.
6. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving corporation, but,
in connection with such merger, the then outstanding shares of Common
Stock shall be changed into or exchanged for stock or other securities of any
other person or cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Grantee or one of its Subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and
upon the terms and conditions set forth herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at the election of the
Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or
(y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the shares of
capital stock (or similar equity interest) with the greatest voting power
with respect of the election of directors (or other persons similarly
responsible for direction of the business and affairs) of the issuer of
the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the price
per share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common Stock to
be paid by any third party pursuant to an agreement with Issuer, or (iii)
in the event of a sale of all or substantially all of Issuer's assets,
the sum of the price paid in such sale for such assets and the current
market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder,
divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined
by a nationally recognized investment banking firm selected by the
Holder.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the six months immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute
Common Stock on the day preceding such consolidation, merger or
sale; provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of Common
Stock issued by the person merging into Issuer or by any company
which controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms and conditions
as the Option, provided, that if any term or condition of the Substitute
Option cannot, for legal reasons, be the same as the Option, such term or
condition shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also enter into an
agreement with the then Holder or Holders of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to (i) the product of (A) the
Assigned Value and (B) the number of shares of Common Stock for which
the Option is then exercisable, divided by (ii) the Average Price. The
exercise price of the Substitute Option per share of Substitute Common
Stock shall then be equal to the Option Price multiplied by a fraction the
numerator of which shall be the number of shares of Common Stock for
which the Option is then exercisable and the denominator of which shall be
the number of shares of Substitute Common Stock for which the Substitute
Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 12.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 7 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
7. The 180-day period for exercise of certain rights under Section
2 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
8. Repurchase at the Option of Holder. (a) At the request of
Holder at any time commencing upon the first occurrence of a Repurchase
Event (as defined in Section 8(d)) and ending 12 months immediately
thereafter, Issuer shall repurchase from Holder (i) the Option and (ii) all
shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which
Holder exercises its rights under this Section 8 is referred to as the
"Request Date". Such repurchase shall be at an aggregate price (the
"Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Option Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Common Stock over (y) the Option Price (subject
to adjustment pursuant to Sections 1 and 5), multiplied by the number of
shares of Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Option
Price (subject to adjustment pursuant to Sections 1 and 5) paid (or, in the
case of Option Shares with respect to which the Option has been exercised
but the Closing Date has not occurred, payable) by Holder for each share of
Common Stock with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by
the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within 10 business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the
Option and the certificates evidencing the shares of Common Stock
purchased thereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all
liens. Notwithstanding the foregoing, to the extent that prior notification
to or approval of any federal or state regulatory authority is required in
connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke
its request for repurchase pursuant to Section 8, in whole or in part, or to
require that Issuer deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the
other in the filing of any such notice or application and the obtaining of any
such approval). If any federal or state regulatory authority disapproves of
any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Holder. If any federal or state
regulatory authority prohibits the repurchase in part but not in whole, then
Holder shall have the right (i) to revoke the repurchase request or (ii) to
the extent permitted by such regulatory authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what
extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant
to Section 8(a)(ii) and the number of shares covered by the portion of the
Option (if any) that has been repurchased. Holder shall notify Issuer of its
determination under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 2(a).
(c) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share of Common Stock paid
for any such share by the person or groups described in Section 8(d)(i), (ii)
the price per share of Common Stock received by holders of Common Stock
in connection with any merger or other business combination transaction
described in Section 6(a)(i), 6(a)(ii) or 6(a)(iii), or (iii) the highest
closing bid price per share of Issuer Common Stock quoted on the Nasdaq
National Market System (or if Issuer Common Stock is not quoted on the Nasdaq
National Market System, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Holder) during the 40
business days preceding the Request Date; provided, however, that in the
event of a sale of less than all of Issuer's assets, the Applicable Price
shall be the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by Holder, divided by
the number of shares of Common Stock outstanding at the time of such sale.
If the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if, prior to
an Exercise Termination Event, (i) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial ownership of (as such
term is defined in Rule 13d-3 promulgated under the Exchange Act), or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined under the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 50% or more of the
then outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 6(a)(i), 6(a)(ii) or 6(a)(iii) shall have
occurred.
9. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and, except for the
approval by the requisite vote of the Primary Bank shareholders, no other
corporate proceedings on the part of Issuer are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
Subject to the approval of the requisite vote of the Primary Bank
shareholders and the receipt of the required approvals from the Regulatory
Authorities described in Section 3.04 of the Reorganization Agreement (and
assuming the ▇▇▇ authorization, execution and delivery by both Granite
State and Granite Bank, this Agreement is the valid and legally binding
obligation of Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of
Common Stock at any time and from time to time issuable hereunder, and
all such shares, upon issuance pursuant hereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrance and security interests and not subject
to any preemptive rights.
(c) Issuer has taken all necessary action to exempt this Agreement,
and the transactions contemplated hereby and thereby from, and this
Agreement and the transactions contemplated hereby and thereby are
exempt from, (I) any applicable state takeover laws, (ii) any state laws
limiting or restricting the voting rights of stockholders and (iii) any
provision in its or any of its subsidiaries' articles of agreement,
certificate of incorporation, charter or bylaws restricting or limiting stock
ownership of the voting rights of stockholders.
(d) The execution, delivery and performance of this Agreement does
not or will not, and the consummation by Issuer of any of the transactions
contemplated hereby will not, constitute or result in (i) a breach or
violation of, or a default under, its articles of agreement or bylaws, or the
comparable governing instruments of any of its subsidiaries, or (ii) a breach
or violation of, or a default under, any agreement, lease, contract, note,
mortgage, indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or both)
or under any law, rule, ordinance or regulation or judgment, decree, order,
award or governmental or nongovernmental permit or license to which it or any
of its subsidiaries is subject, that would, in any case referred to in this
clause (ii), upon receipt of approvals from Regulatory Authorities referred to
in Section 3.04 of the Reorganization Agreement, give any other person the
ability to prevent or enjoin Issuer's performance under this Agreement in any
material respect, except for such violations, conflicts, breaches or defaults
under clause (i) or (ii) above which would not, either individually or in the
aggregate, have a Material Adverse Effect on Primary Bank and its
Subsidiaries taken as a whole.
10. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) This Option is not being acquired with a view to the public
distribution thereof and neither this Option nor any Option Shares will be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under applicable federal and state securities laws
and regulations.
11. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder
to any other person, without the express written consent of the other party,
except (i) to any wholly-owned Subsidiary or (ii) that in the event a
Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may
assign in whole or in part its rights and obligations hereunder to one or more
transferees.
12. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of all third parties and governmental
authorities necessary to the consummation of the transactions contemplated
by this Agreement.
13. Notwithstanding anything to the contrary herein, in the event that
the Holder or any Related Person thereof is a person making an offer or
proposal to engage in an Acquisition Transaction (other than the
transactions contemplated by the Reorganization Agreement), then in the
case of a Holder or any Related Person thereof, the Option held by it shall
immediately terminate and be of no further force or effect. A Related Person
of a Holder means any Affiliate (as defined in Rule 12b-2 of the rules and
regulations under the ▇▇▇▇ ▇▇▇) of the Holder and any person that is the
beneficial owner of 20% or more of the voting power of the Holder.
14. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire the full
number of shares of Common Stock provided in Section 1(a) hereof (as
adjusted pursuant to Section 1(b) or Section 5 hereof), it is the express
intention of Issuer to allow the Holder to acquire such lesser number of
shares as may be permissible, without any amendment or modification
hereof.
16. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by cable, telegram, telecopy or telex, or by registered
or certified mail (postage prepaid, return receipt requested) at the
respective addresses of the parties set forth in the Reorganization Agreement.
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Hampshire, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
18. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
19. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
20. Except as otherwise expressly provided herein, or in the
Reorganization Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder
and supersedes all prior arrangements or understandings with respect
thereof, written or oral. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and, as permitted herein,
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
21. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Reorganization Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers, all as of the date
first above written.
PRIMARY BANK
BY: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive
Officer
GRANITE STATE BANKSHARES, INC.
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive
Officer
EXHIBIT 4
FORM OF OPINION OF COUNSEL TO GRANITE STATE
Primary Bank shall have received from counsel to Granite State, an
opinion, dated as of the Closing Date, substantially to the effect that,
subject to normal exceptions and qualifications:
(a) Granite State and Granite Bank have full corporate power to
carry out the transactions contemplated in the Agreement and the Plan of
Merger, respectively. The execution and delivery of the Agreement and the
Plan of Merger and the consummation of the transactions contemplated
thereunder have been duly and validly authorized by all necessary corporate
action on the part of Granite State and Granite Bank, and the Agreement
and the Plan constitute valid and legally binding obligations of Granite State
and Granite Bank, respectively, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium, receivership, conservatorship, and
other laws affecting creditors' rights generally and institutions the deposits
of which are insured by the FDIC, and as may be limited by the exercise of
judicial discretion in applying principles of equity. Subject to satisfaction
of the conditions set forth in the Agreement, neither the transactions
contemplated in the Agreement or the Plan, nor compliance by Granite State
and Granite Bank with any of the respective provisions thereof, will (i)
conflict with or result in a breach or default under (A) the articles of
agreement or bylaws of Granite State or the articles of agreement or bylaws
of Granite Bank, or, (B) to the knowledge of such counsel, any note, bond,
mortgage, indenture, license, agreement or other material instrument or
obligation to which Granite State or Granite Bank is a party; or (ii) based on
certificates of officers and without independent verification, to the
knowledge of such counsel, result in the creation or imposition of any
material lien or encumbrance upon the property of Granite State or Granite
Bank, except such material lien, instrument or obligation that has been
disclosed pursuant to the Agreement or the Plan; or (iii) violate in any
material respect any order, writ, injunction or decree known to such counsel,
or any federal or New Hampshire statute, rule or regulation applicable to
Granite State or Granite Bank.
(b) Granite Bank is a validly existing bank organized and in good
standing under the laws of the State of New Hampshire. The deposits of
Granite Bank are insured to the maximum extent provided by law by the
Federal Deposit Insurance Corporation.
(c) There is, to the knowledge of such counsel, no legal,
administrative, arbitration or governmental proceeding or investigation
pending or threatened to which Granite State or Granite Bank is a party
which would, if determined adversely to Granite State or Granite Bank,
have a material adverse effect on the financial condition or results of
operation of Granite State and Granite Bank taken as a whole, or which
presents a claim to restrain or prohibit the transactions contemplated by the
Agreement and the Plan, respectively.
(d) No consent, approval, authorization or order of any federal or
state court or federal or state governmental agency or body is required for
the consummation by Granite State or Granite Bank of the transactions
contemplated by the Agreement and the Plan, except for such consents,
approvals, authorizations or orders as have been obtained.
(e) Upon the filing and effectiveness of the filings with the
appropriate New Hampshire authorities in accordance with the Agreement
and the Plan, the mergers of Granite State and Primary Bank and of Granite
Bank and Primary Bank contemplated by the Agreement and the Plan,
respectively, will have been effected in compliance with all applicable
federal and New Hampshire laws and regulations in all material respects.
(f) The shares of Granite State Common Stock to be issued in
connection with the merger of Primary Bank and Granite State contemplated
by the Agreement have been duly authorized and will, when issued in
accordance with the terms of the Agreement, be validly issued, fully paid
and nonassessable, free and clear of any mortgage, pledge, lien,
encumbrance or claim (legal or equitable).
(g) On the sole basis of such counsel's participation in conferences
with officers and employees of Granite State in connection with the Proxy
Statement/Prospectus, and without other independent investigation or
inquiry, such counsel has no reason to believe that the Proxy
Statement/Prospectus, including any amendments or supplements thereto
(except for the financial information, financial schedules and other financial
or statistical data contained therein and except for any information supplied
by Primary Bank for inclusion therein, as to which counsel need express no
belief), as of the date of mailing thereof, contained any untrue statement of
a material fact with respect to Granite State or omitted to state any material
fact with respect to Granite State necessary to make any statement therein
with respect to Granite State, in light of the circumstances under which it
was made, not misleading. Counsel may state in delivering such opinion,
that such counsel has not independently verified and does not assume the
responsibility for the accuracy, completeness or fairness of any information
or statements contained in the Proxy Statement/Prospectus, except with
respect to identified statements of law or regulations or legal conclusions
relating to Granite State or the transactions contemplated in the Agreement
and the Plan.
EXHIBIT 5
FORM OF TAX OPINION OF ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Granite State and Primary Bank shall have received an opinion of
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ substantially to the effect that,
under the provisions of the IRC:
1. Provided the Merger qualifies as a statutory merger under
applicable law, the transfer by Primary Bank of all of its assets to Granite
Bank in exchange for Granite State Common Stock (including fractional
share interests) and the assumption by Granite Bank of all of Primary
Bank's liabilities will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the IRC, by application of Section 368(a)(2)(D) of
the IRC.
2. Primary Bank, Granite State and Granite Bank will each be "a
party to a reorganization" within the meaning of Section 368(b) of the IRC.
3. Neither Primary Bank nor Granite Bank will recognize any gain
or loss upon the transfer of Primary Bank's assets to Granite Bank in
exchange solely for Granite State Common Stock (including fractional share
interests) and the assumption by Granite State of the liabilities of Primary
Bank.
4. The basis of the Primary Bank assets in the hands of Granite
Bank will be in the same as the basis of such assets in the hands of Primary
Bank immediately prior to the Merger.
5. The holding period of the assets of Primary Bank in the hands
of Granite Bank will include the period during which the assets were held
by Primary Bank.
6. No gain or loss will be recognized by the shareholders of
Primary Bank on the receipt of Granite State Common Stock (including
fractional share interests) solely in exchange for their shares of Primary
Bank Common Stock.
7. The basis of the Granite State Common Stock (including
fractional share interests) to be received by the Primary Bank shareholders
in the Merger will be the same as the basis of the Primary Bank Common
Stock surrendered in exchange therefor.
8. The basis of the Granite Bank common stock to be held by
Granite State after the Merger will equal the basis of such stock immediately
before the Merger, increased by the net basis of Primary Bank in the
property acquired from it by Granite Bank.
9. The holding period of the Granite State Common Stock
(including fractional share interests) to be received by the Primary Bank
shareholders in the Merger will include the period during which the Primary
Bank shareholders held their Primary Bank Common Stock, provided the
shares of Primary Bank Common Stock are held as a capital asset on the
Effective Date.
10. The payment of cash in lieu of fractional share interests of
Granite State Common Stock will be treated as if the fractional share
interests were distributed as part of the Merger and then redeemed by
Granite State. Such cash payments will be treated as having been received
as distribution in full payment in exchange for the fractional share interests
redeemed, as provided in Section 302(a) of the IRC.
11. As provided in Section 381(c)(2) of the IRC and related
Treasury regulations, Granite Bank will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of Primary Bank as
of the Effective Date. Any deficit in the earnings and profits of Granite
Bank or Primary Bank will be used only to offset the earnings and profits
accumulated after the Merger.
12. Pursuant to Section 381(a) of the IRC and related Treasury
regulations, Granite Bank will succeed to and take into account the items of
Primary Bank described in Section 381(c) of the IRC. Such items will be
taken into account by Granite State subject to the conditions and limitations
of Sections 381, 382, 383, and 384 of the IRC and the Treasury regulations
thereunder.
EXHIBIT 6
FORM OF OPINION OF COUNSEL TO PRIMARY BANK
Granite State shall have received from counsel to Primary Bank, an
opinion, dated as of the Closing Date, substantially to the effect that,
subject to normal exceptions and qualifications:
(a) Primary Bank has full corporate power to carry out the
transactions contemplated in the Agreement and the Plan of Merger,
respectively. The execution and delivery of the Agreement and the Plan of
Merger and the consummation of the transactions contemplated thereunder
have been duly and validly authorized by all necessary corporate action on
the part of Primary Bank. Subject to the receipt of the requisite vote of
Primary Bank shareholders and the receipt of approvals from the Regulatory
Authorities referred to in Section 3.04 of the Agreement (and assuming the
due authorization, execution and delivery by Granite State and Granite
Bank), the Agreement and the Plan constitute a valid and legally binding
obligation, in accordance with their respective terms, of Primary Bank,
except as may be subject to the conservatorship or receivership provisions
of the FDIA, or the insolvency and similar laws affecting creditors' rights
generally and institutions the deposits of which are insured by the FDIC,
and as may be subject, as to enforceability, to general principles of equity.
Subject to satisfaction of the conditions set forth in the Agreement, neither
the transactions contemplated in the Agreement and the Plan, nor
compliance by Primary Bank with any of the respective provisions thereof,
will (i) conflict with or result in a breach or default under (A) the articles
of agreement or bylaws of Primary Bank, or (B) based on certificates of
officers and without independent verification, to the knowledge of such
counsel, any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which Primary Bank is a party; or (ii) to the
knowledge of such counsel, result in the creation or imposition of any
material lien, instrument or encumbrance upon the property of Primary
Bank, except such material lien, instrument or obligation that has been
disclosed to Granite State pursuant to the Agreement and the Plan, or (iii)
violate in any material respect any order, writ, injunction, or decree known
to such counsel, or any statute, rule or regulation applicable to Primary
Bank.
(b) Primary Bank is a validly existing guaranty (stock) savings bank
organized and in good standing under the laws of the State of New
Hampshire. The deposits of Primary Bank are insured to the maximum
extent provided by law by the Federal Deposit Insurance Corporation.
(c) There is, to the knowledge of such counsel, no legal,
administrative, arbitration or governmental proceeding or investigation
pending or threatened to which Primary Bank is a party which would, if
determined adversely to Primary Bank, have a material adverse effect on the
business, properties, results of operations, or condition, financial or
otherwise, of Primary Bank or the Primary Bank Subsidiaries taken as a
whole or which presents a claim to restrain or prohibit the transactions
contemplated by the Agreement and the Plan, respectively.
(d) No consent, approval, authorization, or order of any federal or
state court or federal or state governmental agency or body, or of any third
party, is required for the consummation by Primary Bank of the transactions
contemplated by the Agreement and the Plan, except for such consents,
approvals, authorizations or orders as have been obtained or waived by
Granite State.
(e) On the sole basis of such counsel's participation in conferences
with officers and employees of Primary Bank in connection with the
preparation of the Prospectus/Proxy Statement and without other
independent investigation or inquiry, such counsel has no reason to believe
that the Prospectus/Proxy Statement, including any amendments or
supplements thereto (except for the financial information, financial
statements, financial schedules and other financial or statistical data
contained therein and except for any information supplied by Granite State
for inclusion therein, as to which counsel need express no belief), as of the
date of mailing thereof and as of the date of the meeting of shareholders of
Primary Bank to approve the merger, contained any untrue statement of a
material fact or omitted to state a material fact necessary to make any
statement therein, in light of the circumstances under which it was made,
not misleading. Counsel may state in delivering such opinion, that such
counsel has not independently verified and does not assume any
responsibility for the accuracy, completeness or fairness of any information
or statements contained in the Prospectus/Proxy Statement, except with
respect to identified statements of law or regulations or legal conclusions
relating to Primary Bank or the transactions contemplated in the Agreement
and the Plan.