1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-12
Connecticut Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|_| No fee required.
|X| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common stock, par value $0.01 per share
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
12,466,111
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
$52.00
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$647,197,772
- --------------------------------------------------------------------------------
(5) Total Fee paid:
$129,440
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
N/A
- --------------------------------------------------------------------------------
(3) Filing party:
N/A
- --------------------------------------------------------------------------------
(4) Date filed:
N/A
- --------------------------------------------------------------------------------
2
[CONNECTICUT BANCSHARES LOGO]
_______________, 2003
Dear Stockholder:
You are cordially invited to attend a special meeting of the stockholders
of Connecticut Bancshares, Inc., the holding company for The Savings Bank of
Manchester. The meeting will be held at ______________, ______________________,
______________, Connecticut on ___________, _____________, 2003, at __:00 __.m.,
local time.
At the special meeting, you will be asked to approve a merger agreement by
and among The New Haven Savings Bank, Connecticut Bancshares, and The Savings
Bank of Manchester. Upon completion of the merger, you will be entitled to
receive a cash payment of $52.00 for each share of Connecticut Bancshares stock
that you own.
The completion of the merger is subject to certain conditions, including
the completion of New Haven's conversion from mutual-to-stock form, the receipt
of regulatory approvals and the approval of the merger agreement by the
affirmative vote of a majority of the outstanding shares of Connecticut
Bancshares common stock. We urge you to read the attached proxy statement
carefully. It describes the merger agreement in detail and includes a copy of
the merger agreement as Appendix A.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS
THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT BECAUSE THE BOARD BELIEVES
IT TO BE IN THE BEST INTERESTS OF THE CONNECTICUT BANCSHARES STOCKHOLDERS.
YOUR VOTE IS VERY IMPORTANT
Whether or not you plan to attend the special meeting, please complete,
date and sign the enclosed proxy card and return it promptly in the postage-paid
envelope provided.
On behalf of the board of directors, I thank you for your prompt attention
to this important matter.
Sincerely,
Richard P. Meduski
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THIS PROXY STATEMENT IS FIRST BEING MAILED TO CONNECTICUT BANCSHARES'
STOCKHOLDERS ON OR ABOUT ____________, 2003.
3
CONNECTICUT BANCSHARES, INC.
923 MAIN STREET
MANCHESTER, CONNECTICUT 06040
(860) 646-1700
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON __________, 2003
A special meeting of stockholders of Connecticut Bancshares, Inc. will be
held at ____________, ____________, ____________, Connecticut on _______, ______
___, 2003 at __:00 __.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated July 15, 2003, by and among The
New Haven Savings Bank, Connecticut Bancshares, Inc. and The Savings
Bank of Manchester. Upon completion of the merger, you will be
entitled to receive $52.00 in cash for each share of Connecticut
Bancshares common stock that you own. A copy of the merger agreement
is included as Appendix A to the accompanying proxy statement.
2. To transact any other business that may properly come before the
meeting, including adjourning the special meeting to permit, if
necessary, further solicitation of proxies or any adjournment
thereof.
The board of directors is not aware of any such other business.
Only stockholders of record at the close of business on _____________,
2003 are entitled to vote at the meeting or any adjournments or postponements of
the meeting.
Remember, if your shares are held in the name of a broker, only your
broker can vote your shares on the merger agreement and only after receiving
your instructions. Please contact the person responsible for your account and
instruct him/her to execute a proxy card on your behalf. You should also sign,
date and mail your instruction card at your earliest convenience.
By Order of the Board of Directors
Manchester, Connecticut Carole L. Yungk
_________, 2003 CORPORATE SECRETARY
THE BOARD OF DIRECTORS OF CONNECTICUT BANCSHARES UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE APPROVAL OF THE MERGER AGREEMENT. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN
THE ACCOMPANYING PRE-ADDRESSED POSTAGE-PAID ENVELOPE.
4
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE MERGER........................................
SUMMARY TERM SHEET............................................................
THE SPECIAL MEETING
Place, Date and Time....................................................
Purpose of the Meeting..................................................
Who Can Vote at the Meeting; Record Date................................
Quorum and Vote Required................................................
Shares Held by Directors and Officers of Connecticut Bancshares;
Voting Agreements.......................................................
Voting by Proxy.........................................................
Revocability of Proxies.................................................
Participants in The Savings Bank of Manchester's ESOP and Savings Plan..
THE MERGER
The Parties to the Merger...............................................
Form of the Merger......................................................
Treatment of Connecticut Bancshares Stock Options.......................
Treatment of Connecticut Bancshares Stock Awards........................
Procedures for Surrendering Your Certificates...........................
Material Federal Income Tax Consequences of the Merger..................
Background of the Merger................................................
Connecticut Bancshares' Reasons for the Merger..........................
Opinion of Connecticut Bancshares' Financial Advisor....................
Interests of Directors and Officers in the Merger that Are
Different From Your Interests...........................................
Approvals Needed to Complete the Merger.................................
New Haven's Conversion..................................................
Financing the Merger....................................................
Accounting Treatment of the Merger......................................
Dissenters' Appraisal Rights............................................
THE MERGER AGREEMENT
When Will the Merger Be Completed.......................................
Conditions to Completing the Merger.....................................
Other Provisions of the Merger Agreement................................
INFORMATION ABOUT NEWALLIANCE BANCSHARES AND NEW HAVEN.......................
STOCK OWNERSHIP...............................................................
STOCKHOLDER PROPOSALS AND NOMINATIONS.........................................
SOLICITATION OF PROXIES.......................................................
WHERE YOU CAN FIND MORE INFORMATION...........................................
i
5
APPENDIX A Agreement and Plan of Merger, dated July 15, 2003 by and among The
New Haven Savings Bank, Connecticut Bancshares, Inc. and The
Savings Bank of Manchester (exhibits omitted)
APPENDIX B Opinion of Sandler O'Neill & Partners, L.P.
APPENDIX C Section 262 of the Delaware General Corporation Law
ii
6
QUESTIONS AND ANSWERS ABOUT THE MERGER
WHAT AM I BEING ASKED TO VOTE ON AND HOW DOES MY BOARD RECOMMEND THAT I VOTE?
You are being asked to vote FOR the adoption of the Agreement and Plan of
Merger dated as of July 15, 2003 providing for the merger of Connecticut
Bancshares with and into NewAlliance Bancshares, Inc., the newly formed stock
holding company for The New Haven Savings Bank once New Haven completes its
conversion from mutual-to-stock form. The Connecticut Bancshares board of
directors has determined that the proposed merger is in the best interests of
Connecticut Bancshares stockholders, has approved the merger agreement and
recommends that Connecticut Bancshares stockholders vote FOR the adoption of the
merger agreement.
WHAT VOTE IS REQUIRED TO ADOPT THE MERGER AGREEMENT?
The adoption of the merger agreement requires the affirmative vote of at
least a majority of the outstanding shares of Connecticut Bancshares common
stock.
WHAT WILL I RECEIVE IN THE MERGER?
Under the merger agreement, each share of Connecticut Bancshares common
stock you own will be converted into the right to receive $52.00 in cash.
However, if the closing of the merger does not take place on or before March 31,
2004, the per share merger consideration will be increased by the amount that
Connecticut Bancshares' net income exceeds dividends paid after that date.
HOW DO I EXCHANGE MY CONNECTICUT BANCSHARES STOCK CERTIFICATES?
You will receive instructions on where and how to surrender your
Connecticut Bancshares stock certificates from the exchange agent,
___________________________, after the merger is completed. IN ANY EVENT, YOU
SHOULD NOT FORWARD YOUR CONNECTICUT BANCSHARES STOCK CERTIFICATES WITH YOUR
PROXY CARD.
WHAT SHOULD I DO NOW?
After you have carefully read this document, please indicate on your proxy
card how you want to vote. Sign, date and mail the proxy card in the enclosed
postage prepaid envelope as soon as possible, so that your shares will be
represented at the special meeting. If you do not return a properly executed and
dated proxy card or do not vote at the special meeting in person, this will have
the same effect as a vote against the adoption of the merger agreement.
1
7
IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, BANK OR NOMINEE, WILL MY
BROKER, BANK OR NOMINEE AUTOMATICALLY VOTE MY SHARES FOR ME?
No. Your broker, bank or nominee will not be able to vote your shares of
Connecticut Bancshares common stock unless you provide instructions on how to
vote. You should instruct your broker, bank or nominee how to vote your shares
by following the procedures your broker, bank or nominee provides. If you do not
provide instructions to your broker, bank or nominee, your shares will not be
voted, and this will have the effect of voting against adoption of the merger
agreement. Please check the voting form used by your broker, bank or nominee to
see if it offers telephone or internet voting.
WHO CAN HELP ANSWER MY QUESTIONS?
If you want additional copies of this document, or if you want to ask any
questions about the merger or how to submit your proxy, you should contact:
Carole L. Yungk
Corporate Secretary
Connecticut Bancshares, Inc.
923 Main Street
Manchester, Connecticut 06040
Telephone: (860) 646-1700
2
8
SUMMARY TERM SHEET
THIS SUMMARY TERM SHEET HIGHLIGHTS SELECTED INFORMATION REGARDING THE
MERGER FROM THIS PROXY STATEMENT AND DOES NOT CONTAIN ALL THE INFORMATION THAT
IS IMPORTANT TO YOU. FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF THE
PROPOSED MERGER, WE URGE YOU TO READ CAREFULLY THE ENTIRE DOCUMENT AND THE OTHER
DOCUMENTS TO WHICH WE REFER, INCLUDING THE MERGER AGREEMENT, ATTACHED AS
APPENDIX A.
THE COMPANIES
CONNECTICUT BANCSHARES, INC.
THE SAVINGS BANK OF MANCHESTER
923 MAIN STREET
MANCHESTER, CONNECTICUT 06040
(860) 646-1700
We are a Delaware corporation and the parent company of
The Savings Bank of Manchester, a Connecticut-chartered
stock savings bank. The Savings Bank of Manchester
operates 28 full-service banking offices in Hartford, Tolland
and Windham Counties, Connecticut. At ____________,
2003, we had total assets of $_____ billion, deposits of
$_____ billion and stockholders' equity of $_____ million.
NEWALLIANCE BANCSHARES, INC.
THE NEW HAVEN SAVINGS BANK
195 CHURCH STREET
NEW HAVEN, CONNECTICUT 06510
(203) 787-1111
Upon completion of the conversion of The New Haven
Savings Bank from mutual-to-stock form, NewAlliance Bancshares will be
the parent company of New Haven, a Connecticut-chartered
stock savings bank. NewAlliance Bancshares is a Delaware corporation.
New Haven operates 36 banking offices in ____________
Counties, Connecticut. NewAlliance Bancshares will have no material
assets or liabilities until the completion of the conversion.
At _________, 2003, New Haven had total assets of $_____
billion, deposits of $_____ billion and total equity of
$_____ million.
In a separate and unrelated transaction, New Haven is also acquiring Alliance
Bancorp of New England, Inc., a savings and loan holding company organized under
the laws of the State of Delaware in 1997. It operates Tolland Bank, a
Connecticut-charted savings bank that operates nine banking offices in and
around Tolland County. At ____________, 2003, Alliance had total assets of $____
million, deposits of $____ million and stockholders' equity of $______ million.
THE ALLIANCE MERGER DOES NOT REQUIRE THE APPROVAL OF THE STOCKHOLDERS OF
CONNECTICUT BANCSHARES AND THE CONNECTICUT BANCSHARES MERGER DOES NOT DEPEND ON
THE COMPLETION OF THE ALLIANCE MERGER.
THE SPECIAL MEETING
PLACE, DATE AND TIME (PAGE __)
A special meeting of our stockholders will be held at
____________, ____________, ____________, Connecticut
on ________________, 2003 at __:00 __.m., local time.
PURPOSE OF THE MEETING
(PAGE __)
At the special meeting, our stockholders will be asked to approve the merger
agreement with New Haven and to transact any other business that may properly
come before meeting.
3
9
WHO CAN VOTE AT THE MEETING
(PAGE __)
You can vote at the special meeting of Connecticut Bancshares stockholders only
if you owned our common stock at the close of business on _______, 2003. You
will be able to cast one vote for each share of our common stock you owned on
that date. As of __________, 2003, there were ______________ shares of our
common stock outstanding.
WHAT VOTE IS REQUIRED FOR
APPROVAL OF THE MERGER
AGREEMENT (PAGE __)
In order to approve the merger agreement, the holders of at least a majority of
the outstanding shares of our common stock entitled to vote must vote in favor
of the merger agreement. You can vote your shares by attending the special
meeting and voting in person or by completing and mailing the enclosed proxy
card. As of __________, 2003, the directors and executive officers of
Connecticut Bancshares beneficially owned approximately _____% of our
outstanding common stock (excluding options).
THE MERGER
OVERVIEW OF THE TRANSACTION
(PAGE __)
We propose a business combination in which we will merge with a wholly owned,
interim subsidiary of NewAlliance Bancshares, with Connecticut Bancshares as the
surviving entity. Immediately after completion of the merger, Connecticut
Bancshares will be merged with and liquidated into NewAlliance Bancshares. Each
of these transactions are conditioned on and will be completed immediately
following the completion of New Haven's conversion from mutual-to-stock form.
EACH CONNECTICUT BANCSHARES
SHARE WILL BE EXCHANGED FOR
$52.00 IN CASH (PAGE __)
As our stockholder, upon the closing of the merger, each of
your shares of our common stock will automatically be
converted into the right to receive $52.00 in cash. However,
if the closing of the merger does not take place on or before
March 31, 2004, the per share merger consideration will be
increased by the amount that Connecticut Bancshares' net
income exceeds dividends paid for each full month after that date.
HOW TO RECEIVE CASH IN EXCHANGE
FOR YOUR CONNECTICUT BANCSHARES
STOCK CERTIFICATES
(PAGE __)
In order to receive cash in exchange for your Connecticut
Bancshares stock certificates, you will need to surrender your
Connecticut Bancshares stock certificates. The exchange
agent, ___________________________, will send you
written instructions for surrendering your certificates after we
have completed the merger.
CONNECTICUT BANCSHARES STOCK
PRICE
Our common stock trades on the Nasdaq National Market
under the symbol "SBMC." On July 15, 2003, which was the
last trading day before we announced the merger, our
common stock closed at $46.45 per share. On _______,
2003, which is the last practicable trading day before the
printing of this document, our common stock closed at
$______ per share.
4
10
TAX CONSEQUENCES OF THE MERGER
(PAGE __)
When you exchange your Connecticut Bancshares shares solely for cash, you
generally should recognize capital gain or loss on the exchange.
THIS TAX TREATMENT MAY NOT APPLY TO ALL CONNECTICUT BANCSHARES STOCKHOLDERS.
DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU CAN BE COMPLICATED.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S
TAX CONSEQUENCES THAT ARE PARTICULAR TO YOU.
CONNECTICUT BANCSHARES' BOARD
OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS APPROVE THE MERGER
Our board of directors believes that the merger is fair and in the stockholders'
best interests, and unanimously recommends that you vote "FOR" the proposal to
approve and adopt the merger agreement.
For a discussion of the circumstances surrounding the merger and the factors
considered by our board of directors in approving the merger agreement, see
page__.
CONNECTICUT BANCSHARES'
FINANCIAL ADVISOR BELIEVES THE
MERGER CONSIDERATION IS FAIR TO
STOCKHOLDERS (PAGE __)
Sandler O'Neill & Partners, L.P. has delivered to our board of directors its
opinion that, as of the date of this document, the merger consideration is fair
to the holders of Connecticut Bancshares common stock from a financial point of
view. A copy of this opinion is provided as Appendix B to this document. You
should read it completely to understand the procedures followed, assumptions
made, matters considered, and qualifications and limitations on the review made
by Sandler O'Neill in providing this opinion. We have agreed to pay Sandler
O'Neill approximately $________, of which $_________ has been paid as of
_________, 2003, plus expenses for its services in connection with the merger.
INTERESTS OF CONNECTICUT BANCSHARES' DIRECTORS AND OFFICERS IN THE MERGER THAT
DIFFER FROM YOUR INTERESTS (PAGE __)
Some of our directors and officers have interests in the merger that are
different from, or are in addition to, their interests as stockholders in
Connecticut Bancshares. The members of our board of directors knew about these
additional interests, and considered them, when they approved the merger. These
include:
o Termination and Release Agreements with four executive officers (Messrs.
Meduski, Anderson, Pike and Somerville), under which they will receive cash
payments, continued health and welfare benefit coverage, and, as applicable,
vested supplemental retirement benefits in consideration for the termination
of their employment and supplemental executive retirement agreements with
Connecticut Bancshares and/or The Savings Bank of Manchester and their
agreement to take or refrain from taking certain actions with respect to
their
5
11
restricted stock awards, stock options, and bonus
compensation;
o Termination and Release Agreements with 12 additional officers (Messrs.
Hartl, Martin, Orenstein, Thomas, Gaucher, Hamby, Lynch, Smith and Ms.
Trainer, McLaughlin, Yungk and Elliott), under which they will receive cash
payments and continued health and welfare benefit coverage in consideration
for the termination of their change in control agreements and their agreement
to refrain from taking certain actions with respect to their outstanding
stock options, restricted stock awards and bonus compensation;
o Noncompetition Agreements with four executive officers (Messrs. Meduski,
Anderson, Pike and Somerville), under which they will receive cash payments
in exchange for their agreement to refrain, for the period of time set forth
in their agreement, from engaging in competitive business activities within a
certain geographic area and to maintain the confidentiality of information
learned during the course of their employment. Messrs. Meduski, Anderson,
Pike and Somerville will be subject to Noncompetition Agreements for 42
months, 27 months, 12 months and six months, respectively;
o the vesting of unvested Connecticut Bancshares stock options and restricted
stock awards as a result of completion of the merger;
o the termination of the Connecticut Bancshares employee stock ownership plan
and allocation of any surplus cash to plan participants following the
repayment of the loan;
o provisions in the merger agreement relating to the indemnification of
directors and officers and insurance for our directors and officers for
events occurring before the merger; and
o the offer to two non-employee directors of each of Connecticut Bancshares and
The Savings Bank of Manchester to become directors of NewAlliance Bancshares
and New Haven.
REGULATORY APPROVAL NEEDED TO
COMPLETE THE MERGER
(PAGE __)
We cannot complete the merger unless it is first approved by the Federal Deposit
Insurance Corporation and the State of Connecticut Department of Banking and,
unless approval is waived, by the Federal Reserve Board. New Haven has filed the
required applications with these regulatory agencies. As of the date of this
document, New Haven has [NOT] received
6
12
the approval from any regulatory agency. While we do not know of any reason why
New Haven would not be able to obtain approval in a timely manner, we cannot be
certain if or when New Haven will receive it.
NEW HAVEN'S CONVERSION AND
REGULATORY APPROVALS NEEDED TO
COMPLETE THE CONVERSION
(PAGE __)
In connection with the merger, New Haven has adopted a plan of conversion
pursuant to which it will convert from a Connecticut-chartered mutual savings
bank to a Connecticut-chartered stock savings bank. Recently, New Haven has
organized a Delaware holding company, NewAlliance Bancshares, to acquire and
hold all of the capital stock of New Haven to be issued in the conversion.
Consummation of the conversion and/or acquisition of New Haven by NewAlliance
Bancshares requires regulatory approval from the Connecticut Department of
Banking and the Federal Reserve Board and the regulatory non-objection of the
Federal Deposit Insurance Corporation. New Haven has filed applications or
notices with these regulators, but as of the date of this proxy statement it has
not received approval or non-objection. New Haven anticipates receiving the
requisite regulatory approvals and non-objections for the conversion no later
than ______________________.
In connection with the conversion, NewAlliance Bancshares also has filed a
Registration Statement on Form S-1 with the Securities and Exchange Commission.
The registration statement is currently under review by the SEC. New Haven
anticipates the registration statement will be declared effective not later than
_____________________.
YOU HAVE DISSENTERS' APPRAISAL
RIGHTS IN THE MERGER (PAGE __)
Under Delaware law, if you do not vote in favor of the merger you have the right
to seek an appraisal of the fair value of your Connecticut Bancshares common
stock and receive a cash payment of such fair value. CONNECTICUT BANCSHARES'
STOCKHOLDERS ELECTING TO EXERCISE DISSENTERS' APPRAISAL RIGHTS MUST COMPLY WITH
THE PROVISIONS OF SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW IN ORDER
TO PERFECT THEIR RIGHTS. WE WILL REQUIRE STRICT COMPLIANCE WITH THE STATUTORY
PROCEDURES. A copy of Section 262 of the Delaware General Corporation Law is
attached as Appendix C.
7
13
THE MERGER AGREEMENT
A COPY OF THE MERGER AGREEMENT IS PROVIDED AS APPENDIX A TO THIS PROXY
STATEMENT. PLEASE READ THE ENTIRE MERGER AGREEMENT CAREFULLY. IT IS THE LEGAL
DOCUMENT THAT GOVERNS THE MERGER.
CONDITIONS TO COMPLETING THE
MERGER (PAGE __)
The completion of the merger depends on a number of conditions being met. These
conditions include, among other items:
o approval of the merger agreement by our stockholders;
o approval of New Haven's plan of conversion by New
Haven's corporators and any other party as may be
required;
o completion of New Haven's conversion;
o approval of the merger and the conversion by regulatory
authorities;
o the continued accuracy of certain representations and
warranties made on the date of the merger agreement;
o the performance of all obligations and covenants;
o New Haven's receipt of a "comfort letter" from Connecticut Bancshares'
auditors with respect to certain financial information regarding Connecticut
Bancshares; and
o the absence of any event or circumstance since January 1, 2003 that has had a
material adverse effect on Connecticut Bancshares.
We cannot be certain when or if the conditions to the merger will be satisfied
or waived, or that the merger will be completed.
AGREEMENT NOT TO SOLICIT
OTHER PROPOSALS (PAGE __)
We have agreed not to initiate, solicit, encourage or facilitate any competing
proposal with a third party.
Despite the agreement not to solicit other competing proposals, we may, at any
time prior to stockholder approval of the merger, generally negotiate or have
discussions with, or provide information to, a third party who makes an
unsolicited proposal, provided that our board of directors:
o determines in good faith, based on advice of legal counsel, that such
negotiations or discussions would be
8
14
required in order to comply with our directors' fiduciary
duties to our stockholders; and
o determines in good faith, after consultation with our financial advisor, that
a potential "acquisition proposal," if accepted, is at least as reasonably
likely to be consummated and would result in a transaction more favorable to
Connecticut Bancshares' stockholders from a financial point of view.
After Connecticut Bancshares receives an "acquisition proposal" from a third
party, it must notify New Haven of the third party offer. If Connecticut
Bancshares determines the "acquisition proposal" is superior, New Haven will
have five business days to increase the merger consideration to an amount at
least equal to the "superior proposal."
WE MAY AMEND THE TERMS OF THE
MERGER AND WAIVE SOME
CONDITIONS (PAGE __)
We may agree to amend the merger agreement, and each party may waive the right
to require the other party to adhere to the terms and conditions of the merger
agreement, where the law allows. However, if Connecticut Bancshares'
stockholders approve the merger agreement, we must obtain their further approval
of any amendment or waiver that reduces or changes the consideration to be
received by Connecticut Bancshares' stockholders in the merger.
TERMINATING THE MERGER
AGREEMENT (PAGE __)
Connecticut Bancshares and New Haven may agree at any time not to complete the
merger, even if our stockholders have approved the merger agreement. In
addition, either Connecticut Bancshares or New Haven may decide, without the
consent of the other, to terminate the merger agreement if:
o there has been a material breach of any of the representations and warranties
by the other party and the breach cannot be cured within 30 days of notice of
breach;
o there has been a material failure to perform any of the covenants or
agreements on the part of the other party and the breach cannot be cured
within 30 days of notice of breach;
o our stockholders fail to approve the merger agreement;
o New Haven's corporators or any other party required to vote on the plan, fail
to approve the plan of conversion;
o a government entity does not approve the merger agreement or a court or other
governmental authority issues an order prohibiting the merger;
9
15
o a government entity does not approve New Haven's conversion or a court or
other governmental authority issues an order prohibiting New Haven's
conversion; or
o either party cannot satisfy its obligations to the other party by October 15,
2004 or if the closing has not occurred by October 15, 2004.
We may also terminate the merger agreement if:
o New Haven has not received all regulatory approvals in connection with the
merger, the bank merger and the conversion and NewAlliance Bancshares' SEC
registration statement is not declared effective by August 16, 2004;
o New Haven cannot satisfy its conditions to Connecticut Bancshares to
consummate the merger or the bank merger by August 16, 2004; or
o Connecticut Bancshares enters into an "acquisition agreement" with respect to
a "superior proposal" and sufficient notice has been granted to New Haven
allowing it to match the "superior proposal."
New Haven may also terminate the merger agreement if:
o our board of directors fails to make its recommendation to our stockholders
or fails to give notice of or convene the stockholders meeting; or
o a third party commences a tender or exchange offer for 25% or more of our
stock and our board of directors recommends to our stockholders to tender
their shares.
CONNECTICUT BANCSHARES
TERMINATION FEE (PAGE __)
We will pay New Haven a termination fee of $30 million if:
o New Haven terminates because (i) our board of directors fails to recommend
approval of the merger agreement, (ii) our board of directors fails to call
or convene a meeting of the stockholders, or (iii) a tender offer for 25% or
more of our common stock is commenced and our board of directors recommends
to our stockholders that they tender their shares;
o New Haven terminates because we materially breach a representation, warranty
or covenant and, before termination, a competing "acquisition proposal" has
been publically announced or made known;
10
16
o either party terminates because our stockholders fail to approve the merger
agreement and, before the stockholder vote, a competing "acquisition
proposal" has been publically announced or made known; or
o before our stockholder meeting, we terminate the merger agreement to accept a
"superior proposal" which New Haven fails to at least match within five
business days after Connecticut Bancshares notifies New Haven of the
"superior proposal."
For each of the termination events above, except for the last termination event,
we must pay $10 million to New Haven by the third business day following
termination and the balance of $20 million if, within 18 months after
termination, we enter into an agreement with respect to, or consummate, an
"acquisition transaction" with another party. For the last termination event, we
must pay the entire $30 million by the third business day following termination.
NEW HAVEN SPECIAL PAYMENT
(PAGE __)
New Haven must pay us $30 million if (i) New Haven's corporators, or any other
party required to vote on the plan of conversion, fail to approve the plan of
conversion, (ii) New Haven fails to obtain all required regulatory approvals for
the merger and the conversion, (iii) New Haven does not complete the merger by
October 15, 2004 or such later date agreed to by the parties, or (iv) we
terminate the merger agreement because New Haven has intentionally and willfully
breached any of its representations or warranties or failed to perform or comply
with any of its covenants or agreements to an extent to allow for termination.
New Haven will not have to pay us the $30 million if any of the above "special
payment" events is due to a breach by us of our representations or warranties or
our covenants and such breach is the principal cause of the "special payment"
event.
We must repay to New Haven $15 million of the $30 million special payment if
before the earlier of (a) October 15, 2006 or (b) two years after our demand for
the "special payment," we or any of our subsidiaries enter into a merger
transaction in which our stockholders are entitled to receive merger
consideration in excess of $51.60 per share.
11
17
THE SPECIAL MEETING
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of Connecticut Bancshares to be used at the
special meeting of stockholders. This proxy statement and the enclosed proxy
card are being first mailed on or about _______, 2003 to stockholders of record
as of the close of business on ______________, 2003.
PLACE, DATE AND TIME
The special meeting will be held at ____________, ____________,
____________, Connecticut on _________, ________, 2003 at __:00 __.m., local
time.
PURPOSE OF THE MEETING
The purpose of the meeting is to consider and vote on a proposal to
approve and adopt the merger agreement and to act on any other matters brought
before the meeting.
WHO CAN VOTE AT THE MEETING; RECORD DATE
You are entitled to vote your Connecticut Bancshares common stock only if
you held your shares as of the close of business on ________, 2003. As of the
close of business on ________, 2003, a total of ____________ shares of
Connecticut Bancshares' common stock were outstanding. Each share of common
stock has one vote. As provided in Connecticut Bancshares' certificate of
incorporation, record holders of Connecticut Bancshares' common stock who
beneficially own, either directly or indirectly, in excess of 10% of Connecticut
Bancshares' outstanding shares are not entitled to any vote in respect of the
shares held in excess of the 10% limit.
QUORUM AND VOTE REQUIRED
QUORUM. The special meeting will be held only if a majority of the
outstanding shares of common stock entitled to vote (excluding any shares in
excess of the 10% limit) are represented at the meeting. If you return valid
proxy instructions or attend the meeting in person, your shares will be counted
for purposes of determining whether there is a quorum present, even if you
abstain from voting. Broker non-votes also will be counted for purposes of
determining the existence of a quorum. A broker non-vote occurs when a broker,
bank or other nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received voting instructions from the
beneficial owner. Under applicable rules, brokers, banks and other nominees may
not exercise their voting discretion on the proposal to approve and adopt the
merger agreement and, for this reason, may not vote shares held for beneficial
owners without specific instructions from the beneficial owners.
VOTE REQUIRED. Approval and adoption of the merger agreement requires the
affirmative vote of the majority of the outstanding shares of Connecticut
Bancshares' common stock. Failure to return a properly executed and dated proxy
card or to vote in person and abstentions and broker non-votes will have the
same effect as a vote "Against" the merger agreement.
12
18
SHARES HELD BY DIRECTORS AND OFFICERS OF CONNECTICUT BANCSHARES; VOTING
AGREEMENTS
As of _________, 2003, directors and executive officers of Connecticut
Bancshares owned approximately _____% of the shares of Connecticut Bancshares
common stock, not including shares that may be acquired upon the exercise of
stock options. All of the Connecticut Bancshares directors have entered into
voting agreements with New Haven requiring each individual to continue to hold
all shares owned or controlled on and after July 15, 2003 through the date of
the completion of the merger and to vote all of their shares of Connecticut
Bancshares common stock in favor of the proposal to approve the merger
agreement. Notwithstanding the voting agreements, Mr. Meduski's Termination and
Release Agreement requires him to exercise all of his vested stock options and
sell the shares of Connecticut Bancshares common stock acquired upon such
exercise.
VOTING BY PROXY
The board of directors of Connecticut Bancshares is sending you this proxy
statement for the purpose of requesting that you allow your shares of
Connecticut Bancshares common stock to be represented at the special meeting by
the persons named in the enclosed proxy card. All shares of Connecticut
Bancshares' common stock represented at the special meeting by properly executed
and dated proxies will be voted according to the instructions indicated on the
proxy card. If you sign, date and return a proxy card without giving voting
instructions, your shares will be voted as recommended by Connecticut
Bancshares' board of directors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
If any matters not described in this proxy statement are properly
presented at the special meeting, the persons named in the proxy card will use
their own best judgment to determine how to vote your shares. This includes a
motion to adjourn or postpone the special meeting in order to solicit additional
proxies. However, no proxy voted against the proposal to approve the merger
agreement will be voted in favor of an adjournment or postponement to solicit
additional votes in favor of the merger agreement. If the special meeting is
postponed or adjourned, Connecticut Bancshares common stock may be voted by the
persons named in the proxy card on the new special meeting date as well, unless
you have revoked your proxy. Connecticut Bancshares does not know of any other
matters to be presented at the special meeting.
If Connecticut Bancshares common stock is held in street name, you will
receive instructions from your broker, bank or other nominee that you must
follow in order to have your shares voted. Your broker, bank or other nominee
may allow you to deliver your voting instructions via the telephone or the
Internet. Please see the instruction form provided by your bank, broker or other
nominee that accompanies this proxy statement.
REVOCABILITY OF PROXIES
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Corporate Secretary of
Connecticut Bancshares in writing before your common stock has been voted at the
special meeting, deliver a properly executed and later dated proxy card, or
attend the meeting and vote your shares in person. Attendance at the special
meeting will not in itself constitute revocation of your proxy.
13
19
PARTICIPANTS IN THE SAVINGS BANK OF MANCHESTER'S ESOP AND SAVINGS PLAN
If you participate in The Savings Bank of Manchester's Employee Stock
Ownership Plan ("ESOP") or if you hold shares through The Savings Bank of
Manchester's Savings Plan, you will receive a vote authorization form for each
plan that reflects all shares you may vote under the plans. Under the terms of
the ESOP, the ESOP trustee votes all shares held by the ESOP, but each
participant in the ESOP may direct the trustee how to vote the shares of
Connecticut Bancshares common stock allocated to his or her account. The ESOP
trustee, subject to the exercise of its fiduciary duties, will vote all
unallocated shares of common stock held by the ESOP and allocated shares for
which no timely voting instructions are received in the same proportion as
shares for which the trustee has received voting instructions. Under the terms
of the Savings Plan, a participant is entitled to direct the trustee how to vote
the shares of Connecticut Bancshares common stock held in the Connecticut
Bancshares Stock Fund and credited to his or her account. The trustee will vote
all shares of Connecticut Bancshares common stock for which no directions are
given or for which timely instructions were not received in the same proportion
as shares for which the trustee received voting instructions. The deadline for
returning your voting instructions to each plan's trustee is __________, 2003.
THE MERGER
THE FOLLOWING DISCUSSION OF THE MERGER IS QUALIFIED BY REFERENCE TO THE
MERGER AGREEMENT, WHICH IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX A. YOU
SHOULD READ THE ENTIRE MERGER AGREEMENT CAREFULLY. IT IS THE LEGAL DOCUMENT THAT
GOVERNS THE MERGER.
THE PARTIES TO THE MERGER
CONNECTICUT BANCSHARES, INC. Connecticut Bancshares was organized in
October 1999 for the purpose of becoming the holding company for The Savings
Bank of Manchester upon the conversion of The Savings Bank of Manchester's
former parent holding company, Connecticut Bancshares, M.H.C., from a
mutual-to-stock form of organization. The conversion was completed on March 1,
2000. As a savings and loan holding company, Connecticut Bancshares is regulated
by the Office of Thrift Supervision. Since its formation, Connecticut
Bancshares' principal activity has been to direct and coordinate the business of
The Savings Bank of Manchester. At __________, 2003, Connecticut Bancshares had
total assets of $_______ billion, total deposits of $________ billion and
stockholders' equity of $______ million.
The Savings Bank of Manchester is a Connecticut-chartered savings bank
headquartered in Manchester, Connecticut. The Savings Bank of Manchester is
regulated by the Connecticut Department of Banking and its deposits are insured
by the Federal Deposit Insurance Corporation up to applicable limits. The
Savings Bank of Manchester is a traditional savings association that accepts
retail deposits from the general public in the areas surrounding its 28
full-service offices.
NEWALLIANCE BANCSHARES, INC. NewAlliance Bancshares is a newly-formed
Delaware corporation that will become the parent company of New Haven upon New
Haven's conversion from mutual-to-stock form. Upon completion of the conversion,
NewAlliance Bancshares will be regulated by the Federal Reserve Board and direct
and coordinate the business of New Haven. NewAlliance Bancshares will have no
material assets or liabilities until the completion of the conversion.
New Haven is a Connecticut-chartered savings bank headquartered in New
Haven, Connecticut. New Haven is regulated by the Connecticut Department of
Banking and its deposits are insured by the
14
20
Federal Deposit Insurance Corporation up to applicable limits. New Haven
currently operates 36 offices in the greater New Haven area. At _______, 2003,
New Haven had total assets of $_________ billion, total deposits of $_____
billion and total equity of $_____ million.
In a separate and unrelated transaction, New Haven is also acquiring
Alliance Bancorp of New England, Inc., a bank holding company organized under
the laws of the State of Delaware in 1997. It operates Tolland Bank, a
Connecticut-charted savings bank that operates nine banking offices in and
around Tolland County. At ____________, 2003, Alliance had total assets of
$____________ million, deposits of $____________ million and stockholders'
equity of $____________ million. THE ALLIANCE MERGER DOES NOT REQUIRE THE
APPROVAL OF THE STOCKHOLDERS OF CONNECTICUT BANCSHARES AND THE CONNECTICUT
BANCSHARES MERGER DOES NOT DEPEND ON THE COMPLETION OF THE ALLIANCE MERGER.
FORM OF THE MERGER
Immediately following New Haven's conversion from mutual-to-stock form,
which is a condition precedent to our merger with New Haven, Connecticut
Bancshares will merge with and into a subsidiary of NewAlliance Bancshares, with
Connecticut Bancshares as the surviving entity. In a second step, Connecticut
Bancshares will be merged with and liquidated into NewAlliance Bancshares.
Upon completion of the merger, each share of Connecticut Bancshares common
stock will be converted into the right to receive $52.00 in cash and Connecticut
Bancshares stockholders will no longer have any rights or interests in
Connecticut Bancshares. However, if the closing of the merger does not take
place on or before March 31, 2004, other than as a result of a breach of a
representation, warranty or covenant by Connecticut Bancshares, the per share
merger consideration will be increased by the amount determined by dividing (x)
the Connecticut Bancshares' net income for each full month after March 31, 2004
minus the amount of dividends paid after March 31, 2004 by (y) the sum of (i)
the number of Connecticut Bancshares shares outstanding and (ii) the number of
shares of Connecticut Bancshares stock which may be acquired upon the exercise
of stock options. The adjustment in merger consideration is subject to the
following:
o as soon as possible after the end of each month ending after March
31, 2004, Connecticut Bancshares must deliver to New Haven a
consolidated statement of operations for such month; and
o not later than 5 business days prior to the closing, Connecticut
Bancshares must cause PricewaterhouseCoopers, LLP, or another
accounting firm reasonably acceptable to the parties to review and
issue its report on the consolidated statements of operations of
Connecticut Bancshares for the period ending at the date of the last
of such statements operations. Absent an error in the report, such
report will be binding on the parties for purposes of calculating
the adjustment to the merger consideration.
TREATMENT OF CONNECTICUT BANCSHARES STOCK OPTIONS
Immediately before the closing of the merger, all outstanding options to
purchase shares of Connecticut Bancshares common stock will become immediately
exercisable and vested, to the extent not already exercisable and vested. At or
within five business days after the closing of the merger, all options will be
cancelled and either Connecticut Bancshares or New Haven will pay each holder an
amount equal to the excess of the $52.00 per share merger consideration over the
exercise price per share
15
21
of each option, net of any cash that must be withheld under federal and state
income and employment tax requirements, and subject to any increase in the
amount of the per share merger consideration as discussed above.
TREATMENT OF CONNECTICUT BANCSHARES STOCK AWARDS
At the closing of the merger, each share of restricted stock outstanding
and issued under the Connecticut Bancshares 2000 Stock-Based Incentive Plan and
the 2002 Equity Compensation Plan, to the extent not already vested, will vest
and will represent a right to receive the $52.00 per share merger consideration,
subject to any increase in the per share merger consideration as discussed
above.
PROCEDURES FOR SURRENDERING YOUR CERTIFICATES
On or before the closing of the merger, NewAlliance Bancshares will
deposit with the exchange agent an amount of cash equal to the aggregate merger
consideration. The exchange agent will act as exchange agent for the benefit of
the holders of Connecticut Bancshares common stock. Each holder of Connecticut
Bancshares common stock who properly surrenders his or her Connecticut
Bancshares shares to the exchange agent will be entitled to receive a cash
payment of $52.00 per share of Connecticut Bancshares common stock, net of any
required tax withholding upon acceptance of the shares by the exchange agent.
No later than five business days after the closing of the merger, the
exchange agent will send you a letter of transmittal that will contain detailed
instructions for surrendering your certificates of Connecticut Bancshares common
stock. If you hold your Connecticut Bancshares common stock in "street name,"
your broker, bank or nominee will send you the letter of transmittal.
YOU SHOULD NOT RETURN YOUR CONNECTICUT BANCSHARES COMMON STOCK
CERTIFICATES WITH THE ENCLOSED PROXY, AND YOU SHOULD NOT SEND YOUR STOCK
CERTIFICATES TO THE EXCHANGE AGENT UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL.
If your Connecticut Bancshares common stock certificates have been lost,
stolen or destroyed, you will have to prove your ownership of the shares of
common stock evidenced by these certificates and that the certificates were
lost, stolen or destroyed before you receive any payment for your shares.
At any time following the six month period after the closing of the
merger, NewAlliance Bancshares will be entitled at its election to cause the
exchange agent to deliver to NewAlliance Bancshares any funds not disbursed to
former Connecticut Bancshares stockholders. Thereafter, former Connecticut
Bancshares stockholders will be entitled to look to NewAlliance Bancshares with
respect to any merger consideration that may be payable upon surrender of their
stock certificates.
Neither NewAlliance Bancshares, Connecticut Bancshares, the exchange agent
nor any other party to the merger will be liable to any former holder of
Connecticut Bancshares common stock for any funds delivered to a public official
according to applicable abandoned property or escheat laws.
NewAlliance Bancshares or the exchange agent will be entitled to withhold
from the merger consideration payable to any Connecticut Bancshares stockholder
such amounts as either are required to withhold with respect to making such
payments under the Internal Revenue Code of 1986, as amended.
16
22
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion addresses the material United States federal
income tax consequences of the merger to holders of Connecticut Bancshares
common stock. This discussion applies only to Connecticut Bancshares
stockholders that hold their Connecticut Bancshares common stock as a capital
asset within the meaning of Section 1221 of the Internal Revenue Code of 1986,
as amended. Further, this discussion does not address all aspects of United
States federal taxation that may be relevant to a particular stockholder in
light of its personal circumstances or to stockholders subject to special
treatment under the United States federal income tax laws including: banks or
trusts; tax-exempt organizations; insurance companies; dealers in securities or
foreign currency; traders in securities who elect to apply a mark-to-market
method of accounting; pass-through entities and investors in such entities;
foreign persons; stockholders who received their Connecticut Bancshares common
stock through the exercise of employee stock options, through a tax-qualified
retirement plan or otherwise as compensation; and stockholders who hold
Connecticut Bancshares common stock as part of a hedge, straddle, constructive
sale, conversion transaction or other integrated instrument.
This discussion is based on the Internal Revenue Code of 1986, as amended,
Treasury regulations, administrative rulings and judicial decisions, all as in
effect as of the date of this proxy statement and all of which are subject to
change (possibly with retroactive effect) and to differing interpretations. Tax
considerations under state, local and foreign laws are not addressed in this
document. The tax consequences of the merger to you may vary depending upon your
particular circumstances. Therefore, you should consult your tax advisor to
determine the particular tax consequences of the merger to you, including those
relating to state and/or local taxes.
Neither Connecticut Bancshares nor New Haven has requested or will request
a ruling from the Internal Revenue Service as to any of the tax effects to
Connecticut Bancshares' stockholders of the transactions discussed in this proxy
statement, and no opinion of counsel has been or will be rendered to Connecticut
Bancshares's stockholders with respect to any of the tax effects of the merger
to stockholders.
Connecticut Bancshares stockholders will recognize gain or loss for
federal income tax purposes equal to the difference, if any, between the cash
received and such stockholder's aggregate adjusted tax basis in the Connecticut
Bancshares common stock surrendered in exchange for the cash. The gain or loss
will be a capital gain or loss, provided that such shares were held as capital
assets of the Connecticut Bancshares stockholder at the effective time of the
merger. The gain or loss will be long-term capital gain or loss if the
Connecticut Bancshares stockholder's holding period is more than one year;
otherwise, the capital gain or loss will be short-term. The Internal Revenue
Code contains limitations on the extent to which a taxpayer may deduct capital
losses from ordinary income.
THIS TAX TREATMENT MAY NOT APPLY TO ALL CONNECTICUT BANCSHARES
STOCKHOLDERS. DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU CAN
BE COMPLICATED. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING
OF THE MERGER'S TAX CONSEQUENCES THAT ARE PARTICULAR TO YOU.
BACKGROUND OF THE MERGER
As part of its continuing efforts to improve Connecticut Bancshares'
community banking franchise and enhance stockholder value, Connecticut
Bancshares's board of directors and management, together with its financial and
legal advisors, have periodically reviewed various strategic options available
to Connecticut Bancshares, including, among other things, continued
independence, the
17
23
acquisition of other institutions and a strategic merger with or acquisition by
another financial institution. As part of this process, Connecticut Bancshares's
legal counsel periodically reviewed with the board of directors its fiduciary
duties in the context of the various strategic alternatives. Consistent with its
periodic reviews of strategic alternatives, Connecticut Bancshares acquired
First Federal Savings and Loan Association of East Hartford in August 2001.
The initial contact between Connecticut Bancshares and New Haven with
respect to the proposed transaction occurred on November 19, 2002. Peyton R.
Patterson, New Haven's Chairman, President and Chief Executive Officer,
contacted Richard P. Meduski, Connecticut Bancshares's President and Chief
Executive Officer, to request a meeting to discuss New Haven's interest in a
potential business combination with Connecticut Bancshares.
On December 3, 2002, Ms. Patterson, Mr. Meduski and Douglas K. Anderson,
Connecticut Bancshares' Executive Vice President, met along with representatives
of Sandler O'Neill, Connecticut Bancshares' financial advisor. Ms. Patterson
generally discussed New Haven's general business and acquisition strategy and
its interest in a potential business combination with Connecticut Bancshares as
part of New Haven's strategic growth plans, including a potential conversion
from mutual-to-stock form. Although general price parameters relative to
Connecticut Bancshares's trading multiples were discussed, there was no
discussion of a proposed price or a proposed range of prices.
On January 7, 2003, Ms. Patterson contacted Mr. Meduski and discussed
preliminary terms of a proposed transaction, including a proposed price range of
$47 to $50 per share in cash. On January 8, 2003, New Haven's financial advisor
contacted Sandler O'Neill to increase the proposed price range to $48 to $52 per
share in cash.
On January 13, 2003, Connecticut Bancshares's board of directors held its
monthly meeting. Representatives of Sandler O'Neill and legal counsel to
Connecticut Bancshares were present. The board discussed the terms of New
Haven's non-binding expression of interest, including matters relating to New
Haven's proposed conversion transaction, the completion of which would be a
condition precedent to any business combination between New Haven and
Connecticut Bancshares. In addition to reviewing New Haven's non-binding
expression of interest, representatives of Sandler O'Neill also identified and
discussed with the board certain other institutions that, in Sandler O'Neill's
view, would have the capacity and may have an interest in pursuing a business
combination transaction with Connecticut Bancshares. Representatives of these
other institutions had previously expressed to Mr. Meduski their interest in a
potential business combination transaction if and when the board of directors of
Connecticut Bancshares determined to consider such a transaction. Any business
combination between Connecticut Bancshares and any of the identified
institutions would not be subject to a financing contingency analogous to New
Haven's proposed mutual-to-stock conversion. Following discussion, the board
authorized Mr. Meduski to obtain further information about New Haven's
non-binding expression of interest and about the other parties that Sandler
O'Neill discussed as potentially having an interest in a potential business
combination with Connecticut Bancshares. Sandler O'Neill was instructed not to
places any limitations on any party.
On January 27, 2003, Mr. Meduski and Ms. Patterson met and discussed the
proposed transaction.
The board of directors of Connecticut Bancshares met again on February 24,
2003, at which representatives of Sandler O'Neill and legal counsel were
present. After management updated the board of directors relative to the
activity that had taken place since the previous board meeting, the board
18
24
authorized management to engage in further exploratory discussions with New
Haven and the other institutions previously discussed by Sandler O'Neill in its
presentation. The board also authorized management to enter into confidentiality
agreements and conduct due diligence investigations.
On February 27, 2003, New Haven executed a confidentiality agreement in
favor of Connecticut Bancshares.
On March 3, 2003, two other interested parties, both large regional
financial institutions who Sandler O'Neill had identified at the January 13,
2003 board meeting, executed separate confidentiality agreements in favor of
Connecticut Bancshares.
From March 5 to 7, 2003, representatives of New Haven conducted
preliminary due diligence on Connecticut Bancshares.
On March 10, 2003, Sandler O'Neill contacted New Haven and the two other
interested parties to request that they submit the final terms of their
non-binding expressions of interest.
On March 12, 2003, representatives of one of the other two interested
parties conducted preliminary due diligence on Connecticut Bancshares.
On March 13, 2003, Connecticut Bancshares executed a confidentiality
agreement in favor of New Haven and representatives of Connecticut Bancshares
conducted preliminary due diligence on New Haven. On the same day,
representatives of the second interested party conducted preliminary due
diligence on Connecticut Bancshares.
On March 19, 2003, one of the other two interested parties submitted to
Sandler O'Neill its non- binding expression of interest. The party proposed part
cash/part stock consideration, which indicated a value of $51 per share.
On March 20, 2003, New Haven and the second interested party submitted to
Sandler O'Neill their respective non-binding expressions of interest. New Haven
initially proposed an all cash price of $50 per share but subsequently increased
it to $52 per share. The other interested party proposed an all cash price of
$49 per share.
On March 24, 2003, Connecticut Bancshares's board of directors held a
special meeting at which representatives of Sandler O'Neill and legal counsel
were present. The board considered the terms of each non-binding expressions of
interest, but deferred any decision until a special board meeting scheduled for
March 31, 2003.
At the special meeting on March 31, 2003, the board of directors again
reviewed with management, representatives of Sandler O'Neill and legal counsel
the non-binding expressions of interest. Following discussion, the board of
directors determined to engage in negotiations with New Haven toward a
definitive agreement containing terms and conditions appropriate given that the
completion of New Haven's mutual-to-stock conversion would be a condition
precedent to the proposed transaction.
19
25
On April 8, 2003, Connecticut Bancshares received a draft merger agreement
from New Haven. Representative of Connecticut Bancshares and New Haven
negotiated the merger agreement and other related documents over the next
several days.
On April 17, 2003, representatives of New Haven and Connecticut Bancshares
met to conduct further due diligence.
On April 18, 2003, New Haven's financial advisor contacted Sandler O'Neill
to inform them that New Haven had reduced its proposed price to $48 per share.
On April 28, 2003, the Connecticut Bancshares board of directors met and
adopted resolutions to terminate negotiations with New Haven and to refrain from
initiating or soliciting further contact with New Haven and the other two
interested parties.
On May 16, 2003, Ms. Patterson contacted Mr. Meduski to express New
Haven's desire to resume negotiations at a revised proposed price of $50 per
share.
On June 11, 2003, Ms. Patterson contacted Mr. Meduski to express New
Haven's desire to resume negotiations at a revised proposed price of $52 per
share.
On June 17, 2003, the executive committee of the board of directors of
Connecticut Bancshares met to discuss New Haven's most recent proposal and
authorized management to obtain further clarification with respect to certain
proposed terms, including proposed termination terms should New Haven fail to
complete its proposed conversion or to do so in a timely manner.
On June 23, 2003, at a special meeting, the board of directors of
Connecticut Bancshares met to review and discuss New Haven's most recent
non-binding indication of interest. Representatives of Sandler O'Neill and legal
counsel were present. After deliberations, the board of directors authorized
management to resume negotiations with New Haven.
From June 24 to 27, 2003, Connecticut Bancshares representatives conducted
due diligence on New Haven.
On June 26, 2003, Connecticut Bancshares received a revised draft of the
merger agreement from New Haven and representatives of Connecticut Bancshares
and New Haven negotiated the merger agreement and other related documents over
the ensuing days.
At a special meeting of Connecticut Bancshares' board of directors on July
15, 2003, Sandler O'Neill reviewed with the board the financial aspects of the
proposed transaction and delivered its opinion that the merger consideration was
fair to Connecticut Bancshares' stockholders from a financial point of view. The
board of directors considered this opinion carefully as well as Sandler
O'Neill's experience, qualifications and interest in the transaction. In
addition, the board of directors reviewed the merger agreement and all related
documents, copies of which were sent to each director before the date of the
board meeting, at length with legal counsel. After extensive review and
discussion, the merger agreement was unanimously approved by the directors
present and voting and management was instructed to execute and deliver the
merger agreement.
On July 16, 2003, before the opening of the equity markets, Connecticut
Bancshares publicly announced the adoption and approval of the definitive merger
agreement.
20
26
CONNECTICUT BANCSHARES' REASONS FOR THE MERGER
Connecticut Bancshares' board of directors voted by unanimous vote of
those directors present and voting to approve the merger agreement and the
entire board of directors unanimously recommends that Connecticut Bancshares
stockholders vote "FOR" the approval of the merger agreement.
Connecticut Bancshares' board of directors has determined that the merger
and the merger agreement are fair to, and in the best interests of, Connecticut
Bancshares and its stockholders. In approving the merger agreement, Connecticut
Bancshares' board of directors also consulted with legal counsel regarding its
legal duties and the terms of the merger agreement, and with Sandler O'Neill
with respect to the financial aspects and fairness of the transaction from a
financial point of view to its stockholders. In arriving at its determination,
Connecticut Bancshares' board of directors also considered a number of factors,
including the following:
o the process followed by Connecticut Bancshares and its financial
advisor in connection with the sale helped to ensure that an offer
more favorable than New Haven's offer was not available;
o the board of directors considered the book value and earnings per
share of Connecticut Bancshares' common stock and various pricing
and other data in an attempt to establish Connecticut Bancshares'
value in a merger or sales transaction;
o the opinion of Sandler O'Neill, Connecticut Bancshares' financial
advisor, that the $52.00 merger consideration is fair from a
financial point of view to Connecticut Bancshares' stockholders;
o the review conducted by the board of directors of the strategic
options available to Connecticut Bancshares and the assessment of
the board of directors that none of those options presented superior
opportunities or were likely to create greater value for Connecticut
Bancshares stockholders than the prospects presented by the proposed
merger with New Haven;
o New Haven's indication that it would likely retain most of
Connecticut Bancshares' employees;
o the current and prospective economic, competitive and regulatory
environment facing Connecticut Bancshares, New Haven and the
financial services industry generally;
o the board of directors' assessment that Connecticut Bancshares would
better serve the convenience and needs of its customers and the
communities that it serves through affiliation with a financial
institution such as New Haven that has a larger infrastructure;
o the likelihood of Connecticut Bancshares stockholders approving the
merger;
o the fact that appraisal rights will be available under Delaware law
with respect to the merger;
21
27
o the uncertainties of receiving regulatory approval for the merger
and New Haven's conversion;
o the $30 million payment from New Haven in the event New Haven fails
to complete its conversion or consummate this transaction; and
o the appointment of two members of each of Connecticut Bancshares'
and The Savings Bank of Manchester's board of directors to the
boards of directors of NewAlliance Bancshares and New Haven.
The foregoing discussion of the information and factors considered by
Connecticut Bancshares' board of directors is not intended to be exhaustive, but
constitutes all material factors considered by the Connecticut Bancshares board
of directors. In view of the variety of factors considered in connection with
its evaluation of the merger agreement and the transactions contemplated by it,
the Connecticut Bancshares board of directors did not find it practicable to,
and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its determination. In addition,
individual directors may have given different weights to the different factors.
OPINION OF CONNECTICUT BANCSHARES' FINANCIAL ADVISOR
By letter agreement dated as of February 25, 2003, Connecticut Bancshares
retained Sandler O'Neill as an independent financial advisor in connection with
Connecticut Bancshares' consideration of a possible business combination
involving Connecticut Bancshares and a second party. Sandler O'Neill is a
nationally recognized investment banking firm whose principal business specialty
is financial institutions. In the ordinary course of its investment banking
business, Sandler O'Neill is regularly engaged in the valuation of financial
institutions and their securities in connection with mergers and acquisitions
and other corporate transactions.
Sandler O'Neill acted as financial advisor to Connecticut Bancshares in
connection with the proposed merger with New Haven and participated in certain
of the negotiations leading to the merger agreement. At the request of the
Connecticut Bancshares board, representatives of Sandler O'Neill attended the
July 15, 2003 meeting at which the board considered the merger and approved the
merger agreement. At the July 15th meeting, Sandler O'Neill delivered to the
Connecticut Bancshares board its oral opinion, subsequently confirmed in
writing, that, as of such date, the merger consideration was fair to Connecticut
Bancshares' stockholders from a financial point of view. Sandler O'Neill has
updated its July 15th opinion by delivering to the board a written opinion dated
the date of this proxy statement. In rendering its updated opinion, Sandler
O'Neill confirmed the appropriateness of its reliance on the analyses used to
render its earlier opinion by reviewing the assumptions upon which its analyses
were based, performing procedures to update certain of its analyses and
reviewing the other factors considered in rendering its earlier opinion. THE
FULL TEXT OF SANDLER O'NEILL'S UPDATED OPINION IS ATTACHED AS APPENDIX B TO THIS
PROXY STATEMENT. THE OPINION OUTLINES THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE,
MATTERS CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN
BY SANDLER O'NEILL IN RENDERING THE OPINION. THE DESCRIPTION OF THE OPINION SET
FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPINION.
CONNECTICUT BANCSHARES' STOCKHOLDERS ARE URGED TO READ THE OPINION CAREFULLY AND
IN ITS ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED MERGER.
Sandler O'Neill's opinion speaks only as of the date of the opinion.
Sandler O'Neill's opinion was directed to the Connecticut Bancshares board and
was provided to the board for its information in
22
28
considering the merger. The opinion is directed only to the fairness of the
merger consideration to Connecticut Bancshares stockholders from a financial
point of view. It does not address the underlying business decision of
Connecticut Bancshares to engage in the merger or any other aspect of the merger
and is not a recommendation to any Connecticut Bancshares stockholder as to how
such stockholder should vote at the special meeting with respect to the merger
or any other matter.
In connection with rendering its opinion, Sandler O'Neill reviewed and
considered, among other things:
(1) the merger agreement and certain of the exhibits and schedules
thereto;
(2) certain publicly available financial statements and other historical
financial information of Connecticut Bancshares that they deemed
relevant;
(3) certain historical financial information of New Haven that was
publicly available or provided by New Haven that they deemed
relevant;
(4) internal financial projections for Connecticut Bancshares for the
years ending December 31, 2003 through 2006 prepared by and reviewed
with management of Connecticut Bancshares and the views of senior
management of Connecticut Bancshares, based on limited discussions
with them, regarding Connecticut Bancshares' business, financial
condition, results of operations and prospects;
(5) the views of senior management of New Haven, based on limited
discussions with representatives of senior management, regarding New
Haven's financial condition and prospects, including New Haven's
proposed conversion from mutual-to-stock form and issuance of common
stock in connection therewith and its proposed acquisition of
Alliance Bancorp of New England, Inc. (as to which Sandler O'Neill
performed no independent investigation);
(6) the publicly reported historical price and trading activity for
Connecticut Bancshares' common stock, including a comparison of
certain financial and stock market information for Connecticut
Bancshares with similar publicly available information for certain
other companies the securities of which are publicly traded;
(7) the financial terms of certain recent business combinations in the
savings institution industry, to the extent publicly available;
(8) the current market environment generally and the banking environment
in particular; and
(9) such other information, financial studies, analyses and
investigations and financial, economic and market criteria as they
considered relevant.
In performing its reviews and analyses and in rendering its opinion,
Sandler O'Neill assumed and relied upon the accuracy and completeness of all the
financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it and
further relied on the assurances of management of Connecticut Bancshares and New
Haven that they were not aware of any facts or circumstances that would make
such information inaccurate or misleading. Sandler O'Neill was not asked to and
did not undertake an independent verification of the accuracy or
23
29
completeness of any of such information and they did not assume any
responsibility or liability for the accuracy or completeness of any of such
information. Sandler O'Neill did not make an independent evaluation or appraisal
of the assets, the collateral securing assets or the liabilities, contingent or
otherwise, of Connecticut Bancshares or New Haven or any of their respective
subsidiaries, or the collectibility of any such assets, nor was it furnished
with any such evaluations or appraisals. Sandler O'Neill is not an expert in the
evaluation of allowances for loan losses and it has not made an independent
evaluation of the adequacy of the allowance for loan losses of Connecticut
Bancshares or New Haven or any of their subsidiaries, nor has it reviewed any
individual credit files relating to Connecticut Bancshares or New Haven or any
of their subsidiaries. With Connecticut Bancshares' consent, Sandler O'Neill has
assumed that the respective allowances for loan losses for both Connecticut
Bancshares and New Haven and their respective subsidiaries are adequate to cover
such losses. In addition, Sandler O'Neill has not conducted any physical
inspection of the properties or facilities of Connecticut Bancshares or New
Haven or any of their subsidiaries.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
its opinion. Sandler O'Neill assumed, in all respects material to its analysis,
that all of the representations and warranties contained in the merger agreement
and all related agreements are true and correct, that each party to such
agreements will perform all of the covenants required to be performed by such
party under such agreements and that the conditions precedent in the merger
agreement are not waived. Sandler O'Neill also assumed, with Connecticut
Bancshares' consent, that there has been no material change in Connecticut
Bancshares' or New Haven's assets, financial condition, results of operations,
business or prospects since the date of the last financial statements made
available to them and that Connecticut Bancshares and New Haven will remain as
going concerns for all periods relevant to its analyses.
In rendering its opinion, Sandler O'Neill performed a variety of financial
analyses. The following is a summary of the material analyses performed by
Sandler O'Neill, but is not a complete description of all the analyses
underlying Sandler O'Neill's opinion. The summary includes information presented
in tabular format. IN ORDER TO FULLY UNDERSTAND THE FINANCIAL ANALYSES, THESE
TABLES MUST BE READ TOGETHER WITH THE ACCOMPANYING TEXT. THE TABLES ALONE DO NOT
CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. The preparation of
a fairness opinion is a complex process involving subjective judgments as to the
most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances. The process, therefore, is not
necessarily susceptible to a partial analysis or summary description. Sandler
O'Neill believes that its analyses must be considered as a whole and that
selecting portions of the factors and analyses considered without considering
all factors and analyses, or attempting to ascribe relative weights to some or
all such factors and analyses, could create an incomplete view of the evaluation
process underlying its opinion. Also, no company included in Sandler O'Neill's
comparative analyses described below is identical to Connecticut Bancshares and
no transaction is identical to the merger. Accordingly, an analysis of
comparable companies or transactions involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading values or
merger transaction values, as the case may be, of Connecticut Bancshares or the
companies to which it is being compared.
The earnings projections for Connecticut Bancshares relied upon by Sandler
O'Neill in its analyses were based upon internal projections provided by
Connecticut Bancshares' management for the years ended December 31, 2003 through
December 31, 2006. With respect to such financial projections, Connecticut
Bancshares' management confirmed to Sandler O'Neill that they had been
reasonably
24
30
prepared on bases reflecting the best currently available estimates and
judgments of such management of the future financial performance of Connecticut
Bancshares and Sandler O'Neill assumed for purposes of its analyses that such
performance would be achieved. Sandler O'Neill expressed no opinion as to such
financial projections or the assumptions on which they were based. The financial
projections furnished to Sandler O'Neill by Connecticut Bancshares were prepared
for internal purposes only and not with a view towards public disclosure. These
projections were based on numerous variables and assumptions that are inherently
uncertain and, accordingly, actual results could vary materially from those set
forth in such projections.
In performing its analyses, Sandler O'Neill also made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which cannot be predicted and are beyond the
control of Connecticut Bancshares, New Haven and Sandler O'Neill. The analyses
performed by Sandler O'Neill are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Sandler O'Neill prepared its analyses solely for purposes of
rendering its opinion and provided such analyses to the Connecticut Bancshares
board at the July 15th meeting. Estimates on the values of companies do not
purport to be appraisals or necessarily reflect the prices at which companies or
their securities may actually be sold. Such estimates are inherently subject to
uncertainty and actual values may be materially different. Accordingly, Sandler
O'Neill's analyses do not necessarily reflect the value of Connecticut
Bancshares' common stock or the prices at which Connecticut Bancshares' common
stock may be sold at any time.
SUMMARY OF PROPOSAL. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based upon the per share consideration of $52.00 and
Connecticut Bancshares' March 31, 2003 financial information, Sandler O'Neill
calculated the following ratios:
Transaction price / last twelve months' earnings per share 20.4x
Transaction price / 2003 estimated earnings per share (1) 19.5x
Transaction price / tangible book value 254.2%
Transaction price / book value 225.6%
Tangible book premium / core deposits (2) 25.3%
Premium to closing price as of July 10, 2003 (3) 23.5%
Premium to closing price as of June 11, 2003 (4) 36.1%
--------------------------------
(1) Based on the median IBES estimates of $2.67 fully diluted earnings
per share in 2003.
(2) Assumes core deposits of $1.49 billion.
(3) The closing price on July 10, 2003 was $42.10.
(4) The closing price on June 11, 2003 was $38.20.
The aggregate transaction value was approximately $603.4 million, based
upon 10,754,943 shares of Connecticut Bancshares common stock outstanding plus
the value of options outstanding for 1,691,172 shares calculated using the
implied transaction value less the exercise price of the option.
25
31
STOCK TRADING HISTORY. Sandler O'Neill reviewed the history of the
reported trading prices and volume of Connecticut Bancshares' common stock and
the relationship between the movements in the prices of Connecticut Bancshares'
common stock to movements in certain stock indices, including the Standard &
Poor's 500 Index, the NASDAQ Bank Index, the Standard & Poor's Bank Index and
the median performance of a composite group of publicly traded regional savings
institutions selected by Sandler O'Neill. During the one-year and three-year
periods ended July 10, 2003, Connecticut Bancshares' common stock outperformed
each of the indices to which it was compared.
BEGINNING INDEX VALUE ENDING INDEX VALUE
JULY 10, 2002 JULY 10, 2003
------------------ ----------------
Connecticut Bancshares 100.00% 131.36%
Regional Group 100.00 107.43
Nasdaq Bank Index 100.00 107.63
S&P Bank Index 100.00 106.48
S&P 500 Index 100.00 107.41
BEGINNING INDEX VALUE ENDING INDEX VALUE
JULY 10, 2000 JULY 10, 2003
------------------ ----------------
Connecticut Bancshares 100.00% 271.61%
Regional Group 100.00 234.98
Nasdaq Bank Index 100.00 159.52
S&P Bank Index 100.00 123.96
S&P 500 Index 100.00 67.00
COMPARABLE COMPANY ANALYSIS. Sandler O'Neill used publicly available
information to compare selected financial and market trading information for
Connecticut Bancshares and a group of twelve publicly traded Northeastern
savings institutions selected by Sandler O'Neill (the "Regional Group"):
Independence Community Bank Corp. First Sentinel Bancorp, Inc.
Staten Island Bancorp, Inc. PennFed Financial Services, Inc.
Seacoast Financial Services Corp. Flushing Financial Corp.
Dime Community Bancshares, Inc. Troy Financial Corp.
Hudson River Bancorp Berkshire Hills Bancorp, Inc.
FIRSTFED AMERICA BANCORP INC. MASSBANK Corp.
26
32
The analysis compared publicly available financial information for
Connecticut Bancshares and each of the companies in the Regional Group as of and
for the twelve months ended March 31, 2003. The table below sets forth the
comparative data for Connecticut Bancshares and the median data for the Regional
Group, with pricing data as of July 11, 2003.
CONNECTICUT REGIONAL GROUP
BANCSHARES MEDIAN
--------------- ----------------
Total assets (in millions) $2,555 $2,353
Market capitalization (in millions) $ 467 $ 375
Current price / 52-week high (1) 92.5% 97.2%
Tangible equity / tangible assets 8.98% 8.02%
LTM Return on average equity 10.96% 12.09%
LTM Return on average assets 1.11% 1.09%
Price / tangible book value per share 205.75% 215.19%
Price / LTM earnings per share 16.51x 15.02x
Price / I/B/E/S Estimated 2003 EPS 15.77x 14.16x
- -------------------------
(1) Based on publicly reported daily closing prices for the common stock of each
company during past year.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Sandler O'Neill reviewed all
transactions announced nationwide from January 1, 2003 to July 11, 2003 and
Northeast transactions announced from January 1, 2002 to July 11, 2003, in each
case involving publicly traded savings institutions as acquired institutions and
transaction values greater than $15 million. Sandler O'Neill reviewed 13
transactions announced nationwide and 14 transactions announced in the
Northeast. Sandler O'Neill reviewed the multiples of transaction value at
announcement to last twelve months' earnings, transaction value to estimated
current year earnings, transaction value to book value, transaction value to
tangible book value, tangible book premium to core deposits and premium to
market price and computed high, low, mean and median multiples and premiums for
each group of transactions. These multiples were applied to Connecticut
Bancshares' financial information as of and for the twelve months ended March
31, 2003. As illustrated in the following table, Sandler O'Neill derived an
imputed range of values per share of Connecticut Bancshares' common stock of
$33.66 to $51.16 based upon the median multiples for nationwide transactions and
$44.25 to $53.05 based upon the median multiples for Northeast transactions.
NATIONWIDE TRANSACTIONS NORTHEAST TRANSACTIONS
----------------------- ----------------------
MEDIAN IMPLIED MEDIAN IMPLIED
MULTIPLE VALUE MULTIPLE VALUE
-------- ---------- ---------- ---------
Transaction value/LTM EPS 16.46x $41.97 19.06x $48.59
Transaction value/Estimated EPS (1) 14.03x $37.63 17.43x $46.76
Transaction value/Book Value 162.07% $37.36 226.88% $52.29
Transaction value/Tangible book value 164.50% $33.66 229.13% $46.88
Tangible book premium/Core deposits(2) 15.64% $41.50 17.69% $44.25
Premium to market price (3) 21.52% $51.16 26.01% $53.05
- -----------------------------
(1) Based upon management's estimate for fully diluted EPS of $2.68 for 2003.
(2) Assumes core deposits of $1.49 billion.
(3) Based upon Connecticut Bancshares' stock price of $42.10 as of
July 10, 2003.
27
33
DISCOUNTED DIVIDEND STREAM AND TERMINAL VALUE ANALYSIS. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of Connecticut Bancshares through December 31, 2006 under various
circumstances, assuming Connecticut Bancshares' projected dividend increases and
that Connecticut Bancshares performed in accordance with the earnings forecasts
prepared by and reviewed with management. To approximate the terminal value of
Connecticut Bancshares common stock at December 31, 2006, Sandler O'Neill
applied price/earnings multiples ranging from 10x to 20x. The dividend income
streams and terminal values were then discounted to present values using
different discount rates ranging from 9% to 15% chosen to reflect different
assumptions regarding required rates of return of holders or prospective buyers
of Connecticut Bancshares common stock. As illustrated in the following table,
this analysis indicated an imputed range of values per share of Connecticut
Bancshares common stock of $20.61 to $47.91.
DISCOUNT
RATE 10X 12X 14X 16X 18X 20X
---------- ------ ------ ------ ------ ------ ------
9% $25.30 $29.83 $34.35 $38.87 $43.39 $47.91
11 23.60 27.80 32.01 36.21 40.42 44.62
13 22.04 25.95 29.87 33.78 37.70 41.61
15 20.61 24.26 27.91 31.55 35.20 38.85
In connection with its analyses, Sandler O'Neill considered and discussed
with the Connecticut Bancshares board how the present value analyses would be
affected by changes in the underlying assumptions, including variations with
respect to the growth rate of assets, net income and dividend payout ratio.
Sandler O'Neill noted that the discounted dividend stream and terminal value
analysis is a widely used valuation methodology, but the results of such
methodology are highly dependent upon the numerous assumptions that must be
made, and the results thereof are not necessarily indicative of actual values or
future results.
In connection with the merger, Connecticut Bancshares has agreed to pay
Sandler O'Neill a transaction fee of 1% of the aggregate purchase price being
paid in the transaction, or approximately $6.0 million, which is contingent and
payable upon closing of the merger. Sandler O'Neill has also received a fee of
$300,000 for rendering its opinion, which will be credited against the
transaction fee due and payable upon closing. Under certain circumstances,
Sandler O'Neill will also receive a fee if the merger agreement is terminated.
Connecticut Bancshares has also agreed to reimburse Sandler O'Neill for its
reasonable out-of-pocket expenses incurred in connection with its engagement up
to a maximum of $50,000 and to indemnify Sandler O'Neill and its affiliates and
their respective partners, directors, officers, employees, agents, and
controlling persons against certain expenses and liabilities, including
liabilities under securities laws.
Sandler O'Neill has in the past provided investment banking services to
Connecticut Bancshares and received compensation for such services. In addition,
in the ordinary course of its business as a broker-dealer, Sandler O'Neill may
purchase securities from and sell securities to Connecticut Bancshares and New
Haven Savings and their respective affiliates and may actively trade the equity
securities of Connecticut Bancshares for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
28
34
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER THAT ARE DIFFERENT FROM YOUR
INTERESTS
Some members of Connecticut Bancshares' management and board of directors
may have interests in the merger that are in addition to or different from the
interests of Connecticut Bancshares stockholders. Connecticut Bancshares board
of directors was aware of these interests and considered them in approving the
merger agreement. Included below is a summary of some of the agreements and
benefit plans under which officers or directors participate and under which
benefits will be paid in accordance with the merger agreement.
TERMINATION AND RELEASE AGREEMENTS WITH MESSRS. MEDUSKI, ANDERSON, PIKE
AND SOMERVILLE. Richard P. Meduski, Douglas K. Anderson, Charles L. Pike and
Roger A. Somerville have entered into employment agreements with Connecticut
Bancshares and The Savings Bank of Manchester, each dated as of March 1, 2000.
Under these agreements, the executives would be entitled to receive a severance
payment equal to three times their average annual compensation (as defined under
the agreements) for the five preceding taxable years and 36 months of continued
health and welfare benefits upon their termination of employment in connection
with a change in control. In connection with the execution of the merger
agreement, Richard P. Meduski, Douglas K. Anderson, Charles L. Pike, and Roger
A. Somerville entered into Termination and Release Agreements with Connecticut
Bancshares, The Savings Bank of Manchester, and New Haven dated as of July 15,
2003. The termination agreements, provide that if Messrs. Meduski, Anderson,
Pike and Somerville are employed as of the effective date of the merger they
will receive cash payments of $3,256,234, $1,367,156, $1,711,943 and $1,035,497,
respectively, as consideration for the termination of (1) their employment
agreements with the Bank and the Company, (2) participation by Messrs. Meduski,
Anderson and Pike in Manchester's supplemental executive retirement plan, and
(3) supplemental retirement benefit agreements between Messrs. Meduski and Pike
and The Savings Bank of Manchester. The executives and their dependents also
will receive 36 months of continued life, health, dental and disability (i.e.,
health and welfare) benefit coverage, less the executive's premium share, or a
cash payment equal to the present value of such coverage.
Under the Termination and Release Agreements, the executives also agreed
to take the following actions between July 15, 2003 and December 31, 2003: (1)
exercise all vested non-qualified stock options, including those that vest prior
to December 31, 2003, under the Connecticut Bancshares 2000 Stock-Based
Incentive Plan, and, for Mr. Somerville, the additional exercise of
non-qualified stock options granted under the Connecticut Bancshares 2002 Equity
Compensation Plan; and (2) exercise all vested incentive stock options granted
under the 2000 Stock-Based Incentive Plan, and, for Mr. Somerville, those
granted under the 2002 Equity Compensation Plan, and their subsequent sale in a
manner that will constitute a disqualifying disposition under Section 421(b) of
the Internal Revenue Code. Messrs. Meduski, Anderson, and Pike also agreed to
refrain from exercising any stock options granted to them under the 2002 Equity
Compensation Plan. Mr. Somerville further agreed to the accelerated vesting, as
of December 31, 2003, of his restricted stock award granted under the 2000
Stock- Based Incentive Plan that would otherwise vest as of January 2, 2004, and
to accept payment of his cash bonus for 2003, otherwise scheduled for payment in
2004, as of December 31, 2003.
Payments to the executives under the Termination and Release Agreements
are subject to their compliance with Section 280G of the Internal Revenue Code.
If these payments constitute "excess parachute payments" under Section 280G,
they will be reduced to an amount that is one dollar less than the executive's
maximum payment amount under Section 280G; i.e., the Section 280G Limit.
29
35
The executives further agreed, with respect to the definition of annual
compensation under their employment agreements, and as applicable, benefits
payable under their supplemental executive retirement plan or supplemental
retirement benefit agreements, to exclude from their 2003 annual compensation,
amounts related to: (1) the grant or vesting of restricted stock awards after
October 1, 2003; (2) the grant, vesting or exercise of stock options; (3) income
resulting from the disqualifying disposition of incentive stock options; (4)
cash bonus payments; and (5) other mutually agreed-upon severance payments.
Lastly, under the Termination and Release Agreements, the parties agreed
to release each other from their remaining obligations under the employment
agreements and, as applicable, the supplemental executive retirement plan and
supplemental retirement benefit agreements.
TERMINATION AND RELEASE AGREEMENTS WITH CERTAIN SENIOR OFFICERS. Messrs.
Hartl, Martin, Orenstein, Thomas, Hamby, Gaucher, Lynch and Smith and Ms.
Trainer, Yungk, Elliott and McLaughlin have entered into change in control
agreements with The Savings Bank of Manchester. The agreements provide for a
severance payment of three times the executive's average annual compensation (as
defined under the agreements) for the five preceding taxable years and 36 months
of continued health and welfare benefits upon an involuntary termination of
employment following a change in control during the agreement term, or upon a
voluntary termination of employment due to a demotion or material reduction in
compensation or benefits with 12 months after a change in control. Upon
execution of the merger agreement, Messrs. Hartl, Martin, Orenstein, Thomas,
Hamby, Gaucher, Lynch and Smith and Ms. Trainer, Yungk, Elliott and McLaughlin
entered into Termination and Release Agreements with Connecticut Bancshares, The
Savings Bank of Manchester and New Haven, dated as of July 15, 2003, under which
they will receive payments of $761,831, $956,304, $528,083, $544,940, $596,950,
$841,414, $517,314, $676,760, $526,681, $317,290, $282,858, and $307,207,
respectively, as well as continued health and welfare benefit coverage, or a
cash payment equivalent to the present value of such coverage, for a period of
36 months, in exchange for their agreement to terminate their change in control
agreements with The Savings Bank of Manchester as of the effective date of the
merger. The executives also agreed to take the following actions prior to
December 31, 2003: (1) exercise all vested non-qualified stock options granted
under the Connecticut Bancshares 2000 Stock-Based Incentive Plan and 2002 Equity
Compensation Plan; (2) exercise all vested incentive stock options granted under
these plans and the subsequent sale of the shares in a manner that will
constitute a disqualifying disposition under Section 421(b) of the Internal
Revenue Code; (3) accept accelerated vesting, as of December 31, 2003, of all
unvested restricted stock awards, and (4) accept on December 31, 2003, their
2003 cash bonus, which would otherwise be paid in 2004.
Payments to the executives under the Termination and Release Agreements
are subject to their compliance with Section 280G of the Internal Revenue Code.
If the cash payments constitute "excess parachute payments" under Section 280G,
they will be reduced to an amount that is one dollar less than the executive's
maximum payment amount under Section 280G; i.e., the Section 280G Limit.
The executives also agreed, with respect to the definition of annual
compensation under their change in control agreements, to exclude from their
2003 annual compensation amounts related to: (1) the grant or vesting of
restricted stock awards after October 1, 2003; (2) the grant, vesting or
exercise of stock options; (3) income resulting from the disqualifying
disposition of incentive stock options; (4) bonus payments; and (5) other
severance payments. The executives further agreed to release Connecticut
Bancshares, The Savings Bank of Manchester and New Haven from their remaining
obligations under the change in control agreements.
30
36
NONCOMPETITION AGREEMENTS WITH MESSRS. MEDUSKI, ANDERSON, PIKE AND
SOMERVILLE. In connection with the merger agreement, Messrs. Meduski, Anderson,
Pike and Somerville entered into noncompetition agreements, dated as of July 15,
2003, under which they agreed, for a period of 42 months, 27 months, 12 months
and six months, respectively, following the merger effective date, to refrain
from engaging in competitive business activities and soliciting customers of New
Haven or its subsidiaries in certain counties within Connecticut and Rhode
Island and in the New York metropolitan area. The executives have also agreed to
treat as confidential all non-public information gained during the course of
their employment with Connecticut Bancshares and Manchester. As consideration
for their compliance with the terms of their noncompetition agreements, Messrs.
Meduski, Anderson, Pike and Somerville will receive cash payments of $3,780,000,
$1,100,000, $1,868,000 and $75,000 respectively, on the effective date of the
merger.
VESTING OF CONNECTICUT BANCSHARES RESTRICTED STOCK. Directors, officers
and employees of Connecticut Bancshares received restricted stock awards that
vest equally over a five-year period from the date of receipt under the
Connecticut Bancshares, Inc. 2000 Stock-Based Incentive Plan and 2002 Equity
Compensation Plan. Under the terms of the plans, all unvested restricted stock
awards immediately vest upon a change in control of Connecticut Bancshares. The
merger will constitute a change in control of Connecticut Bancshares under the
plans. As of _______, 2003, the directors and executive officers of Connecticut
Bancshares held a total of ________ shares of unvested restricted stock, which
will be converted into the right to receive the same $52.00 per share merger
consideration as all other shares of Connecticut Bancshares common stock. The
following table reflects the number of shares of unvested restricted stock held
by directors and executive officers and the payment that each will receive in
exchange for their unvested shares of restricted stock.
NUMBER OF SHARES TOTAL PAYMENT
OF UNVESTED FOR UNVESTED
NAME RESTRICTED STOCK RESTRICTED STOCK
- ----- ------------------ -------------------
Douglas K. Anderson............... $
A. Paul Berte.....................
Timothy J. Devanney...............
Sheila B. Flanagan................
Michael J. Hartl..................
John D. LaBelle, Jr...............
Eric A. Marziali..................
Richard P. Meduski................
Timothy J. Moynihan...............
Jon L. Norris.....................
William D. O'Neill................
Brian A. Orenstein................
Charles L. Pike...................
Laurence P. Rubinow...............
Roger A. Somerville...............
John G. Sommers...................
Thomas E. Toomey..................
Gregory S. Wolff..................
All executive officers who are
not directors (21) persons........
31
37
CONNECTICUT BANCSHARES STOCK OPTIONS. Immediately before the closing of
the merger, all outstanding options to purchase shares of Connecticut Bancshares
common stock will become immediately exercisable and vested, to the extent not
already exercisable and vested. At the closing of the merger, all options will
be cancelled and each holder will be entitled to an amount equal to the excess
of the $52.00 per share merger consideration over the exercise price per share
of each option, net of any cash which must be withheld under federal and state
income and employment tax requirements. As of __________, 2003, the directors
and executive officers of Connecticut Bancshares held options to purchase a
total of _________ shares of Connecticut Bancshares common stock with a weighted
average exercise price of $______. The following table reflects for directors
and officers the number of options that will vest as a result of the merger, the
number of options held by each and the payment that each will receive in
exchange for his or her options.
NUMBER OF OPTIONS TOTAL
VESTING AS A RESULT NUMBER TOTAL PAYMENT
NAME OF THE MERGER OF OPTIONS FOR OPTIONS
- ---- -------------------- ------------ --------------
$
Douglas K. Anderson..............
A. Paul Berte....................
Timothy J. Devanney..............
Sheila B. Flanagan...............
Michael J. Hartl.................
John D. LaBelle, Jr..............
Eric A. Marziali.................
Richard P. Meduski...............
Timothy J. Moynihan..............
Jon L. Norris....................
William D. O'Neill...............
Brian A. Orenstein...............
Charles L. Pike..................
Laurence P. Rubinow..............
Roger A. Somerville..............
John G. Sommers..................
Thomas E. Toomey.................
Gregory S. Wolff.................
All executive officers who are
not directors (21) persons.......
TERMINATION OF THE SAVINGS BANK OF MANCHESTER ESOP. The Savings Bank of
Manchester will terminate its employee stock ownership plan upon completion of
the merger. The plan will repay its existing loan from Connecticut Bancshares
and will allocate the remaining cash representing earnings on trust assets to
the accounts of the plan participants, in proportion to their account balances,
to the extent allowed under applicable law and the governing documents of the
plan.
PROTECTION OF CONNECTICUT BANCSHARES DIRECTORS AND OFFICERS AGAINST
CLAIMS. New Haven has agreed to indemnify and hold harmless each present and
former director and officer of Connecticut Bancshares and its subsidiaries from
liability and expenses arising out of matters existing or occurring at or before
the consummation of the merger to the fullest extent that he or she would have
been entitled under Connecticut Bancshares', or the subsidiary's, certificate of
incorporation and bylaws. New Haven will advance any related costs to each of
these persons as they are incurred. New Haven will also maintain a policy of
directors' and officers' liability insurance coverage for the benefit of
32
38
Connecticut Bancshares' directors and officers for six years following
consummation of the merger, subject to certain limitations on the amount of
premiums to be paid.
APPROVALS NEEDED TO COMPLETE THE MERGER
In addition to the approval of the merger agreement by the Connecticut
Bancshares stockholders, completion of the merger and the transactions
contemplated by the merger agreement are subject to the prior approval of the
Connecticut Banking Commissioner, the Federal Deposit Insurance Corporation and
the Federal Reserve Board.
CONNECTICUT DEPARTMENT OF BANKING. The approval of the Connecticut Banking
Commissioner is required for the consummation of the merger and the bank merger.
These approvals are required under Sections 36a-184 and 36a-125 of the
Connecticut General Statutes. In deciding whether to approve a transaction, the
Connecticut Banking Commissioner must consider a number of factors, including
whether the transaction is consistent with safe and sound banking practices and
can reasonably be expected to produce benefits to the public and whether the
transaction will not cause a substantial decrease in competition in the banking
industry of the state. The Connecticut Banking Commissioner also must make
findings that the transaction meets various requirements under the Community
Reinvestment Act and applicable consumer protection laws pursuant to Section
36a-34 of the Connecticut General Statutes.
FEDERAL DEPOSIT INSURANCE CORPORATION. The approval of the Federal Deposit
Insurance Corporation under the Bank Merger Act is needed to consummate the bank
merger. In making its decision, the Federal Deposit Insurance Corporation will
consider the competitive factors involved under the federal antitrust laws, the
financial resources and managerial resources of the institutions involved and
the future prospects of the existing and proposed institutions. In addition, the
Federal Deposit Insurance Corporation will consider the convenience and needs of
the community in making its decision regarding the bank merger. Pursuant to the
Community Reinvestment Act of 1977, the Federal Deposit Insurance Corporation
must also take into account the performance of each participating bank in
meeting the credit needs of the entire community, including low and moderate
income neighborhoods.
FEDERAL RESERVE BOARD. The merger of Connecticut Bancshares into a
subsidiary of NewAlliance Bancshares is subject to the prior approval of the
Federal Reserve Board under Section 3 of the Bank Holding Company Act of 1956,
as amended. Pursuant to the Bank Holding Company Act, the Federal Reserve Board
considers the competitive effects of the merger under the federal antitrust
laws. The Federal Reserve Board is also required to consider the financial and
managerial resources and future prospects of the bank holding companies and the
banks concerned and the convenience and needs of the communities to be served.
Under the Community Reinvestment Act of 1977, the Federal Reserve Board also
must take into account the record of performance of each participating bank
holding company in meeting the credit needs of the entire community, including
low and moderate-income neighborhoods, served by each bank holding company and
its subsidiaries. Any merger approved by the Federal Deposit Insurance
Corporation under the Bank Merger Act or by the Federal Reserve Board under the
Bank Holding Company Act may not be completed until 30 days after such approval,
during which time the U.S. Department of Justice may challenge such transaction
on antitrust grounds. With the approval of the applicable Bank regulator and the
U.S. Department of Justice, the waiting period may be reduced to 15 days.
33
39
Section 225.12(d)(2) of the Federal Reserve Board's Regulation Y provides
that the approval of the Federal Reserve Board is not required for certain
acquisitions by bank holding companies if the acquisition has a component that
will be approved by a federal supervisory agency under the Bank Merger Act and
certain other requirements are met. Under this regulation, the acquiring bank
holding company must submit a notice to the Federal Reserve Board at least ten
days prior to the transaction and no application for approval of the proposed
acquisition under the Bank Holding Company Act will be required unless the
Federal Reserve Board informs the proposed acquiror to the contrary prior to
expiration of this period. New Haven believes that the proposed merger and bank
merger satisfy these requirements and, accordingly, intends to submit a notice
to the Federal Reserve Board under this regulation.
In addition, the Bank Holding Company Act requires that the Federal
Reserve Board take into account the record of compliance of each bank holding
company with applicable state community reinvestment laws. Applicable
regulations require publication of notice of an application for approval of the
merger and an opportunity for the public to comment on the application in
writing and to request a hearing.
STATUS OF APPLICATIONS AND NOTICES. New Haven and Connecticut Bancshares
are in the process of preparing and filing all required applications and notices
with applicable regulatory authorities in connection with the merger and the
bank merger. There can be no assurance that all requisite approvals will be
obtained, that such approvals will be received on a timely basis or that such
approvals will not impose conditions or requirements which, individually or in
the aggregate, would so materially reduce the economic or business benefits of
the transactions contemplated by the merger agreement and described under "THE
MERGER AGREEMENT--CONDITIONS TO COMPLETING THE MERGER."
The approval of any application merely implies the satisfaction of
regulatory criteria for approval that does not include review of the merger from
the standpoint of the adequacy of the consideration to be received by
Connecticut Bancshares stockholders. Furthermore, regulatory approvals do not
constitute an endorsement or recommendation of the merger.
NEW HAVEN'S CONVERSION
New Haven has adopted a plan of conversion pursuant to which it will
convert from a Connecticut-chartered mutual savings bank to a
Connecticut-chartered stock savings bank. Recently, New Haven has organized a
Delaware corporation, NewAlliance Bancshares, to acquire and hold all of the
capital stock of New Haven to be issued in the conversion.
Consummation of the merger is subject to certain conditions, including the
receipt by New Haven of all approvals necessary to complete the conversion.
Specifically, the conversion of New Haven must be approved by the Connecticut
Banking Commissioner and receive the non-objection of the Federal Deposit
Insurance Corporation. In addition, the Federal Reserve Board must approve
NewAlliance Bancshares' becoming a bank holding company by acquiring the stock
of New Haven. New Haven filed an application for conversion with the Connecticut
Banking Commissioner and a notice of conversion with the Federal Deposit
Insurance Corporation on _____________, 2003 and ____________, 2003,
respectively. The application and the notice are currently under review. New
Haven anticipates obtaining the approval of the Connecticut Banking Commissioner
and the non-objection of the Federal Deposit Insurance Corporation no later than
______________________. There can be no assurance as to the timing of such
approval or non-objection or that the Connecticut Banking
34
40
Commissioner will approve the conversion or that the Federal Deposit Insurance
Corporation will not object to the conversion. In connection with the
conversion, NewAlliance Bancshares also filed a Registration Statement on Form
S-1 with the Securities and Exchange Commission on _____________, 2003. The
Registration Statement is currently under review by the SEC. New Haven
anticipates the registration statement will be declared effective not later than
_________________________________. There can be no assurance as to the timing of
such effectiveness or that the SEC will declare the registration statement
effective. See "THE MERGER AGREEMENT - CONDITIONS TO COMPLETING THE MERGER."
FINANCING THE MERGER
The total amount of funds required to consummate the merger and to pay
NewAlliance Bancshares' related fees and expenses is estimated to be
approximately $_____ million. The funds NewAlliance Bancshares will use to
satisfy its obligations will be obtained from the proceeds of New Haven's
conversion offering. Consummating the conversion is a condition precedent to
consummating the merger. If the conversion proceeds are insufficient to finance
the total merger consideration, New Haven may have to obtain alternative
financing to cover any shortfall. For further information, see "HOW WE INTEND
TO USE THE NET PROCEEDS FROM THE OFFERING" beginning on page ___ of the attached
NewAlliance Bancshares prospectus.
ACCOUNTING TREATMENT OF THE MERGER
The merger will be accounted for under the purchase method of accounting.
Under this method of accounting, NewAlliance Bancshares and Connecticut
Bancshares will be treated as one company as of the date of the merger, and
NewAlliance Bancshares will record the fair value of Connecticut Bancshares'
assets (including intangible assets which arise from either contractual or other
legal rights or are separable) and liabilities on its consolidated financial
statements. Acquisition costs in excess of the fair value of the net assets
acquired will be recorded as goodwill. Goodwill will not be amortized for
financial accounting purposes, but instead will be tested for impairment
annually. Connecticut Bancshares' results of operations will be included in
NewAlliance Bancshares' consolidated income statement after completion of the
merger.
DISSENTERS' APPRAISAL RIGHTS
Under Delaware law, if you both properly make a demand for appraisal in
writing before the vote taken at the special meeting and you do not vote in
favor of the merger, you have the right to seek an appraisal of the fair value
of your Connecticut Bancshares common stock and receive a cash payment of such
fair value. CONNECTICUT BANCSHARES' STOCKHOLDERS ELECTING TO EXERCISE
DISSENTERS' APPRAISAL RIGHTS MUST COMPLY WITH THE PROVISIONS OF SECTION 262 OF
THE DELAWARE GENERAL CORPORATION LAW IN ORDER TO PERFECT THEIR RIGHTS.
CONNECTICUT BANCSHARES WILL REQUIRE STRICT COMPLIANCE WITH THE STATUTORY
PROCEDURES. A copy of Section 262 of the Delaware General Corporation Law is
attached as Appendix C.
The following is intended as a brief summary of the material provisions of
the Delaware statutory procedures required to be followed by a stockholder in
order to dissent from the merger and perfect the stockholder's appraisal rights.
This summary, however, is not a complete statement of all applicable
requirements and is qualified in its entirety by reference to Section 262 of the
Delaware General Corporation Law, the full text of which appears in Appendix C
of this proxy statement.
Section 262 requires that stockholders be notified not less than 20 days
before the special meeting to vote on the merger that appraisal rights will be
available. A copy of Section 262 must be included with such notice. This proxy
statement constitutes Connecticut Bancshares' notice to its
35
41
stockholders of the availability of appraisal rights in connection with the
merger in compliance with the requirements of Section 262. If you wish to
consider exercising your appraisal rights, you should carefully review the text
of Section 262 contained in Appendix C because failure to timely and properly
comply with the requirements of Section 262 will result in the loss of your
appraisal rights under Delaware law.
If you elect to exercise your appraisal rights and demand appraisal of
your shares, you must satisfy each of the following conditions:
(1) YOU MUST DELIVER TO CONNECTICUT BANCSHARES A WRITTEN DEMAND FOR
APPRAISAL OF YOUR SHARES BEFORE THE STOCKHOLDER VOTE ON THE MERGER IS TAKEN.
This written demand for appraisal must be in addition to and separate from any
abstention from or vote against the merger, whether by proxy or in person.
Voting against or failing to vote for the merger by itself does not constitute a
demand for appraisal within the meaning of Section 262.
(2) YOU MUST NOT VOTE IN FAVOR OF THE MERGER. An abstention or failure to
vote will satisfy this requirement, but a vote in favor of the merger, by proxy
or in person, will constitute a waiver of your appraisal rights in respect of
the shares so voted and will nullify any previously filed written demands for
appraisal.
(3) YOU MUST CONTINUOUSLY BE THE RECORD HOLDER OF YOUR SHARES FROM THE
DATE OF MAKING THE DEMAND FOR APPRAISAL THROUGH THE EFFECTIVE TIME OF THE
MERGER.
(4) YOU MUST OTHERWISE COMPLY WITH THE STATUTORY REQUIREMENTS OF SECTION
262.
If you fail to comply with any of these conditions and the merger is
completed, you will be entitled to receive payment for your shares of
Connecticut Bancshares common stock as provided for in the merger agreement, but
you will have no appraisal rights with respect to your shares of Connecticut
Bancshares common stock.
All demands for appraisal should be addressed to the Corporate Secretary,
Connecticut Bancshares, Inc., 923 Main Avenue, Manchester, Connecticut 06040,
before the vote on the merger is taken at the special meeting. Any demand should
be executed by or on behalf of the record holder of the shares of Connecticut
Bancshares common stock. The demand must reasonably inform Connecticut
Bancshares of the identity of the stockholder and the intention of the
stockholder to demand appraisal of his or her shares.
TO BE EFFECTIVE, A DEMAND FOR APPRAISAL BY A HOLDER OF CONNECTICUT
BANCSHARES COMMON STOCK MUST BE MADE BY OR IN THE NAME OF SUCH REGISTERED
STOCKHOLDER. A DEMAND CANNOT BE MADE BY THE BENEFICIAL OWNER IF HE OR SHE DOES
NOT ALSO HOLD THE SHARES OF RECORD. THE BENEFICIAL HOLDER MUST, IN SUCH CASES,
HAVE THE REGISTERED OWNER SUBMIT THE REQUIRED DEMAND IN RESPECT OF SUCH SHARES.
IF YOU HOLD YOUR SHARES OF CONNECTICUT BANCSHARES COMMON STOCK IN A BROKERAGE
ACCOUNT OR IN OTHER NOMINEE FORM AND YOU WISH TO EXERCISE APPRAISAL RIGHTS, YOU
SHOULD CONSULT WITH YOUR BROKER OR OTHER NOMINEE TO DETERMINE THE APPROPRIATE
PROCEDURES FOR THE MAKING OF A DEMAND FOR APPRAISAL BY SUCH NOMINEE.
36
42
If shares are owned of record by a fiduciary, such as a trustee, guardian
or custodian, execution of a demand for appraisal should be made by the record
owner in its fiduciary capacity. If the shares are owned of record by more than
one person, as in a joint tenancy or tenancy in common, the demand should be
executed by or for all joint owners. An authorized agent, including one for two
or more joint owners, may execute the demand for appraisal for a stockholder of
record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, he or she is acting
as agent for the record owner. A record owner, such as a broker, who holds
shares as a nominee for others may exercise his or her right of appraisal with
respect to the shares held for one or more beneficial owners, while not
exercising this right for other beneficial owners. In such case, the written
demand should state the number of shares as to which appraisal is sought. Where
no number of shares is expressly mentioned, the demand will be presumed to cover
all shares held in the name of such record owner.
Within 10 days after the effective date of the merger, New Haven must give
written notice to each Connecticut Bancshares stockholder who has properly filed
a written demand for appraisal and who did not vote in favor of the merger that
the merger has become effective. Within 120 days after the effective date,
either New Haven or any stockholder who has complied with the requirements of
Section 262 and is otherwise entitled to appraisal rights may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
the shares held by all stockholders entitled to appraisal. New Haven does not
presently intend to file this petition in the event there are such stockholders
and has no obligation to do so. Accordingly, the failure of a stockholder to
file a petition under Section 262 within the period specified could nullify such
stockholder's previously written demand for appraisal.
Within 120 days after the effective date of the merger, any Connecticut
Bancshares stockholder who has complied with the requirements of Section 262 is
entitled to receive upon written request to New Haven a written statement from
New Haven that sets forth the aggregate number of shares not voted in favor of
the merger and for which demands for appraisal have been received and the
aggregate number of stockholders that made demands for appraisal. The New Haven
statement must be mailed to the stockholder within 10 days after New Haven
received the stockholders' written request or the expiration of the time period
for delivery of demands for appraisals, whichever is later.
At any time within 60 days after the effective date, any stockholder who
has demanded an appraisal has the right to withdraw the demand and to accept the
payment specified by the merger agreement for his or her shares of Connecticut
Bancshares common stock. If a petition for appraisal is duly filed by a
stockholder and a copy of the petition is delivered to New Haven, New Haven will
then be obligated within 20 days after receiving service of a copy of the
petition to provide the Chancery Court with a duly verified list containing the
names and addresses of all stockholders who have demanded an appraisal of their
shares and with whom agreements as to the value of their shares have not been
reached. After notice to the stockholders named on such list, the Chancery Court
is empowered to conduct a hearing upon the petition, to determine those
stockholders who have complied with Section 262 and who have become entitled to
appraisal rights. The Chancery Court may require the stockholders who have
demanded payment for their shares to submit their stock certificates to the
Register in Chancery for notation on the stock certificates of the pendency of
the appraisal proceedings; and if any stockholder fails to comply with such
direction, the Chancery Court may dismiss the proceedings as to such
stockholder.
After determination of the stockholders entitled to appraisal of their
shares of Connecticut Bancshares common stock, the Chancery Court will appraise
the shares, determining their fair value exclusive of any element of value
arising from the accomplishment or expectation of the merger, together
37
43
with a fair rate of interest. When the fair value is determined, the Chancery
Court will direct the payment of such value, with interest thereon accrued
during the pendency of the proceeding if the Chancery Court so determines, to
the stockholders entitled to receive payment, upon surrender by such holders of
the certificates representing the shares entitled to appraisal.
In determining fair value, the Chancery Court is required to take into
account all relevant factors. You should be aware that the fair value of your
shares as determined under Section 262 could be more, the same, or less than the
value that you are entitled to receive pursuant to the merger agreement.
Costs of the appraisal proceeding may be imposed upon New Haven and the
stockholders participating in the appraisal proceeding by the Chancery Court as
the Chancery Court deems equitable in the circumstances. Upon the application of
a stockholder, the Chancery Court may order all or a portion of the expenses
incurred by any stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts, to be charged pro rata against the value of all shares
entitled to appraisal. Any stockholder who had demanded appraisal rights will
not, after the effective date of the merger, be entitled to vote shares subject
to such demand for any purpose or to receive payments of dividends or any other
distribution with respect to such shares (other than with respect to payment as
of a record date prior to the effective date of the merger); however, if no
petition for appraisal is filed within 120 days after the effective date, or if
the stockholder delivers a written withdrawal of his or her demand for appraisal
and an acceptance of the merger within 60 days after the effective date of the
merger, then the right of the stockholder to appraisal will cease and the
stockholder will be entitled to receive the cash payment for shares of his or
her Connecticut Bancshares common stock pursuant to the merger agreement. Any
withdrawal of a demand for appraisal made more than 60 days after the effective
date of the merger may only be made with the written approval of the surviving
corporation and must, to be effective, be made within 120 days after the
effective date of the merger.
In view of the complexity of Section 262, Connecticut Bancshares
stockholders who may wish to dissent from the merger and pursue appraisal rights
should consult their legal advisors.
THE MERGER AGREEMENT
THE FOLLOWING DISCUSSION OF THE MERGER IS QUALIFIED BY REFERENCE TO THE
MERGER AGREEMENT, WHICH IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX A. YOU
SHOULD READ THE ENTIRE MERGER AGREEMENT CAREFULLY. IT IS THE LEGAL DOCUMENT THAT
GOVERNS THE MERGER.
WHEN WILL THE MERGER BE COMPLETED
The closing of the merger will take place on a date designated by New
Haven and Connecticut Bancshares. On the closing date, New Haven will file a
certificate of merger with the Secretary of State of the State of Delaware. The
merger will become effective at the time stated in the certificate of merger.
Connecticut Bancshares and New Haven expect to complete the merger in the
first calendar quarter of 2004. However, neither Connecticut Bancshares nor New
Haven can guarantee when or if the required regulatory approvals will be
obtained. See "THE MERGER--APPROVALS NEEDED TO COMPLETE THE MERGER." Connecticut
Bancshares may terminate the merger agreement if New Haven has not received all
required regulatory approvals and NewAlliance Bancshares' registration
statement as filed with the Securities and Exchange Commission has not been
declared effective before August 16, 2004.
38
44
Furthermore, either Connecticut Bancshares or New Haven may terminate the merger
agreement if, among other reasons, the merger has not been completed on or
before October 15, 2004, unless failure to complete the merger by that time is
due to the failure of the party seeking to terminate the agreement to perform
its obligations set forth in the merger agreement. See "--OTHER PROVISIONS OF
THE MERGER AGREEMENT--TERMINATING THE MERGER AGREEMENT."
CONDITIONS TO COMPLETING THE MERGER
The respective obligations of Connecticut Bancshares and New Haven to
effect the merger are subject to the satisfaction or waiver of the following
conditions specified in the merger agreement:
o approval by a majority of the outstanding shares of stock held by
our stockholders;
o approval of New Haven's plan of conversion by New Haven's
corporators and any other party as may be required;
o absence of any order, decree or injunction which enjoins or
prohibits consummation of the transactions contemplated by the
merger agreement;
o receipt of all required regulatory approvals for the merger and the
conversion, provided that none contain any condition that would
materially and adversely affect the combined enterprise of
Connecticut Bancshares, The Savings Bank of Manchester and New Haven
or otherwise materially impair the value of the Connecticut
Bancshares or The Savings Bank of Manchester to New Haven;
o completion of New Haven's conversion;
o each party's representations and warranties continuing to be true
and correct in all material respects as of the date of the merger
agreement and as of the closing date, except as otherwise
contemplated by the Agreement or consented to in writing by the
other party (PROVIDED, HOWEVER, that this condition will be
satisfied unless the failure of the representations or warranties to
be true and correct would have a material adverse effect on the
party);
o performance in all material respects of all obligations and
compliance in all material respects with all agreements or covenants
required to be performed by each party, except to the extent that
failure to perform or comply does not have materially adversely
effect the consummation of the merger;
o receipt of any and all material permits, authorizations, consents,
waivers, clearances or approvals required for the lawful
consummation of the transactions contemplated by the Agreement, the
failure to obtain which would have a material adverse effect;
o receipt by New Haven of a "comfort letter" from our independent
certified public accountants, dated the effective date of the
conversion registration statement, regarding certain financial
information of Connecticut Bancshares;
39
45
o absence of any event or circumstance since January 1, 2003 that has
had or is reasonably likely to have a material adverse effect on
Connecticut Bancshares; and
o delivery by New Haven of the merger consideration to the exchange
agent on or before the closing date, and receipt by Connecticut
Bancshares of a certificate from the exchange agent evidencing such
delivery.
You can find the details of the conditions to the merger in Article IX of
the merger agreement located in Appendix A. Neither party to the merger
agreement can guarantee that all of these conditions will be satisfied or
waived.
OTHER PROVISIONS OF THE MERGER AGREEMENT
Although the completion of the merger requires stockholder approval, many
provisions of the merger agreement became effective immediately upon its
signing. Your vote was not required to make these provisions binding obligations
of New Haven and Connecticut Bancshares.
REPRESENTATIONS AND WARRANTIES. New Haven and Connecticut Bancshares have
made certain customary representations and warranties to each other in the
merger agreement relating to each party's business. Each party's representations
and warranties must be true and correct upon both signing of the merger
agreement and the completion of the merger. A party can terminate the merger
agreement if the other party's representations and warranties are not true and
correct resulting in a material adverse effect on that other party. If the
merger is completed, or if the merger agreement is terminated for some unrelated
reason, the representations and warranties become void. You can find details of
these obligations in Articles IV and V of the merger agreement located in
Appendix A.
COOPERATION AND CONDUCT OF BUSINESS; AGREEMENT NOT TO SOLICIT OTHER
PROPOSALS.
Each party has agreed to cooperate in completing the merger and
Connecticut Bancshares has agreed to avoid extraordinary transactions between
the signing of the merger agreement and the completion of the merger. You can
find details of these obligations in Article VI of the merger agreement located
in Appendix A.
In addition, Connecticut Bancshares and its directors, officers,
employees, agents and representatives have agreed not to:
(1) solicit or encourage any inquiries or proposals with respect to an
"acquisition proposal;"
(2) engage in any negotiations concerning an "acquisition proposal;" or
(3) provide any confidential information to any person relating to an
"acquisition proposal."
Notwithstanding these prohibitions, Connecticut Bancshares may:
(1) provide non-public information to a third party who makes an
unsolicited "acquisition proposal" if the third party has executed a
confidentiality agreement;
(2) negotiate with such third party regarding an unsolicited
"acquisition proposal;" and
40
46
(3) recommend an unsolicited "acquisition proposal" to our stockholders;
BUT ONLY IF each of the following conditions are met:
(a) Connecticut Bancshares' board of directors determines in good
faith, after consultation with legal counsel, that such action
would be required in order for its directors to comply with
their fiduciary duties; and
(b) Connecticut Bancshares' board of directors determines in good
faith, after consultation with its financial advisor, that
such "acquisition proposal," if accepted, is at least as
reasonably likely to be consummated, taking into account all
legal, financial and regulatory aspects of the proposal and
the third party making the proposal and, if consummated, would
result in a transaction more favorable to Connecticut
Bancshares' stockholders from a financial point of view than
the merger with New Haven.
EMPLOYEE MATTERS. New Haven anticipates employing substantially all branch
customer service employees of The Savings Bank of Manchester and other employees
needed to conduct business following the merger. In addition, New Haven may pay
retention bonuses to certain key employees, provided they remain in the employ
of New Haven for some negotiated period of time following consummation of the
merger. Employees who are terminated in connection with the merger are entitled
to COBRA health care continuation benefits as required by law. New Haven will
consult with Connecticut Bancshares regarding limited outplacement services to
terminated employees, with the cost for such services not to exceed $30,000.
Continuing employees may continue to participate in The Savings Bank of
Manchester's employee benefit plans, deferred compensation arrangements, bonus
or incentive plans and other compensation and benefit plans that New Haven
maintains following the merger. Continuing employees may also participate in
additional New Haven benefit programs on the same basis as similarly situated
employees of New Haven. Finally, continuing employees may participate in any
stock option or employee stock ownership plan implemented by New Haven after the
merger, based on the same criteria as other New Haven employees. With respect to
existing New Haven employee benefit plans, continuing employees will receive
past service credit for purposes of determining eligibility to participate and
vesting, but not for purposes of benefit accrual; provided, however, that New
Haven is not required to provide past service credit that would cause a
duplication of benefits. New Haven reserves the right under the merger agreement
to amend or terminate any of The Savings Bank of Manchester employee benefit
plans at any time in accordance with their terms.
New Haven will honor and perform the obligations of The Savings Bank of
Manchester under its existing benefit agreements, other than those covered by
the Termination and Release Agreements. Consummation of the merger will
constitute a "change in control" with respect to such arrangements. Upon
execution of a release of claims, employees will receive the cash and other
benefits provided for under such benefit agreements. In order to avoid the
duplication of fringe benefits, an employee entitled to fringe benefits under an
executive agreement who becomes entitled to similar benefits upon service as a
director, officer, employee or consultant of New Haven will receive such
benefits in lieu of, rather than in addition to, the fringe benefits provided
under the executive agreement.
41
47
The Savings Bank of Manchester will terminate its employee stock ownership
plan upon completion of the merger. The plan will repay its existing loan from
Connecticut Bancshares and will allocate the remaining cash representing
earnings on trust assets to the accounts of the plan participants, in proportion
to their account balances, to the extent allowed under applicable law and the
governing documents of the plan.
CHANGING THE TERMS OF THE MERGER AGREEMENT. Before the completion of the
merger, Connecticut Bancshares and New Haven may agree to waive, amend or modify
any provision of the merger agreement. However, after the vote by Connecticut
Bancshares stockholders, Connecticut Bancshares and New Haven can make no
amendment or modification that would reduce the amount or alter the kind of
consideration to be received by Connecticut Bancshares' stockholders under the
terms of the merger agreement without further approval of Connecticut
Bancshares' stockholders.
TERMINATING THE MERGER AGREEMENT. Connecticut Bancshares and New Haven may
agree at any time not to complete the merger, even if Connecticut Bancshares'
stockholders have approved the merger agreement. In addition, either Connecticut
Bancshares or New Haven may decide, without the consent of the other, to
terminate the merger agreement:
o if there has been a material breach of any of the representations
and warranties on the part of the other party and the breach cannot
be cured within 30 days of notice of breach;
o if there has been a material failure to perform or comply with any
of the covenants or agreements on the part of the other party and
the breach cannot be cured within 30 days of notice of breach;
o if the closing has not occurred by October 15, 2004, provided that
no party may terminate the merger agreement if the failure to close
before such date resulted from that party's breach of its
obligations;
o if (a) the stockholders of Connecticut Bancshares fail to approve
the merger agreement, or (b) New Haven's corporators fail to approve
the plan of conversion, or (c) any other party required to vote on
the plan of conversion fails to approve it;
o if (a) a government entity takes final action regarding the merger
agreement or the bank merger agreement and such action does not
approve those transactions, (b) if any regulatory authority has
stated in writing that it will not issue its approval in connection
with the merger agreement or the bank merger agreement, or (c) a
court or other governmental authority issues an order prohibiting
the merger or the bank merger; or
o if (a) a government entity takes final action regarding the
conversion and such action does not approve that transaction, (b) if
any regulatory authority has stated in writing that it will not
issue its approval in connection with the conversion, or (c) a court
or other governmental authority issues an order prohibiting the
conversion; or
o if either party cannot satisfy its obligations to the other party
under the conditions to completing the merger by October 15, 2004.
42
48
Connecticut Bancshares may also terminate the merger agreement if any of
the following conditions is met:
o New Haven has not received all regulatory approvals in connection
with the merger, the bank merger, the conversion (except for any
approval with respect to the conversion to be received following the
completion of the offering and before consummation of the
conversion) and the conversion registration statement is not
declared effective by August 16, 2004;
o any of the conditions to the obligations of Connecticut Bancshares
cannot be satisfied (except for any approval with respect to the
conversion to be received following the completion of the offering
and before consummation of the conversion) by August 16, 2004; or
o (before its stockholder meeting) in order to enter into an
"acquisition agreement" with respect to a "superior proposal" and
sufficient notice has been granted New Haven allowing it to match or
better the "superior proposal."
NewAlliance Bancshares may also terminate the merger agreement:
o if (a) Connecticut Bancshares' board fails to make or changes its
recommendation to stockholders prior to Connecticut Bancshares'
stockholder meeting, or (b) Connecticut Bancshares' board fails to
give notice of, convene and hold its stockholder meeting; or
o if a third party commences a tender or exchange offer for 25% or
more of Connecticut Bancshares stock and Connecticut Bancshares
board recommends to its stockholders to tender their shares or fails
to recommend a rejection of the offer.
TERMINATION FEE. The merger agreement requires Connecticut Bancshares to
pay New Haven a fee of $30 million if:
o New Haven terminates the merger agreement because (i) Connecticut
Bancshares' board of directors fails to recommend approval of the
merger agreement, or withdraws or modifies the recommendation in a
manner adverse to New Haven, (ii) Connecticut Bancshares fails to
call a meeting of stockholders, or (iii) a tender offer for 25% or
more of Connecticut Bancshares' common stock is commenced and
Connecticut Bancshares' board recommends to its stockholders that
they tender their shares or otherwise fails to recommend that such
stockholders reject such tender offer within ten business days;
o New Haven terminates the merger agreement because Connecticut
Bancshares materially breaches a representation, warranty or
covenant and, before termination, a competing "acquisition proposal"
has been publically announced or made known to Connecticut
Bancshares management;
o either party terminates the merger agreement because Connecticut
Bancshares' stockholders fail to approve the merger agreement and,
before the stockholder vote, a competing "acquisition proposal" has
been publically announced or made known to Connecticut Bancshares
management; or
43
49
o before Connecticut Bancshares' stockholder meeting, Connecticut
Bancshares terminates to accept a "superior proposal" which New
Haven fails to at least match within five business days after
Connecticut Bancshares notifies New Haven of the "superior
proposal."
If the termination fee is triggered under the first three triggering
events, Connecticut Bancshares must pay $10 million to New Haven by the third
business day following termination and the balance of $20 million if, within 18
months after termination, Connecticut Bancshares enters into an agreement with
respect to, or consummates, an "acquisition transaction" with another party. If
the termination fee is triggered under the fourth triggering event, Connecticut
Bancshares must pay the entire $30 million by the third business day following
termination.
In addition, New Haven must pay Connecticut Bancshares a special payment
fee of $30 million if:
o New Haven's corporators, or any other party required to vote on the
plan of conversion, fail to approve the plan of conversion;
o New Haven fails to obtain all required regulatory approvals for the
merger and the conversion;
o New Haven does not complete the merger by October 15, 2004 or such
later date agreed to by the parties; or
o Connecticut Bancshares terminates the merger agreement because New
Haven has intentionally and willfully breached any of its
representations or warranties or New Haven has intentionally and
willfully failed to perform or comply with any of its covenants or
agreements to an extent to allow for termination.
New Haven will not have to make this $30 million special payment fee if
any of the above events causing the fee is due to a breach by Connecticut
Bancshares of its representations or warranties or its covenants and such breach
is the principal cause of the "special payment" event.
Connecticut Bancshares will return to New Haven $15 million of the special
payment fee if New Haven pays the $30 million to Connecticut Bancshares and
before the earlier of (a) October 15, 2006 or (b) two years after demand for the
"special payment," Connecticut Bancshares or any of its subsidiaries enter into
a merger transaction in which our stockholders are entitled to receive merger
consideration in excess of $51.60 per share.
COSTS AND EXPENSES. If a party terminates because the other party, through
willful conduct or gross negligence, breaches a representation, warranty or
covenant, the breaching party will reimburse the other party for up to $2
million in "costs" (i.e., legal, accounting, investment banking fees and
expenses, etc.). However, if Connecticut Bancshares pays New Haven a termination
fee or if New Haven pays Connecticut Bancshares the "special payment," the
paying party has no liability for such costs. Otherwise, all costs incurred will
be paid by the party incurring such costs whether or not the merger is
completed.
44
50
INFORMATION ABOUT NEWALLIANCE BANCSHARES AND NEW HAVEN
FINANCING THE MERGER
For information regarding how New Haven intends to finance the merger,
see "How We Intend to Use the Net Proceeds From the Offering" beginning on page
___ of the attached NewAlliance Bancshares prospectus.
DESCRIPTION OF BUSINESS
For information regarding the business of NewAlliance Bancshares and New
Haven, see "Business of New Haven Savings Bank" beginning on page _____ of the
attached NewAlliance Bancshares prospectus.
DESCRIPTION OF PROPERTY
For information regarding the properties of NewAlliance Bancshares and New
Haven, see "Business of New Haven Savings Bank" beginning on page ____ of the
attached NewAlliance Bancshares prospectus.
DESCRIPTION OF COMMON STOCK
For information regarding the common stock of NewAlliance Bancshares, see
"Our Policy Regarding Dividends" on page ____ and "Market for the Common Stock"
on page ____ of the attached NewAlliance Bancshares prospectus.
LEGAL PROCEEDINGS
For information regarding the legal proceedings of NewAlliance Bancshares
and New Haven, see "Business of New Haven Savings Bank - Legal Proceedings" on
page ____ of the attached NewAlliance Bancshares prospectus.
FINANCIAL STATEMENTS
For the financial statements of New Haven, see New Haven's Consolidated
Financial Statements beginning on page F-1 of the attached NewAlliance
Bancshares prospectus.
SELECTED FINANCIAL DATA
For the selected financial data of New Haven, see "Selected Consolidated
Financial Information of New Haven Savings Bank" beginning on page ___ of the
attached NewAlliance Bancshares prospectus.
SUPPLEMENTARY FINANCIAL INFORMATION
For the supplementary financial information of New Haven, see "Note ___ of
New Haven's Consolidated Financial Statements contained in the attached
NewAlliance Bancshares prospectus.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF NEW HAVEN SAVINGS BANK
For the management's discussion and analysis of financial condition and
results of operations of New Haven, see "Management's Discussion and Analysis of
New Haven Savings Bank" beginning on page ____ of the attached NewAlliance
Bancshares prospectus.
45
51
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the quantitative and qualitative disclosures about market risk of New
Haven, see "Management's Discussion and Analysis of New Haven Savings Bank -
Management of Market and Interest Rate Risk" beginning on page ___ of the
attached NewAlliance Bancshares prospectus.
STOCK OWNERSHIP
The following table provides information as of __________, 2003, about the
persons known by Connecticut Bancshares to be the beneficial owners of more than
5% of Connecticut Bancshares' outstanding common stock. A person may be
considered to own any shares of common stock over which the person has, directly
or indirectly, sole or shared voting or investment power.
PERCENT OF
NUMBER OF SHARES COMMON STOCK
NAME AND ADDRESS OWNED OUTSTANDING
- ---------------- ------------------ --------------
The Savings Bank of Manchester _______(1) ___%
Employee Stock Ownership Plan
923 Main Street
Manchester, CT 06040
Private Capital Management, L.P. 864,375(2) ___%
Bruce S. Sherman
Gregg J. Powers
8889 Pelican Bay Boulevard
Naples, FL 34108
SBM Charitable Foundation, Inc. 748,000(3) ___%
923 Main Street
Manchester, CT 06040
(1)Under the terms of the ESOP, the ESOP trustee will vote shares allocated to
participants' accounts in the manner directed by the participants. As of
__________, 2003, ________ shares had been allocated under the ESOP and
_________ shares remain unallocated. The ESOP trustee, subject to its
fiduciary responsibilities, will vote unallocated shares and allocated shares
for which no timely voting instructions are received in the same proportion
as shares for which the trustee has received timely voting instructions from
participants.
(2)Based on information disclosed in a Schedule 13G filed with the Securities
and Exchange Commission on February 14, 2003.
(3)SBM Charitable Foundation, Inc. was established and funded in connection with
The Savings Bank of Manchester conversion to the stock holding company form
of organization on March 1, 2000. The terms of the gift instrument require
that all shares of common stock held by the SBM Charitable Foundation, Inc.
must be voted in the same ratio as all other shares of Connecticut
Bancshares' common stock on all proposals considered by stockholders of
Connecticut Bancshares.
46
52
The following table provides information as of __________, 2003 about the
shares of Connecticut Bancshares common stock that may be considered to be
beneficially owned by each director, the named executive officers and by all
directors and named executive officers of Connecticut Bancshares as a group. A
person may be considered to beneficially own any shares of common stock over
which he or she has, directly or indirectly, sole or shared voting or investment
power. Unless otherwise indicated, each of the named individuals has sole voting
and investment power with respect to the shares shown.
NUMBER OF
SHARES THAT MAY
BE ACQUIRED
WITHIN 60 DAYS PERCENT OF
NUMBER OF BY EXERCISABLE COMMON STOCK
NAME SHARES OWNED OPTIONS OUTSTANDING
- ------ ------------- ---------------- --------------
Douglas K. Anderson**........................ *
A. Paul Berte................................ *
Timothy J. Devanney ......................... *
Sheila B. Flanagan .......................... *
Michael J. Hartl**........................... *
John D. LaBelle, Jr.......................... *
Eric A. Marziali............................. *
Richard P. Meduski**......................... ______
Timothy J. Moynihan.......................... *
Jon L. Norris................................ *
William D. O'Neill........................... *
Brian A. Orenstein**......................... *
Charles L. Pike**............................ *
Laurence P. Rubinow.......................... *
Roger A. Somerville**........................ *
John G. Sommers.............................. *
Thomas E. Toomey............................. *
Gregory S. Wolff............................. *
All Directors and Executive Officers as a
Group (21 persons)........................... ______
- --------------------------------------
*Less than 1.0% of shares outstanding.
**Named executive officer.
(1) Includes shares of unvested restricted stock awarded as follows: each of
Messrs. Berte, Devanney, LaBelle, Marziali, Norris, O'Neill, Rubinow,
Sommers, Toomey and Wolff and Ms. Flanagan, ________; Mr. Meduski, ________
shares; Mr. Moynihan, ________ shares; Mr. Pike, ________ shares; Mr.
Anderson, ________ shares; Mr. Somerville, ________ shares; and Mr. Hartl,
________ shares. Each participant has voting but not investment power as to
shares of unvested restricted stock.
(2) Includes shares held in trust by The Savings Bank of Manchester Savings Plan
as to which each individual has investment and voting power as follows: Mr.
Meduski, ________ shares; Mr. Pike, ________ shares; Mr. Anderson, ________
shares; Mr. Somerville, ________ shares; and Mr. Hartl, ________ shares.
(3) Includes shares held in a separate trust in which Guarantee Trust Company
serves as a trustee as follows: Ms. Flanagan, ________ shares; Mr. LaBelle,
________ shares; and Mr. Anderson, ________ shares.
(4) Includes shares allocated to the account of individuals under the ESOP as of
________, 2003 as to which each individual has voting but not investment
power as follows: Mr. Meduski, ________ shares; Mr. Anderson, ________
shares; Mr. Pike, ________ shares; Mr. Somerville, ________ shares; and Mr.
Hartl, ________ shares.
(5) Based on ________ shares of Company common stock outstanding and entitled to
vote as of ________, 2003, plus the number of shares that may be acquired
through the exercise of stock options exercisable within 60 days of
________, 2003.
(6) Includes ________ shares held by Mr. Anderson's spouse.
47
53
(7) Includes ________ shares held in trust by The Savings Bank of Manchester
Supplemental Executive Retirement Plan as to which Mr. Anderson has voting
power.
(8) Includes ________ shares held by Mr. Devanney's children, ________ shares
held by Mr. Devanney as custodian for his children under the Connecticut
UGMA, and ________ shares represents Mr. Devanney's beneficial interest of
shares owned by Highland Park Market of Glastonbury, Inc. and by Highland
Park Market, Inc.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Connecticut Bancshares will hold an annual meeting for the year ending
December 31, 2003, only if the merger is not anticipated to be completed during
the 2004 calendar year. Proposals that stockholders seek to have included in the
proxy statement for Connecticut Bancshares's next annual meeting, if one is
held, must have been received by Connecticut Bancshares no later than December
8, 2003. If, however, next year's annual meeting is held on a date more than 30
calendar days from May 12, 2004, a stockholder proposal must be received by a
reasonable time before Connecticut Bancshares begins to print and mail its proxy
materials for such annual marketing. Any such proposals will be subject to the
requirements of the proxy rules adopted by the Securities and Exchange
Commission.
The bylaws of Connecticut Bancshares set forth the procedures by which a
stockholder may properly bring business before a meeting of stockholders,
including director nominations. Pursuant to the bylaws, only business brought by
or at the direction of the board of directors may be conducted at a special
meeting. The bylaws of Connecticut Bancshares provide an advance notice
procedure for a stockholder to properly bring business before an annual meeting.
The stockholder must give written advance notice to the Corporate Secretary of
Connecticut Bancshares not less than ninety (90) days before the date originally
fixed for such meeting; PROVIDED, HOWEVER, that in the event that less than one
hundred (100) days notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
received not later than the close of business on the tenth day following the
date on which Connecticut Bancshares' notice to stockholders of the annual
meeting date was mailed or such public disclosure was made. In order for a
stockholder to bring business before Connecticut Bancshares' 2004 Annual Meeting
of Stockholders, Connecticut Bancshares would have to receive notice of such
business not later than February 12, 2004, assuming the 2004 Annual Meeting is
held on May 12, 2004 and that Connecticut Bancshares provides at least 100 days
notice of the date of the meeting. The advance notice by stockholders must
include certain information required by the bylaws. In the case of nominations
to the board of directors, certain information regarding the nominee must be
provided. A copy of the bylaws may be obtained from Connecticut Bancshares.
Notwithstanding the advance notice provisions of the Connecticut Bancshares'
bylaws, Connecticut Bancshares is not required to include in its proxy statement
or proxy related to any annual meeting a stockholder proposal that fails to meet
all of the requirements of the proxy rules of the Securities and Exchange
Commission in effect when Connecticut Bancshares receives any such proposal.
SOLICITATION OF PROXIES
The cost of solicitation of proxies on behalf of the board of directors will
be borne by Connecticut Bancshares. Proxies may be solicited personally or by
telephone by directors, officers and other employees of Connecticut Bancshares
and The Savings Bank of Manchester without any additional compensation.
Connecticut Bancshares will also request persons, firms and corporations holding
shares in their names, or in the name of their nominees, which are beneficially
owned by others, to send proxy material to, and obtain proxies from, the
beneficial owners, and will reimburse those record holders for their reasonable
expenses in doing so. Georgeson Stockholder Communications, Inc., a proxy
solicitation firm, will be paid a fee of $10,000, plus out-of-pocket expenses,
to assist Connecticut Bancshares.
48
54
WHERE YOU CAN FIND MORE INFORMATION
As a public company, Connecticut Bancshares is obligated to file annual,
quarterly and current reports, proxy statements and other information with the
SEC. You may read and copy any reports, statements or other information that we
file at the SEC's public reference rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, Connecticut Bancshares's
public filings are available to the public from commercial document retrieval
services and on the Internet World Wide Website maintained by the SEC at
http://www.sec.gov.
- ------------------
Connecticut Bancshares has supplied all information in this proxy
statement relating to Connecticut Bancshares, and New Haven has supplied all
information in this proxy statement and in the attached prospectus relating to
NewAlliance Bancshares and New Haven.
BY ORDER OF THE BOARD OF DIRECTORS
Carole L. Yungk
CORPORATE SECRETARY
Manchester, Connecticut
______, 2003
49
55
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE NEW HAVEN SAVINGS BANK
AND
CONNECTICUT BANCSHARES, INC.
AND
THE SAVINGS BANK OF MANCHESTER
DATED AS OF
JULY 15, 2003
A-1
56
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of July
15, 2003 is by and among THE NEW HAVEN SAVINGS BANK, a Connecticut-chartered
mutual savings bank ("NHSB"), CONNECTICUT BANCSHARES, INC., a Delaware
corporation ("Connecticut Bancshares"), and THE SAVINGS BANK OF MANCHESTER, a
Connecticut savings bank and wholly-owned subsidiary of Connecticut Bancshares
("SBM").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Boards of Directors of NHSB, Connecticut Bancshares and
SBM have determined that it is in the best interest of their respective
companies and shareholders or depositors as the case may be, to consummate the
business combination transactions provided for herein whereby, subject to the
terms and conditions set forth herein;
WHEREAS, NHSB will convert to a stock bank/stock holding company form of
organization pursuant to its proposed plan of conversion (the "Plan"), and in
connection therewith will form a new Delaware corporation ("NewAlliance
Bancshares"), which shall become the parent holding company of NHSB;
WHEREAS, Connecticut Bancshares will merge with and into an interim
corporation ("Interim"), a Delaware corporation to be formed as a subsidiary of
NewAlliance Bancshares, with Connecticut Bancshares being the surviving entity
(the "Surviving Corporation") (the "Merger");
WHEREAS, simultaneously with, or as soon as practicable after the Merger,
the Surviving Corporation will be merged with and liquidated into NewAlliance
Bancshares in accordance with a Plan of Liquidation in form and substance
substantially similar to that attached hereto as Exhibit A.
------- -
WHEREAS, prior to the consummation of the Merger, NHSB and SBM will
enter into a merger agreement, in form and substance substantially similar to
that attached hereto as Exhibit B (the "Bank Merger Agreement") pursuant to
------- -
which SBM will merge with and into NHSB, with NHSB being the surviving entity
(the "Bank Merger"), which Bank Merger shall be consummated immediately
following the Merger;
WHEREAS, all of the directors of Connecticut Bancshares have agreed, in
their capacities as shareholders of Connecticut Bancshares, to vote their shares
of Connecticut Bancshares Common Stock in favor of this Agreement pursuant to
separate voting agreements entered into by and between each such director and
NHSB prior to or on the date hereof in the form attached hereto as Exhibit C;
------- -
WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the business combination
transactions described in this Agreement and to prescribe certain conditions
thereto.
A-2
57
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
-------------------
have the following meanings, unless the context otherwise requires (both here
and throughout this Agreement, references to Articles and Sections refer to
Articles and Sections of this Agreement).
"ACQUISITION AGREEMENT" shall have the meaning set forth in Section
11.1.11 hereof.
"ACQUISITION PROPOSAL" means any proposal or offer with respect to any
of the following (other than the transactions contemplated hereunder) involving
Connecticut Bancshares or any Connecticut Bancshares Subsidiaries: (i) any
merger, consolidation, share exchange, business combination or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 25% or more of its consolidated assets in a single transaction or
series of transactions; (iii) any tender offer or exchange offer for 25% or more
of the outstanding shares of its capital stock or the filing of a registration
statement under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
"ACQUISITION TRANSACTION" means any of the following (other than the
transaction contemplated hereunder) involving Connecticut Bancshares or any
Connecticut Bancshares Subsidiaries: (i) any merger, consolidation, share
exchange, business combination or other similar transaction; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more
of its consolidated assets in a single transaction or series of transactions; or
(iii) any tender offer or exchange offer for 25% or more of the outstanding
shares of its capital stock or the filing of a registration statement under the
Securities Act in connection therewith.
"AFFILIATE" shall mean, with respect to a Person, any Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BANKING LAW" shall mean the Banking Law of Connecticut, Connecticut
General Statutes Section 36a-1 et seq., as amended.
"BANK MERGER" shall have the meaning set forth in the recitals hereto.
"BANK MERGER AGREEMENT" shall have the meaning set forth in the
recitals hereto.
A-3
58
"BANK REGULATOR" shall mean any federal or state banking regulator that
regulates NHSB or SBM, or any of their respective holding companies or
subsidiaries, as the case may be, including but not limited to the FDIC, the
Department, and the FRB.
"BENCHMARK PRICE" shall have the meaning set forth in Section 11.3.4
hereof.
"BENEFIT AGREEMENT" shall have the meaning set forth in Section 7.6.3
hereof.
"BIF" shall mean the Bank Insurance Fund administered by the FDIC.
"BUSINESS DAY" means Monday through Friday of each week, except a legal
holiday recognized as such by the U.S. Government or any day on which banking
institutions in the State of Connecticut are authorized or obligated to close.
"CERTIFICATE" shall mean certificates evidencing shares of Connecticut
Bancshares Common Stock.
"CLAIM" shall have the meaning set forth in Section 7.7.2 hereof.
"CLOSING" shall have the meaning set forth in Section 2.3 hereof.
"CLOSING DATE" shall have the meaning set forth in Section 2.3 hereof.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY RESTRICTED SHARE" shall have the meaning set forth in Section
3.1.4 hereof.
"CONFIDENTIALITY AGREEMENTS" shall mean the confidentiality agreements
referred to in Section 12.1 of this Agreement.
"CONNECTICUT BANCSHARES" shall mean Connecticut Bancshares, Inc., a
Delaware corporation with its principal office located at 923 Main Street,
Manchester, Connecticut.
"CONNECTICUT BANCSHARES COMMON STOCK" shall mean the common stock, par
value $.01 per share, of Connecticut Bancshares.
"CONNECTICUT BANCSHARES DEFINED BENEFIT PLAN" shall have the meaning
set forth in Section 4.14.3 hereof.
"CONNECTICUT BANCSHARES DISCLOSURE SCHEDULE" shall mean a written,
signed disclosure schedule delivered by Connecticut Bancshares to NHSB
specifically referring to the appropriate
A-4
59
section of this Agreement and describing in reasonable detail the matters
contained therein.
"CONNECTICUT BANCSHARES EMPLOYEE PLAN(S)" shall mean all stock option,
employee stock purchase, stock bonus and any other stock-based plans, qualified
pension or profit-sharing plans, any deferred compensation, non-qualified plan
or arrangement, supplemental retirement, consultant, bonus or group insurance
contract or any other incentive, health and welfare or employee benefit plan or
agreement maintained for the benefit of any of the employees or former employees
or directors of Connecticut Bancshares or any Connecticut Bancshares Subsidiary,
whether written or oral.
"CONNECTICUT BANCSHARES FINANCIAL STATEMENTS" shall mean (i) the
audited consolidated balance sheets (including related notes and schedules, if
any) of Connecticut Bancshares as of December 31, 2002, 2001 and 2000 and the
consolidated statements of operations, changes in shareholders' equity and cash
flows (including related notes and schedules, if any) of Connecticut Bancshares
for each of the three (3) years ended 2002, 2001 and 2000 as filed by
Connecticut Bancshares in its Securities Documents, and (ii) the unaudited
interim and audited annual consolidated financial statements of Connecticut
Bancshares as of the end of each calendar quarter and fiscal year, respectively,
following December 31, 2002 as filed by Connecticut Bancshares in its Securities
Documents.
"CONNECTICUT BANCSHARES NET INCOME" shall mean the amount set forth as
net income on Connecticut Bancshares' consolidated statements of operations
prepared in accordance with GAAP in a manner consistent with the preparation of
the Connecticut Bancshares Financial Statements as adjusted to (i) exclude any
gain or loss on sale of assets other than in the ordinary course of business,
including but not limited to the sales of loans, investment securities and
repossessed assets, (ii) exclude any transaction expenses paid or to be paid as
a result of the Merger as detailed in Section 6.13 hereof, which have been
reflected in Connecticut Bancshares consolidated statements of operations, and
(iii) exclude any additional accruals and reserves that may be established in
accordance with Section 6.12 hereof.
"CONNECTICUT BANCSHARES OPTION PLANS" shall mean the Connecticut
Bancshares, Inc. 2000 Stock-Based Incentive Plan and the Connecticut Bancshares,
Inc. 2002 Equity Compensation Plan.
"CONNECTICUT BANCSHARES PENSION PLAN" shall have the meaning set forth
in Section 4.14.4 hereof.
"CONNECTICUT BANCSHARES SHAREHOLDERS MEETING" shall have the meaning
set forth in Section 8.1 hereof.
"CONNECTICUT BANCSHARES TERMINATION FEE" shall have the meaning set
forth in Section 11.2.2.
"CONNECTICUT BANCSHARES WELFARE PLAN" shall have the meaning set forth
in Section 4.14.11 hereof.
A-5
60
"CONTINUING EMPLOYEE" shall have the meaning set forth in Section 7.6.2
hereof.
"CONVERSION" shall have the meaning set forth in Section 2.10 hereof.
"CONVERSION PROSPECTUS" shall mean a prospectus issued by NewAlliance
Bancshares in connection with the Offering, which meets all of the requirements
of the Securities Act, applicable state securities laws and banking laws and
regulations.
"CONVERSION REGISTRATION STATEMENT" shall mean the registration statement,
together with all amendments and supplements, filed with the SEC under the
Securities Act for the purpose of registering shares of NewAlliance Bancshares
Common Stock to be offered and issued in connection with the Offering.
"CORPORATORS" shall mean the corporators of NHSB.
"COSTS" shall have the meaning set forth in Section 11.2.3 hereof.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"DEPARTMENT" shall mean the Connecticut Department of Banking.
"DISSENTING SHARES" shall have the meaning set forth in Section 3.2.1
hereof.
"DISSENTING SHAREHOLDER" shall have the meaning set forth in Section
3.2.1 hereof.
"DOJ" shall mean the United States Department of Justice.
"EFFECTIVE DATE" shall mean the date on which the Effective Time
occurs. The Effective Date shall occur as soon as practicable after the closing
of the Offering.
"EFFECTIVE TIME" shall mean the date and time specified pursuant to
Section 2.3 hereof as the effective time of the Merger.
"ENVIRONMENTAL LAWS" means any applicable federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (a) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss. 9601, et seq.; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss. 6901, et seq.; the Clean Air Act, as amended, 42 U.S.C. ss. 7401, et
seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251,
et seq.; the Toxic Substances
A-6
61
Control Act, as amended, 15 U.S.C. ss. 9601, et seq.; the Emergency Planning and
Community Right to Know Act, 42 U.S.C. ss. ll0l, et seq.; the Safe Drinking
Water Act, 42 U.S.C. ss. 300f, et seq.; the Connecticut Transfer Act,
Connecticut General Statutes ss. 22a-134 et seq.; and all applicable comparable
state and local laws, and (b) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to the presence of or exposure to any
Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" shall have the meaning set forth in Section 4.14.3
hereof.
"ESOP" shall have the meaning set forth in Section 6.1.2(j) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCHANGE AGENT" shall mean a bank or trust company designated by NHSB
and reasonably acceptable to Connecticut Bancshares, which shall act as agent
for NHSB in connection with the exchange procedures for converting Connecticut
Bancshares Common Stock and Options into the Merger Consideration.
"EXCHANGE FUND" shall have the meaning set forth in Section 3.3.1
hereof.
"EXECUTIVE AGREEMENTS" shall have the meaning set forth in Section
7.6.3 hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FINAL DIVIDEND RECORD DATE" shall have the meaning set forth in
Section 6.1.2(e) hereof.
"FRB" shall mean the Board of Governors of the Federal Reserve System
or any successor thereto.
"GAAP" shall mean accounting principles, generally accepted in the
United States.
"GOVERNMENTAL ENTITY" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"HOLA" shall mean the Home Owners Loan Act.
"INDEMNIFIED LIABILITIES" shall have the meaning set forth in Section
7.7.2 hereof.
"INDEMNIFIED PARTIES" shall have the meaning set forth in Section 7.7.2
hereof.
A-7
62
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section
4.26 hereof.
"INTERIM" shall have the meaning set forth in the recitals hereto.
"JOINT VENTURE" shall mean any limited partnership, joint venture,
corporation, or venture capital investment.
"LOAN PROPERTY" shall have the meaning set forth in Section 4.9.2
hereof.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to Connecticut
Bancshares or NHSB, respectively, any effect that (i) is material and adverse to
the financial condition, results of operations or business of Connecticut
Bancshares and its Subsidiaries taken as a whole, or NHSB and its Subsidiaries
taken as a whole, respectively, or (ii) materially impairs the ability of either
Connecticut Bancshares, on the one hand, or NHSB, on the other hand, to
consummate the transactions contemplated by this Agreement; provided that
"Material Adverse Effect" shall not be deemed to include the impact of (a)
changes in laws and regulations affecting banks generally, (b) changes in GAAP
or regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions and omissions of a party (or any of its
Subsidiaries) taken with the prior written consent of the other party, (d)
changes in economic conditions affecting financial institutions generally,
including but not limited to changes in market interest rates or the projected
future interest rate environment, and (e) the direct effects of compliance with
this Agreement on the operating performance of the parties.
"MATERIALS OF ENVIRONMENTAL CONCERN" shall mean petroleum and petroleum
products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls and any other
chemicals, materials or substances regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Laws.
"MERGER" shall have the meaning set forth in the recitals hereto.
"MERGER CONSIDERATION" shall mean the cash paid by NewAlliance Bancshares
to holders of Connecticut Bancshares Common Stock and Options under Section 3.1
hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NewAlliance Bancshares" shall mean a Delaware corporation to be organized
by NHSB pursuant to the DGCL and the Banking Law, which shall own 100% of the
common stock of NHSB following the consummation of the transactions contemplated
in the Plan.
"NewAlliance Bancshares COMMON STOCK" shall mean the common stock, par
value $0.01 per share, of NewAlliance Bancshares to be issued in the Offering.
"NEW EXECUTIVE AGREEMENTS" shall have the meaning set forth in Section
7.6.3 hereof.
"NEW OPTION PLAN" shall have the meaning set forth in Section 7.6.2
hereof.
A-8
63
"NHSB" shall mean The New Haven Savings Bank, either as a
Connecticut-chartered mutual savings bank or, following the Conversion, a stock
savings bank, with its principal offices located at 195 Church Street, New
Haven, Connecticut 06510.
"NHSB DISCLOSURE SCHEDULE" shall mean a written, signed disclosure
schedule delivered by NHSB to Connecticut Bancshares specifically referring to
the appropriate section of this Agreement and describing in reasonable detail
the matters contained therein.
"NHSB FINANCIAL STATEMENTS" shall mean the audited consolidated balance
sheets (including related notes and schedules, if any) of NHSB as of March 31,
2003, 2002 and 2001 and the consolidated statements of income and cash flows
(including related notes and schedules, if any) of NHSB for each of the three
(3) years ended March 31, 2003, 2002 and 2001, and the NHSB call reports as of
the end of each quarter following March 31, 2003.
"NHSB PROPOSAL" shall have the meaning set forth in Section 6.10
hereof.
"OFFERING" shall mean the offering, in connection with the Conversion, of
shares of NewAlliance Bancshares Common Stock in a subscription offering and, if
necessary, a community offering and/or a syndicated community offering.
"OPTION CONSIDERATION" shall have the meaning set forth in Section
3.1.3 hereof.
"OPTION PRICE" shall have the meaning set forth in Section 3.1.3
hereof.
"OPTIONS" shall mean options to purchase shares of Connecticut
Bancshares Common Stock granted pursuant to the Connecticut Bancshares Option
Plans as set forth in Section 4.1 of the Connecticut Bancshares Disclosure
Schedule.
"PARTICIPATION FACILITY" shall have the meaning set forth in Section
4.9.2 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"PER SHARE MERGER CONSIDERATION" shall have the meaning set forth in
Section 3.1 hereof.
"PLAN" shall have the meaning set forth in the recitals hereto.
"PROXY STATEMENT" shall have the meaning set forth in Section 8.2.1
hereof.
"PURCHASE PRICE ADJUSTMENT" means the amount, not less than zero, equal
to the Connecticut Bancshares Net Income for each full month after March 31,
2004 minus the amount of any cash dividends paid after March 31, 2004 on
Connecticut Bancshares Common Stock
A-9
64
which relates to Connecticut Bancshares Net Income earned after said date.
"RIGHTS" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments that obligate an
entity to issue or dispose of any of its capital stock or other ownership
interests or that provide for compensation based on the equity appreciation of
its capital stock.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITIES DOCUMENTS" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the SEC promulgated thereunder.
"SPECIAL PAYMENT" shall have the meaning set forth in Section 11.3.1
hereof.
"SPECIAL PAYMENT EVENT" shall have the meaning set forth in Section
11.3.1 hereof.
"STOCK EXCHANGE" shall mean the Nasdaq National Market.
"SUBSIDIARY" shall have the meaning set forth in Rule 1-02 of
Regulation S-X of the SEC.
"SUPERIOR PROPOSAL" shall have the meaning set forth in Section 6.10
hereof.
"SURVIVING BANK" shall mean NHSB as the resulting institution of the
Bank Merger.
"SURVIVING CORPORATION" shall have the meaning set forth in the
recitals hereof.
"TAX" shall have the meaning set forth in Section 4.10.6 hereof.
"TAX RETURN" shall have the meaning set forth in Section 4.10.6 hereof.
"TERMINATION DATE" shall mean October 15, 2004.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
A-10
65
ARTICLE II
THE MERGER AND THE CONVERSION
2.1 THE MERGER. As promptly as practicable following the satisfaction
----------
or waiver of the conditions to each party's respective obligations hereunder,
and subject to the terms and conditions of this Agreement, at the Effective Time
Interim shall merge with and into Connecticut Bancshares with Connecticut
Bancshares as the Surviving Corporation in accordance with the provisions of the
DGCL, simultaneously with or as soon as practicable after the Bank Merger, the
Surviving Corporation shall be merged with and liquidated into
NewAlliance Bancshares in accordance with a Plan of Liquidation, in the form
attached hereto as Exhibit A.
---------
At the Effective Time of the Merger, each share of Connecticut Bancshares Common
Stock and each Option will be converted into the right to receive the Merger
Consideration pursuant to the terms of Article III hereof.
2.2 THE BANK MERGER. The Bank Merger shall be consummated immediately
---------------
following the Merger in accordance with a Bank Merger Agreement substantially in
the form attached hereto as Exhibit A.
2.3 EFFECTIVE TIME. The Merger shall be effected by the filing of a
---------------
certificate of merger with the Delaware Office of the Secretary of State on the
day of the closing ("Closing Date"), in accordance with the DGCL (the
"Closing"). The "Effective Time" of the Merger shall be the date and time upon
which the certificate of merger as to the Merger is filed with the Delaware
Office of the Secretary of State, or as otherwise stated in such certificate of
merger.
2.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
-------------------------------------------
Incorporation and Bylaws of Connecticut Bancshares as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation until thereafter amended as provided therein
and by applicable law.
2.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The directors of
------------------------------------------------
the Surviving Corporation immediately after the Effective Time shall be the
directors of Interim immediately prior to the Effective Time, plus two (2)
directors of Connecticut Bancshares immediately prior to the Effective Time who
shall be selected by the Board of Directors of NewAlliance Bancshares in
accordance with the provisions of Section 7.10 hereof, each to meet the
qualifications of and hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of
NewAlliance Bancshares immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
2.6 DIRECTORS AND OFFICERS OF SURVIVING BANK. The directors of the
------------------------------------------
Surviving Bank immediately after the Effective Time shall be the directors of
NHSB prior to the Effective Time plus two (2) directors of SBM immediately prior
to the Effective Time who shall be selected by the Board of Directors of NHSB,
each to meet the qualifications of and hold office in accordance
A-11
66
with the Certificate of Incorporation and Bylaws of the Surviving Bank. The
officers of NHSB immediately prior to the Effective Time shall be the initial
officers of the Surviving Bank, in each case until their respective successors
are duly elected or appointed and qualified.
2.7 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
-------------------
Surviving Corporation or the Surviving Bank shall consider or be advised that
any further assignments or assurances in law or any other acts are necessary or
desirable (a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation or the Surviving Bank, title to and possession of any
property or right of Connecticut Bancshares (or SBM) acquired or to be acquired
by reason of, or as a result of, the Merger, or (b) otherwise to carry out the
purposes of this Agreement, Connecticut Bancshares, SBM and their officers and
directors shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such property or rights in
the Surviving Corporation or the Surviving Bank and otherwise to carry out the
purposes of this Agreement; and the officers and directors of the Surviving
Corporation and the Surviving Bank are fully authorized in the name of
Connecticut Bancshares, SBM or otherwise to take any and all such action.
2.8 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
---------------------
shall have the effects set forth in the DGCL with respect to Interim and
Connecticut Bancshares, and the Bank Merger shall have the effects set forth in
the Banking Law with respect to NHSB and SBM.
2.9 POSSIBLE ALTERNATIVE STRUCTURES. Notwithstanding anything to the
--------------------------------
contrary contained in this Agreement, prior to the Effective Time NHSB shall be
entitled to revise the structure of the Merger described in Section 2.1 hereof,
provided that (i) there are no adverse federal or state income tax consequences
to Connecticut Bancshares and its shareholders as a result of the modification;
(ii) the consideration to be paid to the holders of Connecticut Bancshares
Common Stock and Options under this Agreement is not thereby changed in kind or
value or reduced in amount; (iii) there are no adverse changes to the benefits
and other arrangements provided to or on behalf of Connecticut Bancshares'
directors, officers and other employees; and (iv) such modification will not
delay materially or jeopardize receipt of any required regulatory approvals or
non-objection of Governmental Entities. NHSB, Connecticut Bancshares and SBM
agree to amend this Agreement and any related documents appropriately in order
to reflect any such revised structure.
2.10 THE CONVERSION. Concurrently with the approval of this Agreement
--------------
by the Board of Directors of NHSB, the Board of Directors of NHSB shall adopt
the Plan pursuant to which, subject to the receipt of all necessary approvals
(including the approval of the Corporators and any others as set forth in
Section 9.1.1(ii) hereof), NHSB shall take all steps reasonably necessary to
convert from a mutual savings bank to a capital stock savings bank as part of a
transaction in which a holding company is organized to acquire upon issuance all
of the capital stock of the converted bank (the "Conversion").
A-12
67
ARTICLE III
CONVERSION OF SHARES AND OPTIONS
3.1 MERGER CONSIDERATION.
--------------------
3.1.1 At the Effective Time, by virtue of the Merger and
without any action on the part of NHSB, Connecticut Bancshares or the holders of
any of the shares of Connecticut Bancshares Common Stock, each share of
Connecticut Bancshares Common Stock issued and outstanding immediately prior to
the Effective Time (other than any shares to be cancelled pursuant to Section
3.1.2 hereof and any Dissenting Shares) shall be converted into the right to
receive a cash payment in an amount equal to $52.00 (the "Per Share Merger
Consideration"), provided, however, that in the event the Closing does not take
place on or prior to March 31, 2004, other than as the result of a breach of a
representation or warranty of Connecticut Bancshares (subject to the standard
set forth in Section 9.2.1 of this Agreement) or a breach by Connecticut
Bancshares of one or more covenants in this Agreement (subject to the standard
set forth in Section 9.2.2), which breach of representation, warranty or
covenant is the principal cause of the failure of the Closing to take place on
or before March 31, 2004, the Per Share Merger Consideration shall be increased
by the amount determined by dividing (x) the Purchase Price Adjustment by (y)
the sum of (i) the number of shares of Connecticut Bancshares Common Stock
issued and outstanding immediately prior to the Effective Date and (ii) the
number of shares of Connecticut Bancshares Common Stock which may be acquired
immediately prior to the Effective Date upon the exercise of the Options,
subject to Connecticut Bancshares providing to NHSB the following:
(a) as soon as reasonably practicable following the end of
each calendar month ending after March 31, 2004 preceding the
Closing, Connecticut Bancshares shall deliver to NHSB a
consolidated statement of operations for such calendar month
in form consistent with the determination of Connecticut
Bancshares Net Income as defined herein; and
(b) not later than five (5) Business Days prior to the Closing
Date, NHSB shall cause PricewaterhouseCoopers, LLP ("PwC"), or
another accounting firm reasonably acceptable to the parties,
to review and issue its report on the consolidated statement
of operations of Connecticut Bancshares for the period
beginning on April 1, 2004 and ending at the date of the last
of such statements of operations. Absent manifest error, such
report shall be binding on the parties for the purpose of
calculating the Purchase Price Adjustment. No partner or
manager of PwC who is involved in the audit engagement at NHSB
shall participate in the preparation or issuance of the
report.
3.1.2 Each share of Connecticut Bancshares Common Stock (i)
held in the treasury of Connecticut Bancshares, (ii) owned by NHSB, NewAlliance
Bancshares or any direct or indirect wholly owned subsidiary of NewAlliance
Bancshares or of Connecticut Bancshares immediately prior to the Effective Time
(other than shares held in a fiduciary capacity or in connection with debts
A-13
68
previously contracted), or (iii) reserved for issuance under the Connecticut
Bancshares Option Plans which has not been granted or allocated, shall, at the
Effective Time, cease to exist, and the certificates for such shares shall be
cancelled as promptly as practicable thereafter, and no payment or distribution
shall be made in consideration therefor.
3.1.3 Each Option issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof and without regard to any future vesting date
thereof, be cancelled and converted into the right to receive a cash payment in
an amount determined by multiplying (i) the positive difference, if any, between
the Per Share Merger Consideration, adjusted, if applicable, pursuant to Section
3.1.1 above, and the exercise price of such Option, for each share of
Connecticut Bancshares Common Stock covered by such Option (the "Option Price")
by (ii) the number of shares of Connecticut Bancshares Common Stock subject to
such Option (the "Option Consideration"). The payment of the Option
Consideration referred to in the immediately preceding sentence to each holder
of an Option shall be subject to such holder executing such instruments of
cancellation as NewAlliance Bancshares and Connecticut Bancshares may reasonably
deem appropriate. Connecticut Bancshares or SBM shall make necessary tax
withholdings from the Option Consideration as they deem appropriate.
3.1.4. At the Effective Time, each unvested restricted share
of Connecticut Bancshares Common Stock granted under the Connecticut Bancshares
Option Plans (each a "Company Restricted Share"), as set forth in Connecticut
Bancshares Disclosure Schedule Section 3.1.4, which is outstanding immediately
prior to the Effective Time shall vest and become free of restrictions to the
extent provided by the terms thereof. Each holder of a Company Restricted Share
shall have the same rights to receive the Merger Consideration as are provided
to other holders of Company Common Stock pursuant to Section 3.1.
3.2 DISSENTERS' RIGHTS.
------------------
3.2.1 Each outstanding share of Connecticut Bancshares Common
Stock the holder of which has perfected his right to dissent under the DGCL and
has not effectively withdrawn or lost such right as of the Effective Time (the
"Dissenting Shares") shall not be converted into or represent a right to receive
the Merger Consolidation hereunder, and the holder thereof shall be entitled
only to such rights as are granted by the DGCL. Connecticut Bancshares shall
give NHSB notice upon receipt by Connecticut Bancshares of any such demands for
payment of the fair value of such shares of Connecticut Bancshares Common Stock
and of withdrawals of such notice and any other instruments provided pursuant to
applicable law (any shareholder duly making such demand being hereinafter called
a "Dissenting Shareholder"), and NHSB shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Connecticut
Bancshares shall not, except with the prior written consent of NHSB, voluntarily
make any payment with respect to, or settle or offer to settle, any such demand
for payment, or waive any failure to timely deliver a written demand for
appraisal or the taking of any other action by such Dissenting Shareholder as
may be necessary to perfect appraisal rights under the DGCL. Any payments made
in respect of Dissenting Shares shall be made by NewAlliance Bancshares.
A-14
69
3.2.2 If any Dissenting Shareholder shall effectively withdraw
or lose (through failure to perfect or otherwise) his right to such fair value
payment at or prior to the Effective Time, such holder's shares of Connecticut
Bancshares Common Stock shall be converted into a right to receive the Merger
Consideration in accordance with the applicable provisions of this Agreement. If
such holder shall effectively withdraw or lose (through failure to perfect or
otherwise) his right to such fair value payment after the Effective Time, each
share of Connecticut Bancshares Common Stock of such holder shall be converted
into the right to receive the Merger Consideration.
3.2.3 After the Effective Time, shares of Connecticut
Bancshares Common Stock other than Dissenting Shares shall be no longer
outstanding and shall automatically be cancelled and shall cease to exist, and
shall thereafter by operation of this section be the right to receive the Merger
Consideration as set forth in Section 3.3.4.
3.3 PROCEDURES FOR EXCHANGE OF CONNECTICUT BANCSHARES COMMON STOCK
--------------------------------------------------------------
AND OPTIONS.
- -----------
3.3.1 NewAlliance Bancshares to Make Cash Available. Prior
----------------------------------------------
to the Effective Time, NHSB shall designate the Exchange Agent. NewAlliance
Bancshares shall take all steps necessary on or prior to Closing Date to deliver
to the Exchange Agent, for the benefit of the holders of shares of Connecticut
Bancshares Common Stock and Options, for exchange in accordance with this
Section 3.3, an amount of cash sufficient to pay the aggregate amount of cash
payable in accordance with Article III hereof (such cash for shares of
Connecticut Bancshares Common Stock and Options, together with any dividends or
distributions with respect thereto being hereinafter referred to as the
"Exchange Fund") to be paid in exchange for outstanding Connecticut Bancshares
Common Stock and Options in accordance with this Agreement.
3.3.2 Exchange of Certificates. Provided that Connecticut
-------------------------
Bancshares has delivered or caused to be delivered to the Exchange Agent all
information which is necessary for the Exchange Agent to perform its obligations
specified herein, NewAlliance Bancshares shall, within five (5) Business Days
after the Effective Time, take all steps necessary to cause the Exchange Agent
to mail to each holder of a Certificate or Certificates a form letter of
transmittal for return to the Exchange Agent and instructions for use in
effecting the surrender of the Certificates for cash into which the Connecticut
Bancshares Common Stock represented by such Certificates shall have been
converted as a result of the Merger. The letter of transmittal (which shall be
subject to the reasonable approval of Connecticut Bancshares) shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent. Upon
surrender of a Certificate for exchange and cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a check
representing the amount of cash that such holder has the right to receive in
respect of Certificates surrendered pursuant to the provisions of Section 3.1,
and the Certificates so surrendered shall forthwith be cancelled.
A-15
70
3.3.3 Payment of Option Price. At the Effective Time, if not
-----------------------
previously paid by Connecticut Bancshares immediately prior to the Effective
Time (to which NHSB has no objection), NewAlliance Bancshares shall take all
steps necessary to cause the Exchange Agent to issue and deliver within five (5)
Business Days a check representing the amount of the Option Price to the holders
of the Options, all of which shall have been cancelled in connection with the
Merger Agreement.
3.3.4 Rights of Certificate or Option Holders after the
-------------------------------------------------------
Effective Time. The holder of (i) a Certificate (other than a Certificate with
- --------------
respect to Dissenting Shares) that prior to the Merger represented issued and
outstanding Connecticut Bancshares Common Stock, or (ii) an Option shall have no
rights, after the Effective Time, with respect to such Connecticut Bancshares
Common Stock or Option except to surrender the Certificate and receive in
exchange for the Merger Consideration as provided in this Agreement.
3.3.5 Surrender by Persons Other than Record Holders. If the
-----------------------------------------------
Person surrendering a Certificate and signing the accompanying letter of
transmittal is not the record holder thereof, then it shall be a condition of
the payment of the Merger Consideration that: (i) such Certificate is properly
endorsed to such Person or is accompanied by appropriate stock powers, in either
case signed exactly as the name of the record holder appears on such
Certificate, and is otherwise in proper form for transfer, or is accompanied by
appropriate evidence of the authority of the Person surrendering such
Certificate and signing the letter of transmittal to do so on behalf of the
record holder; and (ii) the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
3.3.6 Closing of Transfer Books. From and after the Effective
-------------------------
Time, there shall be no transfers on the stock transfer books of Connecticut
Bancshares of the Connecticut Bancshares Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates representing such shares are presented for transfer to the Exchange
Agent, they shall be exchanged for the Merger Consideration and cancelled as
provided in this Section 3.3.
3.3.7 Return of Exchange Fund. At any time following the six
------------------------
(6) month period after the Effective Time, NewAlliance Bancshares shall be
entitled to require the Exchange Agent to deliver to it any portions of the
Exchange Fund that had been made available to the Exchange Agent and not
disbursed to holders of Certificates and Options (including, without limitation,
all interest and other income received by the Exchange Agent in respect of all
funds made available to it), and thereafter such holders shall be entitled to
look to NewAlliance Bancshares (subject to abandoned property, escheat and other
similar laws) with respect to any Merger Consideration that may be payable upon
due surrender of the Certificates or Options held by them. Notwithstanding the
foregoing, neither NHSB, NewAlliance Bancshares nor the Exchange Agent shall be
liable to any holder of a Certificate or Option for any Merger Consideration
delivered in respect of such Certificate or Option to a public official pursuant
to any abandoned property, escheat or other similar law.
A-16
71
3.3.8 Lost, Stolen or Destroyed Certificates. 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 NewAlliance Bancshares, the posting by
such person of a bond in such amount as NewAlliance Bancshares may reasonably
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration deliverable in respect
thereof.
3.3.9 Withholding. NewAlliance Bancshares or the Exchange
-----------
Agent will be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement or the transactions contemplated hereby to
any holder of Connecticut Bancshares Common Stock or Options such amounts as
NewAlliance Bancshares (or any Affiliate thereof) or the Exchange Agent are
required to deduct and withhold with respect to the making of such payment under
the Code, or any applicable provision of U.S. federal, state, local or non-U.S.
tax law. To the extent that such amounts are properly withheld by NewAlliance
Bancshares or the Exchange Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the Connecticut
Bancshares Common Stock or Options in respect of whom such deduction and
withholding were made by NewAlliance Bancshares or the Exchange Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
CONNECTICUT BANCSHARES AND SBM
Connecticut Bancshares and SBM represent and warrant to NHSB that the
statements contained in this Article IV are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article IV), except as set forth in the
Connecticut Bancshares Disclosure Schedule delivered by Connecticut Bancshares
to NHSB on the date hereof, and except as to any representation or warranty
which specifically relates to an earlier date. No representation or warranty of
Connecticut Bancshares or SBM contained herein shall be deemed untrue or
incorrect, and neither Connecticut Bancshares nor SBM shall be deemed to have
breached a representation or warranty, on account of the existence of any fact,
circumstance or event, unless, as a direct or indirect consequence of such fact,
circumstance or event, individually or taken together with all other facts,
circumstances or events inconsistent with any paragraph in this Article IV, as
applicable, there is reasonably likely to exist a Material Adverse Effect. The
mere inclusion of an item in the Connecticut Bancshares Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission by
Connecticut Bancshares that such item represents a material exception or fact,
event or circumstance or that, absent such inclusion in the Connecticut
Bancshares Disclosure Schedule, such item is or would be reasonably likely to
result in a Material Adverse Effect.
4.1 CAPITAL STRUCTURE. The authorized capital stock of Connecticut
------------------
Bancshares consists of 45,000,000 shares of common stock, par value $0.01 per
share, and 1,000,000 shares of preferred stock, par value $0.01 per share. As of
the date of this Agreement, 10,754,943
A-17
72
shares of Connecticut Bancshares Common Stock, including shares of Connecticut
Bancshares Common Stock issued subject to restrictions as to vesting pursuant to
the Connecticut Bancshares Option Plans, are issued and outstanding, 558,641
shares of Connecticut Bancshares Common Stock are directly or indirectly held by
Connecticut Bancshares as treasury stock, and no shares of Connecticut
Bancshares preferred stock, par value $0.01 per share, are issued or
outstanding. All outstanding shares of Connecticut Bancshares Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Connecticut Bancshares Common Stock has
been issued in violation of the preemptive rights of any person, firm or entity.
Except for the Connecticut Bancshares Option Plans pursuant to which there are
outstanding options to acquire 1,691,168 shares of Connecticut Bancshares Common
Stock, a schedule of which is set forth in Section 4.1 of the Connecticut
Bancshares Disclosure Schedule, there are no Rights authorized, issued or
outstanding with respect to or relating to the capital stock of Connecticut
Bancshares.
4.2 ORGANIZATION, STANDING AND AUTHORITY OF CONNECTICUT BANCSHARES.
-----------------------------------------------------------------
Connecticut Bancshares is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted, and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect. Connecticut Bancshares is duly registered as a
savings and loan holding company under the HOLA. Connecticut Bancshares has
heretofore delivered to NHSB and has included as Section 4.2 of the Connecticut
Bancshares Disclosure Schedule true, complete and correct copies of the
Certificate of Incorporation and Bylaws of Connecticut Bancshares as in effect
as of the date hereof.
4.3 OWNERSHIP OF CONNECTICUT BANCSHARES SUBSIDIARIES. Set forth in
---------------------------------------------------
Section 4.3 of the Connecticut Bancshares Disclosure Schedule is the name,
jurisdiction of incorporation and percentage ownership of each direct or
indirect Connecticut Bancshares Subsidiary. Except for (x) capital stock of the
Connecticut Bancshares Subsidiaries, (y) securities and other interests held in
a fiduciary capacity and beneficially owned by third parties or taken in
consideration of debts previously contracted, and (z) securities and other
interests which are set forth in the Connecticut Bancshares Disclosure Schedule,
Connecticut Bancshares does not own or have the right or obligation to acquire,
directly or indirectly, any outstanding capital stock or other voting securities
or ownership interests of any corporation, bank, savings association,
partnership, joint venture or other organization, other than investment
securities representing not more than five percent (5%) of the outstanding
capital stock of any entity. The outstanding shares of capital stock or other
ownership interests of each Connecticut Bancshares Subsidiary that are owned by
Connecticut Bancshares or any Connecticut Bancshares Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and are directly
or indirectly owned by Connecticut Bancshares free and clear of all liens,
claims, encumbrances, charges, pledges, restrictions or rights of third parties
of any kind whatsoever. No Rights are authorized, issued or outstanding with
respect to the capital stock or other ownership interests of any Connecticut
Bancshares Subsidiary and there are no agreements, understandings or commitments
relating to
A-18
73
the right of Connecticut Bancshares to vote or to dispose of such capital stock
or other ownership interests.
4.4 ORGANIZATION, STANDING AND AUTHORITY OF CONNECTICUT BANCSHARES
------------------------------------------------------------------
SUBSIDIARIES. Each Connecticut Bancshares Subsidiary is a savings bank,
- ------------
corporation or partnership duly organized, validly existing and in good standing
or legal existence, as appropriate, under the laws of the jurisdiction in which
it is organized. Each Connecticut Bancshares Subsidiary (i) has full power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and (ii) is duly licensed or qualified to do business
and is in good standing or legal existence, as appropriate, in each jurisdiction
in which its ownership or leasing of property or the conduct of its business
requires such qualification, except where the failure to be so licensed or
qualified would not have a Material Adverse Effect. Connecticut Bancshares is
authorized to own each Connecticut Bancshares Subsidiary under the HOLA. The
deposit accounts of SBM are insured by the FDIC through the BIF to the maximum
extent permitted by the FDIA. SBM has paid all premiums and assessments required
by the FDIC. Connecticut Bancshares has heretofore delivered or made available
to NHSB and has included as Section 4.4 of the Connecticut Bancshares Disclosure
Schedule true, complete and correct copies of the Certificate of Incorporation
and Bylaws of SBM and each other Connecticut Bancshares Subsidiary as in effect
as of the date hereof.
4.5 AUTHORIZED AND EFFECTIVE AGREEMENT.
----------------------------------
4.5.1 Each of Connecticut Bancshares and SBM has all requisite
corporate power and authority to enter into this Agreement and the Bank Merger
Agreement, as applicable, and (subject to receipt of all necessary governmental
approvals and the approval of Connecticut Bancshares' shareholders of this
Agreement) to perform all of its obligations under this Agreement and the Bank
Merger Agreement, as applicable. 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 authorized by all
necessary corporate action in respect thereof on the part of Connecticut
Bancshares and SBM, except for the approval of this Agreement by Connecticut
Bancshares' shareholders. This Agreement has been duly and validly executed and
delivered by Connecticut Bancshares and SBM and, assuming due authorization and
execution by NHSB, constitutes the legal, valid and binding obligations of
Connecticut Bancshares and SBM, enforceable against Connecticut Bancshares and
SBM in accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. The Bank Merger Agreement, upon execution and delivery by
SBM, will have been duly and validly executed and delivered by SBM and, assuming
due authorization and execution by NHSB, will constitute the legal, valid and
binding obligation of SBM, enforceable against SBM in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency, and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
4.5.2 Neither the execution and delivery of this Agreement by
Connecticut Bancshares or SBM, nor the execution and delivery of the Bank Merger
Agreement by SBM, nor
A-19
74
consummation of the transactions contemplated hereby or thereby, nor compliance
by Connecticut Bancshares and SBM with any of the provisions hereof or thereof
(i) does or will conflict with or result in a breach of any provisions of the
Certificate of Incorporation or Bylaws of Connecticut Bancshares or the
equivalent documents of any Connecticut Bancshares Subsidiary, (ii) violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Connecticut Bancshares
or any Connecticut Bancshares Subsidiary pursuant to, any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Connecticut Bancshares or any Connecticut
Bancshares Subsidiary is a party, or by which any of their respective properties
or assets may be bound or affected, or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Connecticut Bancshares or any
Connecticut Bancshares Subsidiary.
4.5.3 Except for (i) the filing of applications and notices
with, and the consents and approvals of, as applicable, the Bank Regulators,
(ii) the filing of the Proxy Statement with the SEC, (iii) the approval of this
Agreement by the requisite vote of the shareholders of Connecticut Bancshares,
(iv) the filing of the certificate of merger with respect to the merger of
Connecticut Bancshares with and into NewAlliance Bancshares with the Secretary
of State of the State of Delaware pursuant to the DGCL in connection with the
Merger, and (v) the filing of a copy of the Bank Merger Agreement and a copy of
the approval of the commissioner of the Connecticut Department of Banking with
the Connecticut Secretary of the State with respect to the Bank Merger, no
consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary on the part of Connecticut
Bancshares or SBM in connection with the execution and delivery by Connecticut
Bancshares and SBM of this Agreement, the execution and delivery by SBM of the
Bank Merger Agreement, the consummation of the Merger by Connecticut Bancshares,
and the consummation of the Bank Merger by SBM.
4.5.4 As of the date hereof, neither Connecticut Bancshares
nor SBM is aware of any reasons relating to Connecticut Bancshares or SBM
(including without limitation Community Reinvestment Act compliance) why all
consents and approvals shall not be procured from all regulatory agencies having
jurisdiction over the Merger or the Bank Merger as shall be necessary for (i)
consummation of the Merger and the Bank Merger, and (ii) the continuation by
NewAlliance Bancshares and NHSB after the Effective Time of the business of
Connecticut Bancshares and SBM as such business is carried on immediately prior
to the Effective Time, free of any conditions or requirements which, in the
reasonable opinion of Connecticut Bancshares, could have a Material Adverse
Effect on the business of Connecticut Bancshares or SBM.
4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS.
-------------------------------------------
4.6.1 Since March 31, 2000, Connecticut Bancshares has timely
filed with the SEC and the NASD all Securities Documents required by the
Securities Laws and such Securities Documents, as the same may have been
amended, complied as to form in all material respects with the Securities Laws
and did not contain any untrue statement of a material fact or
A-20
75
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
4.6.2 Since March 31, 2000, each of Connecticut Bancshares and
SBM, has duly filed with the Bank Regulators in correct form the reports
required to be filed under applicable laws and regulations and such reports were
complete and accurate in all material respects and in compliance in all material
respects with the requirements of applicable laws and regulations. In connection
with the most recent federal and state Bank Regulator examinations of
Connecticut Bancshares and SBM, neither Connecticut Bancshares nor SBM was
required to correct or change any action, procedure or proceeding which
Connecticut Bancshares or SBM believes has not been corrected or changed as
required as of the date hereof.
4.7 FINANCIAL STATEMENTS.
--------------------
4.7.1 Connecticut Bancshares has previously delivered or made
available to NHSB accurate and complete copies of the Connecticut Bancshares
Financial Statements which, in the case of audited Connecticut Bancshares
Financial Statements, are accompanied by the audit reports of its independent
public accountants. The Connecticut Bancshares Financial Statements referred to
herein, as well as the Connecticut Bancshares Financial Statements to be
delivered pursuant to Section 6.2 hereof, fairly present or will fairly present,
as the case may be, the consolidated financial condition of Connecticut
Bancshares as of the respective dates set forth therein, and the consolidated
results of operations, shareholders' equity and cash flows of Connecticut
Bancshares for the respective periods or as of the respective dates set forth
therein.
4.7.2 Each of the Connecticut Bancshares Financial Statements
referred to in Section 4.7.1 has been prepared in accordance with GAAP during
the periods involved, except as stated therein or, in the case of unaudited
interim Connecticut Bancshares Financial Statements, the absence of footnotes
and customary year-end adjustments. The audits of Connecticut Bancshares and
Connecticut Bancshares Subsidiaries have been conducted in accordance with
generally accepted auditing standards. The books and records of Connecticut
Bancshares and the Connecticut Bancshares Subsidiaries are being maintained in
compliance with applicable legal and accounting requirements, and such books and
records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of
Connecticut Bancshares and its Subsidiaries. The minute books of Connecticut
Bancshares and each Connecticut Bancshares Subsidiary contain complete and
accurate records of all meetings and other corporate actions of their respective
shareholders and Boards of Directors (including all committees) authorized at
such meetings held or taken since January 1, 2000 through the date of this
Agreement.
4.7.3 Except (i) as set forth in Section 4.7.3 of the
Connecticut Bancshares Disclosure Schedule, (ii) as reflected, disclosed or
provided for in the Connecticut Bancshares Financial Statements as of December
31, 2000, 2001 and 2002 (including related notes), (iii) for liabilities
incurred since December 31, 2002 in the ordinary course of business and (iv)
liabilities incurred in connection with this Agreement and the transactions
contemplated hereby, neither Connecticut Bancshares nor any Connecticut
Bancshares Subsidiary has any liabilities, whether
A-21
76
absolute, accrued, contingent or otherwise, material to the financial condition,
results of operations or business of Connecticut Bancshares on a consolidated
basis that would be required according to GAAP to be reflected on an audited
consolidated balance sheet of Connecticut Bancshares or the notes thereto.
4.8 MATERIAL ADVERSE CHANGE. Since January 1, 2003 to the date hereof
------------------------
(i) Connecticut Bancshares and each Connecticut Bancshares Subsidiary has
conducted its respective business in the ordinary and usual course (excluding
the incurrence of expenses in connection with this Agreement, and excluding the
transactions contemplated hereby), and (ii) no event has occurred or
circumstance arisen that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on Connecticut Bancshares.
4.9 ENVIRONMENTAL MATTERS.
---------------------
4.9.1 Except as set forth in Section 4.9.1 of the Connecticut
Bancshares Disclosure Schedule, with respect to Connecticut Bancshares and each
Connecticut Bancshares Subsidiary:
(a) To the best of Connecticut Bancshares' knowledge, each of
Connecticut Bancshares and the Connecticut Bancshares Subsidiaries, the
Participation Facilities, and the Loan Properties are, and at all times have
been, in compliance with, and are not in violation of or liable under, any
Environmental Laws;
(b) There is no (and to the best of Connecticut Bancshares'
knowledge there is no basis to expect any) suit, claim, action, demand,
executive or administrative order, directive, investigation or proceeding
pending and, to Connecticut Bancshares' knowledge, there is no such action
threatened, before any court, governmental agency or other forum against it or
any of the Connecticut Bancshares Subsidiaries or any Participation Facility (x)
for alleged noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (y) relating to the presence of or release (as
defined herein) into the environment of any Materials of Environmental Concern
(as defined herein), whether or not occurring at or on a site currently or
formerly owned, leased or operated by it or any of the Connecticut Bancshares
Subsidiaries or any Participation Facility or (z) with respect to any property
at or to which Material of Environmental Concern were generated, Landlord,
manufactured, refined, transported, transferred, imported, used, disposed,
treated, or processed by Connecticut Bancshares or any Connecticut Bancshares
Subsidiary or any Participation Facility or from which Materials of
Environmental Concern have been transported, treated, stored, handled,
transferred, disposed, recycled, or received;
(c) There is no (and to the best of Connecticut Bancshares'
knowledge there is no basis to expect any) suit, claim, action, demand,
executive or administrative order, directive, investigation or proceeding
pending and, to Connecticut Bancshares' knowledge, no such action is threatened
before any court, governmental agency or other forum relating to or against any
Loan Property (or Connecticut Bancshares or any of the Connecticut Bancshares
Subsidiaries in respect of such Loan Property) (x) relating to alleged
noncompliance (including by any
A-22
77
predecessor) with, or liability under, any Environmental Law or (y) relating to
the presence of or release into the environment of any Materials of
Environmental Concern;
(d) To the best of Connecticut Bancshares' knowledge, the real
properties, leasehold or other interest in real property currently or formerly
owned or operated by Connecticut Bancshares or any Connecticut Bancshares
Subsidiary (including, without limitation, soil, groundwater or surface water
on, under or geologically or hydrologically adjacent to the properties, and
buildings thereon) are not contaminated with and do not otherwise contain any
Materials of Environmental Concern;
(e) Neither Connecticut Bancshares nor any Connecticut
Bancshares Subsidiary has received (and to the best of Connecticut Bancshares'
knowledge there is no basis to expect any) any written notice, demand letter,
executive or administrative order, directive or request for information from any
federal, state, local or foreign governmental entity or any third party
indicating that it may be in violation of, or liable under, any Environmental
Law;
(f) To the best of Connecticut Bancshares' knowledge, there
are no underground storage tanks on, in or under any properties currently or
formerly owned or operated by Connecticut Bancshares or any of the Connecticut
Bancshares Subsidiaries or any Participation Facility, and no underground
storage tanks have been closed or removed from any properties currently or
formerly owned or operated by Connecticut Bancshares or any of the Connecticut
Bancshares Subsidiaries or any Participation Facility; and
(g) To the best of Connecticut Bancshares' knowledge, during
the period of (s) Connecticut Bancshares' or any of the Connecticut Bancshares
Subsidiaries' ownership or operation of any of their respective currently or
formerly owned or operated properties or (t) Connecticut Bancshares' or any of
the Connecticut Bancshares Subsidiaries' participation in the management of any
Participation Facility, there has been no contamination by or release of
Materials of Environmental Concern in, on, under or affecting such properties.
To the best of Connecticut Bancshares' knowledge, prior to the period of (x)
Connecticut Bancshares' or any of the Connecticut Bancshares Subsidiaries'
ownership or operation of any of their respective currently or formerly owned or
operated properties or (y) Connecticut Bancshares' or any of Connecticut
Bancshares Subsidiaries' participation in the management of any Participation
Facility, there was no contamination by or release of Materials of Environmental
Concern in, on, under or affecting such properties.
4.9.2 "Loan Property" means any property (including a
leasehold interest therein) in which the applicable party (or a Subsidiary of
it) currently holds a security interest or has held a security interest within
the past five (5) years. "Participation Facility" means any facility in which
the applicable party (or a Subsidiary of it) currently participates or formerly
participated in the management (including all property held as trustee or in any
other fiduciary capacity) and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
A-23
78
4.9.3 Except as set forth in Section 4.9.3 of the Connecticut
Bancshares Disclosure Schedule, Connecticut Bancshares does not possess and has
not conducted or arranged for the conduct of any environmental studies, reports,
analyses, tests or monitoring during the past ten (10) years with respect to any
properties currently or formerly owned or leased by Connecticut Bancshares or
any Connecticut Bancshares Subsidiary or any Participation Facility. Connecticut
Bancshares has delivered to NHSB true and complete copies and results of any and
all such schedules, reports, analyses, tests or monitoring.
4.9.4 To the best of Connecticut Bancshares' knowledge, except
as set forth in Section 4.9.4 of the Connecticut Bancshares Disclosure Schedule,
no real property currently or formerly owned or leased by Connecticut Bancshares
or any Connecticut Bancshares Subsidiary, no Loan Property, and no Participation
Facility meets the statutory criteria of an "Establishment" as such term is
defined pursuant to the Connecticut Transfer Act, Connecticut General Statutes
Section 22a-134 et seq. To the best of Connecticut Bancshares' knowledge, no
condition exists at any real property currently or formerly owned or leased by
Connecticut Bancshares or any Connecticut Bancshares Subsidiary, any Loan
Property or any Participation Facility that would require investigation,
remediation, or post-remediation or natural attenuation monitoring under the
Connecticut Department of Environmental Protection's Remediation Standard
Regulations, Regulations of Connecticut State Agencies Sections 22a-133k-1 et
seq.
4.10 TAX MATTERS.
-----------
4.10.1 Connecticut Bancshares and each Connecticut Bancshares
Subsidiary (taking into account any extension of time within which to file which
has not expired) has timely filed all Tax Returns required by applicable law to
be filed by them in respect of all applicable Taxes required to be paid through
the date hereof and will timely file any such Tax Returns required to be filed
prior to the Effective Time with respect to Taxes required to be paid through
the Effective Time. Connecticut Bancshares and each Connecticut Bancshares
Subsidiary have paid, or where payment is not required to have been made, have
set up an adequate reserve or accrual for the payment of, all Taxes required to
be paid in respect of the periods covered by such Tax Returns and, as of the
Effective Time, will have paid, or where payment is not required to have been
made, will have set up an adequate reserve or accrual for the payment of, all
Taxes for any subsequent periods ending on or prior to the Effective Time. To
the knowledge of each of Connecticut Bancshares and any Connecticut Bancshares
Subsidiary, neither Connecticut Bancshares nor any Connecticut Bancshares
Subsidiary will have any liability for any such Taxes in excess of the amounts
so paid or reserves or accruals so established. As of the date hereof, except as
disclosed in Section 4.10.1 of the Connecticut Bancshares Disclosure Schedule,
no audit, examination or deficiency or refund litigation with respect to any Tax
Returns filed by Connecticut Bancshares or any Connecticut Bancshares Subsidiary
is pending or, to the best of Connecticut Bancshares' knowledge, threatened and
to the best of Connecticut Bancshares' knowledge, there is no basis for any Tax
authority to assess any additional Taxes for any period for which Tax Returns
have been filed.
A-24
79
4.10.2 Connecticut Bancshares and each Connecticut Bancshares
Subsidiary has withheld and paid all Taxes required to be paid in connection
with amounts paid to any employee, independent contractor, creditor, stockholder
or other third party.
4.10.3 All Tax Returns filed by Connecticut Bancshares and its
Subsidiaries are complete and accurate in all material respects. Neither
Connecticut Bancshares nor any Connecticut Bancshares Subsidiary is delinquent
in the payment of any Tax, assessment or governmental charge, or has requested
any extension of time within which to file any Tax Returns in respect of any
fiscal year or portion thereof which have not since been filed. Except as set
forth in Section 4.10.3 of the Connecticut Bancshares Disclosure Schedule, the
Tax Returns of Connecticut Bancshares and its Subsidiaries have been examined by
the applicable tax authorities (or are closed to examination due to the
expiration of the applicable statute of limitations) and no deficiencies for any
Tax, assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against Connecticut Bancshares or any Connecticut
Bancshares Subsidiary as a result of such examinations or otherwise which have
not been settled and paid. Except as set forth in Section 4.10.3 of the
Connecticut Bancshares Disclosure Schedule, there are currently no agreements in
effect with respect to Connecticut Bancshares or any Connecticut Bancshares
Subsidiary to extend the period of limitations for the assessment or collection
of any Tax and no power of attorney has been granted by Connecticut Bancshares
and its Subsidiaries with respect to any Tax matter currently in force.
4.10.4 Except as set forth in Section 4.10.4 of the
Connecticut Bancshares Disclosure Schedule, neither Connecticut Bancshares nor
any Connecticut Bancshares Subsidiary has made any payments, is obligated to
make any payments, or is party to any agreement that could obligate them to make
any payments that will not be deductible under Section 280G of the Code.
4.10.5 Except as set forth in Section 4.10.5 of the
Connecticut Bancshares Disclosure Schedule, neither Connecticut Bancshares nor
any Connecticut Bancshares Subsidiary (i) is a party to any agreement providing
for the allocation or sharing of taxes (other than a tax allocation agreement
between Connecticut Bancshares and SBM), (ii) is required to include in income
any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by Connecticut Bancshares or any
Connecticut Bancshares Subsidiary (nor does Connecticut Bancshares have any
knowledge that the Internal Revenue Service has proposed any such adjustment or
change of accounting method) or (iii) has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply.
4.10.6 As used in this Agreement, "Tax" means any federal,
state, local or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, highway, estimated or other tax of any
kind whatsoever, including any interest, penalties or addition thereto, whether
disputed or not, imposed by any government or quasi-government authority; and
"Tax Return" means any
A-25
80
return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
4.11 LEGAL PROCEEDINGS. Except as set forth in Section 4.11 of the
------------------
Connecticut Bancshares Disclosure Schedule, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of Connecticut Bancshares or any Connecticut Bancshares Subsidiary,
threatened against Connecticut Bancshares or any Connecticut Bancshares
Subsidiary or against any asset, interest or right of Connecticut Bancshares or
any Connecticut Bancshares Subsidiary, or to the best of Connecticut Bancshares'
knowledge, against any officer, director or employee of any of them, and neither
Connecticut Bancshares nor any Connecticut Bancshares Subsidiary is a party to
any order, judgment or decree.
4.12 COMPLIANCE WITH LAWS.
--------------------
4.12.1 Each of Connecticut Bancshares and the Connecticut
Bancshares Subsidiaries has all material permits, licenses, certificates of
authority, orders and approvals of, and has made all filings, applications and
registrations with, federal, state, local and foreign governmental or regulatory
bodies that are required in order to permit it to carry on its business in all
material respects as it is currently being conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect; and to the best knowledge of Connecticut Bancshares, no suspension or
cancellation of any of the same is threatened.
4.12.2 Except as set forth in Section 4.12.2 of the
Connecticut Bancshares Disclosure Schedule, neither Connecticut Bancshares nor
any Connecticut Bancshares Subsidiary is in violation of its respective
Certificate of Incorporation, Charter or other chartering instrument or Bylaws,
or to the best of their knowledge, in violation of any applicable federal, state
or local law or ordinance or any order, rule or regulation of any federal,
state, local or other governmental agency or body (including, without
limitation, all banking (including without limitation all regulatory capital
requirements), municipal securities, insurance, safety, health, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency and, to the best knowledge of
Connecticut Bancshares, Connecticut Bancshares along with its executive officers
and directors is not in violation of any Securities Laws; and neither
Connecticut Bancshares nor any Connecticut Bancshares Subsidiary has received
any written notice or communication from any federal, state or local
governmental authority asserting that Connecticut Bancshares or any Connecticut
Bancshares Subsidiary is in violation of any of the foregoing, which violation
has not been corrected on a prospective basis in all material respects. Neither
Connecticut Bancshares nor any Connecticut Bancshares Subsidiary is subject to
any regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than those
of general applicability to all savings banks or holding companies), and none of
them has received any written communication requesting that it enter into any of
the foregoing. Since March 31, 2000, no regulatory agency has initiated any
proceeding or, to the best knowledge of Connecticut Bancshares, investigation
A-26
81
into the business or operations of Connecticut Bancshares or any Connecticut
Bancshares Subsidiary. Connecticut Bancshares has not received any objection
from any regulatory agency to Connecticut Bancshares' response to any violation,
criticism or exception with respect to any report or statement relating to any
examination of Connecticut Bancshares or any of the Connecticut Bancshares
Subsidiaries.
4.13 CERTAIN INFORMATION. None of the information supplied by
---------------------
Connecticut Bancshares or SBM relating to Connecticut Bancshares and its
Subsidiaries to be included or incorporated by reference in (i) the Conversion
Prospectus will, at the time such prospectus is mailed to subscribers (and at
the time the related Conversion Registration Statement becomes effective under
the Securities Act), contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the Proxy
Statement, as of the date(s) such Proxy Statement is mailed to shareholders of
Connecticut Bancshares, and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by Connecticut Bancshares to its shareholders in connection with the meeting of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder.
4.14 EMPLOYEE BENEFIT PLANS.
----------------------
4.14.1 Connecticut Bancshares has set forth in Section 4.14.1
of the Connecticut Bancshares Disclosure Schedule all Connecticut Bancshares
Employee Plans, and Connecticut Bancshares has previously furnished or made
available to NHSB accurate and complete copies of the same together with (i)
Schedule B forms and the actuarial and audited financial reports prepared with
respect to any qualified plans for the last three (3) plan years, (ii) the
annual reports filed with any governmental agency for any qualified or
non-qualified plans for the last three (3) plan years, (iii) the Summary Annual
Report provided to Participants for the last three (3) plan years; and (iv) all
rulings and determination letters and any open requests for rulings or letters
that pertain to any qualified plan.
4.14.2 None of Connecticut Bancshares, any Connecticut
Bancshares Subsidiary, any pension plan maintained by any of them and qualified
under Section 401 of the Code or, to the best of Connecticut Bancshares'
knowledge, any fiduciary of such plan has incurred any liability to the PBGC
(except for premiums payable in the ordinary course) or the Internal Revenue
Service with respect to any employees of Connecticut Bancshares or any
Connecticut Bancshares Subsidiary. No reportable event under Section 4043(b) of
ERISA has occurred with respect to any such pension plan, other than the
transactions contemplated by this Agreement.
A-27
82
4.14.3 Except as set forth in Section 4.14.3 of the
Connecticut Bancshares Disclosure Schedule: (a) neither Connecticut Bancshares
nor any Connecticut Bancshares Subsidiary participates in or has incurred any
liability under Section 4201 of ERISA for a complete or partial withdrawal from
a multi-employer plan (as such term is defined in ERISA); (b) no liability under
Title IV of ERISA has been incurred by Connecticut Bancshares or any Connecticut
Bancshares Subsidiary with respect to any Connecticut Bancshares Employee Plan
which is subject to Title IV of ERISA, or with respect to any "single-employer
plan" (as defined in Section 4001(a) of ERISA) ("Connecticut Bancshares Defined
Benefit Plan") currently or formerly maintained by Connecticut Bancshares or any
entity which is considered an affiliated employer with Connecticut Bancshares
under Section 4001(b) (1) of ERISA or Section 414 of the Code (an "ERISA
Affiliate") since the effective date of ERISA that has not been satisfied to the
extent required by ERISA from time to time; (c) no Connecticut Bancshares
Defined Benefit Plan had an "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, as of the last day of the end of
the most recent plan year ending prior to the date hereof that has not or will
not be funded within the time provided under Section 302(c) (10) of ERISA; (d)
the fair market value of the assets of each Connecticut Bancshares Defined
Benefit Plan exceeds the present value of the "benefit liabilities" (as defined
in Section 4001(a) (16) of ERISA) under such Connecticut Bancshares Defined
Benefit Plan as of the end of the most recent plan year with respect to the
respective Connecticut Bancshares Defined Benefit Plan ending prior to the date
hereof, calculated on the basis of the actuarial assumptions used in the most
recent actuarial valuation for such Connecticut Bancshares Defined Benefit Plan
as of the date hereof; (e) neither Connecticut Bancshares nor any ERISA
Affiliate has provided, or is required to provide, security to any Connecticut
Bancshares Defined Benefit Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a) (29) of the Code; (f) neither Connecticut
Bancshares nor any ERISA Affiliate has contributed to any "multiemployer plan,"
as defined in Section 3(37) of ERISA, on or after September 26, 1980; (g)
neither Connecticut Bancshares, nor any ERISA Affiliate, nor any Connecticut
Bancshares Employee Plan, including any Connecticut Bancshares Defined Benefit
Plan, nor any trust created thereunder has engaged in a transaction in
connection with which Connecticut Bancshares, any ERISA Affiliate, and any
Connecticut Bancshares Employee Plan, including any Connecticut Bancshares
Defined Benefit Plan, any such trust or any trustee or administrator thereof, is
subject to either a civil liability or penalty pursuant to Section 409, 502(i)
or 502(1) of ERISA or a tax imposed pursuant to Chapter 43 of the Code.
4.14.4 Except as set forth in Section 4.14.4 of the
Connecticut Bancshares Disclosure Schedule, a favorable determination letter has
been issued by the Internal Revenue Service, with respect to each Connecticut
Bancshares Employee Plan which is an "employee pension benefit plan" (as defined
in Section 3(2) of ERISA) (a "Connecticut Bancshares Pension Plan") which is
intended to qualify under Section 401 of the Code, to the effect that such plan
is qualified under Section 401 of the Code and the trust associated with such
employee pension plan is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of Connecticut Bancshares' knowledge, is
threatened to be revoked, and Connecticut Bancshares does not know of any ground
on which such revocation may be based. Except as set forth in Section 4.14.4 of
the Connecticut Bancshares Disclosure Schedule, neither Connecticut Bancshares
nor any Connecticut Bancshares Subsidiary has any current liability under any
such
A-28
83
plan that was required to be reflected as a liability on the Financial
Statements as of December 31, 2002 under GAAP, which was not reflected on the
consolidated statement of financial condition of Connecticut Bancshares at
December 31, 2002 included in the Connecticut Bancshares Financial Statements.
4.14.5 No prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt under Section 408
of ERISA or Section 4975 of the Code) has occurred with respect to any
Connecticut Bancshares Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax on Connecticut Bancshares under
Section 4975 of the Code.
4.14.6 Except as specifically identified in Section 4.14.6 of
the Connecticut Bancshares Disclosure Schedule, neither Connecticut Bancshares
nor any Connecticut Bancshares Subsidiary has any obligations for
post-retirement or post-employment benefits under any Connecticut Bancshares
Employee Plan that cannot be amended or terminated upon sixty (60) or fewer days
notice without incurring any liability thereunder, except for coverage required
by Part 6 of Title I of ERISA or Section 4980B of the Code, or similar state
law, the cost of which is borne by the insured individual. Full payment has been
made (or proper accruals have been established) of all contributions which are
required for periods prior to the date hereof, and full payment will be so made
(or proper accruals will be so established) of all contributions which are
required for periods after the date hereof and prior to the Effective Time,
under the terms of each Connecticut Bancshares Employee Plan or ERISA; no
accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Connecticut
Bancshares Pension Plan, and there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any Connecticut Bancshares
Pension Plan.
4.14.7 The Connecticut Bancshares Employee Plans have been
operated in compliance in all material respects with the applicable provisions
of ERISA, the Code, all regulations, rulings and announcements promulgated or
issued thereunder and all other applicable governmental laws and regulations.
4.14.8 There are no pending or, to the best knowledge of
Connecticut Bancshares, threatened claims (other than routine claims for
benefits) by, on behalf of or against any of the Connecticut Bancshares Employee
Plans or any trust related thereto or any fiduciary thereof.
4.14.9 Section 4.14.9 of the Connecticut Bancshares Disclosure
Schedule sets forth (i) the maximum amount that could be paid to each executive
officer of Connecticut Bancshares or any Connecticut Bancshares Subsidiary as a
result of the transactions contemplated by this Agreement under all employment,
severance, and termination agreements, other compensation arrangements and
Connecticut Bancshares Employee Plans currently in effect; and (ii) the
estimated "base amount" (as such term is defined in section 280G(b) (3) of the
Code) for each such individual calculated as of the date of this Agreement based
on estimated 2003 compensation.
A-29
84
4.14.10 Except as set forth in Section 4.14.10 of the
Connecticut Bancshares Disclosure Schedule, no compensation payable by
Connecticut Bancshares or any Connecticut Bancshares Subsidiary to any of their
employees under any Connecticut Bancshares Employee Plan (including by reason of
the transactions contemplated hereby) will be subject to disallowance under
Section 162(m) of the Code.
4.14.11 Except as set forth in Section 4.14.11 of the
Connecticut Bancshares Disclosure Schedule, with respect to any Connecticut
Bancshares Employee Plan which is an employee welfare benefit plan (within the
meaning of ERISA Section 3(1) (a "Connecticut Bancshares Welfare Plan"): (i)
each such Connecticut Bancshares Welfare Plan which is intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of the
Code meets such requirements; (ii) there is no disqualified benefit (as such
term is defined in Code Section 4976(b)) which would subject Connecticut
Bancshares to a tax under Code Section 4976(a); (iii) each and every Connecticut
Bancshares Welfare Plan which is a group health plan (as such term is defined in
Code Sections 5000(b)(1)) complies and in each and every case has complied with
the applicable requirements of Code Section 4980B; and (iv) each such
Connecticut Bancshares Welfare Plan (including any such plan covering former
employees of Connecticut Bancshares or any Connecticut Bancshares Subsidiary)
may be amended or terminated by Connecticut Bancshares or NHSB or NewAlliance
Bancshares on or at any time after the Effective Date without incurring
liability thereunder except as required to satisfy the terms of the Plan.
4.15 CERTAIN CONTRACTS.
-----------------
4.15.1 Neither Connecticut Bancshares nor any Connecticut
Bancshares Subsidiary is in default or non-compliance under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party or by which its assets, business or operations may be
bound or affected, whether entered into in the ordinary course of business or
otherwise and whether written or oral, and there has not occurred any event that
with the lapse of time or the giving of notice, or both, would constitute such a
default or non-compliance.
4.15.2 Except as set forth in Section 4.15.2 of the
Connecticut Bancshares Disclosure Schedule, neither Connecticut Bancshares nor
any Connecticut Bancshares Subsidiary is a party to, is bound or affected by,
receives, or is obligated to pay benefits under:
(a) any agreement, arrangement, policy or commitment,
including without limitation any agreement, indenture or other instrument,
relating to the borrowing of money by Connecticut Bancshares or any Connecticut
Bancshares Subsidiary (other than in the case of SBM deposits, Federal Reserve
or Federal Home Loan Bank advances, federal funds purchased and securities sold
under agreements to repurchase in the ordinary course of business) or the
guarantee by Connecticut Bancshares or any Connecticut Bancshares Subsidiary of
any obligation;
A-30
85
(b) any agreement, arrangement, policy or commitment relating
to the employment of a consultant or the employment, election or retention in
office of any present or former director, officer or employee of Connecticut
Bancshares or any Connecticut Bancshares Subsidiary;
(c) any agreement, arrangement, policy or understanding
pursuant to which any payment (whether of severance pay or otherwise) became or
may become due to any director, officer or employee of Connecticut Bancshares or
any Connecticut Bancshares Subsidiary upon execution of this Agreement or the
Bank Merger Agreement or upon or following consummation of the transactions
contemplated by this Agreement or the Bank Merger Agreement (either alone or in
connection with the occurrence of any additional acts or events);
(d) any agreement, arrangement, policy or understanding
pursuant to which Connecticut Bancshares or any Connecticut Bancshares
Subsidiary is obligated to indemnify any director, officer, employee or agent of
Connecticut Bancshares or any Connecticut Bancshares Subsidiary;
(e) any agreement, arrangement, policy or understanding to
which Connecticut Bancshares or any Connecticut Bancshares Subsidiary is a party
or by which any of the same is bound which limits the freedom of Connecticut
Bancshares or any Connecticut Bancshares Subsidiary to compete in any line of
business or with any person;
(f) any assistance agreement, supervisory agreement,
memorandum of understanding, consent order, cease and desist order or condition
of any regulatory order or decree with or by any Bank Regulator;
(g) any agreement (other than any agreement with a banking
customer for the provision of banking services entered into by any Connecticut
Bancshares Subsidiary in the ordinary course of business) that involves a
payment or series of payments of more than $50,000 in any one (1) year from or
to Connecticut Bancshares or any Connecticut Bancshares Subsidiary;
(h) any agreement, arrangement or understanding 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 or the Bank Merger 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 or the Bank Merger Agreement; or
(i) any other agreement, arrangement or understanding that
would be required to be filed as an exhibit to Connecticut Bancshares' Annual
Report on Form 10-K under the Exchange Act and which has not been so filed.
4.16 BROKERS AND FINDERS. Except as set forth in Section 4.16 of the
--------------------
Connecticut Bancshares Disclosure Schedule, neither Connecticut Bancshares nor
any Connecticut Bancshares Subsidiary nor any of their respective directors,
officers or employees, has employed
A-31
86
any broker or finder or incurred any liability for any broker or finder fees or
commissions in connection with the transactions contemplated hereby.
4.17 INSURANCE. Connecticut Bancshares and each Connecticut Bancshares
---------
Subsidiary are insured for reasonable amounts with reputable insurance companies
against such risks as management of Connecticut Bancshares and any Connecticut
Bancshares Subsidiary reasonably has determined to be prudent for companies
engaged in a similar business would, in accordance with good business practice,
customarily be insured and has maintained all insurance required by contracts
currently in effect and applicable laws and regulations. Section 4.17 of the
Connecticut Bancshares Disclosure Schedule sets forth all policies of insurance
maintained by Connecticut Bancshares or any Connecticut Bancshares Subsidiary as
of the date hereof and any claims thereunder in excess of $25,000 since March
31, 2000. Since April 1, 2000, neither Connecticut Bancshares nor any
Connecticut Bancshares Subsidiary has received any notice of termination of any
such insurance coverage or increase in the premiums therefor or has any reason
to believe that any such insurance coverage will be terminated or the premiums
therefor increased (except for increases in premiums in the ordinary course of
business).
4.18 PROPERTIES. Section 4.18 of the Connecticut Bancshares Disclosure
----------
Schedule sets forth the street address of all real property in which Connecticut
Bancshares or any Connecticut Bancshares Subsidiary has an ownership or
leasehold interest (specifying, as to each, whether owned or leased) and
identifies all properties on which any Connecticut Bancshares Subsidiary
operates a bank branch. All real and personal property owned by Connecticut
Bancshares or any Connecticut Bancshares Subsidiary or presently used by any of
them in its respective business are in good condition (ordinary wear and tear
excepted) and are sufficient to carry on its business in the ordinary course of
business consistent with their past practices. Each of Connecticut Bancshares
and each Connecticut Bancshares Subsidiary has good and marketable title free
and clear of all material liens, encumbrances, charges, defaults or equities
(other than equities of redemption under applicable foreclosure laws) to all of
the properties and assets, real and personal, reflected on the consolidated
statement of financial condition of Connecticut Bancshares contained in the
Connecticut Bancshares Financial Statements dated December 31, 2002 or acquired,
through merger or otherwise, after such date (other than those disposed of for
fair value after such date), except (i) liens for current taxes not yet due or
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent, and (iv) as reflected on the consolidated statement of financial
condition of Connecticut Bancshares contained in the Connecticut Bancshares
Financial Statements dated December 31, 2002. All real and personal property
leased or licensed by Connecticut Bancshares or any Connecticut Bancshares
Subsidiary are held pursuant to leases or licenses that are valid and
enforceable in accordance with their respective terms subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles, and no such real
property lease will terminate or lapse prior to the Effective Time, except as
disclosed in Section 4.18 of the Connecticut Bancshares Disclosure Schedule.
A-32
87
4.19 LABOR. No work stoppage involving Connecticut Bancshares or any
-----
Connecticut Bancshares Subsidiary is pending or, to the best knowledge of
Connecticut Bancshares, threatened. Neither Connecticut Bancshares nor any
Connecticut Bancshares Subsidiary is involved in, or to the best knowledge of
Connecticut Bancshares, threatened with or affected by, any labor dispute,
arbitration, lawsuit or administrative proceeding involving its employees.
Employees of Connecticut Bancshares and the Connecticut Bancshares Subsidiaries
are not represented by any labor union nor are any collective bargaining
agreements otherwise in effect with respect to such employees, and to the best
of Connecticut Bancshares' knowledge there have been no efforts to unionize or
organize any employees of Connecticut Bancshares or any Connecticut Bancshares
Subsidiary.
4.20 CERTAIN TRANSACTIONS. Since December 31, 2002, neither Connecticut
--------------------
Bancshares nor any Connecticut Bancshares Subsidiary has been a party to any
off-balance-sheet transactions involving interest rate and currency swaps,
options and futures contracts, or any other similar derivative transactions,
except as set forth in Section 4.20 of the Connecticut Bancshares Disclosure
Schedule.
4.21 FAIRNESS OPINION. Connecticut Bancshares has received an opinion
----------------
from Sandler O'Neill & Partners, L.P. to the effect that, subject to the terms,
conditions and qualifications set forth therein, as of the date thereof, the
Merger Consideration to be received by the shareholders of Connecticut
Bancshares pursuant to this Agreement is fair to such shareholders from a
financial point of view, and Sandler O'Neill & Partners, L.P. has consented to
the inclusion of such written opinion in the Proxy Statement.
4.22 LOAN PORTFOLIO.
--------------
4.22.1 The allowance for possible losses reflected in
Connecticut Bancshares' audited consolidated statement of financial condition
contained in the Connecticut Bancshares Financial Statements dated December 31,
2002 was, and the allowance for possible losses shown on the balance sheets in
Connecticut Bancshares' Securities Documents for dates after December 31, 2002
will be, adequate in all material respects, as of the dates thereof, under GAAP.
4.22.2 Section 4.22.2 of the Connecticut Bancshares Disclosure
Schedule sets forth a listing, as of June 30, 2003, by account, of: (A) all
loans, (1) that are contractually past due ninety (90) days or more in the
payment of principal and/or interest, (2) that are on non-accrual status, (3)
that as of the date of this Agreement are classified as "Impaired" (as
contemplated under FAS 114), "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Watch
list", or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such loan and the identity of the obligor
thereunder, (4) where a reasonable doubt exists as to the timely future
collectibility of principal and/or interest, whether or not interest is still
accruing or the loans are less than ninety (90) days past due, (5) where the
interest rate terms have been reduced and/or the maturity dates have been
extended subsequent to the agreement under which the loan was originally created
due to concerns regarding the borrower's ability to pay in accordance with such
initial terms, or (6) where a specific reserve allocation exists in connection
therewith, and
A-33
88
(B) all assets classified by Connecticut Bancshares or any
Connecticut Bancshares Subsidiary as real estate acquired through foreclosure or
in lieu of foreclosure, including in-substance foreclosures, and all other
assets currently held that were acquired through foreclosure or in lieu of
foreclosure.
4.22.3 All loans receivable (including discounts) and accrued
interest entered on the books of Connecticut Bancshares and the Connecticut
Bancshares Subsidiaries arose out of bona fide arm's-length transactions, were
---- ----
made for good and valuable consideration in the ordinary course of Connecticut
Bancshares' or the appropriate Connecticut Bancshares Subsidiary's respective
business, and the notes or other evidences of indebtedness with respect to such
loans (including discounts) are, in all material respects, valid, true and
genuine and are what they purport to be, except as set forth in Section 4.22.3
of the Connecticut Bancshares Disclosure Schedule. The loans, discounts and the
accrued interest reflected on the books of Connecticut Bancshares and the
Connecticut Bancshares Subsidiaries are subject to no defenses, set-offs or
counterclaims (including, without limitation, those afforded by usury or
truth-in-lending laws), except as may be provided by bankruptcy, insolvency or
similar laws affecting creditors' rights generally or by general principles of
equity. Except as set forth in Section 4.22.3 of the Connecticut Bancshares
Disclosure Schedule, all such loans are owned by Connecticut Bancshares or the
appropriate Connecticut Bancshares Subsidiary free and clear of any liens.
4.22.4 All pledges, mortgages, deeds of trust and other
collateral documents or security instruments relating to all notes or other
evidences of indebtedness referred to in Section 4.22.3 are, in all material
respects, valid, true and genuine, and what they purport to be.
4.23 REQUIRED VOTE; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES.
--------------------------------------------------------
4.23.1 The affirmative vote of the holders of a majority of
outstanding shares of Connecticut Bancshares Common Stock and entitled to vote
is necessary to approve this Agreement and the transactions contemplated hereby
(including the Bank Merger) on behalf of Connecticut Bancshares.
4.23.2 No "fair price," "moratorium," "control share
acquisition" or other form of anti-takeover statute or regulation or provision
of Connecticut Bancshares' Certificate of Incorporation or By-Laws is applicable
to this Agreement and the transactions contemplated hereby.
4.24 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as set forth in
----------------------------------------
Section 4.24 of the Connecticut Bancshares Disclosure Schedule, no officer or
director of Connecticut Bancshares or a Connecticut Bancshares Subsidiary, or
any "associate" (as such term is defined in Rule 14a-l under the Exchange Act)
of any such officer or director, (i) has any material interest in any contract
or property (real or personal), tangible or intangible, used in or pertaining to
the business of Connecticut Bancshares or any of the Connecticut Bancshares
Subsidiaries, or (ii) is indebted to, or has the right under a line of credit to
borrow from, Connecticut Bancshares or any Connecticut Bancshares Subsidiary.
A-34
89
4.25 JOINT VENTURES. Section 4.25 of the Connecticut Bancshares
---------------
Disclosure Schedule sets forth (i) the identities of all Joint Ventures in which
Connecticut Bancshares or any Connecticut Bancshares Subsidiary is
participating, (ii) a list of agreements relating to such Joint Ventures, (iii)
the identities of the other participants in the Joint Venture, (iv) the
percentage of the Joint Venture owned by each participant, (v) copies of the
most recent available financial statements (on an audited basis if available) of
such Joint Ventures, and (vi) the amount of the investment or contractually
binding commitment of Connecticut Bancshares or any Connecticut Bancshares
Subsidiary to invest in such Joint Venture.
4.26 INTELLECTUAL PROPERTY. Connecticut Bancshares and each Connecticut
---------------------
Bancshares Subsidiary own or possess valid and binding licenses and other rights
to use without payment of any material amount all material patents, trademarks,
trade names, service marks, copyrights and any applications therefor,
schematics, technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer programs and applications (in both source code and object
code form) and tangible and intangible proprietary information or material that
are used in their businesses ("Intellectual Property"), and all such
Intellectual Property is described in Section 4.26 of the Connecticut Bancshares
Disclosure Schedule. Neither Connecticut Bancshares nor any Connecticut
Bancshares Subsidiary has any material undisclosed liability with respect to (i)
the Intellectual Property or (ii) licenses, sublicenses and other agreements as
to which Connecticut Bancshares or any Connecticut Bancshares Subsidiary is a
party and pursuant to which Connecticut Bancshares or any Connecticut Bancshares
Subsidiary is authorized to use any third party patents, trademarks or
copyrights, including software which are incorporated in, or form a part of any
Connecticut Bancshares or any Connecticut Bancshares Subsidiary product.
4.27 DISCLOSURES. None of the representations and warranties of
-----------
Connecticut Bancshares and SBM or any of the written information or documents
furnished or to be furnished by Connecticut Bancshares or SBM to NHSB in
connection with or pursuant to this Agreement or the consummation of the
transactions contemplated hereby (including the Bank Merger), when considered as
a whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NHSB
NHSB represents and warrants to Connecticut Bancshares and SBM that the
statements contained in this Article V are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article V), except as set forth in the NHSB
Disclosure Schedule delivered by NHSB to Connecticut Bancshares on the date
hereof. Unless otherwise specified, any reference to NHSB in this Article V
shall include NewAlliance Bancshares and any direct or indirect Subsidiary of
NHSB. No representation or warranty of NHSB contained herein shall be deemed
untrue or incorrect, and NHSB shall not be deemed to
A-35
90
have breached a representation or warranty, on account of the existence of any
fact, circumstance or event, unless, as a direct or indirect consequence of such
fact, circumstance or event, individually or taken together with all other
facts, circumstances or events inconsistent with any paragraph in this Article
V, as applicable, there is reasonably likely to exist a Material Adverse Effect.
The mere inclusion of an item in the NHSB Disclosure Schedule as an exception to
a representation or warranty shall not be deemed an admission by NHSB that such
item represents a material exception or fact, event or circumstance or that,
absent such inclusion in the NHSB Disclosure Schedule, such item is or would be
reasonably likely to result in a Material Adverse Effect.
5.1 CAPITAL STRUCTURE. As of the date hereof, NHSB is a
-------------------
Connecticut-chartered savings bank in mutual form and, as a result, has no
authorized or outstanding capital stock. Upon consummation of the Conversion,
NHSB will be a duly organized Connecticut-chartered savings bank in stock form
and will have authorized capital stock as set forth in its Certificate of
Incorporation.
5.2 ORGANIZATION, STANDING AND AUTHORITY OF NHSB.
--------------------------------------------
5.2.1 NHSB is a mutual savings bank duly organized and in
legal existence under the laws of the State of Connecticut with full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and is duly licensed or qualified to do
business and is in good standing or legal existence, as appropriate, in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such licensing or qualification. The deposit accounts of NHSB
are insured by the FDIC through the BIF to the maximum extent permitted by the
FDIA. NHSB has paid all premiums and assessments required by the FDIC. NHSB has
heretofore delivered or made available to Connecticut Bancshares, true and
complete copies of the Certificate of Incorporation and Bylaws of NHSB as in
effect on the date hereof.
5.2.2 Prior to the filing of the Conversion Registration
Statement, NewAlliance Bancshares will be duly organized and validly existing
under the DGCL.
5.2.3 NHSB is a member in good standing of the Federal Home
Loan Bank of Boston and owns the requisite amount of stock therein.
5.3 AUTHORIZED AND EFFECTIVE AGREEMENT.
----------------------------------
5.3.1 NHSB has all requisite corporate power and authority to
enter into this Agreement and the Bank Merger Agreement and (subject to receipt
of all necessary governmental approvals and the approval of the Conversion
and/or the Plan by the Corporators) to perform all of its obligations under this
Agreement and the Bank Merger Agreement. 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
A-36
91
authorized by all necessary corporate action in respect thereof on the part of
NHSB except for approval of the Conversion and/or the Plan by the Corporators.
This Agreement has been duly and validly executed and delivered by NHSB and,
assuming due authorization, execution and delivery by Connecticut Bancshares and
SBM, constitutes the legal, valid and binding obligation of NHSB, enforceable
against NHSB in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles. The Bank Merger
Agreement, upon execution and delivery by NHSB, will have been duly and validly
executed and delivered by NHSB and, assuming due authorization, execution and
delivery by Connecticut Bancshares and SBM, constitutes the legal, valid and
binding obligation of NHSB, enforceable against NHSB in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
5.3.2 Neither the execution and delivery of this Agreement or
the Bank Merger Agreement, nor consummation of the transactions contemplated
hereby or thereby (including the Conversion) nor compliance by NHSB with any of
the provisions hereof or thereof (i) does or will conflict with or result in a
breach of any provisions of the Certificate of Incorporation or Bylaws of NHSB,
(ii) violate, conflict with or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of NHSB
pursuant to, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which NHSB is a
party, or by which any of its properties or assets may be bound or affected, or
(iii) subject to receipt of all required governmental, Corporator, and Board of
Director approvals, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to NHSB.
5.3.3 Except for (i) the filing of applications and notices
with, and the consents and approvals of, the applicable Bank Regulators, (ii)
the filing and effectiveness of the Conversion Registration Statement with the
SEC in connection with the Conversion, (iii) the approval of the Conversion
and/or the Plan by the requisite vote of the Corporators, (iv) the filing of a
certificate of merger with the Secretary of State of the State of Delaware
pursuant to the DGCL in connection with the Merger, (v) the filing of a copy of
the Bank Merger Agreement and the approval of the commissioner of the
Connecticut Department of Banking with the Connecticut Secretary of the State in
connection with the Bank Merger, and (vi) compliance with applicable state
securities or "blue sky" laws, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
on the part of NHSB in connection with the execution and delivery of this
Agreement or the Bank Merger Agreement, the consummation of the Merger by
NewAlliance Bancshares, and the consummation of the Bank Merger by NHSB.
5.3.4 As of the date hereof, NHSB is not aware of any reasons
relating to NHSB why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement and the Bank Merger Agreement as shall be necessary for
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreement.
A-37
92
5.4 FINANCIAL STATEMENTS.
--------------------
5.4.1 NHSB has previously made available to Connecticut
Bancshares the NHSB Financial Statements. The NHSB Financial Statements have
been prepared in accordance with GAAP and (including the related notes where
applicable) fairly present in each case in all material respects (subject in the
case of the unaudited interim statements to normal year-end adjustments) the
consolidated financial position, results of operations and cash flows of NHSB
and the NHSB Subsidiaries on a consolidated basis as of and for the respective
periods ending on the dates thereof, in accordance with GAAP during the periods
involved, except as indicated in the notes thereto.
5.4.2 At the date of each balance sheet included in the NHSB
Financial Statements, NHSB did not have any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued, contingent or otherwise)
of a type required to be reflected in such NHSB Financial Statements or in the
footnotes thereto which are not fully reflected or reserved against therein or
fully disclosed in a footnote thereto, except for liabilities, obligations and
loss contingencies which are not material individually or in the aggregate or
which are incurred in the ordinary course of business, consistent with past
practice, and except for liabilities, obligations and loss contingencies which
are within the subject matter of a specific representation and warranty herein
and subject, in the case of any unaudited statements, to normal, recurring audit
adjustments and the absence of footnotes.
5.5 MATERIAL ADVERSE CHANGE. Since March 31, 2003 to the date hereof
-------------------------
(i) NHSB has conducted its business in the ordinary and usual course (excluding
the incurrence of expenses in connection with this Agreement, and excluding the
incurrence of expenses in connection with the transactions contemplated hereby
and the transactions contemplated by or referred to in the Plan), and (ii) no
event has occurred or circumstance arisen that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
NHSB.
5.6 TAX MATTERS.
-----------
5.6.1 NHSB (taking into account any extension of time within
which to file which has not expired) has timely filed all Tax Returns required
by applicable law to be filed by it in respect of all applicable Taxes required
to be paid through the date hereof and will timely file any such Tax Returns
required to be filed prior to the Effective Time with respect to Taxes required
to be paid through the Effective Time. NHSB has paid, or where payment is not
required to have been made, has set up an adequate reserve or accrual for the
payment of, all Taxes required to be paid in respect of the periods covered by
such Tax Returns and, as of the Effective Time, will have paid, or where payment
is not required to have been made, will have set up an adequate reserve or
accrual for the payment of, all Taxes for any subsequent periods ending on or
prior to the Effective Time. To the knowledge of NHSB, NHSB will have no
liability for any such Taxes in excess of the amounts so paid or reserves or
accruals so established. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to any Tax Returns filed by NHSB is
pending or, to the best of NHSB's knowledge,
A-38
93
threatened and, to the best of NHSB's knowledge, there is no basis for any Tax
authority to assess any additional Taxes for any period for which Tax Returns
have been filed.
5.6.2 NHSB has withheld and paid all Taxes required to be paid
in connection with amounts paid to any employee, independent contractor,
creditor, stockholder or other third party.
5.6.3 All Tax Returns filed by NHSB are complete and accurate,
in all material respects. NHSB is not delinquent in the payment of any Tax,
assessment or governmental charge, or has requested any extension of time within
which to file any Tax Returns in respect of any fiscal year or portion thereof
which have not since been filed. Except as set forth in Section 5.6.3 of the
NHSB Disclosure Schedule, the Tax Returns of NHSB have been examined by the
applicable tax authorities (or are closed to examination due to the expiration
of the applicable statute of limitations) and no deficiencies for any Tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against NHSB as a result of such examinations or
otherwise which have not been settled and paid. There are currently no
agreements in effect with respect to NHSB to extend the period of limitations
for the assessment or collection of any Tax and no power of attorney has been
granted by NHSB with respect to any Tax matter currently in force.
5.6.4 Except as set forth in Section 5.6.4 of the NHSB
Disclosure Schedule, NHSB has made no payments, is obligated to make no
payments, and is party to no agreement that could obligate it to make any
payments that will not be deductible under Section 280G of the Code.
5.6.5 Except as set forth in Section 5.6.5 of the NHSB
Disclosure Schedule, NHSB (i) is not a party to any agreement providing for the
allocation or sharing of taxes, (ii) is not required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by NHSB (NHSB does not have any knowledge
that the Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has not filed a consent pursuant to Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply.
5.6.6 As used in this Agreement, "Tax" means any federal,
state, local or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, highway, estimated or other tax of any
kind whatsoever, including any interest, penalties or addition thereto, whether
disputed or not, imposed by any government or quasi-government authority; and
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
5.7 LEGAL PROCEEDINGS. Except as set forth in Section 5.7 of the NHSB
------------------
Disclosure Schedule, there are no actions, suits, claims, governmental
investigations or proceedings
A-39
94
instituted, pending or, to the best knowledge of NHSB, threatened against NHSB
or against any asset, interest or right of NHSB, or against any officer,
director or employee of any of them, and NHSB is not a party to any order,
judgment or decree.
5.8 COMPLIANCE WITH LAWS.
--------------------
5.8.1 NHSB has all material permits, licenses, certificates of
authority, orders and approvals of, and has made all filings, applications and
registrations with, federal, state, local and foreign governmental or regulatory
bodies that are required in order to permit it to carry on its business in all
material respects as it is currently being conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect; and to the best knowledge of NHSB, no suspension or cancellation of any
of the same is threatened.
5.8.2 Except as set forth in Section 5.8.2 of the NHSB
Disclosure Schedule, NHSB is not in violation of its respective Certificate of
Incorporation, Charter or other chartering instrument or Bylaws, or to its
knowledge, in violation of any applicable federal, state or local law or
ordinance or any order, rule or regulation of any federal, state, local or other
governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), municipal
securities, insurance, safety, health, zoning, anti-discrimination, antitrust,
and wage and hour laws, ordinances, orders, rules and regulations), or in
default with respect to any order, writ, injunction or decree of any court, or
in default under any order, license, regulation or demand of any governmental
agency and, to the best knowledge of NHSB along with its executive officers and
directors, is not in violation of any Securities Laws; and NHSB has not received
any written notice or communication from any federal, state or local
governmental authority asserting that NHSB is in violation of any of the
foregoing, which violation has not been corrected on a prospective basis in all
material respects. NHSB is not subject to any regulatory or supervisory cease
and desist order, agreement, written directive, memorandum of understanding or
written commitment (other than those of general applicability to all savings
banks), and it has not received any written communication requesting that it
enter into any of the foregoing. Since March 31, 2000, no regulatory agency has
initiated any proceeding or, to the best knowledge of NHSB, investigation into
the business or operations of NHSB. NHSB has not received any objection from any
regulatory agency to NHSB's response to any violation, criticism or exception
with respect to any report or statement relating to any examination of NHSB.
5.9 BROKERS AND FINDERS. Except as set forth in Section 5.9 of the NHSB
-------------------
Disclosure Schedule, neither NHSB nor any of its directors, officers or
employees, has employed any broker or finder or incurred any liability for any
broker or finder fees or commissions in connection with the transactions
contemplated hereby.
5.10 DISCLOSURES. None of the representations and warranties of NHSB or
-----------
any of the written information or documents furnished or to be furnished by NHSB
to Connecticut Bancshares in connection with or pursuant to this Agreement or
the consummation of the transactions contemplated hereby (including the Bank
Merger), when considered as a whole, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any
A-40
95
material fact required to be stated or necessary to make any such information or
document, in light of the circumstances, not misleading.
5.11 FINANCIAL ABILITY. On the Effective Date and through the date of
------------------
payment of the aggregate amount of cash payable pursuant to Article III hereof,
NHSB or NewAlliance Bancshares will have the funds necessary to consummate the
Merger and pay the aggregate amount of cash to be paid to holders of Connecticut
Bancshares Common Stock and Options pursuant to Section 3.3 hereof.
A-41
96
ARTICLE VI
COVENANTS OF CONNECTICUT BANCSHARES AND SBM
6.1 CONDUCT OF BUSINESS.
-------------------
6.1.1 Affirmative Covenants. Except with the written consent
----------------------
of NHSB, during the period from the date of this Agreement to the Effective
Time, Connecticut Bancshares will operate its business, and it will cause each
of the Connecticut Bancshares Subsidiaries to operate its business, only in the
usual, regular and ordinary course of business; use its reasonable best efforts
in good faith to preserve intact its business organization and assets, keep
available the present services of the employees, maintain its rights and
franchises, and preserve the goodwill of its customers and others with whom
business relationships exist; and voluntarily take no action which would or be
reasonably likely to (i) adversely affect the ability of Connecticut Bancshares
or SBM to obtain any necessary approvals of Governmental Entities required for
the transactions contemplated hereby or under the Bank Merger Agreement or
increase the period of time necessary to obtain such approvals, or (ii)
adversely affect its ability to perform its covenants and agreements under this
Agreement or the Bank Merger Agreement.
6.1.2 Negative Covenants. Connecticut Bancshares agrees that
------------------
from the date of this Agreement to the Effective Time, except as otherwise
specifically permitted or required by this Agreement and except to the extent
required by law or regulation or any Governmental Entity, or consented to by
NHSB in writing, Connecticut Bancshares will not, and will cause each of the
Connecticut Bancshares Subsidiaries not to:
(a) change or waive any provision of its Certificate of
Incorporation, Charter or Bylaws, except as required by law;
(b) change the number of shares of its authorized capital
stock;
(c) issue any capital stock or issue or grant any option,
restricted stock award, warrant, call, commitment, subscription, right to
purchase or agreement of any character relating to the authorized or issued
capital stock of Connecticut Bancshares or any of the Connecticut Bancshares
Subsidiaries, or any securities convertible into shares of such stock; except
that Connecticut Bancshares may issue shares of Connecticut Bancshares Common
Stock or permit treasury shares to become outstanding to satisfy currently
outstanding Company Restricted Stock awards or Options exercised prior to the
Effective Date under and in accordance with the terms of the Connecticut
Bancshares Option Plans described in Section 4.1 hereof;
(d) effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization, or redeem, repurchase or
otherwise acquire any shares of its capital stock;
(e) declare or pay any dividends or other distributions with
respect to its capital stock except for dividends paid by any Connecticut
Bancshares Subsidiary to Connecticut
A-42
97
Bancshares, and except for a quarterly cash dividend not to exceed $0.18 per
share through December 31, 2003 and $0.20 per share thereafter, with payment and
record dates consistent with past practice. The Board of Directors of
Connecticut Bancshares shall cause its last quarterly dividend record date prior
to the Effective Time to occur on the day immediately preceding the Effective
Date (the "Final Dividend Record Date") with the dividend amount to be
calculated as follows: the quotient of $0.80 divided by 365, multiplied by the
number of days between the Final Dividend Record Date and the record date of the
immediately preceding dividend paid by Connecticut Bancshares;
(f) enter into or terminate any material contract or agreement
(including without limitation any settlement agreement with respect to
litigation) except in the ordinary course of business or except as set forth in
Section 6.1.2(f) of the Connecticut Bancshares Disclosure Schedule;
(g) except in the ordinary course of business consistent with
past practice, incur any liabilities or obligations (excluding customer deposit
accounts and commercial "Bottom Line" repurchase agreements), whether directly
or by way of guaranty, including any obligation for borrowed money whether or
not evidenced by a note, bond, debenture or similar instrument other than
borrowings from the Federal Home Loan Bank of Boston reflected on the
Connecticut Bancshares Financial Statements as of June 30, 2003, plus five
percent (5%);
(h) make any capital expenditures in excess of $50,000
individually or $250,000 in the aggregate, except pursuant to binding
commitments existing on the date hereof and as set forth in Section 6.1.2(h) of
the Connecticut Bancshares Disclosure Schedule and except for expenditures
reasonable and necessary to maintain assets in good repair;
(i) except for commitments issued prior to the date of this
Agreement which have not yet expired and which have been disclosed in Section
6.1.2(i) of the Connecticut Bancshares Disclosure Schedule, and the renewal of
existing lines of credit, make any new loan or other credit facility commitment
or increase any loan or other credit facility commitment to any borrower or
group of affiliated borrowers in excess of the following limitations without
prior consultation with and approval from NHSB's Executive Vice President -
Business Banking (which approval shall not be unreasonably withheld and, if
granted, shall be granted in a timely manner):
(i) unsecured loan in excess of $500,000;
(ii) residential first mortgage loan in excess of
$1,000,000;
(iii) residential construction loan in excess of
$1,000,000;
(iv) commercial and industrial loan in excess of
$2,000,000;
(v) commercial real estate loan in excess of
$3,000,000;
(vi) commercial construction loan in excess of
$2,000,000;
(vii) consumer loan (including home equity loan) in
excess of $500,000;
(viii) residential development, acquisition, and
construction loan in excess of $4,000,000; and
A-43
98
(ix) loans of new monies to criticized borrowers or
borrowing relationships (unless the criticism has
been corrected at the time of advance) shall not
be made in any amount.
and, provided that, the outstanding balance of each of the following portfolios
shall not increase by more than the lesser of (A) fifteen percent (15%) or (B)
$10,000,000 over the balance of the respective portfolio at June 30, 2003,
without prior consultation with and approval from NHSB's Executive Vice
President - Business Banking (which approval shall not be unreasonably withheld
and, if granted, shall be granted in a timely manner):
(i) loans or other credit facility commitments to
condominium associations;
(ii) loans or other credit facility commitments to
finance personal property leases;
(iii) loans or other credit facility commitments with
respect to and/or secured by special use properties,
including without limitation, golf courses, motels,
hotels and the like; and
(iv) loans with respect to the construction of
residential or commercial property and secured by
same;
(j) (i) grant any increase in rates of compensation to its
non-officer employees other than in the ordinary course of business consistent
with past practice provided that no such increase shall result in an annual
adjustment of more than 4% without prior consultation with and approval from
NHSB; grant any increase in rates of compensation to, or pay or agree to pay any
bonus or severance to, or provide any other new employee benefit or incentive to
its directors or to its officers except for non-discretionary payments required
by agreements existing as of the date hereof and set forth on Schedule
6.1.2(j)(i) of the Connecticut Bancshares Disclosure Schedule without prior
consultation with and approval from NHSB; grant any increases in compensation or
bonuses to its non-officer employees other than in the ordinary course of
business consistent with past practice and other than cash bonuses that are
reasonable and necessary to compensate Connecticut Bancshares or SBM employees
in lieu of option grants between the date hereof through the Effective Date, in
consultation with the Chief Operating Officer of NHSB; enter into any
employment, severance or similar agreements or arrangements with any director or
employee; adopt or amend or terminate any employee benefit plan, pension plan or
incentive plan except as required by law or the terms of such plan or as
provided in Section 6.1.2(j)(i) of the Connecticut Bancshares Disclosure
Schedule, or permit the vesting of any material amount of benefits under any
such plan other than pursuant to the provisions thereof as in effect on the date
of this Agreement; or make any contributions to any Connecticut Bancshares
Employee Plan not in the ordinary course of business consistent with past
practice; or make any contributions to Connecticut Bancshares' Employee Stock
Ownership Plan (the "ESOP"), other than regular periodic contributions
sufficient to cover regularly scheduled debt service with respect to the ESOP,
with no prepayment thereof permitted; or
(ii) increase the number of (A) non-officer personnel
employed by Connecticut Bancshares or any Connecticut Bancshares Subsidiary over
the staffing level previously authorized as set forth in Section 6.1.2(j)(ii) of
the Connecticut Bancshares Disclosure
A-44
99
Schedule, or (B) officers employed by Connecticut Bancshares or any Connecticut
Bancshares Subsidiary over the number of such officers currently so employed,
without the prior consent of NHSB's Chief Operating Officer.
(k) make application for the opening or closing of any, or
open or close any, branch or automated banking facility, except that, with the
prior written consent of NHSB, it may proceed with negotiations for and the
opening of a branch at the location referred to in Section 6.1.2(k) of the
Connecticut Bancshares Disclosure Schedule;
(l) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings in the ordinary course of business consistent with
customary banking practices;
(m) subject to Section 6.10 hereof, merge into, consolidate
with, affiliate with, or be purchased or acquired by, any other Person, or
permit any other Person to be merged, consolidated or affiliated with it or be
purchased or acquired by it, or, except to realize upon collateral in the
ordinary course of its business, acquire a significant portion of the assets of
any other Person, or sell a significant portion of its assets;
(n) make any change in its accounting methods or practices,
except changes as may be required by GAAP or by law or regulatory requirements;
(o) enter into any off-balance sheet transaction involving
interest rate and currency swaps, options and futures contracts, or any other
similar derivative transactions other than to hedge forward loan sale
commitments in the ordinary course of business consistent with past practices;
(p) except for commitments outstanding as of June 30, 2003,
invest in or commit to invest in, or otherwise increase, decrease or alter its
investment in, any existing or new Joint Venture;
(q) except as set forth in Section 6.1.2(q) of the Connecticut
Bancshares Disclosure Schedule, make any material change in policies in
existence as of the date of this Agreement with regard to the extension of
credit, the establishment of reserves with respect to the possible loss thereon
or the charge off of losses incurred thereon, investment, asset/liability
management or other material banking policies, except as may be required by
changes in applicable law or regulations or by GAAP;
(r) waive, release, grant or transfer any rights of value or
modify or change any existing agreement or indebtedness to which Connecticut
Bancshares or any Connecticut Bancshares Subsidiary is a party, other than in
the ordinary course of business, consistent with past practice;
A-45
100
(s) purchase any debt securities below investment grade "A" or
any equity securities (other than index funds of no more than $5 million in the
aggregate), or purchase any security for its investment portfolio inconsistent
with Connecticut Bancshares' or any Connecticut Bancshares Subsidiary's current
investment policy, or otherwise take any action that would materially alter the
mix, maturity, credit or interest rate risk profile of its portfolio of
investment securities or its portfolio of collateralized mortgage obligations
(CMO) and mortgage-backed securities (MBS) (changes in mix, maturity or interest
rate risk profile arising from (a) sale of all or part of the equity securities
portfolio, (b) changes in open-market interest rates, or (c) changes in CMO/MBS
prepayment speeds are not subject to the limitations of this Section 6.1.2(s));
(t) enter into, renew, extend or modify any other transaction
with any Affiliate;
(u) except for the execution of this Agreement, and actions
taken or which will be taken in accordance with the provisions of this Agreement
and performance thereunder, take any action that would give rise to a right of
payment to any individual under any employment or severance agreement or similar
agreement;
(v) except for the execution of this Agreement, and actions
taken or which will be taken in accordance with the provisions of this
Agreement, take any action that would give rise to an acceleration of the right
to payment to any individual under any Connecticut Bancshares Employee Plan;
(w) without the prior consultation and consent of NHSB's
Executive Vice President - Business Banking, sell any participation interest in
any existing or newly originated loan other than as permitted under Section
6.1.2(i), or acquire a participation in any loan that would properly be included
in the Connecticut Bancshares Commercial and Industrial Loan Portfolio except as
set forth in and subject to the restrictions of Section 6.1.2(i) hereof;
(x) enter into any new or depart from any existing line of
business;
(y) materially increase or decrease the rate of interest paid
on time deposits or certificates of deposit, except in a manner and pursuant to
policies consistent with past practices;
(z) take any action that (i) would, or is reasonably likely
to, prevent or impede the Merger from qualifying as a qualified stock purchase
within the meaning of Section 338 of the Code or (ii) is intended or is
reasonably likely to result in (x) any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material respect at or
prior to the Effective Time, (y) any of the conditions to the Merger set forth
in Article IX not being satisfied or (z) a material violation of any provision
of this Agreement or the Bank Merger Agreement, except, in each case, as may be
required by applicable law or regulation; or
(aa) agree to do any of the foregoing.
A-46
101
6.2 CURRENT INFORMATION. During the period from the date of this
--------------------
Agreement to the Effective Time, Connecticut Bancshares will cause one or more
of its representatives to confer with representatives of NHSB and report on the
general status of its ongoing operations at such times as NHSB may reasonably
request, which reports shall include, but not be limited to, discussion of the
possible termination by Connecticut Bancshares or SBM of third-party service
provider arrangements effective at the Effective Time or at a date thereafter,
non-renewal of personal property leases and software licenses used by
Connecticut Bancshares or any of its Subsidiaries in connection with its systems
operations, retention of outside consultants and additional employees to assist
with the conversion, and outsourcing, as appropriate, of proprietary or
self-provided system services, it being understood that Connecticut Bancshares
shall not be obligated to take any such action prior to the Effective Time and,
unless Connecticut Bancshares otherwise agrees, no conversion shall take place
prior to the Effective Time. Connecticut Bancshares will promptly notify NHSB of
any material change from the normal course of the business of Connecticut
Bancshares or any Connecticut Bancshares Subsidiary or in the operation of the
properties of Connecticut Bancshares or any Connecticut Bancshares Subsidiary
and, to the extent permitted by applicable law, of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of litigation involving
Connecticut Bancshares or any Connecticut Bancshares Subsidiary. With respect to
such events, Connecticut Bancshares will also provide NHSB such information as
NHSB may reasonably request from time to time. Within twenty-five (25) days
after the end of each month, Connecticut Bancshares will deliver to NHSB an
unaudited consolidated balance sheet and an unaudited consolidated statement of
operations, without related notes, for such month prepared in accordance with
Connecticut Bancshares' current financial reporting practices.
6.3 ACCESS TO PROPERTIES AND RECORDS. In order to facilitate the
-----------------------------------
consummation of the Merger and the Bank Merger and the integration of the
business and operations of the parties, subject to Section 12.1 hereof and
subject to applicable laws relating to exchange of information, Connecticut
Bancshares will permit NHSB and its officers, employees, counsel, accountants
and other authorized representatives, access, upon reasonable notice, to its
personnel and properties and those of the Connecticut Bancshares Subsidiaries,
and shall disclose and make available to NHSB during normal business hours
throughout the period prior to the Effective Time all of the books, papers and
records of Connecticut Bancshares or any Connecticut Bancshares Subsidiary
relating to the assets, properties, operations, obligations and liabilities,
including, but not limited to, all books of account (including the general
ledger), tax records, minute books of directors' (other than minutes that
discuss any of the transactions contemplated by this Agreement or other
strategic alternatives) and shareholders' meetings, organizational documents,
Bylaws, material contracts and agreements, filings with any regulatory
authority, litigation files, plans affecting employees, and any other business
activities or prospects in which NHSB may have a reasonable interest; provided,
however, that Connecticut Bancshares shall not be required to take any action
that would provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights or business interests or
confidences of any customer or other person or would result in the waiver by it
of the privilege protecting communications between it and any of its counsel.
Connecticut Bancshares shall provide and shall request its auditors to provide
NHSB with such historical financial information regarding Connecticut Bancshares
and
A-47
102
any Connecticut Bancshares Subsidiary (and related audit reports and consents)
as NHSB may reasonably request for securities disclosure purposes. NHSB shall
use reasonable efforts to minimize any interference with Connecticut Bancshares'
and any Connecticut Bancshares Subsidiary's regular business operations during
any such access to Connecticut Bancshares' or any Connecticut Bancshares
Subsidiary's personnel, property, books or records. Connecticut Bancshares and
its Subsidiaries shall permit NHSB, at NHSB's expense, to cause so-called "Phase
I Environmental Site Assessments" and/or "Phase II Environmental Site
Assessments" to be performed at any physical location owned or operated by
Connecticut Bancshares or any Connecticut Bancshares Subsidiary and, to the
extent Connecticut Bancshares or the applicable Connecticut Bancshares
Subsidiary has the contractual right to do so, at any Loan Property or
Participation Facility.
6.4 FINANCIAL AND OTHER STATEMENTS.
------------------------------
6.4.1 Promptly upon receipt thereof, Connecticut Bancshares
will furnish to NHSB copies of each annual, interim or special audit of the
books of Connecticut Bancshares and the Connecticut Bancshares Subsidiaries made
by its independent accountants and/or its internal auditors and copies of all
internal control reports submitted to Connecticut Bancshares by such accountants
and/or internal auditors in connection with each annual, interim or special
audit of the financial statements of Connecticut Bancshares and the Connecticut
Bancshares Subsidiaries made by such accountants and/or internal auditors.
A-48
103
6.4.2 As soon as reasonably available, but in no event later
than the date such documents are filed with the SEC, Connecticut Bancshares will
deliver to NHSB any and all Securities Documents filed by it with the SEC under
the Securities Laws. As soon as practicable, Connecticut Bancshares will furnish
to NHSB copies of all such financial statements and reports as it or any
Connecticut Bancshares Subsidiary shall send to its shareholders, the FDIC, the
FRB, the Department or any other regulatory authority, except as legally
prohibited thereby.
6.4.3 Connecticut Bancshares will advise NHSB promptly of the
receipt of any examination report of any Bank Regulator with respect to the
condition or activities of Connecticut Bancshares or any of the Connecticut
Bancshares Subsidiaries.
6.4.4 Connecticut Bancshares will promptly furnish to NHSB
such additional financial data as NHSB may reasonably request, including without
limitation, detailed routine monthly loan reports and other reports that
Connecticut Bancshares routinely produces.
6.5 MAINTENANCE OF INSURANCE. Connecticut Bancshares shall maintain,
------------------------
and shall cause its Subsidiaries to maintain, such insurance in such amounts as
are reasonable to cover such risks management of Connecticut Bancshares and any
Connecticut Bancshares Subsidiary reasonably has determined to be prudent and as
are customary in relation to the character and location of its and their
respective properties and the nature of its and their respective businesses
consistent with past practices.
6.6 DISCLOSURE SUPPLEMENTS. From time to time prior to the Effective
-----------------------
Time, Connecticut Bancshares and SBM will promptly supplement or amend the
Connecticut Bancshares Disclosure Schedule delivered in connection herewith with
respect to any matter hereafter arising which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in such Connecticut Bancshares Disclosure Schedule or which is
necessary to correct any information in such Connecticut Bancshares Disclosure
Schedule which has been rendered materially inaccurate thereby. No supplement or
amendment to such Connecticut Bancshares Disclosure Schedule shall be deemed to
have modified the representation, warranties and covenants for the purpose of
determining satisfaction of the conditions set forth in Article IX.
6.7 CONSENTS AND APPROVALS OF THIRD PARTIES. Connecticut Bancshares
-----------------------------------------
shall use all reasonable best efforts in good faith to obtain as soon as
practicable all consents and approvals of any other persons necessary or
desirable for the consummation of the transactions contemplated by this
Agreement and the Bank Merger Agreement. Without limiting the generality of the
foregoing, Connecticut Bancshares shall utilize the services of a professional
proxy soliciting firm to help obtain the shareholder vote required to be
obtained by it hereunder.
6.8 REASONABLE BEST EFFORTS. Subject to the terms and conditions herein
-----------------------
provided, Connecticut Bancshares shall use its reasonable best efforts in good
faith to take, or cause to be taken, all action and to do, or cause to be done,
all things necessary, proper or advisable under
A-49
104
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and the Bank Merger Agreement.
6.9 FAILURE TO FULFILL CONDITIONS. In the event that Connecticut
--------------------------------
Bancshares determines that a condition to its obligation to complete the Merger
or the Bank Merger cannot be fulfilled and that it will not waive that
condition, it will immediately so notify NHSB.
6.10 ACQUISITION PROPOSALS. (a) From and after the date of this
----------------------
Agreement and until the termination of this Agreement, Connecticut Bancshares
agrees that neither it nor any of Connecticut Bancshares' Subsidiaries shall,
and that it shall direct and use its reasonable best efforts in good faith to
cause its and each such Subsidiary's directors, officers, employees, agents and
representatives not to, directly or indirectly, initiate, solicit, knowingly
encourage or otherwise facilitate any inquiries or the making of any proposal or
offer with respect to an Acquisition Proposal. Connecticut Bancshares further
agrees that neither it nor any of its Subsidiaries shall, and that it shall
direct and use its reasonable best efforts in good faith to cause its and each
such Subsidiary's directors, officers, employees, agents and representatives not
to, directly or indirectly, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
Person relating to an Acquisition Proposal, or otherwise knowingly facilitate
any effort or attempt to make or implement an Acquisition Proposal; provided,
however, that nothing contained in this Agreement shall prevent Connecticut
Bancshares or its Board of Directors from (A) complying with its disclosure
obligations under federal or state law; (B) providing information in response to
a request therefore by a Person who has made an unsolicited bona fide written
Acquisition Proposal if the Connecticut Bancshares Board of Directors receives
from the Person so requesting such information an executed confidentiality
agreement substantially similar to that entered into with NHSB; (C) engaging in
any negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal or (D) recommending such an Acquisition
Proposal to the shareholders of Connecticut Bancshares, if and only to the
extent that, in each such case referred to in clause (B), (C) or (D) above, (i)
the Connecticut Bancshares Board of Directors determines in good faith (after
consultation with outside legal counsel) that such action would be required in
order for its directors to comply with their respective fiduciary duties under
applicable law, and (ii) the Connecticut Bancshares Board of Directors
determines in good faith (after consultation with its financial advisor) that
such Acquisition Proposal, if accepted, is at least as reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposal and the Person making the proposal and, if consummated, would
result in a transaction more favorable to the Connecticut Bancshares'
shareholders from a financial point of view than the Merger. An Acquisition
Proposal which is received and considered by Connecticut Bancshares in
compliance with this Section 6.10 and which meets the requirements set forth in
clause (D) of the preceding sentence is herein referred to as a "Superior
Proposal." Connecticut Bancshares agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposals.
Connecticut Bancshares agrees that it will notify NHSB immediately if any such
inquiries, proposals or offers are received by, any such information is
requested from, or any such discussions or negotiations are sought to be
initiated or continued with Connecticut Bancshares or any of its representatives
after the date hereof, and
A-50
105
the identity of the person making such inquiry, proposal or offer and the
substance thereof and will keep NHSB informed of any material developments with
respect thereto immediately upon the occurrence thereof.
(b) In the event that the Board of Directors of Connecticut Bancshares
determines in good faith, after consultation with its financial advisor and upon
advice from outside counsel, that it desires to accept a Superior Proposal, it
shall notify NHSB in writing of its intent to terminate this Agreement in order
to enter into an acquisition agreement with respect to, or recommend acceptance
of, the Superior Proposal. Such notice shall specify all of the material terms
and conditions of such Superior Proposal and identify the Person making such
Superior Proposal. NHSB shall have five Business Days to evaluate and respond to
Connecticut Bancshares' notice. If NHSB notifies Connecticut Bancshares in
writing prior to the expiration of the five Business Day period provided above
that it shall increase the Merger Consideration to an amount at least equal to
that of such Superior Proposal (the "NHSB Proposal"), then Connecticut
Bancshares shall not be permitted to enter into an acquisition agreement with
respect to, or permit its Board to recommend acceptance to its shareholders of,
such Superior Proposal. Such notice by NHSB shall specify the new Merger
Consideration. Connecticut Bancshares shall have five Business Days to evaluate
the NHSB Proposal.
(c) In the event the Superior Proposal involves consideration to Connecticut
Bancshares' shareholders consisting of securities, in whole or in part, a NHSB
Proposal shall be deemed to be at least equal to the Superior Proposal, if the
NHSB Proposal offers Merger Consideration that equals or exceeds the
consideration being offered to Connecticut Bancshares' shareholders in the
Superior Proposal valuing any securities forming a part of the Superior Proposal
at its cash equivalent based upon (a) the average trading price of such
securities for the 10 trading days immediately preceding the date of the NHSB
Proposal, or (b) the written valuation of such securities by a nationally
recognized investment banking firm selected if such securities are not traded on
a nationally recognized exchange or will be newly issued securities that are not
of a class then trading on a nationally recognized exchange. Any written
valuation shall be attached as an exhibit to the NHSB Proposal.
(d) In the event that the Board of Directors Connecticut Bancshares determines
in good faith, upon the advice of its financial advisor and outside counsel,
that the NHSB Proposal is not at least equal to the Superior Proposal,
Connecticut Bancshares can terminate this Agreement in order to execute an
acquisition agreement with respect to, or to allow its Board to adopt a
resolution recommending acceptance to Connecticut Bancshares' shareholders of,
the Superior Proposal as provided in Section 11.1.10.
6.11 BOARD OF DIRECTORS AND COMMITTEE MEETINGS. Connecticut Bancshares
-----------------------------------------
shall provide to NHSB (a) notice of any and all regular meetings of the Board of
Directors of Connecticut Bancshares or SBM, which notice shall be no less timely
than the notice required to be provided to Connecticut Bancshares' or SBM's
directors, and (b) at such time as customarily provided to Connecticut
Bancshares' and SBM's directors, copies of all written materials (i)
accompanying any such notices, (ii) presented to the participants of any and all
such meetings, and (iii) copies of drafts of meeting minutes and credit
memoranda produced with respect to such
A-51
106
meeting excluding, however, any materials pertaining to NHSB, the transactions
contemplated by this Agreement, and any third party proposal to acquire a
controlling interest in Connecticut Bancshares or SBM.
6.12 RESERVES AND MERGER-RELATED COSTS. On or before the Effective
-----------------------------------
Time, Connecticut Bancshares shall use its reasonable best efforts in good faith
to establish such additional accruals and reserves as may be necessary to
conform the accounting reserve practices and methods (including credit loss
practices and methods) of Connecticut Bancshares and SBM to those of NHSB (as
such practices and methods are to be applied to Connecticut Bancshares and SBM
from and after the Closing Date) and NHSB's plans with respect to the conduct of
the business of Connecticut Bancshares and SBM following the Merger and
otherwise to reflect Merger-related expenses and costs incurred by Connecticut
Bancshares, provided, however, that Connecticut Bancshares shall not be required
to take such action unless NHSB agrees in writing that all conditions to Closing
set forth in Article IX have been satisfied or waived (including the expiration
of any applicable waiting periods but excluding the delivery of certificates and
other documents to be delivered at the Closing); prior to the delivery by NHSB
of the writing referred to in the preceding clause, Connecticut Bancshares
shall, upon NHSB's request, provide NHSB a written statement that the
representation made in Section 4.22.1, hereof with respect to Connecticut
Bancshares' allowance for possible loan losses is true as of such date or,
alternatively, setting forth in detail the circumstances that prevent such
representation from being true as of such date; and no accrual or reserve made
by Connecticut Bancshares or any Connecticut Bancshares Subsidiary pursuant to
this subsection, or any litigation or regulatory proceeding arising out of any
such accrual or reserve, shall constitute a breach of this Agreement within the
meaning of Section 11.1.2 hereof. No action shall be required to be taken by
Connecticut Bancshares pursuant to this Section 6.12 if, in the opinion of
Connecticut Bancshares' independent auditors, such action would contravene GAAP.
6.13 TRANSACTION EXPENSES OF CONNECTICUT BANCSHARES.
----------------------------------------------
6.13.1 For planning purposes, Connecticut Bancshares shall,
within thirty (30) days from the date hereof, provide NHSB with Connecticut
Bancshares' estimated budget of transaction-related expenses reasonably
anticipated to be payable by Connecticut Bancshares in connection with this
transaction, including the fees and expenses of counsel, accountants, investment
bankers and other professionals. Connecticut Bancshares shall promptly notify
NHSB if or when it determines that it expects to exceed its budget.
6.13.2 Promptly after the execution of this Agreement,
Connecticut Bancshares shall ask all of its attorneys and other professionals to
render current and correct invoices for all unbilled time and disbursements.
Connecticut Bancshares shall accrue and/or pay all of such amounts that are
actually due and owing as soon as possible.
6.13.3 Connecticut Bancshares shall advise NHSB monthly of all
out-of-pocket expenses that Connecticut Bancshares has incurred in connection
with the transactions contemplated by this Agreement (including the Bank
Merger).
A-52
107
ARTICLE VII
COVENANTS OF NHSB
7.1 DISCLOSURE SUPPLEMENTS. From time to time prior to the Effective
-----------------------
Time, NHSB will promptly supplement or amend the NHSB Disclosure Schedule
delivered in connection herewith with respect to any material matter hereafter
arising which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such NHSB Disclosure
Schedule or which is necessary to correct any information in such NHSB
Disclosure Schedule which has been rendered inaccurate thereby. No supplement or
amendment to such NHSB Disclosure Schedule shall have any effect for the purpose
of determining satisfaction of the conditions set forth in Article IX.
7.2 CONSENTS AND APPROVALS OF THIRD PARTIES. NHSB shall use all
-------------------------------------------
reasonable best efforts in good faith to obtain as soon as practicable all
consents and approvals of any other Persons, including the Corporators,
necessary or desirable for the consummation of the transactions contemplated by
this Agreement and the Bank Merger Agreement, including the Conversion.
7.3 REASONABLE BEST EFFORTS. Subject to the terms and conditions herein
-----------------------
provided, NHSB agrees to use its reasonable best efforts in good faith to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Bank Merger Agreement, including the Conversion. It is NHSB's intention
that the Closing shall occur as soon as practicable following the consummation
of the Conversion.
7.4 FAILURE TO FULFILL CONDITIONS. In the event that NHSB determines
------------------------------
that a condition to its obligation to complete the Merger or the Bank Merger
Agreement cannot be fulfilled and that it will not waive that condition, it will
immediately so notify Connecticut Bancshares.
7.5 NEWALLIANCE BANCSHARES ORGANIZATIONAL DOCUMENTS. Prior to the filing
-----------------------------------------------
of the Conversion Registration Statement, NewAlliance Bancshares will be a
corporation duly organized and in good standing or legal existence, as
appropriate, under the laws of the jurisdiction in which it is organized with
full corporate power and authority to own or lease all of its properties and
assets and to carry on its business as then conducted and shall be duly licensed
or qualified to do business and be in good standing or legal existence, as
appropriate, in each jurisdiction in which its ownership or leasing of property
or the conduct of its business requires such licensing or qualification.
Promptly following the organization of NewAlliance Bancshares, the Board of
Directors thereof shall approve this Agreement and the transactions contemplated
hereby, and NHSB shall cause NewAlliance Bancshares to execute and deliver an
appropriate instrument of accession to this Agreement, whereupon NewAlliance
Bancshares shall become a party to, and be bound by, this Agreement. On the
Effective Date, NewAlliance Bancshares will be a bank holding company under the
BHCA.
A-53
108
7.6 EMPLOYEES AND EMPLOYEE BENEFITS.
-------------------------------
7.6.1 NHSB anticipates employing substantially all branch
office customer service employees of SBM and such other employees of SBM as NHSB
shall reasonably require for the conduct of NHSB's business following the
Effective Time. NHSB may, after consultation with SBM, pay a retention bonus to
certain key employees in an amount to be determined by NHSB in its sole
discretion, in the event such employee remains in the employ of Connecticut
Bancshares or SBM through the Effective Time and is an employee of NHSB or
NewAlliance Bancshares for a period of time to be negotiated between NHSB and
each such key employee. Each SBM employee whose employment is terminated at the
Effective Time shall be eligible to receive COBRA health care continuation
benefits as required by law.
7.6.2 Each employee of SBM who remains employed by
NewAlliance Bancshares or NHSB following the Effective Time (each, a "Continuing
Employee") shall be entitled to participate in (i) such of the employee benefit
plans, deferred compensation arrangements, bonus or incentive plans and other
compensation and benefit plans that NewAlliance Bancshares or NHSB may continue
for the benefit of Continuing Employees following the Effective Time and (ii)
whatever employee benefit plans and other compensation and benefit plans that
NewAlliance Bancshares or a NewAlliance Bancshares Subsidiary may maintain for
the benefit of its similarly situated employees on an equitably equivalent
basis, if such Continuing Employee is not otherwise then participating in a
similar plan. The parties hereto acknowledge that Continuing Employees shall be
eligible to participate in any stock option plan or employee stock ownership
plan implemented by NewAlliance Bancshares after the Effective Time based upon
the same criteria as other employees of NHSB or NewAlliance Bancshares.
Continuing Employees shall be eligible to receive credit for service with
Connecticut Bancshares and the Connecticut Bancshares Subsidiaries under any
existing NHSB employee plan, NHSB benefit plan or NHSB personnel policy in which
such employees would be eligible to enroll or participate for purposes of
determining eligibility to participate and vesting therein but not for purposes
of calculating benefits thereunder; provided, however, that such service shall
not be recognized to the extent that such recognition would result in a
duplication of benefits. Each Continuing Employee shall be credited with service
as an SBM employee for purposes of determining their status under NHSB's
policies with respect to vacation, sick and other leave. With respect to the
NHSB defined benefit pension plan, each Continuing Employee shall be credited
with service as an SBM employee for purposes of determining eligibility under
the early retirement, normal retirement and disability provisions of such plan.
With respect to any NHSB plan which is a health, life or disability insurance
plan, each Continuing Employee shall not be subject to any pre-existing
condition limitation for conditions covered under such plans and each such plan
which provides health insurance benefits shall honor any deductible and
out-of-pocket expenses incurred under any comparable SBM plan for the year in
which the Effective Time occurs. Nothing herein shall limit the ability of NHSB
or NewAlliance Bancshares to amend or terminate any of the Connecticut
Bancshares Employee Plans in accordance with their terms at any time. NHSB shall
consult with Connecticut Bancshares prior to the Effective Time as to the
advisability of outplacement assistance for any Continuing Employee whose
employment is terminated within six months of the Effective Date. The structure
of such assistance will be in the sole discretion of NHSB, at a cost not to
exceed $30,000.
A-54
109
7.6.3 Section 7.6.3 of the Connecticut Bancshares Disclosure
Schedule contains all employment and change of control, severance and similar
agreements, arrangements, policies or programs with any employee or director of
Connecticut Bancshares or any Connecticut Bancshares Subsidiary ("Benefit
Agreements"). At and following the Effective Time, NHSB and NewAlliance
Bancshares shall honor, and the Surviving Corporation shall continue to be
obligated to perform, in accordance with their terms, all benefit obligations of
Connecticut Bancshares existing as of the Effective Time under the Benefit
Agreements other than those employment agreements, change in control agreements
and supplemental executive retirement plans covered by the Termination and
Release Agreements referenced in Section 7.6.5 hereof. NHSB acknowledges (i)
that the consummation of the Merger will constitute a "change-in-control" of
Connecticut Bancshares for purposes of any of the Benefit Agreements of
Connecticut Bancshares (except where otherwise set forth in Section 7.6.3 of the
Connecticut Bancshares Disclosure Schedule). Any employee of Connecticut
Bancshares or any of its Subsidiaries who is a party to an agreement (excluding
the employment agreements, change in control agreements and supplemental
retirement agreements covered by the Termination and Release Agreements
referenced in Section 7.6.5 hereof) which has been set forth in Section 7.6.3 of
the Connecticut Bancshares Disclosure Schedule (the "Executive Agreements") who
becomes entitled to benefits thereunder shall be entitled to receive the cash
and other benefits payable or provided under such agreement; provided, however,
that the employee executes and delivers to NHSB an instrument in form and
substance satisfactory to NHSB releasing NHSB and its affiliates from any
further liability for monetary payments under such agreement. Connecticut
Bancshares represents and warrants that the amounts set forth in Section 7.6.3
of the Connecticut Bancshares Disclosure Schedule (A) have been calculated in a
manner consistent with, and according to, the provisions of the Executive
Agreements (copies of which have been furnished by Connecticut Bancshares to
NHSB) and (B) represent good faith estimates of the amounts payable as of the
future date specified therein based upon assumptions regarding interest rates,
compensation or the assumed Closing Date, which have been set forth in Section
7.6.3 of the Connecticut Bancshares Disclosure Schedule, and (ii) the amounts
payable under such Executive Agreements will not exceed, individually or in the
aggregate, the amounts set forth in Section 7.6.3 of the Connecticut Bancshares
Disclosure Schedule (except to the extent that any good faith estimates set
forth in Section 7.6.3 of Connecticut Bancshares's Disclosure Schedule change
due to changes in interest rates or the assumed Closing Date). To the extent
that an employee of Connecticut Bancshares or any of its Subsidiaries is
entitled to the continued receipt of health insurance, life insurance,
disability insurance, automobile allowance or other similar fringe benefits
pursuant to an Executive Agreement, and such employee becomes a director,
officer, employee or consultant of NewAlliance Bancshares or any of its
Subsidiaries following the Effective Time and as a result becomes entitled to
receive the same fringe benefits in his or her capacity as a director, officer,
employee or consultant of NewAlliance Bancshares or any of its Subsidiaries,
then the fringe benefits provided to such person shall be deemed to be provided
in connection with such person's service as a director, officer, employee or
consultant of NewAlliance Bancshares or any of its Subsidiaries for so long as
such person serves in such capacity and shall be in lieu of, and not in addition
to (and for the sole purpose to avoid duplication of benefits), the same fringe
benefits that would have otherwise been provided pursuant to the Executive
Agreement.
A-55
110
7.6.4 The ESOP shall be terminated as of the Effective Time
(all shares held by the ESOP shall be converted into the right to receive the
Merger Consideration), all outstanding ESOP indebtedness shall be repaid as of
the Effective Time, and the balance remaining with respect to unallocated shares
held by the ESOP prior to the Effective Time shall be allocated and distributed
to the ESOP participants (subject to the receipt of a determination letter from
the IRS), as provided for in the ESOP and unless otherwise required by
applicable law. As soon as practicable after the date hereof, Connecticut
Bancshares shall file a request for a determination letter from the IRS
regarding the continued qualified status of the ESOP upon its termination. Prior
to the Effective Time, Connecticut Bancshares and, following the Effective Time,
NHSB shall use their respective reasonable best efforts in good faith to obtain
such favorable determination letter (including, but not limited to, making such
changes to the ESOP and the proposed allocations described herein as may be
requested by the IRS as a condition to its issuance of a favorable determination
letter). NHSB and NewAlliance Bancshares will adopt such additional amendments
to the ESOP as may be reasonably required by the IRS subsequent to the Effective
Time as a condition to granting such favorable determination and termination
letters provided that such amendments do not substantially change the terms
outlined herein or would result in an additional material liability to NHSB or
NewAlliance Bancshares. Neither Connecticut Bancshares nor NHSB shall make any
distribution from the ESOP except as may be required by applicable law until
receipt of such favorable determination letter.
7.6.5 Concurrently with the execution of this Agreement by the
parties hereto, (i) each of Richard P. Meduski, Charles L. Pike, Douglas K.
Anderson, Roger A. Sommerville and SBM, Connecticut Bancshares and NHSB shall
enter into a Termination and Release Agreement substantially in the form of
Exhibit D-1 hereto, (ii) each of Nancy A. Elliott, Harry S. Gaucher, III, John
H. Hamby, Michael J. Hartl, Dale B. Lynch, Christopher Martin, Patricia
McLaughlin, Brian A. Orenstein, John F. Smith, William T. Thomas, Joyce R.
Trainer, Carol L. Yungk and SBM, Connecticut Bancshares and NHSB shall enter
into a Termination and Release Agreement substantially in the form of Exhibit
D-2, and (iii) each of Richard P. Meduski, Charles L. Pike, Douglas K. Anderson,
Roger A. Sommerville shall enter into a Noncompetition Agreement substantially
in the form of Exhibit E hereto.
---------
7.7 DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE.
----------------------------------------------------
7.7.1 NHSB shall maintain, and/or shall cause
NewAlliance Bancshares to maintain, in effect for six (6) years following the
Effective Time, the current directors' and officers' liability insurance
policies maintained by Connecticut Bancshares and the Connecticut Bancshares
Subsidiaries (provided, that NHSB may substitute therefor policies of at least
the same coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall NHSB be required to expend in the
aggregate pursuant to this Section 7.7.1 more than 150% of the annual cost
currently expended by Connecticut Bancshares with respect to such insurance. In
connection with the foregoing, Connecticut Bancshares agrees to provide such
insurer or substitute insurer with such representations as such insurer may
request with respect to the reporting of any prior claims.
A-56
111
7.7.2 From and after the Effective Time, NHSB shall, and/or
shall cause NewAlliance Bancshares or the appropriate NewAlliance Bancshares
Subsidiary to, indemnify, defend and hold harmless each person who is now, or
who has been at any time before the date hereof or who becomes before the
Effective Time, an officer, director or employee of Connecticut Bancshares or
SBM (the "Indemnified Parties") against all losses, claims, damages, costs,
expenses (including reasonable attorney's fees), liabilities or judgments or
amounts that are paid in settlement (which settlement shall require the prior
written consent of NewAlliance Bancshares, which consent shall not be
unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, investigative or
administrative (each a "Claim"), in which an Indemnified Party is, or is
threatened to be made, a party or witness in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer
or employee of Connecticut Bancshares or a Connecticut Bancshares Subsidiary if
such Claim pertains to any matter of fact arising, existing or occurring at or
before the Effective Time (including, without limitation, the Merger and the
other transactions contemplated hereby), regardless of whether such Claim is
asserted or claimed before, or after, the Effective Time (the "Indemnified
Liabilities"), to the fullest extent permitted under applicable state or federal
law and under Connecticut Bancshares' Certificate of Incorporation and Bylaws.
NewAlliance Bancshares shall pay expenses in advance of the final disposition of
any such action or proceeding to each Indemnified Party to the full extent
permitted by applicable state or federal law upon receipt of an undertaking to
repay such advance payments if he or she shall be adjudicated or determined not
to be entitled to indemnification in the manner set forth below. Any Indemnified
Party wishing to claim indemnification under this Section 7.7.2 upon learning of
any Claim, shall notify NewAlliance Bancshares (but the failure so to notify
NewAlliance Bancshares shall not relieve it from any liability which it may have
under this Section 7.7.2, except to the extent such failure prejudices
NewAlliance Bancshares) and shall deliver to NewAlliance Bancshares the
undertaking referred to in the previous sentence. In the event of any such Claim
(whether arising before or after the Effective Time) (1) NewAlliance Bancshares
shall have the right to assume the defense thereof (in which event the
Indemnified Parties will cooperate in the defense of any such matter) and upon
such assumption NewAlliance Bancshares 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 NewAlliance Bancshares elects not to assume such defense, or counsel for
the Indemnified Parties reasonably advises the Indemnified Parties that there
are or may be (whether or not any have yet actually arisen) issues which raise
conflicts of interest between NewAlliance Bancshares and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them, and NewAlliance Bancshares shall pay the reasonable fees and expenses of
such counsel for the Indemnified Parties, (2) NewAlliance Bancshares shall be
obligated pursuant to this paragraph to pay for only one (1) firm of counsel for
all Indemnified Parties whose reasonable fees and expenses shall be paid
promptly as statements are received unless there is a conflict of interest that
necessitates more than one (1) law firm, (3) NewAlliance Bancshares shall not be
liable for any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld), and (4) no Indemnified Party shall
be entitled to indemnification hereunder with respect to a matter as to which
(x) he shall have been adjudicated in any proceeding not to have acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of Connecticut Bancshares or any Connecticut Bancshares
Subsidiary, or (y) in the event that a proceeding is compromised or settled so
as to impose any liability or obligation upon an Indemnified Party, if there is
a determination that with respect to said matter said Indemnified Party
A-57
112
did not act in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of Connecticut Bancshares or any Connecticut
Bancshares Subsidiary. The determination shall be made by a majority vote of a
quorum consisting of the Directors of NewAlliance Bancshares who are not
involved in such proceeding.
7.7.3 If NHSB, NewAlliance Bancshares or any of their
successors or assigns shall consolidate with or merge into any other entity and
shall not be the continuing or surviving entity of such consolidation or merger
or shall transfer all or substantially all of its assets to any other entity,
then in each case, proper provision shall be made so that the successors and
assigns of NHSB and NewAlliance Bancshares shall assume the obligations set
forth in this Section 7.7.
7.7.4 NHSB shall honor and/or shall cause NewAlliance
Bancshares to honor Connecticut Bancshares' "Directors' Consultation Plan" as it
exists as of the date hereof.
7.8 CONNECTICUT BANCSHARES MAIN OFFICE. NHSB shall occupy, or cause a
-----------------------------------
third party to occupy, the Connecticut Bancshares main office building located
at 923 Main Street, Manchester, Connecticut 06045 for a period of twenty-four
(24) months after the Effective Date.
7.9 CHARITABLE FOUNDATION. NHSB acknowledges and agrees that SBM
----------------------
Charitable Foundation, Inc., the charitable foundation affiliated with
Connecticut Bancshares, is in existence and will continue to be operated for the
benefit of Connecticut Bancshares' community, notwithstanding that it is NHSB's
intention that The New Haven Savings Bank Foundation, Inc., the charitable
foundation affiliated with NHSB and/or a new charitable foundation to be
established in connection with the Conversion, may at some time subsequent to
the Effective Date, service each of Connecticut Bancshares' and NHSB's
respective communities.
7.10 DIRECTORSHIPS. On or prior to the Effective Time, each of NHSB and
-------------
NewAlliance Bancshares agrees to take all action necessary (i) to increase the
size of their respective Boards of Directors, if necessary, to accommodate the
appointment and election of, and (ii) to appoint or elect, effective as of the
Effective Time, two (2) non-employee directors of Connecticut Bancshares as of
the date hereof who are designated by NHSB and NewAlliance Bancshares.
7.11 MAINTENANCE OF SBM LIQUIDATION ACCOUNT. NHSB shall take all action
--------------------------------------
as of the Effective Time to comply with the requirements of Section
36-142m-10(c) of the Regulations of the Department.
ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1 CONNECTICUT BANCSHARES SPECIAL MEETING.
--------------------------------------
A-58
113
Connecticut Bancshares will, in accordance with applicable law and
Connecticut Bancshares' Certificate of Incorporation and Bylaws, (i) as promptly
as reasonably practicable take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders (the "Connecticut Bancshares
Shareholders Meeting") for the purpose of approving the transactions
contemplated by this Agreement, and for such other purposes as may be, in
Connecticut Bancshares' and NHSB's reasonable judgment, necessary or desirable,
(ii) subject to the fiduciary responsibility of the Board of Directors of
Connecticut Bancshares as advised by counsel, recommend to its shareholders the
approval of the aforementioned matters to be submitted by it to its shareholders
and oppose any third party proposal or other action that is inconsistent with
this Agreement or the consummation of the transactions contemplated herein
(including the Bank Merger), and (iii) cooperate and consult with NHSB with
respect to each of the foregoing matters. Except with the prior approval of
NHSB, no other matters shall be submitted for approval of the Connecticut
Bancshares shareholders at the Connecticut Bancshares Shareholders Meeting.
8.2 PROXY STATEMENT.
---------------
8.2.1 For the purposes of holding the Connecticut Bancshares
Shareholders Meeting, Connecticut Bancshares shall draft and prepare, and NHSB
shall cooperate in the preparation of, a proxy statement or statements
satisfying all applicable requirements of the Exchange Act and the rules and
regulations thereunder (such proxy statement in the form mailed by Connecticut
Bancshares to the Connecticut Bancshares shareholders, together with any and all
amendments or supplements thereto, being herein referred to as the "Proxy
Statement"). Connecticut Bancshares shall file the Proxy Statement with the SEC
in accordance with its Regulation 14A under the Exchange Act. Connecticut
Bancshares shall upon expiration of the period of time within which the SEC may
comment on the preliminary Proxy Statement, thereafter promptly mail the Proxy
Statement to its shareholders.
8.2.2 NHSB shall provide Connecticut Bancshares with any
information concerning NHSB that Connecticut Bancshares may reasonably request
in connection with the drafting and preparation of the Proxy Statement, and
Connecticut Bancshares shall notify NHSB promptly of the receipt of any comments
of the SEC with respect to the Proxy Statement and of any requests by the SEC
for any amendment or supplement thereto or for additional information and shall
provide to NHSB promptly copies of all correspondence between Connecticut
Bancshares or any of its representatives and the SEC. Connecticut Bancshares
shall give NHSB and its counsel the opportunity to review and comment on the
Proxy Statement prior to its being filed with the SEC and shall give NHSB and
its counsel the opportunity to review and comment on all amendments and
supplements to the Proxy Statement and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the SEC. Each of NHSB and Connecticut Bancshares agrees to use all reasonable
efforts, after consultation with the other party hereto, to respond promptly to
all such comments of and requests by the SEC and to cause the Proxy Statement
and all required amendments and supplements thereto to be mailed to the holders
of Connecticut Bancshares Common Stock entitled to vote at the Connecticut
Bancshares Shareholders Meeting at the earliest practicable time.
A-59
114
8.2.3 NHSB and Connecticut Bancshares each shall promptly
notify the other party if at any time either of them, respectively, becomes
aware that the Proxy Statement contains any untrue statement of a material fact
or omits to state a material fact about themselves required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. In such event, NHSB
shall cooperate with Connecticut Bancshares in the preparation of a supplement
or amendment to such Proxy Statement which corrects such misstatement or
omission, and Connecticut Bancshares shall mail an amended Proxy Statement to
Connecticut Bancshares' shareholders.
8.3 NHSB CONVERSION. Commencing promptly after the date of this
----------------
Agreement, NHSB will take all steps reasonably necessary to effect the
Conversion. In addition, without limiting the generality of the foregoing, NHSB
shall cause the following to be done:
8.3.1 NHSB will (i) as promptly as practicable after receipt
of all approvals or non-objections necessary from the applicable Bank
Regulators, take all steps necessary to duly call, give notice of, convene and
hold a special meeting or meetings of the Corporators for the purpose of
approving the Plan and for such other purposes as may be, in the reasonable
judgment of NHSB, necessary or desirable, and (ii) recommend to its Corporators
the approval of the aforementioned matters to be submitted by it to its
Corporators, and (iii) cooperate and consult with Connecticut Bancshares with
respect to each of the foregoing matters.
8.3.2 NHSB will use its reasonable best efforts in good faith
(i) to prepare and file by September 30, 2003 all required regulatory
applications and notices required in connection with the Merger, the Bank Merger
and the Conversion, including, without limitation, filing applications with the
Department, the FDIC, and the FRB and (ii) to effectuate the provisions of the
Plan in a timely manner. NHSB shall notify Connecticut Bancshares promptly of
the receipt of any comments with respect to such applications and notices from
the Department, the FDIC, the FRB or any other Governmental Entity and of any
requests (written or oral) by the Department, the FDIC, the FRB or any
Governmental Entity for any amendment or supplement to such regulatory
applications and notices or for additional information and shall provide to
Connecticut Bancshares promptly copies of all correspondence between NHSB or any
of its representatives and the Department, the FDIC, the FRB or any other
Governmental Entity. NHSB shall give Connecticut Bancshares and its counsel the
opportunity to review and comment on all required regulatory applications
required in connection with the Merger, the Bank Merger and the Conversion and
all amendments and supplements to the foregoing and all responses to the
requests for additional information and replies to comments prior to their being
filed with, or sent to, any Governmental Entity or the SEC, the FRB, the FDIC or
the Department.
8.3.3 NHSB shall prepare as promptly as practicable (using its
reasonable best efforts in good faith to effect the preparation on or before
September 30, 2003) and Connecticut Bancshares shall co-operate in the
preparation of, the Conversion Registration Statement and the Conversion
Prospectus. NHSB shall file the Conversion Registration Statement with the SEC
and all appropriate State Securities Offices. NHSB shall use its reasonable best
efforts in good faith to have the Conversion Registration Statement declared
effective under the Securities Act
A-60
115
as promptly as practicable after such filing and on a basis coordinated with the
other steps required in the Plan.
8.3.4 Connecticut Bancshares shall provide NHSB with any
information concerning it that NHSB may reasonably request in connection with
the Conversion Prospectus. Connecticut Bancshares shall provide NHSB a "comfort"
letter from its independent certified public accountant, dated as of the date of
the Conversion Prospectus and updated as of the date of consummation of the
Merger, with respect to certain financial information regarding Connecticut
Bancshares, in form and substance which is customary in transactions such as the
Conversion and NHSB shall notify Connecticut Bancshares promptly of the receipt
of any comments of the SEC, the FRB, the FDIC or the Department with respect to
the Conversion Prospectus and of any requests by the SEC, the FRB, the FDIC or
the Department for any amendment or supplement thereto or for additional
information, and shall provide to Connecticut Bancshares promptly copies of all
correspondence between NHSB or any representative of NHSB and the SEC, the FRB,
the FDIC or the Department. NHSB shall give Connecticut Bancshares and its
counsel the opportunity to review and comment on the Conversion Prospectus prior
to its being filed with the SEC, the FRB, the FDIC or the Department and shall
give Connecticut Bancshares and its counsel the opportunity to review and
comment on all amendments and supplements to the Conversion Prospectus and all
responses to requests for additional information and replies to comments prior
to their being filed with, or sent to, the SEC, the FRB, the FDIC or the
Department. Each of NHSB and Connecticut Bancshares agrees to use their
reasonable best efforts, after consultation with the other party hereto, in good
faith to respond promptly to all such comments of and requests by the SEC, the
FRB, the FDIC or the Department.
8.3.5 Connecticut Bancshares shall promptly notify NHSB if at
any time it becomes aware that the Conversion Prospectus or the Conversion
Registration Statement contains any untrue statement of a material fact or omits
to state a material fact with respect to Connecticut Bancshares or a Connecticut
Bancshares Subsidiary required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. In such event, Connecticut Bancshares shall cooperate
with NHSB in the preparation of a supplement or amendment to such Conversion
Prospectus, which corrects such misstatement or omission, and NHSB shall file an
amended Conversion Registration Statement with the SEC. Connecticut Bancshares
shall provide to NHSB and the marketing agent for the sale of NewAlliance
Bancshares Common Stock in the Offering a "comfort" letter from the independent
certified public accountants for Connecticut Bancshares, dated as of the
effective date of the Conversion Registration Statement with respect to certain
financial information regarding Connecticut Bancshares, each in form and
substance which is customary in transactions such as the Conversion.
8.4 REGULATORY APPROVALS. Each of Connecticut Bancshares, SBM and NHSB
--------------------
will cooperate with the other and use all reasonable efforts to promptly prepare
all necessary documentation, to effect all necessary filings and to obtain all
necessary permits, consents, approvals and authorizations of all third parties
and governmental bodies necessary to consummate the transactions contemplated by
this Agreement, including without limitation the
A-61
116
Merger, the Bank Merger, the Conversion and the Offering. Connecticut Bancshares
and NHSB will furnish each other and each other's counsel with all information
concerning themselves, their subsidiaries, directors, officers and shareholders
and such other matters as may be necessary or advisable in connection with the
Conversion Prospectus, the Proxy Statement and any application, petition or any
other statement or application made by or on behalf of NHSB, Connecticut
Bancshares or SBM to any governmental body in connection with the Conversion,
the Merger, the Bank Merger, the Offering and the other transactions
contemplated by this Agreement. Each party hereto shall have the right to review
and approve in advance all characterizations of the information relating to such
party and any of its Subsidiaries that appear in any filing made in connection
with the transactions contemplated by this Agreement with any governmental body.
In addition, NHSB, Connecticut Bancshares and SBM shall each furnish to the
other for review a copy of each such filing made in connection with the
transactions contemplated by this Agreement with any governmental body prior to
its filing.
8.5 COMPLIANCE WITH ANTI-TRUST LAWS. Each of NHSB and Connecticut
----------------------------------
Bancshares shall use reasonable best efforts in good faith to resolve
objections, if any, which may be asserted with respect to the Merger under
anti-trust laws. In the event a suit is threatened or instituted challenging the
Merger as violative of anti-trust laws, each of NHSB and Connecticut Bancshares
shall use reasonable best efforts in good faith to avoid the filing of, or
resist or resolve such suit, NHSB and Connecticut Bancshares shall use
reasonable best efforts in good faith to take such action as may be required:
(a) by the FRB, the Connecticut Banking Commissioner, and the Antitrust Division
of the DOJ or the United States Federal Trade Commission in order to resolve
such objections as any 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 in good
faith shall not include, among other things and only to the extent NHSB so
desires, the willingness of NHSB to accept an order agreeing to the divestiture,
or the holding separate, of any assets of NHSB or Connecticut Bancshares.
8.6 EXECUTION OF BANK MERGER AGREEMENT. Prior to the Effective Time,
-----------------------------------
SBM and NHSB each shall execute and deliver the Bank Merger Agreement,
substantially in the form attached hereto as Exhibit A.
---------
ARTICLE IX
CLOSING CONDITIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT. The
-------------------------------------------------------------
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions,
none of which may be waived:
9.1.1 Stockholder, Corporator and Other Approvals.
-------------------------------------------
A-62
117
(i) This Agreement shall have been approved by
the requisite vote of shareholders of
Connecticut Bancshares.
(ii) The Plan shall have been approved by the
requisite vote of Corporators and by the
requisite vote of any others as may be
required.
9.1.2 Injunctions. None of the parties hereto shall be subject
-----------
to any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the transactions
contemplated by this Agreement.
9.1.3 Regulatory Approvals. All necessary approvals,
----------------------
authorizations and consents of all Governmental Entities required to consummate
the transactions contemplated by this Agreement, including the Merger, the Bank
Merger and the Conversion, shall have been obtained and shall remain in full
force and effect and all waiting periods relating to such approvals,
authorizations or consents shall have expired; and no such approval,
authorization or consent shall include any condition or requirement, excluding
standard conditions that are normally imposed by the regulatory authorities in
bank merger transactions or in mutual-to-stock conversions, that would, in the
good faith reasonable judgment of the Board of Directors of NHSB and Connecticut
Bancshares, materially and adversely affect the business, operations, financial
condition, property or assets of the combined enterprise of Connecticut
Bancshares, SBM and NHSB or otherwise materially impair the value of Connecticut
Bancshares or SBM to NHSB.
9.1.4 Conversion. NHSB shall have consummated the
----------
Conversion.
9.2 CONDITIONS TO THE OBLIGATIONS OF NHSB UNDER THIS AGREEMENT. The
------------------------------------------------------------
obligations of NHSB under this Agreement shall be further subject to the
satisfaction of the conditions set forth in Sections 9.2.1 through 9.2.5 at or
prior to the Closing:
9.2.1 Representations and Warranties. Except as otherwise
-------------------------------
contemplated by this Agreement or consented to in writing by NHSB, the
representations and warranties of Connecticut Bancshares and SBM set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and as of the Effective Time as though made on and as of the
Effective Time (or on the date when made in the case of any representation and
warranty which specifically relates to an earlier date), except as otherwise
contemplated by this Agreement or consented to in writing by NHSB; provided,
however, that (i) in determining whether or not the condition contained in this
Section 9.2.1 shall be satisfied, no effect shall be given to any exceptions in
such representations and warranties relating to materiality or Material Adverse
Effect and (ii) the condition contained in this Section 9.2.1 shall be deemed to
be satisfied unless the failure of such representations and warranties to be so
true and correct constitute, individually or in the aggregate, a Material
Adverse Effect on Connecticut Bancshares and SBM, taken as a whole; and
Connecticut Bancshares shall have delivered to NHSB a certificate of Connecticut
Bancshares to such effect signed by the Chief Executive Officer and the Chief
Financial Officer of Connecticut Bancshares as of the Effective Time.
A-63
118
9.2.2 Agreements and Covenants. As of the Closing Date,
--------------------------
Connecticut Bancshares and each Connecticut Bancshares Subsidiary shall have
performed in all material respects all obligations and complied in all material
respects with all agreements or covenants of Connecticut Bancshares and such
Connecticut Bancshares Subsidiary to be performed or complied with by each of
them at or prior to the Effective Date under this Agreement, except to the
extent that any failure to perform or comply shall not individually, or in the
aggregate, have a Material Adverse Effect on Connecticut Bancshares and the
Connecticut Bancshares Subsidiaries, taken as a whole, or materially adversely
affect consummation of the Merger and other transactions contemplated hereby,
and NHSB shall have received a certificate signed on behalf of Connecticut
Bancshares by the Chief Executive Officer and Chief Financial Officer of
Connecticut Bancshares to such effect dated as of the Effective Time.
9.2.3 Permits, Authorizations, Etc. Connecticut Bancshares and
----------------------------
the Connecticut Bancshares Subsidiaries shall have obtained any and all material
permits, authorizations, consents, waivers, clearances or approvals required for
the lawful consummation of the Merger by Connecticut Bancshares and the Bank
Merger by SBM, the failure to obtain which would have a Material Adverse Effect
on Connecticut Bancshares and the Connecticut Bancshares Subsidiaries, taken as
a whole.
9.2.4 Accountants' Letter. NHSB shall have received a
---------------------
"comfort" letter from the independent certified public accountants for
Connecticut Bancshares, dated the effective date of the Conversion Registration
Statement, with respect to certain financial information regarding Connecticut
Bancshares, each in form and substance which is customary in transactions of the
nature contemplated by this Agreement.
9.2.5 No Material Adverse Effect. Since January 1, 2003, no
----------------------------
event has occurred or circumstance has arisen that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
Connecticut Bancshares.
9.3 CONDITIONS TO THE OBLIGATIONS OF CONNECTICUT BANCSHARES UNDER THIS
-------------------------------------------------------------------
AGREEMENT. The obligations of Connecticut Bancshares under this Agreement shall
- ---------
be further subject to the satisfaction of the conditions set forth in Sections
9.3.1 through 9.3.4 at or prior to the Closing:
9.3.1 Representations and Warranties. Except as otherwise
--------------------------------
contemplated by this Agreement or consented to in writing by Connecticut
Bancshares, the representations and warranties of NHSB set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Effective Time as though made on and as of the
Effective Time (or on the date when made in the case of any representation and
warranty which specifically relates to an earlier date), except as otherwise
contemplated by this Agreement or consented to in writing by Connecticut
Bancshares; provided, however, that (i) in determining whether or not the
condition contained in this Section 9.3.1 shall be satisfied, no effect shall be
given to any exceptions in such representations and warranties relating to
materiality or Material Adverse Effect and (ii) the condition contained in this
Section 9.3.1 shall be deemed to be satisfied unless the failure of such
representations and warranties to be so true and correct constitute,
individually or in the aggregate, a Material Adverse Effect on NHSB; and NHSB
shall
A-64
119
have delivered to Connecticut Bancshares a certificate of NHSB to such effect
signed by the Chief Executive Officer and the Chief Financial Officer of NHSB as
of the Effective Time.
9.3.2 Agreements and Covenants. As of the Closing Date,
------------------------
NewAlliance Bancshares and NHSB shall have performed in all material respects
all obligations and complied in all material respects with all agreements or
covenants of NewAlliance Bancshares and NHSB to be performed or complied with by
them at or prior to the Effective Date under this Agreement except to the extent
that any failure to perform or comply shall not individually, or in the
aggregate, have a Material Adverse Effect on NewAlliance Bancshares, NHSB and
the NHSB Subsidiaries, taken as a whole, or materially adversely affect
consummation of the Merger and other transactions contemplated hereby; and
Connecticut Bancshares shall have received a certificate signed on behalf of
NHSB and NewAlliance Bancshares by the Chief Executive Officer and Chief
Financial Officer of each of NewAlliance Bancshares and NHSB to such effect
dated as of the Effective Time.
9.3.3 Permits, Authorizations, Etc. NewAlliance Bancshares
-----------------------------
and NHSB shall have obtained any and all material permits, authorizations,
consents, waivers, clearances or approvals required for the lawful consummation
of the Merger, the Bank Merger and the Conversion by NewAlliance Bancshares and
NHSB, the failure to obtain which would have a Material Adverse Effect on
NewAlliance Bancshares, NHSB, and its Subsidiaries, taken as a whole.
9.3.4 Payment of Merger Consideration. NHSB shall have
----------------------------------
delivered the Exchange Fund to the Exchange Agent on or before the Closing Date
and the Exchange Agent shall provide Connecticut Bancshares with a certificate
evidencing such delivery.
ARTICLE X
THE CLOSING
10.1 TIME AND PLACE. Subject to the provisions of Articles IX and XI
--------------
hereof, the Closing of the transactions contemplated hereby shall take place at
the offices of Tyler Cooper & Alcorn, LLP, 205 Church Street, New Haven,
Connecticut at 10:00 a.m. on the date determined by NHSB, in its sole
discretion, upon five (5) days prior written notice to Connecticut Bancshares,
but in no event later than thirty (30) days after the last condition precedent
pursuant to this Agreement has been fulfilled or waived (including the
expiration of any applicable waiting period), or at such other place, date or
time upon which NHSB and Connecticut Bancshares mutually agree.
10.2 DELIVERIES AT THE CLOSING. At the Closing there shall be delivered
-------------------------
(i) to NHSB and Connecticut Bancshares the certificates and other documents and
instruments required to be delivered at the Closing under Article IX hereof and
(ii) to the Exchange Agent on behalf of Connecticut Bancshares the Merger
Consideration required to be delivered at the Closing under Section 9.3.4
hereof.
A-65
120
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 TERMINATION. This Agreement may be terminated at any time prior to
-----------
the Closing Date, whether before or after approval of the Merger by the
stockholders of Connecticut Bancshares:
11.1.1 By the mutual written agreement of NHSB and
Connecticut Bancshares;
11.1.2 By either NHSB or Connecticut Bancshares (provided that
the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) 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 such that the conditions set forth in Sections
9.2.1 or 9.3.1, as the case may be, would not be satisfied and such breach by
its nature cannot be cured prior to the Closing Date or shall not have been
cured within thirty (30) days after written notice by NHSB to Connecticut
Bancshares (or by Connecticut Bancshares to NHSB) of such breach;
11.1.3 By either NHSB or Connecticut Bancshares (provided that
the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a failure to perform or comply with any of the covenants or agreements set forth
in this Agreement on the part of the other party such that the conditions set
forth in Sections 9.2.2 or 9.3.2, as the case may be, would not be satisfied and
such failure by its nature cannot be cured prior to the Closing Date or shall
not have been cured within thirty (30) days after written notice by NHSB to
Connecticut Bancshares (or by Connecticut Bancshares to NHSB) of such failure;
11.1.4 By (a) Connecticut Bancshares, if NHSB shall not have
received all required regulatory approvals, authorizations, consents and
non-objections required in connection with the Merger and the Bank Merger and
the Conversion (except only for any approvals, authorizations, consents and
non-objections with respect to the Conversion to be received following the
completion of the Offering and before the consummation of the Conversion) and
the Conversion Registration Statement shall not have been declared effective by
the Securities and Exchange Commission within the meaning of the Securities Laws
by August 16, 2004, or (b) either NHSB or Connecticut Bancshares, if the Closing
shall not have occurred by the Termination Date, or such later date as shall
have been agreed to in writing by NHSB and Connecticut Bancshares; provided,
that no party may terminate this Agreement pursuant to either clause (a) or (b)
of this Section 11.1.4 if the failure of the Closing to have occurred on or
before said date was due to such party's breach of any of its obligations under
this Agreement;
11.1.5 By either NHSB or Connecticut Bancshares if (a) the
shareholders of Connecticut Bancshares shall have voted at the Connecticut
Bancshares Shareholders Meeting
A-66
121
on the Agreement and such vote shall not have been sufficient to approve the
Agreement; (b) the Corporators shall have voted at a meeting of the Corporators
and such vote shall not have been sufficient to approve the Plan; or (c) any
other party as may be required to vote on the Plan shall have voted at a meeting
of such party and such vote shall not have been sufficient to approve the Plan;
11.1.6 By either NHSB or Connecticut Bancshares (i) if final
action has been taken by a Government Entity whose approval or non-objection is
required in connection with this Agreement or the Bank Merger Agreement and the
transactions contemplated hereby or thereby (other than the Conversion), which
final action (x) has become unappealable and (y) does not approve or state a
non-objection to this Agreement or the Bank Merger Agreement or the transactions
contemplated hereby or thereby, (ii) if any regulatory authority whose approval
or non-objection is required in connection with this Agreement or the Bank
Merger Agreement and the transactions contemplated hereby or thereby (other than
the Conversion) has stated in writing that it will not issue the required
approval or non-objection, or (iii) if any court of competent jurisdiction or
other governmental authority shall have issued an order, decree, ruling or taken
any other action restraining, enjoining or otherwise prohibiting the Merger or
the Bank Merger and such order, decree, ruling or other action shall have become
final and nonappealable;
11.1.7 By either NHSB or Connecticut Bancshares (i) if final
action has been taken by a Government Entity whose approval or non-objection is
required in connection with the Conversion, which final action (x) has become
unappealable and (y) does not approve or state a non-objection to the
Conversion, or (ii) if any regulatory authority whose approval or non-objection
is required in connection with the Conversion has stated in writing that it will
not issue the required approval or non-objection, (iii) if any court of
competent jurisdiction or other governmental authority shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Conversion and such order, decree, ruling or other
action shall have become final and nonappealable;
11.1.8 By (a) Connecticut Bancshares (provided that
Connecticut Bancshares is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) in the event that any of
the conditions precedent to the obligations of Connecticut Bancshares to
consummate the Merger or the Bank Merger, as set forth in Article IX, cannot be
satisfied or fulfilled (except, with respect to the condition precedent set
forth in Section 9.3.3, such permits, authorizations, consents, waivers,
clearances or approvals with respect to the Conversion to be received following
the completion of the Offering and before the consummation of the Conversion) by
August 16, 2004 or (b) either NHSB or Connecticut Bancshares (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) in the event that any of
the conditions precedent to the obligations of such party to consummate the
Merger or the Bank Merger, as set forth in Article IX, cannot be satisfied or
fulfilled by the Termination Date;
11.1.9 By NHSB if (a) at any time prior to the Connecticut
Bancshares Shareholder meeting, the Connecticut Bancshares Board of Directors
shall have failed for any reason to make its recommendation referred to in
Section 8.1, withdrawn such recommendation
A-67
122
or modified or changed such recommendation in a manner adverse in any respect to
the interests of NHSB, or (ii) the Connecticut Bancshares Board of Directors
shall have failed for any reason to call, give notice of, convene and hold the
Connecticut Bancshares Shareholder Meeting;
11.1.10 By NHSB if a tender offer or exchange offer for 25% or
more of the outstanding shares of Connecticut Bancshares Common Stock is
commenced (other than by NHSB), and the Connecticut Bancshares Board of
Directors recommends that the shareholders of Connecticut Bancshares tender
their shares in such tender or exchange offer or otherwise fails to recommend
that such shareholders reject such tender offer or exchange offer within the
ten-Business Day period specified in Rule 14e-2(a) under the Exchange Act;
11.1.11 At any time prior to the Connecticut Bancshares
Shareholders Meeting, by Connecticut Bancshares in order to concurrently enter
into an acquisition agreement or similar agreement (each, an "Acquisition
Agreement") with respect to a Superior Proposal which has been received and
considered by Connecticut Bancshares and the Connecticut Bancshares Board of
Directors in compliance with Section 6.10 hereof, provided, however, that this
Agreement may be terminated by Connecticut Bancshares pursuant to this Section
11.1.11 only after the fifth Business Day following NHSB's receipt of written
notice from Connecticut Bancshares advising NHSB that Connecticut Bancshares is
prepared to enter into an Acquisition Agreement with respect to a Superior
Proposal, and only if, during such five-Business Day period, NHSB does not, in
its sole discretion, make an offer to Connecticut Bancshares that the
Connecticut Bancshares' Board of Directors determines in good faith, after
consultation with its financial and legal advisors, is at least as favorable as
the Superior Proposal.
For purposes of this Section 11.1, termination of this Agreement by
NHSB shall be deemed to constitute a termination on behalf of NewAlliance
Bancshares.
11.2 EFFECT OF TERMINATION.
---------------------
11.2.1 In the event of termination of this Agreement pursuant
to any provision of Section 11.1, this Agreement shall forthwith become void and
have no further force, except that (i) the provisions of Sections 11.1, 11.3,
12.1, 12.2, 12.6, 12.9, 12.10, this Section 11.2, and (ii) any other Section
which, by its terms, relates to post-termination rights or obligations, shall
survive such termination of this Agreement and remain in full force and effect.
11.2.2 In recognition of the efforts, expenses and other
opportunities foregone by NHSB while structuring and pursuing the Merger, the
parties hereto agree that Connecticut Bancshares shall pay to NHSB a termination
fee of Thirty Million Dollars ($30,000,000) (the "Connecticut Bancshares
Termination Fee") in the manner and subject to the conditions set forth below
only if:
(i) this Agreement is terminated by NHSB pursuant to
Section 11.1.9 or 11.1.10;
A-68
123
(ii) this Agreement is terminated by (A) NHSB
pursuant to Sections 11.1.2 or 11.1.3, or (B)
by either NHSB or Connecticut Bancshares
pursuant to Section 11.1.5(a), and in the case
of any termination pursuant to clause (A) or
(B) an Acquisition Proposal shall have been
publicly announced or otherwise communicated
or made known to the senior management of
Connecticut Bancshares or the Connecticut
Bancshares Board of Directors (or any Person
shall have publicly announced, communicated or
made known an intention, whether or not
conditional, to make an Acquisition Proposal)
at any time after the date of this Agreement
and prior to the taking of the vote of the
shareholders of Connecticut Bancshares
contemplated by this Agreement at the
Connecticut Bancshares Shareholder Meeting, in
the case of clause (B), or the date of
termination of this Agreement, in the case of
clause (A); or
(iii) this Agreement is terminated by Connecticut
Bancshares pursuant to Section 11.1.11.
In the event the Connecticut Bancshares Termination Fee shall
become payable pursuant to Section 11.2.2(i) or (ii), (x) Connecticut Bancshares
shall pay to NHSB an amount equal to Ten Million Dollars ($10,000,000) on or
before the third Business Day following termination of this Agreement, and (y)
if within 18 months after such termination Connecticut Bancshares or a
Connecticut Bancshares Subsidiary enters into any agreement with respect to, or
consummates, any Acquisition Transaction, Connecticut Bancshares shall pay to
NHSB the Connecticut Bancshares Termination Fee (net of any payment made
pursuant to clause (x) above) on the date of execution of such agreement or
consummation of the Acquisition Transaction. In the event the Connecticut
Bancshares Termination Fee shall become payable pursuant to Section 11.2.2(iii),
Connecticut Bancshares shall pay to NHSB the entire Connecticut Bancshares
Termination Fee within three Business Days following the date of termination of
this Agreement. Any amount that becomes payable pursuant to this Section 11.2.2
shall be paid by wire transfer of immediately available funds to an account
designated by NHSB.
11.2.3 In the event of a termination of this Agreement
pursuant to Section 11.1.2 or 11.1.3 hereof resulting from the willful conduct
or gross negligence of a party, such party shall be obligated to reimburse the
other party for up to Two Million Dollars ($2,000,000) of out-of-pocket costs
and expenses, including, without limitation, reasonable legal, accounting and
investment banking fees and expenses, incurred by such other party in connection
with the entering into of this Agreement and the carrying out of any and all
acts contemplated hereunder (collectively referred to as "Costs"). The payment
of Costs is not an exclusive remedy, but is in addition to any other rights or
remedies available to the parties hereto at law or in equity or as is
contemplated herein. Notwithstanding anything to the contrary herein, if (i)
Connecticut Bancshares makes the payment contemplated in Section 11.2.2 of this
Agreement or (ii) if NHSB makes the payment contemplated in Section 11.3 of this
Agreement, such party shall not have any further liability to the other party
(or its Subsidiaries), whether for Costs, breach or otherwise.
A-69
124
11.2.4 Except as provided in Sections 11.2.2, 11.2.3 and 11.3,
whether or not the Merger is consummated, all Costs incurred in connection with
this Agreement and the transactions contemplated hereby shall be borne by the
party incurring such Costs.
11.2.5 In no event shall any officer, agent or director of
Connecticut Bancshares, any Connecticut Bancshares Subsidiary, NHSB or any NHSB
Subsidiary, be personally liable thereunder for any default by any party in any
of its obligations hereunder unless any such default was intentionally caused by
such officer, agent or director.
11.3 NHSB SPECIAL PAYMENT.
--------------------
11.3.1 NHSB Special Payment. As a condition of Connecticut
---------------------
Bancshares' willingness to, and in order to induce Connecticut Bancshares to,
enter into this Agreement, and to reimburse Connecticut Bancshares for incurring
the damages, costs and expenses related to entering into this Agreement and
consummating the transactions contemplated by this Agreement, NHSB hereby agrees
to pay to Connecticut Bancshares, as liquidated damages and in lieu of any other
rights or remedies under this Agreement, a cash payment in the amount of Thirty
Million Dollars ($30,000,000) (the "Special Payment") only if (i) the Agreement
is terminated pursuant to Section 11.1.5(b) or 11.1.5(c) of this Agreement, or
(ii) the Agreement is terminated pursuant to Section 11.1.6 or 11.1.7, or (iii)
NHSB otherwise does not consummate the Merger by no later than the Termination
Date or such later date agreed as contemplated in Section 11.1.4(b), or (iv)
Connecticut Bancshares has terminated this Agreement in accordance with Section
11.1.2 or Section 11.1.3 because NHSB has intentionally and willfully breached
any of its representations or warranties herein or intentionally and willfully
failed to perform or comply with any of its covenants or agreements herein, to
such extent as to permit such termination (each of such reasons for termination
being hereinafter referred to as the "Special Payment Event"). Notwithstanding
the foregoing, NHSB shall have no obligation to make the Special Payment to
Connecticut Bancshares if the Special Payment Event is primarily due to a breach
of a representation or warranty of Connecticut Bancshares (subject to the
standard set forth in Section 9.2.1 of this Agreement) or a breach by
Connecticut Bancshares of one or more covenants in this Agreement (subject to
the standard set forth in Section 9.2.2 of this Agreement), which breach of
representation, warranty or covenant is the principal cause of the occurrence of
the Special Payment Event.
11.3.2 Payments Required. Any payment required to be made
------------------
under this Section 11.3 shall be paid by NHSB to Connecticut Bancshares by wire
transfer of immediately available funds to an account designated by Connecticut
Bancshares within three (3) Business Days after demand by Connecticut
Bancshares.
11.3.3 Exclusivity of Remedy. Notwithstanding anything to the
---------------------
contrary set forth in this Agreement, if NHSB pays or causes to be paid to
Connecticut Bancshares the Special Payment, NHSB will not have any further
obligations or liabilities to Connecticut Bancshares or SBM with respect to this
Agreement or the transactions contemplated by this Agreement.
A-70
125
11.3.4 Return of Portion of NHSB Special Payment. In the event
-----------------------------------------
NHSB pays the Special Payment to Connecticut Bancshares and prior to the earlier
of (a) October 15, 2006 or (b) two years after demand for payment from
Connecticut Bancshares pursuant to Section 11.3.2 of this Agreement, Connecticut
Bancshares or a Connecticut Bancshares Subsidiary consummates any acquisition or
merger transaction pursuant to which the shareholders of Connecticut Bancshares
are entitled to receive per share merger consideration in excess of $51.60 (the
"Benchmark Price"), Connecticut Bancshares shall pay to NHSB Fifteen Million
Dollars ($15,000,000). The Benchmark Price shall be adjusted for any subsequent
stock dividends or splits by Connecticut Bancshares. The Benchmark Price shall
be determined on the date of closing of such acquisition or merger transaction.
If the consideration in such transaction includes or consists of shares of
capital stock of another entity, the value of such shares shall equal the
average of the last sales prices for such shares on the five trading days ending
on the day prior to the consummation of such transaction. Any amount that
becomes payable pursuant to this Section 11.3.4 shall be paid by wire transfer
of immediately available funds to an account designed by NHSB within ten (10)
Business Days of the closing of such acquisition or merger transaction.
11.4 AMENDMENT, EXTENSION AND WAIVER. Subject to applicable law, at any
-------------------------------
time prior to the Effective Time (whether before or after approval thereof by
the shareholders of Connecticut Bancshares), the parties hereto by action of
their respective Boards of Directors, may (a) amend this Agreement, (b) extend
the time for the performance of any of the obligations or other acts of any
other party hereto, (c) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, or (d)
waive compliance with any of the agreements or conditions contained herein;
provided, however, that after any approval of this Agreement and the
transactions contemplated hereby by the shareholders of Connecticut Bancshares,
there may not be, without further approval of such shareholders, any amendment
of this Agreement which reduces the amount, value or changes the form of
consideration to be delivered to Connecticut Bancshares' shareholders or Option
holders pursuant to this Agreement. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE XII
MISCELLANEOUS
12.1 CONFIDENTIALITY. Except as specifically set forth herein, NHSB and
---------------
Connecticut Bancshares mutually agree to be bound by the terms of the
confidentiality agreements dated February 27, 2003 and March 13, 2003
(collectively, the "Confidentiality Agreements") previously executed by the
parties hereto, which Confidentiality Agreements are hereby incorporated herein
by reference. The parties hereto agree that such Confidentiality Agreements
A-71
126
shall continue in accordance with their respective terms, notwithstanding the
termination of this Agreement.
12.2 PUBLIC ANNOUNCEMENTS. Connecticut Bancshares and NHSB shall
---------------------
cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this
Agreement, except as may be otherwise required by law, and neither Connecticut
Bancshares nor NHSB shall issue any joint news releases with respect to this
Agreement unless such news releases have been mutually agreed upon in writing by
the parties hereto, except as required by law.
12.3 SURVIVAL. All representations, warranties and covenants in this
--------
Agreement or in any instrument delivered pursuant hereto or thereto shall expire
on and be terminated and extinguished at the Effective Date, other than those
covenants set forth in Sections 2.4, 2.5, 2.6, 2.7, 7.6, 7.7, 7.8, 7.9 and 7.11,
or any other covenant that by its terms is to survive or be performed after the
Effective Date.
A-72
127
12.4 NOTICES. All notices or other communications hereunder shall be in
-------
writing and shall be deemed given if delivered by receipted hand delivery or
mailed by prepaid registered or certified mail (return receipt requested) or by
cable, telegram, telex or fax addressed as follows:
If to Connecticut Bancshares or SBM, to:
923 Main Street
Manchester, Connecticut 06040
Attention: Richard P. Meduski, President and Chief Executive Officer
Fax: (860) 533-3346
With required copies to:
Muldoon Murphy & Faucette, LLP
5101 Wisconsin Avenue, N.W.
Washington D.C. 20016
Attention: Douglas P. Faucette, Esq.
Fax: (202) 966-9409
If to NHSB, to:
195 Church Street
New Haven, Connecticut 06510
Attention: Peyton R. Patterson, President
Fax: (203) 789-2650
With required copies to:
Tyler Cooper & Alcorn, LLP
185 Asylum Street / 35th Floor
Hartford, Connecticut 06103
Attention: William W. Bouton III, Esq.
Fax: (860) 278-3802
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
12.5 PARTIES IN INTEREST. This Agreement shall be binding upon and
--------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party, and that (except as
otherwise expressly provided in this Agreement) nothing in this Agreement is
intended to confer upon any other person any rights or remedies under or by
reason of this Agreement.
A-73
128
12.6 COMPLETE AGREEMENT. This Agreement, including the Exhibits and
-------------------
Disclosure Schedules hereto and the documents and other writings referred to
herein or therein or delivered pursuant hereto or thereto, together with the
Confidentiality Agreements referred to in Section 12.1, contains the entire
agreement and understanding of the parties with respect to its subject matter.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings between the parties other than those expressly set forth herein or
therein. This Agreement supersedes all prior agreements and understandings
(other than the Confidentiality Agreements referred to in Section 12.1 hereof)
between the parties, both written and oral, with respect to its subject matter.
12.7 COUNTERPARTS. This Agreement may be executed in counterparts all
------------
of which shall be considered one and the same agreement and each of which shall
be deemed an original.
12.8 SEVERABILITY. In the event that any one or more provisions of this
------------
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and the
parties shall use their reasonable efforts to substitute a valid, legal and
enforceable provision which, insofar as practical, implements the purposes and
intents of this Agreement.
12.9 GOVERNING LAW. This Agreement shall be governed by the laws of the
-------------
State of Connecticut, without giving effect to conflicts of laws principles that
would require the application of any other law.
12.10 INTERPRETATION. When a reference is made in this Agreement to
--------------
Sections or Exhibits, such reference shall be to a Section of or Exhibit to this
Agreement unless otherwise indicated. The recitals hereto constitute an integral
part of this Agreement. References to Sections include subsections, which are
part of the related Section (e.g., a section numbered "Section 5.5.1" would be
part of "Section 5.5" and references to "Section 5.5" would also refer to
material contained in the subsection described as "Section 5.5.1"). The table of
contents, index 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". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the Recitals to this Agreement.
12.11 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
---------------------
damage would occur in the event that the provisions contained in this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and
A-74
129
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.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
A-75
130
IN WITNESS WHEREOF, NHSB, Connecticut Bancshares and SBM have caused
this Agreement to be executed under seal by their duly authorized officers as of
the date first set forth above.
THE NEW HAVEN SAVINGS BANK
By: /s/ Peyton R. Patterson
-----------------------------------
Name: Peyton R. Patterson
-----------------------------------
Title: Chairman, President and CEO
-----------------------------------
CONNECTICUT BANCSHARES, INC.
By: /s/ Richard P. Meduski
-----------------------------------
Name: Richard P. Meduski
-----------------------------------
Title: President and CEO
-----------------------------------
THE SAVINGS BANK OF MANCHESTER
By: /s/ Richard P. Meduski
-----------------------------------
Name: Richard P. Meduski
-----------------------------------
Title: President and CEO
-----------------------------------
A-76
131
APPENDIX B
DRAFT
_____________, 2003
Board of Directors
Connecticut Bancshares, Inc.
923 Main Street
Manchester, CT 06040
Ladies and Gentlemen:
Connecticut Bancshares, Inc. ("Connecticut Bancshares") and its wholly
owned subsidiary, The Savings Bank of Manchester, have entered into an Agreement
and Plan of Merger (the "Agreement"), dated as of July 15, 2003, with The New
Haven Savings Bank ("New Haven"), pursuant to which Connecticut Bancshares will
be acquired by a newly formed parent holding company of New Haven ("Holding
Company") through the merger of Connecticut Bancshares with and into a newly
formed subsidiary of Holding Company (the "Merger"). Under the terms of the
Agreement, upon consummation of the Merger, each share of Connecticut Bancshares
common stock, par value $.01 per share, issued and outstanding immediately prior
to the Merger (the "Connecticut Bancshares Shares"), other than certain shares
specified in the Agreement, will be converted into the right to receive $52.00
in cash without interest (the "Merger Consideration"). The Merger Consideration
may be increased under certain circumstances as set forth in the Agreement. The
terms and conditions of the Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a financial point of
view, of the Merger Consideration to the holders of Connecticut Bancshares
Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and certain of the exhibits and schedules thereto;
(ii) certain publicly available financial statements and other historical
financial information of Connecticut Bancshares that we deemed relevant; (iii)
certain historical financial information of New Haven that was publicly
available or provided by New Haven that we deemed relevant; (iv) internal
financial projections for Connecticut Bancshares for the years ending December
31, 2003 through 2006 prepared by and reviewed with management of
B-1
132
Connecticut Bancshares and the views of senior management of Connecticut
Bancshares, based on limited discussions with them, regarding Connecticut
Bancshares' business, financial condition, results of operations and prospects;
(v) the views of senior management of New Haven, based on limited discussions
with representatives of senior management, regarding New Haven's financial
condition and prospects, including New Haven's proposed conversion from mutual
to stock form and issuance of common stock in connection therewith and its
proposed acquisition of Alliance Bancorp of New England, Inc. (as to which we
have performed no independent investigation); (vi) the publicly reported
historical price and trading activity for Connecticut Bancshares' common stock,
including a comparison of certain financial and stock market information for
Connecticut Bancshares with similar publicly available information for certain
other companies the securities of which are publicly traded; (vii) the financial
terms of certain recent business combinations in the savings institution
industry, to the extent publicly available; (viii) the current market
environment generally and the banking environment in particular; and (ix) such
other information, financial studies, analyses and investigations and financial,
economic and market criteria as we considered relevant.
In performing our review, we have relied upon the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by Connecticut Bancshares or New
Haven or their respective representatives or that was otherwise reviewed by us
and have assumed such accuracy and completeness for purposes of rendering this
opinion. We have further relied on the assurances of management of Connecticut
Bancshares and New Haven that they are not aware of any facts or circumstances
that would make any of such information inaccurate or misleading. We have not
been asked to and have not undertaken an independent verification of any of such
information and we do not assume any responsibility or liability for the
accuracy or completeness thereof. We did not make an independent evaluation or
appraisal of the specific assets, the collateral securing assets or the
liabilities (contingent or otherwise) of Connecticut Bancshares or New Haven or
any of their subsidiaries, or the collectibility of any such assets, nor have we
been furnished with any such evaluations or appraisals. We did not make an
independent evaluation of the adequacy of the allowance for loan losses of
Connecticut Bancshares or New Haven or any of their subsidiaries nor have we
reviewed any individual credit files relating to Connecticut Bancshares or New
Haven or any of their subsidiaries and, with your permission, we have assumed
that their respective allowances for loan losses are adequate to cover such
losses. With respect to the financial projections reviewed with Connecticut
Bancshares' management, Connecticut Bancshares' management has confirmed that
they reflect the best currently available estimates and judgments of such
management of the future financial performance of Connecticut Bancshares and we
have assumed that such performance will be achieved. We express no opinion as to
such financial projections or the assumptions on which they are based. We have
also assumed that there has been no material change in Connecticut Bancshares'
or New Haven's assets, financial condition, results of operations, business or
prospects since the date of the most recent financial statements made available
to us. We have assumed in all respects material to our analysis that Connecticut
Bancshares and New Haven will remain as going concerns for all periods relevant
to our analyses, that all of the representations and warranties contained in the
B-2
133
Agreement and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be performed by
such party under such agreements and that the conditions precedent in the
Agreement are not waived.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect this
opinion. We have not undertaken to update, revise, reaffirm or withdraw this
opinion or otherwise comment upon events occurring after the date hereof. We are
expressing no opinion herein as to the prices at which Connecticut Bancshares'
common stock may trade at any time.
We have acted as Connecticut Bancshares' financial advisor in connection
with the Merger and will receive a fee for our services, which is contingent
upon consummation of the Merger. Under certain circumstances, we will also
receive a fee if the Agreement is terminated. We have also received a fee for
rendering this opinion. Connecticut Bancshares has also agreed to indemnify us
against certain liabilities arising out of our engagement. In the past, we have
provided certain other investment banking services for Connecticut Bancshares
and have received compensation for such services. In the ordinary course of our
business as a broker-dealer, we may purchase securities from and sell
securities to Connecticut Bancshares and New Haven or their affiliates. We may
also actively trade the equity securities of Connecticut Bancshares for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of Connecticut
Bancshares in connection with its consideration of the Merger and does not
constitute a recommendation to any shareholder of Connecticut Bancshares as to
how such shareholder should vote at any meeting of shareholders called to
consider and vote upon the Merger. Our opinion is directed only to the fairness
of the Merger Consideration to the holders of Connecticut Bancshares Shares from
a financial point of view and does not address the underlying business decision
of Connecticut Bancshares to engage in the Merger, the relative merits of the
Merger as compared to any other alternative business strategies that might exist
for Connecticut Bancshares or the effect of any other transaction in which
Connecticut Bancshares might engage. Our opinion is not to be quoted or referred
to, in whole or in part, in a registration statement, prospectus, proxy
statement or in any other document, nor shall this opinion be used for any other
purposes, without Sandler O'Neill's prior written consent; PROVIDED, HOWEVER,
that we hereby consent to the inclusion of this opinion as an annex to the Proxy
Statement of Connecticut Bancshares dated the date hereof and to the references
to this opinion therein.
B-3
134
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration to be received by the holders of
Connecticut Bancshares Shares is fair to such shareholders from a financial
point of view.
Very truly yours,
B-4
135
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
C-1
136
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at
a meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for appraisal
of such stockholder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such
action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of
C-2
137
or consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, then either a constituent corporation
before the effective date of the merger or consolidation or the surviving
or resulting corporation within 10 days thereafter shall notify each of
the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section. Such
notice may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date
of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation
or (ii) the surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining
the stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d)
C-3
138
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after such stockholder's written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may
C-4
139
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
C-5
140
CONNECTICUT BANCSHARES, INC.
SPECIAL MEETING OF STOCKHOLDERS
________, 2003
__:00 __.M., LOCAL TIME
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints _______________________, each with full
power of substitution, to act as proxies for the undersigned, and to vote all
shares of common stock of Connecticut Bancshares, Inc. which the undersigned is
entitled to vote at the special meeting of stockholders, to be held on _______,
2003, at __:00 __.m., local time, at ________, _____________, _______,
Connecticut and at any and all adjournments of the meeting with all of the
powers the undersigned would possess if personally present at such meeting as
follows:
The approval of the Agreement and Plan of Merger, dated July 15, 2003, by
and among The New Haven Savings Bank, Connecticut Bancshares, Inc. and The
Savings Bank of Manchester.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the special meeting or any adjournment or
postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AGREEMENT AND
PLAN OF MERGER.
141
THIS PROXY, PROPERLY SIGNED AND DATED, WILL BE VOTED AS DIRECTED, BUT IF
NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE APPROVAL OF
THE AGREEMENT AND PLAN OF MERGER. IF ANY OTHER BUSINESS IS PRESENTED AT THE
SPECIAL MEETING, INCLUDING WHETHER OR NOT TO ADJOURN THE MEETING, THIS PROXY
WILL BE VOTED BY THE PROXIES IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE SPECIAL
MEETING.
Dated:
------------------------------
------------------------------------
SIGNATURE OF STOCKHOLDER
------------------------------------
SIGNATURE OF CO-HOLDER (IF ANY)
The above signed acknowledges receipt from Connecticut Bancshares prior to
the execution of this proxy of a notice of special meeting of stockholders and
of a proxy statement for the special meeting of stockholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
-----------------------------
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
142
[THE SAVINGS BANK OF MANCHESTER LETTERHEAD]
Dear ESOP Participant:
On behalf of the Board of Directors, I am forwarding to you the attached
GREEN vote authorization form for the purpose of conveying your voting
instructions to Eastern Bank (the "Trustee") on the proposal presented at the
Special Meeting of Stockholders of Connecticut Bancshares, Inc. (the "Company")
on ___________, 2003. Also enclosed is a Notice and Proxy Statement for the
Company's Special Meeting of Stockholders.
As of the Record Date, __________, 2003, The Savings Bank of Manchester
Employee Stock Ownership Plan (the "ESOP") Trust held __________ shares of
common stock, _________ of which had been allocated to participants' accounts.
These allocated shares of Company common stock will be voted as directed by the
ESOP participants; provided timely instructions from the participants are
received by the ESOP Trustee. The unallocated shares of Company common stock in
the ESOP Trust and the allocated shares of Company common stock for which no
instructions are provided, or for which no timely instructions are received by
the ESOP Trustee will be voted by the ESOP Trustee in a manner calculated to
most accurately reflect the instructions the ESOP Trustee has received from
participants regarding the shares of Company common stock allocated to their
accounts, so long as such vote is in accordance with the Employee Retirement
Income Security Act of 1974, as amended.
At this time, in order to direct the voting of the shares of Company
common stock allocated to your ESOP account, please complete and sign the
enclosed GREEN vote authorization form and return it in the enclosed
postage-paid envelope no later than ________, 2003. Your vote will not be
revealed, directly or indirectly, to any employee or director of the Company or
The Savings Bank of Manchester (the "Bank"). The vote authorization forms will
be tabulated by the ESOP Trustee. The ESOP Trustee will use the voting
instructions it receives to vote the shares of Company common stock held in the
ESOP Trust.
As an employee of the Bank and participant in several of the Company and
Bank employee benefit plans you will receive vote authorization forms for each
stock-based plan in which you are a participant. Please vote all of the vote
authorization forms you receive.
Sincerely,
Richard P. Meduski
PRESIDENT AND CHIEF EXECUTIVE OFFICER
143
Name:____________________
Shares:___________________
VOTE AUTHORIZATION FORM
I understand that Eastern Bank (the "Trustee"), is the holder of record
and custodian of all shares of Connecticut Bancshares, Inc. (the "Company")
common stock allocated to me under The Savings Bank of Manchester Employee Stock
Ownership Plan (the "ESOP"). I understand that my voting instructions are
solicited on behalf of the Company's Board of Directors for the Special Meeting
of Stockholders to be held on __________, 2003.
Accordingly, vote my shares as follows:
The approval of the Agreement and Plan of Merger, dated July 15, 2003, by
and among The New Haven Savings Bank, Connecticut Bancshares, Inc. and
The Savings Bank of Manchester.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AGREEMENT AND
PLAN OF MERGER.
The ESOP Trustee is hereby authorized to vote all shares of Company common
stock allocated to my ESOP account in its trust capacity as indicated above.
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE NO
LATER THAN _______, 2003.
144
[THE SAVINGS BANK OF MANCHESTER LETTERHEAD]
Dear Savings Plan Participant:
On behalf of the Board of Directors, I am forwarding to you the attached
YELLOW vote authorization form for the purpose of conveying your voting
instructions to Eastern Bank (the "Trustee") on the proposal presented at the
Special Meeting of Stockholders of Connecticut Bancshares, Inc. (the "Company")
on _____________, 2003. Also enclosed is a Notice and Proxy Statement for the
Company's Special Meeting of Stockholders.
As a Savings Plan Participant investing in the Connecticut Bancshares,
Inc. Stock Fund ("Employer Stock Fund"), you are entitled to direct the Employer
Stock Fund Trustee as to the voting of Company common stock credited to your
account. The Employer Stock Fund Trustee will vote all shares of Company common
stock for which no directions are given or for which timely instructions were
not received in a manner calculated to most accurately reflect the instructions
the Employer Stock Fund Trustee received from participants regarding shares of
Company common stock in their Savings Plan accounts.
At this time, in order to direct the voting of Company common stock
credited to your Savings Plan account, you must complete and sign the enclosed
YELLOW vote authorization form and return it to the Employer Stock Fund Trustee
in the accompanying postage-paid envelope by __________, 2003. Your vote will
not be revealed, directly or indirectly, to any employee or director of the
Company or The Savings Bank of Manchester (the "Bank"). The vote authorization
forms will be tabulated by the Employer Stock Fund Trustee. The Employer Stock
Fund Trustee will use the voting instructions it receives to vote the shares of
Company common stock held in the Employer Stock Fund Trust.
As an employee of the Bank and participant in several of the Company and
Bank employee benefit plans you will receive vote authorization forms for each
stock-based plan in which you are a participant. Please vote all of the vote
authorization forms you receive.
Sincerely,
Richard P. Meduski
PRESIDENT AND CHIEF EXECUTIVE OFFICER
145
Name:____________________
Shares:___________________
VOTE AUTHORIZATION FORM
I understand that Eastern Bank (the "Trustee"), is the holder of record
and custodian of all shares of Connecticut Bancshares, Inc. (the
"Company") common stock credited to me under The Savings Bank of Manchester
Savings Plan. I understand that my voting instructions are solicited on behalf
of the Company's Board of Directors for the Special Meeting of Stockholders to
be held on _________, 2003.
Accordingly, vote my shares as follows:
The approval of the Agreement and Plan of Merger, dated July 15, 2003, by
and among The New Haven Savings Bank, Connecticut Bancshares and The
Savings Bank of Manchester.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AGREEMENT AND
PLAN OF MERGER.
The Employer Stock Fund Trustee is hereby authorized to vote all shares
credited to my Savings Plan account in its trust capacity as indicated above.
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE NO
LATER THAN _______, 2003.
146
[CONNECTICUT BANCSHARES, INC. LETTERHEAD]
Dear Stock Award Recipient:
On behalf of the Board of Directors, I am forwarding to you the attached
BLUE vote authorization form for the purpose of conveying your voting
instructions to Eastern Bank (the "Trustee") on the proposal presented at the
Special Meeting of Stockholders of Connecticut Bancshares, Inc. (the "Company")
on ___________, 2003. Also enclosed is a Notice and Proxy Statement for the
Company's Special Meeting of Stockholders.
As a recipient of a Stock Award under the Connecticut Bancshares, Inc.
2000 Stock-Based Incentive Plan and/or 2002 Equity Compensation Plan (the
"Incentive Plan"), you are entitled to vote all shares of restricted Company
common stock awarded to you under the Incentive Plan that are unvested as of
____________, 2003. The Incentive Plan Trustee will vote the shares of Company
common stock held in the Incentive Plan Trust in accordance with instructions it
receives from you and other Stock Award Recipients.
At this time, in order to direct the voting of Company common stock
awarded to you under the Incentive Plan, you must complete and sign the enclosed
BLUE vote authorization form and return it in the accompanying postage-paid
envelope no later than ___________, 2003.
If you are an employee of The Savings Bank of Manchester and participant
in several of the Connecticut Bancshares employee benefit plans you will receive
vote authorization forms for each stock-based plan in which you are a
participant. Please vote all of the vote authorization forms you receive.
Sincerely,
Richard P. Meduski
PRESIDENT AND CHIEF EXECUTIVE OFFICER
147
Name:____________________
Shares:___________________
VOTE AUTHORIZATION FORM
I understand that Eastern Bank (the "Trustee") is the holder of record and
custodian of all unvested shares of Connecticut Bancshares, Inc. (the "Company")
common stock awarded to me under the Connecticut Bancshares, Inc. 2000
Stock-Based Incentive Plan and/or 2002 Equity Compensation Plan (the "Incentive
Plan"). I understand my voting instructions are solicited on behalf of the
Company's Board of Directors for the Special Meeting of Stockholders to be held
on _________, 2003.
Accordingly, you are to vote my shares as follows:
The approval of the Agreement and Plan of Merger, dated July 15, 2003, by
and among The New Haven Savings Bank, Connecticut Bancshares, Inc. and
The Savings Bank of Manchester.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AGREEMENT AND
PLAN OF MERGER.
The Incentive Plan Trustee is hereby authorized to vote any unvested shares
awarded to me under the Incentive Plan in its trust capacity as indicated above.
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE NO
LATER THAN ________, 2003.