UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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MASSBANK CORP.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it
was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
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Amount previously paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
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MASSBANK
Corp.
123 Haven Street
Reading, Massachusetts 01867
June 6,
2008
Dear Stockholder:
On behalf of our board of directors, you are cordially invited
to attend a special meeting of stockholders of MASSBANK Corp. to
be held at the Andover Country Club, located at
60 Canterbury Street, Andover, Massachusetts 01810, on
Tuesday, July 15, 2008, at 11:00 a.m., local time.
At the special meeting, you will be asked to consider and vote
upon a proposal to approve a merger agreement that MASSBANK
Corp., MASSBANK, a wholly owned subsidiary of MASSBANK Corp.,
Eastern Bank Corporation, Eastern Bank, a wholly owned
subsidiary of Eastern, and Minuteman Acquisition Corp., a wholly
owned subsidiary of Eastern, have entered into. If the merger is
consummated, MASSBANK Corp. will become a wholly-owned
subsidiary of Eastern, and each outstanding share of our common
stock will be converted into the right to receive $40.00 in
cash, without interest. You should carefully read the merger
agreement, a copy of which is attached as
Annex A
to
the accompanying proxy statement.
Our board unanimously adopted the merger agreement and
approved the merger and determined that the merger agreement and
the merger were advisable and in the best interests of our
stockholders, and accordingly recommends that our stockholders
vote FOR approval of the merger agreement. In
reaching its determination, our board considered a number of
factors, including the opinion of our financial advisor, which
is attached as
Annex B
to the accompanying proxy
statement, and which you are urged to read in its entirety.
The accompanying proxy statement provides you with a detailed
summary of the merger agreement and additional information about
the parties involved and their interests.
The affirmative vote of holders of a majority of the outstanding
shares of our common stock entitled to vote at the special
meeting is necessary to approve the merger agreement. Holders of
approximately 9% of these shares have already agreed with
Eastern to vote in favor of approval of the merger agreement.
Your vote is very important.
Because approval of the
merger agreement requires the affirmative vote of the holders of
a majority of the outstanding shares of our common stock
entitled to vote, a failure to vote will have the same effect as
a vote against approval of the merger agreement.
Please give all of this information your careful attention.
Whether or not you plan to attend the special meeting in person,
please complete, sign and date the enclosed proxy card and
return it in the envelope provided as soon as possible or submit
a proxy through the Internet or by telephone as described on the
enclosed proxy card. This will not prevent you from voting your
shares in person if you subsequently choose to attend the
special meeting.
Thank you for your cooperation and your continued support of
MASSBANK.
Sincerely,
Gerard H. Brandi
Chairman of the Board, Chief Executive Officer and President
IMPORTANT
Your vote is important regardless of the number of shares you
own. Please complete, sign, date and return your proxy card at
your earliest convenience. No postage is required if mailed in
the United States. You may also vote your shares through the
Internet or by telephone.
Stockholders with questions or requiring assistance voting their
shares may call Laurel Hill Advisory Group, LLC, which is
assisting us, toll-free at (888) 742-1305.
This proxy statement is dated June 6, 2008, and was first
mailed to stockholders of MASSBANK Corp. on or about
June 6, 2008.
MASSBANK
Corp.
123 Haven Street
Reading, Massachusetts 01867
(781) 662-0100
Notice of Special Meeting of
Stockholders
of MASSBANK Corp.
To Be
Held on July 15, 2008
To the Stockholders of
MASSBANK Corp.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
MASSBANK Corp., a Delaware corporation, will be held at the
Andover Country Club, located at 60 Canterbury Street,
Andover, Massachusetts 01810, on Tuesday, July 15, 2008 at
11:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve the
agreement and plan of merger, dated as of March 10, 2008,
by and among Eastern Bank Corporation, Eastern Bank, a wholly
owned subsidiary of Eastern, Minuteman Acquisition Corp., a
wholly owned subsidiary of Eastern, MASSBANK Corp. and MASSBANK,
a wholly owned subsidiary of MASSBANK Corp. (a copy of the
merger agreement is attached as
Annex A
to the
accompanying proxy statement);
2. To consider and vote upon a proposal to approve one or
more adjournments of the special meeting, if necessary, to
permit further solicitation of proxies if there are not
sufficient votes at the time of the special meeting, or at any
adjournment or postponement of that meeting, to approve the
merger agreement; and
3. To consider and act upon any other business that may
properly come before the special meeting or at any adjournments
or postponements of that meeting.
Only holders of record of our common stock at the close of
business on June 3, 2008 are entitled to notice of, and to
vote at, the special meeting and any adjournments or
postponements of that meeting. The affirmative vote of the
holders of a majority of the outstanding shares of our common
stock entitled to vote is required to approve the merger
agreement. A form of proxy and a proxy statement containing more
detailed information with respect to matters to be considered at
the special meeting accompany and form a part of this notice.
MASSBANK Corp. stockholders have the right to dissent from the
merger and obtain payment in cash of the fair value of their
shares of our common stock as determined by the Delaware Court
of Chancery under applicable provisions of Delaware law. A copy
of the applicable Delaware statutory provisions is included as
Annex D
to the accompanying proxy statement, and a
summary of these provisions can be found under the section
entitled Appraisal Rights beginning on page 63
in the accompanying proxy statement.
If you fail to vote by proxy or in person, it will have the same
effect as a vote against approval of the merger agreement. If
you return a properly signed proxy card but do not indicate how
you want to vote, your proxy will be counted as a vote
FOR
approval of the merger agreement.
The MASSBANK Corp. board unanimously recommends that
stockholders vote FOR approval of the merger
agreement.
By Order of the Board of Directors
Robert S. Cummings
Secretary
Reading, Massachusetts
June 6, 2008
YOUR VOTE IS VERY IMPORTANT. PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED OR SUBMIT A PROXY THROUGH THE INTERNET OR BY TELEPHONE
AS DESCRIBED ON THE ENCLOSED PROXY CARD WHETHER OR NOT YOU
INTEND TO BE PRESENT AT THE MEETING IN PERSON. IF YOU ATTEND THE
MEETING, YOU MAY CONTINUE TO HAVE YOUR SHARES VOTED AS
INSTRUCTED IN THE PROXY OR YOU MAY WITHDRAW YOUR PROXY AND VOTE
YOUR SHARES IN PERSON.
Please do not send your stock certificates at this time. If
the merger is consummated, you will be sent instructions
regarding the surrender of your stock certificates.
TABLE OF
CONTENTS
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69
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ii
ANNEXES
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Agreement and Plan of Merger, dated as of March 10, 2008,
by and among Eastern Bank Corporation, Eastern Bank, Minuteman
Acquisition Corp., MASSBANK Corp. and MASSBANK
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Opinion of Friedman, Billings, Ramsey & Co., Inc.
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Form of Voting Agreement
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Section 262 of the Delaware General Corporations Law
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iii
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are provided for your
convenience, and briefly address some commonly asked questions
about the MASSBANK Corp. special meeting of stockholders and the
proposed merger. These questions and answers may not address all
questions that may be important to you as a stockholder. You
should still carefully read this entire proxy statement,
including each of the annexes.
The
Special Meeting
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Q:
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Why am I receiving this proxy statement?
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A:
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Eastern Bank Corporation and MASSBANK Corp. have agreed to the
acquisition of MASSBANK Corp. by Eastern under the terms of a
merger agreement that is described in this proxy statement. A
copy of the merger agreement is attached to this proxy statement
as
Annex A
. In order to complete the merger,
MASSBANK Corp. stockholders must vote to approve the merger
agreement. MASSBANK Corp. will hold a special meeting of its
stockholders to obtain this approval. This proxy statement
contains important information about the merger, the merger
agreement, the special meeting of stockholders, and other
related matters, and you should read it carefully. The enclosed
voting materials for the special meeting allow you to vote your
shares of our common stock without attending the special meeting.
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Q:
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Who is soliciting my proxy?
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A:
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This proxy is being solicited by our board of directors.
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Q:
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When and where is the special meeting?
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A:
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The special meeting will be held at the Andover Country Club,
located at 60 Canterbury Street, Andover,
Massachusetts 01810, on Tuesday, July 15, 2008, at 11:00
a.m., local time.
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What will I be asked to vote upon at the special meeting?
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A:
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You are being asked to vote on the approval of the merger
agreement that we have entered into with Eastern Bank
Corporation, Eastern Bank, a wholly-owned subsidiary of Eastern,
Minuteman Acquisition Corp., a wholly-owned subsidiary of
Eastern, and MASSBANK, our wholly-owned subsidiary, which
provides for the merger of Minuteman Acquisition Corp. with and
into MASSBANK Corp. After the merger, MASSBANK Corp., as the
surviving corporation, will be a wholly-owned subsidiary of
Eastern.
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We also are asking you to authorize the named proxies to approve
one or more adjournments, if necessary, of the special meeting
in order to solicit additional proxies in favor of approval of
the merger agreement at the time of the special meeting.
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Q:
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Who is entitled to vote at the special meeting?
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A:
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Holders of record of our common stock as of the close of
business on June 3, 2008 are entitled to vote at the
special meeting.
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Q:
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How do I vote?
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A:
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Indicate on your proxy card how you want to vote, sign and date
your proxy card, and mail it in the enclosed, postage-paid
envelope or vote your shares through the Internet or by
telephone as soon as possible, so that your shares will be
represented at the special meeting. Instructions for voting your
shares through the Internet or by telephone are located on the
enclosed proxy card. You may also attend the special meeting and
vote your shares in person, rather than voting by proxy. In
addition, you may withdraw your proxy at any time up to and
including the time the polls are closed on the vote on the
merger agreement at the special meeting and either change your
vote, cast a new vote through the Internet or by telephone, or
attend the special meeting and vote in person.
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Q:
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If my shares are held in street name by my
broker, will my broker vote my shares for me?
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A:
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Your broker will be permitted to vote your shares only if you
instruct your broker how to vote. You should follow the
procedures provided by your broker regarding the voting of your
shares.
If you do not
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provide instructions to your broker, your shares will not be
voted, which will have the same effect as a vote against the
proposal to approve the merger agreement.
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Q:
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May I vote in person?
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A:
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Yes. You may attend the special meeting and vote your shares in
person. If you hold shares in street name you must
provide a legal proxy executed by your bank or broker to vote
your shares at the special meeting.
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Q:
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What if I do not vote?
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A:
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The failure to vote, by proxy or in person, an abstention from
voting or a broker non-vote will have the same
effect as a vote against the proposal to approve the merger
agreement. If you return a properly signed proxy card but do not
indicate how you want to vote, your proxy will be counted as a
vote
FOR
approval of the merger agreement.
Your vote is important regardless of the number of shares
that you own.
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Q:
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What should I do now?
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A:
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After carefully reading and considering the information
contained in this proxy statement, please vote your shares by
returning the enclosed proxy or submitting a proxy through the
Internet or by telephone. You may also attend the special
meeting and vote in person. Do
not
enclose or
return your stock certificate(s) with your proxy card.
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Q:
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When should I send in my proxy card?
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A:
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You should send in your proxy card as soon as possible so that
your shares will be voted at the special meeting.
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Q:
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May I change my vote after I have mailed my signed proxy
card?
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A:
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Yes. You may change your vote at any time before your proxy card
is voted at the special meeting. You may do this in one of three
ways. First, you may send a written, dated notice to the
Secretary of MASSBANK Corp. stating that you would like to
revoke your proxy. Second, you may complete, sign, date and
submit a new proxy card or submit a new vote through the
Internet or by telephone. Third, you may attend the special
meeting and vote in person. Your attendance alone will not
revoke your proxy. If you have instructed a broker to vote your
shares, you must follow the directions received from your broker
relating to changing those instructions.
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The
Merger
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Q:
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What will happen in the merger?
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A:
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Upon consummation of the merger, Minuteman Acquisition Corp.
will be merged with and into MASSBANK Corp., with MASSBANK Corp.
being the surviving corporation. MASSBANK Corp. will become a
wholly-owned
subsidiary of Eastern and cease to be a publicly traded company.
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What will I receive in the merger?
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A:
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As a stockholder of MASSBANK Corp., you will receive $40.00 in
cash, without interest and less any applicable withholding
taxes, for each share of our common stock that you own (which we
sometimes refer to as the merger consideration). For example, if
you own 100 shares of our common stock, upon consummation
of the merger, you will receive $4,000 in cash.
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Q:
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What vote is required to approve the merger agreement?
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A:
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Approval of the merger agreement requires the affirmative vote
of holders of a majority of the outstanding shares of our common
stock entitled to vote on the matter. We urge you to complete,
sign, date, and return the enclosed proxy card or to vote your
shares through the Internet or by telephone to ensure the
representation of your shares at the special meeting.
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Q:
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What rights do I have if I oppose the merger?
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A:
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You can vote against approval of the merger agreement by
completing, signing, dating and returning your proxy card or by
voting against approval of the merger agreement through the
Internet, by telephone or in person at the special meeting.
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Q:
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Am I entitled to appraisal rights in connection with the
merger?
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A:
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Yes. To exercise appraisal rights, you must satisfy each of the
following conditions:
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before the vote on the proposal to approve the
merger agreement is taken, deliver to MASSBANK Corp. a written
demand, separate from your proxy, of your intent to demand
appraisal for your shares of common stock;
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not
vote in favor of the proposal to
approve the merger agreement; and
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comply with other procedures required by
Section 262 of the Delaware General Corporation Law.
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A copy of Section 262 of the Delaware General Corporation
Law is attached to this proxy statement as
Annex D
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Q:
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If the merger is consummated, when can I expect to receive
the merger consideration for my shares of common stock?
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A:
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After the merger is consummated, you will receive detailed
instructions from the paying agent regarding the surrender of
your stock certificates. You should not send your stock
certificates to us or anyone else until you receive these
instructions. The paying agent will arrange for the payment of
the merger consideration to be sent to you promptly following
receipt of your stock certificates and other documents required
by the paying agent.
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Q:
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Why is the MASSBANK Corp. board recommending the merger?
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A:
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Our board believes that the merger and the merger agreement are
advisable and in the best interests of our stockholders and
unanimously recommends that you approve the merger agreement. To
review our boards reasons for recommending the merger, see
the section entitled The Merger Recommendation
of Our Board and Reasons for the Merger beginning on
page 29 of this proxy statement.
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Q:
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What are the tax consequences of the merger to me?
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A:
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Your receipt of the merger consideration will be a taxable
transaction for federal income tax purposes. To review the tax
consequences to you in greater detail, see the section entitled
Federal Income Tax Consequences beginning on
page 66 of this proxy statement. Your tax consequences will
depend on your personal situation. You should consult your
personal tax advisors for a full understanding of the tax
consequences of the merger to you.
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Q:
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When do you expect the merger to be consummated?
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A:
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We are working towards consummating the merger as quickly as
possible. We currently expect to consummate the merger during
the third quarter of 2008. We cannot, however, require Eastern
to consummate the merger until three business days after all of
the conditions to the merger described in the merger agreement
that can be satisfied prior to the closing are satisfied or
waived, including the approval of the merger agreement by our
stockholders. The merger requires regulatory approvals including
the approvals of the Board of Governors of the Federal Reserve
System (which we sometimes refer to as the Federal Reserve) and
the Massachusetts banking regulators. We cannot assure you as to
when or if all the conditions to the merger will be met, and it
is possible the parties will not complete the merger. For a
further summary of the conditions of the Merger, please see
The Merger Agreement Conditions to the
Merger beginning on page 52 of this proxy statement.
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Q:
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What will happen to my shares of common stock in MASSBANK
Corp. after the merger?
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A:
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From and after the effective time of the merger, your shares of
our common stock will represent solely the right to receive the
merger consideration and trading in our common stock on the
NASDAQ Global Select Market will cease. Price quotations for our
common stock will no longer be available and we will cease
filing periodic reports under the Securities Exchange Act of
1934, as amended (which we sometimes refer to as the Exchange
Act).
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Q:
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What happens if I sell my shares before the special
meeting?
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A:
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The record date for the special meeting is earlier than the
expected effective time of the merger. If you held your shares
of common stock on the record date but have transferred those
shares after the record date and before the merger, you may
retain your right to vote at the special meeting but not the
right to receive the merger consideration. This right to receive
the merger consideration will pass to the person who owns the
shares of our common stock as of the effective time of the
merger.
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Q:
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Should I send in my MASSBANK Corp. stock certificates now?
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A:
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No. After the merger is consummated, the paying agent will
send you written instructions for exchanging your MASSBANK Corp.
stock certificates. You must return your MASSBANK Corp. stock
certificates as described in the instructions. You will receive
your cash payment promptly after the paying agent receives your
MASSBANK Corp. stock certificates and any completed documents
required in the instructions.
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PLEASE DO NOT SEND YOUR MASSBANK CORP. CERTIFICATES NOW.
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Q:
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What should I do if I have questions?
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A:
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If you have questions about the special meeting, the merger or
this proxy statement, or would like additional copies of this
proxy statement or the proxy card, you should contact Laurel
Hill Advisory Group, LLC, our proxy solicitor, toll-free at
(888) 742-1305.
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4
SUMMARY
This summary highlights selected information from this proxy
statement and may not contain all of the information that is
important to you. To understand the merger fully, you should
carefully read this entire proxy statement, as well as the other
documents to which we refer you, including the merger agreement
attached to this proxy statement as Annex A. We have
included page references in parentheses to direct you to a more
complete summary of the topics presented in this summary. You
may obtain the information incorporated by reference into this
proxy statement without charge by following the instructions in
the section entitled Where You Can Find More
Information beginning on page 72 of this proxy
statement.
Throughout this proxy statement, MASSBANK Corp.,
the Company, we and our
refer to MASSBANK Corp.; Eastern refers to Eastern
Bank Corporation; Eastern Bank refers to Eastern
Bank, a wholly-owned subsidiary of Eastern; Merger
Sub refers to Minuteman Acquisition Corp., a wholly-owned
subsidiary of Eastern; and the Company Bank, or
MASSBANK refers to MASSBANK, a wholly-owned
subsidiary of MASSBANK Corp. Also, we refer to the merger
between MASSBANK Corp. and Merger Sub as the merger;
and the agreement and plan of merger, dated as of March 10,
2008, by and among Eastern, Eastern Bank, Merger Sub, MASSBANK
Corp. and MASSBANK as the merger agreement.
Parties
to the Merger (Page 15)
MASSBANK
Corp.
123 Haven Street
Reading, Massachusetts 01867
(781) 662-0100
www.massbank.com
MASSBANK Corp. is a Delaware corporation that is registered as a
bank holding company under the Bank Holding Company Act of 1956,
as amended (which we sometimes refer to as the BHC Act), and is
subject to regulation by the Federal Reserve. The Company, which
was organized in 1986, has its main office in Reading,
Massachusetts. Through our subsidiaries, we offer a broad range
of financial services to individuals and businesses. Our common
stock is publicly traded, and we are registered as an issuer of
publicly-traded securities with the Securities and Exchange
Commission. Our common stock is quoted on the NASDAQ Global
Select Market under the symbol MASB.
MASSBANK
123 Haven Street
Reading, Massachusetts 01867
(781) 662-0100
www.massbank.com
MASSBANK, the Companys sole banking subsidiary, is a
Massachusetts-chartered savings bank that was founded in 1872 as
the Melrose Savings Bank. In 1983, the Reading Savings Bank was
merged with and into the Melrose Savings Bank, and the name of
the surviving institution was changed to MASSBANK for
Savings. In 1986, MASSBANK for Savings converted from a
mutual to a stock form of ownership and in 1996, MASSBANK for
Savings changed its name to MASSBANK. MASSBANK has
its main office in Reading, Massachusetts and has 14 additional
full-service branch offices in Melrose (2), Stoneham, Wilmington
(2), Medford, Chelmsford (2), Tewksbury, Westford, Dracut,
Lowell (2) and Everett, Massachusetts.
5
EASTERN
BANK CORPORATION
265 Franklin Street
Boston, Massachusetts 02110
(800) 327-8376
www.easternbank.com
Eastern is a mutual holding company corporation organized under
the laws of the Commonwealth of Massachusetts. Eastern, through
its wholly-owned subsidiary Eastern Bank, a
Massachusetts-chartered trust company, engages in a retail,
commercial and correspondent banking business, primarily in
eastern Massachusetts. Easterns principal executive
offices are located in Boston, Massachusetts.
EASTERN
BANK
265 Franklin Street
Boston, Massachusetts 02110
(800) 327-8376
www.easternbank.com
Eastern Bank, a Massachusetts-chartered trust company and
wholly-owned subsidiary of Eastern, operates 74 banking offices
and in-store locations in Massachusetts. Eastern Bank offers
retail and commercial banking products, as well as correspondent
banking services for area community banks and offers a full
range of financial products for consumers, businesses,
investors, government agencies and nonprofit organizations
located primarily in eastern Massachusetts. Eastern Banks
principal executive offices are located in Boston, Massachusetts.
MINUTEMAN
ACQUISITION CORP.
265 Franklin Street
Boston, Massachusetts 02110
(800) 327-8376
www.easternbank.com
Merger Sub is a corporation organized under the laws of the
State of Delaware and a wholly-owned subsidiary of Eastern.
Eastern organized Merger Sub for the sole purpose of entering
into the merger agreement and consummating the merger. Merger
Sub has not conducted any business. The principal executive
offices of Merger Sub are located in Boston, Massachusetts.
The
Merger (Page 21)
We signed a merger agreement with Eastern, Eastern Bank and
Merger Sub on March 10, 2008. The merger agreement provides
for the merger of Merger Sub with and into the Company, with the
Company being the surviving corporation. Following the merger,
the Company will cease to be a publicly traded company and will
become a wholly-owned subsidiary of Eastern. The merger
agreement is attached as
Annex A
to this proxy
statement; please read it carefully.
What You
Will Receive in the Merger (Page 48)
At the effective time of the merger, each outstanding share of
our common stock will be converted automatically into the right
to receive $40.00 in cash, without interest and less any
applicable withholding taxes (which we sometimes refer to as the
merger consideration).
The
Special Meeting (Page 17)
A special meeting of the holders of our common stock will be
held at the Andover Country Club, located at
60 Canterbury Street, Andover, Massachusetts 01810 on
Tuesday, July 15, 2008, at 11:00 a.m., local time. At the
special meeting, you will be asked to consider and vote on a
proposal to approve the merger agreement.
6
We will also ask you to consider and vote on a proposal to
adjourn, if necessary, the special meeting so that we can
solicit additional proxies in favor of approval of the merger
agreement.
Record
Date and Voting Power (Page 18)
Our board has fixed the close of business on June 3, 2008,
as the record date for determining stockholders entitled to
notice of and to vote at the special meeting. On the record
date, we had 4,233,079 outstanding shares of common stock held
by approximately 667 stockholders of record. We have no
other class of voting securities outstanding.
Stockholders of record on the record date will be entitled to
one vote per share of our common stock on any matter that may
properly come before the special meeting and any adjournment or
postponement of that meeting.
Quorum
and Vote Required (Page 18)
Our charter and bylaws and Delaware law require:
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the presence, in person or by proxy, of the holders of a
majority of the shares of our common stock outstanding and
entitled to vote at the special meeting in order to constitute a
quorum; and
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the affirmative vote of holders of a majority of the shares of
our common stock outstanding and entitled to vote at the special
meeting in order to approve the merger agreement.
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Failure to vote by proxy, either by mail, through the Internet
or by telephone, or in person, will have the same effect as a
vote against approval of the merger agreement.
On the record date, our directors and executive officers and
their affiliates owned 384,971 shares of our common stock,
or approximately 9% of our outstanding shares. These shares are
subject to voting agreements with Eastern.
Proxies
and Voting (Page 19)
You may vote by proxy through the Internet, by telephone or by
returning the enclosed proxy card. If you hold your shares
through a broker or other nominee, you should follow the voter
instruction form provided by your broker or nominee.
Shares of our common stock represented at the special meeting by
properly executed proxies received prior to or at the special
meeting, and not revoked, will be voted at the special meeting,
and at any and all adjournments or postponements of that
meeting, in accordance with the instructions on the proxies.
If a proxy is duly executed and submitted without
instructions, the shares of common stock represented by that
proxy will be voted FOR approval of the merger
agreement and, if necessary, FOR the approval of one
or more adjournments of the special meeting to solicit
additional proxies.
Proxies are being solicited on behalf of
our board.
Revocability
of Proxy (Page 19)
A proxy may be revoked by the person who executed it at or
before the special meeting. If you have not submitted a proxy
through your broker or nominee, you may revoke your proxy by:
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delivering to our Secretary a written notice of revocation
bearing a later date than the proxy;
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duly completing, signing, dating and returning a subsequent
proxy;
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properly casting a new vote through the Internet or by telephone
at any time before the closure of the Internet or telephone
voting facilities; or
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attending the special meeting and voting in person.
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Attendance at the special meeting will not, in and of itself,
constitute revocation of a proxy.
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If your shares are held in street name, you should
follow the instructions of your broker or nominee regarding
revocation of proxies.
Recommendation
of Our Board and Reasons for the Merger (Page 29)
After an evaluation of a variety of business, financial and
market factors and consultation with senior management and our
legal and financial advisors, at a meeting on March 10,
2008, our board unanimously adopted the merger agreement and
approved the merger and determined that the merger agreement and
the merger were advisable and in the best interests of our
stockholders. Our board unanimously recommends that our
stockholders vote
FOR
approval of the merger
agreement.
Opinion
of Financial Advisor (Page 31)
Friedman, Billings, Ramsey & Co., Inc. (which we
sometimes refer to as FBR), our financial advisor, delivered an
oral opinion to our board, which was subsequently confirmed in
writing, that, as of March 10, 2008, and based on and
subject to the factors, limitations and assumptions set forth in
the opinion, the merger consideration was fair, from a financial
point of view, to holders of our common stock.
The full text of the written opinion of FBR, dated
March 10, 2008, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex B
to this proxy statement. FBR provided its
opinion for the information and assistance of our board in
connection with its consideration of the merger agreement. The
FBR opinion is not a recommendation as to how any holder of our
common stock should vote with respect to the merger agreement.
We have agreed to pay FBR an advisory fee in connection with the
merger of approximately $1.7 million, which is contingent
and payable upon the consummation of the merger. We have also
paid FBR a $100,000 retainer fee and $500,000 to render the
fairness opinion, which opinion fee will be credited against the
advisory fee due upon the consummation of the merger. We have
also agreed to reimburse certain of FBRs
out-of-pocket
expenses incurred in connection with its engagement and to
indemnify FBR and certain related parties against certain
liabilities, and to reimburse FBR for certain expenses arising
in connection with or as a result of its engagement.
Appraisal
Rights (Page 63)
Holders of our common stock have the right to dissent from the
merger and, if the merger is consummated and the dissenting
shareholder satisfies all requirements of Delaware law, to
receive payment equal to the fair value of their shares of our
common stock, determined in the manner set forth under the
Delaware General Corporation Law. The procedures that must be
followed in connection with the exercise of appraisal rights are
set forth in Section 262 of the Delaware General
Corporation Law, a copy of which is attached as
Annex D
to this proxy statement. A stockholder seeking to exercise
appraisal rights must file a written demand with the Company
prior to the special meeting of his, her or its intention to
demand appraisal rights and must not vote his, her or its shares
in favor of approving the merger agreement. Failure to take any
required step in connection with exercise of such rights may
result in termination or waiver of these rights.
Exchange
of Stock Certificates (Page 48)
As soon as reasonably practicable after the effective time of
the merger, but in no event later than five business days after
the effective time of the merger, the paying agent will mail to
each of our stockholders a letter of transmittal and
instructions specifying the procedures to be followed in
surrendering your shares of our common stock in exchange for the
merger consideration.
You should not submit your stock
certificates for exchange until you receive the letter of
transmittal and instructions from the paying agent.
You will
receive the merger consideration promptly after surrendering
your stock certificates along with the properly executed letter
of transmittal and any other required documents.
8
Source of
Funds (Page 62)
Easterns obligation to consummate the merger is not
conditioned upon Easterns obtaining financing. Eastern
anticipates that approximately $170 million will be
required to pay the aggregate consideration to our stockholders
and option holders. Eastern intends to finance the merger
through internal cash resources.
Conditions
to the Merger (Page 52)
The Company and Eastern will not consummate the merger unless a
number of conditions are satisfied or waived, including:
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our stockholders must have approved the merger agreement;
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all required regulatory approvals must have been received, any
waiting periods required by law must have passed, and none of
the regulatory approvals must impose any burdensome condition
upon Eastern;
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there must be no order, decree or injunction in effect, nor any
law, statue or regulation enacted or adopted, preventing
consummation of the merger;
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Eastern must receive from the Company all material third-party
consents to the merger;
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the representations and warranties of each of the Company and
Eastern in the merger agreement must be accurate, subject, in
most cases, to exceptions that would not have a material adverse
effect;
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the Company and Eastern must have each performed in all material
respects all obligations required to be performed by it under
the merger agreement;
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there must not have been a material adverse effect on the
Company since March 10, 2008; and
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the total number of dissenting shares must not exceed 15% of the
issued and outstanding shares of our common stock.
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Solicitation
of Proposals from Other Parties (Page 56)
The merger agreement restricts our ability to solicit or engage
in discussions or negotiations with a third party regarding a
proposal to acquire a significant interest in the Company.
However, if we receive a bona fide unsolicited written
acquisition proposal from a third party that is, or is
reasonably likely to be, more favorable to our stockholders than
the terms of the merger agreement, we may furnish nonpublic
information to that third party and engage in negotiations
regarding an acquisition proposal with that third party, subject
to specified conditions in the merger agreement. In addition,
unless our board determines in good faith, after consultation
with legal counsel and financial advisors, that an acquisition
proposal is a superior proposal and that it is required to take
such action to comply with its fiduciary duties to our
stockholders under applicable law, and we provide Eastern with
notice of such determination and cooperate and negotiate in good
faith with Eastern to adjust or modify the terms and conditions
of the merger agreement and the merger, our board may not
withdraw or modify its approval or recommendation of the merger
agreement, approve or recommend another acquisition proposal to
our stockholders, or cause the Company to enter into a letter of
intent, definitive agreement or similar arrangement with respect
to an acquisition proposal or that requires us to abandon,
terminate or fail to consummate the merger.
Termination
of the Merger Agreement (Page 58)
Either Eastern or the Company may terminate the merger agreement
at or prior to the effective time of the merger if any of the
following occurs:
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the parties mutually agree in writing to terminate the merger
agreement;
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there has been either (1) a breach by the other party of
any of its representations or warranties in the merger agreement
or (2) a material breach by the other party of any of the
covenants or agreements in the merger agreement and, in each
case, the breach cannot be or has not been cured within
30 days
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after written notice of the breach (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
in the merger agreement);
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the merger is not consummated by November 1, 2008, unless
the failure to consummate the merger is due to the failure by
the terminating party to perform its obligations under the
merger agreement;
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the approval of any governmental authority required for
consummation of the merger and the other transactions
contemplated by the merger agreement has been denied by final
nonappealable action of such governmental authority, or any
governmental entity of competent jurisdiction has issued a final
nonappealable order, injunction or decree enjoining or otherwise
prohibiting the consummation of the transactions contemplated by
the merger agreement, provided that the terminating party has
used its reasonable best efforts to have such order, injunction
or decree lifted;
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our stockholders do not approve the merger agreement at the
special meeting; or
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a vote on the approval of the merger agreement has not been
taken by our stockholders at the special meeting by
November 1, 2008.
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In addition, Eastern has the right to unilaterally terminate the
merger agreement (we sometimes refer to these termination rights
as Easterns unilateral termination rights) if:
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modifies, qualifies, withholds or withdraws its approval or
recommendation to our stockholders that they vote in favor of
approval of the merger agreement (including taking a neutral
position or no position with respect to an acquisition proposal);
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makes any statement, filing or release, in connection with the
special meeting or otherwise, inconsistent with its approval or
recommendation to our stockholders that they vote in favor of
approval of the merger agreement;
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breaches its obligations to call, give notice of and commence
the special meeting;
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approves or recommends an acquisition proposal;
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fails to publicly recommend against a publicly announced
acquisition proposal within five business days of being
requested to do so by Eastern; or
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resolves or otherwise determines to take, or announces an
intention to take, any of the foregoing actions; or
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there has been a material breach by us of the no solicitation
provisions of the merger agreement, as discussed in the section
entitled The Merger Agreement Solicitation of
Proposals from Other Parties beginning on page 56 of
this proxy statement.
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We have the right to terminate the merger agreement if, at any
time prior to our stockholders approving the merger agreement,
we have received a superior proposal and
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our board withdraws, qualifies or modifies its recommendation
with respect to the merger agreement and we have otherwise
complied in all material respects with the no solicitation
provisions of the merger agreement, as discussed in the section
entitled The Merger Agreement Solicitation of
Proposals from Other Parties beginning on page 56 of
this proxy statement;
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we concurrently pay Eastern a termination fee of
$5 million, as discussed in the section entitled The
Merger Agreement Termination Fee; Expenses
beginning on page 59 of this proxy statement; and
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our board concurrently approves, and we concurrently enter into,
a definitive agreement with respect to such superior proposal.
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10
Termination
Fee; Expenses (Page 59)
The merger agreement requires us to pay Eastern a termination
fee equal to $5 million if:
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the merger agreement is terminated by Eastern
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pursuant to Easterns unilateral termination rights, as
discussed in the section entitled The Merger
Agreement Termination of the Merger Agreement
beginning on page 58 of this proxy statement;
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because we have either (1) breached our representations or
warranties in the merger agreement or (2) materially
breached our covenants or agreements in the merger agreement
and, in each case, the breach is incapable of being cured or, if
capable of being cured, has not been cured within 30 days
after written notice of the breach is given to us and Eastern is
not then in material breach of any representation, warranty,
covenant or other agreement contained in the merger agreement,
as discussed in the section entitled The Merger
Agreement Termination of the Merger Agreement
beginning on page 58 of this proxy statement, and on or
before the date of such termination,
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an acquisition proposal with respect to the Company has been
publicly disclosed or announced and not withdrawn before the
applicable breach by the Company; and
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within one year of such termination, the Company enters into a
definitive agreement with respect to, or the Company has
consummated, an acquisition transaction;
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because the merger has not been consummated by November 1,
2008 (other than because of a breach of the merger agreement
caused by Eastern), as discussed in the section entitled
The Merger Agreement Termination of the Merger
Agreement beginning on page 58 of this proxy
statement, and on or before the date of such termination,
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an acquisition proposal with respect to the Company has been
publicly disclosed or announced and not withdrawn before
November 1, 2008; and
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within one year of such termination, the Company enters into a
definitive agreement with respect to, or the Company has
consummated, an acquisition transaction;
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the merger agreement is terminated by Eastern or us
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because our stockholders fail to approve the merger agreement at
the special meeting, or any adjournment thereof, and on or
before the date of such termination,
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an acquisition proposal with respect to the Company has been
publicly disclosed or announced and not withdrawn at least
10 days before the special meeting; and
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within one year of such termination, the Company enters into a
definitive agreement with respect to, or the Company has
consummated, an acquisition transaction;
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because a vote on the approval of the merger agreement has not
been taken at the special meeting by November 1, 2008, and
on or before the date of such termination,
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an acquisition proposal with respect to the Company has been
publicly disclosed or announced and not withdrawn by
November 1, 2008; and
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within one year of such termination, the Company enters into a
definitive agreement with respect to, or the Company has
consummated, an acquisition transaction; or
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we terminate the merger agreement because we have received a
superior proposal and our board
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withdraws, qualifies or modifies its recommendation with respect
to the merger agreement and we have otherwise complied in all
material respects with the no solicitation provisions of the
merger agreement, as discussed in the section entitled The
Merger Agreement Solicitation of Proposals from
Other Parties beginning on page 56 of this proxy
statement; and
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concurrently approves, and the Company concurrently enters into,
a definitive agreement with respect to such superior proposal.
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The merger agreement requires Eastern to pay us a termination
fee equal to $5 million if we terminate the merger
agreement because Eastern has either (1) breached its
representations or warranties in the merger agreement or
(2) materially breached its covenants or agreements in the
merger agreement and, in each case, the breach is incapable of
being cured or, if capable of being cured, has not been cured
within 30 days after written notice of the breach is given
to us and we are not then in material breach of any
representation, warranty, covenant or other agreement contained
in the merger agreement, as discussed in the section entitled
The Merger Agreement Termination of the Merger
Agreement beginning on page 58 of this proxy
statement.
If Eastern has not received the termination fee, as discussed
above, the merger agreement requires us to pay Eastern
$1 million, if
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we have either (1) breached our representations or
warranties in the merger agreement or (2) materially
breached our covenants or agreements in the merger agreement
and, in each case, the breach is incapable of being cured or, if
capable of being cured, has not been cured within 30 days
after written notice of the breach is given to us and Eastern is
not then in material breach of any representation, warranty,
covenant or other agreement contained in the merger agreement,
as discussed in the section entitled The Merger
Agreement Termination of the Merger Agreement
beginning on page 58 of this proxy statement;
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our stockholders fail to approve the merger agreement at the
special meeting, or any adjournment thereof; or
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a vote on the approval of the merger agreement has not been
taken by our stockholders at the special meeting by
November 1, 2008.
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Interests
of Certain Persons in the Merger (Page 42)
In considering the recommendations of our board with respect to
the approval of the merger agreement, you should be aware that
our directors and executive officers have interests in the
merger that may be in addition to, or different from, the
interests of our stockholders. These interests may create
potential conflicts of interest. Our board was aware of these
interests, which include those summarized below, and considered
them, among other matters, in adopting the merger agreement and
approving the merger.
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The executive officers employment agreements provide for
the payment of severance benefits to the executive officers of
the Company
and/or
the
Company Bank, as the case may be, if the executive
officers employment is terminated within two years
following a change in control of the Company (which stockholder
approval of the merger would constitute) either by (1) the
Company and/or the Company Bank, as the case may be, for any
reason other than for cause, or (2) the executive officer
for good reason.
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Stock options held by our directors and executive officers will
be treated in the same manner as all other stock options in the
merger. For a discussion regarding the treatment of stock
options generally, see the section entitled The Merger
Agreement Treatment of Stock Options beginning
on page 61 of this proxy statement. Our directors and
executive officers holding
in-the-money
stock options, whether vested or unvested, as of May 30,
2008 will receive cash payments upon the consummation of the
merger in an aggregate amount (before withholding for applicable
taxes) of approximately $1,422,765.
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In addition, under the terms of the merger agreement, our
directors and executive officers will be entitled to
indemnification in specified circumstances.
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Voting
Agreements (Page 45)
In connection with the merger agreement, Eastern entered into
voting agreements with our executive officers and directors and
certain of their affiliates, who are also stockholders of our
company. Pursuant to the voting agreements, each stockholder has
agreed, among other things to:
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appear and cause all of his, her or its shares of our common
stock to be counted as present for purposes of calculating a
quorum;
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vote in favor of approval of the merger agreement;
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vote against any action or agreement that would reasonably be
expected to result in a breach of any covenant, representation
or warranty or any other obligation or agreement of the Company
contained in the merger agreement or of such stockholder in the
voting agreement;
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vote against any acquisition proposal or any other action that
is intended, or could reasonably be expected to, materially
impede, interfere or be inconsistent with, delay, discourage or
materially and adversely affect consummation of the transactions
contemplated by the merger agreement or any of such
stockholders obligations under the voting
agreement; and
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appoint Eastern as his, her or its proxy with respect to the
voting of his, her or its shares if the stockholder is unable to
perform his, her or its obligations under the respective voting
agreement.
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The following directors and executive officers entered into
voting agreements with Eastern: Gerard H. Brandi, Allan S.
Bufferd, Kathleen M. Camilli, Stephen W. Carr, Reginald E.
Cormier, Alexander S. Costello, O. Bradley Latham, Stephen E.
Marshall, Paul J. McCarthy, James L. Milinazzo, Nalin M. Mistry,
Joseph P. Orefice, Nancy L. Pettinelli, Thomas J. Queeney,
William F. Rivers, William F. Rucci, Jr., Donna H. West,
and certain of their affiliates. As of the record date, there
were 384,971 shares of our common stock subject to the
voting agreements, which represented approximately 9% of our
outstanding common stock as of that date.
The form of voting agreement is attached to this proxy statement
as
Annex C
.
Treatment
of Stock Options (Page 61)
At the effective time of the merger, each outstanding stock
option, whether vested or unvested, to purchase shares of our
common stock will be canceled and the holder of such stock
option will receive an amount in cash equal to the number of
shares of common stock underlying the stock option multiplied by
the excess, if any, between the merger consideration and the
exercise price applicable to that stock option (which we
sometimes refer to as the option consideration).
Effective
Time of the Merger (Page 47)
We expect that the merger will be completed as soon as
practicable following the approval of the merger agreement by
our stockholders at the special meeting and the satisfaction or
waiver of all other conditions. The parties cannot be certain
whether or when any of the conditions to the merger will be
satisfied, or waived where permissible. We currently expect to
complete the merger during the third quarter of 2008; however,
because the merger is subject to these conditions, we cannot
predict the actual timing.
Litigation
Related to the Merger (Page 40)
On March 13, 2008, Pennsylvania Avenue Funds, an alleged
Company stockholder purportedly representing 817 shares of
our common stock, filed a purported class action lawsuit
allegedly on behalf of all Company stockholders in the
Massachusetts Superior Court against the Company, our board,
Eastern, Eastern Bank and Merger Sub. The complaint generally
alleges that our board breached its fiduciary duties by
approving the merger agreement because, plaintiff alleges, the
merger consideration is inadequate, the merger agreements
termination fee and no solicitation provisions discourage bids
from other sources, the transaction unfairly benefits our board
to the disadvantage of our stockholders, our chief executive
officer and chairman of the board, during negotiations with
Eastern, was also discussing a future position at Eastern, and
approval of the merger by our board was a response by our board
to a proxy contest that might have resulted in three
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members of our board being replaced. The complaint also alleges
that the Company and Eastern aided and abetted our boards
breach of fiduciary duties. On April 18, 2008, the
defendants filed motions to dismiss the lawsuit in its entirety.
On May 6, 2008, the plaintiff filed an amended complaint,
individually and as a purported class action on behalf of all
Company stockholders. The amended complaint generally makes the
same allegations as those contained in the initial complaint
but, in addition, alleges that our board breached its fiduciary
duties by failing, in the preliminary proxy statement filed with
the Securities and Exchange Commission on April 24, 2008
(which we sometimes refer to as the preliminary proxy
statement), to disclose adequate information to our stockholders
necessary for them to make a fully informed decision about the
merger. While we believe the amended complaint is without merit,
we and Eastern have reached a settlement in principal with
plaintiffs counsel that will involve a release of all
claims contained in the amended complaint in exchange for adding
in this proxy statement certain limited disclosures. These
limited disclosures have been added and are a part of this proxy
statement. A final settlement cannot be assured since it is
contingent upon confirmatory discovery, preliminary approval by
the court (including the certification of a provisional
settlement class), the results of a fairness hearing, and final
approval by the court.
Federal
Income Tax Consequences (Page 66)
If the merger is consummated, the exchange of common stock by
our stockholders for the merger consideration will be treated as
a taxable transaction for federal income tax purposes under the
Internal Revenue Code of 1986, as amended (which we sometimes
refer to as the Internal Revenue Code), and may be taxable for
state, local and foreign purposes as well. Because of the
complexities of the tax laws, we advise you to consult your own
personal tax advisors concerning the applicable federal, state,
local, foreign and other tax consequences of the merger.
Regulatory
Approvals and Other Information (Page 67)
Before we may complete the merger, the parties must obtain
regulatory approvals from federal and state bank regulators,
including the Federal Reserve, the Massachusetts Commissioner of
Banks (which we sometimes refer to as the Massachusetts
Commissioner) and the Massachusetts Board of Bank Incorporation
(which we sometimes refer to as the Massachusetts BBI). Eastern
expects to file in June 2008 the required submission to the
Federal Reserve, requesting approval for Eastern to acquire
ownership and control of the Company and thereby acquire control
of the Company Bank. On May 15, 2008, Eastern filed the
required application with the Massachusetts Commissioner and on
May 15, 2008 filed the required application with the
Massachusetts BBI seeking approval of the bank merger and
merger, respectively. In addition, the completion of the merger
is subject to the expiration of certain waiting periods and
other requirements that are described more fully in the section
entitled Regulatory Approvals and Other Information
beginning on page 67 of this proxy statement. Although we
believe regulatory approvals will be received in a timely manner
and currently expect to receive all such approvals no later than
the third quarter of 2008, we cannot be certain when or if those
approvals will be obtained.
14
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement contains forward-looking statements about
our plans, objectives, expectations and intentions.
Forward-looking statements are statements that contain
predictions or projections of future events or performance, and
often contain words such as anticipates,
can, estimates, believe,
expects, projects, will,
might, or other words indicating a statement about
the future. You should read statements that contain these words
carefully. There can be no assurance that future developments
affecting the Company will be those anticipated by the Company.
These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond our control) or other
assumptions that may cause actual results or performance to be
materially different from those expressed or implied by such
forward-looking statements. These risks and uncertainties
include, but are not limited to:
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the risk that we will be unable to satisfy all of the closing
conditions set forth in the merger agreement;
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the possibility that our stockholders will not approve the
merger agreement;
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the possibility that we may not obtain the necessary state and
federal regulatory approvals to consummate the merger or that an
adverse regulatory condition will be imposed in connection with
those approvals;
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the outcome of any legal proceeding that has been or may be
instituted against us, Eastern or others relating to the merger
agreement, including the terms of any settlement of such legal
proceedings that may be subject to court approval;
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the disruptions to our business as a result of the announcement
and pendency of the merger, including our ability to retain
depositor and loan relationships and key personnel; and
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other risks detailed in our current filings with the Securities
and Exchange Commission, including our most recent filings on
Forms 10-Q
and
10-K.
For details about obtaining these documents, see the section
entitled Where You Can Find More Information
beginning on page 72 of this proxy statement.
The factors referred to above include many, but not all, of the
factors that could impact our ability to achieve the results
described in any forward-looking statement. You should not place
undue reliance on forward-looking statements. We cannot
guarantee that the merger will be consummated or our future
results, performance or achievements. The statements made in
this proxy statement represent our views as of the date of this
proxy statement, and it should not be assumed that the
statements made herein remain accurate as of any future date.
Moreover, we assume no obligation to update forward-looking
statements or update the reasons actual results could differ
materially from those anticipated in forward-looking statements,
except as required by law.
PARTIES
TO THE MERGER
MASSBANK
Corp.
123 Haven Street
Reading, Massachusetts 01867
(781) 662-0100
www.massbank.com
MASSBANK Corp. is a Delaware corporation that is registered as a
bank holding company under the BHC Act, and is subject to
regulation by the Federal Reserve. We have not elected
Financial Holding Company status under the BHC Act.
The Company, which was organized in 1986, has its main office in
Reading, Massachusetts. Our common stock is publicly traded and
we are registered as an issuer of publicly-traded securities
with the Securities and Exchange Commission. Our common stock is
quoted on the NASDAQ Global Select Market under the symbol
MASB.
Through our subsidiaries, we provide a broad range of financial
services to individuals and businesses and we do not engage in
any business activity at the holding company level.
15
Our sole nonbank direct subsidiary is Knabssam LLC, a Delaware
limited liability company wholly-owned by us and headquartered
in Reading, Massachusetts. Knabssam was formed in 2006, and it
holds a parcel of land that was acquired as bank premises and
that is excess land adjacent to, but not necessary for the
efficient operation of, the Company Banks Westford branch.
For more information on the business of the Company and our
subsidiaries, please refer to our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007. Please refer
to the section entitled Where You Can Find More
Information beginning on page 72 of this proxy
statement in order to find out where you can obtain copies of
our Annual Report as well as other documents that we file with
the Securities and Exchange Commission.
MASSBANK
123 Haven Street
Reading, Massachusetts 01867
(781) 662-0100
www.massbank.com
MASSBANK, our sole banking subsidiary, is a
Massachusetts-chartered savings bank that was founded in 1872 as
the Melrose Savings Bank. In 1983, the Reading Savings Bank was
merged with and into the Melrose Savings Bank, and the name of
the surviving institution was changed to MASSBANK for
Savings. In 1986, MASSBANK for Savings converted from a
mutual to a stock form of ownership, and in 1996, MASSBANK for
Savings changed its name to MASSBANK.
MASSBANK has its main office in Reading, Massachusetts and has
14 additional full-service branch offices in Melrose (2),
Stoneham, Wilmington (2), Medford, Chelmsford (2), Tewksbury,
Westford, Dracut, Lowell (2) and Everett, Massachusetts.
MASSBANK and its subsidiaries (described below) offer a broad
range of deposit accounts, loans and other financial products
for consumers, businesses, government agencies and nonprofit
organizations.
MASSBANK deposits are insured by the Deposit Insurance Fund of
the Federal Deposit Insurance Corporation (which we sometimes
refer to as the FDIC) to the maximum extent permitted by law and
by the Depositors Insurance Fund for amounts in excess of FDIC
coverage limits.
MASSBANK has three subsidiaries, all of which are wholly-owned,
direct subsidiaries. The subsidiaries include Readibank
Properties, Inc., a Massachusetts corporation that is currently
inactive, but that holds certain bank premises; Readibank
Investment Corporation, a Massachusetts-chartered corporation
that holds, as a passive investor, a portfolio of bank eligible
securities; and Melbank Investment Corporation, a
Massachusetts-chartered corporation that, in a manner similar to
Readibank Investment Corporation, holds, as a passive investor,
a portfolio of bank eligible securities.
EASTERN
BANK CORPORATION
265 Franklin Street
Boston, Massachusetts 02110
(800) 327-8376
www.easternbank.com
Eastern is a mutual holding company corporation organized under
the laws of the Commonwealth of Massachusetts. Eastern, through
its wholly-owned subsidiary Eastern Bank, a
Massachusetts-chartered trust company, engages in a retail,
commercial and correspondent banking business, primarily in
eastern Massachusetts. Easterns principal executive
offices are located in Boston, Massachusetts.
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EASTERN
BANK
265 Franklin Street
Boston, Massachusetts 02110
(800) 327-8376
www.easternbank.com
Eastern Bank, a Massachusetts-chartered trust company and
wholly-owned subsidiary of Eastern, operates 74 banking
offices and in-store locations in Massachusetts. Eastern Bank
offers retail and commercial banking products, as well as
correspondent banking services for area community banks and
offers a full range of financial products for consumers,
businesses, investors, government agencies and nonprofit
organizations located primarily in eastern Massachusetts.
Eastern Banks principal executive offices are located in
Boston, Massachusetts.
Eastern Banks deposits are insured by the FDIC to the
maximum extent permitted by law but are not insured by the
Depositors Insurance Fund.
MINUTEMAN
ACQUISITION CORP.
265 Franklin Street
Boston, Massachusetts 02110
(800) 327-8376
www.easternbank.com
Merger Sub is a corporation organized under the laws of the
State of Delaware and a wholly-owned subsidiary of Eastern.
Eastern organized Merger Sub for the sole purpose of entering
into the merger agreement and consummating the merger. Merger
Sub has not conducted any business. The principal executive
office of Merger Sub is located in Boston, Massachusetts.
THE
SPECIAL MEETING
We are furnishing this proxy statement to you, as a
stockholder of MASSBANK Corp., as part of the solicitation of
proxies by our board for use at the special meeting of
stockholders.
Date,
Time and Place of the Special Meeting
The special meeting will be held at the Andover Country Club,
located at 60 Canterbury Street, Andover,
Massachusetts 01810, on Tuesday, July 15, 2008, at 11:00
a.m., local time.
Purpose
of the Special Meeting
At the special meeting, you will be asked to consider and vote
on the following proposals:
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to approve the merger agreement, a copy of which is attached as
Annex A
to this proxy statement;
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to approve one or more adjournments of the special meeting, if
necessary, to permit further solicitation of proxies if there
are not sufficient votes at the time of the special meeting, or
at any adjournment or postponement of that meeting, to approve
the merger agreement; and
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to act upon any other business that may properly come before the
special meeting or any adjournment or postponement of that
meeting.
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Recommendation
of Our Board
Our board has unanimously determined that the merger agreement
and the merger are advisable and in the best interests of our
stockholders, and has adopted the merger agreement and approved
the merger.
Our board unanimously recommends that our
stockholders vote FOR approval of the merger
agreement.
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Even though a quorum may be present at the special meeting, it
is possible that we may not have received sufficient votes to
approve the merger agreement by the time of the special meeting.
To allow the proxies that have been received by us at the time
of the special meeting to be voted for one or more adjournments
of the special meeting for purposes of soliciting additional
proxies to obtain the requisite stockholder vote, we are
submitting a proposal to approve one or more adjournments to you
for consideration.
Our board recommends that you vote
FOR the adjournment proposal so that proxies may be
used for that purpose only, should it become necessary. Properly
executed proxies will be voted FOR the adjournment
proposal, unless otherwise indicated on the proxies.
If the
special meeting is adjourned for 30 days or less, we are
not required to give notice of the time and place of the
adjourned meeting unless our board fixes a new record date for
the special meeting.
The matters to be considered at the special meeting are of
great importance to you. Accordingly, we urge you to read and
carefully consider the information presented in this proxy
statement and to complete, sign, date and promptly return the
enclosed proxy card in the enclosed postage-paid envelope or to
vote your shares through the Internet or by telephone.
You should not send any stock certificates with your proxy
cards. A letter of transmittal with instructions for the
surrender of the Companys stock certificates will be
mailed to stockholders. For more information regarding the
procedures for exchanging the Companys stock certificates,
see the section entitled The Merger Agreement
Exchange of Stock Certificates beginning on page 48
of this proxy statement.
Record
Date and Voting Power
Our board has fixed the close of business on June 3, 2008
as the record date for the determination of stockholders
entitled to notice of, and to vote at, the special meeting. At
the close of business on the record date, 4,233,079 shares
of our common stock were outstanding and entitled to receive
notice of, and vote at, the special meeting. On the record date,
our shares were held of record by approximately
667 stockholders. Our common stock is our only outstanding
class of stock. Stockholders of record on the record date will
be entitled to one vote per share of our common stock on any
matter that properly comes before the special meeting and any
adjournment or postponement of that meeting.
Quorum
Our charter and bylaws and Delaware law require the presence, in
person or by duly executed proxy, of the holders of a majority
of the voting power of shares of our common stock outstanding
and entitled to vote at the special meeting to constitute a
quorum. Both abstentions and broker non-votes will
be counted as present for purposes of determining the existence
of a quorum. If a quorum is not present and if the adjournment
proposal has the necessary majority, we expect to adjourn or
postpone the special meeting to solicit additional proxies and
intend to vote any proxies we have received at the time of the
special meeting in favor of an adjournment or postponement.
Vote
Required
Our charter and bylaws and Delaware law require the affirmative
vote of holders of a majority of the shares of our common stock
outstanding and entitled to vote at the special meeting to
approve the merger agreement. On the record date, our directors
and executive officers and their affiliates owned
384,971 shares of our common stock, or approximately 9% of
our total outstanding shares, all of which are subject to voting
agreements with Eastern. Pursuant to these voting agreements,
our directors and executive officers and their affiliates have
agreed, among other things, to vote in favor of approval of the
merger agreement, as discussed in the section entitled
Interests of Certain Persons in the Merger
Voting Agreements beginning on page 45 of this proxy
statement.
The proposal to approve one or more adjournments of the special
meeting requires the affirmative vote of holders of a majority
of the shares of our common stock present or represented at the
special meeting and entitled to vote on the proposal.
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Abstentions
and Broker Non-Votes
For purposes only of determining the presence or absence of a
quorum for the transaction of business at the special meeting,
we intend to count abstentions and broker non-votes
as present at the special meeting. Abstentions and broker
non-votes are not, however, counted as favorable
votes and, therefore, have the same effect as a vote against
approval of the merger agreement.
If you fail to vote or
abstain from voting, it will have the effect of a vote against
the proposal to approve the merger agreement.
Broker
non-votes are shares held by brokers or nominees as
to which (1) voting instructions have not been received
from the beneficial owners or the persons entitled to vote those
shares, and (2) the broker or nominee does not have
discretionary voting power. The proposal to approve the merger
agreement is not an item on which brokerage firms may vote in
their discretion on behalf of their clients.
Accordingly, we
urge you to return the enclosed proxy card marked to indicate
your vote, to vote your shares through the Internet or by
telephone or to give your broker proper instructions.
To approve the adjournment proposal, a majority of the
outstanding shares of our common stock present or represented at
the special meeting and entitled to vote, which includes
abstentions, must vote in favor of the proposal. Broker
non-votes will have no effect on the outcome of this
proposal.
Proxies
and Voting
Stockholders may vote their shares by attending the special
meeting and voting their shares in person or by completing,
signing and dating the accompanying proxy card and promptly
returning it to us. All properly executed proxies received prior
to taking the vote at the special meeting and not revoked will
be voted as instructed on the proxy card.
If the proxy is
signed and returned without indicating any voting instructions,
the shares represented by that proxy will be voted
FOR approval of the merger agreement,
FOR the approval of one or more adjournments or
postponements of the special meeting, if necessary, and in the
discretion of the individuals named as proxies as to any and all
other matters that may come before the special meeting.
In addition, stockholders may vote their shares through the
Internet or by telephone by following the instructions included
on the accompanying proxy card. If you vote your shares through
the Internet or by telephone, please do not return the proxy
card. You should be aware that in delivering a vote through the
Internet or by telephone, you may incur costs such as telephone
and Internet access charges for which you will be responsible.
The Internet voting facility and the telephone voting facility
for stockholders of record will close at 11:59 p.m., Eastern
Time, on July 14, 2008.
Stockholders who have questions or requests for assistance in
completing and submitting proxy cards should contact Laurel Hill
Advisory Group, LLC, our proxy solicitor, toll-free at (888)
742-1305.
Stockholders who hold their shares of our common stock in
street name, meaning in the name of a bank, broker
or other person who is the record holder, must either direct the
record holder of their shares of our common stock how to vote
their shares or obtain a proxy from the record holder to vote
their shares at the special meeting.
Revocability
of Proxies
If you have not submitted a proxy through your broker or other
nominee, you may revoke your proxy at any time before it is
voted at the special meeting by:
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delivering to our Secretary at the address listed below a
written notice of revocation bearing a later date than the proxy;
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duly completing, signing, dating and delivering to our Secretary
at the address listed below, a new proxy card, dated later than
the first proxy card, which will automatically replace any
earlier dated proxy card that you returned;
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properly casting a new vote through the Internet or by telephone
at any time before the closure of the Internet voting facilities
and the telephone voting facilities; or
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attending the special meeting and voting in person.
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Attendance at the special meeting will not, in and of itself,
constitute revocation of a proxy.
If your shares are held in street name, you should
follow the voter instruction form provided by your broker or
other nominee regarding revocation of proxies. If the holder of
record of your shares is your broker, bank or other nominee and
you wish to vote at the special meeting, you must bring a legal
proxy from your broker, bank or other nominee authorizing you to
vote those shares.
You should send any notice of revocation of your proxy card to:
MASSBANK
Corp.
123 Haven Street
Reading, Massachusetts 01867
Attention: Robert S. Cummings, Secretary
Solicitation
of Proxies and Expenses
In addition to solicitation by mail, our directors, officers and
employees may solicit proxies by telephone, other electronic
means or in person. These people will not receive any additional
compensation for their services, but we will reimburse them for
their
out-of-pocket
expenses. We will reimburse banks, brokers, nominees, custodians
and fiduciaries for their reasonable expenses in forwarding
copies of this proxy statement to the beneficial owners of
shares of our common stock and in obtaining voting instructions
from those owners. We will pay all expenses of filing, printing
and mailing this proxy statement.
We have retained Laurel Hill Advisory Group, LLC to assist in
the solicitation of proxies by mail, telephone or other
electronic means, or in person, for a fee of approximately
$6,000 plus reasonable
out-of-pocket
expenses relating to the solicitation.
Other
Business
We are not currently aware of any business to be acted upon at
the special meeting other than the matters discussed in this
proxy statement. Under our bylaws, business transacted at the
special meeting is limited to matters relating to the purposes
stated in the notice of special meeting, which is provided at
the beginning of this proxy statement, unless otherwise properly
brought before the special meeting by our board or a
stockholder. If other matters do properly come before the
special meeting, or at any adjournment or postponement of the
special meeting, we intend that shares of our common stock
represented by properly submitted proxies will be voted by and
at the discretion of the persons named as proxies on the proxy
card. The grant of a proxy will confer discretionary authority
on the persons named as proxies on the proxy card to vote in
accordance with their best judgment on other matters that are
properly presented at the special meeting.
20
THE
MERGER
(Proposal 1)
This discussion of the merger is qualified by reference to
the merger agreement, which is attached to this proxy statement
as Annex A. You should read the entire merger agreement
carefully as it is the legal document that governs the
merger.
General
The merger agreement provides for the merger of Merger Sub with
and into the Company. We will be the surviving corporation in
the merger and will continue our existence under the laws of the
State of Delaware as a wholly-owned subsidiary of Eastern. After
the effective time of the merger, on a date selected by Eastern,
Company Bank will merge with and into Eastern Bank, which is a
wholly-owned subsidiary of Eastern, and Eastern Bank will be the
surviving entity (which we sometimes refer to as the bank
merger). As a result of the merger, we will cease to exist as a
separate company and our common stock will no longer be listed
on the NASDAQ Global Select Market. The merger will be
consummated when the certificate of merger has been filed with
the Secretary of State of the State of Delaware in accordance
with Delaware General Corporation Law, which is expected to
occur as soon as practicable after the special meeting and the
satisfaction or waiver of all other conditions to closing,
unless another effective time is specified in the certificate of
merger. However, under the merger agreement, Eastern will not be
required to consummate the merger until three business days
after all of the conditions to the merger that can be satisfied
prior to the closing are satisfied or waived.
As of the effective time of the merger, holders of shares of our
common stock will have no further ownership interest in the
surviving corporation. Instead, each holder of our common stock
outstanding immediately prior to the effective time of the
merger will be entitled to receive $40.00 in cash per share,
without interest and less any applicable withholding taxes
(which we sometimes refer to as the merger consideration). At
the effective time of the merger, each outstanding option,
whether vested or unvested, to purchase shares of our common
stock will be canceled and the holder of such stock option will
receive an amount in cash equal to the number of shares of
common stock underlying the stock option multiplied by the
excess, if any, between the merger consideration and the
exercise price applicable to that stock option (which we
sometimes refer to as the option consideration).
Background
of the Merger
Our management and board of directors, with the assistance of
our financial advisors and outside legal counsel, have
periodically reviewed the various strategic alternatives
available to the Company, including, among other things,
continued independence, acquisitions of other institutions, and
mergers with and acquisitions by larger institutions. Our
management and board also prepare and update a strategic
business plan and budget on an annual basis. At least once a
year, our management and board compare quantitative measures of
the Companys performance with those of other financial
institutions and review the banking industry environment,
including the trend towards consolidation, and potential
strategies for enhancing our competitive position in our
industry. In addition, our board periodically discusses issues
relating to its fiduciary duties with our outside legal counsel,
Goodwin Procter
LLP
.
In the ordinary course of business, and consistent with these
goals, our chairman, chief executive officer and president,
Gerard H. Brandi, has been involved, from time to time, in
informal discussions with representatives of other financial
institutions regarding banking industry issues and exploratory
discussions of the potential benefits and issues arising from
possible combinations. Any conversations concerning a more
substantial alliance between the parties were always general in
nature and did not result in the parties engaging in more
significant discussions.
On January 9, 2007, the chief executive officer of Company
A had a dinner meeting with Mr. Brandi. During this
meeting, the chief executive officer of Company A expressed his
opinion that a combination of Company A and the Company would be
competitively advantageous given, among other reasons, their
21
complementary geographic footprints, and, as he had done in
previous years, suggested to Mr. Brandi that, if our board
ever decided to consider in a serious fashion the sale of the
Company, it should contact Company A.
Between April 4, 2007 and April 6, 2007, we held our
annual strategic planning conference where we, among other
things, reviewed the banking industry environment, including the
trend towards consolidation, the Companys performance as
compared with those of our peers, and the current mergers and
acquisition environment in the banking industry. These
discussions included a review of the various strategic
alternatives available to the Company, including, among other
things, continued independence, acquisitions of other
institutions, and mergers with and acquisitions by larger
institutions. At this conference, Mr. Brandi discussed the
limitations facing the Company, including, among other things,
industry consolidation, continued competition from non-banks as
well as other community banks, the continued loss of market
share to credit unions, mega-banks and mortgage companies,
margin compression due to the inverted yield curve, the lack of
noninterest income, facility limitations, unprofitable products,
and employee retention issues. Also at this conference, at the
suggestion of members of our board, a financial advisor
provided, among other things, an overview of the banking
industry environment and the current mergers and acquisition
environment in the banking industry.
On August 7, 2007, Lawrence B. Seidman and
certain affiliates filed a Schedule 13D with the Securities
and Exchange Commission in which Mr. Seidman stated a
desire to meet with our board and management to review ways to
maximize stockholder value, including the possibility of a sale
of the Company to a larger institution.
On August 20, 2007, the chief executive officer of Company
A contacted Mr. Brandi to discuss the possibility of a
strategic transaction. The parties concluded this discussion by
agreeing to meet in person on August 29, 2007 to engage in
further discussions.
On August 22, 2007, at a regularly scheduled joint meeting
of the executive committee of our board and the executive
committee of the Company Bank board, with Goodwin Procter in
attendance at the request of the executive committees,
Mr. Brandi updated the executive committees on the
discussions with Company A. The executive committees also
discussed the possibility of a strategic transaction with other
parties. Mr. Brandi suggested that Company B may have an
interest in a strategic transaction with the Company. At the
conclusion of this meeting, the executive committees authorized
Mr. Brandi to begin discussions with Company A regarding
the terms of a potential transaction, including pricing. The
executive committees also authorized Mr. Brandi to contact
the chief executive officer of Company B regarding its interest
in evaluating a potential strategic transaction between the
parties.
On August 29, 2007, Mr. Brandi and the chief executive
officer of Company A met in person in Boston to follow up on
their August
20
th
discussion. During this meeting, they continued to express a
mutual interest in a potential strategic transaction and
discussed, in general terms, the potential merits and challenges
of a strategic transaction between the two companies. The chief
executive officer of Company A also expressed preliminary
interest in pursuing a potential transaction at a price of up to
$44.00 per share of our common stock in a combination of cash
and Company A common stock.
On August 31, 2007, the Company entered into a customary
confidentiality agreement with Company A.
On September 3, 2007, at Mr. Brandis initiative,
Mr. Brandi had a breakfast meeting with the chief executive
officer of Company B to discuss the possibility of a strategic
transaction. The chief executive officer of Company B expressed
an interest in a strategic transaction with the Company and the
parties concluded this meeting by expressing an interest to
engage in further discussions.
Between September 3, 2007 and September 5, 2007,
Mr. Brandi and the chief executive officer of Company B
engaged in several communications to follow up on their
September
3
rd
discussion.
On September 5, 2007, the chief executive officer of
Company B informed Mr. Brandi that Company B was not in a
position to continue discussions with the Company regarding a
potential strategic transaction at that time.
22
On September 12, 2007, at a regularly scheduled meeting of
the Company Bank board, with Goodwin Procter in attendance at
the request of the Company Bank board, Mr. Brandi, together
with Goodwin Procter, updated the Company Bank board on the
status of discussions with Company A and with Company B.
Also on September 12, 2007, the chief executive officer of
Company A had a dinner meeting with Mr. Brandi and Goodwin
Procter to continue discussions regarding a potential strategic
transaction between the parties. The parties continued to
discuss the possibility of a transaction at a price of up to
$44.00 per share of our common stock in a combination of cash
and Company A common stock. The chief executive officer of
Company A stated that the exchange ratio for determining the
number of shares of Company A common stock to be paid per share
of our common stock would float so as to provide a fixed market
value within a range to be determined. The chief executive
officer of Company A also indicated that this proposal was
preliminary and subject to Company A performing confirmatory due
diligence and negotiating a mutually satisfactory definitive
merger agreement.
Also on September 12, 2007, and in response to the on-going
discussions with Company A and Company B, the Company requested
that FBR, with which the Company had no prior relationship,
assist our board in these discussions.
Between September 12, 2007 and September 19, 2007, the
chief executive officer of Company A engaged in several
communications with Mr. Brandi regarding the general terms
of a potential transaction between the companies. Also during
this period, Company As financial advisor engaged in
several communications with FBR regarding the general terms of a
potential transaction between the companies, including valuation
issues.
During this same period, Company As financial advisor
delivered to the Company a draft term sheet outlining the basic
structure of Company As proposal to pay up to $44.00 per
share for the Companys common stock in a combination of
cash and Company A common stock with the exchange ratio for
determining the number of shares of Company A common stock
floating so as to provide a fixed market value within a range to
be determined.
Beginning on September 17, 2007 and throughout the rest of
September, Company A and its financial advisor and legal counsel
conducted financial and legal due diligence on the Company.
On September 19, 2007, the chief executive officer of
Company A and two members of the board of directors of Company A
met in Boston with Mr. Brandi, Allan S. Bufferd, a member
of our board, and Robert S. Cummings, the Companys
Secretary and a member of the Company Bank board, regarding the
general terms of a potential transaction between the companies,
including, among other things, the structure of the transaction,
valuation issues, the anticipated role of Mr. Brandi with
the combined company and potential seats on Company As
board of directors for Company representatives as well as the
business and operating models of their respective companies.
On September 20, 2007, we formally engaged FBR as our
financial advisor to assist our board in assessing the strategic
alternatives available to the Company, including the proposal
submitted by Company A, which engagement was confirmed in a
letter dated September 20, 2007.
Also on September 20, 2007, legal counsel to Company A
furnished an initial draft of the merger agreement to the
Company.
Between September 20, 2007 and September 24, 2007,
Company A and its financial advisor and legal counsel continued
to conduct financial and legal due diligence on the Company.
During this same period, the Company, FBR and Goodwin Procter
began financial and legal due diligence on Company A.
Also during this period, Mr. Brandi and FBR engaged in
several communications with Company As financial advisor
regarding the form of consideration that Company A would pay for
the Companys common stock, whether the exchange ratio
would be set at signing or at closing, and if the exchange ratio
was set at signing, whether there would be any adjustments to
the exchange ratio as a result of fluctuations in the value of
Company As common stock at closing. Throughout these
discussions, Company As financial advisor stated that the
exchange ratio would be set at closing.
23
On September 24, 2007, after consulting with FBR and
Goodwin Procter, Mr. Brandi called the chief executive
officer of Company A and told him that setting the exchange
ratio at closing was unacceptable.
On September 25, 2007, legal counsel for Company A
furnished a draft term sheet outlining the basic structure and
terms of Company As proposal to pay up to $44.00 per share
of our common stock in a combination of cash and Company A
common stock with the exchange ratio being set at closing and
with no adjustments to the exchange ratio as a result of
fluctuations in the value of Company As common stock.
Between September 25, 2007 and September 28, 2007,
Mr. Brandi discussed the draft term sheet with FBR and
Goodwin Procter.
Also on September 25, 2007, after a regularly scheduled
dinner of present and former banking industry executives,
Mr. Brandi and a member of the board of directors of
Company A, who were both present at the dinner, discussed the
general terms of a potential transaction, including, among other
things, structure and valuation issues. The parties concluded
this discussion by agreeing that the chief executive officer of
Company A and two members of the board of directors of Company A
would meet with Mr. Brandi and a member of our board in
person on September 27, 2007 to discuss the general terms
of a potential transaction, including, structure and valuation
issues.
On September 26, 2007, at a regularly scheduled joint
meeting of the executive committee of our board and the
executive committee of the Company Bank board, with Goodwin
Procter in attendance at the request of the executive
committees, Mr. Brandi, together with Goodwin Procter,
updated the executive committees on the discussions with Company
A and discussed whether other parties would have a strong
interest in acquiring the Company. Mr. Brandi indicated
that Company C may be interested in such a transaction. At the
conclusion of this meeting, the executive committees authorized
Mr. Brandi to continue discussions with Company A regarding
the terms of a potential transaction, including pricing, and
authorized Mr. Brandi to initiate discussions with Company
C.
On September 27, 2007, Mr. Brandi and Robert S.
Cummings, the Companys Secretary and a member of the
Company Bank board, met with the chief executive officer of
Company A and a member of the board of directors of Company A to
discuss the general terms of a potential transaction, including,
among other things, the transaction structure and valuation of a
potential transaction. At this meeting, Company A provided the
Company with a revised draft term sheet that outlined these
discussions.
On September 28, 2007, FBR provided a revised draft term
sheet to Company As financial advisor, which provided for
the exchange ratio being set at signing, with adjustments,
subject to certain collars, to the exchange ratio based on
fluctuations in the value of Company As common stock
through closing.
Between September 28, 2007 and October 2, 2007, FBR
engaged in several discussions with Company As financial
advisor regarding whether the exchange ratio would be set at
signing or at closing and whether there would be any adjustments
to the exchange ratio as a result of fluctuations in the value
of Company As common stock at closing.
Due to the inability of Company A to propose acceptable
definitive merger terms, including, principally, whether the
exchange ratio would be set at signing or at closing and whether
there would be any adjustments to the exchange ratio based on
fluctuations in the value of Company As common stock
through closing, on October 2, 2008, Mr. Brandi
instructed Goodwin Procter to deliver a letter to Company
As legal counsel asking Company A, pursuant to the terms
of the confidentiality agreement between the parties, to either
destroy or return any of the Companys confidential
information that Company A had in its possession. The letter was
sent by Goodwin Procter but Company A did not return any
documents to the Company.
On October 4, 2007, the chief executive officer of Company
A delivered to Mr. Brandi an outline of a written proposal
to acquire the Company for $44.00 per share, with 40% of the
total consideration to consist of Company A common stock and 60%
of the total consideration to consist of cash. The written
proposal also stated that the exchange ratio for determining the
number of shares of Company A common stock to be delivered at
closing would float, to provide an agreed upon market value,
within a +/- range of 10% relative to the
10-day
trailing average stock price of Company As common stock at
the signing of the definitive merger
24
agreement, with each party having the right to terminate the
definitive merger agreement if the
10-day
trailing average stock price of Company As common stock
was less than an agreed upon dollar amount per share. The
written offer also stated that two members of our board would be
asked to join the board of directors of Company A, one of whom
would also be asked to join the board of directors of Company
As banking subsidiary. The proposal was subject to Company
A performing confirmatory due diligence and negotiating a
mutually satisfactory definitive merger agreement and expired on
October 16, 2008.
On October 9, 2007, Mr. Brandi met with the chief
executive officer of Company C to discuss a potential strategic
transaction between their respective companies, which meeting
was arranged by FBR. Mr. Brandi and the chief executive
officer of Company C discussed general industry trends and
opportunities facing companies in the banking industry as well
as their respective business models. The chief executive officer
of Company C expressed an interest in a strategic transaction
with the Company; however, no specific acquisition prices were
discussed.
Between October 9, 2007 and October 16, 2007, FBR
engaged in several preliminary discussions with Company Cs
financial advisor regarding valuation matters related to a
potential strategic transaction between the parties.
On October 10, 2007, at a regularly scheduled meeting of
the Company Bank board, Mr. Brandi updated the Company Bank
board on the status of discussions with Company A, Company B and
Company C.
Also on October 10, 2007, Mr. Brandi had a discussion
with the chief executive officer of Company B and inquired as to
whether Company B had any interest in re-engaging in discussions
concerning a potential strategic transaction between the
parties. The chief executive officer of Company B informed
Mr. Brandi that Company B was not in a position to engage
in any such discussions at that time. Thereafter, discussions
with Company B ceased.
On October 11, 2007, Company As legal counsel
delivered a letter to Mr. Brandi indicating that Company
As written proposal dated October 4, 2008 was
extended from October 16, 2008 to October 18, 2008.
On October 15, 2007, Mr. Brandi had a dinner meeting
with Company As financial advisors to discuss the status
of the Companys discussions with Company A regarding a
potential strategic transaction.
On October 16, 2007, the chief executive officer of Company
C delivered to FBR a written preliminary proposal to acquire the
Company for a price between $42.00 and $43.00 per share in a
combination of a cash and Company C common stock. The proposal
also stated that the mix of the total consideration would be in
the range of 50% stock/50% cash to 70% stock/30% cash with final
percentages to be determined after further discussions between
the parties. The written proposal further indicated that the
exchange ratio for determining the number of shares of Company C
common stock that would be delivered at closing would be fixed
at signing. The proposal was subject to Company C performing
confirmatory due diligence and negotiating a mutually
satisfactory definitive merger agreement
On October 16, 2007, at a regularly scheduled meeting of
our board, with FBR and Goodwin Procter in attendance at the
request of our board, Mr. Brandi, together with FBR and
Goodwin Procter, updated our board on, among other things, the
discussions with Company A and Company C and the Companys
strategic alternatives and opportunities in general. FBR
reviewed the terms of the preliminary proposals received from
each of Company A and Company C. Following these discussions,
our board authorized FBR to request a full proposal, including
price and terms, from Company Cs financial advisor and to
continue negotiations with Company A.
On October 17, 2007, at the request of Company As
legal counsel, Goodwin Procter furnished Company As legal
counsel with comments to the initial draft of the merger
agreement that we had originally received on September 20,
2007.
On October 19, 2007, Company Cs financial
advisor provided FBR with a term sheet for a consulting
agreement between Company C and Mr. Brandi, which term
sheet was never discussed between Company C and Mr. Brandi.
25
During the period from October 9, 2007 to October 23,
2007, the market price of Company Cs common stock declined
more than 18%. On October 23, 2007, Company Cs
financial advisor informed FBR that, in light of the precipitous
decline in Company Cs stock price, Company C was not in a
position to continue discussions with the Company regarding a
potential strategic transaction at that time.
On October 24, 2007, the chief executive officer of Company
C contacted Mr. Brandi to reiterate the conversation
between Company Cs financial advisor and FBR on October
23
rd
and stated that, in light of the precipitous decline in Company
Cs stock price, Company C was not in a position to
continue discussions with the Company regarding a potential
strategic transaction at that time. Thereafter, discussions with
Company C ceased.
On October 25, 2007, the chief executive officer of Company
A sent a letter to Mr. Brandi asking Mr. Brandi for a
response to Company As written offer dated October 4,
2008.
On November 1, 2007, Mr. Brandi sent the chief
executive officer of Company A a letter stating that the Company
had not heard from Company A or its legal counsel regarding the
revised draft merger agreement Goodwin Procter had sent to
Company As legal counsel on October 17, 2008.
During the period from August 31, 2007 to November 7,
2007, the market price of Company As common stock declined
more than 23%. On November 7, 2007, the chief executive
officer of Company A contacted Mr. Brandi and indicated
that, in light of the steep fall in Company As stock
price, the proposed transaction with the Company would be
excessively dilutive to the stockholders of Company A and,
therefore, Company A had determined to not proceed with the
proposed transaction at that time.
On January 16, 2008, Mr. Brandi and the chief
executive officer of Company A had a dinner meeting. During this
meeting, Mr. Brandi discussed with the chief executive
officer of Company A whether Company A was interested in
re-engaging in discussions concerning a potential strategic
transaction between the parties. The chief executive officer of
Company A indicated that he would have to discuss the
matter with Company As board of directors and
financial advisors.
On January 22, 2008, FBR had a discussion with Company
As financial advisor and inquired as to whether Company A
had any interest in re-engaging in discussions concerning a
potential strategic transaction between the parties. Company
As financial advisor informed FBR that Company A was not
in a position to pursue a viable transaction at that time.
Thereafter, discussions with Company A ceased.
On January 25, 2008, at a special meeting of our board,
with FBR and Goodwin Procter in attendance at the request of our
board, our board discussed, among other things, the possibility
of exploring a strategic transaction. The process and criteria
for screening possible strategic partners and evaluating a
potential strategic transaction were discussed. Following these
discussions, our board authorized FBR to informally contact a
number of local, regional and national banks which likely would
have an interest in a strategic transaction with the Company.
In late January and early February, FBR contacted 14
institutions regarding their interest in evaluating a potential
strategic transaction. Eastern and Company D expressed interest
in learning more about the potential strategic transaction,
including the identity of the Company, which was withheld by FBR.
During this same period, FBR had separate preliminary
discussions with Richard E. Holbrook, the chairman and chief
executive officer of Eastern, regarding valuation matters
related to a potential strategic transaction between the parties
and the chief executive officer of Company D and its financial
advisor regarding valuation matters related to a potential
strategic transaction between the parties.
On February 6, 2008, the Company entered into a customary
confidentiality agreement with Eastern.
Also on February 6, 2008, Mr. Brandi contacted
Mr. Holbrook regarding the discussions about a possible
strategic transaction between the parties and the due diligence
process.
Also on February 6, 2008, Mr. Brandi contacted the
chief executive officer of Company D regarding the discussions
about a possible strategic transaction between the parties and
the due diligence process.
26
On February 7, 2008, at a special meeting of our board,
with FBR and Goodwin Procter in attendance at the request of our
board, FBR made a presentation to our board on the current
status of the mergers and acquisition market in the banking
industry in general and the Companys performance as
compared to our peers. As part of these discussions, FBR noted
that there have been fewer merger and acquisition transactions
completed in the recent past because of the substantial credit
and subprime disruption, which also resulted in the pricing of
completed transactions being significantly depressed. FBR also
updated our board on the results of FBRs informal
discussions with the 14 potential strategic partners. FBR noted
that, of the 14 potential strategic partners contacted, only two
indicated an interest in proceeding with discussions. FBR stated
that the other 12 potential strategic partners were either not
interested or not able, at that time, to pursue a viable
transaction. Our board, with the participation of FBR and
Goodwin Procter, discussed the possibility of strategic
transactions with either Eastern or Company D and authorized FBR
to continue discussions with both parties and to discuss, among
other things, valuation and the due diligence process.
After the February
7
th
board meeting, FBR informed both Mr. Holbrook and the chief
executive officer of Company D and its financial advisor of the
process our board was undertaking to move forward.
On February 8, 2008, the Company entered into a customary
confidentiality agreement with Company D.
Between February 11, 2008 and February 22, 2008, FBR
engaged in several discussions with the chief financial officer
of Company D and the general counsel of Company D regarding the
due diligence process.
On February 13, 2008, at a regularly scheduled meeting of
the Company Bank board, Mr. Brandi updated the Company Bank
board on, among other things, the discussions with Eastern and
Company D.
Also on February 13, 2008, Mr. Holbrook delivered to
FBR a written offer to acquire the Company for cash
consideration of $40.00 for each share of our outstanding common
stock, subject to Eastern performing confirmatory due diligence
and negotiating a mutually satisfactory definitive merger
agreement.
On February 14, 2008, Mr. Brandi and the chief
executive officer of Company D discussed the on-going due
diligence process.
Between February 14, 2008 and February 25, 2008,
Eastern began conducting financial and legal due diligence on
the Company.
Between February 22, 2008 and February 29, 2008,
Company D and its financial advisor and legal counsel conducted
financial and legal due diligence on the Company.
On February 25, 2008, Mr. Holbrook delivered to FBR a
letter confirming the February
13
th
written offer to acquire the Company for cash consideration of
$40.00 for each share of our outstanding common stock, subject
to Eastern performing confirmatory due diligence and negotiating
a mutually satisfactory definitive merger agreement. In
addition, Eastern requested that we negotiate exclusively with
them for a period of time to be determined. The Company refused
to agree to negotiate exclusively with Eastern and did not sign
the proposed exclusivity agreement.
Between February 26, 2008 and February 29, 2008, FBR
engaged in a series of discussions with the chief executive
officer of Company D and its financial advisor regarding Company
Ds ability to make a viable proposal for the acquisition
of the Company.
On February 28, 2008, Mr. Brandi and Mr. Holbrook
met to discuss a potential strategic transaction between the
parties. Mr. Brandi and Mr. Holbrook discussed the
written offer that Mr. Holbrook had delivered on
February 25, 2008 as well as the potential benefits to our
stockholders and the customers of both companies that could
result from such a transaction. Mr. Brandi and
Mr. Holbrook also discussed general industry trends and
opportunities facing companies in the banking industry as well
as their respective business and operating models.
On February 29, 2008, the chief executive officer of
Company D informed FBR that Company D was not in a position to
continue discussions with the Company regarding a viable
strategic transaction at that time. Thereafter, discussions with
Company D ceased.
27
From February 25, 2008 through March 10, 2008, our
management and financial and legal advisors and Easterns
management and financial and legal advisors facilitated the
exchange of business, financial, accounting, tax and legal due
diligence and participated in discussions with each other on
various issues relating to the proposed transaction.
On February 29, 2008, legal counsel to Eastern furnished an
initial draft of the merger agreement to the Company.
On March 3, 2008, Mr. Brandi and Goodwin Procter met
with Mr. Holbrook, Terence A. McGinnis, senior vice
president and general counsel of Eastern, and Easterns
outside legal counsel at Goodwin Procters offices in
Boston to discuss and negotiate various issues in the draft
merger agreement, including the representations and warranties
to be made by the Company, the treatment of the Companys
employees in the merger, the conduct of the Companys
business between signing and closing of the merger, the
parties respective conditions to closing, the rights of
the parties to abandon the merger, the ability of the Company to
consider competing proposals, the amount of the termination fee
to be paid by the Company to Eastern, and the voting agreement
to be entered into by the Companys directors and officers
pursuant to which such individuals would agree to vote their
shares of Company common stock in favor of the merger.
On March 4, 2008, at a special joint meeting of our board
and the Company Bank board, with FBR and Goodwin Procter in
attendance at the request of our board and the Company Bank
board, Mr. Brandi, together with FBR and Goodwin Procter,
updated our board and the Company Bank board on the status of
discussions with Company D and Eastern. FBR made a presentation
to our board and the Company Bank board on the financial
analysis of the proposed terms of the transaction with Eastern.
Goodwin Procter advised our board and the Company Bank board as
to its fiduciary duties in responding to Easterns
proposal. In addition, Goodwin Procter reviewed for our board
and the Company Bank board the terms of the merger agreement and
the form of voting agreement, indicated the unresolved issues
and informed our board and the Company Bank board as to the
parties respective positions with respect to those issues,
and updated our board and the Company Bank board on the status
of due diligence. The directors commented and raised a number of
issues, which were addressed by Goodwin Procter. At the
conclusion of the meeting, our board and the Company Bank board
directed management, FBR and Goodwin Procter to continue
negotiations with Eastern and our board and the Company Bank
board agreed to meet on March 7, 2008 to consider the
proposed merger with Eastern, provided that all the remaining
issues were resolved by that time.
Between March 4, 2008 and March 5, 2008, the parties
continued negotiating the terms of the merger agreement and
exchanging drafts between the parties.
On March 5, 2008, Mr. Brandi, Donna H. West, the
Companys Senior Vice President, Community Banking, and
Chief Operating Officer, met with Mr. Holbrook to discuss
the Companys operating model, personnel and related
matters.
On March 6, 2008, Mr. Brandi, FBR and Goodwin Procter
met with Mr. Holbrook, Mr. McGinnis and Easterns
outside legal counsel at Goodwin Procters offices in
Boston to continue to discuss and negotiate various issues in
the draft merger agreement.
On March 7, 2008, at a special joint meeting of our board
and the Company Bank board, with FBR and Goodwin Procter in
attendance at the request of our board and the Company Bank
board, Mr. Brandi, together with FBR and Goodwin Procter,
updated our board and the Company Bank board on the status of
negotiations with Eastern. FBR reviewed for our board and the
Company Bank board, its financial analysis of Easterns
proposal. Goodwin Procter reviewed for our board and the Company
Bank board the updated terms of the merger agreement, indicated
the unresolved issues that had been agreed upon since the prior
joint board meeting, subject to approval by our board and the
Company Bank board, indicated the remaining unresolved issues,
informed our board and the Company Bank board as to the
parties respective positions with respect to those issues,
and updated our board and the Company Bank board on the status
of due diligence. The directors commented and raised a number of
issues, which were addressed by Goodwin Procter. At the
conclusion of the meeting, our board and the Company Bank board
directed management, FBR and Goodwin Procter to continue
negotiations with Eastern and our board and the Company Bank
board agreed to meet on March 10,
28
2008 to consider the proposed merger with Eastern, provided that
all the remaining issues were resolved by that time.
Between March 7, 2008 and March 10, 2008, the parties
continued negotiating the terms of the merger agreement and
exchanging drafts between the parties.
On March 10, 2008, our board and the Company Bank board
held a special joint meeting, with FBR and Goodwin Procter in
attendance at the request of our board and the Company Bank
board, to consider approving the merger agreement and the
merger. At this meeting, Mr. Brandi, together with FBR and
Goodwin Procter, updated our board and the Company Bank board on
all of the material terms of the transaction and the resolution
of all significant issues. Goodwin Procter made a presentation
in which the fiduciary duties of the directors in connection
with the proposed transaction were again reviewed and the terms
of the merger agreement, including the merger consideration,
closing conditions, the ability of the Company to consider
competing proposals, termination rights and termination fee,
were summarized. The directors commented and raised a number of
issues, which were addressed by Goodwin Procter. FBR made an
updated presentation to our board and the Company Bank board
regarding the financial analysis of the proposed terms of the
transaction. At the conclusion of FBRs update, FBR
delivered an oral opinion concerning the fairness, from a
financial point of view, of the proposed merger consideration to
be received by holders of our common stock as set forth in the
merger agreement, which opinion was later confirmed in writing.
Our board and the Company Bank board then continued to discuss
at length the terms of the proposed merger and a variety of
positive and negative considerations concerning the transaction.
The factors considered are described in more detail below under
the heading Recommendation of Our Board and
Reasons for the Merger beginning on page 29 of this
proxy statement. Based on these deliberations, by the unanimous
vote of all directors, our board and the Company Bank board
approved the merger agreement and the merger, authorized
management to enter into the merger agreement and other related
agreements and recommended that the stockholders vote their
shares in favor of approving the merger agreement.
Following this joint meeting, on the evening of March 10,
2008, the parties executed the definitive merger agreement and
issued a joint press release announcing the execution of the
merger agreement after the closing of the markets.
Recommendation
of Our Board and Reasons for the Merger
Recommendation
of Our Board
Our board unanimously determined that the merger agreement and
the merger were advisable and in the best interests of our
stockholders, adopted the merger agreement and approved the
merger, and recommended that our stockholders approve the merger
agreement. In connection with the foregoing, our board
considered the opinion of FBR, our companys financial
advisor, in making its recommendation. For more information on
the opinion of FBR, see the section entitled
Opinion of Financial Advisor beginning
on page 31 of this proxy statement.
Our board
unanimously recommends that our stockholders vote
FOR approval of the merger agreement.
Reasons
for the Merger
In reaching its determination, our board consulted with senior
management and our financial and legal advisors, drew on their
knowledge of the business, operations, properties, assets,
financial condition, operating results, historical market prices
and prospects of our company, and considered the following
factors in favor of the merger:
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the value of the consideration to be received by our
stockholders pursuant to the merger agreement, as well as the
fact that stockholders will receive the consideration in cash,
which provides certainty of value to our stockholders compared
to a transaction in which they would receive stock or other
non-cash consideration;
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the presentation of FBR (including the assumptions and
methodologies underlying the analyses in connection therewith)
and the opinion of FBR to our board dated March 10, 2008, a
copy of which is
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29
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attached to this proxy statement as
Annex B
and
which you should read carefully in its entirety, which provides
that, as of March 10, 2008, and based on and subject to the
factors, limitations and assumptions set forth in its opinion,
the merger consideration was fair, from a financial point of
view, to holders of our common stock;
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the then current financial market conditions, and historical
market prices, volatility and trading information with respect
to our common stock, including the possibility that if we
remained as an independent publicly-owned corporation, in the
event of a decline in the market price of our common stock or
the stock market in general, the price that might be received by
holders of our common stock in the open market or in a future
transaction might be less than the merger consideration;
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the then current and prospective economic, regulatory and
competitive climate facing us and independent regional banking
organizations generally, including margin pressure, minimal
deposit growth, rising expenses, slowing revenue growth, the
importance of capitalizing on developing opportunities in the
banking and finance industries, the pace and scope of
consolidation in the banking industry and competition from
larger institutions;
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the current and prospective regulatory and interest rate
environment in which we operate;
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the fact that discussions with Company A, Company B, Company C
and Company D, as discussed in the section entitled
Background of the Merger Section
beginning on page 21 of this proxy statement, did not
result in a binding proposal to acquire the Company;
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the geographic fit of the branch network of Company Bank and
Eastern Bank;
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the compatibility of the banking cultures and business and
management philosophies of the two companies, particularly with
respect to customer service, convenience, the meeting of local
banking needs, disciplined loan and deposit pricing,
conservative underwriting standards, and the companies
compatible management teams;
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the anticipated effect of the acquisition on our employees
(including the fact that our employees who do not continue as
employees of Eastern or Eastern Bank will be entitled to receive
severance benefits);
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the effect on our customers and the communities we serve;
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the terms and conditions of the merger agreement, including:
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the ability of our board, under certain circumstances, to
furnish information to and conduct negotiations with a third
party and, upon the payment to Eastern of a termination fee of
$5 million, to terminate the merger agreement to accept a
superior proposal; and
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our boards belief that the $5 million maximum
aggregate fees payable to Eastern was reasonable in the context
of termination fees that were payable in other comparable
transactions and would not be likely to preclude another party
from making a competing proposal;
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the likelihood that the merger will be consummated in light of
the limited conditions to Easterns obligation to
consummate the merger;
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Easterns financial capability and the absence of any
financing condition to Easterns obligation to consummate
the merger;
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the fact that the merger agreement and the transactions
contemplated thereby were the product of extensive arms
length negotiations between representatives of Eastern and
representatives of the Company;
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the fact that dissenters rights of appraisal would be
available to our stockholders under Delaware law. For more
information, see the section entitled Appraisal
Rights beginning on page 63 of this proxy
statement; and
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the fact that approval of the merger agreement would require the
affirmative vote of the holders of a majority of the outstanding
shares of our common stock entitled to vote. Our board noted
that all of our
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30
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directors and executive officers and their affiliates, who
collectively owned approximately 9% of our common stock, entered
into a voting agreement with Eastern in which the stockholders
agreed to vote the shares held by such stockholders in favor of
approval of the merger agreement. Our board also noted that the
voting agreements with the stockholders were a condition to
Eastern entering into the merger agreement and that such voting
agreements terminate in the event that the merger agreement is
terminated in accordance with its terms.
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In the course of its deliberations, our board also considered a
variety of risks and other countervailing factors, including:
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the risks and costs to us if the merger does not close,
including:
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the diversion of management and employee attention, potential
employee attrition and the effect on customers and business
relationships; and
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the market price of our common stock, as the market price could
be affected by many factors, including (1) the reason or
reasons for which the merger agreement was terminated and
whether such termination resulted from factors adversely
affecting us; (2) our then current operating and financial
results, which could be variable; (3) the possibility that,
as a result of the termination of the merger agreement, the
marketplace would consider us to be an unattractive acquisition
candidate; and (4) the possible sale of shares of our
common stock by short-term investors (such as arbitrageurs)
following an announcement of termination of the merger agreement;
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the restrictions that the merger agreement imposes on actively
soliciting competing bids, and the fact that we would be
obligated to pay the $5 million termination fee to Eastern
under certain circumstances;
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the fact that we will no longer exist as an independent,
stand-alone company and our stockholders will no longer
participate in the growth of the Company or in any synergies
resulting from the merger;
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the fact that gains from an all-cash transaction would be
taxable to our stockholders for U.S. federal income tax
purposes; and
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the interests of our officers and directors in the merger
described under the section entitled Interests of Certain
Persons in the Merger beginning on page 42 of this
proxy statement.
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The foregoing discussion of the factors considered by our board
is not intended to be exhaustive, but does set forth the
principal factors considered by our board. Our board
collectively reached the unanimous conclusion to adopt the
merger agreement and approve the merger in light of the various
factors described above and other factors that each member of
our board felt was appropriate. In view of the wide variety of
factors considered by our board in connection with its
evaluation of the merger and the complexity of these matters,
our board did not consider it practical and did not attempt to
quantify, rank or otherwise assign relative weights to the
specific factors it considered in reaching its decision. Rather,
our board made its recommendation based on the totality of
information presented to and the investigation conducted by it.
In considering the factors discussed above, individual directors
may have given different weights to different factors.
After evaluating these factors and consulting with our legal
counsel and financial advisors, our board determined that the
merger agreement was advisable and in the best interests of our
stockholders. Accordingly, our board has unanimously adopted the
merger agreement and approved the merger.
Our board
unanimously recommends that you vote FOR approval of
the merger agreement.
Opinion
of Financial Advisor
We retained FBR as our financial advisor due to FBRs
qualifications, expertise, and reputation and its knowledge of
our business and the banking industry. Pursuant to our
engagement letter with FBR, dated September 20, 2007 and as
amended March 8, 2008, we requested that FBR evaluate the
fairness, from a financial point of view, of the merger
consideration to be received by holders of our common stock.
31
On March 10, 2008, FBR delivered its oral opinion and
subsequently confirmed in writing on the same date to our board
that, based on and subject to the factors, limitations and
assumptions set forth in the opinion, the merger consideration
to be received by the holders of our common stock pursuant to
the merger agreement was fair, from a financial point of view,
to such holders.
The full text of the written opinion of FBR, dated
March 10, 2008, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex B
to this proxy statement and is incorporated
in this proxy statement by reference. You are urged to, and
should, read the FBR opinion carefully and in its entirety. FBR
provided its opinion for the information and assistance of our
board in connection with its consideration of the transactions
contemplated by the merger agreement. The FBR opinion was
limited solely to the fairness to our stockholders of the merger
consideration from a financial point of view as of the date of
the opinion. Neither the FBR opinion nor the related analyses
constituted a recommendation of the merger to our board. FBR
makes no recommendation to any of our stockholders as to how to
vote at the special meeting. FBR was not requested to consider,
and its opinion does not address, the relative merits of the
merger compared to any alternative business strategies that
might exist for the Company or the effect of any other
transaction in which the Company might engage. This summary of
the FBR opinion is qualified in its entirety by reference to the
full text of the opinion.
In arriving at its opinion, FBR, among other things:
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reviewed a draft of the merger agreement dated March 10,
2008 and the financial terms and conditions set forth therein,
as well as the schedules and exhibits thereto, furnished by our
legal counsel;
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reviewed our Annual Reports to Stockholders and Annual Reports
on
Form 10-K
for each of the fiscal years ended December 31, 2004,
December 31, 2005 and December 31, 2006, including the
audited financial statements contained therein and our Quarterly
Reports on
Form 10-Q
for each of the quarters ended March 31, 2007,
June 30, 2007 and September 30, 2007;
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reviewed regulatory financial data concerning the Company,
available through SNL Financial LLC (an industry information and
research firm), for the fiscal years ended December 31,
2005, December 31, 2006 and December 31, 2007;
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reviewed certain other public and non-public information,
primarily financial in nature, relating to the business,
earnings, assets and prospects of the Company and Eastern
provided to FBR or publicly available;
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participated in meetings and telephone conferences with our
senior management concerning the financial condition, business,
assets, financial forecasts and prospects of the Company, as
well as such other matters as we deemed relevant to our inquiry;
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reviewed certain stock market information for our common stock
and compared it with similar information for companies that FBR
deemed to be relevant for purposes of arriving at its opinion;
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compared our results of operations and financial condition with
that of certain thrift institutions that FBR deemed to be
relevant for purposes of arriving at its opinion;
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compared the financial terms of the merger with the financial
terms, to the extent publicly available, of other transactions
that FBR deemed relevant and comparable to the merger;
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assisted in negotiations and discussions related to the merger
among the Company, Eastern and their respective financial and
legal advisors; and
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performed such other reviews and analyses and considered such
other information as FBR deemed appropriate for the purposes of
its opinion.
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In preparing its opinion, FBR, with the consent of our board,
relied upon and assumed the accuracy and completeness of all of
the financial, accounting, legal, tax and other information it
reviewed, and did not assume any responsibility for the
independent verification of any of such information. With
respect to the
32
financial forecasts provided to or discussed with FBR by our
management and other financial information provided to FBR by
our management, FBR assumed that they were reasonably prepared
on a basis reflecting the best currently available estimates and
judgments of the Company. FBR assumed no responsibility for the
assumptions, estimates and judgments on which such forecasts and
other financial information were based and did not make any
independent verification of any such information. In addition,
FBR was not requested to make, and did not make, an independent
evaluation or appraisal of the assets or liabilities
(contingent, derivative, off-balance sheet or otherwise) of the
Company or any of its subsidiaries or of Eastern or any of its
subsidiaries, independently or combined, nor was FBR furnished
with any such evaluations or appraisals, and, accordingly, FBR
expressed no opinion as to the future prospects, plans or
viability of the Company or Eastern, independently or combined.
FBR also assumed that there has been no change in the assets,
liabilities, business, condition (financial or otherwise),
results of operations or prospects of the Company or of Eastern
since the date of the most recent financial statements made
available to FBR that would be material to its analysis. FBR
also assumed that the merger agreement, when executed, conformed
to the draft reviewed by FBR in all respects material to its
analyses, that in the course of obtaining any necessary
regulatory and third party consents, approvals and agreements
for the merger, no modification, delay, limitation, restriction
or condition will be imposed that will have a material adverse
effect on the merger and that the merger will be consummated in
accordance with the terms of the merger agreement, without
waiver, modification or amendment of any term, condition or
agreement that is material to FBRs analysis, including
that Eastern will have sufficient funds available at closing to
consummate the merger.
The FBR opinion is necessarily based on financial, economic,
market and other circumstances and conditions as they exist on
and the information made available to FBR as of the date of its
opinion. The FBR opinion can be evaluated only as of
March 10, 2008 and any change in such circumstances and
conditions would require a reevaluation of the opinion, which
FBR is under no obligation to undertake. FBR assumes no
responsibility to update or revise its opinion based upon events
or circumstances occurring after the date of the opinion.
The following is a summary explanation of the various sources of
information and valuation methodologies employed by FBR in
rendering its opinion. These analyses were presented to our
board at its meeting on March 10, 2008. This summary
includes the financial analyses used by FBR and deemed to be
material, but does not purport to be a complete description of
analyses performed by FBR in arriving at its opinion. This
summary of financial analyses includes information presented in
tabular format. In order to fully understand the financial
analyses used by FBR, the tables must be read together with the
text of each summary. The tables alone do not constitute a
complete description of the financial analyses. As discussed
below, in these analyses, FBR utilized a normalized tangible
equity to tangible assets capital ratio for the Company of 8%
(and assumed that a buyer would value excess equity on a dollar
for dollar basis), and generally considered comparable companies
with a tangible equity to tangible assets capital ratios of less
than 10%, in each case to provide comparability to peer
companies for analytical purposes. The Companys tangible
equity to tangible assets capital ratio at December 31,
2007 was 13.47%.
Description
of Valuation Analysis
FBR assessed the fairness of the merger consideration to the
holders of our common stock in connection with the merger by
assessing the value of the Company using several methodologies,
including:
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a comparable companies analysis using valuation multiples from
selected publicly traded companies;
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a comparable acquisitions analysis; and
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discounted dividend analysis,
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each of which is described in more detail below. Each of these
methodologies was used to generate imputed valuation ranges that
were then compared to the $40.00 per share merger consideration.
33
The following table shows the ranges of imputed valuation per
share of our common stock derived using each of these
methodologies. No company or transaction reviewed was directly
comparable to the Company or the merger. Accordingly, these
analyses involved complex considerations and judgments
concerning differences in financial and operating
characteristics of the Company relative to the selected
companies and to the targets in the selected transactions and
other factors that would affect their values. The table should
be read together with the more detailed summary of each of the
valuation analyses discussed below.
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Implied Valuation of the Companys Common Stock
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Valuation Methodology
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Metric
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Minimum
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Median
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Maximum
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Comparable Companies Analysis New England Based
Thrifts
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Last Twelve Months
Earnings Per Share
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$
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25.67
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$
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35.61
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$
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52.18
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2008 Analyst Earnings
Per Share Estimates
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$
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20.59
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$
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20.59
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$
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20.59
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Book Value
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$
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22.00
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$
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26.61
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$
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28.54
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Tangible Book Value
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$
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23.37
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$
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28.25
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$
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34.02
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Comparable Companies Analysis Nationwide Thrifts
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Last Twelve Months
Earnings Per Share
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$
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16.15
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$
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27.59
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$
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52.18
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2008 Analyst Earnings
Per Share Estimates
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$
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19.44
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$
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24.48
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$
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38.66
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Book Value
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$
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20.75
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$
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26.21
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$
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45.43
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Tangible Book Value
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$
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25.68
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$
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27.71
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$
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44.84
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Comparable Acquisition Analysis Massachusetts Based
Companies
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Last Twelve Months Net
Income
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$
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30.27
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$
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48.04
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$
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58.83
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Book Value
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$
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35.07
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$
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41.85
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$
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48.38
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Tangible Book Value
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$
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35.60
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$
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45.63
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$
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65.25
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Premium to Core Deposits
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$
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42.61
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$
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49.96
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$
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69.34
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Comparable Acquisition Analysis Nationwide Companies
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Last Twelve Months Net
Income
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$
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23.95
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$
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37.85
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$
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57.78
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Book Value
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$
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25.90
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$
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39.25
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$
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62.20
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Tangible Book Value
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$
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29.74
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$
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39.79
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$
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62.77
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Premium to Core Deposits
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$
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32.69
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$
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48.01
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$
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72.76
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Discounted Dividend Analysis
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Not Applicable
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$
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33.58
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$
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43.36
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$
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55.57
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In the book value and tangible book value analyses, FBR assumed:
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that a buyer would be willing to pay a premium to tangible book
value on a normalized capital base and would value excess equity
on a dollar for dollar basis; and
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a normalized tangible equity to tangible assets capital ratio of
8%.
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Comparable
Companies Analysis
FBR compared the financial and operating performance of the
Company with publicly available information of selected thrifts
(1) located in the New England market and
(2) nationwide, in each case, with similar operating
characteristics, in order to derive multiples that indicate the
value public equity markets place on companies in a particular
market segment. In order to perform this analysis, FBR compared
financial information of the Company with publicly available
information for the companies included in the applicable
markets. For this analysis, as well as other analyses, FBR
examined publicly available information.
No company utilized in the comparable companies analysis as a
comparison to the Company is identical to the Company. In
evaluating the comparables, FBR made numerous assumptions with
respect to the thrift industrys performance and general
economic conditions, many of which are beyond the control of the
Company. Mathematical analysis, such as determining the median,
average or range, is not in itself a meaningful method of using
comparable company data.
34
The companies included in the New England-based thrifts market
were:
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Benjamin Franklin Bancorp Inc.;
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Berkshire Hills Bancorp Inc.;
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Central Bancorp Inc.;
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Hingham Institution for Savings;
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LSB Corp.;
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Mayflower Bancorp Inc.; and
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PSB Holdings Inc. (MHC).
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These companies were selected, among other reasons, for their
size, target market, focus and performance. All companies had a
tangible equity to tangible assets ratio of less than 10%.
The companies included in the nationwide thrifts market were:
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Danvers Bancorp Inc.;
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First Financial Northwest Inc.;
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HMN Financial Inc.;
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BofI Holding, Inc.;
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HF Financial Corp.;
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Benjamin Franklin Bancorp Inc.;
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Rainier Pacific Financial Group Inc.;
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HopFed Bancorp Inc.;
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Harleysville Savings Financial;
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Citizens South Banking Corp.;
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Fidelity Bancorp Inc.;
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TF Financial Corp.;
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Meta Financial Group Inc.;
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First Federal Bankshares Inc.;
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Pamrapo Bancorp Inc.;
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LSB Corp.; and
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First Keystone Financial
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These companies were selected, among other reasons, for their
size, target market, focus and performance. All companies had a
tangible equity to tangible assets ratio of less than 10%.
For each selected company, using publicly available information,
FBR calculated the ratio of
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its last twelve months earnings per share;
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its estimated earnings per share for 2008;
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its book value per share as of the most recent reported
quarter; and
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its tangible book value per share as of the most recent reported
quarter,
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35
in each case, to the applicable companys stock price as of
March 7, 2008. The following table presents, based on
closing prices as of March 7, 2008, the minimum, median and
maximum multiples based on the applicable metric for both the
New England-based thrifts comparable companies and the
nationwide based thrift comparable companies:
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Comparable New England
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Comparable Nationwide
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Based Thrifts
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Thrifts
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Low/High
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Low/High
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Range
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Median
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Range
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Median
|
|
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Last Twelve Months Earnings Per Share
|
|
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14.0x 29.4
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x
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|
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19.8
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x
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8.5x 29.4
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x
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14.0
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x
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Estimated Earnings Per Share
|
|
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10.4x 10.4
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x
|
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10.4
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x
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9.8x 20.3
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x
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12.6
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x
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Book Value per Share for the Most Recently Reported Quarter
|
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0.72x 1.20
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x
|
|
|
1.06
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x
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|
|
0.63x 2.44
|
x
|
|
|
1.03
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x
|
Tangible Book Value for the Most Recently Reported Quarter
|
|
|
0.84x 1.63
|
x
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1.20
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x
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1.01x 2.44
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x
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1.10x
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The comparables imply the following minimum, median and maximum
per share value for the Company:
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Comparable England
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Comparable Nationwide
|
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|
Based Thrifts
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Thrifts
|
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Low/High
|
|
|
|
|
|
Low/High
|
|
|
|
|
|
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Range
|
|
|
Median
|
|
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Range
|
|
|
Median
|
|
|
Last Twelve Months Earnings Per Share
|
|
$
|
25.67 $52.18
|
|
|
$
|
35.61
|
|
|
$
|
16.15 $52.18
|
|
|
$
|
27.59
|
|
Estimated Earnings Per Share
|
|
$
|
20.59 $20.59
|
|
|
$
|
20.59
|
|
|
$
|
19.44 $38.66
|
|
|
$
|
24.48
|
|
Book Value per Share for the Most Recently Reported Quarter(1)
|
|
$
|
22.00 $28.54
|
|
|
$
|
26.61
|
|
|
$
|
20.75 $45.43
|
|
|
$
|
26.21
|
|
Tangible Book Value for the Most Recently Reported Quarter(1)
|
|
$
|
23.37 $34.02
|
|
|
$
|
28.25
|
|
|
$
|
25.68 $44.84
|
|
|
$
|
27.71
|
|
|
|
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(1)
|
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This calculation has been adjusted to an 8% normalized tangible
equity to tangible assets capital ratio and equity valued on a
dollar for dollar basis above 8%.
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Comparable
Acquisitions Analysis
FBR considered ratios of equity purchase price to selected
historical and projected operating results in order to indicate
multiples strategic and financial acquirers have been willing to
pay for companies in a particular market segment. In order to
perform this analysis, FBR reviewed a number of transactions,
including those involving companies deemed by FBR to be
comparable to the Company based on financial performance, market
focus, business model and size. FBR reviewed 12 comparable
merger and acquisition transactions within the thrifts industry
announced from January 1, 2003 through March 7, 2008
where the target was a thrift headquartered in Massachusetts and
had a tangible equity to tangible assets ratio less than 10%.
FBR also reviewed 29 comparable merger and acquisition
transactions within the thrifts industry announced from
January 1, 2003 through March 7, 2008 where the target
was a thrift headquartered in the United States, had total
assets between $500 million and $1.5 billion and had a
tangible equity to tangible assets ratio less than 10%. For this
analysis, as well as other analyses, FBR examined publicly
available information.
No transaction reviewed was directly comparable to the merger.
In evaluating the comparables, FBR made numerous assumptions
with respect to the thrift industrys performance and
general economic conditions, many of which are beyond the
control of the Company. Accordingly, this analysis involved
complex considerations and judgments concerning differences in
financial and operating characteristics of the Company relative
to the targets in the selected transactions and other factors
that would affect the acquisition values in the precedent
transactions. Mathematical analysis, such as determining the
median, average or range, is not in itself a meaningful method
of using comparable company data.
36
The 12 comparable merger and acquisition transactions within the
thrifts industry announced from January 1, 2003 through
March 7, 2008 where the target was a thrift headquartered
in Massachusetts and had a tangible equity to tangible assets
ratio less than 10% consisted of the following acquisitions:
|
|
|
Target
|
|
Acquiror
|
|
Port Financial Corp.
|
|
Royal Bank of Scotland Group Plc
|
First Essex Bancorp, Inc.
|
|
Sovereign Bancorp, Inc.
|
FIRSTFED AMERICA BANCORP, INC.
|
|
Webster Financial Corporation
|
Abington Bancorp, Inc.
|
|
Seacoast Financial Services Corporation
|
Seacoast Financial Services Corporation
|
|
Sovereign Bancorp, Inc.
|
BostonFed Bancorp, Inc.
|
|
Banknorth Group, Inc.
|
Mystic Financial, Inc.
|
|
Brookline Bancorp, Inc.
|
Chart Bank A, Cooperative Bank
|
|
Benjamin Franklin Bancorp, Inc.
|
Woronoco Bancorp, Inc.
|
|
Berkshire Hills Bancorp, Inc.
|
BankMalden CO-OP BK
|
|
Danvers Bancorp, Inc.
|
Westborough Financial Services, Inc.
|
|
Assabet Valley Bancorp
|
Ipswich Co-operative Bank
|
|
Institution for Savings
|
The 29 comparable merger and acquisition transactions within the
thrifts industry announced from January 1, 2003 through
March 7, 2008 where the target was a thrift headquartered
in the United States, had total assets between $500 million
and $1.5 billion and had a tangible equity to tangible
assets ratio less than 10% consisted of the following
acquisitions:
|
|
|
Target
|
|
Acquiror
|
|
Lighthouse Financial Services
|
|
SunTrust Banks, Inc.
|
First Bell Bancorp, Inc.
|
|
Northwest Bancorp Inc. (MHC)
|
Monterey Bay Bancorp, Inc.
|
|
UnionBanCal Corporation
|
Port Financial Corp.
|
|
Royal Bank of Scotland Group Plc
|
Klamath First Bancorp, Inc.
|
|
Sterling Financial Corporation
|
Progress Financial Corporation
|
|
FleetBoston Financial Corporation
|
Southeast Texas Bcshs Inc.
|
|
Texas Regional Bancshares, Inc.
|
Thistle Group Holdings, Co.
|
|
Royal Bank of Scotland Group Plc
|
Abington Bancorp, Inc.
|
|
Seacoast Financial Services Corporation
|
Warwick Community Bancorp, Inc.
|
|
Provident Bancorp Inc.
|
FSF Financial Corp.
|
|
MidCountry Financial Corp.
|
Winton Financial Corp.
|
|
WesBanco, Inc.
|
First Capital Bankers Inc.
|
|
Prosperity Bancshares, Inc.
|
Northeast Pennsylvania Financial Corp.
|
|
KNBT Bancorp, Inc.
|
Woronoco Bancorp, Inc.
|
|
Berkshire Hills Bancorp, Inc.
|
FFLC Bancorp, Inc.
|
|
The Colonial BancGroup, Inc.
|
Gibraltar Financial Corporation
|
|
Boston Private Financial Holdings, Inc.
|
EFC Bancorp, Inc.
|
|
MAF Bancorp, Inc.
|
Great Lakes Bancorp, Inc.
|
|
Bay View Capital Corp.
|
NewMil Bancorp, Inc.
|
|
Webster Financial Corporation
|
FirstBank NW Corp.
|
|
Sterling Financial Corporation
|
Pocahontas Bancorp, Inc.
|
|
IBERIABANK Corporation
|
First Federal Banc of the Southwest, Inc.
|
|
Washington Federal, Inc.
|
FMS Financial Corporation
|
|
Beneficial Mutual Bancorp, Inc.
|
City & Suburban Financial Corp.
|
|
Ridgewood Savings Bank
|
First Mutual Bancshares, Inc.
|
|
Washington Federal, Inc.
|
PVF Capital Corp.
|
|
United Community Financial Corp.
|
Peoples Community Bancorp, Inc.
|
|
Integra Bank Corporation
|
MFB Corp.
|
|
MutualFirst
Financial, Inc.
|
37
For each of the transactions, FBR analyzed the price:
|
|
|
|
|
as a multiple of the last twelve months earnings of the target
company prior to the transaction;
|
|
|
|
as a multiple of the book value of the target company as of the
most recent reported quarter prior to announcement of the
transaction;
|
|
|
|
as a multiple of the tangible book value of the target company
as of the most recent reported quarter prior to announcement of
the transaction; and
|
|
|
|
as a premium to core deposits.
|
The following table presents the results of this analysis for
the transactions reviewed, based on information available as of
March 7, 2008:
|
|
|
|
|
|
|
|
|
|
|
Comparable Massachusetts
|
|
Comparable Nationwide
|
|
|
Based Transactions
|
|
Transactions
|
|
|
Low/High Range
|
|
Median
|
|
Low/High Range
|
|
Median
|
|
Last Twelve Months Earnings
|
|
16.7x 33.2x
|
|
27.0x
|
|
13.0x 32.6x
|
|
21.1x
|
Book Value per Share for the Most Recently Reported Quarter
|
|
1.68x 2.65x
|
|
2.18x
|
|
1.11x 3.67x
|
|
1.98x
|
Tangible Book Value for the Most Recently Reported Quarter
|
|
1.75x 3.96x
|
|
2.50x
|
|
1.31x 3.78x
|
|
2.06x
|
Premium to Core Deposits
|
|
13.2% 33.8%
|
|
18.9%
|
|
6.1% 36.5%
|
|
17.3%
|
The comparables imply the following minimum, median and maximum
value per share for the Company:
|
|
|
|
|
|
|
|
|
|
|
Comparable Massachusetts
|
|
Comparable Nationwide
|
|
|
Based Transactions
|
|
Transactions
|
|
|
Low/High Range
|
|
Median
|
|
Low/High Range
|
|
Median
|
|
Last Twelve Months Earnings
|
|
$30.27 $58.83
|
|
$48.04
|
|
$23.95 $57.78
|
|
$37.85
|
Book Value per Share for the Most Recently Reported Quarter(1)
|
|
$35.07 $48.38
|
|
$41.85
|
|
$25.90 $62.20
|
|
$39.25
|
Tangible Book Value for the Most Recently Reported Quarter(1)
|
|
$35.60 $65.25
|
|
$45.63
|
|
$29.74 $62.77
|
|
$39.79
|
Premium to Core Deposits
|
|
$42.61 $69.34
|
|
$49.96
|
|
$32.69 $72.76
|
|
$48.01
|
|
|
|
(1)
|
|
As applied to the Companys normalized book value as of
December 31, 2007 adjusted to an 8% normalized tangible
equity to tangible assets capital ratio and equity valued on a
dollar for dollar basis above 8%.
|
Discounted
Dividend Analysis
A discounted dividend analysis is a method of evaluating a
company using estimates of the future theoretical dividends and
taking into consideration the time value of money with respect
to those future theoretical dividends by calculating their
present value. Present value refers to
the current value of one or more future cash dividends from a
company and is obtained by discounting those dividends back to
the present using a discount rate that takes into account
macro-economic assumptions and estimates of risk, the
opportunity cost of equity capital, capitalized returns and
other appropriate factors. Terminal value refers to
the capitalized value of all dividends from a company for
periods beyond the final forecast period.
FBR conducted discounted dividend analyses to calculate ranges
of implied per share values of the Company using projections FBR
had prepared and had reviewed and discussed with the management
of the Company, who agreed that these projections were
reasonable. These projections are based upon various factors and
assumptions, many of which are beyond the control of the
Company. These projections are, by their nature, forward-looking
and may differ materially from the actual future values or
actual future results. Actual future values or results may be
significantly more or less favorable than suggested by such
projections.
38
FBR performed the discounted dividend analysis of the Company to
calculate the estimated present value of the dividends that the
Company could generate in 2008 and beyond. FBR assumed an annual
growth rate of 2% for both assets and net income in the forecast
period of 2008 through 2012, based on discussions with the
Companys management. FBR calculated a range of terminal
values by applying assumed forward net income terminal value
multiples of 19.0x to 31.0x to the Companys calendar year
2012 estimated net income. The dividends and terminal values
were then discounted to present value using assumed discount
rates ranging from 9.5% to 15.5%. The range of terminal values
and discount rates were based on FBRs analysis of numerous
bank and thrift industry metrics over three-, five- and ten-year
periods. Based on a level of equity capital for the Company
deemed appropriate for purposes of this analysis, FBR maintained
a tangible equity to tangible capital ratio of 8%. The
discounted dividend analysis, together with FBRs estimate
of excess capital per share, indicated an implied range of
values for each share of the Companys common stock of
$33.58 to $55.57.
This analysis does not purport to be indicative of actual values
or expected values or an appraisal range of the shares of the
Companys common stock. The discounted dividend analysis is
a widely used valuation methodology, but FBR noted that it
relies on numerous assumptions, including dividend payout rates,
termination values and discount rates, the future values of
which may be significantly more or less than such assumptions.
Any variation from actual assumptions used would produce
different results.
* * * * *
In connection with the review of the merger by our board, FBR
performed a variety of financial and comparative analyses for
the purpose of rendering its opinion. The above summary of these
analyses, while describing the material analyses performed by
FBR, does not purport to be a complete description of the
analyses performed by FBR in arriving at its opinion. The
preparation of a fairness opinion is a complex process and is
not necessarily susceptible to a partial analysis or summary
description. In arriving at its opinion, FBR considered the
results of all of its analyses as a whole and did not attribute
any particular weight to any particular analysis or factor
considered by it; rather, FBR made its determination as to
fairness on the basis of its experience and professional
judgment after considering the result of all such analyses.
Furthermore, FBR believes that selecting any portion of its
analyses, without considering all of its analyses, would create
an incomplete view of the process underlying its analyses and
the opinion.
In performing its analyses, FBR made numerous assumptions with
respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the
control of the Company. Any estimates contained in the analyses
performed by FBR are not necessarily indicative of future
results or actual values, which may be significantly more or
less favorable than those suggested by such estimates. Such
analyses were prepared solely as a part of FBRs analysis
of the fairness from a financial point of view of the
consideration to be offered to the holders of the Companys
common stock pursuant to the merger agreement and were provided
to our board in connection with the delivery of the FBR opinion.
The analyses do not purport to be appraisals of value or to
reflect the prices at which the stock of the Company might
actually trade. In addition, as described above, the FBR opinion
was one of the many factors taken into consideration by our
board in making its determination to approve and adopt the
merger agreement. The consideration pursuant to the merger
agreement was determined through arms-length negotiations
between the Company and Eastern and was approved by our board.
FBR did not recommend any specific consideration to the Company
or advise that any given consideration constituted the only
appropriate consideration for the merger. Consequently, the FBR
analyses as described above should not be viewed as
determinative of the opinion of our board with respect to the
value of the Company or of whether our board would have been
willing to agree to a different consideration.
FBR, as part of its investment banking business, is regularly
engaged in the valuation of businesses and securities in
connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. FBR
has acted as financial advisor to the Company in connection with
the merger. To date, FBR has received a $100,000 retainer fee
and $500,000 fairness opinion fee. FBR will be entitled to
receive an additional fee of approximately $1.7 million
upon consummation of the merger, less the amount of the opinion
fee already paid. In addition, the Company
39
has agreed to indemnify FBR and certain related parties against
certain liabilities and to reimburse FBR for certain expenses
arising in connection with or as a result of its engagement.
FBR and its affiliates provide a wide range of investment
banking and financial services, including financial advisory,
securities trading, brokerage and financing services. In that
regard, FBR and its affiliates have in the past provided and may
in the future provide investment banking and other financial
services to the Company, Eastern and their respective affiliates
for which FBR and its affiliates would expect to receive
compensation. In the ordinary course of business, FBR and its
affiliates may trade in the securities and financial instruments
of the Company and its affiliates for its and its
affiliates own accounts and the accounts of customers.
Accordingly, FBR may at any time hold a long or short position
in such securities and financial instruments.
Litigation
Related to the Merger
On March 13, 2008, Pennsylvania Avenue Funds, an alleged
Company stockholder purportedly representing 817 shares of
our common stock, filed a purported class action lawsuit
allegedly on behalf of all Company stockholders in the
Massachusetts Superior Court against the Company, our board,
Eastern, Eastern Bank and Merger Sub. The case is captioned
Pennsylvania Avenue Funds v. Brandi, et al.
, Civ.
Act.
No. 08-1057.
The complaint generally alleges that our board breached its
fiduciary duties by approving the merger agreement because,
plaintiff alleges, the merger consideration is inadequate, the
merger agreements termination fee and no solicitation
provisions discourage bids from other sources, the transaction
unfairly benefits our board to the disadvantage of our
stockholders, Mr. Brandi, our chief executive officer and
chairman of the board, during negotiations with Eastern, was
also discussing a future position at Eastern, and approval of
the merger by our board was a response by our board to a proxy
contest that might have resulted in three members of our board
being replaced. The complaint also alleges that the Company and
Eastern aided and abetted our boards breach of fiduciary
duties.
The plaintiff seeks the following relief:
|
|
|
|
|
declaring that the lawsuit is a proper class action;
|
|
|
|
enjoining the completion of the merger unless and until we
implement a procedure to obtain the highest price for the
company;
|
|
|
|
declaring the termination fee provisions, as discussed in the
section entitled The Merger Agreement
Termination Fee; Expenses beginning on page 59 of
this proxy statement, to be unfair, unreasonable and improper
deal protection devices and enjoining the payment of any
termination fee to Eastern or its affiliates;
|
|
|
|
declaring that our board has breached its fiduciary duties to
the purported class and that Eastern aided and abetted such
breaches;
|
|
|
|
awarding the plaintiff the costs of the action, including
attorneys fees and experts fees; and
|
|
|
|
granting such other further relief as the Court deems
appropriate.
|
On April 18, 2008, the defendants filed motions to dismiss
the lawsuit in its entirety.
On May 6, 2008, the plaintiff filed an amended complaint,
individually and as a purported class action on behalf of all
Company stockholders. The amended complaint generally makes the
same allegations as those contained in the initial complaint in
support of its claim of a breach of fiduciary duties by our
board, but, in addition, alleges that our board breached its
fiduciary duties by failing, in the preliminary proxy statement,
to disclose adequate information to our stockholders necessary
for them to make a fully informed decision about the merger.
Generally, the amended complaint alleges that the preliminary
proxy statement fails to:
|
|
|
|
|
adequately describe in sufficient detail the process used by the
defendants in deciding to enter into, and agreeing to the terms
of, the merger;
|
|
|
|
provide sufficient detail of the analysis used by FBR or the
criteria for selecting FBR;
|
40
|
|
|
|
|
disclose the fact that a third party investor was seeking to
gain control of the Company and any impact of his efforts on our
boards efforts to sell the Company; and
|
|
|
|
disclose any future employment by Mr. Brandi at Eastern.
|
Like the initial complaint, the amended complaint also alleges
that the Company and Eastern aided and abetted our boards
breach of fiduciary duties. The amended complaint seeks the same
relief sought in the initial complaint.
While we believe the amended complaint is without merit, we and
Eastern have reached a settlement in principal with
plaintiffs counsel that will involve a release of all
claims contained in the amended complaint in exchange for adding
in this proxy statement certain limited disclosures. These
limited disclosures have been added and are a part of this proxy
statement. A final settlement cannot be assured since it is
contingent upon confirmatory discovery, preliminary approval by
the court (including the certification of a provisional
settlement class), the results of a fairness hearing, and final
approval by the court.
Certain
Effects of the Merger
If the merger is consummated, our stockholders will not have an
opportunity to continue their equity interest in the surviving
corporation as an ongoing corporation and, therefore, will not
have the opportunity to share in its future earnings, dividends
or growth, if any.
Delisting
and Deregistration of Our Common Stock
If the merger is consummated, our common stock will be delisted
from the NASDAQ Global Select Market and deregistered under the
Exchange Act, and we will cease to file periodic reports with
the Securities and Exchange Commission.
41
INTERESTS
OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of our board with respect to
the merger agreement, you should be aware that our directors and
executive officers have interests in the merger that may be
different from, or in addition to, those of our stockholders
generally. These interests may create potential conflicts of
interest. Our board was aware of these interests and considered
them, among other matters, when it adopted the merger agreement
and approved the merger and voted to recommend that our
stockholders vote in favor of approving the merger agreement.
Change in
Control Payments
The Company and the Company Bank have employment agreements with:
|
|
|
Name
|
|
Title
|
|
Gerard H. Brandi
|
|
Chairman of the Board, Chief Executive Officer and President of
the Company and the Company Bank
|
Reginald E. Cormier
|
|
Senior Vice President, Treasurer and Chief Financial Officer of
the Company and the Company Bank
|
Donna H. West
|
|
Senior Vice President and Chief Operating Officer of the Company
Bank and Assistant Secretary of the Company
|
The Company Bank has employment agreements with:
|
|
|
Name
|
|
Title
|
|
James L. Milinazzo
|
|
Senior Vice President and Senior Lending Officer
|
Joseph P. Orefice
|
|
Vice President
|
Thomas J. Queeney
|
|
Vice President and Senior Trust Officer
|
William F. Rivers
|
|
Vice President
|
We sometimes refer to these agreements as the employment
agreements.
The employment agreements generally provide that if there is a
change in control of the Company (which stockholder approval of
the merger would constitute), and if at any time during the
two-year period following the change in control, either the
Company
and/or
the
Company Bank, as the case may be, were to terminate the
employment of any of the executive officers for any reason other
than for cause or if any of the officers were to
terminate his or her employment for good reason,
including a substantial adverse change in his or her title or
responsibilities or a reduction in his or her annual base
salary, the executive officer would be entitled to receive a
change in control payment under his or her respective employment
agreements.
In the case of Mr. Brandi, his change in control payment
would be approximately equal to three times the sum of
Mr. Brandis current base compensation, most recent
bonus (or average bonus if higher), and 20% of the difference
between Mr. Brandis current compensation and the
current years compensation limit under
Section 401(a)(17) of the Internal Revenue Code, and the
continuation of all benefits for a period of three years. These
benefits include the continuation of Mr. Brandis
retirement, health and welfare benefits, incentive compensation,
the use of an automobile, membership in health club, and tax and
financial planning expenses.
In the case of the other executive officers, the change in
control payment would be approximately equal to three times his
or her average taxable compensation over the five previous years
of his or her employment with the Company
and/or
the
Company Bank, as the case may be, and the continuation of
benefits for a period of three years. These benefits include the
payment of health insurance premiums as may be necessary to
provide health insurance coverage to the executive officers
substantially similar to the coverage received prior to
termination.
42
Other than for Mr. Brandi, any change in control payments
to the executive officers may be subject to reduction if such
reduction would result in a higher net after-tax amount to the
executive officer. In the case of Mr. Brandi, however, if
any payments received by Mr. Brandi become subject to an
excise tax as a result of Section 4999 of the Internal
Revenue Code, then Mr. Brandi is entitled to an additional
gross-up
payment from the Company or Company Bank in an amount such that
after Mr. Brandi pays all taxes on such
gross-up
payment, he will retain an amount equal to the excise tax
imposed upon the payments.
The table below sets forth, for such executive officer, the
approximate cash severance payable under the employment
agreements, assuming the merger is completed on August 1,
2008:
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
Severance
|
|
Name
|
|
Title
|
|
Amount(1)
|
|
|
Gerard H. Brandi
|
|
Chairman of the Board, Chief Executive Officer and President of
the Company and the Company Bank
|
|
$
|
1,937,880
|
(2)
|
Reginald E. Cormier
|
|
Senior Vice President, Treasurer and Chief Financial Officer of
the Company and the Company Bank
|
|
$
|
395,213
|
|
James L. Milinazzo
|
|
Senior Vice President and Senior Lending Officer of the Company
Bank
|
|
$
|
383,962
|
|
Joseph P. Orefice
|
|
Vice President of the Company Bank
|
|
$
|
172,087
|
|
|
|
Vice President and Senior Trust
|
|
|
|
|
Thomas J. Queeney
|
|
Officer of the Company Bank
|
|
$
|
189,684
|
|
William F. Rivers
|
|
Vice President of the Company Bank
|
|
$
|
287,847
|
|
Donna H. West
|
|
Senior Vice President and Chief Operating Officer of the Company
Bank and Assistant Secretary of the Company
|
|
$
|
453,841
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
3,820,514
|
|
|
|
|
(1)
|
|
The above severance amounts were calculated using the
compensation information available as of May 30, 2008,
which included 2008 base salary and 2007 bonus information. The
above severance amounts do not include the value of benefits
continuation in the following amounts: Mr. Brandi,
$1,040,508; Mr. Cormier, $36,406; Mr. Milinazzo, $0;
Mr. Orefice, $36,406; Mr. Queeney, $36,406;
Mr. Rivers, $36,406; and Ms. West, $13,509.
|
|
(2)
|
|
In the event Mr. Brandi becomes subject to the excise tax
imposed by Section 280G of the Internal Revenue Code, he
would receive a tax
gross-up
payment of approximately $1,250,000. This assumes an excise tax
rate of 20%, a federal income tax rate of 35%, a state income
tax rate of 5.3%, and a Medicare tax rate of 1.45%.
|
Stock
Options of Our Directors and Executive Officers
The merger agreement provides that, at the effective time of the
merger, each outstanding stock option, whether vested or
unvested, to purchase shares of our common stock will be
canceled and the holder of such stock option will receive an
amount in cash equal to the option consideration.
43
Our directors and executive officers holding in-the-money stock
options, whether vested or unvested, as of May 30, 2008
will receive cash payments upon the consummation of the merger
in the approximate amounts (before withholding for applicable
taxes) indicated in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
Number of
|
|
|
Stock Option
|
|
Stock
|
|
|
|
|
|
Stock
|
|
|
Shares
|
|
Option
|
|
|
|
|
|
Option
|
|
|
Exercise
|
|
Settlement
|
|
Name
|
|
Title
|
|
Shares
|
|
|
Price
|
|
Amount
|
|
|
Gerard H. Brandi
|
|
Chairman of the Board, Chief Executive Officer and President of
the Company and the Company Bank
|
|
|
21,250
|
|
|
|
$19.00 - $37.15
|
|
|
$
|
219,100
|
|
Allan S. Bufferd
|
|
Director
|
|
|
8,250
|
|
|
|
$19.00 - $37.15
|
|
|
$
|
91,355
|
|
Kathleen M. Camilli
|
|
Director
|
|
|
5,000
|
|
|
|
$29.60 - $37.15
|
|
|
$
|
31,700
|
|
Stephen W. Carr
|
|
Director
|
|
|
3,000
|
|
|
|
$32.50 - $36.15
|
|
|
$
|
18,750
|
|
Alexander S. Costello
|
|
Director
|
|
|
8,250
|
|
|
|
$19.00 - $37.15
|
|
|
$
|
91,355
|
|
O. Bradley Latham
|
|
Director
|
|
|
3,000
|
|
|
|
$32.60 - $36.15
|
|
|
$
|
18,450
|
|
Stephen E. Marshall
|
|
Director
|
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5,875
|
|
|
|
$27.63 - $37.15
|
|
|
$
|
43,883
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Paul J. McCarthy
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Director
|
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2,000
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|
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$32.92 - $36.15
|
|
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$
|
10,930
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Nalin M. Mistry
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Director
|
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2,000
|
|
|
|
$32.92 - $36.15
|
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$
|
10,930
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Nancy L. Pettinelli
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Director
|
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8,250
|
|
|
|
$19.00 - $37.15
|
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$
|
91,355
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William F. Rucci, Jr.
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Director
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3,000
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|
|
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$32.60 - $36.15
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|
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$
|
18,450
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Reginald E. Cormier
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Senior Vice President, Treasurer and Chief Financial Officer of
the Company and the Company Bank
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20,000
|
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$19.00 - $37.15
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$
|
220,360
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James L. Milinazzo
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Senior Vice President and Senior Lending Officer of the Company
Bank
|
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7,400
|
|
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$32.60 - $36.15
|
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|
$
|
45,405
|
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Joseph P. Orefice
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Vice President of the Company Bank
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|
7,250
|
|
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|
$32.60 - $37.15
|
|
|
$
|
40,962
|
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Thomas J. Queeney
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Vice President and Senior Trust Officer of the Company Bank
|
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17,750
|
|
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$19.00 -$37.15
|
|
|
$
|
206,820
|
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William F. Rivers
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Vice President of the Company Bank
|
|
|
8,000
|
|
|
|
$32.60 - $37.15
|
|
|
$
|
42,600
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Donna H. West
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Senior Vice President and Chief Operating Officer of the Company
Bank and Assistant Secretary of the Company
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|
20,000
|
|
|
|
$19.00 - $37.15
|
|
|
$
|
220,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
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|
|
|
|
|
|
|
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$
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1,422,765
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|
|
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|
|
|
|
|
|
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Severance
Obligations
If an eligible employee of the Company or any of our
subsidiaries is terminated by Eastern or Eastern Bank for any
reason other than cause within one year following the effective
time of the merger, the eligible employee will be provided
severance benefits as determined under the Company Banks
Severance Pay Plan in effect on March 10, 2008. None of our
directors or our executive officers is eligible for benefits
under this plan.
In addition, we have created a change in control retention bonus
plan in an aggregate amount of $226,500. Distributions from this
plan have been allocated among certain of our employees to be
distributed according to the terms of individual letter
agreements with these employees.
Indemnification
of Our Directors and Executive Officers
Under the terms of the merger agreement, our directors and
executive officers will be entitled to indemnification in
specified circumstances, as more fully described in the section
entitled The Merger Agreement Indemnification
and Insurance on page 62 of this proxy statement.
44
Director
Relationships
Paul J. McCarthy, one of our directors, is the Executive Vice
President and director of Jobs for Massachusetts, Inc., a
non-profit organization whose mission is to promote the economic
and social conditions that support job growth in Massachusetts
through cooperation among business, government and labor
leaders. Currently, there are 36 members on the board of
directors for Jobs for Massachusetts, Inc., including the chief
executive officer of Eastern, the managing partner of Goodwin
Procter, our outside legal counsel, and the managing partner of
Nutter McClennen & Fish LLP, outside legal counsel to
Eastern. None of these individuals serves on the compensation
committee of the board of directors for Jobs for Massachusetts,
Inc. Our board was aware of this relationship and considered
whether these matters created a conflict of interest for
Mr. McCarthy that would prevent him from participating in
board deliberations concerning a potential transaction with
Eastern. Our board concluded that no material conflict of
interest existed that would prevent Mr. McCarthy from
participating in any of the discussions or deliberations
concerning a potential transaction with Eastern.
Voting
Agreements
The following summary of the voting agreements is qualified by
reference to the complete text of the form of voting agreement,
which is attached to this proxy statement as
Annex C
and incorporated in this proxy statement by reference.
In connection with the merger agreement, Eastern entered into
voting agreements with our directors and executive officers, who
are also stockholders of our company or hold stock options,
consisting of Gerard H. Brandi, Allan S. Bufferd, Kathleen M.
Camilli, Stephen W. Carr, Reginald E. Cormier, Alexander S.
Costello, O. Bradley Latham, Stephen E. Marshall, Paul J.
McCarthy, James L. Milinazzo, Nalin M. Mistry, Joseph P.
Orefice, Nancy L. Pettinelli, Thomas J. Queeney, William F.
Rivers, William F. Rucci, Jr., Donna H. West, and their
affiliates. Pursuant to the voting agreements, each of these
stockholders has agreed that, at the special meeting held in
connection with the merger agreement or for purposes of any
other vote taken in connection with the merger agreement, he,
she or it would:
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appear and cause all of his, her or its shares of our common
stock to be counted as present for purposes of calculating a
quorum;
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vote in favor of approval of the merger agreement;
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vote against any action or agreement that would reasonably be
expected to result in a breach of any covenant, representation
or warranty or any other obligation or agreement of the Company
contained in the merger agreement or of such stockholder in the
voting agreement;
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vote against any acquisition proposal or any other action that
is intended, or could reasonably be expected to, materially
impede, interfere or be inconsistent with, delay, discourage or
materially and adversely affect consummation of the transactions
contemplated by the merger agreement or any of such
stockholders obligations under the voting
agreement; and
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appoint Eastern as his, her or its proxy with respect to the
voting of his, her or its shares if the stockholder is unable to
perform his, her or its obligations under the respective voting
agreement.
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As of the record date, there were 384,971 shares of our
common stock subject to the voting agreements, which represented
approximately 9% of our outstanding common stock as of that
date. Under the voting agreements, each of the stockholders
generally agreed not to sell, assign, transfer or otherwise
dispose of any of his, her or its shares of our common stock
prior to the merger.
Under the voting agreements, each of the stockholders also has
agreed not to, and not to permit any of his, her or its
affiliates to:
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initiate, solicit, induce, knowingly encourage, or knowingly
take any action that would reasonably be expected to materially
facilitate the making of, any offer or proposal which
constitutes, or could reasonably be expected to lead to, an
acquisition proposal;
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45
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participate in any discussions or negotiations regarding any
acquisition proposal or furnish or otherwise afford access to
any person (other than Eastern, Eastern Bank and Merger Sub) any
information or data with respect to the Company or any of our
subsidiaries or otherwise relating to an acquisition proposal;
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enter into any agreement, including without limitation, any
agreement in principle, letter of intent, memorandum of
understanding or similar arrangement with respect to an
acquisition proposal;
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solicit proxies or become a participant in a
solicitation (as such terms are defined in
Regulation 14A under the Exchange Act) with respect to an
acquisition proposal (other than the merger agreement) or
otherwise encourage or assist any party in taking or planning
any action that would reasonably be expected to compete with,
restrain or otherwise serve to interfere with or inhibit the
timely consummation of the merger in accordance with the terms
of the merger agreement;
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initiate a stockholders vote or action by consent of our
stockholders with respect to an acquisition proposal; or
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except by reason of the voting agreement, become a member of a
group (as such term is used in Section 13(d) of
the Exchange Act) with respect to any voting securities of the
Company that takes any action in support of an acquisition
proposal.
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Nothing in the voting agreements will be deemed to apply to, or
limit in any manner, the obligations of the stockholders to
comply with whatever fiduciary duties they may have as a
director, officer or employee of the Company.
The voting agreements will terminate on the earliest to occur of
(1) the effective time of the merger, (2) the
termination of the merger agreement in accordance with its
terms, or (3) upon mutual written agreement of the parties
to the voting agreement.
46
THE
MERGER AGREEMENT
The following is a summary of the material terms of the
merger agreement, a copy of which is attached to this proxy
statement as Annex A and incorporated in this proxy
statement by reference. This description is qualified in its
entirety by, and made subject to, the more complete information
set forth in the merger agreement. You should read the merger
agreement carefully and in its entirety. This summary may not
contain all of the information about the merger agreement that
is important to you.
Except for the merger agreements status as a
contractual document that establishes and governs the legal
relations of the parties thereto with respect to the merger, we
do not intend for its text to be a source of factual, business
or operational information about us and our subsidiaries. The
representations, warranties and covenants made by the parties in
the merger agreement are qualified and limited, including by
information in the schedules referenced in the merger agreement
that we delivered in connection with the execution of the merger
agreement. Representations and warranties may be used as a tool
to allocate risks between the respective parties to the merger
agreement, including where the parties do not have complete
knowledge of all facts, instead of establishing such matters as
facts. Furthermore, the representations and warranties may be
subject to different standards of materiality applicable to the
contracting parties, which may differ from what may be viewed as
material by our stockholders. These representations and
warranties may or may not have been accurate as of any specific
date and do not purport to be accurate as of the date of this
proxy statement. Moreover, information concerning the subject
matter of the representations and warranties may have changed
since the date of the merger agreement and subsequent
developments or new information qualifying a representation or
warranty may have been included in this proxy statement.
Accordingly, the representations and warranties should not be
relied upon as statements of factual information. Stockholders
are not third-party beneficiaries under the merger agreement
and, therefore, may not directly enforce or rely on its terms
and conditions and should not rely on the representations,
warranties and covenants or any descriptions thereof as
characterizations of the actual state of facts or condition of
the Company or our affiliates.
Structure
If all of the conditions to the merger are satisfied or waived
in accordance with the merger agreement, Merger Sub, a
wholly-owned subsidiary of Eastern and created solely for the
purpose of engaging in the transactions contemplated by the
merger agreement, will merge with and into the Company, with the
Company being the surviving corporation. The Company will cease
to exist as a separate company and our common stock will no
longer be listed on the NASDAQ Global Select Market and we will
no longer file periodic reports with the Securities and Exchange
Commission. After the merger, the Company will be a wholly-owned
subsidiary of Eastern. We sometimes refer to the Company after
the merger as the surviving corporation.
Effective
Time
The merger will become effective when the certificate of merger
has been filed with the Secretary of State of the State of
Delaware or such time as is specified in the certificate of
merger. We expect the merger to become effective as soon as
practicable after the special meeting and the satisfaction or
waiver of all of the other conditions to closing the merger.
However, under the merger agreement, Eastern will not be
required to consummate the merger until three business days
after all of the conditions to closing the merger described in
the merger agreement are satisfied or waived, except for
conditions that by their terms are required to be satisfied or
waived at the closing. We refer to the time at which the merger
is consummated as the effective time. Although we expect that
the merger will be consummated during the third quarter of 2008,
we cannot specify when, or assure you that, we and Eastern will
satisfy or waive all of the conditions to the merger.
Certificate
of Incorporation and Bylaws
The certificate of incorporation of Merger Sub, as in effect
immediately prior to the effective time of the merger, will be
the certificate of incorporation of the surviving corporation,
except the name of the surviving corporation will be MASSBANK
Corp. At the effective time of the merger, the bylaws of Merger
Sub, as in
47
effect immediately prior to the effective time of the merger,
will become the bylaws of the surviving corporation.
Board of
Directors and Officers of the Surviving Corporation
The directors of Merger Sub immediately prior to the merger will
become the directors of the surviving corporation following the
merger. The officers of Merger Sub immediately prior to the
merger will become the officers of the surviving corporation
following the merger.
Merger
Consideration
At the effective time of the merger, each outstanding share of
our common stock will be converted into the right to receive
$40.00 per share (which we sometimes refer to as the merger
consideration), other than shares held by stockholders who
properly exercise and perfect their appraisal rights and any
shares owned by Eastern or us. No interest will be paid with
respect to the merger consideration. Our stockholders are
entitled to assert appraisal rights and, if the merger is
consummated and all requirements of Delaware law are satisfied,
to receive payment equal to the fair value of their shares of
our common stock, determined in the manner set forth under the
Delaware General Corporation Law. For more information on
appraisal rights, see the section entitled Appraisal
Rights beginning on page 63 of this proxy statement.
Dissenting
Shares
Shares of our common stock that are held by stockholders who
have perfected demands for appraisal of their shares in
accordance with Delaware law will not be converted into the
right to receive the merger consideration. We have agreed to
give Eastern and Merger Sub prompt notice of any demands for
appraisal we receive. We have also agreed to give Eastern the
opportunity to participate in all negotiations and proceedings
with respect to demands for appraisal. We will not, except with
the prior written consent of Eastern, make any payment with
respect to any demands for appraisals, or settle or offer to
settle any demands.
Under the merger agreement, Eastern will not have to consummate
the merger if stockholders representing more than 15% of the
outstanding shares of our common stock exercise their appraisal
rights. For more information, see the section entitled
Conditions to the Merger beginning on
page 52 of this proxy statement.
Rights of
Holders of Our Common Stock at the Effective Time of the
Merger
At the effective time of the merger, holders of our common stock
will cease to be, and will have no rights as, our stockholders,
other than the right to receive the merger consideration and any
unpaid dividends with a record date occurring prior to the
effective time of the merger. After the merger occurs, there
will be no transfers on our stock transfer books of any shares
of our common stock.
Exchange
of Stock Certificates
Prior to the effective time of the merger, Eastern will appoint
a paying agent that will make payment of the merger
consideration in exchange for certificates representing shares
of our common stock. Eastern will deposit sufficient cash with
the paying agent on or before the effective time of the merger
in order to permit the payment of the merger consideration. As
soon as reasonably practicable after the effective time of the
merger, but in no event later than five business days after the
effective time of the merger, the paying agent will mail to each
holder of record of a certificate representing shares of our
common stock, a letter of transmittal and instructions
explaining how to surrender your shares of our common stock in
exchange for the merger consideration and instructions for use
by holders of shares issued in uncertificated form. The letter
of transmittal and instructions will specify that delivery will
be effected and risk of loss and title to stock certificates
will pass only upon proper delivery of the stock certificate to
the paying agent and will specify how to properly surrender your
stock certificates for payment.
48
You should not send your stock certificates for exchange
until you receive the letter of transmittal and instructions
referred to above. Do not return your stock certificate with the
enclosed proxy card.
When you deliver your stock certificates to the paying agent
along with a properly executed letter of transmittal and any
other required documents, you will receive the merger
consideration to which you are entitled under the merger
agreement for each share of common stock previously represented
by your stock certificate, and the stock certificate will be
canceled. Eastern, the paying agent and the surviving
corporation will be entitled to deduct and withhold from the
merger consideration any amounts required to be withheld under
the Internal Revenue Code or any provision of federal, state,
local or foreign law.
You are not entitled to receive any interest on the merger
consideration. The paying agent will issue a check for the
merger consideration only in the name in which a surrendered
stock certificate is registered, unless the stock certificate
surrendered is properly endorsed, or otherwise in proper form
for transfer, and you show that you paid any applicable stock
transfer taxes. Until surrendered in accordance with the
provisions stated above, each certificate will, after the
effective time of the merger, represent only the right to
receive the merger consideration.
Beginning one year after the effective time of the merger,
Eastern will act as the paying agent and our former stockholders
may look to Eastern for any amounts owed to them. None of
Eastern, Eastern Bank, Merger Sub, the Company, the Company Bank
or the paying agent will be liable to any person in respect of
any cash delivered to a public official pursuant to applicable
abandoned property, escheat or similar law.
After the effective time of the merger, there will be no
transfers of certificates that previously represented common
stock on our stock record books. If, after the effective time of
the merger, stock certificates are presented to Eastern, the
surviving corporation or the paying agent for payment, they will
be canceled and exchanged for the merger consideration, without
interest. However, no holder of a stock certificate will have
any greater rights against the surviving corporation than may be
accorded to general creditors of the surviving corporation under
applicable law.
If any of your certificates representing our common stock have
been lost, stolen or destroyed, you will be entitled to obtain
the merger consideration after you make an affidavit of that
fact and, if required by Eastern or the paying agent, post a
bond as Eastern or the paying agent may direct as indemnity
against any claim that may be made against the surviving
corporation with respect to your lost, stolen or destroyed stock
certificates.
Our
Conduct of Business Prior to Completing the Merger
Under the merger agreement, we have agreed that, from the date
of the merger agreement through the effective time of the merger
or the date, if any, on which the merger agreement is
terminated, as discussed in the section entitled
Termination of the Merger Agreement
beginning on page 58 of this proxy statement, we and our
subsidiaries will not, except as expressly permitted by the
merger agreement, required by law or to the extent that Eastern
otherwise consents in writing:
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conduct our business other than in the ordinary and usual course
consistent with recent past practice;
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fail to use reasonable best efforts to preserve intact our
business organizations and assets, and maintain our rights,
franchises and existing relations with customers, suppliers,
employees and business associates;
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take any action that would adversely affect the ability of any
party to receive any necessary approval from any governmental
authority required for the transactions contemplated by the
merger agreement or adversely affect a partys ability to
perform any of its material obligations under the merger
agreement;
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issue or sell any securities or equity equivalents, except with
respect to stock options outstanding on March 10, 2008 and
existing deferral elections under our Director Deferred
Compensation Plan as of March 10, 2008;
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accelerate the vesting of any existing stock options or other
equity rights;
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effect a split, combination or reclassification of our capital
stock;
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49
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declare or pay any dividend or other distribution on our capital
stock, other than regular quarterly cash dividends in an amount
not to exceed $0.29 per share and dividends from wholly-owned
subsidiaries to us or to another of our wholly-owned
subsidiaries;
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directly or indirectly combine, redeem, reclassify, purchase or
otherwise acquire any shares of our stock;
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enter into or amend any employment or similar agreements with
any of our directors, officers, employees or consultants or
increase the compensation or benefits of any of our directors,
officers, employees or consultants, except:
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for normal increases in compensation to non-executive officer
employees in the ordinary course of business consistent with
recent past practice, provided that no increase will exceed 15%
of an individuals current annual compensation (unless in
connection with a promotion consistent with recent past
practice) and 5% in the aggregate;
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as may be required by law, including Section 409A of the
Internal Revenue Code;
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to satisfy contractual obligations existing as of March 10,
2008; or
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the hiring of at-will employees at an annual rate of salary not
to exceed $50,000 to fill vacancies that may arise from time to
time in the ordinary course of business;
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enter into, establish, adopt or amend any benefit plans or
arrangement or any agreement, arrangement, plan or policy
between us and any of our directors, officers, or other
employees, except:
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as may be required by applicable law;
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to satisfy contractual obligations existing as of March 10,
2008; or
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as otherwise permitted under the merger agreement;
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except as otherwise permitted under the merger agreement:
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sell, transfer, mortgage, encumber or otherwise dispose of or
discontinue any of our assets, deposits, business or properties
except in the ordinary course of business consistent with recent
past practice and in a transaction that, together with all other
such transactions, is not material to us and our subsidiaries
taken as whole; or
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transfer ownership or grant any license or other rights to any
person or entity of or in respect of any of our material
intellectual property, other than grants of non-exclusive
licenses pursuant to license agreements entered into in the
ordinary course of business consistent with recent past practice;
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amend or change our organizational and charter documents or take
any action to exempt any person (other than Eastern or its
subsidiaries) from any takeover laws or similarly restrictive
provisions of our organizational documents;
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terminate, amend or waive any provisions of any confidentiality
or standstill agreements in place with any person;
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acquire all or any portion of the assets, business, deposits or
properties of any other entity other than by way of foreclosures
or acquisitions of control in a bona fide fiduciary capacity or
in satisfaction of debts previously contracted in good faith, in
each case, in the ordinary course of business consistent with
recent past practices;
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make any capital expenditures other than capital expenditures in
the ordinary course of business consistent with recent past
practice in amounts not exceeding $50,000 individually or
$100,000 in the aggregate, except as otherwise permitted by the
merger agreement or as required pursuant to new contracts
entered into in the ordinary course of business consistent with
recent past practices;
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enter into or terminate any material contract or amend or modify
in any material respect any of our existing material contracts;
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50
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settle any litigation;
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enter into any new material line of business, change our
material lending, investment, underwriting, risk and asset
liability management and other material banking and operating
policies, except as required by law, regulation or policies
imposed by any governmental authority, or file any application
or make any contract with respect to branching or site location
or relocation;
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enter into any derivative contract;
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incur any indebtedness for borrowed money (other than deposits,
federal funds purchased, federal home loan bank advances and
securities sold under agreements to repurchase, in each case, in
the ordinary course of business consistent with recent past
practice);
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assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other person,
other than in the ordinary course of business consistent with
recent past practice, or cancel, release or assign any material
amount of indebtedness, or any claims held, to any other person;
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acquire, sell or otherwise dispose of any debt, equity or other
investment security except:
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the acquisition, sale or other disposition of any investment
security in the ordinary course of business consistent with
recent 2008 past practice (particularly with respect to the size
and duration of the portfolio) and in accordance with the
Company Banks investment policy, which policy will not be
amended or modified except to the extent required by law or as
we may, in good faith, determine is necessary to comply with
safe and sound banking practices (in which case, we will give
Eastern notice thereof and will give due consideration to
Easterns request with respect thereto);
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by way of foreclosure or acquisitions or sales in a bona fide
fiduciary capacity; or
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in satisfaction of debts previously contracted in good faith;
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make any loan, loan commitment, letter of credit or other
extension of credit other than in the ordinary course of
business consistent with recent past practice;
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invest in real estate or in any real estate development project
(other than by way of foreclosure or acquisitions in a bona fide
fiduciary capacity or in satisfaction of a debt previously
contracted in good faith, in each case in the ordinary course of
business consistent with recent past practice);
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implement or adopt any material change in our accounting
principles, practices or methods, other than as may be required
by changes in laws or regulations or by generally accepted
accounting principles in the United States;
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make or change any tax election, file any material amended tax
return, fail to timely file any material tax return, enter into
any material closing agreement, settle or compromise any
material liability with respect to taxes, agree to any material
adjustment of any tax attribute, file any material claim for a
refund of taxes, or consent to any extension or waiver of the
limitation period applicable to any material tax claim or
assessment;
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change our loan policies, practices and procedures, except as
required by law or any governmental authority;
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foreclose on or take a deed or title to any loan property
without first conducting a Phase I environmental assessment of
the property or foreclose on any loan property if such
environmental assessment indicates the presence of a hazardous
material in amounts which, if such foreclosure were to occur,
would be material to the Company Bank;
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knowingly take any action that is intended, or is reasonably
likely to result in (1) any of our representations and
warranties in the merger agreement being or becoming untrue in
any material respect at any time prior to the effective time of
the merger, (2) any of the conditions to the merger set
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51
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forth in Article VII of the merger agreement not being
satisfied, or (3) a material violation of any provision of
the merger agreement, except, in every case, as may be required
by applicable law; and
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agree or commit to do, or adopt any resolution of our board in
support of, any of the foregoing.
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The agreements relating to the conduct of our business contained
in the merger agreement are complicated and not easily
summarized. You are urged to carefully read Article V of
the merger agreement, which is attached to this proxy statement
as
Annex A
.
Easterns
Conduct of Business Prior to Completing the Merger
From the date of the merger agreement through the effective time
of the merger or the date, if any, on which the merger agreement
is terminated, as discussed in the section entitled
Termination of the Merger Agreement
beginning on page 58 of this proxy statement, Eastern has
agreed, and has agreed to cause its subsidiaries, except as
permitted by the merger agreement or otherwise consented to by
us, not to knowingly take any action that would, or would
reasonably be likely to result in (1) any of its
representations and warranties in the merger agreement being or
becoming untrue in any material respect at any time prior to the
effective time of the merger, (2) any of the conditions to
the merger set forth in Article VII of the merger agreement
not being satisfied, or (3) a material violation of any
provision of the merger agreement, except, in every case, as may
be required by applicable law.
Stockholder
Meeting
We have agreed to hold as promptly as practicable a meeting of
our stockholders to vote on the proposal to approve the merger
agreement. We have also agreed to ensure that the special
meeting is called, noticed and held in compliance with the
Delaware General Corporation Law, our restated certificate of
incorporation and bylaws and all other applicable legal
requirements.
Conditions
to the Merger
The obligations of the Company and Eastern to consummate the
merger are subject to the satisfaction or waiver of the
following conditions:
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the approval of the merger agreement by the required vote of our
stockholders;
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the Company and Eastern having obtained all regulatory approvals
required to consummate the transactions contemplated by the
merger agreement and all related statutory waiting periods
having expired, and none of the regulatory approvals having
imposed any term, condition or restriction that Eastern
reasonably determines would prohibit or materially limit the
ownership or operation by the Company or Eastern or any of their
respective subsidiaries of all or any material portion of the
business or assets of the Company and its subsidiaries, taken as
a whole, or Eastern or its subsidiaries, taken as a whole, or
compel Eastern or any of its subsidiaries to dispose of or hold
separate all or any material portion of the business or assets
of the Company and its subsidiaries, taken as a whole, or
Eastern or any of its subsidiaries (which we sometimes refer to
as a burdensome condition); and
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there must be no order, decree or injunction in effect, nor any
law, statue or regulation enacted or adopted, that enjoins,
prohibits, materially restricts or makes illegal consummation of
any of the transactions contemplated by the merger agreement.
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Our obligation to consummate the merger is subject to the
satisfaction of the following additional conditions, any of
which can be waived by us:
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each of the representations and warranties of Eastern in the
merger agreement must be true and correct as of March 10,
2008 and as of the closing date of the merger as though made on
and as of such date and time (except to the extent that any such
representation and warranty speaks of a specified date, in which
case such representation and warranty must be true and correct
as of such specified date), unless the failure of those
representations and warranties to be true and correct,
individually or in the aggregate, has not had, or would not
reasonably be expected to have, a material adverse effect on
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Eastern (except for certain representations and warranties that
will be deemed untrue, incorrect and breached if they are not
true and correct in all respects);
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Eastern must have performed and complied with, in all material
respects, all obligations and agreements required by the merger
agreement to be performed or complied with by Eastern on or
prior to the closing date of the merger; and
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we must have received a certificate signed by the chief
executive officer or the chief financial officer of Eastern,
dated as of the closing date of the merger, certifying as to the
satisfaction of the preceding two conditions.
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The obligations of Eastern to consummate the merger are subject
to the satisfaction of the following additional conditions, any
of which can be waived by Eastern:
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each of our representations and warranties in the merger
agreement must be true and correct as of March 10, 2008 and
as of the closing date of the merger as though made on and as of
such date and time (except to the extent that any such
representation and warranty speaks of a specified date, in which
case such representation and warranty must be true and correct
as of such specified date), unless the failure of those
representations and warranties to be true and correct,
individually or in the aggregate, has not had, or would not
reasonably be expected to have, a material adverse effect on us
(except for certain representations and warranties that will be
deemed untrue, incorrect and breached if they are not true and
correct in all respects);
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we must have performed and complied with, in all material
respects, all obligations and agreements required by the merger
agreement to be performed or complied with by us on or prior to
the closing date of the merger;
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there must not have occurred a material adverse effect on us
since March 10, 2008;
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Eastern must have received a certificate signed by our chief
executive officer or chief financial officer, dated as of the
closing date of the merger, certifying as to the satisfaction of
the preceding three conditions;
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we will not have any outstanding shares of capital stock or
common stock equivalents outstanding immediately prior to the
effective time of the merger other than our common stock and
stock options that were outstanding on March 10, 2008, and
the number of shares of our common stock outstanding immediately
prior to the effective time of the merger will not exceed
4,233,079 shares, except to the extent increased as a
result of the exercise of any stock options that were
outstanding as of March 10, 2008;
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all consents or approvals of all persons (other than
governmental authorities) required for the consummation of the
merger have been obtained, unless the failure to obtain any
consent or approval would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on
us; and
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the total number of shares of our common stock held by
stockholders that have properly exercised their appraisal rights
available under Section 262 of the Delaware General
Corporation Law must not exceed 15% of the issued and
outstanding shares of our common stock as of the record date for
the special meeting.
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Representations
and Warranties
In the merger agreement, we and the Company Bank made customary
representations and warranties, subject to exceptions that were
disclosed to Eastern, concerning our business and assets. These
representations and warranties related to, among other things:
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organization, good standing, and authority;
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our capital structure;
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our subsidiaries;
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corporate power;
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corporate authority;
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no violation or breach of certain organizational documents,
agreements and governmental orders;
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organizational documents;
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regulatory approvals;
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compliance with laws;
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litigation;
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Securities and Exchange Commission documents and filings;
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absence of certain changes;
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taxes and tax returns;
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employee benefit plans;
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labor matters;
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insurance;
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environmental matters;
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intellectual property;
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material agreements;
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property and leases;
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regulatory capitalization;
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loans and nonperforming and classified assets;
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trust business and the administration of fiduciary accounts;
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investment management and related activities;
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risk management instruments;
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investment securities and commodities;
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repurchase agreements;
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deposit insurance;
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Community Reinvestment Act and anti-money laundering compliance;
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transactions with affiliates;
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inapplicability of takeover provisions;
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payment of fees to brokers in connection with the merger;
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the opinion of our financial advisor;
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our stockholder rights agreement;
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the accuracy of the information contained in this proxy
statement; and
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disclosure.
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The merger agreement also contains customary representations and
warranties of Eastern, Eastern Bank and Merger Sub relating to,
among other things:
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organization, good standing and authority;
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corporate power;
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corporate authority;
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regulatory approvals;
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no violation or breach of certain organizational documents,
agreements and governmental orders;
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organizational documents;
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compliance with laws;
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litigation;
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regulatory capitalization;
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deposit insurance;
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sufficient funds to complete the merger;
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net worth;
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financial condition;
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payment of fees to brokers in connection with the merger;
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the accuracy of the information contained in this proxy
statement; and
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disclosure.
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Many of our representations and warranties are qualified by a
material adverse effect standard. A material adverse effect
means, with respect to us, any fact, change, event, development,
effect or circumstance that, individually or in the aggregate,
(1) are, or would reasonably be expected to be, materially
adverse to the business, operations, assets, liabilities,
condition (financial or otherwise), results of operations, cash
flows, assets or properties of the Company and our subsidiaries,
taken as a whole, or (2) would reasonably be expected to
prevent us from performing our obligations under the merger
agreement or consummating the transactions contemplated by the
merger agreement, without including the impact of:
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any fact, change, event, development, effect or circumstance
generally affecting comparable banks or their holding companies
or arising from changes in general business or economic
conditions (and not specifically relating to or having the
effect of specifically relating to or having a materially
disproportionate effect (relative to most other comparable banks
or their holding companies) on us and our subsidiaries, taken as
a whole);
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any fact, change, event, development, effect or circumstance
resulting from any change in law, generally accepted accounting
principles in the U.S. or regulatory accounting, which
affects generally entities such as us and our subsidiaries,
taken as a whole (and not specifically relating to or having the
effect of specifically relating to or having a materially
disproportionate effect (relative to most other comparable banks
or their holding companies) on us and our subsidiaries taken as
a whole);
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actions and omissions of us or any of our subsidiaries taken
with the prior written consent of Eastern in furtherance of the
transactions contemplated by the merger agreement or otherwise
permitted to be taken by us under the merger agreement;
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any fact, change, event, development, effect or circumstance
resulting from the announcement or pendency of the transactions
contemplated by the merger agreement; and
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any failure by us to meet any estimates of revenues or earnings
for any period ending on or after March 10, 2008 and prior
to the closing of the merger; except that this exception will
not prevent or
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otherwise affect a determination that any change, effect,
circumstance or development underlying such failure has resulted
in, or contributed to, a material adverse effect on us.
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The representations and warranties included in the merger
agreement are complicated and not easily summarized. You are
urged to carefully read Articles III and IV of the
merger agreement, which is attached to this proxy statement as
Annex A
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Solicitation
of Proposals from Other Parties
We have agreed that neither we nor our subsidiaries nor any of
our respective officers, directors, employees, investment
bankers, financial advisors, attorneys, accountants,
consultants, affiliates and other of our agents (which we
sometimes refer to as our representatives) will, directly or
indirectly:
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initiate, solicit, induce, knowingly encourage or knowingly take
any action that would reasonably be expected to materially
facilitate the making of any offer or proposal which
constitutes, or could reasonably be expected to lead to, an
acquisition proposal;
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participate in any discussions or negotiations regarding any
acquisition proposal or furnish, or otherwise afford access, to
any person (other than Eastern, Eastern Bank and Merger Sub) any
information with respect to us or any of our subsidiaries or
otherwise relating to an acquisition proposal;
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release any person from, waive any provisions of, or fail to
enforce any confidentiality agreement or standstill agreement to
which we are a party; or
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enter into any agreement, agreement in principle, letter of
intent, memorandum of understanding or similar arrangement with
respect to any acquisition proposal or approve or recommend or
resolve to approve or recommend any acquisition proposal or any
agreement, agreement in principle, letter of intent, memorandum
of understanding or similar arrangement relating to an
acquisition proposal.
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An acquisition proposal means an offer or proposal (other than
an offer or proposal from Eastern), whether or not in writing,
contemplating, relating to, or that could reasonably be expected
to lead to, an acquisition transaction. An acquisition
transaction means:
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any transaction or series of transactions involving any merger,
consolidation, recapitalization, share exchange, liquidation,
dissolution or similar transaction involving us or any of our
subsidiaries;
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any transaction pursuant to which any third party or group
acquires or would acquire (whether through sale, lease or other
disposition), directly or indirectly, any assets of us or any of
our subsidiaries representing, in the aggregate, 15% or more of
the assets of the Company and our subsidiaries on a consolidated
basis;
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any issuance, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar
transaction) securities (or options, rights or warrants to
purchase or securities convertible into, such securities)
representing 15% or more of the votes attached to the
outstanding securities of the Company or any of our subsidiaries;
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any tender offer or exchange offer that, if consummated, would
result in any third party or group beneficially owning 15% or
more of any class of equity securities of the Company or any of
our subsidiaries; or
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any transaction which is similar in form, substance or purpose
to any of the foregoing transactions, or any combination of the
foregoing.
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If, prior to the approval of the merger agreement by our
stockholders, we receive a bona fide unsolicited written
acquisition proposal that did not result from a breach by us of
any of the no solicitation provisions in the merger agreement,
as discussed above, our board may participate in discussions or
negotiations regarding the unsolicited acquisition proposal or
furnish the third party with, or otherwise afford access to the
third party
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of, any information with respect to us or any of our
subsidiaries or otherwise relating to the acquisition proposal
if:
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our board first determines in good faith, after consultation
with and having considered the advice of our outside legal
counsel and a nationally recognized, independent financial
advisor, that
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such acquisition proposal constitutes or is reasonably likely to
lead to a superior proposal; and
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the failure to take such actions would be inconsistent with its
fiduciary duties to our stockholders under applicable
law; and
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prior to furnishing or affording access to any information with
respect to the Company or any of our subsidiaries or otherwise
relating to an acquisition proposal, the third party enters into
a confidentiality agreement with us containing terms no less
favorable to us than those contained in our confidentiality
agreement with Eastern.
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A superior proposal means any bona fide written proposal (on its
most recently amended or modified terms, if amended or modified)
made by a third party to enter into an acquisition transaction
on terms that our board determines in its good faith judgment,
after consultation with and having considered the advice of
outside legal counsel and a nationally recognized, independent
financial advisor:
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would, if consummated, result in the acquisition of all, but not
less than all, of the issued and outstanding shares of our
common stock or all, or substantially all, of the assets of the
Company and our subsidiaries on a consolidated basis;
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would result in a transaction that
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involves consideration to the holders of the shares of our
common stock that is more favorable, from a financial point of
view, than the consideration to be paid to our stockholders
pursuant to the merger agreement, considering, among other
things, the nature of the consideration being offered and any
material regulatory approvals or other risks associated with the
timing of the proposed transaction beyond or in addition to
those specifically contemplated by the merger agreement, and
which proposal is not conditioned upon obtaining additional
financing; and
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is, in light of the other terms of such proposal, more favorable
to our stockholders than the merger and the transactions
contemplated by the merger agreement; and
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is reasonably likely to be completed on the terms proposed,
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in each case taking into account all legal, financial,
regulatory and other aspects of the proposal.
We have agreed to promptly, and in any event within
24 hours, notify Eastern in writing if any proposals or
offers are received by, any information is requested from, or
any negotiations or discussions are sought to be initiated or
continued with, us or any of our representatives, in each case
in connection with any acquisition proposal. Any such notice
will indicate the name of the person initiating such discussions
or negotiations or making such proposal, offer or information
request and the material terms and conditions of any proposals
or offers and, in the case of written materials, providing
copies of such materials. We are also required to keep Eastern
informed, on a current basis, of the status and terms of any
such proposal, offer, information request, negotiations or
discussions (including any amendments or modifications to such
proposal, offer or request). We have also agreed to promptly
provide Eastern with any non-public information regarding us or
any of our subsidiaries provided to any other person that was
not previously provided to Eastern.
Under the merger agreement, we agreed that our board would not:
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withdraw, qualify or modify, or propose to withdraw, qualify or
modify, in a manner adverse to Eastern, its approval of the
merger agreement and its recommendation to our stockholders to
vote to approve the merger agreement or make any statement,
filing or release, in connection with the special meeting of our
stockholders or otherwise, inconsistent with its recommendation
to our stockholders to vote to approve the merger agreement
(including taking a neutral position or no position with respect
to an acquisition proposal);
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approve or recommend, or propose to approve or recommend, any
acquisition proposal; or
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enter into (or cause the Company or any of our subsidiaries to
enter into) any letter of intent, agreement in principle, merger
agreement, acquisition agreement or other agreement
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related to any acquisition transaction (other than a
confidentiality agreement entered into in accordance with the no
solicitation provisions of the merger agreement discussed
above); or
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requiring the Company to abandon, terminate or fail to
consummate the merger or any other transaction contemplated by
the merger agreement.
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However, prior to the approval of the merger agreement by our
stockholders, our board may approve or recommend to our
stockholders a superior proposal and withdraw, qualify or modify
its recommendation with respect to the merger agreement, if our
board reasonably determines in good faith, after consultation
with and having considered the advice of outside legal counsel
and a nationally recognized, independent financial advisor, that
the failure to take such actions would be inconsistent with its
fiduciary duties to our stockholders under applicable law. In
the event that our board makes this determination, we must
provide three business days prior written notice to Eastern that
our board has decided that a bona fide unsolicited written
acquisition proposal that we received (that did not result from
a breach of the no solicitation provisions of the merger
agreement discussed above) constitutes a superior proposal.
During the three business days period after Easterns
receipt of the notice of a superior proposal, we and our board
must cooperate and negotiate in good faith with Eastern to make
such adjustments, modifications or amendments to the terms and
conditions of the merger agreement as would enable us to proceed
with our boards original recommendation with respect to
the merger agreement without requiring us to approve or
recommend to our stockholders a superior proposal and withdraw,
qualify or modify our boards recommendation with respect
to the merger agreement. At the end of the three business day
notice period, and after taking into account any such adjusted,
modified or amended terms as may have been proposed by Eastern
during such period, our board must, again, determine in good
faith, after consultation with and having considered the advice
of outside legal counsel and a nationally recognized,
independent financial advisor, that
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it is required to approve or recommend to our stockholders a
superior proposal and withdraw, qualify or modify its
recommendation with respect to the merger agreement to comply
with its fiduciary duties to our stockholders under applicable
law; and
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such acquisition proposal is a superior proposal.
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Termination
of the Merger Agreement
Either Eastern or the Company may terminate the merger agreement
at or prior to the effective time of the merger if any of the
following occurs:
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the parties mutually agree in writing to terminate the merger
agreement;
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there has been either (1) a breach by the other party of
any of its representations or warranties in the merger agreement
or (2) a material breach by the other party of any of the
covenants or agreements in the merger agreement and, in each
case, the breach cannot be or has not been cured within
30 days after written notice of the breach (provided that
the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
in the merger agreement);
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the merger is not consummated by November 1, 2008, unless
the failure to consummate the merger is due to the failure by
the terminating party to perform its obligations under the
merger agreement;
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the approval of any governmental authority required for
consummation of the merger and the other transactions
contemplated by the merger agreement has been denied by final
nonappealable action of such governmental authority, or any
governmental entity of competent jurisdiction has issued a final
nonappealable order, injunction or decree enjoining or otherwise
prohibiting the consummation of the transactions contemplated by
the merger agreement, provided that the terminating party has
used its reasonable best efforts to have such order, injunction
or decree lifted;
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our stockholders do not approve the merger agreement at the
special meeting; or
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a vote on the approval of the merger agreement has not been
taken by our stockholders at the special meeting by
November 1, 2008.
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In addition, Eastern has the right to unilaterally terminate the
merger agreement (we sometimes refer to these termination rights
as Easterns unilateral termination rights) if:
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modifies, qualifies, withholds or withdraws its approval or
recommendation to our stockholders that they vote in favor of
approval of the merger agreement (including taking a neutral
position or no position with respect to an acquisition proposal);
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makes any statement, filing or release, in connection with the
special meeting or otherwise, inconsistent with its approval or
recommendation to our stockholders that they vote in favor of
approval of the merger agreement;
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breaches its obligations to call, give notice of and commence
the special meeting;
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approves or recommends an acquisition proposal;
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fails to publicly recommend against a publicly announced
acquisition proposal within five business days of being
requested to do so by Eastern; or
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resolves or otherwise determines to take, or announces an
intention to take, any of the foregoing actions; or
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there has been a material breach by us of the no solicitation
provisions of the merger agreement, as discussed in the section
entitled Solicitation of Proposals from Other
Parties beginning on page 56 of this proxy statement.
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We have the right to terminate the merger agreement if, at any
time prior to our stockholders approving the merger agreement,
we have received a superior proposal and
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our board withdraws, qualifies or modifies its recommendation
with respect to the merger agreement and we have otherwise
complied in all material respects with the no solicitation
provisions of the merger agreement, as discussed in the section
entitled Solicitation of Proposals from Other
Parties beginning on page 56 of this proxy statement;
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we concurrently pay Eastern a termination fee of
$5 million, as discussed in the section entitled
Termination Fee; Expenses beginning on
page 59 of this proxy statement; and
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our board concurrently approves, and we concurrently enter into,
a definitive agreement with respect to such superior proposal.
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Termination
Fee; Expenses
The merger agreement requires us to pay Eastern a termination
fee equal to $5 million if:
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the merger agreement is terminated by Eastern
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pursuant to Easterns unilateral termination rights, as
discussed in the section entitled Termination
of the Merger Agreement beginning on page 58 of this
proxy statement;
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because we have either (1) breached our representations or
warranties in the merger agreement or (2) materially
breached our covenants or agreements in the merger agreement
and, in each case, the breach is incapable of being cured or, if
capable of being cured, has not been cured within 30 days
after written notice of the breach is given to us and Eastern is
not then in material breach of any representation, warranty,
covenant or other agreement contained in the merger agreement,
as discussed in the section entitled
Termination of the Merger Agreement
beginning on page 58 of this proxy statement, and on or
before the date of such termination,
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an acquisition proposal with respect to the Company has been
publicly disclosed or announced and not withdrawn before the
applicable breach by the Company; and
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within one year of such termination, the Company enters into a
definitive agreement with respect to, or the Company has
consummated, an acquisition transaction;
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because the merger has not been consummated by November 1,
2008 (other than because of a breach of the merger agreement
caused by Eastern), as discussed in the section entitled
Termination of the Merger Agreement
beginning on page 58 of this proxy statement, and on or
before the date of such termination,
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an acquisition proposal with respect to the Company has been
publicly disclosed or announced and not withdrawn before
November 1, 2008; and
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within one year of such termination, the Company enters into a
definitive agreement with respect to, or the Company has
consummated, an acquisition transaction;
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the merger agreement is terminated by Eastern or us
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because our stockholders fail to approve the merger agreement at
the special meeting, or any adjournment thereof, and on or
before the date of such termination,
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an acquisition proposal with respect to the Company has been
publicly disclosed or announced and not withdrawn at least
10 days before the special meeting; and
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within one year of such termination, the Company enters into a
definitive agreement with respect to, or the Company has
consummated, an acquisition transaction;
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because a vote on the approval of the merger agreement has not
been taken at the special meeting by November 1, 2008, and
on or before the date of such termination,
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an acquisition proposal with respect to the Company has been
publicly disclosed or announced and not withdrawn by
November 1, 2008; and
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within one year of such termination, the Company enters into a
definitive agreement with respect to, or the Company has
consummated, an acquisition transaction; or
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we terminate the merger agreement because we have received a
superior proposal and our board
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withdraws, qualifies or modifies its recommendation with respect
to the merger agreement and we have otherwise complied in all
material respects with the no solicitation provisions of the
merger agreement, as discussed in the section entitled
Solicitation of Proposals from Other
Parties beginning on page 56 of this proxy
statement; and
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concurrently approves, and the Company concurrently enters into,
a definitive agreement with respect to such superior proposal.
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For the purpose of this provision, the definition of acquisition
transaction as defined in more detail in the section entitled
Solicitation of Proposals from Other
Parties beginning on page 56 of this proxy statement,
is modified such that all references to 15% or more
are replaced with 50% or more.
The merger agreement requires Eastern to pay us a termination
fee equal to $5 million if we terminate the merger
agreement because Eastern has either (1) breached its
representations or warranties in the merger agreement or
(2) materially breached its covenants or agreements in the
merger agreement and, in each case, the breach is incapable of
being cured or, if capable of being cured, has not been cured
within 30 days after written notice of the breach is given
to us and we are not then in material breach of any
representation, warranty, covenant or other agreement contained
in the merger agreement, as discussed in the section entitled
Termination of the Merger Agreement
beginning on page 58 of this proxy statement.
If Eastern has not received the termination fee, as discussed
above, the merger agreement requires us to pay Eastern
$1 million, if
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we have either (1) breached our representations or
warranties in the merger agreement or (2) materially
breached our covenants or agreements in the merger agreement
and, in each case, the breach is incapable of being cured or, if
capable of being cured, has not been cured within 30 days
after written notice of the breach is given to us and Eastern is
not then in material breach of any representation, warranty,
covenant or other agreement contained in the merger agreement,
as discussed in the section entitled
Termination of the Merger Agreement
beginning on page 58 of this proxy statement;
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our stockholders fail to approve the merger agreement at the
special meeting, or any adjournment thereof; or
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a vote on the approval of the merger agreement has not been
taken by our stockholders at the special meeting by
November 1, 2008.
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Treatment
of Stock Options
At the effective time of the merger, each outstanding stock
option, whether vested or unvested, to purchase shares of our
common stock will be canceled and the holder of such option will
receive an amount in cash equal to the number of shares of
common stock underlying the stock option, multiplied by the
excess, if any, between the merger consideration and the
exercise price applicable to that stock option (which we
sometimes refer to as the option consideration). This payment
will be made without interest and will be net of any applicable
withholding taxes. As of May 30, 2008, there were
outstanding options to purchase 232,925 shares of our
common stock with an exercise price per share less than the
merger consideration.
Employee
Matters
Employee Benefit Plans.
Under the terms of the
merger agreement, for one year after the effective time of the
merger, Eastern will maintain the current compensation levels
(excluding any stock-based benefits) for the employees of the
Company and any of our subsidiaries who remain employed after
the effective time of the merger at the same levels that are, in
the aggregate, comparable to those in effect for our employees
on March 10, 2008. Eastern also has the right, in its sole
discretion, to maintain any, all or none of our employee benefit
plans.
Our employees will receive full credit for service with us for
purposes of eligibility, vesting and other appropriate benefits,
including applicability of minimum waiting periods for
participation, but excluding benefit accrual under
Easterns defined benefit pension plan, with respect to any
employee benefit plans or arrangements maintained by Eastern or
any of its subsidiaries. Eastern has also agreed to waive all
pre-existing conditions or limitations, eligibility waiting
periods or required physical examinations under any health or
similar plan of Eastern for our employees, to the extent that
our employees had satisfied any similar limitations or
requirements under the corresponding plan in which our employees
participated immediately prior to the closing date of the
merger. In addition, any deductibles paid by our employees under
our health plans in the plan year in which the closing date of
the merger occurs will be credited towards the deductibles under
the health plans of Eastern and its subsidiaries.
Severance Obligations.
Eastern has agreed to
honor, in accordance with their terms, all of the employment,
severance, change of control and similar obligations of the
Company and our subsidiaries. Also, if the employment of an
eligible employee of the Company or our subsidiaries is
terminated by Eastern for any reason other than cause within one
year following the effective time of the merger, and provided
that such employee executes a general release and waiver of
claims, the eligible employee will be provided severance
benefits as determined under the Company Banks severance
pay plan in effect on March 10, 2008. None of our executive
officers or our directors are eligible for benefits under this
plan.
In addition, we have created a change in control retention bonus
plan in an aggregate amount of $226,500. Distributions from this
plan have been allocated among certain of our employees to be
distributed according to the terms of individual letter
agreements with these employees.
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Indemnification
and Insurance
Eastern has agreed that all rights to indemnification and all
limitations of liability existing in favor of each of our and
our subsidiaries former and present directors, officers,
employees, fiduciaries or agents, as provided in our restated
certificate of incorporation and bylaws or similar governing
documents of a subsidiary, with respect to matters occurring on
or prior to the effective time of the merger will continue from
and after the effective time of the merger through the sixth
anniversary of the effective time of the merger. All rights to
indemnification with respect to any claim asserted or made
within such period will continue until the final disposition of
the claim, and these indemnification rights will continue
despite a liquidation, consolidation or merger of Eastern.
Before the effective time of the merger, we will purchase an
extended reporting period endorsement for our directors and
officers under our existing directors and officers
liability insurance coverage. The endorsement must be in a form
acceptable to us with coverage for a period of six years
following the effective time of the merger of not less than the
existing coverage under, and with other terms not materially
less favorable to, our directors and officers than our current
directors and officers liability insurance policy.
However, the aggregate cost for this insurance cannot exceed
$200,000. If such amount is insufficient to obtain such
coverage, then we will purchase an endorsement with the greatest
coverage available for a cost not exceeding $200,000.
Source of
Funds
Easterns obligation to consummate the merger is not
conditioned upon Easterns obtaining financing. Eastern
anticipates that approximately $170 million will be
required to pay the aggregate consideration to our stockholders
and option holders. Eastern intends to finance the merger
through internal cash resources.
Other
Covenants
The merger agreement also contains covenants relating to the
preparation and distribution of this proxy statement and all
requisite regulatory filings.
Expenses
Each party will pay all expenses incurred by it in connection
with the merger agreement and the merger.
Amendment
and Waiver
Any provision of the merger agreement may be amended or waived
if such amendment or waiver is in writing and signed, in the
case of an amendment, by both us and Eastern, or in the case of
a waiver, by the party against whom the waiver is to be
effective. However, after approval of the merger agreement by
our stockholders, no amendment of the merger agreement may be
made which, by law, requires further approval of our
stockholders without obtaining that approval. While we do not
have any current intention to waive any of the conditions to
closing in favor of our company, we may determine that such a
waiver is in the best interests of our stockholders because the
benefits of closing the merger outweigh the detriments, if any,
of waiving such condition.
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APPRAISAL
RIGHTS
If the merger is consummated, holders of shares of our common
stock are entitled to appraisal rights under Section 262 of
the Delaware General Corporation Law, provided that they
(1) strictly comply with the conditions established by
Section 262, (2) perfect their rights to appraisal of
their capital stock in accordance with Section 262, and
(3) do not thereafter withdraw their demand for appraisal
of their capital stock or otherwise lose their appraisal rights,
in each case in accordance with the Delaware General Corporation
Law.
Section 262 is reprinted in its entirety as
Annex D
to this proxy statement. The following discussion is not a
complete statement of the law relating to appraisal rights and
is qualified in its entirety by reference to
Annex D
. This discussion and
Annex D
should be reviewed carefully by any stockholder who wishes
to exercise statutory appraisal rights or who wishes to preserve
the right to do so, as failure to strictly comply with the
procedures set forth in this section or Section 262 will
result in the loss of appraisal rights.
A record holder of shares of our common stock:
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who makes the demand described below with respect to those
shares;
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who continuously is the record holder of those shares through
the effective time of the merger;
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who otherwise complies with the statutory requirements of
Section 262; and
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who neither votes in favor of approval of the merger agreement
nor consents to such approval in writing,
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will be entitled to an appraisal by the Delaware Court of
Chancery of the fair value of his, her or its shares of our
common stock. All references in this summary of appraisal rights
to a stockholder or holders of shares of our
common stock are to the record holder or holders of shares
of our common stock. Except as set forth in this section, our
stockholders will not be entitled to appraisal rights in
connection with the merger. In addition, neither the Company nor
Eastern has made any provisions in connection with this
transaction to grant unaffiliated stockholders appraisal
services at the expense of the Company or Eastern.
Under Section 262, when a merger agreement is to be
submitted for approval at a meeting of stockholders, such as the
special meeting, a constituent corporation must notify each of
the holders of its stock for whom appraisal rights are available
not less than 20 days prior to the meeting that such
appraisal rights are available and include in each such notice a
copy of Section 262. Such copy is reprinted in its entirety
as
Annex D
to this proxy statement. This proxy
statement shall constitute that notice to the record holders of
our common stock.
Holders of shares of our common stock who desire to exercise
their appraisal rights must not vote in favor of approval of the
merger agreement, and must deliver a separate written demand for
appraisal to us prior to the vote by our stockholders on the
merger agreement at the special meeting. A demand for appraisal
must be executed by or on behalf of the stockholder of record
and must reasonably inform us of the identity of the stockholder
of record and that such stockholder intends to demand appraisal
of his, her or its shares of our common stock. A proxy or vote
against the merger agreement will not by itself constitute such
a demand. Within 10 days after the effective date of the
merger, we must provide notice of the effective date to all
stockholders who have complied with Section 262.
A stockholder who elects to exercise appraisal rights should
mail or deliver his, her or its written demand to the attention
of our Secretary at our offices located at 123 Haven Street,
Reading, Massachusetts 01867.
A person having a beneficial interest in shares of our common
stock that are held of record in the name of another person,
such as a broker, fiduciary, depositary or other nominee, must
act promptly to cause the record holder to follow the steps
summarized in this section properly and in a timely manner to
perfect appraisal rights. If the shares of our common stock are
owned of record by a person other than the beneficial owner,
including a broker, fiduciary (such as a trustee, guardian or
custodian), depositary or other nominee, such demand must be
executed by or for the record owner. If the shares of our common
stock are owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by or
for all joint owners. An authorized agent, including an agent
for two or more joint owners, may execute
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the demand for appraisal for a stockholder of record; however,
the agent must identify the record owner and expressly disclose
the fact that, in exercising the demand, such person is acting
as agent for the record owner.
A record holder, such as a broker, fiduciary, depositary or
other nominee, who holds shares of our common stock as a nominee
for others, may exercise appraisal rights with respect to the
shares held for all or less than all beneficial owners of shares
as to which such person is the record owner. In that case, the
written demand must set forth the number of shares covered by
the demand. Where the number of shares is not expressly stated,
the demand will be presumed to cover all shares of our common
stock outstanding in the name of that record owner.
At any time within 60 days after the effective time of the
merger, any former stockholder who has demanded appraisal but
has not commenced an appraisal proceeding or joined a proceeding
as a named party, has the right to withdraw the demand and
accept the terms offered pursuant to the merger agreement. Any
attempt by a holder of shares of our common stock to withdraw
his, her or its appraisal demand more than 60 days after
the effective time of the merger will require our written
approval. Within 120 days after the effective time of the
merger, the Company or any former stockholder who has complied
with the requirements of Section 262 may commence an
appraisal proceeding by filing a petition in the Delaware
Chancery Court demanding a determination of the value of the
shares of our common stock entitled to appraisal. The Company is
under no obligation to and has no present intention to file such
a petition. Accordingly, it will be the obligation of former
stockholders of the Company seeking appraisal rights to initiate
all necessary action to perfect any appraisal rights within the
time prescribed in Section 262. If no petition for
appraisal is filed with the Delaware Chancery Court within
120 days after the effective time of the merger,
stockholders rights to appraisal shall cease, and all
holders of shares of our common stock will be entitled to
receive the merger consideration offered pursuant to the merger
agreement. No petition timely filed in the Delaware Chancery
Court demanding appraisal shall be dismissed as to any
stockholder without the approval of the Delaware Chancery Court,
and such approval may be conditioned upon such terms as the
Delaware Chancery Court deems just.
Within 10 days after the effective time of the merger, the
Company, as the surviving corporation, must notify each
stockholder who is entitled to appraisal rights that the merger
has become effective and inform the stockholder of the effective
date; provided, however, that if this second notice is sent more
than 20 days following the first notice, this second notice
need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such
holders shares in accordance with Section 262(d)(2).
Within 120 days after the effective time of the merger, any
former stockholder who has complied with the requirements for
exercise of appraisal rights under Section 262 will be
entitled, upon written request, to receive from us a statement
setting forth the aggregate number of shares of our common stock
not voted in favor of approval of the merger agreement and with
respect to which demands for appraisal have been received by us
and the aggregate number of holders of such shares of our common
stock. This statement must be mailed (1) within
10 days after a written request therefor has been received
by us; or (2) within 10 days after the expiration of
the period for the delivery of demands for appraisal from the
Company as described above, whichever is later. A person who is
the beneficial owner of shares of our common stock held either
in a voting trust or by a nominee on behalf of such person may,
in his, her or its own name, file a petition or request from the
Company the statement described above.
If a petition for an appraisal is timely filed, a copy thereof
will be served upon the Company, and the Company will then be
obligated within 20 days after such service to file in the
office of the Register in Chancery a duly verified list
containing the names and addresses of all of our stockholders
who have demanded an appraisal of their shares of our common
stock and with whom an agreement as to the value of their shares
has not been reached. After notice to such stockholders by the
Register in Chancery in accordance with the provisions of
Section 262, the Delaware Chancery Court is empowered to
conduct a hearing on such petition to determine those
stockholders who have complied with Section 262 and who
have become entitled to appraisal rights. The Delaware Chancery
Court may require the holders of shares of our common stock who
have demanded an appraisal for their shares and who hold stock
represented by certificates to submit their stock certificates
to the Register in Chancery for notation on those certificates
of the pendency of the appraisal
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proceeding; and if any stockholder fails to comply with such
direction, the Delaware Chancery Court may dismiss the
proceedings as to such stockholder.
After the Delaware Chancery Court determines the stockholders of
the Company entitled to an appraisal, the appraisal proceeding
will be conducted in accordance with the rules of the Delaware
Chancery Court, including any rules specifically governing
appraisal proceedings. Through such proceedings, the Delaware
Chancery Court will determine the fair value of
their shares of our common stock, exclusive of any element of
value arising from the accomplishment or expectation of the
merger, together with interest, if any, to be paid upon the
amount determined to be the fair value. Unless the Delaware
Chancery Court determines otherwise for good cause shown,
interest from the effective date of the merger through the date
of payment of the judgment shall be compounded quarterly and
shall accrue at 5% over the Federal Reserve discount rate
(including any surcharge) as established from time to time
during the period between the effective date of the merger and
the date of payment of the judgment. Although we believe that
the merger consideration is fair, no representation is made as
to the outcome of the appraisal of fair value as determined by
the Delaware Chancery Court, and stockholders should recognize
that an appraisal could result in a determination of a value
higher or lower than, or the same as, the merger consideration.
Moreover, we do not anticipate offering more than the merger
consideration to any stockholder exercising appraisal rights and
reserve the right to assert, in any appraisal proceeding, that,
for purposes of Section 262, the fair value of
a share of our common stock is less than the merger
consideration.
The cost of the appraisal proceeding may be determined by the
Delaware Chancery Court and taxed against the parties as the
Delaware Chancery Court deems equitable in the circumstances.
However, such costs do not include attorneys and expert
witness fees. Each dissenting stockholder is responsible for
his, her or its attorneys and expert witness expenses,
although, upon application of a dissenting stockholder, the
Delaware Chancery Court may order that all or a portion of the
expenses incurred by a dissenting stockholder in connection with
the appraisal proceeding, including, without limitation,
reasonable attorneys fees and the fees and expenses of
experts, be charged pro rata against the value of all shares of
stock entitled to appraisal.
Any holder of shares of our common stock who has duly demanded
appraisal in compliance with Section 262 will not, after
the effective time of the merger, be entitled to vote for any
purpose any shares subject to that demand or to receive payment
of dividends or other distributions on those shares, except for
dividends or distributions payable to stockholders of record at
a date prior to the effective time.
Pursuant to the merger agreement, we have agreed to give Eastern
and Merger Sub prompt notice of any demands for appraisal
received by us. We have also agreed to give Eastern the
opportunity to participate in all negotiations and proceedings
with respect to demands for appraisal. We will not, except with
the prior written consent of Eastern, make any payment with
respect to any demands for appraisals, or settle or offer to
settle any demands. In addition, the merger agreement provides
that Eastern will not have to consummate the merger if
stockholders representing more than 15% of the outstanding
shares of our common stock exercise their appraisal rights. For
more information, see the section entitled The Merger
Agreement Dissenting Shares beginning on
page 48 of this proxy statement and the section entitled
The Merger Agreement Conditions to the
Merger beginning on page 52 of this proxy statement.
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FEDERAL
INCOME TAX CONSEQUENCES
The following discussion summarizes certain material
U.S. federal income tax considerations of the merger
generally relevant to holders of our capital stock who are
U.S. stockholders (as defined below), assuming that the
merger is consummated. This discussion is based upon
interpretations of the Internal Revenue Code, Treasury
Regulations promulgated under the Internal Revenue Code and
judicial decisions and administrative rulings as of the date of
this proxy statement, all of which are subject to change or
differing interpretations, including changes and interpretations
with retroactive effect. The discussion below does not address
all U.S. federal income tax consequences or any state,
local or foreign tax consequences of the merger. The tax
treatment of our stockholders may vary depending upon each
stockholders particular situation. This discussion does
not apply to stockholders who received our stock pursuant to the
exercise of employee stock options, warrants or otherwise as
compensation. Also, stockholders subject to special treatment,
including:
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dealers in securities or foreign currency;
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tax-exempt entities;
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banks and thrifts;
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insurance companies;
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persons that hold our capital stock as part of a
straddle, a hedge, a constructive
sale transaction or a conversion transaction;
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persons that have a functional currency other than
the U.S. dollar; and
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investors in pass-through entities,
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may be subject to special rules not discussed below. This
discussion also does not address the U.S. federal income
tax consequences of the merger to holders of our capital stock
that do not hold such stock as a capital asset and does not
address tax consequences of the merger to
non-U.S. stockholders.
A U.S. stockholder is a stockholder that, for
U.S. federal income tax purposes, is:
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a U.S. citizen or resident;
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a domestic corporation;
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an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust, if (1) a U.S. court is able to exercise
primary supervision over the administration of the trust and one
or more U.S. persons have the authority to control all the
substantial decisions of the trust, or (2) the trust has a
valid election in effect under current Treasury Regulations to
be treated as a U.S. person.
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For investors who own our capital stock through a partnership,
the U.S. federal income tax treatment will generally depend
upon the status of the partner and the activities of the
partnership. Such investors should consult their own tax advisor
as to their particular tax consequences.
This discussion of certain material U.S. federal income
tax considerations is not tax advice. You are urged to consult
your own tax advisor with respect to the particular
U.S. federal income tax consequences to you of the merger,
including any special considerations related to your particular
situation, as well as the applicability and effect of any state,
local, foreign or other tax laws and changes in any applicable
tax laws.
Consequences
to U.S. Stockholders
For U.S. stockholders, the merger will be a taxable event
and each U.S. stockholder will recognize capital gain or
loss with respect to our capital stock, measured by the excess
of the amount of merger consideration received by such
U.S. stockholder in exchange for our capital stock over
such U.S. stockholders tax basis in the exchanged
capital stock. If a U.S. stockholder acquired our capital
stock by purchase, the U.S. stockholders adjusted tax
basis in our capital stock will generally equal the amount the
U.S. stockholder paid for the stock, less any returns of
capital that the U.S. stockholder might have received with
regard to the stock. In the case of a
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U.S. stockholder that holds multiple blocks of our capital
stock (i.e., blocks of our capital stock acquired separately at
different times
and/or
prices), gain or loss must be calculated and accounted for
separately for each block.
The gain or loss on the sale of our common stock will constitute
long-term capital gain or loss if that capital stock had been
held for more than one year as of the effective time of the
merger. If a U.S. stockholder receiving long-term capital
gain is an individual, then the capital gain will generally be
subject to tax at a maximum rate of 15%. U.S. stockholders
that are taxable as corporations for U.S. federal income
tax purposes will generally be subject to 35% tax on any gain
(whether long-term or short-term) from the sale or exchange of
our capital stock. A U.S. stockholder may deduct capital
losses only to the extent that the U.S. stockholder has
capital gains in a given tax year, plus up to $3,000 for
individual U.S. stockholders.
REGULATORY
APPROVALS AND OTHER INFORMATION
Before we and Eastern may complete the merger and the bank
merger, we must obtain a number of regulatory approvals from, or
give notices to, federal and state bank regulators, as
summarized below.
Federal
Reserve Board
Eastern expects to file in June 2008 a submission to the Federal
Reserve, pursuant to Section 3 of the BHC Act and
Regulation Y of the Federal Reserves regulations
requesting approval for Eastern to acquire ownership and control
of the Company and thereby acquire control of the Company Bank.
The Federal Reserves determination whether to approve or
issue a letter of non-objection with respect to the merger is
subject to certain requirements. The Federal Reserve generally
will not issue an approval or letter of non-objection with
respect to any transaction that would result in a monopoly or
that would further a combination or conspiracy to monopolize
banking in the United States or that would cause Eastern to
control deposits that exceed certain deposit concentration
limits.
The Federal Reserve also may not issue an approval or letter of
non-objection with respect to a transaction that could
substantially lessen competition in any section of the country
or that would be in restraint of trade. However, the Federal
Reserve may issue an approval or a letter of non-objection with
respect to any such transaction if it determines that the public
interest in meeting the convenience and needs of the community
served clearly outweigh the anticompetitive effects of the
proposed transaction. The Federal Reserve is also required to
consider the financial and managerial resources and future
prospects of the bank holding companies and banks concerned, as
well as the convenience and needs of the communities to be
served. The consideration of convenience and needs includes the
parties performance under the Community Reinvestment Act.
Consideration of financial resources generally focuses on
capital adequacy.
The BHC Act, as amended by the USA PATRIOT Act, also requires
that the Federal Reserve consider the effectiveness of the
Company, Eastern and their respective subsidiaries in combating
money laundering activities in connection with its determination
whether to issue an approval or letter of non-objection with
respect to the merger.
The Company and Eastern may not complete the merger before the
30
th
calendar
day following the Federal Reserves approval of the merger
or, if the Federal Reserve has not received any adverse comments
from the Attorney General of the United States concerning the
competitive effect of the merger, such shorter period of time as
the Federal Reserve may permit that does not end sooner than the
15
th
calendar
day following the Federal Reserves issuance of an approval
or letter of non-objection with respect to the merger. During
this waiting period, the Attorney General may, but is not
expected to, commence an action to stay the effectiveness of the
Federal Reserves approval and prevent the merger. The
Federal Reserve or the Attorney General may also challenge the
merger on competitive grounds.
FDIC
On May 16, 2008 Eastern filed with the FDIC the required
application under the Bank Merger Act to obtain approval of the
bank merger, that is, for the merger of the Company Bank with
and into Eastern Bank. The FDIC is required to consider the
financial and managerial resources and future prospects of the
banks
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concerned, as well as the convenience and needs of the
communities to be served. The consideration of convenience and
needs includes the parties performance under the Community
Reinvestment Act. Consideration of financial resources generally
focuses on capital adequacy. In addition, in reviewing the
application, the FDIC must consider the effectiveness of the
Company Bank and Eastern Bank in combating money laundering
activities in connection with its determination whether to
approve the bank merger.
State
Regulatory Filings
Eastern is a bank holding company for purposes of the laws of
the Commonwealth of Massachusetts. Accordingly, on May 15,
2008 Eastern filed an application seeking the permission of the
Massachusetts BBI pursuant to Massachusetts General Laws,
Chapter 167A, Sections 2 and 4, to acquire the Company
and the Company Bank. In determining whether to approve the
merger, the Massachusetts BBI must consider whether the merger
will unreasonably affect competition and whether public
convenience and advantage will be promoted. The Massachusetts
BBI must also consider whether the merger will result in
net new benefits in Massachusetts, which includes
consideration of factors such as initial capital investments,
job creation plans, consumer and business services, commitments
to maintain and open branch offices within a banks
delineated local community and such other matters as may be
deemed to benefit the community. Before the Massachusetts BBI
may approve the merger, the Massachusetts BBI must hold a public
hearing (which is scheduled to be held on June 26, 2008)
and must receive confirmation from the Massachusetts Housing
Partnership Fund that Eastern has made satisfactory arrangements
with the Massachusetts Housing Partnership Fund with respect to
any assets to be acquired that are located in Massachusetts. All
of the Companys assets are located in Massachusetts. On
May 15, 2008, Eastern notified the Massachusetts Housing
Partnership Fund of the merger.
On May 15, 2008 Eastern Bank filed an application with the
Massachusetts Commissioner whereby Eastern seeks the
Massachusetts Commissioners approval, pursuant to
Section 34D of Chapter 168 and Section 36 of
Chapter 172 of the Massachusetts General Laws, to merge the
Company Bank into Eastern Bank, that is, the bank merger. To
approve the bank merger, the Massachusetts Commissioner must
find that the bank merger is in the interests of the depositors
of the banks concerned. In making a finding that the bank merger
is in the interests of the depositors, the Massachusetts
Commissioner will also determine whether or not competition
among banking institutions will be unreasonably affected and
whether or not public convenience and advantage will be
promoted. In making such determination, the Massachusetts
Commissioner will consider, but not be limited to, a showing of
net new benefits.
The merger agreement provides that the obligation of each of the
Company and Eastern to complete the merger is conditioned upon
the receipt of all requisite regulatory approvals, including the
approvals of the Federal Reserve, the Massachusetts Commissioner
and the Massachusetts BBI and the expiration of all applicable
waiting periods. There can be no assurance that the Federal
Reserve, the FDIC, the Massachusetts Commissioner or the
Massachusetts BBI will approve or take any required action with
respect to the merger, and, if such approvals are received or
action is taken, there can be no assurance as to the date of
such approvals or action, that such approvals or action will not
be conditioned upon matters that would cause Eastern to abandon
the merger or that no action will be brought challenging such
approvals or action, including a challenge by the Attorney
General of the United States or, if such a challenge is made,
the result thereof.
The Company and Eastern are not aware of any governmental
approvals or actions that may be required for consummation of
the merger other than as described above. Should any other
approval or action be required, the Company and Eastern
currently contemplate that such approval or action would be
sought.
68
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 30, 2008
information regarding the beneficial ownership of our common
stock for:
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each person or entity known by us to beneficially own more than
5% of our common stock;
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each of our directors;
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each of our executive officers for which compensation
information is required to be disclosed in our proxy statement
for our annual meeting; and
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all of our directors and executive officers as a group.
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This information is based on filings received by us under the
Exchange Act, as supplemented by additional information provided
to us. Unless otherwise indicated, the beneficial owner has sole
voting power and dispositive power with respect to the shares of
common stock beneficially owned.
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Percent of
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Common Stock
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Number of Shares of Common Stock
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Beneficially
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Name and Address*
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Beneficially Owned(1)
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Owned(2)
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Private Capital Management, L.P.(3)
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365,887
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8.64
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%
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8889 Pelican Bay Blvd., Suite 500
Naples, FL 34108
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Dimensional Fund Advisors LP(4)
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283,151
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6.69
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%
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1299 Ocean Avenue
Santa Monica, CA 90401
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Lawrence B. Seidman, et. al(5)
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319,814
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7.56
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%
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100 Misty Lane
Parsippany, NJ 07054
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Eastern Bank Corporation(6)
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547,719
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12.94
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%
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265 Franklin Street
Boston, MA 02110
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Gerard H. Brandi
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268,233
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(7)(8)(9)
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6.31
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%
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Allan S. Bufferd
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11,075
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(10)
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**
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Kathleen M. Camilli
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3,100
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**
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Stephen W. Carr
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3,100
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**
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Reginald E. Cormier
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72,534
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(8)
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1.71
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%
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Alexander S. Costello
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13,475
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**
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O. Bradley Latham
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600
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**
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Stephen E. Marshall
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5,573
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(11)
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**
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Paul J. McCarthy
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200
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**
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James L. Milinazzo
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1,738
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(8)
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**
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Nalin M. Mistry
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200
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**
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Nancy L. Pettinelli
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6,350
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**
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William F. Rivers
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6,483
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(8)
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**
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William F. Rucci, Jr.
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728
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**
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Donna H. West
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59,709
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(8)(12)(13)
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1.41
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%
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All Directors and executive officers as a group (17 persons)
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485,096
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(7)(8)(9)(10)(11)(12)(13)(14)(15)
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11.19
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%
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*
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The address for the directors and executive officers is the
Company address: MASSBANK Corp., 123 Haven Street, Reading, MA
01867.
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**
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Less than 1%.
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69
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(1)
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Unless otherwise indicated, each person named has sole voting
and sole investment power with respect to all shares indicated.
Includes the following number of shares that the above listed
directors and executive officers, as applicable, have the right
to acquire within 60 days after May 30, 2008 through
the exercise of stock options granted pursuant to our 2004 Stock
Option and Incentive Plan and 1994 Stock Incentive Plan:
Mr. Brandi, 16,550 shares; Mr. Bufferd,
6,350 shares; Ms. Camilli, 3,100 shares;
Mr. Carr, 600 shares; Mr. Cormier,
16,500 shares; Mr. Costello, 6,350 shares;
Mr. Latham, 600 shares; Mr. Marshall,
4,225 shares; Mr. McCarthy, 200 shares;
Mr. Milinazzo, 1,400 shares; Mr. Mistry,
200 shares; Ms. Pettinelli, 6,350 shares;
Mr. Rivers, 3,200 shares; Mr. Rucci,
600 shares; and Ms. West, 16,500 shares; and all
directors and executive officers as a group
(17 persons) 100,125 shares. Does not
include the following number of deferred stock units (held by
participants in our Deferred Compensation Plan) whose value per
unit is derived from changes in the market price per share of
our Common Stock: Mr. Bufferd, 3,811 units;
Mr. Marshall, 1,539 units; Mr. Rucci,
242 units; and Ms. Pettinelli 2,330 units.
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(2)
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Our calculation of the percentage of shares beneficially owned
by the stockholders in this table is based upon the number of
shares of our common stock outstanding as of May 30, 2008
(4,233,079), plus for each listed beneficial owner, any shares
of common stock that the listed beneficial owner has the right
to acquire within 60 days after May 30, 2008. The
number of shares beneficially owned by holders of 5% or more of
our voting securities is based on the applicable filings with
the Securities and Exchange Commission.
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(3)
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Based on the share information set forth in a Form 13F
filed with the Securities and Exchange Commission on
May 15, 2008 as well as information set forth in Amendment
No. 6 to Schedule 13G/A filed with the Securities and
Exchange Commission on February 14, 2008. Private Capital
Management, L.P. (which we sometimes refer to as PCM) is an
investment adviser registered under Section 203 of the
Investment Advisers Act of 1940 (which we sometimes refer to as
the Advisers Act). According to a filing made by PCM with the
Securities and Exchange Commission on Schedule 13G/A dated
February 14, 2008, PCM, in its role as investment adviser,
has sole voting power and sole dispositive power over 64,734 of
the above shares and shared voting power and shared dispositive
power over 323,544 of the above shares, which had been purchased
for the accounts of investment advisory clients of PCM.
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(4)
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Based on the share information set forth in a Form 13F
filed with the Securities and Exchange Commission on May 5,
2008 as well as information set forth in Amendment No. 9 to
Schedule 13G/A filed with the Securities and Exchange
Commission on February 6, 2008. Dimensional
Fund Advisors LP (formerly, Dimensional Fund Advisors
Inc.) (which we sometimes refer to as Dimensional), an
investment adviser registered under Section 203 of the
Advisers Act, furnishes investment advice to four investment
companies registered under the Investment Company Act of 1940
and serves as investment manager to certain other commingled
group trusts and separate accounts (we sometimes refer to such
investment companies, trusts and accounts as the Funds).
According to a filing made by Dimensional with the Securities
and Exchange Commission on Schedule 13G/A dated
February 6, 2008, Dimensional, in its role as investment
adviser and investment manager, possesses sole voting power and
sole dispositive power over 278,446 of the above shares, which
are owned by the Funds, and disclaims beneficial ownership of
the shares owned by the Funds.
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(5)
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Based on share information set forth in Amendment No. 7 to
Schedule 13D/A filed with the Securities and Exchange
Commission on March 24, 2008. The Schedule 13D/A was
also filed by: (a) Seidman and Associates L.L.C.,
(b) Seidman Investment Partnership, L.P., whose principal
and executive offices are located at 19 Veteri Place, Wayne, NJ
07470, (c) Seidman Investment Partnership II, L.P., whose
principal and executive offices are located at 19 Veteri Place,
Wayne, NJ 07470, (d) Broad Park Investors, L.L.C., whose
principal and executive offices are located at 80 Main Street,
West Orange, NJ 07052, (e) LSBK06-08, L.L.C., whose
principal and executive offices are located at 10 Hill Hollow
Road, Watchung, NJ 07069, (f) Berggruen Holdings North
America Ltd., whose principal offices are located at 1114 Avenue
of the Americas, Forty First Floor, New York, NY 10036,
(g) Thomas C. Goggins, whose principal office is located at
99 Summer Street, Suite 1520, Boston, MA 02110, and
(h) Welles C. Hatch, whose principal office is located at 5
Concord Farms, 555 Virginia Road, Concord, MA 01742.
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(6)
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Based on share information set forth in a Schedule 13D
filed with the Securities and Exchange Commission on
March 20, 2008. Eastern filed the Schedule 13D
pursuant to the voting agreements Eastern
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70
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entered into with each of our directors and executive officers
in connection with the merger agreement. According to the
filing, Eastern possesses shared voting power over all of the
above shares and expressly disclaims beneficial ownership of
such shares. The figure includes 163,025 shares
beneficially owned by the directors and executive officers
subject to the voting agreements as unexercised options to
purchase shares of common stock, which options, if exercised,
would also be subject to the terms and conditions of the voting
agreements. For more information on the voting agreements,
please see the section entitled Interests of Certain
Persons in the Merger Voting Agreements
beginning on page 45 of this proxy statement.
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(7)
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Gerard H. Brandi is the Chairman of the Board of Directors and
President and Chief Executive Officer of the Company. This
information is as of May 30, 2008 and is based on a filing
made by Mr. Brandi with the Securities and Exchange
Commission on Schedule 13G/A dated February 5, 2008
and our records. Includes 1,387 shares held by
Mr. Brandi as custodian for various nieces and nephews and
19,352 shares owned by Mr. Brandis spouse, as to
all of which shares Mr. Brandi disclaims beneficial
ownership. Also includes 163,739 shares owned jointly with
Mr. Brandis spouse, with respect to which shares Mr.
and Mrs. Brandi share voting and investment power.
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(8)
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Includes shares allocated to the accounts of executive officers
under the Company Banks Employee Stock Ownership Plan. As
of September 30, 2007, the number of such allocated shares
included in the above table is as follows:
Mr. Brandi 31,175; Mr. Cormier
12,462; Mr. Milinazzo 238;
Mr. Rivers 283; Ms. West
14,721; and all executive officers as a group (seven
persons) 65,845.
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(9)
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In January 2008, Mr. Brandi pledged 46,670 shares as
collateral for a loan.
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(10)
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Includes 600 shares owned jointly with
Mr. Bufferds spouse, with respect to which shares Mr.
and Mrs. Bufferd share voting and investment power.
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(11)
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Includes 1,125 shares owned jointly with
Mr. Marshalls spouse, with respect to which shares
Mr. and Mrs. Marshall share voting and investment power.
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(12)
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Includes 876 shares held by Ms. West as custodian for
her minor grandchildren, as to which shares Ms. West
disclaims beneficial ownership.
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(13)
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7,000 shares of Ms. Wests shares were pledged as
of January 10, 2008 as collateral for a loan.
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(14)
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Includes 100,125 shares that such persons have the right to
acquire through the exercise of options granted pursuant to our
2004 Stock Option and Incentive Plan and 1994 Stock Incentive
Plan.
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(15)
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6,500 of Mr. Queeneys shares, an executive officer,
were pledged as of September 18, 2006 and an additional
1,125 shares were pledged as of January 16, 2008 as
collateral for a loan.
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71
ADJOURNMENT
OF THE SPECIAL MEETING
(Proposal 2)
We are submitting a proposal for consideration at the special
meeting to authorize the named proxies to approve one or more
adjournments of the special meeting if there are not sufficient
votes to approve the merger agreement at the time of the special
meeting. Even though a quorum may be present at the special
meeting, it is possible that we may not have received sufficient
votes to approve the merger agreement by the time of the special
meeting. In that event, we would need to adjourn the special
meeting in order to solicit additional proxies. The adjournment
proposal relates only to an adjournment of the special meeting
for purposes of soliciting additional proxies to obtain the
requisite stockholder approval to approve the merger agreement.
Any other adjournment of the special meeting (e.g., an
adjournment required because of the absence of a quorum) would
be voted upon pursuant to the discretionary authority granted by
the proxy.
The proposal to approve one or more adjournments of the special
meeting requires the affirmative vote of holders of a majority
of the shares of our common stock present or represented at the
special meeting and entitled to vote on the proposal.
Our board recommends that you vote FOR the
adjournment proposal so that proxies may be used for the purpose
described above, should it become necessary. Properly executed
proxies will be voted FOR the adjournment proposal,
unless otherwise indicated on the proxies.
If the special
meeting is adjourned for 30 days or less, we are not
required to give notice of the time and place of the adjourned
meeting unless our board fixes a new record date for the special
meeting.
The adjournment proposal relates only to an adjournment of the
special meeting occurring for purposes of soliciting additional
proxies for approval of the merger agreement proposal in the
event that there are insufficient votes to approve that
proposal. Our board retains full authority to the extent set
forth in our bylaws and Delaware law to postpone the special
meeting before it is convened, without the consent of any of our
stockholders.
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the information filing requirements of the
Exchange Act and, in accordance with the Exchange Act, are
obligated to file with the Securities and Exchange Commission
periodic reports, proxy statements and other information
relating to our business, financial condition and other matters.
These reports, proxy statements and other information may be
inspected at the Securities and Exchange Commissions
office at the public reference facilities of the Securities and
Exchange Commission, which are located at Room 1024,
Judiciary Plaza, at 450 Fifth Street, NW,
Washington, D.C. 20549. Copies of these materials can be
obtained, upon payment of the Securities and Exchange
Commissions customary charges, by writing to the
Securities and Exchange Commissions principal office at
450 Fifth Street, NW, Washington, D.C. 20549. All
documents filed by the Company with the Securities and Exchange
Commission may be obtained for free at the Securities and
Exchange Commissions website at www.sec.gov. In addition,
the documents filed with the Securities and Exchange Commission
by the Company may be obtained free of charge by directing such
request to our Secretary at
(781) 662-0100
or at our offices located at 123 Haven Street, Reading,
Massachusetts 01867 or from our website at www.massbank.com.
STOCKHOLDER
PROPOSALS
In light of the merger, we have not presently scheduled our
annual meeting of stockholders. Any matters that one of our
stockholders wishes to have included in our proxy statement for
the next annual meeting or otherwise considered at the annual
meeting must be received at a time reasonably in advance of the
printing and mailing of such proxy material and should be sent
to MASSBANK Corp., 123 Haven Street, Reading, Massachusetts
01867, Attention: Robert S. Cummings, Secretary. Our bylaws,
which were amended in February 2008, provide that any
stockholder wishing to have any director nominations or a
stockholder proposal considered at an annual meeting must
provide written notice of such nominations or stockholder
72
proposal and certain other information as set forth in our
bylaws to the Secretary of the Company at our principal
executive offices (a) not less than 75 days nor more
than 120 days prior to the anniversary of the immediately
preceding annual meeting of stockholders (which we sometimes
refer to as the Anniversary Date), (b) in the event that
the annual meeting of stockholders is scheduled to be held on a
date more than seven days prior to the Anniversary Date, not
later than the close of business on (i) the
20
th
day
(or if that day is not a business day for the Company, on the
next succeeding business day) following the first date on which
the date of such meeting was publicly disclosed, or (ii) if
the first date of such public disclosure occurs more than
75 days prior to such scheduled date of such meeting, then
the later of (1) the
20
th
day
(or if that day is not a business day for the Company, on the
next succeeding business day) following the first date of such
public disclosure, or (2) the
75
th
day
prior to such scheduled date of such meeting (or if that day is
not a business day for the Company, on the next succeeding
business day), or (c) in the event that the annual meeting
of stockholders is scheduled to be held on a date more than
seven days after the Anniversary Date, not later than the close
of business on (i) the
20
th
day
(or if that day is not a business day for the Company, on the
next succeeding business day) following the first date on which
the date of such meeting was publicly disclosed or (ii) if
the first date of such public disclosure occurs more than
75 days prior to such scheduled date of such meeting, then
the later of (1) the
20
th
day
(or if that day is not a business day for the Company, on the
next succeeding business day) following the first date of such
public disclosure or (2) the
75
th
day
prior to such scheduled date of such meeting (or if that day is
not a business day for the Company, on the next succeeding
business day). Any stockholder desiring to submit a nomination
or proposal must comply with our bylaws.
Pursuant to
Rule 14a-8
under the Exchange Act, a proposal must be received at our
principal executive offices not less than 120 calendar days
before the anniversary date of our proxy statement released to
our stockholders in connection with our previous years
annual meeting. However, if the date of the annual meeting has
been changed by more than 30 days from the date of the
previous years meeting, then the deadline is a reasonable
time before we begin to print and mail our proxy materials.
Any proposals must be in conformity with all applicable legal
provisions and our bylaws. Proxies solicited by our board will
confer discretionary voting authority on the proxy holders with
respect to these proposals, subject to the rules of the
Securities and Exchange Commission governing the exercise of
this authority.
You should rely only on the information contained in this proxy
statement to vote your shares of our common stock at the special
meeting. We have not authorized anyone to provide you with
information that is different from what is contained in this
proxy statement.
This proxy statement is dated June 6, 2008. You should not
assume that the information contained in this proxy statement is
accurate as of any date other than that date, and the mailing of
this proxy statement to stockholders does not create any
implication to the contrary. If any of the information in this
proxy statement becomes materially inaccurate prior to the
special meeting, we will update
and/or
correct that information to the extent required by applicable
law. This proxy statement does not constitute a solicitation of
a proxy in any jurisdiction where, or to or from any person to
whom, it is unlawful to make such proxy solicitation in such
jurisdiction.
IMPORTANT
YOUR VOTE IS IMPORTANT. REGARDLESS OF THE NUMBER
OF SHARES OF OUR COMMON STOCK THAT YOU OWN, PLEASE VOTE AS
RECOMMENDED BY OUR BOARD BY COMPLETING, SIGNING, DATING AND
PROMPTLY RETURNING THE ENCLOSED PROXY CARD IN THE POSTAGE-PAID
ENVELOPE PROVIDED OR BY VOTING YOUR SHARES THROUGH THE INTERNET
OR BY TELEPHONE.
73
Instructions
for Street Name Stockholders
If you own your shares in the name of a brokerage firm or bank,
only your broker or bank can vote your shares on your behalf and
only after receiving your specific instructions. Please call
your broker or bank and instruct your contact to execute a proxy
card on your behalf. You should also promptly complete, sign,
date and return your card when you receive it from your broker.
Please do so for each separate account you maintain.
Please
return your proxy card at once.
If you have any questions or need assistance in voting your
shares, or need additional copies of this proxy statement or the
accompanying proxy card, please call:
Laurel
Hill Advisory Group, LLC
100 Wall Street, 22nd Floor
New York, New York 10005
Call
Toll-Free (888) 742-1305
74
ANNEX
A
AGREEMENT
AND PLAN OF MERGER
by and among
Eastern Bank Corporation,
Eastern Bank,
Minuteman Acquisition Corp.,
MASSBANK Corp.
and
MASSBANK
Dated as of March 10, 2008
A-1
TABLE OF
CONTENTS
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ARTICLE I THE MERGER
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A-5
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1.1 The Merger
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A-5
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|
1.2 Bank Merger
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A-5
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|
1.3 Effective Date and Effective Time;
Closing; Effects of the Merger
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A-5
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|
1.4 Certificate of Incorporation and
Bylaws
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A-6
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|
1.5 Directors of the Surviving Corporation
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A-6
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|
1.6 Officers of the Surviving Corporation
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|
A-6
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|
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ARTICLE II MERGER CONSIDERATION AND EXCHANGE PROCEDURES
|
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A-6
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|
2.1 Merger Consideration
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|
|
A-6
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|
2.2 Rights as Shareholders; Closing of
the Companys Transfer Books
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A-7
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|
2.3 Exchange Procedures
|
|
|
A-7
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|
2.4 Options
|
|
|
A-8
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|
2.5 Tax Withholding
|
|
|
A-8
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|
2.6 Appraisal Rights
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|
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A-9
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|
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|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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|
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A-9
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|
3.1 Making of Representations and
Warranties
|
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A-9
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|
3.2 Organization, Standing and Authority
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A-9
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|
3.3 Capitalization
|
|
|
A-10
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|
3.4 Subsidiaries
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|
A-10
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|
3.5 Corporate Power
|
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A-11
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|
3.6 Corporate Authority
|
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|
A-11
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|
3.7 Non-Contravention
|
|
|
A-11
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|
3.8 Certificate of Incorporation; Bylaws;
Corporate Records
|
|
|
A-11
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|
3.9 Regulatory Approvals
|
|
|
A-12
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|
3.10 Compliance with Laws
|
|
|
A-12
|
|
3.11 Litigation; Regulatory Action
|
|
|
A-13
|
|
3.12 SEC Documents; Financial Reports; and Regulatory
Reports
|
|
|
A-13
|
|
3.13 Absence of Certain Changes or Events
|
|
|
A-15
|
|
3.14 Taxes and Tax Returns
|
|
|
A-15
|
|
3.15 Employee Benefit Plans
|
|
|
A-17
|
|
3.16 Labor Matters
|
|
|
A-20
|
|
3.17 Insurance
|
|
|
A-20
|
|
3.18 Environmental Matters
|
|
|
A-21
|
|
3.19 Intellectual Property
|
|
|
A-22
|
|
3.20 Material Agreements; Defaults
|
|
|
A-23
|
|
3.21 Property and Leases
|
|
|
A-24
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|
3.22 Regulatory Capitalization
|
|
|
A-25
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|
3.23 Loans; Nonperforming and Classified Assets
|
|
|
A-25
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|
3.24 Trust Business; Administration of Fiduciary
Accounts
|
|
|
A-25
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|
3.25 Investment Management and Related Activities
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|
|
A-25
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|
3.26 Risk Management Instruments
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|
|
A-26
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|
3.27 Investment Securities and Commodities
|
|
|
A-26
|
|
3.28 Repurchase Agreements
|
|
|
A-26
|
|
A-2
|
|
|
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|
3.29 Deposit Insurance
|
|
|
A-26
|
|
3.30 CRA; Anti-money Laundering
|
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3.31 Transactions with Affiliates
|
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3.32 Inapplicability of Takeover Provisions
|
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3.33 Brokers; Fairness Opinion
|
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3.34 Rights Agreement
|
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3.35 Company Information
|
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|
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3.36 Disclosure
|
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER
|
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4.1 Making of Representations and
Warranties
|
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4.2 Organization, Standing and Authority
|
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4.3 Corporate Power
|
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4.4 Corporate Authority
|
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4.5 Regulatory Approvals
|
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4.6 Non-Contravention
|
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4.7 Articles of Incorporation; Bylaws
|
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4.8 Compliance with Laws
|
|
|
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|
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4.9 Litigation
|
|
|
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4.10 Regulatory Capitalization
|
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4.11 Deposit Insurance
|
|
|
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4.12 Sufficient Funds
|
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4.13 Net Worth
|
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4.14 Financial Condition of Buyer
|
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4.15 Brokers
|
|
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4.16 Information Supplied
|
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|
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4.17 Disclosure
|
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ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
|
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5.1 Company Forbearances
|
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5.2 Buyer Forbearances
|
|
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ARTICLE VI ADDITIONAL AGREEMENTS
|
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6.1 Reasonable Best Efforts
|
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6.2 Shareholder Approval
|
|
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6.3 Publicity
|
|
|
A-35
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6.4 Access; Information
|
|
|
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|
|
6.5 No Solicitation
|
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6.6 Takeover Laws
|
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A-38
|
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6.7 Regulatory Applications; Filings;
Consents
|
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A-38
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6.8 Indemnification; Directors and
Officers Insurance
|
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|
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6.9 Employees; Benefit Plans
|
|
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6.10 Notification of Certain Matters
|
|
|
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|
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6.11 Confidentiality Agreement
|
|
|
A-42
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6.12 Current Information
|
|
|
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|
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6.13 Transition; Informational Systems Conversion
|
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|
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6.14 Access to Suppliers
|
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|
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|
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6.15 Environmental Assessments
|
|
|
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6.16 Stock Exchange De-listing
|
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6.17 Director Resignations
|
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6.18 Coordination
|
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6.19 Transactional Expenses
|
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ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER
|
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A-45
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7.1 Conditions to Each Partys
Obligations to Effect the Merger
|
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7.2 Conditions to the Obligations of Buyer
|
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7.3 Conditions to the Obligations of the
Company
|
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7.4 Frustration of Closing Conditions
|
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ARTICLE VIII TERMINATION
|
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8.1 Termination
|
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8.2 Effect of Termination and Abandonment
|
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ARTICLE IX MISCELLANEOUS
|
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|
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9.1 Survival
|
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A-48
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9.2 Certain Definitions
|
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9.3 Waiver; Amendment
|
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9.4 Expenses
|
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9.5 Notices
|
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9.6 Understanding; No Third Party
Beneficiaries
|
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9.7 Assignability; Binding Effect
|
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9.8 Headings; Interpretation
|
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9.9 Counterparts; Delivery
|
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9.10 Governing Law
|
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9.11 Jurisdiction
|
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9.12 Severability
|
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9.13 Enforcement
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A-4
This
AGREEMENT AND PLAN OF MERGER
, dated as of
March 10, 2008 (this
Agreement
) is by
and among Eastern Bank Corporation, a Massachusetts corporation
(the
Buyer
), Eastern Bank, a
Massachusetts-chartered savings bank and wholly owned subsidiary
of Buyer (the
Buyer Bank
), Minuteman
Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Buyer (the
Merger Sub
),
MASSBANK Corp., a Delaware corporation (the
Company
), and MASSBANK, a
Massachusetts-chartered savings bank and wholly owned subsidiary
of the Company (the
Company Bank
).
BACKGROUND
A. The respective Boards of Directors of Buyer, Buyer Bank,
Merger Sub, the Company and Company Bank have determined that it
is in the best interests of their respective corporations and
shareholders to enter into this Agreement and to consummate the
strategic business combination provided for herein, pursuant to
which, subject to the terms and conditions set forth in this
Agreement: (i) Merger Sub will merge with and into the
Company, with the Company as the surviving entity (the
Merger
); and (ii) after the Effective
Time of the Merger at a date selected by Buyer, Company Bank
will merge with and into Buyer Bank, with Buyer Bank as the
surviving entity (the
Bank Merger
);
B. As a condition to the willingness of Buyer to enter into
this Agreement, each of the directors and executive officers of
the Company (each a
Voting Agreement
Shareholder
and collectively, the
Voting
Agreement Shareholders
) has entered into a Voting
Agreement, substantially in the form of
Exhibit A
hereto, dated as of the date hereof, with Buyer (each a
Voting Agreement
and collectively, the
Voting Agreements
), pursuant to which each
Voting Agreement Shareholder has agreed, among other things, to
vote such Voting Agreement Shareholders shares of common
stock, par value $1.00 per share, of the Company
(
Company Common Stock
) in favor of the
approval of this Agreement and the transactions contemplated
hereby, upon the terms and subject to the conditions set forth
in the Voting Agreement; and
C. The parties desire to make certain representations,
warranties and agreements in connection with the Merger and also
to prescribe certain conditions to the Merger.
NOW, THEREFORE
, in consideration of the mutual
covenants, representations, warranties and agreements contained
herein, and intending to be legally bound hereby, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1
The Merger
. Subject to the
terms and conditions of this Agreement, the satisfaction or
waiver of the conditions set forth herein, and in reliance upon
the representations, warranties and covenants set forth herein,
at the Effective Time, Merger Sub shall merge with and into the
Company in accordance with the General Corporation Law of the
State of Delaware (the
DGCL
). Upon
consummation of the Merger, the separate corporate existence of
the Merger Sub shall cease and the Company shall survive and
continue to exist as a corporation incorporated under the laws
of Delaware (the Company, as the surviving corporation in the
Merger, sometimes being referred to herein as the
Surviving Corporation
).
1.2
Bank Merger
. The Plan of Bank
Merger, substantially in the form of
Exhibit B
hereto, has been simultaneously entered into between Buyer Bank
and Company Bank providing for the Bank Merger, it being
intended that the Bank Merger be consummated at a date selected
by Buyer in its sole discretion following consummation of the
Merger, by, among other things, the filing of the Articles of
Merger with the Secretary of the Commonwealth of the
Commonwealth of Massachusetts (the
Articles of
Merger
).
1.3
Effective Date and Effective Time; Closing;
Effects of the Merger
.
(a) On the Closing Date, as promptly as practicable after
all of the conditions set forth in Article VII have been
satisfied or, if permissible, waived by the party entitled to
the benefit of the same, Merger Sub and the Company shall
execute and file with the Secretary of State of the State of
Delaware the certificate of merger related to the Merger (the
Certificate of Merger
). The Merger provided
for herein shall become
A-5
effective upon the acceptance for filing by the Secretary of
State of the State of Delaware of the Certificate of Merger or
such later date and time as may be set forth in the Certificate
of Merger. The date of such filing or such later effective date
is herein called the
Effective Date
. The
Effective Time
of the Merger shall be as
specified in the Certificate of Merger.
(b) Subject to the terms and conditions of this Agreement,
the transactions contemplated by this Agreement shall be
consummated at a closing (the
Closing
) that
will take place at 10:00 a.m., local time, on a date to be
specified by the parties, which shall be no later than three
(3) Business Days after all of the conditions to the
closing set forth in Article VII (other than conditions to
be satisfied at Closing, which are satisfied or waived (subject
to applicable law) at the Closing) have been satisfied or waived
in accordance with terms hereof, at the principal offices of
Nutter, McClennen & Fish, LLP, in Boston,
Massachusetts, or such other place or on such other date as the
parties may mutually agree upon in writing (such date, the
Closing Date
), unless this Agreement has been
theretofore terminated pursuant to its terms or unless extended
by mutual agreement of the parties. At the Closing, there shall
be delivered to Buyer and the Company the certificates and other
documents required to be delivered pursuant to Article VII.
(c) At and after the Effective Time, the Merger shall have
the effects set forth in this Agreement and in the appropriate
provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, the
Surviving Corporation shall possess all the rights, privileges,
powers, and franchises, and be subject to all of the
restrictions, disabilities, and duties of the Company and Merger
Sub, as provided under Section 259 of the DGCL.
1.4
Certificate of Incorporation and
Bylaws
. The Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time
(which shall contain such provisions as are necessary to give
full effect to the exculpation and indemnification provided for
in Section 6.8 hereof), shall be the Certificate of
Incorporation of the Surviving Corporation
,
except the
name of the Surviving Corporation shall continue to be MASSBANK
Corp., until thereafter amended as provided therein and in
accordance with applicable law. The Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time (which shall
contain such provisions as are necessary to give full effect to
the exculpation and indemnification provided for in
Section 6.8 hereof), shall be the Bylaws of the Surviving
Corporation, until thereafter amended as provided therein and in
accordance with applicable law.
1.5
Directors of the Surviving
Corporation
. The directors of Merger Sub
immediately prior to the Effective Time shall become the
directors of the Surviving Corporation, each of whom shall serve
in accordance with the Certificate of Incorporation and Bylaws
of the Surviving Corporation.
1.6
Officers of the Surviving
Corporation
. The officers of Merger Sub
immediately prior to the Effective Time shall become the
officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation.
ARTICLE II
MERGER
CONSIDERATION AND EXCHANGE PROCEDURES
2.1
Merger Consideration
. Subject
to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on
the part of Buyer, Merger Sub, the Company or any shareholder of
the Company or Merger Sub:
(a) Each share of common stock, par value $0.01 per share,
of Merger Sub that is issued and outstanding immediately prior
to the Effective Time shall be converted into one validly
issued, fully paid, and nonassessable share of common stock, par
value $0.01 per share, of the Surviving Corporation.
(b) Each share of Company Common Stock held as Treasury
Stock immediately prior to the Effective Time shall be cancelled
and retired at the Effective Time without any conversion
thereof, and no payment shall be made with respect thereto.
A-6
(c) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than
Treasury Stock and Dissenting Shares) shall become and be
converted into, as provided in and subject to the limitations
set forth in this Agreement, the right to receive $40.00 in cash
(the
Merger Consideration
), payable to the
holder thereof, in each case without interest and less
applicable Tax withholdings, if any, upon surrender of the
certificate formerly representing such share of the Company
Common Stock and such other documents as Buyer reasonably may
require in accordance with Section 2.3.
2.2
Rights as Shareholders; Closing of the
Companys Transfer Books
.
(a) All shares of Company Common Stock, when converted as
provided in Section 2.1(c), shall no longer be outstanding
and shall automatically be cancelled and retired and shall cease
to exist, and each certificate (a
Certificate
) previously evidencing such
shares, and all uncertificated shares, shall thereafter
represent only the right to receive the Merger Consideration for
each such share of Company Common Stock. At the Effective Time,
holders of Company Common Stock shall cease to be, and shall
have no rights as, shareholders of the Company, other than the
right to receive the Merger Consideration and the right to
receive any unpaid dividend with respect to the Company Common
Stock with a record date occurring prior to the Effective Time.
(b) At the Effective Time, the stock transfer books of the
Company shall be closed and no transfer of shares of Company
Common Stock that were outstanding immediately prior to the
Effective Time shall thereafter be made, other than transfers of
the Company Common Stock that have occurred prior to the
Effective Time.
2.3
Exchange Procedures
.
(a) Prior to the Effective Time, Buyer shall designate a
bank or trust company reasonably acceptable to the Company to
act as paying agent in the Merger (the
Paying
Agent
), and on or before the Effective Time, Buyer
shall deposit or cause to be deposited with the Paying Agent
cash in an amount equal to the aggregate amounts payable under
Section 2.1(c) (the
Exchange Fund
). In
the event the Exchange Fund shall be insufficient to make all
such payments, Buyer shall promptly deposit, or cause to be
deposited, additional funds with the Paying Agent in an amount
that is equal to the deficiency in the amount of funds required
to make such payments. The Paying Agent shall make payments of
the aggregate Merger Consideration out of the Exchange Fund in
accordance with this Agreement. The Exchange Fund shall not be
used for any other purpose.
(b) As soon as reasonably practicable after the Effective
Time but in no event later than five (5) Business Days
after the date thereof, Buyer shall cause the Paying Agent to
mail to each holder of record of Company Common Stock at the
Effective Time (each an
Effective Date
Holder
) whose shares were converted into the right to
receive the Merger Consideration pursuant to
Section 2.1(c): (i) a letter of transmittal in
customary form for transactions of this nature (which shall
specify that for holders of shares issued in certificated form,
delivery of such holders Certificates shall be effected,
and risk of loss and title to the Certificates shall pass, only
upon actual delivery of the Certificates to the Paying Agent and
shall be in such form and have such other provisions as Buyer or
the Paying Agent reasonably may specify), and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration and
instructions for use by holders of shares issued in
uncertificated form. Upon delivery to the Paying Agent of a duly
executed letter of transmittal and such other documents as the
Paying Agent shall reasonably require, including where
applicable delivery of Certificates, each Effective Date Holder
shall be entitled to receive in exchange therefor the Merger
Consideration for each share of Company Common Stock covered by
the letter of transmittal, in accordance with
Section 2.1(c), and the Certificates so surrendered shall
be canceled. If a transfer of ownership of Company Common Stock
has occurred but has not been registered in the transfer records
of the Company, a check representing the proper amount of Merger
Consideration may be issued to the transferee if the Certificate
representing such shares of Company Common Stock is presented to
the Paying Agent accompanied by all documents and endorsements
required to evidence and effect such transfer and evidence that
any applicable stock transfer taxes have been paid. Until
surrendered as provided in this Section 2.3, each
Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon
A-7
such surrender the Merger Consideration for each share of
Company Common Stock represented thereby. No interest will be
paid or accrue on any amounts payable upon surrender of any
Certificate.
(c) Promptly following the date that is one (1) year
after the Effective Time, the Paying Agent shall deliver to
Buyer all cash and any documents in its possession or control
relating to the transactions described in this Agreement, and
the Paying Agents duties shall terminate. Thereafter, each
holder of a Certificate may surrender such Certificate to Buyer
and (subject to applicable abandoned property, escheat or other
similar laws) receive in exchange therefor the Merger
Consideration, payable upon due surrender of the Certificate
without any interest thereon.
(d) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or
destroyed, the Paying Agent shall issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof determined in accordance with
this Article II;
provided
,
however
, that
Buyer or the Paying Agent may, in its discretion, require the
delivery of an indemnity or bond in customary amount against any
claim that may be made against the Surviving Corporation with
respect to such Certificate or ownership thereof.
(e) The Paying Agent shall invest any funds held by it for
purposes of this Section 2.3 as directed by Buyer, on a
daily basis. Any interest and other income resulting from such
investments shall be paid to Buyer. To the extent that there are
losses with respect to any such investments, Buyer shall be
responsible to ensure that the Paying Agent has access to funds
sufficient to make any required payments under this
Article II promptly when due.
(f) None of Buyer, the Company, Buyer Bank, Company Bank,
Merger Sub or the Paying Agent shall be liable to any person in
respect of any cash delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If
any Certificate shall not have been surrendered prior to three
(3) years after the Effective Time, or immediately prior to
such earlier date on which any of the Merger Consideration would
otherwise escheat or become the property of any Governmental
Authority, the amount payable in respect thereof shall, to the
extent permitted by law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any
Person previously entitled thereto.
2.4
Options
.
(a) At the Effective Time, each option, warrant or other
similar right to acquire shares of Company Common Stock (each an
Option
) that then remains outstanding and
originally was granted under any Employee Program, whether or
not then vested or exercisable, automatically shall be
terminated at the Effective Time and converted into the right of
the holder thereof to receive thereupon in full satisfaction of
such Option as of the Effective Time, an amount in cash (subject
to any applicable withholding Taxes) equal to the product of
(x) the excess, if any, of the Merger Consideration over
the applicable exercise price of such Option and (y) the
number (determined without reference to vesting requirements or
other limitations on exercisability) of shares of Company Common
Stock issuable upon exercise of such Option (the
Option
Consideration
). For the avoidance of doubt, Buyer and
the Company acknowledge and agree that any Option that is
outstanding immediately prior to the Effective Time and has an
exercise price greater than the Merger Consideration shall
expire without the right to receive any Company Common Stock or
any payment in lieu thereof.
(b) As soon as reasonably practicable after the Effective
Time, Buyer or the Surviving Corporation shall mail to each
holder of an Option immediately prior to the Effective Time, a
check in an amount equal to the Option Consideration due and
payable to such holder pursuant to Section 2.4(a) in
respect of such Option.
2.5
Tax Withholding
. Each of Buyer,
the Surviving Corporation, and the Paying Agent shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any former holder of
shares of Company Common Stock or Options, as the case may be,
such amounts as Buyer, the Surviving Corporation, or the Paying
Agent is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986,
as amended (the
Code
), or any other provision
of federal, state, local or foreign Tax law. To the extent that
amounts are so withheld by Buyer, the Surviving Corporation, or
the Paying Agent, such withheld amounts shall be treated for all
purposes of this Agreement
A-8
as having been paid to the former holder of the shares of
Company Common Stock or Options in respect of which such
deduction and withholding was made by Buyer, the Surviving
Corporation, or the Paying Agent.
2.6
Appraisal Rights
.
(a) Notwithstanding anything in this Agreement to the
contrary, any shares (the
Dissenting Shares
)
of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are held by
Company Shareholders who, in accordance with Section 262 of
the DGCL (the
Appraisal Rights Provisions
),
(i) have not voted in favor of approving this Agreement,
(ii) shall have demanded properly in writing appraisal for
such shares, (iii) have otherwise complied in all respects
with the Appraisal Rights Provisions, and (iv) have not
effectively withdrawn, lost or failed to perfect their rights to
appraisal (the
Dissenting Shareholders
), will
not be converted into Merger Consideration, but at the Effective
Time, by virtue of the Merger and without any action on the part
of the holder thereof, shall be cancelled and shall cease to
exist and shall represent the right to receive only those rights
provided under the Appraisal Rights Provisions;
provided
,
however
, that all shares of Company Common Stock held by
Company Shareholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to
appraisal of such shares of Company Common Stock under the
Appraisal Rights Provisions shall thereupon be deemed to have
been cancelled and to have been converted, as of the Effective
Time, into the right to receive the Merger Consideration
relating thereto, without interest, in the manner provided in
Sections 2.1 and 2.3.
(b) The Company shall give Buyer and Merger Sub prompt
notice of any demands received by the Company for the exercise
of appraisal rights with respect to shares of Company Common
Stock, and Buyer shall have the right to participate in all
negotiations and proceedings with respect to such demands. The
Company shall not, except with the prior written consent of
Buyer, make any payment with respect to, or settle or offer to
settle, any such demands.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
3.1
Making of Representations and Warranties
.
(a) As a material inducement to Buyer, Buyer Bank and
Merger Sub to enter into this Agreement and to consummate the
transactions contemplated hereby, the Company and Company Bank
jointly and severally hereby make to Buyer, Buyer Bank and
Merger Sub the representations and warranties contained in this
Article III.
(b) On or prior to the date hereof, the Company has
delivered to Buyer, Buyer Bank and Merger Sub a schedule (the
Company Disclosure Schedule
) listing, among
other things, items the disclosure of which is necessary or
appropriate in relation to any or all of the Companys and
Company Banks representations and warranties contained in
this Article III;
provided
,
however
, that no
such item is required to be set forth on the Company Disclosure
Schedule as an exception to a representation or warranty if its
absence is not reasonably likely to result in the related
representation or warranty being untrue or incorrect under the
standards established by Section 3.1(c).
(c) No representation or warranty of the Company and
Company Bank contained in this Article III shall be deemed
untrue or incorrect, and the Company and Company Bank shall not
be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, circumstance or event
unless such fact, circumstance or event, individually or taken
together with all other facts, circumstances or events
inconsistent with any section of this Article III, has had
or would reasonably be expected to have a Company Material
Adverse Effect;
provided
,
however
, that the
foregoing standard shall not apply to the representations and
warranties contained in Sections 3.3, 3.4(a), 3.5, 3.6,
3.9(a) and 3.32, as well as the first two sentences of
Section 3.2, and the last sentence of Section 3.15(g),
which shall be deemed untrue, incorrect and breached if they are
not true and correct in all respects.
3.2
Organization, Standing and
Authority
. The Company is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. The Company is duly registered as a
A-9
bank holding company under the Bank Holding Company Act of 1956,
as amended (
BHCA
), and the regulations of the
Board of Governors of the Federal Reserve System (the
FRB
) promulgated thereunder. The Company is
duly qualified to do business and is in good standing in the
jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified. A
complete and correct list of all such jurisdictions is set forth
on
Schedule 3.2
of the Company Disclosure Schedule.
3.3
Capitalization
.
(a) As of the date hereof, the authorized capital stock of
the Company consists solely of (i) 10,000,000 shares
of Company Common Stock, of which 4,233,079 shares are
issued and outstanding, and (ii) 2,000,000 shares of
preferred stock, par value $1.00 per share, none of which are
issued and outstanding. As of the date hereof, there were
60,000 shares of the Companys preferred stock
designated as Series B Junior Participating
Cumulative Preferred Stock and reserved for issuance
pursuant to the Rights Agreement. In addition, as of the date
hereof, there are 254,575 shares of Company Common Stock
reserved for issuance upon exercise of outstanding Options. The
outstanding shares of the Company Common Stock are validly
issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, and subject to no preemptive
or similar rights (and were not issued in violation of any
preemptive or similar rights). Other than shares issuable under
the Rights Agreement, and except as set forth on
Schedule 3.3
of the Company Disclosure Schedule,
(A) there are no additional shares of the Companys
capital stock authorized or reserved for issuance, (B) the
Company does not have any securities (including units of
beneficial ownership interest in any partnership or limited
liability company) convertible into or exchangeable for any
additional shares of stock, any stock appreciation rights, or
any other rights to subscribe for or acquire shares of its
capital stock issued and outstanding, and (C) the Company
does not have, and is not bound by, any commitment to authorize,
issue or sell any such shares or other rights.
(b) Except for the Rights Agreement and as set forth on
Schedule 3.3
of the Company Disclosure Schedule,
there are no outstanding contractual obligations of the Company
to repurchase, redeem or otherwise acquire any shares of capital
stock of, or other equity interests in, the Company, or to
provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in any Subsidiary of the
Company.
(c)
Schedule 3.3
of the Company Disclosure
Schedule sets forth, as of the date hereof, for each Option, the
name of the grantee, the date of grant, the type of grant, the
status of the Option grant as qualified or non-qualified under
Section 422 of the Code, the number of shares of Company
Common Stock subject to each Option, the vesting schedule of
each Option, the number of shares of Company Common Stock that
are currently exercisable with respect to such Option, the
expiration date of each Option, and the exercise price per
share.
Schedule 3.3
of the Company Disclosure
Schedule also sets forth the weighted average exercise price of
all outstanding Options.
3.4
Subsidiaries
.
(a) (i)
Schedule 3.4
of the Company Disclosure
Schedule sets forth a complete and correct list of all of the
Companys Subsidiaries, including the jurisdiction of
organization of each such Subsidiary and the authorized and
outstanding shares of capital stock of such Subsidiary,
(ii) the Company owns, directly or indirectly, all of the
issued and outstanding equity securities of each Subsidiary,
(iii) no equity securities of any of the Companys
Subsidiaries are or may become required to be issued, sold or
otherwise transferred (other than to the Company) by reason of
any contractual right or otherwise, (iv) there are no
contracts, commitments, understandings or arrangements by which
any of such Subsidiaries is or may be bound to sell or otherwise
transfer any of its equity securities (other than to the Company
or a wholly-owned Subsidiary of the Company), (v) there are
no contracts, commitments, understandings or arrangements
relating to the Companys rights to vote or to dispose of
such securities, and (vi) all of the equity securities of
each such Subsidiary held by the Company, directly or
indirectly, are validly issued, fully paid and nonassessable,
not subject to preemptive or similar rights and are owned by the
Company free and clear of all mortgages, pledges, liens,
security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any
kind (collectively,
Liens
).
A-10
(b) Except for equity interests held in the investment
portfolios of the Companys Subsidiaries, equity interests
held by the Companys Subsidiaries in a fiduciary capacity,
and equity interests held in connection with the lending
activities of the Companys Subsidiaries, including stock
in the Federal Home Loan Bank of Boston, in each case acquired
in the ordinary course of business consistent with recent past
practice, and except as set forth on
Schedule 3.4
of
the Company Disclosure Schedule, the Company does not own (other
than in a bona fide fiduciary capacity or in satisfaction of a
debt previously contracted) beneficially, directly or
indirectly, any equity securities or similar interests of any
Person, or any interest in a joint venture of any kind.
(c) Each of the Companys Subsidiaries has been duly
organized and qualified under the laws of the jurisdiction of
its organization and is duly qualified to do business and in
good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it
to be so qualified. A complete and correct list of all such
jurisdictions is set forth on
Schedule 3.4
of the
Company Disclosure Schedule.
3.5
Corporate Power
. Each of the
Company and its Subsidiaries has the requisite corporate power
and authority to carry on its business as it is now being
conducted and to own all of its properties and assets; and each
of the Company and Company Bank has the requisite corporate
power and authority to execute and deliver this Agreement, to
perform its obligations under this Agreement and to consummate
the transactions contemplated hereby, subject to obtaining the
Company Shareholder Approval.
3.6
Corporate Authority
. This
Agreement and the transactions contemplated hereby, subject to
the Company Shareholder Approval, have been authorized by all
necessary corporate action of the Company and the Board of
Directors of the Company (the
Company Board
)
and Company Bank and the board of directors of Company Bank (the
Company Bank Board
). The Company Board and
the Company Bank Board (i) approved this Agreement and
determined that this Agreement and the transactions contemplated
hereby, including the Merger, are advisable and in the best
interests of the holders of Company Common Stock and
(ii) resolved to recommend that the holders of Company
Common Stock vote for the approval of this Agreement at the
Company Meeting. The Plan of Bank Merger has been approved by
the Company as the holder of all of the outstanding shares of
Company Bank common stock. Each of the Company and Company Bank
has duly executed and delivered this Agreement and, assuming the
due authorization, execution and delivery by Buyer, Buyer Bank,
and Merger Sub, this Agreement is a legal, valid and binding
agreement of the Company and Company Bank, enforceable against
it in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting
creditors rights or by a courts application of
general equitable principles (the
Bankruptcy and Equity
Exception
).
3.7
Non-Contravention
. Subject to
the receipt of the Regulatory Approvals, the required filings
under federal and state securities laws, the receipt of the
Company Shareholder Approval and the filing of the Certificate
of Merger, and except as set forth on
Schedule 3.7
of the Company Disclosure Schedule, the execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby (including, without limitation,
the Merger) by each of the Company and Company Bank do not and
will not (i) constitute a breach or violation of, or a
default under, result in a right of termination or the
acceleration of any right or obligation under, any law, rule or
regulation or any judgment, decree, order, permit, license,
credit agreement, indenture, loan, note, bond, mortgage,
reciprocal easement agreement, lease, instrument, concession,
franchise or other agreement of the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries,
properties or assets is subject or bound, (ii) constitute a
breach or violation of, or a default under, the Companys
Restated Certificate of Incorporation or Bylaws or Company
Banks Articles of Organization or Bylaws, or
(iii) require the consent or approval of any third party
under any such law, rule, regulation, judgment, decree, order,
permit, license, credit agreement, indenture, loan, note, bond,
mortgage, reciprocal easement agreement, lease, instrument,
concession, franchise or other agreement.
3.8
Certificate of Incorporation; Bylaws;
Corporate Records
. The Company has made available
to Buyer, Buyer Bank and Merger Sub a complete and correct copy
of the Restated Certificate of Incorporation and the Bylaws or
equivalent organizational documents, each as amended to date, of
the Company and each of
A-11
its Subsidiaries. The Company is not in violation of any of the
terms of its Restated Certificate of Incorporation or Bylaws.
The minute books of the Company and each of its Subsidiaries
contain complete and accurate records of all meetings held, and
complete and accurate records of all other corporate actions of
their respective shareholders and boards of directors (including
committees of their respective boards of directors).
3.9
Regulatory Approvals
.
(a) No consents or approvals of, or waivers by, or filings
or registrations with, any Governmental Authority are required
to be made or obtained by the Company or any of its Subsidiaries
in connection with the execution, delivery or performance by the
Company of this Agreement or to consummate the transactions
contemplated hereby, except for (i) filings of applications
or notices with, and consents, approvals or waivers by the FRB,
the FDIC, the Office of the Massachusetts Commissioner of Banks
and the Massachusetts Board of Bank Incorporation, (ii) the
obtaining by Buyer of a letter from the Massachusetts Housing
Partnership Fund (the
MHPF
) to the
Massachusetts Commissioner of Banks stating that Buyer has made
satisfactory arrangements with the MHPF,
(iii) obtaining by Buyer from the Depositors Insurance Fund
(the
DIF
) a letter to the Massachusetts
Commissioner of Banks stating that arrangements
satisfactory to the Depositors Insurance Fund have been
made in connection with the Bank Merger, (iv) the filing of
the Certificate of Merger, (v) the filing with the SEC of a
proxy statement (as amended and supplemented, the
Proxy
Statement
) and related proxy materials to be used in
soliciting the Company Shareholders approval and the filing of
such other reports under and such other compliance with the
Exchange Act as may be required in respect of this Agreement and
the transactions contemplated hereby, (vi) the approval of
this Agreement by the holders of a majority of the outstanding
shares of Company Common Stock (the
Company Shareholder
Approval
), and (vii) compliance with the rule and
regulations of the Nasdaq Stock Market.
(b) As of the date hereof, the Company is not aware of any
reason relating to the Company or Company Bank (including,
without limitation, Community Reinvestment Act compliance or the
USA Patriot Act) (i) why all of the Regulatory Approvals
shall not be procured from the applicable Governmental
Authorities having jurisdiction over the transactions
contemplated by this Agreement or (ii) why any Burdensome
Condition would be imposed.
3.10
Compliance with Laws
. Each of
the Company and its Subsidiaries:
(a) to the Knowledge of the Company, is in compliance in
all material respects with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto or to the
employees conducting their businesses, including, without
limitation, state usury laws, the Bank Secrecy Act, the Truth in
Lending Act, the Real Estate Settlement Procedures Act, the
Consumer Credit Protection Act, the Equal Credit Opportunity
Act, the Fair Credit Reporting Act, the Homeowners Ownership and
Equity Protection Act, the Fair Debt Collections Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act, the Truth in Savings Act, and all other
applicable consumer protection laws, fair lending laws and other
laws relating to discriminatory business practices. In addition,
each of the Company and its Subsidiaries has complied in all
material respects with all applicable laws, privacy policies and
terms of use or other contractual obligations relating to
privacy, data security, and the collection, storage, use and
dissemination of consumer information, including nonpublic
personal information. The Company and each of its Subsidiaries
have reasonable data security and consumer information
protections in place, in compliance with the Interagency
Guidelines Establishing Information Security Standards, and
there has been no material breach thereof or loss of data since
December 31, 2005;
(b) has all material permits, licenses, authorizations,
orders, franchises and approvals of, and has made all filings,
applications and registrations with, all Governmental
Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as
presently conducted; all such material permits, licenses,
authorizations, orders, franchises and approvals are in full
force and effect and, to the Knowledge of the Company, no
suspension or cancellation of any of them is threatened; and
A-12
(c) has not received, since December 31, 2004, any
written, or to the Knowledge of the Company, oral, notification
from any Governmental Authority (i) asserting that the
Company or any of its Subsidiaries is not in material compliance
with any statute, law, regulation, ordinance, rule, judgment,
order or decree, or threatening an investigation with respect to
possible violations of same, (ii) threatening revocation of
any license, authorization, order, franchise or approval,
(iii) threatening revocation or limitation of, or which
would have the effect of revoking or limiting, federal deposit
insurance (nor, to the Knowledge of the Company, is there any
fact or circumstance reasonably apparent that would reasonably
be expected to give rise to such revocation or termination), or
(iv) failing to approve any proposed acquisition, or
stating its intention not to approve acquisitions, proposed to
be effected by the Company or any of its Subsidiaries within a
certain time period or indefinitely.
3.11
Litigation; Regulatory Action
.
(a) Except as set forth in the Company SEC Documents filed
or furnished prior to the date of this Agreement or as set forth
on
Schedule 3.11
of the Company Disclosure Schedule,
no litigation, claim, suit, investigation or other proceeding
before any court, Governmental Authority or arbitrator is
pending against the Company or any of its Subsidiaries, and, to
the Knowledge of the Company, no such litigation, claim, suit,
investigation or other proceeding has been threatened and there
are no facts that are reasonably apparent that would reasonably
be expected to give rise to any litigation, claim, suit,
investigation or other proceeding that would result in a Company
Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries nor any
of their respective properties is a party to or is subject to
any
cease-and-desist
or other order or enforcement action, assistance agreement,
board resolution, order, decree, supervisory agreement,
memorandum of understanding, condition or similar arrangement
with, or a commitment letter or similar submission to, any
Governmental Authority charged with the supervision or
regulation of financial institutions or issuers of securities or
engaged in the insurance of deposits (including, without
limitation, the FRB, the FDIC, and the Massachusetts
Commissioner of Banks) or the supervision or regulation of the
Company or any of its Subsidiaries. Except as set forth on
Schedule 3.11
of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries has been subject
to any order or directive by, or been ordered to pay any civil
money penalty by, or has been since December 31, 2004, a
recipient of any supervisory letter from, or since
December 31, 2004, has adopted any policies, procedures or
board resolutions at the request or suggestion of, any
Governmental Authority that currently regulates in any material
respect the conduct of its business or that in any manner
relates to its capital adequacy, its ability to pay dividends,
its credit or risk management policies, its management or its
business, other than those of general application that apply to
similarly-situated bank or financial holding companies or their
Subsidiaries.
(c) No Governmental Authority has advised the Company or
any of its Subsidiaries in writing, or to the Knowledge of the
Company, orally, that it will issue any such order, decree,
agreement, board resolution, memorandum of understanding,
supervisory letter, commitment letter, condition or similar
submission, nor to the Knowledge of the Company is there any
fact or circumstance reasonably apparent that would reasonably
be expected to give rise to the issuance of any such order,
decree, agreement, board resolution, memorandum of
understanding, supervisory letter, commitment letter, condition
or similar submission.
3.12
SEC Documents; Financial Reports; and
Regulatory Reports
.
(a) The Companys Annual Report on
Form 10-K,
as amended through the date hereof, for the fiscal year ended
December 31, 2006 (the
Company 2006
Form 10-K
),
and all other reports, registration statements, definitive proxy
statements or information statements required to be filed by the
Company or any of its Subsidiaries subsequent to
December 31, 2004 under the Securities Act, or under
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
(collectively, the
Company SEC Documents
),
with the Securities and Exchange Commission
(
SEC
), and all of the Company SEC Documents
filed with the SEC after the date hereof, in the form filed or
to be filed, (i) complied or will comply, at the time
filed, in all material respects as to form with the applicable
requirements under the Securities Act or the Exchange Act, as
the case may be, and (ii) did not and will not contain, at
the time filed, any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
A-13
(b) The Company has provided to Buyer, Buyer Bank and
Merger Sub a complete and correct copy of the audited
consolidated balance sheet of the Company and its Subsidiaries
(the
Company Balance Sheet
) as of
December 31, 2007 (the
Company Balance Sheet
Date
) and the audited consolidated statements of
income and changes in shareholders equity and cash flows
or equivalent statements of the Company and its Subsidiaries for
each of the years in the three-year period ended
December 31, 2007 (together with the Company Balance Sheet,
the
2007 Company Financial Statements
). The
Company Balance Sheet, and each of the balance sheets contained
in or incorporated by reference into any Company SEC Document
filed with the SEC after the date hereof (including the related
notes and schedules thereto) fairly presents and will fairly
present the financial position of the entity or entities to
which such balance sheet relates as of its date; and each
statement of income and changes in shareholders equity and
cash flows or equivalent statements in the 2007 Company
Financial Statements and each such statement contained in or
incorporated by reference into any Company SEC Document filed
with the SEC after the date hereof (including any related notes
and schedules thereto) fairly present and will fairly present
the results of operations, changes in shareholders equity
and changes in cash flows, as the case may be, of the entity or
entities to which such statement relates for the periods to
which it relates, in each case in accordance with GAAP
consistently applied during the periods involved, except in each
case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements. Since
December 31, 2007, except for (i) liabilities that are
fully reflected or reserved against in the Company Balance
Sheet, (ii) liabilities discharged or otherwise satisfied
in the ordinary course of business consistent with recent past
practices, and (iii) liabilities incurred since the Company
Balance Sheet Date in the ordinary course of business consistent
with recent past practices or in connection with this Agreement,
neither the Company nor any of its Subsidiaries has any
liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set
forth on its consolidated balance sheet or in the notes thereto.
The books and records of the Company and its Subsidiaries have
been, and will be, maintained in all material respects in
accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
Each of the balance sheets contained in or incorporated by
reference into any Company SEC Document, and each of the
statements of income and changes in shareholders equity
and cash flows or equivalent statements in such Company SEC
Document has been prepared from, and is in accordance with, the
books and records of the Company and its Subsidiaries.
(c) The records, systems, controls, data and information of
the Company and its Subsidiaries are recorded, stored,
maintained and operated under means (including any electronic,
mechanical or photographic process, whether computerized or not)
that are under the exclusive ownership and direct control of the
Company or its Subsidiaries or accountants (including all means
of access thereto and therefrom), except for any non-exclusive
ownership and non-direct control that would not reasonably be
expected to have a material adverse effect on the system of
internal accounting controls described below in
Section 3.12(d).
(d) The Company and each of its Subsidiaries, officers and
directors are in compliance with, and have complied, with
(1) the applicable provisions of the Sarbanes-Oxley Act of
2002, as amended (
Sarbanes-Oxley
) and the
related rules and regulations promulgated under such act and the
Exchange Act and (2) the applicable listing and corporate
governance rules and regulations of the Nasdaq Stock Market. The
Company (i) has established and maintained disclosure
controls and procedures and internal control over financial
reporting (as such terms are defined in paragraphs (e) and
(f), respectively, of
Rule 13a-15
under the Exchange Act) as required by
Rule 13a-15
under the Exchange Act, and (ii) has disclosed based on its
most recent evaluations, to its outside auditors and the audit
committee of the Company Board (A) all significant
deficiencies and material weaknesses in the design or operation
of internal control over financial reporting (as defined in
Rule 13a-15(f)
of the Exchange Act) which are reasonably likely to adversely
affect the Companys ability to record, process, summarize
and report financial data and (B) any fraud, whether or not
material, that involves management or other employees who have a
significant role in the Companys internal control over
financial reporting. Since December 31, 2006,
(i) neither the Company nor any of its Subsidiaries nor, to
the Knowledge of the Company, any director, officer, employee,
auditor, accountant or representative of the Company or any of
its Subsidiaries has received or otherwise had or obtained
knowledge of any material complaint, allegation, assertion or
claim regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or any of
its Subsidiaries or their respective internal accounting
controls, including any material complaint, allegation,
assertion or claim that the Company or any of its Subsidiaries
A-14
has engaged in questionable accounting or auditing practices,
and (ii) no attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of
its Subsidiaries, has reported evidence of a material violation
of securities laws, breach of fiduciary duty or similar
violation by the Company or any of its officers, directors,
employees or agents to the Company Board or any committee
thereof or to any director or officer of the Company.
(e) Since December 31, 2004, neither the Company nor
any of its Subsidiaries has received any SEC comment letter.
(f) Since December 31, 2004, the Company and its
Subsidiaries have duly filed with the FRB, the FDIC, the
Massachusetts Commissioner of Banks and any other applicable
Governmental Authority, 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 in
compliance with the requirements of applicable laws and
regulations
3.13
Absence of Certain Changes or
Events
. As of the date of this Agreement and
except as disclosed in
Schedule 3.13
of the Company
Disclosure Schedule or in the Company SEC Documents filed or
furnished prior to the date of this Agreement, or as otherwise
expressly permitted or expressly contemplated by this Agreement,
since December 31, 2007, there has not been (i) any
change or development in the business, operations, assets,
liabilities, condition (financial or otherwise), results of
operations, cash flows or properties of the Company or any of
its Subsidiaries which has had, or would reasonably be expected
to have, individually or in the aggregate, a Company Material
Adverse Effect, (ii) any change by the Company or any of
its Subsidiaries in its accounting principles, or any material
change by the Company or any of its Subsidiaries in its
accounting methods or practices, in each case other than changes
required by applicable law or GAAP or regulatory accounting,
(iii) any entry by the Company or any of its Subsidiaries
into any contract or commitment of (A) more than $100,000
or (B) $50,000 per annum with a term of more than one year,
other than loans and loan commitments and investments and
investment commitments that in each case were entered into in
the ordinary course of business consistent with recent past
practice, (iv) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of
the Company or any of its Subsidiaries or any redemption,
purchase or other acquisition of any of its securities, other
than in the ordinary course of business consistent with recent
past practice, (v) other than the payment of year-end
bonuses for 2007 in the approximate aggregate amount set forth
on
Schedule 3.13
of the Company Disclosure Schedule,
and except as would be permitted by Section 5.1(d) after
the date hereof, any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation
rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase
in the compensation payable or to become payable to any
director, officer or employee of the Company or any of its
Subsidiaries, or any grant of severance or termination pay, or
any contract or arrangement entered into to make or grant any
severance or termination pay, any payment of any bonus, or the
taking of any action not in the ordinary course of business with
respect to the compensation or employment of any director,
officer or employee of the Company or any of its Subsidiaries,
(vi) any material election made by the Company or any of
its Subsidiaries for federal or state income Tax purposes,
(vii) any material change in the credit policies or
procedures of the Company or any of its Subsidiaries, the effect
of which was or is to make any such policy or procedure less
restrictive in any respect, (viii) any material acquisition
or disposition of any assets or properties, or any contract for
any such acquisition or disposition entered into other than
loans and loan commitments, or (ix) any material lease of
real or personal property entered into, other than in connection
with foreclosed property or in the ordinary course of business
consistent with recent past practice.
3.14
Taxes and Tax Returns
. Except
as set forth on
Schedule 3.14
of the Company
Disclosure Schedule:
(a) The Company and each of its Subsidiaries have timely
filed (or have caused to be timely filed on their behalf) (after
taking into account any extension of time within which to file)
in correct form all Tax Returns that were required to be filed
by any of them, and have paid (or have caused to be paid on
their behalf) all Taxes shown as due on any Tax Returns, except
for Taxes that are being diligently
A-15
contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP.
(b) No assessment that has not been settled or otherwise
resolved has been made with respect to Taxes, other than such
additional Taxes as are being diligently contested in good faith
and which are described on
Schedule 3.14
of the
Company Disclosure Schedule. The Tax Returns of the Company and
its Subsidiaries have been examined by the Internal Revenue
Service (
IRS
) or other taxing authority, as
applicable, for all years through December 31, 2003 (or the
statute of limitations has closed without examination) and any
liability with respect thereto has been satisfied. There is no
dispute pending or written claim asserted for Taxes or
assessments upon either the Company or any of its Subsidiaries,
nor has the Company or any of its Subsidiaries been requested to
give, or has given, any currently effective waiver extending the
statutory period of limitation applicable to any Tax assessment
or deficiency. Neither the Company nor any of its Subsidiaries
is currently the beneficiary of any extension of time within
which to file any Tax Return. No deficiency in Taxes or other
proposed adjustment that has not been settled or otherwise
resolved has been asserted in writing by any taxing authority
against the Company or any of its Subsidiaries. To the Knowledge
of the Company, no Tax Return of the Company or any of its
Subsidiaries is now under examination by any applicable taxing
authority. There is no Lien for Taxes (other than current Taxes
not yet due and payable) on any of the assets of the Company or
any of its Subsidiaries.
(c) Adequate provision has been made on the Company Balance
Sheet for all Taxes of the Company and its Subsidiaries in
respect of all periods through the Company Balance Sheet Date.
In addition, (A) proper and accurate amounts have been
withheld by the Company and each of its Subsidiaries from its
respective employees for all prior periods in compliance in all
respects with the Tax withholding provisions of applicable
federal, state, county and local laws; (B) federal, state,
county and local Tax Returns, which are complete and accurate in
all material respects, have been filed by the Company and each
of its Subsidiaries for all periods for which Tax Returns were
due with respect to income Tax withholding, Social Security and
unemployment Taxes; and (C) the amounts shown on such Tax
Returns to be due and payable have been paid in full or adequate
provision therefor has been included by the Company in its
consolidated financial statements included in the Company 2006
Form 10-K,
or, with respect to Tax Returns filed after the date hereof,
will be so paid or provided for in the consolidated financial
statements of the Company for the period covered by such Tax
Returns. Since the date of the Company Balance Sheet, neither
the Company nor any of its Subsidiaries has incurred any
liability for Taxes arising from extraordinary gains or losses,
as that term is used in GAAP, outside the ordinary course of
business consistent with recent past practice. The Company has
made available to Buyer, Buyer Bank and Merger Sub correct and
complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or
agreed to by the Company, or any of its Subsidiaries filed or
received since December 31, 2003.
(d) Neither the Company nor any of its Subsidiaries is a
party to or bound by any Tax indemnification, Tax allocation or
Tax sharing agreement with any Person or has any current or
potential contractual obligation to indemnify any other Person
with respect to Taxes.
(e) Neither the Company nor any of its Subsidiaries has
filed or been included in a combined, consolidated or unitary
income Tax Return (including any consolidated federal income Tax
Return) other than one of which the Company was the parent.
(f) Except as set forth on
Schedule 3.14
of the
Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has made any payment, is obligated to make any
payment, or is a party to any agreement that could obligate it
or its successor after the Merger to make any payment that will
not be deductible under Code Section 162(m) or Code
Section 280G.
(g) No property of the Company or any of its Subsidiaries
is property that is or will be required to be treated as being
owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Code (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is tax
exempt use property within the meaning of
Section 168(h) of the Code. Neither the Company nor any of
its Subsidiaries has
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been required to include in income any adjustment pursuant to
Section 481 of the Code by reason of a voluntary change in
accounting method initiated by the Company or any of its
Subsidiaries, and the IRS has not initiated or proposed any such
adjustment or change in accounting method.
(h) None of the Company or its Subsidiaries will be
required to include any item of income in, or exclude any item
of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of
any: (A) closing agreement as described in Code
Section 7121 (or any corresponding or similar provision of
state, local, or foreign income Tax law) executed on or prior to
the Closing Date; (B) intercompany transactions or any
excess loss account described in Treasury Regulations under Code
Section 1502 (or any corresponding or similar provision of
state, local, or foreign income Tax law); (C) installment
sale or open transaction disposition made on or prior to the
Closing Date; or (D) prepaid amount received on or prior to
the Closing Date.
(i) Neither the Company nor any of its Subsidiaries has
distributed stock of another Person, or has had its stock
distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by Code
Section 355 or Section 361.
3.15
Employee Benefit Plans
.
(a)
Schedule 3.15(a)
of the Company Disclosure
Schedule sets forth a list of every Employee Program that is
currently maintained by the Company or an ERISA Affiliate, or
with respect to which the Company or an ERISA Affiliate has any
liability, known or unknown.
(b) Each Employee Program which has ever been maintained by
the Company or an ERISA Affiliate and which has been intended to
qualify under Section 401(a) or 501(c)(9) of the Code has
received a favorable determination or approval letter from the
IRS regarding its qualification under such section. Except as
set forth in
Schedule 3.15(b)
of the Company
Disclosure Schedule, all amendments and filings required to
maintain the qualified status of any Employee Program after
initial qualification have been adopted or made on a timely
basis. No event or omission has occurred which would reasonably
be likely to cause any Employee Program to lose its
qualification or otherwise fail to satisfy the relevant
requirements to provide tax-favored benefits under the
applicable Code Section (including, without limitation, Code
Sections 105, 106, 125, 132, 137, 401(a), 409A and
501(c)(9)). Except as set forth on
Schedule 3.15(b)
of the Company Disclosure Schedule, each asset held under any
such Employee Program may be liquidated or terminated without
the imposition of any redemption fee, surrender charge or
comparable liability. No partial termination (within the meaning
of Section 411(d)(3) of the Code) has occurred with respect
to any Employee Program.
(c) Each Employee Program intended to qualify as an
employee stock ownership plan within the meaning of
Section 4975(e) of the Code (an
ESOP
)
satisfies the applicable requirements of Section 409 of the
Code including, without limitation, Section 409(e). Each
ESOP provides that shares of Company Common Stock held as a plan
asset shall be voted by the ESOPs trustee (or other
applicable named fiduciary) in a manner that conforms with the
Code and the Employee Retirement Income Security Act of 1974, as
amended (
ERISA
).
(d) To the Knowledge of the Company, neither the Company
nor any ERISA Affiliate knows of any failure of any party to
comply with any laws applicable with respect to the Employee
Programs maintained by the Company or any ERISA Affiliate. With
respect to any Employee Program maintained by the Company or any
ERISA Affiliate, there has been no (i) prohibited
transaction, as defined in Section 406 of ERISA or
Code Section 4975, (ii) failure to comply with any
provision of ERISA, other applicable law, or any agreement, or
(iii) non-deductible contribution, which, in the case of
any of (i), (ii), or (iii), could subject the Company or any
ERISA Affiliate to liability either directly or indirectly
(including, without limitation, through any obligation of
indemnification or contribution) for any damages, penalties, or
Taxes, or any other loss or expense. No litigation or
governmental administrative proceeding (or investigation) or
other proceeding (other than those relating to routine claims
for benefits) is pending or, to the Knowledge of the Company,
threatened, with respect to any such Employee Program. All
payments and contributions required to have been made (under the
provisions of any agreements or other governing documents or
applicable law) with respect to any
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and all Employee Programs ever maintained by the Company or any
ERISA Affiliate, for all periods prior to the Closing Date,
inclusive, either have been made or have been properly accrued.
(e) Neither the Company nor any ERISA Affiliate has ever
maintained, or contributed to (or been obligated to contribute
to) a Multiemployer Plan. Except as described in
Schedule 3.15(e)
of the Company Disclosure Schedule,
neither the Company nor any ERISA Affiliate has ever maintained,
or contributed to (or been obligated to contribute to) any
Employee Program which has been subject to Title IV of
ERISA or Code Section 412 or ERISA Section 302. Except
as described in
Schedule 3.15(e)
of the Company
Disclosure Schedule, none of the Employee Programs ever
maintained by the Company or any ERISA Affiliate has ever
provided health care or any 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.
(f) With respect to each Employee Program, complete and
correct copies of the following documents (if applicable to such
Employee Program) have been made available to Buyer, Buyer Bank
and Merger Sub: (i) all documents embodying or governing
such Employee Program, and any funding medium for the Employee
Program (including, without limitation, trust agreements) as
they may have been amended to the date hereof; (ii) the
most recent IRS determination or approval letter with respect to
such Employee Program under Code Sections 401(a) or
501(c)(9), and any applications for determination or approval
subsequently filed with the IRS; (iii) the two
(2) most recently filed IRS Forms 5500, with all
applicable schedules and accountants opinions attached
thereto; (iv) the two (2) most recent actuarial
valuation reports completed with respect to such Employee
Program; (v) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided
to employees) and all modifications thereto; and (vi) any
correspondence since December 31, 2001 from any
Governmental Authority with respect to any Employee Program that
threatens any litigation, claim, suit, investigation or other
proceeding against the Company, any ERISA Affiliate or any
Employee Program or that refers to or alleges any fact or
circumstance which could reasonably be expected to give rise to
any such litigation, claim, suit, investigation or other
proceeding, together with any response thereto by or on behalf
of the Company or of any Subsidiary or Employee Program.
(g) Except as described in
Schedule 3.15(g)
of
the Company Disclosure Schedule, each Employee Program required
to be listed on
Schedule 3.15(a)
of the Company
Disclosure Schedule may be amended, terminated, or otherwise
modified by the Company to the greatest extent permitted by
applicable law, including the elimination of any and all future
benefit accruals under any Employee Program and no employee
communications or provision of any Employee Program document has
failed to effectively reserve the right of the Company or the
ERISA Affiliate to so amend, terminate or otherwise modify such
Employee Program. Except as described in
Schedule 3.15(g)
of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will
(either alone or in conjunction with any other event) result in,
cause the accelerated vesting, funding or delivery of, or
increase the amount or value of, any payment or benefit to any
current or former employee, officer, director or service
provider of the Company or any of its Subsidiaries.
(h) Each Employee Program ever maintained by the Company
(including each non-qualified deferred compensation arrangement)
has been maintained in compliance with all applicable
requirements of federal and state laws, including securities
laws, including (without limitation, if applicable) the
requirements that the offering of interests in such Employee
Program be registered under the Securities Act
and/or
state
blue sky laws.
(i) Each Employee Program ever maintained by the Company or
an ERISA Affiliate has complied with the applicable notification
and other applicable requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, the Family and Medical Leave
Act of 1993, the Health Insurance Portability and Accountability
Act of 1996, the Newborns and Mothers Health
Protection Act of 1996, the Mental Health Parity Act of 1996,
the Womens Health and Cancer Rights Act of 1998, and any
other applicable federal or state law.
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(j) Except as set forth on
Schedule 3.15(j)
of
the Company Disclosure Schedule, no Employee Program is a
nonqualified deferred compensation plan, as such term is defined
under Section 409A(d)(1) of the Code and the guidance
thereunder (a
409A Plan
) nor are there any
so-called rabbi trusts or secular trusts
established to satisfy, in whole or in part, the obligations of
any such plan. Each 409A Plan has been operated in good faith
compliance with Section 409A of the Code since
January 1, 2005. Each 409A Plan complies in all respects,
in both form and operation, with the requirements of
Section 409A of the Code and the Treasury regulations and
guidance thereunder. No payment to be made under any 409A Plan
is, or to the Knowledge of the Company will be, includible in
gross income of any participant in such 409A Plan pursuant to
Sections 409A(a)(1)(A) or 409A(b) of the Code or subject to
interest or additional tax pursuant to
Section 409A(a)(1)(B) of the Code. No Option granted by the
Company provides or provided for a deferral of compensation
subject to Section 409A of the Code, and all such Options
were granted with an exercise price equal to at least 100% of
the fair market value of the underlying Company Common Stock on
the date the Option was granted based upon a reasonable
valuation method acceptable for purposes of both 409A and GAAP.
(k) The Company, Company Bank, and each of their Affiliates
have complied in all respects with the Massachusetts law known
as An Act Providing Access to Affordable, Quality,
Accountable Health Care, as amended, including, without
limitation, timely adoption and administration in accordance
with 956 CMR 4.01 through 4.08 of a Section 125 plan for
all employees for whom such plan is required, filing of all
reporting and disclosure requirements (including, without
limitation, all requirements with respect to Health Insurance
Responsibility Disclosure forms) and the non-discriminatory
offer and equal availability requirements.
(l) All Options have been granted in compliance with the
terms of the applicable Employee Program, with applicable law,
and with the applicable provisions of the Restated Certificate
of Incorporation and Bylaws of the Company as in effect at the
applicable time, and all such Options are accurately disclosed
as required under applicable law in the Company SEC Documents,
including the financial statements contained therein or attached
thereto (if amended or superseded by a filing with the SEC made
prior to the date of this Agreement, as so amended or
superseded).
(m) No penalties have been imposed on the Company, any
Subsidiary, any Employee Program, or any employee, officer,
director, administrator or agent thereof under
Sections 1176 or 1177 of the Health Insurance Portability
and Accountability Act of 1996, as amended.
(n) Except as set forth in
Schedule 3.15(n)
of
the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries has taken any action to take corrective action
or make a filing under any voluntary correction program of the
IRS, Department of Labor or any other Governmental Authority
with respect to any Employee Program, and neither the Company
nor any of its Subsidiaries has any Knowledge of any plan defect
including, without limitation, any defect that would qualify for
correction under any such program.
(o) Except as set forth in
Schedule 3.15(o)
of
the Company Disclosure Schedule, each qualified defined benefit
plan sponsored by the Company or any ERISA Affiliate has assets
valued in excess of the accumulated benefit obligations of such
plan.
(p) For purposes of this Agreement:
(i)
Employee Program
means
(A) all employee benefit plans within the meaning of ERISA
Section 3(3), including, but not limited to, multiple
employer welfare arrangements (within the meaning of ERISA
Section 3(40)), plans to which more than one unaffiliated
employer contributes and employee benefit plans (such as foreign
or excess benefit plans) which are not subject to ERISA;
(B) all stock option plans, stock purchase plans, bonus or
incentive award plans, severance pay policies or agreements,
deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements (including any informal
arrangements) not described in (A) above, including,
without limitation, any arrangement intended to comply with Code
Sections 105, 106, 120, 125, 127, 129, 132 or 137; and
(C) all plans or arrangements providing compensation to
employees, non-employee directors or other service providers
(including, in each case, their beneficiaries), including,
without limitation, any employment agreements, severance
agreements,
A-19
change in control agreements or similar agreements. In the case
of an Employee Program funded through a trust described in Code
Section 401(a) or an organization described in Code
Section 501(c)(9), or any other funding vehicle, each
reference to such Employee Program shall include a reference to
such trust, organization or other vehicle.
(ii) An entity
maintains
an Employee
Program if such entity sponsors, contributes to, or provides
benefits under or through such Employee Program, or has any
obligation (by agreement or under applicable law) to contribute
to or provide benefits under or through such Employee Program,
or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents,
or beneficiaries).
(iii) An entity is an
ERISA Affiliate
of
the Company if it would have ever been considered a single
employer with the Company under ERISA Section 4001(b) or
part of the same controlled group as the Company for
purposes of ERISA Section 302(d)(8)(C) or Code
Section 414(b).
(iv)
Multiemployer Plan
means an
employee pension or welfare benefit plan to which more than one
unaffiliated employer contributes and which is maintained
pursuant to one or more collective bargaining agreements.
3.16
Labor Matters
. The Company and
its Subsidiaries are in compliance with all federal, state and
local laws respecting employment and employment practices, terms
and conditions of employment, and wages and hours, and other
than normal accruals of wages during regular payroll cycles,
there are no arrearages in the payment of wages. There are no
complaints, lawsuits, arbitrations, administrative proceedings,
or other proceedings of any nature pending or, to the Knowledge
of the Company, threatened, against the Company or any of its
Subsidiaries brought by or on behalf of any applicant for
employment, any current or former employee, any person alleging
to be a current or former employee, any class of the foregoing,
or any Governmental Authority, relating to any such law or
regulation, or alleging breach of any express or implied
contract of employment, wrongful termination of employment, or
alleging any other discriminatory, wrongful or tortious conduct
in connection with the employment relationship. Neither the
Company nor any of its Subsidiaries is a party to, or bound by
any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor
is the Company or any of its Subsidiaries the subject of a
proceeding asserting that the Company or any of its Subsidiaries
has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel the
Company or any of its Subsidiaries to bargain with any labor
organization as to wages and conditions of employment. No work
stoppage involving the Company or any of its Subsidiaries is
pending or, to the Knowledge of the Company, threatened. Neither
the Company nor any of its Subsidiaries is involved in, or, to
the Knowledge of the Company, threatened with, any dispute,
arbitration, lawsuit or administrative proceeding relating to
labor or employment matters that would reasonably be expected to
interfere in any respect with the respective business activities
of the Company or its Subsidiaries. To the Knowledge of the
Company, no labor union is attempting to organize employees of
the Company or any of its Subsidiaries. The Company has made
available to Buyer, Buyer Bank and Merger Sub a copy of all
written policies and procedures related to the Companys
and its Subsidiaries employees.
3.17
Insurance
. The Company and
each of its Subsidiaries is insured, and during each of the past
three (3) calendar years has been insured, for reasonable
amounts with financially sound and reputable insurance companies
against such risks as companies engaged in a similar business
would, in accordance with good business practice, customarily be
insured, and has maintained all insurance required by applicable
laws and regulations.
Schedule 3.17
of the Company
Disclosure Schedule lists all insurance policies maintained by
the Company and each of its Subsidiaries as of the date hereof.
All of the policies and bonds maintained by the Company or any
of its Subsidiaries are in full force and effect and, to the
Knowledge of the Company, all claims thereunder have been filed
in a due and timely manner and no such claim has been denied.
Neither the Company nor any of its Subsidiaries is in breach of
or default under any insurance policy, and to the Knowledge of
the Company, there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute
such a breach or default.
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3.18
Environmental Matters
. Except
as described in
Schedule 3.18
of the Company
Disclosure Schedule:
(a) Each of the Company and its Subsidiaries and each
property owned, leased or operated by any of them (each, a
Company Property
) and, to the Knowledge of
the Company, the Loan Properties, are, and, since
December 31, 2004, have been, in material compliance with
all Environmental Laws.
(b) The Company has not received any notice from the United
States Environmental Protection Agency, the Massachusetts
Department of Environmental Protection, or any other
Governmental Authority claiming that (i) any Company
Property or any use thereof violates any Environmental Law, or
(ii) the Company or any of its Subsidiaries or any of their
respective employees or agents has violated any Environmental
Law with respect to any Company Property.
(c) Neither the Company nor any of its Subsidiaries has any
outstanding liability to the Commonwealth of Massachusetts, the
United States of America or any other Governmental Authority
under any Environmental Law. No Lien against any Company
Property has arisen due to any Environmental Law.
(d) There is no suit, claim, action or proceeding pending
or, to the Knowledge of the Company, threatened, before any
Governmental Authority in which the Company or any of its
Subsidiaries has been or, with respect to threatened
proceedings, may be, named as a defendant, responsible party or
potentially responsible party (A) for alleged noncompliance
(including by any predecessor) with any Environmental Law or
(B) relating to the release or presence of any Hazardous
Materials or Oil at, on, affecting or from any Company Property
or any previously owned, operated or leased property.
(e) To the Knowledge of the Company, neither the Company
nor any of its Subsidiaries has received or been named in any
written notice regarding a matter on which a suit, claim, action
or proceeding as described in Section 3.18(d) would
reasonably be based.
(f) During the period of (i) the Companys or any
of its Subsidiaries ownership or operation of any Company
Property or (ii) the Companys or any of its
Subsidiaries holding of a security interest in a Loan
Property, to the Knowledge of the Company, there has been no
release of Hazardous Material or Oil at, on, affecting or from
any Company Property or Loan Property, and no Hazardous Material
is present at, on, affecting or from any Company Property or
Loan Property that would reasonably be expected to result in any
material liability or obligation pursuant to Environmental Laws.
To the Knowledge of the Company, prior to the period of the
Companys or any of its Subsidiaries ownership or
operation of any Company Property or any previously owned,
operated or leased property, there was no release or presence of
Hazardous Material or Oil at, on, affecting or from any Company
Property or any previously owned, operated or leased property
that would reasonably be expected to result in any material
liability or obligation pursuant to Environmental Laws.
(g) No Hazardous Materials have been or are currently
generated, stored, transported, utilized, disposed of, managed,
released or located at, on, affecting or from any Company
Property, whether or not in reportable quantities, or have been
in any manner introduced onto any Company Property, including,
without limitation, any septic, sewage or other waste disposal
systems servicing any Company Property, in material violation of
any Environmental Law.
(h) To the Knowledge of the Company, there is no
underground storage tank on or under any Company Property.
(i) The Company has obtained and is in compliance with
every material permit, license and approval required for any
activity or operation at any Company Property by any
Environmental Law.
(j) Neither the Company nor any of its Subsidiaries is an
owner or operator (as such terms are defined under any
Environmental Law) of any Loan Property, and neither the Company
nor any of its Subsidiaries has any relationship to a
Participation Facility.
(k) The Company has delivered to Buyer an accurate list,
together with correct and complete copies, of any and all
environmental monitoring, sampling, tests or studies, and any
report in respect thereof,
A-21
which the Company or any of its Subsidiaries may have initiated,
or were conducted by or on behalf of the Company or any of its
Subsidiaries and any and all environmental tests, studies or
reports conducted or made by others which are in the possession
of the Company or any of its Subsidiaries in respect of any
Company Property.
(l) For purposes of this Agreement:
(i)
Loan Property
means any property in
which the Company or any of its Subsidiaries holds a security
interest, and, where required by the context (as a result of
foreclosure), said term means the owner or operator of such
property;
(ii)
Participation Facility
means any
facility in which the Company or any of its Subsidiaries
participates or has participated in the management and, where
required by the context, said term means the owner or operator
of such property, pursuant to any Environmental Law;
(iii)
Hazardous Material
means any
compound, chemical, pollutant, contaminant, toxic substance,
hazardous waste, hazardous material, or hazardous substance
(whether solid, liquid or gas), as any of the foregoing may be
defined, identified or regulated under or pursuant to any
Environmental Laws, and including without limitation, asbestos,
asbestos-containing materials, polychlorinated biphenyls, toxic
mold, or fungi, or any other material that may pose a threat to
the Environment or to human health and safety but excludes
substances in kind and amounts used or stored for cleaning
purposes or other maintenance or for the operation of motor
vehicles used by tenants (if applicable) or guests, and
otherwise in compliance with Environmental Laws;
(iv)
Oil
means oil or petroleum of any
kind or origin or in any form, as defined in or pursuant to the
Federal Clean Water Act, 33 U.S.C. Section 1251 et
seq., the Massachusetts Oil and Hazardous Material Release
Prevention and Response Act, G.L. c. 21E, or any other
Environmental Law;
(v)
Environment
means any air, water
vapor, surface water, groundwater, drinking water supply,
surface soil, subsurface soil, sediment, surface or subsurface
strata, plant and animal life, and any other environmental
medium or natural resource; and
(vi)
Environmental Law
means any
federal, state, regional or local law, statute, ordinance, rule,
regulation, code, license, permit, approval, consent order,
judgment, decree, injunction or agreement with any Governmental
Authority relating to (1) the protection, preservation or
restoration of the Environment,
and/or
(2) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production,
release or disposal of Hazardous Material or Oil. The term
Environmental Law
includes without
limitation (a) the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C.
§ 9601, et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. §§ 6901,
et seq.; the Clean Air Act, as amended, 42 U.S.C.
§ 7401, et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. § 1251, et seq.; the
Toxic Substances Control Act, as amended, 15 U.S.C.
§ 2601, et seq.; the Emergency Planning and Community
Right to Know Act, 42 U.S.C. § 11001, et seq.;
the Safe Drinking Water Act, 42 U.S.C. § 300f, et
seq.; and all comparable state, regional and local laws,
regulations, policies or guidance, and (b) any common law
(including, without limitation, common law that may impose
strict liability) that may impose liability or obligations for
injuries or damages to persons or property due to the presence
of or exposure to any Hazardous Material or Oil as in effect on
or prior to the date of this Agreement.
3.19
Intellectual Property
.
(a)
Schedule 3.19
of the Company Disclosure
Schedule sets forth a complete and correct list of all Company
Intellectual Property. The Company or its Subsidiaries owns or
has a valid license to use all Company Intellectual Property,
free and clear of any Lien, royalty or other payment obligation
(except for royalties or payments with respect to off-the-shelf
software at standard commercial rates). To the Knowledge of the
Company, the conduct of the business of the Company or any of
its Subsidiaries does not violate,
A-22
misappropriate or infringe upon the intellectual property rights
of any third party. The consummation of the transactions
contemplated by this Agreement will not result in the loss or
impairment of the right of the Company or any of its
Subsidiaries to own or use any Company Intellectual Property.
All renewal and maintenance fees, Taxes, and other fees required
to be paid and applicable to the Company Intellectual Property
have been paid in full through the date of this Agreement and
will be paid in full through the Effective Time.
(b) For purposes of this Agreement:
(i)
Company Intellectual Property
means
the Intellectual Property used in or held for use in the conduct
of the business of the Company and its Subsidiaries that is
material to the financial condition, results of operations or
business of the Company.
(ii)
Intellectual Property
means
(A) trademarks, service marks, trade names, Internet domain
names, designs, logos, slogans, and general intangibles of like
nature, together with all goodwill, registrations and
applications related to the foregoing; (B) patents and
industrial designs (including any continuations, divisionals,
continuations-in-part,
renewals, reissues, and applications for any of the foregoing);
(C) copyrights (including any registrations and
applications for any of the foregoing); and (D) technology,
trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, and
methodologies.
3.20
Material Agreements; Defaults
.
(a) Except as filed as an exhibit to any Company SEC
Document,
Schedule 3.20
of the Company Disclosure
Schedule, and except for this Agreement and the transactions
contemplated hereby, neither the Company nor any of its
Subsidiaries is a party to or is bound by (i) any
agreement, arrangement, or commitment that is material to the
financial condition, results of operations or business of the
Company; (ii) any written (or oral) agreement, arrangement,
or commitment in excess of $100,000 per annum relating to the
employment, including, without limitation, engagement as a
consultant of any Person, or the election or retention in office
or severance of any present or former director or officer of the
Company or any of its Subsidiaries; (iii) any agreement by
and among the Company or any of its Subsidiaries,
and/or
any
of its directors or executive officers or any of their immediate
family members or any Person controlled by any of them (except
as set forth on the Companys Regulation O report
dated as of February 29, 2008, which has been provided to
Buyer, Buyer Bank and Merger Sub); (iv) any contract or
agreement or amendment thereto that would be required to be
filed as an exhibit to a
Form 10-K
filed by the Company as of the date hereof that has not been
filed as an exhibit to the Company 2006
Form 10-K;
(v) any agreement, arrangement, or commitment (whether
written or oral) which, upon the consummation of the
transactions contemplated by this Agreement, would result in any
payment (whether of severance pay or otherwise) becoming due
from the Company or any of its Subsidiaries to any director,
officer or employee thereof; (vi) any agreement,
arrangement or commitment (whether written or oral) which is a
consulting or other agreement (including agreements entered into
in the ordinary course and data processing, software programming
and licensing contracts) not terminable on sixty (60) days
or less notice or involving the payment of in excess of $100,000
per annum; (vii) any agreement, arrangement or commitment
(whether written or oral) which restricts the conduct of any
line of business by the Company or any of its Subsidiaries; or
(viii) any agreement, arrangement or commitment (whether
written or oral) (including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock
purchase plan) any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this
Agreement, or the value of any of the benefits of which will be
affected by, or calculated on the basis of, any of the
transactions contemplated by this Agreement. Each contract,
arrangement, commitment or understanding of the type described
in this Section 3.20(a) is referred to herein as a
Company Material Contract
. The Company
has previously made available to Buyer, Buyer Bank and Merger
Sub complete and correct copies of all of the Company Material
Contracts, including any and all amendments and modifications
thereto.
(b) Each Company Material Contract is legal, valid and
binding upon the Company or its Subsidiaries, as the case may
be, and to the Knowledge of the Company, all other parties
thereto, and is in full force and
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effect and is enforceable in accordance with its terms (except
as such enforceability may be limited by the Bankruptcy and
Equity Exception). Neither the Company nor any of its
Subsidiaries is in breach of or default under any Company
Material Contract and, to the Knowledge of the Company, there
has not occurred any event that, with the lapse of time or the
giving of notice or both, would constitute such a breach or
default. To the Knowledge of the Company, no other party to any
Company Material Contract is in breach of or default under such
Company Material Contract, and there has not occurred any event
that, with the lapse of time or the giving of notice or both,
would constitute such a breach or default.
3.21
Property and Leases
.
(a)
Schedule 3.21(a)
of the Company Disclosure
Schedule lists all real property leased or subleased to or by
the Company or any of its Subsidiaries. The Company has made
available to Buyer, Buyer Bank and Merger Sub complete and
correct copies of the leases and subleases (each as amended to
date) of the properties listed in
Schedule 3.21(a)
of the Company Disclosure Schedule. With respect to each such
lease and sublease of the properties listed in
Schedule 3.21(a)
of the Company Disclosure Schedule:
(i) the lease or sublease is a valid, binding and
enforceable obligation of the Company or its Subsidiary, as the
case may be, subject to the Bankruptcy and Equity Exception;
(ii) neither the Company nor any of its Subsidiaries, or to
the Knowledge of the Company, any other party, is in breach or
violation of, or default under, any such lease or sublease, and
no event has occurred, is pending or to the Knowledge of the
Company, is threatened which, after the giving of notice or the
lapse of time or both, would constitute a breach or default by
the Company or any of its Subsidiaries;
(iii) neither the Company nor any of its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in any leasehold or
subleasehold; and
(iv) there are no Liens, easements, covenants or other
restrictions applicable to the real property subject to such
lease or sublease, except for recorded easements, covenants, and
other restrictions, which do not, individually or in the
aggregate, materially impair the current uses or the occupancy
by the Company or its Subsidiaries, as the case may be, of the
property subject thereto.
(b) The Company owns fee simple title to the real property
listed on
Schedule 3.21(b)
of the Company Disclosure
Schedule, free and clear of any Liens, easements, covenants, or
other restrictions applicable to such real property, except for
recorded easements, covenants, and other restrictions, which do
not, individually or in the aggregate, materially impair the
current uses or the occupancy by the Company or its
Subsidiaries, as the case may be, of the property subject
thereto. Except as set forth on Schedule 3.21(b), no tenant
or other party in possession of any of such property has any
right to purchase, or holds any right of first refusal to
purchase, such properties.
(c) To the Knowledge of the Company, none of the properties
listed on Schedules 3.21(a) or (b) of the Company
Disclosure Schedule, or the buildings, structures, facilities,
fixtures or other improvements thereon, or the use thereof,
contravenes or violates any building, zoning, administrative,
occupational safety and health or other applicable statute, law
ordinance, rule or regulation in any respect that could
reasonably be expected to require material expenditures by the
Company or any of its Subsidiaries or to result in a material
impairment in or limitation on the activities presently
conducted there.
(d) The plants, buildings, structures and equipment located
on the property listed on Schedules 3.21(a) and (b) of the
Company Disclosure Schedule and used by the Company or any of
its Subsidiaries are in good operating condition and in a state
of good maintenance and repair, ordinary wear and tear excepted,
are adequate and suitable for the purposes for which they are
presently being used and, to the Knowledge of the Company, there
are no condemnation or appropriation proceedings pending or
threatened against any of the Company Real Property or any
plants, buildings or other structures thereon.
(e) To the Knowledge of the Company and except as set forth
on
Schedule 3.21(e)
of the Company Disclosure
Schedule, the Company and its Subsidiaries own good title, free
and clear of all Liens, to all personal property and other
non-real estate assets, in all cases excluding Intellectual
Property assets, necessary to conduct the business of the
Company as currently conducted, except for (i) Liens
reflected in the Company
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Financial Statements, (ii) Liens or imperfections of title
that do not materially detract from the value or materially
interfere with the present use of the assets subject thereto or
affected thereby, (iii) Liens for current Taxes not yet due
and payable, and (iv) Liens on the landlords interest
in the premises. The Company and its Subsidiaries, as lessees,
have the right under valid and subsisting leases to use,
possess, and control all personal property leased by the Company
or its Subsidiaries as now used, possessed, and controlled by
the Company or its Subsidiaries, as applicable.
3.22
Regulatory Capitalization
. The
Company Bank is, and immediately after the Effective Time will
be, well capitalized, as such term is defined
in the rules and regulations promulgated by the FDIC. The
Company is, and immediately prior to the Effective Time will be,
well capitalized as such term is defined in
the rules and regulations promulgated by the FRB.
3.23
Loans; Nonperforming and Classified
Assets
.
(a) Each loan agreement, note or borrowing arrangement,
including, without limitation, portions of outstanding lines of
credit and loan commitments (collectively,
Loans
), on the Companys or any of
its Subsidiaries books and records, (i) was made and
has been serviced in accordance with the Companys lending
standards in the ordinary course of business; (ii) is
evidenced by appropriate and sufficient documentation;
(iii) to the extent secured, has been secured by valid
liens and security interests which have been perfected; and
(iv) constitutes the legal, valid and binding obligation of
the obligor named therein, enforceable in accordance with its
terms, subject to the Bankruptcy and Equity Exception. The
Company has made available to Buyer, Buyer Bank and Merger Sub
complete and correct copies of its lending policies. The deposit
and loan agreements of the Company and its Subsidiaries comply
with all applicable laws, rules and regulations. The allowance
for loan losses reflected in the Company SEC Documents and
financial statements filed therewith, as of their respective
dates, is adequate under GAAP and all regulatory requirements
applicable to financial institutions.
(b)
Schedule 3.23
of the Company Disclosure
Schedule discloses as of December 31, 2007 and
February 29, 2008: (A) any Loan under the terms of
which the obligor is sixty (60) or more days delinquent in
payment of principal or interest, or to the Knowledge of the
Company, in default of any other provision thereof;
(B) each Loan which has been classified as
other loans specially maintained,
classified, criticized,
substandard, doubtful,
credit risk assets, watch list
assets, loss or special
mention (or words of similar import) by the Company, its
Subsidiaries or a Governmental Authority (the
Classified Loans
); (C) a listing
of the real estate owned, acquired by foreclosure or by
deed-in-lieu
thereof, including the book value thereof; and (D) each
Loan with any director, executive officer or five percent (5%)
or greater shareholder of the Company, or to the Knowledge of
the Company, any Person controlling, controlled by or under
common control with any of the foregoing. All Loans which are
classified as Insider Transactions by
Regulation O of the FRB have been made by the Company or
any of its Subsidiaries in an arms-length manner made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other Persons and do not involve more than
normal risk of collectibility or present other unfavorable
features.
3.24
Trust Business; Administration of
Fiduciary Accounts
. The Company Bank (i) has
been duly appointed to all fiduciary or representative
capacities it holds with respect to the Trust Business, all
such appointments are currently in effect, and (ii) has all
authorizations, approvals, licenses and permits necessary for
the conduct of its Trust Business. For purposes of this
Section 3.24,
Trust Business
shall mean the trusts, executorships, administrations,
guardianships, conservatorships, and other representative
capacities at Company Banks banking and trust offices.
3.25
Investment Management and Related
Activities
. None of the Company, its Subsidiaries
or their respective directors, officers or employees is required
to be registered, licensed or authorized under the laws or
regulations issued by any Governmental Authority as an
investment adviser, a broker or dealer, an insurance agency or
company, a commodity trading adviser, a commodity pool operator,
a futures commission merchant, an introducing broker, a
registered representative or associated person, investment
adviser, representative or solicitor, a counseling officer, an
insurance agent, a sales person or in any similar capacity with
a Governmental Authority.
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3.26
Risk Management Instruments
.
(a)
Derivative Contracts
means a
derivative contract or derivative instrument as such terms are
used for purposes of reporting the same under the FFIEC Reports
of Condition and Income and related Glossary (each as revised as
of June 2007);
provided
that
, for the avoidance of
doubt, the term
Derivative Contracts
shall not include any Option.
(b) The Company and its Subsidiaries have adopted policies
and procedures consistent with the publications of Governmental
Authorities with respect to Derivative Contracts. All Derivative
Contracts, whether entered into for the account of the Company
or any of its Subsidiaries or for the account of a customer of
the Company or any of its Subsidiaries, were entered into in the
ordinary course of business consistent with recent past practice
and in accordance with applicable laws, rules, regulations and
policies of any Governmental Authority and in accordance with
the investment, securities, commodities, risk management and
other policies, practices and procedures employed by the Company
and its Subsidiaries, and with counterparties believed at the
time to be financially responsible and able to understand
(either alone or in consultation with their advisers) and to
bear the risks of such Derivative Contracts. All of such
Derivative Contracts are valid and binding obligations of the
Company or one of its Subsidiaries enforceable against it in
accordance with their terms (subject to the Bankruptcy and
Equity Exception), and are in full force and effect. The Company
and its Subsidiaries and, to the Knowledge of the Company, all
other parties thereto, have duly performed their obligations
under the Derivative Contracts to the extent that such
obligations to perform have accrued and, to the Knowledge of the
Company, there is no breach, violation or default or allegation
or assertion of such by any party thereunder.
3.27
Investment Securities and Commodities
.
(a) Each of the Company and its Subsidiaries has good title
to all securities and commodities owned by it (except those sold
under repurchase agreements or held in any fiduciary or agency
capacity), free and clear of any Lien, except to the extent such
securities or commodities are pledged in the ordinary course of
business to secure obligations of the Company or its
Subsidiaries. Such securities and commodities are valued on the
books of the Company in accordance with GAAP in all material
respects.
(b) The Company and its Subsidiaries and their respective
businesses employ investment, securities, commodities, risk
management and other policies, practices and procedures (the
Policies, Practices and Procedures
)
which the Company believes are prudent and reasonable in the
context of such businesses. Prior to the date hereof, the
Company has made available to Buyer, Buyer Bank and Merger Sub
the material Policies, Practices and Procedures.
(c) The Company has provided to Buyer a correct and
complete listing of Company Banks investment securities
portfolio as of February 29, 2008.
3.28
Repurchase Agreements
. With
respect to all agreements pursuant to which the Company or any
of its Subsidiaries has purchased securities subject to an
agreement to resell, if any, the Company or any of its
Subsidiaries, as the case may be, has a valid, perfected first
lien or security interest in the government securities or other
collateral securing the repurchase agreement, and, as of the
date hereof, the value of such collateral equals or exceeds the
amount of the debt secured thereby.
3.29
Deposit Insurance
.
(a) The deposits of Company Bank are insured by the FDIC in
accordance with the Federal Deposit Insurance Act
(
FDIA
) to the fullest extent permitted
by law, and Company Bank has paid all premiums and assessments
and filed all reports required by the FDIA. No proceeding for
the revocation or termination of such FDIC deposit insurance is
pending or, to the Knowledge of the Company, threatened.
(b) The deposits of Company Bank are insured, in excess of
FDIC limits, by the DIF to the fullest extent permitted by law,
and Company Bank has paid all premiums and assessments and filed
all reports required by the DIF. No proceeding for the
revocation or termination of such DIF deposit insurance is
pending or, to the Knowledge of the Company, threatened.
A-26
3.30
CRA; Anti-money
Laundering
. Neither the Company nor any of its
Subsidiaries is a party to any agreement with any individual or
group regarding Community Reinvestment Act matters and the
Company is not aware of, and none of the Company and its
Subsidiaries has been advised of, or has any reason to believe
that any facts or circumstances exist, which would cause Company
Bank: (i) to be deemed not to be in satisfactory compliance
with the Community Reinvestment Act, and the regulations
promulgated thereunder, or to be assigned a rating for Community
Reinvestment Act purposes by federal or state bank regulators of
lower than satisfactory; or (ii) to be
deemed to be operating in violation of the federal Bank Secrecy
Act, as amended, and its implementing regulations
(31 C.F.R. Part 103), the USA Patriot Act of 2001,
Public Law
107-56,
and
the regulations promulgated thereunder (the
USA
Patriot Act
), any order issued with respect to
anti-money laundering by the U.S. Department of the
Treasurys Office of Foreign Assets Control, or any other
applicable anti-money laundering statute, rule or regulation.
Furthermore, the Company Bank Board has adopted and Company Bank
has implemented an anti-money laundering program that contains
adequate and appropriate customer identification verification
procedures that has not been deemed ineffective by any
Governmental Authority and that meets the requirements of
Sections 352 and 326 of the USA Patriot Act.
3.31
Transactions with
Affiliates
. Except as set forth in
Schedule 3.31
of the Company Disclosure Schedule,
there are no outstanding amounts payable to or receivable from,
or advances by the Company or any of its Subsidiaries to, and
neither the Company nor any of its Subsidiaries is otherwise a
creditor or debtor to, any shareholder, director, employee or
Affiliate of the Company or any of its Subsidiaries, other than
as part of the normal and customary terms of such persons
employment or service as a director with the Company or any of
its Subsidiaries. All agreements between the Company and any of
its Affiliates comply, to the extent applicable, with
Regulation W of the FRB.
3.32
Inapplicability of Takeover Provisions
.
(a) The Company has taken all action required to be taken
by it in order to exempt this Agreement, the Voting Agreements
and the transactions contemplated hereby and thereby from, and
this Agreement, the Voting Agreements and the transactions
contemplated hereby and thereby are exempt from, the
requirements of any moratorium,
business combination, control
share, fair price or other takeover
defense laws and regulations (collectively,
Takeover Laws
), if any, of the State of
Delaware.
(b) In accordance with Section 4 of Article 7 of
the Companys Restated Certificate of Incorporation, the
Company Board has determined that Buyer is not an Interested
Person (as defined in the Companys Restated Certificate of
Incorporation).
3.33
Brokers; Fairness Opinion
. No
action has been taken by the Company or any of its Subsidiaries
that would give rise to any valid claim against the Company for
a brokerage commission, finders fee or other like payment
with respect to the transactions contemplated by this Agreement,
except in connection with the engagement of Friedman, Billings,
Ramsey & Co., Inc. (the
Financial
Advisor
) by the Company. The fee payable to the
Financial Advisor in connection with the transactions
contemplated by this Agreement is accurately and completely
described in an engagement letter between the Company and the
Financial Advisor, a complete and correct copy of which has been
made available to Buyer, Buyer Bank and Merger Sub (the
Engagement Letter
). The Company Board
has received the opinion of the Financial Advisor, to the effect
that, as of the date hereof, and based upon and subject to the
factors and assumptions set forth therein, the Merger
Consideration to be received by the Company Shareholders
pursuant to the Merger is fair from a financial point of view to
such Company Shareholders, and such opinion has not been amended
or rescinded, and remains in full force and effect. The Company
has been authorized by the Financial Advisor to permit the
inclusion of such opinion in its entirety in the Proxy Statement.
3.34
Rights Agreement
. The Company
or the Board of Directors of the Company, as the case may be,
has (a) taken all necessary actions so that the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in a
Distribution Date
(as defined in the
Rights Agreement) or result in Buyer being an
Acquiring Person
(as defined in the
Rights Agreement) and (b) amended the Rights Agreement to
(i) render it inapplicable to this Agreement and the
transactions contemplated hereby and (ii) provide that the
Final Expiration Date
(as defined in
the Rights Agreement) shall occur immediately prior to the
Closing.
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3.35
Company Information
. The
information relating to the Company and its Subsidiaries that is
provided by the Company or its representatives for inclusion in
the Proxy Statement or in any application, notification or other
document filed with any other Governmental Authority in
connection with the transactions contemplated by this Agreement,
will not, on the date the Proxy Statement is first mailed to the
Company Shareholders or at the time of the Company Meeting or
the date such application notification or other document is
filed, as applicable, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they
are made, not misleading. The portions of the Proxy Statement
relating to the Company and its Subsidiaries and other portions
within the reasonable control of the Company and its
Subsidiaries will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations
thereunder.
3.36
Disclosure
. No representation
or warranty contained in this Agreement, and no statement
contained in any certificate delivered hereunder, in the Company
Disclosure Schedule or in any Company SEC Document as the same
may be updated as of the date hereof, furnished to Buyer
pursuant to the provisions hereof, contains or will contain any
untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements
herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF BUYER
4.1
Making of Representations and Warranties
.
(a) As a material inducement to the Company to enter into
this Agreement and to consummate the transactions contemplated
hereby, Buyer, Buyer Bank and Merger Sub jointly and severally
hereby make to the Company the representations and warranties
contained in this Article IV.
(b) On or prior to the date hereof, Buyer, Buyer Bank and
Merger Sub have delivered to the Company a schedule (the
Buyer Disclosure Schedule
) listing,
among other things, items the disclosure of which is necessary
or appropriate in relation to any or all of its representations
and warranties;
provided
,
however
, that no such
item is required to be set forth on the Buyer Disclosure
Schedule as an exception to a representation or warranty if its
absence is not reasonably likely to result in the related
representation or warranty being untrue or incorrect under the
standards established by Section 4.1(c).
(c) No representation or warranty of Buyer, Buyer Bank or
Merger Sub contained in this Article IV shall be deemed
untrue or incorrect, and no party hereto shall be deemed to have
breached a representation or warranty, as a consequence of the
existence of any fact, circumstance or event unless such fact,
circumstance or event, individually or taken together with all
other facts, circumstances or events inconsistent with any
section of this Article IV, has had or would reasonably be
expected to have a Buyer Material Adverse Effect;
provided
,
however
, that the foregoing standard
shall not apply to the representations and warranties contained
in Sections 4.3, 4.4, 4.5, 4.12 and the first two sentences
of Section 4.2, which shall be deemed untrue, incorrect and
breached if they are not true and correct in all respects.
4.2
Organization, Standing and
Authority
. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. Buyer is duly registered as a
bank holding company under the BHCA and the regulations of the
FRB thereunder. Buyer is duly qualified to do business and is in
good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it
to be so qualified. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the
state of Delaware, and is qualified to do business and is in
good standing in the jurisdictions where its ownership of
property or the conduct of its business requires it to be so
qualified.
4.3
Corporate Power
. Each of Buyer
and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted
and to own all of its properties and assets; and each of Buyer,
Buyer Bank and Merger Sub has the requisite corporate power and
authority to execute and
A-28
deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated hereby.
4.4
Corporate Authority
. This
Agreement and the transactions contemplated hereby have been
authorized by all necessary corporate action of Buyer and the
Board of Directors of Buyer (
Buyer
Board
), Buyer Bank and the Board of Directors of Buyer
Bank, and Merger Sub and the Board of Directors of Merger Sub,
including the approval of Buyer as the sole shareholder of
Merger Sub. Each of Buyer, Buyer Bank and Merger Sub has duly
executed and delivered this Agreement and, assuming the due
authorization, execution and delivery by the Company and Company
Bank, this Agreement is a legal, valid and binding agreement of
Buyer, Buyer Bank and Merger Sub, enforceable against it in
accordance with its terms (except as such enforceability may be
limited by the Bankruptcy and Equity Exception).
4.5
Regulatory Approvals
. No
consents or approvals of, or waivers by, or filings or
registrations with, any Governmental Authority or with any third
party are required to be made or obtained by Buyer or any of its
Subsidiaries or affiliates in connection with the execution,
delivery or performance by Buyer, Buyer Bank and Merger Sub of
this Agreement, or to consummate the transactions contemplated
hereby, except for (i) filings of applications or notices
with, and consents, approvals or waivers by, the FDIC, the FRB,
the Office of the Massachusetts Commissioner of Banks and the
Massachusetts Board of Bank Incorporation, (ii) the
obtaining by Buyer of a letter from the MHPF to the
Massachusetts Commissioner of Banks stating that Buyer has made
satisfactory arrangements with the MHPF,
(iii) obtaining by Buyer from the DIF a letter to the
Massachusetts Commissioner of Banks stating that
arrangements satisfactory to the Depositors
Insurance Fund have been made in connection with the Bank
Merger and (iv) the filing of the Certificate of Merger. As
of the date hereof, Buyer is not aware of any reason why the
approvals set forth above will not be received in a timely
manner.
4.6
Non-Contravention
.
(a) Subject to the receipt of the Regulatory Approvals, the
required filings under federal and state securities laws, and
the filing of the Certificate of Merger, the execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby (including, without limitation,
the Merger) by Buyer, Buyer Bank and Merger Sub do not and will
not (i) constitute a breach or violation of, or a default
under, result in a right of termination, or the acceleration of
any right or obligation under, any law, rule or regulation or
any judgment, decree, order, permit, license, credit agreement,
indenture, loan, note, bond, mortgage, reciprocal easement
agreement, lease, instrument, concession, franchise or other
agreement of Buyer or of any of its Subsidiaries or to which
Buyer or any of its Subsidiaries, properties or assets is
subject or bound, (ii) constitute a breach or violation of,
or a default under, Buyers, Buyer Banks or Merger
Subs Articles of Organization or Bylaws, or
(iii) require the consent or approval of any third party or
Governmental Authority under any such law, rule, regulation,
judgment, decree, order, permit, license, credit agreement,
indenture, loan, note, bond, mortgage, reciprocal easement
agreement, lease, instrument, concession, franchise or other
agreement.
(b) As of the date hereof, Buyer is not aware of any reason
relating to Buyer or its Subsidiaries (including, without
limitation, Community Reinvestment Act compliance or the USA
Patriot Act) (i) why all of the Regulatory Approvals shall
not be procured from the applicable Governmental Authorities
having jurisdiction over the transactions contemplated by this
Agreement or (ii) why any Burdensome Condition(s) would be
imposed.
4.7
Articles of Incorporation;
Bylaws
. Buyer has made available to the Company
and Company Bank a complete and correct copy of its Articles of
Incorporation and Bylaws, each as amended to date, of Buyer and
each of its Subsidiaries. None of Buyer, Buyer Bank nor Merger
Sub is in violation of any of the terms of its Articles of
Incorporation or Certificate of Incorporation or Bylaws.
4.8
Compliance with Laws
. Each of
Buyer and its Subsidiaries is in compliance with all applicable
federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting their businesses,
including, without limitation, the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage
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Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices.
4.9
Litigation
. No litigation,
claim, suit, investigation or other proceeding before any court,
Governmental Authority or arbitrator is pending against Buyer or
any of its Subsidiaries, and, to the Knowledge of Buyer, no
litigation, claim, suit, investigation or other proceeding has
been threatened and there are no facts that are reasonably
apparent that would reasonably be expected to give rise to any
litigation, claim, suit, investigation or other proceeding that
would result in a Buyer Material Adverse Effect.
4.10
Regulatory
Capitalization
. Buyer Bank is, and immediately
after the Effective Time will be, well
capitalized as such term is defined in the rules and
regulations promulgated by the FDIC. Buyer is, and immediately
after the Effective Time will be, well
capitalized as such term is defined in the rules and
regulations promulgated by the FRB.
4.11
Deposit Insurance
. The
deposits of Buyer Bank are insured by the FDIC in accordance
with the FDIA to the fullest extent permitted by law, and Buyer
Bank has paid all premiums and assessments and filed all reports
required by the FDIA. No proceedings for the revocation or
termination of such deposit insurance are pending or, to the
knowledge of Buyer, threatened.
4.12
Sufficient Funds
. As of the
date of this Agreement, Buyer Bank has, and as of the Closing
Buyer will have, as a result of a dividend that Buyer Bank shall
pay to Buyer (which dividend has been authorized as of the date
of this Agreement by all necessary action by the Board of
Directors of Buyer Bank), sufficient funds to consummate the
transactions contemplated by this Agreement, including the
payment of the aggregate Merger Consideration and the aggregate
Option Consideration, subject to the terms and conditions of
this Agreement.
4.13
Net Worth
. As of
January 31, 2008, Buyer has a tangible net worth
(determined in accordance with GAAP) of at least $705,000,000.
4.14
Financial Condition of
Buyer
. Buyer has provided to the Company and
Company Bank complete and correct copies of the audited
financial statements of Buyer and its Subsidiaries for the
fiscal year ended December 31, 2007. Such financial
statements have been prepared in accordance with GAAP applied on
a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present, in
accordance with applicable requirements of GAAP, the financial
position of Buyer and its Subsidiaries as of the date thereof
and the consolidated statements of income and the consolidated
statements of cash flows of Buyer and its Subsidiaries for the
periods presented therein.
4.15
Brokers
. No action has been
taken by Buyer or any of its Subsidiaries that would give rise
to any valid claim against Buyer for a brokerage commission,
finders fee or other like payment with respect to the
transactions contemplated by this Agreement, except in
connection with Buyers engagement of Sandler ONeill
+ Partners, L.P.
4.16
Information Supplied
. None of
the information to be provided by Buyer or Merger Sub for
inclusion in the Proxy Statement will contain any untrue
statement of a material fact or omit to state any material fact
required to be stated in any such document or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.17
Disclosure
. No representation
or warranty contained in this Agreement, and no statement
contained in any certificate delivered hereunder or in the Buyer
Disclosure Schedule as the same may be updated as of the date
hereof, furnished to the Company pursuant to the provisions
hereof, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein not
misleading.
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ARTICLE V
COVENANTS
RELATING TO CONDUCT OF BUSINESS
5.1
Company Forbearances
. From the
date hereof until the Effective Time or the date, if any, on
which this Agreement is terminated pursuant to Section 8.1,
except as expressly set forth in the Company Disclosure
Schedule, as expressly provided or expressly contemplated by
this Agreement, or as required by applicable law, without the
prior written consent of Buyer, which consent shall not be
unreasonably withheld, the Company will not, and will cause each
of its Subsidiaries not to:
(a)
Ordinary Course
. Conduct its business other than
in the ordinary and usual course consistent with recent past
practice or fail to use reasonable best efforts to preserve
intact its business organizations and assets and maintain its
rights, franchises and existing relations with customers,
suppliers, employees and business associates, or take any action
that would (i) adversely affect the ability of any party to
obtain any necessary approval of any Governmental Authority
required for the transactions contemplated hereby or
(ii) adversely affect its ability to perform any of its
material obligations under this Agreement.
(b)
Stock
. (i) Other than pursuant to Options
or stock-based awards outstanding as of the date hereof and
listed on the Company Disclosure Schedule and other than
existing deferral elections made under the Companys
Director Deferred Compensation Plan, issue, sell or otherwise
permit to become outstanding, or authorize the creation of, any
additional shares of stock, any securities (including units of
beneficial ownership interest in any partnership or limited
liability company) convertible into or exchangeable for any
additional shares of stock, any stock appreciation rights, any
stock options, restricted shares, restricted stock units,
deferred equity units, awards based on the value of the
Companys capital stock or other equity-based award with
respect to shares of Company Common Stock, or any other rights
to subscribe for or acquire shares of stock, or take any action
related to such issuance or sale, except with respect to grants
of Options to new hires or permitted employees in the ordinary
course of business and consistent with recent past practice,
(ii) enter into any agreement with respect to the
foregoing, (iii) accelerate the vesting of any existing
stock options, stock appreciation rights or other rights to
subscribe for or acquire shares of stock, or (iv) change
(or establish a record date for changing) the number of, or
provide for the exchange of, shares of its stock, any securities
(including units of beneficial ownership interest in any
partnership or limited liability company) convertible into or
exchangeable for any additional shares of stock, any stock
appreciation rights, or any other rights to subscribe for or
acquire shares of stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend,
recapitalization, reclassification, or similar transaction with
respect to its outstanding stock or any other such securities.
(c)
Dividends, Etc
. (i) Make, declare or pay
any dividend on or in respect of, or declare or make any
distribution on, any shares of Company Common Stock other than
(A) regular quarterly cash dividends on Company Common
Stock of no more than $0.29 per share with record and payment
dates set consistent with recent past practice (it being the
intention of the parties hereto that the Company Shareholders
shall not receive more than one dividend in any calendar quarter
with respect to their shares of Company Common Stock), and
(B) dividends from wholly-owned Subsidiaries to the Company
or any wholly-owned Subsidiary of the Company, as applicable or
(ii) directly or indirectly combine, redeem, reclassify,
purchase or otherwise acquire, any shares of its stock.
(d)
Compensation; Employment Agreements; Etc
. Enter
into or amend any employment, severance or similar agreements or
arrangements with any of its directors, officers, employees or
consultants, or grant any salary or wage increase, or increase
any employee benefit (including incentive or bonus payments),
except (i) for normal increases in compensation to
non-executive officer employees in the ordinary course of
business consistent with recent past practice;
provided
that no such increase shall exceed fifteen percent (15%) of an
individuals current annual compensation (unless in
connection with a promotion consistent with recent past
practice) and five percent (5%) in the aggregate, (ii) as
may be required by law, including Section 409A of the Code,
(iii) to satisfy contractual obligations existing as of the
date hereof and disclosed on
Schedule 3.15(g)
of the
Company Disclosure Schedule, or (iv) the hiring of at-will
employees at an annual rate of salary not to exceed $50,000 to
fill vacancies that may arise from time to time in the ordinary
course of business.
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(e)
Benefit Plans
. Except (i) as may be
required by applicable law, (ii) to satisfy contractual
obligations existing as of the date hereof and disclosed on
Schedule 3.15
of the Company Disclosure Schedule, or
(iii) as set forth on
Schedule 5.1(e)
of the
Company Disclosure Schedule, enter into, establish, adopt or
amend any pension, retirement, stock option, stock purchase,
savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any director, officer or other
employee of the Company or any of its Subsidiaries, including,
without limitation, taking any action that accelerates the
vesting or exercise of any benefits payable thereunder.
(f)
Dispositions
. Except as set forth on
Schedule 5.1(f)
of the Company Disclosure Schedule:
(i) sell, transfer, mortgage, encumber or otherwise dispose
of or discontinue any of its assets, deposits, business or
properties except in the ordinary course of business consistent
with recent past practice and in a transaction that, together
with all other such transactions, is not material to the Company
and its Subsidiaries taken as a whole.
(ii) transfer ownership, or grant any license or other
rights, to any person or entity of or in respect of any material
Company Intellectual Property, other than grants of
non-exclusive licenses pursuant to license agreements entered
into in the ordinary course of business consistent with recent
past practice.
(g)
Governing Documents
. Amend its Restated
Certificate of Incorporation or Bylaws (or equivalent
documents), or take any action to exempt any Person (other than
Buyer or its Subsidiaries), or any action taken by any Person,
from any Takeover Laws or similarly restrictive provisions of
its organizational documents or terminate, amend or waive any
provisions of any confidentiality or standstill agreements in
place with any Person.
(h)
Acquisitions
. Acquire (other than by way of
foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in
good faith, in each case in the ordinary course of business
consistent with recent past practice) all or any portion of the
assets, business, deposits or properties of any other entity.
(i)
Capital Expenditures
. Except as set forth on
Schedule 5.1(i)
of the Company Disclosure Schedule
or as required pursuant to new contracts entered into in the
ordinary course of business consistent with recent past
practice, make any capital expenditures other than capital
expenditures in the ordinary course of business consistent with
recent past practice in amounts not exceeding $50,000
individually or $100,000 in the aggregate.
(j)
Contracts
. Enter into or terminate any Company
Material Contract or amend or modify in any material respect any
of its existing Company Material Contracts.
(k)
Claims
. Settle any action, suit, proceeding, or
enter into any settlement or similar agreement with respect to
any order or investigation to which the Company or any of its
Subsidiaries is a party as of the date hereof or becomes a party
after the date of this Agreement.
(l)
Banking Operations
. Enter into any new material
line of business; change its material lending, investment,
underwriting, risk and asset liability management and other
material banking and operating policies, except as required by
applicable law, regulation or policies imposed by any
Governmental Authority; or file any application or make any
contract with respect to branching or site location or branching
or site relocation.
(m)
Derivative Contracts
. Enter into any Derivative
Contract.
(n)
Indebtedness
. Incur any indebtedness for
borrowed money (other than deposits, federal funds purchased,
federal home loan bank advances, and securities sold under
agreements to repurchase, in each case in the ordinary course of
business consistent with recent past practice) or assume,
guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other Person, other than
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in the ordinary course of business consistent with recent past
practice, or cancel, release or assign any material amount of
indebtedness, or any claims held, to any other Person.
(o)
Investment Securities
. Acquire, sell or
otherwise dispose of any debt, equity, or other investment
security, except (1) the acquisition, sale or other
disposition of any such investment security in the ordinary
course of business consistent with recent 2008 past practice
(particularly with respect to the size and duration of the
portfolio) and in accordance with the Company Banks
investment policy, which policy will not be amended or modified
except to the extent required by law or as the Company may, in
good faith determine, is necessary to comply with safe and sound
banking practices (in which case the Company shall give Buyer
notice thereof and shall give due consideration to Buyers
requests with respect thereto), (2) by way of foreclosure
or acquisitions or sales in a bona fide fiduciary capacity, or
(3) in satisfaction of debts previously contracted in good
faith: provided, however, that any acquisition, sale or other
disposition of any such investment security made consistent with
the request of Buyer pursuant to Section 6.18(b) shall be
deemed not to breach this Section 5.1(o).
(p)
Loans
. Make any loan, loan commitment, letter of
credit or other extension of credit other than in the ordinary
course of business consistent with recent past practice.
(q)
Investments in Real Estate
. Make any investment
or commitment to invest in real estate or in any real estate
development project (other than by way of foreclosure or
acquisitions in a bona fide fiduciary capacity or in
satisfaction of a debt previously contracted in good faith, in
each case in the ordinary course of business consistent with
recent past practice).
(r)
Accounting Methods
. Implement or adopt any
material change in its accounting principles, practices or
methods, other than as may be required by changes in laws or
regulations or by GAAP.
(s)
Tax Matters
. Make or change any Tax election,
file any material amended Tax Return, fail to timely file any
material Tax Return, enter into any material closing agreement,
settle or compromise any material liability with respect to
Taxes, agree to any material adjustment of any Tax attribute,
file any material claim for a refund of Taxes, or consent to any
extension or waiver of the limitation period applicable to any
material Tax claim or assessment.
(t)
Loan Policies
. Change its loan policies,
practices and procedures in effect as of the date of this
Agreement, except as required by law or any Governmental
Authority.
(u)
Environmental Assessments
. Foreclose on or take
a deed or title to any Loan Property without first conducting a
Phase I Environmental Assessment of the property or foreclose on
any Loan Property if such environmental assessment indicates the
presence of a Hazardous Material in amounts which, if such
foreclosure were to occur, would be material to Company Bank.
(v)
Adverse Actions
. Knowingly take any action that
is intended or is reasonably likely to result in (x) any of
its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time
prior to the Effective Time, (y) any of the conditions to
the Merger set forth in Article VII not being satisfied, or
(z) a material violation of any provision of this
Agreement, except, in each case, as may be required by
applicable law.
(w)
Agreements
. Agree or commit to do, or adopt any
resolution of the Company Board in support of, any of the
actions prohibited by this Section 5.1.
5.2
Buyer Forbearances
. From the
date hereof until the Effective Time or the date, if any, on
which this Agreement is terminated pursuant to Section 8.1,
except as expressly set forth in the Buyer Disclosure Schedule,
as expressly permitted or expressly contemplated by this
Agreement, or as required by law, without the prior written
consent of the Company, which consent shall not be unreasonably
withheld, Buyer will not, and will cause each of its
Subsidiaries not to knowingly take any action that would, or
would be reasonably likely to result in (i) any of its
representations and warranties set forth in this Agreement being
or becoming untrue in any material respect at any time prior to
the Effective Time, (ii) any of the conditions to the
Merger set forth in Article VII not being satisfied, or
(iii) a material violation of any provision of this
Agreement, except, in each case, as may be required by
applicable law.
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ARTICLE VI
ADDITIONAL
AGREEMENTS
6.1
Reasonable Best
Efforts
. Subject to the terms and conditions of
this Agreement, each of the Company, Company Bank, Buyer, Buyer
Bank and Merger Sub agree to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or desirable, or advisable
under applicable laws, so as to permit consummation of the
Merger as promptly as practicable and otherwise to enable
consummation of the transactions contemplated hereby, including,
without limitation, effecting all filings and obtaining (and
cooperating with the other party hereto to obtain) any permit,
consent, authorization, order or approval of, or any exemption
by, any Governmental Authority (including, but not limited to,
the Regulatory Approvals) and any other third party that is
required to be obtained by the Company or Buyer or any of their
respective Subsidiaries in connection with the Merger and the
other transactions contemplated by this Agreement, and using
reasonable best efforts to lift or rescind any injunction or
restraining order or other order adversely affecting the ability
of the parties to consummate the Merger and the transactions
contemplated hereby, and using reasonable best efforts to defend
any litigation seeking to enjoin, prevent or delay the
consummation of the Merger and the transactions contemplated
hereby or seeking material damages, and each shall cooperate
fully with the other party hereto to that end.
6.2
Shareholder Approval
.
(a) The Company shall, as soon as reasonably practicable
but in any event not more than forty-five (45) days
following the date of this Agreement, prepare and file a
preliminary form of the Proxy Statement with the SEC and each of
the Company and Buyer shall use its reasonable best efforts to
respond to any comments of the SEC or its staff, and to cause
the Proxy Statement to be mailed to the Company Shareholders as
promptly as reasonably practicable after responding to all such
comments to the satisfaction of the SECs staff. The
Company shall notify Buyer promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy
Statement or for additional information and shall supply Buyer
with copies of all correspondence between the Company or any of
its representatives, on the one hand, and the SEC or its staff,
on the other hand, with respect to the Proxy Statement or the
Merger. If at any time prior to the Company Meeting there shall
occur any event that is required to be set forth in an amendment
or supplement to the Proxy Statement, the Company shall promptly
prepare, and, after consultation with Buyer, mail to the Company
Shareholders such an amendment or supplement. Buyer shall
cooperate with the Company in the preparation of the Proxy
Statement, any amendment or supplement thereto, and any other
communication that could reasonably be deemed to be proxy
solicitation materials relating to the Merger (collectively,
Proxy Materials
), and shall furnish the
Company with all information reasonably requested by the Company
for inclusion in, or otherwise in respect of, the Proxy
Materials. Buyer and its counsel shall be given a reasonable
opportunity to review and comment upon any Proxy Material prior
to its filing with the SEC or dissemination to the Company
Shareholders.
(b) Without limiting the generality of the foregoing, each
of the parties shall correct promptly any information provided
by it to be used specifically in the Proxy Statement, if and to
the extent any such information shall be or have become false or
misleading in any material respect and shall take all steps
necessary to file with the SEC and have declared effective or
cleared by the SEC any amendment or supplement to the Proxy
Statement so as to correct the same and to cause the Proxy
Statement as so corrected to be disseminated to the Company
Shareholders, in each case to the extent required by applicable
law or otherwise deemed appropriate by the Company.
(c) Following the execution of this Agreement, the Company
shall take, in accordance with applicable law, applicable rules
of Nasdaq and its Restated Certificate of Incorporation and
Bylaws, and subject to any judgment, order, decree or
injunction, all action necessary to convene a meeting of its
shareholders as promptly as practicable to consider and vote
upon the approval of this Agreement and any other matter
required to be approved by the Company Shareholders in order to
consummate the Merger and the transactions contemplated hereby
(including any adjournment or postponement thereof, the
Company Meeting
).
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(d) Subject to Section 6.5 hereof, the Company shall
ensure that the Company Meeting is called, noticed, convened,
held and conducted, and that all proxies solicited by the
Company in connection with the Company Meeting are solicited in
compliance with the DGCL, the Restated Certificate of
Incorporation and Bylaws of the Company, and all other
applicable legal requirements.
(e) Subject to Section 6.5 hereof, (i) the
Company Board shall recommend that the Company Shareholders vote
to approve this Agreement and any other matters required to be
approved by the Company Shareholders for consummation of the
Merger and the transactions contemplated hereby (the
Company Recommendation
), and
(ii) the Proxy Statement shall include the Company
Recommendation.
(f) Participants in any ESOP maintained by the Company or
Company Bank who have pass-through voting
rights under Section 409(e) of the Code shall be notified
of such rights and may exercise such rights subject to all
requirements of the Code and ERISA.
6.3
Publicity
.
(a) Except with respect to any action taken pursuant to,
and in accordance with, Section 6.5 or Article VIII,
so long as this Agreement is in effect, Buyer and the Company
will consult with each other before issuing any press release
with respect to this Agreement and the transactions contemplated
hereby and will not issue any press release or written statement
for general circulation relating to the transactions
contemplated hereby or make any such public statements without
the prior consent of the other party, which consent shall not be
unreasonably withheld;
provided
,
however
, that a
party may, without the prior consent of the other party (but
after consultation with the other party, to the extent
practicable), issue such press release or public statement as
may be required by applicable law or the rules and regulations
of any stock exchange.
(b) Without limiting the scope of the Section 6.3(a),
Buyer and the Company shall (i) cooperate to develop all
public announcement materials related to the transactions
contemplated by this Agreement; and (ii) make appropriate
management available at presentations related to the
transactions contemplated by this Agreement as reasonably
requested by the other. In addition, except with respect to any
action taken pursuant to, and in accordance with,
Section 6.5 or Article VIII, so long as this Agreement
is in effect the Company and its Subsidiaries shall coordinate
with Buyer regarding all communications with customers,
suppliers, employees, shareholders, and the community in general
related to the transactions contemplated by this Agreement.
6.4
Access; Information
. Upon
reasonable notice and subject to applicable laws relating to the
exchange of information, the Company shall, and shall cause its
Subsidiaries to, afford Buyer and its officers, employees,
counsel, accountants, advisors and other authorized
representatives (collectively,
Buyer
Representatives
), reasonable access, during normal
business hours throughout the period from the date of this
Agreement until the Effective Time or the date, if any, on which
this Agreement is terminated pursuant to Section 8.1, to
all of its properties, books, contracts, commitments and records
(including, without limitation, work papers of independent
auditors but excluding confidential information contained in
personnel files to the extent the disclosure of such information
is prohibited by privacy laws), and to its officers, employees,
accountants, counsel or other representatives, and, during such
period, it shall, and shall cause its Subsidiaries to, furnish
promptly to Buyer and the Buyer Representatives (i) a copy
of each material report, schedule and other document filed by it
pursuant to the requirements of federal or state securities laws
(other than reports or documents that the Company, or its
Subsidiaries, as the case may be, are not permitted to disclose
under applicable law), and (ii) all other information
concerning the business, properties and personnel of the Company
and its Subsidiaries as Buyer or any Buyer Representative may
reasonably request. Neither the Company nor any of its
Subsidiaries shall be required to provide access to or to
disclose information where such access jeopardizes the
attorney-client privilege of the institution in possession or
control of such information or may reasonably be deemed to
contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the
date of this Agreement. Buyer agrees to hold all information and
documents obtained pursuant to this Section 6.4 in
confidence (as provided in, and subject to the provisions of,
the Confidentiality Agreement, as if it were the party receiving
the confidential information as described therein). No
investigation by Buyer of the business and affairs of the
Company and its Subsidiaries shall affect or be deemed to modify
or waive any representation, warranty, covenant or agreement
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in this Agreement, or the conditions to Buyers obligation
to consummate the transactions contemplated by this Agreement.
Notwithstanding anything to the contrary contained in this
Section 6.4, the Company shall not be obligated, and shall
not be obligated to cause any of its Subsidiaries, to afford to
Buyer or the Buyer Representatives any access to any of its
properties, books, contracts, commitments, and records relating
to, or in respect of, any pricing information, customer specific
information, or other similar competitively sensitive
information.
6.5
No Solicitation
.
(a) Except as authorized or permitted in this
Section 6.5, the Company shall not and shall cause its
Subsidiaries and shall use its reasonable best efforts to cause
the respective officers, directors, employees, investment
bankers, financial advisors, attorneys, accountants,
consultants, affiliates and other agents of the Company and its
Subsidiaries (collectively, the
Company
Representatives
) not to, directly or indirectly,
(i) initiate, solicit, induce, knowingly encourage, or
knowingly take any action that would reasonably be expected to
materially facilitate the making of, any offer, or proposal
which constitutes, or could reasonably be expected to lead to,
an Acquisition Proposal; (ii) participate in any
discussions or negotiations regarding any Acquisition Proposal
or furnish, or otherwise afford access, to any Person (other
than Buyer, Buyer Bank and Merger Sub) any information with
respect to the Company or any of its Subsidiaries or otherwise
relating to an Acquisition Proposal; (iii) release any
Person from, waive any provisions of, or fail to enforce any
confidentiality agreement or standstill agreement to which the
Company is a party; (iv) enter into any agreement,
including, without limitation, any agreement in principle,
letter of intent, memorandum of understanding or similar
arrangement with respect to an Acquisition Proposal; or
(v) approve or recommend or resolve to approve or recommend
any Acquisition Proposal or any agreement, including without
limitation, any agreement in principle, letter of intent,
memorandum of understanding or similar arrangement with respect
to an Acquisition Proposal. Upon execution of this Agreement,
the Company and its Subsidiaries shall, and shall use its
reasonable best efforts to cause each of the Company
Representatives to, immediately cease and cause to be terminated
any and all existing discussions, negotiations, and
communications with any Persons with respect to any existing or
potential Acquisition Proposal. Any violation of the foregoing
restrictions by any of the Company Representatives, whether or
not such Company Representative is so authorized and whether or
not such Company Representative is purporting to act on behalf
of the Company or otherwise, shall be deemed to be a breach of
this Agreement by the Company.
For purposes of this Agreement,
Acquisition
Proposal
shall mean any offer or proposal (other than
an offer or proposal from Buyer), whether or not in writing,
contemplating, relating to, or that could reasonably be expected
to lead to, an Acquisition Transaction, and shall include any
public announcement by any Person (including any regulatory
application or notice, whether in draft or final form) of a
proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing. For purposes of
this Agreement,
Acquisition Transaction
shall mean (A) any transaction or series of transactions
involving any merger, consolidation, recapitalization, share
exchange, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries; (B) any
transaction pursuant to which any third party or group acquires
or would acquire (whether through sale, lease or other
disposition), directly or indirectly, any assets of the Company
or any of its Subsidiaries representing, in the aggregate,
fifteen percent (15%) or more of the assets of the Company and
its Subsidiaries on a consolidated basis; (C) any issuance,
sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction)
securities (or options, rights or warrants to purchase or
securities convertible into, such securities) representing
fifteen percent (15%) or more of the votes attached to the
outstanding securities of the Company or any of its
Subsidiaries; (D) any tender offer or exchange offer that,
if consummated, would result in any third party or group
beneficially owning fifteen percent (15%) or more of any class
of equity securities of the Company or any of its Subsidiaries;
or (E) any transaction which is similar in form, substance
or purpose to any of the foregoing transactions, or any
combination of the foregoing.
(b) Notwithstanding Section 6.5(a), the Company may
take any of the actions described in clause (ii) of
Section 6.5(a) if, but only if, (i) the Company has
received a bona fide unsolicited written Acquisition Proposal
that did not result from a breach of this Section 6.5;
(ii) the Company Board determines in good faith, after
consultation with and having considered the advice of its
outside legal counsel and a nationally
A-36
recognized, independent financial advisor, that (A) such
Acquisition Proposal constitutes or is reasonably likely to lead
to a Superior Proposal and (B) the failure to take such
action would be inconsistent with its fiduciary duties to the
Company Shareholders under applicable law; and (iii) prior
to furnishing or affording access to any information or data
with respect to the Company or any of its Subsidiaries or
otherwise relating to an Acquisition Proposal, the Company
receives from such Person a confidentiality agreement with terms
no less favorable to the Company than those contained in the
Confidentiality Agreement. The Company shall promptly provide to
Buyer any non-public information regarding the Company or its
Subsidiaries provided to any other Person which was not
previously provided to Buyer, such additional information to be
provided no later than the date of provision of such information
to such other party.
For purposes of this Agreement,
Superior
Proposal
shall mean any bona fide written proposal (on
its most recently amended or modified terms, if amended or
modified) made by a third party to enter into an Acquisition
Transaction on terms that the Company Board determines in its
good faith judgment, after consultation with and having
considered the advice of outside legal counsel and a nationally
recognized, independent financial advisor (i) would, if
consummated, result in the acquisition of all, but not less than
all, of the issued and outstanding shares of Company Common
Stock or all, or substantially all, of the assets of the Company
and its Subsidiaries on a consolidated basis; (ii) would
result in a transaction that (A) involves consideration to
the holders of the shares of Company Common Stock that is more
favorable, from a financial point of view, than the
consideration to be paid to the Company Shareholders pursuant to
this Agreement, considering, among other things, the nature of
the consideration being offered and any material regulatory
approvals or other risks associated with the timing of the
proposed transaction beyond or in addition to those specifically
contemplated hereby, and any requirement to obtain additional
financing and (B) is, in light of the other terms of such
proposal, more favorable to the Company Shareholders than the
Merger and the transactions contemplated by this Agreement; and
(iii) is reasonably likely to be completed on the terms
proposed, in each case taking into account all legal, financial,
regulatory and other aspects of the proposal.
(c) The Company shall promptly (and in any event within
twenty-four (24) hours) notify Buyer in writing if any
proposals or offers are received by, any information is
requested from, or any negotiations or discussions are sought to
be initiated or continued with, the Company or the Company
Representatives, in each case in connection with any Acquisition
Proposal, and such notice shall indicate the name of the Person
initiating such discussions or negotiations or making such
proposal, offer or information request and the material terms
and conditions of any proposals or offers (and, in the case of
written materials, providing copies of such materials (including
e-mails
or
other electronic communications) unless (i) such materials
constitute confidential information of the party making such
offer or proposal under an effective confidentiality agreement,
(ii) disclosure of such materials jeopardizes the
attorney-client privilege or (iii) disclosure of such
materials may reasonably be deemed to contravene any law, rule,
regulation, order, judgment or decree. The Company agrees that
it shall keep Buyer informed, on a current basis, of the status
and terms of any such proposal, offer, information request,
negotiations or discussions (including any amendment or
modification to such proposal, offer or request).
(d) Neither the Company Board nor any committee thereof
shall (i) withdraw, qualify or modify, or propose to
withdraw, qualify or modify, in a manner adverse to Buyer in
connection with the transactions contemplated by this Agreement
(including the Merger), the Company Recommendation, or make any
statement, filing or release, in connection with the Company
Meeting or otherwise, inconsistent with the Company
Recommendation (it being understood that taking a neutral
position or no position with respect to an Acquisition Proposal
shall be considered an adverse modification of the Company
Recommendation); (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal; or
(iii) enter into (or cause the Company or any of its
Subsidiaries to enter into) any letter of intent, agreement in
principle, merger agreement, acquisition agreement or other
agreement (A) related to any Acquisition Transaction (other
than a confidentiality agreement entered into in accordance with
the provisions of Section 6.5(b)) or (B) requiring the
Company to abandon, terminate or fail to consummate the Merger
or any other transaction contemplated by this Agreement.
(e) Notwithstanding Section 6.5(d), prior to the date
of the Company Meeting, the Company Board may approve or
recommend to the Company Shareholders a Superior Proposal and
withdraw, qualify or modify the
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Company Recommendation in connection therewith (a
Company Subsequent Determination
) after
the third (3rd) Business Day following Buyers receipt of a
notice (the
Notice of Superior
Proposal
) from the Company advising Buyer that the
Company Board has decided that a bona fide unsolicited written
Acquisition Proposal that it received (that did not result from
a breach of this Section 6.5) constitutes a Superior
Proposal (it being understood that the Company shall be required
to deliver a new Notice of Superior Proposal in respect of any
revised Superior Proposal from such third party or its
Affiliates that the Company proposes to accept) if, but only if,
(i) the Company Board has reasonably determined in good
faith, after consultation with and having considered the advice
of outside legal counsel and a nationally recognized,
independent financial advisor, that the failure to take such
action would be inconsistent with its fiduciary duties to the
Company Shareholders under applicable law, (ii) during the
three (3) Business Day period after receipt of the Notice
of Superior Proposal by Buyer, the Company and the Company Board
shall have cooperated and negotiated in good faith with Buyer to
make such adjustments, modifications or amendments to the terms
and conditions of this Agreement as would enable the Company to
proceed with the Company Recommendation without a Company
Subsequent Determination;
provided
,
however
, that
Buyer shall not have any obligation to propose any adjustments,
modifications or amendments to the terms and conditions of this
Agreement, and (iii) at the end of such three
(3) Business Day period, after taking into account any such
adjusted, modified or amended terms as may have been proposed by
Buyer since its receipt of such Notice of Superior Proposal, the
Company Board has again in good faith made the determination
(A) in clause (i) of this Section 6.5(e) and
(B) that such Acquisition Proposal constitutes a Superior
Proposal. Notwithstanding the foregoing, the changing,
qualifying or modifying of the Company Recommendation or the
making of a Company Subsequent Determination by the Company
Board shall not change the approval of the Company Board for
purposes of causing any Takeover Laws to be inapplicable to this
Agreement and the Voting Agreements and the transactions
contemplated hereby and thereby, including the Merger.
(f) Nothing contained in this Section 6.5 shall
prohibit the Company or the Company Board from
(i) complying with the Companys obligations required
under
Rules 14d-9
and
14e-2(a)
promulgated under the Exchange Act;
provided
,
however
, that any such disclosure relating to an
Acquisition Proposal shall be deemed a change in the Company
Recommendation unless the Company Board reaffirms the Company
Recommendation in such disclosure, or (ii) informing any
Person of the existence of the provisions contained in this
Section 6.5.
6.6
Takeover Laws
. No party shall
take any action that would cause the transactions contemplated
by this Agreement to be subject to requirements imposed by any
Takeover Law, as applicable, and each party shall take all
necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions contemplated by this
Agreement from any applicable Takeover Law, as now or hereafter
in effect, that purports to apply to this Agreement or the
transactions contemplated hereby.
6.7
Regulatory Applications; Filings; Consents
.
(a) Buyer and the Company and their respective Subsidiaries
shall cooperate and use their respective reasonable best efforts
(a) to prepare all necessary documentation, to effect all
necessary filings, to obtain all necessary permits, consents,
approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the
transactions contemplated by this Agreement, including, without
limitation, the Regulatory Approvals, (b) to comply with
the terms and conditions of such permits, consents, approvals
and authorizations and (c) to cause the Merger to be
consummated as expeditiously as practicable (including by
avoiding or setting aside any preliminary or permanent
injunction or other order of any United States federal or state
court of competent jurisdiction or any other Governmental
Authority);
provided
,
however
, that in no event
shall Buyer be required to agree to any prohibition, limitation,
or other requirement which would prohibit or materially limit
the ownership or operation by the Company or any of its
Subsidiaries, or by Buyer or any of its Subsidiaries, of all or
any material portion of the business or assets of the Company
and its Subsidiaries, taken as a whole, or Buyer or its
Subsidiaries, or compel Buyer or any of its Subsidiaries to
dispose of or hold separate all or any material portion of the
business or assets of the Company and its Subsidiaries, taken as
a whole, or Buyer or any of its Subsidiaries (together, the
Burdensome Conditions
). Provided the
Company has cooperated as required above, Buyer agrees to file
the requisite applications to be filed by it with the FRB, the
FDIC, the Massachusetts Commissioner of Banks and the
Governmental
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Authorities of the states in which Buyer, the Company and their
respective Subsidiaries operate. Each of Buyer and the Company
shall have the right to review in advance, and to the extent
practicable each will consult with the other, in each case
subject to applicable laws relating to the exchange of
information, with respect to, all material written information
submitted to any third party or any Governmental Authority in
connection with the transactions contemplated by this Agreement.
In exercising the foregoing right, each of the parties hereto
agrees to act reasonably and as promptly as practicable. Each
party hereto agrees that it will consult with the other parties
hereto with respect to the obtaining of all material permits,
consents, approvals and authorizations of all third parties and
Governmental Authorities necessary or advisable to consummate
the transactions contemplated by this Agreement and each party
will keep the other parties apprised of the status of material
matters relating to completion of the transactions contemplated
hereby.
(b) The Company will notify Buyer promptly and shall
promptly furnish Buyer with copies of notices or other
communications received by the Company or any of its
Subsidiaries of (i) any communication from any Person
alleging that the consent of such Person (or another Person) is
or may be required in connection with the transactions
contemplated by this Agreement (and the response thereto from
the Company, its Subsidiaries or the Company Representatives),
(ii) subject to applicable laws and the instructions of any
Governmental Authority, any communication from any Governmental
Authority in connection with the transactions contemplated by
this Agreement (and the response thereto from the Company, its
Subsidiaries or the Company Representatives) and (iii) any
legal action threatened or commenced against or otherwise
affecting Company or any of its Subsidiaries that are related to
the transactions contemplated by this Agreement (and the
response thereto from the Company, its Subsidiaries or the
Company Representatives). With respect to any of the foregoing,
the Company will consult with Buyer and the Buyer
Representatives so as to permit the Company and Buyer and their
respective representatives to cooperate to take appropriate
measures to avoid or mitigate any adverse consequences that may
result from any of the foregoing.
(c) Buyer will notify the Company promptly and shall
promptly furnish the Company with copies of notices or other
communications received by Buyer or any of its Subsidiaries of
(i) any communication from any Person alleging that the
consent of such Person (or another Person) is or may be required
in connection with the transactions contemplated by this
Agreement (and the response thereto from Buyer, its Subsidiaries
or the Buyer Representatives), (ii) subject to applicable
laws and the instructions of any Governmental Authority, any
communication from any Governmental Authority in connection with
the transactions contemplated by this Agreement (and the
response thereto from Buyer, its Subsidiaries or the Buyer
Representatives), and (iii) any legal action threatened or
commenced against or otherwise affecting Company or any of its
Subsidiaries that are related to the transactions contemplated
by this Agreement (and the response thereto from Buyer, its
Subsidiaries or the Buyer Representatives). With respect to any
of the foregoing, Buyer will consult with the Company, its
Subsidiaries and the Company Representatives so as to permit
Buyer and the Company and their respective representatives to
cooperate to take appropriate measures to avoid or mitigate any
adverse consequences that may result from any of the foregoing.
6.8
Indemnification; Directors and
Officers Insurance
.
(a) Buyer agrees that all rights to indemnification and all
limitations of liability existing in favor of each former and
present director, officer, employee, fiduciary or agent of the
Company or its Subsidiaries (each, an
Indemnified
Party
and collectively, the
Indemnified
Parties
) as provided in the Companys Restated
Certificate of Incorporation or Bylaws or in the similar
governing documents of the Companys Subsidiaries as in
effect as of the date hereof (including, without limitation, the
right to the advancement of expenses) with respect to matters
occurring on or prior to the Effective Time shall survive the
Merger and shall continue in full force and effect, without any
amendment thereto, for a period of six (6) years from the
Effective Time;
provided
,
however
, that all rights
to indemnification in respect of any Claim asserted or made
within such period shall continue until the final disposition of
such Claim. During such period, Buyer shall not amend, repeal or
otherwise modify such provisions for indemnification in any
manner that would materially and adversely affect the rights
thereunder of individuals who at any time prior to the Effective
Time was an Indemnified Party in respect of actions or omissions
occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement),
unless such modification is required by law;
provided
,
however
, that in the event any claim or claims are
asserted or made either prior to the Effective
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Time or within such six-year period, all rights to
indemnification in respect of any such claim or claims shall
continue until disposition of any and all such claims.
(b) Prior to the Effective Time, the Company shall purchase
an extended reporting period endorsement under the
Companys existing directors and officers
liability insurance coverage, which, by its terms, shall survive
the Merger, for the Companys directors and officers in a
form acceptable to the Company which shall provide such
directors and officers with coverage for six (6) years
following the Effective Time of not less than the existing
coverage under, and have other terms not materially less
favorable to, the insured persons than the directors and
officers liability insurance coverage presently maintained
by the Company so long as the aggregate cost is less than
$200,000 (the
Maximum D&O Tail
Premium
);
provided
that, if the cost of such
endorsement exceeds the Maximum D&O Tail Premium, the
Company shall obtain such an endorsement with the greatest
coverage available for a cost not exceeding Maximum D&O
Tail Premium.
(c) In the event Buyer or the Surviving Corporation or any
of their respective successors or assigns (i) consolidates
with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all
or substantially all of its properties and assets to any Person,
then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of
Buyer or the Surviving Corporation, as the case may be, shall
assume the obligations set forth in this Section 6.8.
(d) The provisions of this Section 6.8 are intended to
be for the benefit of, and to grant third party rights to, and
shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
6.9
Employees; Benefit Plans
.
(a) For purposes of this Section 6.9, the term
Bank
shall refer to Company Bank after
the Merger and until such time as the Bank Merger in
Section 1.2 occurs, after which the term shall refer to
Buyer Bank.
(b) For the 12 month period commencing on the
Effective Date, Buyer shall cause, and cause Bank to, maintain
the current compensation levels, excluding any stock-based
benefits, for the employees of the Company or any Subsidiary of
the Company who remain employed by Bank after the Effective Time
(collectively, the
Company Employees
)
at the same levels that are, in the aggregate, comparable to
those in effect for the Company Employees on the date hereof.
With respect to retirement, health, and welfare benefits, Buyer
may cause or may cause the Bank to cause, such Company Employees
to be enrolled in plans of Buyer or Buyer Bank during such
12 month period (instead of plans of the Company or any
Subsidiary of the Company), provided that during such
12 month period the retirement, health and welfare benefits
offered shall be reasonably comparable to those offered to
similarly situated employees of Buyer Bank. For purposes of any
such plan, Buyer shall cause, and shall cause Buyer Bank or the
Surviving Corporation to, treat, and cause the applicable
benefit plans to treat, the service of the Company Employees
with the Company or any Subsidiary of Company attributable to
any period before the Effective Time as service rendered to
Buyer or the Surviving Corporation for purposes of eligibility
to participate, vesting and for other appropriate benefits
including, but not limited to, applicability of minimum waiting
periods for participation but excluding benefit accrual under
any defined benefit plan of Buyer. For purposes of determining
any matching or other employer contribution under the 401(k)
plan of Buyer Bank, compensation prior to the Effective Time
will not be considered. Without limiting the foregoing, and
subject to the consent of Buyers or Buyer Banks
health insurance carriers, Buyer shall cause any pre-existing
conditions or limitations, eligibility waiting periods or
required physical examinations under any health or similar plan
of Buyer to be waived with respect to the Company Employees and
their eligible dependents, to the extent the Company Employees
had satisfied any similar limitations or requirements under the
corresponding plan in which the Company Employees participated
immediately prior to the Closing Date, and any deductibles paid
by the Company Employees under any of Companys or its
Subsidiaries health plans in the plan year in which the
Closing Date occurs shall be credited towards deductibles under
the health plans of Buyer or any Subsidiary of Buyer. Buyer
shall use all commercially reasonable efforts to attempt and
cause the Surviving Corporation to attempt, to make appropriate
arrangements with its insurance carrier(s) to ensure such
result. Except with respect to employees who have entered into
employments agreements with the Company or its Subsidiaries, and
subject to Section 6.9(j) hereof, the Company Employees who
remain employed after the Effective Time shall be
A-40
considered to be employed by Buyer at will and
nothing shall be construed to limit the ability of Buyer or the
Surviving Corporation to terminate the employment of any such
Company Employee at any time.
(c) Following the Effective Date, Bank may choose to
maintain any, all, or none of the Employee Programs in its sole
discretion. However, for any Employer Program terminated for
which there is a comparable Buyer Bank benefit plan of general
applicability (meaning that the plan is available to all
employees satisfying uniformly applied age and service
requirements), all Company Employees shall be entitled to
participate prospectively after the Effective Date in such Buyer
Bank benefit plan (or a comparable plan offered by Bank) to the
same extent as similarly-situated employees of Buyer or Buyer
Bank (it being understood that inclusion of Company Employees in
such benefit plans may occur, if at all, at different times with
respect to different plans). Nothing herein shall limit the
ability of Buyer, Buyer Bank or Bank to amend or terminate any
of the Employee Programs or Buyer Bank benefit plans in
accordance with their terms at any time.
(d) With respect to each Employee Program subject to
Section 409A of the Code, the Company agrees to amend each
such plan or cause each such plan to be amended to the extent,
in Buyers reasonable judgment, such an amendment is
necessary to comply with Section 409A of the Code (or to
cause such plan, in whole or in part, to avoid the application
of Section 409A of the Code by preserving the terms of such
plan, and the law in effect, for benefits earned and vested as
of December 31, 2004) prior to the earlier of the
Effective Time or the deadline imposed by the IRS for such
amendment. Such amendments shall be provided to Buyer and its
counsel at least ten (10) days prior to their proposed
adoption by the Company or Company Bank and shall be subject to
the prior approval of Buyer, which shall not be unreasonably
withheld.
(e) During the one-year period commencing as of the date on
which the Effective Time occurs, Buyer (or Bank) shall honor,
with respect to Company Employees employed as of the Effective
Time, the Severance Pay Plan of Company Bank (the
Company Bank Severance Pay Plan
)
(referenced at page 6.49 of the Employee Handbook provided
to Buyer, Buyer Bank and Merger Sub as in effect as of the date
of this Agreement) in connection with the involuntary
termination of employment, other than for cause, of any Company
Employee (excluding any employee who is party to an employment
agreement,
change-in-control
agreement or any other agreement which provides for severance
payments or who separates from service in connection with a
business transaction between the Buyer or Bank and another
entity that offers employment to the employee immediately
following the effective date of the transaction), in such
amounts, at such times and upon such conditions as set forth in
the Company Severance Pay Plan with respect to involuntary
employment terminations for reasons other than cause. Neither
Buyer nor Bank shall be obligated to pay any amount to any
Company Employee who does not execute a general release and
waiver of claims, in a form satisfactory to Buyer, of any and
all claims, known or unknown, against Buyer, Buyer Bank, the
Company, Company Bank, and officers, trustees, directors,
employees, attorneys and affiliates of the above.
(f) Buyer shall honor, in accordance with their terms, all
compensation, employment, severance, change-of-control, and
deferred compensation obligations of the Company and its
Subsidiaries as set forth on
Schedule 6.9(f)
of the
Company Disclosure Schedule.
(g) The Company shall use all commercially reasonable
efforts to cause its ESOP to be terminated at the Effective Time.
(h) The Company shall not terminate prior to the Effective
Time any Employee Program that is an employee
pension benefit plan within the meaning of
Section 3(2) of ERISA that is subject to Title IV of
ERISA. After the Effective Time, at its sole election, Buyer
will determine whether to terminate any such Employee Program,
merge it into a defined benefit pension plan of Buyer or Buyer
Bank in a transaction meeting all ERISA and Code requirements
including, without limitation, Section 414(l) of the Code,
to maintain it separately and to freeze or modify further
accruals under such plan, or take other action. Upon
Buyers reasonable request, the Company shall cooperate
with Buyer Bank to facilitate such action, on or after the
Effective Date,
provided
that any termination of such
Employee Program is effected in a manner that does not adversely
affect such Employee Programs qualification under
Sections 401(a) and 501(a) of the Code. Buyer Bank, Bank
and the Company shall use reasonable best efforts to effect such
a termination and the associated distribution of all assets of
each such terminated Employee Program.
A-41
(i) Nothing in this Section 6.9, expressed or implied,
is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this
Section 6.9. Without limiting the foregoing, no provision
of this Section 6.9 will create any third party beneficiary
rights in any current or former employee, director or consultant
of the Company or its Subsidiaries in respect of continued
employment (or resumed employment) or any other matter. Nothing
in this Section 6.9 is intended (i) to amend any
Employee Program, (ii) interfere with Buyers or
Banks or the Surviving Corporations right from and
after the Effective Date to amend or terminate any Employee
Program or (iii) interfere with Buyers or Banks
or the Surviving Corporations right from and after the
Effective Time to terminate the employment or provision of
services by any director, employee, independent contractor or
consultant.
(j) The Company shall use reasonable best efforts to cause
the employee welfare benefit plan, within the
meaning of Section 3(1) of ERISA, known as the Company Bank
Severance Pay Plan and referenced in Section 6.9(e) to be
administered at all times in accordance with the requirements
for exemption from Section 409A of the Code available under
Treasury Regulation
section 1.409A-1(b)(9)(iii).
6.10
Notification of Certain Matters
.
(a) Each of Buyer and the Company shall give prompt notice
to the other of any fact, event or circumstance known to it that
(a) is reasonably likely, individually or taken together
with all other facts, events and circumstances known to it, to
result in any Buyer Material Adverse Effect or Company Material
Adverse Effect, respectively, or (b) notwithstanding the
standards set forth in Section 3.1(c) or 4.1(c), as
applicable, would cause or constitute a material breach of any
of its representations, warranties, covenants or agreements
contained herein. No such notice by Buyer or the Company shall
affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Agreement, or the
conditions to Buyers or the Companys obligations to
consummate the transactions contemplated by this Agreement.
(b) Not less than three (3) Business Days prior to the
contemplated Closing Date, the Company shall supplement or amend
the Company Disclosure Schedules delivered in connection with
the execution of this Agreement to reflect any material matter
which, if existing, occurring or Known at the date of this
Agreement, would have been required to be set forth or described
in the Company Disclosure Schedules or that is necessary to
correct any information in the Company Disclosure Schedules
which has been rendered materially inaccurate thereby; provided,
however, that the Company shall not be required to update the
Company Disclosure Schedule to the extent such change is as a
result of any action taken at the request of Buyer. No
supplement or amendment to the Company Disclosure Schedules
shall have any effect for the purpose of determining the
accuracy of the representations and warranties contained in
Article III in order to determine the fulfillment of the
conditions set forth in Section 7.2(a), or the compliance
by the Company with its covenants and agreements contained
herein.
6.11
Confidentiality Agreement
.
(a) The Confidentiality Agreement shall remain in full
force and effect after the date hereof in accordance with its
terms.
(b) With respect to Confidential Buyer Information, the
Company shall not (i) use any Confidential Buyer
Information or Notes (as defined in the Confidentiality
Agreement) except in connection with the transactions
contemplated by this Agreement, or (b) disclose any
Confidential Buyer Information or Notes other than to those
Company Representatives with a need to know the information
contained therein;
provided
, that the Company
specifically informs each such Company Representative of the
confidential nature of the Confidential Buyer Information and
the terms of this Agreement; and
provided
,
further
, that the Company shall be responsible for any
breach of this Section 6.11(b) by any Company
Representative. For purposes of this Agreement, the term
Confidential Buyer Information
shall
mean confidential and proprietary information of Buyer and its
Subsidiaries, whether written or oral, including, without
limitation, the trade secrets of Buyer and all information,
data, reports, analyses, compilations, studies, interpretations,
projections, forecasts, records and other materials (whether
prepared by Buyer or otherwise and in whatever form maintained,
whether documentary, computerized or otherwise).
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6.12
Current Information
. During
the period from the date of this Agreement to the Effective Time
or the date, if any, on which this Agreement is terminated
pursuant to Section 8.1, the Company will cause one or more
of its designated representatives to confer on a regular and
frequent basis (not less than weekly during normal business
hours) with representatives of Buyer and to report the general
status of the ongoing operations of the Company and each of its
Subsidiaries. Without limiting the foregoing, the Company agrees
to provide Buyer (i) a copy of each report filed by the
Company or any of its Subsidiaries with a Governmental Authority
within one (1) Business Day following the filing thereof,
(ii) a consolidated balance sheet and a consolidated
statement of operations, without related notes, within
twenty-five (25) days after the end of each month, prepared
in accordance with the Companys current financial
reporting practices, and (iii) promptly after the end of
each quarter, a schedule comparable to
Schedule 3.23
of the Company Disclosure Schedule current as of the end of the
most recent quarter or as recent as practical.
6.13
Transition; Informational Systems
Conversion
. From and after the Company
Shareholder Approval, Buyer and the Company shall use their
reasonable best efforts to facilitate the integration of the
Company with the business of Buyer following the Effective Time,
and shall meet on a regular basis during normal business hours
to discuss and plan for the conversion of the data processing
and related electronic informational systems of the Company and
each of its Subsidiaries (the
Informational
Systems Conversion
) to those used by Buyer, which
planning shall include, but not be limited to,
(a) discussion of third-party service provider arrangements
of the Company and each of its Subsidiaries;
(b) non-renewal, after the Effective Time, of personal
property leases and software licenses used by the Company and
each of its Subsidiaries in connection with the systems
operations; (c) retention of outside consultants and
additional employees to assist with the conversion;
(d) outsourcing, as appropriate after the Effective Time,
of proprietary or self-provided system services; and
(e) any other actions necessary and appropriate to
facilitate the conversion, as soon as practicable following the
Effective Time. Buyer shall indemnify the Company for any
reasonable out-of-pocket fees, expenses or charges that the
Company may incur as a result of taking, at the request of
Buyer, any action to facilitate the Informational Systems
Conversion.
6.14
Access to Suppliers
. From and
after the Company Shareholder Approval, the Company shall, upon
Buyers reasonable request, use commercially reasonable
efforts to introduce Buyer and its representatives to suppliers
of the Company and its Subsidiaries for the purpose of
facilitating the integration of the Company and its business
into that of Buyer. Any interaction between Buyer and the
Companys suppliers shall be coordinated by the Company.
The Company shall have the right to participate in any
discussions between Buyer and the Companys suppliers.
6.15
Environmental Assessments
.
(a) The Company shall cooperate with and grant access to an
environmental consulting firm selected by Buyer and reasonably
acceptable to the Company, during normal business hours (and at
such other times as may be agreed), to any Company Property set
forth on
Schedule 3.21
of the Company Disclosure
Schedule, as to which Buyer has elected to perform an
environmental assessment, for the purpose of conducting Phase I
Environmental Assessments (which also may include an evaluation
of asbestos containing materials, lead based paint, lead in
drinking water, mold and radon).
(b) Each environmental assessment shall include an estimate
by the environmental consulting firm preparing such
environmental assessment of the costs to investigate, monitor,
clean up, or remediate, as the case may be, the
potential environmental condition(s) or
recognized environmental condition(s)
identified in any Phase I Environmental Assessment.
(c) Buyer shall bear and pay the environmental consulting
firms fees and expenses. With respect to any Company
Property as to which Buyer has elected to perform an
environmental assessment, within twenty (20) days after the
date hereof, Buyer shall engage an environmental consulting firm
reasonably acceptable to the Company to perform the Phase I
Environmental Assessments. Buyer shall use its reasonable best
efforts to cause its environmental consulting firm to complete
and provide Buyer with its written Phase I Environmental
Assessment(s) within forty-five (45) days after such
consultant is retained.
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6.16
Stock Exchange
De-listing
. Prior to the Closing Date, the
Company shall cooperate with Buyer and use reasonable best
efforts to take, or cause to be taken, all actions, and do or
cause to be done all things, reasonably necessary, proper or
advisable on its part under applicable laws and rules and
policies of Nasdaq and the other exchanges on which the common
stock of the Company is listed to enable the de-listing by the
Surviving Corporation of the Company Common Stock from Nasdaq
and the other exchanges on which the Company Common Stock is
listed and the deregistration of the Company Common Stock under
the Exchange Act as promptly as practicable after the Effective
Time, and in any event no more than ten (10) days after the
Closing Date.
6.17
Director Resignations
. The
Company shall use its reasonable best efforts to cause to be
delivered to Buyer resignations of all the directors of the
Company and its Subsidiaries to be effective as of the Effective
Time.
6.18
Coordination
.
(a) The Company shall take any action Buyer may reasonably
request prior to the Effective Time to facilitate the
consolidation of the operations of Company Bank with Buyer Bank.
Without limiting the foregoing, senior officers of the Company
and Buyer shall meet from time to time as the Company may
reasonably request, and in any event not less frequently than
monthly, to review the financial and operational affairs of the
Company and Company Bank, and the Company shall give due
consideration to Buyers input on such matters, with the
understanding that, notwithstanding any other provision
contained in this Agreement, (i) neither Buyer nor Buyer
Bank shall under any circumstance be permitted to exercise
control of the Company, Company Bank or any of its Subsidiaries
prior to the Effective Time, and (ii) the Company shall not
be under any obligation to act in a manner that could reasonably
be deemed to constitute anti-competitive behavior under federal
or state antitrust laws.
(b) Upon Buyers reasonable request, prior to the
Effective Time and consistent with GAAP, the rules and
regulations of the SEC and applicable banking laws and
regulations, the Company shall give due consideration to
Buyers request that the Company Bank divest itself of such
investment securities and loans as are identified by Buyer in
writing from time to time prior to the Closing Date, provided,
however, that no such divestitures need be made prior to the
Effective Time.
(c) No accrual or reserve or change in policy or procedure,
or any divestiture of investment securities or loans, made by
the Company or any of its Subsidiaries at the request of Buyer
pursuant to this Section 6.18 shall constitute or be deemed
to be a breach, violation of or failure to satisfy any
representation, warranty, covenant, agreement, condition or
other provision of this Agreement or otherwise be considered in
determining whether any such breach, violation or failure to
satisfy shall have occurred. The recording of any such
adjustment shall not be deemed to imply any misstatement of
previously furnished financial statements or information and
shall not be construed as concurrence of the Company or its
management with any such adjustments.
6.19
Transactional Expenses
. The
Company has provided on
Schedule 6.19
of the Company
Disclosure Schedule a reasonable good faith estimate of costs
and fees that the Company and its Subsidiaries expect to pay to
retained representatives in connection with the transactions
contemplated by this Agreement excluding for this purpose any
litigation-related fees or expenses (collectively,
Company Expenses
). Upon the reasonable
request of Buyer, not more frequently than quarterly, the
Company shall promptly provide an updated budget of the Company
Expenses to Buyer. The Company shall not incur investment
banking fees in connection with the Merger other than those
expressly provided for in the Engagement Letter.
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ARTICLE VII
CONDITIONS
TO CONSUMMATION OF THE MERGER
7.1
Conditions to Each Partys Obligations to
Effect the Merger
. The obligations of each of the
parties to consummate the Merger is conditioned upon the
satisfaction (or waiver if permissible under applicable law) at
or prior to the Effective Time of each of the following
conditions:
(a)
Shareholder Vote
. This Agreement shall have been
approved by the requisite affirmative vote of the Company
Shareholders present and voting at the Company Meeting in
accordance with DGCL Section 251(c) and the Companys
Restated Certificate of Incorporation and Bylaws.
(b)
Regulatory Approvals; No Burdensome Condition
.
All Regulatory Approvals required to consummate the transactions
contemplated hereby shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in
respect thereof shall have expired. None of such Regulatory
Approvals shall impose any term, condition or restriction upon
Buyer or any of its Subsidiaries that Buyer reasonably
determines is a Burdensome Condition;
provided
,
however
, that no divestiture requirement or other term,
condition, or restriction shall be deemed to be materially
burdensome if such divestiture, term, condition, or restriction
is consistent with Department of Justice or FDIC guidelines,
policies and practices as applied in recent bank merger
transactions.
(c)
No Injunction, Etc
. No order, decree or
injunction of any court or agency of competent jurisdiction
shall be in effect, and no law, statute or regulation shall have
been enacted or adopted, that enjoins, prohibits, materially
restricts or makes illegal consummation of any of the
transactions contemplated hereby.
7.2
Conditions to the Obligations of
Buyer
. The obligation of Buyer to consummate the
Merger is also conditioned upon the satisfaction or waiver (in
writing if permissible under applicable law) by Buyer, at or
prior to the Effective Time, of each of the following conditions:
(a)
Company Capital Stock and Common Stock
Equivalents
. Notwithstanding the standard set forth in
Section 3.1, (i) the Company shall not have any
outstanding shares of capital stock or common stock equivalents
outstanding at immediately prior to the Effective Time, other
than outstanding shares of Company Common Stock and Options, and
(ii) the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time shall not
exceed 4,233,079, except to the extent increased as a result of
the exercise, after the date of this Agreement, of one or more
Options listed on the Company Disclosure Schedule, provided such
exercise is in accordance with the terms existing as of the date
of this Agreement and such Option is disclosed on the Company
Disclosure Schedule;
provided
,
however
, that this
condition shall be deemed to be satisfied unless the consequence
of its failure to be true would reasonably be expected to
increase the aggregate Merger Consideration and Option
Consideration, taken as a whole, by more than a
de minimis
amount.
(b)
Representations, Warranties and Covenants of the
Company
. (i) Each of the representations and warranties
of the Company contained herein shall be true and correct as of
the date hereof and as of the Closing Date with the same effect
as though all such representations and warranties had been made
on the Closing Date, except for any such representations and
warranties made as of a specified date, which shall be true and
correct as of such date, in any case subject to the standard set
forth in Section 3.1(c), and (ii) each and all of the
agreements and covenants of the Company to be performed and
complied with pursuant to this Agreement on or prior to the
Closing Date shall have been duly performed and complied with in
all material respects.
(c)
Company Material Adverse Effect
. Since the date
of this Agreement, there shall not have occurred any Company
Material Adverse Effect.
(d)
Officers Certificate
. Buyer shall have
received a certificate, dated the Closing Date, signed by the
Chief Executive Officer or Chief Financial Officer of the
Company, to the effect that the conditions set forth in
Sections 7.2(b) and (c) have been satisfied.
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(e)
Third Party Consents
. All consents or approvals
of all Persons (other than Governmental Authorities) required
for the consummation of the Merger shall have been obtained and
shall be in full force and effect, unless the failure to obtain
any such consent or approval would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect.
(f)
Appraisal Rights
. The aggregate number of shares
of Company Common Stock at the Effective Time, the holders of
which have demanded purchase of their shares of Company Common
Stock in accordance with the provisions of Section 262 of
the DGCL, shall not exceed fifteen percent (15%) of the shares
of Company Common Stock outstanding as of the record date for
the Company Meeting.
(g)
Other Actions
. The Company shall have furnished
Buyer with such customary certificates of its officers to
evidence fulfillment of the conditions set forth in
Sections 7.1 and 7.2 as Buyer may reasonably request.
7.3
Conditions to the Obligations of the
Company
. The obligation of the Company to
consummate the Merger is also conditioned upon the satisfaction
or waiver (in writing if permissible under applicable law) by
the Company, at or prior to the Effective Time, of each of the
following conditions:
(a)
Representations, Warranties and Covenants of
Buyer
. (i) Each of the representations and warranties
of Buyer contained herein shall be true and correct as of the
date hereof and as of the Closing Date with the same effect as
though all such representations and warranties had been made on
the Closing Date, except for any such representations and
warranties made as of a specified date, which shall be true and
correct as of such date, in any case subject to the standard set
forth in Section 4.1(c), and (ii) each and all of the
agreements and covenants of Buyer to be performed and complied
with pursuant to this Agreement on or prior to the Closing Date
shall have been duly performed and complied with in all material
respects.
(b)
Officers Certificate
. The Company shall
have received a certificate, dated the Closing Date, signed by
the Chief Executive Officer or Chief Financial Officer of Buyer,
to the effect that the conditions set forth in
Sections 7.3(a) have been satisfied.
7.4
Frustration of Closing
Conditions
. Neither Buyer nor the Company may
rely on the failure of any condition set forth in
Section 7.1, 7.2 or 7.3, as the case may be, to be
satisfied if such failure was caused by such partys
failure to use reasonable best efforts to consummate any of the
transactions contemplated hereby, as required by and subject to
Section 6.1.
ARTICLE VIII
TERMINATION
8.1
Termination
. This Agreement may
be terminated, and the Merger and the transactions contemplated
hereby may be abandoned at any time prior to the Effective Time,
whether before or after the Company Shareholder Approval:
(a) by the mutual consent of Buyer and the Company in a
written instrument;
(b) by Buyer or the Company (
provided
that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein), in the event of either: (i) a breach by the other
party of any representation or warranty contained herein
(subject to the standards set forth in Section 3.1(c) or
4.1(c), as applicable), and such breach shall be incapable of
being cured or, if capable of being cured, shall not have been
cured within thirty (30) days after the giving of written
notice to the breaching party of such breach; or (ii) a
material breach by the other party of any of the covenants or
agreements contained herein, and such breach shall be incapable
of being cured or, if capable of being cured, shall not have
been cured within thirty (30) days after the giving of
written notice to the breaching party of such breach;
(c) by Buyer or the Company, in the event that the Merger
is not consummated by November 1, 2008, except to the
extent that the failure of the Merger to be consummated shall be
due to the failure of
A-46
the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth
herein;
(d) by Buyer or the Company, in the event the approval of
any Governmental Authority required for consummation of the
Merger and the other transactions contemplated by this Agreement
shall have been denied by final nonappealable action of such
Governmental Authority, or any governmental entity of competent
jurisdiction shall have issued a final nonappealable order,
injunction or decree enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement;
provided
that the party seeking to terminate this
Agreement shall have used its reasonable best efforts to have
such order, injunction or decree lifted;
(e) by Buyer or the Company, if either (x) the Company
Meeting shall have been duly held and the votes cast at the
Company Meeting (including any adjournment thereof) shall be
insufficient to constitute the Company Shareholder Approval or
(y) a vote on the approval of this Agreement shall not have
been duly taken at the Company Meeting (including by reason of
the absence of a quorum) by the Termination Date.
(f) by Buyer, if (i) the Company Board
(A) modifies, qualifies, withholds or withdraws the Company
Recommendation (it being understood that taking a neutral
position or no position with respect to an Acquisition Proposal
shall be considered an adverse modification of the Company
Recommendation), or makes any statement, filing or release, in
connection with the Company Meeting or otherwise, inconsistent
with the Company Recommendation, (B) breaches its
obligations to call, give notice of and commence the Company
Meeting under Section 6.2, (C) approves or recommends
an Acquisition Proposal, (D) fails to publicly recommend
against a publicly announced Acquisition Proposal within five
(5) Business Days of being requested to do so by Buyer, or
(E) resolves or otherwise determines to take, or announces
an intention to take, any of the foregoing actions or
(ii) there shall have been a material breach by the Company
of Section 6.5; or
(g) by the Company, if, at any time after the date of this
Agreement and prior to obtaining the Company Shareholder
Approval, the Company receives a Superior Proposal; provided,
however, that the Company shall not terminate this Agreement
pursuant to the foregoing clause unless:
(i) the Company shall have made a Company Subsequent
Determination in accordance with Section 6.5(e) and shall
otherwise have complied in all material respects with
Section 6.5 of this Agreement;
(ii) the Company concurrently pays the Termination Fee
payable pursuant to Section 8.2(b); and
(iii) the Company Board concurrently approves, and the
Company concurrently enters into, a definitive agreement with
respect to such Superior Proposal.
8.2
Effect of Termination and Abandonment
.
(a) In the event of termination of this Agreement by either
Buyer or the Company as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, and
none of Buyer, the Company, any of their respective Subsidiaries
or any of the officers or directors of any of them shall have
any liability of any nature whatsoever hereunder, or in
connection with the transactions contemplated hereby, except
that Sections 6.4, 6.11 and 9.4 and this Section 8.2
and all other obligations of the parties specifically intended
to be performed after the termination of this Agreement shall
survive any termination of this Agreement;
provided
,
however
, that, notwithstanding anything to the contrary
herein (including Section 8.2(f)), neither Buyer nor the
Company shall be relieved or released from any liabilities or
damages arising out of knowing, intentional misrepresentation or
fraud.
(b) In the event this Agreement is terminated by Buyer
pursuant to Section 8.1(f) or by the Company pursuant to
Section 8.1(g), the Company shall pay to Buyer an amount
equal to $5,000,000 (the
Termination
Fee
).
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(c) In the event (i) this Agreement is terminated by
the Company or Buyer pursuant to Section 8.1(e) or Buyer
pursuant to Section 8.1(b) or 8.1(c), and (ii) on or
before the date of any such termination, (x) an Acquisition
Proposal with respect to the Company shall have been publicly
disclosed or announced and not withdrawn (x) in the case of
a termination pursuant to clause (x) of
Section 8.1(e), at least 10 days before the Company
Meeting, (y) in the case of a termination pursuant to
Section 8.1(b), before the applicable breach by the
Company, or (z) in the case of a termination pursuant to
Section 8.1(c) or clause (y) of Section 8.1(e),
before the date specified therein, and (iii) within one
(1) year of such termination, the Company shall consummate
a transaction or have entered into a definitive agreement for a
transaction with any third party that involves the consummation
of a transaction described in the definition of Acquisition
Transaction (but replacing references to 15% or
more with 50% or more), then the Company
shall pay to Buyer, upon consummation of such transaction, the
Termination Fee less the Expense Amount if previously paid.
(d) If this Agreement is terminated pursuant to
Section 8.1(e) or by Buyer pursuant to Section 8.1(b),
but the Termination Fee (or any portion thereof) has not been
paid and is not then payable, the Company shall pay at the
direction of Buyer as promptly as practicable (but in any event
within two (2) Business Days after receipt of Buyers
request therefor), $1,000,000 (the
Expense
Amount
) on account of the expenses and opportunity
costs incurred by Buyer and its Subsidiaries in connection with
this Agreement and the transactions contemplated by this
Agreement.
(e) If this Agreement is terminated by the Company pursuant
to Section 8.1(b), then Buyer shall pay at the direction of
the Company as promptly as practicable (but in any event within
two (2) Business Days after receipt of the Companys
request therefor) the Termination Fee.
(f) Any payment of the Termination Fee required to be made
pursuant to this Section 8.2 shall be made not more than
two (2) Business Days after the date of the event giving
rise to the obligation to make such payment, unless the
Termination Fee is payable as a result of the termination of
this Agreement by the Company pursuant to Section 8.1(g),
in which case, the Termination Fee shall be payable concurrently
with such termination. All payments under this Section 8.2
shall be made by wire transfer of immediately available funds to
an account designated by Buyer or the Company, as the case may
be. The payment of the Termination Fee
and/or
Expense Amount by the Company pursuant to Section 8.2(b),
8.2(c) or 8.2(d) shall be the sole and exclusive remedy of
Buyer, Buyer Bank and Merger Sub in connection with the
termination of this Agreement under the circumstances described
thereunder. The payment of the Termination Fee by Buyer pursuant
to Section 8.2(e) shall be the sole and exclusive remedy of
the Company and Company Bank in connection with the termination
of this Agreement under the circumstances described thereunder.
(g) Buyer, Buyer Bank, Merger Sub, the Company and Company
Bank acknowledge that the agreements contained in this
Section 8.2 are an integral part of the transactions
contemplated by this Agreement and that, without these
agreements, the parties would not enter into this Agreement.
Accordingly, if the Company or Buyer, as the case may be, fails
promptly to pay any amount due pursuant to this Section 8.2
and, in order to obtain such payment, Buyer or the Company, as
the case may be, commences a suit which results in a judgment
against the Company or Buyer for the amount set forth in this
Section 8.2, the Company or Buyer, as the case may be,
shall pay to the other party its costs and expenses (including
reasonable attorneys fees and expenses) in connection with
such suit, together with interest on all amounts due pursuant to
this Section 8.2 at an interest rate equal to the prime
rate of Citibank N.A. in effect on the date such payment was
required to be made plus 300 basis points.
ARTICLE IX
MISCELLANEOUS
9.1
Survival
. No representations,
warranties, agreements and covenants contained in this Agreement
shall survive the Effective Time. This Section 9.1 shall
not limit any covenant or agreement of the parties that, by its
terms, contemplates performance after the Effective Time or
relates to the delivery of the Exchange Fund.
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9.2
Certain Definitions
.
(a) As used in this Agreement, the following terms shall
have the meanings set forth below:
Affiliate
shall mean, with respect to any
Person, any other Person controlling, controlled by or under
common control with such Person. As used in this definition,
control (including, with its correlative
meanings,
controlled by
and
under common control with
) means the
possession, directly or indirectly, of power to direct or cause
the direction of the management and policies of a Person whether
through the ownership of voting securities, by contract or
otherwise.
Business Day
means Monday through Friday of
each week, except any legal holiday recognized as such by the
U.S. Government or any day on which banking institutions in
the Commonwealth of Massachusetts are authorized or obligated to
close.
Buyer Material Adverse Effect
shall mean any
fact, change, event, development, effect or circumstance that
(a) individually or in the aggregate, would reasonably be
expected to materially delay or materially impair the ability of
Buyer, Buyer Bank or Merger Sub to perform its respective
obligations under this Agreement or to consummate the Merger and
the other transactions contemplated by this Agreement or
(b) has a material adverse effect on the ability of Buyer
to obtain in a timely manner all Regulatory Approvals.
Company Material Adverse Effect
shall mean
any fact, change, event, development, effect or circumstance
that, individually or in the aggregate, (a) are, or would
reasonably be expected to be, materially adverse to the
business, operations, assets, liabilities, condition (financial
or otherwise), results of operations, cash flows or properties
of the Company and its Subsidiaries, taken as a whole, or
(b) would reasonably be expected to prevent the Company
from performing its obligations under this Agreement or
consummating the transactions contemplated by this Agreement;
provided
,
however
, that notwithstanding the
foregoing, the term
Company Material Adverse
Effect
shall not include (i) any fact, change,
event, development, effect or circumstance generally affecting
comparable banks or their holding companies or arising from
changes in general business or economic conditions (and not
specifically relating to or having the effect of specifically
relating to or having a materially disproportionate effect
(relative to most other comparable banks or their holding
companies) on the Company and its Subsidiaries, taken as a
whole); (ii) any fact, change, event, development, effect
or circumstance resulting from any change in law, GAAP or
regulatory accounting, which affects generally entities such as
the Company and its Subsidiaries, taken as a whole (and not
specifically relating to or having the effect of specifically
relating to or having a materially disproportionate effect
(relative to most other comparable banks or their holding
companies) on the Company and its Subsidiaries taken as a
whole); (iii) actions and omissions of the Company and its
Subsidiaries taken with the prior written consent of Buyer in
furtherance of the transactions contemplated hereby or otherwise
permitted to be taken by the Company under this Agreement;
(iv) any fact, change, event, development, effect or
circumstance resulting from the announcement or pendency of the
transactions contemplated by this Agreement; and (v) any
failure by the Company to meet any estimates of revenues or
earnings for any period ending on or after the date of this
Agreement and prior to the Closing; provided, however, that the
exception in this clause (v) shall not prevent or otherwise
affect a determination that any change, effect, circumstance or
development underlying such failure has resulted in, or
contributed to, a Company Material Adverse Effect.
Company Shareholders
shall mean the holders
of Company Common Stock.
Confidentiality Agreement
shall mean the
letter dated February 6, 2008 from the Financial Advisor,
as the Companys agent, and accepted by Buyer with respect
to, among other things, the parties obligations with
respect to Evaluation Material (as defined therein).
Exchange Act
shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
FDIC
shall mean the Federal Deposit Insurance
Corporation.
GAAP
shall mean generally accepted accounting
principles in the United States.
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Governmental Authority
shall mean any
department, agency, or other body or division of any federal,
state, regional or local government, commission, board, body,
bureau or other regulatory authority or agency, that exercises
any form of jurisdiction or authority under federal, state,
regional, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees, including
without limitation Environmental Laws, or any quasi-governmental
or private body exercising any regulatory, taxing or other
governmental or quasi-governmental authority.
Knowledge
or
Known
as used with respect to the Company and Company Bank means the
actual knowledge of any of the persons named in
Schedule 9.2(a)
of the Company Disclosure Schedule,
and with respect to Buyer, Buyer Bank and Merger Sub, means the
actual knowledge of the persons named in Schedule 9.2(a) of
the Buyer Disclosure Schedule.
Person
or
person
shall mean any individual, bank, corporation, partnership,
limited liability company, association, joint-stock company,
business trust or unincorporated organization.
Regulatory Approvals
shall mean (a) the
approval (or waiver) of the FRB, (b) the approval of the
Office of the Massachusetts Commissioner of Banks,
(c) notification to the Massachusetts Department of
Banking, Insurance, Securities and Healthcare Administration,
and (d) the approval of the Massachusetts Board of Bank
Incorporation (including by the Massachusetts Housing
Partnership Fund with respect to an application for credit for
affordable housing lending).
Rights Agreement
shall mean the Shareholder
Rights Agreement dated as of January 18, 2000, between the
Company and The First National Bank of Boston, as Rights Agent.
Securities Act
shall mean the Securities Act
of 1933, as amended, and the rules and regulations thereunder.
Subsidiary
shall mean, when used with
reference to a party, any corporation, partnership, limited
liability company, association, joint-stock company, business
trust or other entity, whether incorporated or unincorporated,
of which such party or any other Subsidiary of such party is a
general partner or serves in a similar capacity, or with respect
to such corporation or other entity, at least twenty percent
(20%) of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of
directors or others performing similar functions is directly or
indirectly owned or controlled by such party or by any one of
more of its Subsidiaries, or by such party and one or more of
its Subsidiaries.
Tax Returns
shall mean 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.
Taxes
shall mean (i) all taxes, charges,
fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales,
use, ad valorem, goods and services, capital, transfer,
franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp,
occupation, property or other taxes, custom duties, fees,
assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority; and (ii) any
liability for the payment of amounts with respect to payments of
a type described in clause (i) as a result of being a
member of an affiliated, consolidated, combined or unitary
group, or as a result of any obligation under any tax sharing
arrangement or tax indemnity agreement.
Treasury Stock
shall mean shares of Company
Common Stock held (i) in the Companys treasury or
(ii) by the Company or any of its Subsidiaries or by Buyer
or any of its Subsidiaries, in each case other than in a
fiduciary capacity (including custodial or agency).
(b) The following terms are defined elsewhere in this
Agreement, as indicated below:
2007 Company Financial Statements
shall have
the meaning set forth in Section 3.12(b).
409A Plan
shall have the meaning set forth in
Section 3.15(j).
A-50
Acquisition Proposal
shall have the meaning
set forth in Section 6.5(a).
Acquisition Transaction
shall have the
meaning set forth in Section 6.5(a).
Agreement
shall have the meaning set forth in
the preamble to this Agreement.
Appraisal Rights Provision
shall have the
meaning set forth in Section 2.6(a).
Articles of Merger
shall have the meaning set
forth in Section 1.2.
Bank
shall have the meaning set forth in
Section 6.9(a).
Bank Merger
shall have the meaning set forth
in the recitals to this Agreement.
Bankruptcy and Equity Exception
shall have
the meaning set forth in Section 3.6.
BHCA
shall have the meaning set forth in
Section 3.2.
Burdensome Conditions
shall have the meaning
set forth in Section 6.7(a).
Buyer
shall have the meaning set forth in the
preamble to this Agreement.
Buyer Bank
shall have the meaning set forth
in the preamble to this Agreement.
Buyer Board
shall have the meaning set forth
in Section 4.4.
Buyer Disclosure Schedule
shall have the
meaning set forth in Section 4.1(b).
Buyer Representatives
shall have the meaning
set forth in Section 6.4.
Certificate
shall have the meaning set forth
in Section 2.2(a).
Certificate of Merger
shall have the meaning
set forth in Section 1.3(a).
Classified Loans
shall have the meaning set
forth in Section 3.23(b).
Closing
shall have the meaning set forth in
Section 1.3(b).
Closing Date
shall have the meaning set forth
in Section 1.3(b).
Code
shall have the meaning set forth in
Section 2.5.
Company
shall have the meaning set forth in
the preamble to this Agreement.
Company 2006
Form 10-K
shall have the meaning set forth in Section 3.12(a).
Company Balance Sheet
shall have the meaning
set forth in Section 3.12(b)
Company Balance Sheet Date
shall have the
meaning set forth in Section 3.12(b)
Company Bank
shall have the meaning set forth
in the preamble to this agreement.
Company Bank Board
shall have the meaning set
forth in Section 3.6.
Company Bank Severance Pay Plan
shall have
the meaning set forth in Section 6.9(e).
Company Board
shall have the meaning set
forth in Section 3.6.
Company Common Stock
shall have the meaning
set forth in the recitals to this Agreement.
Company Disclosure Schedule
shall have the
meaning set forth in Section 3.1(b).
Company Employees
shall have the meaning set
forth in Section 6.9(a).
Company Expenses
shall have the meaning set
forth in Section 6.19.
Company Intellectual Property
shall have the
meaning set forth in Section 3.19(b)(i).
Company Material Contract
shall have the
meaning set forth in Section 3.20(a).
A-51
Company Meeting
shall have the meaning set
forth in Section 6.2(c).
Company Property
shall have the meaning set
forth in Section 3.18(a).
Company Recommendation
shall have the meaning
set forth in Section 6.2(e).
Company Representatives
shall have the
meaning set forth in Section 6.5(a).
Company SEC Documents
shall have the meaning
set forth in Section 3.12(a).
Company Shareholder Approval
shall have the
meaning set forth in Section 3.9(a).
Company Subsequent Determination
shall have
the meaning set forth in Section 6.5(e).
Confidential Buyer Information
shall have the
meaning set forth in Section 6.11(b).
Derivative Contracts
shall have the meaning
set forth in Section 3.26(a).
DIF
shall have the meaning set forth in
Section 3.9(a).
Dissenting Shareholders
shall have the
meaning set forth in Section 2.6(a).
Dissenting Shares
shall have the meaning set
forth in Section 2.6(a).
DGCL
shall have the meaning set forth in
Section 1.1.
Effective Date
shall have the meaning set
forth in Section 1.3(a).
Effective Date Holder
shall have the meaning
set forth in Section 2.3(b).
Effective Time
shall have the meaning set
forth in Section 1.3(a).
Employee Program
shall have the meaning set
forth in Section 3.15(p)(i).
Engagement Letter
shall have the meaning set
forth in Section 3.33.
Environment
shall have the meaning set forth
in Section 3.18(l)(v).
Environmental Law
shall have the meaning set
forth in Section 3.18(l)(vi).
ERISA
shall have the meaning set forth in
Section 3.15(c).
ERISA Affiliate
shall have the meaning set
forth in Section 3.15(p)(iii).
ESOP
shall have the meaning set forth in
Section 3.15(c).
Exchange Fund
shall have the meaning set
forth in Section 2.3(a).
Expense Amount
shall have the meaning set
forth in Section 8.2(d).
FDIA
shall have the meaning set forth in
Section 3.29(a).
Financial Advisor
shall have the meaning set
forth in Section 3.33.
FRB
shall have the meaning set forth in
Section 3.2.
Hazardous Material
shall have the meaning set
forth in Section 3.18(l)(iii).
Indemnified Party
and
Indemnified Parties
shall each have the
meaning set forth in Section 6.8(a).
Intellectual Property
shall have the meaning
set forth in Section 3.19(b)(ii).
IRS
shall have the meaning set forth in
Section 3.14(b).
Liens
shall have the meaning set forth in
Section 3.4(a).
Loans
shall have the meaning set forth in
Section 3.23(a).
maintains
shall have the meaning set forth in
Section 3.15(p)(ii).
A-52
Massachusetts Courts
shall have the meaning
set forth in Section 9.11.
Maximum D&O Tail Premium
shall have the
meaning set forth in Section 6.8(b).
Merger
shall have the meaning set forth in
the recitals to this Agreement.
Merger Consideration
shall have the meaning
set forth in Section 2.1(c).
Merger Sub
shall have the meaning set forth
in the preamble of this Agreement.
MHPF
shall have the meaning set forth in
Section 3.9(a).
Multiemployer Plan
shall have the meaning set
forth in Section 3.15(p)(iv).
Notice of Superior Proposal
shall have the
meaning set forth in Section 6.5(e).
Oil
shall have the meaning set forth in
Section 3.18(l)(iv).
Option
shall have the meaning set forth in
Section 2.4(a).
Option Consideration
shall have the meaning
set forth in Section 2.4(a).
Paying Agent
shall have the meaning set forth
in Section 2.3(a).
Policies, Practices and Procedures
shall have
the meaning set forth in Section 3.27(b).
Proxy Materials
shall have the meaning set
forth in Section 6.2(a).
Proxy Statement
shall have the meaning set
forth in Section 3.9(a).
Sarbanes-Oxley
shall have the meaning set
forth in Section 3.12(d).
SEC
shall have the meaning set forth in
Section 3.12(a).
Superior Proposal
shall have the meaning set
forth in Section 6.5(b).
Surviving Corporation
shall have the meaning
set forth in Section 1.1.
Takeover Laws
shall have the meaning set
forth in Section 3.32(a).
Termination Fee
shall have the meaning set
forth in Section 8.2(b).
Trust Business
shall have the meaning
set forth in Section 3.24.
USA Patriot Act
shall have the meaning set
forth in Section 3.30.
Voting Agreement
and
Voting
Agreements
shall each have the meaning set forth in
the recitals to this Agreement.
Voting Agreement Shareholder
and
Voting Agreement Shareholders
shall
each have the meaning set forth in the recitals to this
Agreement.
9.3
Waiver; Amendment
. Subject to
compliance with applicable law, prior to the Effective Time, any
provision of this Agreement may be (a) waived by the party
intended to benefit by the provision, or (b) amended or
modified at any time, by an agreement in writing between the
parties hereto approved by their respective Boards of Directors
and executed in the same manner as this Agreement;
provided
,
however
, that after the approval of this
Agreement by the Company Shareholders, no amendment of this
Agreement shall be made which by law requires further approval
of the Company Shareholders without obtaining such approval.
9.4
Expenses
. Each party hereto
will bear all expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby.
9.5
Notices
. All notices and other
communications hereunder shall be in writing and may be given by
any of the following methods: (a) personal delivery;
(b) facsimile transmission; (c) registered or
certified mail, postage prepaid return receipt requested; or
(d) overnight delivery service. Notices shall be sent to
the
A-53
appropriate party at its address or facsimile number (or such
other address or facsimile number for such party as shall be
specified by such party by notice given hereunder):
If to Buyer:
Eastern Bank
265 Franklin Street
Boston, MA
02110-3120
Attention: Richard Holbrook, Chief Executive Officer
Facsimile:
617-897-1005
with copies (which shall not constitute notice) to:
Eastern Bank
One Eastern Place, EP5-10
Lynn, MA
01901-1508
Attention: Terence McGinnis, General Counsel
Facsimile:
781-596-4540
and
Nutter, McClennen & Fish, LLP
World Trade Center West
155 Seaport Blvd
Boston, MA 02210
Attention: Michael E. Mooney, Esq.
Michael K. Krebs, Esq.
If to the Company, to:
MASSBANK Corp.
123 Haven Street
Reading, Massachusetts 01867
Attn: Gerard H. Brandi, Chief Executive Officer and President
Facsimile:
(781) 942-8138
with a copy (which shall not constitute notice) to:
Goodwin Procter
llp
Exchange Place
Boston, Massachusetts 02109
Attention: Raymond C. Zemlin
Facsimile:
(617) 523-1231
All such notices and other communications shall be deemed
received (i) in the case of personal delivery, upon actual
receipt by the addressee, (ii) in the case of overnight
delivery, on the first business day following delivery to the
overnight delivery service, (iii) in the case of mail, on
the date of delivery indicated on the return receipt, and
(iv) in the case of a facsimile transmission, upon
transmission by the sender and issuance by the transmitting
machine of a confirmation slip that the number of pages
constituting the notice has been transmitted without error. In
the case of notices sent by facsimile transmission, the sender
shall contemporaneously mail by overnight delivery service a
copy of the notice to the addressee at the address provided for
above; however, such mailing shall in no way alter the time at
which the facsimile notice is deemed received.
9.6
Understanding; No Third Party
Beneficiaries
. Except for the Confidentiality
Agreement, which shall remain in effect, this Agreement
represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and thereby
and supersedes any and all other oral or written agreements
heretofore made. Except for Section 6.8 and the provisions
of Article II concerning payment of the Merger
Consideration, which shall inure to the Company Shareholders
but, prior to the Effective Time, may only be enforced by the
Company acting on their behalf, nothing in this Agreement,
expressed or implied, is
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intended to confer upon any person, other than the parties
hereto or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.7
Assignability; Binding
Effect
. Prior to the Closing, this Agreement may
not be assigned by Buyer without the written consent of the
Company and no such assignment shall release Buyer of its
obligations hereunder. After the Closing, Buyers rights
and obligations hereunder shall be freely assignable. This
Agreement may not be assigned by the Company without the prior
written consent of Buyer. This Agreement shall be binding upon
and enforceable by, and shall inure to the benefit of, the
parties hereto and their respective successors and permitted
assigns.
9.8
Headings; Interpretation
. The
headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. The word
including and words of similar import when
used in this Agreement shall mean including, without
limitation, unless the context otherwise requires or
unless otherwise specified. Words of number may be read as
singular or plural, as required by context.
9.9
Counterparts; Delivery
. This
Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall
constitute one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the
parties and delivered to the other party. Signatures delivered
by facsimile or by electronic data file shall have the same
effect as originals.
9.10
Governing Law
. This Agreement
shall be governed by, and interpreted in accordance with, the
laws of the State of Delaware, without regard to the conflict of
law principles thereof.
9.11
Jurisdiction
. Each of Buyer,
Buyer Bank, the Company, Company Bank and Merger Sub hereby
irrevocably and unconditionally consents and agrees to submit to
the exclusive jurisdiction of the courts of the Commonwealth of
Massachusetts and of the United States of America located in the
Commonwealth of Massachusetts (the
Massachusetts
Courts
) for any litigation arising out of or relating
to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any
such litigation in the Massachusetts Courts and agrees not to
plead or claim in any Massachusetts Court that such litigation
brought therein has been brought in an inconvenient forum;
provided
,
however
, that nothing in this
Section 9.11 is intended to waive the right of any party to
remove any such action or proceeding commenced in any such state
court to an appropriate federal court that is a Massachusetts
Court to the extent the basis for such removal exists under
applicable law.
9.12
Severability
. If any term or
other provision of this Agreement is invalid, illegal or
incapable of being enforced by reason of any law or public
policy, all other terms and provisions of this Agreement
nevertheless shall remain in full force and effect 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.
9.13
Enforcement
. The parties agree
that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
with their specific terms. It is accordingly agreed that the
parties shall be entitled to specific performance of the terms
hereof, this being in addition to any other remedy to which they
are entitled at law or in equity.
[Remainder
of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement and Plan of Merger to be executed in counterparts by
their duly authorized officers, all as of the day and year first
above written.
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BUYER
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EASTERN BANK CORPORATION
By:
/s/ Richard
E. Holbrook
Name: Richard
E. Holbrook
Title: Chairman, President, CEO
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MERGER SUB
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MINUTEMAN ACQUISITION CORP.
By:
/s/ Richard
E. Holbrook
Name: Richard
E. Holbrook
Title: Chairman
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BUYER BANK
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EASTERN BANK
By:
/s/ Richard
E. Holbrook
Name: Richard
E. Holbrook
Title: Chairman and CEO
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COMPANY
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MASSBANK CORP.
By:
/s/ Gerard
H. Brandi
Name: Gerard
H. Brandi
Title: Chief Executive Officer and President
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COMPANY BANK
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MASSBANK CORP.
By:
/s/ Gerard
H. Brandi
Name: Gerard
H. Brandi
Title: President
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A-56
ANNEX B
Board of Directors
MASSBANK Corp.
123 Haven Street
Reading, MA 01867
March 10, 2008
Ladies and Gentlemen:
We understand that MASSBANK Corp. (MASB) intends to
enter into an agreement with Eastern Bank Corporation
(Eastern) pursuant to which (i) Merger Sub, a
wholly owned subsidiary of Eastern (Merger Sub),
will merge with and into MASB (the Merger),
whereupon MASB will continue as the surviving entity and
(ii) at Easterns election after the Merger, a wholly
owned subsidiary of MASB (Company Bank), will merge
with and into a wholly owned subsidiary of Eastern (Buyer
Bank) with Buyer Bank as the surviving entity. The terms
and conditions of the merger and related transactions are set
forth in the Agreement and Plan of Merger (the Merger
Agreement) to be dated as of March 10, 2008 by and
among Eastern, Buyer Bank, Merger Sub, MASB and Company Bank.
Upon the effectiveness of the Merger, each share of MASB common
stock (Company Common Stock) issued and outstanding
immediately prior to the effective time of the Merger will be
converted into the right to receive $40.00 in cash (the
Consideration).
We have been requested by the Board of Directors of MASB to
render our opinion with respect to the fairness, from a
financial point of view, to the holders of Company Common Stock
of the Consideration to be received by such holders pursuant to
the Merger Agreement. We have not been requested to opine as to,
and our opinion does not in any manner address, MASBs
underlying business decision to proceed with or effect the
Merger.
In connection with our review of the Merger and in arriving at
our opinion, we have among other things:
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Reviewed the Merger Agreement (draft as of March 10,
2008) and the financial terms and conditions set forth
therein, as well as the schedules and exhibits thereto and
certain related documents;
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Reviewed MASBs Annual Report to Shareholders and Annual
Report on
Form 10-K
for each of the fiscal years ended December 31, 2004,
December 31, 2005 and December 31, 2006, including the
audited financial statements contained therein and MASBs
Quarterly Report on
Form 10-Q
for each of the quarters ended March 31, 2007,
June 30, 2007 and September 30, 2007;
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Reviewed regulatory financial data concerning MASB, available
through SNL Financial LC, for the fiscal years ended
December 31, 2005, December 31, 2006 and
December 31, 2007;
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Reviewed certain other public and non-public information,
primarily financial in nature, relating to the business,
earnings, assets and prospects of MASB and Eastern provided to
us or publicly available;
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Participated in meetings and telephone conferences with members
of senior management of MASB concerning the financial condition,
business, assets, financial forecasts and prospects of MASB and
Eastern, as well as such other matters as we deemed relevant to
our inquiry;
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Reviewed certain stock market information for MASBs common
stock and compared it with similar information for certain
companies that we deemed to be relevant for purposes of arriving
at our opinion;
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Compared the results of operations and financial condition of
MASB with that of certain thrift institutions companies that we
deemed to be relevant for purposes of arriving at our opinion;
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B-1
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Compared the financial terms of the Merger with the financial
terms, to the extent publicly available, of other transactions
that we deemed relevant and comparable to the Merger; and
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Performed such other reviews and analyses and considered such
other information as we deemed appropriate.
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In rendering this opinion, we did not assume responsibility for
independently verifying, and did not independently verify, any
financial or other information concerning MASB or Eastern
furnished to us by MASB or Eastern, respectively, or the
publicly-available financial and other information regarding
MASB, Eastern and other financial institutions and we have
assumed, for purposes of this opinion, that all such information
is accurate and complete. We have further relied on the
assurances of the management of MASB that they are not aware of
any facts that would make such financial or other information
relating to MASB or Eastern, inaccurate or misleading. With
respect to the financial forecasts for MASB provided to us by
the management of MASB, we have assumed, for purposes of this
opinion, that the respective forecasts and estimates have been
reasonably prepared on bases reflecting the best available
estimates and judgment of management as to the future financial
performance of MASB.. We also have assumed that Eastern has or
will obtain all financing required to enable it to consummate
the Merger and that the Merger will be consummated in accordance
with the terms of the Merger Agreement, without waiver,
modification or amendment of any material term, condition or
agreement therein. In addition, we have assumed that the final
form of the Merger Agreement executed by the parties thereto
will be the same in all material respects as the last draft
reviewed by us.
We have assumed that there has been no undisclosed material
change in the assets, financial condition, results of
operations, business or prospects of either MASB or Eastern
since the date of their most recent financial statements. We did
not undertake an independent evaluation or appraisal of the
assets or liabilities of either MASB or Eastern nor were we
furnished with any such evaluations or appraisals. We are not an
expert in the evaluation of allowances for loan losses, were not
requested to and did not review such allowances, and were not
requested to and did not review any individual credit files of
either MASB or Eastern. Our conclusions and opinion are
necessarily based upon economic, market and other conditions and
the information made available to us as of the date of this
opinion, and upon current assumptions regarding future financial
performance which we have previously discussed with you. We
express no opinion on matters of a legal, regulatory, tax or
accounting nature related to the Merger, and we have assumed the
correctness of all legal advice provided to MASB and us by
counsel.
We also express no opinion as to the prices at which MASBs
stock will trade at any time.
Our opinion is based on market, economic, financial and other
circumstances and conditions as they exist and can be evaluated
as of the date of this letter, and any material change in such
circumstances and conditions would require a reevaluation of
this opinion, which we are under no obligation to undertake. We
have assumed that in the course of obtaining the necessary
regulatory or other consents or approvals (contractual or
otherwise) for the Merger, no restrictions, including any
divestiture requirements or amendments or modifications, will be
imposed that will have a material adverse effect on MASB,
Eastern or the contemplated benefits of the Merger to MASB.
We express no opinion as to the underlying business decision to
effect the Merger or the structure, accounting treatment or tax
consequences of the Merger. We also express no opinion with
respect to any other reasons, legal, business or otherwise, that
may support the decision of the Board of Directors to approve or
recommend the Merger.
We have acted as financial advisor to MASB in connection with
the proposed Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation
of the Merger. We will also receive a fee for rendering this
opinion. MASB has agreed to indemnify us against certain
liabilities, including any which may arise under the federal
securities laws. We have in the past provided financial advisory
and other investment banking services to MASB, and have received
and may receive fees for rendering such services. In addition,
in the ordinary course of our business we may actively trade the
securities
B-2
of MASB for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position
in such securities.
This letter is solely for the information of the Board of
Directors of MASB in connection with its consideration of the
Merger and may not be relied upon by any other person or used
for any other purpose, reproduced, disseminated, quoted from or
referred to without our prior written consent. This letter does
not constitute a recommendation to any shareholder as to how
such shareholder should vote or act on any matter relating to
the Merger.
Based upon and subject to the foregoing, as well as such other
matters as we consider relevant, it is our opinion that, as of
the date hereof, the Consideration to be paid to the holders of
Company Common Stock is fair, from a financial point of view, to
such holders.
Very truly yours,
/S/ FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
B-3
ANNEX C
FORM OF
VOTING AGREEMENT
This VOTING AGREEMENT
(this
Agreement
)
is dated as of March 10, 2008, by and between the
undersigned holder (
Shareholder
) of one or
more shares of common stock, par value $1.00 per share
(
Company Common Stock
), of MASSBANK Corp., a
Delaware corporation (the
Company
), and
Eastern Bank Corporation, a Massachusetts corporation
(
Buyer
). All capitalized terms used but not
defined herein shall have the meanings assigned to them in the
Merger Agreement (defined below).
WHEREAS
, concurrently with the execution of this
Agreement, Buyer, the Company, Merger Sub, Company Bank and
Buyer Bank are entering into an Agreement and Plan of Merger (as
such agreement may be subsequently amended or modified, the
Merger Agreement
), pursuant to which Merger
Sub shall merge with and into the Company and, in connection
therewith, each outstanding share of Company Common Stock will
be converted into the right to receive the Merger Consideration;
WHEREAS
, Shareholder owns the shares of Company Common
Stock identified on
Exhibit A
hereto (such shares,
together with all shares of Company Common Stock subsequently
acquired by Shareholder during the term of this Agreement,
including through the exercise of any stock option or other
equity award, warrant or similar instrument, as well as all
shares that are allocated to such shareholder under the
Companys Employee Stock Ownership Plan (the
ESOP
) but not including any other shares held
by the ESOP, being referred to as the
Shares
); and
WHEREAS
, it is a condition to the willingness of Buyer to
enter into the Merger Agreement that Shareholder execute and
deliver this Agreement.
NOW, THEREFORE,
in consideration of the promises,
representations, warranties and agreements contained herein, and
for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1.
Agreement
to Vote Shares.
Shareholder agrees that, prior to
the Expiration Date (as defined in Section 8), at any
meeting of shareholders of the Company, however called, or at
any adjournment or postponement thereof, or in connection with
any written consent of the shareholders of the Company, except
as otherwise agreed to in writing in advance by Buyer,
Shareholder shall:
(a) appear at each such meeting, in person or by proxy, and
thereby cause the Shares to be counted as present thereat for
purposes of calculating a quorum; and
(b) from and after the date hereof until the Expiration
Date, vote (or cause to be voted), in person or by proxy, or
deliver a written consent (or cause a consent to be delivered)
with respect to, all the Shares (whether acquired heretofore or
hereafter) that are beneficially owned by Shareholder, or as to
which Shareholder has, directly or indirectly, the right to vote
or direct the voting, (i) in favor of approval of the
Merger Agreement; (ii) against any action or agreement that
would reasonably be expected to result in a breach of any
covenant, representation or warranty or any other obligation or
agreement of the Company contained in the Merger Agreement or of
Shareholder contained in this Agreement; and (iii) against
any Acquisition Proposal or any other action, agreement or
transaction that is intended, or could reasonably be expected,
to materially impede, interfere or be inconsistent with, delay,
discourage or materially and adversely affect consummation of
the transactions contemplated by the Merger Agreement or any of
Shareholders obligations under this Agreement.
Section 2.
No
Inconsistent Agreements.
Shareholder hereby
agrees that Shareholder shall not enter into any voting
agreement or grant a proxy or power of attorney with respect to
such the Shares that is inconsistent with Shareholders
obligations under this Agreement.
Section 3.
No
Transfers.
From and after the date hereof until
the Expiration Date and except as contemplated by this Agreement
or the Merger Agreement, Shareholder agrees not to, directly or
indirectly, sell, transfer, pledge, assign or otherwise dispose
of, or enter into any contract option, commitment or other
C-1
arrangement or understanding with respect to the sale, transfer,
pledge, assignment or other disposition of, any of the Shares,
except the following transfers shall be permitted:
(a) transfers by will or operation of law, in which case
this Agreement shall bind the transferee, (b) transfers
pursuant to any pledge agreement, subject to the pledgee
agreeing in writing to be bound by the terms of this Agreement,
(c) transfers in connection with estate or tax planning or
similar purposes, including transfers to relatives, trusts,
foundations and charitable organizations, subject to the
transferee first agreeing in writing to be bound by the terms of
this Agreement, and (d) such transfers as Buyer may
otherwise permit in its sole discretion. Any transfer or other
disposition in violation of the terms of this Section 3
shall be null and void.
Section 4.
Representations
and Warranties of Shareholder.
Shareholder
represents and warrants to and agrees with Buyer as follows:
(a) Shareholder has all requisite capacity and authority to
enter into and perform his, her or its obligations under this
Agreement.
(b) This Agreement has been duly executed and delivered by
Shareholder, and assuming the due authorization, execution and
delivery by Buyer, constitutes the valid and legally binding
obligation of Shareholder enforceable against Shareholder in
accordance with its terms (except as such enforceability may be
limited by the Bankruptcy and Equity Exception).
(c) The execution and delivery of this Agreement by
Shareholder does not, and the performance by Shareholder of his,
her or its obligations hereunder and the consummation by
Shareholder of the transactions contemplated hereby will not,
violate or conflict with, or constitute a default under, any
agreement, instrument, contract or other obligation or any
order, arbitration award, judgment or decree to which
Shareholder is a party or by which Shareholder is bound, or any
statute, rule or regulation to which Shareholder is subject or,
in the event that Shareholder is a corporation, partnership,
trust or other entity, any charter, bylaw or other
organizational document of Shareholder.
(d) Shareholder is the record and beneficial owner of, or
is the trustee that is the record holder of, and whose
beneficiaries are the beneficial owners of, and has good title
to all of the Shares set forth on
Exhibit A
hereto,
and the Shares are so owned free and clear of any liens,
security interests, charges or other encumbrances, except as
otherwise described on
Exhibit A
hereto. Shareholder
does not own, of record or beneficially, any shares of capital
stock of Company other than the Shares (other than shares of
capital stock subject to stock options over which Shareholder
will have no voting rights until the exercise of such stock
options). The Shares do not include shares over which
Shareholder exercises control in a fiduciary capacity and no
representation by Shareholder is made thereby pursuant to the
terms hereof. Shareholder has the right to vote the Shares
(unless otherwise noted on
Exhibit A
), and none of
the Shares is subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting of the
Shares, except as contemplated by this Agreement.
Section 5.
Irrevocable
Proxy.
Subject to the last sentence of this
Section 5, by execution of this Agreement, Shareholder does
hereby appoint Buyer with full power of substitution and
resubstitution, as Shareholders true and lawful attorney
and irrevocable proxy, to the full extent of Shareholders
rights with respect to the Shares, to vote, if Shareholder is
unable to perform his, her or its obligations under this
Agreement, each of such Shares that Shareholder shall be
entitled to so vote with respect to the matters set forth in
Section 1 hereof at any meeting of the shareholders of the
Company, and at any adjournment or postponement thereof, and in
connection with any action of the shareholders of the Company
taken by written consent. Shareholder intends this proxy to be
irrevocable and coupled with an interest hereafter until the
Expiration Date and hereby revokes any proxy previously granted
by Shareholder with respect to the Shares. Notwithstanding
anything contained herein to the contrary, this irrevocable
proxy shall automatically terminate upon the Expiration Date of
this Agreement.
Section 6.
No
Solicitation.
Except as otherwise expressly
permitted under Section 6.5 of the Merger Agreement, from
and after the date hereof until the Expiration Date,
Shareholder, in his, her or its capacity as a shareholder of the
Company, shall not, nor to the extent applicable to Shareholder,
shall such Shareholder authorize any partner, officer, director,
advisor or representative of, such Shareholder or any of his,
her or its
C-2
affiliates to (and, to the extent applicable to Shareholder,
such Shareholder shall use reasonable best efforts to prohibit
any of his, her or its representatives or affiliates to),
(a) initiate, solicit, induce, knowingly encourage, or
knowingly take any action that would reasonably be expected to
materially facilitate the making of, any offer, or proposal
which constitutes, or could reasonably be expected to lead to,
an Acquisition Proposal, (b) participate in any discussions
or negotiations regarding any Acquisition Proposal, or furnish
or otherwise afford access to any Person (other than Buyer,
Buyer Bank and Merger Sub) any information or data with respect
to the Company or any of its Subsidiaries or otherwise relating
to an Acquisition Proposal, (c) enter into any agreement,
including, without limitation, any agreement in principle,
letter of intent, memorandum of understanding or similar
arrangement with respect to an Acquisition Proposal,
(d) solicit proxies or become a participant in
a solicitation (as such terms are defined in
Regulation 14A under the Exchange Act) with respect to an
Acquisition Proposal (other than the Merger Agreement) or
otherwise encourage or assist any party in taking or planning
any action that would reasonably be expected to compete with,
restrain or otherwise serve to interfere with or inhibit the
timely consummation of the Merger in accordance with the terms
of the Merger Agreement, (e) initiate a shareholders
vote or action by consent of the Companys shareholders
with respect to an Acquisition Proposal, or (f) except by
reason of this Agreement, become a member of a group
(as such term is used in Section 13(d) of the Exchange Act)
with respect to any voting securities of Company that takes any
action in support of an Acquisition Proposal.
Section 7.
Specific
Performance; Remedies; Attorneys
Fees.
Shareholder acknowledges that it is a
condition to the willingness of Buyer to enter into the Merger
Agreement that Shareholder execute and deliver this Agreement
and that it will be impossible to measure in money the damage to
Buyer if Shareholder fails to comply with the obligations
imposed by this Agreement and that, in the event of any such
failure, Buyer will not have an adequate remedy at law or in
equity. Accordingly, Shareholder agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or in
damages, is the appropriate remedy for any such failure and will
not oppose the granting of such relief on the basis that Buyer
has an adequate remedy at law. Shareholder further agrees that
Shareholder will not seek, and agrees to waive any requirement
for, the securing or posting of a bond in connection with
Buyers seeking or obtaining such equitable relief.
Shareholder also agrees that if Shareholder fails to comply in
any material respect with the obligations imposed by this
Agreement, Shareholder shall pay to Buyer all of Buyers
reasonable costs and expenses (including attorneys fees)
in connection with enforcing its rights under this Agreement. In
addition, after discussing the matter with Shareholder, Buyer
shall have the right to inform any third party that Buyer
reasonably believes to be, or to be contemplating, participating
with Shareholder or receiving from Shareholder assistance in
violation of this Agreement, of the terms of this Agreement and
of the rights of Buyer hereunder, and that participation by any
such persons with Shareholder in activities in violation of
Shareholders agreement with Buyer set forth in this
Agreement may give rise to claims by Buyer against such third
party.
Section 8.
Term
of Agreement; Termination.
As used in this
Agreement, the term
Expiration Date
shall
mean the earlier to occur of (a) the Effective Time,
(b) such date and time as the Merger Agreement shall be
terminated pursuant to Article VIII thereof, or
(c) upon mutual written agreement of the parties to
terminate this Agreement. Shareholder shall have the right to
terminate this Agreement if the Merger Agreement is amended to
decrease the Merger Consideration, provided that Shareholder
sends notice to Buyer of Shareholders election to
terminate within five (5) Business Days after the public
announcement of such amendment, in which case the
Expiration Date shall mean the date Buyer receives
such notice. Upon termination or expiration, no party shall have
any further obligations or liabilities hereunder; provided,
however, such termination shall not relieve any party from
liability for any willful breach of this Agreement prior to such
termination.
Section 9.
Entire
Agreement; Amendments.
This Agreement supersedes
all prior agreements, written or oral, among the parties hereto
with respect to the subject matter hereof and contains the
entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented
or modified, and no provisions hereof may be modified or waived,
except by an instrument in writing signed by each party hereto.
No waiver of any provision hereof by either party shall be
deemed a waiver of any other provision hereof by any such party,
nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
C-3
Section 10.
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.
Section 11.
Further
Assurances.
Shareholder shall, from time to time,
execute and deliver, or cause to be executed and delivered, such
additional or further consents, documents and other instruments
as Buyer may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement.
Section 12.
Capacity
as Shareholder.
The covenants contained herein
shall apply to Shareholder solely in his or her capacity as a
shareholder of the Company, and no covenant contained herein
shall apply to Shareholder in his or her capacity as a director,
officer or employee of the Company or in any other capacity.
Nothing contained in this Agreement shall be deemed to apply to,
or limit in any manner, the obligations of Shareholder to comply
with whatever fiduciary duties he or she may have as a director,
officer or employee of the Company.
Section 13.
Governing
Law.
This Agreement shall be governed by, and
interpreted in accordance with, the laws of the state of
Delaware, without regard to the conflict of law principles
thereof.
Section 14.
No
Agreement Until Executed.
Irrespective of
negotiations among the parties or the exchanging of drafts of
this Agreement, this Agreement shall not constitute or be deemed
to evidence a contract, agreement, arrangement or understanding
between the parties hereto unless and until (a) the Merger
Agreement is executed by all parties thereto, and (b) this
Agreement is executed by Shareholder and Buyer.
(remainder of page intentionally left blank)
C-4
IN WITNESS WHEREOF
, the parties hereto have executed and
delivered this Agreement as of the date first written above.
EASTERN BANK CORPORATION
Name:
SHAREHOLDER
Name:
Signature Page to Voting Agreement
C-5
EXHIBIT A
SHARES OF
COMPANY COMMON STOCK BENEFICIALLY OWNED BY SHAREHOLDER
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Shareholder
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Shares(1)
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Plan Shares
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Options
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(1)
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Shares include shares allocable to Shareholders account
under the Companys employee stock ownership, deferred
investment or other similar plan of the Company. If Shareholder
does not have the power to vote any of such Shares, they are
included under the column titled Plan Shares.
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ANNEX D
DELAWARE
GENERAL CORPORATION LAW
SECTION 262
APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate
D-1
of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the
certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the
D-2
Court of Chancery demanding a determination of the value of the
stock of all such stockholders. Notwithstanding the foregoing,
at any time within 60 days after the effective date of the
merger or consolidation, any stockholder who has not commenced
an appraisal proceeding or joined that proceeding as a named
party shall have the right to withdraw such stockholders
demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder
who has complied with the requirements of subsections (a)
and (d) of this section hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger
or resulting from the consolidation a statement setting forth
the aggregate number of shares not voted in favor of the merger
or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of
D-3
stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
D-4
MASSBANK CORP.
123 Haven Street
Reading, MA 01867
FORM OF REVOCABLE PROXY
Special Meeting of
Stockholders
To Be Held On July 15, 2008 at 11:00 a.m., local time
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gerard H. Brandi and
Reginald E. Cormier, and each or any of them, as proxies (the Proxies ) of the
undersigned, with full power to act without the other and with full power of substitution
in each, and hereby authorizes each of them to represent and to vote all shares of common
stock, par value $1.00 per share, of MASSBANK Corp., a Delaware corporation (the
Company), which the undersigned may be entitled to vote, at the Special Meeting of
Stockholders (the Special Meeting) to be held at the Andover Country Club, located at 60
Canterbury Street, Andover, Massachusetts 01810, on Tuesday, July 15, 2008, at 11:00 a.m.,
local time, and at any and all adjournments or postponements thereof, with all powers the
undersigned would possess if personally present. The Proxies are authorized to vote as
indicated herein upon the matters set forth herein and in their discretion upon all other
matters that may properly come before the Special Meeting.
When properly executed, this
proxy will be voted in the manner directed herein by the undersigned stockholder(s). If no
direction is given, this proxy will be voted FOR each of the proposals set forth on the
reverse side. In their discretion, the Proxies are each authorized to vote upon any and all
other matters that may properly be brought before the Special Meeting and at any and all
adjournments or postponements thereof. A stockholder wishing to vote in accordance with the
Board of Directors recommendations need only sign and date this proxy and return it in the
enclosed postage-paid envelope
.
(Continued and to be
signed on the reverse side)
SPECIAL MEETING OF
STOCKHOLDERS OF
MASSBANK CORP.
July 15, 2008
PROXY
VOTING
INSTRUCTIONS
MAIL
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Sign, date and mail
your proxy card in the envelope provided as soon as possible.
- OR -
TELEPHONE
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Call toll-free
1-800-PROXIES
(1-800-776-9437) in the United States or
1-718-921-8500
from foreign countries and follow
the instructions. Have your proxy card available when you call.
- OR -
INTERNET
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Access
www.voteproxy.com
and follow the on-screen instructions. Have your proxy
card available when you access the web page.
- OR -
IN PERSON
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You may vote your shares in person by attending the Special Meeting.
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COMPANY
NUMBER
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ACCOUNT
NUMBER
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You may enter your voting
instructions at 1-800-PROXIES in the United States or 1-718-921-8500 from foreign countries
or www.voteproxy.com up until 11:59 PM Eastern Time the day before the cut-off or meeting
date.
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Please detach along perforated line and mail in the envelope provided
IF
you are not
voting via telephone or the Internet.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2 BELOW.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN
BLUE OR BLACK INK AS SHOWN HERE
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To change the address on
your account, please check the box at right and indicate your new address in the address
space above. Please note that changes to the registered name(s) on the account may not be
submitted via this method.
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FOR
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AGAINST
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ABSTAIN
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1.
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To approve the agreement and plan of
merger, dated as of March 10, 2008, by and among Eastern Bank Corporation, Eastern Bank,
Minuteman Acquisition Corp., MASSBANK Corp. and MASSBANK.
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2.
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To approve one or more adjournments
of the Special Meeting, if necessary, to permit further solicitation of proxies if there
are not sufficient votes at the time of the Special Meeting, or at any adjournment or
postponement of that meeting, to approve the agreement and plan of merger.
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3.
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To consider and act
upon any other business that may properly come before the special meeting or at any and all
adjournments or postponements of that meeting.
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Your shares of the Companys common stock will not be voted unless a proxy form is signed
and returned, a proxy is submitted by telephone or through the Internet or the shares are
voted in person at the Special Meeting.
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The undersigned hereby acknowledge(s) receipt of a copy of the accompanying Notice of
Special Meeting of Stockholders and the Proxy Statement with respect thereto and hereby
revoke(s) any proxy or proxies heretofore given.
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Also, if you have any questions or need assistance in voting, please call Laurel Hill
Advisory Group, LLC, toll-free at (888) 742-1305. Stockholders calling from outside the
U.S. and Canada may call collect at (917) 338-3181. Office hours are weekdays from 8:30
a.m. to 5:30 p.m., Eastern Time.
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PLEASE VOTE, DATE AND SIGN THIS PROXY ON
REVERSE SIDE AND
RETURN PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please
sign full corporate name by duly authorized officer, giving full title as such. If signer
is a partnership, please sign in partnership name by authorized person.
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SPECIAL MEETING OF STOCKHOLDERS OF
MASSBANK CORP.
July 15, 2008
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
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Please detach along perforated line and mail in the envelope provided.
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071508
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2 BELOW.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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FOR
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AGAINST
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ABSTAIN
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1.
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To approve the agreement and plan of merger, dated as of March 10, 2008, by and among Eastern Bank Corporation, Eastern Bank, Minuteman Acquisition Corp., MASSBANK Corp. and MASSBANK.
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2.
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To approve one or more adjournments of the Special Meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting, or at any adjournment or postponement of that meeting, to approve the agreement and plan of merger.
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3.
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To consider and act upon any other business that may properly come before the special meeting or at any and all adjournments or postponements of that meeting.
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Your shares of the Companys common stock will not be voted unless a proxy form is signed and returned, a proxy is submitted by telephone or through the Internet or the shares are voted in person at the Special Meeting.
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The undersigned hereby acknowledge(s) receipt of a copy of the accompanying Notice of Special Meeting of Stockholders and the Proxy Statement with respect thereto and hereby revoke(s) any proxy or proxies heretofore given.
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Also, if you have any questions or need assistance in voting, please call Laurel Hill Advisory Group, LLC, toll-free at (888) 742-1305. Stockholders calling from outside the U.S. and Canada may call collect at (917) 338-3181. Office hours are weekdays from 8:30 a.m. to 5:30 p.m., Eastern Time.
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PLEASE VOTE, DATE AND SIGN THIS PROXY ON REVERSE SIDE AND
RETURN PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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Massbank Corp Read Mass (MM) (NASDAQ:MASB)
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