AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NEWMIL BANCORP, INC.,
NEW MILFORD SAVINGS BANK
AND
NUTMEG FEDERAL SAVINGS & LOAN ASSOCIATION
DATED AS OF
MAY 30, 2000
TABLE OF CONTENTS
ARTICLE I - THE MERGER
1.1 The Merger
1.2 Effective Time
1.3 Effects of the Merger
1.4 Conversion of Nutmeg Capital Stock
1.5 New Milford Savings Bank Common Stock
1.6 Options
1.7 Charter
1.8 Bylaws
1.9 Directors and Executive Officers
1.10 Tax Consequences
ARTICLE II - EXCHANGE OF SHARES
2.1 NewMil to Make Merger Consideration Available
2.2 Exchange of Cash and Shares
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF NUTMEG
3.1 Corporate Organization
3.2 Capitalization
3.3 Authority; No Violation
3.4 Consents and Approvals
3.5 Loan Portfolio; Reports
3.6 Financial Statements; Books and Records
3.7 Broker's Fees
3.8 Absence of Certain Changes or Events
3.9 Legal Proceedings
3.10 Taxes and Tax Returns
3.11 Employee Benefit Plans
3.12 Certain Contracts
3.13 Agreements with Regulatory Agencies
3.14 Takeover Laws; Certificate of Incorporation
3.15 Environmental Matters
3.16 Reserves for Losses
3.17 Properties and Assets
3.18 Insurance
3.19 Compliance with Applicable Laws
3.20 Loans
3.21 Affiliates
3.22 Ownership of NewMil Common Stock
3.23 Fairness Opinion
3.24 Community Reinvestment Act and Consumer Compliance
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF NEWMIL
4.1 Corporate Organization
4.2 Capitalization
4.3 Authority; No Violation
4.4 Consents, Approvals and Reports
4.5 Financial Statements; Exchange Act Filings; Books and Records
4.6 Absence of Certain Changes or Events
4.7 Ownership of Nutmeg Common Stock; Affiliates and Associates
4.8 Employee Benefit Plans
4.9 Agreements with Regulatory Agencies
4.10 Community Reinvestment Act and Consumer Compliance
4.11 Legal Proceedings
4.12 Taxes and Tax Returns
4.13 Compliance with Applicable Laws
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of Nutmeg
5.1 A Loan Servicing Rights
5.2 Covenants of NewMil
5.3 Merger Covenants
5.4 Compliance with Antitrust Laws
ARTICLE VI - ADDITIONAL AGREEMENTS
6.1 Regulatory Matters
6.2 Access to Information
6.3 Shareholder Meetings
6.4 Legal Conditions to Merger
6.5 Stock Exchange Listing
6.6 Employees; Employment and Other Agreements
6.7 Indemnification
6.8 Subsequent Interim and Annual Financial Statements
6.9 Additional Agreements
6.10 Advice of Changes
6.11 Current Information
6.12 Execution and Authorization of Bank Merger Agreement
6.13 Change in Structure
6.14 Transaction Expenses of Nutmeg
ARTICLE VII - CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger
7.2 Conditions to Obligations of NewMil and New Milford Savings Bank
7.3 Conditions to Obligations of Nutmeg
ARTICLE VIII - TERMINATION AND AMENDMENT
8.1 Termination
8.2 Effect of Termination
8.3 Amendment
8.4 Extension; Waiver
ARTICLE IX - GENERAL PROVISIONS
9.1 Closing
9.2 Nonsurvival of Representations, Warranties, Covenants and Agreements
9.3 Expenses; Breakup Fee
9.4 Notice
9.5 Interpretation
9.6 Counterparts
9.7 Entire Agreement
9.8 Governing Law
9.9 Enforcement of Agreement
9.10 Severability
9.11 Publicity
9.12 Assignment; Limitation of Benefits
9.13 Additional Definitions
This AGREEMENT AND PLAN OF MERGER, dated as of May 30, 2000
(this "Agreement"), is entered into by and among NewMil Bancorp,
Inc., a Delaware corporation ("NewMil"), New Milford Savings Bank,
a Connecticut savings bank and wholly owned subsidiary of NewMil
("New Milford Savings Bank"), and Nutmeg Federal Savings & Loan
Association, a federally chartered savings association ("Nutmeg").
(New Milford Savings Bank and Nutmeg are sometimes collectively
referred to herein as the "Constituent Banks".)
WHEREAS, the Boards of Directors of NewMil, New Milford
Savings Bank and Nutmeg have determined that it is in the best
interests of their respective companies and shareholders to
consummate the business combination transaction provided for herein
in which Nutmeg will, subject to the terms and conditions set forth
herein, merge with and into New Milford Savings Bank, with New
Milford Savings Bank being the "Surviving Bank" and a wholly owned
subsidiary of NewMil (the "Merger");
WHEREAS, prior to the consummation of the Merger, New Milford
Savings Bank and Nutmeg will enter into articles of combination and
bank merger agreement, substantially in the form attached hereto as
Exhibit A (the "Bank Merger Agreement"), providing for the Merger;
WHEREAS, as an inducement to NewMil to enter into this
Agreement, Nutmeg will enter into an option agreement, in the form
attached hereto as Exhibit B (the "Option Agreement"), with NewMil
immediately following the execution of this Agreement pursuant to
which Nutmeg will grant NewMil an option to purchase, under certain
circumstances, an aggregate of 457,280 newly issued shares of
common stock, par value $.003 per share, of Nutmeg ("Nutmeg Common
Stock") upon the terms and conditions therein contained; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I - THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement, in
accordance with the Banking Law of Connecticut (the "Connecticut
Banking Law") and the rules and regulations of the Office of Thrift
Supervision (the "OTS"), at the Effective Time (as defined in
Section 1.2 hereof), Nutmeg shall merge into New Milford Savings
Bank, with New Milford Savings Bank being the Surviving Bank in the
Merger. Upon consummation of the Merger, the corporate existence
of Nutmeg shall cease and the Surviving Bank shall continue to
exist as a Connecticut chartered savings bank under the Connecticut
Banking Law and a wholly owned subsidiary of NewMil.
1.2 Effective Time.
The Merger shall become effective on the Closing Date (as
defined in Section 9.1 hereof), as set forth in the Bank Merger
Agreement which shall be filed with the Secretary of State of the
State of Connecticut (the "Connecticut Secretary of State"). The
term "Effective Time" shall be the date and time when the Merger
becomes effective as set forth in the Bank Merger Agreement.
1.3 Effects of the Merger.
At and after the Effective Time, the Merger shall have the
effects set forth in Section 36a-126(a) of the Connecticut Banking
Law.
1.4 Conversion of Nutmeg Capital Stock.
(a) At the Effective Time, subject to Sections 1.4(b),
1.4(e) and 2.2 hereof, each share of Nutmeg Common Stock and each
share of Class B Preferred Stock, par value $.005 per share, of
Nutmeg ("Nutmeg Preferred Stock" which, together with Nutmeg Common
Stock, the "Nutmeg Capital Stock") issued and outstanding prior to
the Effective Time shall, at the election of the holders thereof as
provided in Section 2.2 hereof, be converted and exchangeable into
the Merger Consideration consisting of either:
(i) in the case of Nutmeg Common Stock, the right to
receive that number of shares of NewMil common stock, par value
$.50 per share ("NewMil Common Stock"), determined by dividing
$8.25 (the "Base Value") by the Base Period Trading Price (as
defined below), as may be adjusted as provided in Section 1.4(b)
hereof, computed to three decimal places (the "Exchange Ratio")
and, in the case of Nutmeg Preferred Stock, that number of shares
of NewMil Common Stock as shall equal 1.75 times the Exchange
Ratio, provided that if the number of shares of Nutmeg Capital
Stock (adjusted to treat each share of Nutmeg Preferred Stock as
1.75 shares of Nutmeg Capital Stock) as to which the holders
thereof elect to receive NewMil Common Stock pursuant to this
Section 1.4(a)(i) exceeds 60% of the outstanding shares of Nutmeg
Capital Stock (as so adjusted), then the number of shares of Nutmeg
Capital Stock (as so adjusted) that shall be exchangeable for
NewMil Common Stock may be reduced, at the discretion of NewMil, as
provided in Section 2.2(e) hereof to a number which shall not be
less than 60% of the number of outstanding shares of Nutmeg Capital
Stock (as so adjusted) plus the number of shares of Nutmeg Common
Stock subject to options outstanding at the Effective Time. The
Exchange Ratio will therefore fluctuate without limits depending
upon the Base Trading Price. Subject to the provisions of the next
succeeding sentence of this Subsection 1.4(a)(i), the term "Base
Period Trading Price" shall mean the average of the high and low
quotations per share for NewMil Common Stock for the 15 consecutive
trading days on which shares of NewMil Common Stock are actually
traded (as reported in the Wall Street Journal NASDAQ National
Market Issues) ending on the third trading day preceding the
Closing Date (such period herein called the "Base Period"). In the
event that at any time prior to the Closing Date NewMil shall have
publicly announced any transaction pursuant to which NewMil expects
to experience a "Purchase Event" (as described in the Exhibit B
Option Agreement attached hereto and incorporated herein), then in
such event the Base Period shall be the fifteen consecutive trading
days on which shares of NewMil Common Stock are actually traded
ending on the day preceding the period of fifteen consecutive
trading days ending on the date of such public announcement. For
the purposes of this Agreement, references to NewMil Common Stock
shall be deemed to include, where appropriate, references to the
right to purchase shares of NewMil's Common Stock pursuant to the
Rights Agreement, dated as of July 19, 1994, as amended, between
NewMil and American Stock Transfer & Trust Company (the "Rights
Agreement"); or
(ii) in the case of Nutmeg Common Stock, the right to
receive the Base Value in cash, without interest, adjusted as
provided in Section 1.4(b) hereof and, in the case of Nutmeg
Preferred Stock, the right to receive 1.75 times the Base Value,
without interest, adjusted as provided in Section 1.4(b) hereof,
provided that if the number of shares of Nutmeg Capital Stock (as
adjusted to treat each share of Nutmeg Preferred Stock as 1.75
shares of Nutmeg Capital Stock) as to which the holders thereof
elect to receive cash, as provided in this Section 1.4(a)(ii),
exceeds 50% of the outstanding shares of Nutmeg Capital Stock (as
so adjusted), then the number of shares of Nutmeg Capital Stock (as
so adjusted) that shall be exchangeable for cash may be reduced, at
the discretion of NewMil, as provided in Section 2.2(e) hereof, to
a number that shall not be less than 50% of the number of
outstanding shares of Nutmeg Capital Stock (as so adjusted) plus
the number of shares of Nutmeg Common Stock subject to options at
the Effective Time, provided that the cash portion of the Merger
Consideration shall not be greater than an amount that is
consistent with the issuance of the opinion referred to in Section
7.1(f) hereof.
(b) Nutmeg owns certain loan servicing rights (the
"Loan Servicing Rights"). Prior to the Closing Date, Nutmeg shall
sell the Loan Servicing Rights for cash. The Merger Consideration
shall be adjusted by adding to the Base Amount the positive
difference per share of Nutmeg Capital Stock (adjusted to treat
each share of Nutmeg Preferred Stock as 1.75 shares of Nutmeg
Capital Stock and including unexercised options) between (i) the
sales price received by Nutmeg from the sale of the Loan Servicing
Rights, net of all expenses and costs related to the sale and net
of all taxes (including income or business taxes) payable by reason
of such sale, and (ii) the book value of the Loan Servicing Rights
appropriately amortized to the date of the sale of the Loan
Servicing Rights, all to be determined in accordance with generally
accepted accounting principles.
(c) All of the shares of Nutmeg Capital Stock converted
and exchangeable as provided in this Article I shall no longer be
outstanding and shall automatically be canceled and shall cease to
exist, and each certificate (each a "Certificate") previously
representing any such shares of Nutmeg Capital Stock shall
thereafter represent the right to receive either (i) the number of
whole shares of NewMil Common Stock (and, if applicable, cash in
lieu of any fractional shares) into which the shares of Nutmeg
Capital Stock represented by such Certificate have been converted
pursuant to Section 1.4(a)(i) or (ii) the amount of cash payable as
provided in Section 1.4(a)(ii). Certificates previously
representing shares of Nutmeg Capital Stock shall be exchanged for
(x) certificates representing whole shares of NewMil Common Stock
(and, if applicable, cash in lieu of fractional shares) issued in
consideration therefor or (y) cash, upon the surrender of such
Certificates in accordance with Section 2.2 hereof.
(d) At the Effective Time, all shares of Nutmeg Capital
Stock that are owned by Nutmeg as treasury stock and all shares of
Nutmeg Capital Stock that are owned directly or indirectly by
NewMil or Nutmeg or any of NewMil's Subsidiaries (as defined in
Section 9.13 hereof) (other than shares of Nutmeg Capital Stock
held directly or indirectly in trust accounts, managed accounts and
the like or otherwise held in a fiduciary capacity that are
beneficially owned by third parties (any such shares, whether held
directly or indirectly by NewMil or Nutmeg, as the case may be,
being referred to herein as "Trust Account Shares") and other than
any shares of Nutmeg Capital Stock held by NewMil or Nutmeg or any
of NewMil's Subsidiaries in respect of a debt previously contracted
(any such shares, whether held directly or indirectly by NewMil or
Nutmeg, being referred to herein as "DPC Shares") shall be canceled
and shall cease to exist and no stock of NewMil or other
consideration shall be delivered in exchange therefor. All shares
of NewMil Common Stock that are owned by Nutmeg (other than Trust
Account Shares and DPC Shares) shall become treasury stock of
NewMil.
(e) Certificates for fractions of shares of NewMil
Common Stock will not be issued. In lieu of a fraction of a share
of NewMil Common Stock, each holder of Nutmeg Capital Stock
otherwise entitled to a fraction of a share of NewMil Common Stock
shall be entitled to receive an amount of cash equal to (i) the
fraction of a share of the NewMil Common Stock to which such holder
would otherwise be entitled, multiplied by (ii) $8.25, as adjusted
as provided in Section 1.4(b) hereof. Following consummation of
the Merger, no holder of Nutmeg Capital Stock shall be entitled to
dividends or any other rights in respect of any such fraction.
1.5 New Milford Savings Bank Common Stock.
At the Effective Time, the shares of the common stock, par
value $.50 per share, of New Milford Savings Bank issued and
outstanding immediately prior to the Effective Time shall
constitute all of the issued and outstanding shares of the
Surviving Bank.
1.6 Options.
At the Effective Time, each option granted by Nutmeg to
purchase shares of Nutmeg Common Stock under the Directors'
Incentive Option Plan, the Directors' Option Plan for Non-Employee
Directors (collectively, the "Director Stock Option Plans"), the
1998 Employee Stock Option Plan, the 1994 Stock Option Incentive
Plan (for employees), and the 1986 Stock Option Reserve Plan (the
preceding three option plans shall be referred to as the "Employee
Stock Option Plans") (collectively, all five option plans shall be
referred to as the "Nutmeg Stock Plans") which is outstanding and
unexercised immediately prior thereto shall be converted
automatically into cash or payment in NewMil Common Stock equal to
the difference between the option exercise price and $8.25
(adjusted, as necessary, as provided in Section 1.4(b) above). The
payment will be in cash or NewMil Common Stock based on the option
holder's election as provided in Section 2.2 hereof. Payment in
NewMil Common Stock shall be based on the Exchange Ratio.
1.7 Charter.
At the Effective Time, the Certificate of Incorporation of New
Milford Savings Bank, as amended (the "Charter"), as in effect
immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Bank.
1.8 Bylaws.
At the Effective Time, the Bylaws, as amended (the "Bylaws"),
of New Milford Savings Bank, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Bank.
1.9 Directors and Executive Officers.
At the Effective Time, the directors and executive officers of
New Milford Savings Bank immediately prior to the Effective Time
shall be, together with the three directors selected from Nutmeg's
Board of Directors as provided in this Section 1.9, the directors
and executive officers of the Surviving Bank, and New Milford
Savings Bank and NewMil shall each, at the Effective Time, increase
their respective directorships and fill by appointment the
vacancies created thereby with three persons who are directors of
Nutmeg. The three Nutmeg directors to be appointed to both boards
are Messrs. Paul N. Jaber, John Otto, and Anthony M. Rizzo,Sr. (the
"Designated Directors"). Should any of the Designated Directors
become unavailable to serve as a director of NewMil and New Milford
Savings Bank for any reason prior to the Effective Time, a
substitute designee will be proposed by Nutmeg and, subject to the
consent of the Nominating Committees of the Boards of Directors of
New Milford Savings Bank and NewMil, will be so appointed. The
Designated Directors shall be appointed to serve terms, each within
a separate class of directors, consistent with the three year
staggered voting procedure currently in place at NewMil and New
Milford Savings Bank, and NewMil and New Milford Savings Bank shall
nominate for re-election the person whose term is the first to
expire of the Designated Directors so appointed, subject to the
continued qualification of such person under NewMil's and New
Milford Savings Bank's general criteria for the nomination and
election of directors. The non-employee directors of Nutmeg serving
immediately prior to the Effective Time will be invited to serve on
the advisory board currently being organized for New Milford
Savings Bank after the Merger to serve for a period of at least 12
months.
1.10 Tax Consequences.
It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code,
and that this Agreement shall constitute a "plan of reorganization"
for the purposes of the Code.
ARTICLE II - EXCHANGE OF SHARES
2.1 NewMil to Make Merger Consideration Available.
At or prior to the Effective Time, NewMil shall deposit, or
shall cause to be deposited, with NewMil's transfer agent, American
Stock Transfer & Trust Company, or such other bank, trust company
or transfer agent as NewMil may select (the "Exchange Agent"), for
the benefit of the holders of Certificates, for exchange in
accordance with this Article II, (i) the cash consideration
pursuant to Section 1.4(a)(ii) hereof and (ii) certificates
representing the shares of NewMil Common Stock and the cash in lieu
of fractional shares pursuant to Section 1.4(a)(i) hereof (such
cash and certificates for shares of NewMil Common Stock, being
hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Section 1.4 and paid pursuant to Section 2.2(a) hereof
in exchange for outstanding shares of Nutmeg Capital Stock.
2.2 Exchange of Cash and Shares.
(a) Prior to the date of the special meeting of
Nutmeg's shareholders (the "Special Meeting") contemplated in
Section 6.3 hereof, NewMil shall prepare a form, subject to review
and comment by Nutmeg (an "Election Form"), pursuant to which a
holder of shares of Nutmeg Capital Stock may specify the number of
such shares owned by such holder that such holder desires to be
converted into a right to receive cash in the Merger and the number
of shares of Nutmeg Capital Stock owned by such holder that such
holder desires to be converted into a right to receive shares of
NewMil Common Stock in the Merger. Nutmeg shall cause an Election
Form to be included with the notice of the Special Meeting to be
sent to the holders of Nutmeg Capital Stock and mailed to each such
holder as of the record date for the Special Meeting (such
shareholders hereinafter referred to as "Election Eligible
Shareholders"). Only Election Eligible Shareholders shall have the
right to receive and submit an Election Form.
(b) Each Election Eligible Shareholder (other than holders of
shares of Nutmeg Capital Stock which, in accordance with Section
1.4 (d) hereof, are to be canceled in the Merger) shall have the
right to specify in an Election Form the number of shares owned by
such holder that such holder desires to have converted into a right
to receive cash in the Merger (a "Cash Election") and the number of
Shares owned by such holder that such holder desires to have
converted into a right to receive shares of NewMil Common Stock in
the Merger (a "Stock Election"); provided that, subject to the
provisions of Section 2.2(c) hereof, any holders of Non-Electing
Shares shall be deemed to have made a Cash Election. For purposes
of this Agreement, "Non-Electing Shares" means all shares (other
than shares that are to be canceled in the Merger) of Nutmeg
Capital Stock outstanding at the Effective Time as to which neither
an effective Cash Election nor an effective Stock Election was made
as of the Election Deadline. A Cash Election or a Stock Election
shall be effective only if the Exchange Agent appointed by NewMil
pursuant to Section 2.1 hereof shall have received no later than
5:00 p.m. New York City time on the date specified on such Election
Form, which date shall be disclosed on the Election Form and shall
not be earlier than the date of the Special Meeting (the "Election
Deadline"), an Election Form covering the shares to which such Cash
Election and/or Stock Election applies, executed and completed in
accordance with the instructions set forth in such Election Form.
Except as described in the last two sentences of this paragraph, a
Cash Election or Stock Election may be revoked or changed only by
delivering to the Exchange Agent, prior to the Election Deadline,
a written notice of revocation or, in the case of a change, a
properly completed revised Election Form that identifies the
Certificates to which such revised Election Form applies. Delivery
to the Exchange Agent prior to the Election Deadline of a revised
Election Form with respect to any Certificate shall result in the
revocation of all prior Election Forms with respect to all shares
evidenced by such Certificate. Any termination of this Agreement
in accordance with Article VIII shall result in the revocation of
all Election Forms delivered to the Exchange Agent on or prior to
the date of such termination. If an Election Form is revoked
(either by delivery of a written notice of revocation or by
delivery of a revised Election Form), the Certificates to which
such Election Form applies, if previously delivered to the Exchange
Agent, shall be returned to the person revoking such Election Form
unless such person otherwise instructs the Exchange Agent. On the
day following the last day of the Base Period (i.e., the third
trading day preceding the Closing Date), NewMil shall announce a
special, 48-hour election change period by posting such
announcement on its internet web site (www.newmil.com) and filing
a Form 8-K with the Securities and Exchange Commission's ("SEC")
"EDGAR" filing system (www.sec.gov). Such announcement will permit
Election Eligible Shareholders to change their Cash Election or
Stock Election through telephonic and/or electronic transmission to
the Exchange Agent as described in the announcement.
(c) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Certificate
or Certificates who did not submit an effective Cash Election or
Stock Election, a form letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for cash (or for
certificates representing the shares of NewMil Common Stock and, if
applicable, the cash in lieu of fractional shares as determined by
the Exchange Agent in order to best meet the desires of the holders
of Electing Shares to receive either cash or shares of NewMil
Common Stock) into which the shares of Nutmeg Capital Stock
represented by such Certificate or Certificates shall have been
converted pursuant to this Agreement. Nutmeg shall have the right
to review both the letter of transmittal and the instructions prior
to such documents being finalized. Upon surrender of a Certificate
for exchange and cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole shares of NewMil
Common Stock to which such holder of Nutmeg Capital Stock shall
have become entitled pursuant to the provisions of Article I hereof
and, if applicable, a check representing the amount of cash in lieu
of fractional shares or (y) a check representing the amount of cash
which such holder has the right to receive pursuant to the
provisions of Sections 1.4 (a)(ii) hereof in respect of the
Certificate surrendered pursuant to the provision of this Article
II, and the Certificate so surrendered shall forthwith be canceled.
No interest will be paid or accrued on the cash and unpaid
dividends and distributions, if any, payable to holders of
Certificates.
(d) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Certificate
or Certificates a form letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for cash or for
certificates representing the shares of NewMil Common Stock and, if
applicable, the cash in lieu of fractional shares into which the
shares of Nutmeg Capital Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement.
Nutmeg shall have the right to review both the letter of
transmittal and the instructions prior to such documents being
finalized. Upon surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor (x) a certificate
representing that number of whole shares of NewMil Common Stock to
which such holder of Nutmeg Capital Stock shall have become
entitled pursuant to the provisions of Article I hereof and, if
applicable, a check representing the amount of cash in lieu of
fractional shares or (y) a check for the amount of cash which such
holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Article II, and the
Certificate so surrendered shall forthwith be canceled. No
interest will be paid or accrued on any cash payable to holders of
Certificates.
(e) (i) If the holders of Nutmeg Capital Stock shall
have submitted Stock Elections with respect to more than 60% of the
outstanding shares of Nutmeg Capital Stock (adjusted to treat each
share of Nutmeg Preferred Stock as 1.75 shares of Nutmeg Capital
Stock), NewMil may direct the Exchange Agent, as soon as
practicable after the Effective Time, to reduce the number of
shares of Nutmeg Capital Stock that shall be exchangeable for
NewMil Common Stock to a number that is not less than 60% of the
outstanding shares of Nutmeg Capital Stock (as so adjusted) and to
treat the remainder of such shares as shares as to which a Cash
Election has been submitted, such reductions to be allocated among
such holders as nearly as practicable in proportion to their
respective holdings of Nutmeg Capital Stock (as so adjusted) as to
which such Stock Elections have been submitted.
(ii) If the holders of Nutmeg Capital Stock shall
have submitted Cash Elections with respect to more than 50% of the
outstanding shares of Nutmeg Capital Stock (as so adjusted), NewMil
may direct the Exchange Agent, as soon as practicable after the
Effective Time, to reduce the number of shares of Nutmeg Capital
Stock that shall be exchangeable for cash to a number that is not
less than 50% of the outstanding shares of Nutmeg Capital Stock (as
so adjusted) and to treat the remainder of such shares as shares as
to which a Stock Election has been submitted, such reductions to be
allocated among such holders as nearly as practicable in proportion
to their respective holdings of Nutmeg Capital Stock (as so
adjusted) as to which such Cash Elections have been submitted,
provided that the cash portion of the Merger Consideration shall
not be greater than an amount that is consistent with the issuance
of the opinion referred to in Section 7.1(f) hereof.
(f) No dividends or other distributions declared after
the Effective Time with respect to NewMil Common Stock and payable
to the holders of record thereof shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender
such Certificate in accordance with this Article II. After the
surrender of a Certificate in accordance with this Article II, the
record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon,
which theretofore had become payable with respect to shares of
NewMil Common Stock represented by such Certificate. No holder of
an unsurrendered Certificate shall be entitled, until the surrender
of such Certificate, to vote the shares of NewMil Common Stock into
which his Nutmeg Capital Stock shall have been converted.
(g) If any certificate representing shares of NewMil
Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it
shall be a condition of the issuance thereof that the Certificate
so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form
for transfer, and that the person requesting such exchange shall
pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing
shares of NewMil Common Stock in any name other than that of the
registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not payable.
(h) After the close of business on the day immediately
prior to the Effective Time, there shall be no transfers on the
stock transfer books of Nutmeg of the shares of Nutmeg Capital
Stock which were issued and outstanding immediately prior to the
Effective Time. If after the Effective Time, Certificates
representing such shares are presented for transfer to the Exchange
Agent, they shall be canceled and exchanged for cash as provided in
this Article II.
(i) Any portion of the Exchange Fund that remains
unclaimed by the shareholders of Nutmeg for six months after the
Effective Time shall be returned to NewMil. Any shareholders of
Nutmeg who have not theretofore complied with this Article II shall
thereafter look only to NewMil for payment of Merger Consideration
in the form of cash, their shares of NewMil Common Stock, cash in
lieu of fractional shares and unpaid dividends and distributions on
NewMil Common Stock deliverable in respect of each share of Nutmeg
Capital Stock such shareholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of NewMil, Nutmeg, the Exchange
Agent or any other person shall be liable to any former holder of
shares of Nutmeg Capital Stock for any amount properly delivered to
a public official pursuant to applicable abandoned property,
escheat or similar laws.
(j) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by NewMil, the posting by such person of
a bond in such amount as NewMil may reasonably direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will provide the Merger
Consideration in exchange for such lost, stolen or destroyed
Certificate in an amount determined in accordance with Section 1.4
(a) hereof.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF NUTMEG
Nutmeg hereby makes the following representations and
warranties to NewMil and New Milford Savings Bank as set forth in
this Article III, each of which is being relied upon by NewMil and
New Milford Savings Bank as a material inducement to enter into and
perform this Agreement. All of the disclosure schedules of Nutmeg
referenced below and thereby required of Nutmeg pursuant to this
Agreement, which disclosure schedules shall be cross-referenced to
the specific sections and subsections of this Agreement and
delivered herewith, are referred to herein as the "Nutmeg
Disclosure Schedule."
3.1 Corporate Organization.
Nutmeg is a federally chartered savings association duly
organized, validly existing and in good standing under the laws of
the United States of America. The deposit accounts of Nutmeg are
insured by the Federal Deposit Insurance Corporation (the "FDIC")
through the Savings Association Insurance Fund to the fullest
extent permitted by law, and all premiums and assessments required
in connection therewith have been paid by Nutmeg. Nutmeg has the
corporate power and corporate authority to own or lease all of its
properties and assets and to carry on its business as it is now
being conducted and is duly licensed or qualified to do business in
each jurisdiction in which the nature of any business conducted by
it or the character or location of any properties or assets owned
or leased by it makes such licensing or qualification necessary.
The Amended and Restated Certificate of Incorporation and Bylaws,
as amended, (the "Bylaws") of Nutmeg, copies of which have
previously been delivered to NewMil, are true, correct and complete
copies of such documents as in effect as of the date of this
Agreement.
3.2 Capitalization.
(a) The authorized capital stock of Nutmeg consists of
6,000,000 shares of Nutmeg Common Stock and 2,000,000 shares of
Nutmeg Preferred Stock. As of the date hereof, there are (i)
1,435,294 shares of Nutmeg Common Stock issued and outstanding and
no shares of Nutmeg Common Stock held in Nutmeg's treasury, and
(ii) no shares of Nutmeg Common Stock reserved for issuance upon
exercise of outstanding stock options or otherwise, except for (i)
304,756 shares of Nutmeg Common Stock reserved for issuance
pursuant to the Director Stock Option Plans (of which options for
236,139 shares are currently outstanding) and (ii) 293,416 shares
of Nutmeg Common Stock reserved for issuance pursuant to the
Employee Stock Option Plans (of which 292,968 option shares are
currently outstanding); (iii) 384,457 shares of Nutmeg Common
Stock reserved for issuance upon exercise of the option to be
issued to NewMil pursuant to the Option Agreement; (iv) 487,001
shares of Nutmeg Preferred Stock issued and outstanding; and (v) no
shares of Nutmeg Preferred Stock reserved for issuance pursuant to
any option plan. All of the issued and outstanding shares of
Nutmeg Capital Stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof.
Except for the Option Agreement, the aforementioned options to
purchase 598,172 shares of Nutmeg Common Stock issued pursuant to
the Nutmeg Stock Plans, and the conversion privileges of the Nutmeg
Preferred Stock, Nutmeg does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of
any shares of Nutmeg Capital Stock or any securities representing
the right to purchase or otherwise receive any shares of Nutmeg
Capital Stock. The names of the optionees, the date of each option
to purchase Nutmeg Common Stock granted, the number of shares
subject to each such option, the expiration date of each such
option, and the price at which each such option may be exercised
under the Director and Employee Stock Option Plans, are set forth
in Section 3.2(a) of the Nutmeg Disclosure Schedule. Since
December 31, 1999, Nutmeg has not issued any shares of its capital
stock or any securities convertible into or exercisable for any
shares of its capital stock, other than pursuant to the exercise of
director or employee stock options granted prior to December 31,
1999 under the Nutmeg Stock Plans.
(b) Nutmeg has no Subsidiaries and has not owned any
Subsidiaries, other than as set forth in Section 3.2(b) of the
Nutmeg Disclosure Schedule.
3.3 Authority; No Violation.
(a) Nutmeg has full corporate power and corporate
authority to execute and deliver this Agreement, the Bank Merger
Agreement and the Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the Bank Merger Agreement and the
Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of Nutmeg. The Board of Directors of
Nutmeg has directed that this Agreement, the Merger and the other
transactions contemplated hereby be submitted to Nutmeg's
shareholders for approval at the Special Meeting and, except for
the approval of this Agreement, the Merger and the other
transactions contemplated hereby by the requisite vote of Nutmeg's
shareholders, no other corporate proceedings on the part of Nutmeg
(except for matters related to setting the date, time, place and
record date for the Special Meeting) are necessary to approve this
Agreement, the Bank Merger Agreement or the Option Agreement or to
consummate the transactions contemplated hereby or thereby. This
Agreement has been, and the Bank Merger Agreement and the Option
Agreement will be, duly and validly executed and delivered by
Nutmeg and (assuming due authorization, execution and delivery by
NewMil and New Milford Savings Bank of this Agreement, by New
Milford Savings Bank of the Bank Merger Agreement, and by NewMil of
the Option Agreement) will constitute valid and binding obligations
of Nutmeg, enforceable against Nutmeg in accordance with their
terms, except as enforcement may be limited by general principles
of equity whether applied in a court of law or a court of equity
and by bankruptcy, insolvency and similar laws affecting creditors
rights and remedies generally.
(b) Neither the execution and delivery of this
Agreement, the Bank Merger Agreement or the Option Agreement by
Nutmeg, nor the consummation by Nutmeg of the transactions
contemplated hereby or thereby, nor compliance by Nutmeg with any
of the terms or provisions hereof or thereof, will (i) violate any
provision of the Certificate of Incorporation or Bylaws of Nutmeg,
or (ii) assuming that the consents and approvals referred to in
Section 3.4(a) hereof are duly obtained, (x) violate any Laws (as
defined in Section 9.13 hereof) applicable to Nutmeg, or any of its
properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation
of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of Nutmeg under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Nutmeg is a party, or by which it
or any of its properties or assets may be bound or affected.
3.4 Consents and Approvals.
(a) Except for (i) the filing of applications and
notices, as applicable, as to the Merger with the OTS under the
HOLA and the Bank Merger Act and approval of such applications and
notices, (ii) the obtaining of a waiver from the Federal Reserve
Board ("FRB") pursuant to the exception provided in 12 CFR Part
225.12(d), (iii) the filing of applications and notices with the
Banking Commissioner of the State of Connecticut (the "Connecticut
Commissioner") and approval of such applications and notices as to
the Merger (the "State Banking Approvals"), (iv) the filing with
the SEC of a registration statement on Form S-4, which will include
the proxy statement/prospectus to be used in soliciting the
approval of Nutmeg's shareholders at the Special Meeting (the
"Proxy Statement"), to register the shares of NewMil Common Stock
to be issued in connection with the Merger (including the shares of
NewMil Common Stock that may be issued upon the exercise of the
options referred to in Section 1.6 hereof) (the "Registration
Statement"), (v) the approval of this Agreement by the requisite
vote of the shareholders of Nutmeg, (vi) the filings with the OTS
and the Connecticut Secretary of State required in connection with
the Bank Merger Agreement, (vii) such filings, authorizations and
approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states or with The NASDAQ
Stock Market, Inc. (or such other exchange as may be applicable) in
connection with the issuance of the shares of NewMil Common Stock
pursuant to this Agreement, and (viii) such notices, filings,
authorizations, approvals or consents that are set forth in Section
3.4(a) of the Nutmeg Disclosure Schedule, no consents or approvals
of or filings or registrations with any court, administrative
agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third
party are necessary in connection with (1) the execution and
delivery by Nutmeg of this Agreement, the Bank Merger Agreement and
the Option Agreement, and (2) the consummation by Nutmeg of the
Merger, the Option Agreement and the other transactions
contemplated hereby and thereby, except, in each case, for such
consents, approvals or filings, the failure of which to obtain will
not have a Material Adverse Effect (as defined in Section 9.13
hereof) on the ability of NewMil to consummate the transactions
contemplated hereby or thereby.
(b) Nutmeg hereby represents to NewMil that it has no
knowledge of any reason why approval or effectiveness of any of the
applications, notices or filings referred to in Section 3.4(a)
hereof cannot be obtained or granted on a timely basis.
3.5 Loan Portfolio; Reports.
(a) Except as set forth at Section 3.5(a) of the Nutmeg
Disclosure Schedule, as of December 31, 1999 and thereafter through
and including the date of this Agreement, Nutmeg was not a party to
any written or oral loan agreement, note or borrowing arrangement
(including, without limitation, leases, credit enhancements,
commitments, guarantees and interest-bearing assets) (collectively,
"Loans"), with any director, officer or five percent or greater
shareholder of Nutmeg or any Affiliated Person (as defined in
Section 9.13 hereof) of the foregoing.
(b) Nutmeg has timely filed all reports, registrations
and statements, together with any amendments required to be made
with respect thereto, that it was required to file with (i) the
OTS, (ii) the FDIC and any self-regulatory organization ("SRO")
(collectively "Regulatory Agencies"). Except for normal
examinations conducted by a Regulatory Agency in the regular course
of the business of Nutmeg, no Governmental Entity is conducting, or
has conducted, any proceeding or investigation into the business or
operations of Nutmeg nor does Nutmeg have knowledge of any pending
or threatened proceeding or investigation.
3.6 Financial Statements; Books and Records.
(a) Nutmeg has previously delivered to NewMil true,
correct and complete copies of (a) the balance sheets of Nutmeg as
of December 31 for the years 1997, 1998, and 1999 and the related
statements of income, changes in stockholders equity and cash
flows for the years 1996 through 1999, inclusive, in each case
accompanied by the audit report of Seward and Monde, independent
public accountants with respect to Nutmeg, and (b) the unaudited
balance sheets of Nutmeg as of March 31, 2000 and the related
comparative unaudited statements of income, changes in stockholders
equity and cash flows for the three month periods ended March 31,
1999 and 2000. The financial statements referred to in this
Section 3.6(a) (including the related notes, where applicable)
fairly present, and the financial statements referred to in Section
6.8 hereof will fairly present (subject, in the case of the
unaudited statements, to recurring audit adjustments normal in
nature and amount), the results of the operations and financial
condition of Nutmeg for the respective fiscal periods or as of the
respective dates therein set forth; each of such statements
(including the related notes, where applicable) comply, and the
financial statements referred to in Section 6.8 hereof will comply,
with applicable accounting requirements and with the published
rules and regulations of the OTS and FDIC with respect thereto; and
each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in
Section 6.8 hereof will be, prepared in accordance with generally
accepted accounting principles ("GAAP") during the periods
involved, except in each case as indicated in such statements or in
the notes thereto. The annual reports and quarterly reports that
Nutmeg has sent to shareholders since December 31, 1997 do not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not
misleading, and Nutmeg has previously delivered or made available
to NewMil true, correct and complete copies of such reports. The
books and records of Nutmeg have been, and are being, maintained in
all material respects in accordance with GAAP and any other
applicable legal and accounting requirements.
(b) Except and to the extent (i) reflected, disclosed or
provided for in the financial statements as of December 31, 1999
referred to above, (ii) of liabilities incurred since December 31,
1999 in the ordinary course of business and consistent with past
practice, and (iii) of liabilities related to the Agreement, Nutmeg
has no material liabilities, whether absolute, accrued, contingent
or otherwise.
(c) The minute books of Nutmeg contain records of all
meetings and other corporate action held of its shareholders and
Board of Directors (including committees thereof) and are complete
and accurate in all material respects.
3.7 Broker's Fees.
Neither Nutmeg nor any of its officers or directors has
employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any
of the transactions contemplated by this Agreement, the Bank Merger
Agreement or the Option Agreement, except that Nutmeg has engaged,
and will pay a fee to McConnell, Budd & Downes, Inc. ("MB&D") in
accordance with the terms of a letter agreement between MB&D and
Nutmeg dated June 25, 1998, a true, complete and correct copy of
which is attached hereto as Section 3.7 of the Nutmeg Disclosure
Schedule.
3.8 Absence of Certain Changes or Events.
(a) Except as disclosed in Nutmeg's balance sheet as of
December 31, 1999 referred to in Section 3.6(a) hereof or Nutmeg's
balance sheet as of March 31, 2000 referred to in Section 3.6(a)
hereof, since December 31, 1997 (i) Nutmeg has not incurred any
material liability, except as contemplated by this Agreement or in
the ordinary course of its business consistent with its past
practices, and (ii) no event has occurred which has had, or is
likely to have, individually or in the aggregate, a Material
Adverse Effect on Nutmeg.
(b) Since December 31, 1999 Nutmeg has carried on its
businesses in the ordinary and usual course consistent with its
past practices.
3.9 Legal Proceedings.
(a) Nutmeg is not a party to any, and there are no
pending or threatened, legal, administrative, arbitration or other
proceedings, claims, actions or governmental or regulatory
investigations of any nature against Nutmeg (other than routine
litigation in the ordinary course of business) or which challenge
the validity or propriety of the transactions contemplated by this
Agreement, the Bank Merger Agreement or the Option Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Nutmeg or its assets.
3.10 Taxes and Tax Returns.
Nutmeg has duly filed all federal and state tax returns
required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all material respects) and
has duly paid or made provision for the payment of all material
taxes and other governmental charges which have been incurred or
are due or claimed to be due from it by federal and state taxing
authorities on or prior to the date hereof other than taxes or
other charges (a) which (x) are not yet delinquent or (y) are being
contested in good faith and set forth at Section 3.10 of the Nutmeg
Disclosure Schedule and (b) which have not been finally determined.
All liability with respect to the income tax returns of Nutmeg has
been satisfied for all years to and including 1999. The Internal
Revenue Service (the "IRS") has not notified Nutmeg of, or
otherwise asserted, that there are any material deficiencies with
respect to any income tax returns of Nutmeg. There are no material
disputes pending, or claims asserted for, taxes or assessments upon
Nutmeg, nor has Nutmeg been requested to give any currently
effective waivers extending the statutory period of limitation
applicable to any federal or state income tax return for any
period. In addition, federal and state returns which are accurate
and complete in all material respects have been filed by Nutmeg for
all periods for which returns were due with respect to income tax
withholding, social security and unemployment taxes and the amounts
shown on such federal and state returns to be due and payable have
been paid in full or adequate provision therefor has been included
by Nutmeg in its financial statements as of December 31, 1999 and
March 31, 2000. The most recent audit of Nutmeg's federal tax
returns by the IRS related to the tax return for the year ended
December 31, 1995.
3.11 Employee Benefit Plans.
(a) Section 3.11(a) of the Nutmeg Disclosure Schedule
sets forth a true and complete list of each employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), arrangement or
agreement that is maintained or contributed to as of the date of
this Agreement, or that has within the last six years been
maintained or contributed to, by Nutmeg or any other entity which
together with Nutmeg would be deemed a "single employer" within the
meaning of Section 4001 of ERISA or Code Sections 414(b), (c) or
(m) or under which Nutmeg has any liability (collectively, the
"Plans").
(b) Nutmeg has heretofore delivered to NewMil true,
correct and complete copies of each of the Plans and all related
documents, including but not limited to (i) the actuarial report
for such Plan (if applicable) for each of the last six years, (ii)
the most recent determination letter from the IRS (if applicable)
for such Plan, (iii) the current summary plan description and any
summaries of material modifications, (iv) all annual reports (Form
5500 series) for each Plan filed for the preceding six plan years,
(v) all agreements with fiduciaries and service providers relating
to the Plan, and (vi) all substantive correspondence relating to
any such Plan addressed to or received from the IRS, the Department
of Labor, the Pension Benefit Guaranty Corporation or any other
governmental agency.
(c) (i) Except as set forth at Section 3.11(c) of the
Nutmeg Disclosure Schedule, each of the Plans has been operated and
administered in all material respects in compliance with applicable
Laws, including but not limited to ERISA and the Code; (ii) each of
the Plans intended to be "qualified" within the meaning of Section
401(a) of the Code is so qualified; (iii) with respect to each Plan
which is subject to Title IV of ERISA, the present value of accrued
benefits under such Plan, based upon the actuarial assumptions used
for funding purposes in the most recent actuarial report prepared
by such Plan's actuary with respect to such Plan, did not, as of
its latest valuation date, exceed the then current value of the
assets of such Plan allocable to such accrued benefits; (iv) no
Plan provides benefits, including, without limitation, death or
medical benefits (whether or not insured), with respect to current
or former employees of Nutmeg beyond their retirement or other
termination of service, other than (w) coverage mandated by
applicable Law, (x) death benefits or retirement benefits under a
Plan that is an "employee pension plan," as that term is defined in
Section 3(2) of ERISA, (y) deferred compensation benefits under a
Plan that are accrued as liabilities on the books of Nutmeg, or (z)
benefits the full cost of which is borne by the current or former
employee (or his beneficiary); (v) no liability under Title IV of
ERISA has been incurred by Nutmeg that has not been satisfied in
full, and no condition exists that presents a material risk to
Nutmeg incurring a material liability thereunder; (vi) no Plan is
a "multiemployer pension plan," as such term is defined in Section
3(37) of ERISA; (vii) all contributions or other amounts payable by
Nutmeg as of the Effective Time with respect to each Plan and all
other liabilities of each such entity with respect to each Plan, in
respect of current or prior plan years have been paid or accrued in
accordance with generally accepted accounting practices and Section
412 of the Code; (viii) Nutmeg has not engaged in a transaction in
connection with which Nutmeg could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
tax imposed pursuant to Section 4975 or 4976 of the Code; (ix) to
the knowledge of Nutmeg, there are no pending, threatened or
anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts related
thereto; (x) all Plans could be terminated as of the Effective Time
without any liability materially in excess of the amounts accrued
with respect to such Plans on the March 31, 2000 financial
statements referenced in Section 3.6(a) hereof; (xi) no Plan,
program, agreement or other arrangement, either individually or
collectively, provides for any payment by Nutmeg that would not be
deductible under Code Sections 162(a)(1), 162(m) or 404 or that
would constitute a "parachute payment" within the meaning of Code
Section 280G; (xii) no "accumulated funding deficiency" as defined
in Section 302(a)(2) of ERISA or Section 412 of the Code, whether
or not waived, and no "unfunded current liability" as determined
under Section 412(1) of the Code exists with respect to any Plan;
and (xiii) no Plan has experienced a "reportable event" (as such
term is defined in Section 4043(b) of ERISA and the regulations
thereunder) that is not subject to an administrative or statutory
waiver from the reporting requirement.
3.12 Certain Contracts.
(a) Except as set forth at Section 3.12(a) of the Nutmeg
Disclosure Schedule, Nutmeg is not a party to or bound by any
contract, arrangement or commitment (i) with respect to the
employment of any directors, officers, employees or consultants,
(ii) which, upon the consummation of the transactions contemplated
by this Agreement, the Bank Merger Agreement or the Option
Agreement will (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from NewMil, Nutmeg, New
Milford Savings Bank, the Surviving Bank or any of NewMil's
Subsidiaries to any director, officer or employee thereof, (iii)
which materially restricts the conduct of any line of business by
Nutmeg, (iv) with or to a labor union or guild (including any
collective bargaining agreement) or (v) (including any stock option
plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan) any of the benefits of which will be
increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, the Bank Merger Agreement or the
Option Agreement, or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated
by this Agreement, the Bank Merger Agreement or the Option
Agreement. Nutmeg has previously delivered to NewMil true, correct
and complete copies of all employment, consulting and deferred
compensation agreements to which Nutmeg is a party. Section
3.12(a) of the Nutmeg Disclosure Schedule sets forth a list of all
material contracts (as defined in Item 601(b)(10) of Regulation
S-K) of Nutmeg. Each contract, arrangement or commitment of the
type described in this Section 3.12(a), whether or not set forth in
Section 3.12(a) of the Nutmeg Disclosure Schedule, is referred to
herein as a "Nutmeg Contract," and Nutmeg has not received notice
of, nor do any of its executive officers know of, any violation of
any Nutmeg Contract.
(b) (i) Each Nutmeg Contract is valid and binding and in
full force and effect, (ii) Nutmeg has in all material respects
performed all obligations required to be performed by it to date
under each Nutmeg Contract, and (iii) no event or condition exists
which constitutes or, after notice or lapse of time or both, would
constitute, a material default on the part of Nutmeg under any such
Nutmeg Contract.
3.13 Agreements with Regulatory Agencies.
Neither Nutmeg nor any of its affiliates is subject to any
cease-and-desist or other order issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding
with, or has adopted any board resolutions at the request of (each,
whether or not set forth at Section 3.13 of the Nutmeg Disclosure
Schedule, a "Regulatory Agreement") any Governmental Entity that
restricts the conduct of its business or that in any manner relates
to its capital adequacy, its credit policies, its management or its
business, nor has Nutmeg been advised by any Governmental Entity
that it is considering issuing or requesting any Regulatory
Agreement.
3.14 Takeover Laws; Certificate of Incorporation.
The Board of Directors of Nutmeg has approved Nutmeg entering
into this Agreement, the Bank Merger Agreement and the Option
Agreement, and the transactions contemplated hereby and thereby,
such that under the Home Owners' Loan Act, Nutmeg's Certificate of
Incorporation and any and all other applicable law or documents,
the only vote of Nutmeg stockholders necessary to consummate the
transactions contemplated hereby (including the Merger and issuance
under the Option Agreement) is the approval of this Agreement, the
Merger and the other transactions contemplated hereby by the
affirmative vote of at least two-thirds of the issued and
outstanding shares of Nutmeg Capital Stock, including majority
votes of shares held by the holders of each of Nutmeg's Common
Stock and Preferred Stock.
3.15 Environmental Matters.
(a) Nutmeg is in compliance in all material respects
with all applicable federal and state laws and regulations relating
to pollution or protection of the environment (including without
limitation, laws and regulations relating to emissions, discharges,
releases and threatened releases of Hazardous Material (as
hereinafter defined), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials;
(b) There is no suit, claim, action, proceeding,
investigation or notice pending or to the knowledge of Nutmeg's
directors and executive officers threatened (or past or present
actions or events that could form the basis of any such suit,
claim, action, proceeding, investigation or notice), in which
Nutmeg has been or, with respect to threatened suits, claims,
actions, proceedings, investigations or notices may be, named as a
defendant (x) for alleged noncompliance (including by any
predecessor), with any environmental law, rule or regulation or (y)
relating to any material release or threatened release into the
environment of any Hazardous Material, whether or not occurring at
or on a site owned, leased or operated by Nutmeg;
(c) To the knowledge of Nutmeg's directors and executive
officers, during the period of Nutmeg's ownership or operation of
any of its properties, there has not been any material release of
Hazardous Material in, on, under or affecting any such property.
(d) To the knowledge of Nutmeg's executive officers,
Nutmeg has not made or participated in any loan to any person who
is subject to any suit, claim, action, proceeding, investigation or
notice, pending or threatened, with respect to (i) any alleged
noncompliance as to any property securing such loan with any
environmental law, rule or regulation, or (ii) the release or the
threatened release into the environment of any Hazardous Material
at a site owned, leased or operated by such person on any property
securing such loan.
(e) For purposes of this Section 3.15, the term
"Hazardous Material" means any hazardous waste, petroleum product,
polychlorinated biphenyl, chemical, pollutant, contaminant,
pesticide, radioactive substance, or other toxic material, or other
material or substance (in each such case, other than small
quantities of such substances in retail containers) regulated under
any applicable environmental or public health statute, law,
ordinance, rule or regulation.
(f) No real property owned or leased by Nutmeg as other
real estate owned ("OREO") or otherwise, or owned or controlled by
Nutmeg as a trustee or fiduciary meets the statutory criteria of an
"Establishment" as that term is defined pursuant to Section
22a-134(3) of the General Statutes of Connecticut.
3.16 Reserves for Losses.
All reserves or other allowances for possible losses reflected
in Nutmeg's most recent financial statements referred to in Section
3.6(a) hereof as of December 31, 1999 and March 31, 2000 complied
with all Laws and are adequate under GAAP. Nutmeg has not been
notified by the OTS, FDIC, or Nutmeg's independent auditor, in
writing or otherwise, that such reserves are inadequate or that the
practices and policies of Nutmeg in establishing such reserves and
in accounting for delinquent and classified assets generally fail
to comply with applicable accounting or regulatory requirements, or
that the OTS, FDIC, or Nutmeg's independent auditor believes such
reserves to be inadequate or inconsistent with the historical loss
experience of Nutmeg. Nutmeg has previously furnished NewMil with
a complete list of all extensions of credit and OREO that have been
classified by any bank examiner (regulatory or internal) since
January 1, 1998 as other loans specially mentioned, special
mention, substandard, doubtful, loss, classified or criticized,
credit risk assets, concerned loans or words of similar import.
Nutmeg agrees to update such list no less frequently than monthly
after the date of this Agreement until the earlier of the Closing
Date or the date that this Agreement is terminated in accordance
with Section 8.1 hereof. All OREO held by Nutmeg is being carried
net of reserves at the lower of cost or net realizable value.
3.17 Properties and Assets.
Section 3.17 of the Nutmeg Disclosure Schedule lists (i) all
real property owned by Nutmeg; (ii) each real property lease,
sublease or installment purchase arrangement to which Nutmeg is a
party; (iii) each contract for the purchase, sale, or development
of real estate to which Nutmeg is a party; and (iv) all items of
Nutmeg's tangible personal property and equipment with a book value
of $25,000 or more or having an annual lease payment of $10,000 or
more. Except for (a) items reflected in Nutmeg's financial
statements as of December 31, 1999 and March 31, 2000 referred to
in Section 3.6(a) hereof, (b) exceptions to title that do not
interfere materially with Nutmeg's use and enjoyment of owned or
leased real property (other than OREO), (c) liens for current real
estate taxes not yet delinquent, or being contested in good faith,
properly reserved against (and reflected on the financial
statements referred to in Section 3.6(a) above), (d) properties and
assets sold or transferred in the ordinary course of business
consistent with past practices since December 31, 1999, and (e)
items listed in Section 3.17 of the Nutmeg Disclosure Schedule,
Nutmeg has good and, as to owned real property, marketable and
insurable title to all its properties and assets, reflected in the
financial statements of Nutmeg as of December 31, 1999 and March
31, 2000, free and clear of all liens, claims, charges and other
encumbrances, except those having no material adverse effect upon
the operations of Nutmeg or which would involve no material expense
to correct or remove. Nutmeg, as lessee, has the right under valid
and subsisting leases to occupy, use and possess all property
leased by it, and there has not occurred under any such lease any
material breach, violation or default by Nutmeg, and Nutmeg has not
experienced any material uninsured damage or destruction with
respect to such properties since December 31, 1999. All properties
and assets used by Nutmeg are in good operating condition and
repair suitable for the purposes for which they are currently
utilized and comply in all material respects with all Laws relating
thereto now in effect or scheduled to come into effect. Nutmeg
enjoys peaceful and undisturbed possession under all leases for the
use of all property under which it is the lessee, and all leases to
which Nutmeg is a party are valid and binding obligations in
accordance with the terms thereof. Nutmeg is not in material
default with respect to any such lease, and there has occurred no
default by Nutmeg or event which with the lapse of time or the
giving of notice, or both, would constitute a material default
under any such lease. There are no Laws, conditions of record, or
other impediments which interfere with the intended use by Nutmeg
of any of the property owned, leased, or occupied by it.
3.18 Insurance.
Section 3.18 of the Nutmeg Disclosure Schedule contains a
true, correct and complete list of all insurance policies and bonds
maintained by Nutmeg, including the name of the insurer, the policy
number, the type of policy and any applicable deductibles, and all
such insurance policies and bonds (or other insurance policies and
bonds that have, from time to time, in respect of the nature of the
risks insured against and amount of coverage provided, been
substantially similar in kind and amount to that customarily
carried by parties similarly situated who own properties and engage
in businesses substantially similar to that of Nutmeg) are in full
force and effect and have been in full force and effect as of the
times they were supposed to cover. As of the date hereof, Nutmeg
has not received any notice of cancellation or amendment of any
such policy or bond or is in default under any such policy or bond,
no coverage thereunder is being disputed and all claims thereunder
have been filed in a timely fashion The existing insurance carried
by Nutmeg is and will continue to be, in respect of the nature of
the risks insured against and the amount of coverage provided,
substantially similar in kind and amount to that customarily
carried by parties similarly situated who own properties and engage
in businesses substantially similar to that of Nutmeg, and is
sufficient for compliance by Nutmeg with all requirements of Law
and agreements to which Nutmeg is subject or is party. True,
correct and complete copies of all such policies and bonds
reflected at Section 3.18 of the Nutmeg Disclosure Schedule, as in
effect on the date hereof, have been delivered to NewMil.
3.19 Compliance with Applicable Laws.
Nutmeg has complied in all material respects with all Laws
applicable to it or to the operation of its business. Nutmeg has
not received any notice of any alleged or threatened claim,
violation, or liability under any such Laws that has not heretofore
been cured and for which there is no remaining liability.
3.20 Loans.
As of the date hereof:
(a) All loans owned by Nutmeg, or in which Nutmeg has an
interest, comply in all material respects with all Laws, including,
but not limited to, applicable usury statutes, underwriting and
recordkeeping requirements and the Truth in Lending Act, the Equal
Credit Opportunity Act, and the Real Estate Settlement Procedures
Act, and other applicable consumer protection statutes and the
regulations thereunder.
(b) All loans owned by Nutmeg, or in which Nutmeg has an
interest, have been made or acquired by Nutmeg in accordance with
board of director-approved loan policies and all of such loans are
collectible, except to the extent reserves have been made against
such loans in Nutmeg's financial statements at March 31, 2000
referred to in Section 3.6(a) hereof. Nutmeg holds mortgages
contained in its loan portfolio for its own benefit to the extent
of its interest shown therein; such mortgages evidence liens having
the priority indicated by their terms, subject, as of the date of
recordation or filing of applicable security instruments, only to
such exceptions as are discussed in attorneys opinions regarding
title or in title insurance policies in the mortgage files relating
to the loans secured by real property or are not material as to the
collectibility of such loans; and, except as set forth at Section
3.20(b) of the Nutmeg Disclosure Schedule, all loans owned by
Nutmeg are with full recourse to the borrowers, and Nutmeg has
taken no action which would result in a waiver or negation of any
rights or remedies available against the borrower or guarantor, if
any, on any loan. All applicable remedies against all borrowers
and guarantors are enforceable except as may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting
creditors rights and except as may be limited by the exercise of
judicial discretion in applying principles of equity. Except as
set forth at Section 3.20(b) of the Nutmeg Disclosure Schedule, all
loans purchased or originated by Nutmeg and subsequently sold by
Nutmeg have been sold without recourse to Nutmeg and without any
liability under any yield maintenance or similar obligation. True,
correct and complete copies of loan delinquency reports as of March
31, 2000 prepared by Nutmeg, which reports include all loans
delinquent or otherwise in default, have been furnished to NewMil.
True, correct and complete copies of the currently effective
lending policies and practices of Nutmeg also have been furnished
to NewMil.
(c) Except as set forth at Section 3.20(c) of the Nutmeg
Disclosure Schedule, each outstanding loan participation sold by
Nutmeg was sold with the risk of non-payment of all or any portion
of that underlying loan to be shared by each participant (including
Nutmeg) proportionately to the share of such loan represented by
such participation without recourse of such other lender or
participant to Nutmeg for payment or repurchase of the amount of
such loan represented by the participation or liability under any
yield maintenance or similar obligation. Nutmeg has properly
fulfilled its contractual responsibilities and duties in any loan
in which it acts as the lead lender or servicer and has complied
with its duties as required under applicable regulatory
requirements.
(d) Nutmeg has properly perfected or caused to be
properly perfected all security interests, liens, or other
interests in any collateral securing any loans made by it.
3.21 Affiliates.
Each director, executive officer and other person who is an
"affiliate" (for purposes of Rule 145 under the Securities Act of
1933, as amended (the "Securities Act")) of Nutmeg is listed at
Section 3.21 of the Nutmeg Disclosure Schedule. Each director
(including the President and Chief Executive Officer) and executive
officer of Nutmeg has delivered to NewMil, concurrently with the
execution of this Agreement, the Nutmeg Stockholder Agreement in
the form attached hereto as Exhibit C. The Nutmeg Stockholder
Agreement has been duly and validly executed and delivered by each
person that is a party thereto (assuming due authorization,
execution and delivery by NewMil) and will constitute the valid and
binding obligation of such person, enforceable against such person
in accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors rights and remedies generally.
3.22 Ownership of NewMil Common Stock.
Except as set forth at Section 3.22 of the Nutmeg Disclosure
Schedule (which, for this Section only, may be delivered by Nutmeg
within twenty days following the date of this Agreement), neither
Nutmeg nor any of its affiliates or associates (as defined in the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(i) beneficially own, directly or indirectly, or (ii) is a party to
any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, any
shares of outstanding capital stock of NewMil (other than those
agreements, arrangements or understandings specifically
contemplated hereby).
3.23 Fairness Opinion.
Nutmeg has received an opinion from MB&D to the effect that,
in its opinion, the consideration to be paid to stockholders of
Nutmeg hereunder is fair to such stockholders from a financial
point of view (the "Fairness Opinion"), and MB&D has consented to
the inclusion of its Fairness Opinion in the Registration
Statement, updated as necessary to the effective date of the
Registration Statement, it being understood that MB&D shall have
the right to review and comment upon the Registration Statement.
3.24 Community Reinvestment Act and Consumer Compliance.
Nutmeg has received a "satisfactory" or better rating in its
most recent Community Reinvestment Act examination, and Nutmeg is
not aware of any concern of the OTS or FDIC regarding its
compliance with the Community Reinvestment Act or any applicable
consumer compliance laws.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF NEWMIL
NewMil, on behalf of itself and its wholly owned subsidiary,
New Milford Savings Bank, hereby makes the following
representations and warranties to Nutmeg as set forth in this
Article IV, each of which is being relied upon by Nutmeg as a
material inducement to enter into and perform this Agreement.
4.1 Corporate Organization.
(a) NewMil is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. NewMil has the corporate power and corporate authority
to own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature
of the business conducted by it or the character or location of the
properties or assets owned or leased by it makes such licensing or
qualification necessary. NewMil is duly registered as a bank
holding company with the FRB. The Certificate of Incorporation
("Certificate of Incorporation"), and Bylaws ("Bylaws"), of NewMil,
as amended to date, copies of which have previously been made
available to Nutmeg, are true, correct and complete copies of such
documents as in effect as of the date of this Agreement.
(b) New Milford Savings Bank is a Connecticut state
savings bank duly organized, validly existing and in good standing
under the laws of the State of Connecticut. New Milford Savings
Bank has the corporate power and corporate authority to own or
lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the
properties or assets owned or leased by it makes such licensing or
qualification necessary. The Certificate of Incorporation and
By-Laws of New Milford Savings Bank, as amended to date, copies of
which have previously been made available to Nutmeg, are true,
correct and complete copies of such documents as in effect as of
the date of this Agreement.
4.2 Capitalization.
(a) The authorized capital stock of NewMil consists of
20,000,000 shares of NewMil Common Stock, par value $.50 per share,
of which 3,608,225 shares were outstanding (net of 2,381,913
treasury shares) at March 31, 2000. At such date, there were
options outstanding to purchase 439,350 shares of NewMil Common
Stock. All of the issued and outstanding shares of NewMil Common
Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. As of the date of
this Agreement, except as set forth above, NewMil does not have and
is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of NewMil Common Stock or any
other equity security of NewMil or any securities representing the
right to purchase or otherwise receive any shares of NewMil Common
Stock or NewMil Preferred Stock, other than pursuant to the Rights
Agreement and director and employee stock option plans. The shares
of NewMil Common Stock to be issued pursuant to the Merger are
authorized and, at the Effective Time, all such shares will be
validly issued, fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership
thereof.
(b) The authorized capital stock of New Milford Savings
Bank consists of 10,000,000 shares of common stock, par value $1.00
per share, 3,709,586 of which are issued and outstanding. The
outstanding shares of common stock of New Milford Savings Bank are
owned by NewMil free and clear of all liens, charges, encumbrances
and security interests whatsoever, and all of such shares are duly
authorized and validly issued and fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to
ownership thereof.
4.3 Authority; No Violation.
(a) NewMil has full corporate power and corporate
authority to execute and deliver this Agreement and the Option
Agreement and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement, the
Bank Merger Agreement and the Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors of NewMil which has
directed that this Agreement, the Merger and the other transactions
contemplated hereby be submitted to NewMil's shareholders for
approval at a special meeting of NewMil shareholders ("NewMil
Special Meeting") and, except for such approval, no other corporate
proceedings on the part of NewMil (except for matters related to
setting the date, time, place and record date for the New Mil
Special Meeting), are necessary to approve this Agreement, the Bank
Merger Agreement or the Option Agreement or to consummate the
transactions contemplated hereby or thereby. This Agreement has
been, and the Bank Merger Agreement and the Option Agreement will
be, duly and validly executed and delivered by NewMil and (assuming
due authorization, execution and delivery by Nutmeg) will
constitute valid and binding obligations of NewMil, enforceable
against NewMil in accordance with their terms, except as
enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors rights and
remedies generally.
(b) New Milford Savings Bank has full corporate power
and authority to execute and deliver this Agreement and the Bank
Merger Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement
and the Bank Merger Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and
validly approved by the Board of Directors of New Milford Savings
Bank and by NewMil as the sole shareholder of New Milford Savings
Bank. All corporate proceedings on the part of New Milford Savings
Bank necessary to consummate the transactions contemplated hereby
and thereby will have been taken prior to the Effective Time. This
Agreement has been, and the Bank Merger Agreement will be, duly and
validly executed and delivered by New Milford Savings Bank and
(assuming due authorization, execution and delivery by Nutmeg) will
constitute valid and binding obligations of New Milford Savings
Bank, enforceable against New Milford Savings Bank in accordance
with their terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court
of equity and by bankruptcy, insolvency and similar laws affecting
creditors rights and remedies generally.
(c) Neither the execution and delivery of this Agreement
by NewMil and New Milford Savings Bank, the Bank Merger Agreement
by New Milford Savings Bank, or the Option Agreement by NewMil, nor
the consummation by NewMil or New Milford Savings Bank, as the case
may be, of the transactions contemplated hereby or thereby, nor
compliance by NewMil or New Milford Savings Bank with any of the
terms or provisions hereof or thereof, will (i) violate any
provision of the Certificate of Incorporation or Bylaws of NewMil
or the Charter or Bylaws of New Milford Savings Bank, as the case
may be, or (ii) assuming that the consents and approvals referred
to in Section 4.4 hereof are duly obtained, (x) violate any Laws
applicable to NewMil, New Milford Savings Bank or any of their
respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result
in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of
NewMil or New Milford Savings Bank under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or
obligation to which NewMil or New Milford Savings Bank is a party,
or by which they or any of their respective properties or assets
may be bound or affected.
4.4 Consents, Approvals and Reports.
(a) Except for (i) the filing of applications and
notices, as applicable, as to the Merger with the OTS under the
HOLA and the FDIC under the Bank Merger Act and approval of such
applications and notices, (ii) the obtaining of a waiver from the
FRB pursuant to the exception provided in 12 CFR Part 225.12(d);
(iii) the filing and approval of the application for approval to
the Banking Commissioner pursuant to Section 36a-126(a) of the
Connecticut Banking Law, (iv) the filing with the SEC of the
Registration Statement, (v) the approval of this Agreement by the
requisite vote of the shareholders of Nutmeg, (vi) the approval of
this Agreement and the increase in directorships contemplated in
this Agreement by the requisite vote of shareholders of NewMil,
(vii) the filings with the Connecticut Secretary of State required
in connection with the Bank Merger Agreement, (viii) such filings,
authorizations and approvals as are required to be made or obtained
under the securities or "Blue Sky" laws of various states or with
The Nasdaq Stock Market, Inc. (or such other exchange as may be
applicable) in connection with the issuance of the shares of NewMil
Common Stock pursuant to this Agreement, and (ix) any necessary
notices, filings, authorizations, approvals or consents of third
parties, no consents or approvals of or filings or registrations
with any Governmental Entity or third party are necessary in
connection with (1) the execution and delivery by NewMil and New
Milford Savings Bank of this Agreement, (2) the execution and
delivery by New Milford Savings Bank of the Bank Merger Agreement,
(3) the execution and delivery by NewMil of the Option Agreement,
(4) the consummation by NewMil of the transactions contemplated
hereby, and (5) the consummation by New Milford Savings Bank of the
Merger, except, in each case, for such consents, approvals or
filings, the failure of which to obtain will not have a Material
Adverse Effect on the ability of Nutmeg to consummate the
transactions contemplated hereby or thereby.
(b) NewMil hereby represents to Nutmeg that it has no
knowledge of any reason why approval or effectiveness of any of the
applications, notices or filings referred to in Section 4.4(a)
hereof cannot be obtained or granted on a timely basis.
(c) NewMil and New Milford Savings Bank have filed all
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required
to file since December 31, 1997, with (i) the FRB, (ii) the Banking
Commissioner, (iii) the FDIC, (iv) the SEC and (v) the Regulatory
Agencies. Except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of NewMil and its
Subsidiaries, no Governmental Entity is conducting, or has
conducted, any proceeding or investigation into the business or
operations of NewMil since December 31, 1997.
4.5 Financial Statements; Exchange Act Filings; Books and
Records.
NewMil has previously delivered to Nutmeg true, correct and
complete copies of (a) the consolidated balance sheets of NewMil
and its Subsidiaries as of June 30, for the fiscal years 1997, 1998
and 1999 and the related consolidated statements of income and
statements of changes in shareholders equity and cash flows for the
fiscal years ended June 30, 1996 through 1999, inclusive, as
reported in NewMil's Reports on Form 10-K filed with the SEC on or
about September 30, 1998 and 1999 under the Exchange Act, in each
case accompanied by the audit report of PricewaterhouseCoopers,
LLP, independent public accountants with respect to NewMil, and (b)
the unaudited consolidated statement of condition of NewMil and its
Subsidiaries as of March 31, 2000 and the related comparative
unaudited statements of operations and cash flows for the three and
nine month periods ended March 31, 2000 and 1999. The financial
statements referred to in this Section 4.5 (including the related
notes, where applicable) fairly present, and the financial
statements referred to in Section 6.8 hereof will fairly present
(subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount), the results of the
consolidated operations and consolidated financial condition of
NewMil and its Subsidiaries for the respective fiscal periods or as
of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) comply, and the
financial statements referred to in Section 6.8 hereof will comply,
with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable) has
been, and the financial statements referred to in Section 6.8
hereof will be, prepared in accordance with GAAP during the periods
involved, except as indicated in such statements or in the notes
thereto or, in the case of unaudited statements, as permitted by
Form 10-Q. NewMil's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997 and all subsequently filed reports under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act comply in
all material respects with the appropriate requirements for such
reports under the Exchange Act, and NewMil has previously delivered
or made available to Nutmeg true, correct and complete copies of
such reports. The books and records of NewMil and New Milford
Savings Bank have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and
accounting requirements.
4.6 Absence of Certain Changes or Events.
Except as disclosed in NewMil's filings with the SEC on any of
Forms 10-K, 10-Q or 8-K during 1999 or 2000, true, correct and
complete copies of which have previously been delivered to Nutmeg,
since December 31, 1997, (i) NewMil has not incurred any material
liability, except as contemplated by this Agreement or in the
ordinary course of business consistent with its past practices, and
(ii) no event has occurred which has had, individually or in the
aggregate, a Material Adverse Effect on NewMil.
4.7 Ownership of Nutmeg Common Stock; Affiliates and
Associates.
Except as contemplated by this Agreement, neither NewMil nor
any of its affiliates or associates (as defined in the Exchange
Act) (i) beneficially own, directly or indirectly, or (ii) is a
party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each
case, more than five percent of the outstanding capital stock of
Nutmeg, excluding the shares of Nutmeg Common Stock issuable
pursuant to the Option Agreement to be executed subsequent to the
execution of the Agreement.
4.8 Employee Benefit Plans.
NewMil has heretofore made available for inspection, or
delivered (if requested) to Nutmeg true, correct and complete
copies of each employee benefit plan arrangement or agreement that
is maintained as of the date of this Agreement (the "NewMil Plans")
by NewMil or any of its Subsidiaries. No "accumulated funding
deficiency" as defined in Section 302(a)(2) of ERISA or Section 412
of the Code, whether or not waived, and no "unfunded current
liability" as determined under Section 412(1) of the Code exists
with respect to any NewMil Plan. The NewMil Plans are in
compliance in all material respects with the applicable
requirements of ERISA and the Code.
4.9 Agreements with Regulatory Agencies.
Neither NewMil nor any of its affiliates is subject to any
cease-and-desist or other order issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding
with, or has adopted any board resolutions at the request of any
Governmental Entity that restricts the conduct of its business or
that in any manner relates to its capital adequacy, its credit
policies, its management or its business, nor has NewMil, nor New
Milford Savings Bank been advised by any Governmental Entity that
it is considering issuing or requesting any Regulatory Agreement.
4.10 Community Reinvestment Act and Consumer Compliance.
New Milford Savings Bank has received a "satisfactory" or
better rating in its most recent Community Reinvestment Act
examination, and New Milford Savings Bank is not aware of any
concern of the Banking Commissioner or FDIC regarding its
compliance with the Community Reinvestment Act or any applicable
consumer compliance laws.
4.11 Legal Proceedings.
(a) NewMil is not a party to any, and there are no
pending or threatened, legal, administrative, arbitration or other
proceedings, claims, actions or governmental or regulatory
investigations of any nature against NewMil or New Milford Savings
Bank (other than routine litigation in the ordinary course of
business) or which challenge the validity or propriety of the
transactions contemplated by this Agreement, the Bank Merger
Agreement or the Option Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon NewMil or its assets.
4.12 Taxes and Tax Returns.
NewMil has duly filed all federal and state tax returns
required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all material respects) and
has duly paid or made provision for the payment of all material
taxes and other governmental charges which have been incurred or
are due or claimed to be due from it by federal and state taxing
authorities on or prior to the date hereof other than taxes or
other charges (a) which (x) are not yet delinquent or (y) are being
contested in good faith and set forth at Section 4.12 of the NewMil
Disclosure Schedule and (b) which have not been finally determined.
All liability with respect to the income tax returns of NewMil has
been satisfied for all years to and including 1999. The IRS has
not notified NewMil of, or otherwise asserted, that there are any
material deficiencies with respect to any income tax returns of
NewMil. There are no material disputes pending, or claims asserted
for, taxes or assessments upon NewMil, nor has NewMil been
requested to give any currently effective waivers extending the
statutory period of limitation applicable to any federal or state
income tax return for any period. In addition, federal and state
returns which are accurate and complete in all material respects
have been filed by NewMil for all periods for which returns were
due with respect to income tax withholding, social security and
unemployment taxes and the amounts shown on such federal and state
returns to be due and payable have been paid in full or adequate
provision therefor has been included by NewMil in its financial
statements as of June 30, 1999 and March 31, 2000. The most recent
audit of NewMil's federal tax returns by the IRS related to the tax
return for the year ended June 30, 1991.
4.13 Compliance with Applicable Laws.
NewMil has complied in all material respects with all Laws
applicable to it or to the operation of its business. NewMil has
not received any notice of any alleged or threatened claim,
violation, or liability under any such Laws that has not heretofore
been cured and for which there is no remaining liability.
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of Nutmeg.
During the period from the date of this Agreement and
continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement, including Section
1.4(b) hereof respecting the sale of the Loan Servicing Rights, the
Bank Merger Agreement or the Option Agreement or with the prior
written consent of NewMil, Nutmeg shall carry on its businesses in
the ordinary course consistent with past practices and consistent
with prudent banking practices. Nutmeg will use its reasonable
efforts to (x) preserve its business organization intact, (y) keep
available to itself and NewMil the present services of the
employees of Nutmeg and (z) preserve for itself and NewMil the
goodwill of the customers of Nutmeg and others with whom business
relationships exist. Without limiting the generality of the
foregoing, and except as set forth in the Nutmeg Disclosure
Schedule or as otherwise contemplated by this Agreement or
consented to by NewMil in writing, Nutmeg shall not:
(a) declare or pay any dividends on, or make other
distributions in respect of, any of its capital stock except for
the payment in cash of (i) regular quarterly cash dividends on the
Nutmeg Common Stock and Nutmeg Preferred Stock in accordance with
Section 5.1(a) of the Nutmeg Disclosure Schedule with declaration,
record and payment dates corresponding to the quarterly dividends
paid by Nutmeg during its fiscal year ended December 31, 1999
(without otherwise limiting the foregoing, Nutmeg shall be entitled
to declare and pay a regular dividend on the Nutmeg Common Stock if
holders of Nutmeg Common Stock who receive NewMil Common Stock as
Merger Consideration would otherwise not be paid a quarterly cash
dividend for that calendar quarter with respect to NewMil Common
Stock so received as Merger Consideration) and (ii) the amount of
dividends on the Nutmeg Preferred Stock accrued in the financial
statements of Nutmeg through the Closing Date if such accrued
amount is paid in cash and the payment thereof does not cause the
shareholders' equity of Nutmeg immediately following such payment
to be less than the shareholders' equity reflected on the March 31,
2000 balance sheet (unaudited) of Nutmeg, in accordance with
Section 5.1(a) of the Nutmeg Disclosure Schedule;
(b) (i) split, combine or reclassify any shares of its
capital stock or issue, authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock except upon the exercise or fulfillment
of rights or options issued or existing pursuant to the Nutmeg
Stock Plans in accordance with their present terms, all to the
extent outstanding and in existence on the date of this Agreement,
and except pursuant to the Option Agreement, or (ii) repurchase,
redeem or otherwise acquire (except for the acquisition of Trust
Account Shares and DPC Shares, as such terms are defined in Section
1.4(c) hereof), any shares of the capital stock of Nutmeg, or any
securities convertible into or exercisable for any shares of the
capital stock of Nutmeg;
(c) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or
any securities convertible into or exercisable for, or any rights,
warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing, other than (i) the
issuance of Nutmeg Common Stock pursuant to stock options or
similar rights to acquire Nutmeg Common Stock granted pursuant to
the Nutmeg Stock Plans and outstanding prior to the date of this
Agreement, in each case in accordance with their present terms and
(ii) pursuant to the Option Agreement;
(d) amend its Certificate of Incorporation, Bylaws or
other similar governing documents;
(e) authorize or permit any of its officers, directors,
employees or agents to, directly or indirectly, solicit, initiate
or encourage any inquiries relating to, or the making of any
proposal from, hold substantive discussions or negotiations with or
provide any information to, any person, entity or group (other than
NewMil) concerning any Acquisition Transaction (as defined below).
Notwithstanding the foregoing, Nutmeg may provide information in
connection with a possible Acquisition Transaction if the Board of
Directors of Nutmeg following receipt of written advice of counsel,
reasonably determines in the exercise of its fiduciary duty that
such information must be furnished. Nutmeg shall promptly
communicate to NewMil the material terms of any proposal, whether
written or oral, which it may receive in respect of any Acquisition
Transaction and whether it is providing information in connection
with, or which may lead to, an Acquisition Transaction with a third
party. Nutmeg will promptly cease and cause to be terminated any
existing activities, discussions or negotiations previously
conducted with any parties other than NewMil with respect to any of
the foregoing. As used in this Agreement, "Acquisition
Transaction" shall mean any offer, proposal or expression of
interest relating to (i) any tender or exchange offer, (ii) merger,
consolidation or other business combination involving Nutmeg, or
(iii) the acquisition in any manner of a substantial equity
interest in, or a substantial portion of the assets and/or
liabilities, out of the ordinary course of business, of, Nutmeg
other than the transactions contemplated or permitted by this
Agreement, the Bank Merger Agreement and the Option Agreement,
including the sale of the Loan Servicing Rights pursuant to Section
1.4(b) hereof;
(f) make capital expenditures aggregating in excess of
$25,000;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or
consolidating with, or by purchasing an equity interest in or the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire any assets, other than in connection
with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings, or in the ordinary course of business
consistent with prudent banking practices;
(i) take any action that is intended or may reasonably
be expected to result in any of its representations and warranties
set forth in this Agreement being or becoming untrue or in any of
the conditions to the Merger set forth in Article VII not being
satisfied, or in a violation of any provision of this Agreement,
the Bank Merger Agreement or the Option Agreement, except, in every
case, as may be required by applicable law;
(j) change its methods of accounting in effect at
December 31, 1999 except as required by changes in GAAP or
regulatory accounting principles as concurred to by NewMil's
independent auditors;
(k) (i) except as required by applicable law or to
maintain qualification pursuant to the Code, adopt, amend, renew or
terminate any Plan or any other agreement, arrangement, plan or
policy relating to one or more of its current or former directors,
officers, employees or independent contractors, (ii) except in the
ordinary course of business consistent with past practices,
increase in any manner the compensation of any employee or director
or pay any benefit not required by any plan or agreement as in
effect as of the date hereof (including, without limitation, the
granting of stock options, stock appreciation rights, restricted
stock, stock units or performance units or shares), (iii) enter
into, modify or renew any contract, agreement, commitment or
arrangement providing for the payment to any director, officer or
employee of compensation or benefits, (iv) hire any new employee at
an annual compensation in excess of $20,000, (v) except in the
ordinary course of business consistent with past practices, pay
expenses of any employees or directors for attending conventions or
similar meetings which conventions or meetings are held after the
date hereof, (vi) promote to a rank of vice president or more
senior any employee, (vii) pay any retention or other bonuses in
the aggregate in excess of $50,000, or any severance payments in
the aggregate in excess of $50,000, to employees, (viii) make any
contribution to any Plan that is subject to Title IV of ERISA in
excess of the amount required to satisfy applicable minimum funding
requirements under ERISA and the Code, or (ix) make any
nondeductible contribution to any Plan;
(l) incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual,
corporation or other entity;
(m) sell, purchase, enter into a lease, relocate, open
or close any banking or other office, or file an application
pertaining to such action with any Governmental Entity;
(n) make any equity investment or commitment to make
such an investment in real estate or in any real estate development
project, other than in connection with foreclosure, settlements in
lieu of foreclosure, or troubled loan or debt restructuring, in the
ordinary course of business consistent with past banking practices;
(o) make any new loans to, modify the terms of any
existing loan to, or engage in any other transactions (other than
routine banking transactions) with, any Affiliated Person of
Nutmeg;
(p) make any investment, or incur deposit liabilities,
other than in the ordinary course of business consistent with past
practices, including deposit pricing, and which would not change
the risk profile of Nutmeg based on its existing deposit and
lending policies or make any equity investments;
(q) purchase any loans or sell, purchase or lease any
real property, except for the sale of real estate that is the
subject of a casualty loss or condemnation or the sale of OREO on
a basis consistent with past practices;
(r) originate (i) any loans except in accordance with
existing Nutmeg lending policies, (ii) commercial business loans in
excess of $250,000, (iii) unsecured consumer loans in excess of
$10,000, (iv) commercial real estate first mortgage loans in excess
of $250,000 as to any loan or $250,000 in the aggregate as to
related loans, or loans to related persons, or (v) land acquisition
loans to borrowers who intend to construct a residence on such land
in excess of the lesser of 75% of the appraised value of such land
or $100,000, except in each case for loans for which written
applications have been received by Nutmeg as of the date hereof and
as set forth in Section 5.1(r) of the Nutmeg Disclosure Schedule;
provided, however, that (x) Nutmeg may renew existing lines of
credit upon substantially the same terms and conditions in
accordance with existing Nutmeg lending policies without prior
consultation with NewMil, and (y) if Nutmeg submits to NewMil a
written proposal for an exception to the lending limitations set
forth in this Section 5.1(r), unless NewMil notifies Nutmeg within
five business days after receipt of the written proposal, NewMil
shall be deemed to have consented to the proposal (for purposes of
this provision, notice shall be given in accordance with Section
5.1(r) of the Nutmeg Disclosure Schedule;
(s) make any investments in any equity or derivative
securities or engage in any forward commitment, futures
transaction, financial options transaction, hedging or arbitrage
transaction or covered asset trading activities or make any
investments in any investment security with a maturity of greater
than one year;
(t) purchase any mortgage loan servicing rights except
in connection with the performance of three contracts in force on
the date of this Agreement, as listed in Section 5.1(t) of the
Nutmeg Disclosure Schedule, that require purchases of loan
servicing rights subsequent to the date of this Agreement; or
(u) agree or commit to do any of the actions set forth
in (a) - (t) above.
The consent of NewMil to any action by Nutmeg that is not
permitted by any of the preceding paragraphs shall be evidenced by
a writing signed by the Chairman, Chief Executive Officer and
President or any Senior Vice President of NewMil.
5.1 A Loan Servicing Rights.
Prior to the Effective Time, Nutmeg shall sell all Loan
Servicing Rights owned by it for cash. The sale shall be on terms
and conditions that are usual and customary in such transactions
and shall be accounted for as a sale in accordance with GAAP.
Nutmeg shall, as soon as practicable following the execution of
this Agreement, engage a firm, acceptable to NewMil, experienced in
the sale of loan servicing rights to begin to market the Loan
Servicing Rights.
5.2 Covenants of NewMil.
During the period from the date of this Agreement and
continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or the Option Agreement
or with Nutmeg's prior written consent, NewMil shall not, and shall
not permit New Milford Savings Bank to:
(a) take any action that will result in (i) any of
NewMil's representations and warranties set forth in this Agreement
being or becoming untrue, unless the failure of such
representations or warranties to be true would not, individually or
in the aggregate, have a Material Adverse Effect on NewMil, or (ii)
any of the conditions to the Merger set forth in Article VII not
being satisfied or in a violation of any provision of this
Agreement, the Bank Merger Agreement or the Option Agreement,
except, in every case, as may be required by applicable law;
(b) repurchase shares of NewMil Common Stock in
amounts or at prices that are materially larger or higher than
NewMil's past practices respecting repurchases of NewMil Common
Stock;
(c) take any other action that would materially
adversely affect the ability of NewMil and New Milford Savings Bank
to consummate the transactions contemplated by this Agreement; or
(d) declare a stock split or stock dividend.
5.3 Merger Covenants.
Notwithstanding that Nutmeg believes that it has
established all reserves and taken all provisions for possible loan
losses required by GAAP and applicable laws, rules and regulations,
Nutmeg recognizes that may have adopted different loan, accrual and
reserve policies (including loan classifications and levels of
reserves for possible loan losses). In that regard, and in
general, from and after the date of this Agreement to the Effective
Time, Nutmeg and NewMil shall consult and cooperate with each other
in order to formulate the plan of integration for the Merger,
including, among other things, with respect to conforming, based
upon such consultation, Nutmeg's loan, accrual and reserve policies
to those policies of NewMil to the extent appropriate, provided,
that any change in Nutmeg's policies in connection with such
matters need not be effected until the parties receive all
necessary governmental and stockholder approvals and consents to
consummate the transactions contemplated hereby. To facilitate the
foregoing, Nutmeg shall assign a loan officer to work with a NewMil
loan officer to conform the documentation, information and data in
Nutmeg's loan files with the policies and procedures required by
NewMil in its loan files.
5.4 Compliance with Antitrust Laws.
Each of NewMil and Nutmeg shall use its reasonable best
efforts to resolve objections, if any, which may be asserted with
respect to the Merger under antitrust laws, including, without
limitation, the Bank Merger Act and the Hart-Scott-Rodino Act. In
the event a suit is threatened or instituted challenging the Merger
as violative of antitrust laws, each of NewMil and Nutmeg shall use
its reasonable best efforts to avoid the filing of, or resist or
resolve such suit. NewMil and Nutmeg shall use their reasonable
best efforts to take such action as may be required: (a) by the
Antitrust Division of the Department of Justice or the Federal
Trade Commission in order to resolve such objections as either of
them may have to the Merger under antitrust laws, or (b) by any
federal or state court of the United States, in any suit brought by
a private party or governmental entity challenging the Merger as
violative of antitrust laws, in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining
order, or other order which has the effect of preventing the
consummation of the Merger. Reasonable best efforts shall not
include, among other things and to the extent NewMil so desires,
the willingness of NewMil to accept an order agreeing to the
divestiture, or the holding separate, of any assets of NewMil or
Nutmeg.
ARTICLE VI - ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.
(a) Upon the execution and delivery of this Agreement,
NewMil and Nutmeg (as to information to be included therein
pertaining to Nutmeg) shall promptly cause to be prepared and filed
with the SEC the Registration Statement for the purpose of
registering the NewMil Common Stock to be issued in the Merger, and
with the OTS the Proxy Statement for the purpose of soliciting
votes on the Merger from the holders of Nutmeg Capital Stock.
NewMil and Nutmeg shall use their reasonable best efforts to have
the Registration Statement declared effective by the SEC and the
Proxy Statement approved by the OTS as soon as possible after the
filing. The parties shall cooperate in responding to and
considering any questions or comments from the SEC or OTS staff
regarding the information contained in the Registration Statement
or Proxy Statement. If at any time after the Registration
Statement or Proxy Statement is filed with the SEC or OTS, and
prior to the Closing Date, any event relating to Nutmeg is
discovered which should be set forth in an amendment of, or a
supplement to, the Registration Statement or Proxy Statement,
Nutmeg shall promptly inform NewMil and shall furnish NewMil with
all necessary information relating to such event whereupon NewMil
shall promptly cause an appropriate amendment to the Registration
Statement or Proxy Statement to be filed with the SEC or OTS. Upon
the effectiveness of such amendment, Nutmeg (if prior to the
meeting of shareholders pursuant to Section 6.3 hereof) will take
all necessary action as promptly as practicable to permit an
appropriate amendment or supplement to be transmitted to its
shareholders entitled to vote at such meeting. NewMil shall also
use reasonable efforts to obtain all necessary state securities law
or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Bank Merger
Agreement and Nutmeg shall furnish all information concerning
Nutmeg and the holders of Nutmeg Common Stock as may be reasonably
requested in connection with any such action.
(b) The parties hereto shall cooperate with each other
and use their reasonable best efforts to promptly prepare and file
all necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable all
permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable
to consummate the transactions contemplated by this Agreement
(including without limitation the Merger and the effectiveness of
the Stockholder Agreement). Nutmeg and NewMil shall have the right
to review in advance, and to the extent practicable each will
consult the other on, in each case subject to applicable laws
relating to the exchange of information, all the information
relating to Nutmeg or NewMil and New Milford Savings Bank, as the
case may be, which appears in any filing made with, or written
materials submitted to, any third party or any Governmental Entity
in connection with the transactions contemplated by this Agreement;
provided, however, that nothing contained herein shall be deemed to
provide either party with a right to review any information
provided to any Governmental Entity on a confidential basis in
connection with the transactions contemplated hereby. In
exercising the foregoing right, each of the parties hereto shall
act reasonably and as promptly as practicable. The parties hereto
agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of
all third parties and Governmental Entities necessary or advisable
to consummate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of matters
relating to contemplation of the transactions contemplated herein.
(c) Nutmeg shall, upon request, furnish NewMil with all
information concerning Nutmeg and its directors, officers and
shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Registration Statement, the
Proxy Statement or any other statement, filing, notice or
application made by or on behalf of NewMil or New Milford Savings
Bank to any Governmental Entity in connection with the Merger or
the other transactions contemplated by this Agreement.
(d) NewMil and Nutmeg shall promptly advise each other
upon receiving any communication from any Governmental Entity whose
consent or approval is required for consummation of the
transactions contemplated by this Agreement which causes such party
to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval (as defined in Section 7.1(c) hereof) will not
be obtained or that the receipt of any such approval will be
materially delayed
6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable
Laws relating to the exchange of information, Nutmeg shall accord
to the officers, employees, accountants, counsel and other
representatives of NewMil and New Milford Savings Bank access,
during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, Nutmeg shall make
available to NewMil (i) a copy of each report, schedule,
registration statement and other document filed or received by it
during such period pursuant to the requirements of federal
securities laws or federal or state banking laws and (ii) all other
information concerning its business, properties and personnel as
NewMil may reasonably request. NewMil shall receive minutes of
all meetings of the Nutmeg's Board of Directors and any committees
thereof, and of any management committees (except for the portion
of such meetings which relate to the Merger or an Acquisition
Transaction or such other matters deemed confidential
("Confidential Matters") of Nutmeg). NewMil will hold all such
information in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement
which NewMil entered into with Nutmeg dated April 14, 2000 (the
"Confidentiality Agreement").
(b) Upon reasonable notice and subject to applicable
Laws relating to the exchange of information, NewMil shall, and
shall cause New Milford Savings Bank to, afford to the officers,
employees, accountants, counsel and other representatives of
Nutmeg, access, during normal business hours during the period
prior to the Effective Time, to such information regarding NewMil
as shall be reasonably necessary for Nutmeg to fulfill its
obligations pursuant to this Agreement or which may be reasonably
necessary for Nutmeg to confirm that the representations and
warranties of NewMil contained herein are true and correct and that
the covenants of NewMil contained herein have been performed in all
material respects. Nutmeg will hold all such information in
confidence to the extent required by, and in accordance with, the
provisions of the Confidentiality Agreement.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations and
warranties of the other set forth herein.
(d) Nutmeg shall provide NewMil with true, correct and
complete copies of all financial and other information provided to
directors of Nutmeg in connection with meetings of their Boards of
Directors or committees thereof, which information shall be
provided to NewMil concurrently with its provision to the directors
of Nutmeg.
(e) Nutmeg acknowledges that NewMil may in the future
become involved in the process of acquiring other businesses,
banks and financial institutions and that in connection with such
acquisitions, information concerning Nutmeg may be required to be
included in the registration statements, if any, for the sale of
securities of NewMil or in SEC reports in connection with such
acquisitions. Nutmeg agrees to provide NewMil with any
information, certificates, documents or other materials about
Nutmeg as are reasonably necessary to be included in such other SEC
reports or registration statements, including registration
statements which may be filed by NewMil prior to the Effective
Time. Nutmeg shall use its reasonable best efforts to cause its
attorneys and accountants to provide NewMil and any underwriters
for NewMil with any consents, comfort letters, opinion letters,
reports or information which are necessary to complete the
registration statements and applications for any such acquisition
or issuance of securities NewMil shall reimburse Nutmeg for
reasonable expenses thus incurred by Nutmeg should the transactions
contemplated by this Agreement be terminated for any reason.
6.3 Shareholder Meetings.
Nutmeg and NewMil shall each take all steps necessary to duly
call, give notice of, convene and hold the Special Meeting and
NewMil Special Meeting within 50 days after the Registration
Statement becomes effective and the Proxy Statement is approved for
circulation by the OTS for the purpose of voting upon the approval
of this Agreement, the Merger and the other transactions
contemplated hereby. Management and the Board of Directors of each
of Nutmeg and NewMil shall recommend to their respective
shareholders approval of this Agreement, the Merger, and the other
transactions contemplated hereby, together with any matters
incident thereto, and shall oppose any third party proposal or
other action that is inconsistent with this Agreement or the
consummation of the transactions contemplated hereby, unless the
Board of Directors of either party reasonably determines, based
upon the written advice of its legal counsel, that such
recommendation or opposition, as the case may be, would constitute
a breach of the exercise of its fiduciary duty. Nutmeg and NewMil
shall coordinate and cooperate with respect to the foregoing
matters.
6.4 Legal Conditions to Merger.
Each of NewMil and Nutmeg shall use their reasonable best
efforts (a) to take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal requirements
which may be imposed on such party with respect to the Merger and,
subject to the conditions set forth in Article VII hereof, to
consummate the transactions contemplated by this Agreement and (b)
to obtain (and to cooperate with the other party to obtain) any
consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party which is required
to be obtained by Nutmeg or NewMil in connection with the Merger
and the other transactions contemplated by this Agreement.
6.5 Stock Exchange Listing.
NewMil shall cause the shares of NewMil Common Stock to be
issued in the Merger and pursuant to options referred to herein to
be approved for quotation on Nasdaq (or such other exchange on
which the NewMil Common Stock has become listed, or approved for
listing) prior to or at the Effective Time.
6.6 Employees; Employment and Other Agreements.
(a) To the extent permissible under the applicable
provisions of the Code and ERISA, for purposes of crediting periods
of service for eligibility to participate and vesting, but not for
benefit accrual purposes, under the New Milford Savings Bank 401(k)
Plan (but not under the New Milford Savings Bank Defined Benefit
Pension Plan), in the case of individuals who are employees of
Nutmeg at the Effective Time and who become employees of New
Milford Savings Bank, periods of service with Nutmeg before the
Effective Time shall be treated as if such service had been with
New Milford Savings Bank. Individuals who are employees of Nutmeg
at the Effective Time and who become employees of New Milford
Savings Bank shall be eligible to participate in any other employee
benefit plan (within the meaning of ERISA Section 3(3)) (but not
the New Milford Savings Bank defined benefit pension plan, the
benefit accruals for which have been suspended since 1993 for all
employees) maintained by New Milford Savings Bank on the same
terms and conditions as apply generally to other employees of New
Milford Savings Bank.
(b) New Milford Savings Bank expects, subject to its
normal hiring process, to offer a position of at-will employment to
each of Nutmeg's employees with direct customer contact except
those who duplicate functions served by employees of New Milford
Savings Bank, at their existing branch location. In addition, New
Milford Savings Bank will use its reasonable best efforts in
connection with reviewing applicants for employment positions to
give Nutmeg employees who are not offered positions at the
Effective Time the same consideration as is afforded NewMil or New
Milford Savings Bank employees for such position in accordance with
existing formal or informal policies.
(c) Following the Merger, NewMil agrees that it shall
honor the existing change of control contracts with the three
senior officers of Nutmeg that are specifically listed at Section
3.12(a) of the Nutmeg Disclosure Schedule; provided, however, that
in making the foregoing agreement, except as otherwise required by
law, NewMil will honor such contracts only to the extent that, as
represented at Section 3.11 hereof, none of such contracts, nor any
other Plan, program, agreement or other arrangement, either
individually or collectively, provides for any payment by Nutmeg
that would not be deductible under Code Sections 162(a)(1), 162(m)
or 404 or that would constitute a "parachute payment" within the
meaning of Code Section 280G.
6.7 Indemnification.
(a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal
or administrative, in which any person who is now, or has been at
any time prior to the date of this Agreement, or who becomes prior
to the Effective Time, a director or officer or employee of Nutmeg
(the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part
out of, or pertaining to (i) the fact that he is or was a director,
officer or employee of Nutmeg or any of their respective
predecessors or (ii) this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate
and defend against and respond thereto to the extent permitted by
applicable law and the Certificate of Incorporation and Bylaws of
Nutmeg. It is understood and agreed that after the Effective Time,
NewMil shall indemnify and hold harmless, as and to the fullest
extent permitted by applicable law and the Certificate of
Incorporation and Bylaws of NewMil or the Charter and Bylaws of New
Milford Savings Bank, as the case may be, each such Indemnified
Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses)
judgments, fines and amounts paid in settlement in connection with
any such threatened or actual claim, action, suit, proceeding or
investigation, and in the event of any such threatened or actual
claim, action, suit, proceeding or investigation (whether asserted
or arising before or after the Effective Time), the Indemnified
Parties may retain counsel reasonably satisfactory to NewMil;
provided, however, that (1) NewMil shall have the right to assume
the defense thereof and upon such assumption NewMil shall not be
liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except
that if NewMil elects not to assume such defense or counsel for the
Indemnified Parties reasonably advises the Indemnified Parties that
there are issues which raise conflicts of interest between NewMil
and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to NewMil, and NewMil shall pay the
reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) NewMil shall be obligated pursuant to this paragraph
to pay for only one firm of counsel for each Indemnified Party, and
(3) NewMil shall not be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably
withheld or delayed). NewMil shall have no obligation to advance
expenses incurred in connection with a threatened or pending
action, suit or preceding in advance of final disposition of such
action, suit or proceeding, unless (i) NewMil would be permitted to
advance such expenses pursuant to the General Corporation Law of
the State of Delaware (the "Delaware Corporation Law") and NewMil's
Certificate of Incorporation or Bylaws, and (ii) NewMil receives an
undertaking by the Indemnified Party to repay such amount if it is
determined that such party is not entitled to be indemnified by
NewMil pursuant to the Delaware Corporation Law and NewMil's
Certificate of Incorporation or Bylaws. Any Indemnified Party
wishing to claim indemnification under this Section 6.7, upon
learning of any such claim, action, suit, proceeding or
investigation, shall notify NewMil thereof; provided, however, that
the failure to so notify shall not affect the obligations of NewMil
under this Section 6.7 except to the extent such failure to notify
materially prejudices NewMil.
(b) NewMil shall use commercially reasonable efforts to
cause the persons serving as officers and directors of Nutmeg
immediately prior to the Effective Time to be covered by a
directors and officers liability insurance policy ("Tail
Insurance") of substantially the same coverage and amounts
containing terms and conditions which are generally not less
advantageous than Nutmeg's current policy with respect to acts or
omissions occurring prior to the Effective Time which were
committed by such officers and directors in their capacity as such
for an aggregate premium cost for the Tail Insurance of not more
than $30,000 and for a period not less than three years.
6.8 Subsequent Interim and Annual Financial Statements.
As soon as reasonably available, but in no event more than 45
days after the end of each fiscal quarter (other than the fourth
fiscal quarter), NewMil will deliver to Nutmeg its Quarterly
Reports on Form 10-Q as filed with the SEC under the Exchange Act,
and Nutmeg will deliver promptly to NewMil its Form 10-QSB as filed
with the OTS under the Exchange Act. NewMil and Nutmeg shall each
deliver to the other its Current Reports on Form 8-K and Annual
Reports on Form 10-K or 10-KSB promptly after filing such reports
with the SEC or OTS as well as any shareholder communications set
forth by either party to its shareholders.
6.9 Additional Agreements.
In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this
Agreement or the Bank Merger Agreement, or to vest the Surviving
Bank with full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger, the
proper officers and directors of each party to this Agreement and
Nutmeg's Subsidiaries shall take all such necessary action as may
be reasonably requested by NewMil.
6.10 Advice of Changes.
NewMil and Nutmeg shall promptly advise the other party of any
change or event that, individually or in the aggregate, has or
would be reasonably likely to have a Material Adverse Effect on it
or to cause or constitute a material breach of any of its
representations, warranties or covenants contained herein. From
time to time prior to the Effective Time, Nutmeg will promptly
supplement or amend its disclosure schedule delivered in connection
with the execution of this Agreement to reflect any matter which,
if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such
disclosure schedule or which is necessary to correct any
information in such disclosure schedule which has been rendered
inaccurate thereby. No supplement or amendment to such disclosure
schedule shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Sections 7.2(a) hereof,
as the case may be, or the compliance by Nutmeg with the covenants
set forth in Section 5.1 hereof.
6.11 Current Information.
During the period from the date of this Agreement to the
Effective Time, Nutmeg will cause one or more of its designated
representatives to confer on a regular and frequent basis (not less
than monthly) with representatives of NewMil and to report the
general status of the ongoing operations of Nutmeg. Nutmeg will
promptly notify NewMil of any material change in the normal course
of business or in the operation of the properties of Nutmeg and of
any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or
the institution or the threat of litigation involving Nutmeg, and
will keep NewMil fully informed of such events.
6.12 Execution and Authorization of Bank Merger Agreement.
Prior to the Effective Time, (a) NewMil shall approve the Bank
Merger Agreement as the sole shareholder of New Milford Savings
Bank, and (b) New Milford Savings Bank and Nutmeg shall execute and
deliver the Bank Merger Agreement.
6.13 Change in Structure.
NewMil may elect to modify the structure of the transactions
contemplated by this Agreement as noted herein so long as (i) there
are no material adverse federal income tax consequences to the
Nutmeg shareholders as a result of such modification, (ii) the
consideration to be paid to the Nutmeg shareholders under this
Agreement is not thereby changed or reduced in amount, (iii) such
modification will not materially change the rights or benefits of
any director, officer or employee of Nutmeg provided in this
Agreement, and (iv) such modification will not be reasonably likely
to delay materially or jeopardize receipt of any Requisite
Regulatory Approvals. In the event that NewMil elects to change
the structure of the Merger, the parties agree to modify this
Agreement and the various exhibits hereto to reflect such revised
structure. In such event, NewMil shall prepare appropriate
amendments to this Agreement and the exhibits hereto for execution
by the parties hereto. NewMil and Nutmeg agree to cooperate fully
with each other to effect such amendments.
6.14 Transaction Expenses of Nutmeg.
(a) For planning purposes, Nutmeg shall, within 15 days
from the date hereof, provide NewMil with its estimated budget of
transaction-related expenses reasonably anticipated to be payable
by Nutmeg in connection with this transaction, including the fees
and expenses of counsel, accountants, investment bankers and other
professionals. Nutmeg shall promptly notify NewMil if or when it
determines that it will expect to exceed its budget.
(b) Promptly after the execution of this Agreement,
Nutmeg shall ask all of its attorneys and other professionals to
render current and correct invoices for all unbilled time and
disbursements. Nutmeg shall accrue and/or pay all of such amounts
as soon as possible.
(c) Nutmeg shall advise NewMil monthly of all out-of-pocket
expenses which Nutmeg has incurred in connection with this transaction.
(d) NewMil, in reasonable consultation with Nutmeg,
shall make all arrangements with respect to the printing and
mailing of the Proxy Statement. NewMil, if it deems necessary,
also shall engage (at NewMil's expense) a proxy solicitation firm
to assist in the solicitation of proxies for the Special Meeting of
Nutmeg's shareholders. Nutmeg agrees to cooperate as to such
matters.
ARTICLE VII - CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger
shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(a) Shareholder Approval.
This Agreement, the Merger and the other transactions
contemplated hereby shall have been approved and adopted by the
affirmative vote of the holders of at least two-thirds of the
issued and outstanding shares of Nutmeg Capital Stock entitled to
vote thereon (including a majority vote of each of the Common Stock
and Preferred Stock shares), and the affirmative vote of a majority
of the votes cast in person or by proxy by holders of the issued
and outstanding shares of NewMil Common Stock entitled to vote
thereon.
(b) Stock Exchange Listing.
The shares of NewMil Common Stock which shall be issued
in the Merger (including the NewMil Common Stock that may be issued
upon exercise of the options referred to in Section 1.6 hereof)
upon consummation of the Merger shall have been authorized for
quotation on the Nasdaq (or such other exchange on which the NewMil
Common Stock may become listed).
(c) Other Approvals.
All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall
remain in full force and effect and all statutory waiting periods
in respect thereof shall have expired (all such approvals and the
expiration of all such waiting periods being referred to herein as
the "Requisite Regulatory Approvals"). No Requisite Regulatory
Approval shall contain a non-customary condition that NewMil
reasonably determines to be burdensome or otherwise alter the
benefits for which it bargained in this Agreement.
(d) Registration Statement.
The Registration Statement shall have become effective
under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) No Injunctions or Restraints; Illegality.
No order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or
prohibition (an "Injunction") preventing the consummation of the
Merger or any of the other transactions contemplated by this
Agreement, the Bank Merger Agreement or the Option Agreement shall
be in effect. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by
any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger.
(f) Federal Tax Opinion.
NewMil and Nutmeg shall have received from Tyler Cooper
& Alcorn, LLP or PricewaterhouseCoopers, LLP an opinion to NewMil
and Nutmeg, in form and substance reasonably satisfactory to NewMil
and Nutmeg, substantially to the effect that on the basis of facts,
representations, and assumptions set forth in such opinion which
are consistent with the state of facts existing at the time of such
opinion, the Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the
Code and the receipt by shareholders of Nutmeg of Merger
Consideration consisting of NewMil Common Stock will not result in
the recognition of gain or loss by such shareholders for federal
income tax purposes. In rendering such opinion, such counsel may
require and, to the extent such counsel deems necessary or
appropriate, may rely upon representations made in certificates of
officers of Nutmeg, NewMil, New Milford Savings Bank, their
respective affiliates and others.
7.2 Conditions to Obligations of NewMil and New Milford
Savings Bank.
The obligation of NewMil and New Milford Savings Bank to
effect the Merger is also subject to the satisfaction or waiver by
NewMil at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties.
The representations and warranties of Nutmeg set forth in
this Agreement shall be true and correct as of the date of this
Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date; provided, however, that
for purposes of this paragraph, such representations and warranties
shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and
correct, individually or in the aggregate, would have a Material
Adverse Effect on Nutmeg. Such determination of aggregate Material
Adverse Effect shall be made as if there were no materiality
qualifications in such representations and warranties. NewMil
shall have received a certificate signed on behalf of Nutmeg by the
President of Nutmeg to the foregoing effect.
(b) Performance of Covenants and Agreements.
Nutmeg shall have performed in all material respects all
covenants and agreements required to be performed by it under this
Agreement, including, but not limited to, the sale of the Loan
Servicing Rights in accordance with Section 5.1(a) hereof, at or
prior to the Closing Date. NewMil shall have received a
certificate signed on behalf of Nutmeg by the President of Nutmeg
to such effect.
(c) Nutmeg Shareholders' Equity
The shareholders' equity reflected on the balance sheet
of Nutmeg immediately following the sale of the Loan Servicing
Rights (unaudited) shall be equal to or greater than the
shareholders' equity reflected on the March 31, 2000 balance sheet
(unaudited) of Nutmeg, exclusive of any increase in shareholders'
equity attributable to the exercise of any options by Nutmeg option
holders in the intervening period.
(d) Consents under Agreements.
The consent, approval or waiver of each person (other
than the Requisite Regulatory Approvals) whose consent or approval
shall be required in connection with the transactions contemplated
hereby or in order to permit the succession by the Surviving Bank
pursuant to the Merger to any obligation, right or interest of
Nutmeg under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument shall
have been obtained except for those, the failure of which to
obtain, will not result in a Material Adverse Effect on the
Surviving Bank.
(e) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity
seeking an Injunction shall be pending.
(f) Legal Opinion.
NewMil shall have received the opinion of Day, Berry &
Howard, counsel to Nutmeg, dated the Closing Date, in the form
attached hereto as Exhibit D. As to any matter in such opinion
which involves matters of fact, such counsel may rely upon the
certificates of officers and directors of Nutmeg and of public
officials, reasonably acceptable to NewMil.
(g) Accountant's Comfort Letter.
Nutmeg shall have caused to be delivered on the
respective dates thereof to NewMil "comfort letters" from Seward
and Monde, Nutmeg's independent public accountants, dated the date
on which the Registration Statement or last amendment thereto shall
become effective, and dated the date of the Closing (defined in
Section 9.1 hereof), and addressed to NewMil and Nutmeg, with
respect to Nutmeg's financial data presented in the Registration
Statement, which letters shall be based upon Statements on Auditing
Standards Nos. 72 and 76.
7.3 Conditions to Obligations of Nutmeg.
The obligation of Nutmeg to effect the Merger is also subject
to the satisfaction or waiver by Nutmeg at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties.
The representations and warranties of NewMil set forth in
this Agreement shall be true and correct as of the date of this
Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date; provided, however, that
for purposes of this paragraph, such representations and warranties
shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and
correct, individually or in the aggregate, would have a Material
Adverse Effect on NewMil. Such determination of aggregate Material
Adverse Effect shall be made as if there were no materiality
qualifications in such representations and warranties. Nutmeg
shall have received a certificate signed on behalf of NewMil by
each of the Chairman, Chief Executive Officer and President of
NewMil to the foregoing effect.
(b) Performance of Covenants and Agreements.
NewMil and New Milford Savings Bank shall have each
performed in all material respects all covenants and agreements
required to be performed by it under this Agreement at or prior to
the Closing Date. Nutmeg shall have received a certificate signed
on behalf of NewMil by the Chairman, Chief Executive Officer and
President of NewMil and New Milford Savings Bank to the foregoing
effect.
(c) Consents under Agreements.
The consent or approval or waiver of each person (other
than the Requisite Regulatory Approvals) whose consent or approval
shall be required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument to which
NewMil or New Milford Savings Bank is a party or is otherwise bound
shall have been obtained, except for those, the failure of which to
obtain, will not result in a Material Adverse Effect on NewMil.
(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(e) Legal Opinion.
Nutmeg shall have received the opinion of Tyler Cooper & Alcorn,
LLP, counsel to NewMil, dated the Closing Date, in the form attached
hereto as Exhibit E. As to any matter in such opinion which involves
matters of fact, such counsel may rely upon the certificates of
officers and directors of NewMil and of public officials, reasonably
acceptable to Nutmeg.
(f) Updated Fairness Opinion.
Nutmeg shall have received from MB&D for inclusion in the
Proxy Statement an update of the Fairness Opinion received by it
prior to the execution of this Agreement.
ARTICLE VIII - TERMINATION AND AMENDMENT
8.1 Termination.
This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the shareholders of
Nutmeg or NewMil:
(a) by mutual consent of NewMil and Nutmeg in a written
instrument, if the Board of Directors of each so determines by a
vote of a majority of the members of its entire Board;
(b) by either NewMil or Nutmeg upon written notice to
the other party 30 days after the date on which any request or
application for a Requisite Regulatory Approval shall have been
denied or withdrawn at the request or recommendation of the
Governmental Entity which must grant such Requisite Regulatory
Approval, unless within the 30-day period following such denial or
withdrawal the parties agree to file, and have filed with the
applicable Governmental Entity, a petition for rehearing or an
amended application, provided, however, that no party shall have
the right to terminate this Agreement pursuant to this Section
8.1(b), if such denial or request or recommendation for withdrawal
shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of
such party set forth herein;
(c) by either NewMil or Nutmeg if the Merger shall not
have been consummated on or before March 31, 2001, unless the
failure of the Closing to occur by such date shall be due to the
failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth
herein;
(d) by NewMil or by Nutmeg (provided that either is not
in breach of its obligations hereof) if the approval of the
shareholders of such party required for the consummation of the
Merger shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of shareholders or
at any adjournment or postponement thereof;
(e) by either NewMil or Nutmeg (provided that the
terminating party is not then in breach of any representation,
warranty, covenant or other agreement contained herein that,
individually or in the aggregate, would give the other party the
right to terminate this Agreement) if there shall have been a
breach of any of the representations or warranties set forth in
this Agreement on the part of the other party, if such breach,
individually or in the aggregate, has had or is likely to have a
Material Adverse Effect on the breaching party, and such breach
shall not have been cured within 30 days following receipt by the
breaching party of written notice of such breach from the other
party hereto or such breach, by its nature, cannot be cured prior
to the Closing;
(f) by either NewMil or Nutmeg (provided that the
terminating party is not then in breach of any representation,
warranty, covenant or other agreement contained herein that,
individually or in the aggregate, would give the other party the
right to terminate this Agreement) if there shall have been a
material breach of any of the covenants or agreements set forth in
this Agreement on the part of the other party, and such breach
shall not have been cured within 30 days following receipt by the
breaching party of written notice of such breach from the other
party hereto or such breach, by its nature, cannot be cured prior
to the Closing; and
(g) by either party, if the management of the other
party or its Board of Directors, for any reason, (i) fails to call
and hold within 50 days of the effectiveness of the Registration
Statement the Special Meeting or New Mil Special Meeting to
consider and approve this Agreement, the Merger and the other
transactions contemplated hereby, (ii) fails to recommend to
shareholders the approval of this Agreement, the Merger and the
transactions contemplated hereby, (iii) fails to oppose any third
party proposal that is inconsistent with the transactions
contemplated by this Agreement or (iv) violates Section 5.1(e) of
this Agreement or would have violated Section 5.1(e) but for the
fiduciary duty exception.
8.2 Effect of Termination.
In the event of termination of this Agreement by either NewMil
or Nutmeg, as provided in Section 8.1 hereof, this Agreement shall
forthwith become void and have no effect except (i) the last
sentences of Sections 6.2(a) and 6.2(b) and Sections 8.2, 9.2 and
9.3 hereof shall survive any termination of this Agreement, and
(ii) notwithstanding anything to the contrary contained in this
Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful or intentional
breach of any provision of this Agreement.
8.3 Amendment.
Subject to compliance with applicable law, this Agreement may
be amended by the parties hereto, by action taken or authorized by
their respective Board of Directors, at any time before or after
approval of the matters presented in connection with the Merger by
the shareholders of Nutmeg or NewMil; provided, however, that after
any approval of the transactions contemplated by this Agreement by
Nutmeg's shareholders, there may not be, without further approval
of such shareholders, any amendment of this Agreement which reduces
the amount or changes the form of the consideration to be delivered
to Nutmeg shareholders hereunder other than as contemplated by this
Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
8.4 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto,
by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the
other parties hereto, (b)waive any inaccuracies in the
representations and warranties contained herein or in any document
delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on
strict compliance with an obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX - GENERAL PROVISIONS
9.1 Closing.
Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m.
at the main offices of NewMil on the tenth business day after the
date on which all of the conditions contained in Section 7.2
hereof, to the extent not waived, are satisfied or at such other
date, place and time as the parties may agree (the "Closing Date").
9.2 Nonsurvival of Representations, Warranties, Covenants and
Agreements.
None of the representations, warranties, covenants and
agreements in this Agreement or in any instrument delivered
pursuant to this Agreement (other than pursuant to the Option
Agreement, which shall terminate in accordance with its terms)
shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply
in whole or in part after the Effective Time.
9.3 Expenses; Breakup Fee.
All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense. All filing and other fees paid
to the SEC in connection with this Agreement shall be borne by
NewMil. In the event that this Agreement is terminated by either
NewMil or Nutmeg by reason of a breach of the other pursuant to
Sections 8.1(e), (f) or (g) hereof, the other party shall pay all
documented, reasonable costs and expenses up to $150,000 incurred
by the terminating party in connection with this Agreement and the
transactions contemplated hereby, plus, in the case of Nutmeg, a
breakup fee of $300,000 or, in the case of NewMil, a breakup fee of
$500,000 ($600,000 if all of the Loan Servicing Rights are subject
to an irrevocable contract for sale at the time the Agreement is so
terminated). Except as set forth in the next sentence, in the
event that this Agreement is terminated by either party under
Section 8.1(d) hereof by reason of the other party's shareholders
not having given any required approval, the other party shall pay
all documented, reasonable costs and expenses up to $150,000
incurred by the first party in connection with this Agreement and
the transactions contemplated hereby. In the event that this
Agreement is terminated by NewMil under Section 8.1(d) by reason of
Nutmeg shareholders not having given any required approval, and
there shall have been prior to the Special Meeting a "Third Party
Public Event" (as defined below), Nutmeg shall pay all documented,
reasonable costs and expenses up to $150,000 incurred by NewMil in
connection with this Agreement and the transactions contemplated
hereby, plus a breakup fee of $300,000. For purposes of this
Section 9.3, a "Third Party Public Event" shall refer to any of the
following events: (i) any person (as defined at Sections 3(a)(9)
and 13(d)(3) of the Exchange Act and the rules and regulations
thereunder), other than NewMil or any NewMil Subsidiary, shall have
made a bona fide proposal to Nutmeg or, by a public announcement or
written communication that is or becomes the subject of public
disclosure, to Nutmeg's shareholders to engage in an Acquisition
Transaction (including, without limitation, any situation in which
any person other than NewMil or any NewMil Subsidiary shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the
Securities Act, with respect to a tender offer or exchange offer to
purchase any shares of Nutmeg Common Stock such that, upon
consummation of such offer, such person would have beneficial
ownership of 10.% or more of the then outstanding shares of Nutmeg
Common Stock); or (ii) any director, officer, 5% or greater
shareholder or affiliate of Nutmeg shall have, by any means which
becomes the subject of public disclosure, communicated opposition
to this Agreement, the Merger or other transactions contemplated
hereby, or otherwise takes action to influence the vote of Nutmeg
shareholders against this Agreement, the Merger and the
transactions contemplated hereby.
9.4 Notice.
All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, mailed
by registered or certified mail (return receipt requested) or
delivered by an express courier (with confirmation) to the parties
at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to NewMil or New Milford Savings Bank, to:
New Milford Savings Bank
191 Main Street
New Milford, CT 06776
Attn: Francis J. Wiatr, Chairman and CEO
with a copy (which shall not constitute notice) to:
Tyler, Cooper & Alcorn, LLP
CityPlace 35th Floor
Hartford, CT 06103-3488
Attn: William W. Bouton, III Esq.
and
(b) if to Nutmeg Savings & Loan Association, to:
Nutmeg Savings & Loan Association
301 Main Street
Danbury, CT 06810
Attn: Henry A. Bessel, President & CEO
with a copy (which shall not constitute notice,) to:
Day, Berry & Howard, LLP
CityPlace
Hartford, CT 06103
Attn: Robert M. Taylor, Esq.
and to
Paul N. Jaber, Esq.
148 Deer Hill Avenue
P.O. Box 440
Danbury, CT 06810
9.5 Interpretation.
When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or
an Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever
the words "include" "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation".
9.6 Counterparts.
This Agreement may be executed in counterparts, all of which
shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.7 Entire Agreement.
This Agreement (including the disclosure schedules, documents
and the instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings.
both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement,
the Bank Merger Agreement, the Option Agreement and the Nutmeg
Stockholder Agreement.
9.8 Governing Law.
This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware, without regard to any
applicable conflicts of law rules.
9.9 Enforcement of Agreement.
The parties hereto agree that irreparable damage would occur
in the event that the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity.
9.10 Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms and
provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement
in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.11 Publicity.
Except as otherwise required by law or the rules of NASDAQ (or
such other exchange on which the NewMil Common Stock may become
listed), so long as this Agreement is in effect, Nutmeg shall not
issue or cause the publication of any press release or other public
announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this
Agreement, the Bank Merger Agreement, the Option Agreement or the
Nutmeg Stockholder Agreement without prior review by and the
consent of NewMil, which consent shall not be unreasonably
withheld.
9.12 Assignment; Limitation of Benefits.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective
successors and assigns. Except as otherwise specifically provided
in Section 6.7 hereof, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any
person other than the parties hereto any rights or remedies
hereunder, and the covenants, undertakings and agreements set out
herein shall be solely for the benefit of, and shall be enforceable
only by, the parties hereto and their permitted assigns.
9.13 Additional Definitions.
In addition to any other definitions contained in this
Agreement, the following words, terms and phrases shall have the
following meanings when used in this Agreement.
"Affiliated Person": any director, officer or 5% or greater
shareholder, spouse or other person living in the same household of
such director, officer or shareholder, or any company, partnership
or trust in which any of the foregoing persons is an officer, 5% or
greater shareholder, general partner or 5% or greater trust
beneficiary.
"Laws": any and all statutes, laws, ordinances, rules,
regulations, orders, permits, judgments, injunctions, decrees, case
law and other rules of law enacted, promulgated or issued by any
Governmental Entity.
"Material Adverse Effect": with respect to NewMil or Nutmeg,
as the case may be, means a condition, event, change or occurrence
that is reasonably likely to have a material adverse effect upon
(A) the financial condition, results of operations, business or
properties of NewMil or Nutmeg (other than as a result of changes
in laws or regulations or accounting rules of general applicability
or interpretations thereof), or (B) the ability of NewMil or Nutmeg
to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement, the Bank Merger
Agreement and, in the case of Nutmeg, the Option Agreement.
"Subsidiary": with respect to any party means any
corporation, partnership or other organization, whether
incorporated or unincorporated, which is consolidated with such
party for financial reporting purposes.
IN WITNESS WHEREOF, NewMil, New Milford Savings Bank and
Nutmeg have caused this Agreement to be executed and delivered by
their respective officers thereunto duly authorized as of the date
first above written.
NEWMIL BANCORP, INC.
ATTEST:
By: By: /s/
Francis J. Wiatr
Its: Chairman, President and
Chief Executive Officer
NEW MILFORD SAVINGS BANK
ATTEST:
By: By: /s/
Francis J. Wiatr
Its: Chairman, President and
Chief Executive Officer
NUTMEG FEDERAL SAVINGS & LOAN
ASSOCIATION COMPANY
ATTEST:
By: By: /s/
Paul N. Jaber
Its: Chairman of the Board
