-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G1QCHcIXK5kCMsTL+vuwmlaLkuKOg6WZXwcNAeA3Sbv5G4y8J8wu9vCupOA0I4DU dlLQxg2B4domjaMgRtT5Lw== 0000950109-96-000213.txt : 19960116 0000950109-96-000213.hdr.sgml : 19960116 ACCESSION NUMBER: 0000950109-96-000213 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960105 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAFETY FUND CORP CENTRAL INDEX KEY: 0000086134 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 042532311 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11615 FILM NUMBER: 96503228 BUSINESS ADDRESS: STREET 1: 470 MAIN ST CITY: FITCHBURG STATE: MA ZIP: 01420 BUSINESS PHONE: 5083436406 MAIL ADDRESS: STREET 1: 470 MAIN STREET CITY: FITCHBURG STATE: MA ZIP: 01420 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): January 5, 1996 ----------------------------- THE SAFETY FUND CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 2-50084 04-2532311 - -------------------------------------------------------------------------------- (State or other jurisdiction) (Commission (IRS Employer of incorporation) File Number) Identification No.) 470 Main Street, Fitchburg, Massachusetts 01420 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (508) 343-6406 ---------------------------- Item 5. Other Events. ------------ A. Agreement and Plan of Merger On January 5, 1996, The Safety Fund Corporation, a Massachusetts corporation ("Safety Fund"), entered into an Agreement and Plan of Merger (the "Merger Agreement") with CFX Corporation, a New Hampshire corporation ("CFX"). A copy of the joint press release issued by Safety Fund and CFX on January 5, 1996 and the Merger Agreement are filed as exhibits hereto and incorporated by reference herein. Under the terms of the Merger Agreement, CFX will form a Massachusetts corporation as a wholly owned subsidiary, which subsidiary will be merged with and into Safety Fund, with Safety Fund as the surviving corporation (the "Merger"). Upon the effectiveness of the Merger, each share of the common stock, par value $5.00 per share, of Safety Fund ("Safety Fund Common Stock"), issued and outstanding immediately prior to the effectiveness of the Merger (other than shares held by dissenting stockholders or owned by Safety Fund or any of its subsidiaries or CFX or any of its subsidiaries) shall be converted into and exchangeable for shares of the common stock, par value $0.66 2/3 per share, of CFX ("CFX Common Stock") equal to one share multiplied by the appropriate exchange ratio (the "Exchange Ratio"). The parties expect the Merger to be accounted for under the pooling-of- interests method of accounting. If CFX can make a Pooling Determination (as such term is defined in the Merger Agreement), the Exchange Ratio will be 1.700, subject to adjustment based on the average closing price of CFX Common Stock for the ten consecutive trading days ending on the business day before the date on which the last regulatory approval required to consummate the transaction is obtained (the "Buyer Trading Price"). In the event the Buyer Trading Price is greater than or equal to $12.43 but less than $13.21, then the Exchange Ratio becomes a fraction, the numerator of which is $22.46 and the denominator of which is the Buyer Trading Price. If the Buyer Trading Price is greater than or equal to $17.87 but less than $18.65, then the Exchange Ratio becomes a fraction, the numerator of which is $30.38 and the denominator of which is the Buyer Trading Price. In the event the Buyer Trading Price is below $12.43, the Exchange Ratio becomes 1.806; and if the Buyer Trading Price is above $18.65, the Exchange Ratio becomes 1.629. Safety Fund has the right to terminate the Merger Agreement if the Buyer Trading Price is below $11.65 unless CFX agrees to increase the Exchange Ratio. The parties have agreed upon an alternative pricing mechanism to be applied if a Pooling Determination with respect to the Merger cannot be made and the Merger is accounted for under the purchase method of accounting. In such event, the Exchange Ratio will be 1.520 subject to adjustments based on the Buyer Trading Price. In the event the Buyer Trading Price is greater than or equal to $12.50 but less than $13.16, then the Exchange Ratio becomes a -2- fraction, the numerator of which is $20.00 and the denominator of which is the Buyer Trading Price. If the Buyer Trading Price is greater than or equal to $16.45 but less than $20.84, then the Exchange Ratio becomes a fraction the numerator of which is $25.00 and the denominator of which is the Buyer Trading Price. If the Buyer Trading Price is equal to or greater than $20.84, then the Exchange Ratio becomes 1.200. If the Buyer Trading Price is less than $12.50, the Exchange Ratio becomes 1.600 but Safety Fund has the right to terminate the Merger Agreement unless CFX agrees to increase the Exchange Ratio. The Merger Agreement also provides that, at the effective time of the Merger, each then outstanding stock option to purchase Safety Fund Common Stock ("Safety Fund Option") pursuant to the 1984 Incentive Stock Option Plan or the 1994 Incentive and Nonqualified Stock Option Plan (collectively, the "Safety Fund Stock Option Plans") (the aggregate number of such Safety Fund Options not to exceed 65,850) will be assumed by CFX. Each Safety Fund Option so assumed will be exercisable (when vested) for that number of whole shares of CFX Common Stock equal to the product of the number of shares of Safety Fund Common Stock covered by the Safety Fund Option multiplied by the Exchange Ratio. As part of the Merger, Safety Fund and CFX have also entered into a Stock Option Agreement dated January 5, 1996 (the "Option Agreement") pursuant to which Safety Fund has granted an option (the "Option") to CFX to purchase up to 332,000 shares of Safety Fund Common Stock (19.9% of the outstanding Safety Fund Common Stock) under certain conditions, at a price of $20.00 per share, subject to adjustment. Safety Fund agreed to grant the Option to CFX as a condition to CFX's entry into the Merger Agreement and to induce such entry. A copy of the Option Agreement is filed as an exhibit hereto and is incorporated by reference herein. Because a Safety Fund stockholder has filed an application with federal regulators for approval to acquire securities representing greater than 10% of the voting power of Safety Fund, one of the conditions triggering the Option has been satisfied and the Option is now exercisable, and shall remain exercisable for so long as such condition is continuing. The transaction, which is subject to customary closing conditions, has been approved by the Boards of Directors of both Safety Fund and CFX. It must be approved by the stockholders of Safety Fund and CFX as well as by regulatory authorities. The foregoing description of the Merger Agreement and the Option Agreement does not purport to be complete and is qualified in its entirety by reference to the attached exhibits, which are incorporated herein by reference. B. Stockholder Rights Plan On January 5, 1996, the Board of Directors of Safety Fund distributed one Right for each outstanding share of the Safety Fund Common Stock. The Rights will be issued to the holders of record of Safety Fund Common Stock outstanding on January 5, 1996, and with respect to Safety Fund Common Stock issued thereafter until the Distribution Date (as defined below) and, in certain circumstances, with respect to Safety Fund Common Stock -3- issued after the Distribution Date. Each Right, when it becomes exercisable as described below, will entitle the registered holder to purchase from Safety Fund one one-thousandth (1/1000th) of a share of Series A Participating Cumulative Preferred Stock, par value $10.00 per share, of Safety Fund (the "Preferred Shares") at a price of $65 (the "Purchase Price"). The description and terms of the Rights are set forth in a Rights Agreement dated as of January 5, 1996 (the "Rights Agreement"), between Safety Fund and Fleet National Bank of Massachusetts, as Rights Agent (the "Rights Agent"). Until the earlier of (i) such time as Safety Fund learns that a person or group (including any affiliate or associate of such person or group) has acquired, or has obtained the right to acquire, Beneficial Ownership (as defined below) of an amount equal to or greater than such person's or group's Ownership Threshold (as defined below) of the outstanding Capital Shares (as defined below) (such person or group being an "Acquiring Person"), and (ii) such date, if any, as may be designated by the Board of Directors of Safety Fund following the commencement of, or first public disclosure of an intent to commence, a tender or exchange offer for outstanding Capital Shares which could result in such person or group becoming the Beneficial Owner of an amount equal to or greater than such person's or group's Ownership Threshold of the outstanding Capital Shares (the earlier of such dates being called the "Distribution Date"), the Rights will be evidenced by the certificates for Capital Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates, as defined below) and not by separate Right Certificates. Therefore, until the Distribution Date, the Rights will be transferred with and only with the Capital Shares. "Beneficial Ownership", when used with reference to the ownership of securities, means (i) securities which a person, or any of such person's associates and affiliates, is deemed to "beneficially own" under Securities and Exchange Commission Rule 13d-3, (ii) securities which a person, or any of such person's associates and affiliates, has the right to acquire or the right to vote pursuant to any agreement, arrangement or understanding (whether written or oral) and (iii) securities Beneficially Owned by any person with which such person, or any of such person's associates and affiliates, has any agreement, arrangement or understanding (whether written or oral), or is acting in concert or with conscious parallel behavior, for the purpose of acquiring, holding, voting or disposing of any securities of the company. In the case of clause (iii), the Safety Fund Board of Directors may attribute Beneficial Ownership of securities to any person if the Safety Fund Board determines in good faith that such an agreement, arrangement or understanding exists or that such actions in concert or with conscious parallel behavior have occurred. A person will not be deemed to Beneficially Own any Capital Shares solely by virtue of the receipt by such person of a revocable proxy or consent given to such person pursuant to a definitive proxy statement filed with the Securities and Exchange Commission and otherwise in accordance with the rules and regulations under the Securities Exchange Act of 1934. "Capital Shares", when used with reference to Safety Fund prior to a business combination, means the shares of Safety Fund Common Stock or any other shares of capital -4- stock of Safety Fund into which the Safety Fund Common Stock shall be reclassified or changed. "Ownership Threshold" means, with respect to any person, the Beneficial Ownership of the greater of (i) 15% of the Capital Shares at any time ------- outstanding or (ii) the percentage of the aggregate of the outstanding Capital Shares Beneficially Owned by such person on the date the Rights Plan is implemented, plus in the case of this clause (ii) 1% of the Capital Shares outstanding on such date. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the Capital Shares as of the close of business on the Distribution Date (and to each initial record holder of certain Safety Fund Common Stock originally issued after the Distribution Date), and such separate Right Certificates alone will thereafter evidence the Rights. The Rights are not exercisable until the Distribution Date and will expire on January 5, 2006 (the "Expiration Date") unless earlier redeemed by Safety Fund as described below. The number of Preferred Shares or other securities issuable upon exercise of a Right, the Purchase Price, the Redemption Price (as defined below) and the number of Rights associated with each outstanding Capital Share are all subject to adjustment by the Board of Directors of Safety Fund in the event of any change in the Capital Shares or the Preferred Shares, whether by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of securities, split-ups, split-offs, spin-offs, liquidations, other similar changes in capitalization, any distribution or issuance of cash, assets, evidences of indebtedness or subscription rights, options or warrants to holders of Capital Shares or Preferred Shares, as the case may be (other than distribution of the Rights or regular quarterly cash dividends) or otherwise. The Preferred Shares are authorized to be issued in fractions which are an integral multiple of one one-thousandth (1/1000th) of a Preferred Share. Safety Fund may, but is not required to, issue fractions of shares upon the exercise of Rights, and, in lieu of fractional shares, Safety Fund may issue certificates or utilize a depository arrangement as provided by the terms of the Preferred Shares and, in the case of fractions other than one one-thousandth (1/1000th) of a Preferred Share or integral multiples thereof, may make a cash payment based on the market price of such shares. At such time as there is an Acquiring Person, the Rights will entitle each holder (other than such Acquiring Person (or any affiliate or associate of such Acquiring Person)) of a Right to purchase, for the Purchase Price, that number of one one-thousandths (1/1000ths) of a Preferred Share equivalent to the number of Capital Shares which at the time of such event would have a market value of twice the Purchase Price. -5- In the event Safety Fund is acquired in a merger or other business combination by an Acquiring Person or an associate or affiliate of an Acquiring Person that is a publicly traded corporation or 50% or more of Safety Fund's assets or assets representing 50% or more of Safety Fund's revenues or cash flow are sold, leased, exchanged or otherwise transferred (in one or more transactions) to an Acquiring Person or an associate or affiliate of an Acquiring Person that is a publicly traded corporation, each Right will entitle its holder (subject to the next paragraph) to purchase, for the Purchase Price, that number of common shares of such corporation which at the time of the transaction would have a market value of twice the Purchase Price. In the event Safety Fund is acquired in a merger or other business combination by an Acquiring Person or an associate or affiliate of an Acquiring Person that is not a publicly traded entity or 50% or more of Safety Fund's assets or assets representing 50% or more of Safety Fund's revenues or cash flow are sold, leased, exchanged or otherwise transferred (in one or more transactions) to an Acquiring Person or an associate or affiliate of an Acquiring Person that is not a publicly traded entity, each Right will entitle its holder (subject to the next paragraph) to purchase, for the Purchase Price, at such holder's option, (i) that number of shares of the surviving corporation in the transaction with such entity (which surviving corporation could be Safety Fund) which at the time of the transaction would have a book value of twice the Purchase Price, (ii) that number of shares of such entity which at the time of the transaction would have a book value of twice the Purchase Price or (iii) if such entity has an affiliate which has publicly traded common shares, that number of common shares of such affiliate which at the time of the transaction would have a market value of twice the Purchase Price. Any Rights that are at any time Beneficially Owned by an Acquiring Person (or any affiliate or associate of an Acquiring Person) will be null and void and nontransferable and any holder of any such Right (including any purported transferee or subsequent holder) will be unable to exercise or transfer any such Right. At any time after a person or a group becomes an Acquiring Person, the Board of Directors of Safety Fund may exchange all or part of the then outstanding Rights (other than Rights that have become null and void and nontransferable as described above) for consideration per Right consisting of one-half of the securities that otherwise would have been issuable to the holder of each Right upon exercise thereof. The Board of Directors of Safety Fund may also issue, in substitution for Preferred Shares, Safety Fund Common Stock having an equivalent market value to the Preferred Shares if, at such time, Safety Fund has a sufficient number of Safety Fund Common Stock issued but not outstanding or authorized but unissued. At any time prior to the earlier of (i) such time as a person becomes an Acquiring Person and (ii) the Expiration Date, the Board of Directors of Safety Fund may redeem the Rights in whole, but not in part, at a price (in cash or Safety Fund Common Stock or other securities of Safety Fund deemed by the Board of Directors to be at least equivalent in value) of $.01 per Right, subject to adjustment as provided in the Rights Agreement (the "Redemption Price"). -6- Immediately upon the action of the Board of Directors of Safety Fund electing to redeem the Rights, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. After there is an Acquiring Person, the Board of Directors may elect to exchange each Right (other than Rights that shall have become null and void and nontransferable as described above) for consideration per Right consisting of one-half of the securities that would be issuable at such time upon the exercise of one Right pursuant to the terms of the Rights Agreement. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of Safety Fund, including, without limitation, the right to vote or to receive dividends. At any time prior to the Distribution Date, Safety Fund may, without the approval of any holder of the Rights, supplement or amend any provision of the Rights Agreement (including the date on which the Distribution Date shall occur, the time during which the Rights may be redeemed or the terms of the Preferred Shares), except that no supplement or amendment shall be made which reduces the Redemption Price (other than pursuant to certain adjustments therein) or provides for an earlier Expiration Date. The Rights have certain antitakeover effects. The Rights will cause substantial dilution to a person or group that attempts to acquire Safety Fund without conditioning the offer on substantially all the Rights being acquired. The Rights will not interfere with any merger or other business combination pursuant to certain all-cash tender offers for all outstanding Capital Shares or with a third party approved by the Board of Directors of Safety Fund since the Board of Directors of Safety Fund may, at its option, at any time prior to any person becoming an Acquiring Person, redeem all but not less than all of the then outstanding Rights at the Redemption Price. A Registration Statement on Form 8-A with respect to the Rights has been filed with the Securities and Exchange Commission. The Rights Agreement specifying the terms of the Rights, the Certificate of Vote of Directors Establishing a Series of a Class of Stock of the Preferred Shares specifying the terms of the Preferred Shares (Exhibit A to the Rights Agreement) and the form of Right Certificate (Exhibit B to the Rights Agreement) are filed herewith as exhibits. The foregoing description of the Rights does not purport to be complete and is qualified in its entirety by reference to such exhibits, which are incorporated herein by reference. -7- Item 7. Exhibits. -------- Number Title ------ ----- 2(a) Agreement and Plan of Merger dated January 5, 1996 between CFX Corporation and The Safety Fund Corporation. 2(b) Press release dated January 5, 1996. 2(c) Stock Option Agreement dated January 5, 1996 between CFX Corporation and The Safety Fund Corporation. 4(a) Rights Agreement dated as of January 5, 1996, between The Safety Fund Corporation and Fleet National Bank of Massachusetts, as Rights Agent. 4(b) Form of Certificate of Vote of Directors Establishing a Series of a Class of Stock (which is attached as Exhibit A to the Rights Agreement filed as Exhibit 4(a) hereto). 4(c) Form of Right Certificate (which is attached as Exhibit B to the Rights Agreement filed as Exhibit 4(a) hereto). SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE SAFETY FUND CORPORATION Dated: January 12, 1996 By:/s/ Christopher W. Bramley -------------------------------------- Christopher W. Bramley President and Chief Executive Officer EXHIBIT INDEX Pursuant to Item 601 of Regulation S-K Number Title ------ ----- 2(a) Agreement and Plan of Merger between CFX Corporation and The Safety Fund Corporation dated January 5, 1996. 2(b) Press release dated January 5, 1996. 2(c) Stock Option Agreement between CFX Corporation and The Safety Fund Corporation dated January 5, 1996. 4(a) Rights Agreement dated as of January 5, 1996, between The Safety Fund Corporation and Fleet National Bank of Massachusetts, as Rights Agent. 4(b) Form of Certificate of Vote of Directors Establishing a Series of a Class of Stock (which is attached as Exhibit A to the Rights Agreement filed as Exhibit 4(a) hereto). 4(c) Form of Right Certificate (which is attached as Exhibit B to the Rights Agreement filed as Exhibit 4(a) hereto). EX-2.A 2 AGREEMENT AND PLAN OF MERGER EXHIBIT 2(a) Execution Copy Agreement and Plan of Merger between CFX Corporation and The Safety Fund Corporation January 5 , 1996 TABLE OF CONTENTS ARTICLE I THE MERGER AND THE BANK MERGER
1.1 THE MERGER.................................................... 1 1.2 EFFECTIVE TIME................................................ 1 1.3 CHARTER AND BY-LAWS........................................... 2 1.4 DIRECTORS AND COMMITTEES OF SURVIVING CORPORATION AND BUYER... 2 1.5 OFFICERS OF SURVIVING CORPORATION............................. 2 1.6 SURVIVING BANK................................................ 2 1.7 ADDITIONAL ACTIONS............................................ 3 1.8 ADDITIONAL AGREEMENTS......................................... 3 1.9 EFFECTS OF THE MERGER......................................... 3 1.10 THE OPTION AGREEMENT......................................... 3 ARTICLE II CONVERSION OF SHARES 2.1 CONVERSION.................................................... 4 2.2 CERTAIN DEFINED TERMS......................................... 4 2.3 DETERMINATION OF APPLICABLE EXCHANGE RATIO.................... 4 2.4 POOLING OF INTERESTS ACCOUNTING EXCHANGE RATIOS............... 5 2.5 PURCHASE ACCOUNTING EXCHANGE RATIOS........................... 5 2.6 ADDITIONAL MERGER CONSIDERATION............................... 6 2.7 CONVERSION OF STOCK........................................... 6 2.8 PROCEDURES FOR EXCHANGE OF SAFETY FUND COMMON STOCK FOR MERGER CONSIDERATION................................................. 7 2.9 BUYER SUB COMMON STOCK........................................ 9 2.10 DISSENTERS' RIGHTS........................................... 9 2.11 STOCK OPTIONS................................................ 9 2.12 TERMINATION, NOTICE AND CURE................................. 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SAFETY FUND 3.1 CORPORATE ORGANIZATION........................................ 11 3.2 CAPITALIZATION................................................ 11 3.3 AUTHORITY..................................................... 12 3.4 NO VIOLATION.................................................. 13 3.5 CONSENTS AND APPROVALS........................................ 13 3.6 REGULATORY APPROVAL........................................... 14 3.7 FINANCIAL STATEMENTS.......................................... 14 3.8 SAFETY FUND REPORTS........................................... 14
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS....................... 15 3.10 LEGAL PROCEEDINGS......................................... 15 3.11 TAXES AND TAX RETURNS..................................... 16 3.12 PROPERTIES................................................ 17 3.13 CERTAIN CONTRACTS......................................... 17 3.14 CERTAIN DEFAULTS.......................................... 18 3.15 INSURANCE................................................. 18 3.16 EMPLOYEE BENEFIT PLANS.................................... 18 3.17 COMPLIANCE WITH APPLICABLE LAW; REGULATORY EXAMINATIONS... 19 3.18 BROKER'S FEES............................................. 19 3.19 SAFETY FUND INFORMATION................................... 20 3.20 ENVIRONMENTAL ISSUES...................................... 20 3.21 MATERIAL INTERESTS OF CERTAIN PERSONS..................... 20 3.22 CERTAIN TRANSACTIONS...................................... 20 3.23 REGULATORY AGREEMENTS..................................... 20 3.24 LABOR MATTERS............................................. 21 3.25 ADMINISTRATION OF TRUST ACCOUNTS.......................... 21 3.26 INTELLECTUAL PROPERTY..................................... 21 3.27 LOAN PORTFOLIO............................................ 21 3.28 ABSENCE OF UNDISCLOSED LIABILITIES........................ 22 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 4.1 CORPORATE ORGANIZATION..................................... 22 4.2 CAPITALIZATION............................................. 22 4.3 AUTHORITY.................................................. 23 4.4 NO VIOLATION............................................... 23 4.5 CONSENTS AND APPROVALS..................................... 24 4.6 REGULATORY APPROVAL........................................ 24 4.7 FINANCIAL STATEMENTS....................................... 24 4.8 BUYER REPORTS.............................................. 25 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS....................... 25 4.10 LEGAL PROCEEDINGS......................................... 25 4.11 COMPLIANCE WITH APPLICABLE LAW; REGULATORY EXAMINATIONS... 25 4.12 BROKER'S FEE.............................................. 26 4.13 BUYER INFORMATION......................................... 26 4.14 ENVIRONMENTAL ISSUES...................................... 26 4.15 CAPITAL................................................... 26 4.16 REGULATORY AGREEMENTS..................................... 26 4.17 ABSENCE OF UNDISCLOSED LIABILITIES........................ 27 4.18 BUYER SUB................................................. 27
ARTICLE V COVENANTS OF SAFETY FUND ii 5.1 CONDUCT OF BUSINESS................................................. 27 5.2 NO SOLICITATION..................................................... 30 5.3 CURRENT INFORMATION................................................. 30 5.4 ACCESS TO PROPERTIES AND RECORDS.................................... 30 5.5 FINANCIAL AND OTHER STATEMENTS...................................... 31 5.6 APPROVAL OF SAFETY FUND'S STOCKHOLDERS.............................. 31 5.7 DISCLOSURE SUPPLEMENTS.............................................. 31 5.8 FAILURE TO FULFILL CONDITIONS....................................... 32 5.9 CONSENTS AND APPROVALS OF THIRD PARTIES............................. 32 5.10 ALL REASONABLE EFFORTS............................................. 32 5.11 SAFETY FUND SUBSIDIARIES........................................... 32 ARTICLE VI COVENANTS OF BUYER 6.1 CONDUCT OF BUSINESS................................................. 32 6.2 CERTAIN BUSINESS TRANSACTIONS....................................... 32 6.3 CURRENT INFORMATION................................................. 33 6.4 ACCESS TO PROPERTIES AND RECORDS.................................... 33 6.5 FINANCIAL AND OTHER STATEMENTS...................................... 33 6.6 CONSENTS AND APPROVALS OF THIRD PARTIES............................. 34 6.7 ALL REASONABLE EFFORTS.............................................. 34 6.8 FAILURE TO FULFILL CONDITIONS....................................... 34 6.9 DISCLOSURE SUPPLEMENTS.............................................. 34 6.10 EMPLOYEE BENEFITS.................................................. 34 6.11 DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE............... 35 6.12 STOCK EXCHANGE LISTING............................................. 37 6.13 BUYER SUB.......................................................... 37 ARTICLE VII REGULATORY AND OTHER MATTERS 7.1 PROXY STATEMENT-PROSPECTUS.......................................... 37 7.2 REGULATORY APPROVALS................................................ 38 7.3 AFFILIATES; PUBLICATION OF COMBINED FINANCIAL RESULTS............... 38 ARTICLE VIII CLOSING CONDITIONS 8.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT......... 39 8.2 CONDITIONS TO THE OBLIGATIONS OF BUYER UNDER THIS AGREEMENT......... 40 8.3 CONDITIONS TO THE OBLIGATIONS OF SAFETY FUND UNDER THIS AGREEMENT... 41
ARTICLE IX iii THE CLOSING 9.1 TIME AND PLACE........................................ 42 9.2 DELIVERIES AT THE CLOSING............................. 42 ARTICLE X TERMINATION, AMENDMENT AND WAIVER 10.1 TERMINATION.......................................... 42 10.2 EFFECT OF TERMINATION................................ 43 10.3 EXPENSES............................................. 44 10.4 AMENDMENT, EXTENSION AND WAIVER...................... 44 ARTICLE XI CERTAIN DEFINITIONS 11.1 CERTAIN DEFINITIONS.................................. 44 ARTICLE XII MISCELLANEOUS 12.1 CONFIDENTIALITY...................................... 45 12.2 PUBLIC ANNOUNCEMENTS................................. 45 12.3 SURVIVAL............................................. 46 12.4 NOTICES.............................................. 46 12.5 PARTIES IN INTEREST.................................. 47 12.6 COMPLETE AGREEMENT................................... 47 12.7 COUNTERPARTS......................................... 47 12.8 SEVERABILITY......................................... 47 12.9 GOVERNING LAW........................................ 47 12.10 HEADINGS............................................ 47 INDEX OF DEFINED TERMS..................................... I-1
iv AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER dated as of January 5, 1996 (this "Agreement"), by and between CFX Corporation, a New Hampshire corporation ---------- ("Buyer"), and The Safety Fund Corporation, a Massachusetts corporation ("Safety ----- ------ Fund"). (Certain capitalized terms used herein shall have the meanings defined - ---- in Section 11.1 hereof.) WHEREAS, Buyer intends to organize a Massachusetts corporation that will be a wholly-owned direct or indirect subsidiary of Buyer ("Buyer Sub"); and --------- WHEREAS, the respective Boards of Directors of Buyer and Safety Fund have approved the acquisition of Safety Fund by Buyer pursuant to the merger of Buyer Sub with and into Safety Fund (the "Merger"); and ------ WHEREAS, the parties hereto desire that, following the consummation of the Merger, Safety Fund will merge with and into Buyer (the "BHC Merger") pursuant ---------- to a merger agreement in a form to be specified by Buyer and reasonably satisfactory to Safety Fund and consistent with the terms of this Agreement, and that Buyer may cause the merger of Orange Savings Bank ("Orange Savings"), a -------------- wholly-owned subsidiary of Buyer, with Safety Fund National Bank ("SFNB"), a ---- wholly-owned subsidiary of Safety Fund (the "Bank Merger"), pursuant to a merger ----------- agreement (the "Bank Merger Agreement") in a form to be specified by Buyer and --------------------- reasonably satisfactory to Safety Fund and consistent with the terms of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I THE MERGER AND THE BANK MERGER 1.1 THE MERGER. As promptly as practicable following the satisfaction or waiver of the conditions to the parties' respective obligations hereunder, and subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 1.2 hereof): (a) unless theretofore done, Buyer shall organize the Buyer Sub in accordance with Massachusetts law; (b) Buyer Sub shall be merged with and into Safety Fund, with Safety Fund as the surviving corporation (the "Surviving Corporation"); and (c) the separate existence of --------------------- Buyer Sub shall cease and all of the rights, privileges, powers, franchises, properties, assets, liabilities and obligations of Buyer Sub shall be vested in and assumed by Safety Fund. 1.2 EFFECTIVE TIME. The Merger shall be effected by the filing of articles of merger (the "Articles of Merger") with the Secretary of State of The ------------------ Commonwealth of Massachusetts (the "Secretary of State") in accordance with ------------------ Massachusetts law to become effective on the day of the closing ("Closing Date") ------------ provided for in Article IX hereof (the "Closing"). The term "Effective Time" ------- -------------- shall mean the time on the Closing Date (or a subsequent date not later than the opening of business on the next business day) when the Merger becomes effective as set forth in the Articles of Merger. 1.3 CHARTER AND BY-LAWS. The Charter and By-laws of the Surviving Corporation shall be the Articles of Organization, as amended (the "Charter"), ------- and By-laws of Buyer Sub as in effect immediately prior to the Effective Time, until thereafter amended as provided therein and by applicable law. 1.4 DIRECTORS AND COMMITTEES OF SURVIVING CORPORATION AND BUYER. (a) The Directors of Buyer Sub immediately prior to the Effective Time shall be the initial Directors of Surviving Corporation, each to hold office in accordance with the Charter and By-Laws of Surviving Corporation. (b) Prior to or at the Effective Time, four directors of Safety Fund to be designated by Buyer after consultation with Safety Fund shall be elected to the Board of Directors of Buyer, to be divided proportionately among the classes. The Board of Directors of Buyer shall nominate such persons for re- election, and support their re-election at the next succeeding annual meeting of shareholders of Buyer to its Board of Directors, to be divided proportionately among the classes of directors. Prior to the Effective Time, Buyer, in consultation with Safety Fund shall reconstitute the committees of its Board of Directors (as well as its joint management-Board committees) so as to achieve substantially proportionate representation, taking into account to the extent practicable the specific skills, education and experience of the various designees, for the directors of Safety Fund designated to become directors of Buyer. 1.5 OFFICERS OF SURVIVING CORPORATION. The officers of Buyer Sub immediately prior to the Effective Time shall be the initial officers of Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified. 1.6 SURVIVING BANK. (a) In the event Buyer determines to accomplish the Bank Merger immediately following the Merger and the BHC Merger: (1) The Bank Merger Agreement shall specify which of SFNB and Orange Savings shall be the surviving bank in the Bank Merger ("Surviving --------- Bank"), provided that the name of the Surviving Bank shall include the ---- words "Safety Fund". (2) Buyer agrees, to the extent permitted by applicable law and appropriate federal and state bank regulators, to maintain the Surviving Bank in existence as a separate subsidiary for at least three years following the Effective Time subject to regulatory considerations, safe and sound banking practices, and the fiduciary duties of Buyer's directors. (3) The officers of SFNB immediately prior to the Effective Time shall continue to be the officers of the Surviving Bank following the Effective Time, each to hold office in accordance with the Charter and By- Laws of the Surviving Bank. Nine directors of SFNB to be designated by Buyer after consultation with Safety Fund shall continue to be 2 directors of the Surviving Bank following the Effective Time, each to hold office in accordance with the Charter and By-Laws of the Surviving Bank. Buyer intends initially to elect up to three additional directors to serve on the Board of the Surviving Bank. Buyer agrees that, the continuing directors of SFNB will be kept in place for at least three years subject to regulatory considerations, safe and sound banking practices, and the fiduciary duties of Buyer's directors. (4) To the extent any of the Persons designated in this Agreement to serve as a director of Buyer or Surviving Bank is unable or unwilling, as of the Effective Time, to serve in such position, Buyer and Safety Fund shall agree on another member of the SFNB Board to serve as a replacement for such designee. (b) In the event Buyer determines not to accomplish the Bank Merger immediately following the Merger and the BHC Merger, Buyer agrees to take all the measures specified in Sections 1.6(a)(2), (3) and (4) with respect to SFNB to the same extent as they would have been applied to the Surviving Bank. (c) Nothing herein shall be deemed to preclude Buyer from accomplishing the Bank Merger at any time from and after the Effective Time as determined by the Board of Directors of Buyer. 1.7 ADDITIONAL ACTIONS. If, at any time after the Effective Time, Surviving Corporation shall consider or be advised that any further assignments or assurances in law or any other acts are necessary or desirable (a) to vest, perfect or confirm, of record or otherwise, in Surviving Corporation, title to and possession of any property or right of Buyer Sub acquired or to be acquired by reason of, or as a result of, the Merger, or (b) otherwise to carry out the purposes of this Agreement, Buyer Sub and its proper officers and directors shall be deemed to have granted to Surviving Corporation an irrevocable power of attorney to execute and deliver all such proper deeds, assignments and assurances in law and to do all acts necessary or proper to vest, perfect or confirm title to and possession of such property or rights in Surviving Corporation and otherwise to carry out the purposes of this Agreement; and the proper officers and directors of Surviving Corporation are fully authorized in the name of Buyer Sub or otherwise to take any and all such action. 1.8 ADDITIONAL AGREEMENTS. Safety Fund shall cause SFNB to execute and deliver the Bank Merger Agreement as soon as practicable following Buyer's request therefor. Safety Fund shall, and shall cause SFNB to, execute all other documents and take all actions as may be necessary or desirable for consummation of the BHC Merger and the Bank Merger, as described in the recitals hereto. 1.9 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger shall have the effects set forth in Chapter 156B, Section 80 of the General Laws of The Commonwealth of Massachusetts, as amended. 1.10 THE OPTION AGREEMENT. The parties acknowledge that Safety Fund and Buyer have entered into that certain Stock Option Agreement dated as of even date herewith (the "Option Agreement") pursuant to which Safety Fund has granted ---------------- to Buyer the right to purchase certain shares of Safety Fund Common Stock (as defined in Section 2.1 hereof) upon terms and 3 conditions specified in the Option Agreement. ARTICLE II CONVERSION OF SHARES 2.1 CONVERSION. At the Effective Time, each share of common stock, par value $5.00 per share, of Safety Fund (the "Safety Fund Common Stock") issued ------------------------ and outstanding immediately prior to the Effective Time (other than Dissenting Shares (as such term is defined in Section 2.10 hereof) and other than Safety Fund Common Stock then owned by Safety Fund, any Safety Fund Subsidiary, Buyer, or any Buyer Subsidiary (in each case other than in a fiduciary capacity or in connection with debts previously contracted)), including each attached right issued pursuant to the Shareholder Rights Plan (as hereinafter defined), shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and exchangeable for an amount of common stock, par value $0.66 2/3 per share, of Buyer ("Buyer Common Stock") equal to one share ------------------ multiplied by the appropriate Exchange Ratio (rounded to the nearest four decimal places) determined in accordance with Section 2.4 or Section 2.5 hereof, as the case may be (the "Merger Consideration"). -------------------- 2.2 CERTAIN DEFINED TERMS. As used herein, the following capitalized terms shall have the specified values or meanings. (a) "BUYER INDEX PRICE" shall mean $15.54 per share of Buyer Common Stock. (b) "BUYER TRADING PRICE" shall mean the average closing price of Buyer Common Stock on the American Stock Exchange ("Stock Exchange") (as -------------- reported by The Wall Street Journal or, if not reported thereby, another authoritative source) for the ten consecutive trading days ending on the business day before the date on which the last regulatory approval required to consummate the transactions contemplated hereby is obtained. (c) "POOLING DETERMINATION" shall mean either (i) a determination by Buyer that it is permissible under applicable financial and regulatory accounting principles for Buyer to record the Merger under the pooling of interests method of accounting or (ii) a determination that, solely as a result of actions of Buyer in breach of this Agreement, it is impermissible under applicable financial and regulatory accounting principles for Buyer to record the Merger under the pooling of interests method of accounting and that Buyer will be required to use the purchase method of accounting for the Merger. 2.3 DETERMINATION OF APPLICABLE EXCHANGE RATIO. The parties expect the Merger to be accounted for under the pooling of interests method of accounting. In view of the fact that, among other possibilities, a shareholder might take actions so as to preclude pooling treatment for the Merger, the parties have agreed that the Merger Consideration shall be paid as follows. Not later than the second business day preceding the Effective Time, Buyer shall consult with its independent certified public accountants as to whether a Pooling Determination can be made, and shall promptly advise Safety Fund of the determination. If, as of the close of business on the day preceding the Effective Time, a Pooling Determination shall have been made, the Exchange Ratio shall be the Pooling Exchange Ratio and the provisions of Section 2.4 shall apply. If as of such time it shall not have been possible to make a Pooling Determination the initial Exchange Ratio 4 shall be the Purchase Exchange Ratio and the provisions of Sections 2.5 and 2.6 shall apply. 2.4 POOLING OF INTERESTS ACCOUNTING EXCHANGE RATIOS. The "Pooling ------- Exchange Ratio" shall be determined as follows: - -------------- (a) If the Buyer Trading Price is equal to or greater than 85 percent of the Buyer Index Price and is no greater than 115 percent of the Buyer Index Price, the Pooling Exchange Ratio shall be 1.700. (b) If the Buyer Trading Price is greater than 115 percent of the Buyer Index Price and is no greater than 120 percent of the Buyer Index Price, the Pooling Exchange Ratio shall be equal to: Buyer Index Price X 1.955 --------------------------- Buyer Trading Price (c) If the Buyer Trading Price is greater than 120 percent of the Buyer Index Price, the Pooling Exchange Ratio shall be 1.629. (d) If the Buyer Trading Price is less than 85 percent of the Buyer Index Price and is equal to or greater than 80 percent of the Buyer Index Price, the Pooling Exchange Ratio shall be equal to: Buyer Index Price X 1.445 --------------------------- Buyer Trading Price (e) If the Buyer Trading Price is less than 80 percent of the Buyer Index Price, the Pooling Exchange Ratio shall be 1.806 unless the Buyer Trading Price is less than 75 percent of the Buyer Index Price and the Pooling Exchange Ratio is increased or this Agreement is terminated in accordance with the terms of Section 2.12 hereof. (f) Notwithstanding any other provisions of this Section 2.4, in the event that before the Effective Time an announcement is made with respect to a business combination involving the acquisition of Buyer or a substantial portion of its assets, the Pooling Exchange Ratio shall not be less than 1.700. 2.5 PURCHASE ACCOUNTING EXCHANGE RATIOS. The "Purchase Exchange Ratio" ----------------------- shall be determined as follows: (a) If the Buyer Trading Price is equal to or greater than $13.16 and is less than $16.45, the Purchase Exchange Ratio shall be equal to 1.520. (b) If the Buyer Trading Price is equal to or greater than $16.45 and less than $20.84, the Purchase Exchange Ratio shall be equal to: $25.00 ------------------- Buyer Trading Price 5 (c) If the Buyer Trading Price is equal to or greater than $20.84, the Purchase Exchange Ratio shall be equal to 1.200. (d) If the Buyer Trading Price is less than $13.16 and equal to or greater than $12.50, the Purchase Exchange Ratio shall be: $20.00 ------------------- Buyer Trading Price (e) If the Buyer Trading Price is less than $12.50 the Purchase Exchange Ratio shall be 1.600 unless the Purchase Exchange Ratio is increased or this Agreement is terminated in accordance with the terms of Section 2.12 hereof. (f) Notwithstanding any other provisions of this Section 2.5, in the event that before the Effective Time an announcement is made with respect to a business combination involving the acquisition of Buyer or a substantial portion of its assets, the Purchase Exchange Ratio shall not be less than 1.520. 2.6 ADDITIONAL MERGER CONSIDERATION. If the Purchase Exchange Ratio is used to determine the Exchange Ratio at the Effective Time, each holder of Safety Fund Common Stock exchanging shares of Safety Fund Common Stock in connection with the Merger ("Holder") shall also be entitled to received ------ additional Merger Consideration under the circumstances described in this Section 2.6. Upon the occurrence of a "Triggering Event" and without the ---------------- payment of further consideration, each Holder shall be entitled to receive a number of shares of Buyer Common Stock, rounded down to the nearest whole share, determined by multiplying the number of shares of Safety Fund Common Stock held of record and beneficially by such Holder as of the Closing by the difference between the Pooling Exchange Ratio and the Purchase Exchange Ratio. A Triggering Event shall have occurred if, on or before the date which is three months after the Closing Date, a Pooling Determination is made with respect to the Merger. During the three-month period following the Effective Date, Buyer shall regularly cause an inquiry to be made as to whether a Pooling Determination can be made and shall cause a Pooling Determination to be made as promptly as practicable after the occurrence of events that would permit such a determination to be made based on facts not determinable prior to the Effective Time. If no Triggering Event shall have occurred on or before the end of such three-month period, no Holder shall have any right to receive any additional Merger Consideration pursuant to this Section 2.6. The right to receive additional Merger Consideration shall not be transferable except in the case of the death of the Holder, and then only by will or the laws of descent and distribution. 2.7 CONVERSION OF STOCK. (a) All Safety Fund Common Stock converted into Buyer Common Stock pursuant to this Article II shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each certificate (each a "Certificate") previously representing any such Safety Fund Common Stock shall ----------- thereafter represent the right to receive (i) the number of whole shares of Buyer Common Stock, and (ii) cash in lieu of fractional shares into which the Safety Fund Common Stock represented by such Certificate have been converted. Certificates previously representing Safety Fund Common Stock shall be exchanged for certificates representing whole shares of Buyer Common Stock and cash in lieu of fractional shares issued in consideration 6 therefor upon the surrender of such Certificates in accordance with this Section 2.7, without any interest thereon. (b) If prior to the Effective Time Buyer should split or combine its common stock (or other securities which are convertible into such common stock) or pay a dividend or other distribution in such common stock or convertible securities, all without Buyer receiving consideration therefor, then an appropriate and proportionate adjustment shall be made to the Exchange Ratio, the Buyer Index Price and the Buyer Trading Price. (c) At the Effective Time, all shares of Safety Fund Common Stock held in the treasury of Safety Fund other than in a fiduciary capacity or in connection with a debt previously contracted and all shares of Safety Fund Common Stock owned by Buyer or owned beneficially by any subsidiary of Buyer other than in a fiduciary capacity or in connection with debts previously contracted shall be cancelled and no cash, stock or other property shall be delivered in exchange therefor. 2.8 PROCEDURES FOR EXCHANGE OF SAFETY FUND COMMON STOCK FOR MERGER CONSIDERATION. (a) BUYER TO MAKE SHARES AVAILABLE. Buyer shall take all steps necessary on and as of the Effective Time to deliver to the Exchange Agent (as hereinafter defined), for the benefit of the holders of Certificates, for exchange in accordance with this Section 2.8, certificates representing shares of Buyer Common Stock and the cash in lieu of fractional shares to be paid pursuant to this Section 2.8 (such cash and certificates for shares of Buyer Common Stock, together with any dividends or distributions with respect thereto being hereinafter referred to as the "Exchange Fund") to be issued and paid in ------------- exchange for outstanding Safety Fund Common Stock in accordance with this Agreement. The Exchange Agent shall be such banking institution, corporate trust company, or other stock transfer agent appointed by Buyer and reasonably satisfactory to Safety Fund to act as exchange agent hereunder. The Exchange Agent shall act as agent on behalf of record holders (individually, a "Record ------ Holder") of Safety Fund Common Stock at the Effective Time, other than Safety - ------ Fund, any Safety Fund Subsidiary, Buyer, or any Buyer Subsidiary (in each case other than in a fiduciary capacity or in connection with debts previously contracted), or any Person holding Dissenting Shares. (b) EXCHANGE OF CERTIFICATES. Within three business days after the Effective Time, Buyer shall take all steps necessary to cause the Exchange Agent to mail to each Record Holder of a Certificate or Certificates, a form letter of transmittal for return to the Exchange Agent and instructions for use in effecting the surrender of the Certificates for certificates representing the Buyer Common Stock and the cash in lieu of fractional shares into which the Safety Fund Common Stock represented by such Certificates shall have been converted as a result of the Merger. The form letter (which shall be subject to the reasonable approval of Safety Fund) shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent. Upon surrender of a Certificate for exchange and cancellation to the Exchange Agent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor (x) a certificate for the number of whole shares of Buyer Common Stock to which such holder of Safety Fund Common Stock shall have become entitled pursuant to the provisions of this Section 2.8 and (y) a check representing the amount of cash in lieu of the fractional shares, if any, which 7 such holder has the right to receive in respect of Certificates surrendered pursuant to the provisions of this Section 2.8, and the Certificates so surrendered shall forthwith be cancelled. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Buyer, the posting by such person of a bond in such amount as Buyer may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof. Certificates surrendered for exchange by any person who is an "affiliate" of Safety Fund for purposes of Rule 145(c) under the Securities Act of 1933, as amended (the "Securities Act") shall not be exchanged for -------------- certificates representing shares of Buyer Common Stock until Buyer has received the written agreement of such person contemplated by Section 7.3 hereof. (c) RIGHTS OF CERTIFICATE HOLDERS AFTER THE EFFECTIVE TIME. The holder of a Certificate that prior to the Merger represented issued and outstanding Safety Fund Common Stock shall have no rights, after the Effective Time, with respect to such Safety Fund Common Stock except to surrender the Certificate in exchange for the Merger Consideration as provided in this Agreement or to perfect the rights of appraisal as a holder of Dissenting Shares that such holder may have pursuant to the applicable provisions of Massachusetts law. No dividends or other distributions declared after the Effective Time with respect to Buyer Common Stock shall be paid to the holder of any un-surrendered Certificate until the holder thereof shall surrender such Certificate in accordance with this Section 2.8. After the surrender of a Certificate in accordance with this Section 2.8, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of Buyer Common Stock represented by such Certificate. (d) FRACTIONAL SHARES. Notwithstanding anything to the contrary contained herein, no certificates or scrip representing fractional shares of Buyer Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to Buyer Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of Buyer. In lieu of the issuance of any such fractional share, Buyer shall pay to each former holder of Safety Fund Common Stock who otherwise would be entitled to receive a fractional share of Buyer Common Stock, an amount in cash determined by multiplying the closing sale price of Buyer Common Stock on the Stock Exchange as reported by The Wall Street Journal for the trading day immediately preceding the date of the Effective Time (the "Last Closing Price") by the fraction of a share of Buyer Common Stock ------------------ which such holder would otherwise be entitled to receive pursuant to Section 2.8 hereof. No interest will be paid on the cash which the holders of such fractional shares shall be entitled to receive upon such delivery. (e) SURRENDER BY PERSONS OTHER THAN RECORD HOLDERS. If the Person surrendering a Certificate and signing the accompanying letter of transmittal is not the Record Holder thereof, then it shall be a condition of the payment of the Merger Consideration that such Certificate is properly endorsed to such Person or is accompanied by appropriate stock powers, in either case signed exactly as the name of the Record Holder appears on such Certificate, and is otherwise in proper form for transfer, or is accompanied by appropriate evidence of the authority of the Person surrendering such Certificate and signing the letter of transmittal to do so on behalf of the Record Holder and that the person requesting such exchange shall pay to the Exchange Agent in 8 advance any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. (f) CLOSING OF TRANSFER BOOKS. From and after the Effective Time, there shall be no transfers on the stock transfer books of Safety Fund of the Safety Fund Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be ex- changed for the Merger Consideration and cancelled as provided in this Section 2.8. (g) RETURN OF EXCHANGE FUND. At any time following the 12-month period after the Effective Time, Buyer shall be entitled to require the Exchange Agent to deliver to it any portions of the Exchange Fund which had been made available to the Exchange Agent and not disbursed to holders of Certificates (including, without limitation, all interest and other income received by the Exchange Agent in respect of all funds made available to it), and thereafter such holders shall be entitled to look to Buyer (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither Buyer nor the Exchange Agent shall be liable to any holder of a Certificate for any Merger Consideration delivered in respect of such Certificate to a public official pursuant to any abandoned property, escheat or other similar law. 2.9 BUYER SUB COMMON STOCK. Each share of common stock of Buyer Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation at the Effective Time. 2.10 DISSENTERS' RIGHTS. Notwithstanding anything in this Agreement to the contrary and unless otherwise provided by applicable law, Safety Fund Common Stock which is issued and outstanding immediately prior to the Effective Time and which is owned by stockholders who, pursuant to applicable law, (a) deliver to Safety Fund in the manner provided by law, before the taking of the vote of Safety Fund's stockholders on the Merger, a written objection to the Merger and a written demand for the appraisal of their shares if the Merger is effected and (b) whose shares are not voted in favor of the Merger, nor consented thereto in writing (the "Dissenting Shares"), shall not be converted into the right to ----------------- receive, or be exchangeable for, the Merger Consideration, but, instead, the holders thereof shall be entitled to payment of the appraised value of such Dissenting Shares in accordance with the provisions of Chapter 156B, (S)(S)86-98 of the Massachusetts Business Corporation Law (as amended, the "MBCL"). If any ---- such holder shall have failed to perfect or shall have effectively withdrawn or lost such right of appraisal, the Safety Fund Common Stock of such holder shall thereupon be deemed to have been converted into and be exchangeable for, at the Effective Time, the right to receive the Merger Consideration. Buyer shall have the right to participate in any proceeding involving dissenters' rights. 2.11 STOCK OPTIONS. (a) At the Effective Time, each holder of a then outstanding stock option to purchase Safety Fund Common Stock ("Safety Fund ----------- Option") pursuant to the 1984 Incentive Stock Option Plan or the 1994 Incentive - ------ and Nonqualified Stock Option Plan (collectively, the "Safety Fund Stock Option ------------------------ Plans") (it being understood that the aggregate number of shares of Safety Fund - ----- Common Stock subject to purchase pursuant to the exercise of such Safety 9 Fund Options is not and shall not be more than 65,850), whether vested or unvested, will be assumed by Buyer. Each Safety Fund Option so assumed by Buyer under this Agreement shall continue to have, and be subject to, the same terms and conditions set forth in the Safety Fund Stock Option Plans immediately prior to the Effective Time, except that (i) such Safety Fund Option shall be exercisable (when vested) for that number of whole shares of Buyer Common Stock equal to the product of the number of shares of Safety Fund Common Stock covered by the Safety Fund Option multiplied by the Exchange Ratio, provided that any fractional share of Buyer Common Stock resulting from such multiplication shall be rounded down to the nearest share; and (ii) the exercise price per share of Buyer Common Stock shall be equal to the exercise price per share of Safety Fund Common Stock of such Safety Fund Option, divided by the Exchange Ratio, provided that such exercise price shall be rounded up to the nearest cent. (b) After the Effective Time, Buyer shall issue to each holder of an outstanding Safety Fund Option a document evidencing the foregoing assumption of such Safety Fund Option by Buyer. (c) It is the intention of the parties that the Safety Fund Options assumed by Buyer qualify following the Effective Time as incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") to the extent that the Safety Fund Options qualified as incentive stock ---- options immediately prior to the Effective Time. (d) Buyer shall not issue or pay for any fractional share otherwise issuable upon exercise of a Safety Fund Option. Prior to the Effective Time, Buyer shall reserve for issuance (and, if not previously registered pursuant to the Securities Act, register) the number of shares of Buyer Common Stock necessary to satisfy Buyer's obligations with respect to the issuance of Buyer Common Stock pursuant to the exercise of Safety Fund Options. (e) The provisions of this Section 2.11 are expressly intended to be for the irrevocable benefit of, and shall be enforceable by, each holder of a Safety Fund Option and his or her heirs and representatives. 2.12 TERMINATION, NOTICE AND CURE. (a) If (i) the Buyer Trading Price is less than $11.65 and a Pooling Determination can be made or (ii) the Buyer Trading Price is less than $12.50 and a Pooling Determination cannot be made, Safety Fund may elect by giving written notice to Buyer prior to the third business day immediately preceding the Closing Date to terminate this Agreement pursuant to Section 1.01. Within two business days thereafter: (1) in the event the Exchange Ratio is a Pooling Exchange Ratio, Buyer may elect to increase the Exchange Ratio to: $21.06 ------------------- Buyer Trading Price and (2) in the event the Exchange Ratio cannot be a Pooling Exchange Ratio, Buyer may elect either to (X) increase the Exchange Ratio to that Exchange Ratio which when 10 multiplied by the Buyer Trading Price has a value of $20.00 or (Y) offer an Exchange Ratio of 1.600 plus an amount of cash which when added to the product of 1.600 and the Buyer Trading Price has an aggregate value of $20.00 per share of Safety Fund Common Stock; (b) In the event Buyer makes an election referred to in the preceding Section 2.12(a), this Agreement shall not terminate and the Exchange Ratio shall be determined in accordance with such Section 2.12(a), subject (in the event such Exchange Ratio cannot be a Pooling Exchange Ratio) to the possible payment of additional Merger Consideration as described in Section 2.6 hereof. In the event Buyer does not elect to increase the Exchange Ratio, this Agreement shall terminate on the date established as the Closing Date with the consequences specified in Section 10.2 hereof. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SAFETY FUND Safety Fund hereby represents and warrants to Buyer as follows: 3.1 CORPORATE ORGANIZATION. (a) Safety Fund is a corporation, duly organized and validly existing and in good standing under the laws of The Commonwealth of Massachusetts, and is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHCA"). The subsidiaries ---- listed in Exhibit 21 of Safety Fund's Annual Report on Form 10-KSB for the year ended December 31, 1994 constitute all of Safety Fund's subsidiaries (the "Safety Fund Subsidiaries"). Except as set forth in Schedule 3.1 of the Safety - ------------------------- ------------ Fund Disclosure Schedules (the "Schedules"), each of the Safety Fund --------- Subsidiaries is a bank or corporation, in each case duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. SFNB is a national banking association organized under the National Bank Act. Each of Safety Fund and the Safety Fund Subsidiaries has the power and authority to own or lease all of its properties and assets and to conduct its business as it is now being conducted, and, except as set forth in Schedule 3.1, is duly licensed or qualified to do busi ness and is in good - ------------ standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing does not or would not have a Material Adverse Effect (as defined in Section 11.1) on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. (b) Neither Safety Fund nor any of the Safety Fund Subsidiaries owns, controls or holds with the power to vote, directly or indirectly of record, beneficially or otherwise, any capital stock or any equity or ownership interest in any corporation, partnership, association, joint venture or other entity, other than not more than five percent of any equity security regis tered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than ------------ as disclosed on Schedule 3.1 hereto and except, in the case of Safety Fund, for ------------ stock of the Safety Fund Subsidiaries. 3.2 CAPITALIZATION. (a) The authorized capital stock of Safety Fund consists solely of 3,200,000 shares of Safety Fund Common Stock and 100,000 shares of preferred stock, $10.00 11 par value ("Safety Fund Preferred Shares"). There are 1,660,665 shares of ---------------------------- Safety Fund Common Stock issued and outstanding, no shares of Safety Fund Common Stock held in its treasury and no Safety Fund Preferred Shares issued and outstanding or held in its treasury. In connection with the shareholder rights plan ("Shareholder Rights Plan") adopted by Safety Fund as of the date of this Agreement, an aggregate 3,200 shares of its Series A Participating Cumulative Preferred Stock (the "Series A Preferred") have been created and have been reserved for issuance. All issued and outstanding Safety Fund Common Stock has been, and the Series A Preferred upon issuance will be, duly authorized, validly issued, fully paid, nonassessable, and free of preemptive rights, with no personal liability attaching to the ownership thereof. The authorized, issued and outstanding capital stock of each Safety Fund Subsidiary is set forth in Schedule 3.2 hereto. All issued and outstanding shares of each of the Safety - ------------ Fund Subsidiaries have been duly authorized and validly issued and are fully paid, nonassessable, and free of preemptive rights, with no personal liability attaching to the ownership thereof. All issued and outstanding shares or interests of each of the Safety Fund Subsidiaries are owned by Safety Fund and are held by Safety Fund free and clear of any security interest, pledge, lien, claim or other encumbrance or restriction on voting or transfer. (b) Except for the Option Agreement, the shareholder rights plan ("Shareholder Rights Plan") in the form previously discussed with Buyer and ----------------------- options to acquire not more than 50,850 shares of Safety Fund Common Stock pursuant to stock options outstanding as of the date hereof under the Safety Fund Stock Option Plans, neither Safety Fund nor any of the Safety Fund Subsidiaries has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the transfer, purchase or issuance of, or representing the right to purchase, subscribe for or otherwise receive, any shares of its capital stock or any securities convertible into or representing the right to receive, purchase or subscribe for any such shares of Safety Fund, or shares of any of the Safety Fund Subsidiaries. The names of the optionees, the date of grant of each option to purchase Safety Fund Common Stock, the number of shares subject to each such option, the expiration date of each such option, and the price at which each such option may be exercised under the Safety Fund Stock Option Plans are set forth on Schedule 3.2. Except as set forth on Schedule 3.2 and except for ------------ ------------ restrictions on transferability of rights granted pursuant to the Shareholder Rights Plan (as set forth in such Shareholder Rights Plan), there are no agreements or understandings with respect to the voting of any such shares or which restrict the transfer of such shares to which Safety Fund is a party, nor does Safety Fund have knowledge of any such agreements or understandings to which Safety Fund is not a party with respect to the voting of any such shares or which restrict the transfer of such shares. The Safety Fund Common Stock is listed on the Nasdaq small-cap market. 3.3 AUTHORITY. Safety Fund has full corporate power and authority to execute and deliver this Agreement and the Option Agreement and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Option Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly approved by at least a majority of Safety Fund's directors. The Board of Directors of Safety Fund has directed that this Agreement and the transactions contemplated hereby be submitted to Safety Fund's stockholders for approval at a meeting of such stockholders and has recommended approval of this Agreement by Safety Fund's stockholders. Except for the adoption of this Agreement by a vote of the holders of two-thirds of the outstanding shares of Safety Fund Common Stock and except for any actions required or appropriate to be taken by Safety Fund with respect to the rights of any dissenting shareholders under Chapter 156B, (S)(S)86-98 of the MBCL, no other corporate proceedings on the part of Safety Fund are necessary to consummate the transactions contemplated by this Agreement. Each of this Agreement and the Option Agreement has been duly and validly executed and delivered by Safety Fund, constitutes a valid and binding obligation of Safety Fund, and is enforceable against Safety Fund in accordance with its terms, subject to (i) bankruptcy, insolvency, reorganization, moratorium and similar laws 12 affecting the rights and remedies of creditors generally and (ii) general principles of equity, regardless of whether enforcement is sought in proceedings in equity or at law. 3.4 NO VIOLATION. Neither the execution and delivery of this Agreement or the Option Agreement by Safety Fund, nor the consummation by Safety Fund of the transactions contemplated hereby or thereby, nor the compliance by Safety Fund with any of the terms or provisions hereof, does or will: (a) violate any provision of the Charter or By-laws of Safety Fund or any of the Safety Fund Subsidiaries, (b) assuming that the consents and approvals referred to in Section 3.5 hereof are duly obtained, violate any statute, code, ordinance, permit, authorization, registration, rule, regulation, judgment, order, writ, decree or injunction applicable to Safety Fund or any of the Safety Fund Subsidiaries or any of their respective properties, securities or assets, except for violations which would not, individually or in the aggregate, have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole, or (c) assuming that the consents and approvals referred to in Section 3.5 hereof are duly obtained and except as set forth on Schedule 3.4 hereto, ------------ violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the respective properties or assets of Safety Fund or any of the Safety Fund Subsidiaries under, any of the terms, conditions or provisions of any note, bond, debenture, mortgage, indenture, deed of trust, license, lease, contract, agreement or other instrument or obligation to which Safety Fund or any of the Safety Fund Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except for violations, conflicts, breaches or defaults which would not, individually or in the aggregate, have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. 3.5 CONSENTS AND APPROVALS. Neither the execution, delivery and performance of this Agreement or the Option Agreement by Safety Fund nor consummation of the transaction contemplated hereby or thereby requires 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, including, without limitation, any Bank Regulator (as hereinafter defined), except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act, state takeover laws, and filing and recordation of appropriate merger documents as required by Massachusetts, New Hampshire and Federal law, (ii) for consents and approvals of or filings or registrations with the Board of Governors of the Federal Reserve System (the "Federal Reserve"), the Office of the Comptroller of --------------- the Currency (the "OCC"), the Massachusetts Board of Bank Incorporation (the --- "BBI"), the Massachusetts Commissioner of Banks ("Massachusetts Commissioner"), - ---- -------------------------- and the Massachusetts Housing Partnership Fund ("MHP") (each of the foregoing, a --- "Bank Regulator"), and (iii) 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, the BHC Merger or the Bank Merger or otherwise prevent Safety Fund from performing its obligations 13 under this Agreement, or would not have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole, or on Buyer. 3.6 REGULATORY APPROVAL. Safety Fund is not aware of any reason why the conditions set forth in Section 8.1(c) hereof would not be satisfied without significant delay. Safety Fund is not aware of any reason why the Merger cannot qualify as a "pooling of interests" for accounting purposes. 3.7 FINANCIAL STATEMENTS. (a) The consolidated balance sheets of Safety Fund as of December 31, 1994 and 1993, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years ended December 31, 1994, 1993 and 1992, certified by KPMG Peat Marwick LLP for 1994 and by Ernst & Young LLP for 1993 and 1992 in the form delivered to Buyer prior to execution and delivery of this Agreement (all of the above being collectively referred to as the "Safety Fund Audited Financial Statements"), ---------------------------------------- have been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis (except as may be indicated in the ---- footnotes thereto and except as required or permitted by SFAS 109 and 115) and present fairly in all material respects the consolidated financial position of and results of operations of Safety Fund at the dates, and for the periods, stated therein. (b) The consolidated balance sheets of Safety Fund as of September 30, 1995 and 1994, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the nine months ended September 30, 1995 and 1994 in the form delivered to Buyer prior to execution and delivery of this Agreement (hereinafter referred to collectively as the "Safety Fund Interim ------------------- Financial Statements") present fairly, and the financial statements referred to - -------------------- in Section 5.5 hereof will present fairly, in all material respects the consolidated financial position and results of operations of Safety Fund for the periods indicated thereon and have been, and the financial statements referred to in Section 5.5 hereof will be, prepared in accordance with GAAP applied on a consistent basis (except for the omission of notes to the Safety Fund Interim Financial Statements and year-end adjustments to interim results, which adjustments will not be material, and except as required or permitted by SFAS 109 and 115) with all prior periods and throughout the periods indicated. (c) The Safety Fund Audited Financial Statements and the Safety Fund Interim Financial Statements are herein referred to together as the "Safety Fund ----------- Financial Statements." - -------------------- (d) The books and records of Safety Fund and each Safety Fund Subsidiary fairly reflect in all material respects the transactions to which it is a party or by which its properties are subject or bound. Such books and records have been properly kept and maintained and are in compliance in all material respects with all applicable legal and accounting requirements. The minute books of Safety Fund and the Safety Fund Subsidiaries contain records which are accurate in all material respects of all corporate actions of the respective shareholders and Board of Directors (including committees of its Board of Directors). 3.8 SAFETY FUND REPORTS. Since January 1, 1991, Safety Fund and the Safety Fund Subsidiaries have filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed (except where the failure to do so would not, individually or in the aggregate, have a Material Adverse Effect on Safety 14 Fund and the Safety Fund Subsidiaries, taken as a whole), with (i) the Securities and Exchange Commission ("SEC") pursuant to the Securities Act or the --- Exchange Act, (ii) the OCC, (iii) the Federal Reserve, and (iv) any applicable state securities or banking authorities (all such reports and statements are collectively referred to herein as the "Safety Fund Reports"). As of their ------------------- respective dates, no such Safety Fund Reports filed with the SEC contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information filed as of a later date shall be deemed to modify information as of an earlier date and except that Safety Fund has corrected a scrivener's error with a filing of an amended Form 10-QSB, for the quarter ended September 30, 1995. 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule -------- 3.9 hereto, since December 31, 1994, Safety Fund and the Safety Fund - --- Subsidiaries have conducted their business in the ordinary course consistent with past practice and there has not been: (a) any change or event which, individually or in the aggregate with other changes and events, has had a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole; (b) except as permitted by Section 5.1 with respect to actions that occur after the date hereof and as set forth in Schedule 3.9 hereto or in the ------------ ordinary course of business consistent with past practice with respect to actions that occurred prior to the date hereof, any increase in the compensation payable or to become payable to any of the officers, directors or employees of Safety Fund or any of the Safety Fund Subsidiaries or any bonus payment or arrangement made to or with any of them; (c) 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, individually or in the aggregate, is reasonably expected to have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole); (d) any change in any of the accounting methods or practices of Safety Fund or any of the Safety Fund Subsidiaries other than changes required by applicable law or by GAAP; (e) any change in the credit policies or procedures of Safety Fund or any Safety Fund Subsidiary, the effect of which was or is to make any such policy or procedure less restrictive in any material respect; or (f) any material election made by Safety Fund or any Safety Fund Subsidiary for federal or state income tax purposes. 3.10 LEGAL PROCEEDINGS. (a) Except as set forth on Schedule 3.10 hereto ------------- and except for matters which, individually or in the aggregate, would not have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole, neither Safety Fund nor any of the Safety Fund Subsidiaries is a party to any, and there are no pending or, to the best of Safety Fund's knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental investigations of any nature by or against Safety Fund or any of the Safety Fund Subsidiaries; and neither Safety Fund nor any of the Safety Fund Subsidiaries is a party to or 15 subject to any order, judgment or decree. (b) Schedule 3.10 lists, as of the date of this Agreement, all ------------- pending litigation involving any claim against Safety Fund or any Safety Fund Subsidiary, whether directly or by counterclaim, involving a "lender liability" cause of action . (c) There are no actions, suits or proceedings instituted, pending or, to the knowledge of Safety Fund, threatened (and which if asserted would be reasonably likely to have an unfavorable outcome) against any present or former director or officer of Safety Fund or any Safety Fund Subsidiary that might give rise to a claim for indemnification against Safety Fund or any Safety Fund Subsidiary that is reasonably likely to have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. 3.11 TAXES AND TAX RETURNS. (a) Safety Fund, all Safety Fund Subsidiaries, and all predecessors of Safety Fund have timely filed all federal, state, and local tax returns required by applicable law to be filed except for filings which are filed pursuant to routine extensions permitted by law or the failure to file which or the late filing of which would not have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. Such returns were accurate and complete in all material respects except where the failure to be accurate or complete would not have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. (b) Safety Fund, all Safety Fund Subsidiaries, and all predecessors of Safety Fund have paid or, where payment is not required to have been made, have set up adequate reserves or accruals in the Safety Fund Financial Statements for the payment of all taxes required to be paid in respect of the periods covered by such returns and as of the date hereof, including but not limited to accruals or withholdings relating to any tax withholding, social security or unemployment provisions of the applicable federal, state and local laws except where the failure to do so would not have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. As of the respective dates of the Safety Fund Financial Statements in which such reserves or accruals are established and the date hereof, neither Safety Fund nor any Safety Fund Subsidiary had any liability for any such taxes in excess of the amounts so paid or reserved or accruals so established which was material to Safety Fund and the Safety Fund Subsidiaries, taken as a whole. Except for taxes which are being contested in good faith and for which adequate reserves or accruals are reflected in the Safety Fund Financial Statements, neither Safety Fund nor any of the Safety Fund Subsidiaries is delinquent in the payment of any material tax, assessment or governmental charge the failure to pay which would have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole, and none of them has requested any extension of time within which to file any tax returns in respect of any fiscal year which have not since been filed. (c) No material deficiencies for any tax, assessment or governmental charge have been proposed, asserted or assessed (tentatively or definitively) against Safety Fund or any of the Safety Fund Subsidiaries which have not been settled and paid or adequately reserved against in the Safety Fund Financial Statements and no requests for waivers of the time to assess any tax are pending. Safety Fund and the Safety Fund Subsidiaries file consolidated federal income tax returns. Safety Fund's consolidated federal income tax returns have not been audited by the IRS since prior to 1988. 16 (d) None of the transactions contemplated hereby or the termination of the employment of any employee of Safety Fund or any Safety Fund Subsidiary prior to or following consummation of the transactions contemplated hereby could result in Buyer or any Buyer Subsidiary making or being required to make any "excess parachute payment" as that term is defined in Section 280G of the Code. 3.12 PROPERTIES. Except (i) as may be reflected in the Safety Fund Financial Statements, (ii) for any lien for current taxes not yet delinquent, (iii) for pledges to secure deposits, (iv) for liens on real estate acquired by foreclosure or substantively repossessed, and (v) for such other liens, security interests, claims, charges, options or other encumbrances and imperfections of title that do not have a Material Adverse Effect on the value of personal or real property reflected in the Safety Fund Financial Statements or acquired since the date of such statements and which do not materially interfere with or impair the present and continued use of such property, Safety Fund and the Safety Fund Subsidiaries have good title, free and clear of any liens, claims, charges, options or other encumbrances, to all of the personal and real property reflected in the consolidated balance sheets of Safety Fund included in the Safety Fund Financial Statements and all personal and real property acquired since such date, except such personal and real property as has been disposed of in the ordinary course of business. 3.13 CERTAIN CONTRACTS. Except as set forth in Schedule 3.13 hereto and ------------- except for agreements, indentures, arrangements and contracts which are exhibits to Safety Fund's Annual Report on Form 10-KSB for the year ended December 31, 1994, accurate copies of which have been made available to Buyer, neither Safety Fund nor any of the Safety Fund Subsidiaries is a party to, is bound by, owns properties subject to, or receives benefits under: (a) any agreement, arrangement or other contract not made in the ordinary course of business that (x) would be required to be filed as an exhibit to a Form 10-K or 10-KSB under the Exchange Act or (y) is or may reasonably be expected to be material to the financial condition, business or results of operations of Safety Fund and the Safety Fund Subsidiaries, taken as a whole, (b) any agreement, indenture or other instrument relating to the borrowing of money by Safety Fund or any Safety Fund Subsidiary or the guarantee by Safety Fund or any Safety Fund Subsidiary of any such obligation (other than instruments relating to transactions entered into in the ordinary course of the business of Safety Fund or in the ordinary course of business of any Safety Fund Subsidiary), (c) any agreement, arrangement or commitment which cannot be terminated at will relating to the employment of a consultant or the employment, election or retention of any present or former director, officer or employee, (d) any contract, agreement or understanding with a labor union, (e) any agreement (other than any agreement (x) with a banking customer entered into by any Safety Fund Subsidiary in the ordinary course of business under which any Safety Fund Subsidiary provides banking services to such banking customer or (y) relating to the sale of mortgage loans, including forward commitments) that involves a payment or series of payments of more than $100,000 from or to Safety Fund or any Safety Fund Subsidiary, or 17 (f) any agreement containing covenants that limit the ability of Safety Fund or any Safety Fund Subsidiary to compete in any line of business or with any person, or that involve any restriction on the geographic area in which, or method by which, Safety Fund or any Safety Fund Subsidiary may carry on its business. 3.14 CERTAIN DEFAULTS. Except as set forth in Schedule 3.14 hereto, ------------- neither Safety Fund nor any Safety Fund Subsidiary, nor, to the knowledge of Safety Fund, any other party thereto, is in default in any material respect under any material lease, contract, mortgage, promissory note, deed of trust, loan or other commitment or arrangement pursuant to which Safety Fund or any Safety Fund Subsidiary has borrowed funds or is otherwise the obligor, which default would have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. 3.15 INSURANCE. (a) The deposit accounts of any Safety Fund Subsidiary which are of an insurable type are insured by the FDIC to the extent permitted by the Bank Insurance Fund of the FDIC. (b) Safety Fund has made available to Buyer correct and complete copies of all material policies of insurance of Safety Fund and the Safety Fund Subsidiaries currently in effect. Neither Safety Fund nor any of the Safety Fund Subsidiaries has any liability for unpaid premiums or premium adjustments not properly reflected on Safety Fund's financial statements included in Safety Fund's Quarterly Report on Form 10-QSB for the period ended September 30, 1995, except for any such liability that would not have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. Except as set forth on Schedule 3.15 hereto, neither Safety Fund nor any Safety Fund ------------- Subsidiary has received any notice of termination of any such insurance coverage or material increase in the premiums therefor or has any reason to believe that any such insurance coverage will be terminated or the premiums therefor materially increased. 3.16 EMPLOYEE BENEFIT PLANS. (a) Except as described on Schedule 3.16 ------------- hereto, neither Safety Fund nor any of the Safety Fund Subsidiaries has any obligation, contingent or otherwise, under any employment, consulting, retirement or severance agreement which would require Safety Fund or any Safety Fund Subsidiary to make payments exceeding $100,000 for any employee or former employee. (b) SCHEDULE 3.16 hereto sets forth a complete list of all ERISA Plans (as defined below). Except as set forth in Schedule 3.16, neither Safety ------------- Fund nor any Safety Fund Subsidiary maintains or contributes to any "multi- employer plan" as that term is defined at Section 4001(a)(3) of ERISA, and neither Safety Fund nor any Safety Fund Subsidiary has incurred any material liability under Section 4062, 4063 or 4201 of ERISA. To the knowledge of Safety Fund, each pension plan, as defined at Section 3(2) of ERISA, maintained by Safety Fund or any Safety Fund Subsidiary (each, a "Pension Plan") which is ------------ intended to be qualified under Section 401(a) of the Code is so qualified. Except as set forth in Schedule 3.16 hereto, to the knowledge of Safety Fund, ------------- since January 1, 1991, (i) each welfare plan, as defined at Section 3(1) of ERISA, maintained by Safety Fund or a Safety Fund Subsidiary (each, a "Welfare ------- Plan"), and each Pension Plan (the Pension Plans and Welfare Plans being - ---- hereinafter referred to as "ERISA Plans"), has been administered substantially ----------- in accordance with the terms of such plan and the provisions of ERISA, (ii) nothing has been done or omitted to be done with respect to any ERISA Plan that would result in any material liability on the part of Safety Fund or any Safety 18 Fund Subsidiary, including the loss of any material tax deduction, under ERISA or the Code, (iii) no "reportable event" as defined at Section 4043 of ERISA, other than any such event for which the thirty-day notice period has been waived, has occurred with respect to any Pension Plan subject to Title IV of ERISA, and (iv) except for continuation of health coverage to the extent required under Section 4980B of the Code, there are no unfunded obligations under any ERISA Plan providing benefits after termination of employment. (c) Schedule 3.16 hereto sets forth a complete list of all material ------------- employment, consulting, retirement and severance agreements with individuals and all material incentive, bonus, fringe benefit and other employee benefit arrangements of Safety Fund and the Safety Fund Subsidiaries, covering employees or former employees of Safety Fund and the Safety Fund Subsidiaries. (d) Safety Fund has made available to Buyer copies of all ERISA Plans, copies of all agreements and arrangements referred to in (c) above that have been reduced to writing, and a written summary of the material terms of all such agreements or arrangements that have not been reduced to writing. 3.17 COMPLIANCE WITH APPLICABLE LAW; REGULATORY EXAMINATIONS. (a) Safety Fund and each of the Safety Fund Subsidiaries holds, and has at all times held, all licenses, franchises, permits, approvals, consents, qualifications and authorizations material for the lawful conduct of its business under and pursuant to, and has complied with, and is not in default under, any applicable law, statute, order, rule, regulation, policy, ordinance, reporting or filing requirement and/or guideline of any federal, state or local governmental authority relating to Safety Fund or any of the Safety Fund Subsidiaries, except as set forth on Schedule 3.17 hereto and except for violations which, either ------------- individually or in the aggregate, do not or would not have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries taken as a whole, and neither Safety Fund or any of the Safety Fund Subsidiaries has knowledge of any violation of any of the above. (b) Except for normal examinations conducted by a regulatory agency in the regular course of the business of Safety Fund and the Safety Fund Subsidiaries and except as set forth on Schedule 3.17 hereto, no regulatory ------------- agency has initiated any proceeding or, to the best knowledge of Safety Fund, investigation into the business or operations of Safety Fund or any of the Safety Fund Subsidiaries since prior to December 31, 1991. Safety Fund has not received any objection from any regulatory agency to Safety Fund's response to any violation, criticism or exception with respect to any report or statement relating to any examinations of Safety Fund or any of the Safety Fund Subsidiaries. 3.18 BROKER'S FEES. Neither Safety Fund, any Safety Fund Subsidiary, nor any of its officers or directors has employed any broker, finder or investment advisor, or incurred any liability for any broker's fees, commissions, finder's fees or investment advisory fees in connection with any of the transactions contemplated by this Agreement, except that Safety Fund has engaged, and will pay a fee to McConnell, Budd & Downes, Inc. (the "Safety Fund Investment ---------------------- Advisor"). The Safety Fund Investment Advisor has delivered an opinion to the - ------- Board of Directors of Safety Fund stating its opinion that the consideration to be received by Safety Fund's stockholders pursuant to the Merger is fair to such stockholders, from a financial point of view. 19 3.19 SAFETY FUND INFORMATION. The information relating to Safety Fund and the Safety Fund Subsidiaries to be contained in the Proxy Statement-Prospectus -------------------------- (as defined in Section 7.1) and any application to any Bank Regulator, or any other statement or application filed with any other governmental body in connection with the Merger, the BHC Merger, the Bank Merger, and the other transactions contemplated by this Agreement, will not contain as of the date of such Proxy Statement-Prospectus and as of the date of the Special Meeting (defined in Section 5.6) any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, Safety Fund makes and will make no representation or warranty with respect to any information supplied by Buyer which is contained in any of the foregoing documents. The Proxy Statement-Prospectus (except for such portions thereof that relate only to Buyer and its subsidiaries) will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. 3.20 ENVIRONMENTAL ISSUES. Except as set forth on Schedule 3.20 hereto ------------- and except where such violation, liability or noncompliance would not have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole: (i) neither Safety Fund nor any of the Safety Fund Subsidiaries has violated during the last five years or is in violation of any Environmental Law (as defined in Section 11.1); (ii) none of the properties owned or leased by Safety Fund or any Safety Fund Subsidiary (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance (as defined in Section 11.1); (iii) neither Safety Fund nor any of the Safety Fund Subsidiaries is liable for any off-site contamination; (iv) neither Safety Fund nor any of the Safety Fund Subsidiaries is liable under any Environmental Law; and (v) Safety Fund and each of the Safety Fund Subsidiaries is, and has during the last five years been, in compliance with, all of their respective Environmental Permits (as defined in Section 11.1). For purposes of the foregoing, all references to "properties" include, without limitation, any owned real property or leased real property. 3.21 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as set forth on Schedule 3.21 or in the proxy statement for Safety Fund's 1995 Annual Meeting of - ------------- Stockholders, to the knowledge of Safety Fund, no officer or director of Safety Fund, 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 Safety Fund or any of the Safety Fund Subsidiaries that would be required to be disclosed in a proxy statement to stockholders under Regulation 14A of the Exchange Act. 3.22 CERTAIN TRANSACTIONS. Since December 31, 1994, neither Safety Fund nor any Safety Fund Subsidiary has entered into any material transactions involving interest rate and currency swaps, options and futures contracts, or any other similar transactions, except as disclosed in Schedule 3.22 hereto. 3.23 REGULATORY AGREEMENTS. Neither Safety Fund nor any Safety Fund Subsidiary is a party to any assistance agreement, supervisory agreement, memorandum of understanding, consent order, cease and desist order, or condition of any regulatory order or decree with or by the OCC, the Federal Reserve or any other financial services regulatory agency that relates to the conduct of the business of Safety Fund or any Safety Fund Subsidiary, nor has Safety Fund or any of the Safety Fund Subsidiaries been advised by any such regulatory agency or other governmental entity that it is considering issuing or requesting any such agreement, order or decree. 20 3.24 LABOR MATTERS. With respect to their employees, neither Safety Fund nor any Safety Fund Subsidiary has engaged in any unfair labor practice as defined under applicable federal law. Since January 1, 1994, Safety Fund and the Safety Fund Subsidiaries have not experienced any attempt by organized labor or its representatives to make Safety Fund or any Safety Fund Subsidiary conform to demands of organized labor relating to their employees or to enter into a binding agreement with organized labor that would cover the employees of Safety Fund or any Safety Fund Subsidiary. There is no unfair labor practice charge or other complaint by any employee or former employee of Safety Fund or any Safety Fund Subsidiary against any of them pending before any governmental agency arising out of Safety Fund's or such Safety Fund Subsidiary's activities, which charge or complaint (i) has a reasonable probability of an unfavorable outcome and (ii) in the event of an unfavorable outcome would, individually or in the aggregate, have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole; there is no labor strike or labor disturbance pending or threatened against any of them; and neither Safety Fund nor any Safety Fund Subsidiary has experienced a work stoppage or other labor difficulty since January 1, 1994. 3.25 ADMINISTRATION OF TRUST ACCOUNTS. Each Safety Fund Subsidiary has properly administered all accounts for which it acts as a fiduciary or agent, including but not limited to accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable state and federal law and regulation and common law, except where the failure to do so would not, individually or in the aggregate, have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. None of Safety Fund, any Safety Fund Subsidiary, or any director, officer or employee of Safety Fund or any Safety Fund Subsidiary acting on behalf of Safety Fund or a Safety Fund Subsidiary, has committed any breach of trust with respect to any such fiduciary or agency account, and the accountings for each such fiduciary or agency account are true and correct in all material respects and accurately reflect the assets of such fiduciary or agency account, except for such breaches and failures to be true, correct and accurate as would not, individually or in the aggregate, have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. 3.26 INTELLECTUAL PROPERTY. Safety Fund and each Safety Fund Subsidiary owns the entire right, title and interest in and to, or has valid licenses with respect to, all of the Intellectual Property, as hereinafter defined, necessary in all material respects to conduct the business and operations of Safety Fund and the Safety Fund Subsidiaries as presently conducted, except where the failure to do so would not, individually or in the aggregate, have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. None of such Intellectual Property is subject to any outstanding order, decree, judgment, stipulation, settlement, lien, charge, encumbrance or attachment, which order, decree, judgment, stipulation, settlement, lien, charge, encumbrance or attachment would have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. For purposes of this Section 3.26, the term "Intellectual Property" means all domestic and foreign letters patent, patents, patent applications, patent licenses, software licensed or owned, know-how licenses, trade names, common law and other trademarks, service marks, licenses of trademarks, trade names and/or service marks, trademark registrations and applications, service mark registrations and applications and copyright registrations and applications. 3.27 LOAN PORTFOLIO. Schedule 3.27 sets forth all of the loans in ------------- original principal 21 amount in excess of $200,000 of Safety Fund or any Safety Fund Subsidiary that as of the date of this Agreement are classified by Safety Fund or any Bank Regulator as "Special Mention", "Substandard", "Doubtful", "Loss" or "Classified," together with the aggregate principal amount of and accrued and unpaid interest on such loans by category, it being understood that no representation is being made that the OCC or any other Bank Regulator would agree with the loan classifications contained in Schedule 3.27. ------------- 3.28 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Safety Fund nor any Safety Fund Subsidiary has any liability (contingent or otherwise), excluding contractually assumed contingencies, except (i) as set forth on the consolidated balance sheet of Safety Fund and its subsidiaries as at December 31, 1994 contained in the Safety Fund Reports, including the notes thereto, (ii) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since December 31, 1994, and (iii) liabilities which would not, individually or in the aggregate, have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Safety Fund as follows: 4.1 CORPORATE ORGANIZATION. Buyer is a corporation, duly organized, validly existing and in good standing under the laws of the State of New Hampshire. Buyer has the power and authority to own or lease all of its properties and assets and to conduct 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 in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing does not or would not, either individually or in the aggregate, have a Material Adverse Effect on Buyer and its subsidiaries, taken as a whole. Buyer is registered as a bank holding company under the BHCA. Buyer has previously made available to Safety Fund for inspection true and complete copies as amended to date of the Charter and By- laws of Buyer. 4.2 CAPITALIZATION. (a) As of the date hereof, the authorized capital stock of Buyer consists solely of 22,500,000 shares of common stock ("Buyer ----- Common Shares") and 3,000,000 shares of preferred stock ("Buyer Preferred - ------------- --------------- Shares"). As of the date hereof, there were 7,087,550 Buyer Common Shares - ------ issued and outstanding, no Buyer Common Shares held in its treasury, and no Buyer Preferred Shares issued and outstanding. All issued and outstanding Buyer Common Shares have been duly authorized and validly issued and are fully paid, nonassessable, and free of preemptive rights, with no personal liability attaching to the ownership thereof. The shares of Buyer Common Stock to be issued pursuant to the Merger will be duly authorized and validly issued and (at the Effective Time) will be fully paid, nonassessable, and free of preemptive rights, with no personal liability attaching to the ownership thereof. (b) As of the date hereof, except for the options to acquire not more than 732,000 Buyer Common Shares pursuant to stock options under the CFX Stock Option Plan (the "Buyer Stock Option Plan"), Buyer is not bound by any ----------------------- outstanding subscriptions, options, warrants, 22 calls, commitments or agreements of any character calling for the transfer, purchase or issuance of, or representing the right to purchase, subscribe for or otherwise receive, any shares of its capital stock or any securities convertible into or representing the right to receive, purchase or subscribe for any such shares of Buyer. There are no agreements or understandings with respect to the voting of any such shares or which restrict the transfer of such shares to which Buyer is a party, nor does Buyer have knowledge of any such agreements or understandings to which Buyer is not a party with respect to the voting of any such shares or which restrict the transfer of such shares. Buyer Common Shares are listed on the Stock Exchange. 4.3 AUTHORITY. Buyer has full corporate power and authority to execute and deliver this Agreement and the Option Agreement, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Option Agreement, and the consummation of the transactions contemplated hereby and thereby have been duly and validly approved by the Board of Directors of Buyer. No corporate proceedings on the part of Buyer are necessary to consummate the transactions contemplated by this Agreement, except that the affirmative vote of the holders of a majority of the votes cast by the holders of Buyer Common Stock eligible to vote thereon is required to authorize the issuance of Buyer Common Stock pursuant to this Agreement in accordance with Stock Exchange policy. Each of this Agreement and the Option Agreement has been duly and validly executed and delivered by Buyer, constitutes a valid and binding obligation of Buyer, and is enforceable against Buyer in accordance with its terms, subject to (i) bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors generally and (ii) general principles of equity, regardless of whether enforcement is sought in proceedings in equity or at law. 4.4 NO VIOLATION. Neither the execution and delivery of this Agreement or the Option Agreement by Buyer, nor the consummation by Buyer of the transactions contemplated hereby or thereby, nor the compliance by Buyer with any of the terms or provisions hereof or thereof, does or will (a) violate any provision of the Charter or By-laws of Buyer, (b) assuming that the consents and approvals referred to in Section 4.5 hereof are duly obtained, violate any statute, code, ordinance, permit, authorization, registration, rule, regulation, judgment, order, writ, decree or injunction applicable to Buyer or any of its subsidiaries or any of their respective properties, securities or assets, except for violations which would not, individually or in the aggregate, have a Material Adverse Effect on Buyer and its subsidiaries, taken as a whole, or (c) assuming that the consents and approvals referred to in Section 4.5 hereof are duly obtained and except as set forth on Schedule 4.4 hereto, ------------ violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by, or result in the creation of any lien, security interest, charge or other encumbrance upon any of the respective properties or assets of Buyer or any of its subsidiaries under, any of the terms, conditions or provisions of any note, bond, debenture, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Buyer or any of its subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except for violations, conflicts, breaches or defaults which would not, 23 individually or in the aggregate, have a Material Adverse Effect on Buyer and its subsidiaries, taken as a whole. 4.5 CONSENTS AND APPROVALS. The execution, delivery and performance of this Agreement and the Option Agreement by Buyer does not require any consent, approval, authorization or permit of, or filing with or notification to, any court, administrative agency or other governmental or regulatory authority or instrumentality, domestic or foreign, including, without limitation, any Bank Regulator, except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act or the laws of certain states under which a "blue sky" filing or consent may be required, state takeover laws, and filing and recordation of appropriate merger documents as required by Massachusetts and New Hampshire law, (ii) for consents and approvals of or filings or registrations with the Bank Regulators, and (iii) 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, the BHC Merger, or the Bank Merger or otherwise prevent Buyer from performing its obligations under this Agreement, or would not have a Material Adverse Effect on Buyer and its subsidiaries, taken as a whole. 4.6 REGULATORY APPROVAL. Buyer is not aware of any reason why the conditions set forth in Section 8.1(c) hereof would not be satisfied without significant delay. Buyer is not aware of any reason why the Merger cannot qualify as a "pooling of interests" for accounting purposes. 4.7 FINANCIAL STATEMENTS. (a) The consolidated balance sheets of Buyer as of December 31, 1994 and 1993, and the related consolidated statements of operations, changes in stockholders' equity, cash flows and changes in financial position for the years ended December 31, 1994 and 1993, certified by Wolf & Company, P.C., and for the year ended December 31, 1992, certified by Ernst & Young LLP, in the form delivered to Safety Fund prior to execution and delivery of this Agreement (all of the above being collectively referred to as the "Buyer Audited Financial Statements"), have been prepared in accordance with ---------------------------------- GAAP applied on a consistent basis (except as may be indicated in the footnotes thereto and except as required or permitted by SFAS 109 and 115) and present fairly in all material respects the consolidated financial position of and results of operations of Buyer at the dates, and for the periods, stated therein. (b) The consolidated balance sheets of Buyer as of September 30, 1995 and 1994, and the related consolidated statements of income for the nine months ended September 30, 1995 and 1994 in the form delivered to Safety Fund prior to execution and delivery of this Agreement (hereinafter referred to collectively as the "Buyer Interim Financial Statements") present fairly, and the financial ---------------------------------- statements referred to in Section 6.5 hereof will present fairly, in all material respects the consolidated financial position and results of operations of Buyer at the dates and for the periods indicated thereon and are prepared in accordance with GAAP applied on a consistent basis (except for the omission of notes to the Buyer Interim Financial Statements and year-end adjustments to interim results, which adjustments will not be material, and except as required or permitted by SFAS 109 and 115) with all prior periods and throughout the periods indicated. (c) The Buyer Audited Financial Statements and the Buyer Interim Financial State ments are herein referred to together as the "Buyer Financial --------------- Statements." - ---------- 24 (d) The books and records of Buyer and each Buyer Subsidiary fairly reflect in all material respects the transactions to which it is a party or by which its properties are subject or bound. Such books and records have been properly kept and maintained and are in compliance in all material respects with all applicable legal and accounting requirements. The minute books of Buyer and the Buyer Subsidiaries contain records which are accurate in all material respects of all corporate actions of the respective shareholders and Board of Directors (including committees of its Board of Directors). 4.8 BUYER REPORTS. Buyer has previously made available to Safety Fund a true and complete, in all material respects, copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1991 by Buyer with the SEC pursuant to the Securities Act or the Exchange Act (the "Buyer Reports") and (b) communication mailed by Buyer to ------------- its shareholders since January 1, 1991, and, as of their respective dates, no such Buyer Reports contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information as of a later date shall be deemed to modify information as of an earlier date. 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule -------- 4.9 hereto, since December 31, 1994, there has not been: - --- (a) any change or event which, individually or in the aggregate with other changes and events, has had a Material Adverse Effect on Buyer and its subsidiaries, taken as a whole; (b) any change in any of the accounting methods or practices of Buyer or any of its subsidiaries other than changes required by applicable law or by GAAP; or (c) any incurrence by Buyer of any liability that has had, or to the knowledge of Buyer, could reasonably be expected to have, a Material Adverse Effect upon Buyer and its subsidiaries, taken as a whole. 4.10 LEGAL PROCEEDINGS. Except as set forth on Schedule 4.10 hereto and ------------- except for matters which, individually or in the aggregate, would not have a Material Adverse Effect on Buyer and its subsidiaries, taken as a whole, neither Buyer nor any of its subsidiaries is a party to any, and there are no pending or, to the best of Buyer's knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental investigations of any nature by or against Buyer or any of its subsidiaries; and neither Buyer nor any of its subsidiaries is a party to or subject to any order, judgment or decree. 4.11 COMPLIANCE WITH APPLICABLE LAW; REGULATORY EXAMINATIONS. (a) Buyer and each of its subsidiaries holds, and has at all times held, all licenses, franchises, permits, approvals, consents, qualifications and authorizations material for the lawful conduct of its business under and pursuant to, and has complied with, and is not in default under, any applicable law, statute, order, rule, regulation, policy, ordinance, reporting or filing requirement and/or guideline of any federal, state or local governmental authority relating to Buyer or any of its subsidiaries, except for violations which, either individually or in the aggregate, do not or would not have a Material Adverse Effect on Buyer and its subsidiaries taken as a whole, and neither Buyer or any of its subsidiaries has knowledge of any violation of any of the above. 25 (b) Except for normal examinations conducted by a regulatory agency in the regular course of the business of Buyer and its subsidiaries, no regulatory agency has initiated any proceeding or, to the best knowledge of Buyer, investigation into the business or operations of Buyer or any of its subsidiaries since prior to December 31, 1991. Buyer has not received any objection from any regulatory agency to Buyer's response to any violation, criticism or exception with respect to any report or statement relating to any examinations of Buyer or any of its subsidiaries. 4.12 BROKER'S FEE. Neither Buyer, any subsidiary, nor any of its officers or directors has employed any broker, finder or investment advisor, or incurred any liability for any broker's fees, commissions, finder's fees or investment advisory fees in connection with any of the transactions contemplated by this Agreement, except that Buyer has engaged, and will pay a fee or commission to Alex, Brown & Sons Incorporated (the "Buyer Investment Advisor"). ------------------------ 4.13 BUYER INFORMATION. The information relating to Buyer to be contained in the Proxy Statement-Prospectus (as contemplated by Section 7.1) and any application to any Bank Regulator, or any other statement or application filed with any governmental body in connection with the Merger, the BHC Merger, the Bank Merger and the other transactions contemplated by this Agreement will not contain as of the date of such Proxy Statement-Prospectus or filing any untrue statement of a material fact or omit to state a material fact necessary to make such information not misleading. Notwithstanding the foregoing, Buyer makes and will make no representation or warranty with respect to any information supplied by Safety Fund which is contained in any of the foregoing documents. The Proxy Statement-Prospectus (except for such portions thereof that relate only to Safety Fund or the Safety Fund Subsidiaries) will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. 4.14 ENVIRONMENTAL ISSUES. Except where such violation, liability or noncompliance would not have a Material Adverse Effect on Buyer and its subsidiaries, taken as a whole: (i) neither Buyer nor any of its subsidiaries has violated during the last five years or is in violation of any Environmental Law; (ii) none of the properties owned or leased by Buyer or any subsidiary (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance; (iii) neither Buyer nor any of its subsidiaries is liable for any off-site contamination; (iv) neither Buyer nor any of its subsidiaries is liable under any Environmental Law; and (v) Buyer and each of its subsidiaries is, and has during the last five years been, in compliance with, all of their respective Environmental Permits. For purposes of the foregoing, all references to "properties" include, without limitation, any owned real property or leased real property. 4.15 CAPITAL. As of September 30, 1995, Buyer's Tier 1 risk-based capital ratio, total risk-based capital ratio, and leverage ratio, each calculated in accordance with the capital guidelines of the Federal Reserve applicable to bank holding companies on a fully phased-in basis, were each in excess of the specified minimum levels for qualification as "well capitalized." 4.16 REGULATORY AGREEMENTS. Neither Buyer nor any of its subsidiaries is a party to any assistance agreement, supervisory agreement, memorandum of understanding, consent order, cease and desist order, or condition of any regulatory order or decree with or by the FDIC, the Federal Reserve, the New Hampshire Bank Commissioner, or other financial services regulatory 26 agency that restricts Buyer's ability to perform its obligations hereunder, nor has Buyer or any of its subsidiaries been advised by any such regulatory agency or other governmental entity that it is considering issuing or requesting any such agreement, order or decree. 4.17 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Buyer nor any Buyer Subsidiary has any liability (contingent or otherwise), excluding contractually assumed contingencies, except (i) as set forth on the consolidated balance sheet of Buyer and its subsidiaries as at December 31, 1994 contained in the Buyer Reports, including the notes thereto, (ii) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since December 31, 1994, and (iii) liabilities which would not, individually or in the aggregate, have a Material Adverse Effect on Buyer and the Buyer Subsidiaries, taken as a whole. 4.18 BUYER SUB. (a) Upon its formation, Buyer Sub will be a corporation, duly organized, validly existing and in good standing under the laws of Massachusetts, all of the outstanding capital stock of which is, or will be prior to the Effective Time, owned directly or indirectly by Buyer free and clear of any lien, charge or other encumbrance. From and after its incorporation, Buyer Sub has not and will not engage in any activities other than in connection with or as contemplated by this Agreement. (b) Buyer Sub has, or will have prior to the Effective Time, all corporate power and authority to consummate the transactions contemplated hereunder and carry out all of its obligations with respect to such transactions. The consummation of the transactions contemplated hereby has been, or will have been prior to the Closing, duly and validly authorized by all necessary corporate action in respect thereof on the part of Buyer Sub. ARTICLE V COVENANTS OF SAFETY FUND 5.1 CONDUCT OF BUSINESS. (a) AFFIRMATIVE COVENANTS. During the period from the date of this Agreement to the Effective Time, except with the written consent of Buyer, Safety Fund will operate its business, and it will cause each of the Safety Fund Subsidiaries to operate its business, only in the usual, regular and ordinary course of business; use reasonable efforts to preserve intact its business organization and assets and maintain its rights and franchises; and to take no action which would (i) materially adversely affect the ability of Buyer or Safety Fund to obtain any necessary approvals of governmental authorities required for the transactions contemplated hereby or materially increase the period of time necessary to obtain such approvals, or (ii) materially adversely affect its ability to perform its covenants and agreements under this Agreement. (b) NEGATIVE COVENANTS. Safety Fund agrees that from the date of this Agreement to the Effective Time, except as otherwise specifically permitted or required by this Agreement, or consented to by Buyer in writing, Safety Fund will not, and will cause each of the Safety Fund Subsidiaries not to: (1) change or waive any provision of its Charter or By-laws; 27 (2) change the number of shares of its authorized or issued capital stock (except (i) as may be required by the Option Agreement, (ii) for the issuance of Safety Fund Common Stock pursuant to the exercise of outstanding stock options under the Safety Fund Stock Option Plans, as contemplated by Section 3.2(b) hereof, and (iii) in connection with its adoption of the Shareholder Rights Plan; (3) except in connection with its adoption of the Shareholder Rights Plan or as described in Schedule 6.10, issue or grant any option, warrant, ------------- call, commitment, sub scription, right to purchase or agreement of any character relating to the authorized or issued capital stock of Safety Fund or any of the Safety Fund Subsidiaries, or any securi ties convertible into shares of such stock; except that (i) Safety Fund may issue shares of Safety Fund Common Stock or permit treasury shares to become outstanding in accor dance with the terms of the Safety Fund Stock Option Plans, and (ii) Safety Fund may issue shares of Safety Fund Common Stock to Buyer in accordance with the terms of the Option Agreement; (4) except pursuant to the Shareholder Rights Plan, effect any recapitalization, reclassification, stock dividend, stock split or like change in capitalization, or redeem, repurchase or otherwise acquire any shares of its capital stock; (5) declare or pay any dividends or other distributions with respect to its capital stock except pursuant to the Shareholder Rights Plan and except for a quarterly cash dividend not in excess of $.05, $.06, $.07, $.08 and $.09 per share in the first, second, third and fourth quarters of 1996 and the first quarter of 1997, respectively, declared and paid in accordance with applicable law, regulation and contractual and regulatory commitments and for dividends paid by any Safety Fund Subsidiary to Safety Fund, provided, however, that Safety Fund's then-current quarterly cash dividend may be increased to the Increased Dividend (as defined below) per share of Safety Fund Common Stock beginning in the first quarter of 1997, and (ii) that the parties agree (x) to consult with respect to the amount of the last Safety Fund quarterly dividend payable prior to the Effective Time with the objective of assuring that the shareholders of Safety Fund do not receive a shortfall, or dividend or distribution from both Safety Fund and Buyer, for such quarter based on the record and payment dates of their last dividend prior to the Merger and the record and payment dates of the first dividend of Buyer following the Merger and (y) that Safety Fund may pay a special dividend to holders of record of Safety Fund Common Stock immediately prior to the Effective Time consistent with the objective described in clause (x) above. The parties agree that Buyer dividends paid in any calendar quarter are paid with respect to the then-preceding calendar quarter and that Safety Fund dividends to be paid in any calendar quarter will be paid with respect to the then-preceding calendar quarter. The quarterly "Increased Dividend" shall be determined by multiplying the ------------------ quarterly dividend then being paid by Buyer with respect to each share of Buyer Common Stock by 1.700; (6) enter into, amend in any material respect or terminate any contract or agreement (including without limitation any settlement agreement with respect to litigation) that is or may reasonably be expected to have a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole, except in the ordinary course of business consistent with past practice; 28 (7) except in the ordinary course of business consistent with past practice, incur any material liabilities or material obligations, whether directly or by way of guaranty, including any obligation for borrowed money whether or not evidenced by a note, bond, debenture or similar instrument, or acquire any equity, debt, or other investment securities; (8) make any capital expenditures other than in the ordinary course of business or as necessary to maintain existing assets in good repair; (9) except as described on Schedule 5.1, grant any increase in rates ------------ of compensation to its employees, except merit increases in accordance with past practices and general increases to employees as a class in accordance with past practice or as required by law; grant any increase in rates of compensation to its directors; adopt or amend in any material respect or terminate any employee benefit plan, pension plan or incentive plan except as required by law, or permit the vesting of any material amount of benefits under any such plan other than pursuant to the provisions thereof as in effect on the date of this Agreement; or enter into any employment, severance or similar agreements or arrangements with any directors or officers; (10) make application for the opening or closing of any, or open or close any, branches or automated banking facility except as previously disclosed to Buyer; (11) make any equity investment or commitment to make such an investment in real estate or in any real estate development project, other than in connection with foreclo sures, settlements in lieu of foreclosure or troubled loan or debt restructurings in the ordinary course of business consistent with customary banking practices; (12) merge into, consolidate with, affiliate with, or be purchased or acquired by, any other Person, or permit any other to be merged, consolidated or affiliated with it or be purchased or acquired by it, or, except to realize upon collateral in the ordinary course of its business, acquire a significant portion of the assets of any other Person, or sell a significant portion of its assets; (13) make any material change in its accounting methods or practices, except changes as may be required by GAAP or by regulatory requirements; (14) take or cause to be taken any action which would disqualify the Merger as a "pooling of interests" for accounting purposes or a tax free reorganization under Section 368 of the Code; (15) enter into any transactions involving interest rate and currency swaps, options and futures contracts, or any other similar off-balance sheet transactions; (16) take any action that would result in the representations and warranties of Safety Fund contained in this Agreement not being true and correct on the date of this Agreement or at any future date on or prior to the Closing Date; or (17) agree to do any of the foregoing. 29 5.2 NO SOLICITATION. Safety Fund shall not authorize or permit any of its officers, directors, employees or agents to directly or indirectly solicit, initiate or encourage any inquiries relating to, or the making of any proposal which constitutes, a "takeover proposal" (as defined below), or, except to the extent legally required for the discharge of the fiduciary duties of its Board of Directors, recommend or endorse any takeover proposal, or participate in any discussions or negotiations, or provide third parties with any non-public information, relating to any such inquiry or proposal. Nothing contained in this Section 5.2 shall prohibit Safety Fund or Safety Fund's Board from taking and disclosing to Safety Fund's stockholders a position with respect to a tender offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act or making such other disclosure to Safety Fund's stockholders which, in the judgment of the Safety Fund Board, based upon the advice of outside counsel, may be required under applicable law, or making disclosure to the Safety Fund's stockholders of the absence of an opinion from the Safety Fund Investment Advisor as to the fairness of the Merger Consideration dated the date of the Proxy Statement. Safety Fund will take all reasonable actions necessary or advisable to inform the appropriate individuals or entities referred to in the first sentence hereof of the obligations undertaken herein. Safety Fund will notify Buyer immediately if any such inquiries or takeover proposals are received by, any such information requested from, or any such negotiations or discussions are sought to be initiated or continued with, Safety Fund, indicating in reasonable detail the identity of the person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or contact. As used in this Agreement, "takeover proposal" shall mean any tender or exchange offer, proposal for a merger, consolidation or other business combination involving Safety Fund or any of its Subsidiaries or any proposal or offer to acquire in any manner a substantial equity interest in, or a substantial portion of the assets of, Safety Fund or any of its Subsidiaries other than the transactions contemplated or permitted by this Agreement or the Option Agreement. 5.3 CURRENT INFORMATION. During the period from the date of this Agreement to the Effective Time, Safety Fund will cause one or more of its representatives to confer with representatives of Buyer and report the general status of its ongoing operations at such times as Buyer may reasonably request. Safety Fund will promptly notify Buyer of any material change in the normal course of its business or in the operation of its properties and, to the extent permitted by applicable law, of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of material litigation involving Safety Fund. Safety Fund will also provide Buyer such information with respect to such events as Buyer may reasonably request from time to time. 5.4 ACCESS TO PROPERTIES AND RECORDS. Safety Fund shall permit Buyer reasonable access to its properties and those of the Safety Fund Subsidiaries, and shall disclose and make available to Buyer during normal business hours all of its books, papers and records relating to the assets, stock ownership, properties, operations, obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute books of directors' and stockholders' meetings, organizational documents, by- laws, material contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees, and any other business activities or prospects in which Buyer may have a reasonable interest; provided, however, that Safety Fund shall not be required to take any action that would provide access to or to disclose information where such access or disclosure would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel. 30 Safety Fund shall provide and shall request its auditors to provide Buyer with such historical financial information regarding it (and related audit reports and consents) as Buyer may reasonably request for securities disclosure purposes. 5.5 FINANCIAL AND OTHER STATEMENTS. (a) Promptly upon receipt thereof, Safety Fund will furnish to Buyer copies of each annual, interim or special audit of the books of Safety Fund and the Safety Fund Subsidiaries made by its independent accountants and copies of all internal control reports submitted to Safety Fund by such accountants in connection with each annual, interim or special audit of the books of Safety Fund and the Safety Fund Subsidiaries made by such accountants. (b) As soon as practicable, Safety Fund will furnish to Buyer copies of all such financial statements and reports as it shall send to its stockholders, the SEC, the OCC or any other regulatory authority, except as legally prohibited thereby. (c) Safety Fund will advise Buyer promptly of Safety Fund's receipt of any examination report of any federal or state regulatory or examination authority with respect to the condition or activities of Safety Fund or any of the Safety Fund Subsidiaries. (d) With reasonable promptness, Safety Fund will furnish to Buyer such additional financial data as Buyer may reasonably request, including without limitation, detailed monthly financial statements and loan reports. 5.6 APPROVAL OF SAFETY FUND'S STOCKHOLDERS. Safety Fund will take all reasonable steps necessary to duly call, give notice of, solicit proxies for, convene and hold a special meeting (the "Special Meeting") of its stockholders --------------- as soon as practicable for the purpose of approving this Agreement and the transactions contemplated hereby. The date of the Special Meeting shall occur as soon as practicable following the effectiveness of the Registration Statement on Form S-4 (as more fully described in Section 7.1) filed with the SEC. The Board of Directors of Safety Fund will recommend to Safety Fund's stockholders the approval of this Agreement and the transactions contemplated hereby and will use all reasonable efforts to obtain, as promptly as practicable, the necessary approvals by Safety Fund's stockholders of this Agreement and the transactions contemplated hereby, provided, however, that nothing contained herein shall prohibit the Board of Directors of Safety Fund from failing to make such a recommendation or modifying or withdrawing its recommendation, if such Board shall have concluded in good faith with the advice of counsel that such action is required to prevent such Board from breaching its fiduciary duties to the stockholders of Safety Fund, and no such action shall constitute a breach of this Agreement. 5.7 DISCLOSURE SUPPLEMENTS. From time to time prior to the Effective Time, Safety Fund will promptly supplement or amend the Schedules delivered in connection herewith pursuant to Article III with respect to any matter hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such Schedules or which is necessary to correct any information in such Schedules which has been rendered inaccurate thereby. No supplement or amendment to such Schedules shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article VIII or the compliance by Safety Fund with the covenants set forth in Section 5.1 hereof. 31 5.8 FAILURE TO FULFILL CONDITIONS. In the event that Safety Fund determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify Buyer. 5.9 CONSENTS AND APPROVALS OF THIRD PARTIES. Safety Fund shall use all reasonable efforts to obtain as soon as practicable all consents and approvals of any other Persons necessary or desirable for the consummation of the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, Safety Fund may utilize the services of a professional proxy soliciting firm to help obtain the shareholder vote required to be obtained by it hereunder. 5.10 ALL REASONABLE EFFORTS. Subject to the terms and conditions herein provided, Safety Fund agrees to use all reasonable efforts to take, or cause to be taken, all corporate or other action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. 5.11 SAFETY FUND SUBSIDIARIES. Safety Fund undertakes and agrees that, if so requested by Buyer, it shall take all necessary action to facilitate the merger of Safety Fund Subsidiaries (other than SFNB) with subsidiaries of Buyer effective on or after the Effective Time; provided, however, that in no event shall the Closing be delayed in order to facilitate any such merger and provided further, however, that Safety Fund shall not be required to take any action that could adversely affect the qualification of the Merger as a reorganization within the meaning of Section 368(a) of the Code or the treatment of the Merger as a pooling of interests for accounting purposes. ARTICLE VI COVENANTS OF BUYER 6.1 CONDUCT OF BUSINESS. During the period from the date of this Agreement to the Effective Time, except with the written consent of Safety Fund and except as provided below, Buyer will take no action which would (i) materially adversely affect the ability of Buyer or Safety Fund to obtain any necessary approvals of governmental authorities required for the transactions contemplated hereby or materially increase the period of time necessary to obtain such approvals, or (ii) materially adversely affect its ability to perform its covenants and agreements under this Agreement, or (iii) disqualify the Merger as a "pooling of interests" for accounting purposes or a tax free reorganization under Section 368 of the Code, or (iv) result in the representations and warranties of Buyer contained in this Agreement not being true and correct on the date of this Agreement or at any future date on or prior to the Closing Date; provided that nothing herein contained shall preclude Buyer from exercising its rights under the Option Agreement or from taking any action described on Schedule 6.1 hereto. ------------ 6.2 CERTAIN BUSINESS TRANSACTIONS. Buyer will not enter into any agreement with respect to an Acquisition of another Person without the prior written consent of Safety Fund if such Acquisition would (i) require the approval of Buyer's shareholders; or (ii) involve Buyer's payment of consideration having a value that equals or exceeds $30 million; or (iii) be reasonably likely to result in a delay in the consummation of the Merger in any material respect; or (iv) be reasonably likely to reduce in any material respect the chances that the Merger will be consum- 32 mated in accordance with the terms of this Agreement. Safety Fund agrees not to withhold unreasonably or delay any response to a request by Buyer for consent under this Section 6.2. The term "Acquisition" shall mean Buyer's purchase or other acquisition (including by way of merger, consolidation, share exchange or any similar transaction) of securities representing 50% or more of the voting power of a Person other than Safety Fund; or Buyer's purchase or other acquisition of assets of another Person as a going concern, but shall not include: (i) internal reorganizations or consolidations involving subsidiaries, (ii) foreclosures in the ordinary course of business, (iii) acquisitions of control by a banking subsidiary in its fiduciary capacity, or (iv) the creation of new subsidiaries other than in the context of a purchase or acquisition of assets from another Person. 6.3 CURRENT INFORMATION. During the period from the date of this Agreement to the Effective Time, Buyer will cause one or more of its representatives to confer with representatives of Safety Fund and report the general status of its ongoing operations at such times as Safety Fund may reasonably request. Buyer will promptly notify Safety Fund of any material change in the normal course of its business or in the operation of its properties and, to the extent permitted by applicable law, of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of material litigation involving Buyer. Buyer will also provide Safety Fund such information with respect to such events as Safety Fund may reasonably request from time to time. 6.4 ACCESS TO PROPERTIES AND RECORDS. Buyer shall permit Safety Fund reasonable access to its properties and those of its subsidiaries, and shall disclose and make available to Safety Fund during normal business hours all of its books, papers and records relating to the assets, stock ownership, properties, operations, obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute books of directors' and stockholders' meetings, organizational documents, by- laws, material contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees, and any other business activities or prospects in which Safety Fund may have a reasonable interest; provided, however, that Buyer shall not be required to take any action that would provide access to or to disclose information where such access or disclosure would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel. 6.5 FINANCIAL AND OTHER STATEMENTS. (a) Promptly upon receipt thereof, Buyer will furnish to Safety Fund copies of each annual, interim or special audit of the books of Buyer and its subsidiaries made by its independent accountants and copies of all internal control reports submitted to Buyer by such accountants in connection with each annual, interim or special audit of the books of Buyer and its subsidiaries made by such accountants. (b) As soon as practicable, Buyer will furnish to Safety Fund copies of all such financial statements and reports as it shall send to its stockholders, the SEC, the OCC or any other regulatory authority, except as legally prohibited thereby. (c) Buyer will advise Safety Fund promptly of Buyer's receipt of any examination report of any federal or state regulatory or examination authority with respect to the condition or activities of Buyer or any of its subsidiaries. 33 (d) With reasonable promptness, Buyer will furnish to Safety Fund such additional financial data as Safety Fund may reasonably request, including without limitation, detailed monthly financial statements and loan reports. 6.6 CONSENTS AND APPROVALS OF THIRD PARTIES. Buyer shall use all reasonable efforts to obtain as soon as practicable all consents and approvals of any other Persons necessary or desirable for the consummation of the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, Buyer may utilize the services of a professional proxy soliciting firm to help obtain the shareholder vote required to be obtained by it hereunder. 6.7 ALL REASONABLE EFFORTS. Subject to the terms and conditions herein provided, Buyer agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. 6.8 FAILURE TO FULFILL CONDITIONS. In the event that Buyer determines that a condition to its obligation to complete the Merger, the BHC Merger, or the Bank Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify Safety Fund. 6.9 DISCLOSURE SUPPLEMENTS. From time to time prior to the Effective Time, Buyer will promptly supplement or amend the Schedules delivered in connection herewith pursuant to Article with respect to any matter hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such Schedules or which is necessary to correct any information in such Schedules which has been rendered inaccurate thereby. No supplement or amendment to such Schedules shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article VII. 6.10 EMPLOYEE BENEFITS. (a) All employees of Safety Fund and its Subsidiaries as of the Effective Time shall become employees of Buyer or a Subsidiary as of the Effective Time. Nothing in this Agreement shall give any employee of Safety Fund or its Subsidiaries a right to continuing employment with Buyer after the Effective Time. Any employee of Safety Fund whose employment with Buyer is terminated after the Effective Time shall be entitled to the same severance benefits generally available to employees of Buyer, provided, however, that for purposes of determining eligibility for and vesting of such severance benefits, service with Safety Fund or any Safety Fund Subsidiary prior to the Effective Time shall be treated as service with an "employer" to the same extent as if such persons had been employees of Buyer. A copy of Buyer's severance policy has previously been made available to Safety Fund. (b) As soon as practicable after the Effective Time, Buyer shall provide or cause to be provided to all employees of Safety Fund and any Safety Fund Subsidiary who remain employed by Buyer or any of Buyer's Subsidiaries after the Effective Time with employee benefits which, in the aggregate, are no less favorable than those generally afforded to other employees of Buyer or Buyer's Subsidiaries holding similar positions, subject to the terms and conditions under which those employee benefits are made available to such employees, provided, however, that (i) for purposes of determining eligibility for and vesting of such employee benefits only (and not for pension benefit accrual purposes), service with Safety Fund or any Safety Fund Subsidiary prior to the Effective Time shall be treated as service with an "employer" to the same extent as if such persons had been employees of Buyer, (ii) this Section 6.10 shall not be 34 construed to limit the ability of Buyer and its Subsidiaries to terminate the employment of any employee or to review employee benefits programs from time to time and to make such changes as they deem appropriate, and (iii) neither Buyer nor any of its Subsidiaries shall be required to provide any employees or former employees of Safety Fund with post-retirement medical benefits more favorable than those provided to new hires of Buyer. (c) Safety Fund has listed certain employment and change of control agreements and a tin parachute plan in Schedule 6.10 hereto. Following the ------------- Effective Time, Buyer shall honor or cause its Subsidiaries to honor in accordance with their terms all such employment and change of control agreements and the tin parachute plan and assume or cause its Subsidiaries to assume all duties, liabilities and obligations under such agreements and arrangements. Buyer agrees that the consummation of the transactions contemplated hereby constitutes a "Change in Control" as defined in the change of control agreements entered into between Safety Fund or any Safety Fund Subsidiary and certain officers as disclosed in Schedule 6.10 hereto. The provisions of this Section ------------- 6.10 are expressly intended to be for the irrevocable benefit of, and shall be enforceable by, each director, officer, employee and former employee covered hereby and his or her heirs and representatives. 6.11 DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE. (a) CONTRACTUAL INDEMNIFICATION. In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, administrative or criminal, including, without limitation, any such claim, action, suit, proceeding or investigation in which any Person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Effective Time, a director or officer of Safety Fund or any Safety Fund Subsidiary (the "Indemnified Parties") is, or is threatened to be, made a party, based in whole - --------------------- or in part on, or arising in whole or in part out of, or pertaining to, this Agreement or any of the transactions contemplated hereby, whether in any case asserted or arising before or after the Effective Time, the parties hereto agree to cooperate and use their reasonable efforts to defend against and respond to such claim, action, suit, proceedings or investigation. It is understood and agreed that from and after the Effective Time, Buyer shall indemnify and hold harmless, as and to the fullest extent permitted by applicable law, each Indemnified Party against any and all losses, claims, damages, liabilities and fines, and amounts paid in settlement, in connection with any such threatened or actual claim, action, suit, proceeding or investigation (whether asserted or arising before or after the Effective Time). In connection with any such claim, action, suit, proceeding or investigation, (x) Buyer shall pay expenses (including without limitation reasonable attorney fees) in advance of the final disposition of any such claim, suit, proceeding or investigation to each Indemnified Party to the fullest extent permitted by applicable law upon receipt of any undertaking required by applicable law, and (y) Buyer shall use all reasonable efforts to assist in the vigorous defense of any such matter; provided, however, that (1) Buyer shall have the right to assume the defense thereof and upon such assumption Buyer shall not be liable to any Indemnified Party for any legal expenses of other counsel or any other expenses subsequently incurred by any Indemnified Party in connection with the defense thereof, except that if Buyer does not assume such defense or counsel for the Indemnified Parties reasonably advises that there are issues which raise conflicts of interest between Buyer and the Indemnified Parties, the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with Buyer, and Buyer shall pay the reasonable fees and expenses of such counsel for the Indemnified Parties, (2) Buyer shall be obligated pursuant to this paragraph to pay for only one firm of counsel for all Indemnified 35 Parties, (3) Buyer shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld) and (4) Buyer shall have no obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and nonappealable, that indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. (b) PROCEDURAL LIMITATIONS. Any Indemnified Party wishing to claim indemnification under Section 6.11 shall, upon learning of any such claim, action, suit, proceeding or investigation, notify Buyer thereof, provided that the failure so to notify shall not affect the obligations of Buyer under Section 6.11 except to the extent such failure materially prejudices it. As a condition to receiving indemnification under Section 6.11, the party claiming indemnification shall assign, by separate writing, to Buyer all right, title and interest to and in proceeds of any insurance maintained or provided by Safety Fund or Buyer or any of their respective affiliates for the benefit of claimant, to the extent of indemnification actually received from Buyer hereunder. Any Person entitled to indemnification pursuant to Section 6.11 shall be required to cooperate in the defense and investigation of any claim as to which indemnification may be made and shall send such notices as Buyer may reasonably request under any applicable directors and officers liability or bankers blanket bond insurance coverage to preserve claims of which the claiming party is aware. No person shall be entitled to indemnification under Section 6.11 if such Person is seeking indemnification based on a claim (other than a claim arising as a supplier to, customer of or borrower from Buyer or the Buyer Subsidiaries or Safety Fund or the Safety Fund Subsidiaries) brought by such person or by an entity of which such person is a general partner, executive officer, director, trustee, beneficiary or controlling person unless such Person or entity has waived any right to participate in any damage or other award to such claiming party or other entity in any such action, suit or proceeding. (c) CHARTER AND BY-LAWS. All rights to indemnification and all limitations of liability existing in favor of the Indemnified Parties as provided in Safety Fund's Charter and By-laws, or similar governing documents of any Safety Fund Subsidiary, as in effect as of the date hereof with respect to claims or liabilities arising from facts or events existing or occurring prior to the Effective Time shall survive the Merger and shall continue in full force and effect, without any amendment thereto, for a period of six (6) years from the Effective Time; provided, however, that all rights to indemnification in respect of any claim asserted or made within such period shall continue until the final disposition of such claim. Buyer shall indemnify, defend and hold harmless the Indemnified Parties pursuant to the rights surviving pursuant to the preceding sentence to the full extent permitted under applicable law. (d) PURCHASE OF INSURANCE. Buyer, from and after the Effective Time, will cause the persons who served as directors or officers of Safety Fund on or before the Effective Time to be covered by Safety Fund's existing directors' and officers' liability insurance policy (provided that Buyer may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are not less advantageous than such policy) but in no event shall any insured person be entitled under this Section 6.11 to insurance coverage more favorable than that provided to him or her in such capacities at the date hereof with respect to acts or omissions resulting from their service as such on or prior to the Effective Time. Such insurance coverage shall commence on the Effective Date and will be provided for a period of no less than six years after the Effective Time; provided, however, that in no event shall Buyer be required to expend 36 in any year more than 150% of the current per annum amount expended by Safety Fund to maintain or procure insurance coverage pursuant hereto. Safety Fund agrees to renew any such existing insurance or to purchase any "discovery period" insurance provided for thereunder at Buyer's request. (e) SUCCESSORS OR ASSIGNS. To the extent not otherwise provided by applicable law, contract or otherwise, and to the extent necessary under the circumstances for Buyer's successors or assigns to be bound, in the event 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 corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, proper provision shall be made so that the successors and assigns of Buyer assume the obligations set forth in this Section 6.11. (f) THIRD PARTY BENEFICIARY. The provisions of this Section 6.11 are expressly intended to be for the irrevocable benefit of, and shall be enforceable by, each director or officer covered hereby and his or her heirs and representatives. 6.12 STOCK EXCHANGE LISTING. Buyer shall apply for approval to list the shares of Buyer Common Stock to be issued in the Merger on the Stock Exchange, subject to official notice of issuance, prior to the Effective Time. 6.13 BUYER SUB. Prior to the Effective Time, Buyer will take any and all necessary action to cause (i) Buyer Sub to be organized, (ii) Buyer Sub to become a direct or indirect wholly-owned subsidiary of Buyer, (iii) the directors and stockholder or stockholders of Buyer Sub to approve the transactions contemplated by this Agreement ARTICLE VII REGULATORY AND OTHER MATTERS 7.1 PROXY STATEMENT-PROSPECTUS. For the purposes (x) of registering Buyer's Common Stock to be issued to holders of Safety Fund's Common Stock in connection with the Merger with the SEC under the Securities Act and applicable state securities laws and (y) of holding the Safety Fund shareholders' meeting, Buyer and Safety Fund shall cooperate in the preparation of a registration statement (such registration statement, together with all and any amendments and supplements thereto, being herein referred to as the "Registration Statement"), ---------------------- including a proxy statement/prospectus or statements satisfying all applicable requirements of applicable state securities and banking laws, and of the Securities Act and the Exchange Act, and the rules and regulations thereunder (such proxy statement/prospectus in the form mailed by Safety Fund to the Safety Fund shareholders, together with any and all amendments or supplements thereto, being herein referred to as the "Proxy Statement-Prospectus"). Buyer shall -------------------------- file the Registration Statement with the SEC. Each of Buyer and Safety Fund shall use their best efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing, and Safety Fund shall thereafter promptly mail the Proxy Statement-Prospectus to its stockholders. Buyer shall also use its best efforts to obtain all necessary state securities law or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement, and Safety Fund shall furnish all information concerning Safety Fund and the holders of Safety Fund Common Stock as may be reasonably requested in connection with any such 37 action. Safety Fund and Buyer shall each promptly notify the other if at any time it becomes aware that the Proxy Statement-Prospectus contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, Safety Fund and Buyer shall cooperate in the preparation of a supplement or amendment to the Proxy Statement-Prospectus, which corrects such misstatement or omission, and shall cause the same to be filed with the SEC and distributed to stockholders of Safety Fund. 7.2 REGULATORY APPROVALS. Each of Safety Fund and Buyer will cooperate with the other and use all reasonable efforts to prepare all necessary documentation, to effect all necessary filings and to obtain all necessary permits, consents, approvals and authorizations of all third parties and governmental bodies necessary to consummate the transactions contemplated by this Agreement, including without limitation the Merger, the BHC Merger, and the Bank Merger. Safety Fund and Buyer will furnish each other and each other's counsel with all information concerning themselves, their subsidiaries, directors, officers and stockholders and such other matters as may be necessary or advisable in connection with the Proxy Statement-Prospectus and any application, petition or any other statement or application made by or on behalf of Safety Fund or Buyer to any governmental body in connection with the Merger, the BHC Merger, the Bank Merger, and the other transactions contemplated by this Agreement. Safety Fund and Buyer shall have the right to review and approve in advance all characterizations of the information relating to Buyer or Safety Fund, as the case may be, and any of their respective subsidiaries, which appear in any filing made in connection with the transactions contemplated by this Agreement with any governmental body. In addition, Safety Fund and Buyer shall each furnish to the other a final copy of each such filing made in connection with the transactions contemplated by this Agreement with any governmental body. 7.3 AFFILIATES; PUBLICATION OF COMBINED FINANCIAL RESULTS. (a) Each of Buyer and Safety Fund shall use all reasonable efforts to cause each director, executive officer and other person who is an "affiliate" (for purposes of Rule 145 under the Securities Act and for purposes of qualifying the Merger for "pooling of interests" accounting treatment) of such party to deliver to the other party hereto, as soon as practicable after the date of this Agreement, and prior to the date of the shareholders meeting called by Safety Fund to approve this Agreement, a written agreement, in the form of Exhibit 7.3 hereto, ----------- providing that such person will not sell, pledge, transfer or otherwise dispose of any shares of Buyer Common Stock or Safety Fund Common Stock held by such "affiliate", and, in the case of the "affiliates" of Safety Fund, the shares of Buyer Common Stock to be received by such "affiliate" in the Merger: (1) otherwise than in compliance with the applicable provisions of the Securities Act and the rules and regulations thereunder or (2) unless the parties shall have agreed that it will be impossible to obtain pooling treatment for the Merger, during the period commencing 30 days prior to the Merger and ending at the time of the publication of financial results covering at least 30 days of combined operations of Buyer and Safety Fund. (b) Buyer shall use its best efforts to publish no later than twenty- five (25) days after the end of the first calendar quarter in which there are at least thirty (30) days of post-Merger combined operations (which calendar quarter may be the calendar quarter in which the Effective Time occurs), combined sales and net income figures as contemplated by and in accordance with the terms of SEC Accounting Series Release No. 135. 38 ARTICLE VIII CLOSING CONDITIONS 8.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT. The respective obligations of each party under this Agreement shall be subject to the fulfillment at or prior to the Effective Time of the following conditions, none of which may be waived: (a) STOCKHOLDER APPROVAL. This Agreement and the transactions contemplated hereby shall have been approved in accordance with applicable law and Stock Exchange policy by the requisite vote of the stockholders of Safety Fund and Buyer. (b) INJUNCTIONS. None of the parties hereto shall be subject to any order, decree or injunction of a court or agency of competent jurisdiction which enjoins or prohibits the consummation of the transactions contemplated by this Agreement. (c) REGULATORY APPROVALS. All necessary approvals, authorizations and consents of all governmental bodies required to consummate the transactions contemplated by this Agreement shall have been obtained and shall remain in full force and effect and all waiting periods relating to such approvals, authorizations or consents shall have expired; and no such approval, authoriza- tion or consent shall include any condition or requirement, not reasonably foreseen as of the date of this Agreement, that would, in the good faith reasonable judgment of the Board of Directors of either Buyer or Safety Fund, materially and adversely affect the business, operations, financial condition, property or assets of the combined enterprise or of Safety Fund or SFNB or otherwise materially impair the value of Safety Fund or SFNB to Buyer; provided, however, that no condition or requirement that relates primarily to regulatory matters existing at the date hereof with respect to Buyer's pre-Merger business or activities shall be deemed to affect the business, operations, financial condition, property or assets of the combined enterprise or of Safety Fund or otherwise materially impair the value of Safety Fund to Buyer. (d) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued, and no proceedings for that purpose shall have been initiated or threatened by the SEC. (e) STOCK EXCHANGE LISTING. The shares of Buyer Common Stock to be issued in the Merger shall have been authorized for listing on the Stock Exchange, subject to official notice of issuance. (f) TAX OPINION. On the basis of facts, representations and assumptions which shall be consistent with the state of facts existing at the Effective Time, each of Buyer and Safety Fund shall have received an opinion of Arnold & Porter reasonably acceptable in form and substance to Buyer and Safety Fund dated as of the Closing Date, substantially to the effect that, for federal income tax purposes: (1) The Merger, when consummated in accordance with the terms hereof, either will constitute a reorganization within the meaning of Section 368(a) of the Code or will be treated as part of a reorganization within the meaning of Section 368(a) of the Code, 39 (2) The exchange of Safety Fund Common Stock to the extent exchanged for Buyer Common Stock will not give rise to recognition of gain or loss for federal income tax purposes to the shareholders of Safety Fund, (3) The basis of the Buyer Common Stock to be received (including any fractional shares deemed received for tax purposes) by a Safety Fund shareholder will be the same as the basis of the Safety Fund Common Stock surrendered pursuant to the Merger in exchange therefor, and (4) The holding period of the shares of Buyer Common Stock to be received by a shareholder of Safety Fund will include the period during which the shareholder held the shares of Safety Fund Common Stock surrendered in exchange therefor, provided the Safety Fund Common Stock surrendered is held as a capital asset at the Effective Time. Each of Buyer and Safety Fund shall provide Arnold & Porter with a letter setting forth the facts, assumptions and representations on which Arnold & Porter may rely in rendering its opinion. 8.2 CONDITIONS TO THE OBLIGATIONS OF BUYER UNDER THIS AGREEMENT. The obligations of Buyer under this Agreement shall be further subject to the satisfaction, at or prior to the Effective Time, of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Safety Fund set forth in Article III hereof shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (or on the date when made in the case of any representation and warranty which specifically relates to an earlier date), except as otherwise contemplated by this Agreement or consented to in writing by Buyer; provided, however, that (i) in determining whether or not the condition contained in this Section 8.2 shall be satisfied, no effect shall be given to any exceptions in such representations and warranties relating to materiality or Material Adverse Effect and (ii) the condition contained in this Section 8.2 shall be deemed to be satisfied unless the failure of such representations and warranties to be so true and correct constitute, individually or in the aggregate, a Material Adverse Effect on Safety Fund and the Safety Fund Subsidiaries, taken as a whole; and Safety Fund shall have delivered to Buyer a certificate of Safety Fund to such effect signed by the Chief Executive Officer and the Chief Financial Officer of Safety Fund as of the Effective Time. (b) AGREEMENTS AND COVENANTS. Safety Fund shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants of Safety Fund to be performed or complied with by it at or prior to the Effective Time under this Agreement and Buyer shall have received a certificate signed on behalf of Safety Fund by the Chief Executive Officer and Chief Financial Officer of Safety Fund to such effect dated as of the Effective Time. (c) PERMITS, AUTHORIZATIONS, ETC. Safety Fund and the Safety Fund Subsidiaries shall have obtained any and all material permits, authorizations, consents, waivers, clearances or approvals required for the lawful consummation of the Merger by Safety Fund, the lawful consummation of the BHC Merger by the Surviving Corporation, and the lawful consummation of the Bank Merger by SFNB, the failure to obtain which would have a Material Adverse Effect 40 on Safety Fund and the Safety Fund Subsidiaries, taken as a whole. (d) LEGAL OPINION. Buyer shall have received an opinion, dated the Closing Date, from Foley, Hoag & Eliot, counsel to Safety Fund as to such matters as Buyer may reasonably request with respect to the transactions contemplated hereby. In rendering any such opinion, such counsel may require and, to the extent they deem necessary or appropriate may rely upon, opinions of other counsel and upon representations made in certificates of officers of Safety Fund, Buyer, Affiliates of the foregoing, and others. (e) ACCOUNTANTS' LETTER. Buyer shall have received a "comfort" letter from the independent certified public accountants for Safety Fund, dated (i) the effective date of the Registration Statement and (ii) the Closing Date, with respect to certain financial information regarding Safety Fund, each in form and substance which is customary in transactions of the nature contemplated by this Agreement. Safety Fund will furnish Buyer with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth in this Section 8.2 as Buyer may reasonably request. 8.3 CONDITIONS TO THE OBLIGATIONS OF SAFETY FUND UNDER THIS AGREEMENT. The obliga tions of Safety Fund under this Agreement shall be further subject to the satisfaction, at or prior to the Effective Time, of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Buyer set forth in Article III hereof shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (or on the date when made in the case of any representation and warranty which specifically relates to an earlier date), except as otherwise contemplated by this Agreement or consented to in writing by Safety Fund; provided, however, that (i) in determining whether or not the condition contained in this Section 8.3(a) shall be satisfied, no effect shall be given to any exceptions in such representations and warranties relating to materiality or Material Adverse Effect and (ii) the condition contained in this Section 8.3(a) shall be deemed to be satisfied unless the failure of such representations and warranties to be so true and correct constitute, individually or in the aggregate, a Material Adverse Effect on Buyer; and Buyer shall have delivered to Safety Fund a certificate of Buyer to such effect signed by the Chief Executive Officer and the Chief Financial Officer of Buyer as of the Effective Time; (b) AGREEMENTS AND COVENANTS. Buyer shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants of Buyer to be performed or complied with by it at or prior to the Effective Time under this Agreement and Safety Fund shall have received a certificate signed on behalf of Buyer by the Chief Executive Officer and Chief Financial Officer of Buyer to such effect dated as of the Effective Time. (c) PERMITS, AUTHORIZATIONS, ETC. Buyer and its subsidiaries shall have obtained any and all material permits, authorizations, consents, waivers, clearances or approvals required for the lawful consummation of the Merger and the Bank Merger by Buyer, the failure to obtain which would have a Material Adverse Effect on Buyer and its subsidiaries, taken as a whole. 41 (d) LEGAL OPINION. Safety Fund shall have received an opinion from Devine, Millimet & Branch, counsel to Buyer, dated the Closing Date, as to such matters as Safety Fund may reasonably request with respect to the transactions contemplated hereby. In rendering any such opinion, such counsel may require and, to the extent they deem necessary or appropriate may rely upon, opinions of other counsel and upon representations made in certificates of officers of Buyer, Safety Fund, Affiliates of the foregoing, and others. Buyer will furnish Safety Fund with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth in this Section 8.3 as Safety Fund may reasonably request. ARTICLE IX THE CLOSING 9.1 TIME AND PLACE. Subject to the provisions of Articles VIII and X hereof, the Closing of the transactions contemplated hereby shall take place at the offices of Foley, Hoag & Eliot, One Post Office Square, Boston, Massachusetts at 10:00 a.m. on a date specified by Buyer at least three business days prior to such date. The Closing Date shall be as soon as practicable after the last required approval for the Merger, the BHC Merger and the Bank Merger has been obtained and the last of all required waiting periods under such approvals have expired, or at such other place, date or time as Buyer and Safety Fund may mutually agree upon. 9.2 DELIVERIES AT THE CLOSING. At the Closing there shall be delivered to Buyer and Safety Fund the opinions, certificates, and other documents and instruments required to be delivered under Article VII hereof. ARTICLE X TERMINATION, AMENDMENT AND WAIVER 10.1 TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the Merger by the stockholders of Safety Fund: (a) At any time by the mutual written agreement of Buyer and Safety Fund; (b) By either Safety Fund or Buyer (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein), if there has been a material breach on the part of the other party of any representation, warranty or agreement contained herein which cannot be or has not been cured within 30 days after written notice by the Buyer to Safety Fund (or by Safety Fund to Buyer) of such breach; (c) At the election of either Buyer or Safety Fund, if the Closing shall not have occurred on or before January 5, 1997 (the "Termination Date"), ---------------- or such later date as shall have been agreed to in writing by Buyer and Safety Fund; provided, that no party may terminate this Agreement pursuant to this Section 10.1 if the failure of the Closing to have occurred on or before said date was due to such party's breach of any of its obligations under this Agreement, and provided, further, that the Termination Date may be extended until April 5, 1997 by either 42 party by written notice to the other party (given not later than December 5, 1996) if the Closing shall not have occurred because of failure to have obtained approval from one or more regulatory authorities whose approval is required in connection with this Agreement and the transactions contemplated hereby under circumstances in which neither party has the right to terminate this Agreement pursuant to Section 10.1 hereof; (d) By either Safety Fund or Buyer if the stockholders of Safety Fund or Buyer shall have voted at the Annual or Special Meeting on the transactions contemplated by this Agreement and such vote shall not have been sufficient to approve such transactions; (e) By either Safety Fund or Buyer if final action has been taken by a regulatory authority whose approval is required in connection with this Agreement and the transactions contemplated hereby, which final action (i) has become unappealable and (ii) does not approve this Agreement or the transactions contemplated hereby; or (f) By Safety Fund, in accordance with the provisions of Section 2.12 hereof. 10.2 EFFECT OF TERMINATION. (a) In the event of termination of this Agreement pursuant to any provision of Section 10.1, this Agreement shall forthwith become void and have no further force, except that (i) the provisions of Sections 10.3, 11.1, 12.1, 12.6, 12.9, and 12.10 (and of this Section 10.2) shall survive such termination of this Agreement and remain in full force and effect and (ii) notwithstanding anything to the contrary contained in this Agreement, each party shall remain liable (in an action at law or otherwise) for any liabilities or damages arising out of its gross negligence or its wilful breach of any provision of this Agreement. (b) If this Agreement is terminated, expenses of the parties hereto shall be determined as follows: (1) Any termination of this Agreement pursuant to Sections 10.1, (a), 10.1(c), 10.1(d), 10.1(e), or 10.1(f) hereof (other than as a result of a wilful breach or gross negligence by a party hereto) shall be without cost or expense on the part of any party to the other; and (2) In the event of a termination of this Agreement pursuant to Section 10.1(b) hereof as a result of a breach of a representation, warranty or covenant which is caused by the wilful conduct or gross negligence of a party, such party shall (while remaining liable for any liabilities or damages arising out of such wilful breach or gross negligence) be obligated to reimburse the other party for all out-of-pocket costs and expenses, including, without limitation, reasonable legal, accounting and investment banking fees and expenses, incurred by such other party in connection with the entering into of this Agreement and the carrying out of any and all acts contemplated hereunder (collectively referred to as "Expenses"). -------- (c) The payment of Expenses is not an exclusive remedy, but is in addition to any other rights or remedies available to the parties hereto at law or in equity and notwithstanding anything to the contrary contained herein, no party shall be relieved or released from any liabilities or damages arising out of its gross negligence or wilful breach of any provision of this Agreement. 43 (d) In no event shall any officer, agent or director of Safety Fund, any Safety Fund Subsidiary, Buyer or any Buyer subsidiary, be personally liable thereunder for any default by any party in any of its obligations hereunder unless any such default was intentionally caused by such officer, agent or director. 10.3 EXPENSES. Except as provided in Section 10.2 hereof, whether or not the Merger is consummated, all Expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses, provided, however, that the Expenses of printing and mailing the Proxy Statement-Prospectus and all filings with the SEC in connection therewith shall be shared by Buyer and by Safety Fund in accordance with the procedures set forth in Schedule 10.3 hereto, provided, ------------- further, however, that nothing contained herein shall limit either party's rights under Section 10.2 hereof, including but not limited to the right to recover any liability or damages arising out of the other party's gross negligence or wilful breach of this Agreement. 10.4 AMENDMENT, EXTENSION AND WAIVER. Subject to applicable law, at any time prior to the Effective Time (whether before or after approval thereof by the stockholders of Safety Fund), the parties hereto may (a) amend this Agreement, (b) extend the time for the performance of any of the obligations or other acts of any other party hereto, (c) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (d) waive compliance with any of the agreements or conditions contained herein; provided, however, that after any approval of this Agreement and the transactions contemplated hereby by the stockholders of Safety Fund, there may not be, without further approval of such stockholders, any amendment of this Agreement which reduces the amount or changes the form of consideration to be delivered to Safety Fund's stockholders pursuant to this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Any agreement on the part of a party hereto to any extension or waiver shall be valid only if set forth in an instrument in writing signed 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 XI CERTAIN DEFINITIONS 11.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms have the following meanings (unless the context otherwise requires, both here and throughout this Agreement, references to Articles and Sections refer to Articles and Sections of this Agreement). (a) "AFFILIATE" of a specified Person shall mean 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 a Person (either alone, or through or together with any subsidiary) has, directly or indirectly, an interest of 5% or more. (b) "ENVIRONMENTAL LAWS" shall mean any federal, state or local law relating to (A) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances, (B) the manufacture, handling, transport, use, treatment, storage or disposal of 44 Hazardous Substances or materials containing Hazardous Substances, or (C) otherwise relating to pollution of the environment. (c) "ENVIRONMENTAL PERMITS" means all permits, licenses and other authorizations referred to under any Environmental Law. (d) "HAZARDOUS SUBSTANCES" means (A) those substances defined in or regulated under the Comprehensive Environmental Response, Compensation and Liability Act, and its state counterparts, as each may be amended from time to time, and all regulations thereunder, (B) petroleum and petroleum products including crude oil and any fractions thereof, (C) natural gas, synthetic gas, and any mixtures thereof, (D) radon, (E) any other contaminant, and (F) any substance with respect to which a federal, state or local agency requires environmental investigation, monitoring, reporting or remediation. (e) "MATERIAL ADVERSE EFFECT", when used with respect to any Person, shall mean a material adverse effect on the financial condition, business, or results of operations of such Person; provided, however, that the following matters shall not constitute or contribute to a Material Adverse Effect: (i) changes in the financial condition, business, or results of operations of a person resulting directly or indirectly from (x) changes in interest rates (provided that Safety Fund is in compliance with its asset/liability management policy as disclosed to Buyer prior to the date of this Agreement, as the same may be revised thereafter with Buyer's concurrence) or (y) changes in regulations or legislation affecting Massachusetts banks; or (ii) matters related to changes in federal, state or local tax laws or changes in federal, state or local tax status, characteristics, or attributes or the ability to use such attributes. (f) "PERSON" shall mean any individual, corporation, partnership, joint venture, association, trust, unincorporated organization or government or any agency or political subdivision thereof. (g) "SUBSIDIARY" or "SUBSIDIARY" of any Person shall mean an Affiliate controlled by such Person, directly or indirectly, through one or more intermediaries, except as otherwise defined herein. ARTICLE XII MISCELLANEOUS 12.1 CONFIDENTIALITY. Except as specifically set forth herein, Buyer and Safety Fund mutually agree to be bound by the terms of the Confidentiality Agreement previously executed by the parties hereto, which Agreement is hereby incorporated herein by reference. The parties hereto agree that such Confidentiality Agreement shall continue in accordance with its respective terms, notwithstanding the termination of this Agreement. 12.2 PUBLIC ANNOUNCEMENTS. Safety Fund and Buyer shall cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement or any of the transactions contemplated hereby, except as may be otherwise required by law, and neither Safety Fund nor Buyer shall issue any joint news releases with respect to this Agreement or any of the transactions contemplated hereby, unless such news 45 releases have been mutually agreed upon by the parties hereto. 12.3 SURVIVAL. All representations, warranties and covenants in this Agreement or in any instrument delivered pursuant hereto or thereto shall expire on, and be terminated and extinguished at, the Effective Date other than covenants that by their terms are to survive or be performed after the Effective Date. 12.4 NOTICES. All notices or other communications hereunder shall be in writing and shall be deemed given if delivered by receipted hand delivery or mailed by prepaid registered or certified mail (return receipt requested) or by cable, telegram, telex or telecopy addressed as follows: If to Buyer to: CFX Corporation 102 Main Street Keene, New Hampshire 03431 Attn: Mark A. Gavin Chief Financial Officer Fax: (603 358-5028 Copy to: Steven Kaplan, Esq. Arnold & Porter 555 Twelfth Street, N.W. Washington, D.C. 20004 Fax: (202) 942-5999 If to Safety Fund, to: The Safety Fund Corporation 470 Main Street Fitchburg, Massachusetts 01420 Attention: President Fax: (508) 342-9795 Copy to Peter W. Coogan, Esq. Carol Hempfling Pratt, Esq. Foley, Hoag & Eliot One Post Office Square Boston, Massachusetts 02109 Fax: (617) 832-7000 or such other address as shall be furnished in writing by any party, and any such notice or communication shall be deemed to have been given as of the date so mailed. 46 12.5 PARTIES IN INTEREST. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other party, and that (except as otherwise expressly provided in this Agreement) nothing in this Agreement is intended to confer upon any other Person any rights or remedies under or by reason of this Agreement. 12.6 COMPLETE AGREEMENT. This Agreement and the Option Agreement, including the Exhibits and Schedules hereto and the documents and other writings referred to herein or therein or delivered pursuant hereto or thereto, contains the entire agreement and understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties other than those expressly set forth herein or therein. This Agreement supersedes all prior agreements and understandings (other than the Confidentiality Agreement referred to in Section 12.1 hereof) between the parties, both written and oral, with respect to its subject matter. 12.7 COUNTERPARTS. This Agreement may be executed in one or more counterparts all of which shall be considered one and the same agreement and each of which shall be deemed an original. 12.8 SEVERABILITY. In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement. 12.9 GOVERNING LAW. This Agreement shall be governed by the laws of Massachusetts, without giving effect to its principles of conflicts of laws. 12.10 HEADINGS. The Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. * * * * * 47 IN WITNESS WHEREOF, Buyer and Safety Fund have caused this Agreement to be executed under seal by their duly authorized officers as of the date first set forth above. CFX CORPORATION [SEAL] By:/s/ Peter J. Baxter ------------------------- Peter J. Baxter President and CEO THE SAFETY FUND CORPORATION [SEAL] By:/s/ Christopher W. Bramley ------------------------------ Christopher W. Bramley President and CEO [SEAL] By:/s/ Martin F. Connors, Jr. ------------------------------- Martin F. Connors, Jr. Treasurer 48 INDEX OF DEFINED TERMS
Affiliate............................................................... 44 Agreement................................................................ 1 Articles of Merger....................................................... 1 Bank Merger.............................................................. 1 Bank Merger Agreement.................................................... 1 Bank Regulator.......................................................... 13 BBI..................................................................... 13 BHC Merger............................................................... 1 BHCA.................................................................... 11 Buyer.................................................................... 1 Buyer Audited Financial Statements...................................... 24 Buyer Common Shares..................................................... 22 Buyer Common Stock....................................................... 4 Buyer Financial Statements.............................................. 24 Buyer Index Price........................................................ 4 Buyer Interim Financial Statements...................................... 24 Buyer Investment Advisor................................................ 26 Buyer Preferred Shares.................................................. 22 Buyer Reports........................................................... 25 Buyer Stock Option Plan................................................. 22 Buyer Sub................................................................ 1 Buyer Trading Price...................................................... 4 Closing.................................................................. 1 Closing Date............................................................. 1 Code.................................................................... 10 Dissenting Shares........................................................ 9 Effective Time........................................................... 1 Environmental Laws...................................................... 44 Environmental Permits................................................... 45 ERISA Plans............................................................. 18 Excess parachute payment................................................ 17 Exchange Act............................................................ 11 Exhibit A............................................................... 41 Expenses................................................................ 43 FDIC.................................................................... 13 Federal Reserve......................................................... 13 GAAP.................................................................... 14 Hazardous Substances.................................................... 45 Holder................................................................... 6 Increased Dividend...................................................... 28 Indemnified Parties..................................................... 35 Investment Advisor...................................................... 19 Last Closing Price....................................................... 8 Massachusetts Commissioner.............................................. 13 MBCL..................................................................... 9 Merger................................................................... 1
I-1 Merger Consideration........................................................ 4 MHP........................................................................ 13 Option Agreement............................................................ 3 Orange Savings.............................................................. 1 Pension Plan............................................................... 18 Person..................................................................... 45 Pooling Determination....................................................... 4 Pooling Exchange Ratio...................................................... 5 Proxy Statement-Prospectus................................................. 37 Purchase Exchange Ratio..................................................... 5 Registration Statement..................................................... 37 Schedules.................................................................. 11 SEC........................................................................ 15 Secretary of State.......................................................... 1 Securities Act.............................................................. 8 SFNB........................................................................ 1 Shareholder Rights Plan.................................................... 12 Special Meeting............................................................ 31 Stock Exchange.............................................................. 4 Subsidiaries............................................................... 45 Subsidiary................................................................. 45 Surviving Bank.............................................................. 2 Surviving Corporation....................................................... 1 Termination Date........................................................... 42 Triggering Event............................................................ 6 Welfare Plan............................................................... 18
I-2 EX-2.B 3 PRESS RELEASE EXHIBIT 2(b) FOR [LOGO OF CFX CORPORATION APPEARS HERE] NEWS RELEASE IMMEDIATE RELEASE For Additional Information Contact: Mark A. Gavin, Chief Financial Officer ---------------------------------------- Paul D. Spiess, Executive Vice President ---------------------------------------- ================================================================================ Safety Fund Contact: Christopher W. Bramley President & CEO (508) 343-6406 CFX CORPORATION AND THE SAFETY FUND CORPORATION AGREE TO MERGE AND FORM $1.2 BILLION BANKING COMPANY Keene, NH, January 5, 1996 -- CFX Corporation (AMEX: CFX), headquartered in Keene, New Hampshire and The Safety Fund Corporation, (NASDAQ: SFCO), headquartered in Fitchburg, Massachusetts, announced today that they have signed a definitive agreement for the merger of Safety Fund into CFX. As a result of the transaction, Safety Fund National Bank, Safety Fund's bank subsidiary, would operate as a subsidiary of CFX. Pursuant to the definitive agreement and in the event that the transaction is accounted for as a pooling-of-interests, each of Safety Fund's outstanding shares of Common Stock has the potential to be converted into 1.7 shares of CFX's Common Stock. The actual number of shares of CFX's Common Stock issuable in the transaction is subject to adjustment based on the average price of CFX Common Stock for the ten trading days immediately before CFX receives the last regulatory approval required to consummate the transaction. In the event that the average price of CFX Common Stock is below $12.43, the exchange ratio becomes 1.806 shares; and if the average price of CFX Common Stock is above $18.65, the exchange ratio becomes 1.629 shares. Safety Fund has the right to terminate the agreement if the average price of CFX Common Stock is below $11.65 per share unless CFX agrees to increase the exchange ratio. The transaction is tax free to the owners of Safety Fund and is subject to regulatory approval and the approval of both CFX's and Safety Fund's shareholders. It is anticipated that the transaction will be accounted for by the pooling-of-interests method of accounting. However, if the transaction is required to be accounted for under the purchase method of accounting, the stock exchange ratio would be 1.52 shares, subject to adjustments based on the average price of CFX Common Stock. [FOOTLINE APPEARS HERE] Based on the closing price of CFX Common Stock on January 4, 1996 of $15.375 and assuming the pooling-of-interests method of accounting and a 1.7 exchange ratio, the indicated value of the transaction would be $26.14 per share, which is equivalent to a price of $39.21 per share prior to the 3 for 2 stock split declared by Safety Fund in the fourth quarter of 1995. The total aggregate consideration would be $43.4 million based on such assumptions. The agreement also provides CFX with an option to acquire up to 19.9% of the outstanding Safety Fund Common Stock under certain circumstances. In announcing the transaction, Peter J. Baxter, President and Chief Executive Officer of CFX Corporation, stated, "I am extremely pleased to have the opportunity to affiliate with such a strong commercial banking franchise. Safety Fund National Bank's commercial banking culture and trust operations complement CFX's mortgage banking capability and community banking heritage. Also, this affiliation allows CFX to add to its existing investment in Massachusetts and capture a significant position in the north central part of the Commonwealth. The addition of Safety Fund to our family of banks underscores the ongoing commitment of CFX Corporation to providing a superior community banking alternative to cities and towns in central New England." Mr. Baxter added, "Under the leadership of Christopher W. Bramley, Safety Fund brings to CFX a strong and capable management team that will remain after the consummation of this acquisition to service the Massachusetts marketplace and pursue additional opportunities. We are also looking forward to the addition of four Safety Fund Directors to the Board of CFX Corporation. We anticipate that after 20% ($2.8 million pre-tax) expense savings, the transaction will be accretive to earnings per share in the first year. Upon consummation of the merger, CFX will take a special charge of approximately $2.5 million to earnings for one time costs of the transaction." Christopher W. Bramley, President and Chief Executive Officer of Safety Fund, said, "We are very pleased to affiliate with a strong, well-managed and locally controlled financial institution. Safety Fund will continue to provide the same high level of service to our customers, while being able to offer a greater array of products and services. CFX's strong capital base will enhance Safety Fund's ability to compete and grow while increasing the availability of credit to our marketplace." Mr. Bramley added, "While we believe that this transaction represents not only fair value for our shareholders, it also substantially increases shareholder liquidity while securing an historically high dividend rate." The parties expect to complete the transaction in the second half of 1996. Separately, the Board of Directors of Safety Fund today approved a shareholder rights plan that is designed to provide protection from a number of tactics that third parties could use to disrupt the proposed merger of CFX and Safety Fund and gain control of Safety Fund without offering a fair price to all shareholders. Under the rights plan, each Safety Fund shareholder of record as of January 5, 1996, will receive a dividend of one non-voting right for each share of the company's common stock owned. Initially, the rights are attached to the company's common shares, are not exercisable and do not represent any significant value to shareholders. The rights become exercisable and valuable if any person (other than CFX Corporation) acquires 15% or more of Safety Fund's common stock. At that time, each right will entitle all holders (including CFX but excluding any other person acquiring 15% or more of Safety Fund's common stock) to purchase common stock at a substantial discount. The exercise of the rights would have a substantial dilutive effect on any person (other than CFX) that acquires 15% or more of Safety Fund's common stock. The Board may redeem the rights at $.01 per right at any time prior to the acquisition by a person or group of beneficial ownership of 15% or more of Safety Fund's common stock. A summary of the terms of the rights plan will be mailed to all Safety Fund shareholders. CFX Corporation is a multi-bank holding company with total assets of $879 million, as of September 30, 1995. The Company's two banking subsidiaries are CFX Bank, headquartered in Keene, New Hampshire, and Orange Savings Bank, headquartered in Orange, Massachusetts. CFX Mortgage, Inc., CFX Bank's mortgage banking subsidiary, services approximately $652 million in mortgage loans for others. The Company operates 23 full service offices, 2 loan production offices, and 50 automated teller and remote service banking locations in New Hampshire and north central Massachusetts. The Safety Fund Corporation is a bank holding company with total assets of $293 million as of September 30, 1995. The Company's banking subsidiary, Safety Fund National Bank, operates a trust division with $350 million in assets and has twelve full service offices located throughout Worcester County, Massachusetts. EX-2.C 4 STOCK OPTION AGREEMENT EXHIBIT 2(c) Execution Copy STOCK OPTION AGREEMENT ---------------------- THIS STOCK OPTION AGREEMENT ("Option Agreement"), dated as of January 5, 1996, is by and between The Safety Fund Corporation ("Safety Fund"), a Massachusetts corporation registered as a bank holding company under the Bank Holding Company Act of 1956, as amended ("BHC Act"), and CFX Corporation ("CFX"), a New Hampshire corporation registered as a bank holding company under the BHC Act. WITNESSETH ---------- WHEREAS, the Boards of Directors of Safety Fund and CFX have approved an Agreement and Plan of Merger ("Merger Agreement"), providing for certain transactions pursuant to which Safety Fund would be merged with and into CFX; WHEREAS, as a condition to CFX's entry into the Merger Agreement and to induce such entry, Safety Fund has agreed to grant to CFX the option set forth herein to purchase authorized but unissued shares of Safety Fund Common Stock; NOW, THEREFORE, in consideration of the premises herein contained, the parties agree as follows: 1. DEFINITIONS. Capitalized terms defined in the Merger Agreement and used herein shall have the same meanings as in the Merger Agreement. 2. GRANT OF OPTION. Subject to the terms and conditions set forth herein, Safety Fund hereby grants to CFX an option ("Option") to purchase up to 332,000 shares of Safety Fund Common Stock, at a price of $20.00 per share payable in cash as provided in Section 4 hereof; provided, however, that in the event Safety Fund issues or agrees to issue any shares of Safety Fund Common Stock in breach of its obligations under the Merger Agreement at a price less than $20.00 per share (as adjusted pursuant to Section 6 hereof), the exercise price shall be equal to such lesser price. Notwithstanding anything else in this Agreement to the contrary, the number of shares of Safety Fund Common Stock subject to the Option shall be reduced to such lesser number, if any, as may from time to time be necessary, but only for so long as may be necessary, to cause CFX not to become an "interested stockholder" for purposes of Chapter 11OF of the General Laws of the Commonwealth of Massachusetts. 3. EXERCISE OF OPTION. (a) CFX may exercise the Option, in whole or part, at any time or from time to time if a Purchase Event (as defined below) shall have occurred and be continuing; provided that to the extent the Option shall not have been exercised, it shall terminate and be of no further force and effect upon the earliest to occur of (i) the Effective Time of the Merger or (ii) termination (other than a termination resulting from a willful breach by Safety Fund of any covenant contained therein) of the Merger Agreement in accordance with the provisions thereof prior to the occurrence of a Subsequent Purchase Event (as defined below) or (iii) six months after termination of the Merger Agreement if such termination follows the occurrence of a Subsequent Purchase Event or is due to a willful breach by Safety Fund of any covenant contained therein; and provided further that any such exercise shall be subject to compliance with applicable provisions of law. As used herein "Subsequent Purchase Event" shall mean a Purchase Event that occurs after the date hereof. (b) As used herein, a "Purchase Event" shall mean any of the following events or transactions: (1) any person (other than Safety Fund, any Safety Fund subsidiary, CFX, or any CFX affiliate) shall have commenced a bona fide tender or exchange offer to purchase shares of Safety Fund Common Stock such that upon consummation of such offer such person would own or control 10% or more of the outstanding shares of Safety Fund Common Stock; (2) any person (other than Safety Fund or any Safety Fund subsidiary), other than in connection with a transaction to which CFX has given its prior written consent, shall have filed an application or notice with any federal or state regulatory agency for clearance or approval, to (i) merge or consolidate, or enter into any similar transaction, with Safety Fund or any Safety Fund subsidiary, (ii) purchase, lease or otherwise acquire all or substantially all the assets of Safety Fund or any Safety Fund subsidiary, or (iii) purchase or otherwise acquire (including by way of merger, consolidation, share exchange or any similar transaction) securities representing 10% or more of the voting power of Safety Fund or any Safety Fund subsidiary; (3) any person (other than Safety Fund, any Safety Fund subsidiary, subsidiaries of Safety Fund in a fiduciary capacity, CFX, affiliates of CFX, or subsidiaries of CFX in a fiduciary capacity) shall have acquired beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Safety Fund Common Stock (the term "beneficial ownership" for purposes of this Option Agreement having the meaning assigned thereto in Section 13(d) of the Exchange Act and the regulations promulgated thereunder); (4) any person (other than Safety Fund or any Safety Fund subsidiary) shall have made a bona fide proposal to Safety Fund by public announcement or written communication that is or becomes the subject of public disclosure to (i) acquire Safety Fund or any Safety Fund subsidiary by merger, consolidation, purchase of all or substantially all its assets or any other similar transaction, or (ii) make an offer described in clause (i) above; or (5) Safety Fund shall have willfully breached any covenant contained in the Merger Agreement, which breach would entitle CFX to terminate the Merger Agreement (without regard to the cure periods provided for therein) and such breach shall not have been cured prior to the Notice Date (as defined below). (c) If more than one of the transactions giving rise to a Purchase Event under Section 3(b) is undertaken or effected, then all such transactions shall give rise only to one Purchase Event, which Purchase Event shall be deemed continuing for all purposes hereunder until all such transactions are abandoned. As used in this Option Agreement, "person" shall have the meanings specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act, and shall also include persons (other than Safety Fund, any Safety Fund subsidiary, CFX, or any CFX - 2 - affiliate), who have entered into an agreement, arrangement or understanding (whether or not in writing), or who are acting in concert or with conscious parallel behavior, for the purpose of acquiring, holding, voting or disposing of any voting securities of Safety Fund (except pursuant solely to a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the regulations promulgated thereunder). (d) In the event CFX wishes to exercise the Option, it shall send to Safety Fund a written notice (the date of which being herein referred to as "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise, and (ii) a place and date not earlier than three business days nor later than 60 business days from the Notice Date for the closing of such purchase ("Closing Date"); provided that, if prior notification to or approval of any federal or state regulatory agency is required in connection with such purchase, CFX shall promptly file the required notice or application for approval and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification period has expired or been terminated or such approval has been obtained and any requisite waiting period shall have passed. 4. PAYMENT AND DELIVERY OF CERTIFICATES. (a) At the closing referred to in Section 3 hereof, CFX shall pay to Safety Fund the aggregate purchase price for the shares of Safety Fund Common Stock purchased pursuant to the exercise of the Option in immediately available funds by a wire transfer to a bank account designated by Safety Fund. (b) At such closing, simultaneously with the delivery of cash as provided in subsection (a), Safety Fund shall deliver to CFX a certificate or certificates representing the number of shares of Safety Fund Common Stock purchased by CFX, and CFX shall deliver to Safety Fund a letter agreeing that CFX will not offer to sell or otherwise dispose of such shares in violation of applicable law or the provisions of this Option Agreement. (c) Certificates for Safety Fund Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend which shall read substantially as follows: "The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and The Safety Fund Corporation and to resale restrictions arising under the Securities Act of 1933, as amended, a copy of which agreement is on file at the principal office of The Safety Fund Corporation. A copy of such agreement will be provided to the holder hereof without charge upon receipt by The Safety Fund Corporation of a written request." It is understood and agreed that the above legend shall be removed by delivery of substitute certificate(s) without such legend if CFX shall have delivered to Safety Fund a copy of a letter from the staff of the Commission, or an opinion of counsel, in form and substance satisfactory to Safety Fund, to the effect that such legend is not required for purposes of the Securities Act. 5. REPRESENTATIONS. Safety Fund hereby represents, warrants and covenants to CFX as follows: - 3 - (a) Safety Fund shall at all times maintain sufficient authorized but unissued shares of Safety Fund Common Stock so that the option may be exercised without authorization of additional shares of Safety Fund Common Stock. (b) The shares to be issued upon due exercise, in whole or in part, of the Option, when paid for as provided herein, will be duly authorized, validly issued, fully paid and nonassessable. 6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change in Safety Fund Common Stock by reason of stock dividends, split-ups, recapitalizations, combinations, exchanges of shares or the like, the type and number of shares subject to the Option, and the purchase price per share, as the case may be, shall be adjusted appropriately. In the event that any additional shares of Safety Fund Common Stock are issued or otherwise become outstanding after the date of this Option Agreement (other than pursuant to this Option Agreement), the number of shares of Safety Fund Common Stock subject to the Option shall be adjusted so that, after such issuance, it equals 19.99%. of the number of shares of Safety Fund Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 6 shall be deemed to authorize Safety Fund to breach any provision of the Merger Agreement. 7. REGISTRATION RIGHTS. Safety Fund shall, if requested by CFX, as expeditiously as possible following the occurrence of a Purchase Event and prior to the second anniversary thereof, file a registration statement on a form of general use under the Securities Act if necessary in order to permit the sale or other disposition of the shares of Safety Fund Common Stock that have been acquired upon exercise of the Option in accordance with the intended method of sale or other disposition requested by CFX. CFX shall provide all information reasonably requested by Safety Fund for inclusion in any registration statement to be filed hereunder. Safety Fund will use its best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 270 days from the day such registration statement first becomes effective as may be reasonably necessary to effect such sales or other dispositions. The obligations of Safety Fund hereunder to file a registration statement and to maintain its effectiveness may be suspended for one or more periods of time not exceeding 60 days in the aggregate if the Board of Directors of Safety Fund shall have determined that the filing of such registration statement or the maintenance of its effectiveness would require disclosure of non-public information that would materially and adversely affect Safety Fund. The first registration effected under this Section 7 shall be at Safety Fund's expense except for underwriting commissions and the fees and disbursements of CFX's counsel attributable to the registration of such Safety Fund Common Stock. A second registration may be requested hereunder at CFX's expense. In no event shall Safety Fund be required to effect more than two registrations hereunder. The filing of any registration statement hereunder may be delayed for such period of time as may reasonably be required to facilitate any public distribution by Safety Fund of Safety Fund Common Stock. If requested by CFX, in connection with any such registration, Safety Fund will become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agreements customarily included in such underwriting agreements. Upon receiving any request from CFX or assignee thereof under this Section 7, Safety Fund agrees to send a copy thereof to CFX and to any assignee thereof known to Safety Fund, in each case by promptly mailing the same, postage prepaid, to the address of record of - 4 - the persons entitled to receive such copies. 8. REPURCHASE. (a) At the request of CFX at any time commencing upon the occurrence of a Repurchase Event (as defined in subsection (c) below) and ending nine months thereafter ("Repurchase Period"), Safety Fund shall repurchase the Option (whether or not previously terminated) from CFX together with any shares of Safety Fund Common Stock purchased by CFX pursuant thereto, at a price equal to the sum of: (1) the exercise price paid by CFX for any shares of Safety Fund Common Stock acquired pursuant to the Option; (2) the difference between the "market/tender offer" price for shares of Safety Fund Common Stock (defined as the higher of the highest price per share at which a tender or exchange offer has been made or the highest reported sale price for shares of Safety Fund Common Stock within that portion of the Repurchase Period preceding the date CFX gives notice of the required repurchase under this Section 8) and the exercise price as determined pursuant to Section 2 hereof multiplied by the number of shares of Safety Fund Common Stock with respect to which the Option has not been exercised, but only if the market/tender offer price is greater than such exercise price; (3) the difference between the market/tender offer price (as defined in Section 8(b) hereof) and the exercise price paid by CFX for any shares of Safety Fund Common Stock purchased pursuant to the exercise of the option, multiplied by the number of shares so purchased, but only if the market/tender offer price is greater than such exercise price; and (4) CFX's reasonable out-of-pocket expenses incurred in connection with the transactions contemplated by the Merger Agreement, including, without limitation, legal, accounting and investment banking fees. (b) In the event CFX exercises its rights under this Section 8, Safety Fund shall, within three business days thereafter, pay the required amount to CFX in immediately available funds and CFX shall surrender to Safety Fund the Option and the certificates evidencing the shares of Safety Fund Common Stock purchased thereunder and CFX shall warrant that it owns such shares and that the same are then free and clear of all liens and encumbrances; provided that, if prior notification to the Federal Reserve Board is required in connection with such purchase, Safety Fund shall promptly file the required notice or application for approval and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification period has expired or been terminated or such approval has been obtained and any requisite waiting period shall have passed. (c) A "Repurchase Event" shall mean any of the following: (1) any person (other than Safety Fund, any Safety Fund subsidiary, CFX, or any CFX affiliate) shall have acquired beneficial ownership of 51% or more of the outstanding shares of Safety Fund Common Stock; or - 5 - (2) any person (other than CFX or any CFX affiliate) shall have entered into an agreement, arrangement or understanding (whether or not in writing) with Safety Fund or any Safety Fund subsidiary to (i) merge or consolidate, or enter into any similar transaction, with Safety Fund or any Safety Fund subsidiary, (ii) purchase, lease or otherwise acquire all or substantially all the assets of Safety Fund or any Safety Fund subsidiary, or (iii) purchase or otherwise acquire (including by way of merger, consolidation, share exchange or any similar transaction) securities representing 51% or more of the voting power of Safety Fund or any Safety Fund subsidiary. 9. SEVERABILITY. If any term, provision, covenant or restriction contained in this Option Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants and restrictions contained in this Option Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or regulatory agency determines that the Option will not permit the holder to acquire or Safety Fund to repurchase the full number of shares of Safety Fund Common Stock provided in Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is the express intention of Safety Fund to allow the holder to acquire or to require Safety Fund to repurchase such lesser number of shares as may be permissible, without any amendment or modification hereof. 10. MISCELLANEOUS. (a) EXPENSES. Except as otherwise provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. (b) ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this Option Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereto, written or oral. Notwithstanding anything to the contrary contained in this Agreement or the Merger Agreement, this Agreement shall be deemed to amend the Confidentiality Agreement so as to permit CFX to enter into this Agreement and exercise all its rights hereunder, including its right to acquire Safety Fund Common Stock upon exercise of the Option. The terms and conditions of this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. Nothing in this Option Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Option Agreement, except as expressly provided herein. (c) ASSIGNMENT. Neither of the parties hereto may assign any of its rights or obligations under this Option Agreement or the Option created hereunder to any other person, without the express written consent of the other party, except that in the event a Purchase Event shall have occurred and be continuing CFX may assign in whole or in part its rights and obligations hereunder; provided, however, that until the date 30 days following the date on which the Federal Reserve Board approves an application by CFX under the BHC Act to acquire the shares of Safety Fund Common Stock subject to the Option, CFX may not assign its rights under the Option except in (i) a widely dispersed public distribution, (ii) a private placement in which - 6 - no one party acquires the right to purchase in excess of 2% of the voting shares of Safety Fund, (iii) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widely dispersed public distribution on CFX's behalf, or (iv) any other manner approved by the Federal Reserve Board. If at any time prior to the expiration of the Option, CFX shall desire to assign all or any part of the Option, other than in a manner described in clause (i), (ii), or (iii) above, it shall give Safety Fund written notice of the proposed transaction ("Offeror's Notice"), identifying the proposed transferee and setting forth the terms of the proposed transaction. An Offeror's Notice shall be deemed an offer by CFX to Safety Fund, which may be accepted within two business days of the receipt of such Offeror's Notice, on the same terms and conditions and at the same price at which CFX is proposing to transfer the Option or portion thereof to a third party. Settlement shall be within five business days of the date of the acceptance of the offer and the purchase price shall be paid in immediately available funds. In the event of the failure or refusal of Safety Fund to purchase all of the portion of the Option covered by the Offeror's Notice, CFX may, within 60 days from the date of the Offeror's Notice, sell all, but not less than all, of such portion of the Option to such third party at no less than the price specified and on terms no more favorable than those set forth in the Offeror's Notice. (d) NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally or sent by overnight express or by registered or certified mail, postage prepaid, addressed as provided in the Merger Agreement. A party may change its address for notice purposes by written notice to the other party hereto. (e) COUNTERPARTS. This Option Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. (f) SPECIFIC PERFORMANCE. The parties agree that damages would be an inadequate remedy for a breach of the provisions of this option Agreement by either party hereto and that this Option Agreement may be enforced by either party hereto through injunctive or other equitable relief. (g) GOVERNING LAW. This option Agreement shall be governed by and construed in accordance with the laws of Massachusetts applicable to agreements made and entirely to be performed within such state and such federal laws as may be applicable. - 7 - IN WITNESS WHEREOF, each of the parties hereto has executed this Option Agreement as of the day and year first written above. CFX CORPORATION [SEAL) By:/s/ Peter J. Baxter ----------------------------------- Peter J. Baxter, President and CEO THE SAFETY FUND CORPORATION [SEAL] By:/s/ Christopher W. Bramley ----------------------------------- Christopher W. Bramley, President and CEO [SEAL] By:/s/ Martin F. Connors, Jr. -------------------------- Martin F. Connors, Jr., Treasurer - 8 - EX-4.A 5 RIGHTS AGREEMENT EXHIBIT 4(a) RIGHTS AGREEMENT Dated as of January 5, 1996 between THE SAFETY FUND CORPORATION and FLEET NATIONAL BANK OF MASSACHUSETTS as Rights Agent TABLE OF CONTENTS
SECTION PAGE Section 1. CERTAIN DEFINITIONS........................................................... 1 Section 2. APPOINTMENT OF RIGHTS AGENT.................................................. 7 Section 3. ISSUE OF RIGHTS AND RIGHT CERTIFICATES....................................... 7 Section 4. FORM OF RIGHT CERTIFICATES................................................... 8 Section 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION................................. 9 Section 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES; UNCERTIFICATED RIGHTS........................................................................... 9 Section 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS................................. 10 Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES............................ 12 Section 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES.............................. 12 Section 10. PREFERRED SHARES RECORD DATE................................................ 13 Section 11. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING PERSON; EXCHANGE OF RIGHTS FOR SHARES; BUSINESS COMBINATIONS...................................... 14 Section 12. CERTAIN ADJUSTMENTS......................................................... 18 Section 13. CERTIFICATE OF ADJUSTMENT................................................... 19 Section 14. ADDITIONAL COVENANTS........................................................ 19 Section 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES..................................... 19 Section 16. RIGHTS OF ACTION............................................................ 20 Section 17. TRANSFER AND OWNERSHIP OF RIGHTS AND RIGHT CERTIFICATES..................... 21 Section 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER........................... 21 Section 19. CONCERNING THE RIGHTS AGENT................................................. 21 Section 20. MERGER OR CONSOLIDATION OR CHANGE OF RIGHTS AGENT........................... 21
i Section 21. DUTIES OF RIGHTS AGENT...................................................... 22 Section 22. CHANGE OF RIGHTS AGENT...................................................... 24 Section 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHT CERTIFICATES........................ 25 Section 24. REDEMPTION AND TERMINATION.................................................. 25 Section 25. NOTICES..................................................................... 26 Section 26. SUPPLEMENTS AND AMENDMENTS.................................................. 26 Section 27. SUCCESSORS.................................................................. 27 Section 28. BENEFITS OF RIGHTS AGREEMENT; DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.......................................................... 27 Section 29. SEVERABILITY................................................................ 28 Section 30. GOVERNING LAW............................................................... 28 Section 31. COUNTERPARTS; EFFECTIVENESS................................................. 28 Section 32. DESCRIPTIVE HEADINGS........................................................ 28
EXHIBITS A Certificate of Designation B Form of Right Certificate ii This RIGHTS AGREEMENT, dated as of January 5, 1996, is made between THE SAFETY FUND CORPORATION, a Massachusetts corporation (the "Company"), and Fleet National Bank of Massachusetts, a national banking association, as Rights Agent (the "Rights Agent"). The Board of Directors of the Company has authorized and declared a distribution of one Right (as hereinafter defined) for each share of Common Stock, $5.00 par value, of the Company (the "Common Stock") outstanding at the Close of Business (as hereinafter defined) on January 5, 1996 (the "Record Date"), and has authorized the issuance of one Right (as such number may hereafter be adjusted pursuant to the provisions of this Rights Agreement) with respect to each share of Common Stock that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Expiration Date (as such terms are hereinafter defined); PROVIDED, HOWEVER, that Rights may be issued with respect to shares of Common Stock that shall become outstanding after the Distribution Date and prior to the earlier of the Redemption Date or the Expiration Date in accordance with the provisions of Section 23. Each Right shall initially represent the right to purchase one one- thousandth (1/1000th) of a share of Series A Participating Cumulative Preferred Stock, par value $10.00 per share, of the Company (the "Preferred Shares"), having the powers, rights and preferences set forth in the Certificate of Designation attached as Exhibit A. Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. CERTAIN DEFINITIONS. For purposes of this Rights Agreement, the following terms have the meanings indicated: "ACQUIRING PERSON" shall mean any Person who or which, alone or together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of the Capital Shares then outstanding that equals or exceeds such Person's Ownership Threshold, but shall not include (a) the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any of its Subsidiaries, or any Person holding Capital Shares for or pursuant to the terms of any such employee benefit plan or (b) any such Person who has become such a Beneficial Owner solely because (i) of a change in the aggregate number of Capital Shares outstanding since the last date on which such Person acquired Beneficial Ownership of any Capital Shares or (ii) it acquired such Beneficial Ownership in the good faith belief that such acquisition would not cause such Beneficial Ownership to exceed such Person's Ownership Threshold and such Person relied in good faith in computing the percentage of its Beneficial Ownership on publicly filed reports or documents of the Company which are inaccurate or out- of-date. Notwithstanding clause (b) of the prior sentence, if any Person that is not an Acquiring Person due to such clause (b) does not reduce its percentage of Beneficial Ownership of Capital Shares to an amount less than such Person's Ownership Threshold by the Close of Business on the fifth Business Day after notice from the Company (the date of notice being the first day) that such Person's Beneficial Ownership of Capital Shares so exceeds such Person's Ownership Threshold, such Person shall, at the end of such five Business Day period, become an Acquiring Person (and such 1 clause (b) shall no longer apply to such Person). For purposes of this definition, the determination whether any Person acted in "good faith" shall be conclusively determined by the Board of Directors of the Company. "AFFILIATE" and "ASSOCIATE", when used with reference to any Person, shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Rights Agreement. A Person shall be deemed the "BENEFICIAL OWNER" of, and shall be deemed to "BENEFICIALLY OWN", and shall be deemed to have "BENEFICIAL OWNERSHIP" of, any securities: (i) which such Person or any of such Person's Affiliates or Associates is deemed to "beneficially own" within the meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Rights Agreement; (ii) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time or the occurrence of events) pursuant to any agreement, arrangement or understanding (written or oral), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, or to have Beneficial Ownership of, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange thereunder, or (B) the right to vote pursuant to any agreement, arrangement or understanding (written or oral); PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if (1) the agreement, arrangement or understanding (written or oral) to vote such security arises solely from a revocable proxy or consent given to such Person pursuant to a definitive proxy statement filed with the Securities and Exchange Commission and otherwise in accordance with, the applicable rules and regulations under the Exchange Act and (2) the beneficial ownership of such security is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (written or oral), or is acting in concert or with conscious parallel behavior, for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in clause (ii)(B) of this definition) or disposing of any securities of the Company. Attribution of a Person's Beneficial Ownership of securities to any other Person pursuant to this clause (iii) shall be deemed to occur (i) automatically if the existence of an agreement, arrangement or understanding (written or oral), or actions in concert or with conscious parallel behavior, of the type described in this clause (iii) has been disclosed to the Securities and Exchange Commission on a Schedule 13D or Schedule 13G under the Exchange 2 Act (or any successor schedule thereto) or (ii) if the Board of Directors of the Company determines in good faith that such an agreement, arrangement or understanding exists or that such actions in concert or with conscious parallel behavior have occurred. Notwithstanding the foregoing, nothing contained in this definition shall cause a Person ordinarily engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own", any securities acquired in a bona fide firm commitment underwriting pursuant to an underwriting agreement with the Company. "BOOK VALUE", when used with reference to Capital Shares issued by any Person, shall mean the amount of equity of such Person applicable to each Capital Share, determined (i) in accordance with generally accepted accounting principles in effect on the date as of which such Book Value is to be determined, (ii) using all the consolidated assets and all the consolidated liabilities of such Person on the date as of which such Book Value is to be determined, except that no value shall be included in such assets for goodwill arising from consummation of a business combination, and (iii) after giving effect to (A) the exercise of all rights, options and warrants to purchase such Capital Shares (other than the Rights), and the conversion of all securities convertible into such Capital Shares, at an exercise or conversion price, per Capital Share, which is less than such Book Value before giving effect to such exercise or conversion (whether or not exercisability or convertibility is conditioned upon occurrence of a future event), (B) all dividends and other distributions on the capital stock of such Person declared prior to the date as of which such Book Value is to be determined and to be paid or made after such date, and (C) any other agreement, arrangement or understanding (written or oral), or transaction or other action prior to the date as of which such Book Value is to be determined which would have the effect of thereafter reducing such Book Value. "BUSINESS COMBINATION" shall have the meaning set forth in Section 11(c)(I). "BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in Boston, Massachusetts or the city in which the principal office of the Rights Agent is located, are authorized or obligated by law or executive order to close. "CAPITAL SHARES", when used with reference to the Company prior to a Business Combination, shall mean the shares of Common Stock or any other shares of capital stock of the Company into which the Common Stock shall be reclassified or changed. "Capital Shares", when used with reference to any Person (other than the Company prior to a Business Combination), shall mean shares of capital stock of such Person (if such Person is a corporation) of any class or series, or units of equity interests in such Person (if such Person is not a corporation) of any class or series, the terms of which do not limit (as a maximum amount and not merely in proportional terms) the amount of dividends or income payable or distributable on such class or series or the amount of assets distributable on such class or series upon any voluntary or involuntary liquidation, dissolution or winding up of such Person and do not provide that such class or series is subject to redemption at the option of such Person, or any shares of capital stock or units of equity interests into which 3 the foregoing shall be reclassified or changed; PROVIDED, HOWEVER, that, if at any time there shall be more than one such class or series of capital stock or equity interests of such Person, "Capital Shares" of such Person shall include all such classes and series substantially in the proportion of the total number of shares or other units of each such class or series outstanding at such time. "CERTIFICATE OF DESIGNATION" shall mean the Certificate of Vote of Directors Establishing a Series of a Class of Stock setting forth the powers, preferences, rights, qualifications, limitations and restrictions of such series of Preferred Stock of the Company, a copy of which is attached as Exhibit A. "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m., Boston time, on such date; PROVIDED, HOWEVER, that, if such date is not a Business Day, "Close of Business" shall mean 5:00 p.m., Boston, Massachusetts time, on the next succeeding Business Day. "COMMON STOCK" shall have the meaning set forth in the introductory paragraph of this Rights Agreement. "COMPANY" shall have the meaning set forth in the heading of this Rights Agreement; PROVIDED, HOWEVER, that if there is a Business Combination, "Company" shall have the meaning set forth in Section 11(c)(III). The term "CONTROL" with respect to any Person shall mean the power to direct the management and policies of such Person, directly or indirectly, by or through stock ownership, agency or otherwise, or pursuant to or in connection with an agreement, arrangement or understanding (written or oral) with one or more other Persons by or through stock ownership, agency or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. "DISTRIBUTION DATE" shall have the meaning set forth in Section 3(b). "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as in effect on the date in question, unless otherwise specifically provided. "EXCHANGE CONSIDERATION" shall have the meaning set forth in Section 11(b)(I). "EXPIRATION DATE" shall have the meaning set forth in Section 7(a). "MAJOR PART", when used with reference to the assets of the Company and its Subsidiaries as of any date, shall mean assets (i) having a fair market value aggregating 50% or more of the total fair market value of all the assets of the Company and its Subsidiaries (taken as a whole) as of the date in question, (ii) accounting for 50% or more of the total value (net of depreciation and amortization) of all the assets of the Company and its Subsidiaries (taken as a whole) as would be shown on a consolidated or combined balance sheet of the Company and its Subsidiaries as of the date in question, prepared in accordance with generally accepted accounting principles then in effect, or (iii) accounting for 50% or 4 more of the total amount of earnings before interest, taxes, depreciation and amortization or revenues of the Company and its Subsidiaries (taken as a whole) as would be shown on, or derived from, a consolidated or combined statement of income of the Company and its Subsidiaries for the period of 12 months ending on the last day of the Company's monthly accounting period next preceding the date in question, prepared in accordance with generally accepted accounting principles then in effect. "MARKET VALUE", when used with reference to any class of Capital Shares on any date, shall be deemed to be the average of the daily closing prices, per share, of any such class for the period which is the shorter of (1) 30 consecutive Trading Days immediately prior to the date in question or (2) the number of consecutive Trading Days beginning on the Trading Day immediately after the date of the first public announcement of a Business Combination with an Acquiring Person or Affiliate or Associate of an Acquiring Person requiring a determination of the Market Value and ending on the Trading Day immediately prior to the record date of such Business Combination; PROVIDED, HOWEVER, that, in the event that the Market Value of such class of Capital Shares is to be determined in whole or in part during a period following the announcement by the issuer of such class of Capital Shares of any action of the type described in Section 12(a) that would require an adjustment thereunder, then, and in each such case, the Market Value of such class shall be appropriately adjusted to reflect the effect of such action on the market price of such class. The closing price for each Trading Day shall be the closing price quoted on the composite tape for securities listed on the New York Stock Exchange, or, if such securities are not quoted on such composite tape or if such securities are not listed on such exchange, on the principal United States securities exchange registered under the Exchange Act (or any recognized foreign stock exchange) on which such securities are listed, or, if such securities are not listed on any such exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market with respect to a share of such securities as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or if no such quotations are available, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such securities selected by the Board of Directors of the Company. If on any such Trading Day no market maker is making a market in such securities for any reason, the closing price of such securities on such Trading Day shall be deemed to be the fair value of such securities as determined in good faith by the Board of Directors of the Company (whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent, the holders of Rights and all other Persons); PROVIDED, HOWEVER, that for the purpose of determining the closing price of the Preferred Shares for any Trading Day on which there is no such market maker for the Preferred Shares the closing price on such Trading Day shall be deemed to be the Formula Number (as defined in the Certificate of Designation) times the closing price of the Common Stock of the Company on such Trading Day. "OWNERSHIP THRESHOLD" shall mean, with respect to any Person, Beneficial Ownership of the GREATER of (A) 15% of the Capital Shares at any time outstanding or (B) the percentage of the outstanding Capital Shares Beneficially Owned by such Person on the date of this Agreement, plus in the case of this clause (B) 1% of the Capital Shares outstanding on such date. 5 "PERSON" shall mean an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. "PREFERRED SHARES" shall have the meaning set forth in the introductory paragraph of this Rights Agreement. Any reference in this Rights Agreement to Preferred Shares shall be deemed to include any authorized fraction of a Preferred Share, unless the context otherwise requires. "PREFERRED STOCK" shall mean the Preferred Stock, par value $10.00 per share, of the Company. "PRINCIPAL PARTY" shall mean the Surviving Person in a Business Combination; PROVIDED, HOWEVER, that, if such Surviving Person is a direct or indirect Subsidiary of any other Person, "Principal Party" shall mean the Person which is the ultimate parent of such Surviving Person and which is not itself a Subsidiary of another Person. In the event ultimate control of such Surviving Person is shared by two or more Persons, "Principal Party" shall mean that Person that is immediately controlled by such two or more Persons. "PURCHASE PRICE" with respect to each Right shall mean $65, as such amount may from time to time be adjusted as provided herein, and shall be payable in lawful money of the United States of America. All references herein to the Purchase Price shall mean the Purchase Price as in effect at the time in question. "RECORD DATE" shall have the meaning set forth in the introductory paragraph of this Rights Agreement. "REDEMPTION DATE" shall have the meaning set forth in Section 24(a). "REDEMPTION PRICE" with respect to each Right shall mean $.01, as such amount may from time to time be adjusted in accordance with Section 12. All references herein to the Redemption Price shall mean the Redemption Price as in effect at the time in question. "REGISTERED CAPITAL SHARES" shall mean Capital Shares which are, as of the date of consummation of a Business Combination, and have continuously been for the 12 months immediately preceding such date, registered under Section 12 of the Exchange Act. "RIGHT CERTIFICATE" shall mean a certificate evidencing a Right in substantially the form attached as Exhibit B. "RIGHTS" shall mean the rights to purchase Preferred Shares (or other securities) as provided in this Rights Agreement. "SECURITIES ACT" shall mean the Securities Act of 1933, as in effect on the date in question, unless otherwise specifically provided. 6 "SUBSIDIARY" shall mean a Person, at least a majority of the total outstanding voting power (being the power under ordinary circumstances (and not merely upon the happening of a contingency) to vote in the election of directors of such Person (if such Person is a corporation) or to participate in the management and control of such Person (if such Person is not a corporation)) of which is owned, directly or indirectly, by another Person or by one or more other Subsidiaries of such other Person or by such other Person and one or more other Subsidiaries of such other Person. "SURVIVING PERSON" shall mean (1) the Person which is the continuing or surviving Person in a consolidation or merger specified in Section 11(c)(I)(i) or 11(c)(I)(ii) or (2) the Person to which the Major Part of the assets of the Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of in a transaction specified in Section 11(c)(I)(iii); PROVIDED, HOWEVER, that, if the Major Part of the assets of the Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of in one or more related transactions specified in Section 11(c)(I)(iii) to more than one Person, the "Surviving Person" in such case shall mean the Person that acquired assets of the Company and/or its Subsidiaries with the greatest fair market value in such transaction or transactions. "TRADING DAY" when used with reference to the Market Value of a security, shall mean a day on which the principal national securities exchange (or principal recognized foreign stock exchange, as the case may be) on which such securities are listed or admitted to trading is open for the transaction of business or, if such securities in question are not listed or admitted to trading on any national securities exchange (or recognized foreign stock exchange, as the case may be), a Business Day. Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint one or more co-Rights Agents as it may deem necessary or desirable (the term "Rights Agent" being used herein to refer, collectively, to the Rights Agent together with any such co-Rights Agents). In the event the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agents shall be as the Company shall determine. Section 3. ISSUE OF RIGHTS AND RIGHT CERTIFICATES. (a) One Right shall be associated with each Capital Share outstanding on the Record Date, each additional Capital Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Expiration Date and each additional Capital Share with which Rights are issued after the Distribution Date but prior to the earlier of the Redemption Date or the Expiration Date as provided in Section 23, in each case subject to the provisions of Section 12. (b) Until the earlier of (i) such time as the Company learns that a Person has become an Acquiring Person or (ii) the Close of Business on such date, if any, as may be designated by the Board of Directors of the Company following the commencement of, or first public disclosure of an intent to commence, a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the 7 Company or of any of its Subsidiaries, or any Person holding Capital Shares for or pursuant to the terms of any such employee benefit plan) for outstanding Capital Shares, if upon consummation of such tender or exchange offer such Person's Beneficial Ownership of Capital Shares then outstanding could equal or exceed such Person's Ownership Threshold (the Close of Business on the earlier of such dates being the "Distribution Date"), (x) the Rights will be evidenced by the certificates for Capital Shares registered in the names of the holders thereof and not by separate Right Certificates and (y) the Rights, including the right to receive Right Certificates, will be transferable only in connection with the transfer of Capital Shares. As soon as practicable after the Distribution Date, the Rights Agent will send, by first-class, postage-prepaid mail, to each record holder of Capital Shares as of the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate evidencing the Rights to which such holder is entitled. As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (c) With respect to any certificate for Capital Shares, until the earliest of the Distribution Date, the Redemption Date or the Expiration Date, the Rights associated with the Capital Shares represented by any such certificate shall be evidenced by such certificate alone, the registered holders of the Capital Shares shall also be the registered holders of the associated Rights and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Capital Shares represented thereby. (d) Certificates issued for Capital Shares after the Record Date (including, without limitation, upon transfer or exchange of outstanding Capital Shares), but prior to the earliest of the Distribution Date, the Redemption Date or the Expiration Date, may have printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement dated as of January 5, 1996, as it may be amended from time to time (the "Rights Agreement"), between THE SAFETY FUND CORPORATION (the "Company") and FLEET NATIONAL BANK OF MASSACHUSETTS, as Rights Agent (the "Rights Agent"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Rights beneficially owned by Acquiring Persons or their Affiliates or Associates (as such terms are defined in the Rights Agreement) and by any subsequent holder of such Rights are null and void and nontransferable. Notwithstanding this paragraph (d), the omission of a legend shall not affect the enforceability of any part of this Rights Agreement or the rights of any holder of Rights. Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the form of election to purchase and form of assignment to be printed on the reverse side thereof) 8 shall be in substantially the form set forth as Exhibit B and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Rights Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may, from time to time be listed, or to conform to usage. Subject to the provisions of Sections 7, 11 and 23, the Right Certificates, whenever issued, shall be dated as of the Distribution Date, and on their face shall entitle the holders thereof to purchase such number of Preferred Shares as shall be set forth therein for the Purchase Price set forth therein, subject to adjustment from time to time as herein provided. Section 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION. (a) The Right Certificates shall be executed on behalf of the Company by the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer or a Vice President (whether preceded by any additional title) of the Company, either manually or by facsimile signature, and have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary, an Assistant Secretary or a Vice President (whether preceded by any additional title, provided that such Vice President shall not have also executed the Right Certificates) of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid or obligatory for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such an officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates may nevertheless be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such an officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of execution of this Rights Agreement any such person was not such an officer of the Company. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office in Hartford, Connecticut, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced by each of the Right Certificates, the certificate number of each of the Right Certificates and the date of each of the Right Certificates. Section 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES; UNCERTIFICATED RIGHTS. (a) Subject to the provisions of Sections 7(e) and 15, at any time after the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date, any Right Certificate or Right Certificates may be transferred, split-up, combined or exchanged for another Right Certificate or Right Certificates representing, in the aggregate, the same number of Rights as the Right Certificate or Right Certificates surrendered then represented. Any registered holder desiring to transfer, split-up, combine or exchange any Right Certificate shall make such request in writing delivered 9 to the Rights Agent and shall surrender the Right Certificate or Right Certificates to be transferred, split-up, combined or exchanged at the office of the Rights Agent; PROVIDED, HOWEVER, that neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any Right Certificate surrendered for transfer until the registered holder shall have completed and signed the certification contained in the form of assignment on the reverse side of such Right Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 7(e) and 15, countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split-up, combination or exchange of Right Certificates. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a valid Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make a new Right Certificate of like tenor and deliver such new Right Certificate to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. (c) Notwithstanding any other provision hereof, the Company and the Rights Agent may amend this Rights Agreement to provide for uncertificated Rights in addition to or in place of Rights evidenced by Right Certificates. Section 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS. (a) Subject to Section 7(e) and except as otherwise provided herein (including Section 11), each Right shall entitle the registered holder thereof, upon exercise thereof as provided herein, to purchase for the Purchase Price, at any time after the Distribution Date and at or prior to the earlier of (i) the Close of Business on the 10th anniversary of the date of this Rights Agreement (the Close of Business on such date being the "Expiration Date") or (ii) the Redemption Date, one one- thousandth (1/1000th) of a Preferred Share, subject to adjustment from time to time as provided in Sections 11 and 12. (b) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date, upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent in Hartford, Connecticut, together with payment of the Purchase Price for each one- thousandth (1/1000th) of a Preferred Share as to which the Rights are exercised, at or prior to the earlier of (i) the Expiration Date or (ii) the Redemption Date. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the 10 Purchase Price for the Preferred Shares to be purchased together with an amount equal to any applicable transfer tax, in lawful money of the United States of America, in cash or by certified check or money order payable to the order of the Company, the Rights Agent shall thereupon (i) either (A) promptly requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent) certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the Preferred Shares with a depositary agent under a depositary arrangement, promptly requisition from the depositary agent depositary receipts representing the number of one-thousandths (1/1000ths) of a Preferred Share to be purchased (in which case certificates for the Preferred Shares to be represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with all such requests, (ii) when appropriate, promptly requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 15, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt promptly deliver such cash to or upon the order of the registered holder of such Right Certificate. (d) In case the registered holder of any Right Certificate shall exercise fewer than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 15. (e) Notwithstanding anything in this Rights Agreement to the contrary, any Rights that are at any time beneficially owned by an Acquiring Person or any Affiliate or Associate of an Acquiring Person shall be null and void and nontransferable, and any holder of any such Right (including any purported transferee or subsequent holder) shall not have any right to exercise or transfer any such Right. (f) Notwithstanding anything in this Rights Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of any Right Certificates upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. (g) The Company may temporarily suspend, for a period of time not to exceed 90 calendar days after the Distribution Date, the exercisability of the Rights in order to prepare and file a registration statement under the Securities Act, on an appropriate form, with respect to the Preferred Shares purchasable upon exercise of the Rights and permit such registration statement to become effective; PROVIDED, HOWEVER, that no such suspension shall remain effective after, and the Rights shall without any further action by the Company or any 11 other Person become exercisable immediately upon, the effectiveness of such registration statement. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended and shall issue a further public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision herein to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification under the blue sky or securities laws of such jurisdiction shall not have been obtained or the exercise of the Rights shall not be permitted under applicable law. Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right Certificates surrendered or presented for the purpose of exercise, transfer, split-up, combination or exchange shall, and any Right Certificate representing Rights that have become null and void and nontransferable pursuant to Section 7(e) surrendered or presented for any purpose shall, if surrendered or presented to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered or presented to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by this Rights Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any Right Certificate purchased or acquired by the Company. The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES. (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any authorized and issued Preferred Shares held in its treasury, free from preemptive rights or any right of first refusal, a number of Preferred Shares sufficient to permit the exercise in full of all outstanding Rights. (b) In the event that there shall not be sufficient Preferred Shares issued but not outstanding or authorized but unissued to permit the exercise or exchange of Rights in accordance with Section 11, the Company covenants and agrees that it will take all such action as may be necessary to authorize additional Preferred Shares for issuance upon the exercise or exchange of Rights pursuant to Section 11; PROVIDED, HOWEVER, that if the Company is unable to cause the authorization of additional Preferred Shares, then the Company shall, or in lieu of seeking any such authorization, the Company may, to the extent necessary and permitted by applicable law and any agreements or instruments in effect prior to the Distribution Date to which it is a party, (A) upon surrender of a Right, pay cash equal to the Purchase Price in lieu of issuing Preferred Shares and requiring payment therefor, (B) upon due exercise of a Right and payment of the Purchase Price for each Preferred Share as to which such Right is exercised, issue equity securities having a value equal to the value of the Preferred Shares which otherwise would have been issuable pursuant to Section 11, which value shall be determined by a nationally recognized investment banking firm selected by the Board of Directors of the Company or (C) upon due exercise of a Right and payment of the Purchase Price for each Preferred Share as to which such Right is exercised, distribute a combination of Preferred Shares, cash and/or other equity and/or debt securities having an aggregate value equal to the value of the Preferred Shares which otherwise would have been 12 issuable pursuant to Section 11, which value shall be determined by a nationally recognized investment banking firm selected by the Board of Directors of the Company. To the extent that any legal or contractual restrictions (pursuant to agreements or instruments in effect prior to the Distribution Date to which it is party) prevent the Company from paying the full amount payable in accordance with the foregoing sentence, the Company shall pay to holders of the Rights as to which such payments are being made all amounts which are not then restricted on a pro rata basis as such payments become permissible under such legal or contractual restrictions until such payments have been paid in full. (c) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise or exchange of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. (d) So long as the Preferred Shares issuable upon the exercise or exchange of Rights are to be listed on any national securities exchange, the Company covenants and agrees to use its best efforts to cause, from and after such time as the Rights become exercisable or exchangeable, all Preferred Shares reserved for such issuance to be listed on such securities exchange upon official notice of issuance upon such exercise or exchange. (e) The Company further covenants and agrees that it will pay when due and payable any and all Federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of Right Certificates or of any Preferred Shares or Capital Shares or other securities upon the exercise or exchange of the Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or in respect of the issuance or delivery of certificates for the Preferred Shares or Capital Shares or other securities, as the case may be, in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or exchange or to issue or deliver any certificates for Preferred Shares or Capital Shares or other securities, as the case may be, upon the exercise or exchange of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any certificate for Preferred Shares or Capital Shares or other securities is issued upon the exercise or exchange of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares or Capital Shares or other securities, as the case may be, represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of any Purchase Price (and any applicable transfer taxes) was made; PROVIDED, HOWEVER, that, if the date of such surrender and payment is a date upon which the transfer books of the Company for the Preferred Shares or Capital Shares or other securities, as the case may be, are closed, such Person shall be deemed to have become the record holder of such Preferred Shares or Capital Shares or other securities, as the case may be, on, and such certificate shall be dated, the 13 next succeeding Business Day on which the transfer books of the Company for the Preferred Shares or Capital Shares or other securities, as the case may be, are open. Section 11. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING PERSON; EXCHANGE OF RIGHTS FOR SHARES; BUSINESS COMBINATIONS. (a) Upon a Person becoming an Acquiring Person, proper provision shall be made so that each holder of a Right, except as provided in Section 7(e), shall thereafter have a right to receive, upon exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, such number of one-thousandths (1/1000ths) of a Preferred Share as shall equal the result obtained by multiplying the Purchase Price by a fraction, the numerator of which is the number of one-thousandths (1/1000ths) of a Preferred Share for which a Right is then exercisable and the denominator of which is 50% of the Market Value of the Common Stock on the date on which a Person becomes an Acquiring Person. As soon as practicable after a Person becomes an Acquiring Person (provided the Company shall not have elected to make the exchange permitted by Section 11(b)(I) for all outstanding Rights), the Company covenants and agrees to use its best efforts to: (I) prepare and file a registration statement under the Securities Act, on an appropriate form, with respect to the Preferred Shares purchasable upon exercise of the Rights; (II) cause such registration statement to become effective as soon as practicable after such filing; (III) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date; and (IV) qualify or register the Preferred Shares purchasable upon exercise of the Rights under the blue sky or securities laws of such jurisdictions as may be necessary or appropriate. (b)(I) The Board of Directors of the Company may, at its option, at any time after a Person becomes an Acquiring Person, mandatorily exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that shall have become null and void and nontransferable pursuant to the provisions of Section 7(e)) for consideration per Right consisting of one-half of the securities that would be issuable at such time upon the exercise of one Right in accordance with Section 11(a) or, if applicable, Section 9(b) (the consideration issuable per Right pursuant to this Section 11(b)(I) being the "Exchange Consideration"). The Board of Directors of the Company may, at its option, issue, in substitution for Preferred Shares, shares of Common Stock in an amount per Preferred Share equal to the Formula Number if there are sufficient shares of Common Stock issued but not outstanding or authorized but unissued. If the Board of Directors of the Company elects to exchange all the Rights for Exchange Consideration pursuant to this Section 11(b)(I) prior to the physical distribution of the Rights Certificates, the Corporation may distribute the Exchange Consideration in lieu of distributing Right Certificates, in which case for purposes 14 of this Rights Agreement holders of Rights shall be deemed to have simultaneously received and surrendered for exchange Right Certificates on the date of such distribution. (II) Any action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to Section 11(b)(I) shall be irrevocable and, immediately upon the taking of such action and without any further action and without any notice, the right to exercise any such Right pursuant to Section 11(a) shall terminate and the only right thereafter of a holder of such Right shall be to receive the Exchange Consideration in exchange for each such Right held by such holder or, if the Exchange Consideration shall not have been paid or issued, to exercise any such Right pursuant to Section 11(c)(I). The Company shall promptly give public notice of any such exchange; PROVIDED, HOWEVER, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Rights for the Exchange Consideration will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which shall have become null and void and nontransferable pursuant to the provisions of Section 7(e)) held by each holder of Rights. (c)(I) In the event that, following a Distribution Date, directly or indirectly, any transactions specified in the following clause (i), (ii) or (iii) of this Section 11(c) (each such transaction being a "Business Combination") shall be consummated: (i) the Company shall consolidate with, or merge with and into, any Acquiring Person or any Affiliate or Associate of an Acquiring Person; (ii) any Acquiring Person or any Affiliate or Associate of an Acquiring Person shall merge with and into the Company and, in connection with such merger, all or part of the Capital Shares shall be changed into or exchanged for capital stock or other securities of the Company or of any Acquiring Person or Affiliate or Associate of an Acquiring Person or cash or any other property; or (iii) the Company shall sell, lease, exchange or otherwise transfer or dispose of (or one or more of its Subsidiaries shall sell, lease, exchange or otherwise transfer or dispose of), in one or more transactions, the Major Part of the assets of the Company and its Subsidiaries (taken as a whole) to any Acquiring Person or any Affiliate or Associate of an Acquiring Person, then, in each such case, proper provision shall be made so that each holder of a Right, except as provided in Section 7(e), shall thereafter have the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, the securities specified below (or, at such holder's option, the securities specified in Section 11(a)): 15 (A) If the Principal Party in such Business Combination has Registered Capital Shares outstanding, each Right shall thereafter represent the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, such number of Registered Capital Shares of such Principal Party, free and clear of all liens, encumbrances or other adverse claims, as shall have an aggregate Market Value equal to the result obtained by multiplying the Purchase Price by two; (B) If the Principal Party involved in such Business Combination does not have Registered Capital Shares outstanding, each Right shall thereafter represent the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, at the election of the holder of such Right at the time of the exercise thereof, any of: (1) such number of Capital Shares of the Surviving Person in such Business Combination as shall have an aggregate Book Value immediately after giving effect to such Business Combination equal to the result obtained by multiplying the Purchase Price by two; (2) such number of Capital Shares of the Principal Party in such Business Combination (if the Principal Party is not also the Surviving Person in such Business Combination) as shall have an aggregate Book Value immediately after giving effect to such Business Combination equal to the result obtained by multiplying the Purchase Price by two; or (3) if the Principal Party in such Business Combination is an Affiliate of one or more Persons which has Registered Capital Shares outstanding, such number of Registered Capital Shares of whichever of such Affiliates of the Principal Party has Registered Capital Shares with the greatest aggregate Market Value on the date of consummation of such Business Combination as shall have an aggregate Market Value on the date of such Business Combination equal to the result obtained by multiplying the Purchase Price by two. (II) The Company shall not consummate any Business Combination unless each issuer of Capital Shares for which Rights may be exercised, as set forth in this Section 11(c), shall have sufficient authorized Capital Shares that have not been issued or reserved for issuance (and which shall, when issued upon exercise thereof in accordance with this Rights Agreement, be validly issued, fully paid and nonassessable and free of preemptive rights, rights of first refusal or any other restrictions or limitations on the transfer or ownership thereof) to permit the exercise in full of the Rights in accordance with this Section 11(c) and unless prior thereto: (i) a registration statement under the Securities Act on an appropriate form, with respect to the Rights and the Capital Shares of such issuer purchasable upon exercise of the Rights, shall be effective under the Securities Act; and 16 (ii) the Company and each such issuer shall have: (A) executed and delivered to the Rights Agent a supplemental agreement providing for the assumption by such issuer of the obligations set forth in this Section 11(c) (including the obligation of such issuer to issue Capital Shares upon the exercise of Rights in accordance with the terms set forth in Sections 11(c)(I) and 11(c)(III)) and further providing that such issuer, at its own expense, will use its best efforts to: (1) cause a registration statement under the Securities Act on an appropriate form, with respect to the Rights and the Capital Shares of such issuer purchasable upon exercise of the Rights, to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date; (2) qualify or register the Rights and the Capital Shares of such issuer purchasable upon exercise of the Rights under the blue sky or securities laws of such jurisdictions as may be necessary or appropriate; and (3) list the Rights and the Capital Shares of such issuer purchasable upon exercise of the Rights on each national securities exchange on which the Capital Shares were listed prior to the consummation of the Business Combination or, if the Capital Shares were not listed on a national securities exchange prior to the consummation of the Business Combination, on a national securities exchange; (B) furnished to the Rights Agent a written opinion of independent counsel stating that such supplemental agreement is a valid, binding and enforceable agreement of such issuer; and (C) filed with the Rights Agent a certificate of a nationally recognized firm of independent accountants setting forth the number of Capital Shares of such issuer which may be purchased upon the exercise of each Right after the consummation of such Business Combination. (III) After consummation of any Business Combination and subject to the provisions of Section 11(c)(II), (i) each issuer of Capital Shares for which Rights may be exercised as set forth in this Section 11(c) shall be liable for, and shall assume, by virtue of such Business Combination, all the obligations and duties of the Company pursuant to this Rights Agreement, (ii) the term "Company" shall thereafter be deemed to refer to such issuer, (iii) each such issuer shall take such steps in connection with such consummation as may be necessary to assure that the provisions hereof (including the provisions of Sections 11(a) and 11(c)) shall thereafter be applicable, as nearly as reasonably may be, in relation to its Capital Shares thereafter deliverable upon the exercise of the Rights, and (iv) the number of Capital Shares of each such issuer thereafter receivable upon exercise of any Right shall 17 be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions of Sections 11 and 12, and the provisions of Section 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly as reasonably may be, on like terms to any such Capital Shares. Section 12. CERTAIN ADJUSTMENTS. (a) To preserve the actual or potential economic value of the Rights, if at any time after the date of this Rights Agreement there shall be any change in the Capital Shares or the Preferred Shares, whether by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of securities, split-ups, split-offs, spin-offs, liquidations, other similar changes in capitalization, any distribution or issuance of cash, assets, evidences of indebtedness or subscription rights, options or warrants to holders of Capital Shares or Preferred Shares, as the case may be (other than distribution of the Rights or regular quarterly cash dividends) or otherwise, then, in each such event the Board of Directors of the Company shall make such appropriate adjustments in the number of Preferred Shares (or the number and kind of other securities) issuable upon exercise of each Right, the Purchase Price and Redemption Price in effect at such time and the number of Rights outstanding at such time (including the number of Rights or fractional Rights associated with each Capital Share) such that following such adjustment such event shall not have had the effect of reducing or limiting the benefits the holders of the Rights would have had absent such event. (b) If, as a result of an adjustment made pursuant to Section 12(a), the holder of any Right thereafter exercised shall become entitled to receive any securities other than Preferred Shares, thereafter the number of such securities so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions of Sections 11 and 12, and the provisions of Sections 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly as reasonably may be, on like term, to any such other securities. (c) All Rights originally issued by the Company subsequent to any adjustment made to the amount of Preferred Shares or other securities relating to a Right shall evidence the right to purchase, for the Purchase Price, the adjusted number and kind of securities purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (d) Irrespective of any adjustment or change in the Purchase Price or the number of Preferred Shares or number or kind of other securities issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the terms which were expressed in the initial Right Certificates issued hereunder. (e) In any case in which action taken pursuant to Section 12(a) requires that an adjustment be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date the Preferred Shares and/or other securities, if any, issuable upon such exercise over and above the Preferred Shares and/or other securities, if any, issuable before giving effect to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's 18 right to receive such additional securities upon the occurrence of the event requiring such adjustment. Section 13. CERTIFICATE OF ADJUSTMENT. Whenever an adjustment is made as provided in Section 11 or 12, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate (or, prior to the Distribution Date, of the Capital Shares) in accordance with Section 25. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained. Section 14. ADDITIONAL COVENANTS. (a) Notwithstanding any other provision of this Rights Agreement, no adjustment to the number of Preferred Shares (or fractions of a share) or other securities for which a Right is exercisable or the number of Rights outstanding or associated with each Capital Share or any similar or other adjustment shall be made or be effective if such adjustment would have the effect of reducing or limiting the benefits the holders of the Rights would have had absent such adjustment, including, without limitation, the benefits under Sections 11 and 12, unless the terms of this Rights Agreement are amended so as to preserve such benefits. (b) The Company covenants and agrees that, after the Distribution Date, except as permitted by Section 26, it will not take (or permit any Subsidiary of the Company to take) any action if at the time such action is taken it is intended or reasonably foreseeable that such action will reduce or otherwise limit the benefits the holders of the Rights would have had absent such action, including, without limitation, the benefits under Sections 11 and 12. Any action taken by the Company during any period after any Person becomes an Acquiring Person but prior to the Distribution Date shall be null and void unless such action could be taken under this Section 14(b) from and after the Distribution Date. The Company shall not consummate any Business Combination if any issuer of Capital Shares for which Rights may be exercised after such Business Combination in accordance with Section 11(c) shall have taken any action that reduces or otherwise limits the benefits the holders of the Rights would have had absent such action, including, without limitation, the benefits under Sections 11 and 12. Section 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company may, but shall not be required to, issue fractions of Rights or distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, the Company may pay to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 15(a), the current market value of a whole Right shall be the closing price of the Rights (as determined in a manner similar to that of Common Stock pursuant to the second and third sentences of the definition of Market Value contained in Section 1) for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. 19 (b) The Company may, but shall not be required to, issue fractions of Preferred Shares upon exercise of the Rights or distribute certificates which evidence fractional Preferred Shares. In lieu of fractional Preferred Shares, the Company may elect to (i) utilize a depository arrangement as provided by the terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred Share (other than one one-thousandth (1/1000th) of a Preferred Share or any integral multiple thereof), pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share, if any are outstanding and publicly traded (or the Formula Number times the current market value of one share of Common Stock if the Preferred Shares are not outstanding and publicly traded). If, as a result of an adjustment made pursuant to Section 12(a), the holder of any Right thereafter exercised shall become entitled to receive any securities other than Preferred Shares, the provisions of this Section 15(b) shall apply, as nearly as reasonably may be, on like terms to such other securities. (c) The Company may, but shall not be required to, issue fractions of shares of Common Stock upon exchange of Rights pursuant to Section 11(b), or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, the Company may pay to the registered holders of the Right Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable an amount in cash equal to the same fraction of the current Market Value of one share of Common Stock as of the date on which a Person became an Acquiring Person. (d) The holder of Rights by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right except as provided in this Section 15. Section 16. RIGHTS OF ACTION. (a) All rights of action in respect of this Rights Agreement are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Capital Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Capital Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Capital Shares) may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Rights Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Rights Agreement and shall be entitled to specific performance of the obligations of any Person under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Rights Agreement. (b) Any holder of Rights who prevails in an action to enforce the provisions of this Rights Agreement shall be entitled to recover the reasonable costs and expenses, including attorneys' fees, incurred in such action. 20 Section 17. TRANSFER AND OWNERSHIP OF RIGHTS AND RIGHT CERTIFICATES. (a) Prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Capital Shares. (b) After the Distribution Date, the Right Certificates will be transferable, subject to Section 7(e), only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer. (c) The Company and the Rights Agent may deem and treat the Person in whose name a Right Certificate (or, prior to the Distribution Date, the associated Capital Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated certificate for Capital Shares made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. Section 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Right Certificate shall be entitled to vote or receive dividends or be deemed, for any purpose, the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company, including, without limitation, any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders, or to receive dividends or other distributions or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. Section 19. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Rights Agreement and the exercise and performance of its duties hereunder. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Rights Agreement in reliance upon any Right Certificate or certificate for the Capital Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. Section 20. MERGER OR CONSOLIDATION OR CHANGE OF RIGHTS AGENT. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or 21 any corporation succeeding to the stock transfer or corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Rights Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; PROVIDED that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 22. In case, at the time such successor Rights Agent shall succeed to the agency created by this Rights Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Rights Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Rights Agreement. Section 21. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and obligations imposed by this Rights Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates (or, prior to the Distribution Date, of the Capital Shares), by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken, suffered or omitted by it in good faith and in accordance with such advice or opinion. (b) Whenever in the performance of its duties under this Rights Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person) be proved or established by the Company prior to taking, refraining from taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, a Vice President (whether preceded by any additional title) or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Rights Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or wilful misconduct. 22 (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Rights Agreement or in the Right Certificates (except as to its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Rights Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Rights Agreement or in any Right Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or 12 or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or Capital Shares to be issued pursuant to this Rights Agreement or any Right Certificate or as to whether any Preferred Shares or Capital Shares will, when so issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Rights Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, a Vice President (whether preceded by any additional title) or the Secretary of the Company, in connection with its duties and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Rights Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company 23 resulting from any such act, default, neglect or misconduct provided reasonable care was exercised in the selection and continued employment thereof. (j) The Company agrees to indemnify and to hold the Rights Agent harmless against any loss, liability, damage or expense (including reasonable fees and expenses of legal counsel) which the Rights Agent may incur resulting from its actions as Rights Agent pursuant to this Rights Agreement; PROVIDED, HOWEVER, that the Rights Agent shall not be indemnified or held harmless with respect to any such loss, liability, damage or expense incurred by the Rights Agent as a result of, or arising out of, its own gross negligence, bad faith or wilful misconduct. In no case shall the Company be liable with respect to any action, proceeding, suit or claim against the Rights Agent unless the Rights Agent shall have notified the Company, by letter or by facsimile confirmed by letter, of the assertion of any action, proceeding, suit or claim against the Rights Agent, promptly after the Rights Agent shall have notice of any such assertion of an action, proceeding, suit or claim or have been served with the summons or other first legal process giving information as to the nature and basis of the action, proceeding, suit or claim. The Company shall be entitled to participate at its own expense in the defense of any such action, proceeding, suit or claim, and, if the Company so elects, the Company shall assume the defense of any such action, proceeding, suit or claim. In the event that the Company assumes such defense, the Company shall not thereafter be liable for the fees and expenses of any additional counsel retained by the Rights Agent, so long as the Company shall retain counsel satisfactory to the Rights Agent, in the exercise of its reasonable judgment, to defend such action, proceeding, suit or claim. The Rights Agent agrees not to settle any litigation in connection with any action, proceeding, suit or claim with respect to which it may seek indemnification from the Company without the prior written consent of the Company. Section 22. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Rights Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Capital Shares and the Preferred Shares by registered or certified mail, and to the holders of the Right Certificates (or, prior to the Distribution Date, of the Capital Shares) by first-class mail, postage prepaid. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Capital Shares and the Preferred Shares by registered or certified mail, and to the holders of the Right Certificates (or, prior to the Distribution Date, of the Capital Shares) by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (or, prior to the Distribution Date, of the Capital Shares) (who shall, with such notice, submit his Right Certificate or, prior to the Distribution Date, the certificate representing his Capital Shares, for inspection by the Company), then the registered holder of any Right Certificate (or, prior to the Distribution Date, of the Capital Shares) may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of 24 any state of the United States, in good standing, which is authorized under such laws to exercise stock transfer or corporate trust powers and is subject to supervision or examination by Federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000; PROVIDED that the principal transfer agent for the Capital Shares shall in any event be qualified to be the Rights Agent. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Capital Shares and the Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates (or, prior to the Distribution Date, of the Capital Shares). Failure to give any notice provided for in this Section 22, however, or any defect therein shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHT CERTIFICATES. Notwithstanding any of the provisions of this Rights Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change made in accordance with the provisions of this Rights Agreement. In addition, in connection with the issuance or sale of Capital Shares following the Distribution Date and prior to the earlier of the Redemption Date and the Expiration Date, the Company (a) shall, with respect to Capital Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by its Board of Directors, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; PROVIDED, HOWEVER, that (i) no such Right Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued, and (ii) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 24. REDEMPTION AND TERMINATION. (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) such time as a Person becomes an Acquiring Person and (ii) the Expiration Date, order the redemption of all, but not fewer than all, the then outstanding Rights at the Redemption Price (the date of such redemption being the "Redemption Date"), and the Company, at its option, may pay the Redemption Price either in cash or Capital Shares or other securities of the Company deemed by the Board of Directors of the Company, in the exercise of its sole discretion, to be at least equivalent in value to the Redemption Price. (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, and without any further action and without any notice, 25 the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. Within 10 Business Days after the action of the Board of Directors of the Company ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Capital Shares. Each such notice of redemption will state the method by which payment of the Redemption Price will be made. The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the holder of Rights receives such notice. In any case, failure to give such notice by mail, or any defect in the notice, to any particular holder of Rights shall not affect the sufficiency of the notice to other holders of Rights. Section 25. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of a Right Certificate (or, prior to the Distribution Date, of the Capital Shares) to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: The Safety Fund Corporation 470 Main Street Fitchburg, Massachusetts 01420 Attention of Chief Executive Officer Subject to the provisions of Section 22, any notice or demand authorized by this Rights Agreement to be given or made by the Company or by the holder of a Right Certificate (or, prior to the Distribution Date, of the Capital Shares) to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: Fleet National Bank of Massachusetts One Federal Street OF-3101 Boston, Massachusetts 02211 Attention of Corporate Trust Administration Notices or demands authorized by this Rights Agreement to be given or made by the Company or the Rights Agent to any holder of a Right Certificate (or, prior to the Distribution Date, of the Capital Shares) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Capital Shares. Section 26. SUPPLEMENTS AND AMENDMENTS. At any time prior to the Distribution Date and subject to the last sentence of this Section 26, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Rights Agreement (including, without limitation, the date on which the Distribution Date 26 shall occur, the time during which the Rights may be redeemed pursuant to Section 24 or any provision of the Certificate of Designation) without the approval of any holder of the Rights. From and after the Distribution Date and subject to applicable law, the Company may, and the Rights Agent shall if the Company so directs, amend this Rights Agreement without the approval of any holders of Right Certificates (i) to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision of this Rights Agreement or (ii) to make any other provisions in regard to matters or questions arising hereunder which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Right Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Any supplement or amendment adopted during any period after any Person has become an Acquiring Person but prior to the Distribution Date shall be null and void unless such supplement or amendment could have been adopted under the prior sentence from and after the Distribution Date. Any supplement or amendment to this Rights Agreement duly approved by the Company that does not amend Sections 19, 20, 21 or 22 in a manner adverse to the Rights Agent shall become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent. In addition, notwithstanding anything to the contrary contained in this Rights Agreement, no supplement or amendment to this Rights Agreement shall be made which (a) reduces the Redemption Price (except as required by Section 12(a)) or (b) provides for an earlier Expiration Date. Section 27. SUCCESSORS. All the covenants and provisions of this Rights Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 28. BENEFITS OF RIGHTS AGREEMENT; DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. (a) Nothing in this Rights Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, of the Capital Shares) any legal or equitable right, remedy or claim under this Rights Agreement; but this Rights Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, of the Capital Shares). (b) Except as explicitly otherwise provided in this Rights Agreement, the Board of Directors of the Company shall have the exclusive power and authority to administer this Rights Agreement and to exercise all rights and powers specifically granted to the Board of Directors of the Company or to the Company, or as may be necessary or advisable in the administration of this Rights Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Rights Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Rights Agreement (including, without limitation, a determination to redeem or not redeem the Rights or to amend this Rights Agreement and a determination of whether there is an Acquiring Person). (c) Nothing contained in this Rights Agreement shall be deemed to be in derogation of the obligation of the Board of Directors of the Company to exercise its 27 fiduciary duty. Without limiting the foregoing, nothing contained herein shall be construed to suggest or imply that the Board of Directors shall not be entitled to reject any tender offer, or to recommend that holders of Capital Shares reject any tender offer, or to take any other action (including, without limitation, the commencement, prosecution, defense or settlement of any litigation and the submission of additional or alternative offers or other proposals) with respect to any tender offer that the Board of Directors believes is necessary or appropriate in the exercise of such fiduciary duty. Section 29. SEVERABILITY. If any term, provision, covenant or restriction of this Rights Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Rights Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 30. GOVERNING LAW. This Rights Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the law of the Commonwealth of Massachusetts and for all purposes shall be governed by and construed in accordance with the law of such State applicable to contracts to be made and performed entirely within such State. Section 31. COUNTERPARTS; EFFECTIVENESS. This Rights Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. This Rights Agreement shall be effective as of the Close of Business on the date hereof. Section 32. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of this Rights Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions of this Rights Agreement. * * * * * 28 IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed as of the day and year first above written. THE SAFETY FUND CORPORATION By:/s/ Christopher W. Bramley -------------------------------- Name: Christopher W. Bramley Title: Chief Executive Officer FLEET NATIONAL BANK OF MASSACHUSETTS as Rights Agent, By:/s/ Robert L. Bice, II --------------------------------- Name: Robert L. Bice, II Title: Vice President 29 EXHIBIT A [LETTERHEAD OF THE COMMONWEALTH OF MASSACHUSETTS] FEDERAL IDENTIFICATION NO. 04-2532311 ------------------- CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING A SERIES OF A CLASS OF STOCK General Laws, Chapter 156B, Section 26 We, Christopher W. Bramley ,President and John E. Howard ,Clerk/ The Safety Fund Corporation ................................................................................ (Name of Corporation) located at 470 Main Street, Fitchburg, Massachusetts ...................................................................... do hereby certify that at a meeting of the directors of the corporation held on January 5 1996, the following vote establishing and designating a series of a ......... class of stock and determining the relative rights and preference thereof was duly adopted:- VOTED, that, pursuant to the authority vested in the Board of Directors of the Safety Fund Corporation (the "Corporation") in accordance with the provisions of the Articles of Organization of the Corporation, a series of Preferred Stock of the Corporation is hereby created and that the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as set forth in the "Terms of Series A Participating Cumulative Preferred Stock of The Safety Fund Corporation" attached hereto and hereby incorporated in this vote by reference. A copy of the Terms of Series A Participating Cumulative Preferred Stock of The Safety Fund Corporation referred to in said vote is attached hereto as Rider A. Note: Votes for which the space provided above is not sufficient should be set out an continuation sheets to be numbered 2A, 2B, etc. Continuation sheets must have a left-hand margin 1 inch wide for binding and shall be 81/2" ======= x 11"'. Only one side should be used. ===== RIDER A ------- TERMS OF SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK OF THE SAFETY FUND CORPORATION Section 1. DESIGNATION AND NUMBER OF SHARES. The shares of such series shall be designated as "Series A Participating Cumulative Preferred Stock" (the "Series A Preferred Stock"), par value $10.00 per share. The number of shares initially constituting the Series A Preferred Stock shall be 3,200; PROVIDED, HOWEVER, that, if more than a total of 3,200 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated as of January 5, 1996, between the Corporation and Fleet National Bank of Massachusetts, a national banking association, as Rights Agent (the "Rights Agreement"), the Board of Directors of the Corporation, pursuant to Section 26 of the Business Corporation Law of the Commonwealth of Massachusetts, shall direct by resolution or resolutions that a certificate be properly executed, acknowledged, filed and recorded, in accordance with the provisions of said Section 26 thereof, providing for the total number of shares of Series A Preferred Stock authorized to be issued to be increased (to the extent that the Articles of Organization then permits) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights. Section 2. DIVIDENDS OR DISTRIBUTIONS. (a) Subject to the prior and superior rights of the holders of shares of any other series of Preferred Stock or other class of capital stock of the Corporation ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of the Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, (1) quarterly dividends payable in cash on the last day of each fiscal quarter in each year, or such other dates as the Board of Directors of the Corporation shall approve (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or a fraction of a share of Series A Preferred Stock, in the amount of $10.00 per whole share (rounded to the nearest cent) less the amount of all cash dividends declared on the Series A Preferred Stock pursuant to the following clause (2) since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock (the total of which shall not, in any event, be less than zero) and (2) dividends payable in cash on the payment date for each cash dividend declared on the Common Stock in an amount per whole share (rounded to the nearest cent) equal to the Formula Number (as hereinafter defined) then in effect times the cash dividends then to be paid on each share of Common Stock. In addition, if the Corporation shall pay any dividend or make any distribution on the Common Stock payable in assets, securities or other forms of noncash consideration (other than dividends or distributions solely in shares of Common Stock), then, in each such case, the Corporation shall simultaneously pay or make on each outstanding whole share of Series A Preferred Stock a dividend or distribution in like kind equal to the Formula Number then in effect times such dividend or distribution on each share A-1 of the Common Stock. As used herein, the "Formula Number" shall be 1,000; PROVIDED, HOWEVER, that if at any time after January 5, 1996, the Corporation shall (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock or make any distribution on the Common Stock in shares of Common Stock, (ii) subdivide (by a stock split or otherwise) the outstanding shares of Common Stock into a larger number of shares of Common Stock or (iii) combine (by a reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then in each such event the Formula Number shall be adjusted to a number determined by multiplying the Formula Number in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event (and rounding the result to the nearest whole number); and PROVIDED FURTHER, that, if at any time after January 5, 1996, the Corporation shall issue any shares of its capital stock in a merger, reclassification, or change of the outstanding shares of Common Stock, then in each such event the Formula Number shall be appropriately adjusted to reflect such merger, reclassification or change so that each share of Series A Preferred Stock continues to be the economic equivalent of a Formula Number of shares of Common Stock prior to such merger, reclassification or change. (b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in Section 2(a) immediately prior to or at the same time it declares a dividend or distribution on the Common Stock(other than a dividend or distribution solely in shares of Common Stock); PROVIDED, HOWEVER, that, in the event no dividend or distribution (other than a dividend or distribution in shares of Common Stock) shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a dividend or distribution declared thereon, which record date shall be the same as the record date for any corresponding dividend or distribution on the Common Stock. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from and after the Quarterly Dividend Payment Date next preceding the date of original issue of such shares of Series A Preferred Stock; PROVIDED, HOWEVER, that dividends on such shares which are originally issued after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and on or prior to the next succeeding Quarterly Dividend Payment Date shall begin to accrue and be cumulative from and after such Quarterly Dividend Payment Date. Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock which are originally issued prior to the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend on the first Quarterly Dividend Payment Date shall be calculated as if cumulative from and after the last day of the fiscal quarter next preceding the date of original issuance of such shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and A-2 payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (d) So long as any shares of the Series A Preferred Stock are outstanding, no dividends or other distributions shall be declared, paid or distributed, or set aside for payment or distribution, on the Common Stock unless, in each case, the dividend required by this Section 2 to be declared on the Series A Preferred Stock shall have been declared. (e) The holders of the shares of Series A Preferred Stock shall not be entitled to receive any dividends or other distributions except as provided herein. Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred Stock shall have the following voting rights: (a) Each holder of Series A Preferred Stock shall be entitled to a number of votes equal to the Formula Number then in effect, for each share of Series A Preferred Stock held of record on each matter on which holders of the Common Stock or stockholders generally are entitled to vote, multiplied by the maximum number of votes per share which any holder of the Common Stock or stockholders generally then have with respect to such matter (assuming any holding period or other requirement to vote a greater number of shares is satisfied). (b) Except as otherwise provided herein or by applicable law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class for the election of directors of the Corporation and on all other matters submitted to a vote of stockholders of the Corporation. (c) If, at the time of any annual meeting of stockholders for the election of directors, the equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares of Series A Preferred Stock are in default, the number of directors constituting the Board of Directors of the Corporation shall be increased by two. In addition to voting together with the holders of Common Stock for the election of other directors of the Corporation, the holders of record of the Series A Preferred Stock, voting separately as a class to the exclusion of the holders of Common Stock, shall be entitled at said meeting of stockholders (and at each subsequent annual meeting of stockholders), unless all dividends in arrears have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Corporation, the holders of any Series A Preferred Stock being entitled to cast a number of votes per share of Series A Preferred Stock equal to the Formula Number. Until the default in payments of all dividends which permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the next preceding sentence may be removed at any time, either with or without cause, only by the affirmative vote of the holders of the shares of Series A Preferred Stock at the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders. If and when such default shall cease to exist, the holders of the Series A Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments A-3 of dividends. Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced by two. The voting rights granted by this Section 3(c) shall be in addition to any other voting rights granted to the holders of the Series A Preferred Stock in this Section 3. (d) Except as provided herein, in Section 11 or by applicable law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for authorizing or taking any corporate action. Section 4. CERTAIN RESTRICTIONS. (a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock; PROVIDED that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. A-4 (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received an amount equal to the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (x) $100.00 per whole share or (y) an aggregate amount per share equal to the Formula Number then in effect times the aggregate amount to be distributed per share to holders of Common Stock or (2) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. Section 6. CONSOLIDATION, MERGER, ETC.. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then in any such case the then outstanding shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share equal to the Formula Number then in effect times the aggregate amount of stock, securities, cash or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is exchanged or changed. In the event both this Section 6 and Section 2 appear to apply to a transaction, this Section 6 will control. Section 7. NO REDEMPTION; NO SINKING FUND. (a) The shares of Series A Preferred Stock shall not be subject to redemption by the Corporation or at the option of any holder of Series A Preferred Stock; PROVIDED, HOWEVER, that the Corporation may purchase or otherwise acquire outstanding shares of Series A Preferred Stock in the open market or by offer to any holder or holders of shares of Series A Preferred Stock. (b) The shares of Series A Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund. Section 8. RANKING. The Series A Preferred Stock shall rank junior to all other series of Preferred Stock of the Corporation, unless the Board of Directors shall specifically determine otherwise in fixing the powers, preferences and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations and restrictions thereof. Section 9. FRACTIONAL SHARES. The Series A Preferred Stock shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement in whole shares or in any fraction of a share that is one one-thousandth (1/1000th) of a share or any integral A-5 multiple of such fraction which shall entitle the holder, in proportion to such holder's fractional shares, to receive dividends, exercise voting rights, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fraction of a share of Series A Preferred Stock, may elect (1) to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-thousandth (1/1000th) of a share or any integral multiple thereof or (2) to issue depository receipts evidencing such authorized fraction of a share of Series A Preferred Stock pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; PROVIDED that such agreement shall provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of the Series A Preferred Stock. Section 10. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors pursuant to the provisions of Section 2 of Article IV of the Articles of Organization. Section 11. AMENDMENT. None of the powers, preferences and relative, participating, optional and other special rights of the Series A Preferred Stock as provided herein or in the Certificate of Incorporation shall be amended in any manner which would alter or change the powers, preferences, rights or privileges of the holders of Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least 66-2/3% of the outstanding shares of Series A Preferred Stock, voting as a separate class; PROVIDED, HOWEVER, that no such amendment approved by the holders of at least 66-2/3% of the outstanding shares of Series A Preferred Stock shall be deemed to apply to the powers, preferences, rights or privileges of any holder of shares of Series A Preferred Stock originally issued upon exercise of the Rights after the time of such approval without the approval of such holder. * * * * * A-6 IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this 5th day of January in the year 1996. /s/ Christopher W. Bramley , President ................................................................ /s/ John E. Howard , Clerk ................................................................... THE COMMONWEALTH OF MASSACHUSETTS CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING A Series of a Class of Stock (General Laws, Chapter 156B, Section 26) I hereby approve the within certificate and, the filing fee in the amount of $ having been paid, said certificate is hereby filed this day of , 19 . WILLIAM FRANCIS GLAVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION PHOTO COPY OF CERTIFICATE TO BE SENT TO: Peter W. Coogan, Esquire Foley, Hoag & Eliot ................................................ One Post Office Square ................................................ Boston, Massachusetts 02109 ................................................ (617) 832-1196 Telephone....................................... EXHIBIT B [Form of Right Certificate] Certificate No. [R]- Rights NOT EXERCISABLE AFTER JANUARY 5, 2006, OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE. Right Certificate SAFETY FUND CORPORATION This certifies that _________________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner, thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of January 5, 1996, (the "Rights Agreement"), between Safety Fund Corporation, a Massachusetts corporation (the "Company"), and Fleet National Bank of Massachusetts, a national banking association, as Rights Agent (the "Rights Agent"), unless the Rights evidenced hereby shall have been previously redeemed by the Company, to purchase from the Company at any time after the Distribution Date (as defined in the Rights Agreement) and prior to 5:00 p.m., Boston, Massachusetts time, on the 10th anniversary of the date of the Rights Agreement (the "Expiration Date"), at the office of the Rights Agent, or its successors as Rights Agent, in Hartford, Connecticut one one-thousandth (1/1000th) of a fully paid, nonassessable share of Series A Participating Cumulative Preferred Stock, par value $10.00 per share, of the Company (the "Preferred Shares"), at a purchase price per one one-thousandth (1/1000th) of a share equal to $65 (the "Purchase Price") payable in cash, upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The Purchase Price and the number and kind of shares which may be purchased upon exercise of each Right evidenced by this Right Certificate, as set forth above, are the Purchase Price and the number and kind of shares which may be so purchased as of January 5, 1996. As provided in the Rights Agreement, the Purchase Price and the number and kind of shares which may be purchased upon the exercise of each Right B-1 evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events. If the Rights evidenced by this Right Certificate are at any time beneficially owned by an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement), such Rights shall be null and void and nontransferable and the holder of any such Right (including any purported transferee or subsequent holder) shall not have any right to exercise or transfer any such Right. This Right Certificate is subject to all the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which reference to the Rights Agreement is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available from the Company upon written request. This Right Certificate, with or without other Right Certificates, upon surrender at the stock transfer or corporate trust office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number and kind of shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall entitle such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Right Certificate may be redeemed by the Company at its option at a redemption price (in cash or shares of Common Stock or other securities of the Company deemed by the Board of Directors to be at least equivalent in value) of $.01 per Right (which amount shall be subject to adjustment as provided in the Rights Agreement) at any time prior to the earlier of (i) such time as a Person becomes an Acquiring Person and (ii) the Expiration Date. The Company may, but shall not be required to, issue fractions of Preferred Shares or distribute certificates which evidence fractions of Preferred Shares upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing fractional shares, the Company may elect to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one- thousandth (1/1000th) of a share or any integral multiple thereof or to issue certificates or utilize a depository arrangement as provided in the terms of the Rights Agreement and the Preferred Shares. No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company, including, without limitation, any right to vote for the election of directors or upon any matter submitted to B-2 stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or other distributions or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in accordance with the provisions of the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of: The Safety Fund Corporation By:_____________________________ Authorized Signatory Attest: ______________________________ Authorized Signatory Countersigned: Fleet National Bank of Massachusetts as Rights Agent, By:_____________________ Authorized Signatory B-3 [On Reverse Side of Right Certificate] FORM OF ELECTION TO PURCHASE (To be executed by the registered holder if such holder desires to exercise the Rights represented by this Right Certificate.) To the Rights Agent: The undersigned hereby irrevocably elects to exercise ____________ Rights represented by this Right Certificate to purchase the Preferred Shares (or other shares) issuable upon the exercise of such Rights and requests that certificates for such shares be issued in the name of: Please insert social security or other identifying number (Please print name and address) If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number (Please print name and address) Dated: , 19__ Signature Signature Guaranteed: NOTICE The signature on the foregoing Form of Election to Purchase must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. 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