UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the period ending March 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________ to __________________
Commission File Number: 0-15213
--------
WEBSTER FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1187536
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Webster Plaza, Waterbury, Connecticut 06720
- --------------------------------------- ----------
(Address of principal executive offices) (ZipCode)
(203) 753-2921
---------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding for the issuer's classes of common
stock, as of the latest practicable date.
Common Stock (par value $ .01) 11,981,452 Shares
------------------------------ ----------------------------------------
(Class) Issued and Outstanding at May 8, 1997
<PAGE>
Webster Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Consolidated Statements of Condition at March 31, 1997
and December 31, 1996 3
Consolidated Statements of Operations for the Three Months
Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Consolidated
Financial Statements 10
PART II - OTHER INFORMATION 16
SIGNATURES 17
2
<PAGE>
Webster Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
Cash and Due from Depository Institutions $ 90,578 $ 100,113
Interest-bearing Deposits 23,702 27
Securities: (Note 2)
Trading at Fair Value 62,440 59,331
Available for Sale, at Fair Value 1,243,123 810,989
Held to Maturity, (Market Value: $463,855 in 1997;
$500,458 in 1996) 472,465 506,159
Loans Receivable, Net 3,431,896 3,384,465
Segregated Assets, Net 69,889 75,670
Accrued Interest Receivable 30,942 31,400
Premises and Equipment, Net 56,108 56,575
Foreclosed Properties, Net 13,519 12,991
Core Deposit Intangible 44,971 46,442
Prepaid Expenses and Other Assets 43,986 42,116
----------- -----------
Total Assets $ 5,583,619 $ 5,126,278
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 4,054,179 $ 4,099,501
Federal Home Loan Bank Advances 660,945 510,130
Other Borrowings 420,136 144,627
Advance Payments by Borrowers for Taxes and Insurance 11,953 28,447
Accrued Expenses and Other Liabilities 52,869 51,480
----------- -----------
Total Liabilities 5,200,082 4,834,185
----------- -----------
Corporation-Obligated Mandatorily Redeemable Capital
Securities of Subsidiary Trust (Note 9) 100,000 --
----------- -----------
SHAREHOLDERS' EQUITY
Cumulative Convertible Preferred Stock, Series B, No shares
issued and outstanding at March 31, 1997 and 98,084 shares
issued and outstanding at December 31, 1996 -- 1
Common Stock, $.01 par value:
Authorized - 30,000,000 shares;
Issued - 12,003,116 shares at March 31, 1997 and
12,142,555 shares at December 31, 1995 120 120
Paid-in Capital 153,541 171,766
Retained Earnings 133,270 139,936
Less Treasury Stock at cost, 49,609 shares at March 31, 1997
and 575,274 shares at December 31, 1996 (1,710) (18,801)
Less Employee Stock Ownership Plan Shares Purchased with Debt (1,971) (2,574)
Unrealized Gains on Securities, Net 287 1,645
----------- -----------
Total Shareholders' Equity 283,537 292,093
----------- -----------
Total Liabilities and Shareholders' Equity $ 5,583,619 $ 5,126,278
=========== ===========
</TABLE>
3
<PAGE>
Webster Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share Data)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
1997 1996
-------- --------
INTEREST INCOME:
Loans and Segregated Assets $ 67,338 $ 62,608
Securities and Interest-bearing Deposits 24,688 21,571
-------- --------
Total Interest Income 92,026 84,179
-------- --------
INTEREST EXPENSE:
Interest on Deposits 39,315 39,480
Interest on Borrowings 11,340 9,822
-------- --------
Total Interest Expense 50,655 49,302
-------- --------
Net Interest Income 41,371 34,877
Provision for Loan Losses (Note 6) 7,025 1,650
-------- --------
Net Interest Income After Provision for Loan Losses 34,346 33,227
-------- --------
NONINTEREST INCOME:
Fees and Service Charges 5,603 3,987
Gain on Sale of Loans and Loan Servicing, Net 139 115
Gain on Sale of Securities, Net 398 582
Other Noninterest Income 1,165 1,050
-------- --------
Total Noninterest Income 7,305 5,734
-------- --------
NONINTEREST EXPENSES:
Salaries and Employee Benefits 14,596 13,380
Occupancy Expense of Premises 2,949 2,698
Furniture and Equipment Expenses 2,701 1,905
Federal Deposit Insurance Premiums 247 526
Foreclosed Property Expenses and Provisions, Net (Note 4) 437 1,393
Marketing Expenses 1,494 1,422
Core Deposit Intangible Amortization 1,471 913
Non-recurring Expenses (Note 6) 19,858 500
Capital Securities Expense 1,648 --
Other Operating Expenses 5,458 3,942
-------- --------
Total Noninterest Expenses 50,859 26,679
-------- --------
Income (Loss) Before Income Taxes (9,208) 12,282
Income Tax (Benefit) Expense (4,250) 4,594
-------- --------
NET INCOME (LOSS) (4,958) 7,688
Preferred Stock Dividends -- 324
-------- --------
Net Income (Loss) Available to Common Shareholders ($ 4,958) $ 7,364
======== ========
Net Income (Loss) Per Common Share:
Primary ($ 0.41) $ 0.62
Fully Diluted ($ 0.41) $ 0.60
Dividends Declared Per Common Share $ 0.18 $ 0.16
4
<PAGE>
Webster Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
------ -----
OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) $ (4,958) $ 7,688
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities:
Provision for Loan Losses 7,025 1,650
Provision for Foreclosed Property Losses 63 650
Provision for Depreciation and Amortization 2,171 1,501
Amortization of Securities Premiums, Net (118) 695
Amortization of Hedging Costs, Net 652 101
Amortization and Write-down of Core Deposit Intangible 1,471 913
Amortization of Mortgage Servicing Rights 97 191
Gains on Sale of Foreclosed Properties, Net (151) (348)
Loans and Securities Gains, Net (340) (224)
Gains on Trading Securities, Net (197) (473)
(Increase) Decrease in Trading Securities (5,579) 1,022
Loans Originated for Sale (10,514) (16,758)
Sale of Loans, Originated for Sale 10,508 11,990
Decrease in Interest Receivable 458 119
Increase (Decrease) in Interest Payable 938 (878)
Increase (Decrease) in Accrued Expenses and Other Liabilities, Net 3,118 (15,273)
Decrease in Prepaid Expenses and Other Assets, Net 1,316 1,958
----------- -----------
Net Cash Provided (Used) by Operating Activ ties 5,960 (5,476)
----------- -----------
INVESTING ACTIVITIES:
Purchases of Securities, Available for Sale (503,762) (13,714)
Purchases of Securities, Held to Maturity (5,949) (44,362)
Maturities of Securities 15,002 28,781
Proceeds from Sale of Securities, Available for Sale 28,469 114,016
Net (Increase) Decrease in Interest-bearing Deposits (23,675) 13,001
Purchase of Loans (65,000) (37,382)
Net Decrease in Loans 8,651 12,703
Proceeds from Sale of Foreclosed Properties 1,598 3,786
Net Decrease in Segregated Assets 5,781 5,872
Principal Collected on Mortgage-backed Securities 65,126 48,308
Purchases of Premises and Equipment, Net (1,704) (3,921)
Net Cash and Cash Equivalents Received from Bank Acquisition -- 113,551
----------- -----------
Net Cash (Used) Provided by Investing Activities (475,463) 240,639
----------- -----------
FINANCING ACTIVITIES:
Net Decrease in Deposits (45,322) (10,588)
Repayment of FHLB Advances (997,182) (416,413)
Proceeds from FHLB Advances 1,147,997 291,749
Repayment of Other Borrowings (710,057) (189,317)
Proceeds from Other Borrowings 986,334 156,080
Net Decrease in Advance Payments for Taxes and Insurance (16,494) (8,318)
Net Proceeds from Issuance of Capital Securities 97,700 --
Cash Dividends to Common and Preferred Shareholders (1,708) (1,784)
Common Stock Repurchased (1,660) --
Exercise of Stock Options 360 497
----------- -----------
Net Cash Provided (Used) by Financing Activities 459,968 (178,094)
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents (9,535) 57,069
Cash and Cash Equivalents at Beginning of Period 100,113 62,653
----------- -----------
Cash and Cash Equivalents at End of Period $ 90,578 $ 119,722
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Income Taxes Paid 1,535 1,681
Interest Paid 42,220 49,591
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfer of Loans to Foreclosed Properties 8,159 6,040
</TABLE>
5
<PAGE>
Webster Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
-----------------------------------------------------
The accompanying consolidated financial statements include all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All adjustments
were of a normal recurring nature. The results of operations for the three month
period ended March 31, 1997 are not necessarily indicative of the results which
may be expected for the year as a whole. These financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Webster Financial Corporation 1996 Annual Report to shareholders. The
consolidated financial statements include the accounts of Webster Financial
Corporation ("Webster") and its wholly owned subsidiary, Webster Bank (the
"Bank"). On January 31, 1997, Webster acquired DS Bancor, Inc. ("DS Bancor")
through a merger transaction. The transaction was accounted for as a pooling of
interests; accordingly, the financial statements as of and for the periods prior
to the DS Bancor transaction have been restated to reflect the combination.
NOTE 2 - SECURITIES
----------
Securities with fixed maturities that are classified as Held to
Maturity are carried at cost, adjusted for amortization of premiums and
accretion of discounts over the estimated terms of the securities utilizing a
method which approximates the level yield method. Securities that management
intends to hold for indefinite periods of time (including securities that
management intends to use as part of its asset/liability strategy, or that may
be sold in response to changes in interest rates, changes in prepayment risk,
the need to increase regulatory capital or other similar factors) are classified
as Available for Sale. All Equity Securities are classified as Available for
Sale. Securities Available for Sale are carried at fair value with unrealized
gains and losses recorded as adjustments to shareholders' equity on a tax
effected basis. Securities classified as Trading Securities are carried at fair
value with unrealized gains and losses included in earnings. Gains and losses on
the sales of securities are recorded using the specific identification method.
A summary of securities are as follows (Dollars in Thousands):
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
--------------------------- ---------------------
Book Estimated Book Estimated
Value Fair Value Value Fair Value
TRADING SECURITIES:
Mortgage-Backed Securities:
<S> <C> <C> <C> <C>
GNMA $35,205 $35,205 $31,537 $31,537
FHLMC 27,235 27,235 27,794 27,794
-------- --------- --------- --------
62,440 62,440 59,331 59,331
-------- --------- --------- --------
</TABLE>
6
<PAGE>
Webster Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES (continued)
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------------------- ------------------------------
Book Estimated Book Estimated
Value Fair Value Value Fair Value
-------- ------------ ------- ------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE PORTFOLIO:
U.S. Treasury Notes:
Matures over 1 within 5 years 2,507 2,522 2,508 2,544
U.S. Government Agency:
Matures over 1 within 5 years 12,923 13,008 12,883 12,974
Matures over 5 within 10 years -- -- 9,700 9,638
Matures over 10 years 5,700 5,511 -- --
Corporate Bonds and Notes:
Matures within 1 year -- -- 2,000 1,999
Matures over 1 within 5 years 170 172 -- --
Matures over 5 within 10 years 2,492 2,490 2,659 2,655
Mutual Funds* 12,257 12,257 7,216 7,236
Equity Securities:
Stock in Federal Home Loan Bank of Boston 41,499 41,499 39,832 39,832
Other Equity Securities 55,014 60,591 32,486 36,644
Mortgage Backed Securities:
FNMA 259,621 255,229 142,497 141,944
FHLMC 71,509 71,614 17,214 17,425
GNMA 518,576 518,801 236,393 239,142
Collateralized Mortgage Obligations 241,992 240,398 296,180 294,920
Unamortized Hedge Instruments 17,484 19,031 5,460 4,036
Unrealized Securities Gains, Net 1,379 -- 3,961 --
------------ ------------- ----------- ---------
1,243,123 1,243,123 810,989 810,989
------------ ------------- ----------- ----------
HELD TO MATURITY PORTFOLIO:
U.S. Treasury Notes:
Matures within 1 year 699 700 944 956
U.S. Government Agency:
Matures within 1 year 5,225 5,201 6,867 6,867
Matures over 1 within 5 years 23,041 23,454 28,089 28,712
Matures over 5 within 10 years 499 479 499 487
Corporate Bonds and Notes:
Matures within 1 year 700 700 301 302
Matures over 1 within 5 years 777 769 1,176 1,173
Matures over 10 years 100 99 100 100
Money Market Preferred Stock 7,500 7,500 8,000 8,000
Mortgage Backed Securities:
FHLMC 28,065 28,204 84,862 84,069
FNMA 80,069 79,145 28,859 29,086
GNMA 1,259 1,295 1,309 1,369
Collateralized Mortgage Obligations 324,531 316,309 345,153 339,337
------------- ------------ ------------ ----------
472,465 463,855 506,159 500,458
------------- ----------- ----------- ----------
Total $1,778,028 $1,769,418 $1,376,479 $1,370,778
============= ============ ============ ==========
</TABLE>
* Mutual Funds consist primarily of funds invested in money market and
short duration instruments.
7
<PAGE>
Webster Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 - NET INCOME PER SHARE
--------------------
Primary net income per share is calculated by dividing net income less
preferred stock dividends by the weighted-average number of shares of common
stock and common stock equivalents outstanding, when dilutive. The common stock
equivalents consist of common stock options and warrants. Fully diluted net
income per share is calculated by dividing adjusted net income by the
weighted-average fully diluted common shares, including the effect of common
stock equivalents and the hypothetical conversion into common stock of the
Series B 7 1/2% Cumulative Convertible Preferred Stock. The weighted-average
number of shares used in the computation of primary net income per share for the
three months ended March 31, 1997 was 12,114,585 and for the three months ended
March 31, 1996 was 11,842,415. The weighted-average number of shares used in the
computation of fully diluted earnings per share for the three months ended March
31, 1997 was 12,183,746 and for the three months ended March 31, 1996 was
12,871,539.
NOTE 4 - FORECLOSED PROPERTY EXPENSES AND PROVISIONS, NET
-------------------------------------------------
Foreclosed property expenses and provisions, net are summarized as
follows (in thousands):
Three Months
Ended March 31,
1997 1996
Gain on Sale of Foreclosed Property, Net $ (151) $ (348)
Provision for Losses on Foreclosed Property 63 650
Rental Income (27) (119)
Foreclosed Property Expenses 552 1,210
------- -------
Foreclosed Property Expenses and Provisions, Net $ 437 $ 1,393
======= =======
NOTE 5 - REVERSE REPURCHASE AGREEMENTS
At March 31, 1997, Webster had short term borrowings through reverse
repurchase agreements outstanding. Information concerning borrowings under
reverse repurchase agreements is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
BALANCE AT WEIGHTED MATURITY BOOK VALUE MARKET VALUE
MARCH 31, 1997 TERM AVERAGE RATE DATE OF COLLATERAL OF COLLATERAL
- ------------------- -------------- ------------ ------------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
$230,790 1 to 3 months 5.41% Less than 3 months $237,366 $238,697
</TABLE>
The securities underlying the reverse repurchase agreements are all
U.S. Agency collateral and have been delivered to the broker-dealers who arrange
the transactions. Webster uses reverse repurchase agreements when the cost of
such borrowings is less than other funding sources. The average balance and the
maximum amount of outstanding reverse repurchase agreements at any month-end
during the 1997 first quarter was $165.3 million and $245.8 million,
respectively. The total balance for reverse repurchase agreements outstanding at
March 31, 1996 was $93.5 million.
8
<PAGE>
Webster Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6 - DS BANCOR ACQUISITION
---------------------
In connection with the acquisition of DS Bancor, Inc., which was
completed on January 31, 1997, Webster recorded approximately $19.9 million in
merger-related charges and a $5.6 million addition to the provision for loan
losses to conform to Webster's credit policies.
The following table presents a summary of the merger-related accrued
liability (in thousands):
Balance of DS Bancor merger-related accrual
at December 31, 1996 $ 0
Additions 19,900
Compensation (severance and related costs) (6,500)
Data Processing Contract Termination (1,100)
Write down of fixed assets (600)
Transaction costs (including investment bankers,
attorneys and accountants) (1,700)
Merger related and miscellaneous expenses (2,500)
--------
Balance of DS Bancor merger-related accrual
at March 31, 1997 $ 7,500
========
The remaining liability of $7.5 million represents, for the most part,
an accrual for data processing contract termination and the estimated loss on
sale of excess fixed assets due to consolidation of overlapping branch
locations.
NOTE 7 - ACCOUNTING STANDARDS
--------------------
In September 1996, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 125 "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" which was amended by SFAS No. 127 in December 1996 to defer the
effective date of certain provisions of SFAS No. 125 for one year. This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial components approach that focuses on
control of the underlying assets or liabilities transferred. It distinguishes
transfers of financial assets that are sales from transfers that are secured
borrowings. It is expected that the provisions of this statement will not have a
material impact on the financial results of the corporation. On January 1,
1997, Webster adopted SFAS No. 125, except as amended by SFAS No.127, with no
material impact on its financial results.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share." This statement simplifies the standards for
computing and presenting earnings per share previously found in APB Opinion No.
15 and makes them comparable to international standards. It replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share and requires dual presentation of basic and diluted earnings per share
on the face of the income statement for all entities with complex capital
structures. It is expected that the implementation of this statement will not
have a material impact on the financial results of Webster. This statement is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods.
NOTE 8 - CONVERSION OF CONVERTIBLE PREFERRED STOCK
------------------------------------------
During the month of January 1997, preferred stockholders converted the
remaining 98,084 shares of convertible preferred shares into 563,002 shares of
common stock.
NOTE 9 - CAPITAL-OBLIGATED MANDATORILY REDEEMABLE CAPITAL SECURITIES OF
SUBSIDIARY TRUST.
-----------------------------------------------------------------------
On January 30, 1997, Webster completed the sale of $100 million of Webster
Capital Trust I Capital Securities. Webster Capital Trust I is a business trust
formed for the purpose of issuing capital securities and investing the proceeds
in junior subordinated debentures, due 2027, issued by Webster. The primary
assets of the Trust are the junior subordinated debentures. Interest payments on
the debenutures are tax deductible by Webster. The securities have an annual
interest rate of 9.36%, payable semiannually, beginning July 29, 1997. Webster
will use the capital for general corporate purposes.
9
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GENERAL
Webster Financial Corporation ("Webster" ), through its subsidiary,
Webster Bank, (the "Bank") delivers financial services to individuals, families
and businesses located throughout Connecticut. Webster Bank emphasizes three
business lines - consumer, business and mortgage banking, each supported by
centralized administration and operations. The Corporation has grown
significantly in recent years, primarily through a series of acquisitions which
have expanded and strengthened its franchise. Webster currently serves customers
from 78 full service banking offices located in Hartford, New Haven, Fairfield,
Litchfield, and Middlesex counties in Connecticut.
CHANGES IN FINANCIAL CONDITION
- ------------------------------
Total assets were $5.6 billion at March 31, 1997, an increase of $457.3
million from $5.1 billion at December 31, 1996. The increase in total assets is
due primarily to the purchase of securities and an increase in net loans of
$401.5 million and $47.4 million, respectively. The increases were funded, in
part, by the capital received in January 1997 discussed below.
Net Segregated Assets decreased to $69.9 million at March 31, 1997 from
$75.7 million at December 31, 1996 due primarily to principal repayments of $5.7
million and net chargeoffs of $99,000. Total net foreclosed properties were
$13.5 million at March 31, 1997 compared to $13.0 million at December 31, 1996.
The net increase in foreclosed properties of $500,000 for the current quarter
was primarily attributable to additions of $4.4 million, that were offset by
sales of $1.5 million and valuation write downs of $2.4 million.
Total liabilities were $5.2 billion at March 31, 1997, an increase of
$365.9 million from $4.8 billion at December 31, 1996. The increase in total
liabilities is due primarily to a net increase in borrowings of $426.3 million
that was partially offset by a decrease of $45.3 million in deposits.
On January 30, 1997, Webster completed the sale of $100 million of
Webster Capital Trust I Capital Securities. Webster Capital Trust I is a
business trust formed for the purpose of issuing capital securities and
investing the proceeds in subordinated debentures, due 2027, issued by Webster.
Interest payments on the debentures are tax deductible by Webster. The
securities have an annual interest rate of 9.36%, payable semiannually,
beginning July 29, 1997. Webster will use the net proceeds for general corporate
purposes.
Shareholders' equity was $283.5 million at March 31, 1997 and $292.1 at
December 31, 1996. At March 31, 1997, the Bank had Tier 1 leveraged, Tier 1
risk-based, and total risk-based capital ratios of 6.09%, 12.23% and 13.49% ,
respectively. The Bank met the regulatory capital requirements to be categorized
as a "well capitalized" institution at March 31, 1997.
ASSET QUALITY
- -------------
Webster devotes significant attention to maintaining high asset quality
through conservative underwriting standards, active servicing of loans,
aggressively managing nonperforming assets and maintaining adequate reserve
coverage on nonaccrual assets. At March 31, 1997, residential and consumer loans
comprised approximately 87% of the loan portfolio. All fixed income securities
must have an investment rating in the top two rating categories by a major
rating service at time of purchase. Unless otherwise noted, the information set
forth concerning loans, nonaccrual loans, foreclosed properties and allowances
for loan losses excludes Segregated Assets which are discussed separately.
10
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A breakdown of loans receivable, net by type as of March 31, 1997 and
December 31, 1996 follows (in thousands):
March 31, 1997 December 31, 1996
--------------- -----------------
Residential Mortgage Loans $2,640,860 $2,574,304
Commercial Real Estate Loans 266,072 267,265
Commercial Loans 180,715 194,220
Consumer Loans (Including Home Equity) 392,502 390,284
---------- ----------
Total Loans 3,480,149 3,426,073
Allowance for Loan Losses (48,253) (41,608)
----------- ----------
Loans Receivable, Net $3,431,896 $3,384,465
=========== ==========
Included above at March 31, 1997 and December 31, 1996 were loans held for
sale of $3.8 million and $3.9 million, respectively. Loans held for sale at
March 31, 1997 and December 31, 1996 represented one-to-four family residential
mortgage loans.
The following table details the nonaccrual assets at March 31, 1997 and
December 31, 1996 (in thousands):
March 31, 1997 December 31, 1996
--------------- -----------------
Loans Accounted For on a Nonaccrual Basis:
Residential Real Estate $23,901 $24,067
Commercial 11,965 12,874
Consumer 2,867 3,116
-------- ---------
Total Nonaccrual Loans 38,733 40,057
Foreclosed Properties:
Residential and Consumer 5,772 5,082
Commercial 7,747 7,909
--------- ----------
Total Nonaccrual Assets $52,252 $53,048
========= ==========
The net decrease in nonaccrual assets of $796,000 at March 31, 1997 as
compared to the December 31, 1996 balance is due primarily to payoffs,
foreclosed property sales and charge-offs.
At March 31, 1997, Webster's allowance for losses on loans of $48.3
million represented 124.6% of nonaccrual loans and its total allowances for
losses on nonaccrual assets of $48.8 million amounted to 92.4% of nonaccrual
assets. A detail of the changes in the allowances for losses on loans and
foreclosed property for the three months ended March 31, 1997 follows (in
thousands):
<TABLE>
<CAPTION>
Allowances For Losses On
------------------------------------
Impaired Foreclosed Total
Loans Loans Properties Allowance for Losses
----- ----- ---------- --------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $39,152 $ 2,456 $ 740 $42,348
Provisions for Losses 1,375 - 27 1,402
Provision for DS Bancor Loan Losses 5,650 - - 5,650
Allocation to General Allowance 1,600 (1,600) - -
Losses Charged to Allowances (2,715) - (283) (2,998)
Recoveries Credited to Allowances 2,335 - 76 2,411
-------- --------- ---------- --------
Balance at March 31, 1997 $ 47,397 $ 856 $ 560 $ 48,813
======== ========= ========= ========
</TABLE>
11
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Segregated Assets, Net
Segregated Assets, Net at March 31, 1997 included the following assets
purchased from the FDIC in the First Constitution Acquisition which are subject
to a loss-sharing arrangement with the FDIC (in thousands):
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------- ------------------
<S> <C> <C>
Commercial Real Estate Loans $ 53,394 $ 58,745
Commercial Loans 6,449 6,606
Multi-Family Real Estate Loans 12,502 12,772
Foreclosed Properties 398 406
----------- ---------
72,743 78,529
Allowance for Segregated Assets Losses (2,854) (2,859)
---------- ----------
Segregated Assets, Net $ 69,889 $ 75,670
========== ========
</TABLE>
Under the Purchase and Assumption Agreement with the FDIC relating to
the First Constitution Acquisition, during the first five years after October 2,
1992 (the "Acquisition Date"), the FDIC is required to reimburse Webster
quarterly for 80% of all net charge-offs (i.e., the excess of charge-offs over
recoveries) and certain permitted expenses related to the Segregated Assets
acquired by Webster.
During the sixth and seventh years after the Acquisition Date, Webster
is required to pay quarterly to the FDIC an amount equal to 80% of the
recoveries during such years on Segregated Assets which were previously charged
off after deducting certain permitted expenses related to those assets. Webster
is entitled to retain 20% of such recoveries during the sixth and seventh years
following the Acquisition Date and 100% thereafter.
Upon termination of the seven-year period after the Acquisition Date,
if the sum of net charge-offs on Segregated Assets for the first five years
after the Acquisition Date plus permitted expenses during the entire seven-year
period, less any recoveries during the sixth and seventh year on Segregated
Assets charged off during the first five years, exceeds $49.2 million, the FDIC
is required to pay Webster an additional 15% of any such excess over $49.2
million at the end of the seventh year. At March 31, 1997, cumulative net
charge-offs aggregated $54.1 million.
The reduction of $5.8 million for gross Segregated Assets for the
current quarter is the result of approximately $340,000 in gross charge-offs and
$5.7 million in payments received. In the 1997 first quarter, Webster received
reimbursements for net charge-offs and eligible expenses on Segregated Assets
aggregating $926,000. A reimbursement request totaling $89,000 has been
submitted to the FDIC for the first quarter 1997 period.
A detail of changes in the allowance for Segregated Assets losses
follows (in thousands):
Balance at December 31, 1996 $ 2,859
Charge-offs (17)
Recoveries 12
-------
Balance at March 31, 1997 $ 2,854
=======
12
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table details nonaccrual Segregated Assets at March 31,
1997 and December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------- ------------------
Segregated Assets Accounted For on a Nonaccrual Basis:
<S> <C> <C>
Commercial Real Estate Loans $ 3,725 $ 3,337
Commercial Loans 192 192
Multi-Family Real Estate Loans 723 495
-------- ------
Total Nonaccrual Loans 4,640 4,024
Foreclosed Properties:
Commercial Real Estate 269 269
Multi-Family Real Estate 129 138
-------- -------
Total Nonaccrual Segregated Assets $ 5,038 $ 4,431
======== =======
</TABLE>
ASSET/LIABILITY MANAGEMENT
- --------------------------
The goal of Webster's asset/liability management policy is to manage
interest-rate risk so as to maximize net interest income over time in changing
interest-rate environments. To this end, Webster's strategies for managing
interest-rate risk are responsive to changes in the interest-rate environment
and to market demands for particular types of deposit and loan products.
Management measures interest-rate risk using simulation, price elasticity and
GAP analyses. Based on Webster's asset/liability mix at March 31, 1997,
management's simulation analysis of the effects of changing interest rates
estimates that an instantaneous +/- 100 basis point change in interest rates
would change net interest income by less than 2%. Estimates regarding the impact
of changes in interest rates are based on a number of assumptions, and
therefore, Webster can provide no assurance as to the actual impact of such
changes. Management believes that its interest-rate risk position represents a
reasonable amount of interest-rate risk at March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Under regulations of the Office of Thrift Supervision, Webster Bank is
required to maintain assets which are readily marketable in an amount equal to
5% or more of its net withdrawable deposits plus short-term borrowings. At March
31, 1997, Webster Bank had a liquidity ratio of 5.9% and was in compliance with
the applicable regulations. Webster Bank had mortgage commitments outstanding of
$70.2 million, non-mortgage commitments of $26.4 million, unused home equity
credit lines of $255.2 million, available credit card lines of $60.2 million and
commercial lines and letters of credit of $95.7 million.
13
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND MARCH 31, 1996
GENERAL
- -------
Net income for the current three month period ended March 31, 1997,
excluding non-recurring items, was $10.0 million, or $.82 per fully diluted
share, an increase of $2.0 million, as compared to $8.0 million or $.62 per
fully diluted share for the same period in 1996. Including the non-recurring
after tax charges of $15.0 million related to Webster's acquisition of DS
Bancor, Inc., Webster reported a net loss of $5.0 million or $0.41 per fully
diluted share for the 1997 first quarter. Results for the first quarter of 1996
included $290,000 of after tax non-recurring conversion costs related to the 20
branches acquired from Shawmut Bank Connecticut National Association (the
"Shawmut Transaction"). The results of operations for the 1996 first quarter
period included 44 days of income and expense related to the Shawmut
Transaction, consummated on February 16, 1996.
NET INTEREST INCOME
-------------------
Net interest income for the three month period ended March 31, 1997
amounted to $41.4 million, an increase of $6.5 million or 19% as compared to
$34.9 million for the same period in 1996. The increase is primarily
attributable to an increased volume of average interest-earning assets and
interest-bearing liabilities and a decrease in the cost of interest-bearing
liabilities. The net interest rate spread for the three months ended March 31,
1997 was 3.20% as compared to 2.96% for the same period in 1996.
Interest Income for the three months ended March 31, 1997 amounted to
$92.0 million as compared to $84.2 million for the same period in 1996. The
increase is due primarily to a higher volume of average interest-earning assets,
offset by a decrease in the yield on loans. The yield on loans for the current
three month period was 7.72% as compared to 7.86% for the same period a year
earlier.
Interest Expense for the three months ended March 31, 1997 amounted to
$50.7 million compared to $49.3 million for the same period in 1996. This
increase is due primarily to a higher amount of average interest-bearing
liabilities offset by a decrease in the cost of interest-bearing liabilities.
The cost of interest-bearing liabilities decreased to 4.16% for the three months
ended March 31, 1997 compared to 4.50% for the same period in 1996. Interest
expense on borrowings for the three months ended March 31, 1997 amounted to
$11.3 million as compared to $9.8 million for the same period in 1996. The
increase in interest expense on borrowings is primarily attributed to a higher
volume of borrowings offset by a lower cost of funds.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses amounted to $7.0 million for the three
month period ended March 31, 1997 as compared to $1.7 million for the same
period in 1996. Included in the provision for the current quarter was a $5.6
million provision related to loans acquired in the DS Bancor Acquisition. At
March 31, 1997, the allowance for loan losses was $48.3 million and represented
124.6% of nonaccrual loans, compared to $53.0 million and 102.6% a year earlier.
14
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NONINTEREST INCOME
- ------------------
Noninterest income increased to $7.3 million for the three month
period ended March 31, 1997 from $5.7 million in the same period in 1996. The
increase was due primarily to a $1.6 million increase in fees and service
charges, offset by a $160,000 decrease in net gains from loan and securities
sales. There were $537,000 of net gains on sales of loans and securities for the
three months ended March 31, 1997 as compared to $697,000 of net gains for the
same period in 1996.
NONINTEREST EXPENSES
- --------------------
Noninterest expenses for the three months ended March 31, 1997
amounted to $50.9 million as compared to $26.7 million for the same period in
1996. The increase in noninterest expenses for the current quarter is due
primarily to $19.9 million in non-recurring expenses related to the acquisition
of DS Bancor, Inc., completed on January 31, 1997. Additionally, increases in
salaries and employee benefits, furniture and equipment, core deposit intangible
amortization, Capital Securities expenses and other operating expenses were
offset by decreases in foreclosed property expenses and FDIC premiums.
INCOME TAXES
- ------------
Webster recorded an income tax benefit for the three months ended March
31, 1997 of $4.3 million compared to income tax expense of $4.6 million for the
comparable 1996 quarter. The income tax benefit was due to the net loss recorded
by Webster as a result of the $25.4 million of non-recurring expenses related to
the DS Bancor, Inc. Acquisition.
15
<PAGE>
Webster Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - Not Applicable
Item 2. CHANGES IN SECURITIES - Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES - Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant had a special meeting of shareholders on January
30, 1997. The Registrant's annual meeting of shareholders was held
on April 17, 1997.
(b) Not Applicable
(c) Not Applicable
(d) Not Applicable
Item 5. OTHER INFORMATION
On April 4, 1997, Webster announced that it had signed a definitive
merger agreement by which Webster will acquire People's Savings
Financial Corp., a $482 million savings bank headquartered in New
Britain, CT., on a stock for stock basis valued at $34 per share in a
tax free exchange. The acquisition is expected to close in the third
quarter of 1997 and be accounted for as a pooling of interests.
On May 6, 1997, Webster announced that it had entered into an Agreement
and Plan of Merger by which Webster will acquire Sachem Trust National
Association ("Sachem Trust"), a trust company headquartered in
Guilford, CT with $300 million in trust assets, in a tax free
stock-for-stock exchange. Under the terms of the Agreement, Sachem
Trust shareholders will receive 0.493 shares of Webster common stock
for each share of Sachem Trust common stock. Webster will issue up to
85,333 shares of Webster common stock in exchange for all 173,000
outstanding shares of Sachem Trust. Ten percent of the consideration
will be held in escrow pending certain conditions and may be used by
Webster to fund certain expenses detailed in the merger agreement.
Sachem Trust is the largest independent trust company in Connecticut
and operates trust offices in Guilford, Westport and Greenwich. The
acquisition is expected to close in the third quarter of 1997 and be
accounted for as a purchase. Webster plans to Repurchase shares of
Webster common stock up to the total number of shares issued to Sachem
Trust shareholders.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. 3. Bylaws of Registrant, as amended
Exhibit No. 27. Financial Data Table
(b) Reports on Form 8-K
Form 8K filed January 2 , 1997 (announcing the approval from the
OTS to acquire DS Bancor, Inc.)
Form 8K filed February 14, 1997 (announcing the completion of the
acquisition of DS Bancor, Inc.)
Form 8K filed February 21 , 1997 (announcing the date for the
Registrant's annual meeting of shareholders)
16
<PAGE>
Webster Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEBSTER FINANCIAL CORPORATION
Registrant
Date: May 15, 1997 By: /s/ John V. Brennan
---------------------- --------------------
John V. Brennan
Executive Vice President
Chief Financial Officer and Treasurer
Date: May 15, 1997 By: /s/ Peter J. Swiatek
---------------------- ---------------------
Peter J. Swiatek
Controller
17
BYLAWS
OF
WEBSTER FINANCIAL CORPORATION
(hereinafter called the "Corporation")
(As amended effective January 21, 1997)
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the Corporation shall be
in the city of Wilmington, County of New Castle, State of Delaware.
SECTION 2. Other Offices. The Corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. Place of Meetings. Meetings of shareholders for the election of
directors or for any other purpose shall be held at such time and place, either
within or without the State of Delaware, as shall be designated from time to
time by the board of directors and stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
SECTION 2. Annual Meetings. The annual meetings of shareholders shall be held at
Webster Plaza, Waterbury, Connecticut on the third Thursday of April at 11:00
a.m. or at such other place, date and hour as shall be designated from time to
time by the board of directors and stated in the notice of the meeting, at which
meetings the shareholders shall elect by a plurality vote a board of directors
and transact such other business as may properly be brought before the meeting.
Written notice of the annual meeting stating the place, date and hour of the
meeting shall be given to each shareholder entitled to vote at such meeting not
less than 20 nor more than 50 days before the date of the meeting. The notice
shall also set forth the purpose or purposes for which the meeting is called.
SECTION 3. Business at Annual Meeting. At an annual meeting of the shareholders,
only such business shall be conducted as shall have been properly brought before
the meeting. To be properly brought before an annual meeting, business must be
(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the board of directors, (b) otherwise properly brought
before the meeting by or at the direction of the board of directors, or (c)
otherwise properly brought before the meeting by a shareholder.
For business to be properly brought before an annual meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 30 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 45 days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than the
close of business on the 15th day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. A
shareholder's notice to the secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for
<PAGE>
conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the shareholder proposing such
business, (C) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. Notwithstanding anything in these bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 3. The chairman of an
annual meeting shall, if the facts warrant, determine and declare to the annual
meeting that a matter of business was not properly brought before the meeting in
accordance with the provisions of this Section 3, and if he should so determine,
he shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
SECTION 4. Special Meetings. Special meetings of shareholders for any purpose
may be called only as provided in the Certificate of Incorporation. Written
notice of a special meeting stating the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called shall be given not less
than 20 nor more than 50 days before the date of the meeting to each shareholder
entitled to vote at such meeting.
SECTION 5. Quorum. The holders of one-third of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder entitled to vote at the
meeting.
SECTION 6. Voting. Except as otherwise required by law, the Certificate of
Incorporation or these bylaws, any matter brought before any meeting of
shareholders shall be decided by the affirmative vote of the majority of the
votes cast on the matter. Each shareholder represented at a meeting of
shareholders shall be entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such shareholder. The board of directors,
in its discretion, may require that any votes cast at such meeting shall be cast
by written ballot.
SECTION 7. List of Shareholders Entitled to Vote. The officer of the Corporation
who has charge of the stock ledger of the Corporation shall prepare and make, at
least ten days before every meeting of shareholders, a complete list of the
shareholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each shareholder and the number of shares registered
in the name of each shareholder. Such list shall be open to the examination of
any shareholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder of the Corporation who is present.
SECTION 8. Stock Ledger. The stock ledger of the Corporation shall be the only
evidence as to who are the shareholders entitled to examine the list required by
Section 7 of this Article II or to vote in person or by proxy at any meeting of
shareholders.
<PAGE>
SECTION 9. Proxies. At all meetings of shareholders, a shareholder may vote by
proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact. Proxies solicited on behalf of the board of directors shall be
voted as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power.
SECTION 10. Voting of Shares in the Name of Two or More Persons. If shares or
other securities having voting power stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the secretary
of the Corporation is given written notice to the contrary and is furnished with
a copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect: (1) if only one votes, his act binds all; (2) if more than one
vote, the act of the majority so voting binds all; (3) if more than one vote,
but the vote is evenly split on any particular matter, each faction may vote the
securities in question proportionally, or any person voting the shares, or a
beneficiary, if any, may apply to the Court of Chancery of the State of Delaware
or such other court as may have jurisdiction to appoint an additional person to
act with the persons so voting the shares, which shall then be voted as
determined by a majority of such persons and the person appointed by the Court.
If the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even-split for the purposes of this subsection shall be
a majority or even-split in interest.
SECTION 12. Voting of Shares by Certain Holders. Shares standing in the name of
another corporation may be voted by any officer, agent or proxy as the bylaws of
such corporation may prescribe, or, in absence of such provision, as the board
of directors of such corporation may determine. Shares held by an administrator,
executor, guardian or conservator may be voted by him, but no trustees shall be
entitled to vote shares held by him without a transfer of such shares into his
name. Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer into his name if authority so to do is contained
in an appropriate order of the court or other public authority by which such
receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
unless in the transfer by the pledgor on the books of the Corporation he has
expressly empowered that pledgee to vote thereon, in which case only the
pledgee, or his proxy, may represent such stock and vote thereon.
Neither treasury shares of its own stock held by the Corporation, nor shares
held by another corporation, if a majority of shares entitled to vote for the
election of directors of such other corporation are held by the Corporation,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
SECTION 13. Inspectors of Election. In advance of any meeting of shareholders,
the board of directors may appoint any persons other than nominees for office as
inspectors of election to act at such meeting or any adjournment thereof. The
number of inspectors shall be either one or three. If the board of directors so
appoints either one or three such inspectors, that appointment shall not be
altered at the meeting. If inspectors of election are not so appointed, the
chairman of the board or the president may, and on the request of not less than
ten percent of the votes represented at the meeting
<PAGE>
shall, make such appointments at the meeting. If appointed at the meeting, the
majority of the votes present shall determine whether one or three inspectors
are to be appointed. In case any person appointed as inspector fails to appear
or fails or refuses to act, the vacancy may be filled by appointment by the
board of directors in advance of the meeting or by the chairman of the board or
the president.
Unless otherwise prescribed by law, the duties of such inspectors shall include:
determining the number of shares of stock entitled to vote, the voting power of
each share, the shares of stock represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies; receiving votes,
ballots or consents; hearing and determining all challenges and questions in any
way arising in connection with the right to vote; counting and tabulating all
votes or consents; determining the result; and such acts as may be proper to
conduct the election or the vote with fairness to all shareholders.
SECTION 14. Conduct of Meetings. Annual and special meetings shall be conducted
in accordance with rules prescribed by the presiding officer of the meeting,
unless otherwise prescribed by law or these bylaws. The board of directors shall
designate, when present, either the chairman of the board or the president to
preside at such meetings.
ARTICLE III
DIRECTORS
SECTION 1. Number and Election of Directors. The number of directors shall be
twelve. Directors need not be residents of the State of Delaware. To be eligible
for nomination as a director, a nominee must be a resident of the State of
Connecticut at the time of his nomination or, if not then a resident, have been
previously a resident for at least three years.
Directors shall be elected only by shareholders at annual meetings of
shareholders, other than the initial board of directors and except as provided
in Section 2 of this Article III in the case of vacancies and newly created
directorships.
Each director elected shall hold office for the term for which he is elected and
until his successor is elected and qualified or until his earlier resignation or
removal. After the Corporation becomes publicly-owned, each director is required
to own not less than 100 shares of the common stock of the Corporation.
SECTION 2. Classes; Terms of Office; Vacancies. The board of directors shall
divide the directors into three classes; and, when the number of directors is
changed, shall determine the class or classes to which the increased or
decreased number of directors shall be apportioned; provided, further, that no
decrease in the number of directors shall affect the term of any director then
in office. At each annual meeting of shareholders, directors elected to succeed
those whose terms are expiring shall be elected for a term of office to expire
at the third succeeding annual meeting of shareholders and when their respective
successors are elected and qualified.
Vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled, for the unexpired term, by the
concurring vote of a majority of the directors then in office, whether or not a
quorum, and any director so chosen shall hold office for the remainder of the
full term of the class of directors in which the new directorship was created or
the vacancy occurred and until such director's successor shall have been elected
and qualified.
<PAGE>
SECTION 3. Duties and Powers. The business of the Corporation shall be managed
by or under the direction of the board of directors which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation, or by these bylaws directed or
required to be exercised or done by the shareholders. The board of directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, either the chairman of the board or
the president to preside at its meetings.
SECTION 4. Meetings. The board of directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. The annual regular meeting of the board of directors shall be held
without other notice than this bylaw immediately after, and at the same place
as, the annual meeting of the shareholders. Additional regular meetings of the
board of directors shall be held monthly, and may be held without notice at such
time and at such place as may from time to time be determined by the board of
directors. Special meetings of the board of directors may be called by the
chairman of the board, the president or a majority of directors then in office.
Notice thereof stating the place, date and hour of the meeting shall be given to
each director either by mail not less than 48 hours before the date of the
meeting, or by telephone or telegram on 24 hours' notice.
SECTION 5. Quorum. Except as may be otherwise specifically provided by law, the
Certificate of Incorporation or these bylaws, at all meetings of the board of
directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the board
of directors. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 6. Actions Without Meeting. Any action required or permitted to be taken
at any meeting of the board of directors or of any committee thereof may be
taken without a meeting, if all the members of the board of directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board of directors or
committee.
SECTION 7. Meetings by Means of Conference Telephone. Members of the board of
directors of the Corporation, or any committee designated by the board of
directors, may participate in a meeting of the board of directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
SECTION 8. Compensation. The board of directors shall have the authority to fix
the compensation of directors. The directors may be paid their reasonable
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a reasonable fixed sum for actual attendance at each meeting of the
board of directors. Directors, as such, may receive a stated salary for their
services. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 9. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board of directors or committee
<PAGE>
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose if (i) the material facts as to his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the board of directors or the committee, and the board
of directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
board of directors, a committee thereof or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
SECTION 10. Corporate Books. The directors may keep the books of the Corporation
outside of the State of Delaware at such place or places as they may from time
to time determine.
SECTION 11. Presumption of Assent. A director of the Corporation who is present
at meeting of the board of directors at which action on any matter is taken
shall be presumed to have assented to the action taken unless his dissent or
abstention shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation within five days after the
date he receives a copy of the minutes of the meeting. Such right to dissent
shall not apply to a director who voted in favor of such action.
SECTION 12. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the chairman of the board or the president
of the Corporation. Unless otherwise specified therein such resignation shall
take effect upon receipt thereof by the chairman of the board or the president.
More than three consecutive absences from regular meetings of the board of
directors, unless excused by resolution of the board of directors, shall
automatically constitute a resignation, effective when such resignation is
accepted by the board of directors.
SECTION 13. Nominees. Only persons who are nominated in accordance with the
procedures set forth in this Section 13 shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
Corporation may be made at a meeting of shareholders by or at the direction of
the board of directors or by any shareholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 13. Such nominations, other than those made
by or at the direction of the board of directors, shall be made pursuant to
timely notice in writing to the secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 30 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 45 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the 15th day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person, and (iv) any other information relating to such person that is
required to be disclosed in solicitations or proxies for election of directors,
or is otherwise required, in each case pursuant to
<PAGE>
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the shareholder giving notice (i) the name and address, as they appear on the
Corporation's books, of such shareholder and (ii) the class and number of shares
of the Corporation which are beneficially owned by such shareholder. At the
request of the board of directors, any person nominated by the board of
directors for election as a director shall furnish to the secretary of the
Corporation that information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth in this Section 13. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with procedures prescribed by the bylaws, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
SECTION 1. Appointment. The board of directors, by resolution adopted by a
majority of the full board, may designate the chief executive officer and two or
more other directors to constitute an executive committee. The chairman of the
board shall serve as the chairman of the executive committee, unless a different
director is designated as chairman by the board of directors. The designation of
any committee pursuant to this Article IV and the delegation of authority
thereto shall not operate to relieve the board of directors, or any director, of
any responsibility imposed by law or regulation.
SECTION 2. Authority. The executive committee, when the board of directors is
not in session, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it, except to the extent, if any, that such powers and
authority shall be limited by the resolution appointing the executive committee;
and except also that the executive committee shall not have the power or
authority of the board of directors with reference to amending the Certificate
of Incorporation; adopting an agreement of merger or consolidation; recommending
to the shareholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets; recommending to the shareholders a
dissolution of the Corporation or a revocation of a dissolution; amending the
bylaws of the Corporation; filling a vacancy or creating a new directorship; or
approving a transaction in which any member of the executive committee, directly
or indirectly, has any material beneficial interest; and unless the resolution
or bylaws expressly so provide, the executive committee shall not have the power
or authority to declare a dividend or to authorize the issuance of stock or
securities convertible into or exercisable for stock.
SECTION 3. Tenure. Subject to the provisions of Section 8 of this Article IV,
each member of the executive committee shall hold office until the next annual
regular meeting of the board of directors following his designation and until
his successor is designated as a member of the executive committee.
SECTION 4. Meetings. Regular meetings of the executive committee may be held
without notice at such times and places as the executive committee may fix from
time to time by resolution. Special meetings of the executive committee may be
called by the chairman of the executive committee, the chief executive officer
or any two members thereof upon not less than one day's notice stating the
place, date and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to
<PAGE>
any member thereof who attends in person. The notice of a meeting of the
executive committee need not state the business proposed to be transacted at the
meeting.
SECTION 5. Quorum. A majority of the members of the executive committee shall
constitute a quorum for the transaction of business at any meeting thereof, and
action of the executive committee must be authorized by the affirmative vote of
a majority of the members present at a meeting at which a quorum is present.
SECTION 6. Action Without a Meeting. Any action required or permitted to be
taken by the executive committee at a meeting may be taken without a meeting if
a consent in writing, setting forth the action so taken, shall be signed by all
of the members of the executive committee and the writings are filed with the
minutes of the proceedings of the committee.
SECTION 7. Vacancies. Any vacancy in the executive committee may be filled by a
resolution adopted by a majority of the full board of directors.
SECTION 8. Resignations and Removal. Any member of the executive committee may
be removed at any time with or without cause by resolution adopted by a majority
of the full board of directors. Any member of the executive committee may resign
from the executive committee at any time by giving written notice to the
chairman of the board or the president of the Corporation. Unless otherwise
specified therein, such resignation shall take effect upon receipt. The
acceptance of such resignation shall not be necessary to make it effective.
SECTION 9. Procedure. The executive committee may fix its own rules of procedure
which shall not be inconsistent with these bylaws. It shall keep regular minutes
of its proceedings and report the same to the full board of directors for its
information at the meeting thereof held next after the proceedings shall have
been taken.
SECTION 10. Other Committees. The board of directors by resolution shall
establish an audit committee, and a stock option committee, composed in each
case only of directors who are not employees of the Corporation or any
subsidiary thereof. The board of directors by resolution may also establish such
other committees composed of directors as they may determine to be necessary or
appropriate for the conduct of the business of the Corporation and may prescribe
the duties and powers thereof.
ARTICLE V
OFFICERS
SECTION 1. Positions. The officers of the Corporation shall be a president, one
or more vice presidents, a secretary and a treasurer, each of whom shall be
elected by the board of directors. The board of directors may also designate the
chairman of the board as an officer. The president shall be the chief executive
officer, unless the board of directors designates the chairman of the board as
the chief executive officer. The president may serve as the chairman of the
board, if so designated by the board of directors. The offices of the secretary
and treasurer may be held by the same person and a vice president may also be
either the secretary or the treasurer. The board of directors may designate one
or more vice presidents as executive vice president or senior vice president.
The board of directors may also elect or authorize the appointment of such other
officers as the business of the Corporation may require. The officers shall have
such authority and perform such duties as the board of directors may from time
to time authorize or determine. In the absence of action by the board of
directors, the
<PAGE>
officers shall have such powers and duties as generally pertain to their
respective offices.
SECTION 2. Election. The board of directors at its first meeting held after the
annual meeting of shareholders shall elect annually the officers of the
Corporation who shall exercise such powers and perform such duties as shall be
set forth in these bylaws and as determined from time to time by the board of
directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the board of directors may be removed at any
time by the affirmative vote of a majority of the board of directors. Any
vacancy occurring in any office of the Corporation shall be filled by the board
of directors. The salaries of all officers of the Corporation shall be fixed by
the board of directors.
SECTION 3. Removal. Any officer may be removed by the board of directors
whenever in its judgment the best interests of the Corporation will be served
thereby, but such removal, other than for cause, shall be without prejudice to
the contract rights, if any, of the person so removed.
SECTION 4. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the chairman of the board, the president or any
vice president, and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and powers incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The board of directors may, by resolution, from time
to time confer like powers upon any other person or persons.
ARTICLE VI
STOCK
SECTION 1. Form of Certificates. Every holder of stock in the Corporation shall
be entitled to have a certificate signed by or in the name of the Corporation by
(i) the chairman of the board or the president and (ii) by the secretary or an
assistant secretary of the Corporation, representing the number of shares
registered in certificate form.
SECTION 2. Signatures. Any and all of the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
SECTION 3. Lost Certificates. The chairman of the board, the president or any
vice president may direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the chairman of the board, the
president or any vice president may, in his discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to advertise the same in
such manner as such officer may require and/or to give the Corporation a bond in
such sum as he may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
<PAGE>
SECTION 4. Transfers. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these bylaws. Transfer of stock shall be made on
the books of the Corporation only by the person named in the certificate or by
his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.
SECTION 5. Record Date. In order that the Corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than 50 days nor less than 20 days before the date
of such meeting, nor more than 50 days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
SECTION 6. Beneficial Owners. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not the Corporation shall have express
or other notice thereof, except as otherwise required by law.
ARTICLE VII
NOTICES
SECTION 1. Notices. Whenever written notice is required by law, the Certificate
of Incorporation or these bylaws to be given to any director, member of a
committee or shareholder, such notice my be given by mail, addressed to such
director, member of a committee or shareholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
Unites States mail. Written notice may also be given personally or by telegram,
telex or cable.
SECTION 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these bylaws to be given to any director, member
of a committee or shareholder, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting with the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at nor the purpose of any regular or special meeting of the
shareholders, directors, or members of a committee of directors need be
specified in any other waiver of notice unless so required by the Certificate of
Incorporation or these bylaws.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation and the laws of
the State of Delaware, may be declared by
<PAGE>
the board of directors at any regular or special meeting, and may be paid in
cash, in property, or in shares of capital stock of the Corporation.
Subject to the provisions of the General Corporation Law of the State of
Delaware, such dividends may be paid either out of surplus, out of the net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year.
SECTION 2. Disbursement. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
SECTION 3. Fiscal Year. The fiscal year of the Corporation shall be December 31.
SECTION 4. Corporate Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words. "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
INDEMNIFICATION
SECTION 1. Power to Indemnify in Actions, Suits or Proceedings Other Than Those
by or in the Right of the Corporation. Subject to Section 3 of this Article IX,
the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, and any appeal therein, whether civil, criminal,
administrative, arbitrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, trustee, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, trustee, employee or
agent of another corporation, association, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines, penalties and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, and any appeal
therein, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding, and any
appeals therein, by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
SECTION 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation. Subject to Section 3 of this Article IX, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, trustee, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against amounts paid in
settlement and expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit, if he acted in good faith an in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; provided, however, that
no indemnification
<PAGE>
shall be made against expenses in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation or
against amounts paid in settlement unless and only to the extent that there is a
determination (as set forth in Section 3 of this Article IX) that despite the
adjudication of liability or the settlement, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses or amounts paid in settlement.
SECTION 3. Authorization of Indemnification. Any indemnification under this
Article IX (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, trustee, employee or agent is proper in the circumstances
because such director, officer, trustee, employee or agent has met the
applicable standard of conduct set forth in Section 1 or Section 2 of this
Article IX and, if applicable, is fairly and reasonably entitled to indemnity as
set forth in the proviso in Section 2 of this Article IX, as the case may be.
Such determination shall be made (I) by the board of directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the shareholders. To the extent,
however, that a director, officer, trustee, employee or agent of the Corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific case. No director, officer, trustee, employee or
agent of the Corporation shall be entitled to indemnification in connection with
any action, suit or proceeding voluntarily initiated by such person unless the
action, suit or proceeding was authorized by a majority of the entire board of
directors.
SECTION 4. Good Faith Defined. For purposes of any determination under Section 3
of this Article IX, a person shall be deemed to have acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, or, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe his conduct was unlawful, if his action is
based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the Corporation
or another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
association, partnership, joint venture, trust or other enterprise of which such
person is or was serving at the request of the Corporation as a director,
officer, trustee, employee or agent. The provisions of this Section 4 shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standards of conduct set forth
in Sections 1 or 2 of this Article IX, as the case may be.
SECTION 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article IX, and
notwithstanding the absence of any determination thereunder, any director,
officer, trustee, employee or agent may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Sections 1 and 2 of this Article IX. The basis of
such indemnification by a court shall be a determination by such court that
indemnification of the director, officer, trustee, employee or agent is proper
in the circumstances because he has met the applicable standards of conduct set
forth in Sections 1 and 2 of this Article IX, as the case may be. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application.
<PAGE>
Notwithstanding any of the foregoing, unless otherwise required by law, no
director, officer, trustee, employee or agent of the Corporation shall be
entitled to indemnification in connection with any action, suit or proceeding
voluntarily initiated by such person unless the action, suit or proceeding was
authorized by a majority of the entire board of directors.
SECTION 6. Expenses Payable in Advance. Expenses incurred in connection with a
threatened or pending action, suit or proceeding may be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director, officer, trustee,
employee or agent to repay such amount if it shall be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article IX.
SECTION 7. Contract, Non-exclusivity and Survival of Indemnification. The
indemnification provided by this Article IX shall be deemed to be a contract
between the Corporation and each director, officer, employee and agent who
serves in such capacity at any time while this Article IX is in effect, and any
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts. Further, the indemnification and
advancement of expenses provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any certificate of incorporation,
bylaw, agreement, contract, vote of shareholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that, subject to the limitation in Section 3 of this Article IX
concerning voluntary initiation of actions, suits or proceedings,
indemnification of the person specified in Sections 1 and 2 of this Article IX
shall be made to the fullest extent permitted by law. The provisions of this
Article IX shall not be deemed to preclude the indemnification of any person who
is not specified in Sections 1 and 2 of this Article IX but whom the Corporation
has the power or obligation to indemnify under the provisions of the law of the
State of Delaware. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, trustee, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of each person.
SECTION 8. Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, trustee, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, trustee, employee or agent of another corporation,
association, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power or the obligation to indemnify him against such liability under the
provisions of this Article IX.
SECTION 9. Meaning of "Corporation" for Purposes of Article IX. For purposes of
this Article IX, references to "the Corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, association,
partnership, joint venture, trust or other enterprises, shall stand in the same
position under the provisions of this Article IX with
<PAGE>
respect to the resulting of surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
ARTICLE X
AMENDMENTS
The board of directors or the shareholders may from time to time amend the
bylaws of the Corporation. Such action by the board of directors shall require
the affirmative vote of at least two-thirds of the directors then in office at a
duly constituted meeting of the board of directors called for such purpose. Such
action by the shareholders shall require the affirmative vote of at least
two-thirds of the total votes eligible to be voted at a duly constituted meeting
of shareholders called for such purpose.
***************
The foregoing bylaws were adopted by the board of directors on October 6, 1986.
-----------------------------------
Corporate Secretary
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