1
Execution Copy
Stock Purchase Agreement
Dated as of April 12, 1999
Among
Sun Life Assurance Company of Canada (U.S.)
Parent
New London Trust, FSB
Target
and
PM Holdings, Inc.
Purchaser Parent
PM Trust Holding Company
Purchaser
Lake Sunapee Bank, fsb
Mascoma Savings Bank
and
βββββββ Bank
The Bank Parties
2
TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS...............................................................................2
ARTICLE II
THE ACQUISITION
2.1 THE ACQUISITION...................................................................................6
2.2 EFFECTIVE TIME....................................................................................6
2.3 PURCHASE PRICE....................................................................................6
2.4 ACCOUNTING AS OF EFFECTIVE TIME; PRORATION........................................................8
2.5 ADJUSTMENTS TO TARGET'S BOOKS AS OF CLOSING DATE..................................................9
2.6 SOLICITATION OF TRUST BUSINESS....................................................................9
2.7 SOLICITATION OF DEPOSIT ACCOUNTS..................................................................10
2.8 ADMINISTRATION OF TRUST BUSINESS..................................................................10
2.9 PAYMENT OF CLOSING DIVIDEND. ....................................................................10
2.10 REQUIREMENTS PRIOR TO CLOSING DATE................................................................10
2.11 POSSIBLE ALTERNATIVE STRUCTURES. ................................................................11
2.12 COOPERATION IN CALCULATION OF AMOUNTS PAYABLE UNDER AGREEMENT.....................................12
ARTICLE III
DISCLOSURE STANDARDS
3.1 DISCLOSURE SCHEDULES. ..........................................................................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND TARGET
4.1 CAPITAL STRUCTURE................................................................................12
4.2 ORGANIZATION, STANDING AND AUTHORITY OF TARGET...................................................13
4.3 ORGANIZATION, STANDING AND AUTHORITY OF PARENT. ...............................................13
4.4 OWNERSHIP OF TARGET STOCK OUTSTANDING............................................................13
4.5 OWNERSHIP OF TARGET SUBSIDIARIES.................................................................13
4.6 ORGANIZATION, STANDING AND AUTHORITY OF TARGET SUBSIDIARIES......................................14
4.7 PERSONAL PROPERTY; CASH ON HAND..................................................................14
4.8 AUTHORIZED AND EFFECTIVE AGREEMENT. ..........................................................14
4.9 REGULATORY REPORTS...............................................................................15
4.10 FINANCIAL STATEMENTS............................................................................15
4.11 MATERIAL ADVERSE CHANGE.........................................................................16
4.12 ENVIRONMENTAL MATTERS...........................................................................16
4.13 TAX MATTERS.......................................................................................17
3
4.14 LEGAL PROCEEDINGS...............................................................................18
4.15 COMPLIANCE WITH LAWS............................................................................18
4.16 EMPLOYEE BENEFIT PLANS..........................................................................19
4.17 CERTAIN CONTRACTS...............................................................................21
4.18 BROKERS AND FINDERS.............................................................................22
4.19 INSURANCE.......................................................................................22
4.20 LOANS...........................................................................................22
4.21 LOAN PORTFOLIO..................................................................................23
4.22 ACCURACY OF DEPOSIT SCHEDULES...................................................................23
4.23 ACCURACY AND AVAILABILITY OF DEPOSIT ACCOUNT RECORDS............................................23
4.24 PROPERTIES......................................................................................23
4.25 TENANTS; LEASES.................................................................................24
4.26 LABOR. ........................................................................................24
4.27 MATERIAL INTERESTS OF CERTAIN PERSONS...........................................................25
4.28 TRUST BUSINESS..................................................................................25
4.29 BOOKS AND RECORDS...............................................................................26
4.30 ACCOUNTS RECEIVABLE AND PAYABLE.................................................................26
4.31 ACCOUNT ALLOWANCES. ............................................................................26
4.32 LOCATION AND CONDUCT OF BUSINESS................................................................26
4.33 YEAR 2000 COMPLIANCE. ..........................................................................26
4.34 INTELLECTUAL PROPERTY...........................................................................27
4.35 NO FURTHER REPRESENTATIONS......................................................................27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PURCHASER PARENT
5.1 ORGANIZATION, STANDING AND AUTHORITY OF PURCHASER................................................27
5.2 ORGANIZATION, STANDING AND AUTHORITY OF PURCHASER PARENT. ......................................27
5.3 AUTHORIZED AND EFFECTIVE AGREEMENT...............................................................28
5.4 FINANCIAL STATEMENTS.............................................................................29
5.5 MATERIAL ADVERSE CHANGE..........................................................................29
5.6 PURCHASER INVESTIGATION. .......................................................................29
5.7 LEGAL PROCEEDINGS................................................................................30
5.8 REGULATORY MATTERS...............................................................................30
5.9 BROKERS AND FINDERS..............................................................................30
5.10 FINANCING.......................................................................................30
5.11 NO FURTHER REPRESENTATIONS.......................................................................30
ARTICLE VI
COVENANTS OF TARGET AND PARENT
6.1 MAKING OF COVENANTS AND AGREEMENTS...............................................................31
6.2 CONDUCT OF BUSINESS..............................................................................31
6.3 CURRENT INFORMATION..............................................................................33
6.4 ALL REASONABLE EFFORTS...........................................................................34
4
6.5 FAILURE TO FULFILL CONDITIONS...................................................................34
6.6 REGULATORY APPROVALS............................................................................34
6.7 CORPORATE AND OTHER CONSENTS....................................................................34
6.9 NONSOLICITATION OF PURCHASER'S EMPLOYEES. ....................................................34
6.10 ACCESS TO AND RETENTION OF BOOKS AND RECORDS....................................................35
6.11 DATA PROCESSING AND TRANSFER SERVICES...........................................................35
6.12 AUTOMATED CLEARING HOUSE ENTRIES................................................................35
6.13 COMMUNICATIONS; NOTICES; ETC....................................................................35
6.14 REGULATORY AUTHORIZATIONS.......................................................................36
6.15 CLIENT CONSENTS.................................................................................36
6.16 SALES OF CERTAIN ASSETS; DEPOSITS TO BE MAINTAINED. ...........................................37
CERTAIN EMPLOYMENT OBLIGATIONS..................................................................37
6.18 FILING WITH RESPECT TO PROFIT SHARING PLAN......................................................38
6.19 PAYMENT OF ACCOUNTS PAYABLE.....................................................................38
ARTICLE VII
COVENANTS OF PURCHASER, PURCHASER PARENT AND THE BANK PARTIES
7.1 MAKING OF COVENANTS AND AGREEMENTS...............................................................38
7.2 CONDUCT OF BUSINESS..............................................................................38
7.3 PROVISION OF ADEQUATE CAPITAL....................................................................39
7.4 CURRENT INFORMATION..............................................................................39
7.5 ALL REASONABLE EFFORTS...........................................................................39
7.6 FAILURE TO FULFILL CONDITIONS....................................................................40
7.7 EMPLOYEE BENEFITS................................................................................40
7.8 DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE.............................................41
7.9 NON-SOLICITATION OF PARENT EMPLOYEES. ..........................................................41
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION....................................................................................42
8.3 INDEMNIFICATION PROCEDURE..........................................................................43
8.4 LIMITATION ON INDEMNIFICATION......................................................................44
8.5 SPECIAL, CONSEQUENTIAL, AND PUNITIVE DAMAGES NOT INDEMNIFIABLE.....................................44
8.6 INDEMNITY PAYMENTS REDUCED BY INSURANCE PROCEEDS. ................................................45
8.7 MAXIMUM AGGREGATE LIABILITY........................................................................45
8.8 EXCLUSIVE REMEDY...................................................................................45
8.9 LIMITATION ON ACTIONS..............................................................................45
ARTICLE IX
REGULATORY AND OTHER MATTERS
9.1 REGULATORY APPROVALS.............................................................................46
9.2 ACCESS AND INVESTIGATION. ......................................................................46
5
9.3 CONFIDENTIALITY. ...............................................................................47
9.4 POST-CLOSING TAX MATTERS.........................................................................47
9.5 NON-COMPETITION..................................................................................50
9.6 FURTHER ASSURANCES...............................................................................50
9.7 RETENTION OF RECORDS.............................................................................50
9.8 ACCESS TO BOOKS AND RECORDS......................................................................50
ARTICLE X
CLOSING CONDITIONS
10.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT.....................................51
10.2 CONDITIONS TO THE OBLIGATIONS OF PURCHASER UNDER THIS AGREEMENT.................................51
10.3 CONDITIONS TO THE OBLIGATIONS OF PARENT UNDER THIS AGREEMENT....................................53
ARTICLE XI
THE CLOSING
11.1 TIME AND PLACE. ...............................................................................53
11.2 DELIVERIES AT THE CLOSING.......................................................................54
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
12.1 TERMINATION.....................................................................................54
12.2 EFFECT OF TERMINATION...........................................................................55
12.3 AMENDMENT, EXTENSION AND WAIVER.................................................................56
ARTICLE XIII
MISCELLANEOUS
13.1 CONFIDENTIALITY AGREEMENT. ....................................................................56
13.2 SURVIVAL. ......................................................................................56
13.3 NOTICES.........................................................................................56
13.4 PARTIES IN INTEREST.............................................................................58
13.5 COMPLETE AGREEMENT..............................................................................58
13.6 COUNTERPARTS....................................................................................58
13.7 SEVERABILITY....................................................................................58
13.8 GOVERNING LAW...................................................................................58
13.9 HEADINGS........................................................................................58
13.10 INTERPRETATION.................................................................................58
6
INDEX OF DEFINED TERMS
1998 Trust Revenues...............................................................................................6
Accounts Receivable..............................................................................................26
Acquisition ...................................................................................................1
Advisers Act ..................................................................................................25
Affiliate ...................................................................................................2
Allocation ..................................................................................................49
Bank Assets ...................................................................................................1
Bank Business ...................................................................................................2
Bank Parties ...................................................................................................1
Bank Regulator ...................................................................................................2
Benefit Agreements...............................................................................................40
BHCA ...................................................................................................2
BIF ...................................................................................................2
Branch Customers..................................................................................................9
Branch Subset ...................................................................................................2
Burdensome Condition.............................................................................................51
Cargill ...................................................................................................1
Charter Trust Company............................................................................................40
Closing ...................................................................................................6
Closing Date ...................................................................................................6
Closing Deposit Balances..........................................................................................6
Closing Dividend.................................................................................................10
Code ...................................................................................................2
Comparable Job ..................................................................................................40
Damages ..................................................................................................42
Deposit Measurement Period........................................................................................6
Deposit Reduction Amount..........................................................................................6
DOJ ...................................................................................................2
Effective Time ...................................................................................................6
Environmental Claim...............................................................................................2
Environmental Laws................................................................................................2
ERISA ...................................................................................................3
Estimated Balance Sheet...........................................................................................8
Exchange Act ...................................................................................................3
Exhibit A ..................................................................................................36
Exhibit B ..................................................................................................36
Exhibit C ..................................................................................................36
Exhibit D ..................................................................................................37
Exhibit E ..................................................................................................37
Expenses ..................................................................................................55
FDIA ...................................................................................................3
FDIC ...................................................................................................3
FHLB ...................................................................................................3
Final Approval Date..............................................................................................35
7
Final Balance Sheet...............................................................................................8
FRB ...................................................................................................3
GAAP ...................................................................................................3
Governmental Entity...............................................................................................3
HOLA ...................................................................................................3
Holding Company..................................................................................................11
Indemnified Liabilities..........................................................................................43
Intellectual Property............................................................................................27
βββ ...................................................................................................5
Lake Sunapee ...................................................................................................1
Leases ..................................................................................................24
Letter Agreement.................................................................................................52
Liens ...................................................................................................6
Loan ...................................................................................................3
Loans ..................................................................................................22
March Deposit Balances............................................................................................7
Mascoma ...................................................................................................1
Material Adverse Effect...........................................................................................3
Materials of Environmental Concern................................................................................4
Measurement Period................................................................................................8
NLT Severance Plan...............................................................................................32
OTS ...................................................................................................4
Outside Directors................................................................................................41
Parent ...................................................................................................1
Parent 1998 Balances..............................................................................................7
Parent Accounts..................................................................................................37
Parent CPA ...................................................................................................8
Parent Indemnified Parties.......................................................................................42
Parent Threshold.................................................................................................44
PBGC ...................................................................................................4
Person ...................................................................................................4
Post-Closing Deposit Reduction Amount.............................................................................7
Post-Closing Trust Revenues.......................................................................................7
Purchase Agreement................................................................................................1
Purchase Price ...................................................................................................6
Purchaser ...................................................................................................1
Purchaser CPA ...................................................................................................8
Purchaser Disclosure Schedule....................................................................................12
Purchaser Financial Statements....................................................................................4
Purchaser Indemnified Parties....................................................................................42
Purchaser Parent..................................................................................................1
Purchaser Parent Financial Statements.............................................................................4
Purchaser Representing Party.....................................................................................28
Purchaser Threshold..............................................................................................44
Real Property ..................................................................................................24
Related Documents................................................................................................14
8
Remedial Actions.................................................................................................43
Rights ...................................................................................................4
SAIF ...................................................................................................4
Schedule ...................................................................................................4
SEC ...................................................................................................4
Section 338(h)(10) Election......................................................................................49
Securities Act ...................................................................................................4
Security Interest.................................................................................................4
Subsidiary ...................................................................................................5
Target ...................................................................................................1
Target Common Stock...............................................................................................5
Target Disclosure Schedule.......................................................................................12
Target Employee Plans............................................................................................20
Target Financial Statements.......................................................................................5
Target Offices ...................................................................................................5
Target Pension Plan..............................................................................................20
Target Stock Outstanding..........................................................................................5
Tax ...................................................................................................5
Tax Liability ...................................................................................................5
Tax Return ...................................................................................................5
Tax Subsidiary ...................................................................................................5
Termination Date.................................................................................................54
Title Commitments................................................................................................11
Title Company ..................................................................................................11
Transferred Employee.............................................................................................34
Trust Business ...................................................................................................5
Trust Revenue Reduction Amount....................................................................................7
Trusts ...................................................................................................6
9
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("AGREEMENT"), dated as of April 12, 1999, by
and among Sun Life Assurance Company of Canada (U.S.) a Delaware corporation
("PARENT") with its principal place of business in Wellesley, Massachusetts; New
London Trust, FSB, a federally-chartered savings bank in stock form ("TARGET")
with its main office in New London, New Hampshire; PM Holdings, Inc., a
Connecticut corporation with its main office in Hartford, Connecticut
("PURCHASER PARENT"); PM Trust Holding Company, a Connecticut corporation
("PURCHASER") with its principal place of business in Hartford, Connecticut;
βββββββ Bank, a state-chartered savings and loan association ("CARGILL") with
its main office in Putnam, Connecticut; Lake Sunapee Bank, fsb, a
federally-chartered savings bank ("LAKE SUNAPEE") with its main office in
Newport, New Hampshire; and Mascoma Savings Bank, a federally-chartered savings
bank ("MASCOMA") with its main office in Lebanon, New Hampshire. Lake Sunapee,
Mascoma, and Cargill are hereinafter each referred to as a "Bank Party" and
together referred to collectively as the "BANK PARTIES." (Certain capitalized
terms used herein shall have the meanings defined in Section 1.1 hereof.)
WHEREAS, Parent owns all of the issued and outstanding capital stock of
Target; and Purchaser Parent and Purchaser are desirous of Purchaser purchasing
such capital stock so as to acquire Target's charter and fiduciary accounts;
WHEREAS, the respective Boards of Directors of each of Purchaser and
Parent have approved the acquisition of Target by Purchaser pursuant to a
purchase of all of such issued and outstanding capital stock (the
"ACQUISITION").
WHEREAS, in connection with the Acquisition, Purchaser is
simultaneously entering into a certain Purchase and Assumption Agreement
("PURCHASE AGREEMENT") with the Bank Parties, whereby the Bank Parties agree to
purchase, immediately after the Closing of the Acquisition, the Bank Business
(as defined in Section 1.1) of Target;
WHEREAS, Parent and Target have entered into this Agreement with the
Bank Parties, and have made certain representations, warranties, covenants, and
agreements for the benefit of the Bank Parties as a material inducement for the
Bank Parties to enter into the Purchase Agreement with Purchaser;
WHEREAS, execution by the Bank Parties of the Purchase Agreement shall
constitute additional consideration for Purchaser and Purchaser Parent to enter
into this Agreement;
WHEREAS, the Bank Parties have appointed Purchaser to act as their
representative to take all action necessary to negotiate this Agreement and to
effectuate all transactions among the parties hereto contemplated hereby.
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Acquisition and to set forth certain
conditions to the Acquisition;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
10
ARTICLE I
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the following meanings (unless the context otherwise requires, both here
and throughout this Agreement, references to Articles and Sections refer to
Articles and Sections of this Agreement).
"ACQUISITION" shall mean the purchase of the Target Stock Outstanding
by Purchaser pursuant to the terms hereof.
"AFFILIATE" shall mean with respect to a specified Person, any other
Person who or which, directly or indirectly, controls, is controlled by or is
under common control with, such specified Person. As used in this definition,
the term "control" shall mean the power to direct or cause the direction of the
management and policies of such Person whether through ownership of voting
securities, by contract or otherwise.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504(a) of which Sun Life Assurance Company of Canada - U.S.
Operations Holdings Inc. was the common parent.
"BANK BUSINESS" shall mean any and all services, functions and
activities conducted or performed by Target, and all assets, rights and
liabilities related thereto, other than Trust Business.
"BANK REGULATOR" shall mean the FDIC, FRB, OTS, or any state regulatory
agency with authority over any of the parties hereto.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC, or any
successor thereto.
"BRANCH SUBSET" shall mean any of the three groups of Target Offices
and related Bank Business to be transferred to the Bank Parties pursuant to the
Purchase Agreement and the Related Documents (as hereinafter defined).
"CODE" shall mean the Internal Revenue Code of 1986, as amended, as in
effect from time to time.
"DOJ" shall mean the United States Department of Justice.
"EFFECTIVE TIME" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Acquisition.
"ENVIRONMENTAL CLAIM" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"ENVIRONMENTAL LAWS" means any foreign, federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree,
2
11
injunction or agreement with any Governmental Entity relating to (1) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water supply,
surface soil, subsurface soil, plant and animal life or any other natural
resource), and/or (2) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Materials of Environment Concern. The term Environmental Law includes without
limitation (1) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, et seq; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, et seq; the
Clean Air Act, as amended, 42 U.S.C. Section 7401, et seq; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, et seq; the Toxic
Substances Control Act, as amended, 15 U.S.C. Section 9601, et seq; the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 1101, et
seq; the Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq; and all
comparable state and local laws, and (2) any common law (including without
limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank, or any successor thereto.
"FRB" means the Board of Governors of the Federal Reserve System, or
any successor thereto.
"GOVERNMENTAL ENTITY" shall mean any federal or state court,
administrative agency, or commission or other governmental authority or
instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"INCOME TAX" means any federal, state, local, or foreign income tax
including any interest, penalty, or addition thereto, whether disputed or not.
"INCOME TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto.
"MATERIAL ADVERSE EFFECT" shall mean, (i) with respect to any party, a
material adverse effect on the business, results of operations or financial
condition of such party, other than any such effect attributable to or resulting
from (u) a depositor's transfer of deposit liabilities from Target to any of the
Bank Parties or their Affiliates or a client's transfer of Trust account assets
from Target to Purchaser or an Affiliate of Purchaser; (v) changes in interest
rates or general economic conditions or a general decline in the securities
market resulting in a reduction in the market value of securities on which fee
income is calculated, (w) any change in banking or similar laws, rules or
regulations of general applicability or interpretations thereof by courts or
governmental authorities, (x) any change in generally accepted accounting
principles ("GAAP") or applicable regulatory accounting principles, (y) any
action or omission of a party or any Subsid-
3
12
iary taken with the express prior written consent of the other parties hereto,
or (z) the execution and delivery of this Agreement or the transactions
contemplated hereby, including any expenses incurred by such party which
expenses are reasonably incurred in connection with this Agreement or the
transactions contemplated hereby, (ii) with respect to Target, a material
adverse effect on the business, results of operations, or financial condition of
Target and its Subsidiaries (taken as a whole) or of a Branch Subset, or, (iii)
with respect to any party, a material adverse effect on the ability of any party
to consummate the transactions contemplated hereby.
"MATERIALS OF ENVIRONMENTAL CONCERN" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws.
"OTS" shall mean the Office of Thrift Supervision, or any successor
thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PERSON" means an individual, corporation, partnership, limited
liability company, unincorporated association, trust, joint venture or other
organization or entity, including a Governmental Entity.
"PURCHASER PARENT FINANCIAL STATEMENTS" shall mean (i) the audited
consolidated statements of financial condition (including related notes and
schedules, if any) of Purchaser Parent as of December 31, 1997, 1996 and 1995
and the consolidated statements of operations, shareholders' equity and cash
flows (including related notes and schedules, if any) of Purchaser Parent for
each of the three years ended December 31, 1997, 1996 and 1995, and (ii) the
unaudited draft consolidated statements of financial condition (including
related notes and schedules, if any) of Purchaser Parent as of December 31, 1998
and 1997 and the consolidated statements of operations, shareholders' equity and
cash flows (including related notes and schedules, if any) of Purchaser Parent
for each of the two years ended December 31, 1998 and 1997.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.3.1
hereof.
"RIGHTS" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation of
its capital stock.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC, or any successor thereto.
"SCHEDULE" shall mean a written, signed disclosure schedule delivered
from the disclosing party to the other party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein.
"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes
4
13
not yet due and payable, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
ordinary course of business and not incurred in connection with the borrowing of
money.
"SUBSIDIARY" shall have the meaning set forth in Rule 1-02 of
Regulation S-X of the SEC.
"TARGET COMMON STOCK" shall mean the common stock of Target.
"TARGET EMPLOYEE PLANS" shall have the meaning set forth in Section
4.16.1 hereof.
"TARGET OFFICES" shall mean the banking and trust offices and other
premises operated by Target as of the date hereof and as of the Effective Time
at which its Bank Business or Trust Business is conducted.
"TARGET STOCK OUTSTANDING" shall mean all of the issued and outstanding
capital stock of Target.
"TARGET FINANCIAL STATEMENTS" shall mean (i) the audited consolidated
statements of financial condition (including related notes and schedules, if
any) of Target as of December 31, 1998, 1997 and 1996 and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of Target for each of the three years ended
December 31, 1998, 1997 and 1996 and (ii) the unaudited quarterly financial
statements required to be delivered pursuant to Section 6.3.
"TAX" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), for Taxes.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TAX SUBSIDIARY" means any corporation or partnership or other entity
with respect to which Target (or a Target Subsidiary) owns a majority of the
voting, profits, or capital interest therein.
"TRUST BUSINESS" shall mean the business of providing fiduciary
services in connection with the administration of the trusts, executorships,
administrations, guardianships, conservatorships, agencies, custodianships and
other representative capacities administered at the Target Offices and including
all investment management and custodial business, services and contracts related
to or offered in connection with such fiduciary services, and all fiduciary
assets and all agreements and rights of Target in connection with the
administration of the Trusts; provided, however, that all individual retirement
accounts ("βββ") accounts which consist solely of Target
5
14
deposits shall be deemed to constitute Bank Business.
"TRUSTS" shall mean the trusts, executorships, administrations,
guardianships, conservatorships, agencies, custodianships and other
representative capacities administered at the Target Offices; provided, however,
that the term "Trusts" shall not include βββ accounts which consist solely of
Target deposits.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II
THE ACQUISITION
2.1 THE ACQUISITION. As promptly as practicable following the
satisfaction or waiver of the conditions to the parties' respective obligations
hereunder, and subject to the terms and conditions of this Agreement, as of the
Effective Time, Parent shall transfer to Purchaser all of its right title and
interest in and to the Target Stock Outstanding, free and clear of any liens,
claims, encumbrances, charges, pledges, restrictions or rights of third parties
of any kind whatsoever ("LIENS") in exchange for the Purchase Price.
2.2 EFFECTIVE TIME. The Acquisition shall be effected by the transfer
of the Target Stock Outstanding as contemplated by Section 2.1 at the closing
(the "CLOSING") on the day ("CLOSING DATE") provided for in Article XI hereof.
The term "EFFECTIVE TIME" shall mean the time on the Closing Date (or a
subsequent date not later than the opening of business on the next business day)
when the Acquisition becomes effective as agreed to by the parties at the
Closing.
2.3 PURCHASE PRICE.
2.3.1. On the Closing Date, Purchaser shall pay to, or to the
order of, Parent by wire transfer in immediately available funds in U.S. dollars
an aggregate amount equal to $30.6 million (as hereinafter adjusted, the
"PURCHASE PRICE") to an account designated by Parent in writing.
2.3.2. The Purchase Price shall be adjusted as follows: (i) if
Trust Business revenues reflected in the December 31, 1998 financial statements
("1998 TRUST REVENUES") of Target exceed by more than 5 percent the annualized
Trust Business revenues ("CLOSING TRUST REVENUES") generated for the period
commencing ninety (90) days prior to the third business day prior to the Closing
Date and ending on the third business day prior to the Closing Date, then the
Purchase Price shall be reduced by an amount equal to two (2) times the
difference between such 1998 Trust Revenues and the Closing Trust Revenues,
provided, however, that there shall be no adjustment in the Purchase Price for
any loss of Trust Revenues up to an amount equal to 5% of 1998 Trust Revenues
that is directly attributable to a general decline in the securities markets;
(ii) if the aggregate balance of deposit accounts of Target outstanding as of
December 31, 1998, as reflected in the December 31, 1998 financial statements
("1998 DEPOSIT BALANCES") of Target, exceed by more than 5 percent the aggregate
average balance of deposit accounts ("CLOSING DEPOSIT BALANCES") for the period
(the "DEPOSIT MEASUREMENT PERIOD") commencing thirty (30) days prior to the
third business day prior to the Closing Date and ending on such third business
day prior to the Closing Date, the Purchase Price shall be reduced by an amount
(the "DEPOSIT REDUCTION AMOUNT") equal to the product of (A) 9.4% and (B) the
difference between the 1998 Deposit Balances and the Closing Deposit Balances;
and (iii) if annualized Closing Trust Revenues exceed by more than 5 percent the
annualized Trust Business revenues generated in the
6
15
six (6) month period following the Closing Date ("POST-CLOSING TRUST REVENUES"),
then the Purchase Price shall be reduced by an amount equal to two (2) times the
difference between the Closing Trust Revenues and the Post-Closing Trust
Revenues (the "TRUST REVENUE REDUCTION AMOUNT"), and Parent will pay the Trust
Revenue Reduction Amount, if any, to Purchaser promptly after the sixth month
anniversary of the Closing Date.
If any portion of the Deposit Measurement Period falls within the
period from December 15, 1999 to December 31, 1999, the parties agree that
reductions in deposit balances may be temporary and attributable to customer
nervousness over the Y2K issue. In such event, Parent may elect, in lieu of
calculating or paying a Deposit Reduction Amount, if any, in accordance with the
preceding paragraph, to calculate a Post-Closing Deposit Reduction Amount, if
any, as follows. If the 1998 Deposit Balances exceed by more than 12.5 percent
the aggregate average deposit account balances ("MARCH DEPOSIT BALANCES") on
accounts that were transferred to Purchaser at the Closing for the period (the
"Y2K DEPOSIT MEASUREMENT PERIOD") commencing on March 1, 2000 and ending on
March 31, 2000, the Purchase Price shall be reduced by an amount (the
"POST-CLOSING DEPOSIT REDUCTION AMOUNT") equal to the product of (A) 9.4% and
(B) the difference between the 1998 Deposit Balances and the March Deposit
Balances. Parent will pay the Post-Closing Deposit Reduction Amount, if any, to
Purchaser promptly after March 31, 2000. Deposit balances transferred by former
Branch Customers from a transferred account at one Bank Party to an account at
another Bank Party or to another account at a Bank Party shall be included in
all calculations of March Deposit Balances.
2.3.3. Notwithstanding any other provision of this Agreement,
(a) there shall be no adjustment in the Purchase Price to
the extent that such reduction represents a depositor's transfer
(direct or indirect) of deposit liabilities from Target to a Bank Party
or any Affiliate or a client's transfer of Trust Business from Target
to Purchaser or an Affiliate of Purchaser, in each case between the
date of this Agreement and the last day of the applicable deposit or
Trust Revenues measurement period;
(b) there shall be no adjustment in the Purchase Price based
upon differences in annualized Trust Revenues if Purchaser shall not
have been in material compliance with the requirements of Section 2.8;
(c) if Parent shall have closed the Parent Accounts upon the
request of Purchaser (as provided in Section 6.16), the aggregate
amount of deposit balances in the Parent Accounts as of December 31,
1998 ("PARENT 1998 BALANCES") shall not be taken into account in
calculating the 1998 Deposit Balances. Accordingly, under such
circumstances the 1998 Deposit Balances shall be calculated after
deducting (X) the Parent 1998 Balances from (Y) the aggregate amount of
deposit balances reflected in the December 31, 1998 financial
statements of Target;
(d) as to the Trust Revenue Reduction Amount only, all
calculations of annualized Trust Revenues shall be prepared after
adjusting the fee percentages applicable to accounts and market values
of all securities on which fee income is calculated so that such fee
percentages and market values are identical for each of the two
measurement periods.
2.3.4. In the event that the Effective Time has not occurred on
or prior to the eight month anniversary of the date of this Agreement, and the
failure of the Effective Time to have
7
16
occurred on or prior to such anniversary is not attributable to acts or
omissions by Target or Parent, then the Purchase Price shall be adjusted upwards
by an amount determined by (a) multiplying (1) the originally agreed upon
Purchase Price by (2) a percentage interest rate determined for the period
commencing on the day after such eight-month anniversary date through and
including the Closing Date (the "MEASUREMENT PERIOD") by averaging the discount
rate, expressed as a percentage, from face value on the 90-day treasury ββββ
rate for the initial and each succeeding seven-day period during the Measurement
Period based on the most recent auction of such 90-day treasury ββββ as reported
in the "Money Rates" column of The Wall Street Journal or equivalent publication
or information service, rounded at the date the foregoing calculation is made at
the Effective Time, upwards to the nearest $.01, then (b) dividing the product
determined pursuant to clause (a) by 365, and then (c) multiplying the amount
obtained after the application of clauses (a) and (b) by the number of calendar
days in the Measurement Period.
2.4 ACCOUNTING AS OF EFFECTIVE TIME; PRORATION. Seven (7) business days
prior to the Closing Date, Deloitte and Touche, independent certified
accountants with respect to Target, will deliver to Purchaser an estimated
balance sheet ("ESTIMATED BALANCE SHEET") of Target as of the Closing Date,
prepared as provided in Section 2.5. Except to the extent otherwise provided in
Section 2.5, such Estimated Balance Sheet shall be prepared on a basis
consistent with Target's December 31, 1998, financial statements and in
accordance with GAAP as though the Closing Date were the end of a fiscal year
(and reviewed in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public Accountants
by Deloitte and Touche). Except to the extent otherwise provided in Section 2.5,
items of income and expense attributable to the period prior to the Closing
shall be allocated to Target and the Estimated Balance Sheet shall be prepared
taking such allocations into account, and items of income and expense
attributable to the period after the Closing shall be allocated to Target for
periods thereafter. Except to the extent otherwise provided in Section 2.5, such
items of income and expense (including all Taxes) shall be prorated on an
estimated basis as of the close of business on the Closing Date, and reflected
on the Estimated Balance Sheet as of the Closing Date, whether or not such
adjustment would normally be made as of such time. Items of proration not
capable of being settled at Closing shall be settled not later than thirty (30)
days after Closing unless otherwise agreed by the parties hereto, and reflected,
together with any other adjustments agreed to by Purchaser and Parent, in a
final balance sheet to be prepared by Deloitte and Touche on behalf of Target
delivered to Purchaser and Parent on the 30th day following Closing (the "FINAL
BALANCE SHEET"). Unless Purchaser or Parent objects to the Final Balance Sheet
calculation, the Closing Dividend shall be recalculated based on the Final
Balance Sheet and Parent or Purchaser, as the case may be, shall promptly pay
the amount due to the other party by wire transfer in immediately available
funds in U.S. dollars to such account as such other party shall advise. If
either Purchaser or Parent objects to any element of the calculation of the
Final Balance Sheet provided in this Section 2.4, such objecting Party shall
notify the other of its objection and the basis therefor in the form of written
advice by a certified public accountant of its choosing ("PARENT CPA" or
"PURCHASER CPA", as the case may be). If such objections are not resolved within
15 days, Purchaser CPA and Parent CPA, as applicable, shall designate an
independent certified public accountant to resolve the matter and such
accountant's determination shall be binding on Purchaser and Parent. The fees of
Deloitte and Touche in preparing the Estimated Balance Sheet and the Final
Balance Sheet and the fees of any independent certified public accountant
designated to resolve any objections with respect to the Final Balance Sheet
shall be
8
17
shared equally by Parent and Purchaser.
2.5 ADJUSTMENTS TO TARGET'S BOOKS AS OF CLOSING DATE. Notwithstanding
any other provisions of this Agreement, and regardless of the requirements of
GAAP, in preparing Target's financial statements as of the Closing Date (and in
preparing the Estimated Balance Sheet and the Final Balance Sheet), the
following provisions shall apply:
2.5.1. No adjustment shall be made in Target's book value for any
real property of Target;
2.5.2. All securities in Target's investment portfolio will be
carried at values equal to their fair market value;
2.5.3. All goodwill, all sold mortgage servicing intangibles, and
all other intangibles shall have been written off to zero (it being understood
that the so-called "deferred tax asset" does not constitute goodwill or an
intangible).
2.5.4. It is the intention of the parties that the Estimated
Balance Sheet and the Final Balance Sheet be prepared, to the extent possible,
as if the Closing Date were the end of a fiscal year. Accordingly, to the extent
accruals are not normally made as of the close of a fiscal year for recurring
expenses (such as rent and utility bills), no accruals shall be made for such
types of items in preparation of the Estimated Balance Sheet or the Final
Balance Sheet;
2.5.5. Purchaser has agreed to be responsible for "stay for pay"
arrangements with key employees of Target in an amount not to exceed $200,000 in
the aggregate (as described in Section 6.2.2), and the full amount of such stay
for pay arrangements (up to such maximum) shall be an expense allocated to and
payable by Purchaser (and, accordingly, not accrued on the Estimated Balance
Sheet or the Final Balance Sheet);
2.5.6. Purchaser shall be responsible for the costs of
terminating any agreements or contracts that it or a Bank Party may choose to
terminate in connection with the transactions contemplated by this Agreement,
and the full amount of any charges or expense payable in connection with any
such terminations shall be an expense allocated to and payable by Purchaser or a
Bank Party, as the case may be (and, accordingly, not accrued on the Estimated
Balance Sheet or the Final Balance Sheet);
2.5.7. Target shall have sold or transferred all mortgage and
other Loan servicing rights (other than those relating to Loans retained in
Target's Loan portfolio) and all collateralized mortgage obligations of Target;
and
2.5.8. Purchaser agrees to accept all of Target's accounting
principles, practices and procedures to the extent they are consistent with GAAP
and Target's prior accounting practices, including, but not limited to,
valuation of assets and determination of liabilities, reserves for bad debts,
inventory valuations, fixed asset accounting and record keeping, methods and
lives of depreciation and capitalization policies; provided, however, that
Target shall not alter its loan loss reserve methodologies and shall maintain
its loan loss reserves at levels consistent with those reflected in the December
31, 1998 audited financial statements of Target.
2.6 SOLICITATION OF TRUST BUSINESS. Prior to the Closing Date, neither
Purchaser nor any Bank Party nor any of their Affiliates shall solicit customers
of the Target Offices ("BRANCH
9
18
CUSTOMERS") through advertising specifically referencing or targeted to such
Branch Customers in a way which is reasonably likely to induce such Branch
Customers to close Trust accounts or would otherwise result in the transfer of
all or a portion of existing Trust Business or Bank Business from Target.
Notwithstanding the foregoing sentence, Purchaser, the Bank Parties, and their
respective Affiliates shall be permitted, subject to the provisions of Section
6.13.3, to (a) engage in advertising, solicitations or marketing campaigns not
primarily directed to or targeted at Target Customers, (b) respond to
unsolicited inquiries by Branch Customers with respect to Trust services, and
(c) provide notices or communications relating to the transactions contemplated
hereby in accordance with the provisions hereof.
2.7 SOLICITATION OF DEPOSIT ACCOUNTS. Prior to the Closing Date,
neither Purchaser nor any Bank Party nor any of their Affiliates shall solicit
Branch Customers through advertising specifically referencing or targeted to
such Branch Customers in a way which is reasonably likely to induce such Branch
Customers to close deposit liability accounts or open accounts with any Bank
Party or would otherwise result in the transfer of all or a portion of an
existing deposit liability from Target. Notwithstanding the foregoing sentence,
Purchaser, the Bank Parties, and their respective Affiliates shall be permitted,
subject to the provisions of Section 6.13.3, to (a) engage in advertising,
solicitations or marketing campaigns not primarily directed to or targeted at
Target Customers, (b) respond to unsolicited inquiries by Target Office
Customers with respect to banking or other financial services, and (c) provide
notices or communications relating to the transactions contemplated hereby in
accordance with the provisions hereof.
2.8 ADMINISTRATION OF TRUST BUSINESS. During the six month period
following the Closing Date, Purchaser will operate the Trust Business, and it
will cause each of the Purchaser Subsidiaries to operate its Trust Business,
only in the usual, regular and ordinary course of business, use commercially
reasonable efforts to preserve intact the Trust Business and assets, and
maintain its rights and franchises and fee income; and except as disclosed on
Schedule 2.8, take no action which could reasonably be expected to adversely
affect the Trust Business or the fee income generated by such Trust Business.
2.9 PAYMENT OF CLOSING DIVIDEND. On the Closing Date, Target shall
transfer the "CLOSING DIVIDEND" to Parent. The Closing Dividend shall be an
amount equal to (A) the total equity of Target as reflected on the Estimated
Balance Sheet (after making the adjustments described in Section 2.5) plus (B)
all accrued liabilities for Taxes deducted in calculating the total equity of
Target referred to in clause (A), above (which amount shall later be adjusted,
if necessary, to equal the amount of accrued liabilities for Taxes deducted in
calculating the total equity of Target reflected on the Final Balance Sheet),
minus (C) $2.5 million in cash or cash equivalents which shall remain in Target
for the benefit of Purchaser. The Closing Dividend shall be paid by the transfer
or liquidation of securities in the Target's investment portfolio previously
approved by Purchaser in an aggregate amount equal to the Closing Dividend,
unless the Parent and Purchaser agree to fund the Closing Dividend in another
manner. The Closing Dividend shall be recalculated based on the Final Balance
Sheet and (in the case of any difference occasioned by such recalculation)
Parent or Purchaser (as the case may be) shall promptly pay the amount due to
the other party by wire transfer in immediately available funds in U.S. dollars
to such account as the receiving party shall advise.
2.10 REQUIREMENTS PRIOR TO CLOSING DATE.
10
19
2.10.1. MONTHLY STATEMENTS. Between the date of this Agreement
and the Closing Date, Target shall provide to Purchaser and the Bank Parties, on
or before the 15th day of each month commencing May 15, 1999, a schedule, as of
the last day of the immediately preceding month, setting forth deposits by
Target Office as of such date and Trust Business revenues for the month then
ended, including all adjustments, together with a reasonable estimate of the
adjustments to such deposits and revenues which would be required in order to
make the adjustments to deposits and Trust Business revenues described in
Section 2.3.
2.10.2. DETERMINATION OF CLOSING PAYMENT AMOUNT. On or before
12:00 noon on the second business day prior to the Closing Date, Parent shall
deliver to Purchaser a statement setting forth the Purchase Price (as calculated
based on the Estimated Balance Sheet and including all adjustments thereto) and
each component thereof and shall make available such work papers, schedules and
other supporting data as may be reasonably requested by Purchaser to enable it
to verify such determination.
2.10.3. TITLE INSURANCE COMMITMENTS. From and after the date of
this Agreement, Parent shall deliver or cause to be delivered to Purchaser (at
Purchaser's expense) title insurance commitments (collectively, the "TITLE
COMMITMENTS") issued by First American Title Insurance Company or another
nationally recognized title insurance company (the "TITLE COMPANY") for all of
the real property owned or leased by Target or any Target Subsidiary and
reflected on the consolidated statement of financial condition of Target on
December 31, 1998, which title commitments shall (a) confirm that Target or a
Target Subsidiary, as applicable, owns fee title (or leasehold title in the case
of the so-called Shopping Center Branch, Newport Road, New London, New
Hampshire) in and to the real property free of material encumbrances, Liens and
other title imperfections which would prevent transfer of such premises or use
of such premises for banking operations, subject to the provisions of Schedule
4.24; (b) commit the Title Company, on the Closing Date, to issue to Purchaser
or its designee, at commercially reasonable rates, an owner's (or leasehold, as
the case may be) policy of title insurance for each such parcel of real property
in an amount equal to the portion of the Purchase Price allocated to the same;
and (c) Parent will cause the Title Insurance Policy on the ββ βββββ ββββ
ββββββ, βββββββ, βββ βββββββββ, property to be transferred to ββ βββββ ββββ
ββββββ Corp.
2.11 POSSIBLE ALTERNATIVE STRUCTURES. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Effective Time, Purchaser may
(with the permission of Parent, which permission shall not be unreasonably
withheld or delayed) revise the structure of the Acquisition and the other
transactions contemplated hereby and thereby (including to effect the indirect
acquisition of Target by the acquisition of a mid-tier holding company the
capital stock of which is owned 100% by Parent, and which mid-tier holding
company owns 100% of the outstanding stock of Target ("HOLDING COMPANY");
provided, however, that provisions hereof which refer to "Target" shall be
deemed modified, as appropriate, to refer to "Target" and "Holding Company."
Notwithstanding the foregoing, any modification of the structure of the
Acquisition (which currently contemplates a Section 338(h)(10) election) may be
effected only if (i) Purchaser reimburses Parent (on a "grossed-up" basis) for
any increase in the aggregate Taxes of Parent, Target (to the extent paid by
Parent), and their stockholders as a result of the modification and in excess
of the Taxes that would be due under the structure provided in this Agreement
prior to such modification pursuant to this Section 2.11; (ii) the consideration
to be paid to the direct or indirect holders of Target Common Stock under this
Agreement is not thereby changed
11
20
in kind or reduced in amount; (iii) there are no material adverse changes to the
benefits and other arrangements provided to or on behalf of Target's directors,
officers and other employees; (iv) such modification will not be likely to delay
materially or jeopardize receipt of any required regulatory approvals or other
consents and approvals relating to the consummation of the Acquisition; and (v)
Purchaser reimburses Target for any costs (including without limitation the cost
of preparing any necessary regulatory application) incurred as a result of such
modification. Purchaser and Target agree to appropriately amend this Agreement
and any related documents as necessary in order to reflect any such revised
structure.
2.12 COOPERATION IN CALCULATION OF AMOUNTS PAYABLE UNDER AGREEMENT.
Each of the parties to this Agreement agrees to provide to each other party, and
to such other party's agents and representatives, such information (including,
without limitation, records reflecting transfers of deposit balances or Trust
Business) as may from time to time be in its possession and may be reasonably
requested by a party in order to determine amounts payable or receivable by a
party under this Agreement.
ARTICLE III
DISCLOSURE STANDARDS
3.1 DISCLOSURE SCHEDULES. Prior to the execution and delivery of this
Agreement, Parent and Target have delivered to Purchaser, and Purchaser has
delivered to Parent and Target, a schedule (in the case of Parent and Target,
the "TARGET DISCLOSURE SCHEDULE," and in the case of Purchaser and Purchaser
Parent, the "PURCHASER DISCLOSURE SCHEDULE") setting forth, among other things,
on schedules corresponding to the Sections hereof, items the disclosure of which
is necessary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to one or more of
such party's representations or warranties contained in Article IV, in the case
of Parent and Target, or Article V, in the case of Purchaser or Purchaser
Parent, or Section 5.3, in the case of the Bank Parties, or to one or more of
such party's covenants contained in Articles VI and VII; provided, however, that
notwithstanding anything in this Agreement to the contrary the mere inclusion of
an item in a disclosure schedule as an exception to a representation or warranty
shall not be deemed an admission by a party that such item represents a material
exception or material fact, event or circumstance or that such item has had or
would have a Material Adverse Effect (as defined herein) with respect to either
Target or Purchaser, respectively, unless otherwise stated in a specific
representation, warranty or schedule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND TARGET
As a material inducement to Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, Parent and Target hereby
represent and warrant to Purchaser and the Bank Parties that, except as set
forth in the appropriately numbered disclosure schedules delivered by Parent and
Target to Purchaser:
4.1 CAPITAL STRUCTURE. The authorized capital stock of Target consists
of 65,000 shares of Target Common Stock. 56,441 shares of Target Common Stock
are issued and outstanding. All outstanding shares of Target Common Stock have
been duly authorized and validly issued and
12
21
are fully paid and nonassessable. None of the outstanding shares of Target
Common Stock has been issued in violation of the preemptive rights of any
Person, firm or entity. None of Target's stock has been issued in violation of
any federal or state law. No Rights are authorized, issued or outstanding with
respect to the capital stock of Target, and there are no agreements,
understandings or commitments relating to the right of Parent to vote or to
dispose of such capital stock.
4.2 ORGANIZATION, STANDING AND AUTHORITY OF TARGET. Target is a federal
savings bank, duly organized and validly existing under the laws of the United
States of America with full corporate power and authority to own or lease or
hold as trustee, agent, custodian or in its own right as the case may be, all of
its properties, assets and Trusts and to carry on its business as now conducted.
Target is duly licensed or qualified to do business and is in good standing in
the locations listed in Schedule 4.2, which constitute each jurisdiction in
which its ownership or leasing of property or the conduct of its business
requires such licensing or qualification. Target has heretofore delivered to
Purchaser true and complete copies of the Corporate Charter and Bylaws of Target
as in effect as of the date hereof, and no amendments thereto are pending.
Target is not in violation of its Corporate Charter or Bylaws. The deposit
accounts of Target are insured by the BIF or the SAIF, to the maximum extent
permitted by the FDIA. Target has paid all deposit insurance premiums and
assessments required by the FDIC and filed all related reports with the FDIC.
4.3 ORGANIZATION, STANDING AND AUTHORITY OF PARENT. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to own or
lease all of its properties and assets and to carry on its business as now
conducted and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which its ownership or leasing of property or
the conduct of its business requires such licensing or qualification. Parent and
each other direct or indirect holder of Target Common Stock is duly registered
as a savings and loan holding company under the HOLA and the regulations of the
OTS thereunder.
4.4 OWNERSHIP OF TARGET STOCK OUTSTANDING. The Target Stock Outstanding
is owned by Parent free and clear of all Liens.
4.5 OWNERSHIP OF TARGET SUBSIDIARIES. Schedule 4.5 lists the name,
jurisdiction of incorporation and percentage ownership of each direct or
indirect Target Subsidiary. Except for (x) capital stock of the Target
Subsidiaries, (y) securities and other interests held in a fiduciary capacity
and beneficially owned by third parties or taken in consideration of debts
previously contracted, and (z) securities and other interests which are
disclosed in Schedule 4.5, Target does not own or have the right or obligation
to acquire, directly or indirectly, any outstanding capital stock or other
voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization, other than
investment securities representing not more than 1% of any entity. The
outstanding shares of capital stock or other ownership interests of each Target
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are directly or indirectly owned by Target free and clear of
all Liens. None of a Target Subsidiary's stock has been issued in violation of
any federal or state law. No Rights are authorized, issued or outstanding with
respect to the capital stock or other ownership interests of the Target
Subsidiaries and there are no agreements, understandings or commitments relating
to the right of Target to vote or to dispose of such capital stock or other
ownership interests.
13
22
4.6 ORGANIZATION, STANDING AND AUTHORITY OF TARGET SUBSIDIARIES. Each
of the Target Subsidiaries is a corporation or partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized. Except as disclosed on Schedule 4.6, each of the Target
Subsidiaries (i) has full power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted, and (ii) is
duly licensed or qualified to do business and is in good standing in the
locations listed in Schedule 4.6, which constitutes each jurisdiction in which
its ownership or leasing of property or the conduct of its business requires
such qualification. Target has heretofore delivered or made available to
Purchaser true and complete copies of the Corporate Charter and Bylaws of each
Target Subsidiary as of the date hereof.
4.7 PERSONAL PROPERTY; CASH ON HAND. Target and Target Subsidiaries
have good and marketable title to the personal property and the cash on hand
owned by each, free and clear of all Liens and encumbrances, other than those of
the types described in Section 4.24.
4.8 AUTHORIZED AND EFFECTIVE AGREEMENT.
4.8.1. Each of Parent and Target has all requisite corporate
power and authority to enter into this Agreement (subject to receipt of all
necessary governmental approvals) and each agreement, document and instrument to
be executed and delivered by Parent or Target pursuant to this Agreement (the
"RELATED DOCUMENTS") and to perform all of its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Related
Documents and the sale by Parent of the Target Stock Outstanding have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of each of Parent and Target. This Agreement has been duly and validly
executed and delivered by each of Parent and Target and, assuming due
authorization, execution and delivery by Purchaser, Purchaser Parent and each of
the Bank Parties, constitutes the legal, valid and binding obligation of each of
Parent and Target, enforceable against each of Parent and Target in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
4.8.2. Except as disclosed in Schedule 4.8.2, neither the
execution and delivery of this Agreement or any Related Document nor
consummation of the transactions contemplated hereby or thereby (including the
Acquisition and the sale of the Bank Business to the Bank Parties), nor
compliance by either of Parent or Target with any of the provisions hereof or
thereof (i) does or will conflict with or result in a breach of any provisions
of the Corporate Charter or Bylaws of Parent or Target or the equivalent
documents of any Target Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of, any Lien, charge or encumbrance
upon any property or asset of Parent or Target or any Target Subsidiary pursuant
to, any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Parent or Target or any
Target Subsidiary is a party, or by which any of their respective properties or
assets may be bound or affected, or (iii) subject to receipt of all required
governmental approvals, does or will constitute a violation of any order, writ,
injunction, decree, judgment, governmental permit, license, statute, rule or
regulation applicable to Parent or Target or any Target Subsidiary. For
14
23
the purposes of this section, Trusts and fiduciary arrangements held by Target
shall be considered material agreements.
4.8.3. Except for the filing of applications and notices with,
and the consents and approvals of, as applicable, the Bank Regulators and the
Department of Insurance of the State of Delaware, and review of the Acquisition
by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals which are disclosed on Schedule 4.8.3, no
material consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are necessary on the part of Parent
or Target in connection with the execution and delivery by Parent or Target of
this Agreement and the Related Documents and the consummation by Parent and
Target of the transactions contemplated hereby or thereby (including, with
respect to contractual consents, the sale of the Bank Business to the Bank
Parties).
4.8.4. As of the date hereof, neither Parent nor Target is aware
of any reasons relating to Parent or Target (including without limitation
Community Reinvestment Act compliance) why all consents and approvals shall not
be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement and Related Documents as shall be
necessary for consummation of the transactions contemplated hereby or thereby.
4.9 REGULATORY REPORTS. Since January 1, 1997, Target has duly filed
with the OTS and any other applicable federal or state banking authority, as the
case may be, in correct form the reports required to be filed under applicable
laws and regulations and such reports were in all material respects complete and
accurate and in compliance with the requirements of applicable laws and
regulations. In connection with the most recent examinations of Target by the
OTS, except as disclosed on Schedule 4.9, Target was not required to correct or
change any action, procedure or proceeding which Target reasonably believes has
not been corrected or changed as required as of the date hereof in all material
respects.
4.10 FINANCIAL STATEMENTS
4.10.1. Target has previously delivered or made available to
Purchaser accurate and complete copies of the Target Financial Statements, which
are accompanied by the audit reports of Deloitte and Touche, independent
certified public accountants with respect to Target. The Target Financial
Statements referred to herein, as well as the Target Financial Statements to be
delivered pursuant to Section 6.3 hereof (including the related notes) have been
prepared in accordance with GAAP consistently applied, except as may be
otherwise indicated in the notes thereto, fairly present or will fairly present,
as the case may be, in all material respects the consolidated financial
condition of Target as of the respective dates set forth therein, and the
consolidated results of operations, shareholders' equity and cash flows of
Target for the respective periods or as of the respective dates set forth
therein, subject, in the case of unaudited statements, to the addition of notes
and to normal and recurring year-end adjustments.
4.10.2. Each of the Target Financial Statements referred to in
Section 4.10.1 has been or will be, as the case may be, prepared in accordance
with generally accepted accounting principles consistently applied during the
periods involved, except as stated therein. The books and records of Target and
its Subsidiaries are being maintained in material compliance with applicable
legal and accounting requirements, and such books and records accurately reflect
in all material respects all dealings and transactions in respect of the
business, assets, liabilities and
15
24
affairs of Target and its Subsidiaries.
4.10.3. Except and to the extent (i) contemplated by this
Agreement (including without limitation the payment of the Closing Dividend and
severance and retention payments disclosed in the Schedules to this Agreement),
(ii) reflected, disclosed or provided for in the consolidated statement of
financial condition of Target as of December 31, 1998 (including related notes)
and (iii) of liabilities incurred since December 31, 1998 in the ordinary course
of business, neither Target nor any Target Subsidiary (x) had as of the date
hereof or will have as of the Effective Time any material liabilities, whether
absolute, accrued, contingent or otherwise, which are not either reflected in
the Target Financial Statements or would not be required to be so reflected in
accordance with GAAP or (y) will have as of the Effective Time any material
liabilities, whether absolute, accrued, contingent or otherwise, that arose
between the date of this Agreement and the Closing Date and that would be
required to be reflected in accordance with GAAP on Target's year-end
consolidated statement of financial condition.
4.11 MATERIAL ADVERSE CHANGE. Except as disclosed in Schedule 4.11 or
as contemplated by this Agreement, since December 31, 1998 (i) Target and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with prior practices (excluding the incurrence of
expenses in connection with this Agreement, and excluding the effects of the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen that, individually or in the aggregate, has had or is reasonably likely
to have a Material Adverse Effect on Target and its Subsidiaries (taken as a
whole) or any Branch Subset.
4.12 ENVIRONMENTAL MATTERS
4.12.1. To the best of Target's and Parent's knowledge after due
inquiry by Target, Target and its Subsidiaries are in material compliance with
all Environmental Laws. Neither Parent, Target nor a Target Subsidiary has
received any communication alleging that Target or a Target Subsidiary is not in
such compliance and, to the best knowledge of Parent and Target, there are no
present circumstances that would prevent or interfere with the continuation of
such compliance.
4.12.2. To the best of Target's and Parent's knowledge after due
inquiry by Target, none of the properties owned, leased or operated by Target or
a Target Subsidiary , whether directly, indirectly or in a fiduciary capacity,
has been or is in material violation of or liable under any Environmental Law.
4.12.3. To the best of Target's and Parent's knowledge after due
inquiry by Target, there are no past or present actions, activities,
circumstances, conditions, events or incidents that could reasonably form the
basis of any Environmental Claim or other claim or action or governmental
investigation that could reasonably be expected to result in the imposition of
any liability arising under any Environmental Law against Target or a Target
Subsidiary or against any Person or entity whose liability for any Environmental
Claim Target or a Target Subsidiary has or may have retained or assumed either
contractually or by operation of law, except such which would not have a
Material Adverse Effect on Target and its Subsidiaries (taken as a whole) or any
Branch Subset or a Target Subsidiary.
4.12.4. Except as disclosed in Schedule 4.12.4, Target has not
conducted any environmental studies during the past five years with respect to
any properties owned, leased or
16
25
operated by it or a Target Subsidiary, whether directly, indirectly or in a
fiduciary capacity, as of the date hereof.
4.13 TAX MATTERS
4.13.1. Except as set forth on Schedule 4.13.1, each of Target
and its Tax Subsidiaries has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all material respects.
All Taxes owed by any of the Target and its Tax Subsidiaries (whether or not
shown on any Tax Return) have been paid. Except as set forth on Schedule 4.13.1,
none of the Target and its Tax Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return. Within the past six years
no claim has been made by an authority in a jurisdiction where any of the Target
and its Tax Subsidiaries does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction. There are no Security Interests on any of the
assets of any of the Target and its Tax Subsidiaries that arose in connection
with any failure (or alleged failure) to pay any Tax.
4.13.2. Each of the Target and its Tax Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
4.13.3. Neither Parent nor any director or officer (or employee
responsible for Tax matters) of any of the Target and its Tax Subsidiaries
expects any authority to assess any additional material Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim concerning any
Tax Liability of any of the Target and its Tax Subsidiaries either (A) claimed
or raised by any authority in writing or (B) as to which the Parent and the
directors and officers (and employees responsible for Tax matters) of the Target
and its Tax Subsidiaries has knowledge based upon personal contact with any
agent of such authority. Schedule 4.13.3 lists all Income Tax Returns filed with
respect to any of Target and the Tax Subsidiaries for taxable periods ending on
or after December 31, 1995, indicates those Income Tax Returns that have been
audited, and indicates those Income Tax Returns that currently are the subject
of audit. Parent has delivered to Purchaser correct and complete copies of all
federal Income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of Target and the Tax Subsidiaries since
December 31, 1995.
4.13.4. Except as listed on Schedule 4.13.4, none of Target and
the Tax Subsidiaries has waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency.
4.13.5. None of the Target and its Tax Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible corporations or agreed
to have Code Section 341(f)(2) apply. None of the Target and its Tax
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Section 280G or Code
Section 162(m). Except as listed on Schedule 4.13.5, none of Target and the Tax
Subsidiaries is a party to any Tax allocation or sharing agreement, and any such
tax sharing agreement shall be terminated as provided in Section 9.4.6. Any
deductions taken or reserve for bad debts or loan losses of the Target and its
Tax Subsidiaries does not exceed the amount permitted under applicable Tax law.
None of the Target and its Tax Subsidiaries is or will be required to
17
26
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Target or any
Tax Subsidiary (nor does Parent or the Target have knowledge that the Internal
Revenue Service has proposed any such adjustment in accounting method). None of
the property owned or used by the Target or a Tax Subsidiary is subject to a tax
benefit transfer lease executed in accordance with Section 168(f)(8) of the
Code, as amended. None of the Target and its Tax Subsidiaries own any tax-exempt
use property within the meaning of Code Section 168(h). Since December 24, 1997,
neither Target nor any of its Tax Subsidiaries has been a member of an
affiliated group filing a consolidated federal Income Tax Return other than the
group the common parent of which is Sun Life Assurance Company of Canada - U.S.
Operations Holdings Inc. Since December 31, 1994, neither Target nor any of its
Tax Subsidiaries has been a member of an affiliated group filing a consolidated
federal Income Tax Return other than the group the common parent of which was
Sun Life Assurance Company of Canada (US) or Sun Life Assurance Company of
Canada-U.S. Operations Holdings, Inc..
4.13.6. The unpaid Taxes of the Target and its Tax Subsidiaries
(A) did not, as of December 31, 1998 (or any subsequent date for which Financial
Statements have been prepared), materially exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Financial
Statements prepared as of that date (rather than in any notes thereto) and (B)
do not materially exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Target and its Tax Subsidiaries in filing their Tax Returns.
4.13.7. None of Target and the Tax Subsidiaries has any liability
for the Income Taxes of any Person other than Target and the Tax Subsidiaries
(A) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law), (B) as a transferee or successor, (C) by contract,
or (D) otherwise.
4.14 LEGAL PROCEEDINGS Schedule 4.14 hereto lists all currently pending
litigation and governmental or administrative proceedings or investigations to
which Target or any Target Subsidiary is a party, either directly, indirectly or
in a fiduciary capacity. There are no actions, suits, claims, governmental
investigations or proceedings instituted, pending or, to the best knowledge of
Target and Parent, threatened against Target or a Subsidiary or Parent or
against any asset, interest or right of Target or Parent or a Subsidiary of
either, or against any officer, director or employee of any of them in their
capacity as such that in any such case, if decided adversely, would prevent or
hinder sale by Parent of the Target Stock Outstanding or have a Material Adverse
Effect on Target and its Subsidiaries (taken as a whole) or any Branch Subset.
Neither Target nor Parent nor a Subsidiary of either is a party to any order,
judgment or decree which has or could reasonably be expected to have a Material
Adverse Effect on Target and its Subsidiaries (taken as a whole) or any Branch
Subset, and neither Target, Parent nor any Subsidiary is in default under any
such order, judgment, or decree.
4.15 COMPLIANCE WITH LAWS
4.15.1. Except as disclosed on Schedule 4.15, each of Target and
the Target Subsidiaries has all permits, licenses, certificates of authority,
orders and approvals of, and has made all filings, applications and
registrations with, federal, state, local and foreign governmental
18
27
or regulatory bodies that are required in order to permit it to carry on its
business as it is presently being conducted and the absence of which could
reasonably be expected to have a Material Adverse Effect on Target and the
Target Subsidiaries (taken as a whole) or any Branch Subset; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect; and to the best knowledge of Target and Parent after due inquiry by
Target, no suspension or cancellation of any of the same is threatened.
4.15.2. Except as disclosed on Schedule 4.15, neither Target nor
any Target Subsidiary is in violation of, nor is any of the real property owned
by Target or any Target Subsidiary in material violation of, nor is any of the
real property leased by Target, to the knowledge of Target, in material
violation of, its respective Corporate Charter or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (including, without
limitation, all banking (including without limitation all regulatory capital
requirements), fiduciary or agency, consumer protection, securities, municipal
securities, safety, health, environmental, zoning, anti-discrimination,
antitrust, and wage and hour laws, ordinances, orders, rules and regulations),
or in default with respect to any order, writ, injunction or decree of any
court, or in default under any order, license, regulation or demand of any
governmental agency, and in the past three years neither Target nor any Target
Subsidiary has received notice of a violation or alleged violation of any
statute, ordinance, order, rule or regulation. Neither Target nor any Target
Subsidiary is subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written commitment
(other than those of general applicability to all banks and holding companies
thereof), and none of them has received any written communication requesting
that it enter into any of the foregoing. No regulatory agency has initiated any
proceeding or, to the best knowledge of Target and Parent after due inquiry by
Target, investigation into the business or operations of Target or any of the
Target Subsidiaries since December 31, 1996. Target has not received any
objection from any regulatory agency to Target's response to any violation,
criticism or exception with respect to any report or statement relating to any
examinations of Target or any of the Target Subsidiaries. Except as disclosed on
Schedule 4.15, Target is administering all Trusts in all material respects in
accordance with customary and usual standards of fiduciary responsibility,
applicable law, and the governing provisions of all applicable agreements,
instruments, and documents and any amendments thereto.
4.15.3. To Parent's and Target's knowledge, the operation of the
Target Offices has been and is being conducted in accordance with all applicable
laws, rules and regulations of all authorities the penalty or liability for the
violation of which, if imposed or asserted, could reasonably be expected to have
a Material Adverse Effect on Parent, Target, or any Branch Subset.
4.15.4. Target satisfies all requirements to be considered a
qualified thrift lender under HOLA.
4.16 EMPLOYEE BENEFIT PLANS
4.16.1. Schedule 4.16.1 describes all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare, fringe or employee benefit plan or
agreement maintained for the benefit of employees or former employees
19
28
of Target or any Target Subsidiary at any time during the six-year period ending
on the Closing Date (the "TARGET EMPLOYEE PLANS"), whether written or oral, and
Target has previously furnished or made available to Purchaser accurate and
complete copies of the same together with (i) the three (3) most recent
actuarial and financial reports prepared with respect to any qualified plans,
(ii) the three (3) most recent annual reports filed with any governmental
agency, (iii) all rulings and determination letters and any open requests for
rulings or letters that pertain to any qualified plan, and (4) the summary plan
description or other employee communications relating thereto.
4.16.2. None of Target, any Target Subsidiary, any pension plan
maintained by either of them and intended to be qualified under Section 401 of
the Code or, to the best of Target's knowledge, any fiduciary of such plan has
incurred any material liability to the PBGC or the Internal Revenue Service with
respect to any employees of Target or any Target Subsidiary.
4.16.3. Except as set forth in Schedule 4.16.3, neither Target
nor any Target Subsidiary (i) has ever participated in or has incurred any
liability under Section 4201 of ERISA for a complete or partial withdrawal from
a multi-employer plan (as such term is defined in ERISA), or (ii) has ever
provided health care or other non-pension benefits to any employees after their
employment is terminated (other than as required by part 6 of subtitle B of
title I of ERISA) or has ever promised to provide such post-termination
benefits.
4.16.4. Except as set forth in Schedule 4.16.4, a favorable
determination letter has been issued by the Internal Revenue Service with
respect to each Target Employee Plan which is an "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) (a "TARGET PENSION PLAN") which is
intended to qualify under Section 401 of the Code to the effect that such plan
is qualified under Section 401 of the Code and the trust associated with such
employee pension plan is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of Target's and Parent's knowledge, is
threatened to be revoked.
4.16.5. Except as set forth in Schedule 4.16.5, to the best of
Target's and Parent's knowledge, no prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt under Section 408
of ERISA or Section 4975 of the Code) has occurred with respect to any Target
Employee Plan which would result in the imposition, directly or indirectly, of
an excise tax under Section 4975 of the Code.
4.16.6. Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Target Employee
Plan or ERISA; no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any Target Pension Plan, and there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any Target Pension Plan.
With respect to any Target Employee Plan subject to Title IV of ERISA, there has
been no (nor will there be any as a result of the sale by Parent of the Target
Stock Outstanding) (i) "reportable event," within the meaning of ERISA Section
4043 or the regulations thereunder, for which the notice requirement is not
waived by the regulations thereunder, and (ii) event or condition which presents
a material risk of a plan termination or any other event that is reasonably
likely to cause the Target or any Target Subsidiary to incur liability
20
29
or have a Lien imposed on its assets under Title IV of ERISA. No Target Employee
Plan subject to Title IV of ERISA has any "unfunded benefit liabilities" within
the meaning of ERISA Section 4001(a)(18), as of the Closing Date. Neither Target
nor any Target Subsidiary has ever maintained a multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA). Except as may be provided in the
applicable Plan document or in Schedule 4.16.6, no withdrawal, termination or
other liability would be incurred as a result of Target's or Target Subsidiary's
termination of, or a cessation of participation in, any Target Employee Plan as
of the Closing Date, including, without limitation, liability under Section 4063
of ERISA. Each Target Employee Plan has complied with the notification and other
applicable requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, Health Insurance Portability and Accountability Act of 1996, the Newborns'
and Mothers' Health Protection Act of 1996, and the Mental Health Parity Act of
1996.
4.16.7. Except as disclosed in Schedule 4.16.7 or 4.16.5, to the
best of Target's and Parent's knowledge, the Target Employee Plans have been
operated in compliance in all material respects with the applicable provisions
of ERISA, the Code, all regulations, rulings and announcements promulgated or
issued thereunder and all other applicable governmental laws and regulations.
4.16.8. Each Target Employee Plan may be amended, terminated, or
otherwise modified by Target to the greatest extent permitted by applicable law,
including the elimination of any and all future benefit accruals under any
Target Employee Plan, and no employee communication has limited the right of
the Target or any Target Subsidiary to so amend, terminate or otherwise modify
such Target Employee Plan.
4.17 CERTAIN CONTRACTS
4.17.1. Except as disclosed in Schedule 4.17, neither Target nor
any Target Subsidiary is a party to, is bound or affected by, receives, or is
obligated to pay, benefits under
(a) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument,
relating to the borrowing of money by Target or any Target Subsidiary
(other than in the case of Target deposits, FHLB advances, federal
funds purchased and securities sold under agreements to repurchase in
the ordinary course of business) or the guarantee by Target or any
Target Subsidiary of any obligation, other than by Target or any Target
Subsidiary in the ordinary course of its business;
(b) any agreement, arrangement or understanding pursuant to
which any payment (whether of severance pay or otherwise) became or may
become due to any current or former director, officer or employee of
Target or any Target Subsidiary upon execution of this Agreement or
upon or following sale by Parent of the Target Stock Outstanding
(either alone or in connection with the occurrence of any additional
acts or events);
(c) any agreement, arrangement or understanding pursuant to
which Target or any Target Subsidiary is obligated to indemnify any
current or former director, officer, employee or agent of Target or any
Target Subsidiary;
(d) any agreement, arrangement or understanding to which
Target or any Target Subsidiary is a party or by which any of the same
is bound which limits the freedom of
21
30
Target or any Target Subsidiary to compete in any line of business or
with any Person,
(e) any assistance agreement, supervisory agreement,
memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by the OTS, the
FDIC, the FRB or any other regulatory agency, or
(f) any agreement (other than any agreement with a banking
customer for the provision of banking services entered into by any
Target Subsidiary in the ordinary course of business) that involves a
payment or series of payments of more than $100,000 in the aggregate
from or to Target or any Target Subsidiary (unless such agreement is
cancellable by Target upon payment of a termination fee of not more
than $100,000 in the aggregate).
4.17.2. Neither Target nor any Target Subsidiary is in material
default or non-compliance under any material contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party
or by which its assets, business or operations may be bound or affected, whether
entered into in the ordinary course of business or otherwise and whether written
or oral, and there has not occurred any event that with the lapse of time or the
giving of notice, or both, would constitute such a material default or
non-compliance.
4.18 BROKERS AND FINDERS Except as disclosed in Schedule 4.18, neither
Target nor any Target Subsidiary nor any of their respective directors, officers
or employees, has employed any broker or finder or incurred any liability for
any broker or finder fees or commissions in connection with the transactions
contemplated hereby.
4.19 INSURANCE. Target has disclosed in Schedule 4.19 all policies of
insurance maintained by it or any Target Subsidiary as of the date hereof and
any claims thereunder in excess of $50,000 since January 1, 1997. Said insurance
is sufficient for compliance by each of them with all requirements of law and
all agreements and leases to which each of them is a party and to conduct
business as it is currently being conducted. Neither Target nor any Target
Subsidiary has received any notice of termination of any such insurance coverage
or material increase in the premiums therefor or has any reason to believe that
any such insurance coverage will be terminated or the premiums therefor
materially increased prior to the Effective Time or, except as disclosed on
Schedule 4.19, that such policies cannot be continued by Purchaser or any
successor to Purchaser after the Effective Time. In addition, Target has all
ERISA bonds necessary for it to continue to conduct its business as historically
conducted.
4.20 LOANS. Except as disclosed in Schedule 4.20, neither Target nor
any of its Subsidiaries is a party to any written or oral (a) loan agreement,
note or borrowing arrangement (including, without limitation, leases and credit
enhancements) (collectively, "LOANS") the unpaid principal balance of which
exceeds $25,000 and as to which the obligor is, as of December 31, 1998, over 90
days delinquent in payment of principal or interest, or (b) Loan with any
director, executive officer or affiliate of Target or any of its affiliates,
other than cash advances in the ordinary course of business. To the best
knowledge of Parent and Target, all of the Loans originated, sold or held as of
the date hereof and at the Effective Time by Target and its Subsidiaries, and
any other Loans purchased and held as of the date hereof and at the Effective
Time by Target and its Subsidiaries, were solicited, originated and exist, and
will exist at the Effective Time, in material compliance with all applicable
loan policies, loan sale agreements and proce-
22
31
dures of Target and its Subsidiaries; were solicited, originated and exist, and
will exist at the Effective Time, in material compliance with all applicable
laws and contractual provisions; are based upon valid, binding and enforceable
agreements to which Target has good title, free and clear of all Liens; and the
collateral for each of the Loans that is secured is (i) the borrower's rights in
the collateral described in the applicable security agreement, mortgage, pledge,
collateral assignment or other security document, and (ii) subject to a valid,
enforceable and perfected Lien; provided however that the enforceability of loan
agreements and Lien is subject to bankruptcy, reorganization, insolvency, and
similar laws of general application relating to or affecting the rights or
remedies of creditors generally, and to equitable principles that may be applied
by a court in construing or enforcing such agreements or Liens. All Loans
serviced by Target for third parties have been billed, collected and serviced in
material compliance with the terms of such Loans, any applicable servicing
agreement, and applicable law. Target has not made, is not making and shall not
be deemed to have made, any representation as to the collectibility of any Loan,
the value of any collateral, or the creditworthiness, credit history or
financial condition of any primary or secondary obligor under any Loan, or any
guarantor or surety thereof, in this Agreement or any agreement, instrument or
other document executed in connection with any of the transactions contemplated
hereby or provided or prepared pursuant hereto or in connection with any of the
transactions contemplated hereby.
4.21 LOAN PORTFOLIO. Schedule 4.21 lists all of the loans in original
principal amount in excess of $50,000 of Target or any Target Subsidiary that,
as of December 31, 1998, are classified by Target or any Bank Regulator as
"SPECIAL MENTION", "SUBSTANDARD", "DOUBTFUL", "LOSS" or "CLASSIFIED," together
with the aggregate principal amount of and accrued and unpaid interest on all
such loans by category, it being understood that no representation is being made
that the FDIC, the OTS or any other Bank Regulator would agree with the loan
classifications of Target.
4.22 ACCURACY OF DEPOSIT SCHEDULES. The information to be delivered
pursuant to Section 2.10.1 shall accurately reflect Target's allocation of
deposits among the Target Offices and the Trust Business revenues and will be
complete and accurate, to the knowledge of Target, in all material respects as
of the date thereof, and the account records related to such deposits, to the
knowledge of Target, are and will be complete and accurate in all material
respects as of the date hereof. Notwithstanding the foregoing, Target makes no
representation that Target's allocation of deposits among the Target Offices in
any way reflects the current preferences or expectations of its customers as to
the Target Office at which they do any significant portion of their banking
business.
4.23 ACCURACY AND AVAILABILITY OF DEPOSIT ACCOUNT RECORDS. The deposit
agreements and other documents relating to the Deposits to be delivered to
Purchaser will be all such documents in Target's possession or reasonably
available to Target at the Closing, and the account records related to such
deposits, to the knowledge of Target, are and will be complete and accurate in
all material respects as of the date hereof. Notwithstanding the foregoing,
Target makes no representation that Target's allocation of deposits among the
Target Offices in any way reflects the current preferences or expectations of
its customers as to the Target Office at which they do any significant portion
of their banking business.
4.24 PROPERTIES. All real and personal property owned by Target or its
Subsidiaries or
23
32
presently used by any of them in its respective business is or as of the Closing
will be in an adequate condition (ordinary wear and tear excepted) and is (and
as of the Closing will be) sufficient to carry on the business of Target and its
Subsidiaries in the ordinary course of business consistent with their past
practices. With respect to real property, Target and its Subsidiaries will have
title (or, in the case of leases, leasehold interests) of the type described in
Section 2.10.3, except as described in Schedule 4.24. Target and its
Subsidiaries have or will have at the Closing title, free and clear of all Liens
(other than equities of redemption under applicable foreclosure laws), to all of
the material personal properties and assets reflected on the consolidated
statement of financial condition of Target as of December 31, 1998 included in
the Target Financial Statements or acquired after such date, except (i) Liens
for current taxes not yet due or payable, (ii) pledges to secure deposits and
other Liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent, (iv) those items that secure public or statutory
obligations or any discount with, borrowing from, or obligations to any Federal
Reserve Bank or Federal Home Loan Bank, (v) as reflected on the consolidated
statement of financial condition of Target as of December 31, 1998 included in
the Target Financial Statements, and (vi) as disclosed in Schedule 4.24. All
real and personal property which is material to Target's business on a
consolidated basis and leased or licensed by Target or any Target Subsidiary is
held pursuant to leases or licenses which to Target's knowledge are valid and
enforceable in accordance with their respective terms. Neither Target nor any of
the Target Subsidiaries has received any notice from any Governmental Entity of
any violation of any law, ordinance, regulation, license, permit or
authorization issued with respect to any of the real property that has not been
corrected heretofore, and no such violation now exists which could reasonably be
expected to have an adverse effect on the operation or value of any of the real
property. All improvements constituting a part of the property are in compliance
in all material respects with all applicable laws, ordinances, regulations,
licenses, permits and authorizations, and there are presently in effect all
licenses, permits and authorizations required by law, ordinance, or regulation.
4.25 TENANTS; LEASES. Schedule 4.25 hereto lists each landlord or
lessor under any leases whose consent is required for the transfer of the lease
to Purchaser or the subsequent transfer to the Bank Parties effected by the
Purchase Agreement. Schedule 4.25 hereto discloses whether such transfer
(assuming receipt of appropriate consents) will give any landlord or lessor
under any lease any right or remedy under any lease. Except for the tenants
disclosed in Schedule 4.25 hereto, there are no tenants or other occupants of
the real properties owned by Target or any Target Subsidiary. To Target's and
Parent's knowledge, except as disclosed in Schedule 4.25 hereto, each of the
leases is in full force and effect, and Target is not in default under any of
its obligations thereunder.
4.26 LABOR. Target and Target Subsidiaries employ approximately 136
full-time employees and 26 part-time employees, and they generally enjoy good
employer-employee relationships. No work stoppage involving Target or any Target
Subsidiary is pending or, to the best knowledge of Target and Parent,
threatened. Neither Target nor any Target Subsidiary is involved in, or
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding involving the employees of Target or any Target
Subsidiary which is reasonably expected to have a Material Adverse Effect on
Target. Employees of Target and the Target Subsidiaries are not represented by
any labor union nor are any collective bargaining agreements
24
33
otherwise in effect with respect to such employees, and to the best of Target's
and Parent's knowledge, there have been no efforts to unionize or organize any
employees of Target or any of the Target Subsidiaries during the past five
years. Upon termination of the employment of any of said employees, neither
Purchaser nor a Bank Party will by reason of the Acquisition, the transfer of
the Bank Business to the Bank Parties, or anything done prior to the Effective
Time be liable to any of said employees for so-called "severance pay" or any
other payments, except as set forth in Schedule 4.26. Target and Target
Subsidiaries do not have any policy, practice, plan or program of paying
severance pay or any form of severance compensation in connection with the
termination of employment, except as set forth in said Schedule 4.26, and each
is in compliance in all material respects with all applicable laws and
regulations respecting labor, employment, fair employment practices, work place
safety and health, terms and conditions of employment, and wages and hours.
4.27 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
Schedule 4.27, to the knowledge of Target, no officer or director of Target, or
any "associate" (as such term is defined in Rule 14a-1 under the Exchange Act)
of any such officer or director, (i) has any material interest in any material
contract or property (real or personal), tangible or intangible, used in or
pertaining to the business of Target or any of the Target Subsidiaries or (ii)
is indebted to, or has the right under a line of credit to borrow from, Target
or any Target Subsidiary, in an amount exceeding $50,000.
4.28 TRUST BUSINESS; ADMINISTRATION OF FIDUCIARY ACCOUNTS.
(a) Target (i) has been duly appointed to all fiduciary or
representative capacities it holds with respect to the Trusts and all such
appointments are currently in effect, (ii) has all other authorizations or
approvals necessary to conduct its Trust Business, (iii) has all other licenses
or permits necessary for the conduct of its Trust Business except as disclosed
in Schedule 4.28, and (iv) has or will have, as of the Closing Date, all
licenses necessary for the conduct of the Trust Business. Target and each Target
Subsidiary has properly administered all accounts for which it acts as a
fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law. Except as
disclosed in Schedule 4.28, to Target's and Parent's knowledge neither Target
nor any of its Subsidiaries nor any of their respective directors, officers or
employees has committed any breach of trust with respect to any such fiduciary
account, and the accountings for each such fiduciary account are true and
correct and accurately reflect the assets of such fiduciary account.
(b) Neither Target nor, to the knowledge of Parent and the Target, any
Person "associated" (as defined under the Investment Advisers Act of 1940, as
amended (the "ADVISERS ACT")) with the Target, has been convicted of any crime
or is or has engaged in any conduct that would be a basis for denial, suspension
or revocation of registration of an investment adviser under Section 203(e) of
the Advisers Act or would need to be disclosed pursuant to Rule 206(4)-4(b)
thereunder, and to the knowledge of the Parent and the Target, there is no
proceeding or investigation that is reasonably likely to become the basis for
any such disqualification, denial, suspension or revocation. Except as disclosed
in Schedule 4.28, the Target and each of its investment adviser representatives
(as such term is defined in Rule 203A-3(a) under the Advisers
25
34
Act) has, and after giving effect to the Closing, will have, all material
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Licenses") required from foreign, federal, state or local
authorities in order for it to conduct the businesses presently conducted by the
Target in the manner presently conducted by the Target. The Target is not a
"broker" or "dealer" within the meaning of the Exchange Act, or a "commodity
pool operator" or "commodity trading adviser" within the meaning of the
Commodity Exchange Act. None of the Target or its officers and employees is
required to be registered as a broker or dealer, a commodity trading adviser, a
commodity pool operator, a futures commission merchant, an introducing broker, a
registered representative or associated Person, a counseling officer, an
insurance agent, a real estate broker, a sales person or in any similar capacity
with the Securities and Exchange Commission, the Commodity Futures Trading
Commission, the National Futures Association, the National Association of
Securities Dealers, Inc., or the applicable commission of any state or any
self-regulatory body.
4.29 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Target and the Target Subsidiaries, all
of which have been made available to Purchaser, are complete and correct and
have been maintained in accordance with sound business practices and including
the maintenance of an adequate system of internal controls. The minute books of
the Target and the Target Subsidiaries contain accurate and complete records of
all corporate action taken by the stockholders and the Boards of Directors, and
no meeting of any such stockholders, Board of Directors, or committee has been
held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be in the
possession of the Target.
4.30 ACCOUNTS RECEIVABLE AND PAYABLE. All accounts receivable of the
Target that are reflected on the Target Financial Statements (collectively, the
"ACCOUNTS RECEIVABLE") represent or will represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. All accounts payable of Target as of the Closing Date shall be
accrued or paid by Target as of the Closing Date in the ordinary course of
business consistent with past practices.
4.31 ACCOUNT ALLOWANCES. Target has secured within five years of the
date hereof judicial allowance of its account as trustee, executor,
administrator, guardian or conservator of each Trust with assets having an
aggregate fair market value in excess of $750,000 as of the date hereof that is
now or was previously subject to continuing superior court supervision, with the
exception of those Trusts shown on Schedule 4.31 hereto to have had no judicial
account allowance within five years of the date hereof.
4.32 LOCATION AND CONDUCT OF BUSINESS. Except as disclosed in Schedule
4.32, Target conducts all of the customer operations of the Bank Business and
the Trust Business at the Target Offices and at no other locations. Target has
no other place of business within the meaning of the Advisers Act.
4.33 YEAR 2000 COMPLIANCE. Target and its Subsidiaries have undertaken
a comprehensive assessment of the steps necessary to address the software,
accounting and recordkeeping issues raised in order for the data processing
systems used in the businesses conducted by Target and its Subsidiaries to be
Year 2000 compliant on or before the end of 1999 and have developed, and are
implementing a plan to deal with Year 2000 compliance issues. Target does not
expect its
26
35
future cost of addressing its internal Year 2000 compliance issues to be in
excess of $100,000. Neither Target nor any Target Subsidiary has received a
rating of less than satisfactory from any regulatory agency with respect to Year
2000 compliance.
4.34 INTELLECTUAL PROPERTY. Schedule 4.34 to this Agreement lists all
of the material intellectual property (including all material trade names,
trademarks, service marks, patents, patent rights, copyrights, trade secrets,
proprietary process, software and other industrial and intellectual property
rights (collectively, "INTELLECTUAL PROPERTY") that Target uses in the conduct
of its business as it is presently being conducted. Target has good and valid
license agreements giving it the right to use all material intellectual property
necessary to the conduct of Target's business as presently conducted. There is
no claim, suit, action or proceeding, pending or, to the knowledge of Parent or
Target after due inquiry by Target, threatened, against Target asserting that
Target's use of any Intellectual Property infringes the rights of any third
party or otherwise contesting its rights with respect to any Intellectual
Property, and no third party is known to Target to be infringing upon the rights
of Target in the Intellectual Property.
4.35 NO FURTHER REPRESENTATIONS. Neither Parent nor Target has made,
and neither shall be deemed to have made, to Purchaser or any Bank Party any
representation or warranty other than as expressly set forth in this Article IV.
Without limiting the generality of the foregoing, and notwithstanding any
otherwise express representations and warranties made in this Article IV,
neither Parent nor Target makes any representation or warranty to Purchaser with
respect to any projections, estimates or budgets heretofore delivered to or made
available to Purchaser of future revenues, expenses or expenditures or future
results of operations; or except as expressly covered by a representation and
warranty contained in this Article IV, any other information or documents
(financial or otherwise) made available to Purchaser or its counsel, accountants
or advisers.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PURCHASER PARENT
Purchaser and Purchaser Parent (and to the extent specifically
provided, each Bank Party) hereby represent and warrant to Parent and Target as
follows:
5.1 ORGANIZATION, STANDING AND AUTHORITY OF PURCHASER. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Connecticut with full corporate power and authority to own or
lease all of its properties and assets and to carry on its business as now
conducted and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which its ownership or leasing of property or
the conduct of its business requires such licensing or qualification, except
where the failure to be so licensed, qualified or in good standing would not
prevent or hinder the consummation of the Transactions contemplated by this
Agreement. Purchaser has heretofore delivered to Parent true and complete copies
of the Corporate Charter and Bylaws of Purchaser as in effect as of the date
hereof.
5.2 ORGANIZATION, STANDING AND AUTHORITY OF PURCHASER PARENT. Purchaser
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Connecticut with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property
27
36
or the conduct of its business requires such licensing or qualification, except
where the failure to be so licensed, qualified or in good standing would not
prevent or hinder the consummation of the Transactions contemplated by this
Agreement. Purchaser Parent has heretofore delivered to Parent true and complete
copies of the Corporate Charter and Bylaws of Purchaser Parent as in effect as
of the date hereof.
5.3 AUTHORIZED AND EFFECTIVE AGREEMENT.
5.3.1. Each of Purchaser, Purchaser Parent and each Bank Party
(individually a "PURCHASER REPRESENTING PARTY" and collectively the "PURCHASER
REPRESENTING PARTIES") has all requisite corporate power and authority to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered to Parent or any of its Affiliates by such Purchaser Representing
Party pursuant to this Agreement and (subject to receipt of all necessary
governmental approvals) to perform all of its obligations hereunder and
thereunder. The execution and delivery of this Agreement and each agreement,
document and instrument to be executed and delivered to Parent or any of its
Affiliates by a Purchaser Representing Party pursuant to this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
each Purchaser Representing Party. This Agreement has been duly and validly
executed and delivered by each Purchaser Representing Party and, assuming due
authorization, execution and delivery by Target, Parent and each of the Bank
Parties, constitutes a legal, valid and binding obligation of each Purchaser
Representing Party which is enforceable against such Purchaser Representing
Party in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
5.3.2. Neither the execution and delivery of this Agreement and
each agreement, document and instrument to be executed and delivered to Parent
or any of its Affiliates by any Purchaser Representing Party pursuant to this
Agreement, nor consummation of the transactions contemplated hereby or thereby
nor compliance by any Purchaser Representing Party with any of the provisions
hereof or thereof (i) does or will conflict with or result in a breach of any
provisions of the Corporate Charter or Bylaws of any Purchaser Representing
Party or the equivalent documents of any Subsidiary of any Purchaser
Representing Party, (ii) violate, conflict with or result in a breach of any
term, condition or provision of, or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or acceleration with respect
to, or result in the creation of, any Lien, charge or encumbrance upon any
property or asset of any Purchaser Representing Party or any Subsidiary of any
Purchaser Representing Party pursuant to, any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which any Purchaser Representing Party or any Subsidiary of any
Purchaser Representing Party is a party, or by which any of their respective
properties or assets may be bound or affected, or (iii) subject to receipt of
all required governmental approvals, violate any order, writ, injunction,
decree, judgment, governmental permit, license, statute, rule or regulation
applicable to any Purchaser Representing Party or any Subsidiary of any
Purchaser Representing Party.
5.3.3. Except for the filing of applications and notices with,
and the consents and approvals of, as applicable, the Bank Regulators, and
review of the Acquisition by the DOJ under
28
37
federal antitrust laws, and except for such filings, registrations, consents or
approvals which are disclosed in Schedule 5.3.3, no consents or approvals of or
filings or registrations with any Governmental Entity or with any third party
are necessary on the part of Purchaser or Purchaser Parent in connection with
the execution and delivery by Purchaser or Purchaser Parent of this Agreement
and each agreement, document and instrument to be executed and delivered to
Parent or any of its Affiliates by Purchaser or Purchaser Parent pursuant to
this Agreement and the consummation by Purchaser or Purchaser Parent or any Bank
Party of the transactions contemplated hereby or thereby (including the
Acquisition and the subsequent transactions effected by the Purchase Agreement).
5.3.4. Except as disclosed in Schedule 5.3.4, as of the date
hereof, no Purchaser Representing Party is aware of any reasons relating to any
Purchaser Representing Party or any Affiliate of any Purchaser Representing
Party (including without limitation Community Reinvestment Act compliance and
Management Interlocks Act compliance) why all consents and approvals shall not
be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for
consummation of the transactions contemplated by this Agreement and each
agreement, document and instrument to be executed and delivered to Parent or any
of its Affiliates by any Purchaser Representing Party pursuant to this Agreement
and the consummation by each Purchaser Representing Party of the transactions
contemplated hereby or thereby.
5.4 FINANCIAL STATEMENTS
5.4.1. Purchaser Parent has previously delivered or made
available to Parent accurate and complete copies of the Purchaser Parent
Financial Statements which (with respect to the 1997 audited financial
statements) are accompanied by the audit reports of Price Waterhouse LLP,
independent certified public accountants, with respect to Purchaser Parent. The
Purchaser Parent Financial Statements referred to herein, as well as the
Purchaser Parent Financial Statements to be delivered pursuant to Section 7.4
hereof, fairly present or will fairly present, as the case may be, in all
material respects the consolidated financial condition of Purchaser Parent as of
the respective dates set forth therein, and the consolidated results of
operations, shareholders' equity and cash flows of Purchaser Parent for the
respective periods or as of the respective dates set forth therein, subject, in
the case of unaudited statements, to the addition of notes and to normal and
recurring year-end adjustments.
5.4.2. Each of the Purchaser Parent Financial Statements referred
to in Section 5.4.1 has been or will be, as the case may be, prepared in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as stated therein.
5.5 MATERIAL ADVERSE CHANGE. Since December 31, 1997 (i) each of
Purchaser and Purchaser Parent has conducted its business in the ordinary and
usual course (excluding the incurrence of expenses in connection with this
Agreement, and excluding the transactions contemplated hereby) and (ii) no event
has occurred or circumstance arisen that, individually or in the aggregate, has
had or is reasonably likely to prevent or hinder the transactions contemplated
by this Agreement.
5.6 PURCHASER INVESTIGATION. Each of Purchaser, Purchaser Parent and
the Bank Parties acknowledges that: (i) it has had the opportunity to visit with
Target and meet with its
29
38
representative officers and other representatives to discuss the business,
assets, liabilities, reserves, financial condition, cash flow and operations of
Target, and (ii) all materials and information requested by Purchaser or
Purchaser Parent and the Bank Parties have been provided to Purchaser or
Purchaser Parent or the Bank Parties to the reasonable satisfaction of such
party. Each of Purchaser and Purchaser Parent and the Bank Parties acknowledges
that it has made its own independent examination, investigation, analysis and
evaluation of Target, including its own estimate of the value of Target's or the
appropriate Branch Subset's business. Each of Purchaser and Purchaser Parent and
the Bank Parties acknowledges that it has undertaken such investigation
(including a review of the assets, liabilities, books, records and contracts of
Target) as Purchaser, Purchaser Parent or the Bank Parties deems adequate,
including that described above. Purchaser hereby confirms that (i) it is
acquiring the Target Common Stock for its own account, and not for, with a view
to, or in connection with the resale or distribution thereof; and (ii) it has no
intention to sell, pledge, hypothecate, distribute or otherwise transfer any of
the Target Common Stock or any interest therein except in accordance with
applicable securities laws.
5.7 LEGAL PROCEEDINGS. There are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of Purchaser or Purchaser Parent, threatened against Purchaser or
Purchaser Parent or against any officer, director or employee of either which
would be reasonably likely to prevent or hinder the consummation of the
transactions contemplated by this Agreement.
5.8 REGULATORY MATTERS. There are no pending or, to the knowledge of
Purchaser or Purchaser Parent, threatened, disputes or controversies between
Purchaser, Purchaser Parent or any Bank Party and any federal, state or local
Governmental Entity that (i) could reasonably be expected to prevent or impair
the ability of Purchaser or Purchaser Parent to perform its obligations under
this Agreement or any Bank Party to perform its obligations under the Purchase
Agreement in any material respect or (ii) could reasonably be expected to impair
the validity or consummation of this Agreement or the transactions contemplated
hereby (including the Acquisition and the subsequent transactions effected by
the Purchase Agreement). Purchaser Parent has sufficient sources of funds
available to it to be able to capitalize Purchaser in an amount sufficient to
enable Purchaser to pay the Purchase Price without being required to seek
funding from third parties, and Purchaser believes that it can satisfy all
capital and other regulatory requirements necessary to obtain all Regulatory
Approvals, and that it will be able to meet such requirements after payment of
the Closing Dividend.
5.9 BROKERS AND FINDERS. Except as disclosed in Schedule 5.9, neither
Purchaser Parent, Purchaser nor any Purchaser Subsidiary, nor any of their
respective directors, officers or employees, has employed any broker or finder
or incurred any liability for any broker or finder fees or commissions in
connection with the transactions contemplated hereby.
5.10 FINANCING. Purchaser Parent and Purchaser have available to it
sources of financing sufficient to fulfill their obligations hereunder.
5.11 NO FURTHER REPRESENTATIONS. Neither Purchaser nor Purchaser Parent
has made, and neither shall be deemed to have made, to Parent or Target any
representation or warranty other than as expressly set forth in this Article V.
Without limiting the generality of the foregoing, and notwithstanding any
otherwise express representations and warranties made in this Article V, neither
Purchaser nor Purchaser Parent makes any representation or warranty to Parent
30
39
or Target, or except as expressly covered by a representation and warranty
contained in this Article V, any other information or documents (financial or
otherwise) made available to Parent or Target or its counsel, accountants or
advisers. For purposes of this Article V each Purchaser Representing Party shall
be deemed to be making representations only as to itself and its Affiliates, and
not as to any other, unrelated party.
ARTICLE VI
COVENANTS OF TARGET AND PARENT
6.1 MAKING OF COVENANTS AND AGREEMENTS. For the benefit of Purchaser,
Purchaser Parent and the Bank Parties, Target and Parent jointly and severally
hereby make the covenants and agreements set forth in this Article VI and Parent
agrees to cause Target and its Subsidiaries to comply with such agreements and
covenants. Parent shall have no right of indemnity or contribution from Target
or any Subsidiary with respect to the breach of any covenant or agreement
hereunder. Reference to "Purchaser" in Sections 6.5 through 6.14 hereof shall be
deemed to include Purchaser acting individually and on behalf of the Bank
Parties. Moreover, rights and obligations hereunder shall be in addition to and
not in lieu of those under Schedule 6.2.1.
6.2 CONDUCT OF BUSINESS.
6.2.1. AFFIRMATIVE COVENANTS. During the period from the date of
this Agreement to the Effective Time, except with the written consent of
Purchaser, Target will operate its business, and it will cause each of the
Target Subsidiaries to operate its business, only in the usual, regular and
ordinary course of business consistent with past practices (except for the
payment of the Closing Dividend, as contemplated by Section 2.9, the sale of
Target's mortgage servicing rights and/or collateralized mortgage obligations,
and otherwise as expressly contemplated by this Agreement); use commercially
reasonable efforts to preserve intact its business organization and assets and
maintain its rights and franchises; and take no action which would (i)
materially adversely affect the ability of Purchaser, Target or the Bank Parties
to obtain any necessary approvals of governmental authorities required for the
transactions contemplated hereby or materially increase the period of time
necessary to obtain such approvals, or (ii) materially adversely affect its
ability to perform its covenants and agreements under this Agreement. Without
limiting the foregoing, during such period, Target will perform in a prompt and
timely manner, in accordance with its ordinary course of business consistent
with past practices or existing business plans, all of its obligations with
respect to the Bank Business as provided in Schedule 6.2.1 incorporated herein
by reference; provided, however, that notwithstanding any provisions of such
Schedule, without the permission of Parent no information shall be sent to
Target Customers and no changes shall be made at or to Target's facilities
before the Final Approval Date. Target agrees that it shall conduct the Bank
Business and Trust Business, as applicable, in accordance with sound banking,
fiduciary and commercial practices consistent with past practices or existing
operating policies and business plans and will use its commercially reasonable
best efforts to preserve for the benefit of Purchaser the goodwill and
relationships with depositors, borrowers, trustors, beneficiaries, suppliers,
lessees, and others associated with the conduct of the Bank Business and Trust
Business.
6.2.2. NEGATIVE COVENANTS. Except as set forth in Schedule
6.2.2, from the date of
31
40
this Agreement to the Effective Time, except as otherwise specifically permitted
or required by this Agreement, or consented to by Purchaser in writing, Target
will not, and will cause each of the Target Subsidiaries not to:
(a) change or waive any provision of its Charter or By-laws;
(b) issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating
to the authorized or issued capital stock of Target or any of the
Target Subsidiaries, or any securities convertible into shares of such
stock;
(c) effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization, or redeem,
repurchase or otherwise acquire any shares of its capital stock;
(d) declare or pay any dividends or other distributions with
respect to its capital stock except for cash dividends paid by any
Target Subsidiary to Target, and except for payment of the Closing
Dividend, as contemplated by Section 2.9;
(e) acquire any collateralized mortgage obligations, or
except in the ordinary course of business consistent with past practice
and in no event at a cost greater than $150,000, incur any material
liabilities or material obligations for borrowed money whether or not
evidenced by a note, bond, debenture or similar instrument (other than
deposits, FHLB advances in an aggregate amount not exceeding $25
million at any one time outstanding, federal funds purchased and
securities sold under agreements to repurchase in the ordinary course
of business), or acquire any equity, debt, or other investment
securities;
(f) make any capital expenditures in excess of $75,000
individually or $300,000 in the aggregate;
(g) (i) grant any increase in rates of compensation to its
employees except as set forth in Schedule 4.11 or as otherwise
consented to by Purchaser, which consent shall not be unreasonably
withheld or delayed; (ii) grant any increase in rates of compensation
to, or pay or agree to pay any bonus or severance to, or provide any
other new employee benefit or incentive to its directors or to its
officers who are currently covered by employment or severance
agreements with Target; (iii) enter into any employment, severance or
similar agreements or arrangements (provided that Target may employ an
employee in the ordinary course of business if the employment of such
employee is terminable by Target at will without liability, other than
as required by law) with any director or employee (except that Target
may provide at the expense of Purchaser for "stay for pay" arrangements
with key employees in an amount not to exceed $200,000 in the aggregate
and that Parent may provide reasonable additional "stay for pay"
arrangements at its own expense after reasonable consultation with
Purchaser, provided that any "stay for pay" arrangement will not
increase the base salary of any such employee (including for the
purposes of the New London Trust, FSB Severance Pay and Benefit Plan
dated as of March 1, 1999 ("NLT SEVERANCE PLAN")); (iv) adopt or amend
in any material respect or terminate any employee benefit plan,
pension plan or incentive plan except as required by law, or permit the
vesting of any material amount of benefits under any such plan other
than pursuant to the
32
41
provisions thereof as in effect on the date of this Agreement; (v) make
any contributions to Target's defined benefit Pension Plan or 401(k)
Plan not in the ordinary course of business consistent with past
practice; or (vi) increase the "total payout" under the 1999 Incentive
Compensation Plans for senior officers of the Trust and Bank Divisions
over the level contemplated as of the date of this Agreement.
(h) make application for the opening or closing of any, or
open or close any, branch;
(i) merge into, consolidate with, affiliate with, or be
purchased or acquired by, any other Person, or permit any other to be
merged, consolidated or affiliated with it or be purchased or acquired
by it, or, except to realize upon collateral in the ordinary course of
its business, acquire a significant portion of the assets of any other
Person, or sell a significant portion of its assets;
(j) make any material change in its accounting methods or
practices, except changes as may be required by GAAP or by regulatory
requirements;
(k) enter into any new leases, or extend or terminate any
existing leases, pertaining to all or any part of the real property
used by Target in the operation of the Trust Business or the Bank
Business without securing Purchaser's prior written consent; provided,
however, if Purchaser fails to notify Target of its disapproval of any
lease submitted for its approval within fifteen (15) days after
receiving a copy thereof, together with Target's request for
Purchaser's approval, then Purchaser shall be deemed to have approved
such lease for the purposes of this Agreement;
(l) or enter into any new contract (or extend any existing
contract) that involves a payment or series of payments of more than
$50,000 in the aggregate from or to Target or any Target Subsidiary
(unless such agreement is cancellable by Target upon payment of a
termination fee of not more than $50,000 in the aggregate) used by
Target in the operation of the Trust Business or the Bank Business
without securing Purchaser's prior written consent; provided, however,
if Purchaser fails to notify Target of its disapproval of any contract
submitted for its approval within fifteen (15) days after receiving a
copy thereof, together with Target's request for Purchaser's approval,
then Purchaser shall be deemed to have approved such contract for the
purposes of this Agreement; or
(m) agree to do any of the foregoing.
6.3 CURRENT INFORMATION. During the period from the date of this
Agreement to the Effective Time, Target will cause one or more of its
representatives to confer with representatives of Purchaser and report the
general status of its ongoing operations at such times as Purchaser may
reasonably request but no more than on a weekly basis. Target will promptly
notify Purchaser of any material change in the normal course of its business or
in the operation of its properties and, to the extent permitted by applicable
law, of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
of litigation or the threat of material litigation involving Target. Target will
also provide Purchaser such information with respect to such events as Purchaser
may reasonably request from time to time. As soon as reasonably available, but
in no event more than 45 days after the end of each calendar quarter ending
after the date of this Agreement (other than the last
33
42
quarter of each fiscal year ending December 31), Target will deliver to
Purchaser a consolidated balance sheet and a consolidated statement of
operations, without related notes, for such quarter prepared in accordance with
generally accepted accounting principles, and within 25 days after the end of
each month, Target will deliver to Purchaser a consolidated balance sheet and a
consolidated statement of operations, without related notes, for such month
prepared in accordance with past practices.
6.4 ALL REASONABLE EFFORTS. Subject to the terms and conditions herein
provided, Target and Parent agree to use all reasonable efforts to take, or
cause to be taken, all corporate or other action and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this Agreement
and the Related Documents.
6.5 FAILURE TO FULFILL CONDITIONS. In the event that Target or Parent
determines that a condition to any party's obligation to complete the
Acquisition cannot be fulfilled and (in the event that the notifying party has
the right to waive such condition) that it will not waive that condition, it
will promptly notify Purchaser.
6.6 REGULATORY APPROVALS. Target shall use reasonable efforts to assist
Purchaser in obtaining all required Regulatory Approvals. Target shall provide
Purchaser or the appropriate regulatory authorities all information reasonably
required to be submitted by Target in connection with the Regulatory Approvals.
Target shall take no action which would adversely affect or delay the ability of
any party hereto to obtain any Regulatory Approval or to perform such party's
covenants and agreements under this Agreement.
6.7 CORPORATE AND OTHER CONSENTS. Target and Parent shall use
commercially reasonable efforts (which shall not require Target or Parent to pay
any money or other consideration to any Person or to initiate any claim or
proceeding against any Person) to secure all corporate and other non-regulatory
consents (except those involving Purchaser) with respect to contracts listed in
Schedule 6.7, and Purchaser shall fully cooperate in order to obtain such
consents. Target shall provide copies of such consents to Purchaser upon
Purchaser's request.
6.8 LEASE CONSENTS AND OBLIGATIONS. Target and Parent shall use
commercially reasonable efforts (which shall not require Target or Parent to pay
any money or other consideration to any Person or to initiate any claim or
proceeding against any Person) to secure such landlord or lessor consents as may
be necessary for the transfer of the real property leases identified on Schedule
6.8, and the transfer of said leases by Purchaser to the Bank Parties under the
Purchase Agreement, and Purchaser shall fully cooperate in order to obtain such
consents. In addition, Target and Parent agree to use such commercially
reasonable efforts to renew or extend those Leases identified on Schedule 6.8.
6.9 NONSOLICITATION OF PURCHASER'S EMPLOYEES. In consideration of the
consummation of the transactions contemplated hereby, Parent agrees that, for a
period of one year following the Closing Date, it shall not, directly solicit
for employment, retain as an independent contractor or consultant, induce to
terminate employment with Purchaser or otherwise interfere with Purchaser's
employment relationship with any former employee of Target who becomes an
employee of Purchaser ("TRANSFERRED EMPLOYEE"); provided, however, that Parent
shall be permitted to retain any such Transferred Employee who has responded to
a general employment inquiry of the
34
43
Parent not specifically targeted to such Transferred Employee. It is expressly
acknowledged by the parties hereto that Parent may employ or retain as an
independent contractor or consultant any such Transferred Employee or other such
employee of Purchaser who shall terminate his or her employment with Purchaser,
without any such direct or indirect inducement or interference by, or other
pre-termination contact with, Parent or who shall be terminated by Purchaser, in
either case after the Closing Date. For purposes of this Section 6.9, the term
"Purchaser" shall be deemed to include any Affiliate of Purchaser or any of the
Bank Parties.
6.10 ACCESS TO AND RETENTION OF BOOKS AND RECORDS. Upon execution of
this Agreement, Target shall provide Purchaser and the Bank Parties and their
representatives, accountants and counsel reasonable access to the Target
Offices, employees, depository records, Loan files, and all other documents and
other information concerning the Target Offices as a Bank Party may reasonably
request; provided that with respect to Target employees, Target's sole
obligation shall be to provide the requesting Bank Party with information
concerning the name, position, date of hire and salary of Target employees.
Target shall provide each Bank Party reasonable assistance in its investigation
relating to the Target Offices; provided that the Bank Party's investigation
shall be conducted in a manner which does not unreasonably interfere with
Target's normal operations, customers and employee relations and provided
further that if the Bank Party's investigation occurs during non-business hours,
the expenses incurred by Target as a result of such investigation during
non-business hours shall be paid by such Bank Party to Target promptly upon the
receipt of an invoice therefor. On the Closing Date, to the extent practicable,
Purchaser and Purchaser's designee shall receive possession of, and all right,
title and interest of Target in, all books and records relating to the Bank
Business and the Trust Business, the Assumed Liabilities, and the operation of
the Target Offices which are in the possession of Target.
6.11 DATA PROCESSING AND TRANSFER SERVICES. Target agrees to provide to
Purchaser other data processing and transfer services as set forth in Schedule
6.2.1 hereof, provided, however, that without the permission of Parent no
information shall be sent to Target Customers and no changes shall be made at or
to Target's facilities before the Final Approval Date.
6.12 AUTOMATED CLEARING HOUSE ENTRIES. Prior to the Closing Date,
Target will make reasonable efforts to notify all originators of Automated
Clearing House ("ACH") entries affecting deposits or Loans of the terms and
effect of the Acquisition, to facilitate Purchaser's transfer of the accounts to
the Bank Parties immediately after the Closing.
6.13 COMMUNICATIONS; NOTICES; ETC. Subject to regulatory restrictions:
6.13.1. Target agrees that promptly following the execution of
this Agreement, Target and Purchaser shall conduct information meetings at the
Target Offices or at such other location as Purchaser and Target shall mutually
agree, to announce Purchaser's proposed acquisition of Target to the employees.
Target and Purchaser shall mutually agree as to the scope and content of all
initial communications to the employees. Thereafter, Purchaser shall be
permitted to meet with Target employees, at times mutually convenient to
Purchaser and Target to discuss employment opportunities with Purchaser. From
and after the date on which the last regulatory approval required to permit
consummation of the Acquisition has been obtained ("FINAL APPROVAL DATE"),
Purchaser shall be permitted to conduct training sessions during normal business
hours or at other times with Target employees; provided that Purchaser will use
35
44
reasonable efforts to schedule such training sessions in a manner which does not
interfere with Target's normal business operations. Purchaser shall reimburse
Target employees for transportation costs to and from the location where
Purchaser shall train such employees and compensate Target employees at their
respective applicable standard or overtime rates for the time spent in such
training.
6.13.2. After the Final Approval Date and prior to the Closing
Date, on a date certain which is mutually agreeable to the parties, Target and
Purchaser shall each send statements (or, in the event the parties shall
mutually agree, the parties shall send a joint statement) to Target's customers
announcing the transactions contemplated hereby. From time to time prior to the
Closing, Purchaser or a Bank Party may request consent to transmit certain
communications to Target Customers, and Target agrees that it will not
unreasonably withhold such consent.
6.13.3. Purchaser and Target shall each furnish to the other
copies of the text of all notices (including with respect to βββ accounts),
advertisements, information or communications, written or oral, proposed to be
sent or transmitted by the furnishing party to employees, customers or the
public generally regarding the proposed or actual transfer of the Bank Business
and/or the purchase and sale of the Target Offices (including any public notices
required to be given by law or regulation in connection with such transactions
or applications for approval thereof), and the furnishing party shall not send
or transmit such notices, advertisements, information or communications or
otherwise make them public unless and until the prior consent of the other party
shall have been received (such consent not to be unreasonably withheld or
delayed); provided, however, that nothing in this Section 6.13 shall (i)
prohibit any party from making any press release or announcement which its legal
counsel reasonably deems necessary under law, if it makes a good faith effort to
obtain the other party's consent to the text of the press release or
announcement before making it public, or (ii) require Target to furnish to
Purchaser or obtain Purchaser's consent for any communication (A) made in an ad
hoc fashion that is responsive to issues or questions of any employees or
customers and does not disparage Purchaser, or (B) that makes factual statements
about the transactions contemplated hereby and does not disparage Purchaser.
6.14 REGULATORY AUTHORIZATIONS. Target shall, and Parent shall cause
Target and its employees to, use reasonable efforts to obtain all
authorizations, consents, orders, approvals and licenses of federal, state and
local regulatory bodies and officials that may be or become necessary for their
respective execution and delivery of, and the performance of their respective
obligations pursuant to, this Agreement and the other agreements, documents and
instruments contemplated hereby, and for Target to conduct the Trust Business.
6.15 CLIENT CONSENTS.
6.15.1. At a date to be mutually agreed by Parent and Purchaser,
but in any event no later than the Final Approval Date, Target shall notify each
of its Trust Business clients of the transactions contemplated hereby and by the
other agreements, documents and instruments contemplated hereby. Such notice
shall be substantially in the form of Exhibit A with respect to those clients
whose contracts require affirmative written consent (by their terms or under
applicable law) for their assignment, substantially in the form of Exhibit B
with respect to those clients whose contracts do not require affirmative written
consent (by their terms or under applicable law) for their assignment, but
substantially in the form of Exhibit C with respect to
36
45
those clients whose contracts terminate (by their terms or under applicable law)
upon their assignment, or substantially in the form of Exhibit E with respect to
those contracts under which Target provides custody services only and no
investment advisory, investment management, or trustee services (in each case,
with such changes thereto as may be agreed to by Purchaser in writing). Target
will use its reasonable best efforts (which shall not require Target to pay any
money or other consideration to any Person or to initiate any claim or
proceeding against any Person) to obtain required consents from all Trust
Business customers.
6.15.2. Promptly following the Final Approval Date, Target shall
send to each client who was sent, but who has not by such date returned, a
notice substantially in the form of Exhibit B, countersigned indicating approval
of the transactions contemplated hereby, a second notice substantially in the
form of Exhibit D.
6.16 SALES OF CERTAIN ASSETS; DEPOSITS TO BE MAINTAINED. Target agrees
to sell all of Target's rights and interest in all mortgage and other Loan
servicing rights (other than those relating to Loans retained in Target's Loan
portfolio) prior to the Closing Date on terms consented to by Purchaser,
provided, however, that Target shall have no obligation to sell such servicing
rights if Purchaser does not consent to the terms of such sale, which consent
shall not be unreasonably withheld or delayed. Parent agrees that it will
maintain accounts at Target or any successor thereto at Closing for a period of
two (2) years with balance levels over such period generally not less than those
maintained by Parent ("PARENT ACCOUNTS") during the one year period prior to the
date hereof, provided that the level of service and the interest rates provided
to Parent are not substantially diminished from those prevailing during such one
year period, and provided that Parent shall continue to have legal authority to
maintain such Parent Accounts. Upon written request of Purchaser received not
later than sixty days after the date of this Agreement, Parent shall close the
Parent Accounts and transfer any deposit balances to another depositary
institution.
6.17 CERTAIN EMPLOYMENT OBLIGATIONS.
6.17.1. Target shall accrue, in accordance with Section 2.4 all
Target Employee cost and benefits through the Closing Date, including without
limitation, wages, salaries, sick pay, accrued vacation, employment, incentive,
compensation or bonus agreements or other benefits or payments, except for the
NLT Severance Plan and except for the stay for pay arrangements described in
Section 2.5, and except for the agreements referred to in Section 7.7.3.
6.17.2.With respect to all group health plans maintained by
Target or any Subsidiary thereof, Target shall retain full responsibility and
liability for compliance with the continuation health care coverage requirements
of Code Section 4980B and ERISA Sections 601 through 608 for all "qualifying
events" within the meaning of Section 4980B(f)(3) of the Code and Section 603 of
ERISA occurring with respect to such group health plans on or prior to the
Closing Date.
6.17.3. Target has agreed to extend the severance benefits
payable to approximately 20 officers of Target, at the level of Vice President
or above, under the NLT Severance Plan as described in Schedule 4.11(i). Parent
shall be solely responsible for bearing the cost of such extended payments, to
the extent they exceed the amounts otherwise payable under the NLT Severance
Plan (and no NLT Severance Plan benefits (whether the obligation of Parent, on
the one hand, or of Target, Purchaser or a Bank Party, on the other hand) shall
be accrued or
37
46
expensed in calculating either the Estimated Balance Sheet or the Final Balance
Sheet).
6.17.4. Parent shall cause Target to obtain the agreement of each
insurer or other entity which is to provide benefits pursuant to the New London
Trust F.S.B. Severance Pay and Benefit Plan to provide such benefits during the
relevant periods.
6.18 FILING WITH RESPECT TO PROFIT SHARING PLAN. Parent shall cause
Target to submit the New London Trust F.S.B. Employees' Profit Sharing and
401(k) Plan to the Internal Revenue Service under its Closing Agreement Program
or similar program in order to correct any document or operational defect and to
account for the failure to obtain a favorable determination letter from the
Internal Revenue Service regarding the Plan's qualification under Section 401(a)
of the Code, and Target shall take all remedial actions required in connection
with such submission including, without limitation, the making of any additional
contributions required to be made to the Plan.
6.19 PAYMENT OF ACCOUNTS PAYABLE. During the period from the date of
this Agreement to the Closing Target shall continue to pay its accounts payable
in the ordinary course of business and maintain the same aging of payables as it
regularly maintained before the date of this Agreement.
ARTICLE VII
COVENANTS OF PURCHASER, PURCHASER PARENT AND THE BANK PARTIES
7.1 MAKING OF COVENANTS AND AGREEMENTS. Each Purchaser, Purchaser
Parent and each Bank Party hereby makes the covenants and agreements ascribed to
them in this Article VII.
7.2 CONDUCT OF BUSINESS.
7.2.1. PURCHASER AND PURCHASER PARENT. During the period from the
date of this Agreement to the Effective Time, except with the written consent of
Target and except as provided below, neither Purchaser Parent nor Purchaser will
take any action which would (i) materially adversely affect the ability of
Purchaser Parent, Purchaser or Target to obtain any necessary approvals of
governmental authorities required for the transactions contemplated hereby or
materially increase the period of time necessary to obtain such approvals, or
(ii) materially adversely affect its ability to perform its covenants and
agreements under this Agreement, or (iii) result in the representations and
warranties of Purchaser Parent and Purchaser contained in this Agreement not
being true and correct in all material respects on the date of this Agreement or
at any future date on or prior to the Closing Date; provided that nothing
contained herein shall preclude Purchaser Parent or Purchaser from taking any
action disclosed on a Schedule hereof. During such period, each of Purchaser
Parent and Purchaser will perform in a prompt and timely manner all of its
obligations with respect to the Trust Business and otherwise under this
Agreement.
7.2.2. During the period from the date of this Agreement to the
Effective Time, except with the written consent of Target and except as provided
below, no Bank Party will take any action which would (i) materially adversely
affect the ability of any Bank Party, Purchaser Parent, Purchaser or Target to
obtain any necessary approvals of governmental authorities required for the
transactions contemplated hereby or materially increase the period of time
necessary to obtain such approvals or (ii) materially adversely affect its
ability to perform its
38
47
covenants and agreements under this Agreement.
7.3 PROVISION OF ADEQUATE CAPITAL. Each of Purchaser and Purchaser
Parent understands that the Closing Dividend constitutes an essential portion of
the consideration being paid to Parent in connection with the sale of Target.
Accordingly, Purchaser Parent covenants and agrees that it will, subject to the
duties of Parent and Target to comply with the terms of this Agreement and to
act in good faith, provide and furnish to Purchaser, and Purchaser covenants and
agrees that it will provide and furnish to Target, whatever capital infusion may
be required to meet regulatory requirements so that Target will be well
capitalized under applicable OTS standards as of the Closing Date. Each of
Purchaser and Purchaser Parent further agrees that, if requested to do so by
Bank Regulators in connection with any application for approval of the
Acquisition and the transactions contemplated hereby, it will agree to provide
at or before the Closing Date any additional capital that may be required or
requested to permit approval of the Acquisition with in connection with and at
the Closing Date.
7.4 CURRENT INFORMATION.
7.4.1. PURCHASER AND PURCHASER PARENT. During the period from the
date of this Agreement to the Effective Time, Purchaser will cause one or more
of its representatives to confer with representatives of Target and report the
general status of its ongoing operations at such times as Target may reasonably
request and as such operations could affect the consummation of the
transactions contemplated hereby. To the extent that such could affect the
consummation of the transactions contemplated hereby, Purchaser will promptly
notify Target of any material change in the normal course of its business or in
the operation of its properties and, to the extent permitted by applicable law,
of any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving Purchaser, and Purchaser will also provide
Target such information with respect to such events as Target may reasonably
request from time to time. As soon as reasonably available, but in no event more
than 45 days after the end of each calendar quarter ending after the date of
this Agreement (other than the last quarter of each fiscal year ending December
31), Purchaser will deliver to Target a consolidated balance sheet and a
consolidated statement of operations, without related notes, for such quarter
prepared in accordance with generally accepted accounting principles.
7.4.2. BANK PARTIES. During the period from the date of this
Agreement to the Effective Time, each Bank Party will cause one or more of its
representatives to confer with representatives of Target and report the general
status of its ongoing operations at such times as Target may reasonably request
and as such operations could affect the consummation of the transactions
contemplated hereby. To the extent that such could affect the consummation of
the transactions contemplated hereby, each Bank Party will promptly notify
Target of any material change in the normal course of its business or in the
operation of its properties and, to the extent permitted by applicable law, of
any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving it, and each Bank Party will also provide
Target such information with respect to such events as Target may reasonably
request from time to time.
7.5 ALL REASONABLE EFFORTS. Subject to the terms and conditions herein
provided, Purchaser Parent, Purchaser and each Bank Party agree to use all
reasonable efforts to take, or
39
48
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
7.6 FAILURE TO FULFILL CONDITIONS. In the event that any of Purchaser
Parent, Purchaser or any Bank Party determines that a condition to any party's
obligation to complete the Acquisition cannot be fulfilled and that it will not
waive that condition, it will promptly notify Target.
7.7 EMPLOYEE BENEFITS.
7.7.1. All employees of Target as of the Effective Time shall
either be (i) offered a "COMPARABLE JOB" (as defined in the NLT Severance Plan
as in effect on the date of this Agreement) by Purchaser Parent or its Affiliate
or a Bank Party as of the Effective Time or (ii) entitled to benefits in
accordance with the NLT Severance Plan. Nothing in this Agreement shall give any
employee of Target or its Subsidiaries a right to continuing employment with
Purchaser Parent or any Affiliate thereof or a Bank Party after the Effective
Time. Any employee of Target whose employment with Purchaser Parent, an
Affiliate thereof or a Bank Party is terminated by Purchaser Parent, an
Affiliate thereof or a Bank Party within one year after the Effective Time for
other than cause shall be entitled to benefits in accordance with the NLT
Severance Plan (which benefits shall be post-Effective Time obligations of
Target, Purchaser or a Bank Party and in no event shall be accrued or expensed
in calculating either the Estimated Balance Sheet or the Final Balance Sheet).
7.7.2. As soon as practicable after the Effective Time, Purchaser
Parent (or an Affiliate) and the Bank Parties shall provide or cause to be
provided to all employees of Target who are offered employment by Purchaser
Parent, an Affiliate thereof or a Bank Party after the Effective Time with
employee benefits which, in the aggregate, are no less favorable than those
generally afforded to other similarly situated employees of Charter Trust
Company (in the case of employees offered employment by Purchaser Parent or an
Affiliate thereof) or of the relevant Bank Party (in the case of employees
offered employment by a Bank Party) holding similar positions, subject to the
terms and conditions under which those employee benefits are made available to
such employees, provided, however, that (i) for purposes of determining
eligibility for and vesting of such employee benefits only (and not for pension
benefit accrual purposes), service with Target or any Target Subsidiary prior to
the Effective Time shall be treated as service with an "employer" as if such
Persons had been employees of Purchaser Parent, an Affiliate thereof or the Bank
Party, (ii) this Section 7.7 shall not be construed to limit the ability of
Purchaser Parent and its Affiliates or any Bank Party to terminate the
employment of any employee or to review employee benefits programs from time to
time and to make such changes or terminate such plans as they deem appropriate,
and (iii) neither Purchaser Parent nor any of its Affiliates nor any Bank Party
shall be required to provide any employees or former employees of Target with
post-retirement medical benefits more favorable than those provided to new hires
of Charter Trust Company or of the relevant Bank Party, as the case may be.
Subject to Section 7.7.3 below, nothing in this Agreement shall be construed to
(i) obligate Purchaser Parent or any of its Affiliates to continue in effect for
any specific period of time after the Closing Date any of the Benefit Agreements
or (ii) restrict Purchaser Parent or any of its Affiliates from amending,
modifying or terminating any of the Benefit Agreements.
7.7.3. Target has disclosed to Purchaser the agreements
(collectively, "BENEFIT
40
49
AGREEMENTS") listed in Schedule 7.7.3. Following the Effective Time, Purchaser
Parent shall honor or cause its Subsidiaries to honor in accordance with their
terms all such Benefit Agreements and assume or cause its Subsidiaries to
assume all duties, liabilities and obligations under such agreements and
arrangements. Purchaser Parent agrees that the consummation of the transactions
contemplated hereby constitutes a "Change in Control" as defined in the Benefit
Agreements. All payments under the Benefit Agreements that result from the
transactions contemplated hereby shall be post-Effective Time obligations of
Target or Purchaser and in no event shall any such payments be accrued or
expensed in calculating either the Estimated Balance Sheet or the Final Balance
Sheet.
7.8 DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE.
7.8.1. Purchaser shall cause Target to honor its indemnification
obligations with respect to each current director and officer of Target who is
not an employee, officer, or director of Parent and who serves as a director of
Target after the Effective Time ("OUTSIDE DIRECTORS") under applicable law and
regulation and the provisions of its By-laws, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would affect adversely the rights thereunder
of such Outside Directors, unless such modification shall be required by law.
The provisions of this Section 7.8 are specifically for the benefit of the
Outside Directors.
7.8.2. In the event that either Purchaser or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving bank or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then, and in each such case, proper provision shall be made so
that the successors and assigns of Purchaser shall assume the obligations set
forth in this Section 7.8.
7.8.3. Parent shall not assert any claim relating to any
pre-Closing act or omission against any Outside Director for which such Outside
Director would be entitled to indemnification under this Section 7.8.
7.8.4. Neither Purchaser, any Purchaser Affiliate, nor any Bank
Party shall assert or permit Target to assert any claim relating to any
pre-Closing act or omission against any current or former officer or director of
Target for which Parent or Target might be required to provide indemnification.
7.9 NON-SOLICITATION OF PARENT EMPLOYEES. Purchaser agrees that, for a
period of one year following the Closing Date, it shall not, directly solicit
for employment, retain as an independent contractor or consultant, induce to
terminate employment with Parent or otherwise interfere with Parent's employment
relationship with any of Parent's employees whom Purchaser has identified in the
course of the Acquisition ("PARENT EMPLOYEE"); provided, however, that Purchaser
shall be permitted to hire any such Parent Employee who has responded to a
general employment inquiry of Purchaser not specifically targeted to such Parent
Employee. It is expressly acknowledged by the parties hereto that Purchaser may
employ or retain as an independent contractor or consultant any such Parent
Employee or other such employee of Parent who shall terminate his or her
employment with Parent, without any such direct or indirect inducement or
interference by, or other pre-termination contact with, Purchaser or who shall
be
41
50
terminated by Parent, in either case after the Closing Date. For purposes of
this Section 7.9, the term "Purchaser" shall be deemed to include any Affiliate
of Purchaser or any of the Bank Parties.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION.
8.1.1. PURCHASER PARENT'S INDEMNIFICATION OBLIGATIONS. On and
after the Closing Date, Purchaser Parent hereby agrees to indemnify, defend and
hold Parent and each of its directors, officers, employees, Subsidiaries and
other Affiliates (each, a "PARENT INDEMNIFIED PARTY" and collectively, the
"PARENT INDEMNIFIED PARTIES") harmless from and against any and all losses,
damages, out of pocket costs, Taxes, liabilities, penalties and fines (including
reasonable attorney's fees) (collectively, "DAMAGES") actually and reasonably
incurred by them, as a direct result of, but only in respect of:
(a) any breach of Purchaser or Purchaser Parent's
representations and warranties, any such claim to be made by Parent in
good faith in writing within the period of survivability set forth in
Section 13.2;
(b) Purchaser Parent's or Purchaser's failure to perform or
otherwise fulfill any of its agreements, covenants, obligations or
undertakings hereunder and in accordance with the terms hereof, any
such claim to be made by Parent in good faith in writing within the
period of survivability set forth in Section 13.2;
(c) the operation of the Trust Business following the
Closing Date; or
(d) Taxes allocated to Purchaser pursuant to Section 9.4.
8.1.2. BANK PARTIES' INDEMNIFICATION OBLIGATIONS. On and after
the Closing Date, each Bank Party hereby agrees to indemnify, defend and hold
Parent and each other Parent Indemnified Party harmless from and against any and
all Damages actually and reasonably incurred by them, as a direct result of, but
only in respect of:
(a) any breach by such Bank Party of its representations and
warranties, any such claim to be made by a Parent Indemnified Party in
good faith in writing within the period of survivability set forth in
Section 13.2;
(b) such Bank Party's failure to perform or otherwise
fulfill any of its agreements, covenants, obligations or undertakings
hereunder and in accordance with the terms hereof, any such claim to be
made by a Parent Indemnified Party in good faith in writing within the
period of survivability set forth in Section 13.2; or
(c) such Bank Party's operation of its portion of the Bank
Business following the Closing Date.
8.1.3. PARENT'S INDEMNIFICATION OBLIGATIONS. On and after the
Closing Date, Parent hereby agrees to indemnify, defend and hold Purchaser,
Purchaser Parent, and each Bank Party, and each of their directors, officers,
employees, Subsidiaries and other Affiliates (each, a "PURCHASER INDEMNIFIED
PARTY" and collectively, the "PURCHASER INDEMNIFIED PARTIES"), harmless from and
against and in respect of any and all Damages actually and reasonably incurred
42
51
by them, as a direct result of, but only in respect of:
(a) any breach of Parent's or Target's representations and
warranties, any such claim to be made by a Purchaser Indemnified Party
in good faith in writing within the period of survivability set forth
in Section 13.2;
(b) Parent's failure, or Target's failure prior to the
Effective Time, to perform or otherwise fulfill any of its agreements,
covenants, obligations or undertakings hereunder and in accordance with
the terms hereof, any such claim to be made by a Purchaser Indemnified
Party in good faith in writing within the period of survivability set
forth in Section 13.2; or
(c) Taxes allocated to Parent pursuant to Section 9.4.
8.1.4. PARENT RETIREMENT PLAN INDEMNITY. Parent further agrees to
indemnify and hold Purchaser harmless from and in respect to any and all (i)
Damages (which term for the purposes of this Section 8.1.4 shall include any
penalty, filing fee or tax incurred or contribution required to be made in
connection with the IRS's determination letter or audit process or the IRS's
Voluntary Compliance Resolution Program, Closing Agreement Programs or similar
program) arising out of any matter disclosed in Schedule 4.16.4 or 4.16.7
(paragraph 2), provided that Target and Purchaser act reasonably and in good
faith with respect to such matters.
8.1.5. INDEMNIFIED LIABILITIES. All such Damages described in the
foregoing subsections of this Section 8.1 are collectively referred to as
"INDEMNIFIED LIABILITIES."
8.2 ENVIRONMENTAL MATTERS. With respect to any Damages arising out of a
breach of the representation set forth in Section 4.12 hereof:
8.2.1. Purchaser Indemnified Party shall, and shall cause any
applicable Subsidiary to, cooperate with any reasonable request by Parent to
enable Parent to perform its obligations under this Article VIII with respect to
such Indemnified Liabilities;
8.2.2. Purchaser Indemnified Party shall promptly notify Parent
of the existence of any Indemnified Liabilities (with reasonable information as
to proposed plans for remediation, if appropriate, to be provided whenever the
same become available), but failure to so notify Parent promptly shall not
relieve Parent of any of its obligations hereunder in the absence of actual
prejudice and then only to the extent such actual prejudice is caused by such
failure to so notify Parent; and
8.2.3. Notwithstanding any other provision of this Agreement to
the contrary, Damages relating to any environmental investigation, monitoring or
remediation (collectively, "REMEDIAL ACTIONS") that would otherwise constitute
Indemnified Liabilities shall be subject to indemnification only to the extent
that: (i) the Remedial Action is required pursuant to Environmental Laws and
(ii) the Remedial Action is performed in a cost-effective manner, reasonable
under the totality of the circumstances, given due consideration for actual
current use of the property that is the subject of the Remedial Action.
8.3 INDEMNIFICATION PROCEDURE. If a claim or demand by a third party is
made against an indemnified party, and if such party intends to seek indemnity
with respect thereto pursuant to this Article VIII or under any other provisions
of this Agreement providing for indemnification, such
43
52
indemnified party shall promptly notify the indemnifying party in writing of
such claims or demands setting forth such claims in reasonable detail. The
failure of the indemnified party to give the indemnifying party prompt notice as
provided herein shall not relieve the indemnifying party of any of its
obligations under this Article VIII, except to the extent that the indemnifying
party is materially prejudiced by such failure. The indemnifying party shall
have 30 days after receipt of such notice to undertake, conduct and control,
through counsel of its own choosing and at its own expense, the settlement or
defense thereof, and the indemnified party shall cooperate with it in connection
therewith; provided, that the indemnified party may participate in such
settlement or defense through counsel chosen by such indemnified party if the
fees and expenses of such counsel shall be borne by such indemnified party. So
long as the indemnifying party is reasonably contesting any such claim in good
faith, the indemnified party shall not pay, defend, or settle any such claim.
Notwithstanding the foregoing, the indemnified party shall have the right to pay
or settle any such claim; provided, that in such event it shall waive any right
to indemnity therefor by the indemnifying party. If the indemnifying party does
not notify the indemnified party within 30 days after the receipt of the
indemnified party's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the indemnified party shall have the right to
contest, settle or compromise the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement. The indemnifying party shall not,
except with the consent of the indemnified party, enter into any settlement that
does not include as an unconditional term thereof the giving by the Person or
Persons asserting such claim to all indemnified parties (i.e., Parent
Indemnified Parties or Purchaser Indemnified Parties, as the case may be) an
unconditional release from all liability with respect to such claim or consent
to entry of any judgment. Any Person entitled to indemnification pursuant to
this Article VIII shall be required to cooperate in the defense and
investigation of any claim as to which indemnification may be sought and to
cooperate with other indemnified parties so as to minimize the costs of
defending multiple indemnified parties. No indemnifying party shall be obligated
pursuant to this Article VIII to pay for more than one firm of counsel for all
indemnified parties.
8.4 LIMITATION ON INDEMNIFICATION.
8.4.1. PARENT INDEMNIFICATION THRESHOLD. Parent shall be required
to indemnify and hold harmless Purchaser Indemnified Parties with respect to
Damages incurred by such indemnified party only to the extent that the aggregate
amount of all such Damages of Purchaser Indemnified Parties exceeds $200,000
(the "PARENT THRESHOLD"), provided, however that the Parent Threshold shall be
zero for indemnity provided under Sections 8.1.3 (c) and 8.1.4.
8.4.2. PURCHASER INDEMNIFICATION THRESHOLD. Purchaser shall be
required to indemnify and hold harmless Parent Indemnified Parties with respect
to Damages incurred by such indemnified party only to the extent that the
aggregate amount of all such Damages of Parent Indemnified Parties exceeds
$200,000 (the "PURCHASER THRESHOLD"), provided, however that the Purchaser
Threshold shall be zero for indemnity provided under Section 8.1.1(d).
8.5 SPECIAL, CONSEQUENTIAL, AND PUNITIVE DAMAGES NOT INDEMNIFIABLE. In
no event shall Parent, Purchaser, Purchaser Parent, or any Bank Party, as the
case may be, be liable to Purchaser Indemnified Parties or Parent Indemnified
Parties, respectively, for special, indirect, incidental, consequential or
punitive damages other than those recovered or recoverable by a third party from
a party seeking indemnification under this Article VIII.
44
53
8.6 INDEMNITY PAYMENTS REDUCED BY INSURANCE PROCEEDS. Any indemnity
payment payable pursuant to this Agreement shall be decreased to the extent of
any insurance proceeds actually received by the indemnified party.
8.7 MAXIMUM AGGREGATE LIABILITY. In no event shall the aggregate
liability of any party under Article VIII exceed $20 million, provided, however,
that the maximum aggregate liability of Parent under Article VIII shall be equal
to the sum of the Purchase Price and the Closing Dividend ("LARGER CAP") in the
event and to the extent that Damages incurred by Purchaser Parent, Purchaser, or
Target (i) arising from Parent's breach of any of the representations and
warranties set forth in Sections 4.1, 4.2 (first sentence only), 4.4, 4.5 or
4.13, or (ii) for indemnity provided under Sections 8.1.3(c) or 8.1.4, or
arising from the matters disclosed in Schedule 4.28 (paragraph 3 only).
8.8 EXCLUSIVE REMEDY.
8.8.1. OF PURCHASER INDEMNIFIED PARTIES (INCLUDING THE BANK
PARTIES). The indemnification provisions of this Article VIII shall, from and
after the Closing, be the sole and exclusive remedy of Purchaser Indemnified
Parties (which term includes the Bank Parties) for any breach of any provision
of this Agreement or otherwise as against any Parent Indemnified Party arising
out of the transactions contemplated hereby. In no event shall Parent be liable
to any Purchaser Indemnified Party under this Article VIII except for Damages
actually incurred by such Purchaser Indemnified Party; provided, however, that
nothing herein shall limit the non-monetary equitable remedies of any party
hereto in respect of any breach of any covenant or other agreement of any party
required to be performed after the Closing or (ii) limit the rights of any
Purchaser Indemnified Party to pursue remedies for breach of the indemnification
provisions under this Article VIII.
8.8.2. OF PARENT. The indemnification provisions of this Article
VIII shall, from and after the Closing, be the sole and exclusive remedy of
Parent Indemnified Parties for any breach of any provision of this Agreement or
otherwise as against any Purchaser Indemnified Party arising out of the
transactions contemplated hereby other than the future operations of Target and
the Bank Parties which shall be the sole responsibility of Purchaser the Bank
Parties, respectively, subject to the Larger Cap. In no event shall any
Purchaser Indemnified Party be liable to Parent Indemnified Parties under this
Article VIII except for Damages actually incurred by Parent Indemnified Parties;
provided, however, that nothing herein shall (i) limit the non-monetary
equitable remedies of any party hereto in respect of any breach of any covenant
or other agreement of any party required to be performed after the Closing, or
(ii) limit the rights of any Parent Indemnified Party to pursue remedies for
breach of the indemnification provisions under this Article VIII.
8.9 LIMITATION ON ACTIONS. Parent Indemnified Parties shall have no
rights of contribution against Target or any Target Subsidiary for any breach
of a representation or warranty of Target hereunder. No Purchaser Indemnified
Party shall have any rights of contribution against any present or former
directors, officers and employees of Target or any Target Subsidiary for any
breach of a representation or warranty of Target hereunder, or otherwise with
respect to any activities before the Effective Time for which such present or
former Director, officer or employee of Target might seek indemnification from a
Parent Indemnified Party.
45
54
ARTICLE IX
REGULATORY AND OTHER MATTERS
9.1 REGULATORY APPROVALS.
9.1.1. As soon as practicable after the date hereof, each of
Target, Purchaser and the Bank Parties shall take all reasonable efforts to
prepare all necessary documentation, to effect all necessary filings and to
obtain all necessary permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary to consummate the transactions
contemplated by this Agreement, including without limitation the Acquisition.
Target, Purchaser, Purchaser Parent and the Bank Parties will each cooperate
with the other and will each furnish the other and the other's counsel with all
information concerning themselves, their subsidiaries, directors, officers and
stockholders and such other matters as may be necessary or advisable in
connection with any application, petition or any other statement or application
made by or on behalf of Target, Purchaser, Purchaser Parent or a Bank Party to
any Governmental Entity in connection with the Acquisition and the other
transactions contemplated by this Agreement. Target, Purchaser, Purchaser Parent
and the Bank Parties shall have the right to review in advance all filings and
approve in advance all characterizations of the information relating to them and
any of their respective subsidiaries which appear in any filing made in
connection with the transactions contemplated by this Agreement with any
Governmental Entity. In addition, Target, Purchaser, Purchaser Parent and the
Bank Parties shall each furnish to the other a final copy of each such filing
made in connection with the transactions contemplated by this Agreement with any
Governmental Entity.
9.1.2. Without limiting the generality of the foregoing,
Purchaser, Purchaser Parent and Purchaser Parent's parent and the Bank Parties
will file all regulatory applications necessary for the consummation of the
transactions contemplated hereby and by the Purchase Agreement within 45 days of
the date of this Agreement, and will respond to any OTS or other Bank Regulator
comments on such application within 15 days following the receipt thereof. If
any Bank Party becomes unwilling or unable to consummate the transactions
contemplated by the Purchase Agreement in a timely manner and no other Bank
Party has assumed such obligation within 30 days, Purchaser, Purchaser Parent
and Purchaser Parent's parent will promptly amend its OTS application to seek
approval to accept deposits and to operate the Target Office(s) that such Bank
Party otherwise would have purchased, and the Bank Parties will each make any
required changes in their regulatory applications to conform such applications
to the revised structure of the Acquisition and divestiture of the Bank
Business, and all such parties will prosecute all such revised applications
diligently in order to minimize any delay caused by such amendments.
9.2 ACCESS AND INVESTIGATION. Each of Target and Purchaser and the Bank
Parties shall permit the other party and its representatives reasonable access
to its properties and personnel, and shall disclose and make available to such
other parties all books, papers and records relating to the assets, stock
ownership, properties, operations, obligations and liabilities of it and its
Subsidiaries, including, but not limited to, all books of account (including the
general ledger), tax records, minute books of meetings of boards of directors
(and any committees thereof) and shareholders, organizational documents, bylaws,
material contracts and agreements, filings with any regulatory authority,
accountants' work papers, litigation files, loan files, plans affecting
46
55
employees, and any other business activities or prospects in which the other
party may have a reasonable interest, provided that such access shall be
reasonably related to the transactions contemplated hereby and, in the
reasonable opinion of the respective parties providing such access, not unduly
interfere with normal operations or violate applicable law. Each of Target,
Purchaser, the Bank Parties and their respective Subsidiaries shall make their
respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with the other party and its representatives, provided that such
access shall be reasonably related to the transactions contemplated hereby and
shall not unduly interfere with normal operations.
9.3 CONFIDENTIALITY. All information furnished previously in connection
with the transactions contemplated by this Agreement or pursuant hereto shall be
treated as the sole property of the party furnishing the information until
consummation of the transactions contemplated hereby. Each party shall use its
best efforts to keep confidential all such information, and shall not directly
or indirectly use such information for any competitive or other commercial
purposes and, if such transactions shall not occur, the party receiving the
information shall either destroy or return to the party which furnished such
information all documents or other materials containing, reflecting or referring
to such information. The obligation to keep such information confidential shall
continue for five years from the date the proposed transactions are abandoned
but shall not apply to (i) any information which (x) the party receiving the
information can establish by convincing evidence was already in its possession
prior to the disclosure thereof by the party furnishing the information; (y) was
then generally known to the public; or (z) became known to the public through no
fault of the party receiving the information; or (ii) disclosures pursuant to a
legal requirement or in accordance with an order of a court of competent
jurisdiction, provided that the party which is the subject of any such legal
requirement or order shall use its best efforts to give the other party at least
ten business days prior notice thereof.
9.4 POST-CLOSING TAX MATTERS
9.4.1. Parent shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for Target and the Tax Subsidiaries with
respect to all periods beginning before the Closing Date that are filed after
the Closing Date and that are consolidated, unitary or combined Tax Returns that
will include the operations of Parent, Target and the Tax Subsidiaries, and will
pay (or duly contest the obligation to pay) all Taxes due in connection with
such Tax Returns. Target and the Tax Subsidiaries will furnish Tax information
to Parent for inclusion in such Tax Returns in accordance with their past custom
and practice. Parent will allow the Purchaser an opportunity to review and
comment upon such Tax Returns (including any amended returns) to the extent they
relate to the Target and its Tax Subsidiaries.
9.4.2. Purchaser shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns of Target and the Tax Subsidiaries, other
than those Tax Returns described in Section 9.4.1. Purchaser shall permit Parent
to review and comment upon each such Tax Return (including any amended return)
described in the preceding sentence that relates to taxable periods that begin
before the Closing Date, prior to filing to the extent that such Tax Return
relates to any of Target or a Tax Subsidiary. Parent shall pay to Purchaser
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such Taxable period ending on the Closing Date. For
47
56
purposes of this Section 9.4, in the case of any Taxes that are imposed on a
periodic basis and are payable for a Taxable period that includes (but does not
end on) the Closing Date, the portion of such Tax which relates to the portion
of such Taxable period ending on the Closing Date shall (x) in the case of any
Taxes other than Taxes based upon or related to income or receipts, be deemed to
be the amount of such Tax for the entire Taxable period multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
the prior practice of Target.
9.4.3. Purchaser, Target and Parent shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Tax Returns of Target and the Tax Subsidiaries pursuant to this
Section 9.4 and any audit, litigation or other proceeding with respect to Taxes
of Target and the Tax Subsidiaries. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
that are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Target and Parent agree (A) to retain all books and records with respect to Tax
matters pertinent to Target relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Purchaser or Parent, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, Target or Parent, as
the case may be, shall allow the other party to take possession of such books
and records.
9.4.4. Purchaser and Parent shall, upon request, use their best
efforts to obtain any certificate or other document from any Governmental Entity
or any other Person as may be necessary to mitigate, reduce or eliminate any Tax
that could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
9.4.5. Purchaser and Parent shall, upon request, provide the
other party with all information that either party may be required to report
pursuant to Code Section 6043 and all Treasury Department regulations
promulgated thereunder.
9.4.6.Any tax sharing agreement between Parent and any of Target
and the Tax Subsidiaries shall be terminated as of the Closing Date and will
have no further effect for any taxable year (whether the current year, a future
year, or a past year).
9.4.7. All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred on
account of the sale of Target Stock Outstanding in connection with this
Agreement, shall be shared equally between Purchaser and Parent when due, and
Purchaser and Parent will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Parent will and Purchaser will, and each will cause its
Affiliates to, join in the execution of any such Tax Returns
48
57
and other documentation.
9.4.8. Parent agrees to indemnify (in accordance with the
procedures and subject to the limitations set forth in Article VIII) Purchaser
from and against any and all Damages arising out of any Tax liability of any of
Target and the Tax Subsidiaries for Taxes of any Person other than any of Target
and the Tax Subsidiaries (A) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), (B) as a transferee or
successor, (C) by contract, or (D) otherwise.
9.4.9. Upon Purchaser's request on or prior to the Closing,
Parent will join with Purchaser in making an election under Section 338(h)(10)
of the Code (and any corresponding elections under state, local, or foreign tax
law) (collectively, a "SECTION 338(h)(10) ELECTION") with respect to the
purchase and sale of Target Stock Outstanding hereunder (including, at
Purchaser's option, a Section 338(h)(10) Election with respect to the deemed
purchase and sale of the stock of a Tax Subsidiary). Parent will pay any Tax
attributable to the making of the Section 338(h)(10) Election. Parent will also
pay any state, local or foreign Tax. In the event that a Section 338(h)(10)
Election is made, the parties agree that the Purchase Price and the liabilities
of Target and the Tax Subsidiaries (plus other relevant items) will be allocated
to the assets of Target and the Tax Subsidiaries for all purposes (including Tax
and financial accounting purposes) as shown on the Allocation to be prepared
pursuant to Section 9.4.10. Purchaser, Target, the Tax Subsidiaries, and Parent
will file all Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with such allocation.
9.4.10. Not less than 45 days before the due date for the
filing of the Section 338(h)(10) Election, Purchaser shall deliver to Parent a
proposed allocation (the "ALLOCATION") of the Purchaser Price and the
liabilities of Target and the Tax Subsidiaries (plus any other relevant items)
to the assets of Target and the Tax Subsidiaries, prepared in accordance with
the provisions of Treasury Regulation Section 1.338(h)(10)-1(f). Parent shall
have the right to review, comment on, and approve such allocation, provided,
however, that such approval shall not be unreasonably withheld. Purchaser and
Parent agree that the Allocation shall apply for all purposes (including Tax and
financial accounting purposes), and that Purchaser, Target, the Tax Subsidiaries
and Parent will file all Tax Returns (including amended returns and claims for
refund) and information reports in a manner consistent with such Allocation.
9.4.11. Purchaser agrees to indemnify (in accordance with the
procedures and subject to the limitations set forth in Article VIII) Parent for
any additional tax owed by Parent (including tax owed by Parent due to this
indemnification payment) resulting from any transaction not in the ordinary
course of business occurring on the Closing Date after Purchaser's purchase of
Target Stock Outstanding.
9.4.12. Parent and Purchaser agree to report all transactions
not in the ordinary course of business occurring on the Closing Date after
Purchaser's purchase of Target Stock Outstanding on Purchaser's federal Income
Tax Return to the extent permitted by Treasury Regulation Section
1.1502-76(b)(1)(B).
9.4.13. Any Tax refunds that are received by Purchaser or
Target and the Tax Subsidiaries, and any amounts credited against Tax to which
Purchaser or Target and the Tax Subsidiaries become entitled, that relate to Tax
periods or portions thereof ending on or before
49
58
the Closing Date and not previously included in the calculation of the total
equity of Target reflected on the Estimated Balance Sheet or Final Balance Sheet
as an asset on the Estimated Balance Sheet or Final Balance Sheet shall be for
the account of Parent, and Purchaser shall pay over to Parent any such refund or
the amount of any such credit within fifteen (15) days after receipt of such
refund or entitlement to such credit.
9.5 NON-COMPETITION. For a period of one year after the Closing Date,
Parent shall not, directly or indirectly, conduct a personal trust service
business within the State or States of New Hampshire, Connecticut or Vermont.
9.6 FURTHER ASSURANCES. On and after the Closing Date, Parent,
Purchaser and the Bank Parties will (i) provide such further assurances to each
other, (ii) execute and deliver all such further instruments and papers, (iii)
provide such records and information, and (iv) take such further action as may
be appropriate to carry out the transactions contemplated by and to accomplish
the purposes of this Agreement.
9.7 RETENTION OF RECORDS. Following the Closing Date, Purchaser agrees
to retain or cause its subsidiaries to retain the books, records, documents,
instruments, accounts, correspondence, writings, evidences of title, tax
returns and other papers relating to Target and its business for seven years or
for such longer period as may be required by any law or court order applicable
to Parent or any of its subsidiaries and, in any event, to notify Parent before
the destruction of any of such materials and, upon Parent's request, to turn
over to Parent any of such materials the proposed destruction of which was
notified to Parent.
9.8 ACCESS TO BOOKS AND RECORDS. Parent shall have the right for a
period of seven years following the Closing Date to have reasonable access to
such books, records and accounts, including financial and tax information,
correspondence, production records, employment records and other similar
information as are transferred to Purchaser pursuant to the terms of this
Agreement for the limited purposes of concluding its involvement in the business
of Target prior to the Closing Date, complying with its obligations under
applicable securities, tax, environmental, employment or other laws and
regulations, and defending against claims or litigation.
9.9 NO SOLICITATION. From the date hereof until the termination of this
Agreement or the Closing Date, whichever occurs first, neither Parent nor any of
its Subsidiaries shall, directly or indirectly, through any officer, director,
agent or otherwise, solicit or initiate the submission of any proposal or offer
from any Person relating to any acquisition or purchase of all or (other than in
the ordinary course of business) any material portion of the assets of, or any
equity interest in, Target or any of its subsidiaries or any business
combination with Target or any of its subsidiaries or participate in any
negotiations regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate, any effort or attempt by any other Person to do or seek any of the
foregoing, nor shall Parent nor any of its Subsidiaries enter into an agreement
with any Person not a party to this Agreement with respect to any such
transaction. Parent shall notify Purchaser promptly if any such proposal or
offer, or any inquiry or contact with any Person with respect thereto, is made
and shall, in any such notice to Purchaser, indicate in reasonable detail the
terms and conditions of such proposal, offer, inquiry or contact. Parent agrees
not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which Parent is a party related to
Target.
50
59
ARTICLE X
CLOSING CONDITIONS
10.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
none of which may be waived:
10.1.1. INJUNCTIONS. None of the parties hereto shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the transactions
contemplated by this Agreement. No statute, rule, regulation, order, injunction
or decree shall have been enacted, entered, promulgated or enforced by any
legislative body or Governmental Entity which prohibits, materially restricts or
makes illegal consummation of the transactions contemplated by this Agreement,
or the continued conduct of the insurance, securities, investment management and
related business engaged in by Purchaser, Purchaser Parent or its Affiliates or
Target's Trust Business as of the date hereof if the transactions contemplated
by this Agreement are consummated.
10.1.2. REGULATORY APPROVALS. All necessary approvals,
authorizations and consents of all Governmental Entities required to consummate
the transactions contemplated by this Agreement shall have been obtained and
shall remain in full force and effect and all waiting periods relating to such
approvals, authorizations or consents shall have expired.
10.1.3. NO MATERIAL BURDENSOME CONDITION. None of the
regulatory approvals required to be obtained by Section 9.1 hereof shall impose
any term, condition or restriction upon Purchaser or its Affiliates that would
materially and adversely affect the business, operations, financial condition,
property or assets of Target and its Subsidiaries (taken as a whole) or any
Branch Subset or that would otherwise materially and adversely affect Purchaser
or its Affiliates by imposing (i) any material limitation or condition on
Purchaser's conducting the Trust Business through Target in the manner that it
is currently conducted or the continuation of Target's Bank Business, or (ii)
any restriction on affiliations of insurance agencies or other segments of the
business of Purchaser or its Affiliates materially limiting the legality of
Purchaser's performing the Trust Business through Target in the manner that it
is currently conducted while continuing the present operations of Purchaser or
its Affiliates (a "BURDENSOME CONDITION").
10.1.4. AUDIT REVIEW. Parent will provide to Purchaser a
review by its independent auditors of Target's financial statements for all
interim periods between December 31, 1998 and the date 30 days prior to the
Closing Date in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public Accountants
by Deloitte and Touche.
10.2 CONDITIONS TO THE OBLIGATIONS OF PURCHASER UNDER THIS AGREEMENT.
The obligations of Purchaser under this Agreement shall be further subject to
the satisfaction, at or prior to the Effective Time, of the following
conditions:
10.2.1. REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Parent and Target set forth in Article IV hereof shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (or on the date
when made in the case of any representation and warranty which specifically
51
60
relates to an earlier date), except as otherwise contemplated by this Agreement
or consented to in writing by Purchaser or a Bank Party, as applicable;
provided, however, that (i) in determining whether or not the condition
contained in this Section 10.2.1 shall be satisfied, no effect shall be given to
any exceptions in such representations and warranties relating to materiality or
Material Adverse Effect and (ii) the condition contained in this Section 10.2.1
shall be deemed to be satisfied unless the failure of such representations and
warranties to be so true and correct constitute, individually or in the
aggregate, a Material Adverse Effect on Target and the Target Subsidiaries,
taken as a whole or on any Branch Subset, taken as a whole; and Target shall
have delivered to Purchaser a certificate of Target to such effect signed by the
Chief Executive Officer and the Chief Financial Officer of Target as of the
Effective Time.
10.2.2. AGREEMENTS AND COVENANTS. Parent and Target shall have
performed in all material respects all obligations and complied in all material
respects with all agreements or covenants of Parent and Target to be performed
or complied with by it at or prior to the Effective Time under this Agreement
and Purchaser shall have received a certificate signed on behalf of Target by
the Chief Executive Officer and Chief Financial Officer of Target to such effect
dated as of the Effective Time.
10.2.3. PERMITS, AUTHORIZATIONS, ETC. Target and the Target
Subsidiaries shall have obtained any and all permits, authorizations, licenses,
consents, waivers, clearances or approvals required to be obtained by Target
from any Governmental Entity for the lawful consummation of the Acquisition by
Target, conduct of the Trust Business, and the transfer of Bank Business to the
Bank Parties under the Purchase Agreement the failure of which to obtain would
have a Material Adverse Effect on Target and its Subsidiaries (taken as a whole)
or any Branch Subset.
10.2.4. LEASE CONSENTS AND OBLIGATIONS. Parent and Target
shall have obtained landlord and lessor consents necessary for the transfer of
all real property leases identified on Schedule 10.2.4 for which consent is
required to effect the Acquisition and the transfer of said leases by Purchaser
to the Bank Parties under the Purchase Agreement, or entered into subleases with
respect thereto with Purchaser or a Bank Party on terms and with a term
consistent with existing term and terms thereof, and all leases transferred to,
or subleases executed with Purchaser or a Bank Party shall be in full force and
effect.
10.2.5. REGISTRATION AS AN INVESTMENT ADVISER. Target shall be
registered as an investment adviser under the Advisers Act and the rules and
regulations promulgated thereunder, and made appropriate notice filings under
the laws of each jurisdiction in which Target does business which is determined
by Purchaser and Target to be necessary and further shall address the matters
set forth in a letter dated the date hereof among Parent, Target and Purchaser
(the "LETTER AGREEMENT") in accordance with the terms of such letter.
10.2.6. MINIMUM CAPITAL. Target shall have minimum tangible
net equity of $2.5 million in cash or cash equivalents at the Effective Time and
immediately thereafter, provided that Purchaser shall have complied with the
requirements of Section 7.3.
10.2.7. SALES OF CERTAIN ASSETS. Target shall have complied
with the requirements of Section 6.16.
Target will furnish Purchaser with such certificates of its officers or others
and such other
52
61
documents to evidence fulfillment of the conditions set forth in this Section
10.2 as Purchaser may reasonably request.
10.3 CONDITIONS TO THE OBLIGATIONS OF PARENT UNDER THIS AGREEMENT. The
obligations of Parent under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
10.3.1. REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Purchaser set forth in Article V hereof shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date (or on the date when
made in the case of any representation and warranty which specifically relates
to an earlier date), except as otherwise contemplated by this Agreement or
consented to in writing by Target; provided, however, that (i) in determining
whether or not the condition contained in this Section 10.3.1 shall be
satisfied, no effect shall be given to any exceptions in such representations
and warranties relating to materiality or Material Adverse Effect and (ii) the
condition contained in this Section 10.3.1 shall be deemed to be satisfied
unless the failure of such representations and warranties to be so true and
correct constitute, individually or in the aggregate, a Material Adverse Effect
on Purchaser; and Purchaser shall have delivered to Target a certificate of
Purchaser to such effect signed by the Chief Executive Officer and the Chief
Financial Officer of Purchaser as of the Effective Time;.
10.3.2. AGREEMENTS AND COVENANTS. Purchaser shall have
performed in all material respects all obligations and complied in all material
respects with all agreements or covenants of Purchaser to be performed or
complied with by it at or prior to the Effective Time under this Agreement and
Target shall have received a certificate signed on behalf of Purchaser by the
Chief Executive Officer and Chief Financial Officer of Purchaser to such effect
dated as of the Effective Time.
10.3.3. PERMITS, AUTHORIZATIONS, ETC. Purchaser and its
subsidiaries shall have obtained any and all material permits, authorizations,
consents, waivers, clearances or approvals required for the lawful consummation
of the Acquisition by Purchaser.
10.3.4. CLOSING DIVIDEND. Parent shall have received payment
of the Closing Dividend and a written commitment, in form and substance
reasonably satisfactory to Parent, from Purchaser to cause Target to pay to
Parent the amount, if any, by which the originally-calculated and paid Closing
Dividend is less than the amount of the Closing Dividend as calculated on the
Final Balance Sheet.
Purchaser will furnish Parent with such certificates of its officers or others
and such other documents to evidence fulfillment of the conditions set forth in
this Section 10.3 as Parent may reasonably request.
ARTICLE XI
THE CLOSING
11.1 TIME AND PLACE. Subject to the provisions of Articles X and XII
hereof, the Closing of the transactions contemplated hereby shall take place at
the offices of βββββ, ββββ & βββββ LLP, βββ ββββ ββββββ ββββββ, ββββββ,
βββββββββββββ at 10:00 a.m. on a date specified by Purchaser at least three
business days prior to such date. The Closing Date shall be as soon as
53
62
practicable after the later to occur of the receipt of last required approval
for the Acquisition and the expiration of the last of all required waiting
periods under such approvals, or at such other place, date or time as Purchaser
and Target may mutually agree upon, provided that such date shall not be more
than 20 days after the Final Approval Date and provided further that Purchaser
shall not have an obligation to close from December 11, 1999 to January 13,
2000, subject to Purchaser's obligation to pay any additional amounts due under
Section 2.3.4.
11.2 DELIVERIES AT THE CLOSING. At the Closing there shall be delivered
to Purchaser the certificates for the Target Stock Outstanding and to Purchaser
and Target the certificates and other documents and instruments required to be
delivered under Article X hereof, and to Parent the Closing Dividend and the
Purchase Price.
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
12.1.1. At any time by the mutual written agreement of
Purchaser and Parent;
12.1.2. By either Parent or Purchaser (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein), if there has been a
material breach on the part of the other party of any representation, warranty
or agreement contained herein which cannot be or has not been cured within 30
days after written notice by Purchaser to Parent (or by Parent to Purchaser) of
such breach;
12.1.3. At the election of either Purchaser or Parent, if the
Closing shall not have occurred on or before January 31, 2000 (the "TERMINATION
DATE"), or such later date as shall have been agreed to in writing by Purchaser
and Parent; provided, that no party may terminate this Agreement pursuant to
this Section 12.1.3 if the failure of the Closing to have occurred on or before
said date was due to such party's breach of any of its obligations under this
Agreement, and provided, further, that the Termination Date may be extended for
an additional two-month period by either party by written notice to the other
party (given not later than one week prior to the Termination Date) if the
Closing shall not have occurred because of failure to have obtained approval
from one or more Governmental Entities whose approval is required in connection
with this Agreement and the transactions contemplated hereby under circumstances
in which neither party has the right to terminate this Agreement pursuant to
Section 12.1.4 hereof; and provided, further, that the Termination Date may be
extended for an additional six-month period by Parent by written notice to
Purchaser (given not later than one week prior to the Termination Date) if the
Closing shall not have occurred because of failure to have obtained approval
from one or more Governmental Entities whose approval is required in connection
with this Agreement and any party has been obligated to amend its application
for approval of the transactions contemplated hereby under the circumstances
contemplated by Section 9.1.2.
12.1.4. By either Parent or Purchaser if final action has been
taken by a regulatory authority whose approval is required in connection with
this Agreement and the transactions contemplated hereby, which final action (i)
has become unappealable and (ii) does not approve this Agreement or the
transactions contemplated hereby.
54
63
12.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to any provision of Section 12.1, this Agreement shall
forthwith become void and have no further force, except that the provisions of
Sections 1.1, 9.3, 12.3, 13.1, 13.2, 13.3, 13.5, 13.7, 13.8, and 13.10 and this
Section 12.2, and any other Section which, by its terms, relates to
post-termination rights or obligations, shall survive such termination of this
Agreement and remain in full force and effect, and Purchaser, Purchaser Parent
and the Bank Parties each agree not to solicit deposit accounts or trust
accounts of Target. Notwithstanding the foregoing sentence, Purchaser, Purchaser
Parent, the Bank Parties, and their respective Affiliates shall be permitted to
(a) engage in advertising, solicitations or marketing campaigns not primarily
directed to or targeted at Target Customers and (b) respond to unsolicited
inquiries by Target Office Customers with respect to Trust or other banking
services.
12.2.1. If this Agreement is terminated, expenses and damages
of the parties hereto shall be determined as follows:
(a) Any termination of this Agreement pursuant to
Sections 12.1.1, 12.1.2, 12.1.3, or 12.1.4 hereof (other than
termination pursuant to Section 12.1.2 as a result of a wilful breach
or gross negligence by a party hereto) shall be without liability, cost
or expense on the part of any party to the other.
(b) In the event of a termination of this Agreement
pursuant to Section 12.1.2 hereof as a result of a breach of a
representation, warranty or covenant which is caused by the wilful
conduct or gross negligence of Parent or Target, such party shall be
obligated to reimburse the other parties for up to $500,000 of
out-of-pocket costs and expenses, including, without limitation,
reasonable legal, accounting and investment banking fees and expenses,
incurred by such other parties in connection with the entering into of
this Agreement and the carrying out of any and all acts contemplated
hereunder (collectively referred to as "EXPENSES").
(c) In the event of a termination of this Agreement
pursuant to Section 12.1.2 hereof as a result of a breach of a
representation, warranty or covenant which is caused by the wilful
conduct or gross negligence of Purchaser, Purchaser Parent, or a Bank
Party, such breaching party shall be obligated to reimburse (1) first,
Parent in full for all Expenses, and (2) after fully reimbursing Parent
for all of its Expenses, second, the other non-breaching parties (pro
rata based on actual Expenses incurred by each such non-breaching
party) in full for all Expenses.
(d) No party shall be obligated to pay, and no party
shall be entitled to receive, more than an aggregate of $500,000 as
reimbursement of Expenses pursuant to this Section 12.2.1.
(e) Any payments required by this Section 12.2.1 will
be payable within five business days after demand therefor by wire
transfer of immediately available funds to an account designated by the
party entitled to such payment.
12.2.2. Except as provided in Section 12.2.1, whether or not
the Acquisition is consummated, all Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the party
incurring such costs and expenses.
55
64
12.2.3. The payment of Expenses is not an exclusive remedy,
but is in addition to any other rights or remedies available to the parties
hereto at law or in equity, including but not limited to specific performance to
remedy any violation of Section 9.9, and notwithstanding anything to the
contrary contained herein, no party shall be relieved or released from any
liabilities or damages arising out of its wilful breach or gross negligence.
12.3 AMENDMENT, EXTENSION AND WAIVER. Subject to applicable law, at any
time prior to the Effective Time, Parent and Purchaser, by mutual agreement, may
(a) amend this Agreement, (b) extend the time for the performance of any of the
obligations or other acts of any other 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 herein. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of Parent and Purchaser. 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 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. Notwithstanding
the foregoing, no amendment, modification or waiver of or under this Agreement
shall be effective to increase materially the obligations of any Bank Party
hereunder without the consent of such Bank Party.
ARTICLE XIII
MISCELLANEOUS
13.1 CONFIDENTIALITY AGREEMENT. Except as specifically set forth
herein, Purchaser, Parent, Target and the Bank Parties mutually agree to be
bound by the terms of the Confidentiality Agreements previously executed by the
parties hereto, which Agreements are hereby incorporated herein by reference.
The parties hereto agree that such Confidentiality Agreements shall continue in
accordance with their respective terms, notwithstanding the termination of this
Agreement.
13.2 SURVIVAL. All representations, warranties and covenants in this
Agreement or in any instrument delivered pursuant hereto or thereto shall expire
on, and be terminated and extinguished at the date that is fifteen months after
the Closing Date, other than covenants that by their terms are to survive or be
performed after the Closing Date (which shall survive as specified) and other
than (i) the representations and warranties contained in Sections 4.1, 4.2
(first sentence), 4.4 and 4.5 (which shall survive the Closing for a period of
10 years) and (ii) the representations and warranties contained in Sections 4.16
and 4.28 (to the extent that such representations relate to the matter disclosed
in Schedule 4.28 (paragraph 3)) and in Section 4.13 (each of which shall survive
for the applicable statute of limitations period).
13.3 NOTICES. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered by receipted hand delivery or
mailed by prepaid registered or certified mail (return receipt requested) or by
cable, telegram, telex or fax addressed as follows:
If to Parent or (before the Closing) to Target to:
C. βββββ ββββββ
President
56
65
ββββββ ββββ
Assistant Vice President
Sun Life of Canada
One Sun Life Executive Park, SC 3358
βββββββββ βββββ, βββββββββββββ βββββ
Fax: (βββ) βββ ββββ
With required copies to each of:
βββββ β. ββββββ
Vice President and Chief Counsel, U.S. Operations
Sun Life of Canada
One Sun Life Executive Park, SC 3358
βββββββββ βββββ, βββββββββββββ βββββ
Fax: (βββ) βββ ββββ
` and
βββββ β. ββββββ
βββββ βββββββββ βββββ
βββββ, ββββ & βββββ LLP
βββ ββββ ββββββ ββββββ
ββββββ, βββββββββββββ βββββ
Fax: (βββ) βββ-ββββ
If to Purchaser, to:
ββββββ β. βββββ
President
PM Trust Holding Company
βββ ββββββββ βββ
ββββββββ, βββββββββββ βββββ
Telephone: (βββ) βββ-ββββ
Fax: (βββ) βββ-ββββ
With required copy to:
βββββ β. ββββββββββ, Esq.
Phoenix Home Life Mutual Insurance Company
βββ ββββββββ βββ
ββββββββ, βββββββββββ βββββ
Telephone: (βββ) βββ-ββββ
Fax: (βββ) βββ-ββββ
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
57
66
13.4 PARTIES IN INTEREST. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and (except as provided in
Section 8.9) their respective successors and assigns; provided, however, that
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any party hereto other than the assignment of certain
assets of Target and its Subsidiaries by Purchaser to the Bank Parties after the
Effective Time without the prior written consent of the other parties, which
shall not be unreasonably withheld, and that (except as otherwise expressly
provided in this Agreement) nothing in this Agreement is intended to confer upon
any other Person any rights or remedies under or by reason of this Agreement.
13.5 COMPLETE AGREEMENT. This Agreement, including the Exhibits and
Disclosure Schedules hereto and the documents and other writings referred to
herein or therein or delivered pursuant hereto or thereto, contains the entire
agreement and understanding of the parties with respect to its subject matter.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings between the parties other than those expressly set forth herein or
therein. This Agreement supersedes all prior agreements and understandings
(other than the Confidentiality Agreements referred to in Section 13.1 hereof)
between the parties, both written and oral, with respect to its subject matter.
13.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
13.7 SEVERABILITY. In the event that any one or more provisions of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and the
parties shall use their reasonable efforts to substitute a valid, legal and
enforceable provision which, insofar as practical, implements the purposes and
intents of this Agreement.
13.8 GOVERNING LAW. This Agreement shall be governed by the laws of The
State of New Hampshire, without giving effect to its principles of conflicts of
laws.
13.9 HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
13.10 INTERPRETATION. For all purposes, this Agreement (a) shall be
deemed to be the joint efforts of the parties, and (b) shall not in any manner
be construed more severely against any party. When a reference is made in this
Agreement to Sections or Exhibits, such reference shall be to a Section of or
Exhibit to this Agreement unless otherwise indicated. The recitals hereto
constitute an integral part of this Agreement. References to Sections include
subsections, which are part of the related Section (e.g., a section numbered
"Section 5.5.1" would be part of "Section 5.5" and references to "Section 5.5"
would also refer to material contained in the subsection described as "Section
5.5.1"). The table of contents, index and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
58
67
The phrases "the date of this Agreement", "the date hereof" and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to the
date set forth in the Recitals to this Agreement.
THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
[The next page is page S-1]
59
68
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first set
forth above.
PURCHASER PARENT:
PM Holdings, Inc.
[SEAL] By: /s/ ββββββ β. βββββ
Vice President
PURCHASER:
PM Trust Holding Company
[SEAL] By: /s/ ββββββ β. βββββ
President
PARENT:
Sun Life Assurance Company
of Canada (U.S.)
[SEAL] By:
Authorized Officer
TARGET:
New London Trust, FSB
[SEAL] By:
Chairman and CEO
S-1
69
Lake Sunapee Bank, fsb
[SEAL] By:
Mascoma Savings Bank
[SEAL] By:
βββββββ Bank
[SEAL] By:
------------------------------
Executive Vice President
S-2