UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission File number:
0-11786
VILLAGE BANCORP, INC.
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-1076844
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 Prospect Street, Ridgefield, Ct. 06877
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203 438-9551
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class: Name of each exchange on which registered:
Common Stock ($3.33 Par Value) NASDAQ
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 13, 1998
Common Stock ($3.33 Par Value) 1,918,434 Shares
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant - $32,922,480.
Aggregrate market value Based upon reported closing price
of voting stock as supplied by NASDAQ
$38,368,680 March 13, 1998
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December 31,
1997 are incorporated by reference into parts I, II and IV. Portions of the
Proxy Statement for the Annual Meeting of Stockholders to be held on April 27,
1998 are incorporated by reference into Part III. Exhibit index is on page 6.
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VILLAGE BANCORP, INC.
FORM 10-K
TABLE OF CONTENTS
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PART I
Item 1. Business ........................................................ 1
Item 2. Properties ...................................................... 2
Item 3. Legal Proceedings ............................................... 2
Item 4. Submission Of Matters to Vote of Security Holders ............... 3
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters ..................................... 3
Item 6. Selected Financial Data ......................................... 3
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 3
Item 7.a. Quantitative and Qualitative Disclosure About Market Risk ....... 3
Item 8. Financial Statements and Supplementary Data ..................... 3
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............................. 3
PART III
Item 10. Directors and Executive Officers of the Registrant .............. 3
Item 11. Executive Compensation .......................................... 3
Item 12. Security Ownership of Certain Beneficial Owners
and Management .................................................. 4
Item 13. Certain Relationships and Related Transactions .................. 4
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ............................................. 4
SIGNATURES ............................................................................ 5
EXHIBIT INDEX ......................................................................... 6
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PART I
Item 1. Business
"Business" on pages 4 through 10 of the Annual Report to Stockholders for the
year ended December 31, 1997 is incorporated herein by reference.
Additional information required pursuant to this Item follows:
Village Bancorp, Inc.
The management of The Village Bank & Trust Company (Village) caused Village
Bancorp, Inc. (Company) to be formed in 1983 to enhance the opportunity for
diversification and expansion, and to allow for greater flexibility in both
banking and non-banking functions which banks are prohibited from entering. On
July 19, 1983, the Bank became a wholly owned subsidiary of the Company. On
November 18, 1994, Liberty National Bank (Liberty), Danbury, Connecticut became
a wholly owned subsidiary of the Company. On June 20, 1995, the Company merged
Liberty into Village and now operates Liberty's former office as a branch office
of Village. As a combination of entities under common control the merger was
accounted for in a manner similiar to a pooling of interests. As such, all
historical financial data presented in the annual report has been restated to
include both entities for all periods presented. As of December 31, 1997 the
Company's only subsidiary was Village.
The Village Bank & Trust Company
The Village Bank & Trust Company was incorporated in 1973 and commenced
operations in 1974. The Bank maintains its headquarters in Ridgefield,
Connecticut where it conducts general banking business as a state chartered
commercial bank as allowed by Sec. 36-57 of the Connecticut General Statutes.
The Bank began offering trust and similiar services in the third quarter of
1993. Liberty was merged into Village in June 1995, with its former office now a
Village branch. The Bank intends to offer services in the future that will allow
the Bank to remain competitive with other financial institutions as regulations
permit.
Patents, Trademarks, Licenses and Concessions Held
There are no patents, trademarks, licenses or concessions held that have a
material importance to the Company.
Seasonal Variations In Business
The Bank experiences little or no seasonal variation in it's business due to the
retail composition of it's customer base.
Dependence Upon Limited Number Of Customers
The Bank is not materially dependent on any single person, group of persons or
organization. The loss of any customer or group of related customers would not
have a materially adverse effect on the continued operation of the Bank.
Competition
The Bank encounters substantial competition for deposits and loans from other
financial institutions. Vigorous competition exists between the Bank and other
branch offices of financial institutions in Danbury, New Milford, Wilton,
Westport and Ridgefield, including commercial banks, savings banks and savings
and loan associations. No one financial institution is dominant in any
particular function of the banking market place.
Number of Employees
At December 31, 1997, Village had seventy-seven (97) full time equivalent
employees. Of these employees two officers of Village provide services to the
Company.
Supervision and Regulation
Village is insured by the Federal Deposit Insurance Corporation (FDIC) and is
subject to extensive regulation by the FDIC. Village, as a Connecticut state
chartered bank, is also subject to regulation by the Connecticut State Banking
Commissioner, who is responsible for administering Connecticut banking laws.
(Bancorp, as a bank holding company, is also subject to regulation by the
Federal Reserve Board.
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The FDIC has adopted regulations which require FDIC-insured banks to meet
certain minimum capital requirements. Banks that have less than the minimum
required capital are considered to be operating in an unsafe and unsound
condition, and are subject to a number of possible regulatory enforcement
actions, ranging from being required to acquire additional capital up to
termination of the Bank's FDIC deposit insurance.
Until recently most legislation had been aimed at increasing capital levels in
the banking industry and restricting business for those who fail to meet
adequate capital levels. As the Company is well capitalized the majority of this
legislation has had little effect on the operation or financial condition of the
Company. Legislation and proposed legislation most recently has been addressing
the area of risk, specifically interest rate risk. Essentially it is looking for
the banking industry to have a comprehensive risk management process in place,
that effectively identifies, measures, monitors and controls interest rate risk
exposures. Other regulatory actions focus on risk management (i.e. credit risk)
and the proper use of internal controls. Proposed legislation runs a wide gamut
of proposals. It is not possible at this time to predict whether or not any such
proposals will have any adverse effect on the Company, although management does
not expect any material adverse effect on the financial condition of the
Company.
Item 2. Properties
Village owns in fee simple a self contained facility at 25 Prospect Steet,
Ridgefield, Connecticut. The site contains 0.929 acres. The building has two
floors, the first floor which approximates 5,500 square feet is the location of
the general banking area, board room and President's office. The second floor,
which approximates 5,000 square feet, is the location of the administrative
offices, loan operations department, sanitary and employee facilities.
Village entered into a lease agreement on April 5, 1985 for a branch banking
facility at 219 Town Green, Wilton, Connecticut. The leasehold contains two
thousand six hundred forty five (2,645) square feet, that the Bank uses for its
branch banking office. The lease arrangement is for ten years with two five year
extensions options that can be exercised by the Bank. The lease has provisions
for consumer price index increases, and the current annual rental expense is
$75,343 not including property tax and maintenance charges. This facility was
opened November 16, 1985 and is a full service branch banking office.
Village extended a lease agreement on March 31, 1993, for a non-branch
operations (back-office) facility at 96 Danbury Road, Ridgefield, Connecticut.
The leasehold contains approximately six thousand (6,000) square feet of office
space and one thousand (1,000) square feet of storage space. The original lease
arrangement was for five years with provisions for two five year extensions, at
an annual rental of approximately $90,870, not including property tax and
maintenance charges. This lease originally commenced November, 1988, with five
percent annual increases. Four stockholders, two of whom are Directors, are
affiliated with the partnership which is leasing the facility to the Bank.
Village owns in fee simple a self contained facility at 54 Bridge Street, New
Milford, Connecticut. The site contains 0.16 acres. The building has two floors.
The first floor, which approximates 1,700 square feet, is the location of the
general banking office. The second floor, which approximates 1,524 square feet,
will be used for offices and loan originations and closings.
Village has a lease agreement for a branch banking facility at 28 Shelter Rock
Road, Danbury, Connecticut, that extends through October 31, 2001. The leasehold
contains approximately two thousand four hundred sixty (2,460) square feet. The
annual rental is approximately $39,360, not including property and maintenance
charges.
Village entered into a lease agreement in May, 1997 for a branch banking
facility at 244 Post Road East, Westport, Connecticut. The leasehold contains
eight thousand seventy-nine (8,079) square feet, of which approximately 6,000 is
used by the Bank for its branch banking office. Currently approximately one
thousand six hundred (1,600) square feet of this space is being sublet. The
lease arrangement is for ten years with one five year extension option that can
be exercised by the Bank. The current annual rental amount is $270,000, not
including tax and maintenance charges.
Village completed the building a three-story, 17,000 square foot building at 2
National Place, Danbury, Connecticut, in July of 1997, which it owns in fee
simple. The first floor contains a full service branch banking office. The
second and third floors are being utilized for loan and deposit back-office
operations.
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Item 3. Legal Proceedings
There are no material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of 1997.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
"Capital Stock" on page 36 of the Annual Report to Stockholders for the year
ended December 31, 1997 is incorporated herin by reference.
Item 6. Selected Financial Data
"Selected Financial Data" on page 10 of the Annual Report to Stockholders for
the year ended December 31, 1996 is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 11 to 14 of the Annual Report to Stockholders for the year
ended December 31, 1997 is incorporated herein by reference.
Item 7.a. Quantitative and Qualitative Disclosure About Market Risk
"Market Risk" and "Interest Rate Sensitivity" on pages 8 to 10 of the Annual
Report to Stockholders for the year ended December 31, 1997 is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes thereto on pages 16 to 33 of the
Annual Report to Stockholders for the year ended December 31, 1997 and the
Independent Auditors' Report on page 15 are incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information relating to directors and executive officers of the Registrant and
Bank and the information required by this item are included in the proxy
statement for the annual meeting of stockholders to be held on April 27, 1998,
on pages 9 through 15 and the information required by this item is herein
incorporated by reference.
Item 11. Executive Compensation
Compensation of directors and officers and the information required by this item
are included in the proxy statement for the annual meeting of stockholders to be
held on April 27, 1998, on pages 16 through 22 and the information required by
this item is herein incorporated by reference.
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Item 12. Security Ownership of Certain Beneficial Owners and Management
Information relating to security ownership of certain beneficial owners and
management as required by this item is included in the proxy statement for the
annual meeting of stockholders to be held on April 27, 1998, on pages 4 through
8 and is herein incorporated by reference.
Item 13. Certain Relationships and Related Transactions
Information of certain relationships and related transactions is included in the
proxy statement for the annual meeting of stockholders to be held on April 27,
1998, on pages 13 through 16 and is herein incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statements
(a) (1) The following consolidated financial statements and the Independent
Auditors' Report included in the Annual Report to Stockholders of Village
Bancorp, Inc. and Subsidiaries for the year ended December 31, 1997, are
incorporated by reference in Item 8:
Consolidated Balance Sheets - December 31, 1997 and 1996.
Consolidated Statements of Income - Years Ended December 31, 1997,
1996 and 1995.
Consolidated Statements of Changes in Stockholders' Equity - Years
Ended December 31, 1997,1996 and 1995.
Consolidated Statements of Cash Flows - Years Ended December 31, 1997,
1996 and 1995.
Notes to Consolidated Financial Statements.
(a)(2) Schedules to the Consolidated Financial Statements required by
Article 9 of Regulation S-X are not required under the related instructions or
the information is included in the Consolidated Financial Statements or Notes
thereto and has therefore been ommitted.
(a)(3) Exhibits.
The exhibits which are filed with this Form 10-K or which are incorporated
herein by reference are set forth in the Exhibit Index on Page 6.
(b) There were no reports on Form 8-K filed for the three months ended
December 31, 1997.
(c) Exhibits.
The exhibits which are filed with this Form 10-K or which are incorporated
herein by reference are set forth in the Exhibit Index on Page 6.
(d) Financial Statement Schedules - None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, therunto duly authorized.
Village Bancorp, Inc.
By /s/ James R. Umbarger March 27, 1998
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James R. Umbarger - Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
DATE
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/s/ Edward J. Hannafin March 27, 1998
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Edward J. Hannafin - Chairman of the Board & Director
/s/ Nicholas R. DiNapoli March 27, 1998
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Nicholas R. DiNapoli - Vice Chairman of the Board & Director
/s/ Robert V. Macklin March 27, 1998
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Robert V. Macklin - President, Chief Executive Officer & Director
/s/ Enrico J. Addessi March 27, 1998
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Enrico J. Addessi - Secretary of the Board & Director
/s/ Robert Scala March 27, 1998
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Robert Scala - Assistant Secretary of the Board & Director
/s/ Jose P. Boa March 27, 1998
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Jose P. Boa - Director
/s/ Richard 0. Carey March 27, 1998
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Richard 0. Carey - Director
/s/ Madeline F. Contegni March 27, 1998
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Madeline F. Contegni - Director
/s/ Jeanne M. Cook March 27, 1998
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Jeanne M. Cook - Director
/s/ Carl Lecher March 27, 1998
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Carl Lecher - Director
/s/ Joseph L. Knapp March 27, 1998
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Joseph L. Knapp - Director
/s/ Antonio M. Resendes March 27, 1998
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Antonio M. Resendes - Director
/s/ Thomas F. Reynolds March 27, 1998
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Thomas F. Reynolds - Director
/s/ James R. Umbarger March 27, 1998
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James R. Umbarger - Executive Vice President & Director
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VILLAGE BANCORP, INC.
EXHIBIT INDEX
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EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION REFERENCE NUMBERED PAGE
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3(i) Articles of Incorporation Exhibit 3(a) to Registration
Statement No. 2-8 1879
June 1,1983
3(ii) By-Laws Exhibit 3(b) to Registration
Statement No. 2-8 1879
June 1, 1983
4 Specimen Common Exhibit 4 to Form 10-K
Stock Certificate December 31, 1986
10(a) Lease Dated April 18, 1985 Exhibit 10(a) to Form 10-K
December 31, 1986
10(b) Lease Dated March 31, 1988 Exhibit 10(b) to Form 10-K
December 31, 1988
10(c) Lease Dated April 28, 1997 Exhibit 10(c) to Form 10-K
December 31, 1997 7
13 Annual Report to Stockholders Filed Herewith 44
for the year ended
December 31, 1997
21 Subsidiaries of the Registrant Filed Herewith 80
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LEASE made this 28th day of April, 1997 between LEO NEVAS and JAMIE GERARD,
TRUSTEE under the Spray Trust, both of the Town of Westport, County of Fairfield
and State of Connecticut ("Landlord") and THE VILLAGE BANK & TRUST COMPANY, a
Connecticut banking corporation with offices at 25 Prospect Street, Ridgefield,
Connecticut, acting herein by JAMES R. UMBARGER, Jr., its Executive Vice
president, duly authorized, ("Tenant").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein contained
and other good and valuable consideration, Landlord and Tenant hereby agree as
follows:
Article 1
Definitions; Construction of Terms
Section 1.01. Definitions. For the purposes of this Lease, and in addition
to those terms which are elsewhere defined in this Lease, the terms defined in
this Section 1.01 shall have the meaning so specified, unless such meanings are
expressly contradicted, limited or expanded elsewhere in this Lease, or the
context otherwise requires:
(a) "Buildings" shall mean all the buildings now or hereafter
comprising the tenantable portions of the Commercial Center, and "Building"
shall mean the building in which the Premises are contained.
(b) "Commencement Date" shall mean May 1, 1997 or the first day of the
month after the Landlord is able to deliver possession to the Tenant.
(a) "Commercial Center" shall mean all the Land, the Buildings and
Improvements thereon, and all easements, air rights, development rights and
other appurtenances thereto which are the premises located at 244 post Road
East in the Town of Westport, County of Fairfield and State of Connecticut,
plus such additional buildings and/or improvements as may hereafter be
added thereto.
(d) "Common Areas" shall mean all areas, spaces, facilities, equipment
and signs from time to time made available by Landlord for the common and
joint benefit and use of Landlord, Tenant and other tenants and occupants
of the Commercial Center, and their respective employees, agents, customers
and invitees. Common Areas may include, without limitation (but shall not
be deemed a representation as to their availability), the sidewalks,
parking areas, access roads, driveways, landscaped areas, loading docks,
pedestrian malls (enclosed or open), courts, stairs, ramps, elevators and
escalators.
(e) "Expiration Date" shall mean the last day of the One Hundred and
Twentieth (120th) month following the month in which the Commencement Date
occurs.
(f) "lmprovements" shall mean improvements, changes, alterations,
additions, installations, substitutions or decorations to any portion of
the Premises and/or the Buildings.
(g) "Insurance Requirements" shall mean all requirements of any
insurance policy covering or applicable to all or any part of the
Commercial Center or Premises or the use thereof, all requirements of the
issuer of any such policy and all orders, rules, regulations,
recommendations and other requirements of the Board of Fire Underwriters or
any other body exercising the same or similar functions and having
jurisdiction over all or any portion of the Commercial Center and/or
Premises.
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(h) "Interest Rate" shall mean a rate per annum equal to the lesser of
(i) three percentage points above the rate publicly announced from time to
time by THE VILLAGE BANK & TRUST COMPANY (or its successors), as its
so-called "base lending rate" (but in no event less than twelve percent
(12%) per annum) or (ii) the maximum rate of interest permissible under
applicable law, if any, with respect to the applicable amount payable
hereunder.
(i) "Land" shall mean the real property owned or leased by Landlord
upon which the Commercial Center is located at 244 Post Road East,
Westport, Connecticut.
(j) "Lease Year" shall mean the twelve full calendar months comprising
the period immediately following the Commencement Date.
(k) "Legal Requirements" shall mean all laws, statutes or ordinances
(including, without limitation, building codes and zoning ordinances), and
the orders, rules, regulations, directives and requirements of all federal,
state and local departments, bureaus, boards, agencies, and other
subdivisions thereof, or of any official thereof, or of any other
governmental or public authority, whether now or hereafter in force, which
are or become applicable to the Commercial Center or Premises or any part
thereof and all requirements, obligations and conditions of all instruments
of record affecting the Commercial Center or any part thereof on the date
of this Lease or to which this Lease is or becomes subordinate.
(1) "Minimum Rent" shall mean the amounts set forth on Schedule "A"
annexed hereto and made a part hereof.
(m) "Permitted Use" shall mean use as a bank and trust company, and a
bank holding company and other uses related thereto.
(n) "Premises" shall mean the office, retail, basement and/or storage
space, which space is marked on Exhibit "A" attached hereto, and is part of
the Commercial Center. The Premises shall not extend beyond the midway
point of any common interior wall. Landlord and Tenant acknowledge and
agree that for the purposes of this Lease, the Premises shall be deemed to
contain 8,079 rentable square feet of office space.
(o) "Rental Year" shall mean every period of 12 consecutive months
during the Term, commencing with the first day of the calendar month in
which occurs the Commencement Date.
(p) "Tenant's Proportionate Share" shall mean 20.97 percent.
(q) "Term" shall mean the period commencing on the Commencement Date
and ending on the Expiration Date, unless the Term shall sooner terminate
pursuant to the terms, covenants and conditions of this Lease or pursuant
to law.
(r) "Initial Term" shall mean the first ten years of this lease.
Section l.02. Construction of Terms. For the purposes of this Lease, unless
the context otherwise requires:
(a) Reference to Landlord as having "no liability to Tenant" or being
"without liability to Tenant" shall mean that Tenant is not entitled to
terminate this Lease, or to claim actual or constructive eviction, partial
or total, or to receive any abatement or diminution of rent, or to be
relieved in any manner of any of Tenant's other obligations hereunder, or
to be compensated for loss or injury suffered or to enforce any other right
or kind of liability whatsoever against Landlord
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<PAGE>
under or with respect to his Lease or with respect to Tenant's use or
occupancy of the Premises.
(b) The term "Landlord's agents" shall include all agents, servants,
contractors and employees of Landlord.
(c) The term "Tenant's agents" shall include all agents, servants,
contractors, employees, customers and invitees of Tenant.
(d) The term "Person" shall include individuals, corporation,
partnerships, firms, associations and any other legal entities.
(e) Words and phrases used in the singular shall be deemed to include
with plural and vice-versa, and nouns and pronouns used in any particular
gender shall be deemed to include any other gender.
Article 2
Demise of Premises; Change in Commercial Center
Section 2.01- Demise of Premises. Landlord hereby leases to Tenant and
Tenant hereby rents from Landlord the Premises. Nothing contained herein shall
be construed as a grant or demise by Landlord to Tenant of (i) the roof or
exterior walls of the Building or (ii) the space above the Premises and below
the underside of the roof slab of the Building, or (iii) the land below the
sub-base of the Premises, or (iv) the Common Areas.
Section 2.02- Change in Commercial Center. Landlord reserves the right
without any liability to Tenant to (i) increase, reduce or change the number,
type, size, quantity, height, design, nature, use, layout or location of the
Buildings and/or the Common Areas or any portion thereof in any manner as
Landlord may, from time to time, deem proper provided that the exercise of such
right shall not deprive the Tenant of its use and occupancy of the Premises, nor
substantially reduce the parking areas, nor shall Landlord take any action which
will have the effect of obstructing or interfering with the use of the drive-up
teller window or ATM machines.
Article 3
Term; Minimum Rent; Escalation of Minimum Rent;
Additional Rent; Net Lease; Past Due Rent
Section 3.01. Term. The Term shall commence on the Commencement Date and
end at 12:00 noon on the Expiration Date.
Notwithstanding the above, Tenant shall not commence payment of rent until
the day following the day on which any regulatory approval of the opening of
said branch becomes final. In the event the Tenant shall not obtain regulatory
approval within 45 days of the Commencement Date, either Landlord or Tenant
shall be entitled to terminate this Lease and neither party shall have any
further rights against the other.
Section 3.02. Minimum Rent. Throughout the Term, Tenant shall pay to
Landlord the Minimum Rent, without previous demand and without any setoff,
abatement or deduction whatsoever, at Landlord's office or at such address as
Landlord may, from time to time, designate by notice. The Minimum Rent shall be
payable in equal monthly installments, in advance, on the first day of each and
every calendar month during the Term; except Tenant
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<PAGE>
shall pay to Landlord the first full monthly installment of Minimum Rent on the
date hereof. If the Commencement Date shall occur on a day other than the first
day of any month, Minimum Rent for the first month of the Term shall be prorated
on a per diem basis. The annual minimum rents is shown on Schedule "A" attached
hereto.
Section 3.03 Additional Rent. In addition to Minimum Rent, all other
payments to be made by Tenant hereunder shall be deemed to be additional rent
hereunder, whether or not the same be designated as such, and shall be due and
payable (unless provided to the contrary herein) on demand or together with the
next succeeding installment of Minimum Rent, whichever shall first occur.
Landlord shall have the same rights and remedies upon Tenant's failure to pay
additional rent as for the nonpayment of Minimum Rent. Landlord, at its
election, shall have the right (but not the obligation), to pay for or perform
any act which requires the expenditure of any sum of money by reason of the
failure or neglect of Tenant to perform any of the provisions of this Lease
within the applicable grace period, if any, provided herein, and in the event
Landlord shall at its election pay such sums or perform such acts requiring the
expenditure of monies, Tenant agrees to reimburse and pay Landlord such sums
together with interest at the Interest Rate from the date of Landlord's
expenditure of such sum to the date of repayment.
Section 3.04. Net Lease. It is the purpose and intent of Landlord and
Tenant that this be a net lease which shall yield to Landlord the Minimum Rent
in each Rental year, and that all costs, expenses and obligations of every kind
and nature whatsoever relating to the Premises (except as hereinafter expressly
provided), which may arise or become due during or with respect to the Term
shall be paid by Tenant, and that Landlord shall be indemnified and saved
harmless by Tenant from and against the same.
Section 3.05. Past Due Rents. If Tenant shall fail to pay when due any
Minimum Rent or additional rent within five (5) days from the due date upon 24
hours notice of non-payment given to Tenant, such unpaid amounts shall bear
interest from the due date thereof to the date of payment at the Interest Rate.
In addition, if Tenant shall fail to pay any rents, charges or other sums,
within ten (10) days after the same become due and payable, then Tenant shall
also pay to Landlord additional rent to cover Landlord's additional overhead and
administrative costs and expenses arising out of such late payment in the amount
of five (5%) percent of the delinquent payment. The provisions herein for
interest and late charges shall not be construed to extend the date for payment
of any sums required to be paid by Tenant hereunder or to relieve Tenant of its
obligation to pay all such sums at the time or times herein stipulated.
Notwithstanding the imposition of such interest and/or late charges, Tenant
shall be in default under this Lease if any or all payments required to be made
by Tenant are not made at the time herein stipulated plus any applicable grace
period. Neither the demand for, nor collection by Landlord of such interest
and/or charges shall be construed as a curing of such default on the part of
Tenant.
Article 4
Construction
Section 4.01- Landlord's Work. Tenant shall accept the Premises herein in
its present condition. It is understood that the Landlord owns all of the trade
fixtures and equipment presently in the Premises, which may be used by Tenant
during the Term of this Lease or any Extension Term. Tenant acknowledges that
Landlord is not required to perform any work in the Premises, and that neither
Landlord nor Landlord's agents have made any representations regarding the
condition of the Premises
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or the suitability thereof for the Permitted Use. Any and all work to be
performed in the Premises as provided herein shall be performed by Tenant at
Tenant's sole cost and expense
Section 4.02. Tenant's Alterations. (a) Following the initial construction
of the Premises, if any, Tenant, at its own cost and expense, may paint, paper
or change floor coverings in and to the interior of the Premises only, provided
that (i) the structural integrity of the Building shall not be affected; and
(ii) the value of the Building is not thereby diminished; and (iii) the exterior
appearance (including store front) of the Premises is not thereby altered or
changed; and (iv) the cost of any such alteration, addition and decoration does
not exceed $7,500.00; and (v) the sprinkler system design, if any, is not
thereby affected, modified, altered or changed.
(b) In all instances in which Tenant desires to perform alterations,
installations, additions or improvements to the Premises other than as provided
in subsection (a) above, Tenant shall secure the prior written approval and
consent of Landlord. At the time such approval is sought, Tenant shall submit to
Landlord plans and specifications for such work, together with a statement of
the estimated cost of such work and the name of the proposed contractor who
Tenant proposes to engage to perform the same.
Section 4.03. Ownership of Improvements. All Improvements made by either
party (except Tenant's personal property, furniture and furnishings, signs and
moveable trade fixtures not constituting a permanent part of the Premises),
including all affixed lighting fixtures, heating, ventilating, air conditioning
and other equipment and apparatus, and all pipes, ducts, conduits, wiring,
paneling, partitions, railings, mezzanine floors, galleries and the like, if
any, shall remain upon and be surrendered with the Premises as a part thereof at
the expiration or sooner termination of the Term, and shall become the property
of Landlord at such time. Tenant shall not assign, lien, encumber, hypothecate,
pledge, chattel mortgage or create a security interest in and to or upon the
Premises (excluding Tenant's trade fixtures) without first obtaining in each
instance the prior written consent of Landlord. Any violation of the preceding
sentence by Tenant shall be without force and effect and shall not be binding
upon Landlord.
Article 5
Use of Premises
Subject to Legal Requirements and Insurance Requirements, Tenant shall use
the Premises solely for the Permitted Use. Tenant shall not use or permit or
suffer the use of the Premises for any other business or purpose. Tenant shall
conduct Tenant's business in the Premises under the Trade Name, which Tenant
represents it has the right to use.
Article 6
Operation of Business
Tenant shall: (a) subject to Article 25 hereof, continuously and
uninterruptedly occupy and use during the Term the entire Premises for the
Permitted Use, except for that portion of the Premises consisting of the
basement, which is currently subleased to Sachem Trust National Association
("Sachem Trust") under which sublease dated June 1, 1995, Tenant is hereby
substituted as "Sublessor" as contained therein; (b) conduct Tenant's business
therein in a reputable manner; (c) remain open for business as a full service
bank during the usual and regular hours and days as such businesses are
customarily open for business in the locality where the Commercial Center is
located; and (d) adequately staff its operation with sufficient staff to
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handle its clientele and conduct its full banking business therein.
Article 7
Laws and Requirements: Waste and Nuisance
Section 7.01. Laws and Requirements. Tenant, at Tenant's own cost and
expense, shall comply with all Legal Requirements and Insurance Requirements.
Section 7.02. Waste and Nuisance. Tenant shall not suffer, permit or commit
any waste, nor allow, suffer or permit any odors, vapors, steam, water,
vibrations, noises or undesirable effects to emanate from the premises or any
apparatus, equipment or installation therein and/or serving the Premises into
other portions of the Building or into the Commercial Center, or otherwise
allow, suffer or permit the Premises or any use thereof to constitute a nuisance
or interfere unreasonably with the safety, comfort or enjoyment of the
Commercial Center by Landlord or any other occupants of the Commercial Center or
their customers. Upon notice by Landlord to Tenant that any of the aforesaid is
occurring, Tenant agrees forthwith to cease and discontinue the same and within
ten (10) days thereafter to make such changes in the Premises and install
therein or remove therefrom such apparatus or equipment as may be required by
Landlord for the purpose of obviating any such condition. If any such condition
is not so remedied, then Landlord may, at its option, either (i) enter upon the
Premises during normal business hours, and cure such condition in any manner
Landlord shall deem necessary and add the cost and expense incurred by Landlord,
together with all damages, including reasonable attorney's fees, sustained by
Landlord to the next installment of Minimum Rent due, or (ii) treat such failure
on the part of Tenant to remedy such condition as an Event of Default under
Article 20 hereof. Tenant shall indemnify and save Landlord free and harmless of
and from all fines, claims, demands, actions, proceedings, judgments and damages
(including reasonable attorneys' fees) of any kind or nature by anyone
whomsoever, arising or growing out of any breach or nonperformance by Tenant of
the covenants contained in this Article 7.
Article 8
Repairs
Section 8.01. Landlord's Repairs. Landlord shall make at its expense all
necessary structural repairs to the roof, foundation, exterior walls and any
load bearing interior walls of the Premises and/or the Building and those parts
of any central heating, ventilation, air conditioning, plumbing and electrical
systems not located within the premises; and Landlord shall keep in good order,
condition and repair the downspouts and gutters of the Premises and/or the
Building. If the necessity for any of such repairs shall have been occasioned by
any action, omission to act or negligence of Tenant or Tenant's agents, Landlord
shall make such repairs and Tenant, within ten days after demand by Landlord,
shall pay to Landlord, as additional rent, an amount equal to the cost of such
repairs. Landlord shall not be required to commence any such repairs until after
notice from Tenant that the same is necessary, which notice, except in case of
an emergency, shall be in writing and shall allow Landlord a reasonable time in
which to commence such repair. Landlord shall use reasonable efforts to perform
such repair work with the minimum inconvenience, annoyance, disturbance or loss
of business to Tenant, as may be reasonably possible under the circumstances,
consistent with accepted construction practice in the locality, and so that such
work shall be completed expeditiously. In no event shall Landlord be required to
incur any additional expenses for work to be done during hours or days other
than regular business hours and days.
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Section 8.02 Tenant's Repairs. Except for the repairs which Landlord is
required to make pursuant to Section 8.01 above, Tenant shall, at Tenant's own
cost and expense, keep and maintain the Premises and each and every part thereof
in good repair, order and condition. Tenant shall make all repairs to the
Premises and to the fixtures and equipment therein or serving the Premises, and
the appurtenances thereto, necessary or desirable to keep the same in good order
and tenantable condition. Such repairs may include, without limitation, all
items of work described as Tenant's Work, the exterior and interior windows and
window frames, interior doors and door frames, entrances, store fronts, signs,
showcases, floor coverings, interior walls, partitions and the lighting,
electrical, heating, air conditioning, ventilating, plumbing, sprinkler (if any)
and sewage systems, equipment, fixtures and facilities within or serving the
Premises, and the escalators and elevators therein, if any, and the floor slab
and that portion of any pipes, lines, ducts, wires or conduits contained under,
above or within, and serving the Premises. Tenant shall keep and maintain the
premises in a first-class and attractive condition throughout the Term. Tenant
shall replace all damaged or broken glass and other glass, including structural
glass, with glass of at least equal quality to the broken or damaged, but in all
cases such replacement glass shall comply with Legal Requirements.
Section 8.03. HVAC Service Contract. As of the Commencement Date and
throughout the Term, Tenant shall have and maintain in full force and effect, at
its expense, a service contract ("Service Contract") with respect to the
heating, ventilating and air-conditioning equipment ("HVAC Equipment") at or
serving the Premises. The Service Contract shall require the servicing company
to provide routine maintenance of the HVAC Equipment, and to repair the same and
replace damaged or worn out parts in the event of any breakdown, all in
accordance with the specifications of the manufacturer of the HVAC Equipment.
Tenant shall provide a copy of the Service Contract to Landlord within ten days
after the Commencement Date. If Tenant fails to maintain a Service Contract as
required by this Section 8.03, Landlord may procure the same at Tenant's
expense, and Tenant shall pay a statement of Landlord's cost therefor, plus a
fifteen (15%) percent administrative fee, as additional rent within ten days
after receipt
Section 8.04. Tenant's Failure to Repair. If Tenant shall fail to make
repairs in accordance with the terms and provisions of this Lease, or if
Landlord is required to make any repairs by reason of any act, omission to act
or negligence of Tenant or Tenant's agent, Landlord shall have the right, at its
option, after Landlord shall have given to Tenant ten days' notice (except in
case of an emergency), to make such repairs on behalf of and for the account of
Tenant, to enter upon the premises for such purposes, and add the cost and
expense thereof (including a fee of 15% of the cost of such repairs for
Landlord's supervisory expenses) to the next installment of Minimum Rent due
hereunder. Nothing contained in this Section 8.04 shall be deemed to impose any
duty upon Landlord or affect in any manner the obligations assumed by Tenant
hereunder. Repairs made by Landlord on behalf of and for the account of Tenant
pursuant to this Section shall be without liability to landlord for any loss or
damage that may result to Tenant's merchandise, fixtures or other property or to
Tenant's business by reason thereof. Notwithstanding the above, any entry of the
Premises by Landlord under the terms of this Lease when Tenant is closed shall
require that Landlord first contact the Westport Police Department and be
accompanied by the Police or a duly authorized agent of Tenant.
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Article 9
Signs
Tenant, at its expense, shall provide an identification sign for the
Premises of such size, design and character as Landlord shall first approve in
writing. Tenant shall maintain any such sign or other installation in good
condition and repair. Tenant shall not place or install or suffer to be placed
or installed or maintain any other sign upon or outside the Premises or in the
Commercial Center. Tenant shall not place or install or suffer to be placed or
installed or maintained on the exterior of the Premises any awning, canopy,
banner, flag, pennant, aerial, antenna or the like; nor shall Tenant place or
maintain on the glass of any window of the Premises any sign, decoration,
lettering, advertising matter, shade or blind or other thing of any kind.
Landlord shall have the right, with or without notice to Tenant, to remove any
signs installed by Tenant in violation of this Article and to charge Tenant for
the reasonable cost of such removal and any repairs necessitated thereby,
without liability to Tenant for such removal. As used in this Article, the word
"sign" shall be construed to include any placard, light or other advertising
symbol or object irrespective of whether the same be temporary or permanent.
Tenant shall not, after obtaining Landlord's approval with respect to any sign,
materially change of any sign without first obtaining from Landlord a further
such approval. It is understood that the free standing Colonial Green "clock
sign" located on the Commercial Premises owned by the Landlord may be replaced
and modified by Landlord and arrangements made for the presence thereon of other
tenants, provided, however, that the Tenant will be permitted the use of the
sign subject to the terms contained in this Article 9.
Article 10
Covenant Against Liens
Tenant shall do all things necessary to prevent the filing of any
mechanic's lien or other lien against the Premises or any other portion of the
Commercial Center or the interest of Landlord or any ground or underlying
lessors therein or the interest of any mortgagees in the Commercial Center, by
reason of any work, labor, services or materials performed or supplied or
claimed to have been performed for or supplied to Tenant, or anyone holding the
Premises, or any part thereof, through or under Tenant. If any such lien shall
at any time be filed, Tenant shall either cause the same to be vacated and
canceled of record within thirty (30) days after the date of the filing thereof
or, if Tenant in good faith determines that such lien should be contested,
Tenant shall furnish such security, by surety bond or otherwise, as may be
necessary or be prescribed by law to release the same as a lien against the real
property and to prevent any foreclosure of such lien during the pendency of such
contest. If Tenant shall fail to vacate or release such lien in the manner and
within the time period aforesaid, then, in addition to any other right or remedy
of Landlord resulting from Tenant's said default, Landlord may, but shall not be
obligated to, vacate or release the same either by paying the amount claimed to
be due or by procuring the release of such lien by giving security or such other
manner as may be prescribed by law. Tenant shall repay to Landlord, within ten
days of demand, all sums disbursed or deposited by Landlord pursuant to the
foregoing provisions of this Article 10, including Landlord's cost and expenses
and reasonable attorney's fees incurred in connection therewith. Nothing
contained herein shall imply any consent or agreement on the part of Landlord or
any ground or underlying lessors or mortgagees to subject their respective
estates or interest to liability under any mechanic's or other lien law, whether
or not the performance or the furnishings of such work,
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labor, services or materials to Tenant or anyone holding the Premises, or any
part thereof, through or under such Tenant, shall have been consented to by
Landlord or any of such parties.
Article 11
Utilities and Services
Section 11.01. Payment for Utilities. (a) Tenant shall pay promptly, as and
when the same become due and payable, all water rents, rates and charges, and
all charges for electricity, gas and other utilities supplied to the Premises.
Tenant shall pay such charges in accordance with a meter or meters measuring the
consumption of such utilities. Tenant shall pay such charges within ten days
after a bill is rendered with respect thereto. Tenant shall pay such charges
from the date of Tenant entering into the Premises for the purpose of performing
any work therein.
(b) Landlord shall have no liability to Tenant for any interruption in the
supply of any utility to the Premises. Landlord reserves the right to stop or
reduce the level of the service of any or all of the utilities when necessary by
reason of accident or emergency, mechanical breakdown, Legal Requirements,
Insurance Requirements and/or unavoidable delays as set forth in Article 25
hereof, or for repairs, alterations, replacements or improvements, which, in the
judgment of Landlord, are desirable or necessary, until the reason for such
stoppage shall have been eliminated. Landlord shall use diligent efforts to
restore the service or complete the work, as the case may be. Tenant shall not
at any time overburden or exceed the capacity of the mains, feeder, ducts,
conduits or other facilities by which such utilities are supplied to,
distributed in or serve the Premises. If Tenant desires to install any equipment
which shall require additional utility facilities or utility facilities of a
greater capacity than the facilities provided by Landlord, such installation
shall be subject to Landlord's prior written approval of Tenant's plans and
specifications therefor. If approved by Landlord, Tenant agrees to pay Landlord,
within ten (10) days of demand, the cost for providing such additional utility
facilities or utility facilities of greater capacity.
Article 12
Taxes
12.01. Tax Obligation and Determination of Taxes.
Tenant shall, in all instances, pay Tenant's Proportionate Share of all
"Taxes" (as hereinafter defined) which may be levied, assessed or imposed
against, or become a lien upon, the Land, Building and all other improvements
and betterments in the Commercial Center during the Term of this Lease. The term
"Taxes" shall mean and include all real estate taxes, assessments (special or
otherwise), water and sewer rents, rates and charges (including water and sewer
connection and/or hookup charges), and other governmental levies and charges of
every kind and nature whatsoever, general and special, extraordinary and
ordinary, foreseen and unforeseen and each and every installment thereof, which
shall or may during the Term be levied, assessed, imposed, become due and
payable, or liens upon, or arising in connection with the use, occupancy or
possession of, or grow due and payable out of, or for, the Commercial Center or
any part thereof or the Land, Buildings, or other improvements therein (as
initially constructed or as the same may at any time thereafter be enlarged,
altered or reduced), including interest on installment payments and all costs
and fees (including reasonable attorneys' and appraisers' fees) incurred by
Landlord in contesting Taxes and negotiating with the public authorities as to
the same. "Assessments", as used in the foregoing definition of Taxes, shall be
deemed to include the costs of all road, highway and transportation improvements
(including, without limitation,
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traffic signals and systems) installed and paid for by Landlord. If at any time
after the date hereof the methods of taxation prevailing at the date hereof
shall be altered so that in addition to, or in lieu of, or a substitute for the
whole or any part of Taxes now levied, assessed or imposed on real estate, as
such, there shall be levied, assessed or imposed (i) a tax, assessment, levy
imposition or charge based on the rents received from such real estate, or (ii)
a license fee measured by the rents receivable by Landlord for the Commercial
Center or any portion thereof, or (iii) a tax or license imposed upon Landlord
which is otherwise measured by or based in whole or in part upon the Commercial
Center or any portion thereof, or (iv) any other tax, levy, imposition, charge
or license fee however described, then the same shall be included in the
computation of Taxes, computed as if the amount of such tax, imposition, charge
or fee so payable were that part due if the Commercial Center were the only
property of Landlord subject thereto. Nothing herein contained shall be
construed to include as Taxes any inheritance, estate, succession, transfer,
gift, franchise, corporation, income or profit tax or capital levy that is or
may be imposed upon Landlord, except as hereinabove provided.
Section 12.02 Payment of Taxes. Tenant shall pay to Landlord an amount with
respect to Taxes ("Tax Charge") equal to the product obtained by multiplying
Tenant's Proportionate Share by the entire amount of Taxes which are or become
due and payable with respect to the Term. The Tax Charge shall be paid to
Landlord in equal monthly installments (as the same may be subsequently
increased or decreased), in advance, at the same time and in the same manner as
payments of monthly installments of Minimum Rent hereunder. The official tax
bill shall be conclusive evidence of the amount of Taxes levied, assessed or
imposed, as well as of the items taxed. A copy of such tax bill shall, upon
written request of Tenant, be submitted by Landlord to Tenant. Any bill or
statement shall be deemed binding and conclusive upon Tenant if Tenant fails to
object thereto in writing (stating the reasons therefor) within 30 days after
the date thereof. If the aggregate amount of such monthly payments paid by
Tenant exceeds the actual amount thereafter due, the overpayment shall be
credited on Tenant's next succeeding Tax Charge payment or, during the final
Rental Year, Landlord will refund such excess to Tenant within 30 days following
the expiration of the Term, provided Tenant is not then in default of any of its
obligations under this Lease. If the aggregate amount of such monthly payments
paid by Tenant shall be less than the actual amount due, Tenant shall pay to
Landlord the difference between the amount paid by Tenant and the actual amount
due, within ten (10) days after demand from Landlord. If, on the first day of
the month in question, the amount of Taxes payable during the then current tax
year shall not have been determined by the taxing authority, then the Tax Charge
then payable by Tenant shall be estimated by Landlord based on the amount of the
corresponding Taxes for the immediately preceding tax year. Any such estimated
Tax Charge shall be subject to immediate adjustment when the amount of such
Taxes shall be determined, and payment or credit of such adjustment shall be
made upon billing by Landlord. If any mortgagee or ground lessor of Landlord
should require any tax escrow deposits, in advance of the due date, then Tenant
shall deposit with Landlord, in advance, its share of such deposits. If the
Commencement Date and/or the Expiration Date occur other than on the first day
of a calendar month, the Tax Charge payable by Tenant hereunder shall be
prorated with respect to the month in which occurs the Commencement Date and/or
the Expiration Date, as the case may be. Tenant agrees to pay prior to
delinquency any and all taxes and assessments levied, assessed or imposed upon
during the Term upon or against (i) all furniture, fixtures, signs and equipment
and any other personal property installed or located within the Premises, (ii)
all alterations, additions, betterments, or improvements of whatsoever kind or
nature made by or on behalf of Tenant to the Premises, including such
improvements and betterments included in Tenant's Work, as the same may be
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separately levied, taxes and assessed against or imposed directly upon Tenant by
the taxing authorities, and (iii) the rentals payable hereunder by Tenant to
Landlord (other than Landlord's Federal, State or local income taxes thereon).
Should any governmental authority require that a tax, other than the Taxes, be
paid by Tenant, but collected by Landlord, for and on behalf of said
governmental authority, and from time to time forwarded by the Landlord to said
governmental authority, the same shall be paid by Tenant to Landlord, payable
monthly in advance. (Landlord shall have the right, if permitted by law, to make
installment payments of any assessments levied against the Commercial Center;
and in any such event Taxes shall be computed upon the installments and interest
paid by Landlord in each Lease Year. If Landlord has been or will be required to
install and pay for improvements or betterments and thereafter deed and dedicate
the same to the public or private authority having jurisdiction thereover, the
cost thereof shall be included in the computation of Taxes only to the extent of
equal installments for each Lease Year of the Term.
Article 13
Common Areas
Section 13.01. Definition and General Provisions. The Common Areas shall be
subject to the exclusive control and management of Landlord, expressly reserving
to Landlord, without limitation, the right to erect, install, replace and remove
improvements, including planters, fences, landscaping and freestanding
buildings. Landlord reserves the right, from time to time, to construct,
maintain, replace, remove and operate lighting and other facilities, equipment
and signs on all of the Common Areas; to police the same; to change the area,
level, location and arrangement of the parking areas and other facilities
forming a part of the Common Areas; to reasonably restrict parking by Tenant and
other tenants and occupants of the Commercial Center and their respective
employees, agents, customers and invitees; to close temporarily all or any
portion of the Common Areas for the purpose of making repairs or changes thereto
or to effect construction, repairs or changes within the Commercial Center, and
to discourage non-customer parking; and to establish, modify, invoke and enforce
reasonable rules and regulations with respect to the Common Areas and the use to
be made thereof. Tenant shall make no claim against Landlord by reasons of
Landlord's failure to uniformly enforce such rules and regulations against all
tenants and occupants of the Commercial Center. Tenant further agrees, after
notice thereof, to abide by such rules and regulations and to use its best
efforts to cause its officers, employees, agents, customers and invitees to
abide thereby. Tenant is hereby given a non-exclusive and non-transferable
license (in common with all others to whom Landlord has or may hereafter grant
such rights) to use, during the Term, the Common Areas as they may now or at any
time during the Term exist; provided, however, that if the size, location or
arrangement of the Common Areas or the type of facilities at any time forming a
part thereof be changed or diminished, Landlord shall have no liability to
Tenant therefor. In order to establish that all or any portion of the Commercial
Center is and will continue to remain private property and to prevent a
dedication thereof or the accrual of any rights to the person or to the public
therein, Landlord reserves the unrestricted right to close to the general public
all or any portion of the Commercial Center owned, leased or controlled by
Landlord to the extent and for the period necessary to prevent such dedication
or accrual, and, in connection therewith, to seal off all entrances to the
Commercial Center, or any portion thereof. Tenant acknowledges and consents that
any and all services, facilities and access by the public to the Premises or to
the Commercial Center may be suspended in whole or in part during such temporary
times as legal holidays, on such other days as may be declared by local, State
or Federal authorities or employees' unions, if any,
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as days of observance, and during any periods of actual or threatened civil
commotion, insurrection or other circumstances beyond Landlord's control, when
Landlord, in Landlord's reasonable judgment, shall deem the suspension of such
services, facilities and access necessary for the protection or preservation of
persons or property or otherwise as required by law. Common Areas shall not be
used for solicitations, distributions of handbills or other advertising matter,
demonstrations or any other activities that would in Landlord's judgment
interfere with the use of the Common areas or with the conduct of business or
the rights of other tenants. Landlord shall operate, manage, equip, light,
repair, replace and maintain the Common Areas and keep good order and security
therein all in such manner as Landlord, in its reasonable discretion, may from
time to time determine, and Landlord shall have the right and exclusive
authority to employ and discharge all personnel connected therewith.
Section 13.02. Cost of Maintenance of Common Areas. (a) Tenant shall pay to
Landlord, in the manner provided in subparagraph (b) of this section 13.02, a
share ("Tenant's Common Area Charge"), as hereafter computed, of the operating
costs (as hereafter defined) of the Commercial Center. "Operating Costs" shall
mean the sum of (i) the costs incurred by Landlord pursuant to section 8.01 and
16.01 hereof and, with respect to Section 8.01 hereof, similar costs in respect
to similar obligations to other tenants of the Commercial Center, and (ii) the
total costs, expenses and fees incurred in operating, managing, equipping,
cleaning, lighting, repairing, replacing and otherwise maintaining the Common
Areas, and maintaining order and security therein, including, without
limitation, the cost of all materials, supplies and services purchased or hired
therefor; personal property taxes; surcharges levied upon or assessed against
parking spaces or areas; the cost and expense of landscaping, gardening and
planting, cleaning, removal of snow and ice, painting (including line painting),
decorating, paving, lighting, sanitary control, and removal of trash, garbage
and other refuse, heating, ventilating and air conditioning of the enclosed
portions of the Common Areas, if any; fire protection; management fees; water,
sanitary sewer and storm water lines and other utility lines, pipes and
conduits; depreciation of machinery, apparatus, and equipment owned and used in
the operation, maintenance and repair of the Common Areas, or the rental charges
for such machinery and equipment; the cost of personnel (including applicable
payroll taxes, worker's compensation insurance and disability insurance) to
implement all of the foregoing, including the policing of the Common Areas and
the directing of traffic and parking of automobiles on the parking areas thereof
and administrative costs attributable to the Common Areas. Landlord may,
however, cause any or all of said services to be provided by independent
contractors.
(b) Tenant's Common Area Charge shall be in an amount equal to the product
obtained by multiplying the operating costs paid or incurred by Landlord during
the first accounting period and each subsequent accounting period (as hereafter
defined) by Tenant's Proportionate Share. As used herein, the "first accounting
period" shall mean the fractional period, if any, corresponding to the partial
Lease Year hereunder; and "each subsequent accounting period" shall mean the
period of 12 full calendar months corresponding with each Lease Year hereunder
(or any other fiscal or 12 month period selected by Landlord) after the first
accounting period. Tenant's Common Area Charge shall be payable as follows:
(1) During that portion of the Term within the first accounting period
(subject to adjustment as hereafter in subparagraph (b) (3) set forth),
Tenant shall pay Landlord monthly, in advance, on the first day of each
month, a sum in such amount as is billed to Tenant by Landlord, as an
estimate of Tenant's Common Area Charge during the first accounting period.
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(2) The foregoing estimated sum under subparagraph (b) (1) above shall
be adjusted and revised by Landlord as of the end of the first and each
subsequent accounting period during the Term on the basis of the actual
operating costs during the immediately preceding first or subsequent
accounting period, as the case may be, plus reasonably anticipated
increases or decreases in such costs. Upon Landlord's furnishing to Tenant
a written statement setting forth such revised estimated operating costs,
Tenant shall pay to Landlord Tenant's Common Area Charge in monthly
installments, in advance, on the first day of each month until the next
succeeding revision in such estimate. If a statement is furnished to Tenant
after the commencement date of the first of any subsequent accounting
period, Tenant shall pay to Landlord, within ten (10) days after the
receipt of such statement, or Landlord shall credit against the next
succeeding payment of Tenant's Common Area Charge, as the case may be, an
amount equal to the deficiency or overpayment allocable to the part of the
accounting period which shall have elapsed prior to the first day of the
calendar month next succeeding the calendar month in which the statement is
furnished to Tenant.
(3) Within a reasonable period following the end of the first
accounting period and each subsequent accounting period, Landlord shall
furnish Tenant a written statement covering the accounting period just
expired, showing in reasonable detail a general breakdown of the total
operating costs, the amount of Tenant's Common Area Charge for such
accounting period and the payments made by Tenant with respect to such
accounting period. If Tenant's Common Area Charge exceeds Tenant's payment
with respect to such accounting period, Tenant shall pay Landlord the
deficiency within ten (10) days after the furnishing of said statement; and
if said payments exceed Tenant's Common Area charge, Tenant shall be
entitled to a credit for such excess against payments next thereafter to
become due to Landlord on account of Tenant's Common Area Charge, or,
during the final Lease Year, Landlord will refund such excess to Tenant
within thirty (30) days following the Expiration Date, provided Tenant is
not then in default hereunder.
(4) As to the first accounting period, or any subsequent accounting
period, a portion only of which is contained in the Term, Tenant's
obligation for a share of the actual operating costs shall be prorated on
the basis of the actual number of days in the portion of such accounting
period contained in the Term. Tenant's obligation to pay Tenant's Common
Area Charge shall survive the expiration or sooner termination of this
Lease.
(5) In the event of any dispute, Tenant shall pay the amount of
Landlord's bill or statement hereunder and such payment shall be without
prejudice to Tenant's position. If the dispute shall be determined in
Tenant's favor, by agreement or otherwise, Landlord shall pay Tenant the
amount of Tenant's overpayment resulting from such compliance by Tenant.
(6) Any such bill or statement shall be deemed binding and conclusive
if (i) Tenant fails to object thereto in writing (stating the reason(s)
therefor), within thirty (30) days after the date the same has been
furnished by Landlord to Tenant, or (ii) Tenant fails to comply with the
provisions of subparagraph (b) (5) above.
(c) Notwithstanding the provisions of subsection 13.02(b) above which
provide for payment of Tenant's Common Area Charge monthly, in advance, in
accordance with Landlord's estimated bills ("Advance Billing System"), Landlord,
at its option, may bill Tenant monthly, in arrears, for Tenant's Common Area
Charge based upon actual operating costs paid or incurred by Landlord with
respect to the immediately preceding month ("Arrears Billing System").
Subsections l3.02(b)(4), (5) and (6) shall continue to be applicable in the
event Landlord elects to utilize the Arrears Billing System. Landlord's election
to use either the Advance
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Billing System or the Arrears Billing System at any time during the Term shall
not preclude its election to switch, on one or more occasions, to the
alternative billing system at any other time during the Term, provided that any
such change in billing systems shall not result in duplication of charges to
Tenant.
ARTICLE 14
Assignment and Subletting
Section 14.01. General Provisions. (a) Neither this Lease, nor the Term and
estate hereby granted, nor any part hereof or thereof, nor the interest in
Tenant in any sublease or the rentals thereunder, shall be assigned, mortgaged,
pledged, encumbered or otherwise transferred by Tenant, Tenant's legal
representatives or successors in interest by operation of law or otherwise, and
neither the Premises, nor any part thereof, shall be encumbered in any manner by
reason of any act or omission on the part of Tenant or anyone claiming under or
through Tenant, or shall be sublet or be used or occupied or permitted to be
used or occupied, by anyone other than Tenant, or for any purpose other than as
permitted by this Lease, without the prior written consent of Landlord in each
case, except as expressly otherwise provided in this Article.
(b) If at any time or from time to time prior to or during the Term, Tenant
desires to assign this Lease or sublet all or any portion of the Premises,
Tenant shall notify Landlord in writing of such desire.
(C) Landlord shall not unreasonably withhold its consent, which must be in
writing, to an assignment of this Lease or a subletting of all or that part of
the Premises proposed to be sublet, provided, however, that Landlord shall not,
in any event, be obligated to consent to any such proposed assignment or
subletting unless:
(i) At the time of the request for Landlord's consent and at the date
of the sublease or assignment, as the case may be, this Lease shall be in
full force and effect, without any breach or default hereunder on the part
of Tenant;
(ii) The proposed assignee or subtenant shall possess a business
reputation and financial credit such as are in keeping with the standards
of Landlord and shall conform with the "tenant mix" reasonably desired by
Landlord for the Commercial Center;
(iii) The proposed assignee or subtenant shall assume, by instrument
in form and content satisfactory to Landlord, the due performance of all
Tenant's obligations under this Lease (except that in the case of a
subletting of less than the entire premises, the subtenant shall assume
only its proportionate share of Tenant's obligations hereunder);
(iv) A copy of the original assumption agreement and the assignment or
subletting agreement, as the case may be, fully executed and acknowledged,
shall be submitted to Landlord within ten (10) days of the execution of the
same.
(d) It is understood and agreed that the Landlord may refuse its consent to
any assignment or subletting and may take into consideration facts beyond the
financial stability or business to be conducted by the Tenant. Reasons which
shall be deemed to be a satisfactory basis for withholding consent shall
include, but not be limited to, unsatisfactory prior business dealings of any
kind whether related to these premises or not with the proposed assignee, its
affiliates, predecessors, or otherwise connected entities.
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(e) With respect to an assignment of this Lease or a sublease by Tenant of
all or any portion of the Premises, the following provisions shall apply: Any
profit on such sublease or assignment shall be shared 50% by Tenant and 50% by
Landlord. For purposes of this paragraph, "profit" shall refer to the difference
between (1) all payments made by a subtenant or assignee to Tenant, directly or
indirectly, as rent or otherwise under or in connection with said sublease or
assignment; and (2) the annual prorated amount of Minimum Rent and additional
rent payable hereunder with respect to the space affected by such sublease or
assignment. Payments of Landlord's share of the profit in connection therewith
shall be made monthly as additional rent hereunder, on the first day of each
calendar month. If all or any part of Tenant's profit shall be paid to Tenant
other than in monthly installments, Tenant shall pay 50% of such profit to
Landlord within ten (10) days of receipt thereof.
(f) In the case of a subletting, the subletting agreement delivered to
Landlord in accordance with subparagraph (c) (iv) above shall provide that (i)
such sublease is and shall be subject and subordinate to this Lease and any then
existing or future modifications thereof; and (ii) in the event of termination,
reentry or dispossess by Landlord under the Lease, Landlord may, at its option,
take over all of the right, title and interest of Tenant, as sublessor, under
such sublease, and such subtenant shall, at Landlord's option, attorn to
Landlord pursuant to the then executory provisions of such sublease, except that
Landlord shall not (x) be liable for any previous acts or omissions of Tenant,
as sublessor under such sublease, or (y) be subject to any offsets, not
expressly provided for in such sublease, against Landlord, or (z) be bound by
any previous modification of such sublease to which Landlord shall not have
consented in writing, or by any previous prepayments of more than one month's
rent.
(g) In the case of an assignment or subletting, Tenant, as assignor, or as
sublessor, as the case may be, shall remain liable for the performance or
observance of all of the terms and provisions on Tenant's part to be performed
or observed under this Lease
(h) Any consent of Landlord to any assignment or subletting shall not be
construed as a waiver of any requirement for obtaining (i) the consent of
Landlord to any subsequent assignment of this Lease or subletting of all or any
part of the Premises, or (ii) the consent of Landlord to any assignment of any
sublease, the under subletting of the whole or any portion of the Premises or
the subletting of any portion of the Premises.
(i) Tenant shall pay the reasonable expenses of Landlord's attorneys in
connection with the review and/or preparation of any documents resulting from a
request by Tenant to assign this Lease or sublet all or any part of the
Premises. Tenant shall make payment within ten (10) days after receipt of
Landlord's statement. Landlord shall provide reasonable substantiation of the
fees involved, which fees shall not exceed Fifteen Hundred ($1,500.00) Dollars.
Section 14.02. Change in Ownership. For purposes of this Article 14, (i)
the transfer of a majority of the issued and outstanding capital stock of any
corporate tenant, or of a corporate subtenant, or the transfer of a majority of
the total interest in any partnership tenant or subtenant, however,
accomplished, whether in a single transaction or in a series of related or
unrelated transactions, shall be deemed an assignment of this Lease, or of such
sublease, as the case may be, except that the transfer of the outstanding
capital stock of any corporate tenant, or subtenant, shall be deemed not to
include the sale of such stock by persons or parties through the
"over-the-counter market" or through any recognized stock exchange,
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other than those deemed "insiders" within the meaning of the Securities Exchange
Act of 1934, as amended, (ii) a takeover agreement shall be deemed a transfer of
this Lease, (iii) any person or legal representative of Tenant, to whom Tenant's
interest under this lease passes by operation of law, or otherwise, shall be
bound by the provisions of Article 14, and (iv) a modification, amendment or
extension of a sublease shall be deemed a sublease. (Refer to Article 14.01(d)
and Article 34). Notwithstanding the above, any sublease or assignment to an
independent bank or subsidiary bank in which Tenant shall have a substantial
interest shall not require the consent of Landlord.
Section 14.03. Sachem Trust Sublease. Notwithstanding anything to the
contrary contained herein, Tenant accepts the premises subject to the terms of a
sublease by and between Lafayette American Bank & Trust Company and Sachem Trust
National Association dated June 1, 1995 and the terms of a consent to sublease
between Leo Nevas and Jamie Gerard, Trustee, Lafayette American Bank & Trust
Company and Sachem Trust National Association dated June, 1995, copies of which
are annexed hereto and made a part hereof.
Article 15
Indemnity
A. Tenant shall defend, pay, indemnify and save free and harmless Landlord,
and any fee owner or ground or underlying lessors of the Commercial center, to
the full extent permitted by law, from and against any and all claims, demands,
liabilities, fines, suits, actions, proceedings, orders, decrees and judgments
of any kind or nature by or in favor of anyone whomsoever and from and against
any and all costs and expenses, including reasonable attorney's fees, resulting
from or in connection with loss of life, bodily or personal injury or damage to
property arising, directly or indirectly, out of or from or on account of any
occurrence in upon, at, or from the Premises or occasioned wholly or in part
through the use and occupancy of the Premises or by any improvements therein or
appurtenances thereto, or by any act or omission of negligence of Tenant or any
subtenant of Tenant, or their respective employees, agents, invitees, customers
or contractors in, upon, at or from the Premises or its appurtenances or the
Common Areas, except for the negligence of the Landlord, its agents, or
employees.
B. Tenant and all those claiming by, through or under Tenant shall store
their property in and shall occupy and use the Premises and any improvements
therein and appurtenances thereto and all portions of the Commercial Center
solely at their own risk. Tenant and all those claiming by, through or under
Tenant hereby release Landlord and any fee owner or ground or underlying lessors
of the Commercial Center, to the full extent permitted by law, from all claims
of every kind, including loss of life, bodily or personal injury, damage to
merchandise, equipment, fixtures or other property, or damage to business or for
business interruption, arising, directly or indirectly, out of or from or on
account of such occupancy and use or resulting from any present or future
condition or state of repair thereof, except for the negligence of the Landlord,
its agent, or employees.
C. Landlord shall have no liability to Tenant, or those claiming by,
through or under Tenant, for any loss of life, bodily or personal injury, or
damage to property or business, or for business interruption, that may be
occasioned by or through the acts, omissions or negligence of any other persons,
or any other tenant or occupants of any portion of the Commercial Center, except
for the negligence of the Landlord, its agents, or employees.
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n. Neither Landlord nor any fee owner or ground or underlying lessors of
the Commercial Center shall be responsible or liable for damages at any time for
any defects, latent or otherwise, in the Building or other improvements in the
Commercial Center or in any of the equipment, machinery, utilities, appliances
or apparatus therein. Further, Landlord shall not be responsible or liable for
damages at any time for loss of life, or bodily or personal injury or damage to
property or for business interruption, to any person or to any property or
business of Tenant, or those claiming by, through or under Tenant, caused by or
resulting from the bursting, breaking, leaking, running, seeping, overflowing or
backing up of water, steam, gas or sewage, in any part of the premises or caused
by or resulting from acts of God or the elements, or resulting from any defect
or negligence in the occupancy, construction, operation or use of any of the
Buildings or other improvements in the Commercial Center, including the
Premises, except for the negligence of the Landlord, its agents or employees.
E. Landlord shall have no liability to Tenant, or to those claiming by,
through or under Tenant, if the Rules and Regulations set forth on Exhibit B
hereto or any other Rules and Regulations established by Landlord in good faith
are determined by a court to have deprived Tenant, or those claiming by, through
or under Tenant, of any free speech or other rights under the Connecticut
Constitution or the United States Constitution.
F. After any litigation or proceeding between the parties hereto, the
successful party shall be entitled to all costs, expenses and reasonable
attorneys' fees that it may actually incur in enforcing the terms of this Lease
against the other party. Tenant acknowledges that all of the foregoing
provisions of this Article shall apply and become effective from and after the
date Landlord shall deliver possession of the Premises to Tenant in accordance
with the terms of this Lease.
Article 16
Insurance
Section 16.01 Landlord's Insurance. From and after the Commencement Date,
Landlord shall keep the Buildings at the Commercial Center insured against fire
and such other risks as are, from time to time, included in standard extended
coverage endorsements in the locality in which the Commercial Center is located,
and with such deductibles as Landlord from time to time may determine. Such
insurance shall not cover any property with respect to which Tenant or other
tenants are obliged to insure. Landlord may also take out and keep in force
other insurance, in amounts to be determined by Landlord, against other
insurance hazards which Landlord, in its reasonable judgment, believes it is
prudent or necessary to insure against. Such other insurance may include,
without limitation, rent insurance and insurance in such amount and form as may
from time to time be required by the holder of any mortgages or fee interest to
which this Lease is subordinate. Landlord shall have the right to insure and
maintain the insurance coverage set forth herein under blanket insurance
policies covering other properties owned, leased or operated by Landlord or any
parent, subsidiary or affiliate of Landlord.
Section 16.02. Tenant's Insurance. Tenant shall secure and keep in force
from and after the date Landlord shall deliver possession of the Premises to
Tenant and throughout the Term, at Tenant's expense: (a) Comprehensive General
Liability Insurance on an occurrence basis with a minimum limit of liability in
amounts reasonably determined by Landlord but in no event less than the amount
of One Million ($l,000,000.00) Dollars combined single limit for bodily injury
and property damage, including non-owned automobile liability; and which
insurance shall contain (i) a contractual liability endorsement covering the
matters set
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forth in Article 16 hereof and (ii) a "personal injury" endorsement covering
claims arising out of false arrest, false imprisonment, defamation of character,
libel and slander, wrongful eviction and invasion of privacy; (b) insurance upon
property of every kind and description owned by Tenant, or for which Tenant is
legally liable, or installed by or on behalf of Tenant, and which is located
within the Commercial Center, including, without limitation, furniture, fittings
installations, alterations, additions, partitions, fixtures and anything in the
nature of a leasehold improvement in an amount equal to at least 90% of the full
replacement value thereof including any increase in value resulting from
increased costs, with coverage against the perils of fire and other perils as
are, from time to time, included in standard "All Risk" policies of insurance in
the locality in which the Commercial Center is located; (c) Plate Glass
Insurance covering all plate glass in the Premises, but Tenant shall have the
option, in respect of Plate Glass Insurance, either to insure the risk or
self-insure; and (d) such other insurance in such amounts as Landlord or
Landlord's mortgagee may reasonably require from time to time. Tenant shall have
the right to insure and maintain the insurance coverage set forth in this
Section 16.02 under blanket insurance policies covering other premises operated
by Tenant so long as such blanket policies comply as to terms and amounts with
the insurance provisions set forth in this Lease.
Section 16.03. Insurance Requirements. (a) All policies of insurance
procured by Tenant: (i) shall be written as primary policies not contributing
with, nor in excess of, coverage that Landlord may carry, and (ii) shall be
issued in the name of Tenant and shall contain an endorsement naming Landlord
and, at Landlord's request, its mortgagees or ground lessors, if any, as
additional insureds. (b) Duly executed certificates of insurance or, if required
by Landlord or any mortgagee, together with reasonably satisfactory evidence of
payment of the premiums therefor, shall be delivered to Landlord on or before
the day Tenant takes possession of the Premises and, upon renewals of such
policy or policies, not less than ten (10) days prior to the expiration of the
term of any coverage thereunder. The minimum limits of any insurance coverage
required herein to be carried by Tenant shall not limit Tenant's liabilities
under Article 16 hereof. All such certificates or policies shall provide for
thirty (30) days' notice to Landlord or any Mortgagee or ground lessor of the
cancellation of such policy. (c) Tenant releases Landlord and Landlord's agent,
Mortgagees and ground lessors, if any, from liability for loss or damage to any
of Tenant's property situated in the Commercial Center that is covered by the
insurance required to be maintained by Tenant under Section 16.02 hereof, or, if
Tenant fails to maintain such insurance, would have been covered by such
insurance unless Landlord maintains insurance coverage for such loss and such
loss was due to Landlord's gross negligence or willful misconduct. This release
shall not be limited to the liability of Landlord or Landlord's agents to
Tenant; it shall also apply to Landlord or Landlord's agents liability to any
person claiming through or under Tenant pursuant to a right of subrogation or
otherwise. All policies procured by Tenant under subsection 16.02(b) hereof
shall provide that such insurance shall not be invalidated should the insured
waive in writing prior to a loss any or all rights of recovery against any party
for loss occurring to the property described therein. (d) Landlord releases
Tenant and Tenant's agents from liability for loss or damage to all or any
portion of the Buildings to the extent the same is covered by the fire and
extended coverage insurance maintained by the Landlord with respect to the
Commercial Center. This release shall not be limited to the liability of Tenant
or Tenants agents to Landlord; it shall also apply to Tenant's or Tenant's
agents liability to any person claiming through or under Landlord pursuant to a
right of subrogation or otherwise. This release shall apply even if the loss or
damage shall have been caused by the fault or negligence of Tenant or Tenant's
agents. (e) If Tenant fails to take out or to keep in force any insurance
required to be taken
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out and kept in force by Tenant, Landlord shall have the right, without assuming
any obligation in connection therewith, to effect such insurance at the sole
cost and expense of Tenant and all outlays by Landlord shall be paid by Tenant
to Landlord within ten (10) days of demand as additional rent.
Article 17
Damage and Destruction
Section 17.01. Landlord's obligation to Repair. If the Premises or any part
thereof shall be partially damaged by fire or other casualty and Tenant gives
prompt notice thereof to Landlord, subject to its rights under Section 17.03,
Landlord shall proceed with reasonable diligence to repair or cause to be
repaired such damages; provided, however, Landlord shall have no obligation to
repair or restore Tenant's trade fixtures, decorations, signs, store contents or
other property of Tenant, and Landlord's obligations to repair shall be limited
to the extent of insurance proceeds received by Landlord therefor. If the damage
is not the result of the willful or negligent act or omission of Tenant or
Tenant's agents, the Minimum Rent shall be abated to the extent that the
Premises shall have been rendered untenantable, such abatement to be from the
date of such damage or destruction to the date the Premises shall be
substantially repaired, restored or rebuilt. If Tenant shall reoccupy portions
of the Premises as the restoration continues, the abatement, if any, shall cease
as to such portions.
Section 17.02. Tenant's Right to cancel. If the Premises shall be totally
damaged or rendered wholly untenantable by fire or other casualty, and either of
the following (a) or (b) occurs: (a) Landlord has not commenced the making of
the required repairs within ninety (90) days after the date on which Landlord
shall have obtained all required governmental permits and approvals in
connection with such repairs and restoration and all insurance proceeds with
respect to any such event; or (b) Landlord has not completed the making of the
required repairs and substantially restored and rebuilt the Premises and/or
access thereto within nine (9) months from the date of such damage or
destruction, and such additional time after such date (but in no event to exceed
three months), as shall be equal to the aggregate period Landlord may have been
delayed in doing so by unavoidable delays (as set forth in Article 25 hereof),
including without limitation the period of delay in connection with obtaining
all required governmental permits and approvals or adjustment of insurance, then
Tenant, in either such event, may serve notice on Landlord of its intention to
terminate this Lease, and, if within thirty (30) days thereafter Landlord shall
not have completed the making of the required repairs and substantially restored
and rebuilt the Premises, this Lease shall terminate on the expiration of such
thirty (30) days period as if such termination date were the Expiration Date.
Subject to Section 17.03, Landlord shall diligently proceed to obtain all such
permits, approvals and insurance proceeds.
Section 17.03. Landlord's Right to cancel. If (i) the premises shall be
totally damaged or rendered wholly untenable by fire or other casualty, or (ii)
the Building or more than fifty (50%) percent of the other Buildings which then
comprise the Commercial Center shall be so damaged by fire or other casualty
that substantial alteration or reconstruction of the building or such other
buildings shall, in Landlord's opinion, be required (whether or not the premises
shall have been damaged by such fire or other casualty) , or (iii) the Premises
are damaged in whole or in part as a result of a risk which is not covered by
the insurance maintained by Landlord, or (iv) the Premises are damaged in whole
or in part during the last eighteen (18) months of the Term, or (v) the
Buildings or the Common Areas are damaged (whether or not the Premises are
damaged) to such an extent that the Commercial Center cannot in Landlord's
judgment be operated
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as an integral facility, then in any such events, Landlord may, at its option,
terminate this Lease by giving Tenant thirty (30) days' notice of such
termination, which notice shall be given within sixty (60) days after the date
of such damage. If such notice of termination shall be given, this Lease shall
terminate as of the date provided in such notice of termination (whether or not
the Term shall have commenced) with the same effect as if that were the
Expiration Date, and the Minimum Rent and additional rent shall be apportioned
as of such date of damage or destruction. If, at any time prior to Landlord
giving Tenant the aforesaid notice of termination or commencing the repair and
restoration pursuant to this Article, as the case may be, the holder of a
mortgage on all or part of the Commercial Center takes possession of the
Building through foreclosure or otherwise, such holder or person shall have a
further period of sixty (60) days from the date of so taking possession to
terminate this Lease by written notice of Termination.
Section 17.04. Miscellaneous Casualty Provisions. (a) Landlord shall not be
liable for any inconvenience or annoyance to Tenant or injury to the business of
Tenant resulting in any way from such damage by fire or other casualty or the
repair thereof. Landlord will not carry insurance of any kind on any property of
Tenant, and Landlord shall not be obligated to repair any damage thereto or
replace the same.
(b) This Lease shall be considered an express agreement governing any case
of damage to or destruction of the Building or any part thereof by fire or other
casualty, and any law providing for such a contingency in the absence of such
express agreement, now or hereafter enacted, shall have no application in such
case.
Article 18
Condemnation
Section 18.01. Total. If the whole of the Premises or such part thereof as
in Landlord's judgment will render the remainder unusable for the Permitted Use
shall be acquired or taken by eminent domain or similar proceedings for any
public or quasi public use or purposes, or by private purchase in lieu thereof,
then, this Lease and the Term shall automatically cease and terminate as of the
date of title vesting in such proceedings.
Section 18.02. Partial. If twenty-five (25%) percent or more of the gross
leasable area of the Premises shall be so taken, then Landlord or Tenant shall
have the right to terminate this Lease by notice given to the other within sixty
(60) days after the date of title vesting in such proceeding. If any part of the
Premises shall be so taken and this Lease shall not be terminated, as aforesaid,
then this Lease and all of the terms and provisions hereof shall continue in
full force and effect, except that the Minimum Rent shall be reduced in the same
proportion that the rentable area of the Premises taken bears to the original
rentable area of the Premises, and Landlord shall, upon receipt of the award in
condemnation, make all necessary repairs and alterations (exclusive of Tenant's
property, including trade and lighting fixtures, furniture, furnishings,
personal property, decorations, signs and contents) to restore the portion of
the Premises remaining as near to its former conditions as the circumstances
will permit, and to the Building to the extent necessary to constitute the
portion of the Building not so taken a complete architectural unit; provided,
however, that Landlord, in any event, shall not be required to spend for such
repairs and alterations an amount in excess of the amount received by Landlord
as damages for the taking of such part of the Premises, and Tenant, at Tenant's
expense, shall make all necessary repairs and alterations to Tenant's property,
including trade and lighting fixtures, furniture, furnishings, personal
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property, signs and contents. As used herein, the amount received by Landlord
shall mean that portion of the award in condemnation received by Landlord as
damages from the condemning authority which is free and clear of all ground or
underlying lessors, and less reasonable attorneys' and appraisers' fees and
expenses. If more than fifty (50%) percent of the rentable area of either the
Building or the Commercial Center shall be taken as aforesaid, Landlord shall
have the right, by notice given to Tenant, to terminate this Lease, such
termination to be effective as of the date of title vesting in such proceedings.
If, as a result of any taking, the remaining parking areas equal or exceed
seventy-five (75%) percent of the parking areas as the same existed prior to
such taking, Tenant shall not be entitled to compensation, diminution or
abatement of any rents or other charges or sums reserved hereunder, nor shall
the same be deemed an actual or construction evidence. If as a result of such
taking the remaining parking areas are reduced below seventy-five (75%) percent
of the parking areas as the same existed prior to such taking, Landlord shall
have the right, to supply substitute parking facilities on the property of
Landlord or within reasonable proximity to the Commercial Center. If Landlord
shall be unable to replace or substitute any such parking facilities so taken to
comply with the provisions of the preceding sentence, then Landlord or Tenant
shall have the right and option to cancel and terminate this Lease within ninety
(90) days after the taking by giving the other party thirty (30) days' written
notice; and in such event, this Lease shall cease and terminate upon the
expiration of said thirty (30) days and neither party thereafter shall have any
further rights and obligations as against the other. If, pursuant to the
preceding sentence, neither party shall have so cancelled and terminated this
Lease, then Tenant shall not be entitled to compensation, diminution or
abatement of any rents, charges or other sums reserved hereunder, nor shall the
failure to replace or substitute any such parking facilities so taken be deemed
an actual or constructive eviction.
Section 18.03 Award. All damages or compensation awarded or paid for any
taking, whether for the whole or a part of the Premises or any part of the Land
or Buildings and other improvements constituting the Commercial Center, shall
belong to and be the property of Landlord without any participation by Tenant,
whether such damages or compensation shall be awarded or paid for diminution in
value of the fee or any interest of Landlord in any ground or underlying lease
covering the Commercial Center or in the leasehold estate created hereby or
otherwise, and Tenant hereby expressly waives and relinquishes all claims to
such award or compensation or any part thereof and relinquishes the right to
participate in any such condemnation proceedings against the owners of any
interest in the Commercial Center; provided, however, that nothing herein
contained shall be construed to preclude Tenant from prosecuting any claim
directly against the condemning authority, but not against Landlord or the
owners of any interest in the Commercial Center, for the value of or damages to,
or for the cost of removal of, Tenant's trade fixtures and other personal
property which under the terms of this Lease would in all events remain Tenant's
property upon the expiration of the Term, as may be recoverable by Tenant in
Tenant's own right, provided further that no such claim shall diminish or
otherwise affect Landlord's or such owner's award. Each party agrees to execute
and deliver to the other all instruments that may be required to effectuate the
provisions of this Article.
Section 18.04. Miscellaneous Condemnation Provisions. If this Lease is
terminated as provided in this Article, all rents, charges or other sums
reserved hereunder shall be paid by Tenant up to the date that possession is so
taken by the condemning authority or this Lease is terminated, as the case may
be, and Landlord shall make an equitable refund of any rents, charges or other
sums reserved hereunder paid by Tenant in advance and not earned. Any sale,
grant, dedication or taking of peripheral or perimeter parts or portions of the
parking area of the Commercial
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Center for road widening or road improvement purposes or for the installation of
utilities shall not be deemed a condemnation or taking within the meaning of
this Article, and Tenant shall not, in any such event, be entitled to any
compensation, diminution or abatement of any rents, charges or other sums
reserved hereunder.
Article 19
Bankruptcv - Insolvencv
If at any time after the date hereof: (a) any proceeding in bankruptcy,
insolvency or reorganization shall be instituted against Tenant pursuant to any
Federal or State law now or hereafter enacted, or any receiver or trustee shall
be appointed for all or any portion of Tenant's business or property, and any
such proceeding or appointment be not discharged and dismissed within thirty
(30) days from the date of such proceeding or appointment; or (b) Tenant shall
be adjudged a bankrupt or insolvent, or Tenant shall make an assignment for the
benefit of creditors, or Tenant shall file a voluntary petition in bankruptcy or
shall petition for (or enter into) an agreement for reorganization, composition
or any other arrangement with Tenant's creditors under any Federal or State law
now or hereafter enacted or this Lease or the estate of Tenant herein shall pass
to or devolve upon, by operation of law or otherwise, anyone other than Tenant
(except as herein provided), the occurrence of any one of such contingencies
shall be deemed to constitute and shall be construed as a repudiation by Tenant
of Tenant's obligations hereunder and shall cause this Lease ipso facto to be
cancelled and terminated, without thereby releasing Tenant; and upon such
termination Landlord shall have the immediate right to re-enter the Premises and
to remove all persons and property therefrom. Upon the termination of this
Lease, as aforesaid, Landlord shall have the right to retain as partial damages,
and not as a penalty, any prepaid rents and the Security Deposit and Landlord
shall also be entitled to exercise such rights and remedies to recover from
Tenant as damages such amounts as are specified in Article 21 hereof, unless any
statute or rule of law governing the proceedings in which such damages are to be
proved shall lawfully limit the amount of such claims capable of being so
proved, in which case Landlord shall be entitled to recover, as and for
liquidated damages, the maximum amount which may be allowed under any such
statute or rule of law. As used in this Article 19, the term "Tenant" shall be
deemed to include and shall apply to Tenant and its successors, sublessees and
assigns and a guarantor of this lease, if any.
Article 20
Default
Section 20.01- Events of Default. If this Lease be assigned or the Premises
be sublet in whole or in part, either voluntarily or by the operation of law,
except as herein expressly provided, or if Tenant shall fail (a) to pay, when
due, any rents, charges or other sums reserved hereunder and such failure shall
continue for ten (10) days; or (b) to keep, observe or perform any of the other
terms, covenants and conditions herein to be kept, observed and performed by
Tenant for more than fifteen (15) days after notice shall have been given to
Tenant specifying the nature of such default, or if such default so specified
(other than a default under clause (a) hereof) shall be of such nature that the
same cannot reasonably be cured or remedied within such fifteen (15) day period
and shall not thereafter continuously and diligently proceed therewith to
completion; then and in any one or more of such events (herein referred to as an
"Event of Default") , Landlord shall have the immediate right to re-enter the
Premises and to dispossess Tenant and all other occupants therefrom and remove
and dispose of all property therein or, at Landlord's election, to store such
property in a public warehouse
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or elsewhere at the cost and for the account of Tenant, and without Landlord
being deemed guilty of trespass or becoming liable for any loss or damage which
may be occasioned thereby. Upon the occurrence of any Event of Default, the
total of all rents due under this Lease shall immediately thereupon become due
and payable without credits or offsets. Landlord shall also have the right, at
its option, in addition to and not in limitation of any other right or remedy,
to terminate this Lease by giving Tenant five (5) days' notice cancellation and
upon the expiration of such five days, this Lease and the Term shall cease and
terminate as fully and completely as if the date of expiration of such five day
period were the Expiration Date, and thereupon, unless Landlord shall have
therefore elected to re-enter the premises, Landlord shall have the immediate
right to re-entry, in the manner aforesaid, and Tenant and all other occupants
shall quit and surrender the Premises to the Landlord, but Tenant shall remain
liable as hereinafter mentioned. If Tenant shall default (x) in the payment when
due of any rents, charges or other sums reserved hereunder, and any such default
shall continue to be repeated for two (2) consecutive months, or for a total of
three (3) months in any period of twelve (12) months, or (y) in the performance
of any other covenant of this Lease more than six (6) times, in the aggregate,
in any period of twelve (12) months then, notwithstanding that such defaults
have been cured within the period after notice as above provided, any further
similar default shall be deemed to be deliberate and Landlord thereafter may
serve such five (5) days' notice of termination without affording Tenant an
opportunity to cure such default.
Section 20.02. Reletting of premises and Deficiency. If by reason of the
occurrence of any Event of Default, the Term shall end before the date
originally fixed herein for the expiration thereof, or Landlord shall re-enter
the Premises, or Tenant shall be ejected, dispossessed, or removed therefrom by
summary proceedings or in any other manner, whether or not specifically
enumerated in this Lease, or if the Premises become vacant, deserted or
abandoned, Landlord, at any time thereafter, may at its sole election relet the
Premises, or any part or parts thereof, either in the name of Landlord or as
agent for Tenant, for a term or terms which may, at Landlord's option, be less
than or exceed the period of the remainder of the Term, and at such rental or
rentals and upon such other conditions, which may include concessions and free
rent periods, as Landlord, in its sole discretion, shall determine. Landlord
shall receive the rents from such reletting and shall apply the same first, to
the payment of such expenses as Landlord may have incurred in connection with
re-entering, ejecting, removing, dispossessing, reletting, altering, repairing,
redecorating, subdividing, or otherwise preparing the Premises for reletting,
including brokerage and reasonable attorneys' fees and expenses; second, to the
payment of any indebtedness or the rents, charges and other sums due hereunder
from Tenant to Landlord; and the residue, if any, Landlord shall apply to the
fulfillment of the terms, covenants and conditions of Tenant hereunder, and
Tenant shall receive the surplus, if any. Tenant shall be liable for and pay
Landlord any deficiency between the rents, charges and other sums reserved
hereunder and the net rentals, as aforesaid, of reletting, if any, for each
month of the period which otherwise would have constituted the balance of the
Term. Tenant shall pay such deficiency in monthly installments on the rent days
specified in this Lease, and any suit or proceeding brought to collect the
deficiency for any month, either during the Term or after any termination
thereof, shall not prejudice or preclude in any way the rights of Landlord to
collect the deficiency for any subsequent month by a similar suit or proceeding.
Landlord shall in no event be liable in any way whatsoever for the failure to
relet the Premises or, in the event of such reletting, for failure to collect
the rents reserved hereunder. Landlord is hereby authorized and empowered to
make such repairs, alterations, decorations, subdivisions or other preparations
for the reletting of the Premises as Landlord shall deem advisable, without in
any way releasing Tenant from any liability hereunder,
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as aforesaid. No such re-entry or taking possession of the premises by Landlord
shall be construed as an election on its part to terminate this Lease unless the
termination thereof shall result as a matter of law or be decreed by a court of
competent jurisdiction. Notwithstanding any such reletting without termination,
Landlord may at any time thereafter elect to terminate this Lease for such
previous default. Nothing herein contained shall require that the Landlord relet
or sublet the Premises but may do so at its sole discretion.
Section 20.03. Damages. In the event this Lease is terminated pursuant to
the foregoing provisions of this Article or terminates pursuant to the
provisions of Article 20 hereof, Landlord may recover from Tenant all damages it
may sustain by reason of Tenant's default, including the cost of recovering the
Premises and reasonable attorneys' fees and expenses and, upon so electing and
in lieu of the damages that may be recoverable under Section 20.02 above
(measured by the monthly deficiency, if any), shall be entitled to recover from
Tenant, as and for liquidated damages, and not as a penalty, an amount equal to
the difference between the rents, charges and other sums reserved hereunder for
the period which otherwise would have constituted the balance of the Term and
the rental value of the Premises at the time of such election, for such period,
both discounted at the rate of four (4%) percent per annum to present worth, all
of which shall immediately be due and payable by Tenant to Landlord. In
determining the rental value of the Premises the rental realized by any
reletting, if such reletting be accomplished by Landlord within a reasonable
time after the termination of this Lease, shall be deemed prima facie to be the
rental value. Nothing herein contained, however, shall limit or prejudice the
right by Landlord or prove and obtain as liquidated damages by reason of such
termination an amount equal to the maximum allowed by an statute or rule of law
if effect at the time when, and governing the proceedings in which, such damages
are to be proved, whether or not such amount be greater, equal to, or less than
the amounts referred to in this Section 20.03.
Section 20.04. Miscellaneous Default Provisions. (a) In the event of a
breach or threatened breach by Tenant of any of the covenants or provisions
hereof, Landlord shall also have the right of injunction and the right to invoke
any remedy allowed by law or in equity. Tenant hereby expressly waives any and
all rights of redemption granted by or under any present or future laws in the
event of Tenant being evicted or dispossessed for any cause, or in the event of
Landlord obtaining possession of the Premises, by reason of violation by Tenant
of any of the covenants and conditions of Lease, or otherwise.
(b) The rights and remedies herein reserved by or granted to Landlord and
Tenant are distinct, separate and cumulative, and the exercise of any one of
them shall not be deemed to preclude, waive or prejudice Landlord's or Tenant's
right to exercise any or all others.
(c) Landlord and Tenant hereby expressly waive any right to assert a
defense based on merger and agree that neither the commencement of any action or
proceeding, nor the settlement thereof nor the entry of judgment therein shall
bar Landlord or Tenant from bringing any subsequent actions or proceedings from
time to time.
(d) Tenant acknowledges that the transaction of which this lease is a part
is a "commercial transaction" as defined by the statutes of the State of
Connecticut. TENANT HEREBY WAIVES ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING
OR COURT ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-287a ET SEQ. AS
AMENDED OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL
PREJUDGMENT REMEDIES LANDLORD MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES
HEREUNDER.
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Article 21
Notice to Mortgagees
A. If required by any current present or future mortgagee, the Tenant will
give prompt written notice of Landlord's default in the performance of its
obligations under this Lease to the mortgagee or trustee under any mortgage and
to the lessor under any ground or underlying lease, if the default is of such
nature as to (a) give Tenant a right to cancel and terminate this Lease, or (b)
reduce the rents, charges or any sums reserved hereunder, or (c) credit or
offset any amounts against future rents payable hereunder, provided that Tenant
shall not be obligated to give such notice to any such person who shall not have
advised Tenant in writing of its status as mortgagee, trustee or lessee, as the
case may be, and of the address to which notice should be sent. Any such
mortgagee and ground lessor shall have the right to cure any such Landlord's
default within sixty (60) days after the receipt of such notice and no such
rights or remedies shall be exercised by Tenant until the expiration of such
sixty (60) Days or such additional time as may be reasonably required to cure
any such default.
B. In reference to any assignment of Landlord's interest in this Lease, or
the rents, charges, or any other sums reserved hereunder, conditional in nature
or otherwise, which assignment is made to the holder of a mortgage or ground
lease, Tenant acknowledges (a) that the execution thereof by Landlord, and the
acceptance thereof by the holder of such mortgage, or the ground lessor, shall
not be treated as an assumption by such holder or ground lessor of any of the
obligations of Landlord hereunder, unless such holder or ground lessor, by
notice sent to Tenant, shall specifically otherwise elect; and (b) that, except
as aforesaid, such holder or ground lessor shall be treated as having assumed
Landlord's obligations hereunder only upon foreclosure (or deed in lieu of
foreclosure) of such holder's mortgage and the taking of possession of the
Premises, or, in the case of a ground lessor, the assumption of Landlord's
position hereunder by such ground lessor.
Article 22
Access to Premises
Landlord and its authorized representatives shall have the right to enter
upon the Premises during all regular business hours, upon reasonable prior
notice to Tenant (which notice may be oral) and subject to Tenant's reasonable
security precautions, for the purpose of (i) inspecting or exhibiting the same
to prospective purchasers, mortgagees and tenants, and (ii) maintaining and
repairing all utility equipment in, upon, above or under the Premises as may be
necessary for the servicing of the Premises or other portions of the Commercial
Center. Landlord and its authorized representatives shall also have the right to
enter upon the Premises during all regular business hours (and in emergencies at
all times) for the purpose of making any repairs thereto or thereon to the
Building, as Landlord may deem necessary, and for any other lawful purpose; and
in connection therewith, Landlord shall have the right to bring and store
materials, tools and equipment in, through or above the Premises that may be
required therefore, without the same constituting an actual or constructive
eviction of Tenant from the Premises or any part thereof. However, nothing
herein shall be deemed to impose any duty upon Landlord to do any such work
which, under any provisions of this Lease, Tenant shall be required to perform,
and the performance thereof by Landlord shall not shall not constitute a waiver
of Tenant's default in failing to perform the same. Landlord in no event shall
be liable for any inconvenience, disturbance, loss of business or
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other damages to Tenant by reasons of the performance by Landlord of any work
in, upon, above or under the Premises or for bringing and storing materials,
tools and equipment in, through or above the Premises during the course thereof,
and the obligations of Tenant under the Lease shall not be affected thereby in
any manner whatsoever, nor shall the same constitute any ground for an abatement
of any rents, charges or other sums reserved hereunder. Landlord shall use all
reasonable efforts not to interfere with or interrupt the conduct and operation
of Tenant's business in the Premises, but in no event shall Landlord be required
to incur any additional expense for work to be during hours or days other than
regular business hours and days of the parties performing such work. If Tenant
or Tenant's employees shall not be personally present to permit an entry into
the premises when an emergency or casualty occurs, Landlord must contact the
Westport Police Department and any entry by Landlord must be accompanied by a
Police officer or agent or employee of Tenant contacted as a result. During the
period commencing Twelve (12) months prior to the expiration of the Term (or any
renewal term thereof) , Landlord may place upon the exterior of the Premises
"For Lease", "To Let", or "For Rent" signs of reasonable size which signs shall
not be removed, obliterated or hidden by Tenant.
Article 23
Subordination: Attornment; Certificate of Tenant
Section 23.01. Subordination. This lease is, and all of Tenant's rights
hereunder are and shall be, subject and subordinate at all times to all
covenants, restrictions, easements and encumbrances now or hereafter affecting
the fee title of the Commercial Center and to all ground and underlying leases
and mortgages or any other method of financing or refinancing, in any amounts,
and all advances thereon, which may now or hereafter be placed against or affect
any or all of the Land or the Premises or any or all of the Buildings and
improvements now or at any time hereafter constituting a part of or adjoining
the Commercial Center, and to all renewals, modifications, consolidations,
participations, replacements, spreaders and extensions thereof. The term
"mortgages" as used in this Lease shall be deemed to include trust indentures,
and the term "mortgagees" as used in this Lease shall be deemed to include
trustees or beneficiaries under trust indentures. The aforesaid provisions shall
be self-operative and no further instrument or subordination shall be necessary
unless required by any such ground or underlying lessors or mortgagees. Should
Landlord or any ground or underlying lessors or mortgagees desire confirmation
of such subordination, Tenant, within ten (10) days following Landlord's request
therefor, agrees to execute, acknowledge and deliver, without charge, any and
all documents (in form acceptable to such ground or underlying lessors or
mortgagees) subordinating this Lease and Tenant's rights hereunder. However,
should any such ground or underlying lessors or any mortgagees request that this
Lease be made superior, rather than subordinate, to any such ground or
underlying lease or mortgage, then Tenant, within ten (10) days following
Landlord's request therefor, agrees to execute, acknowledge and deliver,
without, any and all documents (in form acceptable to such ground or underlying
lessors or mortgagees) effectuating such priority.
Section 23.02 Attornment. In the event of a sale, transfer (including,
without limitation, a deed in lieu of foreclosure), or assignment of Landlord's
interest in the Commercial Center or any part thereof, including the Premises,
or in the event any proceedings are brought for the foreclosure of any mortgage
constituting a lien upon the Commercial Center or any part thereof, including
the Premises, or in the event of a cancellation or termination of any ground or
underlying lease covering the Commercial Center, or any part thereof, including
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the Premises, Tenant shall attorn to and recognize such transferee, purchaser,
ground or underlying lessor or mortgagee as Landlord under this Lease. The
foregoing provisions of this Section shall be self-operative and no further
instrument shall be required to give effect to such provisions. Tenant, however,
shall, at the request of the party to whom it has attorned, promptly execute.
Section 23.03. Certificate of Tenant. Tenant shall, without charge, at any
time and from time to time, within ten (10) days after request by Landlord,
deliver a written instrument to Landlord or any other person, firm or
corporation specified by Landlord, duly authorized, executed and acknowledged,
certifying:
(a) That this Lease is unmodified and in full force and effect, or, if
there has been any modification, that the same is in full force and effect
as modified and stating any such modification; whether there is any
existing basis to cancel or terminate this Lease and whether, to the best
of Tenant's knowledge, Landlord is in default hereunder;
(b) Whether the Term has commenced and Minimum Rent has become payable
hereunder, and whether Tenant is in possession of all of the Premises
except for such portions thereof which have been sublet or are being held
for sublet pursuant to the provisions of this Lease;
(c) Whether or not there are then existing any defenses or offsets
(which are not claims under subsection (e) below) against the enforcement
of any of the agreements, terms, covenants, or conditions of this Lease to
be observed or performed by Tenant, and, if so, specifying the same;
(d) The amount of the Minimum Rent payable under this Lease and the
dates to which the Minimum Rent and additional rent and other charges
hereunder have been paid,
Section 24.04. Non Disturbance. Landlord shall use its best efforts to
obtain a non-disturbance agreement from any future mortgagee of the Premises.
If Tenant fails to execute, acknowledge and deliver any such instrument to
Landlord within ten (10) days after Landlord's request, Tenant does hereby make,
constitute and irrevocably appoint Landlord as its attorney-in-fact and in its
name, place and stead to do so, such appointment being coupled with an interest.
Article 24
Quiet Enjoyment
Tenant, upon paying the rents, charges and other items reserved hereunder
and performing and observing all of the other terms, covenants and conditions of
this Lease on Tenant's part to be performed and observed, shall peaceably and
quietly have, hold and enjoy the Premises during the Term, subject,
nevertheless, to the terms of this Lease, and to any mortgages, ground or
underlying leases, agreements and encumbrances to which this Lease is or may be
subordinate.
Article 25
Unavoidable Delays
The provisions of this Article 25 shall be applicable if there shall occur,
on or after the date hereof, any strikes, lockouts or labor disputes, inability
to obtain labor or materials or reasonable substitutes therefor or acts of God,
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governmental action, civil commotion, riot or insurrection, fire or other
casualty or other events beyond the reasonable control of the party obligated to
perform. If Landlord or Tenant, as a result of any of the aforementioned events,
shall fail punctually to perform any term, covenant or condition on its part to
be performed under this Lease, then such failure shall be excused and not be a
breach of this Lease by the party in question, but only to the extent and for
the time occasioned by such event. Notwithstanding anything to the contrary
herein contained, however, the provisions of this Article 25 shall not be
applicable to Tenant's obligation to pay, when due and payable, the rents,
charges or other sums reserved hereunder; and in addition, lack of funds and
inability to procure financing shall not be deemed to be an event beyond the
reasonable control of Tenant. In the event of any unavoidable delay as in this
Article provided, and as a condition precedent of Tenant claiming or relying
upon such delay, Tenant shall give notice of such unavoidable delay to Landlord
within ten (10) days after the occurrence of the same.
Article 26
Surrender of Premises
Upon the expiration or sooner termination of the Term, Tenant shall quit
and surrender the Premises, broom-clean, in as good condition and repair as
Tenant is required to maintain the same throughout the Term, together with all
keys and combinations to locks, safes and vaults. If Tenant shall fail to remove
any of Tenant's personal property, furniture and furnishings, signs and moveable
trade fixtures not constituting a permanent part of the Premises, such property
shall at the option of Landlord, either be deemed abandoned and become the
exclusive property of Landlord, or Landlord shall have the right to remove and
store such property, at the expense of Tenant, without further notice to or
demand upon Tenant and hold Tenant responsible for any and all charges and
expenses incurred by Landlord therefor. If the Premises are not surrendered as
and when aforesaid and after Landlord shall have given to Tenant ten (10) days'
notice to quit, Tenant shall indemnify Landlord against all loss, cost, expense
(including reasonable attorneys' fees) or liability resulting from the delay by
Tenant in so surrendering the same, including, without limitation, any claims
made by any succeeding occupant founded on such delay. Tenant's obligations
under this Article 26 shall survive the expiration or sooner termination of the
Term.
Article 27
Holding over
Should Tenant remain in possession of the Premises after the expiration of
the Term (or any renewal term hereof) without the execution of the new lease,
such holding over, in the absence of a written agreement to the contrary, shall
be deemed to have created and be construed to be a tenancy from month-to-month
terminable on thirty (30) days' notice by either party to the other, at a
monthly rental equal to One Hundred Fifty (150%) Percent of the sum of (1) the
monthly installment of Minimum Rent payable during the last month of the Term;
(ii) One-Twelfth (1/12) of the Tax charge payable for the last Lease Year of the
Term; and (iii) the monthly Tenant's Common Area Charge payable for such month,
subject to all the other terms, covenants and conditions, provisions and
obligations of this Lease insofar as the same are applicable to a month-to-month
tenancy.
Article 28
Broker's Commission
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Tenant covenants, warrants and represents to Landlord that there was and is
no broker, finder or similar person entitled to a commission, fee or other
compensation with respect to the consummation of this Lease and that no
conversations or prior negotiations were had by Tenant or any one acting on
behalf of Tenant with any broker, finder or similar person concerning the
renting of the Premises. Tenant shall indemnify and hold Landlord harmless
against and from all costs, expenses, damages and liabilities, including,
without limitation, reasonable attorneys' fees, arising from any claims
judicially proven for brokerage commissions, finder's fees or other compensation
resulting from or arising out of any conversations, negotiations or actions had
by Tenant or any one acting on behalf of Tenant with any broker, finder or
similar person. Landlord represents that it has not had any listing agreement
for the Premises with any broker, finder or similar person entitled to a
commission. The provisions of this Article 28 shall survive the expiration or
earlier termination of this Lease.
Article 29
No Waiver
The failure of Landlord to insist upon the strict performance of any
provisions of this Lease, or the failure of Landlord to exercise any right,
option or remedy hereby reserved shall not be construed as a waiver for the
future of any such provision, right, option or remedy or as a waiver of a
subsequent breach thereof. The consent or approval by Landlord or any act by
Tenant requiring Landlord's consent or approval shall not be construed to waive
or render unnecessary the requirement for Landlord's consent or approval of any
subsequent similar act by Tenant. The receipt by Landlord of rent or other
charges or sums with knowledge of a breach of any provisions of this Lease shall
not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived unless such waiver shall be in writing signed by the
party to be charged. No payment by Tenant or receipt by Landlord of a lesser
amount than the rents, charges and other sums hereby reserved shall be deemed to
be other than on account of the earliest rents, charges and other sums then
unpaid, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment by Tenant be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rents, charges and other sums
due, or Landlord may pursue any other remedy in this Lease provided or by law
permitted, and no waiver by Landlord in favor of any other Tenant or occupant of
the commercial center shall constitute a waiver in favor of Tenant.
Article 30
Waiver of Liability
Anything contained in this Lease to the contrary notwithstanding, Tenant
shall look solely to the estate and property of Landlord in the Commercial
Center and the rentals therefrom for the collection of any judgment (or other
judicial process) requiring the payment of money by Landlord in the event of any
default or breach by Landlord with respect to any of the terms, covenants and
conditions of this Lease to be observed and performed by Landlord, subject,
however, to the prior right of any ground or underlying lessor or the holder of
any mortgage covering the commercial center; and no other assets of Landlord or
any partner or joint venture comprising Landlord shall be subject to levy,
execution or other judicial process for the satisfaction of Tenant's claims. In
the event Landlord conveys or transfers its interest in the Commercial Center or
in this Lease, except as collateral security for a loan, upon such
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conveyance or transfer, Landlord (and in the case of any subsequent conveyances
or transfers, and then grantor or transferor) shall be entirely released and
relieved from all liability with respect to the performance of any terms,
covenants and conditions on the part of the Landlord to be performed hereunder
from and after the date of such conveyance or transfer, provided that any
amounts then due and payable to Tenant by Landlord (or by the then grantor or
transferor) or any other obligations then to be performed by Landlord (or by the
then grantor or transferor) for Tenant under any provisions of this Lease, shall
either be paid or performed by Landlord (or by the then grantor or transferor)
or such payment or performance assumed by the grantee or transferee; it being
intended hereby that the covenants and obligations on the part of Landlord, its
successors and assigns only during and in respect of their respective periods of
ownership of an interest in the Commercial Center or in this Lease. This
provision shall not be deemed construed or interpreted to be or constitute an
agreement, express or implied, between Landlord and Tenant that Landlord's
interest hereunder and in the Commercial center shall be subject to impressment
of an equitable lien or otherwise.
Article 31
Notices
Except as otherwise provided herein, every notice, demand, consent,
approval request or other communication which may be or is required to be given
under this Lease or by law shall be in writing and shall be sent by United
States certified or Registered Mail, postage prepaid, return receipt requested,
and shall be addressed: (a) if to Landlord, to Landlord at Post Office Box 791,
Westport, Connecticut 06881 and to Marc Nevas Real Estate, 250 Post Road East,
Westport, Connecticut 06880 and (b) if to Tenant, to Tenant at 25 Prospect
Street, Ridgefield, Connecticut 06877, Attention: Mr. James Umbarger, and the
same shall be deemed delivered when deposited in the United States Mail. Either
party may designate, by similar written notice to the other party, any other
address or party for such purposes. Notwithstanding the foregoing, either party
hereto may give the other party telegraphic notice of the need of emergency
repairs.
Article 32
Miscellaneous
Section 32.01- Entire Agreement. Etc. (a) This Lease, including the
Exhibits, if any, attached hereto, sets forth the entire agreement between the
parties with respect to the Premises. (b) All prior conversations or writings
between the parties hereto or their representatives with respect to the Premises
are merged herein and extinguished. (c) This Lease shall not be modified except
by a writing signed by the party to be charged, nor may this Lease be cancelled
by Tenant or the Premises surrendered except with the written express
authorization of Landlord unless otherwise specifically provided herein. (d) The
submission by Landlord to Tenant of this Lease in draft form shall be deemed
submitted solely for Tenant's consideration and not for acceptance and
execution. Such submission shall have no binding force and effect, shall not
constitute an option or offer for the leasing of the Premises, and shall not
confer any rights or impose any obligations under either party. The submission
by Landlord of this Lease for execution by Tenant and the actual execution and
delivery thereof by Tenant to Landlord shall similarly have no binding force and
effect unless and until Landlord shall have executed this Lease and a
counterpart thereof shall have been delivered to Tenant. (e) If any provisions
contained in any Exhibit hereto is inconsistent or in conflict with any
provision in the body of this Lease, the provision contained in such Exhibit
shall
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supersede such provision in the body hereof and shall be paramount and superior.
(f) Tenant acknowledges that this Lease shall not be deemed, interpreted or
construed to contain, by implication or otherwise, any warranty, representation
or agreement on the part of Landlord that any regional or national chain store
or any other merchant shall open or remain open for business or occupy or
continue to occupy any premises in or adjoining the Commercial Center during the
Term or any part thereof, and Tenant waives all claims with respect thereto and
acknowledges that Tenant is not relying on any such warranty, representation or
agreement by Landlord either as a matter of inducement in entering into this
Lease or as a condition of this Lease or as a covenant by Landlord. (g) Tenant
acknowledges that Tenant has had the opportunity to review and negotiate the
terms of this Lease, and that the canon or rule of interpretation requiring
construction of any ambiguities herein against landlord, as the draftsman, shall
not be applicable. (h) The Article and Section numbers, captions and Table of
Contents appearing herein are inserted only as a matter of convenience and are
not intended to define, limit, construe or describe the scope or intent of any
provision of this Lease, nor in any way affect this Lease.
Section 32.02 Partial Invalidity. If any provision of this Lease or the
application thereof to any person or circumstances shall to any extent be held
void, unenforceable or invalid, then the remainder of this Lease or the
application of such provision to persons or circumstances other than those as to
which it is held void, unenforceable or invalid shall not be affected thereby,
and each provision of this Lease shall be valid and enforced to the fullest
extent permitted by law.
section 32.03. Provisions Binding. Except as otherwise expressly provided
in this Lease, all the terms, covenants, conditions and provisions of this Lease
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, legal representatives, successors and permitted assigns.
Each provision of this Lease to be performed by Tenant shall be construed to be
both a covenant and a condition, and if there shall be more than one Tenant,
they shall all be bound, jointly and severally, by the terms, covenants and
conditions of this Lease.
Section 32.04. Relationship of Parties. Nothing contained in this Lease
shall be deemed to constitute or be construed or otherwise to create the
relationship of principal and agent, partnership, joint venture or any other
relationship of Landlord and Tenant.
Section 32.05. Recording. Tenant shall not record this Lease without the
written consent of the Landlord. However, upon the request of either party
hereto the other party shall join in the execution of a memorandum of so-called
"short form" notice of this lease for the purpose of recordation. Said
memorandum or notice of this lease shall describe the parties, the leased
premises and the term of this Lease and shall incorporate this Lease by
reference.
Section 32.07. Rules and Regulations. Tenant shall comply fully with all of
the Rules and Regulations set forth under Exhibit B attached hereto and made a
part hereof as though fully set forth herein, and any changes thereto or
additional Rules and Regulations hereafter promulgated by Landlord in writing to
Tenant.
Section 32.08. Counterparts. This Lease may be executed in several
counterparts, each of which shall be deemed an original, and all such
counterparts shall together constitute one and the same instrument.
Section 32.09. Applicable Law Without regard to principles of conflicts of
laws, the internal laws of the State
-37-
<PAGE>
of Connecticut shall govern and control the validity, interpretation,
performance and enforcement of this Lease.
Article 33
Sidewalks
The Tenant shall keep and maintain the sidewalk adjacent to the Premises
clear of obstructions, snow and ice and shall use reasonable efforts to keep the
said sidewalk free of dirt, debris and other unsightly materials
Article 34
Landlord's Consent
Wherever in this Lease it provided that Tenant must secure Landlord's
consent prior to performing any act, Landlord agrees not to unreasonably
withhold or delay its consent. Landlord shall deny Tenant's request in writing
within a reasonable period, which denial shall specifically set forth Landlord's
objections relating to the act for which Tenant has sought Landlord's consent.
Article 35
Tenant's Improvements
Tenant shall not be required. to remove at the end of the term or any
renewal term of the Lease, or at any other time, any of the fixtures or
improvements to the Premises constituting the initial 'fit-up", whether
undertaken by Landlord or by Tenant on or before ninety (90) days after Tenant
shall take occupancy of the Premises. As to all subsequent improvements,
Landlord shall, prior to Tenant undertaking same, simultaneous with the
approval/consent thereof by Landlord, advise Tenant if such improvements must be
removed by Tenant as otherwise provided in the Lease.
Article 36
Option to Extend or Renew Lease
section 36.01. Option to Extend. Provided this Lease is in full force and
effect and Tenant is not in default hereunder either at the time of exercising
its option to extend the Lease Term, or at the effective date of extension,
Tenant shall have the right, at its option, to extend the term of this Lease
beyond the initial Term for a further term of five (5) years (the "Extension
Term") upon the same terms, covenants, and conditions set forth in this Lease
and with the rental provided for the eleventh (11th) through fifteenth (15th)
years shown on Schedule "A" attached hereto and made a part hereof.
section 36.02. The Tenant shall notify the Landlord in writing at least
nine (9) months prior to the expiration of the Initial Term, as to whether it
intends to exercise the option provided for in Section 36.01. In the event
Tenant does not so notify Landlord that it intends to exercise this option, this
option shall then become and be null and void. Time is of the essence in the
exercise of this option.
Article 37
Parking
-38-
<PAGE>
Parking. The Tenant covenants for itself and its employees, agents, and
contractors, that cars of such Tenant, agents, employees and contractors will be
parked in the portion of the parking area provided for that purpose, or in such
other areas designated by the Landlord. The Tenant will furnish to the Landlord
a complete list with the names, addresses, automobile description and license
plate number of every person who is employed by the Tenant or who comes within
the above description, and the Landlord reserves the right to charge the Tenant
$5.00 per day, or any part thereof, for each car of the Tenant, employee, agent
or contractors, that is parked in violation of designations or signs provided.
IN WITNESS WHEREOF, the parties hereto have executed or caused this Lease
to be executed the day and year first above written.
WITNESSES:
LEO NEVAS and JAMIE GERARD, TRUSTEE
under the Spray Trust
/s/ Patricia A Martin
/s/ Veronica Sanwald By: /s/ Leo Nevas
-------------------------------
Leo Nevas
/s/ Patricia A Martin
By: /s/ Jamie K Gerard, Trustee
-------------------------------
/s/ Veronica Sanwald Jamie K. Gerard, Trustee
THE VILLAGE BANK & TRUST COMPANY
/s/ Annette R Carlo
/s/ Heidi B Hannafin
By: /s/ James R Umbarger Jr
------------------------------
James R. Umbarger, Jr.
Executive Vice President
duly authorized
STATE OF CONNETICUT }
} ss. Danbury April 23 , 1997
COUNTY OF FAIRFIELD }
Personally appeared Leo Nevas, signer and sealer of the foregoing
instrument, and acknowledged the same to be his free act and deed and the free
act and deed of said Corporation, before me.
/s/ Heidi B. Hannafin
Notary Public
My Commission Expires: Nov. 30, 1997
HEIDI B. HANNAFIN
-39-
<PAGE>
STATE OF CONNETICUT
>ss. Westport April 28, 1997
COUNTY OF FAIRFIELD }
Personally appeared Jamie Gerard, Trustee, signer and sealer of the
foregoing instrument, and acknowledged the same to be his free act and deed and
the free act and deed of said Corporation, before me.
/s/ Veronica T Sanwald
------------------------------
Notary Public
My Commission Expires 8/31/99
STATE OF CONNETICUT >
>ss. Westport April 28, 1997
COUNTY OF FAIRFIELD }
Personally appeared James R. Umbarger, Executive Vice President of the
Village Bank & Trust Company, signer and sealer of the foregoing instrument, and
acknowledged the same to be his free act and deed and the free act and deed of
said Corporation, before me.
/s/ Veronica T Sanwald
------------------------------
Notary Public
My Commission Expires 8/31/99
-40-
<PAGE>
SCHEDULE "A"
MINIMUM RENT SCHEDULE
MINIMUM MINIMUM
PERIOD ANNUAL RENT MONTHLY RENT
- ------ ----------- ------------
First rental year; $270,000.00 $ 22,500.00
Second rental year; $280,000.00 $ 23,333.34
Third rental year; $295,000.00 $ 24,583.34
Fourth rental year; $310,000.00 $ 25,833.34
Fifth rental year; $325,000.00 $ 27,083.34
Sixth rental year; $340,000.00 $ 28,333.34
Seventh rental year; $350,000.00 $ 29,166.67
Eighth rental year; $360,000.00 $ 30,000.00
Ninth rental year; $375,000.00 $ 31,250.00
Tenth rental year; $400,000.00 $ 33,333.34
EXTENSION TERM
--------------
Eleventh rental year; $420,000.00 $ 35,000.00
Twelfth rental year; $445,000.00 $ 37,083.34
Thirteenth rental year; $465,000.00 $ 38,750.00
Fourteenth rental year; $480,000.00 $ 40,000.00
Fifteenth rental year; $500,000.00 $ 41,666.67
-41-
<PAGE>
EXHIBIT B
RULES AND REGULATIONS
1. The delivery or shipping of supplies and fixtures to and from the
Premises shall be subject to such rules as in the judgment of Landlord are
necessary for the proper operation of the Premises or Commercial Center.
2. All garbage and refuse shall be kept in the kind of container approved
by Landlord, and shall be placed within the area designated for refuse
collection. Tenant shall pay the cost of removal of any of Tenant's refuse or
rubbish.
3. If the Premises are equipped with heating facilities separate from those
in the remainder of the Commercial Center or if Tenant can control the heating
from its own premises, Tenant shall keep the Premises at a temperature
sufficiently high to prevent freezing of water in pipes and fixtures.
4. The plumbing facilities shall not be used for any other purpose than
that for which they are constructed, and no foreign substance of any kind such
as detergents shall be thrown therein, and the expense of any breakage, stoppage
or damage resulting from a violation of this provision shall be borne by Tenant,
who shall, or whose employees, agents or invitees shall, have caused it.
5. Tenant shall not change (whether by alteration, replacement, rebuilding
or otherwise) the exterior color and/or architectural treatment of the Premises
or the Building, or any part thereof.
6. Tenant shall not use, or permit to be used, the sidewalk adjacent to, or
any other space outside, the Premises for display, sale or any similar
undertaking.
7. Tenant shall not subject any fixtures or equipment which are so fixed to
the realty so as to become part thereof to any mortgages, liens, conditional
sales agreements or encumbrances.
8. Tenant shall not perform any act or carry on any practice which may
damage, mar or deface the Premises or any other part of the Commercial Center.
9. Tenant shall not place a load on any floor in the Premises exceeding the
floor load per square foot which such floor was designed to carry, or install,
operate or maintain therein any heavy item of equipment except in such manner as
to achieve a proper distribution of the weight.
10. Tenant shall not install, operate or maintain in the Premises any
electrical equipment which will overload the electrical equipment or the
electrical system, or any part thereof, beyond its reasonable capacity for
proper and safe operation as determined by Landlord in light of the overall
system and requirements therefor in the Commercial Center, or which does not
bear Underwriters' approval.
11. No curtains, blinds, shades or screens shall be attached to or hung in,
or used in connection with, any window or door of the Premises without the prior
written consent of Landlord.
12. Neither Tenant nor Tenant's agents shall at any time bring or keep upon
the Premises any flammable, combustible or explosive fluid, chemical or
substance.
13. All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place during the hours
which Landlord or its agent may determine
-42-
<PAGE>
from time to time. Landlord reserves the right to inspect all freight to be
brought into the Building and to exclude from the Building all freight which
violates any of these Rules or Regulations or this Lease.
14. There shall not be used in any space, or in the public halls of the
Building, either by Tenant or by jobbers or others, in the delivery of receipt
of supplies, any hand trucks, except those equipped with soft tires and side
guards.
-43-
VILLAGE
BANCORP
1997
annual report
table of contents
Letter to Stockholders o 2
Business o 4
Business/Selected Financial Data o 10
Management's Discussion & Analysis of Financial Condition
& Results of Operations o 11
Independent Auditors' Report o 15
Consolidated Balance Sheets o 16
Consolidated Statements of Income o 17
Consolidated Statements of Changes in Stockholders' Equity o 18
Consolidated Statements of Cash Flows o 19
Notes to Consolidated Financial Statements o 20
Officers, Board of Directors & Advisory Board of Directors o 34
Capital Stock, Annual Meeting, Request for Financial Information o 36
Banking Office Information o 36
-44-
<PAGE>
1997
annual report
[GRAPHIC]
We are very pleased to report to you on the many accomplishments of Village
Bancorp, Inc. and its sole subsidiary, The Village Bank & Trust Company, during
1997. The past year was a period of strong growth for the organization - growth
that we believe will allow your company to compete effectively in today's
rapidly changing world.
The Corporation's total assets on December 31, 1997, were $222,549,000, a 24%
increase from the total assets on December 31, 1996 of $179,550,000. The Bank's
loan portfolio grew 17% during the year from the $125,480,000 reported on
December 31, 1996 to $146,350,000 at December 31, 1997. At December 31, 1997 the
Bank's investment portfolio totaled $53,809,000, up a significant 64% from the
December 31, 1996 total of $32,904,000. The Bank's total deposits were
$203,808,000 on December 31, 1997, an increase of 25% from the total deposits of
$162,625,000 the year before.
The year 1997 was a very exciting one for the Bank and its staff. In June, a new
full service office was opened in Westport, Connecticut. One month later, the
Bank completed its new building in CityCenter Danbury and opened a full service
office to the public on July 19, 1997. Over the Labor Day weekend, most of the
Bank's back office processing departments were relocated to the top two floors
of the new Danbury building. Over time, having these areas of our operation in
our own building will save the Company significant rental expense that it would
otherwise pay. The Bank also undertook a complete conversion of its teller
system to make the entire process more efficient.
These projects helped produce the Bank's strong growth; but also resulted in a
short term increase in expenses. As a result, net profit for the fiscal year
ending December 31, 1997 was $1,178,000, down from the 1996 net profit of
$1,820,000. These amounts represent basic earnings per share of $ .62 for 1997
versus a basic earnings per share of $ .96 for 1996. Fully diluted earnings per
share were $ .61 and $ .95 for 1997 and 1996, respectively. Many of the expenses
related to the new offices and the other projects were nonrecurring. That fact,
combined with increased business both from the new offices and the existing
operation, should produce increased profitability in 1998.
For our stockholders, the Company accomplished several goals during 1997. In the
fall a Dividend Reinvestment and Stock Purchase Plan for stockholders was
implemented. Response to this program has been excellent. An Employee Stock
Purchase Plan was also introduced and we are pleased to report that over 30% of
our employees have decided to participate so far. Their interest in ownership of
the Company has a very positive effect on their day to day efforts at producing
quality service. In December, the Board of Directors declared a 100% stock
dividend (the functional equivalent of a 2 for 1 stock split). We believe the
addition of our two new offices has significantly increased the value of our
franchise The Village Bank now has six offices extending from Westport to New
Milford, one of the most attractive markets in the country.
2 o Village Bancorp
-45-
<PAGE>
letter to our stockholders
================================================================================
For our customers, the Bank continues to enjoy a reputation for quality,
personal service - a reputation we work hard to maintain and one we all take
pride in. We also recently expanded our lobby hours while continuing the 8 a.m.
to 8 p.m. daily hours of the five offices that are equipped with drive-up
windows. Our 24 hour telephone inquiry system continues to be very popular,
averaging over 12,000 calls per month. Our Trust Department is expanding rapidly
as more and more people realize the critical need for these services.
We are beginning to introduce The Village Banker On Line, which is a home
banking service that allows customers an easy, safe, and convenient way to bank
at home, pay bills, transfer funds, view account histories and maintain
financial records. To compliment the home banking service, we also introduced
our newly designed web site which contains information about the Bank's products
and services, investor relations, stock quotes, and recent press releases. The
web site is located at www.villagebank.com.
Finally, we are very proud of the positive effect The Village Bank has on each
of the communities in which we do business. As a strong and growing company, we
believe that our participation in the life of our towns is important. Certainly
the Bank makes financial contributions to many worthy groups and organizations.
However, our influence goes much beyond that. We encourage our employees to get
involved. They have done this in significant ways. In all the towns where we
have a presence, Village bankers are seemingly everywhere, volunteering their
time and effort on boards of agencies and organizations, raising funds for local
charities, mentoring young people, etc. The monthly list of our community
involvement literally runs pages. Our leadership, we believe, serves as a model
for other organizations and individuals which affects the quality of life for
all of us.
We are very pleased to have you be a part of what we think is a special company.
/s/ Robert V. Macklin
--------------------------------------
Robert V. Macklin
President & Chief Executive Officer
[PHOTO]
/s/ Edward J. Hannafin
--------------------------------------
Edward J. Hannafin
Chairman& Chief Executive Officer
1997 Annual Report o 3
-46-
<PAGE>
O business
================================================================================
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
1997 1996 1995
===========================================================================================================================
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans(1) $135,525 $11,708 8.64% $121,387 $10,472 8.63% $116,556 $10,177 8.73%
Taxable securities(2) 35,688 2,064 5.78 32,132 1,883 5.86 26,912 1,680 6.24
Tax-exempt securities 6,836 312 4.56 2,495 121 4.85 2,284 112 4.90
Interest bearing deposits 50 2 4.00 -- -- -- --
Federal funds sold 7,745 417 5.38 5,994 317 5.29 6,329 371 5.86
- ---------------------------------------------------------------------------------------------------------------------------
Total interest earning assets $185,844 $14,503 7.80% $162,008 $12,793 7.90% $152,081 $12,340 8.11%
- ---------------------------------------------------------------------------------------------------------------------------
Noninterest earning assets:
Cash and due from banks 9,184 8,004 7,722
Bank premises and equipment 2,760 1,537 1,608
Accrued income and other assets 4,337 2,532 1,951
Allowance for loan losses (1,333) (1,299) (1,464)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL $200,792 $172,782 $161,898
===========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
NOW accounts $ 42,522 $ 645 1.52% $ 39,029 $ 622 1.59% $ 35,759 $ 622 1.74%
Savings deposits 48,035 1,317 2.74 46,200 1,320 2.86 44,334 1,230 2.77
Time deposits 74,730 4,174 5.59 54,990 3,011 5.48 50,413 2,761 5.48
Federal funds purchased 15 1 6.67 8 -- -- 556 33 5.94
- ---------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities $165,302 $ 6,137 3.71% $140,227 $ 4,953 3.53% $131,062 $4,646 3.54%
- ---------------------------------------------------------------------------------------------------------------------------
Noninterest bearing liabilities:
Demand deposits 17,773 16,271 15,974
Other 2,061 1,670 1,317
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 185,136 158,168 148,353
Stockholders' equity 15,656 14,614 13,545
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL $200,792 $172,782 $161,898
NET INTEREST INCOME $ 8,366 $ 7,840 $7,694
===========================================================================================================================
NET YIELD ON INTEREST
EARNING ASSETS 4.50% 4.84% 5.06%
===========================================================================================================================
</TABLE>
(1) For the purposes of these computations, nonaccruing loans are included in
the daily average loan amounts outstanding. Interest income includes fees on
loans of $208,000, $198,000 and $165,000 in 1997, 1996 and 1995, respectively.
(2) Includes Federal Home Loan Bank stock.
4 o Village Bancorp
-47-
<PAGE>
------------------
Business
------------------
================================================================================
VOLUME/RATE ANALYSIS
The following table sets forth for the periods indicated a summary of the
changes in interest income and interest expense resulting from changes in volume
and changes in rate.
<TABLE>
<CAPTION>
(In thousands)
1997 Compared to 1996 1996 Compared to 1995
Increase (Decrease) Due to: (1) Increase (Decrease) Due to: (1)
=========================================================================================================================
Volume Rate Net Volume Rate Net
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Interest income on:
Loans $ 1,224 $ 12 $ 1,236 $ 408 $ (113) $ 295
Taxable securities 199 (18) 181 296 (93) 203
Tax-exempt securities 198 (7) 191 10 (1) 9
Interest bearing deposits 1 1 2 -- -- --
Federal funds sold 94 6 100 (19) (35) (54)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,716 $ (6) $ 1,710 $ 695 $ (242) $ 453
=========================================================================================================================
Interest expense on:
NOW accounts $ 45 $ (22) $ 23 $ -- $ -- $ --
Savings deposits (2) (1) (3) 395 (305) 90
Time deposits 1,101 62 1,163 250 -- 250
Federal funds purchased 1 -- 1 (16) (17) (33)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,145 $ 39 $ 1,184 $ 629 $ (322) $ 307
=========================================================================================================================
</TABLE>
(1) The change in interest due to both rate and volume has been allocated to the
volume and rate changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
SECURITIES PORTFOLIO
The following table sets forth the balance sheet carrying amount of securities
at the dates indicated:
<TABLE>
<CAPTION>
(In thousands)
December 31,
1997 1996 1995
============================================================================================
<S> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies $ 42,890 $ 30,218 $ 32,060
States and political subdivisions 10,886 2,639 2,444
Other 33 47 58
- --------------------------------------------------------------------------------------------
TOTAL $ 53,809 $ 32,904 $ 34,562
============================================================================================
</TABLE>
1997 Annual Report o 5
-48-
<PAGE>
o business (continued)
================================================================================
The following table sets forth the maturities of securities at December 31, 1997
and the weighted average yields of such securities (calculated on the basis of
the amortized cost and effective yields weighted for the scheduled maturity of
each security). Tax equivalent adjustments have not been made in calculating
yields on obligations of states and political subdivisions.
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Maturing
After One Year But After Five Years But After
Within One Year Within Five Years Within Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies $ 24,774 5.60% $16,495 5.74% $ 1,572 5.92% $ 49 8.04%
States and political
subdivisions 822 4.26 3,407 4.31 3,545 4.71 3,112 4.93
Other 13 5.08 20 6.50 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
TOTALS $ 25,609 5.56% $19,922 5.50% $ 5,117 5.08% $ 3,161 4.98%
===============================================================================================================================
</TABLE>
LOAN PORTFOLIO
The following table shows the Bank's loan distribution (net of deferred loan
fees) at the end of each of the last three years:
<TABLE>
<CAPTION>
(In thousands)
December 31,
1997 1996 1995
============================================================================================================
<S> <C> <C> <C>
Real estate - mortgage and home equity $ 108,621 $ 96,345 $88,400
Real estate - construction and land development 14,012 7,953 7,737
Installment and consumer credit 7,888 9,917 10,562
Commercial and financial 17,138 12,621 12,892
------------------------------------------------------------------------------------------------------------
TOTALS $ 147,659 $126,836 $119,591
============================================================================================================
</TABLE>
The following table shows the maturity of gross loans (excluding installment and
consumer credit loans) outstanding as of December 31, 1997. Also provided are
the amounts due after one year classified according to sensitivity to changes in
interest rates.
<TABLE>
<CAPTION>
(In thousands)
Maturing
After One Year
Within But Within After
One Year Five Years Five Years Total
=======================================================================================================================
<S> <C> <C> <C> <C>
Commercial and financial $ 7,539 $ 6,991 $ 2,608 $ 17,138
Real estate - construction and land development 11,815 2,141 56 14,012
Real estate - mortgage and home equity 246 6,168 102,207 108,621
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $ 19,600 $ 15,300 $104,871 $ 139,771
=======================================================================================================================
Loans maturing after one year with:
Fixed interest rates $ 5,074 $ 10,912
Variable interest rates 10,226 93,959
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $ 15,300 $104,871
=======================================================================================================================
</TABLE>
6 o Village Bancorp
-49-
<PAGE>
------------------
Business
------------------
================================================================================
NONACCRUAL AND PAST DUE LOANS
The following table summarizes the Bank's nonaccrual loans and loans past due 90
days or more:
(In thousands)
December 31,
1997 1996 1995
================================================================================
Nonaccrual loans $1,299 $1,596 $ 606
Accruing loans past due
90 days or more 323 157 230
- --------------------------------------------------------------------------------
TOTAL $1,622 $1,753 $ 836
================================================================================
At December 31, 1997, $1,299,000 of nonaccrual loans were collateralized.
A loan is put on nonaccrual basis when the loan becomes past due ninety days,
except for instances where there are factors known to management which reflect
favorably on the ability of the customer to fulfill the obligation. The Bank
would have recorded an additional $74,000, $59,000 and $51,000 of gross interest
income in 1997, 1996 and 1995, respectively, if nonaccrual loans had been
current.
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the activity in the allowance for loan losses:
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
1997 1996 1995
================================================================================================================
<S> <C> <C> <C>
Allowance at beginning of year $ 1,356 $ 1,311 $ 1,551
Charge-offs:
Commercial and financial -- -- 95
Installment and consumer credit 77 69 183
Real estate - mortgage 42 104 186
- ----------------------------------------------------------------------------------------------------------------
Total charge-offs 119 173 464
================================================================================================================
Recoveries:
Commercial and financial 1 10 8
Installment and consumer credit 10 7 6
Real estate - mortgage 1 81 --
- ----------------------------------------------------------------------------------------------------------------
Total recoveries 12 98 14
================================================================================================================
Net charge-offs 107 75 450
Provision for loan losses (1) 60 120 210
- ----------------------------------------------------------------------------------------------------------------
Allowance at end of year $ 1,309 $ 1,356 $ 1,311
================================================================================================================
Ratio of net charge-offs (recoveries) during the
year to average loans outstanding .079% .062% .385%
================================================================================================================
</TABLE>
(1) The amount charged to operations and the related balance in the allowance
for loan losses is based upon periodic evaluations of the loan portfolio by
management. These evaluations consider several factors which include, but are
not limited to, general economic conditions, loan portfolio composition, prior
loan loss experience and management's estimation of potential losses.
The allowance for loan losses is considered adequate by management to cover
known and unknown risk elements in the portfolios. This consideration is
affected by the Bank's real estate lending portfolio which represents the major
portion of the growth in the loan portfolios. Real estate loans are generally
well collateralized, and are therefore reflected as such in the allowance.
Management anticipates no material increase or decrease in charge-off activity
in 1998.
1997 Annual Report o 7
-50-
<PAGE>
o business (continued)
================================================================================
DEPOSITS
The average daily amount of deposits and rates paid on such deposits are
summarized for the periods indicated in the following table:
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Year Ended December 31,
1997 1996 1995
===========================================================================================================================
Amount Rate Amount Rate Amount Rate
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing and
demand deposits $ 17,773 $ 16,271 $ 15,974
NOW accounts 42,522 1.52% 39,029 1.59% 35,759 1.74%
Savings deposits 48,035 2.74 46,200 2.86 44,334 2.77
Time deposits 74,730 5.59 54,990 5.48 50,413 5.48
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL $183,060 $156,490 $146,480
===========================================================================================================================
</TABLE>
Maturities of time certificates of deposit of $100,000 or more outstanding at
December 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
Time Certificates of Deposit
===========================================================================
<S> <C>
Three months or less $ 5,498
Over three through six months 2,487
Over six through twelve months 4,384
Over twelve months 2,278
---------------------------------------------------------------------------
TOTAL $ 14,647
===========================================================================
</TABLE>
RETURN ON EQUITY AND ASSETS
The following table shows consolidated operating and capital ratios for each of
the last three years:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
================================================================================
<S> <C> <C> <C>
Return on average assets .59% 1.05% .81%
Return on average stockholders' equity 7.52 12.45 9.72
Dividend payout ratio 59.02 35.26 34.78
Equity to assets ratio (1) 7.80 8.46 8.37
================================================================================
</TABLE>
(1) Ratio is based upon average stockholders' equity and average asset balances.
MARKET RISK
As a financial institution, the Company's primary component of market risk is
interest rate volatility. Any fluctuation in interest rates will impact both the
level of income and expense recorded on a large percentage of the Bank's assets
and liabilities, and the fair value of all interest earning assets. In general,
financial institutions are negatively affected by an increase in interest rates
to the extent that interest-bearing liabilities mature or reprice more rapidly
than interest-earning assets. The Bank does not own any trading assets, nor does
it have any hedging transactions in place such as interest rate swaps and caps.
Based on the nature of the Bank's operations, it is not subject to foreign
exchange or commodity price risk.
The Bank's earnings are primarily dependent on its net interest income which is
the difference (the "spread") between the yields earned on its interest earning
assets, such as loans and investments, and the rates paid on its interest
bearing liabilities, primarily deposits.
8 o Village Bancorp
-51-
<PAGE>
------------------
Business
------------------
================================================================================
Asset/liability management is the measurement and analysis of the Bank's
exposure to changes in the interest rate environment. The principal objectives
of the Bank's interest rate risk management activites are to: (a) evaluate the
interest rate risk included in certain balance sheet accounts; (b) determine the
level of risk appropriate given the Bank's business focus, operating
environment, capital and liquidity requirements and performance objectives; and
(c) manage this risk consistent with Board of Director approved guidelines. The
Bank's interest rate management strategy is designed to stabilize the spread and
preserve capital over a broad range of interest rate scenarios, while at the
same time enhancing income. Management realizes certain risks are inherent in
the financial services industry and that the goal is to identify and minimize
these risks. Various strategies are in place to control the Bank's exposure to
interest rate risk. The Bank has an Asset/Liability Committee comprised of
senior management which is primarily responsible for monitoring and determining
methods of managing the rate sensitivity and repricing characteristics of the
balance sheet components. This is done consistent with maintaining acceptable
levels of both risk and net interest income. This committee meets on a regular
basis. Quarterly reports are provided to the Board of Directors for
informational purposes and to ensure compliance with policy.
The following table sets forth the dollar amount, weighted average interest
rates and estimated fair value (see Note 15 to the financial statements) of
selected assets and liabilities that are scheduled to mature within the stated
time frames as of December 31, 1997:
<TABLE>
<CAPTION>
Maturities (dollars in thousands)
Scheduled Maturity dates
1998 1999 2000 2001 2002 Thereafter Total Fair Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Securities $ 26,391 $ 9,713 $ 6,600 $ 2,452 $ 1,157 $ 8,278 $ 54,591 $ 54,763
Weighted average
interest rate (%) 5.59 5.60 5.44 5.48 5.15 5.04 5.47
Home equity loans 275 351 1,485 550 1,447 5,776 9,884 9,884
Weighted average
interest rate (%) 9.75 9.98 9.86 9.90 9.94 9.97 9.94
Real estate loans 11,786 2,907 241 731 598 96,690 112,953 113,817
Weighted average
interest rate (%) 8.00 8.72 9.33 9.63 8.46 7.84 7.90
Installment and
commercial loans 13,650 4,682 3,054 1,873 1,147 620 25,026 24,949
Weighted average
interest rate (%) 9.50 9.29 8.91 9.50 9.34 9.42 9.38
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 52,102 $ 17,653 $ 11,380 $ 5,606 $ 4,349 $111,364 $202,454 $203,413
===============================================================================================================================
Liabilities:
Non-interest
bearing deposits $ 20,764 $ -- $ -- $ -- $ -- $ -- $ 20,764 $ 20,764
Weighted average
interest rate (%) -- -- -- -- -- -- --
Now, savings &
money market 100,014 -- -- -- -- -- 100,014 100,014
Weighted average
interest rate (%) 1.84 -- -- -- -- -- 1.84
Certificates of deposit 69,950 8,648 3,440 533 459 -- 83,030 83,209
Weighted average
interest rate (%) 5.35 5.90 6.05 5.74 6.12 -- 5.44
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 190,728 $ 8,648 $ 3,440 $ 533 $ 459 $ -- $203,808 $203,987
===============================================================================================================================
</TABLE>
Although the Bank is subject to interest rate risk as described above, loans and
deposits of the Bank have historically been largely stable and the Company has
not experienced any significant adverse effects on net income in periods of
rapidly changing interest rates. Accordingly, no prepayment, deposit decay rates
or reinvestment assumptions have been reflected in the above table. Management
makes a concious effort to match the maturities or the repricing time frames of
assets with the liabilities that fund them, to limit the period of time between
repricing on adjustable rate assets in portfolio and to minimize the volume of
fixed-rate assets held.
1997 Annual Report o 9
-52-
<PAGE>
o business/selected financial data
================================================================================
INTEREST RATE SENSITIVITY
The following table sets forth the dollar amount of rate sensitive assets and
liabilities that contractually reprice within the stated time frames at December
31, 1997:
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Rate Sensitive Assets:
1 Year or less 1 - 5 Years Over 5 Years Total
======================================================================================================================
<S> <C> <C> <C> <C>
Loans (net of deferred loan fees) $ 107,383 $ 27,904 $ 12,372 $ 147,659
Securities 26,391 19,922 8,278 54,591
- ----------------------------------------------------------------------------------------------------------------------
Total 133,774 47,826 20,650 202,250
======================================================================================================================
Rate Sensitive Liabilities:
Deposits 169,863 13,181 -- 183,044
- ----------------------------------------------------------------------------------------------------------------------
Gap (Repricing difference) $ (36,089) $ 34,645 $ 20,650 $ 19,206
======================================================================================================================
Cumulative gap $ (36,089) $ (1,444) $ 19,206
======================================================================================================================
Cumulative ratio of rate
sensitive assets to liabilities .79 .99 1.10
======================================================================================================================
</TABLE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the last five years:
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
Year Ended December 31,
1997 1996 1995 1994 1993
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Net interest income $ 8,366 $ 7,840 $ 7,694 $ 7,002 $ 6,744
Provision for loan losses 60 120 210 311 45
Net income 1,178 1,820 1,316 707 994
- ----------------------------------------------------------------------------------------------------------------------
Per share data: (1)
Net income - basic earnings $ .62 $ .96 $ .70 $ .37 $ .53
Net income - diluted earnings .61 .95 .69 .37 .53
Cash dividends declared .36 .335 .24 .315 .26
- ----------------------------------------------------------------------------------------------------------------------
Balance sheet totals:
Average assets $200,792 $ 172,782 $ 161,898 $ 149,505 $ 143,365
Average deposits 183,075 156,498 146,480 135,642 129,752
Average stockholders' equity 15,656 14,614 13,545 13,095 12,824
======================================================================================================================
</TABLE>
The following table sets forth selected quarterly financial data for 1997 and
1996:
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
1997 Quarters 1996 Quarters
Total Fourth Third Second First Total Fourth Third Second First
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $8,366 $2,250 $2,106 $2,041 $1,969 $7,840 $1,947 $1,995 $1,933 $1,965
Provision for loan losses 60 15 15 15 15 120 30 30 30 30
Net income 1,178 223 231 315 409 1,820 549 458 421 392
- ---------------------------------------------------------------------------------------------------------------------------
Per share data: (1)
Net income - basic earnings $ .62 $ .12 $ .12 $ .17 $ .21 $ .96 $ .29 $ .24 $ .22 $ .21
Net income - diluted earnings .61 .12 .12 .16 .21 .95 .29 .24 .22 .20
Cash dividends declared .36 .09 .09 .09 .09 .335 .09 .085 .085 .075
===========================================================================================================================
</TABLE>
(1) Per share data prior to 1997 has been adjusted for the 100% stock dividend
issued in 1997.
10 o Village Bancorp
-53-
<PAGE>
----------------------------------------------------------------------
Business / Selected Financial Data / Management's Discussion
& Analysis of Financial Condition & Results of Operations
----------------------------------------------------------------------
o management's discussion & analysis of financial condition
& results of operations
================================================================================
General
Village Bancorp, Inc. (Company) is a Connecticut incorporated bank holding
company and parent corporation of the Village Bank & Trust Company (Village),
which is the only subsidiary of the Company. During 1997, the Bank opened
full-service branches in Danbury and Westport, Connecticut. The Westport
location was opened in June of 1997 in leased office space. The Danbury location
was opened in July of 1997 in the Bank's new three-story, 17,000 square foot
office building. In January 1994, Village Bancorp, Inc. and Liberty National
Bank (Liberty) jointly announced the signing of an agreement by which Village
Bancorp, Inc. would acquire all of the outstanding common stock of Liberty. This
acquisition took place in November of 1994. In June of 1995, Liberty National
Bank was merged into The Village Bank & Trust Company. All historical financial
data has been restated to include both entities for all periods presented. The
Bank functions as a financial intermediary acting as depository and lender of
funds to its customers, and generates its income from the interest earned on
invested assets less interest paid on its deposits and interest bearing
liabilities. The Bank is a member of the Federal Deposit Insurance Corporation
(FDIC) and the deposits of the Bank are insured by the FDIC to the extent
provided by law. The Bank offers all general commercial banking services allowed
by both State and Federal regulations. The Company does not engage in any
non-banking activities that are permitted to bank holding companies under
enacted regulations. The Bank is subject to intense competition from various
financial institutions and other companies or firms that engage in similiar
activities. Bank holding companies and banks are extensively regulated under
both federal and state law. As of December 31, 1997, the Bank had 97 full-time
equivalent employees. Most full-time employees are eligible for group life,
health and medical and disability insurance. Village Bank & Trust employees are
eligible for participation in a 401(k) plan after one year of service. The
Company is listed on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") SmallCap Stock Market price quotation service under
the symbol "VBNK". Village began operating a trust department and offering trust
services in the third quarter of 1993.
COMPARISON OF 1997 TO 1996
Financial Condition
The Company had total assets of $222,549,000 on December 31, 1997 as compared to
assets of $179,550,000 on December 31, 1996. The most significant areas of
increase over the past year were in loans, which increased $20,823,000 (16.4%)
and securities, which increased $20,905,000 (63.5%).
The growth in these two areas was funded mainly by an increase of $41,183,000
(25.3%) in the Bank's deposits. This increase in loans is primarily attributable
to a combination of factors. The Bank continued its increased marketing effort
in this area. The new branch offices increased the Bank's presence in the
marketplace, with the Westport branch opening an entirely new market. The sales
force was expanded late in 1996 in both the mortgage and commercial loan areas,
this helped to increase the volume of business. The expanded adjustable rate
product line has been well received. The Bank generally retains adjustable rate
loans for its own portfolio, this contributed to the increase in the mortgage
loan area.
The loan portfolio of the Bank includes $122,633,000 of real estate, home equity
and construction mortgages. This is 83.1% of the Bank's total loan portfolio as
of December 31, 1997. This is in comparison to $104,298,000 (82.2%) in real
estate related loans outstanding on December 31, 1996. Due to this high
percentage of real estate loans the management of the Bank is continuously
monitoring real estate values and the general economic conditions in the Bank's
lending areas so that it may take appropriate action when necessary.
Capital Resources
The Company, aware that its capital position is a measure of its ongoing
viability and ability to compete effectively in the highly competitive financial
services industry, strives to maintain a strong capital position. With a strong
capital position, the Company has the ability to effectively compete now and in
the future and to be better able to withstand economic instability or
uncertainty. The Company had a leverage ratio of 7.80% on December 31, 1997 as
compared to 8.46% on December 31, 1996.
In 1989 the Federal Deposit Insurance Corporation approved a final Statement of
Policy on Risk-Based Capital to be implemented over a two-year transition period
beginning at December 31, 1990. Risk weights are assigned to balance sheet and
off-balance sheet items and are used to calculate the Bank's capital ratios. On
December 31, 1997 the required minimum capital was 8.0% of total capital to risk
weighted assets and 4.0% Tier 1 capital to risk weighted assets. The Company's
ratios on December 31, 1997 were 13.06% total capital ratio and 12.06% Tier 1
capital ratio, which exceed the minimum requirements. These ratios for December
31, 1996 were 14.62% and 13.43%, respectively. Management does not anticipate
any event that would cause the Company to fall below the minimum requirements at
December 31, 1998, and anticipates that the Company will continue to have excess
"risk-based" capital.
1997 Annual Report o 11
-54-
<PAGE>
o management's discussion & analysis of financial condition
& results of operations (continued)
================================================================================
Results of Operations
Net income for 1997 was $1,178,000 as compared to $1,820,000 for 1996. This
decrease was primarily the result of an increase in expenses incurred as a
result of the completion and related move into the Bank;s new three story office
building in Danbury, Connecticut along with the opening of a new full-service
branch office in Westport, Connecticut in leased office space. Net interest
income for 1997 amounted to $8,366,000 as compared to $7,840,000 for 1996. Net
interest income increased primarily as a result of the increase in interest
income on loans.
Income Taxes
The Company's provision for income taxes was $585,000 for 1997 as compared to
$471,000 for 1996. The increase in the Company's provision for income taxes was
primarily the result of the 1996 receipt of a tax refund settlement from the
State of Connecticut. For more information please see Note 10 to the
Consolidated Financial Statements.
Assets and Related Income Analysis
Loans outstanding on December 31, 1997 totaled $147,659,000 as compared to
$126,836,000 outstanding on December 31, 1996. The increase in the loan
portfolio of $20,823,000 (16.4%) was for the most part attributable to the
majority of real estate loans originated being variable rate, which the Bank
primarily holds for its own portfolio. There was also an increased sales effort
in the commercial loan area which encreased the outstandings by $4,517,000. The
majority of loans at the Bank are and have been real estate related. Loan income
increased $1,236,000 from $10,472,000 for 1996 to $11,708,000 for 1997. This
increase is due to an increase in average outstanding loans from $121,623,000
for 1996 to $135,772,000 for 1997, coupled with a slight increase in the average
rate earned from 8.61% in 1996 to 8.62% in 1997.
Securities, which consist of securities held-to-maturity and securities
available-for-sale, increased $20,905,000 (63.5%) from $32,904,000 at December
31, 1996 to $53,809,000 at December 31, 1997. Income from securities increased
$329,000 (16.5%) from $2,000,000 for the 1996 period to $2,329,000 for the 1997
period. This increase resulted primarily from an increase in average dollar
amount outstanding from $34,570,000 for 1996 to $41,760,000 for 1997, offset by
a decrease in average rate earned from 5.79% for 1996 to 5.58% for 1997. In 1997
there were no net security gains or losses; there were net security losses of
$17,000 in 1996. The Bank has the positive intent and ability to hold securities
designated as held-to-maturity until maturity and does not engage in trading
activities. Securities available-for-sale are used to compensate for liquidity
forecasting deviations.
Federal funds sold decreased $6,600,000 from $6,600,000 at December 31, 1996 to
$0 at December 31, 1997. Federal funds sold income increased $100,000 (31.5%)
from $317,000 for 1996 to $417,000 for 1997. This increase resulted primarily
from an increase in average dollar amount outstanding from $5,994,000 in 1996 to
$7,745,000 in 1997 coupled with an increase in the average rate earned from
5.29% for 1996 to 5.38% in 1997.
Liability and Related Expense Analysis
Deposits increased $41,183,000 (25.3%) from $162,625,000 at December 31, 1996 to
$203,808,000 at December 31, 1997. Interest on deposits increased $1,184,000
(23.9%) from $4,953,000 for 1996 to $6,137,000 for 1997. This increase is
attributable to an increase in the average dollar amount outstanding from
$156,489,000 for 1996 to $183,060,000 in 1997, coupled with an increase in the
average rate paid of 3.17% for 1996 to 3.35% for 1997.
Salary and benefits expenses increased $535,000 (17.5%) from $3,064,000 in 1996
to $3,599,000 in 1997, primarily as a result of the increase in the number of
personnel due to the opening of the two new branch office locations.
Net occupancy expenses increased $218,000 (37.5%) from $582,000 in 1996 to
$800,000 in 1997, furniture and equipment expenses increased $62,000 (23.6%)
from $263,000 in 1996 to $325,000 in 1997, both as result of additional expenses
due to the opening of the full-service branch locations in Westport and Danbury,
Connecticut.
Supplies expenses increased $89,000 (50.6%) from $176,000 in 1996 to $265,000 in
1997, mainly as a result of expenses incurred in the opening of the new branch
offices.
Data processing services increased $63,000 (13.4%) from $470,000 in 1995 to
$533,000 in 1996, as a result of increased use of services offered along with
increased volumes.
Provision for Loan Losses
The provision for loan losses decreased $60,000 (100.0%) from $120,000 for 1996
to $60,000 for 1997. The economy and the real estate market in the Bank's market
areas are closely monitored by management to maintain an allowance for loan
losses that is considered adequate. The loan loss allowance was $1,309,000 to
support loan portfolios of $147,659,000, or a loan loss reserve ratio of .89%.
This is in comparison to a ratio of 1.07% for 1996. Management believes that the
allowance for loan losses is adequate.
12 o Village Bancorp
-55-
<PAGE>
-------------------------------------------------------------------
Management's Discussion & Analysis of Financial Condition
& Results of Operations
-------------------------------------------------------------------
================================================================================
Interest Rate Sensitivity
Financial institutions have become increasingly concerned about matching the
repricing ability of interest-earning assets to the repricing ability of
interest-bearing liabilities. Interest rate risk occurs when these repricings
occur in different time frames. An interest rate sensitivity "gap" is the
difference between the repricing assets and the repricing liabilities occuring
in a given time frame. A positive "gap" occurs when the asset amount exceeds the
liability amount. A negative "gap" occurs when the liability amount exceeds the
asset amount. In a falling interest rate environment a negative "gap" would tend
to increase the institution's net interest income, while a positive "gap" would
have an adverse effect. In a rising interest rate environment a positive "gap"
would tend to increase the institution's net interest income, while a negative
"gap" would have an adverse effect. Normally institutions attempt to match these
repricings while maintaining an adequate interest rate spread without
compromising the quality of assets. The Bank's interest rate sensitivity for the
one year or less time frame consists of $133,774,000 of repricing assets
compared to $169,863,000 of repricing liabilities. For more information please
see "Business".
Liquidity
Liquidity is the ability to provide funds for loan requests, unexpected deposit
outflows and meeting other recurring financial obligations. The Bank, as a
financial intermediary, monitors its liquidity position carefully, so that it
might identify trends that could impact its liquidity/cash flow position. The
Bank experiences little in seasonal liquidity fluctuation. Loan commitments are
also closely monitored to assure these commitments do not negatively affect the
Bank's planned liquidity position. Primary liquidity is comprised of cash and
due from banks, interbank overnight federal funds sold and securities maturing
in less than one year. These assets aggregated $36,762,000, or 16.5% of total
assets, as of December 31, 1997, as compared to $25,689,000 (14.7%) at December
31, 1996. The Bank has borrowing capabilities from the Federal Home Loan Bank of
Boston, which is available as a supplemental source of funding for liquidity
purposes. Management closely monitors the Bank's liquidity/cash flow position
and does not anticipate any liquidity problems in the future.
Impact of Inflation
The quantitative impact of inflation is subjective in interpretation and
difficult and imprecise to measure in the financial services industry. Inflation
poses a financial risk as the Bank's assets consist mainly of financial assets
which are funded by deposit liabilities of varying maturities and deposit yields
as opposed to physical or real assets. With few fixed or physical assets, the
Bank has a low degree of operating leverage which mitigates the inflationary
impact. The financial leverage ratio of capital to total assets is the most
effective measure of a financial institution's viability and its ability to
withstand inflationary pressures.
Year 2000
The Corporation and the Bank are aware of the significant impact that Year 2000
("Y2K") will have on financial services companies, as such, the Bank has
established a program to address Y2K issues. The Board of Directors monitors the
project and its ongoing implementation. The costs associated with the
implementation of changes to deal with Y2K issues is not expected to have a
material impact on the Bank's financial statements, however there can be no
assurances that Y2K will not to some degree affect the operations of the Bank.
COMPARISON OF 1996 TO 1995
Financial Condition
The Company had total assets of $179,550,000 on December 31, 1996 as compared to
assets of $174,277,000 on December 31, 1995. The most significant area of
increase over the past year was in loans, which increased $7,245,000 (6.1%).
Loan growth was funded mainly by an increase of $4,086,000 (2.6%) in the Bank's
deposits. This increase in loans is primarily attributable to a combination of
factors. The Bank increased its marketing effort in this area and at the same
time brought on board two loan originators. In addition the Bank also expanded
the adjustable rate product line with a new selection of choices. These new
product lines have been well received, and as the Bank generally retains
adjustable rate loans for its own portfolio, this contributed to the increase in
the mortgage loan area.
The loan portfolio of the Bank includes $104,298,000 of real estate, home equity
and construction mortgages. This is 82.2% of the Bank's total loan portfolio as
of December 31, 1996. This is in comparison to $96,137,000 (80.4%) in real
estate related loans outstanding on December 31, 1995. Due to this high
percentage of real estate loans the management of the Bank is continuously
monitoring real estate values and the general economic conditions in the Bank's
lending areas so that it may take appropriate action when necessary.
Capital Resources
The Company had a leverage ratio of 8.46% on December 31, 1996 as compared to
8.37% on December 31, 1995. On December 31, 1996 the required minimum capital
was 8.0% of total capital to risk weighted assets and 4.0% Tier 1 capital to
risk weighted assets. The Company's ratios on December 31, 1996 were 14.62%
total capital ratio and 13.43% Tier 1 capital ratio, which exceed the minimum
requirements. These ratios for December 31, 1995 were 14.64% and 13.84%,
respectively. Management does not anticipate any event that
1997 Annual Report o 13
-56-
<PAGE>
o management's discussion & analysis of financial condition
& results of operations (continued)
================================================================================
would cause the Company to fall below the minimum requirements at December 31,
1998, and anticipates that the Company will continue to have excess "risk
- -based" capital.
Results of Operations
Net income for 1996 was $1,820,000 as compared to $1,316,000 for 1995. Net
interest income for 1996 amounted to $7,840,000 as compared to $7,694,000 for
1995. Net interest income increased primarily as a result of the increase in
interest income on loans.
Income Taxes
The Company's provision for income taxes was $471,000 for 1996 as compared to
$984,000 for 1995. The change in the Company's provision for income taxes was
primarily due to the Company utilizing tax loss carry forwards available as a
result of the 1994 acquisition of Liberty National Bank, along with the receipt
of a tax refund settlement from the State of Connecticut.
Assets and Related Income Analysis
Loans outstanding on December 31, 1996 totaled $126,836,000 as compared to
$119,591,000 outstanding on December 31, 1995. The increase in the loan
portfolio of $7,245,000 (6.1%) was for the most part attributable to the
majority of real estate loans originated being variable rate, which the Bank
primarily holds for its own portfolio. The majority of loans at the Bank are and
have been real estate related. Loan income increased $295,000 from $10,177,000
for 1995 to $10,472,000 for 1996. This increase is due to an increase in average
outstanding loans from $116,921,000 for 1995 to $121,623,000 for 1996, offset by
a decrease in the average rate earned from 8.70% in 1995 to 8.61% in 1996.
Securities, which consist of securities held-to-maturity and securities
available-for-sale, decreased $1,658,000 (4.8%) from $34,562,000 at December 31,
1995 to $32,904,000 at December 31, 1996. Income from securities increased
$208,000 (11.6%) from $1,792,000 for the 1995 period to $2,000,000 for the 1996
period. This increase resulted primarily from an increase in average dollar
amount outstanding from $29,196,000 for 1995 to $34,570,000 for 1996, offset by
a decrease in average rate earned from 6.14% for 1995 to 5.79% for 1996. In 1996
there were net security losses of $17,000; there were net security gains of
$70,000 in 1995. The Bank has the positive intent and ability to hold securities
designated as held-to-maturity until maturity and does not engage in trading
activities. Securities available-for-sale are used to compensate for liquidity
forecasting deviations.
Federal funds sold decreased $1,600,000 (19.5%) from $8,200,000 at December 31,
1995 to $6,600,000 at December 31, 1996. Federal funds sold income decreased
$54,000 (14.6%) from $371,000 for 1995 to $317,000 for 1996. This decrease
resulted primarily from a decrease in the average rate earned from 5.86% for
1995 to 5.29% in 1996, coupled with a decrease in average dollar amount
outstanding from $6,329,000 in 1995 to $5,994,000 in 1996.
Liability and Related Expense Analysis
Deposits increased $4,086,000 (2.6%) from $158,539,000 at December 31, 1995 to
$162,625,000 at December 31, 1996. Interest on deposits increased $307,000
(6.6%) from $4,646,000 for 1995 to $4,953,000 for 1996. This increase is
attributable to an increase in the average dollar amount outstanding from
$146,480,000 for 1995 to $156,489,000 in 1996. The average rate paid was 3.17%
for both the 1995 and 1996 period.
Data processing services increased $63,000 (13.4%) from $470,000 in 1995 to
$533,000 in 1996, as a result of increased use of services offered along with
increased volumes.
Advertising increased $21,000 (16.8%) from $125,000 in 1995 to $146,000 in 1996
as a result of an increased emphasis in this area.
Other operating expenses increased $218,000 (28.9%) from $754,000 in 1995 to
$972,000 in 1996. This increase was primarily due to a $152,000 increase in the
legal and professional expense, from $72,000 in 1995 to $224,000 in 1996,
resulting from professional fees incurred in connection with a tax refund
settlement from the State of Connecticut. In addition, director and committee
fees increased $53,000, from $106,000 in 1995 to $159,000 in 1996.
Provision for Loan Losses
The provision for loan losses decreased $90,000 (42.9%) from $210,000 for 1995
to $120,000 for 1996. The economy and the real estate market in the Bank's
market areas are closely monitored by management to maintain an allowance for
loan losses that is considered adequate. The loan loss allowance was $1,356,000
to support loan portfolios of $126,836,000, or a loan loss reserve ratio of
1.07%. This is in comparison to a ratio of 1.10% for 1995. Management believes
that the allowance for loan losses is adequate.
Liquidity
Primary liquidity is comprised of cash and due from banks, interbank overnight
federal funds sold and securities maturing in less than one year. These assets
aggregated $25,689,000, or 14.7% of total assets, as of December 31, 1996, as
compared to $37,745,000 (21.7%) at December 31, 1995.
14 o Village Bancorp
-57-
<PAGE>
0 independent auditors' report
================================================================================
[LOGO] Deloitte & Touche LLP
Stamford Harbor Park Telephone: (203)708-4000
333 Ludlow Street Facsimile: (203)708-4797
P.O. Box 10098
Stamford, Connecticut 06904
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Village Bancorp, Inc.
We have audited the consolidated balance sheets of Village Bancorp, Inc. and
subsidiary (the "Company") as of December 31, 1997 and 1996, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Village Bancorp,
Inc. and subsidiary as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
January 23, 1998
- ------------------
Deloitte & Touche
Tohmatsu
International
1997 Annual Report o 15
-58-
<PAGE>
1997
annual report
o consolidated balance sheets
================================================================================
<TABLE>
<CAPTION>
(In thousands)
December 31,
1997 1996
==================================================================================================
<S> <C> <C>
ASSETS
Cash and due from banks $ 11,153 $ 8,545
Federal funds sold -- 6,600
--------------------------------------------------------------------------------------------------
Cash and cash equivalents 11,153 15,145
--------------------------------------------------------------------------------------------------
Securities:
Available-for-sale, at fair value 19,427 15,706
Held-to-maturity, at amortized cost (fair value of $34,554
and $17,135 in 1997 and 1996) 34,382 17,198
Federal Home Loan Bank stock, at cost 782 712
Loans, net of deferred loan fees 147,659 126,836
Allowance for loan losses (1,309) (1,356)
--------------------------------------------------------------------------------------------------
Loans - net 146,350 125,480
--------------------------------------------------------------------------------------------------
Loans held for sale 1,686 50
Bank premises and equipment - net 5,256 1,509
Accrued income and other assets 3,513 3,750
--------------------------------------------------------------------------------------------------
Total Assets $ 222,549 $ 179,550
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing $ 20,764 $ 15,125
Interest bearing 183,044 147,500
--------------------------------------------------------------------------------------------------
Total deposits 203,808 162,625
--------------------------------------------------------------------------------------------------
Income taxes 26 275
Other liabilities 2,842 1,353
--------------------------------------------------------------------------------------------------
Total liabilities 206,676 164,253
--------------------------------------------------------------------------------------------------
Commitments and contingent liabilities (Note 5, 14)
STOCKHOLDERS' EQUITY
Common stock, $3.33 par value; authorized, 10,000,000 shares;
issued and outstanding, 1,908,634 shares in 1997 and 952,117
in 1996 6,356 3,171
Additional paid-in capital 4,851 7,996
Retained earnings 4,635 4,143
Net unrealized gains (losses) on securities available-for-sale,
net of tax 31 (13)
--------------------------------------------------------------------------------------------------
Total stockholders' equity 15,873 15,297
--------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 222,549 $ 179,550
==================================================================================================
</TABLE>
16 o Village Bancorp
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<PAGE>
-------------------------------------------------------------------------
Consolidated Balance Sheets / Consolidated Statements of Income
-------------------------------------------------------------------------
consolidated statements of income
================================================================================
<TABLE>
<CAPTION>
(In thousands, except per share data)
Year Ended December 31,
1997 1996 1995
======================================================================================================
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 11,708 $ 10,472 $ 10,177
Securities:
Taxable 2,017 1,879 1,680
Tax-exempt 312 121 112
Federal funds sold 417 317 371
Dividends on Federal Home Loan Bank stock 49 4 --
- ------------------------------------------------------------------------------------------------------
Total interest income 14,503 12,793 12,340
INTEREST EXPENSE 6,137 4,953 4,646
- ------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 8,366 7,840 7,694
PROVISION FOR LOAN LOSSES 60 120 210
- ------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,306 7,720 7,484
- ------------------------------------------------------------------------------------------------------
OTHER INCOME
Service charges 343 332 359
Security gains (losses) - net -- (17) 70
Other operating income 225 175 138
- ------------------------------------------------------------------------------------------------------
Total other income 568 490 567
- ------------------------------------------------------------------------------------------------------
OTHER EXPENSES
Salaries and employee benefits 3,599 3,064 2,991
Net occupancy 800 582 547
Other real estate owned 4 18 37
Furniture and equipment 325 263 290
Data processing services 615 533 470
Regulatory assessments 20 3 148
Printing, stationery and supplies 265 176 220
Advertising 240 146 125
Appraisal fees 72 55 51
Postage 122 107 118
Other operating expenses 1,049 972 754
- ------------------------------------------------------------------------------------------------------
Total other expenses 7,111 5,919 5,751
- ------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,763 2,291 2,300
PROVISION FOR INCOME TAXES 585 471 984
- ------------------------------------------------------------------------------------------------------
NET INCOME $ 1,178 $ 1,820 $ 1,316
======================================================================================================
PER SHARE DATA(1)
Net income - basic earnings $ .62 $ .96 $ .70
Net income - diluted earnings $ .61 .95 .69
Cash dividends $ .36 $ .335 $ .24
======================================================================================================
</TABLE>
See notes to consolidated financial statements.
(1) 1996 and 1995 data has been adjusted for the 100% stock dividend issued in
1997.
1997 Annual Report o 17
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<PAGE>
1997
annual report
o Consolidated statements of changes
in stockholders' equity
================================================================================
<TABLE>
<CAPTION>
(In thousands, except share data)
Common Stock Net Unrealized
---------------------- Additional Gains (Losses)
Number of Paid-In on Securities Retained
Shares Amount Capital Available-For-Sale Earnings
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995 946,949 $ 3,153 $ 7,959 $ (157) $ 2,099
Net income 1,316
Cash dividends declared, $.24* per share (455)
Exercise of options 3,999 14 21
Retirement of stock (631) (2) 2
Change in net unrealized gains (losses) on
securities available-for-sale, net of tax 198
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 950,317 3,165 7,982 41 2,960
Net income 1,820
Cash dividends declared, $.335* per share (637)
Exercise of options 1,800 6 14
Change in net unrealized gains (losses) on
securities available-for-sale, net of tax (54)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 952,117 3,171 7,996 (13) 4,143
Net income 1,178
Cash dividends declared, $.36* per share (686)
Exercise of options 2,200 7 33
100% Stock dividend 954,317 3,178 (3,178)
Change in net unrealized gains (losses) on
securities available-for-sale, net of tax 44
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 1,908,634 $ 6,356 $ 4,851 $ 31 $ 4,635
===========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
* Adjusted for the 100% stock dividend issued in 1997.
18 o Village Bancorp
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<PAGE>
--------------------------------------------------------------------
Consolidated Statements of Changes in Stockholder's Equity
/ Consolidated Statements of Cash Flows
--------------------------------------------------------------------
consolidated statements of cash flows
================================================================================
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31,
1997 1996 1995
==============================================================================================================
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,178 $ 1,820 $ 1,316
Adjustments to reconcile net income to net cash
provided by
operating activities:
Provision for loan losses 60 120 210
Depreciation and amortization 339 242 262
Accretion of security discounts, net (251) (196) (194)
Deferred income taxes (4) (213) --
Security losses (gains), net -- 17 (70)
Increase (decrease) in deferred loan fees (59) 16 (134)
Origination of loans held for sale (10,159) (6,934) (5,295)
Proceeds from sales of loans 8,600 7,513 4,790
Gains on sales of loans (77) (77) (47))
Decrease (increase) in accrued income and other assets 206 (1,492) 85
Increase (decrease) in other liabilities 1,240 38 824
- --------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,073 854 1,747
- --------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of securities available-for-sale -- 2,307 8,535
Proceeds from maturities of securities held-to-maturity 4,160 6,350 10,598
Proceeds from maturities of securities available-for-sale 9,099 16,719 4,600
Purchases of securities held-to-maturity (21,245) (9,583) (1,088)
Purchases of securities available-for-sale (12,591) (14,047) (20,900)
Purchase of Federal Home Loan Bank stock (70) (712) --
Net increase in loans (20,869) (7,336) (13,582)
Purchases of premises and equipment (4,086) (201) (176)
- --------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (45,602) (6,503) (12,013)
- --------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits 41,183 4,086 15,118
Cash dividends (686) (637) (455)
Net proceeds from issuance of common stock 40 20 35
- --------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 40,537 3,469 14,698
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (3,992) (2,180) 4,432
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR 15,145 17,325 12,893
- --------------------------------------------------------------------------------------------------------------
END OF YEAR $ 11,153 $ 15,145 $ 17,325
==============================================================================================================
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid on deposits $ 5,439 $ 5,202 $ 3,787
Income tax payments 939 898 896
==============================================================================================================
</TABLE>
See notes to consolidated financial statements.
1997 Annual Report o 19
-62-
<PAGE>
1997
annual report
o notes to consolidated
financial statements
================================================================================
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations -- Village Bancorp, Inc. and its subsidiary, The Village
Bank & Trust Company (the "Bank"), collectively the "Company", are engaged in
the business of commercial banking. Headquartered in Ridgefield, the Company
operates six branch offices in Fairfield and Litchfield counties in Connecticut.
The Company principally is engaged in lending and deposit gathering activities
within these counties. The Company's future prospects are largely dependent on
its ability to compete with entities having greater resources and on the
performance of the local economy. A wide range of loan and deposit products and
trust services are offered to the customer. Customer convenience and responsive
service are emphasized. Over 80% of loans are collateralized by real estate
located in Fairfield, Litchfield and adjacent counties. Within this area
employment levels and related economic activity generally are not materially
dependent on any one employer.
Organization -- In November of 1994, Village Bancorp, Inc. acquired Liberty
National Bank ("Liberty"). Each share of Liberty stock was converted into .2298
shares of Village Bancorp, Inc. common stock. This transaction was accounted for
using the pooling-of-interests method and, accordingly, all historical financial
data has been restated to include both entities for all periods presented. On
June 20, 1995, the Company merged Liberty into the Bank and now operates
Liberty's former office as a branch office. In this transaction, Liberty was
combined with the Bank as a combination of entities under common control and,
accordingly, was accounted for in a manner similiar to a pooling of interests.
Basis of Financial Statement Presentation -- The Company's consolidated
financial statements include the Bank and have been prepared in accordance with
generally accepted accounting principles and conform with predominant practices
used within the banking industry. All significant intercompany accounts and
transactions are eliminated in consolidation. In preparing such financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the
consolidated balance sheet and the revenues and expenses for the period. Actual
results could differ significantly from those estimates.
Estimates that are particularly susceptible to significant change relate to the
determination of the allowance for loan losses, the valuation of real estate
acquired in connection with foreclosures or in satisfaction of loans and the
valuation allowance for deferred tax assets. In connection with the
determination of the allowance for loan losses and real estate owned, management
obtains independent appraisals for significant properties.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize possible loan losses, future
additions to the allowance may be necessary based on changes in economic
conditions, particularly in the Bank's service area, Fairfield and Litchfield
Counties, Connecticut. In addition, regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses. Such agencies may recommend to the Bank that it recognize additions to
the allowance based on their judgements of information available to them at the
time of their examination.
Allowance for Loan Losses -- The allowance for loan losses is sustained by
charges to operating expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely; recoveries of previously charged off loans are restored to the
allowance. The allowance for loan losses is maintained at a level believed
adequate by management to absorb potential losses inherent in the loan
portfolio. Management's determination of the adequacy of the allowance is based
on an evaluation of the loan portfolio and other pertinent factors, including,
but not limited to, past loan loss experience, composition of the loan portfolio
and current economic factors.
Consolidated Statements of Cash Flows -- For purposes of presenting the
consolidated statements of cash flows, cash equivalents include amounts due from
banks and federal funds sold. Generally, federal funds sold have one day
availability.
Securities -- Securities held-to-maturity are stated at cost, adjusted for
accumulated amortization of premiums and accretion of discounts, which is
calculated on a method that approximates the interest method. Securities
available-for-sale are stated at estimated fair value. The determination to
include debt securities as securities held-to-maturity or securities
available-for-sale is made at the time of purchase and is based on such factors
as the overall interest rate sensitivity of the Company, projected liquidity
needs, and the Company's long-term investment strategies. The Bank does not
acquire securities for the purpose of engaging in trading activities. When sales
occur, gains or losses on the sale of securities are recognized using the
specific identification method. The Bank has the positive intent and ability to
hold its securities classified as held-to-maturity for their economic life.
20 o Village Bancorp
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<PAGE>
----------------------------------------------------
Notes to Consolidated Financial Statements
----------------------------------------------------
================================================================================
Loans -- Interest income on loans is recognized based on rates applied to
principal amounts outstanding. Loans are placed on nonaccrual status when
management believes that interest or principal on such loans may not be
collected in the normal course of business. Interest payments received on loans
in nonaccrual status are applied, based on management's judgement as to the
collectibility of loan principal, either as a reduction of principal or as
interest income. Such loans are restored to accrual status when there is no
longer doubt concerning collectibility and the borrower has performed in
accordance with the terms of the loan. Loans held for sale are stated at the
lower of cost or estimated fair value.
Loan origination and commitment fees, net of certain loan origination costs, are
deferred and the net amount amortized as an adjustment of the related loan's
yield. Loan fees deferred in 1997 and 1996 aggregated $203,000 and $274,000,
respectively. Loan costs deferred in 1997 and 1996 aggregated $18,000 and
$18,000, respectively. Net amounts amortized to income aggregated $260,000,
$213,000 and $433,000 in 1997, 1996 and 1995, respectively.
Impaired Loans -- The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan",
as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan
Income Recognition and Disclosures", as of January 1, 1995. Adoption of these
statements did not result in any adjustment to the allowance for loan losses as
of January 1, 1995.
A loan is recognized as impaired when it is probable that principal and/or
interest are not collectible in accordance with the contractual terms of the
loan. When a loan is considered impaired, it is placed on nonaccrual status.
Income is recorded using the income recognition principles outlined above.
Measurement of impairment is based on the present value of expected future cash
flows discounted at the loan's effective interest rate, or, at the loan's
observable market price or the fair value of the collateral, if the loan is
collateral dependent. Small homogeneous loans such as residential mortgages,
home equity loans, installment loans and consumer credit are not separately
reviewed for impaired status. These loans typically are for maturities less than
five years and require monthly payments. Separate allocations of the allowance
for loan losses are made based upon trends and prior loss experience and
composition of credit risk in these types of loans. This evaluation is
inherently subjective as it requires material estimates that may be susceptible
to significant change.
If the fair value of an impaired loan is less than the related recorded amount,
a specific valuation allowance is established or the write down is charged
against the allowance for loan losses if the impairment is considered to be
permanent.
Bank Premises and Equipment -- Bank premises and equipment are stated at cost,
less accumulated depreciation and amortization. Depreciation and amortization
are computed using the straight-line method based upon estimated useful lives or
the lease term, if shorter, up to 39 years for premises and 15 years for
equipment.
Income Taxes -- An asset and liability approach is used for financial accounting
and reporting for income taxes. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period the change is enacted.
Other Real Estate -- Other real estate includes properties which are foreclosed
or received in settlement of a loan, and real property not used in trade or
business. The properties are recorded at the lower of cost or fair value (net of
estimated costs of disposition) at the date transferred. Losses arising at the
time of acquisition of such properties are charged against the allowance for
loan losses. Subsequent write-downs of the carrying value of these properties
may be required and would be charged to operations. At December 31, 1997, other
real estate was $154,000. There was no other real estate at December 31, 1996.
Earnings Per Share -- SFAS No. 128, "Earnings Per Share", became effective for
the Company in the fourth quarter of 1997, and requires restatement of all
prior-period earnings per share ("EPS"). SFAS 128 requires that "Basic EPS"
exclude dilution and be computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period; "Diluted EPS" reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that would then
share in the earnings of the entity. Adoption of SFAS 128 had no significant
effect on the Company's previously reported EPS.
Stock-Based Compensation -- SFAS No. 123, "Accounting for Stock-Based
Compensation", establishes a fair value based method of accounting for
stock-based compensation plans and encourages, but does not require, entities to
adopt that method of accounting for all employee stock compensation plans. SFAS
No. 123 also establishes fair value as the measurement basis for transactions in
which an entity acquires goods or services from non-employees in exchange for
equity instruments. However, SFAS No. 123 permits entities to continue to
measure compensation costs for stock-based compensation plans using the
1997 Annual Report o 21
-64-
<PAGE>
o notes to consolidated
financial statements (continued)
================================================================================
instrinsic value based method of accounting prescribed by Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
present proforma disclosure of net income and earnings per share, as if the fair
value based method of accounting prescribed by SFAS No. 123 had been applied.
Effective January 1, 1996, the Company adopted SFAS No. 123 and has elected to
continue to measure compensation cost for stock-based compensation plans in
accordance with the provisions of APB Opinion No. 25.
Transfers and Servicing of Financial Assets -- SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
specifies accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities and for distinguishing
whether a transfer of financial assets in exchange for cash or other
consideration should be accounted for as a sale or as a pledge of collateral in
a secured borrowing. SFAS No. 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996, except for certain provisions (relating to the accounting for secured
borrowings and collateral and the accounting for transfers and servicing or
repurchase agreements, dollar rolls, securities lending and similiar
transactions) which have been deferred until January 1, 1998 in accordance with
SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125." Adoption of the effective provisions of SFAS No. 125 as of
January 1, 1997 has not had, and the adoption of the remaining provisions is not
expected to have, any material effect on the Company's consolidated financial
statements.
Pending Accounting Pronouncemnts. -- SFAS No. 130 "Reporting Comprehensive
Income," requires that all items that are components of "comprehensive income"
be reported in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income is defined as the "change in
equity (net assets) of a business enterprise during a period from transactions
and other events and circumstances from nonowner sources. It includes all
changes in equity during a period except those resulting from investments by
owners and distributions to owners." SFAS No. 130 requires companies to (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information," requires that enterprises
report certain financial and descriptive information about operating segments in
complete sets of financial statements and in condensed financial statements of
interim periods issued to stockholders. It will require the Company to report
certain information about its products and services, geographic areas in which
it operates and its major customers. SFAS Nos. 130 and 131 are effective for the
Company in 1998. As the requirements of these standards are disclosure-related,
their implementation will have no impact on the Company's financial condition or
results of operations.
Reclassifications -- Certain prior year amounts in the consolidated financial
statements have been reclassified to conform with the current presentation.
2. Earnings Per Share
The only dilutive potential common shares were attributable to stock options
outstanding (See Note 9). A summary of the basic and diluted earnings per share
calculations for 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Income Shares Per-Share
================================================================================
1997
<S> <C> <C> <C>
Basic EPS $1,178,000 1,905,441 $.62
Effect of
Dilutive Securities -
Stock Options -- 36,389 --
Diluted EPS $1,178,000 1,941,830 $.61
1996
Basic EPS $1,820,000 1,902,375 $.96
Effect of
Dilutive Securities -
Stock Options -- 16,127 --
Diluted EPS $1,820,000 1,918,502 $.95
1995
Basic EPS $1,316,000 1,893,159 $.70
Effect of
Dilutive Securities -
Stock Options -- 7,493 --
Diluted EPS $1,316,000 1,900,652 $.69
</TABLE>
3. Cash and Due from Banks
The Bank is required by Federal regulation to maintain average cash reserve
balances. Throughout 1997, daily cash reserves and compensating balances served
to satisfy this requirement and averaged approximately $3,237,000.
22 o Village Bancorp
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<PAGE>
----------------------------------------------------
Notes to Consolidated Financial Statements
----------------------------------------------------
================================================================================
4. Securities
The aggregate amortized cost and estimated fair values of securities
held-to-maturity and securities available-for-sale at December 31, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
=======================================================================================================
<S> <C> <C> <C> <C>
SECURITIES HELD-TO-MATURITY
U.S. Treasury securities $ 16,792 $ 23 $ (4) $ 16,811
Mortgage-backed securities of
U.S. Government agencies 6,704 24 (2) 6,726
Obligations of states and political subdivisions 10,886 147 (16) 11,017
- -------------------------------------------------------------------------------------------------------
Total $ 34,382 $ 194 $ (22) $ 34,554
=======================================================================================================
SECURITIES AVAILABLE-FOR-SALE
U.S. Treasury securities $ 18,993 $ 54 $ (2) $ 19,045
Mortgage-backed securities of
U.S. Government agencies 346 3 -- 349
Other 33 -- -- 33
- -------------------------------------------------------------------------------------------------------
Total $ 19,372 $ 57 $ (2) $ 19,427
=======================================================================================================
<CAPTION>
1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
=======================================================================================================
<S> <C> <C> <C> <C>
SECURITIES HELD-TO-MATURITY
U.S. Treasury securities $ 9,824 $ 31 $ (96) $ 9,759
Mortgage-backed securities of
U.S. Government agencies 4,735 15 (34) 4,716
Obligations of states and political subdivisions 2,639 37 (16) 2,660
- -------------------------------------------------------------------------------------------------------
Total $ 17,198 $ 83 $ (146) $ 17,135
=======================================================================================================
SECURITIES AVAILABLE-FOR-SALE
U.S. Treasury securities $ 15,250 $ 6 $ (27) $ 15,229
Mortgage-backed securities of
U.S. Government agencies 430 -- -- 430
Other 48 -- (1) 47
- -------------------------------------------------------------------------------------------------------
Total $ 15,728 $ 6 $ (28) $ 15,706
=======================================================================================================
</TABLE>
At December 31, 1997, securities with an amortized cost of $1,134,000 and a fair
value of $1,142,000 were pledged to secure public funds and for other purposes
as required by law and banking regulation. There were no gains or losses on
securities transactions in 1997. Gross gains on sales of securities in 1996 and
1995 were $5,000 and $77,000, respectively, and gross losses were $22,000 and
$7,000, respectively.
The amortized cost and fair value of securities at December 31, 1997, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
1997 Annual Report o 23
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<PAGE>
o notes to consolidated
financial statements (continued)
================================================================================
<TABLE>
<CAPTION>
(In thousands)
December 31, 1997
=========================================================================================
Available-for-sale Held-to-maturity
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
=========================================================================================
<S> <C> <C> <C> <C>
Within 1 year $ 12,725 $ 12,725 $ 12,884 $ 12,899
After 1 but within 5 years 5,086 5,115 14,517 14,553
After 5 but within 10 years 1,561 1,587 3,820 3,862
After 10 years -- -- 3,161 3,240
-----------------------------------------------------------------------------------------
Totals $ 19,372 $ 19,427 $ 34,382 $ 34,554
=========================================================================================
</TABLE>
In December 1995, the Company transferred a security having a fair value of
$353,000 (carrying value of $336,000) from its "held-to-maturity" to
"available-for-sale" securities. This was done to respond to changes in the
interest rate environment and to align the Company's interest rate gap position.
This transfer was made in accordance with FASB's "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities" issued in November 1995. Concurrent with the adoption of this
guidance, corporations were permitted through December 31, 1995, to reclassify
their "available-for-sale" and "held-to-maturity" securities without calling
into question the past intent of an entity to hold securities to maturity. As
this security was sold before year-end 1995, the gain on the sale was reflected
in the Company's results of operations in that year.
5. Loans
The composition of the loan portfolio is summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
December 31,
1997 1996
===========================================================================================
<S> <C> <C>
Real estate - mortgage and home equity $ 108,825 $ 96,608
Real estate - construction and land development 14,012 7,953
Installment and consumer credit 7,888 9,917
Commercial and financial 17,138 12,621
-------------------------------------------------------------------------------------------
Total loans 147,863 127,099
Deferred loan fees, net (204) (263)
Allowance for loan losses (1,309) (1,356)
-------------------------------------------------------------------------------------------
Loans - net $ 146,350 $ 125,480
===========================================================================================
</TABLE>
In the normal course of business there are outstanding various commitments and
contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the financial statements. Such commitments involve
elements of credit and interest rate risk in excess of the amount recognized in
the consolidated balance sheet. The Bank controls these risks through credit
approvals, limits and monitoring procedures. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since a portion of these commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. At December 31, 1997, existing commitments were as follows:
commitments to originate loans - $13,459,000, unused revolving lines of credit
on residential properties, including home equity - $8,775,000, unused revolving
lines of credit on commercial real estate and construction - $6,106,000, stand
by letters of credit - $1,939,000 and unused consumer lines of credit -
$2,417,000. At December 31, 1996, these commitments were as follows: commitments
to originate loans - $13,740,000, unused revolving lines of credit on
residential properties, including home equity - $10,455,000, unused revolving
lines of credit on commercial real estate and construction - $5,373,000, stand
by letters of credit - $1,843,000 and unused consumer lines of credit
$2,241,000.
24 o Village Bancorp
-67-
<PAGE>
----------------------------------------------------
Notes to Consolidated Financial Statements
----------------------------------------------------
================================================================================
Substantially all of the Bank commercial and residential lending activities are
with customers located in Fairfield and Litchfield counties, Connecticut.
Although lending activities are diversified, a substantial portion of many Bank
customers' net worth is dependent on local real estate values.
The Bank has established credit policies applicable to each type of lending
activity in which it engages, evaluates the credit-worthiness of each customer
and, in most cases, lends up to 80% of the fair value of the collateral,
depending on the Bank's evaluation of the borrowers' creditworthiness. The fair
value of collateral is monitored on an ongoing basis and additional collateral
is obtained when warranted. Real estate is the primary form of collateral. While
collateral provides assurance as a secondary source of repayment, the Bank
ordinarily requires the primary source of repayment to be based on the
borrower's ability to generate continuing cash flows.
Changes in the allowance for loan losses are summarized as follow:
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31,
1997 1996 1995
================================================================================
<S> <C> <C> <C>
Balance, beginning of year $ 1,356 $ 1,311 $ 1,551
Provision for loan losses
charged to operating expense 60 120 210
Loans charged off (119) (173) (464)
Recoveries on loans
previously charged off 12 98 14
- --------------------------------------------------------------------------------
Balance, end of year $ 1,309 $ 1,356 $ 1,311
================================================================================
</TABLE>
For management purposes, portions of this allowance are allocated to segments of
the loan portfolio based on perceived credit risks. At December 31, 1997,
management allocated $275,000 of the balance in the allowance for loan losses to
specific credit risks, which includes $174,000 of reserves that relate to loans
that are considered impaired, and $1,034,000 is considered to be an unallocated
or general allowance. Based on regulatory constraints all or a portion of this
allowance is considered to be capital for purposes of determining compliance
with certain regulatory capital standards (see Note 8).
The principal portion of loans delinquent as to principal or interest for ninety
days or more, including nonaccrual loans, is as follows:
(In thousands)
December 31,
1997 1996
================================================================================
Loans 90 days or more past due:
Real estate-mortgage and home equity $ 1,557 $ 1,629
Installment and consumer credit 65 124
- --------------------------------------------------------------------------------
Total $ 1,622 $ 1,753
================================================================================
1997 Annual Report o 25
-68-
<PAGE>
o notes to consolidated
financial statements (continued)
================================================================================
At December 31, 1997 and 1996 there were restructured loans of $831,000 and $0,
respectively. Loans on which interest is not being accrued aggregated
approximately $1,299,000 and $1,596,000 at December 31, 1997 and 1996,
respectively. The Bank would have recorded an additional $74,000, $59,000 and
$51,000 of gross interest income in 1997, 1996 and 1995, respectively, if
nonaccrual loans had been current. At December 31, 1997, there were no
commitments to lend additional funds to borrowers whose loans are classified as
nonaccrual or were restructured.
The recorded investment in loans that are considered to be impaired at December
31, 1997 and 1996 was $1,427,000 and $1,576,000, respectively. Specific
valuation allowances of $174,000 and $215,000 for 1997 and 1996, respectively,
have been established. During 1997 and 1996 the average recorded investment in
impaired loans was approximately $1,418,000 and $791,000, respectively. No
interest income was recognized on impaired or nonaccrual loans, either on the
accrual or on the cash basis method of interest recognition. Generally, the fair
value of the above loans was determined using the fair value of the underlying
collateral.
6. Bank Premises and Equipment
Bank premises and equipment, at cost, and accumulated depreciation and
amortization are summarized as follows:
(In thousands)
December 31,
1997 1996
===========================================================================
Land $ 175 $ 175
Premises 4,673 1,646
Equipment 2,606 1,628
Leasehold improvements 387 441
---------------------------------------------------------------------------
Total 7,841 3,890
Accumulated depreciation and amortization (2,585) (2,381)
---------------------------------------------------------------------------
Bank premises and equipment - net $ 5,256 $ 1,509
===========================================================================
The Bank completed the construction of a new three story building in Danbury,
Connecticut, in July of 1997. The first floor of this new building contains a
full-service branch office. The second and third floors are being utilized for
the deposit and loan back-office operations of the bank.
7. Deposits
Included in interest bearing deposits are certificates of deposit in
denominations of $100,000 or more. These certificates and their remaining
maturities are as follows:.
(In thousands)
December 31,
1997 1996
===========================================================================
Three months or less $ 5,498 $ 1,932
Over three through six months 2,487 2,763
Over six through twelve months 4,384 2,558
Over twelve months 2,278 887
---------------------------------------------------------------------------
Total $14,647 $ 8,140
===========================================================================
26 o Village Bancorp
-69-
<PAGE>
----------------------------------------------------
Notes to Consolidated Financial Statements
----------------------------------------------------
================================================================================
NOW accounts, included in interest bearing deposit liabilities, were $49,107,000
and $43,321,000 at December 31, 1997 and 1996, respectively.
8. Stockholders' Equity
The Company and Bank are subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain actions by regulators that, if
undertaken, could have a direct material effect on the Company's financial
statements. Under capital adequacy guidelines, and, with respect to the Bank,
the regulatory framework for prompt corrective action, the Company and Bank must
meet or exceed specific capital guidelines that involve quantitatve measures of
the Company's and the Bank's assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Company's and
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about capital components, risk weightings and other
factors.
Capital adequacy regulations require the Company and Bank to maintain or exceed
minimum amounts and ratios (set forth in the tables below) of Total and Tier 1
Capital (as defined in the regulations) to risk weighted assets (as defined),
and Tier 1 capital (as defined) to average assets (as defined). Management
believes that the Company and Bank meet all capital adequacy requirements to
which it is subject, and is considered well capitalized under regulatory
guidelines, as of December 31, 1997.
As of December 31, 1997, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain or exceed minimum total risk-based, Tier 1
risk-based and Tier 1 leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the Bank's category.
The Company's and Bank's capital amounts and ratios are presented in the table
that follows:
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Minimum
Minimum To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Company Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------
At December 31, 1997
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets) $ 17,151 13.06% $ 10,505 8.0% N/A N/A
Tier 1 Capital (to Risk Weighted Assets) 15,842 12.06 5,253 4.0 N/A N/A
Tier 1 Capital (to Average Assets) 15,842 7.17 8,842 4.0 N/A N/A
At December 31, 1996
Total Capital (to Risk Weighted Assets) $ 16,666 14.62% $ 9,120 8.0% N/A N/A
Tier 1 Capital (to Risk Weighted Assets) 15,310 13.43 4,560 4.0 N/A N/A
Tier 1 Capital (to Average Assets) 15,310 8.80 6,960 4.0 N/A N/A
Bank
- ------------------------------------------------------------------------------------------------------------
At December 31, 1997
Total Capital (to Risk Weighted Assets) $ 17,076 13.01% $ 10,499 8.0% $ 13,124 10.0%
Tier 1 Capital (to Risk Weighted Assets) 15,767 12.01 5,250 4.0 7,874 6.0
Tier 1 Capital (to Average Assets) 15,767 7.14 8,839 4.0 11,049 5.0
At December 31, 1996
Total Capital (to Risk Weighted Assets) $ 16,585 14.56% $ 9,114 8.0% $ 11,393 10.0%
Tier 1 Capital (to Risk Weighted Assets) 15,229 13.37 4,557 4.0 6,836 6.0
Tier 1 Capital (to Average Assets) 15,229 8.76 6,657 4.0 8,696 5.0
</TABLE>
1997 Annual Report o 27
-70-
<PAGE>
o notes to consolidated
financial statements (continued)
================================================================================
Capital ratios are computed excluding unrealized gains or losses on
available-for-sale securities, net of tax effect, which is included as a
component of stockholders' equity for financial reporting purposes.
9. Stock Option Plans
The Company and Bank have two stock option plans for their officers and
employees to be granted and issued by the Board of Directors from time to time.
The first plan, adopted in 1988, provides for 43,292 shares to be reserved for
issuance. The second plan, adopted in 1996, provides for 150,000 shares to be
reserved for issuance. There are currently 12,092 shares available for issuance
under this 1988 plan. In 1997 and 1996, 23,800 and 78,400 shares, respectively,
were granted under the 1996 plan to the Bank's officers. There are currently
49,800 shares available for issuance under the 1996 plan. Options issued under
the plans must be granted at the fair value of the Company's common stock on the
date of grant and expire five years from the grant date. In addition, all grants
vest immediately upon issuance. 1996 and 1995 share amounts have been adjusted
for the 100% stock dividend issued in 1997.
Stock option transactions under the Plans were as follows:
<TABLE>
<CAPTION>
Shares Underlying Weighted Average
Options Exercise Price
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding and exercisable Options as of January 1, 1995: 43,326 $ 5.53
Options exercised 7,998 4.34
Options expired 6,128 7.11
---------------------------------------------------------------------------------------------------------
Outstanding and exercisable Options as of December 31, 1995: 29,200 $ 5.50
Options granted 78,400 9.50
Options exercised 3,600 5.50
---------------------------------------------------------------------------------------------------------
Outstanding and exercisable Options as of December 31, 1996: 104,000 8.52
Options granted 23,800 13.19
Options exercised 4,400 9.14
Options expired 2,000 9.50
---------------------------------------------------------------------------------------------------------
Outstanding and exercisable Options as of December 31, 1997: 121,400 $ 9.39
---------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information regarding options outstanding and
exercisable as of December 31, 1997:
Range of Weighted Average Weighted Average
Exercise Prices Number Remaining Life Exercise Price
---------------------------------------------------------------------------
$ 5.50 - $ 15.63 121,400 3.03 years $ 9.39
28 o Village Bancorp
-71-
<PAGE>
----------------------------------------------------
Notes to Consolidated Financial Statements
----------------------------------------------------
================================================================================
As described in Note 1, the Bank continues to apply APB Opinion No. 25 and
related interpretations in accounting for the Plans, and accordingly, no
compensation cost has been recognized in 1997 or 1996. If compensation cost for
the Plans had been determined consistent with the method of SFAS No. 123, the
Bank's net income and earnings per share for the year ended December 31, 1997
would have been reduced to the pro forma amounts indicated as follows:
1997 1996
- --------------------------------------------------------------------------------
(In thousands, except share data)
Net income As reported $ 1,178 $ 1,820
Pro forma 989 1,696
Basic EPS As reported .62 .96
Pro forma .52 .89
Diluted EPS As reported .61 .95
Pro forma .51 .88
The weighted average fair value of options granted under the Plans was $7.95 for
1997 and $3.16 for 1996 and were estimated on the date of the grants using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used: dividend yield- 1997--3.12%, 1996--3.46%, expected volatility-
1997--24.66%, 1996--22.26%, risk free interest rate- 1997--5.39-5.40%,
1996--5.95%, expected lives of 3 years for both 1997 and 1996. No options were
granted in 1995.
10. Income Taxes
A reconciliation of the income tax provision to the amount computed using the
statutory federal tax rate is as follows
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Year Ended December 31,
1997 1996 1995
====================================================================================================
<S> <C> <C> <C> <C>
Income tax at 34% of pre-tax income $ 599 $ 778 $ 782
Connecticut corporation tax, net of federal tax benefit 57 (14) 171
Effect of tax-exempt income (91) (36) (38)
Merger expenses -- -- 5
Change in valuation allowance (25) (214) --
Other items, net 45 (43) 64
- ----------------------------------------------------------------------------------------------------
Provision for income taxes $ 585 $ 471 $ 984
====================================================================================================
Effective rate 33.2% 20.6% 42.7%
====================================================================================================
</TABLE>
The components of the provision for income taxes are as follows:
(In thousands)
Year Ended December 31,
1997 1996 1995
================================================================================
Current income taxes:
Federal $ 454 $ 762 $ 725
State 160 136 259
- --------------------------------------------------------------------------------
Total 614 898 984
Deferred income tax (benefit) expense
Federal 69 (56) --
State (73) (157) --
- --------------------------------------------------------------------------------
Total (4) (213) --
Change in valuation allowance (25) (214) --
- --------------------------------------------------------------------------------
Total provision for income taxes $ 585 $ 471 $ 984
================================================================================
1997 Annual Report o 29
-72-
<PAGE>
o notes to consolidated
financial statements (continued)
================================================================================
Deferred income tax assets and liabilities at December 31, 1997 and 1996 reflect
the impact of temporary differences between values recorded as assets and
liabilities for financial reporting purposes and values utilized for
remeasurement in accordance with the tax laws. The tax effects of temporary
differences giving rise to the Company's deferred tax assets and liabilities are
as follows:
(In thousands)
December 31,
1997 1996
===========================================================================
Deferred tax assets:
Allowance for loan losses $ 341 $ 360
Deferred loan fees 66 103
Deferred compensation 80 72
Net operating loss 718 647
Available for sale securities - 9
State tax credit 103 148
Other 11 0
---------------------------------------------------------------------------
Total 1,319 1,339
---------------------------------------------------------------------------
Deferred tax liabilities:
Available for sale securities 24 --
Treasury securities 35 76
Depreciation 39 70
Other 61 37
---------------------------------------------------------------------------
Total 159 183
---------------------------------------------------------------------------
Valuation allowance (396) (421)
---------------------------------------------------------------------------
Net deferred tax assets $ 764 $ 735
===========================================================================
The Company has net operating loss carryforwards ("NOL's") for federal income
tax purposes at December 31, 1997 of approximately $1,828,000 expiring in years
2003 through 2008. The NOL's relate to the acquisition of Liberty in 1994. Due
to limitations on their use, a valuation allowance has been established to
reduce the NOL's to the amount that, more likely than not, will be realized.
11. Employee Benefit Plan
The Bank has an incentive savings plan under Section 401(k) of the Internal
Revenue Code. Employees are eligible to participate after one year of continuous
service. The plan allows participating employees to defer up to 15% of their
compensation on a pre-tax basis, within code limitations, through contributions
to the plan. In accordance with the provisions of the plan, the Bank matches up
to 6% of the employee contributions with a percentage determined by the Board of
Directors. Matching contributions of $48,000, $43,000 and $38,600 were charged
to operating expenses in 1997, 1996 and 1995, respectively.
30 o Village Bancorp
-73-
<PAGE>
----------------------------------------------------
Notes to Consolidated Financial Statements
----------------------------------------------------
================================================================================
12. Village Bancorp, Inc. (Parent Company Only)
Condensed Financial Statements
Condensed balance sheets are as follows:
(In thousands)
December 31,
1997 1996
================================================================================
ASSETS
- --------------------------------------------------------------------------------
Investment in subsidiary $ 15,798 $ 15,222
Other assets 75 75
- --------------------------------------------------------------------------------
TOTAL ASSETS $ 15,873 $ 15,297
================================================================================
STOCKHOLDERS' EQUITY $ 15,873 $ 15,297
================================================================================
Condensed operating results are as follows:
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31,
1997 1996 1995
=====================================================================================================
<S> <C> <C> <C>
Dividend income from Bank $ 686 $ 637 $ 455
Equity in undistributed income of subsidiary 492 1,183 861
- -----------------------------------------------------------------------------------------------------
Net income $ 1,178 $ 1,820 $ 1,316
=====================================================================================================
</TABLE>
Condensed statements of cash flows are as follows:
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31,
1997 1996 1995
=====================================================================================================
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,178 $ 1,820 $ 1,316
Equity in undistributed income of subsidiary (492) (1,183) (861)
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 686 $ 637 $ 455
=====================================================================================================
INVESTING ACTIVITIES:
Investment in subsidiaries $ (40) $ (20) $ (35)
- -----------------------------------------------------------------------------------------------------
Net cash used in investing activities $ (40) $ (20) $ (35)
=====================================================================================================
FINANCING ACTIVITIES:
Cash dividends paid $ (686) $ (637) $ (455)
Net proceeds from issuance of common
stock and capital contribution 40 20 35
- -----------------------------------------------------------------------------------------------------
Net cash used in financing activities $ (646) $ (617) $ (420)
=====================================================================================================
</TABLE>
1997 Annual Report o 31
-74-
<PAGE>
O notes to consolidated
financial statements (continued)
================================================================================
There are various restrictions which limit the ability of a bank subsidiary to
transfer funds in the form of cash dividends, loans or advances to the parent
company. Under Connecticut law, the approval of the primary regulator is
required if the dividend declared by the bank in any year exceeds the net
profits of that year combined with its retained net profits of the preceding two
years.
In addition, the Company is subject to restrictions under the Federal Reserve
Act. These restrictions limit the transfer of funds to the parent company, in
the form of loans or extensions of credit, investments and purchases of assets.
Such transfers are limited in amount to 10% of the bank's capital and surplus.
These transfers are also subject to various collateral requirements.
13. Related Party Transactions
Certain directors and executive officers, including their immediate families and
companies in which they are principals, are loan customers of the Bank. Loans to
these persons aggregated approximately $5,540,000 and $4,644,000 at December 31,
1997 and 1996, respectively. During 1997 new loans to related parties aggregated
11,004,000 and loan payments aggregated $10,108,000. The maximum amount of such
loans outstanding during 1997 and 1996 was $11,167,000 and $10,220,000,
respectively.
Two directors and four stockholders of the Company are partners in a joint
venture which is leasing certain real estate to the Bank. The terms of such
lease are described further in Note 14.
14. Commitments and Contingent Liabilities
In July 1985, the Bank entered into a five-year noncancelable, branch office
lease arrangement. The lease contains a provision which allows for an annual
adjustment to the minimum payment to reflect changes in the Consumer Price Index
and a provision for two five-year renewal options, which have been exercised.
In March 1993, the Bank entered into a five-year noncancelable, office lease
arrangement with related parties (see Note 13). Minimum payments under this
operating lease started at $82,400 a year. The lease contains a provision which
allows for a five percent annual increase and provides for two five-year renewal
options.
The Bank is leasing space for its Shelter Rock Road, Danbury office under a
lease agreement that extends through October 31, 2001. Minimum payments under
this lease start at $39,360 per year.
In April 1997, the Bank entered into a ten-year noncancelable, branch office
lease arrangement. The lease contains a provision which allows for an annual
increase and provides for a five-year renewal option.
Total rent expense for 1997, 1996 and 1995 was $434,000, $255,000 and $248,000,
respectively, which amounts are net of $36,000, $0 and $19,000 of sublease
income in 1997, 1996 and 1995.Future minimum lease payments at December 31, 1997
are as follows:
Year Ending December 31, Amount
(In thousands)
================================================================================
1998 $ 477
1999 407
2000 415
2001 353
2002 335
Thereafter 1,598
- --------------------------------------------------------------------------------
Total $ 3,585
================================================================================
15. Estimated Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of the estimated fair values of certain financial instruments.
Estimated fair values are as of December 31, 1997 and 1996 and have been
determined using available market information and various valuation estimation
methodologies. Considerable judgment is required to interpret the effects on
fair value of such items as future expected loss experience, current economic
conditions, risk characteristics of various financial instruments and other
factors. The estimates presented herein are not necessarily indicative of the
amounts that the Company would realize in a current market exchange. Also, the
use of different market assumptions and/or estimation methodologies may have a
material effect on the determination of the estimated fair values.
32 o Village Bancorp
-75-
<PAGE>
----------------------------------------------------
Notes to Consolidated Financial Statements
----------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
As of December 31,
1997 1996
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
=====================================================================================================
(In thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 11,153 $ 11,153 $ 15,145 $ 15,145
Securities 54,591 54,763 33,616 33,553
Loans 145,051 145,837 123,884 124,275
Loans held for sale 1,686 1,706 50 51
Accrued income receivable 1,881 1,881 1,401 1,401
Liabilities:
Deposits without stated maturities 122,341 122,341 106,625 106,625
Time deposits 81,467 81,646 56,000 55,972
Accrued interest payable 1,610 1,610 912 912
=====================================================================================================
</TABLE>
The fair value estimates presented above are based on pertinent information
available to management as of December 31, 1997 and 1996. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued since
December 31, 1997 and, therefore, current estimates of fair value may differ
significantly from the amounts presented above.
Fair value methods and assumptions are as follows:
Cash and Cash Equivalents, Accrued Income Receivable and Accrued Interest
Payable -- The carrying amount is a reasonable estimate of fair value.
Securities -- The fair value of securities was estimated based on quoted market
prices or dealer quotes, if available. If a quote is not available, fair value
is estimated using quoted market prices for similar securities.
Loans -- The fair value of fixed rate loans has been estimated by discounting
projected cash flows using current rates for similar loans. For loans which
reprice to market rates or mature within a one year time frame, the carrying
amount is a reasonable estimate of fair value. The value of impaired loans of
approximately $1,427,000 and $1,576,000 at December 31, 1997 and 1996,
respectivly,are estimated to have a fair value of approximately $1,254,000 and
$1,361,000. This estimate is net of other specific and general allowances and is
very subjective and may not be indicative of what would be realized in a
liquidation situation.
Deposits Without Stated Maturities -- Under the provisions of SFAS No. 107, the
estimated fair value of deposits with no stated maturity, such as non-interest
bearing demand deposits, savings accounts, NOW accounts, money market and
checking accounts, is equal to the amount payable on demand.
Time Deposits -- The fair value of certificates of deposit is based on the
discounted value of contractual cash flows. The discount rate is estimated using
the rates currently offered for deposits of similar remaining maturities.
Off Balance Sheet Risk -- As described in Note 4, the Company was a party to
financial instruments with off-balance sheet risk at December 31, 1997. Such
financial instruments consist of commitments to extend permanent financing and
letters of credit. If the options are exercised by the prospective borrowers,
these financial instruments will become interest-bearing assets of the Company.
If the options expire, the Company retains any fees paid by the counterparty in
order to obtain the commitment or guarantee. The fair value of commitments is
estimated based upon fees currently charged to enter into similiar agreements,
taking into account the remaining terms of the agreements and the present
creditworthiness of the counterparties. For fixed-rate commitments, the fair
value estimation takes into consideration an interest rate risk factor. The fair
value of guarantees and letters of credit is based on fees currently charged for
similiar agreements. The fair value of these off-balance sheet items at December
31, 1997 and 1996, respectively, approximates the recorded amounts of the
related fees, which are not material. The Company has not engaged in hedge
transactions such as interest rate futures contracts or interest rate swaps.
1997 Annual Report o 33
-76-
<PAGE>
1997
annual report
O officers, board of directors &
advisory board of directors
================================================================================
Village Bancorp, Inc.
Officers
Edward J. Hannafin, Chairman of the Board
Nicholas R. DiNapoli, Vice Chairman of
the Board
Enrico J. Addessi, Secretary of the Board
Robert V. Macklin, President & Chief Executive
Officer
James R. Umbarger, Executive Vice President
Board of Directors
Enrico J. Addessi, President -
Addessi of Ridgefield, Inc.
Jose P. Boa, President -
Diversified Maintenance Corporation
Richard O. Carey, Owner -
Connecticut Land Company
Madeline F. Contegni, Partner -
Prudential Prime Properties
Jeanne M. Cook, Travel Industry Consultant
Nicholas R. DiNapoli, President -
DiNapoli Development Company, Inc.
Edward J. Hannafin, Attorney - (Principal) Collins,
Hannafin, Garamella, Jaber & Tuozzolo, P.C.
Joseph L. Knapp, Officer - Knapp Brothers, Inc.
Carl H. Lecher, President - Carl Lecher, Inc.
Robert V. Macklin, President - Village Bancorp, Inc.
Antonio M. Resendes, Department Head -
Henry Abbott Technical School
Thomas F. Reynolds, Partner -
Reynolds & Rowella, CPA
Robert Scala, Private Investor
James R. Umbarger, Executrive Vice President -
Village Bancorp, Inc.
The Village Bank & Trust Company
Officers
Edward J. Hannafin, Chairman of the Board
Nicholas R. DiNapoli, Vice Chairman of the Board
Robert V. Macklin, President & Chief Executive
Officer
Enrico J. Addessi, Secretary of the Board
Robert Scala, Assistant Secretary of the Board
James R. Umbarger, Executive Vice President &
Treasurer
Kenneth M. Griffin, Senior Vice President
George W. Hermann, Senior Vice President
Gerard P. Shpunt, Senior Vice President &
Controller
Paul T. Budrow, Vice President
Dennis J. Fitzgerald, Vice President
Kathleen Leach, Vice President
Maria J. Murphy, Vice President
Deborah L. Roche, Vice President
Jane Saunders, Vice President
Mary Lou Bell, Assistant Vice President
Joanne Boyer, Assistant Vice President
Richard Fink, Assistant Vice President
Dolores F. Mezo, Assistant Vice President
Maura E. Saraceno, Assistant Vice President
Rita Sedor, Assistant Vice President
Paul M. Schmiedel, Assistant Vice President
William Gabriele, Assistant Treasurer
Marc Hirschenfang, Assistant Treasurer
Claudia K. St. John, Assistant Treasurer
Emma Cardoso, Banking Officer - Operations
34 o Village Bancorp
-77-
<PAGE>
-------------------------------------------------------------------
Officers, Board of Directors, Advisory Board of Directors
-------------------------------------------------------------------
================================================================================
The Village Bank & Trust Company
Board of Directors
Enrico J. Addessi, President -
Addessi of Ridgefield, Inc.
Jose P. Boa, President -
Diversified Maintenance Corporation
Richard O. Carey, Owner -
Connecticut Land Company
Madeline F. Contegni, Partner -
Prudential Prime Properties
Jeanne M. Cook, Travel Industry Consultant
Nicholas R. DiNapoli, President -
DiNapoli Development Co., Inc.
Edward J. Hannafin, Attorney - (Principal)
Collins, Hannafin, Garamella, Jaber &
Tuozzolo, P.C.
Joseph L. Knapp, Officer - Knapp Brothers, Inc.
Carl H. Lecher, President - Carl Lecher, Inc.
Robert V. Macklin, President -
Village Bancorp, Inc.
Antonio M. Resendes, Department Head -
Henry Abbott Technical School
Thomas F. Reynolds, Partner -
Reynolds & Rowella, CPA
Robert Scala, Private Investor
James R. Umbarger, Executive Vice President -
Village Bancorp, Inc.
Advisory Board of Directors
Lewis J. Finch, Real Estate Investor -
Chairman of the Board Emeritus
James Belote, Teacher-
Ridgefield Public Schools
Loretta Brickley, Zoning Enforcement Officer -
New Milford
Joseph Brunetti, Retired
Eugene Buccini, Dean - Ancell School,
Western Connecticut State University
Joseph F. Buzaid, Jr., Owner -
Powerhouse Appliances
George M. Cohan, Attorney - (Partner)
Cohan & Kulawitz
Elie S. Coury, Attorney
Paul Dewitt, Owner - Economy Printing
Wendy DiNapoli,Vice President -
DiNapoli Development, Co., Inc.
Delfina do Nascimento, Co-Owner -
N&T Enterprises
Eric G. Erhardt, President -
Ridgefield European Motors, Inc.
Barry Finch, Realtor - Finch Associates
Patrick Fortin, Owner -
Pat's Sales & Service, Inc.
Dr. Joshua Friedman, President -
Electro-Lite Corporation
Morley M. Goldberg, M.D. - Physician
Clark A. Heydon, Jr., D.D.S. - Orthodontist
Carmine Iapaluccio. Jr., Owner -
C. Iapaluccio Co.
George Kaufman, President -
International Tire Warehouses, Inc.
Paul J. Kuehner, Vice President -
Building & Land Technology, Inc.
Nicholas M. LaCava, Owner -
Asco Supply Company, Inc.
Edward J. Manzi, President -
Woodbury Insurance
Joseph F. Millett, Owner - The Athletic Club
Fred P. Montanari, Real Estate Investor
Abraham Morelli, Jr., First Selectman -
Town of Ridgefield
Thomas B. Nash, Publisher - The Acorn Press
Louis Nazzaro, Partner - Nazzaro Contracting
Del Overby, Community Leader
R. David Piersall, Real Estate Investor
Gino B. Polverari, Retired
Deborah Pritchard, Vice President -
Chemical Marketing Concepts, Inc.
Gerald A. Rabin, Owner -
Ridgefield Hardware Company, Inc.
Octavio Rebelo, Owner - Rebelo's Realty
Perry Salvagne, Owner - Hodge Insurance
Agency
Robert J. Sharp, President -
Newman/Sharp Racing, Inc.
Jeffery Sienkiewicz, Attorney - (Partner)
Sienkiewicz & McKenna
Thomas M. Sinchak, Attorney
Wayne Skelly, Zoning Enforcement Officer -
City of Danbury
John Spatola, Self Employed
O.H. Stark, Marketing Consultant
Donald C. Sturges, Partner - Sturges Bros., Inc.
William W. Sullivan, Attorney - (Partner)
Sullivan & Biraglia, P.C.
Luis A. Tomas, Owner - European's Furniture
Gino Torcellini, Retired
Valentine Ventura, Owner - Ventura's Insurance
Gerry Ward, President -
Gerry Ward & Associates
1997 Annual Report o 35
-78-
<PAGE>
1997
annual report
O capital stock, annual meeting,
request for financial information
================================================================================
Capital Stock
Village Bancorp, Inc. stock is listed on the NASDAQ SmallCap Market. The prices
of the Company's common stock as quoted by NASDAQ and the dividends paid during
1997 and 1996 are as follows:
1997 1996
Bid Ask Dividend Bid Ask Dividend
--- --- -------- --- --- --------
1st Quarter $10.50 $11.4375 $.09/Share $9.375 $10.125 $.075/Share
2nd Quarter $11.00 $11.75 $.09/Share $9.50 $10.25 $.085/Share
3rd Quarter $12.375 $13.50 $.09/Share $9.50 $10.25 $.085/Share
4th Quarter $19.25 $22.00 $.09/Share $10.375 $11.25 $.09/Share
As of December 31, 1997 there were 1,209 stockholders of record.
Annual Meeting
The Company's annual meeting will be held on Monday April 27, 1998, 8:00 PM at
The Village Bank & Trust Company, 25 Prospect Street, Ridgefield, Connecticut.
Stockholders who cannot attend are urged to exercise their right to vote by
proxy.
Request for Financial Information
The Company will provide without charge to each stockholder, upon written
request, a copy of the Company's Annual Report on Form 10-K. Written requests
should be directed to Enrico J. Addessi, Secretary, c/o Village Bancorp, Inc.,
P.O. Box 366, Ridgefield, CT 06877.
This Statement has not been reviewed, nor confirmed for accuracy or relevance,
by the Federal Deposit Insurance Corporation.
O The Village Bank & Trust Company
banking office information
================================================================================
<TABLE>
<S> <C> <C>
RIDGEFIELD WILTON NEW MILFORD
25 Prospect Street 219 Town Green 54 Bridge Street
Ridgefield, CT 06877 Wilton, CT 06897 New Milford, CT 06776
Manager: Dolores Mezo Manager: Rita Sedor Manager: Maura Saraceno
(203)438-9551 (203)762-8409 (860) 350-3460
DANBURY WESTPORT CITYCENTER DANBURY
28 Shelter Rock Road 244 Post Road East 2 National Place
Danbury, CT 06810 Westport, CT 06880 Danbury, CT 06810
Manager: William Gabriele Manager: Maria Murphy Manager: Paul Schmiedel
(203)798-9696 (203) 291-7888(203)798-9696 (203) 778-7555
</TABLE>
-79-
Exhibit 21
Subsidiaries of the Registrant
The Registrant has one wholly owned subsidiary, The Village Bank & Trust
Company, a Connecticut chartered commercial bank.
-80-
<PAGE>
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