As filed with the Securities and Exchange Commission on June 26, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NEW ENGLAND COMMUNITY BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
0-14550
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
06-1116165
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
176 Broad Street
P.O. Box 130
Windsor, Connecticut 06095
Tel. (860) 610-3600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
David A. Lentini
176 Broad Street
P.O. Box 130
Windsor, Connecticut 06095
Tel. (860) 683-4601
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
With copies of all communications to:
William H. Cuddy Paul G. Hughes
Day, Berry & Howard LLP Cummings & Lockwood
CityPlace I Four Stamford Plaza, P.O. Box 120
Hartford, Connecticut 06103-3499 Stamford, Connecticut 06904
Telephone (860) 275-0217 Telephone (203) 351-4207
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: At the Effective Time of the Merger, as defined in the Plan and
Agreement of Merger, dated as of March 19, 1998 (the "Merger Agreement"), by and
among New England Community Bancorp, Inc. ("NECB") New England Bank & Trust
Company ("NEBT") and Bank of South Windsor ("BSW"), attached as APPENDIX A to
the Joint Proxy Statement-Prospectus.
If any of the securities being registered on this Form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Title of each class of securities Proposed Proposed
to be registered Amount to be maximum offering maximum aggregate Amount of registration fee
registered price per unit offering price
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$.10 per share 1,229,325 (1) $31.00 (2) $38,109,074 (2) $2,370.00 (3)
===================================================================================================================================
</TABLE>
(1)The number of shares of NECB Common Stock issuable in exchange for
shares of BSW Common Stock in connection with the Merger, assuming the exchange
ratio of 1.3204 shares of NECB Common Stock for each share of BSW Common Stock
and certain options. The Registrant also registers hereby such additional shares
of its common stock as may be issuable in connection with the Merger pursuant to
the exchange ratio adjustment provisions set out in the Merger Agreement.
(2) Estimated solely for purposes of calculating the registration fee for
the filing on Form S-4 pursuant to Rule 457(f)(1), calculated on the basis of
the average of the high and low prices of BSW Common Stock reported in the
consolidated reporting system of the American Stock Exchange on June 24, 1998, a
date within five business days prior to the filing of this registration
statement.
<PAGE>
(3) Pursuant to Rule 457(o), the registration fee is based upon the
maximum aggregate offering price computed in accordance with Rule 457(f)(1),
which will not be affected by an increase in the number of shares registered in
accordance with the exchange ratio adjustment provisions set out in the Merger
Agreement. In accordance with Rule 457(b), the fee of $5,750.00 paid by NECB
pursuant to Section 14(g)(1)(A) of the Securities Exchange Act of 1934 upon the
filing of its preliminary proxy materials on May 29, 1998, has been credited
against the registration fee payable in connection with this filing.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
176 BROAD STREET
P.O. BOX 130
WINDSOR, CT 06095
(860) 610-3600
July __, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
New England Community Bancorp, Inc. ("NECB"), to be held on August 10, 1998 at
8:00 a.m. at the executive offices of NECB, 176 Broad Street, Windsor,
Connecticut, at which time you will be asked to consider and vote on a proposal
to approve a Plan and Agreement of Merger (the "Merger Agreement") by and among
NECB, NECB's wholly-owned subsidiary, New England Bank & Trust Company, and Bank
of South Windsor ("BSW") and the transactions contemplated thereby. The Merger
Agreement provides, among other things, that BSW will be merged with and into
New England Bank & Trust Company and that NECB shall provide for the election of
two BSW directors to the Board of Directors of NECB. If the Merger Agreement is
approved, upon the Merger's becoming effective, each share of BSW common stock
issued and outstanding will be converted into the right to receive 1.3204 shares
of common stock of NECB and cash in lieu of fractional shares (subject to
adjustment as provided in the Merger Agreement).
The Board of Directors of NECB has unanimously approved the Merger
Agreement and has determined that the Merger is fair to, and in the best
interests of, the stockholders of NECB. In addition, HAS Associates, Inc., as
financial advisor to NECB, has delivered its opinion to the Board of Directors
of NECB and indicated that the Merger Agreement is fair, from a financial point
of view, to the stockholders of NECB. Therefore, the Board of Directors of NECB
unanimously recommends that the stockholders of NECB vote "FOR" the approval of
the Merger Agreement.
I urge you to consider carefully these important matters which are
described in the accompanying Joint Proxy Statement-Prospectus. In order to
ensure that your vote is represented at the Special Meeting, please indicate
your choice on the enclosed proxy form, sign, date and return it in the enclosed
envelope. A prompt response will be appreciated. If you attend the Special
Meeting, you may revoke your proxy and vote in person if you wish.
Very truly yours,
David A. Lentini
Chairman, President and CEO
<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
176 BROAD STREET
P.O. BOX 130
WINDSOR, CT 06095
(860) 610-3600
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on August 10, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Special Meeting") of New England Community Bancorp, Inc. ("NECB") will be held
at 8:00 a.m. Eastern Daylight Time on August 10, 1998 at the executive offices
of NECB, 176 Broad Street, Windsor, Connecticut for the following purpose:
1. To consider and vote upon a proposal (i) to adopt a Plan and
Agreement of Merger, dated as of March 19, 1998 (the "Merger
Agreement"), by and among NECB, New England Bank & Trust Company,
a wholly-owned subsidiary of NECB ("NEBT"), and Bank of South
Windsor ("BSW"), which provides, among other things, for NECB to
acquire BSW through the merger of BSW into NEBT pursuant to which
each outstanding share of Common Stock, $5.00 par value per
share, of BSW ( the "BSW Common Stock") would be exchanged for
1.3204 shares of Common Stock, $.10 par value per share, of NECB
(the "NECB Common Stock"), and cash in lieu of fractional shares,
subject to adjustment as provided in the Merger Agreement and
described in the accompanying Joint Proxy Statement-Prospectus,
and (ii) to approve the transactions contemplated thereby,
including the issuance of shares of NECB Common Stock pursuant
thereto.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or adjournments thereof.
Only holders of NECB Common Stock of record at the close of business
on June 29, 1998 will be entitled to notice of and to vote at the Special
Meeting or any adjournment thereof. A Joint Proxy Statement-Prospectus
containing more detailed information with respect to the matters to be
considered at the Special Meeting (including a copy of the Merger Agreement
attached as Appendix A thereto) accompany and form part of this notice.
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING, PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. ANY PROXY GIVEN MAY
BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF. IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR NAME,
YOU WILL NEED ADDITIONAL DOCUMENTATION FROM THE HOLDERS OF RECORD TO VOTE YOUR
SHARES PERSONALLY AT THE SPECIAL MEETING.
By Order of the Board of Directors,
Angelina J. McGillivray
Secretary
Windsor, Connecticut
July ___, 1998
<PAGE>
BANK OF SOUTH WINDSOR
1695 ELLINGTON ROAD
SOUTH WINDSOR, CT 06074-4514
(860) 644-4412
JULY __, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of Bank of South Windsor, a Connecticut-chartered commercial bank ("BSW"), at
8:00 a.m., Eastern Time, on August 10, 1998 at the Quality Inn, Route 83,
Vernon, Connecticut (the "Special Meeting").
At the Special Meeting, you will be asked to approve a Plan and
Agreement of Merger, dated as of March 19, 1998 (the "Merger Agreement"), by and
among New England Community Bancorp, Inc., a Delaware corporation ("NECB"), New
England Bank & Trust Company, a Connecticut-chartered commercial bank and a
wholly-owned subsidiary of NECB ("NEBT"), and BSW, pursuant to which BSW will
merge with and into NEBT (the "Merger"). The Merger will be consummated on the
terms and subject to the conditions set forth in the Merger Agreement, which is
described in, and a copy of which is attached to, the enclosed Joint Proxy
Statement-Prospectus, which you are urged to read carefully. If the Merger
Agreement is approved, the shareholders of BSW will receive in connection with
the Merger 1.3204 shares of Common Stock of NECB, $.10 par value per share (the
"NECB Common Stock"), in exchange for each share of Common Stock, $5.00 par
value per share, of BSW (the "BSW Common Stock"), and cash in lieu of fractional
shares, subject to adjustment as provided in the Merger Agreement and subject to
the rights of dissenting shareholders of BSW to pursue their dissenters' rights
in accordance with Connecticut law (as more fully set forth in the accompanying
Joint Proxy Statement-Prospectus under the caption "THE MERGER
AGREEMENT--Dissenters' Rights" and in Appendix E thereto).
Consummation of the Merger is subject to certain conditions, including
the receipt of certain regulatory approvals and approval of the Merger Agreement
by the affirmative vote of two-thirds of the outstanding shares of BSW Common
Stock and a majority of the total votes cast in person or by proxy by NECB
stockholders entitled to vote thereon assuming a quorum is present at the
meeting of stockholders of NECB.
The Board of Directors of BSW believes the Merger is in the best
interests of the shareholders of BSW and recommends that you vote in favor of
the Merger Agreement and the consummation of the transactions contemplated
thereby. In addition, Bank Analysis Center, Inc., financial advisor to BSW, has
delivered its opinion to the Board of Directors of BSW that the Merger Agreement
is fair, from a financial point of view, to the shareholders of BSW.
<PAGE>
Enclosed are a Notice of Special Meeting of Shareholders, a Joint Proxy
Statement-Prospectus containing a discussion of the Merger Agreement and the
Merger, and a Proxy Card. PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED.
IT IS VERY IMPORTANT THAT YOUR SHARES OF BSW COMMON STOCK BE
REPRESENTED AT THE SPECIAL MEETING. FAILURE TO RETURN A PROPERLY EXECUTED PROXY
CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE MERGER AGREEMENT. ACCORDINGLY, EVEN IF YOU PLAN TO BE PRESENT AT THE
SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE PROXY
CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE. IF YOU DECIDE TO
ATTEND THE SPECIAL MEETING, YOU MAY VOTE YOUR SHARES IN PERSON WHETHER OR NOT
YOU HAVE PREVIOUSLY SUBMITTED A PROXY.
IF THE MERGER AGREEMENT IS APPROVED AND THE MERGER IS CONSUMMATED, YOU
WILL BE SENT A LETTER OF TRANSMITTAL WITH INSTRUCTIONS FOR SURRENDERING YOUR
CERTIFICATES REPRESENTING SHARES OF BSW COMMON STOCK. PLEASE DO NOT SEND YOUR
SHARE CERTIFICATES UNTIL YOU RECEIVE THESE MATERIALS.
Very truly yours,
Barbara Barbour
Chairwoman
<PAGE>
BANK OF SOUTH WINDSOR
1695 ELLINGTON ROAD
SOUTH WINDSOR, CT 06074-4514
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on August 10, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Special Meeting") of Bank of South Windsor ("BSW") will be held at 8:00 a.m.
Eastern Time on August 10, 1998 at the Quality Inn, Route 83, Vernon,
Connecticut for the following purpose:
1. To consider and vote upon a proposal (i) to adopt a Plan and
Agreement of Merger, dated as of March 19, 1998 (the "Merger
Agreement"), by and among New England Community Bancorp, Inc.
("NECB"), New England Bank & Trust Company, a wholly-owned
subsidiary of NECB ("NEBT"), and BSW, which provides, among other
things, for NECB to acquire BSW through the merger of BSW into
NEBT pursuant to which each outstanding share of Common Stock,
$5.00 par value per share, of BSW (the "BSW Common Stock") would
be exchanged for 1.3204 shares of Common Stock, $.10 par value
per share, of NECB, and cash in lieu of fractional shares,
subject to adjustment as provided in the Merger Agreement, and
(ii) to approve the transactions contemplated thereby.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or adjournments thereof.
Only holders of BSW Common Stock of record at the close of business on
June 29, 1998 will be entitled to notice of and to vote at the Special Meeting
or any adjournment thereof.
Under Connecticut law, shareholders of BSW have dissenters' rights with
respect to the Merger. See "THE MERGER AGREEMENT--Dissenters' Rights" in the
accompanying Joint Proxy Statement-Prospectus and APPENDIX E to such Joint Proxy
Statement-Prospectus which contains a copy of Section 36a-125(h) of the Banking
Law of Connecticut and Sections 33-855 to 33-872 of the Connecticut Business
Corporation Act addressing dissenters' rights available to BSW shareholders.
A Joint Proxy Statement-Prospectus containing more detailed information
with respect to the matters to be considered at the Special Meeting (including a
copy of the Merger Agreement attached as APPENDIX A thereto) accompanies and
forms part of this notice.
Approval of the Merger Agreement requires the affirmative vote of the
holders of two-thirds of the issued and outstanding shares of BSW Common Stock.
If you are a shareholder whose shares are not registered in your name, you will
need additional documentation from the holder of record of your shares to vote
personally at the Special Meeting. WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
SPECIAL MEETING, PLEASE SIGN,
<PAGE>
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. ANY PROXY
GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE
EXERCISE THEREOF.
THE BOARD OF DIRECTORS OF BSW RECOMMENDS THAT THE SHAREHOLDERS OF BSW
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
By Order of the Board of Directors,
Solomon Kerensky
Secretary
South Windsor, Connecticut
July __, 1998
A FAILURE TO VOTE WITH RESPECT TO THE MERGER AGREEMENT BY NOT RETURNING THE
ENCLOSED PROXY CARD, BY ABSTAINING, BY INCORRECTLY FILLING OUT THE PROXY CARD OR
BY OTHERWISE FAILING TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS
A VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT.
YOU SHOULD NOT DELIVER STOCK CERTIFICATES REPRESENTING YOUR SHARES OF BSW COMMON
STOCK AT THIS TIME. EXCHANGE OF SHARES WILL BE HANDLED PURSUANT TO A TRANSMITTAL
LETTER FURNISHED BY AN APPOINTED EXCHANGE AGENT AT A LATER TIME, ALL AS MORE
FULLY DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT-PROSPECTUS.
<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
PROSPECTUS
For 1,229,325 Shares of Common Stock, par value $.10 per share
NEW ENGLAND COMMUNITY BANCORP, INC. BANK OF SOUTH WINDSOR
JOINT PROXY STATEMENT
This Joint Proxy Statement-Prospectus is being furnished to the
stockholders of New England Community Bancorp, Inc. ("NECB") and Bank of South
Windsor ("BSW") in connection with the solicitation of proxies by their
respective Boards of Directors for use at the Special Meeting of Stockholders of
NECB (the "NECB Special Meeting") to be held at 8:00 a.m. on August 10, 1998 at
the executive offices of NECB, 176 Broad Street, Windsor, Connecticut and at any
adjournments or postponements thereof, and the Special Meeting of Shareholders
of BSW (the "BSW Special Meeting") to be held at 8:00 a.m. on August 10, 1998
at the Quality Inn, Route 83, Vernon, Connecticut, and at any adjournments or
postponements thereof.
At the BSW Special Meeting, the shareholders of BSW will consider and
vote upon a proposal to approve the Plan and Agreement of Merger, dated as of
March 19, 1998 (the "Merger Agreement"), by and among NECB, New England Bank &
Trust Company ("NEBT"), a Connecticut-chartered commercial bank and wholly-owned
subsidiary of NECB, and BSW and the transactions contemplated thereby. The
Merger Agreement provides, among other things, for NECB to acquire BSW through
the merger (the "Merger") of BSW into NEBT. At the Effective Time (as
hereinafter defined) of the Merger, each share of Common Stock, par value $5.00
per share, of BSW (the "BSW Common Stock") issued and outstanding immediately
prior to the Effective Time (except for shares held by BSW as treasury shares,
shares owned by any direct or indirect subsidiary of BSW, shares held by NECB or
NEBT other than in a fiduciary or trust capacity for the benefit of third
parties, and shares as to which dissenters' rights have been asserted) shall be
converted into and exchangeable for Common Stock, par value $.10 per share, of
NECB (the "NECB Common Stock") and cash in lieu of fractional shares, based on
an exchange ratio of 1.3204 shares of NECB Common Stock for each share of BSW
Common Stock (the "Exchange Ratio"), subject to adjustment as described below
("Per Share Merger Consideration"). The Exchange Ratio shall be adjusted to
result in the issuance to BSW shareholders of shares of NECB Common Stock with a
value equal to $31.00 per share of BSW Common Stock in the event that:
(i) the product of the Average Closing Price (as hereinafter defined)
multiplied by the Exchange Ratio is less than $31.00, and
(ii) the percentage decline in the closing price of NECB Common Stock
from March 19, 1998 to the date on which the last of the regulatory approvals
required for the consummation of the Merger occurs (the "Price Period") exceeds
the percentage decline in the average closing share price of the institutions
reported in the SNL Securities LLC New England Banks Index for the Price Period
by more than 10%.
The "Average Closing Price" is the average of the daily per share
closing prices of NECB Common Stock supplied by the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") and reported in THE
WALL STREET JOURNAL as of the end of the 20 consecutive trading-day period
ending on the date on which the last of the regulatory approvals required for
the consummation of the Merger occurs.
For a description of the Merger Agreement, which is included in its
entirety as APPENDIX A to this Joint Proxy Statement-Prospectus, see "THE MERGER
AGREEMENT."
Consummation of the Merger is subject to certain conditions, including
the receipt of certain regulatory approvals and the approval of the Merger
Agreement by the affirmative vote of two-thirds of the outstanding shares of BSW
Common Stock at the BSW Special Meeting and a majority of the total votes cast
thereon by holders of NECB Common Stock at the NECB Special Meeting.
Giving effect to the Merger and the issuance of shares of NECB Common
Stock contemplated thereby, it is expected that approximately 17% of the shares
of NECB Common Stock to be outstanding following the Merger will have been
issued to shareholders of BSW in the Merger.
<PAGE>
Shareholders of BSW are entitled to dissenters' rights under the
Connecticut General Statutes. BSW shareholders who wish to exercise their
dissenters' rights must follow the procedures described under "THE MERGER
AGREEMENT--Dissenters' Rights" and APPENDIX E.
At the NECB Special Meeting, the stockholders of NECB will consider and
vote upon a proposal to approve the Merger Agreement and the transactions
contemplated thereby including the issuance of shares of NECB Common Stock to
BSW shareholders. NECB stockholders do not have dissenters' rights in connection
with the merger.
This Joint Proxy Statement-Prospectus also constitutes the Prospectus
of NECB in respect of the shares of NECB Common Stock to be issued in the
Merger. THIS DOCUMENT DOES NOT SERVE AS A PROSPECTUS TO COVER ANY RESALES OF
NECB COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER. PERSONS WHO ARE
CONSIDERED "AFFILIATES" OF BSW OR NECB UNDER APPLICABLE SECURITIES LAWS WILL BE
SUBJECT TO RESTRICTIONS ON THEIR ABILITY TO RESELL NECB COMMON STOCK RECEIVED BY
THEM IN THE MERGER.
NECB COMMON STOCK IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY, NOR IS SUCH
STOCK GUARANTEED BY ANY BANK OR BANK HOLDING COMPANY.
The outstanding shares of NECB Common Stock are traded over the counter
on the Nasdaq National Market System (the "Nasdaq NM") under the symbol "NECB."
The outstanding shares of BSW Common Stock are traded on the American Stock
Exchange (the "AMEX") under the symbol "BSW."
ALL INFORMATION AND STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE
HEREIN WITH RESPECT TO BSW WERE SUPPLIED BY BSW. ALL INFORMATION AND STATEMENTS
CONTAINED OR INCORPORATED BY REFERENCE HEREIN WITH RESPECT TO NECB WERE SUPPLIED
BY NECB.
This Joint Proxy Statement-Prospectus and the accompanying proxy
materials are first being mailed to shareholders of NECB and BSW on or about
July , 1998. NECB and BSW shareholders are urged to read this document
carefully.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT-PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF NECB COMMON STOCK OFFERED HEREBY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE FULL VALUE THEREOF. SHARES OF
NECB COMMON STOCK ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A
BANK OR SAVINGS ASSOCIATION.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN WHAT IS INCLUDED OR INCORPORATED BY REFERENCE IN THIS
DOCUMENT. IF SUCH INFORMATION OR REPRESENTATION IS GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS DOCUMENT AT ANY TIME, NOR ANY DISTRIBUTION
OF SHARES OF NECB COMMON STOCK, SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE
<PAGE>
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
NEITHER THE DELIVER OF THIS JOINT PROXY STATEMENT-PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF NECB OR BSW
SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
-------------------------------
THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS IS JULY ___, 1998.
<PAGE>
Table of Contents
-----------------
Page
AVAILABLE INFORMATION ......................................................iii
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE..........................iv
SUMMARY .....................................................................1
The Merger...........................................................1
Parties to the Merger................................................1
Proposed Olde Port Acquisition by NECB...............................1
The Special Meetings.................................................1
Votes Required and Record Dates......................................2
Recommendations of Boards of Directors; Opinions of Financial
Advisors............... ...........................................2
Effective Time.......................................................3
Interests of Certain Persons in the Merger...........................3
The Stock Option Agreement; Shareholder Agreements...................3
Conditions; Regulatory Approvals.....................................4
Fees and Expenses under Certain Circumstances........................4
Anticipated Accounting Treatment.....................................4
Federal Income Tax Consequences .....................................5
Certain Differences in Shareholders' Rights..........................5
Dissenters' Rights...................................................5
Markets and Market Prices............................................5
Actual and Pro Forma Capital Ratios..................................6
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA...........................7
ACTUAL AND PRO FORMA PER SHARE DATA...........................................8
SELECTED CONSOLIDATED FINANCIAL DATA OF NECB..................................9
SELECTED CONSOLIDATED FINANCIAL DATA OF BSW..................................11
INTRODUCTION.................................................................13
THE SPECIAL MEETINGS.........................................................14
General.............................................................14
Record Dates; Votes Required........................................15
Proxies.............................................................16
THE MERGER...................................................................16
Background of the Merger............................................16
Recommendation of the NECB Board and NECB's Reason for the Merger...18
Opinion of NECB's Financial Advisor.................................22
Recommendation of the BSW Board and Reasons for the Merger..........22
Opinion of BSW's Financial Advisor..................................23
THE MERGER AGREEMENT.........................................................25
General.............................................................26
Effective Time......................................................26
Effect of the Merger................................................27
Interests of Certain Persons in the Merger..........................27
Shareholder Agreements..............................................29
The Stock Option Agreement..........................................30
<PAGE>
Procedures for Exchange of Certificates.............................30
Conditions to Consummation of the Merger............................31
Regulatory Approvals Required for the Merger........................33
Conduct of Business Pending the Merger..............................34
Termination; Amendment; Extension and Waiver........................36
Employee Matters....................................................38
Fees and Expenses Under Certain Circumstances.......................38
Anticipated Accounting Treatment....................................39
Management and Operation After the Merger...........................39
Resales of NECB Common Stock Received in the Merger.................40
Trading Market for NECB Common Stock................................40
Federal Income Tax Consequences.....................................40
Dissenters' Rights..................................................41
PRO FORMA FINANCIAL INFORMATION..............................................44
DESCRIPTION OF NECB'S CAPITAL STOCK..........................................54
NECB Common Stock...................................................54
NECB Preferred Stock................................................54
Absence of Cumulative Voting .....................................54
Market for NECB Common Stock and Related Security Holder Matters....55
COMPARISON OF THE RIGHTS OF SHAREHOLDERS ....................................55
Authorized Capital Stock............................................56
Issuance of Capital Stock...........................................56
Voting Rights.......................................................56
Dividends and Other Distributions...................................56
Size and Classification of Board of Directors.......................56
Director Vacancies and Removal of Directors.........................57
Duties of Directors.................................................57
Meetings of Shareholders............................................57
Shareholder Nominations of Directors................................58
Shareholder Action Without a Meeting................................58
Amendment of Governing Instruments..................................59
Sale of Assets, Merger and Consolidations ..........................59
Appraisal Rights....................................................59
Dissolution.........................................................59
Conflict-of-Interest Transactions...................................60
Limitation of Director Liability....................................60
Indemnification of Directors and Officers...........................60
State Antitakeover Statutes.........................................61
VALIDITY OF SECURITIES.......................................................62
EXPERTS ....................................................................62
SHAREHOLDER PROPOSALS........................................................63
OTHER MATTERS................................................................63
Plan and Agreement of Merger.........................................APPENDIX A
Stock Option Agreement...............................................APPENDIX B
Fairness Opinion of HAS Associates, Inc..............................APPENDIX C
Fairness Opinion of Bank Analysis Center, Inc........................APPENDIX D
Sections 36a-125(h) and 33-85 to 33-872, inclusive, of the
Connecticut General Statutes....................................APPENDIX E
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AVAILABLE INFORMATION
NECB is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other information
with the Securities and Exchange Commission (the "Commission"). The reports,
proxy and information statements and other information filed by NECB with the
Commission can be inspected and copied at public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices at 7 World Trade Center, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission also maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
(such as NECB) which file electronically with the Commission. The address of the
site is http//www.sec.gov. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The NECB Common Stock is listed on
the Nasdaq NM under the symbol NECB.
BSW is also subject to the information requirements of the Exchange
Act, and in accordance therewith files reports, proxy and information
statements, and other information with the Federal Deposit Insurance Corporation
(the "FDIC"). The reports, proxy and information statements and other
information filed by BSW with the FDIC can be inspected and copied at public
reference facilities maintained by the FDIC at its Public Files in the
Registration and Disclosure Section at Room F-6043, 1776 F Street, N.W.,
Washington, D.C. 20006. The facsimile number is (202) 898-3909. Copies of such
material may be ordered from such Section by telephone request at prescribed
rates by calling (202) 898-8920. In addition, BSW Common Stock is listed on the
AMEX and certain material as to BSW can be inspected at the offices of the AMEX,
86 Trinity Place, New York, New York 10006-1881.
NECB has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereof, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of NECB Common Stock to be issued pursuant to the Merger Agreement. As
permitted by the rules and regulations of the Commission, this Joint Proxy
Statement-Prospectus does not contain all the information set forth in the
Registration Statement and exhibits thereto. Such additional information may be
inspected and copied as set forth above. For further information with respect to
NECB and the securities offered thereby, reference is made to the Registration
Statement, including the exhibits thereto. Statements contained in this Joint
Proxy Statement- Prospectus or in any document incorporated by reference in this
Joint Proxy Statement-Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS OF NECB BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. STOCKHOLDERS OF
BSW AND OF NECB MAY OBTAIN THESE DOCUMENTS (NOT INCLUDING EXHIBITS THERETO,
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN) WITHOUT CHARGE UPON REQUEST TO: NEW ENGLAND
COMMUNITY BANCORP, INC., P.O. BOX 130, 176 BROAD STREET, WINDSOR, CONNECTICUT
06095 AND THE BSW SPECIAL MEETING, ATTENTION: VIRGINIA B. SPRINGER (TELEPHONE
NUMBER (860) 610- 4602). IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS IN
ADVANCE OF THE NECB SPECIAL MEETING AND THE BSW SPECIAL MEETING, ANY REQUEST
SHOULD BE MADE BY AUGUST 3, 1998.
THIS JOINT PROXY STATEMENT-PROSPECTUS ALSO INCORPORATES DOCUMENTS OF
BSW BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
STOCKHOLDERS OF BSW AND OF NECB MAY OBTAIN THESE DOCUMENTS (NOT INCLUDING
EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) WITHOUT CHARGE UPON REQUEST
TO: BANK OF SOUTH WINDSOR, 1695 ELLINGTON ROAD, SOUTH WINDSOR, CONNECTICUT
06074-4514, ATTENTION: SECRETARY (TELEPHONE NUMBER (860) 648-6004). IN ORDER TO
ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS IN ADVANCE OF THE NECB SPECIAL MEETING
AND THE BSW SPECIAL MEETING, ANY REQUEST SHOULD BE MADE BY AUGUST 3, 1998.
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No dealer, salesperson or other individual has been authorized to give
any information or make any representations not contained in this Joint Proxy
Statement-Prospectus in connection with the Merger and offering covered by this
Joint Proxy Statement-Prospectus. If given or made, such information or
representations must not be relied upon as having been authorized by NECB or
BSW. This Joint Proxy Statement-Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, NECB Common Stock in any jurisdiction
where, or to any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this Joint Proxy Statement- Prospectus nor
any issuance of securities made pursuant to the Merger Agreement shall, under
any circumstances, create an implication that there has not been any change in
the facts set forth in this Joint Proxy Statement-Prospectus or in the affairs
of NECB or BSW since the date hereof.
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE
The following documents filed by NECB with the Commission are hereby
incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1997,
filed on March 31, 1998;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
filed on May 15, 1998;
3. Amendment No. 1 to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998, filed on June 12, 1998;
4. Current Reports on Form 8-K filed with the Commission on January 7,
1998, February 26, 1998, March 24, 1998 and June 25, 1998 and the
Current Report on Form 8-K/A filed with the Commission on March 13,
1998; and
5. The description of NECB's Common Stock contained in the
Registration Statement on Form 8-A filed by NECB to register NECB
Common Stock pursuant to Section 12(g) of the Exchange Act,
including any amendment or reports filed for the purposes of
updating such description.
A copy of NECB's Annual Report to Stockholders for the year ended
December 31, 1997 ("NECB's Annual Report") and NECB's Proxy Statement for its
Annual Meeting held on April 21, 1998 and each of the documents incorporated
herein by reference are available to any holder of BSW Common Stock or NECB
Common Stock, including any beneficial owner, free of charge upon written or
oral request to NECB at the address and telephone number set forth above under
"AVAILABLE INFORMATION."
The following documents, or portions thereof indicated, initially filed
by BSW with the FDIC and subsequently filed by NECB with the Commission, are
incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1997;
and
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
A copy of BSW's Annual Report on Form 10-K ("BSW 10-K") filed with the
FDIC for the year ended December 31, 1997 and BSW's Quarterly Report on Form
10-Q filed with the FDIC for the quarter ended March 31, 1998 ("BSW 10-Q")
accompany each copy of this Joint Proxy Statement-Prospectus delivered to
holders of BSW Common Stock. Additional copies of both of these documents are
available to any holder of BSW Common Stock or NECB Common Stock, including any
beneficial owner, free of charge upon written or oral request to BSW at the
address and telephone number as set forth above under "AVAILABLE INFORMATION."
All documents filed by NECB pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act subsequent to the date hereof and prior to the earlier
of (i) the date of the NECB Special Meeting and the BSW Special Meeting or (ii)
the termination of the Merger Agreement, are hereby incorporated by reference
into this Joint Proxy Statement-Prospectus and shall be deemed a part hereof
from the date of filing of such documents. Documents filed
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<PAGE>
by BSW pursuant to Sections 12(i), 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date hereof and prior to the earlier of (i) the date of the
NECB Special Meeting and the BSW Special Meeting or (ii) the termination of the
Merger Agreement, are hereby incorporated herein by reference and shall be
deemed a part hereof from the date of filing of such documents. Such documents
shall also be filed by NECB on Forms 8-K.
Any statement contained herein, in any amendment or supplement hereto
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of the Registration
Statement and this Joint Proxy Statement-Prospectus to the extent that a
statement contained herein, in any amendment or supplement hereto or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement, this Joint Proxy
Statement-Prospectus or any supplement thereto.
CONTAINED WITHIN AND INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT-PROSPECTUS ARE CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND ARE THUS
PROSPECTIVE. SUCH FORWARD LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES
AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
FUTURE RESULTS EXPRESS OR IMPLIED BY SUCH STATEMENTS. SUCH FACTORS INCLUDE, BUT
ARE NOT LIMITED TO: CHANGES IN INTEREST RATES, REGULATION, COMPETITION AND THE
LOCAL AND REGIONAL ECONOMY.
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SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Joint Proxy Statement- Prospectus. Reference is made to, and
this summary is qualified in all respects by, the more detailed information
appearing elsewhere in this Joint Proxy Statement-Prospectus, the Appendices
hereto and the documents referred to herein.
THE MERGER
Pursuant to the Merger Agreement, BSW will be merged into NEBT with
NEBT as the surviving entity. A copy of the Merger Agreement is attached as
APPENDIX A to this Joint Proxy Statement-Prospectus. Upon consummation of the
Merger, each outstanding share of BSW Common Stock, except for (i) shares held
by BSW as treasury shares; (ii) shares owned by any direct or indirect
subsidiary of BSW; (iii) shares held by NECB or NEBT other than in a fiduciary
or trust capacity for the benefit of third parties and (iv) shares as to which
dissenters' rights have been asserted (the "Excluded Shares"), will be converted
into and exchangeable for NECB Common Stock and cash in lieu of fractional
shares, based on an exchange ratio of 1.3204 shares of NECB Common Stock for
each share of BSW Common Stock (the "Exchange Ratio"), subject to adjustment
(the "Per Share Merger Consideration"). NECB shall adjust the Exchange Ratio to
result in a value equal to $31.00 per share of BSW Common Stock in the event
that (i) the product of the Average Closing Price multiplied by the Exchange
Ratio is less than $31.00 and (ii) the percentage decline in the closing price
of NECB Common Stock from March 19, 1998 to the date on which the last of the
regulatory approvals required for the consummation of the Merger occurs (the
"Price Period") exceeds the percentage decline in the average closing share
price of those institutions as reported in the SNL Securities LLC New England
Banks Index by more than ten percent (10.0%) for the Price Period.
As of June 23, 1998 there were 5,171,626 shares of NECB Common Stock
outstanding. The number of estimated shares to be issued in the Olde Port
merger, as described below, are not included in such number. It is estimated
that approximately 1,229,325 shares will be issued in the Merger.
PARTIES TO THE MERGER
NECB. NECB is a multi-bank bank holding company registered under the
Bank Holding Company Act of 1956, as amended. NECB was organized under the laws
of Delaware in 1985 and directly owns three banking subsidiaries, NEBT, The
Equity Bank and Community Bank (together, the "Subsidiaries"), all
Connecticut-chartered commercial banks. The FDIC insures the deposits of the
Subsidiaries in accordance with the Federal Deposit Insurance Act. NECB's
principal executive officers are located at 176 Broad Street, P.O. Box 130,
Windsor, Connecticut 06095; telephone (860) 610-3600.
BSW. BSW was chartered on May 18, 1988 under the laws of the State of
Connecticut. BSW is subject to regulation by the State of Connecticut Department
of Banking and by the FDIC. BSW commenced operations on May 15, 1989 and
conducts business from its headquarters located at 1695 Ellington Road, South
Windsor, Connecticut 06074-4514; telephone (860) 644-4412. BSW operates two
other banking offices located in East Hartford and Vernon, Connecticut,
respectively.
PROPOSED OLDE PORT ACQUISITION BY NECB
On February 10, 1998, the Boards of Directors of NECB and Olde Port
Bank & Trust Company, a state chartered trust company incorporated under the
laws of New Hampshire ("Olde Port"), approved a definitive agreement (the "Olde
Port Agreement") whereby NECB will organize a New Hampshire interim bank which
will merge into Olde Port with Olde Port as the survivor under the name "Olde
Port Bank & Trust." Under the Olde Port Agreement, Olde Port will become a
wholly-owned subsidiary of NECB and all of the outstanding shares of Olde Port
common stock (except for shares held by Olde Port as treasury shares, shares
owned by any direct or indirect subsidiary of Olde Port, shares held by NECB or
the Subsidiaries other than in a fiduciary or trust capacity for the benefit of
third parties and shares as to which dissenters' rights have been perfected)
will be converted into and exchangeable for merger consideration consisting of
that number of shares of NECB Common Stock, and cash in lieu of fractional
shares, equal to $200.00 in value per share of Olde Port common stock.
<PAGE>
Each certificate previously representing a share of Olde Port common
stock will represent the right to receive the per share merger consideration
into which that share of Olde Port common stock has been converted plus cash in
lieu of any fractional share. The final exchange ratio is 8.6674 which will
result in the issuance of 594,061 shares of NECB Common Stock.
As of March 31, 1998, Olde Port had total assets of $49.8 million,
loans of $30.7 million, deposits of $40.5 million and shareholders' equity of
$4.9 million.
THE SPECIAL MEETINGS
NECB. The NECB Special Meeting will be held at 8:00 a.m. on August 10,
1998 at the executive offices of NECB, 176 Broad Street, Windsor, Connecticut.
The purpose of the NECB Special Meeting is to consider and vote upon the Merger
Agreement and the transactions contemplated thereby, including the issuance of
shares of NECB Common Stock pursuant to the Merger Agreement (the "Merger
Proposal").
BSW. The BSW Special Meeting will be held at 8:00 a.m. on August 10,
1998 at the Quality Inn, Route 83, Vernon, Connecticut. The purpose of the BSW
Special Meeting is to consider and vote upon the Merger Agreement and the
transactions contemplated thereby.
VOTES REQUIRED AND RECORD DATES
NECB. Only NECB stockholders of record at the close of business on June
29, 1998 (the "NECB Record Date") will be entitled to vote at the NECB Special
Meeting. Each stockholder is entitled to one vote for each share of NECB Common
Stock held. The affirmative vote of a majority of the votes cast at the NECB
Special Meeting by a quorum of the holders of NECB Common Stock is required to
approve the Merger Proposal under the rules of the Nasdaq NM in order for NECB
to maintain its listing on the Nasdaq NM. As of the NECB Record Date, there were
shares of NECB Common Stock outstanding and entitled to be voted.
The directors and executive officers of NECB beneficially owned as of
June 23, 1998 541,283 shares or 10.5% of the outstanding NECB Common Stock.
All of the executive officers and directors who are also stockholders of NECB
have indicated that they intend to vote in favor of the Merger Proposal.
BSW. Only BSW shareholders of record at the close of business on June
29, 1998 (the "BSW Record Date") will be entitled to vote at the BSW Special
Meeting. Each shareholder is entitled to one vote for each share of BSW Common
Stock held. The affirmative vote of the holders of two-thirds of the shares of
BSW Common Stock outstanding on the BSW Record Date is required to approve the
Merger Agreement. As of the BSW Record Date, there were __________ shares of BSW
Common Stock outstanding and entitled to be voted.
The directors and executive officers of BSW beneficially owned, as of
June 18, 1998, 167,679 shares or 17.5% of the outstanding BSW Common Stock. All
of the executive officers and all of the directors of BSW who are shareholders
of BSW have agreed to vote to approve the Merger Agreement.
RECOMMENDATIONS OF BOARDS OF DIRECTORS; OPINIONS OF FINANCIAL ADVISORS
NECB. The Board of Directors of NECB (the "NECB Board") believes that
the Merger is fair to and in the best interests of the stockholders of NECB and
unanimously recommends that the stockholders vote "FOR" the approval of the
Merger Proposal. In reaching its decision, the NECB Board was advised by HAS
Associates, Inc.
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<PAGE>
("HAS"), NECB's financial advisor, to the effect that as of March 19, 1998, the
date of HAS' initial opinion and June 23, 1998, the date of HAS' updated
opinion, and based upon and subject to the matters stated therein, the
consideration to be paid by NECB to BSW shareholders in the Merger was fair,
from a financial point of view, to the holders of NECB Common Stock. A copy of
HAS' June 23, 1998 opinion is attached to this Joint Proxy Statement- Prospectus
as APPENDIX C. NECB stockholders are urged to read HAS' opinion and the
discussion of the opinion set forth under "THE MERGER--Opinion of NECB's
Financial Advisor" in their entirety. See "THE MERGER- Recommendation of the
NECB Board of Directors and NECB's Reasons for the Merger."
BSW. The Board of Directors of BSW (the "BSW Board") has approved the
Merger Agreement by the unanimous vote of the directors present at the BSW Board
meeting convened therefore, has determined that the Merger is fair to and in the
best interests of BSW and its shareholders and recommends that holders of BSW
Common Stock vote "FOR" the approval of the Merger Agreement and the
transactions contemplated thereby. In reaching its decision to approve the
Merger Agreement, the BSW Board consulted with its legal and financial advisors
regarding the terms of the proposed transaction. In reaching its decision, the
BSW Board was advised by Bank Analysis Center, Inc. ("BAC"), BSW's financial
advisor, to the effect that as of the date of March 19, 1998, the date of BAC's
initial opinion and June 24, 1998, the date of BAC's updated opinion, and based
upon and subject to the matters stated therein, the consideration to be paid by
NECB to BSW shareholders in the Merger was fair, from a financial point of view,
to the holders of BSW Common Stock. A copy of BAC.'s opinion is attached to this
Joint Proxy Statement- Prospectus as APPENDIX D. BSW shareholders are urged to
read BAC's opinion and the discussion of the opinion set forth under "THE
MERGER--Opinion of BSW's Financial Advisor" in their entirety. See "THE
MERGER--Recommendation of the BSW Board of Directors and Reasons For the
Merger."
EFFECTIVE TIME
The Merger will become effective at 11:59 p.m. Eastern Standard Time on
the date on which a copy of the Merger Agreement is filed with the Secretary of
the State of the State of Connecticut, certified by the Connecticut Banking
Commissioner (the "Banking Commissioner"), along with the Banking Commissioner's
approval of the Merger (the "Effective Time"). If the Effective Time does not
occur by March 31, 1999, either BSW or NECB may abandon the Merger and terminate
the Merger Agreement. See "THE MERGER AGREEMENT--Conditions to Consummation of
the Merger" and "--Regulatory Approvals Required for the Merger."
If the Merger is approved by the shareholders of NECB and BSW, and NECB
and BSW receive the required state and federal regulatory approvals, subject to
certain conditions described herein, the Effective Time is expected to occur
during the third quarter of 1998.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
NECB, NEBT and Mr. David Lentini, Chairman, President and Chief
Executive Officer of NECB have certain interests in the Merger as shareholders
of BSW and, in the case of Mr. Lentini, as the holder of options to acquire
shares of BSW Common Stock. Certain members of the BSW Board and management of
BSW have certain interests in the Merger in addition to their interests
generally as shareholders of BSW. Such additional interests are described in
"THE MERGER AGREEMENT--Interests of Certain Persons in the Merger."
THE STOCK OPTION AGREEMENT; SHAREHOLDER AGREEMENTS
As a condition to the parties' entry into the Merger Agreement, on
March 19, 1998, NECB and BSW entered into a Stock Option Agreement (the "Stock
Option Agreement") in the form of APPENDIX B hereto, granting NECB the right to
purchase up to 215,000 shares of BSW Common Stock at a price of $12.00 per
share, if any of certain events set forth therein occur.
NECB and certain shareholders of BSW have entered into shareholder
agreements (the "Shareholder Agreements") whereby each shareholder who is a
party to a Shareholder Agreement agrees to vote all of his or her shares of BSW
Common Stock in favor of the Merger and any other matters relating thereto
presented for approval of the shareholders of BSW and agrees to vote such shares
against the approval of any other agreement providing for a merger,
consolidation, sale of assets or other business combination of BSW with any
person or entity other than NECB or an affiliate of NECB. The Shareholder
Agreements cover 167,011 shares of BSW Common Stock.
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CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is subject to various conditions, including
receipt of the shareholder approvals solicited hereby, receipt of the necessary
regulatory approvals, and satisfaction of other customary closing conditions.
The regulatory approvals and consents necessary to consummate the
Merger include the approval of the FDIC and the Banking Commissioner. The
application to the FDIC was filed June 11, 1998 and the application to the
Banking Commissioner was filed June 16, 1998. Both approvals are pending. See
"THE MERGER AGREEMENT--Regulatory Approvals Required for the Merger."
FEES AND EXPENSES UNDER CERTAIN CIRCUMSTANCES
NO SOLICITATION OF TRANSACTIONS. BSW has agreed in the Merger Agreement
that BSW will not solicit, approve or recommend to its shareholders, or
undertake or enter into, with or without shareholder approval, either as the
surviving or disappearing or the acquiring or acquired corporation, any other
merger, consolidation, asset acquisition, tender offer or other takeover
transaction, or furnish or cause to be furnished any information concerning its
business, properties or assets to any person or entity (other than NECB)
interested in any such transaction (except for directors and executive officers
of BSW and such other persons as may be required by law), and BSW will not
authorize or permit any officer, director, employee, investment banker or other
representative, directly or indirectly, to solicit, encourage or support any
offer from any person or entity (other than NECB) to acquire substantially all
of the assets of BSW, to acquire 10% or more of the outstanding stock of BSW, to
enter into an agreement to merge with BSW, or to take any other action that
would have substantially the same effect as the foregoing, without the written
consent of NECB (any such solicitation, approval, undertaking, authorization,
permission or other action referred to in this sentence being sometimes referred
to as an "Unauthorized Action"). If the Merger is not consummated in accordance
with the terms set forth in the Merger Agreement because of any such action or
omission by BSW, BSW shall on demand pay to NECB the sum of (a) NECB's
out-of-pocket expenses, including without limitation, reasonable attorney,
accountant and investment banker fees and expenses, incurred by NECB in
connection with the Merger and the transactions provided for in the Merger
Agreement plus (b) a sum as liquidated damages, provided, however, that the
total amount of such fees and liquidated damages shall not exceed $400,000. The
foregoing restrictions do not preclude the directors of BSW from taking actions
which they determine, in the exercise of their fiduciary duties, are in the best
interest of the BSW shareholders. However, if they take any Unauthorized Action,
BSW will be responsible for the aforementioned fees and liquidated damages.
BREACHES OF REPRESENTATIONS AND WARRANTIES. If either BSW or NECB fails
to perform any material covenant or agreement in the Merger Agreement, or if any
representation or warranty by BSW or NECB is determined to be materially untrue
(the party which fails to perform or who makes the untrue representation or
warranty being the "Breaching Party"), and if at the time of the failure or
untrue representation or warranty by the Breaching Party, the other party is not
a Breaching Party (the "Non-Breaching Party"), and if the Merger Agreement is
thereafter terminated prior to the Effective Time, then the Breaching Party
shall on demand pay to the Non-Breaching Party liquidated damages, to include
whatever expenses the Non-Breaching Party may have incurred. The amount of
liquidated damages shall be $400,000 if BSW is the Breaching Party. If NECB is
the Breaching Party the amount of liquidated damages shall be the following: (i)
$1,000,000 if the Merger Agreement is terminated prior to September 19, 1998;
(ii) $1,500,000 if the Merger Agreement is terminated on or after September 19,
1998 and before March 19, 1999; and (iii) $2,400,000 if the Merger Agreement is
terminated on or after March 19, 1999.
PROHIBITED TRANSACTIONS WITH THIRD PARTIES. In addition, if BSW does
not take any Unauthorized Action, BSW shareholders do not approve the Merger,
NECB does not breach the Merger Agreement and if an agreement to acquire or
merge with BSW is executed before March 19, 1999, with an entity that makes an
offer during the term of the Merger Agreement, BSW shall pay to NECB upon
execution of such agreement the sum of all out-of-pocket expenses incurred by
NECB in connection with the Merger and the transactions provided for in the
Merger Agreement, up to $250,000; provided, that if the transaction agreed to
with such other entity shall not close, NECB shall thereupon promptly repay such
amount to BSW.
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ANTICIPATED ACCOUNTING TREATMENT
It is anticipated that the Merger will be treated as a "pooling of
interests" for accounting and financial reporting requirements. The unaudited
pro forma financial information contained in this Joint Proxy Statement-
Prospectus has been prepared using the pooling of interests method of accounting
to account for the Merger. See "PRO FORMA FINANCIAL INFORMATION."
FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger shall constitute a merger within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). Consummation of the Merger is conditioned upon receipt of an opinion of
counsel stating that, on the basis of facts, representations and assumptions set
forth in such opinion, which are consistent with the facts existing at the
Effective Time, (i) the Merger will be treated for federal income tax purposes
as a merger within the meaning of Section 368(a) of the Code, (ii) no gain or
loss will be recognized by the shareholders of BSW who exchange their BSW Common
Stock for NECB Common Stock pursuant to the Merger other than any cash received
in lieu of a fractional share of NECB Common Stock or cash received by
dissenters, if any, (iii) no gain or loss will be recognized by the stockholders
of NECB upon consummation of the Merger and (iv) such other matters as NECB or
NEBT deem appropriate and necessary. See "THE MERGER AGREEMENT--Federal Income
Tax Consequences."
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS
At the Effective Time, shareholders of BSW, except shareholders who
assert dissenters' rights in accordance with Connecticut law, automatically will
become stockholders of NECB and their rights as stockholders of NECB will be
determined by the Delaware General Corporation Law and by NECB's Amended and
Restated Certificate of Incorporation and Bylaws. The rights of the present
stockholders of NECB differ from rights of the present shareholders of BSW with
respect to certain matters. For a summary of these differences, see "COMPARISON
OF RIGHTS OF SHAREHOLDERS."
DISSENTERS' RIGHTS
Dissenters' rights are available to shareholders of BSW who object to
the Merger. Under the Connecticut General Statutes, shareholders can obtain
payment of the value of their shares if certain procedures contained in those
statutes are complied with by the shareholders. The procedures to be followed
are summarized under "THE MERGER AGREEMENT--Dissenters' Rights" and included in
APPENDIX E.
Stockholders of NECB do not have dissenters' rights in connection with
the Merger Proposal.
MARKETS AND MARKET PRICES
NECB Common Stock is quoted on the Nasdaq NM. As of June 1, 1998, NECB
had approximately 4,000 stockholders of record. BSW Common Stock is traded on
the AMEX. As of June 1, 1998, BSW had 1,171 shareholders of record.
Common BSW
NECB BSW Stock
Common Common Pro Forma
Stock Stock Equivalent Value(a)
------ ------- -------------------
Market Value Per Share at:
March 18, 1998 $25.50 $28.75 $33.67
June 1998
5
<PAGE>
(a) Pro forma equivalent value per share of BSW Common Stock represents
the closing price of NECB Common Stock, as reported in THE WALL STREET
JOURNAL, on the last trading day preceding the public announcement of
the Merger and on June , 1998, multiplied by 1.3204, the Exchange
Ratio.
BSW shareholders are advised to obtain current market quotations for
NECB Common Stock. No assurance can be given concerning the market price of NECB
Common Stock before or after the Effective Time of the Merger. The market price
for NECB Common Stock will fluctuate between the date of this Joint Proxy
Statement-Prospectus and the Effective Time. However, in the event that (i) the
Average Closing Price of NECB Common Stock is less than $23.48 and (ii) the
percentage decline in the closing price of NECB Common Stock from March 19, 1998
to the date on which the last of the regulatory approvals required for the
consummation of the Merger occurs exceeds the percentage decline in the average
closing share price of a group of similar banks by more than 10%, the Exchange
Ratio will be adjusted to result in shares of NECB Common Stock having a value
of $31.00 per share being issued for each share of BSW Common Stock. For a more
comprehensive description of the adjustment of the Exchange Ratio, see "THE
MERGER AGREEMENT--General."
ACTUAL AND PRO FORMA CAPITAL RATIOS
The following tables present certain pro forma information for the
regulatory capital ratios of NECB (current and pro forma) and BSW for the
quarter ended March 31, 1998 and the year ended December 31, 1998. The NECB and
BSW pro forma regulatory capital ratios give effect to NECB's proposed
acquisition of BSW. The pro forma information is not necessarily indicative of
the financial condition or results of operations which would have been achieved
had the Merger been consummated as of the beginning of the periods for which
such data is presented and should not be construed as being representative of
future periods.
<TABLE>
<CAPTION>
Minimum NECB
Regulatory Historical Historical Pro
Capital Level NECB BSW Forma
------------- ---------- ---------- -----
<S> <C> <C> <C> <C>
March 31, 1998
- --------------
Tier 1 leverage capital ratio 4.0% 8.3% 7.1% 7.6%
Tier 1 risk-based capital ratio 4.0% 11.7% 11.4% 11.0%
Total risk-based capital ratio 8.0% 12.9% 12.7% 12.2%
</TABLE>
<TABLE>
<CAPTION>
Minimum
Regulatory Historical Historical NECB
Capital Level NECB BSW Pro Forma
------------- ---------- ---------- -----
<S> <C> <C> <C> <C>
December 31, 1997
Tier 1 leverage capital ratio 4.0% 9.1% 6.9% 8.0%
Tier 1 risk-based capital ratio 4.0% 11.4% 10.7% 10.8%
Total risk-based capital ratio 8.0% 12.6% 11.9% 12.1%
</TABLE>
For a detailed discussion of the capital of NECB and BSW, respectively,
see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF NECB Capital" in NECB's Annual Report on Form 10-K for the year
ended December 31, 1997 ("NECB 10-K") and "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NECB" in NECB's Quarterly
Report on Form 10-Q ("NECB 10-Q") for the three months ended March 31, 1998
which are incorporated by reference into this Joint Proxy Statement-Prospectus,
and MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Capital Resources" in the BSW 10-K and in the BSW 10-Q which are
incorporated by reference into this Joint Proxy Statement-Prospectus. See "PRO
FORMA FINANCIAL INFORMATION."
6
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth certain summary unaudited pro forma
combined financial data for NECB after giving effect to the Merger, as if it had
occurred as of the beginning of each of the periods presented and using the
Exchange Ratio of 1.3204 and accounting for the Merger as a
pooling-of-interests. See "THE MERGER AGREEMENT--Anticipated Accounting
Treatment." This information should be read in conjunction with the historical
consolidated financial statements of NECB and BSW, including the notes thereto,
and pro forma financial information, including the notes thereto appearing
elsewhere in this Joint Proxy Statement-Prospectus or incorporated herein by
reference. See "INFORMATION DELIVERED AND INCORPORATED BY REFERENCE" and "PRO
FORMA FINANCIAL INFORMATION."
The pro forma financial information set forth below and elsewhere in
this Joint Proxy Statement-Prospectus does not take into account NECB's pending
acquisition of Olde Port. The pro forma financial data are not necessarily
indicative of the actual financial position that would have occurred had the
Merger been consummated at the beginning of the periods presented or that may be
obtained in the future.
<TABLE>
<CAPTION>
For the
Quarter
Ended For the Year Ended
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) March 31, December 31,
--------- ------------------------------
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Results of Operations:
Interest income...................................... $ 14,131 $ 50,574 $ 44,837 $ 31,753
Interest expense..................................... 5,352 17,944 16,194 11,233
---------- --------- ---------- ----------
Net interest income............................... 8,779 32,630 28,643 20,520
Provision for possible loan losses...................... 412 1,616 2,669 2,140
---------- --------- ---------- ----------
Net interest income after provision
for possible loan losses.......................... 8,367 31,014 25,974 18,380
Noninterest income...................................... 2,744 5,212 4,558 3,416
Noninterest expense..................................... 7,235 26,515 21,468 17,415
---------- --------- ---------- ----------
Income before taxes..................................... 3,876 9,711 9,064 4,381
Income taxes............................................ 1,543 3,855 2,793 187
---------- --------- ---------- ----------
Net income.............................................. $ 2,333 $ 5,856 $ 6,271 $ 4,194
========== ========= ========== ==========
Net income per share--basic.............................. $ 0.36 $ 0.92 $ 1.07 $ 0.96
Net income per share--diluted............................ $ 0.36 $ 0.91 $ 1.07 $ 0.96
Weighted average shares outstanding 6,426 6,354 5,848 4,355
Ending Balance Sheet Data:
Assets............................................... $ 754,145 $ 759,235
Investments.......................................... 156,201 172,633
Loans outstanding.................................... 495,480 508,482
Allowance for loan losses............................ 9,381 11,413
Goodwill............................................. 5,140 5,238
Deposits............................................. 638,545 655,547
Borrowed funds....................................... 45,941 36,258
Shareholders' equity................................. 62,568 60,297
</TABLE>
7
<PAGE>
ACTUAL AND PRO FORMA PER SHARE DATA
The following table sets forth certain historical per share, pro forma
combined per share and BSW equivalent pro forma per share information with
respect to NECB Common Stock and BSW Common Stock for the three months ended
March 31, 1998 and the years ended December 31, 1997, 1996 and 1995. The
historical per share data have been derived from the historical financial
information of NECB and BSW, respectively, incorporated by reference herein. The
pro forma combined per share information has been derived from the unaudited pro
forma combined financial statements of NECB and BSW appearing elsewhere in this
Joint Proxy Statement-Prospectus, as if the Merger had occurred as of the
beginning of each of the periods presented and using the Exchange Ratio of
1.3204 and accounting for the Merger as a pooling-of-interests. The pro forma
combined per share amounts have been determined based on the assumptions set
forth in the Unaudited Pro Forma Combined Financial Information contained
elsewhere in this Joint Proxy Statement-Prospectus. The pro forma information is
not necessarily indicative of the results of operations which would have been
achieved had the Merger been consummated as of the beginning of the periods for
which such data are presented and should not be construed as being
representative of future periods. The information set forth below should be read
in conjunction with the historical financial information of NECB and BSW
incorporated by reference in this Joint Proxy Statement-Prospectus and in
conjunction with the Pro Forma Financial Information contained elsewhere in this
Joint Proxy Statement-Prospectus. See "INFORMATION DELIVERED AND INCORPORATED BY
REFERENCE" and "PRO FORMA FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
At or For
the Quarter
Ended At or for the Year Ended
----- -------------------------
3/31/98 1997 1996 1995
------- ---- ---- ----
<S> <C> <C> <C> <C>
Book Value per Common Share:
NECB - Historical $10.68 $10.43 $10.65 $9.67
BSW - Historical 11.67 11.31 9.84 9.15
Pro Forma Combined 9.81 9.56 9.60 8.54
BSW Equivalent Pro Forma (a) 12.95 12.62 12.68 11.28
Cash Dividends per Common Share:
NECB - Historical $0.09 $0.33 $0.26 $0.19
BSW - Historical 0.05 0.12 0.00 0.00
Pro Forma Combined 0.09 0.33 0.26 0.19
BSW Equivalent Pro Forma (a) 0.12 0.43 0.34 0.25
Net Income per Common Share (Diluted):
NECB - Historical $0.36 $0.90 $1.19 $1.18
BSW - Historical 0.43 1.26 0.83 0.54
Pro Forma Combined 0.35 0.91 1.07 0.96
BSW Equivalent Pro Forma (a) 0.46 1.20 1.41 1.27
</TABLE>
(a) The weighted shares outstanding (diluted) for the periods ended March
31, 1998 and December 31, 1997, 1996 and 1995 were: 6,683,000;
6,451,000; 5,868,000; and 4,357,000, respectively. BSW equivalent pro
forma per share amounts are calculated by multiplying the pro forma
combined amounts by the Exchange Ratio as computed as of March 19, 1998
which was 1.3204. The actual Exchange Ratio will depend on the Average
Closing Price and may differ from the number used in these
calculations. See "THE MERGER AGREEMENT--General."
8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF NECB
The following table sets forth selected consolidated financial data of
NECB at the dates and for the periods indicated. The data at December 31, 1997,
1996 and 1995, and for the years then ended, have been derived from the audited
Consolidated Financial Statements and related Notes of NECB included in the NECB
10-K for the year ended December 31, 1997 and incorporated by reference herein.
The selected consolidated financial data set forth below should be read in
conjunction with, and are qualified in their entirety by, the more detailed
information, including the Consolidated Financial Statements and related Notes,
included in the NECB 10-K for the year ended December 31, 1997 and incorporated
by reference herein.
(DOLLAR AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS (LOSS):
Net interest income $ 25,452 $ 22,544 $ 14,395 $ 12,153 $ 11,651
Provision for loan losses 1,248 2,209 1,200 1,436 2,614
Noninterest income 4,079 3,416 2,343 2,356 3,062
Noninterest expense 20,531 15,964 11,872 11,095 12,619
Income tax expense (benefit) 3,117 2,299 (24) 468 72
Cumulative effect of change
in accounting principle (228)
Net income (loss) 4,635 5,488 3,690 1,510 (364)
PER SHARE DATA:
Net income (loss) per share--basic $ 0.91 $ 1.19 $ 1.19 $ 0.74 $ (0.18)
Net income (loss) per share--diluted 0.90 1.19 1.18 0.74 (0.18)
Dividends declared 0.326 0.255 0.186 0.045 0.00
BALANCE SHEET DATA (AS OF END OF
YEAR):
Loans $399,278 $329,544 $257,887 $175,458 $170,183
Allowance 9,257 6,660 5,875 4,137 4,413
Goodwill 5,238 4,464 402 0 0
Assets 606,170 516,754 418,868 290,474 281,601
Deposits 522,644 457,004 377,403 266,638 262,779
Shareholders' equity 53,823 49,220 37,148 21,826 16,460
Nonperforming assets 11,945 8,757 8,315 8,551 9,780
OPERATING RATIOS:
Return (loss) on average assets 0.91% 1.21% 1.26% 0.56% (0.13)%
Return (loss) on average equity 9.01 13.00 14.64 8.85 (2.20)
Net interest margin 5.43 5.40 5.39 4.92 4.57
Total equity to total assets 8.88 9.52 8.87 7.51 5.85
Tangible equity to total assets 8.02 8.66 8.77 7.51 5.85
</TABLE>
9
<PAGE>
The following table sets forth selected consolidated financial
information of NECB at the dates and for the periods indicated. The data at
March 31, 1998 and 1997 and for the quarters then ended have been derived from
the unaudited Consolidated Financial Statements and related Notes of NECB
included in the NECB 10-Q which is incorporated by reference herein. The
selected consolidated financial data set forth below should be read in
conjunction with, and are qualified in their entirety by, the more detailed
information, including the Consolidated Financial Statements and related Notes,
included in the NECB 10-Q for the quarter ended March 31, 1998 and incorporated
by reference herein. Operating results for the quarter ended March 31, 1998
are not necessarily indicative of operating results which may be expected for
the entire year.
(DOLLAR AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA)
Quarter Ended March 31, 1998 1997
- -------------------------------------------------------------------------------
EARNINGS:
Net interest income $ 6,780 $ 6,322
Provision for loan losses 322 273
Noninterest income 2,528 954
Noninterest expense 5,819 4,597
Income tax expense 1,278 904
Net income 1,889 1,502
PER SHARE DATA:
Net income per share--basic $ 0.37 $ 0.30
Net income per share--diluted 0.36 0.30
Dividends declared 0.09 0.07
BALANCE SHEET DATA (AS OF END OF PERIOD):
Loans $399,653 $333,737
Allowance 7,210 6,727
Goodwill 5,140 4,385
Assets 603,013 509,623
Deposits 509,592 440,993
Shareholders' equity 55,248 49,765
Nonperforming assets 6,400 7,830
OPERATING RATIOS:
Return on average assets (annualized) 1.30% 1.21%
Return on average equity (annualized) 13.99 12.13
Net interest margin 5.06 5.45
Total equity to total assets 9.17 9.76
Tangible equity to total assets 8.31 8.90
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF BSW
The following table sets forth selected consolidated financial data of
BSW at the dates and for the periods indicated. The data at December 31, 1997,
1996 and 1995, and for the years then ended, have been derived from the audited
Consolidated Financial Statements and related Notes of BSW included in the BSW
10-K for the year ended December 31, 1997 and incorporated by reference herein.
The selected consolidated financial data set forth below should be read in
conjunction with, and are qualified in their entirety by, the more detailed
information, including the Consolidated Financial Statements and related Notes,
included in the BSW 10-K for the year ended December 31, 1997 and incorporated
by reference herein.
(DOLLAR AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS (LOSS):
Net interest income $ 7,178 $ 6,099 $ 6,125 $ 6,154 $ 5,897
Provision for loan losses 368 460 940 1,750 787
Noninterest income 1,133 1,142 1,073 606 965
Noninterest expense 5,984 5,504 5,543 5,391 5,057
Income taxes 738 494 211 55 255
Net income (loss) 1,221 783 504 (436) 763
PER SHARE DATA:
Net income (loss) per share--basic $ 1.29 $ .83 $ .54 $ (.47) $ 1.01
Net income (loss) per share--diluted 1.26 .83 .54 (.47) 1.01
Dividends declared .12 -- -- .08 --
BALANCE SHEET DATA (AS OF END OF
YEAR):
Loans $ 99,947 $ 99,076 $ 97,446 $100,873 $ 92,611
Allowance 2,156 1,973 2,657 3,058 1,855
Assets 155,123 136,213 129,556 124,871 124,619
Deposits 132,903 122,888 119,931 114,621 115,508
Shareholders' equity 10,837 9,261 8,612 7,872 7,420
Nonperforming assets 849 2,788 3,508 4,524 2,426
OPERATING RATIOS:
Return (loss) on average assets .82% .60% .39% (.35)% .63%
Return (loss) on average equity 12.42 8.82 6.05 (5.13) 10.84
Net interest margin 5.14 5.01 5.07 5.29 5.24
Total equity to total assets 6.99 6.80 6.65 6.30 5.95
</TABLE>
11
<PAGE>
The following table sets forth selected consolidated financial
information of BSW at the dates and for the periods indicated. The data at March
31, 1998 and 1997 and for the quarters then ended have been derived from the
unaudited Consolidated Financial Statements and related Notes of BSW included in
the BSW 10-Q which is incorporated by reference herein. The selected
consolidated financial data set forth below should be read in conjunction with,
and are qualified in their entirety by, the more detailed information, including
the Consolidated Financial Statements and related Notes, included in the BSW
10-Q for the quarter ended March 31, 1998 and incorporated by reference herein.
Operating results for the quarter ended March 31, 1998 are not necessarily
indicative of operating results which may be expected for the entire year.
(DOLLAR AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA)
Quarter Ended March 31, 1998 1997
- -------------------------------------------------------------------------------
EARNINGS:
Net interest income $ 1,999 $ 1,605
Provision for loan losses 90 105
Noninterest income 216 307
Noninterest expense 1,416 1,452
Income tax expense 265 144
Net income 444 211
PER SHARE DATA:
Net income per share--basic $ .46 $ .22
Net income per share--diluted .43 .22
Dividends declared .05 .03
BALANCE SHEET DATA (AS OF END OF PERIOD):
Loans $ 95,827 $101,365
Allowance 2,171 2,066
Assets 152,608 145,865
Deposits 128,953 124,675
Shareholders' equity 11,182 9,212
Nonperforming assets 630 2,257
OPERATING RATIOS:
Return on average assets (annualized) 1.16% .63%
Return on average equity (annualized) 16.27 9.07
Net interest margin 5.62 5.11
Total equity to total assets 7.33 6.32
12
<PAGE>
INTRODUCTION
This Joint Proxy Statement-Prospectus solicits, on behalf of the NECB
Board and on behalf of the BSW Board, approval by the holders of NECB Common
Stock of the Merger Proposal and by the holders of BSW Common Stock of the
Merger Agreement. Pursuant to the Merger Agreement, BSW will be merged into NEBT
with NEBT as the surviving entity. A copy of the Merger Agreement is attached as
APPENDIX A to this Joint Proxy Statement-Prospectus. Upon consummation of the
Merger, each outstanding share of BSW Common Stock, except for (i) shares held
by BSW as treasury shares; (ii) shares owned by any direct or indirect
subsidiary of BSW; (iii) shares held by NECB or NEBT other than in a fiduciary
or trust capacity for the benefit of third parties and (iv) shares as to which
dissenters' rights have been asserted (the "Excluded Shares"), will be converted
into and exchangeable for the Per Share Merger Consideration. NECB shall adjust
the Exchange Ratio to result in a value equal to $31.00 per share of BSW Common
Stock in the event that (i) the product of the Average Closing Price multiplied
by the Exchange Ratio is less than $31.00 and (ii) the percentage decline in the
closing price of NECB Common Stock from March 19, 1998 to the date on which the
last of the regulatory approvals required for the consummation of the Merger
occurs (the "Price Period") exceeds the percentage decline in the average
closing share price of those institutions as reported in the SNL Securities LLC
New England Banks Index by more than ten percent (10.0%) for the Price Period.
At the Effective Time, all of the shares of BSW Common Stock converted into NECB
Common Stock shall no longer be outstanding and shall automatically be canceled
and shall cease to exist. Each certificate previously representing any such
shares of BSW Common Stock (each a "Certificate") shall thereafter represent the
right to receive the Per Share Merger Consideration into which the share of BSW
Common Stock represented by such Certificate has been converted. Certificates
previously representing shares of BSW Common Stock shall be exchanged for
certificates representing whole shares of NECB Common Stock and cash in lieu of
fractional shares upon the surrender of such Certificates, without any interest
thereon. If prior to the Effective Time NECB should split or combine the NECB
Common Stock, or a record date occurs with respect to the payment of a stock
dividend or other distribution in the NECB Common Stock, then the Exchange Ratio
shall be appropriately adjusted to reflect such split, combination, dividend or
distribution. At the Effective Time, (i) all shares of BSW Common Stock that are
owned by BSW as treasury shares, (ii) all shares of BSW Common Stock that are
owned directly or indirectly by any subsidiary of BSW, and (iii) all shares of
BSW Common Stock held by NECB or NEBT other than in a fiduciary or trust
capacity for the benefit of third parties shall be canceled and shall cease to
exist, and no stock of NECB or other consideration shall be delivered in
exchange therefor.
PARTIES TO THE MERGER
NECB. NECB is a multi-bank bank holding company registered under the
Bank Holding Company Act of 1956, as amended. NECB was organized under the laws
of the state of Delaware in 1985 and directly owns three banking subsidiaries,
NEBT, The Equity Bank and Community Bank (together, the "Subsidiaries"), all
Connecticut- chartered commercial banks. The FDIC insures the deposits of the
Subsidiaries in accordance with the Federal Deposit Insurance Act.
Through the Subsidiaries, NECB provides a wide range of commercial and
consumer banking services through a branch network located in north central
Connecticut. NEBT's branch offices are located in the Connecticut towns of East
Windsor, Ellington, Enfield, Manchester (2), Somers, Suffield, West Hartford and
Windsor (2). Equity Bank's office is located in Wethersfield, Connecticut and
serves the surrounding communities. Community Bank has offices in Bristol and
Plymouth, Connecticut.
NECB has built its community banking network through both internal
growth and acquisitions. In 1985, NECB was formed under the name of Olde Windsor
Bancorp, Inc. by the shareholders of Windsor Bank and Trust Company ("Windsor
Bank"), a Connecticut-chartered bank and trust company. NECB subsequently
acquired all of the capital stock and became the sole shareholder of Windsor
Bank. In 1986, NECB acquired a second bank subsidiary, NEBT. In 1988, the two
subsidiaries were combined retaining the NEBT name. In 1995, NECB created a
second banking subsidiary when it acquired all of the outstanding common stock
of Equity Bank, which was founded in 1987. In July, 1996 and August, 1997,
respectively, NECB acquired all of the outstanding common stock of Manchester
State Bank and First Bank of West Hartford, both of which were merged into NEBT.
On December 31, 1997, NECB acquired Community Bank. The acquisitions of Equity
Bank, Manchester State Bank and Community Bank were accounted for as purchases
and, as such, prior year comparative data included in this Joint Proxy
13
<PAGE>
Statement-Prospectus has not been revised to include information about any of
these entities. Conversely, the acquisition of First Bank of West Hartford was
accounted for as a "pooling of interests" and, therefore, all comparative prior
periods have been restated as if the acquisition of First Bank of West Hartford
had been in effect for all periods presented.
As of March 31, 1998, NECB had total assets of $603.0 million, loans of
399.7 million, deposits of $509.6 million and shareholders' equity of $55.2
million.
NECB's principal executive offices are located at 176 Broad Street,
P.O. Box 130, Windsor, Connecticut 06095; telephone: (860) 610-3600.
BSW. BSW was chartered on May 18, 1988 under the laws of the State of
Connecticut. BSW is subject to regulation by the State of Connecticut Department
of Banking and by the FDIC. BSW commenced operations on May 15, 1989 and
conducts business from its headquarters located at 1695 Ellington Road, South
Windsor, Connecticut 06074-4514, telephone number 860-644-4412. BSW operates two
other banking offices located in East Hartford and Vernon, Connecticut
respectively.
BSW is engaged in the full service commercial and consumer banking
business. It emphasizes personalized banking services for individuals,
professionals and small- to medium-sized businesses. BSW offers a full range of
commercial banking services, emphasizing short and long-term business lending
(including Small Business Administration and Connecticut Development Authority
loans), as well as offering checking, savings, club and money market accounts,
certificates of deposit, customer repurchase agreements, personal loans,
residential mortgage loans, student loans, and MasterCard and Visa credit cards.
It also offers other consumer-oriented financial services as well as safe
deposit boxes. Individual retirement accounts are also offered to its customers.
Deposits are insured up to prescribed limits by the FDIC.
BSW's retail service area is presently concentrated in the Connecticut
cities and towns of East Hartford, South Windsor and Vernon, but it also serves
other surrounding communities. Industrial, retail, professional service and
manufacturing organizations of varying sizes are situated within its service
area as well as homes and service businesses for the employees of these
industries and the residents of these areas.
BSW is not presently a member of the Federal Reserve System. BSW is a
member of the Federal Home Loan Bank of Boston, which membership provides BSW
with an additional credit facility by way of access to fixed and variable rate
advances available under various optional terms.
As of March 31, 1998, BSW had total assets of $152,608,000, loans of
$95,827,000, deposits of $ 128,953,000 and shareholders' equity of $11,182,000.
THE SPECIAL MEETINGS
GENERAL
NECB. This Joint Proxy Statement-Prospectus is being mailed to the
holders of NECB Common Stock on the NECB Record Date and is accompanied by a
proxy card furnished in connection with the solicitation of proxies by the NECB
Board for use at the NECB Special Meeting to be held on August 10, 1998 at 8:00
a.m. Eastern Daylight Time, at the executive offices of NECB, 176 Broad Street,
Windsor, Connecticut and at any adjournments or postponements thereof to
consider and vote upon the approval of the Merger Proposal.
The costs of soliciting proxies from holders of NECB Common Stock will
be borne by NECB and is not expected to exceed $1,000. Such solicitation will be
made by mail but also may be made by telephone or in person by the directors,
officers, and employees of NECB (who will receive no additional compensation for
such efforts). In addition, NECB will make arrangements with brokerage firms and
other custodians, nominees and fiduciaries to send proxy materials to their
principals and will reimburse such parties for their expenses in doing so.
14
<PAGE>
BSW. This Joint Proxy Statement-Prospectus is first being mailed to the
holders of BSW Common Stock on the BSW Record Date and is accompanied by a proxy
card furnished in connection with the solicitation of proxies by the BSW Board
for use at the BSW Special Meeting to be held on August 10, 1998 at 8:00 a.m.
Eastern Daylight Time, at the Quality Inn, Route 83, Vernon, Connecticut and at
any adjournments or postponements thereof to consider and vote upon the approval
of the Merger Agreement and the transactions contemplated thereby.
The costs of soliciting proxies from holders of BSW Common Stock will
be borne by BSW and is not expected to exceed $6,000.00. Such solicitation will
be made by mail but also may be made by telephone or in person by ChaseMellon
Shareholder Services, LLC on behalf of BSW. In addition, BSW will make
arrangements with brokerage firms and other custodians, nominees and fiduciaries
to send proxy materials to their principals and will reimburse such parties for
their expenses in doing so.
RECORD DATES; VOTES REQUIRED
NECB. The NECB Board has fixed June 29, 1998 as the NECB Record Date
for determining stockholders entitled to notice of and to vote at the NECB
Special Meeting. Only holders of record of shares of NECB Common Stock on the
NECB Record Date will be entitled to notice of and to vote at the NECB Special
Meeting. The affirmative vote of a majority of the total votes cast in person or
by proxy by a quorum of NECB stockholders entitled to vote thereon is required
in order to approve the Merger Proposal. As of the NECB Record Date, there were
[ ] shares of NECB Common Stock outstanding and entitled to vote at the NECB
Special Meeting, with each share being entitled to one vote. Where proxies are
marked as abstentions (or stockholders appear in person but abstain from voting)
or a broker indicates on a proxy that it does not have discretionary authority
with respect to certain shares, such abstentions and "broker non-votes" will be
treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. If a quorum is present, the required vote
of the NECB stockholders on the Merger Proposal is based on the total number of
votes cast. Therefore, the failure to submit a proxy card or to vote in person
at the meeting, abstention from voting by a stockholder and any broker non-vote
will not have the same effect as a "NO" vote on the Merger Proposal.
The directors and executive officers of NECB beneficially owned, as of
the NECB Record Date, in the aggregate 541,283 shares, or approximately 10.5% of
the outstanding shares, of NECB Common Stock. The directors of NECB unanimously
approved the Merger Agreement and the issuance of shares pursuant thereto, and
all of the executive officers and directors of NECB who are stockholders have
indicated that they intend to vote FOR the Merger Proposal.
NECB and NEBT collectively own 47,264 shares of BSW Common Stock or
4.9% of BSW Common Stock. Accordingly, NECB and NEBT will vote as shareholders
of BSW at the BSW Special Meeting and will vote in favor of the Merger Agreement
and the transactions contemplated thereby. In accordance with the Merger
Agreement, these shares will be canceled at the Effective Time.
The President of NECB, David A. Lentini, holds options to acquire
11,000 shares of BSW Common Stock with an exercise price of $9.09 per share
granted to him pursuant to the BSW 1990 Non-Qualified Stock Option Plan when he
was president of BSW from 1989-1992. Mr. Lentini does not intend to exercise his
options prior to the BSW Record Date and, therefore, will not vote at the BSW
Special Meeting. At the Effective Time, his options shall be converted
automatically into an option to purchase 14,524 shares of NECB Common Stock at
an exercise price of $6.88.
BSW. The BSW Board has fixed June 29, 1998 as the BSW Record Date for
determining shareholders entitled to notice of and to vote at the BSW Special
Meeting. Only holders of record of shares of BSW Common Stock on the BSW Record
Date will be entitled to notice of and to vote at the BSW Special Meeting. The
affirmative vote of two-thirds of the holders of the shares of BSW Common Stock
outstanding on the BSW Record Date is required in order to approve the Merger
Agreement and the transactions contemplated thereby. As of the BSW Record Date
there were _________ shares of BSW Common Stock outstanding and entitled to vote
at the BSW Special Meeting, with each share being entitled to one vote. Where
proxies are marked as abstentions (or shareholders appear in person but abstain
from voting) or a broker indicates on a proxy that it does not have authority
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with respect to certain shares, such abstentions and "broker non-votes" will be
treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. The required vote of the BSW shareholders
on the Merger Agreement is based upon the total number of outstanding shares of
BSW Common Stock and not upon the number of shares which are actually voted.
ACCORDINGLY, THE FAILURE TO SUBMIT A PROPERLY-EXECUTED PROXY CARD, OR TO VOTE IN
PERSON AT THE MEETING, ABSTENTION FROM VOTING BY A SHAREHOLDER AND ANY BROKER
NON-VOTE WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER
AGREEMENT.
BSW SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. IF THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD BE DELIVERED IN
ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL WHICH WILL BE
SENT TO BSW SHAREHOLDERS BY NECB AND/OR A DULY APPOINTED EXCHANGE AGENT PROMPTLY
AFTER THE EFFECTIVE TIME.
The BSW Board has approved the Merger Agreement and all of the
executive officers and directors of BSW who are shareholders, representing
167,679 shares or 17.5% of the outstanding BSW Common Stock as of the BSW Record
Date, have agreed to vote FOR the Merger Agreement. See "THE MERGER
AGREEMENT--Interests of Certain Persons in the Merger" for information on the
number of shares of BSW Common Stock and BSW options held by BSW directors and
executive officers.
PROXIES
NECB. Any holder of NECB Common Stock who has delivered a proxy may
revoke it at any time before it is voted. The holder seeking to revoke his or
her proxy may give notice of revocation in writing, submit a signed proxy card
bearing a later date to Virginia Springer, the Assistant Secretary of NECB,
provided that such notice or proxy card is actually received by NECB before the
stockholders cast a vote at the NECB Special Meeting, or attend the NECB Special
Meeting and give notice of such revocation in person. The shares of NECB Common
Stock represented by properly executed proxies received at or prior to the NECB
Special Meeting and not subsequently revoked will be voted as directed in such
proxies. If instructions are not given, shares represented by proxies received
will be voted "FOR" approval of the Merger Proposal. If any other matters are
properly presented at the NECB Special Meeting for consideration, the persons
named in the NECB proxy card will have discretionary authority to vote on such
matters in accordance with their best judgment; provided, however, that such
discretionary authority will only be exercised to the extent permissible under
applicable federal and state securities, corporation and banking laws. As of the
date of this Joint Proxy Statement-Prospectus, NECB is unaware of any other
matter to be presented at the NECB Special Meeting.
BSW. Any holder of BSW Common Stock who has delivered a proxy may
revoke it at any time before it is voted. The holder seeking to revoke his or
her proxy may give notice of revocation in writing, submit a signed proxy card
bearing a later date to Solomon Kerensky, the Secretary of BSW, provided that
such notice or proxy card is actually received by BSW before the vote of
shareholders, or attend the BSW Special Meeting and give notice of such
revocation in person. The shares of BSW Common Stock represented by properly
executed proxies received at or prior to the BSW Special Meeting and not
subsequently revoked will be voted as directed in such proxies. If instructions
are not given, shares represented by proxies received will be voted "FOR"
approval of the Merger Agreement. If any other matters are properly presented at
the BSW Special Meeting for consideration, the persons named in the BSW proxy
card will have discretionary authority to vote on such matters in accordance
with their best judgment; provided, however, that such discretionary authority
will only be exercised to the extent permissible under applicable federal and
state securities, corporation and banking laws. As of the date of this Joint
Proxy Statement- Prospectus, BSW is unaware of any other matter to be presented
at the BSW Special Meeting.
THE MERGER
BACKGROUND OF THE MERGER
Over the past several years, the BSW Board periodically has reviewed
BSW's performance, market activity in BSW Common Stock and the performance of
certain comparable publicly traded bank or thrift institutions. In addition, the
BSW Board, in the normal course of business, has periodically reviewed merger
and acquisition activity occurring in the banking industry. During 1996 and
1997, the management and BSW Board were frequently
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approached by other institutions concerning potential business combinations. In
the spring of 1997, Ms. Barbara Barbour, Chairwoman of BSW, received a
telephone call from Mr. David A. Lentini, Chairman, President and CEO of NECB.
The two parties discussed industry trends in general and Mr. Lentini indicated
NECB's interest in pursuing a possible business combination with BSW. Shortly
thereafter, Mr. Lentini made an informal presentation to Mr. John R. Dunn,
President and CEO of BSW and Mrs. Barbour where he outlined the potential
benefits of a business combination to the shareholders and customers of BSW and
provided a range of possible purchase prices for BSW to consider. On April 24,
1997, the BSW Board was briefed by Mr. Dunn and Ms. Barbour on Mr. Lentini's
presentation. The BSW Board discussed the implications of an increasingly
competitive marketplace to its business plan. At that time the BSW Board decided
to keep BSW independent pending a more detailed analysis. In June of 1997, based
upon continuing expressions of interest by a number of financial institutions,
BSW engaged BAC to assist it in an analysis of strategic alternatives.
In August of 1997, BAC presented the BSW Board with its preliminary
analysis of BSW's strategic alternatives and the BSW Board began a process of
evaluating BAC's research and recommendations. Throughout 1997, NECB and NEBT
accumulated a significant investment in BSW. On September 12, 1997, Mr. Dunn
received a call from Mr. Lentini indicating that NECB had filed a Form F-11 with
the FDIC disclosing that NECB and NEBT had acquired 88,396 shares or 9.39% of
the outstanding stock of BSW. Mr. Lentini indicated that NECB had acquired the
stock for investment purposes and to facilitate a possible business combination
with BSW. The Form F-11 also noted that Mr. Lentini held a stock option, which
he had acquired when he was the President of BSW from 1989-1992, to acquire
11,000 shares of BSW Common Stock. On September 18, 1997, NECB acquired 668 and
3,200 shares of BSW Common Stock.
In October 1997, BAC presented the BSW Board with a final summary of
its analysis of strategic alternatives. Following BAC's presentation, the BSW
Board, in order to better assess the possibility of BSW's entering into an
acquisition, authorized BAC to begin preparing an information memorandum to be
distributed to potential combination partners. In January 1998, the BSW Board
authorized BAC to approach 14 financial institutions which had been identified
as potential combination partners. BAC contacted these 14 institutions in an
effort to establish their levels of interest. All 14 parties contacted expressed
interest, executed confidentiality agreements and received an information
memorandum. Such confidentiality agreements were executed and information
memoranda were distributed during late January 1998. Of the 14 parties who
entered into confidentiality agreements, 7 of such parties provided BSW with
written indications of interest outlining the terms of a possible business
combination, in each case subject to further due diligence. In February 1998 the
BSW Board, with the assistance of BAC, reviewed the proposals and determined
that 3 of the parties be invited to conduct a due diligence review of BSW. Two
parties conducted such due diligence reviews in late February 1998. On March 4,
1998, the BSW Board, together with the assistance of BAC and BSW's counsel,
discussed further the 3 proposals and reviewed conversations between BAC and
representatives of the 3 parties which had occurred in conjunction with the due
diligence review process. Based on its review, the BSW Board decided to continue
conversations with both of the parties who had conducted due diligence, and
wished to continue negotiations namely, NECB and one other institution (the
"Other Institution").
On March 11, 1998, representatives from NECB and the Other Institution
met with the BSW Board upon its invitation. NECB and the Other Institution made
independent presentations to the BSW Board with respect to their respective
institutions, discussed a merger proposal and the operations of BSW after a
proposed merger and addressed various questions for the BSW Board. In addition,
at the meeting BAC presented updated information with respect to a proposed
merger with NECB and the Other Institution, respectively. Based on these
presentations, the BSW Board created a Committee of the BSW Board to continue
discussions with NECB.
Following the decision by the BSW Board to further pursue a merger with
NECB, a draft of the proposed Merger Agreement and related documents (including
the Stock Option Agreement) were prepared, circulated and discussed in detail
among the BSW Board, NECB and their respective legal and financial advisors. In
addition, during this period BSW and its advisors conducted on-site due
diligence of NECB.
In preparing the Merger Agreement and considering the required
regulatory approvals for consummation of the Merger, NECB became aware that its
acquisition of more than 5% of the outstanding shares of BSW Common Stock, which
occurred in September of 1997, had been made without the prior approval of the
Board of Governors of
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the Federal Reserve System ("FRB"). Pursuant to Section 3(a)(3) of the Bank
Holding Company Act of 1956 and regulations issued by the FRB, a bank holding
company is required to obtain the prior approval of the FRB before acquiring
ownership of more than 5% of the outstanding shares of any class of voting
securities of another bank. Upon recognizing its failure to have obtained prior
FRB approval for the acquisition of more than 5% of the outstanding shares of
BSW Common Stock, NECB, on March 13, 1998, sold 45,000 shares of BSW Common
Stock to a purchaser in a private transaction. Accordingly, as of March 13,
1998, NECB's ownership of shares of BSW Common Stock was reduced to 4.9%. NECB
thereupon notified the FRB of these facts. By letter dated May 21, 1998, the FRB
notified NECB that the corrective actions taken by NECB had satisfactorily cured
the violation. This sale also reduced the aggregate ownership of NECB and Mr.
Lentini to less than 10% of the BSW Common Stock. Under certain Connecticut
antitakeover statutes, mergers between Connecticut corporations and owners of
10% or more of their shares are prohibited or delayed for five years unless
certain exceptions apply. See "COMPARISON OF RIGHTS OF SHAREHOLDERS-State
Antitakeover Statutes."
The BSW Board met on March 19, 1998, at which time the terms of the
Merger Agreement and the related documents, including the Stock Option
Agreement, were discussed in detail. In addition, the BSW Board again reviewed
its various strategic alternatives, including a transaction with the Other
Institution, or remaining independent. The BSW Board also considered the opinion
delivered by BAC to the effect that the proposed Exchange Ratio pursuant to the
Merger Agreement was fair, from a financial point of view, to BSW's
shareholders. The BSW Board approved the Merger Agreement and Stock Option
Agreement on March 19, 1998 by the unanimous vote of the directors present at a
BSW Board meeting convened therefore. The directors who were not present
subsequently indicated that they also approved the Merger Agreement. The
definitive agreements relating to the Merger were executed by the parties on
March 19, 1998, whereupon the parties issued a public announcement concerning
the transaction.
RECOMMENDATION OF THE NECB BOARD AND NECB'S REASON FOR THE MERGER
The NECB Board believes that the transactions contemplated by the
Merger is fair to and in the best interests of the stockholders of NECB and
unanimously recommends that the stockholders vote "FOR" the approval of the
Merger Proposal. In considering the Merger, the NECB Board considered four
criteria:
(i) if BSW had a compatible business philosophy;
(ii) if BSW operated in markets which are geographically within
or near to those of NECB;
(iii) if NECB stockholder value would be enhanced ; and
(iv) BSW's asset quality, interest rate risk and core deposit base
stability.
The NECB Board believes that BSW meets the above criteria and as such
will contribute positively to NECB's net income within an acceptable period
following consummation of the Merger. The acquisition of BSW will add
significantly to NEBT's presence in Tolland County, Connecticut as well as fill
a void in NEBT's service area between Manchester, Connecticut to the south,
where it has two offices, and East Windsor and Enfield, Connecticut to the north
where it also has two offices.
NECB entered into the Merger Agreement with BSW as part of NECB's
ongoing strategy of growth through acquisitions. In the view of the NECB Board,
the Merger constitutes an acquisition which is in line with NECB's
aforementioned strategy and complements NECB's existing franchise.
OPINION OF NECB'S FINANCIAL ADVISOR
HAS has delivered to the NECB Board its written opinion, as of March
19, 1998 and an updated opinion as of June 23, 1998, that the Exchange Ratio of
NECB Common Stock to be exchanged for outstanding shares of BSW Common Stock is
fair, from a financial point of view, to NECB's shareholders. HAS has acted as
financial advisor to NECB in connection with NECB's evaluation of the BSW
acquisition.
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HAS advised NECB during the negotiation process leading up to the
execution of the Merger Agreement and the Stock Option Agreement and provided
NECB with various analyses as to the range of financially feasible exchange
ratios and cash acquisition prices that might be offered. A representative of
HAS met with the executive management of NECB on a number of occasions in
connection with the analysis of BSW. The Exchange Ratio was arrived at through
an arms-length negotiation between NECB and BSW in a process in which HAS
advised NECB.
HAS was retained by NECB based on its qualifications and experience in
the financial analysis of banking and thrift institutions, its knowledge of the
Connecticut and New England banking markets, and its experience with merger and
acquisition transactions involving banking institutions. HAS has worked with
NECB and/or its subsidiaries for over five years and has been involved with
numerous mergers and acquisitions of New England financial institutions since
1980.
The full text of the opinion of HAS, which sets forth assumptions made,
matters considered and limits on the review undertaken by HAS, is attached
hereto as APPENDIX C. NECB's shareholders are urged to read the opinion in its
entirety. HAS' opinion is directed only to the Exchange Ratio and does not
constitute a recommendation to any holder of NECB Common Stock as to how such
holder should vote at the NECB Special Meeting. The summary of the opinion of
HAS set forth in this Joint Proxy Statement-Prospectus was provided to NECB by
HAS and is qualified in its entirety by reference to the full text of the
opinion itself. HAS' opinion was necessarily based upon conditions as they
existed and should be evaluated on the date hereof and the information made
available to HAS through the date hereof.
In arriving at its opinion, HAS (i) reviewed the Merger Agreement and
the Stock Option Agreement; (ii) reviewed publicly available business and
financial information with respect to both NECB and BSW and certain internal
financial information and financial projections prepared by the management of
each of BSW and NECB respectively; (iii) held discussions with members of the
senior management of NECB concerning the past and current results of operations
of NECB, its current financial condition and senior management's opinion of its
future prospects; (iv) reviewed the historical reported price and record of
trading volume for both NECB Common Stock and BSW Common Stock; (v) held
discussions with the senior management of BSW and NECB concerning the current
and past results of operations of BSW and its current financial condition; (vi)
considered the current state of and future prospects for the economy of
Connecticut generally and the relevant market areas for BSW and NECB in
particular; (vii) reviewed acquisition analysis models employed by HAS to
evaluate potential business combinations of banking companies; (viii) reviewed
the reported financial terms of certain recent business combinations in the
banking industry; and (ix) performed such other studies and analyses as HAS
considered appropriate under the circumstances associated with this particular
transaction.
HAS' opinion takes into account its assessment of general economic,
market and financial conditions and its experience in other transactions, as
well as its experience in securities valuation and its knowledge of the banking
industry generally. For purposes of reaching its opinion, HAS has assumed and
relied upon the accuracy and completeness of the information provided to it by
BSW, and does not assume any responsibility for the independent verification of
such information or any independent valuation or appraisal of any of the assets
or liabilities of either NECB or BSW. With respect to the financial projections
reviewed by HAS in the course of rendering its opinion, HAS has assumed that
such projections have been reasonably prepared to reflect the best currently
available estimates and judgments of the management of each of NECB and BSW as
to the most likely future performance of their respective companies.
The following is a summary of material analyses employed by HAS in
connection with rendering its written opinion. Given that it is a summary, it
does not purport to be a complete and comprehensive description of all the
analyses performed, or an enumeration of all the matters considered by HAS in
arriving at its opinion. The preparation of a fairness opinion is a complicated
process, involving a determination as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, such an opinion is not readily susceptible
to a summary description. In arriving at its fairness opinion, HAS did not
attribute any particular weight to any one specific analysis or factor
considered by it and made qualitative as well as quantitative judgments as to
the significance of each analysis and factor. Therefore, HAS believes that its
analyses must be considered as a whole and feels that attributing undue weight
to any single analysis or factor considered could create a misleading or
incomplete view of the process leading to the formation of its opinion. In its
analyses, HAS has
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made certain assumptions with respect to banking industry performance, general
business and economic conditions and other factors, many of which are beyond the
control of management of either NECB or BSW. Any estimates which are referred to
in HAS' analyses are not necessarily indicative of actual values or predictive
of future results or values, which may vary significantly from those set forth.
CONTRIBUTION ANALYSIS
HAS reviewed and compared the relative contribution each party would
have made based upon a pro forma combined entity as it relates to assets, loans,
deposits, stockholder's equity and last twelve months' ("LTM") net income. This
analysis was based upon available results for the period ended December 31,1997.
This analysis showed that NECB retains 81.7% of the combined entity at
the agreed Exchange Ratio and BSW has 18.3%. NECB's assets represent 80.8% to
81.4% of the assets, loans and deposits of the new entity. Its contribution to
stockholder's equity is 84.3%, while BSW contributes 15.7%. The combined entity
will have an equity position that is within the well-capitalized levels as
classified by the Federal regulatory authorities. NECB, due to its larger size,
will contribute 86.1% of the estimated pro forma earnings.
COMPARABLE COMPANY ANALYSIS
HAS compared the financial condition and financial operating
performance of BSW with two peer groups. The first was a list of New England
banks with assets of less than one billion dollars ("Group 1"). In addition to
BSW, there were 20 banks in the group. Seven of the banks were located in
Connecticut. The other group was a list of more comparable banks in New England
with assets less than $375 million ("Group 2"). There were thirteen banks in
this group, including six Connecticut banks.
Balance sheet analysis showed that BSW had a loan to assets ratio of
64.43%, a deposit to asset ratio of 85.68% and an equity to asset ratio of 6.99%
at the end of 1997. Its return on average assets (ROAA) was 0.97%, its return on
average equity (ROAE) was 14.22% and it had an efficiency ratio of 71.31 % at
year-end 1997.
In comparing these ratios to the other two groups, Group 1 had a loan
to assets ratio of 65.38%, a deposit to asset ratio of 81.18% and an equity to
asset ratio of 9.27% at the end of 1997. Its ROAA was 1.12%, its ROAE was 11.40%
and it had an efficiency ratio of 64.16% at year-end 1997. These ratios are
comparable to BSW except for BSW's lower capital ratio. Within Group 2, BSW was
at the lower end of the average ranges. This group had a loan to assets ratio of
67.86%, a deposit to asset ratio of 83.30% and an equity to asset ratio of 9.62%
at the end of 1997. Its ROAA was 1.20%, its ROAE was lower at 11.73% and it had
an efficiency ratio of 65.83% at year-end 1997.
HAS also compared the financial and trading performance of BSW with
these peer groups. Based on a thirty-day average closing bid price for BSW for
the period ended March 18, 1998, its price to earnings ratio for the LTM was
22.17 times LTM earnings, its price to book and tangible book value was 246.77%
and its price to asset was 17.24%. In Group 1 the price to earnings ratio was
28.16 times earnings, the price to LTM earnings was 24.10 times LTM earnings,
the price to book ratio was 241.04%, the price to tangible book value was
256.23% and the price to asset ratio was 21.60%. Within Group 2 these same
ratios were a price to earnings ratio of 33.68 times earnings, the price to LTM
earnings was 22.83 times LTM earnings, the price to book ratio was 240.33%, the
price to tangible book value was 251.25% and the price to asset ratio was
22.87%.
DISCOUNTED CASH FLOW ANALYSIS
HAS reviewed a discounted cash flow analysis to permit the conceptual
examination of the present discounted values of potential future results
employing selected assumptions and discount rates.
The use of the discounted cash flow analysis assumes various discount
rates, earnings assumptions, terminal values, dividend payout ratios and growth
assumptions. The use of different assumptions can produce different results and
the NECB Board was advised of these factors and cautioned that various
assumptions can result in different outcomes. To avoid confusion of values, the
NECB Board was presented with a discounted cash flow approach which was based on
normal expected growth assumptions.
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These assumptions were made based on the past history of BSW and its
earnings, dividend payout and operating procedures and growth. A dividend payout
ratio of 10.0% based on recent payouts was used and long term growth of 25% was
assumed. A terminal multiple of 15 times earnings was used as control sale
price/earnings ratio at the end of a five-year period. Given the five-year time
horizon and a discount rate of 13%, these cash flows resulted in an implied
valuation of $35.0 million.
It is important to note that the discount factors employed embody both
the concept of a riskless time value of money and risk factors that reflect the
uncertainty of the forecasted cash flows and terminal price/earnings multiples.
Use of higher discount rates would result in lower discounted present values.
Conversely, use of lower discount rates would result in higher discounted
present values. Numerous assumptions could be used, including discount rates,
terminal values, earnings and asset growth, as well as dividend payout ratios.
Any or all of these assumptions may vary from actual future performance and
results.
TRADING HISTORY
HAS examined the history of trading prices for BSW Common Stock for the
period August 29, 1997 through March 18,1998, the day prior to the announcement
of the Merger. During that time period, BSW Common Stock appreciated from $10.50
to a high of $29.25. BSW Common Stock traded at the low end of the range in the
early part of the time period. Stock appreciation began in November 1997 and has
steadily increased since that date. On March 18,1998, BSW Common Stock closed at
$28.75.
BSW was listed on the AMEX in November 1997.
SELECTED MERGER ANALYSIS
The process of evaluating the Merger also took into account other
comparable merger transactions. Although no true comparable transaction can be
found due to the differences of financial history, longevity of the entity,
external factors and differences in operation, such comparison can be helpful as
a point of reference and provide the directors with an informational approach to
assessing the transaction; however, such comparison must be evaluated as only
part of this analysis and in conjunction with other methodologies.
The NECB Board was made aware of current market conditions as they
relate to various ratios on a national and regional level. Merger transactions
of a national scale for 1998 were examined while 25 merger transactions in New
England from 1997 to 1998 were considered as the regional group. Finally, an
analysis of New England transactions was presented where the value of the
transaction was less than $75 million.
The HAS analysis examined the financial situation of each group of
transactions, and various ratios that resulted from them. These included price
to LTM earnings ("P/E"), price to book ("P/B"), price to tangible book ("P/TB")
and price to deposits ("P/D"). At the national level, the P/E ratio was at a
level of 25.5 times earnings, regionally at 18.8 times earnings and the small
New England group of nine transactions less than $75 million in value was 18.7
times earnings. These compare to the 26.7 times P/E ratio in the BSW
transaction. The P/B and P/TB ratios were 294.63% on average for the national
group, 203.75% for the regional group and 224.64% for the smaller New England
group. These compare to the BSW ratio of 297.70%. Finally, the P/D ratio was
calculated as 33.66% nationally, 24.07% regionally, and 21.16% for the small New
England deals. These compare to the BSW transaction at 26.33%.
IMPACT ANALYSIS
HAS analyzed the changes in the amount of fully diluted earnings per
share and book value represented by the issuance of 1.3204 shares of NECB Common
Stock for each share of BSW fully converted Common Stock. The analysis
considered, among other things, the impact on fully diluted earnings per share
and book value per share of NECB. The analysis was based upon reported December
31,1997 balance sheet data for BSW and NECB and earnings for twelve months ended
December 31, 1997 for BSW and NECB.
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These analyses indicated that, based upon a pooling-of-interests
accounting, the impact on the earnings per share ("EPS") of NECB is highly
accretive by 11.8% to the projected pro forma earnings per share in light of
anticipated cost savings and other synergies.
The tangible book value per share after the merger is also slightly
accretive to NECB stockholders on a pooling basis by 3.2%.
Pursuant to HAS's advisory agreement with NECB, HAS will receive an
advisory fee for its services in connection with the Merger of $150,000. NECB
has made interim payments to HAS totaling $80,000 which will be credited against
the advisory fee. NECB has also agreed to reimburse HAS for its reasonable
out-of-pocket expenses incurred in connection with its engagement and to
indemnify HAS and its affiliates and their respective directors, officers,
employees, agents and controlling persons against certain expenses and
liabilities.
RECOMMENDATION OF THE BSW BOARD AND REASONS FOR THE MERGER
The BSW Board, with the assistance of its financial and legal advisors,
has evaluated the financial, legal and market considerations bearing on the
decision to recommend the Merger Agreement. The terms of the Merger Agreement,
including the Exchange Ratio, are the result of arm's-length negotiations
between BSW and NECB and their representatives. In reaching its determination
that the Merger Agreement is fair to, and in the best interest of, BSW and the
holders of BSW Common Stock, the BSW Board considered a number of factors, both
from a short-term and a long-term perspective. The factors which the BSW Board
considered, without assigning any relative or specific weights, included,
without limitation, the following:
(1) the BSW Board's review of BSW's business, financial condition,
results of operations, management and prospects, including, but not limited to,
its potential growth, development, productivity and profitability;
(2) the current and prospective environment in which BSW operates,
including regional economic conditions, the competitive environment for banking
and other financial institutions generally and the trend toward consolidation in
the financial services industry;
(3) information concerning the business, financial condition, results
of operations and prospects of NECB, including recent acquisitions by NECB, the
recent performance of NECB Common Stock, historical data of NECB, customary
statistical measurements of NECB's financial performance, NECB's expectations of
future business prospects and earnings based upon discussions with
representatives of NECB;
(4) the value to be received by holders of BSW Common Stock pursuant to
the Merger Agreement in relation to the historical trading prices and book value
of BSW Common Stock;
(5) the information presented to the BSW Board by BAC with respect to
the Merger Agreement and the opinion of BAC that, as of the date of such
opinion, the Exchange Ratio is fair, from a financial point of view, to BSW's
shareholders;
(6) the financial and other significant terms of the NECB offer;
(7) the review by the BSW Board with its legal and financial advisors
of the provisions of the Merger Agreement and Stock Option Agreement;
(8) the future growth prospects of BSW and NECB following the Merger
and the potential synergies expected from the Merger, including potential
expense reductions and increases in efficiency;
(9) the expectation that NECB will continue to provide quality service
to the community and customers served by BSW and the prospects for future
expansion of the products and services offered by BSW in its market area;
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(10) the compatibility of the respective business and management
philosophies of BSW and NECB, and the prospect that two individuals from the BSW
Board would serve as directors of NECB and that the existing directors of BSW
would serve on an Advisory Board to be formed by NECB (all of which were
considered by the BSW Board to enhance the prospect for a smooth transition
after the Merger and the prospects that the interests of BSW's current
shareholders and BSW's customers and employees would not be overlooked after the
Merger); and
(11) the less attractive alternative strategic courses available to
BSW, including remaining independent and the other potential acquisition
transactions.
After considering the factors described above and other considerations
it deemed relevant, the BSW Board determined that the Merger and the
consideration to be received by BSW's shareholders in connection with the Merger
was fair and, consequently, approved the Merger by the unanimous vote of the
directors present as being in the best interests of BSW and its shareholders.
ACCORDINGLY, THE BSW BOARD RECOMMENDS THAT SHAREHOLDERS OF BSW VOTE FOR APPROVAL
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY at the BSW
Special Meeting.
OPINION OF BSW'S FINANCIAL ADVISOR
BAC was retained by BSW as its financial advisor based on its
qualifications and experience in the financial analysis of banking and financial
service firms. BAC was also chosen because of its knowledge of the Connecticut
and New England banking industries. BAC has previously done numerous assignments
for BSW including strategy analysis, capital and dividend planning and
regulatory representation. In June of 1997 BAC was retained by BSW for the
purpose of advising the BSW Board on prioritizing BSW's strategic alternatives
including, among other considerations, the decision to remain independent as
opposed to selling BSW to another banking institution.
In December of 1997, the BSW Board concluded that they wished to
undertake a competitive solicitation with other institutions for the purpose of
receiving offers to acquire BSW. This solicitation resulted in the preliminary
acceptance by the BSW Board to affiliate with NECB, contingent upon the
fairness, from a financial point of view, of the consideration offered to BSW's
shareholders.
BAC has delivered to the BSW Board its written opinion as of March 19,
1998 and an updated opinion as of June 24, 1998, that the terms of the
transaction with NECB are fair, from a financial point of view, to the
shareholders of BSW. The full text of the opinion of BAC, which sets forth
assumptions made, matters considered and limits on the review undertaken by BAC,
is attached hereto as Appendix D. BSW shareholders are urged to read the opinion
in its entirety. BAC's opinion is directed only to the valuation by NECB of the
BSW price per share and does not constitute a recommendation to any holder of
BSW Common Stock as to how such holder should vote at the BSW Special Meeting.
The summary of the opinion of BAC set forth in this Joint Proxy
Statement-Prospectus was provided to BSW by BAC and is qualified in its entirety
by reference to the full text of the opinion itself. BAC's opinion was
necessarily based upon conditions as they existed and should be evaluated on the
date hereof and the information made available to BAC through the date hereof.
In order to determine the financial fairness of the terms of the
proposed merger, BAC utilized a six-fold test. Each methodology in the six-fold
process yielded an explicit per share valuation price which is assigned a weight
in the overall calculation. The weighted average of these prices yields a
composite per share price for BSW Common Stock against which must be measured
the valuation of BSW's Common Stock which is specified under the terms of the
proposed Merger. The composite price as of the date hereof is $23.54.
Valuation prices for the BSW Common Stock above $23.54 as computed
would, in the opinion of BAC, be fair from a financial point of view. As of the
date of the Fairness Opinion, delivered to the BSW Board on March 19, 1998 (the
"Fairness Opinion"), the valuation for BSW Common Stock was $34.00 based on a
common stock exchange ratio of 1.3204 shares of NECB Common Stock for each share
of BSW Common Stock and a price of $25.75 for NECB stock which was the price as
of the date of the Fairness Opinion. Therefore, the proposed transaction was
deemed fair, from a financial point of view, at that time. As of the date
hereof; the price of NECB Common Stock is $23.25 per share, which under the
terms of the Merger Agreement, implies a value of $31.00 per BSW share.
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As of the date hereof and using the exchange ratio as specified in the
Agreement, the composite price using BAC's six-fold test is below the offer
price of $31.00 and hence the terms of the proposed Merger between NECB and BSW
are found by BAC to be fair, from a financial point of view, to BSW
shareholders.
The six-fold methodology included:
FAIR VALUE PRICE PER SHARE
The fair value methodology derives a share price (the "Fair Value Share
Price") based upon a forecasted stream of earnings, dividends and terminal value
of a company. A financial forecast of the prospective results of operations was
developed and reviewed and approved by BSW's management for the years 1998-2000.
This forecast provided for the declaration of cash dividend payments to
shareholders in 1998, 1999, 1999 and 2000. These annual cash dividends and a
"liquidating" dividend or "terminal" value were used to establish a valuation
price for the shares of BSW as a going-concern. The value today (present value),
of the future dividends (both annual and liquidating), represent a "fair value
price" for BSW as a candidate for merger with another institution.
This derived price per share was compared to the valuation as proposed
in the terms of the Merger with NECB.
Using this methodology, the per share valuation as proposed in the
Merger for BSW shareholders must be compared to the Fair Value Price Per Share.
Share valuations greater than the Fair Value Price are considered fair, from a
financial point of view, to the shareholders of BSW. The price per share for BSW
common shares pursuant to the terms of the Merger Agreement was higher than the
derived price using the Fair Value approach. BAC has assigned the Fair Value
Price Per Share Methodology a 25% weighting in comparison with other
methodologies considered.
ADJUSTED (TANGIBLE) BOOK VALUE PER SHARE
BAC has determined the adjusted book value per share for BSW based upon
various adjustments to the stated book value of equity as of December 31, 1997.
These adjustments are made for the purpose of estimating net tangible equity.
The effect of these adjustments is to determine a per share liquidation
valuation.
The valuation of the BSW share price pursuant to the terms of the
Merger with NECB exceeds the liquidation valuation or adjusted net tangible
value per share. Therefore, using this test, the terms of the Merger are deemed
to be fair, from a financial point of view. BAC assigned a weighting to this
methodology of 5%.
GORDON GROWTH MODEL
This Gordon Growth Model is based on the financial principle that the
price of a share of common stock should reflect the present value of the future
stream of dividend payments to shareholders. Using this model yielded a
theoretical price for BSW's Common Stock. If the value of BSW Common Stock
pursuant to the terms of the Merger were above this price, the terms would be
considered fair from a financial point of view to the shareholders of BSW.
Valuations below the theoretical price based on the Gordon Growth Model would
not be considered fair to BSW shareholders. The derived price for BSW Common
Stock using the Gordon Growth Model were below the price of BSW Common Stock as
reflected in the terms of the Merger. Therefore, using this methodology BAC
concluded that the terms of the Merger were fair, from a financial point of view
to the shareholders of BSW. BAC assigned a weight of 15% to this methodology.
MARKET COMPARABLE FORMULA
The Market Comparable Formula is a methodology which derives a price
per share of common stock based on using explicit weights for (1) earnings per
share (EPS) times the multiplicative value of a price earnings ratio (PE), for
peer banks, (2) dividend yield, and (3) book value per share. The composite
weighted average of these three
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variables yields a price per share of common stock which is compared to the
valuation of BSW Common Stock as expressed in the proposed Merger between BSW
and NECB. If the price of BSW common shares pursuant to the terms of the Merger
is above the price determined according to the Market Comparable Formula as
described above, then in the opinion of BAC, the terms are fair, from a
financial point of view to BSW shareholders. The terms were above the price as
determined by the Market Comparable Formula and hence were deemed to be fair to
the shareholders of BSW. BAC assigned a 15% weighting to this methodology.
RECENT MARKET TRADING PERFORMANCE
This methodology seeks to compare the price of BSW's Common Stock as
indicated by recent market values to the value pursuant to the terms of the
proposed Merger. If the value pursuant to the proposed Merger is above current
market prices, the terms of the Merger, in the opinion of BAC, would be fair,
from a financial point of view to BSW's shareholders. The valuation of BSW stock
pursuant to the proposed merger with NECB was above the market price per share
of BSW Common Stock as of the date of the Fairness Opinion and was also above
typical market price premiums for similar bank acquisitions. Accordingly, using
this test, the terms of the proposed agreement with NECB indicate that the
transaction is fair, from a financial point of view, to BSW shareholders. BAC
assigned a weight of 15% to this methodology.
COMPARABLE TRANSACTIONS
This methodology compares the terms of a proposed merger with
contemporaneous terms of similar transactions. The methodology is based upon
financial comparisons between: (1) acquisition price and book value per share,
(2) acquisition price and earnings per share and finally, (3) acquisition price
and deposits. A weighted average score of these three financial benchmarks using
data from comparative bank acquisitions in the northeastern United States
yielded a composite price which was compared to the per share offering price by
NECB for BSW Common Stock. The valuation of BSW stock pursuant to the proposed
Merger with NECB was above the composite price derived from comparable
transactions. Therefore this methodology indicated that the terms of the
proposed transaction with NECB were fair, from a financial point of view. BAC
assigned a weight of 25% to this methodology.
BAC performed due diligence on NECB and its constituent banks. This due
diligence included an evaluation of the current and projected earnings of NECB,
as well as an examination of the financial condition of NECB with respect to the
loan portfolio and loan loss valuation reserves. Additionally, because of a
pending merger with the Olde Port Bank of Portsmouth, New Hampshire, BAC also
examined the financial condition of this institution with respect to its loan
portfolio and loss valuation reserves. In both instances BAC was satisfied that
there did not exist any material adverse conditions, or the expectation of the
development of such adverse conditions, which would materially impact the price
of NECB Common Stock.
The impact upon BSW shareholders was also evaluated based upon the
proposed terms of Merger with NECB. In particular, using share exchange ratios
pursuant to the terms of the Merger Agreement, the impact on BSW shareholders
was examined from the standpoint of the equivalent in the combined entity of (1)
book value per share, (2) earnings per share, and, (3) dividends per share. On a
pro-forma basis pursuant to the terms of the proposed Merger, the equivalent
value to BSW shareholders from each of these measures of investment ownership
was higher with NECB than they would have been had BSW remained independent and
performed according to its own internal financial forecasts. Using this
methodology provided added confirmation that, in BAC's opinion, the terms of the
transaction were, from a financial point of view, to BSW shareholders. Pursuant
to BAC's advisory agreement with BSW, BAC will receive a contingent advisory fee
for its services in connection with the merger of 1.00% of the aggregate
consideration received by BSW shareholders at closing which is approximately
$320,000. In addition, through the date hereof, BSW has paid BAC $40,000 which
is in addition to the contingent fee. BSW has also agreed to reimburse BAC for
its reasonable out-of-pocket expenses incurred in connection with its engagement
and to indemnify BAC and its officers and employees against certain expenses and
liabilities.
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THE MERGER AGREEMENT
The following information, insofar as it relates to matters contained
in the Merger Agreement, is qualified in its entirety by the Merger Agreement,
which is incorporated herein by reference and attached hereto as APPENDIX A. BSW
shareholders and NECB stockholders are urged to read carefully the Merger
Agreement.
GENERAL
In accordance with the provisions of the Merger Agreement and
Connecticut law, at the Effective Time, BSW will be merged with and into NEBT,
the separate corporate existence of BSW will cease and NEBT will continue its
corporate existence as the resulting bank in the Merger (the "Resulting Bank")
as a Connecticut-chartered commercial bank under the name New England Bank &
Trust Company. In addition, at the Effective Time, all of the outstanding shares
of BSW Common Stock (except for the Excluded Shares) will be converted into and
exchangeable for NECB Common Stock and cash in lieu of fractional shares, based
upon an exchange ratio of 1.3204 shares of NECB Common Stock for each share of
BSW Common Stock (the "Exchange Ratio"), subject to adjustment as described
below (the "Per Share Merger Consideration").
The Exchange Ratio will be adjusted to result in $31.00 in value of
NECB Common Stock per share of BSW Common Stock in the event that (i) the
product of the Average Closing Price, multiplied by the Exchange Ratio, is less
than $31.00 and (ii) the percentage decline in the closing price of NECB Common
Stock from March 19, 1998 to the date on which the last of the regulatory
approvals required for the consummation of the Merger occurs (the "Price
Period") exceeds the percentage decline in the average closing share price of
those institutions as reported in the SNL Securities LLC New England Banks Index
for the Price Period by more than ten percent (10.0%).
At the Effective Time, Stock Options (as defined in Section 3.02 of the
Merger Agreement) granted pursuant to the BSW 1990 Non-Qualified Stock Option
Plan which are outstanding and unexercised immediately prior to the Effective
Time shall cease to represent a right to acquire shares of BSW Common Stock and
shall be converted automatically into an option to purchase shares of NECB
Common Stock as follows: (i) the number of shares of NECB Common Stock to be
subject to the new option shall be equal to the product of the number of shares
of BSW Common Stock subject to the original option and the Exchange Ratio,
provided that any fractional shares of NECB Common Stock resulting from such
multiplication shall be rounded down to the nearest share; and (ii) the exercise
price per share of NECB Common Stock under the new option shall be equal to the
exercise price per share of BSW Common Stock under the original option divided
by the Exchange Ratio, provided that such exercise price shall be rounded up to
the nearest cent. The duration and other terms of the new option shall be the
same as the original option, except that all references to BSW shall be deemed
to be references to NECB.
At the Effective Time, Stock Options granted pursuant to the BSW 1997
Incentive Stock Option Plan which are outstanding and exercisable by their terms
immediately prior to the Effective Time shall cease to represent a right to
acquire shares of BSW Common Stock and shall be converted automatically into the
right to receive in settlement for each such Stock Option shares of NECB Common
Stock in a number equal to the quotient of (a) the excess, if any, of (i) the
product of (A) the Average Closing Price times (B) the Per Share Merger
Consideration minus (ii) the per share exercise price of such Stock Option,
multiplied by (iii) the number of shares of BSW Common Stock covered by such
Stock Option, divided by (b) the Average Closing Price. All such Stock Options
shall be canceled and of no further effect as of the Effective Time.
Holders of BSW Common Stock who follow the procedures specified in
Sections 33-855 through 33-872, inclusive, of the Connecticut Business
Corporation Act ("CBCA") will be entitled to the rights and remedies of
dissenting shareholders. Pursuant to Section 36a-125(h) of the Banking Laws of
Connecticut, BSW shareholders have the right to dissent from the Merger and to
obtain payment of the fair value of their shares of BSW Common Stock if the
Merger is consummated. Necessary procedural steps are set forth in Sections
33-855 through 33-872, inclusive, of the CBCA. See "THE MERGER AGREEMENT--
Dissenters' Rights" and APPENDIX E to this Joint Proxy Statement-Prospectus,
which set forth the steps to be taken by a holder of BSW Common Stock who wishes
to exercise the right to dissent.
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EFFECTIVE TIME
The closing (the "Closing") of the Merger will take place on the third
business day after the mutual conditions to the obligations of NECB and BSW are
satisfied or on such other day as the parties may agree. The Merger shall become
effective at 11:59 p.m. Eastern time on the date on which a copy of the Merger
Agreement certified by the Banking Commissioner, along with the Banking
Commissioner's approval of the Merger, is filed with the Secretary of the State
of the State of Connecticut.
EFFECT OF THE MERGER
At and after the Effective Time and by virtue of the Merger, the
Resulting Bank shall possess all the rights, privileges, powers and franchises
of BSW and the entire assets, business and franchises of BSW shall be vested in
the Resulting Bank without any deed or transfer, provided the parties may
execute such deeds or instruments of conveyance as may be convenient to confirm
the same. The Resulting Bank shall assume and be liable for all debts, accounts,
undertakings, contractual obligations and liabilities of BSW and shall exercise
and be subject to all the duties, relations, obligations, and trusts of BSW,
whether as debtor, depository, registrar, transfer agent, executor,
administrator, trustee or otherwise. The Resulting Bank shall be liable to pay
and discharge all such debts and liabilities, to perform such duties and to
administer all such trusts in the same manner and to the same extent as if the
Resulting Bank had itself incurred the obligation or liability or assumed the
duty, relation or trust. All rights of creditors and all liens upon the property
of BSW shall be preserved unimpaired and the Resulting Bank shall be entitled to
receive, accept, collect, hold and enjoy any and all gifts, bequests, devises,
conveyances, trusts and appointments in favor of or in the name of BSW whether
made or created to take effect prior to or after the Merger and the same shall
inure to and vest in the Resulting Bank. In addition to the foregoing, the
Merger shall have such other effects as may be provided under the laws of the
State of Connecticut.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
OWNERSHIP OF BSW BY NECB AND NEBT AND NECB DIRECTORS AND OFFICERS
NECB AND NEBT. Throughout 1997, NECB and NEBT accumulated a significant
investment in BSW. In September, 1997, NECB filed a Form F-11 with the FDIC
disclosing that NECB and NEBT collectively had acquired 88,396 shares or 9.39%
of the outstanding stock of BSW. NECB acquired the stock for investment purposes
and to facilitate a possible business combination with BSW. On September 18,
1997 NECB made a purchases of 668 and 3,200 shares of BSW Common Stock. In
preparing the Merger Agreement and considering the required regulatory approvals
for consummation of the Merger, NECB became aware that its acquisition of more
than 5% of the outstanding shares of BSW Common Stock, which occurred in
September of 1997, had been made without the prior approval of the Board of
Governors of the Federal Reserve System ("FRB"). Pursuant to Section 3(a)(3) of
the Bank Holding Company Act of 1956 and regulations issued by the FRB, a bank
holding company is required to obtain the prior approval of the FRB before
acquiring ownership of more than 5% of the outstanding shares of any class of
voting securities of another bank. Upon recognizing its failure to have obtained
prior FRB approval for the acquisition of more than 5% of the outstanding shares
of BSW Common Stock, NECB, on March 13, 1998, sold 45,000 shares of BSW Common
Stock to a purchaser in a private transaction. Accordingly, as of March 13,
1998, NECB's ownership of shares of BSW Common Stock was reduced to 4.9%. NECB
thereupon notified the FRB of these facts. By letter dated May 21, 1998, the FRB
notified NECB that the corrective actions taken by NECB had satisfactorily cured
the violation. As of the date hereof, NECB and NEBT directly own 47,264 shares
of BSW Common Stock. NECB and NEBT will vote at the BSW Special Meeting and
following the consummation of the Merger, NECB's and NEBT's shares of BSW Common
Stock will be canceled in accordance with the provisions set forth in the Merger
Agreement.
DAVID A. LENTINI. Mr. Lentini holds options to acquire 11,000 shares of
BSW Common Stock with an exercise price of $9.09 per share granted to him
pursuant to the BSW 1990 Non-Qualified Stock Option Plan when he was president
of BSW from 1989-1992. Following the consummation of the Merger, Mr. Lentini's
options shall be converted automatically into an option to purchase shares of
NECB Common Stock as follows: (i) the number of shares of NECB Common Stock to
be subject to the new option shall be equal to the product of the number of
shares of BSW Common Stock subject to the original option (11,000) and the
Exchange Ratio (1.3204), provided that any fractional shares of NECB Common
Stock resulting from such multiplication shall be rounded down to the nearest
share, which equals 14,524 shares; and (ii) the exercise price per share of NECB
Common Stock under the new option
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shall be equal to the exercise price per share of BSW Common Stock under the
original option divided by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent ($9.09/1.3204), which equals $6.88. The
duration and other terms of the new option shall be the same as the original
option, except that all references to BSW shall be deemed to be references to
NECB. Mr. Lentini, therefore, has beneficial ownership in BSW as a result of his
right to exercise his options. Mr. Lentini does not intend to exercise his
options prior to the BSW Record Date and, therefore, will not vote at the BSW
Special Meeting.
The aggregate holding of BSW Common Stock of NECB, NEBT and Mr. Lentini
is less than 10% of BSW Common Stock.
INTERESTS OF BSW DIRECTORS AND OFFICERS
Directors and executive officers of BSW have personal interests which
will be affected by the Merger, including the following: directors and executive
officers of BSW collectively owned, as of June 18, 1998, 167,679 shares of BSW
Common Stock to be exchanged for NECB Common Stock in the Merger. Assuming a
$31.00 BSW equivalent share price, these shares would have a market value of
approximately $5,198,049.00. In addition to these shares are stock options held
by BSW directors and executive officers for a total of 82,040 shares at exercise
prices of $7.50 to $21.75 per share.
The following table shows the holdings of BSW Common Stock and options
by BSW directors and executive officers as of June 24, 1998:
Name and address of Amount and nature Percent
Title of class beneficial owner of beneficial ownership of class
- -------------- ------------------- ----------------------- --------
BSW Common
Stock Barbara Harbour 25,614 3.2%
BSW Common
Stock John R. Dunn 2,828 1.8%
BSW Common
Stock Robert O. Ciraco 668 .6%
BSW Common
Stock Salvatore Garofalo 37,208 4.4%
BSW Common
Stock Wayne C. Gerlt 9,236 1.5%
BSW Common
Stock Edward F. Havens 11,586 1.7%
BSW Common
Stock Richard S. Kelley 28,786 3.5%
BSW Common
Stock Walter Kupchunos, Jr. 7,385 1.3%
BSW Common
Stock Raymond H. Lefurge, Jr. 7,600 1.4%
BSW Common
Stock John J. Mitchell 15,553 2.2%
BSW Common
Stock Barbara M. Perry 1,161 .7%
BSW Common
Stock J. Brian Smith 10,036 1.6%
BSW Common
Stock Robert J. Smith 10,036 1.6%
Under the terms of the Merger Agreement, at the Effective Time, NECB
will provide for the election of two BSW Directors, as selected by NECB after
consultation with BSW, to the NECB Board and two BSW Directors, as selected by
NECB after consultation with BSW, to the Board of Directors of NEBT. These four
directors have not been selected. For their service on the NECB Board during
1997, directors (other than executive officers of NECB who are NECB Board
members) received a retainer of $3,000 plus $300 for each NECB Board meeting
attended and $150 for each committee meeting attended. Each committee chairman
received additional annual compensation of $1,000. For her service as chairman
of the BSW Board during 1997, Ms. Barbara Barbour received $4,000. For each
meeting of the BSW Board, BSW directors (other than executive officers of BSW
who are BSW Board members) received $250 per meeting.
NECB has agreed to establish a South Windsor Advisory Board, the
members of which will include all BSW directors holding office immediately prior
to the Effective Time who elect to become members of the Advisory Board. The
Advisory Board will meet on a quarterly basis and will assist the Boards of
Directors of NECB and NEBT in identifying the needs of the South Windsor
community. Members of the Advisory Board will be paid $250 per meeting.
BSW has entered into written agreements with certain of its executive
officers providing such officers with compensation upon the occurrence of
certain "change-in-control" transactions affecting BSW, as more fully described
below.
Pursuant to an Employment Agreement, dated March 6, 1997, between BSW
and John R. Dunn, its President and Chief Executive Officer, if a
change-in-control transaction results in a termination of employment, Mr. Dunn
is to receive as a severance payment an amount equal to 2.99 times his then
current base salary on an annualized basis (base salary is not less than
$150,000 under such contract), payable no later than three months from the date
of the closing of the change-in-control transaction, but in no event prior to
receipt by the bank of any necessary shareholder and federal and state
regulatory approvals for said transaction. Mr. Dunn is also to receive certain
continued life, health, disability and accident insurance benefits (or the cash
equivalent thereof) for a maximum of three years following the change in
control. Notwithstanding the foregoing, the agreement provides that Mr. Dunn and
a majority of BSW's directors in office prior to the occurrence of the subject
event may elect to agree that a change in control has not occurred within 30
days following the event. Mr. Dunn's change in control agreement is expected to
be triggered following the Merger.
Pursuant to a Change-in-Control Agreement, dated January 2, 1998,
between BSW and Robert O. Ciraco, its Executive Vice President and Chief Lending
Officer, if a change-in-control transaction results in a termination of
employment, Mr. Ciraco is to receive as a severance payment an amount equal to
2.00 times (1) his then current base salary on an annualized basis (which is
$98,000 for 1998), plus (2) his bonus awarded for performance in the calendar
year preceding the change in control, payable no later than three months from
the date of termination of employment.
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Mr. Ciraco is also to receive certain continued health insurance benefits
(or the cash equivalent thereof) for a maximum of two years following the change
in control. Mr. Ciraco's change in control agreement is expected to be triggered
following the Merger.
For purposes of the two agreements, a "change in control" is defined as
(A) the acquisition by another party of (i) more than 50% of the voting common
stock of BSW, (ii) all or substantially all of the assets of BSW, (iii) control
over the election of majority of the directors of BSW, or (B) the obtaining by
another party of the ability to exercise a controlling influence over the
management or policies of BSW, as determined in good faith by the BSW Board.
In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
March 19, 1998, or who becomes prior to the Effective Time, a director or
officer or employee of BSW (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 or she is or was a director,
officer or employee of BSW or (ii) the Merger Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use their
best efforts to defend against and respond thereto. It is understood and agreed
that BSW shall indemnify and hold harmless, and that after the Effective Time,
the Resulting Bank and NECB shall indemnify and hold harmless, as and to the
fullest extent permitted by applicable law and by the provisions of their
respective certificates of incorporation and bylaws, 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.
The foregoing notwithstanding, it is further understood and agreed that
NECB shall indemnify and hold harmless BSW, its officers, directors and
employees against any and all losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses), judgments, fines
and amounts paid in settlement in connection with any threatened or actual
claim, action, suit, proceeding or investigation arising out of or relating to a
breach by NECB of the representation contained in the Merger Agreement stating
that neither NECB, nor its President nor any of its subsidiaries is an
"interested shareholder" of BSW as "interested shareholder" is defined in
Section 33- 843(9) of the Connecticut General Statutes. Any amounts required to
be paid by NECB pursuant to these indemnification provisions shall be paid by
NECB within thirty (30) days of receipt of appropriate documentation therefor.
See "-Employee Matters."
The indemnity provisions summarized above may result in discouraging or
deterring stockholders and management of NECB from bringing suit against the
former directors and officers of BSW even though such suit, if successful, might
otherwise benefit NECB or its stockholders. NECB's obligations under those
provisions to indemnify such directors and officers for the actions specified
above would negate any such benefits. No present plan exists to provide
indemnification that goes beyond the rights specified. One case exists for which
indemnification may be sought. This action, PAGE V. BANK OF SOUTH WINDSOR, ET
AL, is pendng in the Connecticut Superior Court for the Judicial District of
Hartford. The causes of action alleged in the suit brought by the former
president of BSW, including both contract and tort claims, are related to the
circumstances of the former president's termination and statements allegedly
made concerning those circumstances. Damages in an unspecified amount are sought
by the plaintiff. On the basis of the current status of this suit, management of
BSW believes that the outcome of such litigation will not have a material
adverse effect on the financial condition of BSW. Besides this case, there is no
pending or, to NECB's or BSW's knowledge, threatened litigation for which
indemnification may be sought.
At and after the Effective Time, NECB shall maintain BSW's current
directors' and officers' liability insurance run-off and tail coverage and will
use its best efforts to procure directors' and officers' liability insurance
run-off and tail coverage so as to increase the term of coverage to a date not
earlier than three years from the Effective Date.
In the event NECB or the Resulting Bank or any of their successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its property
and assets to any person, then, and in each such case proper provision shall be
made so that the successors and assigns of NECB or the Resulting Bank, as the
case may be, assume the obligations set forth above.
SHAREHOLDER AGREEMENTS
Concurrently with the execution of the Merger Agreement, the directors
of BSW executed Shareholder Agreements which contain provisions to support the
Merger. More specifically, BSW's directors have agreed to vote
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their BSW Common Stock "FOR" approval of the Merger Agreement and have agreed to
vote against approval of any other agreement providing for any merger,
consolidation, sale of assets or other business combination of BSW with or to
any other person, entity or bank.
The directors of BSW also agreed that they will not, prior to the
Closing, transfer any of their BSW Common Stock except by will or operation of
law unless such transfer is agreed to in writing by NECB. Moreover, the
directors have agreed not to solicit, encourage or initiate any communication
with any other person or entity with respect to any proposal for a merger,
consolidation, sale of assets or other business combination involving BSW or
encourage any person, firm, corporation, group or other entity to engage in such
transaction.
Pursuant to Connecticut law, such agreements may not be enforceable
without the approval of the Banking Commissioner. Such approval was obtained on
June 4, 1998.
THE STOCK OPTION AGREEMENT
In order to preserve the integrity of the Merger Agreement, NECB and
BSW have entered into the Stock Option Agreement granting NECB the right to
purchase up to 215,000 shares of BSW Common Stock at a price of $12.00 per share
(the "Option"). Among other provisions, the Stock Option Agreement provides that
NECB may not exercise the Option without the written consent of BSW except: (a)
subsequent to the fifth day preceding the scheduled expiration date of a tender
or exchange offer by any person or group of persons (other than NECB or an
affiliate of NECB) to acquire 25% or more of the BSW Common Stock or (b) upon
the acquisition by any one person or group of persons (other than NECB or an
affiliate of NECB) of, or of the right to acquire, 25% or more of the BSW Common
Stock, if in the case of (a) or (b), (1) after giving effect to such offer or
acquisition such person or group would own or have the right to acquire 25% or
more of the BSW Common Stock, (2) there have been filed documents with the FDIC
in connection therewith (or, if no such filing is required, similar evidence
that the offer is actually commencing) and (3) such person or group has received
all required regulatory approvals to own or control 25% or more of the BSW
Common Stock, or (c) upon a willful breach of the Merger Agreement by BSW which
would permit NECB to terminate the Merger Agreement, provided that within 12
months from the date of such breach either an event described in clauses (a) or
(b) above has occurred or any agreement has been entered into between BSW and
any third party, including, without limitation, an agreement in principle,
contemplating (a) any acquisition by such third party of 25% or more of the BSW
Common Stock or any other class or series of voting securities of BSW or (b) a
merger or other business combination involving BSW or the acquisition of a
substantial interest in, or a substantial portion of the assets, business or
operations of, BSW, other than as contemplated by the Merger Agreement.
The Option, to the extent not previously exercised, terminates if the
Merger Agreement is terminated before the Option is exercisable and before NECB
delivers notice of its intention to exercise the Option.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
Promptly after the Effective Time, each holder of record of BSW Common
Stock as of the Effective Time will be provided with transmittal materials,
together with instructions for the exchange of such holder's Certificates for
the number of shares of NECB Common Stock together with a check in payment in
lieu of any fractional share.
HOLDERS OF BSW COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL MATERIALS AND THE INSTRUCTIONS FROM NECB AND/OR A
DULY APPOINTED EXCHANGE AGENT.
Upon transmittal of one or more Certificates, together with transmittal
materials duly executed and completed in accordance with the instructions
thereto (or upon completion of reasonable procedures pertaining to lost
Certificates), NECB shall promptly cause to be issued to the persons entitled
thereto the Per Share Merger Consideration to which such persons are entitled.
After the Effective Time, there will be no transfers on BSW's stock
transfer books of shares of BSW Common Stock issued and outstanding immediately
prior to the Effective Time. If Certificates are presented to
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NECB after the Effective Time, they will be canceled and exchanged for Per Share
Merger Consideration in accordance with the foregoing procedures.
Dissenters' rights will be satisfied in accordance with the procedures
described under "--Dissenters' Rights" which are fully set forth in APPENDIX E
to this Joint Proxy Statement-Prospectus.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of NECB and BSW to effect the Merger are
subject to the satisfaction of the following conditions at or prior to the
Effective Time, none of which may be waived: (i) the Merger Agreement shall have
been approved by the affirmative vote of the holders of at least two-thirds of
the outstanding shares of BSW Common Stock and by a majority of the total votes
cast in person or by proxy by a quorum of NECB stockholders entitled to vote
thereon; (ii) the shares of NECB Common Stock which shall be issued to the
shareholders of BSW upon consummation of the Merger shall have been authorized
for inclusion for quotations on the Nasdaq NM, subject to official notice of
issuance; (iii) the Merger Agreement and the transactions contemplated thereby
shall have been approved by the Banking Commissioner and by the FDIC and neither
of such approvals shall contain any term or condition which would (a) have a
material adverse effect on the business, operations, properties, assets or
financial condition of the Resulting Bank or (b) otherwise materially impair the
value of the Resulting Bank, and all appropriate waiting periods shall have
expired (see "--Regulatory Approvals Required for the Merger"); (iv) 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 Commission; and (v) neither BSW nor NECB shall be subject
to any order, injunction or decree of any court or agency of competent
jurisdiction which prevents the consummation of the Merger.
In addition, NECB's obligations under the Merger Agreement are subject
to the satisfaction, at or prior to the Effective Time, of the following
conditions, any of which may be waived by NECB:
(a) Each of the obligations of BSW required to be performed by it
at or prior to the Effective Time pursuant to the terms of the Merger Agreement
shall have been duly performed and complied with in all material respects and
the representations and warranties of BSW contained in the Merger Agreement
shall be true and correct in all material respects as of the date of the Merger
Agreement and as of the Effective Time as though made at and as of the Effective
Time (except as otherwise contemplated by the Merger Agreement), and NECB shall
have received a certificate to that effect signed by the President of BSW.
(b) All actions required to be taken by, or on the part of, BSW
to authorize the execution, delivery and performance of the Merger Agreement by
BSW and the consummation of the transactions contemplated by the Merger
Agreement shall have been duly and validly taken by the BSW Board and the BSW
shareholders, and NECB shall have received certified copies of the resolutions
evidencing such authorization.
(c) NECB shall have received certificates as of a day as close as
practicable to the date of the Effective Time from appropriate authorities as
to the good standing of, and of the payment of franchise taxes, if any, by BSW.
(d) Any and all permits and approvals of governmental bodies and
material consents (including all consents of landlords) and authorizations of
other third parties shall have been obtained by BSW and NECB which are required
with respect to and are necessary in connection with (i) the consummation of the
Merger and the other transactions contemplated by the Merger Agreement, (ii) the
ownership by the Resulting Bank of all of the properties and assets of BSW, or
(iii) the conduct by the Resulting Bank of the business of BSW as conducted by
BSW at the Effective Time.
(e) NECB shall have received an opinion, dated the date of
Closing, from counsel to BSW, in form and substance reasonably satisfactory to
NECB.
(f) BSW shall have caused to be delivered to NECB a letter from
BSW's independent public accountants with respect to BSW, and dated the date of
the Closing, and addressed to NECB and
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BSW, in form and substance reasonably satisfactory to NECB with respect to
certain matters specified in the Merger Agreement.
(g) Neither NECB nor BSW shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which would impose
material limitations on the ability of the Resulting Bank to exercise full
rights of ownership of the assets or business of BSW, and no action, suit,
proceeding or investigation shall be pending or threatened which, in the opinion
of counsel to NECB, is reasonably likely to result in any such order, decree or
injunction.
(h) Except as otherwise provided for in the Merger Agreement, any
agreement to which BSW is a party which takes effect upon, or which provides a
penalty or payment conditioned upon or related to, a change of control of BSW
shall have been duly terminated without material cost or expense to BSW, the
Resulting Bank or NECB.
(i) The real property leases to which BSW is a party shall have
remained in full force and effect as of the Effective Time and shall not have
been terminated by reason of the consummation of the Merger.
(j) NECB shall have received rulings from the Internal Revenue
Service, in form and substance satisfactory to counsel for NECB and NEBT, or an
opinion of counsel for NECB and NEBT shall have been received rendered on the
basis of facts, representations and assumptions set forth in such opinions or in
writing elsewhere and referred to therein, substantially to the effect that for
federal income tax purposes, (i) the Merger constitutes a merger within the
meaning of Section 368(a) of the Code; (ii) no gain or loss will be recognized
by NECB or NEBT upon the Merger; (iii) no gain or loss will be recognized by the
shareholders of NECB upon consummation of the Merger; and (iv) such other
matters as NECB or NEBT deems appropriate and necessary. In rendering any such
opinion, such counsel may require and, to the extent they deem necessary or
appropriate, may rely upon, opinions of other counsel and upon representations
made in certificates of officers of BSW, NECB, affiliates of the foregoing, and
others.
(k) NECB shall have received the results of any environmental
site assessment contracted for in accordance with the Merger Agreement and based
upon such environmental site assessment, not more than $500,000 shall be needed
to be expended to correct any deficiency cited in such assessment and, in the
case of property used for BSW bank operations, it shall not be necessary to
cease using the cited locations for a period in excess of 30 days in order to
complete such corrections, provided, that, as to any deficiency that can be
corrected reasonably promptly and before the Effective Time, BSW shall have the
option of correcting such deficiency.
BSW's obligations under the Merger Agreement are subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any of which may be waived by BSW:
(a) Each of the obligations of NECB and NEBT required to be
performed by them at or prior to the Effective Time shall have been duly
performed and complied with and the representations and warranties of NECB
contained in the Merger Agreement shall be true and correct in all respects as
of the date of the Merger Agreement and as of the Effective Time as though made
at and as of the Effective Time, and BSW shall have received a certificate to
that effect signed by the President and Chief Financial Officer of NECB.
(b) All actions required to be taken by or on behalf of NECB and
NEBT to authorize the execution, delivery and performance of the Merger
Agreement by NECB and NEBT and the consummation of the transactions contemplated
thereby shall have been duly and validly taken by the Boards of Directors of
NECB and NEBT, by NECB as sole shareholder of NEBT, and by the stockholders of
NECB, and BSW shall have received certified copies of the resolutions evidencing
such authorization.
(c) Any and all permits and approvals of governmental bodies and
material consents (including all consents of landlords) and authorizations of
other third parties shall have been obtained by
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BSW and NECB which are required with respect to and are necessary in connection
with (i) the consummation of the Merger and the other transactions contemplated
by the Merger Agreement, (ii) the ownership by the Resulting Bank of all of the
properties and assets of BSW, and (iii) the conduct by the Resulting Bank of the
business of BSW as conducted by BSW at the Effective Time.
(d) BSW shall have received an opinion, dated the date of the
Closing, from counsel to NECB, in form and substance reasonably satisfactory to
BSW.
(e) BSW shall have received rulings from the Internal Revenue
Service, in form and substance satisfactory to counsel for BSW, or an opinion of
counsel for BSW or NECB shall have been received, rendered on the basis of
facts, representations and assumptions set forth in such opinions or in writing
elsewhere and referred to therein, substantially to the effect that for federal
income tax purposes (i) the Merger constitutes a merger within the meaning of
Section 368(a) of the Code; and (ii) accordingly, no gain or loss will be
recognized by the shareholders of BSW with respect to NECB Common Stock received
solely in exchange for BSW Common Stock pursuant to the Merger Agreement
(noting, however, that non-taxability does not extend to cash received in lieu
of a fractional share interest in NECB Common Stock, or by dissenters, if any).
In rendering any such opinion, such counsel may require and, to the extent they
deem necessary or appropriate, may rely upon, opinions of other counsel and upon
representations made in certificates of officers of BSW, NECB, affiliates of the
foregoing, and others.
No assurance can be provided as to when, or whether, the regulatory and
other consents and approvals necessary to consummate the Merger will be obtained
or whether all of the other conditions precedent to the Merger will be satisfied
or waived by the party permitted to do so. See "-Regulatory Approvals Required
for the Merger" below. If the Merger is not effected on or before March 31,
1999, the Merger Agreement may be terminated by a vote of a majority of the NECB
Board or BSW Board, unless the failure to effect the Merger by such date is due
to the breach of the Merger Agreement by the party seeking to terminate the
Merger Agreement.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
The Merger is subject to the prior approval of the FDIC under the Bank
Merger Act, as amended (the "BMA"). An application for such approval has been
filed with the FDIC. In reviewing the BMA application, the FDIC must take into
consideration, among other factors, the financial and managerial resources and
future prospects of the institutions and the convenience and needs of the
communities to be served. In addition, the BMA prohibits the FDIC from approving
the Merger if it would result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the business
of banking in any part of the United States, or if its effect in any section of
the country may be substantially to lessen competition or to tend to create a
monopoly, or if it would in any other manner be a restraint of trade, unless the
FDIC finds that the anticompetitive effects of the Merger are clearly outweighed
by the public interest and the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. In addition, under the
BMA, the Merger may not be consummated until the fifteenth day following the
date of FDIC approval of the Merger, during which time the United States
Department of Justice may challenge the Merger on antitrust grounds. The
commencement of an antitrust action during the waiting period would stay the
effectiveness of such approval unless a court specifically orders otherwise.
Because the Merger is subject to the prior approval of the FDIC under
the BMA, no approval of the Federal Reserve Board is necessary to effectuate the
Merger.
The Merger also is subject to the approval of the Banking Commissioner
pursuant to Section 36a-125 of the Connecticut General Statutes. An application
for such approval has been filed with the Banking Commissioner. Under applicable
Connecticut law, in considering the Merger, the Banking Commissioner is required
to determine whether the terms of the Merger are reasonable and in accordance
with law and sound public policy and whether benefits to the public clearly
outweigh possible adverse effects, including, but not limited to, an undue
concentration of resources and decreased or unfair competition. The Banking
Commissioner may not approve the Merger, however, unless the Banking
Commissioner considers whether: (i) the investment and lending policies of NEBT
and BSW or the proposed investment and lending policies of the Resulting Bank,
are consistent with safe and sound banking practices and will benefit the
economy of the state; (ii) the services or proposed services of the Resulting
Bank are
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consistent with safe and sound banking practices and will benefit the economy of
the state; (iii) NEBT and BSW have sufficient capital to ensure, and agree to
ensure, that the Resulting Bank will comply with applicable minimum capital
requirements; (iv) NEBT and BSW have sufficient managerial resources to operate
the Resulting Bank in a safe and sound manner; and (v) the proposed acquisition
will not substantially lessen competition in the banking industry of the state.
The Banking Commissioner may not approve the Merger unless the Banking
Commissioner finds, in accordance with applicable regulations, that the
subsidiary banks have a record of compliance with the requirements of the
Community Reinvestment Act of 1977, 12 U.S.C. ss.2901 et seq., as from time to
time amended, the community reinvestment requirements of Section 36a-34 of the
General Statutes of Connecticut, as amended, inclusive, and applicable consumer
protection laws; and the Resulting Bank will provide adequate services to meet
the banking needs of all community residents, including low income residents and
moderate income residents, in accordance with a plan submitted by NECB, NEBT and
BSW in such form and containing such information as the Banking Commissioner may
require. The Banking Commissioner may not approve the Merger if it would result
in a monopoly, or would be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in the State of
Connecticut or if the Banking Commissioner determines that the effect of the
Merger may be to substantially lessen competition, or would tend to create a
monopoly, or would be in restraint of trade, unless the Banking Commissioner
finds that the anticompetitive effects of the Merger are clearly outweighed in
the public interest by the probable effect of the Merger in meeting the
convenience and needs of the community to be served.
Although there can be no assurances that all required regulatory
approvals will be received for the Merger, NECB and BSW believe that all
required regulatory approvals will be obtained.
NECB and BSW are not aware of any regulatory approvals that are
required for consummation of the Merger, except as described above. Should any
other approvals be required, it is presently contemplated that such approvals
would be sought. There can be no assurance that any other approvals, if
required, would be obtained.
The Merger will not be consummated unless all of the requisite
regulatory approvals for the transactions contemplated by the Merger Agreement
are obtained. See "-Conditions to Consummation of the Merger" above.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, BSW has agreed that until the
Effective Time, BSW will conduct its business only in the ordinary course and
consistent with prudent banking practice, will use all reasonable efforts to
preserve BSW's properties wherever located, and will comply in all material
respects with all laws applicable to BSW and to the conduct of its business and
to the transactions contemplated by the Merger Agreement. BSW will use all
reasonable efforts to preserve its business organization intact, to keep
available the present services of its employees, and to preserve the goodwill of
its customers and others with whom business relationships exist. BSW will, until
at least through the consummation of the transactions contemplated by the Merger
Agreement, keep its material insurance policies in full force and effect or will
replace such policies with comparable policies. In addition, BSW has agreed that
until the consummation of the Merger, and except as otherwise consented to or
approved by a duly authorized officer of NECB or as permitted or required by the
Merger Agreement, BSW will not:
(a) enter into or amend certain contracts designated in the
Merger Agreement;
(b) change any provision of its Articles of Incorporation or
Bylaws or similar governing documents;
(c) change the number of issued shares of its capital stock other
than upon exercise of currently outstanding options, or issue or grant any
option, warrant, call, commitment, subscription, right to purchase or agreement
of any character relating to its authorized or issued capital stock, or any
securities convertible into shares of such stock, or split, combine or
reclassify any shares of its capital stock, declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock or redeem or otherwise
acquire any shares of its capital stock, provided, however, BSW may declare, set
aside or pay cash dividends per share of BSW Common Stock at the rate currently
paid by BSW, which rate may be increased by BSW to reflect the same percentage
rate increase as any increase in the dividend rate paid by NECB from its current
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dividend rate, provided that in no event may any dividend declared, set aside or
paid by BSW exceed 25% of BSW's net earnings for the then most recently
completed quarter. Without limiting the foregoing, nothing herein shall prevent
BSW from paying quarterly dividends prior to the Effective Time such that its
shareholders shall receive a total of four quarterly dividends in 1998 from BSW
and NECB;
(d) make unsecured loans in excess of $75,000 for any individual
loan or in excess of $75,000 in the aggregate to any borrower or group of
borrowers, other than renewals in the ordinary course of business and not
involving any change in terms;
(e) (i) make any loan or loans described as an "Undesirable" or
"Prohibited" Loan; (ii) make any secured loan or loans, other than residential
mortgage loans with a loan to value ratio in excess of 80% except with prior
notice to NECB, in an aggregate amount to any one borrower (including members of
his/her immediate family or affiliates of such borrower with an exposure to BSW
in excess of $300,000) in excess of $300,000, except for loans sold to investors
and renewals in the ordinary course of business and not involving any change in
terms; (iii) make any junior mortgage loan in excess of $100,000 behind first
mortgages if the resulting loan to value ratio of the combined mortgages would
exceed 80% or if prior mortgage loans are in excess of $250,000; (iv) make any
commercial loan or loans in excess of $300,000 unless fully secured by readily
marketable collateral or real estate with a maximum loan to value ratio of 80%;
or (v) honor or extend any overdraft in excess of $75,000 unless fully secured
by readily marketable collateral;
(f) make any new loans to any director or employee of BSW, or any
member or affiliate of their respective families other than in the ordinary
course of business;
(g) other than with respect to residential mortgage loans, renew
or otherwise reinstate any loan that has been in default for a period of 90 days
or more which, when added to any loans outstanding to the families or affiliates
of any maker or surety of the defaulted loans (whether or not such other loans
are in default) has a balance outstanding in excess of $50,000, except that BSW
may accept payments for the purpose of bringing loans current, so long as there
is no amendment or restructuring of the loans;
(h) offer rates on deposits that are set in deviation from past
practice and procedure employed by BSW or are materially higher than those of
its competitors in the local market, or offer loan pricing which is materially
different relative to its competitors in the local market;
(i) hire or retain any new employees, consultants or contractors,
or increase the compensation of current employees, consultants or contractors,
except that BSW may hire replacements for current employees who are not officers
or managers if such employees cease to be employees of BSW and that BSW may hire
temporary employees or consultants as reasonably necessary in the ordinary
course of business;
(j) make any capital expenditures in excess of $25,000;
(k) enter into any real property lease or any lease of personal
property or extend or modify any existing lease of real or personal property;
(1) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of 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 in
the ordinary course of business, which would be material to BSW;
(m) take any action that is intended or would result in any of
its representations and warranties set forth in the Merger Agreement being or
becoming untrue in any material respect, or in any of the conditions to the
Merger not being satisfied, or in a violation of any provision of the Merger
Agreement except, in every case, as may be required by applicable law;
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(n) change its methods of accounting in effect at December 31,
1997, except as required by changes in generally accepted accounting principles
or regulatory accounting principles as concurred on by BSW's independent
auditors;
(o) take or cause to be taken any action which would disqualify
the Merger as a tax-free Merger under Section 368 of the Code;
(p) take or cause to be taken any action which would, or may
reasonably be expected to, significantly delay or otherwise adversely affect the
regulatory approvals required to consummate the Merger;
(q) other than activities in the ordinary course of business
consistent with prior practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of,
any of its material assets, properties or other rights or agreements;
(r) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity;
(s) file any application to open, relocate or terminate the
operations of any banking office;
(t) 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 foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings in the ordinary course of business;
(u) purchase or sell loans in bulk;
(v) foreclose upon or take deed or title to any commercial real
estate without first conducting a Phase I environmental assessment of the
property or foreclose upon such commercial real estate if such environmental
assessment indicates the likely presence of Hazardous Material (as defined in
the Merger Agreement);
(w) terminate the employment of, or decrease in any material
respect, the duties, obligations, responsibilities, or position of any senior
officer of BSW; or
(x) agree to do any of the foregoing.
Pursuant to the Merger Agreement, NECB has also agreed that until the
Effective Time, except as provided in the Merger Agreement or with the prior
consent of BSW, which shall not be unreasonably withheld, NECB and its
subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice and use all reasonable efforts to preserve intact
their present business organizations and relationships. The Merger Agreement
also provides, among other things, that neither NECB nor any of its subsidiaries
will (i) take any action that is intended or would result in any of its
representations and warranties set forth in the Merger Agreement being or
becoming untrue in any material respect, or in any of the conditions to the
Merger not being satisfied, or in a violation of any provision of the Merger
Agreement, except, in every case, as may be required by applicable law; (ii)
change its methods of accounting in effect on December 31, 1997, except in
accordance with changes in generally accepted accounting principles or
regulatory accounting principles as concurred on by NECB's independent certified
public accountants; (iii) take or cause to be taken any action which would
disqualify the Merger as a tax-free Merger under Section 368 of the Code; (iv)
take or cause to be taken any action which would, or could reasonably be
expected to, significantly delay or otherwise adversely affect the regulatory
approvals required to consummate the Merger; or (v) agree to do any of the
foregoing.
TERMINATION; AMENDMENT; EXTENSION AND WAIVER
Termination. The Merger 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 BSW and NECB:
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(i) by the mutual consent of NECB and BSW in a written
instrument, if a majority of the members of the NECB Board and a majority of
members of the BSW Board each vote for termination;
(ii) by either NECB or BSW upon written notice to the other party
at least 90 days after the date on which any request or application for a
regulatory approval required to consummate the Merger shall have been denied or
withdrawn at the request or recommendation of the governmental entity which must
grant such requisite regulatory approval, unless within such 90-day period
following such denial or withdrawal a petition for rehearing or an amended
application has been filed with the applicable governmental entity; provided,
however, that no party shall have the right to terminate the Merger Agreement if
such denial or request or recommendation for withdrawal shall be due to failure
of the party seeking to terminate the Merger Agreement to perform or observe the
covenants and agreements of such party set forth in the Merger Agreement;
(iii) by either NECB or BSW if the Merger shall not have been
consummated on or before March 31, 1999, unless the failure to consummate the
Merger is due to the failure of the party seeking to terminate the Merger
Agreement to perform or observe in any material respect the covenants and
agreements of such party set forth in the Merger Agreement;
(iv) by either NECB or BSW (provided that the terminating party
is not in material breach of any of its obligations under the Merger Agreement)
if any approval of the shareholders of NECB or BSW 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;
(v) by either NECB or BSW (provided that the terminating party is
not in material breach of any representations, warranty, covenant or other
agreement contained in the Merger Agreement) if there shall have been a material
breach of any of the representations and warranties set forth in the Merger
Agreement on the part of the other party, which breach is not cured within 45
days following written notice to the party committing such breach, or which
breach, by its nature, cannot be cured prior to the closing of the Merger under
the Merger Agreement;
(vi) by NECB or BSW, in the event of the institution by any
governmental agency of any litigation or proceeding to restrain or prohibit the
consummation of the Merger;
(vii) by NECB if at the time of such termination there shall have
been a reduction in BSW's capital of 5% or more below the levels disclosed to
NECB in the December 31, 1997 financial statements of BSW referred to in the
Merger Agreement unless such change shall have resulted from conditions
affecting the banking industry generally;
(viii) by BSW if at the time of such termination there shall have
been a material adverse change in NECB's financial condition unless such change
shall have resulted from conditions affecting the banking industry generally.
For purposes of this clause (viii) of this paragraph, (1) no bulk sale of
non-performing assets by NECB or NEBT approved by the NECB Board or by the Board
of Directors of NEBT, and made in all material respects in accordance with such
approval after the date of the Merger Agreement, shall be counted except to the
extent the net adverse effect thereof (after considering any tax benefits) on
the capital of NECB exceeds $1,500,000, and (2) no other transaction, event or
condition, or series or combination of transactions, events or conditions shall
be considered as resulting in a material adverse change with respect to NECB if
the net adverse effect thereof, together with any net adverse effect counted
under clause (1) above, on the capital of NECB is not in excess of $2,500,000;
(ix) by NECB if the results, preliminary or other, of any
regulatory examination of BSW indicates (1) any action or actions the net effect
of which is likely to result in a reduction in BSW's capital of 5% or more below
levels disclosed to NECB in the December 31, 1997 financial statements of BSW
referred to in the Merger Agreement, or (2) any other action that is likely to
result in a significant restriction on BSW, its business or operations, unless
such reduction or restriction has been requested in writing by NECB;
(x) by NECB if, in order to obtain any required permit, consent,
approval or authorization of any governmental authority having jurisdiction,
NECB or the Resulting Bank will be required to agree to, or will be subjected
to, a limitation upon its activities following the Effective Time which NECB or
NEBT reasonably regards as materially adverse; or
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(xi) by NECB if the Average Closing Price is less than eighty
percent (80.0%) of the closing price of NECB Common Stock supplied by NASDAQ and
reported in THE WALL STREET JOURNAL on March 18, 1998.
In the event of termination of the Merger Agreement by either NECB or
BSW, the Merger Agreement shall become void and have no further effect except
(i) for certain specified provisions of the Merger Agreement relating to
confidentiality and expenses and (ii) notwithstanding anything to the contrary
contained in the Merger Agreement, no party shall be relieved or released from
any liabilities or damages arising out of its breach of any representation,
warranty or other provision of the Merger Agreement.
AMENDMENT. Subject to compliance with applicable law, the Merger
Agreement may be amended by the parties to the Merger Agreement by action taken
or authorized by the NECB Board and the BSW Board, at any time before or after
approval of the matters presented in connection with the Merger by the
shareholders of BSW or NECB; provided, however, that after any approval of the
transactions contemplated by the Merger Agreement by BSW's shareholders, there
may not be, without further approval of such shareholders, any amendment to the
Merger Agreement which reduces the amount or changes the form of the
consideration to be delivered to such shareholders in any material respect other
than as contemplated by the Merger Agreement. The Merger Agreement may not be
amended except by an instrument in writing signed on behalf of NECB, NEBT and
BSW.
EXTENSION AND WAIVER. At any time prior to the Effective Time, NECB and
BSW, by action taken or autho rized by the NECB Board and the BSW Board, may, to
the extent legally allowed, (a) extend the time for the perfor mance of any of
the obligations or other acts of the other parties to the Merger Agreement, (b)
waive any inaccuracies in the representations and warranties contained in the
Merger Agreement or in any document delivered pursuant to the Merger Agreement
and (c) waive compliance with any of the agreements or conditions contained in
the Merger Agreement (other than a specified section).
EMPLOYEE MATTERS
NECB will honor all of BSW's employment agreements, change-in-control
agreements and supplemental executive retirement plan provisions set forth in
the Merger Agreement and the schedules thereto. NECB shall offer employment to
all BSW branch managers, platform and teller line employees who are in good
standing with BSW as of the Closing. From and after the Effective Time and
subject to applicable law, NECB will provide the employees of BSW who are
offered and accept employment with NECB or any of its subsidiaries, and who
accept such employment, with benefits comparable to those provided to its own
employees in similar positions and with comparable terms of service with NECB or
its subsidiaries, as reasonably determined by NECB and its subsidiaries. For
purposes of any employee benefit plan of NECB, service by an employee to BSW
shall be deemed service to NECB. For employees of BSW who are not offered
employment with NECB or any of its subsidiaries, NECB will provide two weeks of
severance pay per full or partial year of service, subject to a minimum of
ninety (90) days of severance pay for officers and sixty (60) days of severance
pay for non-officers. See "-General" above for a discussion of the effect of the
Merger on BSW stock options.
FEES AND EXPENSES UNDER CERTAIN CIRCUMSTANCES
BSW has agreed in the Merger Agreement that it will not solicit, approve
or recommend to its shareholders, or undertake or enter into, with or without
shareholder approval, either as the surviving or disappearing or the acquiring
or acquired corporation, any other merger, consolidation, asset acquisition,
tender offer or other takeover transaction, or furnish or cause to be furnished
any information concerning its business, properties or assets to any person or
entity (other than NECB) interested in any such transaction (except for
directors and executive officers of BSW and such other persons as may be
required by law), and BSW will not authorize or permit any officer, director,
employee, investment banker or other representative, directly or indirectly, to
solicit, encourage or support any offer from any person or entity (other than
NECB) to acquire substantially all of the assets of BSW, to acquire 10% or more
of the outstanding stock of BSW, to enter into an agreement to merge with BSW,
or to take any other action that would have substantially the same effect as the
foregoing, without the written consent of NECB (any such solicitation, approval,
undertaking, authorization, permission or other action referred to in this
sentence being sometimes referred to as an "Unauthorized Action"). If the Merger
is not consummated in accordance with the terms of the Merger Agreement because
of any action or omission by BSW as set forth above in this paragraph, then BSW
shall on demand pay to
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NECB the sum of (a) the out-of-pocket expenses, including, without limitation,
reasonable attorney, accountant and investment banker fees and expenses,
incurred by NECB in connection with the proposed Merger and the transactions
provided for in the Merger Agreement plus (b) a sum as liquidated damages;
provided, however, that the total amount of such fees and liquidated damages
shall not exceed $400,000. The above restrictions shall not preclude the
directors of BSW from taking actions which they determine, in the exercise of
their fiduciary duties, are in the best interests of the shareholders of BSW;
however, if they take any Unauthorized Action, BSW will be responsible for the
aforementioned fees and liquidated damages.
Subject to the Merger Agreement, if either BSW or NECB fails to perform
any material covenant or agreement in the Merger Agreement, or if any
representation or warranty by BSW or NECB is determined to be materially untrue
(the party which fails to perform or which makes the untrue representation or
warranty being referred to as a "Breaching Party"), and if, at the time of the
failure or untrue representation or warranty by the Breaching Party, the other
party is not a Breaching Party (the "Non-Breaching Party"), and if the Merger
Agreement is thereafter terminated prior to the Effective Time, then the
Breaching Party shall on demand pay to the Non-Breaching Party liquidated
damages, to include whatever expenses the Non-Breaching Party may have incurred,
provided, however, that the amount of such liquidated damages shall be $400,000
if BSW is the Breaching Party and if NECB is the Breaching Party the amount of
such liquidated damages shall be the following: (i) $1,000,000 if the Merger
Agreement is terminated prior to the Effective Time and before September 19,
1998; (ii) $1,500,000 if the Merger Agreement is terminated prior to the
Effective Time on or after September 19, 1998 and before March 19, 1999; (iii)
$2,400,000 if the Merger Agreement is terminated prior to the Effective Time on
or after March 19, 1999.
If BSW does not take any Unauthorized Action, if BSW shareholders do not
approve the Merger, if NECB does not breach the Merger Agreement and if an
agreement to acquire or merge with BSW is executed before March 19, 1999, with
an entity that makes an offer during the term of the Merger Agreement, BSW shall
pay to NECB upon execution of such agreement the sum of all out-of-pocket
expenses, including without limitation, reasonable attorney, accountant and
investment banker fees and expenses, incurred by NECB in connection with the
proposed Merger and the transactions provided for in the Merger Agreement;
provided, however, that the amount of such fees shall not exceed $250,000 and
provided that if the transaction agreed to with such other entity shall not
close, NECB shall thereupon promptly repay such amount to BSW.
ANTICIPATED ACCOUNTING TREATMENT
It is anticipated that the Merger will be treated as a "pooling of
interests" for accounting and financial reporting purposes. As required by
generally accepted accounting principles, under pooling-of-interests accounting,
as of the Effective Time the assets and liabilities of BSW would be added to
those of NECB at their recorded book values and the stockholders' equity
accounts of NECB and BSW would be combined on NECB's consolidated balance sheet.
On a pooling-of-interests accounting basis, income and other financial
statements of NECB issued after the consummation of the Merger would be restated
retroactively to reflect the consolidated combined financial position and
results of operations of NECB and BSW as if the Merger had taken place prior to
the periods covered by such financial statements. The Pro Forma Financial
Information contained in this Joint Proxy Statement-Prospectus has been prepared
using the pooling of interests account method to account for the Merger. See
"PRO FORMA FINANCIAL INFORMATION." NECB will not terminate the Merger Agreement
and the actions contemplated thereby if the Merger is not treated as a pooling
of interests or because of the exercise of dissenters' rights by BSW
shareholders. Should the Merger be accounted for under the purchase method for
accounting and financial reporting purposes, under generally accepted
accounting principles the assets and liabilities of BSW will be recorded by NECB
at their fair value. The cost of the acquisition will be allocated to the
identifiable tangible and intangible assets and liabilities being acquired or
assumed, with any excess cost being recorded as goodwill. For financial
statement purposes, the balances and reported income of BSW will be included in
the operations of NECB after the acquisition.
MANAGEMENT AND OPERATION AFTER THE MERGER
At the Effective Time, NECB shall provide for the election of two BSW
Directors, as selected by NECB after consultation with BSW, to the NECB Board
and two BSW Directors, as selected by NECB after consultation with BSW, to the
Board of Directors of the Resulting Bank. NECB further agrees to nominate said
BSW Directors for re-election at the 1999 Annual Meeting of the stockholders of
NECB and of the stockholders of the Resulting Bank, subject to their continued
qualification under NECB's and the Resulting Bank's general criteria for
directors. NECB further agrees, within three months after the Effective Time, to
establish a South Windsor Advisory Board (the "Advisory Board") the members of
which will include all BSW Directors holding office immediately prior to the
Effective Time who shall elect to become members of the Advisory Board.
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RESALES OF NECB COMMON STOCK RECEIVED IN THE MERGER
Each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act) of BSW has delivered to NECB
a signed written agreement, providing that such person will not sell, pledge,
transfer or otherwise dispose of any shares of NECB Common Stock to be received
by such "affiliate" in the Merger except in compliance with the applicable
provisions of the Securities Act and the rules and regulations thereunder,
including, without limitation, Rule 145. NECB has agreed to file the financial
results of the combined operations of NECB, NEBT and BSW on a Form 8-K or other
appropriate SEC form for the first full monthly period commencing after the
Effective Time and to make such filing within thirty (30) days of the end of
such first full month period commencing after the Effective Time.
TRADING MARKET FOR NECB COMMON STOCK
NECB Common Stock is listed on the Nasdaq NM. NECB shall cause the
shares of NECB Common Stock to be issued in the Merger or which may be issued
upon exercise of options which become outstanding pursuant to the Merger
Agreement to be approved for inclusion for quotation on the Nasdaq NM, subject
to official notice of issuance, prior to the Effective Time.
FEDERAL INCOME TAX CONSEQUENCES
Neither NECB nor BSW has requested an advance ruling from the Internal
Revenue Service as to the tax consequences of the Merger.
BSW has received an opinion from Cummings & Lockwood, its legal counsel,
which is filed as Exhibit 8 to the Registration Statement, regarding the
material federal income tax consequences of the Merger, including certain
consequences to shareholders of BSW who are citizens or residents of the United
States and who hold their shares as capital assets. This summary does not
discuss every aspect of federal income taxation that may be relevant to a
particular BSW shareholder in light of his or her personal circumstances or to
BSW shareholders subject to special federal income tax treatment such as
insurance companies, dealers in securities, certain retirement plans, financial
institutions, tax exempt organizations or foreign persons. In addition, this
summary does not address any aspects of state, local, or foreign tax laws that
may be relevant to holders of BSW Common Stock. This opinion is not binding upon
the Internal Revenue Service. No opinion concerning state tax consequences has
been obtained.
Cummings & Lockwood has opined that the Merger will be treated as a
merger within the meaning of Section 368(a) of the Code and, accordingly, for
federal income tax purposes:
(1) no gain will be recognized by the holders of BSW Common Stock upon the
receipt of NECB Common Stock in exchange for their BSW Common Stock
pursuant to the Merger. BSW shareholders who dissent should consult
their own legal and tax advisors;
(2) the tax basis of NECB Common Stock received by each holder of BSW Common
Stock will be the same as such holder's basis in his, her or its BSW
Common Stock surrendered in exchange therefor, reduced by the amount of
cash, if any, received by such holder for any shares of BSW Common Stock
so surrendered and increased by the amount of dividend income and other
gain recognized to such shareholder; and
(3) holders of BSW Common Stock who receive cash in lieu of fractional share
interests of NECB Common Stock will be treated as having received such
fraction of any share of NECB Common Stock and then as having received
cash in redemption of the fractional share interest, subject to the
provisions of Section 302 of the Code and Rev. Ruling 66-365, 1966-2
C.B. 116.
The discussion set forth above is based on currently existing
provisions of the Code, existing U.S. Treasury regulations thereunder and
current administrative rulings and court decisions. All of the foregoing are
subject to change and any such change could affect the continuing validity of
this discussion.
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HOLDERS OF BSW COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY
AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
DISSENTERS' RIGHTS
Throughout this section entitled "Dissenters' Rights," the term "BSW"
includes BSW and the Resulting Bank if the Merger becomes effective. If the
Merger does not become effective, the term "BSW" shall refer only to BSW.
Any BSW shareholder who objects to the Merger Agreement shall have the
right to be paid the fair value of all shares of BSW Common Stock owned by such
shareholder in accordance with the provisions of Section 36a-125(h) of the
Banking Law of Connecticut and Sections 33-855 to 33-872 of the CBCA, a copy of
which is set forth in APPENDIX E to this Joint Proxy Statement-Prospectus. The
right to be paid the value of such shares shall be such shareholder's exclusive
remedy as holder of such shares with respect to the Merger, whether or not such
shareholder proceeds as provided in CBCA Sections 33-855 to 33-872.
Any BSW shareholder may elect to exercise such right by giving written
notice to the BSW of such shareholder's intent to demand payment of such
shareholder's shares as provided in CBCA Section 33-861(a) prior to the voting
of the BSW shareholders on the proposal to approve the Merger Agreement and must
not vote such shares in favor of the proposal. Such notice should be sent to
Solomon Kerensky, Bank of South Windsor, 1695 Ellington Road, South Windsor,
Connecticut 06074-4514, telephone number (860) 648-6004.
A BSW SHAREHOLDER WHO VOTES IN FAVOR OF THE MERGER AGREEMENT WILL BE
PRECLUDED FROM EXERCISING DISSENTERS' RIGHTS. A BSW SHAREHOLDER DOES NOT HAVE TO
VOTE NO ON THE MERGER AGREEMENT IN ORDER TO EXERCISE DISSENTERS' RIGHTS.
HOWEVER, A SHAREHOLDER WHO VOTES AGAINST THE MERGER AGREEMENT OR FAILS TO VOTE
WILL BE PERMITTED TO EXERCISE DISSENTERS' RIGHTS ONLY IF ALL OTHER REQUIREMENTS
SET FORTH HEREIN AND IN APPENDIX E ARE MET.
A VOTE AGAINST THE MERGER AGREEMENT WILL NOT OF ITSELF SATISFY THE
REQUIREMENT THAT A DISSENTING BSW SHAREHOLDER DELIVER HIS OR HER WRITTEN NOTICE
OF INTENT TO DEMAND PAYMENT IF THE MERGER IS CONSUMMATED, NOR WILL SUCH VOTE OF
ITSELF SATISFY ANY OTHER NOTICE REQUIREMENT UNDER CONNECTICUT LAW WITH RESPECT
TO DISSENTERS' RIGHTS.
A demand for payment must be executed by or for the shareholder of
record fully and correctly, as the shareholder's name appears on the share
certificate. A beneficial owner of shares of BSW Common Stock who is not the
record owner may make such demand for payment with respect to all (but not less
than all) shares held on his or her behalf if the beneficial owner submits to
BSW at or before the assertion of his or her dissenters' rights a written
consent of the record holder. A record owner, such as a broker, who holds BSW
Common Stock for others, may make such demand for payment with respect to less
than all of the shares of BSW Common Stock held of record by such person. In
that event, the record owner must make such demand with respect to all shares
owned beneficially by the same person, and must provide BSW with the name and
address of each person on whose behalf such demand is being made.
If the Merger Agreement is approved, any shareholder notifying BSW of
his or her intent to demand payment for his or her shares as provided in CBCA
33-861(a), provided none of such shareholder's shares shall have been voted in
favor of the Merger Agreement, may require BSW to purchase such shareholder's
shares at fair value. As provided in CBCA Section 33-862, BSW shall send a
dissenters' notice to shareholders who have complied with CBCA Section 33-861 no
later than ten days after the consummation of the Merger. The dissenters' notice
sent by BSW shall state where the demand for payment must be sent and where and
when certificates for certificated shares must be deposited; inform holders of
uncertificated shares to what extent transfer of the shares will be restricted
after the payment demand is received; supply a form for demanding payment that
includes the date of the first announcement to news media or to shareholders of
the terms of the Merger Agreement (March 19, 1998); and require that each
shareholder asserting dissenters' rights certify whether or not such shareholder
acquired beneficial ownership of the shares before that date. Finally, BSW shall
set a date by which BSW must receive the payment demand, which date may not be
fewer than 30 nor more than 60 days after the date that the written dissenters'
notice
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is delivered by BSW, and BSW shall ensure that each such dissenters' notice is
accompanied by a copy of CBCA Sections 33-855 to 33-872.
After a BSW shareholder receives such written dissenters' notice from
BSW, such shareholder must demand payment for such shareholder's shares and
certify whether such shareholder acquired beneficial ownership of such shares
prior to the date of the first announcement to the news media or to shareholders
of the terms of the Merger Agreement in accordance with the terms of the
dissenters' notice, as provided in CBCA Section 33-863(a). Such shareholder who
demands payment shall also be required to submit the certificate or certificates
representing such shareholder's shares to BSW in accordance with the terms of
the dissenters' notice. A SHAREHOLDER'S FAILURE TO DEMAND PAYMENT OR DEPOSIT HIS
SHARE CERTIFICATES SHALL TERMINATE SUCH SHAREHOLDER'S RIGHTS UNDER CBCA SECTIONS
33-855 TO 33-872.
If a BSW shareholder makes such demand for payment and submits such
share certificates to BSW, such shareholder shall retain all other rights of a
BSW shareholder until these rights are canceled or modified by the consummation
of the Merger as provided in CBCA Section 33-863(b). Any shareholder failing to
make such demand as described above shall be bound by the terms of the Merger
Agreement if it is approved.
Pursuant to CBCA Section 33-864, BSW is further entitled to restrict the
transfer of uncertificated shares from the date the demand for payment by such
shareholders is received until BSW either consummates the Merger or fails to do
so within 60 days after the date set for demanding payment and depositing share
certificates. A BSW shareholder who has asserted dissenters' rights as to
uncertified securities retains all rights (other than the foregoing potential
restriction on transfer) of a BSW shareholder until such rights are canceled or
modified by the consummation of the Merger.
After BSW either receives such demand for payment by a BSW shareholder,
or upon consummation of the Merger, BSW shall pay each shareholder who makes a
proper demand for payment pursuant to CBCA Section 33-863 the amount BSW
estimates to be the fair value of such shareholder's shares, plus accrued
interest as provided in CBCA Section 33-865(a). The payment by BSW to such
shareholder shall be accompanied by: BSW's balance sheet as of the fiscal year
ending not more than 16 months before the date of payment; an income statement
for that year; a statement of changes in shareholders' equity for that year; the
latest available interim financial statements, if any; a statement of BSW's
estimate of the fair value of the shares; an explanation of how the interest was
calculated; a statement of the dissenting shareholder's right to demand payment
under CBCA Section 33-860; and a copy of CBCA Sections 33-855 to 33-872.
Pursuant to CBCA Section 33-866, if the Merger is not consummated within
60 days after the date set for such shareholders' demand for payment and deposit
of share certificates, BSW shall return the deposited certificates and release
the transfer restrictions imposed on uncertificated shares. If the Merger is
consummated after the deposited certificates have been returned and the transfer
restrictions have been released, BSW shall send a new dissenters' notice under
CBCA Section 33-862 and repeat the payment demand procedure.
BSW may elect to withhold payment to a shareholder who makes a demand
for payment pursuant to CBCA Section 33-863 if such shareholder was not the
beneficial owner of such shares before the date set forth in the dissenters'
notice as the date of the first announcement to the news media or to
shareholders of the terms of the Merger Agreement. Pursuant to CBCA Section
33-867(b), if BSW elects to withhold payment to such shareholder and the Merger
is consummated, BSW shall estimate the fair value of such shareholder's shares,
plus accrued interest, and shall pay this amount to such shareholder if such
shareholder agrees to accept such payment in full satisfaction of such
shareholder's demand. BSW's offer to such shareholder shall be accompanied by a
statement of BSW's estimate of the fair value of such shares, an explanation of
how the interest was calculated and a statement of such shareholder's right to
demand payment under CBCA Section 33-868.
Pursuant to CBCA Section 33-868, a dissenting BSW shareholder may notify
BSW in writing of such shareholder's own estimate of the fair value of his
shares and the amount of interest due, and demand payment of his estimate, less
any payment by BSW under CBCA Section 33-865, or may reject BSW's offer to
purchase such shareholder's shares, and demand payment for the fair value of
such shareholder's shares and interest owing, if (a) such shareholder believes
that the amount paid under CBCA Section 33-865 or offered under CBCA Section
33-867
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is less than the fair value of such shareholder's shares or that the interest
due is incorrectly calculated; (b) BSW fails to make payment under CBCA Section
33-865 within 60 days after the date set for such shareholder's demand for
payment; or (c) if the Merger is not consummated, and BSW fails to return the
deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for such shareholder's
demand for payment. Such dissenting BSW shareholder must make a demand for
payment pursuant to CBCA Section 33- 868(a) within 30 days after BSW makes or
offers payment for such shareholder's shares. FAILURE TO MAKE SUCH DEMAND WITHIN
THE 30-DAY PERIOD WILL BE TREATED AS A WAIVER OF SUCH SHAREHOLDER'S RIGHT TO
DEMAND PAYMENT IN AN AMOUNT EXCEEDING THE AMOUNT PREVIOUSLY OFFERED BY BSW.
If a BSW shareholder's demand for payment under CBCA Section 33-868
remains unsettled, BSW shall commence a proceeding within 60 days after receipt
of such shareholder's demand for payment and file a petition in the Hartford,
Connecticut Superior Court or before any judge thereof, requesting that the fair
value of the shares of such shareholder and the accrued interest thereon be
found and determined as provided in CBCA Section 33-871(a). If BSW fails to
timely commence such proceeding, BSW shall pay each dissenting shareholder whose
demand remains unsettled the amount demanded. All shareholders making such
demand for payment as described above, whose demands remain unsettled, wherever
residing, shall be made parties to the proceeding. A copy of the petition shall
be served on each such shareholder who is a resident of Connecticut.
Non-resident dissenting shareholders may be served by registered or certified
mail or by publication as provided by law. The jurisdiction of the court shall
be exclusive. The court may, if it so elects, appoint one or more persons as
appraisers to receive evidence and recommend a decision on the question of fair
value. The appraisers shall have such power and authority as shall be specified
in the order of their appointment or an amendment thereof. Each BSW shareholder
made a party to the proceeding is entitled to judgment for the amount, if any,
by which the court finds the fair value of such shareholders' shares, plus
interest, exceeds the amount paid by BSW, or for the fair value, plus accrued
interest, of the after-acquired shares of such shareholders for which BSW
elected to withhold payment under CBCA Section 33-867. The costs and expenses,
including the reasonable compensation and expenses of court-appointment
appraisers, of any such proceeding shall be determined by the court and shall be
assessed against BSW, but all or any part of such costs and expenses may be
apportioned and assessed as the court may deem equitable against any or all
shareholders who are parties to the proceeding to whom BSW has made an offer to
pay for the shares if the court finds that the action of such shareholders was
arbitrary or vexatious or not in good faith in demanding payment under CBCA
Section 33-868. Such expenses also may include the fees and expenses of counsel
and experts employed by any party, and be entered against (a) BSW in favor of
any or all dissenting shareholders who are parties to the proceeding if BSW
failed to substantially comply with the requirements of CBCA Sections 33-860 to
33-868, inclusive, or (b) either BSW or a dissenter, in favor of any other
party, if the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith with respect to rights provided by
CBCA Sections 33-855 to 33-872, inclusive. If the court finds that the services
of counsel for any shareholder were of substantial benefit to other dissenting
shareholders similarly situated, and that such fees should not be assessed
against BSW, the court may find that such fees should be paid out of the amounts
awarded to the dissenting shareholders who were benefitted.
The foregoing is only a summary of the rights of an objecting holder of
BSW Common Stock. Any holder of BSW Common Stock who intends to object to the
Merger Agreement should carefully review the text of the applicable provisions
of the CBCA set forth in APPENDIX E to this Joint Proxy Statement-Prospectus and
should also consult with such holder's attorney. THE FAILURE OF A HOLDER OF BSW
COMMON STOCK TO FOLLOW PRECISELY THE PROCEDURES SUMMARIZED ABOVE AND SET FORTH
IN APPENDIX E MAY RESULT IN LOSS OF DISSENTERS' RIGHTS. No further notice of the
events giving rise to dissenters' rights or any steps associated therewith will
be furnished to holders of BSW Common Stock, except as otherwise required by
law.
In general, any objecting shareholder who perfects such holder's right
to be paid the fair value of such holder's BSW Common Stock in cash will
recognize taxable gain or loss for federal income tax purposes upon receipt of
such cash.
43
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Combined Balance Sheets as of March 31, 1998 and
December 31, 1997 combine the historical consolidated balance sheets of NECB and
BSW giving effect to the Merger, accounted for as a pooling of interests, as if
the Merger was consummated as of such dates, and the pro forma adjustments
described in the notes thereto. The following Pro Forma Combined Statements of
Income for the years ended December 31, 1997, 1996 and 1995 and for the quarter
ended March 31, 1998 combine the historical consolidated statements of income of
NECB and BSW giving effect to the Merger, accounted for as a pooling of
interests, as if the Merger was consummated as of the first day of such periods,
and the pro forma adjustments described in the notes thereto. The Pro Forma
Financial Information assumes that the Merger qualifies as a tax-free
reorganization for federal income tax purposes.
The Pro Forma Financial Information should be read in conjunction with
the historical consolidated financial statements of NECB and BSW, including the
respective notes thereto, which are incorporated by reference in this Joint
Proxy Statement-Prospectus. See "INFORMATION DELIVERED AND INCORPORATED BY
REFERENCE."
The Pro Forma Financial Information is not necessarily indicative of the
financial condition or results of operations which would have been achieved had
the Merger been consummated as of the beginning of the periods for which such
data is presented and should not be construed as being representative of future
periods.
44
<PAGE>
PRO FORMA COMBINED BALANCE SHEETS (UNAUDITED)
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
NECB BSW Pro Forma Pro Forma
(AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA) (Historical) (Historical) Adjustments Results
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash & due from banks $ 34,796 $ 6,605 $ $ 41,401
Interest bearing time deposits with banks 291 291
Federal funds sold 21,107 6,000 27,107
Investments
Securities held-to-maturity 9,925 500 10,425
Securities available-for-sale 106,137 41,115 (1,015) (a)
(461) (b) 145,776
FHLBB stock 2,977 1,295 4,272
Loans held-for-sale 8,000 8,000
Loans outstanding 399,653 95,827 495,480
Less allowance for loan losses (7,210) (2,171) (9,381)
--------------------------------------------------------------
Net loans 392,443 93,656 486,099
Premises & Equipment 10,978 988 11,966
OREO 2,466 2,466
Goodwill 5,140 5,140
Other assets 9,044 2,158 11,202
--------------------------------------------------------------
Total Assets $603,013 $152,608 ($1,476) $754,145
==============================================================
Liabilities:
Deposits
Noninterest-bearing $ 98,214 $ 29,643 $ $127,857
Interest-bearing 411,378 99,310 510,688
--------------------------------------------------------------
Total Deposits 509,592 128,953 638,545
Short-term borrowings 14,466 11,895 26,361
Long-term debt 19,580 19,580
Other liabilities 4,127 578 2,570 (c)
(184) (b) 7,091
--------------------------------------------------------------
Total Liabilities 547,765 141,426 2,386 691,577
--------------------------------------------------------------
Equity
Common Stock 517 4,791 (4,671) (d) 637
Additional paid-in capital 51,165 3,799 4,791 (e)
(120) (f)
(1,015) (a) 58,620
Retained earnings 2,531 2,445 (2,570) (c) 2,406
Unrealized gains on securities available-for-
sale, net 1,035 147 (277) (b) 905
--------------------------------------------------------------
Total Equity 55,248 11,182 (3,862) 62,568
--------------------------------------------------------------
Total Liabilities & Equity $603,013 $152,608 ($1,476) $754,145
==============================================================
Shares outstanding 5,172 958 245 (g) 6,375
Book value/per share $10.68 $11.67 $9.81
See "Notes to Pro Forma Combined Balance Sheets (Unaudited) March 31, 1998"
</TABLE>
45
<PAGE>
Notes to Pro Forma Combined Balance Sheets (unaudited)
March 31, 1998
(a) Retirement of BSW Common Stock (cost basis) owned by NECB and
NEBT-offset is Additional paid-in capital.
(b) Elimination of valuation allowance of BSW Common Stock (difference
between cost basis and market value at March 31, 1998) with offsetting
entries to:
Other liabilities (deferred tax liability)............. $ 184
Unrealized gain on securities available-for-sale....... 277
------
$ 461
(c) Estimated expenses related to offering of NECB Common Stock and
Restructuring Expenses-net of related tax benefit. While a portion of
these costs may be required to be recognized over time, the current
estimate of these costs has been recorded in this Pro Forma Combined
Balance Sheet in order to disclose the aggregate effect of these
activities on NECB's Pro Forma Combined financial position.
(d) Difference in par value of BSW Common Stock and NECB Common Stock to be
issued.
(e) Increase to reflect elimination of par value of BSW shares.
(f) Decrease to reflect issuance of NECB Common Stock (par value $0.10 per
share).
(g) Pro forma number of common shares outstanding:
BSW Common Stock outstanding at March 31, 1998 958,289
Less: BSW shares owned by NECB and NEBT 47,264
-----------
Net shares to be exchanged 911,025
Exchange ratio 1.3204
NECB Common Stock to be issued in the Reorganization 1,202,917
NECB Common Stock outstanding at March 31, 1998 5,171,626
-----------
Total NECB Common Stock outstanding, pro forma 6,374,543
Difference between the sum of the number of outstanding
shares of NECB and BSW at March 31, 1998
and the total NECB Common Stock outstanding, pro forma 244,628
46
<PAGE>
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
NECB BSW Pro Forma Pro Forma
(AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA) (Historical) (Historical) Adjustments Results
------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash & due from banks $ 35,201 $ 7,591 $ $ 42,792
Interest bearing time deposits with banks 394 394
Federal funds sold 4,650 1,900 6,550
Investments
Securities held-to-maturity 11,336 1,000 12,336
Securities available-for-sale 120,448 41,907 (1,394) (a)
(664) (b) 160,297
FHLBB stock 2,977 1,295 4,272
Loans held-for-sale 2,966 2,966
Loans outstanding 408,535 99,947 508,482
Less allowance for loan losses (9,257) (2,156) (11,413)
------------------------------------------------------------
Net loans 399,278 97,791 497,069
Premises & Equipment 11,064 1,009 12,073
OREO 2,870 212 3,082
Goodwill 5,238 5,238
Other assets 10,142 2,024 12,166
------------------------------------------------------------
Total Assets $606,170 $155,123 ($2,058) $759,235
============================================================
Liabilities:
Deposits
Noninterest-bearing $114,510 $ 29,989 $ $144,499
Interest-bearing 408,134 102,914 511,048
------------------------------------------------------------
Total Deposits 522,644 132,903 655,547
Short-term borrowings 14,036 10,610 24,646
Long-term debt 11,612 11,612
Other liabilities 4,055 773 2,570 (c)
(265) (b) 7,133
------------------------------------------------------------
Total Liabilities 552,347 144,286 2,305 698,938
------------------------------------------------------------
Equity
Common Stock 516 4,791 (4,677) (d) 630
Additional paid-in capital 51,064 3,799 4,791 (e)
(114) (f)
(1,394) (a) 58,146
Retained earnings 1,107 2,049 (2,570) (c) 586
Unrealized gains on securities
available-for- sale, net 1,136 198 (399) (b) 935
------------------------------------------------------------
Total Equity 53,823 10,837 (4,363) 60,297
------------------------------------------------------------
Total Liabilities & Equity $606,170 $155,123 ($2,058) $759,235
============================================================
Shares outstanding 5,161 958 185 (g) 6,304
Book value/per share $10.43 $11.31 $9.56
See "Notes to Pro Forma Combined Balance Sheets (Unaudited) December 31, 1998"
</TABLE>
47
<PAGE>
Notes to Pro Forma Combined Balance Sheets (unaudited)
December 31, 1997
(a) Retirement of BSW Common Stock (cost basis) owned by NECB and
NEBT-offset is Additional paid-in capital.
(b) Elimination of valuation allowance of BSW Common Stock (difference
between cost basis and market value at December 31, 1997) with
offsetting entries to:
Other Liabilities (deferred tax liability).............. $ 265
Unrealized gain on securities available-for-sale........ 399
-----
$ 664
(c) Estimated expenses related to offering of NECB Common Stock and
Restructuring Expenses-net of related tax benefit. While a portion of
these costs may be required to be recognized over time, the current
estimate of these costs has been recorded in this Pro Forma Combined
Balance Sheet in order to disclose the aggregate effect of these
activities on NECB's Pro Forma Combined financial position.
(d) Difference in par value of BSW Common Stock and NECB Common Stock to be
issued.
(e) Increase to reflect elimination of par value of BSW shares.
(f) Decrease to reflect issuance of NECB Common Stock (par value $0.10 per
share).
(g) Pro forma number of common shares outstanding:
BSW Common Stock outstanding at December 31, 1997 958,289
Less: BSW shares owned by NECB and NEBT 92,264
-----------
Net shares to be exchanged 866,025
Exchange ratio 1.3204
NECB Common Stock to be issued in the Reorganization 1,143,499
NECB Common Stock outstanding at December 31, 1997 5,160,626
-----------
Total NECB Common Stock outstanding, pro forma 6,304,125
Difference between the sum of the number of outstanding
shares of NECB and BSW at December 31, 1997
and the total NECB Common Stock outstanding, pro forma 185,210
48
<PAGE>
Pro Forma Combined Statements of Income (Unaudited)
QUARTER ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
NECB BSW Pro Forma Pro
(AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA) (Historical) (Historical)(a) Adjustments Forma
Results
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 9,035 $ 2,398 $ 0 $11,433
Securities:
Interest 1,849 671 2,520
Dividends 63 21 84
Federal funds sold and other interest 60 34 94
--------------------------------------------- -----------
Total interest income 11,007 3,124 0 14,131
INTEREST EXPENSE:
Deposits 3,865 966 4,831
Borrowed funds 362 159 521
--------------------------------------------- -----------
Total interest expense 4,227 1,125 0 5,352
Net interest income 6,780 1,999 0 8,779
Provision for possible loan losses 322 90 41
--------------------------------------------- -----------
Net interest income after provision
for possible loan losses 6,458 1,909 0 8,367
NONINTEREST INCOME:
Service charges, fees and commissions 714 183 897
Investment securities gains, net 1,229 12 1,241
Gain on the sales of loans, net 541 0 541
Other 44 21 65
--------------------------------------------- -----------
Total noninterest income 2,528 216 0 2,744
NONINTEREST EXPENSES:
Salaries and employee benefits 2,800 808 3,608
Occupancy 535 156 691
Furniture and equipment 354 72 426
Outside services 217 211 428
Postage and supplies 224 73 297
Insurance and assessments 87 26 113
Losses, writedowns, expenses - other real
estate owned, net 68 (146) (78)
Amortization of goodwill 98 0 98
Acquisition expense 0 0 0
Other 1,436 216 1,652
--------------------------------------------- -----------
Total noninterest expenses 5,819 1,416 0 7,235
--------------------------------------------- -----------
Income before taxes 3,167 709 0 3,876
Income taxes 1,278 265 1,543
--------------------------------------------- -----------
Net Income $ 1,889 $ 444 $ 0 $ 2,333
============================================= ===========
Net Income per share--Basic $ 0.37 $ 0.46 $ 0.36
Net income per share--Diluted $ 0.37 $ 0.43 $ 0.35
Weighted average shares of Common Stock 5,161 958 307 (b) 6,426
Weighted average shares of Common Stock
including effect of diluted stock options 5,315 1,036 332 (b) 6,683
See "Notes to Pro Forma Combined Statements of Income (Unaudited)"
</TABLE>
49
<PAGE>
Pro Forma Combined Statements of Income (Unaudited)
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NECB BSW Pro Forma Pro
(AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA) (Historical) (Historical)(a) Adjustments Forma
Results
-----------------------------------------------------------------
<C> <S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 30,909 $ 8,963 $ 0 $ 39,872
Securities:
Interest 7,458 2,401 9,859
Dividends 214 70 284
Federal funds sold and other interest 400 159 559
--------------------------------------------- -----------
Total interest income 38,981 11,593 0 50,574
INTEREST EXPENSE:
Deposits 12,599 3,926 16,525
Borrowed funds 930 489 1,419
--------------------------------------------- -----------
Total interest expense 13,529 4,415 0 17,944
Net interest income 25,452 7,178 0 32,630
Provision for possible loan losses 1,248 368 1,616
--------------------------------------------- -----------
Net interest income after provision
for possible loan losses 24,204 6,810 0 31,014
NONINTEREST INCOME:
Service charges, fees and commissions 2,551 900 3,451
Investment securities gains, net 315 74 389
Gain on the sales of loans, net 860 0 860
Other 353 159 512
--------------------------------------------- -----------
Total noninterest income 4,079 1,133 0 5,212
NONINTEREST EXPENSES:
Salaries and employee benefits 9,648 2,940 12,588
Occupancy 2,069 705 2,774
Furniture and equipment 1,404 336 1,740
Outside services 1,035 854 1,889
Postage and supplies 728 267 995
Insurance and assessments 187 109 296
Losses, writedowns, expenses - other real
estate owned, net 387 59 446
Amortization of goodwill 314 0 314
Acquisition expense 2,197 0 2,197
Other 2,562 714 3,276
--------------------------------------------- -----------
Total noninterest expenses 20,531 5,984 0 26,515
--------------------------------------------- -----------
Income before taxes 7,752 1,959 0 9,711
Income taxes 3,117 738 3,855
--------------------------------------------- -----------
Net Income $ 4,635 $ 1,221 $ 0 $ 5,856
============================================= ===========
Net Income per share--Basic $ 0.91 $ 1.29 $ 0.92
Net income per share--Diluted $ 0.91 $ 1.26 $ 0.91
Weighted average shares of Common Stock 5,105 946 303 (b) 6,354
Weighted average shares of Common Stock
including effect of diluted stock options 5,175 966 310 (b) 6,451
See "Notes to Pro Forma Combined Statements of Income (Unaudited)"
</TABLE>
50
<PAGE>
Pro Forma Combined Statements of Income (Unaudited)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NECB BSW Pro Forma Pro
(AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA) (Historical) (Historical)(a) Adjustments Forma
Results
---------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 27,715 $ 8,159 $ 0 $ 35,874
Securities:
Interest 6,480 1,349 7,829
Dividends 350 63 413
Federal funds sold and other interest 506 215 721
--------------------------------------------- -----------
Total interest income 35,051 9,786 0 44,837
INTEREST EXPENSE:
Deposits 12,245 3,623 15,868
Borrowed funds 262 64 326
--------------------------------------------- -----------
Total interest expense 12,507 3,687 0 16,194
Net interest income 22,544 6,099 0 28,643
Provision for possible loan losses 2,209 460 2,669
--------------------------------------------- -----------
Net interest income after provision
for possible loan losses 20,335 5,639 0 25,974
NONINTEREST INCOME:
Service charges, fees and commissions 1,959 933 2,892
Investment securities gains, net 7 22 29
Gain on the sales of loans, net 1,076 0 1,076
Other 374 187 561
--------------------------------------------- -----------
Total noninterest income 3,416 1,142 0 4,558
NONINTEREST EXPENSES:
Salaries and employee benefits 8,320 2,554 10,874
Occupancy 1,836 671 2,507
Furniture and equipment 1,151 377 1,528
Outside services 1,152 701 1,853
Postage and supplies 759 288 1,047
Insurance and assessments 180 115 295
Losses, writedowns, expenses - other real
estate owned, net 397 185 582
Amortization of goodwill 155 0 155
Acquisition expense 0 0 0
Other 2,014 613 2,627
--------------------------------------------- -----------
Total noninterest expenses 15,964 5,504 0 21,468
--------------------------------------------- -----------
Income before taxes 7,787 1,277 0 9,064
Income taxes 2,299 494 2,793
--------------------------------------------- -----------
Net Income $ 5,488 $ 783 $ 0 $ 6,271
============================================= ===========
Net Income per share--Basic $ 1.19 $ 0.83 $ 1.07
Net income per share--Diluted $ 1.19 $ 0.83 $ 1.07
Weighted average shares of Common Stock 4,605 941 302 (b) 5,848
Weighted average shares of Common Stock
including effect of diluted stock options 4,625 941 302 (b) 5,868
See "Notes to Pro Forma Combined Statements of Income (Unaudited)"
</TABLE>
51
<PAGE>
Pro Forma Combined Statements of Income (Unaudited)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NECB BSW Pro Forma Pro
(AMOUNTS IN THOUSANDS; EXCEPT PER SHARE DATA) (Historical) (Historical)(a) Adjustments Forma
Results
---------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 17,360 $ 8,476 $ 0 $ 25,836
Securities:
Interest 3,846 770 4,616
Dividends 188 78 266
Federal funds sold and other interest 713 322 1,035
-------------------------------------------- -----------
Total interest income 22,107 9,646 0 31,753
INTEREST EXPENSE:
Deposits 7,663 3,278 10,941
Borrowed funds 49 243 292
-------------------------------------------- -----------
Total interest expense 7,712 3,521 0 11,233
Net interest income 14,395 6,125 0 20,520
Provision for possible loan losses 1,200 940 2,140
-------------------------------------------- -----------
Net interest income after provision
for possible loan losses 13,195 5,185 0 18,380
NONINTEREST INCOME:
Service charges, fees and commissions 1,611 853 2,464
Investment securities gains, net 26 38 64
Gain on the sales of loans, net 498 0 498
Other 208 182 390
-------------------------------------------- -----------
Total noninterest income 2,343 1,073 0 3,416
NONINTEREST EXPENSES:
Salaries and employee benefits 5,543 2,749 8,292
Occupancy 1,226 670 1,896
Furniture and equipment 861 394 1,255
Outside services 870 679 1,549
Postage and supplies 501 278 779
Insurance and assessments 630 277 907
Losses, writedowns, expenses - other real
estate owned, net 505 102 607
Amortization of goodwill 0 0 0
Acquisition expense 0 0 0
Other 1,736 394 2,130
-------------------------------------------- -----------
Total noninterest expenses 11,872 5,543 0 17,415
-------------------------------------------- -----------
Income before taxes (benefit) 3,666 715 0 4,381
Income taxes (benefit) (24) 211 187
-------------------------------------------- -----------
Net Income $ 3,690 $ 504 $ 0 $ 4,194
============================================ ===========
Net Income per share--Basic $ 1.19 $ 0.54 $ 0.96
Net income per share--Diluted $ 1.18 $ 0.54 $ 0.96
Weighted average shares of Common Stock 3,112 941 302 (b) 4,355
Weighted average shares of Common Stock
including effect of diluted stock options 3,114 941 302 (b) 4,357
See "Notes to Pro Forma Combined Statements of Income (Unaudited)"
</TABLE>
52
<PAGE>
Notes to Pro Forma Combined Statements of Income(Unaudited)
(a) Certain historical data of BSW have been reclassified on a pro forma basis
to conform to NECB's classifications.
(b) The pro forma adjustment to average shares outstanding is based upon
historical average shares outstanding of NECB plus historical average shares
outstanding of BSW multiplied by an assumed conversion Exchange Ratio of 1.3204
less the historical average shares of BSW outstanding.
53
<PAGE>
DESCRIPTION OF NECB'S CAPITAL STOCK
NECB COMMON STOCK
NECB is authorized to issue 20,000,000 shares of NECB Common Stock, of
which 5,171,626 shares were issued and outstanding as of June 23, 1998. Each
share of NECB Common Stock has the same relative rights and is identical in all
respects to each other share of the NECB Common Stock. Shares of NECB Common
Stock are not deposits and are not insured by the FDIC.
Holders of the NECB Common Stock are entitled to one vote per share on
each matter properly submitted to shareholders, including the election of
directors. Holders of the NECB Common Stock have no preemptive rights with
respect to any shares that may be issued. All shares of the NECB Common Stock
currently outstanding and when issued in accordance with this Prospectus, are or
will be fully paid and nonassessable. Holders of the NECB Common Stock are
entitled to receive dividends when and as declared by the NECB Board out of
funds legally available for distribution.
In the event of any liquidation or dissolution of NECB, the holders of
the NECB Common Stock would be entitled to receive, after payment or provision
for payment of all debts and liabilities of NECB, and after payment of the
liquidation preferences of all outstanding shares of preferred stock, all
remaining assets of NECB available for distribution, in cash or in kind.
The transfer agent and registrar for the NECB Common Stock is Registrar
and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016-3572.
NECB PREFERRED STOCK
Pursuant to NECB's Amended and Restated Certificate of Incorporation,
the NECB Board may, without action of the shareholders of NECB, issue from time
to time up to 200,000 shares of NECB's Serial Preferred Stock ("NECB Preferred
Stock") in one or more series with distinctive serial designations, preferences,
limitations and other rights. No shares of NECB Preferred Stock are issued and
outstanding.
The NECB Board is authorized to determine, among other things, with
respect to each series which may be issued: (i) the rate and manner of payment
of dividends, if any; (ii) the par value, if any; (iii) whether shares may be
redeemed and, if so, the redemption price and the terms and conditions of
redemption; (iv) the amount payable for shares in the event of liquidation,
dissolution or other winding up of the corporation; (v) sinking fund provisions,
if any, for the redemption or purchase of shares; (vi) the terms and conditions,
if any, on which shares may be converted or exchanged; (vii) voting rights, if
any; and (viii) any other rights and preferences of such shares, to the full
extent now or hereafter permitted by the laws of the State of Delaware.
NECB has no present plans for the issuance of any shares of NECB
Preferred Stock. Accordingly, it is not possible to state the actual effect of
the issuance of the NECB Preferred Stock upon the rights of holders of the NECB
Common Stock until the NECB Board determines the specific rights of the holders
of a series of the NECB Preferred Stock. However, such effect might include: (a)
restrictions on dividends on the NECB Common Stock if dividends on NECB
Preferred Stock have not been paid; (b) dilution of the voting power of the NECB
Common Stock to the extent that the NECB Preferred Stock has voting rights; (c)
dilution of the equity interest of the NECB Common Stock to the extent that the
NECB Preferred Stock is converted into NECB Common Stock; or (d) reduction in
the extent to which the Common Stock is entitled to share in NECB's assets upon
liquidation until any liquidation preference granted to the holders of the NECB
Preferred Stock is satisfied. Issuance of NECB Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could make it more difficult for a third party to acquire a
majority of the outstanding voting stock. Accordingly, the issuance of NECB
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the shareholders of NECB.
54
<PAGE>
ABSENCE OF CUMULATIVE VOTING
NECB's Amended and Restated Certificate of Incorporation prohibits
cumulative voting in the election of directors. Under the Delaware General
Corporation Law, shareholders do not have cumulative voting rights unless such
rights are specifically provided for in the Amended and Restated Certificate of
Incorporation.
Without cumulative voting, holders of a plurality of the voting shares
voting at an annual meeting will be able to elect all of the directors to be
elected at that meeting, and no persons holding shares or proxies representing
less than a plurality of the shares will be able to elect any director, as they
might if cumulative voting were applicable. The absence of cumulative voting
prevents any entity or group which has accumulated a significant minority block
of shares from obtaining representation on the NECB Board, unless and until such
entity or group is able to persuade enough of the remaining stockholders of NECB
to vote for its representatives so that it controls a plurality of the votes
cast.
MARKET FOR NECB COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
As of June 23, 1998, there were 5,171,626 shares of NECB Common Stock
issued and outstanding which were held by approximately 4,000 shareholders of
record.
NECB's Common Stock is listed on the Nasdaq NM. The following
represents the high and low sale prices for each quarter since December 31, 1995
and per share dividends declared during such period:
1998
- ----
High Low Dividends
---- --- ---------
1st Quarter......................... $26 7/8 $23 3/8 $0.09
2nd Quarter......................... $26 1/4 $24 1/8 $0.10
1997
- ----
High* Low * Dividends*
---- --- ----------
1st Quarter......................... $18 3/8 $14 7/8 $0.07
2nd Quarter......................... 17 1/2 15 0.08
3rd Quarter......................... 24 3/4 16 7/8 0.08
4th Quarter......................... 25 3/4 20 15/16 0.09
1996
- ----
High* Low* Dividends*
---- --- ----------
1st Quarter......................... $11 1/4 $ 9 3/4 $0.06
2nd Quarter......................... 13 10 1/2 0.06
3rd Quarter......................... 13 11 1/2 0.06
4th Quarter......................... 15 3/8 12 5/8 0.07
* Not adjusted for 10% stock dividend paid on January 16, 1998.
Dividends are generally declared to stockholders of record as of a date
10 to 15 days prior to the declaration date, and are generally payable within 45
days of said declaration date.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
NECB is a Delaware corporation subject to the provisions of the
Delaware General Corporation Law ("DGCL") and BSW is a Connecticut-chartered
commercial bank subject to the provisions of the Banking Laws of Connecticut
("Connecticut Banking Law") and the CBCA when applicable. Upon consummation of
the Merger, shareholders of BSW will become stockholders of NECB and their
rights as stockholders of NECB will be governed by the Amended and Restated
Certificate of Incorporation of NECB (the "NECB Certificate") and Bylaws of NECB
(the "NECB Bylaws") and the DGCL.
55
<PAGE>
The following summary is not intended to be a complete statement of the
differences affecting the rights of BSW's shareholders, but rather summarizes
the differences affecting the rights of such shareholders and certain important
similarities.
AUTHORIZED CAPITAL STOCK
The NECB Certificate authorizes the issuance of up to 20,000,000 shares
of NECB Common Stock, of which [ ] shares were outstanding as of the NECB Record
Date, and up to 200,000 shares of NECB Preferred Stock, of which no shares are
issued and outstanding. NECB Preferred Stock is issuable in series, each series
having such rights and preferences as the NECB Board may fix and determine by
resolution.
The BSW Articles of Incorporation (the "BSW Articles") authorize the
issuance of up to 1,300,000 shares of BSW Common Stock, of which [ ] shares were
outstanding as of the BSW Record Date. BSW does not have authorized preferred
stock.
ISSUANCE OF CAPITAL STOCK
Under the DGCL, NECB may issue rights or options for the purchase of
shares of capital stock of NECB. Such rights or options may be issued to
directors, officers or employees of NECB or its subsidiaries and the issuance or
plan pursuant to which they are issued need not be approved by the holders of
NECB Common Stock. However, the Bylaws of the National Association of Securities
Dealers, Inc. generally require corporations, such as NECB, with securities
which are quoted on the Nasdaq NM to obtain stockholder approval for most stock
compensation plans for directors, officers and key employees of the corporation.
Stockholder approval of stock-related compensation plans may also be sought in
certain instances in order to qualify such plans for favorable federal income
tax treatment under current laws and regulations. Also, in order to continue to
have its shares quoted on the Nasdaq NM, NECB is required to obtain stockholder
approval for issuances of stock, such as the issuance contemplated by the Merger
Agreement, which exceed 20% of its previously outstanding shares.
Under the Connecticut Banking Law, BSW may issue rights, options or
warrants for the purchase of authorized shares of capital stock of BSW. The BSW
Board determines the terms upon which the rights, options or warrants are
issued, their form and content and the consideration for which the shares are to
be issued.
Neither the stockholders of NECB nor the shareholders of BSW have
preemptive rights.
VOTING RIGHTS
Each share of NECB Common Stock and BSW Common Stock is entitled to one
vote per share on all matters properly presented at meetings of stockholders of
NECB or BSW, as the case may be. Neither the NECB Certificate nor the NECB
Bylaws, nor the BSW Articles nor the Bylaws of BSW (the "BSW Bylaws"), permit
stockholders to cumulate their votes in an election of directors.
DIVIDENDS AND OTHER DISTRIBUTIONS
Under Connecticut Banking Law, subject to any restrictions contained in
its articles of incorporation, and except for dividends payable in shares of its
capital stock, a bank such as BSW may not declare a dividend on its capital
stock except from its net profits. "Net Profits" is defined as the remainder of
all earnings from current operations. The total of all dividends declared by a
bank in any calendar year may not, unless specifically approved by the Banking
Commissioner, exceed the total of its net profits of that year combined with its
retained net profits of the preceding two years.
Under the DGCL, NECB may, unless otherwise restricted by the NECB
Certificate, pay dividends in cash, property or shares of capital stock out of
surplus or, if no surplus exists, out of net profits for the fiscal year in
which declared or out of net profits for the preceding fiscal year (provided
that such payment will not reduce capital below the amount of capital
represented by classes of stock having a preference upon distribution of
assets). The NECB Certificate does not currently restrict the payment of
dividends.
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Under the DGCL, a corporation may repurchase or redeem its shares only
out of surplus and only if such purchase does not impair capital. However, a
corporation may redeem preferred stock out of capital if such shares will be
retired upon redemption and the stated capital of the corporation is thereupon
reduced in accordance with Delaware law.
Under Connecticut Banking Law, BSW may, subject to the approval of the
Banking Commissioner, acquire and dispose of BSW Common Stock, provided no such
acquisition reduces BSW's equity capital below the minimum required for a
Connecticut capital stock bank.
For a description of the regulatory capital requirements which are
applicable to BSW and NECB and regulatory limitations on the ability of NECB's
banking subsidiaries to pay dividends, see the BSW 10-K and the NECB 10-K, which
are incorporated in this Joint Proxy Statement-Prospectus by reference.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS
The NECB Bylaws provide that the NECB Board may not consist of less
than three members. Each director shall hold office until the next annual
meeting of the stockholders following the election and until a successor has
been elected and shall qualify or until such director's death, resignation or
removal.
The BSW Bylaws provide that the size of the BSW Board shall be between
eleven and twenty-one directors as determined from time to time by a resolution
of the Board of Directors. In addition to the number of directorships set by the
BSW Board, the BSW Bylaws provide that the President and Chief Executive Officer
of BSW shall serve as an "Ex-Officio Director," having the same voting rights as
any director elected by the shareholders.
The BSW Board is divided into three classes, as nearly equal as
possible. Each class is elected to serve a three year term, with one class being
elected at each annual meeting. Each director holds office until his successor
is duly elected and qualified.
DIRECTOR VACANCIES AND REMOVAL OF DIRECTORS
Under the NECB Bylaws, vacancies on the NECB Board may be filled by the
remaining directors then in office, although less than a quorum, and directors
chosen by the NECB Board to fill vacancies or newly created directorships hold
office until the next election of directors. Under the DGCL, any director or the
entire Board may be removed, with or without cause, by the holders of a majority
of the outstanding stock entitled to vote. Under the NECB Bylaws, any director
may be removed if two-thirds of the whole NECB Board determines, at a meeting
called for that purpose, that the director in question is or has engaged in
activities, the nature of which have or would bring disrepute upon NECB.
Under the BSW Bylaws, vacancies created by an increase in the number of
directorships shall be filled for the unexpired term by a vote of not less than
a majority of the directorships existing prior to such increase. Vacancies
occurring by reason other than by increase in the number of directorships shall
be filled for the unexpired term by the concurring vote of a majority of the
directors remaining in office, even though such remaining directors may be less
than a majority of the number of directorships (as fixed for the current year in
accordance with the BSW Bylaws). Any director may be removed from office at any
time, with or without cause, by the affirmative vote of an 80% majority of the
issued and outstanding shares entitled to vote at any meeting of shareholders
called for that purpose.
DUTIES OF DIRECTORS
Neither the DGCL, the NECB Certificate nor the NECB Bylaws contain a
specific provision elaborating on the duties of the NECB Board with respect to
the best interests of NECB. The scope of the fiduciary duties of the NECB Board
is thus determined by the courts of Delaware. In connection with business
combination transactions, Delaware courts have permitted directors to consider
various constituencies provided that there be some rationally related benefit to
the stockholders.
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The CBCA requires that a director of BSW discharge his or her duties as
a director in good faith, with the care of an ordinarily prudent person in a
like position would exercise under similar circumstances, and in a manner such
director reasonably believes to be in the best interests of BSW. In connection
with the directors' consideration of certain business combination transactions,
the CBCA requires that a director consider, in determining what such director
reasonably believes to be in the best interests of BSW, (i) the long-term as
well as the short-term interests of BSW, (ii) the interests of the shareholders,
long-term as well as short-term, including the possibility that those interests
may be best served by the continued independence of BSW, (iii) the interests of
BSW's employees, customers, creditors and suppliers and (iv) community and
societal considerations including those of any community in which any office or
other facility of BSW is located. A director may also in his discretion consider
any other factors he reasonably considers appropriate in determining what he
reasonably believes to be in the best interests of BSW.
MEETINGS OF SHAREHOLDERS
Pursuant to the NECB Bylaws, a special meeting of the stockholders may
be called at any time by the Chairman of the NECB Board, the President or by
order of a majority of the NECB Board members. At each meeting of the
stockholders, the holders of record of one-third of the issued and outstanding
stock of NECB entitled to vote at such meeting, present in person or by proxy,
shall constitute a quorum for the transaction of business, except where
otherwise provided by law, the NECB Certificate or the NECB Bylaws. At all
meetings of the stockholders, a quorum being present, all matters should be
decided by majority vote of the shares of stock entitled to vote held by
stockholders present in person or by proxy, except as otherwise required by the
DGCL.
Pursuant to the BSW Bylaws, a special meeting of the shareholders may
be called at any time by the Chairman of the BSW Board, by a majority of the BSW
Board members or by the Chairman of the BSW Board or the Secretary upon the
written request of the holders of not less than 25% of all of the outstanding
capital stock of BSW entitled to vote at the meeting; provided, however, that
special meetings of shareholders relating to changes in control of BSW or
amendments to the BSW Articles may only be called upon direction of the BSW
Board, unless otherwise required by law. The holders of a majority of the shares
of the issued and outstanding stock entitled to vote at a meeting, present
either in person or by proxy, shall constitute a quorum for the transaction of
business at such meeting of the shareholders. Except as otherwise provided by
law or the BSW Bylaws, all questions shall be decided by a vote of the holders
of a majority of the shares present at any meeting of shareholders at which a
quorum is present.
SHAREHOLDER NOMINATIONS OF DIRECTORS
Nominations of persons for election to the NECB Board may be made at an
annual meeting of stockholders by or at the direction of the NECB Board or by
any stockholder of NECB entitled to vote for the election of directors, who is
present in person or by proxy at the meeting and who complies with certain
notice procedures set forth in the NECB Bylaws. Such nominations, other than
those made by or at the direction of the NECB Board, must be made pursuant to
timely notice in writing to the Chairman of the Nominating Committee, which may
be sent in care of the Secretary of NECB. Each director will hold office for the
term for which he or she is elected and until his or her successor is elected
and qualified, or until such director's death, resignation or removal.
The BSW Bylaws have similar provisions with regards to the nomination
of directors. The BSW Bylaws and BSW Articles provide for election by the
shareholders of three classes of directors serving staggered three-year terms
SHAREHOLDER ACTION WITHOUT A MEETING
Under the DGCL, any action which may be taken by the NECB stockholders
at any annual or special meeting of stockholders may be taken without a meeting
or prior notice if consent in writing, setting forth the action to be so taken,
is signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote were present and voted.
Under Section 33-698 of the CBCA, any action which may be taken by the
BSW shareholders at any annual or special meeting of the BSW shareholders may be
taken without a meeting by consent in writing, setting forth the
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action so taken or to be taken, signed by all of the persons who would be
entitled to vote upon such action at a meeting, or by their duly authorized
attorneys.
AMENDMENT OF GOVERNING INSTRUMENTS
No amendment to the NECB Certificate generally may be made unless it is
first proposed by the NECB Board and thereafter approved by the holders of at
least a majority of outstanding shares entitled to vote.
The BSW Articles may be amended by BSW's shareholders in accordance
with the provisions of the CBCA which generally require an affirmative vote of a
majority of the shares entitled to vote.
The NECB Bylaws may be amended either by the affirmative vote of the
holders of a majority of stock issued and outstanding and entitled to vote in
respect thereof or by a majority vote of the full NECB Board.
The BSW Bylaws may be amended by the affirmative vote of a majority of
the BSW Board. Any notice of a meeting of the BSW Board at which the BSW Bylaws
are proposed to be amended shall include notice of such proposed action.
SALE OF ASSETS, MERGER AND CONSOLIDATIONS
Under the DGCL, a sale, lease or exchange of all or substantially all
of the property or assets of NECB requires approval first by the NECB Board and
then by a majority of the outstanding stock entitled to vote thereon. A sale of
less than substantially all of the assets of NECB, a merger of NECB with a
company in which it owns 90% or more of the outstanding capital stock or a
reclassification of NECB's securities not involving an amendment to the NECB
Certificate would not require stockholder approval. Subject to the provisions of
Section 203 of the DGCL described below under "-State Antitakeover Statutes," no
vote of the stockholders of NECB would be required if NECB were the surviving
corporation of a merger and (i) the merger agreement does not amend the NECB
Certificate, (ii) each share of stock of NECB outstanding immediately before the
merger is to be an identical outstanding or treasury share of NECB stock after
the merger and (iii) the number of shares of NECB Common Stock to be issued in
the merger (or to be issuable upon conversion of any convertible instruments to
be issued in the merger) will not exceed 20% of the shares of NECB Common Stock
outstanding immediately before the merger. If NECB fails this test under the
DGCL, the recommendation of the NECB Board and the approval of a majority of the
total votes cast by the NECB stockholders on the proposal in person or by proxy
are required to effect a merger.
The Connecticut Banking Law requires the approval of the majority of
the Board of Directors and the approval of an affirmative vote of the holders of
at least two-thirds of the issued and outstanding shares of each class of the
capital stock for mergers and consolidations in which a Connecticut bank is a
participating bank and for sales of all or substantially all of such a bank's
property and assets.
APPRAISAL RIGHTS
The DGCL provides appraisal rights for stockholders who dissent in a
merger or consolidation, subject to certain circumstances. Where the right of
appraisal is available to a stockholder objecting to such a transaction,
appraisal is his or her exclusive remedy as a holder of such shares against such
transactions. Stockholders of NECB do not have appraisal rights in connection
with the Merger.
Connecticut law provides dissenters' rights for shareholders of banks
such as BSW, who dissent in a merger or consolidation. See "THE MERGER
AGREEMENT--Dissenters' Rights."
DISSOLUTION
Under the DGCL, voluntary dissolution of NECB requires the adoption of
a resolution by a majority of the NECB Board and by the affirmative vote of the
holders of a majority of the voting power of the outstanding shares entitled to
vote thereon.
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Under Connecticut Banking Law, voluntary dissolution of BSW may be
effectuated with the approval of the Banking Commissioner and the affirmative
vote of the holders of two-thirds of the shares entitled to vote.
CONFLICT-OF-INTEREST TRANSACTIONS
The DGCL permits transactions involving NECB and an interested director
or officer of NECB so long as (i) the material facts are disclosed and a
majority of disinterested directors consent, (ii) the material facts are
disclosed and a majority of shares entitled to vote thereon consent or (iii) the
transaction is fair to NECB at the time it is authorized by the NECB Board, a
committee thereof or the stockholders.
Similar to the DGCL, the CBCA permits transactions involving BSW and an
interested director of BSW so long as (i) the transaction is approved by an
affirmative vote of a majority, but no fewer than two, of those qualified
directors (as defined in the CBCA) on the BSW Board or on a duly empowered
committee thereof who voted on the transaction after the existence and nature of
the director's conflicting interest and all facts known to him or her respecting
the subject matter of the conflicting interest transaction that an ordinarily
prudent person would reasonably believe to be material to a judgment about
whether or not to proceed with the transaction are known or disclosed to them,
(ii) a majority of the votes entitled to be cast by the holders of all qualified
shares (as defined in the CBCA) were cast in favor of the transaction after the
existence and nature of the director's conflicting interest and all facts known
to the interested director respecting the subject matter of the conflicting
interest transaction that an ordinarily prudent person would reasonably believe
to be material to a judgment about whether or not to proceed with the
transaction are known or disclosed to the holders of such shares, or (iii) the
transaction, judged accordingly to the circumstances at the time of commitment,
is established to have been fair to BSW. Unlike the DGCL, the CBCA contains no
provisions explicitly treating conflict-of-interest transactions to be
undertaken by officers of BSW.
LIMITATION OF DIRECTOR LIABILITY
The NECB Certificate contains a provision which provides that to the
full extent permitted by law, no director of NECB shall have any personal
liability to NECB or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that the provision will not eliminate or
limit the liability of a director in certain circumstances. Specifically,
liability will not be eliminated or limited (i) for any breach of the director's
duty of loyalty to NECB or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violations of law;
(iii) for any unlawful payment of dividends, unlawful stock purchase or unlawful
redemption; or (iv) for any transaction from which the director derived an
improper personal benefit.
Under the Connecticut Banking Law, banks are permitted to include in
their articles of incorporation provisions limiting the personal liability of
their directors to the bank or its shareholders for monetary damages for breach
of duty as a director, to an amount that is not less than the compensation
received by the director for serving such bank during the year of the violation.
Under the Connecticut Banking Law, such limitation cannot apply in certain
situations. The BSW Articles do not contain any such provisions regarding
limitation of liability.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The DGCL, the NECB Bylaws and the NECB Certificate authorize NECB to
indemnify officers, directors and certain individuals associated with NECB. In
general, Article V of the NECB Bylaws and Article VII of the NECB Certificate
require NECB, to the full extent permitted by Section 145 of the DGCL, to
indemnify any person who was or is a party or who is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding, and
any appeal therein, whether civil, criminal, administrative or investigative
(other than an action by or in the right of NECB) by reason of the fact that
such person is or was a director, officer, employee or agent of NECB, or is or
was serving at the request of NECB as a director, officer, trustee, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of NECB, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful.
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Under Delaware law, the termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of NECB, and, with respect to any
criminal action or proceeding, that he or she had reasonable cause to believe
that his or her conduct was unlawful.
The BSW Bylaws provide for indemnification of BSW's directors,
officers, employees, shareholders and agents of BSW and eligible outside
parties, for any judgments, fines, penalties, amounts paid in settlement and
reasonable expenses incurred, including attorney's fees, for any proceeding
involving BSW for which such person was made a party, and as such was either:
successful on the merits, acted in good faith and in a manner reasonably
expected to be in the best interests of BSW. Such right to indemnification shall
become effective only upon consent in writing signed by a majority of the BSW
Board who were not a party to the proceeding. No indemnification shall be
provided for any person made a party to any action by or in the right of BSW;
however, indemnification in such a matter will be mandatory as to: a party
adjudged not to have breached his duty to the corporation or where a court has
upon application determined that in view of all the circumstances such person is
fairly and reasonably entitled to be indemnified and then for such amount as a
court shall determine.
Notwithstanding the foregoing, the BSW Bylaws provide that the current
indemnification provisions set forth in Connecticut statutory law shall govern
with respect to the foregoing. Under the current Connecticut law, a corporation
may indemnify an individual made a party to a proceeding because he or she was a
director against liability incurred in the proceeding (a) if such individual
conducted himself or herself in good faith and (b) such individual reasonably
believed in the case of conduct in his or her official capacity with the
corporation that his or her conduct was in the best interests of the corporation
and in all other cases, that his or her conduct was not opposed to the best
interests of the corporation and (c) in the case of a criminal proceeding, that
such individual had no reasonable cause to believe that his or her conduct was
unlawful. A corporation may not indemnify a director in connection with a
proceeding by or in the right of the corporation in which the director was
adjudged liable to the corporation or in connection with any other proceeding
charging improper personal benefit to him or her, whether or not involving
action in his or her official capacity, in which he or she was adjudged liable
on the basis that personal benefit was improperly received by him or her. An
officer of the corporation who is not a director is entitled to mandatory
indemnification and is entitled to apply for court-ordered indemnification under
the CBCA, in each case to the same extent as a director. The corporation may
indemnify and advance expenses under the CBCA to an officer, employee or agent
of the corporation who is not a director to the same extent as to a director.
STATE ANTITAKEOVER STATUTES
Section 203 of the DGCL ("Section 203") prohibits a "business
combination" (as defined in Section 203, generally including mergers, certain
sales and leases of assets, issuances of securities and similar transactions) by
a corporation or a subsidiary with an "interested stockholder" (as defined in
Section 203, generally the beneficial owner of 15 percent or more of a
corporation's voting stock) within three years after the person or entity
becomes an interested stockholder, unless (i) prior to the person or entity
becoming an interested stockholder, the business combination or the transaction
pursuant to which such person or entity became an interested stockholder is
approved by the board of directors of the corporation, (ii) upon the
consummation of the transaction in which the person or entity became an
interested stockholder, the interested stockholder holds at least 85 percent of
the voting stock of the corporation (excluding for purposes of determining the
number of shares outstanding, shares held by persons who are both officers and
directors of the corporation and shares held by certain employee benefit plans)
or (iii) after the person becomes an interested stockholder the business
combination is approved by the corporation's board of directors and by the
holders of at least two-thirds of the outstanding voting stock of the
corporation, excluding shares held by the interested stockholder.
The CBCA provides that any business combination (as generally defined
in Section 33-840(4) of the CBCA, to include (A) any merger, consolidation or
share exchange with (i) any interested shareholder (as defined below) or (ii)
any other domestic or foreign corporation whether or not itself an interested
shareholder, which is, or after the merger, consolidation or share exchange
would be, an affiliate or associate of an interested shareholder that was an
interested shareholder prior to the transaction; (B) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition, other than in the usual and
regular course of business, in one transaction or a series of transactions in
any
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twelve-month period, to any interested shareholder or any affiliate or associate
of any interested shareholder, other than the corporation or any of its
subsidiaries, of any assets of the corporation or any subsidiary having an
aggregate book value of 10% or more of the total market value of the outstanding
shares of the corporation or of its net worth, (C) the issuance or transfer by
the corporation, or any subsidiary, of any equity securities of the corporation
or any subsidiary which have an aggregate value of 5% or more of the total
market value of the outstanding shares of the corporation to any "interested
shareholder" (generally defined as the beneficial owner of 10% or more of the
voting power of the outstanding shares of voting stock of a corporation) or any
affiliate or associate of any interested shareholder, (D) the adoption of any
resolution for the liquidation or dissolution or any subsidiary proposed by or
on behalf of an interested shareholder or any affiliate or associate of any
interested shareholder, other than the corporation or any of its subsidiaries;
or (E) any reclassification of securities, as defined therein, in each case
subject to certain limitations) must, with certain exceptions, be approved by
the board of directors and the affirmative vote of at least the holders of 80%
of the voting power of the outstanding shares of the voting stock of the
corporation and the holders of two-thirds of the voting power of the outstanding
shares of voting stock of the corporation other than voting stock held by the
interested shareholder who is, or whose affiliate or associate is, a party to
the business combination or held by an affiliate or associate of the interested
shareholder. This supermajority voting provision will not be applicable if (A)
all of the conditions set forth in Section 33-842(b) of the CBCA are met or (B)
if the board of directors approves the business combination prior to the time
the interested shareholder became an interested shareholder, unless the
certificate of incorporation otherwise.
The CBCA has a second business combination statute set forth in
Sections 33-843 to 33-845. Pursuant to this statute, a resident domestic
corporation (as defined in Section 33-843(11) of the CBCA) may not engage in a
business combination (which is defined similarly to the definition contained in
Section 33-840(4) of the CBCA) with an interested shareholder of such
corporation for a period of five years following the date that the interested
shareholder became such unless such business combination or the purchase of
stock made by such interested person on the date that the interested shareholder
became such is approved by the board of directors of such corporation and by a
majority of the nonemployee directors, of which there must be at least two,
prior to such interested shareholder's stock acquisition date. The provisions of
Section 33-844 of the CBCA shall not apply to the exceptions listed in Section
33-845 of the CBCA.
VALIDITY OF SECURITIES
The validity of the NECB Common Stock to be issued in connection with
the Merger will be passed upon for NECB by Day, Berry & Howard LLP, Hartford,
Connecticut, counsel to NECB.
EXPERTS
The financial statements of NECB, as of December 31, 1997, 1996 and
1995 and for the years then ended included in the NECB 10-K have been audited by
Shatswell, MacLeod & Company, P.C., independent accountants, as set forth in
their report thereon dated January 29, 1998, except for Note 2, as to which the
date is February 10, 1998. Such financial statements are incorporated herein by
reference in reliance on such report of Shatswell, MacLeod & Company, P.C.,
given on the authority of said firm as experts in auditing and accounting.
The balance sheets of BSW as of December 31, 1997 and 1996 and the
statements of operations, changes in shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1997 included in the
BSW Form 10-K have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report thereon dated January 23, 1998, except
for Note 15, as to which the date is March 19, 1998, incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance on such report of Arthur Andersen LLP, given on the authority of said
firm as experts in auditing and accounting.
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A representative of Arthur Anderson LLP is expected to be present at
the BSW Special Meeting. At this meeting, such representative will have the
opportunity to make a statement if he or she desires to do so and is expected to
be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Any proposal which a NECB stockholder wishes to have included in the
proxy materials for the 1999 NECB annual meeting must be presented to NECB no
later than November 20, 1998.
Any proposal which a BSW shareholder wishes to have included in the
proxy materials for the 1999 BSW annual meeting, if it is held, must be
presented to BSW no later than January 22, 1999.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, neither the
NECB Board nor the BSW Board knows of any other matters which may come before
the respective Special Meetings. If any matters other than those referred to in
this Joint Proxy Statement-Prospectus should properly come before either of such
meetings, it is the intention of each person named in the enclosed form of proxy
to vote each proxy with respect to such matters in accordance with his or her
best judgement.
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Appendix A
PLAN AND AGREEMENT OF MERGER
By and Among
New England Community Bancorp, Inc.
and
New England Bank & Trust Company
and
Bank of South Windsor
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Dated as of March 19, 1998
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TABLE OF CONTENTS
ARTICLE 1 - THE MERGER.......................................................1
1.01. THE MERGER.................................................1
1.02. EFFECTIVE TIME.............................................2
1.03. EFFECT OF THE MERGER.......................................2
1.04. CONVERSION OF BSW COMMON STOCK.............................2
1.05. DISSENTERS' RIGHTS.........................................3
1.06. CONVERTING STOCK OPTIONS...................................4
1.07. OTHER MATTERS..............................................4
1.08. DIRECTORS..................................................5
1.09. ACCOUNTHOLDER ACCOUNTS.....................................5
1.10. TAX CONSEQUENCES...........................................5
1.11. CERTAIN AGREEMENTS.........................................5
ARTICLE II - EXCHANGE OF SHARES..............................................6
2.01. THE COMPANY TO MAKE MERGER CONSIDERATION AVAILABLE.........6
2.02. EXCHANGE OF SHARES.........................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BSW..........................8
3.01. CORPORATE ORGANIZATION.....................................8
3.02. CAPITALIZATION.............................................8
3.03. AUTHORITY; NO VIOLATION....................................9
3.04. CONSENTS AND APPROVALS....................................10
3.05. FINANCIAL STATEMENTS......................................10
3.06. ABSENCE OF UNDISCLOSED LIABILITIES........................10
3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS......................10
3.08. LOAN PORTFOLIO............................................13
3.09. INVESTMENTS...............................................13
3.10. TITLE TO PROPERTIES.......................................14
3.11. LEASES....................................................14
3.12. TRADEMARKS; TRADE NAMES...................................15
3.13. LEGAL PROCEEDINGS.........................................15
3.14. COMPLIANCE WITH APPLICABLE LAWS...........................15
3.15. ABSENCE OF QUESTIONABLE PAYMENTS..........................15
3.16. TAXES.....................................................16
3.17. EMPLOYEE BENEFIT AND OTHER PLANS..........................16
3.18. CONTRACTS AND COMMITMENTS; NO DEFAULTS....................17
3.19. BSW REPORTS...............................................19
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3.20. ENVIRONMENTAL MATTERS.....................................19
3.21. BSW INFORMATION...........................................20
3.22. INSURANCE.................................................20
3.23. POWERS OF ATTORNEY; GUARANTEES............................20
3.24. BROKER'S FEES.............................................20
3.25. AGREEMENTS WITH REGULATORY AGENCIES.......................20
3.26. MATERIAL INTERESTS OF CERTAIN PERSONS.....................20
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................21
4.01. CORPORATE ORGANIZATION....................................21
4.02. CAPITALIZATION............................................22
4.03. AUTHORITY; NO VIOLATION...................................22
4.04. CONSENTS AND APPROVALS....................................23
4.05. FINANCIAL STATEMENTS......................................23
4.06. BROKER'S FEES.............................................24
4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS......................24
4.08. LEGAL PROCEEDINGS.........................................25
4.09. SEC REPORTS...............................................25
4.10. COMPANY INFORMATION.......................................25
4.11. COMPLIANCE WITH APPLICABLE LAW............................26
4.12. ABSENCE OF QUESTIONABLE PAYMENTS..........................26
4.13. TAXES.....................................................26
4.14. EMPLOYEE BENEFIT AND OTHER PLANS..........................27
4.15. NO DEFAULTS...............................................28
4.16. AGREEMENTS WITH REGULATORY AGENCIES.......................28
4.17. REGULATORY APPROVALS......................................28
4.18. ENVIRONMENTAL MATTERS.....................................28
4.19. NOT AN "INTERESTED SHAREHOLDER"...........................29
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS.......................29
5.01. COVENANTS OF BSW..........................................29
5.02. COVENANTS OF THE COMPANY..................................32
ARTICLE VI - ADDITIONAL AGREEMENTS..........................................33
6.01. REGULATORY MATTERS........................................33
6.02. ACCESS TO INFORMATION.....................................34
6.03. SHAREHOLDER APPROVALS.....................................35
6.04. LEGAL CONDITIONS TO MERGER................................35
6.05. AFFILIATES................................................35
6.06. STOCK LISTING.............................................36
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6.07. EMPLOYEE MATTERS..........................................36
6.08. FINANCIAL STATEMENTS......................................36
6.09. ADDITIONAL AGREEMENTS.....................................36
6.10. DISCLOSURE SUPPLEMENTS....................................37
6.11. CURRENT INFORMATION.......................................37
6.12. ENVIRONMENTAL ASSESSMENT..................................38
6.13. PUBLIC ANNOUNCEMENTS......................................38
ARTICLE VII - CONDITIONS PRECEDENT..........................................38
7.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER
THIS AGREEMENT............................................38
7.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY UNDER
THIS AGREEMENT............................................39
7.03. CONDITIONS TO THE OBLIGATIONS OF BSW UNDER
THIS AGREEMENT............................................42
ARTICLE VIII - CLOSING .....................................................43
8.01. TIME AND PLACE............................................43
8.02. DELIVERIES AT THE CLOSING.................................43
ARTICLE IX - TERMINATION AND AMENDMENT......................................43
9.01. TERMINATION...............................................43
9.02. EFFECT OF TERMINATION.....................................45
9.03. AMENDMENT.................................................45
9.04. EXTENSION; WAIVER.........................................46
ARTICLE X - MISCELLANEOUS...................................................46
10.01. EXPENSES..................................................46
10.02. FEES AND EXPENSES UNDER CERTAIN CIRCUMSTANCES.............46
10.03. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES............48
10.04. INDEMNIFICATION AND DIRECTORS' AND OFFICERS'
INSURANCE.................................................48
10.05. NOTIFICATION OF CERTAIN MATTERS...........................49
10.06. NOTICES...................................................50
10.07. PARTIES IN INTEREST.......................................50
10.08. GRANT OF STOCK OPTION.....................................51
10.09. COMPLETE AGREEMENT........................................51
10.10. COUNTERPARTS..............................................51
10.11. GOVERNING LAW.............................................51
10.12. HEADINGS..................................................51
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PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER, dated as of March 19, 1998, by and among
New England Community Bancorp, Inc., a Delaware corporation (the "Company"), New
England Bank & Trust Company, a Connecticut-chartered commercial bank and a
wholly-owned subsidiary of the Company (the "Bank"), and Bank of South Windsor,
a Connecticut-chartered commercial bank ("BSW").
WHEREAS, the Boards of Directors of the Company, the Bank and BSW have
determined that it is in the best interests of their respective institutions and
shareholders to consummate the business combination transaction provided for
herein in which BSW will, subject to the terms and conditions set forth herein,
merge with and into the Bank, with the Bank being the surviving corporation in
the merger (the "Merger"); 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
1.01. THE MERGER. In accordance with the provisions of this Agreement
and of the banking laws of Connecticut, including Section 36a-125 of the
Connecticut General Statutes ("C.G.S."), at the Effective Time as defined by
Section 1.02, BSW shall be merged with and into the Bank, the separate corporate
existence of BSW shall cease, and the Bank shall continue its corporate
existence as the resulting corporation in the Merger (the "Resulting
Corporation") as a Connecticut-chartered commercial bank under the name "New
England Bank & Trust Company" with all of the powers provided to such banks
under the laws of the State of Connecticut. Also at the Effective Time, all the
outstanding shares of common stock, $5.00 par value, of BSW ("BSW Common Stock")
(except for (i) shares held by BSW as treasury shares, (ii) shares owned by any
direct or indirect subsidiary of BSW, (iii) shares held by the Company or the
Bank other than in a fiduciary or trust capacity for the benefit of third
parties, and (iv) shares as to which dissenters' rights have been asserted) will
be converted into the right to receive consideration in shares of the Class A
common stock, $.l0 par value, of the Company ("Company Common Stock"), without
interest, in the manner specified in Section 1.04 and Article II hereof, and
each outstanding share of common stock, $5.00 par value, of the Bank ("Bank
Common Stock") and Company Common Stock, respectively, shall remain outstanding
and continue to be one fully paid and nonassessable share of Common Stock of the
Resulting Corporation and of the Company, respectively.
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1.02. EFFECTIVE TIME. The Merger shall become effective at 11:59 p.m.,
Eastern Time, on the date on which a copy of this Agreement certified by the
Banking Commissioner of the State of Connecticut (the "Commissioner"), along
with the Commissioner's approval of the Merger, is filed with the Secretary of
State of the State of Connecticut (the "Secretary") (the "Effective Time").
1.03. EFFECT OF THE MERGER. At and after the Effective Time and by
virtue of the Merger, the Resulting Corporation shall possess all the rights,
privileges, powers and franchises of BSW and the entire assets, business and
franchises of BSW shall be vested in the Resulting Corporation without any deed
or transfer, provided the parties may execute such deeds or instruments of
conveyance as may be convenient to confirm the same. The Resulting Corporation
shall assume and be liable for all debts, accounts, undertakings, contractual
obligations and liabilities of BSW and shall exercise and be subject to all the
duties, relations, obligations, and trusts of BSW, whether as debtor,
depository, registrar, transfer agent, executor, administrator, trustee or
otherwise, and shall be liable to pay and discharge all such debts and
liabilities, to perform such duties and to administer all such trusts in the
same manner and to the same extent as if the Resulting Corporation had itself
incurred the obligation or liability or assumed the duty, relation or trust, and
all rights of creditors and all liens upon the property of BSW shall be
preserved unimpaired and the Resulting Corporation shall be entitled to receive,
accept, collect, hold and enjoy any and all gifts, bequests, devises,
conveyances, trusts and appointments in favor of or in the name of BSW whether
made or created to take effect prior to or after the Merger and the same shall
inure to and vest in the Resulting Corporation. In addition to the foregoing,
the Merger shall have such other effects as may be provided under the laws of
the State of Connecticut.
1.04. CONVERSION OF BSW COMMON STOCK.
(a) At the Effective Time, each share of BSW Common Stock
issued and outstanding immediately prior to the Effective Time (except
for (i) shares held by BSW as treasury shares, (ii) shares owned by any
direct or indirect subsidiary of BSW, (iii) shares held by the Company,
or the Bank, other than in a fiduciary or trust capacity for the
benefit of third parties, and (iv) shares as to which dissenters'
rights have been asserted) shall, by virtue of the Merger and this
Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for Merger consideration ("Per Share
Merger Consideration") consisting of 1.3204 shares of Company Common
Stock (the "Exchange Ratio"), and cash in lieu of fractional shares,
subject to adjustment as described in Section 1.04(b).
(b) The Exchange Ratio shall be adjusted to result in an
amount equal to $31.00 per share of BSW Common Stock in the event that
(i) the product of the Average Closing Price, as hereinafter defined,
multiplied by the Exchange Ratio is less than $31.00 and (ii) the
percentage decline in the closing price of Company Common Stock from
the date hereof to the date on which the last of the regulatory
approvals required for
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the consummation of the Merger occurs (the "Price Period") exceeds the
percentage decline in the average closing share price of those
institutions as reported in the SNL Securities LLC New England Banks
Index, by more than ten percent (10.0%) for the Price Period. The
"Average Closing Price" shall be defined as the average of the daily
per share closing prices of Company Common Stock supplied by the
National Association of Securities Dealers Automated Quotations System
("NASDAQ") and reported in the WALL STREET JOURNAL as of the end of the
twenty (20) consecutive trading-day period ending on the date on which
the last of the regulatory approvals required for the consummation of
the Merger occurs (the "Average Closing Price").
(c) At the Effective Time, all of the shares of BSW Common
Stock converted into Company Common Stock pursuant to 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 BSW Common Stock shall thereafter
represent the right to receive the Per Share Merger Consideration into
which the share of BSW Common Stock represented by such Certificate has
been converted pursuant to this Section 1.04 and Section 2.02(d)
hereof. Certificates previously representing shares of BSW Common Stock
shall be exchanged for certificates representing whole shares of
Company Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates in
accordance with Section 2.02 hereof, without any interest thereon. If
prior to the Effective Time the Company should split or combine its
common stock, or a record date occurs with respect to the payment of a
stock dividend or other distribution in such common stock, then the
Exchange Ratio shall be appropriately adjusted to reflect such split,
combination, dividend or distribution.
(d) At the Effective Time, (i) all shares of BSW Common Stock
that are owned by BSW as treasury shares, (ii) all shares of BSW Common
Stock that are owned directly or indirectly by any subsidiary of BSW,
and (iii) shares of BSW Common Stock held by the Company or the Bank
other than in a fiduciary or trust capacity for the benefit of third
parties shall be canceled and shall cease to exist and no stock of the
Company or other consideration shall be delivered in exchange therefor.
1.05 DISSENTERS' RIGHTS. Notwithstanding anything in this Agreement to
the contrary and unless otherwise provided by applicable law, shares of BSW
Common Stock which are issued and outstanding immediately prior to the Effective
Time and which are owned by shareholders who: (a) pursuant to applicable law,
deliver to BSW, before the taking of the vote of BSW's shareholders on the
Merger, written demand for the appraisal of their shares, if the Merger is
effected; and (b) whose shares are not voted in favor of the Merger, nor
consented thereto in writing (the "Dissenting Shares"), shall not be converted
into Merger consideration as provided in Section 1.04, unless and until such
holders shall have failed to perfect or shall have effectively withdrawn or lost
their right of appraisal and payment under applicable law. If any such holder
shall have failed to perfect or shall have effectively withdrawn or lost such
right of
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appraisal, BSW Common Stock of such holder shall thereupon be deemed to have
been converted into the right to receive and become exchangeable for, at the
Effective Time, Merger Consideration determined pursuant to Section 1.04 and
Section 2.02(d) hereof.
1.06. CONVERTING STOCK OPTIONS.
(a) At the Effective Time, Stock Options (as defined in
Section 3.02) pursuant to the 1990 Non-Qualified Stock Option Plan
which are outstanding and unexercised immediately prior to the
Effective Time shall cease to represent a right to acquire shares of
BSW Common Stock and shall be converted automatically into an option to
purchase shares of Company Common Stock as provided below:
(i) The number of shares of Company Common Stock to be
subject to the new option shall be equal to the product of the
number of shares of BSW Common Stock subject to the original
option and the Exchange Ratio, provided that any fractional
shares of Company Common Stock resulting from such
multiplication shall be rounded down to the nearest share; and
(ii) The exercise price per share of Company Common Stock
under the new option shall be equal to the exercise price per
share of BSW Common Stock under the original option divided by
the Exchange Ratio, provided that such exercise price shall be
rounded up to the nearest cent.
(iii) The duration and other terms of the new option shall
be the same as the original option, except that all references
to BSW shall be deemed to be references to the Company.
(b) At the Effective Time, Stock Options pursuant to the 1997
Incentive Stock Option Plan which are outstanding and exercisable by
their terms immediately prior to the Effective Time shall cease to
represent a right to acquire shares of BSW Common Stock and shall be
converted automatically into the right to receive in settlement for
each such Stock Option shares of Company Common Stock in a number equal
to the quotient of (a) the excess, if any, of (i) the product of (A)
the Average Closing Price times (B) the Per Share Merger Consideration
minus (ii) the per share exercise price of such Stock Option,
multiplied by (iii) the number of shares of BSW Common Stock covered by
such Stock Option divided by (b) the Average Closing Price. All such
Stock Options shall be canceled and of no further effect as of the
Effective Time.
1.07. OTHER MATTERS. At and after the Effective Time: (i) the Resulting
Corporation's main office shall continue to be located in Windsor, Connecticut,
(ii) except as provided in Section 1.08 hereof, the Directors and officers of
the Bank who are holding office immediately prior to the Effective Time shall
continue to be the Resulting Corporation's Directors and
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officers, (iii) the Certificate of Incorporation and Bylaws of the Bank existing
immediately prior to the Effective Time shall continue to be the Certificate of
Incorporation and Bylaws of the Resulting Corporation, (iv) the authorized
capital stock of the Resulting Corporation at the Effective Time shall consist
of 350,000 shares of common stock, $5.00 par value per share, and no shares of
preferred stock, as provided in the Certificate of Incorporation of the Bank,
and (v) the minimum and maximum number of Directors of the Resulting Corporation
shall be as set forth in the Certificate of Incorporation and Bylaws of the
Resulting Corporation.
1.08. DIRECTORS. At the Effective Time, the Company shall provide for
the election of two BSW Directors, as selected by the Company after consultation
with BSW, to the Board of Directors of the Company and two BSW Directors, as
selected by the Company after consultation with BSW, to the Board of Directors
of the Resulting Corporation. The Company further agrees to nominate said BSW
Directors for re-election at the 1999 Annual Meeting of the shareholders of the
Company and of the shareholder of the Resulting Corporation, subject to their
continued qualification under the Company's and the Resulting Corporation's
general criteria for Directors. The Company further agrees, within three months
after the Effective Time, to establish a South Windsor Advisory Board (the
"Advisory Board") the members of which will include all BSW Directors holding
office immediately prior to the Effective Time who shall elect to become members
of the Advisory Board.
1.09. ACCOUNTHOLDER ACCOUNTS. Upon the Effective Time, subject to any
contractual provisions in effect between BSW and its accountholders, the
Resulting Corporation shall provide to each accountholder of BSW, without
charge, an account or accounts in the Resulting Corporation which shall be equal
in value to the deposit account or accounts held by such accountholder in BSW at
such time. To the extent practicable, but without requiring that the Resulting
Corporation establish any new types of accounts, or to change the terms of the
types of accounts which the Bank had established prior to the Effective Time,
the accounts provided by the Resulting Corporation to the accountholders of BSW
shall be selected from among the types of accounts which were made available by
the Bank to its depositors prior to the Effective Time with a view toward
ensuring that the accounts provided by the Resulting Corporation to the
accountholders of BSW shall be comparable to the deposit accounts which were
held by such accountholders in BSW prior to the Merger.
1.10. TAX CONSEQUENCES. It is intended that the Merger shall constitute
a Merger within the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and that this Agreement shall constitute a
tax-free "plan of Merger" for the purposes of Section 368 of the Code.
1.11. CERTAIN AGREEMENTS. In order to protect the integrity of this
Agreement, as of the date of this Agreement, (i) the Company and BSW are
entering into a Stock Option Agreement, as described in Section 10.08 of this
Agreement, and (ii) the Company and certain shareholders of BSW are entering
into agreements (the "Shareholder Agreements") whereby such shareholders agree
to take or refrain from certain actions.
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ARTICLE II
EXCHANGE OF SHARES
2.01. THE COMPANY TO MAKE MERGER CONSIDERATION AVAILABLE. At or prior
to the Effective Time, the Company shall deposit, or shall cause to be
deposited, with a bank or trust company selected by the Company (the "Exchange
Agent"), for the benefit of the holders of Certificates, for exchange in
accordance with this Article II, certificates representing the shares of Company
Common Stock sufficient to pay the Merger consideration provided for in Section
1.04 (the"Merger Consideration") (such certificates for shares of Company Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") to be issued and paid pursuant
to Section 2.02(a) in exchange for outstanding shares of BSW Common Stock.
2.02. EXCHANGE OF SHARES.
(a) As soon as practicable after the Effective Time, and in no
event later than five business days thereafter, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates a
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 Merger Consideration into which the shares of BSW Common
Stock represented by such Certificate or Certificates shall have been
converted pursuant to this Agreement. 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 Company Common Stock to
which such holder of BSW Common Stock shall have become entitled
pursuant to the provisions of Article I hereof and (y) a check
representing the amount of cash in lieu of fractional shares, if any,
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.
(b) At the Effective Time and until so surrendered and
exchanged, each such Certificate other than Certificates representing
(i) all shares of BSW Common Stock that are owned by BSW as treasury
shares, (ii) all shares of BSW Common Stock that are owned directly or
indirectly by any subsidiary of BSW, (iii) shares of BSW Common Stock
held by the Company or the Bank other than in a fiduciary or trust
capacity for the benefit of third parties, and (iv) shares of BSW as to
which dissenters' rights have been asserted, shall represent solely the
right to receive Merger Consideration as provided for in this
Agreement. If Merger Consideration (or any portion thereof) is to be
delivered to any person other than the person in whose name the
Certificate surrendered in exchange therefor is registered, it shall be
a condition to such exchange that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer and
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that the person requesting such exchange shall pay to the Exchange
Agent any transfer or other taxes required by reason of the payment of
Merger Consideration to a person other than 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 applicable.
(c) After the Effective Time, there shall be no transfers on
the stock transfer books of BSW of the shares of BSW Common Stock which
were issued and outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the
Exchange Agent for transfer, they shall be canceled and exchanged for
Merger Consideration as provided in this Article II.
(d) Notwithstanding anything to the contrary contained herein,
no certificates or scrip representing fractional shares of Company
Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to Company
Common Stock shall be payable on or with respect to any fractional
share, and such fractional share interests shall not entitle the owner
thereof to vote or to any other rights of a shareholder. In lieu of the
issuance of any such fractional share, each former shareholder of BSW
who otherwise would be entitled to receive a fractional share of
Company Common Stock shall be entitled to receive an amount in cash
determined by multiplying (i) the Average Closing Price of Company
Common Stock as defined in Section 1.04 hereof by (ii) the fraction of
a share of Company Common Stock to which such holder would otherwise be
entitled to receive pursuant to Section 1.04 hereof.
(e) Any portion of the Exchange Fund that remains unclaimed by
the shareholders of BSW for 12 months after the Effective Time shall be
paid to the Company. Any shareholders of BSW who have not theretofore
surrendered their Certificates shall thereafter look only to the
Company for payment of Merger Consideration deliverable in respect of
each share of BSW Common Stock represented by a Certificate not
surrendered pursuant to this Agreement, in each case, without any
interest thereon. Notwithstanding the foregoing, none of the Company,
the Bank, BSW, the Exchange Agent or any other person shall be liable
to any former holder of shares of BSW Common Stock for any amount
properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(f) In the event that 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 the Company, the posting by such person of a bond
in such amount as the Company may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate, the Merger Consideration deliverable in respect
thereof pursuant to this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BSW
BSW hereby represents and warrants to the Bank and the Company as
follows:
3.01. CORPORATE ORGANIZATION.
(a) BSW is a state bank and trust company duly organized,
validly existing and in good standing under the laws of the State of
Connecticut. BSW has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is
now being conducted. BSW has all necessary federal, state and local
banking authorization to own or lease its properties and assets and to
carry on its business as it is being conducted. The accounts of
depositors of BSW are insured by the Bank Insurance Fund ("BIF") of the
Federal Deposit Insurance Corporation (the "FDIC") in accordance with
law and with the regulations of the FDIC and all premiums and
assessments required in connection therewith have been paid. The copies
of BSW's Certificate of Incorporation and Bylaws, each certified by an
officer of BSW as of the date of this Agreement, which are being
delivered to the Company herewith, are complete and correct copies in
effect as of the date of this Agreement. Except as listed on the
attached SCHEDULE 3.01(a), BSW does not have any wholly owned
subsidiaries or capital stock or other equity ownership interest in any
corporation, partnership or other entity which totals 5% or more of
such entity's total equity.
(b) As used in this Agreement, the word "Subsidiary", when
used with respect to any party, means any corporation, partnership or
other organization, whether incorporated or unincorporated, which is
consolidated with such party for financial purposes. Each Subsidiary of
BSW is wholly owned by BSW and is duly organized, validly existing and
in good standing under the laws of the State of its incorporation and
has all corporate power and authority required to own or lease all of
its properties and assets and to carry on its business as being
conducted on the date hereof. For purposes of this Agreement, all
representations and warranties of BSW pertaining to its business,
operations and financial condition shall be deemed to include the
business, operations and financial condition of BSW and its
Subsidiaries taken as a whole.
(c) BSW's minute books contains complete and accurate records
of all meetings through January 31, 1998, and other corporate actions
of its shareholders and its Board of Directors (including committees of
its Board of Directors).
3.02. CAPITALIZATION. The authorized capital stock of BSW consists
solely of 1,300,000 shares of BSW Common Stock. As of the date of this
Agreement, there were 958,289 shares of BSW Common Stock issued and outstanding,
no shares held in BSW's treasury and 126,040 shares reserved for issuance upon
exercise of outstanding stock options (the "Stock Options") pursuant to the 1990
Non-Qualified Stock Option Plan and the 1997 Incentive Stock Option Plan
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(the "BSW Stock Option Plans"). All issued and outstanding shares of BSW Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except as provided in this Section 3.02, BSW 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 BSW capital stock or any security representing the right to
purchase or otherwise receive any capital stock of BSW. None of the shares of
capital stock of BSW has been issued in violation of the preemptive rights of
any person. Except as provided for in this Agreement, there are no agreements of
record or of which BSW is aware among any of the BSW shareholders relating to
rights to own, vote or dispose of BSW Common Stock.
3.03. AUTHORITY; NO VIOLATION.
(a) BSW has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
BSW and the consummation by BSW of the transactions contemplated by
this Agreement have been duly and validly approved by the Board of
Directors of BSW and a certified copy of the Board resolution
reflecting such approval is attached hereto as SCHEDULE 3.03(a). The
Board of Directors of BSW has directed that this Agreement and the
transactions contemplated hereby be submitted to BSW's shareholders for
consideration at a meeting of such shareholders and, except for the
adoption of this Agreement by the requisite vote of BSW's shareholders,
no other corporate proceedings on the part of BSW are necessary to
approve this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered
by BSW and (assuming adoption of the Agreement by the requisite vote of
BSW's shareholders and the due authorization, execution and delivery by
the Bank and the Company, and also subject to the receipt of the
requisite regulatory approvals) constitutes a valid and binding
obligation of BSW, enforceable against BSW 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.
(b) Neither the execution and delivery of this Agreement by
BSW, nor the consummation by BSW of the transactions contemplated
hereby, nor compliance by BSW with any of the terms or provisions
hereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of BSW or (ii) assuming that the consents and
approvals referred to in Section 3.04 hereof are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to BSW, or (y) violate,
result in a breach of any provision of, constitute a default under, or
result in the creation of any material lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of BSW
under any of the terms or conditions of any note, bond, mortgage,
indenture, deed of trust, license, lease,
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agreement or other instrument or obligation to which BSW is a party, or
by which it or any of its properties or assets may be bound or
affected.
3.04. CONSENTS AND APPROVALS. Except for consents, approvals, filings
or registrations which may be required of or with the Commissioner, the FDIC,
any other applicable governmental authorities and the shareholders of BSW, no
consents or approvals of or filings or registrations with any third party or any
public body or authority are necessary in connection with (a) the execution and
delivery by BSW of this Agreement or (b) the consummation of the Merger and the
other transactions contemplated hereby, insofar as they relate to any actions
required of BSW.
3.05. FINANCIAL STATEMENTS. BSW has previously delivered to the Company
accurate and complete copies of (a) the balance sheets of BSW as of December 31
of each of the three fiscal years 1995 through 1997, inclusive, and the related
statements of operations, statements of shareholders' equity, and statements of
cash flows for the periods then ended, in each case accompanied by the report of
BSW's independent certified public accountants, and (b) all management letters
from such accountants delivered to BSW since January 1, 1995. Each of the
financial statements referenced above ("Financial Statements") has been prepared
in accordance with generally accepted accounting principles applied on a basis
consistent with other periods, except as otherwise noted therein or in notes
thereto, and fairly presents in all material respects the financial condition or
income of BSW as at the date thereof and for the period covered thereby. Except
as and to the extent reflected or reserved in the balance sheets included in the
Financial Statements or notes thereto or as described in the Schedules hereto,
BSW did not have, as of the dates of such balance sheets, any material
liabilities or obligations (absolute or contingent) of a nature customarily
reflected in balance sheets or notes thereto prepared in accordance with
generally accepted accounting principles ("GAAP"). The books and records of BSW
have been, and are being, maintained in all material respects in accordance with
applicable legal and accounting requirements and reflect only valid
transactions.
3.06. ABSENCE OF UNDISCLOSED LIABILITIES. Except for the transactions
contemplated by this Agreement, BSW has not incurred any liability (contingent
or otherwise) that is material to BSW or that, when combined with all similar
liabilities, would be material to BSW, except as disclosed in the notes to BSW's
December 31, 1997 balance sheet or as described in the Schedules hereto, and
except for commitments and contingencies incurred in the ordinary course of
business.
3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth in SCHEDULE 3.07(a) or elsewhere in
the Schedules delivered by BSW, since December 31, 1997, there has not
been:
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(1) any material adverse change in the business,
operations, properties, assets or financial condition of BSW
and no fact or condition exists which BSW believes will cause
such a material adverse change in the future;
(2) any loss (for purposes of this subsection 3.07(a)(2),
"loss" shall not mean a loan loss), damage, destruction or
other casualty materially and adversely affecting any of the
significant properties, assets or business of BSW (whether or
not covered by insurance);
(3) any increase in the compensation payable by BSW to any
of its employees whose total compensation after such increase
was in excess of $50,000 per annum, or to any of its Directors
or officers or any bonus, service award or other like benefit
granted, made or accrued to the credit of any such Director,
officer or employee, or any welfare, pension, retirement,
severance or similar payment or arrangement made or agreed to
by BSW for the benefit of any such Director, officer or
employee;
(4) any change in any method of accounting or accounting
practice of BSW other than as may have been required in
accordance with GAAP;
(5) any rescheduling or moratorium on payments, or writing
off as uncollectible of any individual loan in excess of
$50,000, or loans in the aggregate in excess of $200,000, or
any portion thereof; or
(6) any agreement or understanding, whether in writing or
otherwise, of BSW to do any of the foregoing.
(b) Except as set forth in SCHEDULE 3.07(b) since December 31,
1997, BSW has not:
(1) issued or sold any promissory notes, stock, bonds or
other corporate securities of which it is the issuer other
than securities issued upon exercise of Stock Options;
(2) discharged or satisfied any lien or encumbrance or paid
or satisfied any obligation or liabilities (whether absolute,
accrued, contingent or otherwise and whether due or to become
due) in an amount greater than $25,000, other than current
liabilities shown on the December 31, 1997 balance sheet (the
"1997 Balance Sheet") and current liabilities incurred since
December 31, 1997 in the ordinary course of business or in
connection with the transactions contemplated hereby;
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(3) declared, paid or set aside for payment any dividend or
other distribution (whether in cash, stock or property) in
respect of its capital stock;
(4) split, combined or reclassified any shares of its
capital stock, or redeemed, purchased or otherwise acquired
any shares of its capital stock or other securities;
(5) sold, assigned, or transferred any of its assets (real,
personal or mixed, tangible or intangible), canceled any debts
or claims or waived any rights of substantial value, except,
in each case, in the ordinary course of business;
(6) sold, assigned, transferred or permitted to lapse any
material patents, trademarks, trade names, copyrights or other
similar assets, including applications or licenses therefor;
(7) paid any amounts or incurred any liability to or in
respect of, or sold any properties or assets (real, personal
or mixed, tangible or intangible) to, or engaged in any
transaction or entered into any agreement or arrangement with,
any corporation or business in which BSW or any of its
officers or Directors, or any "affiliate" or "associate" (as
such terms are defined in the rules and regulations
promulgated under the Securities Act of 1933, as amended (the
"Securities Act")) of any such person, has any direct or
indirect interest which would be required to be disclosed
pursuant to Item 404 of Regulation S-K of the Securities and
Exchange Commission;
(8) entered into or amended any collective bargaining
agreement or suffered any material strike, work stoppage, slow
down, or other labor disturbance;
(9) amended its Certificate or Incorporation or Bylaws, or
any provision thereof, or proposed any such amendment;
(10) borrowed or agreed to borrow any funds or incurred, or
become subject to, any obligation or liability (absolute or
contingent), except for borrowings from the Federal Home Loan
Bank of Boston or other borrowings in the ordinary course of
business;
(11) waived any rights of value which in the aggregate are
material considering the business of BSW taken as a whole;
(12) except in the ordinary course of business, made or
permitted any amendment or termination of any contract,
agreement or license to which it is a party if such amendment
or termination would have a material adverse effect on BSW, or
its business or operations taken as a whole;
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(13) made any material investment or commitment therefor in
any person, corporation, association, partnership, joint
venture or other entity;
(14) permitted the occurrence of any change or event within
its control which would render any of its representations and
warranties contained herein untrue in any material respect at
and as of the Effective Time;
(15) incurred any liability that has had, or to the
knowledge of BSW, any liability that could reasonably be
expected to have, a material adverse effect on BSW, or its
business or operations taken as a whole; or
(16) entered into any other material transaction other than
in the ordinary course of business or in connection with the
transactions contemplated by this Agreement.
3.08. LOAN PORTFOLIO. Except as set forth in SCHEDULE 3.08, all
evidences of indebtedness reflected as assets of BSW in BSW's Financial
Statements are, to the knowledge of BSW's management, in all respects binding
obligations of the respective primary obligors named therein and no material
amount thereof is subject to any defenses known to BSW which may be asserted
against BSW. Except as set forth on SCHEDULE 3.08, BSW has delivered to the
Company a true and complete list in all material respects and brief description
of all real property in which BSW has an interest as creditor or mortgagee
securing an amount or amounts greater than $250,000 to one borrower, or a series
of related borrowers. Except as set forth in such list or as set forth in
SCHEDULE 3.08, BSW has no loans reflected as assets in such Financial Statements
which have principal balances in excess of $250,000, except for fully secured
mortgage loans. For the purposes hereof, "default" shall include but not be
limited to a failure of an obligor to make any payments with respect to any
loans for 30 days or more past the due date for such payment. SCHEDULE 3.08 sets
forth all of the loans in the original principal amount in excess of $100,000 of
BSW that as of December 31, 1997 were classified by BSW as "Special Mention,"
"Substandard," "Doubtful," "Loss" or "Classified," together with the aggregate
principal amount of and accrued and unpaid interest on such loans by category.
Except for normal examinations conducted by (i) the FDIC, and (ii) the
Commissioner, in the regular course of the business of BSW, no agency has
initiated any proceeding into the business or operations of BSW since January 1,
1995. The amount established by BSW as a reserve for loan losses on the date
hereof is sufficient to the knowledge of BSW's management in all material
respects to cover losses in BSW's loan portfolio as it now exists.
3.09. INVESTMENTS.
(a) Except as set forth in SCHEDULE 3.09 and except for
ownership of stock of the Federal Home Loan Bank of Boston, BSW has no
subsidiaries other than as listed on SCHEDULE 3.01(a) and no equity
interest or other investment, direct or indirect, in any corporation,
partnership, joint venture or other entity other than interests that
have been
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pledged to BSW as collateral for loans or obligations made by
BSW in the ordinary course of its lending business. To the extent any
such interest has been foreclosed or otherwise hereafter may become
owned by BSW, no filing with any regulatory authority is necessary.
(b) Except as disclosed in the notes to BSW's December 31,
1997 balance sheet or on SCHEDULE 3.09 and except for pledges to secure
public funds or for other purposes required by law, none of the
investments reflected under the heading "Investment Securities" in
BSW's 1997 Balance Sheet which are owned by BSW at the Effective Time
and none of the investments made by BSW since December 31, 1997 are
subject to any investment or other restriction, whether contractual or
statutory, which materially impairs the ability of the holder freely to
dispose thereof in the open market at any time.
3.10. TITLE TO PROPERTIES. Except as set forth in SCHEDULE 3.10, BSW
has (a) good, valid and marketable title to all its owned real properties, and
(b) good and valid title to all other properties and assets reflected in the
1997 Balance Sheet or acquired since December 31, 1997, other than any of such
properties or assets which have been sold or otherwise disposed of since
December 31, 1997 in the ordinary course of business and consistent with past
practice. Except as set forth in SCHEDULE 3.10 and except for BSW's loans which
are described in Section 3.08, all of such properties and assets are free and
clear of material title defects and obligations, mortgages, pledges, liens,
claims, charges, security interests or other encumbrances of any nature
whatsoever, including, without limitation, leases, options to purchase,
conditional sales contracts, collateral security arrangements and other title or
interest retention arrangements, and are not, in the case of owned real
property, subject to any easements, building use restrictions, exceptions,
reservations or limitations of any nature whatsoever except those having no
material adverse effect upon the operations of BSW as currently being conducted
or which would involve no material expense to correct or remove. All personal
property material to the business, operations or financial condition of BSW, and
all buildings, structures and fixtures used by BSW in the conduct of its
business, are in good operating condition and have been maintained in accordance
with industry standards. Except as set forth in SCHEDULE 3.10, BSW has not
received any notification of any material violation (which has not been cured)
of any building, zoning or other law, ordinance or regulation in respect of such
property or structures or BSW's use thereof.
3.11. LEASES. BSW owns no real property used in the operation of its
business, except as listed in SCHEDULE 3.11, and BSW has delivered to the
Company an accurate and complete list of all leases pursuant to which BSW, as
lessee, (a) leases any real property or (b) any item of personal property for
which annual lease payments exceed $100,000, including, without limitation, all
leases of computer or computer services. Except as set forth in SCHEDULE 3.11,
(a) all such leases are to the knowledge of BSW's management, valid and binding
and are enforceable in accordance with their terms, and (b) there exists to the
knowledge of BSW's management, on the part of BSW no event of default or event,
occurrence, condition or act
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which with the giving of notice, the lapse of time or the happening of any
further event or condition would become a default under any such lease.
3.12. TRADEMARKS; TRADE NAMES. To the knowledge of BSW, set forth in
SCHEDULE 3.12 is an accurate and complete list of all trademarks (either
registered or common law), trade names and copyrights (and all applications and
licenses therefor) owned by BSW or in which it has any interest. BSW owns, or
has the right to use, all material trademarks, trade names and copyrights used
in or necessary for the ordinary conduct of its existing business as heretofore
conducted, and the consummation of the transactions contemplated hereby will not
alter or impair any such rights. Except as set forth in SCHEDULE 3.12, no claims
are pending by any person for the use of any trademarks, trade names or
copyrights or challenging or questioning the validity or effectiveness of any
license or agreement relating to the same, nor, to the knowledge of BSW, is
there any valid basis for any such claim, challenge or question, and use of such
trademarks, trade names and copyrights by BSW does not to the knowledge of BSW's
management infringe on the rights of any person.
3.13. LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 3.13, BSW is
not a party to any, and there are no pending or, to the knowledge of BSW's
management, threatened legal, administrative, arbitration or other proceedings,
claims, actions, suits or governmental investigations of any nature involving,
affecting or relating to BSW other than such matters arising in the ordinary
course of BSW's business which, individually and in the aggregate, could not
reasonably be expected to have a material adverse effect on the business or
financial condition of BSW which challenges the validity or propriety of the
transactions contemplated in this Agreement; and there is not known to BSW's
management any reasonable basis for any such proceedings, claim, action or
governmental investigation. BSW is not a party to any order, judgment or decree
which will, or could reasonably be expected to, materially adversely affect its
business, operations, properties, assets, financial condition or results of
operations or its ability to acquire any property or conduct its business in any
area in which it presently does business.
3.14. COMPLIANCE WITH APPLICABLE LAWS. BSW holds all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of its
business under and pursuant to all, and has complied in all materials respects
with and is not in default in any material respect under, any applicable law,
statute, order, rule, regulation, policy or guideline of any federal, state or
local governmental authority relating to it, and which may materially adversely
affect the business, operations, or financial condition of BSW, and has not
received notice of violation of, and to the knowledge of BSW's management does
not know of any violations of, any of the above. To the knowledge of BSW's
management, no suspension or cancellation of any material license, franchise,
permit or authorization is threatened.
3.15. ABSENCE OF QUESTIONABLE PAYMENTS. BSW has not, nor has any
Director, officer or employee (a) used any BSW corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, or (b) made any direct or indirect
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unlawful payments to government officials from any BSW corporate funds, or
established or maintained any unlawful or unrecorded accounts with funds
received from BSW.
3.16. TAXES. BSW properly and accurately completed and duly filed in
correct form all federal, state and local information and tax returns required
to be filed by it (all such returns being accurate and complete in all material
respects) and has duly paid or made provisions for the payment of all taxes and
other charges which have been incurred or are due or claimed to be due from it
by federal, state or local taxing authorities (including, without limitation,
those due in respect of its properties, income, business, capital stock,
deposits, franchises, licenses, sales and payrolls). The amounts set up as
reserves for taxes on the 1997 Balance Sheet are, to the knowledge of BSW's
management, sufficient in the aggregate for the payment of all unpaid federal,
state and local taxes (including any interest or penalties thereon and including
reserves for local real estate or other property taxes in an amount which is at
least as great as the amount of such taxes paid in the prior year), whether or
not disputed, accrued or applicable for the period ended December 31, 1997 or
for any year or period prior thereto, and for which BSW may be liable in its own
right or as transferee of the assets of, or successor to, any corporation,
person, association, partnership, joint venture or other entity. The federal and
state income tax returns of BSW have never been examined by the Internal Revenue
Service.
To the knowledge of BSW's management, there are no pending claims
asserted for taxes or assessments upon BSW nor has BSW given any waivers
extending the statutory period of limitation applicable to any federal, state or
local income tax return for any period. Amounts have been withheld by BSW from
its employees for all prior periods in compliance with the tax withholding
provisions of applicable federal, state and local laws; federal, state and local
returns, accurate and complete in all material respects, have been filed by BSW
for all periods for which returns were due with respect to income tax
withholding, Social Security, property, sales, retirement plan and unemployment
taxes; and the amounts shown on such returns to be due and payable have been
paid in full or adequate provision therefor has been included by BSW in its
financial statements as of December 31, 1997.
3.17. EMPLOYEE BENEFIT AND OTHER PLANS. Except as set forth in SCHEDULE
3.17, BSW neither maintains nor contributes to any "employee pension benefit
plan" or "employee welfare benefit plan," as such terms are defined in Section 3
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
With respect to any such plan listed on SCHEDULE 3.17, BSW is in compliance
with, and such plans comply with, ERISA. In this connection, (i) no "reportable
event" has occurred and is continuing with respect to any such plans; (ii) the
statements of assets and liabilities of such plans as of the close of the most
recent plan year for which financial statements are available, and the
statements of changes in fund balance and in financial position, or the
statements of changes in net assets available for each plan's benefits, for the
plan year then ended, fairly present the financial condition of such plan for
such plan year; (iii) except as disclosed in the annual reports of the plans, no
"prohibited transaction" (as defined in Section 406 of ERISA) resulting in
material liability of BSW has occurred with respect to the plans; (iv) no breach
of fiduciary responsibility under Part 4 of Title I of ERISA which could
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reasonably be expected to result in material liability of BSW has occurred with
respect to the plans; (v) all contributions required to be made to the plans
have been made; (vi) no waiver of the minimum funding standards under ERISA or
the Code is in effect or has been applied for with respect to the plans; (vii)
as of the latest valuation date, the present value of the assets of BSW's plans
listed on SCHEDULE 3.17 which are subject to Title IV of ERISA (other than
"Multiemployer Plans," as defined in Section 3 of ERISA), exceeds the present
value of all vested accrued benefits under such plans, based upon actuarial
assumptions currently utilized for such plans; (viii) BSW does not currently
maintain or contribute to a Multiemployer Plan; (ix) each of BSW's plans listed
on the attached SCHEDULE 3.17 which is intended to be a qualified plan within
the meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified to the extent required under current law, and
BSW is not aware of any fact or circumstance which would adversely affect the
qualified status of any such plan; and (x) no liability under Title IV of ERISA
has been incurred by BSW that has not been satisfied in full.
3.18. CONTRACTS AND COMMITMENTS; NO DEFAULTS.
(a) Set forth in or attached to SCHEDULE 3.18 are true and correct
copies of the following documents or summary descriptions of the following
information relating to BSW:
(1) subject to applicable law, any bank regulatory agency
reports or other communication relating to the examination of BSW which
have been made available to BSW;
(2) the name of each bank with which BSW has an account or
safekeeping or custodial arrangement or correspondent relationship and
the names of all persons who are authorized with respect thereto;
(3) all mortgages, indentures, promissory notes, deeds of
trust, loan or credit agreements or similar instruments under which BSW
is indebted in an amount greater than $100,000 for borrowed money or
the price of purchased property, accompanied by copies thereof
including all amendments or modifications of any thereof except for
banking transactions in the ordinary course of business, including
without limitation repurchase agreements, reverse repurchase
agreements, Federal Home Loan Bank stock and federal funds
transactions;
(4) any loans or other credit arrangements by BSW to, with or
for the benefit of any holder of 5% or more of BSW Common Stock, any of
BSW's Directors or executive officers, or, to the knowledge of BSW's
management, any members of the immediate families of any of such
persons or any corporation, firm or other entity in which any of such
Directors or officers has a financial interest; and
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(5) any pending application, including any documents or
materials relating thereto, which has been filed by BSW with any bank
regulatory authority in order to obtain the approval of such bank
regulatory authority for the establishment of a new branch bank or for
any other purpose.
(b) Except as set forth in SCHEDULE 3.18, BSW is not a party to or
bound by, nor have any bids or proposals been made by or to BSW with respect to,
any written or oral, express or, to the knowledge of BSW's management, implied:
(1) contract relating to the matters referred to in paragraph
(a) above;
(2) contract with or arrangement for Directors, officers,
employees, former employees, agents or consultants with respect to
salaries, bonuses, percentage compensation, pensions, deferred
compensation or retirement payments, or any profit sharing, stock
option, stock purchase or other employee benefit plan or arrangement;
(3) collective bargaining or union contract or agreement;
(4) contract, commitment or arrangement for the borrowing of
money or for obtaining a line of credit (except for federal funds
purchases and Federal Home Loan Bank advances);
(5) contract or agreement for the future purchase by it of any
materials, equipment, services, or supplies, which continues for a
period of more than 12 months (including periods covered by any option
to renew by the other party to such contract or arrangement);
(6) contract containing covenants purporting to limit its
freedom to compete;
(7) contract or commitment for the acquisition, construction
or refurbishment of any owned real property, branch or significant
equipment;
(8) contract or commitment upon which its total business is
substantially dependent;
(9) contract or commitment to which present or former
Directors or officers of BSW or any of their "affiliates" or
"associates" (as such terms are defined in the rules and regulations
promulgated under the Securities Act) are parties;
(10) agreement or arrangement for the sale of any of BSW
stock, tangible assets, or rights or for the grant of any preferential
rights to purchase any of BSW stock, tangible assets, or rights or
which requires the consent of any third party to the transfer and
assignment of any of BSW stock, significant tangible assets, or rights;
or
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(11) contract, agreement, arrangement or commitment not
elsewhere specifically disclosed pursuant to this Agreement, involving
the payment by BSW of more than $50,000.
(c) BSW has not committed a default with respect to any material
contract, agreement or commitment to which it is a party, and BSW has not
received notice of any such default, nor has the management of BSW knowledge of
any facts or circumstances which would reasonably indicate that BSW will be or
may be in such default under any such contract, agreement, arrangement,
commitment or other instrument subsequent to the date hereof.
3.19. BSW REPORTS. BSW has previously made available for inspection by,
the Company an accurate and complete copy of each final offering circular,
registration statement, prospectus, report and definitive proxy statement filed
by BSW with the FDIC, pursuant to the Exchange Act since January 1, 1995, and
each communication concerning the financial condition of BSW mailed by BSW to
its shareholders or its depositors since January 1, 1995, and each annual report
on Form F-2 for and since the year ended December 31, 1995, if any. The most
recently mailed offering circular, report, communication and proxy statement did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
3.20. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.20:
(a) BSW is in compliance, and has in the last three years been
in compliance, with all applicable laws, rules, regulations, standards
and requirements adopted or enforced by the United States Environmental
Protection Agency (the "EPA") and of state and local agencies with
jurisdiction over pollution or protection of the environment, except
where such noncompliance or violations could not reasonably be expected
to have a material adverse effect on BSW taken as a whole; and
(b) There is no suit, claim, action or proceeding pending
before any court or governmental entity (and, to the knowledge of BSW's
management, no basis exists for the assertion or commencement thereof)
in which BSW has been named as a defendant (x) for alleged
noncompliance with any environmental law, rule or regulation or (y)
relating to the release into the environment of any Hazardous Material
(as hereinafter defined) or oil at or on a site presently or formerly
owned, leased, or operated by BSW or to the knowledge of BSW's
management, on a site with respect to which BSW has made a commercial
real estate loan and has a mortgage or security interest in, except
where such noncompliance or release could not reasonably be expected to
have a material adverse effect on BSW taken as a whole. "Hazardous
Material" means any pollutant, contaminant, or hazardous substance
under the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq., or any similar state
law.
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3.21. BSW INFORMATION. No representation or warranty contained in this
Agreement, and no statement or information contained in any certificate, list or
other writing furnished to the Company by BSW pursuant to the provisions hereof,
including without limitation for inclusion in the S-4 (as defined in Section
6.01(a)) or any regulatory application, filing or report, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein not
misleading. No information which is necessary to make the representations and
warranties herein contained not misleading has been withheld from, or has not
been delivered to, the Company.
3.22. INSURANCE. Set forth in SCHEDULE 3.22 is an accurate and complete
list in all material respects of all policies of insurance, including the
amounts thereof, owned by BSW or in which BSW is named as the insured party. All
such policies are to the knowledge of BSW's management valid, outstanding and
enforceable.
3.23. POWERS OF ATTORNEY; GUARANTEES. BSW does not have any power of
attorney outstanding, nor any obligation or liability, either actual, accruing
or contingent, as guarantor, surety, co-signer, endorser, co-maker or indemnitor
in respect of the obligation of any person, corporation, partnership, joint
venture, association, organization or other entity, except for letters of credit
issued in the ordinary course of business or such obligations or liabilities as
are listed in SCHEDULE 3.23.
3.24. BROKER'S FEES. Neither BSW nor any of its officers, Directors or
employees has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with the transactions
contemplated herein, except as disclosed in SCHEDULE 3.24.
3.25. AGREEMENTS WITH REGULATORY AGENCIES. Except as set forth in
SCHEDULE 3.25, BSW is not 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 (each a "Regulatory Agreement"), with any regulatory agency or
other governmental entity that restricts in any material respect the conduct of
its business or that relates to its capital adequacy, its credit policies or its
management, nor has BSW been notified by any regulatory agency or other
governmental entity that it is considering issuing or requesting any Regulatory
Agreement.
3.26. MATERIAL INTERESTS OF CERTAIN PERSONS. Except as set forth in
SCHEDULE 3.26, to the knowledge of BSW's management, no officer or Director of
BSW, or any "associate" (as such term is defined in Rule 14a-1 under the
Exchange Act) of any such officer or Director, has any material interest in any
material contract or property (real or personal), tangible or intangible, used
in or pertaining to the business of BSW that would be required to be disclosed
in a proxy statement to shareholders under Form F-5 of the Federal Deposit
Insurance Corporation Act regulations.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and Bank hereby represent and warrant to BSW as follows:
4.01. CORPORATE ORGANIZATION.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
The Company has the corporate power and 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 and assets owned or
leased by it makes such licensing or qualification necessary. The
Company is duly registered as a bank holding company under the Bank
Holding Company Act (the "BHC Act") and under applicable provisions of
Connecticut law. The Certificate of Incorporation and Bylaws of the
Company, copies of which have previously been made available to BSW,
are true and complete copies of such documents as in effect as of the
date of this Agreement. Except for the Bank, The Equity Bank, which is
a Connecticut-chartered commercial bank duly organized, validly
existing and in good standing under the laws of the State of
Connecticut and which became a subsidiary of the Company on November
30, 1995, and Community Bank, which is a Connecticut-chartered
commercial bank duly organized, validly existing and in good standing
under the laws of the State of Connecticut and which became a
subsidiary of the Company on December 31, 1997, the Company does not
have any wholly-owned subsidiaries or capital stock or other equity
ownership interest in any corporation, partnership or other entity
which totals 5% or more of such entity's total equity.
(b) The Bank is a Connecticut-chartered commercial bank duly
organized, validly existing and in good standing under the laws of the
State of Connecticut. The Bank has the corporate power and authority to
own or lease all of its properties and assets and to carry on its
business as it is now being conducted. The Bank has all necessary
federal, state and local banking authorization to own or lease its
properties and assets and to carry on its business as it is being
conducted. The Bank is a Subsidiary of the Company. The accounts of
depositors of the Bank are insured by the BIF of the FDIC in accordance
with law and with the regulations of the FDIC and all premiums and
assessments required in connection therewith have been paid. The copies
of the Bank's Certificate of Incorporation and Bylaws, each certified
by its Secretary as of the date of this Agreement, which are being
delivered to BSW herewith, are complete and correct copies in effect as
of the date of this Agreement. Except as listed on the attached
SCHEDULE 4.01(b), the Bank does not have any wholly-owned subsidiaries
or capital stock or other equity ownership interest in any corporation,
partnership or other entity which totals 5 % or more of such entity's
total equity.
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4.02. CAPITALIZATION. The authorized capital stock of the Company
consists of 10,200,000 shares, consisting of 10,000,000 shares of Company Common
Stock and 200,000 shares of preferred stock, $.10 par value ("Preferred Stock").
As of the date of this Agreement, there are approximately 5,161,000 shares of
Company Common Stock issued and outstanding, no shares held in the Company's
treasury, and (except as described below or in SCHEDULE 4.02) no shares reserved
for issuance upon exercise of outstanding stock options. At the date of this
Agreement, no shares of Preferred Stock are outstanding and no shares of Company
Preferred Stock have heretofore been issued or are outstanding. All issued and
outstanding shares of Company Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable. Except for 475,750 shares of
Company Common Stock reserved for issuance upon exercise of outstanding stock
options that have been granted to certain of the Bank's and the Company's
executive officers, or directors, the Company 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 capital stock of the Company or any security representing the right to
purchase or otherwise receive any capital stock of the Company. None of the
shares of Company Common Stock has been issued in violation of the preemptive
rights of any person.
4.03. AUTHORITY; NO VIOLATION.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly approved by
the Board of Directors of the Company, a certified copy of the Board
Resolution reflecting such approval is attached hereto as SCHEDULE
4.03(a), and no other corporate proceedings on the part of the Company
are necessary to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the
Company and (assuming due authorization, execution and delivery by BSW)
constitutes a valid and binding obligation of the Company, enforceable
against the Company 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.
(b) The Bank has all necessary corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by the Bank and the consummation by the Bank of the
transactions contemplated hereby have been duly and validly approved by
the Board of Directors of the Bank and the Company as sole shareholder
of the Bank, a certified copy of the Board Resolutions and the consent
of the Company as sole shareholder of the Bank reflecting such approval
are attached hereto as SCHEDULE 4.03(b), and no other corporate
proceedings on the part of the Bank are necessary to consummate
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the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by the Bank and (assuming due
authorization, execution and delivery by BSW) constitutes a valid and
binding obligation of the Bank, enforceable against the Bank 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.
(c) Neither the execution and delivery of this Agreement by
the Company or the Bank, nor the consummation by the Company or the
Bank, as the case may be, of the transactions contemplated hereby, nor
compliance by the Company or the Bank with any of the terms or
provisions hereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of the Company or the Bank, as the case may be,
or (ii) assuming that the consents and approvals referred to in Section
4.04 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to
the Company or any of its Subsidiaries, or (y) violate, result in a
breach of any provision of, constitute a default under, or result in
the creation of any material lien, pledge, security interest, charge or
other encumbrance upon any of the respective properties or assets of
the Company or any of its Subsidiaries 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 the Company or any of its Subsidiaries is a party, or by which
they or any of their respective properties or assets may be bound or
affected.
4.04. CONSENTS AND APPROVALS. Except for (i) the filing of applications
and notices, as applicable, with the FDIC under the Bank Merger Act and with the
Board of Governors of the Federal Reserve System under the Bank Holding Company
Act and approval of such applications and notices, (ii) the filing of
applications with the Commissioner under Section 36a-125 and 36a-184 of the
C.G.S. and approvals of such applications, (iii) the filing with the SEC of the
Proxy Statement and the S-4 (as defined in Section 6.01(a)), (iv) the filing of
this Agreement by the Commissioner, with his approval thereon, with the
Secretary, (v) the approval of this Agreement by the shareholders of the
Company, and (vi) such filings, authorizations or approvals as may be set forth
in SCHEDULE 4.04, no consents or approvals of or filings or registrations with
any governmental entity or with any third party are necessary in connection with
the execution and delivery by the Company and the Bank of this Agreement and the
consummation by the Company and the Bank of the Merger and the other
transactions contemplated hereby, except where the failure to obtain such
consents or approvals, or to make such filings or registrations, would not
prevent or delay the Merger or otherwise prevent the Company from performing its
obligations under this Agreement or could reasonably be expected to have a
material adverse effect on the Company.
4.05. FINANCIAL STATEMENTS. The Company has previously made available
to BSW accurate and complete copies of (a) the consolidated balance sheets of
the Company and its
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Subsidiaries as of December 31 for the fiscal years 1994 through 1997 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the fiscal years 1994 through 1997, in each case accompanied by
the report of the Company's independent certified public accountants. The
December 31, 1997 consolidated balance sheet of the Company (including the
related notes, where applicable) fairly presents in all material respects the
consoli dated financial position of the Company and its Subsidiaries as of the
date thereof, and the other financial statements referred to in this Section
4.05 (including the related notes where applicable) fairly present in all
material respects the results of the consolidated operations, changes in
shareholders' equity and cash flows and consolidated financial position of the
Company and its Subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth and each of such statements (including the
related notes, where applicable) has been prepared in accordance with GAAP
consistently applied during the periods involved, except as indicated in the
notes thereto. The books and records of the Company and of its Subsidiaries have
been, and are being, maintained in all material respects in accordance with
applicable legal and accounting requirements and reflect only valid
transactions.
4.06. BROKER'S FEES. Neither the Company nor the Bank nor any Company
Subsidiary, nor any of their respective officers, Directors, or employees 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 the transactions
contemplated by this Agreement except as disclosed in SCHEDULE 4.06.
4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except for the transactions contemplated by this Agreement
or as a result of the consummation of its Plan and Agreement of Merger
with Olde Port Bank & Trust Company, which became effective February
10, 1998, the Company has not incurred any liability (contingent or
otherwise) that is material to Company or that, when combined with all
similar liabilities, would be material to Company, except as disclosed
in the notes to Company's December 31, 1997 balance sheet, and except
for commitments and contingencies incurred in the ordinary course of
business.
(b) Except as may be set forth in SCHEDULE 4.07, since
December 31, 1997:
(i) there has not been any material adverse change in the
Company, its loan portfolio, and its Subsidiaries, their
businesses or operations taken as a whole, and no fact or
condition exists which could reasonably be expected to cause
such a material adverse change;
(ii) there has not been any incurrence by the Company of
any liability that has had, or could reasonably be expected to
have, a material adverse effect on the Company and its
Subsidiaries taken as a whole;
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<PAGE>
(iii) there has not been any change in any of the
accounting methods or practices of the Company or any of its
Subsidiaries other than changes required by applicable law or
GAAP;
(iv) there has not been any agreement or understanding,
whether in writing or otherwise, of the Company of any of its
Subsidiaries to do any of the foregoing; and
(v) there has not been any loss, damage, destruction or
other casualty, materially and adversely affecting any of the
significant properties, assets or business of the Company of
any of its Subsidiaries.
(c) For purposes of this Section 4.07, no transaction, event
or condition or series or combination of transactions, events or
conditions shall be materially adverse with respect to the Company, if
the net adverse effect thereof on the capital of the Company is not in
excess of $1,500,000.
4.08. LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 4.08, neither
the Company nor any of its Subsidiaries is a party to any, and there are no
pending or, to the knowledge of the Company's management, threatened legal,
administrative, arbitration or other proceedings, claims, actions, suits or
governmental investigations of any nature involving, affecting or relating to
the Company or any of its Subsidiaries other than such matters arising in the
ordinary course of business which, individually and in the aggregate, are not
material, or challenging the validity or propriety of the transactions
contemplated in this Agreement; and there is not known to the Company or any of
its Subsidiaries any reasonable basis for any such proceeding, claim, action or
governmental investigation. Neither the Company nor any of its Subsidiaries is a
party to any order, judgment or decree which will, or could reasonably be
expected to, affect its business, operations, properties, assets, financial
condition, prospects or results of operations or its ability to acquire any
property or conduct business in any area in which it presently does business.
4.09. SEC REPORTS. The Company has previously made available to BSW a
true and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1995 by
the Company with the SEC pursuant to the Securities Act or the Exchange Act (the
"Company Reports") and (b) communication mailed by the Company to its
shareholders since January 1, 1995, and, as of their respective dates, no such
Company Report contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
4.10. COMPANY INFORMATION. No representation or warranty contained in
this Agreement, and no statement or information contained in any certificate,
list or other writing furnished to BSW pursuant to the provisions hereof,
including without limitation for inclusion in
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<PAGE>
the Proxy Statement and the S-4 or any regulatory application, filing or report,
contains or will contain any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements herein or
therein not misleading. No information material to the Merger and which is
necessary to make the representations and warranties herein contained not
misleading has been withheld from, or has not been delivered in writing to, BSW.
4.11. COMPLIANCE WITH APPLICABLE LAW. The Company and each of its
Subsidiaries holds, and have at all times held, all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with and are
not in default under any, applicable law, statute, order, rule, regulation,
policy or guideline of any governmental entity relating to the Company or any of
its Subsidiaries, except where the failure to hold such license, franchise,
permit or authorization or such noncompliance or default would not have a
material adverse effect on the Company, and neither the Company nor any of its
Subsidiaries has received notice of any material violation of, or knows of any
material violation of, any of the above.
4.12. ABSENCE OF QUESTIONABLE PAYMENTS. Neither the Company nor any of
its Subsidiaries has, nor has any Director, officer, agent, employee, consultant
or other person associated with, or acting on behalf of, the Company or any of
its Subsidiaries, (a) used any of the Company's or any of its Subsidiaries'
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, or (b) made any direct or
indirect unlawful payments to government officials from any corporate funds of
the Company or any of its Subsidiaries, or established or maintained any
unlawful or unrecorded accounts with funds received from the Company or any of
its Subsidiaries.
4.13. TAXES. The Company and its Subsidiaries properly and accurately
completed and duly filed in correct form all federal, state and local
information and tax returns required to be filed by it (all such returns being
accurate and complete in all material respects) and have duly paid or made
provisions for the payment of all taxes and other charges which have been
incurred or are due or claimed to be due from them by federal, state or local
taxing authorities (including, without limitation, those due in respect of its
properties, income, business, capital stock, deposits, franchises, licenses,
sales and payrolls). The amounts set up as reserves for taxes on the 1997
Balance Sheet are, to the best knowledge of the Company and its Subsidiaries,
sufficient in the aggregate for the payment of all unpaid federal, state and
local taxes (including any interest or penalties thereon and including reserves
for local real estate or other property taxes in an amount which is at least as
great as the amount of such taxes paid in any prior year), whether or not
disputed, accrued or applicable for the period ended December 31, 1997 or for
any year or period prior thereto, and for which the Company and its Subsidiaries
may be liable in its own right or as transferee of the assets of, or successor
to, any corporation, person, association, partnership, joint venture or other
entity. Except as set forth in Schedule 4.13, neither the federal nor state
income tax returns of the Company or any of its Subsidiaries have ever been
examined by the Internal Revenue Service.
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<PAGE>
To the best knowledge of the Company and its Subsidiaries, there are no
pending questions relating to, or claims asserted for, taxes or assessments upon
the Company or any of its Subsidiaries nor has the Company or any of its
Subsidiaries been requested to give any waivers extending the statutory period
of limitation applicable to any federal, state or local income tax return for
any period. Proper and accurate amounts have been withheld by the Company and
its Subsidiaries from its employees for all prior periods in compliance with the
tax withholding provisions of applicable federal, state and local laws; federal,
state and local returns, accurate and complete in all material respects, have
been filed by the Company and its Subsidiaries for all periods for which returns
were due with respect to income tax withholding, Social Security, property,
sales, retirement plan and unemployment taxes; and the amounts shown on such
returns to be due and payable have been paid in full or adequate provision
therefor has been included by the Company and its Subsidiaries in their
financial statements as of December 31, 1997.
4.14. EMPLOYEE BENEFIT AND OTHER PLANS. Except as set forth in SCHEDULE
4.14, neither the Company nor any of its Subsidiaries maintains nor contributes
to any "employee pension benefit plan" or "employee welfare benefit plan," as
such terms are defined in Section 3 of the ERISA. With respect to any such plan
listed on SCHEDULE 4.14, the Company and its Subsidiaries are in compliance
with, and such plans comply with, ERISA. In this connection, (i) no "reportable
event" has occurred and is continuing with respect to any such plan; (ii) the
statements of assets and liabilities of such plans as of the close of the most
recent plan year for which financial statements are available, and the
statements of changes in fund balance and in financial position, or the
statements of changes in net assets available for each plan's benefits, for the
plan year then ended, fairly present the financial condition of such plan for
such plan year; [(iii) except as disclosed in the annual reports of the plans,
no "prohibited transaction" (as defined in Section 406 of ERISA) resulting in
material liability of the Company or any of its Subsidiaries has occurred with
respect to the plans]; (iv) no breach of fiduciary responsibility under Part 4
of Title I of ERISA resulting in material liability of the Company or its
Subsidiaries has occurred with respect to the plans; (v) all contributions
required to be made to the plans have been made; (vi) no waiver of the minimum
funding standards under ERISA or the Code is in effect or has been applied for
with respect to the plans; (vii) as of the latest valuation date, the present
value of the assets of the Company's and its Subsidiaries' plans listed on
SCHEDULE 4.14 which are subject to Title IV of ERISA (other than "Multiemployer
Plans," as defined in Section 3 of ERISA), exceeds the present value of all
vested accrued benefits under such plans, based upon actuarial assumptions
currently utilized for such plans; (viii) neither the Company nor its
Subsidiaries currently maintains or contributes to a Multiemployer Plan; (ix)
each of the Company's and its Subsidiaries' plans listed on SCHEDULE 4.14 which
are intended to be qualified plans within the meaning of Section 401(a) of the
Code has been determined by the Internal Revenue Service to be so qualified to
the extent required under current law, and neither the Company nor any of its
Subsidiaries is aware of any fact or circumstance which would adversely affect
the qualified status of any such plan; and (x) no liability under Title IV of
ERISA has been incurred by either the Company or any of its Subsidiaries that
has not been satisfied in full.
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<PAGE>
4.15. NO DEFAULTS. Neither the Company nor any of its Subsidiaries has
committed a default with respect to any material contract, agreement or
commitment to which it is a party, and neither the Company nor any of its
Subsidiaries has received notice of any such default, nor has the Company or any
of its Subsidiaries knowledge of any facts or circumstances which would
reasonably indicate that the Company or any of its Subsidiaries will be or may
be in such default under any such contract, agreement, arrangement, commitment
or other instrument subsequent to the date hereof.
4.16. AGREEMENTS WITH REGULATORY AGENCIES. Neither the Company nor any
of its Subsidiaries 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 (each a "Company Regulatory Agreement") with, any regulatory
agency or other governmental entity that restricts in any material respect the
conduct of its business or that relates in any manner to its capital adequacy,
its credit policies or its management, nor has the Company or any of its
Subsidiaries been notified by any regulatory agency or other governmental entity
that it is considering issuing or requesting any Company Regulatory Agreement.
4.17. REGULATORY APPROVALS. The Company is not, as of the date hereof,
aware of any reason why the regulatory approvals required to be obtained by it
or any of its Subsidiaries to consummate the Merger would not be satisfied
within the time frame customary for transactions of the nature contemplated
hereby.
4.18. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 4.18:
(a) The Company and the Bank are in compliance, and have in
the last three years been in compliance, with all applicable laws,
rules, regulations, standards and requirements adopted or enforced by
the EPA and of state and local agencies with jurisdiction over
pollution or protection of the environment, except where such
noncompliance or violations could not reasonably be expected to have a
material adverse effect on the Company;
(b) There is no suit, claim, action or proceeding pending
before any court or governmental entity (and, to the best of the
Company's knowledge, no basis exists for the assertion or commencement
thereof) in which the Company or any of its Subsidiaries has been named
as a defendant (x) for alleged noncompliance with any environmental
law, rule or regulation or (y) relating to the release into the
environment of any Hazardous Material (as defined in Section 3.20(b))
or oil at or on a site presently or formerly owned, leased, or operated
by the Company or any of its Subsidiaries or, to the Company's
knowledge, on a site with respect to which the Company or any of its
Subsidiaries has made a commercial real estate loan and has a mortgage
or security interest in, except where such noncompliance or release
would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
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4.19. NOT AN "INTERESTED SHAREHOLDER." As of the time immediately prior
to the grant of the option pursuant to the Stock Option Agreement (as
hereinafter defined), neither the Company, nor its President, nor any of its
Subsidiaries, either jointly or severally, is an "interested shareholder" of BSW
as "interested shareholder" is defined in C.G.S. ss. 33-843(9). Section 33-844
does not prohibit consummation of the Merger.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01. COVENANTS OF BSW. During the period from the date of this
Agreement to the Effective Time, BSW will conduct its business only in the
ordinary course and consistent with prudent banking practice, will use all
reasonable efforts to preserve BSW's properties wherever located, and will
comply in all material respects with all laws applicable to BSW and to the
conduct of its business, and to the transactions contemplated by this Agreement.
BSW will use all reasonable efforts to preserve its business organization
intact, to keep available the present services of its employees, and to preserve
the goodwill of its customers and others with whom business relationships exist.
BSW will, from the date hereof until at least through the consummation of the
transactions contemplated by this Agreement, keep all insurance policies set
forth in SCHEDULE 3.22 in full force and effect or will replace such policies
with comparable policies. In addition, BSW agrees that from the date hereof to
the consummation of the Merger, and except as otherwise consented to or approved
by a duly authorized officer of the Company in writing, which consent shall not
be unreasonably withheld, or as permitted or required by this Agreement, BSW
will not:
(a) enter into or amend any contract of the nature required to
be set forth in SCHEDULE 3.18;
(b) change any provision of its Certificate of Incorporation
or Bylaws or similar governing documents;
(c) change the number of issued shares of its capital stock
other than upon exercise of currently outstanding options, or issue or
grant any option, warrant, call, commitment, subscription, right to
purchase or agreement of any character relating to its authorized or
issued capital stock, or any securities convertible into shares of such
stock, or split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of
its capital stock or redeem or otherwise acquire any shares of its
capital stock, provided, however, from the date hereof to the Effective
Time, BSW may declare, set aside or pay cash dividends per share of BSW
Common Stock at the rate currently paid by BSW, which rate may be
increased by BSW to reflect the same percentage rate increase as any
increase in the dividend rate paid by the Company from its current
dividend rate, provided that in no event may any dividend declared, set
aside or paid by BSW exceed 25% of BSW's net earnings for the then most
recently completed
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quarter. Without limiting the foregoing, nothing herein shall prevent
BSW from paying quarterly dividends prior to the Effective Time such
that its shareholders shall receive a total of four quarterly dividends
in 1998 from BSW and the Company;
(d) make unsecured loans in excess of $75,000 for any
individual loan or in excess of $75,000 in the aggregate to any
borrower or group of borrowers, other than renewals in the ordinary
course of business and not involving any change in terms;
(e) (i) make any loan or loans described as an "Undesirable"
or "Prohibited" Loan; (ii) make any secured loan or loans, other than
residential mortgage loans with a loan to value of in excess of 80%
except with the prior notice to the Company, in an aggregate amount to
any one borrower (including members of his/her immediate family or
affiliates of such borrower with an exposure to BSW in excess of
$300,000) in excess of $300,000, except for loans sold to investors and
renewals in the ordinary course of business and not involving any
change in terms; (iii) make any junior mortgage loan in excess of
$100,000 behind first mortgages if the resulting loan to value ratio of
the combined mortgages would exceed 80% or if prior mortgage loans are
in excess of $250,000; (iv) make any commercial loan or loans in excess
of $300,000 unless fully secured by readily marketable collateral or
real estate with a maximum loan to value ratio of 80%; or (v) honor or
extend any overdraft in excess of $75,000 unless fully secured by
readily marketable collateral;
(f) make any new loans to any Director or employee of BSW, or
any member or affiliate of their respective families other than in the
ordinary course of business;
(g) other than with respect to residential mortgage loans,
renew or otherwise reinstate any loan that has been in default for a
period of 90 days or more which, when added to any loans outstanding to
the families or affiliates of any maker or surety of the defaulted
loans (whether or not such other loans are in default) has a balance
outstanding in excess of $50,000, except that BSW may accept payments
for the purpose of bringing loans current, so long as there is no
amendment or restructuring of the loans;
(h) offer rates on deposits that are set in deviation from
past practice and procedure employed by BSW or are materially higher
than those of its competitors in the local market, or offer loan
pricing which is materially different relative to its competitors in
the local market;
(i) hire or retain any new employees, consultants or
contractors, or increase the compensation of current employees,
consultants or contractors, except that BSW may hire replacements for
current employees who are not officers or managers if such employees
cease to be employees of BSW and that BSW may hire temporary employees
or consultants as reasonably necessary in the ordinary course of
business;
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(j) make any capital expenditures in excess of $25,000;
(k) enter into any real property lease or any lease of
material personal property or extend or modify any existing lease of
real or material personal property;
(l) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a
substantial portion of 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 in with foreclosures, settlements in lieu of
foreclosure or troubled loan or debt restructurings in the ordinary
course of business, which would be material to BSW;
(m) take any action that is intended or would result in any of
its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect, 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 except, in every case, as
may be required by applicable law;
(n) change its methods of accounting in effect at December 31,
1997, except as required by changes in GAAP or regulatory accounting
principles as concurred to by BSW's independent auditors;
(o) take or cause to be taken any action which would
disqualify the Merger as a tax-free Merger under Section 368 of the
Code;
(p) take or cause to be taken any action which would, or could
reasonably be expected to, significantly delay or otherwise adversely
affect the regulatory approvals required to consummate the Merger;
(q) other than activities in the ordinary course of business
consistent with prior practice, sell, lease, encumber, assign or
otherwise dispose of, or agree to sell, lease, encumber, assign or
otherwise dispose of, any of its material assets, properties or other
rights or agreements;
(r) other than in the ordinary course of business consistent
with past practice, 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;
(s) file any application to open, relocate or terminate the
operations of any banking office;
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(t) make any equity investment or any commitment to make such
an investment in real estate or in any real estate development project,
other than in connection with foreclosures, settlements in lieu of
foreclosure or troubled loan or debt restructurings in the ordinary
course of business;
(u) purchase or sell loans in bulk;
(v) foreclose upon or take deed or title to any commercial
real estate without first conducting a Phase I environmental assessment
of the property or foreclose upon such commercial real estate if such
environmental assessment indicates the presence of Hazardous Material;
(w) terminate the employment of, or decrease in any material
respect, the duties, obligations, responsibilities, or position of any
senior officer of BSW; or
(x) agree to do any of the foregoing.
5.02. COVENANTS OF THE COMPANY. During the period from the date of this
Agreement to the Effective Time, except as expressly contemplated or permitted
by this Agreement or with the prior written consent of BSW, which shall not be
unreasonably withheld, the Company and its Subsidiaries shall carry on their
respective businesses in the ordinary course consistent with past practice and
use all reasonable efforts to preserve intact their present business
organizations and relationships. Without limiting the generality of the
foregoing and as otherwise contemplated by this Agreement or consented to in
writing by BSW, which shall not be unreasonably withheld, the Company shall not
and shall not permit any of its Subsidiaries to:
(a) take any action that is intended or would result in any of
its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect, 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, except, in every case, as
may be required by applicable law;
(b) change its methods of accounting in effect at December 31,
1997, except in accordance with changes in GAAP or regulatory
accounting principles as concurred in by the Company's independent
certified public accountants;
(c) take or cause to be taken any action which would
disqualify the Merger as a tax-free Merger under Section 368 of the
Code;
(d) take or cause to be taken any action which would, or could
reasonably be expected to, significantly delay or otherwise adversely
affect the regulatory approvals required to consummate the Merger; or
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(e) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. REGULATORY MATTERS.
(a) Following the review by the Company and BSW of all
information and material provided to each in accordance with this
Agreement, BSW, with the Company's best efforts cooperation, shall
promptly prepare and file with the FDIC a proxy statement for a meeting
of its shareholders called for the purpose of approving this Agreement
(the "Proxy Statement") and the Company, with BSW's best efforts
cooperation, shall promptly prepare and file with the SEC a
registration statement on Form S-4 with respect to the shares of
Company Common Stock to be issued in the Merger (the "S-4"), in which
the Proxy Statement will be included as a prospectus. The Company shall
use its best efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing, and BSW
and the Company shall thereafter promptly mail the Proxy Statement to
their respective shareholders.
(b) The parties hereto shall cooperate with each other and use
their best efforts to prepare and file promptly 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, approval of the Merger by the FDIC, approval of the Merger
by the Commissioner, and approval by the Board of Governors of the
Federal Reserve System if it elects to exercise jurisdiction. The
parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and governmental entities necessary
or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein.
(c) The Company and BSW shall, upon request, furnish each
other with all information concerning themselves, their respective
Subsidiaries, directors, officers and shareholders and such other
matters as may be reasonably necessary or advisable in connection with
the Proxy Statement, the S-4 or any other statement, filing, notice or
application made by or on behalf of the Company, BSW or any of their
respective Subsidiaries to any governmental entity in connection with
the Merger and the other transactions contemplated hereby.
(d) The Company and BSW shall promptly furnish each other with
copies of written communications received by the Company or BSW, as the
case may be, or any of
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their respective Subsidiaries from, or delivered by any of the
foregoing to, any governmental entity in respect of the transactions
contemplated hereby.
6.02. ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information and so as not to unreasonably
interfere with the ordinary proper conduct of its business, BSW shall
afford to the officers, employees, accountants, counsel and other
representatives of the Company access, during normal business hours
during the period prior to the Effective Time, to all its properties,
books, contracts, commitments and records relating to the ownership,
operation, obligations and liabilities of BSW, including, but not
limited to, its books of account (including its general ledger), tax
records, minute books of Directors' and shareholders' meetings,
Certificate of Incorporation, Bylaws, contracts and agreements, public
filings with any regulatory authority, examination reports of any
regulatory authority, including preliminary and partial reports
(subject to applicable law), plans affecting its employees, and any
other business activities or prospects in which the Company may have a
reasonable interest. During such period, BSW shall make available to
the Company (i) a copy of each report, schedule, 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 the Company may reasonably request (other than information which BSW
is not permitted to disclose under applicable law). As to information
which BSW is not permitted by law to disclose, BSW will, upon request
from the Company, use all reasonable efforts to obtain any consent,
approval or waiver that may be required for such disclosure.
(b) Upon reasonable notice and subject to applicable laws
relating to the exchange of information and so as not to unreasonably
interfere with the ordinary proper conduct of its business, the Company
shall and shall cause its Subsidiaries to, afford to the officers,
employees, accountants, counsel and other representatives of BSW
access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments
and records relating to the ownership, operation, obligations and
liabilities of the Company and its Subsidiaries, including, but not
limited to, its books of account (including its general ledger), tax
records, minute books of Directors' and shareholders' meetings,
Certificate of Incorporation, Bylaws, contracts and agreements, public
filings with any regulatory authority, examination reports of any
regulatory authority, including preliminary and partial reports
(subject to applicable law), plans affecting its employees, and any
other business activities or prospects in which BSW may have a
reasonable interest. During such period, the Company and its
Subsidiaries shall make available to BSW (i) a copy of each report,
schedule, 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 BSW may reasonably
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request (other than information which the Company or its Subsidiaries
are not permitted to disclose under applicable law). As to information
which the Company or its Subsidiaries are not permitted by law to
disclose, the Company or its Subsidiaries will, upon request from the
BSW, use all reasonable efforts to obtain any consent, approval or
waiver that may be required for such disclosure.
(c) Neither the Company nor any of its Subsidiaries, nor BSW
shall be required to provide access to or to disclose information where
such access or disclosure would violate or prejudice the rights of the
customers of such party, jeopardize the attorney-client privilege of
the institution in possession or control of such information or
contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the date of
this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply.
(d) All information furnished pursuant to this Agreement shall
be held in confidence to the extent required by, and in accordance
with, the provisions of the confidentiality agreement among the
Company, the Bank and BSW in connection with the transactions
contemplated hereby (the "Confidentiality Agreement").
6.03. SHAREHOLDER APPROVALS. The Company, if required, and BSW shall
each take all steps necessary to duly call, give notice of, convene and hold a
meeting of its shareholders to be held as soon as is reasonably practicable
after the date on which the S-4 becomes effective for the purpose of voting upon
the approval of this Agreement. BSW will, through its Board of Directors,
recommend to its shareholders approval of this Agreement and the transactions
contemplated hereby, subject to the fiduciary duties of its Board of Directors,
and such other matters as may be submitted to its shareholders in connection
with this Agreement.
6.04. LEGAL CONDITIONS TO MERGER. Each of the Company and BSW shall,
and the Company shall cause each of its Subsidiaries to, use its best efforts
(a) to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
or its Subsidiaries with respect to the 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 BSW or the Company or any of the Company's Subsidiaries in
connection with the Merger and the other transactions contemplated by this
Agreement.
6.05. AFFILIATES. BSW shall use its best efforts to cause each
Director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act) of BSW to deliver to the Company, prior to
the signing of this Agreement, a signed written agreement, in the form of
SCHEDULE 6.05 hereto, providing that such person will not sell, pledge,
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transfer or otherwise dispose of any shares of Company Common Stock to be
received by such "affiliate" in the Merger except in compliance with the
applicable provisions of the Securities Act and the rules and regulations
thereunder, including, without limitation, Rule 145. The Company agrees to file
the financial results of the combined operations of the Company, the Bank and
BSW on a Form 8-K or other appropriate SEC form for the first full monthly
period commencing after the Effective Time and to make such filing within thirty
(30) days of the end of such first full month period commencing after the
Effective Time.
6.06. STOCK LISTING. The Company shall cause the shares of Company
Common Stock to be issued in the Merger or which may be issued upon exercise of
options which become outstanding pursuant to Section 1.06 hereof to be approved
for inclusion for quotation on the NASDAQ National Market, subject to official
notice of issuance, prior to the Effective Time.
6.07. EMPLOYEE MATTERS. The Company shall honor all employment
agreements, change-in-control agreements and supplemental executive retirement
plan provisions set forth in SCHEDULE 3.18 hereto. The Company shall offer
employment to all BSW branch managers, platform and teller line employees who
are in good standing with BSW as of the Closing (as defined in Section 8.01
hereof). From and after the Effective Time and subject to applicable law, the
Company shall provide the employees of BSW who are offered employment with the
Company or any of its Subsidiaries, and who accept such employment, with
benefits comparable to those provided to its own employees in similar positions
and with comparable terms of service with the Company or its Subsidiaries, as
reasonably determined by the Company and its Subsidiaries. For purposes of any
employee benefit plan of the Company, service by an employee to BSW shall be
deemed service to the Company. For employees of BSW who are not offered
employment with the Company or any of its Subsidiaries, the Company shall
provide two weeks of severance pay per full or partial year of service, subject
to a minimum of ninety (90) days of severance pay for officers and sixty (60)
days of severance pay for non-officers.
6.08. FINANCIAL STATEMENTS.
(a) As soon as reasonably available, the Company will deliver
to BSW and BSW will deliver to the Company their respective Annual
Reports on Form 10-K or F-2, as appropriate, as filed with the SEC or
the FDIC, as appropriate, under the Exchange Act.
(b) As soon as reasonably available, the Company will deliver
to BSW and BSW will deliver to the Company their respective Quarterly
Reports on Form 10-Q or F-4, as appropriate, as filed with the SEC or
the FDIC, as appropriate, under the Exchange Act.
6.09. ADDITIONAL AGREEMENTS. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purpose of
this Agreement, or to vest the Resulting Corporation with full title to all
properties, assets, rights, approvals, immunities and
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franchises of any of the parties to the Merger, the proper officers and
Directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by, and at
the sole expense of, the Company.
6.10. DISCLOSURE SUPPLEMENTS. From time to time prior to the Effective
Time, each party will promptly supplement or amend the Schedules 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 Schedules or which is necessary to
correct any information in such Schedules which has been rendered inaccurate
thereby. The party to which a supplement or amendment to a Schedule is delivered
in accordance with this Section 6.10 that objects to the inclusion of the
information contained in such supplement or amendment, together with any prior
supplements or amendments to such Schedule, as a material breach of this
Agreement must, within fourteen (14) calendar days of receipt of such supplement
or amendment, provide written notice of a material breach to the other party as
provided for in Section 9.01(e). If the party to which a supplement or amendment
to a Schedule is delivered in accordance with this Section 6.10 does not provide
such written notice to the other party within such 14-day period, such Schedule
shall be deemed to include the information contained in such supplement or
amendment, and the Schedule as so supplemented and amended shall be used for
purposes of determining satisfaction by BSW or the Company, as the case may be,
of the conditions set forth in Section 7.02(a) or 7.03(a) hereof, as the case
may be, or the compliance by BSW or the Company, as the case may be, with the
respective covenants set forth in Sections 5.01 and 5.02 hereof.
6.11. CURRENT INFORMATION.
(a) During the period from the date of this Agreement to the
Effective Time, BSW will cause one or more of its designated
representatives to be available, upon the reasonable request of the
Company, to confer on a regular and frequent basis with representatives
of the Company and to report the general status of the ongoing
operations of BSW. BSW will promptly notify the Company of any
significant change in the normal course of business of BSW or in the
operation of its properties, and of any governmental complaints,
investigations or hearings (or communications indicating that the same
may be contemplated) or the institution or the overt threat of any
significant litigation involving BSW and will keep the Company
reasonably informed of such events and permit the Company access to all
significant materials prepared in connection therewith. With respect to
any regulatory examination of BSW, BSW will keep the Com pany advised
of all reports, preliminary or otherwise, received from examiners,
subject to applicable disclosure laws, and will use all reasonable
efforts to obtain any consent, approval or waiver that may be required
for such disclosure.
(b) The Company will promptly notify BSW of any material
change in the normal course of business of the Company or any of its
Subsidiaries and of any governmental complaints, investigations or
hearings, or the institution or overt threat of
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significant litigation involving the Company or any of its
Subsidiaries, and will keep BSW reasonably informed of such events and
permit BSW access to all significant materials prepared in connection
therewith. With respect to any regulatory examination of the Company or
any of its Subsidiaries, the Company will keep BSW advised of all
reports, preliminary or otherwise, received from examiners, subject to
applicable disclosure laws, and will use all reasonable efforts to
obtain any consent, approval, or waiver that may be required for such
disclosure.
6.12. ENVIRONMENTAL ASSESSMENT. BSW agrees, to the extent it is legally
permitted, to allow the Company, its agents and representatives, during the
sixty days subsequent to execution of this Agreement at the Company's expense,
to conduct an environmental site assessment of any real property owned
(including assets held as other real estate owned) or leased by BSW, and agrees
to cooperate in providing information and other assistance to the Company, its
agents and representatives in connection therewith, including, without
limitation, providing access and entry onto such real property for the purpose
of making appropriate environmental and related inspections; provided, however
that the Company agrees to enter into a confidentiality agreement with the
party(ies) conducting any environmental testing that said party shall not
disclose its findings to any third party unless required by state or federal
law. The Company agrees that it shall also be bound by this restriction. An
environmental site assessment may include sampling and intrusive studies if the
Company's representative deems them advisable in light of the current standards.
BSW shall be entitled, as a condition to its obligations hereunder, to notice
within 60 days of signing this Agreement of any material environmental problems
identified by the Company and to be indemnified to its reasonable satisfaction
from and against any loss or damage incurred from the conducting of any such
site assessment (but not the findings thereof). The Company shall contract for
any site assessment desired by it not later than 30 days after the later of the
date hereof or, with respect to property acquired alter the date hereof, the
date BSW notified the Company of such acquisition.
6.13. PUBLIC ANNOUNCEMENTS. Except to the extent required otherwise by
applicable state or federal securities laws or any applicable Connecticut or
federal banking laws, with respect to which BSW and the Company may act upon the
advice of their respective legal counsel, neither BSW nor the Company or any of
its Subsidiaries shall issue any press release or otherwise make any public
statement with respect to this Agreement or any of the transactions contemplated
hereby prior to the Effective Time without obtaining the consent to or approval
thereof from the other party, which consent or approval shall not be
unreasonably withheld.
ARTICLE VII
CONDITIONS PRECEDENT
7.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
none of which may be waived:
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(a) This Agreement and the transaction contemplated hereby
shall have been approved and adopted by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of BSW Common
Stock and, if legally required, by the requisite shareholder vote of
Company Common Stock.
(b) This Agreement and the transactions contemplated hereby
shall have been approved by the Commissioner, by the FDIC and by the
Board of Governors of the Federal Reserve System unless it waives
jurisdiction, and by any other regulatory authority having appropriate
jurisdiction, none of such approvals shall contain any term or
condition which would (i) have a material adverse effect on the
business, operations, properties, assets or financial condition of the
Resulting Corporation, or (ii) otherwise materially impair the value of
the Resulting Corporation, and all appropriate waiting periods shall
have expired.
(c) Neither the Company nor BSW shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction
which prevents the consummation of the Merger.
(d) The shares of Company Common Stock which shall be issued
to the shareholders of BSW upon consummation of the Merger shall have
been authorized for inclusion for quotation on the NASDAQ National
Market, subject to official notice of issuance.
(e) The S-4 shall have become effective under the Securities
Act and no stop order suspending the effectiveness of the S-4 shall
have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
7.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY UNDER THIS
AGREEMENT. The obligations of the Company under this Agreement shall be further
subject to the satisfaction, at or prior to the Effective Time, of the following
conditions, any one or more of which may be waived by the Company:
(a) Each of the obligations of BSW required to be performed by
it at or prior to the Effective Time pursuant to the terms of this
Agreement shall have been duly performed and complied with in all
material respects and the representations and warranties of BSW
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time
as though made at and as of the Effective Time (except as otherwise
contemplated by this Agreement), and the Company shall have received a
certificate to that effect signed by the President of BSW.
(b) All action required to be taken by, or on the part of, BSW
to authorize the execution, delivery and performance of this Agreement
by BSW and the consummation
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of the transactions contemplated hereby shall have been duly and
validly taken by the Board of Directors of BSW and BSW shareholders and
the Company shall have received certified copies of the resolutions
evidencing such authorization.
(c) The Company shall have received certificates as of a day
as close as practicable to the date of the Effective Time from
appropriate authorities as to the good standing of, and of the payment
of franchise taxes, if any, by BSW.
(d) Any and all permits and approvals of governmental bodies
and material consents (including all consents of landlords) and
authorizations of other third parties shall have been obtained by BSW
and the Company which are required with respect to and are necessary in
connection with (i) the consummation of the Merger and the other
transactions contemplated hereby, (ii) the ownership by the Resulting
Corporation of all of the properties and assets of BSW, or (iii) the
conduct by the Resulting Corporation of the business of BSW as
conducted by BSW at the Effective Time.
(e) The Company shall have received an opinion, dated the date
of Closing, from counsel to BSW, in form and substance reasonably
satisfactory to the Company.
(f) BSW shall have caused to be delivered to the Company a
letter from BSW's independent public accountants with respect to BSW,
and dated the date of the Closing, and addressed to the Company and
BSW, in form and substance reasonably satisfactory to the Company to
the effect that:
(1) they are independent public accountants with respect to
BSW;
(2) in their opinion the audited financial statements of
BSW examined by them comply as to form in all material
respects with the applicable published rules and regulations
of the FDIC with respect to proxy statements and of the SEC
with respect to registration statements; and
(3) at the request of BSW they have carried out procedures
to a specified date not more than 10 business days prior to
the date of each such letter as follows: (i) read the
unaudited financial statements of BSW for the period from the
date of the most recent audited financial statements ("Audit
Date") through the date of the most recent financial
statements available in the ordinary course of business; (ii)
read the minutes of the meetings of the Board of Directors of
BSW from the Audit Date to the date not more than 10 days
prior to the date of each such letter, and (iii) consulted
with the President of BSW as to whether there has been a
decrease in total assets of $5,000,000 or more, an increase in
nonperforming loans of more than $500,000, an increase in
foreclosed real estate of more than $500,000, a decrease in
total deposits of more than $5,000,000, and a decrease in
total shareholders' equity, each as compared to the audited
financial statements of
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BSW as of the Audit Date and, based on such procedures and
except as disclosed in such letter, nothing has come to their
attention which would cause them to believe that said
financial statements and the financial statements referred to
in (i) above and the most recent unaudited financial
statements are not presented in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements of BSW at the Audit Date.
(g) Neither the Company nor BSW shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction
which would impose material limitations on the ability of the Resulting
Corporation to exercise full rights of ownership of the assets or
business of BSW and no action, suit, proceeding or investigation shall
be pending or threatened which, in the opinion of counsel to the
Company, is reasonably likely to result in any such order, decree or
injunction.
(h) Except for any agreement referred to in the Schedules to
this Agreement, any agreement to which BSW is a party on the date
hereof or hereafter which takes effect upon, or which provides a
payment or penalty conditioned upon or related to, a change of control
of BSW, shall have been duly terminated without material cost or
expense to BSW, the Resulting Corporation or the Company.
(i) The Company shall have received the results of any
environmental site assessment contracted for in accordance with Section
6.12 hereof, and based upon such environmental site assessment, not
more than $500,000 shall be needed to be expended to correct any
deficiency cited in such assessment and, in the case of property used
for BSW bank operations, it shall not be necessary to cease using the
cited location for a period in excess of 30 days in order to complete
such corrections, provided, that, as to any deficiency that can be
corrected reasonably promptly and before the Effective Time, BSW shall
have the option of correcting such deficiency.
(j) The real property leases to which BSW is a party shall
have remained in full force and effect as of the Effective Time and
shall not have been terminated by reason of the consummation of the
Merger.
(k) The Company shall have received an update of the opinion
received by it prior to the execution of this Agreement upon reasonable
request by the Company for inclusion in the Proxy Statement in form and
substance reasonably satisfactory to the Company, from HAS Associates,
Inc. or such other investment banker as may be selected by the Company,
that the terms of the Merger are fair to the Company from a financial
point of view.
(l) Rulings from the Internal Revenue Service, in form and
substance satisfactory to counsel for the Company and the Bank, or an
opinion of counsel for the
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Company and the Bank, shall have been received, rendered on the basis
of facts, representations, and assumptions set forth in such opinions
or in writing elsewhere and referred to therein, substantially to the
effect that for federal income tax purposes (i) the Merger constitutes
a merger within the meaning of Section 368(a) of the Code; (ii) no gain
or loss will be recognized by the Company or the Bank upon the Merger;
(iii) no gain or loss will be recognized by the shareholders of the
Company upon consummation of the Merger; and (iv) such other matters as
the Company or the Bank deems appropriate and necessary. In rendering
any such opinion, such counsel may require and, to the extent they deem
necessary or appropriate, may rely upon, opinions of other counsel and
upon representations made in certificates of officers of BSW, the
Company, affiliates of the foregoing, and others.
BSW will furnish the Company with such certificates of its officers or
others and such other documents to evidence fulfillment of the conditions set
forth in this Section 7.02 as the Company may reasonably request.
7.03. CONDITIONS TO THE OBLIGATIONS OF BSW UNDER THIS AGREEMENT. The
obligations of BSW under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any one or more of which may be waived by BSW:
(a) Each of the obligations of the Company and the Bank
required to be performed by them at or prior to the Effective Time
shall have been duly performed and complied with and the
representations and warranties of the Company contained in this
Agreement shall be true and correct in all respects as of the date of
this Agreement and as of the Effective Time as though made at and as of
the Effective Time (except as otherwise contemplated by this
Agreement), and BSW shall have received a certificate to that effect
signed by the President and Chief Financial Officer of the Company.
(b) All action required to be taken by, or on the part of, the
Company and the Bank to authorize the execution, delivery and
performance of this Agreement by the Company and the Bank and the
consummation of the transactions contemplated hereby shall have been
duly and validly taken by the Board of Directors of the Company and the
Bank, and by the Company as sole shareholder of the Bank, and BSW shall
have received certified copies of the resolutions evidencing such
authorization.
(c) The conditions in Section 7.02(d) shall have been
satisfied.
(d) BSW shall have received from Bank Analysis Center, Inc.,
or such other investment banker as may be selected by BSW, an update of
the opinion received by it prior to execution of this Agreement for
inclusion in the Proxy Statement, in form and substance reasonably
satisfactory to BSW, that the terms of the Merger are fair to BSW and
its shareholders from a financial point of view.
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(e) BSW shall have received an opinion, dated the date of
Closing, from counsel to the Company, in form and substance reasonably
satisfactory to BSW.
(f) Rulings from the Internal Revenue Service, in form and
substance satisfactory to counsel for BSW, or an opinion of counsel for
BSW or the Company, shall have been received, rendered on the basis of
facts, representations, and assumptions set forth in such opinions or
in writing elsewhere and referred to therein, substantially to the
effect that for federal income tax purposes (i) the Merger constitutes
a merger within the meaning of Section 368(a) of the Code, and (ii)
accordingly, no gain or loss will be recognized by shareholders of BSW
with respect to Company Common Stock received solely in exchange for
BSW Common Stock pursuant to this Agreement (noting, however, that
non-taxability does not extend to cash received in lieu of a fractional
share interest in Company Common Stock, or by dissenters, if any). In
rendering any such opinion, such counsel may require and, to the extent
they deem necessary or appropriate, may rely upon, opinions of other
counsel and upon representations made in certificates of officers of
BSW, the Company, affiliates of the foregoing, and others.
The Company will furnish BSW with such certificates of its officers or
others and such other documents to evidence fulfillment of the conditions set
forth in this Section 7.03 as BSW may reasonably request.
ARTICLE VIII
CLOSING
8.01. TIME AND PLACE. Subject to the satisfaction or waiver of the
conditions of Article VII hereof, the closing (the "Closing") of the
transactions contemplated hereby shall take place at the offices of Day, Berry &
Howard, CityPlace I, Hartford, Connecticut at 10:00 A.M., on the third business
day after the date on which all of the conditions contained in Article VII
hereof, to the extent not waived, are satisfied, unless extended pursuant to the
procedure described in Article 9.01(k) below, or at such other place, at such
other time, or on such other date as the Company and BSW may mutually agree upon
for the Closing to take place.
8.02. DELIVERIES AT THE CLOSING. At the Closing, there shall be
delivered to the Company and BSW the opinions, certificates, and other documents
and instruments required to be delivered under Articles VI and VII hereof.
ARTICLE IX
TERMINATION AND AMENDMENT
9.01. TERMINATION. Notwithstanding any other provision of this
Agreement, 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 BSW and the Company:
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(a) by mutual consent of the Company and BSW 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 the Company or BSW upon written notice to the
other party at least 90 days after the date on which any request or
application for a regulatory approval required to consummate the Merger
shall have been denied or withdrawn at the request or recommendation of
the governmental entity which must grant such requisite regulatory
approval, unless within the 90-day period following such denial or
withdrawal a petition for rehearing or an amended application has been
filed with the applicable governmental entity; provided, however, that
no party shall have the right to terminate this Agreement pursuant to
this Section 9.01(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 the Company or BSW if the Merger shall not have
been consum mated on or before March 31, 1999, 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 in any
material respect the covenants and agreements of such party set forth
herein;
(d) by either the Company or BSW (provided that the
terminating party is not in material breach of any of its obligations
under this Agreement) if any approval of the shareholders of either
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 the Company or BSW (provided that the
terminating party is not in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall
have been a material breach of any of the representations or warranties
set forth in this Agreement on the part of the other party, which
breach is not cured within 45 days following written notice to the
party committing such breach, or which breach, by its nature, cannot be
cured prior to the Closing;
(f) by the Company or BSW, in the event of the institution by
any governmental agency of any litigation or proceeding to restrain or
prohibit the consummation of the Merger;
(g) by the Company if at the time of such termination there
shall have been a reduction in BSW's capital of 5% or more below the
levels disclosed to the Company in the December 31, 1997 financial
statements of BSW referred to in Section 3.05 unless such change shall
have resulted from conditions affecting the banking industry generally;
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(h) by BSW if at the time of such termination there shall have
been a material adverse change in the Company's financial condition
unless such change shall have resulted from conditions affecting the
banking industry generally. For purposes of this Section 9.01(h), (1)
no bulk sale of non-performing assets by the Company or the Bank
approved by the Board of Directors of the Company or the Bank, and made
in all material respects in accordance with such approval after the
date of this Agreement, shall be counted except to the extent the net
adverse effect thereof (after considering any tax benefits) on the
capital of the Company exceeds $1,500,000, and (2) no other
transaction, event or condition, or series or combination of
transactions, events or conditions shall be considered as resulting in
a material adverse change with respect to the Company if the net
adverse effect thereof, together with any net adverse effect counted
under (1), on the capital of the Company is not in excess of
$2,500,000;
(i) by the Company if the results, preliminary or other, of
any regulatory examination of BSW indicates (1) any action or actions
the net effect of which is likely to result in a reduction in BSW's
capital of 5% or more below levels disclosed to the Company in the
December 31, 1997 financial statements of BSW referred to in Section
3.05, or (2) any other action that is likely to result in a significant
restriction on BSW, its business or operations, unless such reduction
or restriction has been requested in writing by the Company;
(j) by the Company if, in order to obtain any required permit,
consent, approval or authorization of any governmental authority having
jurisdiction, the Company or the Resulting Corporation will be required
to agree to, or will be subjected to, a limitation upon its activities
following the Effective Time which the Company or the Bank reasonably
regards as materially adverse; or
(k) by the Company if the Average Closing Price is less than
eighty percent (80.0%) of the closing price of Company Common Stock
supplied by NASDAQ and reported in the WALL STREET JOURNAL on the day
preceding the date hereof.
9.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or BSW as provided in Section 9.01, this
Agreement shall forthwith become void and have no further effect, except (i)
Sections 6.02(d), 9.02, 10.01 and 10.02 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 breach of any representation, warranty, or other
provision of this Agreement.
9.03. AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the shareholders of BSW
or the Company if required; provided, however, that after any approval of the
transactions contemplated by this Agreement by BSW's shareholders, there
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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 such shareholders hereunder in any material respect 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.
9.04. 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 herein (other than Section
7.01). 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 shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
ARTICLE X
MISCELLANEOUS
10.01. EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall, except to the
extent and under the circumstances set forth in Section 10.02 below to the
contrary, be paid by the party incurring such costs and expenses.
10.02. FEES AND EXPENSES UNDER CERTAIN CIRCUMSTANCES.
(a) BSW and its Board of Directors shall vote for the Merger
and recommend the Merger to the shareholders of BSW and shall not
solicit, approve or recommend to its shareholders, or undertake or
enter into with or without shareholder approval, either as the
surviving or disappearing or the acquiring or acquired corporation, any
other merger, consolidation, assets acquisition, tender offer or other
takeover transaction, or furnish or cause to be furnished any
information concerning its business, properties or assets to any person
or entity, other than the Company, interested in any such transaction
(except for Directors and executive officers of BSW and such other
persons as may be required by law), and BSW will not authorize or
permit any officer, Director, employee, investment banker or other
representative directly or indirectly to solicit, encourage or support
any offer from any person or entity (other than the Company) to acquire
substantially all of the assets of BSW, to acquire 10% or more of the
outstanding stock of BSW, to enter into an agreement to merge with BSW,
or to take any other action that would have substantially the same
effect as the foregoing, without the written consent of the Company
(any such solicitation, approval, undertaking, authorization,
permission or other action referred to in this sentence being sometimes
referred to as an "Unauthorized Action"). If the Merger is not
consummated in accordance with the terms hereof because
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of any action or omission by BSW as set forth above in this Section,
then BSW shall on demand pay to the Company the sum of (a) the
out-of-pocket expenses, including, without limitation, reasonable
attorney, accountant and investment banker fees and expenses, incurred
by the Company in connection with the proposed Merger and the
transactions provided for in this Agreement plus (b) a sum as
liquidated damages; provided, however, that the total amount of such
fees and liquidated damages shall not exceed $400,000. The above
restrictions shall not preclude the Directors from taking actions which
they determine, in the exercise of their fiduciary duties, are in the
best interests of the shareholders; however, if they take any
Unauthorized Action, BSW will be responsible for the aforementioned
fees and liquidated damages.
(b) Subject to Section 10.04(b) hereof, if either BSW or the
Company fails to perform any material covenant or agreement in this
Agreement, or if any representation or warranty by BSW or the Company
is determined to be materially untrue (the party which fails to perform
or which makes the untrue representation or warranty being referred to
as a "Breaching Party"), and if, at the time of the failure or untrue
representation or warranty by the Breaching Party, the other party is
not a Breaching Party (the "Non-Breaching Party"), and if the Agreement
is thereafter terminated prior to the Effective Time, then the
Breaching Party shall on demand pay to the Non-Breaching Party
liquidated damages, to include whatever expenses the Non-Breaching
Party may have incurred, provided, however, that the amount of such
liquidated damages shall be $400,000 if BSW is the Breaching Party and
if the Company is the Breaching Party the amount of such liquidated
damages shall be the following:
(i) $1,000,000 if the Agreement is terminated prior to the
Effective Time as provided in this Section 10.02(b) within six
(6) months from the date hereof;
(ii) $1,500,000 if the Agreement is terminated prior to the
Effective Time as provided in this Section 10.02(b) within the
period from the end of the sixth month to one year from the
date hereof; and
(iii) $2,400,000 if the Agreement is terminated prior to
the Effective Time as provided in this Section 10.02(b) on or
after one year from the date hereof.
(c) If BSW does not take any Unauthorized Action, if BSW
shareholders do not approve the Merger, if the Company does not breach
this Agreement and if an agree ment to acquire or merge with BSW is
executed within the twelve months following the date of the execution
of this Agreement, with an entity that makes an offer during the term
of the Agreement, BSW shall pay to the Company upon execution of such
agree ment the sum of all out-of-pocket expenses, including without
limitation, reasonable attorney, accountant and investment banker fees
and expenses, incurred by the Company in connection with the proposed
Merger and the transactions provided for in the Agreement; provided,
however, that the amount of such fees shall not exceed $250,000
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and provided that if the transaction agreed to with such other entity
shall not close, the Company shall thereupon promptly repay such amount
to BSW.
10.03. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the Company and BSW contained in this
Agreement or in any instrument or certificate delivered pursuant hereto by the
Company or BSW shall expire on and be terminated and extinguished at the
Effective Time; provided, however, that after the Effective Time, any such
representation or warranty of the Company or BSW shall not be deemed to be
terminated or extinguished so as to deprive the Company of any defense at law or
in equity which it would otherwise have to any claim against it by any person,
firm, corporation or other legal entity, including, without limitation, any
shareholder or former shareholder of BSW.
10.04. INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE.
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action,
suit proceeding or investigation in which any person who is now, or has
been at any time prior to the date of this Agreement, or who becomes
prior to the Effective Time, a director or officer or employee of BSW
(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 or she is or was a director, officer
or employee of BSW 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 use
their best efforts to defend against and respond thereto. It is
understood and agreed that BSW shall indemnify and hold harmless, and
that after the Effective Time the Resulting Corporation and the Company
shall indemnify and hold harmless, as and to the fullest extent
permitted by applicable law and by the provisions of their respective
Certificates of Incorporation and Bylaws, 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.
(b) The foregoing notwithstanding, it is further understood
and agreed that the Company shall indemnify and hold harmless BSW, its
officers, directors and employees against any and all losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses), judgments, fines and amounts paid in settlement in
connection with any threatened or actual claim, action, suit,
proceeding or investigation arising out of or relating to a breach by
the Company of the representation contained in Section 4.19 hereof. Any
amounts required to be paid by the Company pursuant to this Section
10.04(b) shall be paid by the Company within thirty (30) days of
receipt of appropriate documentation therefor.
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(c) At and after the Effective Time, the Company shall
maintain BSW's current directors' and officers' liability insurance
run-off and tail coverage and will use its best efforts to procure
directors' and officers' liability insurance run-off and tail coverage
so as to increase the term of coverage to a date not earlier than three
years from the Effective Date.
(d) In the event the Company or the Resulting Corporation or
any of their successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its property and
assets to any person, then, and in each such case proper provision
shall be made so that the successors and assigns of the Company or the
Resulting Corporation, as the case may be, assume the obligations set
forth in this Section 10.04.
10.05. NOTIFICATION OF CERTAIN MATTERS.
(a) BSW shall give prompt notice to the Company and the
Company shall give prompt notice to BSW, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be
likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any
time from the date hereof to the Effective Time, and (ii) any material
failure of BSW or the Company, as the case may be, or of any officer,
Director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. The party to which notice is given in accordance with this
Section 10.05(a) that objects to the information contained in such
notice, together with any prior notice under this Section 10.05, as a
material breach of this Agreement must, within fourteen (14) calendar
days of receipt of such notice, provide written notice of a material
breach to the other party as provided for in Section 9.01(e). If the
party to which a notice is delivered in accordance with this Section
10.05(a) does not provide written notice as provided for in Section
9.01(e) to the other party within such 14-day period, any breach of a
representation or warranty which could be caused by the information
contained in such notice or any failure of an obligation of the party
delivering such notice which would result from such information shall
be deemed waived by the party receiving such notice.
(b) BSW agrees to notify the Company by telephone within 24
hours of receipt after the date hereof of any inquiry with respect to a
proposed merger, consolidation, assets acquisition, tender offer or
other takeover transaction with another person or receipt of a request
for information from the FDIC, the Commissioner, or other governmental
authority with respect to a proposed acquisition of BSW by another
party. BSW will promptly communicate to the Company the terms of any
such proposal, discussion, negotiation, or inquiry, including the
identity of the party making such proposal or inquiry.
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10.06. NOTICES. All notices or other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
prepaid certified first class mail (return receipt requested) or by recognized
overnight delivery service addressed as follows:
(a) If to the Company or the Bank, to:
New England Community Bancorp, Inc. and
New England Bank & Trust Company
176 Broad Street
Windsor, CT 06095
Attention: David A. Lentini
President and Chief Executive Officer
Copy to:
Day, Berry & Howard
CityPlace I
Hartford, CT 06103-3499
Attention: Robert M. Taylor, III, Esquire
(b) If to BSW, to:
Bank of South Windsor
1695 Ellington Road
South Windsor, CT 06074-4514
Attention: John R. Dunn
President and Chief Executive Officer
Copy to:
Cummings & Lockwood
Four Stamford Plaza
P.O. Box 120
Stamford, CT 06904
Attention: Paul G. Hughes, Esquire
or such other address as shall be furnished in writing by either party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
10.07. PARTIES IN INTEREST. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that
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neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either party hereto without the prior written consent of
the other party, and that nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any rights or remedies under
or by reason of this Agreement.
10.08. GRANT OF STOCK OPTION. As part of this transaction and as a
condition to their entry into this Agreement, the Company and BSW shall enter
into, on even date herewith, a Stock Option Agreement in the form of EXHIBIT A
hereto (the "Stock Option Agreement"), granting the Company the right to
purchase shares of BSW Common Stock at the price set forth therein, if any of
certain events set forth therein occur.
10.09. COMPLETE AGREEMENT. This Agreement, including the documents and
other writings referred to herein or delivered pursuant thereto, contains the
entire agreement and understanding of the parties with respect to its subject
matter. This Agreement supersedes all prior agreements and understandings
between the parties, both written and oral, with respect to its subject matter.
If any provision or part of this Agreement is deemed unenforceable, the
enforceability of the other provisions and parts shall not be affected.
10.10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.11. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Connecticut.
10.12. HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the Company, the Bank and BSW have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
NEW ENGLAND COMMUNITY BANCORP, INC.
By /s/David A. Lentini
--------------------------
David A. Lentini
Its Chairman, President and Chief Executive Officer
NEW ENGLAND BANK & TRUST COMPANY
By /s/David A. Lentini
--------------------------
David A. Lentini
Its President and Chief Executive Officer
BANK OF SOUTH WINDSOR
By /s/John R. Dunn
--------------------------
John R. Dunn
Its President and Chief Executive Officer
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DIRECTORS OF NEW ENGLAND COMMUNITY BANCORP, INC.
We hereby confirm, as of this 19th day of March, 1998, our approval of
the foregoing Plan and Agreement of Merger by and among New England Community
Bancorp, Inc., New England Bank & Trust Company and Bank of South Windsor.
/s/John C. Carmon
- ---------------------------- -----------------------------
John C. Carmon Gary J. DeNino
/s/Frank A. Falvo /s/Dominic J. Ferraina
- ---------------------------- -----------------------------
Frank A. Falvo Dominic J. Ferraina
/s/John R. Harvey /s/David A. Lentini
- ---------------------------- -----------------------------
John R. Harvey David A. Lentini
/s/Angelina J. McGillivray
- ---------------------------- -----------------------------
Angelina J. McGillivray Michael P. Solimene
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<PAGE>
DIRECTORS OF NEW ENGLAND BANK & TRUST COMPANY
We hereby confirm, as of this 19th day of March, 1998, our approval of
the foregoing Plan and Agreement of Merger by and among New England Community
Bancorp, Inc., New England Bank & Trust Company and Bank of South Windsor.
/s/John C. Carmon /s/Nathan G. Agostinelli
- ---------------------------- -----------------------------
John C. Carmon Nathan G. Agostinelli
/s/Andrew Ansaldi, Jr. /s/Dominic J. Ferraina
- ---------------------------- -----------------------------
Andrew Ansaldi, Jr. Dominic J. Ferraina
/s/David A. Lentini
- ---------------------------- -----------------------------
Bruce A. Fischman David A. Lentini
/s/Angelina J. McGillivray
- ---------------------------- -----------------------------
Angelina J. McGillivray Michael P. Solimene
- ---------------------------
P. Anthony Giorgio, Ph.D
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<PAGE>
DIRECTORS OF BANK OF SOUTH WINDSOR
We hereby confirm, as of this 19th day of March, 1998, our approval of
the foregoing Agreement and Plan of Merger by and among New England Community
Bancorp, Inc., New England Bank & Trust Company and Bank of South Windsor.
/s/Barbara Barbour /s/John R. Dunn
- ---------------------------- -----------------------------
Barbara Barbour John R. Dunn
/s/Salvatore Garofalo /s/Wayne C. Gerlt
- ---------------------------- -----------------------------
Salvatore Garofalo Wayne C. Gerlt
/s/Edward F. Havens /s/Richard S. Kelley
- ---------------------------- -----------------------------
Edward F. Havens Richard S. Kelley
/s/Walter Kupchunos, Jr. /s/Raymond H. Lefurge, Jr.
- ---------------------------- -----------------------------
Walter Kupchunos, Jr. Raymond H. Lefurge, Jr.
/s/John J. Mitchell /s/Barbara M. Perry
- ---------------------------- -----------------------------
John J. Mitchell Barbara M. Perry
/s/J. Brian Smith /s/Robert J. Smith
- ---------------------------- -----------------------------
J. Brian Smith Robert J. Smith
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Appendix B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 19, 1998 between Bank of
South Windsor, a Connecticut bank and trust company (the "Bank"), and New
England Community Bancorp, Inc., a Delaware corporation ("NECB").
WHEREAS, NECB, New England Bank & Trust Company, a Connecticut bank and
trust company and a wholly-owned subsidiary of NECB ("NEBT"), and the Bank have
entered into a Plan and Agreement of Merger as of the date hereof (the "Merger
Agreement"), which provides, among other things, for the exchange of shares of
the Bank for shares of NECB and the merger of the Bank with and into NEBT (the
"Merger"); and
WHEREAS, as a condition to NECB's entry into the Merger Agreement and
in consideration for such entry, the Bank has agreed to grant NECB the Option
(as hereinafter defined)
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. GRANT OF OPTION. The Bank hereby grants to NECB an unconditional,
irrevocable option (the "Option") to purchase up to 215,000 shares (the "Option
Shares") of the common stock, par value $5.00 per share (the "Common Shares"),
of the Bank at a price of $12.00 per share; provided, however, that the Option
will terminate if the Merger Agreement is terminated pursuant to Section 9.01 of
the Merger Agreement before the Option is exercisable and before NECB delivers
notice of its intent to exercise this Option, as hereinafter provided.
2. EXERCISE OF OPTION. NECB will not exercise the Option without the
written consent of the Bank except: (a) subsequent to the fifth day preceding
the scheduled expiration date of a tender or exchange offer by any person or
group of persons (other than NECB or an affiliate of NECB) to acquire 25% or
more of the Common Shares or (b) upon the acquisition by any one person or group
of persons (other than NECB or an affiliate of NECB) of, or of the right to
acquire, 25% or more of the Common Shares, if in the case of (a) or (b), (1)
after giving effect to such offer or acquisition such person or group would own
or have the right to acquire 25% or more of the Common Shares, (2) there have
been filed documents with the Federal Deposit Insurance Corporation ("FDIC") in
connection therewith (or, if no such filing is required, similar evidence that
the offer is actually commencing) and (3) such person or group has received all
required regulatory approvals to own or control 25% or more of the Common
Shares, or (c) upon a willful breach of the Merger Agreement by the Bank which
would permit
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NECB to terminate the Merger Agreement, provided that within 12 months from the
date of such breach either an event described in clauses (a) or (b) above shall
have occurred or any agreement shall have been entered into between the Bank and
any third party, including, without limitation, an agreement inprinciple,
contemplating (a) any acquisition by such third party of 25% or more of the
Common Shares or any other class or series of voting securities of the Bank or
(b) a merger or other business combination involving the Bank or the acquisition
of a substantial interest in, or a substantial portion of the assets, business
or operations of the Bank, other than as contemplated by the Merger Agreement.
As used in this Section 2, "person" or "group of persons" shall have the meaning
conferred thereon pursuant to Section 13(d) of the Securities Exchange Act of
1934. The Bank will not take any action which would have the effect of
preventing or disabling the Bank from delivering the Option Shares to NECB upon
exercise of the Option or otherwise performing its obligations under this
Agreement. In the event NECB wishes to exercise the Option, NECB shall send a
written notice to the Bank specifying the total number of Option Shares it
wishes to purchase and a place and date between one and ten business days
inclusive from the date such notice is given for the closing of such purchase (a
"Closing"); provided, however, that a Closing shall not occur prior to the
receipt of all necessary regulatory approvals.
The Bank will afford NECB the benefit of one demand registration
covering all or any part of the Option Shares with respect to any public
offering of the Option Shares. Without the written consent of NECB, neither the
Bank nor any other holder of securities may include securities in such
registrations. In addition, NECB will be afforded the benefit of unlimited
"piggyback" registration rights with respect to the Option Shares (subject to
appropriate exceptions for registrations in connection with dividend
reinvestment, employee stock purchase, stock option or similar plans or a
registration statement on Form S-4). The Bank will notify NECB of any
registration at least ten (10) days prior to the filing date of any such
registration and NECB will give notice at least three (3) days prior to the
filing date of any such registration that it desires "piggyback" registration
rights and state the number of shares to be included in such registration. The
costs of all such registrations (other than underwriting fees and commissions)
will be borne by the Bank. If NECB elects to have any Option Shares included in
such registration, it will promptly provide the Bank with such information as
the Bank may request for use therein.
3. PAYMENT AND DELIVERY OF CERTIFICATES. At any Closing hereunder NECB
will make payment to the Bank of the aggregate price for the Option Shares so
purchased by delivery of immediately available funds and the Bank will deliver
to NECB a stock certificate or certificates representing the number of Option
Shares so purchased, registered in the name of NECB or its designee in such
denominations as were specified by NECB in its notice of exercise. Any such
certificate will bear appropriate legends to identify the Option Shares
represented thereby as "restricted securities".
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<PAGE>
4. FILINGS AND CONSENTS. NECB and the Bank will each use their best
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary for the consummation of the transactions
contemplated by this Agreement.
5. ENTIRE AGREEMENT. This Agreement and the Merger Agreement and the
other agreements referenced therein constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof.
6. ASSIGNMENT. At any time or from time to time after the Option is
exercisable without the written consent of the Bank, NECB may sell, assign or
otherwise transfer its rights and obligations hereunder, in whole or in part, to
any person or group of persons, subject only to compliance with applicable law.
In order to effectuate the foregoing, NECB (or any direct or indirect assignee
or transferee of NECB) shall be entitled to surrender this Agreement in exchange
for a similar agreement entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock as may then be purchasable
hereunder. Notwithstanding the foregoing, NECB may not sell, assign or otherwise
transfer to any person or affiliated group of persons Common Shares and/or
rights to acquire Common Shares under this Agreement which would account for 5%
or more of the outstanding Common Shares (assuming that the Option is fully
exercised).
7. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect; and,
except as otherwise provided herein to the contrary, the failure or invalidity
of any portion of the consideration for which this Option is being granted shall
not reduce the amount of, or render invalid or unenforceable, all or any portion
of this Option.
8. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram or telex, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:
If to NECB:
New England Community Bancorp, Inc.
176 Broad Street
P.O. Box 130
Windsor, CT 06095-0130
Attention: David A. Lentini
Chairman, President and Chief Executive Officer
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with a copy to:
Day, Berry & Howard
CityPlace I
Hartford, CT 06103-3499
Attention: Robert M. Taylor, III, Esq.
If to the Bank:
Bank of South Windsor
1695 Ellington Road
South Windsor, CT 06074-4514
Attention: John R. Dunn
President and Chief Executive Officer
with a copy to:
Cummings & Lockwood
Four Stamford Plaza
P.O. Box 120
Stamford, CT 06904
Attention: Paul G. Hughes, Esquire
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
10. DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
11. PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person (other than an
assignee or transferee of NECB pursuant to Section 8 hereof) any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
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12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
13. EXPENSES. Except as otherwise provided in Section 2 hereof, all
costs and expenses incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
14. TERMINATION. The Option granted hereby, to the extent not
previously exercised, shall terminate upon the earliest of (a) seven months
after an event described in Section 2, (b) the Effective Time (as such term is
defined in the Merger Agreement) of the Merger, (c) the termination of the
Merger Agreement in accordance with its terms (other than if terminated by NECB
by reason of a breach or violation by the Bank) prior to the occurrence of an
event described in Section 2. The foregoing notwithstanding, if a breach of the
Merger Agreement described in clause (c) of Section 2 shall have occurred, this
Option shall terminate to the extent not previously exercised on the date which
is 90 days following the first anniversary of the date of such breach.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
NEW ENGLAND COMMUNITY BANCORP, INC.
By: /s/David A. Lentini
-------------------------------
David A. Lentini
Chairman, President and Chief Executive Officer
BANK OF SOUTH WINDSOR
By: /s/John R. Dunn
-------------------------------
John R. Dunn
President and Chief Executive Officer
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Appendix C
================================================================================
HAS ASSOCIATES, INC. 76 Northeastern Blvd., Suite 34 P.O. Box 84
Nashua, NH 03062 Boston, MA 02171
(603) 880-4529 (617) 472-5086
FAX (603) 880-4351 FAX (617) 472-6903
[email protected] [email protected]
June 23, 1998
Board of Directors
New England Community Bancorp
176 Broad Street
Windsor, CT 06095
Members of the Board:
You have requested our opinion as to the fairness to the stockholders
of New England Community Bancorp, Windsor, Connecticut ("NECB"), from a
financial point of view, of the terms of the Agreement and Plan of Merger dated
March 9, 1998 ("the Agreement") which will ultimately provide for the merger
(the "Merger") of Bank of South Windsor ("BSW") into NECB, a Connecticut
corporation in a transaction whereby each share of BSW Common Stock issued and
outstanding immediately prior to the Effective Time (except for shares held by
BSW as treasury shares, shares owned by any indirect or direct subsidiary of
BSW, shares held by NECB or New England Bank & Trust Company ("NEBT") other than
in a fiduciary or trust capacity for the benefit of third parties, and shares as
to which dissenters' rights have been asserted) shall be converted into and
exchangeable for consideration consisting of shares of Common Stock, par value
$0.10 per share, of NECB and cash in lieu of fractional shares, based on an
exchange ratio of 1.3204 shares of NECB Common Stock for each share of BSW
Common Stock, subject to adjustment as defined in the Merger Agreement.
You have asked for HAS Associates, Inc. ("HAS") opinion as to whether
the Exchange ratio is fair, from a financial point of view, to NECB. In arriving
at the opinion set forth below, HAS has, among other things:
(a) reviewed and analyzed certain publicly available financial statements
for NECB and BSW;
(b) analyzed certain internal financial statements, including financial
projections, and other financial and operating data prepared by the
managements of NECB and BSW;
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HAS ASSOCIATES, INC.
(c) discussed the past, present and future operations, financial condition
and prospects of NECB and BSW with the senior management of the
respective companies;
(d) compared the financial performance and condition as well as the
trading activities and market prices of BSW and NECB with that of
certain other comparable publicly traded companies;
(e) reviewed and discussed with the senior management of NECB the strategic
objectives of the Merger and certain other benefits of the Merger to
NECB;
(f) reviewed the financial terms, to the extent publicly available, of
certain merger and acquisition transactions comparable, in whole or in
part, to the Merger;
(g) reviewed the Merger Agreement; and
(h) performed such other analyses as we have deemed appropriate.
In conducting its review and arriving at its opinion, HAS relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and HAS did not attempt to
verify such information independently or undertake an independent appraisal of
the assets and liabilities of NECB or BSW. HAS relied upon the accuracy and
opinion of the audit reports prepared by the Bank's independent accountants. HAS
assumes no responsibility for the accuracy and completeness of the financial and
other information relied upon.
We have acted as financial advisor to the Board of NECB in connection
with the Merger and will receive a fee for this service.
In reliance upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Exchange Ratio and the financial terms of the
Agreement were, and as of the date hereof, such terms are, fair, from a
financial point of view, to NECB.
This letter is furnished to you in connection with the Merger and we
consent to its inclusion in the Registration Statement and proxy solicitation
material.
Sincerely,
/s/HAS Associates, Inc.
- -----------------------
HAS Associates, Inc.
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<PAGE>
APPENDIX D
BANK
[GRAPHIC] ANALYSIS
CENTER, INC.
- -----------------------
CityPlace II - 16th Floor
Hartford, CT 06103
860-275-6050
Fax 860-275-6060
June 24, 1998
The Board of Directors
Bank of South Windsor
1695 Ellington Road
South Windsor
Connecticut 06074
SUBJECT: FINANCIAL EVALUATION REGARDING THE TERMS OF FAIRNESS PURSUANT TO
A PROPOSED MERGER BETWEEN BANK OF SOUTH WINDSOR AND NEW ENGLAND
COMMUNITY BANCORP, INC.
Dear Members of the Board of Directors:
You have retained Bank Analysis Center, Inc. for the purpose of rendering a
financial evaluation concerning the terms of fairness regarding a plan of merger
(the Merger), between Bank of South Windsor (the Bank), and New England
Community Bancorp (the Company or NECB). This Merger proposes the conversion of
the Bank's common stock ($5.00 par value) into shares of the Company at an
exchange ratio of no less than 1.3204 shares of NECB common stock for each share
of the common stock of Bank of South Windsor and no more than 1.50 shares of
NECB common stock for each share of common stock of Bank of South Windsor. This
band of exchange ratios implies a price for BSW shares of no less than $31.00
per share and an unlimited potential appreciation in the event of future price
increases in NECB common stock between the date hereof and the closing of the
proposed merger.
In connection with providing an opinion of fairness, BAC has examined and relied
upon, among other things, (1) certain financial reports filed with the Federal
Deposit Insurance Corporation by the Bank and the Company for each of the last
three calendar years ended December 1997; (2) annual reports to shareholders for
the same period; and, in the case of the Company, (3) certain annual and
quarterly filings to the Securities & Exchange Commission. In addition, BAC has
relied upon and examined (4) recent terms relating to comparable mergers between
other banking institutions, (5) stock market trends of the banking industry on a
state-wide and national basis and (6) various financial and other information
supplied to BAC by Management of both the Bank and the Company including (6a)
the 1998 operating budgets and future year financial projections of the Bank and
the Company, (6b) various schedules of non-performing assets and (6c) certain
policies and procedures including asset/liability management, loan policies et
al and (6d) the findings and conclusions of reviews and examinations conducted
by Federal and State bank regulatory authorities. Moreover, (7) BAC has held
discussions with members of the senior
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The Board of Directors of Bank of South Windsor
Opinion of Fairness
June 24, 1998
Page two
Management of both the Bank and the Company as to their respective operating
history, as well as current and future business prospects. BAC has also (8)
considered the current financial condition and operating performance of the Bank
and the Company and the projected condition and operating performance of the
Bank and the Company. Also in rendering an opinion of fairness concerning the
terms of the Merger, BAC has (9), reviewed the Plan and Agreement of Merger and
supporting materials (the Agreement).
In determining the financial fairness regarding the terms of the proposed
merger, BAC has based its evaluation on certain generally accepted principles of
investment analysis customary in the investment banking and consulting
professions as applied to the banking industry.
In conducting its review and arriving at its opinion, BAC has a relied upon the
accuracy and completeness of the financial and other information provided to it.
Although BAC has undertaken a due diligence review of the Company and the Bank,
BAC has not attempted to verify such information beyond reviewing the
information mentioned above. Further BAC has not verified, appraised, or
otherwise evaluated the assets and liabilities of the Bank or the Company. BAC
assumes no responsibility for the accuracy and completeness of the financial
information and other information it has relied upon.
In reliance upon and subject to the foregoing, it is our opinion that as of the
date hereof and based upon the terms of the Plan and Agreement of
Reorganization, the terms of the merger are fair, from a financial point of
view, to the Bank and to the current stockholders of the Bank. In rendering this
opinion, BAC has evaluated (1) the relative nominal and tangible capital
contributions of both the Bank and the Company to the proposed Merger, (2) the
relative contributions of current and projected net earnings of the Bank and the
Company (3) the price paid per share of common stock by the Company to the Bank,
(4) the probable future market performance of the common stock of both the
Company and the Bank. Finally, (5) BAC has also considered the present value to
the Bank's shareholders of future expected dividends and the terminal value of
equity as it relates to remaining an independent institution.
This opinion does not represent investment advice or a recommendation to the
current stockholders of the Bank or the Company, or any other party regarding
the valuation of the common shares of the Bank or the Company for potential
purchase.
Sincerely yours,
/s/ Bank Analysis Center Inc.
- -----------------------------
Bank Analysis Center, Inc.
D-2
BANK
[GRAPHIC] ANALYSIS
CENTER, INC.
Hartford, Connecticut
<PAGE>
APPENDIX E
CONNECTICUT GENERAL STATUTES SS. 36(a)-125(h) AND SS.SS. 33-855-872
DISSENTERS' RIGHTS
(A)
RIGHT TO DISSENT AND OBTAIN
PAYMENT FOR SHARES
SEC. 36a-125(h). Upon the effectiveness of the agreement of merger or
consolidation, the shareholders, if any, of the constituent banks, except to the
extent that they have received cash, property or other securities of the
resulting bank or shares or other securities of any other corporation in
exchange for or upon conversion of their shares, shall be shareholders of a
capital stock resulting bank. Unless such agreement otherwise provides, the
resulting bank may require each shareholder to surrender such shareholder's
certificates of stock in the constituent bank and in that event no shareholder,
until such surrender of that shareholder's certificates, shall be entitled to
receive a certificate of stock of the resulting bank or to vote thereon or to
collect dividends declared thereon, or to receive cash, property or other
securities of the resulting bank, or shares or other securities of any other
corporation. Any shareholder of any such constituent bank who dissents from the
merger or consolidation is entitled to assert dissenters' rights under sections
33-855 to 33-872, inclusive. The rights and obligations of the objecting
shareholders and the bank shall be determined in accordance with said sections.
The stock of a capital stock resulting bank up to an amount of the combined
stock of the constituent banks shall be exempt from any franchise tax.
SEC. 33-855. DEFINITIONS. As used in sections 33-855 to 33-872,
inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when and in
the manner required by sections 33-860 to 33-868, inclusive.
(3) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
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(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 33-856. RIGHT TO DISSENT. (a) A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any of
the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party (A) if shareholder approval is required for the merger by section 33-817
or the certificate of incorporation and the shareholder is entitled to vote on
the merger or (B) if the corporation is a subsidiary that is merged with its
parent under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
(4) An amendment of the certificate of incorporation that materially
and adversely affects rights in respect of a dissenter's shares because it: (A)
Alters or abolishes a preferential right of the shares; (B) creates, alters or
abolishes a right in respect to redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the shares; (C) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities; (D) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or (E)
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under section
33-668; or
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(5) Any corporate action taken pursuant to a shareholder vote to the
extent the certificate of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available to
a shareholder by this section, such remedy shall be his exclusive remedy as
holder of such shares against the corporate transactions described in this
section, whether or not he proceeds as provided in sections 33-855 to 33-872,
inclusive.
SEC. 33-857. DISSENT BY NOMINEES AND BENEFICIAL OWNERS. (a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if: (1) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
SECS. 33-858 AND 33-859. Reserved for future use.
(B)
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 33-860. NOTICE OF DISSENTERS' RIGHTS. (a) If proposed corporate
action creating dissenters' rights under section 33-856 is submitted to a vote
at a shareholders' meeting, the meeting notice shall state that shareholders are
or may be entitled to assert dissenters' rights under sections 33-855 to 33-872,
inclusive, and be accompanied by a copy of said sections.
(b) If corporate action creating dissenters' rights under section
33-856 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in section 33-862.
SEC. 33-861. NOTICE OF INTENT TO DEMAND PAYMENT. (a) If proposed
corporate action creating dissenters' rights under section 33-856 is submitted
to a vote at a shareholders' meeting, a shareholder who wishes to assert
dissenters' rights (1) shall deliver to the corporation before
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the vote is taken written notice of his intent to demand payment for his shares
if the proposed action is effectuated and (2) shall not vote his shares in favor
of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection
(a) of this section is not entitled to payment for his shares under sections
33-855 to 33-872, inclusive.
SEC. 33-862. DISSENTERS' NOTICE. (a) If proposed corporate action
creating dissenters' rights under section 33-856 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after
the corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days after
the date the subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
SEC. 33-863. DUTY TO DEMAND PAYMENT. (a) A shareholder sent a
dissenters' notice described in section 33-862 must demand payment, certify
whether he acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters, notice pursuant to subdivision (3) of
subsection (b) of said section and deposit his certificates in accordance with
the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) of this section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
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SEC. 33-864. SHARE RESTRICTIONS. (a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under section 33-866.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 33-865. PAYMENT. (a) Except as provided in section 33-867, as soon
as the proposed corporate action is taken, or upon receipt of a payment demand,
the corporation shall pay each dissenter who complied with section 33-863 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment shall be accompanied by: (1) The corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, a statement of changes
in shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a statement of the dissenter's right to demand payment under section 33-860; and
(5) a copy of sections 33-855 to 33-872, inclusive.
SEC. 33-866. FAILURE TO TAKE ACTION. (a) If the corporation does not
take the proposed action within sixty days after the date set for demanding
payment and depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
SEC. 33-867. AFTER-ACQUIRED SHARES. (a) A corporation may elect to
withhold payment required by section 33-865 from a dissenter unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under
section 33-868.
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SEC. 33-868. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. (a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865 or
offered under section 33-867 is less than the fair value of his shares or that
the interest due is incorrectly calculated;
(2) The corporation fails to make payment under section 33-865 within
sixty days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
of this section within thirty days after the corporation made or offered payment
for his shares.
SECS. 33-869 AND 33-870. Reserved for future use.
(C)
JUDICIAL APPRAISAL OF SHARES
SEC. 33-871. COURT ACTION. (a) If a demand for payment under section
33-868 remains unsettled, the corporation shall commence a proceeding within
sixty days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the superior court
for the judicial district where a corporation's principal office or, if none in
this state, its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the superior court for the judicial district where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares
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and all parties must be served with a copy of the petition. Nonresidents may be
served by registered or certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment (1) for the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation, or (2)
for the fair value, plus accrued interest, of his after-acquired shares for
which the corporation elected to withhold payment under section 33-867.
SEC. 33-872. COURT COSTS AND COUNSEL FEES. (a) The court in an
appraisal proceeding commenced under section 33-871 shall determine all costs of
the proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment under section 33-868.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable: (1)
Against the corporation and in favor of any or all dissenters if the court finds
the corporation did not substantially comply with the requirements of sections
33-860 to 33-868, inclusive; or (2) against either the corporation or a
dissenter, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by sections 33-855 to
33-872, inclusive.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
------------------------
As revised June 23, 1998.
------------------------
E-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware law, NECB's Bylaws and NECB's Certificate authorize NECB to
indemnify officers, directors and certain individuals associated with NECB. In
general, Article V of NECB's Bylaws and Article VII of NECB's Certificate
require NECB to indemnify any person who was or is a party or who is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, and any appeal therein, whether civil, criminal, administrative or
investigative (other than an action by or in the right of NECB) by reason of the
fact that such person is or was a director, officer, employee or agent of NECB,
or is or was serving at the request of NECB as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding, and any appeal therein, if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of NECB, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of NECB, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
ITEM 21. EXHIBIT AND FINANCIAL STATEMENTS SCHEDULES
(a) List of Exhibits
The exhibits filed as a part of this Registration Statement are as
follows:
Exhibit No. Exhibit
---------- -------
2.1 Plan and Agreement of Merger, dated as of March 19, 1998, by
and among New England Community Bancorp, Inc., New England
Bank & Trust Company and Bank of South Windsor is included as
APPENDIX A to the Joint Proxy Statement-Prospectus.
2.2 Stock Option Agreement dated March 19, 1998 between Bank of
South Windsor and New England Community Bancorp, Inc. is
included as APPENDIX B to the Joint Proxy
Statement-Prospectus.
3.1 Amended and Restated Certificate of Incorporation of New
England Community Bancorp, Inc.
3.2 Amended and Restated Bylaws of New England Community Bancorp,
Inc. were filed on March 31, 1998 as Exhibit (3)(ii) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997 and are incorporated
herein by reference.
4. Specimen Common Stock Certificate of New England Community
Bancorp, Inc. was filed on June 20, 1995 as Exhibit 4 to New
England Community Bancorp, Inc.'s Registration Statement on
Form S-4 (No. 33-93640) and is incorporated herein by
reference.
5. Opinion of Day, Berry & Howard LLP regarding legality of
securities being registered.
8. Opinion of Cummings & Lockwood regarding certain federal
income tax consequences.
10.1 Employment Agreement between New England Bank & Trust Company
and David A. Lentini dated August 9, 1994 was filed as Exhibit
10.3 to Olde Windsor Bancorp, Inc.'s (now known as
II-1
<PAGE>
New England Community Bancorp, Inc.'s) Registration Statement
on Form S-1 (No. 33-83622) and is incorporated herein by
reference.
10.2 Employment Agreement by and between New England Bank & Trust
Company and Donat A. Fournier dated August 9, 1994 was filed
on October 20, 1994 as Exhibit 10.6 to New England Community
Bancorp, Inc.'s Registration Statement on Form S-1 (No.
33-83622), Amendment No. 1, and is incorporated herein by
reference.
10.3 Employment Agreement by and between New England Bank & Trust
Company and Anson C. Hall dated August 9, 1994 was filed on
October 20, 1994 as Exhibit 10.7 to New England Community
Bancorp, Inc.'s Registration Statement on Form S-1 (No.
33-83622), Amendment No. 1, and is incorporated herein by
reference.
10.4 Employment Agreement by and between New England Community
Bancorp., Inc. and Frank A. Falvo dated December 6, 1996 was
filed on March 31, 1997 as Exhibit 10(f) to New England
Community Bancorp, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1997, and is incorporated herein by
reference.
10.5 Executive Retention Agreement by and between New England
Community Bancorp, Inc. and David A. Lentini dated October 16,
1997 was filed on March 31, 1998 as Exhibit 10(g) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997, and is incorporated
herein by reference.
10.6 Executive Retention Agreement by and between New England
Community Bancorp, Inc. and Donat A. Fournier dated October
16, 1997 was filed on March 31, 1998 as Exhibit 10(h) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997, and is incorporated
herein by reference.
10.7 Executive Retention Agreement by and between New England
Community Bancorp, Inc. and Anson C. Hall dated October 16,
1997 was filed on March 31, 1998 as Exhibit 10(i) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997, and is incorporated
herein by reference.
10.8 Executive Retention Agreement by and between New England
Community Bancorp, Inc. and Frank A. Falvo dated October 16,
1997 was filed on March 31, 1998 as Exhibit 10(j) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997, and is incorporated
herein by reference.
21. List of Subsidiaries of New England Community Bancorp, Inc was
filed on March 31, 1998 as Exhibit 21 to New England Community
Bancorp, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997, and is incorporated herein by reference.
23.1 Consent of Day, Berry & Howard LLP (See Exhibit 5).
23.2 Consent of Shatswell, MacLeod & Company, P.C. relating to New
England Community Bancorp, Inc.
23.3 Consent of Cummings & Lockwood (See Exhibit 8).
23.4 Consent of Arthur Andersen LLP relating to Bank of South
Windsor.
23.5 Consent of HAS Associates, Inc.
23.6 Consent of Bank Analysis Center, Inc.
II-2
<PAGE>
99.1 Form of Proxy for the Special Meeting of Stockholders of New
England Community Bancorp, Inc.
99.2 Form of Proxy for the Special Meeting of Shareholders of Bank
of South Windsor.
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or related notes incorporated by reference herein.
ITEM 22. UNDERTAKINGS
(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(2) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(3) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(4) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to
the request.
(5) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired therein, that was not the subject of and
included in the registration statement when it became effective.
(6) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions
II-3
<PAGE>
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Windsor,
State of Connecticut, on June 18, 1998.
NEW ENGLAND COMMUNITY BANCORP, INC.
(Registrant)
By /s/ David A. Lentini
-------------------------
David A. Lentini
Its Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby constitutes David A. Lentini and Anson C. Hall and each of them singly,
such person's true and lawful attorneys, with full power to them and each of
them to sign for such person and in such person's name and capacity indicated
below any and all amendments to this Registration Statement, hereby ratifying
and confirming such person's signature as it may be signed by said attorneys to
any and all such amendments.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ David A. Lentini Chairman of the Board, President and Chief June 18, 1998
- ---------------------------------- Executive Officer
David A. Lentini
/s/ Anson C. Hall Vice President, Chief Financial Officer, June 18, 1998
- ----------------------------------- (Principal Financial and Accounting Officer)
Anson C. Hall
/s/ John C. Carmon Director June 18, 1998
- -----------------------------------
John C. Carmon
/s/ Gary J. DeNino Director June 18, 1998
- -----------------------------------
Gary J. DeNino
/s/ Frank A. Falvo Executive Vice President and Director June 18, 1998
- -----------------------------------
Frank A. Falvo
/s/ Dominic J. Ferraina Director June 18, 1998
- -----------------------------------
Dominic J. Ferraina
/s/ John R. Harvey Director June 18, 1998
- -----------------------------------
John R. Harvey
/s/ Angelina J. McGillivray Corporate Secretary and Director June 18, 1998
- -----------------------------------
Angelina J. McGillivray
/s/ Michael P. Solimene Director June 18, 1998
- -----------------------------------
Michael P. Solimene
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
2.1 Plan and Agreement of Merger, dated as of March 19, 1998, by
and among New England Community Bancorp, Inc., New England
Bank & Trust Company and Bank of South Windsor is included as
APPENDIX A hereto.
2.2 Stock Option Agreement dated March 19, 1998 between Bank of
South Windsor and New England Community Bancorp, Inc. is
included as APPENDIX B hereto.
3.1 Amended and Restated Certificate of Incorporation of New
England Community Bancorp, Inc.
3.2 Amended and Restated Bylaws of New England Community Bancorp,
Inc. were filed on March 31, 1998 as Exhibit (3)(ii) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997 and are incorporated
herein by reference.
4. Specimen Common Stock Certificate of New England Community
Bancorp, Inc. was filed on June 20, 1995 as Exhibit 4 to New
England Community Bancorp, Inc.'s Registration Statement on
Form S-4 (No. 33-93640) and is incorporated herein by
reference.
5. Opinion of Day, Berry & Howard LLP regarding legality of
securities being registered.
8. Opinion of Cummings & Lockwood, regarding certain federal
income tax consequences.
10.1 Employment Agreement between New England Bank and Trust
Company and David A. Lentini dated August 9, 1994 was filed as
Exhibit 10.3 to Olde Windsor Bancorp, Inc.'s (now known as New
England Community Bancorp, Inc.'s) Registration Statement on
Form S-1 (No. 33-83622) and is incorporated herein by
reference.
10.2 Employment Agreement by and between New England Bank and Trust
Company and Donat A. Fournier dated August 9, 1994 was filed
on October 20, 1994 as Exhibit 10.6 to New England Community
Bancorp, Inc.'s Registration Statement on Form S-1 (No.
33-83622), Amendment No. 1, and is incorporated herein by
reference.
10.3 Employment Agreement by and between New England Bank and Trust
Company and Anson C. Hall dated August 9, 1994 was filed on
October 20, 1994 as Exhibit 10.7 to New England Community
Bancorp, Inc.'s Registration Statement on Form S-1 (No.
33-83622), Amendment No. 1, and is incorporated herein by
reference.
10.4 Employment Agreement by and between New England Community
Bancorp., Inc. and Frank A. Falvo dated December 6, 1996 was
filed on March 31, 1997 as Exhibit 10(f) to New England
Community Bancorp, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1997, and is incorporated herein by
reference.
10.5 Executive Retention Agreement by and between New England
Community Bancorp, Inc. and David A. Lentini dated October 16,
1997 was filed on March 31, 1998 as Exhibit 10(g) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997, and is incorporated
herein by reference.
10.6 Executive Retention Agreement by and between New England
Community Bancorp, Inc. and Donat A. Fournier dated October
16, 1997 was filed on March 31, 1998 as Exhibit 10(h) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997, and is incorporated
herein by reference.
II-6
<PAGE>
10.7 Executive Retention Agreement by and between New England
Community Bancorp, Inc. and Anson C. Hall dated October 16,
1997 was filed on March 31, 1998 as Exhibit 10(i) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997, and is incorporated
herein by reference.
10.8 Executive Retention Agreement by and between New England
Community Bancorp, Inc. and Frank A. Falvo dated October 16,
1997 was filed on March 31, 1998 as Exhibit 10(j) to New
England Community Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997, and is incorporated
herein by reference.
13.1 New England Community Bancorp, Inc. Annual Report on Form 10-K
for the year ended December 31, 1997 was filed on March 31,
1998, and is incorporated herein by reference.
13.2 New England Community Bancorp, Inc. Quarterly Report on Form
10-Q for the three months ended March 31, 1998 was filed on
May 15, 1998 and is incorporated herein by reference.
21. List of Subsidiaries of New England Community Bancorp, Inc was
filed on March 31, 1998 as Exhibit 21 to New England Community
Bancorp, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997, and is incorporated herein by reference.
23.1 Consent of Day, Berry & Howard LLP (See Exhibit 5.).
23.2 Consent of Shatswell, MacLeod & Company, P.C. relating to New
England Community Bancorp, Inc.
23.3 Consent of Cummings & Lockwood (See Exhibit 8).
23.4 Consent of Arthur Andersen, LLP relating to Bank of South
Windsor.
23.5 Consent of HAS Associates, Inc.
23.6 Consent of Bank Analysis Center, Inc.
99.1 Form of Proxy for the Special Meeting of Stockholders of New
England Community Bancorp, Inc.
99.2 Form of Proxy for the Special Meeting of Shareholders of Bank
of South Windsor.
II-7
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEW ENGLAND COMMUNITY BANCORP, INC.
ARTICLE I
The name of the corporation is New England Community Bancorp, Inc. (the
"Corporation").
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at the address is The Corporation Trust
Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
Article IV
A. Authorized Capital Stock. The total number of shares of Capital Stock
the Corporation has authority to issue is 20,200,000 shares, consisting of:
1. 200,000 shares of Serial Preferred Stock; and
2. 20,000,000 shares of Common Stock, par value $. 10 per share.
B. Serial Preferred Stock. The Board of Directors is authorized at any
time, and from time to time, to provide for the issuance of shares of Serial
Preferred Stock in one or more series, and to determine the designations,
preferences, limitations and relative or other rights of the Serial Preferred
Stock or any series thereof. For each series, the Board of Directors shall
determine, by resolution or resolutions adopted prior to the issuance of any
shares thereof, the designations, preferences, limitations and relative or other
rights thereof, including but not limited to the following relative rights and
preferences, as to which there may be variations among different series:
1. The rate and manner of payment of dividends, if any;
2. The par value thereof, if any;
3. Whether shares may be redeemed and, if so, the redemption price
and the terms and conditions of redemption;
4. The amount payable for shares in the event of liquidation,
dissolution or other winding up of the Corporation;
1
<PAGE>
5. Sinking fund provisions, if any, for the redemption or purchase of
shares;
6. The terms and conditions, if any, on which shares may be convened
or exchanged;
7. Voting rights, if any; and
8. Any other rights and preferences of such shares, to the full
extent now or hereafter permitted by the laws of the State of
Delaware.
The Board of Directors shall have the authority to determine the number of
shares that will comprise each series.
Prior to the issuance of any shares of a series, but after adoption by the
Board of Directors of the resolution establishing such series, the appropriate
officers of the Corporation shall file such documents with the State of Delaware
as may be required by law.
C. Common Stock. The shares of Common Stock may be issued by the
Corporation from time to time by a resolution approved by its Board of Directors
without requiring the approval of its shareholders. The consideration for the
issuance of the shares shall be paid in full before their issuance and shall not
be less than the par value per share. Neither promissory notes nor future
services shall constitute payment or part payment for the issuance of the shares
of the Corporation. The consideration for the shares shall be cash, services
actually performed for the Corporation, personal property, real property, leases
of real property or any combination of the foregoing. In the absence of actual
fraud in the transaction, the value of such property, labor or services, as
determined by the Board of Directors of the Corporation, shall be conclusive.
Upon payment of such consideration such shares shall be deemed to be fully paid
and nonassessable.
Each holder of shares of Common Stock shall be entitled to one vote for
each share held by such holder, including the election of directors. There shall
be no cumulative voting rights in the election of directors.
Dividends may be paid on the Common Stock out of any assets legally
available for the payment of dividends; but only when and as declared by the
Board of Directors.
In the event of any liquidation, dissolution or winding up of the
Corporation the holders of the Common Stock shall be entitled, after payment or
provision for payment of all debts and liabilities of the Corporation, to
receive the remaining assets of the Corporation available for distribution, in
cash or in kind.
Each share of Common Stock shall have the same relative rights as and be
identical in all respects with all the other shares of common stock.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
The Board of Directors of the Corporation is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation.
2
<PAGE>
ARTICLE VII
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise to the full extent permitted or allowed by
Section 1435 of the General Corporation Law of Delaware, as it may be amended.
Notwithstanding any other provision of this Article VII, to the full extent
permitted by law, no director of the Corporation shall have any personal
liability to the Corporation or its shareholders for monetary damages for breach
of his fiduciary duty as a director, provided that this provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of the General Corporation Law
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
To authorize and cause to be executed mortgages, security
agreements and other liens upon the real and personal property of the
Corporation.
To set apart out of any of the funds of the Corporation available
for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created. By a
majority of the whole Board, to designate one or more directors as
alternate members of any committee and may replace any absent or
disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolutions or
in the Bylaws of the Corporation, shall have and may exercise the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided,
however, the Bylaws may provide that in the absence or disqualification
of any member of a committee or committees, the member or members
thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
When and as authorized by the affirmative vote of the holders of a
majority of the stock issued and outstanding having voting power given
at a shareholders' meeting duly called upon such notice as is required
by statute, or when authorized by the written consent of the holders of
a majority of the voting stock issued and outstanding, to sell, lease
or exchange all or substantially all of the property and assets of the
Corporation, including its good will and its corporate franchises upon
such terms and conditions and for such consideration, which may consist
in whole or in part of money or property including shares
3
<PAGE>
of stock, in and/or other securities of, any other corporation or
corporations, as its Board of Directors shall deem expedient and for
the best interests of the Corporation.
ARTICLE IX
Meetings of shareholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation. Elections of Directors
need not be by written ballot unless the Bylaws of the Corporation shall so
provide.
ARTICLE X
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
shareholders and directors are subject to this reserved power.
4
Exhibit 5
June 26, 1998
New England Community Bancorp, Inc.
176 Broad Street
P.O. Box 130
Windsor, Connecticut 06095
Re: Registration Statement on Form S-4
Registration No. 333-_____
Ladies and Gentlemen:
We have acted as counsel to New England Community Bancorp, Inc.
("NECB"), a Delaware corporation with its principal office in Windsor,
Connecticut, in connection with the proposed merger (the "Merger") whereby Bank
of South Windsor ("BSW") will be merged with and into New England Bank & Trust
Company, a wholly-owned subsidiary of NECB ("NEBT"), under the terms of a Plan
and Agreement of Merger dated March 19, 1998 by and among NECB, NEBT and BSW. In
the Merger all of the outstanding common stock of BSW, par value $5.00 per
share, will be converted into shares of NECB Common Stock, $ .10 par value per
share ("NECB Common Stock"), with certain limited exceptions.
In rendering our opinion, we have reviewed: (i) the Certificate of
Incorporation of NECB, as amended to date, (ii) the Bylaws of NECB, as amended
to date, (iii) the Plan and Agreement of Merger, (iv) resolutions of the Board
of Directors of NECB, (v) the Registration Statement on Form S-4 of NECB (the
"Registration Statement") relating to 1,229,325 shares of NECB Common Stock, to
be issued in connection with the Merger and (vi) such other documents and
instruments, and have made such examination of law as we have deemed necessary
or appropriate for purposes of this opinion. In our examination, we have assumed
the genuineness of all signatures, the legal capacity of natural persons, the
authenticity of documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. As to any
facts material to this opinion which we did not independently establish or
verify, we have relied upon statements and representations of officers and other
representatives of NECB. The opinions set forth herein are based on the
corporation laws of the State of Delaware, and no opinion is expressed as to the
laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that
upon consummation of the Merger as contemplated in the Plan and Agreement of
Merger and in the Registration Statement, the shares of NECB Common Stock that
will be issued to the shareholders of BSW will be duly and validly authorized,
validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Validity of
Securities" in the Proxy Statement-Prospectus contained therein. In giving this
consent we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/S/ DAY, BERRY & HOWARD LLP
---------------------------
DAY, BERRY & HOWARD LLP
WHC:JPO
June 25, 1998
Bank of South Windsor
I695 Ellington Road
South Windsor, CT 06074-4514
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences to Bank of South Windsor, a Connecticut-chartered commercial bank
CBSW"), New England Community Bancorp, Inc., a Delaware corporation CNECB"), and
the shareholders of BSW, resulting from the consummation of the merger (the
"Merger") of BSW, with. and into New England Bank & Trust Company, a
Connecticut-chartered commercial bank and wholly-owned subsidiary of NECB (the
"Bank") pursuant to the Agreement and Plan of Merger dated as of March 19, 1998,
(the "Merger Agreement"), among BSW, NECB and the Bank.
Except as otherwise provided, capitalized terms not defined herein have
the meanings set forth in the Merger Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
Pursuant to the Merger Agreement, (i) BSW wi11 be merged with and into
the Bank, (ii) all shares of BSW common stock issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive shares
of Class A common stock, par value $.10 per share, of NECB, (iii) each share of
BSW common stock (hereinafter referred to as "BSW Common Stock") issued and
outstanding immediately prior to the Effective Time (other than any shares of
BSW Common Stock (a) which are Dissenting Shares, or (b) which are shares held
by NECB or the Bank other than in a fiduciary or trust capacity for the benefit
of third parties) will be converted into the right to receive 1.3204 shares of
NECB common stock (hereinafter referred to as "NECB common stock") and (iv) the
shareholders of BSW will receive cash in lieu of fractional interests in the
NECB common stock to which they would otherwise be entitled.
<PAGE>
Such description of the transaction set forth above, and our opinion as
stated herein, are based upon and subject to (i) the Merger and related
transactions being effected in the manner described in the draft Form of Joint
Proxy Statement Prospectus forming a part of NECB's Registration Statement on
Form S-4 dated May 29, 1998 (the "Proxy Statement / Prospectus") and in
accordance with the provisions of the Merger Agreement, (ii) the accuracy of the
representations made to us by NECB and the Bank and BSW in their respective
officer's certificates each dated June 23, 1998 and delivered to its for
purposes of this opinion (the "Officer's Certificates"), which representations
shall, by the terms of such Officer's Certificates, be true and correct at all
times through the Effective Time of the Merger, (iii) the accuracy of the
representations and compliance with the covenants contained in the Merger
Agreement made by the respective parties thereto, insofar as they relate to or
affect the tax treatment of the transactions contemplated in the Merger
Agreement, which representations and/or covenants shall be satisfied and/or true
and correct, as the case may be, at all times through and/or after the Effective
Time of the Merger, (v) the accuracy of the statements set forth in the Proxy
Statement / Prospectus as to the purposes of the parties for consummating the
Merger, and (v) none of the compensation to be received by any holder of BSW
Common Stock who is an employee of BSW pursuant to any employment agreement or
any covenants not to compete or other arrangement will be separate consideration
for any of such holder's shares of BSW Common Stock.
In rendering our opinion, we have considered the applicable provisions
of the Code, Treasury Regulations, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant as of the date of this opinion, and any subsequent change
therein may adversely affect the conclusions reached in this opinion and such
opinion may not then be relied upon.
Based on our examination of the foregoing items and subject to the
limitations set forth herein, we are of the opinion that for federal income tax
purposes:
1. The Merger of BSW with and into Bank, with Bank surviving, will
qualify as a reorganization under Section 368(a) of the Code. BSW, NECB and Bank
will each be a party to the reorganization within the meaning of Section 368(b)
of the Code.
<PAGE>
2. No gain or loss will be recognized by a shareholder of BSW upon the
exchange of their BSW Common Stock for the right to receive NECB common stock
and the exercise of such right by a shareholder of BSW.
3. The aggregate tax basis of the NECB Common Stock received by a
shareholder of BSW in the exchange (including any fractional shares which the
BSW shareholder otherwise might be entitled to receive) will be the same as the
basis of the BSW Common Stock exchanged therefor.
4. Cash received by a shareholder of BSW in lieu of a fractional share
of NECB Common Stock or for Dissenting Shares will be treated as if the
fractional shares or Dissenting Shares were received in exchange of such
fractional shares or Dissenting Shares pursuant to Section 302(a) of the Code as
a redemption, and not as a dividend under Section 301 of the Code. Any gain or
loss recognized as a result of the receipt of such cash will be capital gain or
loss under Section 1222 of the Code, if such stock was held as a capital asset
at the time of the exchange, equal to the difference between the cash received
and the shareholder's basis in the NECB Common Stock for which such fractional
share interest or Dissenting Shares is received.
This opinion is rendered solely with respect to certain United States
federal income tax consequences of the Merger under the Code as specifically set
forth herein, and does not extend to the income or other potential tax
consequences of the Merger under the laws of any State or any political
subdivision of any State or any other jurisdiction nor does it extend to any tax
effects or consequences of the Merger to NECB, the Bank or BSW other than those
expressly stated in this opinion. Furthermore, no opinion is expressed as to the
United States federal or state tax treatment of the transaction under any other
provisions of the Code and regulations, or about the tax treatment of any
conditions existing at the time of, or effects resulting From, the transaction
that is not specifically covered by this opinion. In addition, this opinion may
not be relied upon except with respect to the consequences specifically
discussed herein. This opinion is being furnished only to BSW and the
shareholders of BSW in connection with the Merger in accordance with the Merger
Agreement and solely for their benefit in connection therewith and may not be
used or relied upon for any other purpose and may not be circulated, quoted or
otherwise referred to for any other purpose without our prior express written
consent except that
<PAGE>
this opinion may be included as an exhibit in the Proxy Statement - Prospectus.
Additionally, we hereby consent to the reference to our Firm in the Proxy
Statement - Prospectus.
Very truly yours,
/s/Cummings & Lockwood
----------------------
Cummings & Lockwood
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-4 of New England Community Bancorp, Inc., of our report dated January 29,
1998, except for Note 2, as to which the date is February 10, 1998, on our
audits of the consolidated financial statements of New England Community
Bancorp, Inc. and Subsidiaries as of December 31, 1997 and 1996 and for each of
the three years in the period ended December 31, 1997, which report is
incorporated by reference in New England Community Bancorp, Inc.'s 1997 Annual
Report on Form 10-K. We also consent to the reference to our firm under the
heading "Experts" in the Joint Proxy Statement-Prospectus which is part of such
Registration Statement.
/s/ Shatswell, MacLeod & Company, P.C.
--------------------------------------
Shatswell, MacLeod & Company, P.C.
West Peabody, Massachusetts
June 23, 1998
Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation in this registration statement on Form S-4 of
New England Community Bancorp, Inc., of our report dated January 23, 1998,
except for Note 15 as to which the date is March 19, 1998, on our audits of the
financial statements of Bank of South Windsor as of December 31, 1997 and 1996
and for each of the three years in the period ended December 31, 1997 which
report is incorporated by reference in Bank of South Windsor's 1997 Annual
Report 10-K. We also consent to the reference to our firm under the heading
"Experts" in the Joint Proxy Statement-Prospectus which is part of such
Registration Statement.
/s/ Arthur Andersen LLP
------------------------------
Arthur Andersen LLP
Hartford, Connecticut
June 23, 1998
Exhibit 23.5
HAS ASSOCIATES, INC.
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion of the Opinion of HAS Associates,
Inc. as an Appendix to the Joint Proxy Statement-Prospectus filed as part of the
Form S-4 Registration Statement of New England Community Bancorp, Inc. In giving
such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations of the Securities and Exchange Commission.
HAS ASSOCIATES, INC.
By: /s/ Thomas F. Collins, III
---------------------------
Thomas F. Collins, III
Date: June 23, 1998
Exhibit 23.6
BANK ANALYSIS CENTER, INC.
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion of the Opinion of Bank Analysis
Center, Inc. as an Appendix to the Joint Proxy Statement-Prospectus filed as
part of the Form S-4 Registration Statement of New England Community Bancorp,
Inc. In giving such consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules and regulations of the Securities and Exchange
Commission.
BANK ANALYSIS CENTER, INC.
By: /s/ John Carusone
------------------------------
John Carusone
Date: June 24, 1998
EXHIBIT 99.1
REVOCABLE PROXY
| | PLEASE MARK VOTES NEW ENGLAND COMMUNITY
| X | AS IN THIS EXAMPLE BANCORP, INC.
| |
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF THE STOCKHOLDERS
TO BE HELD AUGUST 10, 1998
The undersigned hereby appoints ___________ and _____________with full
power of substitution in each, proxies and agents of the undersigned to vote at
the Special Meeting of Stockholders of New England Community Bancorp, Inc.
("NECB"), to be held at the executive offices of NECB, 176 Broad Street,
Windsor, Connecticut, on August 10, 1998 at 8:00 a.m., and at any adjournment
thereof, all shares of common stock of NECB which the undersigned would be
entitled to vote if personally present for the following matters.
For Against Abstain
1. TO ADOPT A PLAN AND AGREEMENT | | | | | |
AGREEMENT OF MERGER, dated as of | | | | | |
March 19, 1998 by and among New England
Community Bancorp, Inc., New England Bank & Trust Company and Bank of South
Windsor and the issuance of shares of NECB Common Stock pursuant thereto.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment or adjournments thereof.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR Proposal 1. The undersigned acknowledges receipt of the Notice of
Special Meeting of Stockholders and the related Proxy Statement.
Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. when signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
- ------------------------------------------------------------
Please be sure to sign and date |
this Proxy in the box below. | Date
- ------------------------------------------------------------
Stockholder sign above Co-holder (if any) sign above
- ------------------------------------------------------------
[Arrow] Detach above card, sign, date and mail in postage paid
envelope provided. [Arrow]
NEW ENGLAND COMMUNITY BANCORP, INC.
- --------------------------------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
EXHIBIT 99.2
REVOCABLE PROXY
| | PLEASE MARK VOTES BANK OF SOUTH WINDSOR
| X | AS IN THIS EXAMPLE
| |
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF THE SHAREHOLDERS
TO BE HELD AUGUST 10, 1998
The undersigned hereby appoints ________________ and _________________ and
each of them, with full power of substitution in each, proxies and agents of the
undersigned to vote at the Special Meeting of Shareholders of Bank of South
Windsor ("BSW'), to be held at the Quality Inn, Route 83, Vernon, Connecticut on
August 10, 1998, at 8:00 am, and at any adjournment thereof, all shares
of common stock of BSW which the undersigned would be entitled to vote if
personally present for the following matters.
For Against Abstain
1. TO ADOPT A PLAN AND | | | | | |
AGREEMENT OF MERGER, dated | | | | | |
as of March 19, 1998 by and among New
England Community Bancorp, Inc., New England Bank & Trust Company and Bank of
South Windsor.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment or adjournments thereof.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR Proposal 1. The undersigned acknowledges receipt of the Notice of
Special Meeting of Shareholders and the related Proxy Statement.
Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
- ------------------------------------------------------------
Please be sure to sign and date |
this Proxy in the box below. | Date
- ------------------------------------------------------------
Shareholder sign above Co-holder (if any) sign above
- ------------------------------------------------------------
[Arrow] Detach above card, sign, date and mail in postage paid
envelope provided. [Arrow]
BANK OF SOUTH WINDSOR
- --------------------------------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
