SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
RFS BANCORP, INC.
-----------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
-----------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|_| No fee required.
|X| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common stock, par value $0.01 per share of RFS Bancorp, Inc., a
federally chartered stock holding company (the "Common Stock").
(2) Aggregate number of securities to which transaction applies: 390,156
(3) 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):
390,156 multiplied by $22.75 (cash consideration) and multiplying
that sum by 1/50th of 1%.
(4) Proposed maximum aggregate value of transaction: $8,876,049.
(5) Total fee paid: $1,776.00.
|_| Fee paid previously with preliminary materials.
|_| 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.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[RFS Bancorp, Inc. Letterhead]
_____________, 2001
Dear Stockholder:
We cordially invite you to attend a special meeting of the stockholders
of RFS Bancorp, Inc. The meeting will be held at
__________________________________________, Revere, Massachusetts, on _________
__________, 2001 at _:__ _.m., local time.
At the special meeting, you will be asked to approve a merger agreement
by and between RFS Bancorp, Inc., Revere Federal Savings Bank, Revere, MHC and
Danvers Bancorp, Inc. and Danvers Savings Bank, whereby RFS Bancorp will effect
a reverse stock split and you will be entitled to receive a cash payment of
$22.75 for each share of RFS Bancorp stock that you owned before the split upon
completion of the transactions contemplated by the merger agreement.
In connection with the transactions contemplated by the merger agreement,
including the reverse stock split transaction, you will also be asked to approve
a proposal to amend a provision of RFS Bancorp's federal stock holding company
charter to increase the par value of the common stock of RFS Bancorp from $0.01
per share to $4,947.67 per share. If proposals for both the merger agreement and
charter amendment are approved by shareholders at the special meeting, we will
first change the par value of RFS Bancorp common stock from $.01 per share to
$4,947.67. We will then effect a reverse stock split on a 494,767 for one
basis. As a result, for every share of RFS Bancorp common stock that you own,
after the reverse stock split, you will own 1/494,767 share of RFS Bancorp
common stock. Because you will receive cash for any fractional shares resulting
from the reverse stock split, your shares of RFS Bancorp common stock will be
cancelled. This means that after receiving the cash merger consideration of
$22.75 for every share of RFS Bancorp common stock that you owned prior to the
reverse stock split, you will no longer have any interests as a shareholder in
RFS Bancorp.
Your exchange of shares of RFS Bancorp's stock for cash generally will
cause you to recognize a taxable gain for federal, and possibly state and local,
income tax purposes. You should consult your personal tax advisor for a full
understanding of the tax consequences of the transactions contemplated pursuant
to the merger agreement to you.
The completion of the merger transactions is subject to certain
conditions, including approval from our shareholders of the two proposals
further described in the accompanying proxy statement. We urge you to read the
attached proxy statement carefully. It describes in detail the merger agreement
and the transactions contemplated by it, including a reverse stock split
transaction, and the charter amendment. The attached proxy statement also
includes a copy of the merger agreement and the proposed charter amendment as
APPENDICES A AND C, respectively.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS THAT YOU
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE CHARTER AMENDMENT BECAUSE
THE BOARD BELIEVES THESE PROPOSALS ARE IN THE BEST INTERESTS OF OUR
STOCKHOLDERS.
Whether or not you plan to attend the special meeting, please complete,
date and sign the enclosed proxy form and return it promptly in the postage-paid
envelope provided.
On behalf of the Board of Directors, I thank you for your prompt
attention to this important matter.
Sincerely,
/s/JAMES J. MCCARTHY
-----------------------------------------
James J. McCarthy
President and Chief Executive Officer
RFS BANCORP, INC.
310 BROADWAY
REVERE, MASSACHUSETTS 02151
(781) 284-7777
---------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _________, 2001
Notice is hereby given that a special meeting of shareholders of RFS
Bancorp, Inc. will be held at ____________________________, Revere,
Massachusetts on __________, _____, 2001 at _:_ _.m., local time, for the
following purposes:
1. To approve the Agreement and Plan of Merger, dated April 27, 2001, by and
between RFS Bancorp, Inc., Revere Federal Savings Bank, Revere, MHC and,
Danvers Savings Bank and Danvers Bancorp, Inc. , as amended on June 5,
2001 (the "Merger Agreement") and the transactions contemplated by it,
including a reverse stock split to decrease the number of issued and
outstanding shares of our common stock by means of a 494,767 for
one basis split (the "Reverse Stock Split"). Upon completion of
the merger transactions, you will be entitled to receive $22.75 in
cash for each share of RFS Bancorp stock that you owned prior to the
Reverse Stock Split. A copy of the Merger Agreement is included as
APPENDIX A to the accompanying proxy statement and is incorporated
therein by reference;
2. To approve a proposal to amend Section 5 of the federal stock holding
company charter of RFS Bancorp that would increase the par value per
share from $.01 to $4,947.67 in connection with the Reverse Stock Split
and the other transactions contemplated by the Merger Agreement (the
"Charter Amendment"). The proposed Charter Amendment is included as
APPENDIX C to the proxy statement and is incorporated therein by
reference.
3. Such other business as may properly come before the meeting or any
adjournment thereof. The Board of Directors is not aware of any such
other business.
Any action may be taken on the foregoing proposals at the meeting on the
date specified above, or on any date or dates to which the meeting may be
adjourned. Only shareholders of record at the close of business on
_____________, 2001 are entitled to vote at the meeting or any adjournments or
postponements.
You are requested to complete and sign the enclosed proxy card which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the meeting and vote
in person.
Remember, if your shares are held in the name of a broker, only your
broker can vote your shares on the proposals and only after receiving your
instructions. Please contact the person responsible for your account and
instruct him/her to execute a proxy card on your behalf. You should also sign,
date and mail your proxy at your earliest convenience.
Please review the documents accompanying this notice for more complete
information regarding the matters proposed for your consideration at the special
meeting. Should you have any questions or require assistance, please call us at
(781) 284-7777.
By Order of the Board of Directors
/s/ ERNEST F. BECKER
-----------------------------------------
Ernest F. Becker
Secretary
Revere, Massachusetts
_____________, 2001
================================================================================
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER
AGREEMENT AND THE CHARTER AMENDMENT AT THE SPECIAL MEETING.
================================================================================
PLEASE NOTE
No one has been authorized to provide RFS Bancorp stockholders with any
information other than the information included in this proxy statement and the
documents that are referred to in this proxy statement. Stockholders of RFS
Bancorp should not rely on other information as being authorized by RFS Bancorp.
This proxy statement has been prepared as of ________ ___, 2001. There
may be changes in the affairs of RFS Bancorp since that date which are not
reflected in this document.
As used in this proxy statement, Revere Federal Savings Bank, RFS Bancorp
and Revere, MHC are sometimes collectively referred to as "Revere," and Danvers
Savings Bank and Danvers Bancorp are sometimes collectively referred to as
"Danvers."
WHO CAN HELP ANSWER YOUR QUESTIONS
If you want additional copies of this document, or if you want to ask any
questions about the Merger Agreement or the Charter Amendment you should
contact:
Mr. James J. McCarthy
President and CEO
RFS Bancorp, Inc.
310 Broadway
Revere, Massachusetts 02151
Telephone: (781) 284-7777
In order to obtain timely delivery of the documents, you must request the
information by ____________ ___, 2001.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
i
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET................................................................................................1
The Companies............................................................................................1
Our Reasons for the Merger...............................................................................1
Some Material Terms of the Merger Agreement..............................................................1
Amendment or Termination of the Merger Agreement.........................................................2
Merger Consideration to be Received by RFS Bancorp Stockholders..........................................2
No Financing Requirement.................................................................................2
RFS Bancorp Stock Options and Stock Awards...............................................................2
Votes Required by RFS Bancorp's Shareholders.............................................................2
Abstention or Non-Vote...................................................................................2
The Merger Will be Taxable to Our Shareholders...........................................................2
Accounting Treatment.....................................................................................3
Our Board of Directors Recommends Shareholder Approval...................................................3
Our Financial Advisor Says the Merger Consideration is Fair
From a Financial Point of View to Our Shareholders..............................................3
You Have Dissenters' Rights..............................................................................3
The Merger and Related Transactions
Are Expected to be Completed in the Fourth Quarter of 2001......................................3
Regulatory Approvals.....................................................................................3
Financial Interests of RFS Bancorp's Officers and Directors in the Merger................................3
QUESTIONS AND ANSWERS ABOUT THE VOTING PROCEDURES REGARDING THE MERGER AGREEMENT
AND RELATED TRANSACTIONS..........................................................................................6
SPECIAL MEETING OF STOCKHOLDERS...................................................................................8
Purposes.................................................................................................8
Quorum...................................................................................................8
Voting Rights............................................................................................9
Votes by Revere, MHC.....................................................................................9
Votes Required...........................................................................................9
Revocability of Proxies.................................................................................10
Solicitation of Proxies.................................................................................10
SPECIAL FACTORS..................................................................................................10
Background of the Merger................................................................................10
Reasons for the Merger and Board Recommendation.........................................................12
Opinion of RFS Bancorp's Financial Advisor..............................................................13
Financing...............................................................................................21
Material Terms of the Reverse Stock Split...............................................................21
Interests of Certain Persons in the Merger and Related Transactions.....................................22
Federal Income Tax Consequences of the Merger to You....................................................24
Accounting Treatment of the Merger Transactions.........................................................25
VOTING AGREEMENTS................................................................................................25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................25
Principal Shareholders of RFS Bancorp...................................................................25
Security Ownership of Directors and Management..........................................................26
ii
PROPOSAL 1: APPROVAL OF THE MERGER AGREEMENT.....................................................................29
The Companies...........................................................................................29
Overview................................................................................................30
What RFS Bancorp Stockholders Will Receive in the Merger................................................30
Conditions of the Merger ...............................................................................30
Effective Time..........................................................................................31
Appraisal Rights........................................................................................31
Procedures for Surrendering Your Certificates...........................................................34
Regulatory Matters......................................................................................35
Time Period For Completing The Merger...................................................................36
Other Provisions of the Merger Agreement................................................................36
PROPOSAL 2: APPROVAL OF THE CHARTER AMENDMENT...................................................................39
OTHER MATTERS....................................................................................................39
STOCKHOLDER PROPOSALS............................................................................................40
INCORPORATION BY REFERENCE.......................................................................................40
iii
Appendices
Appendix A Agreement and Plan of Merger by and among Danvers Bancorp,
Inc., Danvers Savings Bank and Revere, MHC, RFS Bancorp, Inc.,
and Revere Federal Savings Bank dated April 27, 2001, as amended
on June 5, 2001
Appendix B Agreement and Plan of Merger by and between Danvers Savings
Bank and Revere Federal Savings Bank dated April 27, 2001
Appendix C Proposed Amendment to Section 5 of the federal stock holding
company charter of RFS Bancorp, Inc.
Appendix D Opinion of Ryan, Beck & Co., LLC.
Appendix E Form of Voting Agreements, including an agreement by and
between Revere, MHC and Danvers Bancorp, and an agreement by and
between each director and executive officer of RFS Bancorp, Inc.,
and Danvers Bancorp
Appendix F Dissenter and Appraisal Rights under 12 C.F.R. section 552.14
iv
SUMMARY TERM SHEET
THIS SUMMARY TERM SHEET HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU.
YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE OTHER DOCUMENTS WE REFER
TO IN THIS DOCUMENT. THESE WILL GIVE YOU A MORE COMPLETE DESCRIPTION OF THE
TRANSACTIONS WE ARE PROPOSING. WE HAVE INCLUDED PAGE REFERENCES IN THIS SUMMARY
TERM SHEET TO DIRECT YOU TO OTHER PLACES IN THIS PROXY STATEMENT WHERE YOU CAN
FIND A MORE COMPLETE DESCRIPTION OF THE TOPICS WE DISCUSS BELOW.
THE COMPANIES (SEE PAGE _____).
RFS Bancorp, Inc., is a federally chartered stock holding company
headquartered in Revere, Massachusetts. RFS Bancorp operates through its
wholly-owned subsidiary bank, Revere Federal Savings Bank of Revere,
Massachusetts, a federally chartered savings and loan association, and one
branch office located in Chelsea, Massachusetts. Revere, MHC, a federal mutual
holding company, also headquartered in Revere, Massachusetts, owns 56% of the
common stock of RFS Bancorp.
Danvers Bancorp is a mutual bank holding company incorporated in
Massachusetts. Danvers Bancorp operates through its wholly owned subsidiary,
Danvers Savings Bank, a Massachusetts chartered savings bank. Danvers Savings
Bank, through its main office in Danvers, Massachusetts, five branches and one
loan office, provides a wide array of commercial and consumer banking services.
OUR REASONS FOR THE MERGER (SEE PAGE ____).
Your Board of Directors believes that the business combination of Revere
and Danvers exceeds what Revere could accomplish by itself. We also believe that
the combined companies will be stronger than Revere on a stand-alone basis as
the products and services available to Revere customers will be expanded.
SOME MATERIAL TERMS OF THE MERGER AGREEMENT (SEE PAGE ____).
o RFS Bancorp will first effectuate the Reverse Stock Split to decrease the
total number of shares outstanding. In connection with the Reverse Stock
Split, each shareholder excluding Revere, MHC, will be entitled to
receive $22.75 for each share of RFS Bancorp common stock that they owned
prior to the Reverse Stock Split.
o RFS Bancorp will then exchange its federal stock holding company charter
for an interim federal stock savings association charter and merge with
and into Revere Federal Savings Bank with Revere Federal Savings Bank as
the surviving entity.
o Revere, MHC will then merge with and into Danvers Bancorp. In connection
with this merger transaction, the members of Revere, MHC will be provided
with liquidation and subscription interests substantially of the same
nature in Danvers Bancorp as they had in Revere, MHC.
o Revere Federal Savings Bank will also merge with Danvers Savings Bank and
function as a division of Danvers Savings Bank for a period of one year.
o Following the merger, two directors of RFS Bancorp will serve on the
Board of Trustees of Danvers Bancorp and on the Board of Directors of
Danvers Savings Bank.
o Danvers Bancorp will also establish an Advisory Board consisting of
Revere Federal Savings Bank's current directors who are not serving on
the Board of Directors of Danvers Savings Bank.
o James J. McCarthy, the President and Chief Executive Officer of Revere
Federal Savings Bank, will continue to serve as President and Chief
Executive Officer of the Revere Federal Savings Bank division of Danvers
Savings Bank. Mr. McCarthy will also serve as an Executive Vice President
at Danvers Bancorp. He is also expected to be appointed Chief Operating
Officer of Danvers Savings Bank upon the earlier of December 31, 2002, or
such time as the position becomes vacant. Mr. McCarthy will also serve as
a trustee of Danvers Bancorp and a director of Danvers Savings Bank.
1
o The merger transactions cannot occur unless: (1) our stockholders approve
the Merger Agreement and the Charter Amendment; (2) members of Revere,
MHC approve the Merger Agreement; (3) corporators of Danvers Bancorp
approve the Merger Agreement; and (4) and we receive certain approvals
from various banking regulators.
o If the merger transactions are not completed on or before June 30, 2002,
the Merger Agreement may be terminated by either Revere or Danvers,
unless the failure to close is due to a breach of the party seeking to
terminate.
o We have agreed not to solicit or encourage a competing transaction to
acquire us. However, if our fiduciary duties require it, the Board of
Directors may furnish information to or negotiate with someone who makes,
or accept, an unsolicited proposal that would be superior to Danvers
Bancorp's proposal.
o If we terminate the Merger Agreement with Danvers because we receive a
superior proposal, or if our Board of Directors change their
recommendation to approve of the Merger Agreement, we will pay Danvers
Bancorp a fee of $1.0 million.
AMENDMENT OR TERMINATION OF THE MERGER AGREEMENT (SEE PAGE ___).
RFS Bancorp and Danvers Bancorp may mutually agree to terminate the
Merger Agreement and elect not to complete the merger at any time before the
effective date of the merger.
The parties also may terminate the merger if other circumstances occur
which are described in the Merger Agreement, including the failure to complete
the merger by June 30, 2002.
The Merger Agreement may be amended by the written agreement of Revere
and Danvers.
MERGER CONSIDERATION TO BE RECEIVED BY RFS BANCORP STOCKHOLDERS (SEE PAGE ___).
RFS Bancorp stockholders will be entitled to receive $22.75 in cash for
each share of RFS Bancorp common stock that they owned before the Reverse Stock
Split.
NO FINANCING REQUIREMENT (SEE PAGE ___).
Danvers will pay the aggregate cash merger consideration of $22.75 per
share of RFS Bancorp common stock prior to the Reverse Stock Split, estimated to
be $8.9 million. Under the Merger Agreement, Danvers will not require any
financing from a third party source to pay the full amount of the aggregate cash
merger consideration. Rather, Danvers intends to pay the full amount of the cash
merger consideration from its cash reserves.
RFS BANCORP STOCK OPTIONS AND STOCK AWARDS (SEE PAGE ___).
RFS Bancorp's stock option plan and its recognition and retention plan
will terminate on the effective date of the merger.
In addition, stock options to purchase RFS Bancorp common stock made
pursuant to RFS Bancorp's stock option plan and awards made pursuant to RFS
Bancorp's recognition and retention plan will become immediately vested and
holders of these options and awards will receive a cash payment in accordance
with the calculation presented in the Merger Agreement.
VOTES REQUIRED BY RFS BANCORP'S SHAREHOLDERS (SEE PAGE ___).
o Approval of the Merger Agreement and the transactions contemplated by it,
including the Reverse Stock Split, requires the affirmative vote of a
majority of the outstanding shares of RFS Bancorp common stock that are
not held by Revere, MHC.
o Approval of the Charter Amendment requires a majority vote of the total
number of outstanding shares of RFS Bancorp common stock, including
shares held by Revere, MHC.
ABSTENTION OR NON-VOTE (SEE PAGE ___).
Any abstention, non-voting of shares or "broker non-vote" will have the
same effect as a vote "AGAINST" approval of the Merger Agreement and the Charter
Amendment.
THE MERGER WILL BE TAXABLE TO OUR SHAREHOLDERS (SEE PAGE __).
Our shareholders will generally recognize gain for federal, and possibly
state and local, income tax purposes, on the exchange of their RFS Bancorp
2
common stock for cash. You will recognize gain equal to the difference between
the amount of cash you receive and your tax basis in your RFS Bancorp common
stock. You should determine the actual tax consequences of the exchange to you.
It will depend on your specific situation and factors not within our control.
You should consult your personal tax advisor for a full understanding of the
transactions contemplated by the Merger Agreement and their specific tax
consequences to you.
ACCOUNTING TREATMENT (SEE PAGE ___)
Danvers Bancorp intends to account for the merger transactions as a
"purchase" for accounting and financial reporting purposes.
OUR BOARD OF DIRECTORS RECOMMENDS SHAREHOLDER APPROVAL
(SEE PAGES __ THROUGH __).
Our Board of Directors believes that the transactions contemplated by the
Merger Agreement, including the Reverse Stock Split, and the Charter Amendment
are in the best interests of RFS Bancorp and our shareholders. The Board has
unanimously approved the Merger Agreement and the Charter Amendment. Our Board
of Directors unanimously recommends that you vote "FOR" approval of these
proposals.
OUR FINANCIAL ADVISOR SAYS THE MERGER CONSIDERATION IS FAIR FROM A FINANCIAL
POINT OF VIEW TO OUR SHAREHOLDERS (SEE PAGE __).
Our financial advisor, Ryan, Beck & Co., LLC. has given our Board of
Directors a written opinion dated June 5, 2001 that states the cash
consideration to be paid to our shareholders is fair from a financial point of
view. A copy of the opinion is attached to this proxy statement as APPENDIX D.
You should read it completely to understand the assumptions made, matters
considered and limitations on the review performed by our financial advisor in
issuing its opinion. We have agreed to pay Ryan, Beck a fee of approximately
$250,000 as consideration for their services. Of this amount, $75,000 has been
paid to date.
YOU HAVE DISSENTERS' RIGHTS (SEE PAGE __).
Under federal law, you may disagree with the terms of the Merger
Agreement with respect to your shares of RFS Bancorp common stock and elect to
follow specified requirements to force an appraisal of your shares.
THE MERGER AND RELATED TRANSACTIONS ARE EXPECTED TO BE COMPLETED IN THE FOURTH
QUARTER OF 2001 (SEE PAGE __).
The merger and the related transactions will only occur after all the
conditions to its completion have been satisfied or waived. Currently, we
anticipate that the merger transactions will be com- pleted in the fourth
quarter of 2001.
REGULATORY APPROVALS (SEE PAGE _____)
The charter exchange of RFS Bancorp for an interim federal stock savings
association charter and the subsequent merger with Revere Federal Savings Bank
must be approved by the Office of Thrift Supervision. The merger of Revere, MHC
into Danvers Bancorp and the merger of Revere Federal Savings Bank into Danvers
Savings Bank must be approved by the Board of Governors of the Federal Reserve
System and the Federal Deposit Insurance Corporation, respectively. The U.S.
Department of Justice may also review the merger transactions' impact on
competition. In addition, state regulatory authorities, including the
Massachusetts Division of Banks and the Board of Bank Incorporation, will need
to approve the transactions contemplated by the Merger Agreement.
We have filed all the regulatory applications and notices with these
state and federal regulatory authorities. We cannot assure you that we will
receive regulatory approval or that regulatory approvals received will not
contain a condition or requirement that requires the approvals to fail to
satisfy the conditions set forth in the Merger Agreement.
FINANCIAL INTERESTS OF RFS BANCORP'S OFFICERS AND DIRECTORS IN THE MERGER
(SEE PAGES __ THROUGH __).
Our directors and executive officers have interests in the merger as
individuals in addition to, or different from, their interests as shareholders.
For example, the Merger Agreement provides for accelerated vesting of stock
options and awards made under certain stock benefit plans. In addition, some
interests arise from the provisions of the Merger Agreement relating to
appointments to the Danvers Bancorp Board of Trustees, director and officer
indemnification and insurance, and employment arrangements and benefits after
completion of the merger and related transactions.
Our Board of Directors was aware of these interests and considered them
in its decision to approve the Merger Agreement and the transactions
contemplated by it.
3
QUESTIONS AND ANSWERS ABOUT THE
VOTING PROCEDURES REGARDING THE MERGER AGREEMENT
AND RELATED TRANSACTIONS
Q: WHAT DO I NEED TO DO NOW:
A: After you have carefully read this proxy statement, indicate on your
proxy form how you want your shares to be voted. Then sign, date and mail
your proxy form in the enclosed prepaid return envelope as soon as
possible. This will enable your shares to be represented and voted at the
special meeting.
If you sign, date and send in your proxy but you do not indicate how you
want to vote, your proxy will be voted in favor of the proposals to
approve the Merger Agreement and the Charter Amendment.
If you do not sign and send in your proxy or attend and vote at the
special meeting, it will have the effect of a vote against the Merger
Agreement and the Charter Amendment.
Q: IF MY SHARES ARE HELD IN STREET NAME BY MY BROKER, WILL MY BROKER
AUTOMATICALLY VOTE MY SHARES FOR ME?
A: No. Your broker will not be able to vote your shares without instructions
from you. You should instruct your broker to vote your shares, following
the directions your broker provides.
Q: WHAT IF I FAIL TO INSTRUCT MY BROKER?
A: If you fail to instruct your broker to vote your shares, your shares will
not be voted on the Merger Agreement and the Charter Amendment and will
have the effect of votes against the Merger Agreement and the Charter
Amendment.
Q: MAY I ATTEND THE MEETING AND VOTE MY SHARES IN PERSON?
A: Yes. All shareholders are invited to attend the special meeting.
Shareholders of record may vote in person at the special meeting. If your
shares are held in street name, then you are not the shareholder of
record and you must ask your broker or other nominee how you can vote at
the special meeting.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. If you have not voted through your broker or other nominee, there
are three ways you may change your vote after you have sent in your proxy
card.
o First, you may send a written notice to the person to whom you
submitted your proxy stating that you would like to revoke your
proxy.
o Second, you may complete and submit a new proxy form. Any earlier
proxies will be revoked automatically.
o Third, you may attend the special meeting and vote in person. Any
earlier proxy will be revoked. However, simply attending the special
meeting without voting in person will not revoke your proxy.
If you have instructed a broker or other nominee to vote your shares, you
must follow directions you received from your broker or other nominee to
change your vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. You should not send in your stock certificates at this time.
Instructions for surrendering your stock certificates in exchange for
$22.75 per share in cash will be sent to you after we complete the merger
and related transactions.
Q: MAY I DISSENT FROM THE MERGER AND RELATED TRANSACTIONS AND SEEK AN AP-
PRAISAL OF THE FAIR MARKET VALUE OF MY SHARES?
A: Yes. Federal law provides dissenters' rights to stockholders of RFS
Bancorp if they satisfy certain requirements.
6
Q: WHEN DO YOU EXPECT THE MERGER AND RELATED TRANSACTIONS TO BE COMPLETED?
A: We are working toward completing the merger transactions as quickly as
possible. We expect to complete the transactions contemplated by the
Merger Agreement during the fourth quarter of 2001.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT?
A: Our shareholders will generally recognize gain for federal, and possibly
state and local, income tax purposes, on the exchange of their RFS
Bancorp common stock for cash. A brief review of the possible tax
consequences to holders of RFS Bancorp common stock is set forth under
the heading "Proposal 1: Approval of the Merger Agreement -- Federal
Income Tax Consequences of the Merger to You." Holders of RFS Bancorp
common stock should consult their own tax advisors as to the tax
consequences of the proposed transactions to them.
Q: WHAT OTHER MATTERS MAY BE VOTED ON AT THE RFS BANCORP SPECIAL MEETING?
A: In addition to voting on the Merger Agreement and Charter Amendment, you
may also be asked to vote upon any other matters that may properly come
before the special meeting or any adjournment or postponement of the
special meeting if RFS Bancorp fails to receive enough votes to approve
the proposals described in this proxy statement. However, we are not
aware of any matters that will be voted upon at the special meeting other
than the approval of the Merger Agreement and the Charter Amendment.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you want additional copies of this document, or if you want to ask any
questions about any of the proposals described in this proxy statement,
you should call:
Mr. James J. McCarthy
President and CEO
RFS Bancorp, Inc.
310 Broadway
Revere, Massachusetts 02151
Telephone: (781) 284-7777
7
SPECIAL MEETING OF STOCKHOLDERS
PURPOSES
RFS Bancorp is furnishing this proxy statement in connection with the
proxy solicitation by RFS Bancorp's Board of Directors. The RFS Bancorp Board of
Directors will use the proxies at the special meeting of stockholders of RFS
Bancorp to be held on _______ ___, 2001, and at any adjournments.
At the RFS Bancorp special meeting, holders of RFS Bancorp common stock
will be asked to vote upon two proposals. First, shareholders will be asked to
approve the Merger Agreement pursuant to which RFS Bancorp will effect the
Reverse Stock Split to decrease the total number of shares outstanding. In
connection with the Reverse Stock Split, each shareholder of RFS Bancorp,
excluding Revere, MHC, will be entitled to receive $22.75 for each share of
common stock of RFS Bancorp that they owned prior to the split. The Merger
Agreement is attached to this proxy statement as APPENDIX A.
Second, in order to effect the Reverse Stock Split, shareholders will be
asked to approve an amendment to RFS Bancorp's federal stock holding company
charter to increase the par value of the common stock per share from $.01 to
$4,947.67. The proposed Charter Amendment is attached to this proxy statement as
APPENDIX C.
If shareholders of RFS Bancorp approve the Merger Agreement and the
Charter Amendment, the following transactions will take place in accordance with
the Merger Agreement:
o First, RFS Bancorp will conduct the Reverse Stock Split and decrease
the total number of shares outstanding, whereby each shareholder,
excluding Revere, MHC, will receive $22.75 for each share of RFS
Bancorp common stock that they owned before the split.
o Second, RFS Bancorp will exchange its federal stock holding company
charter for an interim federal stock savings association charter
(the "Interim Entity").
o Third, the Interim Entity will merge with and into Revere Federal
Savings Bank with Revere Federal Savings Bank as the surviving
entity.
o Fourth, Revere, MHC will merge with and into Danvers Bancorp with
Danvers Bancorp as the surviving entity. In connection with this
merger transaction, the depositors of Revere Federal Savings Bank
will be provided with liquidation and subscription interests
substantially of the same nature in Danvers Bancorp as they had in
Revere, MHC.
o Finally, Revere Federal Savings Bank will merge with and into
Danvers Savings Bank pursuant to a subsidiary merger agreement by
and between Revere Federal Savings Bank and Danvers Savings Bank,
which is attached to this proxy statement as APPENDIX B and
incorporated herein by reference (the "Subsidiary Merger
Agreement"). Pursuant to the Subsidiary Merger Agreement, Revere
Federal Savings Bank will function as a division of Danvers Savings
Bank for a period of one year.
In addition, an alternative structure is permitted under the Merger
Agreement if it becomes necessary to receive any regulatory approval to complete
the transactions contemplated by the Merger Agreement.
QUORUM
A quorum of shareholders is necessary to hold a valid meeting. If the
holders of at least a majority of the total number of the outstanding shares of
common stock entitled to vote are represented in person or by proxy at the
special meeting, a quorum will exist. Abstentions and broker non-votes will
count for determining to determine the number of shares present at the special
meeting.
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If necessary, the proxy holders may vote in favor of a proposal to
adjourn the special meeting in order to permit further solicitation of proxies
if there are not sufficient votes to approve the proposals at the time of the
special meeting. However, no proxy holder may vote any proxies voted against
approval of the Merger Agreement or the Charter Amendment in favor of a proposal
to adjourn the special meeting.
VOTING RIGHTS
You are entitled to one vote at the special meeting for each share of the
common stock of RFS Bancorp that you owned as of record at the close of business
on __________, 2001. The number of shares you own (and may vote) is listed at
the top of the back of the proxy card. If you owned RFS Bancorp common stock at
the close of business on _________, 2001, the record date, you are entitled to
notice and to vote at the RFS Bancorp special meeting. On the RFS Bancorp record
date, there were _____ shares of RFS Bancorp common stock issued and outstanding
held by approximately ______ holders of record.
You may vote your shares at the special meeting in person or by proxy. To
vote in person, you must attend the special meeting and obtain and submit a
ballot, which we will provide to you at the special meeting. To vote by proxy,
you must complete, sign and return the enclosed proxy card. If you properly
complete your proxy card and send it to us in time to vote, your "proxy" (one of
the individuals named on your proxy card) will vote your shares as you have
directed. IF YOU SIGN THE PROXY CARD, BUT DO NOT MAKE SPECIFIC CHOICES, YOUR
PROXY WILL VOTE YOUR SHARES "FOR" THE MERGER AGREEMENT AND THE CHARTER
AMENDMENT.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority of
the Board of Directors determines. As of the date of this proxy statement, we
know of no other matters that may be presented at the special meeting, other
than those listed in the Notice of the Special Meeting.
VOTES BY REVERE, MHC
Revere, MHC is the holding company for RFS Bancorp, which was formed
pursuant to the reorganization of Revere Federal Savings Bank to a mutual
holding company structure in December, 1998. As indicated under "Security
Ownership of Certain Beneficial Owners and Management," Revere, MHC owns 56%, or
494,767 shares, of the outstanding common stock of RFS Bancorp. While Revere,
MHC is expected to vote such shares "FOR" the approval of the Merger Agreement
and the Charter Amendment, the proposal to adopt the Merger Agreement requires
the approval of a majority of the total votes of the common stock issued and
outstanding as of __________, 2001, exclusive of the shares owned by Revere,
MHC.
Revere, MHC also has entered into a voting agreement with Danvers Bancorp
pursuant to which Revere, MHC will vote, among other things, all of its shares
for approval of the Merger Agreement and the Charter Amendment. For a more
complete description of the voting agreement, please refer to "Voting
Agreements," below, in this proxy statement.
VOTES REQUIRED
PROPOSAL 1: THE MERGER AGREEMENT. In order to implement the proposal to
adopt the Merger Agreement, including the Reverse Stock Split, the majority of
the outstanding shares of our common stock that are not held by Revere, MHC must
be voted "FOR" approval of the Merger Agreement. Under this voting standard, an
abstention or failure to vote will have the same effect as a vote "AGAINST" the
Merger Agreement. Shares for which no vote is cast or for which the "ABSTAIN"
box has been selected on the proxy card will have the same effect as a vote
"AGAINST" the Merger Agreement. A broker non-vote will be treated the same as a
vote "AGAINST" the Merger Agreement.
PROPOSAL 2: THE CHARTER AMENDMENT. In order to implement the proposal to
adopt the Charter Amendment, we must obtain the affirmative vote of the holders
of a majority of the total shares of our common
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stock outstanding. Under this voting standard, we must treat an abstention or
failure to vote will have the same as a vote "AGAINST" the Charter Amendment.
Shares for which no vote is cast or for which the "ABSTAIN" box has been
selected on the proxy card will be treated the same as a vote "AGAINST" the
Charter Amendment. A broker non-vote will be treated the same as a vote
"AGAINST" the Charter Amendment. Because Revere, MHC owns more than 50% of RFS
Bancorp's total outstanding shares, we expect that RFS Bancorp will control the
outcome of the vote on the proposal to adopt the Charter Amendment.
REVOCABILITY OF PROXIES
A RFS Bancorp stockholder who has given a proxy solicited by the Board of
Directors may revoke it at any time prior to its exercise at the special meeting
by:
o giving written notice of revocation to the Secretary of RFS Bancorp;
o properly submitting to RFS Bancorp a duly executed proxy bearing a
later date; or
o attending the RFS Bancorp special meeting and voting in person.
All written notices of revocation and other communications with respect
to revocation of proxies should be sent to: the Secretary, RFS Bancorp, Inc.,
310 Broadway, Revere, Massachusetts 02151.
A list of RFS Bancorp stockholders entitled to vote at the special
meeting will be available for inspection at RFS Bancorp's main office during
regular business hours at least 20 days before the special meeting, as well as
at the special meeting.
SOLICITATION OF PROXIES
RFS Bancorp will pay the costs of soliciting proxies from its
shareholders, including, if necessary, hiring a professional proxy solicitor.
Directors, officers and employees of RFS Bancorp may solicit proxies by mail,
telephone and other forms of communication. They will receive no additional
compensation for such services. We will also reimburse banks, brokers, nominees
and other fiduciaries for the expenses they incur in forwarding the proxy
materials to you.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
Since Revere's mutual holding company reorganization in 1998, management
of Revere has focused its principal attention on increasing Revere's core
business of originating residential and commercial mortgages and offering a full
range of retail deposit and loan services. In accordance with this strategy,
Revere has emphasized (i) expansion of its commercial loans, commercial real
estate loans and commercial transactional deposit relationships; and (ii)
expansion of market share in its market area through the opening of its branch
in Chelsea, Massachusetts. As a means to increase stockholder value, the Board
of Directors of RFS Bancorp has implemented various initiatives in the past two
years to increase stockholder value, including the implementation of a stock
repurchase program.
The Revere Boards have also regularly evaluated Revere's corporate
strategy in view of its capital position and market conditions, including the
economic and regulatory environment, the consolidation process in the depository
institution industry and the sharp increase in the numbers of acquisitions of
thrifts, including the prices paid in such acquisitions.
On July 19, 2000, the Revere Boards met at their regular board meetings
to explore various strategic options with Ryan, Beck & Co., LLC., including:
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o Managing Revere's capital;
o Enhancing the second-step conversion value of the combined entity;
and
o Meeting Revere's long term goals.
On December 5, 2000, the Revere Boards again met at their regular board
meetings to explore various strategic options with Ryan, Beck. At this meeting,
Ryan, Beck discussed:
o Revere's prospects as an independent financial institution pursuing
internal expansion in mutual holding company form;
o Revere's prospects as an independent financial institution pursuing
internal expansion after a second-step conversion;
o an analysis of potential acquirors for Revere; and
o an analysis of the state of the market.
Over the next several months, the Revere Boards, at various times,
continued to evaluate their strategic options in light of market conditions and
other merger and acquisition activities in the banking market.
On February 21, 2001, at regular board meetings, the Revere Boards met
with Ryan, Beck and Thacher Proffitt & Wood, their special legal counsel, to
again explore the strategic options of remaining independent or pursuing a
possible affiliation with another financial institution. The Revere Boards
evaluated Revere's prospects as an independent financial institution; strategic
alternatives available to Revere; and the feasibility of a sale of Revere. The
Revere Boards informally authorized management and their advisers to pursue
discussions regarding potential business affiliations with other institutions.
The Revere Boards considered these matters with Ryan, Beck, senior management
and Thacher Proffitt & Wood. Revere formally entered into an engagement letter
with Ryan, Beck on April 26, 2001.
During the time in between the February 21st and March 21st regular board
meetings, the Chief Executive Officer of Danvers informally approached the Chief
Executive Officer of Revere regarding the merits of merging their two respective
institutions. The discussions were preliminary. On March 21, 2001, Ryan, Beck
met with the Revere Boards to advise them of the status of the strategic option
review and process, including the possibility of pursuing an expression of
interest from Danvers, which involved an all cash offer. The Revere Boards
reviewed data prepared by Ryan, Beck with respect to Revere and Danvers,
including selected thrift mergers and acquisitions, the terms of the expressions
of interest, and financial and other data regarding the thrift acquisition. The
Revere Boards informally authorized management and their advisers to pursue
exclusive merger discussions with Danvers.
From March 21, 2001 through April 6, 2001, Revere and Danvers, and their
respective advisers, negotiated the parameters of a term sheet, including the
social, corporate governance, employee benefits and operational terms. The
parties then agreed to the $22.75 per share cash price for each share of RFS
Bancorp common stock.
On April 6, 2001, Thacher Proffitt & Wood and Ryan, Beck participated in
a special telephone meeting with members of the Revere Boards to discuss the
material aspects of the term sheet. The Revere Boards reviewed the proposed term
sheet and other matters related to the proposed transaction, including the
regulatory approval process. After consideration, the Boards authorized Thacher
Proffitt & Wood and Ryan, Beck to negotiate a final term sheet and definitive
merger agreement with Danvers.
Danvers conducted due diligence on Revere on April 17-18, 2001. Revere
performed due diligence on Danvers on April 23, 2001. During the following week,
the parties made progress on the negotiations regarding the terms of the Merger
Agreement. The representatives and advisers for both parties met and spoke on
numerous occasions throughout this period discussing the transaction and the
related documentation and negotiated the terms of the definitive merger
agreement.
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On April 26, 2001, the Revere Boards held a meeting with Ryan, Beck and
Thacher Proffitt & Wood to review the status of the proposed Merger Agreement
and other related documents. The Revere Boards reviewed the Merger Agreement on
a section by section basis with its advisors, who advised the Revere Boards as
to the issues which remained unresolved. Thacher Proffitt & Wood advised the
Revere Boards that the open issues were expected to be negotiated that evening
and that they would report the results of these negotiations to the Boards at
the next board meeting to be held the following day.
On April 27, 2001, the Revere Boards again held a meeting with Ryan, Beck
and Thacher Proffitt & Wood to review the final terms of the Merger Agreement
and other acquisition documents. The Boards also obtained an opinion from Ryan,
Beck as to the fairness of the merger consideration to be received by the
minority stockholders of RFS Bancorp from a financial point of view. As Revere's
financial advisor, Ryan, Beck analyzed the financial factors related to the
merger transaction and rendered its opinion that the merger consideration was
fair, from a financial point of view, to the minority stockholders of RFS
Bancorp. Thacher Proffitt & Wood reported the results of the negotiations to the
directors and discussed all changes to the Merger Agreement with the Revere
Boards. Thacher Proffitt & Wood also discussed the fiduciary duties of the
Revere Boards with the directors. The RFS Bancorp Board unanimously approved the
terms of the Merger Agreement as being in the best interests of RFS Bancorp and
its stockholders and authorized the execution of the Merger Agreement.
On April 27, 2001, Revere and Danvers executed the Merger Agreement and
RFS Bancorp released a press release announcing the proposed merger and other
transactions contemplated by the Merger Agreement. On that same date, Revere,
MHC and each director and executive officer of RFS Bancorp entered into voting
agreements with Danvers Bancorp. Under these voting agreements, Danvers Bancorp
has shared voting power and in certain circumstances sole voting power with
respect to shares held by Revere, MHC and the directors and executive officers
of RFS Bancorp, respectively. For a more complete description of the voting
agreements, please refer to "Voting Agreements," below, in this proxy statement.
REASONS FOR THE MERGER AND BOARD RECOMMENDATION
The terms of the Merger Agreement, including the cash consideration of
$22.75 per share of RFS Bancorp common stock, were the result of arm's length
negotiations between representatives of Revere and Danvers. Revere consulted
with its special legal counsel, Thacher Proffitt & Wood, and its financial
advisor, Ryan, Beck & Co., LLC., during the negotiation process. Our Board of
Directors believes that the transactions contemplated by the Merger Agreement
are fair and in the best interests of the stockholders of RFS Bancorp. In the
course of reaching its determination, our Board of Directors considered the
following factors:
o the merger consideration to be paid to our shareholders in relation
to the market value, book value and earnings per share of our common
stock;
o the opinion of our financial advisor as to the fairness of the
merger consideration from a financial point of view to the minority
holders of our common stock;
o information concerning our financial condition, results of
operations, capital levels, asset quality and prospects;
o our strategic alternatives to the merger, including the continued
operation of Revere, MHC, RFS Bancorp and Revere Federal Savings
Bank as independent financial institutions;
o the general structure of the transaction and the compatibility of
management and business philosophies;
o the greater resources and expanded branch network that Danvers will
have after the merger;
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o depositors of Revere Federal Savings Bank will become members of
Danvers Bancorp and, in the event of a stock offering transaction by
Danvers Bancorp, will retain their subscription rights as of the
date of their original deposit at Revere Federal Savings Bank and
their liquidation interest;
o our assessment of Danvers Bancorp's ability to pay the aggregate
merger consideration;
o the results of our due diligence investigation of Danvers, including
the likelihood of receiving the requisite regulatory approvals in a
timely manner;
o the ability of Danvers Bancorp and Danvers Savings Bank after the
merger to compete in relevant banking and non-banking markets; and
o industry and economic conditions.
The foregoing discussion of the information and factors considered by RFS
Bancorp's Board of Directors is not intended to be exhaustive, but constitutes
all material factors considered by our Board of Directors. In view of the
variety of factors considered in connection with its evaluation of the Merger
Agreement and the transactions contemplated by it, our Board of Directors did
not find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
determination and individual directors may have given different weights to the
different factors. In considering and approving the Merger Agreement, our Board
of Directors relied upon information and analysis prepared by management and
Ryan, Beck.
Our Board of Directors believes that the transactions contemplated by the
Merger Agreement, including the Reverse Stock Split, and the Charter Amendment,
are in the best interests of RFS Bancorp and our shareholders. Accordingly, the
Board of Directors unanimously recommends that our shareholders vote "FOR" the
approval of the Merger Agreement and the transactions contemplated by it.
OPINION OF RFS BANCORP'S FINANCIAL ADVISOR
RFS Bancorp formally retained Ryan, Beck to act as its exclusive
financial advisor on April 26, 2001 in connection with the merger and related
matters. RFS Bancorp selected Ryan, Beck because it is a nationally recognized
investment-banking firm with substantial experience in merger and acquisition
transactions and is familiar with RFS Bancorp and its business. As part of its
investment banking business, Ryan, Beck is continually engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
mutual to stock conversions, initial and secondary stock offerings and other
corporate transactions. Additionally, Ryan, Beck is widely recognized for its
knowledge of the mutual holding company structure of organization.
Ryan, Beck participated in the negotiations with respect to the
pricing and other terms and conditions of the proposed merger transactions.
However, the Board of Directors of RFS Bancorp made the final decision as to
the pricing and other terms of the Merger Agreement. Ryan, Beck rendered a
written opinion dated June 5, 2001 to RFS Bancorp's Board, that based on and
subject to the assumptions, factors, and limitations as set forth in the
opinions and as described below, stating that the merger consideration is
"fair" to the minority shareholders of RFS Bancorp from a financial point of
view. Ryan, Beck also rendered a written opinion dated June 5, 2001 to
Revere, MHC's Board, that the depositor conversion is "fair" from a financial
point of view to members of Revere, MHC, as depositors of Revere Federal
Savings Bank. Ryan, Beck was requested by RFS Bancorp and Revere, MHC to
review these opinions on an inseparable basis and not evaluate the fairness
to minority shareholders of RFS Bancorp or members of Revere, MHC separately.
No limitations were imposed by RFS Bancorp's Board of Directors or Revere,
MHC's Board of Directors upon Ryan, Beck with respect to the investigations
made or procedures followed by it in arriving at its opinions.
13
The full text of Ryan, Beck's opinion to RFS Bancorp's Board regarding
the fairness of the merger consideration to minority shareholders of RFS Bancorp
sets forth assumptions made and matters considered, and is attached as APPENDIX
D to this proxy statement. Minority holders of RFS Bancorp common stock are
urged to read the attached Ryan, Beck opinion in its entirety. The Ryan, Beck
opinion is directed only to the financial fairness of the consideration and does
not constitute a recommendation to any shareholder as to how to vote at the RFS
Bancorp special shareholders' meeting. The summary of the Ryan, Beck opinion in
this proxy statement is qualified in its entirety by reference to the full text
of the Ryan, Beck opinion. In rendering its opinions, Ryan, Beck does not admit
that it is an expert within the meaning of the term "expert" as used within the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promul- gated thereunder, or that its opinions constitute a report
or valuation within the meaning of Section 11 of the Securities Act and the
rules and regulations promulgated thereunder.
In connection with its opinion, Ryan, Beck reviewed the following
documents:
o the Merger Agreement and related documents;
o Danvers Bancorp's, audited financial statements for the years ended
December 31, 2000, 1999 and 1998, and Danvers Savings Bank's Call
Reports filed with the Federal Deposit Insurance Corporation for the
quarters ended March 31, 2001, September 30, 2000, June 30, 2000 and
March 31, 2000;
o RFS Bancorp's Annual Reports to Shareholders and Annual Report on
Form 10-KSB for the years ended September 30, 2000 and 1999, and
Revere Federal Savings Bank's Annual Report on Form 10-KSB for the
year ended September 30, 1998, and RFS Bancorp's Quarterly Reports
on Form 10-QSB for the periods ended December 31, 2000, June 30,
2000, March 31, 2000 and December 31, 1999.
o certain operating and financial information provided to Ryan, Beck
by the management of RFS Bancorp relating to its business and
prospects;
o the publicly available financial data of thrift organizations which
Ryan, Beck deemed generally comparable to RFS Bancorp;
o the financial terms of other recently completed second step
conversions of mutual holding companies; and
o the historical stock prices and trading volumes of RFS Bancorp's
common stock.
Additionally, Ryan, Beck:
o conducted or reviewed such other studies, analyses, inquiries and
examinations as we deemed appropriate including an analysis of the
pro forma impact on shareholders of RFS Bancorp and depositors of
Revere Federal Savings Bank of alternative strategies as an
independent institution, including the option of remaining in mutual
holding company form and various options regarding the timing and
pro forma impact of a second step conversion;
o analyzed Danvers Bancorp's ability to consummate the merger;
o considered the future prospects of RFS Bancorp in the event it
remained independent; and
o met with members of RFS Bancorp's senior management to discuss RFS
Bancorp's operations, historical financial statements, strategic
plans and future prospects, including any potential operating
efficiencies and synergies that may arise from the merger.
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In connection with its review, Ryan, Beck relied upon and assumed,
without independent verification, the accuracy and completeness of the financial
and other information regarding RFS Bancorp and its subsidiaries provided to
Ryan, Beck by RFS Bancorp and its representatives. Ryan, Beck is not an expert
in evaluating loan and lease portfolios for purposes of assessing the adequacy
of the allowances for loan losses. Therefore, Ryan, Beck has not assumed any
responsibility for making an independent evaluation of the adequacy of the
allowance for loan losses set forth in the respective balance sheets of Danvers
Bancorp, and RFS Bancorp at December 31, 2000, and Ryan, Beck assumed such
allowances were adequate and complied fully with applicable law, regulatory
policy, sound banking practice and policies of the Securities and Exchange
Commission as of the date of such financial statements. Ryan, Beck has reviewed
certain historical financial data provided by RFS Bancorp. Ryan, Beck reviewed
certain operating forecasts and financial projections (and the assumptions and
bases therefore) provided by RFS Bancorp. Ryan, Beck assumed that such forecasts
and projections reflected the best currently available estimates and judgments
of management. In certain instances, for the purposes of its analysis, Ryan,
Beck made adjustments to such forecasts and projections that in Ryan, Beck's
judgment were appropriate under the circumstances. Ryan, Beck was not retained
to nor did it make any independent evaluation or appraisal of the assets or
liabilities of RFS Bancorp or Danvers Bancorp or their respective subsidiaries
nor did Ryan, Beck review any loan files of RFS Bancorp or Danvers Bancorp or
any of their respective subsidiaries. Ryan, Beck also assumed that the merger
transactions in all respects are, and will be, undertaken and consummated in
compliance with all laws and regulations that are applicable to Danvers and
Revere.
The preparation of a fairness opinion on a transaction such as the merger
transactions contemplated by the Merger Agreement, involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Therefore, Ryan, Beck's opinion is not readily susceptible to summary
description. In arriving at such opinion, Ryan, Beck performed a variety of
financial analyses. Ryan, Beck believes that its analyses must be considered as
a whole and the consideration of portions of such analyses and the factors
considered therein, or any one method of analysis, without considering all
factors and analyses, could create an incomplete view of the analyses and the
process underlying Ryan, Beck's opinion. No one method of analysis was assigned
a greater significance than any other.
The forecasts and projections furnished to Ryan, Beck were prepared by
the management of RFS Bancorp without input or guidance by Ryan, Beck. RFS
Bancorp does not publicly disclose internal management projections of the type
provided to Ryan, Beck in connection with the review of the merger. Such
projections were not prepared with a view toward public disclosure. The public
disclosure of such projections could be misleading since the projections were
based on numerous variables and assumptions that are inherently uncertain,
including, without limitation, factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from those set forth in such projections.
In its analyses, Ryan, Beck made numerous assumptions with respect to
industry performance, general business and economic conditions, and other
matters, many of which are beyond the control of RFS Bancorp or Danvers Bancorp.
Any estimates contained in Ryan, Beck's analyses are not necessarily indicative
of future results or values, which may be significantly more or less favorable
than such estimates. Estimates of values of companies do not purport to be
appraisals nor do they necessarily reflect the prices at which companies or
their securities may actually be sold.
The following is a brief summary of the analyses and procedures performed
by Ryan, Beck in the course of arriving at its opinion. The summary does not
purport to be a complete description, but is a brief summary of the material
analyses and procedures performed by Ryan, Beck in the course of arriving at its
opinion.
ANALYSIS OF SELECTED PUBLICLY TRADED FULLY CONVERTED THRIFTS: Ryan, Beck
compared the financial data for RFS Bancorp as of or for the latest twelve
months ended March 31, 2001 to a peer group of 14 selected thrifts. The criteria
for the peer group were fully converted thrifts located in the New England and
15
Mid-Atlantic regions of the United States with assets between $150 million and
$400 million for which public trading and pricing information was available.
Ryan, Beck deemed this group to be generally comparable to RFS Bancorp. The
following table compares selected statistics of RFS Bancorp with the average
ratios and median ratios for the 14 selected thrifts comprising the peer group:
RFS PEER PEER
CAPITALIZATION BANCORP AVERAGE MEDIAN
- ------------------------------------------------------------------ -------- -------- --------
Total Assets (000s) $153,533 $278,404 $274,975
Total Shareholders' Equity (000s) 10,821 21,539 20,604
Tangible Equity / Tangible Assets 7.05 7.83 8.46
ASSET QUALITY
- ------------------------------------------------------------------
Non-Performing Loans / Loans 0.55 0.89 0.39
Loan Loss Reserves / NPLs 159.96 260.80 251.83
Loan Loss Reserves / Loans 0.88 1.08 0.97
Non-Performing Assets / Assets .34 0.57 0.30
Non-Performing Assets / Equity 4.82 9.94 3.98
LOAN & DEPOSIT COMPOSITION
- ------------------------------------------------------------------
Total Loans / Total Assets 61.71 62.40 65.58
Total Loans / Deposits 90.97 87.80 85.04
1-4 Family Loans / Total Loans 61.24 60.23 61.24
5 + Family Loans / Total Loans 0.00 3.28 1.62
Construction & Development Loans/Total Loans 6.13 5.61 3.01
Other Real Estate Loans / Total Loans 23.52 18.42 12.37
Real Estate Loans / Total Loans 90.89 87.54 93.15
Consumer Loans / Total Loans 1.85 7.47 2.21
Commercial Loans / Total Loans 7.26 4.95 1.82
Non-Interest Bearing Deposits / Total Deposits 13.75 6.80 7.21
Time Deposits > $100,000 / Total Deposits 35.49 12.97 9.73
PERFORMANCE
- ------------------------------------------------------------------
Return on Average Assets 0.40 0.44 0.82
Return on Average Equity 5.57 3.79 12.44
Net Interest Margin 3.59 3.24 3.22
Yield on Interest Earning Assets 7.76 7.74 7.67
Cost of Interest Bearing Liabilities 4.65 4.88 4.70
Non Interest Income / Average Assets 0.33 0.46 0.39
Non Interest Expense / Average Assets 2.94 2.61 2.56
Efficiency Ratio 79.77 73.14 69.09
RFS Bancorp's 0.40% return on assets was below the 0.82% peer group median, and
its 5.57% return on average equity was below the 12.44% peer group median. A
higher yield on interest earning assets combined
16
with a lower cost of interest-bearing liabilities produced a net interest margin
higher than that of the peer group at 3.59% versus the peer group median of
3.22%. RFS Bancorp's higher yield on interest-earning assets is probably due to
its higher level of commercial real estate loans, commercial loans and
construction and development loans. The loan loss reserve at RFS Bancorp equaled
0.88% of loans versus the peer group median of 0.97%. Additionally, RFS
Bancorp's reserve coverage of non-performing loans equaled 159.96% versus the
peer group median of 251.83%. Non-interest income as a percentage of average
assets at 0.33% at RFS Bancorp was below the peer group median at 0.39%.
Non-interest expenses at 2.94% of average assets at RFS Bancorp was higher than
the peer group median of 2.56%.
ANALYSIS OF SELECTED PUBLICLY TRADED MUTUAL HOLDING COMPANIES: Ryan, Beck also
compared certain financial data for RFS Bancorp to the median data for 20 mutual
holding companies with assets between $50 million and $250 million. The
following table compares selected statistics of RFS Bancorp with the median data
for the 20 mutual holding companies comprising the peer group:
RFS PEER
BANCORP MEDIAN
------- ------
Total Assets (000) $153,533 $157,487
Tangible Equity / Tangible Assets 7.05% 11.92%
Return on Average Assets 0.40 0.77
Return on Average Equity 5.57 4.79
Ryan, Beck noted that RFS Bancorp's return on average assets was below the peer
group median while RFS Bancorp's return on average equity was higher than the
peer group median. This is mainly due to RFS Bancorp's tangible equity to
tangible assets ratio being significantly less than the peer median.
ANALYSIS OF TRADING PRICE TO PROPOSED ACQUISITION PRICE: Ryan, Beck noted
that the proposed offer from Danvers Bancorp at $22.75 per share was
approximately 2.0 times the $11.20 closing price of RFS common stock on the day
prior to the announcement of the merger.
Three different methodologies were used to estimate a value for the
minority shares of RFS Bancorp.
METHODOLOGY 1: Estimates the value of RFS Bancorp minority shares in a
conventional sale of control context. This valuation methodology has three
parts: first, assumes a second step conversion to a fully converted thrift
utilizing current second step valuation levels; second, assumes a sale of RFS
Bancorp two years after completion of a second step conversion with the
acquisition price based upon projected discounted cash flows at that date; and
third, the analysis applies the second step minority exchange ratio to the
projected acquisition value. A second step appraisal of $10.9 million was
derived by assuming a 70.00% price to pro forma book value. This results in a
minority exchange ratio of 1.221, i.e., each minority share for RFS Bancorp
would be converted into 1.221 shares of the new fully converted RFS Bancorp with
an assumed offering price of $10.00 per share. The assumptions and resultant
projected financials are as follows:
17
PRO FORMA 2 YEAR PROJECTIONS
----------------------------
ASSUMPTIONS:
Pre-Adjustment Earnings Growth Rate 15.00%
Asset Growth Rate 10.00%
Share Repurchases
Year 1 5.00%
Year 2 10.00%
Dividend $ 0.20
After-tax cost of cash 3.90%
PRO FORMA 2 YEAR PROJECTED FINANCIALS:
Total Assets (000) $187,978
Total Equity (000) $ 14,736
Net Income (000) $ 867
Using a discounted dividend analysis utilizing the pro forma second step
results, Ryan, Beck estimated the present value of the future dividend stream
that RFS Bancorp could produce in perpetuity. Projection ranges for RFS
Bancorp's five-year balance sheet and income statement were based upon certain
growth assumptions for net income (15%) and assets (10%). These projections are,
by their nature, forward-looking and may differ materially from the actual
future values or actual future results. The actual future values or results may
be significantly more or less favorable than suggested by such projections. In
producing a range of per share RFS Bancorp values, Ryan, Beck utilized the
following assumptions: an immediate dividend payout in an amount which would
bring RFS Bancorp's tangible equity ratio to 6%, discount rates ranging from 13%
to 15%, terminal price/earnings multiples ranging from 12x to 14x (which, when
applied to terminal year estimated earnings, produces a value which approximates
the net present value of the dividends in perpetuity, given certain assumptions
regarding growth rates and discount rates) and earnings that include estimated
savings in RFS Bancorp's non-interest expense equal to 35% in the first year and
40% in the second year, with 5.00% growth thereafter. The discounted dividend
analysis produced the range of net present values per share of RFS Bancorp
common stock illustrated in the chart below:
AGGREGATE NET PRESENT VALUE - PER SHARE
- -----------------------------------------------------------------------------------
DISCOUNT RATE
------------------------------------------------
13.0% 14.0% 15.0%
------- ------ ------
Terminal 12.0x $18.95 $17.93 $16.99
Multiple of Earnings 13.0x 20.09 19.00 17.99
14.0x 21.23 20.07 18.99
NPV ADJUSTED FOR MINORITY EXCHANGE RATE
- -----------------------------------------------------------------------------------
DISCOUNT RATE
------------------------------------------------
13.0% 14.0% 15.0%
------- ------ ------
Terminal 12.0x $23.13 $21.89 $20.74
Multiple of Earnings 13.0x 24.52 23.19 21.96
14.0x 25.92 24.5 23.19
EXCHANGE RATIO 1.221
18
These analyses do not purport to be indicative of actual values or expected
values or an appraisal range of shares of RFS Bancorp common stock. The
discounted dividend analysis is a widely used valuation methodology, but Ryan,
Beck noted that it relies on numerous assumptions, including expense savings
levels, dividend payout rates, terminal values and discount rates, the future
values of which may be significantly more or less than such assumptions. Any
variation from these assumptions would likely produce different results.
METHODOLOGY 2: Estimates the potential value of RFS Bancorp minority
shares in a scenario where RFS Bancorp remained an independent institution and
second step valuation levels improve. This valuation method first projected
certain RFS Bancorp balance sheet and income statement data for 5 years and
assumed that second step conversion market valuation levels improved to a level
equivalent with the median pro forma price/book of all second step transactions
over the last five years of 95% of pro forma price/book. The analysis then
discounted the pro forma book value and earnings per minority share to its
present value (using a 14% discount rate) and used those numbers to impute a per
share price for RFS Bancorp stock. The multiples used to impute the trading
values were derived from taking the current trading multiples of all companies
that had undergone a second step conversion since December, 1997. This analysis
resulted in a price to book of 88.09% and a price to earnings multiple of 14.0x.
The assumptions used for projecting RFS Bancorp's performance for five years
were a 15% earnings growth rate, a 10% asset growth rate and share repurchases
of 5%, 4%, 3%, 2% and 1% in years one through five, respectively. These
projections are, by their nature, forward looking and may differ materially from
the actual future values or actual future results. The actual future values or
results may be significantly more or less favorable than suggested by such
projections. That analysis produced the following results:
NET PRESENT VALUE: YEAR 3 YEAR 4 YEAR 5
- ---------------------------------- ------- ------- -------
Book Value Per Minority Share (1) $ 18.27 $ 18.80 $ 19.43
Earnings Per Minority Share (1) $ 1.09 $ 1.14 $ 1.19
- -----------------
(1) Based on a 14% discount rate
19
4/25/01 Price / Book or Second Step Peer Group 88.09%
4/25/01 Price / Earning of Second Step Peer Group 14.0x
RFS Year 5 Book Value per Minority Share $19.43
RFS Year 5 Earnings per Minority Share $ 1.19
Imputed Stock Price Based on Book Value $17.12
Imputed Stock Price Based on Earnings $16.66
Imputed Average Stock Prices $16.89
Ryan, Beck noted that the imputed stock price based on the book value per
minority share and earnings per minority share of $16.89 was significantly less
than the $22.75 per minority share offered by Danvers Bancorp. This analysis
does not purport to be indicative of actual values or expected values or an
appraisal range of shares of common stock. Ryan, Beck noted that this analysis
relies on numerous assumptions about RFS Bancorp's future performance, valuation
levels for second step conversions and trading multiples of companies having
undergone a second step conversion, the future values of which may be
significantly more or less than such assumptions. Any variation from these
assumptions would likely produce different results.
METHODOLOGY 3: Analysis of break-even returns: Using a break-even
analysis, Ryan, Beck estimated the earnings per share growth rate necessary for
the present value of RFS Bancorp's future stock price to equal the $22.75 per
minority share acquisition price. In producing the earnings growth rate, Ryan,
Beck utilized the following assumptions: 2001 earnings per share estimate of
$1.67 (based only on minority shares), discount rates range from 12% to 18%,
terminal price/earnings multiples range from 8x to 14x, and no dividend payment.
In the scenarios involving an acquisition, Ryan, Beck used a higher discount
rate to reflect the higher risk associated with such scenarios. For purposes of
this analysis, the initial price of RFS Bancorp common stock was assumed to be
$11.00 per share, which was the closing price of the common stock on April 25,
2001, two days prior to the announcement of the merger transaction. The
break-even analysis produced the range of five-year earnings growth rates
illustrated in the chart below:
TERMINAL
YEAR DISCOUNT RATE
MULTIPLE OF -----------------------------------------
EARNINGS 12.0% 14.0% 16.0% 18.0%
----------- ----- ----- ----- -----
8.0x 31.6% 34.6%
MARKET
MULTIPLES
10.0x 24.5% 27.3%
12.0x 24.2% 27.0%
ACQUISITION
MULTIPLES
14.0x 19.5% 22.2%
Ryan, Beck noted that RFS Bancorp's historical earnings growth rates were
substantially less than those indicated above. These analyses do not purport to
be indicative of actual values or expected values or an appraisal range of the
20
minority shares of RFS Bancorp common stock. The break-even analysis is a widely
used valuation methodology, but Ryan, Beck noted that it relies on numerous
assumptions, including projected earnings, price/earnings multiples, discount
rates, dividend payout ratio and Danvers Bancorp's $22.75 offer per minority
share to RFS Bancorp shareholders, the future values of which may be
significantly more or less than such assumptions. Any variation from these
assumptions would likely produce different results.
OTHER CONSIDERATIONS. Ryan, Beck also considered the impact of the
depositor conversion from a financial point of view to members of Revere, MHC as
depositors of Revere Federal Savings Bank. In evaluating the depositor
conversion, Ryan, Beck considered that the proposed transaction provided for the
continuity of depositor subscription rights for Revere Federal Savings Bank
depositors, in the event of a stock offering transaction initiated by Danvers
Bancorp, an expanded product line for customers of Revere Federal Savings Bank.
LIMITATIONS. Ryan, Beck's opinion was based solely upon the information
available to it and the economic, market and other circumstances, as they
existed as of the June 5, 2001 date of the opinion. Events occurring after
such date could materially affect the assumptions and conclusions contained in
Ryan, Beck's opinion. Ryan, Beck has not undertaken to reaffirm or revise its
opinion or otherwise comment upon any events occurring after the date of its
opinion.
With regard to Ryan, Beck's services in connection with the merger, RFS
Bancorp has agreed to pay Ryan, Beck a transaction fee in connection with the
merger and related transactions, a portion of which is contingent upon the
consummation of the merger. RFS Bancorp has agreed to pay total fees of
approximately $250,000, of which $75,000 has been paid, an additional $50,000
will be payable upon the receipt of the Office of Thrift Supervision approval,
$50,000 will be payable upon issuance of the opinion included in this proxy
statement and the remainder of which will be paid when the merger is
consummated. In addition, RFS Bancorp has agreed to reimburse Ryan, Beck for its
reasonable out-of-pocket expenses, which shall not exceed $15,000 without the
prior consent of RFS Bancorp. RFS Bancorp has also agreed to indemnify Ryan,
Beck and certain related persons against certain liabilities, including
liabilities under federal securities law, incurred in connection with its
services. The amounts of Ryan, Beck's fees were determined by negotiation
between RFS Bancorp and Ryan, Beck.
Ryan, Beck has not had an investment banking relationship with Danvers
Bancorp. Ryan, Beck has previously served as a financial advisor to RFS Bancorp
and Revere, MHC. Ryan, Beck's research department does not provide published
investment analysis on RFS Bancorp other than inclusion of a full conversion
worksheet as part of a periodic review of mutual holding companies. However,
Ryan, Beck does make a market in RFS Bancorp's common stock.
In the ordinary course of Ryan, Beck's business as a broker-dealer, it
may actively trade equity securities of RFS Bancorp for its own account and the
account of its customers and, accordingly, may at any time hold a long or short
position in such securities.
FINANCING
Danvers will pay the aggregate cash merger consideration of $22.75 per
share, estimated to be $8.9 million. Under the Merger Agreement, Danvers will
not require any financing from a third party source to pay the full amount of
the aggregate cash merger consideration. Rather, Danvers is expected to pay the
full amount of the cash merger consideration from its cash reserves.
MATERIAL TERMS OF THE REVERSE STOCK SPLIT
GENERAL. If shareholders approve the proposals to adopt the Merger
Agreement and the Charter Amendment, RFS Bancorp will effect the Reverse
Stock Split to decrease the total number of issued and outstanding shares of
our common stock on a 494,767 for one basis split. This means that each
shareholder of RFS Bancorp will receive 1/494,767 share of common stock, par
value $4,947.67 per share, for each outstanding share of common stock, par
value $0.01 per share, that the shareholder owned before the split. At the
completion of the Reverse Stock
21
Split, you will be entitled to receive $22.75 for each share of RFS Bancorp
common stock that you owned before the Reverse Stock Split. For example:
o If you currently own 100 shares of RFS Bancorp common stock, then
after the Reverse Stock Split you will be entitled to receive $2,275
in cash.
o If you currently own 10,000 shares of RFS Bancorp common stock, then
after the Reverse Stock Split you will be entitled to receive
$227,500 in cash.
REASONS FOR THE REVERSE STOCK SPLIT. The principal effect of the Reverse
Stock Split will be to decrease the number of issued and outstanding shares of
our common stock from 884,923 (based on outstanding share information as of
______, 2001) to 1, and cash out the interests of all shareholders, except
Revere, MHC. Upon completion of the Reverse Stock Split, Revere, MHC will be the
sole shareholder of RFS Bancorp.
After we complete the Reverse Stock Split, each certificate representing
pre-split shares of common stock will be deemed canceled and you will no longer
have any rights as a shareholder in RFS Bancorp or any other Revere entity, or
own any stock in Danvers Savings Bank or Danvers Bancorp.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND RELATED TRANSACTIONS
GENERAL. Some members of our management and Board of Directors may have
interests in the merger and related transactions that are in addition to or
different from the interests of our stockholders. Our Board of Directors was
aware of these interests and considered them in approving the Merger Agreement
and the transactions contemplated by it. Included below is a summary of some of
the benefit plans under which officers or directors participate and under which
benefits will be paid in accordance with the Merger Agreement.
EMPLOYMENT ARRANGEMENT FOR JAMES J. MCCARTHY. In connection with the
Merger Agreement, Mr. McCarthy signed an employment letter with Danvers Bancorp
and Danvers Savings Bank. The agreement with Mr. McCarthy has a minimum term of
18 months ("employment period"), during which time he will serve as President
and Chief Executive Officer of Revere Federal Savings Bank which will operate as
a division of Danvers Savings Bank, and an Executive Vice President of Danvers
Bancorp. Mr. McCarthy's base salary will be $175,000, subject to an annual
review with the first such review to be held in December of 2002. In addition,
McCarthy will be eligible to participate in Danvers Bancorp's annual incentive
plan, which will provide him with a discretionary bonus of up to 35% of his base
salary. Mr. McCarthy will be entitled to participate in all other employee
benefit plans offered by Danvers Bancorp and Danvers Savings Bank on a basis
equal to that of other Danvers employees and will be provided with a grant of
6,000 phantom shares for 2002 under the Danvers Savings Bank Phantom Stock Plan.
Mr. McCarthy will also be provided with a company automobile for his use and
provided certain reimbursements for memberships in certain organizations.
Upon the completion of the merger transactions, Mr. McCarthy will also be
entitled to receive a retention payment in the amount of $265,000 (the
"retention payment"), provided however, that if he is terminated for cause or
voluntarily resigns from any positions he holds with Danvers Savings Bank or
with Danvers Bancorp within six months of the commencement of his employment
period, Mr. McCarthy will reimburse Danvers Bancorp for the full amount of the
retention payment. If, however, he terminates his position after the expiration
of the six months following the completion of the merger transactions or is
terminated by Danvers Bancorp during the employment period, he will be entitled
to receive twice his then current base salary. The agreement also provides that
if Mr. McCarthy is terminated without cause or he resigns from all positions he
holds with Danvers Bancorp and Danvers Savings Bank effective as of a date that
is later than six months, but earlier than five years following completion of
the merger transactions, he will be entitled to receive a supplemental payment
in the amount of $250,000.
PAYMENTS UNDER EXISTING EMPLOYMENT CONTRACTS. Revere Federal Savings Bank
is currently a party to employment agreements with James J. McCarthy, Anthony J.
Patti and Judith E. Tenaglia, which provide for payments to be made upon a
change of control of Revere Federal Savings Bank. Immediately prior to the
effective date of the transactions contemplated by the Merger Agreement, Revere
shall make a single payment to each such
22
executive in settlement of each such employment agreement. Currently, Messrs.
McCarthy and Patti and Ms. Tenaglia are expected to receive payments of
$349,049, $259,141, and $144,047, respectively, with the amount of such payments
subject to modification due to fluctuations in interest rates and the timing of
the effective date of the transactions contemplated by the Merger Agreement,
which could affect the payments due under these employment agreements.
EMPLOYEE BENEFITS AND EMPLOYMENT. Employees of RFS Bancorp and Revere
Federal Savings Bank, including senior executive officers, shall be entitled to
participate in any employee benefit plans offered by Danvers Bancorp and Danvers
Savings Bank to the extent that employees of Danvers Bancorp and Danvers Savings
Bank with similar responsibilities are eligible to participate in the programs.
In addition, employees of RFS Bancorp and Revere Federal Savings Bank who become
employees of Danvers Bancorp or Danvers Savings Bank will participate in the
respective group health plans of Danvers Bancorp or Danvers Savings Bank and
will receive credit for deductibles and co-payments made under the health plans
maintained by RFS Bancorp or Revere Federal Savings Bank prior to the effective
date of the transactions contemplated by the Merger Agreement to the extent
permitted by the insurance carriers after reasonable efforts have been made by
Danvers Bancorp to ensure such result. Such health care coverage shall be
extended to former employees of RFS Bancorp or Revere Federal Savings Bank with
no waiting period and Danvers Bancorp will use its best efforts to provide that
such coverage will be without any exclusions for pre-existing conditions.
Upon the effective date of the transactions contemplated by the Merger
Agreement, Danvers Bancorp and/or Danvers Savings Bank expects to offer
employment to each officer and employee (except for Mr. McCarthy, whose
employment arrangement is described above) employed by RFS Bancorp or Revere
Federal Savings Bank as of the effective date of the merger transactions
contemplated by the Merger Agreement. If any such officer or employee is
terminated during the one year period following the effective date for reasons
other than cause, as defined in the Merger Agreement, such officer or employee
shall be entitled to a severance payment equal to the greater of (i) the
remainder of his pay for the 52 week period following the effective date of the
transactions contemplated by the Merger Agreement or (ii) two weeks' pay for
each year of employment with Revere Federal Savings Bank (not to exceed 36
weeks' pay). Such officers or employees may be terminated, however, for cause,
as defined in the Merger Agreement, and will be subject to the employment terms,
conditions, policies and rules applicable to other employees of Danvers Bancorp
and/or Danvers Savings Bank and the terms, conditions, policies and rules
relating to vacation benefits, sick leave, and other plans and benefits
available to other Danvers Bancorp and Danvers Savings Bank officers and
employees, except as such terms, conditions, policies and rules may be modified
by the Merger Agreement.
DIRECTORSHIPS. Upon completion of the merger and related transactions,
Mr. McCarthy and Mr. J. Michael O'Brien, a current director of RFS Bancorp,
Revere, MHC and Revere Federal Savings Bank, will become trustees of the Board
of Trustees of Danvers Bancorp and directors of the Board of Directors of
Danvers Savings Bank.
ADVISORY BOARD. Danvers Bancorp has agreed that each member of RFS
Bancorp's Board of Directors, except for Messrs. McCarthy and O'Brien, will be
entitled to serve on an advisory board to be established for at least a one year
period following the effective date of the merger and related transactions. Each
non-employee advisory director will receive a fee equal to $5,000 per year.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. The Merger Agreement
provides that, for a period of six years after the completion of the merger and
related transactions, Danvers Bancorp will indemnify the directors and officers
of RFS Bancorp, Revere Federal Savings Bank and Revere, MHC against certain
liabilities to the fullest extent that Danvers Bancorp is permitted to indemnify
its directors and executive officers in accordance with applicable law.
Furthermore, Danvers Bancorp has also agreed to use its reasonable best efforts
to maintain, if available, for a period of six years, subject to certain
limitations, directors' and officers' liability insurance coverage for persons
who were covered by such insurance maintained by RFS Bancorp on the date of the
Merger Agreement.
EMPLOYEE STOCK OWNERSHIP PLAN (THE "ESOP"). Prior to the completion of
the transactions contemplated by the Merger Agreement, the ESOP will be
terminated. The termination of the ESOP will require the ESOP trustee to use the
proceeds received from the merger to repay the related outstanding debt of the
ESOP. Pursuant to the
23
terms of the ESOP, to the extent permitted by law, any amounts remaining after
the repayment of the debt would be allocated to the ESOP participants in
proportion to the balances of their existing ESOP accounts. All ESOP accounts
would then become 100% vested.
STOCK OPTION PLAN. RFS Bancorp currently maintains a stock option plan
pursuant to which options to purchase RFS Bancorp common stock have been granted
from time to time to employees and directors of Revere. Under the Merger
Agreement, the holders of outstanding stock options, whether or not vested, as
of the effective date of the transactions contemplated by the Merger Agreement
shall be entitled to receive a cash payment equal to the excess of (1) $22.75
per share of RFS Bancorp common stock subject to the stock option(s) less (2)
the aggregate exercise price for the shares of RFS Bancorp common stock subject
to the stock option(s), less any applicable taxes. As of the effective date of
the transactions contemplated by the Merger Agreement, the stock options will no
longer be exercisable for shares of RFS Bancorp common stock nor will they be
assumed by Danvers. As of the effective date of the transactions contemplated by
the Merger Agreement, the stock option plan will be terminated. As of the date
of this proxy statement, there are approximately ________ stock options
outstanding.
RECOGNITION AND RETENTION PLAN. RFS Bancorp currently maintains a
recognition and retention plan pursuant to which restricted shares of RFS
Bancorp common stock have been granted from time to time to employees and
directors of Revere. Pursuant to the terms of the Merger Agreement, the holders
of outstanding restricted stock awards, whether or not vested, as of the
effective date of the transactions contemplated by the Merger Agreement shall be
entitled to receive a cash payment equal to $22.75 per share of RFS Bancorp
common stock subject to the restricted stock awards less any applicable taxes.
As of the effective date of the transactions contemplated by the Merger
Agreement, the recognition and retention plan will be terminated. As of the date
of this proxy statement, there are approximately ________ restricted stock
awards outstanding with no shares available for grant remaining in the plan.
401(K) PLAN STOCK FUND. RFS Bancorp currently maintains a tax-qualified
401(k) plan which permits plan participants to invest their accounts in shares
of RFS Bancorp common stock. Pursuant to the terms of the Merger Agreement, the
shares held in these accounts will be exchanged for a cash payment equal to
$22.75 per share as of the effective date of the transactions contemplated by
the Merger Agreement.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO YOU
The exchange of our common stock for cash pursuant to the terms of the
Merger Agreement will be a taxable transaction for federal income tax purposes
under the Internal Revenue Code, and may also be a taxable transaction under
state, local and other tax laws. A shareholder of RFS Bancorp will recognize
gain or loss equal to the difference between the amount of cash received by the
shareholder in the exchange and the tax basis in the RFS Bancorp common stock.
Gain or loss recognized by the shareholder exchanging his or her RFS
Bancorp common stock pursuant to the Merger Agreement will be capital gain or
loss if such RFS Bancorp common stock is a capital asset in the hands of the
shareholder. If the RFS Bancorp common stock has been held for more than one
year, the gain or loss will be long-term. Capital gains recognized by an
exchanging individual shareholder generally will be subject to federal income
tax at capital gain rates applicable to the shareholder (up to a maximum of
39.6% for short-term capital gains and 20% for long-term capital gains), and
capital gains recognized by an exchanging corporate shareholder generally will
be subject to federal income tax at a maximum rate of 35%.
Neither RFS Bancorp nor Danvers Bancorp has requested or will request a
ruling from the Internal Revenue Service as to any of the tax effects to RFS
Bancorp's shareholders of the transactions discussed in this proxy statement.
The federal income tax discussion set forth above is based upon current
law and is intended for general information only. You are urged to consult your
tax advisor concerning the specific tax consequences of the exchange to you,
including the applicability and effect of state, local or other tax laws and of
any proposed changes in those tax laws and the Internal Revenue Code. We also
note that any stock held in an individual retirement account or other
tax-deferred account may not be subject to immediate taxation upon receipt of
the cash consideration to be received pursuant to the Merger Agreement.
24
ACCOUNTING TREATMENT OF THE MERGER TRANSACTIONS
The merger and related transactions will be accounted for under the
purchase method of accounting. Under this method of accounting, Revere and
Danvers will be treated as one company as of the date of completion of the
merger and related transactions, and Danvers will record the fair market value
of Revere's assets less liabilities on its consolidated financial statements.
Acquisition costs in excess of the fair values of the net assets acquired, if
any, will be recorded as an intangible asset and may be amortized for financial
accounting purposes. The reported consolidated income of Danvers Bancorp will
include the operations of Revere after the completion of the merger and related
transactions.
VOTING AGREEMENTS
Concurrently with the execution of the Merger Agreement, Revere, MHC, and
each director and executive officer of RFS Bancorp (collectively the
"Shareholders") separately entered into voting agreements under which the
Shareholders: (1) agreed to restrict their ability to transfer or dispose of
their shares of RFS Bancorp common stock; (2) agreed to vote their shares of
common stock of RFS Bancorp in such a manner as will facilitate the transactions
set forth in the Merger Agreement, including the Reverse Stock Split, and the
Charter Amendment; and (3) provided the Merger Agreement has not been
terminated, granted to Danvers Bancorp an irrevocable proxy to vote the shares
of RFS Bancorp common stock with respect to matters necessary to approve and
consummate the transactions contemplated by the Merger Agreement, including the
Reverse Stock Split, and the Charter Agreement. The Shareholders agreed to enter
into the voting agreements as an indication of their support for the Merger
Agreement and the transactions contemplated by it and their willingness to vote
their shares of RFS Bancorp common stock in favor of the Merger Agreement, the
Charter Amendment and other related matters at the special meeting.
The voting agreements terminate automatically upon the termination of the
Merger Agreement. The foregoing summary is qualified in its entirety by
reference to the voting agreements, the forms of which are attached to this
proxy statement as APPENDIX E and are incorporated herein by reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS OF RFS BANCORP
The following table contains stockholder information for persons known to
RFS Bancorp to "beneficially own" five percent or more of RFS Bancorp's common
stock as of _________, 2001. In general, beneficial ownership includes those
shares that a person has the power to vote, sell, or otherwise dispose.
Beneficial ownership also includes the number of shares which an individual has
the right to acquire within 60 days (such as stock options). Two or more persons
may be considered the beneficial owner of the same share. We obtained the
information provided in the following table from filings with the Securities and
Exchange Commission and to RFS Bancorp's knowledge. In this proxy statement,
"voting power" is the power to vote or direct the voting of shares, and
"investment power" includes the power to dispose or direct the disposition of
shares.
25
NAME AND ADDRESS OF AMOUNT AND NATURE OF
TITLE OF CLASS BENEFICIAL-OWNER BENEFICIAL-OWNERSHIP PERCENT
- ---------------------------------- ------------------------- -------------------- -------
Common stock, $.01 par value Revere, MHC 494,767(1) 56.00%
310 Broadway
Revere, MA 02151
Common stock, $.01 par value Danvers Bancorp 590,192(2) 66.69%
1 Conant Street
Danvers, MA 01923
- --------------
(1) See "Voting Agreements" above for a description of the voting agreement
entered into by Revere, MHC and Danvers Bancorp, which provides Danvers
Bancorp with shared voting power and, in certain circumstances, sole
voting power with respect to shares of RFS Bancorp common stock held by
Revere, MHC. Under the terms of the voting agreement, Revere, MHC also is
restricted in its ability to transfer or dispose of its shares of RFS
Bancorp common stock.
(2) Based on information reported by Danvers Bancorp in a Schedule 13D/A
filed on May 11, 2001, which reported shared voting power and in some
circumstances sole voting power over such shares. Such powers as reported
by Danvers Bancorp include shares beneficially owned by Revere, MHC, and
shares owned by each director and executive officer of RFS Bancorp, as
reflected in the table "Security Ownership of Directors and Management."
The amount reflected in the Schedule 13D/A filed by Danvers Bancorp
excludes any stock options held by the directors and executive officers
of RFS Bancorp. Any subsequent acquisition of shares, however, including
shares acquired through the exercise of stock options, are subject to the
terms set forth in the voting agreements.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
On the record date, RFS Bancorp's directors and executive officers
beneficially owned 106,582 shares or approximately 12.2% of the outstanding
shares of RFS Bancorp common stock. Our directors and executives have already
agreed to vote their shares in favor of the Merger Agreement and the Charter
Amendment pursuant to voting agreements entered into between each individual
director and executive officer, and Danvers Bancorp. For a more detailed
description of the voting agreements entered into by each individual director
and executive officer of RFS Bancorp and Danvers Bancorp, please refer to
"Voting Agreements," above in this proxy statement.
26
The following table shows RFS Bancorp's common stock beneficially owned
by each director and each named executive officer of RFS Bancorp identified as
Messrs. James J. McCarthy and Anthony J. Patti, and all directors and executive
officers of RFS Bancorp as a group, as of _________, 2001. Each person and each
group shown in the table has shared voting power with Danvers Bancorp under
voting agreements entered into with Danvers Bancorp on April 27, 2001 and in
certain circumstances no voting power, as more fully provided in "Voting
Agreements" and "Principal Shareholders of RFS Bancorp," above, with respect to
the shares of common stock owned by such persons.
AMOUNT AND
NATURE-OF PERCENT OF
BENEFICIAL COMMON-STOCK
NAME TITLE (1) OWNERSHIP(1)(2)(3) OUTSTANDING
- ------------------------------ ------------------------------------- ------------------ ------------
Ernest F. Becker Vice-Chairman and Director 2,316 *
Arno P. Bommer Chairman of the Board and
Director 6,316 *
Theodore E. Charles Director 16,316 1.8%
Anthony R. Conte Director 3,816 *
Carmen R. Mattuchio Director 16,316 1.8%
John J. Marchese Director 987 *
James J. McCarthy President, Chief Executive
Officer and Director 24,458 2.7%
J. Michael O'Brien Director 2,316 *
Anthony J. Patti Executive Vice President and
Chief Financial Officer 14,031 1.5%
Mark Robinson Director 987 *
John J. Verrengia Director 8,258 *
All directors and executive 106,582 12.2%
officers as a group (12 persons)(4)(5)
- ----------------------------
* Represents less than one percent.
(1) See "Principal Shareholders of RFS Bancorp" above for a definition of
"beneficial ownership."
(2) The figures shown above include shares held in trust pursuant to the RFS
Bancorp, Inc. Employee Stock Ownership Plan (the "ESOP") that have been
allocated as of September 30, 2000, to individual accounts as follows:
Messrs. McCarthy - 1,267 shares, Mr. Patti - 900 shares, and all other
executive officers as a group 491 shares. Such persons have voting power,
subject to the legal duties of the ESOP Trustee, and as provided under
voting agreements entered into by such individuals with Danvers Bancorp,
but no investment power, except in limited circumstances, over such
shares. The amount of shares for all directors and executive officers as
a group includes 26,842 shares held by the ESOP Trust that have not been
allocated to eligible participants as of September 30, 2000, over which
certain members of the Compensation Committee of RFS Bancorp (consisting
of Messrs. Becker, McCarthy and Bommer) may be deemed to have sole
"investment power," except in limited circumstances, thereby causing each
such committee member to be deemed a beneficial owner. Each such person
disclaims beneficial ownership of these shares. The individual
participants in the ESOP have shared voting power with the ESOP Trustee
with respect to the unallocated shares held in the ESOP Trust.
(3) Percentages with respect to each person or group of persons have been
calculated based upon 884,923 shares of common stock of RFS Bancorp, the
number of shares outstanding on _____, 2001.
(FOOTNOTES TO THE TABLE CONTINUE ON THE NEXT PAGE)
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(4) Includes restricted stock awards of 658 shares made to each outside
director under the RFS Bancorp, Inc. 1999 Recognition and Retention Plan
as of June 29, 2000, except for Messrs. Robinson and Marchese, who were
awarded 658 shares under the plan on January 19, 2000 and March 21, 2001,
respectively. Under the plan, Messrs. McCarthy and Patti were also
granted restricted stock awards of 4,388 and 2,633 shares of common
stock, respectively, and all other executive officers as a group were
granted restricted stock awards of 878 shares. Each recipient of a
restricted stock award has sole voting power, but no investment power,
over the common stock covered by the award. The restricted stock awards
vest at the rate of 20% per year on each anniversary date of the grant.
The first installment for each outside director and to Messrs. McCarthy
and Patti vested on June 29, 2000 except for awards held by Messrs.
Robinson and Marchese whose first installment vested on January 19, 2001
and will vest on June 29, 2001, respectively.
(5) Includes shares of common stock as to which the named individual has the
right to acquire beneficial ownership, currently or within 60 days of the
___________, 2001 voting record date, pursuant to the exercise of stock
options, as follows: (i) 658 shares each for Messrs. Becker, Bommer,
Charles, Conte, O'Brien and Verrengia and Ms. Mattuchio; (ii) 5,386
shares for Mr. McCarthy; (iii) 2,632 shares for Mr. Patti; and (iii) 329
shares for Messrs. Marchese and Robinson.
28
------------------------------------------------------------
PROPOSAL 1
APPROVAL OF THE MERGER AGREEMENT
-----------------------------------------------------------------
THE FOLLOWING INFORMATION DESCRIBES INFORMATION PERTAINING TO THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. THIS DESCRIPTION DOES NOT
PROVIDE A COMPLETE DESCRIPTION OF ALL THE TERMS AND CONDITIONS OF THE MERGER
AGREEMENT. THIS DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY THE APPENDICES
ATTACHED TO THIS PROXY STATEMENT, INCLUDING THE TEXT OF THE MERGER AGREEMENT AND
SUBSIDIARY MERGER AGREEMENT, WHICH ARE ATTACHED AS APPENDICES A AND B,
RESPECTIVELY, TO THIS PROXY STATEMENT. THE APPENDICES ARE INCORPORATED HEREIN BY
REFERENCE. YOU ARE URGED TO READ THE APPENDICES IN THEIR ENTIRETY.
THE COMPANIES
BUSINESS OF RFS BANCORP. RFS Bancorp is a federally chartered stock
holding company formed in connection with the mutual holding company
reorganization of Revere Federal Savings Bank, a federally chartered stock
savings and loan association. The reorganization was completed on December 18,
1998. Revere Federal Savings Bank is a wholly owned subsidiary of RFS Bancorp.
As part of the reorganization, Revere, MHC was formed and became the majority
stockholder of RFS Bancorp. Revere, MHC is owned and controlled by the members
of Revere, MHC and conducts no significant operations of its own.
RFS Bancorp conducts its business through Revere Federal Savings Bank,
whose primary business consists of attracting savings deposits from the general
public and investing such deposits in loans secured by single-family residential
real estate, commercial real estate, commercial assets and investment
securities. Revere Federal Savings Bank's commercial and commercial real estate
borrowers are comprised of diverse small businesses, without a particular
concentration in any one industry. Revere Federal Savings Bank also makes
consumer loans, including home equity loans, automobile loans, loans on deposit
accounts and other consumer loans. Revere Federal Savings Bank offers both
fixed-rate and adjustable-rate loans and emphasizes the origination of
residential real estate mortgage loans and commercial loans with adjustable
interest rates. At June 30, 2001, RFS Bancorp had total consolidated assets of
approximately $154.0 million, total consolidated deposits of approximately of
$104.0 million and total consolidated stockholders' equity of approximately
$10.8 million.
The principal executive offices of RFS Bancorp is 310 Broadway, Revere,
Massachusetts 02151, and its telephone number is (781) 284-7777.
BUSINESS OF DANVERS BANCORP. Danvers Bancorp is a mutual bank holding
company incorporated in Massachusetts, which operates primarily through its
subsidiary, Danvers Savings Bank, a Massachusetts chartered savings bank. With
its main office in Danvers, Massachusetts, five branches and one loan office,
Danvers Savings Bank provides a wide array of commercial and consumer banking
services. Danvers Savings Bank's lending activities are concentrated primarily
on the North Shore of eastern Massachusetts. Its loan portfolio consists of
business loans extending across many industry types, single-family and
multi-family residential loans and a variety of consumer loans. In addition,
Danvers Savings Bank makes loans for the construction of residential homes. At
March 31, 2001, Danvers Bancorp had total consolidated assets of approximately
$486.3 million, total consolidated deposits of approximately $365.7 million and
total consolidated surplus of approximately $39.9 million.
The principal executive offices of Danvers Bancorp is 1 Conant Street,
Danvers, Massachusetts 01923, and its telephone number is (978) 777-2200.
29
OVERVIEW
As soon as possible after the conditions to completing the merger
transactions described below have been satisfied or waived, and unless the
Merger Agreement has been terminated, the merger transactions will be effected
as follows:
o First, RFS Bancorp will effect the Reverse Stock Split and decrease
the total number of shares outstanding. In connection with this
split, all minority shareholders will be entitled to receive $22.75
for each share of RFS Bancorp common stock that they owned before
the split. Once your shares of RFS Bancorp common stock are
exchanged for the right to receive cash, you will not own any stock
or other interest in RFS Bancorp, nor will you receive, as a result
of the merger, any stock of Danvers Savings Bank or Danvers Bancorp.
o Second, RFS Bancorp will exchange its federal stock holding company
charter for an interim federal stock savings association charter.
o Third, the Interim Entity will merge with and into Revere Federal
Savings Bank with Revere Federal Savings Bank as the surviving
entity.
o Fourth, Revere, MHC, will merge with and into Danvers Bancorp. In
connection with this merger transaction, the depositors of Revere
Federal Savings Bank will be provided with liquidation and
subscription interests substantially of the same nature in Danvers
Bancorp as they had in Revere, MHC.
o Fifth, simultaneously with the merger of Revere, MHC with and into
Danvers Bancorp, Revere Federal Savings Bank will merge with and
into Danvers Savings Bank pursuant to the Subsidiary Merger
Agreement. Pursuant to the Subsidiary Merger Agreement, Revere
Federal Savings Bank will function as a division of Danvers Savings
Bank for a period of one year.
WHAT RFS BANCORP STOCKHOLDERS WILL RECEIVE IN THE MERGER
Upon completion of the transactions contemplated by the Merger Agreement,
each holder of RFS Bancorp common stock, excluding any shares held by Revere,
MHC, will be entitled to receive $22.75 in cash for each share of RFS Bancorp
common stock held by such shareholder before the Reverse Stock Split.
CONDITIONS OF THE MERGER
The respective obligations of Revere and Danvers to effect the
transactions contemplated by the Merger Agreement are subject to the
satisfaction or waiver of the following conditions specified in the Merger
Agreement.
Revere and Danvers must:
o obtain corporate approvals to execute the Merger Agreement;
o fulfill their obligations under the Merger Agreement;
o avoid any material breach of their representations and warranties;
o obtain regulatory approvals from the Federal Reserve Board, the
Federal Deposit Insurance Corporation, the Office of Thrift
Supervision, and the Massachusetts Division of Banks and the Board
of Bank Incorporation;
o not have in effect any order, decree, or injunction of a court or
agency of competent jurisdiction which would prevent the completion
of the merger transactions;
o receive certain officer's certificates from each other regarding the
satisfaction of the Merger Agreement's conditions; and
30
o obtain tax opinions from counsel covering certain tax matters in
connection with the transactions contemplated by the Merger
Agreement.
Revere must also:
o obtain approvals from shareholders of RFS Bancorp and from the
members of Revere, MHC; and
o do nothing that would have or result in any material adverse effect
on Revere, MHC, RFS Bancorp or Revere Federal Savings Bank.
Danvers must also
o obtain the approval from the corporators of Danvers Bancorp; and
o satisfy other conditions as detailed in Article VI of the Merger
Agreement.
We cannot guarantee that all of these conditions will be satisfied or
waived.
EFFECTIVE TIME
The merger and related transactions, including the Reverse Stock
Split, will be consummated if (1) the Merger Agreement is approved by RFS
Bancorp shareholders and members of Revere, MHC; (2) the proposal to approve
the Charter Amendment is approved by RFS Bancorp shareholders; and (3) Revere
and Danvers obtain all required consents and all other conditions to the
Merger Agreement are either satisfied or waived. The merger and the
transactions contemplated by the Merger Agreement will become effective on
the date (the "Effective Date") and at the time (the "Merger Effective Date")
that certificates of merger are filed with the Secretary of State of the
Commonwealth of Massachusetts, or such later date or time as may be indicated
in such certificates, in accordance with the Merger Agreement and the
Subsidiary Merger Agreement.
We anticipate that the merger and related transactions will become
effective during the fourth quarter of 2001. However, it is possible that
factors outside of the control of the parties could require us to complete the
transactions at a later time.
We cannot assure you that the necessary approvals of the merger and
related transactions will be obtained or that other conditions to consummation
of the merger transactions can or will be satisfied. If the merger is not
completed by June 30, 2002, both Revere and Danvers have the right to terminate
the Merger Agreement, unless the failure to close is due to a breach of the
party seeking to terminate.
APPRAISAL RIGHTS
GENERAL. Stockholders of a corporation that is proposing to merge or
consolidate with another entity are sometimes entitled under relevant state or
federal laws to appraisal or dissenters' rights in connection with the proposed
transaction depending on the circumstances. This right generally confers on
stockholders who oppose a merger or the consideration to be received in the
merger the right to receive, in lieu of the consideration being offered in the
merger, the fair value for their shares as determined in accordance with
applicable state or federal law.
APPRAISAL RIGHTS UNDER 12 C.F.R. SECTION 552.14. As stockholders of a
federally chartered stock holding company, shareholders of RFS Bancorp have
appraisal rights under regulations promulgated by the Office of Thrift
Supervision under 12 C.F.R. section 552.14 (the "OTS Regulations"). Under the
OTS Regulations, if stockholders of RFS Bancorp do not wish to accept the
cash payment of $22.75 for each share of RFS Bancorp that they own, they have
the right to dissent from the merger and related transactions and to seek an
appraisal of, and to be paid the fair value, exclusive of any value arising
from the accomplishment or expectation of the transactions contemplated by
the Merger Agreement, for shares of RFS Bancorp common stock held by them,
provided they comply with Section 552.14 of the OTS Regulations.
31
Our stockholders who are entitled to vote on the approval of the Merger
Agreement that do note vote in favor of the Merger Agreement and who otherwise
comply with the applicable procedures under Section 552.14 of the OTS
Regulations are entitled to dissenters' rights under federal law. To perfect
their appraisal rights, RFS Bancorp stockholders must strictly comply with the
procedures in Section 552.14 of the OTS Regulations. Failure to strictly comply
with these procedures will result in the loss of appraisal rights.
The following is a summary of the material provisions of Section 552.14
of the OTS Regulations. The full text of Section 552.14 of the OTS Regulations
is reprinted as APPENDIX F to this proxy statement. You should read APPENDIX F
in its entirety. All references in this summary to a "stockholder" are to the
record holder of the shares of RFS Bancorp common stock on the record date. A
person having a beneficial interest in shares that are held in "street name" or
otherwise held of record in the name of another person, such as a broker or
nominee, is responsible for ensuring that a demand for appraisal is made by the
record holder and must act promptly to cause the record holder to properly
follow the steps summarized below in a timely manner to exercise whatever
appraisal rights the beneficial owner may have.
WE MUST PROVIDE OUR STOCKHOLDERS NOTICE. Under Section 552.14 of the OTS
Regulations, because we are submitting the Merger Agreement and the transactions
contemplated by it for approval at a special meeting, we must notify not less
than 20 days prior to the special meeting, each of our stockholders who was a
stockholder on the record date for the special meeting, that appraisal rights
are available, and must include in such notice a copy of Section 552.14 of the
OTS Regulations. This proxy statement constitutes notice to the holders of
shares of RFS Bancorp common stock for which appraisal rights are available.
YOU MUST PERFECT YOUR APPRAISAL RIGHTS. To perfect appraisal rights under
Section 552.14 of the OTS Regulations, with respect to your shares of common
stock of RFS Bancorp, you must comply with the following procedures:
o You must not vote for the adoption of the Merger Agreement or
consent thereto in writing, including the returning of a signed
proxy without indicating any voting instructions as to the proposal.
o You must deliver to RFS Bancorp a written demand for appraisal
rights of your shares of RFS Bancorp common stock before the vote on
the proposal to adopt the Merger Agreement.
A written demand for appraisal must reasonably inform us of the identity
of the stockholder and his or her intent to demand appraisal of his or her
shares of RFS Bancorp common stock. This written demand for appraisal must be
separate from any proxy or vote in person against or abstention from voting on
the Merger Agreement. A PROXY OR VOTE IN PERSON AGAINST OR ABSTENTION FROM
VOTING ON THE ADOPTION OF THE MERGER AGREEMENT WILL NOT, IN AND OF ITSELF,
CONSTITUTE A DEMAND FOR APPRAISAL.
A RFS Bancorp stockholder wishing to assert appraisal rights must be the
record holder of his or her shares of RFS Bancorp common stock on the date the
written demand for appraisal is made. Only a holder of record of shares of RFS
Bancorp common stock is entitled to assert appraisal rights for the shares of
RFS Bancorp common stock registered in that holder's name. In addition, to
preserve his or her appraisal rights, a RFS Bancorp stockholder must continue to
hold his or her shares until the completion of the transactions contemplated by
the Merger Agreement. Accordingly, a RFS Bancorp stockholder who is the record
holder of shares of RFS Bancorp common stock on the date the written demand for
appraisal is made, but who subsequently transfers shares prior to the completion
of the merger transactions, will lose any right to appraisal with respect to
those shares.
Only a record holder of shares of RFS Bancorp common stock for which
appraisal rights are available is entitled to assert appraisal rights for the
shares registered in that holder's name. A demand for appraisal should be
executed by or on behalf of the record holder, fully and correctly, as this
holder's name appears on his or her stock certificates. If the shares of RFS
Bancorp common stock for which appraisal rights are available are owned of
record in a fiduciary capacity, for example by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if these shares are
owned of record by more than one owner as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all joint owners. An
authorized agent, including one or more joint owners, may execute a
32
demand for appraisal on behalf of a holder of record. The agent, however, must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is agent for such owner or officers.
A record holder of RFS Bancorp common stock that is a broker who holds
shares, for which appraisal rights are available, as nominee for several
beneficial owners may exercise appraisal rights with respect to shares held for
one or more beneficial owners while not exercising these rights with respect to
the shares held for other beneficial owners. In such case, the written demand
should set forth the number of shares for which appraisal rights are available
and is being sought. When no number of shares is expressly mentioned, the demand
will be presumed to cover all the shares held by such broker. Those who wish to
exercise appraisal rights under Section 552.14 of the OTS Regulations are urged
to consult with their brokers to determine the appropriate procedures for the
making of a demand for appraisal by such a nominee.
All written demands for appraisal must be mailed or delivered to:
RFS Bancorp, Inc.
310 Broadway
Revere, Massachusetts 02151
Attention: Corporate Secretary
or should be delivered to the Corporate Secretary at the RFS Bancorp special
meeting prior to the vote on the Merger Agreement or the Charter Amendment.
DANVERS BANCORP MUST PROVIDE NOTICE TO EACH RFS BANCORP STOCKHOLDER THAT
HAS PROPERLY ASSERTED APPRAISAL RIGHTS. Within ten days after the completion of
the transactions contemplated by the Merger Agreement, Danvers Bancorp, as the
surviving company, will notify each RFS Bancorp stockholder that has properly
asserted appraisal rights under Section 552.14 of the OTS Regulations, and that
has not voted in favor of the Merger Agreement, of the following:
o the Effective Date;
o the fair market value that Danvers will offer to pay for such
shares;
o that, within 60 days of the Effective Date, a petition must be filed
with the Office of Thrift Supervision if an agreement as to the
price of the dissented shares is not agreed upon by Danvers and the
dissenting shareholder;
o that the transfer agent must note on such shareholder's stock
certificates that appraisal proceedings are pending; and
o the notice requirements of the petition.
ACCEPTANCE OF OFFER. If within 60 days of the Effective Date, the fair
value is agreed upon between Danvers Bancorp and any stockholder who has
complied with the requirements summarized above, payment of such agreed price
must be made within 90 days of the Effective Date.
A PETITION MUST BE FILED WITH THE OFFICE OF THRIFT SUPERVISION. Within 60
days after the Effective Date, but not thereafter, any RFS Bancorp stockholder
who has complied with the requirements summarized above may file a petition with
the Office of Thrift Supervision demanding a determination of the fair value of
the shares that are entitled to appraisal rights. A copy of the petition must be
given to Danvers Bancorp as the surviving corporation by registered or certified
mail. It will be the obligation of RFS Bancorp stockholders wishing to assert
appraisal rights to initiate all necessary action to perfect their appraisal
rights within the time prescribed in Section 552.14 of the OTS Regulations. Any
RFS Bancorp stockholder entitled to file a petition with the Office of Thrift
Supervision who fails to file the petition within 60 days of the Effective Date
will be deemed to have accepted the cash consideration of $22.75 for each share
of RFS Bancorp common stock that they owned prior to the Reverse Stock Split.
33
STOCK CERTIFICATES MUST BE NOTED BY THE TRANSFER AGENT. Within 60 days of
the Effective Date, each RFS Bancorp stockholder demanding appraisal and payment
under Section 552.14 of the OTS Regulations must submit to ______________, the
transfer agent, his or her certificates of RFS Bancorp common stock for notation
by the transfer agent that appraisal proceedings are pending. Any RFS Bancorp
stockholder who fails to submit his or her stock certificates for this notation
will no longer be entitled to appraisal rights under Section 552.14 of the OTS
Regulations, and will be deemed to have accepted the cash consideration of
$22.75 for each share of RFS Bancorp common stock that they owned prior to the
Reverse Stock Split.
THE DIRECTOR OF THE OFFICE OF THRIFT SUPERVISION WILL DETERMINE THE FAIR
VALUE OF THE RFS BANCORP COMMON STOCK. The Director of the Office of Thrift
Supervision (the "Director") will either appoint one or more independent persons
or direct appropriate staff of the Office of Thrift Supervision to determine the
fair market value of the shares, as of the Effective Date, exclusive of any
element of value arising from the accomplishment or expectation of the merger
and the other transactions contemplated by the Merger Agreement. Appropriate
staff of the Office of Thrift Supervision will review and provide an opinion on
the appraisals prepared by the independent person as to the suitability of the
appraisal methodology and the adequacy of the analysis and the supportive data.
After considering the appraisal report and the advice of the appropriate
staff, and if the Director agrees with the valuation of the shares, the Director
will direct payment by Danvers Bancorp of the appraised fair market value of the
shares of RFS Bancorp common stock upon surrendering of the certificates
representing such stock. Danvers Bancorp must make the payment, together with
interest from the Effective Date, at a rate deemed equitable by the Director.
In addition, the Director may apportion and assess the costs and expenses
of any proceeding under Section 552.14 of the OTS Regulations against all or
some of the parties. In making this assessment, the Director will consider
whether any party has acted arbitrarily, vexatiously, or not in good faith in
respect to the rights provided under Section 552.14 of the OTS Regulations.
RFS Bancorp stockholders considering the exercise of appraisal rights
should be aware that the fair market value of their shares as determined under
Section 552.14 of the OTS Regulations could be more than, the same as or less
than the value of the cash merger consideration provided pursuant to the Merger
Agreement and that investment banking opinions as to the fairness from a
financial point of view are not necessarily opinions as to the fair value under
Section 552.14 of the OTS Regulations.
YOU MAY WITHDRAW YOUR DEMAND FOR APPRAISAL. At any time within 60 days
after the Effective Date, any RFS Bancorp stockholder will have the right to
withdraw his or her demand for appraisal and to accept the cash amount of $22.75
for each share of common stock that they own in accordance with the terms of the
Merger Agreement.
NO RIGHT TO VOTE APPRAISAL SHARES OR RECEIVE DIVIDENDS OR DISTRIBUTION ON
APPRAISAL SHARES. Any holder of shares of RFS Bancorp common stock for which
appraisal rights are available that has duly demanded an appraisal in compliance
with Section 552.14 of the OTS Regulations will not be entitled to vote, after
the consummation of the merger and other transactions pursuant to the Merger
Agreement, those shares subject to such demand for any purpose or be entitled to
the payment of dividends or other distributions on those shares, except
dividends or other distributions payable to holders of record of those shares as
of a record date prior to the completion of the transactions contemplated by the
Merger Agreement.
PROCEDURES FOR SURRENDERING YOUR CERTIFICATES
On or prior to the Merger Effective Date, Danvers will deposit with the
exchange agent an amount of cash equal to the aggregate merger consideration.
The exchange agent will act as paying agent for the benefit of the holders of
certificates of RFS Bancorp common stock in exchange for the merger
consideration. Each holder of RFS Bancorp common stock, excluding Revere, MHC,
who surrenders his or her RFS Bancorp shares to the exchange agent will be
entitled to receive a cash payment of $22.75 per share of RFS Bancorp common
stock owned prior to the Reverse Stock Split upon acceptance of the shares by
the exchange agent.
34
No later than _____ business days after the Merger Effective Date, a
letter of transmittal will be mailed by the exchange agent to RFS Bancorp
shareholders. The letter of transmittal will contain instructions for
surrendering your certificates of RFS Bancorp common stock.
YOU SHOULD NOT RETURN YOUR RFS BANCORP COMMON STOCK CERTIFICATES WITH THE
ENCLOSED PROXY, AND YOU SHOULD NOT SEND YOUR STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL.
If a certificate for RFS Bancorp common stock has been lost, stolen or
destroyed, the exchange agent is not obligated to deliver payment until the
holder of the shares delivers:
o an appropriate affidavit by the person claiming the loss, theft or
destruction of his or her certificate,
o an indemnity agreement, and
o if required by the exchange agent or Danvers Bancorp, a bond.
______ months following the Merger Effective Date, the exchange agent
will deliver to Danvers Bancorp any funds, certificates, and other documents,
not claimed by former RFS Bancorp shareholders. Thereafter, the payment
obligation for any certificate representing RFS Bancorp common stock which has
not been satisfied will become the responsibility of Danvers Bancorp.
If certificates for RFS Bancorp common stock are not surrendered prior to
the date on which such payments would otherwise escheat to or become the
property of any governmental agency, the unclaimed amounts will become the
property of Danvers Bancorp to the extent permitted by applicable law, free and
clear of all claims or interest of any person previously entitled to such
property. None of Danvers Bancorp, RFS Bancorp, the exchange agent or any other
party to the merger will be liable to any former holder of RFS Bancorp common
stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
REGULATORY MATTERS
Revere and Danvers have filed all applications and notices and have taken
or will promptly take other appropriate action with respect to any requisite
approvals or other action of any governmental authority. The Merger Agreement
provides that the obligation of each of Revere and Danvers to complete the
merger and related transactions are conditioned upon the receipt of all
requisite regulatory approvals, including the approval of the Federal Reserve
Board, the Federal Deposit Insurance Corporation, the Office of Thrift
Supervision, the Massachusetts Division of Banks, and the Massachusetts Board of
Bank Incorporation.
In reviewing applications under the Bank Holding Company Act and the Bank
Merger Act, the Federal Reserve Board and the Federal Deposit Insurance
Corporation must consider, among other factors, the financial and managerial
resources and future prospects of the existing and resulting institutions, and
the convenience and needs of the communities to be served. In addition, the
Federal Reserve Board and the Federal Deposit Insurance Corporation may not
approve a transaction if it will result in a monopoly or otherwise be
anti-competitive. The Massachusetts Division of Banks and the Board of Bank
Incorporation must also approve the merger transaction under its regulations.
Under the Community Reinvestment Act of 1977, the Federal Reserve Board
and the Federal Deposit Insurance Corporation must take into account the record
of performance of Revere Federal Savings Bank and Danvers Savings Bank in
meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by each institution. Revere Federal
Savings Bank received a "satisfactory" rating and Danvers Savings Bank received
an "outstanding" rating during their respective last Community Reinvestment Act
examinations.
In addition, a period of up to 30 days must expire following approval by
each of the Federal Deposit Insurance Corporation and the Federal Reserve Board,
within which period the United States Department of Justice may file objections
to the merger under the federal anti-trust laws. Although we believe that the
likelihood of such action by the
35
Department of Justice is remote in this merger transaction, there can be no
assurance that the Department of Justice will not initiate such a proceeding. If
such a proceeding is instituted or challenge is made, we cannot ensure a
favorable result.
RFS Bancorp also must obtain the approval of the Office of Thrift
Supervision for the charter exchange of RFS Bancorp from a federal stock holding
company for an interim federal stock savings association and subsequent merger
with and into Revere Federal Savings Bank with Revere Federal Savings Bank as
the surviving entity. The Office of Thrift Supervision, as the primary federal
banking regulation of Revere, MHC, RFS Bancorp and Revere Federal Savings Bank,
generally will have an opportunity to review the transactions contemplated by
the Merger Agreement.
We are not aware of any other regulatory approvals required for
completion of the merger, except as described above. Should any other approvals
be required, it is presently contemplated that such approvals would be sought.
There can be no assurance that any other approvals, if required, will be
obtained.
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which does not include review of the merger
from the standpoint of the adequacy of the consideration to be received by RFS
Bancorp shareholders. Furthermore, regulatory approvals do not constitute an
endorsement or recommendation of the merger.
TIME PERIOD FOR COMPLETING THE MERGER
If the merger transactions are not consummated on or before June 30,
2002, the Merger Agreement may be terminated by either Revere or Danvers, unless
the failure to close is due to a breach of the party seeking to terminate.
OTHER PROVISIONS OF THE MERGER AGREEMENT
Although the completion of the transactions contemplated by the Merger
Agreement requires the approval of our shareholders, the members of Revere,
MHC, the corporators of Danvers Bancorp and certain regulatory approvals,
many provisions of the Merger Agreement became effective immediately upon its
signing. Your vote was not required to make these provisions binding
obligations of Revere and Danvers.
REPRESENTATIONS AND WARRANTIES. Each party has made representations and
warranties to the other party with respect to various matters, including its
financial statements, capital structure, business, loans, investments,
regulatory filings and benefit plans. These representations and warranties must
be true and correct upon both signing of the Merger Agreement and the completion
of the transactions contemplated by it. A party can terminate the Merger
Agreement if the other party's representations and warranties are not true and
correct, resulting in a material adverse effect on that other party. If the
transactions contemplated by the Merger Agreement are completed, or if the
Merger Agreement is terminated for some unrelated reason, the representations
and warranties become void. You can find details of these obligations in
Articles II and III of the Merger Agreement.
COOPERATION AND CONDUCT OF BUSINESS. Each party has agreed to cooperate
in completing the transactions set forth in the Merger Agreement and to avoid
extraordinary transactions between the signing of the Merger Agreement and the
completion of transactions contemplated by it. In addition, we have agreed not
to solicit or encourage a competing transaction to acquire us. However, we can
furnish information to or negotiate with someone who makes an unsolicited
written bona fide proposal if our advisors determine that it is our Boards of
Directors' fiduciary duty to do so. These provisions become void if the
transactions pursuant to the Merger Agreement are completed. These provisions
also become void if the Merger Agreement is terminated, except for those related
to confidentiality and shared expenses. You can find details of these
obligations in Article VII of the Merger Agreement.
AMENDMENT AND WAIVER. Section 7.03 of Article VII of the Merger Agreement
allows either Revere or Danvers to extend the time for the performance of any
obligation by the other party, and to waive (to the extent permitted by law) any
condition or obligation of the other party if provided in a writing signed
between the parties.
36
TERMINATION. The Merger Agreement may be terminated under any of the
following circumstances:
(1) The Merger Agreement may be terminated by the mutual consent of
Revere or Danvers.
(2) The Merger Agreement may be terminated by either Revere or Danvers
if:
o any party has been informed by a regulatory authority whose
approval or consent has been requested that the approval or
consent is unlikely to be granted;
o the merger transactions are not completed by June 30, 2002,
provided however, that the right to terminate the Merger
Agreement will not be available to any party whose breach of
any obligation under the Merger Agreement has been the cause
of or resulted in the failure of the merger transactions to
occur on or before June 30, 2002;
o a material breach by or failure to perform on the part of a
party of any representation, warranty, covenant or agreement
contained in the Merger Agreement has occurred and cannot be
or has not been cured within 30 days after the giving of
written notice of such breach by the other party (provided
the other party is not in material breach) such that the
conditions for closing set forth in the merger agreement
would not then be satisfied by the breaching party.
(3) The Merger Agreement may be terminated by Revere:
o if our Boards of Directors determine, after consultation with
our advisors, that it is their fiduciary duty to accept a
superior proposal (as defined in the Merger Agreement);
o if we enter into another agreement with someone else, in
connection with a superior proposal; and
o if the approval of the corporators of Danvers Bancorp has not
been obtained.
(4) The Merger Agreement may be terminated by Danvers:
o if the Boards of Directors of RFS Bancorp or Revere, MHC
withdraw their recommendation to approve the Merger Agreement
or modify their recommendation in a manner adverse to
Danvers, as set forth in the Merger Agreement; and
o if the approval of RFS Bancorp shareholders or members of
Revere, MHC for the consummation of the Merger Agreement
transactions have not been obtained by reason of the failure
to obtain the required vote at the meeting or at any
adjournment or postponement.
You can find details of the termination provisions in Article VII of the
Merger Agreement.
TERMINATION FEES. If the merger is terminated, Revere or Danvers may be
obligated to pay the other party the following fees:
o We will pay Danvers Bancorp $1.0 million if we receive a superior
proposal and terminate the Merger Agreement with Danvers Bancorp or
if our Boards of Directors withdraw or change their recommendation
to approve the Merger Agreement under conditions set forth in the
Merger Agreement.
37
o We will reimburse Danvers Bancorp up to $100,000 of reasonable
out-of-pocket expenses that they incur in connection with the Merger
Agreement and related transactions if they terminate the Merger
Agreement because the required approvals of the shareholders of RFS
Bancorp and the members of Revere, MHC were not received.
o Danvers Bancorp will reimburse us up to $250,000 of reasonable
out-of-pocket expenses that we incur in connection with the Merger
Agreement and related transactions if we terminate the Merger
Agreement because the required approval from the corporators of
Danvers Bancorp was not obtained.
You can find details of the termination fee provisions in Article VII of
the Merger Agreement.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF THE MERGER AGREEMENT.
38
-----------------------------------------------------------------
PROPOSAL 2
APPROVAL OF THE CHARTER AMENDMENT
-----------------------------------------------------------------
In connection with the transactions contemplated by the Merger Agreement,
including the Reverse Stock Split, your Board of Directors recommends approval
of the amendment to Section 5 of RFS Bancorp's federal stock holding company
charter in the manner shown in APPENDIX C attached to this proxy statement. The
proposed Charter Amendment would increase the par value of RFS Bancorp common
stock from $0.01 per share to $4,947.67 per share.
The primary reason for the Charter Amendment proposal is to facilitate
the Reverse Stock Split. If our shareholders approve the Merger Agreement,
including the Reverse Stock Split, and the Charter Amendment, we will first
change the par value of RFS Bancorp common stock from $.01 per share to
$4,947.67. We will then effect a reverse stock split on a 494,767 for one
basis. As a result, for every share of RFS Bancorp common stock that you own,
after the Reverse Stock Split, you will own 1/494,767 share of RFS Bancorp
common stock. Because you will receive cash for any fractional shares resulting
from the Reverse Stock Split, your shares of RFS Bancorp common stock will be
cancelled. This means that after receiving the cash merger consideration of
$22.75 for every share of RFS Bancorp common stock that you owned prior to the
Reverse Stock Split you will no longer have any interests as a shareholder in
RFS Bancorp or in any other Revere entity.
The Charter Amendment will be deemed to have been approved at the time of
adoption by RFS Bancorp's stockholders, provided RFS Bancorp files the Charter
Amendment along with other documents to evidence the adoption of the Charter
Amendment with the Office of Thrift Supervision within 30 days after
shareholders of RFS Bancorp approve the Charter Amendment.
The Board of Directors believes that the Charter Amendment is
necessary to effect the transactions contemplated by the Merger Agreement,
including the Reverse Stock Split, as previously discussed in this proxy
statement under "Proposal 1, Approval of the Merger Agreement -- Overview"
and "Special Factors -- Material Terms of the Reverse Stock Split." This
Proposal 2, even if approved by shareholders of RFS Bancorp at the special
meeting, will not take place unless the proposal to approve the Merger
Agreement and the transactions contemplated by it, including the Reverse
Stock Split, are approved by shareholders of RFS Bancorp at the special
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE CHARTER
AMENDMENT.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors does not
know of any matters that will be presented for consideration at the special
meeting other than as described in this proxy statement. However, if any other
matters properly come before the special meeting or any adjournment or
postponement of the special meeting is voted upon, the enclosed proxy will be
deemed to confer discretionary authority to the individuals named as proxies to
vote the shares represented by such proxies as to any such matters.
39
STOCKHOLDER PROPOSALS
RFS Bancorp will hold its 2002 annual meeting of stockholders only if the
merger and related transactions are not consummated. In order to be eligible for
inclusion in RFS Bancorp's proxy materials for the 2002 annual meeting, if held,
any RFS Bancorp stockholder proposal to take action at such meeting must be
received by RFS Bancorp's executive offices at 310 Broadway, Revere,
Massachusetts 02151, by no later than August 20, 2001, pursuant to the proxy
soliciting regulations of the Securities and Exchange Commission. Securities and
Exchange Commission rules contain standards as to what stockholder proposals are
required to be in the proxy statement. Any such proposal will be subject to 17
C.F.R. Section 240.14a-8 of the rules and regulations promulgated by the
Securities and Exchange Commission.
In addition, under RFS Bancorp's Bylaws, if you wish to nominate a
director or bring other business before an annual meeting:
o You must be a stockholder of record and have given timely notice in
writing to the Secretary of RFS Bancorp.
o Your notice must contain specific information required in our
Bylaws.
INCORPORATION BY REFERENCE
The following documents filed by RFS Bancorp with the Securities and
Exchange Commission are incorporated herein by reference: (i) the Company's
audited financial statements for the years ended September 30, 2000 and 1999 are
included in RFS Bancorp's Annual Report on Form 10-KSB for the Year Ended
September 30, 2000; (ii) the unaudited balance sheets and comparative
year-to-date income statements and statements of cash flows and related earnings
per share amounts included in the Company's Quarterly Report on Form 10-QSB for
the quarter ended March 31, 2001; (iii) Proposal 1: Election of Directors of the
Company's proxy statement for the 2001 Annual Meeting of Shareholders; and (iv)
all documents filed subsequent to the date of this proxy statement.
RFS Bancorp hereby undertakes to provide without charge, to each person
to whom this proxy statement is delivered, upon written request, a copy of any
and all of the information that has been incorporated by reference in this proxy
statement. If you would like a copy of any such documents, please write to:
Anthony J. Patti
Executive Vice President and Chief Financial Officer
RFS Bancorp, Inc.
310 Broadway
Revere, Massachusetts 02151
By Order of the Board of Directors
/s/ Ernest F. Becker
----------------------------------
Ernest F. Becker
Secretary
Revere, Massachusetts
__________, 2001
================================================================================
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
================================================================================
40
Appendix A
=======================================
AGREEMENT AND PLAN OF MERGER
By and Among
DANVERS BANCORP, INC.
DANVERS SAVINGS BANK
and
REVERE, MHC
RFS BANCORP, INC.
REVERE FEDERAL SAVINGS BANK
Dated as of April 27, 2001
=======================================
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..............................................................................................2
SECTION 1.01. THE MERGER....................................................................2
SECTION 1.02. THE REVERSE STOCK SPLIT.......................................................2
SECTION 1.03. THE BANK MERGER...............................................................2
SECTION 1.04. EFFECTIVE TIME................................................................2
SECTION 1.05. EFFECT OF THE MERGER..........................................................3
SECTION 1.06. CERTIFICATE OF INCORPORATION..................................................3
SECTION 1.07. BY-LAWS.......................................................................3
SECTION 1.08. DIRECTORS AND OFFICERS........................................................3
SECTION 1.09. TAX CONSEQUENCES..............................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER...........................................................3
SECTION 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES..................................4
SECTION 2.02. CHARTER; BY-LAWS; CORPORATE RECORDS...........................................4
SECTION 2.03. CAPITALIZATION................................................................5
SECTION 2.04. AUTHORITY.....................................................................5
SECTION 2.05. NO CONFLICT...................................................................6
SECTION 2.06. CONSENTS AND APPROVALS........................................................6
SECTION 2.07. COMPLIANCE....................................................................7
SECTION 2.08. REPORTS.......................................................................7
SECTION 2.09. FINANCIAL STATEMENTS..........................................................8
SECTION 2.10. ABSENCE OF CERTAIN CHANGES OR EVENTS..........................................8
SECTION 2.11. ABSENCE OF LITIGATION.........................................................9
SECTION 2.12. EMPLOYEE BENEFIT PROGRAMS....................................................10
SECTION 2.13. LABOR MATTERS................................................................12
SECTION 2.14. PROPERTY AND LEASES..........................................................13
SECTION 2.15. TAXES AND TAX RETURNS........................................................14
SECTION 2.16. CERTAIN CONTRACTS............................................................17
SECTION 2.17. LOAN PORTFOLIO...............................................................17
SECTION 2.18. INVESTMENT SECURITIES........................................................18
SECTION 2.19. DERIVATIVE TRANSACTIONS......................................................18
SECTION 2.20. INSURANCE....................................................................18
SECTION 2.21. ENVIRONMENTAL MATTERS........................................................19
SECTION 2.22. INTELLECTUAL PROPERTY........................................................20
SECTION 2.23. FIDUCIARY ACCOUNTS...........................................................20
SECTION 2.24. AGREEMENTS WITH BANK REGULATORS..............................................21
SECTION 2.25. MATERIAL INTERESTS OF CERTAIN PERSONS........................................21
SECTION 2.26. BROKERS' FEES; OPINIONS......................................................21
SECTION 2.27. PROXY STATEMENT..............................................................21
SECTION 2.28. DISSENTERS' RIGHTS...........................................................22
SECTION 2.29. TAKEOVER LAWS................................................................22
SECTION 2.30. DISCLOSURE...................................................................22
i
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE BUYER BANK......................................22
SECTION 3.01. CORPORATE ORGANIZATION.......................................................22
SECTION 3.02. AUTHORITY....................................................................23
SECTION 3.03. NO CONFLICT..................................................................23
SECTION 3.04. CONSENTS AND APPROVALS.......................................................23
SECTION 3.05. COMPLIANCE...................................................................24
SECTION 3.06. FINANCIAL STATEMENTS.........................................................24
SECTION 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS.........................................24
SECTION 3.08. ABSENCE OF LITIGATION........................................................25
SECTION 3.09. AGREEMENTS WITH BANK REGULATORS..............................................25
SECTION 3.10. CAPITAL; FINANCING...........................................................25
SECTION 3.11 PURCHASER INVESTIGATION......................................................26
SECTION 3.12 DISCLOSURE...................................................................26
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER...............................................................26
SECTION 4.01. COVENANTS OF THE SELLER......................................................26
SECTION 4.02. SYSTEM CONVERSIONS...........................................................30
SECTION 4.03. CERTAIN CHANGES AND ADJUSTMENTS..............................................30
SECTION 4.04. ALCO MANAGEMENT..............................................................30
SECTION 4.05. COVENANT OF THE BUYER........................................................30
ARTICLE V ADDITIONAL AGREEMENTS.................................................................................31
SECTION 5.01. REGULATORY MATTERS...........................................................31
SECTION 5.02. ACCESS TO INFORMATION........................................................32
SECTION 5.03. PROXY STATEMENT; OTHER FILINGS; BOARD RECOMMENDATIONS........................33
SECTION 5.04. MEETINGS OF MEMBERS AND STOCKHOLDERS.........................................34
SECTION 5.05. LEGAL CONDITIONS TO MERGER...................................................35
SECTION 5.06. NO SOLICITATION..............................................................36
SECTION 5.07. EMPLOYEE BENEFIT MATTERS.....................................................38
SECTION 5.08. DIRECTORS' AND OFFICERS' INSURANCE...........................................39
SECTION 5.09. FINANCIAL AND OTHER STATEMENTS...............................................40
SECTION 5.10. FURTHER ACTION...............................................................40
SECTION 5.11. ADDITIONAL AGREEMENTS........................................................41
SECTION 5.12. UPDATE OF DISCLOSURE SCHEDULES...............................................41
SECTION 5.13. CURRENT INFORMATION..........................................................41
SECTION 5.14. VOTING AGREEMENTS............................................................42
ARTICLE VI CONDITIONS TO THE MERGER..............................................................................42
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER AND THE
BANK MERGER..................................................................42
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF THE BUYER.......................................43
SECTION 6.03. CONDITIONS TO OBLIGATIONS OF THE SELLER......................................43
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...................................................................44
SECTION 7.01. TERMINATION..................................................................44
SECTION 7.02. EFFECT OF TERMINATION; EXPENSES..............................................46
SECTION 7.03. AMENDMENT AND WAIVER.........................................................46
ii
ARTICLE VIII GENERAL PROVISIONS.................................................................................47
SECTION 8.01. CLOSING......................................................................47
SECTION 8.02. ALTERNATIVE STRUCTURE........................................................47
SECTION 8.03. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS...................47
SECTION 8.04. NOTICES......................................................................47
SECTION 8.05. CERTAIN DEFINITIONS..........................................................48
SECTION 8.06. SEVERABILITY.................................................................49
SECTION 8.07. ENTIRE AGREEMENT.............................................................49
SECTION 8.08. ASSIGNMENT...................................................................49
SECTION 8.09. PARTIES IN INTEREST..........................................................49
SECTION 8.10. SPECIFIC PERFORMANCE.........................................................49
SECTION 8.11. GOVERNING LAW................................................................50
SECTION 8.12. HEADINGS.....................................................................50
SECTION 8.13. INTERPRETATION...............................................................50
SECTION 8.14. COUNTERPARTS.................................................................50
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 27, 2001 (this
"AGREEMENT"), by and among DANVERS BANCORP, INC., a Massachusetts corporation
(the "BUYER"), DANVERS SAVINGS BANK, a wholly-owned subsidiary of Buyer and a
savings bank chartered by the Commonwealth of Massachusetts (the "BUYER BANK"),
REVERE, MHC, a federally-chartered mutual holding company (the "SELLER"), RFS
BANCORP, INC., a federally-chartered stock mid-tier holding company and
subsidiary of Seller (the "COMPANY"), and REVERE FEDERAL SAVINGS BANK, a
federally-chartered stock savings bank and wholly-owned subsidiary of the
Company (the "SELLER BANK"). Each of Buyer, Buyer Bank, Seller, Company, and
Seller Bank is sometimes individually referred to herein as a "party," and
Buyer, Buyer Bank, Seller, Company, and Seller Bank are sometimes collectively
referred to herein as the "parties."
WHEREAS, the Boards of Directors of the Buyer and the Seller have each
determined that it is in the best interests of their respective companies for
the Seller to merge with and into the Buyer (the "MERGER"), and for the Seller
Bank to merge with and into the Buyer Bank (the "BANK MERGER"), in connection
with which the Company will adopt a plan of liquidation and immediately
thereafter the company will be liquidated (the "LIQUIDATION"), subject to the
terms and conditions set forth herein;
WHEREAS, the Board of Directors of the Seller has determined that the
Merger, the Bank Merger and the Liquidation are in the best interests of the
members of the Seller;
WHEREAS, the Board of Directors of the Buyer Bank have approved the
execution of this Agreement and the Merger and the Bank Merger as set forth
herein;
WHEREAS, the Boards of Directors of each of the Seller, the Company,
and the Seller Bank have approved the execution of this Agreement and the
Proposed Transaction (as defined below) and the Reverse Stock Split as set forth
herein;
WHEREAS, the Board of Trustees of the Buyer has approved the execution
of this Agreement and the Merger as set forth herein;
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger, the Bank Merger, the Reverse Stock
Split (as defined below) and the Liquidation (together, the "PROPOSED
TRANSACTION") and to prescribe certain conditions to the Proposed Transaction;
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to the Buyer's willingness to enter into this
Agreement, Seller and certain affiliates of the Seller are entering into Voting
Agreements in substantially the form attached hereto as EXHIBIT A (the "VOTING
AGREEMENTS");
WHEREAS, the parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "CODE").
1
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Subject to the terms and conditions of this
Agreement, in accordance with the Massachusetts Business Corporation Law (the
"MBCL"), at the Effective Time (as defined in Section 1.04 hereof), the Seller
shall merge with and into the Buyer. Buyer shall be the surviving corporation
(hereinafter sometimes called the "SURVIVING CORPORATION") in the Merger, and
shall continue its corporate existence under the laws of the Commonwealth of
Massachusetts. The name of the Surviving Corporation shall continue to be
Danvers Bancorp, Inc. Upon consummation of the Merger, the separate corporate
existence of the Seller shall terminate.
SECTION 1.02. THE REVERSE STOCK SPLIT. Subject to the terms and
conditions of this Agreement and applicable requirements of the Office of Thrift
Supervision (the "OTS"), the Company will amend its organizational documents
(the "CHARTER") as necessary by filing with the OTS the form of amendment (the
"Amendment") attached hereto as EXHIBIT B to increase the par value of the
Company Stock (defined in Section 2.03 hereof) and effect a reverse stock split
pursuant to which 1,494,767 shares of Company Stock will be issued in exchange
for each share of Company Stock issued and outstanding immediately prior to the
Effective Time (the "REVERSE STOCK SPLIT"), and cash in the amount of $22.75 per
share (pre-split) will be paid in lieu of fractional shares (the "CASH
CONSIDERATION"). Following the Reverse Stock Split the Surviving Corporation
will own all the outstanding shares of Company Stock and no other person will
have a capital stock or other ownership interest in the Company. Immediately
thereafter the Company will adopt a plan of liquidation pursuant to which the
Company will be liquidated and the Charter will be returned to the OTS.
SECTION 1.03. THE BANK MERGER. Subject to the terms and conditions of
the Agreement and Plan of Merger by and between Seller Bank and Buyer Bank
attached as EXHIBIT C hereto and applicable requirements of the Federal Deposit
Insurance Corporation (the "FDIC"), the OTS and the Commissioner of Banks of the
Commonwealth of Massachusetts (the "MASSACHUSETTS COMMISSIONER"), the Seller
Bank will merge with and into the Buyer Bank. The members of Seller and the
depositors of Seller Bank shall be provided with liquidation and stock
subscription rights of the same nature in the Buyer as they had in Seller to the
extent provided by applicable law, including the original opening dates in Buyer
Bank. The former main office and branch of Seller Bank will be operated as a
separate division of Buyer Bank for a period of one year following the Effective
Time.
SECTION 1.04. EFFECTIVE TIME. As promptly as practicable after all of
the conditions set forth in Article VI shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same, the Buyer
and the Seller shall duly execute and file articles of merger (the "ARTICLES OF
MERGER") with the Secretary of State of the Commonwealth of Massachusetts (the
"MASSACHUSETTS SECRETARY"), in accordance with the MBCL and the Merger
2
shall become effective on the date (the "EFFECTIVE DATE") and at such time (the
"EFFECTIVE TIME") as set forth in the Articles of Merger.
SECTION 1.05. EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided herein and in the applicable provisions of
the MBCL and any other applicable provisions of Massachusetts law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Buyer
and the Seller shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Buyer and
the Seller shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
SECTION 1.06. ARTICLES OF ORGANIZATION. Unless otherwise determined by
the Buyer prior to the Effective Time, at the Effective Time, the Articles of
Organization of the Buyer as in effect immediately prior to the Effective Time
shall be the Articles of Organization of the Surviving Corporation until
thereafter further amended as provided by law and such Articles of Organization.
SECTION 1.07. BY-LAWS. Unless otherwise determined by the Buyer prior
to the Effective Time, the By-Laws of the Buyer, as in effect immediately prior
to the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Organization of the
Surviving Corporation and such By-Laws.
SECTION 1.08. DIRECTORS AND OFFICERS. The initial trustees of the
Surviving Corporation shall consist of (i) the trustees of the Buyer immediately
prior to the Effective Time, (ii) the President and Chief Executive Officer of
the Seller immediately prior to the Effective Time, and (iii) such other current
director of the Seller as shall be determined by the Buyer. In addition, the
Buyer will form an advisory board (the "ADVISORY BOARD") consisting of those
current directors of Seller set forth on EXHIBIT D. The Advisory Board shall
meet quarterly and shall have an initial term of one year with the expectation
of a one (1) year renewal. Annual Advisory Board fees will equal $5,000 per
non-employee advisory director. Certain officers as set forth on EXHIBIT E of
the Buyer and the Seller immediately prior to the Effective Time, shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
SECTION 1.09. TAX CONSEQUENCES. It is intended by the parties that the
Merger and the Bank Merger each shall constitute a reorganization within the
meaning of Section 368(a) of the Code, and that this Agreement shall constitute
a "plan of reorganization" for the purposes of Section 368 of the Code.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER,
THE COMPANY AND THE SELLER BANK
Except as specifically set forth in the corresponding Schedules (the
"SELLER DISCLOSURE SCHEDULE") the Seller, the Company and the Seller Bank,
jointly and severally, hereby represent and warrant to the Buyer and the Buyer
Bank as follows:
3
SECTION 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Seller is a federal mutual holding company, chartered under
Section 10(o) of the Home Owners' Loan Act ("HOLA"), 12 U.S.C. ss. 1467a(o),
with its main office located in Revere, Massachusetts. The Company is a
federally-chartered stock holding company chartered under Section 10(o) of HOLA.
The Seller Bank is a federally-chartered stock savings association and
wholly-owned subsidiary of the Company. The deposit accounts of the Seller Bank
are insured by the FDIC to the fullest extent permitted by law and all premiums
and assessments required in connection therewith have been paid by the Seller
Bank. Each subsidiary (as defined in Section 8.05(g) below) of the Seller
(including the Company and the Seller Bank) (collectively, the "Subsidiaries")
is a corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization. The Seller and each Subsidiary has the requisite power and
authority and all necessary governmental approvals to own, lease and operate all
of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business and is in good
standing in each jurisdiction where the nature of the business conducted by it
or the character or location of the properties and assets owned, leased or
operated by it makes such licensing or qualification necessary, except where the
failure to have obtained such approval or to be so licensed or qualified and be
in good standing would not, either individually or in the aggregate, have a
Material Adverse Effect (as defined below).
(b) A true and complete list of all the Subsidiaries, together with the
jurisdiction of incorporation or organization of each Subsidiary and the
percentage of the outstanding capital stock or other ownership interest by the
Seller, the Company or the Seller Bank in each Subsidiary, is set forth in
Schedule 2.01 hereto. Except as set forth in Schedule 2.01, neither the Seller
nor any Subsidiary directly or indirectly owns five percent or more of the
capital stock or other equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
(c) When used in connection with the Seller or any of the Subsidiaries,
the term "MATERIAL ADVERSE EFFECT" means any change or effect that is or would
be materially adverse to (i) the business, assets, liabilities, financial
condition or results of operations of the Seller and its Subsidiaries taken as a
whole, other than any such effect attributable to or resulting from (x) changes
in interest rates or general economic conditions affecting banks generally, (y)
changes in federal or state banking or tax laws or regulations affecting banks
generally or (z) changes in generally accepted or regulatory accounting
principles applicable to banks or their holding companies generally; or (ii) the
ability of the Seller or the Subsidiaries to consummate the transactions
contemplated hereby.
SECTION 2.02. CHARTER; BY-LAWS; CORPORATE RECORDS. The Seller has
heretofore made available to the Buyer a complete and correct copy of the
Charter and the By-Laws, each as amended to date, of the Seller and each of the
Subsidiaries. Such Charters and By-Laws are in full force and effect. None of
the Seller or any of the Subsidiaries is in violation of any provision of its
Charter or of its By-Laws. The minute books of the Seller and each of the
Subsidiaries contain in all material respects true and correct records of all
meetings held or true and complete records of all other corporate actions taken
since January 1, 1998, of their respective stockholders and boards of directors
(including committees of their respective boards of directors).
4
SECTION 2.03. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 6,000,000
shares of capital stock, of which 5,000,000 shares are common stock (the
"COMPANY STOCK") and 1,000,000 shares are serial preferred stock. As of the date
hereof, (i) 884,923 shares of Company Stock are issued and outstanding, all of
which are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof, (ii) 494,767 shares of Company Stock are owned by the Seller, free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal agreements, limitations on the Seller's voting rights, charges and
other encumbrances of any nature whatsoever; (iii) 390,156 shares of the Company
Stock are held publicly by minority shareholders; (iv) no shares of Company
Stock are held by any of the Subsidiaries, (v) 26,842 shares of unallocated
Company Stock are owned by the RFS Bancorp, Inc. Employee Stock Ownership Plan
and Trust (the "ESOP") for allocation by the Company among eligible
participants, (vi) 1,538 shares of ungranted Company Stock are reserved for
future issuance pursuant to the RFS Bancorp, Inc. 1999 Stock Option Plan (the
"STOCK OPTION PLAN"), through which the Company grants eligible officers,
directors, and employees options to purchase Company Stock, and (vii) no shares
of Company Stock remain to be awarded at the Company's discretion to officers
and employees in accordance with the provisions of the RFS Bancorp, Inc. 1999
Recognition and Retention Plan ("RRP"). With the exception of shares subject to
the ESOP, Stock Option Plan and the RRP, each issued and outstanding share of
Company Stock is duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. Each share of capital stock of each Subsidiary owned by the Company is
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Company's voting rights,
charges and other encumbrances of any nature whatsoever.
(b) The authorized capital stock of the Seller Bank consists of
5,000,000 shares of common stock, par value $.01 per share (the "SELLER BANK
COMMON STOCK"), and 1,000,000 shares of serial preferred stock, no par value per
share. As of the date hereof, (i) 1,000 shares of Seller Bank Common Stock are
issued and outstanding, all of which are owned by the Company free and clear of
any encumbrance or lien (except for directors' qualifying shares, if any) and
all of which are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof, and (ii) no shares of the Seller Bank Common Stock are held in the
treasury of the Seller Bank or are held by any of the Subsidiaries.
(c) Except for shares subject to the ESOP, the Stock Option Plan, and
the RRP, there are no outstanding subscriptions, options, warrants, calls or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any of the
Subsidiaries or obligating the Company or any of the Subsidiaries to issue or
sell any shares of capital stock of, or other equity interests in, the Company
or any of the Subsidiaries. There are no outstanding contractual obligations of
the Company or any of the Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of, or other equity interests in, the
Company or any of the Subsidiaries or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary.
SECTION 2.04. AUTHORITY. The Seller, the Company and the Seller Bank
each have full corporate power and authority to execute and deliver this
Agreement and to
5
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved by unanimous vote of each of the Board of
Directors of the Seller (the "SELLER BOARD"), the Board of Directors of the
Company (the "COMPANY BOARD") and the Board of Directors of the Seller Bank (the
"SELLER BANK BOARD"). The Company Board has directed that an amendment to the
Company's Charter substantially in the form attached as EXHIBIT B hereto, be
submitted to the Company's stockholders for approval in connection with the
Reverse Stock Split. This Agreement has been duly and validly executed and
delivered by the Seller, the Company and the Seller Bank and constitutes a valid
and binding obligation of the Seller, the Company and the Seller Bank
enforceable against the Seller, the Company and the Seller Bank in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally, and as to Seller Bank the conservatorship
or receivership provisions of the Federal Deposit Insurance Act, and subject, as
to enforceability, to general principles of equity.
SECTION 2.05. NO CONFLICT. Neither the execution, delivery and
performance of this Agreement by the Seller and the Subsidiaries, nor the
consummation by the Seller and the Subsidiaries of the transactions contemplated
hereby, nor compliance by the Seller and the Subsidiaries with any of the terms
or provisions hereof, will (i) conflict with, violate or result in a breach of
any provision of the Charter or By-Laws of the Seller or equivalent
organizational documents of any of the Subsidiaries, (ii) conflict with, violate
or result in a breach of any statute, code, ordinance, rule, regulation, order,
writ, judgment, injunction or decree applicable to the Seller or any of the
Subsidiaries, or by which any property or asset of the Seller or any of the
Subsidiaries is bound or affected, or (iii) conflict with, violate or result in
a breach of any provisions of or the loss of any benefit under, constitute a
default (or an event, which, with notice or lapse of time, or both, would
constitute a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien,
pledge, security interest, charge or other encumbrance on any property or asset
of the Seller or any of the Subsidiaries pursuant to any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Seller or any of the Subsidiaries is a party, or by
which the Seller or any of the Subsidiaries is bound or affected, except, in the
case of clause (ii) or (iii) above, for any such conflicts, violations,
breaches, defaults or other occurrences which would not, either individually or
in the aggregate, have a Material Adverse Effect.
SECTION 2.06. CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement by the Seller and the Subsidiaries does not
require any consent, approval, authorization or permit of, or filing with or
notification to, any court, administrative agency or commission or other
governmental or regulatory authority or instrumentality, domestic or foreign,
(each a "GOVERNMENTAL ENTITY") or with any third party, except (i) for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), (ii) for consents and approvals of or filings,
registrations or negotiations with the OTS and the FDIC, and (iii) for approval
of this Agreement and the Proposed Transaction by the directors, officers,
stockholders, and depositors, as applicable pursuant to OTS regulations, of
Seller, the Company and the Seller Bank, (iv) the filings required by this
Agreement and (v) where failure to obtain any such consent, approval,
authorization or permit, or to make any such filing or notification, would not
prevent or significantly delay consummation of the Proposed Transaction or
otherwise prevent the Seller from performing its obligations under this
Agreement, or would not, either individually or in the aggregate, have a
Material Adverse Effect. The Seller is not
6
aware of any reason why the approvals, consents and waivers of Governmental
Entities referred to herein and in Section 6.01(a) should not be obtained.
SECTION 2.07. COMPLIANCE. The Seller and each of the Subsidiaries hold
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to, and have
complied with and are not in conflict with, or in default or violation of, (a)
any statute, code, ordinance, law, rule, regulation, order, writ, judgment,
injunction or decree, published policies and guidelines of any Governmental
Entity, applicable to the Seller or any of the Subsidiaries or by which any
property or asset of the Seller or any of the Subsidiaries is bound or affected
or (b) any note, bond, mortgage, indenture, deed of trust, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Seller or any of the Subsidiaries is a party or by which the Seller or any of
the Subsidiaries or any property or asset of the Seller or any of the
Subsidiaries is bound or affected, except for any such non-compliance,
conflicts, defaults or violations that would not, either individually or in the
aggregate, have a Material Adverse Effect; and none of the Seller or any of the
Subsidiaries knows of, or has received notice of, any material violations of any
of the above. Without limiting the generality of the foregoing, none of the
Seller or any of the Subsidiaries has been advised of the existence of any facts
or circumstances which would cause the Seller Bank to be deemed not to be in
satisfactory compliance with the Community Reinvestment Act of 1977, as amended,
and the regulations promulgated thereunder.
SECTION 2.08. REPORTS.
(a) The Company has heretofore delivered to the Buyer all
communications mailed by the Company to its stockholders since October 1, 1998,
and such communications did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(b) The Seller and each of the Subsidiaries has timely filed and made
available to the Buyer true and complete copies of all forms, reports and
documents required to be filed by each of them with all appropriate federal or
state governmental or regulatory authorities charged with the supervision of
banks or bank holding companies or engaged in the insurance of bank deposits,
including without limitation the Massachusetts Commissioner, the OTS, the Board
of Governors of the Federal Reserve System (the "FRB"), and the FDIC
(collectively, the "BANK REGULATORS") since January 1, 1998, and have paid all
fees and assessments due and payable in connection therewith. Such reports as of
their respective date of filing complied in all material respects with the
requirements of all laws, rules and regulations enforced or promulgated by such
Bank Regulators. Except for normal periodic examinations conducted by any Bank
Regulator in the regular course of the business of the Seller and its
Subsidiaries, no Bank Regulator has initiated any proceeding or, to the best
knowledge of the Seller, investigation into the business or operations of the
Seller or any of the Subsidiaries since January 1, 1998. Except as set forth on
Schedule 2.08(b), the Seller and its Subsidiaries have not received any
objection from any regulatory agency to any of their responses to any violation,
criticism or exception by any Bank Regulator with respect to any report or
statement relating to any examinations, which objection remains unresolved.
7
SECTION 2.09. FINANCIAL STATEMENTS.
(a) The Seller has made available to the Buyer copies of (i) the
consolidated financial statements of the Seller Bank as of September 30, 1998
and the Company and its subsidiaries as of September 30 for the years 1999 and
2000 including related statements of income, changes in stockholders' equity,
cash flows and the notes thereto, in each case accompanied by the audit report
of Shatswell, MacLeod & Company, independent public accountants for the Company,
and (ii) the unaudited consolidated financial statements of the Company and its
subsidiaries as of December 31, 2000 and the related unaudited consolidated
statements of income, changes in stockholders' equity and cash flows. The
September 30, 2000 consolidated balance sheet of the Company and its
subsidiaries (including the related notes, where applicable) (the "COMPANY
BALANCE SHEET") and each of the other financial statements referred to in this
Section 2.09 (including the related notes, where applicable) fairly presents
(subject, in the case of the unaudited statements, to audit adjustments normal
in nature and amount and the addition of customary notes), and the financial
statements referred to in Section 5.09 hereof each will fairly present, the
results of the consolidated operations and changes in stockholders' equity and
consolidated financial position of the Company for the respective periods or as
of the respective dates therein set forth; each of such statements (including
the related notes, where applicable) has been prepared, and the financial
statements referred to in Section 5.09 hereof will be prepared, in accordance
with generally accepted accounting principles ("GAAP") consistently applied
during the periods involved, except as indicated in the notes thereto. Each of
the financial statements referred to in this Section 2.09, including, in each
case, the notes thereto, comply, and the financial statements referred to in
Section 5.09 hereof will comply, with applicable accounting requirements and to
the extent applicable thereto with the published rules and regulations of the
United States Securities and Exchange Commission (the "SEC"), the OTS and the
FDIC. Without limiting the generality of the foregoing, (x) the allowance for
possible loan losses included in the financial statements referred to in this
Section 2.09 was, and the allowance for possible loan losses to be included in
the financial statements referred to in Section 5.09 hereof will be, determined
in accordance with GAAP. The books and records of the Seller and its
Subsidiaries are true and complete in all material respects and have been, and
are being, maintained in all material respects in accordance with applicable
legal and accounting requirements.
(b) The Company Balance Sheet makes adequate provision for all material
liabilities and obligations of every nature (whether accrued, absolute,
contingent or otherwise and whether due or to become due) of the Company and its
subsidiaries as of September 30, 2000, and except as and to the extent set forth
on such consolidated balance sheet, none of the Company or any of the
subsidiaries has any material liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise and whether due or to become due)
which would be required to be reflected or disclosed on a balance sheet, or in
the notes thereto, prepared in accordance with GAAP.
SECTION 2.10. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Schedule 2.10 and as contemplated by this Agreement, since September 30,
2000, the Seller and its Subsidiaries have conducted their businesses only in
the ordinary course and in manners consistent with past practice and, since
September 30, 2000, there has not been (a) either individually or in the
aggregate, any Material Adverse Effect, (b) any material damage, destruction or
loss with respect to any property or asset of the Seller or any of the
Subsidiaries, (c) any change by the Seller or any of the Subsidiaries in its
accounting methods, principles or
8
practices, other than changes required by applicable law or GAAP or regulatory
accounting as concurred in by the Seller's independent accountants, (d) any
revaluation by the Seller or any of the Subsidiaries of any asset, including,
without limitation, any writing off of notes or accounts receivable, other than
in the ordinary course of business consistent with past practice, (e) any entry
by the Seller or any of the Subsidiaries into any contract or commitment of more
than $100,000 or of a term of more than one year (other than with respect to
Loans, as hereinafter defined), (f) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of the Seller or
any of the Subsidiaries except in the ordinary course of business in an amount
consistent with past practice or any redemption, purchase or other acquisition
of any of its securities, (g) except as would have been permitted by Section
4.01(b)(xi) 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 grant of severance or
termination pay, or any contract or arrangement entered into to make or grant
any severance or termination pay, or the taking of any other material action not
in the ordinary course of business with respect to the compensation or
employment of directors, officers or employees of the Seller or any of the
Subsidiaries, (h) any strike, work stoppage, slowdown or other labor disturbance
involving the Seller or any of its Subsidiaries, (i) any material election made
by the Seller or any of the Subsidiaries for federal or state income tax
purposes, (j) any change in the credit policies or procedures of the Seller or
any of the Subsidiaries, the effect of which was or is to make any such policy
or procedure materially less restrictive in any material respect, (k) any
material liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise and whether due or to become due), including without
limiting the generality of the foregoing, liabilities as guarantor under any
guarantees or liabilities for taxes, other than in the ordinary course of
business consistent with past practice, (l) any forgiveness or cancellation of
any indebtedness or contractual obligation other than in the ordinary course of
business consistent with past practice, (m) except with respect to funds
borrowed by the Seller or any of the Subsidiaries, any mortgage, pledge, lien or
lease of any assets, tangible or intangible, of the Seller or any of the
Subsidiaries, (n) any acquisition or disposition of any assets or properties
having a value in excess of $200,000, or any contract for any such acquisition
or disposition entered into, other than the acquisition or disposition of Loans
in the ordinary course of business consistent with past practice, or (o) any
lease of real or personal property entered into, other than in connection with
foreclosed property or in the ordinary course of business consistent with past
practice.
SECTION 2.11. ABSENCE OF LITIGATION. Except as disclosed on Schedule
2.11, none of the Seller or any of the Subsidiaries is a party to any, and there
are no pending, or to the best knowledge of the Seller, threatened, legal,
administrative, arbitral or other claims, actions, proceedings or investigations
of any nature, against the Seller or any of the Subsidiaries or any property or
asset of the Seller or any of the Subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, which, either individually or in the aggregate, would have a Material
Adverse Effect and no facts or circumstances have come to the Seller's attention
which have caused it to believe that a material claim, action, proceeding or
investigation against or affecting the Seller or any of the Subsidiaries could
reasonably be expected to occur. None of the Seller or any of the Subsidiaries,
or any property or asset of the Seller or any of the Subsidiaries, is subject to
any order, writ, judgment, injunction, decree, determination or award which
restricts its ability to
9
conduct business in any area in which it presently does business or has or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
SECTION 2.12. EMPLOYEE BENEFIT PROGRAMS.
(a) Schedule 2.12(a) sets forth a list of every Employee Program
(defined below).
(b) Except as provided in Schedule 2.12(b), each Employee Program 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 Internal Revenue
Service ("IRS") regarding its qualification under such section and has, in fact,
been qualified under the applicable section of the Code from the effective date
of such Employee Program through and including the Closing Date (or, if earlier,
the date that all of such Employee Program's assets were distributed). Except as
provided in Schedule 2.12(b), no event or omission has occurred which would
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, 125,
401(a) and 501(c)(9)). 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
that is qualified under Section 401(a) of the Code.
(c) Neither the Seller nor any Affiliate knows, nor should any of them
reasonably know, of any material failure of any party to comply with any laws
applicable with respect to the Employee Programs that are currently maintained
by the Seller or any Affiliate. With respect to any Employee Program currently
maintained by the Seller, or any Affiliate, there has been no (i) "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Code Section 4975, (ii) material
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 Seller or any 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 threatened with
respect to any such Employee Program. All payments and/or contributions required
to have been made (under the provisions of any agreements or other governing
documents or applicable law) with respect to all Employee Programs, for all
periods prior to the Effective Time, either have been made or have been accrued.
(d) Neither the Seller nor any Affiliate has incurred any liability
under title IV of ERISA which has not been paid in full. There has been no
"accumulated funding deficiency" (whether or not waived) with respect to any
Employee Program ever maintained by the Seller or any Affiliate and subject to
Code Section 412 or ERISA Section 302. With respect to any Employee Program
subject to title IV of ERISA, there has been no (nor will be any as a result of
the transaction contemplated by this Agreement) (i) "reportable event," within
the meaning of ERISA Section 4043, or the regulations thereunder (for which
notice the notice requirement is not waived under 29 C.F.R. Part 2615) and (ii)
no event or condition which presents a material risk of plan termination or any
other event that may cause the Seller or any Affiliate to incur liability or
have a lien imposed on its assets under title IV of ERISA. No Employee Program
10
maintained by the Seller or any Affiliate and subject to title IV of ERISA
(other than a Multiemployer Plan) has any "unfunded benefit liabilities" within
the meaning of ERISA Section 4001(a)(18). With respect to each Multiemployer
Plan maintained by the Seller or any Affiliate, Schedule 2.12(d) states the
amount of withdrawal liability or other termination liability that would be
incurred by the Seller or Affiliate if there were a cessation of operations or
of the obligation to contribute to such plan as of the Closing Date. None of the
Employee Programs provides 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 applicable state or local law).
(e) With respect to each Employee Program complete and correct copies
of the following documents have previously been delivered to the Buyer: (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 Section 401(a) or 501(c)(9), and any applications for determination or
approval subsequently filed with the IRS; (iii) the three most recently filed
IRS Forms 5500, with all applicable schedules and accountants' opinions attached
thereto; (iv) the three 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; (vi) any insurance policy (including
any fiduciary liability insurance policy or fidelity bond) related to such
Employee Program; (vii) any registration statement or other filing made pursuant
to any federal or state securities law; and (viii) all correspondence to and
from any state or federal agency within the last six years with respect to such
Employee Program.
(f) Except as provided in Schedule 2.12(f), each Employee Program
required to be listed on Schedule 2.12(a) may be amended, terminated, or
otherwise modified by the Seller, or the Affiliate 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 Seller or the Affiliate to so amend, terminate or otherwise modify
such Employee Program.
(g) Each Employee Program currently maintained by the Seller or an
Affiliate (including each non-qualified deferred compensation arrangement) is
maintained in all material respects in compliance with all applicable
requirements of federal and state securities laws including (without limitation,
if applicable) the requirements that the offering of interests in such Employee
Program be registered under the Securities Act of 1933 and/or state "Blue Sky"
laws.
(h) Each Employee Program currently maintained by the Seller or an
Affiliate has complied in all material respects with the applicable notification
and other applicable requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, Health Insurance Portability and Accountability Act
of 1996, the Newborns' and Mothers' Health Protection Act of 1996, the Mental
Health Parity Act of 1996, and the Women's Health and Cancer Rights Act of 1998.
(i) For purposes of this section:
11
(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, restricted stock plans, employee stock
ownership 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 Section 120, 125, 127, 129 or 137; and (C) all
plans or arrangements providing compensation to
employee and non-employee directors currently, or at
any time during the immediately preceding three
years, maintained by the Seller or any Affiliate. 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 "AFFILIATE" of the Seller if it would
have ever been considered a single employer with the
Seller under ERISA Section 4001(b) or part of the
same "controlled group" as the Seller for purposes of
ERISA Section 302(d)(8)(C).
(iv) "MULTIEMPLOYER PLAN" means an employee pension or
welfare benefit plan to which more than one
unaffiliated employer contributes.
SECTION 2.13. LABOR MATTERS. No work stoppage involving the Seller or
any of the Subsidiaries is pending or, to the best knowledge of the Seller
threatened. None of the Seller or any of the Subsidiaries is involved in, or, to
the best knowledge of the Seller, threatened with or affected by, any dispute,
arbitration, lawsuit or administrative proceeding relating to labor or
employment matters which might reasonably be expected to interfere in any
material respect with the respective business activities of the Seller or any of
the Subsidiaries. No employees of the Seller or any of the Subsidiaries are
represented by any labor union, and, to the best knowledge of the Seller no
labor union is attempting to organize employees of the Seller or any of the
Subsidiaries.
12
SECTION 2.14. PROPERTY AND LEASES.
(a) The Seller has good and marketable title to all the real property
and all other property owned by it. The Company and each other Subsidiary has
good and marketable title to all the real property and all other property owned
by it and included in the Company Balance Sheet included in audited financial
statements for the period ended September 30, 2000, other than property disposed
of in the ordinary course of business after September 30, 2000. Each parcel of
real property, and each item of personal property, owned or leased by the Seller
or any of the Subsidiaries (i) is owned or leased 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"), other than (A) Liens for current taxes and assessments
not yet past due or which are being contested in good faith, (B) inchoate
mechanics' and materialmen's Liens for construction in progress, (C) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business of the Seller or such Subsidiary consistent with past practice, (D)
all matters of record, Liens and other imperfections of title and encumbrances
which, either individually or in the aggregate, would not be material, and (E)
those items that secure public or statutory obligations or any discount with,
borrowing from, or obligations to any Federal Reserve Bank or Federal Home Loan
Bank, interbank credit facilities, or any transaction by a Subsidiary acting in
a fiduciary capacity (collectively, "PERMITTED LIENS"), and (ii) is neither
subject to any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefore, nor, to the best knowledge of the Seller or any
Subsidiary, has any such condemnation, expropriation or taking been proposed.
None of the Seller or any of the Subsidiaries has received any notice of
violation of any applicable zoning regulation, ordinance or other law, order,
regulation or requirement relating to its properties.
(b) All leases of real property leased for the use or benefit of the
Seller or any of the Subsidiaries to which the Seller or any of the Subsidiaries
is a party, and all amendments and modifications thereto, are in full force and
effect, and there exists no default under any such lease by the Seller or any of
the Subsidiaries, nor, to the best knowledge of the Seller or any subsidiary,
any event which with notice or lapse of time or both would constitute a material
default thereunder by the Seller or any of the Subsidiaries.
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SECTION 2.15. TAXES AND TAX RETURNS.
Except as disclosed in Schedule 2.15, (i) all reports and returns with
respect to Taxes (as defined below) that are required to be filed by or with
respect to the Seller or any of its Subsidiaries, including without limitation
consolidated federal, state, county and local and other tax and information
returns of the Seller and its Subsidiaries (collectively, the "TAX RETURNS"),
have been duly filed, or requests for extensions have been timely filed and have
not expired, and each such Tax Return was, as of the date it was filed, true,
complete and accurate in all material respects, (ii) all Taxes and other
governmental charges which have been incurred (whether or not shown on any Tax
Return) or are due or claimed to be due from the Seller or its Subsidiaries by
federal, state, county, local or other taxing authorities on or prior to the
date hereof, have been paid in full other than charges that are not yet
delinquent or are being contested in good faith and that are properly reflected
on the Seller's financial statements in accordance with GAAP, (iii) Tax Returns
for all years to and including 2000 have been examined by the appropriate taxing
authority, except as disclosed in Schedule 2.15, or the period for assessment of
the Taxes in respect of which such Tax Returns were required to be filed has
expired, (iv) all Taxes due with respect to completed and settled examinations
have been paid in full, (v) there are no material disputes pending, or claims
asserted for Taxes or assessments upon the Seller or any of its Subsidiaries,
except as reserved against in the Seller's financial statements and disclosed in
Schedule 2.15, (vi) no waivers of statutes of limitations (including such
statutes that relate to years currently under examination by the IRS) have been
given by or requested with respect to any Taxes of the Seller or any of its
Subsidiaries, (vii) the amounts set up as reserves for liability for Taxes
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) on the consolidated financial
statements of the Company and its subsidiaries as of September 30, 2000 are
sufficient in the aggregate for the payment of all unpaid Taxes, whether or not
disputed, accrued or applicable, for the period ended September 30, 2000 or for
any year or period prior thereto, (viii) there are no material liens for Taxes
(other than current Taxes not yet due and payable) on any of the assets of the
Seller or its Subsidiaries, (ix) no claim has ever been made by an authority in
a jurisdiction where the Seller or any of its Subsidiaries do not file Tax
Returns that the Seller or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction, and (x) no director or officer or employee
responsible for Tax matters of the Seller or any of its Subsidiaries expects any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed. In addition, (a) proper and accurate amounts have been withheld
by the Seller and Subsidiaries from their employees, independent contractors,
creditors, stockholders and other third parties for all prior periods in
compliance in all material respects with the tax withholding provisions of
applicable federal, state, county, local and other tax laws, (b) federal, state,
county, local and other Tax returns which are accurate and complete in all
material respects have been timely filed by the Seller and its Subsidiaries for
all periods for which returns were due with respect to income tax withholding,
Social Security and unemployment taxes and (c) the amounts shown on such returns
to be due and payable have been paid in full. No property of the Seller or any
of its Subsidiaries is property that the Seller or any of its Subsidiaries is or
will be required to treat 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 Seller nor any of its
Subsidiaries has 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 Seller or any of its Subsidiaries, and the IRS has not
initiated or proposed any such adjustment or change in accounting method. Except
as disclosed in Schedule 2.15, neither the Seller nor any of its Subsidiaries is
a party to any agreement, contract or arrangement that would result, either
individually or in the aggregate, in the payment of an "excess parachute
payment" within the meaning of Section 280G of the Code or that would
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result in payments that would be nondeductible pursuant to Section 162(m) of the
Code. None of the Seller or any of its Subsidiaries (A) is a party to or bound
by any Tax indemnification, Tax allocation or Tax sharing agreement with any
person or entity or has any current or potential contractual obligation to
indemnify any other person or entity with respect to Taxes, (B) has been a
member of a consolidated, combined or affiliated group of corporations (other
than a group the common buyer of which is the Seller) or (C) has any liability
for the Taxes of any person or entity (other than the Seller or any of its
Subsidiaries) under Treasury Regulation Section 1.1502-6 or similar provision of
state, local or foreign law, as a transferee or successor, by contract or
otherwise. None of the Seller or any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code. Each of the Seller and its Subsidiaries has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code.
As used in this Agreement, the term "TAX" or "TAXES" means any and all
federal, state, county, local or foreign income, excise, gross receipts, ad
valorem, profits, property, production, sales, use, payroll, employment,
severance, withholding, license, franchise and other taxes, charges, levies or
like assessments imposed on the Seller or its Subsidiaries, together with
interest, additions, or penalties with respect thereto and any interest in
respect of each addition and penalty. The Seller has delivered to the Buyer
correct and complete copies of all federal income Tax Returns for the Seller and
its Subsidiaries for tax periods ending on or after September 30, 1994 and any
examination reports and statements of deficiencies assessed against or agreed to
by the Seller and its Subsidiaries since September 30, 1997.
15
SECTION 2.16. CERTAIN CONTRACTS.
(a) Except as set forth in Schedule 2.16(a) hereto, neither the Seller
nor any Subsidiary is a party to or bound by any contract, arrangement,
commitment or understanding (whether written or oral): (i) with respect to the
employment of any director, officer, employee or consultant, (ii) which, upon
the consummation of the transactions contemplated by this Agreement, will result
in any payment (whether of severance pay or otherwise) becoming due from the
Seller or any of its Subsidiaries to any officer or employee thereof, (iii)
which is a Material Contract (defined as "any agreement, arrangement or other
contract not made in the ordinary course of business that may reasonably be
expected to have a Material Adverse Effect on Buyer") to be performed after the
date of this Agreement, (iv) 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 60 days or less notice
involving the payment of more than $10,000 per annum, (v) which materially
restricts the conduct of any line of business by the Seller or any of the
Subsidiaries, (vi) with or to a labor union or guild (including any collective
bargaining agreement), or (vii) 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 calculated on the basis of any of the
transactions contemplated by this Agreement (including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan).
The Seller has previously delivered to the Buyer true and complete copies of all
employment, consulting and deferred compensation agreements which are in writing
and to which the Seller or any of the Subsidiaries is a party. Each contract,
arrangement, commitment or understanding of the type described in this Section,
whether or not set forth in Schedule 2.16(a), is referred to herein as a "SELLER
CONTRACT."
(b) Except as set forth in Schedule 2.16(b), (i) each Seller Contract
is legal, valid and binding upon the Seller or a Subsidiary, as the case may be,
and in full force and effect, (ii) the Seller and each of the Subsidiaries has
in all material respects performed all obligations required to be performed by
it to date under each such Seller Contract, and (iii) no event or condition
exists which constitutes or, after notice or lapse of time or both, would
constitute, a material default on the part of the Seller or any of the
Subsidiaries under any such Seller Contract.
SECTION 2.17. LOAN PORTFOLIO. Except as set forth in Schedule 2.17, the
Seller Bank is not a party to any written or oral (a) loan agreement, note or
borrowing arrangement (including, without limitation, leases and credit
enhancements) (collectively, "LOANS") as to which the obligor is, as of the date
of this Agreement, over 90 days delinquent in payment of principal or interest,
or (b) Loan with any director, executive officer or five percent stockholder of
the Seller or any of the Subsidiaries, or any person, corporation or enterprise
controlling, controlled by or under common control with any of the foregoing.
All of the Loans originated and held on the date hereof and at the Effective
Time by the Seller Bank and any other Loans purchased and held currently and at
the Effective Time by the Seller Bank were solicited, originated and exist, and
will exist at the Effective Time, in material compliance with all applicable
loan policies and procedures of the Seller Bank. Schedule 2.17 sets forth as of
the date hereof, (i) all of the Loans in original principal amount in excess of
$50,000 of the Seller Bank that as of the date of this Agreement are classified
as "Other Loans Specially Mentioned," "Special Mention," "Substandard,"
"Doubtful," "Loss," "Classified," "Criticized," "Watch list" or words of similar
import, together with the principal amount of and accrued and unpaid interest on
each such Loan and the identity of the obligor thereunder, and (ii) by category
of Loan (I.E.,
16
commercial, consumer, etc.), all of the other Loans of the Seller Bank that as
of the date of this Agreement are classified as such, together with the
aggregate principal amount of such Loans by category, it being understood that
no representation is being made that the OTS would agree with the loan
classifications contained in Schedule 2.17. The Seller shall promptly inform the
Buyer in writing of any Loan the original principal balance of which exceeds
$50,000 that becomes classified in the manner described in this Section 2.17, or
any Loan the classification of which is materially and adversely changed at any
time after the date of this Agreement. The information (including electronic
information and information contained on tapes and computer disks) with respect
to the Loans furnished to Buyer by the Seller is true and complete in all
material respects.
SECTION 2.18. INVESTMENT SECURITIES. Schedule 2.18 sets forth the book
and market value as of March 31, 2001 of the investment securities, mortgage
backed securities and securities held for sale by the Seller and its
Subsidiaries. Schedule 2.18 sets forth the names of all the joint ventures in
which the Seller or any of the Subsidiaries has an investment (whether or not
such joint ventures remain active). Except for pledges to secure public and
trust deposits, FRB borrowings, repurchase agreements and reverse repurchase
agreements entered into in arms-length transactions pursuant to normal
commercial terms and conditions and other pledges required by law, none of the
investments reflected in the Company Balance Sheet for the period ended
September 30, 2000, and none of the material investments made by the Seller or
any of the Subsidiaries since September 30, 2000, is subject to any restriction
(contractual, statutory or otherwise) that would materially impair the ability
of the entity holding such investment freely to dispose of such investment at
any time. The Company and the Seller Bank have (i) properly reported as such any
investment securities which are required under GAAP to be classified as
"available for sale" at the lower of cost or market, and (ii) accounted for any
decline in the market value of its marketable equity securities portfolio in
accordance with Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 115 and Staff Accounting Bulletin No. 59, including
without limitation the recognition through the Company's consolidated statement
of operations of any unrealized loss with respect to any individual marketable
equity security as a realized loss in the accounting period in which a decline
in the market value of such security is determined to be "other than temporary."
SECTION 2.19. DERIVATIVE TRANSACTIONS. None of the Seller or the
Subsidiaries is engaged in transactions in or involving forwards, futures,
options on futures, swaps or similar off-balance sheet derivative instruments
except as agent on the order and for the account of others other than Federal
Home Loan Bank advances or in connection with mortgage loan secondary market
activities in the ordinary course of business consistent with the Seller Bank's
past practices.
SECTION 2.20. INSURANCE. The Seller has made available to the Buyer
true and complete copies of all material policies of insurance of the Seller and
its Subsidiaries currently in effect. All of the policies relating to insurance
maintained by each of the Seller and its Subsidiaries with respect to its
material properties and the conduct of its business in any material respect (or
any comparable policies entered into as a replacement therefore) are in full
force and effect and none of the Seller or its Subsidiaries has received any
notice of cancellation with respect thereto. All life insurance policies on the
lives of any of the current and former officers of the Seller or its
Subsidiaries which are maintained by the Seller or its Subsidiaries or which are
otherwise included as assets on the books of the Seller or its Subsidiaries (i)
are, or will at the Effective Time be, owned by the Seller or its Subsidiaries,
free and clear of any claims thereon by the officers or members of their
families, except with respect to the death benefits thereunder,
17
as to which the Seller and its Subsidiaries agree that there will not be an
amendment prior to the Effective Time without the consent of the Buyer, and (ii)
are accounted for properly as assets on the books of the Seller or its
Subsidiaries, as applicable, in accordance with GAAP in all material respects.
None of the Seller or the Subsidiaries has any material liability for unpaid
premiums or premium adjustments not properly reflected on the Seller's
consolidated financial statements described in Section 2.09 and Section 5.09.
SECTION 2.21. ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 2.21(a), each of the Seller and its
Subsidiaries and, to the best knowledge of the Seller and the Subsidiaries, the
Participation Facilities and the Loan Properties (each defined below), are, and
have been, in material compliance with all applicable Environmental Laws (as
defined below).
(b) There is no suit, claim, demand, action or proceeding pending or,
to the best knowledge of the Seller, threatened, before the EPA or any other
Governmental Entity or other forum in which the Seller or any of the
Subsidiaries or any Participation Facility (defined below) has been or, with
respect to threatened proceedings, may be, named as a defendant, responsible
party or potentially responsible party (i) for alleged noncompliance (including
by any predecessor), with any Environmental Law, or (ii) relating to the release
into or presence in the Environment of any Hazardous Materials (as defined
below) whether or not occurring at or on a site owned, leased or operated by the
Seller or any of the Subsidiaries or any Participation Facility, except as have
not been or are not reasonably likely to be, either individually or in the
aggregate, material.
(c) To the best knowledge of the Seller and its Subsidiaries, there is
no suit, claim, demand, action or proceeding pending or threatened, before the
EPA or any other Governmental Entity or other forum in which any Loan Property
has been or, with respect to threatened proceedings, may be, named as a
defendant, responsible party or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law, or (ii)
relating to the release into or presence in the Environment of any Hazardous
Material, whether or not occurring at or on a site owned, leased or operated by
a Loan Property (defined below), except where such noncompliance or release has
not been or is not reasonably likely to be, either individually or in the
aggregate, material.
(d) Neither the Seller nor any of the Subsidiaries, nor to their best
knowledge any Participation Facility or any Loan Property, has received any
notice regarding a matter on which a suit, claim, action or proceeding as
described in subsection (b) or (c) of this Section 2.21 could reasonably be
based. To the best knowledge of the Seller and its Subsidiaries, no facts or
circumstances have come to the Seller's attention which have caused it to
believe that a material suit, claim, demand, action or proceeding as described
in subsection (b) or (c) of this Section 2.21 could reasonably be expected to
occur.
(e) Except as set forth on Schedule 2.21(e), during the period of (i)
the Seller's or any of the Subsidiaries' ownership or operation of any of their
respective current properties, (ii) the Seller's or any of the Subsidiaries'
participation in the management of any Participation Facility, or (iii) the
Seller's or any of the Subsidiaries' holding of a security interest in a Loan
Property, there has been no release or presence in the Environment of Hazardous
Material in, on, from, under or affecting such property or, to the best
knowledge of the Seller, such Participation
18
Facility or Loan Property, except where such release or presence is not or is
not reasonably likely to be, either individually or in the aggregate, material.
Except as set forth in Schedule 2.21(e), to the best knowledge of the Seller or
its Subsidiaries or if an environmental report was received in connection with
the origination of a loan related to a Loan Property as may have been disclosed
in such environmental report, prior to the period of (x) the Seller's or any of
the Subsidiaries' ownership or operation of any of their respective current
properties or any previously owned or operated properties, (y) the Seller's or
any of the Subsidiaries' participation in the management of any Participation
Facility, or (z) the Seller's or any of the Subsidiaries' holding of a security
interest in a Loan Property, there was no release or presence of Hazardous
Material in, on, from, under or affecting any such property, Participation
Facility or Loan Property, except where such release or presence is not or is
not reasonably likely to be, either individually or in the aggregate, material.
(f) There is no asbestos or asbestos-containing material,
polychlorinated biphenyls (PCBs) or equipment containing PCBs, or urea
formaldehyde foam insulation at any properties currently owned by the Seller or
any of the Subsidiaries, or, to the best knowledge of Seller or its
Subsidiaries, at any Participation Facility or any Loan Property.
(g) The following definitions apply for purposes of this Section 2.21:
(i) "LOAN PROPERTY" means any property in which the Seller or any of the
Subsidiaries holds a security interest, and, where required by the context, said
term means the owner or operator of such property; (ii) "PARTICIPATION FACILITY"
means any facility in which the Seller or any of the Subsidiaries participates
or has participated in the management and, where required by the context, said
term means the owner or operator of such property; (iii) "HAZARDOUS MATERIAL"
means any pollutant, contaminant, hazardous substance, hazardous material or
hazardous waste, or any oil, petroleum, petroleum product, chemical, smoke,
vapors or other irritants, including without limitation as any or the foregoing
may be defined in or pursuant to any Environmental Law; (iv) "RELEASE" means any
actual or threatened release, migration, seepage, discharge, or disposal into
the Environment, including without limitation as any of the foregoing may be
defined in or pursuant to any Environmental Laws; (v) "ENVIRONMENTAL LAW" means
any law, statute, regulation, rule, ordinance, by-law, order or other binding
decision of any Governmental Entity, whether existing on the date hereof,
previously enforced, or subsequently enacted, regarding health, safety, or the
Environment; (vi) "ENVIRONMENT" means any soil, surface waters, groundwaters,
sediments, surface or subsurface strata, flora, fauna, ambient air, and any
other environmental medium; and (vii) "MATERIAL" means any change or effect that
is or would be materially adverse to the business, assets, liabilities,
financial condition or results of operations of the Seller and its Subsidiaries
taken as a whole.
SECTION 2.22. INTELLECTUAL PROPERTY. The Seller and each of the
Subsidiaries owns or possesses valid and binding licenses and other rights to
use without payment of any material amount all material patents, copyrights,
trade secrets, trade names, service marks and trademarks used in its businesses,
and neither the Seller nor any of the Subsidiaries has received any notice of
conflict with respect thereto that asserts the right of others. The Seller and
each of the Subsidiaries have performed in all material respects all the
obligations required to be performed by them and are not in default under any
contract, agreement, arrangement or commitment relating to any of the foregoing.
SECTION 2.23. FIDUCIARY ACCOUNTS. Except as set forth in Schedule 2.23,
neither the Seller nor any of the Subsidiaries serves as a fiduciary or
maintains fiduciary accounts,
19
including but not limited to accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment advisor,
in accordance with the terms of the governing documents and applicable law.
SECTION 2.24. AGREEMENTS WITH BANK REGULATORS. Neither the Seller nor
any of the Subsidiaries is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, any Bank Regulator which restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, its loan loss allowances or reserves, its credit policies or its
management, nor has the Seller or any Subsidiary been informed by any Bank
Regulator that it is contemplating issuing or requesting any such order,
directive, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission. Neither the Seller nor any of
the Subsidiaries is a party to any agreement or arrangement entered into in
connection with the consummation of a federally assisted acquisition of a
depository institution pursuant to which the Seller or any of the Subsidiaries
is entitled to receive financial assistance or indemnification from any
governmental agency.
SECTION 2.25. MATERIAL INTERESTS OF CERTAIN PERSONS. No officer or
director of the Seller or any of the Subsidiaries, or any "associate" (as such
term is defined in Rule 14a-1 under the Exchange Act) of any such officer or
director, has any material interest in any material contract or property (real
or personal), tangible or intangible, used in or pertaining to the business of
the Seller or any of the Subsidiaries that would be required to be disclosed in
a proxy statement to stockholders under Regulation 14A of the Exchange Act.
SECTION 2.26. BROKERS' FEES; OPINIONS. No broker, finder or investment
banker, other than Ryan, Beck & Co., LLC. (the "INVESTMENT BANKER"), is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Seller. The fee payable to the Investment Banker in connection
with the transactions contemplated by this Agreement is as described in an
engagement letter between the Seller and the Investment Banker, a true and
complete copy of which has heretofore been furnished to the Buyer. The Seller
has previously received the opinion of the Investment Banker to the effect that,
as of the date of such opinion, the cash consideration to be received by the
stockholders of the Company pursuant to the Reverse Stock Split is fair, from a
financial point of view, to such stockholders, and such opinion has not been
amended or rescinded as of the date of this Agreement.
SECTION 2.27. PROXY STATEMENT. The information contained in the proxy
statement to be sent to the stockholders of the Company in connection with the
Stockholders' Meeting (the "PROXY STATEMENT") will not, on the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company or at the time of the Stockholders' Meeting, contain
any statement which, at such time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or omits
to state any material fact required to be stated therein or necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information to be supplied by the Buyer which is
contained in any of the foregoing documents. To the extent reasonably
practicable, the Proxy
20
Statement will comply in all material respects as to form and content with the
requirements of the Exchange Act and the rules and regulations thereunder.
SECTION 2.28. DISSENTERS' RIGHTS. No dissenters' or appraisal rights
shall be available with respect to the Company and its subsidiaries except as
may be required by the OTS.
SECTION 2.29. TAKEOVER LAWS. No "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation enacted
under state or federal laws in the United States applicable to the Seller, the
Company, the Seller Bank or any of their subsidiaries is applicable to the
execution, delivery or performance of this Agreement or the consummation of the
Proposed Transaction.
SECTION 2.30. DISCLOSURE. No representation or warranty contained in
this Agreement, and no statement contained in any Schedule, certificate, list or
other writing furnished to the 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, in light of the circumstances in which they are made, not misleading.
No information believed by the Seller or any of the Subsidiaries to be material
to the Proposed Transaction and which is necessary to make the representations
and warranties herein contained, taken as a whole, not misleading, to the best
knowledge of the Seller or any of the Subsidiaries, has been withheld from, or
has not been delivered in writing to, the Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE BUYER BANK
The Buyer and the Buyer Bank, jointly and severally, hereby represent
and warrant to the Seller, the Company and the Seller Bank that, except as
specifically set forth in the corresponding section of the Disclosure Schedule
previously delivered by the Buyer to the Seller as follows:
SECTION 3.01. CORPORATE ORGANIZATION.
(a) The Buyer is a corporation, duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts. Buyer Bank is
a savings bank and a wholly-owned (except for directors' qualifying shares)
subsidiary of the Buyer, duly organized and validly existing under the laws of
the Commonwealth of Massachusetts. The deposit accounts of the Buyer Bank are
insured by the FDIC to the fullest extent permitted by law and all premiums and
assessments required in connection therewith have been paid by the Buyer Bank.
The Buyer and the Buyer Bank each has the requisite power and authority and all
necessary governmental approvals to own, lease and operate all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business and is in good standing in each
jurisdiction where the nature of the business conducted by it or the character
or location of the properties and assets owned, leased or operated by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified and be in good standing would not, either individually or
in the aggregate, have a Material Adverse Effect.
21
(b) When used in connection with the Buyer or the Buyer Bank, the term
"MATERIAL ADVERSE EFFECT" means any change or effect that is or would be
materially adverse to (i) the business, assets, liabilities, financial condition
or results of operations of the Buyer and the Buyer Bank taken as a whole, other
than any such effect attributable to or resulting from (x) changes in interest
rates or general economic conditions affecting banks generally, (y) changes in
federal or state banking or tax laws or regulations affecting banks generally or
(z) changes in generally accepted or regulatory accounting principles applicable
to banks or their holding companies generally; or (ii) the ability of the Buyer
or the Buyer Bank to consummate the transactions contemplated hereby.
SECTION 3.02. AUTHORITY. The Buyer and the Buyer Bank each have full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of the Buyer and the
Buyer Bank. This Agreement has been duly and validly executed and delivered by
the Buyer and the Buyer Bank and constitutes a valid and binding obligation of
the Buyer and the Buyer Bank, enforceable against the Buyer and the Buyer Bank
in accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and as to the Buyer Bank the
conservatorship or receivership provisions of the Federal Deposit Insurance Act,
and subject, as to enforceability, to general principles of equity.
SECTION 3.03. NO CONFLICT. Neither the execution, delivery and
performance of this Agreement by the Buyer, nor the consummation by the Buyer of
the transactions contemplated hereby, nor compliance by the Buyer with any of
the terms or provisions hereof, will (i) conflict with, violate or result in a
breach of any provision of the Articles of Organization or By-Laws of the Buyer
or the articles of organization or by-laws of the Buyer Bank, (ii) conflict
with, violate or result in a breach of any statute, code, ordinance, rule,
regulation, order, writ, judgment, injunction or decree applicable to the Buyer
or the Buyer Bank, or by which any property or asset of the Buyer or the Buyer
Bank is bound or affected, or (iii) conflict with, violate or result in a breach
of any provisions of or the loss of any benefit under, constitute a default (or
an event, which, with notice or lapse of time, or both, would constitute a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien, pledge,
security interest, charge or other encumbrance on any property or asset of the
Buyer or the Buyer Bank pursuant to any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Buyer or the Buyer Bank is a party, or by which the Buyer or the Buyer Bank is
bound or affected, except, in the case of clause (ii) or (iii) above, for any
such conflicts, violations, breaches, defaults or other occurrences which would
not, either individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.04. CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement by the Buyer and the Buyer Bank does not require
any consent, approval, authorization or permit of, or filing with or
notification to any Governmental Entity or with any third party, except (i) for
applicable requirements, if any, of the Exchange Act, state takeover laws, and
filing and recordation of appropriate merger documents as required by the laws
of the Commonwealth of Massachusetts, (ii) for consents and approvals of or
filings, registrations or negotiations with the OTS, the FRB, the FDIC, the BBI,
and the Massachusetts
22
Housing Partnership Fund, (iii) for approval of this Agreement, the Merger and
the Bank Merger by the Corporators, trustees and officers of the Buyer and the
Buyer Bank (iv) the filings required by this Agreement and (v) where failure to
obtain any such consent, approval, authorization or permit, or to make any such
filing or notification, would not prevent or significantly delay consummation of
the Merger or otherwise prevent the Buyer from performing its obligations under
this Agreement, or would not, either individually or in the aggregate, have a
Material Adverse Effect. The Buyer is not aware of any reason why the approvals,
consents and waivers of Governmental Entities referred to herein and in Section
6.01(a) should not be obtained.
SECTION 3.05. COMPLIANCE. The Buyer and the Buyer Bank hold, and have
at all times within the last six years, held, all material licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
conflict with, or in default or violation, of any (a) statute, code, ordinance,
law, rule, regulation, order, writ, judgment, injunction or decree, published
policies and guidelines of any Governmental Entity applicable to the Buyer or
the Buyer Bank or by which any property or asset of the Buyer or the Buyer Bank
is bound or affected or any (b) note, bond, mortgage, indenture, deed of trust,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Buyer or the Buyer Bank is a party or by which the Buyer
or the Buyer Bank or any property or asset of the Buyer or the Buyer Bank is
bound or affected, except for any such non-compliance, conflicts, defaults or
violations that would not, either individually or in the aggregate, have a
Material Adverse Effect; and neither the Buyer nor the Buyer Bank knows of, or
has received notice of, any violation of any of the above. Without limiting the
generality of the foregoing, neither the Buyer nor the Buyer Bank has been
advised of the existence of any facts or circumstances which would cause the
Buyer Bank to be deemed not to be in satisfactory compliance with the Community
Reinvestment Act of 1977, as amended, and the regulations promulgated
thereunder.
SECTION 3.06. FINANCIAL STATEMENTS. The Buyer has previously made
available to the Seller copies of (i) the audited and unaudited financial
statements of the Buyer and its subsidiaries as of December 31 for the fiscal
years 1998, 1999, and 2000, (ii) the most recent consolidated internal financial
statements, I.E. for the year to date, and the most recent fiscal quarter and
the month(s) thereafter. The December 31, 2000 consolidated balance sheet of the
Buyer (including the related notes, where applicable) fairly presents in all
material respects the consolidated financial position of the Buyer and its
subsidiaries as of the date thereof, and the other financial statements referred
to in this Section 3.06 (including the related notes where applicable) fairly
present in all material respects, (subject, in the case of the unaudited
statements, to audit adjustments normal in nature and amount and the addition of
customary notes) the results of the consolidated operations and changes in
shareholders' equity and consolidated financial position of the Buyer for the
respective fiscal periods or as of the respective dates therein set forth and
each of such statements (including the related notes, where applicable) has been
prepared in accordance with GAAP consistently applied during the periods
involved, except as indicated in the notes thereto.
SECTION 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 2000:
(i) there has not been any Material Adverse Effect;
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(ii) there has not been any incurrence by the Buyer
of any liability that has had, or to the best knowledge of the Buyer
could reasonably be expected to have, a Material Adverse Effect with
respect to the Buyer or the Buyer Bank;
(iii) there has not been any agreement, contract or
commitment entered into, or agreed to be entered into, except for those
in the ordinary course of business none of which has had a Material
Adverse Effect with respect to the Buyer or the Buyer Bank;
(iv) there has not been any change in any of the
accounting methods or practices of the Buyer or any of its subsidiaries
other than changes required by applicable law or generally accepted
accounting principles.
SECTION 3.08. ABSENCE OF LITIGATION. Neither the Buyer nor any of its
subsidiaries is a party to any, and there are no pending, or to the best
knowledge of the Buyer, threatened legal, administrative, arbitral or other
claims, actions, proceedings or investigations of any nature, against the Buyer
or any of its subsidiaries or any property or asset of the Buyer or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, which, either individually or
in the aggregate, would have a Material Adverse Effect with respect to the Buyer
or the Buyer Bank and no facts or circumstances have come to the Buyer's
attention which have caused it to believe that a material claim, action,
proceeding or investigation against or affecting the Buyer or any of its
subsidiaries could reasonably be expected to occur. Neither the Buyer nor its
subsidiaries, or any property or asset of the Buyer or any of its subsidiaries,
is subject to any order, writ, judgment, injunction, decree, determination or
award which restricts its ability to conduct business in any area in which it
presently does business or has or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect with respect to the
Buyer or the Buyer Bank.
SECTION 3.09. AGREEMENTS WITH BANK REGULATORS. Neither the Buyer nor
the Buyer Bank is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, any Bank Regulator which restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, its loan loss allowances or reserves, its credit policies or its
management, nor has the Buyer or the Buyer Bank been informed by any Bank
Regulator that it is contemplating issuing or requesting any such order,
directive, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission. Neither the Buyer nor the Buyer
Bank is a party to any agreement or arrangement entered into in connection with
the consummation of a federally assisted acquisition of a depository institution
pursuant to which the Buyer or the Buyer Bank is entitled to receive financial
assistance or indemnification from any governmental agency.
SECTION 3.10. CAPITAL; FINANCING. On the date hereof, the Buyer is, at
a minimum, "adequately capitalized," as such term is defined in the rules and
regulations promulgated by the FRB and the FDIC, as the case may be. The Buyer
shall not require any financing from any third-party source as a condition or
contingency to the payment in full of the Cash Consideration as contemplated
under this Agreement. The Cash Consideration shall be available from the Buyer's
working capital and cash flow.
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SECTION 3.11. PURCHASER INVESTIGATION. The Buyer acknowledges that: (i)
it has had the opportunity to visit with the Seller and its Subsidiaries and
meet with their representative officers and other representatives to discuss the
business, assets, liabilities, reserves, financial condition, cash flow and
operations of Seller and its Subsidiaries, as applicable and (ii) to Buyer's
knowledge or except as disclosed in Schedule 3.11, all materials and information
requested by Buyer has been provided to Buyer to the reasonable satisfaction of
such party. The Buyer acknowledges that it has made its own independent
examination, investigation, analysis and evaluation of the Seller and its
Subsidiaries, including the Buyer's own estimate of the value of the Seller and
its Subsidiaries' businesses. The Buyer acknowledges that it has undertaken such
investigation (including a review of the assets, liabilities, books, records and
contracts of Seller and its Subsidiaries) as the Buyer deems adequate, including
that described above.
SECTION 3.12. DISCLOSURE. No representation or warranty contained in
this Agreement, and no statement contained in any schedule, certificate, list or
other writing furnished to the Seller 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, in light of the circumstances in which they are made, not
misleading. No information believed by the Buyer or the Buyer Bank to be
material to the Merger or the Bank Merger and which is necessary to make the
representations and warranties herein contained, taken as a whole, not
misleading, to the best knowledge of the Buyer and the Buyer Bank, has been
withheld from, or has not been delivered in writing to, the Seller.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. COVENANTS OF THE SELLER.
(a) The Seller covenants and agrees that, between the date of this
Agreement and the Effective Time, unless the Buyer shall otherwise agree in
writing, the business of the Seller and its Subsidiaries shall be conducted only
in, and the Seller and its Subsidiaries shall not take any action except in, the
usual, regular and ordinary course of business and in a manner consistent with
past banking practice and generally to conduct their business in substantially
the same way as heretofore conducted, and without limiting the foregoing, to
continue to operate in the same geographic markets serving the same market
segments and without a material increase in the rate of growth of the Seller
Bank's loan portfolio relative to such rate over the 12 month period prior to
the date hereof. The Seller shall use its reasonable best efforts to preserve
substantially intact the business organization of the Seller and its
Subsidiaries, to keep available the present services of the officers, employees
and consultants of the Seller and its Subsidiaries and to preserve the current
relationships and goodwill of the Seller and its Subsidiaries with customers,
suppliers and other persons with which the Seller or any of the Subsidiaries
have business relationships, including without limitation, implementing a
deposit retention program in furtherance thereof.
(b) By way of amplification and not limitation of clause (a) above,
except as contemplated by this Agreement, the Seller shall not, nor shall the
Seller permit any of the Subsidiaries, between the date of this Agreement and
the Effective Time, directly or indirectly to do, or publicly announce an
intention to do, any of the following without the prior written consent of the
Buyer through its representative, Kevin T. Bottomley (which consent shall not be
unreasonably withheld):
25
(i) amend or otherwise change its Charter or By-laws
or equivalent organizational documents;
(ii) issue, deliver, sell, pledge, dispose of, grant,
encumber, or authorize the issuance, delivery, sale, pledge,
disposition, grant or encumbrance of, any shares of capital stock of
any class of the Seller or any of the Subsidiaries, or any options,
warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, other than restricted stock awards
under the RRP from the pool of shares currently reserved for grant
under the RRP or any other ownership interest, of the Seller or any of
the Subsidiaries, or enter into any agreement with respect to any of
the foregoing other than as contemplated herein;
(iii) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(iv) split, combine or reclassify any shares of its
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock, except upon the exercise or fulfillment of
rights or options issued and vested or existing pursuant to employee
benefit plans, programs or arrangements, all to the extent outstanding
vested and in existence on the date of this Agreement;
(v) repurchase, redeem or otherwise acquire any
shares of the capital stock of the Company, or any other Subsidiary, or
any securities convertible into or exercisable for any shares of the
capital stock of the Company, or any other Subsidiary;
(vi) enter into any new line of business or
materially expand the business currently conducted by the Seller and
its Subsidiaries or file any application to relocate or terminate the
operations of any banking office of the Seller Bank;
(vii) acquire or agree to acquire, by merging or
consolidating with, or by purchasing an equity interest in or a portion
of the assets of, or by any other manner, any business or any
corporation, partnership, other business organization or any division
thereof or any material amount of assets;
(viii) except for advances from the Federal Home Loan
Bank in an amount not to exceed $20 million outstanding at any one
time, incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any
individual, corporation or other entity, or make any Loan or advance,
other than in the ordinary course of business consistent with past
practice;
(ix) enter into any contract or agreement other than
in the ordinary course of business consistent with past practice and,
in any event, regardless of whether consistent with past practice,
undertake or enter into any contract or other commitment (other than
contracts or commitments relating to Loans) involving an aggregate
payment by or to the Seller or any of the Subsidiaries under any such
contract or commitment of more than $25,000 or having a term of one
year or more from the time of execution;
26
(x) authorize any single capital expenditure which is
in excess of $5,000 or capital expenditures which are, in the
aggregate, in excess of $10,000 for the Seller and its Subsidiaries
taken as a whole, except for written contractual commitments entered
into prior to the date of this Agreement as disclosed in the Seller
Disclosure Schedule;
(xi) (A) except as required by applicable law and
except as set forth in Schedule 4.01(b)(xi), (x) adopt, amend, renew or
terminate any plan or any agreement, arrangement, plan or policy
between the Seller or any of the Subsidiaries and one or more of its
current or former directors, officers or employees, except to the
extent necessary to comply with applicable law, or (y) increase in any
manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan or agreement as in
effect as of the date hereof (including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares), PROVIDED,
HOWEVER, that the Seller or Seller Bank may grant salary increases to
its officers and employees at the regular review date of such officers
and employees in an aggregate amount for all officers and employees not
to exceed 4% of the aggregate current annualized base salaries of such
officers and employees or constitute more than a 10% increase with
respect to any one officer or employee; or (B) enter into, modify or
renew any employment, severance or other agreement with any director,
officer or employee of the Seller or any of the Subsidiaries, or
establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement
providing for any benefit to any director, officer or employee;
(xii) take any action with respect to accounting
methods, principles or practices, other than changes required by
applicable law or GAAP or regulatory accounting as concurred in by the
Seller's independent accountants;
(xiii) make any tax election or settle or compromise
any federal, state, local or foreign tax liability;
(xiv) pay, discharge or satisfy any claim, liability
or obligation, other than payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice;
(xv) make any new or additional equity investment or
commitment to make such an investment in real estate or in any real
estate development project, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business consistent with past
practice;
(xvi) sell any securities in its investment
portfolio, except in the ordinary course of business, or engage in
transactions in or involving forwards, futures, options on futures,
swaps or similar derivative instruments;
27
(xvii) sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise
dispose of, any of its material assets, properties or other rights or
agreements or purchase or sell any Loans in bulk;
(xviii) take any action that is intended or
reasonably can be expected to result in any of its representations and
warranties set forth in this Agreement being or becoming untrue in any
material respect, or any of the conditions to the consummation of the
merger and the other transactions contemplated by this Agreement set
forth in Article VII not being satisfied in any material respect, or in
any material violation of any provision of this Agreement except, in
every case, as may be required by applicable law;
(xix) commit any act or omission which constitutes a
material breach or default by the Seller or any of the Subsidiaries
under any regulatory agreement or under any material contract or
material license to which any of them is a party or by which any of
them or their respective properties is bound;
(xx) foreclose upon or take a deed or title to any
commercial real estate without first conducting a Phase I environmental
assessment of the property or foreclose upon any commercial real estate
if such environmental assessment indicates the presence of Hazardous
Material in amounts which, if such foreclosure were to occur, would be
material;
(xxi) enter into or renew, amend or terminate, or
give notice of a proposed renewal, amendment or termination of or make
any commitment with respect to, (A) any contract, agreement or lease
for office space, operations space or branch space to which the Seller
or any of the Subsidiaries is a party or by which the Seller or any of
the Subsidiaries or its respective properties is bound; (B) any lease,
contract or agreement other than in the ordinary course of business
consistent with past practice including renewals of leases to existing
tenants of the Seller or any Subsidiary; (C) regardless of whether
consistent with past practices, any lease, contract, agreement or
commitment, other than Loans, involving an aggregate payment by or to
the Seller or any of the Subsidiaries of more than $25,000 or requiring
performance by the Seller or any of the Subsidiaries of any obligations
at any time more than one year after the time of execution;
(xxii) change in any material respect its loan
policies or procedures, except as required by regulatory authorities;
(xxiii) engage in any action that could reasonably be
expected to cause the Proposed Transaction to fail to qualify as a
"reorganization" under Section 368(a) of the Code, whether or not
otherwise permitted by the provisions of this Article IV; or
(xxiv) agree to do any of the foregoing.
(c) Subject to Section 5.06(b), Seller shall vote its shares
of Company Stock in favor of the Proposed Transaction and the Amendment
at the Company's Stockholders' Meeting (defined herein).
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SECTION 4.02. SYSTEM CONVERSIONS. From and after the date hereof, the
Buyer and the Seller shall meet on a regular basis to discuss and plan for the
conversion of the Seller's and the Seller Bank's data processing and related
electronic informational systems to those used by the Buyer and its affiliates,
which planning shall include, but not be limited to, discussion of the possible
termination by the Seller and Seller Bank of third-party service provider
arrangements effective at the Effective Time or at a date thereafter,
non-renewal of personal property leases and software licenses used by the Seller
or Seller Bank in connection with its systems operations and outsourcing, as
appropriate, of proprietary or self-provided system services, it being
understood that the Seller and Seller Bank shall not be obligated to take any
such action prior to the Effective Time and, unless the Seller and Seller Bank
otherwise agree, no conversion shall take place prior to the Effective Time. In
the event that the Seller or Seller Bank takes, at the request of the Buyer, any
action relative to third parties to facilitate the conversion that results in
the imposition of any termination fees or charges, the Buyer shall indemnify the
Seller or Seller Bank, as applicable on terms reasonably satisfactory to such
party for any such fees and expenses, provided that the indemnification shall
not apply to the termination of the agreement between Connecticut On-Line
Computer Center Trust and the Seller Bank.
SECTION 4.03. CERTAIN CHANGES AND ADJUSTMENTS. Prior to the Closing (as
defined in Section 8.01 hereof), the Buyer and the Seller shall consult and
cooperate with each other concerning Seller Bank's loan, litigation and real
estate valuation policies and practices (including loan classifications and
levels of reserves) to reflect Buyer's plans with respect to the conduct of
Seller Bank's business following the Merger; PROVIDED, HOWEVER, that the Seller
and Seller Bank shall not be obligated to take any action pursuant to this
Section which is inconsistent with GAAP and unless and until the Buyer
acknowledges, and the Seller and Seller Bank are satisfied, that all conditions
to Seller's obligation to consummate the Merger have been satisfied. No action
taken by the Seller or Seller Bank pursuant to this Section or the consequences
resulting therefrom shall be deemed to be a breach of any representation,
warranty, agreement or covenant herein or constitute a Material Adverse Effect.
SECTION 4.04. ALCO MANAGEMENT. The Seller agrees that during the period
from the date of this Agreement through the Effective Time, the Seller will
consult with the Buyer in the development of a reasonable program to manage the
Seller's and any of the Subsidiary's interest sensitive assets and liabilities
(including its fixed-rate mortgage portfolio and its investment portfolio),
which program will include a policy not to acquire securities for the investment
portfolio of the Seller or any Subsidiary if such securities have a maturity
date that is more than five years after the date of acquisition thereof, unless
otherwise agreed by the parties. The Buyer and Seller agree to consult on
investment programs to be administered by the Seller and the Seller Bank.
SECTION 4.05. COVENANT OF THE BUYER. During the period from the date of
this Agreement and continuing until the Effective Time, the Buyer shall not, and
shall not permit any of its subsidiaries to, take any action that is intended or
which reasonably can be expected to result in any of its representations and
warranties set forth in this Agreement being untrue in any material respect, or
in any of the conditions to the Merger or other transactions contemplated in
this Agreement as set forth in Article I not being satisfied in any material
respect, or in a material violation of any provision of this Agreement except,
in every case, as may be required by applicable law.
29
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. REGULATORY MATTERS.
(a) The parties hereto shall cooperate with each other and use their
reasonable best efforts to prepare and file no more than 45 days after the
execution of the Agreement all necessary documentation, to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including without limitation
the Merger). The Seller and the Buyer shall have the right to review in advance,
and to the extent practicable each will consult with the other on, in each case
subject to applicable laws relating to the exchange of information, all the
information relating to the Seller or the Buyer, as the case may be, and any of
their respective subsidiaries, which appear in any filing made with or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as promptly
as practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(b) The Buyer and the Seller shall, upon request, furnish each other
with all information concerning themselves, their respective subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of the Buyer, the Seller or any of their
respective subsidiaries to any Governmental Entity in connection with the Merger
and the other transactions contemplated hereby.
(c) The Buyer and the Seller shall promptly furnish each other with
copies of written communications received by the Buyer or the Seller, as the
case may be, or any of their respective subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
30
SECTION 5.02. ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws relating to
the exchange of information, the Seller shall, and shall cause each of the
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the Buyer, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, the Seller shall, and shall
cause the Subsidiaries to, make available to the Buyer (i) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of Federal securities laws or
Federal or state banking laws (other than reports or documents which the Seller
is not permitted to disclose under applicable law), (ii) copies of all periodic
reports to senior management, including, without limitation, reports on
non-performing loans and other asset quality matters and all materials furnished
to the board of directors of the Seller or the Subsidiaries relating to asset
quality generally, and (iii) all other information concerning its business,
properties and personnel as the Buyer may reasonably request (other than
information which the Seller is not permitted to disclose under applicable law).
Neither the Seller nor any of the Subsidiaries shall be required to provide
access to or to disclose information where such access or disclosure would
violate or prejudice the rights of the Seller's or the Subsidiaries' customers,
jeopardize the attorney-client privilege of the institution in possession or
control of such information or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) Upon reasonable notice and subject to applicable laws relating to
the exchange of information, the Buyer shall, and shall cause the Buyer Bank to,
afford to the officers, employees, accountants, counsel and other
representatives of the Seller, access, during normal business hours during the
period prior to the Effective Time, to information concerning its business,
properties and personnel as the Seller may reasonably request (other than
information which the Buyer is not permitted to disclose under applicable law).
Neither the Buyer nor the Buyer Bank shall be required to provide access to or
to disclose information where such access or disclosure would violate or
prejudice the rights of the Buyer's or the Buyer Bank's customers, jeopardize
the attorney-client privilege of the institution in possession or control of
such information or contravene any law, rule, regulation, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date of
this Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(c) Without limiting the generality of the foregoing, the Seller shall
cooperate with the Buyer in compiling the following with respect to each of the
Seller and each Subsidiary as of the most recent practicable date (as well as on
an estimated pro forma basis as of the Effective Date giving effect to the
consummation of the transactions contemplated hereby): (A) the basis of the
Seller and each Subsidiary in its assets; (B) the basis of the stockholder(s) of
each Subsidiary in its stock, or the amount of any excess loss account (as
defined in Treasury Regulations Section 1.1502-19); (C) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to the Seller and any
Subsidiary; and (D) the amount of any deferred gain or loss allocable to the
Seller or any Subsidiary arising out of any deferred intercompany transaction
(as defined in Treasury Regulations Section 1.1502-13).
31
(d) All information furnished by the Seller to the Buyer or its
representatives pursuant hereto shall be treated as the sole property of the
Seller and, if the Proposed Transaction shall not occur, the Buyer and its
representatives shall return to the Seller or destroy all of such written
information and all documents, notes, summaries or other materials containing,
reflecting or referring to, or derived from, such information. The Buyer shall,
and shall use its reasonable efforts to cause its representatives to, keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purpose. The obligation to
keep such information confidential shall continue from the date the Proposed
Transaction is abandoned and shall not apply to (i) any information which (x)
was already in the Buyer's possession prior to the disclosure thereof by the
Seller; (y) was then generally known to the public; or (z) was disclosed to the
Buyer by a third party not bound by an obligation of confidentiality or (ii)
disclosures made as required by law. It is further agreed that, if in the
absence of a protective order or the receipt of a waiver hereunder the Buyer is
nonetheless, in the opinion of its counsel, compelled to disclose information
concerning the Seller to any tribunal or governmental body or agency or else
stand liable for contempt or suffer other censure or penalty, the Buyer may
disclose such information to such tribunal or governmental body or agency
without liability hereunder.
(e) All information furnished by the Buyer to the Seller or its
representatives pursuant hereto shall be treated as the sole property of the
Buyer and, if the Proposed Transaction shall not occur, the Seller and its
representatives shall return to the Buyer or destroy all of such written
information and all documents, notes, summaries or other materials containing,
reflecting or referring to, or derived from, such information. The Seller shall,
and shall use its reasonable efforts to cause its representatives to, keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purpose. The obligation to
keep such information confidential shall continue from the date the Proposed
Transaction is abandoned and shall not apply to (i) any information which (x)
was already in the Seller's possession prior to the disclosure thereof by the
Buyer; (y) was then generally known to the public; or (z) was disclosed to the
Seller by a third party not bound by an obligation of confidentiality or (ii)
disclosures made as required by law. It is further agreed that, if in the
absence of a protective order or the receipt of a waiver hereunder the Seller is
nonetheless, in the opinion of its counsel, compelled to disclose information
concerning the Buyer to any tribunal or governmental body or agency or else
stand liable for contempt or suffer other censure or penalty, the Seller may
disclose such information to such tribunal or governmental body or agency
without liability hereunder.
(f) No investigation by any of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein or any condition to the obligations of the parties hereto.
SECTION 5.03. PROXY STATEMENT; OTHER FILINGS; BOARD RECOMMENDATIONS.
The parties hereto shall cooperate with each other and use their reasonable best
efforts to as promptly as practicable (but in any event within 45 days) after
the execution of this Agreement, prepare, and the Company will file with the
SEC, a proxy statement (the "PROXY STATEMENT") relating to a special meeting of
the stockholders of the Company (the "COMPANY STOCKHOLDERS' MEETING") to
consider, among other things, (i) the approval of this Agreement and the
Proposed Transaction and (ii) an amendment to the Company's Charter effecting
the Reverse Stock Split (collectively, the "COMPANY STOCKHOLDER PROPOSALS").
Each of the Buyer and the Company shall
32
provide promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the Proxy
Statement, or in any amendments or supplements thereto, and to cause its counsel
and auditors to cooperate with the other's counsel and auditors in the
preparation of the Proxy Statement. The Company will cause the Proxy Statement
to be mailed to its stockholders at the earliest practicable time after it has
been cleared by the SEC. As promptly as practicable after the date of this
Agreement, each of the Company and the Buyer will prepare and file any other
filings required to be filed by it under the Exchange Act, or any other Federal,
foreign or Blue Sky or related laws relating to the Proposed Transaction and the
transactions contemplated by this Agreement (the "OTHER Filings"). Each of the
Company and the Buyer will notify the other promptly upon the receipt of any
comments from the SEC or its staff or any other government officials and of any
request by the SEC or its staff or any other government officials for amendments
or supplements to the Proxy Statement or any Other Filing or for additional
information and will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the SEC or its
staff or any other government officials, on the other hand, with respect to the
Proxy Statement, the Proposed Transaction or any Other Filing. Each of the
Company and the Buyer will cause all documents that it is responsible for filing
with the SEC or other regulatory authorities under this Section 5.03(a) to
comply in all material respects with all applicable requirements of law and the
rules and regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Proxy Statement or
any Other Filing, the Company or the Buyer, as the case may be, will promptly
inform the other of such occurrence and cooperate in filing with the SEC or its
staff or any other government officials, and/or mailing to stockholders of the
Company, such amendment or supplement.
SECTION 5.04. MEETINGS OF MEMBERS AND STOCKHOLDERS.
(a) Promptly after the date hereof, the Company will take all action
necessary in accordance with applicable law and the Company's Charter and
By-Laws to convene the Company Stockholders' Meeting to be held as promptly as
practicable, and in any event (to the extent permissible under applicable law)
within 45 days after the clearance of the Proxy Statement by the SEC, for the
purpose of voting upon the Company Stockholder Proposals. The Company will use
its best efforts to solicit from its stockholders proxies in favor of the
adoption and approval of this Agreement and the approval of the Company
Stockholder Proposals and will take all other action necessary or advisable to
secure the vote or consent of its stockholders as required by applicable law to
obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, the Company may adjourn or postpone the Company Stockholders'
Meeting to the extent necessary to ensure that any necessary supplement or
amendment to the Proxy Statement is provided to the Company's stockholders in
advance of a vote on the Company Stockholder Proposals or, if as of the time for
which the Company Stockholders' Meeting is originally scheduled (as set forth in
the Proxy Statement) there are insufficient shares of Company Stock represented
(either in person or by proxy) to constitute a quorum necessary to conduct the
business of the Company Stockholders' Meeting. The Company shall ensure that the
Company Stockholders' Meeting is called, noticed, convened, held and conducted,
and that all proxies solicited by the Company in connection with the Company
Stockholders' Meeting are solicited, in compliance with applicable law, the
Company's Charter and By-Laws, and all other applicable legal requirements.
33
(b) Subject to Section 5.06(b): (i) the Company Board shall recommend
that the stockholders vote in favor of and adopt the Company Stockholder
Proposals at the Company Stockholders' Meeting; (ii) the Proxy Statement shall
include a statement to the effect that the Company Board has recommended that
the Company's stockholders vote in favor of and adopt the Company Stockholder
Proposals at the Company Stockholders' Meeting; and (iii) neither the Company
Board nor any committee thereof shall withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify in a manner adverse to the Buyer, the
recommendation of the Company Board that the Company's stockholders vote in
favor of and adopt the Company Stockholder Proposals.
(c) Promptly after the date hereof, the Seller will take all action
necessary in accordance with applicable law, OTS regulations, the Charter and
By-Laws of the Seller to convene a meeting of its members to be held as promptly
as practicable after the clearance of the notice of meeting (the "NOTICE") by
the OTS, for the purpose of voting upon this Agreement, the Proposed Transaction
and any other related matters. The Seller will use its best efforts to solicit
from its members proxies in favor of the adoption and approval of this Agreement
and the approval of the Proposed Transaction (and any other related matters) and
will take all other action necessary or advisable to secure the vote or consent
of its members as required by applicable law to obtain such approvals.
Notwithstanding anything to the contrary contained in this Agreement, the Seller
may adjourn or postpone the meeting to the extent necessary to ensure that any
necessary supplement or amendment to the Notice is provided to its members in
advance of such vote or, if as of the time for which the meeting is originally
scheduled (as set forth in the Notice) there are insufficient members
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the meeting. The Seller shall ensure that the meeting is
called, convened, held and conducted, and that all proxies solicited by the
Seller in connection with the meeting are solicited, in compliance with
applicable law, the Charter and By-Laws of the Seller and all other applicable
legal requirements.
(d) Subject to Section 5.06(b): (i) the Seller Board shall recommend
that its members vote in favor of and approve this Agreement, the Proposed
Transaction and any other related matters at the meeting; (ii) the Notice shall
include a statement to the effect that the Board have recommended that the
members vote in favor of and approve this Agreement, the Proposed Transaction
and any other related matters at the meeting; and (iii) neither the Seller
Board, nor any committee thereof shall withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify in a manner adverse to the Buyer, the
recommendations of the Seller Board that the members vote in favor of and adopt
this Agreement, the Proposed Transaction and any other related matters.
SECTION 5.05. LEGAL CONDITIONS TO PROPOSED TRANSACTION. Each of the
Buyer and the Seller shall, and shall cause each of its subsidiaries to, use its
reasonable best efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
which may be imposed on such party or its subsidiaries with respect to the
Proposed Transaction and, subject to the conditions set forth in Article IV
hereof, to consummate the transactions contemplated by this Agreement, (b) to
obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by the Seller
or the Buyer or any of their respective subsidiaries in connection with the
Merger and the other transactions contemplated by this Agreement, and (c) to
obtain the authorization of each
34
party's directors, officers, corporators, trustees, stockholders, members and
depositors, as applicable.
SECTION 5.06. NO SOLICITATION.
(a) NO SHOPPING. Each of the Seller, the Company and the Seller Bank
represents and warrants that it has terminated any discussions or negotiations
relating to, or that could reasonably be expected to lead to, any Acquisition
Proposal (as hereinafter defined). Except as permitted by this Agreement, each
of the Seller, the Company and the Seller Bank shall not, and shall not
authorize or permit any Subsidiary or any of their respective officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by the Seller or any Subsidiary to,
directly or indirectly, (i) solicit, initiate or encourage (including by way of
furnishing non-public information), or take any other action to facilitate, any
inquiries, discussions or the making of any proposal that constitutes or could
reasonably be expected to lead to an Acquisition Proposal, (ii) participate in
any discussions or negotiations, or otherwise communicate in any way with any
person (other than the Buyer), regarding an Acquisition Proposal or (iii) enter
into or consummate any agreement, arrangement or understanding requiring it to
abandon, terminate or fail to consummate the transactions contemplated hereby.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any officer, director or
employee of the Seller or any of the Subsidiaries or any investment banker,
financial advisor, attorney, accountant or other representative retained by the
Seller or any Subsidiary shall be deemed to be a breach of this Section 5.06 by
the Seller, the Company and the Seller Bank. Notwithstanding the foregoing, the
Company may, in response to a Superior Proposal (as hereinafter defined) that
has not been withdrawn and that did not otherwise result from a breach of this
Section 5.06, (x) furnish non-public information with respect to the Company
Subsidiaries to the person who made such Superior Proposal pursuant to a
confidentiality agreement on terms no more favorable to such person than the
confidentiality agreement between Buyer and Seller dated March 30, 2001 (the
"Confidentiality Agreement") and (y) participate in discussions or negotiations
with such person regarding such Superior Proposal, if and so long as the Company
Board determines in good faith (based on advice of its outside legal counsel)
that failing to take such action would constitute a breach of its fiduciary
duties under applicable law.
(b) WITHDRAWAL OF RECOMMENDATION.
(a) The Company Board shall not (A) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the
Buyer, its approval or recommendation of this Agreement or the Proposed
Transaction, (B) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal, or (C) approve or recommend, or
propose to approve or recommend, or execute or enter into an agreement
in principle or definitive agreement relating to an Acquisition
Proposal (other than a confidentiality agreement referred to in Section
5.06(a)), or resolve to do any of the foregoing. Notwithstanding the
foregoing, the Company Board may take any of the actions described in
the preceding clauses (i) through (iii) in connection with the
termination of this Agreement by the Seller pursuant to Section
7.01(g).
(b) To the extent the Seller Board shall be required
under applicable law to recommend that the members of the Seller
approve or adopt, consent or otherwise agree to, this Agreement or the
Proposed Transaction or any matters related thereto (a
35
"SELLER MEMBER APPROVAL"), then the Seller Board shall not (A) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to the
Buyer, its approval or recommendation of this Agreement, the Proposed
Transaction or any such related matter, (B) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal, or (C)
approve or recommend, or propose to approve or recommend, or execute or
enter into an agreement in principle or definitive agreement relating
to an Acquisition Proposal (other than a confidentiality agreement
referred to in Section 5.06(a)), or resolve to do any of the foregoing.
(c) NOTICE OF INQUIRIES. Each of the Seller, the Company and the Seller
Bank promptly (and in any event within 48 hours of the relevant event) shall
advise the Buyer orally and in writing of any Acquisition Proposal, any request
received by the Seller or any Subsidiary for non-public information that could
reasonably be expected to lead to an Acquisition Proposal, or any inquiry with
respect to or that could reasonably be expected to lead to an Acquisition
Proposal, including, in each case, the identity of the person making any such
Acquisition Proposal, request or inquiry and the terms and conditions thereof,
and shall provide to the Buyer any written materials received by the Seller or
any Subsidiary in connection therewith. The Seller, the Company and the Seller
Bank shall keep the Buyer informed in all material respects of the status of any
such Acquisition Proposal, request or inquiry on a current basis. Each of the
Seller, the Company and the Seller Bank agrees not to release any person from,
or waive any provisions of, any confidentiality or standstill agreement to which
any of them is a party (other than the Confidentiality Agreement).
(d) EXCHANGE ACT COMPLIANCE. Nothing contained in this Section 5.06
shall prohibit the Company from at any time taking and disclosing to its
stockholders a position contemplated by Rule 14d-9 or Rule 14e-2 promulgated
under the Exchange Act or making any disclosure required by Rule 14a-9
promulgated under the Exchange Act.
(e) DEFINITION OF "ACQUISITION PROPOSAL." As used in this Agreement,
the term "ACQUISITION Proposal" shall mean any proposed or actual tender offer,
merger, consolidation or other business combination involving the Seller or any
Subsidiary or sale, lease or other disposition, directly or indirectly, by
merger, consolidation, share exchange or otherwise, of any material assets or
securities of the Seller or any of the Subsidiaries, or any transaction which is
similar in form, substance or purpose to any of the foregoing transactions;
provided, however, that the term "Acquisition Proposal" shall not include the
Proposed Transaction.
(f) DEFINITION OF "SUPERIOR PROPOSAL." As used in this Agreement, the
term "SUPERIOR PROPOSAL" shall mean an unsolicited, bona fide written offer made
by a third party to consummate an Acquisition Proposal that (i) the Company
Board determines in good faith, after consulting with its outside legal counsel
and its financial advisor, would, if consummated, result in a transaction that
is more favorable to the stockholders of the Company than the transactions
contemplated hereby (taking into account all legal, financial, regulatory and
other aspects of the proposal and the entity making the proposal), (ii) the
Seller Board determines in good faith, after consulting with its financial
advisors would, if consummated, result in a transaction that it is more
favorable to the members of the Seller than the transactions contemplated hereby
(taking into account all legal, financial, regulatory and other aspects of the
proposal and the entity making the proposal), (iii) is not conditioned on
obtaining financing (and with respect to which the Buyer has received written
evidence of such person's ability to fully finance its Acquisition Proposal),
(iv) is for 100% of the Company Stock, (v) is, in the written opinion of the
36
Company's financial advisor, more favorable to the minority stockholders of the
Company from a financial point of view than the transactions contemplated hereby
(including any adjustments to the terms and conditions of such transactions
proposed by the Buyer in response to such Acquisition Proposal) and (vi) is, in
the written opinion of Seller's financial advisors, fair to the members of the
Seller.
SECTION 5.07. EMPLOYEE BENEFIT MATTERS.
(a) PROVISION OF BENEFITS. As soon as practicable after the Effective
Time, the Buyer agrees to provide the employees of Seller Bank (the "SELLER
EMPLOYEES") who remain employed after the Effective Time (collectively, the
"TRANSFERRED SELLER EMPLOYEES") with the same types and levels of employee
benefits maintained by the Buyer for similarly situated employees of the Buyer
Bank.
Transferred Seller Employees will be granted credit for years of
service for eligibility and vesting purposes in connection with Buyer's benefit
plans, including vacation policy. The Buyer will treat, and cause all of its
benefit plans to treat, the service of Transferred Seller Employees with Seller
or any Subsidiary as service rendered to the Buyer or any Affiliate of Buyer for
purposes of eligibility to participate, vesting and for all other benefits,
including applicability of minimum waiting periods for participation, but in no
event for purposes of benefit accrual (including minimum pension amount)
attributable to any period before the Effective Time. Without limiting the
foregoing, the Buyer shall make reasonable efforts within the parameters of its
existing plans not to treat any employee of the Seller or any of its
Subsidiaries as a "new" employee for purposes of any exclusions under any health
or similar plan of the Buyer or an Affiliate for a pre-existing medical
condition, and will make appropriate arrangements with its insurance carrier(s)
to ensure such result. The Buyer shall make reasonable efforts within the
parameters of its health insurance plans to honor any deductible or
out-of-pocket expenses incurred under the applicable health insurance plans
maintained by Seller, the Company and the Seller Bank as of the Effective Time.
(b) ESOP. In connection with the Reverse Stock Split, a cash payment
shall be made to the ESOP Trust for the fractional share to be held in the ESOP
Trust following the Reverse Stock Split. The cash consideration received by the
ESOP with respect to unallocated shares held in the ESOP Trust will first be
used to repay the Seller Bank for the Loan made to the ESOP upon the
establishment of the ESOP (the "ESOP LOAN"). The cash consideration received by
the ESOP with respect to allocated shares held in the ESOP Trust will be paid as
required to participants. Any cash remaining thereafter shall be fully allocated
to the ESOP participants in proportion to their account balances. The
participants in the ESOP will become fully vested and the ESOP shall be
terminated immediately thereafter.
(c) RRP. In connection with the Reverse Stock Split, a cash payment of
$22.75 per share (pre-split) will be made for unvested shares held in the Trust.
The cash consideration will thereafter be distributed among RRP participants in
accordance with their participation interests.
(d) STOCK OPTION PLAN. In connection with the Reverse Stock Split,
holders of all unexercised vested or unvested stock options to acquire Company
Stock will receive payment per share (pre-split) equal to the excess (if any) of
$22.75 over the option exercise price per share (pre-split).
37
(e) CONTINUATION OF PLANS. Notwithstanding anything to the contrary
contained herein, the Buyer shall have sole discretion with respect to
determining whether or when to terminate, merge or continue any employee benefit
plans and programs of the Seller or any of the Subsidiaries; PROVIDED, HOWEVER,
that the Buyer shall continue to maintain such plans (other than stock based or
incentive plans or the Seller's ESOP) until the Seller Employees are permitted
to participate in the Buyer's or its Affiliates' plans.
(f) SEVERANCE OBLIGATIONS. Seller Bank Employees whose employment is
terminated involuntarily other than for cause (which shall mean gross negligence
or dereliction in the performance of such employee's duties, dishonesty or
commission of a crime) within one year of the Effective Date shall receive a
lump sum severance payment equal to the greater of (i) the remainder of their
pay for the 52 week period following the Effective Date or (ii) two weeks pay
for each year of employment with Seller Bank (not to exceed 36 weeks) unless
such employee has a severance arrangement listed in Schedule 5.07(f).
(g) SETTLEMENT OF EMPLOYMENT AGREEMENTS. Seller shall pay the amounts
described in Schedule 5.07(g) in settlement of the current employment agreements
of James J. McCarthy, Anthony J. Patti and Judith E. Tenaglia immediately prior
to the Effective Time, subject to adjustments, if necessary, to reflect changes
in interest rates, the timing of the Closing Date and confirmation of taxable
compensation reported on Box 1 of Forms W-2 for the individuals involved.
(h) SECTION 401(K) PLAN. Upon the request of Buyer, Seller shall take
all such action as is necessary to terminate the Seller's Section 401(k) Plan on
a date prior to the Closing Date.
(i) EMPLOYMENT AGREEMENT; NON-COMPETITION AGREEMENT. Concurrently with
the execution of this Agreement, Mr. McCarthy will enter into an employment
agreement and non-competition agreement with the Buyer substantially in the form
attached hereto as EXHIBIT F.
(j) SALARY TO CONTINUING EMPLOYEES. Employees of Seller or Seller Bank
who continue in the employ of Buyer or Buyer Bank will continue their employment
with Buyer or Buyer Bank in comparable positions to those previously held while
employed by Seller or Seller Bank and for a period of at least one year such
employees shall be paid at a rate of salary by Buyer or Buyer Bank that is no
less than the rate of salary that was paid to such employees immediately prior
to the Effective Time except for those employees listed on Schedule 5.07(j) who
shall be paid at a rate no less than that specified in such Schedule 5.07(j).
SECTION 5.08. DIRECTORS' AND OFFICERS' INSURANCE.
(a) The Buyer shall use its reasonable best efforts to maintain in
effect for six years from the Effective Time, if available, the current
directors' and officers' liability insurance policy maintained by the Seller
(PROVIDED that the Buyer may substitute therefore policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time;
PROVIDED, HOWEVER, that in no event shall the Buyer be required to expend
pursuant to this Section 5.08(a) more than 150% of the current cost. In
connection with the foregoing, the Seller agrees to provide such insurer or
substitute insurer with such representations as such insurer may request with
respect to the reporting of any prior claims.
38
(b) The Buyer agrees to indemnify current and former directors or
officers of the Seller to the same extent that such directors or officers are
entitled to indemnification as of the date of this Agreement under the Seller's
Charter and/or By-Laws to the full extent permitted under applicable law for a
period of six years from the Effective Time, provided that in the event that any
claim is asserted or made by such current or former director or officer within
such three year period, the right to indemnification in respect of such claim
shall continue until the disposition of such claim. The provisions of this
Section 5.08 are specifically for the benefit of those present and former
directors and officers entitled to indemnification as of the date of this
Agreement under the Seller's By-Laws.
(c) In the event that the Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving bank or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of the Buyer shall assume the obligations set forth in
this Section 5.08.
SECTION 5.09. FINANCIAL AND OTHER STATEMENTS. Notwithstanding anything
to the contrary in Section 5.02, during the term of this Agreement, the Company
shall provide to the Buyer the following documents and information:
(a) As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter ending after the date of this Agreement,
the Seller will deliver to the Buyer, Seller Bank's quarterly Thrift Financial
Report as filed with the appropriate Bank Regulator. As soon as reasonably
available, but in no event more than 90 days after the end of each fiscal year
ending after the date of this Agreement, the Seller will deliver to the Buyer
the Company's consolidated and audited financial statements for the fiscal year
then ended.
(b) Promptly upon receipt thereof, the Company will furnish to the
Buyer copies of all internal control reports submitted to the Company or the
Seller Bank by independent auditors in connection with each annual, interim or
special audit of the books of the Company or Seller Bank made by such auditors.
(c) As soon as practicable, the Company and Seller Bank will furnish to
the Buyer copies of all such financial statements and reports as they shall send
to their stockholder(s), the OTS, the FDIC, or any other regulatory authority,
to the extent any such reports furnished to any such regulatory authority are
not confidential and except as legally prohibited under applicable laws and
regulations.
(d) With reasonable promptness, the Company and Seller Bank will
furnish to the Buyer such additional financial data as the Buyer may reasonably
request.
SECTION 5.10. FURTHER ACTION. The Buyer and the Seller each shall, and
shall cause their subsidiaries to, use reasonable best efforts (a) to take, or
cause to be taken, all actions necessary, proper or advisable to comply promptly
with all legal requirements which may be imposed on such party or its
subsidiaries with respect to the Proposed Transaction and, subject to the
conditions set forth in Article IV hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by the Seller or the Buyer or any of their respective
39
subsidiaries in connection with the Proposed Transaction and any of the other
transactions contemplated by this Agreement.
SECTION 5.11. ADDITIONAL AGREEMENTS. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of any
of the parties to the Proposed Transaction, the proper officers and directors of
each party to this Agreement and their respective subsidiaries shall take all
such necessary action as may be reasonably requested by the Buyer.
SECTION 5.12. UPDATE OF DISCLOSURE SCHEDULES. From time to time prior
to the Effective Time, the Seller will promptly supplement or amend the Seller
Disclosure Schedule to reflect any 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 Seller Disclosure Schedule or which is necessary to correct any
information in the Seller Disclosure Schedule which has been rendered inaccurate
thereby. No supplement or amendment to the Seller Disclosure Schedule shall have
any effect for the purpose of determining satisfaction of the conditions set
forth in Section 6.02(b) hereof, as the case may be, or the compliance by the
Seller with the covenants set forth in Articles IV and V hereof.
SECTION 5.13. CURRENT INFORMATION.
(a) During the period from the date of this Agreement to the Effective
Time, the Seller will cause one or more of its designated representatives (i) to
confer on a regular and frequent basis (at least monthly) with representatives
of Buyer to report on (x) the general status of the ongoing operations of the
Seller and the Subsidiaries, (y) the status of, and the action proposed to be
taken with respect to, those Loans held by the Seller or the Subsidiaries which,
either individually or in combination with one or more other Loans to the same
borrower thereunder, have an aggregate original principal amount of $250,000 or
more and are classified or non-performing assets, and (z) the status of, and the
action proposed to be taken with respect to, foreclosed property and other real
estate owned by the Seller or the Subsidiaries, and (ii) to cooperate and
communicate with respect to the manner in which the business of the Seller and
the Subsidiaries is conducted, including but not limited to, the disposition of
certain assets after the Effective Time, the type and mix of products and
services, personnel matters, branches, the granting of credit, and problem loan
management, reserve adequacy, securities investments and accounting. During the
period from the date of this Agreement to the Effective Time, the Seller and the
Subsidiaries shall provide the Buyer with sufficient information to review new
extensions of credit, renewals and restructurings having an original principal
amount of $200,000 and information detailing overall asset quality.
(b) The Seller and the Subsidiaries will promptly notify the Buyer of
any material change in the normal course of business or in the operation of the
properties of the Seller or the Subsidiaries and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of litigation involving them and
will keep the Buyer reasonably informed of such events.
(c) To the extent not covered by paragraphs (a) and (b) above, the
Seller and the Subsidiaries shall give prompt notice to the Buyer, and the Buyer
shall give prompt notice to the Seller, of (i) the occurrence or non-occurrence
of
40
any event the occurrence or non-occurrence of which would be reasonably likely
to cause any representation or warranty contained in this Agreement to be untrue
or inaccurate in any material respect, and (ii) any failure of the Seller, the
Subsidiaries or the Buyer, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, HOWEVER, that the delivery of any notice pursuant to
this paragraph (c) shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 5.14. VOTING AGREEMENTS. The Seller and the Company agree to
cause each of its directors and officers to execute and deliver (individually,
and to the extent applicable in their respective capacities as trustee)
concurrently with the execution of this Agreement or within twenty-one (21) days
thereafter, a voting agreement in the form of EXHIBIT A hereto.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER AND THE BANK MERGER. The respective obligation of each party to effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(a) REGULATORY APPROVALS. All necessary approvals, authorizations and
consents of all Governmental Entities required to consummate the Proposed
Transaction shall have been obtained and remain in full force and effect, and
all waiting periods relating to such approvals, authorizations and consents
shall have expired or been terminated (all such approvals and the expiration of
all such waiting periods being referred to herein as the "REQUISITE REGULATORY
APPROVALS").
(b) NO ORDERS, INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order,
injunction or decree (whether temporary, preliminary or permanent) issued by
federal or state governmental authority or other agency or commission or federal
or state court of competent jurisdiction or other legal restraint or prohibition
(an "INJUNCTION") preventing the consummation of the Proposed Transaction shall
be in effect and no proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending. No statute, rule, regulation, order, injunction or
decree (whether temporary, preliminary or permanent) shall have been enacted,
entered, promulgated or enforced by any federal or state governmental authority
or other agency or commission or federal or state court of competent
jurisdiction, which prohibits, restricts or makes illegal the consummation of
the Proposed Transaction.
(c) TAX OPINIONS. The Buyer and the Seller shall each have received
written opinions from their respective tax counsel (Goodwin Procter LLP and
Thacher Proffitt & Wood, respectively), in form and substance reasonably
satisfactory to them, to the effect that the Merger and the Bank Merger each
will constitute a reorganization within the meaning of Section 368(a) of the
Code and such opinions shall not have been withdrawn.
41
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of
the Buyer to effect the Proposed Transaction is also subject to the satisfaction
or waiver by the Buyer at or prior to the Effective Time of the following
conditions:
(a) STOCKHOLDER AND MEMBER APPROVALS. The Company Stockholder Approvals
shall have been approved and adopted by the affirmative vote of the stockholders
of the Company and the Proposed Transaction shall have been approved by the
affirmative vote of the members of the Seller to the extent required by the OTS
and the Charter of the Seller;
(b) REPRESENTATIONS AND WARRANTIES. Those representations and
warranties of the Seller, the Company and the Seller Bank set forth in this
Agreement which are qualified by materiality or a Material Adverse Effect or
words of similar effect shall be true and correct as of the date of this
Agreement and as of the Effective Time as though made on and as of the Effective
Time (except to the extent such representations and warranties expressly relate
to a specific date, in which case such representations and warranties shall be
true and correct as of such date), and those representations and warranties of
the Seller, the Company and the Seller Bank set forth in this Agreement which
are not so qualified shall be true and correct in all material respects as of
the date of this Agreement and as of the Effective Time as though made on and as
of the Effective Time (except to the extent such representations and warranties
expressly relate to a specific date, in which case such representations and
warranties shall be true and correct in all material respects as of such date).
(c) AGREEMENTS AND COVENANTS. The Seller shall have performed in all
material respects all obligations and complied in all material respects with all
agreements or covenants of the Seller to be performed or complied with by it at
or prior to the Effective Date under this Agreement, and the Buyer shall have
received a certificate to such effect signed by the Chief Executive Officer and
Chief Financial Officer of the Seller dated as of the Effective Date.
(d) MATERIAL ADVERSE EFFECT. There shall not have occurred, after the
date of this Agreement, any change or event concerning the Seller or the
Subsidiaries which has had or which is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect.
SECTION 6.03. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations
of the Seller to effect the Merger are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Those representations and
warranties of the Buyer and the Buyer Bank set forth in this Agreement which are
qualified by materiality or a Material Adverse Effect or words of similar effect
shall be true and correct as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time (except to the
extent such representations and warranties expressly relate to a specific date,
in which case such representations and warranties shall be true and correct as
of such date), and those representations and warranties of the Buyer and the
Buyer Bank set forth in this Agreement which are not so qualified shall be true
and correct in all material respects as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time (except to the
extent such representations and warranties expressly relate to a specific date,
in which case such representations and warranties shall be true and correct in
all material respects as of such date).
42
(b) CORPORATE APPROVALS. This Agreement and the Proposed Transaction
shall have been approved and adopted by the affirmative vote of (i) the members
of Seller to the extent required by OTS regulations, and (ii) the stockholders
of the Company and the Seller Bank.
(c) AGREEMENTS AND COVENANTS. The Buyer shall have performed in all
material respects all obligations and complied in all material respects with all
of the respective agreements or covenants to be performed or complied with by
such party under this Agreement and the Seller shall have received a certificate
signed by the Chief Executive Officer and Chief Financial Officer of the Buyer
to such effect dated as of the Effective Date.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated and the
Merger and the other transactions contemplated by this Agreement may be
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval and adoption of this Agreement and the transactions contemplated in
this Agreement by the Corporators of Buyer, the stockholders of the Company or
the stockholders of Seller Bank:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Buyer and the Seller;
(b) by either the Buyer or the Seller if (i) the Effective Time shall
not have occurred on or BEFORE June 30, 2002, or such later date as the parties
may have agreed upon (the "EXPIRATION DATE"); PROVIDED, HOWEVER, that the right
to terminate this Agreement under this Section 7.01(b) shall not be available to
any party whose failure to fulfill any material obligation under this Agreement
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date;
(c) by either the Buyer or the Seller (i) ninety days after the date on
which any request or application for a regulatory approval required to
consummate the Merger shall have been denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the ninety day period following such denial
or withdrawal a petition for rehearing or an amended application has been filed
with such Governmental Entity; PROVIDED, HOWEVER, that no party shall have the
right to terminate this Agreement pursuant to this Section 7.01(c) (i) if such
denial or request or recommendation for withdrawal shall be due to the failure
of the party seeking to terminate this Agreement to perform or observe the
covenants and agreements of such party set forth herein or (ii) if any court of
competent jurisdiction or other governmental authority shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(d) by either the Buyer or the Seller (PROVIDED that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the representations or warranties set forth in this Agreement on the
part of the other party, which breach by its nature cannot be cured prior to the
43
Effective Time or within thirty business days following receipt by the breaching
party of written notice of such breach from the other party hereto;
(e) by either the Buyer or the Seller (PROVIDED that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the covenants or agreements set forth in this Agreement on the part of
the other party, which breach shall not have been cured within thirty business
days following receipt by the breaching party of written notice of such breach
from the other party hereto;
(f) by the Buyer if either of the Company Stockholder Approvals shall
not have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of stockholders or at any adjournment or postponement thereof
(provided that the Seller shall be permitted to vote the shares of Company Stock
owned by it) or if such meeting of stockholders shall not have been held or
shall have been canceled prior to the Expiration Date; by the Buyer, if, to the
extent required by applicable law, the Seller Member Approval shall not have
been obtained prior to the Expiration Date; by the Seller if the Merger shall
not have been approved and adopted by the affirmative vote of the Corporators of
the Buyer prior to the Expiration Date;
(g) by the Seller if, in response to a Superior Proposal that has not
been withdrawn and that did not otherwise result from a breach of Section 5.06,
each of the Company Board and the Seller Board shall have determined in good
faith (based on advice of its outside legal counsel) that failing to terminate
this Agreement would constitute a breach of its fiduciary duties under
applicable law; provided that simultaneously with such termination of this
Agreement, the Seller, the Company and the Seller Bank shall enter into a
definitive agreement with respect to such Superior Proposal and pay to the Buyer
the amount set forth in Section 7.02(b); provided further that (A) at least
seven business days prior to such termination, each of the Company Board and the
Seller Bank Board shall provide written notice to the Buyer advising it that the
Seller Board, the Company Board and the Seller Bank Board are prepared, subject
to any action taken by the Buyer pursuant to this sentence, to cause the Seller,
the Company and the Seller Bank to accept a Superior Proposal, specifying the
terms and conditions thereof and identifying the person making such proposal (it
being understood and agreed that any amendment or modification of an Acquisition
Proposal shall result in a new Acquisition Proposal for which a new seven
business day period following a new notice referred to above shall be required)
and (B) the Seller, the Company and the Seller Bank shall, and shall cause its
outside legal counsel and financial advisor to, negotiate in good faith with the
Buyer to make adjustments in the terms and conditions of this Agreement as would
enable the Seller, the Company and the Seller Bank to proceed with the
transactions contemplated hereby on such adjusted terms;
(h) by the Buyer if (A) the Company Board, or, if applicable, the
Seller Board, shall have withdrawn or modified in a manner adverse to the Buyer
its approval or recommendation of this Agreement or the Proposed Transaction,
approved or recommended any Acquisition Proposal, or approved, recommended,
executed or entered into an agreement in principle or definitive agreement
relating to an Acquisition Proposal, or proposed or resolved to do any of the
foregoing, (B) the Company Board and the Seller Board shall have provided the
notice of the Buyer described in the second provision of Section 7.01(g), or (C)
a tender or exchange offer relating to securities of the Company shall have been
commenced by a third party and the Company shall not have sent or given to its
stockholders pursuant to Rule 14e-2 under the Exchange Act, within ten business
days after such tender or exchange offer is first published,
44
sent or given, a statement disclosing that the Company recommends rejection of
such tender or exchange offer;
(i) by the Buyer if the Seller, the Company or the Seller Bank shall
have breached any representation, warranty, covenant or other agreement
contained in Section 5.06 of this Agreement;
SECTION 7.02. EFFECT OF TERMINATION; EXPENSES.
(a) In the event of the termination of this Agreement pursuant to
Section 7.01, this Agreement shall forthwith become void (except as set forth in
Section 8.03), and there shall be no liability on the part of any party hereto,
except (i) each party shall remain liable in any action at law or otherwise for
any liabilities or damages arising out of its gross negligence or willful breach
of any provision of this Agreement, and (ii) as otherwise provided in this
Section 7.02.
(b) If (i) the Seller terminates this Agreement pursuant to Section
7.01(g), (ii) the Buyer terminates this Agreement pursuant to Section 7.01(f)
and either of the Company Stockholder Approvals shall not have been obtained
(except in the case where Seller has received a written opinion of its outside
legal counsel to the effect that Seller is prohibited by the OTS from voting its
shares of Company Stock at the Company Stockholder's Meeting by virtue of its
controlling interest in the Company, and such prohibition then results in either
of the Company Stockholder Approvals not having been obtained by reason of the
failure to obtain the required vote), or (iii) the Buyer terminates this
Agreement pursuant to Section 7.01(h) or (i),then the Seller shall pay to the
Buyer an amount in cash equal to $1,000,000 (the "SPECIAL PAYMENT").
(c) Any payment required by this Section 7.02 shall be payable by the
Seller to the Buyer by wire transfer of immediately available funds to an
account designated by the Buyer. Such payments shall be made (x) simultaneously
with the termination of this Agreement by the Seller pursuant to Section 7.01(g)
or (y) no later than one business day after the termination of this Agreement by
the Buyer pursuant to Section 7.01(f), (h) or (i).
(d) In the event of a termination under circumstances that would
trigger a payment under this Section 7.02, any standstill provisions contained
in the Confidentiality Agreement shall terminate.
(e) Except as otherwise provided in this Section 7.02, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, whether or not any of the transactions contemplated by this Agreement
is consummated. In the event, however, this Agreement is terminated by Seller
pursuant to Section 7.01(f), Buyer shall reimburse Seller up to $250,000 of
reasonable out-of-pocket expenses actually incurred by Seller in connection with
this Agreement and in the event this Agreement is terminated by Buyer pursuant
to Section 7.01(f), Seller shall reimburse Buyer up to $100,000 of reasonable
out-of-pocket expenses actually incurred by Buyer in connection with this
Agreement (except under circumstances where the Buyer is entitled to the Special
Payment).
SECTION 7.03. AMENDMENT AND WAIVER. Subject to applicable law, at any
time prior to the consummation of the transactions contemplated by this
Agreement, the parties may
45
(a) amend this Agreement, (b) extend the time for the performance of any of the
obligations or other acts of either party hereto, (c) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained in Article IV hereof or otherwise. Any agreement on the
part of a party hereto to any extension or waiver shall be valid only if set
forth in an instrument in writing signed by a duly authorized officer on behalf
of such party, but such waiver or failure to insist on strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. CLOSING. Subject to the terms and conditions of this
Agreement, the closing of the Merger, the Bank Merger and the other transactions
provided for herein (the "CLOSING") will take place at 9:00 a.m. on a date to be
specified by the parties, within ten business days after the satisfaction or
waiver (subject to applicable law) of the latest to occur of the conditions set
forth in Section 6.01 (the "CLOSING Date"), at the offices of Goodwin Procter
LLP, One Exchange Place, Boston, Massachusetts, unless another time, date or
place is agreed to in writing by the parties hereto.
SECTION 8.02. ALTERNATIVE STRUCTURE. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Effective Time, the Buyer
shall be entitled to revise the structure of the Merger and the other
transactions contemplated hereby, PROVIDED that (i) there are no material
adverse accounting or federal or state income tax consequences to the Seller
Company and its stockholders as a result of the modification; (ii) there are no
material adverse changes to the benefits and other arrangements provided to or
on behalf of the Seller's directors, officers and other employees; and (iii)
such modification will not be likely to delay materially or jeopardize receipt
of any required regulatory approvals or other consents and approvals relating to
the consummation of the Merger. This Agreement and any related documents shall
be appropriately amended in order to reflect any such revised structure.
SECTION 8.03. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Article I and Sections 5.07 and 5.08 shall survive the Effective Time
indefinitely and those set forth in Section 5.02(c) and in Sections 5.02(e),
Article VII and Article VIII hereof shall survive termination indefinitely.
SECTION 8.04. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 8.04):
46
if to the Buyer:
Danvers Bancorp, Inc.
1 Conant Street
Danvers, MA 01923
Attention: Kevin T. Bottomley
President and Chief Executive Officer
with a copy to:
Goodwin Procter LLP
One Exchange Place
Boston, Massachusetts 02109
Facsimile: (617) 523-1231
Attention: William P. Mayer
Patricia S. Mugavero
if to the Seller:
Revere, MHC
310 Broadway
Revere, MA 02151
Facsimile:
Attention: James J. McCarthy
President and Chief Executive Officer
with a copy to:
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, N.W.
Washington, DC 20006
Telephone: (202) 347-8400
Facsimile: (202) 626-1930
Attention: Richard Schaberg
SECTION 8.05. CERTAIN DEFINITIONS. For purposes of this Agreement,
the term:
(a) "AFFILIATE" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person, including, without limitation,
any partnership or joint venture in which the person (either alone, or through
or together with any subsidiary) has, directly or indirectly, an interest of 5%
or more;
(b) "BUSINESS DAY" means any day on which the principal offices of the
OTS in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of Boston;
(c) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
47
(d) "KNOWLEDGE" as used herein in the context of the Seller shall mean
actual knowledge of the Seller or its Subsidiaries after reasonable
investigation and as used herein in the context of the Buyer shall mean actual
knowledge of the Buyer or its subsidiaries after reasonable investigation.
(e) "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government;
and
(f) "SUBSIDIARY" or "SUBSIDIARIES" of the Surviving Corporation, the
Buyer, the Seller or any other person means an affiliate controlled by such
person, directly or indirectly, through one or more intermediaries, except as
otherwise defined herein.
SECTION 8.06. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
SECTION 8.07. ENTIRE AGREEMENT. This Agreement (including the
Disclosure Schedules and Exhibits) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof except for the Confidentiality
Agreement.
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 8.09. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement (other than Sections 5.07 and 5.08), express or implied, is intended
to or shall confer upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 8.10. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained in
this Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions thereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
48
SECTION 8.11. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts
applicable to contracts executed in and to be performed in that State. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any state or federal court sitting in the City of
Boston.
SECTION 8.12. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 8.13. INTERPRETATION. When a reference is made in this
Agreement to Sections, Exhibits, Annexes or Schedules, such reference shall be
to a Section of or Exhibit, Annex or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The phrases "the date of this Agreement," "the
date hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to be April 27, 2001.
SECTION 8.14. COUNTERPARTS. This Agreement may be executed (including
by facsimile) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
* * * * *
49
IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement
to be executed as a sealed instrument as of the date first written above by
their respective officers thereunto duly authorized.
DANVERS BANCORP, INC.
Attest:
/s/ Rebecca S. Skerry By: /s/ Kevin T. Bottomley
- ------------------------------ -----------------------------------
Secretary Kevin T. Bottomley
Title: President and Chief Executive Officer
DANVERS SAVINGS BANK
Attest:
/s/ Rebecca S. Skerry By: /s/ Kevin T. Bottomley
- ------------------------------ -------------------------------------
Secretary Kevin T. Bottomley
Title: President and Chief Executive Officer
REVERE, MHC
Attest:
/s/ Ernest F. Becker By: /s/ James J. McCarthy
- ------------------------------ --------------------------------------
Secretary James J. McCarthy
Title: President and Chief Executive Officer
RFS BANCORP, INC.
Attest:
/s/ Ernest F. Becker By: /s/ James J. McCarthy
- ------------------------------ --------------------------------------
Secretary James J. McCarthy
Title: President and Chief Executive Officer
REVERE FEDERAL SAVINGS BANK
Attest:
/s/ Ernest F. Becker By: /s/ James J. McCarthy
- ------------------------------ ---------------------------------------
Secretary James J. McCarthy
Title: President and Chief Executive Officer
50
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of June 5, 2001
(this "Amendment"), by and among DANVERS BANCORP, INC., a Massachusetts
corporation (the "BUYER"), DANVERS SAVINGS BANK, a wholly-owned subsidiary of
Buyer and a savings bank chartered by the Commonwealth of Massachusetts (the
"BUYER BANK"), REVERE, MHC, a federally-chartered mutual holding company (the
"SELLER"), RFS BANCORP, INC., a federally-chartered stock mid-tier holding
company and subsidiary of Seller (the "COMPANY"), and REVERE FEDERAL SAVINGS
BANK, a federally-chartered stock savings bank and wholly-owned subsidiary of
the Company (the "SELLER BANK"). Each of Buyer, Buyer Bank, Seller, Company, and
Seller Bank is sometimes individually referred to herein as a "party," and
Buyer, Buyer Bank, Seller, Company, and Seller Bank are sometimes collectively
referred to herein as the "parties."
WHEREAS, the parties entered into that certain Agreement and Plan of
Merger dated as of April 27, 2001 (the "Merger Agreement");
WHEREAS, the Merger Agreement set forth a proposed transaction
structure for the merger of the the Seller into the Buyer and Seller Bank into
Buyer Bank which involved the liquidation of the Company;
WHEREAS, Section 8.02 of the Merger Agreement provides that prior to
the Effective Time, the Buyer shall be entitled to revise the structure of the
Merger and the other transactions contemplated by the Merger Agreement provided
that (i) there are no material adverse accounting or federal or state income tax
consequences to the Company and its stockholders as a result of the
modification; (ii) there are no material adverse changes to the benefits and
other arrangements provided to or on behalf of the Seller's directors, officers
and other employees; and (iii) such modification will not be likely to delay
materially or jeopardize receipt of any required regulatory approvals or other
consents and approvals relating to the consummation of the Merger;
WHEREAS, the parties have determined that the alternative transaction
structure set forth herein confers tax advantages on the parties that make the
alternative transaction structure a more desirable structure, will have no
material adverse effect on the benefits to be provided to Seller's directors,
officers and other employees, and will not delay materially or jeopardize the
receipt of required regulatory approvals or other consents and approvals
relating to the consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:
51
1. Article I of the Merger Agreement shall be amended as follows:
SECTION 1.01. THE REVERSE STOCK SPLIT. Subject to the terms
and conditions of this Agreement and applicable requirements of the
Office of Thrift Supervision (the "OTS"), the Company will amend its
organizational documents (the "CHARTER") as necessary by filing with
the OTS the form of amendment (the "AMENDMENT") attached hereto as
EXHIBIT B to increase the par value of the Company Stock (defined in
Section 2.03 hereof) and effect a reverse stock split pursuant to which
1/494,767 shares of Company Stock will be issued in exchange for each
share of Company Stock issued and outstanding immediately prior to the
Effective Time (the "REVERSE STOCK SPLIT"). Fractional shares shall be
cancelled and shall be converted automaticaly into the right of the
holder of such fractional share to receive cash in the amount of $22.75
per share (pre-split) (the "CASH CONSIDERATION").
SECTION 1.02. THE INTERIM FORMATION. Immediately following the
Reverse Stock Split, the Company will exchange its federal stock
holding company charter for an interim stock savings association
charter. The resulting interim stock savings association is hereafter
referred to as "Interim."
SECTION 1.03. THE INTERIM MERGER. Subject to the terms and
conditions of the Agreement and Plan of Merger by and between Seller
Bank and Interim, attached hereto as EXHIBIT G, Interim shall be merged
with and into the Seller Bank, with the Seller Bank as the surviving
bank (the "Interim Merger"). Thereafter, Seller Bank shall be a
wholly-owned subsidiary of the Seller.
SECTION 1.04. THE MERGER. Subject to the terms and conditions
of this Agreement, in accordance with the Massachusetts Business
Corporation Law (the "MBCL"), at the Effective Time, the Seller shall
merge with and into the Buyer. Buyer shall be the surviving corporation
(hereinafter sometimes called the "SURVIVING CORPORATION") in the
Merger, and shall continue its corporate existence under the laws of
the Commonwealth of Massachusetts. The name of the Surviving
Corporation shall continue to be Danvers Bancorp, Inc. Upon
consummation of the Merger, the separate corporate existence of the
Seller shall terminate.
SECTION 1.05. THE BANK MERGER. Subject to the terms and
conditions of the Agreement and Plan of Merger by and between Seller
Bank and Buyer Bank attached as EXHIBIT C hereto and applicable
requirements of the Federal Deposit Insurance Corporation (the "FDIC"),
the OTS and the Commissioner of Banks of the Commonwealth of
Massachusetts (the "MASSACHUSETTS COMMISSIONER"), immediately following
the Merger, the Seller Bank will merge with and into the Buyer Bank. As
promptly as practicable following the Interim Merger, the Cash
Consideration shall be paid to the holders of rights to receive such
Cash Consideration pursuant to the Reverse Stock Split.
52
The members of Seller and the depositors of Seller Bank shall be
provided with liquidation and stock subscription rights of the same
nature in the Buyer as they had in Seller to the extent provided by
applicable law, including the original opening dates in Buyer Bank. The
former main office and branch of Seller Bank will be operated as a
separate division of Buyer Bank for a period of one year following the
Effective Time.
SECTION 1.06. EFFECTIVE TIME. As promptly as practicable after
all of the conditions set forth in Article VI shall have been satisfied
or, if permissible, waived by the party entitled to the benefit of the
same, the Buyer and the Seller shall duly execute and file articles of
merger (the "ARTICLES OF MERGER") with the Secretary of State of the
Commonwealth of Massachusetts (the "MASSACHUSETTS SECRETARY"), in
accordance with the MBCL and the Merger shall become effective on the
date (the "EFFECTIVE DATE") and at such time (the "EFFECTIVE TIME") as
set forth in the Articles of Merger.
SECTION 1.07. EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided herein and in the applicable
provisions of the MBCL and any other applicable provisions of
Massachusetts law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Buyer and the Seller shall
vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Buyer and the
Seller shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
SECTION 1.08. ARTICLES OF ORGANIZATION. Unless otherwise
determined by the Buyer prior to the Effective Time, at the Effective
Time, the Articles of Organization of the Buyer as in effect
immediately prior to the Effective Time shall be the Articles of
Organization of the Surviving Corporation until thereafter further
amended as provided by law and such Articles of Organization.
SECTION 1.09. BY-LAWS. Unless otherwise determined by the
Buyer prior to the Effective Time, the By-Laws of the Buyer, as in
effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended as provided by law,
the Articles of Organization of the Surviving Corporation and such
By-Laws.
SECTION 1.10. DIRECTORS AND OFFICERS. The initial trustees of
the Surviving Corporation shall consist of (i) the trustees of the
Buyer immediately prior to the Effective Time, (ii) the President and
Chief Executive Officer of the Seller immediately prior to the
Effective Time, and (iii) such other current director of the Seller as
shall be determined by the Buyer. In addition, the Buyer will form an
advisory board (the "ADVISORY Board") consisting of those current
directors of Seller set forth on Exhibit D. The Advisory Board shall
meet quarterly and shall have an initial term of one year with the
expectation of a one
53
(1) year renewal. Annual Advisory Board fees will equal $5,000 per
non-employee advisory director. Certain officers as set forth on
EXHIBIT E of the Buyer and the Seller immediately prior to the
Effective Time, shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
SECTION 1.11. TAX CONSEQUENCES. It is intended by the parties
that the Merger and the Bank Merger each shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and
that this Agreement shall constitute a "plan of reorganization" for the
purposes of Section 368 of the Code.
2. All provisions of the Merger Agreement not specifically modified
hereby shall continue in full force and effect.
3. All capitalized terms not otherwise defined herein shall have the
meaning set forth in the Merger Agreement.
IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement
to be executed as a sealed instrument as of the date first written above by
their respective officers thereunto duly authorized.
DANVERS BANCORP, INC.
Attest:
By:
- ---------------------------------- --------------------------------
Secretary Kevin T. Bottomley
Title: President and Chief
Executive Officer
DANVERS SAVINGS BANK
Attest:
By:
- ---------------------------------- --------------------------------
Secretary Kevin T. Bottomley
Title: President and Chief
Executive Officer
54
REVERE, MHC
Attest:
By:
- ---------------------------------- --------------------------------
Secretary James J. McCarthy
Title: President and Chief
Executive Officer
RFS BANCORP, INC.
Attest:
By:
- ---------------------------------- --------------------------------
Secretary James J. McCarthy
Title: President and Chief
Executive Officer
REVERE FEDERAL SAVINGS BANK
Attest:
By:
- ---------------------------------- --------------------------------
Secretary James J. McCarthy
Title: President and Chief
Executive Officer
55
EXHIBITS
Voting Agreements........................................................ A
Charter Amendment........................................................ B
Bank Merger Agreement.................................................... C
Advisory Board........................................................... D
Surviving Corporation Officers........................................... E
McCarthy Employment Agreement............................................ F
56
Exhibit A Voting Agreements (See Appendix E to the Proxy Statement)
57
Exhibit B Charter Amendment (See Appendix C to the Proxy Statement)
58
Exhibit C Bank Merger Agreement (See Appendix B to the Proxy Statement)
59
EXHIBIT D
Revere Advisory Board
Arno P. Bommer
Ernest L. Becker
Theodore Charles
Anthony Conte
Carmen Mattuchio
Jack Marchese
Mark Robinson
John Verrengia
60
EXHIBIT E
OFFICERS OF THE SURVIVING CORPORATION
KEVIN T. BOTTOMLEY, President and Chief Executive Officer
James J. McCarthy, Executive Vice President
Roger A. Eastman, Executive Vice President/Chief Operating Officer
L. Mark Panella, Sr. Vice President and Chief Financial Officer
Rebecca S. Skerry, Clerk
61
EXHIBIT F
[Letterhead of Danvers Savings Bank]
April 27, 2001
James J. McCarthy
President and Chief Executive Officer
Revere, MHC
310 Broadway
Revere, Massachusetts 02151
Dear Jim:
In connection with the merger of Revere, MHC ("Revere") with and into
Danvers Bancorp, Inc. ("Bancorp") and the merger of Revere Federal Savings Bank
("Revere Bank") with and into Danvers Savings Bank ("Danvers Bank") (the
"Proposed Transaction") upon the terms and conditions set forth in the Agreement
and Plan of Merger by and between Bancorp, Danvers Bank, Revere, RFS Bancorp,
Inc. ("RFS") and Revere Bank dated as of April 27, 2001 (the "Agreement"), this
letter is being provided to outline the terms of your engagement with Bancorp
and Danvers Bank following the consummation of the Proposed Transaction.
Your employment with Bancorp will commence immediately upon the
consummation of the Proposed Transaction. Your title will be Executive Vice
President. You will hold this position until the earlier of December 31, 2002 or
such time as the position of Chief Operating Officer ("COO") of Bancorp becomes
vacant, at which time you will be appointed to the position of COO of Bancorp.
Upon consummation of the Proposed Transaction and for a period of one
(1) year thereafter, Revere Bank will operate as a division of Danvers Bank.
During such time, you will serve as President and Chief Executive Officer of the
division. You will be appointed to the Board of Directors of Bancorp and the
Board of Directors of Danvers Bank immediately after the consummation of the
Proposed Transaction.
Your annual base salary for service to Bancorp and Danvers Bank shall
be $175,000, subject to an annual review with the first review to be held during
December 2002. You will be eligible to participate in Bancorp's annual incentive
plan, which will provide you with a discretionary bonus of up to 35% of base
salary.
You shall also be entitled to the following additional benefits:
62
i. You shall be entitled to receive a retention payment, payable upon the
consummation of the Proposed Transaction, in the amount of $265,000
(the "Retention Payment"), PROVIDED, HOWEVER, that if you are
terminated for cause or you voluntarily resign from any position you
hold with Bancorp or Danvers Bank within six (6) months of the
commencement of the Term (defined below), you shall reimburse Bancorp
for the full amount of the Retention Payment at such time and in such
manner as Bancorp shall direct.
ii. You shall be eligible to participate in the Danvers Savings Bank
Phantom Stock Plan, pursuant to which you will be awarded an initial
grant of 6,000 Phantom Shares (as defined in the plan) for 2002.
iii. Bancorp shall provide you with the use of a leased automobile of a
similar value to that provided to you by RFS and Revere Bank prior to
the Proposed Transaction and shall reimburse you for all reasonable
business-related expenses associated with the lease of such automobile
and its maintenance and operation.
iv Bancorp shall reimburse you for costs and expenses to maintain full
membership in Bear Hill Country Club.
v. Bancorp shall provide expense reimbursement for travel and
accommodations with respect to no fewer than two trade association
conventions per year, subject to Bancorp's expense reimbursement
policy.
vi. You shall be entitled to four (4) weeks of annual vacation.
vii. You shall be provided with a credit card for business expenses.
viii. You shall be eligible to participate in any employee benefit plans,
medical insurance plans, life insurance plans, disability income plans,
retirement plans, expense reimbursement plans and other benefit plans
which Bancorp or Danvers Bank may have in effect from time to time for
the benefit of their senior executives, subject to the terms of such
plans, including the Supplemental Executive Retirement Plan for senior
executives of Bancorp as such plan may be amended from time to time.
Your term of employment pursuant this letter shall be for a period of
one year and six months following the consummation of the Proposed Transaction
("Term"). Notwithstanding the foregoing, your employment may be terminated by
Bancorp, with or without cause, upon written notice to you and by a vote of the
Board of Directors. If you are terminated without cause during the Term or you
voluntarily resign during the Term but after the expiration of six (6) months
following the consummation of the Proposed Transaction, you shall be entitled to
receive an amount equal to twice your then-current base salary. In addition, if
you are terminated without cause or you resign from all positions you hold with
Bancorp and Danvers Bank effective as of a date that is later than six (6)
months following the consummation of the Proposed Transaction and earlier than
five (5) years following the consummation of the Proposed Transaction, you shall
be entitled to receive a supplemental payment in the amount of $250,000.
63
The following shall constitute "cause" for termination: personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) or final cease and desist order, or any material breach of this letter
agreement, in each case as measured against standards generally prevailing at
the relevant time in the savings and community banking industry.
During the Term or any subsequent renewal period and during the
one-year period following your resignation from all positions you hold with
Bancorp and Danvers Bank, you (i) will not, directly or indirectly, whether as
owner, partner, shareholder, consultant, agent, employee, co-venturer or
otherwise, engage, participate, assist or invest in any business within 30 miles
of Bancorp's main offices at 1 Conant Street, Danvers, Massachusetts which is
competitive with any business which Bancorp or Danvers Bank conducts or proposes
to conduct at any time during your employment; (ii) will refrain from directly
or indirectly employing, attempting to employ, recruiting or otherwise
soliciting, inducing or influencing any person to leave employment with Bancorp
or Danvers Bank (other than termination of employment of subordinate employees
undertaken in the course of your employment with Bancorp or Danvers Bank; and
(iii) will refrain from soliciting or encouraging any customer or supplier to
terminate or otherwise modify adversely its business relationship with Bancorp
or Danvers Bank. Notwithstanding the foregoing, you may own up to five percent
(5%) of the outstanding stock of a publicly held corporation which is
competitive with the business of Bancorp or Danvers Bank.
If you agree with the terms of employment set forth herein, please
countersign this letter where indicated below and return it to my attention.
Bancorp and Danvers Bank is pleased to present this offer of employment to you
and we look forward to a productive working relationship.
Very truly yours,
/s/ Kevin T. Bottomley
Kevin T. Bottomley
President and Chief Executive Officer
SEEN AND AGREED:
/s/ James J. McCarthy
- ----------------------------
James J. McCarthy
64
Appendix B
AGREEMENT AND PLAN OF MERGER
(BANK MERGER AGREEMENT)
AGREEMENT AND PLAN OF MERGER, dated as of ___________, 2001 (the
"AGREEMENT"), pursuant to the General Laws of The Commonwealth of Massachusetts
(the "MASSACHUSETTS GENERAL LAWS"), by and between DANVERS SAVINGS BANK, a
Massachusetts-chartered savings bank (the "BUYER BANK"), and REVERE FEDERAL
SAVINGS BANK, a federally-chartered stock savings association (the "SELLER
BANK").
WHEREAS, DANVERS BANCORP, INC., a Massachusetts corporation (the
"BUYER"), Buyer Bank, REVERE, MHC, a federally-chartered mutual holding company
(the "SELLER"), RFS BANCORP, INC., a federally-chartered stock mid-tier holding
company and subsidiary of Seller, and Seller Bank have entered into an Agreement
and Plan of Merger, dated as of _____________, 2001, as such agreement may be
subsequently amended or modified (the "AGREEMENT AND PLAN OF MERGER"), providing
for the merger of the Seller into the Buyer (the "MERGER"); and
WHEREAS, in connection with the Agreement and Plan of Merger, this
Agreement provides for the merger (the "BANK MERGER") of the Seller Bank with
and into the Buyer Bank and with Buyer Bank as the surviving bank in accordance
with the Massachusetts General Laws, promptly following the consummation of the
Merger;
NOW, THEREFORE, the Buyer Bank and the Seller Bank hereby agree as
follows:
ARTICLE I
THE BANK MERGER
1.01 THE BANK MERGER. The constituent corporations to the Bank Merger
shall be the Buyer Bank and the Seller Bank. Subject to the terms and conditions
of this Agreement and the Agreement and Plan of Merger, in accordance with
Section 36 of Chapter 172 of the Massachusetts General Laws, at the Effective
Time (as defined in Section 1.02 hereof), the Seller Bank shall merge with and
into the Buyer Bank. The Buyer Bank shall be the surviving bank (sometimes
referred to herein as the "SURVIVING BANK") of the Bank Merger and shall
continue its corporate existence as a Massachusetts-chartered savings bank under
the Massachusetts General Laws following consummation of the Bank Merger. Upon
consummation of the Bank Merger, the separate corporate existence of the Seller
Bank shall cease.
1.02 EFFECTIVE TIME. The Bank Merger shall become effective at 11:59
p.m. on the date that this Agreement and the approval of the Commissioner of
Banks of the Commonwealth of Massachusetts are filed with the Secretary of State
of the Commonwealth of Massachusetts. The term "EFFECTIVE TIME" shall be the
date and time when the Bank Merger becomes effective.
1.03 EFFECTS OF THE BANK MERGER. At and after the Effective Time, the
Bank Merger shall have the effects provided herein and set forth in the
applicable provisions of the Massachusetts General Laws. Without limiting the
generality of the foregoing and subject thereto, all the property, rights,
privileges, powers and franchises of the Seller Bank and the Buyer Bank shall
vest in the Surviving Bank, and all debts, liabilities, obligations,
restrictions, disabilities and duties of the Seller Bank and the Buyer Bank
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Bank.
1.04 ARTICLES OF ORGANIZATION. At the Effective Time, the Articles of
Organization of the Buyer Bank, as in effect immediately prior to the Effective
Time, shall be the Articles of Organization of the Surviving Bank, until
thereafter amended in accordance with applicable law and such Articles of
Organization.
1.05 BY-LAWS. At the Effective Time, the By-Laws of the Buyer Bank, as
in effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Bank until thereafter amended in accordance with applicable law, the
Articles of Organization of the Surviving Bank and such By-Laws.
1.06 NAME. At the Effective Time, the name of the Surviving Bank shall
be "DANVERS SAVINGS BANK," until thereafter amended in accordance with
applicable law and the Articles of Organization of the Surviving Bank.
1.07 CAPITAL STOCK. Unless otherwise determined by the Buyer Bank prior
to the Effective Time by delivery to the Seller Bank of an addendum to this
Agreement, from and after the Effective Time, the total number of shares and the
par value of each class of stock that the Surviving Bank shall be authorized to
issue shall be [____SHARES OF COMMON STOCK, PAR VALUE _____ PER SHARE], until
thereafter amended in accordance with applicable law and the Articles of
Organization of the Surviving Bank.
1.08 DIRECTORS AND OFFICERS.
(a) The initial directors of the Surviving Bank shall consist of (i)
the directors of the Buyer Bank immediately prior to the Effective Time, (ii)
and the President and Chief Executive Officer of the Seller Bank, and (iii) such
other current director of the Seller Bank as shall be determined by the Buyer
Bank.
(b) For one year after the Effective Time, the Seller Bank will
function as a division of the Buyer (the "DIVISION"), during which time the
President and Chief Executive Officer of the Seller Bank immediately prior to
the Effective Date will serve as President and Chief Executive Officer of the
Division. Certain officers, as set forth on EXHIBIT 1 hereto, of the Buyer Bank
and the Seller Bank immediately prior to the Effective Time shall be the initial
officers of the Surviving Bank, in each case until their respective successors
are duly elected or appointed and qualified. In addition, the Buyer will form an
advisory board (the "ADVISORY BOARD") consisting of those current directors of
Seller set forth on EXHIBIT 2. The Advisory Board shall meet
quarterly and shall have an initial term of one (1) year with the expiration of
a one(1) year renewal. Annual Advisory board fees will equal $5,000 per
non-employee advisory director.
1.09 MAIN OFFICE. At the Effective Time, the main office of the
Surviving Bank shall be located in Danvers, Massachusetts.
ARTICLE II
REPRESENTATIONS
Each of the Buyer Bank and the Seller Bank represents that this
Agreement has been duly authorized, executed and delivered by such party and
constitutes a legal, valid and binding obligation of such party, enforceable
against it in accordance with the terms hereof.
ARTICLE III
TERMINATION
Consummation of the Bank Merger contemplated hereunder is conditioned
upon the satisfaction of all conditions set forth in Article VI of the Agreement
and Plan of Merger. This Agreement shall terminate and forthwith become void
automatically and without any action on the part of the Buyer Bank or the Seller
Bank immediately upon the termination of the Agreement and Plan of Merger in
accordance with Article VII thereof, and there shall be no further liability on
the part of the Buyer Bank or the Seller Bank upon such termination.
IN WITNESS WHEREOF, the Buyer Bank and the Seller Bank have each caused
this Agreement to be executed as a sealed instrument by their duly authorized
officers as of the day and year first above written.
By:
Name: Title:
Attest:
By: /s/ Kevin T. Bottomley
/s/ Rebecca S. Skerry ---------------------------
- -------------------------- Name: Kevin T. Bottomley
Clerk Title: President and CEO
Danvers Savings Bank
By:
Name:
Title:
Attest:
By: /s/ James J. McCarthy
/s/ Judith E. Tenaglia ---------------------------
- -------------------------- Name: James J. McCarthy
Title: President and CEO
APPENDIX C
----------------------------------
PROPOSED AMENDMENT
TO THE
FEDERAL STOCK CHARTER
OF
RFS BANCORP, INC.
----------------------------------
The proposed amendment to Section 5 of the Federal Stock Charter of
RFS Bancorp, Inc. is as follows:
'SECTION 5: CAPITAL STOCK. The total number of shares of all
classes of the capital stock that the Company has the authority to
issue is 6,000,000 of which 5,000,000 shares shall be common stock, par
value $4,947.67 per share, and of which 1,000,000 shares shall be
serial preferred stock, no par value per share. The shares may be
issued from time to time as authorized by the Board of Directors
without the approval of the stockholders, except as otherwise provided
in this Section 5 or to the extent that such approval is required by
governing law, rule, or regulation. The consideration for the issuance
of the shares shall be paid in full before their issuance and shall not
be less than the par or stated value. Neither promissory notes nor
future services shall constitute payment or part payment for the
issuance of shares of the Stock Holding Company. The consideration for
the shares shall be cash, tangible or intangible property (to the
extent direct investment in such property would be permitted to the
Company), labor or services actually performed for the Company, or any
combination of the foregoing. In the absence of actual fraud in the
transaction, the value of such property, labor, or services, as
determined by the Board of Directors of the Company, shall be
conclusive. Upon payment of such consideration, such shares shall be
deemed to be fully paid and nonassessable. In the case of a stock
dividend, that part of the retained earnings of the Company which is
transferred to common stock or paid-in capital accounts upon the
issuance of shares as a stock dividend shall be deemed to be the
consideration for their issuance;'"
Appendix D
[Letterhead of Ryan, Beck and Co., LLC]
June 5, 2001
The Board of Directors
RFS Bancorp, Inc.
310 Broadway
Revere, MA 02151
The Board of Directors
Revere, MHC
310 Broadway
Revere, MA 02151
Members of the Boards:
You have requested our opinion as investment bankers that the consideration
to be received in the Merger (the "Merger") between RFS Bancorp, Inc. ("RFS
Bancorp"), Revere, MHC ("Revere MHC"), Revere Federal Savings Bank ("Revere
Savings"), and Danvers Bancorp, Inc. ("Danvers") and Danvers Savings Bank
("Danvers Bank"), pursuant to the Agreement and Plan of Merger dated April
27, 2001 as amended on June 5, 2001, ("Merger Agreement") is fair to the
minority shareholders of RFS Bancorp common stock from a financial point of
view. You have also requested our opinion as to the fairness of the Depositor
Conversion, as hereinafter defined, from a financial point of view to the
members of Revere MHC as depositors of Revere Savings. You have requested
that we review these opinions on an inseparable basis and not evaluate the
fairness to minority shareholders of RFS Bancorp or members of Revere MHC
separately.
Pursuant to the Merger Agreement, on the Effective Date, the Board of
Directors of RFS Bancorp will increase the par value of RFS Bancorp Common
Stock and declare a reverse stock split whereby each shareholder of RFS
Bancorp will receive 1/494,767 shares of RFS Bancorp Common Stock for each
outstanding share of RFS Bancorp Common Stock (the "Reverse Stock Split").
Each shareholder will then be paid $22.75 per share, before giving effect to
the Reverse Stock Split, in cash, in lieu of issuing fractional shares. After
the Reverse Stock Split, RFS Bancorp will exchange its federal stock holding
company charter for an interim federal stock savings association charter (the
"Interim Entity"). The Interim Entity will merge with and into Revere Savings
with Revere Savings as the surviving entity. Revere MHC will then merge with
and into Danvers with Danvers as the surviving entity. Finally, Revere
Savings will merge with and into Danvers Bank with Danvers Bank as the
surviving entity. The members of Revere MHC who are the depositors of Revere
Savings, shall be provided with liquidation and stock
RFS Bancorp, Inc.
June 5, 2001
Page 2
subscription rights of the same nature in Danvers Bank as they had in Revere
MHC (the "Depositor Conversion").
Ryan, Beck & Co., LLC as a customary part of its investment banking business, is
engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisitions and other corporate transactions. In
conducting our investigation and analysis of the Merger, we have met with
members of senior management of RFS Bancorp to discuss RFS Bancorp's operations,
historical financial statements, strategic plans and future prospects. We have
reviewed and analyzed material prepared in connection with the Merger, including
but not limited to the following: (i) the Merger Agreement and related
documents; (ii) RFS Bancorp's Annual Reports to Shareholders and Annual Reports
on Form 10-KSB for the years ended September 30, 2000 and 1999 and RFS Bancorp's
Quarterly Reports on Form 10-QSB for the periods ended December 31, 2000, June
30, 2000, March 31, 2000 and December 31, 1999; (iii) Danvers' Audited Financial
Statements for the years ended December 31, 2000, 1999 and 1998 and Call Reports
filed with the Federal Deposit Insurance Corporation for the quarters ended
March 31, 2001, September 30, 2000, June 30, 2000 and March 31, 2000; (iv)
certain operating and financial information provided to Ryan, Beck by the
management of RFS Bancorp relating to its business and prospects; (v) the
publicly available financial data of thrift organizations which Ryan, Beck
deemed generally comparable to RFS Bancorp; (vi) the historical stock prices and
trading volume of RFS Bancorp's common stock; (vii) an analysis of the pro forma
impact on stockholders of RFS Bancorp and depositors of Revere Savings of
alternative strategies as an independent institution, including the option of
remaining in mutual holding company form and various options regarding the
timing and pro forma impact of a second step conversion; (viii) the financial
terms of other recently completed second step conversions of mutual holding
companies and (ix) Danvers' financial condition as of December 31, 2000 with
respect to Danvers' ability to complete the Merger from a cash and capital
perspective, and the impact of the Merger on Danvers' tangible equity. We also
conducted or reviewed such other studies, analyses, inquiries and examinations
as we deemed appropriate.
While we have taken care in our investigation and analyses, we have relied upon
and assumed the accuracy, completeness and fairness of the financial and other
information provided to us by the respective institutions or which was publicly
available and have not assumed any responsibility for independently verifying
such information. We have also relied upon the management of RFS Bancorp as to
the reasonableness and achievability of the financial and operating forecasts
and projections (and the assumptions and bases therefor) provided to us and in
certain instances we have made certain adjustments to such financial and
operating forecasts which in our judgment were appropriate under the
circumstances. In addition, we have assumed with your consent that such
forecasts and projections reflect the best currently available estimates and
judgments of management. Ryan, Beck is not an expert in evaluating loan and
lease portfolios for purposes of assessing the adequacy of the allowances for
losses. Therefore, Ryan, Beck has not assumed any responsibility for making an
independent evaluation of the adequacy of the allowance for loan losses set
forth in the balance sheets of RFS Bancorp and Danvers at December 31, 2000, and
Ryan, Beck assumed such allowances were adequate and complied fully
RFS Bancorp, Inc.
June 5, 2001
Page 3
with applicable law, regulatory policy, sound banking practice and policies of
the Securities and Exchange Commission as of the date of such financial
statements. We also assumed that the Merger in all respects is, and will be
consummated in compliance with all laws and regulations applicable to RFS
Bancorp and Danvers and their respective subsidiaries. In rendering our opinion,
we have assumed that in the course of obtaining the necessary regulatory
approvals, no adverse conditions will be imposed on Danvers. We have not made or
obtained any independent evaluations or appraisals of the assets and liabilities
of either RFS Bancorp or Danvers or their respective subsidiaries, nor have we
reviewed any individual loan files of RFS Bancorp or Danvers or their respective
subsidiaries.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors, as we have deemed appropriate
in the circumstances. Our opinion is necessarily based on economic, market and
other conditions and projections as they exist and can be evaluated on the date
hereof.
We have been retained by the Boards of Directors of RFS Bancorp and Revere
MHC as an independent contractor to act as financial advisor to RFS Bancorp
and Revere MHC with respect to the Merger and will receive a fee for our
services, a significant portion of which is contingent upon consummation of
the Merger. Ryan, Beck has not had an investment banking relationship with
Danvers. Ryan, Beck has previously served as a financial advisor to RFS
Bancorp and Revere MHC. Ryan, Beck's research department does not provide
published investment analysis on RFS Bancorp other than the inclusion of a
full conversion worksheet as part of a periodic review of mutual holding
companies. Ryan, Beck does make a market in RFS Bancorp's common stock.
In the ordinary course of our business as a broker-dealer, we may actively trade
equity securities of RFS Bancorp for our own account and the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion is directed to the Boards of Directors of RFS Bancorp and Revere
MHC and does not constitute a recommendation to any shareholder of RFS
Bancorp as to how such shareholder should vote at any shareholder meeting
held in connection with the Merger. Our opinion may not be used or circulated
for any purpose or used in any proxy statement without our consent.
Based upon and subject to the foregoing it is our opinion as investment bankers
that the consideration in the Merger as provided and described in the Merger
Agreement is fair to the minority holders of RFS Bancorp common stock from a
financial point of view and the Depositor Conversion is fair to members of
Revere MHC, as depositors of Revere Savings from a financial point of view.
Very truly yours,
/s/ Ryan, Beck & Co., LLC
Appendix E-1
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is made and entered into as of
April 27, 2001, by and between Danvers Bancorp, Inc., a Massachusetts
corporation ("Buyer"), and the undersigned stockholders (each, a "Stockholder"
and collectively, the "Stockholders") of RFS Bancorp, Inc., a
federally-chartered stock mid-tier holding company (the "Company") who together
constitute all of the officers and directors of the Company.
RECITALS
WHEREAS, Buyer, Danvers Saving Bank (the "Buyer Bank"), the Company,
Revere, MHC (the "Seller") and Revere Federal Savings Bank (the "Seller Bank")
have entered into an Agreement and Plan of Merger, dated April 27, 2001 (as may
be amended, the "Merger Agreement"), which provides for the merger (the
"Merger") of Seller with and into Buyer, and the merger of Seller Bank with and
into Buyer Bank.
WHEREAS, each Stockholder is the record holder and beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of the number of shares of the outstanding common stock, par
value $.01 per share, of the Company as is set forth under such Stockholder's
name below (the "Shares").
WHEREAS, Buyer desires the Stockholders to agree, and the Stockholders
are willing to agree, not to transfer or otherwise dispose of any of the Shares,
or any other shares of capital stock of the Company acquired hereunder and prior
to the Termination Date (as defined in Section 1.1 below, except as otherwise
permitted hereby), and to vote the Shares and any other such shares of capital
stock of the Company in a manner so as to facilitate consummation of the
Proposed Transaction (as defined in the Merger Agreement), as provided herein.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. AGREEMENT TO RETAIN SHARES.
1.1 TRANSFER AND ENCUMBRANCE. Other than as provided herein,
until the Termination Date, each Stockholder shall not hereafter (a) sell,
tender, transfer, pledge, encumber, assign or otherwise dispose of any of the
Shares or New Shares (as defined in Section 1.2 below), (b) deposit any Shares
or New Shares into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares or New Shares or grant any proxy or
power of attorney with respect thereto, (c) enter into any contract, option or
other arrangement or undertaking with respect to the direct or indirect sale,
transfer, pledge, encumbrance, assignment or other disposition of any Shares or
New Shares, or (d) take any action that would make any representation or
warranty of the Stockholders contained herein untrue or incorrect or have the
effect of preventing or disabling any Stockholder from performing such
Stockholder's obligations under this Agreement. Notwithstanding the restrictions
set forth in this Section 1.1, nothing shall prohibit Stockholder from
transferring the Shares or New Shares provided the person or entity to whom such
Shares or New Shares are transferred agrees to be bound by the terms of the
Agreement. As used herein, the term "Termination Date" shall mean the earlier to
occur of (i) the Effective Time (as defined in the Merger Agreement); and (ii)
such date and time as the Merger Agreement shall be terminated pursuant to
Article VII thereof.
1.2 ADDITIONAL PURCHASES. Each Stockholder agrees that any
shares of capital stock of the Company that such Stockholder purchases or with
respect to which such Stockholder otherwise acquires beneficial ownership after
the execution of this Agreement and prior to the Termination Date ("New Shares")
shall be subject to the terms and conditions of this Agreement to the same
extent as if they constituted Shares.
2. AGREEMENT TO VOTE SHARES. At every meeting of the stockholders of
the Company called with respect to any of the following matters, and at every
adjournment thereof, and on every action or approval by written consent of the
stockholders of the Company with respect to any of the following matters, each
Stockholder shall vote the Shares and any New Shares: (i) in favor of approval
of the Amendment (as defined in the Merger Agreement) and the Proposed
Transaction and any matter necessary for consummation of the Proposed
Transaction; (ii) against (x) approval of any Acquisition Proposal (as defined
in the Merger Agreement), (y) any proposal for any action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company or Seller Bank under the Merger
Agreement or which could result in any of the conditions of the Company's or
Seller Bank's obligations under the Merger Agreement not being fulfilled, and
(z) any action which could reasonably be expected to impede, interfere with,
delay, postpone or materially adversely affect consummation of the Proposed
Transaction; and (iii) in favor of any other matter necessary for consummation
of the Proposed Transaction which is considered at any such meeting of
stockholders or in such consent, and in connection therewith to execute any
documents which are necessary or appropriate in order to effectuate the
foregoing or, at the request of Buyer, to permit Buyer to vote such Shares and
New Shares directly.
3. IRREVOCABLE PROXY. Each Stockholder hereby revokes any and all
previous proxies granted with respect to such Stockholder's Shares. Each
Stockholder hereby grants a proxy appointing Buyer as such Stockholder's
attorney-in-fact and proxy, with full power of substitution and resubstitution,
for and in such Stockholder's name, to vote all Shares that such Stockholder is
entitled to vote or give consent in accordance with the obligations of the
Stockholders set forth in Section 2 above. The proxy granted by Stockholder
pursuant to this Section 3 is irrevocable and is granted in consideration of
Buyer entering into this Agreement and the Merger Agreement and incurring
certain related fees and expenses. Each Stockholder intends this proxy to be
irrevocable and coupled with an interest hereafter until the expiration of this
Agreement, as provided in Section 8 hereof. At Buyer's request, each Stockholder
shall perform such further acts and execute such further documents as may be
required to vest in Buyer the sole power to vote the Shares during the term of
the proxy granted herein in accordance with the terms of the proxy granted
herein.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF STOCKHOLDERS.
Each Stockholder hereby represents, warrants and covenants to Buyer as follows:
4.1 DUE AUTHORITY. Stockholder has full power, corporate or
otherwise, and authority to execute and deliver this Agreement and to perform
its obligations hereunder. This
2
Agreement has been duly executed and delivered by or on behalf of Stockholder
and constitutes a legal, valid and binding obligation of Stockholder,
enforceable against Stockholder in accordance with its terms.
4.2 NO CONFLICT; CONSENTS. (a) The execution and delivery of
this Agreement by Stockholder do not, and the performance by Stockholder of the
obligations under this Agreement and the compliance by Stockholder with any
provisions hereof do not and will not, (i) conflict with or violate any law,
statute, rule, regulation, order, writ, judgment or decree applicable to
Stockholder or the Shares, or (ii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the Shares pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Stockholder is a party or by which Stockholder
or the Shares are bound.
(b) The execution and delivery of this Agreement by
Stockholder do not, and the performance of this Agreement by Stockholder will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority by Stockholder
except for applicable requirements, if any, of the Exchange Act, and except
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, could not prevent or delay the
performance by Stockholder of his or her obligations under this Agreement in any
material respect.
4.3 OWNERSHIP OF SHARES. Stockholder (i) is the beneficial
owner of the Shares, which at the date hereof are, and at all times up until the
Termination Date will be, free and clear of any liens, claims, options, charges,
proxies or voting restrictions or other encumbrances, and (ii) does not
beneficially own any shares of capital stock of the Company other than the
Shares.
5. NO LIMITATION ON DISCRETION AS DIRECTOR. Notwithstanding anything
herein to the contrary, the covenants and agreements set forth herein shall not
prevent a Stockholder who is serving on the Board of Directors of the Company
from exercising his or her duties and obligations as a Director of the Company
or otherwise taking any action, subject to the applicable provisions of the
Merger Agreement, while acting in such capacity as a director of the Company.
6. ADDITIONAL DOCUMENTS. Each Stockholder hereby covenants and
agrees to execute and deliver any additional documents necessary or desirable,
in the reasonable opinion of Buyer to carry out the intent of the Agreement.
7. CONSENT AND WAIVER. Each Stockholder hereby gives any
consents or waivers that are reasonably required for the consummation of the
Proposed Transaction under the terms of any agreements to which such Stockholder
is a party or pursuant to any rights such Stockholder may have.
3
8. TERMINATION. This Agreement shall terminate and shall have no
further force or effect as of the Termination Date.
9. APPRAISAL AND DISSENTERS RIGHTS. Each Stockholder hereby
waives and agrees not to assert, demand or exercise any rights of appraisal or
dissenters in connection with the Amendment or any of the Proposed Transactions.
10. MISCELLANEOUS.
10.1 SEVERABILITY. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
10.2 BINDING EFFECT AND ASSIGNMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor any
of the rights, interests or obligations of the parties hereto may be assigned by
either party without the prior written consent of each other party.
10.3 AMENDMENTS AND MODIFICATIONS. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
10.4 SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The parties
hereto agree that irreparable damage would occur in the event any provision of
this Agreement was not performed in accordance with the terms hereof or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to specific relief hereunder, including, without limitation, an injunction or
injunctions to prevent and enjoin breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, in any state or
federal court in the Commonwealth of Massachusetts, in addition to any other
remedy to which they may be entitled at law or in equity. Any requirements for
the securing or posting of any bond with respect to any such remedy are hereby
waived.
10.5 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or facsimile (with confirmation of receipt), or sent
by mail (registered or certified mail, postage prepaid, return receipt
requested) or overnight courier (prepaid) to the respective parties as follows:
4
If to Buyer: Danvers Bancorp, Inc.
1 Conant Street
Danvers, MA 01923
Attention: Kevin Bottomley
with a copy to: Goodwin Procter LLP
Exchange Place
Boston, MA 02109
Attention: William P. Mayer, Esq.
If to the Stockholder: To the address for notice set forth
on the last page hereof
with a copy to: Thacher Proffitt & Wood
1700 Pennsylvania Avenue
Washington DC 20006
Attention: Richard A. Schaberg
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective upon receipt.
10.6 GOVERNING LAW; JURISDICTION AND VENUE. This Agreement
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof. All disputes,
claims or controversies arising out of this Agreement, or the negotiation,
validity or performance of this Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts without regard to
its rules of conflict of laws. Buyer and each Stockholder hereby irrevocably and
unconditionally consents to submit to the sole and exclusive jurisdiction of the
courts of the Commonwealth of Massachusetts and of the United States District
Court for the District of Massachusetts (the "MASSACHUSETTS COURTS") for any
litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement (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 any inconvenient forum. Each of the parties hereto
agrees, (a) to the extent such party is not otherwise subject to service of
process in the Commonwealth of Massachusetts, to appoint and maintain an agent
in the Commonwealth of Massachusetts as such party's agent for acceptance of
legal process, and (b) that service of process may also be made on such party by
prepaid certified mail with a proof of mailing receipt validated by the United
States Postal Service constituting evidence of valid service. Service made
pursuant to (a) or (b) above shall have the same legal force and effect as if
served upon such party personally within the Commonwealth of Massachusetts.
10.7 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
5
10.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
10.9 EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
10.10 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 (i) the Board of
Directors of the Company has approved the Amendment and the Preposed
Transaction, (ii) the Merger Agreement is executed by all parties thereto, and
(iii) this Agreement is executed by all parties hereto.
6
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date and year first above written.
DANVERS BANCORP, INC.
By:
-----------------------------
Name:
Title:
STOCKHOLDERS:
---------------------------------
Name:
Stockholder's Address for Notice:
-----------------------------------
-----------------------------------
Shares beneficially owned:
_______ shares of Common Stock of RFS
Bancorp, Inc.
---------------------------------
Name:
Stockholder's Address for Notice:
-----------------------------------
-----------------------------------
Shares beneficially owned:
_______ shares of Common Stock of RFS
Bancorp, Inc.
Appendix E-2
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is made and entered into as of
April 27, 2001, by and between Danvers Bancorp, Inc., a Massachusetts
corporation ("Buyer"), and the undersigned stockholder (the "Stockholder") of
RFS Bancorp, Inc., a federally-chartered stock mid-tier holding company (the
"Company").
RECITALS
WHEREAS, Buyer, Danvers Saving Bank (the "Buyer Bank"), the Company,
Stockholder and Revere Federal Savings Bank (the "Seller Bank") have entered
into an Agreement and Plan of Merger, dated April 27, 2001 (as may be amended,
the "Merger Agreement"), which provides for the merger (the "Merger") of
Stockholder with and into Buyer, and the merger of Seller Bank with and into
Buyer Bank.
WHEREAS, the Stockholder is the record holder and beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such number of shares of the outstanding common stock, par
value $.01 per share, of the Company as is indicated on the final page of this
Agreement (the "Shares").
WHEREAS, Buyer desires the Stockholder to agree, and the Stockholder is
willing to agree, not to transfer or otherwise dispose of any of the Shares, or
any other shares of capital stock of the Company acquired hereunder and prior to
the Termination Date (as defined in Section 1.1 below, except as otherwise
permitted hereby), and to vote the Shares and any other such shares of capital
stock of the Company in a manner so as to facilitate consummation of the
Proposed Transaction (as defined in the Merger Agreement), as provided herein.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. AGREEMENT TO RETAIN SHARES.
1.1 TRANSFER AND ENCUMBRANCE. Other than as provided herein, until
the Termination Date, Stockholder shall not hereafter (a) sell, tender,
transfer, pledge, encumber, assign or otherwise dispose of any of the Shares or
New Shares (as defined in Section 1.2 below), (b) deposit any Shares or New
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares or New Shares or grant any proxy or power of attorney
with respect thereto, (c) enter into any contract, option or other arrangement
or undertaking with respect to the direct or indirect sale, transfer, pledge,
encumbrance, assignment or other disposition of any Shares or New Shares, or (d)
take any action that would make any representation or warranty of Stockholder
contained herein untrue or incorrect or have the effect of preventing or
disabling Stockholder from performing Stockholder's obligations under this
Agreement. As used herein, the term "Termination Date" shall mean the earlier to
occur of (i) the Effective Time (as defined in the Merger Agreement); and (ii)
such date and time as the Merger Agreement shall be terminated pursuant to
Article VII thereof.
1.2 ADDITIONAL PURCHASES. Stockholder agrees that any shares of
capital stock of the Company that Stockholder purchases or with respect to which
Stockholder otherwise acquires beneficial ownership after the execution of this
Agreement and prior to the Termination Date ("New Shares") shall be subject to
the terms and conditions of this Agreement to the same extent as if they
constituted Shares.
2. AGREEMENT TO VOTE SHARES. At every meeting of the stockholders of
the Company called with respect to any of the following matters, and at every
adjournment thereof, and on every action or approval by written consent of the
stockholders of the Company with respect to any of the following matters,
Stockholder shall vote the Shares and any New Shares: (i) in favor of approval
of the Merger Agreement and the Proposed Transaction and any matter necessary
for consummation of the Proposed Transaction; (ii) against (x) approval of any
Acquisition Proposal (as defined in the Merger Agreement), (y) any proposal for
any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
or Seller Bank under the Merger Agreement or which could result in any of the
conditions of the Company's or Seller Bank's obligations under the Merger
Agreement not being fulfilled, and (z) any action which could reasonably be
expected to impede, interfere with, delay, postpone or materially adversely
affect consummation of the Proposed Transaction; and (iii) in favor of any other
matter necessary for consummation of the Proposed Transaction which is
considered at any such meeting of stockholders or in such consent, and in
connection therewith to execute any documents which are necessary or appropriate
in order to effectuate the foregoing or, at the request of Buyer, to permit
Buyer to vote such Shares and New Shares directly.
3. IRREVOCABLE PROXY. Stockholder hereby revokes any and all previous
proxies granted with respect to such Stockholder's Shares. Stockholder hereby
grants a proxy appointing Buyer as such Stockholder's attorney-in-fact and
proxy, with full power of substitution and resubstitution, for and in such
Stockholder's name, to vote all Shares that such Stockholder is entitled to vote
or give consent in accordance with the obligations of the Stockholders set forth
in Section 2 above. The proxy granted by Stockholder pursuant to this Section 3
is irrevocable and is granted in consideration of Buyer entering into this
Agreement and the Merger Agreement and incurring certain related fees and
expenses. Stockholder intends this proxy to be irrevocable and coupled with an
interest hereafter until the expiration of this agreement, as provided in
Section 8 hereof. At Buyer's request, Stockholder shall perform such further
acts and execute such further documents as may be required to vest in Buyer the
sole power to vote the Shares during the term of the proxy granted herein in
accordance with the terms of the proxy granted herein.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF STOCKHOLDER.
Stockholder hereby represents, warrants and covenants to Buyer as follows:
4.1 DUE AUTHORITY. Stockholder has full power, corporate or
otherwise, and authority to execute and deliver this Agreement and to perform
its obligations hereunder. This Agreement has been duly executed and delivered
by or on behalf of Stockholder and constitutes a legal, valid and binding
obligation of Stockholder, enforceable against Stockholder in accordance with
its terms.
2
4.2 NO CONFLICT; CONSENTS. (a) The execution and delivery of this
Agreement by Stockholder do not, and the performance by Stockholder of the
obligations under this Agreement and the compliance by Stockholder with any
provisions hereof do not and will not, (i) conflict with or violate any law,
statute, rule, regulation, order, writ, judgment or decree applicable to
Stockholder or the Shares, (ii) conflict with or violate Stockholder's charter,
bylaws or other organizational documents, if applicable, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Shares pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Stockholder is a party or
by which Stockholder or the Shares are bound.
(b) The execution and delivery of this Agreement by Stockholder do
not, and the performance of this Agreement by Stockholder will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority by Stockholder except for
applicable requirements, if any, of the Exchange Act, and except where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, could not prevent or delay the performance
by Stockholder of his or her obligations under this Agreement in any material
respect.
4.3 OWNERSHIP OF SHARES. Stockholder (i) is the beneficial owner of
the Shares, which at the date hereof are, and at all times up until the
Termination Date will be, free and clear of any liens, claims, options, charges,
proxies or voting restrictions or other encumbrances, and (ii) does not
beneficially own any shares of capital stock of the Company other than the
Shares.
5. NO LIMITATION ON DISCRETION AS DIRECTOR. Notwithstanding anything
herein to the contrary, the covenants and agreements set forth herein shall not
prevent representatives or designees of Stockholder who are serving on the Board
of Directors of the Company from exercising his or their duties and obligations
as a Director of the Company or otherwise taking any action, subject to the
applicable provisions of the Merger Agreement, while acting in such capacity as
a director of the Company.
6. ADDITIONAL DOCUMENTS. Stockholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Buyer to carry out the intent of the Agreement.
7. CONSENT AND WAIVER. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Proposed Transaction
under the terms of any agreements to which Stockholder is a party or pursuant to
any rights Stockholder may have.
8. TERMINATION. This Agreement shall terminate and shall have no
further force or effect as of the Termination Date.
3
9. APPRAISAL AND DISSENTERS RIGHTS. Stockholder hereby waives and
agrees not to assert, demand or exercise any rights of appraisal or dissenters
in connection with the Merger or any of the Proposed Transactions.
10. MISCELLANEOUS.
10.1 SEVERABILITY. If any term or other provision of this Agreement
is determined to be invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
10.2 BINDING EFFECT AND ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
party without the prior written consent of the other.
10.3 AMENDMENTS AND MODIFICATIONS. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
10.4 SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The parties hereto
agree that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to
specific relief hereunder, including, without limitation, an injunction or
injunctions to prevent and enjoin breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, in any state or
federal court in the Commonwealth of Massachusetts, in addition to any other
remedy to which they may be entitled at law or in equity. Any requirements for
the securing or posting of any bond with respect to any such remedy are hereby
waived.
10.5 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or facsimile (with confirmation of receipt), or sent
by mail (registered or certified mail, postage prepaid, return receipt
requested) or overnight courier (prepaid) to the respective parties as follows:
If to Buyer: Danvers Bancorp, Inc.
1 Conant Street
Danvers, MA 01923
Attention: Kevin Bottomley
4
with a copy to: Goodwin Procter LLP
Exchange Place
Boston, MA 02109
Attention: William P. Mayer, Esq.
If to the Stockholder: To the address for notice set forth
on the last page hereof
with a copy to: Thacher Proffitt & Wood
1700 Pennsylvania Avenue
Washington DC 20006
Attention: Richard A. Schaberg
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective upon receipt.
10.6 GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof. All disputes, claims or
controversies arising out of this Agreement, or the negotiation, validity or
performance of this Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts without regard to its rules
of conflict of laws. Each of Buyer and Stockholder hereby irrevocably and
unconditionally consents to submit to the sole and exclusive jurisdiction of the
courts of the Commonwealth of Massachusetts and of the United States District
Court for the District of Massachusetts (the "MASSACHUSETTS COURTS") for any
litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement (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 any inconvenient forum. Each of the parties hereto
agrees, (a) to the extent such party is not otherwise subject to service of
process in the Commonwealth of Massachusetts, to appoint and maintain an agent
in the Commonwealth of Massachusetts as such party's agent for acceptance of
legal process, and (b) that service of process may also be made on such party by
prepaid certified mail with a proof of mailing receipt validated by the United
States Postal Service constituting evidence of valid service. Service made
pursuant to (a) or (b) above shall have the same legal force and effect as if
served upon such party personally within the Commonwealth of Massachusetts.
10.7 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
10.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
10.9 EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction of interpretation of this
Agreement.
5
10.10 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 (i) the Board of
Directors of the Company has approved the possible acquisition of the Shares by
Buyer pursuant to this Agreement, (ii) the Merger Agreement is executed by all
parties thereto, and (iii) this Agreement is executed by all parties hereto.
6
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date and year first above written.
DANVERS BANCORP, INC.
By:_________________________________
Name:
Title:
STOCKHOLDER:
REVERE, MHC
By:_________________________________
Name:
Title:
Stockholder's Address for Notice:
310 Broadway
Revere, MA 02151
Shares beneficially owned:
494,767 shares of Common Stock of RFS
Bancorp, Inc.
Appendix F
SS. 552.14 DISSENTER AND APPRAISAL RIGHTS.
(a) RIGHT TO DEMAND PAYMENT OF FAIR OR APPRAISED VALUE. Except as provided in
paragraph (b) of this section, any stockholder of a Federal stock association
combining in accordance with ss. 552.13 of this part shall have the right to
demand payment of the fair or appraised value of his stock: PROVIDED, That such
stockholder has not voted in favor of the combination and complies with the
provisions of paragraph (c) of this section.
(b) EXCEPTIONS. No stockholder required to accept only qualified consideration
for his or her stock shall have the right under this section to demand payment
of the stock's fair or appraised value, if such stock was listed on a national
securities exchange or quoted on the National Association of Securities Dealers'
Automated Quotation System ("NASDAQ") on the date of the meeting at which the
combination was acted upon or stockholder action is not required for a
combination made pursuant to ss.552.13(h)(2) of this part. "Qualified
consideration" means cash, shares of stock of any association or corporation
which at the effective date of the combination will be listed on a national
securities exchange or quoted on NASDAQ, or any combination of such shares of
stock and cash.
(c) PROCEDURE--(1) NOTICE. Each constituent Federal stock association shall
notify all stockholders entitled to rights under this section, not less than
twenty days prior to the meeting at which the combination agreement is to be
submitted for stockholder approval, of the right to demand payment of appraised
value of shares, and shall include in such notice a copy of this section. Such
written notice shall be mailed to stockholders of record and may be part of
management's proxy solicitation for such meeting.
(2) DEMAND FOR APPRAISAL AND PAYMENT. Each stockholder electing to make a demand
under this section shall deliver to the Federal stock association, before voting
on the combination, a writing identifying himself or herself and stating his or
her intention thereby to demand appraisal of and payment for his or her shares.
Such demand must be in addition to and separate from any proxy or vote against
the combination by the stockholder.
(3) NOTIFICATION OF EFFECTIVE DATE AND WRITTEN OFFER. Within ten days after the
effective date of the combination, the resulting association shall:
(i) Give written notice by mail to stockholders of constituent Federal stock
associations who have complied with the provisions of paragraph (c)(2) of this
section and have not voted in favor of the combination, of the effective date of
the combination;
(ii) Make a written offer to each stockholder to pay for dissenting shares at a
specified price deemed by the resulting association to be the fair value
thereof; and
(iii) Inform them that, within sixty days of such date, the respective
requirements of paragraphs (c)(5) and (c)(6) of this section (set out in the
notice) must be satisfied.
The notice and offer shall be accompanied by a balance sheet and statement of
income of the association the shares of which the dissenting stockholder holds,
for a fiscal year ending not more
than sixteen months before the date of notice and offer, together with the
latest available interim financial statements.
(4) ACCEPTANCE OF OFFER. If within sixty days of the effective date of the
combination the fair value is agreed upon between the resulting association and
any stockholder who has complied with the provisions of paragraph (c)(2) of this
section, payment therefor shall be made within ninety days of the effective date
of the combination.
(5) PETITION TO BE FILED IF OFFER NOT ACCEPTED. If within sixty days of the
effective date of the combination the resulting association and any stockholder
who has complied with the provisions of paragraph (c)(2) of this section do not
agree as to the fair value, then any such stockholder may file a petition with
the Office, with a copy by registered or certified mail to the resulting
association, demanding a determination of the fair market value of the stock of
all such stockholders. A stockholder entitled to file a petition under this
section who fails to file such petition within sixty days of the effective date
of the combination shall be deemed to have accepted the terms offered under the
combination.
(6) STOCK CERTIFICATES TO BE NOTED. Within sixty days of the effective date of
the combination, each stockholder demanding appraisal and payment under this
section shall submit to the transfer agent his certificates of stock for
notation thereon that an appraisal and payment have been demanded with respect
to such stock and that appraisal proceedings are pending. Any stockholder who
fails to submit his or her stock certificates for such notation shall no longer
be entitled to appraisal rights under this section and shall be deemed to have
accepted the terms offered under the combination.
(7) WITHDRAWAL OF DEMAND. Notwithstanding the foregoing, at any time within
sixty days after the effective date of the combination, any stockholder shall
have the right to withdraw his or her demand for appraisal and to accept the
terms offered upon the combination.
(8) VALUATION AND PAYMENT. The Director shall, as he or she may elect, either
appoint one or more independent persons or direct appropriate staff of the
Office to appraise the shares to determine their fair market value, as of the
effective date of the combination, exclusive of any element of value arising
from the accomplishment or expectation of the combination. Appropriate staff of
the Office shall review and provide an opinion on appraisals prepared by
independent persons as to the suitability of the appraisal methodology and the
adequacy of the analysis and supportive data. The Director after consideration
of the appraisal report and the advice of the appropriate staff shall, if he or
she concurs in the valuation of the shares, direct payment by the resulting
association of the appraised fair market value of the shares, upon surrender of
the certificates representing such stock. Payment shall be made, together with
interest from the effective date of the combination, at a rate deemed equitable
by the Director.
(9) COSTS AND EXPENSES. The costs and expenses of any proceeding under this
section may be apportioned and assessed by the Director as he or she may deem
equitable against all or some of the parties. In making this determination the
Director shall consider whether any party has acted arbitrarily, vexatiously, or
not in good faith in respect to the rights provided by this section.
(10) VOTING AND DISTRIBUTION. Any stockholder who has demanded appraisal rights
as provided in paragraph (c)(2) of this section shall thereafter neither be
entitled to vote such stock for any purpose nor be entitled to the payment of
dividends or other distributions on the stock (except dividends or other
distribution payable to, or a vote to be taken by stockholders of record at a
date which is on or prior to, the effective date of the combination): PROVIDED,
That if any stockholder becomes unentitled to appraisal and payment of appraised
value with respect to such stock and accepts or is deemed to have accepted the
terms offered upon the combination, such stockholder shall thereupon be entitled
to vote and receive the distributions described above.
(11) STATUS. Shares of the resulting association into which shares of the
stockholders demanding appraisal rights would have been converted or exchanged,
had they assented to the combination, shall have the status of authorized and
unissued shares of the resulting association.
REVOCABLE PROXY
RFS BANCORP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RFS BANCORP, INC.
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD , , 2001
The undersigned hereby appoints Arno P. Bommer, Ernest F. Becker and
James J. McCarthy, or each of them, with full power to act alone, and with full
power of substitution, to represent the undersigned and to vote, as designated
below and upon any and all other matters that may properly be brought before
such meeting, all shares of common stock that the undersigned would be entitled
to vote at a Special Meeting of Shareholders of RFS Bancorp, Inc. ("RFS
Bancorp"), a federally chartered stock holding company, to be held at
________________, Revere, Massachusetts, on ______________, 2001 at __:__ _.m.,
local time, or any adjournments thereof, for the following purposes:
1. To approve the Agreement and Plan of Merger dated April 27, 2001, as
amended, (the "Merger Agreement") by and among RFS Bancorp, Revere
Federal Savings Bank, and Revere, MHC, Danvers Savings Bank and Danvers
Bancorp, Inc., and the transactions contemplated by the Merger
Agreement. The Merger Agreement is enclosed with the accompanying proxy
statement as APPENDIX A.
[ ] For [ ] Against [ ] Abstain
2. To approve a proposal to amend Section 5 of the federal stock holding
company charter of RFS Bancorp that would increase the par value per
share from $.01 to $4,947.67 in connection with the transactions
contemplated by the Merger Agreement (the "Charter Amendment"). The
proposed Charter Amendment is enclosed with the accompanying proxy
statement as APPENDIX C.
[ ] For [ ] Against [ ] Abstain
3. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting, or any adjournment
thereof.
[ ] For [ ] Against [ ] Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" APPROVAL OF THE MERGER AGREEMENT AND THE CHARTER AMENDMENT.
- ---------------------------- -----------------------------
Print Name Signature
/ / I (We) plan to attend the special meeting.
-----------------------------
Signature
Dated:
-----------------------
(If signing as Attorney,
Administrator, Executor,
Guardian or Trustee, please
add your title as such).
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT AND THE CHARTER AMENDMENT