UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Fiscal Year Ended December 31, 1996
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 06702
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 753-2921
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 per value
(Title of class)
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. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Based upon the closing price of the registrant's common stock as of
March 21, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant is $426,293,171. Solely for purposes of this
calculation, the shares held by directors and executive officers of the
registrant have been excluded because such persons may be deemed to be
affiliates. This reference to affiliate status is not necessarily a conclusive
determination for other purposes.
The number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date is:
Class: Common Stock, par value $.01 per share
Issued and Outstanding at March 27, 1997: 11,949,991
DOCUMENTS INCORPORATED BY REFERENCE
Part I and II: Portions of the Annual Report to Shareholders for fiscal year
ended December 31, 1996
Part III: Portions of the Definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on April 17, 1997.
<PAGE>
WEBSTER FINANCIAL CORPORATION
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business.................................................. 3
General................................................ 3
Recent Acquisitions.................................... 4
FDIC Assisted Acquisitions............................. 5
Lending Activities..................................... 5
Segregated Assets...................................... 13
Investment Activities.................................. 15
Sources of Funds....................................... 18
Bank Subsidiaries...................................... 21
Employees.............................................. 21
Market Area and Competition............................ 21
Regulation............................................. 22
Taxation............................................... 23
Item 2. Properties................................................ 24
Item 3. Legal Proceedings......................................... 26
Item 4. Submission of Matters to a Vote of Security Holders....... 26
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters............................... 26
Item 6. Selected Financial Data................................... 27
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 27
Item 8. Financial Statements and Supplementary Data............... 27
Item 9. Disagreements on Accounting
and Financial Disclosures................................. 27
PART III
Item 10. Directors and Executive Officers of the Registrant........ 28
Item 11. Executive Compensation.................................... 28
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................ 28
Item 13. Certain Relationships and Related Transactions............ 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................... 28
2
<PAGE>
PART I
Item 1. Business
General
Webster Financial Corporation, ("Webster" or the "Corporation"),
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.
Assets at December 31, 1996 were $3.9 billion compared to $3.2
billion a year earlier. Net loans receivable amounted to $2.5 billion at
December 31, 1996 compared to $1.9 billion a year ago. Deposits were $3.1
billion at December 31, 1996 compared to $2.4 billion at December 31, 1995.
Webster expanded its banking operations by acquiring DS Bancor,
Inc. ("Derby") in January 1997, and 20 former Shawmut Bank Connecticut National
Association ("Shawmut") branch banking offices in the Hartford banking market in
February 1996. See "Recent Acquisitions". In preceding years, Webster expanded
its operations through the acquisitions of Shelton Bancorp, Inc. ("Shelton") in
1995, Bristol Savings Bank ("Bristol") in 1994 and Shoreline Bank and Trust
("Shoreline") in 1994 (see "Recent Acquisitions") and the FDIC-assisted
acquisitions of First Constitution Bank ("First Constitution") in 1992 and
Suffield Bank ("Suffield") in 1991. See "FDIC Assisted Acquisitions." These
acquisitions have significantly expanded the market areas served by the
Corporation.
On an unconsolidated basis at December 31, 1996, the assets of
Webster consisted primarily of its investment in the Bank and $25.9 million of
cash and other investments. The principal sources of Webster's revenues on an
unconsolidated basis are dividends from the Bank and interest and dividend
income from other investments. See Note 20 to Webster's Consolidated Financial
Statements for parent-only financial statements.
The Bank's deposits are federally insured by the Federal Deposit
Insurance Corporation ("FDIC"). The Bank is a Bank Insurance Fund ("BIF") member
institution and at December 31, 1996 approximately 72% of the Bank's deposits
were subject to BIF assessment rates and 38% to Savings Association Insurance
Fund ("SAIF") assessment rates. After giving effect to the Derby acquisition,
approximately 79% of the Bank's deposits are subject to BIF assessment rates and
21% to SAIF assessment rates. See "Regulation."
Webster, as a holding company, and the Bank are subject to
comprehensive regulation, examination and supervision by the OTS, as the primary
federal regulator. The bank is also subject to regulation, examination and
supervision by the FDIC as to certain matters. Webster's executive offices are
located at Webster Plaza, Waterbury, Connecticut, 06702. Its telephone number is
(203) 753-2921
3
<PAGE>
Recent Acquisitions
The Derby Acquisition. On January 31, 1997, Webster acquired DS
Bancor and its subsidiary, Derby Savings Bank, a $1.2 billion savings bank in
Derby, Connecticut. In connection with the merger with Derby, Webster issued
3,501,370 shares of its common stock for all the outstanding shares of Derby
common stock. Under the terms of the merger agreement each outstanding share of
Derby common stock was converted into 1.14158 shares of Webster common stock.
This acquisition was accounted for as a pooling of interests and as such future
Consolidated Financial Statements will include Derby's financial data as if
Derby had been combined at the beginning of the earliest period presented. The
1996 Financial Statements do not include Derby financial data.
The Shawmut Transaction. On February 16, 1996, Webster Bank
acquired 20 branches in the Greater Hartford market from Shawmut Bank
Connecticut National Association (the "Shawmut Transaction"), as part of a
divesture in connection with the merger of Shawmut and Fleet Bank. In the branch
purchase, Webster Bank acquired approximately $845 million in deposits, and $586
million in loans. As a result of this transaction, Webster recorded $44.2
million as a core deposit intangible asset. In connection with the Shawmut
Transaction, Webster raised net proceeds of $32.1 million through the sale of
1,249,600 shares of its common stock in an underwritten public offering in
December 1995. The Shawmut Transaction was accounted for as a purchase,
therefore transaction results are reported only for the periods subsequent to
the consummation of the Shawmut Transaction.
The Shelton Bancorp, Inc. Acquisition. On November 1, 1995, Webster
acquired Shelton and its subsidiary, Shelton Savings Bank, a $295 million asset
savings bank in Shelton, Connecticut, with $273 million in BIF insured deposits.
In connection with the merger with Shelton, Webster issued 1,292,549 shares of
its common stock for all the outstanding shares of Shelton common stock. Under
the terms of the agreement, Shelton shareholders received .92 of a share of
Webster common stock in a tax free exchange for each of their Shelton common
shares. This acquisition was accounted for as a pooling of interests. The
Corporation's Consolidated Financial Statements include Shelton's financial data
as if Shelton had been combined at the beginning of the earliest period
presented.
Shoreline Bank and Trust Company. On December 16, 1994, Webster
acquired Shoreline, a $51.0 million asset commercial bank based in Madison,
Connecticut, with $47.0 million in BIF insured deposits. To effect the
acquisition, Shoreline was merged into Webster Bank and its Madison banking
office became a full service office of Webster Bank. In connection with the
merger, the Corporation issued 266,500 shares of its common stock for all of the
outstanding shares of Shoreline common stock. This acquisition was accounted for
as a pooling of interests. The Corporation's Consolidated Financial Statements
include Shoreline's financial data as if Shoreline had been combined at the
beginning of the earliest period presented.
Bristol Savings Bank. On March 3, 1994, Webster acquired Bristol, a
state chartered savings bank with $486 million in assets which became a
wholly-owned subsidiary of Webster. In connection with the conversion of Bristol
from a mutual to a stock charter concurrently with the acquisition, Webster
completed the sale of 1,150,000 shares of its common stock in related
subscription and public offerings. Webster invested in Bristol a total of $31.0
million, including the net proceeds of approximately $21.9 million from
subscription and public offerings plus existing funds from the holding company.
As a result of this investment, Bristol met all ratios required by the FDIC for
a "well-capitalized" savings bank. The Bristol acquisition was accounted for as
a purchase. Results of operations relating to Bristol are included in the
4
<PAGE>
Corporation's Consolidated Financial Statements only for the period subsequent
to the effective date of the acquisition. Webster maintained Bristol as a
separate savings bank subsidiary until November 1, 1995, when First Federal and
Bristol were merged and renamed as Webster Bank.
FDIC Assisted Acquisitions
Webster Bank significantly expanded its retail banking operations
through assisted acquisitions of First Constitution Bank ("First Constitution")
in October 1992 and Suffield Bank ("Suffield") in September 1991 from the
Federal Deposit Insurance Corporation ("FDIC"). These acquisitions, which were
accounted for as purchases, involved financial assistance from the FDIC and
extended Webster Bank's retail banking operations into new market areas by
adding 21 branch offices, $1.5 billion in retail deposits and approximately
150,000 customer accounts.
Lending Activities
General. Webster originates residential, consumer, and business
loans. Total loans receivable were $2.5 billion at December 31, 1996 and $1.9
billion at December 31, 1995. All references to loan and allowance for loan loss
balances and ratios in the Lending Activities section exclude Segregated Assets,
which are discussed immediately after this section. At December 31, 1996, first
mortgage loans secured by one-to-four family properties comprised 72.1% of the
Corporation's loan portfolio, before net items. The allowance for losses on
residential loans was $9.1 million at December 31, 1996.
Nonaccrual loans, which include loans delinquent 90 days or more,
were $21.8 million at December 31, 1996, compared to $37.8 million at December
31, 1995, out of a total loan portfolio, before net items, of approximately
$2.54 billion at December 31, 1996 and $1.94 billion at December 31, 1995. The
ratio of nonaccrual loans to total loans before net items was 0.8% and 1.9% at
December 31, 1996 and 1995, respectively. Nonaccrual assets, which incudes
nonaccrual loans and real estate owned were $31.3 million and $55.0 million at
December 31, 1996 and 1995 respectively.
One-to-Four Family First Mortgage Loans. Webster originates both
fixed-rate and adjustable-rate mortgage loans. At December 31, 1996, 58% of
Webster's total mortgage loans before net items were adjustable-rate loans.
Webster offers adjustable-rate mortgage loans at initial interest rates
discounted from the fully indexed rate. Loans originated during 1996, when fully
indexed, will be 2.75% above the constant maturity one-year U.S. Treasury yield
index. There are no prepayment penalties on any of Webster's adjustable-rate
loans.
At December 31, 1996, $765.4 million or 42% of Webster's total
residential mortgage loans before net items had fixed rates. Webster sells
mortgage loans in the secondary market when such sales are consistent with its
asset/liability management objectives. At December 31, 1996, Webster had $3.7
million of adjustable and fixed-rate mortgage loans held for sale.
Commercial and Commercial Real Estate Mortgage Loans. Webster had
$382.7 million, or 15.0% of its total loans receivable before net items, in
commercial and commercial real estate loans outstanding as of December 31, 1996,
excluding Segregated Assets. At December 31, 1996, $19.6 million of Webster's
$33.5 million allowance for loan losses was allocated to commercial and
commercial real estate loans. See "Management's Discussion and Analysis and
Results of Operations" contained in the annual report to shareholders and
incorporated herein by reference. The annual report is filed as an exhibit
hereto. Also see "Business -- Lending Activities -- Nonaccrual Loans and
Delinquencies" for more information about Webster's asset quality, allowance for
loan losses and provisions for loan losses.
5
<PAGE>
Consumer Loans. At December 31, 1996, consumer loans were $249.2
million or 9.8% of Webster's total loans receivable before net items. Consumer
loans consist primarily of home equity credit lines, home improvement loans,
passbook loans and other consumer loans. The allowance for losses on consumer
loans was $4.7 million at December 31, 1996.
6
<PAGE>
The following table sets forth the composition of Webster's loan portfolio,
excluding Segregated Assets, in dollar amounts and in percentages at the dates
shown, and a reconciliation of loans receivable, net.
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------------------
1996 1995 1994
-------------------- ------------------ -----------------
Amount % Amount % Amount %
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential mortgage loans:
1-4 family units............................... $ 1,832,262 72.6% $ 1,498,024 79.2% $ 1,465,419 78.4%
Multi-family units............................. 4,729 0.2 13,198 0.7 5,931 0.3
Construction................................... 84,442 3.3 54,410 2.9 53,779 2.9
Land........................................... 12,249 0.5 2,652 0.1 26,712 1.4
------------ ----- ----------- ----- ----------- -----
Total residential mortgage loans............. 1,933,682 76.6 1,568,284 82.9 1,551,841 83.0
Residential loans held for sale................. 3,705 0.1 2,872 0.2 24,735 1.3
Commercial mortgage loans:
Income producing properties.................... -- -- -- -- -- --
Land........................................... 57,444 2.3 19,867 1.1 5,607 0.3
Construction................................... 6,297 0.2 8,887 0.5 4,237 0.2
Other commercial real estate................... 141,190 5.6 115,976 6.1 130,248 7.0
------------ ----- ----------- ----- ----------- -----
Total commercial mortgage loans.............. 204,930 8.1 144,730 7.7 140,092 7.5
------------ ----- ----------- ----- ----------- -----
Total mortgage loans........................... 2,142,318 84.8 1,715,886 90.8 1,716,668 91.8
------------ ---- ----------- ----- ----------- -----
Less mortgage loans net items:
Residential loans in process................. 28,871 1.1 20,642 1.1 25,523 1.4
Commercial loans in process.................. (105) 0.0 -- -- 1,174 0.1
Allowance for loan losses.................... 18,866 0.7 30,799 1.6 36,252 1.9
Unearned (premiums) discounts and
deferred loan fees, net.................... 16,339 (0.6) ( 12,207) (0.5) (13,906) (0.8)
------------ ---- ------------- ---- --------- -----
Net mortgage loans........................... 2,111,025 83.6 1,676,652 88.6 1,667,625 89.2
------------ ----- ----------- ----- ----------- -----
Consumer loans:
Home improvement............................... 22,247 0.9 6,980 0.4 4,718 0.3
Home equity credit lines....................... 155,935 6.2 122,737 6.5 128,828 6.9
Credit Card.................................... 13,675 0.6 -- -- -- --
Education...................................... 21 0.0 135 0.0 483 0.0
Personal....................................... 45,172 1.8 31,653 1.7 23,231 1.3
Marine......................................... 436 0.0 462 0.0 226 0.0
Automobile..................................... 3,322 0.1 2,195 0.1 2,399 0.1
Secured by deposits............................ 8,376 0.3 8,121 0.4 7,171 0.4
------------ ----- ----------- ----- ----------- -----
Total consumer loans......................... 249,184 9.9 172,283 9.1 167,056 9.0
Less:
Allowance for loan losses..................... 4,735 0.2 7,865 0.4 7,312 0.4
Deferred loan costs, (net).................... (2,669) (0.1) (1,255) (0.1) -- --
------------ ---- ------------- ---- ---------- -----
Net consumer loans........................... 247,118 9.8 165,673 8.8 159,744 8.6
------------ ----- ----------- ----- ------------- -----
Consumer loans held for sale, net............ -- -- -- -- -- --
Commercial non-mortgage loans.................. 177,766 7.0 53,194 2.8 45,055 2.4
Less:
Allowance for loan losses...................... 9,853 0.4 3,133 0.2 3,208 0.2
Unearned (premiums) discounts and deferred
loan fees, net............................... 513 0.0 430 0.0 -- --
------------ ----- ----------- ----- ----------- -----
Net commercial non-mortgage loans............. 167,400 6.6 49,631 2.6 41,847 2.2
------------ ----- ------------ ----- ----------- -----
Loans receivable, net ........................ $ 2,525,543 100.0% $1,891,956 100.0% $ 1,869,216 100.0%
=========== ===== ========== ===== =========== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At December 31,
----------------------------------
1993 1992
------------------ ------------
Amount % Amount %
(Dollars in thousands)
<S> <C> <C> <C> <C>
Residential mortgage loans:
1-4 family units............................... $1,263,618 86.1% $1,321,825 86.9%
Multi-family units............................. -- -- 5,320 0.3
Construction................................... 28,930 2.0 15,033 1.0
Land........................................... 29,464 2.0 12,045 0.8
---------- ----- --------- -----
Total residential mortgage loans............. 1,322,012 90.1 1,354,223 89.0
Residential loans held for sale................. 11,505 0.8 7,240 0.5
Commercial mortgage loans:
Income producing properties.................... 135 0.0 348 0.0
Land........................................... -- -- -- --
Construction................................... 2,083 0.1 5,735 0.4
Other commercial real estate................... 40,306 2.7 41,636 2.7
---------- ----- --------- -----
Total commercial mortgage loans.............. 42,524 2.8 47,719 3.1
---------- ----- --------- -----
Total mortgage loans........................... 1,376,041 93.7 1,409,182 92.6
---------- ----- --------- -----
Less mortgage loans net items:
Residential loans in process................. 16,994 1.2 3,295 0.2
Commercial loans in process.................. 487 0.0 508 0.0
Allowance for loan losses.................... 38,477 2.6 44,384 2.9
Unearned (premiums) discounts and
deferred loan fees, net.................... (10,318) (0.8) 2,091 0.1
-------------- ----- -----
Net mortgage loans........................... 1,330,401 90.7 1,358,904 89.4
---------- ----- --------- -----
Consumer loans:
Home improvement............................... 4,413 0.3 6,274 0.4
Home equity credit lines....................... 103,523 7.1 100,821 6.6
Credit Card.................................... -- -- -- --
Education...................................... 684 0.0 451 0.0
Personal....................................... 13,928 0.9 14,553 1.0
Marine......................................... 246 0.0 1,160 0.1
Automobile..................................... 2,584 0.2 2,604 0.2
Secured by deposits............................ 7,207 0.5 8,277 0.5
---------- ----- --------- -----
Total consumer loans......................... 132,585 9.0 134,140 8.8
Less:
Allowance for loan losses..................... 5,955 0.4 4,626 0.3
Deferred loan costs, (net).................... -- -- -- --
---------- ------- --------- --------
Net consumer loans........................... 126,630 8.6 129,514 8.5
---------- ----- --------- -----
Consumer loans held for sale, net............ -- -- 23,116 1.5
Commercial non-mortgage loans.................. 11,640 0.8 11,404 0.7
Less:
Allowance for loan losses...................... 736 0.1 770 0.1
Unearned (premiums) discounts and deferred
loan fees, net............................... -- -- -- --
---------- ------- --------- -----
Net commercial non-mortgage loans............. 10,904 0.7 10,634 0.6
---------- ----- --------- -----
Loans receivable, net ........................ $ 1,467,935 100.0% $1,522,168 100.0%
========== ===== =========== =====
</TABLE>
7
<PAGE>
The following table sets forth the contractual maturity and interest-rate
sensitivity of residential and commercial real estate construction loans and
commercial loans at December 31, 1996.
<TABLE>
<CAPTION>
Contractual Maturity
--------------------------------------------------
One Year One to Over
or Less Five Years Five Years Total
-------- ---------- ---------- -----
(In thousands)
<S> <C> <C> <C>
Contractual Maturity:
Construction loans:
Residential mortgage.................................. $ 625 $ 220 $ 83,597 $ 84,442
Commercial mortgage................................... 1,381 4,508 408 6,297
Commercial non-mortgage loans........................... 66,578 74,371 36,817 177,766
---------- ---------- ---------- ----------
Total................................................ $ 68,584 $ 79,099 $ 120,822 $ 268,505
========== ======== ========== ==========
Interest-Rate Sensitivity:
Fixed rate.............................................. $ 3,892 $ 23,850 $ 31,820 $ 59,562
Variable rate........................................... 64,692 55,249 89,002 208,943
---------- ---------- ---------- ----------
Total................................................ $ 68,584 $ 79,099 $ 120,822 $ 268,505
========== ========== ========== ==========
</TABLE>
Purchase and Sale of Loans and Loan Servicing. Webster has been a
seller and purchaser of whole loans and participations in the secondary market.
During 1996 and 1995, Webster originated residential mortgages that were
transferred primarily to the Federal National Mortgage Association ("FNMA") for
conversion into mortgage-backed securities. Webster generally retains the right
to service the underlying loans for these securities.
The following table sets forth information as to Webster's mortgage
loan servicing portfolio at the dates shown. The increase of total loans
serviced for 1996 is primarily due to the loans acquired with the Shawmut
transaction and purchased mortgage loan servicing, while the 1995 decrease is
primarily due to the sale of mortgage loan servicing rights on both owned and
non-owned loans.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------------------
1996 1995 1994
---------------------- -------------------- -----------------------
Amount % Amount % Amount %
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans owned and serviced................ $1,713,797 63.8% $1,324,257 63.7% $1,509,219 61.5%
Loans serviced for others............... 974,152 36.2 753,053 36.3 944,547 38.5
----------- ------ --------- ------- ---------- -------
Total loans serviced by Webster $2,687,949 100.0% $2,077,310 100.0% $2,453,766 100.0%
========== ====== ========== ===== ========== ========
</TABLE>
8
<PAGE>
The table below shows mortgage loan origination, purchase, sale and repayment
activities of Webster for the periods indicated.
<TABLE>
<CAPTION>
At December 31,
-------------------------------------
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
First mortgage loan originations and purchases:
- -----------------------------------------------
Permanent:
Mortgage loans originated..................................... $ 307,799 $ 271,997 $ 665,108
Construction:
1-4 family units.............................................. 50,267 50,445 44,491
----------- ------------ ------------
Total permanent and construction loans originated 358,066 322,442 709,599
Loans and participations purchased.............................. 10,000 2,123 37,158
Loans acquired in the Bristol acquisition....................... -- -- 255,562
Loans acquired in Shawmut Transaction .......................... 344,036 -- --
----------- ------------ -----------
Total loans originated and purchased....................... 712,102 324,565 1,002,319
----------- ------------ ------------
First mortgage loan sales and principal reductions:
- ---------------------------------------------------
Loans securitized and sold...................................... 63,198 109,787 495,135
Loan principal reductions....................................... 209,871 204,314 119,507
Reclassified to REO............................................. 12,602 11,246 47,050
----------- ------------ ------------
Total loans sold and principal reductions 285,671 325,347 661,692
------------ ------------ ------------
Increase (Decrease) in mortgage loans
receivable before net items................................... $ 426,431 $ (782) $ 340,627
=========== ============= ============
</TABLE>
Nonaccrual Assets and Delinquencies. When an insured institution
classifies problem assets as either "substandard" or "doubtful," it is required
to establish general allowances for loan losses in an amount deemed prudent by
management. General allowances represent loss allowances which have been
established to recognize the inherent risk associated with lending activities,
but which, unlike specific allowances, have not been allocated to particular
problem assets. When an insured institution classifies problem assets as "loss,"
it is required either to establish a specific allowance for losses equal to 100%
of the amount of the asset so classified or to charge-off such amount. An
institution's determination as to the classification of its assets and the
amount of its valuation allowances is subject to review by the OTS which can
order the establishment of additional valuation allowances. See "Classification
of Assets" below.
The following table sets forth certain information regarding Webster's
loans (excluding Segregated Assets) accounted for on a nonaccrual basis and real
estate acquired through foreclosure at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis:
Residential real estate......................... $ 11,272 $ 20,560 $ 18,390 $ 27,995 $ 39,633
Commercial...................................... 9,051 15,296 15,268 4,132 1,846
Consumer........................................ 1,491 1,987 1,237 1,137 4,311
Real estate acquired through foreclosure:
Residential and consumer...................... 3,445 6,368 9,296 18,753 11,674
Commercial.................................... 6,044 10,808 17,292 6,711 7,744
---------- --------- --------- ---------- ----------
Total......................................... $31,303 $ 55,019 $ 61,483 $ 58,728 $ 65,208
======= ========= ========= ========== ==========
</TABLE>
9
<PAGE>
Interest on nonaccrual loans that would have been recorded as
additional income for the years ended December 31, 1996, 1995 and 1994 had the
loans been current in accordance with their original terms approximated
$2,615,000, $2,984,000, and $2,784,000, respectively.
See Note 1(e) to the Consolidated Financial Statements contained in the
annual report to shareholders and incorporated herein by reference for a
description of Webster's nonaccrual loan policy.
The following table sets forth information as to delinquent loans,
excluding Segregated Assets, in Webster's loans receivable portfolio before net
items.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------
1996 1995
---- ----
Percentage Percentage
Principal of Loans Principal of Loans
Balances Receivable Balances Receivable
-------- ---------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Past due 30-89 days and still accruing:
Residential real estate.................... $ 25,524 1.00% $ 28,396 1.46%
Commercial................................. 4,507 0.18 11,099 0.57
Consumer................................... 3,624 0.14 2,640 0.14
---------- ------ ---------- ----
Total.................................. $ 33,655 1.32% $ 42,135 2.17%
========== ===== ========== ====
</TABLE>
Classification of Assets. Under the OTS' problem assets classification
system, a savings institution's problem assets are classified as "substandard,"
"doubtful" or "loss" (collectively "classified assets"), depending on the
presence of certain characteristics. An asset is considered "substandard" if
inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. "Substandard" assets include those
characterized by the "distinct possibility" that the institution will sustain
"some loss" if the deficiencies are not corrected. Assets classified as
"doubtful" have all of the weaknesses inherent in those classified "substandard"
with the added characteristic that the weaknesses present make "collection or
liquidation in full," on the basis of currently existing facts, conditions and
values, "highly questionable and improbable." Assets classified "loss" are those
considered "uncollectible" and of such little value that their continuance as
assets without the establishment of a specific loss reserve is not warranted. In
addition, assets that do not currently warrant classification in one of the
foregoing categories but which are deserving of management's close attention are
designated as "special mention" assets.
At December 31, 1996, the Bank's classified assets totaled $71.8
million, consisting of $70.5 million in loans classified as "substandard," $1.3
million in loans classified as "doubtful" and $0 classified as "loss". At
December 31, 1995, the Bank's classified loans totaled $82.6 million, consisting
of $75.8 million in loans classified as "substandard" and $6.8 million in loans
classified as "doubtful." In addition, at December 31, 1996 and 1995, the Bank
had $12.6 million and $29.8 million, respectively, of special mention loans.
Allowance for Loan Losses. Webster's allowance for loan losses at
December 31, 1996 totalled $33.5 million. See "Management's Discussion and
Analysis -- Results of Operations Asset Quality and Comparison of Years ended
December 31, 1996 and 1995," contained in the annual report to shareholders and
incorporated herein by reference. In assessing the specific risks inherent in
the portfolio, management takes into consideration the risk of loss on
10
<PAGE>
Webster's nonaccrual loans, classified loans and watch list loans including an
analysis of the collateral for the loans. Other factors considered are Webster's
loss experience, loan concentrations, local economic conditions and other
factors.
The following is a summary of activity in the allowance for loan losses
for the periods indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period........................... $ 41,797 $ 46,772 $ 45,168 $ 49,780 $ 11,055
Charge-offs:
Residential real estate................................ (12,628) (6,952) (12,761) (8,208) (1,027)
Consumer............................................... (670) (418) (760) (1,236) (706)
Commercial............................................. (6,348) (3,490) (3,578) (2,223) (1,424)
--------- --------- --------- ---------- ----------
(19,646) (10,860) (17,099) (11,667) (3,157)
Recoveries:
Residential real estate................................ 386 657 388 205 10
Consumer............................................... 162 943 1,701 749 558
Commercial............................................. 1,755 1,185 1,015 114 9
--------- --------- --------- ---------- ----------
2,303 2,785 3,104 1,068 577
Net charge-offs...................................... (17,343) (8,075) (13,995) (10,599) (2,580)
Acquired allowance for purchased loans................... 5,000 -- 12,819 -- 35,731
Transfer from allowance for losses
for loans held for sale.............................. -- -- -- 2,390 --
Provisions charged to operations........................ 4,000 3,100 2,780 3,597 5,574
--------- --------- ---------- ---------- ----------
Balance at end of period................................. $ 33,454 $ 41,797 $ 46,772 $ 45,168 $ 49,780
========= ========= ========== ========= ======
Ratio of net charge-offs to average loans
outstanding............................................ 0.7% 0.4% 0.8% 0.7% 0.3%
</TABLE>
11
<PAGE>
The following table presents an allocation of Webster's allowance for
loan losses at the dates indicated and the related percentage of loans in each
category to Webster's gross loan portfolio.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------------------
1996 1995 1994 1993
--------------------- ------------------- -------------------- -------------------
Amount % Amount % Amount % Amount %
------ ------- ------ ------- ------ ------- ------ -------
(Dollars in thousands)
Balance at End of Period
Applicable to:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Residential mortgage loans............ $ 9,079 75.40% $ 19,013 80.93% $ 25,399 81.74% $ 35,473 87.71%
Commercial mortgage loans............. 9,787 7.98 11,786 7.46 10,853 7.26 3,004 2.80
Commercial non-mortgage loans......... 9,853 6.92 3,133 8.87 3,208 2.34 736 .77
Consumer loans........................ 4,735 9.70 7,865 2.74 7,312 8.66 5,955 8.72
--------- ------ --------- ------ --------- ----- --------- ------
Total............................. $ 33,454 100.0% $ 41,797 100.00% $ 46,772 100.00% $ 45,168 100.00%
========= ====== ======== ====== ========= ====== ========= ======
</TABLE>
December 31,
-----------------
1992
-----------------
Amount %
------ ------
Balance at End of Period
Applicable to:
Residential mortgage loans.............. $ 39,888 86.29%
Commercial mortgage loans............... 4,496 3.02
Commercial non-mortgage loans........... 770 .72
Consumer loans.......................... 4,626 9.97
--------- ------
Total............................... $ 49,780 100.00%
========= ======
During 1996, Webster sold $18.0 million of nonaccrual residential and foreclosed
properties in a bulk sale, and incurred charge-offs of $6.3 million related to
the sale. Approximately 50% of the assets sold were secured by two-four family
properties, condominiums or non-owner occupied single family properties.
Charge-offs of $6.3 million reduced the allowance for residential mortgage loans
and had no impact on 1996 earnings.
The increase in the allowance for commercial non-mortgage loans was primarily a
result of acquired allowances for purchased loans related to the Shawmut
Transaction.
12
<PAGE>
Segregated Assets
Segregated Assets at December 31, 1996 and 1995 consist of the
following assets purchased from the FDIC in the First Constitution acquisition
which are subject to a loss-sharing arrangement with the FDIC:
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------
1996 1995
---- ----
Amount % Amount %
------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Commercial real estate loans........................... $ 58,745 74.8% $ 79,995 74.0%
Commercial non-mortgage loans.......................... 6,606 8.4 10,439 9.7
Multi-family mortgage loans............................ 12,772 16.3 16,341 15.1
Other real estate owned................................ 406 0.5 1,299 1.2
----------- ----- ----------- ------
78,529 100.0% 108,074 100.0%
===== =====
Less allowance for segregated assets................... 2,859 3,235
----------- -----------
Segregated Assets, net................................. $ 75,670 $ 104,839
=========== ===========
</TABLE>
Under the Purchase and Assumption Agreement with the FDIC, during the
first five years after October 2, 1992 (the "Acquisition Date") the FDIC is
required to reimburse the Bank quarterly for 80% of all net charge-offs (i.e.,
the excess of charge-offs over recoveries) and certain permitted expenses
related to the commercial non-mortgage loans, commercial real estate loans and
multi-family loans acquired by the Bank.
During the sixth and seventh years following the Acquisition Date, the
Bank is required to pay quarterly to the FDIC an amount equal to 80% of the
recoveries during such years on Segregated Assets that were previously charged
off after deducting certain permitted expenses related to those assets. The Bank
is entitled to retain 20% of such recoveries during the sixth and seventh years
and 100% thereafter.
Upon termination of the seven-year period after the First Constitution
acquisition (December 1999), if the sum of Webster's 20% share 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
the Bank an additional 15% of any such excess over $49.2 million at the end of
the seventh year. At December 31, 1996, cumulative net charge-offs and expenses
aggregated $53.9 million. During the first quarter of 1996, Webster began
recording the additional 15% reimbursement as a receivable from the FDIC. As of
December 31, 1996, Webster has received $42.2 million in reimbursements for net
charge-offs and permitted expenses from the FDIC. At December 31, 1996 and 1995,
Webster had allowances for segregated assets of $2.9 million and $3.2 million,
respectively.
13
<PAGE>
A detail of changes in the allowance for the Bank's share of losses for
Segregated Assets follows:
Years Ended December 31,
------------------------
1996 1995
---- ----
(In thousands)
Balance at beginning of period .............. $ 3,235 $ 4,420
Charge-offs.................................. (621) (1,772)
Recoveries................................... 245 587
--------- ---------
Balance at end of period................. $ 2,859 $ 3,235
========= =======
The following table sets forth information regarding Segregated Assets
delinquencies and nonaccruals at December 31, 1996 and 1995:
At December 31,
---------------------
1996 1995
---- ----
(In thousands)
Past due 30-89 days and still accruing:
Commercial real estate loans.............. $ 1,318 $ 1,042
Commercial non-mortgage loans............. -- 79
Multi-family loans........................ 769 386
--------- ---------
2,087 1,507
Loans accounted for on a nonaccrual basis:
Commercial real estate loans.............. 3,337 2,604
Commercial non-mortgage loans............. 192 1,203
Multi-family real estate loans............ 495 1,432
--------- ---------
4,024 5,239
--------- ---------
Total.................................. $ 6,111 $ 6,746
========= =========
Interest on nonaccrual Segregated Assets that would have been recorded
as additional income had the loans been current in accordance with their
original terms approximated $433,000, $1,207,000 and $2,047,000 for the years
ended December 31, 1996, 1995 and 1994 respectively.
The following table sets forth the contractual maturity and interest
rate sensitivity of commercial loans contained in the Segregated Assets
portfolio at December 31, 1996.
<TABLE>
<CAPTION>
Contractual Maturity
--------------------------------------------------
One Year One to Over
or Less Five Years Five Years Total
-------- ---------- ---------- -----
(In thousands)
<S> <C> <C> <C> <C>
Contractual Maturity:
Commercial loans.............. $ 735 $ 3,694 $ 2,177 $ 6,606
---------- ---------- ---------- ----------
Total..................... $ 735 $ 3,694 $ 2,177 $ 6,606
========== ========== ========== ==========
Interest Rate Sensitivity:
Fixed Rates................... $ 208 $ 213 $ -- $ 421
Variable Rates................ 527 3,481 2,177 6,185
---------- ---------- ---------- ----------
Total..................... $ 735 $ 3,694 $ 2,177 $ 6,606
========== ========== ========== ==========
</TABLE>
14
<PAGE>
Investment Activities
The Bank has authority to invest in various types of liquid assets,
including United States Treasury obligations, securities of federal agencies,
certificates of deposit of federally insured banks and savings institutions,
federal funds and mortgage backed securities and collateralized mortgage
obligations. Subject to various restrictions, the Bank may also invest a portion
of its assets in commercial paper, corporate debt securities, and mutual funds
whose assets conform to the investments that a federally chartered savings
institution is otherwise authorized to make directly. The Bank also is required
to maintain liquid assets at minimum levels which vary from time to time.
See "Regulation."
Webster, as a Delaware corporation, has authority to invest in any type
of investment permitted under Delaware law. As a unitary holding company,
however, its investment activities are subject to certain regulatory
restrictions described under "Holding Company Regulation."
Webster, directly or through the Bank, maintains an investment
portfolio that provides not only a source of income but also, due to staggered
maturity dates, a source of liquidity to meet lending demands and fluctuations
in deposit flows. The securities constituting Webster's investments in corporate
bonds and notes generally are publicly traded and are considered investment
grade quality by a nationally recognized rating firm. The commercial paper and
collateralized mortgage obligations ("CMOs") in Webster's investment portfolio
are all rated in at least the top two rating categories by at least one of the
major rating agencies at time of purchase. One of the inherent risks of
investing in mortgage-backed securities, including CMOs, is the ability of such
instruments to incur prepayments of principal prior to maturity at prepayment
rates different than those estimated at the time of purchase. This generally
occurs because of changes in market interest rates. The market values of
fixed-rate mortgage-backed securities are sensitive to fluctuations in market
interest rates, declining in value as interest rates rise. If interest rates
increase, as had been the case during 1996, the market value of loans and
mortgage-backed securities generally will decrease causing the level of
prepayments to decrease. Webster also utilizes interest rate financial
instruments to hedge mismatches in interest rate maturities to reduce exposure
to movements in interest rates. The objectives of interest rate financial
instruments is to offset the change in value of the available for sale
securities portfolio. See Note 3 and 11 contained in the annual report to
shareholders and incorporated herein by reference. Except for $24.1 million
invested by Webster at the holding company level at December 31, 1996 in the
common stock of certain entities, Webster's investments, directly and through
the Bank, were investments of the type permitted federally chartered savings
institutions. Webster's investment portfolio is managed by its Treasurer in
accordance with a written investment policy approved by the Board of Directors.
A report on investment activities is presented to the Board of Directors
monthly.
15
<PAGE>
The following table sets forth Webster's interest-bearing deposits and
the composition of its securities portfolio at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------
1996 1995 1994
------------------ ------------------ --------------------
% of % of % of
Book Port- Book Port- Book Port-
Value folio Value folio Value folio
----- ----- ----- ----- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing Deposits...................... $ 27 100.0% $26,017 100.0% $54,318 100.0%
========== ===== ======= ===== ======= =====
Trading Securities:
Mortgage Backed Securities:
GNMA..................................... $ 31,537 2.9% $14,766 1.4% $13,706 1.7%
Collateralized Mortgage Obligations -- -- -- -- 9,311 1.1
FHLMC.................................... 27,794 2.6 29,838 2.9 -- --
Equity Securities.............................. -- -- -- -- 78 0.0
----------- ----- ----------- ---- ------ ---
59,331 5.5 44,604 4.3 23,095 2.8
---------- ---- ---------- ---- -------- ---
Available for Sale Portfolio:
U.S. Treasury Notes:
Matures within 1 year..................... -- -- 1,000 0.1 6,416 0.8
Matures over 1 within 5 years............. 2,508 0.2 -- -- 7,530 0.9
U.S. Government Agency:
Matures within 1 year..................... -- -- -- -- 100 0.0
Matures over 1 within 5 years............. 12,883 1.2 12,901 1.2 33,480 4.0
Corporate Bonds and Notes:
Matures over 1 within 5 years............. -- -- 23,005 2.2 -- --
Matures over 5 through 10 years 2,492 0.2 2,737 0.2 2,985 0.4
Mutual Funds................................. 7,216 0.7 34,077 3.2 20,146 2.4
Stock in Federal Home Loan Bank of Boston 30,039 2.8 30,039 2.9 26,269 3.2
Other Equity Securities...................... 19,361 1.8 9,195 0.9 13,619 1.6
Mortgage Backed Securities:
FNMA....................................... 127,908 12.0 139,860 13.4 11,316 1.4
FHLMC...................................... 15,369 1.4 62,572 6.0 -- --
GNMA....................................... 236,393 22.1 20,443 2.0 -- --
Collateralized Mortgage Obligations 107,684 10.1 155,321 14.9 57,121 6.9
Unamortized Hedge............................ 5,460 0.5 816 0.1 -- --
Unrealized Securities Gains (Losses), Net.... 6,303 0.6 6,122 0.6 (3,768) (0.5)
-------- ------- ----- ---- ---------- ------
573,616 53.6 498,088 47.7 175,214 21.1
-------- ------- ----- ---- ---------- ------
Held to Maturity Portfolio:
U.S. Treasury notes:
Matures within 1 year...................... 944 0.1 1,577 0.2 3,318 0.4
Matures over 1 within 5 years.............. -- -- 8,262 0.8 19,567 2.4
U.S. Government Agency:
Matures within 1 year...................... 6,867 0.6 1,003 0.1 -- --
Matures over 1 within 5 years........... 28,089 2.6 39,868 3.8 61,822 7.5
Matures over 5 through 10 years............ 499 0.1 999 0.1 1,000 0.1
Corporate Bonds and Notes:
Matures within 1 year. . . . .............. 301 0.0 -- -- 702 0.1
Matures over 1 within 5 years.............. 1,176 0.1 2,555 0.2 2,564 0.3
Matures over 5 through 10 years............ -- -- 330 0.0 418 0.1
Matures over 10 years...................... 100 0.0 -- -- -- --
Mortgage Backed Securities:
FHLMC...................................... 31,013 2.1 42,877 4.1 87,650 10.6
FNMA ...................................... 22,180 2.9 31,785 3.0 167,254 20.2
GNMA....................................... 1,309 0.1 1,622 0.2 1,919 0.2
Collateralized Mortgage Obligations 345,153 32.3 370,762 35.5 283,861 34.2
Other Mortgage Backed Securities -- -- 308 0.0 374 0.0
------- ------- ---------- ------ ------- ------
437,631 40.9 501,948 48.0 630,449 76.1
-------- ------- ---------- ----- ------- ------
Total.................................... $1,070,578 100.0% 1,044,640 100.0% 828,758 100.0%
========= ======= ========== ===== ======= ======
</TABLE>
16
<PAGE>
The average remaining life of the securities portfolio, exclusive of
equity securities with no maturity, is 22.6 and 14.8 years at December 31, 1996
and 1995, respectively. Although the stated final maturity of these obligations
are long-term, the weighted average life generally is much shorter due to
prepayments of principal.
The following table sets forth the contractual maturities of Webster's
securities and mortgage-backed securities at December 31, 1996 and the weighted
average yields of such securities.
<TABLE>
<CAPTION>
Due Due
Due After One, But After Five, But Due
Within One Year Within Five Years Within 10 Years After 10 Years
------------------ ------------------ ------------------ -----------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Bearing Deposits (a) $ 27 5.15% $ -- -- % $ -- --% $ -- -- %
Trading Portfolio:
Mortgaged-Backed Securities
and Collateralized Mortage
Obligations (b)............ 27,849 7.32 -- -- -- -- 31,482 6.45
Available For Sale Portfolio:
U.S. Government Agency..... -- -- 12,974 5.73 -- -- -- --
Mutual Funds. . . ......... -- -- -- -- -- -- 7,236 5.92
Equity Securities.......... -- -- -- -- -- -- 25,225 --
Corporate Bonds and Notes -- -- -- -- 2,489 6.08 -- --
U.S. Treasury Notes........ -- -- 2,544 7.01 -- -- -- --
Mortgaged-Backed Securities
and Collateralized Mortgage
Obligations (b).......... -- -- 43,064 5.72 4,714 8.50 445,331 6.57
Held to Maturity Portfolio:
U.S. Treasury Notes ...... 944 3.38 -- -- -- -- -- --
U.S. Government Agencies 6,867 9.29 28,089 5.64 499 6.40 -- --
Corporate Bonds and Notes 301 7.39 1,176 5.87 -- -- 100 7.98
FHL Bank Stock................ -- -- -- -- -- -- 30,039 6.40
Mortgage-Backed Securities
and Collateralized Mortgage
Obligations (b)............. 4,285 7.51 10,450 5.63 2,075 7.96 382,845 7.35
-------- ---- -------- ---- ------ ---- ---------- ----
Totals................... $ 40,273 5.99% $ 98,297 5.72% $ 9,777 6.11% $ 922,258 6.74%
======== ==== ======== ==== ======= ==== ========== ====
</TABLE>
(a) Adjusted to a fully taxable equivalent basis.
(b) Although the stated final maturity of these obligations are long-term, the
weighted average life generally is much shorter due to prepayments of
principal.
17
<PAGE>
Sources of Funds
Deposits, loan repayments, securities maturities as well as earnings
are the primary sources of the Bank's funds for use in its lending and
investment activities. While scheduled loan repayments and securities payments
are a relatively stable source of funds, deposit flows and loan prepayments are
influenced by prevailing interest rates, money market and local economic
conditions. The Bank also derives funds from FHL Bank advances and other
borrowings as necessary when the cost of these alternative sources of funds are
favorable.
Webster's main sources of liquidity are dividends from the Bank and net
proceeds from capital offerings and borrowings, while the main outflows are the
payments of dividends to preferred and common stockholders, the payment of
interest to holders of Webster's 8 3/4% Senior Notes and repurchases of
Webster's common stock.
Webster attempts to control the flow of funds in its deposit accounts
according to its need for funds and the cost of alternative sources of funds.
Webster controls the flow of funds primarily by the pricing of deposits, which
is influenced to a large extent by competitive factors in its market area while
adhering to overall asset-liability management strategies.
Deposit Activities. Webster has developed a variety of innovative
deposit programs that are designed to meet depositors needs and attract both
short-term and long-term deposits from the general public. Webster's checking
account programs offer a full line of accounts with varying features that
include both regular non-interest bearing accounts and interest bearing account
types. The Webster's savings account programs includes both statement and
passbook accounts, money market savings, special goal savings, club accounts and
certificate of deposit accounts for both regular and IRA savings purposes that
offer a range of short and long term maturities options. Webster's checking and
savings deposit accounts have several features that include: ATM Card and Check
Card use, direct deposit, combined statements, 24 hour automated telephone
banking services and overdraft protection.
Webster receives retail and commercial deposits through its 78 full
service banking offices. Webster relies primarily on competitive pricing
policies and effective advertising to attract and retain deposits while
emphasizing the objectives of quality customer service and customer convenience.
The WebsterOne Account is a banking relationship that affords customers the
opportunity to avoid fees, earn premium rates on savings and simplify their
bookkeeping with one combined account statement that links account balances.
Webster's Check Card can be used at over twelve million Visa merchants worldwide
to pay for purchases with money in a linked checking account. The Check Card
also serves as a ATM Card for receiving cash, for deposits and processing
transfers, and to obtain account balances 24 hours per day. Customer services
also include ATM facilities that use state-of-the-art technology with membership
in NYCE and PLUS networks and provide 24 hour access to linked accounts. The
Bank's First Call telephone banking service provides automated customer access
to account information 24 hours per day, seven days per week and also to service
representatives at certain established hours. Customers can transfer account
balances, process stop payments and address changes, place check reorders, open
deposit accounts, inquire about account transactions and request general
information about Webster's products and services. Webster's services provide
for automatic loan payment features from its accounts as well as for direct
deposit of Social Security, payroll, and other retirement benefits. Webster has
not used brokers to obtain deposits.
18
<PAGE>
The following table sets forth the deposit accounts of Webster in
dollar amounts and as percentages of total deposits at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------------
1996 1995
-------------------------------- -------------------------------
Weighted % of Weighted % of
average total average total
rate Amount deposits rate Amount deposits
--------- ------ -------- --------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance by account type:
Demand deposits and NOW accounts.................. .93% $606,716 19.6% 1.18% $351,189 14.6
Regular savings................................... 2.49 652,175 21.1 2.09 471,588 19.6
Money market accounts............................. 3.76 101,552 3.3 4.03 87,371 3.6
Certificate accounts.............................. 5.37 1,735,433 56.0 5.59 1,490,054 62.2
---- --------- ---- ------ ------------ -------
Total deposits................................. 3.84% $3,095,876 100.0% 4.20% $2,400,202 100.0%
==== ========== ===== ====== ============ =======
</TABLE>
<TABLE>
<CAPTION>
At December 31,
--------------------------------
1994
--------------------------------
Weighted % of
average total
rate Amount deposits
--------- ------ --------
<S> <C> <C> <C>
Balance by account type:
Demand deposits and NOW accounts................. .98% $327,094 13.4%
Regular savings.................................. 2.09 561,196 23.1
Money market accounts............................ 4.89 125,987 5.2
Certificate accounts............................. 4.62 1,417,668 58.3
------ ----------- -------
Total deposits................................ 3.56% $2,431,945 100.0%
====== =========== =======
</TABLE>
19
<PAGE>
Maturity information regarding Webster's deposit accounts of $100,000
or more at December 31, 1996 is shown below.
<TABLE>
<CAPTION>
Total
Deposits Over Over
of Three Months Six Months
$100,000 Three Months through through Over % of Total
or more or less Six Months One Year One Year Deposits
----------- ------------ ------------ ---------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
$153,709 $37,697 $41,701 $39,387 $34,924 4.96%
</TABLE>
Additional information concerning the deposits of Webster is included
in Note 8 of the Consolidated Financial Statements contained in the annual
report to shareholders and incorporated herein by reference.
Borrowings. The FHL Bank System functions in a reserve credit capacity
for savings institutions and certain other home financing institutions. Members
of the FHL Bank System are required to own capital stock in the FHL Bank.
Members are authorized to apply for advances on the security of such stock and
certain of their home mortgages and other assets (principally securities which
are obligations of, or guaranteed by, the United States) provided certain
creditworthiness standards have been met. See "Federal Home Loan Bank System."
Under its current credit policies, the FHL Bank limits advances based on a
member's assets, total borrowings and net worth.
The Bank used FHL Bank advances as an alternative source of funds to
deposits in order to fund its lending activities when it determines that it can
profitably invest the borrowed funds over their term. At December 31, 1996, the
Bank had outstanding FHL Bank advances of $407.7 million and other borrowings in
the amount of $170.0 million at December 31, 1995.
The following table sets forth certain information as to the Bank's FHL
Bank short-term borrowings at the dates and for the years indicated.
<TABLE>
<CAPTION>
At December 31,
1996 1995 1994
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Average amount outstanding during the period:
FHL Bank short-term advances..................................... $274,596 $ 268,563 $ 261,133
Amount outstanding at end of period:
FHL Bank short-term advances..................................... 247,034 209,401 232,000
Highest month end balance of short-term FHL Bank
borrowings....................................................... 366,000 379,713 387,887
Weighted average interest rate of short-term FHL Bank
borrowings at end of period...................................... 5.77% 6.09% 5.92%
Weighted average interest rate of short-term FHL Bank
borrowings during the period..................................... 5.61% 6.13% 4.69%
</TABLE>
During 1996, reverse repurchase agreement transactions were also used as a
source of short-term borrowings. The Bank uses reverse repurchase agreements
when the cost of such borrowings is favorable as compared to other funding
sources.
20
<PAGE>
The following table sets forth certain information as to the Bank's reverse
repurchase agreement short-term borrowings at the dates and for the years
indicated.
<TABLE>
<CAPTION>
At December 31,
1996 1995 1994
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Average amount outstanding during the period:
reverse repurchase short-term agreements......................... $129,166 $ 37,830 N/A
Amount outstanding at end of period:
reverse repurchase short-term agreements......................... 77,585 126,884 N/A
Highest month end balance of short-term
borrowings....................................................... 180,704 126,884 N/A
Weighted average interest rate of reverse repurchase
agreement short-term borrowings at end of period................. 5.51% 5.80% N/A
Weighted average interest rate of repurchase
agreement short-term borrowings during the period................ 5.52% 5.91% N/A
</TABLE>
There were no reverse repurchase agreements transacted in 1994.
Bank Subsidiaries
At December 31, 1996, the Bank's direct investment in its service
corporation subsidiary totaled $462,000. As of December 31, 1996, the activities
of such service corporation subsidiary consisted primarily of the selling of
mutual funds and annuities through a third party provider. The service
corporation receives a portion of the sales commissions generated and rental
income for the office space leased to the provider. The Bank also has an
operating subsidiary, the primary function of which is to dispose of other real
estate owned. At December 31, 1996 the Bank's direct investment in the operating
subsidiary was $1.3 million.
Employees
At December 31, 1996, Webster had 1,057 employees (including 192
part-time employees), none of whom were represented by a collective bargaining
group. Webster maintains a comprehensive employee benefit program providing,
among other benefits, group medical and dental insurance, life insurance,
disability insurance, a pension plan, an employee investment plan and an
employee stock ownership plan. Management considers Webster's relations with its
employees to be good.
Market Area And Competition
The Bank is headquartered in Waterbury, Connecticut (New Haven County)
and conducts business from its home office in downtown Waterbury and 78 branch
offices in Waterbury, Southbury, Ansonia, Bethany, Oxford, Cheshire, Prospect,
Branford, Derby, East Haven, Hamden, Madison, Milford, Naugatuck, New Haven,
North Haven, Orange and West Haven (New Haven County), Watertown (Litchfield
County), Fairfield, Southbury, Stratford, Trumbull and Shelton (Fairfield
County), and Avon, Suffield, East Windsor, Bristol, Plainville, Terryville,
Enfield, Windsor Locks, Berlin, East Hartford, Farmington, Glastonbury,
Hartford, Manchester, New Britain, Newington, Simsbury, West Hartford, Rocky
Hill, Seymour, Wethersfield and Southington (Hartford County) and Cromwell and
Middletown (Middlesex County). Waterbury
21
<PAGE>
is approximately 30 miles southwest of Hartford and is located on Route 8 midway
between Torrington and the New Haven and Bridgeport metropolitan areas. Most of
the Bank's depositors live, and most of the properties securing its mortgage
loans are located, in the same area or the adjoining counties. The Bank's market
area has a diversified economy with the workforce employed primarily in
manufacturing, financial services, health care, industrial and technology
companies.
The Bank faces substantial competition for deposits and loans
throughout its market areas. The primary factors stressed by the Bank in
competing for deposits are interest rates, personalized services, the quality
and range of financial services, convenience of office locations, automated
services and office hours. Competition for deposits comes primarily from other
savings institutions, commercial banks, credit unions, money market funds and
other investment alternatives. The primary factors in competing for loans are
interest rates, loan origination fees, the quality and range of lending services
and personalized service. Competition for origination of first mortgage loans
comes primarily from other savings institutions, mortgage banking firms,
mortgage brokers, commercial banks and insurance companies. The Bank faces
competition for deposits and loans throughout its market area not only from
local institutions but also from out-of-state financial institutions which have
opened loan production offices or which solicit deposits in its market area.
Regulation
Webster, as a savings and loan holding company, and Webster bank, as a
federally chartered savings bank, are subject to extensive regulation,
supervision and examination by the OTS as their primary federal regulator.
Webster Bank is also subject to regulation, supervision and examination by the
FDIC and as to certain matters by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"). See "Management's Discussion and Analysis"
and "Notes to Consolidated Financial Statements" as to the impact of certain
laws, rules and regulations on the operations of the Corporation and Webster
Bank. Set forth below is a description of certain regulatory developments.
As discussed in Management's Discussion and Analysis, legislation was
enacted in September 1996 to address the undercapitalization of the SAIF of the
FDIC (the "SAIF Recapitalization Legislation"). Legislation also was enacted in
1996 which repeals Section 593 of the Internal Revenue Code of 1986, as amended
(the "IRC") under which qualified savings institutions calculated their bad debt
deduction for federal income tax purposes.
The SAIF Recapitalization Legislation, in addition to providing for a
special assessment to recapitalize the insurance fund, also contemplated the
merger of the SAIF with the BIF of which Webster Bank is a member, and which
generally insures deposits in national and state-chartered banks. The combined
deposit insurance fund, which would be formed no earlier than January 1, 1999,
would insure deposits at all FDIC insured depository institutions. As a
condition to the combined insurance fund, however, no insured depository
institution can be chartered as a savings association (such as Webster Bank).
The Secretary of the Treasury is required to report to the Congress no later
than March 31, 1997 with respect to the development of a common charter for all
insured depository institutions. If legislation with respect to the development
of a common charter is enacted, Webster Bank may be required to convert its
federal charter to either a new federal type of bank charter or state depository
institution charter. Such future legislation also may result in the Corporation
becoming regulated as a bank holding company by the Federal Reserve board rather
than a savings and loan holding company regulated by the OTS. Regulation by the
Federal Reserve Board could
22
<PAGE>
subject the Corporation to capital requirements that are not currently
applicable to the Corporation as a holding company under OTS regulation and may
result in statutory limitations on the type of business activities in which the
Corporation may engage at the holding company level, which business activities
currently are not restricted. The Corporation and Webster Bank are unable to
predict whether such legislation will be enacted.
The SAIF Recapitalization Legislation also contains several provisions
augmenting the Bank's commercial lending authority, provided that any loans in
excess of 10% of assets are used for small business loans. The qualified thrift
lender test that Webster bank must comply with was amended to provide that small
business, credit card and student loans can be included without any limit, and
that the Bank can qualify as a qualified thrift lender by meeting either the
test set forth in the Home Owners' Loan Act or under the definition of a
domestic building and loan association as defined under the IRC. Webster Bank
does not expect such provisions to materially impact its operations.
During 1996, the OTS continued its comprehensive review of its
regulations to eliminate duplicative, unduly burdensome and unnecessary
regulation. Revised lending and investments regulations impose general safety
and soundness standards, and also provide that commercial loans made by a
service corporation of a savings association will be exempted from an
institutions's overall 10% limit on commercial loans. The OTS revised subsidiary
and equity investment regulations to include an expanded list of pre-approved
service corporation activities. The revised corporate governance regulation is
intended to provide greater flexibility with respect to corporate governance of
federal savings institutions, such as Webster Bank.
The OTS also converted its policy statement on conflicts of interest to
a regulation that is intended to be based upon common law principles of "duty of
loyalty" and "duty of care". The new conflicts regulation provides that
directors, officers, employees, persons having the power to control the
management or policies of savings associations, and other persons who owe
fiduciary duties to savings institutions will be prohibited from advancing their
own personal or business interests, or those of others, at the expense of the
institutions they serve. The OTS also clarified that "persons having the power
to control the management or policies of savings associations" includes holding
companies such as the Corporation. The OTS corporate opportunity regulations and
policy statements also were eliminated and replaced with a standard similar to
common law standards governing usurpation of corporate opportunity.
Taxation
Federal. Webster, on behalf of itself and its subsidiaries, files a
calendar tax year consolidated federal income tax return. Webster and its
subsidiaries report their income and expenses using the accrual method of
accounting. Tax law changes were enacted in August 1996 to eliminate the "thrift
bad debt" method of calculating bad debt deductions for tax years after 1995 and
to impose a requirement to recapture into taxable income (over a six-year
period) all bad debt reserves accumulated after 1987. Since Webster previously
recorded a deferred tax liability with respect to these post 1987 reserves, its
total tax expense for financial reporting purposes will not be affected by the
recapture requirement. The tax law changes also provide that taxes associated
with the recapture of pre-1988 bad debt reserves would become payable under more
limited circumstances than under prior law. Under the tax laws, as amended,
events that would result in recapture of the pre-1988 bad debt reserves include
stock and cash distributions to the holding campany from the Bank in excess of
specified amounts. Webster does not expect such reserves
23
<PAGE>
recaptured to be into taxable income. At December 31, 1996 Webster had pre-1988
reserves of approximately $16.4 million.
Depending on the composition of its items of income and expense, a
savings institution may be subject to the alternative minimum tax. For tax years
beginning after 1986, a savings institution must pay an alternative minimum tax
equal to the amount (if any) by which 20% of alternative minimum taxable income
("AMTI"), as reduced by an exemption varying with AMTI, exceeds the regular tax
due. AMTI equals regular taxable income increased or decreased by certain
adjustments and increased by certain tax preferences, including depreciation
deductions in excess of those allowable for alternative minimum tax purposes,
tax-exempt interest on most private activity bonds issued after August 7, 1986
(reduced by any related interest expense disallowed for regular tax purposes),
the amount of the bad debt reserve deduction claimed in excess of the deduction
based on the experience method and, for tax years after 1989, 75% of the excess
of adjusted current earnings over AMTI. AMTI may be reduced only up to 90% by
net operating loss carryovers, but the payment of alternative minimum tax will
give rise to a minimum tax credit which will be available with an indefinite
carryforward period, to reduce federal income taxes of the institution in future
years (but not below the level of alternative minimum tax arising in each of the
carryforward years).
Webster's federal income tax returns have been examined by the Internal
Revenue Service for tax years through 1993.
State. State income taxation is in accordance with the corporate income
tax laws of the State of Connecticut and other states on an apportioned basis.
For the State of Connecticut, the Bank and its subsidiaries are required to pay
taxes under the larger of two methods but no less than the minimum tax of $250
per entity. Method one is 10.75% (scheduled to decrease to 7.5% by 2000) of the
year's taxable income (which, with certain exceptions, is equal to taxable
income for federal purposes) or method two, (additional tax on capital) an
amount equal to 3 and 1/10 mills per dollar on its average capital and a special
rule for banks to calculate its additional tax base is an amount equal to 4% of
the amount of interest or dividends credited by the Bank on savings accounts of
depositors or account holders during the preceding taxable year, provided that,
in determining such amount, interest or dividends credited to the savings
account of a depositor or account holder are deemed to be the lesser of the
actual interest or dividends credited or the interest or dividend that would
have been credited if it had been computed and credited at the rate of
one-eighth of 1% per annum.
Item 2. Properties At December 31, 1996, Webster had 28 banking offices in New
Haven County, 29 banking offices in Hartford County, three banking offices in
Fairfield County, two banking offices in Litchfield County and two banking
offices in Middlesex County.
24
<PAGE>
The following table sets forth certain information concerning the
banking offices of Webster at December 31, 1996.
<TABLE>
<CAPTION>
Lease Lease
Year Owned or Expiration Renewal
Location Opened Leased Date Option
<S> <C> <C> <C> <C>
Webster Plaza, Waterbury, CT 1978 Owned -- --
Naugatuck Valley Mall, Waterbury, CT 1969 Leased 2000 --
Chase Avenue at Wigwam Ave, Waterbury, CT 1976 Owned -- --
364 Reidville Drive, Waterbury, CT 1976 Building-Owned -- --
Land-Leased 1997 --
670 Wolcott Street, Mattatuck Plaza, 1984 Building-Owned -- --
Waterbury, CT Land-Leased 2004 One 10-year option
656 Main Street, Watertown, CT 1959 Owned -- --
544 Straits Turnpike, Watertown, CT 1985 Leased 1998 Three 5-year options
Southbury Plaza, Southbury, CT 1979 Leased 2004 One 10-year option
45 Waterbury Road, Prospect, CT 1988 Owned -- --
359 Queen Street, Southington, CT 1989 Leased 1997 One 5-year option
145 Highland Avenue, Cheshire, CT 1990 Leased 2005 One 5-year option
66 North Main Street, Suffield, CT 1991 Owned -- --
6 National Drive, Windsor Locks, CT 1991 Leased 1999 One 3-year option
24 Dexter Plaza, Windsor Locks, CT 1991 Leased 1998 One 5-year option
561 Hazard Avenue, Enfield, CT 1991 Owned -- --
Route 140, East Windsor, CT 1991 Leased -- Monthly Negotiated
1 South Main Street, Branford, CT 1992 Owned -- --
922 South Main St., Cheshire, CT 1992 Building-Owned -- --
Land-Leased 2013 Two 33-year options
630 New Haven, Ave., Derby, CT 1992 Leased 2001 Five 5-year options
260 Main Street, East Haven, CT 1992 Owned -- --
1177 Post Road, Fairfield, CT 1992 Owned -- --
2290 Whitney Ave., Hamden, CT 1992 Owned -- --
5 Helen St., Hamden, CT 1992 Owned -- --
1227 Whitney Ave., Hamden, CT 1992 Owned -- --
100 Broad St., Milford, CT 1992 Owned -- --
314 Merwin Ave., Milford, CT 1992 Owned -- --
80 Elm St., New Haven, CT 1992 Owned -- --
894 Whalley Ave., New Haven, CT 1992 Owned -- --
70 Washington Ave., North Haven, CT 1992 Leased 2009 Three 5-year options
247 Boston Post Rd., Orange, CT 1992 Owned -- --
534 Campbell Ave., West Haven, CT 1992 Owned -- --
28 Durham Rd., Madison, CT 1995 Leased 2000 One 5-year option
733 Rubber Avenue, Naugatuck, CT 1994 Building-Owned -- --
Land-Leased 2087 --
575 Farmington Ave., Bristol, CT* 1994 Leased 2001 One 5-year option
647 Farmington Ave., Bristol, CT 1994 Leased 2007 One 10-year option
761 Pine St., Forestville, CT 1994 Leased -- Monthly Negotiated
150 Main St., Bristol, CT 1994 Owned -- --
51 East Main Street, Plainville, CT 1994 Owned -- --
North Riverside Avenue, Terryville, CT 1994 Owned -- --
375 Bridgeport, Shelton, CT 1995 Owned -- --
75 Tremont Street, Ansonia, CT 1995 Owned -- --
200 Division Street, Ansonia, CT 1995 Owned -- --
696 Amity Road, Bethany, CT 1995 Owned -- --
60 Oxford Road, Oxford, CT 1995 Owned -- --
427 Howe Avenue, Shelton, CT 1995 Owned -- --
40 Webster Square, Berlin CT 1996 Owned -- --
5 Coles Road, Cromwell, CT 1996 Leased 2004 --
1085 Main Street, East Hartford, CT 1996 Owned -- --
50 Freshwater Blvd., Enfield, CT 1996 Leased 2009 One 6-year option
High Street, Farmington, CT 1996 Leased 1999 --
25
<PAGE>
141 Hebron Avenue, Glastonbury, CT 1996 Owned -- --
185 Asylum Avenue, Hartford, CT 1996 Leased 1998 Two 5-year options
410 Homestead Avenue, Hartford, CT 1996 Owned -- --
655 Wethersfield Avenue, Hartford, CT 1996 Leased 1997 One 5-year option
320 Middle Turnpike, Manchester, CT 1996 Leased 2002 One 5-year option
363 Main Street, Middletown, CT 1996 Owned -- --
741 West Main Street, New Britain, CT 1996 Owned -- --
3180 Berlin Turnpike, Newington, CT 1996 Leased 1999 --
690 Hopmeadow Street, Simsbury, CT 1996 Owned -- --
132 Main Street, Southington, CT 1996 Owned -- --
1114 New Britain Ave., West Hartford, CT 1996 Leased 2000 Three 3-year options
65 La Salle Road, West Hartford, CT 1996 Leased 2002 --
1039 Silas Deane Hwy., Wethersfield, CT 1996 Leased 2000 One 5-year option
270 Broad Street, Windsor, CT 1996 Owned -- --
371 East Main Street, Middletown, CT * 1996 Leased 2021 One 10-year option
* Drive thru facility only
</TABLE>
The total net book value of properties and furniture and fixtures owned and
used for offices at December 31, 1996 was $33.5 million, which includes the
aggregate net book value of leasehold improvements on properties used for
offices of $2.0 million at that date.
Item 3. Legal Proceedings
At December 31, 1996, there were no material pending legal proceedings,
other than ordinary routine litigation to its business, to which Webster was a
party or to which any of its property was subject.
Item 4. Submission Of Matters To A Vote Of Security Holders
Not Applicable
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The common stock of Webster is traded over-the-counter on the Nasdaq
National Market System under the symbol "WBST."
The following table shows dividends declared and the market price per
share by quarter for 1996 and 1995. Webster increased its quarterly dividend to
$.18 per share in August 1996.
26
<PAGE>
<TABLE>
<CAPTION>
Common Stock (Per Share)
Cash Market Price
Dividends End of
Declared Low High Period
<S> <C> <C> <C> <C>
1996:
Fourth................................... $ .18 $ 33 1/2 $ 38 1/4 $ 36 3/4
Third.................................... .18 28 35 3/4 35 1/4
Second................................... .16 26 3/4 29 3/8 28
First.................................... .16 27 1/2 30 1/4 28
1995:
Fourth................................... $ .16 $ 24 1/2 $ 29 1/2 $ 29 1/2
Third.................................... .16 23 31 26 1/4
Second................................... .16 21 1/4 26 23 7/8
First.................................... .16 18 22 1/4 21 1/4
</TABLE>
Payment of dividends from Webster Bank to Webster is subject to certain
regulatory and other restrictions. Payment of dividends by Webster on its stock
is subject to various restrictions, none of which is expected to limit any
dividend policy which the Board of Directors may in the future decide to adopt.
Under Delaware law, Webster may pay dividends out of surplus or, in the event
there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. Dividends may not be paid
out of net profits, however, if the capital of Webster has been diminished to an
amount less than the aggregate amount of capital represented by all classes of
preferred stock.
Item 6. Selected Financial Data
Selected financial data for the five years ended December 31, 1996,
consisting of data captioned "Selected Consolidated Financial and Other Data" on
Page 2 of the Corporation's 1996 Annual Report to Shareholders, is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on Pages 15 to 25 of the Corporation's 1996 Annual Report
to Shareholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The required information is incorporated herein by reference from Pages
26 to 58 of the Corporation's 1996 Annual Report to Shareholders.
Item 9. Disagreements on Accounting and Financial Disclosures.
Not Applicable.
27
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the directors and executive officers of the
Corporation is omitted from this report as the Corporation has filed its
definitive proxy statement within 120 days after the end of the fiscal year
covered by this Report, and the information included therein is incorporated
herein by reference.
Item 11. Executive Compensation
Information regarding compensation of executive officers and directors
is omitted from this Report as the Corporation has filed a definitive proxy
statement within 120 days after the end of the fiscal year covered by this
report, and the information included therein (excluding the Personnel Resources
Committee Report on Executive Compensation and the Comparative Company
Performance information) is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this Item is omitted from this Report as the
Corporation has filed a definitive proxy statement within 120 days after the end
of the fiscal year covered by this Report, and the information included therein
is incorporated by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is
omitted from this Report as the Corporation has filed a definitive proxy
statement within 120 days after the end of the fiscal year covered by this
Report, and the information included therein is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) The following consolidated financial statements of the
Registrant and its subsidiary included in its Annual Report to Shareholders for
the year ended December 31, 1996, are incorporated herein by reference in Item
8. The remaining information appearing in the Annual Report to Shareholders is
not deemed to be filed as part of this Report, except as expressly provided
herein.
Consolidated Statements of Condition - December 31, 1996 and 1995
Consolidated Statements of Income - Years Ended December 31, 1996, 1995 and
1994
Consolidated Statements of Cash Flows -Years Ended December 31, 1996, 1995
and 1994
Consolidated Statements of Shareholders' Equity - Years Ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
28
<PAGE>
Report of Independent Auditors
(a)(2) All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
(a)(3) The following exhibits are either filed as part of this Report
or are incorporated herein by reference; references herein to First Federal Bank
now mean Webster Bank:
Exhibit No. 3. Certificate of Incorporation and Bylaws.
3.1 Restated Certificate of Incorporation.
3.2 Certificate of Amendment of Restated Certificate of
Incorporation.
3.3 Certificate of Designation for the Series A Cumulative
Perpetual Preferred Stock.
3.4 Certificate of Designation for the Series B 7 1/2% Cumulative
Convertible Preferred Stock.
3.5 Certificate of Designation for the Series C Participating
Preferred Stock.
3.6 Certificate of Amendment to Restated Certificate of
Incorporation.
3.7 Bylaws of Registrant (incorporated by reference to Exhibit 3.5
to the Corporation's Form 10-K filed on March 31, 1995).
Exhibit No. 10. Material Contracts.
10.1 1986 Stock Option Plan of Webster Financial Corporation
(incorporated herein by reference to Exhibit 10(a) to the
Corporation's Form 10-K filed on March 27, 1987).
10.2 1992 Stock Option Plan of Webster Financial Corporation
(incorporated by reference to Exhibit 10.2 to the
Corporation's Form 10-K filed on March 31, 1994).
10.3 Amendment No. 1 to 1992 Stock Option Plan (incorporated by
reference to Exhibit 10.3 to the Corporation's Form 10-K filed
on March 31, 1994).
10.4 Short-term Incentive Compensation Plan (incorporated by
reference to Exhibit 10.4 to the Corporation's Form 10-K filed
on March 31, 1995).
10.5 Long-Term Incentive Compensation Plan (incorporated by
reference to Exhibit 99.6 to the Corporation's Form 8-K/A
filed on November 10, 1993).
10.6 Performance Incentive Plan (incorporated by reference to
Exhibit 10.6 to the Corporation's Form 10-K filed on March 31,
1995)
10.7 Amended and Restated Employee Stock Ownership Plan, effective
as of January 1, 1989 (incorporated by reference to Exhibit
10.7 to the Corporation's Form 10-K filed on March 31, 1995)
29
<PAGE>
10.8 First Federal Bank Deferred Compensation Plan for Directors
and Officers, effective December 7, 1987 (incorporated herein
by reference to Exhibit 10(1) to the Corporation's Form 10-K
filed on March 29, 1988).
10.9 Form of Supplemental Retirement Plan for Harold W. Smith
(incorporated herein by reference to Exhibit 10(j) to the
Corporation's Form 10-K filed on March 29, 1988).
10.10 Form of Stock Option Agreement for Harold W. Smith (Initial)
(incorporated herein by reference to Exhibit 10(k) to the
Corporation's Form 10-K filed on March 29, 1988).
10.11 Form of Stock Option Agreement for Executive Officers
(Initial) (incorporated herein by reference to Exhibit 10(l)
to the Corporation's Form 10-K filed on March 29, 1988).
10.12 Form of Stock Option Agreement for Directors (Initial)
(incorporated herein by reference to Exhibit 10(m) to the
Corporation's Form 10-K filed on March 29, 1988).
10.13 Form of Stock Option Agreement for Employees (1987)
(incorporated herein by reference to Exhibit 10(n) to the
Corporation's Form 10-K filed on March 29, 1988).
10.14 Form of Incentive Stock Option Agreement (for employees with
employment agreements) (incorporated by reference to Exhibit
10.15 to the Corporation's Form 10-K filed on March 31, 1994).
10.15 Form of Incentive Stock Option Agreement (for employees with
severance agreements) (incorporated by reference to Exhibit
10.16 to the Corporation's Form 10-K filed on March 31, 1994).
10.16 Form of Incentive Stock Option Agreement (for employees with
no employment or severance agreements) (incorporated by
reference to Exhibit 10.17 to the Corporation's Form 10-K
filed on March 31, 1994).
10.17 Form of Nonqualified Stock Option Agreement (for employees
with employment agreements) (incorporated by reference to
Exhibit 10.18 to the Corporation's Form 10-K filed on March
31, 1994).
10.18 Form of Non-Incentive Stock Option Agreement (for non-employee
directors).(incorporated by reference to Exhibit 10.19 to the
Corporation's Form 10-K filed on March 31, 1994).
10.19 Form of Non-Incentive Stock Option Agreement (for employees
with employment agreements) (incorporated by reference to
Exhibit 10.20 to the Corporation's Form 10-K filed on March
31, 1994).
10.20 Form of Non-Incentive Stock Option Agreement (for employees
with severance agreements) (incorporated by reference to
Exhibit 10.21 to the Corporation's Form 10-K filed on March
31, 1994).
10.21 Form of Non-Incentive Stock Option Agreement (for employees
with no employment or severance agreements) (incorporated by
reference to Exhibit 10.22 to the Corporation's Form 10-K
filed on March 31, 1994).
30
<PAGE>
10.22 Form of Incentive Stock Option Agreement (for employees)
(revised)(incorporated by reference to Exhibit 10.22 to the
Corporation's Form 10-K filed on March 31, 1995)
.
10.23 Form of Nonqualified Stock Option Agreement (for employees
with employment agreements) (revised) (incorporated by
reference to Exhibit 10.23 to the Corporation's Form 10-K
filed on March 31, 1995).
10.24 Form of Nonqualified Stock Option Agreement (immediate
vesting) (incorporated by reference to Exhibit 10.24 to the
Corporation's Form 10-K filed on March 31, 1995.
10.25 Form of Nonqualified Stock Option Agreement (for senior
officers of Bristol Mortgage) (incorporated by reference to
Exhibit 10.25 to the Corporation's Form 10-K filed on March
31, 1995).
10.26 Supplemental Retirement Plan for Employees of First Federal
Bank, as amended and restated effective as of October 1, 1994
(incorporated by reference to Exhibit 10.26 to the
Corporation's Form 10-K filed on March 31, 1995).
10.27 Consulting Agreement between First Federal Bank and Harold W.
Smith, Jr., dated as of January 1, 1994 (incorporated herein
by reference to Exhibit 10.12 to the Corporation's Form 8-K/A
filed on January 13, 1994).
10.28 Amendment to Consulting Agreement, dated as of January 1,
1997, among Webster Bank, the Corporation and Harold W. Smith.
10.29 Employment Agreement among Webster Bank, the Corporation and
James C. Smith, dated as of January 1, 1997.
10.30 Employment Agreement among Webster Bank, the Corporation and
Lee A. Gagnon, dated as of January 1, 1997.
10.31 Employment Agreement among Webster Bank, the Corporation and
John V. Brennan, dated as of January 1, 1997.
10.32 Employment Agreement among Webster Bank, the Corporation and
Ross M. Strickland, dated as of January 1, 1997.
10.33 Employment Agreement among Webster Bank, the Corporation and
Peter K. Mulligan.
10.34 Employment Agreement between the Corporation, First Federal
Bank and Gary M. MacElhiney, dated as of January 1, 1995
(incorporated by reference to Exhibit 10.32 to the
Corporation's Form 10-K filed on March 31, 1995).
10.35 Severance Payment Agreement among the Corporation, First
Federal Bank and Peter K. Mulligan, dated as of April 17, 1995
(incorporated herein by reference to Exhibit 10.38 from the
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995).
10.36 Purchase and Assumption Agreement among FDIC, Receiver of
Suffield Bank, FDIC and First Federal Bank, dated September 6,
1991 (incorporated herein by reference to Exhibit 10(m) from
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992).
10.37 Indemnity Agreement between FDIC and First Federal Bank dated
as of September 6, 1991 (incorporated herein by reference to
Exhibit 10(n) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991).
31
<PAGE>
10.38 Purchase and Assumption Agreement among the FDIC, in its
corporate capacity as receiver of First Constitution Bank,
First Federal Bank and the FDIC, dated as of October 2, 1992
(incorporated herein by reference from the Registrant's Form
8-K filed on October 19, 1992).
10.39 Amendment No. 1 to Purchase and Assumption Agreement, dated as
of August 8, 1994, between the FDIC and First Federal
(incorporated by reference to Exhibit 10.36 to the
Corporation's Form 10-K filed on March 31, 1995).
10.40 Indenture, dated as of June 15, 1993, between the Corporation
and Chemical Bank, as Trustee, relating to the Corporation's
Senior Notes due 2000 (incorporated herein by reference to
Exhibit 99.5 to the Corporation's Form 8-K/A filed on November
10, 1993).
10.41 Junior Subordinated Indenture, dated January 29, 1997 between
the Corporation and the Bank of New York as Trustee, relating
to the Corporation's Junior Subordinated Deferrable Interest
Debentures.
Exhibit No. 13. Annual Report to Shareholders.
Exhibit No. 21. Subsidiaries.
Exhibit No. 24. Consent of KPMG Peat Marwick LLP.
Exhibit No. 27. Financial Data Schedule.
(b) The following current reports on Form 8-K or amendments thereto
on Form 8 were filed by the Registrar during the last quarter of
fiscal year 1996
(i) Current Report on Form 8-K dated October 10, 1996 (ii)
Current Report on Form 8-K dated November 26, 1996
(c) Exhibits to this Form 10-K are attached or incorporated by
reference as stated above.
(d) Not applicable.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WEBSTER FINANCIAL CORPORATION
Registrant
BY: /s/ James C. Smith
----------------------------
James C. Smith, Chairman
and Chief Executive Officer
Date: March 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities noted as of March 27, 1996.
By: /s/ John V. Brennan
--------------------------------------
John V. Brennan, Executive Vice President,
Chief Financial Officer and Treasurer
By: /s/ Peter J. Swiatek
--------------------------------------
Peter J. Swiatek
Controller
By: /s/ Harold W. Smith
--------------------------------------
Harold W. Smith
Director
By: /s/ Joel S. Becker
--------------------------------------
Joel S. Becker
Director
By: /s/ O. Joseph Bizzozero, Jr.
--------------------------------------
O. Joseph Bizzozero, Jr.
Director
33
<PAGE>
By: /s/ Walter R. Griffin
--------------------------------------
Walter R. Griffin
Director
By: /s/ Robert A. Finkenzeller
--------------------------------------
Robert A. Finkenzeller
Director
By: /s/ Marguerite F. Waite
--------------------------------------
Marguerite F. Waite
Director
By: /s/ J. Gregory Hickey
--------------------------------------
J. Gregory Hickey
Director
By: /s/ John. J. Crawford
--------------------------------------
John J. Crawford
Director
By: /s/ Harry P. DiAdamo, Jr.
--------------------------------------
Harry P. DiAdamo, Jr.
Director
By: /s/ C. Michael Jacobi
--------------------------------------
C. Michael Jacobi
Director
By: /s/ Achille Apicella
--------------------------------------
Achille Apicella
Director
34
<PAGE>
EXHIBIT INDEX*
Number Description
3.1 Restated Certificate of Incorporation.
3.2 Certificate of Amendment of Restated Certificate of
Incorporation.
3.3 Certificate of Designation for the Series A Cumulative
Perpetual Preferred Stock.
3.4 Certificate of Designation for the Series B 7 1/2% Cumulative
Convertible Preferred Stock.
3.5 Certificate of Designation for the Series C Participating
Preferred Stock.
3.6 Certificate of Amendment to Restated Certificate of
Incorporation.
3.7 Bylaws of Registrant (incorporated by reference to Exhibit 3.5
to the Corporation's Form 10-K filed on March 31, 1995).
10.1 1986 Stock Option Plan of Webster Financial Corporation
(incorporated herein by reference to Exhibit 10(a) to the
Corporation's Form 10-K filed on March 27, 1987).
10.2 1992 Stock Option Plan of Webster Financial Corporation
(incorporated by reference to Exhibit 10.2 to the
Corporation's Form 10-K filed on March 31, 1994).
10.3 Amendment No. 1 to 1992 Stock Option Plan (incorporated by
reference to Exhibit 10.3 to the Corporation's Form 10-K filed
on March 31, 1994).
10.4 Short-term Incentive Compensation Plan (incorporated by
reference to Exhibit 10.4 to the Corporation's Form 10-K filed
on March 31, 1995).
10.5 Long-Term Incentive Compensation Plan (incorporated by
reference to Exhibit 99.6 to the Corporation's Form 8-K/A
filed on November 10, 1993).
10.6 Performance Incentive Plan (incorporated by reference to
Exhibit 10.6 to the Corporation's Form 10-K filed on March 31,
1995).
10.7 Amended and Restated Employee Stock Ownership Plan, effective
as of January 1, 1989 (incorporated by reference to Exhibit
10.7 to the Corporation's Form 10- K filed on March 31, 1995).
10.8 First Federal Bank Deferred Compensation Plan for Directors
and Officers, effective December 7, 1987 (incorporated herein
by reference to Exhibit 10(1) to the Corporation's Form 10-K
filed on March 29, 1988).
10.9 Form of Supplemental Retirement Plan for Harold W. Smith
(incorporated herein by reference to Exhibit 10(j) to the
Corporation's Form 10-K filed on March 29, 1988).
35
<PAGE>
10.10 Form of Stock Option Agreement for Harold W. Smith (Initial)
(incorporated herein by reference to Exhibit 10(k) to the
Corporation's Form 10-K filed on March 29, 1988).
10.11 Form of Stock Option Agreement for Executive Officers
(Initial) (incorporated herein by reference to Exhibit 10(l)
to the Corporation's Form 10-K filed on March 29, 1988).
10.12 Form of Stock Option Agreement for Directors (Initial)
(incorporated herein by reference to Exhibit 10(m) to the
Corporation's Form 10-K filed on March 29, 1988).
10.13 Form of Stock Option Agreement for Employees (1987)
(incorporated herein by reference to Exhibit 10(n) to the
Corporation's Form 10-K filed on March 29, 1988).
10.14 Form of Incentive Stock Option Agreement (for employees with
employment agreements).(incorporated by reference to Exhibit
10.15 to the Corporation's Form 10-K filed on March 31, 1994).
10.15 Form of Incentive Stock Option Agreement (for employees with
severance agreements)(incorporated by reference to Exhibit
10.16 to the Corporation's Form 10-K filed on March 31, 1994).
10.16 Form of Incentive Stock Option Agreement (for employees with
no employment or severance agreements) (incorporated by
reference to Exhibit 10.17 to the Corporation's Form 10-K
filed on March 31, 1994).
10.17 Form of Nonqualified Stock Option Agreement (for employees
with employment agreements) (incorporated by reference to
Exhibit 10.18 to the Corporation's Form 10-K filed on March
31, 1994).
10.18 Form of Non-Incentive Stock Option Agreement (for non-employee
directors).(incorporated by reference to Exhibit 10.19 to the
Corporation's Form 10-K filed on March 31, 1994).
10.19 Form of Non-Incentive Stock Option Agreement (for employees
with employment agreements) (incorporated by reference to
Exhibit 10.20 to the Corporation's Form 10-K filed on March
31, 1994).
10.20 Form of Non-Incentive Stock Option Agreement (for employees
with severance agreements) (incorporated by reference to
Exhibit 10.21 to the Corporation's Form 10-K filed on March
31, 1994).
10.21 Form of Non-Incentive Stock Option Agreement (for employees
with no employment or severance agreements)(incorporated by
reference to Exhibit 10.22 to the Corporation's Form 10-K
filed on March 31, 1994).
10.22 Form of Incentive Stock Option Agreement (for employees)
(revised) (incorporated by reference to Exhibit 10.22 to the
Corporation's Form 10-K filed on March 31, 1995).
36
<PAGE>
10.23 Form of Nonqualified Stock Option Agreement (for employees
with employment agreements) (revised) (incorporated by
reference to Exhibit 10.23 to the Corporation's Form 10-K
filed on March 31, 1995).
10.24 Form of Nonqualified Stock Option Agreement (immediate
vesting) (incorporated by reference to Exhibit 10.24 to the
Corporation's Form 10-K filed on March 31, 1995.
10.25 Form of Nonqualified Stock Option Agreement (for senior
officers of Bristol Mortgage) (incorporated by reference to
Exhibit 10.25 to the Corporation's Form 10-K filed on March
31, 1995).
10.26 Supplemental Retirement Plan for Employees of First Federal
Bank, as amended and restated effective as of October 1, 1994
(incorporated by reference to Exhibit 10.26 to the
Corporation's Form 10-K filed on March 31, 1995).
10.27 Consulting Agreement between First Federal Bank and Harold W.
Smith, Jr., dated as of January 1, 1994 (incorporated herein
by reference to Exhibit 10.12 to the Corporation's Form 8-K/A
filed on January 13, 1994).
10.28 Amendment to Consulting Agreement, dated as of January 1,
1997, among Webster Bank, the Corporation and Harold W. Smith.
10.29 Employment Agreement among Webster Bank, the Corporation and
James C. Smith, dated as of January 1, 1997.
10.30 Employment Agreement among Webster Bank, the Corporation and
Lee A. Gagnon, dated as of January 1, 1997.
10.31 Employment Agreement among Webster Bank, the Corporation and
John V. Brennan, dated as of January 1, 1997.
10.32 Employment Agreement among Webster Bank, the Corporation and
Ross M. Strickland, dated as of January 1, 1997.
10.33 Employment Agreement among Webster Bank, the Corporation and
Peter K. Mulligan.
10.34 Employment Agreement among the Corporation, First Federal
Bank and Gary M. MacElhiney, dated as of January 1, 1995
(incorporated by reference to Exhibit 10.32 to the
Corporation's Form 10-K filed on March 31, 1995).
10.35 Severance Payment Agreement among the Corporation, First
Federal Bank and Peter K. Mulligan, dated as of April 17,
1995(incorporated herein by reference to Exhibit 10.38 from
the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
10.36 Purchase and Assumption Agreement among FDIC, Receiver of
Suffield Bank, FDIC and First Federal Bank, dated September 6,
1991 (incorporated herein by reference to Exhibit 10(m) from
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992).
10.37 Indemnity Agreement between FDIC and First Federal Bank dated
as of September 6, 1991 (incorporated herein by reference to
Exhibit 10(n) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991).
37
<PAGE>
10.38 Purchase and Assumption Agreement among the FDIC, in its
corporate capacity as receiver of First Constitution Bank,
First Federal Bank and the FDIC, dated as of October 2, 1992
(incorporated herein by reference from the Registrant's Form
8-K filed on October 19, 1992).
10.39 Amendment No. 1 to Purchase and Assumption Agreement, dated as
of August 8, 1994, between the FDIC and First Federal
(incorporated by reference to Exhibit 10.36 to the
Corporation's Form 10-K filed on March 31, 1995).
10.40 Indenture, dated as of June 15, 1993, between the Corporation
and Chemical Bank, as Trustee, relating to the Corporation's
Senior Notes due 2000 (incorporated herein by reference to
Exhibit 99.5 to the Corporation's Form 8-K/A filed on November
10, 1993).
10.41 Junior Subordinated Indenture, dated January 29, 1997 between
the Corporation and the Bank of New York as Trustee, relating
to the Corporation's Junior Subordinated Deferrable Interest
Debentures.
13. Annual Report to Shareholders.
21. Subsidiaries.
24. Consent of KPMG Peat Marwick LLP.
27. Financial Data Schedule.
* References herein to First Federal Bank now mean Webster Bank.
38
Exhibit 3.1
-----------
RESTATED CERTIFICATE OF INCORPORATION
OF
WEBSTER FINANCIAL CORPORATION
Webster Financial Corporation, a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Webster Financial
Corporation and the name under which the corporation was originally incorporated
is Webster Financial Corp. The date of filing its original Certificate of
Incorporation with the Secretary of State was September 10, 1986.
2. This Restated Certificate of Incorporation only restates
and integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or supplemented and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or changes
to read as set forth in full in the attachment hereto.
4. This Restated Certificate of Incorporation was duly adopted
by the board of directors in accordance with Sections 241 and 245 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said Webster Financial Corporation has
caused this certificate to be signed by James C. Smith, its President, and
attested by Harold W. Smith, Jr., its Secretary, this 16th day of December,
1986.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
-------------------------
James C. Smith
President
ATTEST:
By: /s/ Harold W. Smith, Jr.
-----------------------------
Harold W. Smith, Jr.
Secretary
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<PAGE>
STATE OF DELAWARE
RESTATED CERTIFICATE OF INCORPORATION
OF
WEBSTER FINANCIAL CORPORATION
Article 1. CORPORATE TITLE. The name of the corporation is Webster
Financial Corporation (the "Corporation").
Article 2. DURATION. The duration of the Corporation is perpetual.
Article 3. PURPOSE. The purpose or purposes for which the Corporation
is organized are to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
Article 4. CAPITAL STOCK. The total number of shares of all classes of
the capital stock which the Corporation has authority to issue is twenty-five
million (25,000,000), of which twenty-two million (22,000,000) shall be common
stock, par value $.01 per share, amounting in the aggregate to two hundred
twenty thousand dollars ($220,000), and three million (3,000,000) shall be
serial preferred stock, par value $.01 per share, amounting in the aggregate to
thirty thousand dollars ($30,000). The shares may be issued by the Corporation
from time to time as approved by its board of directors without the approval of
its shareholders. The consideration for the issuance of the shares shall be paid
in full before their issuance and shall not be less than the par value per
share. Neither promissory notes nor future services shall constitute payment or
part payment for the issuance of the shares of the Corporation. The
consideration for the shares shall be cash, services actually performed for the
Corporation, personal property, real property, leases of real property or any
combination of the foregoing. In the absence of actual fraud in the transaction,
the value of such property, labor or services, as determined by the board of
directors of the Corporation, shall be conclusive. Upon payment of such
consideration such shares shall be deemed to be fully paid and nonassessable.
Nothing contained in this Article 4 (or in any resolution or
resolutions adopted by the board of directors pursuant hereto) shall entitle the
holders of any class or series of capital stock to more than one vote per share.
A description of the different classes and series of the Corporation's
capital stock and a statement of the designations, and the powers, preferences
and rights, and the qualifications, limitations and restrictions of the shares
of each class of and series of capital stock are as follows:
A. COMMON STOCK. Except as provided in this Article 4 (or in
any resolution or resolutions adopted by the board of directors
pursuant hereto), the holders of the common stock shall exclusively
possess all voting power.
<PAGE>
Each holder of shares of common stock shall be entitled to one vote for
each share held by such holder, including the election of directors.
There shall be no cumulative voting rights in the election of
directors. Each share of common stock shall have the same relative
rights as and be identical in all respects with all the other shares of
common stock.
Wherever there shall have been paid, or declared and set aside
for payment, to the holders of the outstanding shares of any class of
stock having preference over the common stock as to the payment of
dividends, the full amount of dividends and of sinking fund or
retirement fund or other retirement payments, if any, to which such
holders are respectively entitled in preference to the common stock,
then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends, out
of any assets legally available for the payment of dividends; but only
when and as declared by the board of directors.
In the event of any liquidation, dissolution or winding up of
the Corporation, after there shall have been paid to or set aside for
the holders of any class having preferences over the common stock in
the event of liquidation, dissolution or winding up of the full
preferential amounts of which they are respectively entitled, the
holders of the common stock, and of any class or series of stock
entitled to participate therewith, in whole or in part, as to
distribution of assets, shall be entitled after payment or provision
for payment of all debts and liabilities of the Corporation, to receive
the remaining assets of the Corporation available for distribution, in
cash or in kind.
B. SERIAL PREFERRED STOCK. Except as provided in this Section
4, the board of directors of the Corporation is authorized by
resolution or resolutions from time to time adopted and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
provide for the issuance of serial preferred stock in series and to fix
and state the voting powers, full or limited, or no voting powers, and
such designations, preferences and relative, participating, optional or
other special rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. Each shares of
each series of serial preferred stock shall have the same relative
rights as and be identical in all respects with all the other shares of
the same series.
Article 5. PREEMPTIVE RIGHTS. Holders of the capital stock of the
Corporation shall not be entitled to preemptive rights with respect to any
shares or other securities of the Corporation which may be issued.
Article 6. DIRECTORS. The Corporation shall be under the direction of a
board of directors. The board of directors shall consist of not less than seven
directors nor more than 15 directors. The number of directors within this range
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<PAGE>
shall be as stated in the Corporation's bylaws, as may be amended from time to
time, and shall initially consist of seven directors. 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, that the directors
in each class shall be as nearly equal in number as possible, commencing with
the 1987 annual meeting of shareholders; provided, further, that no decrease in
the number of directors shall affect the term of any director then in office.
The classification shall be such that the term of one class shall
expire each succeeding year. The Corporation's board of directors shall
initially be divided into three classes named Class I, Class II and Class III,
with Class I initially consisting of one director and Classes II and III each
initially consisting of three directors. The terms, classifications,
qualifications and election of the board of directors and the filling of
vacancies thereon shall be as provided herein and in the bylaws. The names and
addresses of those persons of each class to serve on the initial board of
directors shall be as follows:
Class I: Terms of office expire at 1987 annual meeting of shareholders:
- -----------------------------------------------------------------------
Name Address
---- -------
Richard G. Morgan First Federal Plaza, Waterbury, Connecticut 06726
Class II: Terms of office expire at 1988 annual meeting of shareholders:
- ------------------------------------------------------------------------
Name Address
---- -------
O. Joseph Bizzozero, Jr. First Federal Plaza, Waterbury, Connecticut 06726
Robert A. Finkenzeller First Federal Plaza, Waterbury, Connecticut 06726
George H. Largay, II First Federal Plaza, Waterbury, Connecticut 06726
Class III: Terms of office expire at 1989 annual meeting of shareholders:
- -------------------------------------------------------------------------
Name Address
---- -------
Joel Becker First Federal Plaza, Waterbury, Connecticut 06726
Harold W. Smith First Federal Plaza, Waterbury, Connecticut 06726
James C. Smith First Federal Plaza, Waterbury, Connecticut 06726
Subject to the foregoing, at each annual meeting of shareholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting and until their successors shall be elected and qualified.
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<PAGE>
Any vacancy occurring in the board of directors, including any vacancy
created by reason of an increase in the number of directors, shall 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.
No director may be removed except for cause and then only by an
affirmative vote of at least two-thirds of the total votes eligible to be voted
by shareholders at a duly constituted meeting of shareholders called for such
purpose. At least 30 days prior to such meeting of shareholders, written notice
shall be sent to the director or directors whose removal will be considered at
such meeting.
No director shall be personally liable to the Corporation or its
shareholders for monetary damages for breach of a fiduciary duty as a director
other than liability (i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
any payment of a dividend or approval of a stock repurchase that is illegal
under ss. 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article 7. BYLAWS. 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.
Article 8. SPECIAL MEETINGS. Special meetings of shareholders may be
called at any time but only the chairman of the board or the president of the
Corporation or by the board of directors of the Corporation.
Article 9. REGISTERED OFFICE. The street address of the Corporation's
initial registered office in the State of Delaware is 1209 Orange Street, City
of Wilmington, County of New Castle, and the name of its initial registered
agent at such address is The Corporation Trust Company.
Article 10. APPROVAL FOR ACQUISITIONS OF CONTROL AND OFFERS TO ACQUIRE
CONTROL. The provisions of this Article 10 shall become effective upon the
consummation of the conversion of First Federal Savings and Loan Association of
Waterbury (the "Association") to a capital stock savings and loan association
and the Association concurrently becoming a wholly-owned subsidiary of the
Corporation. In the event that thereafter the Association (or any successor
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<PAGE>
institution) ceases to be a majority-owned subsidiary of the Corporation, this
Article 10 shall thereupon ease to be effective.
SUBSECTION 1. Five-Year Restrictions on Acquisitions of Control
and Offers to Acquire Control.
For a period of five years after the consummation of the conversion of
the Association to a capital stock savings and loan association, no Person shall
acquire control of the Corporation, or make any Offer to acquire Control of the
Corporation, unless such acquisition or Offer has received the prior approval of
at least two-thirds of the directors then in office at a duly constituted
meeting of the board of directors of the Corporation called for such purpose.
The terms "Person," "Control" and "Offer" as used in this Article 10 are defined
in subsection 5 hereof.
SUBSECTION 2. Shareholder Vote and Regulatory Approval
Required for Acquisition of Control at any Time.
No Person shall acquire Control of the Corporation at any time, unless
such acquisition has been approved prior to its consummation by the affirmative
vote of the holders of at least two-thirds of the outstanding shares of Voting
Stock (as defined in Subsection 5 hereof) at a duly constituted meeting of
shareholders called for such purpose. In addition, no Person shall acquire
Control of the Corporation at any time without obtaining prior thereto all
federal regulatory approvals required under the Change in Savings and Loan
Control Act (the "Control Act") and the Savings and Loan Holding Company Act
(the "Holding Company Act"), or any successor provisions of law, and in the
manner provided by all applicable regulations of the Federal Savings and Loan
Insurance Corporation (the "FSLIC"). In the event that Control is acquired
without obtaining all such regulatory approvals, such acquisition shall
constitute a violation of this Article 10 and the Corporation shall be entitled
to institute a private right of action to enforce such statutory and regulatory
provisions.
SUBSECTION 3. Excess Shares.
In the event that Control of the Corporation is acquired in violation
of this Article 10, all shares of Voting Stock owned by the Person so acquiring
Control in excess of the number of shares the beneficial ownership of which is
deemed under subsection 5 hereof to confer Control of the Corporation shall be
considered from and after the date of their acquisition by such Person to be
"excess shares" for purposes of this Article 10. Such excess shares shall
thereafter no longer (i) be entitled to vote on any matter, (ii) be entitled to
take other shareholder action, (iii) be entitled to be counted in determining
the total number of outstanding shares for purposes of any matter involving
shareholder action, or (iv) be transferable except with the approval of the
board of directors or by an independent trustee appointed by the board of
directors for the purpose of having such excess shares sold on the open market
or otherwise. The proceeds from the sale by the trustee of such excess
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<PAGE>
shares shall be paid (i) first, to the trustee in an amount equal to the
trustee's reasonable fees and expenses, (ii) second, to the "beneficial owner"
(as defined in Article 12, Subsection 3, paragraph B hereof) of such excess
shares in an amount up to such owner's federal income tax basis in such excess
shares, and (iii) third, to the Corporation as to any remaining balance.
SUBSECTION 4. Approval Required for Offers to Acquire Control
after Five Years.
After five years from the consummation of the conversion of the
Association to a capital stock savings and loan association, no Person shall
make any Offer to acquire Control of the Corporation, if the common stock is
then traded on a national securities exchange or quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System, unless such
Person has received prior approval to make such Offer by complying with either
of the following procedures:
1. The Offer shall have been approved by at least two-thirds
of the directors then in office at a duly constituted meeting of the board of
directors of the Corporation called for such purpose, or
2. The Person proposing to make such Offer shall have obtained
approval from the FSLIC, pursuant to the Control Act, the Holding Company Act,
or any successor provisions of law, to acquire control of the Corporation.
SUBSECTION 5. Certain Definitions.
For purposes of this Article 10:
A. "Control" means the sole or shared power to vote or to
direct the voting of, or to dispose or to direct the disposition of, 10 percent
or more of the Voting Stock; provided, that the solicitation, holding and voting
of proxies obtained by the board of directors of the Corporation pursuant to a
solicitation under Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") shall not
constitute "Control."
B. "Group Acting in Concert" includes Persons seeking to
combine or pool their voting or other interests in the Voting Stock for a common
purpose, pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise; provided, that a "Group Acting
in Concert" shall not include the board of directors of the Corporation in its
solicitation, holding and voting of proxies obtained by it pursuant to a
solicitation under Regulation 14A of the General Rules and Regulations under the
Exchange Act.
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<PAGE>
C. "Offer" means every offer to buy or aquire, solicitation of
an offer to sell, tender offer for, or request or invitation for tender of,
Voting Stock.
D. "Person" means any individual, firm, corporation or other
entity including a Group Acting in Concert.
E. "Voting Stock" means the then outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors.
SUBSECTION 6. Inapplicability to Public Offering or Employee
Benefit Plans.
This Article 10 shall not apply to an acquisition or offer to acquire
securities of the Corporation (i) by underwriters in connection with a public
offering of such securities or (ii) by any employee stock purchase plan or other
employee benefit plan of the Corporation or any of its subsidiaries.
SUBSECTION 7. References to FSLIC.
In the event that the accounts of the Association (or any successor
institution) become insured by the Federal Deposit Insurance Corporation
("FDIC") in lieu of the FSLIC, all references in this Article 10 to the FSLIC
shall be deemed to refer to the FDIC, and related references to the Control Act
and the Holding Company Act shall be deemed to be references to applicable
statutes relating to banks the accounts of which are insured by the FDIC.
Article 11. CRITERIA FOR EVALUATING CERTAIN OFFERS. The board of
directors of the Corporation, when evaluating any offer to (i) make a tender or
exchange offer for the common stock of the Corporation, (ii) merge or
consolidate the Corporation with another institution, or (iii) purchase or
otherwise acquire all or substantially all of the properties and assets of the
Corporation, shall, in connection with the exercise of its judgment in
determining what is in the best interests of the Corporation and its
shareholders, give due consideration to all relevant factors, including without
limitation the economic effects of acceptance of such offer on (a) depositors,
borrowers and employees of the insured institution subsidiary or subsidiaries of
the Corporation, and on the communities in which such subsidiary or subsidiaries
operate or are located and (b) the ability of such subsidiary or subsidiaries to
fulfill the objectives of an insured institution under applicable federal
statutes and regulations.
Article 12. CERTAIN BUSINESS COMBINATIONS.
The votes of shareholders and directors required to approve any
Business Combination shall be as set forth in this Article 12. The term
"Business Combination" is used as defined in subsection 1 of this Article 12.
All other
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<PAGE>
capitalized terms not otherwise defined in this Article 12 or elsewhere in this
Certificate of Incorporation are used as defined in subsection 3 of this Article
12.
SUBSECTION 1. Vote Required for Certain Business Combinations.
A. HIGHER VOTE FOR CERTAIN BUSINESS COMBINATIONS. In addition
to any affirmative vote required by law or this Certificate of Incorporation,
and except as otherwise expressly provided in subsection 2 of this Article 12:
(i) any merger, consolidation or share exchange of
the Corporation or any Subsidiary (as hereinafter defined)
with (a) any Interested Shareholder (as hereinafter defined)
or (b) any other corporation (whether or not itself an
Interested Shareholder) which is, or after the merger,
consolidation or share exchange would be, an Affiliate or
Associate (as those terms are hereinafter defined) of such
Interested Shareholder prior to the transaction; or
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition other than in the usual and
regular course of business (in one transaction or a series of
transactions in any twelve-month period) to any Interested
Shareholder or any Affiliate or Associate of such Interested
Shareholder, other than the Corporation or any of its
Subsidiaries, of any assets of the Corporation or any
Subsidiary having, measured at the time the transaction or
transactions are approved by the board of directors of the
Corporation, an aggregate book value as of the end of the
Corporation's most recent fiscal quarter of ten percent or
more of the total Market Value (as hereinafter defined) of the
outstanding shares of the Corporation or of its net worth as
of the end of its most recent fiscal quarter; or
(iii) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of
transactions) of any equity securities of the Corporation or
any Subsidiary having an aggregate Market Value of five
percent or more of the total Market Value of the outstanding
shares of the Corporation to any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder, other
than the Corporation or any of its Subsidiaries, except
pursuant to the exercise of warrants, rights or options to
subscribe for or purchase securities offered, issued or
granted pro rata to all holders of the Voting Stock (as
hereinafter defined) of the Corporation or any other method
affording substantially proportionate treatment to the holders
of Voting Stock; or
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<PAGE>
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation or any
Subsidiary proposed by or on behalf of an Interested
Shareholder or any Affiliate or Associate of such Interested
Shareholder, other than the Corporation or any of its
Subsidiaries; or
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any other transaction (whether or not with
or into or otherwise involving an Interested Shareholder)
which has the effect, directly or indirectly, in one
transaction or a series of transactions, of increasing the
proportionate amount of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder, other than the Corporation or any of
its Subsidiaries;
shall be approved by affirmative vote of the holders of at least 80 percent of
the total number of outstanding shares of Voting Stock. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law.
B. DEFINITION OF "BUSINESS COMBINATION." The term "Business
Combination" as used in this Article 12 shall mean any transaction which is
referred to in any one or more of clauses (i) through (v) of paragraph A of this
subsection 1.
SUBSECTION 2. When Higher Vote Is Not Required.
The provisions of subsection 1 of this Article 12 shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of this Certificate of Incorporation, if all of the conditions
specified in either paragraph A or paragraph B are met:
A. APPROVAL BY CONTINUING DIRECTORS. The Business Combination
shall have been approved by at least two-thirds of the Continuing Directors (as
hereinafter defined) then in office at a duly constituted meeting of the board
of directors of the Corporation called for such purpose.
B. PRICE AND PROCEDURE REQUIREMENTS. All of the following
conditions shall have been met:
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<PAGE>
(i) The aggregate amount of the cash and the Market
Value as of the Valuation Date (as hereinafter defined) of the
Business Combination of consideration other than cash to be
received per share by holders of common stock in such Business
Combination shall be at least equal to the highest of the
following:
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Shareholder
for any shares of common stock acquired by it (1) within the
two-year period immediately prior to the first public
announcement of the proposal of the Business Combination (the
"Announcement Date") or (2) in the transaction in which it
became an Interested Shareholder, whichever is higher; or
(b) the Market Value per share of common stock of the
same class or series on the Announcement Date or on the date
on which the Interested Shareholder became an Interested
Shareholder (such latter date is referred to in this Article
12 as the "Determination Date"), whichever is higher; or
(c) the price per share equal to the Market Value per
share of common stock of the same class or series determined
pursuant to subdivision (i)(b) hereof, multiplied by the
fraction of (1) the highest per share price (including
brokerage commissions, transfer taxes and soliciting dealers
fees) paid by the Interested Shareholder for any shares of
common stock of the same class or series acquired by it within
the two-year period immediately prior to the Announcement
Date, over (2) the Market Value per share of common stock of
the same class or series on the first day in such two-year
period on which the Interested Shareholder acquired shares of
common stock.
(ii) The aggregate amount of the cash and the Market
Value as of the Valuation Date of consideration other than
cash to be received per share by holders of shares of any
class or series of outstanding Voting Stock, other than common
stock, shall be at least equal to the highest of the following
(it being intended that the requirements of this paragraph
B(ii) shall be required to be met with respect to every class
of outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of a particular
class of Voting Stock):
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<PAGE>
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Shareholder
for any shares of such class or series of Voting Stock
acquired by it: (1) within the two-year period immediately
prior to the Announcement Date or (2) in the transaction in
which it became an Interested Shareholder, whichever is
higher; or
(b) (if applicable) the highest preferential amount
per share to which the holders of shares of such class or
series of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation; or
(c) the Market Value per share of such class or
series of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher; or
(d) the price per share equal to the Market Value per
share of such class or series of stock determined pursuant to
subdivision (ii)(c) hereof multiplied by the fraction of (1)
the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid
by the Interested Shareholder for any shares of any class of
series of Voting Stock acquired by it within the two-year
period immediately prior to the Announcement Date over (2) the
Market Value per share of the same class or series of Voting
Stock on the first day in such two-year period on which the
Interested Shareholder acquired any shares of the same class
or series of Voting Stock.
(iii) The consideration to be received by holders of
a particular class or series of outstanding Voting Stock shall
be in cash or in the same form as the Interested Shareholder
has previously paid for shares of such class or series of
Voting Stock. If the Interested Shareholder has paid for
shares of any class or series of Voting Stock with varying
forms of consideration, the form of consideration for such
class or series of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such
class or series of Voting Stock previously acquired by it.
(iv) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such
Business Combination: (a) there shall have been no failure to
declare and pay at the regular date therefor any full
quarterly
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<PAGE>
dividends (whether or not cumulative) on any outstanding
preferred stock of the Corporation; (b) there shall have been
(1) no reduction in the annual rate of dividends paid on any
class or series of the capital stock of the Corporation
(except as necessary to reflect any subdivision of the capital
stock), and (2) an increase in such annual rate of dividends
as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any
similar transaction which has the effect of reducing the
number of outstanding shares of common stock; and (c) such
Interested Shareholder shall have not become the beneficial
owner of any additional shares of capital stock except as part
of the transaction which results in such Interested
Shareholder becoming an Interested Shareholder or by virtue of
proportionate stock splits or stock dividends.
The provisions of subdivisions (iv)(a) and (iv)(b) of this
subsection do not apply if the Interested Shareholder or any Affiliate or
Associate of the Interested Shareholder voted as a director of the Corporation
in a manner inconsistent with such subdivisions, and the Interested Shareholder,
within ten days after any act or failure to act inconsistent with such
subdivisions, notifies the board of directors of the Corporation in writing that
the Interested Shareholder disapproves thereof and requests in good faith that
the board of directors rectify such act or failure to act.
(v) After such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder shall not
have received the benefit directly or indirectly (except
proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation or
any of its Subsidiaries (whether in anticipation of or in
connection with such Business Combination or otherwise).
(vi) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
public shareholders of the Corporation at least 20 days prior
to the consummation of such Business Combination (whether or
not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
-12-
<PAGE>
SUBSECTION 3. Certain Definitions.
For the purposes of this Article 12:
A. "Interested Shareholder" shall mean any person (other than
the Corporation or any Subsidiary or any employee stock purchase plan or other
employee benefit plan of the Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly,
of 10 percent or more of the voting power of the then
outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to the date
in question was the beneficial owner, directly or indirectly,
of 10 percent or more of the voting power of the then
outstanding Voting Stock.
B. "Beneficial owner," when used with respect to any Voting
Stock, means a person:
(i) that, individually or with any of its Affiliates
or Associates, beneficially owns Voting Stock directly or
indirectly; or
(ii) that, individually or with any of its Affiliates
or Associates, has (a) the right to acquire Voting Stock
(whether such right is exercisable immediately or only after
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise; (b) the
right to vote or direct the voting of Voting Stock pursuant to
any agreement, arrangement or understanding; or (c) the right
to dispose of or to direct the disposition of Voting Stock
pursuant to any agreement, arrangement or understanding; or
(iii) that, individually or with any of its
Affiliates or Associates, has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting,
or disposing of Voting Stock with any other person that
beneficially owns, or whose Affiliates or Associates
beneficially own, directly or indirectly, such shares of
Voting Stock.
C. For the purposes of determining whether a person is an
Interested Shareholder pursuant to paragraph A of this subsection 3, the number
of shares of Voting Stock deemed to be outstanding shall include shares deemed
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<PAGE>
owned through application of paragraph B of this subsection 3 but shall not
include any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
D. "Affiliate" means a person that directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, a specified person.
E. "Associate," when used to indicate a relationship with any
person means: (1) any domestic or foreign corporation or organization, other
than the Corporation or a subsidiary of the Corporation, of which such person is
an officer, director or partner or is, directly or indirectly, the beneficial
owner of ten percent or more of any class of equity securities; (2) any trust or
other estate in which such person has a substantial beneficial interest or as to
which such person serves as a trustee or in a similar fiduciary capacity; and
(3) any relative or spouse of such person, or any relative of such spouse who
has the same home as such person or who is a director or officer of the
Corporation or any of its Affiliates.
F. "Subsidiary" means any corporation of which Voting Stock
having a majority of the votes entitled to be cast is owned, directly or
indirectly, by the Corporation.
G. "Continuing Director" means any member of the board of
directors of the Corporation who is unaffiliated with the Interested Shareholder
and was a member of the board of directors of the Corporation prior to the time
that the Interested Shareholder (including any Affiliate or Associate of such
Interested Shareholder) became an Interested Shareholder, and any successor of a
Continuing Director who is unaffiliated with the Interested Shareholder and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the board of directors of the Corporation.
H. "Market Value" means:
(i) in the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date
in question of a share of such stock on the composite tape for
New York Stock Exchange - listed stocks, or, if such stock is
not quoted on the composite tape, or the New York Stock
Exchange, or, if such stock is not listed on such exchange,
the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such stock
is listed, or, if such stock is not listed on any such
exchange, the highest closing sales price or bid quotation
with respect to a share of such stock during the 30-day period
preceding the date in question on the National Association of
Securities Dealers, Inc.
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<PAGE>
Automated Quotation System or any system then in use, or if no
such quotations are available, the fair market value on the
date in question of a share of such stock as determined by the
board of directors of the Corporation in good faith; and
(ii) in the case of property other than cash or
stock, the fair market value of such property on the date in
question as determined by a majority of the board of directors
of the Corporation in good faith.
I. "Valuation Date" means: (A) for a Business Combination
voted on by shareholders, the latter of the day prior to the date of the
shareholders' vote or the date twenty days prior to the consummation of the
Business Combination; and (B) for a Business Combination not voted upon by the
shareholders, the date of the consummation of the Business Combination.
J. "Voting Stock" means the then outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors.
K. In the event of any Business Combination in which the
Corporation is the surviving corporation, the phrase "consideration other than
cash to be received" as used in paragraphs B(i) and B(ii) of Section 2 of this
Article 12 shall include the shares of common stock and/or the shares of any
other class or series of outstanding Voting Stock retained by the holders of
such shares.
SUBSECTION 4. Powers of the Board of Directors.
A majority of the Corporation's directors then in office shall have the
power and duty to determine for the purposes of this Article 12, on the basis of
information known to them after reasonable inquiry, (A) whether a person is an
Interested Shareholder, (B) the number of shares of Voting Stock beneficially
owned by any person, (C) whether a person is an Affiliate or Associate of
another, and (D) whether the requirements of paragraph B of Section 2 have been
met with respect to any Business Combination; and the good faith determination
of a majority of the board of directors on such matters shall be conclusive and
binding for all the purposes of this Article 12.
SUBSECTION 5. No Effect on Fiduciary Obligations of Interested
Shareholders.
Nothing contained in this Article 12 shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
Article 13. ANTI-GREENMAIL. Any direct or indirect purchase or other
acquisition by the Corporation of any Voting Stock (as defined in Article 12
hereof) from any Significant Shareholder (as hereinafter defined) who has been
the
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<PAGE>
beneficial owner (as defined in Article 12 hereof) of such Voting Stock for less
than two years prior to the date of such purchase or other acquisition shall,
except as herein after expressly provided, require the affirmative vote of the
holders of at least a majority of the total number of outstanding shares of
Voting Stock, excluding in calculating such affirmative vote and the total
number of outstanding shares all Voting Stock beneficially owned by such
Significant Shareholder. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser percentage may be
specified, by law, but no such affirmative vote shall be required (i) with
respect to any purchase or other acquisition of Voting Stock made as part of a
tender or exchange offer by the Corporation to purchase Voting Stock on the same
terms from all holders of the same class of Voting Stock and complying with the
applicable requirements of the Securities Exchange Act of 1934 and the rules and
regulations thereunder or (ii) with respect to any purchase of Voting Stock,
where the Board of Directors has determined that the purchase price per share of
the Voting Stock does not exceed the fair market value of the Voting Stock. Such
fair market value shall be calculated on the basis of the average closing price
or the mean of the bid and ask prices of a share of Voting Stock for the 20
trading days immediately preceding the execution of a definitive agreement to
purchase the Voting Stock from a Significant Shareholder.
For the purposes of this Article 13, "Significant Shareholder" shall
mean any person (other than the Corporation or any corporation of which a
majority of any class of Voting Stock is owned, directly or indirectly, by the
Corporation) who or which is the beneficial owner, directly or indirectly, of
five percent or more of the voting power of the outstanding Voting Stock.
Article 14. SHAREHOLDER ACTION. Any action required or permitted to be
taken by the shareholders of the Corporation must be effected at a duly called
annual or special meeting of such holders and may not be affected by any consent
in writing by such holders, unless such consent is unanimous.
Article 15. AMENDMENT OF CERTIFICATE OF INCORPORATION. Except as set
forth in this Article 15 or as otherwise specifically required by law, no
amendment of any provision of this Certificate of Incorporation shall be made
unless such amendment has been first proposed by the board of directors of the
Corporation upon 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 and thereafter approved by the shareholders of the Corporation
by the affirmative vote of the holders of at least a majority of the shares
entitled to vote thereon at a duly called annual or special meeting; provided,
however, that if such amendment is to the provisions set forth in this clause of
Article 15 or in Article 6, 7, 8, 10, 11, 13 or 14 hereof, such amendment must
be approved by the affirmative vote of the holders of at least two-thirds of the
shares entitled to vote thereon rather than a majority; provided, further, that
if such amendment is to the provisions set forth in this
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<PAGE>
clause of Article 15 or in Article 12 hereof, such amendment must be approved by
the affirmative vote of the holders of at least 80 percent of the shares
entitled to vote thereon rather than a majority.
This Restated Certificate of Incorporation was duly adopted by the
board of directors in accordance with Sections 241 and 245 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Webster Financial Corporation has caused this
Restated Certificate of Incorporation to be signed by James C. Smith, its
President, and attested to by Harold W. Smith, Jr., its Secretary, this 16th day
of December, 1986.
WEBSTER FINANCIAL CORPORATION
By /s/ James C. Smith
--------------------------
James C. Smith
President
ATTEST:
By /s/ Harold W. Smith, Jr.
------------------------------
Harold W. Smith, Jr.
Secretary
-17-
Exhibit 3.2
-----------
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
WEBSTER FINANCIAL CORPORATION
Webster Financial Corporation (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the board of directors of the
Corporation resolutions were duly adopted setting forth a proposed amendment to
the first sentence of Article 4 of the Restated Certificate of Incorporation of
the Corporation, declaring said amendment to be advisable and directing that the
amendment proposed be considered at the next meeting of the shareholders of the
Corporation. As amended, Article 4 reads in its entirety as follows:
Article 4. CAPITAL STOCK. The total number of shares of all
classes of the capital stock which the Corporation has
authority to issue is seventeen million (17,000,000), of which
fourteen million (14,000,000) shall be common stock, par value
$.01 per share, amounting in the aggregate to one hundred
forty thousand dollars ($140,000), and three million
(3,000,000) shall be serial preferred stock, par value $.01
per share, amounting in the aggregate to thirty thousand
dollars ($30,000). The shares may be issued by the Corporation
from time to time as approved by its board of directors
without the approval of its shareholders. The consideration
for the issuance of the shares shall be paid in full before
their issuance and shall not be less than the par value per
share. Neither promissory notes nor future services shall
constitute payment or part payment for the issuance of the
shares of the Corporation. The consideration for the shares
shall be cash, services actually performed for the
Corporation, personal property, real property, leases of real
property or any combination of the foregoing. In the absence
of actual fraud in the transaction, the value of such
property, labor or services, as determined by the board of
directors of the Corporation, shall be conclusive. Upon
payment of such
<PAGE>
consideration such shares shall be deemed to be fully paid and
nonassessable.
Nothing contained in this Article 4 (or in any
resolution or resolutions adopted by the board of directors
pursuant hereto) shall entitle the holders of any class or
series of capital stock to more than one vote per share.
A description of the different classes and series of
the Corporation's capital stock and a statement of the
designations, and the powers, preferences and rights, and the
qualifications, limitations and restrictions of the shares of
each class of and series of capital stock are as follows:
A. COMMON STOCK. Except as provided in this
Article 4 (or in any resolution or resolutions
adopted by the board of directors pursuant hereto),
the holders of the common stock shall exclusively
possess all voting power. Each holder of shares of
common stock shall be entitled to one vote for each
share held by such holder, including the election of
directors. There shall be no cumulative voting rights
in the election of directors. Each share of common
stock shall have the same relative rights as and be
identical in all respects with all the other shares
of common stock.
Whenever there shall have been paid, or
declared and set aside for payment, to the holders of
the outstanding shares of any class of stock having
preference over the common stock as to the payment of
dividends, the full amount of dividends and of
sinking fund or retirement fund or other retirement
payments, if any, to which such holders are
respectively entitled in preference to the common
stock, then dividends may be paid on the common stock
and on any class or series of stock entitled to
participate therewith as to dividends, out of any
assets legally available for the payment of
dividends; but only when and as declared by the board
of directors.
In the event of any liquidation, dissolution
or winding up of the Corporation, after there shall
have been paid to or set aside for the holders of any
class having preferences over the common stock in the
event of liquidation, dissolution or winding up of
the full preferential amounts of which they are
respectively entitled, the holders of the common
stock, and of any class or series of stock entitled
to participate therewith, in whole or in part, as to
distribution of assets, shall be entitled
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<PAGE>
after payment or provision for payment of all debts
and liabilities of the Corporation, to receive the
remaining assets of the Corporation available for
distribution, in cash or in kind.
B. SERIAL PREFERRED STOCK. Except as
provided in this Section 4, the board of directors of
the Corporation is authorized by resolution or
resolutions from time to time adopted and by filing a
certificate pursuant to the applicable law of the
State of Delaware, to provide for the issuance of
serial preferred stock in series and to fix and state
the voting powers, full or limited, or no voting
powers, and such designations, preferences and
relative, participating, optional or other special
rights of the shares of each such series and the
qualifications, limitations and restrictions thereof.
Each share of each series of serial preferred stock
shall have the same relative rights as and be
identical in all respects with all the other shares
of the same series.
SECOND: That thereafter, pursuant to resolution of its board
of directors, the annual meeting of the shareholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Webster Financial Corporation has
caused this certificate to be signed by James C. Smith, its president, and
attested by Lee A. Gagnon, its secretary, this 21st day of April, 1989.
ATTEST: Webster Financial Corporation
By: /s/ Lee A. Gagnon By: /s/ James C. Smith
-------------------------- -------------------------
Lee A. Gagnon James C. Smith
Secretary President
-3-
Exhibit 3.3
-----------
CERTIFICATE OF DESIGNATION
OF
WEBSTER FINANCIAL C0RPORATION
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted on October 2, 1992, by the Board of Directors (the
"Board") of WEBSTER FINANCIAL CORPORATION, a Delaware corporation (the
"Corporation") acting pursuant to the authority granted to the Board in
accordance with the provisions of Section 151(g) of the General Corporation Law
of the State of Delaware:
RESOLVED, that pursuant to authority expressly granted to and
vested in the Board by the provisions of the Restated Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), there is
hereby created a series of serial preferred stock as set forth below in this
Certificate of Designation.
A. Series A Cumulative Perpetual Preferred Stock
---------------------------------------------
The Corporation shall have a series of preferred stock
entitled Series A Cumulative Perpetual Preferred Stock (hereinafter referred to
in this Article as the "Series A Stock"), par value one cent ($.01) per share.
The number of shares constituting this Series A Stock shall be one million two
hundred thousand (1,200,000) shares. Shares of this Series A Stock redeemed or
purchased by the Corporation shall be cancelled and shall not thereafter be
issued as shares of this Series A Stock.
With respect to any other class of the Corporation's stock,
shares of this Series A Stock shall rank, both as to dividends and to
liquidation, as set forth in this Certificate of Designation. The powers,
preferences, rights, qualifications, limitations, and restrictions of the shares
of this Series A Stock are as follows:
1. Voting Rights.
-------------
The shares of this Series A Stock shall not have any
voting powers, either general or
special, except as follows:
(a) Unless the vote or consent of the holders of a greater
number of shares shall then be required by law, the vote or consent of the
holders of at least two-thirds (66-2/3%) of all of the shares of this Series A
Stock at the time outstanding, given in person or by proxy, either in writing or
by a vote at a meeting called for the purpose at which the holders of shares of
this Series A Stock shall vote together as a separate class, shall be necessary
for authorizing, effecting or
<PAGE>
validating (i) the amendment, alteration or repeal of any of the provisions of
this Certificate of Designation or of any certificate amendatory thereof or
supplemental thereto which would adversely affect the powers, preferences or
special rights or privileges of this Series A Stock; (ii) the creation,
authorization or issue of any shares of any class or series of stock of the
Corporation ranking prior to the shares of this Series A Stock as to dividends
or upon liquidation, or the reclassification of any authorized stock of the
Corporation into any such prior shares or the creation, authorization or issue
or any obligation or security convertible into or evidencing the right to
purchase any such prior shares; (iii) the amendment, alteration or repeal of any
of the provisions of this Certificate of Designation or of any certificate
amendatory thereof or supplemental thereof which would increase or decrease the
aggregate number of authorized shares of this Series A Stock or increase or
decrease the par value of shares of this Series A Stock; or (iv) the redemption,
purchase or acquisition by the Corporation of any of its equity securities
(other than this Series A Stock) or any securities exercisable for or
convertible into equity securities of the Corporation.
(b) In the event that at any time, the Corporation shall not
have declared and paid dividends in cash on the outstanding shares of this
Series A Stock with respect to any six Quarterly Periods, the holders of a
majority of the shares of this Series A Stock shall have the right to name two
additional members of the Board of Directors of the Corporation, and such
members shall take office at the next meeting of the Board of Directors of the
Corporation. If any vacancy shall occur among the directors named by the holders
of the shares of this Series A Stock pursuant this Section, such vacancy shall
be filled with such person as a majority of such holders may name in a written
notice to the Corporation. Any director named by the holders of the shares of
this Series A Stock pursuant to this paragraph shall serve until all dividends
accumulated on the Series A Stock have been paid in full. Upon such payment all
directors named by the holders of the shares pursuant to this paragraph who are
then in office shall automatically cease to be members of the Board of Directors
of the Corporation, provided, however, that the right of the holders of the
shares of this Series A Stock to name two directors shall be reinstated if
thereafter the Corporation fails to declare and pay dividends in cash on the
outstanding shares of this Series A Stock with respect to any six subsequent
Quarterly Periods.
2. Dividends.
---------
(a) Each holder of shares at this Series A Stock shall be
entitled to receive on the dates specified in Section 2(d), when, as and if
declared payable by the Board of Directors or a committee of said Board duly
authorized by said Board to declare such dividends, from funds legally available
therefor, quarterly cash dividends in an amount per share equal to the Dividend
Rate in effect at the time of such declaration divided by four and then
multiplied by $25.00.
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<PAGE>
For purposes of this calculation, the following terms shall have the meanings
indicated:
(i) "ANNUAL PERIOD" shall mean (x) the period
commencing on the date of the initial
issuance of shares of this Series A Stock
and ending on September 30, 1993 and (y)
each successive period of one year
thereafter, each such successive period to
commence on October 1 and to end on the last
day of the next succeeding September.
(ii) "DIVIDEND RATE" shall mean, with respect to
a Quarterly Period, a rate per annum equal
to (A) an initial annual dividend rate of
8.00% for the first Quarterly Period; and
(B) for each Quarterly Period subsequent to
the first Quarterly Period ("Subsequent
Quarterly Period") (i) the Treasury Note
Rate for such Subsequent Quarterly Period,
plus (ii) 5.00% (the "Spread"), plus (C) an
incremental increase over the Spread (the
"Increase-In-Spread") of (x) 0.00% during
the first seven Subsequent Quarterly
Periods; and (y) .25% for each Subsequent
Quarterly Period thereafter (or .375% for
all such Subsequent Quarterly Periods, if
there has occurred any partial voluntary
redemption taking place prior to the end of
the fourth Quarterly Period), such
Increase-In-Spread not to exceed 9.05%. The
minimum Dividend Rate shall be 7.60% and the
maximum Dividend Rate shall be 14.20%.
(iii) "BUSINESS DAY" shall mean any day other than
a Saturday, a Sunday, federal legal holiday
or any other day on which banks in the State
of Connecticut are authorized by law to
close.
(iv) "QUARTERLY PERIOD" shall mean each period at
three months commencing on January 1, April
1, July 1, and October 1 of each year,
except that the initial Quarterly Period
shall commence on the date of the initial
issuance of shares of this Series A Stock
and shall end on December 31, 1992.
(v) "TREASURY NOTE RATE" shall mean, with
respect to a Quarterly Period, the average
of the yields
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published in H.15 (519) under the caption
"Treasury Constant Maturities" for direct
obligations of the United States with a
constant maturity of one year (the "Constant
Maturity Yield") for the ten consecutive
Business Days ending on the twentieth
Business Day immediately preceding the
commencement of such Quarterly Period. In
the event Constant Maturity Yields are not
so published for each of such ten Business
Days with respect to a Quarterly Period, but
were so published for at least one of such
Business Days, the Treasury Note Rate for
such Quarterly Period shall be the average
of the Constant Maturity Yields as so
published for such Business Days. In the
event Constant Maturity Yields are not so
published for at least one of such Business
Days with respect to a Quarterly Period, the
Treasury Note Rate for such Quarterly Period
shall be the Constant Maturity Yield as
published in H.15 (519) for the next
preceding Business Day for which such
information was so published; provided,
however, that if such information was not so
published for a Business Day during the
60-day period prior to the commencement of
such Quarterly Period, then the Treasury
Note Rate for such Quarterly Period shall be
determined by the Corporation on the
twentieth Business Day next preceding the
commencement of such Quarterly Period and
shall be the bond-equivalent yield of the
arithmetic mean of the secondary market bid
rates (as quoted by three primary United
States government securities dealers in New
York City selected by the Corporation as of
3:00 p.m. (New York City time) on the day of
such determination) for the issue of direct
obligations of the United States with a
remaining maturity closest to one year. All
percentages relating to the calculation of
the Treasury Note Rate based upon secondary
market bid rates will be rounded to the
nearest one hundred thousandth of one per
cent, and dollar amounts used in or
resulting from such calculations will be
rounded to the nearest cent.
(b) Dividends on the shares of this Series A Stock
shall be cumulative. In any Quarterly Period, as long as any shares of this
Series A Stock
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<PAGE>
are outstanding, no dividend (other than a dividend paid in common stock or any
other stock of the Corporation ranking junior as to dividends and liquidation to
this Series A Stock) shall be declared or paid or set aside for payment or other
distribution declared or made upon the common stock or any other stock of the
Corporation ranking junior to this Series A Stock as to dividends or upon
liquidation, nor shall any common stock or other stock of the Corporation
ranking junior to this Series A Stock as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to or made available for a sinking fund for the redemption of any shares
of any such stock) by the Corporation (except by conversion into or exchange for
the stock of the corporation ranking junior to this Series A Stock as to
dividends and upon liquidation) unless, in each case, all unpaid dividends on
the shares of this Series A Stock for all past Quarterly Periods shall have
been, or contemporaneously are, declared and paid in full. When dividends are
not paid in full, as aforesaid, upon the shares of this Series A Stock and any
other class or series ranking on parity as to dividends with this Series A
Stock, all dividends in cash declared upon shares of this Series A Stock and any
other class or series ranking on a parity as to dividends with this Series A
Stock shall be declared pro rata.
(c) Dividends payable on each share of this Series A
Stock for each full Quarterly Period shall be computed by dividing the
applicable annual Dividend Rate, as described above in Section 2(a), by four and
multiplying the resulting percentage by the stated value of twenty-five dollars
per share ($25.00) (the "Stated Value") of this Series A Stock. Dividends
payable on shares of this Series A Stock, for any period less than a full
Quarterly Period, and for the initial Quarterly Period, shall be computed on the
basis of a 360-day year of twelve 30-day months and the actual number of days
elapsed in the period for which a dividend is payable.
(d) Cash dividends on this Series A Stock shall be
cumulative from the date of original issue of such shares and shall be payable
when, as and if declared by the Board of Directors or by a committee of said
Board duly authorized by said Board to declare such dividends, out of funds of
the Corporation legally available therefor, on March 31, June 30, September 30,
and December 31 of each year, commencing on December 31, 1992. Accrued and
unpaid dividends on the Series A Stock will cumulate but will not bear interest.
Each dividend on the shares of this Series A Stock shall be paid to the holders
of record of shares of this Series A Stock as they appear on the stock register
of the Corporation on such record date, not exceeding 45 days preceding the
payment date thereof, as shall be fixed by the Board of Directors of the
Corporation or by a committee of said Board of Directors duly authorized to fix
such date. Dividends on account of arrears for any past dividend periods may be
declared and paid at any time, without reference to any regular dividend payment
date, to the holders of record on such date, not exceeding 45 days preceding the
payment date thereof, as shall be fixed by the
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Board of Directors of the Corporation or by a committee of said Board of
Directors duly authorized to fix such date.
3. Liquidation Rights.
------------------
Upon any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation ("Termination Event"), the holders
of the shares of this Series A Stock shall be entitled to receive out of the net
assets of the Corporation available for distribution to its stockholders an
amount per share equal to, the sum of (i) the Stated Value, plus (ii) an amount
equal to the Liquidation Adjustment (as that term is defined below) on such
shares as of the date of such Termination Event, in cash (the "Liquidation
Amount"), plus (iii) accrued and unpaid cash dividends thereon to the date of
final distribution in cash, including the cumulative dividends for all past
dividend payment periods (computed on the basis of a 360-day year of 30-day
months and the actual number of days in the period), before any amount shall be
paid to the holders of shares of the common stock or any other stock of the
Corporation ranking junior upon liquidation to this Series A Stock. The term
"Liquidation Adjustment" shall mean (i) zero, with respect to shares of this
Series A Stock, at any time up to and including the scheduled payment date of
the fourth dividend, and (ii) the amount of one percent (1%) per year of the
Stated Value, for each Annual Period after the scheduled payment date for the
fourth dividend, to a maximum of ten percent (10%) of such Stated Value or two
dollars and fifty cents ($2.50). The maximum Liquidation Amount shall be
twenty-seven dollars and fifty cents ($27.50).
4. Redemption.
----------
(a) VOLUNTARY REDEMPTION OF SHARES HELD BY THE FDIC.
Except as set forth in Section 4(b) below, the shares of this Series A Stock may
be redeemable in whole, but not in part (unless otherwise agreed by the holders
of such shares or unless at or prior to the scheduled payment date of the sixth
dividend), at the Corporation's option at any time, at the sum of the Redemption
Price (as that term is defined below) plus (ii) accrued and unpaid cash
dividends thereon to the date fixed for redemption, including the cumulative
dividends for all past dividend payment periods (computed on the basis of a
360-day year of 30-day months and the actual number of days in the period). The
term "Redemption Price" shall mean, as to shares of this Series A Stock
continued to be held by the Federal Deposit Insurance Corporation (the "FDIC")
the sum of the Stated Value plus (i) zero, for the period of time up to and
including the scheduled payment date of the sixth dividend, and (ii) the amount
of one per cent (1%) per year of the Stated Value, for each Annual Period
thereafter, to a maximum of ten percent (10%) of such Stated Value or two
dollars and fifty cents ($2.50). The maximum Redemption Price shall be
twenty-seven dollars and fifty cents ($27.50).
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<PAGE>
(b) VOLUNTARY REDEMPTION OF SHARES HELD BY TRANSFEREE
HOLDER. If any shares of this Series A Stock are transferred to a party other
than the FDIC ("Transferee Holder") then such shares of this Series A Stock
shall be non-redeemable after the scheduled payment date for the sixth dividend
at any time until after September 30, 1997; provided, however, that if the FDIC
fails to approve any of the restricted transactions set forth in Section 6.2(b)
of the Stock Purchase Agreement, or if the holders of two thirds of this Series
A Stock fail to approve any of the restricted transactions set forth in Sections
6.2(a) and 6.2(c) of the Stock Purchase Agreement or in clauses (ii), (iii), or
(iv) of Section 1(a) of this Certificate of Designation shares of this Series A
Stock held by a Transferee Holder may be redeemed at any time (but only as of
any regularly scheduled dividend payment date) by the Corporation and the
Redemption Price for any shares of the Series A Stock held by a Transferee
Holder that are voluntarily redeemed by the Corporation shall be 105% of the
Stated Value or at such other Redemption Price then applicable. The Redemption
Price for any shares of this Series A Stock held by a Transferee Holder that are
voluntarily redeemed by the Corporation prior to the scheduled payment date for
the sixth dividend shall be the Stated Value. After September 30, 1997, the
Redemption Price shall be 105% percent of the Stated Value for the next Annual
Period, declining by 50 basis points each Annual Period until the Redemption
Price declines to the Stated Value.
(c) OFFER OF REDEMPTION. The Corporation shall be
required to offer to redeem shares of Series A Stock to the extent provided in
Section 6.2(d) and 6.2(e) of the Stock Purchase Agreement, with notice of such
offer to be given as provided in such Section 6.2(f). The Redemption Price for
such required offer of redemption shall be the Redemption Price referred to in
paragraph (a) above, regardless of whether such shares are held by the FDIC or a
Transferee Holder.
(d) REDEMPTION OF LESS THAN ALL SHARES. If the
holders of the shares of this Series A Stock have given their consent for fewer
than all of the outstanding shares of this Series A Stock to be redeemed, the
number of shares to be redeemed shall be determined by the Board of Directors
and the shares to be redeemed shall be determined by lot or pro rata in a manner
to be determined by the Board of Directors; provided, however, that the number
of shares to be redeemed as determined by the Board of Directors shall be no
less than one hundred twenty thousand (120,000).
(e) NOTICE. If the Corporation elects to redeem
shares of this Series A Stock, notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than thirty (30) nor more than
sixty (60) days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on the stock
register of the Corporation. Each such notice shall state: (1) the redemption
date; (2) the number of shares of this Series A Stock to be redeemed and, if
fewer than all of the shares held by such holder are to be redeemed, the number
of such shares to be redeemed from such
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<PAGE>
holder; (3) the Redemption Price; and (4) the place or places where certificates
for such shares are to be surrendered for payment of the Redemption Price.
(f) RIGHTS OF SHAREHOLDERS. Notices having been so
mailed, from and after the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the Redemption Price and
subject to the provisions of Section 2 of these Preferred Stock Terms, such
shares shall no longer be deemed to be outstanding, and all rights of the
holders thereof as shareholders of the Corporation (except the right to receive
from the Corporation the Redemption Price) shall cease. Upon surrender in
accordance with the notice of redemption, of certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of Directors
of the Corporation shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the Redemption Price specified. If fewer
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without cost to
the holder thereof.
5. Ranking.
-------
Shares of this Series A Stock shall be deemed to rank on
parity with the shares of any other class or series of the Corporation's
preferred capital stock, or senior to any such class or series if such class or
series is expressly declared to be junior to this Series A Stock, both as to
dividends and upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share or sinking fund
provisions, if any, be different from those of this Series A Stock. If such
class or series ranks on parity with this Series A Stock, the holders hereof and
of such stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of affairs of the
Corporation, as the case may be, in proportion to their respective dividend
amounts or liquidation preferences, without preference or priority, one over the
other, as between the holders of such stock and the holders of shares of this
Series A Stock. If such class or series ranks junior to this Series A Stock, the
holders of the shares of this Series A Stock shall be entitled to receipt of
dividends or of amounts distributable upon dissolution, liquidation or winding
up of affairs of the Corporation, as the case may be, in preference or priority
to the holders of such stock.
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<PAGE>
IN WITNESS WHEREOF, WEBSTER FINANCIAL CORPORATION has caused
this Certificate of Designation to be made under the seal of the Corporation and
signed by James C. Smith its President, and attested by Lee A.
Gagnon, its Secretary, this 2nd day of October 1992.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
-------------------------
President
[SEAL]
Attest:
/s/ Lee A. Gagnon
- ---------------------------
Secretary
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Exhibit 3.4
-----------
CERTIFICATE OF DESIGNATION
OF THE
SERIES B 7 1/2% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
WEBSTER FINANCIAL CORPORATION
----------
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
----------
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted on December 21, 1992, by the Board of Directors (the
"Board") of WEBSTER FINANCIAL CORPORATION, a Delaware corporation (the
"Corporation"), acting pursuant to the authority granted to the Board in
accordance with the provisions of Section 151(g) of the General Corporation Law
of the State of Delaware, at a duly convened meeting of the Board at which a
quorum was present and active throughout (the "Authorizing Board Resolution"):
RESOLVED, that pursuant to authority expressly granted to and
vested in the Board by the provisions of the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), there is hereby created a
series of serial preferred stock, par value $.01 per share, which shall consist
of 250,000 of the 3,000,000 shares of serial preferred stock. Such series shall
have the following powers, designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions (in addition to the powers, designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation which may be applicable to the serial preferred
stock) as follows:
I. DESIGNATION AND AMOUNT. The series of serial preferred
stock authorized by this resolution shall be designated the Series B 7 1/2%
Cumulative Convertible Preferred Stock (the "Series B Stock"). The number of
shares of Series B Stock shall be 250,000. The liquidation value of the Series B
Series B Stock shall be issued as full shares and have a par value of $.01 per
share.
<PAGE>
II. DIVIDENDS AND DISTRIBUTIONS.
(a) The shares of Series B Stock will be entitled to receive,
when, as and if declared by the Board out of funds of the Corporation legally
available therefor, cumulative cash dividends at an annual rate of 7.50% and no
more, payable in cash on April 1, 1993, with respect to the period commencing on
the date of initial issuance and ending on March 31, 1993, and thereafter
quarterly on each July 1, October 1, January 1, and April 1, commencing July 1,
1993 (each a "Dividend Payment Date") with respect to the quarterly periods
ending on June 30, September 30, December 31, and March 31 of each year.
Dividends on the Series B Stock will be cumulative from the date of initial
issuance of shares of Series B Stock. Dividends will be payable to holders of
record as they appear on the stock books of the Corporation on such record
dates, not more than 30 days nor less than 15 days preceding the payment dates
thereof, as shall be fixed by the Board (each a "Dividend Payment Record Date").
If dividends are not paid in full upon the Series B Stock and any other
preferred stock ranking on a parity as to dividends with the Series B Stock, all
dividends declared upon shares of Series B Stock and such other preferred stock
will be declared pro rata so that in all cases the amount of dividends declared
per share on the Series B Stock and such other preferred stock bear to each
other the same ratio that accumulated and unpaid dividends per share on the
shares of the Series B Stock and such other preferred stock bear to each other.
Unless full cumulative dividends on the Series B Stock shall have been paid,
dividends (other than in Common Stock (as defined in paragraph III below), other
stock ranking junior to the Series B Stock and rights to acquire the foregoing)
may not be paid or declared and set aside for payment and other distributions
may not be made upon the Common Stock or on any other stock of the Corporation
ranking junior to Series B Stock as to dividends. Dividends payable for any
partial dividend period shall be calculated on the basis of a 360-day year of
twelve 30-day months. Accrued but unpaid dividends shall not bear interest.
III. RANK. The shares of Series B Stock shall rank prior to
the shares of the Corporation's common stock, par value $.01 per share (the
"Common Stock") and of any other class or series of stock of the Corporation
ranking junior to the Series B Stock upon liquidation ("Junior Liquidation
Stock"), so that in the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the Series B
Stock shall be entitled to receive out of the assets of the Corporation
available for distribution to its stockholders before any distribution is made
to holders of shares of Common Stock or any Junior Liquidation Stock, an amount
equal to $100.00 per share (the "Liquidation Preference"), plus an amount equal
to all dividends (whether or not earned or declared) accumulated and unpaid on
the shares of Series B Stock to the date of final distribution. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of shares of
Series B Stock shall be insufficient to pay in full the preferential amount
described in the preceding sentence, then such assets, or the
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<PAGE>
proceeds thereof, shall be distributable among the holders of the Series B Stock
ratably in accordance with the respective amounts which would be payable on such
shares if all amounts payable thereon were paid in full. After payment of the
full amount of the Liquidation Preference and accumulated dividends to which
holders of shares of Series B Stock are entitled, the holders of shares of
Series B Stock will not be entitled to any further participation in any
distribution of assets by the Corporation. For the purposes hereof, neither a
consolidation or merger of the Corporation with or into any other corporation,
nor a sale or transfer of all or any part of the Corporation's assets for cash
or securities, shall be considered a liquidation, dissolution or winding up of
the Corporation.
For purposes of this resolution any stock of any class or
series of the Corporation shall be deemed to rank:
(a) prior to shares of the Series B Stock, either as to
dividends or upon liquidation, if the holders of stock of such class or series
shall be entitled by the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of the Series B Stock;
(b) on a parity with shares of the Series B Stock, either as
to dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share thereof shall be
different from those of the Series B Stock, if the holders of stock of such
class or series shall be entitled by the terms thereof to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority of one over the other between
the holders of such stock and the holders of shares of Series B Stock (the term
"Parity Preferred Stock" being used to refer to the Series A Cumulative
Perpetual Preferred Stock and to any other class or series of stock of the
Corporation ranking on a parity with the shares of Series B Stock, either as to
dividends or upon liquidation; and
(c) junior to shares of the Series B Stock, either as to
dividends or upon liquidation, if such class shall be Common Stock or if the
holders of the Series B Stock shall be entitled to the receipt of dividends or
of amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of stock of such class or
series.
IV. CONVERSION.
(a) Subject to and upon compliance with the provisions of this
paragraph IV, the holder of any shares of Series B Stock shall have the right,
at his option, at any time prior to the close of business on the third business
day next preceding the date fixed for redemption of such share as herein
provided, unless the
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Corporation has defaulted in making payment due on redemption, to convert the
shares into a number of fully paid and nonassessable shares of Common Stock
(calculated as to each conversion to the nearest 1/100th of a share) equal to
$100.00 for each share surrendered for conversion divided by the Conversion
Price (as defined in subparagraph IV(d) below) by surrendering the shares to be
converted, in the manner provided in subparagraph IV(b) below.
(b) (i) In order to exercise the conversion privilege, the
holder of each share of Series B Stock to be converted shall surrender the
certificate representing such share to the Conversion Agent for the Series B
Stock appointed for such purpose by the Corporation (the "Conversion Agent"),
with the Notice of Election to Convert on the back of such certificate duly
completed and signed, together with funds equal to the Dividend Amount, if any,
required to be paid under subparagraph IV(b)(ii) below, at the principal office
of the Conversion Agent. Unless the shares issuable on conversion are to be
issued in the same name as the name in which the shares of Series B Stock are
registered, each share surrendered for conversion shall be accompanied by an
instrument of transfer, in form satisfactory to the Corporation, duly executed
by the holder or his duly authorized attorney and by funds in an amount
sufficient to pay any transfer or similar tax.
(ii) The holders of shares of Series B Stock at the
close of business on a Dividend Payment Record Date shall be entitled to receive
the dividend payable on those shares on the corresponding Dividend Payment Date
notwithstanding the conversion of the shares after the Dividend Payment Record
Date or the Corporation's default in payment of the dividend due on the Dividend
Payment Date. However, shares of Series B Stock surrendered for conversion
during the period between the close of business on any Dividend Payment Record
Date and the opening of business on the corresponding Dividend Payment Date
(except shares called for redemption on a date fixed for redemption during that
period) must be accompanied by payment of an amount equal to the dividend
payable on the shares on the Dividend Payment Date (the "Dividend Amount"). The
holders of shares of Series B Stock on a Dividend Payment Record Date who (or
whose transferees) convert any of those shares on or after the corresponding
Dividend Payment Date will receive the dividend payable by the Corporation on
those shares of Series B Stock on the Dividend Payment Date, and need not
include payment of the Dividend Amount upon surrender of those shares for
conversion. Except as provided above, the Corporation shall make no payment or
adjustment for accrued and unpaid dividends on shares of Series B Stock, whether
or not in arrears, on conversion of those shares, or for dividends on the shares
of Common Stock issued upon the conversion.
(iii) As promptly as practicable after the surrender
by a holder of the certificates for shares of Series B Stock in accordance with
this subparagraph IV(b), the Corporation shall issue and shall deliver at the
office of the conversion agent to the holder, or on his written order, a
certificate or certificates for the
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<PAGE>
number of full shares of Common Stock issuable upon the conversion of those
shares in accordance with the provisions of this paragraph IV, and any
fractional interest in respect of a share of Common Stock arising upon the
conversion shall be settled as provided in subparagraph IV(c) below.
(iv) each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which all of
the conditions specified in subparagraph IV(b)(i) above shall have been
satisfied, and, the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of the shares of
Common Stock represented by those certificates at such time on such date and
such conversion shall be at the Conversion Price in effect at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which all of the conditions
specified in subparagraph IV(b)(i) above shall have been satisfied. All shares
of Common Stock delivered upon conversion of the Series B Stock will upon
delivery be duly and validly issued and fully paid and non-assessable, free of
all liens and charges and not subject to any preemptive rights. Upon the
surrender of certificates representing shares of Series B Stock to be converted,
the shares shall no longer be deemed to be outstanding and all rights of a
holder with respect to the shares surrendered for conversion shall immediately
terminate except the right to receive the Common Stock or other securities, cash
or other assets as herein provided.
(c) No fractional shares or securities representing fractional
shares of Common Stock shall be issued upon conversion of Series B Stock. Any
fractional interest in a share of Common Stock resulting from conversion of a
share of Series B Stock shall be paid in cash (computed to the nearest cent)
based on the price (as defined in subparagraph IV(d)(iv) below) of the Common
Stock on the Trading Day (as defined in subparagraph IV(d)(iv) below) next
preceding the day of conversion. If more than one share shall be surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock issuable upon the conversion shall be computed on the basis of the
aggregate Liquidation Preference of the shares of Series B Stock so surrendered.
(d) The "Conversion Price" per share of Series B Stock shall
be $19.17, subject to adjustment from time to time as follows:
(i) In case the Corporation shall (A) pay a dividend
or make a distribution on its Common Stock in shares of its Common Stock, (B)
subdivide its outstanding Common Stock into a greater number of shares, or (C)
combine its outstanding Common Stock into a smaller number of shares, the
Conversion Price
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<PAGE>
in effect immediately prior to such event shall be proportionably adjusted so
that the holder of any share of Series B Stock thereafter surrendered for
conversion shall be entitled to receive the number and kind of shares of Common
Stock of the Corporation which he would have been entitled to receive had the
share been converted immediately prior to the happening of such event. An
adjustment made pursuant to this subparagraph IV(d)(i) shall become effective
immediately after the record date in the case of a dividend or distribution
except as provided in subparagraph IV(d)(vii) below, and shall become effective
immediately after the effective date in the case of subdivision or combination.
If any dividend or distribution is not paid or made, the Conversion Price then
in effect shall be appropriately readjusted.
(ii) In case the Corporation shall issue rights or
warrants to all holders of its Common Stock entitling them (for a period
expiring within 45 days after the record date referred to below) to subscribe
for or purchase Common Stock at a price per share less than the Current Market
Price (as defined in subparagraph IV(d)(iv) below) of the Common Stock at the
record date for the determination of stockholders entitled to receive the rights
or warrants, the Conversion Price in effect immediately prior to the issuance of
such rights or warrants shall be adjusted so that it shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of issuance of the rights or warrants by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on the date
of issuance of the rights or warrants plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so offered for subscription or purchase would purchase at the Current Market
Price at that record date, and of which the denominator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of the
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase. The adjustment provided for in this subparagraph
IV(d)(ii) shall be made successively whenever any such rights or warrants are
issued, and shall become effective immediately, except as provided in
subparagraph IV(d)(vii) below after such record date. In determining whether any
rights or warrants entitle the holders of the Common Stock to subscribe for or
purchase shares of Common Stock at less than the Current Market Price, and in
determining the aggregate offering price of the shares of Common Stock so
offered, there shall be taken into account any consideration received by the
Corporation for such rights or warrants, the value of such consideration, if
other than cash, to be determined by the Board (whose determination, if made in
good faith, shall be conclusive). If any or all of such rights or warrants are
not so issued or expire or terminate without having been exercised, the
Conversion Price then in effect shall be appropriately readjusted.
(iii) In case the Corporation shall distribute to all
holders of its Common Stock any shares of capital stock of the Corporation
(other than Common Stock) or evidences of indebtedness or assets (excluding cash
dividends or
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<PAGE>
distributions paid from retained earnings of the Corporation) or rights or
warrants to subscribe for or purchase any of its securities (excluding those
referred to in subparagraph IV(d)(ii) above) then, in each such case, the
Conversion Price shall be adjusted so that it shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to the date of
the distribution by a fraction of which the numerator shall be the Current
Market Price of the Common Stock on the record date mentioned below less the
then fair market value (as determined by the Board, whose determination, if made
in good faith, shall be conclusive) of the portion of the capital stock or
assets or evidences of indebtedness so distributed, or of the rights or warrants
so distributed, with respect to one share of Common Stock, and of which the
denominator shall be the Current Market Price of the Common Stock on the record
date. Such adjustment shall become effective immediately, except as provided in
subparagraph IV(d) below, after the record date for the determination of
shareholders entitled to receive such distribution. If any such distribution is
not made or if any or all of such rights or warrants expire or terminate without
having been exercised, the Conversion Price then in effect shall be
appropriately readjusted. Notwithstanding the foregoing, in the event that the
Company shall distribute rights or warrants (other than those referred to in
subparagraph IV(d)(ii) above) ("Rights") pro rata to holders of Common Stock,
the Company may, in lieu of making any adjustment pursuant to this Subparagraph
IV(d)(ii), make proper provision so that each holder of Series B Stock who
converts such Series B Stock (or any portion thereof) after the record date for
such distribution and prior to the expiration or redemption of the Rights shall
be entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion (the "Conversion Shares"), a number of
Rights to be determined as follows: (i) if such conversion occurs on or prior to
the date for the distribution to the holders of Rights of separate certificates
evidencing such Rights (the "Distribution Date"), the same number of Rights to
which a holder of a number of shares of Common Stock equal to the number of
Conversion Shares is entitled at the time of such conversion in accordance with
the terms and provisions of and applicable to the Rights; and (ii) if such
conversion occurs after the Distribution Date, the same number of rights to
which a holder of the number of shares of Common Stock into which the number of
shares of Series B Stock so converted was convertible immediately prior to the
Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(iv) For the purpose of any computation under
subparagraphs IV(d)(ii) and IV(d)(iii) above, the "Current Market Price" of the
Common Stock at any date shall be the average of the last reported sale prices
per share for the ten consecutive Trading Days (as defined below) preceding the
date of such computation. The last reported sale price for each day shall be (A)
the last reported sale price of the Common Stock on the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
System (the "NASDAQ National Market System"), or any similar system of automated
dissemination of
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<PAGE>
quotations of securities prices then in common use, if so quoted, or (B) if not
quoted as described in clause (A), the mean between the high bid and low asked
quotations for the Common Stock as reported by the National Quotation Bureau
Incorporated if at least two securities dealers have inserted both bid and asked
quotations for the Common Stock on at least five of the ten preceding days, or
(C) if the Common Stock is listed or admitted for trading on any national
securities exchange, the last sale price, or the closing bid price if no sale
occurred, of the Common Stock on the principal securities exchange on which the
Common Stock is listed. If the Common Stock is quoted on a national securities
or central market system in lieu of a market or quotation system described
above, the last reported sale price shall be determined in the manner set forth
in clause (B) of the preceding sentence if bid and asked quotations are reported
but actual transactions are not, and in the manner set forth in clause (C) of
the preceding sentence if actual transactions are reported. If none of the
conditions set forth above is set, the last reported sale price of the Common
Stock on any day or the average of such last reported sale prices for any period
shall be the fair market value of such class of stock as determined by a member
firm of the New York Stock Exchange, Inc. selected by the Corporation. As used
herein the term "Trading Days" means (x) if the Common Stock is quoted on the
NASDAQ National Market System or any similar system of automated dissemination
of quotations of securities prices, days on which trades may be made on such
system, or (y) if not quoted as described in clause (x), days on which
quotations are reported by the National Quotation Bureau Incorporated, or (z) if
the Common Stock is listed or admitted for trading on any national securities
exchange, days on which such national securities exchange is open for business.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require a change of at least one percent
in the Conversion Price; provided, however, that any adjustments which by reason
of this subparagraph IV(d)(v) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; and provided,
further, that adjustment shall be required and made in accordance with the
provisions of this paragraph IV (other than this subparagraph IV(d)(v)) not
later than such time as may be required in order to preserve the tax free nature
of a distribution to the holders of shares of Common Stock. All calculations
under this paragraph IV shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. Anything in this subparagraph IV(d) to
the contrary notwithstanding, the Corporation shall be entitled to make such
reductions in the Conversion Price, in addition to those required by this
subparagraph IV(d), as it in its discretion shall determine to be advisable in
order that any stock dividend, subdivision or combination of shares,
distribution of capital stock or rights or warrants to purchase stock or
securities, or distribution of evidences of indebtedness or assets (other than
cash dividends or distributions paid from retained earnings) hereafter made by
the Corporation to its stockholders shall be a tax free distribution for federal
income tax purposes.
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<PAGE>
(vi) Whenever the Conversion Price is adjusted, as
herein provided, the Corporation shall promptly file with the conversion agent
an officers' certificate setting forth the Conversion Price after the adjustment
and setting forth a brief statement of the facts requiring the adjustment, which
certificate shall be conclusive evidence of the correctness of the adjustment.
Promptly after delivery of the certificate, the Corporation shall prepare a
notice of the adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which the adjustment becomes effective and
shall mail the notice of such adjustment of the Conversion Price to the holder
of each share of Series B Stock at his last address as shown on the stock books
of the Corporation.
(vii) In any case in which this paragraph IV(d)
provides that an adjustment shall become effective immediately after a record
date for an event, the Corporation may defer until the occurrence of the event
(i) issuing to the holder of any share of Series B Stock converted after the
record date and before the occurrence of the event the additional shares of
Common Stock issuable upon the conversion by reason of the adjustment required
by the event over and above the Common Stock issuable upon such conversion
before giving effect to the adjustment and (ii) paying to the holder any amount
in cash in lieu of any fractional share pursuant to subparagraph IV(c) above.
(e) If:
(i) the Corporation shall authorize the granting to
the holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or any other rights or warrants; or
(ii) there shall be any reclassification of the
Common Stock (other than a subdivision or combination of the outstanding Common
Stock and other than a change in the par value, or from par value to no par
value, or from no par value to par value), or any consolidation, merger, or
statutory share exchange to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or any sale or
transfer of all or substantially all the assets of the Corporation; or
(iii) there shall be a voluntary or an involuntary
dissolution, liquidation or winding up of the Corporation; then the Corporation
shall cause to be filed with the conversion agent, and shall cause to be mailed
to the holders of shares of the Series B Stock at their addresses as shown on
the stock books of the Corporation, at least 15 days prior to the applicable
date hereinafter specified, a notice stating (A) the date on which a record is
to be taken for the purpose of the dividend, distribution or rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to the dividend, distribution or rights or
warrants are to be determined or (B) the date on which the reclassification,
consolidation, merger, statutory share exchange, sale,
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<PAGE>
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon the reclassification,
consolidation, merger, statutory share exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give any such notice or any defect in the
notice shall not affect the legality or validity of' the proceedings described
in this subparagraph IV(e).
(f) (i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued shares of Common Stock or its issued shares of
Common Stock held in its treasury, or both, for the purpose of effecting
conversions of the Series B Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Series B Stock not
theretofore converted. For purposes of this subparagraph IV(f), the number of
shares of Common Stock which shall be deliverable upon the conversion of all
outstanding shares of Series B Stock shall be computed as if at the time of
computation all the outstanding shares were held by a single holder.
(ii) The Corporation will endeavor to list the shares
of Common Stock required to be delivered upon conversion of the Series B Stock,
prior to the delivery, upon each national securities exchange, if any, upon
which the outstanding Common Stock is listed at the time of delivery.
(iii) Prior to the delivery of any securities which
the Corporation shall be obligated to deliver upon conversion of the Series B
Stock, the Corporation will endeavor, in good faith and as expeditiously as
possible, to comply with all federal and state laws and regulations thereunder
requiring the registration of those securities with, or any approval of or
consent to the delivery thereof by, any governmental authority.
(g) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversion of the Series B Stock; provided, however,
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the holder of the Series B Stock to be
converted and no such issue or delivery shall be made unless and until the
person requesting the issue or delivery has paid to the Corporation the amount
of any such tax or has established, to the satisfaction of the Corporation, that
the tax has been paid.
(h) In case of any reclassification or change of outstanding
shares of Common Stock (other than a change in par value, or as a result of a
subdivision or combination), or in case of any consolidation of the Corporation
with, or merger of the Corporation with or into, any other entity that results
in a reclassification,
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<PAGE>
change, conversion, exchange or cancellation of outstanding shares of Common
Stock or any sale or transfer of all or substantially all of the assets of the
Corporation, each holder of shares of Series B Stock then outstanding shall have
the right thereafter to convert the shares of Series B Stock held by the holder
into the kind and amount of securities, cash and other property which the holder
would have been entitled to receive upon such reclassification, change,
consolidation, merger, sale or transfer if the holder had held the Common Stock
issuable upon the conversion of the shares of Series B Stock immediately prior
to the reclassification, change, consolidation, merger, sale or transfer.
(i) In the event that the Corporation shall consummate any
consolidation or merger or similar business combination, pursuant to which the
outstanding shares of Common Stock are by operation of law exchanged solely for
or changed, reclassified or converted into stock, securities or cash or any
other property, or any combination thereof, the Series B Stock shall, in
connection with such consolidation, merger or similar business combination, be
assumed by and shall become preferred stock of such successor or resulting
corporation, having in respect of such corporation, insofar as possible, the
same powers, preferences and relative rights, and the qualifications,
limitations or restrictions thereon, that the Series B Stock had immediately
prior to such transaction, except that after such transaction each share of
Series B Stock shall be convertible, otherwise on the terms and conditions
provided by paragraph (IV) above, into the nature and kind of consideration so
receivable by a holder of the number of shares of Common Stock into which such
shares of Series B Stock could have been converted immediately prior to such
transaction; provided, however, that if, by virtue of the structure of such
transaction, a holder of Common Stock is required to make an election with
respect to the nature and kind of consideration to be received in such
transaction, which election cannot practicably be made by the holder of the
shares of Series B Stock, then the shares of Series B Stock shall, by virtue of
such transaction and on the same terms as apply to the holders of Common Stock,
be converted into or exchanged for the aggregate amount of stock, securities,
cash or other property (payable in kind) receivable by a holder of the number of
shares of Common Stock into which such shares of Series B Stock could have been
converted immediately prior to such transaction if such holder of Common Stock
failed to exercise any rights of election (however, if the kind or amount of
consideration receivable upon such transaction is not the same for each
non-electing share of Common Stock, then the kind and amount so receivable upon
such transaction shall be the kind and amount so receivable per share by the
plurality of the non-electing shares of Common Stock). The rights of the Series
B Stock as preferred stock of such successor or resulting corporation shall
successively be subject to adjustments pursuant to paragraph (VI) and
subparagraph (IV)(d) hereof after any such transaction as nearly equivalent as
practicable to the adjustment provided for by such paragraphs prior to such
transaction. The Corporation shall not consummate any such merger, consolidation
or similar transaction unless all then outstanding
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<PAGE>
shares of Series B Stock shall be assumed and authorized by the successor or
resulting corporation as aforesaid.
V. STATUS. Upon any conversion, exchange or redemption of
shares of Series B Stock, the shares of Series B Stock so converted, exchanged
or redeemed shall have the status of authorized and unissued shares of serial
preferred stock, and the number of shares of serial preferred stock which the
Corporation shall have authority to issue shall not be decreased by the
conversion, exchange or redemption of shares of Series B Stock.
VI. VOTING RIGHTS. The holders of shares of Series B Stock
shall have no voting rights whatsoever, except for any voting rights to which
they may be entitled under the laws of the State of Delaware, and except as
follows:
(a) (i) If and whenever at any time or times dividends payable
on the Series B Stock shall have been in arrears and unpaid in an aggregate
amount equal to or exceeding the amount of dividends payable thereon for six
quarterly periods, then the holders of a majority of the outstanding shares of
the Series B Stock shall have the right to name two additional members of the
Board of the Corporation, and such members shall take office at the next meeting
of the Board of the Corporation. If any vacancy shall occur among the directors
named by the holders of the shares of this Series B Stock pursuant to this
subparagraph, such vacancy shall be filled with such person as a majority of
such holders may name in a written notice to the Corporation. Any director named
by the holders of the shares of this Series B Stock pursuant to this paragraph
shall serve until all dividends accumulated on the Series B Stock have been paid
in full. Upon such payment all directors named by the holders of the shares
pursuant to this subparagraph who are then in office shall automatically cease
to be members of the Board of Directors of the Corporation, provided, however,
that the right of the holders of the shares of this Series B Stock to name two
directors shall be reinstated if thereafter the Corporation fails to declare and
pay dividends in cash on the outstanding shares of this Series B Stock with
respect to any six subsequent quarterly periods.
(ii) Whenever the voting rights described in
subparagraph VI(a)(i) above shall have vested and remain in effect, the
Corporation shall not, either directly or indirectly or through merger or
consolidation with or into any other corporation, without the affirmative vote
at a meeting or the written consent with or without a meeting of the holders of
at least a majority of the number of shares of the Series B Stock then
outstanding, create or issue or increase the authorized number of shares of any
class or series of stock ranking prior to the Series B Stock either as to
dividends or upon liquidation.
(b) So long as any shares of the Series B Stock remain
outstanding, the Corporation shall not, either directly or indirectly or through
merger or
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<PAGE>
consolidation with or into any other corporation, without the affirmative vote
at a meeting or the written consent with or without a meeting of the holders of
at least two-thirds of the number of shares of the Series B Stock then
outstanding, (i) amend, alter or repeal any of the provisions of the Certificate
of Incorporation (including the Authorizing Board Resolution) so as to affect
adversely the preference or power of the Series B Stock, (ii) authorize any
reclassification of the Series B Stock, or (iii) issue any shares of any class
or series of stock of the Corporation ranking prior to the shares of the Series
B Stock as to dividends or upon liquidation, or reclassify any authorized stock
of the Corporation into any such prior shares or issue any obligation or
security convertible into or evidencing the right to purchase any such prior
shares.
VII. REDEMPTION BY THE CORPORATION.
(a) The shares of Series B Stock may be redeemed for cash at
the option of the Corporation, in whole, or from time to time in part, at any
time on or after January 15, 1997, on at least 15 but not more than 60 days'
prior notice mailed to the holders of the shares to be redeemed, at the
applicable redemption price (as defined below), together in each case with an
amount equal to all dividends (whether or not earned or declared) accumulated
and unpaid to the date fixed for redemption.
The applicable redemption prices per share are as follows:
If Redeemed During
12-month Period Redemption Price
Beginning January 15 Per Share
-------------------- ---------
1997 $104.50
1998 $103.75
1999 $103.00
2000 $102.25
2001 $101.50
2002 $100.75
2003 (or thereafter) $100.00
(b) If full cumulative dividends on the Series B Stock have
not been paid through the most recent Dividend Payment Date, the Series B Stock
may not be redeemed in part and the Corporation may not purchase or acquire any
shares of the Series B Stock otherwise than pursuant to a purchase or exchange
offer made on the same terms to all holders of the Series B Stock. If less than
all the outstanding shares of Series B Stock are to be redeemed, the Corporation
will select those to be redeemed by lot or a substantially equivalent method.
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<PAGE>
(c) (i) If a notice of redemption has been given pursuant to
this paragraph VII and if, on or before the date fixed for the redemption, the
funds necessary for the redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares so called for redemption, then, notwithstanding that
any certificates for those shares have not been surrendered for cancellation, on
the date fixed for redemption dividends shall cease to accrue on the shares of
Series B Stock to be redeemed, and at the close of business on the date fixed
for redemption the holders of those shares shall cease to be stockholders with
respect to those shares and shall have no interest in or claims against the
Corporation by virtue thereof and shall have no voting or other rights with
respect to the shares, except the right to receive the moneys payable upon such
redemption and the right to accumulated and unpaid dividends, without interest
thereon, upon surrender (and endorsement, if required by the Corporation) of
their certificates, and, unless the Corporation subsequently shall default in
mailing payment of these amounts, the shares evidenced thereby shall no longer
be deemed outstanding for any purpose.
(ii) If on or before the date fixed for redemption
(but not less than 15 days after the date the notice of redemption is mailed to
the holders of the Series B Stock) the Corporation shall deposit, in a trust
fund, with any bank or trust company organized under the laws of the United
States of America or any state thereof having a combined capital and surplus of
at least $5,000,000 (the "Redemption Agent") moneys sufficient to redeem on the
date fixed for redemption the shares of Series B Stock to be redeemed, with
irrevocable instructions and authority to the Redemption Agent, on behalf and at
the expense of the Corporation, to pay, on the date fixed for redemption or
prior to that date, the full amount of the consideration (consisting of the
redemption price plus accrued and unpaid dividends, if any, to the date fixed
for redemption, without interest) payable to the holders of the Series B Stock
upon the redemption, upon surrender (and endorsement, if required by the
Corporation) of their certificates, then, from and after the close of business
on the date of such deposit (although prior to the date fixed for redemption)
(the "Deposit Date"), the deposit shall be deemed to constitute full and final
payment for the shares of Series B Stock to be redeemed to the holders thereof
and, notwithstanding that any certificates for those shares have not been
surrendered for cancellation, on the date fixed for redemption dividends shall
cease to accrue on the shares of Series B Stock to be redeemed, and at the close
of business on the Deposit Date the holders of those shares shall cease to be
stockholders with respect to those shares and shall have no interest in or
claims against the Corporation by virtue thereof and shall have no voting or
other rights with respect to the shares, except the right to receive the moneys
payable upon redemption and the right to accumulated interest thereon, upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares evidenced thereby shall no longer be deemed
outstanding for any purpose.
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<PAGE>
(iii) Notwithstanding the foregoing, if notice of
redemption shall have given pursuant to this paragraph VII and any holder of
shares of Series B Stock shall, prior to the close of business on the date three
business days next preceding the date fixed for redemption give written notice
to the Corporation pursuant to paragraph IV above of the conversion of any or
all of the shares held by the holder (accompanied by a certificate or
certificates for such shares, duly endorsed or assigned to the Corporation),
then the redemption shall not become effective as to the shares to be converted
and the conversion shall become effective as provided in paragraph IV above.
(iv) Subject to applicable escheat laws, any moneys
necessary for redemption set aside or deposited by the Corporation and unclaimed
at the end of two years from the date fixed for redemption shall revert to the
general funds of the Corporation, after which reversion the holders of such
shares so called for redemption but not surrendered shall look only to the
general funds of the Corporation for the payment of the amounts payable upon
such redemption. Any interest accrued on funds so set aside or deposited shall
belong to the Corporation and shall be paid to it from time to time. Any funds
which have been deposited by the Corporation, or on its behalf, with a
redemption agent or segregated and held in trust by the Corporation for the
redemption of shares converted into Common Stock on or prior to the date fixed
for such redemption shall (subject to any right of the holder of such shares to
receive the dividend payable thereon as provided in paragraph IV) immediately
upon such conversion be returned to the Corporation or, if then held in trust by
the Corporation, shall be discharged from such trust.
VIII. APPROVAL OF HOLDERS. No approval of the holders of the
Series B Stock shall be required for (a) the creation of any indebtedness of any
kind of the Corporation, (b) the declaration of dividends on any of the
Corporation's capital stock which is not in violation of paragraph II hereof,
(c) the creation or issuance, or increase or decrease in the amount, of any
class or series of stock of the Corporation not ranking prior as to dividends or
upon liquidation to the Series B Stock or, except as provided in subparagraph
VI(b) above, the creation or issuance, or increase or decrease in the amount, of
any class or series of stock of the Corporation ranking prior as to dividends or
upon liquidation to the Series B Stock, (d) any increase or decrease in the
amount of authorized Common Stock or any increase, decrease or change in the par
value thereof or in any other terms thereof, (e) of any increase or decrease in
the authorized amount of preferred stock issuable by the Board of Directors in
series, or (f) any merger, consolidation or pooling of interests of any kind of
the Corporation or any of its subsidiaries which does not adversely affect the
rights or privileges of the holders of Series B Stock.
IX. NUMBER OF SHARES OF CONVERTIBLE PREFERRED STOCK. Subject
to the provisions of paragraph VI above, the Board reserves the right by
subsequent amendment of this resolution from time to time to increase or
decrease the number of shares which constitute the Series B Stock (but not below
the number of shares
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<PAGE>
thereof then outstanding) and in other respects to amend this resolution within
the limitations provided by law, the Authorizing Board Resolution and the
Certificate of Incorporation.
X. MISCELLANEOUS.
(a) Except as otherwise expressly provided, whenever in the
Authorizing Board Resolution notices or other communications are required to be
made, delivered or otherwise given to holders of shares of Series B Stock, the
notice or other communication shall be deemed properly given if deposited in the
United States mail, postage prepaid, addressed to the persons shown on the books
of the Corporation as such holders at the addresses as they appear in the books
of the Corporation, as of a record date or dates determined in accordance with
the Corporation's Certificate of Incorporation and By-laws and applicable law,
as in effect from time to time. No failure to mail a notice or any defect
therein or in the mailing thereof shall affect the validity of any proceeding
contemplated by the Authorizing Board Resolution, including without limitation
any exchange pursuant to paragraph VII above, any redemption pursuant to
paragraph VIII above or any Change of Control described in paragraph IX above.
(b) The holders of the Series B Stock will not have any
preemptive right to subscribe for or purchase any shares or any other securities
which may be issued by the Corporation.
(c) Except as may otherwise be required by law, the shares of
Series B Stock shall not have any designations, preferences, limitations or
relative rights, other than those specifically set forth in the Authorizing
Board Resolution (as such Resolution may be amended from time to time) and in
the Certificate of Incorporation.
(d) The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
(e) If any right, preference or limitation of the Series B
Stock set forth in the Authorizing Board Resolution (as such Resolution may be
amended from time to time) is invalid, unlawful or incapable of being enforced
by reason of any rule or law or public policy, all other rights, preferences and
limitations set forth in the Authorizing Board Resolution (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless so
expressed herein.
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<PAGE>
IN WITNESS WHEREOF WEBSTER FINANCIAL CORPORATION has caused
this Certificate of Designation to be made under the seal of the Corporation and
signed by James C. Smith, its President, and attested by Lee A.
Gagnon, its Secretary, this 21st day of December 1992.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
------------------------
President
[SEAL]
Attest:
/s/ Lee A. Gagnon
- -----------------------
Secretary
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Exhibit 3.5
-----------
CERTIFICATE OF DESIGNATION
OF THE
SERIES C PARTICIPATING PREFERRED STOCK
OF
WEBSTER FINANCIAL CORPORATION
----------------------
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
----------------------
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted on February 5, 1996, by the Board of Directors (the
"Board") of WEBSTER FINANCIAL CORPORATION, a Delaware corporation (the
"Corporation"), acting pursuant to the authority granted to the Board in
accordance with the provisions of Section 151(g) of the General Corporation Law
of the State of Delaware, at a duly convened meeting of the Board at which a
quorum was present and active throughout (the "Authorizing Board Resolution"):
RESOLVED, that pursuant to authority expressly granted to and
vested in the Board by the provisions of the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), there is hereby created a
series of serial preferred stock, par value $.01 per share, which shall consist
of 14,000 of the 3,000,000 shares of serial preferred stock. Such series shall
have the following powers, designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions (in addition to the powers, designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation which may be applicable to the serial preferred
stock) as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series,
par value .01 per share, shall be designated as "Series C Participating
Preferred Stock" (hereinafter "Series C Stock") and the number of shares
constituting such series shall be 14,000. Such number of shares may be increased
or decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series C Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series C Stock.
<PAGE>
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the holders of
any shares of any series of Serial Preferred Stock ranking prior and superior to
the shares of Series C Stock with respect to dividends, the holders of shares of
Series C Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the 1st day of February, May, August and November
in each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share of Series C Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10.00 or (b) subject to the
provision for adjustment hereinafter set forth, one thousand times the aggregate
per share amount of all cash dividends declared on Common Stock, and one
thousand times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on Common Stock since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share of Series
C Stock. In the event the Corporation shall at any time after February 5, 1996
(the "Rights Declaration Date") (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series C Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(b) The Corporation shall declare a dividend or distribution
on the Series C Stock as provided in paragraph (a) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, subject to the requirements
of applicable law and the Amended and Restated Certificate of Incorporation, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on
the Series C Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series C Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series C Stock, unless the
date of issue of such shares is prior to the record date for the first Quarterly
Dividend
-2-
<PAGE>
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series C Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series C Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series C Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no more than 60
days prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series C
Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series C Stock shall entitle the holder thereof to one
thousand votes on all matters submitted to a vote of the stockholders of the
Common Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series C Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(b) Except as otherwise provided herein or by law, the holders
of shares of Series C Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(c) Except as set forth herein, holders of Series C Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series C Stock as provided in Section 2 are in
arrears,
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<PAGE>
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series C Stock outstanding shall have been paid in
full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series C Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series C Stock, except
dividends paid ratably on the Series C Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series C Stock, provided
that the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series C Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series C Stock, or any shares of stock ranking on a parity with the
Series C Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective Series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. REACQUIRED SHARES. Any shares of Series C Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Serial Preferred Stock and may be reissued as part of a new series of Serial
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
-4-
<PAGE>
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Stock unless, prior thereto, the
holders of shares of Series C Stock shall have received $100,000 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series C Liquidation
Preference"). Following the payment of the full amount of the Series C
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series C Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series C Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph
(c) below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the Series
C Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series C Stock and Common Stock, respectively, holders of Series C
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to one (1) with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series C Liquidation
Preference and the liquidation preferences of all other series of Serial
Preferred Stock, if any, which rank on a parity with the Series C Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(c) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
-5-
<PAGE>
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series C Stock shall at the same time be similarly exchanged or charged in an
amount per share (subject to provision for adjustment hereinafter set forth)
equal to 100 times the aggregate amount of stock, securities, cash and/or other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series C Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series C Stock shall
not be redeemable.
Section 9. RANKING. The Series C Stock shall rank junior to
all other series of the Corporation's Serial Preferred Stock as to the payment
of dividends and the distribution of assets, unless the terms of such series
shall provide otherwise.
Section 10. AMENDMENT. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series C Stock so as to affect them adversely without the affirmative
vote of the holders of a majority of the outstanding shares of Series C Stock,
voting separately as a class.
-6-
<PAGE>
IN WITNESS WHEREOF, WEBSTER FINANCIAL CORPORATION has caused
this Certificate of Designation to be made under the seal of the Corporation and
signed by James C. Smith, its Chairman and Chief Executive Officer, and attested
by Lee A. Gagnon, its Secretary, as of this 5th day of February, 1996.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
------------------------------------
Chairman and Chief Executive Officer
[Seal]
ATTEST:
/s/ Lee A. Gagnon
---------------------------
Secretary
-7-
Exhibit 3.6
-----------
CERTIFICATE OF AMENDMENT
TO
THE RESTATED CERTIFICATE OF INCORPORATION
OF
WEBSTER FINANCIAL CORPORATION
Webster Financial Corporation (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Board of Directors of the Corporation, by unanimous
vote at a meeting held November 18, 1996, has adopted a resolution declaring the
following amendment to the Restated Certificate of Incorporation of the
Corporation to be advisable, and has recommended to the shareholders of the
Corporation the adoption of such amendment:
1. That the first sentence of the first paragraph of
Article 4 of the Restated Certificate of Incorporation
of Webster Financial Corporation be amended in its
entirety to read as follows:
The total number of shares of all classes of the
capital stock which the Corporation has authority
to issue is thirty three million (33,000,000), of
which thirty million (30,000,000) shall be common
stock, par value $.01 per share, amounting in the
aggregate to three hundred thousand dollars
($300,000), and three million (3,000,000) shall be
serial preferred stock, par value $.01 per share,
amounting in the aggregate to thirty thousand
dollars ($30,000).
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the Shareholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That the amendment to the Restated Certificate of Incorporation
of Webster Financial Corporation herein certified was duly adopted, pursuant to
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, said Webster Financial Corporation has caused this
Certificate of Amendment to be signed by James C. Smith, its Chairman and Chief
Executive Officer and attested to by Lee A. Gagnon, its Executive Vice
President, Chief Operating Officer and Secretary, dated as of the 30th day of
January, 1997.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
------------------------------------
James C. Smith
Chairman and Chief Executive Officer
ATTEST:
By: /s/ Lee A. Gagnon
-----------------------------------------------
Lee A. Gagnon
Executive Vice President, Chief Operating
Operating Officer and Secretary
2
Exhibit 10.28
-------------
AMENDMENT TO
CONSULTING AGREEMENT
AGREEMENT, dated as of January 1, 1997, among WEBSTER BANK (the
"Bank"), WEBSTER FINANCIAL CORPORATION (the "Company") and HAROLD W. SMITH
("Smith").
WHEREAS, the respective Boards of Directors of the Company and the Bank
have approved and authorized the entry into this Agreement with Smith;
WHEREAS, Smith is currently serving as a consultant to both the Company
and the Bank under a Consulting Agreement dated as of January 1, 1994 (the
"Consulting Agreement");
WHEREAS, the parties desire to amend the Consulting Agreement to extend
the term of the Advisory Period (as defined therein) until December 31, 1997.
NOW, THEREFORE, it is AGREED as follows:
1. Section 1(a) of the Consulting Agreement is amended by
substituting "December 31, 1997" for "December 31, 1996".
2. In all other respects, the Consulting Agreement shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed on their behalf, as of
the day and year first above written.
Attest: WEBSTER FINANCIAL CORPORATION
/s/ Lee A. Gagnon By: /s/James C. Smith
- ------------------------------ ---------------------------------
(Secretary) Its:
-----------------------------
Chief Executive Officer
Attest: WEBSTER BANK
/s/ Lee A. Gagnon By: /s/ James C. Smith
- ------------------------------ ---------------------------------
(Secretary) Its:
-----------------------------
Chief Executive Officer
-------------------------------------
Harold W. Smith
Exhibit 10.29
-------------
JAMES C. SMITH
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1997, among WEBSTER BANK (the
"Bank"), WEBSTER FINANCIAL CORPORATION (the "Company") and JAMES C. SMITH (the
"Employee").
WHEREAS, the respective Boards of Directors of the Company and the Bank
have approved and authorized the entry into this Agreement with the Employee;
WHEREAS, the Employee is currently serving as the Chief Executive
Officer of both the Company and the Bank under an Employment Agreement dated as
of January 1, 1995 (the "Prior Agreement");
WHEREAS, the parties desire to enter into this Agreement to set forth
the terms and conditions for the employment relationships of the Employee with
the Company and the Bank and to replace and supersede the Prior Agreement.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Prior Agreement is hereby replaced and superseded
and the Prior Agreement shall be of no further force or effect after the date of
this Agreement. The Employee is employed as the Chief Executive Officer of both
the Company and the Bank from the date hereof through the term of this
Agreement. As an executive of the Company and of the Bank, the Employee shall
render executive, policy, and other management services to the Company and the
Bank of the type customarily performed by persons serving in similar executive
officer capacities. The Employee shall also perform such duties as the Boards of
Directors of the Company and of the Bank may from time to time reasonably
direct. During the term of this Agreement, there shall be no material increase
or decrease in the duties and responsibilities of the Employee otherwise than as
provided herein, unless the parties otherwise agree in writing. During the term
of this Agreement, the Employee shall not be required to relocate to an area
more than 35 miles from the Bank's home office in order to perform the services
hereunder.
2. Salary. The Bank agrees to pay the Employee during the term of this
Agreement a base salary as follows: from the date hereof through December 31,
1997, a salary at an annual rate equal to $475,000, which salary may be adjusted
in January of each subsequent year during the term of this Agreement as
determined by the Boards of Directors of the Company and the Bank. In
determining salary adjustments, the Board of Directors may compensate the
Employee for increases in the cost of living and may also provide for
performance or merit adjustments. The salary under this Section 2 shall be
payable by the Bank to the Employee not less frequently than monthly. The
Company shall reimburse the Bank for a portion of the salary paid to the
Employee hereunder, which portion shall represent an
<PAGE>
appropriate allocation for the services rendered to the Company hereunder. The
Employee shall not be entitled to receive fees for serving as a director of the
Company or of the Bank or for serving as a member of any committee of the Board
of Directors of the Company or of the Bank if he is elected to such positions.
3. Discretionary Bonuses. In addition to his salary under Section 2
hereof, the Employee shall be eligible to receive such discretionary bonuses as
may be authorized, declared, and paid by the Board of Directors of the Company
or of the Bank. No other compensation provided for in this Agreement shall be
deemed a substitute for such bonuses when and as declared by the Board of
Directors of the Company or the Bank.
4. Participation in Retirement and Employee Benefit Plans; Fringe
Benefits. The Employee shall be eligible to participate in any plan of the
Company or of the Bank relating to stock options, stock purchases, pension,
thrift, profit sharing, employee stock ownership, group life insurance, medical
coverage, disability insurance, education, or other retirement or employee
benefits that the Bank or the Company has adopted or may adopt for the benefit
of its executive employees. The Employee shall also be eligible to participate
in any other fringe benefits which are now or may be or become applicable to the
Company's or the Bank's executive employees. In addition, the Employee shall be
provided with a standard automobile or an automobile allowance for business use.
Participation in these plans and fringe benefits shall not reduce the salary
payable to the Employee under Section 2 hereof.
5. Term. The initial term of employment under this Agreement shall be
for a period commencing on the date hereof and ending on December 31, 1999. The
Company and the Bank may renew this Agreement by written notice to the Employee
for one additional year on December 31, 1997 and each subsequent December 31
during the term of this Agreement, unless the Employee gives contrary written
notice to the other parties hereto prior to such renewal date. Each initial term
and all such renewed terms are collectively referred to herein as the term of
this Agreement.
6. Standards. The Employee shall perform the Employee's duties and
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Boards of Directors of
the Company or the Bank. The reasonableness of such standards shall be measured
against standards for executive performance generally prevailing in the savings
institutions industry.
7. Voluntary Absences; Vacations. The Employee shall be entitled,
without loss of pay, to be absent voluntarily for reasonable periods of time
from the performance of the duties and responsibilities under this Agreement.
All such voluntary absences shall count as paid vacation time, unless the Board
of Directors of the Company or the Bank otherwise approves. The Employee shall
be entitled to an annual paid vacation of at least four weeks per year or such
longer period as the
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<PAGE>
Board of Directors of the Company or the Bank may approve. The timing of paid
vacations shall be scheduled in a reasonable manner by the Employee. The
Employee shall not be entitled (i) to receive any additional compensation from
the Bank on account of failure to take a paid vacation or (ii) to accumulate
more than two weeks of unused paid vacation time from one fiscal year to the
next.
8. Termination of Employment.
(a) (i) The Board of Directors of the Company or the Bank may
terminate the Employee's employment at any time, but any termination by such
Board of Directors other than termination for cause shall not prejudice the
Employee's right to compensation or other benefits under this Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for cause. The term "termination for cause" shall mean
termination because of the Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
In determining incompetence, the acts or omissions shall be measured against
standards generally prevailing in the savings institutions industry; provided,
that it shall be the Company's or the Bank's burden to prove the alleged acts
and omissions and the prevailing nature of the standards the Company or the Bank
shall have alleged are violated by such acts and/or omissions.
(ii) The parties acknowledge and agree that damages
which will result to Employee for termination without cause shall be extremely
difficult or impossible to establish or prove, and agree that, unless the
termination is for cause, the Bank shall be obligated, concurrently with such
termination, to make a lump sum cash payment to the Employee as liquidated
damages of an amount equal to the sum of (a) the Employee's then current annual
base salary under Section 2 of this Agreement and (b) the amount of any bonuses
paid to the Employee pursuant to the Webster Financial Corporation and Webster
Bank Annual Incentive Compensation Plan during the then current fiscal year
multiplied by a fraction the numerator of which is the number of full months
during the then current fiscal year in which the Employee was employed hereunder
and the denominator of which is 12. The Employee agrees that, except for such
other payments and benefits to which the Employee may be entitled as expressly
provided by the terms of this Agreement, such liquidated damages shall be in
lieu of all other claims which Employee may make by reason of such termination.
Such payment to the Employee shall be made on or before the Employee's last day
of employment with the Company or the Bank. The liquidated damages amount shall
not be reduced by any compensation which the Employee may receive for other
employment with another employer after termination of his employment with the
Company or the Bank.
-3-
<PAGE>
(iii) In addition to the liquidated damages above described that are
payable to the Employee for termination without cause, the following shall apply
in the event of any termination without cause (other than a termination subject
to Section 9 hereof): (1) the Employee shall continue to be entitled to medical
and dental coverage as if his employment had not been terminated until the
earliest of (A) the expiration of one year after the date his employment
terminates, (B) the expiration of the remaining term of this Agreement under
Section 5, and (C) the date on which the Employee accepts other employment on a
substantially full time basis and (2) all insurance or other provisions for
indemnification, defense or hold-harmless of officers or directors of the
Company or the Bank which are in effect on the date the notice of termination is
sent to the Employee shall continue for the benefit of the Employee with respect
to all of his acts and omissions while an officer or director as fully and
completely as if such termination had not occurred, and until the final
expiration or running of all periods of limitation against action which may be
applicable to such acts or omissions.
(b) If the Employee is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, as amended, the
Company's and the Bank's obligations under this Agreement shall be suspended as
of the date of service, unless stayed by appropriate proceedings. If the charges
in the notice are dismissed, the Bank may in its discretion (i) pay the Employee
all or part of the compensation withheld while such contractual obligations were
suspended, and (ii) reinstate in whole or in part any of its obligations which
were suspended.
(c) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, as amended, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the parties shall not
be affected.
(d) If the Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act, as amended), all obligations under this
Agreement shall terminate as of the date of default, but this paragraph shall
not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary
for the continued operation of the Bank, (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee, at the time the
Federal Deposit Insurance Corporation or Resolution Trust Company enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act, as amended, or
(ii) by the Director or his or her designee at the time the Director or his or
her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director or his or
her designee to be in an unsafe or unsound
-4-
<PAGE>
condition. Any rights of the parties that have already vested, however, shall
not be affected by any termination hereunder.
(f) The Employee shall have no right to terminate employment
under this Agreement prior to the end of the term of this Agreement, unless such
termination is approved by the Board of Directors of the Company or the Bank or
is in connection with or within two years after a change in control (as defined
in Section 9(b) hereof) of the Company or the Bank. In the event that the
Employee violates this provision, the Company and the Bank shall be entitled, in
addition to its other legal remedies, to enjoin the employment of the Employee
with any significant competitor of the Bank for a period of one year or the
remaining term of this Agreement plus six months, whichever is less. The term
"significant competitor" shall mean any commercial bank, savings bank, savings
and loan association, or mortgage banking company, or a holding company
affiliate of any of the foregoing, which at the date of its employment of the
Employee has an office out of which the Employee would be primarily based within
35 miles of the Bank's home office.
(g) In the event the employment of the Employee is terminated
by the Company or the Bank without cause under Section 8(a) hereof or the
Employee's employment is terminated voluntarily or involuntarily in accordance
with Section 9 hereof and the Bank fails to make timely payment of the amounts
then owed to the Employee under this Agreement, the Employee shall be entitled
to reimbursement for all reasonable costs, including attorneys' fees, incurred
by the Employee in taking action to collect such amounts or otherwise to enforce
this Agreement, plus interest on such amounts at the rate of one percent above
the prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by The Wall Street Journal), compounded
monthly, for the period from the date the payment is due to be paid to the
Employee until payment is made. Such reimbursement and interest shall be in
addition to all rights which the Employee is otherwise entitled to under this
Agreement.
(h) If during the term of this Agreement, the Employee's
employment with the Company and the Bank is terminated (whether voluntarily or
involuntarily), the Employee agrees to maintain the confidentiality of, and not
to use, any non-public information which he acquired during his employment
concerning the Company or the Bank, their respective subsidiaries, or any
director, officer, employee or agent of the aforesaid entities, including any
information as to the customers, business or personnel practices of such
entities. The Employee agrees, for a period of one year after the date of
termination of his employment with the Company and the Bank (other than in
connection with or within two years after a change in control (as defined in
Section 9(b) hereof) of the Company or the Bank), that he will not (i) offer
employment (or a consulting, agency, independent contractor or other similar
paid position) to any employee of the Company, the Bank or any of their
respective subsidiaries, or (ii) induce, encourage or solicit any such employee
to accept
-5-
<PAGE>
employment (or any aforesaid position) with any company or entity with which the
Employee may then be employed or otherwise affiliated.
9. Change in Control.
(a) If during the term of this Agreement there is a change in
control of the Company or the Bank, the Employee shall be entitled to receive as
a severance payment for services previously rendered to the Company and the
Bank, a lump sum cash payment as provided for herein (subject to Section 9(c)
below) in the event the Employee's employment is terminated, voluntarily or
involuntarily, in connection with or within two years after the change in
control of the Company or the Bank, unless such termination is for cause (as
defined in Section 8(a)(i) hereof), is a voluntary termination without "Good
Reason" (as defined below) in connection with or after a "Technical Change" (as
defined below), or occurs by virtue of normal retirement, permanent and total
disability (as defined in Section 22(e) of the Code) or death. Subject to
Section 9(c) below, the amount of the payment shall be equal to (i) one year's
salary plus any bonuses paid during the then current fiscal year, if the
Employee voluntarily terminates his employment without "Good Reason" (as
hereinafter defined) other than in connection with or following a "Technical
Change" (as defined below) or (ii) three times the Employee's annual base salary
in effect immediately before the change in control plus an amount equal to three
times the aggregate amount of bonuses that were paid to the Employee by the
Company and the Bank during the 24 calendar months preceding the change in
control divided by two, if the Employee's termination of employment was either
voluntary with Good Reason or involuntary, except as provided below in the case
of a Technical Change; provided, however, that in the case of a change in
control described in Section 9(b)(vii) below (and not described in any other
subsection of Section 9(b)) in which the persons who were directors of the
Company before the transaction described in such subsection shall constitute at
least 50% of the Board of Directors of the Company or any successor corporation
(a "Technical Change"), no amount shall be payable under clause (i) above and,
subject to Section 9(c) below, the amount payable under clause (ii) above shall
be two times the Employee's annual base salary in effect immediately before the
change in control, plus two times the amount of any bonuses paid during the
fiscal year preceding the fiscal year in which such change in control occurs.
"Good Reason" shall include a material reduction in the position, authority,
duties or responsibilities of the Employee from those which existed prior to the
change in control or a reduction in the Employee's job stature as reflected in
his title. If the Employee notifies the Boards of Directors of the Company and
the Bank that he intends to terminate his employment voluntarily for Good
Reason, he shall state in his notice the reasons why he believes that Good
Reason exists. Unless the Company and the Bank, within 30 days of the date of
the Employee's notice of resignation or termination, reject the Employee's
statement that Good Reason exists, the Employee's entitlement to the severance
payment payable under clause (ii) above shall be conclusive. If both Boards of
Directors reject the Employee's statement of Good Reason within such 30-day
period, the dispute shall be settled by arbitration in
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<PAGE>
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof, but the Company and the Bank
shall have the burden of proving in such arbitration that their rejection of the
Employee's statement was proper. Payment under this Section 9(a) shall be in
lieu of any amount owed to the Employee as liquidated damages for termination
without cause under Section 8(a) hereof. However, payment under this Section
9(a) shall not be reduced by any compensation which the Employee may receive
from other employment with another employer after termination of the Employee's
employment. In addition, subject to Section 9(c) below, in the case of any
termination of employment within the scope of this Section 9(a) for which a
severance payment is payable to the Employee, the following shall apply: (1) the
Employee shall also be entitled to continued medical, dental, group term life
insurance and long-term disability insurance coverage and to continued
eligibility for benefits under any other employee welfare benefit plan (within
the meaning of Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended) in which he was eligible to participate before the change in
control, on a basis no less favorable to him than that in effect during the
fiscal year preceding the fiscal year in which the change in control occurs, as
if his employment had not been terminated, which coverage and eligibility shall
continue: (A) in the case of a voluntary termination of employment described in
clause (i) above, for one year after the termination or the remaining term of
this Agreement, whichever is less; (B) in the case of a termination described in
clause (ii) above and a change in control other than a Technical Change, for the
remaining term of this Agreement; or (C) in the case of a termination described
in clause (ii) above in connection with or following a Technical Change, for two
years after the termination or the remaining term of this Agreement, whichever
is less; and (2) all insurance or other provisions for indemnification, defense
or hold-harmless of officers or directors of the Company or the Bank that are in
effect on the date the notice of termination is given by or to the Employee
shall continue for the benefit of the Employee with respect to all of his acts
and omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final expiration or running of all
periods of limitation against action which may be applicable to such acts or
omissions.
(b) A "change in control" of the Company, for purposes of this
Agreement, shall be deemed to have taken place if: (i) any person becomes the
beneficial owner of 25 percent or more of the total number of voting shares of
the Company; (ii) any person becomes the beneficial owner of 10 percent or more,
but less than 25 percent, of the total number of voting shares of the Company,
unless the Director has approved a rebuttal agreement filed by such person or
such person has filed a certification with the Director; (iii) any person (other
than the persons named as proxies solicited on behalf of the Board of Directors
of the Company) holds revocable or irrevocable proxies, as to the election or
removal of two or more directors of the Company, for 25 percent or more of the
total number of voting shares of the Company; (iv) any person has received the
approval of the Director under Section 10
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<PAGE>
of the Home Owners' Loan Act, as amended (the "Holding Company Act"), or
regulations issued thereunder, to acquire control of the Company; (v) any person
has received approval of the Director under Section 7(j) of the Federal Deposit
Insurance Act, as amended (the "Control Act"), or regulations issued thereunder,
to acquire control of the Company; (vi) any person has commenced a tender or
exchange offer, or entered into an agreement or received an option, to acquire
beneficial ownership of 25 percent or more of the total number of voting shares
of the Company, whether or not the requisite approval for such acquisition has
been received under the Holding Company Act, the Control Act, or the respective
regulations issued thereunder; or (vii) as the result of, or in connection with,
any cash tender or exchange offer, merger, or other business combination, sale
of assets or contested election, or any combination of the foregoing
transactions, the persons who were directors of the Company before such
transaction shall cease to constitute at least two-thirds of the Board of
Directors of the Company or any successor corporation. Notwithstanding the
foregoing, a "change in control" will not be deemed to have occurred under
clauses (ii), (iii), (iv), (v) or (vi) of this section 9(b), if within 30 days
of such action, the Board of Directors of the Company (by a two-thirds
affirmative vote of the directors in office before such action occurred) makes a
determination that such action does not and is not likely to constitute a
"change in control" of the Company. For purposes of this Section 9(b), a
"person" includes an individual, corporation, partnership, trust, association,
joint venture, pool, syndicate, unincorporated organization, joint-stock company
or similar organization or group acting in concert. A person for these purposes
shall be deemed to be a beneficial owner as that term is used in Rule 13d-3
under the Securities Exchange Act of 1934.
A "change in control" of the Bank, for purposes of this Agreement,
shall be deemed to have taken place if the Company's beneficial ownership of the
total number of voting shares of the Bank is reduced to less than 50 percent.
(c) Notwithstanding any other provisions of this Agreement or
of any other agreement, contract, or understanding heretofore or hereafter
entered into by the Employee with the Company or the Bank, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this Section 9(c) (the "Other Agreements"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Company or the Bank for the direct or indirect
provision of compensation to the Employee (including groups or classes of
participants or beneficiaries of which the Employee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Employee (a "Benefit Plan"), the Employee shall not have any right to
receive any payment or other benefit under this Agreement, any Other Agreement,
or any Benefit Plan if such payment or benefit, taking into account all other
payments or benefits to or for the Employee under this Agreement, all Other
Agreements, and all Benefit Plans, would cause any payment to the Employee under
this Agreement to be considered a "parachute payment" within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")
(a
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<PAGE>
"Parachute Payment"). In the event that the receipt of any such payment or
benefit under this Agreement, any Other Agreement, or any Benefit Plan would
cause the Employee to be considered to have received a Parachute Payment under
this Agreement, then the Employee shall have the right, in the Employee's sole
discretion, to designate those payments or benefits under this Agreement, any
Other Agreements, and/or any Benefit Plans, which should be reduced or
eliminated so as to avoid having the payment to the Employee under this
Agreement be deemed to be a Parachute Payment.
10. Disability. If the Employee shall become disabled or incapacitated
to the extent that the Employee is unable to perform the Employee's duties and
responsibilities hereunder, the Employee shall be entitled to receive disability
benefits of the type provided for other executive employees of the Company and
the Bank and the obligations of the Company and the Bank hereunder shall be
limited to providing such benefits for the period of such disability.
11. No Assignments. This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or obligations hereunder
without first obtaining the written consent of the other party hereto. However,
in the event of the death of the Employee all rights to receive payments
hereunder shall become rights of the Employee's estate.
12. Other Contracts. The Employee shall not, during the term of this
Agreement, have any other paid employment other than with a subsidiary of the
Company, except with the prior approval of the Boards of Directors of the
Company and the Bank.
13. Amendments or Additions; Action by Board of Directors. No
amendments or additions to this Agreement shall be binding unless in writing and
signed by all parties hereto. The prior approval by the Boards of Directors of
the Company and the Bank shall be required in order for the Company and the Bank
to authorize any amendments or additions to this Agreement, to give any consents
or waivers of provisions of this Agreement, or to take any other action under
this Agreement including any termination of employment with or without cause
under Section 8(a) hereof.
14. Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
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<PAGE>
16. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Connecticut, excluding the choice of law rules thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed on their behalf, as of
the day and year first above written.
Attest: WEBSTER FINANCIAL CORPORATION
/s/ John D. Benjamin By /s/ Robert A. Finkenzeller
- ------------------------------ ----------------------------------
Asst (Secretary) Its:
-----------------------------
Chairman, Personnel Resources
Committee
Attest: WEBSTER BANK
/s/ John D. Benjamin By /s/ Robert A. Finkenzeller
- ----------------------------- ---------------------------------
Asst (Secretary) Its:
-----------------------------
Chairman, Personnel Resources
Committee
EMPLOYEE
/s/ James C. Smith
-------------------------------------
James C. Smith
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Exhibit 10.30
-------------
LEE A. GAGNON
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1997, among WEBSTER BANK (the
"Bank"), WEBSTER FINANCIAL CORPORATION (the "Company") and LEE A. GAGNON (the
"Employee").
WHEREAS, the respective Boards of Directors of the Company and the Bank
have approved and authorized the entry into this Agreement with the Employee;
WHEREAS, the Employee is currently serving as Executive Vice President,
Chief Operating Officer and Secretary of both the Company and the Bank under an
Employment Agreement dated as of January 1, 1995 (the "Prior Agreement");
WHEREAS, the parties desire to enter into this Agreement to set forth
the terms and conditions for the employment relationships of the Employee with
the Company and the Bank and to replace and supersede the Prior Agreement.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Prior Agreement is hereby replaced and superseded
and the Prior Agreement shall be of no further force or effect after the date of
this Agreement. The Employee is employed as Executive Vice President, Chief
Operating Officer and Secretary of both the Company and the Bank from the date
hereof through the term of this Agreement. As an executive of the Company and of
the Bank, the Employee shall render executive, policy, and other management
services to the Company and the Bank of the type customarily performed by
persons serving in similar executive officer capacities. The Employee shall also
perform such duties as the Chief Executive Officer and the Boards of Directors
of the Company and of the Bank may from time to time reasonably direct. During
the term of this Agreement, there shall be no material increase or decrease in
the duties and responsibilities of the Employee otherwise than as provided
herein, unless the parties otherwise agree in writing. During the term of this
Agreement, the Employee shall not be required to relocate to an area more than
35 miles from the Bank's home office in order to perform the services hereunder.
2. Salary. The Bank agrees to pay the Employee during the term of this
Agreement a base salary as follows: from the date hereof through December 31,
1997, a salary at an annual rate equal to $200,000, which salary may be adjusted
in January of each subsequent year during the term of this Agreement as
determined by the Boards of Directors of the Company and the Bank. In
determining salary adjustments, the Board of Directors may compensate the
Employee for increases in the cost of living and may also provide for
performance or merit adjustments. The salary under this Section 2 shall be
payable by the Bank to the Employee not less frequently than monthly. The
Company shall reimburse the Bank for a portion of
<PAGE>
the salary paid to the Employee hereunder, which portion shall represent an
appropriate allocation for the services rendered to the Company hereunder. The
Employee shall not be entitled to receive fees for serving as a director of the
Company or of the Bank or for serving as a member of any committee of the Board
of Directors of the Company or of the Bank if he is elected to such positions.
3. Discretionary Bonuses. In addition to his salary under Section 2
hereof, the Employee shall be eligible to receive such discretionary bonuses as
may be authorized, declared, and paid by the Board of Directors of the Company
or of the Bank. No other compensation provided for in this Agreement shall be
deemed a substitute for such bonuses when and as declared by the Board of
Directors of the Company or the Bank.
4. Participation in Retirement and Employee Benefit Plans; Fringe
Benefits. The Employee shall be eligible to participate in any plan of the
Company or of the Bank relating to stock options, stock purchases, pension,
thrift, profit sharing, employee stock ownership, group life insurance, medical
coverage, disability insurance, education, or other retirement or employee
benefits that the Bank or the Company has adopted or may adopt for the benefit
of its executive employees. The Employee shall also be eligible to participate
in any other fringe benefits which are now or may be or become applicable to the
Company's or the Bank's executive employees. In addition, the Employee shall be
provided with a standard automobile or an automobile allowance for business use.
Participation in these plans and fringe benefits shall not reduce the salary
payable to the Employee under Section 2 hereof.
5. Term. The initial term of employment under this Agreement shall be
for a period commencing on the date hereof and ending on December 31, 1999. The
Company and the Bank may renew this Agreement by written notice to the Employee
for one additional year on December 31, 1997 and each subsequent December 31
during the term of this Agreement, unless the Employee gives contrary written
notice to the other parties hereto prior to such renewal date. Each initial term
and all such renewed terms are collectively referred to herein as the term of
this Agreement.
6. Standards. The Employee shall perform the Employee's duties and
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Boards of Directors of
the Company or the Bank. The reasonableness of such standards shall be measured
against standards for executive performance generally prevailing in the savings
institutions industry.
7. Voluntary Absences; Vacations. The Employee shall be entitled,
without loss of pay, to be absent voluntarily for reasonable periods of time
from the performance of the duties and responsibilities under this Agreement.
All such voluntary absences shall count as paid vacation time, unless the Board
of Directors of the Company or the Bank otherwise approves. The Employee shall
be entitled to an
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<PAGE>
annual paid vacation of at least four weeks per year or such longer period as
the Board of Directors of the Company or the Bank may approve. The timing of
paid vacations shall be scheduled in a reasonable manner by the Employee. The
Employee shall not be entitled (i) to receive any additional compensation from
the Bank on account of failure to take a paid vacation or (ii) to accumulate
more than two weeks of unused paid vacation time from one fiscal year to the
next.
8. Termination of Employment.
(a) (i) The Board of Directors of the Company or the Bank may
terminate the Employee's employment at any time, but any termination by such
Board of Directors other than termination for cause shall not prejudice the
Employee's right to compensation or other benefits under this Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for cause. The term "termination for cause" shall mean
termination because of the Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
In determining incompetence, the acts or omissions shall be measured against
standards generally prevailing in the savings institutions industry; provided,
that it shall be the Company's or the Bank's burden to prove the alleged acts
and omissions and the prevailing nature of the standards the Company or the Bank
shall have alleged are violated by such acts and/or omissions.
(ii) The parties acknowledge and agree that damages
which will result to Employee for termination without cause shall be extremely
difficult or impossible to establish or prove, and agree that, unless the
termination is for cause, the Bank shall be obligated, concurrently with such
termination, to make a lump sum cash payment to the Employee as liquidated
damages of an amount equal to the sum of (a) the Employee's then current annual
base salary under Section 2 of this Agreement and (b) the amount of any bonuses
paid to the Employee pursuant to the Webster Financial Corporation and Webster
Bank Annual Incentive Compensation Plan during the then current fiscal year
multiplied by a fraction the numerator of which is the number of full months
during the then current fiscal year in which the Employee was employed hereunder
and the denominator of which is 12. The Employee agrees that, except for such
other payments and benefits to which the Employee may be entitled as expressly
provided by the terms of this Agreement, such liquidated damages shall be in
lieu of all other claims which Employee may make by reason of such termination.
Such payment to the Employee shall be made on or before the Employee's last day
of employment with the Company or the Bank. The liquidated damages amount shall
not be reduced by any compensation which the Employee may receive for other
employment with another employer after termination of his employment with the
Company or the Bank.
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<PAGE>
(iii) In addition to the liquidated damages above described that are
payable to the Employee for termination without cause, the following shall apply
in the event of any termination without cause (other than a termination subject
to Section 9 hereof): (1) the Employee shall continue to be entitled to medical
and dental coverage as if his employment had not been terminated until the
earliest of (A) the expiration of one year after the date his employment
terminates, (B) the expiration of the remaining term of this Agreement under
Section 5, and (C) the date on which the Employee accepts other employment on a
substantially full time basis and (2) all insurance or other provisions for
indemnification, defense or hold-harmless of officers or directors of the
Company or the Bank which are in effect on the date the notice of termination is
sent to the Employee shall continue for the benefit of the Employee with respect
to all of his acts and omissions while an officer or director as fully and
completely as if such termination had not occurred, and until the final
expiration or running of all periods of limitation against action which may be
applicable to such acts or omissions.
(b) If the Employee is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, as amended, the
Company's and the Bank's obligations under this Agreement shall be suspended as
of the date of service, unless stayed by appropriate proceedings. If the charges
in the notice are dismissed, the Bank may in its discretion (i) pay the Employee
all or part of the compensation withheld while such contractual obligations were
suspended, and (ii) reinstate in whole or in part any of its obligations which
were suspended.
(c) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, as amended, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the parties shall not
be affected.
(d) If the Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act, as amended), all obligations under this
Agreement shall terminate as of the date of default, but this paragraph shall
not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary
for the continued operation of the Bank, (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee, at the time the
Federal Deposit Insurance Corporation or Resolution Trust Company enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act, as amended, or
(ii) by the Director or his or her designee at the time the Director or his or
her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director or his or
her designee to be in an unsafe or unsound
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<PAGE>
condition. Any rights of the parties that have already vested, however, shall
not be affected by any termination hereunder.
(f) The Employee shall have no right to terminate employment
under this Agreement prior to the end of the term of this Agreement, unless such
termination is approved by the Board of Directors of the Company or the Bank or
is in connection with or within two years after a change in control (as defined
in Section 9(b) hereof) of the Company or the Bank. In the event that the
Employee violates this provision, the Company and the Bank shall be entitled, in
addition to its other legal remedies, to enjoin the employment of the Employee
with any significant competitor of the Bank for a period of one year or the
remaining term of this Agreement plus six months, whichever is less. The term
"significant competitor" shall mean any commercial bank, savings bank, savings
and loan association, or mortgage banking company, or a holding company
affiliate of any of the foregoing, which at the date of its employment of the
Employee has an office out of which the Employee would be primarily based within
35 miles of the Bank's home office.
(g) In the event the employment of the Employee is terminated
by the Company or the Bank without cause under Section 8(a) hereof or the
Employee's employment is terminated voluntarily or involuntarily in accordance
with Section 9 hereof and the Bank fails to make timely payment of the amounts
then owed to the Employee under this Agreement, the Employee shall be entitled
to reimbursement for all reasonable costs, including attorneys' fees, incurred
by the Employee in taking action to collect such amounts or otherwise to enforce
this Agreement, plus interest on such amounts at the rate of one percent above
the prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by The Wall Street Journal), compounded
monthly, for the period from the date the payment is due to be paid to the
Employee until payment is made. Such reimbursement and interest shall be in
addition to all rights which the Employee is otherwise entitled to under this
Agreement.
(h) If during the term of this Agreement, the Employee's
employment with the Company and the Bank is terminated (whether voluntarily or
involuntarily), the Employee agrees to maintain the confidentiality of, and not
to use, any non-public information which he acquired during his employment
concerning the Company or the Bank, their respective subsidiaries, or any
director, officer, employee or agent of the aforesaid entities, including any
information as to the customers, business or personnel practices of such
entities. The Employee agrees, for a period of one year after the date of
termination of his employment with the Company and the Bank (other than in
connection with or within two years after a change in control (as defined in
Section 9(b) hereof) of the Company or the Bank), that he will not (i) offer
employment (or a consulting, agency, independent contractor or other similar
paid position) to any employee of the Company, the Bank or any of their
respective subsidiaries, or (ii) induce, encourage or solicit any such employee
to accept
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<PAGE>
employment (or any aforesaid position) with any company or entity with which the
Employee may then be employed or otherwise affiliated.
9. Change in Control.
(a) If during the term of this Agreement there is a change in
control of the Company or the Bank, the Employee shall be entitled to receive as
a severance payment for services previously rendered to the Company and the
Bank, a lump sum cash payment as provided for herein (subject to Section 9(c)
below) in the event the Employee's employment is terminated, voluntarily or
involuntarily, in connection with or within two years after the change in
control of the Company or the Bank, unless such termination is for cause (as
defined in Section 8(a)(i) hereof), is a voluntary termination without "Good
Reason" (as defined below) in connection with or after a "Technical Change" (as
defined below), or occurs by virtue of normal retirement, permanent and total
disability (as defined in Section 22(e) of the Code) or death. Subject to
Section 9(c) below, the amount of the payment shall be equal to (i) one year's
salary plus any bonuses paid during the then current fiscal year, if the
Employee voluntarily terminates his employment without Good Reason other than in
connection with or following a Technical Change or (ii) if the Employee's
termination of employment was either voluntary with Good Reason or involuntary,
(A) if such change in control of the Company or the Bank occurs before January
1, 1999, three times the Employee's average annual compensation that was payable
by the Company and the Bank and was includible in the Employee's gross income
for federal income tax purposes with respect to the five most recent taxable
years of the Employee ending prior to such change in control of the Company or
the Bank (or such portion of such period during which the Employee was a
full-time employee of the Company and the Bank), less one dollar, except as
provided below in the case of a Technical Change or (B) if such change in
control of the Company or the Bank occurs after December 31, 1998, two times the
Employee's annual base salary in effect immediately before the change in control
plus an amount equal to the aggregate amount of bonuses that were paid to the
Employee by the Company and the Bank during the 24 calendar months preceding the
change in control; provided, however, that the amount payable under clause
(ii)(A) above shall not exceed the amount that would be payable over a period
equal to the remaining term of this Agreement under Section 5 hereof, plus one
year, if the Employee's compensation for such period were at an annual rate
equal to the Employee's base salary under Section 2 hereof, determined as of the
time of termination, and bonuses paid during the fiscal year preceding the
fiscal year in which such change in control occurs, and provided, further, that
in the case of a Technical Change, no amount shall be payable under clause (i)
above and the amount payable under clause (ii) above shall be two times the
Employee's annual base salary in effect immediately before the change in
control, plus two times the amount of any bonuses paid during the fiscal year
preceding the fiscal year in which such change in control occurs. A "Technical
Change" shall mean a change in control described in Section 9(b)(vii) below (and
not described in any other subsection of Section 9(b)) in which the persons who
were directors of the
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<PAGE>
Company before the transaction described in such subsection shall constitute at
least 50% of the Board of Directors of the Company or any successor corporation.
"Good Reason" shall include a material reduction in the position, authority,
duties or responsibilities of the Employee from those which existed prior to the
change in control or a reduction in the Employee's job stature as reflected in
his title. If the Employee notifies the Boards of Directors of the Company and
the Bank that he intends to terminate his employment voluntarily for Good
Reason, he shall state in his notice the reasons why he believes that Good
Reason exists. Unless the Company and the Bank, within 30 days of the date of
the Employee's notice of resignation or termination, reject the Employee's
statement that Good Reason exists, the Employee's entitlement to the severance
payment payable under clause (ii) above shall be conclusive. If both Boards of
Directors reject the Employee's statement of Good Reason within such 30-day
period, the dispute shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof, but the Company and the Bank shall have the burden
of proving in such arbitration that their rejection of the Employee's statement
was proper. Payment under this Section 9(a) shall be in lieu of any amount owed
to the Employee as liquidated damages for termination without cause under
Section 8(a) hereof. However, payment under this Section 9(a) shall not be
reduced by any compensation which the Employee may receive from other employment
with another employer after termination of the Employee's employment. In
addition, subject to Section 9(c) below, in the case of any termination of
employment within the scope of this Section 9(a) for which a severance payment
is payable to the Employee, the following shall apply: (1) the Employee shall
also be entitled to continued medical, dental, group term life insurance and
long-term disability insurance coverage and to continued eligibility for
benefits under any other employee welfare benefit plan (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended)
in which he was eligible to participate before the change in control, on a basis
no less favorable to him than that in effect during the fiscal year preceding
the fiscal year in which the change in control occurs, as if his employment had
not been terminated, which coverage and eligibility shall continue: (A) in the
case of a voluntary termination of employment described in clause (i) above, for
one year after the termination or the remaining term of this Agreement,
whichever is less; (B) in the case of a termination described in clause (ii)
above and a change in control other than a Technical Change, for the remaining
term of this Agreement; or (C) in the case of a termination described in clause
(ii) above in connection with or following a Technical Change, for two years
after the termination or the remaining term of this Agreement, whichever is
less; and (2) all insurance or other provisions for indemnification, defense or
hold-harmless of officers or directors of the Company or the Bank that are in
effect on the date the notice of termination is given by or to the Employee
shall continue for the benefit of the Employee with respect to all of his acts
and omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final
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<PAGE>
expiration or running of all periods of limitation against action which may be
applicable to such acts or omissions.
(b) A "change in control" of the Company, for purposes of this
Agreement, shall be deemed to have taken place if: (i) any person becomes the
beneficial owner of 25 percent or more of the total number of voting shares of
the Company; (ii) any person becomes the beneficial owner of 10 percent or more,
but less than 25 percent, of the total number of voting shares of the Company,
unless the Director has approved a rebuttal agreement filed by such person or
such person has filed a certification with the Director; (iii) any person (other
than the persons named as proxies solicited on behalf of the Board of Directors
of the Company) holds revocable or irrevocable proxies, as to the election or
removal of two or more directors of the Company, for 25 percent or more of the
total number of voting shares of the Company; (iv) any person has received the
approval of the Director under Section 10 of the Home Owners' Loan Act, as
amended (the "Holding Company Act"), or regulations issued thereunder, to
acquire control of the Company; (v) any person has received approval of the
Director under Section 7(j) of the Federal Deposit Insurance Act, as amended
(the "Control Act"), or regulations issued thereunder, to acquire control of the
Company; (vi) any person has commenced a tender or exchange offer, or entered
into an agreement or received an option, to acquire beneficial ownership of 25
percent or more of the total number of voting shares of the Company, whether or
not the requisite approval for such acquisition has been received under the
Holding Company Act, the Control Act, or the respective regulations issued
thereunder; or (vii) as the result of, or in connection with, any cash tender or
exchange offer, merger, or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, the
persons who were directors of the Company before such transaction shall cease to
constitute at least two-thirds of the Board of Directors of the Company or any
successor corporation. Notwithstanding the foregoing, a "change in control" will
not be deemed to have occurred under clauses (ii), (iii), (iv), (v) or (vi) of
this section 9(b), if within 30 days of such action, the Board of Directors of
the Company (by a two-thirds affirmative vote of the directors in office before
such action occurred) makes a determination that such action does not and is not
likely to constitute a "change in control" of the Company. For purposes of this
Section 9(b), a "person" includes an individual, corporation, partnership,
trust, association, joint venture, pool, syndicate, unincorporated organization,
joint-stock company or similar organization or group acting in concert. A person
for these purposes shall be deemed to be a beneficial owner as that term is used
in Rule 13d-3 under the Securities Exchange Act of 1934.
A "change in control" of the Bank, for purposes of this
Agreement, shall be deemed to have taken place if the Company's beneficial
ownership of the total number of voting shares of the Bank is reduced to less
than 50 percent.
(c) Notwithstanding any other provisions of this Agreement or
of any other agreement, contract, or understanding heretofore or hereafter
entered into by the Employee with the Company or the Bank, except an agreement,
contract, or
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<PAGE>
understanding hereafter entered into that expressly modifies or excludes
application of this Section 9(c) (the "Other Agreements"), and notwithstanding
any formal or informal plan or other arrangement heretofore or hereafter adopted
by the Company or the Bank for the direct or indirect provision of compensation
to the Employee (including groups or classes of participants or beneficiaries of
which the Employee is a member), whether or not such compensation is deferred,
is in cash, or is in the form of a benefit to or for the Employee (a "Benefit
Plan"), the Employee shall not have any right to receive any payment or other
benefit under this Agreement, any Other Agreement, or any Benefit Plan if such
payment or benefit, taking into account all other payments or benefits to or for
the Employee under this Agreement, all Other Agreements, and all Benefit Plans,
would cause any payment to the Employee under this Agreement to be considered a
"parachute payment" within the meaning of Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended (the "Code") (a "Parachute Payment"). In the
event that the receipt of any such payment or benefit under this Agreement, any
Other Agreement, or any Benefit Plan would cause the Employee to be considered
to have received a Parachute Payment under this Agreement, then the Employee
shall have the right, in the Employee's sole discretion, to designate those
payments or benefits under this Agreement, any Other Agreements, and/or any
Benefit Plans, which should be reduced or eliminated so as to avoid having the
payment to the Employee under this Agreement be deemed to be a Parachute
Payment.
10. Disability. If the Employee shall become disabled or incapacitated
to the extent that the Employee is unable to perform the Employee's duties and
responsibilities hereunder, the Employee shall be entitled to receive disability
benefits of the type provided for other executive employees of the Company and
the Bank and the obligations of the Company and the Bank hereunder shall be
limited to providing such benefits for the period of such disability.
11. No Assignments. This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or obligations hereunder
without first obtaining the written consent of the other party hereto. However,
in the event of the death of the Employee all rights to receive payments
hereunder shall become rights of the Employee's estate.
12. Other Contracts. The Employee shall not, during the term of this
Agreement, have any other paid employment other than with a subsidiary of the
Company, except with the prior approval of the Boards of Directors of the
Company and the Bank.
13. Amendments or Additions; Action by Board of Directors. No
amendments or additions to this Agreement shall be binding unless in writing and
signed by all parties hereto. The prior approval by the Boards of Directors of
the Company and the Bank shall be required in order for the Company and the Bank
to authorize any amendments or additions to this Agreement, to give any consents
or waivers of provisions of this Agreement, or to take any other action under
this
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<PAGE>
Agreement including any termination of employment with or without cause under
Section 8(a) hereof.
14. Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Connecticut, excluding the choice of law rules thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed on their behalf, as of
the day and year first above written.
Attest: WEBSTER FINANCIAL CORPORATION
/s/ Renee P. Seefried By /s/ James C. Smith
- ---------------------------------- --------------------------
Chief Executive Officer
Attest: WEBSTER BANK
/s/ Renee P. Seefried By /s/ James C. Smith
- ---------------------------------- --------------------------
Chief Executive Officer
EMPLOYEE
/s/ Lee A. Gagnon
-----------------------------
Lee A. Gagnon
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Exhibit 10.31
-------------
JOHN V. BRENNAN
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1997, among WEBSTER BANK (the
"Bank"), WEBSTER FINANCIAL CORPORATION (the "Company") and JOHN V. BRENNAN (the
"Employee").
WHEREAS, the respective Boards of Directors of the Company and the Bank
have approved and authorized the entry into this Agreement with the Employee;
WHEREAS, the Employee is currently serving as Executive Vice President,
Treasurer and Chief Financial Officer of both the Company and the Bank under an
Employment Agreement dated as of January 1, 1995 (the "Prior Agreement");
WHEREAS, the parties desire to enter into this Agreement to set forth
the terms and conditions for the employment relationships of the Employee with
the Company and the Bank and to replace and supersede the Prior Agreement.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Prior Agreement is hereby replaced and superseded
and the Prior Agreement shall be of no further force or effect after the date of
this Agreement. The Employee is employed as Executive Vice President, Treasurer
and Chief Financial Officer of both the Company and the Bank from the date
hereof through the term of this Agreement. As an executive of the Company and of
the Bank, the Employee shall render executive, policy, and other management
services to the Company and the Bank of the type customarily performed by
persons serving in similar executive officer capacities. The Employee shall also
perform such duties as the Chief Executive Officer and the Boards of Directors
of the Company and of the Bank may from time to time reasonably direct. During
the term of this Agreement, there shall be no material increase or decrease in
the duties and responsibilities of the Employee otherwise than as provided
herein, unless the parties otherwise agree in writing. During the term of this
Agreement, the Employee shall not be required to relocate to an area more than
35 miles from the Bank's home office in order to perform the services hereunder.
2. Salary. The Bank agrees to pay the Employee during the term of this
Agreement a base salary as follows: from the date hereof through December 31,
1997, a salary at an annual rate equal to $200,000, which salary may be adjusted
in January of each subsequent year during the term of this Agreement as
determined by the Boards of Directors of the Company and the Bank. In
determining salary adjustments, the Board of Directors may compensate the
Employee for increases in the cost of living and may also provide for
performance or merit adjustments. The salary under this Section 2 shall be
payable by the Bank to the Employee not less frequently than monthly. The
Company shall reimburse the Bank for a portion of
<PAGE>
the salary paid to the Employee hereunder, which portion shall represent an
appropriate allocation for the services rendered to the Company hereunder. The
Employee shall not be entitled to receive fees for serving as a director of the
Company or of the Bank or for serving as a member of any committee of the Board
of Directors of the Company or of the Bank if he is elected to such positions.
3. Discretionary Bonuses. In addition to his salary under Section 2
hereof, the Employee shall be eligible to receive such discretionary bonuses as
may be authorized, declared, and paid by the Board of Directors of the Company
or of the Bank. No other compensation provided for in this Agreement shall be
deemed a substitute for such bonuses when and as declared by the Board of
Directors of the Company or the Bank.
4. Participation in Retirement and Employee Benefit Plans; Fringe
Benefits. The Employee shall be eligible to participate in any plan of the
Company or of the Bank relating to stock options, stock purchases, pension,
thrift, profit sharing, employee stock ownership, group life insurance, medical
coverage, disability insurance, education, or other retirement or employee
benefits that the Bank or the Company has adopted or may adopt for the benefit
of its executive employees. The Employee shall also be eligible to participate
in any other fringe benefits which are now or may be or become applicable to the
Company's or the Bank's executive employees. In addition, the Employee shall be
provided with a standard automobile or an automobile allowance for business use.
Participation in these plans and fringe benefits shall not reduce the salary
payable to the Employee under Section 2 hereof.
5. Term. The initial term of employment under this Agreement shall be
for a period commencing on the date hereof and ending on December 31, 1999. The
Company and the Bank may renew this Agreement by written notice to the Employee
for one additional year on December 31, 1997 and each subsequent December 31
during the term of this Agreement, unless the Employee gives contrary written
notice to the other parties hereto prior to such renewal date. Each initial term
and all such renewed terms are collectively referred to herein as the term of
this Agreement.
6. Standards. The Employee shall perform the Employee's duties and
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Boards of Directors of
the Company or the Bank. The reasonableness of such standards shall be measured
against standards for executive performance generally prevailing in the savings
institutions industry.
7. Voluntary Absences; Vacations. The Employee shall be entitled,
without loss of pay, to be absent voluntarily for reasonable periods of time
from the performance of the duties and responsibilities under this Agreement.
All such voluntary absences shall count as paid vacation time, unless the Board
of Directors of the Company or the Bank otherwise approves. The Employee shall
be entitled to an
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<PAGE>
annual paid vacation of at least four weeks per year or such longer period as
the Board of Directors of the Company or the Bank may approve. The timing of
paid vacations shall be scheduled in a reasonable manner by the Employee. The
Employee shall not be entitled (i) to receive any additional compensation from
the Bank on account of failure to take a paid vacation or (ii) to accumulate
more than two weeks of unused paid vacation time from one fiscal year to the
next.
8. Termination of Employment.
(a) (i) The Board of Directors of the Company or the Bank may
terminate the Employee's employment at any time, but any termination by such
Board of Directors other than termination for cause shall not prejudice the
Employee's right to compensation or other benefits under this Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for cause. The term "termination for cause" shall mean
termination because of the Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
In determining incompetence, the acts or omissions shall be measured against
standards generally prevailing in the savings institutions industry; provided,
that it shall be the Company's or the Bank's burden to prove the alleged acts
and omissions and the prevailing nature of the standards the Company or the Bank
shall have alleged are violated by such acts and/or omissions.
(ii) The parties acknowledge and agree that damages
which will result to Employee for termination without cause shall be extremely
difficult or impossible to establish or prove, and agree that, unless the
termination is for cause, the Bank shall be obligated, concurrently with such
termination, to make a lump sum cash payment to the Employee as liquidated
damages of an amount equal to the sum of (a) the Employee's then current annual
base salary under Section 2 of this Agreement and (b) the amount of any bonuses
paid to the Employee pursuant to the Webster Financial Corporation and Webster
Bank Annual Incentive Compensation Plan during the then current fiscal year
multiplied by a fraction the numerator of which is the number of full months
during the then current fiscal year in which the Employee was employed hereunder
and the denominator of which is 12. The Employee agrees that, except for such
other payments and benefits to which the Employee may be entitled as expressly
provided by the terms of this Agreement, such liquidated damages shall be in
lieu of all other claims which Employee may make by reason of such termination.
Such payment to the Employee shall be made on or before the Employee's last day
of employment with the Company or the Bank. The liquidated damages amount shall
not be reduced by any compensation which the Employee may receive for other
employment with another employer after termination of his employment with the
Company or the Bank.
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<PAGE>
(iii) In addition to the liquidated damages above described that are
payable to the Employee for termination without cause, the following shall apply
in the event of any termination without cause (other than a termination subject
to Section 9 hereof): (1) the Employee shall continue to be entitled to medical
and dental coverage as if his employment had not been terminated until the
earliest of (A) the expiration of one year after the date his employment
terminates, (B) the expiration of the remaining term of this Agreement under
Section 5, and (C) the date on which the Employee accepts other employment on a
substantially full time basis and (2) all insurance or other provisions for
indemnification, defense or hold-harmless of officers or directors of the
Company or the Bank which are in effect on the date the notice of termination is
sent to the Employee shall continue for the benefit of the Employee with respect
to all of his acts and omissions while an officer or director as fully and
completely as if such termination had not occurred, and until the final
expiration or running of all periods of limitation against action which may be
applicable to such acts or omissions.
(b) If the Employee is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, as amended, the
Company's and the Bank's obligations under this Agreement shall be suspended as
of the date of service, unless stayed by appropriate proceedings. If the charges
in the notice are dismissed, the Bank may in its discretion (i) pay the Employee
all or part of the compensation withheld while such contractual obligations were
suspended, and (ii) reinstate in whole or in part any of its obligations which
were suspended.
(c) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, as amended, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the parties shall not
be affected.
(d) If the Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act, as amended), all obligations under this
Agreement shall terminate as of the date of default, but this paragraph shall
not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary
for the continued operation of the Bank, (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee, at the time the
Federal Deposit Insurance Corporation or Resolution Trust Company enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act, as amended, or
(ii) by the Director or his or her designee at the time the Director or his or
her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director or his or
her designee to be in an unsafe or unsound
<PAGE>
condition. Any rights of the parties that have already vested, however, shall
not be affected by any termination hereunder.
(f) The Employee shall have no right to terminate employment
under this Agreement prior to the end of the term of this Agreement, unless such
termination is approved by the Board of Directors of the Company or the Bank or
is in connection with or within two years after a change in control (as defined
in Section 9(b) hereof) of the Company or the Bank. In the event that the
Employee violates this provision, the Company and the Bank shall be entitled, in
addition to its other legal remedies, to enjoin the employment of the Employee
with any significant competitor of the Bank for a period of one year or the
remaining term of this Agreement plus six months, whichever is less. The term
"significant competitor" shall mean any commercial bank, savings bank, savings
and loan association, or mortgage banking company, or a holding company
affiliate of any of the foregoing, which at the date of its employment of the
Employee has an office out of which the Employee would be primarily based within
35 miles of the Bank's home office.
(g) In the event the employment of the Employee is terminated
by the Company or the Bank without cause under Section 8(a) hereof or the
Employee's employment is terminated voluntarily or involuntarily in accordance
with Section 9 hereof and the Bank fails to make timely payment of the amounts
then owed to the Employee under this Agreement, the Employee shall be entitled
to reimbursement for all reasonable costs, including attorneys' fees, incurred
by the Employee in taking action to collect such amounts or otherwise to enforce
this Agreement, plus interest on such amounts at the rate of one percent above
the prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by The Wall Street Journal), compounded
monthly, for the period from the date the payment is due to be paid to the
Employee until payment is made. Such reimbursement and interest shall be in
addition to all rights which the Employee is otherwise entitled to under this
Agreement.
(h) If during the term of this Agreement, the Employee's
employment with the Company and the Bank is terminated (whether voluntarily or
involuntarily), the Employee agrees to maintain the confidentiality of, and not
to use, any non-public information which he acquired during his employment
concerning the Company or the Bank, their respective subsidiaries, or any
director, officer, employee or agent of the aforesaid entities, including any
information as to the customers, business or personnel practices of such
entities. The Employee agrees, for a period of one year after the date of
termination of his employment with the Company and the Bank (other than in
connection with or within two years after a change in control (as defined in
Section 9(b) hereof) of the Company or the Bank), that he will not (i) offer
employment (or a consulting, agency, independent contractor or other similar
paid position) to any employee of the Company, the Bank or any of their
respective subsidiaries, or (ii) induce, encourage or solicit any such employee
to accept
<PAGE>
employment (or any aforesaid position) with any company or entity with which the
Employee may then be employed or otherwise affiliated.
9. Change in Control.
(a) If during the term of this Agreement there is a change in
control of the Company or the Bank, the Employee shall be entitled to receive as
a severance payment for services previously rendered to the Company and the
Bank, a lump sum cash payment as provided for herein (subject to Section 9(c)
below) in the event the Employee's employment is terminated, voluntarily or
involuntarily, in connection with or within two years after the change in
control of the Company or the Bank, unless such termination is for cause (as
defined in Section 8(a)(i) hereof), is a voluntary termination without "Good
Reason" (as defined below) in connection with or after a "Technical Change" (as
defined below), or occurs by virtue of normal retirement, permanent and total
disability (as defined in Section 22(e) of the Code) or death. Subject to
Section 9(c) below, the amount of the payment shall be equal to (i) one year's
salary plus any bonuses paid during the then current fiscal year, if the
Employee voluntarily terminates his employment without Good Reason other than in
connection with or following a Technical Change or (ii) if the Employee's
termination of employment was either voluntary with Good Reason or involuntary,
(A) if such change in control of the Company or the Bank occurs before January
1, 1999, three times the Employee's average annual compensation that was payable
by the Company and the Bank and was includible in the Employee's gross income
for federal income tax purposes with respect to the five most recent taxable
years of the Employee ending prior to such change in control of the Company or
the Bank (or such portion of such period during which the Employee was a
full-time employee of the Company and the Bank), less one dollar, except as
provided below in the case of a Technical Change or (B) if such change in
control of the Company or the Bank occurs after December 31, 1998, two times the
Employee's annual base salary in effect immediately before the change in control
plus an amount equal to the aggregate amount of bonuses that were paid to the
Employee by the Company and the Bank during the 24 calendar months preceding the
change in control; provided, however, that the amount payable under clause
(ii)(A) above shall not exceed the amount that would be payable over a period
equal to the remaining term of this Agreement under Section 5 hereof, plus one
year, if the Employee's compensation for such period were at an annual rate
equal to the Employee's base salary under Section 2 hereof, determined as of the
time of termination, and bonuses paid during the fiscal year preceding the
fiscal year in which such change in control occurs, and provided, further, that
in the case of a Technical Change, no amount shall be payable under clause (i)
above and the amount payable under clause (ii) above shall be two times the
Employee's annual base salary in effect immediately before the change in
control, plus two times the amount of any bonuses paid during the fiscal year
preceding the fiscal year in which such change in control occurs. A "Technical
Change" shall mean a change in control described in Section 9(b)(vii) below (and
not described in any other subsection of Section 9(b)) in which the persons who
were directors of the
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<PAGE>
Company before the transaction described in such subsection shall constitute at
least 50% of the Board of Directors of the Company or any successor corporation.
"Good Reason" shall include a material reduction in the position, authority,
duties or responsibilities of the Employee from those which existed prior to the
change in control or a reduction in the Employee's job stature as reflected in
his title. If the Employee notifies the Boards of Directors of the Company and
the Bank that he intends to terminate his employment voluntarily for Good
Reason, he shall state in his notice the reasons why he believes that Good
Reason exists. Unless the Company and the Bank, within 30 days of the date of
the Employee's notice of resignation or termination, reject the Employee's
statement that Good Reason exists, the Employee's entitlement to the severance
payment payable under clause (ii) above shall be conclusive. If both Boards of
Directors reject the Employee's statement of Good Reason within such 30-day
period, the dispute shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof, but the Company and the Bank shall have the burden
of proving in such arbitration that their rejection of the Employee's statement
was proper. Payment under this Section 9(a) shall be in lieu of any amount owed
to the Employee as liquidated damages for termination without cause under
Section 8(a) hereof. However, payment under this Section 9(a) shall not be
reduced by any compensation which the Employee may receive from other employment
with another employer after termination of the Employee's employment. In
addition, subject to Section 9(c) below, in the case of any termination of
employment within the scope of this Section 9(a) for which a severance payment
is payable to the Employee, the following shall apply: (1) the Employee shall
also be entitled to continued medical, dental, group term life insurance and
long-term disability insurance coverage and to continued eligibility for
benefits under any other employee welfare benefit plan (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended)
in which he was eligible to participate before the change in control, on a basis
no less favorable to him than that in effect during the fiscal year preceding
the fiscal year in which the change in control occurs, as if his employment had
not been terminated, which coverage and eligibility shall continue: (A) in the
case of a voluntary termination of employment described in clause (i) above, for
one year after the termination or the remaining term of this Agreement,
whichever is less; (B) in the case of a termination described in clause (ii)
above and a change in control other than a Technical Change, for the remaining
term of this Agreement; or (C) in the case of a termination described in clause
(ii) above in connection with or following a Technical Change, for two years
after the termination or the remaining term of this Agreement, whichever is
less; and (2) all insurance or other provisions for indemnification, defense or
hold-harmless of officers or directors of the Company or the Bank that are in
effect on the date the notice of termination is given by or to the Employee
shall continue for the benefit of the Employee with respect to all of his acts
and omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final
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<PAGE>
expiration or running of all periods of limitation against action which may be
applicable to such acts or omissions.
(b) A "change in control" of the Company, for purposes of this
Agreement, shall be deemed to have taken place if: (i) any person becomes the
beneficial owner of 25 percent or more of the total number of voting shares of
the Company; (ii) any person becomes the beneficial owner of 10 percent or more,
but less than 25 percent, of the total number of voting shares of the Company,
unless the Director has approved a rebuttal agreement filed by such person or
such person has filed a certification with the Director; (iii) any person (other
than the persons named as proxies solicited on behalf of the Board of Directors
of the Company) holds revocable or irrevocable proxies, as to the election or
removal of two or more directors of the Company, for 25 percent or more of the
total number of voting shares of the Company; (iv) any person has received the
approval of the Director under Section 10 of the Home Owners' Loan Act, as
amended (the "Holding Company Act"), or regulations issued thereunder, to
acquire control of the Company; (v) any person has received approval of the
Director under Section 7(j) of the Federal Deposit Insurance Act, as amended
(the "Control Act"), or regulations issued thereunder, to acquire control of the
Company; (vi) any person has commenced a tender or exchange offer, or entered
into an agreement or received an option, to acquire beneficial ownership of 25
percent or more of the total number of voting shares of the Company, whether or
not the requisite approval for such acquisition has been received under the
Holding Company Act, the Control Act, or the respective regulations issued
thereunder; or (vii) as the result of, or in connection with, any cash tender or
exchange offer, merger, or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, the
persons who were directors of the Company before such transaction shall cease to
constitute at least two-thirds of the Board of Directors of the Company or any
successor corporation. Notwithstanding the foregoing, a "change in control" will
not be deemed to have occurred under clauses (ii), (iii), (iv), (v) or (vi) of
this section 9(b), if within 30 days of such action, the Board of Directors of
the Company (by a two-thirds affirmative vote of the directors in office before
such action occurred) makes a determination that such action does not and is not
likely to constitute a "change in control" of the Company. For purposes of this
Section 9(b), a "person" includes an individual, corporation, partnership,
trust, association, joint venture, pool, syndicate, unincorporated organization,
joint-stock company or similar organization or group acting in concert. A person
for these purposes shall be deemed to be a beneficial owner as that term is used
in Rule 13d-3 under the Securities Exchange Act of 1934.
A "change in control" of the Bank, for purposes of this
Agreement, shall be deemed to have taken place if the Company's beneficial
ownership of the total number of voting shares of the Bank is reduced to less
than 50 percent.
(c) Notwithstanding any other provisions of this Agreement or
of any other agreement, contract, or understanding heretofore or hereafter
entered into by the Employee with the Company or the Bank, except an agreement,
contract, or
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<PAGE>
understanding hereafter entered into that expressly modifies or excludes
application of this Section 9(c) (the "Other Agreements"), and notwithstanding
any formal or informal plan or other arrangement heretofore or hereafter adopted
by the Company or the Bank for the direct or indirect provision of compensation
to the Employee (including groups or classes of participants or beneficiaries of
which the Employee is a member), whether or not such compensation is deferred,
is in cash, or is in the form of a benefit to or for the Employee (a "Benefit
Plan"), the Employee shall not have any right to receive any payment or other
benefit under this Agreement, any Other Agreement, or any Benefit Plan if such
payment or benefit, taking into account all other payments or benefits to or for
the Employee under this Agreement, all Other Agreements, and all Benefit Plans,
would cause any payment to the Employee under this Agreement to be considered a
"parachute payment" within the meaning of Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended (the "Code") (a "Parachute Payment"). In the
event that the receipt of any such payment or benefit under this Agreement, any
Other Agreement, or any Benefit Plan would cause the Employee to be considered
to have received a Parachute Payment under this Agreement, then the Employee
shall have the right, in the Employee's sole discretion, to designate those
payments or benefits under this Agreement, any Other Agreements, and/or any
Benefit Plans, which should be reduced or eliminated so as to avoid having the
payment to the Employee under this Agreement be deemed to be a Parachute
Payment.
10. Disability. If the Employee shall become disabled or incapacitated
to the extent that the Employee is unable to perform the Employee's duties and
responsibilities hereunder, the Employee shall be entitled to receive disability
benefits of the type provided for other executive employees of the Company and
the Bank and the obligations of the Company and the Bank hereunder shall be
limited to providing such benefits for the period of such disability.
11. No Assignments. This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or obligations hereunder
without first obtaining the written consent of the other party hereto. However,
in the event of the death of the Employee all rights to receive payments
hereunder shall become rights of the Employee's estate.
12. Other Contracts. The Employee shall not, during the term of this
Agreement, have any other paid employment other than with a subsidiary of the
Company, except with the prior approval of the Boards of Directors of the
Company and the Bank.
13. Amendments or Additions; Action by Board of Directors. No
amendments or additions to this Agreement shall be binding unless in writing and
signed by all parties hereto. The prior approval by the Boards of Directors of
the Company and the Bank shall be required in order for the Company and the Bank
to authorize any amendments or additions to this Agreement, to give any consents
or waivers of provisions of this Agreement, or to take any other action under
this
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<PAGE>
Agreement including any termination of employment with or without cause under
Section 8(a) hereof.
14. Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Connecticut, excluding the choice of law rules thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed on their behalf, as of
the day and year first above written.
Attest: WEBSTER FINANCIAL CORPORATION
/s/ Renee P. Seefried By /s/ James C. Smith
- ---------------------------- --------------------------
Chief Executive Officer
Attest: WEBSTER BANK
/s/ Renee P. Seefried By /s/ James C. Smith
- ---------------------------- --------------------------
Chief Executive Officer
EMPLOYEE
/s/ John V. Brennan
-----------------------------
John V. Brennan
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Exhibit 10.32
-------------
ROSS M. STRICKLAND
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1997, among WEBSTER BANK (the
"Bank"), WEBSTER FINANCIAL CORPORATION (the "Company") and ROSS M. STRICKLAND
(the "Employee").
WHEREAS, the respective Boards of Directors of the Company and the Bank
have approved and authorized the entry into this Agreement with the Employee;
WHEREAS, the Employee is currently serving as Executive Vice President
of Mortgage Banking of both the Company and the Bank under an Employment
Agreement dated as of January 1, 1995 (the "Prior Agreement");
WHEREAS, the parties desire to enter into this Agreement to set forth
the terms and conditions for the employment relationships of the Employee with
the Company and the Bank and to replace and supersede the Prior Agreement.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Prior Agreement is hereby replaced and superseded
and the Prior Agreement shall be of no further force or effect after the date of
this Agreement. The Employee is employed as Executive Vice President of Mortgage
Banking of both the Company and the Bank from the date hereof through the term
of this Agreement. As an executive of the Company and of the Bank, the Employee
shall render executive, policy, and other management services to the Company and
the Bank of the type customarily performed by persons serving in similar
executive officer capacities. The Employee shall also perform such duties as the
Chief Executive Officer and the Boards of Directors of the Company and of the
Bank may from time to time reasonably direct. During the term of this Agreement,
there shall be no material increase or decrease in the duties and
responsibilities of the Employee otherwise than as provided herein, unless the
parties otherwise agree in writing. During the term of this Agreement, the
Employee shall not be required to relocate to an area more than 35 miles from
the Bank's home office in order to perform the services hereunder.
2. Salary. The Bank agrees to pay the Employee during the term of this
Agreement a base salary as follows: from the date hereof through December 31,
1997, a salary at an annual rate equal to $170,000, which salary may be adjusted
in January of each subsequent year during the term of this Agreement as
determined by the Boards of Directors of the Company and the Bank. In
determining salary adjustments, the Board of Directors may compensate the
Employee for increases in the cost of living and may also provide for
performance or merit adjustments. The salary of the Employee shall not be
decreased from the amount then in effect at any time before January 1, 1998,
unless the Employee otherwise agrees in writing. The
<PAGE>
salary under this Section 2 shall be payable by the Bank to the Employee not
less frequently than monthly. The Company shall reimburse the Bank for a portion
of the salary paid to the Employee hereunder, which portion shall represent an
appropriate allocation for the services rendered to the Company hereunder. The
Employee shall not be entitled to receive fees for serving as a director of the
Company or of the Bank or for serving as a member of any committee of the Board
of Directors of the Company or of the Bank if he is elected to such positions.
3. Discretionary Bonuses. In addition to his salary under Section 2
hereof, the Employee shall be eligible to receive such discretionary bonuses as
may be authorized, declared, and paid by the Board of Directors of the Company
or of the Bank. No other compensation provided for in this Agreement shall be
deemed a substitute for such bonuses when and as declared by the Board of
Directors of the Company or the Bank.
4. Participation in Retirement and Employee Benefit Plans; Fringe
Benefits. The Employee shall be eligible to participate in any plan of the
Company or of the Bank relating to stock options, stock purchases, pension,
thrift, profit sharing, employee stock ownership, group life insurance, medical
coverage, disability insurance, education, or other retirement or employee
benefits that the Bank or the Company has adopted or may adopt for the benefit
of its executive employees. The Employee shall also be eligible to participate
in any other fringe benefits which are now or may be or become applicable to the
Company's or the Bank's executive employees. In addition, the Employee shall be
provided with a standard automobile or an automobile allowance for business use.
Participation in these plans and fringe benefits shall not reduce the salary
payable to the Employee under Section 2 hereof.
5. Term. The initial term of employment under this Agreement shall be
for a period commencing on the date hereof and ending on December 31, 1999. The
Company and the Bank may renew this Agreement by written notice to the Employee
for one additional year on December 31, 1997 and each subsequent December 31
during the term of this Agreement, unless the Employee gives contrary written
notice to the other parties hereto prior to such renewal date. Each initial term
and all such renewed terms are collectively referred to herein as the term of
this Agreement.
6. Standards. The Employee shall perform the Employee's duties and
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Boards of Directors of
the Company or the Bank. The reasonableness of such standards shall be measured
against standards for executive performance generally prevailing in the savings
institutions industry.
7. Voluntary Absences; Vacations. The Employee shall be entitled,
without loss of pay, to be absent voluntarily for reasonable periods of time
from the performance of the duties and responsibilities under this Agreement.
All such
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<PAGE>
voluntary absences shall count as paid vacation time, unless the Board of
Directors of the Company or the Bank otherwise approves. The Employee shall be
entitled to an annual paid vacation of at least four weeks per year or such
longer period as the Board of Directors of the Company or the Bank may approve.
The timing of paid vacations shall be scheduled in a reasonable manner by the
Employee. The Employee shall not be entitled (i) to receive any additional
compensation from the Bank on account of failure to take a paid vacation or (ii)
to accumulate more than two weeks of unused paid vacation time from one fiscal
year to the next.
8. Termination of Employment.
(a) (i) The Board of Directors of the Company or the Bank may
terminate the Employee's employment at any time, but any termination by such
Board of Directors other than termination for cause shall not prejudice the
Employee's right to compensation or other benefits under this Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for cause. The term "termination for cause" shall mean
termination because of the Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
In determining incompetence, the acts or omissions shall be measured against
standards generally prevailing in the savings institutions industry; provided,
that it shall be the Company's or the Bank's burden to prove the alleged acts
and omissions and the prevailing nature of the standards the Company or the Bank
shall have alleged are violated by such acts and/or omissions.
(ii) The parties acknowledge and agree that damages
which will result to Employee for termination without cause shall be extremely
difficult or impossible to establish or prove, and agree that, unless the
termination is for cause, the Bank shall be obligated, concurrently with such
termination, to make a lump sum cash payment to the Employee as liquidated
damages of an amount equal to the sum of (a) the Employee's then current annual
base salary under Section 2 of this Agreement and (b) the amount of any bonuses
paid to the Employee pursuant to the Webster Financial Corporation and Webster
Bank Annual Incentive Compensation Plan during the then current fiscal year
multiplied by a fraction the numerator of which is the number of full months
during the then current fiscal year in which the Employee was employed hereunder
and the denominator of which is 12; provided, that if such termination occurs
before December 31, 1997, the amount of such payment shall not be less than
$200,000. The Employee agrees that, except for such other payments and benefits
to which the Employee may be entitled as expressly provided by the terms of this
Agreement, such liquidated damages shall be in lieu of all other claims which
Employee may make by reason of such termination. Such payment to the Employee
shall be made on or before the Employee's last day of
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<PAGE>
employment with the Company or the Bank. The liquidated damages amount shall not
be reduced by any compensation which the Employee may receive for other
employment with another employer after termination of his employment with the
Company or the Bank.
(iii) In addition to the liquidated damages above
described that are payable to the Employee for termination without cause, the
following shall apply in the event of any termination without cause (other than
a termination subject to Section 9 hereof): (1) the Employee shall continue to
be entitled to medical and dental coverage as if his employment had not been
terminated until the earliest of (A) the expiration of one year after the date
his employment terminates, (B) the expiration of the remaining term of this
Agreement under Section 5, and (C) the date on which the Employee accepts other
employment on a substantially full time basis and (2) all insurance or other
provisions for indemnification, defense or hold-harmless of officers or
directors of the Company or the Bank which are in effect on the date the notice
of termination is sent to the Employee shall continue for the benefit of the
Employee with respect to all of his acts and omissions while an officer or
director as fully and completely as if such termination had not occurred, and
until the final expiration or running of all periods of limitation against
action which may be applicable to such acts or omissions.
(b) If the Employee is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, as amended, the
Company's and the Bank's obligations under this Agreement shall be suspended as
of the date of service, unless stayed by appropriate proceedings. If the charges
in the notice are dismissed, the Bank may in its discretion (i) pay the Employee
all or part of the compensation withheld while such contractual obligations were
suspended, and (ii) reinstate in whole or in part any of its obligations which
were suspended.
(c) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, as amended, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the parties shall not
be affected.
(d) If the Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act, as amended), all obligations under this
Agreement shall terminate as of the date of default, but this paragraph shall
not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary
for the continued operation of the Bank, (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee, at the time the
Federal Deposit Insurance Corporation or Resolution Trust Company enters into an
agreement to provide
-4-
<PAGE>
assistance to or on behalf of the Bank under the authority contained in Section
13(c) of the Federal Deposit Insurance Act, as amended, or (ii) by the Director
or his or her designee at the time the Director or his or her designee approves
a supervisory merger to resolve problems related to operation of the Bank or
when the Bank is determined by the Director or his or her designee to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by any termination hereunder.
(f) The Employee shall have no right to terminate employment
under this Agreement prior to the end of the term of this Agreement, unless such
termination is approved by the Board of Directors of the Company or the Bank or
is in connection with or within two years after a change in control (as defined
in Section 9(b) hereof) of the Company or the Bank. In the event that the
Employee violates this provision, the Company and the Bank shall be entitled, in
addition to its other legal remedies, to enjoin the employment of the Employee
with any significant competitor of the Bank for a period of one year or the
remaining term of this Agreement plus six months, whichever is less. The term
"significant competitor" shall mean any commercial bank, savings bank, savings
and loan association, or mortgage banking company, or a holding company
affiliate of any of the foregoing, which at the date of its employment of the
Employee has an office out of which the Employee would be primarily based within
35 miles of the Bank's home office.
(g) In the event the employment of the Employee is terminated
by the Company or the Bank without cause under Section 8(a) hereof or the
Employee's employment is terminated voluntarily or involuntarily in accordance
with Section 9 hereof and the Bank fails to make timely payment of the amounts
then owed to the Employee under this Agreement, the Employee shall be entitled
to reimbursement for all reasonable costs, including attorneys' fees, incurred
by the Employee in taking action to collect such amounts or otherwise to enforce
this Agreement, plus interest on such amounts at the rate of one percent above
the prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by The Wall Street Journal), compounded
monthly, for the period from the date the payment is due to be paid to the
Employee until payment is made. Such reimbursement and interest shall be in
addition to all rights which the Employee is otherwise entitled to under this
Agreement.
(h) If during the term of this Agreement, the Employee's
employment with the Company and the Bank is terminated (whether voluntarily or
involuntarily), the Employee agrees to maintain the confidentiality of, and not
to use, any non-public information which he acquired during his employment
concerning the Company or the Bank, their respective subsidiaries, or any
director, officer, employee or agent of the aforesaid entities, including any
information as to the customers, business or personnel practices of such
entities. The Employee agrees, for a period of one year after the date of
termination of his employment with the Company and the Bank (other than in
connection with or within two years after a change in control (as
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<PAGE>
defined in Section 9(b) hereof) of the Company or the Bank), that he will not
(i) offer employment (or a consulting, agency, independent contractor or other
similar paid position) to any employee of the Company, the Bank or any of their
respective subsidiaries, or (ii) induce, encourage or solicit any such employee
to accept employment (or any aforesaid position) with any company or entity with
which the Employee may then be employed or otherwise affiliated.
9. Change in Control.
(a) If during the term of this Agreement there is a change in
control of the Company or the Bank, the Employee shall be entitled to receive as
a severance payment for services previously rendered to the Company and the
Bank, a lump sum cash payment as provided for herein (subject to Section 9(c)
below) in the event the Employee's employment is terminated, voluntarily or
involuntarily, in connection with or within two years after the change in
control of the Company or the Bank, unless such termination is for cause (as
defined in Section 8(a)(i) hereof), is a voluntary termination without "Good
Reason" (as defined below) in connection with or after a "Technical Change" (as
defined below), or occurs by virtue of normal retirement, permanent and total
disability (as defined in Section 22(e) of the Code) or death. Subject to
Section 9(c) below, the amount of the payment shall be equal to (i) one year's
salary plus any bonuses paid during the then current fiscal year, if the
Employee voluntarily terminates his employment without Good Reason other than in
connection with or following a Technical Change or (ii) if the Employee's
termination of employment was either voluntary with Good Reason or involuntary,
(A) if such change in control of the Company or the Bank occurs before January
1, 1999, three times the Employee's average annual compensation that was payable
by the Company and the Bank and was includible in the Employee's gross income
for federal income tax purposes with respect to the five most recent taxable
years of the Employee ending prior to such change in control of the Company or
the Bank (or such portion of such period during which the Employee was a
full-time employee of the Company and the Bank), less one dollar, except as
provided below in the case of a Technical Change or (B) if such change in
control of the Company or the Bank occurs after December 31, 1998, two times the
Employee's annual base salary in effect immediately before the change in control
plus an amount equal to the aggregate amount of bonuses that were paid to the
Employee by the Company and the Bank during the 24 calendar months preceding the
change in control; provided, however, that the amount payable under clause
(ii)(A) above shall not exceed the amount that would be payable over a period
equal to the remaining term of this Agreement under Section 5 hereof, plus one
year, if the Employee's compensation for such period were at an annual rate
equal to the Employee's base salary under Section 2 hereof, determined as of the
time of termination, and bonuses paid during the fiscal year preceding the
fiscal year in which such change in control occurs, and provided, further, that
in the case of a Technical Change, no amount shall be payable under clause (i)
above and the amount payable under clause (ii) above shall be two times the
Employee's annual base salary in effect immediately before the change in
control,
-6-
<PAGE>
plus two times the amount of any bonuses paid during the fiscal year preceding
the fiscal year in which such change in control occurs. A "Technical Change"
shall mean a change in control described in Section 9(b)(vii) below (and not
described in any other subsection of Section 9(b)) in which the persons who were
directors of the Company before the transaction described in such subsection
shall constitute at least 50% of the Board of Directors of the Company or any
successor corporation. "Good Reason" shall include a material reduction in the
position, authority, duties or responsibilities of the Employee from those which
existed prior to the change in control or a reduction in the Employee's job
stature as reflected in his title. If the Employee notifies the Boards of
Directors of the Company and the Bank that he intends to terminate his
employment voluntarily for Good Reason, he shall state in his notice the reasons
why he believes that Good Reason exists. Unless the Company and the Bank, within
30 days of the date of the Employee's notice of resignation or termination,
reject the Employee's statement that Good Reason exists, the Employee's
entitlement to the severance payment payable under clause (ii) above shall be
conclusive. If both Boards of Directors reject the Employee's statement of Good
Reason within such 30-day period, the dispute shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof, but the Company and the Bank
shall have the burden of proving in such arbitration that their rejection of the
Employee's statement was proper. Payment under this Section 9(a) shall be in
lieu of any amount owed to the Employee as liquidated damages for termination
without cause under Section 8(a) hereof. However, payment under this Section
9(a) shall not be reduced by any compensation which the Employee may receive
from other employment with another employer after termination of the Employee's
employment. In addition, subject to Section 9(c) below, in the case of any
termination of employment within the scope of this Section 9(a) for which a
severance payment is payable to the Employee, the following shall apply: (1) the
Employee shall also be entitled to continued medical, dental, group term life
insurance and long-term disability insurance coverage and to continued
eligibility for benefits under any other employee welfare benefit plan (within
the meaning of Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended) in which he was eligible to participate before the change in
control, on a basis no less favorable to him than that in effect during the
fiscal year preceding the fiscal year in which the change in control occurs, as
if his employment had not been terminated, which coverage and eligibility shall
continue: (A) in the case of a voluntary termination of employment described in
clause (i) above, for one year after the termination or the remaining term of
this Agreement, whichever is less; (B) in the case of a termination described in
clause (ii) above and a change in control other than a Technical Change, for the
remaining term of this Agreement; or (C) in the case of a termination described
in clause (ii) above in connection with or following a Technical Change, for two
years after the termination or the remaining term of this Agreement, whichever
is less; and (2) all insurance or other provisions for indemnification, defense
or hold-harmless of officers or directors of the Company or the Bank that are in
effect on the date the
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<PAGE>
notice of termination is given by or to the Employee shall continue for the
benefit of the Employee with respect to all of his acts and omissions while an
officer or director as fully and completely as if such termination had not
occurred, and until the final expiration or running of all periods of limitation
against action which may be applicable to such acts or omissions.
(b) A "change in control" of the Company, for purposes of this
Agreement, shall be deemed to have taken place if: (i) any person becomes the
beneficial owner of 25 percent or more of the total number of voting shares of
the Company; (ii) any person becomes the beneficial owner of 10 percent or more,
but less than 25 percent, of the total number of voting shares of the Company,
unless the Director has approved a rebuttal agreement filed by such person or
such person has filed a certification with the Director; (iii) any person (other
than the persons named as proxies solicited on behalf of the Board of Directors
of the Company) holds revocable or irrevocable proxies, as to the election or
removal of two or more directors of the Company, for 25 percent or more of the
total number of voting shares of the Company; (iv) any person has received the
approval of the Director under Section 10 of the Home Owners' Loan Act, as
amended (the "Holding Company Act"), or regulations issued thereunder, to
acquire control of the Company; (v) any person has received approval of the
Director under Section 7(j) of the Federal Deposit Insurance Act, as amended
(the "Control Act"), or regulations issued thereunder, to acquire control of the
Company; (vi) any person has commenced a tender or exchange offer, or entered
into an agreement or received an option, to acquire beneficial ownership of 25
percent or more of the total number of voting shares of the Company, whether or
not the requisite approval for such acquisition has been received under the
Holding Company Act, the Control Act, or the respective regulations issued
thereunder; or (vii) as the result of, or in connection with, any cash tender or
exchange offer, merger, or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, the
persons who were directors of the Company before such transaction shall cease to
constitute at least two-thirds of the Board of Directors of the Company or any
successor corporation. Notwithstanding the foregoing, a "change in control" will
not be deemed to have occurred under clauses (ii), (iii), (iv), (v) or (vi) of
this section 9(b), if within 30 days of such action, the Board of Directors of
the Company (by a two-thirds affirmative vote of the directors in office before
such action occurred) makes a determination that such action does not and is not
likely to constitute a "change in control" of the Company. For purposes of this
Section 9(b), a "person" includes an individual, corporation, partnership,
trust, association, joint venture, pool, syndicate, unincorporated organization,
joint-stock company or similar organization or group acting in concert. A person
for these purposes shall be deemed to be a beneficial owner as that term is used
in Rule 13d-3 under the Securities Exchange Act of 1934.
A "change in control" of the Bank, for purposes of this
Agreement, shall be deemed to have taken place if the Company's beneficial
ownership of the total number of voting shares of the Bank is reduced to less
than 50 percent.
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<PAGE>
(c) Notwithstanding any other provisions of this Agreement or of any
other agreement, contract, or understanding heretofore or hereafter entered into
by the Employee with the Company or the Bank, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this Section 9(c) (the "Other Agreements"), and notwithstanding
any formal or informal plan or other arrangement heretofore or hereafter adopted
by the Company or the Bank for the direct or indirect provision of compensation
to the Employee (including groups or classes of participants or beneficiaries of
which the Employee is a member), whether or not such compensation is deferred,
is in cash, or is in the form of a benefit to or for the Employee (a "Benefit
Plan"), the Employee shall not have any right to receive any payment or other
benefit under this Agreement, any Other Agreement, or any Benefit Plan if such
payment or benefit, taking into account all other payments or benefits to or for
the Employee under this Agreement, all Other Agreements, and all Benefit Plans,
would cause any payment to the Employee under this Agreement to be considered a
"parachute payment" within the meaning of Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended (the "Code") (a "Parachute Payment"). In the
event that the receipt of any such payment or benefit under this Agreement, any
Other Agreement, or any Benefit Plan would cause the Employee to be considered
to have received a Parachute Payment under this Agreement, then the Employee
shall have the right, in the Employee's sole discretion, to designate those
payments or benefits under this Agreement, any Other Agreements, and/or any
Benefit Plans, which should be reduced or eliminated so as to avoid having the
payment to the Employee under this Agreement be deemed to be a Parachute
Payment.
10. Disability. If the Employee shall become disabled or incapacitated
to the extent that the Employee is unable to perform the Employee's duties and
responsibilities hereunder, the Employee shall be entitled to receive disability
benefits of the type provided for other executive employees of the Company and
the Bank and the obligations of the Company and the Bank hereunder shall be
limited to providing such benefits for the period of such disability.
11. No Assignments. This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or obligations hereunder
without first obtaining the written consent of the other party hereto. However,
in the event of the death of the Employee all rights to receive payments
hereunder shall become rights of the Employee's estate.
12. Other Contracts. The Employee shall not, during the term of this
Agreement, have any other paid employment other than with a subsidiary of the
Company, except with the prior approval of the Boards of Directors of the
Company and the Bank.
13. Amendments or Additions; Action by Board of Directors. No
amendments or additions to this Agreement shall be binding unless in writing and
signed by all parties hereto. The prior approval by the Boards of Directors of
the
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<PAGE>
Company and the Bank shall be required in order for the Company and the Bank to
authorize any amendments or additions to this Agreement, to give any consents or
waivers of provisions of this Agreement, or to take any other action under this
Agreement including any termination of employment with or without cause under
Section 8(a) hereof.
14. Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Connecticut, excluding the choice of law rules thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed on their behalf, as of
the day and year first above written.
Attest: WEBSTER FINANCIAL CORPORATION
/s/ Renee P. Seefried By /s/ James C. Smith
- ------------------------------- --------------------------
Chief Executive Officer
Attest: WEBSTER BANK
/s/ Renee P. Seefried By /s/ James C. Smith
- ------------------------------- --------------------------
Chief Executive Officer
EMPLOYEE
/s/ Ross M. Strickland
-----------------------------
Ross M. Strickland
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Exhibit 10.33
-------------
PETER K. MULLIGAN
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1997, among WEBSTER BANK (the
"Bank"), WEBSTER FINANCIAL CORPORATION (the "Company") and PETER K. MULLIGAN
(the "Employee").
WHEREAS, the respective Boards of Directors of the Company and the Bank
have approved and authorized the entry into this Agreement with the Employee;
WHEREAS, the Employee is currently serving as Executive Vice President,
Consumer and Small Business Banking of both the Company and the Bank;
WHEREAS, the parties desire to enter into this Agreement to set forth
the terms and conditions for the employment relationships of the Employee with
the Company and the Bank.
NOW, THEREFORE, it is AGREED as follows:
1. EMPLOYMENT. The Employee is employed as Executive Vice President,
Consumer and Small Business Banking of both the Company and the Bank from the
date hereof through the term of this Agreement. As an executive of the Company
and of the Bank, the Employee shall render executive, policy, and other
management services to the Company and the Bank of the type customarily
performed by persons serving in similar executive officer capacities. The
Employee shall also perform such duties as the Chief Executive Officer and the
Boards of Directors of the Company and of the Bank may from time to time
reasonably direct. During the term of this Agreement, there shall be no material
increase or decrease in the duties and responsibilities of the Employee
otherwise than as provided herein, unless the parties otherwise agree in
writing. During the term of this Agreement, the Employee shall not be required
to relocate to an area more than 35 miles from the Bank's home office in order
to perform the services hereunder.
2. SALARY. The Bank agrees to pay the Employee during the term of this
Agreement a base salary as follows: from the date hereof through December 31,
1997, a salary at an annual rate equal to $170,000, which salary may be adjusted
in January of each subsequent year during the term of this Agreement as
determined by the Boards of Directors of the Company and the Bank. In
determining salary adjusments, the Board of Directors may compensate the
Employee for increases in the cost of living and may also provide for
performance or merit adjustments. The salary under this Section 2 shall be
payable by the Bank to the Employee not less frequently than monthly. The
Company shall reimburse the Bank for a portion of the salary paid to the
Employee hereunder, which portion shall represent an appropriate allocation for
the services rendered to the Company hereunder. The Employee shall not be
entitled to receive fees for serving as a director of the
<PAGE>
Company or of the Bank or for serving as a member of any committee of the Board
of Directors of the Company or of the Bank if he is elected to such positions.
3. DISCRETIONARY BONUSES. In addition to his salary under Section 2
hereof, the Employee shall be eligible to receive such discretionary bonuses as
may be authorized, declared, and paid by the Board of Directors of the Company
or of the Bank. No other compensation provided for in this Agreement shall be
deemed a substitute for such bonuses when and as declared by the Board of
Directors of the Company or the Bank.
4. PARTICIPATION IN RETIREMENT AND EMPLOYEE BENEFIT PLANS: FRINGE
BENEFITS. The Employee shall be eligible to participate in any plan of the
Company or of the Bank relating to stock options, stock purchases, pension,
thrift, profit sharing, employee stock ownership, group life insurance, medical
coverage, disability insurance, education, or other retirement or employee
benefits that the Bank or the Company has adopted or may adopt for the benefit
of its executive employees. The Employee shall also be eligible to participate
in any other fringe benefits which are now or may be or become applicable to the
Company's or the Bank's executive employees. In addition, the Employee shall be
provided with a standard automobile or an automobile allowance for business use.
Participation in these plans and fringe benefits shall not reduce the salary
payable to the Employee under Section 2 hereof.
5. TERM. The initial term of employment under this Agreement shall be
for a period commencing on the date hereof and ending on December 31, 1999. The
Company and the Bank may renew this Agreement by written notice to the Employee
for one additional year on December 31, 1997 and each subsequent December 31
during the term of this Agreement, unless the Employee gives contrary written
notice to the other parties hereto prior to such renewal date. Each initial term
and all such renewed terms are collectively referred to herein as the term of
this Agreement.
6. STANDARDS. The Employee shall perform the Employee's duties and
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Boards of Directors of
the Company or the Bank. The reasonableness of such standards shall be measured
against standards for executive performance generally prevailing in the savings
institutions industry.
7. VOLUNTARY ABSENCES; VACATIONS. The Employee shall be entitled,
without loss of pay, to be absent voluntarily for reasonable periods of time
from the performance of the duties and responsibilities under this Agreement.
All such voluntary absences shall count as paid vacation time, unless the Board
of Directors of the Company or the Bank otherwise approves. The Employee shall
be entitled to an annual paid vacation of at least four weeks per year or such
longer period as the Board of Directors of the Company or the Bank may approve.
The timing of paid vacations shall be scheduled in a reasonable manner by the
Employee. The
-2-
<PAGE>
Employee shall not be entitled (i) to receive any additional compensation from
the Bank on account of failure to take a paid vacation or (ii) to accumulate
more than two weeks of unused paid vacation time from one fiscal year to the
next.
8. TERMINATION OF EMPLOYMENT.
(a) (i) The Board of Directors of the Company or the Bank may
terminate the Employee's employment at any time, but any termination by such
Board of Directors other than termination for cause shall not prejudice the
Employee's right to compensation or other benefits under this Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for cause. The term "termination for cause" shall mean
termination because of the Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
In determining incompetence, the acts or omissions shall be measured against
standards generally prevailing in the savings institutions industry; provided,
that it shall be the Company's or the Bank's burden to prove the alleged acts
and omissions and the prevailing nature of the standards the Company or the Bank
shall have alleged are violated by such acts and/or omissions.
(ii) The parties acknowledge and agree that damages which
will result to Employee for termination without cause shall be extremely
difficult or impossible to establish or prove, and agree that, unless the
termination is for cause, the Bank shall be obligated, concurrently with such
termination, to make a lump sum cash payment to the Employee as liquidated
damages of an amount equal to the sum of (a) the Employee's then current annual
base salary under Section 2 of this Agreement and (b) the amount of any bonuses
paid to the Employee pursuant to the Webster Financial Corporation and Webster
Bank Annual Incentive Compensation Plan during the then current fiscal year
multiplied by a fraction the numerator of which is the number of full months
during the then current fiscal year in which the Employee was employed hereunder
and the denominator of which is 12. The Employee agrees that, except for such
other payments and benefits to which the Employee may be entitled as expressly
provided by the terms of this Agreement, such liquidated damages shall be in
lieu of all other claims which Employee may make by reason of such termination.
Such payment to the Employee shall be made on or before the Employee's last day
of employment with the Company or the Bank. The liquidated damages amount shall
not be reduced by any compensation which the Employee may receive for other
employment with another employer after termination of his employment with the
Company or the Bank.
(iii) In addition to the liquidated damages above described
that are payable to the Employee for termination without cause, the following
shall apply in the event of any termination without cause (other than a
termination subject to
-3-
<PAGE>
Section 9 hereof): (1) the Employee shall continue to be entitled to medical and
dental coverage as if his employment had not been terminated until the earliest
of (A) the expiration of one year after the date his employment terminates, (B)
the expiration of the remaining term of this Agreement under Section 5, and (C)
the date on which the Employee accepts other employment on a substantially full
time basis and (2) all insurance or other provisions for indemnification,
defense or hold-harmless of officers or directors of the Company or the Bank
which are in effect on the date the notice of termination is sent to the
Employee shall continue for the benefit of the Employee with respect to all of
his acts and omissions while an officer or director as fully and completely as
if such termination had not occurred, and until the final expiration or running
of all periods of limitation against action which may be applicable to such acts
or omissions.
(b) If the Employee is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, as amended, the
Company's and the Bank's obligations under this Agreement shall be suspended as
of the date of service, unless stayed by appropriate proceedings. If the charges
in the notice are dismissed, the Bank may in its discretion (i) pay the Employee
all or part of the compensation withheld while such contractual obligations were
suspended, and (ii) reinstate in whole or in part any of its obligations which
were suspended.
(c) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, as amended, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the parties shall not
be affected.
(d) If the Bank is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act, as amended), all obligations under this
Agreement shall terminate as of the date of default, but this paragraph shall
not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary
for the continued operation of the Bank, (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee, at the time the
Federal Deposit Insurance Corporation or Resolution Trust Company enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act, as amended, or
(ii) by the Director or his or her designee at the time the Director or his or
her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director or his or
her designee to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by any termination
hereunder.
-4-
<PAGE>
(f) The Employee shall have no right to terminate employment
under this Agreement prior to the end of the term of this Agreement, unless such
termination is approved by the Board of Directors of the Company or the Bank or
is in connection with or within two years after a change in control (as defined
in Sction 9(b) hereof) of the Company or the Bank. In the event that the
Employee violates this provision, the Company and the Bank shall be entitled, in
addition to its other legal remedies, to enjoin the employment of the Employee
with any significant competitor of the Bank for a period of one year or the
remaining term of this Agreement plus six months, whichever is less. The term
"significant competitor" shall mean any commercial bank, savings and loan
association, or mortgage banking company, or a holding company affiliate of any
of the foregoing, which at the date of its employment of the Employee has an
office out of which the Employee would be primarily based within 35 miles of the
Bank's home office.
(g) In the event the employment of the Employee is terminated by
the Company or the Bank without cause under Section 8(a) hereof or the
Employee's employment is terminated voluntarily or involuntarily in accordance
with Section 9 hereof and the Bank fails to make timely payment of the amounts
then owed to the Employee under this Agreement, the Employee shall be entitled
to reimbursement for all reasonable costs, including attorneys' fees, incurred
by the Employee in taking action to collect such amounts or otherwise to enforce
this Agreement, plus interest on such amounts at the rate of one percent above
the prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by The Wall Street Journal), compounded
monthly, for the period from the date the payment is due to be paid to the
Employee until payment is made. Such reimbursement and interest shall be in
addition to all rights which the Employee is otherwise entitled to under this
Agreement.
(h) If during the term of this Agreement, the Employee's
employment with the Company and the Bank is terminated (whether voluntarily or
involuntarily), the Employee agrees to maintain the confidentiality of, and not
to use, any non-public information which he acquired during his employment
concerning the Company or the Bank, their respective subsidiaries, or any
director, officer, employee or agent of the aforesaid entities, including any
information as to the customers, business or personnel practices of such
entities. The Employee agrees, for a period of one year after the date of
termination of his employment with the Company and the Bank (other than in
connection with or within two years after a change in control (as defined in
Section 9(b) hereof) of the Company or the Bank), that he will not (i) offer
employment (or a consulting, agency, independent contractor or other similar
paid position) to any employee of the Company, the Bank or any of their
respective subsidiaries, or (ii) induce, encourage or solicit any such employee
to accept employment (or any aforesaid position) with any company or entity with
which the Employee may then be employed or otherwise affiliated.
-5-
<PAGE>
9. CHANGE IN CONTROL
(a) If during the term of this Agreement there is a change in
control of the Company or the Bank, the Employee shall be entitled to receive as
a severance payment for services previously rendered to the Company and the
Bank, a lump sum cash payment as provided for herein (subject to Section 9(c)
below) in the event the Employee's employment is terminated, voluntarily or
involuntarily, in connection with or within two years after the change in
control of the Company or the Bank, unless such termination is for cause (as
defined in Section 8(a)(i) hereof), is a voluntary termination without "Good
Reason" (as defined below) in connection with or after a "Technical Change" (as
defined below), or occurs by virtue of normal retirement, permanent and total
disability (as defined in Section 22(e) of the Code) or death. Subject to
Section 9(c) below, the amount of the payment shall be equal to (i) one year's
salary, plus any bonuses paid during the then current fiscal year, if the
Employee voluntarily terminates his employment without Good Reason other than in
connection with or following a Technical Change or (ii) if the Employee's
termination of employment was either voluntary with Good Reason or involuntary,
(A) if such change in control of the Company or the Bank occurs before January
1, 1999, three times the Employee's average annual compensation that was payable
by the Company and the Bank and was includible in the Employee's gross income
for federal income tax purposes with respect to the five most recent taxable
years of the Employee ending prior to such change in control of the Company or
the Bank (or such portion of such period during which the Employee was a
full-time employee of the Company and the Bank), less one dollar, except as
provided below in the case of a Technical Change or (B) if such change in
control of the Company or the Bank occurs after December 31, 1998, two times the
Employee's annual base salary in effect immediately before the change in control
plus an amount equal to the aggregate amount of bonuses that were paid to the
Employee by the Company and the Bank during the 24 calendar months preceding the
change in control; provided, however, that the amount payable under clause
(ii)(A) above shall not exceed the amount that would be payable over a period
equal to the remaining term of this Agreement under Section 5 hereof, plus one
year, if the Employee's compensation for such period were at an annual rate
equal to the Employee's base salary under Section 2 hereof, determined as of the
time of termination, and bonuses paid during the fiscal year preceding the
fiscal year in which such change in control occurs, and provided, further, that
in the case of a Technical Change, no amount shall be payable under clause (i)
above and the amount payable under clause (ii) above shall be two times the
Employee's annual base salary in effect immediately before the change in
control, plus two times the amount of any bonuses paid during the fiscal year
preceding the fiscal year in which such change in control occurs. A "Technical
Change" shall mean a change in control described in Section 9(b)(vii) below (and
not described in any other subsection of Section 9(b)) in which the persons who
were directors of the Company before the transaction described in such
subsection shall constitute at least 50% of the Board of Directors of the
Company or any successor corporation. "Good Reason" shall include a material
reduction in the position, authority, duties or
-6-
<PAGE>
responsibilities of the Employee from those which existed prior to the change in
control or a reduction in the Employee's job stature as reflected in his title.
If the Employee notifies the Boards of Directors of the Company and the Bank
that he intends to terminate his employment voluntarily for Good Reason, he
shall state in his notice the reasons why he believes that Good Reason exists.
Unless the Company and the Bank, within 30 days of the date of the Employee's
notice of resignation or termination, reject the Employee's statement that Good
Reason exists, the Employee's entitlement to the severance payment payable under
clause (ii) above shall be conclusive. If both Boards of Directors reject the
Employee's statement of Good Reason within such 30-day period, the dispute shall
be settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof, but the
Company and the Bank shall have the burden of proving in such arbitration that
their rejection of the Employee's statement was proper. Payment under this
Section 9(a) shall be in lieu of any amount owed to the Employee as liquidated
damages for termination without cause under Section 8(a) hereof. However,
payment under this Section 9(a) shall not be reduced by any compensation which
the Employee may receive from other employment with another employer after
termination of the Employee's employment. In addition, subject to Section 9(c)
below, in the case of any termination of employment within the scope of this
Section 9(a) for which a severance payment is payable to the Employee, the
following shall apply: (1) the Employee shall also be entitled to continued
medical, dental, group term life insurance and long-term disability insurance
coverage and to continued eligibility for benefits under any other employee
welfare benefit plan (within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended) in which he was eligible to
participate before the change in control, on a basis no less favorable to him
than that in effect during the fiscal year preceding the fiscal year in which
the change in control occurs, as if his employment had not been terminated,
which coverage and eligibility shall continue: (A) in the case of a voluntary
termination of employment described in clause (i) above, for one year after the
termination or the remaining term of this Agreement, whichever is less; (B) in
the case of a termination described in clause (ii) above and a change in control
other than a Technical Change, for the remaining term of this Agreement; or (c)
in the case of a termination described in clause (ii) above in connection with
or following a Technical Change, for two years after the termination or the
remaining term of this Agreement, whichever is less; and (2) all insurance or
other provisions for indemnification, defense or hold-harmless of officers or
directors of the Company or the Bank that are in effect on the date the notice
of termination is given by or to the Employee shall continue for the benefit of
the Employee with respect to all of his acts and omissions while an officer or
director as fully and completely as if such termination had not occurred, and
until the final expiration or running of all periods of limitation against
action which may be applicable to such acts or omissions.
-7-
<PAGE>
(b) A "change in control" of the Company, for purposes of this
Agreement, shall be deemed to have taken place if: (i) any person becomes the
beneficial owner of 25 percent or more of the total number of voting shares of
the Company; (ii) any person becomes the beneficial owner of 10 percent or more,
but less than 25 percent, of the total number of voting shares of the Company,
unless the Director has approved a rebuttal agreement filed by such person or
such person has filed a certification with the Director; (iii) any person (other
than the persons named as proxies solicited on behalf of the Board of Directors
of the Company) holds revocable or irrevocable proxies, as to the election or
removal of two or more directors of the Company, for 25 percent or more of the
total number of voting shares of the Company; (iv) any person has received the
approval of the Director under Section 10 of the Home Owners' Loan Act, as
amended (the "Holding Company Act"), or regulations issued thereunder, to
acquire control of the Company; (v) any person has received approval of the
Director under Section 7(j) of the Federal Deposit Insurance Act, as amended
(the "Control Act"), or regulations issued thereunder, to acquire control of the
Company; (vi) any person has commenced a tender or exchange offer, or entered
into an agreement or received an option, to acquire beneficial ownership of 25
percent or more of the total number of voting shares of the Company, whether or
not the requisite approval for such acquisition has been received under the
Holding Company Act, the Control Act, or the respective regulations issued
thereunder; or (vii) as the result of, or in connection with, any cash tender or
exchange offer, merger, or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, the
persons who were directors of the Company before such transaction shall cease to
constitute at least two-thirds of the Board of Directors of the Company or any
successor corporation. Notwithstanding the foregoing, a "change in control" will
not be deemed to have occurred under clauses (ii), (iii), (iv) (v) or (vi) of
this section 9(b), if within 30 days of such action, the Board of Directors of
the Company (by a two-thirds affirmative vote of the directors in office before
such action occurred) makes a determination that such action does not and is not
likely to constitute a "change in control" of the Company. For purposes of this
Section 9(b), a "person" includes an individual, corporation, partnership,
trust, association, joint venture, pool, syndicate, unincorporated organization,
joint-stock company or similar organization or group acting in concert. A person
for these purposes shall be deemed to be a beneficial owner as that term is used
in Rule 13d-3 under the Securities Exchange Act of 1934.
A "change in control" of the Bank, for purposes of this Agreement,
shall be deemed to have taken place if the Company's beneficial ownership of the
total number of voting shares of the Bank is reduced to less than 50 percent.
(c) Notwithstanding any other provisions of this Agreement or
of any other agreement, contract, or understanding heretofore or hereafter
entered into by the Employee with the Company or the Bank, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this Section 9(c) (the "Other Agreement"), and
notwithstanding any formal or
-8-
<PAGE>
informal plan or other arrangement heretofore or hereafter adopted by the
Company or the Bank for the direct or indirect provision of compensation to the
Employee (including groups or classes of participants or beneficiaries of which
the Employee is a member), whether or not such compensation is deferred, is in
cash, or is in the form of a benefit to or for the Employee (a "Benefit Plan"),
the Employee shall not have any right to receive any payment or other benefit
under this Ageement, any Other Agreement, or any Benefit Plan if such payment or
benefit, taking into account all other payments or benefits to or for the
Employee under this Agreement, all Other Agreements, and all Benefit Plans,
would cause any payment to the Employee under this Agreement to be considered a
"parachute payment" within the meaning of Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended (the "Code") (a "Parachute Payment"). In the
event that the receipt of any such payment or benefit under this Agreement, any
Other Agreement, or any Benefit Plan would cause the Employee to be considered
to have received a Parachute Payment under this Agreement, then the Employee
shall have the right, in the Employee's sole discretion, to designate those
payments or benefits under this Agreement, any Other Agreements, and/or any
Benefit Plans, which should be reduced or eliminated so as to avoid having the
payment to the Employee under this Agreement be deemed to be a Parachute
Payment.
10. DISABILITY. If the Employee shall become disabled or incapacitated
to the extent that the Employee is unable to perform the Employee's duties and
responsibilities hereunder, the Employee shall be entitled to receive disability
benefits of the type provided for other executive employees of the Company and
the Bank and the obligations of the Company and the Bank hereunder shall be
limited to providing such benefits for the period of such disability.
11. NO ASSIGNMENTS. This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or obligations hereunder
without first obtaining the written consent of the other party hereto. However,
in the event of the death of the Employee all rights to receive payments
hereunder shall become rights of the Employee's estate.
12. OTHER CONTRACTS. The Employee shall not, during the term of this
Agreement, have any other paid employment other than with a subsidiary of the
Company, except with the prior approval of the Boards of Directors of the
Company and the Bank.
13. AMENDMENTS OR ADDITIONS; ACTION BY BOARD OF DIRECTORS. No
amendments or additions to this Agreement shall be binding unless in writing and
signed by all parties hereto. The prior approval by the Boards of Directors of
the Company and the Bank shall be required in order for the Company and the Bank
to authorize any amendments or additions to this Agreement, to give any consents
or waivers of provisions of this Agreement, or to take any other action under
this Agreement including any termination of employment with or without cause
under Section 8(a) hereof.
-9-
<PAGE>
14. SECTION HEADINGS. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
15. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. GOVERNING LAW. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Connecticut, excluding the choice of law rules thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed on their behalf, as of
the day and year first above written.
Attest: WEBSTER FINANCIAL CORPORATION
/s/ Renee P. Seefried By /s/ James C. Smith
- -------------------------------- --------------------------
Chief Executive Officer
Attest: WEBSTER BANK
/s/ Renee P. Seefried By /s/ James C. Smith
- -------------------------------- --------------------------
Chief Executive Officer
EMPLOYEE
/s/ Peter K. Mulligan
-----------------------------
Peter K. Mulligan
Exhibit 10.41
-------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WEBSTER FINANCIAL CORPORATION
------------------------------
------------------------------
INDENTURE
Dated as of January 29, 1997
------------------------------
The Bank of New York,
as Trustee
------------------------------
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TIE-SHEET
of provisions of Trust Indenture Act of 1939 with Indenture dated as of
January 29, 1997 between Webster Financial Corpora tion and The Bank of New
York, Trustee:
ACT SECTION INDENTURE SECTION
310(a)(1)...................................................................6.09
(a)(2) ..................................................................6.09
310(a)(3)....................................................................N/A
(a)(4)....................................................................N/A
310(a)(5).............................................................6.10, 6.11
310(b).......................................................................N/A
310(c)......................................................................6.13
311(a) and (b)...............................................................N/A
311(c).............................................................4.01, 4.02(a)
312(a)......................................................................4.02
312(b) and (c)..............................................................4.04
313(a)......................................................................4.04
313(b)(1)...................................................................4.04
313(b)(2)...................................................................4.04
313(c)......................................................................4.04
313(d)......................................................................4.04
314(a)......................................................................4.03
314(b).......................................................................N/A
314(c)(1) and (2)...........................................................6.07
314(c)(3)....................................................................N/A
314(d) ......................................................................N/A
314(e)......................................................................6.07
314(f) ......................................................................N/A
315(a)(c) and (d)...........................................................6.01
315(b) .....................................................................5.08
315(e) .....................................................................5.09
316(a)(1) ..................................................................5.07
316(a)(2) ...................................................................N/A
316(a) last sentence .......................................................2.09
316(b) .....................................................................9.02
317(a) .....................................................................5.05
317(b) .....................................................................6.05
318(a) ....................................................................13.08
THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED.
<PAGE>
TABLE OF CONTENTS*
Page
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ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions....................................... 1
Additional Interest................................................. 1
Adjusted Treasury Rate.............................................. 2
Affiliate........................................................... 2
Authenticating Agent................................................ 2
Bankruptcy Law...................................................... 2
Board of Directors.................................................. 2
Board Resolution.................................................... 3
Business Day........................................................ 3
Capital Securities.................................................. 3
Capital Securities Guarantee........................................ 3
Commission.......................................................... 3
Common Securities................................................... 3
Common Securities Guarantee......................................... 3
Common Stock........................................................ 4
Company ........................................................... 4
Company Request..................................................... 4
Comparable Treasury Issue........................................... 4
Comparable Treasury Price........................................... 4
Compounded Interest................................................. 4
Custodian........................................................... 4
Declaration......................................................... 5
Default ........................................................... 5
Deferred Interest................................................... 5
Definitive Securities............................................... 5
Depositary.......................................................... 5
Dissolution Event................................................... 5
Event of Default.................................................... 5
Exchange Act........................................................ 5
Extended Interest Payment Period.................................... 5
Federal Reserve..................................................... 5
Global Security..................................................... 5
holder of Securities................................................ 9
Indebtedness for Money Borrowed..................................... 5
Indenture........................................................... 6
Initial Optional Prepayment Date.................................... 6
Interest Payment Date............................................... 6
Liquidated Damages.................................................. 6
Maturity Date....................................................... 6
- --------
* THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE
DEEMED TO BE A PART OF THE INDENTURE.
i
<PAGE>
Mortgage ........................................................... 6
Non Book-Entry Capital Securities................................... 6
Officers ........................................................... 6
Officers' Certificate............................................... 6
Opinion of Counsel.................................................. 6
Optional Prepayment Price........................................... 7
Other Debentures.................................................... 7
Other Guarantees.................................................... 7
outstanding......................................................... 7
Person ........................................................... 7
Predecessor Security................................................ 7
Prepayment Price.................................................... 8
Principal Office of the Trustee..................................... 8
Property Trustee.................................................... 8
Purchase Agreement.................................................. 8
Quotation Agent..................................................... 8
Reference Treasury Dealer........................................... 8
Reference Treasury Dealer Quotations................................ 8
Regulatory Capital Event............................................ 8
Remaining Life...................................................... 9
Responsible Officer................................................. 9
Restricted Security................................................. 9
Rule 144A........................................................... 9
Securities.......................................................... 9
Securities Act...................................................... 9
Securityholder...................................................... 9
Security Register................................................... 9
Senior Indebtedness................................................. 9
Special Event....................................................... 10
Special Event Prepayment Price...................................... 10
Subsidiary.......................................................... 10
Tax Event........................................................... 10
Trustee ........................................................... 11
Trust Indenture Act of 1939......................................... 11
Trust Securities.................................................... 11
U.S. Government Obligations......................................... 11
Webster Capital Trust............................................... 11
ARTICLE II
SECURITIES
SECTION 2.01. Forms Generally................................... 12
SECTION 2.02. Execution and Authentication...................... 12
SECTION 2.03. Form and Payment.................................. 12
SECTION 2.04. Legends........................................... 13
SECTION 2.05. Global Security................................... 13
SECTION 2.06 Interest.......................................... 15
SECTION 2.07. Transfer and Exchange............................. 15
SECTION 2.08. Replacement Securities............................ 17
SECTION 2.09. Treasury Securities............................... 17
SECTION 2.10. Temporary Securities.............................. 17
SECTION 2.11. Cancellation...................................... 18
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SECTION 2.12. Defaulted Interest................................ 18
SECTION 2.13. CUSIP Numbers..................................... 19
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and Interest........ 19
SECTION 3.02. Offices for Notices and Payments, etc............. 20
SECTION 3.03. Appointments to Fill Vacancies in Trustee's
Office.......................................... 20
SECTION 3.04. Provision as to Paying Agent...................... 21
SECTION 3.05. Certificate to Trustee............................ 22
SECTION 3.06. Compliance with Consolidation Provisions.......... 22
SECTION 3.07. Limitation on Dividends........................... 22
SECTION 3.08. Covenants as to Webster Capital Trust............. 23
SECTION 3.09. Payment of Expenses............................... 23
SECTION 3.10. Payment Upon Resignation or Removal............... 24
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists............................ 24
SECTION 4.02. Preservation and Disclosure of Lists.............. 25
SECTION 4.03. Reports by Company................................ 27
SECTION 4.04. Reports by the Trustee............................ 28
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 5.01. Events of Default................................. 29
SECTION 5.02. Payment of Securities on Default; Suit
Therefor.......................................... 31
SECTION 5.03. Application of Moneys Collected by
Trustee........................................... 33
SECTION 5.04. Proceedings by Securityholders.................... 34
SECTION 5.05. Proceedings by Trustee............................ 35
SECTION 5.06. Remedies Cumulative and Continuing................ 35
SECTION 5.07. Direction of Proceedings and Waiver of Defaults
by Majority of Securityholders.................. 35
SECTION 5.08. Notice of Defaults................................ 36
SECTION 5.09. Undertaking to Pay Costs.......................... 37
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee............ 37
SECTION 6.02. Reliance on Documents, Opinions, etc.............. 39
SECTION 6.03. No Responsibility for Recitals, etc............... 40
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SECTION 6.04. Trustee, Authenticating Agent, Paying Agents,
Transfer Agents or Registrar May Own
Securities...................................... 41
SECTION 6.05. Moneys to be Held in Trust........................ 41
SECTION 6.06. Compensation and Expenses of Trustee.............. 41
SECTION 6.07. Officers' Certificate as Evidence................. 42
SECTION 6.08. Conflicting Interest of Trustee................... 42
SECTION 6.09. Eligibility of Trustee............................ 42
SECTION 6.10. Resignation or Removal of Trustee................. 43
SECTION 6.11. Acceptance by Successor Trustee................... 45
SECTION 6.12. Succession by Merger, etc......................... 45
SECTION 6.13. Limitation on Rights of Trustee as a Creditor..... 46
SECTION 6.14. Authenticating Agents............................. 46
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders......................... 47
SECTION 7.02. Proof of Execution by Securityholders............. 48
SECTION 7.03. Who Are Deemed Absolute Owners.................... 49
SECTION 7.04. Securities Owned by Company Deemed Not
Outstanding..................................... 49
SECTION 7.05. Revocation of Consents; Future Holders Bound...... 49
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings.............................. 50
SECTION 8.02. Call of Meetings by Trustee....................... 50
SECTION 8.03. Call of Meetings by Company or Securityholders.... 51
SECTION 8.04. Qualifications for Voting......................... 51
SECTION 8.05. Regulations....................................... 51
SECTION 8.06. Voting............................................ 52
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Securityholders................ 53
SECTION 9.02. With Consent of Securityholders................... 54
SECTION 9.03. Compliance with Trust Indenture Act; Effect of
Supplemental Indentures......................... 55
SECTION 9.04. Notation on Securities............................ 56
SECTION 9.05. Evidence of Compliance of Supplemental Indenture
to be Furnished Trustee......................... 56
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ARTICLE X
CONSOLIDATION, CONVERSION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 10.01. Company May Consolidate, etc., on Certain Terms... 56
SECTION 10.02. Successor Corporation to be Substituted
for Company..................................... 57
SECTION 10.03. Opinion of Counsel to be Given Trustee............ 58
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01. Discharge of Indenture............................ 58
SECTION 11.02. Deposited Moneys and U.S. Government Obligations
to be Held in Trust by Trustee.................. 59
SECTION 11.03. Paying Agent to Repay Moneys Held................. 59
SECTION 11.04. Return of Unclaimed Moneys........................ 59
SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S.
Government Obligations.......................... 60
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 12.01. Indenture and Securities Solely Corporate
Obligations...................................... 61
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Successors......................................... 62
SECTION 13.02. Official Acts by Successor Corporation............. 62
SECTION 13.03. Surrender of Company Powers........................ 62
SECTION 13.04. Addresses for Notices, etc......................... 62
SECTION 13.05. Governing Law...................................... 63
SECTION 13.06. Evidence of Compliance with Conditions Precedent... 63
SECTION 13.07. Business Days...................................... 63
SECTION 13.08. Trust Indenture Act to Control..................... 64
SECTION 13.09. Table of Contents, Headings, etc................... 64
SECTION 13.10. Execution in Counterparts.......................... 64
SECTION 13.11. Separability....................................... 64
SECTION 13.12. Assignment......................................... 64
SECTION 13.13. Acknowledgement of Rights.......................... 64
ARTICLE XIV
REPAYMENT OF SECURITIES -- MANDATORY AND OPTIONAL SINKING FUND
SECTION 14.01. Special Event Prepayment........................... 65
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SECTION 14.02. Optional Prepayment by Company..................... 65
SECTION 14.03. No Sinking Fund.................................... 67
SECTION 14.04. Notice of Prepayment; Selection of Securities...... 67
SECTION 14.05. Payment of Securities Called for Prepayment........ 68
ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01. Agreement to Subordinate........................... 68
SECTION 15.02. Default on Senior Indebtedness..................... 69
SECTION 15.03. Liquidation; Dissolution; Bankruptcy............... 69
SECTION 15.04. Subrogation........................................ 71
SECTION 15.05. Trustee to Effectuate Subordination................ 72
SECTION 15.06. Notice by the Company.............................. 72
SECTION 15.07. Rights of the Trustee; Holders of Senior
Indebtedness..................................... 74
SECTION 15.08. Subordination May Not Be Impaired.................. 74
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01. Extension of Interest Payment Period............... 75
SECTION 16.02. Notice of Extension................................ 76
EXHIBIT A....................................................................A-1
Testimonium
Signatures
Acknowledgements
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THIS INDENTURE, dated as of January 29, 1997, between Webster
Financial Corporation, a Delaware corporation (hereinaf ter sometimes called the
"Company"), and The Bank of New York, a New York banking corporation, as trustee
(hereinafter sometimes called the "Trustee"),
W I T N E S S E T H :
In consideration of the premises, and the purchase of the
Securities by the holders thereof, the Company covenants and agrees with the
Trustee for the equal and proportionate benefit of the respective holders from
time to time of the Securities, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
The terms defined in this Section 1.01 (except as herein
otherwise expressly provided or unless the context other wise requires) for all
purposes of this Indenture shall have the respective meanings specified in this
Section 1.01. All other terms used in this Indenture which are defined in the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which
are by reference therein defined in the Securities Act, shall (except as herein
otherwise expressly provided or unless the context otherwise requires) have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture as originally executed.
The following terms have the meanings given to them in the Declaration: (i)
Clearing Agency; (ii) Delaware Trustee; (iii) Depository; (iv) Capital Security
Certificate; (v) Property Trustee; (vi) Administrative Trustees; (vii) Direct
Action; and (viii) Purchase Agreement. All accounting terms used herein and not
expressly defined shall have the meanings assigned to such terms in accordance
with generally accepted accounting principles and the term "generally accepted
accounting principles" means such accounting principles as are generally
accepted at the time of any computation. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision. Headings are
used for convenience of reference only and do not affect interpretation. The
singular includes the plural and vice versa.
"Additional Interest" shall have the meaning set forth in Section 2.06(c).
<PAGE>
"Adjusted Treasury Rate" shall mean, with respect to any
prepayment date, the rate per annum equal to (i) the yield, under the heading
which represents the average for the immediately prior week, appearing in the
most recently published statistical release designated "H.15 (519)" or any
successor publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Remaining Life (if no maturity is within three
months before or after the maturity corresponding to the Remaining Life, yields
for the two published maturities most closely corresponding to the Remaining
Life shall be interpolated, and the Adjusted Treasury Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding to the
nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such prepayment date, in each case
calculated on the third Business Day preceding the prepayment date, plus in each
case (a) 1.75% if such prepayment date occurs on or prior to January 31, 1998,
and (b) 1.0% in all other cases.
"Affiliate" shall mean, with respect to a specified Person,
(a) any Person directly or indirectly owning, controlling or holding the power
to vote 10% or more of the outstanding voting securities or other ownership
interests of the specified Person, (b) any Person 10% or more of whose
outstanding voting securities or other ownership interests are directly or
indirectly owned, controlled or held with power to vote by the specified Person,
(c) any Person directly or indirectly controlling, controlled by, or under
common control with the specified Person, (d) a partnership in which the
specified Person is a general partner, (e) any officer or director of the
specified Person, and (f) if the specified Person is an individual, any entity
of which the specified Person is an officer, director or general partner.
"Authenticating Agent" shall mean any agent or agents of the
Trustee which at the time shall be appointed and acting pursuant to Section
6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any
similar federal or state law for the relief of debtors.
"Board of Directors" shall mean either the Board of Directors
of the Company or any duly authorized committee of that board.
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"Board Resolution" shall mean a copy of a resolution certified
by the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day" shall mean any day other than a Saturday or a
Sunday or a day on which banking institutions in The City of New York or
Wilmington, Delaware are authorized or required by law or executive order to
close.
"Capital Securities" shall mean undivided beneficial interests
in the assets of Webster Capital Trust which rank pari passu with the Common
Securities issued by Webster Capital Trust; provided, however, that if an Event
of Default has occurred and is continuing, no payments in respect of
Distributions on, or payments upon liquidation, prepayment or otherwise with
respect to, the Common Securities shall be made until the holders of the Capital
Securities shall be paid in full the Distributions and the liquidation,
prepayment and other payments to which they are entitled.
"Capital Securities Guarantee" shall mean any guarantee that
the Company may enter into with The Bank of New York or other Persons that
operates directly or indirectly for the benefit of holders of Capital Securities
of Webster Capital Trust.
"Commission" shall mean the Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act, or
if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Securities" shall mean undivided beneficial interests
in the assets of Webster Capital Trust which rank pari passu with Capital
Securities issued by Webster Capital Trust; provided, however, that if an Event
of Default has occurred and is continuing, no payments in respect of
Distributions on, or payments upon liquidation, prepayment or otherwise with
respect to, the Common Securities shall be made until the holders of the Capital
Securities shall be paid in full the Distributions and the liquidation,
prepayment and other payments to which they are entitled.
"Common Securities Guarantee" shall mean any guarantee that
the Company may enter into with any Person or Persons that operates directly or
indirectly for the benefit of holders of Common Securities of Webster Capital
Trust.
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"Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company or any other class of stock resulting from changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
"Company" shall mean Webster Financial Corporation, a Delaware
corporation, and, subject to the provisions of Article X, shall include its
successors and assigns.
"Company Request" or "Company Order" shall mean a written
request or order signed in the name of the Company by the Chairman, the Chief
Executive Officer, the President, a Vice Chairman, a Vice President, the
Comptroller, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee.
"Comparable Treasury Issue" shall mean the United States
Treasury security selected by the Quotation Agent as having a maturity
comparable to the Remaining Life of the Securities that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
Remaining Life of the Securities. If no United States Treasury security has a
maturity which is within a period from three months before to three months after
the Initial Optional Prepayment Date, the two most closely corresponding United
States Treasury securities shall be used as the Comparable Treasury Issue, and
the Adjusted Treasury Rate shall be interpolated or extrapolated on a
straight-line basis, rounding to the nearest month, using such securities.
"Comparable Treasury Price" shall mean, with respect to any
prepayment date pursuant to Section 14.01, (i) the average of five Reference
Treasury Dealer Quotations for such prepayment date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of all such Quotations.
"Compounded Interest" shall have the meaning set forth in
Section 16.01.
"Custodian" shall mean any receiver, trustee, assignee,
liquidator, or similar official under any Bankruptcy Law.
"Declaration" shall mean the Amended and Restated Declaration
of Trust of Webster Capital Trust, dated as of January 29, 1997.
"Default" shall mean any event, act or condition that with
notice or lapse of time, or both, would constitute an Event of Default.
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"Deferred Interest" shall have the meaning set forth in
Section 16.01.
"Definitive Securities" shall mean those securities issued in
fully registered certificated form not otherwise in global form.
"Depositary" shall mean, with respect to Securities of any
series, for which the Company shall determine that such Securities will be
issued as a Global Security, The Depository Trust Company, New York, New York,
another clearing agency, or any successor registered as a clearing agency under
the Exchange Act or other applicable statute or regulation, which, in each case,
shall be designated by the Company pursuant to Section 2.05(d).
"Dissolution Event" shall mean the liquidation of the Trust
pursuant to the Declaration, and the distribution of the Securities held by the
Property Trustee to the holders of the Trust Securities issued by the Trust pro
rata in accordance with the Declaration.
"Event of Default" shall mean any event specified in Section
5.01, continued for the period of time, if any, and after the giving of the
notice, if any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Extended Interest Payment Period" shall have the meaning set
forth in Section 16.01.
"Federal Reserve" shall mean the Board of Governors of the
Federal Reserve System.
"Global Security" shall mean, with respect to the Securities,
a Security executed by the Company and delivered by the Trustee to the
Depositary or pursuant to the Depositary's instruction, all in accordance with
the Indenture, which shall be registered in the name of the Depositary or its
nominee.
"Indebtedness for Money Borrowed" shall mean any obligation
of, or any obligation guaranteed by, the Company for the repayment of borrowed
money, whether or not evidenced by bonds, debentures, notes or other written
instruments but shall not include (i) any trade accounts or other liabilities
payable in the ordinary course of business, (ii) any such indebtedness to the
extent that by its terms it ranks pari passu with or junior in right of payment
to the Securities, (iii) all other debt securities, and guarantees in respect of
those debt securities, issued to any other trust, or a trustee of such trust,
partnership or other entity affiliated with the Company that is a
5
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financing vehicle of the Company (a "financing entity") in connection with the
issuance by such financing entity of equity securities or other securities
guaranteed by the Company pursuant to an instrument that ranks pari passu with
or junior in right of payment to the Capital Securities Guarantee, and (iv) any
other indebtedness that would otherwise qualify as Indebtedness for Money
Borrowed to the extent that such indebtedness by its terms ranks pari passu with
or junior in right of payment to any Indebtedness described in any of (i), (ii)
or (iii).
"Indenture" shall mean this instrument as originally executed
or, if amended as herein provided, as so amended.
"Initial Optional Prepayment Date" shall mean January 29,
2007.
"Interest Payment Date" shall have the meaning set forth in
Section 2.06.
"Liquidated Damages" shall have the meaning set forth in the
Registration Rights Agreement.
"Maturity Date" shall mean January 29, 2027.
"Mortgage" shall mean and include any mortgage, pledge, lien,
security interest, conditional sale or other title reten tion agreement or other
similar encumbrance.
"Non Book-Entry Capital Securities" shall have the meaning set
forth in Section 2.05.
"Officers" shall mean any of the Chairman, a Vice Chairman,
the Chief Executive Officer, the President, a Vice President, the Comptroller,
the Group Director, the Secretary or an Assistant Secretary of the Company.
"Officers' Certificate" shall mean a certificate signed by two
Officers and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel,
who may be an employee of the Company, and who shall be acceptable to the
Trustee.
"Optional Prepayment Price" shall have the meaning set forth
in Section 14.02.
"Other Debentures" shall mean all junior subordinated
debentures issued by the Company from time to time and sold to trusts to be
established by the Company (if any), in each case similar to the Trust.
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"Other Guarantees" shall mean all guarantees issued by the
Company with respect to capital securities (if any) and issued to other trusts
established by the Company (if any), in each case similar to the Trust.
The term "outstanding," when used with reference to
Securities, shall, subject to the provisions of Section 7.04, mean, as of any
particular time, all Securities authenticated and delivered by the Trustee or
the Authenticating Agent under this Indenture, except
(a) Securities theretofore cancelled by the Trustee or
the Authenticating Agent or delivered to the Trustee
for cancellation;
(b) Securities, or portions thereof, for the payment or
prepayment of which moneys in the necessary amount
shall have been deposited in trust with the Trustee
or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by
the Company (if the Company shall act as its own
paying agent); provided that, if such Securities, or
portions thereof, are to be prepaid prior to maturity
thereof, notice of such prepayment shall have been
given as in Article Fourteen provided or provision
satisfactory to the Trustee shall have been made for
giving such notice; and
(c) Securities in lieu of or in substitution for which
other Securities shall have been authenticated and
delivered pursuant to the terms of Section 2.08
unless proof satisfactory to the Company and the
Trustee is presented that any such Securities are
held by bona fide holders in due course.
"Person" shall mean any individual, corporation, estate,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security shall mean
every previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this definition,
any Security authenticated and delivered under Section 2.08 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
7
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"Prepayment Price" shall mean the Special Event Prepayment
Price or the Optional Prepayment Price, as the context requires.
"Principal Office of the Trustee", or other similar term,
shall mean the principal office of the Trustee, at which at any particular time
its corporate trust business shall be administered.
"Property Trustee" shall have the same meaning as set forth in
the Declaration.
"Purchase Agreement" shall mean the Purchase Agreement dated
January 22, 1997 among the Company, Webster Capital Trust and the initial
purchasers named therein.
"Quotation Agent" shall mean the Reference Treasury Dealer
appointed by the Company.
"Reference Treasury Dealer" shall mean (i) Merrill Lynch
Government Securities, Inc. and its successors; provided, however, that if the
foregoing shall cease to be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Company shall substitute therefor
another Primary Treasury Dealer, and (ii) any other Primary Treasury Dealer
selected by the Company.
"Reference Treasury Dealer Quotations" shall mean, with
respect to each Reference Treasury Dealer and any prepayment date pursuant to
Section 14.01, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Property Trustee by such
Reference Treasury Dealer at 5:00 p.m. New York City time on the third Business
Day preceding such prepayment date.
"Regulatory Capital Event" shall occur at any time that the
Company becomes, or pursuant to law or regulation will become within 180 days,
subject to capital requirements under which, in the written opinion of
independent bank regulatory counsel experienced in such matters, the Capital
Securities would not constitute Tier 1 Capital applied as if the Company (or its
successor) were a bank holding company (as that concept is used in the
guidelines or regulations issued by the Federal Reserve as of January 22, 1997)
or its then equivalent ("Tier 1 Capital").
"Remaining Life" shall mean, with respect to any optional
prepayment pursuant to Section 14.01, the period from the date of such
prepayment to, and including, the Initial Optional Prepayment Date.
8
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"Responsible Officer", when used with respect to the Trustee,
shall mean the chairman or any vice chairman of the board of directors, the
chairman or any vice chairman of the executive committee of the board of
directors, the chairman of the trust committee, the president, any vice
president, the cashier, any assistant cashier, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer, the controller or any assistant controller or any other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Security" shall mean Securities that bear or are
required to bear the legends set forth in Exhibit A hereto.
"Rule 144A" shall mean Rule 144A under the Securities Act, as
such Rule may be amended from time to time, or under any similar rule or
regulation hereafter adopted by the Commission.
"Securities" shall mean the Company's 9.36% Junior
Subordinated Deferrable Interest Debentures due January 29, 2027, as
authenticated and issued under this Indenture.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securityholder", "holder of Securities", or other similar
terms, shall mean any person in whose name at the time a particular Security is
registered on the register kept by the Company or the Trustee for that purpose
in accordance with the terms hereof.
"Security Register" shall mean (i) prior to a Dissolution
Event, the list of holders provided to the Trustee pursuant to Section 4.01, and
(ii) following a Dissolution Event, any security register maintained by a
security registrar for the securities appointed by the Company following the
execution of a supplemental indenture providing for transfer procedures as
provided for in Section 2.07(a).
"Senior Indebtedness" shall mean all Indebtedness for Money
Borrowed, whether outstanding on the date of execution of this Indenture or
thereafter created, assumed or incurred, unless the terms thereof specifically
provide that it is not superior in right of payment to the Securities, and any
deferrals, renewals or extensions of such Senior Indebtedness.
9
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"Special Event" shall mean either a Regulatory Capital Event
or a Tax Event.
"Special Event Prepayment Price" shall mean, with respect to
any prepayment of the Securities pursuant to Section 14.01 hereof, an amount in
cash equal to the greater of (i) 100% of the principal amount to be prepaid or
(ii) the sum, as determined by a Quotation Agent, of the present value of
104.680% of the principal amount thereof plus scheduled payments of interest on
the Securities during the Remaining Life of the Securities, discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, any
accrued and unpaid interest thereon, including Compounded Interest and
Additional Interest, if any, to the date of such prepayment.
"Subsidiary" shall mean with respect to any Person, (i) any
corporation at least a majority of whose outstanding voting stock of which is
owned, directly or indirectly, by such Person or by one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any
general partner ship, joint venture or similar entity, at least a majority of
whose outstanding partnership or similar interests shall at the time be owned by
such Person, or by one or more of its Subsidiaries, or by such Person and one or
more of its Subsidiaries and (iii) any limited partnership of which such Person
or any of its Subsidiaries is a general partner. For the purposes of this
definition, "voting stock" means shares, interests, participations or other
equivalents in the equity interest (however designated) in such Person having
ordinary voting power for the election of a majority of the directors (or the
equivalent) of such Person, other than shares, interests, participations or
other equivalents having such power only by reason of the occurrence of a
contingency.
"Tax Event" shall mean the receipt by Webster Capital Trust
and the Company of an opinion of a nationally recognized tax counsel experienced
in such matters to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws or any regulations
thereunder of the United States or any political subdivision or taxing authority
thereof or therein or as a result of any official administrative pronouncement
or judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is announced
on or after January 29, 1997, there is more than an insubstantial risk that (i)
Webster Capital Trust is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to income received or
accrued on the Securities, (ii) interest payable by the Company on the
Securities is not, or within 90 days of the date of such opinion will not be,
deductible by the Company, in whole or in part, for United States
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federal income tax purposes, or (iii) Webster Capital Trust is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
"Trustee" shall mean the Person identified as "Trustee" in the
first paragraph hereof, and, subject to the provisions of Article Six hereof,
shall also include its successors and assigns as Trustee hereunder.
"Trust Indenture Act of 1939" shall mean the Trust Indenture
Act of 1939 as in force at the date of execution of this Indenture, except as
provided in Section 9.03.
"Trust Securities" shall mean the Capital Securities and the
Common Securities, collectively.
"U.S. Government Obligations" shall mean securities that are
(i) direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
under clauses (i) or (ii) are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such U.S. Government Obligation
or a specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.
"Webster Capital Trust" or the "Trust" shall mean Webster
Capital Trust I, a Delaware business trust created for the purpose of issuing
its undivided beneficial interests in connection with the issuance of Securities
under this Indenture.
ARTICLE II
SECURITIES
SECTION 2.01. Forms Generally.
The Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A, the
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terms of which are incorporated in and made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject or usage. Each
Security shall be dated the date of its authentication. The Securities shall be
issued in denominations of $1,000 and integral multiples thereof.
SECTION 2.02. Execution and Authentication.
An Officer shall sign the Securities for the Company by manual
or facsimile signature. If an Officer whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the
manual signature of the Trustee. The signature of the Trustee shall be
conclusive evidence that the Security has been authenticated under this
Indenture. The form of Trustee's certificate of authentication to be borne by
the Securities shall be substantially as set forth in Exhibit A hereto.
The Trustee shall, upon a Company Order, authenticate for
original issue up to, and the aggregate principal amount of Securities
outstanding at any time may not exceed $103,093,000 aggregate principal amount
of the Securities.
SECTION 2.03. Form and Payment.
Except as provided in Section 2.05, the Securities shall be
issued in fully registered certificated form without interest coupons. Principal
of, premium, if any, and interest on the Securities issued in certificated form
will be payable, the transfer of such Securities will be registrable and such
Securities will be exchangeable for Securities bearing identical terms and
provisions at the office or agency of the Company maintained for such purpose
under Section 3.02; provided, however, that payment of interest with respect to
Securities (other than a Global Security) may be made at the option of the
Company (i) by check mailed to the holder at such address as shall appear in the
Security Register or (ii) by transfer to an account maintained by the Person
entitled thereto, provided that proper transfer instructions have been received
in writing by the relevant record date. Notwithstanding the foregoing, so long
as the holder of any Securities is the Property Trustee, the payment of the
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principal of, premium, if any, and interest (including Compounded Interest and
Additional Interest, if any) on such Securities held by the Property Trustee
will be made at such place and to such account as may be designated by the
Property Trustee.
SECTION 2.04. Legends.
Except as determined by the Company in accordance with
applicable law, each Security shall bear the applicable legends relating to
restrictions on transfer pursuant to the securities laws in substantially the
form set forth on Exhibit A hereto.
SECTION 2.05. Global Security.
(a) In connection with a Dissolution Event,
(i) if any Capital Securities are held in book-entry
form, the related Definitive Securities shall be presented to the
Trustee (if an arrangement with the Depositary has been maintained) by
the Property Trustee in exchange for one or more Global Securities (as
may be required pursuant to Section 2.07) in an aggregate principal
amount equal to the aggregate principal amount of all outstanding
Securities, to be registered in the name of the Depositary, or its
nominee, and delivered by the Trustee to the Depositary for crediting
to the accounts of its participants pursuant to the instructions of the
Administrative Trustees; the Company upon any such presentation shall
execute one or more Global Securities in such aggregate principal
amount and deliver the same to the Trustee for authentication and
delivery in accordance with this Indenture; and payments on the Secur-
ities issued as a Global Security will be made to the Depositary; and
(ii) if any Capital Securities are held in certif-
icated form, the related Definitive Securities may be presented to the
Trustee by the Property Trustee and any Capital Security certificate
which represents Capital Securities other than Capital Securities in
book-entry form ("Non Book-Entry Capital Securities") will be deemed to
represent beneficial interests in Securities presented to the Trustee
by the Property Trustee having an aggregate principal amount equal to
the aggregate liquidation amount of the Non Book-Entry Capital
Securities until such Capital Security certificates are presented to
the Security Registrar for transfer or reissuance, at which time such
Capital Security certificates will be cancelled and a Security,
registered in the name of the holder of the Capital Security
certificate or the transferee of the holder of such Capital Security
certificate, as the case may be, with an aggregate principal amount
equal to the aggregate liquidation amount of the Capital Security
certificate cancelled, will be
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executed by the Company and delivered to the Trustee for authentication
and delivery in accordance with this Indenture. Upon the issuance of
such Securities, Securities with an equivalent aggregate principal
amount that were presented by the Property Trustee to the Trustee will
be deemed to have been cancelled.
(b) The Global Securities shall represent the aggregate amount
of outstanding Securities from time to time endorsed thereon; provided, that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
prepayments. Any endorsement of a Global Security to reflect the amount of any
increase or decrease in the amount of outstanding Securities represented thereby
shall be made by the Trustee, in accordance with instructions given by the
Company as required by this Section 2.05.
(c) The Global Securities may be transferred, in whole but not
in part, only to the Depositary, another nominee of the Depositary, or to a
successor Depositary selected or approved by the Company or to a nominee of such
successor Depositary.
(d) If at any time the Depositary notifies the Company that it
is unwilling or unable to continue as Depositary or the Depositary has ceased to
be a clearing agency registered under the Exchange Act, and a successor
Depositary is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such condition, as the case may be, the
Company will execute, and the Trustee, upon written notice from the Company,
will authenticate and make available for delivery the Definitive Securities, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Security in exchange for such Global Security. If
there is an Event of Default, the Depositary shall have the right to exchange
the Global Securities for Definitive Securities. In addition, the Company may at
any time determine that the Securities shall no longer be represented by a
Global Security. In the event of such an Event of Default or such a
determination, the Company shall execute, and subject to Section 2.07, the
Trustee, upon receipt of an Officers' Certificate evidencing such determination
by the Company, will authenticate and make available for delivery the Definitive
Securities, in authorized denominations, and in an aggregate principal amount
equal to the principal amount of the Global Security in exchange for such Global
Security. Upon the exchange of the Global Security for such Definitive
Securities, in authorized denominations, the Global Security shall be cancelled
by the Trustee. Such Definitive Securities issued in exchange for the Global
Security shall be registered in such names and in such authorized denominations
as the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee.
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The Trustee shall deliver such Definitive Securities to the Depositary for
delivery to the Persons in whose names such Definitive Securities are so
registered.
SECTION 2.06 Interest.
(a) Each Security will bear interest at the rate of 9.36% per
annum (the "Coupon Rate") from the most recent date to which interest has been
paid or duly provided for or, if no interest has been paid or duly provided for,
from January 29, 1997 until the principal thereof becomes due and payable and at
the Coupon Rate on any overdue principal (and premium, if any) and (to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest, compounded semi-annually, payable (subject to
the provisions of Article XVI) semi-annually in arrears on January 29 and July
29 of each year (each, an "Interest Payment Date") commencing on July 29, 1997,
to the Person in whose name such Security or any predecessor Security is
registered, at the close of business on the regular record date for such
interest installment, which shall be the 15th day prior to the relevant Interest
Payment Date.
(b) Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months and, for any period of less than a full
calendar month, the number of days elapsed in such month. In the event that any
Interest Payment Date falls on a day that is not a Business Day, then payment of
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), with the same force and effect as if made on such date.
(c) During such time as the Property Trustee is the holder of
any Securities, the Company shall pay any additional amounts on the Securities
as may be necessary in order that the amount of Distributions then due and
payable by the Trust on the outstanding Securities shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event ("Additional Interest").
SECTION 2.07. Transfer and Exchange.
(a) Transfer Restrictions. (i) The Securities may not be
transferred except in compliance with the legend contained in Exhibit A unless
otherwise determined by the Company in accordance with applicable law. Upon any
distribution of the Securities following a Dissolution Event, the Company and
the Trustee shall enter into a supplemental indenture pursuant to Section 9.01
to provide for the transfer restrictions and procedures with respect to the
Securities substantially similar to those con-
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tained in the Declaration to the Extent applicable in the circumstances existing
at such time.
(ii) The Securities will be issued and may be
transferred only in blocks having an aggregate principal amount of not less than
$100,000. Any such transfer of the Securities in a block having an aggregate
principal amount of less than $100,000 shall be deemed to be voided and of no
legal effect whatsoever. Any such transferee shall be deemed not to be holder of
such Securities for any purpose, including, but not limited to the receipt of
payments on such Securities, and such transferee shall be deemed to have no
interest whatsoever in such Securi ties.
(b) General Provisions Relating to Transfers and Exchanges. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Definitive Securities and Global Securities at
the Company's request. All Definitive Securities and Global Securities issued
upon any registration of transfer or exchange of Definitive Securities or Global
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Definitive
Securities or Global Securities surrendered upon such registration of transfer
or exchange.
No service charge shall be made to a holder for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith.
The Company shall not be required to (i) issue, register the
transfer of or exchange Securities during a period beginning at the opening of
business 15 days before the day of mailing of a notice of prepayment or any
notice of selection of Securities for prepayment under Article Fifteen hereof
and ending at the close of business on the day of such mailing; or (ii) register
the transfer of or exchange any Security so selected for prepayment in whole or
in part, except the unprepaid portion of any Security being prepaid in part.
Prior to due presentment for the registration of a transfer of
any Security, the Trustee, any Authenticating Agent and the Company may deem and
treat the Person in whose name any Security is registered as the absolute owner
of such Security for the purpose of receiving payment of principal of and
premium, if any, and interest on such Securities, and neither the Trustee, any
Authenticating Agent nor the Company shall be affected by notice to the
contrary.
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SECTION 2.08. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's requirements
for replacements of Securities are met. An indemnity bond must be supplied by
the holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Authenticating Agent or any authenticating
agent from any loss that any of them may suffer if a Security is replaced. The
Company or the Trustee may charge for its expenses in replacing a Security.
Every replacement Security is an obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
SECTION 2.09. Treasury Securities.
In determining whether the holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company or any Affiliate of the Company shall be
considered as though not outstanding, except that for purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that the Trustee actually knows to be so owned shall
be so considered.
SECTION 2.10. Temporary Securities.
Pending the preparation of Definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company shall cause
Definitive Securities to be prepared without unreasonable delay. The Definitive
Securities shall be printed, lithographed or engraved, or provided by any
combination thereof, or in any other manner permitted by the rules and
regulations of any applicable securities exchange, all as determined by the
officers executing such Definitive Securities. After the preparation of
Definitive Securities, the temporary Securities shall be ex-
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changeable for Definitive Securities upon surrender of the tempo rary Securities
at the office or agency maintained by the Company for such purpose pursuant to
Section 3.02 hereof, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute,
and the Trustee shall authenticate and make available for delivery, in exchange
therefor the same aggregate principal amount of Definitive Securities of
authorized denominations. Until so exchanged, the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as Definitive
Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall retain or destroy cancelled Securities in accordance with
its normal practices (subject to the record retention requirement of the
Exchange Act) unless the Company directs them to be returned to it. The Company
may not issue new Securities to replace Securi ties that have been paid or
prepaid or that have been delivered to the Trustee for cancellation. All
cancelled Securities held by the Trustee shall be delivered to the Company.
SECTION 2.12. Defaulted Interest.
Any interest on any Security that is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the holder
on the relevant regular record date by virtue of having been such holder; and
such Defaulted Interest shall be paid by the Company, at its election, as
provided in clause (a) or clause (b) below:
(a) The Company may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their
respective Predecessor Securities) are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each such Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a special record date
for the payment of
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such Defaulted Interest which shall not be more than 15 nor less than
10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such special
record date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the
special record date therefor to be mailed, first class postage prepaid,
to each Securityholder at his or her address as it appears in the
Security Register, not less than 10 days prior to such special record
date. Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names such
Securities (or their respective Predecessor Securities) are registered
on such special record date and shall be no longer payable pursuant to
the following clause (b).
(b) The Company may make payment of any Defaulted Interest on
any Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may
be listed, and upon such notice as may be required by such exchange,
if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
SECTION 2.13. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of prepayment as a convenience to Securityholders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in any notice
of a prepayment and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such prepayment shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers.
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of the
holders of the Securities that it will duly and punctually pay or
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cause to be paid the principal of and premium, if any, and interest on the
Securities at the place, at the respective times and in the manner provided
herein. Except as provided in Section 2.03, each installment of interest on the
Securities may be paid by mailing checks for such interest payable to the order
of the holder of Security entitled thereto as they appear in the Security
Register. The Company further covenants to pay any and all amounts including,
without limitation, Liquidated Damages, if any, on the dates and in the manner
required under the Registration Rights Agreement.
SECTION 3.02. Offices for Notices and Payments, etc.
So long as any of the Securities remain outstanding, the
Company will maintain in the Borough of Manhattan, The City of New York, an
office or agency where the Securities may be presented for payment, an office or
agency where the Securities may be presented for registration of transfer and
for exchange as in this Indenture provided and an office or agency where notices
and demands to or upon the Company in respect of the Securities or of this
Indenture may be served. The Company will give to the Trustee written notice of
the location of any such office or agency and of any change of location thereof.
Until otherwise designated from time to time by the Company in a notice to the
Trustee, any such office or agency for all of the above purposes shall be the
Principal Office of the Trustee. In case the Company shall fail to maintain any
such office or agency in the Borough of Manhattan, The City of New York, or
shall fail to give such notice of the location or of any change in the location
thereof, presentations and demands may be made and notices may be served at the
Principal Office of the Trustee.
In addition to any such office or agency, the Company may from
time to time designate one or more offices or agencies outside the Borough of
Manhattan, The City of New York, where the Securities may be presented for
payment, registration of transfer and exchange in the manner provided in this
Indenture, and the Company may from time to time rescind such designation, as
the Company may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain any such office or agency in the Borough of Manhattan,
The City of New York, for the purposes above mentioned. The Company will give to
the Trustee prompt written notice of any such designation or rescission thereof.
SECTION 3.03. Appointments to Fill Vacancies in Trustee's
Office.
The Company, whenever necessary to avoid or fill a vacancy in
the office of Trustee, will appoint, in the manner
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provided in Section 6.10, a Trustee, so that there shall at all times be a
Trustee hereunder.
SECTION 3.04. Provision as to Paying Agent.
(a) If the Company shall appoint a paying agent other
than the Trustee with respect to the Securities, it
will cause such paying agent to execute and deliver
to the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the
provision of this Section 3.04,
(1) that it will hold all sums held by it as
such agent for the payment of the principal
of and premium, if any, or interest on the
Securities (whether such sums have been paid
to it by the Company or by any other obligor
on the Securities) in trust for the benefit
of the holders of the Securities; and
(2) that it will give the Trustee notice of any
failure by the Company (or by any other
obligor on the Securities) to make any
payment of the principal of and premium or
interest on the Securities when the same
shall be due and payable.
(b) If the Company shall act as its own paying agent, it
will, on or before each due date of the principal of
and premium, if any, or interest on the Securities,
set aside, segregate and hold in trust for the
benefit of the holders of the Securities a sum
sufficient to pay such principal, premium or interest
so becoming due and will notify the Trustee of any
failure to take such action and of any failure by the
Company (or by any other obligor under the
Securities) to make any payment of the principal of
and premium, if any, or interest on the Securities
when the same shall become due and payable.
(c) Anything in this Section 3.04 to the contrary
notwithstanding, the Company may, at any time, for
the purpose of obtaining a satisfaction and dis-
charge with respect to the Securities hereunder, or
for any other reason, pay or cause to be paid to the
Trustee all sums held in trust for any Securities by
the Trustee or any paying agent hereunder, as
required by this Section 3.04, such sums to be held
by the Trustee upon the trusts herein contained.
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(d) Anything in this Section 3.04 to the contrary
notwithstanding, the agreement to hold sums in trust
as provided in this Section 3.04 is subject to
Sections 11.03 and 11.04.
SECTION 3.05. Certificate to Trustee.
The Company will deliver to the Trustee on or before 120 days
after the end of each fiscal year in each year, commencing with the first
fiscal year ending after the date hereof, so long as Securities are outstanding
hereunder, an Officers' Certificate, one of the signers of which shall be the
principal executive, principal financial or principal accounting officer of the
Company stating that in the course of the performance by the signers of their
duties as officers of the Company they would normally have knowledge of any
default by the Company in the performance of any covenants contained herein,
stating whether or not they have knowledge of any such default and, if so,
specifying each such default of which the signers have knowledge and the nature
thereof.
SECTION 3.06. Compliance with Consolidation Provisions.
The Company will not, while any of the Securities remain
outstanding, consolidate with, or merge or convert into, or merge or convert
into itself, or sell or convey all or substantially all of its property to any
other Person unless the provisions of Article Ten hereof are complied with.
SECTION 3.07. Limitation on Dividends.
The Company will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock) or (ii) make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any debt securities of the Company
(including any Other Debentures) that rank pari passu with or junior in right of
payment to the Securities or (iii) make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any Subsidiary of the
Company (including any Other Guarantees) if such guarantee ranks pari passu or
junior in right of payment to the Securities (other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, Common Stock of the Company; (b) any declaration of a
dividend in connection with the implementation of a stockholder rights plan, or
the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto; (c) payments under the Capital
Securities Guarantee; (d) as a result of a reclassification of the Company's
capital stock or the exchange
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or the conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock; (e) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged; and (f) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's benefit plans for
its directors, officers or employees or any of the Company's dividend
reinvestment plans) if at such time (i) there shall have occurred any event of
which the Company has actual knowledge that (a) is or with the giving of notice
or the lapse of time, or both, would constitute an Event of Default and (b) in
respect of which the Company shall not have taken reason able steps to cure,
(ii) if such Securities are held by the Property Trustee, the Company shall be
in default with respect to its payment obligations under the Capital Securities
Guarantee or (iii) the Company shall have given notice of its election of the
exercise of its right to extend the interest payment period pursuant to Section
16.01 and any such extension shall have commenced and shall be continuing.
SECTION 3.08. Covenants as to Webster Capital Trust.
In the event Securities are issued to Webster Capital Trust or
a trustee of such trust in connection with the issuance of Trust Securities by
Webster Capital Trust, for so long as such Trust Securities remain outstanding,
the Company will (i) maintain 100% direct ownership of the Common Securities of
Webster Capital Trust; provided, however, that any successor of the Company,
permitted pursuant to Article Ten, may succeed to the Company's ownership of
such Common Securities, (ii) use its reasonable efforts to cause Webster Capital
Trust (a) to remain a business trust, except in connection with a distribution
of Securities, the prepayment of all of the Trust Securities of Webster Capital
Trust or certain mergers, consolidations or amalgamations, each as permitted by
the Declaration of Webster Capital Trust, and (b) to continue to be treated as a
grantor trust and not an association taxable as a corporation for United States
federal income tax purposes and (iii) to use its reasonable efforts to cause
each holder of Trust Securities to be treated as owning an undivided beneficial
interest in the Securities.
SECTION 3.09. Payment of Expenses.
In connection with the offering, sale and issuance of the
Securities to the Trust and in connection with the sale of the Trust Securities
by the Trust, the Company, in its capacity as borrower with respect to the
Securities, shall:
(a) pay all costs and expenses relating to the offering, sale
and issuance of the Securities, including commissions
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to the initial purchasers payable pursuant to the Purchase Agreement and
compensation of the Trustee in accordance with the provisions of Section 6.06;
(b) pay all costs and expenses of the Trust (including, but
not limited to, costs and expenses relating to the organization of the Trust,
the offering, sale and issuance of the Trust Securities (including commissions
to the initial purchasers in connection therewith), the fees and expenses of the
Property Trustee and the Delaware Trustee, the costs and expenses relating to
the operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets;
(c) be primarily and fully liable for any indemnification
obligations arising with respect to the Declaration;
(d) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust; and
(e) pay all other fees, expenses, debts and obliga tions
(other than payments of principal of, premium, if any, or interest on the Trust
Securities) related to Webster Capital Trust.
SECTION 3.10. Payment Upon Resignation or Removal.
Upon termination of this Indenture or the removal or
resignation of the Trustee, unless otherwise stated, the Company shall pay to
the Trustee all amounts accrued and owing to the date of such termination,
removal or resignation. Upon termination of the Declaration or the removal or
resignation of the Delaware Trustee or the Property Trustee, as the case may be,
pursuant to Section 5.7 of the Declaration, the Company shall pay to the
Delaware Trustee or the Property Trustee, as the case may be, all amounts
accrued and owing to the date of such termination, removal or resignation.
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ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists.
The Company covenants and agrees that it will furnish or cause
to be furnished to the Trustee:
(a) on a semi-annual basis on each regular record date
for the Securities, a list, in such form as the
Trustee may reasonably require, of the names and
addresses of the Securityholders as of such record
date; and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the
Company, of any such request, a list of similar form
and content as of a date not more than 15 days prior
to the time such list is furnished,except that, no
such lists need be furnished so long as the Trustee
is in possession thereof by reason of its acting as
Security registrar.
SECTION 4.02. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as
is reasonably practicable, all information as to the
names and addresses of the holders of the Securities
(1) contained in the most recent list furnished to it
as provided in Section 4.01 or (2) received by it in
the capacity of Securities reg istrar (if so acting)
hereunder. The Trustee may destroy any list furnished
to it as provided in Section 4.01 upon receipt of a
new list so furnished.
(b) In case three or more holders of Securities (here-
inafter referred to as "applicants") apply in writing
to the Trustee and furnish to the Trustee reasonable
proof that each such applicant has owned a Security
for a period of at least six months preceding the
date of such application, and such application states
that the applicants desire to communicate with other
holders of Securities or with holders of all
Securities with respect to their rights under this
Indenture and is accompanied by a copy of the form of
proxy or other communication which such applicants
propose to transmit, then the Trustee shall within 5
Business Days
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after the receipt of such application, at its
election, either:
(1) afford such applicants access to the information
preserved at the time by the Trustee in accordance
with the provisions of subsection (a) of this Section
4.02; or
(2) inform such applicants as to the approximate number
of holders of all Securities, whose names and
addresses appear in the information preserved at the
time by the Trustee in accordance with the provisions
of subsection (a) of this Section 4.02, and as to the
approximate cost of mailing to such Securityholders
the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford
such applicants access to such information, the
Trustee shall, upon the written request of such
applicants, mail to each Securityholder whose name
and address appear in the information preserved at
the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.02 a
copy of the form of proxy or other communication
which is specified in such request with reasonable
promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision
for the payment, of the reasonable expenses of
mailing, unless within five days after such tender,
the Trustee shall mail to such applicants and file
with the Commission, together with a copy of the
material to be mailed, a written statement to the
effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interests of
the holders of all Securities or would be in
violation of applicable law. Such written statement
shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the
objections specified in the written statement so
filed, shall enter an order refusing to sustain any
of such objections or if, after the entry of an order
sustaining one or more of such objections, the
Commission shall find, after notice and opportunity
for hearing, that all the objections so sustained
have been met and shall enter an order so declaring,
the Trustee shall mail copies of such material to all
such Securityholders with reasonable promptness after
the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of
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any obligation or duty to such applicants respecting
their application.
(c) Each and every holder of Securities, by receiving and
holding the same, agrees with the Company and the
Trustee that neither the Company nor the Trustee nor
any paying agent shall be held accountable by reason
of the disclosure of any such information as to the
names and addresses of the holders of Securities in
accordance with the provisions of subsection (b) of
this Section 4.02, regardless of the source from
which such information was derived, and that the
Trustee shall not be held accountable by reason of
mailing any material pursuant to a request made under
said subsec tion (b).
SECTION 4.03. Reports by the Company.
(a) The Company covenants and agrees to file with the
Trustee, within 15 days after the date on which the
Company is required to file the same with the
Commission, copies of the annual reports and of the
information, documents and other reports (or copies
of such portions of any of the foregoing as the
Commission may from time to time by rules and
regulations prescribe) which the Company may be
required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act; or,
if the Company is not required to file information,
documents or reports pursuant to either of such
sections, then to file with the Trustee and the
Commission, in accordance with rules and regulations
prescribed from time to time by the Com mission, such
of the supplementary and periodic information,
documents and reports which may be required pursuant
to Section 13 of the Exchange Act in respect of a
security listed and registered on a national
securities exchange as may be prescribed from time to
time in such rules and regulations.
(b) The Company covenants and agrees to file with the
Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by
the Commission, such additional information,
documents and reports with respect to compliance by
the Company with the conditions and covenants
provided for in this Indenture as may be required
from time to time by such rules and regulations.
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(c) The Company covenants and agrees to transmit by mail
to all holders of Securities, as the names and
addresses of such holders appear upon the Security
Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information,
documents and reports required to be filed by the
Company pursuant to subsections (a) and (b) of this
Section 4.03 as may be required by rules and
regulations prescribed from time to time by the
Commission.
(d) Delivery of such reports, information and documents
to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute
constructive notice of any information contained
therein or determinable from information contained
therein, including the Company's compliance with any
of its covenants hereunder (as to which the Trustee
is entitled to rely exclusively on Officers'
Certificates).
(e) So long as is required for an offer or sale of the
Securities to qualify for an exemption under Rule
144A under the Securities Act, the Company shall,
upon request, provide the information required by
clause (d)(4) thereunder to each Holder and to each
beneficial owner and prospective purchaser of
Securities identified by each Holder of Restricted
Securities, unless such information is furnished to
the Commission pursuant to Section 13 or 15(d) of the
Exchange Act.
SECTION 4.04. Reports by the Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this
Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided
pursuant thereto. If required by Section 313(a) of
the Trust Indenture Act, the Trustee shall, within
sixty days after each January 15 following the date
of this Indenture, commencing January 15, 1998,
deliver to Securityholders a brief report, dated as
of such January May 15, which complies with the
provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the
Trustee with each stock exchange, if any, upon which
the Securities are listed, with the Commission and
with the Company. The Company will
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promptly notify the Trustee when the Securities are
listed on any stock exchange.
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF
DEFAULT
SECTION 5.01. Events of Default.
One or more of the following events of default shall
constitute an Event of Default hereunder (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgement, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest upon any
Security or any Other Debentures when it becomes due
and payable, and continuance of such default for a
period of 30 days; provided, however, that a --------
valid extension of an interest payment period by the
Company in accordance with the terms hereof or, in
the case of any Other Debentures, the indenture
related thereto, shall not constitute a default in
the payment of interest for this purpose; or
(b) default in the payment of all or any part of the
principal of (or premium, if any, on) any Security or
any Other Debentures as and when the same shall
become due and payable either at maturity, upon
prepayment, by declaration of acceleration or
otherwise; or
(c) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture
(other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of
such default or breach for a period of 90 days after
there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company
and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding
Securities a written notice specifying such default
or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder;
or
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(d) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the
Company in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trust ee,
sequestrator (or similar official) of the Company or
for any substantial part of its property, or ordering
the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect
for a period of 90 consecutive days; or
(e) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, shall consent to the
entry of an order for relief in an involuntary case
under any such law, or shall consent to the
appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the
Company or of any substantial part of its property,
or shall make any general assignment for the benefit
of creditors, or shall fail generally to pay its
debts as they become due.
If an Event of Default with respect to Securities at the time
outstanding occurs and is continuing, then in every such case the Trustee or the
holders of not less than 25% in aggregate principal amount of the Securities
then outstanding may declare the principal amount of all Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the holders of the outstanding Securities), and upon any
such declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the
condition that if, at any time after the principal of the Securities shall have
been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, (i) the Company shall pay or shall deposit with the Trustee a sum
sufficient to pay (A) all matured installments of interest upon all the
Securities and the principal of and premium, if any, on any and all Securities
which shall have become due otherwise than by acceleration (with interest upon
such principal and premium, if any, and, to the extent that payment of such
interest is enforceable under applicable law, on overdue installments of
interest, at the same rate as the rate of interest specified in the Securities
to the date of such payment or deposit) and (B) such amount as shall be
sufficient to cover reasonable compensation to the Trustee and each predecessor
Trustee, their respective agents, attorneys and
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counsel, and all other expenses and liabilities incurred, and all advances made,
by the Trustee and each predecessor Trustee except as a result of negligence or
bad faith, and (ii) any and all Events of Default under the Indenture, other
than the non-payment of the principal of the Securities which shall have become
due solely by such declaration of acceleration, shall have been cured, waived or
otherwise remedied as provided herein, then, in every such case, the holders of
a majority in aggregate principal amount of the Securities then outstanding, by
written notice to the Company and to the Trustee, may rescind and annul such
declaration and its consequences, but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default or shall impair
any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings shall have been discontinued or
abandoned because of such rescission or annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the Trustee and the holders of the Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the
Securities shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Securities on Default; Suit
Therefor.
The Company covenants that (a) in case default shall be made
in the payment of any installment of interest upon any of the Securities as and
when the same shall become due and payable, and such default shall have
continued for a period of 30 days, or (b) in case default shall be made in the
payment of the principal of or premium, if any, on any of the Securities as and
when the same shall have become due and payable, whether at maturity of the
Securities or upon prepayment or by declaration of acceleration or otherwise,
then, upon demand of the Trustee, the Company will pay to the Trustee, for the
benefit of the holders of the Securities, the whole amount that then shall have
become due and payable on all such Securities for principal and premium, if any,
or interest, or both, as the case may be, with interest upon the overdue
principal and premium, if any, and (to the extent that payment of such interest
is enforceable under applicable law and, if the Securities are held by Webster
Capital Trust or a trustee of such trust, without duplication of any other
amounts paid by Webster Capital Trust or trustee in respect thereof) upon the
overdue installments of interest at the rate borne by the Securities; and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including a reasonable compensation to the Trustee,
its agents, attorneys and counsel, and any expenses or liabili-
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ties incurred by the Trustee hereunder other than through its negligence or bad
faith.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any actions or proceedings
at law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on the Securities and collect in the manner provided by law out of the
property of the Company or any other obligor on the Securities wherever situated
the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company or any other obligor on the Securities
under Title 11, United States Code, or any other applicable law, or in case a
receiver or trustee shall have been appointed for the property of the Company or
such other obligor, or in the case of any other similar judicial proceedings
relative to the Company or other obligor upon the Securities, or to the
creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 5.02, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the Securities
and, in case of any judicial proceedings, to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for reasonable compensation to the Trustee
and each predecessor Trustee, and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as a result
of negligence or bad faith) and of the Securityholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Securities, or
to the creditors or property of the Company or such other obligor, unless
prohibited by applicable law and regulations, to vote on behalf of the holders
of the Securities in any election of a trustee or a standby trustee in
arrangement, reorganization, liquidation or other bankruptcy or insolvency
proceedings or person performing similar functions in comparable proceedings,
and to collect and receive any moneys or other property payable or deliverable
on any such claims, and to distribute the same after the deduction of its
charges and expenses; and any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized by each of the Securityholders to make such
payments
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to the Trustee, and, in the event that the Trustee shall consent to the making
of such payments directly to the Securityholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
Nothing herein contained shall be construed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any holder thereof or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
All rights of action and of asserting claims under this
Indenture, or under any of the Securities, may be enforced by the Trustee
without the possession of any of the Securities, or the production thereof in
any trial or other proceeding relative thereto, and any such suit or proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall be for the ratable benefit of
the holders of the Securities.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party) the Trustee shall be held to represent all
the holders of the Securities, and it shall not be necessary to make any holders
of the Securities parties to any such proceedings.
SECTION 5.03. Application of Moneys Collected by Trustee.
Any moneys collected by the Trustee shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such moneys, upon presentation of the Securities in respect of which moneys
have been collected, and stamping thereon the payment, if only partially paid,
and upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection
applicable to the Securities and reasonable compensation to the Trustee, its
agents, attorneys and counsel, and of all other expenses and liabilities
incurred, and all advances made, by the Trustee except as a result of its
negligence or bad faith;
Second: To the payment of all Senior Indebtedness of the
Company if and to the extent required by Article Fifteen;
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Third: In case the principal of the outstanding Securities in
respect of which moneys have been collected shall not have become due and be
unpaid, to the payment of the amounts then due and unpaid upon Securities for
principal of (and premium, if any) and interest on the Securities, in respect of
which or for the benefit of which money has been collected, ratably, without
preference of priority of any kind, according to the amounts due on such
Securities for principal (and premium, if any) and interest, respectively;
andFourth: To the Company.
SECTION 5.04. Proceedings by Securityholders.
No holder of any Security shall have any right by virtue of or
by availing of any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof with respect to the
Securities specifying such Event of Default, as hereinbefore provided, and
unless also the holders of not less than 25% in aggregate principal amount of
the Securities then outstanding shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity shall have failed to institute any such action,
suit or proceeding, it being understood and intended, and being expressly
covenanted by the taker and holder of every Security with every other taker and
holder and the Trustee, that no one or more holders of Securities shall have any
right in any manner whatever by virtue of or by availing of any provision of
this Indenture to affect, disturb or prejudice the rights of any other holder of
Securities, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities.
Notwithstanding any other provisions in this Indenture,
however, the right of any holder of any Security to receive payment of the
principal of (premium, if any) and interest on such Security, on or after the
same shall have become due and payable, or to institute suit for the enforcement
of any such payment, shall not be impaired or affected without the consent of
such holder and by accepting a Security hereunder it is expressly understood,
intended and covenanted by the taker and holder of every Security with every
other such taker and holder and the
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Trustee, that no one or more holders of Securities shall have any right in any
manner whatsoever by virtue or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of the holders of any other Securities,
or to obtain or seek to obtain priority over or preference to any other such
holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Securities. For the protection and enforcement of the provisions of this
Section, each and every Securityholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
The Company and the Trustee acknowledge that pursuant to the
Declaration, the holders of Capital Securities are entitled, in the
circumstances and subject to the limitations set forth therein, to commence a
Direct Action with respect to any Event of Default under this Indenture and the
Securities.
SECTION 5.05. Proceedings by Trustee.
In case an Event of Default occurs with respect to Securities
and is continuing, the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 5.06. Remedies Cumulative and Continuing.
All powers and remedies given by this Article V to the Trustee
or to the Securityholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any other powers and remedies available to the
Trustee or the holders of the Securities, by judicial proceedings or otherwise,
to enforce the performance or observance of the covenants and agreements
contained in this Indenture or otherwise established with respect to the
Securities, and no delay or omission of the Trustee or of any holder of any of
the Securities to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or an acquiescence
therein; and, subject to the provisions of Section 5.04, every power and remedy
given by this Article V or by law to the Trustee or to the Securityholders may
be exercised from time to time, and as often as shall be deemed expedient, by
the Trustee or by the Securityholders.
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SECTION 5.07. Direction of Proceedings and Waiver of Defaults
by Majority of Securityholders.
The holders of a majority in aggregate principal amount of the
Securities at the time outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that (subject to the provisions of Section 6.01) the Trustee shall have
the right to decline to follow any such direction if the Trustee shall determine
that the action so directed would be unjustly prejudicial to the holders not
taking part in such direction or if the Trustee being advised by counsel
determines that the action or proceeding so directed may not lawfully be taken
or if the Trustee in good faith by its board of directors or trustees, executive
committee, or a trust committee of direc tors or trustees and/or Responsible
Officers shall determine that the action or proceedings so directed would
involve the Trustee in personal liability. Prior to any declaration accelerating
the maturity of the Securities, the holders of a majority in aggregate principal
amount of the Securities at the time outstanding may on behalf of the holders of
all of the Securities waive any past default or Event of Default and its
consequences except a default (a) in the payment of principal of or premium, if
any, or interest on any of the Securities or (b) in respect of covenants or
provisions hereof which cannot be modified or amended without the consent of the
holder of each Security affected; provided, however, that if the Securities are
held by Property Trustee, such waiver or modification to such waiver shall not
be effective until the holders of a majority in aggregate liquidation amount of
Trust Securities shall have consented to such waiver or modification to such
waiver; provided further, that if the consent of the holder of each outstanding
Security is required, such waiver shall not be effective until each holder of
the Trust Securities shall have consented to such waiver. Upon any such waiver,
the default covered thereby shall be deemed to be cured for all purposes of this
Indenture and the Company, the Trustee and the holders of the Securities shall
be restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon. Whenever any default or Event of Default hereunder shall
have been waived as permitted by this Section 5.07, said default or Event of
Default shall for all purposes of the Securities and this Indenture be deemed to
have been cured and to be not continuing.
SECTION 5.08. Notice of Defaults.
The Trustee shall, within 90 days after the occurrence of a
default with respect to the Securities, mail to all Securityholders, as the
names and addresses of such holders appear upon the Security register, notice of
all defaults known
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to the Trustee, unless such defaults shall have been cured
before the giving of such notice (the term "defaults" for the purpose of this
Section 5.08 being hereby defined to be the events specified in clauses (a),
(b), (c), (d) and (e) of Section 5.01, not including periods of grace, if any,
provided for therein, and irrespective of the giving of written notice specified
in clause (c) of Section 5.01); and provided that, except in the case of default
in the payment of the principal of or premium, if any, or interest on any of the
Securities, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee, or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interests of the Securityholders;
and provided further, that in the case of any default of the character specified
in Section 5.01(c) no such notice to Securityholders shall be given until at
least 60 days after the occurrence thereof but shall be given within 90 days
after such occurrence.
SECTION 5.09. Undertaking to Pay Costs.
All parties to this Indenture agree, and each holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.09 shall not apply to any suit instituted
by the Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in aggregate principal
amount of the Securities outstanding, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Security against the Company on or after the
same shall have become due and payable.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee.
With respect to the holders of the Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default
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which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture. In case an Event of Default has
occurred (which has not been cured or waived) the Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and
after the curing or waiving of all Events of De fault
which may have occurred
(1) the duties and obligations of the Trustee
shall be determined solely by the express
provisions of this Indenture, and the
Trustee shall not be liable except for the
performance of such duties and obligations
as are specifically set forth in this
Indenture, and no implied covenants or
obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on the part of
the Trustee, the Trustee may conclusively
rely, as to the truth of the statements and
the correctness of the opinions expressed
therein, upon any certificates or opinions
furnished to the Trustee and conforming to
the requirements of this Indenture; but, in
the case of any such certificates or
opinions which by any provision hereof are
specifically required to be furnished to the
Trustee, the Trustee shall be under a duty
to examine the same to determine whether or
not they conform to the requirements of this
Indenture;
(b) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer
or Officers, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent
facts; and
(c) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good
faith, in accordance with the direction of
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the Securityholders pursuant to Section 5.07,
relating to the time, method and place of conducting
any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or liability is not reasonably assured to it under
the terms of this Indenture or adequate indemnity against such risk is not
reasonably assured to it.
SECTION 6.02. Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, note,
debenture or other paper or document believed by it
to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request, direction, order or demand of the
Company mentioned herein may be sufficiently
evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically
prescribed); and any Board Resolution may be
evidenced to the Trustee by a copy thereof certified
by the Secretary or an Assistant Secretary of the
Company;
(c) the Trustee may consult with counsel of its selec
tion and any advice or Opinion of Counsel shall be
full and complete authorization and protection in
respect of any action taken or suffered omitted by it
hereunder in good faith and in accordance with such
advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this
Indenture at the request, order or direction of any
of the Securityholders, pursuant to the provisions of
this Indenture, unless such Securityholders shall
have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby;
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(e) the Trustee shall not be liable for any action taken
or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or
powers conferred upon it by this Indenture; nothing
contained herein shall, however, relieve the Trustee
of the obligation, upon the occurrence of an Event of
Default (that has not been cured or waived), to
exercise such of the rights and powers vested in it
by this Indenture, and to use the same degree of care
and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the
conduct of his own affairs;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order,
approval, bond, debenture, coupon or other paper or
document, unless requested in writing to do so by the
holders of a majority in aggregate principal amount
of the outstanding Securities; provid ed, however,
that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such
expense or liability as a condition to so proceeding;
and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either
directly or by or through agents (including any
Authenticating Agent) or attorneys, and the Trustee
shall not be responsible for any misconduct or
negligence on the part of any such agent or attorney
appointed by it with due care.
SECTION 6.03. No Responsibility for Recitals, etc.
The recitals contained herein and in the Securities (except in
the certificate of authentication of the Trustee or the Authenticating Agent)
shall be taken as the statements of the Company and the Trustee and the
Authenticating Agent assume no responsibility for the correctness of the same.
The Trustee and the Authenticating Agent make no representations as to the
validity or sufficiency of this Indenture or of the Securities. The Trustee and
the Authenticating Agent shall not be accountable for the use or application by
the Company of any Securities or the proceeds of any Securities authenticated
and delivered by the
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Trustee or the Authenticating Agent in conformity with the provisions of this
Indenture.
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents,
Transfer Agents or Registrar May Own Securities.
The Trustee or any Authenticating Agent or any paying agent or
any transfer agent or any Security registrar, in its individual or any other
capacity, may become the owner or pledgee of Securities with the same rights it
would have if it were not Trustee, Authenticating Agent, paying agent, transfer
agent or Security registrar.
SECTION 6.05. Moneys to be Held in Trust.
Subject to the provisions of Section 11.04, all moneys
received by the Trustee or any paying agent shall, until used or applied as
herein provided, be held in trust for the purpose for which they were received,
but need not be segregated from other funds except to the extent required by
law. The Trustee and any paying agent shall be under no liability for interest
on any money received by it hereunder except as otherwise agreed in writing with
the Company. So long as no Event of Default shall have occurred and be
continuing, all interest allowed on any such moneys shall be paid from time to
time upon the written order of the Company, signed by the Chairman of the Board
of Directors, the President or a Vice President or the Treasurer or an Assis
tant Treasurer of the Company.
SECTION 6.06. Compensation and Expenses of Trustee.
The Company, as issuer of the Securities, covenants and agrees
to pay to the Trustee from time to time, and the Trustee shall be entitled to,
such compensation as shall be agreed to in writing between the Company and the
Trustee (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and the Company will pay or reim
burse the Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any of the
provisions of this Indenture (including the reasonable compensation and the
expenses and disburse ments of its counsel and of all Persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith. The Company also covenants to indemnify each of the
Trustee and any predecessor Trustee (and its officers, agents, directors and
employees) for, and to hold them harmless against, any and all loss, damage,
claim, liability or expense including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on the part of
the Trustee and arising out of or in connection with the acceptance or
administration of
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this trust, including the costs and expenses of defending itself against any
claim of liability in the premises. The obligations of the Company under this
Section 6.06 to compensate and indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall constitute additional
indebted ness hereunder. Such additional indebtedness shall be secured by a lien
prior to that of the Securities upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the benefit of the holders
of particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(d) or Section
5.01(e), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the termination
of this Indenture.
SECTION 6.07. Officers' Certificate as Evidence.
Except as otherwise provided in Sections 6.01 and 6.02,
whenever in the administration of the provisions of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or established
prior to taking or omitting any action hereunder, such matter (unless other
evidence in respect thereof is herein specifically prescribed) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Trustee, and such certificate, in the absence of negligence or bad faith on the
part of the Trustee, shall be full warrant to the Trustee for any action taken
or omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 6.08. Conflicting Interest of Trustee.
If the Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and
the Company shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act.
SECTION 6.09. Eligibility of Trustee.
The Trustee hereunder shall at all times be a corporation
organized and doing business under the laws of the United States of America or
any state or territory thereof or of the District of Columbia or a corporation
or other Person permitted to act as trustee by the Commission authorized under
such laws to
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exercise corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000) and subject to supervision or
examination by federal, state, territo rial, or District of Columbia authority.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 6.09 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.10.
SECTION 6.10. Resignation or Removal of Trustee.
(a) The Trustee, or any trustee or trustees hereafter
appointed, may at any time resign by giving writ ten
notice of such resignation to the Company and by
mailing notice thereof to the holders of the
Securities at their addresses as they shall appear on
the Security register. Upon receiving such notice of
resignation, the Company shall promptly appoint a
successor trustee or trustees by written instrument,
in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment
within 60 days after the mailing of such notice of
resignation to the affected Securityholders, the
resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor
trustee, or any Securityholder who has been a bona
fide holder of a Security for at least six months
may, subject to the provisions of Section 5.09, on
behalf of himself and all others similarly situated,
petition any such court for the appointment of a
successor trustee. Such court may thereupon, after
such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
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(1) the Trustee shall fail to comply with the
provisions of Section 6.08 after written
request therefor by the Company or by any
Securityholder who has been a bona fide
holder of a Security or Securities for at
least six months, or
(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section
6.09 and shall fail to resign after written
request therefor by the Company or by any
such Securityholder, or
(3) the Trustee shall become incapable of
acting, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or
of its property shall be appointed, or any
public officer shall take charge or control
of the Trustee or of its property or affairs
for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, the Company may remove the
Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or,
subject to the provisions of Section 5.09, any
Securityholder who has been a bona fide holder of a
Security for at least six months may, on behalf of
himself and all others similarly situated, petition
any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor
trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove
the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal
amount of the Securities at the time outstanding may
at any time remove the Trustee and nominate a
successor trustee, which shall be deemed appointed as
successor trustee unless within 10 days after such
nomination the Company objects thereto or if no
successor trustee shall have been so appointed and
shall have accepted appointment within 30 days after
such removal, in which case the Trustee so removed or
any Securityholder, upon the terms and conditions and
otherwise as in subsection (a) of this Section 6.10
provided, may petition any court of competent
jurisdiction for an appointment of a successor
trustee.
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(d) Any resignation or removal of the Trustee and
appointment of a successor trustee pursuant to any of
the provisions of this Section 6.10 shall be come
effective upon acceptance of appointment by the
successor trustee as provided in Section 6.11.
SECTION 6.11. Acceptance by Successor Trustee.
Any successor trustee appointed as provided in Section 6.10
shall execute, acknowledge and deliver to the Company and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as trustee herein; but,
nevertheless, on the written request of the Company or of the successor trustee,
the trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of Section 6.06, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such retiring trustee thereunder. Upon
request of any such successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act
shall, nevertheless, retain a lien upon all property or funds held or collected
by such trustee to secure any amounts then due it pursuant to the provisions of
Section 6.06.
No successor trustee shall accept appointment as provided in
this Section 6.11 unless at the time of such accep tance such successor trustee
shall be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.
Upon acceptance of appointment by a successor trustee as
provided in this Section 6.11, the Company shall mail notice of the succession
of such trustee hereunder to the holders of Securities at their addresses as
they shall appear on the Security register. If the Company fails to mail such
notice within 10 days after the acceptance of appointment by the successor trust
ee, the successor trustee shall cause such notice to be mailed at the expense of
the Company.
SECTION 6.12. Succession by Merger, etc.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to
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which the Trustee shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture any Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor trustee; and in all such cases such certificates shall have the
full force which the Securities or this Indenture elsewhere provides that the
certificate of the Trustee shall have; provided, however, that the right to
adopt the certificate of authentication of any predecessor Trustee or
authenticate Securities in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
SECTION 6.13. Limitation on Rights of Trustee as a Creditor.
The Trustee shall comply with Section 311(a) of the Trust
Indenture Act, excluding any creditor relationship described in Section 311(b)
of the Trust Indenture Act. A Trustee who has resigned or been removed shall be
subject to Section 311(a) of the Trust Indenture Act to the extent included
therein.
SECTION 6.14. Authenticating Agents.
There may be one or more Authenticating Agents appointed by
the Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Securities issued
upon exchange or transfer thereof as fully to all intents and purposes as though
any such Authenticating Agent had been expressly authorized to authenticate and
deliver Securities; provided, that the Trustee shall have no liability to the
Company for any acts or omissions of the Authenticating Agent with respect to
the authentication and delivery of Securities. Any such Authenticating Agent
shall at all times be a corporation organized and doing business under the laws
of the United States or of any state or territory thereof or of the District of
Columbia authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of at least $5,000,000 and being subject to
supervision or examination by federal, state, territorial or District of
Columbia authority. If such corporation publishes reports of condition at least
annually pursuant to law or the requirements of such authority,
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then for the purposes of this Section 6.14 the combined capital and surplus of
such corporation shall be deemed to be its co mbined capital and surplus as set
forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
such Authenticating Agent hereunder, if such successor corporation is otherwise
eligible under this Section 6.14 without the execution or filing of any paper or
any further act on the part of the parties hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee and to the Company. The Trustee may
at any time terminate the agency of any Authenticating Agent by giving written
notice of termination to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time any Authenticating Agent shall cease to be eligible under this Section
6.14, the Trustee may, and upon the request of the Company shall, promptly
appoint a successor Authenticating Agent eligible under this Section 6.14, shall
give written notice of such appointment to the Company and shall mail notice of
such appointment to all Securityholders as the names and addresses of such
holders appear on the Security Register. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent herein.
The Company, as borrower, agrees to pay to any Authenticating
Agent from time to time reasonable compensation for its services. Any
Authenticating Agent shall have no responsibility or liability for any action
taken by it as such in accordance with the directions of the Trustee.
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ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders.
Whenever in this Indenture it is provided that the holders of
a specified percentage in aggregate principal amount of the Securities may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the holders of such specified percentage have
joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, or (b) by the record of such holders of
Securities voting in favor thereof at any meeting of such Securityholders duly
called and held in accordance with the provisions of Article Eight, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of such Securityholders.
If the Company shall solicit from the Securityholders any
request, demand, authorization, direction, notice, consent, waiver or other
action, the Company may, at its option, as evidenced by an Officers'
Certificate, fix in advance a record date for the determination of
Securityholders entitled to give such request, demand, authorization, direction,
notice, consent, waiver or other action, but the Company shall have no
obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Securityholders of record at the
close of business on the record date shall be deemed to be Securityholders for
the purposes of determining whether Securityholders of the requisite proportion
of Outstanding Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other
action, and for that purpose the Outstanding Securities shall be computed as of
the record date; provided, however, that no such authorization, agreement or
consent by such Securityholders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than six months after the record date.
SECTION 7.02. Proof of Execution by Securityholders.
Subject to the provisions of Sections 6.01, 6.02 and 8.05,
proof of the execution of any instrument by a Securityholder or his agent or
proxy shall be sufficient if made in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be
satisfactory to the Trustee. The ownership of Securities shall
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be proved by the Security Register or by a certificate of the Security
registrar. The Trustee may require such additional proof of any matter referred
to in this Section as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in
the manner provided in Section 8.06.
SECTION 7.03. Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any
Security, the Company, the Trustee, any Authenticating Agent, any paying agent,
any transfer agent and any Security registrar may deem the Person in whose name
such Security shall be registered upon the Security Register to be, and may
treat him as, the absolute owner of such Security (whether or not such Security
shall be overdue) for the purpose of receiving payment of or on account of the
principal of and premium, if any, and (subject to Section 2.06) interest on such
Security and for all other purposes; and neither the Company nor the Trustee nor
any Authenticating Agent nor any paying agent nor any transfer agent nor any
Security registrar shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being or upon his order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Security.
SECTION 7.04. Securities Owned by Company Deemed Not
Outstanding.
In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Indenture, Securities which are owned by the Company or any
other obligor on the Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company, except Securities held by the Trust, or any other obligor on the
Securities shall be disregarded and deemed not to be outstanding for the purpose
of any such determination; provided that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, consent or
waiver, only Securities which the Trustee actually knows are so owned shall be
so disregarded. Securities so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 7.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Securities and that the pledgee is not the Company or any such other
obligor or Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee.
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SECTION 7.05. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 7.01, of the taking of any action by the holders
of the percentage in aggregate principal amount of the Securities specified in
this Indenture in connec tion with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor) the
serial number of which is shown by the evidence to be included in the Securities
the holders of which have consented to such action may, by filing written notice
with the Trustee at its principal office and upon proof of holding as provided
in Section 7.02, revoke such action so far as concerns such Security (or so far
as concerns the principal amount represented by any exchanged or substituted
Security). Except as aforesaid any such action taken by the holder of any
Security shall be conclusive and binding upon such holder and upon all future
holders and owners of such Security, and of any Security issued in exchange or
substitution therefor, irrespective of whether or not any notation in regard
thereto is made upon such Security or any Security issued in exchange or
substitution therefor.
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings.
A meeting of Securityholders may be called at any time and
from time to time pursuant to the provisions of this Article Eight for any of
the following purposes:
(a) to give any notice to the Company or to the Trustee,
or to give any directions to the Trustee, or to
consent to the waiving of any Default hereunder and
its consequences, or to take any other action
authorized to be taken by Securityholders pursuant to
any of the provisions of Article Five;
(b) to remove the Trustee and nominate a successor
trustee pursuant to the provisions of Article Six;
(c) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to the
provisions of Section 9.02; or
(d) to take any other action authorized to be taken by or
on behalf of the holders of any specified aggregate
principal amount of such Securities under
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any other provision of this Indenture or under
applicable law.
SECTION 8.02. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Securityholders
to take any action specified in Section 8.01, to be held at such time and at
such place in the Borough of Manhat tan, The City of New York, as the Trustee
shall determine. Notice of every meeting of the Securityholders, setting forth
the time and the place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be mailed to holders of Securities at their
addresses as they shall appear on the Securities Register. Such notice shall be
mailed not less than 20 nor more than 180 days prior to the date fixed for the
meeting.
SECTION 8.03. Call of Meetings by Company or Securityholders.
In case at any time the Company pursuant to a resolu tion of
the Board of Directors, or the holders of at least 10% in aggregate principal
amount of the Securities then outstanding, shall have requested the Trustee to
call a meeting of Securityholders, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within 20 days after
receipt of such request, then the Company or such Securityholders may determine
the time and the place in the Borough of Manhattan, The City of New York for
such meeting and may call such meeting to take any action authorized in Section
8.01, by mailing notice thereof as provided in Section 8.02.
SECTION 8.04. Qualifications for Voting.
To be entitled to vote at any meeting of Securityholders a
Person shall be (a) a holder of one or more Securities or (b) a Person appointed
by an instrument in writing as proxy by a holder of one or more Securities. The
only Persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
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SECTION 8.05. Regulations.
Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Securityholders, in regard to proof of the holding of Securities and
of the appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 8.04, at any meeting each
holder of Securities or proxy therefor shall be entitled to one vote for each
$1,000 principal amount of Securi ties held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Securi ty challenged as not outstanding and ruled by the chairman of the meeting
to be not outstanding. The chairman of the meeting shall have no right to vote
other than by virtue of Securities held by him or instruments in writing as
aforesaid duly designating him as the person to vote on behalf of other
Securityholders. Any meeting of Securityholders duly called pursuant to the
provisions of Section 8.02 or 8.03 may be adjourned from time to time by a
majority of those present, whether or not constituting a quorum, and the meeting
may be held as so adjourned without further notice.
SECTION 8.06. Voting.
The vote upon any resolution submitted to any meeting of
holders of Securities shall be by written ballots on which shall be subscribed
the signatures of such holders or of their representatives by proxy and the
serial number or numbers of the Securities held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in triplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowl-
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edge of the facts setting forth a copy of the notice of the meeting and showing
that said notice was mailed as provided in Section 8.02. The record shall show
the serial numbers of the Securities voting in favor of or against any
resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Securityholders.
The Company and the Trustee may from time to time and at any
time amend this Indenture, without the consent of the Securityholders, for one
or more of the following purposes:
(a) to evidence the succession of another corporation to
the Company, or successive successions, and the
assumption by the successor corporation of the
covenants, agreements and obligations of the Company
pursuant to Article Ten hereof;
(b)
to add to the covenants of the Company such further
covenants, restrictions or conditions for the
protection of the Securityholders as the Board of
Directors and the Trustee shall consider to be for
the protection of the Securityholders, and to make
the occurrence, or the occurrence and continuance, of
a default in any of such additional covenants,
restrictions or conditions a Default or an Event of
Default permitting the enforcement of all or any of
the remedies provided in this Indenture as herein set
forth; provided, however, that in respect of any such
additional covenant, restriction or condition such
amendment may provide for a particular period of
grace after default (which period may be shorter or
longer than that allowed in the case of other
Defaults) or may provide for an immediate enforcement
upon such default or may limit the remedies available
to the Trustee upon such default;
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(c) to provide for the issuance under this Indenture of
Securities in coupon form (including Securities
registrable as to principal only) and to provide for
exchangeability of such Securities with the
Securities issued hereunder in fully registered form
and to make all appropriate changes for such purpose;
(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supple mental
indenture which may be defective or inconsistent with
any other provision contained herein or in any
supplemental indenture, or to make such other
provisions in regard to matters or questions arising
under this Indenture; provided that any such action
shall not materially adversely affect the interests
of the holders of the Securities;
(e) to evidence and provide for the acceptance of
appointment hereunder by a successor trustee with
respect to the Securities;
(f) to make provision for transfer procedures,
certification, book-entry provisions, the form of
restricted securities legends, if any, to be placed
on Securities, and all other matters required
pursuant to Section 2.07 or otherwise necessary,
desirable or appropriate in connection with the
issuance of Securities to holders of Capital
Securities in the event of a distribution of
Securities by Webster Capital Trust following a
Dissolution Event;
(g) to qualify or maintain qualification of this In
denture under the Trust Indenture Act; or
(h) to make any change that does not adversely affect the
rights of any Securityholder in any material respect.
The Trustee is hereby authorized to join with the Company in
the execution of any supplemental indenture to effect such amendment, to make
any further appropriate agreements and stipulations which may be therein
contained and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
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Any amendment to this Indenture authorized by the provisions
of this Section 9.01 may be executed by the Company and the Trustee without the
consent of the holders of any of the Securities at the time outstanding,
notwithstanding any of the provisions of Section 9.02.
SECTION 9.02. With Consent of Securityholders.
With the consent (evidenced as provided in Section 7.01) of
the holders of a majority in aggregate principal amount of the Securities at the
time outstanding, the Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time amend this Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the holders of the Securities; provided, however, that no such amendment shall
without the consent of the holders of each Security then outstanding and
affected thereby (i) change the Maturity Date of any Security, or reduce the
rate or extend the time of payment of interest thereon (except as contemplated
by Article Sixteen), or reduce the principal amount thereof, or reduce any
amount payable on prepayment thereof, or make the principal thereof or any
interest or premium thereon payable in any coin or currency other than that
provided in the Securities, or impair or affect the right of any Securityholder
to institute suit for payment thereof, or (ii) reduce the afore said percentage
of Securities the holders of which are required to consent to any such amendment
to this Indenture, provided, however, that if the Securities are held by Webster
Capital Trust, such amendment shall not be effective until the holders of a
majority in liquidation amount of Trust Securities shall have consented to such
amendment; provided, further, that if the consent of the holder of each
outstanding Security is required, such amendment shall not be effective until
each holder of the Trust Securities shall have consented to such amendment.
Upon the request of the Company accompanied by a copy of a
resolution of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture affecting such
amendment, and upon the filing with the Trustee of evidence of the consent of
Securityholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture. The Trustee may receive an
Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article is authorized or permitted by, and conforms
to, the terms of this Article and that it is proper for the Trustee under the
provisions of this Article to join in the execution thereof.
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Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of this Section, the
Trustee shall transmit by mail, first class postage prepaid, a notice, prepared
by the Company, setting forth in general terms the substance of such
supplemental indenture, to the Securityholders as their names and addresses
appear upon the Security Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
It shall not be necessary for the consent of the
Securityholders under this Section 9.02 to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act; Effect of
Supplemental Indentures.
Any supplemental indenture executed pursuant to the provisions
of this Article Nine shall comply with the Trust Indenture Act. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article Nine, this Indenture shall be and be deemed to be modified and amended
in accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Securities shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
SECTION 9.04. Notation on Securities.
Securities authenticated and delivered after the execution of
any supplemental indenture affecting such series pursuant to the provisions of
this Article Nine may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Securities so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may be prepared and
executed by the Company, authenticated by the Trustee or the Authenticating
Agent and delivered in exchange for the Securities then outstanding.
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SECTION 9.05. Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee.
The Trustee, subject to the provisions of Sections 6.01 and
6.02, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article Nine.
ARTICLE X
CONSOLIDATION, CONVERSION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 10.01. Company May Consolidate, etc., on Certain
Terms.
Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation, conversion or merger of the Company
with or into any other Person (whether or not affiliated with the Company, as
the case may be), or successive consolidations, conversions or mergers in which
the Company, or its successor or successors, as the case may be, shall be a
party or parties, or shall prevent any sale, conveyance, transfer or lease of
the property of the Company, or its successor or successors, as the case may
be, as an entirety, or substantially as an entirety, to any other Person
(whether or not affiliated with the Company, or its successor or successors, as
the case may be) authorized to acquire and operate the same; provided, that (a)
the Company is the surviving Person, or the Person formed by or surviving any
such consolidation, conversion or merger (if other than the Company) or to which
such sale, conveyance, transfer or lease of property is made is a Person
organized and existing under the laws of the United States or any State thereof
or the District of Columbia, and (b) upon any such consolidation, conversion,
merger, sale, conveyance, transfer or lease, the due and punctual payment of the
principal of (and premium, if any) and interest on the Securities according to
their tenor and the due and punctual performance and observance of all the
covenants and conditions of this Indenture to be kept or performed by the
Company shall be expressly assumed, by supplemental indenture (which shall
conform to the provisions of the Trust Indenture Act, as then in effect)
satisfactory in form to the Trustee, and executed and delivered to the Trustee
by the Person formed by such consolidation, conversion or into which the Company
shall have been converted or merged, or by the Person which shall have acquired
such property, as the case may be, (c) after giving effect to such
consolidation, conversion, merger, sale, conveyance, transfer or lease, no
Default or Event of Default shall have occurred and be continuing and (d) such
consolidation, conversion, merger, sale, conveyance, transfer or lease does not
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cause the Securities to be downgraded by a nationally recognized
statistical rating organization.
SECTION 10.02. Successor Corporation to be Substituted for
Company.
In case of any such consolidation, conversion, merger,
conveyance or transfer and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the due and punctual payment of the principal of and
premium, if any, and interest on all of the Securities and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed or observed by the Company, such successor Person
shall succeed to and be substituted for the Company, with the same effect as if
it had been named herein as the party of the first part, and the Company
thereupon shall be relieved of any further liability or obligation hereunder or
upon the Securities. Such successor Person thereupon may cause to be signed, and
may issue either in its own name or in the name of Webster Financial
Corporation, any or all of the Securities issuable hereunder which theretofore
shall not have been signed by the Company and delivered to the Trustee or the
Authenticating Agent; and, upon the order of such successor Person instead of
the Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate
and deliver any Securities which previously shall have been signed and delivered
by the officers of the Company to the Trustee or the Authenticating Agent for
authentication, and any Securities which such successor Person thereafter shall
cause to be signed and delivered to the Trustee or the Authenticating Agent for
that purpose. All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Securities had been issued at the date of the execution hereof.
SECTION 10.03. Opinion of Counsel to be Given Trustee.
The Trustee, subject to the provisions of Sections 6.01 and
6.02, may receive an Opinion of Counsel as conclusive evidence that any
consolidation, merger, sale, conveyance, transfer or lease, and any assumption,
permitted or required by the terms of this Article Ten complies with the
provisions of this Article Ten.
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ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01. Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for
cancellation all Securities theretofore authenticated (other than any Securities
which shall have been destroyed, lost or stolen and which shall have been
prepaid, paid or replaced (as provided in Section 2.08)) and not theretofore
cancelled, or (b) all the Securities not theretofore cancelled or delivered to
the Trustee for cancellation shall have become due and payable, or are by their
terms to become due and payable within one year or are to be called for
prepayment within one year under arrangements satisfactory to the Trustee for
the giving of notice of prepayment, and the Company shall deposit or cause to be
deposited with the Trustee, in trust, funds sufficient to pay on the Maturity
Date or upon prepayment all of the Securities (other than any Securities which
shall have been destroyed, lost or stolen and which shall have been prepaid,
paid or replaced (as provided in Section 2.08)) not theretofore cancelled or
delivered to the Trustee for cancellation, including principal and premium, if
any, and interest due or to become due to the Maturity Date or prepayment date,
as the case may be, but excluding, however, the amount of any moneys for the
payment of principal of or premium, if any, or interest on the Securities (1)
theretofore repaid to the Company in accordance with the provisions of Section
11.04, or (2) paid to any State or to the District of Columbia pursuant to its
unclaimed property or similar laws, and if in either case the Company shall also
pay or cause to be paid all other sums payable hereunder by the Company, then
this Indenture shall cease to be of further effect except for the provisions of
Sections 2.02, 2.07, 2.08, 3.01, 3.02, 3.04, 6.06, 6.10 and 11.04 hereof, which
shall survive until such Securities shall mature and be paid. Thereafter,
Sections 6.06, 6.10 and 11.04 shall survive, and the Trustee, on demand of the
Company accompanied by any Officers' Certificate and an Opinion of Counsel and
at the cost and expense of the Company, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture, the Company,
however, hereby agreeing to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred by the Trustee in connection with
this Indenture or the Securities.
SECTION 11.02. Deposited Moneys and U.S. Government
Obligations to be Held in Trust by Trustee.
Subject to the provisions of Section 11.04, all
moneys and U.S. Government Obligations deposited with the Trustee
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pursuant to Sections 11.01 or 11.05 shall be held in trust and applied by it to
the payment, either directly or through any paying agent (including the Company
if acting as its own paying agent), to the holders of the particular Securities
for the payment of which such moneys or U.S. Government Obligations have been
deposited with the Trustee, of all sums due and to become due thereon for
principal, premium, if any, and interest.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 11.05 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the holders of outstanding Securities.
SECTION 11.03. Paying Agent to Repay Moneys Held.
Upon the satisfaction and discharge of this Indenture all
moneys then held by any paying agent of the Securities (other than the Trustee)
shall, upon written demand of the Company, be repaid to it or paid to the
Trustee, and thereupon such paying agent shall be released from all further
liability with respect to such moneys.
SECTION 11.04. Return of Unclaimed Moneys.
Any moneys deposited with or paid to the Trustee or any paying
agent for payment of the principal of or premium, if any, or interest on
Securities and not applied but remaining unclaimed by the holders of Securities
for two years after the date upon which the principal of or premium, if any, or
interest on such Securities, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee or such paying agent on
written demand; and the holder of any of the Securities shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
and all liability of the Trustee or such paying agent with respect to such
moneys shall thereupon cease.
SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S.
Government Obligations.
The Company shall be deemed to have been Discharged (as
defined below) from its obligations with respect to the Securities on the 91st
day after the applicable conditions set forth below have been satisfied:
(1) the Company shall have deposited or caused to be
deposited irrevocably with the Trustee or the
Defeasance Agent (as defined below) as trust funds in
trust, specifically pledged as security for, and
dedicated solely to, the benefit of the hold-
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ers of the Securities (i) money in an amount, or (ii)
U.S. Government Obligations which through the payment
of interest and principal in respect thereof in
accordance with their terms will provide, not later
than one day before the due date of any payment,
money in an amount, or (iii) a combination of (i) and
(ii), sufficient, in the opinion (with respect to
(ii) and (iii)) of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee and
the Defeasance Agent, if any, to pay and discharge
each installment of principal of and interest and
premium, if any, on the outstanding Securities on the
dates such installments of principal, interest or
premium are due;
(2) if the Securities are then listed on any national
securities exchange, the Company shall have deliv-
ered to the Trustee and the Defeasance Agent, if any,
an Opinion of Counsel to the effect that the exercise
of the option under this Section 11.05 would not
cause such Securities to be delisted from such
exchange;
(3) no Default or Event of Default with respect to the
Securities shall have occurred and be continuing on
the date of such deposit; and
(4) the Company shall have delivered to the Trustee and
the Defeasance Agent, if any, an Opinion of Counsel
to the effect that holders of the Securities will not
recognize income, gain or loss for United States
federal income tax purposes as a result of the
exercise of the option under this Section 11.05 and
will be subject to United States federal income tax
on the same amount and in the same manner and at the
same times as would have been the case if such option
had not been exercised, and such opinion shall be
based on a statement so providing or be accompanied
by a private letter ruling to that effect received
from the United States Internal Revenue Service or a
revenue ruling pertaining to a comparable form of
transaction to that effect published by the United
States Internal Revenue Service.
"Discharged" means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by, and obligations
under, the Securities and to have satisfied all the obligations under this
Indenture relating to the Securities (and the Trustee, at the expense of the
Company, shall execute
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proper instruments acknowledging the same), except (A) the rights of holders of
Securities to receive, from the trust fund described in clause (1) above,
payment of the principal of and the interest and premium, if any, on the
Securities when such payments are due; (B) the Company's obligations with
respect to the Securities under Sections 2.07, 2.08, 5.02 and 11.04; and (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder.
"Defeasance Agent" means another financial institution which
is eligible to act as Trustee hereunder and which assumes all of the obligations
of the Trustee necessary to enable the Trustee to act hereunder. In the event
such a Defeasance Agent is appointed pursuant to this Section, the following
conditions shall apply:
(1) The Trustee shall have approval rights over the
document appointing such Defeasance Agent and the
document setting forth such Defeasance Agent's rights
and responsibilities;
(2) The Defeasance Agent shall provide verification to
the Trustee acknowledging receipt of sufficient money
and/or U. S. Government Obligations to meet the
applicable conditions set forth in this Section
11.05.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Indenture and Securities Solely Corporate
Obligations.
No recourse for the payment of the principal of or premium, if
any, or interest on any Security, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture, or in any Security, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor Person to the Company, either
directly or through the Company or any successor Person to the Company, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that all
such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issue of the
Securities.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Successors.
All the covenants, stipulations, promises and agreements in
this Indenture contained by the Company shall bind its successors and assigns
whether so expressed or not.
SECTION 13.02. Official Acts by Successor Corporation.
Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board, committee or
officer of the Company shall and may be done and performed with like force and
effect by the like board, committee or officer of any corporation that shall at
the time be the lawful sole successor of the Company.
SECTION 13.03. Surrender of Company Powers.
The Company by instrument in writing executed by authority of
2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company, and thereupon such power so
surrendered shall terminate both as to the Company, as the case may be, and as
to any successor Person.
SECTION 13.04. Addresses for Notices, etc.
Any notice or demand which by any provision of this Indenture
is required or permitted to be given or served by the Trustee or by the holders
of Securities on the Company may be given or served by being deposited postage
prepaid by registered or certified mail in a post office letter box addressed
(until another address is filed by the Company with the Trustee for the purpose)
to the Company, Webster Plaza, Waterbury, Connecticut 06702, Attention: John V.
Brennan. Any notice, direction, request or demand by any Securityholder to or
upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or made in writing at the office of the Trustee,
addressed to the Trustee at 101 Barclay Street, Floor 21 West, New York, New
York 10286, Attention: Corporate Trust Administration.
SECTION 13.05. Governing Law.
This Indenture and each Security shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be governed by and construed in accordance
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with the laws of said State, without regard to conflicts of laws principles
thereof.
SECTION 13.06. Evidence of Compliance with Conditions
Precedent.
Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this Indenture, the Company
shall furnish to the Trustee an Officers' Certificate stating that in the
opinion of the signers all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (except certificates delivered pursuant to
Section 3.05) shall include (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an in-
formed opinion as to whether or not such covenant or condition has been complied
with; and (4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 13.07. Business Days.
In any case where the date of payment of principal of or
premium, if any, or interest on the Securities will not be a Business Day, the
payment of such principal of or premium, if any, or interest on the Securities
need not be made on such date but may be made on the next succeeding Business
Day, with the same force and effect as if made on the date of payment and no
interest shall accrue for the period from and after such date.
SECTION 13.08. Trust Indenture Act to Control.
If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act of 1939, such imposed duties shall
control.
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SECTION 13.09. Table of Contents, Headings, etc.
The table of contents and the titles and headings of the
articles and sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.10. Execution in Counterparts.
This Indenture may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
SECTION 13.11. Separability.
In case any one or more of the provisions contained in this
Indenture or in the Securities shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Indenture or of
the Securities, but this Indenture and the Securities shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 13.12. Assignment.
The Company will have the right at all times to assign any of
its respective rights or obligations under this Indenture to a direct or
indirect wholly owned Subsidiary of the Company, provided that, in the event of
any such assignment, the Company will remain liable for all such obligations.
Subject to the foregoing, the Indenture is binding upon and inures to the
benefit of the parties thereto and their respective successors and assigns. This
Indenture may not otherwise be assigned by the parties hereto.
SECTION 13.13. Acknowledgement of Rights.
The Company acknowledges that, with respect to any Securities
held by Webster Capital Trust or a trustee of such trust, if the Property
Trustee of such Trust fails to enforce its rights under this Indenture as the
holder of the Securities held as the assets of Webster Capital Trust any holder
of Capital Securities may institute legal proceedings directly against the
Company to enforce such Property Trustee's rights under this Indenture without
first instituting any legal proceedings against such Property Trustee or any
other Person or entity. Notwithstanding the foregoing, if an Event of Default
has occurred and is continuing and such event is attributable to the failure of
the Company to pay principal of or premium, if any, or interest on the
Securities when due, the Company acknowledges that a
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holder of Capital Securities may directly institute a proceeding for enforcement
of payment to such holder of the principal of or premium, if any, or interest on
the Securities having a principal amount equal to the aggregate liquidation
amount of the Capital Securities of such holder on or after the respective due
date specified in the Securities.
ARTICLE XIV
PREPAYMENT OF SECURITIES -- MANDATORY AND
OPTIONAL SINKING FUND
SECTION 14.01. Special Event Prepayment.
If a Special Event has occurred and is continuing then,
notwithstanding Section 14.02(a) but subject to Section 14.02(c), the Company
shall have the right at any time prior to the Initial Optional Prepayment Date,
upon not (i) less than 45 days written notice to the Trustee and (ii) less than
30 days nor more than 60 days written notice to the Securityholders, to prepay
the Securities, in whole (but not in part), within 90 days following the
occurrence of such Special Event at the Special Event Prepayment Price.
Following a Special Event, the Company shall take such action as is necessary to
promptly determine the Special Event Prepayment Price, including without
limitation the appointment by the Company of a Quotation Agent. The Special
Event Prepayment Price shall be paid prior to 12:00 noon, New York time, on the
date of such prepayment or such earlier time as the Company determines, provided
that the Company shall deposit with the Trustee an amount sufficient to pay the
Special Event Prepayment Price by 10:00 a.m., New York time, on the date such
Special Event Prepayment Price is to be paid.
SECTION 14.02. Optional Prepayment by Company.
(a) Subject to the provisions of this Article Fourteen, the
Company shall have the right to prepay the Securities, in whole or in part, from
time to time, on or after the Initial Optional Prepayment Date at the optional
prepayment prices set forth below (expressed as percentages of principal) plus,
in each case, accrued and unpaid interest thereon (including Additional Interest
and Compounded Interest, if any) to the applicable date of prepayment (the
"Optional Prepayment Price") if prepaid during the 12-month period beginning
January 29 of the years indicated below.
Year Percentage
2007 104.680%
2008 104.212%
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2009 103.744%
2010 103.276%
2011 102.808%
2012 102.340%
2013 101.872%
2014 101.404%
2015 100.936%
2016 100.468%
2017 and thereafter 100.000%
If the Securities are only partially prepaid pursuant to this
Section 14.02, the Securities will be prepaid pro rata or by lot or by any other
method utilized by the Trustee; provided, that if at the time of prepayment the
Securities are registered as a Global Security, the Depositary shall determine,
in accordance with its procedures, the principal amount of Securities held by
each holder of a Security to be prepaid. The Optional Prepayment Price shall be
paid prior to 12:00 noon, New York time, on the date of such prepayment or at
such earlier time as the Company determines, provided that the Company shall
deposit with the Trustee an amount sufficient to pay the Optional Prepayment
Price by 10:00 a.m., New York time, on the date such Optional Prepayment Price
is to be paid.
(b) Notwithstanding the first sentence of Section 14.02, upon
the entry of an order for dissolution of Webster Capital Trust by a court of
competent jurisdiction, the Securities thereafter will be subject to optional
prepayment, in whole only, but not in part, on or after January 29, 2007, at the
optional prepayment prices set forth in Section 14.02 and otherwise in
accordance with this Article Fourteen.
(c) Any prepayment of Securities pursuant to Section
14.01 or Section 14.02 shall be subject to the receipt by the
Company of any required regulatory approval.
SECTION 14.03. No Sinking Fund.
The Securities are not entitled to the benefit of any sinking
fund.
SECTION 14.04. Notice of Prepayment; Selection of Securities.
In case the Company shall desire to exercise the right to
prepay all, or, as the case may be, any part of the Securities in accordance
with their terms, it shall fix a date for prepayment and shall mail a notice of
such prepayment at least 30 and not more than 60 days prior to the date fixed
for prepayment to the holders of Securities so to be prepaid as a whole or in
part at their last addresses as the same appear on the Security Register. Such
mailing shall be by first class mail. The notice
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if mailed in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not the holder receives such notice. In any case,
failure to give such notice by mail or any defect in the notice to the holder of
any Security designated for prepayment as a whole or in part shall not affect
the validity of the proceedings for the prepayment of any other Security.
Each such notice of prepayment shall specify the CUSIP number
of the Securities to be prepaid, the date fixed for prepayment, the prepayment
price at which the Securities are to be prepaid (or the method by which such
prepayment price is to be calculated), the place or places of payment that
payment will be made upon presentation and surrender of the Securities, that
interest accrued to the date fixed for prepayment will be paid as specified in
said notice, and that on and after said date interest thereon or on the
portions thereof to be prepaid will cease to accrue. If less than all the
Securities are to be prepaid the notice of prepayment shall specify the numbers
of the Securities to be prepaid. In case any Security is to be prepaid in part
only, the notice of prepayment shall state the portion of the principal amount
thereof to be prepaid and shall state that on and after the date fixed for
prepayment, upon surrender of such Security, a new Security or Securities in
principal amount equal to the unprepaid portion thereof will be issued.
By 10:00 a.m. New York time on the prepayment date specified
in the notice of prepayment given as provided in this Section, the Company will
deposit with the Trustee or with one or more paying agents an amount of money
sufficient to prepay on the prepayment date all the Securities so called for
prepayment at the appropriate Prepayment Price, together with accrued interest
to the date fixed for prepayment.
The Company will give the Trustee notice not less than 45 days
prior to the prepayment date as to the aggregate principal amount of Securities
to be prepaid and the Trustee shall select, in such manner as in its sole
discretion it shall deem appropriate and fair, the Securities or portions
thereof (in integral multiples of $1,000, except as otherwise set forth in the
applicable form of Security) to be prepaid.
SECTION 14.05. Payment of Securities Called for Prepayment.
If notice of prepayment has been given as provided in Section
14.04, the Securities or portions of Securities with respect to which such
notice has been given shall become due and payable on the date and at the place
or places stated in such notice at the applicable Prepayment Price, together
with interest accrued to the date fixed for prepayment (subject to the rights of
holders of Securities on the close of business on a regular
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record date in respect of an Interest Payment Date occurring on or prior to the
prepayment date), and on and after said date (unless the Company shall default
in the payment of such Securities at the Prepayment Price, together with
interest accrued to said date) interest on the Securities or portions of
Securities so called for prepayment shall cease to accrue. On presentation and
surrender of such Securities at a place of payment specified in said notice, the
said Securities or the specified portions thereof shall be paid and prepaid by
the Company at the applicable Prepayment Price, together with interest accrued
thereon to the date fixed for prepayment (subject to the rights of holders of
Securities on the close of business on a regular record date in respect of an
Interest Payment Date occurring on or prior to the prepayment date).
Upon presentation of any Security prepaid in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations, in principal amount equal to the
unprepaid portion of the Security so presented.
ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01. Agreement to Subordinate.
The Company covenants and agrees, and each holder of
Securities issued hereunder likewise covenants and agrees, that the Securities
shall be issued subject to the provisions of this Article Fifteen; and each
holder of a Security, whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of, premium, if
any, and interest on all Securities issued hereunder shall, to the extent and in
the manner hereinafter set forth, be subordinated and junior in right of payment
to all Senior Indebtedness, whether outstanding at the date of this Indenture
or thereafter incurred.
No provision of this Article Fifteen shall prevent the
occurrence of any Default or Event of Default hereunder.
SECTION 15.02. Default on Senior Indebtedness.
No payment of principal (including prepayment payments) of,
premium, if any, or interest on the Securities may be made at any time when (i)
any Senior Indebtedness is not paid when due, (ii) any applicable grace period
with respect to such default has
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ended and such default has not been cured or waived or ceased to exist, or (iii)
the maturity of any Senior Indebtedness has been accelerated because of a
default.
In the event of the acceleration of the maturity of the
Securities, then no payment shall be made by the Company with respect to the
principal (including prepayment payments) of or premium, if any, or interest on
the Securities until the holders of all Senior Indebtedness outstanding at the
time of such acceleration shall receive payment in full of all amounts due in
respect of such Senior Indebtedness (including any amounts due upon
acceleration).
In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee when such payment is prohibited by the
preceding paragraphs of this Section 15.02, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing, within 90 days of
such payment of the amounts then due and owing on such Senior Indebt edness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of such Senior Indebtedness.
SECTION 15.03. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution or winding-up or liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
of the Company shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the Company on
account of the principal (and premium, if any) or interest on the Securities;
and upon any such dissolution or winding-up or liquidation or reorganization,
any payment by the Company, or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to which the
Securityholders or the Trustee would be entitled to receive from the Company,
except for the provisions of this Article Fifteen, shall be paid by the Company
or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
Person making such payment or distribution, or by the Securityholders or by the
Trustee under this Indenture if received by them or it, directly to the holders
of Senior Indebtedness of the Company (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness held
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by such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Securityholders
or to the Trustee.
In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee before all Senior Indebtedness is paid in full, or provision is made
for such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid over or
delivered to the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
and their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay such Senior Indebtedness in full in money in accordance
with its terms, after giving effect to any concurrent payment or distribution
to or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article Fifteen, the words "cash,
property or securities" shall not be deemed to include shares of stock of the
Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Article
Fifteen with respect to the Securities to the payment of Senior Indebtedness
that may at the time be outstanding, provided that (i) such Senior Indebtedness
is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of such
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the Company with, or
the merger of the Company into, another Person or the liquidation or dissolution
of the Company following the sale, conveyance, transfer or lease of its property
as an entirety, or substantially as an entirety, to another Person upon the
terms and conditions provided for in Article Ten of this Indenture shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section 15.03 if such other Person shall, as a part of such
consolidation, merger, sale, conveyance, transfer or lease, comply with the
conditions stated in Article Ten of this Indenture. Nothing in Section 15.02 or
in this
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Section 15.03 shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 6.05 of this Indenture.
SECTION 15.04. Subrogation.
Subject to the payment in full of all Senior Indebtedness,
the rights of the Securityholders shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company, as the case may be, applicable to
such Senior Indebtedness until the principal of (and premium, if any) and
interest on the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Securityholders or
the Trustee would be entitled except for the provisions of this Article Fifteen,
and no payment over pursuant to the provisions of this Article Fifteen to or for
the benefit of the holders of such Senior Indebtedness by Securityholders or the
Trustee, shall, as between the Company, its creditors other than holders of
Senior Indebtedness of the Company, and the holders of the Securities, be deemed
to be a payment by the Company to or on account of such Senior Indebtedness. It
is understood that the provisions of this Article Fifteen are and are intended
solely for the purposes of defining the relative rights of the holders of the
Securities, on the one hand, and the holders of such Senior Indebtedness on the
other hand.
Nothing contained in this Article Fifteen or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness of the
Company, and the holders of the Securities, the obligation of the Company, which
is absolute and unconditional, to pay to the holders of the Securities the
principal of (and premium, if any) and interest on the Securities as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the holders of the Securities
and creditors of the Company, as the case may be, other than the holders of
Senior Indebtedness of the Company, as the case may be, nor shall anything
herein or therein prevent the Trustee or the holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article Fifteen of the
holders of such Senior Indebtedness in respect of cash, property or securities
of the Company, as the case may be, received upon the exercise of any such
remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article Fifteen, the Trustee, subject to the provisions of
Article Six of this Indenture, and the Securityholders shall be entitled to
conclusively rely upon any
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order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Securityholders, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, as the case may be, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Fifteen.
SECTION 15.05. Trustee to Effectuate Subordination.
Each Securityholder by such Securityholder's acceptance
thereof authorizes and directs the Trustee on such Securityholder's behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Fifteen and appoints the Trustee such
Securityholder's attorney-in-fact for any and all such purposes.
SECTION 15.06. Notice by the Company.
The Company shall give prompt written notice to a Responsible
Officer of any fact known to the Company that would prohibit the making of any
payment of monies to or by the Trustee in respect of the Securities pursuant to
the provisions of this Article Fifteen. Notwithstanding the provisions of this
Article Fifteen or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article Fifteen, unless and until
a Responsible Officer shall have received written notice thereof from the
Company or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the Trustee,
subject to the provisions of Article Six of this Indenture, shall be entitled in
all respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 15.06 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of (or premium, if any) or interest on any Security),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which they were received, and shall not be affected by any
notice to the contrary that may be received by it within two Business Days prior
to such date.
The Trustee, subject to the provisions of Article Six of this
Indenture, shall be entitled to conclusively rely on the
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delivery to it of a written notice by a Person representing himself to be a
holder of Senior Indebtedness of the Company (or a trustee on behalf of such
holder), to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article Fifteen, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Fifteen, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Upon any payment or distribution of assets of the Company
referred to in this Article Fifteen, the Trustee and the Securityholders shall
be entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, liquidating trustee,
custodian, receiver, assignee for the benefit of creditors, agent or other
Person making such payment or distribution, delivered to the Trustee or to the
Securityholders, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Fifteen.
SECTION 15.07. Rights of the Trustee; Holders of Senior
Indebtedness.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article Fifteen in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the
Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article Fifteen,
and no implied covenants or obligations with respect to the holders of such
Senior Indebtedness shall be read into this Indenture against the Trustee. The
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Trustee shall not be deemed to owe any fiduciary duty to the holders of such
Senior Indebtedness and, subject to the provisions of Article Six of this
Indenture, the Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to Securityholders, the Company or
any other Person money or assets to which any holder of such Senior In-
debtedness shall be entitled by virtue of this Article Fifteen or otherwise.
Nothing in this Article Fifteen shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.06.
SECTION 15.08. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Company, as the case may be, or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company, as the
case may be, with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof that any such holder may have or otherwise
be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company may, at any time
and from time to time, without the consent of or notice to the Trustee or the
Securityholders, without incurring responsibility to the Securityholders and
without impairing or releasing the subordination provided in this Article
Fifteen or the obligations hereunder of the holders of the Securities to the
holders of such Senior Indebtedness, do any one or more of the following: (i)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in
any manner such Senior Indebtedness or any instrument evidencing the same or
any agreement under which such Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of such Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Company, as the case may be, and
any other Person.
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ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01. Extension of Interest Payment Period.
So long as no Event of Default has occurred and is continuing,
the Company shall have the right, at any time and from time to time during the
term of the Securities, to defer payments of interest by extending the interest
payment period of such Securities for a period not exceeding 10 consecutive
semi-annual periods, including the first such semi-annual period during such
extension period (the "Extended Interest Payment Period"), during which Extended
Interest Payment Period no interest shall be due and payable; provided that no
Extended Interest Payment Period shall end on a date other than an Interest
Payment Date or extend beyond the Maturity Date. To the extent permitted by
applicable law, interest, the payment of which has been deferred because of the
extension of the interest payment period pursuant to this Section 16.01, will
bear interest thereon at the Coupon Rate compounded semi-annually for each
semi-annual period of the Extended Interest Payment Period ("Compounded
Interest"). At the end of the Extended Interest Payment Period, the Company
shall pay all interest accrued and unpaid on the Securities, including any
Additional Interest and Compounded Interest (together, "Deferred Interest") that
shall be payable to the holders of the Securities in whose names the Securities
are registered in the Security Register on the first record date preceding the
end of the Extended Interest Payment Period. Before the termination of any
Extended Interest Payment Period, the Company may further defer payments of
interest by further extending such period, provided that such period, together
with all such previous and further extensions within such Extended Interest
Payment Period, shall not exceed 10 consecutive semi-annual periods, including
the first such semi-annual period during such Extended Interest Payment Period,
or extend beyond the Maturity Date. Upon the termination of any Extended
Interest Payment Period and the payment of all Deferred Interest then due, the
Company may elect to commence a new Extended Interest Payment Period, subject to
the foregoing requirements. No interest shall be due and payable during an
Extended Interest Payment Period, except at the end thereof, but the Company may
prepay at any time all or any portion of the interest accrued during an Extended
Interest Payment Period.
SECTION 16.02. Notice of Extension.
(a) If the Property Trustee is the only registered holder of
the Securities at the time the Company selects an Extended Interest Payment
Period, the Company shall give written notice to the Administrative Trustees,
the Property Trustee and the Trustee of its selection of such Extended Interest
Payment
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Period five Business Days before the earlier of (i) the next succeeding date on
which Distributions on the Trust Securities issued by Webster Capital Trust are
payable, or (ii) the date the Trust is required to give notice of the record
date, or the date such Distributions are payable, to any national securities
exchange or to holders of the Capital Securities issued by the Trust, but in any
event at least five Business Days before such record date.
(b) If the Property Trustee is not the only holder of the
Securities at the time the Company selects an Extended Interest Payment Period,
the Company shall give the holders of the Securities and the Trustee written
notice of its selection of such Extended Interest Payment Period at least 10
Business Days before the earlier of (i) the next succeeding Interest Payment
Date, or (ii) the date the Company is required to give notice of the record or
payment date of such interest payment to any national securities exchange.
(c) The semi-annual period in which any notice is given
pursuant to paragraphs (a) or (b) of this Section 16.02 shall be counted as one
of the 10 semi-annual periods permitted in the maximum Extended Interest Payment
Period permitted under Section 16.01.
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The Bank of New York hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed by their respective officers thereunto duly
authorized, as of the day and year first above written.
WEBSTER FINANCIAL CORPORATION
By ____________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By ________________________
Name:
Title
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EXHIBIT A
(FORM OF FACE OF SECURITY)
[IF THE SECURITY IS A GLOBAL SECURITY, INSERT: - THIS SECURITY
IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC")
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR
ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
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<PAGE>
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D),
(E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS
AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, AND (ii) PURSUANT TO
CLAUSE (E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THE REVERSE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO
THE COMPANY. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
A-2
<PAGE>
No. CUSIP No. ______________
WEBSTER FINANCIAL CORPORATION
9.36% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE January 29, 2027
Webster Financial Corporation, a Delaware corporation (the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Webster
Capital Trust I or registered assigns, the principal sum of one hundred three
million ninety three thousand dollars on January 29, 2027 (the "Maturity Date"),
unless previously prepaid, and to pay interest on the outstanding principal
amount hereof from January 29, 1997, or from the most recent interest payment
date (each such date, an "Interest Payment Date") to which interest has been
paid or duly provided for, semi-annually (subject to deferral as set forth
herein) in arrears on January 29 and July 29 of each year, commencing July 29,
1997 at the rate of 9.36% per annum until the principal hereof shall have become
due and payable, and on any overdue principal and premium, if any, and (without
duplication and to the extent that payment of such interest is enforceable
under applicable law) on any overdue installment of interest at the same rate
per annum compounded semi-annually. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of a 360-day year of twelve
30-day months and, for any period less than a full calendar month, the number of
days elapsed in such month. In the event that any date on which the principal of
(or premium, if any) or interest on this Security is payable is not a Business
Day, then payment payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), with the same force and effect as if made on such date.
The interest installment so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities, as defined in said Indenture) is registered at the close
of business on the regular record date for such interest installment, which
shall be the 15th day prior to the relevant interest payment date. Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the holders on such regular record date and may be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the holders of Securities not less than 10 days prior
to such special record date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon
A-3
<PAGE>
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
The principal of (and premium, if any) and interest on this
Security shall be payable at the office or agency of the Trustee maintained for
that purpose in any coin or currency of the United States of America that at the
time of payment is legal tender for payment of public and private debts;
provided, however, that, payment of interest may be made at the option of the
Company by (i) check mailed to the holder at such address as shall appear in the
Security Register or (ii) by transfer to an account maintained by the Person
entitled thereto, provided that proper written transfer instructions have been
received by the relevant record date. Notwithstanding the foregoing, so long as
the Holder of this Security is the Property Trustee, the payment of the
principal of (and premium, if any) and interest on this Security will be made at
such place and to such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. Each holder of
this Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and
waives reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed by
or on behalf of the Trustee.
A-4
<PAGE>
The provisions of this Security are continued on the reverse
side hereof and such provisions shall for all purposes have the same effect as
though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed.
WEBSTER FINANCIAL CORPORATION
By: __________________________
Name:
Title
Attest:
By: _______________________
Name:
Title:
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated ______________
The Bank of New York,
as Trustee
By____________________
Authorized Signatory
A-5
<PAGE>
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Company (herein
sometimes referred to as the "Securities"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture, dated as of January
29, 1997 (the "Indenture"), duly executed and delivered between the Company and
The Bank of New York, as Trustee (the "Trustee"), to which Indenture reference
is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Securities.
Upon the occurrence and continuation of a Special Event, the
Company shall have the right at any time prior to January 29, 2007, within 90
days following the occurrency of such Special Event (the "Initial Optional
Prepayment Date"), to prepay this Security in whole (but not in part) at the
Special Event Prepayment Price. "Special Event Prepayment Price" shall mean,
with respect to any prepayment of the Securities following a Special Event, an
amount in cash equal to the greater of (i) 100% of the principal amount to be
prepaid or (ii) the sum, as determined by a Quotation Agent, of the present
value of 104.680% of the principal amount thereof plus the scheduled payments of
interest thereon on the Securities from the prepayment date to and including the
Initial Optional Prepayment Date, discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate, plus any accrued and unpaid interest thereon,
including Compounded Interest and Additional Interest, if any, to the date of
such prepayment.
In addition, the Company shall have the right to prepay this
Security, in whole or in part, at any time on or after the Initial Optional
Prepayment Date (an "Optional Prepayment"), at the prepayment prices as set
forth below (expressed as percentages of principal to be prepaid) plus, in each
case, accrued and unpaid interest thereon (including Additional Interest and
Compounded Interest, if any) to the applicable date of prepayment (the Optional
Prepayment Price") if prepaid during the 12-month period beginning January 29 of
the years indicated below.
Year Percentage
2007 104.680%
2008 104.212%
2009 103.744%
2010 103.276%
2011 102.808%
2012 102.340%
2013 101.872%
2014 101.404%
2015 100.936%
2016 100.468%
2017 and thereafter 100.000%
A-6
<PAGE>
The Optional Prepayment Price or the Special Event Prepayment
Price, as the case requires, shall be paid prior to 12:00 noon, New York time,
on the date of such prepayment or at such earlier time as the Company
determines, provided, that the Company shall deposit with the Trustee an amount
sufficient to pay the applicable Prepayment Price by 10:00 a.m., New York City
time, on the date such Prepayment Price is to be paid. Any prepayment pursuant
to this paragraph will be made upon not less than 30 days nor more than 60 days
notice. If the Securities are only partially prepaid by the Company pursuant to
an Optional Prepayment, the Securities will be prepaid pro rata or by lot or by
any other method utilized by the Trustee; provided that if, at the time of
prepayment, the Securities are registered as a Global Security, the Depositary
shall determine the particular Securities to be prepaid in accordance with its
procedures.
In the event of prepayment of this Security in part only, a
new Security or Securities for the unprepaid portion hereof will be issued in
the name of the holder hereof upon the cancellation hereof.
Notwithstanding the foregoing, any prepayment of Securities by
the Company shall be subject to the receipt by the Company of any required
regulatory approval.
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal of all of the Securities
may be declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of a majority in aggregate
principal amount of the Securities at the time outstanding, as defined in the
Indenture, to execute supplemental indentures for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the holders of the
Securities; provided, however, that no such supplemental indenture shall,
without the consent of each holder of Securities then outstanding and affected
thereby, (i) extend the Maturity Date of any Securities, or reduce the principal
amount thereof, or reduce any amount payable on prepayment thereof, or reduce
the rate or extend the time of payment of interest thereon (subject to Article
Sixteen of the Indenture), or make the principal of, or interest or premium on,
the Securities payable in any coin or currency other than U.S. dollars, or
impair or affect the right of any holder of Securities to institute suit for the
payment thereof, or (ii) reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture. The
Indenture also contains provisions permitting the holders of a majority in
aggregate principal amount of the Securities at the
A-7
<PAGE>
time outstanding affected thereby, on behalf of all of the holders of the
Securities, to waive any past default in the performance of any of the covenants
contained in the Indenture, or established pursuant to the Indenture, and its
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any of the Securities or a default in respect of any
covenant or provision under which the Indenture cannot be modified or amended
without the consent of each holder of Securities then outstanding. Any such
consent or waiver by the holder of this Security (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such holder and upon all
future holders and owners of this Security and of any Security issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Security at the time and place and at the
rate and in the money herein prescribed.
The Company shall have the right, at any time and from time to
time during the term of the Securities, to defer payments of interest by
extending the interest payment period of such Securities for a period not
exceeding 10 consecutive semi-annual periods, including the first such
semi-annual period during such extension period, and not to extend beyond the
Maturity Date of the Securities (an "Extended Interest Payment Period"), at the
end of which period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Securities to the
extent that payment of such interest is enforceable under applicable law).
Before the termination of any such Extended Interest Payment Period, the Company
may further defer payments of interest by further extending such Extended
Interest Payment Period, provided that such Extended Interest Payment Period,
together with all such previous and further exten sions within such Extended
Interest Payment Period, (i) shall not exceed 10 consecutive semi-annual
periods, including the first semi-annual period during such Extended Interest
Payment Period, (ii) shall not end on any date other than an Interest Payment
Date and (iii) shall not extend beyond the Maturity Date of the Securities.
Upon the termination of any such Extended Interest Payment Period and the
payment of all accrued and unpaid interest and any additional amounts then due,
the Company may commence a new Extended Interest Payment Period, subject to the
foregoing requirements.
The Company has agreed that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the
A-8
<PAGE>
Company's capital stock (which includes common and preferred stock) or (ii) make
any payment of principal, interest or premium, if any, on or repay or repurchase
or redeem any debt securities of the Company that rank pari passu with or junior
in right of payment to the Securities or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities or any Subsidiary
of the Company (including any Other Guarantees) if such guarantee ranks pari
passu or junior in right of payment to the Securities (other than (a) dividends
or distributions in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock of the Company; (b) any declaration of a
dividend in connection with the implementation of a stockholder's rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto; (c) payments under the Capital
Securities Guarantee; (d) as a result of a reclassification of the Company's
capital stock or the exchange or the conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock; (e) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the exchange or conversion of such capital stock or
the security being exchanged or converted, and (f) purchases of Common Stock
related to the issuance of Common Stock or rights under any of the Company's
benefit plans for its directors, officers or employees or any of the Company's
dividend reinvestment plans) if at such time (i) there shall have occurred any
event of which the Company has actual knowledge that (a) is, or with the giving
of notice or the lapse of time, or both, would be, an Event of Default and (b)
in respect of which the Company shall not have taken reasonable steps to cure,
(ii) if the Securities are held by Webster Capital Trust, the Company shall be
in default with respect to its payment obligations under the Capital Securities
Guarantee or (iii) the Company shall have given notice of its election of the
exercise of its right to extend the interest payment period and any such
extension shall be continuing.
The Securities are issuable only in registered form without
coupons in denominations of $1,000.00 and any integral multiple thereof. As
provided in the Indenture and subject to the transfer restrictions limitations
as may be contained herein and therein from time to time, this Security is
transferable by the holder hereof on the Security Register of the Company, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in the City and State of New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company or the
Trustee duly executed by the holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of authorized denominations
and for the same aggregate principal amount and series will be issued to the
designated transferee or transferees. No service charge will be made for any
such transfer, but the Company may re-
A-9
<PAGE>
quire payment of a sum sufficient to cover any tax or other governmental charge
payable in relation thereto.
Prior to due presentment for registration of transfer of this
Security, the Company, the Trustee, any authenticating agent, any paying agent,
any transfer agent and the registrar may deem and treat the registered holder
hereof as the absolute owner hereof (whether or not this Security shall be
overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the Security Registrar) for the purpose of receiving payment
of or on account of the principal hereof and premium, if any, and (subject to
the Indenture) interest due hereon and for all other purposes, and neither the
Company nor the Trustee nor any authenticating agent nor any paying agent nor
any transfer agent nor any registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of
or premium, if any, or interest on this Security, or for any claim based hereon,
or otherwise in respect hereof, or based on or in respect of the Indenture,
against any incorporator, stockholder, officer or director, past, present or
future, as such, of the Company or of any predecessor or successor Person,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issuance
hereof, expressly waived and released.
All terms used in this Security that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAW PROVISIONS THEREOF.
A-10
WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
STATEMENT OF CONDITION DATA (Dollars in Thousands Except Share Data)*
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Total assets $3,917,600 $3,219,670 $3,053,851 $2,483,403 $2,367,722
Loans receivable, net 2,525,543 1,891,956 1,869,216 1,467,935 1,522,168
Securities 1,070,578 1,044,640 828,758 669,764 438,323
Core deposit intangible 44,315 4,729 5,457 11,829 15,463
Deposits 3,095,876 2,400,202 2,431,945 1,966,574 1,995,079
Shareholders' equity 206,296 209,973 156,807 126,273 129,144
<CAPTION>
OPERATING DATA Years Ended December 31,
- -------------- -------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Net interest income 115,789 87,278 92,356 73,386 49,816
Provision for loan losses 4,000 3,100 3,155 4,597 5,574
Noninterest income 25,530 21,975 13,629 10,703 8,407
Noninterest expenses:
Non-recurring expenses (a) 5,230 6,371 5,700 - -
Other noninterest expenses 92,019 73,216 73,595 54,997 39,153
------- ------- ------- ------- -------
Total noninterest expenses 97,249 79,587 79,295 54,997 39,153
------- ------- ------- ------- -------
Income before taxes 40,070 26,566 23,535 24,895 13,496
Income taxes 14,462 8,246 4,850 10,595 7,083
------- ------- ------- ------- -------
Net income before cumulative change 25,608 18,320 18,685 14,300 6,413
Cumulative effect of change in method of
accounting for income taxes - - - 4,575 -
------- ------- ------- ------- -------
Net income 25,608 18,320 18,685 18,875 6,413
Preferred stock dividends 1,149 1,296 1,716 2,653 581
------- ------- ------- ------- -------
Net income available to
common shareholders $ 24,459 $ 17,024 $ 16,969 $ 16,222 $ 5,832
======= ======= ======= ======= =======
</TABLE>
<PAGE>
WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
SIGNIFICANT STATISTICAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
For The Period: 1996 1995 1994 1993 1992
-------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Interest rate spread 3.16% 2.78% 3.29% 3.13% 3.32%
Net yield on average earning assets 3.21% 2.89% 3.34% 3.23% 3.50%
Return on average shareholders' equity (b) 11.99% 10.70% 12.55% 11.11% 6.87%
Net Income per common share (c)(d)
Primary $ 2.97 $ 2.44 $ 2.69 $ 2.25 $ 1.18
Fully Diluted $ 2.79 $ 2.30 $ 2.44 $ 2.04 $ 1.16
Dividends declared per common share (e) $ .68 $ .64 $ 0.52 $ 0.50 $ 0.48
Dividend payout ratio 24.37% 27.83% 18.44% 16.85% 37.07%
Noninterest expenses to average assets 2.55% 2.53% 2.86% 2.30% 2.64%
Noninterest expenses(excluding foreclosed
property expenses and provisions, net
to average assets 2.50% 2.40% 2.61% 2.09% 2.23%
At End of Period:
Fully diluted weighted average shares 9,163 7,971 7,650 6,621 5,017
Book value per common share $24.79 $23.87 $20.59 $19.90 $21.29
Tangible book value per common share $21.55 $23.28 $19.78 $17.58 $18.13
Shareholders' equity to total assets 5.27% 6.52% 5.13% 5.08% 5.46%
</TABLE>
* Information for all periods presented has been restated to reflect the
inclusion of the results of Shelton Bancorp, Inc. and Shoreline Bank and
Trust Company which were acquired on November 1, 1995 and December 16,
1994, respectively and were accounted for using the pooling of interests
method.
(a) See Management's Discussion and Analysis Comparison of 1996 and 1995 years
and 1995 and 1994 years and Note 17 to the Consolidated Financial
Statements.
(b) Return on average shareholder's equity, excluding non-recurring items was
13.41%, 12.85% and 12.82% for the years ended December 31, 1996, 1995 and
1994, respectively.
(c) Before cumulative change in the method of accounting for Income Taxes in
1993. After such cumulative change net income per common share for 1993 was
$3.13 on a primary basis and $2.73 on a fully diluted basis.
(d) Net income per common share calculated on a primary and fully diluted
basis, excluding non-recurring expenses was $3.34 and $3.13, respectively,
for the year ended December 31, 1996, $2.97 and $2.76, respectively for the
year ended December 31, 1995 and $3.21 and $2.87 respectively for the year
ended December 31, 1994.
(e) Webster has continuously declared dividends since the third quarter of
1987.
All per share data and the number of outstanding shares of common stock have
been adjusted retroactively to give effect to the payment of stock dividends in
1993.
<PAGE>
I am pleased to report that 1996 was Webster Financial Corporation's best year
ever by virtually any measure. Webster achieved record earnings, significantly
improved asset quality and greatly expanded its franchise and product offerings.
Net income for the year represented a 40 percent increase over 1995 levels.
Nonaccrual assets were reduced 43 percent from 1995 levels to less than one
percent of total assets. The purchase of the 20 former Shawmut Bank Branches in
early 1996 and the recent acquisition of DS Bancor, Inc., parent of Derby
Savings Bank, significantly increased Webster's market share in its primary
markets of Hartford and New Haven counties. Many of our accomplishments for the
year are discussed in greater detail later in this report.
We are committed to creating shareholder value through pursuit of our mission
to help individuals, families and businesses to achieve their financial goals.
Helping customers realize their dreams is central to Webster's core ideology. In
this letter, I'd like to share with you some of the initiatives we have adopted
to fulfill this mission. CUSTOMER FOCUS The belief that every customer is
important is evident throughtout the bank, in every Webster office, in every
business line and in the approach of every employee. This focus is reflected in
the design of new products and services and in the introduction of new delivery
channels which provide greater access and convenience for our customers. As
Webster evolves into a marketing-oriented company, we are increasing our
investment in the tools necessary to understand consumer behavior. Increased
utilization of sophisticated database marketing and consumer segmentation
analysis will enable us to identify and develop customer needs-driven marketing
programs and to target specific customer groups.
<PAGE>
Mergers among large regional banks have reduced the number of
Connecticut-based banks. As the second largest Connecticut-based bank, Webster
has increasingly sought to fill the resulting void. Webster now supports one out
of four hosuseholds within its primary market. We strive to build strong,
lasting relationships by helping customers pursue their financial goals. Meeting
the needs of Connecticut families and businesses continues to be our main focus.
OPERATIONAL EXCELLENCE The concept of operational excellence is central to
Webster's abiility to differentiate itself from other institutions. We create
value for our customers by providing services that are easy to buy, simple to
use, and flawlessly delivered at a reasonable price - simple, hassle-free
banking. The experience we have gained from integrating seven banks into our
operating system over the last five years enables us to continuously reexamine
and streamline our own operational processes. We have effectively used
technology to reduce costs while also improving the delivery of services,
resulting in greater access and convenience for our customers. INCREASING
SHAREHOLDER VALUE It is our goal to achieve results that increase shareholder
value over time. Webster focuses on effective capital management, as evident in
our efficient capital structure and consistent improvement in the shareholder
returns. We recently adopted the concept of Economic Value Added (EVA), a
measure of financial performance that correlates more closely with increases in
market value than do more traditional accounting methods. Developed by Stern
Stewart $ Co, EVA is a decision-making tool based on the cost of capital. Our
primary goal is to improve our EVA continuously and earn a return in excess of
our cost of capital. New
<PAGE>
EVA-based incentive compensation programs planned for 1997 will tie pay and
performance even more closely to the company's economic profitability. GROWTH
AND OPPORTUNITY Since my father founded the company in 1935, we have sought out
opportunities for growth that create value for our customers and increase the
value of Webster's franchise. Our acquisitions have enabled us to offer a
broader range of products and services and to provide greater convenience and
access for our customers. We will continue to seek opportunities for growth that
benefit our constituencies. To this end, we have already achieved two milestones
in 1997, completing the acquisition of DS Bancor, Inc. and the sale of $100
million of Webster Capital Securities. As a result, Webster today is a $5.2
billion-asset institution with over $400 million in capital. The year 1996 was
one of significant accomplishments for Webster. Our achievements were made
possible through the extraordinary dedication of our employees, the strong
support of our customers and the confidence of our shareholders. Our commitment
to our customers combined with our conservative business philosophy are the key
to Webster's success. Webster is a strong, growing Connecticut-based bank with a
bright future. We appreciate your investment.
Sincerely,
/s/ James C. Smith
James C. Smith
Chairman and Chief Executive Officer
<PAGE>
1996 EARNINGS percent reported the previous year.
Earnings for 1996 totaled $25.6 Webster's allowance for loan losses as
million or $2.79 per fully diluted a percent of nonaccrual loans
share compared to $18.3 million or increased to 153 percent at year-end
$2.30 per fully diluted share in 1995. 1996 from 110 percent in 1995.
The 1996 results represent an increase
of 40 percent over 1995 results. The INTRODUCTION OF NEW PRODUCTS Webster
1996 results were reduced by $5.2 introduced several new products in
million in non-recurring expenses, of 1996, reflecting the commitment to
which $4.7 million was related to a full-service banking and to developing
special assessment associated with the long-lasting customer relationships.
recapitalization of the Savings These products included additional
Association Insurance Fund (SAIF). cash management services, Money Desk
Webster's 1996 earnings would have and Treasury services, VISA(R) credit
been $28.6 million or $3.13 per fully and debit cards and the WebsterOne
diluted share adjusting for the (SM) account. The expansion of Cash
effects of the non-recurring expenses. Management services gives business
customers greater management and
DIVIDEND control of cash flows. Webster's Money
In July 1996, the Board of Directors Desk offers short-term investments
increased the quarterly cash dividend such as jumbo CDs and repurchase
12.5 percent to $.18 per common share agreements, for individuals,
representing Webster's fifth dividend businesses and municipalities.
increase since the corporation paid Webster's credit card features a
its first dividend in 1987.Webster has highly competitive interest rate for
paid a regular quarterly cash dividend qualified borrowers, while the Webster
for 37 consecutive quarters. debit card increases customer access
and convenience. WebsterOne is a
relationship banking account that
rewards customers for consolidating
SHAWMUT BRANCH ACQUISITION their banking relationship at Webster.
Webster completed its purchase of 20
former Shawmut Bank branches in
February, greatly expanding its market
presence in Greater Hartford. In this CAPITAL MANAGEMENT
purchase, Webster acquired In January 1997, Webster completed the
approximately $845 million in deposits repurchase of 850,000 of its common
and $586 million in loans. The shares. At Webster's current earnings
acquisition accelerated Webster's level, the buyback is expected to have
transition to a full-service bank a positive impact on earnings per
through the broad expansion of share on those shares of Webster stock
business banking products and that remain outstanding. Also in
services. January, Webster raised $100 million
in new capital through the sale of
DS BANCOR, INC. ACQUISITION Capital Securities that will be used
In October, Webster signed a for general corporate purposes.
definitive agreement to purchase DS Webster formed a business trust for
Bancor, Inc., the holding company for the purpose of issuing capital
Derby Savings Bank. DS Bancor,Inc. had securities and investing the proceeds
$1.2 billion in assets, $1.0 billion in subordinated debentures of the
in deposits and $800 million in loans. holding company. The cost of the
The acquisition was completed in capital raised is materially less than
January 1997 and is expected to have a the cost of capital associated with
positive impact on earnings per share the issuance of common stock. This
in 1997. This acquisition also capital qualifies as regulatory
enhanced the value of the franchise, capital.
increasing the number of offices
statewide to 78.
ECONOMIC VALUE ADDED (EVA)
IMPROVED ASSET QUALITY In 1996, Webster began the
Webster experienced continued implementation of EVA as a management
improvement in asset quality in 1996 tool to improve financial performance
as the result of strong underwriting, and subsequent value to our
active loan servicing and aggressive shareholders. Simply stated, EVA
disposition of nonaccrual assets. At tracks the cash profit remaining after
year-end 1996, Webster's nonaccrual subtracting the cost of the capital
assets amounted to $31.3 million, employed to generate that profit. It
representing a 43 percent decrease is the lens through which management
from the $55.0 million total reported can view and assess its business
at year-end 1995. Webster sold $18.6 judgments in order to efficiently
million in nonaccrual residential allocate, manage and deploy capital.
assets in 1996, significantly reducing To ensure that EVA is ingrained in
the bank's total nonaccrual assets. Webster's corporate culture,
Nonaccrual assets as a percent of management incentive compensation will
total assets were 0.80 percent at be closely tied to achieving annual
year-end 1996, compared to 1.71 EVA goals.
<PAGE>
SENIOR MANAGEMENT GROUP BRANCH LOCATIONS CORPORATE PROFILE
SENIOR MANAGEMENT GROUP
STANDING LEFT TO RIGHT:
PETER K. MULLIGAN, Executive Vice President, Consumer and Small Business Banking
WILLIAM T. BROMAGE, Executive Vice President, Business Banking
RENEE P. SEEFRIED*, Senior Vice President, Human Resources
SEATED BACK ROW LEFT TO RIGHT:
GEORGE M. BROPHY*, Executive Vice President, Information Technologies
ROSS M. STRICKLAND, Executive Vice President, Mortgage Banking
SEATED FRONT ROW LEFT TO RIGHT:
JOHN V. BRENNAN, CPA, Executive Vice President, Chief Financial Officer and
Treasurer
LEE A. GAGNON, CPA, Executive Vice President, Chief Operating Officer and
Secretary
JEFFREY N. BROWN*, Executive Vice President, Marketing and Communications
*Webster Bank Only
[GRAPHIC OMITTED]
CORPORATE PROFILE
Webster Financial Corporation is the holding company for Connecticut-based
Webster Bank, a $5.2 billion bank with 78 full-service offices throughout the
central Connecticut corridor. The company has grown steadily and profitably
through the years by emphasizing customer service, asset quality, recurring
earnings and expense control. A series of recent acquisitions has expanded and
strengthened Webster's franchise, accelerating its transition to a full-service
retail and business bank. Webster is organized along three business lines --
consumer, business and mortgage banking -- each focused on the special needs of
its customers. By helping customers reach their financial goals, Webster builds
strong, lasting relationships that create shareholder value.
<PAGE>
CONSUMER & SMALL BUSINESS BANKING
TOP ACHIEVEMENTS. TO GIVE OUR CUSTOMERS EASIER ACCESS TO THEIR ACCOUNTS, WE
EXPANDED OUR DIRECT BANKING SERVICES BEYOND OUR BRANCHES. AT THE SAME TIME WE
GAVE OUR EMPLOYEES THE TOOLS TO PROVIDE HIGHER LEVELS OF SERVICE. As people
attempt to do more in less time, it is critical that we make banking easier and
more accessible. Electronic transactions, once the exception, are now becoming
an everyday banking tool. When we introduced the Webster debit card and upgraded
our ATM network in 1996, transactions soared. Anticipating our customers' need
for still more convenience, we transformed our Customer Information Center into
a full-service Telebanking Center. Now, no matter where they live or work, our
customers can open accounts, make deposits and apply for loans without leaving
their homes or offices. We are also prepared for the next level of direct
banking with a PC banking pilot, scheduled to roll out in 1997. To better meet
the credit needs of our customers, we greatly expanded our home equity programs
and introduced the Webster Visa(R) Credit Card. Assimilating Small Business
Banking into the consumer banking delivery system was another pivotal
accomplishment. It allows Webster to provide our small business customers with
more points of access and contact for credit and cash management services. Our
employees remain Webster's most valuable asset. As more routine transactions
move through direct banking channels, our employees are taking on more
consultative and referral responsibilities with customers. In redefining
employees' roles, we're providing them with the training, tools and resources to
assess customer needs. Ultimately, this gives them the ideal perspective for
selling the right products and services. VALUE TO SHAREHOLDERS. FOCUSING ON HOW
WE DELIVER OUR PRODUCTS HELPS US WIN CUSTOMER LOYALTY AND TRUST. IN EFFECT,
WE'RE BUILDING STRONG BRIDGES TO PROFITABLE, LONG-TERM CUSTOMERS.
<PAGE>
MORTGAGE BANKING
TOP ACHIEVEMENTS. BY CONTINUALLY STREAMLINING THE PROCESS FROM APPLICATION TO
CLOSING, WE CUT APPROVAL TIMES AND RAISED CUSTOMER SATISFACTION. Timing,
flexibility and responsiveness are the key differentiating factors when it comes
to mortgage lending. Webster made strides in all three areas in 1996. Our
next-day approval program alone resulted in $23 million in new home loans. By
introducing a convertibility option to our Adjustable Rate Mortgages (ARM),
Webster added $144 million in new mortgages. These developments coincided with a
close-to-perfect score in our customer satisfaction surveys. We earned the 1996
Connecticut Homebuilders Association Best Construction Financing Award in
recognition of our streamlined loan processing and innovative financing.
Origination costs are down and customer satisfaction is up largely because of
gains in employee productivity. New processing technology was critical in
attaining high performance levels. Equipped with laptops, our loan originators
now complete loan applications while meeting with customers in their homes or
offices. By putting our people closer to the customer, not only have we reduced
time and paperwork, we've also raised the quality of our service. In fact,
automation has allowed us to deliver a true "next day approval" on most of our
loan products. Similarly, by outsourcing various loan servicing functions, we
further reduced operating costs. One of the year's most satisfying achievements
was that we accomplished more for our customers without investing in new
infrastructure. Loan originations of $367 million were up 39 percent over 1995
levels. In December, we successfully purchased $270 million in servicing rights
from the Connecticut Housing Finance Authority (CHFA). VALUE TO SHAREHOLDERS.
THE COST REDUCTIONS AND INCREASED VOLUME OF LOANS REALIZED IN 1966 HAVE HAD A
POSITIVE IMPACT ON PROFITABILITY.
<PAGE>
BUSINESS BANKING
TOP ACHIEVEMENTS. THROUGH SEASONED RELATIONSHIP MANAGERS, WE PROVIDED
CONNECTICUT BUSINESSES WITH INNOVATIVE LENDING SERVICES AND MONEY MANAGEMENT.
Webster Bank has built its business banking reputation on a foundation of
superior service delivered by seasoned lending professionals. 1996 was a year of
significant milestones. We added several highly regarded business bankers;
developed an asset-based lending capability; expanded the range and depth of our
products to include diversified cash management and international trade
services; and established a regional office in Hartford. As an example, these
strengths allowed Webster Bank, assisted by the Connecticut Development Agency
(CDA), to develop an innovative management-buyout financing package for the
Underwater Construction Company in Essex. Webster's ability to understand their
business and to structure a financing package is what made the buyout feasible.
We provided the reasonable terms and turn-around they required. The creative
solutions we develop for our customers send a clear message to the Connecticut
business community: that Webster Bank delivers innovative solutions through our
locally-based team of experts. We are continually building our business banking
capabilities by expanding our commercial banking team and enhancing the range of
services and products we offer. Our business banking efforts have resulted in a
commercial loan portfolio exceeding $450 million. Today, Webster is one of
Connecticut's leading business banks with the momentum for substantial growth.
VALUE TO SHAREHOLDERS. POWERFUL BUSINESS PARTNERS PRODUCE POWERFUL RESULTS. OUR
COMMITMENT TO BUSINESS BANKING HAS ENHANCED THE VALUE OF THE FRANCHISE AND
CREATED OPPORTUNITIES FOR HIGHER RETURNS.
<PAGE>
GLOSSARY OF TERMS
Allowance for Loan Losses: A reserve for estimated loan losses at a particular
balance sheet date.
Capital Components and Ratios:
Leverage Ratio: Tier 1 capital as a percentage of adjusted total assets for
the Bank.
Risk-Weighted Assets: The sum of risk-weighted assets plus the
risk-weighted credit equivalent amounts of off- balance sheet items, less
core deposit intangibles and certain other non-qualifying intangible assets
and the non-qualifying portion of the allowance for loan losses.
Tier 1 Capital: The sum of common shareholders' equity at the Bank
(excluding net unrealized gains or losses on securities, except for net
unrealized gains/losses on marketable equity securities) less other
non-qualifying intangible assets.
Tier 1 Risk-Weighted Capital Ratio: The ratio of Tier 1 capital to net
risk-adjusted assets.
Total Capital: The sum of Tier 1 capital plus the qualifying portion of the
allowance for loan losses.
Total Risk-Weighted Capital Ratio: The ratio of total capital to net
risk-adjusted assets.
Core Deposit Intangible: The excess of the purchase price over the fair value of
the tangible net assets acquired in a purchase transaction that represents the
estimated value of the deposit base.
Derivatives: Interest rate or currency swaps, futures, forwards, option
contracts, or other off-balance sheet financial instruments used for
asset/liability management or trading purposes. These instruments derive their
values or contractually determined cash flows from the price of an underlying
asset or liability, reference rate, index or other security.
Earning Assets: The sum of loans, segregated assets, mortgage loans held for
sale, securities and short-term investments.
Interest Bearing Liabilities: The sum of interest-bearing deposits, securities
sold under agreements to repurchase and other borrowings.
Interest Rate Spread: The difference between the average yields on earning
assets and interest bearing liabilities.
Net Interest Margin: Net interest income as a percentage of average earning
assets.
Nonaccrual Assets: The sum of nonaccrual loans plus other real estate owned.
Nonaccrual Loans: The sum of loans on nonaccrual status (for purposes of
interest recognition) plus restructured loans (loans whose repayment criteria
have been renegotiated to less-than-market terms due to the inability of the
borrowers to repay the loans in accordance with their original terms).
Other Real Estate Owned: Real estate acquired in foreclosure or comparable
proceedings under which possession of the collateral has been taken.
Reserve Coverage: Allowance for loan losses divided by nonaccrual loans.
Return on Average Equity: Net income as a percentage of average shareholders'
equity.
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS ("MD&A")
INTRODUCTION
- --------------------------------------------------------------------------------
Webster Financial Corporation, ("Webster"), through its subsidiary, Webster
Bank, (the "Bank") delivers financial services to individuals, families and
businesses throughout Connecticut. Webster Bank is organized along three
business lines - consumer, business and mortgage banking, 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.
Assets at December 31, 1996 were $3.9 billion compared to $3.2 billion a year
earlier. Net loans receivable amounted to $2.5 billion at December 31, 1996
compared to $1.9 billion a year ago. Deposits were $3.1 billion at December 31,
1996 compared to $2.4 billion at December 31, 1995.
BUSINESS COMBINATIONS SUBSEQUENT TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
The Derby Acquisition
On January 31, 1997, Webster acquired DS Bancor, Inc. ("Derby") and its
subsidiary, Derby Savings Bank, a $1.2 billion savings bank in Derby,
Connecticut. In connection with the merger with Derby, Webster issued 3,501,370
shares of its common stock for all the outstanding shares of Derby common stock.
Under the terms of the merger agreement each outstanding share of Derby common
stock was converted into 1.14158 shares of Webster common stock. This
acquisition was accounted for as a pooling of interests and as such, future
Consolidated Financial Statements will include Derby's financial data as if
Derby had been combined at the beginning of the earliest period presented. The
1996 Financial Statements do not include Derby financial data.
BUSINESS COMBINATIONS
- --------------------------------------------------------------------------------
The Shawmut Transaction
On February 16, 1996, Webster Bank acquired 20 branches in the Greater Hartford
market from Shawmut Bank Connecticut National Association (the "Shawmut
Transaction"), as part of a divesture in connection with the merger of Shawmut
and Fleet Bank. In the branch purchase, Webster Bank acquired approximately $845
million in deposits, and $586 million in loans. As a result of this transaction,
Webster recorded $44.2 million as a core deposit intangible asset. In connection
with the Shawmut Transaction, Webster raised net proceeds of $32.1 million
through the sale of 1,249,600 shares of its common stock in an underwritten
public offering in December 1995. The Shawmut Transaction was accounted for as a
purchase, therefore transaction results are reported only for the periods
subsequent to the consummation of the Shawmut Transaction.
Prior to the Shawmut Transaction Webster completed five acquisitions as follows:
- --------------------------------------------------------------------------------
Date Assets Acquired Accounting Treatment
- --------------------------------------------------------------------------------
1995 Shelton Bancorp $ 295 million Pooling of Interests
1994 Shoreline Bank & Trust $ 51 million Pooling of Interests
1994 Bristol Savings Bank $ 486 million Purchase
1992 First Constitution Bank $ 1.1 billion Purchase
1991 Suffield Bank $ 264 million Purchase
ASSET QUALITY
- --------------------------------------------------------------------------------
General
Webster devotes significant attention to maintaining high asset quality through
conservative underwriting standards, active servicing of loans, aggressively
managing nonaccrual assets and maintaining adequate reserve coverage on
nonaccrual assets. At year end 1996, residential and consumer loans comprised
over 85% of the total loan portfolio. All investments are either U.S. Government
or Agency securities or have an investment rating in the top two rating
categories by a major rating service at time of purchase.
<PAGE>
Nonaccrual Assets
The aggregate amount of nonaccrual assets decreased to $31.3 million at December
31, 1996 from $55.0 million at December 31, 1995 and declined as a percentage of
total assets to 0.80% at December 31, 1996 from 1.71% at December 31, 1995.
Nonaccrual assets decreased $16.0 million in 1996 and foreclosed properties
decreased $7.7 million due to write-downs, sale of foreclosed properties and a
bulk sale of $18 million of nonaccrual assets. The allowance for loan losses at
December 31, 1996 was $33.5 million and represented 153.36% of nonaccrual loans.
Total allowances for nonaccrual assets of $34.2 million represented 106.72% of
nonaccrual assets. The following table details Webster's nonaccrual assets for
the last five years.
<TABLE>
<CAPTION>
At December 31,
(IN THOUSANDS) 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual Assets:
Loans accounted for on a nonaccrual basis:
Residential real estate $ 11,272 $ 20,560 $ 18,390 $27,995 $39,633
Commercial real estate 9,051 15,296 15,268 4,132 1,846
Consumer 1,491 1,987 1,237 1,137 4,311
Foreclosed Properties:
Residential and Consumer 3,445 6,368 9,296 18,753 11,674
Commercial 6,044 10,808 17,292 6,711 7,744
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 31,303 $ 55,019 $ 61,483 $58,728 $65,208
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
A summary of the activity in the allowance for loan losses for the last five
years follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
(DOLLARS IN THOUSANDS) 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 41,797 $ 46,772 $ 45,168 $49,780 $11,055
Charge-offs:
Residential real estate (12,628) (6,952) (12,761) (8,208) (1,027)
Consumer (670) (418) (760) (1,236) (706)
Commercial (6,348) (3,490) (3,578) (2,223) (1,424)
- ---------------------------------------------------------------------------------------------------------------------------
(19,646) (10,860) (17,099) (11,667) (3,157)
Recoveries:
Residential real estate 386 657 388 205 10
Consumer 162 943 1,701 749 558
Commercial 1,755 1,185 1,015 114 9
- ---------------------------------------------------------------------------------------------------------------------------
Net charge-offs (17,343) (8,075) (13,995) (10,599) (2,580)
Acquired allowance for purchased loans 5,000 - 12,819 - 35,731
Transfer from allowance for losses for
loans held for sale - - - 2,390 -
Provisions charged to operations 4,000 3,100 2,780 3,597 5,574
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of period $ 33,454 $ 41,797 $ 46,772 $45,168 $ 49,780
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net charge-offs to average loans outstanding 0.7% 0.4% 0.8% 0.7% 0.3%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
During 1996, 1995, 1994 and 1993, increased loan charge-offs were due primarily
to loans acquired as a result of the acquisitions. Such charge-offs were in line
with expectations and adequate loan loss allowances were established at the time
of each acquisition. Included in the 1996 loan charge-offs were write-downs of
$6.3 million related to a bulk sale of $18.0 million of nonaccrual residential
loans and foreclosed properties. See Note 13 to the Consolidated Financial
Statements for a summary of activity in the allowance for losses on foreclosed
properties. Management believes that the allowance for loan losses is adequate
to cover expected losses in the portfolio.
<PAGE>
SEGREGATED ASSETS
- --------------------------------------------------------------------------------
Segregated Assets consist of all commercial real estate, commercial, and
multi-family loans acquired from the FDIC in the First Constitution acquisition.
Segregated Assets, before the allowance for losses of $2.9 million, totaled
$78.5 million at December 31, 1996 down from $256.6 million at acquisition
(1992). Segregated Assets are subject to a loss-sharing arrangement with the
FDIC. The FDIC is required to reimburse Webster Bank quarterly for 80% of the
total net charge-offs and certain related expenses on Segregated Assets through
December 1997, with such reimbursement increasing to 95% (less recoveries in
years six and seven) as to such charge-offs and expenses in excess of $49.2
million (with payment at the end of the seventh year as to such excess). At
December 31, 1996, cumulative net charge-offs and expenses aggregated $54.0
million. During the first quarter of 1996, Webster began recording the
additional 15% reimbursement (the difference between the 80% and 95%
reimbursement levels) as a receivable from the FDIC. The impact of purchasing
the Segregated Assets has been reflected primarily in increased noninterest
expenses for the Bank's share of certain reimbursable expenses and all
non-reimbursable expenses. The Bank's share of charge-offs reduces the allowance
for losses on the Segregated Assets which was established in conjunction with
the First Constitution acquisition. Management believes that the allowance for
losses on Segregated Assets is adequate to cover expected losses on this
portfolio. See Note 5 to the Consolidated Financial Statements.
Reimbursable net charge-offs and eligible expenses of Segregated Assets
aggregated $4.9 million for 1996. During 1996, the Bank received $4.2 million as
reimbursement for eligible charge-offs and related net expenses in accordance
with the loss-sharing arrangement described above. Payments due from the FDIC
upon charge-off and related expenses are recorded as receivables. Such
reimbursements are made on a quarterly basis to the Bank by the FDIC and when
received are invested in earning assets. Such reimbursements have no immediate
impact on the consolidated statements of income.
A detail of changes in the allowance for Webster's share of losses for
Segregated Assets follows:
Years Ended December 31,
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Balance at beginning of period $ 3,235 $4,420
Charge-offs (621) (1,772)
Recoveries 245 587
- --------------------------------------------------------------------------------
Balance at end of period $ 2,859 $3,235
- --------------------------------------------------------------------------------
At December 31, 1996 and 1995, nonaccrual Segregated Assets were classified as
follows:
<TABLE>
<CAPTION>
At December 31,
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Segregated Assets accounted for on a nonaccrual basis:
Commercial real estate loans $ 3,337 $2,604
Commercial loans 192 1,203
Multi-family real estate loans 495 1,432
Foreclosed Properties:
Commercial real estate 269 648
Multi-family real estate 138 651
- --------------------------------------------------------------------------------------------------
Total $ 4,431 $6,538
- --------------------------------------------------------------------------------------------------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
Webster Bank is required to maintain minimum levels of liquid assets as defined
by regulations adopted by the Office of Thrift Supervision ("OTS"). This
requirement, which may be varied by the OTS, is based upon a percentage of
withdrawable deposits and short term borrowings. The required liquidity ratio is
currently 5.00% and the Bank's liquidity ratio was 5.79% at December 31, 1996.
The primary sources of liquidity for Webster are net cash flows from operating
activities, investing activities and financing activities. Net cash flows from
operating activities include net income, loans originated for sale, the sale of
<PAGE>
loans originated for sale, net changes in other asset and liabilities and
adjustments for noncash items such as depreciation, the provision for loan
losses and changes in accruals. Net cash flows from investing activities
primarily includes the purchase, maturity, and sale of securities and
mortgage-backed securities that are classified as trading, available for sale or
held to maturity, and the net change in loans and Segregated Assets. While
scheduled loan amortization, maturing securities, short term investments and
securities repayments generally are predictable sources of funds, loan and
mortgage-backed securities prepayments are greatly influenced by general
interest rates, economic conditions and competition. One of the inherent risks
of investing in loans and mortgage-backed securities is the ability of such
instruments to incur prepayments of principal prior to maturity at prepayment
rates different than those estimated at the time of purchase. This generally
occurs because of changes in market interest rates. The market values of
fixed-rate loans and mortgage-backed securities are sensitive to fluctuations in
market interest rates, declining in value as interest rates rise. If interest
rates decrease, the market value of loans and mortgage-backed securities
generally will tend to increase with the level of prepayments also normally
increasing. The lower yields on such loans and mortgage-backed securities may be
offset by a lower cost of funds. Changes in the volume of nonaccrual assets due
to additions or sales of such assets also affect liquidity.
Financing activity net cash flows primarily include proceeds and repayments from
FHL Bank advances and other borrowings, the net change in deposits and changes
in the capital structure generally related to stock issuances and repurchases.
The utilization of particular sources of funds depends on comparative costs and
availability. Webster Bank has from time to time, chosen not to pay rates on
deposits as high as certain competitors, and when necessary, supplements
deposits with various borrowings. The Bank manages the prices of its deposits to
maintain a stable, cost-effective deposit base as a source of liquidity.
The Bank had additional borrowing capacity from the FHL Bank of $1.4 billion at
December 31, 1996. At that date, the Bank had FHL Bank advances outstanding of
$407.7 million compared to $383.1 million at December 31, 1995. See Note 9 to
the Consolidated Financial Statements.
Webster's main sources of liquidity at the holding company level are dividends
from the Bank and net proceeds from capital offerings and borrowings, while the
main outflows are the payment of dividends to preferred and common stockholders,
the payment of interest to holders of Webster's 8 3/4% Senior Notes and
repurchases of Webster's common stock. There are certain restrictions on payment
of dividends by Webster Bank to Webster. See Note 15 to the Consolidated
Financial Statements. Webster also has a $20 million line of credit with a
correspondent bank. On January 31, 1997, Webster completed the sale of
$100,000,000 of Webster Capital Trust/Capital Securities further increasing its
Capital Resources. The Capital Securities are further discussed in Note 18 to
the Consolidated Financial Statements.
On November 19, 1996, Webster completed a previously announced stock repurchase
program, which resulted in total repurchases of 549,800 shares and also
announced its intention to repurchase up to 300,000 additional shares. At
December 31, 1996, 255,100 shares had been repurchased under the new repurchase
plan, to offset future dilution from shares of common stock that were issued in
January 1997, in connection with conversions of preferred stock or issued upon
exercise of options under Webster's stock option plans. The remaining shares
under the plan were repurchased in January 1997. Webster previously repurchased
548,500 shares in two stock repurchase plans announced in 1988 and 1990.
<PAGE>
Applicable OTS regulations require federal savings banks such as the Bank, to
satisfy certain minimum capital requirements, including a leverage capital
requirement (expressed as a ratio of core or Tier 1 capital to adjusted total
assets) and risk-based capital requirements (expressed as a ratio of core or
Tier 1 capital and total capital to total risked-weighted assets). As an OTS
regulated savings institution, the Bank also is subject to a minimum tangible
capital requirement (expressed as a ratio of tangible capital to adjusted total
assets). At December 31, 1996, the Bank was in full compliance with all
applicable capital requirements as detailed below:
<TABLE>
<CAPTION>
At December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Tier 1 Tier 1
Tangible Capital Core Capital Risk-Based Capital Total Risk-Based Capital
Requirement Requirement Requirement Requirement
- -----------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) Amount % Amount % Amount % Amount %
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital for regulatory purposes $ 197,738 5.13% $ 201,720 5.22% $ 201,720 10.17% $ 226,634 11.43%
Minimum regulatory requirement 57,866 1.50 115,850 3.00 79,316 4.00 158,632 8.00
- -----------------------------------------------------------------------------------------------------------------------------------
Excess over requirement $ 139,872 3.63% $ 85,870 2.22% $ 122,404 6.17% $ 68,002 3.43%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ASSET/LIABILITY MANAGEMENT
- --------------------------------------------------------------------------------
The goal of Webster's asset/liability policy is to manage interest-rate risk so
as to maximize net interest income over time in changing interest-rate
environments while maintaining acceptable levels of risk. Webster must provide
for sufficient liquidity for daily operations while maintaining mandated
regulatory liquidity levels. To this end, Webster's strategies for managing
interest-rate risk are responsive to changes in the interest-rate environment
and market demands for particular types of deposit and loan products. Management
measures interest-rate risk using GAP, duration and simulation analyses with
particular emphasis on measuring changes in the market value of portfolio equity
and changes in net interest income in different interest-rate environments. The
simulation analyses incorporate assumptions about balance sheet changes such as
asset and liability growth, loan and deposit pricing and changes due to the mix
and maturity of such assets and liabilities. From such simulations, interest
rate risk is quantified and appropriate strategies are formulated. The overall
interest rate risk position is reviewed on an ongoing basis by the Asset
Liability Committee, which includes Executive Management and has representation
by members of each line of business. Strategies employed in 1996 to improve the
interest-rate sensitive position included (i) the selling of certain fixed-rate
mortgage loans, (ii) promotion of adjustable-rate mortgage loans, (iii) emphasis
on the origination of variable-rate home equity credit lines and commercial
loans, (iv) emphasis on the purchase of short-term or adjustable-rate securities
or mortgage-backed securities, (v) emphasis on deposits and borrowed funds that
meet asset/liability management objectives and (vi) the employment of hedging
techniques to reduce the interest-rate risk of certain assets or liabilities.
Based on Webster's asset/liability mix at December 31, 1996, management's
simulation analysis of the effects of changing interest rates projects that an
instantaneous 200 basis point increase in interest rates would decrease the
market value of equity by approximately 12% at December 31, 1996. At December
31, 1996, Webster had a 6.1% positive GAP position in the one year time horizon
which means that cumulative interest-rate sensitive assets exceed cumulative
interest-rate sensitive liabilities for that period. Management believes that
its interest-rate risk position represents a reasonable amount of interest-rate
risk at this point in time. Webster also utilizes as part of its asset/liability
management strategy various interest rate instruments including short futures
positions, interest rate swaps, interest rate caps and interest rate floors. The
notional amounts of these instruments are not reflected in Webster's statement
of condition but are included in the repricing table for purposes of analyzing
interest rate risk. Interest rate contracts are entered into as hedges against
future rate fluctuations and not for speculative purposes.
Webster is unable to predict future fluctuations in interest rates and as such
the market values of certain of Webster's financial assets and liabilities are
sensitive to fluctuations in market interest rates. Changes in interest rates
can affect the amount of loans originated by the Bank, as well as the value of
its loans and other interest-earning assets. Increases in interest rates may
cause depositors to shift funds from accounts that have a comparatively lower
cost such as regular savings accounts to accounts with a higher cost such as
certificates of deposit. If the cost of interest-bearing liabilities increase at
a rate that is greater than the increase in yields on interest-earning assets,
the interest rate spread is negatively affected. Changes in the asset and
liability mix also affects the interest rate spread.
<PAGE>
The following table sets forth the estimated maturity/repricing structure of
Webster's interest-earning assets and interest-bearing liabilities at December
31, 1996. Repricing for mortgage loans is based on contractual repricing and
projected prepayments and repayments of principal. Deposit liabilities without
fixed maturities are assumed to decay over the periods presented based on
industry standards and internal projections.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
More than More than More than More than More than
6 Months 6 Months 1 Year 3 Years 5 Years 10 Years
(DOLLARS IN THOUSANDS) or less to 1 Year to 3 Years to 5 Years to 10 Years to 20 Years
- ---------------------------------------------------------------------------------------------------------------------------
Assets
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans $ 1,012,035 $ 607,271 $ 308,913 $ 212,306 $ 205,872 $ 180,792
Securities 478,139 302,852 95,796 36,684 64,892 60,115
- ---------------------------------------------------------------------------------------------------------------------------
Total Rate-Sensitive Assets $ 1,490,174 $ 910,123 $ 404,709 $ 248,990 $ 270,764 $ 240,907
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------
Deposits $ 1,115,904 $ 569,675 $ 864,373 $ 219,672 $ 62,036 $ 584
Borrowings 405,062 70,000 65,700 50,000 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total Rate-Sensitive
Liabilities $ 1,520,966 $ 639,675 $ 930,073 $ 269,672 $ 62,036 $ 584
- ---------------------------------------------------------------------------------------------------------------------------
Consolidated GAP $ (30,792) $ 270,448 $ (525,364) $ (20,682) $ 208,728 $ 240,323
GAP to Total Assets Percent (0.79%) 6.90% (13.41%) (0.53%) 5.33% 6.13%
Cumulative GAP $ (30,792) $ 239,656 $ (285,708) $ (306,390) $ (97,662) $ 142,661
Cumulative GAP to Total
Assets Percent (0.79%) 6.12% (7.29%) (7.82%) (2.49%) 3.64%
Total Assets $ 3,917,600 $ 3,917,600 $ 3,917,600 $ 3,917,600 $ 3,917,600 $ 3,917,600
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------
More than
(DOLLARS IN THOUSANDS) 20 Years Total
- -------------------------------------------------------------
Assets
- ------------------------------------------------------------
Loans $ 84,091 $ 2,611,280
Securities 32,129 1,070,607
- -------------------------------------------------------------
Total Rate-Sensitive Assets $ 116,220 $ 3,681,887
- -------------------------------------------------------------
Liabilities
- -------------------------------------------------------------
Deposits $ 263,632 $ 3,095,876
Borrowings -- 590,762
- -------------------------------------------------------------
Total Rate-Sensitive
Liabilities $ 263,632 $ 3,686,638
- -------------------------------------------------------------
Consolidated GAP $ (147,412) N/A
GAP to Total Assets Percent (3.76%) N/A
Cumulative GAP $ (4,751) N/A
Cumulative GAP to Total
Assets Percent (0.12%) N/A
Total Assets $ 3,917,600
- -------------------------------------------------------------
COMPARISON OF 1996 AND 1995 YEARS
- --------------------------------------------------------------------------------
General. For 1996, Webster reported net income of $25.6 million, or $2.79 per
share on a fully diluted basis. Included in the 1996 results are non-recurring
expenses totaling $5.2 million which include: $4.7 million of expenses related
to a special assessment associated with the recapitalization of the Savings
Association Insurance Fund ("SAIF") and $500,000 of acquisition related charges
for the Shawmut Transaction. Excluding the effect of these non-recurring
expenses, net income for the 1996 year would have been $28.6 million or $3.13
per fully diluted share. Net income for 1995 amounted to $18.3 million, or $2.30
per share on a fully diluted basis. Included in the 1995 results are
non-recurring expenses totaling $6.4 million which include: $3.3 million of
expenses related to the Shelton acquisition, $2.1 million of expenses related to
changing the name and of merging together Webster's banking subsidiaries, and
$1.0 million of expenses related to the Shawmut Transaction. Excluding the
effects of these non-recurring expenses, net income for the 1995 year would have
been $22.0 million or $2.76 per fully diluted share. Results for the Shawmut
Transaction are included in the accompanying Consolidated Financial Statements
only from the date of acquisition on February 16, 1996.
Net Interest Income. Net interest income before provision for loan losses
increased $28.5 million in 1996 to $115.8 million from $87.3 million in 1995.
The increase is primarily attributable to an increased volume of average earning
assets and interest bearing liabilities related to the Shawmut Transaction.
Interest rate spread for the 1996 year increased to 3.16% compared to 2.78% in
1995 also due primarily to lower costing liabilities acquired in the Shawmut
Transaction.
Interest Income. Total interest income for 1996 amounted to $265.5 million, an
increase of $46.7 million, or 21.3% compared to $218.8 million in 1995. The
increase in interest income was due primarily to an increase in the average
volume of loans and securities and to an increase in the average yield on all
interest-earning assets which increased to 7.36% in 1996 from 7.20% in 1995.
<PAGE>
Interest Expense. Interest expense for 1996 amounted to $149.7 million, an
increase of $18.2 million compared to $131.5 million in 1995. The increase in
interest expense was due primarily to an increase in the average volume of
deposits and borrowings and to a decrease in the average yield on all interest
bearing liabilities to 4.20% in 1996 from 4.42% in 1995. The decrease in the
average yield on interest bearing liabilities is due primarily to the increase
in noninterest bearing and other deposits acquired in the Shawmut Transaction.
The following table shows the major categories of average assets and average
liabilities together with their respective interest income or expense and the
rates earned and paid by Webster.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------------------------------------
1996 1995
Average Average Average Average
(DOLLARS IN THOUSANDS) Balance Interest Yield Balance Interest Yield
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans, net (a) $ 2,430,749 $ 189,626(b) 7.80% $ 1,935,608 $144,896(b) 7.49%
Segregated Assets, net (a) 93,034 6,470 6.95 123,293 9,592 7.78
Securities 1,049,886 67,803 6.46(c) 959,110 63,375 6.61(c)
Interest-Bearing Deposits 27,533 1,635 5.84 24,790 948 3.80
- -------------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets 3,601,202 265,534 7.36 3,042,801 218,811 7.20
Other Assets 210,857 101,367
- -------------------------------------------------------------------------------------------------------------------
Total Assets $ 3,812,059 $ 3,144,168
- -------------------------------------------------------------------------------------------------------------------
Savings and Escrow $ 663,657 15,633 2.36% $ 484,786 11,284 2.33%
Money Market Savings,
NOW and DDA 653,445 9,076 1.39 450,158 7,977 1.77
Time Deposits 1,668,164 89,677 5.38 1,538,454 78,874 5.13
FHL Bank Advances 394,302 24,117 6.02 419,822 27,501 6.55
Repurchase Agreements
and Other Borrowings 137,192 7,582 5.44 37,830 2,237 5.91
Senior Notes 40,000 3,660 9.15 40,000 3,660 9.15
- -------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities 3,556,760 149,745 4.20 2,971,050 131,533 4.42
Other Liabilities 41,767 1,884
Shareholders' Equity 213,532 171,234
- -------------------------------------------------------------------------------------------------------------------
Net Interest Income and
Interest Rate Spread $ 115,789 3.16 $ 87,278 2.78
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $ 3,812,059 $ 3,144,168
- -------------------------------------------------------------------------------------------------------------------
Net Yield on Average
Earning Assets 3.21% 2.89%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
YEARS ENDED DECEMBER 31,
- ---------------------------------------------------------------------------
1994
Average Average
(dollars in thousands) Balance Interest Yield
- ---------------------------------------------------------------------------
Loans, net (a) $ 1,810,382 $129,859(b) 7.17%
Segregated Assets, net (a) 126,207 9,789 7.76
Securities 794,547 50,101 6.31(c)
Interest-Bearing Deposits 30,312 1,071 3.53
- ---------------------------------------------------------------------------
Total Interest-Earning Assets 2,761,448 190,820 6.91
Other Assets 211,058
- ---------------------------------------------------------------------------
Total Assets $ 2,972,506
- ---------------------------------------------------------------------------
Savings and Escrow $ 455,713 12,139 2.66%
Money Market Savings,
NOW and DDA 423,162 8,852 2.09
Time Deposits 1,446,191 55,844 3.86
FHL Bank Advances 351,693 17,969 5.11
Repurchase Agreements
and Other Borrowings - - -
Senior Notes 40,000 3,660 9.15
- ---------------------------------------------------------------------------
Total Interest-Bearing Liabilities 2,716,759 98,464 3.62
Other Liabilities 106,878
Shareholders' Equity 148,869
- ---------------------------------------------------------------------------
Net Interest Income and
Interest Rate Spread $ 92,356 3.29
- ---------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $ 2,972,506
- ---------------------------------------------------------------------------
Net Yield on Average
Earning Assets 3.34%
- ---------------------------------------------------------------------------
(a) Interest on nonaccrual loans has been included only to the extent reflected
in the Consolidated Statements of Income. Nonaccrual loans, however, are
included in the average balances outstanding.
(b) Includes discount and fee income, net of $1.4 million, $1.1 million and
$547,000 in 1996, 1995 and 1994, respectively.
(c) Yields are adjusted to a fully taxable equivalent basis.
Net interest income also can be analyzed in terms of the impact of changing
rates and changing volumes. The following table describes the extent to which
changes in interest rates and changes in the volume of interest-earning assets
and interest-bearing liabilities have affected Webster's interest income and
interest expense during the periods indicated. Information is provided in each
category with respect to (i) changes attributable to changes in volume (changes
in volume multiplied by prior rate), (ii) changes attributable to changes in
rates (changes in rates multiplied by prior volume), and (iii) the net change.
The change attributable to the combined impact of volume and rate has been
allocated proportionately to the change due to volume and the change due to
rate.
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, Years Ended December 31,
1996 v. 1995 1995 v. 1994
- ---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
(IN THOUSANDS) Rate Volume Total Rate Volume Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest on interest-earning assets:
Loans and Segregated Assets $ 5,655 $ 35,953 $ 41,608 $ 5,802 $ 9,038 $14,840
Securities (897) 6,012 5,115 2,869 10,282 13,151
- ---------------------------------------------------------------------------------------------------------------------------
Total 4,758 41,965 46,723 8,671 19,320 27,991
- ---------------------------------------------------------------------------------------------------------------------------
Interest on interest-bearing liabilities:
Deposits (3,224) 19,475 16,251 16,161 5,139 21,300
FHL Bank advances and other
borrowings (2,178) 4,139 1,961 5,216 6,553 11,769
- ---------------------------------------------------------------------------------------------------------------------------
Total (5,402) 23,614 18,212 21,377 11,692 33,069
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net interest income $ 10,160 $ 18,351 $ 28,511 $(12,706) $ 7,628 $(5,078)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Provision for Loan Losses. The provision for loan losses for 1996 was $4.0
million compared to $3.1 million in 1995. The increased provision for the 1996
year is attributable to an increase in the balance of outstanding loans and the
change in portfolio mix. The allowance for losses on loans amounted to $33.4
million and represented 153.4% of nonaccrual loans at December 31, 1996 versus
$41.8 million or 110.4% of nonaccrual loans at December 31, 1995.
Noninterest Income. Noninterest income for 1996 amounted to $25.5 million,
compared to $22.0 million in 1995. Fees and service charges totaled $18.1
million in 1996, an increase of $4.0 million, or 28% from 1995 due primarily to
a larger customer base. Gains on the sale of loans and mortgage loan servicing
rights amounted to $1.0 million in 1996 compared to $3.1 million in 1995. The
1995 results included gains on the sale of mortgage loan servicing rights of
$2.1 million. Gains on the sale of securities amounted to $2.8 million in 1996
compared to $1.2 million in 1995. Other noninterest income for 1996 and 1995 was
$3.6 million.
Noninterest Expenses. Noninterest expenses for 1996 amounted to $97.2 million
compared to $79.6 million in 1995. The increase of $17.6 million is due
primarily to increased salaries and employee benefits, occupancy, furniture and
equipment, core deposit intangible amortization, marketing, and other operating
expenses with all such increases related primarily to the Shawmut Transaction.
Offsetting such increases were decreased foreclosed property expenses and
provisions due to a decrease in the outstanding balance of foreclosed
properties. Included in the 1996 results are non-recurring expenses totaling
$5.2 million which include: $4.7 million of expenses related to a special
assessment associated with the recapitalization of the SAIF and $500,000 related
to the Shawmut Transaction. Also, included in the 1996 results were benefits
from the Bank Insurance Fund ("BIF") and SAIF related to deposit premium
reductions. At December 31, 1996, approximately 72% of the Bank's deposits are
assessed premiums at the BIF rate and 28% at the SAIF rate. Deposits acquired in
the Derby acquisition on January 31, 1997 will be assessed at the lower BIF
rate. Included in the 1995 results are non-recurring expenses totaling $6.4
million which include: $3.3 million of expenses related to the Shelton
acquisition, $2.1 million of expenses related to changing the name and merging
together Webster's banking subsidiaries, and $1.0 million of expenses related to
the Shawmut Transaction.
Income Taxes. Income tax expense for 1996 increased to $14.5 million from $8.2
million in 1995. The increase in income tax expense is due primarily to an
increase in income before taxes. Included in the 1996 and 1995 results are $2.0
million and $2.9 million of benefits from the reduction of the deferred tax
asset valuation allowance. The decrease in the valuation allowance was due to
favorable reassessments of known risks during 1996 and 1995.
<PAGE>
COMPARISON OF 1995 AND 1994 YEARS
- --------------------------------------------------------------------------------
General. For 1995, Webster reported net income of $18.3 million, or $2.30 per
share on a fully diluted basis. Included in the 1995 results are a total of $6.4
million of non-recurring expenses which include: $3.3 million of expenses
related to the Shelton acquisition, $2.1 million of expenses related to changing
the name of and merging together Webster's banking subsidiaries, and $1.0
million of expenses related to charges incurred in preparation for the Shawmut
Transaction. Also included in the 1995 results are a $2.2 million gain on the
sale of mortgage servicing rights and $500,000 of losses on the sale of
securities as part of a portfolio restructuring plan. Net income for 1994
amounted to $18.7 million, or $2.44 per share on a fully diluted basis. Included
in the 1994 results are $700,000 of expenses related to the Shoreline
acquisition, a $5.0 million write-down of the First Constitution core deposit
intangible asset and income tax benefits of $3.5 million related to a reduction
of the deferred tax asset valuation allowance. Results for Bristol Savings Bank
are included in the accompanying Consolidated Financial Statements only from the
date of acquisition on March 3, 1994.
Net Interest Income. Net interest income before the provision for loan losses
decreased $5.1 million in 1995 to $87.3 million from $92.4 million for 1994. The
decrease was due primarily to the fact that the cost of interest-bearing
liabilities increased faster than the yield on interest-earning assets, in part
due to a shift of low cost deposits to longer term certificates of deposit.
Interest Income. Total interest income for 1995 amounted to $218.8 million, an
increase of $28.0 million, or 14.7%, compared to $190.8 million in 1994. This
increase in interest income was due primarily to an increase in the average
volume of loans and mortgage-backed securities and to an increase in the average
yield on all interest-earning assets which increased to 7.20% in 1995 from 6.91%
in 1994.
Interest Expense. Interest expense for 1995 amounted to $131.5 million, an
increase of $33.1 million, or 33.6%, compared to $98.5 million in 1994. The
increase in interest expense of $33.1 million was due primarily to an increase
in interest rates of $21.4 million and to an increase in the average volume of
deposits and borrowings of $11.7 million.
Provision for Loan Losses. The provision for loan losses for 1995 was $3.1
million versus $3.2 million for 1994. The allowance for loan losses at December
31, 1995 amounted to $41.8 million and represented 110.45% of nonaccrual loans
versus $46.8 million or 134.04% of nonaccrual loans at December 31, 1994.
Noninterest Income. Noninterest income for 1995 amounted to $22.0 million,
compared to $13.6 million in 1994. Fees and service charges totaled $14.1
million in 1995, an increase of $1.9 million, or 15.9% from 1994 due primarily
to a larger customer base. Gains on the sale of loans, mortgage loan servicing
rights, securities and mortgage-backed securities amounted to $4.3 million in
1995 compared to losses of $1.2 million in 1994. The 1995 results include
non-recurring income of $2.2 million, which represent gains on the sale of
mortgage loan servicing rights and non-recurring losses on the sale of
securities as part of a portfolio restructuring plan. Other noninterest income
for 1995 amounted to $3.5 million, an increase of $900,000 from 1994.
Noninterest Expenses. Noninterest expenses for 1995 amounted to $79.6 million
compared to $79.3 million in 1994. The increase of $.3 million was due primarily
to increased salaries and employee benefits, occupancy, furniture and equipment,
and other operating expenses, offset by decreases in federal deposit insurance
premiums and foreclosed properties expenses. Included in the 1995 results were a
total of $6.4 million of non-recurring expenses which include: $3.3 million of
expenses related to the Shelton acquisition, $2.1 million of expenses related to
changing the name of and merging together Webster's banking subsidiaries, and
$1.0 million of expenses related to charges incurred in preparation for the
Shawmut Transaction. Also included in the 1995 results were benefits from the
reduction of the BIF deposit insurance premiums. The Federal Deposit Insurance
Corporation determined that the BIF had met its required reserve ratio as of
June 1, 1995 and lowered the BIF insurance premiums retroactively to that date.
There was no reduction by the FDIC in the premium rates of the SAIF which had
not met its required reserve level. At December 31, 1995, approximately 59% of
the Bank's deposits were assessed premiums at the BIF rate and 41% at the SAIF
rate. Deposits acquired in the Shawmut Transaction on February 16, 1996 were
assessed at the lower BIF rates. The decrease in foreclosed property expenses
was due to lower provisions for foreclosed property losses and lower foreclosed
property expenses due to a decrease in the outstanding balance of foreclosed
properties. Included in the
<PAGE>
1994 results were $700,000 of expenses related to the Shoreline acquisition and
a $5.0 million write-down of the First Constitution core deposit intangible
asset. An evaluation of the core deposit intangible asset at December 31, 1995
was performed using a discounted cash flow analysis. This analysis revealed that
there had not been any further impairment of this asset.
Income Taxes. Income tax expense for 1995 increased to $8.2 million from $4.8
million in 1994. Included in the 1995 and 1994 results were $2.9 million and
$3.5 million of benefits from the reduction of the deferred tax asset valuation
allowance primarily related to Bristol Savings Bank.
IMPACT OF INFLATION AND CHANGING PRICES
- --------------------------------------------------------------------------------
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation.
Unlike most industrial companies, virtually all of the assets and liabilities of
a banking institution are monetary in nature. As a result, interest rates have a
more significant impact on a banking institution's performance than the effects
of general levels of inflation. Interest rates do not necessarily move in the
same direction or in the same magnitude as the price of goods and services. In
the current interest-rate environment, the maturity structure of Webster's
assets and liabilities are critical to the maintenance of acceptable performance
levels.
RECENT FINANCIAL 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. This statement generally is effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996, except as amended by SFAS No. 127, and is to be applied
prospectively.
In October 1995, the FASB issued Statement of Financial Accounting Standard No.
123 "Accounting for Stock-Based Compensation." This statement encourages all
companies to adopt a new fair value based method of accounting for stock
compensation plans in place of the intrinsic value method prescribed by
Accounting Principal Board Opinion No. 25 ("APB 25"). In adopting the fair value
based method, companies record compensation cost related to activity within
their stock-based compensation plans. Companies that choose to continue to
account for stock-based compensation under the provisions of APB 25 are required
to disclose the impact on net income and earnings per share as if they had
adopted the fair value method (See Note 16). Webster has elected not to adopt
the fair value method and will continue to account for stock options as
prescribed under APB 25. This standard applies to financial statements for
fiscal years beginning after December 31, 1994.
In May 1995, the FASB issued Statement of Financial Accounting Standards No. 122
("SFAS No. 122") "Accounting for Mortgage Servicing Rights," which amends SFAS
No. 65 "Accounting for Certain Mortgage Banking Activities." Under SFAS No. 65,
mortgage servicing rights were required to be capitalized only if servicing was
purchased but prohibited separate capitalization of mortgage servicing rights
when acquired through loan portfolio sales with servicing rights retained. SFAS
No. 122 requires that a mortgage banking entity recognize as a separate asset
the value of the right to service mortgage loans for others, regardless of how
those servicing rights are acquired. Additionally, SFAS No. 122 requires that a
mortgage banking entity assess its capitalized mortgage servicing rights for
impairment and establish valuation allowances based on the fair value of those
servicing rights, which include those servicing rights acquired prior to the
adoption of SFAS No. 122. As allowed under the provisions of this statement,
Webster elected early adoption of SFAS No. 122 on July 1, 1995. In September
1996 the FASB superseded SFAS No. 122 with the issuance of SFAS No. 125. See
Note 7.
<PAGE>
In October 1994, the FASB issued SFAS No. 119, "Disclosures about Derivative
Financial Instruments and Fair Value of Financial Instruments." This statement
requires institutions to disclose the average fair value of derivative
instruments as well as net gains and losses arising from trading revenues.
Webster currently holds short futures positions to minimize the price volatility
of certain adjustable-rate assets held as Trading Securities. Changes in the
market value of short futures positions are recognized in the statements of
income as a gain or loss in the period for which the change occurred. Webster
also holds various interest-rate financial instruments in the form of interest
rate swaps, caps and floors as hedges against changes in interest rates. This
statement applies to fiscal years ending after December 15, 1994. See Notes 3
and 11.
In November 1993, the Accounting Standards Executive Committee issued Statement
of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans."
This statement requires institutions with employee stock ownership plans to
record compensation expense equivalent to the fair value of shares committed to
be released to employees. Shares not committed to be released are excluded from
outstanding shares for the calculation of net income per share. Such provisions
are not required for employee stock ownership plan shares issued prior to
December 31, 1992. On March 3, 1994, in conjunction with the subscription and
public offerings of 1,150,000 shares of common stock of Webster, the Webster
Bank Employee Stock Ownership Plan purchased 100,000 additional shares. The
implementation of Statement of Position 93-6 did not have a significant effect
on Webster's earnings.
RECENT TAX LEGISLATION
- --------------------------------------------------------------------------------
Tax law changes were enacted in August 1996 to eliminate the "thrift bad debt"
method of calculating bad debt deductions for tax years after 1995 and to impose
a requirement to recapture into taxable income (over a six-year period) all bad
debt reserves accumulated after 1987. Since Webster previously recorded a
deferred tax liability with respect to these post 1987 reserves, its total
income tax expense for financial reporting purposes will not be affected by the
recapture requirement. The tax law changes also provide that taxes associated
with the recapture of pre-1988 bad debt reserves would become payable under more
limited circumstances than under prior law. Under the tax laws, as amended,
events that would result in recapture of the pre-1988 bad debt reserves include
stock and cash distributions to the holding company from the Bank in excess of
specified amounts. Webster does not expect such reserves to be recaptured into
taxable income.
<PAGE>
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
December 31,
Assets 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and Due from Depository Institutions $ 85,163 $ 44,228
Interest-bearing Deposits 27 26,017
Securities: (Note 3)
Trading at Fair Value 59,331 44,604
Available for Sale, at Fair Value 573,616 498,088
Held to Maturity, (Market Value: $433,308 in 1996; $505,775 in 1995) 437,631 501,948
Loans Receivable, Net (Note 4) 2,525,543 1,891,956
Segregated Assets, Net (Note 5) 75,670 104,839
Accrued Interest Receivable 24,147 21,585
Premises and Equipment, Net (Note 6) 49,785 40,654
Foreclosed Properties, Net (Note 13) 9,489 17,176
Core Deposit Intangible (Note 2) 44,315 4,729
Prepaid Expenses and Other Assets (Note 7) 32,883 23,846
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $ 3,917,600 $ 3,219,670
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- ---------------------------------------------------------------------------------------------------------------------------
Deposits (Note 8) $ 3,095,876 $ 2,400,202
Federal Home Loan Bank Advances (Note 9) 407,734 383,100
Other Borrowings (Note 10) 144,627 170,014
Advance Payments by Borrowers for Taxes and Insurance 17,785 14,435
Accrued Expenses and Other Liabilities 45,282 41,946
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities 3,711,304 3,009,697
- ---------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity: (Notes 15 and 16)
- ---------------------------------------------------------------------------------------------------------------------------
Cumulative Convertible Preferred Stock, Series B, 98,084 shares issued and
outstanding at December 31, 1996 and
172,869 shares issued and outstanding at December 31, 1995 1 2
Common Stock, $.01 par value:
Authorized - 14,000,000 shares;
Issued - 8,501,746 shares at December 31, 1996 and 1995 85 85
Paid in Capital 129,805 138,263
Retained Earnings 94,771 75,858
Less Treasury Stock at cost, 575,274 shares at December 31, 1996 and
424,024 shares at December 31, 1995 (18,801) (3,290)
Less Employee Stock Ownership Plan Shares Purchased with Debt (2,574) (3,207)
Unrealized Gains on Securities, Net 3,009 2,262
- ---------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 206,296 209,973
- ---------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 4, 6, and 19)
Total Liabilities and Shareholders' Equity $ 3,917,600 $ 3,219,670
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Loans and Segregated Assets $ 196,096 $ 154,488 $ 139,648
Securities and Interest-bearing Deposits 69,438 64,323 51,172
- ---------------------------------------------------------------------------------------------------------------------------
Total Interest Income 265,534 218,811 190,820
- ---------------------------------------------------------------------------------------------------------------------------
Interest Expense:
Interest on Deposits (Note 8) 114,386 98,135 76,835
Interest on Borrowings 35,359 33,398 21,629
- ---------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 149,745 131,533 98,464
- ---------------------------------------------------------------------------------------------------------------------------
Net Interest Income 115,789 87,278 92,356
Provision for Loan Losses (Note 4) 4,000 3,100 3,155
- ---------------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 111,789 84,178 89,201
- ---------------------------------------------------------------------------------------------------------------------------
Noninterest Income:
Fees and Service Charges 18,117 14,131 12,188
Gain on Sale of Loans and Loan Servicing, Net (Note 4) 989 3,116 258
Gain (Loss) on Sale of Securities, Net (Note 3) 2,845 1,173 (1,440)
Other Noninterest Income 3,579 3,555 2,623
- ---------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 25,530 21,975 13,629
- ---------------------------------------------------------------------------------------------------------------------------
Noninterest Expenses:
Salaries and Employee Benefits 44,486 37,608 34,943
Occupancy Expense of Premises 9,353 6,390 5,696
Furniture and Equipment Expenses 9,068 5,999 5,976
Federal Deposit Insurance Premiums 1,573 3,990 5,742
Foreclosed Property Expenses
and Provisions, Net (Note 13) 2,073 4,025 6,949
Core Deposit Intangible Amortization 4,617 728 1,371
Marketing Expenses 4,395 3,318 2,101
Non-recurring Expenses (Note 17) 5,230 6,371 5,700
Other Operating Expenses 16,454 11,158 10,817
- ---------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expenses 97,249 79,587 79,295
- ---------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 40,070 26,566 23,535
Income Taxes (Note 14) 14,462 8,246 4,850
- ---------------------------------------------------------------------------------------------------------------------------
Net Income 25,608 18,320 18,685
Preferred Stock Dividends 1,149 1,296 1,716
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Available to Common Shareholders $ 24,459 $ 17,024 $ 16,969
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Per Common Share:
Primary $ 2.97 $ 2.44 $ 2.69
Fully Diluted 2.79 2.30 2.44
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
- ---------------------------------------------------------------------------------------------------------------------------
Employee
Stock Unrealized
Ownership Gains
Plan Shares (Losses) On
Preferred Common Paid-In Retained Treasury Purchased Securities,
Stock Stock Capital Earnings Stock With Debt Net Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 3 $ 57 $ 82,546 $ 49,317 $ (3,816) $(1,952) $ 118 $ 126,273
Net Income for 1994 - - - 18,685 - - - 18,685
Dividends Paid:
$.48 Per Common Share - - - (3,053) - - - (3,053)
Dividends Paid or Accrued:
Preferred Series B - - - (1,716) - - - (1,716)
Dividends On:
Unallocated ESOP Shares - - - 52 - - - 52
Reduction of Debt Related
to ESOP Shares - - - - - 352 - 352
Purchase of Additional
ESOP Shares - - - - - (2,075) - (2,075)
Five Percent Stock Dividend - - - (69) - - - (69)
Exercise of Stock Options - - 507 - 124 - - 631
Net Proceeds from Sale of
Common Stock - 11 21,912 - - - - 21,923
Conversion of Preferred
Series B to Common Stock (1) 5 (4) - - - - -
Net Unrealized Loss on
Securities Available for
Sale, Net of Taxes - - - - - - (4,196) (4,196)
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 $ 2 $ 73 $104,961 $ 63,216 $ (3,692) $(3,675) $(4,078) $ 156,807
- ---------------------------------------------------------------------------------------------------------------------------
Net Income for 1995 - - - 18,320 - - - 18,320
Dividends Paid:
$.64 Per Common Share - - - (4,382) - - - (4,382)
Dividends Paid or Accrued:
Preferred Series B - - - (1,296) - - - (1,296)
Allocation of ESOP Shares - - (3) - - 468 - 465
Fractional Shares Paid - - (13) - - - - (13)
Exercise of Stock Options - - 1,218 - 402 - - 1,620
Proceeds from Sale
of Common Stock - 12 32,100 - - - - 32,112
Net Unrealized Gain on
Securities Available for
Sale, Net of Taxes - - - - - - 6,340 6,340
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $ 2 $ 85 $138,263 $ 75,858 $ (3,290) $(3,207) $ 2,262 $ 209,973
- ---------------------------------------------------------------------------------------------------------------------------
Net Income for 1996 - - - 25,608 - - - 25,608
Dividends Paid:
$.68 Per Common Share - - - (5,546) - - - (5,546)
Dividends Paid or Accrued:
Preferred Series B - - - (1,149) - - - (1,149)
Allocation of ESOP Shares - - 94 - - 633 - 727
Exercise of Stock Options - - 277 - 3,351 - - 3,628
Conversion of Preferred
Series B to Common Stock (1) - (8,724) - 8,725 - - -
Common Stock Repurchased - - - - (27,611) - - (27,611)
Other, Net - - (105) - 24 - - (81)
Net Unrealized Gain on
Securities Available for
Sale, Net of Taxes - - - - - - 747 747
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $ 1 $ 85 $129,805 $ 94,771 $ (18,801) $(2,574) $ 3,009 $ 206,296
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net Income $ 25,608 $ 18,320 $ 18,685
Adjustments to Reconcile Net Income to Net
Cash Provided (Used) by Operating Activities:
Provision for Loan Losses 4,000 3,100 3,155
Provision for Foreclosed Property Losses 1,096 2,000 3,082
Provision for Depreciation and Amortization 7,189 4,507 4,383
Amortization of Securities Premiums, Net 3,871 884 390
Amortization and Write-down of Core Deposit Intangible 4,617 728 6,372
Amortization of Mortgage Servicing Rights 439 651 474
(Gains) Losses on Sale of Foreclosed Properties (1,060) (918) 465
(Gains) Losses on Sale of Loans and Securities (3,314) (4,398) 1,322
(Gains) Losses on Sale of Trading Securities (520) 109 (140)
Decrease (Increase) in Trading Securities 6,085 (19,859) 25,684
Loans Originated for Sale (51,110) (101,537) (288,880)
Sale of Loans, Originated for Sale 63,198 109,787 208,775
Decrease (Increase) in Interest Receivable 105 (3,171) 453
(Decrease) Increase in Interest Payable (742) 960 3,888
(Decrease) Increase in Accrued Expenses and Other Liabilities, Net (16,662) 3,302 (44,671)
(Increase) Decrease in Prepaid Expenses and Other Assets (10,542) 1,589 3,069
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Operating Activities 32,258 16,054 (53,494)
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Purchases of Securities, Available for Sale (426,887) (148,803) (99,631)
Purchases of Securities, Held to Maturity (96,926) (308,021) (100,744)
Maturities of Securities 36,981 14,097 25,944
Proceeds from Sales of Securities, Available for Sale 283,457 140,917 26,767
Net Decrease in Interest-bearing Deposits 25,990 28,301 396
Purchase of Loans (10,000) (2,123) (37,181)
Net Increase in Loans (62,253) (28,598) (117,242)
Proceeds from Sale of Foreclosed Properties 17,452 12,870 23,106
Net Decrease in Segregated Assets 29,169 28,941 39,902
Principal Collected on Mortgage-Backed Securities 191,064 118,174 166,503
Purchase of Premises and Equipment, Net (9,993) (8,529) (6,916)
Net Cash and Cash Equivalents Received from Bank Acquisition 113,551 - 15,490
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities 91,605 (152,774) (63,606)
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Net (Decrease) Increase in Deposits (55,575) (31,743) 26,802
Net Proceeds from Sale of Common Stock - 32,112 21,923
Repayment of FHL Bank Advances (1,556,845) (1,039,613) (1,147,042)
Proceeds from FHL Bank Advances 1,581,479 1,052,014 1,247,542
Repayment of Other Borrowings (1,439,207) (61,193) -
Proceeds from Other Borrowings 1,414,548 188,077 -
Cash Dividends to Common and Preferred Shareholders (6,695) (5,690) (4,724)
Net Increase (Decrease) in Advance Payments for Taxes and Insurance 3,350 1,060 (8,710)
Exercise of Stock Options 3,628 1,620 569
Common Stock Repurchased (27,611) - -
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided by Financing Activities (82,928) 136,644 136,360
- ---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 40,935 (76) 19,260
Cash and Cash Equivalents at Beginning of Period 44,228 44,304 25,044
- ---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 85,163 $ 44,228 $ 44,304
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Disclosures:
Income Taxes Paid $ 15,684 $ 9,087 $ 9,253
Interest Paid 147,484 130,573 102,356
Supplemental Schedule of Noncash Investing and Financing Activities:
Transfer of Loans to Foreclosed Properties 14,249 12,002 47,479
Transfer of Securities from Held to Maturity to Available for Sale - 301,424 -
Securitization of Residential Real Estate Loans - - 137,458
</TABLE>
Assets acquired and liabilities assumed in 1996 business combinations were as
follows:
Year Ended
December 31, 1996
- --------------------------------------------------------------------------------
Assets Acquired:
Loans $ 586,235
Premises and Equipment 6,327
Other Assets 3,059
- --------------------------------------------------------------------------------
Total Assets Acquired $ 595,621
- --------------------------------------------------------------------------------
Liabilities Assumed:
Deposits $ 846,412
Less Deposits Exchanged (95,163)
- --------------------------------------------------------------------------------
Net Deposits Assumed 751,249
Other Liabilities 922
- --------------------------------------------------------------------------------
Total Liabilities Assumed 752,171
- --------------------------------------------------------------------------------
Net Liabilities Assumed 156,550
Net Premium Paid for Deposits (42,999)
- --------------------------------------------------------------------------------
Net Cash and Cash Equivalents Received from Bank Acquisition $ 113,551
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
<PAGE>
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
a) Business
Webster Financial Corporation, ("Webster"), through its subsidiary, Webster
Bank, (the "Bank") delivers financial services to individuals, families and
businesses throughout Connecticut. Webster Bank is organized along three
business lines - consumer, business and mortgage banking, 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 in Connecticut. Webster Bank was
founded in 1935 and converted from a federal mutual to a federal stock
institution in 1986.
b) Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of Webster and the
Bank. The consolidated financial statements and notes hereto have been
retroactively restated to include the accounts of Shelton Bancorp Inc.
("Shelton") acquired on November 1, 1995 and Shoreline Bank and Trust and
Company ("Shoreline") acquired on December 16, 1994 as if the mergers had
occurred at the beginning of the period of the earliest date presented (See Note
2). The financial statements have been prepared in conformity with generally
accepted accounting principles and all significant intercompany transactions
have been eliminated in consolidation.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amount of assets and liabilities as of
the date of the balance sheets and revenues and expenses for the periods
presented. The actual results of Webster could differ from those estimates.
Material estimates that are susceptible to near term changes include the
determination of the allowance for loan losses, the valuation allowance of the
deferred tax asset and the valuation of foreclosed property.
c) Allowance for Loan Losses
An allowance for loan losses is established based upon a review of the loan
portfolio, loss experience, specific problem loans, current and anticipated
economic conditions and other pertinent factors which, in management's judgment,
deserve current recognition in estimating loan losses. Effective January 1,
1995, Webster adopted Statement of Financial Accounting Standard ("SFAS") No.
114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No.
118. Under this standard, commercial and commercial real estate loans are
considered impaired when it is probable that Webster will not collect all
amounts due in accordance with the contractual terms of the loan. Certain loans
are exempt from the provisions of SFAS No. 114, including large groups of
smaller balance homogenous loans that are collectively evaluated for impairment,
such as consumer and residential mortgage loans.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review Webster's allowance for loan
losses. Such agencies may require Webster to recognize additions to the
allowance for loan losses based on judgments different from those of management.
d) Foreclosed Properties
Foreclosed properties consists of properties acquired through foreclosure
proceedings or acceptance of a deed in lieu of foreclosure. Foreclosed
properties are reported at the lower of fair value less estimated selling
expenses or cost with an allowance for losses to provide for declines in value.
Operating expenses are charged to current period earnings and gains and losses
upon disposition are reflected in the statements of income when realized.
e) Loans
Loans are stated at the principal amounts outstanding. Interest on loans is
credited to income as earned based on the rate applied to principal amounts
outstanding. Interest which is more than 90 days past due is not accrued. Such
interest ultimately collected, if any, is credited to income in the period
received. Loan origination fees, net of certain direct origination costs and
premiums and discounts on loans purchased, are recognized in interest income
over the lives of the loans using a method approximating the interest method.
Loans held for sale are carried at the lower of
<PAGE>
cost or market value in aggregate. Net unrealized losses on loans held for sale,
if any, are recognized in a valuation allowance by charges to income.
f) Securities
Securities are classified into one of three categories. Securities with fixed
maturities that management has the intent and ability to hold to maturity are
classified as Held to Maturity and 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.
Mortgage-backed securities include collateralized mortgage obligations ("CMOs")
which are either U.S. government agency securities or are rated in at least the
top two ratings categories by at least one of the major rating agencies at the
time of purchase. One of the risks inherent when investing in CMOs and
mortgage-backed securities is the ability of such instruments to incur
prepayments of principal prior to maturity. Because of prepayments, the
weighted-average yield of these securities may also change, which could effect
earnings.
g) Interest-rate Instruments
Webster utilizes as part of its asset/liability management strategy various
interest rate contracts including short futures positions, interest rate swaps,
interest rate caps and interest rate floors. Webster holds short futures
positions to minimize the price volatility of certain adjustable rate assets
held as Trading Securities. Changes in the market value of short futures
positions are recognized as a gain or loss in the consolidated statement of
income in the period for which the change occurred.
Interest rate caps, interest rate floors and interest rate swaps are entered
into as hedges against future interest rate fluctuations. Webster does not trade
in speculative interest rate contracts. Those agreements meeting the criteria
for hedge accounting treatment are designated as hedges and are accounted for as
such. If a contract is terminated, any unrecognized gain or loss is deferred and
amortized as an adjustment to the yield of the related asset or liability over
the remainder of the period that was being hedged. If the linked asset or
liability is disposed of prior to the end of the period being managed, the
related interest rate contract is marked to fair value, with any resulting gain
or loss recognized in current period income as an adjustment to the gain or loss
on the disposal of the related asset or liability. Interest income or expense
associated with interest rate caps and swaps is recorded as a component of net
interest income. Interest rate instruments that hedge available for sale assets
are marked to fair value monthly with adjustments to shareholders' equity on a
tax effected basis.
h) Interest-bearing Deposits
Interest-bearing Deposits consist primarily of deposits in the Federal Home Loan
Bank of Boston or other short-term overnight investments. These deposits are
carried at cost which approximates market value.
i) Premises and Equipment
Depreciation of premises and equipment is accumulated on a straight-line basis
over the estimated useful lives of the related assets. Estimated lives are 15 to
40 years for buildings and improvements and 3 to 20 years for furniture,
fixtures and equipment. Amortization of leasehold improvements is calculated on
a straight-line basis over the terms of the related leases.
Maintenance and repairs are charged to expense as incurred and improvements are
capitalized. The cost and accumulated depreciation relating to premises and
equipment retired or otherwise disposed of are eliminated from the accounts and
any resulting gains and losses are credited or charged to income.
<PAGE>
j) Segregated Assets
Segregated Assets represent commercial, commercial real estate and multi-family
loans acquired in the October 1992 First Constitution acquisition. In addition,
Segregated Assets contain foreclosed properties that have been so classified
subsequent to the acquisition date. These assets are subject to a loss-sharing
arrangement with the FDIC as discussed in Notes 2 and 5.
Interest on Segregated Assets is credited to income earned on loans and
segregated assets based on the rate applied to principal amounts outstanding.
Interest which is more than 90 days contractually past due is not accrued. Such
interest ultimately collected, if any, is credited to income in the period
received.
k) Core Deposit Intangible
The excess of the purchase price over the fair value of the tangible net assets
acquired in acquisitions accounted for using the purchase accounting method has
been allocated to deposits. The deposit intangible is being amortized on a
straight-line basis over a period of ten years from the acquisition date. On a
periodic basis, management assesses the recoverability of the deposit
intangible. Such assessments encompass a projection of future earnings from the
deposit base as compared to original expectations, based upon a discounted cash
flow analysis. If an assessment of the core deposit intangible indicates that it
is impaired, a charge to income for the most recent period is recorded for the
amount of such impairment.
l) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
m) Employee Benefit Plans
The Bank has a noncontributory pension plan covering substantially all
employees. Pension costs are accrued in accordance with generally accepted
accounting principles and are funded in accordance with the requirements of the
Employee Retirement Income Security Act (ERISA). The Bank also accrues costs
related to postretirement benefits.
n) Net Income Per Share
Primary net income per share is calculated by dividing net income available to
common shareholders 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 cumulative convertible preferred stock. The weighted-average number of
shares used in the computation of primary earnings per share for the years ended
December 31, 1996, 1995 and 1994 were 8,288,759, 6,969,208 and 6,306,994,
respectively and for fully diluted earnings per share were 9,162,756, 7,970,921,
and 7,650,343 for the same periods, respectively.
o) Stock Compensation
Statement of Financial Accounting Standard No. 123 encourages all companies to
adopt a new fair value based method of accounting for stock-based employee
compensation plans. Under the provisions of this statement, Webster has elected
to continue to measure compensation for its stock option plans using the
accounting method prescribed by Accounting Principal Board Opinion No. 25 ("APB
No. 25") "Accounting for Stock Issued to Employees." Entities electing to
maintain accounting standards under APB No. 25 must make pro forma disclosures
for net income and earnings per share as if the fair value based method of
accounting had been applied. See Note 16.
p) Statements of Cash Flows
For purposes of the Statements of Cash Flows, Webster considers cash on hand and
in banks to be cash equivalents.
<PAGE>
q) Loan Sales and Servicing Sales
Gains or losses on sales of loans are recognized at the time of the sale. On
July 1, 1995, Webster elected early adoption of Statement of Financial
Accounting Standard No.
122 ("SFAS No. 122") "Accounting for Mortgage Servicing Rights." SFAS No. 122
requires that a mortgage banking entity recognize as a separate asset the value
of the right to service mortgage loans for others, regardless of how those
servicing rights are acquired. Fair values are estimated considering market
prices for similar mortgage servicing rights and on the discounted anticipated
future net cash flows considering loan prepayment predictions, historical
prepayment rates, interest rates, and other economic factors. For purposes of
impairment evaluation and measurement, Webster stratifies mortgage servicing
rights based on predominate risk characteristics of the underlying loans,
including loan type and amortization type (fixed or adjustable). To the extent
that the carrying value of mortgage servicing rights exceeds fair value by
individual stratum, a valuation allowance is established. The allowance may be
adjusted for changes in fair value. The cost basis of mortgage servicing rights
is amortized into noninterest income over the estimated period of servicing
revenue. See Note 4.
When loans sold have an average contractual interest rate, adjusted for normal
servicing costs, which differs from the agreed yield to the purchaser, gains or
losses are recognized equal to the present value of such differential over the
estimated remaining life of such loans. Any resulting net premium is amortized
over the same estimated life using a method approximating the interest method.
The aggregate of unamortized excess servicing rights arising from gains on loan
sales is included in the accompanying Consolidated Statements of Condition as a
component of Prepaid Expenses and Other Assets and is periodically reviewed and
adjusted for changed circumstances.
r) Reclassifications
Certain financial statement balances as previously reported have been
reclassified to conform to the 1996 Consolidated Financial Statements
presentation.
NOTE 2: BUSINESS COMBINATIONS
- --------------------------------------------------------------------------------
Pooling of Interests Transaction Consummated in 1997 (Unaudited)
On January 31, 1997, Webster acquired DS Bancor, Inc. ("Derby") and its
subsidiary, Derby Savings Bank, a $1.2 billion savings bank in Derby,
Connecticut. In connection with the merger with Derby, Webster issued 3,501,370
shares of its common stock for all the outstanding shares of Derby common stock.
Under the terms of the agreement each outstanding share of Derby common stock
was converted into 1.14158 shares of Webster common stock. This acquisition was
accounted for as a pooling of interests and as such future Consolidated
Financial Statements will include Derby's financial data as if Derby had been
combined at the beginning of the earliest period presented.
The pro forma combined amounts in the table below are presented for
informational purposes and are not necessarily indicative of the results of
operations of the combined company that would have actually occurred had the
merger been consummated as of the earliest date for the period presented. The
pro forma combined amounts are also not necessarily indicative of future results
of operations of the combined company. In particular, Webster expects to achieve
significant operating cost savings as a result of the merger. No adjustment has
been included in the pro forma combined amounts for anticipated operating cost
savings.
The following table sets forth unaudited pro forma results of operations of the
combining entities:
<TABLE>
<CAPTION>
Year Ended December 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA) WEBSTER DS BANCOR COMBINED
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Interest Income $115,789 $39,155 $ 154,944
Provision for Loan Losses 4,000 4,850 8,850
Net Income 25,608 8,879 34,487
Fully Diluted Earnings Per Share $ 2.79 $ 2.80 $ 2.69
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA) WEBSTER DS BANCOR COMBINED
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Interest Income $87,278 $35,014 $ 122,292
Provision for Loan Losses 3,100 2,525 5,625
Net Income 18,320 7,613 25,933
Fully Diluted Earnings Per Share $ 2.30 $ 2.45 $ 2.25
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA) WEBSTER DS BANCOR COMBINED
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Interest Income $92,356 $34,464 $ 126,820
Provision for Loan Losses 3,155 2,325 5,480
Net Income 18,685 5,710 24,395
Fully Diluted Earnings Per Share $ 2.44 $ 1.86 $ 2.19
</TABLE>
POOLING OF INTERESTS TRANSACTIONS
- --------------------------------------------------------------------------------
On November 1, 1995, Webster merged with Shelton, with $295 million in assets,
based in Shelton, Connecticut. In connection with the acquisition, Webster
issued 1,292,549 shares of its common stock for all of the outstanding shares of
Shelton common stock, based on an exchange ratio of .92 shares of Webster common
stock for each of Shelton's outstanding shares of common stock. On December 16,
1994, Webster acquired Shoreline, with $51 million in assets, based in Madison,
Connecticut. In connection with the acquisition of Shoreline, Webster issued
266,500 shares of its common stock for all of the outstanding shares of
Shoreline common stock, based on an exchange ratio of 1 share of Webster's
common stock for 2 shares of Shoreline's common stock. Both acquisitions were
accounted for as a pooling of interests and as such the consolidated financial
statements include financial data as if both Shelton and Shoreline had been
combined as of the beginning of the earliest period presented.
PURCHASE TRANSACTIONS
- --------------------------------------------------------------------------------
The Shawmut Transaction
On February 16, 1996, Webster Bank acquired 20 branches in the Hartford market
from Shawmut Bank Connecticut National Association, as part of a divesture in
connection with the merger of Shawmut and Fleet Bank (the "Shawmut
Transaction"). In the branch purchase, Webster Bank acquired approximately $845
million in deposits, and $586 million in loans. As a result of this transaction,
Webster recorded $44.2 million as a core deposit intangible asset. In connection
with the Shawmut Transaction, Webster raised net proceeds of $32.1 million
through the sale of 1,249,600 shares of its common stock in an underwritten
public offering in December 1995. The Shawmut Transaction was accounted for as a
purchase, and results of operations related to the transaction from February 16,
1996 to December 31, 1996 are included in the accompanying Consolidated
Financial Statements.
Bristol Savings Bank Acquisition
On March 3, 1994, Bristol Savings Bank ("Bristol") converted from a Connecticut
mutual savings bank to a Connecticut capital stock savings bank and concurrently
became a wholly-owned subsidiary of Webster. Bristol had 5 banking offices in
Hartford County. In connection with the conversion, Webster completed the sale
of 1,150,000 shares of its common stock in related subscription and public
offerings. The Bristol acquisition was accounted for as a purchase, and results
of operations relating to Bristol from March 3, 1994 to December 31, 1996 are
included in the accompanying Consolidated Financial Statements. Negative
goodwill of $2.3 million represented the net effect of all purchase accounting
adjustments and is recorded as a reduction of premises and equipment and is
being amortized over a 10 year period. Bristol was merged with Webster Bank in
1995.
FDIC Assisted Acquisitions
Webster significantly expanded its retail banking operations through assisted
acquisitions of First Constitution Bank ("First Constitution") in October 1992
and Suffield Bank ("Suffield") in September 1991 from the Federal Deposit
Insurance Corporation ("FDIC"). These acquisitions, which were accounted for as
purchases, involved financial assistance from the FDIC and extended Webster's
retail banking operations into new market areas by adding 21 branch offices,
$1.5 billion in retail deposits and approximately 150,000 customer accounts. See
Note 5 to the Consolidated Financial Statements for additional information
concerning the terms of these assisted acquisitions.
<PAGE>
NOTE 3: SECURITIES
- --------------------------------------------------------------------------------
A summary of securities follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
Recorded Estimated Recorded Estimated
(IN THOUSANDS) Value Fair Value Value Fair Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trading Securities:
Mortgage-Backed Securities:
GNMA $ 31,537 $ 31,537 $ 14,766 $ 14,766
FHLMC 27,794 27,794 29,838 29,838
- ---------------------------------------------------------------------------------------------------------------------------
59,331 59,331 44,604 44,604
- ---------------------------------------------------------------------------------------------------------------------------
Available for Sale Portfolio:
U.S. Treasury Notes:
Matures within 1 year - - 1,000 1,000
Matures over 1 within 5 years 2,508 2,544 - -
U.S. Government Agency:
Matures over 1 within 5 years 12,883 12,974 12,901 12,522
Corporate Bonds and Notes:
Matures over 1 within 5 years - - 23,005 23,005
Matures over 5 within 10 years 2,492 2,489 2,737 2,730
Mutual Funds* 7,216 7,236 34,077 33,947
Stock in Federal Home Loan Bank of Boston 30,039 30,039 30,039 30,039
Other Equity Securities 19,361 25,225 9,195 11,930
Mortgage-Backed Securities:
FNMA 127,908 127,505 139,860 142,827
FHLMC 15,369 15,563 62,572 63,221
GNMA 236,393 239,142 20,443 20,512
Collateralized Mortgage Obligations 107,684 106,863 155,321 155,539
Unamortized Hedge 5,460 4,036 816 816
Unrealized Securities Gains, Net 6,303 - 6,122 -
- ---------------------------------------------------------------------------------------------------------------------------
573,616 573,616 498,088 498,088
- ---------------------------------------------------------------------------------------------------------------------------
Held to Maturity Portfolio:
U.S. Treasury Notes:
Matures within 1 year 944 956 1,577 1,577
Matures over 1 within 5 years - - 8,262 8,445
U.S. Government Agency:
Matures within 1 year 6,867 6,867 1,003 1,006
Matures over 1 within 5 years 28,089 28,712 39,868 41,330
Matures over 5 within 10 years 499 487 999 1,008
Corporate Bonds and Notes:
Matures within 1 year 301 302 - -
Matures over 1 within 5 years 1,176 1,173 2,555 2,579
Matures over 5 within 10 years - - 330 325
Matures over 10 years 100 100 - -
Mortgage-Backed Securities:
FHLMC 31,013 31,435 42,877 43,714
FNMA 22,180 22,570 31,785 32,457
GNMA 1,309 1,369 1,622 1,698
Collateralized Mortgage Obligations 345,153 339,337 370,762 371,342
Other Mortgage-Backed Securities - - 308 294
- ---------------------------------------------------------------------------------------------------------------------------
437,631 433,308 501,948 505,775
- ---------------------------------------------------------------------------------------------------------------------------
Total $1,070,578 $1,066,255 $1,044,640 $1,048,467
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Mutual funds consist primarily of funds that invest in U.S. Government
securities, Mortgage-Backed securities and Money Market instruments.
<PAGE>
A summary of realized gains and losses follows:
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
(IN THOUSANDS) Gains Losses Net Gains Losses Net Gains Losses Net
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Trading Securities:
Mortgage-Backed Securities $ 2,962 $ (2,712) $ 250 $ 1,901 $ (194) $ 1,707 $ 2,086 $ (3,247) $ (1,161)
Futures and Options Contracts 10,704 (10,434) 270 3,517 (5,333) (1,816) 5,127 (3,826) 1,301
Equity Securities - - - - - - 128 (128) -
- ------------------------------------------------------------------------------------------------------------------------------------
13,666 (13,146) 520 5,418 (5,527) (109) 7,341 (7,201) 140
- ------------------------------------------------------------------------------------------------------------------------------------
Available for Sale:
Mortgage-Backed Securities 1,211 (590) 621 898 (878) 20 - - -
U.S. Treasury Notes - (7) (7) 363 - 363 - - -
U.S. Government Agencies - - - - (284) (284) - - -
Mutual Funds - (174) (174) - (139) (139) 72 (1,653) (1,581)
Other Equity Securities 1,863 (34) 1,829 1,322 - 1,322 28 (27) 1
Other 56 - 56 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
3,130 (805) 2,325 2,583 (1,301) 1,282 100 (1,680) (1,580)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 16,796 $ (13,951) $ 2,845 $ 8,001 $ (6,828) $ 1,173 $ 7,441 $ (8,881) $ (1,440)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
There were no sales of securities from the held to maturity portfolio for the
years ended December 31, 1996 and 1995 and 1994. During the 1995 fourth quarter,
the Bank elected, under guidelines issued by the Financial Accounting Standards
Board, to transfer certain securities from the held to maturity to the available
for sale portfolio. These securities had an approximate book value of $301.4
million and fair market value of $299.9 million. Under this one-time provision,
the Bank was able to reassess the appropriateness of the classifications of all
securities held and account for any resulting reclassifications at fair market
value. The Bank reclassified certain securities to allow greater flexibility in
managing interest-rate risk and to enhance its ability to react to changes in
market conditions.
Webster holds short futures positions to minimize the price volatility of
certain adjustable-rate assets held as Trading Securities. At December 31, 1996,
Webster held 298 short positions in Eurodollar futures contracts ($298.0 million
notional amount) and 410 short positions in 5 and 10 year Treasury note futures
($41.0 million notional amount). Changes in the market value of short futures
positions are recognized as a gain or loss in the period for which the change
occurred. All gains and losses resulting from short futures positions are
reflected in gains (losses) on sale of securities, net in the Consolidated
Statements of Income.
<PAGE>
Summaries of unrealized gains and losses for the available for sale and held to
maturity portfolios follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31,
1996 1995
(IN THOUSANDS) Gains Losses Net Gains Losses Net
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Available for Sale:
U.S. Treasury Notes $ 40 $ (4) $ 36 $ - $ - $ -
U.S. Government Agency 91 - 91 - (379) (379)
Corporate Bonds and Notes - (3) (3) - (7) (7)
Mutual Funds 20 - 20 18 (148) (130)
Equity Securities 5,946 (82) 5,864 3,012 (278) 2,734
Mortgage-Backed Securities 5,810 (5,515) 295 6,615 (2,711) 3,904
- ------------------------------------------------------------------------------------------------------------------------------------
11,907 (5,604) 6,303 9,645 (3,523) 6,122
- ------------------------------------------------------------------------------------------------------------------------------------
Held to Maturity Portfolio:
U.S. Treasury Notes:
Matures within 1 year 12 - 12 1 (1) -
Matures within 5 years - - - 184 (1) 183
U.S. Government Agency
Matures within 1 year - - - 3 - 3
Matures over 1 within 5 years 935 (312) 623 1,465 (2) 1,463
Matures over 5 within 10 years - (12) (12) 8 - 8
Corporate Bonds and Notes
Matures within 1 year 1 - 1 - - -
Matures over 1 within 5 years 5 (8) (3) 26 (2) 24
Matures over 5 within 10 years - - - - (5) (5)
Mortgage-Backed Securities 2,069 (7,013) (4,944) 4,844 (2,693) 2,151
- ------------------------------------------------------------------------------------------------------------------------------------
3,022 (7,345) (4,323) 6,531 (2,704) 3,827
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 14,929 $ (12,949) $ 1,980 $ 16,176 $ (6,227) $ 9,949
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE 4: LOANS RECEIVABLE, NET
- --------------------------------------------------------------------------------
A summary of loans receivable, net follows:
<TABLE>
<CAPTION>
December 31,
(IN THOUSANDS) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans Secured by Mortgages on Real Estate:
Conventional, VA and FHA $1,834,308 $1,504,506
Conventional, VA and FHA Loans Held for Sale 3,705 2,872
Residential Participation 14,933 9,368
Residential Construction 84,442 54,410
Commercial Construction 6,297 8,887
Other Commercial 198,633 135,843
- ---------------------------------------------------------------------------------------------------------------------------
2,142,318 1,715,886
Consumer Loans:
Home Equity Credit Lines 155,935 122,737
Other Consumer Loans 79,574 49,546
Credit Cards 13,675 -
- ---------------------------------------------------------------------------------------------------------------------------
249,184 172,283
Commercial Non-Mortgage Loans 177,766 53,194
- ---------------------------------------------------------------------------------------------------------------------------
Gross Loans Receivable 2,569,268 1,941,363
Less:
Loans in Process 28,766 20,642
Allowance for Losses on Loans 33,454 41,797
Premiums on Loans Purchased, Deferred Loan Fees and Unearned Discounts, Net (18,495) (13,032)
- ---------------------------------------------------------------------------------------------------------------------------
Loans Receivable, Net $2,525,543 $1,891,956
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Included above at December 31, 1996 and 1995 are $395.7 million and $466.9
million, respectively, of residential and consumer loans acquired from the FDIC
in the First Constitution acquisition ("Reserve Assets"). In 1992, the Bank
established $46.5 million in allowances for loan losses and allowances for loans
held for sale through purchase accounting adjustments to cover its portion of
losses on the Reserve Assets. For four years after the acquisition date, the
FDIC was required to reimburse the Bank quarterly, in an aggregate amount up to
$20 million, for 80% of all net charge-offs on the Reserve Assets and the Bank's
share of net charge-offs and expenses associated with Segregated Assets
("Webster Bank's Shared Losses"), if such charge-offs on the Reserve Assets and
Webster Bank's portion of the Shared Losses collectively exceed $52 million.
Cumulative net charge-offs on Reserve Assets and the Bank's share of net
charge-offs and expenses associated with Segregated Assets from acquisition date
through 1996 totaled $38.0 million. The reporting period for contingent reserve
assets expired at December 31, 1996 and the losses recognized by the Bank on
these assets were less than those required for the FDIC to make additional
payments to the Bank. See Note 4 for a discussion on Segregated Assets.
Webster adopted SFAS No. 114 "Accounting by Creditors for Impairment of a Loan"
on January 1, 1995 as amended by SFAS No. 118, with no impact on its results of
operations. At December 31, 1996, Webster had $7.5 million of impaired loans, of
which $1.1 million was measured based upon the fair value of the underlying
collateral and $6.4 million was measured based upon the expected future cash
flows of the impaired loans. Of the total impaired loans of $7.5 million, $1.6
million had allowances for losses on impaired loans of $556,000. In 1996 and
1995, the average balance of impaired loans was $9.8 million and $12.8 million,
respectively. The allowance for losses on impaired loans was established as a
result of an allocation from the allowance for losses on loans.
Webster's policy with regard to the recognition of interest income on impaired
loans includes an individual assessment of each loan. Interest which is more
than 90 days past due is not accrued. When payments on impaired loans are
received, Webster records interest income on a cash basis or applies the total
payment to principal based on an individual assessment of each loan. Cash basis
interest income recognized on impaired loans for the twelve months ended
December 31, 1996 and 1995 amounted to $74,623 and $50,362, respectively.
<PAGE>
A detail of the changes in the allowances for loan losses for the three years
follows:
<TABLE>
<CAPTION>
December 31,
1996
- -------------------------------------------------------------------------------------------------------------------------------
Impaired Total
(IN THOUSANDS) Loans Loans Allowance 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Period $39,704 $ 2,093 $ 41,797 $ 46,772 $ 45,168
Provisions Charged to Operations 4,000 - 4,000 3,100 2,780
Acquired Allowance for Purchased Loans 5,000 - 5,000 - 12,819
Allocation to General Allowance 304 (304) - - -
Charge-offs (18,414) (1,233) (19,647) (10,860) (17,099)
Recoveries 2,304 - 2,304 2,785 3,104
- -------------------------------------------------------------------------------------------------------------------------------
Balance at End of Period $32,898 $ 556 $ 33,454 $ 41,797 $ 46,772
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Webster is a party to financial instruments with off-balance sheet risk to meet
the financing needs of its customers and to reduce its own exposure to
fluctuations in interest rates. These financial instruments included commitments
to extend credit and commitments to sell residential first mortgage loans. These
instruments involve, to varying degrees, elements of credit and interest-rate
risk in excess of the amount recognized on the balance sheet.
The estimated fair value of commitments to extend credit is considered
insignificant at December 31, 1996 and 1995. Future loan commitments represent
residential mortgage loan commitments, letters of credit, standby letters of
credit, credit card lines and unused home equity credit lines. Rates for these
loans are generally established shortly before closing. The rates on home equity
lines of credit generally vary with the prime rate.
At December 31, 1996 and 1995 residential mortgage commitments outstanding
totaled $49.2 million and $45.8 million, respectively. Residential commitments
outstanding at December 31, 1996 consist of adjustable and fixed-rate mortgages
of $27.6 million and $21.6 million respectively, at rates ranging from 5.9% to
8.3%. Commitments to originate loans generally expire within 60 days. In
addition, at December 31, 1996 and 1995, there were unused portions of home
equity credit lines extended by Webster of $165.7 million and $158.5 million,
respectively. Unused commercial lines of credit, letters of credit, standby
letters of credit and outstanding commercial new loan commitments totaled $87.6
million and $40.3 million at December 31, 1996 and 1995, respectively.
Additionally, unused credit card lines were $33.0 million at December 31, 1996.
There were no credit card lines outstanding at December 31, 1995.
Webster uses forward commitments to sell residential first mortgage loans which
are entered into for the purpose of reducing the market risk associated with
originating loans held for sale. The types of risk that may arise are from the
possible inability of Webster or the other party to fulfill the contracts. At
December 31, 1996 and 1995, Webster had forward commitments to sell loans
totaling $3.7 million and $2.9 million, respectively, at rates between 5.75% and
9.0% and 5.5% and 8.0%, respectively. The estimated fair value of commitments to
sell loans is considered insignificant at December 31, 1996 and 1995.
At December 31, 1996, 1995 and 1994, Webster serviced, for the benefit of
others, mortgage loans aggregating approximately $965.1 million, $753.1 million
and $944.5 million, respectively. During 1996, Webster purchased mortgage loan
servicing assets with a principal balance of $272.5 million and recorded a
mortgage servicing asset of $2.8 million and during 1995, Webster sold mortgage
servicing assets with a principal balance of $290.0 million and recorded a $2.2
million gain on their sale.
<PAGE>
NOTE 5: SEGREGATED ASSETS, NET
- --------------------------------------------------------------------------------
Segregated Assets, Net are certain assets purchased from the FDIC in the First
Constitution acquisition which are subject to a loss-sharing arrangement with
the FDIC:
At December 31,
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Commercial Real Estate Loans $ 58,745 $ 79,995
Commercial Loans 6,606 10,439
Multi-Family Real Estate Loans 12,772 16,341
Other Real Estate Owned 406 1,299
- --------------------------------------------------------------------------------
78,529 108,074
Allowance for Segregated Asset Losses (2,859) (3,235)
- --------------------------------------------------------------------------------
Segregated Assets, Net $ 75,670 $104,839
- --------------------------------------------------------------------------------
The FDIC is required to reimburse Webster quarterly through 1997 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.
During 1998 and 1999, 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 First Constitution acquisition and 100%
thereafter.
Upon termination of the seven-year period after the First Constitution
acquisition (December, 1999), if the sum of Webster's 20% share 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 December 31, 1996, cumulative net charge-offs and expenses
aggregated $53.9 million. During the first quarter of 1996, Webster began
recording the additional 15% reimbursement as a receivable from the FDIC (See
Note 7). As of December 31, 1996, Webster had received a total of $42.2 million
in reimbursements for net charge-offs and permitted expenses from the FDIC. At
December 31, 1996 and 1995, Webster had allowances for losses of $2.9 million
and $3.2 million, respectively, to cover its portion of Segregated Assets
losses.
A detail of changes in the allowance for Webster's share of losses for
Segregated Assets follows:
At December 31,
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Balance at Beginning of Period $ 3,235 $ 4,420
Charge-offs (621) (1,772)
Recoveries 245 587
- --------------------------------------------------------------------------------
Balance at End of Period $ 2,859 $ 3,235
- --------------------------------------------------------------------------------
At December 31, 1996 and 1995, nonperforming Segregated Assets are classified as
follows:
At December 31,
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Commercial Real Estate Loans $ 3,337 $ 2,604
Commercial Loans 192 1,203
Multi-Family Real Estate Loans 495 1,432
Foreclosed Property:
Commercial Real Estate 269 648
Multi-Family Real Estate 138 651
- --------------------------------------------------------------------------------
Total $ 4,431 $ 6,538
- --------------------------------------------------------------------------------
<PAGE>
NOTE 6: PREMISES AND EQUIPMENT, NET
- --------------------------------------------------------------------------------
A summary of premises and equipment, net follows:
December 31,
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Land $ 6,969 $ 6,162
Buildings and Improvements 36,322 29,809
Leasehold Improvements 3,046 1,772
Furniture, Fixtures and Equipment 31,580 27,020
- --------------------------------------------------------------------------------
Total Premises and Equipment 77,917 64,763
Accumulated Depreciation and Amortization 28,132 24,109
- --------------------------------------------------------------------------------
Premises and Equipment, Net $ 49,785 $ 40,654
- --------------------------------------------------------------------------------
At December 31, 1996, Webster was obligated under various non-cancelable
operating leases for properties used as branch office facilities. The leases
contain renewal options and escalation clauses which provide for increased
rental expense based primarily upon increases in real estate taxes over a base
year. Rental expense under leases was $2,177,000, $827,000 and $950,000 in 1996,
1995 and 1994, respectively. Webster is also entitled to rental income under
various non-cancelable operating leases for properties owned. Rental income
under these leases was $1,917,000, $1,682,000 and $1,474,000 in 1996, 1995 and
1994, respectively.
The following is a schedule of future minimum rental payments and receipts
required under these leases as of December 31, 1996:
- --------------------------------------------------------------------------------
(IN THOUSANDS) Payments Receipts
- --------------------------------------------------------------------------------
Years ending December 31:
1997 $ 2,304 $ 820
1998 2,095 577
1999 1,804 513
2000 1,461 468
2001 1,338 415
Later years 6,697 948
- --------------------------------------------------------------------------------
Total $ 15,699 $ 3,741
- --------------------------------------------------------------------------------
NOTE 7: PREPAID EXPENSES AND OTHER ASSETS
- -----------------------------------------
A summary of prepaid expenses and other assets follows:
December 31,
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Due from FDIC $ 1,420 $ 1,174
Income Taxes Receivable 6,913 1,809
Deferred Tax Asset, Net (Note 14) 13,714 14,820
Mortgage Servicing Rights, Net 5,108 2,617
Other Assets 5,728 3,426
- --------------------------------------------------------------------------------
Prepaid Expenses and Other Assets $ 32,883 $ 23,846
- --------------------------------------------------------------------------------
Of the $1.4 million due from FDIC at December 31, 1996, $926,000 represents
Webster's 80% reimbursement for fourth quarter net charge-offs and expenses on
Segregated Assets which will be received in the first quarter of 1997. The
remaining 474,000 represents the additional 15% reimbursement of charge-offs and
expenses which Webster will receive at the end of the seventh year (See Note 5).
The increase in Income Taxes Receivable is due to the timing of the SAIF
recapitalization in the third quarter of 1996. Other Assets are primarily
comprised of prepaid expenses and various miscellaneous assets.
<PAGE>
During the 1995 second quarter, Webster adopted Statement of Financial
Accounting Standard No. 122 ("SFAS 122") "Accounting for Mortgage Servicing
Rights." This statement requires that a mortgage banking entity recognize as a
separate asset the value of the right to service mortgage loans for others,
regardless of how those servicing rights are acquired. Amortization of mortgage
servicing rights was $439,000, $651,000, and $474,000 for the years ended
December 31, 1996, 1995 and 1994 respectively. During 1996 and 1995 Webster
capitalized mortgage servicing assets of $308,000 and $184,000, respectively
related to originating loans and selling them servicing retained. Also, during
1996 Webster purchased mortgage loan servicing assets with a principal balance
of $272.5 million and recorded a mortgage loan servicing asset of $2.8 million.
At December 31, 1996 the allowance for decline in value of mortgage loan
servicing rights was $95,000 and was established through a provision in 1996.
There was no allowance for mortgage servicing rights at December 31, 1995.
NOTE 8: DEPOSITS
- --------------------------------------------------------------------------------
Deposits and weighted average rates are summarized as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
- ------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Average % of Average % of
(IN THOUSANDS) Rate Balance Total Rate Balance Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Regular Savings 2.49% $ 652,175 21.1% 2.09% $ 471,588 19.6%
NOW Accounts 1.64 343,271 11.1 1.83 226,770 9.4
Demand Deposits - 263,445 8.5 - 124,419 5.2
Money Market Deposit Accounts 3.76 101,552 3.3 4.03 87,371 3.6
- ------------------------------------------------------------------------------------------------------------------------
Certificate Accounts:
Up to 12 months 5.00 927,827 30.0 5.19 707,540 29.5
13 to 24 months 5.67 530,827 17.1 5.92 521,104 21.7
25 to 36 months 5.77 55,765 1.8 5.52 70,812 3.0
Over 36 months 6.14 221,014 7.1 6.16 190,598 8.0
- ------------------------------------------------------------------------------------------------------------------------
Total Certificates 5.37 1,735,433 56.0 5.59 1,490,054 62.2
- ------------------------------------------------------------------------------------------------------------------------
Total Deposits 3.84% $3,095,876 100.0% 4.20% $2,400,202 100.0%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest expense on deposits is summarized as follows:
Years Ended December 31,
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Regular Savings $ 15,665 $ 11,284 $ 12,139
NOW Accounts 5,096 2,838 3,906
Money Market Deposit Accounts 3,943 5,139 4,946
Certificate Accounts 89,682 78,874 55,844
- --------------------------------------------------------------------------------
Total $ 114,386 $ 98,135 $ 76,835
- --------------------------------------------------------------------------------
The following table presents the amount of time deposits in amounts of $100,000
or more at December 31, 1996 maturing during the periods indicated:
(IN THOUSANDS)
- ------------------------------------------------------------------------------
Maturing Amount
- ------------------------------------------------------------------------------
January 1, 1997 to March 31, 1997 $ 37,697
April 1, 1997 to June 30, 1997 41,701
July 1, 1997 to December 31, 1997 39,387
January 1, 1998 and beyond 34,924
- ------------------------------------------------------------------------------
Total $ 153,709
- ------------------------------------------------------------------------------
<PAGE>
NOTE 9: FEDERAL HOME LOAN BANK ADVANCES
- --------------------------------------------------------------------------------
Advances payable to the Federal Home Loan Bank of Boston are summarized as
follows:
At December 31,
(DOLLARS IN THOUSANDS) 1996 1995
- -------------------------------------------------------------------------
Fixed Rate:
- -------------------------------------------------------------------------
4.82% to 8.61% Due 1996 $ - $ 295,400
5.34% to 7.39% Due 1997 293,000 50,000
5.40% to 6.48% Due 1998 65,000 15,000
8.86% Due 1999 700 700
6.31% Due 2000 10,000 10,000
- -------------------------------------------------------------------------
368,700 371,100
- -------------------------------------------------------------------------
Variable Rate:
- -------------------------------------------------------------------------
5.94% to 6.41% Due in 1996 - 12,000
7.32% Due in 1997 39,034 -
- -------------------------------------------------------------------------
39,034 12,000
- -------------------------------------------------------------------------
Total Federal Home Loan Bank Advances $ 407,734 $ 383,100
- -------------------------------------------------------------------------
The weighted average cost of the Federal Home Loan Bank Advances at December 31,
1996 and 1995 was 5.87% and 6.31%, respectively.
At December 31, 1996, the Bank had additional borrowing capacity of over $1.4
billion from the Federal Home Loan Bank, including a line of credit of
approximately $41.3 million. Advances are secured by the Bank's investment in
FHLB stock and a blanket security agreement. This agreement requires the Bank to
maintain as collateral certain qualifying assets, principally mortgage loans and
securities. At December 31, 1996 and 1995, the Bank was in compliance with the
Federal Home Loan Bank collateral requirements.
NOTE 10: OTHER BORROWINGS
- --------------------------------------------------------------------------------
The following table summarizes other borrowings at December 31, 1996 and 1995.
At December 31,
(DOLLARS IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Reverse Repurchase Agreements $ 77,585 $ 126,884
Senior Notes 40,000 40,000
Bank Line of Credit 18,000 -
ESOP Borrowings 2,546 3,130
Other Borrowings 6,496 -
- --------------------------------------------------------------------------------
Total $ 144,627 $ 170,014
- --------------------------------------------------------------------------------
The weighted average rates for other borrowed funds for the 1996 and 1995 year
periods were 6.28% and 7.58%, respectively.
During 1996, reverse repurchase agreement transactions were the primary source
of borrowed funds with the exception of FHLB advance borrowings (See Note 9).
The average balance and weighted average rate for repurchase transactions for
the 1996 year period was $129.2 million and 5.52% as compared to $37.8 million
and 5.91% for the 1995 year period. Securities underlying the reverse repurchase
transactions held as collateral are primarily U.S. Agency securities consisting
of GNMA and FNMA securities. Securities for reverse repurchase agreement
transactions related to Webster's funding operations are delivered to
broker-dealers who arrange the transactions. Webster also enters into reverse
repurchase agreements directly with certain customers.
<PAGE>
Information concerning borrowings under reverse repurchase agreements is
summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at Weighted Average Book Value Market Value
December 31, 1996 Maturity Date of Collateral of Collateral
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$77,585 1.2 months $78,491 $79,287
</TABLE>
The maximum amount of outstanding reverse repurchase agreements at any month-end
during the 1996 period was $180.7 million.
In 1996, Webster also utilized a variable rate line of credit through a
correspondent bank with a credit limit of $20 million. Webster has established
multiple sources of funding and uses the most favorable source under the
circumstances in conjunction with asset and liability management strategies. The
ESOP borrowings are from a correspondent bank at a floating rate based on the
correspondent bank's base (prime) rate and such rates at December 31, 1996 and
1995 were 7.90% and 8.36%, respectively. The estimated fair value of the ESOP
borrowings approximates book value at December 31, 1996 and 1995. The terms of
the loan agreements call for the ESOP to make annual scheduled principal
repayments through the year 2001. Interest is paid quarterly and the borrowings
are secured and guaranteed by Webster. See Note 15 for a description of the
increase in the ESOP's outstanding indebtedness in 1994.
On June 29, 1993, Webster completed a registered offering of $40 million of 8
3/4% Senior Notes due 2000 ("the Senior Notes"). Webster used $18.25 million
from the net proceeds of the offering to redeem the remaining shares of Series A
Stock issued by Webster to the FDIC in connection with the First Constitution
acquisition. The Senior Notes may not be redeemed by Webster prior to maturity
and are not exchangeable for any shares of Webster's common stock.
NOTE 11: INTEREST RATE FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
Webster utilizes as part of its asset/liability management strategy various
interest rate contracts including short futures positions, interest rate swaps,
interest rate caps and interest rate floors. (See Note 3 for disclosures on
futures positions). Webster utilized interest rate financial instruments to
hedge mismatches in interest rate maturities to reduce exposure to movements in
interest rates. These interest rate financial instruments involve, to varying
degrees, credit risk and market risk. Credit risk is the possibility that a loss
may occur if a counterparty to a transaction fails to perform according to the
terms of the contract. Market risk is the effect of a change in interest rates
or currency rates on the value of the financial instrument. The notional amount
of interest rate financial instruments is the amount upon which interest and
other payments under the contract are based. For interest rate financial
instruments, the notional amount is not exchanged and therefore, the notional
amounts should not be taken as a measure of credit or market risk.
The fair value, which approximates the cost to replace the contract at the
current market rates is generally representative of market risk. Credit risk
related to the interest rate swaps at December 31, 1996 is not significant due
to counterparty ratings and to the fact that Webster is currently paying amounts
that are greater than it is receiving. Credit risk related to interest rate caps
and interest rate floors approximates their fair market value at December 31,
1996. In the event of a default by a counterparty, the cost to Webster, if any,
would be the replacement cost of the contract at the current market rate.
<PAGE>
<TABLE>
<CAPTION>
Interest rate financial instruments are summarized as follows:
- ---------------------------------------------------------------------------------------------------------------------------
Fair Market
Notional Amount Value Book Value
December 31, December 31, December 31,
- ---------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1996 1995 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate swap agreements $ 50,000 $ 150,000 $ (15) $ (4,954) - -
Interest rate floor agreements 100,000 - 1,602 - 1,482 -
Interest rate cap agreements 225,000 125,000 2,449 173 3,978 816
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 375,000 $ 275,000 $ 4,036 $ (4,781) $ 5,460 $ 816
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest rate swap agreements involve the exchange of fixed and variable
interest payments based upon notional amounts paid to a maturity date. At
December 31, 1996, Webster had one interest rate swap agreement in which the
corporation received a variable rate based on LIBOR and paid a fixed rate of
6.04%. Total net interest expense paid on swap agreements totaled $903,000 for
the year ended December 31, 1996.
Interest rate cap agreements require cash payments to be made or received only
if current interest rates rise above a predetermined interest rate. At December
31, 1996, Webster had two outstanding cap agreements with an interest rate cap
of 7% and one outstanding interest rate cap agreement with an interest rate cap
of 6.50%. The amount paid for entering into the interest rate cap is amortized
over the life of the agreement as an adjustment to mortgage-backed securities
available for sale interest income. At December 31, 1996, Webster had $4.0
million of unamortized interest rate cap balances and during the 1996 period
amortized $496,000. Similarly, interest-rate floor agreements require cash
payments to be made or received if current interest rates fall below a
predetermined interest rate. At December 31, 1996, Webster had one outstanding
interest rate floor agreement with an interest rate floor of 5.75%. The amount
paid for entering into an interest rate floor agreement is amortized over the
life of the agreement as an adjustment to mortgage-backed securities available
for sale interest income. At December 31, 1996, Webster had $1.5 million of
unamortized floor balances and during the 1996 period amortized $235,000.
NOTE 12: SUMMARY OF ESTIMATED FAIR VALUES
- --------------------------------------------------------------------------------
A summary of estimated fair values consisted of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
(IN THOUSANDS) Amount Fair Value Amount Fair Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Securities (Note 3) $ 1,065,118 $ 1,062,316 $ 1,044,640 $ 1,048,467
Residential Loans 1,922,190 1,975,421 1,560,823 1,620,103
Consumer Loans 94,353 93,698 49,814 51,892
Home Equity Loans 157,500 162,682 123,724 127,794
Commercial Loans 384,953 379,557 199,392 199,040
Less Allowance for Loan Losses 33,454 - 41,797 -
Segregated Assets, Net (Note 5) 75,670 75,670 104,839 104,839
Interest rate contracts (Note 11) 5,460 4,036 816 (4,781)
Mortgage Servicing Rights, Net 5,108 5,934 2,617 2,617
Other Assets 240,702 240,702 174,802 174,802
Liabilities:
Deposits Other than Certificates $ 1,360,443 $ 1,360,443 $ 910,148 $ 910,148
Certificate Accounts:
Maturing in Less than One Year 927,826 926,238 1,109,471 1,111,199
Maturing in One Year and Beyond 807,607 807,603 380,583 389,233
Federal Home Loan Bank Advances 407,734 408,023 383,100 385,678
Other Borrowings 144,627 144,565 170,014 170,890
Other Liabilities 63,067 63,607 56,381 56,381
</TABLE>
<PAGE>
In December 1991, the Financial Accounting Standards Board issued Statement No.
107, "Disclosures about Fair Value of Financial Instruments," which requires all
entities to disclose the fair value of financial instruments, including both
assets and liabilities recognized and not recognized in the statement of
financial position, for which it is practicable to estimate fair value.
The carrying amounts for interest-bearing deposits approximate fair value since
they mature in 90 days or less and do not present unanticipated credit concerns.
The fair value of securities (Note 3) is estimated based on prices published in
financial newspapers or quotations received from securities dealers or pricing
services. The fair value of interest rate contracts was based on the amount
Webster would receive or pay to terminate the agreements. Federal Home Loan Bank
stock has no active market and is required to be held by member banks. The
estimated fair value of Federal Home Loan Bank stock equals the carrying amount.
In estimating the fair value of loans, portfolios with similar financial
characteristics were classified by type. Loans were segmented into four generic
types: residential, consumer, home equity and commercial. Residential loans were
further segmented into fifteen and thirty year fixed-rate contractual
maturities, with the remaining classified as variable-rate loans. The fair value
of each category is calculated by discounting scheduled cash flows through
estimated maturity using market discount rates. Adjustments were made to reflect
credit and rate risks inherent in the portfolio.
Due to the loss-sharing arrangement with the FDIC, a yield on Segregated Assets
that approximates a market yield and the allowance for Webster's share of losses
on Segregated Assets, Webster believes that the estimated fair value of
Segregated Assets approximates their carrying amount of $75.7 million and $104.8
million at December 31, 1996 and December 31, 1995, respectively.
The estimated fair value of deposits with no stated maturity, such as
noninterest bearing demand deposits, regular savings, NOW accounts and money
market accounts, is equal to the amount payable on demand. The estimated fair
values of certificates of deposit, Federal Home Loan Bank Advances, and other
borrowings were calculated using the discounted cash flow method. The discount
rate is estimated using rates currently offered for deposits and Federal Home
Loan Bank Advances of similar remaining maturities. The discount rate used for
the Senior Notes was calculated using a spread over Treasury Notes consistent
with the spread used to price the Senior Notes at their inception.
The calculation of fair value estimates of financial instruments is dependent
upon certain subjective assumptions and involves significant uncertainties,
resulting in variability in estimates with changes in assumptions. Potential
taxes and other expenses that would be incurred in an actual sale or settlement
are not reflected in the amounts disclosed. Fair value estimates are not
intended to reflect the liquidation value of the financial instruments.
NOTE 13: FORECLOSED PROPERTY EXPENSES AND PROVISIONS, NET AND ALLOWANCE FOR
LOSSES ON FORECLOSED PROPERTIES
- --------------------------------------------------------------------------------
Foreclosed property expenses and provisions, net are summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(IN THOUSANDS) 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
(Gain) Loss on Sale of Foreclosed Properties
Acquired in Settlement of Loans, Net $ (1,061) $ (918) $ 465
Provision for Losses on Foreclosed
Properties 1,096 2,000 3,082
Rental Income (230) (646) (1,017)
Foreclosed Property Expenses 2,268 3,589 4,419
- -----------------------------------------------------------------------------------
Total $ 2,073 $ 4,025 $ 6,949
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
Webster has an allowance for losses on foreclosed properties. A detail of the
changes in the allowance follows:
Years Ended December 31,
- -------------------------------------------------------------------------------
(IN THOUSANDS) 1996 1995 1994
- -------------------------------------------------------------------------------
Balance at Beginning of Period $ 991 $ 2,504 $ 1,036
Provisions 1,096 2,000 3,082
Losses Charged to Allowance (1,513) (3,795) (8,966)
Recoveries Credited to Allowance 144 282 852
Additions to Allowance for Acquired
Foreclosed Properties - - 6,500
- -------------------------------------------------------------------------------
Balance at End of Period $ 718 $ 991 $ 2,504
- -------------------------------------------------------------------------------
In connection with the Bristol acquisition in 1994, a purchase accounting
adjustment of $5.9 million for the allowance for losses on foreclosed properties
was recorded at the time of the acquisition and added to Bristol's existing
allowance of $600,000 to reflect an accelerated disposition strategy.
NOTE 14: INCOME TAXES
- --------------------------------------------------------------------------------
Charges for income taxes in the Consolidated Statements of Income are comprised
of the following:
Years Ended December 31,
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Current:
Federal $ 12,011 $ 10,370 $ 7,929
State 1,874 3,170 2,751
- --------------------------------------------------------------------------------
13,885 13,540 10,680
Deferred:
Federal (1,292) (4,171) (4,452)
State 1,869 (1,123) (1,378)
- --------------------------------------------------------------------------------
577 (5,294) (5,830)
Total:
Federal 10,719 6,199 3,477
State 3,743 2,047 1,373
- --------------------------------------------------------------------------------
$ 14,462 $ 8,246 $ 4,850
- --------------------------------------------------------------------------------
Income tax expense of $14.5 million, $8.2 million and $4.8 million for the years
ended December 31, 1996, 1995 and 1994, respectively, differed from the amounts
computed by applying the Federal income tax rate of 35% in 1996, 1995 and 1994
to pre-tax income as a result of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
(IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "Expected" Tax Expense $ 14,024 $ 9,298 $ 8,238
Reduction in Income Taxes Resulting From:
Dividends Received Deduction (125) (123) (135)
State Income Taxes, Net of Federal Income
Tax Benefit, Including Change in
Valuation Allowance and Rate 2,433 1,330 895
Adjustment to Deferred Tax Assets and Liabilities:
Change in Federal Tax Rate - - (265)
Change in Valuation Allowance (Federal) (2,000) (2,294) (3,781)
Other, Net 130 35 (102)
- ---------------------------------------------------------------------------------------------------------------------------
Income Taxes $ 14,462 $ 8,246 $ 4,850
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1996 and
1995 are presented below.
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Tax Assets: December 31, 1996 December 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loan Loss Allowances & Other Allowances, Net $ 18,286 $ 23,285
Accrued Compensation and Pensions 2,331 1,995
Tax Loss Carry Forwards - 2,025
Intangibles 3,050 2,786
Other 1,889 2,506
- ---------------------------------------------------------------------------------------------------------------------------
Total Gross Deferred Tax Assets 25,556 32,597
Less Valuation Allowance (6,207) (8,207)
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Tax Asset after Valuation Allowance 19,349 24,390
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Tax Liabilities:
Loan Discount $ 2,337 $ 6,132
Plant and Equipment, Principally due to
Differences in Depreciation - 281
Unrealized Gain on Securities 2,178 1,649
Other 1,120 1,508
- ---------------------------------------------------------------------------------------------------------------------------
Total Gross Deferred Tax Liabilities 5,635 9,570
- ---------------------------------------------------------------------------------------------------------------------------
Net Deferred Tax Asset $ 13,714 $ 14,820
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1996 Webster had a net deferred tax asset of $13.7 million. In
order to fully realize the net deferred tax asset, Webster must either incur tax
losses to carryback or generate future taxable income. Based on Webster's
historical and current taxable earnings, management believes it is more likely
than not that Webster will realize the net deferred tax asset. There can be no
assurance, however, that Webster will generate taxable earnings or a specific
level of continuing taxable earnings in the future.
Webster's deferred tax valuation allowance is principally for a portion of
temporary differences that may be subject to review by taxing authorities. The
net decreases in the valuation allowance in 1996, 1995 and 1994 were due to
favorable reassessments of known risks and resulted in reductions of income tax
expense in those years.
NOTE 15: SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Shareholders' equity decreased $3.7 million to $206.3 million at December 31,
1996 from $210.0 million at December 31, 1995. The reduction in shareholders'
equity from 1995 to 1996 was due primarily to the repurchase of 804,900 shares
of common stock in 1996 as part of two share repurchase programs. See
Consolidated Statements of Shareholders' Equity.
In December 1995, Webster completed the sale of 1,249,600 shares of common stock
in an underwritten public offering raising $32.1 million of additional capital,
net of expenses, which was invested in the Bank to facilitate its completion of
the Shawmut Transaction and to have the Bank remain well capitalized for
regulatory purposes.
On November 1, 1995, Webster acquired Shelton (See Note 2). In connection with
the acquisition, Webster issued 1,292,549 shares of its common stock for all the
outstanding shares of Shelton common stock. Under the terms of the agreement,
Shelton shareholders received .92 of a share of Webster common stock in a tax
free exchange for each of their shares of Shelton common stock.
On December 16, 1994, Webster acquired Shoreline (See Note 2). In connection
with the acquisition, Webster issued 266,500 shares of its common stock for all
533,000 outstanding shares of Shoreline common stock, based on an exchange ratio
of 1 share of Webster's common stock for 2 shares of Shoreline's common stock.
On March 3, 1994, Webster completed the sale of 1,150,000 shares of its common
stock in subscription and underwritten public offerings that were conducted in
connection with the Bristol acquisition. Of the 1,150,000 shares sold in the
subscription and public offerings, 100,000 shares were purchased by Webster
Bank's ESOP. The ESOP's outstanding loan balance was increased by approximately
$2.1 million in connection with the purchase.
<PAGE>
On December 30, 1992, through a registered offering, Webster issued 250,000
shares of Series B 7 1/2% Cumulative Convertible Preferred Stock (the "Series B
Stock") for $25 million. Webster used 50% of the net proceeds of $23.5 million
from this equity offering to redeem $11.75 million of its Series A Preferred
Stock issued to the FDIC in connection with the purchase of certain assets and
liabilities of First Constitution Bank in October 1992. On June 29, 1993,
Webster completed a registered offering of $40 million aggregate principal
amount of 8 3/4% Senior Notes due 2000. Webster used $18.25 million of the
proceeds from this offering to redeem the remaining shares of its Series A
Preferred Stock. During 1996 and 1995 holders of the Series B Stock converted
73,785 shares and 260 shares into 423,525 shares and 1,492 shares, respectively
of Webster's common stock. The remaining 98,084 shares of Series B Stock
converted into 563,002 shares of common stock in January 1997.
Retained earnings at December 31, 1996 included $16.4 million of earnings of the
Bank appropriated to bad debt reserves (pre-1988), which were deducted for
federal income tax purposes. Tax law changes were enacted in August 1996 to
eliminate the "thrift bad debt" method of calculating bad debt deductions for
tax years after 1995 and to impose a requirement to recapture into taxable
income (over a six-year period) all bad debt reserves accumulated after 1987.
Since Webster previously recorded a deferred tax liability with respect to these
post-1987 reserves, its total income tax expense for financial reporting
purposes will not be affected by the recapture requirement. The tax law changes
also provide that taxes associated with the recapture of pre-1988 bad debt
reserves would become payable under more limited circumstances than under prior
law. Under the tax laws, as amended, events that would result in recapture of
the pre-1988 bad debt reserves include stock and cash distributions to the
holding company from the Bank in excess of specified amounts. Webster does not
expect such reserves to be recaptured into taxable income.
Applicable OTS regulations require federal savings banks such as the Bank, to
satisfy certain minimum capital requirements, including a leverage capital
requirement (expressed as a ratio of core or Tier 1 capital to adjusted total
assets) and risk-based capital requirements (expressed as a ratio of core or
Tier 1 capital and total capital to total risk-weighted assets). As an OTS
regulated institution, Webster Bank is also subject to a minimum tangible
capital requirement (expressed as a ratio of tangible capital to adjusted total
assets). At December 31, 1996 the Bank exceeded all OTS regulatory capital
requirements and met the FDIC requirements for a "well capitalized" institution.
In order to be considered "well capitalized" a depository institution must have
a ratio of Tier 1 capital to adjusted total assets of 5%, a ratio of Tier 1
capital to risk-weighted assets of 6% and a ratio of total capital to
risk-weighted assets of 10%. Failure to meet minimum capital requirements can
initiate certain mandatory and possible additional discretionary actions by
regulators that if undertaken, could have a direct material effect on Webster's
Consolidated Financial Statements. Webster's capital amounts and classifications
are also subject to qualitative judgements by the OTS about components, risk
weightings, and other factors. At December 31, 1996, the Bank was in full
compliance with all applicable capital requirements as detailed below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
OTS
Minimum Capital Well
Actual Requirements Capitalized
(DOLLARS IN THOUSANDS) Amount Ratio Amount Ratio Amount Ratio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk-Weighted Assets) $226,634 11.43% $158,632 8.00% $198,290 10.00%
Tier 1 Capital (to Risk-Weighted Assets) $201,720 10.17% $ 79,316 4.00% $118,974 6.00%
Tier 1 Capital (to Adjusted Total Assets) $201,720 5.22% $115,850 3.00% $193,084 5.00%
Tangible Capital (to Adjusted Total Assets) $197,738 5.13% $ 57,866 1.50% No Requirement
As of December 31, 1995
Total Capital (to Risk-Weighted Assets) $209,174 13.30% $125,863 8.00% $157,329 10.00%
Tier 1 Capital (to Risk-Weighted Assets) $189,444 12.04% $ 62,932 4.00% $ 94,397 6.00%
Tier 1 Capital (to Adjusted Total Assets) $189,444 5.99% $ 94,810 3.00% $158,016 5.00%
Tangible Capital (to Adjusted Total Assets) $184,715 5.85% $ 47,334 1.50% No Requirement
</TABLE>
<PAGE>
At the time of the respective conversions of the Bank and certain predecessors
from mutual to stock form, each institution established a liquidation account
for the benefit of eligible depositors who continue to maintain their deposit
accounts after conversion. In the event of a complete liquidation of the Bank,
each eligible depositor will be entitled to receive a liquidation distribution
from the liquidation account. The Banks may not declare or pay a cash dividend
on or repurchase any of its capital stock if the effect thereof would cause its
regulatory capital to be reduced below applicable regulatory capital
requirements or the amount required for its liquidation accounts.
The OTS capital distribution regulations establish three tiers of institutions
for purposes of determining the level of dividends that can be paid. Since the
Bank's capital levels exceeded all fully phased-in OTS capital requirements at
December 31, 1996, it is considered a Tier 1 Institution. Tier 1 Institutions
generally are able to pay dividends up to an amount equal to one-half of their
excess capital at the beginning of the year plus all income for the calendar
year. In accordance with the OTS capital distribution regulations, the Bank must
provide a 30 day notice prior to the payment of any dividends to Webster. As of
December 31, 1996, the Bank had $74.8 million available for the payment of
dividends under the OTS capital distribution regulations. The Bank has paid
dividends to Webster amounting to $20.8 million and $13.1 million for 1996 and
1995, respectively. Under the prompt corrective action regulations adopted by
the OTS and the FDIC, the Bank is precluded from paying any dividends if such
action would cause it to fail to comply with applicable minimum capital
requirements.
The Bank has an ESOP that invests in Webster common stock as discussed in Notes
10 and 16. Since Webster has secured and guaranteed the ESOP debt, the
outstanding ESOP loan balance is shown as a reduction of shareholders' equity.
Shareholders' equity is increased by the amount of principal repayments on the
ESOP loan. Principal repayments totaled $583,000, $545,000 and $384,000 during
the years ended December 31, 1996, 1995 and 1994, respectively.
On February 6, 1996, Webster's Board of Directors adopted a stockholders' rights
plan in which preferred stock purchase rights have been granted as a dividend at
the rate of one right for each share of common stock held of record as of the
close of business on February 16, 1996. The plan is designed to protect all
Webster shareholders against hostile acquirers who may seek to take advantage of
Webster and its shareholders through coercive or unfair tactics aimed at gaining
control of Webster without paying all shareholders a fair price. Each right
initially would entitle the holder thereof to purchase under certain
circumstances one 1/1,000th of a share of a new Series C Preferred Stock at an
exercise price of $100 per share. The rights will expire in February 2006. The
rights will be exercisable only if a person or group in the future becomes the
beneficial owner of 15% or more of the common stock, or announces a tender or
exchange offer which would result in its ownership of 15% or more of the common
stock, or if the Board declares any person or group to be an "adverse person"
upon a determination that such person or group has acquired beneficial ownership
of 10% or more and that such ownership is not in the best interests of the
company.
NOTE 16: EMPLOYEE BENEFIT AND STOCK OPTION PLANS
- --------------------------------------------------------------------------------
The Bank maintains a noncontributory pension plan for employees who meet certain
minimum service and age requirements. Pensions are based upon earnings of
covered employees during the period of credited service. The Bank also has an
employee investment plan under section 401(k) of the Internal Revenue Code.
Under the savings plan the Bank will match $.50 for every $1.00 of the
employee's contribution up to 6% of the employee's annual compensation.
Operations were charged with $728,000, $438,000 and $388,000 for the years ended
December 31, 1996, 1995 and 1994, respectively, for contributions to the
investment plan.
The Bank's ESOP, which is noncontributory by employees, is designed to invest,
on behalf of employees of the Bank who meet certain minimum age and service
requirements, in Webster common stock. The Bank may make contributions to the
ESOP in such amounts as the board of directors may determine on an annual basis.
To the extent that the Bank's contributions are used to repay the ESOP loan,
Webster common stock is allocated to the accounts of participants in the ESOP.
Stock and other amounts allocated to a participant's account become fully vested
after the participant has completed five years of service under the ESOP.
Operations were charged with $847,000, $848,000 and $384,000 for the years ended
December 31, 1996, 1995 and 1994, respectively, for contributions to the ESOP.
The
<PAGE>
1996 ESOP charge includes $583,525 for principal payments and $77,283 of
interest payments (net of $133,052 of dividends on unallocated ESOP shares) and
$315,266 of compensation expense recorded as required under the Accounting
Standards Executive Committee's Statement of Position 93-6, "Employers
Accounting for Stock Ownership Plans."
The following table sets forth the funded status of the Bank's pension plan and
amounts recognized in Webster's Consolidated Statements of Condition as of
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
December 31,
(IN THOUSANDS) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 8,904 $ 7,518
Nonvested benefit obligation 1,136 642
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 10,040 8,160
Effect of projected future compensation levels 1,721 1,740
- ---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation for service
rendered to date 11,761 9,900
Plan assets at fair value, primarily listed
stocks and U.S. bonds 11,184 10,782
- ---------------------------------------------------------------------------------------------------------------------------
Excess (Deficiency) of plan assets over
benefit obligation (577) 882
Items not yet recognized in earnings:
Unrecognized prior service cost (2,221) (1,913)
Unrecognized net gain (loss) 582 (312)
Unrecognized net asset at January 1, 1987
being recognized over 20.9 years (130) (139)
- ---------------------------------------------------------------------------------------------------------------------------
Unfunded Accrued Pension Benefit (Liability) $ (2,346) $ (1,482)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average discount rate, rate of increase of future compensation
levels and the expected long-term rate of return on assets used in determining
the actuarial present value of the projected benefit obligation were 7.25%, 5.0%
and 9.0% for 1996 and 1995.
Net pension expense for 1996, 1995 and 1994 included the following components:
<TABLE>
<CAPTION>
December 31,
(IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost benefits earned during the period $ 1,177 $ 700 $ 922
Interest cost on projected benefit obligations 799 665 462
Return on plan assets (1,376) (2,170) 517
Amortization and deferral 264 1,281 (1,131)
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 864 $ 476 $ 770
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The components of postretirement benefits cost were as follows:
Year Ended December 31,
(IN THOUSANDS) 1996 1995
- ------------------------------------------------------------------------
Service cost $ - $ -
Interest cost 39 39
- ------------------------------------------------------------------------
Net Periodic Postretirement Benefit Cost $ 39 $ 39
- ------------------------------------------------------------------------
<PAGE>
The following table sets forth the status of Webster's accumulated
postretirement benefit obligation:
December 31,
(IN THOUSANDS) 1996 1995
- -------------------------------------------------------------------------------
Accumulated benefit obligation $(555) $ (550)
Unrecognized net (loss) gain 19 (4)
- -------------------------------------------------------------------------------
Unfunded Accrued Postretirement Benefit (Liability) $(536) $ (554)
- -------------------------------------------------------------------------------
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25%. The assumed weighted average health
care cost trend rate was 4.25% for 1996. An increase of 1% in the assumed health
care cost trend rate would result in an increase in the accumulated benefit
obligation by $33,000.
Webster maintains stock option plans (the "Option Plans") for the benefit of its
directors and officers. In October 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standard No. 123 ("SFAS No. 123")
"Accounting for Stock-Based Compensation." This statement establishes financial
accounting and reporting standards for stock-based employee compensation plans.
Under the provisions of this statement, Webster has elected to continue to
measure compensation for its option plans using the accounting prescribed by APB
Opinion No. 25 "Accounting for Stock Issued to Employees." Disclosure
information requirements are effective for financial statements for fiscal years
beginning after December 15, 1995, or for an earlier fiscal year for which this
statement is initially adopted for recognizing compensation cost. Pro forma
disclosures required for entities that elect to continue to measure compensation
cost using APB Opinion No. 25 must include the effects of all awards granted in
fiscal years that begin after December 31, 1994.
At December 31, 1996, Webster had two fixed stock option based compensation
plans, which are described below. Webster applies the provisions of APB Opinion
No. 25 and related interpretations in accounting for these plans. Accordingly,
no compensation cost has been recognized for its fixed stock option plans in the
Consolidated Statements of Income. Had compensation cost for Webster's stock
option based compensation plans been determined consistent with SFAS No. 123;
Webster's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
- --------------------------------------------------------------------------------
Years Ended December 31,
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA) 1996 1995
- --------------------------------------------------------------------------------
Net Income:
As Reported $ 25,608 $ 18,320
Pro Forma $ 25,359 $ 18,083
Primary Earnings Per Share:
As Reported $ 2.97 $ 2.44
Pro Forma $ 2.94 $ 2.41
Fully Diluted Earnings Per Share:
As Reported $ 2.79 $ 2.30
Pro Forma $ 2.77 $ 2.27
During the initial phase-in period, the effects of applying this Statement for
providing pro forma disclosures are not likely to be representative of the
effects on reported net income and earnings per share for future years. This is
due to the fact that awards may vest over several years and stock options may be
granted each year.
Webster's two fixed stock option plans were established in 1992 and 1986. Under
these plans, the number of shares that may be granted are 780,500 and 385,085
respectively, after having been adjusted for a 10% stock dividend that occurred
in June 1993 that affected the number of shares under both plans and amendments
to the 1992 plan. The 1992 plan was amended in April 1994 and 1996 to increase
shares under the Plan by an additional 235,000 and 375,000 shares, respectively.
Under the terms of both plans, the exercise price of each option granted equals
the market price of the Company's stock on the date of grant and each option has
a maximum contractual life of ten years. Tables that
<PAGE>
follow provide disclosures and information required under SFAS No. 123 and
summarizes stock compensation activity for the years of 1996, 1995 and 1994 for
which Consolidated Statements of Income are presented.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes Option-Pricing Model with the following weighted average
assumptions used for grants issued during 1996 and 1995: expected option term 10
years, expected dividend yield 1.91%, expected volatility 21.0%, expected
forfeiture rate 1.14%, and weighted average risk-free interest rate of 6.42%.
A summary of the status of Webster's two fixed stock option plans at December
31, 1996, 1995, and 1994 and changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding at Beginning of Year 649,395 $17.15 559,895 $ 14.46 390,567 $ 11.93
Granted 113,681 36.10 148,250 25.32 193,153 19.54
Exercised (176,005) 11.76 (51,850) 11.18 (20,725) 12.94
Forfeited/Canceled (8,250) 22.68 (6,900) 18.75 (3,100) 18.99
- ---------------------------------------------------------------------------------------------------------------------------
Options Outstanding at End of Year 578,821 $22.48 649,395 $ 17.15 559,895 $ 14.48
- ---------------------------------------------------------------------------------------------------------------------------
Options Exercisable at Year End 265,721 426,845 433,545
Weighted Average Per Share Fair Value
of Options Granted During the Year $12.62 $ 8.65 N/A
</TABLE>
The following table summarizes information about Webster's fixed stock option
plans for options granted that are outstanding at December 31, 1996.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Options Outstanding at December 31, 1996 Options Exercisable at December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------
Weighted Average Weighted Weighted
Remaining Average Average
Number Contractual Life Exercise Number Exercise
Range of Exercise Prices Outstanding (In Years) Price Exercisable Price
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$4.55-$9.77 59,380 3.3 $ 7.90 59,380 $ 7.90
$10.91-$19.88 230,558 7.1 $17.79 154,408 $ 17.56
$20.50-$24.75 89,350 7.3 $21.16 37,550 $ 21.05
$25.25-$28.13 103,033 8.9 $27.82 14,383 $ 27.16
$34.25-$38.19 96,500 9.9 $37.90 - -
- ------------------------------------------------------------------------------------------------------------------------
Totals 578,821 7.5 $22.48 265,721 $ 16.41
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Webster also has two restricted stock plans consisting of a Director Fee
Retainer Restricted Stock Plan, which was established in 1996 and a Restricted
Stock Plan, which was established in 1992. Under the Director Fee Restricted
Stock Plan, a total of 3,120 shares were issued to ten directors with each
receiving 312 shares. These restricted shares were reissued from treasury stock
and the cost was measured as of the grant date using the fair market value of
Webster's stock as of the grant date. Under the Restricted Stock Plan, there
were no shares granted in 1996 or 1995 and 8,944 shares granted in 1994. The
cost of all restricted shares are amortized to compensation expense over the
contractual service period and such expense is reflected in Webster's
Consolidated Statements of Income.
<PAGE>
NOTE 17: NON-RECURRING EXPENSES
- --------------------------------------------------------------------------------
A summary of non-recurring expenses follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SAIF Recapitalization Expense $ 4,730 $ - $ -
Non-recurring Acquisition Expenses:
Shawmut Transaction 500 1,000 -
Shelton - 3,271 -
Shoreline - - $ 700
Name Change and Subsidiary Merger Expense - 2,100 -
Core Deposit Intangible Writedown - - 5,000
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 5,230 $ 6,371 $ 5,700
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 18: SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
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 rate
of 9.36%, payable semiannually, beginning July 29, 1997. Webster will use the
capital for general corporate purposes.
NOTE 19: LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
Webster is party to various legal proceedings normally incident to the kind of
business conducted. Management believes that no material liability will result
from such proceedings.
<PAGE>
NOTE 20: PARENT COMPANY CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The Statements of Condition for 1996 and 1995 and the Statements of Income and
Cash Flows for the three-year period ended December 31, 1996 (parent only) are
presented below.
Statements of Condition
<TABLE>
<CAPTION>
December 31,
(IN THOUSANDS) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and Due from Depository Institutions $ 168 $ 440
Securities Available for Sale 24,148 61,400
Investment in Subsidiaries 241,776 191,661
Due from Subsidiaries 117 -
Other Assets 1,470 2,845
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $ 267,679 $ 256,346
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Senior Notes due 2000 $ 40,000 $ 40,000
Line of Credit 18,400 -
ESOP Borrowings 2,546 3,130
Due to Subsidiaries - 2,149
Other Liabilities 437 1,094
Shareholders' Equity 206,296 209,973
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 267,679 $ 256,346
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
(IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividends from Subsidiary $ 20,826 $ 13,072 $ 4,596
Interest on Securities 964 1,098 964
Gain (Loss) on Sale of Securities 1,520 503 (413)
Other Noninterest Income 2 2 -
Interest Expense on Borrowings 3,780 3,660 3,660
Other Noninterest Expenses 2,333 3,453 1,475
- ---------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes and
Equity in Undistributed Earnings of Subsidiaries 17,199 7,562 12
Income Tax Benefit 1,523 2,429 1,955
- ---------------------------------------------------------------------------------------------------------------------------
Income Before Equity in Undistributed
Earnings of Subsidiaries 18,722 9,991 1,967
Equity in Undistributed Earnings of Subsidiaries 6,886 8,329 16,718
- ---------------------------------------------------------------------------------------------------------------------------
Net Income 25,608 18,320 18,685
Preferred Stock Dividends 1,149 1,296 1,716
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Available to Common Shareholders $ 24,459 $ 17,024 $ 16,969
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
(IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net Income $ 25,608 $ 18,320 $ 18,685
Decrease (Increase) in Interest Receivable 42 (16) (15)
Decrease in Other Assets 117 2,048 6,666
(Gains) Losses on Sale of Securities (1,520) (503) 413
Equity in Undistributed Earnings of Subsidiaries (6,886) (8,329) (16,718)
Other, Net 868 1,932 511
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 18,229 13,452 9,542
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Purchases of Securities Available for Sale (35,076) (45,168) (2,369)
Sales of Securities Available for Sale 76,465 4,445 8,400
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities 41,389 (40,723) 6,031
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Repayment of Borrowings (7,000) - -
Proceeds from Borrowings 25,400 - -
Net Proceeds from Sale of Common Stock - 32,112 21,923
Cash Dividends to Shareholders (6,679) (5,691) (4,724)
Common Stock Repurchases (27,611) - -
Investment in Subsidiary (44,000) - (32,000)
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided by Financing Activities (59,890) 26,421 (14,801)
- ---------------------------------------------------------------------------------------------------------------------------
(Decrease) Increase in Cash and Cash Equivalents (272) (850) 772
Cash and Cash Equivalents at Beginning of Year 440 1,290 518
- ---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 168 $ 440 $ 1,290
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE 21: SELECTED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
Selected quarterly data for 1996 and 1995 follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
(IN THOUSANDS, EXCEPT PER SHARE DATA) Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996:
Interest Income $ 61,932 $ 66,782 $ 68,177 $ 68,643
Interest Expense 35,926 37,064 38,059 38,696
- ---------------------------------------------------------------------------------------------------------------------------
Net Interest Income 26,006 29,718 30,118 29,947
Provision for Loan Losses 1,000 1,000 1,000 1,000
Gain on Sale of Loans and Securities, Net 171 340 303 175
Other Noninterest Income 4,669 6,259 6,367 7,246
Noninterest Expenses 21,174 23,623 28,451 24,001
- ---------------------------------------------------------------------------------------------------------------------------
Income Before Taxes 8,672 11,694 7,337 12,367
Income Taxes 3,141 4,247 2,488 4,586
- ---------------------------------------------------------------------------------------------------------------------------
Net Income 5,531 7,447 4,849 7,781
Preferred Stock Dividends 323 321 283 222
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Available to Common Shareholders $ 5,208 $ 7,126 $ 4,566 $ 7,559
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Per Share:
Primary $ 0.63 $ 0.86 $ 0.55 $ 0.92
- ---------------------------------------------------------------------------------------------------------------------------
Fully Diluted $ 0.60 $ 0.81 $ 0.52 $ 0.87
- ---------------------------------------------------------------------------------------------------------------------------
1995:
Interest Income $ 50,954 $ 54,288 $ 56,548 $ 57,156
Interest Expense 28,907 32,380 34,907 35,339
- ---------------------------------------------------------------------------------------------------------------------------
Net Interest Income 22,047 21,908 21,641 21,817
Provision for Loan Losses 385 455 555 1,705
Gain on Sale of Loans and Securities, Net 337 678 1,256 2,018
Other Noninterest Income 4,453 4,316 4,317 4,465
Noninterest Expenses 18,723 18,998 18,369 23,497
- ---------------------------------------------------------------------------------------------------------------------------
Income Before Taxes 7,729 7,449 8,290 3,098
Income Taxes 2,495 2,226 2,718 807
- ---------------------------------------------------------------------------------------------------------------------------
Net Income 5,234 5,223 5,572 2,291
Preferred Stock Dividends 324 324 324 324
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Available to Common Shareholders $ 4,910 $ 4,899 $ 5,248 $ 1,967
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Per Share:
Primary $ 0.71 $ 0.71 $ 0.76 $ 0.27
- ---------------------------------------------------------------------------------------------------------------------------
Fully Diluted $ 0.67 $ 0.67 $ 0.70 $ 0.27
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
All periods presented have been retroactively restated to reflect the inclusion
of the results of Shelton, which was acquired on November 1, 1995 and accounted
for using the pooling of interests method.
<PAGE>
MANAGEMENT'S REPORT
- --------------------------------------------------------------------------------
To Our Shareholders:
The management of Webster is responsible for the integrity and objectivity of
the financial and operating information contained in this annual report,
including the consolidated financial statements covered by the Report of
Independent Auditors. These statements were prepared in conformity with
generally accepted accounting principles and include amounts that are based on
the best estimates and judgements of management.
Webster has a system of internal accounting controls which provides management
with reasonable assurance that transactions are recorded and executed in
accordance with its authorizations, that assets are properly safeguarded and
accounted for, and that financial records are maintained so as to permit
preparation of financial statements in accordance with generally accepted
accounting principles. This system includes formal procedures, an organizational
structure that segregates duties, and a comprehensive program of periodic audits
by the internal auditors. Webster has also instituted policies which require
employees to maintain the highest level of ethical standards.
In addition, the Audit Committee of the Board of Directors, consisting solely of
outside directors, meets periodically with management, the internal auditors and
the independent auditors to review internal accounting controls, audit results
and accounting principles and practices, and annually recommends to the Board of
Directors the selection of independent public accountants.
James C. Smith John V. Brennan
Chairman and Chief Executive Officer Executive Vice President,
Chief Financial Officer and Treasurer
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders of
Webster Financial Corporation
Waterbury, Connecticut
We have audited the accompanying consolidated statements of condition of Webster
Financial Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Webster Financial
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
Hartford, Connecticut
January 21, 1997, except as to Notes 2 and 18, as to which the date is February
1, 1997
<PAGE>
Annual Meeting
The annual meeting of shareholders of Webster Financial Corporation will be held
on April 17, 1997 at 4:00 P.M. at the Courtyard by Marriott, 63 Grand Street,
Waterbury, Connecticut. As of February 28, 1997, there were 11,949,991 shares of
common stock outstanding and approximately 3,394 shareholders of record.
Corporate Headquarters
Webster Financial Corporation and Webster Bank
Webster Plaza
Waterbury, CT 06702
(203) 753-2921
Transfer Agent and Registrar
American Stock Transfer & Trust Co.
Shareholder Services
40 Wall Street
New York, NY 10005
1-800-937-5449
Dividend Reinvestment and Stock Purchase Plan
Stockholders wishing to receive a prospectus for the Dividend Reinvestment and
Stock Purchase Plan are invited to write to American Stock Transfer & Trust Co.
at the address listed above, or call 1-800-278-4353.
Stock Listing Information
The common stock of Webster is traded over-the-counter on the NASDAQ National
Market System under the symbol "WBST."
General Inquiries: Contact Lee A. Gagnon (203) 578-2217
Financial Inquiries: Contact John V. Brennan (203) 578-2335
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
Form 10K and Other Reports
Our annual report to the Securities and Exchange Commission (Form 10K),
additional copies of this report, and quarterly reports may be obtained free of
charge by contacting Lee A. Gagnon, Executive Vice President and Secretary,
Webster Plaza, Waterbury, CT 06702.
<PAGE>
Common Stock Dividends and Market Prices
The following table shows dividends declared and the market price per share by
quarter for 1996 and 1995.
- --------------------------------------------------------------------------------
Common Stock (Per Share)
- --------------------------------------------------------------------------------
Market Price
- --------------------------------------------------------------------------------
Cash
Dividends End of
1996 Declared Low High Period
- --------------------------------------------------------------------------------
Fourth $ .18 $ 33 1/2 $38 1/4 $ 36 3/4
Third .18 28 35 3/4 35 1/4
Second .16 26 3/4 29 3/8 28
First .16 27 1/2 30 1/4 28
1995
- --------------------------------------------------------------------------------
Fourth $ .16 $ 24 1/2 $ 29 1/2 $ 29 1/2
Third .16 23 31 26 1/4
Second .16 21 1/4 26 23 7/8
First .16 18 22 1/4 21 1/4
- --------------------------------------------------------------------------------
Market Makers:
Advest, Inc.
First Albany Corporation
Herzog, Heine, Geduld, Inc.
Keefe, Bruyette & Woods, Inc.
Knight Securities L.P.
Legg Mason Wood Walker Inc.
M.A. Schapiro & Co., Inc.
MacAllister Pitfield MacKay
Mayer & Schweitzer Inc.
Merrill Lynch, Pierce, Fenner & Smith
OTA Limited Partnership
Paine Webber Inc.
Ryan Beck & Co., Inc.
Sandler O'Neill & Partners
Sherwood Securities Corp.
Smith Barney Inc.
Troster Singer Corp.
Tucker Anthony Incorporated
Webster Bank Information
For more information on Webster Bank products and services, call 1-800-325-2424,
or write:
Webster Bank
Telebanking Center
P.O. Box 191
CH420
Waterbury, Connecticut 06720-0191
<PAGE>
DIRECTORS
JAMES C. SMITH, Chairman and Chief Executive Officer
JOEL S. BECKER, Chairman and Chief Executive Officer, Torrington Supply Company
O. JOSEPH BIZZOZERO, Jr., M.D., BCB Medical Group
JOHN J. CRAWFORD, Chairman and Chief Executive Officer, Aristotle Corporation
President and Chief Executive Officer, South Central Connecticut Regional
Water Authority
ROBERT A. FINKENZELLER, President, Eyelet Crafters, Inc.
WALTER R. GRIFFIN, Griffin, Griffin & O'Brien, P.C.
J. GREGORY HICKEY, CPA, Retired Managing Partner of Hartford office of Ernst &
Young
C. MICHAEL JACOBI, President and Chief Executive Officer, Timex Corporation
J. ALLEN KOSOWSKY*, CPA, J. Allen Kosowsky, CPA, P.C.
HAROLD W. SMITH, Chairman Emeritus
Sr. MARGUERITE WAITE, President and Chief Executive Officer, St. Mary's Hospital
SENIOR MANAGEMENT GROUP
JAMES C. SMITH, Chairman and Chief Executive Officer
LEE A. GAGNON, CPA, Executive Vice President, Chief Operating Officer and
Secretary
JOHN V. BRENNAN, CPA, Executive Vice President, Chief Financial Officer and
Treasurer
WILLIAM T. BROMAGE, Executive Vice President, Business Banking
GEORGE M. BROPHY*, Executive Vice President, Information Technologies
JEFFREY N. BROWN*, Executive Vice President, Marketing and Communications
PETER K. MULLIGAN, Executive Vice President, Consumer and Small Business Banking
RENEE P. SEEFRIED*, Senior Vice President, Human Resources
ROSS M. STRICKLAND, Executive Vice President, Mortgage Banking
*Webster Bank only
Exhibit 21
Subsidiaries
The Registrant operates one subsidiary, Webster Bank. Webster Bank has four
wholly owned subsidiaries, Webster Investment Services, Inc., FCB Properties,
Inc., Bristol Financial Services, Inc. ("BFSI"), and Omni Financial Services,
Inc. In addition, BFSI has one wholly owned subsidiary, Pequabuck Capital
Corporation.
-10-
KPMG PEAT MARWICK LLP
CityPlace II
Hartford, CT 06103-4103
Consent of Independent Auditors
-------------------------------
The Board of Directors
Webster Financial Corporation:
We consent to the incorporation by reference in the registration statements
(Nos. 33-13244 and 33-38286) on Forms S-8 of Webster Financial Corporation of
our report dated January 21, 1997, except as to Notes 2 and 18, as to which the
date is February 1, 1997, relating to the consolidated statements of condition
of Webster Financial Corporation and subsidiaries as of December 31, 1996 and
1995 and the related consolidated statements of income, shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1996, which report appears in the December 31, 1996 annual report on Form 10-K
of Webster Financial Corporation.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 85,163
<SECURITIES> 1,070,605
<RECEIVABLES> 2,558,997
<ALLOWANCES> 33,454
<INVENTORY> 0
<CURRENT-ASSETS> 186,504
<PP&E> 49,785
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,917,600
<CURRENT-LIABILITIES> 3,095,876
<BONDS> 552,361
0
0
<COMMON> 206,296
<OTHER-SE> 63,067
<TOTAL-LIABILITY-AND-EQUITY> 3,917,600
<SALES> 291,064
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 97,249
<LOSS-PROVISION> 4,000
<INTEREST-EXPENSE> 149,745
<INCOME-PRETAX> 40,070
<INCOME-TAX> 14,462
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,608
<EPS-PRIMARY> 2.97
<EPS-DILUTED> 2.79
</TABLE>
