EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NEWMIL BANCORP, INC.,
NEW MILFORD SAVINGS BANK
AND
NUTMEG FEDERAL SAVINGS & LOAN ASSOCIATION
DATED AS OF
MAY 30, 2000
TABLE OF CONTENTS
Pages
ARTICLE I - THE MERGER................................................................... 1
1.1 The Merger.................................................................. 1
1.2 Effective Time.............................................................. 2
1.3 Effects of the Merger....................................................... 2
1.4 Conversion of Nutmeg Capital Stock.......................................... 2
1.5 New Milford Savings Bank Common Stock....................................... 4
1.6 Options..................................................................... 4
1.7 Charter..................................................................... 4
1.8 Bylaws...................................................................... 5
1.9 Directors and Executive Officers............................................ 5
1.10 Tax Consequences............................................................ 5
ARTICLE II - EXCHANGE OF SHARES.......................................................... 5
2.1 NewMil to Make Merger Consideration Available............................... 5
2.2 Exchange of Cash and Shares................................................. 6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF NUTMEG................................... 9
3.1 Corporate Organization...................................................... 9
3.2 Capitalization.............................................................. 10
3.3 Authority; No Violation..................................................... 10
3.4 Consents and Approvals...................................................... 11
3.5 Loan Portfolio; Reports..................................................... 12
3.6 Financial Statements; Books and Records..................................... 12
3.7 Broker's Fees............................................................... 13
3.8 Absence of Certain Changes or Events........................................ 13
3.9 Legal Proceedings........................................................... 14
3.10 Taxes and Tax Returns....................................................... 14
3.11 Employee Benefit Plans...................................................... 14
3.12 Certain Contracts........................................................... 16
3.13 Agreements with Regulatory Agencies......................................... 16
3.14 Takeover Laws; Certificate of Incorporation................................. 17
3.15 Environmental Matters....................................................... 17
3.16 Reserves for Losses......................................................... 18
3.17 Properties and Assets....................................................... 18
3.18 Insurance................................................................... 19
3.19 Compliance with Applicable Laws............................................. 19
3.20 Loans....................................................................... 19
3.21 Affiliates.................................................................. 20
3.22 Ownership of NewMil Common Stock............................................ 21
3.23 Fairness Opinion............................................................ 21
3.24 Community Reinvestment Act and Consumer Compliance.......................... 21
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF NEWMIL.................................... 21
4.1 Corporate Organization...................................................... 21
4.2 Capitalization.............................................................. 22
4.3 Authority; No Violation..................................................... 22
4.4 Consents, Approvals and Reports............................................. 24
4.5 Financial Statements; Exchange Act Filings; Books and Records............... 24
4.6 Absence of Certain Changes or Events........................................ 25
4.7 Ownership of Nutmeg Common Stock; Affiliates and Associates................. 25
4.8 Employee Benefit Plans...................................................... 25
4.9 Agreements with Regulatory Agencies......................................... 26
4.10 Community Reinvestment Act and Consumer Compliance.......................... 26
4.11 Legal Proceedings........................................................... 26
4.12 Taxes and Tax Returns....................................................... 26
4.13 Compliance with Applicable Laws............................................. 27
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS.................................... 27
5.1 Covenants of Nutmeg......................................................... 27
5.1 A Loan Servicing Rights....................................................... 31
5.2 Covenants of NewMil......................................................... 31
5.3 Merger Covenants............................................................ 31
5.4 Compliance with Antitrust Laws.............................................. 32
ARTICLE VI - ADDITIONAL AGREEMENTS....................................................... 32
6.1 Regulatory Matters.......................................................... 32
6.2 Access to Information....................................................... 33
6.3 Shareholder Meetings........................................................ 34
6.4 Legal Conditions to Merger.................................................. 35
6.5 Stock Exchange Listing...................................................... 35
6.6 Employees; Employment and Other Agreements.................................. 35
6.7 Indemnification............................................................. 36
6.8 Subsequent Interim and Annual Financial Statements.......................... 37
6.9 Additional Agreements....................................................... 37
6.10 Advice of Changes........................................................... 37
6.11 Current Information......................................................... 38
6.12 Execution and Authorization of Bank Merger Agreement........................ 38
6.13 Change in Structure......................................................... 38
6.14 Transaction Expenses of Nutmeg.............................................. 38
ARTICLE VII - CONDITIONS PRECEDENT....................................................... 39
7.1 Conditions to Each Party's Obligation To Effect the Merger.................. 39
7.2 Conditions to Obligations of NewMil and New Milford Savings Bank............ 40
7.3 Conditions to Obligations of Nutmeg......................................... 42
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ARTICLE VIII - TERMINATION AND AMENDMENT................................................. 43
8.1 Termination................................................................. 43
8.2 Effect of Termination....................................................... 44
8.3 Amendment................................................................... 44
8.4 Extension; Waiver........................................................... 44
ARTICLE IX - GENERAL PROVISIONS.......................................................... 45
9.1 Closing..................................................................... 45
9.2 Nonsurvival of Representations, Warranties, Covenants and Agreements........ 45
9.3 Expenses; Breakup Fee....................................................... 45
9.4 Notice...................................................................... 46
9.5 Interpretation.............................................................. 47
9.6 Counterparts................................................................ 47
9.7 Entire Agreement............................................................ 47
9.8 Governing Law............................................................... 47
9.9 Enforcement of Agreement.................................................... 48
9.10 Severability................................................................ 48
9.11 Publicity................................................................... 48
9.12 Assignment; Limitation of Benefits.......................................... 48
9.13 Additional Definitions...................................................... 48
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This AGREEMENT AND PLAN OF MERGER, dated as of May 30, 2000 (this
"Agreement"), is entered into by and among NewMil Bancorp, Inc., a Delaware
corporation ("NewMil"), New Milford Savings Bank, a Connecticut savings bank and
wholly owned subsidiary of NewMil ("New Milford Savings Bank"), and Nutmeg
Federal Savings & Loan Association, a federally chartered savings association
("Nutmeg"). (New Milford Savings Bank and Nutmeg are sometimes collectively
referred to herein as the "Constituent Banks".)
WHEREAS, the Boards of Directors of NewMil, New Milford Savings Bank and
Nutmeg have determined that it is in the best interests of their respective
companies and shareholders to consummate the business combination transaction
provided for herein in which Nutmeg will, subject to the terms and conditions
set forth herein, merge with and into New Milford Savings Bank, with New Milford
Savings Bank being the "Surviving Bank" and a wholly owned subsidiary of NewMil
(the "Merger");
WHEREAS, prior to the consummation of the Merger, New Milford Savings Bank
and Nutmeg will enter into articles of combination and bank merger agreement,
substantially in the form attached hereto as Exhibit A (the "Bank Merger
Agreement"), providing for the Merger;
WHEREAS, as an inducement to NewMil to enter into this Agreement, Nutmeg
will enter into an option agreement, in the form attached hereto as Exhibit B
(the "Option Agreement"), with NewMil immediately following the execution of
this Agreement pursuant to which Nutmeg will grant NewMil an option to purchase,
under certain circumstances, an aggregate of 457,280 newly issued shares of
common stock, par value $.003 per share, of Nutmeg ("Nutmeg Common Stock") upon
the terms and conditions therein contained; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement, in accordance with
the Banking Law of Connecticut (the "Connecticut Banking Law") and the rules and
regulations of the Office of Thrift Supervision (the "OTS"), at the Effective
Time (as defined in Section 1.2 hereof), Nutmeg shall merge into New Milford
Savings Bank, with New Milford Savings Bank being the Surviving Bank in the
Merger. Upon consummation of the Merger, the corporate existence of Nutmeg
shall cease
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and the Surviving Bank shall continue to exist as a Connecticut chartered
savings bank under the Connecticut Banking Law and a wholly owned subsidiary of
NewMil.
1.2 Effective Time.
The Merger shall become effective on the Closing Date (as defined in
Section 9.1 hereof), as set forth in the Bank Merger Agreement which shall be
filed with the Secretary of State of the State of Connecticut (the "Connecticut
Secretary of State"). The term "Effective Time" shall be the date and time when
the Merger becomes effective as set forth in the Bank Merger Agreement.
1.3 Effects of the Merger.
At and after the Effective Time, the Merger shall have the effects set
forth in Section 36a-126(a) of the Connecticut Banking Law.
1.4 Conversion of Nutmeg Capital Stock.
(a) At the Effective Time, subject to Sections 1.4(b), 1.4(e) and 2.2
hereof, each share of Nutmeg Common Stock and each share of Class B Preferred
Stock, par value $.005 per share, of Nutmeg ("Nutmeg Preferred Stock" which,
together with Nutmeg Common Stock, the "Nutmeg Capital Stock") issued and
outstanding prior to the Effective Time shall, at the election of the holders
thereof as provided in Section 2.2 hereof, be converted and exchangeable into
the Merger Consideration consisting of either:
(i) in the case of Nutmeg Common Stock, the right to receive that
number of shares of NewMil common stock, par value $.50 per share ("NewMil
Common Stock"), determined by dividing $8.25 (the "Base Value") by the Base
Period Trading Price (as defined below), as may be adjusted as provided in
Section 1.4(b) hereof, computed to three decimal places (the "Exchange Ratio")
and, in the case of Nutmeg Preferred Stock, that number of shares of NewMil
Common Stock as shall equal 1.75 times the Exchange Ratio, provided that if the
number of shares of Nutmeg Capital Stock (adjusted to treat each share of Nutmeg
Preferred Stock as 1.75 shares of Nutmeg Capital Stock) as to which the holders
thereof elect to receive NewMil Common Stock pursuant to this Section 1.4(a)(i)
exceeds 60% of the outstanding shares of Nutmeg Capital Stock (as so adjusted),
then the number of shares of Nutmeg Capital Stock (as so adjusted) that shall be
exchangeable for NewMil Common Stock may be reduced, at the discretion of
NewMil, as provided in Section 2.2(e) hereof to a number which shall not be less
than 60% of the number of outstanding shares of Nutmeg Capital Stock (as so
adjusted) plus the number of shares of Nutmeg Common Stock subject to options
outstanding at the Effective Time. The Exchange Ratio will therefore fluctuate
without limits depending upon the Base Trading Price. Subject to the provisions
of the next succeeding sentence of this Subsection 1.4(a)(i), the term "Base
Period Trading Price" shall mean the average of the high and low quotations per
share for NewMil Common Stock for the 15 consecutive trading days on which
shares of NewMil Common Stock are actually traded (as reported in the Wall
Street Journal NASDAQ National Market Issues) ending on the third trading day
preceding the Closing Date (such period herein called the "Base Period"). In
the event that at any time prior to the Closing Date NewMil shall have publicly
announced any transaction pursuant to
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which NewMil expects to experience a "Purchase Event" (as described in the
Exhibit B Option Agreement attached hereto and incorporated herein), then in
such event the Base Period shall be the fifteen consecutive trading days on
which shares of NewMil Common Stock are actually traded ending on the day
preceding the period of fifteen consecutive trading days ending on the date of
such public announcement. For the purposes of this Agreement, references to
NewMil Common Stock shall be deemed to include, where appropriate, references to
the right to purchase shares of NewMil's Common Stock pursuant to the Rights
Agreement, dated as of July 19, 1994, as amended, between NewMil and American
Stock Transfer & Trust Company (the "Rights Agreement"); or
(ii) in the case of Nutmeg Common Stock, the right to receive the Base
Value in cash, without interest, adjusted as provided in Section 1.4(b) hereof
and, in the case of Nutmeg Preferred Stock, the right to receive 1.75 times the
Base Value, without interest, adjusted as provided in Section 1.4(b) hereof,
provided that if the number of shares of Nutmeg Capital Stock (as adjusted to
treat each share of Nutmeg Preferred Stock as 1.75 shares of Nutmeg Capital
Stock) as to which the holders thereof elect to receive cash, as provided in
this Section 1.4(a)(ii), exceeds 50% of the outstanding shares of Nutmeg Capital
Stock (as so adjusted), then the number of shares of Nutmeg Capital Stock (as so
adjusted) that shall be exchangeable for cash may be reduced, at the discretion
of NewMil, as provided in Section 2.2(e) hereof, to a number that shall not be
less than 50% of the number of outstanding shares of Nutmeg Capital Stock (as so
adjusted) plus the number of shares of Nutmeg Common Stock subject to options at
the Effective Time, provided that the cash portion of the Merger Consideration
shall not be greater than an amount that is consistent with the issuance of the
opinion referred to in Section 7.1(f) hereof.
(b) Nutmeg owns certain loan servicing rights (the "Loan Servicing
Rights"). Prior to the Closing Date, Nutmeg shall sell the Loan Servicing
Rights for cash. The Merger Consideration shall be adjusted by adding to the
Base Amount the positive difference per share of Nutmeg Capital Stock (adjusted
to treat each share of Nutmeg Preferred Stock as 1.75 shares of Nutmeg Capital
Stock and including unexercised options) between (i) the sales price received by
Nutmeg from the sale of the Loan Servicing Rights, net of all expenses and costs
related to the sale and net of all taxes (including income or business taxes)
payable by reason of such sale, and (ii) the book value of the Loan Servicing
Rights appropriately amortized to the date of the sale of the Loan Servicing
Rights, all to be determined in accordance with generally accepted accounting
principles.
(c) All of the shares of Nutmeg Capital Stock converted and
exchangeable as provided in this Article I shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each certificate
(each a "Certificate") previously representing any such shares of Nutmeg Capital
Stock shall thereafter represent the right to receive either (i) the number of
whole shares of NewMil Common Stock (and, if applicable, cash in lieu of any
fractional shares) into which the shares of Nutmeg Capital Stock represented by
such Certificate have been converted pursuant to Section 1.4(a)(i) or (ii) the
amount of cash payable as provided in Section 1.4(a)(ii). Certificates
previously representing shares of Nutmeg Capital Stock shall be exchanged for
(x) certificates representing whole shares of NewMil Common Stock (and, if
applicable, cash in lieu of fractional shares) issued in consideration therefor
or (y) cash, upon the surrender of such Certificates in accordance with Section
2.2 hereof.
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(d) At the Effective Time, all shares of Nutmeg Capital Stock that
are owned by Nutmeg as treasury stock and all shares of Nutmeg Capital Stock
that are owned directly or indirectly by NewMil or Nutmeg or any of NewMil's
Subsidiaries (as defined in Section 9.13 hereof) (other than shares of Nutmeg
Capital Stock held directly or indirectly in trust accounts, managed accounts
and the like or otherwise held in a fiduciary capacity that are beneficially
owned by third parties (any such shares, whether held directly or indirectly by
NewMil or Nutmeg, as the case may be, being referred to herein as "Trust Account
Shares") and other than any shares of Nutmeg Capital Stock held by NewMil or
Nutmeg or any of NewMil's Subsidiaries in respect of a debt previously
contracted (any such shares, whether held directly or indirectly by NewMil or
Nutmeg, being referred to herein as "DPC Shares") shall be canceled and shall
cease to exist and no stock of NewMil or other consideration shall be delivered
in exchange therefor. All shares of NewMil Common Stock that are owned by Nutmeg
(other than Trust Account Shares and DPC Shares) shall become treasury stock of
NewMil.
(e) Certificates for fractions of shares of NewMil Common Stock will
not be issued. In lieu of a fraction of a share of NewMil Common Stock, each
holder of Nutmeg Capital Stock otherwise entitled to a fraction of a share of
NewMil Common Stock shall be entitled to receive an amount of cash equal to (i)
the fraction of a share of the NewMil Common Stock to which such holder would
otherwise be entitled, multiplied by (ii) $8.25, as adjusted as provided in
Section 1.4(b) hereof. Following consummation of the Merger, no holder of
Nutmeg Capital Stock shall be entitled to dividends or any other rights in
respect of any such fraction.
1.5 New Milford Savings Bank Common Stock.
At the Effective Time, the shares of the common stock, par value $.50 per
share, of New Milford Savings Bank issued and outstanding immediately prior to
the Effective Time shall constitute all of the issued and outstanding shares of
the Surviving Bank.
1.6 Options.
At the Effective Time, each option granted by Nutmeg to purchase shares of
Nutmeg Common Stock under the Directors' Incentive Option Plan, the Directors'
Option Plan for Non-Employee Directors (collectively, the "Director Stock Option
Plans"), the 1998 Employee Stock Option Plan, the 1994 Stock Option Incentive
Plan (for employees), and the 1986 Stock Option Reserve Plan (the preceding
three option plans shall be referred to as the "Employee Stock Option Plans")
(collectively, all five option plans shall be referred to as the "Nutmeg Stock
Plans") which is outstanding and unexercised immediately prior thereto shall be
converted automatically into cash or payment in NewMil Common Stock equal to
the difference between the option exercise price and $8.25 (adjusted, as
necessary, as provided in Section 1.4(b) above). The payment will be in cash or
NewMil Common Stock based on the option holder's election as provided in Section
2.2 hereof. Payment in NewMil Common Stock shall be based on the Exchange Ratio.
1.7 Charter.
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At the Effective Time, the Certificate of Incorporation of New Milford
Savings Bank, as amended (the "Charter"), as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving Bank.
1.8 Bylaws.
At the Effective Time, the Bylaws, as amended (the "Bylaws"), of New
Milford Savings Bank, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Bank.
1.9 Directors and Executive Officers.
At the Effective Time, the directors and executive officers of New Milford
Savings Bank immediately prior to the Effective Time shall be, together with the
three directors selected from Nutmeg's Board of Directors as provided in this
Section 1.9, the directors and executive officers of the Surviving Bank, and New
Milford Savings Bank and NewMil shall each, at the Effective Time, increase
their respective directorships and fill by appointment the vacancies created
thereby with three persons who are directors of Nutmeg. The three Nutmeg
directors to be appointed to both boards are Messrs. ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. (the "Designated Directors"). Should any of the
Designated Directors become unavailable to serve as a director of NewMil and New
Milford Savings Bank for any reason prior to the Effective Time, a substitute
designee will be proposed by Nutmeg and, subject to the consent of the
Nominating Committees of the Boards of Directors of New Milford Savings Bank and
NewMil, will be so appointed. The Designated Directors shall be appointed to
serve terms, each within a separate class of directors, consistent with the
three year staggered voting procedure currently in place at NewMil and New
Milford Savings Bank, and NewMil and New Milford Savings Bank shall nominate for
re-election the person whose term is the first to expire of the Designated
Directors so appointed, subject to the continued qualification of such person
under NewMil's and New Milford Savings Bank's general criteria for the
nomination and election of directors. The non-employee directors of Nutmeg
serving immediately prior to the Effective Time will be invited to serve on the
advisory board currently being organized for New Milford Savings Bank after the
Merger to serve for a period of at least 12 months.
1.10 Tax Consequences.
It is intended that the Merger shall constitute a reorganization within the
meaning of Section 368(a) of the Code, and that this Agreement shall constitute
a "plan of reorganization" for the purposes of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.1 NewMil to Make Merger Consideration Available.
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At or prior to the Effective Time, NewMil shall deposit, or shall cause to
be deposited, with NewMil's transfer agent, American Stock Transfer & Trust
Company, or such other bank, trust company or transfer agent as NewMil may
select (the "Exchange Agent"), for the benefit of the holders of Certificates,
for exchange in accordance with this Article II, (i) the cash consideration
pursuant to Section 1.4(a)(ii) hereof and (ii) certificates representing the
shares of NewMil Common Stock and the cash in lieu of fractional shares pursuant
to Section 1.4(a)(i) hereof (such cash and certificates for shares of NewMil
Common Stock, being hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Section 1.4 and paid pursuant to Section 2.2(a) hereof in exchange
for outstanding shares of Nutmeg Capital Stock.
2.2 Exchange of Cash and Shares.
(a) Prior to the date of the special meeting of Nutmeg's shareholders
(the "Special Meeting") contemplated in Section 6.3 hereof, NewMil shall prepare
a form, subject to review and comment by Nutmeg (an "Election Form"), pursuant
to which a holder of shares of Nutmeg Capital Stock may specify the number of
such shares owned by such holder that such holder desires to be converted into a
right to receive cash in the Merger and the number of shares of Nutmeg Capital
Stock owned by such holder that such holder desires to be converted into a right
to receive shares of NewMil Common Stock in the Merger. Nutmeg shall cause an
Election Form to be included with the notice of the Special Meeting to be sent
to the holders of Nutmeg Capital Stock and mailed to each such holder as of the
record date for the Special Meeting (such shareholders hereinafter referred to
as "Election Eligible Shareholders"). Only Election Eligible Shareholders shall
have the right to receive and submit an Election Form.
(b) Each Election Eligible Shareholder (other than holders of shares
of Nutmeg Capital Stock which, in accordance with Section 1.4 (d) hereof, are to
be canceled in the Merger) shall have the right to specify in an Election Form
the number of shares owned by such holder that such holder desires to have
converted into a right to receive cash in the Merger (a "Cash Election") and the
number of Shares owned by such holder that such holder desires to have converted
into a right to receive shares of NewMil Common Stock in the Merger (a "Stock
Election"); provided that, subject to the provisions of Section 2.2(c) hereof,
any holders of Non-Electing Shares shall be deemed to have made a Cash Election.
For purposes of this Agreement, "Non-Electing Shares" means all shares (other
than shares that are to be canceled in the Merger) of Nutmeg Capital Stock
outstanding at the Effective Time as to which neither an effective Cash Election
nor an effective Stock Election was made as of the Election Deadline. A Cash
Election or a Stock Election shall be effective only if the Exchange Agent
appointed by NewMil pursuant to Section 2.1 hereof shall have received no later
than 5:00 p.m. New York City time on the date specified on such Election Form,
which date shall be disclosed on the Election Form and shall not be earlier than
the date of the Special Meeting (the "Election Deadline"), an Election Form
covering the shares to which such Cash Election and/or Stock Election applies,
executed and completed in accordance with the instructions set forth in such
Election Form. Except as described in the last two sentences of this paragraph,
a Cash Election or Stock Election may be revoked or changed only by delivering
to the Exchange Agent, prior to the Election Deadline, a written notice of
revocation or, in the case of a change, a properly completed revised Election
Form that identifies the Certificates to which such revised Election Form
applies. Delivery to the Exchange Agent prior to the Election Deadline of a
revised Election Form with
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respect to any Certificate shall result in the revocation of all prior Election
Forms with respect to all shares evidenced by such Certificate. Any termination
of this Agreement in accordance with Article VIII shall result in the revocation
of all Election Forms delivered to the Exchange Agent on or prior to the date of
such termination. If an Election Form is revoked (either by delivery of a
written notice of revocation or by delivery of a revised Election Form), the
Certificates to which such Election Form applies, if previously delivered to the
Exchange Agent, shall be returned to the person revoking such Election Form
unless such person otherwise instructs the Exchange Agent. On the day following
the last day of the Base Period (i.e., the third trading day preceding the
Closing Date), NewMil shall announce a special, 48-hour election change period
by posting such announcement on its internet web site (▇▇▇.▇▇▇▇▇▇.▇▇▇) and
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filing a Form 8-K with the Securities and Exchange Commission's ("SEC") "▇▇▇▇▇"
filing system (▇▇▇.▇▇▇.▇▇▇). Such announcement will permit Election Eligible
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Shareholders to change their Cash Election or Stock Election through telephonic
and/or electronic transmission to the Exchange Agent as descibed in the
announcement.
(c) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a Certificate or Certificates who
did not submit an effective Cash Election or Stock Election, a form letter of
transmittal (which 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) and instructions for use in effecting the
surrender of the Certificates in exchange for cash (or for certificates
representing the shares of NewMil Common Stock and, if applicable, the cash in
lieu of fractional shares as determined by the Exchange Agent in order to best
meet the desires of the holders of Electing Shares to receive either cash or
shares of NewMil Common Stock) into which the shares of Nutmeg Capital Stock
represented by such Certificate or Certificates shall have been converted
pursuant to this Agreement. Nutmeg shall have the right to review both the
letter of transmittal and the instructions prior to such documents being
finalized. 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 representing that number of whole shares of NewMil Common Stock to
which such holder of Nutmeg Capital Stock shall have become entitled pursuant to
the provisions of Article I hereof and, if applicable, a check representing the
amount of cash in lieu of fractional shares or (y) a check representing the
amount of cash which such holder has the right to receive pursuant to the
provisions of Sections 1.4 (a)(ii) hereof in respect of the Certificate
surrendered pursuant to the provision of this Article II, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash and unpaid dividends and distributions, if any, payable to holders of
Certificates.
(d) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a Certificate or Certificates a
form letter of transmittal (which 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) and instructions for use in effecting
the surrender of the Certificates in exchange for cash or for certificates
representing the shares of NewMil Common Stock and, if applicable, the cash in
lieu of fractional shares into which the shares of Nutmeg Capital Stock
represented by such Certificate or Certificates shall have been converted
pursuant to this Agreement. Nutmeg shall have the right to review both the
letter of transmittal and the instructions prior to such documents being
finalized. Upon surrender of a Certificate for
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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 representing that number of whole
shares of NewMil Common Stock to which such holder of Nutmeg Capital Stock shall
have become entitled pursuant to the provisions of Article I hereof and, if
applicable, a check representing the amount of cash in lieu of fractional shares
or (y) a check for the amount of cash which such holder has the right to receive
in respect of the Certificate surrendered pursuant to the provisions of this
Article II, and the Certificate so surrendered shall forthwith be canceled. No
interest will be paid or accrued on any cash payable to holders of Certificates.
(e) (i) If the holders of Nutmeg Capital Stock shall have submitted
Stock Elections with respect to more than 60% of the outstanding shares of
Nutmeg Capital Stock (adjusted to treat each share of Nutmeg Preferred Stock as
1.75 shares of Nutmeg Capital Stock), NewMil may direct the Exchange Agent, as
soon as practicable after the Effective Time, to reduce the number of shares of
Nutmeg Capital Stock that shall be exchangeable for NewMil Common Stock to a
number that is not less than 60% of the outstanding shares of Nutmeg Capital
Stock (as so adjusted) and to treat the remainder of such shares as shares as to
which a Cash Election has been submitted, such reductions to be allocated among
such holders as nearly as practicable in proportion to their respective holdings
of Nutmeg Capital Stock (as so adjusted) as to which such Stock Elections have
been submitted.
(ii) If the holders of Nutmeg Capital Stock shall have submitted
Cash Elections with respect to more than 50% of the outstanding shares of Nutmeg
Capital Stock (as so adjusted), NewMil may direct the Exchange Agent, as soon as
practicable after the Effective Time, to reduce the number of shares of Nutmeg
Capital Stock that shall be exchangeable for cash to a number that is not less
than 50% of the outstanding shares of Nutmeg Capital Stock (as so adjusted) and
to treat the remainder of such shares as shares as to which a Stock Election has
been submitted, such reductions to be allocated among such holders as nearly as
practicable in proportion to their respective holdings of Nutmeg Capital Stock
(as so adjusted) as to which such Cash Elections have been submitted, provided
that the cash portion of the Merger Consideration shall not be greater than an
amount that is consistent with the issuance of the opinion referred to in
Section 7.1(f) hereof.
(f) No dividends or other distributions declared after the Effective
Time with respect to NewMil Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Article
II. After the surrender of a Certificate in accordance with this Article II,
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 NewMil Common Stock represented by such
Certificate. No holder of an unsurrendered Certificate shall be entitled, until
the surrender of such Certificate, to vote the shares of NewMil Common Stock
into which his Nutmeg Capital Stock shall have been converted.
(g) If any certificate representing shares of NewMil Common Stock is
to be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper
8
form for transfer, and that the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
issuance of a certificate representing shares of NewMil Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
(h) After the close of business on the day immediately prior to the
Effective Time, there shall be no transfers on the stock transfer books of
Nutmeg of the shares of Nutmeg Capital Stock which were issued and 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 canceled and exchanged for cash as provided in this Article
II.
(i) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Nutmeg for six months after the Effective Time shall be returned
to NewMil. Any shareholders of Nutmeg who have not theretofore complied with
this Article II shall thereafter look only to NewMil for payment of Merger
Consideration in the form of cash, their shares of NewMil Common Stock, cash in
lieu of fractional shares and unpaid dividends and distributions on NewMil
Common Stock deliverable in respect of each share of Nutmeg Capital Stock such
shareholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of NewMil,
Nutmeg, the Exchange Agent or any other person shall be liable to any former
holder of shares of Nutmeg Capital Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(j) 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 NewMil, the
posting by such person of a bond in such amount as NewMil may reasonably direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will provide the Merger Consideration in
exchange for such lost, stolen or destroyed Certificate in an amount determined
in accordance with Section 1.4 (a) hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NUTMEG
Nutmeg hereby makes the following representations and warranties to NewMil
and New Milford Savings Bank as set forth in this Article III, each of which is
being relied upon by NewMil and New Milford Savings Bank as a material
inducement to enter into and perform this Agreement. All of the disclosure
schedules of Nutmeg referenced below and thereby required of Nutmeg pursuant to
this Agreement, which disclosure schedules shall be cross-referenced to the
specific sections and subsections of this Agreement and delivered herewith, are
referred to herein as the "Nutmeg Disclosure Schedule."
9
3.1 Corporate Organization.
Nutmeg is a federally chartered savings association duly organized, validly
existing and in good standing under the laws of the United States of America.
The deposit accounts of Nutmeg are insured by the Federal Deposit Insurance
Corporation (the "FDIC") through the Savings Association Insurance Fund to the
fullest extent permitted by law, and all premiums and assessments required in
connection therewith have been paid by Nutmeg. Nutmeg has the corporate power
and corporate authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted and is duly licensed or
qualified to do business in each jurisdiction in which the nature of any
business conducted by it or the character or location of any properties or
assets owned or leased by it makes such licensing or qualification necessary.
The Amended and Restated Certificate of Incorporation and Bylaws, as amended,
(the "Bylaws") of Nutmeg, copies of which have previously been delivered to
NewMil, are true, correct and complete copies of such documents as in effect as
of the date of this Agreement.
3.2 Capitalization.
(a) The authorized capital stock of Nutmeg consists of 6,000,000
shares of Nutmeg Common Stock and 2,000,000 shares of Nutmeg Preferred Stock.
As of the date hereof, there are (i) 1,435,294 shares of Nutmeg Common Stock
issued and outstanding and no shares of Nutmeg Common Stock held in Nutmeg's
treasury, and (ii) no shares of Nutmeg Common Stock reserved for issuance upon
exercise of outstanding stock options or otherwise, except for (i) 304,756
shares of Nutmeg Common Stock reserved for issuance pursuant to the Director
Stock Option Plans (of which options for 236,139 shares are currently
outstanding) and (ii) 293,416 shares of Nutmeg Common Stock reserved for
issuance pursuant to the Employee Stock Option Plans (of which 292,968 option
shares are currently outstanding); (iii) 384,457 shares of Nutmeg Common Stock
reserved for issuance upon exercise of the option to be issued to NewMil
pursuant to the Option Agreement; (iv) 487,001 shares of Nutmeg Preferred Stock
issued and outstanding; and (v) no shares of Nutmeg Preferred Stock reserved for
issuance pursuant to any option plan. All of the issued and outstanding shares
of Nutmeg Capital Stock 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. Except for the Option Agreement,
the aforementioned options to purchase 598,172 shares of Nutmeg Common Stock
issued pursuant to the Nutmeg Stock Plans, and the conversion privileges of the
Nutmeg Preferred Stock, Nutmeg does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Nutmeg Capital
Stock or any securities representing the right to purchase or otherwise receive
any shares of Nutmeg Capital Stock. The names of the optionees, the date of
each option to purchase Nutmeg Common Stock granted, 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 Director and Employee
Stock Option Plans, are set forth in Section 3.2(a) of the Nutmeg Disclosure
Schedule. Since December 31, 1999, Nutmeg has not issued any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock, other than pursuant to the exercise of director or
employee stock options granted prior to December 31, 1999 under the Nutmeg Stock
Plans.
10
(b) Nutmeg has no Subsidiaries and has not owned any Subsidiaries,
other than as set forth in Section 3.2(b) of the Nutmeg Disclosure Schedule.
3.3 Authority; No Violation.
(a) Nutmeg has full corporate power and corporate authority to
execute and deliver this Agreement, the Bank Merger Agreement and the Option
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement, the Bank Merger 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
Nutmeg. The Board of Directors of Nutmeg has directed that this Agreement, the
Merger and the other transactions contemplated hereby be submitted to Nutmeg's
shareholders for approval at the Special Meeting and, except for the approval of
this Agreement, the Merger and the other transactions contemplated hereby by the
requisite vote of Nutmeg's shareholders, no other corporate proceedings on the
part of Nutmeg (except for matters related to setting the date, time, place and
record date for the Special Meeting) are necessary to approve this Agreement,
the Bank Merger Agreement or the Option Agreement or to consummate the
transactions contemplated hereby or thereby. This Agreement has been, and the
Bank Merger Agreement and the Option Agreement will be, duly and validly
executed and delivered by Nutmeg and (assuming due authorization, execution and
delivery by NewMil and New Milford Savings Bank of this Agreement, by New
Milford Savings Bank of the Bank Merger Agreement, and by NewMil of the Option
Agreement) will constitute valid and binding obligations of Nutmeg, enforceable
against Nutmeg in accordance with their terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors rights and remedies generally.
(b) Neither the execution and delivery of this Agreement, the Bank
Merger Agreement or the Option Agreement by Nutmeg, nor the consummation by
Nutmeg of the transactions contemplated hereby or thereby, nor compliance by
Nutmeg with any of the terms or provisions hereof or thereof, will (i) violate
any provision of the Certificate of Incorporation or Bylaws of Nutmeg, or (ii)
assuming that the consents and approvals referred to in Section 3.4(a) hereof
are duly obtained, (x) violate any Laws (as defined in Section 9.13 hereof)
applicable to Nutmeg, or any of its properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, 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 properties or assets of Nutmeg under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Nutmeg is a party, or by which it or any of its properties or assets may be
bound or affected.
3.4 Consents and Approvals.
(a) Except for (i) the filing of applications and notices, as
applicable, as to the Merger with the OTS under the HOLA and the Bank Merger Act
and approval of such applications
11
and notices, (ii) the obtaining of a waiver from the Federal Reserve Board
("FRB") pursuant to the exception provided in 12 CFR Part 225.12(d), (iii) the
filing of applications and notices with the Banking Commissioner of the State of
Connecticut (the "Connecticut Commissioner") and approval of such applications
and notices as to the Merger (the "State Banking Approvals"), (iv) the filing
with the SEC of a registration statement on Form S-4, which will include the
proxy statement/prospectus to be used in soliciting the approval of Nutmeg's
shareholders at the Special Meeting (the "Proxy Statement"), to register the
shares of NewMil Common Stock to be issued in connection with the Merger
(including the shares of NewMil Common Stock that may be issued upon the
exercise of the options referred to in Section 1.6 hereof) (the "Registration
Statement"), (v) the approval of this Agreement by the requisite vote of the
shareholders of Nutmeg, (vi) the filings with the OTS and the Connecticut
Secretary of State required in connection with the Bank Merger Agreement, (vii)
such filings, authorizations and approvals as are required to be made or
obtained under the securities or "Blue Sky" laws of various states or with The
NASDAQ Stock Market, Inc. (or such other exchange as may be applicable) in
connection with the issuance of the shares of NewMil Common Stock pursuant to
this Agreement, and (viii) such notices, filings, authorizations, approvals or
consents that are set forth in Section 3.4(a) of the Nutmeg Disclosure Schedule,
no consents or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (1) the execution and delivery by Nutmeg of this
Agreement, the Bank Merger Agreement and the Option Agreement, and (2) the
consummation by Nutmeg of the Merger, the Option Agreement and the other
transactions contemplated hereby and thereby, except, in each case, for such
consents, approvals or filings, the failure of which to obtain will not have a
Material Adverse Effect (as defined in Section 9.13 hereof) on the ability of
NewMil to consummate the transactions contemplated hereby or thereby.
(b) Nutmeg hereby represents to NewMil that it has no knowledge of
any reason why approval or effectiveness of any of the applications, notices or
filings referred to in Section 3.4(a) hereof cannot be obtained or granted on a
timely basis.
3.5 Loan Portfolio; Reports.
(a) Except as set forth at Section 3.5(a) of the Nutmeg Disclosure
Schedule, as of December 31, 1999 and thereafter through and including the date
of this Agreement, Nutmeg was not a party to any written or oral loan agreement,
note or borrowing arrangement (including, without limitation, leases, credit
enhancements, commitments, guarantees and interest-bearing assets)
(collectively, "Loans"), with any director, officer or five percent or greater
shareholder of Nutmeg or any Affiliated Person (as defined in Section 9.13
hereof) of the foregoing.
(b) Nutmeg has timely filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the OTS, (ii) the FDIC and any
self-regulatory organization ("SRO") (collectively "Regulatory Agencies").
Except for normal examinations conducted by a Regulatory Agency in the regular
course of the business of Nutmeg, no Governmental Entity is conducting, or has
conducted, any proceeding or investigation into the business or operations of
Nutmeg nor does Nutmeg have knowledge of any pending or threatened proceeding or
investigation.
12
3.6 Financial Statements; Books and Records.
(a) Nutmeg has previously delivered to NewMil true, correct and
complete copies of (a) the balance sheets of Nutmeg as of December 31 for the
years 1997, 1998, and 1999 and the related statements of income, changes in
stockholders equity and cash flows for the years 1996 through 1999, inclusive,
in each case accompanied by the audit report of ▇▇▇▇▇▇ and Monde, independent
public accountants with respect to Nutmeg, and (b) the unaudited balance sheets
of Nutmeg as of March 31, 2000 and the related comparative unaudited statements
of income, changes in stockholders equity and cash flows for the three month
periods ended March 31, 1999 and 2000. The financial statements referred to in
this Section 3.6(a) (including the related notes, where applicable) fairly
present, and the financial statements referred to in Section 6.8 hereof will
fairly present (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount), the results of the operations
and financial condition of Nutmeg for the respective fiscal periods or as of the
respective dates therein set forth; each of such statements (including the
related notes, where applicable) comply, and the financial statements referred
to in Section 6.8 hereof will comply, with applicable accounting requirements
and with the published rules and regulations of the OTS and FDIC with respect
thereto; and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section 6.8
hereof will be, prepared in accordance with generally accepted accounting
principles ("GAAP") during the periods involved, except in each case as
indicated in such statements or in the notes thereto. The annual reports and
quarterly reports that Nutmeg has sent to shareholders since December 31, 1997
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading, and Nutmeg has
previously delivered or made available to NewMil true, correct and complete
copies of such reports. The books and records of Nutmeg have been, and are
being, maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements.
(b) Except and to the extent (i) reflected, disclosed or provided for
in the financial statements as of December 31, 1999 referred to above, (ii) of
liabilities incurred since December 31, 1999 in the ordinary course of business
and consistent with past practice, and (iii) of liabilities related to the
Agreement, Nutmeg has no material liabilities, whether absolute, accrued,
contingent or otherwise.
(c) The minute books of Nutmeg contain records of all meetings and
other corporate action held of its shareholders and Board of Directors
(including committees thereof) and are complete and accurate in all material
respects.
3.7 Broker's Fees.
Neither Nutmeg nor any of its officers or directors has employed any broker
or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of
13
the transactions contemplated by this Agreement, the Bank Merger Agreement or
the Option Agreement, except that Nutmeg has engaged, and will pay a fee to
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇, Inc. ("MB&D") in accordance with the terms of a letter
agreement between MB&D and Nutmeg dated June 25, 1998, a true, complete and
correct copy of which is attached hereto as Section 3.7 of the Nutmeg Disclosure
Schedule.
3.8 Absence of Certain Changes or Events.
(a) Except as disclosed in Nutmeg's balance sheet as of December 31,
1999 referred to in Section 3.6(a) hereof or Nutmeg's balance sheet as of March
31, 2000 referred to in Section 3.6(a) hereof, since December 31, 1997 (i)
Nutmeg has not incurred any material liability, except as contemplated by this
Agreement or in the ordinary course of its business consistent with its past
practices, and (ii) no event has occurred which has had, or is likely to have,
individually or in the aggregate, a Material Adverse Effect on Nutmeg.
(b) Since December 31, 1999 Nutmeg has carried on its businesses in
the ordinary and usual course consistent with its past practices.
3.9 Legal Proceedings.
(a) Nutmeg is not a party to any, and there are no pending or
threatened, legal, administrative, arbitration or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
Nutmeg (other than routine litigation in the ordinary course of business) or
which challenge the validity or propriety of the transactions contemplated by
this Agreement, the Bank Merger Agreement or the Option Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Nutmeg or its assets.
3.10 Taxes and Tax Returns.
Nutmeg has duly filed all federal and state tax returns required to be
filed by it on or prior to the date hereof (all such returns being accurate and
complete in all material respects) and has duly paid or made provision for the
payment of all material taxes and other governmental charges which have been
incurred or are due or claimed to be due from it by federal and state taxing
authorities on or prior to the date hereof other than taxes or other charges (a)
which (x) are not yet delinquent or (y) are being contested in good faith and
set forth at Section 3.10 of the Nutmeg Disclosure Schedule and (b) which have
not been finally determined. All liability with respect to the income tax
returns of Nutmeg has been satisfied for all years to and including 1999. The
Internal Revenue Service (the "IRS") has not notified Nutmeg of, or otherwise
asserted, that there are any material deficiencies with respect to any income
tax returns of Nutmeg. There are no material disputes pending, or claims
asserted for, taxes or assessments upon Nutmeg, nor has Nutmeg been requested to
give any currently effective waivers extending the statutory period of
limitation applicable to any federal or state income tax return for any period.
In addition, federal and state returns which are accurate and complete in all
material respects have been filed by Nutmeg for all periods for which returns
were
14
due with respect to income tax withholding, social security and unemployment
taxes and the amounts shown on such federal and state returns to be due and
payable have been paid in full or adequate provision therefor has been included
by Nutmeg in its financial statements as of December 31, 1999 and March 31,
2000. The most recent audit of Nutmeg's federal tax returns by the IRS related
to the tax return for the year ended December 31, 1995.
3.11 Employee Benefit Plans.
(a) Section 3.11(a) of the Nutmeg Disclosure Schedule sets forth a
true and complete list of each employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), arrangement or agreement that is maintained or contributed to as of
the date of this Agreement, or that has within the last six years been
maintained or contributed to, by Nutmeg or any other entity which together with
Nutmeg would be deemed a "single employer" within the meaning of Section 4001 of
ERISA or Code Sections 414(b), (c) or (m) or under which Nutmeg has any
liability (collectively, the "Plans").
(b) Nutmeg has heretofore delivered to NewMil true, correct and
complete copies of each of the Plans and all related documents, including but
not limited to (i) the actuarial report for such Plan (if applicable) for each
of the last six years, (ii) the most recent determination letter from the IRS
(if applicable) for such Plan, (iii) the current summary plan description and
any summaries of material modifications, (iv) all annual reports (Form 5500
series) for each Plan filed for the preceding six plan years, (v) all agreements
with fiduciaries and service providers relating to the Plan, and (vi) all
substantive correspondence relating to any such Plan addressed to or received
from the IRS, the Department of Labor, the Pension Benefit Guaranty Corporation
or any other governmental agency.
(c) (i) Except as set forth at Section 3.11(c) of the Nutmeg
Disclosure Schedule, each of the Plans has been operated and administered in all
material respects in compliance with applicable Laws, including but not limited
to ERISA and the Code; (ii) each of the Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified; (iii) with respect to
each Plan which is subject to Title IV of ERISA, the present value of accrued
benefits under such Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Plan's actuary
with respect to such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such accrued
benefits; (iv) no Plan provides benefits, including, without limitation, death
or medical benefits (whether or not insured), with respect to current or former
employees of Nutmeg beyond their retirement or other termination of service,
other than (w) coverage mandated by applicable Law, (x) death benefits or
retirement benefits under a Plan that is an "employee pension plan," as that
term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits
under a Plan that are accrued as liabilities on the books of Nutmeg, or (z)
benefits the full cost of which is borne by the current or former employee (or
his beneficiary); (v) no liability under Title IV of ERISA has been incurred by
Nutmeg that has not been satisfied in full, and no condition exists that
presents a material risk to Nutmeg incurring a material liability thereunder;
(vi) no Plan is a "multiemployer pension plan," as such term is defined in
Section 3(37) of ERISA; (vii) all contributions or other amounts payable by
Nutmeg as of the Effective Time with respect to
15
each Plan and all other liabilities of each such entity with respect to each
Plan, in respect of current or prior plan years have been paid or accrued in
accordance with generally accepted accounting practices and Section 412 of the
Code; (viii) Nutmeg has not engaged in a transaction in connection with which
Nutmeg could be subject to either a civil penalty assessed pursuant to Section
409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the
Code; (ix) to the knowledge of Nutmeg, there are no pending, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the Plans or any trusts related thereto; (x) all Plans could be
terminated as of the Effective Time without any liability materially in excess
of the amounts accrued with respect to such Plans on the March 31, 2000
financial statements referenced in Section 3.6(a) hereof; (xi) no Plan, program,
agreement or other arrangement, either individually or collectively, provides
for any payment by Nutmeg that would not be deductible under Code Sections
162(a)(1), 162(m) or 404 or that would constitute a "parachute payment" within
the meaning of Code Section 280G; (xii) no "accumulated funding deficiency" as
defined in Section 302(a)(2) of ERISA or Section 412 of the Code, whether or not
waived, and no "unfunded current liability" as determined under Section 412(1)
of the Code exists with respect to any Plan; and (xiii) no Plan has experienced
a "reportable event" (as such term is defined in Section 4043(b) of ERISA and
the regulations thereunder) that is not subject to an administrative or
statutory waiver from the reporting requirement.
3.12 Certain Contracts.
(a) Except as set forth at Section 3.12(a) of the Nutmeg Disclosure
Schedule, Nutmeg is not a party to or bound by any contract, arrangement or
commitment (i) with respect to the employment of any directors, officers,
employees or consultants, (ii) which, upon the consummation of the transactions
contemplated by this Agreement, the Bank Merger Agreement or the Option
Agreement will (either alone or upon the occurrence of any additional acts or
events) result in any payment (whether of severance pay or otherwise) becoming
due from NewMil, Nutmeg, New Milford Savings Bank, the Surviving Bank or any of
NewMil's Subsidiaries to any director, officer or employee thereof, (iii) which
materially restricts the conduct of any line of business by Nutmeg, (iv) with or
to a labor union or guild (including any collective bargaining agreement) or (v)
(including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan) any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement, the Bank
Merger Agreement or the Option Agreement, or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement, the Bank Merger Agreement or the Option Agreement. Nutmeg has
previously delivered to NewMil true, correct and complete copies of all
employment, consulting and deferred compensation agreements to which Nutmeg is a
party. Section 3.12(a) of the Nutmeg Disclosure Schedule sets forth a list of
all material contracts (as defined in Item 601(b)(10) of Regulation S-K) of
Nutmeg. Each contract, arrangement or commitment of the type described in this
Section 3.12(a), whether or not set forth in Section 3.12(a) of the Nutmeg
Disclosure Schedule, is referred to herein as a "Nutmeg Contract," and Nutmeg
has not received notice of, nor do any of its executive officers know of, any
violation of any Nutmeg Contract.
(b) (i) Each Nutmeg Contract is valid and binding and in full force
and effect, (ii) Nutmeg has in all material respects performed all obligations
required to be performed by it to date
16
under each Nutmeg Contract, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of Nutmeg under any such Nutmeg Contract.
3.13 Agreements with Regulatory Agencies.
Neither Nutmeg nor any of its affiliates is subject to any cease-and-desist
or other order issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or has adopted any board
resolutions at the request of (each, whether or not set forth at Section 3.13 of
the Nutmeg Disclosure Schedule, a "Regulatory Agreement") any Governmental
Entity that restricts the conduct of its business or that in any manner relates
to its capital adequacy, its credit policies, its management or its business,
nor has Nutmeg been advised by any Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
3.14 Takeover Laws; Certificate of Incorporation.
The Board of Directors of Nutmeg has approved Nutmeg entering into this
Agreement, the Bank Merger Agreement and the Option Agreement, and the
transactions contemplated hereby and thereby, such that under the Home Owners'
Loan Act, Nutmeg's Certificate of Incorporation and any and all other applicable
law or documents, the only vote of Nutmeg stockholders necessary to consummate
the transactions contemplated hereby (including the Merger and issuance under
the Option Agreement) is the approval of this Agreement, the Merger and the
other transactions contemplated hereby by the affirmative vote of at least two-
thirds of the issued and outstanding shares of Nutmeg Capital Stock, including
majority votes of shares held by the holders of each of Nutmeg's Common Stock
and Preferred Stock.
3.15 Environmental Matters.
(a) Nutmeg is in compliance in all material respects with all
applicable federal and state laws and regulations relating to pollution or
protection of the environment (including without limitation, laws and
regulations relating to emissions, discharges, releases and threatened releases
of Hazardous Material (as hereinafter defined), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials;
(b) There is no suit, claim, action, proceeding, investigation or
notice pending or to the knowledge of Nutmeg's directors and executive officers
threatened (or past or present actions or events that could form the basis of
any such suit, claim, action, proceeding, investigation or notice), in which
Nutmeg has been or, with respect to threatened suits, claims, actions,
proceedings, investigations or notices may be, named as a defendant (x) for
alleged noncompliance (including by any predecessor), with any environmental
law, rule or regulation or (y) relating to any material release or threatened
release into the environment of any Hazardous Material, whether or not occurring
at or on a site owned, leased or operated by Nutmeg;
17
(c) To the knowledge of Nutmeg's directors and executive officers,
during the period of Nutmeg's ownership or operation of any of its properties,
there has not been any material release of Hazardous Material in, on, under or
affecting any such property.
(d) To the knowledge of Nutmeg's executive officers, Nutmeg has not
made or participated in any loan to any person who is subject to any suit,
claim, action, proceeding, investigation or notice, pending or threatened, with
respect to (i) any alleged noncompliance as to any property securing such loan
with any environmental law, rule or regulation, or (ii) the release or the
threatened release into the environment of any Hazardous Material at a site
owned, leased or operated by such person on any property securing such loan.
(e) For purposes of this Section 3.15, the term "Hazardous Material"
means any hazardous waste, petroleum product, polychlorinated biphenyl,
chemical, pollutant, contaminant, pesticide, radioactive substance, or other
toxic material, or other material or substance (in each such case, other than
small quantities of such substances in retail containers) regulated under any
applicable environmental or public health statute, law, ordinance, rule or
regulation.
(f) No real property owned or leased by Nutmeg as other real estate
owned ("OREO") or otherwise, or owned or controlled by Nutmeg as a trustee or
fiduciary meets the statutory criteria of an "Establishment" as that term is
defined pursuant to Section 22a-134(3) of the General Statutes of Connecticut.
3.16 Reserves for Losses.
All reserves or other allowances for possible losses reflected in Nutmeg's
most recent financial statements referred to in Section 3.6(a) hereof as of
December 31, 1999 and March 31, 2000 complied with all Laws and are adequate
under GAAP. Nutmeg has not been notified by the OTS, FDIC, or Nutmeg's
independent auditor, in writing or otherwise, that such reserves are inadequate
or that the practices and policies of Nutmeg in establishing such reserves and
in accounting for delinquent and classified assets generally fail to comply with
applicable accounting or regulatory requirements, or that the OTS, FDIC, or
Nutmeg's independent auditor believes such reserves to be inadequate or
inconsistent with the historical loss experience of Nutmeg. Nutmeg has
previously furnished NewMil with a complete list of all extensions of credit and
OREO that have been classified by any bank examiner (regulatory or internal)
since January 1, 1998 as other loans specially mentioned, special mention,
substandard, doubtful, loss, classified or criticized, credit risk assets,
concerned loans or words of similar import. Nutmeg agrees to update such list
no less frequently than monthly after the date of this Agreement until the
earlier of the Closing Date or the date that this Agreement is terminated in
accordance with Section 8.1 hereof. All OREO held by Nutmeg is being carried
net of reserves at the lower of cost or net realizable value.
3.17 Properties and Assets.
Section 3.17 of the Nutmeg Disclosure Schedule lists (i) all real property
owned by Nutmeg; (ii) each real property lease, sublease or installment purchase
arrangement to which Nutmeg is a party; (iii) each contract for the purchase,
sale, or development of real estate to which Nutmeg is a party; and (iv) all
items of Nutmeg's tangible personal property and equipment with a book value of
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$25,000 or more or having an annual lease payment of $10,000 or more. Except
for (a) items reflected in Nutmeg's financial statements as of December 31, 1999
and March 31, 2000 referred to in Section 3.6(a) hereof, (b) exceptions to title
that do not interfere materially with Nutmeg's use and enjoyment of owned or
leased real property (other than OREO), (c) liens for current real estate taxes
not yet delinquent, or being contested in good faith, properly reserved against
(and reflected on the financial statements referred to in Section 3.6(a) above),
(d) properties and assets sold or transferred in the ordinary course of business
consistent with past practices since December 31, 1999, and (e) items listed in
Section 3.17 of the Nutmeg Disclosure Schedule, Nutmeg has good and, as to owned
real property, marketable and insurable title to all its properties and assets,
reflected in the financial statements of Nutmeg as of December 31, 1999 and
March 31, 2000, free and clear of all liens, claims, charges and other
encumbrances, except those having no material adverse effect upon the operations
of Nutmeg or which would involve no material expense to correct or remove.
Nutmeg, as lessee, has the right under valid and subsisting leases to occupy,
use and possess all property leased by it, and there has not occurred under any
such lease any material breach, violation or default by Nutmeg, and Nutmeg has
not experienced any material uninsured damage or destruction with respect to
such properties since December 31, 1999. All properties and assets used by
Nutmeg are in good operating condition and repair suitable for the purposes for
which they are currently utilized and comply in all material respects with all
Laws relating thereto now in effect or scheduled to come into effect. Nutmeg
enjoys peaceful and undisturbed possession under all leases for the use of all
property under which it is the lessee, and all leases to which Nutmeg is a party
are valid and binding obligations in accordance with the terms thereof. Nutmeg
is not in material default with respect to any such lease, and there has
occurred no default by Nutmeg or event which with the lapse of time or the
giving of notice, or both, would constitute a material default under any such
lease. There are no Laws, conditions of record, or other impediments which
interfere with the intended use by Nutmeg of any of the property owned, leased,
or occupied by it.
3.18 Insurance.
Section 3.18 of the Nutmeg Disclosure Schedule contains a true, correct and
complete list of all insurance policies and bonds maintained by Nutmeg,
including the name of the insurer, the policy number, the type of policy and any
applicable deductibles, and all such insurance policies and bonds (or other
insurance policies and bonds that have, from time to time, in respect of the
nature of the risks insured against and amount of coverage provided, been
substantially similar in kind and amount to that customarily carried by parties
similarly situated who own properties and engage in businesses substantially
similar to that of Nutmeg) are in full force and effect and have been in full
force and effect as of the times they were supposed to cover. As of the date
hereof, Nutmeg has not received any notice of cancellation or amendment of any
such policy or bond or is in default under any such policy or bond, no coverage
thereunder is being disputed and all claims thereunder have been filed in a
timely fashion The existing insurance carried by Nutmeg is and will continue to
be, in respect of the nature of the risks insured against and the amount of
coverage provided, substantially similar in kind and amount to that customarily
carried by parties similarly situated who own properties and engage in
businesses substantially similar to that of Nutmeg, and is sufficient for
compliance by Nutmeg with all requirements of Law and agreements to which Nutmeg
is subject or is party. True, correct and complete copies of all such policies
and bonds reflected at Section 3.18 of the Nutmeg Disclosure Schedule, as in
effect on the date hereof, have been delivered to NewMil.
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3.19 Compliance with Applicable Laws.
Nutmeg has complied in all material respects with all Laws applicable to it
or to the operation of its business. Nutmeg has not received any notice of any
alleged or threatened claim, violation, or liability under any such Laws that
has not heretofore been cured and for which there is no remaining liability.
3.20 Loans.
As of the date hereof:
(a) All loans owned by Nutmeg, or in which Nutmeg has an interest,
comply in all material respects with all Laws, including, but not limited to,
applicable usury statutes, underwriting and recordkeeping requirements and the
Truth in Lending Act, the Equal Credit Opportunity Act, and the Real Estate
Settlement Procedures Act, and other applicable consumer protection statutes and
the regulations thereunder.
(b) All loans owned by Nutmeg, or in which Nutmeg has an interest,
have been made or acquired by Nutmeg in accordance with board of director-
approved loan policies and all of such loans are collectible, except to the
extent reserves have been made against such loans in Nutmeg's financial
statements at March 31, 2000 referred to in Section 3.6(a) hereof. Nutmeg holds
mortgages contained in its loan portfolio for its own benefit to the extent of
its interest shown therein; such mortgages evidence liens having the priority
indicated by their terms, subject, as of the date of recordation or filing of
applicable security instruments, only to such exceptions as are discussed in
attorneys opinions regarding title or in title insurance policies in the
mortgage files relating to the loans secured by real property or are not
material as to the collectability of such loans; and, except as set forth at
Section 3.20(b) of the Nutmeg Disclosure Schedule, all loans owned by Nutmeg are
with full recourse to the borrowers, and Nutmeg has taken no action which would
result in a waiver or negation of any rights or remedies available against the
borrower or guarantor, if any, on any loan. All applicable remedies against all
borrowers and guarantors are enforceable except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting creditors rights and
except as may be limited by the exercise of judicial discretion in applying
principles of equity. Except as set forth at Section 3.20(b) of the Nutmeg
Disclosure Schedule, all loans purchased or originated by Nutmeg and
subsequently sold by Nutmeg have been sold without recourse to Nutmeg and
without any liability under any yield maintenance or similar obligation. True,
correct and complete copies of loan delinquency reports as of March 31, 2000
prepared by Nutmeg, which reports include all loans delinquent or otherwise in
default, have been furnished to NewMil. True, correct and complete copies of
the currently effective lending policies and practices of Nutmeg also have been
furnished to NewMil.
(c) Except as set forth at Section 3.20(c) of the Nutmeg Disclosure
Schedule, each outstanding loan participation sold by Nutmeg was sold with the
risk of non-payment of all or any portion of that underlying loan to be shared
by each participant (including Nutmeg) proportionately to the share of such loan
represented by such participation without recourse of such other lender or
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participant to Nutmeg for payment or repurchase of the amount of such loan
represented by the participation or liability under any yield maintenance or
similar obligation. Nutmeg has properly fulfilled its contractual
responsibilities and duties in any loan in which it acts as the lead lender or
servicer and has complied with its duties as required under applicable
regulatory requirements.
(d) Nutmeg has properly perfected or caused to be properly perfected
all security interests, liens, or other interests in any collateral securing any
loans made by it.
3.21 Affiliates.
Each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act")) of Nutmeg is listed at Section 3.21 of the Nutmeg Disclosure
Schedule. Each director (including the President and Chief Executive Officer)
and executive officer of Nutmeg has delivered to NewMil, concurrently with the
execution of this Agreement, the Nutmeg Stockholder Agreement in the form
attached hereto as Exhibit C. The Nutmeg Stockholder Agreement has been duly
and validly executed and delivered by each person that is a party thereto
(assuming due authorization, execution and delivery by NewMil) and will
constitute the valid and binding obligation of such person, enforceable against
such person in accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors
rights and remedies generally.
3.22 Ownership of NewMil Common Stock.
Except as set forth at Section 3.22 of the Nutmeg Disclosure Schedule
(which, for this Section only, may be delivered by Nutmeg within twenty days
following the date of this Agreement), neither Nutmeg nor any of its affiliates
or associates (as defined in the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (i) beneficially own, directly or indirectly, or (ii) is a
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, any shares of
outstanding capital stock of NewMil (other than those agreements, arrangements
or understandings specifically contemplated hereby).
3.23 Fairness Opinion.
Nutmeg has received an opinion from MB&D to the effect that, in its
opinion, the consideration to be paid to stockholders of Nutmeg hereunder is
fair to such stockholders from a financial point of view (the "Fairness
Opinion"), and MB&D has consented to the inclusion of its Fairness Opinion in
the Registration Statement, updated as necessary to the effective date of the
Registration Statement, it being understood that MB&D shall have the right to
review and comment upon the Registration Statement.
3.24 Community Reinvestment Act and Consumer Compliance.
Nutmeg has received a "satisfactory" or better rating in its most recent
Community Reinvestment Act examination, and Nutmeg is not aware of any concern
of the OTS or FDIC
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regarding its compliance with the Community Reinvestment Act or any applicable
consumer compliance laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWMIL
NewMil, on behalf of itself and its wholly owned subsidiary, New Milford
Savings Bank, hereby makes the following representations and warranties to
Nutmeg as set forth in this Article IV, each of which is being relied upon by
Nutmeg as a material inducement to enter into and perform this Agreement.
4.1 Corporate Organization.
(a) NewMil is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. NewMil has the corporate
power and corporate authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties or
assets owned or leased by it makes such licensing or qualification necessary.
NewMil is duly registered as a bank holding company with the FRB. The
Certificate of Incorporation ("Certificate of Incorporation"), and Bylaws
("Bylaws"), of NewMil, as amended to date, copies of which have previously been
made available to Nutmeg, are true, correct and complete copies of such
documents as in effect as of the date of this Agreement.
(b) New Milford Savings Bank is a Connecticut state savings bank duly
organized, validly existing and in good standing under the laws of the State of
Connecticut. New Milford Savings Bank has the corporate power and corporate
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties or assets owned or leased by
it makes such licensing or qualification necessary. The Certificate of
Incorporation and By-Laws of New Milford Savings Bank, as amended to date,
copies of which have previously been made available to Nutmeg, are true, correct
and complete copies of such documents as in effect as of the date of this
Agreement.
4.2 Capitalization.
(a) The authorized capital stock of NewMil consists of 20,000,000
shares of NewMil Common Stock, par value $.50 per share, of which 3,608,225
shares were outstanding (net of 2,381,913 treasury shares) at March 31, 2000.
At such date, there were options outstanding to purchase 439,350 shares of
NewMil Common Stock. All of the issued and outstanding shares of NewMil Common
Stock 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. As of the date of this Agreement, except as
set forth above, NewMil does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of
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any character calling for the purchase or issuance of any shares of NewMil
Common Stock or any other equity security of NewMil or any securities
representing the right to purchase or otherwise receive any shares of NewMil
Common Stock or NewMil Preferred Stock, other than pursuant to the Rights
Agreement and director and employee stock option plans. The shares of NewMil
Common Stock to be issued pursuant to the Merger are authorized and, at the
Effective Time, all such shares will be validly issued, fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(b) The authorized capital stock of New Milford Savings Bank consists
of 10,000,000 shares of common stock, par value $1.00 per share, 3,709,586 of
which are issued and outstanding. The outstanding shares of common stock of New
Milford Savings Bank are owned by NewMil free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are duly
authorized and validly issued and fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to ownership thereof.
4.3 Authority; No Violation.
(a) NewMil has full corporate power and corporate 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, the Bank Merger 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 NewMil which has directed that
this Agreement, the Merger and the other transactions contemplated hereby be
submitted to NewMil's shareholders for approval at a special meeting of NewMil
shareholders ("NewMil Special Meeting") and, except for such approval, no other
corporate proceedings on the part of NewMil (except for matters related to
setting the date, time, place and record date for the New Mil Special Meeting),
are necessary to approve this Agreement, the Bank Merger Agreement or the Option
Agreement or to consummate the transactions contemplated hereby or thereby.
This Agreement has been, and the Bank Merger Agreement and the Option Agreement
will be, duly and validly executed and delivered by NewMil and (assuming due
authorization, execution and delivery by Nutmeg) will constitute valid and
binding obligations of NewMil, enforceable against NewMil in accordance with
their terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors rights and remedies generally.
(b) New Milford Savings Bank has full corporate power and authority to
execute and deliver this Agreement and the Bank Merger Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Bank Merger Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of New Milford Savings Bank and by NewMil as
the sole shareholder of New Milford Savings Bank. All corporate proceedings on
the part of New Milford Savings Bank necessary to consummate the transactions
contemplated hereby and thereby will have been taken prior to the Effective
Time. This Agreement has been, and the Bank Merger Agreement will be, duly and
validly executed and delivered by New Milford Savings Bank and (assuming due
authorization, execution and delivery by Nutmeg) will constitute valid and
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binding obligations of New Milford Savings Bank, enforceable against New Milford
Savings Bank in accordance with their terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors rights and remedies generally.
(c) Neither the execution and delivery of this Agreement by NewMil and
New Milford Savings Bank, the Bank Merger Agreement by New Milford Savings Bank,
or the Option Agreement by NewMil, nor the consummation by NewMil or New Milford
Savings Bank, as the case may be, of the transactions contemplated hereby or
thereby, nor compliance by NewMil or New Milford Savings Bank with any of the
terms or provisions hereof or thereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of NewMil or the Charter or Bylaws of New
Milford Savings Bank, as the case may be, or (ii) assuming that the consents and
approvals referred to in Section 4.4 hereof are duly obtained, (x) violate any
Laws applicable to NewMil, New Milford Savings Bank or any of their respective
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
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 NewMil or New Milford Savings Bank under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which NewMil or New Milford Savings Bank is a party, or by which they or any of
their respective properties or assets may be bound or affected.
4.4 Consents, Approvals and Reports.
(a) Except for (i) the filing of applications and notices, as
applicable, as to the Merger with the OTS under the HOLA and the FDIC under the
Bank Merger Act and approval of such applications and notices, (ii) the
obtaining of a waiver from the FRB pursuant to the exception provided in 12 CFR
Part 225.12(d); (iii) the filing and approval of the application for approval
to the Banking Commissioner pursuant to Section 36a-126(a) of the Connecticut
Banking Law, (iv) the filing with the SEC of the Registration Statement, (v) the
approval of this Agreement by the requisite vote of the shareholders of Nutmeg,
(vi) the approval of this Agreement and the increase in directorships
contemplated in this Agreement by the requisite vote of shareholders of NewMil,
(vii) the filings with the Connecticut Secretary of State required in connection
with the Bank Merger Agreement, (viii) such filings, authorizations and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states or with The Nasdaq Stock Market, Inc. (or such other
exchange as may be applicable) in connection with the issuance of the shares of
NewMil Common Stock pursuant to this Agreement, and (ix) any necessary notices,
filings, authorizations, approvals or consents of third parties, no consents or
approvals of or filings or registrations with any Governmental Entity or third
party are necessary in connection with (1) the execution and delivery by NewMil
and New Milford Savings Bank of this Agreement, (2) the execution and delivery
by New Milford Savings Bank of the Bank Merger Agreement, (3) the execution and
delivery by NewMil of the Option Agreement, (4) the consummation by NewMil of
the transactions contemplated hereby, and (5) the consummation by New Milford
Savings Bank of the Merger, except, in each case, for such consents, approvals
or filings, the failure of which to obtain will not
24
have a Material Adverse Effect on the ability of Nutmeg to consummate the
transactions contemplated hereby or thereby.
(b) NewMil hereby represents to Nutmeg that it has no knowledge of any
reason why approval or effectiveness of any of the applications, notices or
filings referred to in Section 4.4(a) hereof cannot be obtained or granted on a
timely basis.
(c) NewMil and New Milford Savings Bank have filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since December 31, 1997,
with (i) the FRB, (ii) the Banking Commissioner, (iii) the FDIC, (iv) the SEC
and (v) the Regulatory Agencies. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of NewMil and its
Subsidiaries, no Governmental Entity is conducting, or has conducted, any
proceeding or investigation into the business or operations of NewMil since
December 31, 1997.
4.5 Financial Statements; Exchange Act Filings; Books and Records.
NewMil has previously delivered to Nutmeg true, correct and complete copies
of (a) the consolidated balance sheets of NewMil and its Subsidiaries as of June
30, for the fiscal years 1997, 1998 and 1999 and the related consolidated
statements of income and statements of changes in shareholders equity and cash
flows for the fiscal years ended June 30, 1996 through 1999, inclusive, as
reported in NewMil's Reports on Form 10-K filed with the SEC on or about
September 30, 1998 and 1999 under the Exchange Act, in each case accompanied by
the audit report of PricewaterhouseCoopers, LLP, independent public accountants
with respect to NewMil, and (b) the unaudited consolidated statement of
condition of NewMil and its Subsidiaries as of March 31, 2000 and the related
comparative unaudited statements of operations and cash flows for the three and
nine month periods ended March 31, 2000 and 1999. The financial statements
referred to in this Section 4.5 (including the related notes, where applicable)
fairly present, and the financial statements referred to in Section 6.8 hereof
will fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount), the results of the
consolidated operations and consolidated financial condition of NewMil and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) comply, and the financial statements referred to in Section 6.8
hereof will comply, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable) has been, and
the financial statements referred to in Section 6.8 hereof will be, prepared in
accordance with GAAP during the periods involved, except as indicated in such
statements or in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. NewMil's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997 and all subsequently filed reports under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act comply in all material respects with the
appropriate requirements for such reports under the Exchange Act, and NewMil has
previously delivered or made available to Nutmeg true, correct and complete
copies of such reports. The books and records of NewMil and New Milford Savings
Bank have been, and are being, maintained in all material respects in accordance
with GAAP and any other applicable legal and accounting requirements.
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4.6 Absence of Certain Changes or Events.
Except as disclosed in NewMil's filings with the SEC on any of Forms 10-K,
10-Q or 8-K during 1999 or 2000, true, correct and complete copies of which have
previously been delivered to Nutmeg, since December 31, 1997, (i) NewMil has not
incurred any material liability, except as contemplated by this Agreement or in
the ordinary course of business consistent with its past practices, and (ii) no
event has occurred which has had, individually or in the aggregate, a Material
Adverse Effect on NewMil.
4.7 Ownership of Nutmeg Common Stock; Affiliates and Associates.
Except as contemplated by this Agreement, neither NewMil nor any of its
affiliates or associates (as defined in the Exchange Act) (i) beneficially own,
directly or indirectly, or (ii) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, more than five percent of the outstanding capital stock of Nutmeg,
excluding the shares of Nutmeg Common Stock issuable pursuant to the Option
Agreement to be executed subsequent to the execution of the Agreement.
4.8 Employee Benefit Plans.
NewMil has heretofore made available for inspection, or delivered (if
requested) to Nutmeg true, correct and complete copies of each employee benefit
plan arrangement or agreement that is maintained as of the date of this
Agreement (the "NewMil Plans") by NewMil or any of its Subsidiaries. No
"accumulated funding deficiency" as defined in Section 302(a)(2) of ERISA or
Section 412 of the Code, whether or not waived, and no "unfunded current
liability" as determined under Section 412(1) of the Code exists with respect to
any NewMil Plan. The NewMil Plans are in compliance in all material respects
with the applicable requirements of ERISA and the Code.
4.9 Agreements with Regulatory Agencies.
Neither NewMil nor any of its affiliates is subject to any cease-and-desist
or other order issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or has adopted any board
resolutions at the request of any Governmental Entity that restricts the conduct
of its business or that in any manner relates to its capital adequacy, its
credit policies, its management or its business, nor has NewMil, nor New Milford
Savings Bank been advised by any Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
4.10 Community Reinvestment Act and Consumer Compliance.
New Milford Savings Bank has received a "satisfactory" or better rating in
its most recent Community Reinvestment Act examination, and New Milford Savings
Bank is not aware of any concern of the Banking Commissioner or FDIC regarding
its compliance with the Community Reinvestment Act or any applicable consumer
compliance laws.
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4.11 Legal Proceedings.
(a) NewMil is not a party to any, and there are no pending or
threatened, legal, administrative, arbitration or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
NewMil or New Milford Savings Bank (other than routine litigation in the
ordinary course of business) or which challenge the validity or propriety of the
transactions contemplated by this Agreement, the Bank Merger Agreement or the
Option Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon NewMil or its assets.
4.12 Taxes and Tax Returns.
NewMil has duly filed all federal and state tax returns required to be
filed by it on or prior to the date hereof (all such returns being accurate and
complete in all material respects) and has duly paid or made provision for the
payment of all material taxes and other governmental charges which have been
incurred or are due or claimed to be due from it by federal and state taxing
authorities on or prior to the date hereof other than taxes or other charges (a)
which (x) are not yet delinquent or (y) are being contested in good faith and
set forth at Section 4.12 of the NewMil Disclosure Schedule and (b) which have
not been finally determined. All liability with respect to the income tax
returns of NewMil has been satisfied for all years to and including 1999. The
IRS has not notified NewMil of, or otherwise asserted, that there are any
material deficiencies with respect to any income tax returns of NewMil. There
are no material disputes pending, or claims asserted for, taxes or assessments
upon NewMil, nor has NewMil been requested to give any currently effective
waivers extending the statutory period of limitation applicable to any federal
or state income tax return for any period. In addition, federal and state
returns which are accurate and complete in all material respects have been filed
by NewMil for all periods for which returns were due with respect to income tax
withholding, social security and unemployment taxes and the amounts shown on
such federal and state returns to be due and payable have been paid in full or
adequate provision therefor has been included by NewMil in its financial
statements as of June 30, 1999 and March 31, 2000. The most recent audit of
NewMil's federal tax returns by the IRS related to the tax return for the year
ended June 30, 1991.
4.13 Compliance with Applicable Laws.
NewMil has complied in all material respects with all Laws applicable to it
or to the operation of its business. NewMil has not received any notice of any
alleged or threatened claim, violation, or liability under any such Laws that
has not heretofore been cured and for which there is no remaining liability.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of Nutmeg.
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During the period from the date of this Agreement and continuing until the
Effective Time, except as expressly contemplated or permitted by this Agreement,
including Section 1.4(b) hereof respecting the sale of the Loan Servicing
Rights, the Bank Merger Agreement or the Option Agreement or with the prior
written consent of NewMil, Nutmeg shall carry on its businesses in the ordinary
course consistent with past practices and consistent with prudent banking
practices. Nutmeg will use its reasonable efforts to (x) preserve its business
organization intact, (y) keep available to itself and NewMil the present
services of the employees of Nutmeg and (z) preserve for itself and NewMil the
goodwill of the customers of Nutmeg and others with whom business relationships
exist. Without limiting the generality of the foregoing, and except as set
forth in the Nutmeg Disclosure Schedule or as otherwise contemplated by this
Agreement or consented to by NewMil in writing, Nutmeg shall not:
(a) declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock except for the payment in cash of (i)
regular quarterly cash dividends on the Nutmeg Common Stock and Nutmeg Preferred
Stock in accordance with Section 5.1(a) of the Nutmeg Disclosure Schedule with
declaration, record and payment dates corresponding to the quarterly dividends
paid by Nutmeg during its fiscal year ended December 31, 1999 (without otherwise
limiting the foregoing, Nutmeg shall be entitled to declare and pay a regular
dividend on the Nutmeg Common Stock if holders of Nutmeg Common Stock who
receive NewMil Common Stock as Merger Consideration would otherwise not be paid
a quarterly cash dividend for that calendar quarter with respect to NewMil
Common Stock so received as Merger Consideration) and (ii) the amount of
dividends on the Nutmeg Preferred Stock accrued in the financial statements of
Nutmeg through the Closing Date if such accrued amount is paid in cash and the
payment thereof does not cause the shareholders' equity of Nutmeg immediately
following such payment to be less than the shareholders' equity reflected on the
March 31, 2000 balance sheet (unaudited) of Nutmeg, in accordance with Section
5.1(a) of the Nutmeg Disclosure Schedule;
(b) (i) split, combine or reclassify any shares of its capital stock
or issue, authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock except upon
the exercise or fulfillment of rights or options issued or existing pursuant to
the Nutmeg Stock Plans in accordance with their present terms, all to the extent
outstanding and in existence on the date of this Agreement, and except pursuant
to the Option Agreement, or (ii) repurchase, redeem or otherwise acquire (except
for the acquisition of Trust Account Shares and DPC Shares, as such terms are
defined in Section 1.4(c) hereof), any shares of the capital stock of Nutmeg, or
any securities convertible into or exercisable for any shares of the capital
stock of Nutmeg;
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of Nutmeg Common Stock pursuant to stock
options or similar rights to acquire Nutmeg Common Stock granted pursuant to the
Nutmeg Stock Plans and outstanding prior to the date of this Agreement, in each
case in accordance with their present terms and (ii) pursuant to the Option
Agreement;
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(d) amend its Certificate of Incorporation, Bylaws or other similar
governing documents;
(e) 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 from, hold substantive discussions or
negotiations with or provide any information to, any person, entity or group
(other than NewMil) concerning any Acquisition Transaction (as defined below).
Notwithstanding the foregoing, Nutmeg may provide information in connection with
a possible Acquisition Transaction if the Board of Directors of Nutmeg following
receipt of written advice of counsel, reasonably determines in the exercise of
its fiduciary duty that such information must be furnished. Nutmeg shall
promptly communicate to NewMil the material terms of any proposal, whether
written or oral, which it may receive in respect of any Acquisition Transaction
and whether it is providing information in connection with, or which may lead
to, an Acquisition Transaction with a third party. Nutmeg will promptly cease
and cause to be terminated any existing activities, discussions or negotiations
previously conducted with any parties other than NewMil with respect to any of
the foregoing. As used in this Agreement, "Acquisition Transaction" shall mean
any offer, proposal or expression of interest relating to (i) any tender or
exchange offer, (ii) merger, consolidation or other business combination
involving Nutmeg, or (iii) the acquisition in any manner of a substantial equity
interest in, or a substantial portion of the assets and/or liabilities, out of
the ordinary course of business, of, Nutmeg other than the transactions
contemplated or permitted by this Agreement, the Bank Merger Agreement and the
Option Agreement, including the sale of the Loan Servicing Rights pursuant to
Section 1.4(b) hereof;
(f) make capital expenditures aggregating in excess of $25,000;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or consolidating with, or
by purchasing an equity interest in or the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets, other than in
connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings, or in the ordinary course of business consistent
with prudent banking practices;
(i) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue or in any of the conditions to the Merger set forth in
Article VII not being satisfied, or in a violation of any provision of this
Agreement, the Bank Merger Agreement or the Option Agreement, except, in every
case, as may be required by applicable law;
(j) change its methods of accounting in effect at December 31, 1999
except as required by changes in GAAP or regulatory accounting principles as
concurred to by NewMil's independent auditors;
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(k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any Plan or
any other agreement, arrangement, plan or policy relating to one or more of its
current or former directors, officers, employees or independent contractors,
(ii) except in the ordinary course of business consistent with past practices,
increase in any manner the compensation of any employee or director or pay any
benefit not required by any plan or agreement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, stock units or performance units or
shares), (iii) enter into, modify or renew any contract, agreement, commitment
or arrangement providing for the payment to any director, officer or employee of
compensation or benefits, (iv) hire any new employee at an annual compensation
in excess of $20,000, (v) except in the ordinary course of business consistent
with past practices, pay expenses of any employees or directors for attending
conventions or similar meetings which conventions or meetings are held after the
date hereof, (vi) promote to a rank of vice president or more senior any
employee, (vii) pay any retention or other bonuses in the aggregate in excess of
$50,000, or any severance payments in the aggregate in excess of $50,000, to
employees, (viii) make any contribution to any Plan that is subject to Title IV
of ERISA in excess of the amount required to satisfy applicable minimum funding
requirements under ERISA and the Code, or (ix) make any nondeductible
contribution to any Plan;
(l) incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity;
(m) sell, purchase, enter into a lease, relocate, open or close any
banking or other office, or file an application pertaining to such action with
any Governmental Entity;
(n) 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 foreclosure, settlements in lieu of foreclosure, or troubled
loan or debt restructuring, in the ordinary course of business consistent with
past banking practices;
(o) make any new loans to, modify the terms of any existing loan to,
or engage in any other transactions (other than routine banking transactions)
with, any Affiliated Person of Nutmeg;
(p) make any investment, or incur deposit liabilities, other than in
the ordinary course of business consistent with past practices, including
deposit pricing, and which would not change the risk profile of Nutmeg based on
its existing deposit and lending policies or make any equity investments;
(q) purchase any loans or sell, purchase or lease any real property,
except for the sale of real estate that is the subject of a casualty loss or
condemnation or the sale of OREO on a basis consistent with past practices;
(r) originate (i) any loans except in accordance with existing Nutmeg
lending policies, (ii) commercial business loans in excess of $250,000, (iii)
unsecured consumer loans in excess of $10,000, (iv) commercial real estate first
mortgage loans in excess of $250,000 as to any
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loan or $250,000 in the aggregate as to related loans, or loans to related
persons, or (v) land acquisition loans to borrowers who intend to construct a
residence on such land in excess of the lesser of 75% of the appraised value of
such land or $100,000, except in each case for loans for which written
applications have been received by Nutmeg as of the date hereof and as set forth
in Section 5.1(r) of the Nutmeg Disclosure Schedule; provided, however, that (x)
Nutmeg may renew existing lines of credit upon substantially the same terms and
conditions in accordance with existing Nutmeg lending policies without prior
consultation with NewMil, and (y) if Nutmeg submits to NewMil a written proposal
for an exception to the lending limitations set forth in this Section 5.1(r),
unless NewMil notifies Nutmeg within five business days after receipt of the
written proposal, NewMil shall be deemed to have consented to the proposal (for
purposes of this provision, notice shall be given in accordance with Section
5.1(r) of the Nutmeg Disclosure Schedule;
(s) make any investments in any equity or derivative securities or
engage in any forward commitment, futures transaction, financial options
transaction, hedging or arbitrage transaction or covered asset trading
activities or make any investments in any investment security with a maturity of
greater than one year;
(t) purchase any mortgage loan servicing rights except in connection
with the performance of three contracts in force on the date of this Agreement,
as listed in Section 5.1(t) of the Nutmeg Disclosure Schedule, that require
purchases of loan servicing rights subsequent to the date of this Agreement; or
(u) agree or commit to do any of the actions set forth in (a) - (t)
above.
The consent of NewMil to any action by Nutmeg that is not permitted by any
of the preceding paragraphs shall be evidenced by a writing signed by the
Chairman, Chief Executive Officer and President or any Senior Vice President of
NewMil.
5.1 A Loan Servicing Rights.
Prior to the Effective Time, Nutmeg shall sell all Loan Servicing Rights
owned by it for cash. The sale shall be on terms and conditions that are usual
and customary in such transactions and shall be accounted for as a sale in
accordance with GAAP. Nutmeg shall, as soon as practicable following the
execution of this Agreement, engage a firm, acceptable to NewMil, experienced in
the sale of loan servicing rights to begin to market the Loan Servicing Rights.
5.2 Covenants of NewMil.
During the period from the date of this Agreement and continuing until the
Effective Time, except as expressly contemplated or permitted by this Agreement
or the Option Agreement or with Nutmeg's prior written consent, NewMil shall
not, and shall not permit New Milford Savings Bank to:
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(a) take any action that will result in (i) any of NewMil's
representations and warranties set forth in this Agreement being or becoming
untrue, unless the failure of such representations or warranties to be true
would not, individually or in the aggregate, have a Material Adverse Effect on
NewMil, or (ii) any of the conditions to the Merger set forth in Article VII not
being satisfied or in a violation of any provision of this Agreement, the Bank
Merger Agreement or the Option Agreement, except, in every case, as may be
required by applicable law;
(b) repurchase shares of NewMil Common Stock in amounts or at prices
that are materially larger or higher than NewMil's past practices respecting
repurchases of NewMil Common Stock;
(c) take any other action that would materially adversely affect the
ability of NewMil and New Milford Savings Bank to consummate the transactions
contemplated by this Agreement; or
(d) declare a stock split or stock dividend.
5.3 Merger Covenants.
Notwithstanding that Nutmeg believes that it has established all
reserves and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, Nutmeg recognizes that may have adopted
different loan, accrual and reserve policies (including loan classifications and
levels of reserves for possible loan losses). In that regard, and in general,
from and after the date of this Agreement to the Effective Time, Nutmeg and
NewMil shall consult and cooperate with each other in order to formulate the
plan of integration for the Merger, including, among other things, with respect
to conforming, based upon such consultation, Nutmeg's loan, accrual and reserve
policies to those policies of NewMil to the extent appropriate, provided, that
any change in Nutmeg's policies in connection with such matters need not be
effected until the parties receive all necessary governmental and stockholder
approvals and consents to consummate the transactions contemplated hereby. To
facilitate the foregoing, Nutmeg shall assign a loan officer to work with a
NewMil loan officer to conform the documentation, information and data in
Nutmeg's loan files with the policies and procedures required by NewMil in its
loan files.
5.4 Compliance with Antitrust Laws.
Each of NewMil and Nutmeg shall use its reasonable best efforts to resolve
objections, if any, which may be asserted with respect to the Merger under
antitrust laws, including, without limitation, the Bank Merger Act and the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Act. In the event a suit is threatened or instituted challenging
the Merger as violative of antitrust laws, each of NewMil and Nutmeg shall use
its reasonable best efforts to avoid the filing of, or resist or resolve such
suit. NewMil and Nutmeg shall use their reasonable best efforts to take such
action as may be required: (a) by the Antitrust Division of the Department of
Justice or the Federal Trade Commission in order to resolve such objections as
either of them may have to the Merger under antitrust laws, or (b) by any
federal or state court of the United States, in any suit brought by a private
party or governmental entity challenging the Merger
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as violative of antitrust laws, in order to avoid the entry of, or to effect the
dissolution of, any injunction, temporary restraining order, or other order
which has the effect of preventing the consummation of the Merger. Reasonable
best efforts shall not include, among other things and to the extent NewMil so
desires, the willingness of NewMil to accept an order agreeing to the
divestiture, or the holding separate, of any assets of NewMil or Nutmeg.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.
(a) Upon the execution and delivery of this Agreement, NewMil and
Nutmeg (as to information to be included therein pertaining to Nutmeg) shall
promptly cause to be prepared and filed with the SEC the Registration Statement
for the purpose of registering the NewMil Common Stock to be issued in the
Merger, and with the OTS the Proxy Statement for the purpose of soliciting votes
on the Merger from the holders of Nutmeg Capital Stock. NewMil and Nutmeg shall
use their reasonable best efforts to have the Registration Statement declared
effective by the SEC and the Proxy Statement approved by the OTS as soon as
possible after the filing. The parties shall cooperate in responding to and
considering any questions or comments from the SEC or OTS staff regarding the
information contained in the Registration Statement or Proxy Statement. If at
any time after the Registration Statement or Proxy Statement is filed with the
SEC or OTS, and prior to the Closing Date, any event relating to Nutmeg is
discovered which should be set forth in an amendment of, or a supplement to, the
Registration Statement or Proxy Statement, Nutmeg shall promptly inform NewMil
and shall furnish NewMil with all necessary information relating to such event
whereupon NewMil shall promptly cause an appropriate amendment to the
Registration Statement or Proxy Statement to be filed with the SEC or OTS. Upon
the effectiveness of such amendment, Nutmeg (if prior to the meeting of
shareholders pursuant to Section 6.3 hereof) will take all necessary action as
promptly as practicable to permit an appropriate amendment or supplement to be
transmitted to its shareholders entitled to vote at such meeting. NewMil shall
also use reasonable 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 the Bank Merger Agreement and Nutmeg shall
furnish all information concerning Nutmeg and the holders of Nutmeg Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the effectiveness of the
Stockholder Agreement). Nutmeg and NewMil shall have the right to review in
advance, and to the extent practicable each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all the
information relating to Nutmeg or NewMil and New Milford Savings Bank, as the
case may be, which appears in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in
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connection with the transactions contemplated by this Agreement; provided,
however, that nothing contained herein shall be deemed to provide either party
with a right to review any information provided to any Governmental Entity on a
confidential basis in connection with the transactions contemplated hereby. In
exercising the foregoing right, each of the parties hereto shall act reasonably
and as promptly as practicable. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other apprised of the status of matters
relating to contemplation of the transactions contemplated herein.
(c) Nutmeg shall, upon request, furnish NewMil with all information
concerning Nutmeg and its directors, officers and shareholders and such other
matters as may be reasonably necessary or advisable in connection with the
Registration Statement, the Proxy Statement or any other statement, filing,
notice or application made by or on behalf of NewMil or New Milford Savings Bank
to any Governmental Entity in connection with the Merger or the other
transactions contemplated by this Agreement.
(d) NewMil and Nutmeg shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such party to believe that there is a reasonable likelihood that
any Requisite Regulatory Approval (as defined in Section 7.1(c) hereof) will not
be obtained or that the receipt of any such approval will be materially delayed
6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, Nutmeg shall accord to the officers, employees,
accountants, counsel and other representatives of NewMil and New Milford Savings
Bank access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, Nutmeg shall make available to NewMil (i) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws or federal or state banking laws and (ii) all other information
concerning its business, properties and personnel as NewMil may reasonably
request. NewMil shall receive minutes of all meetings of the Nutmeg's Board of
Directors and any committees thereof, and of any management committees (except
for the portion of such meetings which relate to the Merger or an Acquisition
Transaction or such other matters deemed confidential ("Confidential Matters")
of Nutmeg). NewMil will hold all such information in confidence to the extent
required by, and in accordance with, the provisions of the confidentiality
agreement which NewMil entered into with Nutmeg dated April 14, 2000 (the
"Confidentiality Agreement").
(b) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, NewMil shall, and shall cause New Milford Savings
Bank to, afford to the officers, employees, accountants, counsel and other
representatives of Nutmeg, access, during
34
normal business hours during the period prior to the Effective Time, to such
information regarding NewMil as shall be reasonably necessary for Nutmeg to
fulfill its obligations pursuant to this Agreement or which may be reasonably
necessary for Nutmeg to confirm that the representations and warranties of
NewMil contained herein are true and correct and that the covenants of NewMil
contained herein have been performed in all material respects. Nutmeg will hold
all such information in confidence to the extent required by, and in accordance
with, the provisions of the Confidentiality Agreement.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
(d) Nutmeg shall provide NewMil with true, correct and complete copies
of all financial and other information provided to directors of Nutmeg in
connection with meetings of their Boards of Directors or committees thereof,
which information shall be provided to NewMil concurrently with its provision to
the directors of Nutmeg.
(e) Nutmeg acknowledges that NewMil may in the future become involved
in the process of acquiring other businesses, banks and financial institutions
and that in connection with such acquisitions, information concerning Nutmeg may
be required to be included in the registration statements, if any, for the sale
of securities of NewMil or in SEC reports in connection with such acquisitions.
Nutmeg agrees to provide NewMil with any information, certificates, documents or
other materials about Nutmeg as are reasonably necessary to be included in such
other SEC reports or registration statements, including registration statements
which may be filed by NewMil prior to the Effective Time. Nutmeg shall use its
reasonable best efforts to cause its attorneys and accountants to provide NewMil
and any underwriters for NewMil with any consents, comfort letters, opinion
letters, reports or information which are necessary to complete the registration
statements and applications for any such acquisition or issuance of securities
NewMil shall reimburse Nutmeg for reasonable expenses thus incurred by Nutmeg
should the transactions contemplated by this Agreement be terminated for any
reason.
6.3 Shareholder Meetings.
Nutmeg and NewMil shall each take all steps necessary to duly call, give
notice of, convene and hold the Special Meeting and NewMil Special Meeting
within 50 days after the Registration Statement becomes effective and the Proxy
Statement is approved for circulation by the OTS for the purpose of voting upon
the approval of this Agreement, the Merger and the other transactions
contemplated hereby. Management and the Board of Directors of each of Nutmeg
and NewMil shall recommend to their respective shareholders approval of this
Agreement, the Merger, and the other transactions contemplated hereby, together
with any matters incident thereto, and shall oppose any third party proposal or
other action that is inconsistent with this Agreement or the consummation of the
transactions contemplated hereby, unless the Board of Directors of either party
reasonably determines, based upon the written advice of its legal counsel, that
such recommendation or opposition, as the case may be, would constitute a breach
of the exercise of its fiduciary duty. Nutmeg and NewMil shall coordinate and
cooperate with respect to the foregoing matters.
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6.4 Legal Conditions to Merger.
Each of NewMil and Nutmeg shall use their reasonable best efforts (a) to
take, or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party with
respect to the Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this Agreement and (b) to
obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by Nutmeg or
NewMil in connection with the Merger and the other transactions contemplated by
this Agreement.
6.5 Stock Exchange Listing.
NewMil shall cause the shares of NewMil Common Stock to be issued in the
Merger and pursuant to options referred to herein to be approved for quotation
on Nasdaq (or such other exchange on which the NewMil Common Stock has become
listed, or approved for listing) prior to or at the Effective Time.
6.6 Employees; Employment and Other Agreements.
(a) To the extent permissible under the applicable provisions of the
Code and ERISA, for purposes of crediting periods of service for eligibility to
participate and vesting, but not for benefit accrual purposes, under the New
Milford Savings Bank 401(k) Plan (but not under the New Milford Savings Bank
Defined Benefit Pension Plan), in the case of individuals who are employees of
Nutmeg at the Effective Time and who become employees of New Milford Savings
Bank, periods of service with Nutmeg before the Effective Time shall be treated
as if such service had been with New Milford Savings Bank. Individuals who are
employees of Nutmeg at the Effective Time and who become employees of New
Milford Savings Bank shall be eligible to participate in any other employee
benefit plan (within the meaning of ERISA Section 3(3)) (but not the New Milford
Savings Bank defined benefit pension plan, the benefit accruals for which have
been suspended since 1993 for all employees) maintained by New Milford Savings
Bank on the same terms and conditions as apply generally to other employees of
New Milford Savings Bank.
(b) New Milford Savings Bank expects, subject to its normal hiring
process, to offer a position of at-will employment to each of Nutmeg's employees
with direct customer contact except those who duplicate functions served by
employees of New Milford Savings Bank, at their existing branch location. In
addition, New Milford Savings Bank will use its reasonable best efforts in
connection with reviewing applicants for employment positions to give Nutmeg
employees who are not offered positions at the Effective Time the same
consideration as is afforded NewMil or New Milford Savings Bank employees for
such position in accordance with existing formal or informal policies.
(c) Following the Merger, NewMil agrees that it shall honor the
existing change of control contracts with the three senior officers of Nutmeg
that are specifically listed at Section 3.12(a) of the Nutmeg Disclosure
Schedule; provided, however, that in making the foregoing
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agreement, except as otherwise required by law, NewMil will honor such contracts
only to the extent that, as represented at Section 3.11 hereof, none of such
contracts, nor any other Plan, program, agreement or other arrangement, either
individually or collectively, provides for any payment by Nutmeg that would not
be deductible under Code Sections 162(a)(1), 162(m) or 404 or that would
constitute a "parachute payment" within the meaning of Code Section 280G.
6.7 Indemnification.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative, in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of Nutmeg (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 (i) the fact that he is or was a director, officer or employee of
Nutmeg or any of their respective predecessors or (ii) 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
defend against and respond thereto to the extent permitted by applicable law and
the Certificate of Incorporation and Bylaws of Nutmeg. It is understood and
agreed that after the Effective Time, NewMil shall indemnify and hold harmless,
as and to the fullest extent permitted by applicable law and the Certificate of
Incorporation and Bylaws of NewMil or the Charter and Bylaws of New Milford
Savings Bank, as the case may be, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses) judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action, suit, proceeding or
investigation, and in the event of any such threatened or actual claim, action,
suit, proceeding or investigation (whether asserted or arising before or after
the Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to NewMil; provided, however, that (1) NewMil shall have the right
to assume the defense thereof and upon such assumption NewMil 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 NewMil elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises the Indemnified Parties
that there are issues which raise conflicts of interest between NewMil and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to NewMil, and NewMil shall pay the reasonable fees and expenses of
such counsel for the Indemnified Parties, (2) NewMil shall be obligated pursuant
to this paragraph to pay for only one firm of counsel for each Indemnified
Party, and (3) NewMil shall not be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably withheld or
delayed). NewMil shall have no obligation to advance expenses incurred in
connection with a threatened or pending action, suit or preceding in advance of
final disposition of such action, suit or proceeding, unless (i) NewMil would be
permitted to advance such expenses pursuant to the General Corporation Law of
the State of Delaware (the "Delaware Corporation Law") and NewMil's Certificate
of Incorporation or Bylaws, and (ii) NewMil receives an undertaking by the
Indemnified Party to repay such amount if it is determined that such party is
not entitled to be indemnified by NewMil pursuant to the Delaware Corporation
Law and NewMil's Certificate of Incorporation or Bylaws. Any Indemnified Party
wishing to claim indemnification under this Section 6.7, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify NewMil
thereof;
37
provided, however, that the failure to so notify shall not affect the
obligations of NewMil under this Section 6.7 except to the extent such failure
to notify materially prejudices NewMil.
(b) NewMil shall use commercially reasonable efforts to cause the
persons serving as officers and directors of Nutmeg immediately prior to the
Effective Time to be covered by a directors and officers liability insurance
policy ("Tail Insurance") of substantially the same coverage and amounts
containing terms and conditions which are generally not less advantageous than
Nutmeg's current policy with respect to acts or omissions occurring prior to the
Effective Time which were committed by such officers and directors in their
capacity as such for an aggregate premium cost for the Tail Insurance of not
more than $30,000 and for a period not less than three years.
6.8 Subsequent Interim and Annual Financial Statements.
As soon as reasonably available, but in no event more than 45 days after
the end of each fiscal quarter (other than the fourth fiscal quarter), NewMil
will deliver to Nutmeg its Quarterly Reports on Form 10-Q as filed with the SEC
under the Exchange Act, and Nutmeg will deliver promptly to NewMil its Form 10-
QSB as filed with the OTS under the Exchange Act. NewMil and Nutmeg shall each
deliver to the other its Current Reports on Form 8-K and Annual Reports on Form
10-K or 10-KSB promptly after filing such reports with the SEC or OTS as well as
any shareholder communications set forth by either party to its shareholders.
6.9 Additional Agreements.
In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or the Bank
Merger Agreement, or to vest the Surviving Bank with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and Nutmeg's Subsidiaries shall take all such necessary action as may
be reasonably requested by NewMil.
6.10 Advice of Changes.
NewMil and Nutmeg shall promptly advise the other party of any change or
event that, individually or in the aggregate, has or would be reasonably likely
to have a Material Adverse Effect on it or to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein.
From time to time prior to the Effective Time, Nutmeg will promptly supplement
or amend its disclosure schedule delivered in connection with the execution of
this Agreement to reflect any matter which, if existing, occurring or known at
the date of this Agreement, would have been required to be set forth or
described in such disclosure schedule or which is necessary to correct any
information in such disclosure schedule which has been rendered inaccurate
thereby. No supplement or amendment to such disclosure schedule shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Sections 7.2(a) hereof, as the case may be, or the compliance by Nutmeg with
the covenants set forth in Section 5.1 hereof.
6.11 Current Information.
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During the period from the date of this Agreement to the Effective Time,
Nutmeg will cause one or more of its designated representatives to confer on a
regular and frequent basis (not less than monthly) with representatives of
NewMil and to report the general status of the ongoing operations of Nutmeg.
Nutmeg will promptly notify NewMil of any material change in the normal course
of business or in the operation of the properties of Nutmeg and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of litigation involving Nutmeg, and will keep NewMil fully informed of such
events.
6.12 Execution and Authorization of Bank Merger Agreement.
Prior to the Effective Time, (a) NewMil shall approve the Bank Merger
Agreement as the sole shareholder of New Milford Savings Bank, and (b) New
Milford Savings Bank and Nutmeg shall execute and deliver the Bank Merger
Agreement.
6.13 Change in Structure.
NewMil may elect to modify the structure of the transactions contemplated
by this Agreement as noted herein so long as (i) there are no material adverse
federal income tax consequences to the Nutmeg shareholders as a result of such
modification, (ii) the consideration to be paid to the Nutmeg shareholders under
this Agreement is not thereby changed or reduced in amount, (iii) such
modification will not materially change the rights or benefits of any director,
officer or employee of Nutmeg provided in this Agreement, and (iv) such
modification will not be reasonably likely to delay materially or jeopardize
receipt of any Requisite Regulatory Approvals. In the event that NewMil elects
to change the structure of the Merger, the parties agree to modify this
Agreement and the various exhibits hereto to reflect such revised structure. In
such event, NewMil shall prepare appropriate amendments to this Agreement and
the exhibits hereto for execution by the parties hereto. NewMil and Nutmeg
agree to cooperate fully with each other to effect such amendments.
6.14 Transaction Expenses of Nutmeg.
(a) For planning purposes, Nutmeg shall, within 15 days from the date
hereof, provide NewMil with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by Nutmeg in connection with this
transaction, including the fees and expenses of counsel, accountants, investment
bankers and other professionals. Nutmeg shall promptly notify NewMil if or when
it determines that it will expect to exceed its budget.
(b) Promptly after the execution of this Agreement, Nutmeg shall ask
all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements. Nutmeg shall accrue and/or
pay all of such amounts as soon as possible.
(c) Nutmeg shall advise NewMil monthly of all out-of-pocket expenses
which Nutmeg has incurred in connection with this transaction.
39
(d) NewMil, in reasonable consultation with Nutmeg, shall make all
arrangements with respect to the printing and mailing of the Proxy Statement.
NewMil, if it deems necessary, also shall engage (at NewMil's expense) a proxy
solicitation firm to assist in the solicitation of proxies for the Special
Meeting of Nutmeg's shareholders. Nutmeg agrees to cooperate as to such
matters.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval.
This Agreement, the Merger and the other transactions contemplated
hereby shall have been approved and adopted by the affirmative vote of the
holders of at least two-thirds of the issued and outstanding shares of Nutmeg
Capital Stock entitled to vote thereon (including a majority vote of each of the
Common Stock and Preferred Stock shares), and the affirmative vote of a majority
of the votes cast in person or by proxy by holders of the issued and outstanding
shares of NewMil Common Stock entitled to vote thereon.
(b) Stock Exchange Listing.
The shares of NewMil Common Stock which shall be issued in the Merger
(including the NewMil Common Stock that may be issued upon exercise of the
options referred to in Section 1.6 hereof) upon consummation of the Merger shall
have been authorized for quotation on the Nasdaq (or such other exchange on
which the NewMil Common Stock may become listed).
(c) Other Approvals.
All regulatory approvals required to consummate the transactions
contemplated hereby shall have been obtained and shall remain in full force and
effect and all statutory waiting periods in respect thereof shall have expired
(all such approvals and the expiration of all such waiting periods being
referred to herein as the "Requisite Regulatory Approvals"). No Requisite
Regulatory Approval shall contain a non-customary condition that NewMil
reasonably determines to be burdensome or otherwise alter the benefits for which
it bargained in this Agreement.
(d) 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.
40
(e) No Injunctions or Restraints; Illegality.
No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger or any of the other transactions
contemplated by this Agreement, the Bank Merger Agreement or the Option
Agreement shall be in effect. No statute, rule, regulation, order, injunction
or decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restricts or makes illegal consummation of
the Merger.
(f) Federal Tax Opinion.
NewMil and Nutmeg shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
or PricewaterhouseCoopers, LLP an opinion to NewMil and Nutmeg, in form and
substance reasonably satisfactory to NewMil and Nutmeg, substantially to the
effect that on the basis of facts, representations, and assumptions set forth in
such opinion which are consistent with the state of facts existing at the time
of such opinion, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and the receipt
by shareholders of Nutmeg of Merger Consideration consisting of NewMil Common
Stock will not result in the recognition of gain or loss by such shareholders
for federal income tax purposes. In rendering such opinion, such counsel may
require and, to the extent such counsel deems necessary or appropriate, may rely
upon representations made in certificates of officers of Nutmeg, NewMil, New
Milford Savings Bank, their respective affiliates and others.
7.2 Conditions to Obligations of NewMil and New Milford Savings Bank.
The obligation of NewMil and New Milford Savings Bank to effect the Merger
is also subject to the satisfaction or waiver by NewMil at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties.
The representations and warranties of Nutmeg set forth in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on
Nutmeg. Such determination of aggregate Material Adverse Effect shall be made
as if there were no materiality qualifications in such representations and
warranties. NewMil shall have received a certificate signed on behalf of Nutmeg
by the President of Nutmeg to the foregoing effect.
(b) Performance of Covenants and Agreements.
Nutmeg shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement, including, but
not limited to, the sale of the
41
Loan Servicing Rights in accordance with Section 5.1(a) hereof, at or prior to
the Closing Date. NewMil shall have received a certificate signed on behalf of
Nutmeg by the President of Nutmeg to such effect.
(c) Nutmeg Shareholders' Equity
The shareholders' equity reflected on the balance sheet of Nutmeg
immediately following the sale of the Loan Servicing Rights (unaudited) shall be
equal to or greater than the shareholders' equity reflected on the March 31,
2000 balance sheet (unaudited) of Nutmeg, exclusive of any increase in
shareholders' equity attributable to the exercise of any options by Nutmeg
option holders in the intervening period.
(d) Consents under Agreements.
The consent, approval or waiver of each person (other than the
Requisite Regulatory Approvals) whose consent or approval shall be required in
connection with the transactions contemplated hereby or in order to permit the
succession by the Surviving Bank pursuant to the Merger to any obligation, right
or interest of Nutmeg under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument shall have been
obtained except for those, the failure of which to obtain, will not result in a
Material Adverse Effect on the Surviving Bank.
(e) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(f) Legal Opinion.
NewMil shall have received the opinion of Day, ▇▇▇▇▇ & ▇▇▇▇▇▇, counsel
to Nutmeg, dated the Closing Date, in the form attached hereto as Exhibit D. As
to any matter in such opinion which involves matters of fact, such counsel may
rely upon the certificates of officers and directors of Nutmeg and of public
officials, reasonably acceptable to NewMil.
(g) Accountant's Comfort Letter.
Nutmeg shall have caused to be delivered on the respective dates
thereof to NewMil "comfort letters" from ▇▇▇▇▇▇ and Monde, Nutmeg's independent
public accountants, dated the date on which the Registration Statement or last
amendment thereto shall become effective, and dated the date of the Closing
(defined in Section 9.1 hereof), and addressed to NewMil and Nutmeg, with
respect to Nutmeg's financial data presented in the Registration Statement,
which letters shall be based upon Statements on Auditing Standards Nos. 72 and
76.
7.3 Conditions to Obligations of Nutmeg.
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The obligation of Nutmeg to effect the Merger is also subject to the
satisfaction or waiver by Nutmeg at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties.
The representations and warranties of NewMil set forth in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on
NewMil. Such determination of aggregate Material Adverse Effect shall be made
as if there were no materiality qualifications in such representations and
warranties. Nutmeg shall have received a certificate signed on behalf of NewMil
by each of the Chairman, Chief Executive Officer and President of NewMil to the
foregoing effect.
(b) Performance of Covenants and Agreements.
NewMil and New Milford Savings Bank shall have each performed in all
material respects all covenants and agreements required to be performed by it
under this Agreement at or prior to the Closing Date. Nutmeg shall have
received a certificate signed on behalf of NewMil by the Chairman, Chief
Executive Officer and President of NewMil and New Milford Savings Bank to the
foregoing effect.
(c) Consents under Agreements.
The consent or approval or waiver of each person (other than the
Requisite Regulatory Approvals) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument to which NewMil or New Milford Savings Bank is a party or is
otherwise bound shall have been obtained, except for those, the failure of which
to obtain, will not result in a Material Adverse Effect on NewMil.
(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(e) Legal Opinion.
Nutmeg shall have received the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP,
counsel to NewMil, dated the Closing Date, in the form attached hereto as
Exhibit E. As to any matter in such opinion which involves matters of fact,
such counsel may rely upon the certificates of officers and directors of NewMil
and of public officials, reasonably acceptable to Nutmeg.
(f) Updated Fairness Opinion.
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Nutmeg shall have received from MB&D for inclusion in the Proxy
Statement an update of the Fairness Opinion received by it prior to the
execution of this Agreement.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with the
Merger by the shareholders of Nutmeg or NewMil:
(a) by mutual consent of NewMil and Nutmeg in a written instrument,
if the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either NewMil or Nutmeg upon written notice to the other party
30 days after the date on which any request or application for a Requisite
Regulatory Approval shall have been denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 30-day period following such denial or
withdrawal the parties agree to file, and have filed with the applicable
Governmental Entity, a petition for rehearing or an amended application,
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 8.1(b), if such denial or request or
recommendation for withdrawal shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(c) by either NewMil or Nutmeg if the Merger shall not have been
consummated on or before March 31, 2001, unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants and agreements of such party
set forth herein;
(d) by NewMil or by Nutmeg (provided that either is not in breach of
its obligations hereof) if the approval of the shareholders of such party
required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the required vote at a duly held meeting of
shareholders or at any adjournment or postponement thereof;
(e) by either NewMil or Nutmeg (provided that the terminating party
is not then in breach of any representation, warranty, covenant or other
agreement contained herein that, individually or in the aggregate, would give
the other party the right to terminate this Agreement) if there shall have been
a breach of any of the representations or warranties set forth in this Agreement
on the part of the other party, if such breach, individually or in the
aggregate, has had or is likely to have a Material Adverse Effect on the
breaching party, and such breach shall not have been cured within 30 days
following receipt by the breaching party of written notice of such breach from
the other party hereto or such breach, by its nature, cannot be cured prior to
the Closing;
44
(f) by either NewMil or Nutmeg (provided that the terminating party
is not then in breach of any representation, warranty, covenant or other
agreement contained herein that, individually or in the aggregate, would give
the other party the right to terminate this Agreement) if there shall have been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, and such breach shall not have been
cured within 30 days following receipt by the breaching party of written notice
of such breach from the other party hereto or such breach, by its nature, cannot
be cured prior to the Closing; and
(g) by either party, if the management of the other party or its
Board of Directors, for any reason, (i) fails to call and hold within 50 days of
the effectiveness of the Registration Statement the Special Meeting or New Mil
Special Meeting to consider and approve this Agreement, the Merger and the other
transactions contemplated hereby, (ii) fails to recommend to shareholders the
approval of this Agreement, the Merger and the transactions contemplated hereby,
(iii) fails to oppose any third party proposal that is inconsistent with the
transactions contemplated by this Agreement or (iv) violates Section 5.1(e) of
this Agreement or would have violated Section 5.1(e) but for the fiduciary duty
exception.
8.2 Effect of Termination.
In the event of termination of this Agreement by either NewMil or Nutmeg,
as provided in Section 8.1 hereof, this Agreement shall forthwith become void
and have no effect except (i) the last sentences of Sections 6.2(a) and 6.2(b)
and Sections 8.2, 9.2 and 9.3 hereof shall survive any termination of this
Agreement, and (ii) notwithstanding anything to the contrary contained in this
Agreement, no party shall be relieved or released from any liabilities or
damages arising out of its willful or intentional breach of any provision of
this Agreement.
8.3 Amendment.
Subject to compliance with applicable law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Board of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the shareholders of Nutmeg or NewMil; provided,
however, that after any approval of the transactions contemplated by this
Agreement by Nutmeg's shareholders, there may not be, without further approval
of such shareholders, any amendment of this Agreement which reduces the amount
or changes the form of the consideration to be delivered to Nutmeg shareholders
hereunder other than as contemplated by this Agreement. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.4 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b)waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, and (c) waive compliance with any of the agreements
or conditions contained
45
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing.
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. at the main offices of
NewMil on the tenth business day after the date on which all of the conditions
contained in Section 7.2 hereof, to the extent not waived, are satisfied or at
such other date, place and time as the parties may agree (the "Closing Date").
9.2 Nonsurvival of Representations, Warranties, Covenants and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement (other than
pursuant to the Option Agreement, which shall terminate in accordance with its
terms) shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Effective Time.
9.3 Expenses; Breakup Fee.
All costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense. All filing and other fees paid to the SEC in connection with this
Agreement shall be borne by NewMil. In the event that this Agreement is
terminated by either NewMil or Nutmeg by reason of a breach of the other
pursuant to Sections 8.1(e), (f) or (g) hereof, the other party shall pay all
documented, reasonable costs and expenses up to $150,000 incurred by the
terminating party in connection with this Agreement and the transactions
contemplated hereby, plus, in the case of Nutmeg, a breakup fee of $300,000 or,
in the case of NewMil, a breakup fee of $500,000 ($600,000 if all of the Loan
Servicing Rights are subject to an irrevocable contract for sale at the time the
Agreement is so terminated). Except as set forth in the next sentence, in the
event that this Agreement is terminated by either party under Section 8.1(d)
hereof by reason of the other party's shareholders not having given any required
approval, the other party shall pay all documented, reasonable costs and
expenses up to $150,000 incurred by the first party in connection with this
Agreement and the transactions contemplated hereby. In the event that this
Agreement is terminated by NewMil under Section 8.1(d) by reason of Nutmeg
shareholders not having given any required approval, and there shall have been
prior to the Special Meeting a "Third Party Public Event" (as defined below),
Nutmeg shall pay all documented, reasonable costs and expenses up to $150,000
incurred by NewMil in connection with this Agreement and the transactions
contemplated hereby, plus a breakup fee of $300,000. For purposes of this
Section 9.3, a "Third Party Public Event" shall refer to any of the following
events: (i) any
46
person (as defined at Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the
rules and regulations thereunder), other than NewMil or any NewMil Subsidiary,
shall have made a bona fide proposal to Nutmeg or, by a public announcement or
written communication that is or becomes the subject of public disclosure, to
Nutmeg's shareholders to engage in an Acquisition Transaction (including,
without limitation, any situation in which any person other than NewMil or any
NewMil Subsidiary shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement under the
Securities Act, with respect to a tender offer or exchange offer to purchase any
shares of Nutmeg Common Stock such that, upon consummation of such offer, such
person would have beneficial ownership of 10.% or more of the then outstanding
shares of Nutmeg Common Stock); or (ii) any director, officer, 5% or greater
shareholder or affiliate of Nutmeg shall have, by any means which becomes the
subject of public disclosure, communicated opposition to this Agreement, the
Merger or other transactions contemplated hereby, or otherwise takes action to
influence the vote of Nutmeg shareholders against this Agreement, the Merger and
the transactions contemplated hereby.
9.4 Notice.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by registered or certified
mail (return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to NewMil or New Milford Savings Bank, to:
New Milford Savings Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman and CEO
with a copy (which shall not constitute notice) to:
Tyler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
CityPlace ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III Esq.
and
(b) if to Nutmeg Savings & Loan Association, to:
Nutmeg Savings & Loan Association
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President & CEO
47
with a copy (which shall not constitute notice,) to:
Day, ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
CityPlace
Hartford, CT 06103
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
and to
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
9.5 Interpretation.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or an Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include" "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
9.6 Counterparts.
This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
9.7 Entire Agreement.
This Agreement (including the disclosure schedules, documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings. both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement, the Bank Merger Agreement, the Option Agreement and
the Nutmeg Stockholder Agreement.
9.8 Governing Law.
This Agreement shall be governed and construed in accordance with the laws
of the State of Delaware, without regard to any applicable conflicts of law
rules.
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9.9 Enforcement of Agreement.
The parties hereto agree that irreparable damage would occur in the event
that the provisions of this Agreement were not performed in accordance with its
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions thereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.10 Severability.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
9.11 Publicity.
Except as otherwise required by law or the rules of NASDAQ (or such other
exchange on which the NewMil Common Stock may become listed), so long as this
Agreement is in effect, Nutmeg shall not issue or cause the publication of any
press release or other public announcement with respect to, or otherwise make
any public statement concerning, the transactions contemplated by this
Agreement, the Bank Merger Agreement, the Option Agreement or the Nutmeg
Stockholder Agreement without prior review by and the consent of NewMil, which
consent shall not be unreasonably withheld.
9.12 Assignment; Limitation of Benefits.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise specifically provided in Section 6.7 hereof,
this Agreement (including the documents and instruments referred to herein) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder, and the covenants, undertakings and agreements set out
herein shall be solely for the benefit of, and shall be enforceable only by, the
parties hereto and their permitted assigns.
9.13 Additional Definitions.
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In addition to any other definitions contained in this Agreement, the
following words, terms and phrases shall have the following meanings when used
in this Agreement.
"Affiliated Person": any director, officer or 5% or greater shareholder,
-----------------
spouse or other person living in the same household of such director, officer or
shareholder, or any company, partnership or trust in which any of the foregoing
persons is an officer, 5% or greater shareholder, general partner or 5% or
greater trust beneficiary.
"Laws": any and all statutes, laws, ordinances, rules, regulations, orders,
----
permits, judgments, injunctions, decrees, case law and other rules of law
enacted, promulgated or issued by any Governmental Entity.
"Material Adverse Effect": with respect to NewMil or Nutmeg, as the case
-----------------------
may be, means a condition, event, change or occurrence that is reasonably likely
to have a material adverse effect upon (A) the financial condition, results of
operations, business or properties of NewMil or Nutmeg (other than as a result
of changes in laws or regulations or accounting rules of general applicability
or interpretations thereof), or (B) the ability of NewMil or Nutmeg to perform
its obligations under, and to consummate the transactions contemplated by, this
Agreement, the Bank Merger Agreement and, in the case of Nutmeg, the Option
Agreement.
"Subsidiary": with respect to any party means any corporation, partnership
----------
or other organization, whether incorporated or unincorporated, which is
consolidated with such party for financial reporting purposes.
50
IN WITNESS WHEREOF, NewMil, New Milford Savings Bank and Nutmeg have caused
this Agreement to be executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
NEWMIL BANCORP, INC.
ATTEST:
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------- ------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman, President and
Chief Executive Officer
NEW MILFORD SAVINGS BANK
ATTEST:
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------- ------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman, President and
Chief Executive Officer
NUTMEG FEDERAL SAVINGS & LOAN
ASSOCIATION COMPANY
ATTEST:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------- ------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman of the Board
51