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EXHIBIT 2.2
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN
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PROVISIONS CONTAINED HEREIN
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Exhibit B
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OPTION AGREEMENT
This OPTION AGREEMENT, dated as of May 30, 2000 (this "Option
Agreement"), is entered into between NUTMEG FEDERAL SAVINGS AND LOAN
ASSOCIATION, a federal savings association ("Issuer"), and NEWMIL BANCORP, INC.,
a Delaware corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee, New Milford Savings Bank, a wholly owned subsidiary
of Grantee, and Issuer have entered into an Agreement and Plan of Merger, dated
as of the date hereof (the "Agreement"), which was executed by the parties
thereto prior to the execution of this Option Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into the
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Agreement, the parties
hereto agree as follows:
SECTION 1. Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 457,280
fully paid and nonassessable shares of common stock, par value $.003 per share
of Issuer ("Issuer Common Stock") (which number of shares is equal to 19.99% of
the number of outstanding shares of Issuer Common and Class B Preferred Stock
("Issuer Preferred Stock") on the date hereof, treating each share of Issuer
Preferred Stock as the equivalent of 1.75 shares of Issuer Common Stock, at a
price per share equal to $7.00 (the "Initial Price"); provided, however, that in
the event Issuer issues or agrees to issue any additional shares of Issuer
Common Stock (other than shares issued upon the exercise of options outstanding
as of the date of the Agreement in accordance with their terms pursuant to the
Issuer's five employee and director stock option plans), or grants one or more
options to purchase additional shares of Issuer Common Stock at a price less
than the Initial Price, as adjusted pursuant to Section 5(b) hereof, such price
shall be equal to such lesser price (such price, as adjusted, is hereinafter
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referred to as the "Option Price"). The number of shares of Issuer Common Stock
that may be received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at any
time and from time to time following the occurrence of a Purchase Event (as
defined below); provided, however, that the Option shall terminate and be of no
further force and effect upon the earliest to occur of the following events
(which are collectively referred to as an "Exercise Termination Event"):
(i) The time immediately prior to the Effective Time;
(ii) 12 months after the first occurrence of a Purchase Event;
(iii) 18 months after the termination of the Agreement
following the occurrence of a Preliminary Purchase Event (as defined
below), unless clause (vi) or (vii) of this Section 2(a) is applicable;
(iv) upon the termination of the Agreement, prior to the
occurrence of a Purchase Event or Preliminary Purchase Event, by Issuer
pursuant to Sections 8.1 (e) or (f) of the Agreement, by both parties
pursuant to Section 8.1(a) of the Agreement, or by either party pursuant to
Section 8.1(b) or (c) of the Agreement;
(v) 12 months after the termination of the Agreement, by
either party pursuant to Section 8.1(d) of the Agreement based on the
required vote of Issuer's shareholders not being received;
(vi) 2 months after the termination of the Agreement, by
Grantee pursuant to Section 8.1(e) or (f) thereof as a result of a breach
by Issuer, unless such breach was willful or intentional; or
(vii) 24 months after the termination of the Agreement, by
Grantee pursuant to Section 8.1(e) or (f) thereof as a result of a willful
or intentional breach by Issuer.
(b) The term "Preliminary Purchase Event" shall mean any of the
following events or transactions occurring on or after the date hereof and prior
to an Exercise Termination Event:
(i) Issuer without having received Grantee's prior written
consent, shall have entered into any letter of intent or definitive
agreement to engage in an Acquisition Transaction (as defined below) with
any Person (as defined below) other than Grantee or any of its subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall
have recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction with any Person (as the term "person" is defined in
Sections 3(a)(9) and 13(d)(3) of the
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Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations thereunder) other than Grantee or any Grantee
Subsidiary. For purposes of this Option Agreement "Acquisition Transaction"
shall mean (x) a merger, consolidation or other business combination
involving Issuer, (y) a purchase, lease or other acquisition of all or
substantially all of the assets and/or liabilities of Issuer, (z) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of Beneficial Ownership (as the term
"beneficial ownership" is defined in Regulation 13d-3(a) of the Exchange
Act) of securities representing 10% or more of the voting power of Issuer;
(ii) Any Person (other than Grantee, any Grantee Subsidiary or
any current affiliate of Issuer) shall have acquired Beneficial Ownership
of 10% or more of the outstanding shares of Issuer Common Stock (other than
any Person described as having such beneficial ownership in Issuer's March
31, 2000 proxy statement to shareholders);
(iii) (a) Any Person (other than Grantee or any Grantee
Subsidiary) shall have made a bona fide proposal to Issuer or, by a public
announcement or written communication that is or becomes the subject of
public disclosure, to Issuer's shareholders to engage in an Acquisition
Transaction (including, without limitation, any situation in which any
Person other than Grantee or any Grantee Subsidiary shall have commenced
(as such term is defined in Rule 14d-2 under the Exchange Act), or shall
have filled a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") or the securities rules and regulations of
any federal bank regulatory authority, with respect to a tender offer or
exchange offer to purchase any shares of Issuer Common Stock such that,
upon consummation of such offer, such person would have Beneficial
Ownership of 10% or more of the then outstanding shares of Issuer Common
Stock (such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer", respectively)), and (b) the shareholders of Issuer do not
approve the Merger, as defined in the Agreement, at the Special Meeting of
the Issuer's shareholders referenced in the Agreement;
(iv) There shall exist a willful or intentional breach under the
Agreement by Issuer and such breach would entitle Grantee to terminate the
Agreement;
(v) The Special Meeting of Issuer's shareholders held for the
purpose of voting on the Agreement shall not have been held pursuant to the
Agreement or shall have been canceled prior to termination of the
Agreement, or for any reason whatsoever Issuer's Board of Directors shall
have failed to recommend, or shall have withdrawn or modified in a manner
adverse to Grantee the recommendation of Issuer's Board of Directors, that
Issuer's shareholders approve the Agreement, or if Issuer or Issuer's Board
of Directors fails to oppose any proposal by any Person (other than Grantee
or any Grantee Subsidiary) respecting an Acquisition Transaction (unless
advised by counsel to Issuer that Issuer's or Issuer's Board of Directors'
failure to so oppose is necessary in order to satisfy the fiduciary duty
owed by Issuer's Board of Directors to Issuer's shareholders); or
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(vi) Any Person (other than Grantee or any Grantee Subsidiary)
shall have filed an application or notice with the Board of Governors of
the Federal Reserve System (the "FRB"), the Federal Deposit Insurance
Corporation (the "FDIC"), the Connecticut Banking Commissioner (the
"Commissioner"), the Office of Thrift Supervision ("OTS") or other
regulatory or administrative agency or commission (each, a "Governmental
Authority") for approval to engage in an Acquisition Transaction.
(c) The term "Purchase Event" shall mean any of the following events
or transactions occurring on or after the date hereof and prior to an Exercise
Termination Event:
(i) The acquisition by any Person (other than Grantee or any
Grantee Subsidiary) of Beneficial Ownership (other than on behalf of the
Issuer) of 25% or more of the then outstanding Issuer Common; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i) except that the percentage referred to in clause (z)
thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event known to Issuer; provided,
however, that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the "Option Notice," the
date of which being hereinafter referred to as the "Notice Date") specifying (i)
the total number of shares of Issuer Common Stock it will purchase pursuant to
such exercise and (ii) the time (which shall be on a business day that is not
less than three nor more than 10 business days from the Notice Date) on which
the closing of such purchase shall take place (the "Closing Date"); such closing
to take place at the principal office of the Issuer; provided, however, that, if
prior notification to or approval of the FDIC, the FRB, the OTS, the
Commissioner or any other Governmental Authority is required in connection with
such purchase (each, a "Notification" or an "Approval," as the case may be), (a)
Grantee shall promptly file the required notice or application for approval
("Notice/Application"); (b) Grantee shall expeditiously process the
Notice/Application; and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof, any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. On or prior to the Closing Date, Grantee shall have the right to revoke
its exercise of the Option by written notice to the Issuer given not less than
three business days prior to the Closing Date.
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(f) At the closing referred to in Section 2(e) hereof, Grantee shall
pay to Issuer the aggregate purchase price for the number of shares of Issuer
Common Stock specified in the Option Notice in immediately available funds by
wire transfer to a bank account designated by Issuer; provided, however, that
failure or refusal of Issuer to designate such a bank account shall not preclude
Grantee from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f) hereof, Issuer shall deliver to
Grantee a certificate or certificates representing the number of shares of
Issuer Common Stock specified in the Option Notice and, if the Option should be
exercised in part only, a new Option evidencing the rights of Grantee thereof to
purchase the balance of the shares of Issuer Common Stock purchasable hereunder.
(h) Upon the giving by Grantee to Issuer of an Option Notice and the
tender of the applicable purchase price in immediately available funds on the
Closing Date, unless prohibited by applicable law, Grantee shall be deemed to be
the holder of record on the Closing Date of the number of shares of Issuer
Common Stock specified in the Option Notice, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Issuer Common Stock shall not then actually be delivered to
Grantee. Issuer shall pay all expenses and other charges that may be payable in
connection with the preparation, issuance and delivery of stock certificates
under this Section 2 in the name of Grantee.
SECTION 3. Issuer agrees: (i) that it shall at all times until the
termination of this Option Agreement have reserved for issuance upon the
exercise of the Option that number of authorized and reserved shares of Issuer
Common Stock equal to the maximum number of shares of Issuer Common Stock at any
time and from time to time issuable hereunder, all of which shares will, upon
issuance pursuant hereto, be duly authorized, validly issued, fully paid,
nonassessable, and delivered free and clear of all claims, liens, encumbrances
and security interests and not subject to any preemptive rights; (ii) that it
will not, by amendment of its certificate of incorporation or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all reasonable action as may from
time to time be requested by the Grantee, at Grantee's expense (including (x)
complying with all premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. (S) 18a and regulations promulgated
thereunder and (y) in the event prior approval of or notice to the FDIC, the
FRB, the OTS, the Commissioner or any other Governmental Authority, under the
Change in Bank Control Act of 1978, as amended, the Bank Holding Company Act, as
amended, Section 36a-181 or Section 36a-184, as applicable, of the Connecticut
Bank Holding Company Act, Section 1464 of the Home Owners' Loan Act, or any
other applicable federal or state banking law, is necessary before the Option
may be exercised, cooperating with Grantee in preparing such applications or
notices and providing such information to each such Governmental Authority as it
may require in order to permit Grantee to exercise the Option and Issuer duly
and effectively to issue shares of Issuer Common
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Stock pursuant hereto; and (iv) to take all action provided herein to protect
the rights of Grantee against dilution.
SECTION 4. This Option Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Option Agreement at the principal office of Issuer, for other
Option Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same conditions
as are set forth herein, in the aggregate the same number of shares of Issuer
Common Stock purchasable hereunder. The terms "Option Agreement" and "Option" as
used herein include any agreements and related options for which this Option
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Option Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Option Agreement, if mutilated, Issuer will execute and
deliver a new Option Agreement of like tenor and date.
SECTION 5. The number of shares of Issuer Common Stock purchasable upon
the exercise of the Option shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in the type or number of shares of
Issuer Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or other issuances of additional shares (other than pursuant to the exercise of
the Option), or redemptions, repurchases, retirements or other reductions of
outstanding shares, the type and number of shares of Issuer Common Stock
purchasable upon exercise hereof shall be appropriately adjusted and proper
provision shall be made so that, in the event that any shares of Issuer Common
or Preferred Stock are to be issued or otherwise become outstanding or cease to
be outstanding as a result of any such change (other than pursuant to an
exercise of the Option), the number of shares of Issuer Common Stock that remain
subject to the Option shall be increased or decreased (as applicable) so that,
after such issuance and together with the shares of Issuer Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on account
of any of the foregoing changes in the Issuer Common Stock), such number of
shares of Issuer Common Stock shall equal 19.9% of the number of shares of
Issuer Common and Preferred Stock then issued and outstanding, treating each
share of Issuer Preferred Stock as the equivalent of 1.75 shares of Issuer
Common Stock.
(b) Whenever the number of shares of Issuer Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Issuer Common Stock purchasable after the adjustment.
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SECTION 6. (a) Upon the occurrence of a Purchase Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
(whether on its own behalf or on behalf of any subsequent holder of the Option
(or part thereof) or of any of the shares of Issuer Common Stock issued pursuant
hereto), promptly prepare and keep current an offering circular which meets the
standards of a shelf registration statement filed with the Securities and
Exchange Commission under the Securities Act covering any shares issued and
issuable pursuant to the Option and shall use its best efforts to cause such
offering circular to be updated and to remain current and effective for a period
not in excess of 12 months, in order to permit the sale or other disposition of
any shares of Issuer Common Stock issued upon total or partial exercise of the
Option ("Option Shares") in accordance with any plan of disposition requested by
Grantee. Grantee shall provide all information reasonably requested by Issuer
for inclusion in any offering circular or, if applicable, registration statement
to be filed hereunder. In connection with any such offering circular, Issuer and
Grantee shall provide each other with representations, warranties, indemnities
and other agreements customarily given in connection with such registration. If
requested by Grantee, Issuer and Grantee shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating themselves in respect of representations, warranties,
indemnities and other agreements customarily included in such secondary offering
underwriting agreements. The requirement of this Section 6(a) for Issuer to
prepare an offering circular may be satisfied by appropriate compliance with the
analogous public offering requirements of the OTS.
(b) In the event that Grantee requests Issuer to prepare an offering
circular or, if applicable, to file a registration statement following the
failure to obtain any approval required to exercise the Option as described in
Section 9 hereof, the closing of the sale or other disposition of the Issuer
Common Stock or other securities pursuant to such offering circular or, if
applicable, registration statement shall occur substantially simultaneously with
the exercise of the Option.
(c) Concurrently with the preparation and filing of a registration
statement under Section 6(a) hereof, Issuer shall also make all filings required
to comply with state securities laws in such number of states as Grantee may
reasonably request.
SECTION 7. (a) Upon the occurrence of a Repurchase Event (as defined
herein) that occurs prior to an Exercise Termination Event, (i) at the request
delivered to Issuer within 90 days after Grantee receives actual notice of such
occurrence (the date of such request being the "Option Repurchase Request Date")
of Grantee, Issuer shall repurchase, subject to compliance with applicable law
and out of funds legally available therefor, the Option from Grantee at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which the Option may then be exercised and (ii) at
the request delivered to Issuer within 90 days after Grantee receives actual
notice of such occurrence (the date of such request being the "Option Share
Repurchase Request Date") of the owner of Option Shares from time to time (the
"Owner"), Issuer shall repurchase such number of the Option Shares from the
Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the market/offer price multiplied by the number of
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Option Shares so designated. The term "market/offer price" shall mean the
highest of (i) the price per share of Issuer Common Stock at which a tender
offer or exchange offer therefor has been made after the date hereof and on or
prior to the Option Repurchase Request Date or the Option Share Repurchase
Request Date, as the case may be, (ii) the price per share of Issuer Common
Stock paid or to be paid by any third party pursuant to an agreement with Issuer
(whether by way of a merger, consolidation or otherwise), (iii) the average of
the 20 highest last sale prices for shares of Issuer Common Stock as reported
within the 90-day period ending on the Option Repurchase Request Date or the
Option Share Repurchase Request Date, as the case may be, and (iv) in the event
of a sale of all or substantially all of Issuer's assets, the sum of the price
paid in such sale for such assets and the current market value of the remaining
assets of Issuer as determined by an investment banking firm selected by Grantee
or the Owner, as the case may be, and reasonably acceptable to Issuer, divided
by the number of shares of Issuer Common Stock outstanding at the time of such
sale. In determining the market/offer price, the value of consideration other
than cash shall be the value determined by an investment banking firm selected
by Grantee or the Owner, as the case may be, and reasonably acceptable to
Issuer. The investment banking firm's determination shall be conclusive and
binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Option Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within 30 business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price or the portion thereof, if any, that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) Issuer hereby undertakes to use its reasonable best efforts to
obtain all required regulatory, shareholder and legal approvals and to file any
required notices as promptly as practicable in order to accomplish any
repurchase contemplated by this Section 7. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation from repurchasing any
Option and/or any Option Shares in full, Issuer shall promptly so notify Grantee
and/or the Owner and thereafter deliver or cause to be delivered, from time to
time, to Grantee and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively, that it is
no longer prohibited from delivering, within five business days after the date
on which Issuer is no longer so prohibited; provided, however, that if Issuer at
any time after delivery of a notice of repurchase pursuant to Section 7(b)
hereof is prohibited as referred to above, from delivering to Grantee and/or the
Owner, as appropriate, the Option Repurchase Price or the Option Share
Repurchase Price, respectively, in full, Grantee or the Owner, as appropriate,
may revoke its notice of repurchase of the Option or the Option Shares either in
whole or in part
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whereupon, in the case of a revocation in part, Issuer shall promptly (i)
deliver to Grantee and/or the Owner, as appropriate, that portion of the Option
Purchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering after taking into account any such revocation and
(ii) deliver, as appropriate, either (A) to Grantee, a new Option Agreement
evidencing the right of Grantee to purchase that number of shares of Issuer
Common Stock equal to the number of shares of Issuer Common Stock purchasable
immediately prior to the delivery of the notice of repurchase less the number of
shares of Issuer Common Stock covered by the portion of the Option repurchased
or, (B) to the Owner, a certificate for the number of Option Shares covered by
the revocation.
(d) Issuer shall not enter into any agreement with any Person (other
than Grantee or a Grantee Subsidiary) for a Repurchase Event unless the other
Person assumes all the obligations of Issuer pursuant to this Section 7 in the
event that Grantee or the Owner elects, in its sole discretion, to require such
other Person to perform such obligations.
(e) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger, consolidation
or similar transaction involving Issuer or any purchase, lease or other
acquisition of all or substantially all of the assets of Issuer or (ii) upon the
acquisition by any person of beneficial ownership of 25% or more of the then
outstanding shares of Issuer Common, provided, that no such event shall
constitute a Repurchase Event unless a Purchase Event shall have occurred prior
to an Exercise Termination Event.
SECTION 8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate or merge with any Person
(other than Grantee or a Grantee Subsidiary), and Issuer shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any Person (other than Grantee or a Grantee Subsidiary) to merge into
Issuer, and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property or the then outstanding shares of Issuer
Common Stock shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any Person (other
than Grantee or a Grantee Subsidiary) then, and in each such case, such
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below) or (y) any person that controls the Acquiring
Corporation (the Acquiring Corporation and any such controlling person being
hereinafter referred to as the "Substitute Option Issuer").
(b) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as is hereinafter defined) as is equal to the
market/offer price (as defined in Section 7 hereof) multiplied by the number of
shares of Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The
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exercise price of the Substitute Option per share of the Substitute Common Stock
(the "Substitute Purchase Price") shall then be equal to the Option Price
multiplied by a fraction in which the numerator is the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares for which the Substitute Option is
exercisable.
(c) The Substitute Option shall otherwise have the same terms as the
Option, provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Grantee, provided, further that the terms
of the Substitute Option shall include (by way of example and not limitation)
provisions for the repurchase of the Substitute Option and Substitute Common
Stock by the Substitute Option Issuer on the same terms and conditions as
provided in Section 7 hereof.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving corporation, and (iii) the transferee of all or any substantial
part of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute
Option.
(iii) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock as reported, if applicable, on a national
securities exchange or NASDAQ for the one-year period immediately preceding
the consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided, that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of Issuer Common Stock issued by Issuer, the
corporation merging into Issuer or by any company which controls or is
controlled by such merging corporation, as Grantee may elect.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.99% of the shares of
Substitute Common Stock outstanding immediately prior to the issuance of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than such number of shares of Substitute Common Stock but for this
clause (e), the Substitute Option Issuer shall make a cash payment to Grantee
equal to the excess of (i) the value of the Substitute Option without giving
effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee and the Substitute Option Issuer. In addition,
the provisions of Section 5(a) hereof shall not apply to the issuance of any
Substitute Option and for purposes of applying Section 5(a) hereof
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thereafter to any Substitute Option, the percentage referred to in Section 5(a)
hereof shall thereafter equal the percentage that the percentage of the shares
of Substitute Common Stock subject to the Substitute Option bears to the number
of shares of Substitute Common Stock outstanding.
SECTION 9. Notwithstanding Sections 2, 6 and 7 hereof, if Grantee has
given the notice referred to in one or more of such Sections, the exercise of
the rights specified in any such Section shall be extended (a) if the exercise
of such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise; provided,
that in no event shall any closing date occur more than 12 months after the
related notice date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the OTS, the
FDIC, the Commissioner or any other Governmental Authority despite the best
efforts of Issuer or the Substitute Option Issuer, as the case may be, to obtain
such approvals, the exercise of the rights shall be deemed to have been
rescinded as of the related notice date. In the event (a) Grantee receives
official notice that an approval of the OTS, the FDIC, the Commissioner or any
other Governmental Authority required for the purchase and sale of the Option
Shares will not be issued or granted or (b) a closing date has not occurred
within 12 months after the related notice date due to the failure to obtain any
such required approval, Grantee shall be entitled to exercise the Option in
connection with the concurrent resale of the Option Shares pursuant to a
registration statement as provided in Section 6 hereof. Nothing contained in
this Option Agreement shall restrict Grantee from specifying alternative means
of exercising rights pursuant to Sections 2, 6 or 7 hereof in the event that the
exercising of any such rights shall not have occurred due to the failure to
obtain any required approval referred to in this Section 9.
SECTION 10. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has the requisite corporate power and authority to execute
and deliver this Option Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Option Agreement and the
consummation of the transactions contemplated hereby have been duly approved by
the Board of Directors of Issuer and no other corporate proceedings on the part
of Issuer are necessary to authorize this Option Agreement or to consummate the
transactions so contemplated. This Option Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Issuer,
enforceable against Issuer in accordance with its terms, subject to any required
Governmental Approval, and except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought; and
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Option
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Agreement in accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Issuer Common Stock equal to
the maximum number of shares of Issuer Common Stock at any time and from time to
time issuable hereunder, and all such shares, upon issuance pursuant hereto,
will be duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights.
SECTION 11. Neither of the parties hereto may assign any of its rights or
delegate any of its obligations under this Option Agreement or the Option
created hereunder to any other Person without the express written consent of the
other party, except that Grantee may assign this Option Agreement to a wholly
owned subsidiary of Grantee and Grantee may assign its rights hereunder in whole
or in part within 90 days after the occurrence of a Preliminary Purchase Event
that shall have occurred prior to an Exercise Termination Date; provided,
however, that until the date 15 days after the OTS approves an application by
Grantee to acquire the shares of Issuer Common Stock subject to the Option,
Grantee may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which no one party
acquires the right to purchase shares having in excess of 2% of the voting power
of the voting shares of Issuer, (iii) an assignment to a single party (e.g. a
broker or investment banker for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf), or (iv) any other manner approved by
the OTS. The term "Grantee" as used in this Option Agreement shall also be
deemed to refer to Grantee's permitted assigns.
SECTION 12. Each of Grantee and Issuer will use its reasonable efforts to
make all filings with, and to obtain consents of, all third parties and
Governmental Authorities necessary to the consummation of the transactions
contemplated by this Option Agreement, including, without limitation, applying
to the FDIC, the FRB, the OTS, the Commissioner and any other Governmental
Authority for approval to acquire the shares issuable hereunder.
SECTION 13. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Option Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief. Both parties further
agree to waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such equitable relief and that this
provision is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Option Agreement.
SECTION 14. If any term, provision, covenant or restriction contained in
this Option Agreement is held by a court or a federal or state regulatory agency
of competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that Grantee is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7 hereof, the full number of shares
of Issuer Common Stock provided in Section 1 hereof (as adjusted
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pursuant hereto), it is the express intention of Issuer to allow Grantee to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof.
SECTION 15. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in the manner and at the respective addresses of the parties set forth in the
Agreement.
SECTION 16. This Option Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed by
and construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).
SECTION 17. This Option Agreement may be executed in counterparts, each of
which shall be considered one and the same agreement and each of which shall be
deemed to be an original, and shall become effective when counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
SECTION 18. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder.
SECTION 19. Except as otherwise expressly provided herein or in the
Agreement, this Option Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Option Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Option Agreement, except as expressly
provided herein.
SECTION 20. Capitalized terms used in this Option Agreement and not
defined herein but defined in the Agreement shall have the meanings assigned
thereto in the Agreement.
SECTION 21. Nothing contained in this Option Agreement shall be deemed to
authorize or require Issuer or Grantee to breach any provision of the Agreement
or any provision of law applicable to the Grantee or Issuer.
SECTION 22. In the event that any election or determination is to be made
by Grantee or the Owner hereunder and at the time of such election or
determination there is more than one Grantee or Owner, such election shall be
made by a majority in interest of such Grantees or Owners.
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SECTION 23. In the event of any exercise of the option by Grantee, Issuer
and such Grantee shall execute and deliver all other documents and instruments
and take all other action that may be reasonably necessary in order to
consummate the transactions provided for by such exercise.
SECTION 24. Except to the extent Grantee exercises the Option, Grantee
shall have no rights to vote or receive dividends or have any other rights as a
shareholder with respect to shares of Issuer Common Stock covered hereby.
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IN WITNESS WHEREOF, each of the parties has caused this Option Agreement to
be executed and delivered on its behalf by their respective officers thereunto
duly authorized, all as of the date first above written.
NUTMEG FEDERAL SAVINGS & LOAN
ASSOCIATION
By: /s/ Paul N. Jaber
-----------------------------------------
Paul N. Jaber
Its: Chairman of the Board
NEWMIL BANCORP, INC.
By: /s/ Francis J. Wiatr
-----------------------------------------
Francis J. Wiatr
Its: Chairman, President and Chief Executive
Officer
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