As filed with the Securities and Exchange Commission on September 29, 1999
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 6022 06-1187536
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
John V. Brennan
Executive Vice President,
Chief Financial Officer and Treasurer
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
(203) 578-2335
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
Stuart G. Stein, Esq. Robert M. Taylor III, Esq.
Steven E. Ballew, Esq. Day, Berry and Howard LLP
Hogan & Hartson L.L.P. City Place 1
555 Thirteenth Street, N.W. Hartford, Connecticut 06103-3499
Washington, D.C. 20004 (860) 275-0100
(202) 637-8575
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box.[ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Title of each class of Proposed maximum Proposed maximum
securities to be Amount to be offering price per aggregate offering Amount of
registered registered unit* price* registration fee*
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share 8,054,374 $25.81 $207,883,393 $15,909**
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
* Estimated pursuant to Rule 457(f)(1) and Rule 457(c) under the Securities
Act of 1933, as amended, based upon the average of the high and low prices
for shares of common stock of New England Community Bancorp, Inc. as
reported on the Nasdaq Stock Market's National Market Tier and calculated as
of September 27, 1999 and the exchange ratio prescribed by the agreement and
plan of merger.
** Reduced by the $41,883 filing fee previously paid pursuant to Rule 457(b).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
WEBSTER FINANCIAL CORPORATION NEW ENGLAND COMMUNITY BANCORP, INC.
WEBSTER PLAZA 175 BROAD STREET, P. O. BOX 130
WATERBURY, CT 06702 WINDSOR, CT 06095
(203) 753-2921 (860) 610-3600
------------- -------------
PROSPECTUS JOINT PROXY STATEMENT
The boards of directors of Webster Financial Corporation and New
England Community Bancorp, Inc. have each approved a merger agreement. This
agreement provides that NECB will merge into Webster, subject to customary
conditions such as shareholder and regulatory approvals.
If the merger takes place, NECB shareholders will receive 1.06 shares
of Webster's common stock for each share of NECB's common stock you own,
representing a value of $27.26 based on the September 27, 1999 closing price of
Webster's common stock. Webster could opt to increase the exchange ratio in
specific circumstances where NECB could otherwise terminate the merger
agreement. In addition, the conversion of your shares of NECB common stock
generally will not be taxable, except for the receipt of cash instead of
fractional shares. Webster's common stock is traded on the Nasdaq Stock Market's
National Market Tier under the symbol WBST.
This document contains important information about Webster, NECB, the
merger and the conditions that must be satisfied before the merger can occur.
Please give all the information your careful attention.
Your vote is very important. The merger agreement and the merger must
be approved by the holders of at least a majority of outstanding shares of
common stock of each of our companies. To vote your shares, you may use the
enclosed proxy card or attend the special shareholders meeting each of us will
hold to allow you to consider and vote on the merger. To approve the merger
agreement, you MUST vote FOR the proposal by following the instructions on the
enclosed proxy card. If you do not vote at all, that will, in effect, count as a
vote against the proposal. We urge you to vote FOR this proposal.
<TABLE>
<CAPTION>
<S> <C>
/s/ James C. Smith /s/ David A. Lentini
- ------------------ --------------------
James C. Smith David A. Lentini
Chairman and Chief Executive Officer Chairman, President and Chief Executive Officer
Webster Financial Corporation New England Community Bancorp, Inc.
</TABLE>
----------------------------
WEBSTER'S COMMON STOCK HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION, OR THE
FEDERAL DEPOSIT INSURANCE CORPORATION, NOR HAS ANY OF THESE INSTITUTIONS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this joint proxy statement/prospectus is September 29, 1999
and first mailed to shareholders on October 1, 1999
<PAGE>
WEBSTER FINANCIAL CORPORATION
WEBSTER PLAZA
WATERBURY, CT 06702
-------------------
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
NOVEMBER 9, 1999
-------------------
A special meeting of shareholders of Webster Financial Corporation will
be held on November 9, 1999, at 2:00 p.m. at the Sheraton Waterbury Hotel, 3580
East Main Street, Waterbury, Connecticut 06705, for the following purposes:
1. To consider and vote on a proposal to approve and adopt the
agreement and plan of merger, dated as of June 29, 1999,
between Webster Financial Corporation and New England
Community Bancorp, Inc., the merger of NECB into Webster and
the other transactions contemplated by the merger agreement,
as described in the attached joint proxy statement/prospectus.
2. To consider and vote upon a proposal to approve and adopt the
amendment to Webster's certificate of incorporation to
increase the number of authorized shares of Webster's common
stock from 50,000,000 to 200,000,000; and
3. To transact any other business that properly comes before the
special meeting, or any adjournments or postponements of the
meeting, including, without limitation, a motion to adjourn
the special meeting to another time and/or place for the
purpose of soliciting additional proxies in order to approve
the merger agreement and the merger or otherwise.
The board of directors of Webster has fixed the close of business on
September 24, 1999 as the record date for the determination of shareholders of
Webster entitled to notice of and to vote at the special meeting. Only holders
of record of Webster's common stock at the close of business on that day will be
entitled to notice of and to vote at the special meeting or any adjournments or
postponements thereof.
WEBSTER'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AND THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION ARE ADVISABLE AND ARE FAIR TO AND
IN THE BEST INTERESTS OF WEBSTER'S SHAREHOLDERS, HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE MERGER AND THE CERTIFICATE AMENDMENT, AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE TO APPROVE THE ABOVE-LISTED PROPOSALS.
The affirmative vote of a majority of the shares of Webster's common
stock outstanding on September 24, 1999 is required to approve the merger
agreement and the merger. The required vote of Webster's shareholders on the
merger is based on the total number of shares of Webster's common stock
outstanding. NOT RETURNING A PROXY CARD, OR NOT VOTING IN PERSON AT THE SPECIAL
MEETING OR ABSTAINING FROM VOTING WILL HAVE THE SAME EFFECT AS VOTING AGAINST
THE ABOVE-LISTED PROPOSALS.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. A shareholder who executes a proxy may revoke it
at any time before it is exercised by giving written notice to the Secretary of
Webster's board of directors, by subsequently filing another proxy or by
attending the special meeting and voting in person.
By order of the Board of Directors
/s/ James C. Smith
------------------------------------------
James C. Smith
Chairman and Chief Executive Officer
Waterbury, Connecticut
September 29, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD.
<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
175 BROAD STREET, P. O. BOX 130
WINDSOR, CONNECTICUT 06095
-------------------
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
NOVEMBER 9, 1999
-------------------
A special meeting of shareholders of New England Community Bancorp,
Inc. will be held on November 9, 1999, at 10:00 a.m. at the Hartford Golf Club,
134 Norwood Road, West Hartford, Connecticut, 06117-2238 for the following
purposes:
1. To consider and vote on a proposal to approve and adopt the
agreement and plan of merger, dated as of June 29, 1999,
between Webster Financial Corporation and NECB, the merger of
NECB into Webster and the other transactions contemplated by
the merger agreement, as described in the attached joint proxy
statement/prospectus.
2. To transact any other business that properly comes before the
special meeting, or any adjournments or postponements of the
meeting, including, without limitation, a motion to adjourn
the special meeting to another time and/or place for the
purpose of soliciting additional proxies in order to approve
the merger agreement and the merger or otherwise.
You are entitled to notice and to vote at the special meeting or any
adjournments or postponements of the meeting only if you were a holder of record
of NECB's common stock at the close of business on September 24, 1999.
NECB'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS ADVISABLE
AND IS FAIR TO AND IN THE BEST INTERESTS OF NECB'S SHAREHOLDERS, HAS APPROVED
THE MERGER AGREEMENT AND THE MERGER, AND RECOMMENDS THAT YOU VOTE TO APPROVE THE
MERGER AGREEMENT AND THE MERGER.
The affirmative vote of a majority of the shares of NECB's common stock
outstanding on September 24, 1999 is required to approve the merger agreement
and the merger. The required vote of NECB's shareholders is based on the total
number of shares of NECB's common stock outstanding and not on the number of
shares which are actually voted. NOT RETURNING A PROXY CARD, OR NOT VOTING IN
PERSON AT THE SPECIAL MEETING OR ABSTAINING FROM VOTING WILL HAVE THE SAME
EFFECT AS VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. A shareholder who executes a proxy may revoke it
at any time before it is exercised by giving written notice to the Secretary of
NECB's board of directors, by subsequently filing another proxy or by attending
the special meeting and voting in person.
By order of the Board of Directors
/s/ David A. Lentini
------------------------------------------
David A. Lentini
President and Chief Executive Officer
Windsor, Connecticut
September 29, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD.
<PAGE>
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT
THE MERGER............................. ii
SUMMARY ................................... 1
SELECTED FINANCIAL DATA..................... 7
SELECTED UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA OF
WEBSTER AND NECB ........................... 10
THE MEETINGS................................ 12
The Webster Special Meeting............ 12
Matters to be Considered at the
Special Meeting................. 12
Record Date and Voting............. 12
Required Vote; Revocability of
Proxies......................... 13
Solicitation of Proxies............ 14
The NECB Special Meeting....................14
Matters to be Considered at the
Special Meeting................. 14
Record Date and Voting............. 14
Required Vote; Revocability of
Proxies......................... 15
Solicitation of Proxies............ 16
THE MERGER.................................. 17
The Parties............................ 17
Background of the Merger............... 18
Recommendation of the NECB
Board of Directors and Reasons
for the Merger..................... 19
Recommendation of the Webster
Board of Directors and Reasons
for the Merger..................... 20
Purpose and Effects of the Merger...... 21
Structure.............................. 21
Exchange Ratio......................... 22
Options................................ 23
Regulatory Approvals................... 23
Conditions to the Merger............... 25
Conduct of Business Pending
the Merger......................... 26
Third Party Proposals.................. 26
Expenses; Breakup Fee.................. 26
Fairness Opinions of NECB's
Financial Advisors................. 27
A.G. Edwards & Sons, Inc...... 27
HAS Associates, Inc........... 33
Representations and Warranties......... 37
Termination and Amendment of
the Merger Agreement............... 38
Federal Income Tax Consequences........ 40
Accounting Treatment................... 42
Resales of Webster's Common
Stock Received in the Merger....... 42
Employee Benefits...................... 43
Absence of Dissenters' Rights.......... 43
Interests of NECB Directors and
Executive Officers in the
Merger that are Different
Than Yours......................... 43
Existing NECB Executive
Retention Agreements...... 43
Letter Agreements with
Webster................... 44
NECB Stock Options............ 45
Board Membership.............. 45
Indemnification............... 45
Option Agreement....................... 45
MARKET PRICES AND DIVIDENDS................. 48
Webster's Common Stock................. 48
NECB's Common Stock.................... 49
DESCRIPTION OF CAPITAL STOCK
AND COMPARISON OF
SHAREHOLDER RIGHTS..................... 49
Webster's Common Stock................. 49
NECB's Common Stock.................... 50
Webster's Preferred Stock and
Shareholder Rights Agreement........ 51
NECB's Preferred Stock................. 52
Webster's Senior Notes................. 52
Webster's Capital Securities........... 54
Certificate of Incorporation
and Bylaw Provisions.............. 54
Applicable Law......................... 58
WHERE YOU CAN FIND MORE
INFORMATION............................ 58
INCORPORATION OF DOCUMENTS
BY REFERENCE........................... 59
Webster Documents...................... 59
NECB Documents......................... 60
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS......................... 60
SHAREHOLDER PROPOSALS....................... 61
OTHER MATTERS............................... 61
EXPERTS..................................... 61
INDEPENDENT PUBLIC
ACCOUNTANTS............................ 62
LEGAL MATTERS............................... 62
FINANCIAL INFORMATION....................... 63
AMENDMENT TO WEBSTER'
CERTIFICATE OF
INCORPORATION.......................... 69
Appendix A
Opinion of A. G. Edwards & Sons, Inc.. A-1
Appendix B
Opinion of HAS Associates, Inc......... B-1
i
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE WEBSTER AND NECB PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: In general, we believe that the business potential for the combination of
Webster and NECB exceeds what Webster or NECB could accomplish by itself.
We expect that the merger will enhance shareholder value for all
shareholders.
More specifically, we believe that the combined companies will be stronger
than either Webster or NECB on a stand-alone basis. After the merger,
Webster will be the fifth largest New England-based bank with approximately
$10 billion in assets. As a result of the merger, the Webster franchise in
New England will be significantly expanded by entering the New Hampshire
market and by a strengthened business presence in three counties in
Connecticut. Further, the products and services available to NECB customers
will be expanded.
The proposed transaction is expected to have a positive impact on Webster's
earnings per share in the first year. It should also result in financial
benefits from combining the operations of the two companies. The stability
and continuity of Webster after the merger will be enhanced because one
member of NECB's board of directors has agreed to serve on the board of
directors of Webster and Webster Bank.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If you own NECB's common stock, each share will be converted into 1.06
shares of Webster's common stock, representing a value of $28.00 based on
the September 17, 1999 price of Webster's common stock. However, if the
price of Webster's common stock falls below thresholds established in the
merger agreement, NECB may terminate the merger unless Webster decides to
increase the 1.06 exchange ratio. See "The Merger--Termination and
Amendment of the Merger Agreement."
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Before the merger takes place, NECB expects to continue to pay regular
quarterly cash dividends on its common stock, which currently are $.12 per
share. After the merger, any dividends will be based on what Webster pays.
Webster presently also pays dividends at a quarterly dividend rate of $.12
per share. An exchange ratio of 1.06 would mean an equivalent dividend of
$.13 per share for NECB's common stock.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on the enclosed proxy card how you want to vote, and sign,
date and return it as soon as possible in the enclosed envelope. If you
sign and send in your proxy card and do not indicate how you want to vote,
your proxy card will be voted FOR approval of the merger agreement and the
merger. Not returning a proxy card, or not voting in person at the special
meeting or abstaining from voting, will have the same effect as voting
AGAINST the merger agreement and the merger.
You can choose to attend the special meeting and vote your shares in person
instead of completing and returning a proxy card. If you do complete and
return a proxy card, you may change your vote at any time up to and
including the time of the vote on the day of the special meeting by
following the directions on pages 13 and 15.
Q: WHO CAN VOTE?
A: You are entitled to vote at the Webster special meeting if you owned shares
of Webster's common stock at the close of business on September 24, 1999.
You will have one vote for each share of Webster's common stock that you
owned at that time.
ii
<PAGE>
You are entitled to vote at the NECB special meeting if you owned shares of
NECB's common stock at the close of business on September 24, 1999. You
will have one vote for each share of NECB's common stock that you owned at
that time.
Q: IF MY SHARES ARE HELD IN STREET NAME BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions to your
broker on how you want your shares voted.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. There are three ways for you to revoke your proxy and change your
vote. First, you may send a written notice to the person to whom you
submitted your proxy stating that you would like to revoke your proxy.
Second, you may complete and submit a new proxy card. Third, you may vote
in person at the special meeting. If you have instructed a broker to vote
your shares, you must follow directions received from your broker to change
your vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger takes place, NECB shareholders will receive
instructions on how to exchange NECB certificates for Webster certificates.
You do not need to send in your Webster stock certificates at any time in
connection with the merger.
Q: WHAT NEEDS TO BE DONE TO COMPLETE THE MERGER?
A: Our obligations to complete the merger depend on a number of conditions
being met. In addition to our compliance with the merger agreement, these
include:
1. Approval of the merger agreement and merger by both the Webster and
NECB shareholders.
2. Approval of the merger by federal and state regulatory authorities.
3. Receipt of a legal opinion that, for United States tax purposes, NECB
shareholders who exchange their shares for shares of Webster's common
stock will not recognize any gain or loss as a result of the merger,
except in connection with the payment of cash instead of fractional
shares. This opinion will be subject to various limitations and we
recommend that you read the fuller description of tax consequences
provided in this document beginning on page 40.
4. In the case of Webster, receipt of an opinion from Webster's
independent public accountant that the merger will qualify for "pooling
of interests" accounting treatment.
5. Approval by Nasdaq of listing of Webster's common stock to be issued in
the merger.
6. The absence of any injunction or legal restraint blocking the merger or
government proceedings trying to block the merger.
When the law permits, Webster or NECB could decide to complete the merger
even though one or more of these conditions hasn't been met. We can't be
certain when, or if, the conditions to the merger will be satisfied or
waived, or that the merger will be completed.
Q: WHOM CAN I CALL WITH QUESTIONS OR TO OBTAIN COPIES OF THIS PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS?
A: James M. Sitro, Vice President, Investor Relations, Webster Financial
Corporation, Webster Plaza, Waterbury, Connecticut 06702, telephone (203)
578-2399
Anson C. Hall, Vice President and Treasurer, New England Community Bancorp,
Inc., 175 Broad Street, P.O.
iii
<PAGE>
Box 130, Windsor, Connecticut 06095, telephone (860) 683-4610.
A copy of the merger agreement including each of its exhibits and the other
documents described in this joint proxy statement/prospectus will be
provided to you promptly without charge if you call or write to Mr. Sitro
or Mr. Hall at these numbers or addresses. Such documents were also filed
as exhibits to the registration statement filed with the SEC to register
the shares of Webster's common stock to be issued in the merger. See "Where
You Can Find More Information."
iv
<PAGE>
SUMMARY
The following is a brief summary of information located elsewhere in
this document. It does not contain all of the information that is important to
you. Before you vote, you should give careful consideration to all of the
information contained in or incorporated by reference into this document to
fully understand the merger. See "Where You Can Find More Information" on page
56. Each item in this summary refers to the page where that subject is discussed
in more detail.
GENERALLY TAX FREE TRANSACTION FOR NECB SHAREHOLDERS (PAGE 40)
NECB and Webster have structured the merger so that, in general, none of
Webster, NECB or NECB shareholders will recognize gain or loss for federal
income tax purposes in the merger, except to the extent shareholders receive
cash instead of fractional shares. NECB and Webster will not be obligated to
complete the merger unless we receive legal opinions to that effect. Different
tax consequences may apply to you because of your individual circumstances or
because special tax rules apply to you, for example, if you:
o are a tax-exempt organization;
o are a dealer in securities;
o are a financial institution;
o are an insurance company;
o are a non-United States person;
o are subject to the alternative minimum tax;
o are a trader in securities who elects to apply a mark-to-market method
of accounting;
o acquired your shares of NECB's common stock from the exercise of
options or otherwise as compensation or through a qualified retirement
plan; or
o hold shares of NECB's common stock as part of a straddle, hedge, or
conversion transaction.
TAX MATTERS ARE VERY COMPLICATED. YOU SHOULD CONSULT YOUR TAX ADVISOR FOR A FULL
EXPLANATION OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
BOARDS OF DIRECTORS RECOMMEND APPROVAL (PAGE 19)
The Webster and NECB boards of directors approved the merger agreement and the
merger and recommend that you vote FOR approval of these matters.
NECB'S FINANCIAL ADVISORS SAY CONSIDERATION FAIR, FROM A FINANCIAL POINT OF
VIEW, TO NECB SHAREHOLDERS (PAGE 27)
In deciding to approve the merger, NECB's board of directors considered opinions
of A.G. Edwards & Sons, Inc. and HAS Associates, Inc., NECB's financial
advisors. The opinions concluded that the proposed consideration to be received
by the holders of NECB's common stock in the merger is fair to the shareholders
from a financial point of view. These opinions are attached as Appendix A and B
to this document. WE ENCOURAGE YOU TO READ THESE OPINIONS CAREFULLY IN ORDER
COMPLETELY TO UNDERSTAND THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATION
OF THE REVIEW MADE BY A.G. EDWARDS AND HAS ASSOCIATES, IN PROVIDING THESE
OPINIONS.
ABSENCE OF DISSENTERS' APPRAISAL RIGHTS IN THE MERGER (PAGE 43)
The holders of NECB and Webster's common stock have no dissenters' appraisal
rights in connection with the merger.
DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS (PAGE 49)
The rights of NECB shareholders after the merger will be governed by the
certificate of incorporation and bylaws of Webster rather than the certificate
of incorporation and bylaws of NECB. These rights will continue also to be
governed by the General Corporation Law of the state of Delaware since both
Webster and NECB are incorporated in Delaware. Some of the provisions included
in Webster's certificate of incorporation and bylaws may serve to prevent a
change in control of Webster even if desired by a majority of the shareholders.
Such provisions are not currently included in NECB's certificate of
incorporation and bylaws. These provisions are:
1
<PAGE>
o a board of directors divided into three classes, with directors in each
class elected for three-year staggered terms;
o removal of a director only for cause by a two-thirds vote of the
shareholders at a shareholders' meeting;
o shareholder action by written consent only if the vote is unanimous;
o various provisions requiring a holder of 10% or more of Webster's
common stock to seek certain approvals from the Webster board of
directors and/or shareholders before acquiring additional shares or
entering into a business combination with Webster; and
o supermajority approvals to amend the certificate of incorporation and
bylaws of Webster.
o A shareholder rights agreement designed to protect against an
inadequate tender offer or to deter coercive or unfair takeover
tactics.
WEBSTER WILL USE "POOLING OF INTERESTS" ACCOUNTING TREATMENT (PAGE 42)
The merger will be accounted for as a "pooling of interests" for accounting and
financial reporting purposes.
NECB MANAGEMENT'S MONETARY INTEREST IN THE MERGER (PAGE 43)
Some of the directors and executive officers of NECB have interests in the
merger in addition to their interests as shareholders of NECB. David A. Lentini,
Frank A. Falvo, Anson C. Hall and Donat A. Fournier each have existing NECB
retention agreements. The merger will constitute a change in control for
purposes of those retention agreements. Webster and each of these executives
have entered into an agreement, by which the employment of the executives is
terminated without cause, each executive agrees not to solicit Webster employees
or customers or to compete with Webster, and Webster agrees to make payments
based on the executive's rights under his retention agreement. The aggregate
payment to be made to the executives as a group will be $4,559,407.
REGULATORY APPROVALS WE MUST OBTAIN FOR THE MERGER (PAGE 23)
For the merger to take place, we need to receive the regulatory approvals of the
United States Office of Thrift Supervision and the Connecticut and New Hampshire
Commissioners of Banking. We have filed applications with these regulators.
As of the date of this document, we haven't yet received the required approvals.
While we don't know of any reason why we would not be able to obtain the
necessary approvals in a timely manner, we can't be certain when or if we will
get them.
TERMINATION OF THE MERGER AGREEMENT (PAGE 38)
The merger agreement specifies a number of situations when we may terminate the
agreement. The merger agreement may be terminated at any time prior to the
effective time by our mutual consent and by either of us under specified
circumstances, including if the merger is not consummated by June 29, 2000, if
we do not receive the needed shareholder or regulatory approvals or if the other
party breaches its agreements. NECB may terminate if Webster's common stock
price falls below a threshold set forth in the merger agreement and Webster does
not increase the exchange ratio pursuant to a prescribed formula.
Regardless of whether the merger is completed, we will each pay our own fees and
expenses, except that we will evenly divide the costs and expenses that we've
incurred in printing and mailing this document and the registration fees that we
will have to pay to the Securities and Exchange Commission.
OPTION TO DISCOURAGE OTHER PARTIES FROM MAKING OTHER PROPOSALS TO ACQUIRE NECB
(PAGE 45)
In connection with the merger agreement, NECB granted Webster an option to
purchase shares not to exceed 19.9% of NECB's outstanding common stock at an
exercise price of $22.14. The option agreement is intended to
2
<PAGE>
discourage other parties from making alternative acquisition-related proposals
to NECB.
In addition to the option to purchase NECB's common stock, under the
circumstances mentioned in the next paragraph, Webster may require NECB to
repurchase the option or shares acquired upon a previous exercise of the option
at a predetermined price. Alternatively, upon the occurrence of these
circumstances, Webster may surrender the option and/or any shares received upon
a previous exercise of the option and receive a payment of $5,000,000.
Webster cannot exercise its option unless a business combination or acquisition
transaction concerning NECB or related activities, including the sale of a
substantial amount of NECB's assets or stock are proposed or occur. We do not
know of any event that has occurred as of the date of this document that would
permit Webster to exercise its option.
WEBSTER'S CERTIFICATE AMENDMENT TO INCREASE AUTHORIZED SHARES (PAGE 69)
Webster shareholders are also being asked to authorize an amendment to Webster's
certificate of incorporation to increase the number of authorized shares of
common stock from 50,000,000 to 200,000,000 shares.
INFORMATION ABOUT THE SPECIAL MEETINGS (PAGE 12)
A special meeting of Webster shareholders will be held on November 9, 1999, at
2:00 p.m. at the Sheraton Waterbury Hotel, 3580 East Main Street, Waterbury,
Connecticut 06705, for the following purposes:
o to vote on the merger agreement, the merger and the other transactions
contemplated by the merger agreement;
o to vote on a proposed amendment to Webster's certificate of
incorporation; and
o to address any other matters that properly come before the special
meeting, or any adjournments or postponements of the meeting, including
a motion to adjourn the special meeting to another time and/or place to
solicit additional proxies in favor of the merger agreement and the
merger or otherwise.
A special meeting of NECB shareholders will be held on November 9, 1999, at
10:00 a.m. at the Hartford Golf Club, 134 Norwood Road, West Hartford,
Connecticut, 06117-2238 for the following purposes:
o to vote on the merger agreement, the merger and the other transactions
contemplated by the merger agreement; and
o to address any other matters that properly come before the special
meeting, or any adjournments or postponements of the meeting, including
a motion to adjourn the special meeting to another time and/or place to
solicit additional proxies in favor of the merger agreement and the
merger or otherwise.
THE COMPANIES INVOLVED IN THE MERGER (PAGE 17)
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
Webster is a Delaware corporation and the holding company of Webster Bank,
Webster's federal savings bank subsidiary. Both Webster and Webster Bank are
headquartered in Waterbury, Connecticut. At June 30, 1999, Webster had total
consolidated assets of $9.1 billion, total deposits of $5.7 billion, and
shareholders' equity of $565 million, or 6.24% of total assets.
NEW ENGLAND COMMUNITY BANCORP, INC.
175 Broad Street
P.O. Box 130
Windsor, Connecticut 06095
(860) 610-3600
NECB is a Delaware corporation and a multi-bank holding company of New England
Bank and Trust Company, The Equity Bank, Community Bank and Olde Port Bank and
Trust. NECB is headquartered in Windsor, Connecticut. At June 30, 1999, NECB had
total consolidated assets of $808 million, total
3
<PAGE>
deposits of $641 million, and shareholders' equity of $69.6 million, or 8.6% of
total assets.
Immediately after the merger of NECCB with and into Webster, NECB's subsidiary
banks will merge into Webster Bank.
4
<PAGE>
SHARE INFORMATION AND MARKET PRICES
Both Webster's and NECB's common stock are traded on the Nasdaq Stock
Market's National Market Tier under the trading symbols "WBST" and "NECB",
respectively. The table below presents the per share closing prices of Webster's
and NECB's common stock on Nasdaq as of the dates specified and the pro forma
equivalent market value of the 1.06 shares of Webster's common stock to be
exchanged for each share of NECB's common stock in the merger. June 29, 1999 was
the last trading date before public announcement of the merger agreement. NECB's
pro forma equivalent market value was determined by multiplying the closing
price of Webster's common stock on June 29, 1999 by an exchange ratio of 1.06.
For more information about the exchange ratio and how it may be increased, see
"The Merger -- Exchange Ratio," and for more information about the stock prices
and dividends of Webster and NECB, see "Market Prices and Dividends."
<TABLE>
<CAPTION>
NECB's
Last Reported Sale Price Common Stock
------------------------------------ Pro Forma
Webster's NECB's Equivalent Market
Date Common Stock Common Stock Value
- ---- ------------ ------------ -----------------
<S> <C> <C> <C>
June 29, 1999....................... $28.38 $26.75 $30.08
September 27, 1999.................. $25.75 $26.00 $27.26
</TABLE>
NECB's shareholders are advised to obtain current market quotations for
Webster's common stock. The market price of Webster's common stock will
fluctuate between the date of this joint proxy statement/prospectus and the date
on which the merger takes place. No assurance can be given as to the market
price of Webster's common stock at the time of the merger, although NECB may
terminate the merger agreement if Webster's common stock price falls below a
certain threshold and Webster does not increase the exchange ratio pursuant to a
prescribed formula. See "The Merger -- Termination and Amendment to the Merger
Agreement."
COMPARATIVE PER SHARE DATA
The following table shows historical information about net income per
share, cash dividends per share and book value per share, and similar
information reflecting the merger, which we refer to as "pro forma" information.
In presenting the comparative pro forma information for the time periods shown,
we assumed that we had been merged throughout those periods.
We also assumed that we will treat our companies as if they had always
been combined for accounting and financial reporting purposes--a method known as
"pooling of interests" accounting. The information listed as "equivalent pro
forma" was obtained by multiplying the pro forma amounts by the exchange ratio
of 1.06. We present this information to reflect the fact that NECB shareholders
will receive more than one share of Webster's common stock for each share of
NECB's common stock exchanged in the merger.
We expect that we will incur merger and integration charges as a result
of combining our companies. We also anticipate that the merger will provide the
combined company with financial benefits that include reduced operating
expenses. These changes and benefits are not reflected in the pro forma data.
While helpful in illustrating the financial characteristics of the combined
company under one set of assumptions, the pro forma information does not reflect
these anticipated financial benefits and, accordingly, does not attempt to
predict or suggest future results. It also does not necessarily reflect what the
historical results of the combined company would have been had our companies
been combined.
The per share data gives effect to all previous stock splits of
Webster's common stock.
The information in the following table is based on, and you should read
it together with, the
5
<PAGE>
historical financial information that we have presented in
our prior filings with the SEC. We are incorporating this material into this
document by reference. See "Where You Can Find More Information" on page 56 for
a description of where you can find our prior filings.
<TABLE>
<CAPTION>
At or for the At or for the At or for the At or for the
Six Months Ended Year Ended Year Ended Year Ended
June 30, December 31, December 31, December 31,
1999 1998 1997 1996
--------- -------- -------- ------
<S> <C> <C> <C> <C>
Net Income per Common Share (Basic):
Webster -- historical.......................... $ 1.23 $ 1.86 $ 1.10 $ 1.44
NECB -- historical ............................ 0.62 1.07 0.93 1.06
Pro Forma Combined ............................ 1.13 1.74 1.07 1.38
Equivalent Pro Forma .......................... 1.20 1.84 1.14 1.46
Net Income per Common Share (Diluted):
Webster -- historical.......................... 1.20 1.83 1.07 1.36
NECB -- historical............................. 0.61 1.05 0.92 1.06
Pro Forma Combined............................. 1.11 1.70 1.05 1.32
Equivalent Pro Forma .......................... 1.18 1.81 1.11 1.40
Cash Dividends per Common Share:
Webster -- historical......................... 0.23 0.44 0.40 0.34
NECB -- historical............................ 0.24 0.39 0.33 0.26
Pro Forma Combined............................ 0.23 0.43 0.39 0.33
Equivalent Pro Forma ......................... 0.24 0.46 0.42 0.35
Book Value per Common Share:
Webster -- historical......................... 14.88 14.87
NECB -- historical............................ 10.08 10.43
Pro Forma Combined............................ 14.14 14.16
Equivalent Pro Forma ......................... 14.99 15.01
</TABLE>
6
<PAGE>
SELECTED FINANCIAL DATA
The tables below present summary historical financial and other data
for Webster and NECB as of the dates and for the periods indicated. This summary
data is based on and should be read in conjunction with Webster's and NECB's
historical consolidated financial statements and related notes which we have
presented in our prior filings with the SEC and which are incorporated by
reference into this document. For historical information, see "Where You Can
Find More Information." You should read all of the selected financial
information we provide in the following tables together with this historical
financial information and the unaudited pro forma financial information we
provide in this document, which you can find beginning at page 61. All
adjustments necessary for a fair presentation of financial position and results
of operations have been included. The historical operating results of both
Webster and NECB for the six months ended June 30, 1999 and 1998, respectively,
are not necessarily indicative of results which may be expected for the entire
year, nor are the pro forma amounts necessarily indicative of the results of
operations or the combined financial position that would have resulted had the
merger been consummated at the beginning of the periods presented. All financial
data presented for Webster before December 31, 1998 have been restated to
reflect the financial results of Webster and Eagle Financial Corp., which was
acquired by Webster in April 1998. All per share data of Webster and NECB have
been adjusted retroactively to give effect to stock dividends and stock splits.
SELECTED CONSOLIDATED FINANCIAL DATA - WEBSTER
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
1999 1998 1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION AND
OTHER DATA
Total assets.............. $9,056,990 $9,189,143 $9,033,917 $9,095,887 $7,368,941 $6,479,567 $6,114,613
Loans receivable, net..... 5,278,808 4,920,663 4,993,509 4,995,851 4,737,883 3,977,725 4,007,710
Securities................ 3,111,234 3,737,024 3,462,090 3,589,273 2,105,173 2,000,185 1,558,401
Intangible assets......... 139,338 83,550 78,380 78,493 81,936 26,720 31,093
Deposits.................. 5,719,866 5,736,374 5,651,273 5,719,030 5,826,264 5,060,822 5,044,336
Federal Home Loan Bank
advances and other
borrowings............. 2,476,449 2,570,566 2,513,481 2,549,597 957,835 834,557 613,791
Shareholders' equity...... 565,438 548,426 554,879 517,262 472,824 460,791 364,112
Number of banking offices. 115 101 101 114 120 109 108
OPERATING DATA
Net interest income....... $ 130,675 $123,048 $ 245,435 $ 251,050 $ 222,118 $ 188,646 $ 182,100
Provision for loan losses. 4,100 3,800 6,800 24,813 13,054 9,864 7,149
Noninterest income:
Nonrecurring income:.... -- -- -- 546 15,904 -- --
Other income............ 39,657 37,136 74,163 41,718 36,105 33,316 21,378
---------- ----------- ---------- ---------- ---------- ---------- ----------
Total noninterest income 39,657 37,136 74,163 42,264 52,009 33,316 21,378
Noninterest expenses:
Acquisition-related
expenses............ -- 17,400 17,400 29,792 500 4,271 700
Other noninterest expenses 98,083 90,911 180,389 171,871 173,977 142,592 140,260
---------- ----------- ---------- ---------- ---------- ---------- ----------
Total noninterest
expenses............ 98,083 108,311 197,789 201,663 174,477 146,863 140,960
---------- ----------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 68,149 48,073 115,009 66,838 86,596 65,235 55,369
Income taxes.............. 23,171 18,952 44,544 25,725 32,602 23,868 17,861
---------- ----------- ---------- ---------- ---------- ---------- ----------
Net income................ 44,978 29,121 70,465 41,113 53,994 41,367 37,508
Preferred stock dividends. -- -- -- -- 1,149 1,296 1,716
---------- ----------- ---------- ---------- ---------- ---------- ----------
Income available to common
shareholders............ $ 44,978 $29,121 $ 70,465 $ 41,113 $ 52,845 $ 40,071 $ 35,792
========== ========== ========== ========== ========== ========== ==========
</TABLE>
7
<PAGE>
SIGNIFICANT STATISTICAL DATA - WEBSTER
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Net income per common share:
Basic.......................... $ 1.23 $ 0.77 $ 1.86 $ 1.10 $ 1.44 $ 1.18 $ 1.16
Diluted........................ $ 1.20 $ 0.75 $ 1.83 $ 1.07 $ 1.36 $ 1.12 $ 1.09
Cash dividends per common share.. $ 0.23 $ 0.22 $ 0.44 $ 0.40 $ 0.34 $ 0.32 $ 0.26
Return on average shareholders'
equity......................... 16.91% 11.25% 13.16% 8.44% 11.32% 10.05% 10.52%
Interest rate spread............. 2.99% 2.59% 2.64% 3.00% 3.12% 2.98% 3.23%
Net interest margin.............. 3.12% 2.76% 2.81% 3.19% 3.24% 3.14% 3.36%
Noninterest expenses to average
assets......................... 2.19% 2.29% 2.13% 2.45% 2.42% 2.34% 2.45%
Noninterest expenses (excluding
foreclosed property,
acquisition related, capital
securities, preferred dividends
and intangible amortization
expenses) to average assets.... 1.86% 1.61% 1.63% 1.91% 2.30% 2.09% 2.09%
Ratio of earnings to fixed
charges........................ 2.00 1.57 1.72 1.61 2.40 2.25 2.47
AT END OF PERIOD:
Diluted weighted average
shares (000's)................. 37,338 38,679 38,571 38,473 39,560 36,797 34,533
Book value per common share...... $ 14.88 $ 14.31 $ 14.87 $ 13.78 $ 12.73 $ 12.24 $ 10.96
Tangible book value per
common share................... $ 11.21 $ 12.13 $ 12.77 $ 11.69 $ 10.48 $ 11.50 $ 9.98
Shareholders' equity to total
assets......................... 6.24% 5.97% 6.14% 5.69% 6.42% 7.11% 5.95%
Nonaccrual assets to total
assets......................... 0.39% 0.41% 0.32% 0.59% 0.98% 1.46% 1.80%
Allowance for loan losses to
nonaccrual loans............... 197.63% 190.72% 217.14% 141.23% 100.40% 90.93% 102.96%
Allowances for nonaccrual assets
to nonaccrual assets........... 174.89% 149.04% 191.37% 112.23% 78.78% 64.94% 62.72%
</TABLE>
8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA AND SIGNIFICANT STATISTICAL DATA - NECB
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
FINANCIAL CONDITION AND
OTHER DATA 1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets................ $ 808,398 $ 805,882 $ 803,887 $ 806,888 $ 692,628 $ 584,378 $ 446,288
Loans, net.................. 514,907 526,180 513,609 529,067 452,180 376,251 292,533
Deposits.................... 640,721 670,954 660,951 691,966 612,625 527,231 406,395
Shareholders' equity........ 69,592 72,976 73,350 68,341 62,263 49,017 32,274
Number of banking offices... 18 17 18 14 13 9 7
OPERATING DATA
Net interest income......... $ 18,452 $ 18,601 $ 37,176 $ 34,708 $ 30,525 $ 22,220 $ 19,645
Provision for loan losses... 333 805 1,303 1,636 2,687 2,125 3,291
Noninterest income.......... 4,489 4,268 8,475 5,459 4,824 3,646 3,182
Noninterest expenses........ 15,835 14,228 31,644 27,870 22,709 18,679 17,533
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes.. 6,773 7,836 12,704 10,661 9,953 5,062 2,003
Income tax expense.......... 2,428 3,211 5,150 4,162 3,111 254 481
--------- --------- --------- --------- --------- --------- ---------
Net income.................. $ 4,345 $ 4,625 $ 7,554 $ 6,499 $ 6,842 $ 4,808 $ 1,522
========= ========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
SIGNIFICANT STATISTICAL DATA FOR
THE PERIOD: 1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income per common share-
Basic...................... $ 0.62 $ 0.66 $ 1.07 $ 0.93 $ 1.06 $ 0.97 $ 0.39
Diluted.................... $ 0.61 $ 0.64 $ 1.05 $ 0.92 $ 1.06 $ 0.97 $ 0.39
Cash dividends declared per common
share........................ $ 0.24 $ 0.19 $ 0.39 $ 0.326 $ 0.255 $ 0.186 $ 0.045
Return on average shareholders'
equity....................... 11.99% 13.21% 10.38% 9.91% 12.50% 13.15% 5.46%
Interest rate spread........... 4.39% 4.37% 4.30% 4.51% 4.54% 4.43% 4.53%
Net interest 5.19% 5.21% 5.19% 5.36% 5.32% 5.30% 5.03%
margin......................
Noninterest expenses to
average assets............... 4.07% 3.64% 4.08% 3.98% 3.65% 4.12% 4.14%
Ratio of earnings to fixed
charges...................... 3.88 5.29 4.32 4.99 9.72 6.01 3.78
AT END OF PERIOD:
Diluted weighted average
shares (000's)................ 7,105 7,254 7,204 7,069 6,485 4,974 3,883
Book value per common share..... $ 10.08 $ 10.38 $ 10.43 $ 9.74 $ 8.72 $ 7.81 $ 7.47
Tangible book value per
common share................. $ 9.41 $ 9.66 $ 9.74 $ 8.99 $ 8.09 $ 7.74 $ 7.47
Shareholders' equity to total
assets....................... 8.61% 9.06% 9.12% 8.47% 8.99% 8.39% 7.23%
Nonaccrual assets to total
assets........................ 1.01% .91% 0.66% 1.22% 1.18% 1.51% 2.10%
Allowance for loan losses to
nonaccrual loans.............. 157.60% 180.66% 188.99% 122.80% 114.70% 104.10% 84.90%
</TABLE>
9
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED
FINANCIAL DATA OF WEBSTER AND NECB
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
FINANCIAL CONDITION AND OTHER
DATA 1999 1998 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets.................. $9,861,982 $9,995,025 $9,837,804 $9,902,775 $8,061,569 $7,063,945 $6,560,901
Loans receivable, net......... 5,793,715 5,446,843 5,507,118 5,524,918 5,190,063 4,353,976 4,299,840
Securities.................... 3,325,698 3,926,888 3,664,513 3,770,670 2,263,374 2,141,773 1,647,640
Intangible assets............. 143,989 88,592 83,227 83,731 86,400 27,122 31,093
Deposits...................... 6,360,587 6,407,328 6,312,224 6,410,996 6,438,889 5,588,053 5,450,731
Federal Home Loan Bank
advances and other
borrowings................. 2,568,489 2,624,170 2,575,608 2,588,178 963,614 835,585 617,587
Shareholders' equity.......... 623,574 621,402 628,229 585,603 535,087 509,808 396,386
Number of banking offices..... 133 118 119 132 138 123 120
OPERATING DATA
Net interest income........... $ 149,127 $ 141,649 $ 282,611 $ 285,758 $ 252,643 $ 210,866 $ 201,745
Provision for loan losses..... 4,433 4,605 8,103 26,449 15,741 11,989 10,440
Noninterest income:
Nonrecurring income......... -- -- -- 546 15,904 -- --
Other noninterest
income...................... 44,146 41,404 82,638 47,177 40,929 36,962 24,560
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest income.. 44,146 41,404 82,638 47,723 56,833 36,962 24,560
Noninterest expenses:
Acquisition-related expenses -- 17,590 20,993 29,792 500 4,271 700
Other noninterest expenses 113,918 104,949 208,440 199,741 196,686 161,271 157,793
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest
expenses................ 113,918 122,539 229,433 229,533 197,186 165,542 158,493
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 74,922 55,909 127,713 77,499 96,549 70,297 57,372
Income taxes.................. 25,599 22,163 49,694 29,887 35,713 24,122 18,342
---------- ----------- ---------- ---------- ---------- ---------- ----------
Net income.................... 49,323 33,746 78,019 47,612 60,836 46,175 39,030
Preferred stock dividends..... -- -- -- -- 1,149 1,296 1,716
---------- ---------- ---------- ---------- ---------- ----------- ----------
Income available to common
shareholders................ $ 49,323 $ 33,746 $ 78,019 $ 47,612 $ 59,687 $ 44,879 $ 37,314
========== ========== ========== ========== ========== ========== ==========
</TABLE>
10
<PAGE>
SELECTED UNAUDITED PROFORMA COMBINED
FINANCIAL DATA OF WEBSTER AND NECB
SIGNIFICANT STATISTICAL DATA
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Net income per common share:
Basic.......................... $ 1.13 $ 0.75 $ 1.74 $ 1.07 $ 1.38 $ 1.15 $ 1.07
Diluted........................ $ 1.11 $ 0.73 $ 1.70 $ 1.05 $ 1.32 $ 1.10 $ 1.02
Cash dividends per common share.. $ 0.23 $ 0.22 $ 0.43 $ 0.39 $ 0.33 $ 0.31 $ 0.24
Return on average shareholders'
equity......................... 16.30% 11.48% 12.82% 8.61% 11.44% 10.30% 10.17%
Interest rate spread............. 3.10% 2.69% 2.74% 3.12% 3.22% 3.04% 3.31%
Net interest margin.............. 3.31% 2.94% 2.98% 3.36% 3.40% 3.26% 3.47%
Noninterest expenses to average
assets......................... 2.34% 2.38% 2.28% 2.57% 2.52% 2.46% 2.56%
Noninterest expenses (excluding
foreclosed property,
acquisition related, capital
securities, preferred dividends
and intangible amortization
expenses) to average assets.... 2.02% 1.79% 1.78% 2.04% 2.40% 2.22% 2.21%
Ratio of earnings to fixed
charges........................ 2.07 1.65 1.78 1.69 2.53 2.32 2.49
AT END OF PERIOD:
Diluted weighted average
shares (000's).................
Book value per common share...... $ 14.14 $ 13.70 $ 14.16 $ 13.15 $ 12.08 $ 11.61 $ 10.56
Tangible book value per
common share................... $ 10.92 $ 11.75 $ 12.29 $ 11.27 $ 10.10 $ 10.96 $ 9.69
Shareholders' equity to total
assets......................... 6.44% 6.22% 6.39% 5.91% 6.64% 7.22% 6.04%
Nonaccrual assets to total
assets......................... 0.44% 0.45% 0.36% 0.68% 1.04% 1.49% 1.83%
Allowance for loan losses to
nonaccrual loans............... 190.68% 189.12% 212.25% 137.74% 102.30% 92.49% 100.65%
Allowances for nonaccrual assets
to nonaccrual assets........... 165.68% 147.28% 182.29% 108.43% 78.69% 66.67% 62.21%
</TABLE>
11
<PAGE>
THE MEETINGS
THE WEBSTER SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
We are first mailing this document to the holders of Webster's common
stock on or about October 1, 1999. It is accompanied by a proxy card furnished
in connection with the solicitation of proxies by the Webster board of directors
for use at the special meeting of Webster's shareholders. The special meeting is
scheduled to be held on November 9, 1999, at 2:00 p.m., at the Sheraton
Waterbury Hotel, 3580 East Main Street, Waterbury, Connecticut 06705. At the
special meeting, the holders of Webster's common stock will consider and vote
on:
o the proposal to approve and adopt the merger agreement, the
merger and the other transactions contemplated by the merger
agreement, including an increase in the exchange ratio;
o the proposal to amend Webster's certificate of incorporation
to increase the number of authorized shares of common stock
from 50,000,000 to 200,000,000; and
o any other business that properly comes before the special
meeting, or any adjournments or postponements of the meeting,
including, without limitation, a motion to adjourn the special
meeting to another time and/or place for the purpose of
soliciting additional proxies in order to approve the merger
agreement and the merger or otherwise.
RECORD DATE AND VOTING
The Webster board of directors has fixed the close of business on
September 24, 1999 as the record date for determining the Webster shareholders
entitled to receive notice of and to vote at the special meeting. Only holders
of record of Webster's common stock at the close of business on that day will be
entitled to vote at the special meeting or at any adjournment or postponement of
the meeting. At the close of business on September 24, 1999, there were
38,117,759 shares of Webster's common stock outstanding and entitled to vote at
the special meeting, held by approximately 6,999 shareholders of record.
Each holder of Webster's common stock on September 24, 1999 will be
entitled to one vote for each share held of record on each matter that is
properly submitted at the special meeting or any adjournment or postponement of
the meeting. The presence, in person or by proxy, of the holders of one-third of
Webster's common stock entitled to vote at the special meeting is necessary to
constitute a quorum. Shares of Webster's common stock present in person at the
special meeting but not voting, and shares of Webster's common stock for which
we have received proxies indicating that their holders have abstained, will be
counted as present at the special meeting for purposes of determining whether we
have a quorum for transacting business. Brokers who hold shares of Webster's
common stock in nominee or "street" name for customers who are the beneficial
owners of those shares may not give a proxy to vote those shares on the merger
agreement without specific instructions from those customers. However, shares
represented by proxies returned by a broker holding these shares in "street"
name will be counted for purposes of determining whether a quorum exists, even
if those shares aren't voted by their beneficial owners in matters where the
broker cannot vote the shares in its discretion (so-called "broker non-votes").
Approval of the merger agreement requires the affirmative vote of the
holders of at least a majority of the shares of Webster's common stock issued
and outstanding. Thus, abstentions and broker non-votes will have the same
effect as votes against the merger agreement. Approval of the certificate
amendment requires the approval of a majority of the shares voted at a meeting
at which a quorum is present. The presence, in person or by proxy, of at least
one-third of the total number of outstanding shares of common stock entitled to
vote at the meeting is necessary to constitute a
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quorum. See "Amendment to Webster's Certificate of Incorporation" for more
information about this proposed action, including the reasons for the amendment.
If a quorum is not obtained, or if fewer shares of Webster's common
stock are voted in favor of the proposals to approve the merger agreement and
merger than the number required for approval, it is expected that the special
meeting will be adjourned to allow additional time for obtaining additional
proxies. In that event, proxies will be voted to approve an adjournment, except
for proxies as to which instructions have been given to vote against the merger
agreement. The holders of a majority of the shares present at the special
meeting would be required to approve any adjournment of the special meeting or
any other such business that properly comes before the special meeting.
If Webster receives your properly executed proxy card in time to be
voted at the special meeting, the shares represented by the proxy card will be
voted in accordance with the instructions marked on the proxy card. EXECUTED
PROXIES WITH NO INSTRUCTIONS INDICATED ON THE PROXY CARD WILL BE VOTED FOR THE
PROPOSAL TO APPROVE THE MERGER AGREEMENT, THE MERGER AND THE CERTIFICATE
AMENDMENT.
The Webster board of directors is not aware of any other matters that
may properly come before the special meeting. If any other matters properly come
before the special meeting, the persons named in the accompanying proxy will
vote the shares represented by all properly executed proxies on those matters as
determined by a majority of the Webster board of directors.
TO VOTE FOR THE PROPOSALS, YOU NEED TO PROPERLY COMPLETE THE PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE OR ATTEND THE SPECIAL MEETING AND VOTE IN
PERSON.
REQUIRED VOTE; REVOCABILITY OF PROXIES
The affirmative vote of the holders of at least a majority of the
shares of Webster's common stock issued and outstanding on September 24, 1999 is
required to approve the merger agreement and the merger.
All of the directors and executive officers of Webster beneficially
owned as of September 24, 1999, excluding all options to purchase shares of
Webster's common stock, a total of 801,196 shares of Webster's common stock,
which was approximately 2.1% of the outstanding shares of Webster's common stock
on that date. It is expected that each director and executive officer of Webster
will vote his or her shares of Webster's common stock for approval of the merger
agreement, the merger and the certificate amendment.
If you submit a proxy card, attending the special meeting will not
automatically revoke your proxy. You may revoke a proxy at any time before it is
voted by:
o delivering to John D. Benjamin, Senior Vice President and
Assistant Secretary, of Webster Financial Corporation, Webster
Financial Plaza, Waterbury, Connecticut 06702, a written
notice of revocation before the special meeting,
o delivering to Webster a duly executed proxy bearing a later
date before the special meeting, or
o attending the special meeting and voting in person.
Simply attending the special meeting without voting will not
automatically revoke your proxy.
The board of directors of Webster believes that the terms of the merger
agreement, the merger and the certificate amendment are fair to and in the best
interest of, Webster and its shareholders. THE BOARD OF DIRECTORS OF WEBSTER
APPROVED THE MERGER AGREEMENT, THE MERGER AND THE
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CERTIFICATE AMENDMENT AND RECOMMENDS THAT HOLDERS OF WEBSTER'S COMMON STOCK VOTE
FOR APPROVAL OF THESE MATTERS.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of Webster may solicit proxies for the special meeting from shareholders
personally or by telephone or telegram without receiving additional compensation
for these activities. The cost of soliciting proxies will be paid by Webster. In
addition, Webster has retained D.F. King & Co., Inc., a proxy solicitation firm,
to assist in proxy solicitation for the special meeting. The fee to be paid to
that firm is $6,500 plus reasonable out-of-pocket expenses, will be paid by
Webster. Webster also will make arrangements with brokerage firms and other
custodians, nominees and fiduciaries to send proxy materials to their principals
and will reimburse those parties for their expenses in doing so.
THE NECB SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
We are first mailing this document to the holders of NECB's common
stock on or about October 1, 1999. It is accompanied by a proxy card furnished
in connection with the solicitation of proxies by the NECB board of directors
for use at the special meeting of NECB's shareholders on November 9, 1999, at
10:00 a.m., at the Hartford Golf Club, 134 Norwood Road, West Hartford,
Connecticut 06117-2238. At the special meeting, the holders of NECB's common
stock will consider and vote on:
o the proposal to approve and adopt the merger agreement, the
merger and the other transactions contemplated by the merger
agreement, and
o any other business that properly comes before the special
meeting, or any adjournments or postponements of the meeting,
including, without limitation, a motion to adjourn the special
meeting to another time and/or place for the purpose of
soliciting additional proxies in order to approve the merger
agreement and the merger or otherwise.
RECORD DATE AND VOTING
The NECB board of directors has fixed the close of business on
September 24, 1999 as the record date for determining the NECB shareholders
entitled to receive notice of and to vote at the special meeting. Only holders
of record of NECB's common stock at the close of business on that day will be
entitled to vote at the special meeting or at any adjournment or postponement of
the meeting. At the close of business on September 24, 1999, there were
6,928,790 shares of NECB's common stock outstanding and entitled to vote at the
special meeting, held by approximately 3,137 shareholders of record.
Each holder of NECB's common stock on September 24, 1999 will be
entitled to one vote for each share held of record on each matter that is
properly submitted at the special meeting or any adjournment or postponement of
the meeting. The presence, in person or by proxy, of the holders of one-third of
NECB's common stock issued and outstanding and entitled to vote at the special
meeting is necessary to constitute a quorum. Abstentions and broker non-votes
will be included in the calculation of the number of shares represented at the
special meeting in order to determine whether a quorum has been achieved. Since
approval of the merger agreement requires the affirmative vote of the holders of
at least a majority of the shares of NECB's common stock issued and outstanding,
abstentions and broker non-votes will have the same effect as a vote against the
merger agreement.
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If a quorum is not obtained, or if fewer shares of NECB's common stock
are voted in favor of the proposal for approval of the merger agreement than the
number required for approval, it is expected that the special meeting will be
adjourned to allow additional time for obtaining additional proxies. In that
event, proxies will be voted to approve an adjournment, except for proxies as to
which instructions have been given to vote against the merger agreement. The
holders of a majority of the shares present at the special meeting would be
required to approve any adjournment of the special meeting or any other such
business that properly comes before the special meeting.
If your proxy card is properly executed and received by NECB in time to
be voted at the special meeting, the shares represented by the proxy card will
be voted in accordance with the instructions marked on the proxy card. EXECUTED
PROXIES WITH NO INSTRUCTIONS INDICATED ON THE PROXY CARD WILL BE VOTED TO
APPROVE THE MERGER AGREEMENT AND THE MERGER.
The NECB board of directors is not aware of any other matters that may
properly come before the special meeting. If any other matters properly come
before the special meeting, the persons named in the accompanying proxy will
vote the shares represented by all properly executed proxies on those matters as
determined by a majority of the NECB board of directors.
To vote on the merger agreement, you need to properly complete the
proxy card and return it in the enclosed envelope or attend the special meeting
and vote in person.
YOU SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. IF
THE MERGER TAKES PLACE, NECB STOCK CERTIFICATES SHOULD BE DELIVERED IN
ACCORDANCE WITH INSTRUCTIONS THAT WILL BE SENT TO YOU BY WEBSTER'S EXCHANGE
AGENT PROMPTLY AFTER THE EFFECTIVE TIME OF THE MERGER.
REQUIRED VOTE; REVOCABILITY OF PROXIES
In order to approve and adopt the merger agreement, the merger of NECB
and Webster and the other transactions contemplated by the merger agreement, the
holders of at least a majority of the shares of NECB's common stock issued and
outstanding on September 24, 1999, must affirmatively vote FOR the merger
agreement and the merger.
THE REQUIRED VOTE OF NECB'S SHAREHOLDERS IS BASED ON THE TOTAL NUMBER
OF OUTSTANDING SHARES OF NECB'S COMMON STOCK AND NOT ON THE NUMBER OF SHARES
WHICH ARE ACTUALLY VOTED. NOT RETURNING A PROXY CARD, NOT VOTING IN PERSON AT
THE SPECIAL MEETING AND ABSTAINING FROM VOTING WILL HAVE THE SAME EFFECT AS
VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
All of the directors and executive officers of NECB beneficially owned
as of September 24, 1999, excluding all options to purchase shares of NECB's
common stock, a total of 339,538 shares of NECB's common stock, which was
approximately 4.9% of the outstanding shares of NECB's common stock on that
date. We expect all of these persons to vote their shares in favor of the merger
agreement and the merger. Additionally, Webster owned 84,200 shares of NECB's
common stock as of September 24, 1999, all of which we expect will be voted in
favor of the merger agreement and merger.
If you submit a proxy card, attending the special meeting will not
automatically revoke your proxy. However, you may revoke a proxy at any time
before it is voted by:
o delivering to Anson C. Hall, Vice President and Treasurer of
New England Community Bancorp, Inc., 175 Broad Street, P.O.
Box 130, Windsor, Connecticut 06095, a written notice of
revocation before the special meeting,
o delivering to NECB a duly executed proxy bearing a later date
before the special meeting, or
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o attending the special meeting and voting in person.
Simply attending the special meeting without voting will not
automatically revoke your proxy.
NECB and Webster are not obligated to complete the merger unless, among
other things, the merger agreement and the merger are approved by the
affirmative vote of the holders of at least a majority of the shares of NECB's
common stock issued and outstanding on September 24, 1999. For a description of
the conditions to the merger, see "The Merger -- Conditions to the Merger."
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of NECB may solicit proxies for the special meeting from shareholders personally
or by telephone or telecopier without receiving additional compensation for
these activities. The cost of soliciting proxies will be paid by NECB. NECB also
will make arrangements with brokerage firms and other custodians, nominees and
fiduciaries to send proxy materials to their principals and will reimburse those
parties for their expenses in doing so.
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THE MERGER
The information in this section is qualified in its entirety by
reference to the full text of the merger agreement including each of its
exhibits and the option agreement, all of which are incorporated by reference
into this document and the material features of which are described in this
joint proxy statement/prospectus. A copy of the merger agreement including each
of its exhibits and the other documents described in this joint proxy
statement/prospectus will be provided to you promptly without charge if you call
or write to James M. Sitro, Vice President, Investor Relations, Webster
Financial Corporation, Webster Plaza, Waterbury, Connecticut 06702, telephone
(203) 578-2399 or Anson C. Hall, Vice President and Treasurer, New England
Community Bancorp, Inc. 175 Broad Street, P.O. Box 130, Windsor, Connecticut
06095, telephone (860)683-4610. Such documents were also filed as exhibits to
the registration statement filed with the SEC to register the shares of
Webster's common stock to be issued in the merger. See "Where You Can Find More
Information."
THE PARTIES
Webster and NECB have entered into a merger agreement. Under this
agreement, Webster will acquire NECB through the merger of NECB into Webster.
The merger agreement also provides for each of New England Bank and Trust
Company, The Equity Bank, Community Bank and, subject to Webster's discretion,
Olde Port Bank and Trust (collectively, the "NECB Subsidiary Banks"), which are
wholly owned subsidiaries of NECB, to merge into Webster Bank, a wholly owned
subsidiary of Webster.
WEBSTER. Webster is a Delaware corporation and the holding company of
Webster Bank, Webster's federally chartered savings bank subsidiary. Both
Webster and Webster Bank are headquartered in Waterbury, Connecticut. Deposits
at Webster Bank are insured by the FDIC. Through Webster Bank, Webster currently
serves customers from 115 banking offices, three commercial banking centers and
180 ATMs located in Hartford, New Haven, Fairfield, Litchfield and Middlesex
Counties in Connecticut. Webster's mission is to help individuals, families and
businesses achieve their financial goals. Webster emphasizes five business lines
- -- consumer banking, business banking, mortgage banking, trust and investment
services and insurance services -- each supported by centralized administration
and operations. Through a number of recent acquisitions of other financial
service firms, including banks and thrifts, a trust company and an insurance
firm, Webster has established a leading position in the banking and trust and
investment services market in Connecticut.
At June 30, 1999, Webster had total consolidated assets of $9.1
billion, total deposits of $5.7 billion, and shareholders' equity of $565
million or 6.24% of total assets. At that date, Webster also had loans
receivable, net of $5.3 billion, which included $3.8 billion in residential
mortgage loans, $511 million in commercial real estate loans, $534 million in
commercial and industrial loans and $493 million in consumer loans, consisting
primarily of home equity loans. At June 30, 1999, nonaccrual loans and other
real estate owned were $35.0 million. At that date, Webster's allowance for loan
losses was $61.4 million, or 198% of nonaccrual loans, and its total allowance
for loan and other real estate owned losses was $61.6 million, or 175% of
nonaccrual loans and other real estate owned. For additional information about
Webster that is incorporated by reference into this document, see "Incorporation
of Documents by Reference."
Webster, as a savings and loan holding company, is regulated by the
Office of Thrift Supervision. Webster Bank, as a federal savings bank, also is
regulated by the Office of Thrift Supervision and to some extent by the Federal
Deposit Insurance Corporation.
NECB. NECB is a Delaware corporation and the holding company of the
NECB Subsidiary Banks. NECB is headquartered in Windsor, Connecticut. Deposits
at the NECB Subsidiary Banks are insured by the FDIC. NECB operates the NECB
Subsidiary Banks as community-oriented banking institutions dedicated to
providing personalized service. NECB believes that its
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maintenance of professional, personalized service has resulted in its ability to
obtain and service many of the desirable, small to medium-sized business in its
market area.
At June 30, 1999, NECB had total consolidated assets of $808 million,
total deposits of $641 million, and shareholders' equity of $69.6 million, or
8.6% of total assets. At that date, NECB also had loans receivable, net, of $515
million, which included $116 million in residential mortgage loans, $210 million
in commercial real estate loans, $152 million in commercial loans and $40
million in home equity credit lines and consumer installment loans. At June 30,
1999, nonperforming assets were $8.2 million. At that date, NECB's allowance for
loan losses was $10.3 million, or 158% of nonperforming loans. For additional
information about NECB that is incorporated by reference into this document, see
"Incorporation of Documents by Reference."
NECB, as a bank holding company, is regulated by the Board of Governors
of the Federal Reserve System. The NECB Subsidiary Banks, as Connecticut or New
Hampshire-chartered commercial banks, are regulated by the Connecticut and New
Hampshire Commissioners of Banking and by the FDIC.
BACKGROUND OF THE MERGER
Over the past several years, the board of directors and management of
NECB have considered a variety of strategic alternatives, including remaining
independent, acquiring other small institutions and being acquired by a larger
organization.
In April of 1999, the NECB board met and discussed, in light of recent
developments in the competitive landscape in Connecticut and New England, issues
concerning the consolidation within the banking industry, the competitive
banking environment in Connecticut and New England, bank stock valuations and
the future earning potential of NECB.
A majority of the NECB directors agreed to investigate further a
possible strategic business combination of NECB with another financial
institution. A project committee of outside directors was formed with Director
James A. Cotter as Chairman. The project committee was directed to formulate a
list of other potential partners, recommend a methodology to be utilized in
evaluating potential transactions and oversee the process. The project committee
was to report its findings and progress to the full NECB board of directors.
The NECB project committee met on a number of occasions throughout May,
1999. During this time the project committee recommended to the NECB Board that
HAS Associates and A.G. Edwards be engaged as financial advisors for NECB for a
possible business combination transaction.
At these meetings the NECB project committee, along with Thomas Collins
of HAS Associates and John Howland of A.G. Edwards, discussed procedural and
communication issues relevant to identifying and negotiating with a potential
merger partner for NECB, and HAS Associates and A.G. Edwards presented detailed
information on potential merger partners, including valuation analysis, stock
market performance and comparable transactions analysis.
In early June, 1999 NECB's financial advisors reported to the project
committee on preliminary discussions with potential merger partners and updated
the committee on all indications of interest submitted. The project committee,
after discussion and review, determined to invite two potential merger partners
to conduct due diligence on NECB. Later in June, these two potential merger
partners conducted their due diligence.
The NECB project committee met again on June 24, 1999. HAS Associates
and A.G. Edwards updated the committee on the results of the due diligence
activities and the status of the proposals of the two prospective merger
partners, both of which called for a stock-for-stock merger with NECB.
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After this meeting, the full NECB board of directors met with their
legal and financial advisors. The project committee and the financial advisors
updated the board of directors on terms and conditions of the two proposals. An
in-depth discussion took place comparing the two proposals received. NECB's
financial advisors presented detailed financial analyses of the two potential
partners and their proposals. During the course of the meeting, David Lentini,
chairman, had telephone conversations with the presidents and chief executive
officers of each of the other parties to seek clarification of the exchange
ratio and other terms. After these conversations and further discussion by the
board, a motion was made and approved to accept Webster's proposed exchange
ratio of 1.06 shares of Webster's common stock for each share of NECB's common
stock.
The NECB board of directors met again on June 29, 1999. NECB's legal
counsel and financial advisors reviewed the contents of a proposed merger
agreement from Webster. After a lengthy discussion, a motion was made and
approved to enter into the merger agreement with Webster.
RECOMMENDATION OF THE NECB BOARD OF DIRECTORS AND REASONS FOR THE MERGER
The NECB board, with the assistance of its financial and legal
advisors, has evaluated the financial, legal and market considerations bearing
on the decision to recommend the merger agreement. The terms of the merger
agreement, including the exchange ratio, are the result of arms-length
negotiations between NECB and Webster and their representatives. In reaching its
determination that the merger agreement is fair to, and in the best interest of,
NECB and the holders of NECB's common stock, the NECB board considered a number
of factors, both from a short-term and long-term perspective. The factors which
the NECB board considered, without assigning any relative or specific weights,
included, without limitation, the following:
o NECB board's review of NECB's business, financial condition,
results of operations, management and prospects, including,
but not limited to, its potential growth, development,
productivity and profitability;
o the current and prospective environment in which NECB
operates, including regional economic conditions, the
competitive environment for banking and other financial
institutions generally and the trend toward consolidation in
the financial services industry;
o information concerning the business, financial condition,
results of operations and prospects of Webster, including
recent acquisitions by Webster, the recent performance of
Webster's common stock, historical data of Webster, customary
statistical measurements of Webster's financial performance,
Webster's expectations of future business prospects and
earnings based upon discussions with representatives of
Webster;
o the value to be received by holders of NECB's common stock
pursuant to the merger agreement in relation to the historical
trading prices and book value of NECB's common stock;
o the information presented to the NECB board by its financial
advisors with respect to the merger agreement and their
opinion that, as of the date of such opinion, the exchange
ratio is fair, from a financial point of view, to NECB's
shareholders;
o the financial and other significant terms of the Webster
offer;
o the review by the NECB board with its legal and financial
advisors of the provisions of the merger agreement and option
agreement;
o the future growth prospects of NECB and Webster following the
merger and the potential business benefit expected from the
merger, including potential expense reductions and increases
in efficiency;
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o the expectation that Webster will continue to provide quality
service to the community and customers served by NECB and the
prospects for future expansion of the products and services
offered by Webster in its market area;
o the compatibility of the respective business and management
philosophies of NECB and Webster, and the prospect that a
member of the NECB Board would serve as a director of Webster
and Webster Bank, which is considered by the NECB Board to
enhance the prospect for a smooth transition after the merger
and the prospects that the interests of NECB's current
shareholders and NECB's customers and employees would not be
overlooked after the merger; and
o the less attractive alternative strategic courses available to
NECB, including remaining independent and the other potential
strategic business combination transactions.
The discussion in this section of the information and factors
considered by the NECB board is not intended to be exhaustive but includes the
material factors considered by the board. In reaching its determination to
approve and recommend the merger, the NECB board did not assign any relative or
specific weights to the factors considered. Individual directors may have given
differing weights to different factors. After deliberating on the merger and the
other transactions contemplated by the merger agreement, and considering, among
other things, the matters discussed above and the fairness opinions of A.G.
Edwards and HAS Associates referred to above, the NECB board approved the merger
agreement, the merger, the other transactions contemplated by the merger
agreement, and the option agreement, as being fair to, and in the best interests
of NECB and its shareholders.
RECOMMENDATION OF THE WEBSTER BOARD OF DIRECTORS AND REASONS FOR THE MERGER
In reaching its decision to approve the merger agreement, the Webster
board considered the following:
o Webster board's familiarity with and review of a range of
strategic alternatives designed to enhance shareholder value;
o Webster's current and prospective operating environment,
including national and local economic conditions, the highly
competitive environment for financial institutions generally,
the changing regulatory environment, and the trend toward
consolidation in the financial services industry;
o Information concerning NECB's business, financial condition,
results of operations, asset quality and prospects, including
the future growth prospects of NECB combined with Webster
following the proposed merger and the business risks
associated with the merger;
o Expanding the Webster franchise in New England by entering
Tolland County in Connecticut and the New Hampshire market and
strengthening Webster's business presence in Hartford and
Litchfield Counties in Connecticut;
o The scale, scope and strength of the combined companies,
making Webster, after the merger, the fifth largest New
England based bank with approximately $10 billion in assets;
o The anticipated financial impact of the proposed transaction
on the combined company's future financial performance,
including, without limitation, the expected positive impact on
Webster's earnings per share in the first year;
o The expectation that the merger would result in financial
benefits from combining the operations of the two companies,
including an advantageous cost structure relative to
competitors and to Webster on a stand-alone basis;
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o The potential for appreciation and growth in the market and
book value of Webster's common stock following the proposed
merger;
o The terms of the merger agreement and the transactions and
agreements contemplated by the merger agreement;
o The short- and long-term interests of Webster and its
shareholders, the interests of Webster's employees, customers,
creditors and suppliers, and the interests of the Webster
community that may benefit from the acquisition of NECB;
o The compatibility of the businesses and management
philosophies of Webster and NECB; and
o The likelihood of receiving all of the regulatory approvals
required for the merger to take place.
The discussion in this section of the information and factors
considered by the Webster board is not intended to be exhaustive but includes
all material factors considered by the board. In reaching its determination to
approve and recommend the merger, the Webster board did not assign any relative
or specific weights to the factors considered. Individual directors may have
given differing weights to different factors. After deliberating on the merger
and the other transactions contemplated by the merger agreement, and
considering, among other things, the matters discussed above, the Webster board
unanimously approved the merger agreement, the merger and the other transactions
contemplated by the merger agreement, as being in the best interests of Webster
and its shareholders.
PURPOSE AND EFFECTS OF THE MERGER
The purpose of the merger is to enable Webster to acquire the assets
and business of NECB. After the merger, it is expected that the majority of the
NECB Subsidiary Banks' branch banking offices will remain open and will be
operated as banking offices of Webster Bank.
The merger will result in an expansion of Webster Bank's primary market
area to include NECB Subsidiary Banks' banking offices in Connecticut and New
Hampshire. The assets and business of NECB Subsidiary Banks' banking offices
will broaden Webster's existing operations in Hartford and Litchfield Counties,
where Webster Bank currently has banking offices, and expand its operations into
Tolland County and New Hampshire. Webster expects to achieve reductions in the
current operating expenses of NECB upon the consolidation of the NECB Subsidiary
Bank's operations into Webster Bank. Upon completion of the merger, except as
discussed below, the issued and outstanding shares of NECB's common stock
automatically will be converted into shares of Webster's common stock. See "--
Exchange Ratio."
STRUCTURE
NECB will merge into Webster, with Webster as the surviving
corporation. When the merger takes place, except as discussed below, each issued
and outstanding share of NECB's common stock will be converted into the right to
receive Webster's common stock based on the exchange ratio, as described below.
Webster will reissue 400,100 shares of Webster common stock held as transfer
shares as part of the shares issued to NECB shareholders in the merger. Cash
will be paid instead of fractional shares. Shares of NECB's common stock held as
treasury stock or held directly or indirectly by NECB, Webster or any of their
subsidiaries, other than trust account shares and shares related to a previously
contracted debt, will be canceled.
We expect that the merger will take place in the fourth quarter of
1999, or as soon as possible after we receive all required regulatory and
shareholder approvals and all regulatory waiting periods expire. If the merger
does not take place by June 29, 2000, the merger agreement may be terminated by
either of us unless we both agree to extend it.
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The merger agreement permits Webster to modify the structure of this
transaction so long as:
o there are no material adverse federal income tax consequences
to NECB's shareholders from the modification;
o the consideration to be paid to NECB's shareholders under the
merger agreement is not changed or reduced in amount; and
o the modification will not be reasonably likely to delay
materially or jeopardize receipt of any required regulatory
approvals. Webster presently has no intent to modify the
structure of the merger.
EXCHANGE RATIO
The merger agreement provides that at the effective time of the merger,
except as discussed below, each outstanding share of NECB's common stock
automatically will be converted into the right to receive 1.06 shares of
Webster's common stock representing a value of $28.00 based on the September 17,
1999 price of Webster's common stock. However, if the price of Webster's common
stock falls below thresholds set forth in the merger agreement, NECB may
terminate the merger unless Webster decides to increase the 1.06 exchange ratio,
which would result in Webster issuing more shares of its common stock to
complete the merger. See "--Termination and Amendment of the Merger Agreement."
Shares of NECB's common stock held as treasury stock and shares held
directly or indirectly by NECB, Webster or any of their subsidiaries, other than
trust account shares and shares related to a previously contracted debt, will be
canceled. If, prior to the effective time, Webster should split its common
stock, or pay a dividend or other distribution in its common stock, then the
exchange ratio will be adjusted to reflect the split, combination, dividend or
distribution.
Certificates for fractions of shares of Webster's common stock will not
be issued. Instead of a fractional share of Webster's common stock, a NECB
shareholder will be entitled to receive an amount of cash equal to the fraction
of a share of Webster's common stock to which the shareholder would otherwise be
entitled multiplied by the average of the daily closing prices per share for
Webster's common stock for the 20 consecutive trading days on which shares of
Webster's common stock are actually traded as reported on Nasdaq ending on the
third trading day before the closing date of the merger. In this document, we
use the term "purchase price" to refer to the shares of Webster's common stock
and any cash to be paid instead of a fraction of a share of Webster's common
stock payable to each holder of NECB's common stock.
The conversion of NECB's common stock into shares of Webster's common
stock at the exchange ratio will occur automatically upon completion of the
merger. Under the merger agreement, after the effective time of the merger,
Webster will cause its exchange agent to pay the purchase price to each NECB
shareholder who surrenders the appropriate documents to the exchange agent.
Webster will deposit with the exchange agent the certificates
representing the Webster's common stock to be issued to NECB shareholders in
exchange for NECB's common stock, along with cash to be paid instead of
fractional shares. As soon as practicable after the merger takes place, the
exchange agent will mail a letter of transmittal and instructions for use in
surrendering certificates to each shareholder who held NECB's common stock
immediately before the effective time. Upon surrendering his or her
certificate(s) representing shares of NECB's common stock, together with the
signed letter of transmittal, the shareholder shall be entitled to receive
promptly certificate(s) representing a number of shares of Webster's common
stock determined in accordance with the exchange ratio and a check representing
the amount of cash in lieu of fractional shares, if any. No dividends or
distributions on Webster's common stock payable to any NECB shareholder will be
paid until the shareholder surrenders the certificate(s) representing the shares
of NECB's common stock
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<PAGE>
for exchange. No interest will be paid or accrued to NECB shareholders on cash
instead of fractional shares or unpaid dividends and distributions, if any.
If any certificate representing shares of Webster's common stock is to
be issued in a name other than that in which the certificate for shares
surrendered in exchange is registered, or cash is to be paid to a person other
than the registered holder, it will be a condition of issuance or payment that
the certificate so surrendered be properly endorsed or otherwise be in proper
form for transfer and that the person requesting the exchange either:
o pay to the exchange agent in advance any transfer or other
taxes required by reason of the issuance of a certificate or
payment to a person other than the registered holder of the
certificate surrendered, or
o establish to the satisfaction of the exchange agent that the
tax has been paid or is not payable.
After the close of business on the day before the merger takes place, there will
be no transfers on NECB's stock transfer books of shares of NECB's common stock,
and any shares of this kind that are presented to the exchange agent after the
merger takes place will be canceled and exchanged for certificates for shares of
Webster's common stock.
Any portion of the purchase price made available to the exchange agent
that remains unclaimed by NECB shareholders for one year after the effective
time of the merger will be returned to Webster. Any NECB shareholder who has not
exchanged shares of NECB's common stock for the purchase price in accordance
with the merger agreement before that time may look only to Webster for payment
of the purchase price for these shares and any unpaid dividends or distributions
after that time. Nonetheless, Webster, NECB, the exchange agent or any other
person will not be liable to any NECB shareholder for any amount properly
delivered to a public official under applicable abandoned property, escheat or
similar laws.
STOCK CERTIFICATES FOR SHARES OF NECB'S COMMON STOCK SHOULD NOT BE
RETURNED TO NECB WITH THE ENCLOSED PROXY CARD. AFTER THE MERGER TAKES PLACE, YOU
WILL RECEIVE INSTRUCTIONS ON HOW TO EXCHANGE YOUR NECB CERTIFICATES FOR WEBSTER
CERTIFICATES.
OPTIONS
As of the record date, there were outstanding options to purchase
471,894 shares of NECB's common stock at an average exercise price of $13.43 per
share. Under the merger agreement, shares of NECB's common stock issued before
the merger takes place upon the exercise of outstanding NECB options will be
converted into Webster's common stock at the exchange ratio. Each NECB option
that is outstanding and unexercised immediately before the effective time shall
be converted automatically into an option to purchase shares of Webster's common
stock, with adjustment in the number of shares and exercise price to reflect the
exchange ratio. The adjustment will be made in a manner consistent with Section
424(a) of the Internal Revenue Code of 1986, as amended. The duration and other
terms of the NECB options will otherwise be unchanged except that all references
to NECB or any of the NECB Subsidiary Banks in the NECB Stock Plans (and in any
option agreement documenting such option) shall be deemed to be references to
Webster or Webster Bank, as applicable.
REGULATORY APPROVALS
For the merger of Webster and NECB and the merger of Webster Bank and
the NECB Subsidiary Banks to take place, we must receive approvals of the Office
of Thrift Supervision, referred to in this section as the "OTS", the Connecticut
Commissioner of Banking and the New Hampshire Commissioner of Banking. In this
section, we refer to these approvals as the
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<PAGE>
"required regulatory approvals". Webster and NECB have agreed to use their best
efforts to obtain the required regulatory approvals.
Webster Bank has filed with the OTS an application for approval of the
merger of Webster Bank and the NECB Subsidiary Banks. We refer to that merger in
this section as the "bank merger". The bank merger is subject to the approval of
the OTS under the Home Owners' Loan Act of 1933, the Bank Merger Act provisions
of the Federal Deposit Insurance Act and related OTS regulations. These
approvals require consideration by the OTS of various factors, including
assessments of the competitive effect of the contemplated transactions, the
managerial and financial resources and future prospects of the resulting
institutions, and the effect of the contemplated transactions on the convenience
and needs of the communities to be served. The Community Reinvestment Act of
1977, commonly referred to as the "CRA", also requires that the OTS, in deciding
whether to approve the bank merger, assess the records of performance of Webster
Bank and the NECB Subsidiary Banks in meeting the credit needs of the
communities they serve, including low and moderate income neighborhoods. As part
of the review process, it is not unusual for the OTS to receive protests and
other adverse comments from community groups and others. Webster Bank currently
has an outstanding CRA rating from the OTS. Each of the NECB Subsidiary Banks
currently has a satisfactory CRA rating from the FDIC. The OTS regulations
require publication of notice and an opportunity for public comment concerning
the application filed in connection with the bank merger, and authorize the OTS
to hold informal and formal meetings in connection with the application if the
OTS, after reviewing the application or other materials, determines it is
desirable to do so or receives a request for an informal meeting. Any meeting or
comments provided by third parties could prolong the period during which the
bank merger is subject to review by the OTS. As of the date of this joint proxy
statement/prospectus, Webster is not aware of any protests, adverse comments or
requests for a meeting filed with the OTS concerning the bank merger. The bank
merger may not take place for a period of 15 to 30 days following OTS approval,
during which time the Department of Justice has authority to challenge the bank
merger on antitrust grounds. The OTS will determine the precise length of the
period in consultation with the Department of Justice. The commencement of an
antitrust action would stay the effectiveness of any approval granted by the OTS
unless a court specifically orders otherwise. If the Department of Justice does
not start a legal action during the waiting period, it may not challenge the
transaction afterward, except in an action under Section 2 of the Sherman
Antitrust Act.
An acquisition statement has been filed with the Connecticut
Commissioner of Banking in connection with Webster's acquisition of NECB and New
England Bank & Trust, The Equity Bank and Community Bank, the merger and bank
merger. In reviewing the acquisition statement, the Connecticut Commissioner
will review and consider, among other things, whether the investment and lending
policies of Webster Bank are consistent with safe and sound banking practices
and will benefit the economy of the state, whether the services or proposed
services of Webster Bank are consistent with safe and sound banking practices
and will benefit the economy of the state, the competitive effects of the
transaction, and the financial and managerial resources of Webster and Webster
Bank. The Connecticut Commissioner also will review Webster Bank's record under
the CRA. The Connecticut Commissioner may, at his discretion, hold a public
hearing on the proposed transaction.
In connection with the merger of Webster Bank and NECB's subsidiary
bank in New Hampshire, Olde Port Bank and Trust, Webster Bank has filed an
application with the New Hampshire Banking Commissioner requesting approval of
the merger and the establishment by Webster Bank of branches in New Hampshire.
In reviewing the applications, the New Hampshire Commissioner will review
whether the merger will promote the public interests and the interests of the
institutions involved and their shareholders and depositors.
Webster requested and received on September 9,1999 from the Board of
Governors of the Federal Reserve System a waiver of any application filing
requirement under the Bank Holding Company Act of 1956 that would otherwise
apply to the merger.
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<PAGE>
Webster and NECB are not aware of any other material governmental
approvals that are required for the merger and the bank merger to take place
that are not described above. If any other approval or action is required, we
presently expect that we would seek the approval or take the necessary action.
THE MERGER AND THE BANK MERGER CANNOT TAKE PLACE WITHOUT THE REQUIRED
REGULATORY APPROVALS, WHICH WE HAVE NOT RECEIVED YET. THERE IS NO ASSURANCE THAT
WE WILL RECEIVE THESE APPROVALS, AND IF WE DO, WHEN WE WILL RECEIVE THEM. ALSO,
THERE IS NO ASSURANCE THAT THE DEPARTMENT OF JUSTICE WILL NOT CHALLENGE THE
MERGER, OR, IF A CHALLENGE IS MADE, WHAT THE RESULT OF A CHALLENGE WOULD BE.
CONDITIONS TO THE MERGER
Under the merger agreement, Webster and NECB are not required to
complete the merger unless the following conditions are satisfied:
o the merger agreement is not terminated on or before the
effective time of the merger;
o the merger agreement and the merger are approved by the
affirmative vote of the holders of at least a majority of the
issued and outstanding shares of NECB's common stock entitled
to vote at the special meeting and a majority of the issued
and outstanding shares of Webster's common stock entitled to
vote at the special meeting;
o the Webster's common stock to be issued in the merger
(including stock which may be issued upon the exercise of
stock options) is authorized for quotation on the Nasdaq Stock
Market's National Market Tier (or such other exchange on which
the stock may become listed);
o all required regulatory approvals are obtained and remain in
full force and effect, all statutory waiting periods related
to these approvals expire, and none of the regulatory
approvals or statutory waiting periods contains a provision
that Webster reasonably considers to be unduly burdensome;
o the registration statement filed with the Securities and
Exchange Commission cover the shares of Webster's common stock
to be issued in the merger is effective and is not subject to
a stop order or any threatened stop order;
o no order, injunction or decree preventing the merger from
taking place is in effect and the completion of the merger
continues to be legal; and
o Webster and NECB receive a favorable tax opinion from
Webster's counsel which is reasonably satisfactory to Webster
and NECB.
Webster is not required to complete the merger unless the following
additional conditions are satisfied or waived:
o the representations and warranties of NECB contained in the
merger agreement are true and correct as of the date of the
merger agreement and as of the effective time of the merger,
except where the failure or failures to be true and correct
would not have a material adverse effect on NECB;
o NECB performs in all material respects all covenants and
agreements contained in the merger agreement to be performed
by NECB by the effective time; and
o Webster receives the written opinion of KPMG LLP, Webster's
independent public accountant, advising that, as of the
effective time, the merger will be accounted for as a "pooling
of interests."
NECB is not required to complete the merger unless the following
additional conditions are satisfied or waived:
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<PAGE>
o the representations and warranties of Webster contained in the
merger agreement are true and correct as of the date of the
merger agreement and as of the effective time of the merger,
except where the failure or failures to be true and correct
would not have a material adverse effect on Webster; and
o Webster performs in all material respects all covenants and
agreements contained in the merger agreement required to be
performed by it by the effective time.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement contains various restrictions on the operations of
NECB (including the NECB Subsidiary Banks) before the effective time of the
merger. In general, the merger agreement obligates NECB to continue to carry on
its businesses in the ordinary course consistent with past practices and with
prudent banking practices, with specific limitations on the lending activities
and other operations of NECB. The merger agreement prohibits NECB from:
o declaring any dividends or other distributions on its capital
stock other than regular quarterly cash dividends on NECB's
common stock and dividends by any NECB subsidiary to NECB;
o splitting, combining or reclassifying any of its capital
stock;
o issuing or authorizing or proposing the issuance of any
securities, other than the issuance of additional shares of
NECB's common stock upon the exercise or fulfillment of rights
or options issued or existing under NECB's stock option plan
in accordance with their present terms or the stock option
granted to Webster at the time the merger agreement was
signed;
o amending its articles of incorporation or bylaws;
o changing its methods of accounting in effect at December 31,
1998, except as required by changes in regulatory or generally
accepted accounting principles;
o increasing employee or director benefit arrangements or
compensation, other than limited increases in pay for
employees consistent with past practices, including the
granting of stock options and entering into any new employment
or severance agreements; and
o paying any bonuses except for bonuses totaling $250,000 as
agreed to in advance by Webster.
THIRD PARTY PROPOSALS
Under the merger agreement, NECB generally may not authorize or permit
any of its officers, directors, employees or agents to solicit, initiate or
encourage any inquiries relating to any third party proposal relating to a
tender offer or exchange offer or acquisition of a substantial equity interest
in or acquisition of a substantial portion of the assets of or any merger or
consolidation with NECB and/or the NECB Subsidiary Banks. There is also a
prohibition against holding substantive discussions or negotiations and
providing confidential information regarding these kinds of proposals.
Nevertheless, the NECB board of directors may disregard these restrictions if,
based on advice of counsel, it reasonably determines in the exercise of its
fiduciary duty that this kind of information must be furnished and discussions
and negotiations must be entered into.
EXPENSES; BREAKUP FEE
The merger agreement generally provides that all costs and expenses
incurred in connection with the merger agreement and the transactions
contemplated by the merger agreement shall be paid for by the party incurring
such expense, except that Webster and NECB will split all filing and other fees
paid to the SEC in connection with the merger and printing fees in connection
with this
26
<PAGE>
joint proxy statement/prospectus. However, if the merger agreement is terminated
by Webster or NECB as a result of a material breach of a representation,
warranty, covenant or other agreement contained in the merger agreement by the
other party, the merger agreement provides for the non-terminating party to pay
all documented reasonable expenses of the terminating party up to $1,500,000.
Some of the events would also permit Webster to terminate the merger agreement
as well as exercise its rights under the option agreement. See "--Option
Agreement."
FAIRNESS OPINIONS OF NECB'S FINANCIAL ADVISORS
A. G. EDWARDS & SONS, INC.
On May 21, 1999, NECB engaged A.G. Edwards to act as its financial
advisor and to render an opinion as to the fairness, from a financial point of
view, to NECB shareholders of the merger consideration to be received in
connection with the merger.
A.G. Edwards is a nationally recognized securities and investment
banking firm engaged in, among other things, the evaluation of businesses and
their securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive bidding, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes. A.G. Edwards was selected by NECB as its financial advisor
based upon this expertise, the reputation of A.G. Edwards in investment banking
and mergers and acquisitions and A.G. Edwards' expertise in providing financial
advisory services to banking institutions and the banking industry generally.
A.G. Edwards is not aware of any past, present or contemplated relationship
between A.G. Edwards, NECB, NECB's directors, officers or shareholders or
Webster which, in its opinion, would affect its ability to render a fair and
independent opinion in this matter.
On June 29, 1999, at the meeting at which the NECB board approved and
adopted the merger agreement and the transactions contemplated by the merger
agreement, A.G. Edwards rendered its oral and written opinion to the NECB board
that, as of such date, the merger consideration was fair, from a financial point
of view, to NECB shareholders. The opinion has been updated as of the date of
this document.
The full text of the A.G. Edwards updated opinion, which describes,
among other things, assumptions made, procedures followed, matters considered
and limitations of the scope of the review undertaken by A.G. Edwards in
rendering its opinion, is attached as Appendix A to this document. NECB
shareholders are urged to, and should, read the A. G. Edwards opinion carefully
and in its entirety. The opinion was directed to the NECB board and addresses
only the fairness, from a financial point of view, to NECB shareholders of the
merger consideration to be received pursuant to the merger agreement and does
not constitute a recommendation to any holder of NECB capital stock as to how to
vote with respect to the merger agreement and the merger. The summary of the
opinion set forth in this document is qualified in its entirety by reference to
the full text of such opinion.
In connection with rendering its opinion, A.G. Edwards reviewed, among
other things:
o the merger agreement and exhibits thereto;
o the stock option agreement;
o NECB's audited consolidated financial statements and management's
discussion and analysis of financial condition and results of
operations contained in its annual report for the years ended
December 31, 1998 and December 31, 1997;
o Webster's audited consolidated financial statements and
management's discussion and analysis of financial condition and
results of operations contained in its annual report for the
fiscal years ended December 31, 1998 and December 31, 1997;
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<PAGE>
o expressions of interest for NECB by potential bidders other than
Webster;
o financial analyses and forecasts of NECB prepared by and reviewed
with management of NECB and the views of senior management of NECB
regarding NECB's past and current business operations, results of
these operations, financial condition and future prospects;
o financial analyses and forecasts of Webster prepared by, and
reviewed with, management of Webster and the views of senior
management of Webster regarding Webster's past and current
business operations, results of these operations, financial
condition, and future prospects as well as information relating to
the strategic, financial and operational benefits anticipated from
the merger;
o the pro forma impact of the merger on NECB and Webster;
o the publicly reported historical price and trading activity for
Webster's common stock and NECB's common stock, including a
comparison of certain financial and stock market information for
Webster and NECB with similar publicly available information for
certain other companies, the securities of which are publicly
traded;
o the financial terms of recent business combinations of banking
institutions, to the extent publicly available;
o the current market environment generally and the banking
environment in particular; and such other information, financial
studies, analyses and investigations and financial, economic and
market criteria as A.G. Edwards considered relevant.
In rendering its opinion, A.G. Edwards has reviewed the pro forma
impact of the merger as if it will be accounted for as a "pooling of interests"
business combination in accordance with U.S. generally accepted accounting
principals and has assumed that the merger will be consummated on the terms
contained in the merger agreement, without any waiver of any material terms or
conditions by NECB.
In rendering its opinion, A.G. Edwards has relied upon and assumed,
without independent verification, the accuracy and completeness of all financial
and other information, publicly available, or furnished to, or otherwise
discussed with A.G. Edwards for the purposes of the opinion. With respect to
financial projections and other information provided to or otherwise discussed
with A.G. Edwards, A.G. Edwards assumed and was advised by the senior management
of NECB and Webster, respectively, that such projections and other information
were reasonably prepared on a basis that reflects the best currently available
estimates and judgments of the senior management of NECB and Webster,
respectively. The board of NECB did not specifically engage A.G. Edwards to, and
therefore A.G. Edwards did not, verify the accuracy or completeness of any such
information. A.G. Edwards did not conduct a physical inspection of any of the
properties or facilities of NECB or Webster or analyze any loan or asset
documentation, nor did it make or obtain any independent evaluation or
appraisals of any such properties or facilities or of any loans, investments or
financial assets and liabilities. Furthermore, A.G. Edwards is not an expert in
the evaluation of allowances for loan losses, and it did not make an independent
evaluation of the adequacy of the allowances for loan losses of NECB and
Webster, nor did it review the loan portfolios of NECB or Webster. A.G. Edwards
has relied upon the assurances of the management of NECB and Webster that the
respective managements are not aware of any facts that would make such
information inaccurate or misleading. A.G. Edwards did not express an opinion as
to what the value of Webster's common stock will be when issued to the holders
of NECB's common stock pursuant to the merger, or the price at which Webster's
common stock will trade subsequent to the merger. A.G. Edwards' opinion is
necessarily based upon financial and other conditions and circumstances existing
and disclosed to it as of June 29, 1999.
The following is a summary of the material analyses performed by A.G.
Edwards in arriving at its opinion:
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<PAGE>
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. A.G. Edwards used
publicly available information to compare selected financial and market trading
information for NECB and a comparable group of selected banking institutions.
The institutions in the NECB comparable group were selected by A.G. Edwards
based on their geographic proximity and similarity of business lines to NECB's.
The NECB comparable group was comprised of:
o Arrow Financial Corporation;
o Bank Rhode Island;
o CCBT Bancorp, Inc.;
o CNB Financial Group;
o First of Long Island Corporation;
o Granite State Bankshares, Inc.;
o Independent Bank Corp.;
o Merchants Bancshares, Inc.;
o NBT Bancorp, Inc.; and
o Premier National Bancorp Inc.
A.G. Edwards reviewed financial information that included, among other
things, stock price to the last twelve months earnings per share, stock price to
tangible book value per share, stock price to book value per share, and current
dividend yield. A.G. Edwards calculated the following ratios for NECB using
implied valuations based on the consideration to be received for NECB's common
stock:
<TABLE>
<CAPTION>
NECB NECB COMPARABLE GROUP
---- ---------------------
<S> <C> <C>
Price/Last Twelve Month's
Earnings 21.8x 14.1x
Price/Tangible Book Value 314.3% 203.2%
Price/Book Value 293.6% 202.4%
Current Dividend Yield 1.7% 2.6%
</TABLE>
A.G. Edwards also used publicly available information to perform a
similar comparison of selected financial and market trading information for
Webster versus a comparable group of selected publicly traded commercial bank
holding companies. The companies in the Webster comparable group were selected
by A.G. Edwards based on their geographic proximity and similar business lines
to Webster's. The Webster comparable group was comprised of:
o Charter One Financial, Inc.;
o Chittenden Corporation;
o Hudson United Bancorp;
o M&T Bank Corporation;
o North Fork Bancorporation;
o People's Bank;
o Peoples Heritage Financial Group, Inc.;
o Sovereign Bancorp, Inc.; and
o Summit Bancorp.
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<PAGE>
A.G. Edwards reviewed financial information that included, among other
things, stock price to last twelve months earnings per share (excluding
non-recurring charges), stock price to tangible book value per share, stock
price to book value per share and current dividend yield. A.G. Edwards observed
the following results:
<TABLE>
<CAPTION>
WEBSTER WEBSTER COMPARABLE GROUP
------- ------------------------
<S> <C> <C>
Price/Last Twelve Months Earnings 13.0x 14.8x
Price/Tangible Book Value 235.0% 262.6%
Price/Book Value 199.2% 234.3%
Current Dividend Yield 1.5% 2.8%
</TABLE>
ANALYSIS OF SELECTED MERGER TRANSACTIONS. A.G. Edwards reviewed three
groups of selected merger and acquisition transactions involving public
commercial banking and savings institutions from Connecticut, New England and
nationwide and compared these merger transactions with the merger.
o The Connecticut merger comparables included nine commercial
banking and savings institution mergers and corporate
transactions announced since January 1, 1994 in which the
selling institution was headquartered in Connecticut and the
aggregate deal size was in excess of $100 million and less
than $1 billion.
o The New England merger comparables were comprised of sixteen
mergers and corporate transactions of commercial banking and
savings institutions announced since January 1, 1996 in which
the selling institution was headquartered in New England
(Connecticut, New Hampshire, Maine, Massachusetts, Rhode
Island and Vermont) and the aggregate deal size was greater
than $100 million and less than $1 billion.
o The nationwide merger comparables included fifty-two mergers
and corporate transactions announced since January 1, 1997 in
which the selling institution was a commercial banking
institution headquartered in the United States and the
aggregate deal size was in excess of $100 million but less
than $300 million.
A.G. Edwards reviewed, among other things, the ratios of stock price to
last twelve months earnings per share, stock price to tangible book value per
share and stock price to book value per share in each transaction and compared
the medians of these ratios to the same ratios for the merger. The merger ratios
were calculated based on a $28.43 stock price for Webster's common stock. A.G.
Edwards observed the following results:
30
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT MERGER NEW ENGLAND MERGER NATIONAL MERGER
MERGER COMPARABLES COMPARABLES COMPARABLES
------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Price/Last Twelve Months Earnings 21.9x 19.2x 21.4x 23.8x
Price/Tangible Book Value 314% 204% 244% 295%
Price/Book Value 294% 204% 215% 283%
</TABLE>
PRO FORMA MERGER ANALYSIS. A.G. Edwards analyzed the impact of the
merger on NECB's equivalent pro forma earnings per share, NECB's equivalent pro
forma tangible book value per share, NECB's equivalent pro forma book value per
share and equivalent pro forma dividend yield. For purposes of this paragraph,
equivalent pro forma means the product of (1) the associated pro forma Webster
financial items listed below and (2) the 1.06 exchange ratio. Such analysis was
based on consensus earnings estimates, NECB's and Webster's respective
management projections and expense savings as well as consolidation efficiencies
as estimated by Webster's management. A.G. Edwards observed that, before taking
into account any restructuring charges to be incurred by Webster in connection
with the merger, and assuming a price of Webster common stock of $28.43, the
merger would result in the following equivalent pro forma per share effects:
<TABLE>
<CAPTION>
NECB WEBSTER
---- -------
<S> <C> <C>
Earnings 49% to 55% increase 0.5% to 2.1% increase
Tangible Book Value 25% increase 5.1% decrease
Book Value 35% increase 6.2% decrease
Dividend Yield 1.7% 1.5%
</TABLE>
ANALYSIS OF THE MERGER PREMIUMS TO MARKET VALUE. A.G. Edwards analyzed
the merger premiums of the consideration to be received by NECB shareholders to
the market value of NECB's common stock one day, one week, two weeks, one month,
three months and one year prior to June 16, 1999 and June 26, 1999. The merger
premiums were compared versus means and medians produced using the same
parameters for comparable transactions included in the Connecticut merger
comparables, The New England merger comparables, and the nationwide merger
comparables. A.G. Edwards selected June 16, 1999 to reflect more accurately the
trading price for NECB's common stock prior to unusual trading activity which
preceded the public announcement of the merger. A.G. Edwards also analyzed and
compared the merger premiums as a result of the market price for NECB as of June
26, 1999. The merger premiums reflected the following ranges:
31
<PAGE>
<TABLE>
<CAPTION>
RANGE OF MERGER CONNECTICUT MERGER NEW ENGLAND MERGER NATIONAL MERGER
PREMIUMS COMPARABLES COMPARABLES COMPARABLES
-------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
June 16, 1999 34.7% - 56.6% 11.2% - 80.3% 18.6% - 79.2% 20.0% - 73.2%
June 26, 1999 17.1% - 52.6% 11.2% - 80.3% 18.6% - 79.2% 20.0% - 73.2 %
</TABLE>
EXCHANGE RATIO ANALYSIS. A.G. Edwards reviewed the historical prices of
NECB's and Webster's common stock, respectively, and the resulting market-based
exchange ratios, which is the ratio obtained by dividing the price of NECB's
common stock by the price of Webster's common stock on a particular date, since
January 1997 and compared them to the proposed exchange ratio of 1.06.
o Based upon the closing stock prices of NECB's and Webster's
common stock on June 16, 1999 of $19.88 and $27.00
respectively, the market-based exchange ratio was 0.74.
o The maximum and minimum exchange ratio for the period from
January 1, 1997 to June 16, 1999 were 0.84 and 0.63,
respectively.
PRESENT VALUE ANALYSIS. A.G. Edwards reviewed the projected net income
statements for the years 1999 through 2003 as prepared by the management of NECB
on a GAAP basis and performed a discounted present value analysis of NECB based
on these projections. In performing the present value analysis, A.G. Edwards (1)
discounted the net income for each projected year back to June 29, 1999 and (2)
added the sum to the present value as of June 29, 1999 to the capitalized
terminal value of the net income for 2003.
o The terminal value was determined based on anticipated
earnings growth rates and various terminal multiples that A.G.
Edwards believed to be reasonable for such an analysis.
o Based on this analysis, A.G. Edwards calculated a range of
values for NECB's common stock as of June 29, 1999, of between
$21.60 and $28.80.
The descriptions above do not purport to be a complete description of
all the analyses performed by A.G. Edwards in arriving at its opinion. The
preparation of a fairness opinion is a complex process and is not susceptible to
partial analysis or summary description. In rendering its opinion, A.G. Edwards
applied its judgment to a variety of complex analyses and assumptions,
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any analysis or factor considered by it. Furthermore,
selecting any portion of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion. In addition,
A.G. Edwards may have relied upon various analyses and factors more or less than
others, and may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be A.G. Edwards' view of the
actual value of NECB or Webster. In performing its analyses, A.G. Edwards made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
NECB or Webster. The assumptions made and judgments applied by A.G. Edwards in
rendering its opinion are not readily susceptible to description beyond that
described in the written text of the opinion itself. Any estimates contained in
the opinion do not necessarily indicate future results or actual values, which
may be significantly more or less favorable than those suggested by these
estimates. A.G. Edwards does not assume responsibility if future results are
different from those it projected.
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<PAGE>
The analyses performed were prepared solely as part of A.G. Edwards' analysis of
the fairness, from a financial point of view, to NECB shareholders of the
consideration to be received in the merger and were conducted in connection with
the delivery of the opinion. As described above, the opinion to the NECB board
was one of the many factors taken into consideration by the NECB board in making
its determination to approve the merger agreement and the merger. The decision
to enter into the merger agreement was solely that of the NECB board.
The terms of the engagement of A.G. Edwards by NECB are described in a
letter agreement between A.G. Edwards and NECB. Under the terms of this
engagement letter, as compensation for rendering its financial advisory services
and its opinion to the board of NECB, NECB agreed to pay A.G. Edwards a fee of
$50,000 on the date of the engagement letter, and a fee, payable upon the
delivery of an opinion, of $300,000; these fees have been paid. NECB has also
agreed to pay to A.G. Edwards, upon the closing of the merger, an aggregate fee
equal to 0.35% of the total value of the merger, or approximately $700,000. NECB
has agreed to reimburse A.G. Edwards for reasonable fees of A.G. Edwards'
counsel and for A.G. Edwards' travel and out-of-pocket expenses incurred in
connection with its engagement. NECB has also agreed to indemnify A.G. Edwards
against certain liabilities in connection with the engagement of A.G. Edwards.
HAS ASSOCIATES, INC.
On May 21, 1999, NECB also engaged HAS Associates, Inc. to act as its
financial advisor in connection with the possible business combination of NECB
and another financial institution. Under the terms of its engagement, HAS agreed
to assist NECB in analyzing, structuring, negotiating and effecting such a
transaction. NECB selected HAS because HAS is a regional investment banking firm
with experience in such transactions and is familiar with NECB and its business.
As part of its investment banking business, HAS is engaged in the valuation of
financial institutions and their securities in connection with mergers and
acquisitions.
As part of its engagement, representatives of HAS attended the meeting
of the NECB board held on June 29, 1999 at which the NECB board considered and
approved the merger agreement. At the same meeting, HAS rendered an oral
opinion, subsequently confirmed in writing, that, as of that date, the exchange
ratio by which NECB's common stock will be converted into Webster's common stock
was fair to the holders of shares of NECB's common stock from a financial point
of view. Such opinion was reconfirmed in writing as of the date of this
document.
The full text of HAS' written opinion dated as of the date of this
document is attached as Exhibit B and is incorporated into this document by
reference. The description of the opinion in this document is qualified in its
entirety by reference to Exhibit B. We urge NECB shareholders to read HAS'
opinion in its entirety for a description of the procedures followed,
assumptions made, matters considered, and qualifications and limitations on the
review undertaken by HAS in connection with rendering its opinion.
HAS' opinion is directed to the NECB board and addresses only the
fairness, from a financial point of view, of the exchange ratio to the NECB
shareholders. It does not address the underlying business decision to proceed
with the merger and does not constitute a recommendation to any NECB shareholder
as to how the shareholder should vote at the NECB special meeting with respect
to the merger or any other matter related thereto.
In connection with its opinion, HAS reviewed, analyzed and relied upon
material relating to the financial and operating conditions of NECB including,
among other things, the following:
o the merger agreement;
o annual reports to shareholders and annual reports on Form 10-K
for the two years ended December 31, 1998 and 1997, of NECB
and Webster;
33
<PAGE>
o quarterly reports on Form 10-Q, proxy solicitation material of
NECB and Webster and certain other communications from NECB
and Webster to its shareholders;
o other financial information concerning the business and
operations of NECB furnished to HAS by NECB for purposes of
its analysis, including certain internal financial analyses
and forecasts for NECB prepared by the senior management of
NECB;
o the corporate minutes of NECB for three years;
o audit reports certified by the independent accountants of NECB
and Webster for three years;
o regulatory filings of NECB for three years;
o NECB and Webster policies and procedures, material loan files,
and their investment portfolios; and
o material publicly available information with respect to
banking companies and the nature and terms of other
transactions HAS considered relevant to its inquiry.
In addition, HAS reviewed market information concerning Webster,
analyzed data concerning private and publicly owned banks in New England,
reviewed stock market data of other banks generally deemed comparable whose
securities are publicly traded, publicly available information concerning
certain recent business combinations, and additional financial and other
information as HAS deemed necessary.
In preparing its opinion, HAS, with NECB's consent, assumed and relied
on the accuracy and completeness of all financial and other information supplied
or otherwise made available to it by NECB and Webster, including that
contemplated in the items listed above. HAS has not assumed responsibility for
independently verifying this information or undertaken an independent evaluation
or appraisal of the assets or liabilities, contingent or otherwise, of NECB or
Webster, nor has it been furnished any evaluation or appraisal of these assets
and liabilities. HAS' opinion is predicated on the merger receiving the tax and
accounting treatment contemplated in the merger agreement. HAS' opinion was
necessarily based on economic, market and other conditions as in effect on, and
the information made available to it as of, the date of its opinion. HAS'
opinion was rendered without regard to the necessity for, or level of, any
restrictions, obligations, undertakings or divestitures which may be imposed or
required in the course of obtaining regulatory approval for the merger.
In connection with rendering its oral opinion on June 29, 1999, HAS
performed a variety of financial analyses, consisting of those summarized below.
The summary set forth below does not purport to be a complete description of the
analyses performed by HAS in this regard, although it describes all material
analyses performed by HAS. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to a
partial analysis or summary description.
Accordingly, notwithstanding the separate factors summarized below, HAS
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors considered by it, without considering all
analyses and factors, or attempting to ascribe relative weights to some or all
such analyses and factors, could create an incomplete view of the evaluation
process underlying HAS' opinion.
In performing its analyses, HAS made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of NECB, Webster and HAS. The
analyses performed by HAS are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of HAS' analysis of
the fairness to the shareholders of NECB of the conversion ratio and were
provided to the NECB board in connection with the delivery of HAS' opinion. HAS
gave the various analyses described below
34
<PAGE>
approximately similar weight and did not draw any specific conclusions from or
with regard to any one method of analysis. With respect to the comparison of
selected companies' analysis and the analysis of selected merger transactions
summarized below, no company or transaction utilized as a comparison is
identical to NECB, Webster or the merger.
Accordingly, an analysis of comparable companies and comparable
business combinations is not mathematical; rather, it involves complex
considerations and judgments concerning the differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading values or announced merger transaction values, as the case
may be, of the companies concerned. The analyses do no purport to be appraisals
or to reflect the process at which NECB and Webster might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. In addition, as described above, HAS' opinion was one of many
factors taken into consideration by the NECB board.
The following is a summary of the material analyses presented by HAS to
the NECB board in connection with its opinion.
ANALYSES OF SELECTED MERGER TRANSACTIONS. HAS reviewed certain
financial data related to all deal transactions in the Northeast and Ohio
announced between June 30, 1998 and June 30, 1999 with a deal value in a range
of $175M to $500M.
The transactions included in the comparable transaction group were:
o Hudson United Bancorp (NJ)/JeffBanks Inc. (PA)
o Sky Financial Group Inc. (OH)/ Mahoning National Bancorp Inc. (OH)
o Fifth Third Bancorp (OH)/Emerald Financial Corporation (OH)
o Summit Bancorp (NJ)/Prime Bancorp Inc. (PA)
o BB&T Corporation (NC)/Mason-Dixon Bancshares, Inc. (MD)
o Chittenden Corporation (VT)/Vermont Financial Services Corp. (VT)
o Sky Financial Group Inc. (OH)/First Western Bancorp Inc. (PA)
o Sovereign Bancorp (PA)/Peoples Bancorp Inc. (NJ)
o FirstMerit Corporation (OH)/Signal Corp. (OH)
o Banknorth Group Inc. (VT)/Evergreen Bancorp Inc. (NY)
o Citizens Bancshares Inc. (OH)/ Ohio Bank (OH)
o Peoples Heritage Financial Group (ME)/SIS Bancorp Inc. (MA)
o Richmond County Financial Corp. (NY)/Bayonne Bancshares Inc. (NJ)
o First Commonwealth Financial Corporation (PA)/Southwest National
Corporation (PA)
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------------ ----------------- -------------------
Transaction Comparable Comparable Group
Multiple Group Average Median
- ----------------------------------------------------- ------------------ ----------------- -------------------
- ----------------------------------------------------- ------------------ ----------------- -------------------
<S> <C> <C> <C>
Deal Price/Earnings Per Share 27.59x 28.40x 27.53x
- ----------------------------------------------------- ------------------ ----------------- -------------------
Deal Price/Book Value 290% 289% 313%
- ----------------------------------------------------- ------------------ ----------------- -------------------
Deal Price/Tangible Book Value 310% 324% 326%
- ----------------------------------------------------- ------------------ ----------------- -------------------
Deal Price/Total Assets 27.79% 29.28% 29.11%
- ----------------------------------------------------- ------------------ ----------------- -------------------
Deal Price/Deposits 34.44% 40.64% 39.80%
- ----------------------------------------------------- ------------------ ----------------- -------------------
</TABLE>
No company or transaction used as a comparison in the above analysis is
identical to NECB, Webster or the merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared.
35
<PAGE>
SELECTED PEER GROUP ANALYSES. HAS compared the financial performance
and market performance of NECB and Webster based on various financial measures
of earnings performance, capital adequacy and asset quality to a group of
comparable sized New England and/or Northeastern banks. For purposes of such
analysis, the financial information used by HAS was for the period ended March
31, 1999.
<TABLE>
<CAPTION>
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
NECB WEBSTER NECB Peer Group WEBSTER Peer
Average Group Median
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Return on Average Assets 0.95 0.79 1.13 0.97
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Return on Average Equity 10.21 13.37 14.06 11.40
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Net Interest Margin 5.19 2.84 3.82 3.90
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Equity/Assets 9.17 5.79 8.08 8.93
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Non-performing Assets/Assets 1.02 0.34 0.44 0.46
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Efficiency Ratio 59.21 55.81 58.73 51.30
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Price/ Last Twelve Months' Earnings 26.38 14.86 13.65 26.55
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Price / Book 277.2 198.8 174.2 238.2
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Price/ Tangible Book 296.7 234.5 179.7 277.1
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Price/Assets 25.43 11.52 14.08 20.00
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
</TABLE>
CONTRIBUTION ANALYSIS. HAS analyzed the pro forma contribution of NECB
and Webster to the combined company, assuming a 100% stock exchange at 1.06
shares of Webster's common stock for each share of NECB's common stock with the
following results:
<TABLE>
<CAPTION>
WEBSTER NECB Total
------- ---- -----
<S> <C> <C> <C>
Assets 90.7% 9.3% 100.0%
Loans 90.7 9.3 100.0
Deposits 89.7 10.3 100.0
Earnings 90.6 9.4 100.0
Equity 86.6 13.4 100.0
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS. HAS estimated the present value of the
future cash flows that would accrue to a holder of NECB's common stock assuming
the shareholder held the stock through the year 2003 and then sold it at the end
of that period.
HAS based this analysis on several factors. These included, but were
not limited to, an earnings per share of $1.09 in 1998 and estimated 1999
earnings per share of $1.31 and a 20% earnings per share growth rate thereafter.
HAS assumed a 38% dividend payout ratio for NECB through the year 2003. HAS
calculated a terminal value at December 31, 2003 by multiplying NECB's projected
2003 earnings by a price/earnings multiple of 15X for the trailing twelve month
earnings. HAS also did a similar analysis using a terminal value of 13X to 16X
and EPS growth rates in a range of 18% to 21% for comparative purposes.
36
<PAGE>
o The range of values was at a low of $20.30 to a high of
$27.75.
The final analysis of the discounted cash flow relied upon the 13X
multiple.
o The terminal valuation and the estimated dividends were
discounted at a rate of 15% producing a present value of
$25.11.
HAS determined these values by adding the present value of the estimated future
dividends stream that NECB could generate over the period beginning January 1,
1998 and ending December 31, 2003.
The discounted cash flow analysis is a widely used valuation
methodology. It relies on numerous assumptions, including asset and earnings
growth rates, dividend payout rates, terminal values and discount rates. The
analysis did not claim to be indicative of the actual values or expected values
of NECB's common stock.
In connection with its opinion dated as of the date of this document,
HAS performed procedures to update, as necessary, certain of the analyses
described above and reviewed the assumptions on which such analyses described
above were based and the factors considered in connection therewith. Some ratios
did change due to updated information and pricing, but these changes were
immaterial.
HAS was retained by the NECB board as an independent contractor to act
as financial adviser to NECB with respect to the merger. HAS, as part of its
investment banking business, is engaged in the valuation of banking businesses
and their securities in connection with mergers and acquisitions, and valuations
for estate, corporate and other purposes.
HAS and NECB entered into a letter agreement dated May 21, 1999
relating to the services HAS would provide in connection with the merger. Under
the agreement, NECB agreed to pay HAS a fee of 0.35% of the total value of the
deal or approximately, $700,000. In the letter agreement, NECB agreed to
indemnify HAS against certain liabilities related to engagement, including
liabilities under the federal securities laws.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, NECB made representations and warranties to
Webster. The material representations and warranties of NECB are the following:
o the proper organization and good standing of NECB and the NECB
Subsidiary Banks;
o insurance of the NECB Subsidiary Banks' deposit accounts by
the FDIC;
o capitalization of NECB and ownership of shares of NECB
Subsidiary Banks;
o the existence of corporate power and authority to execute,
deliver and perform its various obligations under the
transaction documents;
o receipt of all consents and approvals required to complete the
merger;
o accurate disclosure of loan portfolio and timely file of
reports;
o proper presentation of financial statements;
o no broker's fees other than to A.G. Edwards and HAS
Associates;
o the absence of any material adverse change in NECB;
o the absence of legal proceedings;
o timely filing of tax returns and absence of tax claims;
o existence of employee benefit plans and compliance with
applicable law;
37
<PAGE>
o existence of material contracts and their effectiveness;
o absence of supervisory agreements with banking regulators;
o compliance with environmental law;
o adequacy of loss reserves;
o existence of properties and assets, absence of encumbrances,
and existence of good title;
o existence of insurance policies and their material compliance
with applicable laws;
o existence of loans, their material compliance with applicable
laws, proper organization of loan information, and proper
perfection of security interests;
o affiliates and the stockholder agreement regarding ownership
of Webster's common stock;
o existence of loan participation interests sold;
o receipt of the fairness opinions of A.G. Edwards and HAS;
o Year 2000 compliance; and
o accuracy of information regarding NECB to be included in this
document.
In the merger agreement, Webster made representations and warranties to
NECB. The material representations and warranties of Webster are the following:
o the proper organization and good standing of Webster and
Webster Bank;
o capitalization of Webster;
o existence of corporate power and authority to execute, deliver
and perform Webster's obligations under the transaction
documents;
o receipt of regulatory consents and approvals to complete the
merger;
o proper presentation of financial statements;
o absence of any material adverse change in Webster;
o absence of material legal proceedings;
o timely filing of tax returns and absence of tax claims;
o compliance with applicable laws;
o receipt of accounting opinion regarding "pooling of interests"
accounting for the merger; and
o Year 2000 compliance.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
Before or after our stockholders approve the merger agreement, it may
be terminated:
o by mutual written consent of Webster and NECB;
o by Webster or NECB if:
o 30 days pass after any required regulatory approval
is denied or regulatory application is withdrawn at a
regulator's request unless action is taken during the
30 day period for a rehearing or to file an amended
application;
o the merger has not taken place on or before June 29,
2000, unless the failure to complete the merger by
that date is due to the terminating party's failure
to perform its obligations in the merger agreement;
or
38
<PAGE>
o Webster's or NECB's shareholders do not approve the
merger agreement;
o by Webster or NECB, if the board of directors of the other
shall have withdrawn, modified, or changed, in a manner
adverse to the terminating party, its approval or
recommendation of the merger agreement;
o by Webster, provided that Webster is not in breach of any
representation, warranty or covenant contained in the merger
agreement, if there is a breach of any representation,
warranty, covenant or agreement in the merger agreement by
NECB, if the breach or breaches would entitle Webster not to
consummate the merger if the breach occurred or continued on
the date of the closing of the merger and the breach is not
cured within 30 days after receiving written notice of the
breach; and
o by NECB, provided that NECB is not in breach of any
representation, warranty or covenant contained in the merger
agreement, if there is a breach of any representation,
warranty, covenant or agreement in the merger agreement by
Webster, if the breach or breaches would entitle NECB not to
consummate the merger if the breach occurred or continued on
the date of the closing of the merger and the breach is not
cured within 30 days after receiving written notice of the
breach.
In addition, the merger agreement provides NECB with a termination
right in the event that, generally, the price of Webster's common stock falls by
more than 20% on an absolute basis and underperforms the price performance of a
group of peer savings and loan holding companies by more than fifteen percentage
points. More specifically, during the 10-day period starting two days after we
receive approval of the merger from the OTS, NECB's board can terminate the
merger agreement if both of the following conditions are met:
o the average closing price of Webster's common stock (the
"Webster closing price") on Nasdaq over the twenty days ending
on the date of OTS approval (the "measurement period") is less
than $22.70; and
o the ratio of Webster's closing price to $28.38 (the closing
price of Webster's common stock on June 29, 1999, the last
Nasdaq trading date before we executed the merger agreement),
is more than 0.15 less than the ratio of the average price
over the measurement period of an index of Webster peer
financial institutions (the "index group") to the price of
that index on June 29, 1999.
For five days after Webster receives notice that NECB intends to
exercise its termination right, Webster can opt to increase the exchange ratio
according to a formula in the merger agreement. This formula generally provides
for an increase with the effect that the dollar value of the revised merger
consideration per share of NECB's common stock, based on the Webster closing
price, would be equal to the value that would have been received by an NECB
stockholder if the Webster closing price was the minimum necessary so that one
of the two conditions described above would not have been met. If Webster elects
to increase the exchange ratio according to this formula, then NECB will no
longer have its right to terminate the merger agreement and the exchange ratio
will be revised accordingly. Because the formula is dependent on the future
price of Webster's common stock and that of the index group, it is not possible
presently to determine what the adjusted conversion ratio would be, but, in
general, the ratio would be increased and, consequently, more shares of
Webster's common stock issued, to take into account the extent the average price
of Webster's common stock exceeded the decline in the average price of the
common stock of the index group.
39
<PAGE>
The price of the index group on any date is determined based on the
weighted average closing prices on that date of each of 16 financial
institutions. The weightings are based on the number of outstanding shares of
each of the companies. The companies comprising the index group, and their
weightings, are as follows:
<TABLE>
<S> <C> <C> <C>
Sovereign Bancorp, Inc........................ 16.13% Astoria Financial Corporation........... 5.48%
Dime Bancorp, Incorporated..................... 10.93 Keystone Financial, Inc............... 4.78
Peoples Heritage Financial Group, Inc........... 10.22 Staten Island Bancorp, Inc............ 4.15
Roslyn Bancorp, Inc........................... 7.55 Hudson United Bancorp................. 3.88
Fulton Financial Corporation.................. 6.79 Susquehanna Bancshares, Inc........... 3.63
Independence Community Bank Corp................ 6.58 Richmond County Financial Corp........ 3.21
People's Bank (MHC)........................... 6.16 Commerce Bancorp, Inc................. 2.70
Valley National Bancorp....................... 5.70 Queens County Bancorp, Inc............ 2.12
</TABLE>
If:
o the common stock of any of the companies in the index group
stops being publicly traded, or
o any of the companies in the index group announces a proposal
to be acquired, or
o any of the companies in the index group announces a proposal
to acquire another company or companies in transactions with a
value of more than 25% of the acquiror's market capitalization
on June 29, 1999,
that company will be removed from the index group and the weights will be
redistributed proportionately among the remaining companies.
The merger agreement also permits, subject to applicable law, the
boards of directors of Webster and NECB to:
o amend the merger agreement except as provided below;
o extend the time for performance of any of the obligations or
other acts of the other party;
o waive any inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered
under the merger agreement; or
o waive compliance with any of the agreements or conditions
contained in the merger agreement.
After approval of the merger agreement by NECB's shareholders, no
amendment of the merger agreement may be made without further shareholder
approval if the amendment would reduce the amount or change the form of the
consideration to be delivered to NECB's shareholders under the merger agreement.
FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material federal income tax
consequences of the merger to NECB shareholders. The summary is based on the
Internal Revenue Code of 1986, as amended, referred to in this section as the
Code, applicable U.S. Treasury regulations under the Code, administrative
rulings and judicial authority, all as of the date of this document. All of the
foregoing authorities are subject to change, and any change could affect the
continuing validity of this summary. The summary assumes that the holders of
shares of NECB's common stock hold their shares as a capital asset. The summary
does not address the tax consequences that may be applicable to particular NECB
shareholders in light of their individual circumstances or to NECB shareholders
who are subject to special tax rules, including:
40
<PAGE>
o tax-exempt organizations;
o dealers in securities;
o financial institutions;
o insurance companies;
o non-United States persons;
o shareholders who acquired shares of NECB's common stock
through the exercise of options or otherwise as compensation
or through a qualified retirement plan;
o shareholders who are subject to the alternative minimum tax;
o shareholders who hold shares of NECB's common stock as part of
a straddle, hedge, or conversion transaction; and
o traders in securities who elect to apply a mark-to-market
method of accounting.
This summary also does not address any consequences arising under the tax laws
of any state, locality, or foreign jurisdiction or under any federal laws other
than those pertaining to the federal income tax.
One of the conditions for the merger to take place is that Webster and
NECB must receive opinions from their counsel, Wachtell, Lipton, Rosen & Katz,
and Day, Berry and Howard LLP, respectively, dated as of the effective date that
the merger and each of the mergers included in the bank merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and that Webster and NECB will each be a party to the
reorganization in respect of the merger within the meaning of Section 368(b) of
the Code, and that, accordingly,
o no gain or loss will be recognized by Webster or NECB as a
result of the merger or by the constituent banks as a result
of the bank merger,
o no gain or loss will be recognized by the shareholders of NECB
who exchange all of their NECB's common stock solely for
Webster's common stock in the merger (except with respect to
cash received in lieu of a fractional share interest in
Webster's common stock), and
o the aggregate tax basis of the Webster's common stock received
(including a fractional share interest deemed received) by
shareholders who exchange all of their NECB's common stock
solely for Webster's common stock in the merger will be the
same as the aggregate tax basis of the NECB's common stock
surrendered in exchange for the Webster's common stock.
The opinions will be based on the Code, the U.S. Treasury regulations
promulgated under the Code and related administrative interpretations and
judicial decisions, all as in effect as of the effective time of the merger, on
the assumption that the merger takes place as described in the merger agreement,
and on the basis of facts, representations or assumptions set forth or referred
to in the opinions. Unlike a ruling from the Internal Revenue Service, an
opinion of counsel is not binding on the Internal Revenue Service and there can
be no assurance that the Internal Revenue Service will not take a position
contrary to one or more of the positions reflected in the opinions or that those
positions will be upheld by the courts if challenged by the Internal Revenue
Service.
In addition, Webster and NECB have received opinions of Wachtell,
Lipton, Rosen & Katz and Day, Berry, and Howard LLP, respectively, dated as of
the date of this document. Accordingly,
o Except as discussed below with respect to cash received in
lieu of fractional shares, a NECB shareholder who exchanges
all of his or her NECB's common stock solely for Webster's
common stock pursuant to the merger will recognize no gain or
loss on the exchange.
41
<PAGE>
o The aggregate tax basis of the Webster's common stock received
(including a fractional share interest deemed received) by a
NECB shareholder who exchanged all of its NECB's common stock
solely for Webster's common stock in the merger will be the
same as the shareholder's aggregate tax basis in the NECB's
common stock surrendered in exchange for the Webster's common
stock.
o The holding period of the Webster's common stock received by a
NECB shareholder in the merger (including a fractional share
interest deemed received) will include the holding period of
the NECB's common stock surrendered in exchange for the
Webster's common stock.
o The receipt by a NECB shareholder of cash instead of
fractional shares of Webster's common stock will be treated as
if the fractional shares were distributed as part of the
merger and then were redeemed by Webster. In general, NECB
shareholders should recognize capital gain or loss for U.S.
federal income tax purposes measured by the difference between
the amount of cash received and the portion of the tax basis
of the share of NECB's common stock allocable to the
fractional share interest. This will be a long-term capital
gain or loss if the holding period for the share of Webster's
common stock (determined as described above) is more than one
year at the effective time.
o None of Webster, Webster Bank, NECB nor the NECB Subsidiary
Banks will recognize any gain or loss as a result of the
merger or the bank merger.
Unless an exemption applies, the exchange agent will be required to
withhold, and will withhold, 31% of any cash payments to which a NECB
shareholder or other payee is entitled pursuant to the merger, unless the
shareholder or other payee provides his or her tax identification number (social
security number or employer identification number) and certifies that the number
is correct. Each shareholder and, if applicable, each other payee, is required
to complete and sign the Form W-9 that will be included as part of the
transmittal letter to avoid being subject to backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to Webster
and the exchange agent.
The federal income tax consequences set forth above are based upon
present law and do not purport to be a complete analysis or listing of all
potential tax effects that may apply to a holder of NECB's common stock. The tax
effects that are applicable to a particular holder of NECB's common stock may be
different from the tax effects that are applicable to other holders of NECB's
common stock, including the application and effect of state, local and other tax
laws other than those pertaining to the federal income tax, and thus, holders of
NECB's common stock are urged to consult their own tax advisors.
ACCOUNTING TREATMENT
It is a condition to Webster's obligations to complete the merger that
Webster receives a written opinion from KPMG LLP, Webster's independent public
accountant, to the effect that the merger will be accounted for as a "pooling of
interests." See "-- Conditions to the Merger." Under the "pooling of interests"
method of accounting, the historical basis of the assets and liabilities of
Webster and NECB will be combined and carried forward at their historically
recorded amounts.
RESALES OF WEBSTER'S COMMON STOCK RECEIVED IN THE MERGER
Webster is registering the sale of the shares of its common stock to be
issued in the merger under the securities act. The shares will be freely
transferable under the Securities Act, except for shares received by NECB
shareholders who are deemed to be affiliates of NECB before the merger and/or
affiliates of Webster thereafter. These affiliates only may resell their shares
pursuant to an effective registration statement under the Securities Act
covering the shares, in compliance with Securities Act Rule 145 or under another
exemption from the Securities Act's registration requirements. This joint proxy
statement/prospectus does not cover any resales of Webster's common
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<PAGE>
stock by Webster or NECB affiliates. Affiliates will generally include
individuals or entities who control, are controlled by or are under common
control with NECB or Webster, and may include officers or directors, as well as
principal shareholders of NECB or Webster.
EMPLOYEE BENEFITS
To the extent permissible under applicable law, the NECB Subsidiary
Banks' employees who become employees of Webster Bank at the effective time
generally will be given credit for service at the NECB Subsidiary Banks for the
following purposes:
o eligibility to participate in and the satisfaction of vesting
and service requirements for retirement benefits (such as
early, normal and disability retirement benefits), but not for
benefit accrual purposes, under the Webster Bank 401(k)
savings plan and the Webster Bank defined benefit pension plan
(and not for any purpose under the Webster Financial employee
stock ownership plan), and
o eligibility to participate in and levels of benefits under the
Webster welfare benefit and vacation plans.
In addition, following the effective time, Webster will provide full
time NECB employees whose employment is terminated within one year of the
effective date by Webster other than for cause or by the employee for good
reason with severance payments equal to two weeks' base pay per year of credited
service with a minimum benefit of four weeks' base pay and a maximum benefit of
26 weeks' base pay.
Webster has agreed to honor existing written deferred compensation,
employment, change of control and severance contracts with directors and
employees of NECB and the NECB Subsidiary Banks that were disclosed to Webster
prior to the execution of the merger agreement.
ABSENCE OF DISSENTERS' RIGHTS
Under the Delaware General Corporation Law, holders of NECB's and
Webster's common stock are not entitled to assert dissenters' rights in
connection with the merger.
INTERESTS OF NECB DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER THAT ARE
DIFFERENT THAN YOURS
In considering the recommendation of the NECB board of directors, the
NECB shareholders should be aware that certain members of NECB's senior
management and of the NECB board of directors have interests in the transaction
that are different from, or in addition to, the interests of shareholders
generally. The NECB board of directors knew about these additional interests,
and considered them when approving the merger agreement.
EXISTING NECB EXECUTIVE RETENTION AGREEMENTS. NECB is a party to
executive retention agreements with the following NECB executive officers:
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
David A. Lentini Chairman, President and Chief Executive Officer
Frank A. Falvo Executive Vice President
Anson C. Hall Vice President, Chief Financial Officer and Treasurer
Donat A. Fournier Vice President and Senior Loan Officer
</TABLE>
Each of these retention agreements provides that if, during the three
year period following a "change in control" of NECB, the executive's employment
is terminated other than for cause or the
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<PAGE>
executive terminates his employment for good reason, NECB is required to pay to
the executive a lump sum consisting of:
o three times the sum of the executive's highest annual base
salary in effect during the twelve months preceding his
termination of employment or the change in control, if higher,
plus his highest incentive bonus compensation during the three
years before the change in control for David A. Lentini, and
two times the executive's highest annual base salary in effect
during the twelve months preceding his termination of
employment or the change in control, if higher, plus his
highest incentive bonus compensation during the three years
before the change in control for the other three executives;
o a pro rata bonus for the year in which executive's employment
is terminated; and
o the amount of what NECB's matching contribution to the
executive's 401(k) retirement account would have been if the
executive had received the above amounts over a three-year
period in Mr. Lentini's case and over a two year period in the
case of the other three executives.
In addition, the executive is entitled to have transferred to him title to the
company car then used by the executive, all stock options and shares of
restricted stock vest, the executive will be entitled to continue to receive
benefits and to accrue service credit under NECB's employee benefit plans and to
the continuation of his country club membership for a period of three years
following the termination, and the executive will be provided with outplacement
services.
Any of the payments to an executive described above will be reduced,
but not below zero, to the extent necessary so that these payments, together
with any other payments in the nature of compensation or a benefit to the
executive, will not subject the executive to the excise tax described in Section
4999 of the Code.
The merger will constitute a change in control for purposes of the
retention agreements. For purposes of the retention agreements with each of
Messrs. Lentini, Falvo, Hall and Fournier, each of these NECB executives will be
deemed to have been terminated other than for cause upon completion of the
merger and the letter agreements with Webster will then supersede the retention
agreements. See "-- Letter Agreements with Webster."
LETTER AGREEMENTS WITH WEBSTER. In connection with the signing of the
merger agreement, Webster entered into letter agreements with each of Messrs.
Lentini, Falvo, Hall and Fournier. Under the letter agreements, each of the
executive agrees, during a "restricted period" of up to 24 months after the
consummation of the merger, to:
o hold in a fiduciary capacity for the benefit of Webster, and
not disclose, any and all secret or confidential information,
knowledge or data relating to Webster obtained by the
executive during his employment by Webster;
o not employ or solicit the employment of any person who was
during the previous twelve months an employee, representative,
officer or director of Webster;
o not attempt to persuade any Webster client or customer to
cease to do business or to reduce the amount of business the
client or customer has customarily done or contemplates doing
with Webster, and not to solicit the business of any Webster
client or customer other than on behalf or for the benefit of
Webster; and
o not engage in or become associated with the banking business
in any county in Connecticut (other than Fairfield County in
the case of Mr. Fournier) or in the Portsmouth, New Hampshire
area, other than through employment with Webster.
The letter agreements provide that, upon completion of the merger, each
executive will be deemed to have been terminated other than for cause for
purposes of the NECB retention
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<PAGE>
agreements described above, and will receive payments based on the executive's
rights under the retention agreement and in consideration for the
non-competition and other restrictions described above. The aggregate amount
payable to the executives as a group under their letter agreements is
$4,559,407. If any payment to an executive under his letter agreement or
otherwise is determined to be subject to the excise tax under Section 4999 of
the Code, Webster will make additional payments such that the amount retained by
the executive after application of the excise tax and federal and state income
taxes will equal the total payments amount the executive would have retained
under the letter agreement.
NECB STOCK OPTIONS. Pursuant to the merger agreement, upon consummation
of the merger, each outstanding option or other right to acquire shares of
NECB's common stock (whether or not vested) will cease to represent the right to
acquire shares of NECB's common stock and will be converted into and become a
right with respect to Webster's common stock. In connection with the merger, the
unvested stock options to purchase NECB's common stock granted by NECB to
Messrs. Lentini, Falvo, Hall and Fournier and to the non-employee directors of
NECB who cease serving as directors following the merger will vest. Assuming we
complete the merger on November 10, 1999, NECB expects that approximately
156,200 options held by these executive officers and 33,000 options held by the
non-employee directors will vest in connection with the merger.
BOARD MEMBERSHIP. As of the effective time, Webster will appoint one
person from among those serving on the NECB board of directors to serve as a
director on Webster's board of directors for a period to terminate at the annual
meeting of Webster stockholders next following the first anniversary of the
effective time. Additionally, that person shall also be added to the board of
Webster Bank.
INDEMNIFICATION. In the merger agreement, Webster agreed to indemnify,
defend and hold harmless each person who is, has been, or before the effective
time of the merger becomes, a director, officer or employee of NECB to the
fullest extent permitted under applicable law and Webster's restated certificate
of incorporation and bylaws or the federal stock charter and by-laws of Webster
Bank, for any claims made against the person because he or she is or was a
director, officer or employee of NECB or in connection with the merger
agreement. Webster also agrees to use commercially reasonable efforts to cover
for a period of at least two years after the effective time the officers and
directors of NECB under a directors' and officers' liability insurance policy of
substantially the same coverage and amounts for a total premium cost of not more
than 200% of the current amount expended by NECB to maintain this insurance.
OPTION AGREEMENT
As a condition of and inducement to Webster's entering into the merger
agreement, Webster and NECB entered into the option agreement immediately after
the execution of the merger agreement. Under the option agreement, NECB granted
Webster an option, referred to in this section as the "NECB option", which
entitles Webster to purchase, subject to the terms of the option agreement, up
to 1,400,252 fully paid and nonassessable shares of NECB's common stock, or
approximately 19.9% of the shares of NECB's common stock then outstanding, under
the circumstances described below, at a price per share of $22.14. That price is
subject to adjustment in specified circumstances. The NECB option is intended to
discourage the making of alternative acquisition-related proposals and, under
specified circumstances, may significantly increase the cost to a potential
third party of acquiring NECB compared to its cost had NECB not entered into the
option agreement. Therefore, the NECB option is likely to discourage third
parties from proposing a competing offer to acquire NECB even if the offer
involves a higher price per share for NECB's common stock than the per share
consideration to be paid under the merger agreement.
The following brief summary of the option agreement is qualified in its
entirety by reference to the option agreement. A copy of the option agreement,
as well as the other documents described in this document, will be provided to
you without charge if you call or write to James M. Sitro, Vice
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<PAGE>
President, Investor Relations, Webster Financial Corporation, Webster Plaza,
Waterbury, Connecticut 06702, telephone (203) 578-2399.
Subject to applicable law and regulatory restrictions, Webster may
exercise the NECB option, in whole or in part, following the occurrence of both
an initial triggering event as defined below and a subsequent triggering event
as defined below. An initial triggering event means, in substance:
o the entry by NECB, without the prior written consent of
Webster, into a letter of intent or definitive agreement to
engage in an acquisition transaction with any third party;
o the acquisition of any other person of beneficial ownership or
the right to acquire beneficial ownership of 10% or more of
the outstanding shares of common stock;
o the recommendation by NECB's board of directors that its
shareholders approve or accept any acquisition transaction
with any third party;
o any third party makes a proposal, which is or becomes public,
to NECB or its shareholders to enter into an acquisition
transaction;
o after a third party proposal for an acquisition is made to
NECB, NECB breaches its covenants under the merger agreement
with regard to such situation; or
o a third party files a regulatory application with regard to an
acquisition transaction with NECB.
A subsequent triggering event, as defined in the option agreement
includes either:
o the acquisition by any person of beneficial ownership of 20%
or more of the then outstanding common stock, or
o entering into an agreement to enter into an acquisition
transaction, except that the percentage referred to in that
definition is 20% instead of 10%.
For purposes of the option agreement, the term "acquisition
transaction" means:
o a merger, consolidation or other business combination
involving NECB or its subsidiaries,
o a purchase, lease or other acquisition of all or substantially
all of the assets and/or deposits of NECB or its subsidiaries,
or
o a purchase or the acquisition, including through merger,
consolidation, share exchange or otherwise, of beneficial
ownership of securities representing 10% or more of the voting
power of NECB.
The NECB option terminates on the occurrence of any of the following
events:
o the effective time of the merger;
o the termination of the merger agreement in accordance with the
provisions provided therein, if such termination occurs prior
to the occurrence of an initial triggering event, except if
the termination is due to a volitional breach by NECB; or
o the passage of 12 months after termination of the merger
agreement if such termination follows the occurrence of an
initial triggering event or if the termination is due to a
volitional breach by NECB.
There are provisions that could extend the term of the NECB option, but in no
event beyond 18 months from the termination of the merger agreement.
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<PAGE>
The NECB option may not be assigned by Webster to any other person
without the express written consent of NECB, except that Webster may assign its
rights in whole or in part after the occurrence of a subsequent triggering
event, as defined above. There are provisions that the NECB option is to be
assigned widely so that no person is able to acquire rights to purchase more
than 2% of the NECB's common stock if Webster has not received all federal
regulatory approvals needed to complete the merger.
In the event that before the NECB option is terminated, NECB enters
into a letter of intent or definitive agreement:
o to consolidate or merge with any third party, and NECB is not
the continuing or surviving corporation in the consolidation
or merger;
o to permit any third party to merge into NECB, and NECB is the
continuing or surviving corporation, but, in connection with
the merger, the then outstanding shares of NECB's common stock
will be changed into or exchanged for stock or other
securities of any third party or cash or any other property or
the then outstanding shares of NECB's common stock will
represent after the merger less than 50% of the outstanding
shares and share equivalents of the merged company; or
o to sell or otherwise transfer all or substantially all of its
assets to any third party, then the agreement governing the
transaction must make proper provision so that the NECB option
will, upon the completion of that transaction, be converted
into, or exchanged for, a substitute option, at the election
of Webster, of either
o the acquiring corporation, or
o any person that controls the acquiring corporation.
The substitute option will be exercisable for shares of the issuer's common
stock in a number and at an exercise price in accordance with the option
agreement and will otherwise have the same terms as the NECB option, except that
the number of shares subject to the substitute option may not exceed 19.99% of
the issuer's outstanding shares of common stock.
There are provisions in the option agreement permitting Webster to
receive cash payments from NECB, or the issuer of the substitute option, upon
surrender of the NECB option and/or shares previously acquired in full or
partial exercise of the NECB option. These shares are described in this
discussion as the "option shares." One provision, in general, permits Webster to
surrender the NECB option and/or the option shares and receive on a per share
basis the difference between the price Webster would have paid for to NECB, or
the issuer of the substitute option, upon exercise of the option and the price
per share paid by a third party in a merger, consolidation or similar
transaction with NECB, or any purchase, lease or other acquisition of all or a
substantial portion of NECB's assets or the acquisition of 50% or more of the
then outstanding common stock of NECB, or the highest closing price over the
preceding six months, in the case of the issue of the substitute option.
Another provision, in general, permits Webster to surrender the NECB
option and any option shares then owned by Webster and receive a $5,000,000 cash
payment if any of the third party transactions described in the last paragraph
occurs. As a result of this provision, Webster would expect to receive a minimum
of $5,000,000 as a result of the grant of the option if NECB enter into the
transactions described in which a third party directly or indirectly acquires
control of NECB during the term of the option.
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<PAGE>
MARKET PRICES AND DIVIDENDS
WEBSTER'S COMMON STOCK
The table below sets forth the range of high and low sale prices of
Webster's common stock as reported on the Nasdaq, as well as cash dividends paid
during the periods indicated, restated to reflect the two-for-one split of
Webster's common stock in April 1998:
<TABLE>
<CAPTION>
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
<S> <C> <C> <C>
Quarter Ended:
March 31, 1997................. $20.69 $17.56 $0.10
June 30, 1997.................. 22.88 17.31 0.10
September 30, 1997............. 29.88 21.69 0.10
December 31, 1997.............. 33.88 28.50 0.10
March 31, 1998................. 35.00 28.56 0.10
June 30, 1998.................. 36.25 31.44 0.11
September 30, 1998............. 34.63 20.63 0.11
December 31, 1998.............. 28.13 18.88 0.11
March 31,1999.................. 31.63 27.38 0.11
June 30, 1999.................. 34.13 26.13 0.12
Period Ended:
September 27, 1999............... 28.81 24.75 0.12
</TABLE>
On June 29, 1999, the last trading day before the public announcement
of the merger, the closing price of Webster's common stock on the Nasdaq was
$28.38. On September 27, 1999, the most recent practicable date before the
printing of this document, the closing price of Webster's common stock on the
Nasdaq was $25.75.
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<PAGE>
NECB'S COMMON STOCK
The table below sets forth the range of high and low sale prices of
NECB's common stock as reported on the Nasdaq, as well as cash dividends paid
during the periods indicated, restated to reflect a ten percent stock dividend
in November 1997:
<TABLE>
<CAPTION>
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
<S> <C> <C> <C>
Quarter Ended:
March 31, 1997................. $18.38 $14.88 $ 0.076
June 30, 1997.................. 17.50 15.00 0.076
September 30, 1997............. 24.75 16.88 0.084
December 31, 1997.............. 25.75 20.93 0.09
March 31, 1998................. 26.88 23.38 0.09
June 30, 1998.................. 26.00 21.63 0.10
September 30, 1998............. 24.25 17.00 0.10
December 31, 1998.............. 21.00 13.93 0.10
March 31,1999.................. 20.88 19.38 0.12
June 30, 1999.................. 28.88 18.00 0.12
Period Ended:
September 27, 1999............. 29.38 25.25 0.12
</TABLE>
On June 29, 1999, the last trading day before the public announcement
of the merger, the closing price of NECB's common stock on the Nasdaq was
$26.63. On September 27, 1999, the most recent practicable date before the
printing of this document, the closing price of NECB's common stock on the
Nasdaq was $26.00.
DESCRIPTION OF CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS
Set forth below is a description of Webster's capital stock, as well as
a summary of the material differences between the rights of holders of NECB's
common stock and their prospective rights as holders of Webster's common stock.
If the merger agreement is approved and the merger takes place, the holders of
NECB's common stock will become holders of Webster's common stock. As a result,
Webster's restated certificate of incorporation, as amended, and bylaws, as
amended, and the applicable provisions of the General Corporation Law of the
State of Delaware, referred to in this section as the "Delaware corporation
law", will govern the rights of current holders of NECB's common stock. The
rights of those shareholders are governed at the present time by the amended and
restated certificate of incorporation and the bylaws of NECB and the applicable
provisions of the Delaware corporation law.
The following comparison is based on the current terms of the governing
documents of Webster and NECB and on the provisions of the Delaware corporation
law. The discussion is intended to highlight important similarities and
differences between the rights of holders of Webster's common stock and NECB's
common stock.
WEBSTER'S COMMON STOCK
Webster is authorized to issue 50,000,000 shares of common stock, par
value $.01 per share. If the proposed amendment is authorized, the total number
of shares of common stock Webster would be authorized to issue would increase to
200,000,000. As of June 30, 1999, 38,008,607 shares
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<PAGE>
of Webster's common stock were outstanding and Webster had outstanding stock
options granted to directors, officers and other employees for another 2,303,541
shares of Webster's common stock. Each share of Webster's common stock has the
same relative rights and is identical in all respects to each other share of
Webster's common stock. Webster's common stock is non-withdrawable capital, is
not of an insurable type and is not insured by the FDIC or any other
governmental entity.
Holders of Webster's common stock are entitled to one vote per share on
each matter properly submitted to shareholders for their vote, including the
election of directors. Webster's common stock is not subject to additional calls
or assessments by Webster, and all shares of Webster's common stock currently
outstanding are fully paid and nonassessable. For a discussion of the voting
rights of Webster's common stock, its lack of preemptive rights, the
classification of Webster's board of directors and provisions of Webster's
restated certificate of incorporation and bylaws that may prevent a change in
control of Webster or that would operate only in an extraordinary corporate
transaction involving Webster or its subsidiaries, see "-- Restated Certificate
of Incorporation and Bylaw Provisions."
Holders of Webster's common stock and any class or series of stock
entitled to participate with it are entitled to receive dividends declared by
the board of directors of Webster out of any assets legally available for
distribution. No dividends or other distributions may be declared or paid,
however, unless all accumulated dividends and any sinking fund, retirement fund
or other retirement payments have been paid, declared or set aside on any class
of stock having preference as to payments of dividends over Webster's common
stock. In addition, as described below, the indenture for Webster's senior notes
places restrictions on Webster's ability to pay dividends on its common stock.
See "-- Senior Notes."
In the unlikely event of any liquidation, dissolution or winding up of
Webster, the holders of Webster's common stock and any class or series of stock
entitled to participate with it would be entitled to receive all remaining
assets of Webster available for distribution, in cash or in kind, after payment
or provision for payment of all debts and liabilities of Webster and after the
liquidation preferences of all outstanding shares of any class of stock having
preference over Webster's common stock have been fully paid or set aside.
NECB'S COMMON STOCK
The certificate of incorporation of NECB authorizes 20,000,000 shares
of NECB's common stock, par value $ .10 per share, of which 7,036,494 shares
were outstanding as of June 30, 1999. In addition, as of June 30, 1999, there
were outstanding options to purchase NECB's common stock granted to officers and
other employees of NECB for 496,356 shares of NECB's common stock, plus the
option for 1,400,252 shares of NECB's common stock granted to Webster in
connection with the merger.
Each share of NECB's common stock also has the same relative rights and
is identical in all respect to each other share of NECB's common stock. As with
the Webster's common stock, the NECB's common stock is non-withdrawable capital,
is not of an insurable type and is not insured by the FDIC or any other
governmental entity.
Holders of the NECB's common stock also are entitled to one vote per
share on each matter properly submitted to shareholders for their vote,
including the election of directors. Holders of the NECB's common stock have
distribution and liquidation rights similar to those of holders of the Webster's
common stock. The NECB's common stock is also not subject to additional calls or
assessments by NECB, and all shares of NECB's common stock currently outstanding
are fully paid and nonassessable. For a discussion of the voting rights of
NECB's common stock, its lack of preemptive rights and provisions in NECB's
amended and restated certificate of incorporation which may prevent a change in
control of NECB, see "--Certificate of Incorporation and Bylaw Provisions."
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<PAGE>
WEBSTER'S PREFERRED STOCK AND SHAREHOLDER RIGHTS AGREEMENT
Webster's certificate of incorporation authorizes its board of
directors, without further shareholder approval, to issue up to 3,000,000 shares
of serial preferred stock for any proper corporate purpose. In approving any
issuance of serial preferred stock, the board of directors has broad authority
to determine the rights and preferences of the serial preferred stock, which may
be issued in one or more series. These rights and preferences may include
voting, dividend, conversion and liquidation rights that may be senior to
Webster's common stock.
Webster's Series C participating preferred stock was authorized in
connection with a rights agreement, which was adopted in February 1996 and
amended in October 1998. Webster adopted the rights agreement to protect
shareholders in the event of an inadequate takeover offer or to deter coercive
or unfair takeover tactics. The rights agreement is a complicated document, but,
in general, each right entitles a holder to purchase for $100, 1/1,000th of a
share of series C preferred stock upon the occurrence of specified events. As of
the date of this document, no shares of Webster's Series C preferred stock have
been issued.
The rights will be distributed upon the earliest of:
o 10 business days following a public announcement that a person
or group of affiliated or associated persons (referred to in
this discussion as an "acquiring person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding shares of Webster's common stock,
o 10 business days following the commencement of a tender offer
or exchange offer that, if consummated, would result in a
person or group beneficially owning 15% or more of such
outstanding shares of Webster's common stock, or
o 10 business days after the Webster board has declared any
person to be an adverse person (as explained in the next
paragraph).
The Webster board, by a majority vote, shall declare a person to be an
"adverse person" upon making:
o a determination that the person, alone or together with its
affiliates and associates, has or will become the beneficial
owner of 10% or more of the outstanding shares of Webster's
common stock (provided that this determination will not be
effective until the person has become the beneficial owner of
10% or more of the outstanding shares of Webster's common
stock), and
o a determination, after reasonable inquiry and investigation,
including consultation with anyone as the Webster board deems
appropriate, that
o the beneficial ownership by this person is intended
to cause, is reasonably likely to cause or will cause
Webster to repurchase the Webster's common stock
beneficially owned by the person or to cause pressure
on Webster to take action or enter into a transaction
or series of transactions intended to provide such
person with short-term financial gain under
circumstances where the Webster board believes that
the best long-term interests of Webster and the
Webster shareholders would not be served by taking
such action or entering into such transactions or
series of transactions at that time,
o the beneficial ownership is causing or is reasonably
likely to cause a material adverse impact (including,
but not limited to, impairment of relationships with
customers or impairment of Webster's ability to
maintain its competitive position) on the business or
prospects of Webster or
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<PAGE>
o the beneficial ownership is otherwise determined to
be not in the best interests of Webster and the
Webster shareholders, employees, customers and the
communities in which Webster and its subsidiaries do
business.
However, the Webster board may not declare a person to be an adverse person if,
prior to the time that the person acquired 10% or more of the shares of
Webster's common stock then outstanding, the person provided to the Webster
board a written statement of the person's purpose and intentions with respect to
the acquisition of Webster's common stock, and the Webster board deemed it
appropriate not to declare the person an adverse person. The Webster board may
impose conditions on its determination (such as the person not acquiring more
than a specified amount of Webster's common stock).
In the event that the Webster board determines that a person is an
adverse person or a person becomes the beneficial owner of 15% or more of the
then outstanding shares of Webster's common stock, each holder of a right, will
have the right to receive:
o upon exercise and payment of the exercise price, Webster's
common stock (or, in certain circumstances, cash, property or
other securities of Webster) having a value equal to two times
the exercise price of the right or
o at the discretion of the Webster board, upon exercise and
without payment of the exercise price, Webster's common stock
(or, in certain circumstances, cash, property or other
securities of Webster) having a value equal to the difference
between the exercise price of the right and the value of the
consideration that would be payable under the bullet point
above.
The rights are not exercisable until distributed and will expire at the close of
business on February 4, 2006, unless earlier redeemed by Webster as described
below. A copy of the Webster rights agreement has been filed with the SEC. See
"Where You Can Find More Information" for information on where you can obtain a
copy. A copy of the Webster rights agreement also is available free of charge
from Webster. This summary description of the Webster rights does not purport to
be complete and is qualified in its entirety by reference to the rights
agreement.
NECB'S PREFERRED STOCK
NECB's certificate of incorporation authorizes 200,000 shares of serial
preferred stock, without par value. None are outstanding.
WEBSTER'S SENIOR NOTES
The 8 3/4% Senior Notes due on June 30, 2000 were issued by Webster in
an aggregate principal amount of $40,000,000 under an indenture, dated as of
June 15, 1993, between Webster and Chemical Bank, as trustee. Chemical Bank is
now known as The Chase Manhattan Bank. Particular provisions of the indenture
are summarized below because of their impact on Webster's common stock. The
senior notes bear interest at 8 3/4% payable semi-annually on each June 30 and
December 30 until maturity on June 30, 2000. The senior notes are unsecured
general obligations only of Webster and not of its subsidiaries. The senior
notes may not be redeemed by Webster prior to June 30, 2000. The indenture
contains covenants that limit Webster's ability at the holding company level to
incur additional funded indebtedness, to make restricted distributions, to
engage in specified dispositions affecting Webster Bank or its voting stock, to
create specified liens upon Webster's assets at the holding company level,
including a negative pledge clause, and to engage in mergers, consolidations, or
a sale of substantially all of Webster's assets unless specified conditions are
satisfied. The indenture does not affect Webster's ability to consummate the
merger with NECB. The indenture also requires that Webster maintain a specified
level of liquid assets at the holding company level.
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RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. The indenture limits the
amount of funded indebtedness which Webster may incur or guarantee at the
holding company level. Funded indebtedness includes any obligation of Webster
with a maturity in excess of one year for borrowed money, for the deferred
purchase price of property or services, for capital lease payments, or related
to the guarantee of these kinds of obligations. Webster may not incur or
guarantee any funded indebtedness if, immediately after giving effect to it, the
amount of funded indebtedness of Webster at the holding company level, including
the senior notes, would be greater than 90% of Webster's consolidated net worth.
As of June 30, 1999, Webster's consolidated net worth was $565.4 million and it
had $74.0 million of funded indebtedness.
RESTRICTED DISTRIBUTIONS. Under the indenture, Webster may not,
directly or indirectly, make any restricted distribution, except in capital
stock of Webster, if, at the time or after giving effect to the distribution:
o an event of default has occurred and is continuing under the
indenture;
o Webster Bank would fail to meet any of the applicable minimum
capital requirements under Office of Thrift Supervision
regulations;
o Webster would fail to maintain sufficient liquid assets to
comply with the terms of the covenant described under
"Liquidity Maintenance" below; or
o the aggregate amount of all restricted distributions
subsequent to September 30, 1993 would exceed the sum of
o $5 million, plus
o 75% of Webster's aggregate consolidated net income,
or if the aggregate consolidated net income is a
deficit, minus 100% of the deficit, accrued on a
cumulative basis in the period commencing on June 30,
1993 and ending on the last day of the fiscal quarter
immediately preceding the date of the restricted
distribution, and plus
o 100% of the net proceeds received by Webster from any
capital stock issued by Webster other than to a
subsidiary subsequent to September 30, 1993. As of
June 30 1999, Webster had the ability to pay $306.9
million in restricted distributions.
Restricted distribution means:
o any dividend, distribution or other payment on the capital
stock of Webster or any subsidiary other than a wholly owned
subsidiary, except for dividends, distributions or payments
payable in capital stock;
o any payment to purchase, redeem, acquire or retire any capital
stock of Webster or the capital stock of any subsidiary other
than a wholly owned subsidiary; and
o any payment by Webster of principal, whether a prepayment,
redemption or at maturity of, or to acquire, any indebtedness
for borrowed money issued or guaranteed by Webster, other than
the senior notes or under a guarantee by Webster of any
borrowing by any employee stock ownership plan established by
Webster or a wholly owned subsidiary, except that any payment
of, or to acquire, any indebtedness for borrowed money of this
kind that is not subordinated to the senior notes will not
constitute a restricted distribution if the indebtedness was
issued or guaranteed by Webster at a time when the senior
notes were rated on the same or higher rating category as the
rating assigned to the senior notes by Standard & Poor's at
the time the senior notes were issued.
LIQUIDITY MAINTENANCE. The indenture requires that Webster maintain at
all times, on an unconsolidated basis, liquid assets in an amount equal to or
greater than 150% of the aggregate interest expense on the senior notes and all
other indebtedness for borrowed money of Webster for 12 full calendar months
immediately following each determination date under the indenture, provided that
Webster will not be required to maintain liquid assets in that amount once the
senior notes have
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been rated BBB- or higher by Standard & Poor's for six calendar months and
remain rated in that category.
WEBSTER'S CAPITAL SECURITIES
In January 1996, Webster raised $100 million through the sale of
capital securities that will be used for general corporate purposes. Webster
formed a business trust for the purpose of issuing capital securities and
investing the net proceeds in subordinated debentures issued by Webster.
Before its acquisition by Webster, Eagle Financial Corp. raised $50
million through the sale of capital securities to be used for general corporate
purposes. Eagle also formed a business trust for the purpose of issuing capital
securities and investing the net proceeds in the Eagle capital debentures. In
connection with the acquisition of Eagle by Webster in April 1998, Webster
assumed all of Eagle's rights and obligations with respect to the Eagle capital
securities and capital debentures.
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The following discussion is a general summary of provisions of
Webster's certificate of incorporation and bylaws, and a comparison of those
provisions to similar types of provisions in the certificate of incorporation
and bylaws of NECB. The discussion is necessarily general and, for provisions
contained in Webster's certificate of incorporation and bylaws or in NECB's
certificate of incorporation and bylaws, reference should be made to the
documents in question. Some of the provisions included in Webster's certificate
of incorporation and bylaws may serve to discourage a change in control of
Webster even if desired by a majority of shareholders. These provisions are
designed to encourage potential acquirers to negotiate directly with the board
of directors of Webster and to discourage other takeover attempts.
DIRECTORS. Some of the provisions of Webster's certificate of
incorporation and bylaws will impede changes in majority control of Webster's
board of directors. The certificate of incorporation provides that the board of
directors will be divided into three classes, with directors in each class
elected for three-year staggered terms. The certificate of incorporation further
provides that the size of the board of directors is to be within a 7 to 15
director range. The bylaws currently provide that there are to be 14 directors.
The bylaws also provide that:
o to be eligible for nomination as a director, a nominee must be
a resident of the State of Connecticut at the time of his
nomination or, if not then a resident, have been previously a
resident for at least three years;
o each director is required to own not less than 100 shares of
Webster's common stock; and
o more than three consecutive absences from regular meetings of
the board of directors, unless excused by a board resolution,
will automatically constitute a resignation.
Webster's bylaws also contain a provision prohibiting particular contracts and
transactions between Webster and its directors and officers and some other
entities unless specific procedural requirements are satisfied.
NECB has one class of directors who are elected to one-year terms or
until a successor has been elected or until the director's death, resignation or
removal. The bylaws of NECB provide that the number of directors shall be fixed
from time to time by resolution of the board of directors but will not be less
than three (3) and that all directors are to be stockholders.
Webster's certificate of incorporation and bylaws provide that a
vacancy occurring in the board of directors, including a vacancy created by any
increase in the number of directors, is to be filled for the remainder of the
unexpired term by a majority vote of the directors then in office. Similarly,
NECB's bylaws provide that any vacancy on the board of directors, including any
newly
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created directorships, may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director, unless
otherwise provided by the amended and restated certificate of incorporation or
the laws of the State of Delaware.
Webster's certificate of incorporation provides that a director may be
removed only for cause and then only by 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 that purpose and that 30 days' written notice must be
provided to any director or directors whose removal is to be considered at a
shareholders' meeting.
NECB's directors may be removed with or without cause by a majority of
the shares entitled to vote under Delaware law.
Webster's bylaws impose restrictions on the nomination by shareholders
of candidates for election to the board of directors and the proposal by
shareholders of business to be acted upon at an annual meeting of shareholders.
The certificate of incorporation and bylaws of NECB contain similar provisions.
CALL OF SPECIAL MEETINGS. Webster's certificate of incorporation
provides that a special meeting of shareholders may be called at any time but
only by the Chairman, the President or by the board of directors. Shareholders
are not authorized to call a special meeting. The bylaws of NECB contain similar
provisions.
SHAREHOLDER ACTION WITHOUT A MEETING. Webster's certificate of
incorporation provides that shareholders may act by written consent without a
meeting but only if the vote is unanimous. Under Delaware law, NECB shareholders
may act without a meeting, with signed consents of the number of shareholders
required to approve such action.
LIMITATION ON LIABILITY OF DIRECTORS AND INDEMNIFICATION. Webster's
certificate of incorporation provides that no director shall be personally
liable to the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director other than liability:
o for any breach of the director's duty of loyalty to the
corporation or its shareholders,
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
o for any payment of a dividend or approval of a stock
repurchase that is illegal under Section 174 of the Delaware
corporation law, or
o for any transaction from which a director derived an improper
personal benefit. The certificate of incorporation of NECB
contains similar provisions.
Webster's bylaws also provide for indemnification of directors,
officers, trustees, employees and agents of Webster, and for those serving in
those roles with other business organizations or entities, in the event that the
person was or is made a party to or is threatened to be made a party to any
civil, criminal, administrative, arbitration or investigative action, suit, or
proceeding, other than an action by or in the right of Webster, by reason of the
fact that the person is or was serving in that kind of capacity for or on behalf
of Webster. The bylaws provide that Webster will indemnify any person of this
kind against expenses including attorneys' fees, judgments, fines, penalties and
amounts paid in settlement if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
Webster, and, for any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Similarly, the bylaws provide that Webster
will indemnify these persons for expenses reasonably incurred and settlements
reasonably paid in actions, suits, or proceedings brought by or in the right of
Webster, if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of Webster; provided,
however, that no indemnification may be made against expenses for
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any claim, issue, or matter as to which the person is adjudged to be liable to
Webster or against amounts paid in settlement unless and only to the extent that
there is a determination made by the appropriate party set forth in Webster's
bylaws that the person to be indemnified is, in view of all the circumstances of
the case, fairly and reasonably entitled to indemnity for expenses or amounts
paid in settlement. In addition, Webster's bylaws permit the corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, trustee, employee, or agent of Webster or is acting in this
kind of capacity for another business organization or entity at Webster's
request, against any liability asserted against the person and incurred in that
capacity, or arising out of that status, whether or not Webster would have the
power or obligation to indemnify him against that kind of liability under the
indemnification provisions of Webster's bylaws.
The indemnification provisions in NECB's certificate of incorporation
and bylaws are less extensive than Webster's. NECB's certificate of
incorporation and bylaws which authorize the corporation to indemnify any person
who has or is a party or is threatened to be made a party to any action, suit or
proceeding in which a person is made a party because of that person's status as
a director, officer or employee to the maximum extent permitted by Section 145
of the Delaware corporation law except where the person is finally adjudged to
be liable for negligence or misconduct in the performance of their duties.
CUMULATIVE VOTING. Neither Webster nor NECB stockholders may cumulate
voting rights in the election of directors.
PREEMPTIVE RIGHTS. Both Webster's certificate of incorporation and
NECB's amended and restated certificate of incorporation provide that
shareholders do not have any preemptive rights regarding the entity's
securities.
NOTICE OF MEETINGS. Webster's bylaws require that notice be given not
less than 20 nor more than 50 days prior to each annual or special meeting of
shareholders. NECB's bylaws require that notice of an annual or special meeting
be given not less than 10 days prior to a meeting. Under Delaware law, NECB is
generally not permitted to give such notice more than 60 days before the meeting
date.
QUORUM. Webster's and NECB's bylaws each provide that the holders of
one-third of the capital stock issued and outstanding and entitled to vote at a
meeting constitutes a quorum.
GENERAL VOTE. Webster's bylaws provide that any matter brought before a
meeting of shareholders will be decided by the affirmative vote of a majority of
the votes cast on the matter except as otherwise required by law or Webster's
certificate of incorporation or bylaws. NECB's bylaws contain similar
provisions.
RECORD DATE. Webster's bylaws provide that the record date for
determination of shareholders entitled to notice of or to vote at a meeting and
for other specified purposes may not be less than 10 nor more than 60 days
before the date of the meeting or other action. NECB's bylaws provide that the
record date may not be less than 10 nor more than 50 days prior to the date of
the meeting.
APPROVALS FOR ACQUISITIONS OF CONTROL AND OFFERS TO ACQUIRE CONTROL.
Webster's certificate of incorporation prohibits any person, whether an
individual, company or group acting in concert, from acquiring beneficial
ownership of 10% or more of Webster's voting stock, unless the acquisition has
received the prior approval of at least two-thirds of the outstanding shares of
voting stock at a duly called meeting of shareholders held for that purpose and
of all required federal regulatory authorities. Also, no person may make an
offer to acquire 10% or more of Webster's voting stock without obtaining prior
approval of the offer by at least two-thirds of Webster's board of directors or,
alternatively, before the offer is made, obtaining approval of the acquisition
from the Office of Thrift Supervision. These provisions do not apply to the
purchase of shares by underwriters in connection with a public offering or
employee stock ownership plan or other employee benefit plan
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of Webster or any of its subsidiaries, and the provisions remain effective only
so long as an insured financial institution is a majority-owned subsidiary of
Webster. Shares acquired in excess of these limitations are not entitled to vote
or take other shareholder action or be counted in determining the total number
of outstanding shares in connection with any matter involving shareholder
action. These excess shares are also subject to transfer to a trustee, selected
by Webster, for the sale on the open market or otherwise, with the expenses of
the trustee to be paid out of the proceeds of the sale. The certificate of
incorporation and bylaws of NECB do not contain a similar provision.
PROCEDURES FOR BUSINEss COMBINATIONS. Webster's certificate of
incorporation requires that business combinations between Webster or any
majority-owned subsidiary of Webster and a 10% or more shareholder or its
affiliates or associates, referred to collectively in this section as the
interested shareholder, either be approved by at least 80% of the total number
of outstanding shares of voting stock of Webster, or be approved by at least
two-thirds of Webster's continuing directors, which means those directors
unaffiliated with the interested shareholder and serving before the interested
shareholder became an interested shareholder, or meet specified price and
procedure requirements that provide for consideration per share generally equal
to or greater than that paid by the interested shareholder when it acquired its
block of stock. The types of business combinations with an interested
shareholder covered by this provision include: any merger, consolidation and
share exchange; any sale, lease, exchange, mortgage, pledge or other transfer of
assets other than in the usual and regular course of business; an issuance or
transfer of equity securities having an aggregate market value in excess of 5%
of the aggregate market value of Webster's outstanding shares; the adoption of
any plan or proposal of liquidation proposed by or on behalf of an interested
shareholder; and any reclassification of securities, recapitalization of Webster
or any merger or consolidation of Webster with any of its subsidiaries or any
other transaction which has the effect of increasing the proportionate ownership
interest of the interested shareholder. Webster's restated certificate of
incorporation excludes employee stock purchase plans and other employee benefit
plans of Webster and any of its subsidiaries from the definition of interested
shareholder. The certificate of incorporation and bylaws of NECB do not contain
a similar provision.
ANTI-GREENMAIL. Webster's certificate of incorporation requires
approval by a majority of the outstanding shares of voting stock before Webster
may directly or indirectly purchase or otherwise acquire any voting stock
beneficially owned by a holder of 5% percent or more of Webster's voting stock,
if the holder has owned the shares for less than two years. Any shares
beneficially held by the person are required to be excluded in calculating
majority shareholder approval. This provision would not apply to a pro rata
offer made by Webster to all of its shareholders in compliance with the
Securities Exchange Act of 1934 and the rules and regulations under that statute
or a purchase of voting stock by Webster if the board of directors has
determined that the purchase price per share does not exceed the fair market
value of that voting stock. The certificate of incorporation and bylaws of NECB
do not contain a similar provision.
CRITERIA FOR EVALUATING OFFERS. Webster's certificate of incorporation
provides that the board of directors, when evaluating any acquisition offers,
shall give due consideration to all relevant factors, including, without
limitation, the economic effects of acceptance of the offer on depositors,
borrowers and employees of its insured institution subsidiaries and on the
communities in which its subsidiaries operate or are located, as well as on the
ability of its subsidiaries to fulfill the objectives of insured institutions
under applicable federal statutes and regulations. The certificate of
incorporation and bylaws of NECB do not contain a similar provision.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to
Webster's certificate of incorporation must be approved by at least two-thirds
of Webster's board of directors at a duly constituted meeting called for that
purpose and also by shareholders by the affirmative vote of at least a majority
of the shares entitled to vote thereon at a duly called annual or special
meeting; provided, however, that approval by the affirmative vote of at least
two-thirds of the shares entitled to vote thereon is required to amend the
provisions regarding amendment of the certificate of incorporation, directors,
bylaws, approval for acquisitions of control and offers to acquire control,
criteria for evaluating offers, the calling of special meetings of shareholders,
greenmail, and
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shareholder action by written consent. In addition, the provisions regarding
business combinations may be amended only by the affirmative vote of at least
80% of the shares entitled to vote thereon. Webster's bylaws may be amended by
the affirmative vote of at least two-thirds of the board of directors or by
shareholders by at least two-thirds of the total votes eligible to be voted, at
a duly constituted meeting called for that purpose.
The voting requirements to amend NECB's certificate of incorporation
and bylaws are less stringent. The amended and restated certificate of
incorporation of NECB provides that the bylaws may be made, altered, amended or
repealed by the board of directors. NECB's bylaws provide that the bylaws may be
altered, amended or repealed either by the affirmative vote of the holders of a
majority of the stock issued and outstanding and entitled to vote in respect
thereof and represented in person or by proxy at any annual or special meeting
of the stockholders, or by the board of directors at any regular or special
meeting of the board.
APPLICABLE LAW
The following discussion is a general summary of particular federal
statutory and regulatory provisions that may be deemed to have an anti-takeover
effect. This discussion is applicable both to Webster and NECB.
Federal law provides that, subject to some exemptions, no person acting
directly or indirectly or through or in concert with one or more other persons
may acquire control of an insured institution or holding company of an insured
institution, without giving at least 60 days prior written notice providing
specified information to the appropriate federal banking agency. In the case of
Webster and Webster Bank, the appropriate federal banking agency is the OTS and
in the case of NECB and the NECB Subsidiary Banks, the appropriate federal
banking agency is the Federal Reserve Board or the FDIC. Control is defined for
this purpose as the power, directly or indirectly, to direct the management or
policies of an insured institution or to vote 25% or more of any class of voting
securities of an insured institution. Control is presumed to exist where the
acquiring party has voting control of at least 10% of any class of the
institution's voting securities and other conditions are present. The OTS, the
FDIC or the Federal Reserve may prohibit the acquisition of control if the
agency finds, among other things, that:
o the acquisition would result in a monopoly or substantially
lessen competition;
o the financial condition of the acquiring person might
jeopardize the financial stability of the institution; or
o the competence, experience or integrity of any acquiring
person or any of the proposed management personnel indicates
that it would not be in the interest of the depositors or the
public to permit the acquisition of control by that person.
WHERE YOU CAN FIND MORE INFORMATION
Webster and NECB file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that Webster
or NECB files with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet site that contains reports, proxy and information
statements and other information about issuers that file electronically with the
SEC. The address of the SEC's Internet site is http://www.sec.gov. Webster can
be found on the Internet at http://www.websterbank.com. NECB can be found on the
Internet at http://www.necbancorp.com. Webster's common stock is traded on the
Nasdaq Stock Market's National Market Tier under the trading symbol WBST. NECB's
common stock is traded on the Nasdaq under the trading symbol NECB.
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Webster has filed with the SEC a registration statement on Form S-4
under the Securities Act relating to Webster's common stock to be issued to
NECB's shareholders in the merger. As permitted by the rules and regulations of
the SEC, this joint proxy statement/prospectus does not contain all the
information set forth in the registration statement. You can obtain that
additional information from the SEC's principal office in Washington, D.C. or
the SEC's Internet site as described above. Statements contained in this joint
proxy statement/prospectus or in any document incorporated by reference into
this joint proxy statement/prospectus about the contents of any contract or
other document are not necessarily complete and, in each instance where the
contract or document is filed as an exhibit to the registration statement,
reference is made to the copy of that contract or document filed as an exhibit
to the registration statement, with each statement of that kind in this joint
proxy statement/prospectus being qualified in all respects by reference to the
document.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows Webster and NECB to incorporate by reference information
into this joint proxy statement/prospectus, which means that Webster and NECB
can disclose important information to you by referring you to another document
filed separately with the SEC. The information that Webster and NECB incorporate
by reference is considered a part of this joint proxy statement/prospectus,
except for any information superseded by information presented in this joint
proxy statement/prospectus. This joint proxy statement/prospectus incorporates
important business and financial information about Webster, NECB and their
subsidiaries that is not included in or delivered with this document.
WEBSTER DOCUMENTS
This joint proxy statement/prospectus incorporates by reference the
documents listed below that Webster has filed with the SEC:
<TABLE>
<CAPTION>
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
<S> <C> <C>
o Annual Report on Form 10-K Year ended December 31, 1998
o Quarterly Report on Form 10-Q For the quarter ended March 31, 1999
o Quarterly Report on Form 10-Q For the quarter ended June 30, 1999
o Current Report on Form 8-K Filed February 25, 1999
o Current Report on Form 8-K Filed April 9, 1999
o Current Report on Form 8-K Filed May 6, 1999
o Current Report on Form 8-K Filed July 13, 1999
o For description of Webster common stock
o Form 8-A Filed December 2, 1986
o Current Report on Form 8-K Filed October 30, 1998
o Current Report on Form 8-K Filed November 25, 1996
o Current Report on Form 8-K Filed February 12, 1996
</TABLE>
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR
WRITE TO: JAMES M. SITRO, VICE PRESIDENT, INVESTOR RELATIONS OF WEBSTER
FINANCIAL CORPORATION, WEBSTER PLAZA, WATERBURY, CONNECTICUT 06702, TELEPHONE
(203) 578-2399. IN ORDER TO OBTAIN TIMELY DELIVERY OF DOCUMENTS, YOU SHOULD
REQUEST INFORMATION AS SOON AS POSSIBLE, BUT NO LATER THAN OCTOBER 26, 1999.
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NECB DOCUMENTS
This joint proxy statement/prospectus incorporates by reference the
documents listed below that NECB has filed with the SEC:
<TABLE>
<CAPTION>
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
<S> <C> <C>
o Annual Report on Form 10-K Year ended December 31, 1998
o Quarterly Report on Form 10-Q For the quarter ended March 31, 1999
as amended by Form 10-Q/A
o Quarterly Report on Form 10-Q For the quarter ended June 30, 1999
o For description of NECB common stock
Form 8-A Filed April 30, 1986
(Filed by Olde Windsor Bancorp, Inc.)
</TABLE>
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR
WRITE TO: ANSON C. HALL, VICE PRESIDENT AND TREASURER OF NEW ENGLAND COMMUNITY
BANCORP, INC., TELEPHONE (860) 683-4610. IN ORDER TO OBTAIN TIMELY DELIVERY OF
DOCUMENTS, YOU SHOULD REQUEST INFORMATION AS SOON AS POSSIBLE, BUT NO LATER THAN
OCTOBER 26, 1999.
Webster and NECB incorporate by reference additional documents that
either company may file with the SEC between the date of this document and the
respective dates of the Webster and the NECB special meetings. These documents
include periodic reports, such as annual reports on form 10-K, quarterly reports
on form 10-Q and current reports on form 8-K, as well as proxy statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document, and in
documents that we incorporate by reference. These kinds of statements are
subject to risks and uncertainties. Forward-looking statements include the
information concerning possible or assumed future results of our operations.
When we use words like believes, expects, anticipates or similar expressions, we
are making forward-looking statements.
You should note that many factors, some of which are discussed
elsewhere in this document and in the documents that we incorporate by
reference, could affect our future financial results and could cause those
results to differ materially from those expressed in our forward-looking
statements. These factors include the following:
o the effect of economic conditions;
o inability to realize expected cost savings in connection with
business combinations and other acquisitions;
o higher than expected costs related to integration of combined
or merged businesses;
o deposit attrition; o adverse changes in interest rates;
o change in any applicable law, rule, regulation or practice
with respect to tax or accounting issues or otherwise; and
o adverse changes or conditions in capital or financial markets.
The forward-looking statements are made as of the date of this
document, and we assume no obligation to update the forward-looking statements
or to update the reasons why actual results could differ from those projected in
the forward-looking statements.
No person is authorized to give any information or to make any
representation not contained in this document, and, if given or made, that
information or representation should not be relied upon as having been
authorized. This document does not constitute an offer to sell, or a
solicitation of an
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offer to purchase, any of Webster's common stock offered by
this document, or the solicitation of a proxy, in any jurisdiction in which it
is unlawful to make that kind of offer or solicitation. Neither the delivery of
this document nor any distribution of Webster's common stock offered pursuant to
this joint proxy statement/prospectus shall, under any circumstances, create an
implication that there has been no change in the affairs of NECB or Webster or
the information in this document or the documents or reports incorporated by
reference into this document since the date of this document.
SHAREHOLDER PROPOSALS
Any proposal which a NECB shareholder wishes to have included in NECB's
proxy statement and form of proxy relating to NECB's 2000 annual meeting of
shareholders under Rule 14a-8 of the SEC must be received by NECB at its
principal executive offices at 175 Broad Street, P.O. Box 130, Windsor,
Connecticut 06095, not less than 60 days nor more than 90 days prior to the date
of the meeting, or by April 10, 2000. Nothing in this paragraph shall be deemed
to require NECB to include in its proxy statement and form of proxy for such
meeting any shareholder proposal which does not meet the requirements of the SEC
in effect at the time. If the merger agreement is approved and the merger takes
place, NECB will not have an annual meeting of shareholders in 2000. If the
merger does not take place, NECB anticipates that its 2000 annual meeting will
be held in April 2000.
Any proposal which a Webster shareholder wishes to have included in
Webster's proxy statement and form of proxy relating to Webster's 2000 annual
meeting of shareholders under Rule 14a-8 of the SEC must be received by
Webster's secretary at Webster Plaza, Waterbury, Connecticut 06702 by November
20, 1999. Nothing in this paragraph shall be deemed to require Webster to
include in its proxy statement and form of proxy for such meeting any
shareholder proposal which does not meet the requirements of the SEC in effect
at the time. Any other proposal for consideration by shareholders at Webster's
2000 annual meeting of shareholders must be delivered to, or mailed to and
received by, the secretary of Webster not less that 30 days nor more than 90
days prior to the date of the meeting if Webster gives at least 45 days' notice
or prior public disclosure of the meeting date to shareholders.
OTHER MATTERS
We do not expect that any matters other than those described in this
document will be brought before the special meetings. If any other matters are
presented, however, it is the intention of the persons named in the Webster or
NECB proxy card, to vote proxies in accordance with the determination of a
majority of Webster's or NECB's board of directors, as the case may be
including, without limitation, a motion to adjourn or postpone the special
meeting to another time and/or place for the purpose of soliciting additional
proxies in order to approve the merger agreement or otherwise.
EXPERTS
The consolidated financial statements of Webster at December 31, 1998
and 1997, and for each of the years in the three-year period ended December 31,
1998, have been incorporated by reference into this document and in the
registration statement in reliance on the report of KPMG LLP, independent
certified public accountants, which is incorporated by reference into this
document and into the registration statement, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of NECB, incorporated into this
document by reference from NECB's Annual Report on Form 10-K for the year ended
December 31, 1998 and 1997, have been audited by Shatswell, MacLeod & Company,
P.C., independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of that firm given upon their authority as experts in accounting and auditing.
61
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG LLP will be present at the Webster special
meeting, and representatives of Shatswell, MacLeod & Company, P.C. will be
present at the NECB special meeting. In each case, such representatives will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
LEGAL MATTERS
The validity of Webster's common stock to be issued in the merger has
been passed upon by Hogan & Hartson L.L.P., Washington, D.C. Day, Berry and
Howard LLP and Wachtell, Lipton, Rosen & Katz will be passing upon certain tax
matters in connection with the merger.
62
<PAGE>
FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information and explanatory notes are presented to show the impact on the
historical financial positions and results of operations of Webster and NECB of
the merger under the "pooling of interests" method of accounting. The unaudited
pro forma condensed combined financial information combines the historical
financial information of Webster and NECB as of June 30, 1999 and for the six
months ended June 30, 1999 and 1998 and for the year ended December 31, 1998.
The unaudited pro forma condensed combined statements of income give effect to
the merger as if the merger occurred at the beginning of each period covered by
such statements of income. The pro forma condensed combined statement of
condition assumes the merger was consummated on June 30, 1999.
The pro forma condensed combined financial information as of June 30,
1999 and for the six months ended June 30, 1999 and 1998 and the year ended
December 31, 1998, is based on and derived from, and should be read in
conjunction with, the historical consolidated financial statements and the
related notes thereto of Webster, which are incorporated by reference herein,
and the historical consolidated financial statements and the related notes
thereto of NECB, which we incorporate into this document by reference. See
"Where You Can Find More Information."
The pro forma condensed combined financial statements do not give
effect to the anticipated cost savings or potential revenue enhancements in
connection with the merger. The pro forma data is presented for comparative
purposes only and is not necessarily indicative of the future financial position
or results of operations of the combined company or of the combined financial
position or the results of operations that would have been realized had the
merger been consummated during the periods or as of the dates for which the pro
forma data are presented.
63
<PAGE>
PRO FORMA COMBINED STATEMENT OF CONDITION
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
WEBSTER NECB PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------ ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Depository Institutions...... $ 161,332 $ 33,040 $ $ 194,372
Interest-bearing Deposits...................... 6,658 7,803 14,461
Securities:
Trading, at Fair Value....................... 70,561 -- 70,561
Available for Sale, at Fair Value............ 2,693,847 212,663 (2,321)(a) 2,904,189
Held to Maturity............................. 346,826 4,122 350,948
Loans Receivable, Net.......................... 5,278,808 514,907 5,793,715
Accrued Interest Receivable.................... 55,883 5,560 61,443
Premises and Equipment, Net.................... 85,883 13,454 (1,250)(c) 98,087
Foreclosed Properties, Net..................... 3,939 1,641 5,580
Intangible Assets.............................. 139,338 4,651 143,989
Cash Surrender Value of Life Insurance......... 144,788 -- 144,788
Prepaid Expenses and Other Assets.............. 69,127 10,557 165(b) 79,849
----------- ----------- ----------- -----------
Total Assets................................... $ 9,056,990 $ 808,398 $ (3,406) $ 9,861,982
=========== =========== ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits..................................... $ 5,719,866 $ 640,721 $ $ 6,360,587
Federal Home Loan Bank Advances.............. 1,394,404 49,290 1,443,694
Other Borrowings............................. 1,082,045 42,750 1,124,795
Advanced Payments by Borrowers for Taxes
and Insurance............................... 10,976 3,063 14,039
Accrued Expenses and Other Liabilities....... 84,684 2,982 7,750(c) 95,416
----------- ----------- ----------- -----------
Total Liabilities............................ 8,291,975 738,806 7,750 9,038,531
----------- ----------- ------------ -----------
Corporation-Obligated Mandatorily Redeemable
Capital Securities of Subsidiary Trusts..... 150,000 -- -- 150,000
----------- ----------- ------------ -----------
Preferred Stock of Subsidiary Corporation.... 49,577 -- -- 49,577
----------- ----------- ------------ -----------
SHAREHOLDERS' EQUITY:
Common Stock................................. 385 704 (632)(d) 457
Paid In Capital.............................. 254,102 61,921 (3,957)(a)(b)(d) 312,066
Retained Earnings............................ 351,352 11,869 (9,000)(c) 354,221
Less Treasury Stock at Cost.................. (13,286) (2,681) 2,681(d) (13,286)
Accumulated Other Comprehensive Loss......... (25,987) (2,221) (248)(a) (28,456)
Less Employee Stock Ownership Plan Shares
Purchased with Debt......................... (1,128) -- -- (1,128)
------------ ----------- ---------------- ------------
Total Shareholders' Equity................... 565,438 69,592 (11,156) 623,874
----------- ----------- ------------- -----------
Total Liabilities And Shareholders' Equity... $ 9,056,990 $ 808,398 $ (3,406) $ 9,861,982
=========== =========== ============= ===========
</TABLE>
The pro forma combined statement of condition has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the merger.
See accompanying notes to pro forma combined financial statements.
64
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
WEBSTER NECB PRO FORMA
(HISTORICAL) (HISTORICAL) COMBINED
------------ ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INTEREST INCOME:
Loans ...................................................... $ 188,894 $ 22,150 $ 211,044
Securities and Interest-bearing Deposits.................... 102,528 6,267 108,795
----------- ----------- -----------
Total Interest Income...................................... 291,422 28,417 319,839
----------- ----------- -----------
INTEREST EXPENSE:
Deposits.................................................... 95,486 8,175 103,661
Borrowings.................................................. 65,261 1,790 67,051
----------- ----------- -----------
Total Interest Expense..................................... 160,747 9,965 170,712
----------- ----------- -----------
Net Interest Income........................................ 130,675 18,452 149,127
Provision for Loan Losses..................................... 4,100 333 4,433
----------- ----------- -----------
Net Interest Income After Provision for Loan Losses......... 126,575 18,119 144,694
----------- ----------- -----------
NONINTEREST INCOME:
Fees and Service Charges.................................... 26,943 1,950 28,893
Gain on Sale of Loans and Loan Servicing, Net............... 1,439 1,915 3,354
Gain on Sale of Securities, Net............................. 3,419 499 3,918
Other Noninterest Income.................................... 7,856 125 7,981
----------- ----------- -----------
Total Noninterest Income................................... 39,657 4,489 44,146
----------- ----------- -----------
NONINTEREST EXPENSES:
Salaries and Employee Benefits.............................. 42,396 7,838 50,234
Occupancy Expense of Premises............................... 8,771 1,479 10,250
Furniture and Equipment Expenses............................ 9,481 1,027 10,508
Marketing Expenses.......................................... 4,350 353 4,703
Foreclosed Property Expenses and Provisions, Net............ 10 146 156
Intangibles Amortization.................................... 5,610 235 5,845
Capital Securities Expenses................................. 7,323 -- 7,323
Dividends on Preferred Stock of Subsidiary Corporation...... 2,000 -- 2,000
Acquisition-related Expenses................................ -- 1,353 1,353
Other Operating Expenses.................................... 18,142 3,404 21,546
----------- ----------- -----------
Total Noninterest Expenses................................. 98,083 15,835 113,918
----------- ----------- -----------
Income before Income Taxes.................................... 68,149 6,773 74,922
Income Taxes.................................................. 23,171 2,428 25,599
----------- ----------- -----------
NET INCOME.................................................... $ 44,978 $ 4,345 $ 49,323
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic....................................................... $ 1.23 $ 0.62 $ 1.13(e)
============ ============ ============
Diluted..................................................... $ 1.20 $ 0.61 $ 1.11(e)
============ ============ ============
</TABLE>
The pro forma combined statement of income has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the merger.
See accompanying notes to pro forma combined financial statements.
65
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
WEBSTER NECB PRO FORMA
(HISTORICAL) (HISTORICAL) COMBINED
------------ ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INTEREST INCOME:
Loans ...................................................... $ 382,906 $ 47,730 $ 430,636
Securities and Interest-bearing Deposits.................... 239,547 12,054 251,601
----------- ----------- -----------
Total Interest Income...................................... 622,453 59,784 682,237
----------- ----------- -----------
INTEREST EXPENSE:
Deposits.................................................... 221,288 19,893 241,181
Borrowings.................................................. 155,730 2,715 158,445
----------- ----------- -----------
Total Interest Expense..................................... 377,018 22,608 399,626
----------- ----------- -----------
Net Interest Income........................................ 245,435 37,176 282,611
Provision for Loan Losses..................................... 6,800 1,303 8,103
----------- ----------- -----------
Net Interest Income After Provision for Loan Losses......... 238,635 35,873 274,508
----------- ----------- -----------
NONINTEREST INCOME:
Fees and Service Charges.................................... 43,181 3,693 46,874
Gain on Sale of Loans and Loan Servicing, Net............... 3,290 2,840 6,130
Gain on Sale of Securities, Net............................. 15,351 1,664 17,015
Other Noninterest Income.................................... 12,341 278 12,619
----------- ----------- -----------
Total Noninterest Income................................... 74,163 8,475 82,638
----------- ----------- -----------
NONINTEREST EXPENSES:
Salaries and Employee Benefits.............................. 76,861 15,645 92,506
Occupancy Expense of Premises............................... 16,295 2,773 19,068
Furniture and Equipment Expenses............................ 17,363 1,972 19,335
Marketing Expenses.......................................... 6,604 801 7,405
Foreclosed Property Expenses and Provisions, Net............ 576 27 603
Intangibles Amortization.................................... 9,642 391 10,033
Capital Securities Expense.................................. 14,708 -- 14,708
Dividends on Preferred Stock of Subsidiary Corporation...... 4,151 -- 4,151
Acquisition-related Expenses................................ 17,400 3,593 20,993
Other Operating Expenses.................................... 34,189 6,442 40,631
----------- ----------- -----------
Total Noninterest Expenses................................. 197,789 31,644 229,433
----------- ----------- -----------
Income before Income Taxes.................................... 115,009 12,704 127,713
Income Taxes.................................................. 44,544 5,150 49,694
----------- ----------- -----------
NET INCOME.................................................... $ 70,465 $ 7,554 $ 78,019
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic....................................................... $ 1.86 $ 1.07 $ 1.74(e)
============ ============ ============ -
Diluted..................................................... $ 1.83 $ 1.05 $ 1.70(e)
============ ============ ============
</TABLE>
The pro forma combined statement of income has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the merger.
See accompanying notes to pro forma combined financial statements.
66
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
WEBSTER NECB PRO FORMA
(HISTORICAL) (HISTORICAL) COMBINED
------------ ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INTEREST INCOME:
Loans ...................................................... $ 192,893 $ 24,198 $ 217,091
Securities and Interest-bearing Deposits.................... 125,934 5,923 131,857
----------- ----------- -----------
Total Interest Income...................................... 318,827 30,121 348,948
----------- ----------- -----------
INTEREST EXPENSE:
Deposits.................................................... 113,693 10,291 123,984
Borrowings.................................................. 82,086 1,229 83,315
----------- ----------- -----------
Total Interest Expense..................................... 195,779 11,520 207,299
----------- ----------- -----------
Net Interest Income........................................ 123,048 18,601 141,649
Provision for Loan Losses..................................... 3,800 805 4,605
----------- ----------- -----------
Net Interest Income After Provision for Loan Losses......... 119,248 17,796 137,044
----------- ----------- -----------
NONINTEREST INCOME:
Fees and Service Charges.................................... 19,065 1,813 20,878
Gain on Sale of Loans and Loan Servicing, Net............... 2,565 873 3,438
Gain on Sale of Securities, Net............................. 10,126 1,417 11,543
Other Noninterest Income.................................... 5,380 165 5,545
----------- ----------- -----------
Total Noninterest Income................................... 37,136 4,268 41,404
----------- ----------- -----------
NONINTEREST EXPENSES:
Salaries and Employee Benefits.............................. 38,756 7,807 46,563
Occupancy Expense of Premises............................... 7,767 1,411 9,178
Furniture and Equipment Expenses............................ 8,638 987 9,625
Marketing Expenses.......................................... 4,029 452 4,481
Foreclosed Property Expenses and Provisions, Net............ 559 (114) 445
Intangibles Amortization.................................... 4,662 195 4,857
Capital Securities Expense.................................. 7,354 -- 7,354
Dividends on Preferred Stock of Subsidiary Corporation...... 2,076 -- 2,076
Acquisition-related Expenses................................ 17,400 190 17,590
Other Operating Expenses.................................... 17,070 3,300 20,370
----------- ----------- -----------
Total Noninterest Expenses................................. 108,311 14,228 122,539
----------- ----------- -----------
Income before Income Taxes.................................... 48,073 7,836 55,909
Income Taxes.................................................. 18,952 3,211 22,163
----------- ----------- -----------
NET INCOME.................................................... $ 29,121 $ 4,625 $ 33,746
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic....................................................... $ 0.77 $ 0.66 $ 0.75(e)
=========== ============ ============
Diluted..................................................... $ 0.75 $ 0.64 $ 0.73(e)
=========== ============ ============
</TABLE>
The pro forma combined statement of income has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the merger.
See accompanying notes to pro forma combined financial statements.
67
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Represents the conversion to treasury stock and subsequent
retirement of NECB common stock owned by Webster.
(b) Represents the reversal of the tax effect of the gain on NECB
common stock currently owned by Webster.
(c) Represents the estimated merger costs that will be incurred by
Webster and NECB. These costs are not reflected in the pro forma
combined statements of income since these items do not have a
continuing impact on Webster. The following table summarizes the
financial impact of the additional accruals as reflected in the pro
forma combined statement of financial condition (in thousands):
<TABLE>
<S> <C>
Acquisition-related expenses:
Transaction costs (including investment bankers,
attorneys and accountants).......................... $1,900
Compensation (severance and related costs)................ 5,650
Writedown of fixed assets in preparation of sale.......... 1,250
Conversion and miscellaneous expenses..................... 3,800
Total acquisition-related expenses........................ 10,700
Total pre-tax adjustments................................. 12,600
Income tax effect......................................... (3,600)
Net after-tax adjustments.................................$ 9,000
</TABLE>
The above estimated acquisition-related expenses that will be incurred
by Webster and NECB include only those expenses that are estimated to
be incurred as a result of the acquisition. Compensation costs include
estimated severance to NECB employees and other related expenses as a
result of merging administrative staff and consolidating overlapping
branch locations. The writedown of fixed assets represents the
estimated loss on the sale of fixed assets due to consolidated of
overlapping branch locations.
(d) Represents the issuance of Webster's common stock at the aggregate
$0.01 per share par value and the elimination of shares of NECB
treasury stock and the net effect on paid in capital.
(e) Pro forma combined Webster and NECB net income per common share
data have been determined based upon the combined historical net income
of Webster and NECB and the combined historical weighted average common
equivalent shares of Webster and NECB. For the purposes of this
determination, the historical weighted average common shares
outstanding of NECB was multiplied by 1.06, the exchange ratio. See
"The Merger - Exchange Ratio."
68
<PAGE>
AMENDMENT TO WEBSTER'S CERTIFICATE OF INCORPORATION
Webster stockholders will also vote on the certificate amendment at the
Webster special meeting. Approval of the certificate amendment by Webster
shareholders is not a condition to Webster's or NECB's obligation to consummate
the merger.
Article 4 of Webster's certificate of incorporation presently provides
that the total number of all shares of all classes of stock which Webster has
the authority to issue is 53,000,000 shares, consisting of 50,000,000 shares of
common stock and 3,000,000 shares of preferred stock, par value $0.01 per share.
The proposed amendment to Article 4 of the certificate of incorporation is to
increase the number of authorized shares of common stock from 50,000,000 to
200,000,000. This increase will be effected by amending the first sentence of
Article 4 of the certificate of incorporation to read as follows:
"The total number of shares of all classes of the capital
stock which the Corporation has authority to issue is two hundred three
million (203,000,000), of which two hundred million (200,000,000) shall
be common stock, par value $.01 per share, amounting in the aggregate
to two million dollars ($2,000,000), 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)."
Of the 50,000,000 presently authorized shares of common stock,
38,117,759 shares were issued and outstanding on September 24, 1999, and there
were options outstanding to purchase 2,208,214 shares of Webster's common stock.
An additional 7,255,265 shares are expected to be newly issued in connection
with the merger and options for an additional 500,208 shares will be issued to
individuals who now hold options to buy NECB common stock issued by NECB.
Accordingly, at September 24, 1999, and giving effect to the merger, only
1,918,554 shares of authorized but not outstanding and unreserved shares of
common stock remained available for future issuance. At September 24, 1999, no
shares of Webster preferred stock were outstanding. Since the number of
authorized and unissued shares of Webster's common stock is already limited, if
the merger is consummated, substantially all of Webster's authorized shares will
have been issued or reserved for issuance.
The board of directors believes that the lack of authorized common
stock available for future issuance would unnecessarily limit Webster's ability
to pursue opportunities for future financings, acquisitions, mergers and other
transactions. Webster would also be limited in its ability to effectuate future
stock splits or stock dividends. The board of directors believes the increase in
the authorized shares is necessary to provide Webster with the flexibility to
act in the future without the delay and expense incidental to obtaining
shareholder approval each time an opportunity requiring the issuance of shares
may arise.
Other than with respect to the NECB transaction and currently
outstanding options issued by Webster to its directors and employees, as of the
date of this document and the stock plans under which those Webster options have
been issued, Webster has no plans or commitments that would involve the issuance
of the additional shares of common stock. The increase in the authorized shares
of Webster's common stock will allow the Webster board of directors to consider
and, if in the best interests of Webster shareholders, take advantage of merger
or acquisition opportunities. As part of its business strategy, Webster
continually considers potential strategic business combination and other
acquisition opportunities, and it is the policy of Webster not to comment on
such matters publicly until a definitive agreement has been reached regarding a
particular transaction. In addition, the discretion vested in the Webster board
of directors to authorize the issuance and sale of authorized but unissued
shares of Webster's common stock could, under some circumstances, be used to
discourage certain potential business combinations that some Webster
shareholders may believe to be in the best interests of Webster shareholders and
make more difficult management changes that may occur if a potential business
combination were successful, although Webster has no current intention to issue
shares of Webster's common stock for such purpose.
69
<PAGE>
In general, the authorized but unissued shares of Webster's common
stock may be issued by the board of directors without a future shareholder vote.
Under applicable provisions of Delaware law and the Nasdaq rules, however,
issuances of additional shares of common stock, in transactions where Webster
may be issuing shares of common stock and securities convertible into common
stock exceeding 20% of the shares of common stock outstanding immediately prior
to such merger, will require the approval of the Webster shareholders.
The authorization of additional shares of common stock under this
proposal will have no dilutive effect upon the proportionate voting power of the
present shareholders of Webster. However, to the extent that shares are
subsequently issued to persons other than the present stockholders and/or in
proportions other than the proportion that presently exists, such issuance could
have a substantial dilutive effect on present shareholders with respect to
voting rights, book value of their stock and earnings per share.
THE WEBSTER BOARD RECOMMENDS THAT WEBSTER SHAREHOLDERS VOTE FOR THE
CERTIFICATE AMENDMENT. The affirmative vote of the holders of a majority of the
shares of Webster's common stock entitled to vote on this matter and present in
person or by proxy, at the special meeting, as long as a quorum is present.
70
<PAGE>
Appendix A
A.G. EDWARDS & SONS, INC.
Investment Banking
One North Jefferson
St. Louis, Missouri 63103
September 27, 1999
Board of Directors
New England Community Bancorp, Inc.
Old Windsor Mall
Windsor, CT 06095
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders (the "Stockholders") of the outstanding shares of
common stock of New England Community Bancorp ("New England") of the Merger
Consideration (as defined below) to be received in the proposed merger (the
"Merger") of New England with and into Webster Financial Corporation ("Webster")
pursuant to an Agreement and Plan of Merger dated June 30, 1999 (the
"Agreement").
Pursuant to the Agreement, each share of the common stock of New England will be
converted into 1.06 shares of Webster common stock, and cash in lieu of
fractional shares (the "Merger Consideration").
A.G. Edwards & Sons, Inc. ("Edwards"), as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with New England through our engagement with the
Board of Directors with respect to the Merger. As part of our engagement for
this transaction, we will receive a fee for rendering our fairness opinion. We
will also receive a fee at the closing of the Merger equal to a percentage of
the total Merger Consideration received by the Stockholders. We are not aware of
any present or contemplated relationship between A.G. Edwards, New England, or
New England's directors and officers or the Stockholders, or Webster, its
directors, officers or stockholders, which, in our opinion, would affect our
ability to render a fair and independent opinion in this matter.
In connection with this opinion, we have, among other things:
(i) reviewed the Agreement and related documents;
(ii) reviewed expressions of interest for New England by other
potential bidders with the New England Board of Directors;
A-1
<PAGE>
(iii) held discussions with management of New England and Webster
regarding the nature and extent of the terms of the Merger;
(iv) reviewed publicly available information regarding New England
and Webster which we deemed relevant, including New England's
and Webster's annual and quarterly reports, proxy statements
and other relevant filings with the Securities and Exchange
Commission through the fiscal period ended March 31, 1999, as
well as research reports and analyst opinions;
(v) reviewed financial projections for New England for fiscal
years 1999 through 2003 as provided by New England's
management;
(vi) investigated certain other internal operating and financial
information regarding New England and Webster supplied to us
by the management of New England and Webster, respectively,
concerning the business, operations and financial prospects of
New England and Webster, individually and as combined
entities;
(vii) reviewed the industry and market segments in which New England
and Webster each operate;
(viii) reviewed the reported price and trading activity for the
common stocks of New England and Webster;
(ix) reviewed publicly available information concerning certain
other companies that we believe to be relevant in evaluating
New England and Webster and the trading of their respective
securities;
(x) reviewed information relating to the nature and financial
terms of certain other mergers or acquisitions that we
consider relevant in evaluating the Merger; and
(xi) assessed such other information that we consider relevant to
our analysis.
In rendering our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all financial and other
information publicly available or that was supplied or otherwise made available
to us by New England and Webster. We have not been engaged to, and therefore we
have not, verified the accuracy or completeness of any such information. We have
been informed and assumed that the financial projections supplied to, discussed
with or otherwise made available to us reflect the best currently available
estimates and judgments of the managements of New England and Webster, in each
case on a stand-alone basis and after giving effect to the Merger, including,
without limitation, the projected cost savings and operating synergies resulting
from the Merger as projected by the management of Webster. We have not
independently verified such information or assumptions, nor do we express any
opinion with respect thereto.
We have not conducted a physical inspection of any of the properties or
facilities of New England or Webster or analyzed any loan or asset
documentation, nor have we made, obtained or reviewed any independent evaluation
or appraisals of any such properties or facilities or of any loans, investments
or financial assets and liabilities. Furthermore, we are not experts in the
evaluation of allowances for loan losses and we have not made an independent
evaluation of the adequacy of the allowances for loan losses of New England or
Webster or reviewed the loan portfolios of New England or Webster beyond what
was
A-2
<PAGE>
required to conduct our due diligence review of the Merger. We have relied upon
the assurances of the management of New England and Webster that they are not
aware of any facts or circumstances that would make such information inaccurate
or misleading.
In performing our analysis, we made numerous assumptions with respect to the
industry and markets in which New England and Webster operate, general business
and economic conditions and government regulations, each of which are beyond the
control of New England or Webster. The analysis we performed is not necessarily
indicative of actual values or actual future results that may be significantly
more or less favorable than suggested by such analysis. We do not express any
opinion as to what the value of the Webster common stock will be when issued to
the Stockholders pursuant to the Merger, or the price at which Webster common
stock will trade subsequent to the Merger.
In rendering our opinion, we have assumed that the Merger will be accounted for
as a "pooling-of-interests" business combination in accordance with U.S.
Generally Accepted Accounting Principles and that the Merger will be consummated
on the terms contained in the Agreement, without any waiver of any material
terms or conditions by New England or Webster.
This letter is for the information of the New England Board of Directors and
does not constitute a recommendation as to how any Stockholder should vote with
respect to the Merger. This opinion may not be summarized, excerpted from or
otherwise publicly referred to without our prior written consent, except that
this opinion may be included in its entirety in any proxy materials distributed
to the Stockholders regarding the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Merger Consideration to be received, pursuant to the Agreement is
fair, from a financial point of view, to the New England Stockholders.
Very truly yours,
A.G. Edwards & Sons, Inc.
By:/s/ John H. Howland
John H. Howland
Vice President
- Investment Banking
A-3
<PAGE>
APPENDIX B
HAS ASSOCIATES, INC.
76 Northeastern Blvd. Suite 34 P.O. Box 84
Nashua, N.H. 03062 Boston, MA 02171
September 27, 1999
Board of Directors
New England Community Bancorp, Inc.
176 Broad Street
Windsor, CT 06095
Members of the Board:
You have requested our opinion as to the fairness to the stockholders of
New England Community Bancorp, Inc., Windsor, Connecticut ("NECB"), from a
financial point of view, of the terms of the Agreement and Plan of Merger ("the
Merger") by and between NECB and Webster Financial Corporation ("Webster"), a
Connecticut corporation. Shareholders of NECB who do not exercise their right to
dissent will receive the per share merger consideration which will be payable in
common stock of Webster. The exchange ratio will be 1.05 shares of Webster
common stock for each share of NECB common stock.
In connection with its opinion, HAS, among other things: (1) reviewed NECB'
Annual Reports and related audited financial information for the three fiscal
years ended December 31, 1998; (2) reviewed Webster's Annual Reports and related
audited financial information for the three fiscal years ended December 31,
1998; (3) reviewed certain limited financial information relating to the
respective businesses, earnings, assets and prospects of NECB and Webster
furnished to HAS by senior management of NECB and Webster as well as projected
cost savings and related expenses expected to result from the Merger furnished
to it by senior management of NECB and Webster; (4) conducted certain limited
discussions with members of senior management of NECB and Webster concerning the
respective businesses, financial condition, earnings, assets, liabilities,
operations, regulatory condition, contingencies and prospects of NECB and
Webster and their respective views as to the future financial performance of
NECB, Webster and the Combined Company, as the case may be, following the
Merger; (5) reviewed the historical market prices and trading activity for NECB
and Webster Common Stock and compared them with that of certain publicly traded
companies which HAS deemed to be relevant; (6) compared the respective results
of operations of NECB and Webster with those of certain companies which HAS
deemed to be relevant; (7) compared the proposed financial terms of the Merger
contemplated by the Agreement with the financial terms of certain other mergers
and acquisitions which HAS deemed to be relevant; (8) reviewed the amount and
timing of the expected savings following the Merger as prepared, and discussed
with it; (9) considered, based upon information provided by Webster's senior
B-1
<PAGE>
management, the pro forma impact of the Merger on the earnings and book value
per share, consolidated capitalization and certain balance sheet and
profitability ratios of Webster; (10) reviewed the most recent Agreement; and
(11) reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as HAS deemed necessary.
In conducting its review and arriving at its opinion, HAS relied upon and
assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and HAS did not attempt to
verify such information independently or undertake an independent appraisal of
the assets and liabilities of NECB. HAS relied upon the accuracy and opinion of
the audit reports prepared by the Bank's independent accountants. HAS assumes no
responsibility for the accuracy and completeness of the financial and other
information relied upon.
We have acted as financial advisor to the Board of NECB in connection with
the Merger and will receive a fee for this service.
In reliance upon and subject to the foregoing, it is our opinion that, as
of September 27, 1999, the per share merger consideration to be received by the
shareholders of NECB and the financial terms of the Merger were, and as of the
date hereof, such terms are, fair, from a financial point of view, to the
current shareholders of NECB.
This letter is furnished to you in connection with the Merger and we
consent to its inclusion in the Registration Statement and proxy solicitation
material.
Sincerely,
/s/ HAS Associates Inc.
HAS Associates, Inc.
B-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to the provisions of Article 6 of Webster's
certificate of incorporation, and the provisions of Article IX of the Webster's
bylaws, as amended.
Webster is a Delaware corporation subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware (the "Delaware Corporation Law"). Section 145 of the Delaware
Corporation Law provides for the indemnification, under certain circumstances,
of persons who are or were directors, officers, employees or agents of Webster,
or are or were serving at the request of Webster in such a capacity with another
business organization or entity, against expenses, judgments, fines and amounts
paid in settlement in actions, suits or proceedings, whether civil, criminal,
administrative, or investigative, brought or threatened against or involving
such persons because of such person's service in any such capacity. In the case
of actions brought by or in the right of Webster, Section 145 provides for
indemnification only of expenses, and only upon a determination by the Court of
Chancery or the court in which such action or suit was brought that, in view of
all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses.
Webster's bylaws provide for indemnification of directors, officers,
trustees, employees and agents of Webster, and for those serving in such roles
with other business organizations or entities, in the event that such person was
or is made a party to (or is threatened to be made a party to) any civil,
criminal, administrative, arbitration or investigative action, suit, or
proceeding (other than an action by or in the right of Webster) by reason of the
fact that such person is or was serving in such a capacity for or on behalf of
Webster. Webster will indemnify any such person against expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid in settlement if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of Webster, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Similarly, Webster shall indemnify such persons for
expenses reasonably incurred and settlements reasonably paid in actions, suits,
or proceedings brought by or in the right of Webster, if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of Webster; provided, however, that no
indemnification shall be made against expenses in respect of any claim, issue,
or matter as to which such person is adjudged to be liable to Webster or against
amounts paid in settlement unless and only to the extent that there is a
determination made by the appropriate party set forth in the bylaws that the
person to be indemnified is, in view of all the circumstances of the case,
fairly and reasonably entitled to indemnity for such expenses or amounts paid in
settlement. In addition, Webster may purchase and maintain insurance on behalf
of any person who is or was a director, officer, trustee, employee, or agent of
Webster or is acting in such capacity for another business organization or
entity at Webster's request, against any liability asserted against such person
and incurred in such capacity, or arising out of such person's status as such,
whether or not Webster would have the power or obligation to indemnify him
against such liability under the provisions of Article IX of Webster's bylaws.
Article 6 of Webster's restated certificate of incorporation provides
that no director will be personally liable to Webster or its shareholders for
monetary damages for breach of fiduciary duty as a director other than liability
for any breach of such director's duty of loyalty to Webster or its
shareholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for any payment of a
dividend or approval of a stock repurchase that is illegal under Section 174 of
the Delaware Corporation Law, or for any transaction from which the director
derived an improper personal benefit.
II-1
<PAGE>
The foregoing indemnity and insurance provisions have the effect of
reducing directors' and officers' exposure to personal liability for actions
taken in connection with their respective positions.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Webster pursuant to the foregoing provisions, or otherwise, Webster has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Webster of
expenses incurred or paid by a director, officer or controlling person of
Webster in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, Webster will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
Exhibit
No. Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of June 29, 1999, by and
between Webster Financial Corporation ("Webster") and New England
Community Bancorp, Inc. ("NECB").
2.2 Stock Option Agreement, dated as of June 29, 199, between NECB and
Webster.
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the
securities registered hereunder, including the consent of that
firm.
8.1 Opinion of Day, Berry and Howard LLP as to certain tax matters,
including the consent of that firm.
8.2 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax
matters, including the consent of that firm.
10.1 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and David A. Lentini, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(g) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.2 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Frank A. Falvo, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(j) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.3 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Donat A. Fournier, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(h) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.4 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Anson C. Hall, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997(filed
as Exhibit 10(I) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.5 Non-Compete Agreement, dated as of June 29, 1999, by and between
David A. Lentini and Webster Financial Corporation.
10.6 Non-Compete Agreement, dated as of June 29, 1999, by and between
Frank A. Falvo and Webster Financial Corporation.
10.7 Non-Compete Agreement, dated as of June 29, 1999, by and between
Donat A. Fournier and Webster Financial Corporation.
10.8 Non-Compete Agreement, dated as of June 29, 1999, by and between
Anson C. Hall and Webster Financial Corporation.
II-3
<PAGE>
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5).
23.2 Consent of Day, Berry and Howard LLP (included as part of Exhibit
8).
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included as part of
Exhibit 8).
23.4 Consent of KPMG LLP.
23.5 Consent of Shatswell, MacLeod & Company, P.C.
23.6 Consent of A.G. Edwards, Inc.
23.7 Consent of HAS Associates, Inc.
24 Power of attorney (included on signature page).
99.1 Form of Webster proxy card.
99.2 Form of NECB proxy card
- ---------------
(B) Not required.
(C) See Appendix A and Appendix B to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS.
(a) Webster hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of the
securities offered would not exceed that which was
registered) and any deviation from the low or high end
of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule
424(b) (Section 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of the
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or
II-4
<PAGE>
any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) Webster hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing
of Webster's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(c) Webster hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c),
Webster undertakes that such reoffering prospectus will
contain the information called for by the applicable
registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information
called for by the other Items of the applicable form.
(d) Webster undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii)
that purports to meet the requirements of section 10(a)(3)
of the Securities Act of 1933 and is used in connection with
an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and
that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(e) The undertaking concerning indemnification is included as
part of the response to Item 20.
(f) Webster hereby undertakes to respond to requests for
information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail
or other equally prompt means. This includes information
contained in documents filed subsequent to the effective
date of the registration statement through the date of
responding to the request.
(g) Webster hereby undertakes to supply by means of a
post-effective amendment all information concerning a
transaction, and the company being acquired involved
therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Waterbury,
State of Connecticut, on September 28, 1999.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
------------------------------------
James C. Smith
Chairman and Chief Executive Officer
Each person whose signature appears below James C. Smith or John V.
Brennan, jointly and severally, each in his own capacity, as true and lawful
attorneys-in-fact, with full power or substitution in such person's name, place
and stead, in any and all capacities to sign any amendments to this Registration
Statement on Form S-4 and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on September 23, 1999.
Name: Title:
/s/ James C. Smith Chairman and Chief Executive Officer
- ------------------------------ (Principal Executive Officer)
James C. Smith
/s/ John v. Brennan Executive Vice President, Chief Financial
- ------------------------------ Officer and Treasurer
John V. Brennan (Principal Financial Officer and
Principal Accounting Officer)
/s/ Richard H. Alden Director
- ------------------------------
Richard H. Alden
/s/ Achille A. Apicella Director
- ------------------------------
Achille A. Apicella
/s/ Joel S. Becker Director
- ------------------------------
Joel S. Becker
/s/ O. Joseph Bizzozero, Jr. Director
- ------------------------------
O. Joseph Bizzozero, Jr.
II-6
<PAGE>
/s/ George T. Carpenter Director
- ------------------------------
George T. Carpenter
/s/ John J. Crawford Director
- ------------------------------
John J. Crawford
/s/ Harry P. DiAdamo, Jr. Director
- ------------------------------
Harry P. DiAdamo, Jr.
/s/ Robert A. Finkenzeller Director
- ------------------------------
Robert A. Finkenzeller
/s/ C. Michael Jacobi Director
- ------------------------------
C. Michael Jacobi
/s/ John F. McCarthy Director
- ------------------------------
John F. McCarthy
/s/ Sister Marguerite Waite Director
- ------------------------------
Sister Marguerite Waite
II-7
<PAGE>
EXHIBIT INDEX
Exhibit
No. Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of June 29, 1999, by and
between Webster Financial Corporation ("Webster") and New England
Community Bancorp, Inc. ("NECB").
2.2 Stock Option Agreement, dated as of June 29, 199, between NECB and
Webster.
5 Opinion of Hogan & Hartson L.L.P. as to the validity of securities
registered hereunder, including the consent of that firm.
8.1 Opinion of Day, Berry and Howard LLP as to certain tax matters,
including the consent of that firm.
8.2 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax
matters, including the consent of that firm.
10.1 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and David A. Lentini, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(g) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.2 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Frank A. Falvo, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997(filed
as Exhibit 10(j) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.3 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Donat A. Fournier, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(h) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.4 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Anson C. Hall, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(i) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.5 Non-Compete Agreement, dated as of June 29, 1999, by and between
David A. Lentini and Webster Financial Corporation.
10.6 Non-Compete Agreement, dated as of June 29, 1999, by and between
Frank A. Falvo and Webster Financial Corporation.
10.7 Non-Compete Agreement, dated as of June 29, 1999, by and between
Donat A. Fournier and Webster Financial Corporation.
10.8 Non-Compete Agreement, dated as of June 29, 1999, by and between
Anson C. Hall and Webster Financial Corporation.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5).
<PAGE>
23.2 Consent of Day, Berry and Howard LLP (included as part of Exhibit
8).
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included as part of
Exhibit 8).
23.4 Consent of KPMG LLP.
23.5 Consent of Shatswell, MacLeod & Company, P.C.
23.6 Consent of A.G. Edwards, Inc.
23.7 Consent of HAS Associates, Inc.
24 Power of attorney (included on signature page).
99.1 Form of Webster proxy card.
99.2 Form of NECB proxy card
- --------------
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WEBSTER FINANCIAL CORPORATION,
AND
NEW ENGLAND COMMUNITY BANCORP, INC.
DATED AS OF
JUNE 29, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE I THE MERGER...........................................................................................1
1.1 The Merger...........................................................................................1
1.2 Effective Time.......................................................................................2
1.3 Effects of the Merger................................................................................2
1.4 Conversion of New England Common Stock...............................................................2
1.5 Options..............................................................................................3
1.6 Certificate of Incorporation.........................................................................3
1.7 By-Laws..............................................................................................3
1.8 Directors and Officers...............................................................................3
1.9 Tax Consequences.....................................................................................3
1.10 Accounting Treatment................................................................................3
ARTICLE II EXCHANGE OF SHARES..................................................................................4
2.1 Webster to Make Shares Available.....................................................................4
2.2 Exchange of Shares...................................................................................4
ARTICLE II-A DISCLOSURE SCHEDULE; STANDARDS FOR REPRESENTATIONS AND WARRANTIES.................................5
2A.1 Disclosure Schedule.................................................................................5
2A.2 Standards...........................................................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NEW ENGLAND......................................................5
3.1 Corporate Organization...............................................................................6
3.2 Capitalization.......................................................................................6
3.3 Authority; No Violation..............................................................................7
3.4 Consents and Approvals...............................................................................8
3.5 Loan Portfolio; Reports..............................................................................8
3.6 Financial Statements; Exchange Act Filings; Books and Records........................................9
3.7 Broker's Fees........................................................................................9
3.8 Absence of Certain Changes or Events.................................................................9
3.9 Legal Proceedings...................................................................................10
3.10 Taxes and Tax Returns..............................................................................10
3.11 Employee Plans.....................................................................................11
3.12 Certain Contracts..................................................................................13
3.13 Agreements with Regulatory Agencies................................................................13
3.14 State Takeover Laws; Certificate of Incorporation..................................................14
3.15 Environmental Matters..............................................................................14
3.16 Reserves for Losses................................................................................14
3.17 Properties and Assets..............................................................................15
3.18 Insurance..........................................................................................15
3.19 Compliance with Applicable Laws....................................................................15
3.20 Loans..............................................................................................15
3.21 Ownership of Webster Common Stock..................................................................16
3.22 Fairness Opinion...................................................................................17
3.23 Tax and Accounting Treatment of Merger.............................................................17
3.24 Year 2000..........................................................................................17
3.25 New England Information............................................................................17
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WEBSTER..........................................................17
4.1 Corporate Organization..............................................................................17
4.2 Capitalization......................................................................................18
4.3 Authority; No Violation.............................................................................18
4.4 Consents and Approvals..............................................................................19
4.5 Financial Statements; Exchange Act Filings; Books and Records.......................................20
4.6 Absence of Certain Changes or Events................................................................20
4.7 Compliance with Applicable Laws.....................................................................21
4.8 Tax and Accounting Treatment of Merger..............................................................21
4.9 Legal Proceedings...................................................................................21
4.10 Year 2000..........................................................................................21
4.11 Webster Information................................................................................21
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS...........................................................21
5.1 Covenants of New England............................................................................21
5.2 Covenants of Webster................................................................................24
5.3 Merger Covenants....................................................................................25
ARTICLE VI ADDITIONAL AGREEMENTS..............................................................................25
6.1 Regulatory Matters..................................................................................25
6.2 Access to Information...............................................................................26
6.3 Stockholder Meetings................................................................................26
6.4 Legal Conditions to Merger..........................................................................27
6.5 Stock Exchange Listing..............................................................................27
6.6 Employees...........................................................................................27
6.7 Indemnification.....................................................................................27
6.8 Subsequent Interim and Annual Financial Statements..................................................29
6.9 Additional Agreements...............................................................................29
6.10 Advice of Changes..................................................................................29
6.11 Current Information................................................................................29
6.12 Change in Structure; Stockholder Approval..........................................................29
6.13 Transaction Expenses of New England................................................................29
6.14 Affiliate Agreements...............................................................................30
ARTICLE VII CONDITIONS PRECEDENT..............................................................................30
7.1 Conditions to Each Party's Obligation to Effect the Merger..........................................30
7.2 Conditions to Obligations of Webster................................................................31
7.3 Conditions to Obligations of New England............................................................31
ARTICLE VIII TERMINATION AND AMENDMENT........................................................................32
8.1 Termination.........................................................................................32
8.2 Effect of Termination...............................................................................35
8.3 Amendment...........................................................................................35
8.4 Extension; Waiver...................................................................................35
ARTICLE IX GENERAL PROVISIONS.................................................................................35
9.1 Closing.............................................................................................35
9.2 Nonsurvival of Representations, Warranties and Agreements...........................................35
9.2 Expenses............................................................................................35
9.4 Notices.............................................................................................36
9.5 Interpretation......................................................................................36
9.6 Counterparts........................................................................................36
9.7 Entire Agreement....................................................................................36
9.8 Governing Law.......................................................................................37
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
9.9 Enforcement of Agreement............................................................................37
9.10 Severability.......................................................................................37
9.11 Publicity..........................................................................................37
9.12 Assignment; Limitation of Benefits.................................................................37
9.13 Additional Definitions.............................................................................37
</TABLE>
EXHIBITS
A Form of Option Agreement
B Form of Articles of Combination and Bank Merger Agreement
C Form of Agreement of New England Affiliates
D Form of Agreement of Webster Affiliates
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of June 29, 1999 (this
"Agreement"), is entered into by and between Webster Financial Corporation, a
Delaware corporation ("Webster") and New England Community Bancorp, Inc., a
Delaware corporation ("New England").
WHEREAS, the Boards of Directors of Webster and New England have
determined that it is in the best interests of their respective companies and
stockholders to consummate the business combination transaction provided for
herein in which New England will, subject to the terms and conditions set forth
herein, merge with and into Webster (the "Merger"), with Webster being the
surviving corporation (the "Surviving Corporation") in the Merger;
WHEREAS, prior to the consummation of the Merger, Webster and New
England will respectively cause Webster Bank ("Webster Bank"), a federally
chartered savings bank and wholly-owned subsidiary of Webster, and each of New
England Bank and Trust Company, The Equity Bank, Community Bank and, subject to
Webster's discretion, Olde Port Bank & Trust Company (collectively, the "New
England Banks") to enter into a merger agreement, in the form attached hereto as
Exhibit A (the "Bank Merger Agreement"), providing for the merger (the "Bank
Merger") of each of the New England Banks with and into Webster Bank, with
Webster Bank being the Surviving Bank of the Bank Merger, and the Bank Merger to
be consummated immediately after consummation of the Merger;
WHEREAS, as an inducement to Webster to enter into this Agreement, New
England will enter into an option agreement, in the form attached hereto as
Exhibit B (the "Option Agreement"), with Webster immediately following the
execution of this Agreement pursuant to which New England will grant Webster an
option to purchase, under certain circumstances, an aggregate number of newly
issued shares of common stock equal to 19.9% of the outstanding shares of common
stock, par value $1.00 per share, of New England ("New England Common Stock")
and otherwise upon the terms and conditions therein contained;
WHEREAS, the Merger is intended to be treated as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and as a "pooling of interests" under generally accepted accounting
principles; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. (a) Subject to the terms and conditions of this
Agreement, in accordance with the Delaware General Corporation Law (the "DGCL"),
at the Effective Time (as defined in Section 1.2 hereof), New England shall
merge into Webster, with Webster being the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") in the Merger. Upon consummation
of the Merger, the corporate existence of New England shall cease, and the
Surviving Corporation shall continue to exist as a Delaware corporation.
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1.2 EFFECTIVE TIME. The Merger shall become effective on the date and
at the time set forth in the certificate of merger (the "Certificate of Merger")
which shall be filed with the Secretary of State of the State of Delaware on the
Closing Date. The term "Effective Time" shall be the date and time when the
Merger becomes effective, as set forth in the Certificate of Merger.
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Section 259 and 261 of the DGCL.
1.4 CONVERSION OF NEW ENGLAND COMMON STOCK. (a) At the Effective Time,
subject to Sections 1.4(b), 1.4(d) and 8.1(h) hereof, each share of New England
Common Stock issued and outstanding prior to the Effective Time shall, by virtue
of this Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for 1.06 shares of Webster common stock, par
value $.01 per share ("Webster Common Stock"). The number of shares of Webster
Common Stock to be exchanged for each share of New England Common Stock issued
and outstanding pursuant to this Agreement is hereinafter referred to as the
"Exchange Ratio."
(b) All of the shares of New England Common Stock converted into
Webster Common Stock pursuant to this Article I shall no longer be outstanding
and shall automatically be canceled and shall cease to exist, and each
certificate (each a "Certificate") previously representing any such shares of
New England Common Stock shall thereafter represent the right to receive (i) the
number of whole shares of Webster Common Stock and (ii) cash in lieu of
fractional shares into which the shares of New England Common Stock represented
by such Certificate have been converted pursuant to this Section 1.4(b) and
Section 2.2 hereof. Certificates previously representing shares of New England
Common Stock shall be exchanged for certificates representing whole shares of
Webster Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates in accordance
with Section 2.2 hereof, without any interest thereon. If, after the date hereof
and prior to the Effective Time, Webster should split or combine its common
stock, or pay a dividend or other distribution in such common stock, then the
Exchange Ratio shall be appropriately adjusted to reflect such split,
combination, dividend or distribution.
(c) At the Effective Time, all shares of New England Common Stock that
are owned by New England as treasury stock and all shares of New England Common
Stock that are owned directly or indirectly by Webster or New England or any of
their respective Subsidiaries (other than shares of New England Common Stock
held directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties (any such shares, and shares of Webster Common Stock which are similarly
held, whether held directly or indirectly by Webster or New England, as the case
may be, being referred to herein as "Trust Account Shares") and other than any
shares of New England Common Stock held by Webster or New England or any of
their respective Subsidiaries in respect of a debt previously contracted (any
such shares of New England Common Stock, and shares of Webster Common Stock
which are similarly held, whether held directly or indirectly by Webster or New
England, being referred to herein as "DPC Shares")) shall be canceled and shall
cease to exist and no stock of Webster or other consideration shall be delivered
in exchange therefor. All shares of Webster Common Stock that are owned by New
England or any of its Subsidiaries (other than Trust Account Shares and DPC
Shares) shall become treasury stock of Webster.
(d) Certificates for fractions of shares of Webster Common Stock will
not be issued. In lieu of a fraction of a share of Webster Common Stock, each
holder of New England Common Stock otherwise entitled to a fraction of a share
of Webster Common Stock shall be entitled to receive an amount of cash equal to
(i) the fraction of a share of the Webster Common Stock to which such holder
would otherwise be entitled, multiplied by (ii) the market value of the Webster
Common Stock, which shall be deemed to be the average of the daily closing
prices per share for Webster Common Stock for the twenty consecutive trading
days on which shares of Webster Common Stock are actually traded (as reported on
the Nasdaq Stock Market National Market) ending on the third trading day
preceding the Closing Date. Following consummation of the Merger,
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no holder of New England Common Stock shall be entitled to dividends or any
other rights in respect of any such fraction.
1.5 OPTIONS. At the Effective Time, each option granted by New England
to purchase shares of New England Common Stock which is outstanding and
unexercised immediately prior thereto shall be converted automatically into an
option to purchase shares of Webster Common Stock in an amount and at an
exercise price determined as provided below (and otherwise subject to the terms
of the 1997 Non-Officer Director's Stock Option Plan, the 1996 Incentive and
Nonqualified Compensatory Stock Option Plan, and the 1990 Bank of South Windsor
Non-Qualified Stock Option Plan (the "New England Stock Plans"), in each case,
under which such option was granted):
(1) The number of shares of Webster Common Stock to be
subject to the option immediately after the Effective Time shall be
equal to the product of the number of shares of New England Common
Stock subject to the option immediately before the Effective Time,
multiplied by the Exchange Ratio, rounded to the nearest share; and
(2) The exercise price per share of Webster Common Stock
under the option immediately after the Effective Time shall be equal
to the exercise price per share of New England Common Stock under the
option immediately before the Effective Time divided by the Exchange
Ratio, provided that such exercise price shall be rounded to the
nearest cent.
The adjustment provided herein with respect to any options that are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner that is consistent with Section 424(a) of the Code. The duration and
other terms of the new option shall be the same as the original option, except
that all references to New England or any of the New England Banks in the New
England Stock Plans (and in any option agreement documenting such option) shall
be deemed to be references to Webster or Webster Bank, as applicable.
1.6 CERTIFICATE OF INCORPORATION. At the Effective Time, the
Certificate of Incorporation of Webster, as in effect at the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation.
1.7 BY-LAWS. At the Effective Time, the By-Laws of Webster, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation.
1.8 DIRECTORS AND OFFICERS. At the Effective Time, the directors and
officers of Webster immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation, provided that as of the
Effective Time Webster shall appoint one person (the "Designee") from among
those serving on the New England Board of Directors at such time to the Board of
Directors of the Surviving Corporation, such person to serve as a director for a
period to terminate at the annual meeting of Webster stockholders next following
the first anniversary of the Effective Time. Additionally, as of the Effective
Time, Webster shall, as necessary, cause Webster Bank to amend its bylaws to
increase the size of its Board of Directors by one member, and thereupon Webster
shall appoint the Designee to serve as an additional member of the Board of
Directors of Webster Bank for a period to terminate no earlier than the annual
meeting of Webster stockholders next following the third anniversary of the
Effective Time.
1.9 TAX CONSEQUENCES. It is intended that the Merger shall constitute
a reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for the purposes of the
Code.
1.10 ACCOUNTING TREATMENT. It is intended that the Merger shall be
accounted for as a "pooling of interests" under generally accepted accounting
principles ("GAAP").
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ARTICLE II
EXCHANGE OF SHARES
2.1 WEBSTER TO MAKE SHARES AVAILABLE. At or prior to the Effective
Time, Webster shall deposit, or shall cause to be deposited, with Webster's
transfer agent, American Stock Transfer & Trust Company, or such other bank,
trust company or transfer agent as Webster may select (the "Exchange Agent"),
for the benefit of the holders of Certificates, for exchange in accordance with
this Article II, certificates representing the shares of Webster Common Stock
and the cash in lieu of fractional shares (such cash and certificates for shares
of Webster Common Stock, being hereinafter referred to as the "Exchange Fund")
to be issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) hereof
in exchange for outstanding shares of New England Common Stock.
2.2 EXCHANGE OF SHARES. (a) As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent) and instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing the shares of Webster Common Stock and the cash in
lieu of fractional shares into which the shares of New England Common Stock
represented by such Certificate or Certificates shall have been converted
pursuant to this Agreement. New England shall have the right to review both the
letter of transmittal and the instructions prior to such documents being
finalized. Upon surrender of a Certificate for exchange and cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole shares of Webster Common Stock
to which such holder of New England Common Stock shall have become entitled
pursuant to the provisions of Article I hereof and (y) a check representing the
amount of cash in lieu of fractional shares, if any, which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the cash in lieu
of fractional shares and unpaid dividends and distributions, if any, payable to
holders of Certificates.
(b) No dividends or other distributions declared after the Effective
Time with respect to Webster Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Article
II. After the surrender of a Certificate in accordance with this Article II, the
record holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Webster Common Stock represented by such
Certificate. No holder of an unsurrendered Certificate shall be entitled, until
the surrender of such Certificate, to vote the shares of Webster Common Stock
into which his New England Common Stock shall have been converted.
(c) If any certificate representing shares of Webster Common Stock is
to be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of Webster Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) After the close of business on the day immediately prior to the
Effective Time, there shall be no transfers on the stock transfer books of New
England of the shares of New England Common Stock which were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates representing such shares are presented for transfer to the
Exchange
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Agent, they shall be canceled and exchanged for certificates representing shares
of Webster Common Stock as provided in this Article II.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of New England for six months after the Effective Time shall be
returned to Webster. Any stockholders of New England who have not theretofore
complied with this Article II shall thereafter look only to Webster for payment
of their shares of Webster Common Stock, cash in lieu of fractional shares and
unpaid dividends and distributions on Webster Common Stock deliverable in
respect of each share of New England Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Webster, New England, the
Exchange Agent or any other person shall be liable to any former holder of
shares of New England Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Webster,
the posting by such person of a bond in such amount as Webster may reasonably
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Webster Common Stock and cash in
lieu of fractional shares deliverable in respect thereof pursuant to this
Agreement.
ARTICLE II-A
DISCLOSURE SCHEDULE; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
2A.1 DISCLOSURE SCHEDULE. Prior to the execution and delivery hereof,
New England has delivered to Webster a schedule (the "New England Disclosure
Schedule"), and Webster has delivered to New England a schedule (the "Webster
Disclosure Schedule"), in each case setting forth, among other things, items the
disclosure of which is necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to one
or more of such party's representations or warranties contained in Articles III
or IV, as applicable, or to one or more of its covenants contained in Article V;
provided, however, that the mere inclusion of an item in a Disclosure Schedule
as an exception to a representation or warranty shall not be deemed an admission
by a party that such item represents a material exception or fact, event or
circumstance or that such item has had or would have a Material Adverse Effect
(as defined in Section 9.13) with respect to such party.
2A.2 STANDARDS. No representation or warranty of New England contained
in Article III or of Webster contained in Article IV shall be deemed untrue or
incorrect for any purpose under this Agreement, and no party hereto shall be
deemed to have breached a representation or warranty for any purpose under this
Agreement, as a consequence of the existence or absence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
when taken together with all other facts, circumstances or events inconsistent
with any representations or warranties contained in Article III, in the case of
New England, or Article IV, in the case of Webster, has had or would be
reasonably certain to have a Material Adverse Effect with respect to New England
or Webster, respectively.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NEW ENGLAND
Subject to Article II-A, New England hereby makes the following
representations and warranties to Webster and Webster Bank as set forth in this
Article III.
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3.1 CORPORATE ORGANIZATION. New England is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. New England has the corporate or other power and authority to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of any material business conducted by it or the
character or location of any material properties or assets owned or leased by it
makes such licensing or qualification necessary. New England is duly registered
as a bank holding company with the Board of Governors of the Federal Reserve
System ("FRB") under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). The Certificate of Incorporation and By-Laws of New England, copies of
which have previously been delivered to Webster, are true, correct and complete
copies of such documents as in effect as of the date of this Agreement. Other
than the New England Banks, Connecticut Mortgage Service Company, Inc. and New
England Community Mortgage Corp. ("Mortgage Corp."), and there is no subsidiary
of New England that would qualify as a "Significant Subsidiary" (as such term is
defined in Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC")). Each of the New England Banks is a Connecticut or New Hampshire
chartered commercial bank duly organized and validly existing and in good
standing under the laws of its jurisdiction of organization, and each of such
Banks has been duly organized and validly existing and in good standing
continuously for the five year period preceding the date hereof. The deposit
accounts of the New England Banks are insured by the Federal Deposit Insurance
Corporation (the "FDIC") through the Bank Insurance Fund (the "BIF") to the
fullest extent permitted by law, and all premiums and assessments required in
connection therewith have been paid by New England or the New England Banks, as
applicable.
3.2 CAPITALIZATION. (a) The authorized capital stock of New England
consists of 20,000,000 shares of New England Common Stock and 200,000 shares of
serial preferred stock, par value $.10 per share (the "New England Preferred
Stock"). As of June 25, 1999, there are (x) 7,036,446 shares of New England
Common Stock issued and outstanding and 135,500 shares of New England Common
Stock are held in New England's treasury, (y) no shares of New England Common
Stock reserved for issuance upon exercise of outstanding stock options or
otherwise, except for (i) 1,243,000 shares of New England Common Stock reserved
for issuance pursuant to the New England Stock Plans (of which options for
562,000 shares are currently outstanding) and (ii) 1,400,252 shares of New
England Common Stock reserved for issuance upon exercise of the option to be
issued to Webster pursuant to the Option Agreement, and (z) no shares of New
England's Preferred Stock issued or outstanding, held in New England's treasury
or reserved for issuance upon exercise of outstanding stock options or
otherwise. All of the issued and outstanding shares of New England Common Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. Except for the Option Agreement and the New England Stock
Plans, New England does not have, and is not bound by, any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of New England
Common Stock or New England Preferred Stock or any other equity security of New
England or any securities representing the right to purchase or otherwise
receive any shares of New England Common Stock or any other equity security of
New England. The names of the optionees, the date of each option to purchase New
England Common Stock granted, the number of shares subject to each such option,
the expiration date of each such option, and the price at which each such option
may be exercised under the New England Stock Plans are set forth in Section
3.2(a)(i) of the New England Disclosure Schedule. Since June 25, 1999, New
England has not issued any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock, other than
pursuant to the exercise of director or employee stock options granted under the
New England Stock Plans.
(b) Section 3.2(b) of the New England Disclosure Schedule sets forth a
true, correct and complete list of all Subsidiaries of New England as of the
date of this Agreement. New England owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of each of its Subsidiaries, free
and clear of all liens, charges, encumbrances and security interests whatsoever,
and all of such shares are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership
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thereof. No New England Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock or
any other equity security of such Subsidiary or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary. Section 3.2(b) of the New England Disclosure
Schedule sets forth a list of the material investments of New England in
corporations, joint ventures, partnerships, limited liability companies and
other entities other than its Subsidiaries.
3.3 AUTHORITY; NO VIOLATION. (a) New England has full corporate or
other power and authority to execute and deliver this Agreement and the Option
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors of New England. The Board of
Directors of New England has directed that this Agreement and the transactions
contemplated hereby be submitted to New England's stockholders for approval at a
special meeting of such stockholders and, except for the adoption of this
Agreement by the requisite vote of New England's stockholders, no other
corporate proceedings on the part of New England (except for matters related to
setting the date, time, place and record date for the special meeting) are
necessary to approve this Agreement or the Option Agreement or to consummate the
transactions contemplated hereby or thereby. This Agreement and the Option
Agreement have been duly and validly executed and delivered by New England and
(assuming due authorization, execution and delivery by Webster of this Agreement
and of the Option Agreement) this Agreement and the Option Agreement constitute
valid and binding obligations of New England, enforceable against New England in
accordance with their terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) Each of the New England Banks has full corporate power and
authority to execute and deliver the Bank Merger Agreement and to consummate the
transactions contemplated thereby. The execution and delivery of the Bank Merger
Agreement and the consummation of the transactions contemplated thereby have
been, or will have been prior to the Closing Date, duly and validly approved by
the Board of Directors of each of the New England Banks and by New England as
the sole shareholder of each of the New England Banks. No other corporate
proceedings on the part of any of the New England Banks will be necessary to
consummate the transactions contemplated thereby. The Bank Merger Agreement,
upon execution and delivery by each of the New England Banks, will be duly and
validly executed and delivered by each of the New England Banks and will
(assuming due authorization, execution and delivery by Webster Bank) constitute
a valid and binding obligation of each of the New England Banks, enforceable
against each of the New England Banks in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(c) None of the execution and delivery of this Agreement and the
Option Agreement by New England or of the Bank Merger Agreement by the New
England Banks, nor the consummation by New England or the New England Banks of
the transactions contemplated hereby or thereby, nor compliance by New England
or the New England Banks with any of the terms or provisions hereof or thereof,
will (i) violate any provision of the Certificate of Incorporation or By-Laws of
New England or any similar governing document of any of the New England Banks,
or (ii) assuming that the consents and approvals referred to in Section 3.4
hereof are duly obtained, (x) violate any Laws (as defined in Section 9.13)
applicable to New England or the New England Banks, or any of their properties
or assets, or (y) violate, conflict with, result in a breach of any provision of
or the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the respective
properties or assets of New England or the New England Banks under, any of the
terms, conditions or provisions
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of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which New England or any of the New England
Banks is a party, or by which they or any of their respective properties or
assets may be bound or affected.
3.4 CONSENTS AND APPROVALS. (a) Except for (i) the filing of
applications and notices, as applicable, as to the Merger and the Bank Merger
with the FRB under the BHCA, the Office of Thrift Supervision ("OTS") under the
Home Owners Loan Act of 1933, as amended ("HOLA"), and the Bank Merger Act; (ii)
the filing of applications and notices with the Banking Commissioner of the
State of Connecticut (the "Connecticut Commissioner") and the New Hampshire Bank
Commissioner (the "New Hampshire Commissioner"), as well as any other
applications and notices to or filings with state officials related to the
Merger and the Bank Merger (the "State Banking Approvals"), and approval of the
applications and notices described in clause (i) and this clause (ii); (iii) the
filing of any required applications or notices with the FDIC and OTS as to the
subsidiary activities of each of the New England Banks that become service
corporations or operating subsidiaries of Webster Bank and approval of such
applications and notices; (iv) the filing with the Connecticut Commissioner of
an acquisition statement pursuant to Section 36a-184 of the Connecticut Banking
Law prior to the acquisition of more than 10% of the New England Common Stock
pursuant to the Option Agreement, if not exempt; (v) the filing with the SEC of
a registration statement on Form S-4 to register the shares of Webster Common
Stock to be issued or to become issuable in connection with the Merger, which
will include the joint proxy statement/prospectus to be used in soliciting the
approval of New England's stockholders and Webster's stockholders at special
meetings of such stockholders to be held in connection with this Agreement and
the transactions contemplated hereby (the "Joint Proxy Statement/Prospectus"),
and the approval of such stockholders; (vi) the filing of the Certificate of
Merger with the Secretary of State of Delaware pursuant to the DGCL; (vii) the
filings required by the Bank Merger Agreement; (viii) such filings,
authorizations or approvals as may be set forth in Section 3.4 of the New
England Disclosure Schedule; (ix) such filings and approvals as are required to
be made or obtained under the securities or "Blue Sky" laws of various states or
with Nasdaq (or such other exchange as may be applicable); or (x) any necessary
filing, authorization, approvals or consents of third parties other than any
court, administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity"), no consents or approvals of or
filings or registrations with any Governmental Entity, or with any third party
are necessary in connection with (1) the execution and delivery by New England
of this Agreement and the Option Agreement, (2) the consummation by New England
of the Merger and the other transactions contemplated hereby, (3) the execution
and delivery by each of the New England Banks of the Bank Merger Agreement, (4)
the consummation by New England of the Option Agreement; and (5) the
consummation by each of the New England Banks of the transactions contemplated
by the Bank Merger Agreement, except, in each case, for such consents, approvals
or filings, the failure of which to obtain will not have a material adverse
effect on the ability of Webster, New England, Webster Bank or the New England
Banks to consummate the transactions contemplated hereby.
(b) New England hereby represents to Webster that, as of the date of
this Agreement, it has no knowledge of any reason why approval or effectiveness
of any of the applications, notices or filings referred to in Section 3.4(a)
cannot be obtained or granted on a timely basis.
3.5 LOAN PORTFOLIO; REPORTS. (a) Except as disclosed in Section 3.5(a)
of the New England Disclosure Schedule, New England is not a party to any
written or oral loan agreement, note or borrowing arrangement (including,
without limitation, leases, credit enhancements, commitments, guarantees and
interest-bearing assets) (collectively, "Loans"), with any director, officer or
five percent or greater stockholder of New England or any of its Subsidiaries,
or any Affiliated Person (as defined in Section 9.13) of the foregoing. New
England has made available to Webster a complete and accurate list of each
employee of New England or its Subsidiaries with which New England is a party to
any Loan.
(b) New England and its Subsidiaries have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they
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were required to file since December 31, 1996 with, as applicable, all
Government Entities (including the SEC, the FRB, the FDIC, the Connecticut
Commissioner, the New Hampshire Commissioner and any other state banking
commissions or regulatory authorities (each, a "State Regulator")) and any
self-regulatory organization ("SRO") (collectively, the "Regulatory Agencies").
As of its respective date, each such report, registration, statement and
amendment complied in all material respects with all rules and regulations
promulgated by the applicable Regulatory Agency and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that
information as of a later date shall be deemed to modify information as of an
earlier date. Except for normal examinations conducted by a Regulatory Agency in
the regular course of the business of New England and its Subsidiaries, no
Regulatory Agency is conducting, or has conducted, any proceeding or
investigation into the business or operations of New England or the New England
Banks since December 31, 1996.
3.6 FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; BOOKS AND RECORDS. New
England has previously delivered to Webster true, correct and complete copies of
the consolidated statements of position of New England and its Subsidiaries as
of December 31 for the fiscal years 1997 and 1998, and the related consolidated
statements of earnings, shareholders' equity and cash flows for the fiscal years
1996 through 1998, inclusive, as reported in New England's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 filed with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case
accompanied by the audit report of Shatswell, MacLeod & Company, P.C.,
independent public accountants with respect to New England, and the interim
financial statements of New England as of and for the three months ended March
31, 1999, as included in the New England quarterly report on Form 10-Q for the
period ended March 31, 1999 as filed with the SEC. The financial statements
referred to in this Section 3.6 (including the related notes, where applicable)
fairly present, and the financial statements referred to in Section 6.8 hereof
will fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount), the results of the
consolidated operations and consolidated financial condition of New England and
its Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) comply, and the financial statements referred to in Section 6.8
hereof will comply, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto and each of such
statements (including the related notes, where applicable) has been, and the
financial statements referred to in Section 6.8 hereof will be prepared in
accordance with GAAP consistently applied during the periods involved, except in
each case as indicated in such statements or in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q. New England's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998 and all reports
filed under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act since
December 31, 1993 comply in all material respects with the appropriate
requirements for such reports under the Exchange Act, and New England has
previously delivered or made available to Webster true, correct and complete
copies of such reports. The books and records of New England and each of the New
England Banks have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting requirements.
3.7 BROKER'S FEES. Neither New England nor any New England Subsidiary
nor any of their respective officers or directors has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated by this Agreement,
the Option Agreement or the Bank Merger Agreement, except that New England has
engaged, and will pay a fee or commission to each of A.G. Edwards & Sons, Inc.
and HAS Associates, Inc. in accordance with the terms of letter agreements
between each of them, on the one hand, and New England, on the other, dated May
21, 1999, true, complete and correct copies of which has been previously
delivered by New England to Webster.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Except as disclosed in
any New England report publicly filed with the SEC under the Exchange Act prior
to the date of this
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Agreement, since December 31, 1998 (i) neither New England nor any of its
Subsidiaries has incurred any material liability, except as contemplated by this
Agreement or in the ordinary course of its business consistent with past
practice; (ii) neither New England nor any of its Subsidiaries has discharged or
satisfied any material lien or paid any material obligation or liability
(absolute or contingent), other than in the ordinary course of business; (iii)
neither New England nor any of its Subsidiaries has sold, assigned, transferred,
leased, exchanged or otherwise disposed of any of its material properties or
assets other than in the ordinary course of business; (iv) neither New England
nor any of its Subsidiaries has suffered any material damage, destruction, or
loss, whether as a result of fire, explosion, earthquake, accident, casualty,
labor trouble, requisition or taking of property by any Regulatory Authority,
flood, windstorm, embargo, riot, act of God or other casualty or event, whether
or not covered by insurance; (v) neither New England nor any of its Subsidiaries
has canceled or compromised any debt, except for debts charged off or
compromised in accordance with the past practice of New England or such
Subsidiary, as the case may be; and (vi) no event has occurred which has had or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on New England.
(b) Since December 31, 1998, New England and its Subsidiaries have
carried on their respective businesses in the ordinary and usual course
consistent with their past practices.
3.9 LEGAL PROCEEDINGS. (a) Neither New England nor any of its
Subsidiaries is a party to any, and there are no pending or threatened, legal,
administrative, arbitration or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against New England or
any of its Subsidiaries in which there is a reasonable probability of any
material recovery against or other material adverse effect upon New England or
any of its Subsidiaries or which challenge the validity or propriety of the
transactions contemplated by this Agreement, the Option Agreement or the Bank
Merger Agreement as to which there is a reasonable probability of success.
(b) There is no injunction, order, judgment or decree imposed upon New
England, any of its Subsidiaries or the assets of New England or any of its
Subsidiaries.
3.10 TAXES AND TAX RETURNS. (a) Each of New England and its
Subsidiaries has duly filed all Tax Returns, as hereinafter defined, required to
be filed by it (all such returns being accurate and complete in all material
respects) and has duly paid or made provision (or will make provision) on the
financial statements referred to in Sections 3.6 and 6.8 hereof in accordance
with GAAP for the payment of all Taxes, as hereinafter defined, which have been
incurred or are due or claimed to be due from it by Taxing Authorities, as
hereinafter defined. All liability with respect to the Tax Returns of New
England and its Subsidiaries has been satisfied for all years to and including
1998. The Internal Revenue Service ("IRS") has not notified New England of, or
otherwise asserted, that there are any deficiencies with respect to the federal
income Tax Returns of New England subsequent to 1993. There are no disputes
pending, or claims asserted for, Taxes or assessments upon New England or any of
its Subsidiaries, nor has New England or any of its Subsidiaries been requested
to give any currently effective waivers extending the statutory period of
limitation applicable to any federal or state income Tax Return for any period.
In addition, Tax Returns which are accurate and complete in all material
respects have been filed by New England and its Subsidiaries for all periods for
which Tax Returns were due with respect to income tax withholding, Social
Security and unemployment taxes and the amounts shown on such Tax Returns to be
due and payable have been paid in full. All New England Tax Returns have been
examined by the relevant Taxing Authorities, or closed without audit by
applicable statutes of limitations, and all deficiencies proposed as a result of
such examinations have been paid or settled, for all periods before and
including the taxable year ended 1993. Neither New England nor any of its
Subsidiaries has consented to any waiver or extension of any statute of
limitations with respect to any Tax. Neither New England nor any New England
Subsidiary has made an election under Section 341(f) of the IRC. New England has
provided or made available to Webster complete and correct copies of its Tax
Returns and all material correspondence and documents, if any, relating directly
or indirectly to Taxes for each taxable year or other relevant period as to
which the applicable statute of limitations has not run on the date hereof. For
this purpose, "correspondence and documents" include, without
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limitation, amended Tax Returns, claims for refunds, notices from Taxing
Authorities of proposed changes or adjustments to Taxes or Tax Returns, consents
to assessment or collection of Taxes, acceptances of proposed adjustments,
closing agreements, rulings and determination letters and requests therefor, and
all other written communications to or from Taxing Authorities relating to any
material Tax liability of New England or any New England Subsidiary. New England
is not a "United States real property holding corporation" within the meaning of
Section 897 of the IRC and was not a "United States real property holding
corporation" on any "determination date" (as defined in Section 1.897-2(c) of
such Regulations) that occurred during any relevant period. Neither New England
nor any of its Subsidiaries (i) has ever been a member of an affiliated group
(within the meaning of Section 1504(a) of the IRC) filing a consolidated federal
income tax return (other than an affiliated group the common parent of which was
New England), (ii) has any liability for the Taxes of any person (other than New
England and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
comparable provision of state, local or foreign law), as a successor or
transferee, by contract or otherwise or (iii) is a party to or is bound by any
Tax sharing, allocation or indemnification agreement or arrangement (other than
with each other).
(b) For purposes of this Agreement:
"Tax" means any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Taxing Authority or payable pursuant to any tax-sharing agreement or any
other contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Taxing Authority in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any law, regulation or other legal
requirement relating to any Tax.
"Taxing Authority" means any:
(i) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign, or other
government;
(iii) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(iv) multi-national organization or body; or
(v) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
3.11 EMPLOYEE PLANS. (a) Section 3.11(a) of the New England Disclosure
Schedule sets forth a true and complete list of each employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), arrangement or agreement that is maintained
or contributed to as of the date of this Agreement, or that has within the last
six years been maintained or contributed to, by New England or any of its
Subsidiaries or any other entity which together with New England would be deemed
a "single
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employer" within the meaning of Section 4001 of ERISA or Code Sections 414(b),
(c), (m) or (o) (an "ERISA Affiliate") or under which New England or any
Subsidiary or ERISA Affiliate has any liability (collectively, the "Plans").
(b) New England has heretofore delivered or made available to Webster
true, correct and complete copies of each of the Plans and all related
documents, including but not limited to (i) the actuarial report for such Plan
(if applicable) for the last five years, (ii) the most recent determination
letter from the Internal Revenue Service (if applicable) for such Plan, (iii)
the current summary plan description and any summaries of material modification,
(iv) all annual reports (Form 5500 series) for each Plan filed for the preceding
three plan years, (v) all agreements with fiduciaries and service providers
relating to the Plan, and (vi) all substantive correspondence relating to any
such Plan addressed to or received from the Internal Revenue Service, the
Department of Labor, the Pension Benefit Guaranty Corporation or any other
governmental agency.
(c) Except as set forth at Section 3.11(c) of the New England
Disclosure Schedule, (i) each of the Plans has been operated and administered in
all material respects in compliance with applicable Laws, including but not
limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified, (iii) with
respect to each Plan which is subject to Title IV of ERISA, the present value of
accrued benefits under such Plan (whether or not vested), based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Plan's actuary with respect to such Plan, did not, as of
its latest valuation date, exceed the then current value of the assets of such
Plan allocable to such accrued benefits, and there has not been a material
adverse change in the financial condition of such Plans, (iv) no Plan provides
benefits, including, without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees of New England or any
New England Subsidiary beyond their retirement or other termination of service,
other than (w) coverage mandated by applicable Law, (x) death benefits or
retirement benefits under a Plan that is an "employee pension plan," as that
term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits
under a Plan that are accrued as liabilities on the books of New England or any
New England Subsidiary, or (z) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (v) all Plans (other than Plans
providing for the payment of benefits from the general assets of New England or
any of its Subsidiaries) could be terminated as of the Effective Time without
material liability, (vi) no liability under Title IV of ERISA has been incurred
by New England, any New England Subsidiary or any ERISA Affiliate that has not
been satisfied in full, and no condition exists that presents a material risk to
New England, any New England Subsidiary or any ERISA Affiliate incurring a
material liability thereunder, (vii) no Plan is a "multiemployer plan" (as such
term is defined in Section 3(37) of ERISA), (viii) all contributions or other
amounts payable by New England or any New England Subsidiary as of the Effective
Time with respect to each Plan and all other liabilities of each such entity
with respect to each Plan in respect of current or prior plan years have been
paid or accrued in accordance with generally accepted accounting practices and
Section 412 of the Code, (ix) neither New England nor any New England Subsidiary
has engaged in a transaction in connection with which New England or any New
England Subsidiary is subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to
Section 4975 or 4976 of the Code, (x) to the knowledge of New England, there are
no pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto, (xi) no Plan, program, agreement or other arrangement, either
individually or collectively, provides for any payment by New England or any New
England Subsidiary that would not be deductible under Code Sections 162(a)(1),
162(m) or 404, (xii) no "accumulated funding deficiency," as defined in Section
302(a)(2) of ERISA or Section 412 of the Code, whether or not waived, and no
"unfunded current liability," as determined under Section 412(l) of the Code,
exists with respect to any Plan, and (xiii) no Plan has experienced a
"reportable event" (as such term is defined in Section 4043(c) of ERISA) that is
not subject to an administrative or statutory waiver from the reporting
requirement.
(d) Except as set forth at Section 3.11(d) of the New England
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the
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transactions contemplated hereby (either alone or in conjunction with any other
event) will (w) restrict or prohibit New England or any New England Subsidiary
from amending any Plan, (x) result in any material payment (including, without
limitation, severance, unemployment compensation, "excess parachute payment"
(within the meaning of Section 280G of the Code), forgiveness of indebtedness or
otherwise) becoming due to any director, officer or employee of New England or
any New England Subsidiary under any Plan or otherwise, (y) materially increase
any benefits otherwise payable under any Plan or (z) result in any acceleration
of the time of payment or vesting of any benefits under Plan or otherwise.
3.12 CERTAIN CONTRACTS. (a) Except as set forth at Section 3.12 of the
New England Disclosure Schedule, neither New England nor any of its Subsidiaries
is a party to or bound by any contract, arrangement or commitment (i) with
respect to the employment of any directors, officers, employees or consultants,
(ii) which, upon the consummation of the transactions contemplated by this
Agreement will (either alone or upon the occurrence of any additional acts or
events) result in any payment (whether of severance pay or otherwise) becoming
due from Webster, New England, or any of their respective Subsidiaries to any
director, officer or employee thereof, (iii) which materially restricts the
conduct of any line of business by New England or of any current or future
affiliates thereof, (iv) with or to a labor union or guild (including any
collective bargaining agreement), (v) (including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan) any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement, (vi) that is material and is not made in the ordinary course of
business or pursuant to which New England or any of its Subsidiaries is or may
become obligated to invest in or contribute capital to any New England
Subsidiaries, (vii) not fully disclosed in the financial statements contemplated
by Section 3.6 that relates to borrowings of money (or guarantees thereof by New
England, or any New England Subsidiary), other than in the ordinary course of
business, or (viii) is a lease or similar arrangement with annual rental
payments of $100,000 or more. New England has previously delivered or made
available to Webster true, correct and complete copies of all employment,
consulting and deferred compensation agreements to which New England or any of
its Subsidiaries is a party. Section 3.12(a) of the New England Disclosure
Schedule sets forth a list of all material contracts (as defined in Item
601(b)(10) of Regulation S-K) of New England. Each contract, arrangement or
commitment of the type described in this Section 3.12(a), whether or not set
forth in Section 3.12(a) of the New England Disclosure Schedule, is referred to
herein as a "New England Contract," and neither New England nor any of its
Subsidiaries has received notice of, nor do any executive officers of such
entities know of, any violation or imminent violation of any New England
Contract by any other party thereto.
(b) (i) Each New England Contract is valid and binding and in full
force and effect, (ii) New England and each of its Subsidiaries has in all
material respects performed all obligations required to be performed by it to
date under each New England Contract, and (iii) no event or condition exists
which constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of New England or any of its Subsidiaries under any
such New England Contract.
3.13 AGREEMENTS WITH REGULATORY AGENCIES. New England is not subject
to any cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or has been a recipient of any extraordinary supervisory letter
from, or, except as set forth at Section 3.13 of the New England Disclosure
Schedule, has adopted any board resolutions at the request of (each, whether or
not set forth on Section 3.13 of the New England Disclosure Schedule, a
"Regulatory Agreement"), any Governmental Entity that restricts the conduct of
its business or that in any manner relates to its capital adequacy, its credit
policies, its management or its business, nor has New England been advised by
any Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
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3.14 STATE TAKEOVER LAWS; CERTIFICATE OF INCORPORATION. The Board of
Directors of New England has approved the offer of Webster to enter into this
Agreement, the Bank Merger Agreement and the Option Agreement, and has approved
New England entering into this Agreement, the Bank Merger Agreement and the
Option Agreement, and the transactions contemplated thereby, such that under
applicable law and New England's Certificate of Incorporation the only vote of
New England stockholders necessary to consummate the transactions contemplated
hereby (including the Bank Merger and issuance under the Option Agreement) is
the approval of at least a majority of the outstanding shares of New England
Common Stock.
3.15 ENVIRONMENTAL MATTERS. (a) Each of New England and the New
England Subsidiaries is in compliance in all material respects with all
applicable federal and state laws and regulations relating to pollution or
protection of the environment (including without limitation, laws and
regulations relating to emissions, discharges, releases and threatened releases
of Hazardous Material (as hereinafter defined)), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials;
(b) There is no suit, claim, action, proceeding, investigation or
notice pending or to the knowledge of New England officers threatened (or to the
knowledge of New England's executive officers past or present actions or events
that could reasonably be expected to form the basis of any such suit, claim,
action, proceeding, investigation or notice), in which New England or any New
England Subsidiary has been or, with respect to threatened suits, claims,
actions, proceedings, investigations or notices may be, named as a defendant (x)
for alleged material noncompliance (including by any predecessor), with any
environmental law, rule or regulation or (y) relating to any material release or
threatened release into the environment of any Hazardous Material, whether or
not occurring at or on a site owned, leased or operated (directly or indirectly
in a fiduciary capacity) by New England or any New England Subsidiary;
(c) To the knowledge of New England, there has not been any release of
Hazardous Materials in, on, under or affecting any such property;
(d) To the knowledge of New England, neither New England nor any New
England Subsidiary has made or participated in any loan to any person who is
subject to any suit, claim, action, proceeding, investigation or notice, pending
or threatened, with respect to (i) any alleged material noncompliance as to any
property securing such loan with any environmental law, rule or regulation, or
(ii) the release or the threatened release into the environment of any Hazardous
Material at any property securing such loan;
(e) For purposes of this section 3.15, the term "Hazardous Material"
means any hazardous waste, petroleum product, polychlorinated biphenyl,
chemical, pollutant, contaminant, pesticide, radioactive substance, lead paint
or other toxic material, or other material or substance (in each such case,
other than small quantities of such substances in retail containers) regulated
under any applicable environmental or public health statute, law, ordinance,
rule or regulation.
3.16 RESERVES FOR LOSSES. All reserves or other allowances for
possible losses reflected in New England's most recent financial statements
referred to in Section 3.6 complied with all Laws and are adequate under GAAP.
Except as set forth at Section 3.16 of the New England Disclosure Schedule, New
England has not been notified by any regulatory authority or by New England's
independent auditor, in writing or otherwise, that such reserves are inadequate
or that the practices and policies of New England in establishing such reserves
and in accounting for delinquent and classified assets generally fail to comply
with applicable accounting or regulatory requirements, or that any regulatory
authority or New England's independent auditor believes such reserves to be
inadequate or inconsistent with the historical loss experience of New England.
New England has previously furnished or made available to Webster a complete
list of all extensions of credit and other real estate owned ("OREO") that have
been classified by any bank examiner (regulatory or internal) as other loans
specially mentioned, special mention, substandard, doubtful,
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loss, classified or criticized, credit risk assets, concerned loans or words of
similar import. All OREO held by New England is being carried net of reserves at
the lower of cost or net realizable value.
3.17 PROPERTIES AND ASSETS. Section 3.17 of the New England Disclosure
Schedule lists as of the date of this Agreement (i) all real property owned by
New England and each New England Subsidiary; (ii) each real property lease,
sublease or installment purchase arrangement to which New England or any New
England Subsidiary is a party; (iii) a description of each contract for the
purchase, sale, or development of real estate to which New England or any New
England Subsidiary is a party; and (iv) all items of New England's or any New
England Subsidiary's tangible personal property and equipment with a book value
of $50,000 or more or having any annual lease payment of $25,000 or more. Except
for (a) items reflected in New England's consolidated financial statements as of
March 31, 1999 referred to in Section 3.6 hereof, (b) exceptions to title that
do not interfere materially with New England's or any New England Subsidiary's
use and enjoyment of owned or leased real property (other than OREO), (c) liens
for current real estate taxes not yet delinquent, or being contested in good
faith, properly reserved against, (d) properties and assets sold or transferred
in the ordinary course of business consistent with past practices since March
31, 1999, and (e) items listed in Section 3.17 of the New England Disclosure
Schedule, New England and each New England Subsidiary have good and, as to owned
real property, marketable and insurable title to all their properties and
assets, reflected in the consolidated financial statements of New England as of
March 31, 1999, free and clear of all liens, claims, charges and other
encumbrances. New England and each New England Subsidiary, as lessees, have the
right under valid and subsisting leases to occupy, use and possess all property
leased by them. All properties and assets used by New England and each New
England Subsidiary are in good operating condition and repair (subject to
ordinary wear and tear) suitable for the purposes for which they are currently
utilized and comply in all material respects with all Laws relating thereto now
in effect. New England and each New England Subsidiary enjoy peaceful and
undisturbed possession under all leases for the use of all property under which
they are the lessees, and all leases to which New England or any New England
Subsidiary is a party are valid and binding obligations in accordance with the
terms thereof. Neither New England nor any New England Subsidiary is in material
default with respect to any such lease, and there has occurred no default by New
England or any New England Subsidiary or event which with the lapse of time or
the giving of notice, or both, would constitute a material default under any
such lease. There are no Laws, conditions of record, or other impediments which
interfere with the intended use by New England or any New England Subsidiary of
any of the property owned, leased, or occupied by them.
3.18 INSURANCE. Section 3.18 of the New England Disclosure Schedule
contains a true, correct and complete list of all insurance policies and bonds
maintained by New England and any New England Subsidiary, including the name of
the insurer, the policy number, the type of policy and any applicable
deductibles. The existing insurance carried by New England and New England
Subsidiaries is and will continue to be, in respect of the nature of the risks
insured against and the amount of coverage provided, substantially similar in
kind and amount to that customarily carried by parties similarly situated who
own properties and engage in businesses substantially similar to that of New
England and the New England Subsidiaries, and is sufficient for compliance by
New England and the New England Subsidiaries with all requirements of Law and
agreements to which New England or any of the New England Subsidiaries is
subject or is party. True, correct and complete copies of all such policies and
bonds reflected at Section 3.18 of the New England Disclosure Schedule, as in
effect on the date hereof, have been delivered or made available to Webster.
3.19 COMPLIANCE WITH APPLICABLE LAWS. Each of New England and any New
England Subsidiary has complied in all material respects with all Laws
applicable to it or to the operation of its business. Neither New England nor
any New England Subsidiary has received any notice of any material alleged or
threatened claim, violation, or liability under any such Laws that has not
heretofore been cured and for which there is no remaining liability.
3.20 LOANS. As of the date hereof:
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(a) All loans owned by New England or any New England
Subsidiary, or in which New England or any New England Subsidiary has
an interest, comply in all material respects with all Laws, including,
but not limited to, applicable usury statutes, underwriting and record
keeping requirements and the Truth in Lending Act, the Equal Credit
Opportunity Act and the Real Estate Procedures Act, and other
applicable consumer protection statutes and the regulations
thereunder.
(b) All loans owned by New England or any New England
Subsidiary, or in which New England or any New England Subsidiary has
an interest, have been made or acquired by New England in all material
respects in accordance with board of director-approved loan policies.
Each of New England and each New England Subsidiary holds mortgages
contained in its loan portfolio for its own benefit to the extent of
its interest shown therein; such mortgages evidence liens having the
priority indicated by their terms, subject, as of the date of
recordation or filing of applicable security instruments, only to such
exceptions as are discussed in attorneys' opinions regarding title or
in title insurance policies in the mortgage files relating to the
loans secured by real property or are not material as to the
collectability of such loans; and, except as set forth in Section
3.20(b) of the New England Disclosure Schedule, all loans owned by New
England and each New England Subsidiary are with full recourse to the
borrowers, and each of New England and any New England Subsidiary has
taken no action which would result in a waiver or negation of any
rights or remedies available against the borrower or guarantor, if
any, on any loan, other than in the ordinary course of business. All
applicable remedies against all borrowers and guarantors are
enforceable except as may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights and
except as may be limited by the exercise of judicial discretion in
applying principles of equity. Except as set forth at Section 3.20(b)
of the New England Disclosure Schedule, all loans purchased or
originated by New England or any New England Subsidiary and
subsequently sold by New England or any New England Subsidiary have
been sold without recourse to New England or any New England
Subsidiary and without any liability under any yield maintenance or
similar obligation. True, correct and complete copies of loan
delinquency reports as of March 31, 1999 prepared by New England and
each New England Subsidiary, which reports include all loans
delinquent or otherwise in default, have been furnished or made
available to Webster. True, correct and complete copies of the
currently effective lending policies and practices of New England and
each New England Subsidiary also have been furnished or made available
to Webster.
(c) Except as set forth in Section 3.20(c) of the New
England Disclosure Schedule, each outstanding loan participation sold
by New England or any New England Subsidiary was sold with the risk of
non-payment of all or any portion of that underlying loan to be shared
by each participant (including New England or any New England
Subsidiary) proportionately to the share of such loan represented by
such participation without any recourse of such other lender or
participant to New England or any New England Subsidiary for payment
or repurchase of the amount of such loan represented by the
participation or liability under any yield maintenance or similar
obligation. New England and any New England Subsidiary have properly
fulfilled in all material respects its contractual responsibilities
and duties in any loan in which it acts as the lead lender or servicer
and has complied in all material respects with its duties as required
under applicable regulatory requirements.
(d) New England and each New England Subsidiary have
properly perfected or caused to be properly perfected all security
interests, liens, or other interests in any collateral securing any
loans made by it.
3.21 OWNERSHIP OF WEBSTER COMMON STOCK. Except as set forth at Section
3.21 of the New England Disclosure Schedule, neither New England nor any of its
10% or greater stockholders or affiliates (i) beneficially own, directly or
indirectly, or (ii) is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each
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case, any shares of outstanding capital stock of Webster (other than those
agreements, arrangements or understandings specifically contemplated hereby).
3.22 FAIRNESS OPINION. New England has received an opinion from each
of AG Edwards & Sons, Inc. and HAS Associates, Inc., in each case to the effect
that, in its opinion, the Exchange Ratio pursuant to this Agreement is fair to
the holders of New England Common Stock from a financial point of view.
3.23 TAX AND ACCOUNTING TREATMENT OF MERGER. As of the date of this
Agreement, New England is not aware of any fact or state of affairs that could
cause the Merger not to be treated as a "reorganization" under Section 368(a) of
the Code or to qualify for "pooling-of-interests" accounting treatment.
3.24 YEAR 2000. None of New England or any New England Subsidiary has
received, or reasonably expects to receive, a "Year 2000 Deficiency Notification
Letter" (as such term is employed in the Federal Reserve Board's Supervision and
Regulation Letter No. SR 98-3(SUP), dated March 4, 1998). New England has made
available to Webster a complete and accurate copy of New England's plan,
including an estimate of the anticipated associated costs, for addressing the
issues ("Year 2000 Issues") set forth in the interagency statements of the
Federal Financial Institutions Examination Council addressed to the boards of
directors and chief executive officers of all federally supervised financial
institutions regarding Year 2000 safety and soundness for insured depository
institutions. Between the date of this Agreement and the Effective Time, New
England shall use reasonable best efforts to implement such plan. New England
and its Subsidiaries have complied in all material respects with the
"Interagency Guidelines Establishing Year 2000 Standards for Safety and
Soundness" issued pursuant to section 39 of the Federal Deposit Insurance Act
and effective October 15, 1998.
3.25 NEW ENGLAND INFORMATION. The information relating to New England
and its Subsidiaries to be provided by New England to be contained in the Joint
Proxy Statement/Prospectus and the Registration Statement will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances in which they are
made, not misleading. The Joint Proxy Statement/Prospectus (except for such
portions thereof that relate only to Webster or any of its Subsidiaries) will
comply in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WEBSTER
Subject to Article II-A, Webster hereby makes the following
representations and warranties to New England as set forth in this Article IV:
4.1 CORPORATE ORGANIZATION. (a) Webster is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Webster has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such licensing or
qualification necessary. Webster is duly registered as a savings and loan
holding company with the OTS under HOLA. The Restated Certificate of
Incorporation and By-Laws of Webster, copies of which have previously been made
available to New England, are true, correct and complete copies of such
documents as in effect as of the date of this Agreement.
(b) Webster Bank is a federal savings bank chartered by the OTS under
the laws of the United States with its main office in the State of Connecticut.
Webster Bank has the corporate
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power and authority to own or lease all of its properties and assets and to
carry on business as is now being conducted, and is duly licensed or qualified
to do business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets owned
or leased by it makes such licensing or qualification necessary. The Charter and
By-Laws of Webster Bank, copies of which have previously been made available to
New England, are true, correct and complete copies of such documents as in
effect as of the date of this Agreement.
4.2 CAPITALIZATION. (a) The authorized capital stock of Webster as of
the date hereof consists of 50,000,000 shares of Webster Common Stock, of which
38,008,607 shares were outstanding (net of 470,815 treasury shares) at June 28,
1999, and 3,000,000 shares of serial preferred stock, par value $.01 per share
("Webster Preferred Stock"), 14,000 of which are designated as Series C
Preferred Stock, none of which were outstanding at June 28, 1999. At such date,
there were options outstanding to purchase 2,303,541 shares of Webster Common
Stock. All of the issued and outstanding shares of Webster Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except as set forth above, Webster
does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of Webster Common Stock or Webster Preferred
Stock or any other equity securities of Webster or any securities representing
the right to purchase or otherwise receive any shares of Webster Common Stock or
Webster Preferred Stock, other than pursuant to the Webster Rights Agreement.
The shares of Webster Common Stock to be issued pursuant to the Merger are duly
authorized and, at the Effective Time, all such shares will be validly issued,
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
(b) The authorized capital stock of Webster Bank consists of 2,000
shares of common stock, par value $.01 per share, 1,000 of which are issued and
outstanding, and 1,000 shares of preferred stock, par value $.01 per share, none
of which is issued or outstanding. The outstanding shares of common stock of
Webster Bank are owned by Webster free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are duly
authorized and validly issued and fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to ownership thereof.
4.3 AUTHORITY; NO VIOLATION. (a) Webster has full corporate power and
authority to execute and deliver this Agreement and the Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of Webster and by Webster as the sole stockholder of
Webster Bank. The Board of Directors of Webster has directed that this Agreement
and the transactions contemplated hereby be submitted to Webster's stockholders
for approval at a special meeting of such stockholders and, except for the
adoption of this Agreement by the requisite vote of Webster's stockholders, no
other corporate proceedings on the part of Webster are necessary to consummate
the transactions contemplated hereby. This Agreement and the Option Agreement
have been duly and validly executed and delivered by Webster and (assuming due
authorization, execution and delivery by New England) this Agreement constitutes
a valid and binding obligation of Webster, enforceable against Webster in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) Webster Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby will be duly and
validly approved by the Board of Directors of Webster Bank, and by Webster as
the sole stockholder of Webster Bank, prior to the Effective Time. All corporate
proceedings on the part of Webster Bank necessary to consummate the transactions
contemplated by the Bank Merger Agreement will have been taken prior to the
Effective Time. The Bank Merger
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Agreement, upon due authorization, execution and delivery by Webster Bank and
the New England Banks, will constitute a valid and binding obligation of Webster
Bank, enforceable against Webster Bank in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(c) Neither the execution and delivery of this Agreement or the Option
Agreement by Webster or of the Bank Merger Agreement by Webster Bank, nor the
consummation by Webster or Webster Bank, as the case may be, of the transactions
contemplated hereby or thereby, as applicable, nor compliance by Webster or
Webster Bank, as the case may be, with any of the terms or provisions hereof or
thereof, as applicable, will (i) violate any provision of the Restated
Certificate of Incorporation or Bylaws of Webster or the Charter or By-Laws of
Webster Bank, as the case may be, or (ii) assuming that the consents and
approvals referred to in Section 4.4 are duly obtained, (x) violate any Laws
applicable to Webster or Webster Bank or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the respective
properties or assets of Webster or Webster Bank under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Webster or
Webster Bank is a party, or by which they or any of their respective properties
or assets may be bound or affected.
4.4 CONSENTS AND APPROVALS. (a) Except for (i) the filing of
applications and notices, as applicable, as to the Merger and the Bank Merger
with the FRB and the OTS; (ii) the filing of applications and notices with the
Connecticut Commissioner and the New Hampshire Commissioner, as well as the
State Banking Approvals, and approval of the applications and notices described
in clause (i) and this clause (ii); (iii) the filing of any required
applications or notices with the FDIC and the OTS as to the subsidiary
activities of each of the New England Banks which become service corporations or
operating subsidiaries of Webster Bank and approval of such applications and
notices; (iv) the filing with the Connecticut Commissioner of an acquisition
statement pursuant to Section 36a-184 of the Connecticut Banking Law prior to
the acquisition of more than 10% of the New England Common Stock pursuant to the
Option Agreement, if not exempt; (v) the filing with the SEC of a registration
statement on Form S-4 to register the shares of Webster Common Stock to be
issued or become issuable in connection with the Merger, which will include the
Joint Proxy Statement/Prospectus to be used in soliciting the approval of New
England's stockholders and Webster's stockholders at special meetings of such
stockholders to be held in connection with this Agreement and the transactions
contemplated hereby, and the approval of such stockholders; (vi) the filing of
the Certificate of Merger with the Secretary of State of Delaware pursuant to
the DGCL; (vii) the filings required by the Bank Merger Agreement; (viii) such
filings, authorizations or approvals as may be set forth in Section 3.4 of the
Webster Disclosure Schedule; (ix) such filings and approvals as are required to
be made or obtained under the securities or "Blue Sky" laws of various states or
with Nasdaq (or such other exchange as may be applicable) in connection with the
issuance of the shares of Webster Common Stock pursuant to this Agreement; or
(x) any necessary filing, authorization, approvals or consents of third parties
other than any Government Entity, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
in connection with (1) the execution and delivery by Webster of this Agreement
and the Option Agreement, (2) the consummation by Webster of the Merger and the
other transactions contemplated hereby, (3) the execution and delivery by
Webster Bank of the Bank Merger Agreement, and (4) the consummation by Webster
Bank of the transactions contemplated by the Bank Merger Agreement except for
such consents, approvals or filings the failure of which to obtain will not have
a material adverse effect on the ability of New England, Webster, the New
England Banks or Webster Bank to consummate the transactions contemplated
thereby.
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(b) Webster hereby represents to New England that, as of the date of
this Agreement, it has no knowledge of any reason why approval or effectiveness
of any of the applications, notices or filings referred to in Section 4.4(a)
cannot be obtained or granted on a timely basis.
(c) Webster and Webster Bank have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since December 31, 1996,
with any Regulatory Agencies. As of its respective date, each such report,
registration, statement and amendment complied in all material respects with all
rules and regulations promulgated by the applicable Regulatory Agency and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except for normal examinations conducted by a Regulatory Agency in
the regular course of the business of Webster and its Subsidiaries, no
Governmental Entity is conducting, or has conducted, any proceeding or
investigation into the business or operations of Webster since December 31,
1996.
4.5 FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; BOOKS AND RECORDS.
Webster has previously delivered to New England true, correct and complete
copies of (i) the audited consolidated statements of condition of Webster and
its Subsidiaries as of December 31 for the fiscal years 1997 and 1998 and the
related audited consolidated statements of income, changes in shareholders'
equity and cash flows for the fiscal years 1996 through 1998, inclusive, as
reported in Webster's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 filed with the SEC under the Exchange Act, in each case
accompanied by the audit report of KPMG LLP, independent public accountants with
respect to Webster; and (ii) the unaudited consolidated statements of condition
of Webster and its Subsidiaries as of March 31, 1999 and 1998 and the related
unaudited consolidated statements of income, changes in shareholders' equity and
cash flows for the interim periods ended March 31, 1999 and 1998, as reported on
Webster's Quarterly Report on Form 10-Q for the period ended March 31, 1999
filed with the SEC under the Exchange Act. The financial statements referred to
in this Section 4.5 (including the related notes, where applicable) fairly
present, and the financial statements referred to in Section 6.8 hereof will
fairly present (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial condition of Webster and its Subsidiaries
for the respective fiscal periods or as of the respective dates therein set
forth; each of such statements (including the related notes, where applicable)
comply, and the financial statements referred to in Section 6.8 hereof will
comply, with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been, and the financial
statements referred to in Section 6.8 hereof will be, prepared in accordance
with GAAP consistently applied during the periods involved, except as indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q. Webster's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all subsequently filed reports under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act comply in all material respects with the
appropriate requirements for such reports under the Exchange Act, and Webster
has previously delivered or made available to New England true, correct and
complete copies of such reports. The books and records of Webster and Webster
Bank have been, and are being, maintained in all material respects in accordance
with GAAP and any other applicable legal and accounting requirements and reflect
only actual transactions.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Except as disclosed in
Webster's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
and all reports subsequently filed by Webster under Sections 13(a), 13(e), 14 or
15(d) of the Exchange Act, true, correct and complete copies of which have
previously been delivered or made available to New England, since December 31,
1998, no event has occurred which has had, individually or in the aggregate, a
Material Adverse Effect on Webster.
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(b) Since December 31, 1998, Webster and its Subsidiaries have carried
on their respective businesses in the ordinary and usual course consistent with
their past practices.
4.7 COMPLIANCE WITH APPLICABLE LAWS. Webster and each Webster
Subsidiary has complied in all material respects with all Laws applicable to it
or to the operation of its business. Neither Webster nor any Webster Subsidiary
has received any notice of any alleged or threatened claim, violation of or
liability or potential responsibility under any such Laws that has not
heretofore been cured and for which there is no remaining liability.
4.8 TAX AND ACCOUNTING TREATMENT OF MERGER. As of the date of this
Agreement, Webster is not aware of any fact or state of affairs that could cause
the Merger not to be treated as a "reorganization" under Section 368(a) of the
Code or to qualify for "pooling-of-interests" accounting treatment.
4.9 LEGAL PROCEEDINGS. (a) Neither Webster nor any of its Subsidiaries
is a party to any, and there are no pending or threatened, legal,
administrative, arbitration or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Webster or any
of its Subsidiaries in which there is a reasonable probability of any material
recovery against or other material adverse effect upon Webster or any of its
Subsidiaries or which challenge the validity or propriety of the transactions
contemplated by this Agreement or the Option Agreement as to which there is a
reasonable probability of success.
(b) There is no injunction, order, judgment or decree imposed upon
Webster, any of its Subsidiaries or the assets of Webster or any of its
Subsidiaries.
4.10 YEAR 2000. None of Webster or any Webster Subsidiary has
received, or reasonably expects to receive, a "Year 2000 Deficiency Notification
Letter". Webster has made available to New England a complete and accurate copy
of Webster's plan, including an estimate of the anticipated associated costs,
for addressing Year 2000 Issues. Between the date of this Agreement and the
Effective Time, Webster shall use reasonable best efforts to implement such
plan. Webster and its Subsidiaries have complied in all material respects with
the "Interagency Guidelines Establishing Year 2000 Standards for Safety and
Soundness" issued pursuant to section 39 of the Federal Deposit Insurance Act
and effective October 15, 1998.
4.11 WEBSTER INFORMATION. The information relating to Webster and its
Subsidiaries to be provided by Webster to be contained in the Joint Proxy
Statement/Prospectus and the Registration Statement will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading. The Joint Proxy Statement/Prospectus (except for such portions
thereof that relate only to New England or any of its Subsidiaries) will comply
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 COVENANTS OF NEW ENGLAND. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement, the Option Agreement or the Bank
Merger Agreement, or with the prior written consent of Webster, New England and
each New England Subsidiary shall carry on their respective businesses in the
ordinary course consistent with past practices and consistent with prudent
banking practices. New England shall use its reasonable best efforts to (x)
preserve its business organization and that of each New England Subsidiary
intact, (y) keep available to itself and Webster the present services of the
employees of New England and each New England Subsidiary and (z) preserve for
itself and Webster the goodwill of the customers of New England and each New
England Subsidiary and others with whom business relationships exist. Without
limiting the generality of the foregoing,
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and except as set forth in the New England Disclosure Schedule or as otherwise
expressly contemplated by this Agreement or consented to by Webster in writing,
New England shall not, and shall not permit any New England Subsidiary to:
(a) declare or pay any dividends on, or make other
distributions in respect of, any of its capital stock (except for the
payment of regular quarterly cash dividends by New England of $0.12
per share on the New England Common Stock with declaration, record and
payment dates corresponding to the quarterly dividends paid by New
England during its fiscal year ended December 31, 1998 and except that
any New England Subsidiary may declare and pay dividends and
distributions to New England). Until the Effective Time, New England
and Webster shall coordinate with the other declaration of any
dividends or other distributions with respect to the New England
Common Stock and the Webster Common Stock and the record dates and
payment dates relating thereto, it being the intention of the parties
that holders of shares of New England Common Stock or Webster Common
Stock shall not receive more than one dividend, or fail to receive one
dividend, for any single calendar quarter on their shares of New
England Common Stock (including any shares of Webster Common Stock
received in exchange therefor in the Merger) or Webster Stock, as the
case may be.
(b) (i) split, combine or reclassify any shares of its
capital stock or issue, authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock except upon the exercise or fulfillment of rights or
options issued and outstanding as of the date hereof pursuant to the
New England Stock Plans in accordance with their present terms, and
except pursuant to the Option Agreement, or (ii) repurchase, redeem or
otherwise acquire any shares of the capital stock of New England
(except in connection with the exercise of options issued and
outstanding as of the date hereof pursuant to the New England Stock
Plans) or any New England Subsidiary, or any securities convertible
into or exercisable for any shares of the capital stock of New England
or any New England Subsidiary;
(c) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any
securities convertible into or exercisable for, or any rights,
warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing, other than (i) the
issuance of New England Common Stock pursuant to stock options or
similar rights to acquire New England Common Stock granted pursuant to
the New England Stock Plans outstanding prior to the date of this
Agreement in accordance with their present terms and (ii) pursuant to
the Option Agreement;
(d) amend its Certificate of Incorporation, By-Laws or other
similar governing documents;
(e) authorize or permit any of its or its Subsidiaries'
officers, directors, employees, agents, advisors and affiliates to,
directly or indirectly, solicit or encourage inquiries or proposals
with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any
such person relating to, any tender offer or exchange offer for, or
any proposal for the acquisition of a substantial equity interest in,
or a substantial portion of the assets of, or any merger or
consolidation with, New England or any of its Significant
Subsidiaries; provided, however, that New England may, and may
authorize and permit its officers, directors, employees or agents to,
furnish or cause to be furnished confidential information and may
participate in such discussions and negotiations if New England's
Board of Directors, after having consulted with and considered the
advice of outside counsel, has determined that the failure to provide
such information or participate in such negotiations and discussion
could cause the members of such Board of Directors to breach their
fiduciary duties under applicable laws. New England shall promptly
(within 24 hours) advise Webster of its receipt of any such proposal
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or inquiry, of the substance thereof, and of the identity of the
person making such proposal or inquiry;
(f) make capital expenditures aggregating in excess of
$100,000;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or consolidating
with, or by purchasing an equity interest in or the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire any assets, other than in connection with
foreclosures, settlements in lieu of foreclosure or troubled loan or
debt restructurings, or in the ordinary course of business consistent
with prudent banking practices;
(i) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set
forth in this Agreement being or becoming untrue or in any of the
conditions to the Merger set forth in Article VII not being satisfied,
or in a violation of any provision of this Agreement;
(j) change its methods of accounting in effect at December
31, 1998 except as required by changes in GAAP as concurred to by New
England's independent auditors;
(k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate
any Plan or any agreement, arrangement, plan or policy between New
England or any New England Subsidiary and one or more of its current
or former directors, officers or employees, (ii) other than merit and
promotional increases in the ordinary course of business consistent
with past practices and in any event not to exceed 5% of base pay for
any individual or, in the aggregate, of New England's total payroll as
of the date hereof, increase in any manner the compensation of any
officer, employee or director or pay any benefit not required by any
Plan or agreement as in effect as of the date hereof (including,
without limitation, the granting of stock options, stock appreciation
rights, restricted stock, restricted stock units or performance units
or shares), (iii) enter into, modify or renew any contract, agreement,
commitment or arrangement providing for the payment to any director,
officer or employee of compensation or benefits, (iv) except as set
forth in Section 5.1 of the New England Disclosure Schedule, hire any
new employee at an annual compensation in excess of $35,000, (v)
except as set forth in Section 5.1 of the New England Disclosure
Schedule, pay expenses of any officers, employees or directors for
attending conventions or similar meetings which conventions or
meetings are held after the date hereof, (vi) promote to a rank of
vice president or more senior any employee, (vii) pay any retention or
other bonuses or any severance to any employees, except for bonuses
totaling no more than $250,000 in the aggregate awarded to such
persons and at such times as shall be agreed in advance with Webster,
or (viii) make any non-deductible contribution to any Plan;
(l) incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other
entity other than the incurrence of deposit liabilities in the
ordinary course of business consistent with past practice;
(m) sell, purchase, enter into a lease, relocate, open or
close any banking or other office, or file an application pertaining
to such action with any Governmental Entity;
(n) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project,
other than in connection with foreclosure, settlements in lieu of
foreclosure, or troubled loan or debt restructuring, in the ordinary
course of business consistent with past banking practices;
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(o) make any new loans to, modify the terms of any existing
loan to, or engage in any other transactions (other than routine
banking transactions) with, any Affiliated Person of New England or
any New England Subsidiary;
(p) make any investment, other than in the ordinary course
of business consistent with past practices, or make any equity
investments or investments in callable securities;
(q) purchase any loans or sell, purchase or lease any real
property, except for the sale of real estate that is the subject of a
casualty loss or condemnation or the sale of OREO on a basis
consistent with past practices;
(r) originate (i) any loans except in accordance with
existing New England lending policies, (ii) nonconforming residential
mortgage loans in excess of $250,000, (iii) unsecured consumer loans
in excess of $25,000, (iv) commercial real estate first mortgage loans
or other commercial loans in excess of $1,000,000 as to any loan or
$1,500,000 in the aggregate as to related loans, or loans to related
persons (provided that in the case of loans covered by this clause
(iv) the consent of Webster shall not be unreasonably withheld), or
(v) land acquisition loans to borrowers who intend to construct a
residence on such land in excess of the lesser of 75% of the appraised
value of such land or $250,000, except in each case for (A) loans for
which written commitments have been issued by New England as of the
date hereof and (B) renewals of loans existing as of the date of this
Agreement or loans permitted pursuant to this Section 5.1(r);
(s) make any investments in any equity or derivative
securities or engage in any forward commitment, futures transaction,
financial options transaction, hedging or arbitrage transaction or
covered asset trading activities or make any investments in any
investment security with a maturity of greater than one year;
(t) sell or purchase any mortgage loan servicing rights
other than by Mortgage Corp. in the ordinary course consistent with
past practice;
(u) make any Tax election, or settle or compromise any Tax
liability; or
(v) agree or commit to do any of the actions set forth in
clauses (a) - (u) of this Section 5.1.
The consent of Webster to any action by New England or any New England
Subsidiary that is not permitted by any of the preceding paragraphs shall be
evidenced only by a writing signed by the Chief Executive Officer or any
Executive Vice President of Webster.
5.2 COVENANTS OF WEBSTER. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with New England's prior written
consent, Webster shall not, and shall not permit Webster Bank to:
(a) take any action that will result in any of Webster's
representations and warranties set forth in this Agreement being or
becoming untrue or any of the conditions to the Merger set forth in
Article VII not being satisfied or in a violation of any provision of
this Agreement, except, in every case, as may be required by
applicable Law; or
(b) take any other action that would materially adversely
affect or materially delay the ability of Webster to obtain the
Requisite Regulatory Approvals or otherwise materially adversely
affect Webster's and Webster Bank's ability to consummate the
transactions contemplated by this Agreement.
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5.3 MERGER COVENANTS. Notwithstanding that New England believes that
it has established all reserves and taken all provisions for possible loan
losses required by GAAP and applicable laws, rules and regulations, New England
recognizes that Webster may have adopted different loan, accrual and reserve
policies (including loan classifications and levels of reserves for possible
loan losses). In that regard, and in general, from and after the date of this
Agreement to the Effective Time, New England and Webster shall consult and
cooperate with each other in order to formulate the plan of integration for the
Merger, including, among other things, with respect to conforming, based upon
such consultation, New England's loan, accrual and reserve policies to those
policies of Webster to the extent appropriate.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS. (a) Upon the execution and delivery of this
Agreement, Webster and New England (as to information to be included therein
pertaining to New England) shall promptly cause to be prepared and filed with
the SEC a registration statement of Webster on Form S-4, including the Joint
Proxy Statement/Prospectus (the "Registration Statement") for the purpose of
registering the Webster Common Stock to be issued in the Merger, and for
soliciting, pursuant to Delaware law, the adoption and approval of this
Agreement and the Merger by the stockholders of New England and Webster. Webster
and New England shall use their reasonable best efforts to have the Registration
Statement declared effective by the SEC as soon as possible after the filing
thereof. The parties shall cooperate in responding to and considering any
questions or comments from the SEC staff regarding the information contained in
the Registration Statement. If at any time after the Registration Statement is
filed with the SEC, and prior to the Closing Date, any event relating to a party
hereto is discovered by such party that should be set forth in an amendment of,
or a supplement to, the Registration Statement, including the Joint Proxy
Statement/Prospectus, such party shall promptly inform the other party, and
shall furnish such other party with all necessary information relating to such
event, whereupon Webster shall promptly cause an appropriate amendment to the
Registration Statement to be filed with the SEC. Upon the effectiveness of such
amendment, each of Webster and New England (if prior to the meeting of its
respective stockholders pursuant to Section 6.3 hereof) will take all necessary
action as promptly as practicable to permit an appropriate amendment or
supplement to be transmitted to its stockholders entitled to vote at such
meeting. Webster shall also use reasonable efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and New England shall furnish all
information concerning New England and the holders of New England Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
best efforts to promptly prepare and file all necessary documentation, to effect
all applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including without limitation
the Merger); provided, however, that neither Webster nor Webster Bank will be
obligated to agree to any unduly burdensome condition sought to be imposed by
any Governmental Entity. New England and Webster shall have the right to review
in advance, and to the extent practicable each will consult the other on, in
each case subject to applicable laws relating to the exchange of information,
all the information relating to New England or Webster, as the case may be,
which appears in any filing made with, or written materials submitted to, any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement; provided, however, that nothing contained herein
shall be deemed to provide either party with a right to review any information
provided to any Governmental Entity on a confidential basis in connection with
the transactions contemplated hereby. In exercising the foregoing right, each of
the parties hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
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parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to consummation of the transactions
contemplated herein.
(c) New England shall, upon request, furnish Webster with all
information concerning New England and its directors, officers and stockholders
and such other matters as may be reasonably necessary or advisable in connection
with the Registration Statement or any other statement, filing, notice or
application made by or on behalf of Webster to any Governmental Entity in
connection with the Merger or the other transactions contemplated by this
Agreement.
(d) Webster and New England shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined in Section 7.1(c)
hereof) will not be obtained or that the receipt of any such approval will be
materially delayed.
6.2 ACCESS TO INFORMATION. (a) Upon reasonable notice and subject to
applicable Laws relating to the exchange of information, New England shall
accord to the officers, employees, accountants, counsel and other
representatives of Webster, access, during normal business hours during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, New England shall make
available to Webster (i) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal securities laws or federal or state banking laws and
(ii) all other information concerning its business, properties and personnel as
Webster may reasonably request. Webster shall receive notice of all meetings of
the New England Board of Directors and any committees thereof, and of any
management committees (in all cases, at least as timely as all New England
representatives to such meetings are required to be provided notice), and, to
the extent not prohibited by law, New England shall keep Webster apprised of all
resolutions passed or other actions taken by the New England Board of Directors
and any committees thereof. Webster will hold all such information in confidence
to the extent required by, and in accordance with, the provisions of the
confidentiality agreement which Webster entered into with New England dated May
18, 1999 (the "Confidentiality Agreement").
(b) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, Webster shall afford to the officers, employees,
accountants, counsel and other representatives of New England, access, during
normal business hours during the period prior to the Effective Time, to such
information regarding Webster as shall be reasonably necessary for New England
to fulfill its obligations pursuant to this Agreement or which may be reasonably
necessary for New England to confirm that the representations and warranties of
Webster contained herein are true and correct and that the covenants of Webster
contained herein have been performed in all material respects. New England will
hold all such information in confidence to the extent required by, and in
accordance with, the provisions of the Confidentiality Agreement.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
(d) New England shall provide Webster with true, correct and complete
copies of all financial and other information provided to directors of New
England in connection with meetings of their Boards of Directors or committees
thereof.
6.3 STOCKHOLDER MEETINGS. Each of Webster and New England shall take
all steps necessary to duly call, give notice of, convene and hold a meeting of
its stockholders within 40 days after the Registration Statement becomes
effective for the purpose of voting upon the approval of this Agreement and the
Merger. The Board of Directors of each of Webster and New England shall declare
advisable and recommend to such company's stockholders approval of this
Agreement, including the Merger, and the transactions contemplated hereby,
together with any matters incident
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thereto; and in each case shall oppose any third party proposal or other action
that is inconsistent with this Agreement or the consummation of the transactions
contemplated hereby; provided, however, that the New England Board of Directors
shall not be required to make or maintain such recommendation, or to continue
such opposition, if such Board of Directors reasonably determines, based upon
and consistent with the written advice of outside counsel to New England, as the
case may be, that such recommendation or opposition would constitute a breach of
its fiduciary duties to New England's stockholders. New England and Webster
shall coordinate and cooperate with respect to the foregoing matters.
6.4 LEGAL CONDITIONS TO MERGER. Each of Webster and New England shall
use its reasonable best efforts (a) to take, or cause to be taken, all actions
reasonably necessary, proper or advisable to comply promptly with all legal
requirements which may be imposed on such party with respect to the Merger and
the Bank Merger and, subject to the conditions set forth in Article VII hereof,
to consummate the transactions contemplated by this Agreement and (b) to obtain
(and to cooperate with the other party to obtain) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity and any other
third party which is required to be obtained by New England or Webster or any of
their respective Subsidiaries in connection with the Merger and the other
transactions contemplated by this Agreement, the Option Agreement and the Bank
Merger Agreement; provided, however, that Webster shall not be obligated to
agree to any unduly burdensome condition sought to be imposed by any
Governmental Entity.
6.5 STOCK EXCHANGE LISTING. Webster shall cause the shares of Webster
Common Stock to be issued in the Merger and pursuant to options referred to
herein to be approved for quotation on the Nasdaq Stock Market National Market
(or such other exchange on which the Webster Common Stock has become listed, or
approved for listing) prior to or at the Effective Time.
6.6 EMPLOYEES. (a) Following the Effective Time and until such time as
Webster in its reasonable discretion and in accordance with applicable law
determines that the employees of New England as of the Effective Time (the "New
England Employees") shall participate in the employee benefit plans and programs
provided to similarly situated employees of Webster Bank, the benefits to be
provided to the New England Employees shall be the benefit plans and programs
that were provided by New England to such employees immediately before the
Effective Time.
(b) To the extent permissible under the applicable provisions of the
Code and ERISA, at such time as the New England Employees are integrated into
the employee benefit plans of Webster Bank, Webster shall, or shall cause
Webster Bank to, recognize the prior service with New England or its
subsidiaries (to the extent such service was recognized by New England or its
subsidiaries under any comparable New England Plan) of each New England
Employee, as if such service had been with Webster or Webster Bank, (i) for
purposes of eligibility to participate in and the satisfaction of vesting and
service requirements for retirement benefits, such as early, normal and
disability retirement benefits, but not for benefit accrual purposes, under the
Webster Bank 401(k) savings plan and the Webster Bank defined benefit pension
plan (and not for any purpose under the Webster employee stock ownership plan)
and (ii) for purposes of eligibility to participate in and levels of benefits
under the Webster welfare benefit and vacation plans. In addition, following the
Effective Time, Webster shall provide New England Employees with severance
benefits on the terms and conditions set forth on Schedule 6.6(b) hereof.
(c) Following the Merger, Webster agrees that it shall honor the
existing written deferred compensation, employment, change of control and
severance contracts with directors and employees of New England that are listed
at Section 3.11 of the New England Disclosure Schedule.
6.7 INDEMNIFICATION. (a) In the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer or employee of New England or any of its Subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party based in whole
or in part on, or arising
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in whole or in part out of, or pertaining to (i) the fact that he is or was a
director, officer or employee of New England or any of its Subsidiaries or any
of their respective predecessors or (ii) this Agreement or the Option Agreement
or any of the transactions contemplated hereby or thereby, whether in any case
asserted or arising before or after the Effective Time, the parties hereto agree
to cooperate and use their best efforts to defend against and respond thereto.
It is understood and agreed that, after the Effective Time, Webster shall
indemnify and hold harmless, as and to the fullest extent permitted by
applicable law, each such Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorney's fees and expenses
in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law), judgments, fines
and amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time), the Indemnified Parties
may retain counsel reasonably satisfactory to Webster; provided, however, that
(1) Webster shall have the right to assume the defense thereof and upon such
assumption Webster shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if Webster
elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are issues which raise
conflicts of interest between Webster and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to Webster, and
Webster shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (2) Webster shall be obligated pursuant to this paragraph
to pay for only one firm of counsel for each Indemnified Party, and (3) Webster
shall not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld or delayed). Any
Indemnified Party wishing to claim indemnification under this Section 6.7, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify Webster thereof; provided, however, that the failure to so
notify shall not affect the obligations of Webster under this Section 6.7 except
to the extent such failure to notify materially prejudices Webster. Webster's
obligations under this Section 6.7 continue in full force and effect for a
period of six years from the Effective Time; provided, however, that all rights
to indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim.
(b) Webster shall use its reasonable best efforts to cause the persons
serving as officers and directors of New England immediately prior to the
Effective Time to be covered for a period of two years from the Effective Time
by the directors' and officers' liability insurance policy maintained by the New
England (provided that Webster may substitute therefore policies of at least the
same coverage and amounts containing terms and conditions which are not less
advantageous than such policy) with respect to acts or omissions occurring prior
to the Effective Time (including, without limitation, actions or omissions
relating to the transactions contemplated hereby) which were committed by such
officers and directors in their capacity as such; provided, however, that in no
event shall Webster be required to expend more than 200% of the current amount
expended by New England (the "Insurance Amount") to maintain or procure
insurance coverage pursuant hereto; and provided further, that if Webster is
unable to maintain or obtain the insurance called for by this Section 6.7(b),
Webster shall use its reasonable best efforts to obtain as much comparable
insurance as available for the Insurance Amount.
(c) In the event Webster or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Webster
assume the obligations set forth in this section.
(d) The provisions of this Section 6.7 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
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6.8 SUBSEQUENT INTERIM AND ANNUAL FINANCIAL STATEMENTS. As soon as
reasonably available, but in no event more than 45 days after the end of each
fiscal quarter (other than the fourth fiscal quarter), Webster will deliver to
New England and New England will deliver to Webster their respective Quarterly
Reports on Form 10-Q, as filed with the SEC under the Exchange Act. Each party
shall deliver to the other any Current Reports on Form 8-K promptly after filing
such reports with the SEC.
6.9 ADDITIONAL AGREEMENTS. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of New England,
the proper officers and directors of each party to this Agreement, and Webster's
and New England's Subsidiaries, shall take all such necessary action as may be
reasonably requested by Webster.
6.10 ADVICE OF CHANGES. Webster and New England shall promptly advise
the other party of any change or event that, individually or in the aggregate,
has had or would be reasonably certain to have a Material Adverse Effect on it
or to cause or constitute a material breach of any of its representations,
warranties or covenants contained herein. From time to time prior to the
Effective Time, each party will promptly supplement or amend its disclosure
schedule delivered in connection with the execution of this Agreement to reflect
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such disclosure
schedule or which is necessary to correct any information in such disclosure
schedule which has been rendered inaccurate thereby. No supplement or amendment
to such disclosure schedule shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Sections 7.2(a) or 7.3(a) hereof, as
the case may be, or the compliance by New England or Webster, as the case may
be, with the respective covenants set forth in Sections 5.1 and 5.2 hereof.
6.11 CURRENT INFORMATION. During the period from the date of this
Agreement to the Effective Time, New England will cause one or more of its
designated representatives to confer on a regular and frequent basis (not less
than monthly) with representatives of Webster and to report the general status
of the ongoing operations of New England. New England will promptly notify
Webster of any material change in the normal course of business or in the
operation of the properties of New England and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of litigation involving New
England, and will keep Webster fully informed of such events.
6.12 CHANGE IN STRUCTURE; STOCKHOLDER APPROVAL. Webster may elect (x)
to modify the structure of the transactions contemplated by this Agreement as
noted herein so long as (i) there are no adverse tax consequences to the New
England stockholders as a result of such modification, (ii) the consideration to
be paid to the New England stockholders under this Agreement is not thereby
changed or reduced in amount, and (iii) such modification will not materially
delay or jeopardize receipt of any required regulatory approvals or (y) upon a
determination by Webster that the approval or adoption of this Agreement by
Webster stockholders is not required by applicable law or SRO rule, and
notwithstanding any other provision of this Agreement to the contrary, to not
solicit such approval or adoption. In the event that Webster determines to do
either or both of the foregoing, the parties agree to modify this Agreement and
the various exhibits hereto to reflect such revised terms. In any such event,
Webster shall prepare appropriate amendments to this Agreement and the exhibits
hereto for execution by the parties hereto. New England agrees to cooperate
fully with Webster to effect such amendments.
6.13 TRANSACTION EXPENSES OF NEW ENGLAND. As promptly as practicable
after the execution of this Agreement, New England will provide to Webster an
estimate of the expenses New England expects to incur in connection with the
Merger, and shall keep Webster reasonably informed of material changes in such
estimate.
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6.14 AFFILIATE AGREEMENTS. (a) Not later than the 15th day prior to
the mailing of the Joint Proxy Statement/Prospectus, (i) Webster shall deliver
to New England a schedule of each person that, to the best of its knowledge, is
or is reasonably likely to be, as of the date of the Webster stockholder meeting
called pursuant to Section 6.3, deemed to be an "affiliate" of it (each, a
"Webster Affiliate") as that term is used in SEC Accounting Series Releases 130
and 135; and (ii) New England shall deliver to Webster a schedule of each person
that, to the best of its knowledge, is or is reasonably likely to be, as of the
date of the New England stockholder meeting called pursuant to Section 6.3,
deemed to be an "affiliate" of it (each, an "New England Affiliate") as that
term is used in Rule 145 under the Securities Act or SEC Accounting Series
Releases 130 and 135.
(b) Each of Webster and New England shall use its reasonable best
efforts to cause each person who may be deemed to be an New England Affiliate or
a Webster Affiliate, as the case may be, to execute and deliver to New England
and Webster on or before the date of mailing of the Joint Proxy
Statement/Prospectus an agreement in the form attached hereto as Exhibit C or
Exhibit D, respectively.
(c) Webster shall use its best efforts to publish as promptly as
reasonably practical, but in no event later than 45 days after the end of the
first month after the Effective Time in which there are at least 30 days of
post-Merger combined operations (which month may be the month in which the
Effective Time occurs), combined sales and net income figures as contemplated by
and in accordance with the terms of SEC Accounting Series Release No. 135.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite votes of the New England stockholders
and the Webster Stockholders.
(b) Stock Exchange Listing. The shares of Webster Common Stock which
shall be issued or become issuable in or in connection with the Merger upon
consummation thereof shall have been authorized, subject to official notice of
issuance, for quotation on the Nasdaq Stock Market National Market (or such
other national securities market or exchange on which the Webster Common Stock
may have become listed or authorized for quotation).
(c) Other Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby shall have been obtained (consistent with
the provisions of Sections 6.1(b) and 6.4 hereof) and shall remain in full force
and effect and all statutory waiting periods in respect thereof shall have
expired (all such approvals and the expiration of all such waiting periods being
referred to herein as the "Requisite Regulatory Approvals").
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger or any of the other transactions contemplated by this Agreement, the Bank
Merger Agreement or the Certificate of Merger shall be in effect. No statute,
rule, regulation, order, injunction or decree shall have been enacted, entered,
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promulgated or enforced by any Governmental Entity which prohibits, restricts or
makes illegal consummation of the Merger of the Bank Merger. No proceeding
initiated by any Governmental Entity seeking an Injunction shall be pending.
(f) Federal Tax Opinion. Webster and New England shall have received
an opinion from Day, Berry and Howard, LLP, counsel to New England, in form and
substance reasonably satisfactory to Webster and New England, respectively,
dated the date of the Effective Time, in each case, substantially to the effect
that on the basis of facts, representations, and assumptions set forth in such
opinion which are consistent with the state of facts existing at the Effective
Time, each of the Merger and each of the mergers included in the Bank Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and each of Webster and New England will
be a party to the reorganization in respect of the Merger with the meaning of
Section 368(b) of the Code and that, accordingly, for federal income tax
purposes, (i) no gain or loss will be recognized by Webster or New England as a
result of the Merger or by the constituent banks as a result of the Bank Merger,
(ii) no gain or loss will be recognized by the stockholders of New England who
exchange all of their New England Common Stock solely for Webster Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Webster Common Stock), and (iii) the aggregate tax
basis of the Webster Common Stock received (including a fractional share
interest deemed received) by stockholders who exchange all of their New England
Common Stock solely for Webster Common Stock pursuant to the Merger will be the
same as the aggregate tax basis of the New England Common Stock surrendered in
exchange therefor. In rendering such opinion, such counsel may require and rely
upon representations contained in certificates of officers of New England,
Webster, their respective affiliates and others.
7.2 CONDITIONS TO OBLIGATIONS OF WEBSTER. The obligation of Webster to
effect the Merger is also subject to the satisfaction or waiver by Webster at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. Subject to the standard set forth
in Section 2A.2, the representations and warranties of New England set forth in
this Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date.
Webster shall have received a certificate signed on behalf of New England by
each of the President and Chief Executive Officer and the Chief Financial
Officer of New England to the foregoing effect.
(b) Performance of Covenants and Agreements of New England. New
England shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement at or prior to
the Closing Date. Webster shall have received a certificate signed on behalf of
New England by each of the President and Chief Executive Officer and the Chief
Financial Officer of New England to such effect.
(c) Pooling of Interests. Webster shall have received, as of the
Effective Time, a written opinion of KPMG LLP to the effect that the Merger will
be accounted for as a pooling-of-interests.
7.3 CONDITIONS TO OBLIGATIONS OF NEW ENGLAND. The obligation of New
England to effect the Merger is also subject to the satisfaction or waiver by
New England at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. Subject to the standard set forth
in Section 2A.2, the representations and warranties of Webster set forth in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date. New England
shall have received a certificate signed on behalf of Webster by each of
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the President and Chief Executive Officer and the Chief Financial Officer of
Webster to the foregoing effect.
(b) Performance of Covenants and Agreements of Webster. Webster shall
have performed in all material respects all covenants and agreements required to
be performed by it under this Agreement at or prior to the Closing Date. New
England shall have received a certificate signed on behalf of Webster by each of
the President and Chief Executive Officer and the Chief Financial Officer of
Webster to such effect.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of this Agreement by the
stockholders of Webster or New England:
(a) by mutual consent of Webster and New England in a
written instrument, if the Board of Directors of each so determines by
a vote of a majority of the members of its entire Board;
(b) by either Webster or New England upon written notice to
the other party (i) 30 days after the date on which any request or
application for a Requisite Regulatory Approval shall have been denied
or withdrawn at the request or recommendation of the Governmental
Entity which must grant such Requisite Regulatory Approval, unless
within the 30-day period following such denial or withdrawal the
parties agree to file, and have filed with the applicable Governmental
Entity, a petition for rehearing or an amended application, provided,
however, that no party shall have the right to terminate this
Agreement, if such denial or request or recommendation for withdrawal
shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such
party set forth herein;
(c) by either Webster or New England if the Merger shall not
have been consummated on or before the first anniversary of the date
hereof, unless the failure of the Closing to occur by such date shall
be due to the failure of the party seeking to terminate this Agreement
to perform or observe the covenants and agreements of such party set
forth herein;
(d) by either Webster or New England, if the approval of the
stockholders of either party required for the consummation of the
Merger shall not have been obtained by reason of the failure to obtain
the required vote at the duly held meeting of such party's
stockholders or at any adjournment or postponement thereof;
(e) by either Webster or New England (provided that the
terminating party is not then in breach of any representation,
warranty, covenant or other agreement contained herein that,
individually or in the aggregate, would give the other party the right
to terminate this Agreement) if there shall have been a breach of any
of the representations or warranties set forth in this Agreement on
the part of the other party, if such breach, individually or in the
aggregate, would entitle the terminating party not to consummate the
Merger pursuant to Article VII if such breach were to occur or
continue on the Closing Date, and such breach shall not have been
cured within 30 days following receipt by the breaching party of
written notice of such breach from the other party hereto or such
breach, by its nature, cannot be cured prior to the Closing;
(f) by either Webster or New England (provided that the
terminating party is not then in breach of any representation,
warranty, covenant or other agreement contained
32
<PAGE>
herein that, individually or in the aggregate, would give the other
party the right to terminate this Agreement) if there shall have been
a material breach of any of the covenants or agreements set forth in
this Agreement on the part of the other party, and such breach shall
not have been cured within 30 days following receipt by the breaching
party of written notice of such breach from the other party hereto or
such breach, by its nature, cannot be cured prior to the Closing;
(g) by the Board of Directors of Webster or the Board of
Directors of New England, if the Board of Directors of the other shall
have withdrawn, modified or changed in a manner adverse to the
terminating party its approval or recommendation of this Agreement;
and
(h) by the Board of Directors of New England, upon written
notice to Webster at any time during the ten-day period commencing two
days after the Determination Date (as defined below), if both of the
following conditions are satisfied:
(i) the Average Closing Price shall be less than
the product of 0.80 and the Starting Price; and
(ii) (A) the quotient obtained by dividing the
Average Closing Price by the Starting Price (such number
being referred to herein as the "Webster Ratio") shall be
less than (B) the quotient obtained by dividing the Average
Index Price by the Index Price on the Starting Date and
subtracting 0.15 from the quotient in this clause (ii)(B)
(such number being referred to herein as the "Index Ratio");
subject, however, to the following provisions. If New England elects to exercise
its termination right pursuant to the immediately preceding sentence, it shall
give prompt written notice to Webster; provided, however, that such notice of
election to termination may be withdrawn at any time within the aforementioned
ten-day period. During the five-day period commencing with its receipt of such
notice, Webster shall have the option to elect to increase the Exchange Ratio to
equal the lesser of (i) the quotient obtained by dividing (A) the product of
0.80, the Starting Price and the Exchange Ratio (as then in effect) by (B) the
Average Closing Price, and (ii) the quotient obtained by dividing (A) the
product of the Index Ratio and the Exchange Ratio (as then in effect) by (B) the
Webster Ratio. If Webster makes such an election within such five-day period, it
shall give prompt written notice to New England of such election and of the
revised Exchange Ratio, whereupon no termination shall have occurred pursuant to
this Section 8.1(h) and this Agreement shall remain in effect in accordance with
its terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be deemed to
refer to the Exchange Ratio as adjusted pursuant to this Section 8.1(h) (and
corresponding a corresponding modification shall be made to the Maximum Share
Amount).
For purposes of this Section 8.1(h), the following terms shall have
the meanings indicated:
"Average Closing Price" means the average of the daily last
sale prices of Webster Common Stock as reported on Nasdaq (as reported
in The Wall Street Journal or, if not reported therein, in another
mutually agreed upon authoritative source) for the twenty consecutive
full trading days in which such shares are traded on Nasdaq ending at
the close of trading on the Determination Date.
"Average Index Price" means the average of the Index Prices
for the twenty consecutive full trading days ending at the close of
trading on the Determination Date.
"Determination Date" means the date on which the approval of
the OTS required for consummation of the Merger shall be received.
33
<PAGE>
"Index Group" means the 16 savings and loan holding
companies and thrifts listed below, the common stocks of all of which
shall be publicly traded and as to which there shall not have been,
since the Starting Date and before the Determination Date, an
announcement of a proposal for such company to be acquired or for such
company to acquire another company or companies in transactions with a
value exceeding 25% of the acquiror's market capitalization as of the
Starting Date. In the event that the common stock of any such company
ceases to be publicly traded or any such announcement is made with
respect to any such company, such company shall be removed from the
Index Group, and the weights (which have been determined based on the
number of outstanding shares of common stock) redistributed
proportionately for purposes of determining the Index Price. The 16
savings and loan holding companies and the weights attributed to them
are as follows:
<TABLE>
<CAPTION>
COMPANY WEIGHTING (%)
------- -------------
<S> <C>
Sovereign Bancorp, Inc. 16.13
Dime Bancorp, Incorporated 10.93
Peoples Heritage Financial Group, Inc. 10.22
Roslyn Bancorp, Inc. 7.55
Fulton Financial Corporation 6.79
Independence Community Bank Corp. 6.58
People's Bank (MHC) 6.16
Valley National Bancorp 5.70
Astoria Financial Corporation 5.48
Keystone Financial, Inc. 4.78
Staten Island Bancorp, Inc. 4.15
Hudson United Bancorp 3.88
Suquehanna Bancshares, Inc. 3.63
Richmond County Financial Corp. 3.21
Commerce Bancorp, Inc. 2.70
Queens County Bancorp, Inc. 2.12
</TABLE>
"Index Price" on a given date means the weighted average
(weighted in accordance with the factors listed above) of the closing
prices on such date of the companies comprising the Index Group.
"Starting Date" means the last full day on which Nasdaq was
open for trading prior to the execution of this Agreement.
"Starting Price" shall mean the last sale price per share of
Webster Common Stock on the Starting Date, as reported on Nasdaq (as
reported in The Wall Street Journal or, if not reported therein, in
another mutually agreed upon authoritative source).
If Webster or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting Date
and the Determination Date, the prices for the common stock of such company
shall be appropriately adjusted for the purposes of applying this Section
8.1(h).
34
<PAGE>
8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Webster or New England as provided in Section 8.1 hereof,
this Agreement shall forthwith become void and have no effect except (i) the
last sentences of Sections 6.2(a) and 6.2(b) and Sections 8.2, 9.2 and 9.3
hereof shall survive any termination of this Agreement, and (ii) notwithstanding
anything to the contrary contained in this Agreement, no party shall be relieved
or released from any liabilities or damages arising out of its willful or
intentional breach of any provision of this Agreement.
8.3 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Board of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of New
England; provided, however, that after any approval of the transactions
contemplated by this Agreement by New England's stockholders, there may not be,
without further approval of such stockholders, any amendment of this Agreement
which reduces the amount or changes the form of the consideration to be
delivered to New England stockholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") will take place at 10:00 a.m. at the
main offices of Webster on (i) the fifteenth day after the last Requisite
Regulatory Approval is received and all applicable waiting periods have expired,
or (ii) such other date, place and time as the parties may agree (the "Closing
Date").
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement (other than pursuant to
the Option Agreement, which shall terminate in accordance with its terms) shall
survive the Effective Time, except for those covenants and agreements contained
herein and therein which by their terms apply in whole or in part after the
Effective Time.
9.3 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, except that all filing and other fees paid to the SEC in
connection with this Agreement and printing fees in connection with the Joint
Proxy Statement/Prospectus shall be borne equally by Webster and New England.
Notwithstanding the foregoing and without limitation of any party's rights under
clause (ii) of Section 8.2, in the event that this Agreement is terminated by
either Webster or New England by reason of a material breach pursuant to
Sections 8.1(e) or (f) hereof, the other party shall pay all documented and
reasonable costs and expenses up to $1,500,000 incurred by the terminating party
in connection with this Agreement and the transactions contemplated hereby.
35
<PAGE>
9.4 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or delivered by an
express courier (with confirmation) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) if to Webster, to:
Webster Financial Corporation
Webster Plaza
145 Bank Street
Waterbury, Connecticut 06702
Attn.: James C. Smith
Chairman and Chief
Executive Officer
WITH A COPY TO:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn.: Craig M. Wasserman, Esq.
and
(b) if to New England, to:
New England Community Bancorp, Inc.
176 Broad Street, P.O. Box 130
Windsor, Connecticut 06095
Attn.: David A. Lentini
Chairman, President and
Chief Executive Officer
WITH A COPY TO:
Day, Berry & Howard, LLP
City Place I
Hartford, CT 06103-3499
Attn: Robert M. Taylor, III, Esq.
9.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or an
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
9.6 COUNTERPARTS. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.7 ENTIRE AGREEMENT. This Agreement (including the disclosure
schedules, documents and the instruments referred to herein) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
other than the Confidentiality Agreement and the Option Agreement.
36
<PAGE>
9.8 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law rules.
9.9 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions thereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.10 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.11 PUBLICITY. Except as otherwise required by law or the rules of
the Nasdaq Stock Market National Market (or such other national securities
market or exchange on which the Webster Common Stock may become listed), so long
as this Agreement is in effect, neither Webster nor New England shall, or shall
permit any of Webster's or New England's Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions contemplated
by this Agreement, the Option Agreement or the Bank Merger Agreement without the
consent of the other party, which consent shall not be unreasonably withheld.
9.12 ASSIGNMENT; LIMITATION OF BENEFITS. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except as otherwise
specifically provided in Section 6.7 hereof, this Agreement (including the
documents and instruments referred to herein) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder, and the
covenants, undertakings and agreements set out herein shall be solely for the
benefit of, and shall be enforceable only by, the parties hereto and their
permitted assigns.
9.13 ADDITIONAL DEFINITIONS. In addition to any other definitions
contained in this Agreement, the following words, terms and phrases shall have
the following meanings when used in this Agreement.
"Affiliated Person": any director, officer or 5% or greater
stockholder, spouse or other person living in the same household of such
director, officer or stockholder, or any company, partnership or trust in which
any of the foregoing persons is an officer, 10% or greater stockholder, general
partner or 10% or greater trust beneficiary.
"Laws": any and all statutes, laws, ordinances, rules, regulations,
orders, permits, judgments, injunctions, decrees, case law and other rules of
law enacted, promulgated or issued by any Governmental Entity.
"Material Adverse Effect": with respect to Webster or New England, as
the case may be, means a condition, event, change or occurrence that has had or
is reasonably expected to have a material adverse effect upon (A) the financial
condition, results of operations or business of such party and its Subsidiaries,
taken as a whole, or (B) the ability of Webster, Webster Bank or
37
<PAGE>
New England to timely perform its obligations under, and to consummate the
transactions contemplated by, this Agreement, the Option Agreement or the Bank
Merger Agreement.
"Subsidiary": with respect to any party means any corporation,
partnership or other organization, whether incorporated or unincorporated, which
is consolidated with such party for financial reporting purposes.
38
<PAGE>
IN WITNESS WHEREOF, Webster and New England have caused this Agreement
to be executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
-------------------------------------------
Name: James C. Smith
Title: Chairman and Chief Executive Officer
NEW ENGLAND COMMUNITY BANCORP, INC.
By: /s/ David A. Lentini
-------------------------------------------
Name: David A. Lentini
Title: Chairman, President and Chief
Executive Officer
39
EXHIBIT 2.2
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED
HEREIN AND TO
RESALE RESTRICTIONS UNDER THE SECURITIES ACT OF
1933, AS AMENDED
STOCK OPTION AGREEMENT, dated June 29, 1999, between New England
Community Bancorp, Inc., a Delaware corporation ("Issuer"), and Webster
Financial Corporation, a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties thereto immediately prior to the execution of this Stock
Option Agreement (this "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 1,400,252
fully paid and nonassessable shares of Issuer's common stock, par value $.10 per
share ("Common Stock"), at a price of $22.14 per share (the "Option Price");
provided, however, that in no event shall the number of shares of Common Stock
for which this Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either
(i) issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement) or (ii) redeemed, repurchased, retired
or otherwise cease to be outstanding after the date of the Agreement, the number
of shares of Common Stock subject to the Option shall be increased or decreased,
as appropriate, so that, after such issuance, such number equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within 90 days following such Subsequent Triggering Event. Each of
the following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event, except a
termination by Grantee pursuant to Section 8.1(e) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional); or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 8.1(e) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional) (provided that if an Initial Triggering
<PAGE>
Event continues or occurs beyond such termination and prior to the passage of
such 12-month period, the Exercise Termination Event shall be 12 months from the
expiration of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean the last Initial
Triggering Event to expire. The term "Holder" shall mean the holder or holders
of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the rules and
regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer
shall have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction. For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or consolidation, or
any similar transaction, involving Issuer or any Significant
Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by
the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a
purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power
of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only any two or more of such Subsidiaries be
deemed to be an Acquisition Transaction;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to
authorize, recommend or propose, to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its interest to withdraw
or modify, in any manner adverse to Grantee, its recommendation that
the shareholders of Issuer approve the transactions contemplated by
the Merger Agreement in anticipation of engaging in an Acquisition
Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of its business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its shareholders by
public announcement or written communication that is or becomes the
subject of public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or
its shareholders to engage in an Acquisition Transaction, Issuer shall
have breached any
2
<PAGE>
covenant or obligation contained in the Merger Agreement and such
breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as hereinafter
defined); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), the Office of Thrift
Supervision (the "OTS"), the Federal Deposit Insurance Corporation,
the Banking Commissioner of the State of Connecticut, the Bank
Commissioner of the State of New Hampshire or other federal or state
bank or thrift regulatory authority, which application or notice has
been accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of
20% or more of the then-outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (b) of this Section 2, except
that the percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of any regulatory agency is required in connection
with such purchase, the Holder shall promptly file the required notice or
application for approval and shall expeditiously process the same and the period
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite waiting period
or periods shall have passed. Any exercise of the Option shall be deemed to
occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
3
<PAGE>
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed, subject to the receipt of applicable regulatory
approvals, to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including, without limitation, (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), the Home Owners' Loan Act of 1933,
as amended (the "HOLA"), or any other federal or state banking or thrift law or
regulations thereunder, prior approval of or notice to the Federal Reserve
Board, the OTS or other federal or any such state regulatory authority is
necessary before the Option may be exercised, cooperating fully with the Holder
in preparing such applications or notices and providing such information to the
Federal Reserve Board, the OTS or other federal or any such state regulatory
authority as they may require) in order to permit the Holder to exercise the
Option and Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and (iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the
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principal office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase, on the same
terms and subject to the same conditions as are set forth herein, in the
aggregate the same number of shares of Common Stock purchasable hereunder. The
terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock, or the
like, the type and number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other
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agreements customarily included in secondary offering underwriting agreements
for the Issuer. Upon receiving any request under this Section 6 from any Holder,
Issuer agrees to send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies. Notwithstanding anything to the contrary
contained herein, in no event shall Issuer be obligated to effect more than two
registrations pursuant to this Section 6 by reason of the fact that there shall
be more than one Grantee as a result of any assignment or division of this
Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
hereinafter defined), (i) following a request of the Holder, delivered prior to
an Exercise Termination Event, Issuer (or any successor thereto) shall
repurchase the Option from the Holder at a price (the "Option Repurchase Price")
equal to the amount by which (A) the Market/Offer Price (as hereinafter defined)
exceeds (B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner of Option
Shares from time to time (the "Owner"), delivered within 90 days of such
occurrence (or such later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so designated. The
term "Market/Offer Price" shall mean the highest of (i) the price per share of
Common Stock at which a tender offer or exchange offer therefor has been made,
(ii) the price per share of Common Stock to be paid by any third party pursuant
to an agreement with Issuer, (iii) the highest closing price for shares of
Common Stock within the six-month period immediately preceding the date the
Holder gives notice of the required repurchase of this Option or the Owner gives
notice of the required repurchase of Option Shares, as the case may be, or (iv)
in the event of a sale of all or a substantial portion of Issuer's assets, the
sum of the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may be,
and reasonably acceptable to the Issuer, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale. In determining the
Market/Offer Price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Within the latter to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof, if any,
that Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as
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appropriate, the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals and to file any required
notices, in each case as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed
to have occurred (i) upon the consummation of any merger, consolidation or
similar transaction involving Issuer or any purchase, lease or other acquisition
of all or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the proviso to Section 2(b)(i) hereof or (ii) upon the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding shares of Common
Stock, provided that no such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase the
Option or Option Shares under this Section 7 shall not terminate upon the
occurrence of an Exercise Termination Event unless no Subsequent Triggering
Event shall have occurred prior to the occurrence of an Exercise Termination
Event.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then-outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or surviving
corporation or other organization or person of a consolidation or merger with
Issuer (if other than Issuer), (B) Issuer in a merger in which Issuer is the
continuing or surviving person, and (C) the transferee of all or substantially
all of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the Market/Offer Price, as defined
in Section 7.
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(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of common stock issued by the person merging into Issuer or by any company that
controls or is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this clause (e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
clause (e) over (ii) the value of the Substitute Option after giving effect to
the limitation in this clause (e). This difference in value shall be determined
by a nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the
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Substitute Option and the Substitute Shares pursuant to this Section 9 by
surrendering for such purpose to the Substitute Option Issuer, at its principal
office, the agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and certificates for Substitute Shares
accompanied by a written notice or notices stating that the Substitute Option
Holder or the Substitute Share Owner, as the case may be, elects to require the
Substitute Option Issuer to repurchase the Substitute Option and/or the
Substitute Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five business days after the
surrender of the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating thereto, the
Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or, in
either case, the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day or 6-month periods for exercise of certain rights under
Sections 2, 6, 7, 13 and 15 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, for the
expiration of all statutory waiting periods; (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise;
and (iii) during any period in which Grantee is precluded from exercising such
rights due to an injunction or other legal restriction, plus in each case such
additional period as is reasonably necessary for the exercise of such rights
promptly following the obtaining of such approvals or the expiration of such
periods.
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11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA or the OTS approves an application by Grantee under the
HOLA, as amended, and the Bank Merger Act to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve Board
or the OTS.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation applying to the Federal Reserve
Board under the BHCA, or to the OTS under the HOLA, for approval to acquire the
shares issuable hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
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15. (a) Grantee in its sole discretion may, at any time during which
Issuer would be required to repurchase the Option or any Option Shares pursuant
to Section 7, surrender the Option (together with any Option Shares issued to
and then owned by the Holder) to Issuer in exchange for a cash payment equal to
the Surrender Price (as hereinafter defined); provided, however, that Grantee
may not exercise its rights pursuant to this Section 15 if Issuer has previously
repurchased the Option (or any portion thereof) or any Option Shares pursuant to
Section 7. The "Surrender Price" shall be equal to (i) $5,000,000, plus (ii) if
applicable, the aggregate purchase price previously paid pursuant hereto by
Grantee with respect to any Option Shares, minus (iii) if applicable, the excess
of (A) the net cash, if any, received by Grantee pursuant to the arm's-length
sale of Option Shares (or any other securities into which such Option Shares
were converted or exchanged) to any party not affiliated with Grantee, over (B)
the purchase price paid by Grantee with respect to such Option Shares.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 15 by surrendering for such purchase to
Issuer, at its principal office, a copy of this Agreement, together with
certificates for Option Shares, if any, accompanied by a written notice stating
(i) that Grantee elects to surrender the Option and Option Shares, if any, in
accordance with the provisions of this Section 15 and (ii) the Surrender Price.
Within two business days after the surrender of the Option and the Option
Shares, if applicable, Issuer shall deliver or cause to be delivered to Grantee
the Surrender Price.
(c) To the extent that the Issuer is prohibited under applicable law
or regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver, or cause to be delivered,
from time to time, to Grantee, that portion of the Surrender Price that Issuer
is not or no longer prohibited from paying, within two business days after the
date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of Surrender pursuant to Section
15(b) is prohibited under applicable law or regulation from paying to Grantee
the Surrender Price in full, (i) Issuer shall (A) use its best efforts to obtain
all required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to make such payments, (B) within two business
days of the submission or receipt of any documents relating to any such
regulatory and legal approvals, provide Grantee with copies of the same, and (C)
keep Grantee advised of both the status of any such request for regulatory and
legal approvals and any discussions with any relevant regulatory or other third
party reasonably related to the same, and (ii) Grantee may revoke such notice of
surrender by delivery of a notice of revocation, the Exercise Termination Event
shall be extended to a date six months from the date on which the Exercise
Termination Event would have occurred if not for the provisions of this Section
15(c) (during which period Grantee may exercise any of its rights hereunder,
including any and all rights pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to those set
forth in paragraphs (a), (b) and (c) of this Section 15 with respect to the
Substitute Option and the Substitute Option Issuer during any period in which
the Substitute Option Issuer would be required to repurchase the Substitute
Option pursuant to Section 9.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer or Substitute Option
Issuer, as the case may be, is not permitted to
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repurchase pursuant to Section 7 or Section 9, as the case may be, the full
number of shares of Common Stock provided in Section 1(a) hereof (as adjusted
pursuant to Section 1(b) or 5 hereof), or Issuer or Substitute Option Issuer is
not permitted to pay the full Surrender Price, it is the express intention of
Issuer (which shall be binding on the Substitute Option Issuer) to allow the
Holder to acquire or to require Issuer or the Substitute Option Issuer, as the
case may be, to repurchase such lesser number of shares, or to pay such portion
of the Surrender Price, as may be permissible, without any amendment or
modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal law apply).
20. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
12
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
-------------------------------------------
Name: James C. Smith
Title: Chairman and Chief Executive Officer
NEW ENGLAND COMMUNITY BANCORP, INC.
By: /s/ David A. Lentini
-------------------------------------------
Name: David A. Lentini
Chairman, President and Chief Executive Officer
Exhibit 5
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004
September 29, 1999
Board of Directors
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
Ladies and Gentlemen:
We are acting as special counsel to Webster Financial Corporation, a
Delaware corporation ("Webster"), in connection with its registration statement
on Form S-4 (the "Registration Statement"), filed on the date hereof with the
Securities and Exchange Commission relating to the proposed offering of up to
8,054,374 shares of Webster's common stock, par value $.01 per share, all of
which shares (the "Shares") are to be issued by Webster in accordance with the
terms of the Agreement and Plan of Merger, dated as of June 29, 1999, by and
between Webster and New England Community Bancorp, Inc. (the "Agreement"). This
opinion letter is furnished to you at your request to enable you to fulfill the
requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. Section
229.601(b)(5), in connection with the Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. An executed copy of the Agreement.
3. The Restated Certificate of Incorporation of Webster, with
amendments thereto, as certified by the Secretary of Webster
Financial on the date hereof as then being complete,
accurate and in effect.
4. The Bylaws of Webster, with amendments thereto, as certified
by the Secretary of Webster on the date hereof as then being
complete, accurate and in effect.
5. Resolutions of the Board of Directors of Webster adopted at
a meeting held on June 24, 1999, as certified by the
Secretary of Webster on the date hereof as then being
complete, accurate and in effect, relating to, among other
things, the issuance of the Shares and arrangements in
connection therewith.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons,
the accuracy and completeness of all documents submitted to us, the authenticity
of all original documents, and the conformity to authentic original documents of
all documents submitted to us as copies (including telecopies).
<PAGE>
This opinion letter is given, and all statements herein are made, in the context
of the foregoing.
This opinion letter is based as to matters of law solely on Delaware
corporate law. We express no opinion herein as to any other laws, statutes,
regulations, or ordinances.
Based upon, subject to and limited by the foregoing, we are of the
opinion that following (i) effectiveness of the Registration Statement, (ii)
issuance of the Shares pursuant to the terms of the Agreement, and (iii) receipt
by Webster of the consideration for the Shares specified in the Agreement and
resolutions of the Board of Directors, the Shares will be validly issued, fully
paid and nonassessable.
This opinion letter has been prepared for your use in connection with
the Registration Statement and speaks as of the date hereof. We assume no
obligation to advise you of any changes in the foregoing subsequent to the
delivery of this opinion letter.
We hereby consent to the filing of this opinion letter as Exhibit 5 to
the Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Proxy Statement/Prospectus constituting a part of the
Registration Statement. In giving this consent, we do not thereby admit that we
are an "expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
HOGAN & HARTSON L.L.P.
Exhibit 8.1
Day, Berry and Howard LLP Tax Opinion
[Letterhead of Day, Berry & Howard LLP]
September 29, 1999
New England Community Bancorp, Inc.
176 Broad Street
P.O. Box 130
Windsor, Connecticut 06095
Ladies and Gentlemen:
We have acted as counsel to New England Community Bancorp, Inc.
("NECB"), a Delaware corporation, in connection with the proposed merger of
NECB, with and into Webster Financial Corporation ("Webster"), a Delaware
corporation, (the "Merger") pursuant to the Agreement and Plan of Merger (the
"Agreement"), dated as of June 29, 1999, by and between Webster and NECB. At
your request and in connection with the filing of the registration statement on
Form S-4 with the Securities and Exchange Commission in connection with the
Merger (the "Registration Statement"), we are rendering our opinion pursuant to
Item 601(b)(8) of Regulation S-K. Any capitalized term used and not defined
herein has the meaning given to it in the joint proxy statement-prospectus of
Webster and NECB (the "Joint Proxy Statement-Prospectus") contained within the
Registration Statement, or the appendices thereto (including the Agreement).
For purposes of the opinion set forth below, we have relied, with the
consent of NECB and the consent of Webster, upon the accuracy and completeness
of the statements and representations (which statements and representations we
have neither investigated nor verified) contained, respectively, in the
certificates of the officers of NECB and Webster dated the date hereof, and have
assumed that such statements and representations will be complete and accurate
as of the Effective Time and that all representations made to the knowledge of
any person or entity or with similar qualification are and will be true and
correct as if made without such qualification. We have also relied upon the
accuracy of the Registration Statement and the Joint Proxy Statement-Prospectus.
We have also assumed that the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Joint Proxy Statement-Prospectus and that the Merger will qualify as a statutory
merger under the applicable laws of the State of Delaware.
<PAGE>
Based upon and subject to the foregoing, it is our opinion, under
currently applicable United States federal income tax law, that (a) the Merger
and each of the mergers included in the Bank Merger will be treated for federal
income tax purposes as a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and (b) each of
Webster and NECB will be a party to the reorganization in respect of the Merger
within the meaning of Section 368(b) of the Code, and that, accordingly, for
U.S. federal income tax purposes, (i) no gain or loss will be recognized by
Webster or NECB as a result of the Merger or by the constituent banks as a
result of the Bank Merger, (ii) no gain or loss will be recognized by the
stockholders of NECB who exchange all of their NECB Common Stock solely for
Webster Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Webster Common Stock), and
(iii) the aggregate tax basis of the Webster Common Stock received (including a
fractional share interest deemed received) by stockholders who exchange all of
their NECB Common Stock solely for Webster Common Stock pursuant to the Merger
will be the same as the aggregate tax basis of the NECB Common Stock surrendered
in exchange therefor.
We express no opinion as to the United States federal income tax
consequences of the Merger to stockholders subject to special treatment under
United States federal income tax law (including, for example, foreign persons,
financial institutions, dealers in securities, traders in securities who elect
to apply a mark-to-market method of accounting, insurance companies, tax-exempt
entities, holders who do not hold their shares as capital assets, holders who
acquired their shares pursuant to the exercise of an employee stock option or
right or otherwise as compensation, holders subject to the alternative minimum
tax, and holders who hold Webster Common Stock or NECB Common Stock as part of a
"hedge," "straddle" or "conversion transaction"). In addition, no opinion is
expressed with respect to the tax consequences of the Merger under applicable
foreign, state or local laws or under any federal tax laws other than those
pertaining to the income tax.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "THE MERGER - Federal Income Tax
Consequences" and elsewhere in the Joint Proxy Statement-prospectus. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
We are furnishing this opinion to you solely in connection with the
filing of the Registration Statement and this opinion is not to be relied upon,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
Day, Berry & Howard LLP
<PAGE>
Exhibit 8.2
Wachtell, Lipton, Rosen & Katz Tax Opinion
[Letterhead of Wachtell, Lipton, Rosen & Katz]
September 29, 1999
Webster Financial Corporation
Webster Plaza
145 Bank Street
Waterbury, Connecticut 06702
Ladies/Gentlemen:
We have acted as special counsel to Webster Financial Corporation, a
Delaware corporation ("Webster"), in connection with the proposed merger of New
England Community Bancorp, Inc., a Delaware corporation ("NECB"), with and into
Webster (the "Merger"), pursuant to the Agreement and Plan of Merger (the
"Agreement"), dated as of June 29, 1999, by and between Webster and NECB. At
your request and in connection with the filing of the registration statement on
Form S-4 filed with the Securities and Exchange Commission in connection with
the Merger (the "Registration Statement"), we are rendering our opinion pursuant
to Item 601(b)(8) of Regulation S-K. Any capitalized term used and not defined
herein has the meaning given to it in the joint proxy statement-prospectus of
Webster and NECB (the "Joint Proxy Statement-Prospectus") contained within the
Registration Statement, or the appendices thereto (including the Agreement).
For purposes of the opinion set forth below, we have relied, with the
consent of NECB and the consent of Webster, upon the accuracy and completeness
of the statements and representations (which statements and representations we
have neither investigated nor verified) contained, respectively, in the
certificates of the officers of NECB and Webster dated the date hereof, and have
assumed that such statements and representations will be complete and accurate
as of the Effective Time and that all representations made to the knowledge of
any person or entity or with similar qualification are and will be true and
correct as if made without such qualification. We have also relied upon the
accuracy of the Registration Statement and the Joint Proxy Statement-Prospectus.
We have also assumed that the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Joint Proxy Statement-Prospectus and the Merger will qualify as a statutory
merger under the applicable laws of the State of Delaware.
Based upon and subject to the foregoing, it is our opinion, under
currently applicable United States federal income tax law, that (a) the Merger
and each of the mergers included in the Bank Merger will be treated for federal
income tax purposes as a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and (b) each of
Webster and NECB will be a party to the reorganization in respect of the Merger
within the meaning of Section 368(b) of the Code, and that, accordingly, for
U.S. federal income tax purposes, (i) no gain or loss will be
<PAGE>
recognized by Webster or NECB as a result of the Merger or by the constituent
banks as a result of the Bank Merger, (ii) no gain or loss will be recognized by
the stockholders of NECB who exchange all of their NECB Common Stock solely for
Webster Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Webster Common Stock), and
(iii) the aggregate tax basis of the Webster Common Stock received (including a
fractional share interest deemed received) by stockholders who exchange all of
their NECB Common Stock solely for Webster Common Stock pursuant to the Merger
will be the same as the aggregate tax basis of the NECB Common Stock surrendered
in exchange therefor.
We express no opinion as to the United States federal income tax
consequences of the Merger to stockholders subject to special treatment under
United States federal income tax law (including, for example, foreign persons,
financial institutions, dealers in securities, traders in securities who elect
to apply a mark-to-market method of accounting, insurance companies, tax-exempt
entities, holders who do not hold their shares as capital assets, holders who
acquired their shares pursuant to the exercise of an employee stock option or
right or otherwise as compensation, holders subject to the alternative minimum
tax, and holders who hold Webster Common Stock or NECB Common Stock as part of a
"hedge," "straddle" or "conversion transaction"). In addition, no opinion is
expressed with respect to the tax consequences of the Merger under applicable
foreign, state or local laws or under any federal tax laws other than those
pertaining to the income tax.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "THE MERGER - Federal Income Tax
Consequences" and elsewhere in the Joint Proxy Statement-Prospectus. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
We are furnishing this opinion to you solely in connection with the
filing of the Registration Statement and this opinion is not to be relied upon,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
Wachtell, Lipton, Rosen and Katz
Exhibit 10.1
FIRST AMENDMENT TO EXECUTIVE RETENTION AGREEMENT
This first amendment to executive retention agreement ("First
Amendment") dated as of the 29th day of June 1999, is made and entered into by
New England Community Bancorp, Inc., a Delaware corporation (the "Company") and
David A. Lentini (the "Executive") amending certain provisions of the Executive
Retention Agreement, dated as of October 16, 1997 (the "Retention Agreement") by
and between the Company and the Executive.
WHEREAS, effective as of the date hereof, the Company has determined
that it is in the best interest of the Company and its shareholders to amend the
Retention Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 1(j) of the Retention Agreement is hereby amended by
deleting the words thereof in their entirety and replacing them with the words
"INTENTIONALLY OMITTED."
2. Section 3(a)(iv) of the Retention Agreement is hereby amended by
deleting the words thereof in their entirety and replacing them with the words
"INTENTIONALLY OMITTED."
3. Section 3(b) of the Retention Agreement is hereby amended to read
in its entirety as follows:
(b) Reduction of Certain Payments.
(i) For purposes of this Section 3: (A) a "Payment" shall
mean any payment or distribution in the nature of
compensation to or for the benefit of the Executive,
whether paid or payable pursuant to this Agreement or
otherwise; (B) "Agreement Payment" shall mean a Payment
paid or payable pursuant to this Agreement
(disregarding this Section); (C) "Present Value" shall
mean such value determined in accordance with Sections
280G(b)(2)(A)(ii) and 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code"); and (D)
"Reduced Amount" shall mean an amount expressed in
Present Value that maximizes the aggregate Present
Value of Agreement Payments without causing any Payment
to be nondeductible by the Company because of Section
280G of the Code.
(ii) Anything in the Agreement to the contrary
notwithstanding, in the event KPMG Peat Marwick (the
"Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to tax under
Section 4999 of the Code, the aggregate Agreement
Payments shall be reduced (but not below zero) to meet
the definition of Reduced Amount.
(iii) If the Accounting Firm determines that aggregate
Agreement Payments should be reduced to the Reduced
Amount, the Company shall promptly give the
<PAGE>
Executive notice to that effect and a copy of the detailed calculation
thereof, and the Executive may then elect, in his sole discretion,
which and how much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the Present Value of the
aggregate Agreement Payments equals the Reduced Amount), and shall
advise the Company in writing of his election within ten days of his
receipt of notice. If no such election is made by the Executive within
such ten-day period, the Company may elect which of such Agreement
Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals
the Reduced Amount) and shall notify the Executive promptly of such
election. All determinations made by the Accounting Firm under this
Section shall be at the Company's expense and shall be made within 30
days of a termination of employment of the Executive. All
determinations by the Accounting Firm shall be binding upon the
Company and the Executive. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit
of the Executive such Agreement Payments as are then due to the
Executive under this Agreement.
4. Section 3(c) of the Retention Agreement is hereby amended by
deleting it in its entirety and replacing it with the following words:
(c) The payments and benefits under this Agreement shall be
in lieu of and not in addition to the payments and benefits that the
Executive may be eligible or entitled to receive under any other
agreement, plan, program or arrangement that provides for severance,
termination or change in control pay or benefits.
Except as specifically provided herein, the terms of the Retention
Agreement shall remain in effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
duly executed and delivered by their respective duly authorized representatives
as of the date first above written.
NEW ENGLAND COMMUNITY DAVID A. LENTINI
BANCORP, INC.
By: (s) Frank A. Falvo /s/ David A. Lentini
----------------------- ---------------------------
Exhibit 10.2
FIRST AMENDMENT TO EXECUTIVE RETENTION AGREEMENT
This first amendment to executive retention agreement ("First
Amendment") dated as of the 29th day of June 1999, is made and entered into by
New England Community Bancorp, Inc., a Delaware corporation (the "Company") and
Frank A. Falvo (the "Executive") amending certain provisions of the Executive
Retention Agreement, dated as of October 16, 1997 (the "Retention Agreement") by
and between the Company and the Executive.
WHEREAS, effective as of the date hereof, the Company has determined
that it is in the best interest of the Company and its shareholders to amend the
Retention Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 1(j) of the Retention Agreement is hereby amended by
deleting the words thereof in their entirety and replacing them with the words
"INTENTIONALLY OMITTED."
2. Section 3(a)(iv) of the Retention Agreement is hereby amended by
deleting the words thereof in their entirety and replacing them with the words
"INTENTIONALLY OMITTED."
3. Section 3(b) of the Retention Agreement is hereby amended to read
in its entirety as follows:
(b) Reduction of Certain Payments.
(i) For purposes of this Section 3: (A) a "Payment" shall
mean any payment or distribution in the nature of
compensation to or for the benefit of the Executive,
whether paid or payable pursuant to this Agreement or
otherwise; (B) "Agreement Payment" shall mean a Payment
paid or payable pursuant to this Agreement
(disregarding this Section); (C) "Present Value" shall
mean such value determined in accordance with Sections
280G(b)(2)(A)(ii) and 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code"); and (D)
"Reduced Amount" shall mean an amount expressed in
Present Value that maximizes the aggregate Present
Value of Agreement Payments without causing any Payment
to be nondeductible by the Company because of Section
280G of the Code.
(ii) Anything in the Agreement to the contrary
notwithstanding, in the event KPMG Peat Marwick (the
"Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to tax under
Section 4999 of the Code, the aggregate Agreement
Payments shall be reduced (but not below zero) to meet
the definition of Reduced Amount.
(iii) If the Accounting Firm determines that aggregate
Agreement Payments should be reduced to the Reduced
Amount, the Company shall promptly give the
<PAGE>
Executive notice to that effect and a copy of the detailed calculation
thereof, and the Executive may then elect, in his sole discretion,
which and how much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the Present Value of the
aggregate Agreement Payments equals the Reduced Amount), and shall
advise the Company in writing of his election within ten days of his
receipt of notice. If no such election is made by the Executive within
such ten-day period, the Company may elect which of such Agreement
Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals
the Reduced Amount) and shall notify the Executive promptly of such
election. All determinations made by the Accounting Firm under this
Section shall be at the Company's expense and shall be made within 30
days of a termination of employment of the Executive. All
determinations by the Accounting Firm shall be binding upon the
Company and the Executive. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit
of the Executive such Agreement Payments as are then due to the
Executive under this Agreement.
4. Section 3(c) of the Retention Agreement is hereby amended by
deleting it in its entirety and replacing it with the following words:
(c) The payments and benefits under this Agreement shall be
in lieu of and not in addition to the payments and benefits that the
Executive may be eligible or entitled to receive under any other
agreement, plan, program or arrangement that provides for severance,
termination or change in control pay or benefits.
Except as specifically provided herein, the terms of the Retention
Agreement shall remain in effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
duly executed and delivered by their respective duly authorized representatives
as of the date first above written.
NEW ENGLAND COMMUNITY FRANK A. FALVO
BANCORP, INC.
By: /s/ David A. Lentini /s/ Frank A. Falvo
------------------------ ------------------------
Exhibit 10.3
FIRST AMENDMENT TO EXECUTIVE RETENTION AGREEMENT
This first amendment to executive retention agreement ("First
Amendment") dated as of the 29th day of June 1999, is made and entered into by
New England Community Bancorp, Inc., a Delaware corporation (the "Company") and
Donat A. Fournier (the "Executive") amending certain provisions of the Executive
Retention Agreement, dated as of October 16, 1997 (the "Retention Agreement") by
and between the Company and the Executive.
WHEREAS, effective as of the date hereof, the Company has determined
that it is in the best interest of the Company and its shareholders to amend the
Retention Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 1(j) of the Retention Agreement is hereby amended by
deleting the words thereof in their entirety and replacing them with the words
"INTENTIONALLY OMITTED."
2. Section 3(a)(iv) of the Retention Agreement is hereby amended by
deleting the words thereof in their entirety and replacing them with the words
"INTENTIONALLY OMITTED."
3. Section 3(b) of the Retention Agreement is hereby amended to read
in its entirety as follows:
(b) Reduction of Certain Payments.
(i) For purposes of this Section 3: (A) a "Payment" shall
mean any payment or distribution in the nature of
compensation to or for the benefit of the Executive,
whether paid or payable pursuant to this Agreement or
otherwise; (B) "Agreement Payment" shall mean a Payment
paid or payable pursuant to this Agreement
(disregarding this Section); (C) "Present Value" shall
mean such value determined in accordance with Sections
280G(b)(2)(A)(ii) and 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code"); and (D)
"Reduced Amount" shall mean an amount expressed in
Present Value that maximizes the aggregate Present
Value of Agreement Payments without causing any Payment
to be nondeductible by the Company because of Section
280G of the Code.
(ii) Anything in the Agreement to the contrary
notwithstanding, in the event KPMG Peat Marwick (the
"Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to tax under
Section 4999 of the Code, the aggregate Agreement
Payments shall be reduced (but not below zero) to meet
the definition of Reduced Amount.
(iii) If the Accounting Firm determines that aggregate
Agreement Payments should be reduced to the Reduced
Amount, the Company shall promptly give the
<PAGE>
Executive notice to that effect and a copy of the detailed calculation
thereof, and the Executive may then elect, in his sole discretion,
which and how much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the Present Value of the
aggregate Agreement Payments equals the Reduced Amount), and shall
advise the Company in writing of his election within ten days of his
receipt of notice. If no such election is made by the Executive within
such ten-day period, the Company may elect which of such Agreement
Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals
the Reduced Amount) and shall notify the Executive promptly of such
election. All determinations made by the Accounting Firm under this
Section shall be at the Company's expense and shall be made within 30
days of a termination of employment of the Executive. All
determinations by the Accounting Firm shall be binding upon the
Company and the Executive. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit
of the Executive such Agreement Payments as are then due to the
Executive under this Agreement.
4. Section 3(c) of the Retention Agreement is hereby amended by
deleting it in its entirety and replacing it with the following words:
(c) The payments and benefits under this Agreement shall be
in lieu of and not in addition to the payments and benefits that the
Executive may be eligible or entitled to receive under any other
agreement, plan, program or arrangement that provides for severance,
termination or change in control pay or benefits.
Except as specifically provided herein, the terms of the Retention
Agreement shall remain in effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
duly executed and delivered by their respective duly authorized representatives
as of the date first above written.
NEW ENGLAND COMMUNITY DONAT A. FOURNIER
BANCORP, INC.
By: /s/ David A. Lentini /s/ Donat A. Fournier
-------------------------- -------------------------
Exhibit 10.4
FIRST AMENDMENT TO EXECUTIVE RETENTION AGREEMENT
This first amendment to executive retention agreement ("First
Amendment") dated as of the 29th day of June 1999, is made and entered into by
New England Community Bancorp, Inc., a Delaware corporation (the "Company") and
Anson C. Hall (the "Executive") amending certain provisions of the Executive
Retention Agreement, dated as of October 16, 1997 (the "Retention Agreement") by
and between the Company and the Executive.
WHEREAS, effective as of the date hereof, the Company has determined
that it is in the best interest of the Company and its shareholders to amend the
Retention Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 1(j) of the Retention Agreement is hereby amended by
deleting the words thereof in their entirety and replacing them with the words
"INTENTIONALLY OMITTED."
2. Section 3(a)(iv) of the Retention Agreement is hereby amended by
deleting the words thereof in their entirety and replacing them with the words
"INTENTIONALLY OMITTED."
3. Section 3(b) of the Retention Agreement is hereby amended to read
in its entirety as follows:
(b) Reduction of Certain Payments.
(i) For purposes of this Section 3: (A) a "Payment" shall
mean any payment or distribution in the nature of
compensation to or for the benefit of the Executive,
whether paid or payable pursuant to this Agreement or
otherwise; (B) "Agreement Payment" shall mean a Payment
paid or payable pursuant to this Agreement
(disregarding this Section); (C) "Present Value" shall
mean such value determined in accordance with Sections
280G(b)(2)(A)(ii) and 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code"); and (D)
"Reduced Amount" shall mean an amount expressed in
Present Value that maximizes the aggregate Present
Value of Agreement Payments without causing any Payment
to be nondeductible by the Company because of Section
280G of the Code.
(ii) Anything in the Agreement to the contrary
notwithstanding, in the event KPMG Peat Marwick (the
"Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to tax under
Section 4999 of the Code, the aggregate Agreement
Payments shall be reduced (but not below zero) to meet
the definition of Reduced Amount.
(iii) If the Accounting Firm determines that aggregate
Agreement Payments should be reduced to the Reduced
Amount, the Company shall promptly give the
<PAGE>
Executive notice to that effect and a copy of the detailed calculation
thereof, and the Executive may then elect, in his sole discretion,
which and how much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the Present Value of the
aggregate Agreement Payments equals the Reduced Amount), and shall
advise the Company in writing of his election within ten days of his
receipt of notice. If no such election is made by the Executive within
such ten-day period, the Company may elect which of such Agreement
Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals
the Reduced Amount) and shall notify the Executive promptly of such
election. All determinations made by the Accounting Firm under this
Section shall be at the Company's expense and shall be made within 30
days of a termination of employment of the Executive. All
determinations by the Accounting Firm shall be binding upon the
Company and the Executive. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit
of the Executive such Agreement Payments as are then due to the
Executive under this Agreement.
4. Section 3(c) of the Retention Agreement is hereby amended by
deleting it in its entirety and replacing it with the following words:
(c) The payments and benefits under this Agreement shall be
in lieu of and not in addition to the payments and benefits that the
Executive may be eligible or entitled to receive under any other
agreement, plan, program or arrangement that provides for severance,
termination or change in control pay or benefits.
Except as specifically provided herein, the terms of the Retention
Agreement shall remain in effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
duly executed and delivered by their respective duly authorized representatives
as of the date first above written.
NEW ENGLAND COMMUNITY ANSON C. HALL
BANCORP, INC.
By: /s/ David A. Lentini /s/ Anson C. Hall
---------------------- ---------------------
Exhibit 10.5
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut
June 29, 1999
David A. Lentini
New England Community Bancorp, Inc.
Old Windsor Mall
Windsor, Connecticut 06095
Dear Mr. Lentini:
1. In consideration for the payments set forth in paragraph 2 hereof,
you hereby agree that for a period of 24 months (or 18 months to the extent
permissible) commencing upon the day following the consummation (the "Effective
Time") of the transactions contemplated by the Agreement and Plan of Merger by
and between Webster Financial Corporation (the "Company") and New England
Community Bancorp, Inc. ("NECB"), dated as of June 29,1999 (the "Merger
Agreement"), you will adhere to the restrictions and limitations set forth
herein.
(a) Confidential Information. You will hold in a fiduciary capacity
for the benefit of the Company and its affiliated companies all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies and their respective businesses (including, without
limitation, any proprietary and not publicly available information concerning
any processes, methods, trade secrets, research, secret data, costs or names of
users or purchasers of their respective products or services, business methods,
operating procedures or programs or methods of promotion and sale) that you
obtain or obtained during your employment by the Company or any of the
affiliated companies and that is not public knowledge (other than as a result of
your violation of this paragraph 1(a)) ("Confidential Information"). For the
purposes of this paragraph 1(a), information shall not be deemed to be publicly
available merely because it is embraced by general disclosures or because
individual features or combinations thereof are publicly available. You will not
communicate, divulge or disseminate Confidential Information at any time during
or after your employment with the Company or any of the affiliated companies,
except with the prior written consent of the Company, or as otherwise required
by law or legal process. All records, files, memoranda, reports, customer lists,
drawings, plans, documents and the like that you use, prepare or come into
contact with during the course of your employment shall remain the sole property
of the Company or one or more of the affiliated companies, as applicable, and
shall be turned over to the Company or such affiliated company, as applicable,
upon termination of your employment.
(b) Nonsolicitation. You agree that you will not, at any time during
the Restricted Period (as defined in paragraph 1(c) below), without the prior
written consent of the Company, directly or indirectly employ, or solicit the
employment of (whether as an employee, officer, director, agent, consultant or
independent contractor), any person who was or is at any time during the
previous twelve (12) months an employee, representative, officer or director of
the Company or any of its affiliated companies (except for such employment by
the Company or any of its affiliated companies). You agree that you will not, at
any time during the Restricted Period, directly or indirectly, attempt in any
manner to persuade any client or customer of the Company or its affiliated
companies to cease to do business or to reduce the amount of business which any
such client or customer has customarily done or contemplates doing with the
Company or its affiliated companies, whether or not the relationship between the
Company or such affiliated company and such client or customer was originally
established, in whole or in part, through your efforts, or to solicit business
of any such client or customer of the Company or its affiliated companies,
unless such solicitations is rendered on the behalf of, and in furtherance of
the business of, the Company.
<PAGE>
David A. Lentini
June 29, 1999
Page 2
(c) Noncompetition. During the Restricted Period (as defined below),
you shall not, without the prior written consent of the Chief Executive Officer
of the Company, engage in or become associated with a Competitive Activity. For
purposes of this paragraph 1: (i) the "Restricted Period" means the period
commencing on the Effective Time and ending on the 24 month anniversary of the
Effective Time (18 month anniversary to the extent permissible); (ii) a
"Competitive Activity" means any business or other endeavor, in any county in
Connecticut or in the Portsmouth, New Hampshire area, that is engaged in the
banking business, whether through a bank, a savings and loan, a savings bank, a
credit union, mortgage company, bank holding company, savings and loan holding
company or other depositary institution holding company in such jurisdiction as
of the Effective Time or any time thereafter; and (iii) you will be considered
to have become "associated with a Competitive Activity" if you become directly
or indirectly involved as an owner, principal, employee, officer, director,
independent contractor, representative, stockholder, financial backer, agent,
partner, advisor, lender, or in any other individual or representative capacity
with any individual, partnership, corporation or other organization that is
engaged in a Competitive Activity. Notwithstanding the foregoing, you may make
and retain investments during the Restricted Period in less than one percent of
the equity of any entity engaged in a Competitive Activity, if such equity is
listed on a national securities exchange or regularly traded in an
over-the-counter market.
2. In consideration for your agreement not to engage in the activities
set forth in paragraph 1, the Company hereby agrees to pay you an amount (the
"Non-Compete Amount"), currently valued by the parties at $965,000.00, to be
paid in equal monthly installments over the duration of the Restricted Period,
provided that such payments shall not commence until such time as you are no
longer providing services to the Company or its affiliated companies. The
parties hereby agree to reconfirm and, to the extent necessary or permissible,
modify in writing the Non-Compete Amount and the duration of the Restricted
Period on or before the date on which the Effective Time is expected to occur.
3. In the event payments to you under this Agreement and with or
pertaining to any other plan, agreement or arrangement of the Company or NECB
(the "Total Payments"), are determined by a court of final jurisdiction or a
final settlement approved by the Company to be subject to the excise tax (the
"Excise Tax") under Section 4999 of the Internal Revenue Code (the "Code"), the
Company shall pay to you within 30 days of such determination an additional
amount such that the net amount retained by you, after deduction of the Excise
Tax on Total Payments and any federal and state income tax and Excise Tax upon
the payment provided for by this paragraph 3, shall be equal to the Total
Payments. The parties agree that any calculations required pursuant to this
paragraph 3 shall be made by the Company; provided, however, that if you object
in writing to the Company's determination within 60 days, the determination
shall be made by a "Big Five" accounting firm selected by the Company and
subject to your reasonable consent. The determination made by such accounting
firm shall be binding on you and the Company. The parties further agree that
they shall reasonably cooperate with each other in connection with any
administrative or judicial proceedings concerning the existence or liability for
Excise Tax with respect to the amounts payable hereunder. The Company agrees to
indemnify you and hold you harmless for any penalties, interest or expenses you
may be required to pay in the event it is determined that Excise Tax is owed.
You hereby agree that you will not take any position on your income tax return
or otherwise that is inconsistent with the positions of the Company with respect
to the treatment of any payment, including the Non-Compete Amount, which may be
contended is a "parachute payment" under Section 280G of the Code.
4. For purposes of Section 3(a) of the Executive Retention Agreement
between NECB and you dated as of October 16, 1997, as amended on June 29, 1999
(the "Prior Agreement"), your employment will be deemed terminated by the
Company for a reason other than "Cause" (as defined therein) as of the Effective
Time and, as soon as reasonably practicable following the Effective Time and
within 30 days of the Effective Time, the Company shall make a
<PAGE>
David A. Lentini
June 29, 1999
Page 3
lump sum payment to you equal to $813,960, subject to reduction as provided for
in Section 3(b) of the Prior Agreement. Notwithstanding the foregoing, upon the
Company's request given in writing not less than 45 days prior to the Effective
Time, you hereby agree that you will provide services to the Company on the same
basis as you provided services to NECB immediately prior to the Effective Time,
for a period of up to six months following the Effective Time (but in no event
later than June 30, 2000 without your consent), at your current base pay.
5. In the event of a breach or threatened breach of paragraph 1, you
agree that the Company shall be entitled to injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened breach, and you
acknowledge that damages would be inadequate and insufficient. With respect to
any provision of paragraph 1 finally determined by a court of competent
jurisdiction to be unenforceable, you and the Company hereby agree that such
court shall have jurisdiction to reform this Agreement or any provision hereof
so that it is enforceable to the maximum extent permitted by law, and the
parties agree to abide by such court's determination. If any of the covenants of
paragraph 1 are determined to be wholly or partially unenforceable in any
jurisdiction, such determination shall not be a bar to or in any way diminish
the rights of the Company to enforce any such covenant in any other
jurisdiction.
6. The existence of Excise Tax shall not affect the obligations of the
parties to perform their respective covenants under paragraphs 1 and 2.
7. This Agreement shall be governed by and subject to the jurisdiction
of the laws of the State of Connecticut applicable to contracts made and to be
performed within such State.
8. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. This Agreement
may not be amended or terminated without the prior written consent of the
parties hereto, provided that the parties agree to the modifications or
amendments as are contemplated by paragraph 2. In the event of your death after
the Effective Time, the Non-Compete Amount shall be payable to your
beneficiaries or your estate.
9. This Agreement shall terminate and have no further force and effect
without liability of any kind to any of the parties hereto, upon termination of
the Merger Agreement without consummation of the merger contemplated thereby.
Immediately following the Effective Time, this Agreement shall supersede any
other employment, severance or change of control agreement between you and NECB,
including, without limitation, the Prior Agreement. As used in this Agreement,
the term "affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
<PAGE>
David A. Lentini
June 29, 1999
Page
10. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
Very truly yours,
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
------------------------
Accepted and Agreed to:
By: /s/ David A. Lentini
---------------------------
David A. Lentini
Accepted and Agreed to:
NEW ENGLAND COMMUNITY
BANCORP, INC.
By: /s/ Frank A. Falvo
---------------------------
EXHIBIT 10.6
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut
June 29, 1999
Frank A. Falvo
New England Community Bancorp, Inc.
Old Windsor Mall
Windsor, Connecticut 06095
Dear Mr. Falvo:
1. In consideration for the payments set forth in paragraph 2 hereof,
you hereby agree that for a period of 24 months (or 18 months to the extent
permissible) commencing upon the day following the consummation (the "Effective
Time") of the transactions contemplated by the Agreement and Plan of Merger by
and between Webster Financial Corporation (the "Company") and New England
Community Bancorp, Inc. ("NECB"), dated as of June 29, 1999 (the "Merger
Agreement"), you will adhere to the restrictions and limitations set forth
herein.
(a) Confidential Information. You will hold in a fiduciary capacity
for the benefit of the Company and its affiliated companies all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies and their respective businesses (including, without
limitation, any proprietary and not publicly available information concerning
any processes, methods, trade secrets, research, secret data, costs or names of
users or purchasers of their respective products or services, business methods,
operating procedures or programs or methods of promotion and sale) that you
obtain or obtained during your employment by the Company or any of the
affiliated companies and that is not public knowledge (other than as a result of
your violation of this paragraph 1(a)) ("Confidential Information"). For the
purposes of this paragraph 1(a), information shall not be deemed to be publicly
available merely because it is embraced by general disclosures or because
individual features or combinations thereof are publicly available. You will not
communicate, divulge or disseminate Confidential Information at any time during
or after your employment with the Company or any of the affiliated companies,
except with the prior written consent of the Company, or as otherwise required
by law or legal process. All records, files, memoranda, reports, customer lists,
drawings, plans, documents and the like that you use, prepare or come into
contact with during the course of your employment shall remain the sole property
of the Company or one or more of the affiliated companies, as applicable, and
shall be turned over to the Company or such affiliated company, as applicable,
upon termination of your employment.
(b) Nonsolicitation. You agree that you will not, at any time during
the Restricted Period (as defined in paragraph 1(c) below), without the prior
written consent of the Company, directly or indirectly employ, or solicit the
employment of (whether as an employee, officer, director, agent, consultant or
independent contractor), any person who was or is at any time during the
previous twelve (12) months an employee, representative, officer or director of
the Company or any of its affiliated companies (except for such employment by
the Company or any of its affiliated companies). You agree that you will not, at
any time during the Restricted Period, directly or indirectly, attempt in any
manner to persuade any client or customer of the Company or its affiliated
companies to cease to do business or to reduce the amount of business which any
such client or customer has customarily done or contemplates doing with the
Company or its affiliated companies, whether or not the relationship between the
Company or such affiliated company and such client or customer was originally
established, in whole or in part, through your efforts, or to solicit business
of any such client or customer of the Company or its affiliated companies,
unless such solicitations is rendered on the behalf of, and in furtherance of
the business of, the Company.
(c) Noncompetition. During the Restricted Period (as defined below),
you shall not, without the prior written consent of the Chief Executive Officer
of the Company,
<PAGE>
Frank A. Falvo
June 29, 1999
Page 2
engage in or become associated with a Competitive Activity. For purposes of this
paragraph 1: (i) the "Restricted Period" means the period commencing on the
Effective Time and ending on the 24 month anniversary of the Effective Time (18
month anniversary to the extent permissible); (ii) a "Competitive Activity"
means any business or other endeavor, in any county in Connecticut or in the
Portsmouth, New Hampshire area, that is engaged in the banking business, whether
through a bank, a savings and loan, a savings bank, a credit union, mortgage
company, bank holding company, savings and loan holding company or other
depositary institution holding company in such jurisdiction as of the Effective
Time or any time thereafter; and (iii) you will be considered to have become
"associated with a Competitive Activity" if you become directly or indirectly
involved as an owner, principal, employee, officer, director, independent
contractor, representative, stockholder, financial backer, agent, partner,
advisor, lender, or in any other individual or representative capacity with any
individual, partnership, corporation or other organization that is engaged in a
Competitive Activity. Notwithstanding the foregoing, you may make and retain
investments during the Restricted Period in less than one percent of the equity
of any entity engaged in a Competitive Activity, if such equity is listed on a
national securities exchange or regularly traded in an over-the-counter market.
2. In consideration for your agreement not to engage in the activities
set forth in paragraph 1, the Company hereby agrees to pay you an amount (the
"Non-Compete Amount"), currently valued by the parties at $542,000.00, to be
paid in equal monthly installments over the duration of the Restricted Period,
provided that such payments shall not commence until such time as you are no
longer providing service to the Company or its affiliated companies. The parties
hereby agree to reconfirm and, to the extent necessary or permissible, modify in
writing the Non-Compete Amount and the duration of the Restricted Period on or
before the date on which the Effective Time is expected to occur.
3. In the event payments to you under this Agreement and with or
pertaining to any other plan, agreement or arrangement of the Company or NECB
(the "Total Payments"), are determined by a court of final jurisdiction or a
final settlement approved by the Company to be subject to the excise tax (the
"Excise Tax") under Section 4999 of the Internal Revenue Code (the "Code"), the
Company shall pay to you within 30 days of such determination an additional
amount such that the net amount retained by you, after deduction of the Excise
Tax on Total Payments and any federal and state income tax and Excise Tax upon
the payment provided for by this paragraph 3, shall be equal to the Total
Payments. The parties agree that any calculations required pursuant to this
paragraph 3 shall be made by the Company; provided, however, that if you object
in writing to the Company's determination within 60 days, the determination
shall be made by a "Big Five" accounting firm selected by the Company and
subject to your reasonable consent. The determination made by such accounting
firm shall be binding on you and the Company. The parties further agree that
they shall reasonably cooperate with each other in connection with any
administrative or judicial proceedings concerning the existence or liability for
Excise Tax with respect to the amounts payable hereunder. The Company agrees to
indemnify you and hold you harmless for any penalties, interest or expenses you
may be required to pay in the event it is determined that Excise Tax is owed.
You hereby agree that you will not take any position on your income tax return
or otherwise that is inconsistent with the positions of the Company with respect
to the treatment of any payment, including the Non-Compete Amount, which may be
contended is a "parachute payment" under Section 280G of the Code.
4. For purposes of Section 3(a) of the Executive Retention Agreement
between NECB and you dated as of October 16, 1997, as amended on June 29, 1999
(the "Prior Agreement"), your employment will be deemed terminated by the
Company for a reason other than "Cause" (as defined therein) as of the Effective
Time and, as soon as reasonably practicable following the Effective Time and
within 30 days of the Effective Time, the Company shall make a lump sum payment
to you equal to $426,660, subject to reduction as provided for in Section 3(b)
of the Prior Agreement. Notwithstanding the foregoing, upon the Company's
request given
<PAGE>
Frank A. Falvo
June 29, 1999
Page 3
in writing not less than 45 days prior to the Effective Time, you hereby agree
that you will provide services to the Company on the same basis as you provided
services to NECB immediately prior to the Effective Time, for a period of up to
six months following the Effective Time (but in no event later than June 30,
2000 without your consent), at your current base pay.
5. In the event of a breach or threatened breach of paragraph 1, you
agree that the Company shall be entitled to injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened breach, and you
acknowledge that damages would be inadequate and insufficient. With respect to
any provision of paragraph 1 finally determined by a court of competent
jurisdiction to be unenforceable, you and the Company hereby agree that such
court shall have jurisdiction to reform this Agreement or any provision hereof
so that it is enforceable to the maximum extent permitted by law, and the
parties agree to abide by such court's determination. If any of the covenants of
paragraph 1 are determined to be wholly or partially unenforceable in any
jurisdiction, such determination shall not be a bar to or in any way diminish
the rights of the Company to enforce any such covenant in any other
jurisdiction.
6. The existence of Excise Tax shall not affect the obligations of the
parties to perform their respective covenants under paragraphs 1 and 2.
7. This Agreement shall be governed by and subject to the jurisdiction
of the laws of the State of Connecticut applicable to contracts made and to be
performed within such State.
8. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. This Agreement
may not be amended or terminated without the prior written consent of the
parties hereto, provided that the parties agree to the modifications or
amendments as are contemplated by paragraph 2. In the event of your death after
the Effective Time, the Non-Compete Amount shall be payable to your
beneficiaries or your estate.
9. This Agreement shall terminate and have no further force and effect
without liability of any kind to any of the parties hereto, upon termination of
the Merger Agreement without consummation of the merger contemplated thereby.
Immediately following the Effective Time, this Agreement shall supersede any
other employment, severance or change of control agreement between you and NECB,
including, without limitation, the Prior Agreement. As used in this Agreement,
the term "affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
<PAGE>
Frank A. Falvo
June 29, 1999
Page 4
10. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
Very truly yours,
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
-------------------------
Accepted and Agreed to:
By: /s/ Frank A. Falvo
------------------------------
Frank A. Falvo
Accepted and Agreed to:
NEW ENGLAND COMMUNITY
BANCORP, INC.
By: /s/ David A. Lentini
------------------------------
EXHIBIT 10.7
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut
June 29, 1999
Donat A. Fournier
New England Community Bancorp, Inc.
Old Windsor Mall
Windsor, Connecticut 06095
Dear Mr. Fournier:
1. In consideration for the payments set forth in paragraph 2 hereof,
you hereby agree that for a period of 24 months (or 18 months to the extent
permissible) commencing upon the day following the consummation (the "Effective
Time") of the transactions contemplated by the Agreement and Plan of Merger by
and between Webster Financial Corporation (the "Company") and New England
Community Bancorp, Inc. ("NECB'), dated as of June 29, 1999 (the "Merger
Agreement") you will adhere to the restrictions and limitations set forth
herein.
(a) Confidential Information. You will hold in a fiduciary capacity
for the benefit of the Company and its affiliated companies all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies and their respective businesses (including, without
limitation, any proprietary and not publicly available information concerning
any processes, methods, trade secrets, research, secret data, costs or names of
users or purchasers of their respective products or services, business methods,
operating procedures or programs or methods of promotion and sale) that you
obtain or obtained during your employment by the Company or any of the
affiliated companies and that is not public knowledge (other than as a result of
your violation of this paragraph 1(a)) ("Confidential Information"). For the
purposes of this paragraph 1(a), information shall not be deemed to be publicly
available merely because it is embraced by general disclosures or because
individual features or combinations thereof are publicly available. You will not
communicate, divulge or disseminate Confidential Information at any time during
or after your employment with the Company or any of the affiliated companies,
except with the prior written consent of the Company, or as otherwise required
by law or legal process. All records, files, memoranda, reports, customer lists,
drawings, plans, documents and the like that you use, prepare or come into
contact with during the course of your employment shall remain the sole property
of the Company or one or more of the affiliated companies, as applicable, and
shall be turned over to the Company or such affiliated company, as applicable,
upon termination of your employment.
(b) Nonsolicitation. You agree that you will not, at any time during
the Restricted Period (as defined in paragraph 1 (c) below), without the prior
written consent of the Company, directly or indirectly employ, or solicit the
employment of (whether as an employee, officer, director, agent, consultant or
independent contractor), any person who was or is at any time during the
previous twelve (12) months an employee, representative, officer or director of
the Company or any of its affiliated companies (except for such employment by
the Company or any of its affiliated companies). You agree that you will not, at
any time during the Restricted Period, directly or indirectly, attempt in any
mariner to persuade any client or customer of the Company or its affiliated
companies to cease to do business or to reduce the amount of business which any
such client or customer has customarily done or contemplates doing with the
Company or its affiliated companies, whether or not the relationship between the
Company or such affiliated company and such client or customer was originally
established, in whole or in part, through your efforts, or to solicit business
of any such client or customer of the Company or its affiliated companies,
unless such solicitations is rendered on the behalf of, and in furtherance of
the business of, the Company.
<PAGE>
Donat A. Fournier
June 29, 1999
Page 2
(c) Noncompetition. During the Restricted Period (as defined below),
you shall not, without the prior written consent of the Chief Executive Officer
of the Company, engage in or become associated with a Competitive Activity. For
purposes of this paragraph 1: (i) the "Restricted Period" means the period
commencing on the Effective Time and ending on the 24 month anniversary of the
Effective Time (18 month anniversary to the extent permissible); (ii) a
"Competitive Activity" means any business or other endeavor, in any county in
Connecticut (excluding for this purpose, Fairfield County) or in the Portsmouth,
New Hampshire area, that is engaged in the banking business, whether through a
bank, a savings and loan, a savings bank, a credit union, a mortgage company,
bank holding company, savings and loan holding company or other depositary
institution holding company in such jurisdiction as of the Effective Time or any
time thereafter; and (iii) you will be considered to have become "associated
with a Competitive Activity" if you become directly or indirectly involved as an
owner, principal, employee, officer, director, independent contractor,
representative, stockholder, financial backer, agent, partner, advisor, lender,
or in any other individual or representative capacity with any individual,
partnership, corporation or other organization that is engaged in a Competitive
Activity. Notwithstanding the foregoing, you may make and retain investments
during the Restricted Period in less than one percent of the equity of any
entity engaged in a Competitive Activity, if such equity is listed on a national
securities exchange or regularly traded in an over-the-counter market.
2. In consideration for your agreement not to engage in the activities
set forth in paragraph 1, the Company hereby agrees to pay you an amount (the
"Non-Compete Amount"), currently valued by the parties at $382,000.00, to be
paid in equal monthly installments over the duration of the Restricted Period,
provided that such payments shall not commence until such time as you are no
longer providing services to the Company or its affiliated companies. The
parties hereby agree to reconfirm and, to the extent necessary or permissible,
modify in writing the Non-Compete Amount and the duration of the Restricted
Period on or before the date on which the Effective Time is expected to occur.
3. In the event payments to you under this Agreement and with or
pertaining to any other plan, agreement or arrangement of the Company or NECB
(the "Total Payments"), are determined by a court of final jurisdiction or a
final settlement approved by the Company to be subject to the excise tax (the
"Excise Tax") under Section 4999 of the Internal Revenue Code (the "Code"), the
Company shall pay to you within 30 days of such determination an additional
amount such that the net amount retained by you, after deduction of the Excise
Tax on Total Payments and any federal and state income tax and Excise Tax upon
the payment provided for by this paragraph 3, shall be equal to the Total
Payments. The parties agree that any calculations required pursuant to this
paragraph 3 shall be made by the Company; provided, however, that if you object
in writing to the Company's determination within 60 days, the determination
shall be made by a "Big Five" accounting firm selected by the Company and
subject to your reasonable consent. The determination made by such accounting
firm shall be binding on you and the Company. The parties further agree that
they shall reasonably cooperate with each other in connection with any
administrative or judicial proceedings concerning the existence or liability for
Excise Tax with respect to the amounts payable hereunder. The Company agrees to
indemnify you and hold you harmless for any penalties, interest or expenses you
may be required to pay in the event it is determined that Excise Tax is owed.
You hereby agree that you will not take any position on your income tax return
or otherwise that is inconsistent with the positions of the Company with respect
to the treatment of any payment, including the Non-Compete Amount, which may be
contended is a "parachute payment" under Section 280G of the Code.
4. For purposes of Section 3(a) of the Executive Retention Agreement
between NECB and you dated as of October 16, 1997, as amended on June 29, 1999
(the "Prior Agreement"), your employment will be deemed terminated by the
Company for a reason other than "Cause" (as defined therein) as of the Effective
Time and, as soon as reasonably practicable
<PAGE>
Donat A. Fournier
June 29, 1999
Page 3
following the Effective Time and within 30 days of the Effective Time, the
Company shall make a lump sum payment to you equal to $519,500, subject to
reduction as provided for in Section 3(b) of the Prior Agreement.
Notwithstanding the foregoing, upon the Company's request given in writing not
less than 45 days prior to the Effective Time, you hereby agree that you will
provide services to the Company on the same basis as you provided services to
NECB immediately prior to the Effective Time, for a period of up to six months
following the Effective Time (but in no event later than June 30, 2000 without
your consent), at your current base pay; provided, however, that in the event
you receive and accept a bone fide employment opportunity that is not in
violation of the covenants set forth in paragraph 1 hereof, you may cease
providing services to the Company prior to the end of the period requested by
the Company, but in no event earlier than the 90th day following the Effective
Time.
5. In the event of a breach or threatened breach of paragraph 1, you
agree that the Company shall be entitled to injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened breach, and you
acknowledge that damages would be inadequate and insufficient. With respect to
any provision of paragraph 1 finally determined by a court of competent
jurisdiction to be unenforceable, you and the Company hereby agree that such
court shall have jurisdiction to reform this Agreement or any provision hereof
so that it is enforceable to the maximum extent permitted by law, and the
parties agree to abide by such court's determination. If any of the covenants of
paragraph 1 are determined to be wholly or partially unenforceable in any
jurisdiction, such determination shall not be a bar to or in any way diminish
the rights of the Company to enforce any such covenant in any other
jurisdiction.
6. The existence of Excise Tax shall not affect the obligations of the
parties to perform their respective covenants under paragraphs 1 and 2.
7. This Agreement shall be governed by and subject to the jurisdiction
of the laws of the State of Connecticut applicable to contracts made and to be
performed within such State.
8. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. This Agreement
may not be amended or terminated without the prior written consent of the
parties hereto, provided that the parties agree to the modifications or
amendments as are contemplated by paragraph 2. In the event of your death after
the Effective Time, the Non-Compete Amount shall be payable to your
beneficiaries or your estate.
9. This Agreement shall terminate and have no further force and effect
without liability of any kind to any of the parties hereto, upon termination of
the Merger Agreement without consummation of the merger contemplated thereby.
Immediately following the Effective Time, this Agreement shall supersede any
other employment, severance or change of control agreement between you and NECB,
including, without limitation, the Prior Agreement. As used in this Agreement,
the term "affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
<PAGE>
Donat A. Fournier
June 29, 1999
Page 4
10. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
Very truly yours,
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
--------------------------
Accepted and Agreed to:
By: /s/ Donat A. Fournier
---------------------------
Donat A. Fournier
Accepted and Agreed to:
NEW ENGLAND COMMUNITY
BANCORP, INC.
By: /s/ David A. Lentini
---------------------------
EXHIBT 10.8
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut
June 29, 1999
Anson C. Hall
New England Community Bancorp, Inc.
Old Windsor Mall
Windsor, Connecticut 06095
Dear Mr. Hall:
1. In consideration for the payments set forth in paragraph 2 hereof,
you hereby agree that for a period of 24 months (or 18 months to the extent
permissible) commencing upon the day following the consummation (the "Effective
Time") of the transactions contemplated by the Agreement and Plan of Merger by
and between Webster Financial Corporation (the "Company") and New England
Community Bancorp, Inc. ("NECB"), dated as of June 29,1999 (the "Merger
Agreement"), you will adhere to the restrictions and limitations set forth
herein.
(a) Confidential Information. You will hold in a fiduciary capacity
for the benefit of the Company and its affiliated companies all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies and their respective businesses (including, without
limitation, any proprietary and not publicly available information concerning
any processes, methods, trade secrets, research, secret data, costs or names of
users or purchasers of their respective products or services, business methods,
operating procedures or programs or methods of promotion and sale) that you
obtain or obtained during your employment by the Company or any of the
affiliated companies and that is not public knowledge (other than as a result of
your violation of this paragraph 1(a)) ("Confidential Information'). For the
purposes of this paragraph 1(a), information shall not be deemed to be publicly
available merely because it is embraced by general disclosures or because
individual features or combinations thereof are publicly available. You will not
communicate, divulge or disseminate Confidential Information at any time during
or after your employment with the Company or any of the affiliated companies,
except with the prior written consent of the Company, or as otherwise required
by law or legal process. All records, files, memoranda, reports, customer lists,
drawings, plans, documents and the like that you use, prepare or come into
contact with during the course of your employment shall remain the sole property
of the Company or one or more of the affiliated companies, as applicable, and
shall be turned over to the Company or such affiliated company, as applicable,
upon termination of your employment.
(b) Nonsolicitation. You agree that you will not, at any time during
the Restricted Period (as defined in paragraph 1(c) below), without the prior
written consent of the Company, directly or indirectly employ, or solicit the
employment of (whether as an employee, officer, director, agent, consultant or
independent contractor), any person who was or is at any time during the
previous twelve (12) months an employee, representative, officer or director of
the Company or any of its affiliated companies (except for such employment by
the Company or any of its affiliated companies). You agree that you will not, at
any time during the Restricted Period, directly or indirectly, attempt in any
manner to persuade any client or customer of the Company or its affiliated
companies to cease to do business or to reduce the amount of business which any
such client or customer has customarily done or contemplates doing with the
Company or its affiliated companies, whether or not the relationship between the
Company or such affiliated company and such client or customer was originally
established, in whole or in part, through your efforts, or to solicit business
of any such client or customer of the Company or its affiliated companies,
unless such solicitations is rendered on the behalf of, and in furtherance of
the business of, the Company.
(c) Noncompetition. During the Restricted Period (as defined below),
you shall not, without the prior written consent of the Chief Executive Officer
of the Company,
<PAGE>
Anson C. Hall
June 29, 1999
Page 2
engage in or become associated with a Competitive Activity. For purposes of this
paragraph 1: (i) the "Restricted Period" means the period commencing on the
Effective Time and ending on the 24 month anniversary of the Effective Time (18
month anniversary to the extent permissible); (ii) a "Competitive Activity"
means any business or other endeavor, in any county in Connecticut or in the
Portsmouth, New Hampshire area, that is engaged in the banking business, whether
through a bank, a savings and loan, a savings bank, a credit union, mortgage
company, bank holding company, savings and loan holding company or other
depositary institution holding company in such jurisdiction as of the Effective
Time or any time thereafter; and (iii) you will be considered to have become
"associated with a Competitive Activity" if you become directly or indirectly
involved as an owner, principal, employee, officer, director, independent
contractor, representative, stockholder, financial backer, agent, partner,
advisor, lender, or in any other individual or representative capacity with any
individual, partnership, corporation or other organization that is engaged in a
Competitive Activity. Notwithstanding the foregoing, you may make and retain
investments during the Restricted Period in less than one percent of the equity
of any entity engaged in a Competitive Activity, if such equity is listed on a
national securities exchange or regularly traded in an over-the-counter market.
2. In consideration for your agreement not to engage in the activities
set forth in paragraph 1, the Company hereby agrees to pay you an amount (the
"Non-Compete Amount"), currently valued by the parties at $562,000.00, to be
paid in equal monthly installments over the duration of the Restricted Period,
provided that such payments shall not commence until such time as you are no
longer providing services to the Company or its affiliated companies. The
parties hereby agree to reconfirm and, to the extent necessary or permissible,
modify in writing the Non-Compete Amount and the duration of the Restricted
Period on or before the date on which the Effective Time is expected to occur.
3. In the event payments to you under this Agreement and with or
pertaining to any other plan, agreement or arrangement of the Company or NECB
(the "Total Payments"), are determined by a court of final jurisdiction or a
final settlement approved by the Company to be subject to the excise tax (the
"Excise Tax") under Section 4999 of the Internal Revenue Code (the "Code"), the
Company shall pay to you within 30 days of such determination an additional
amount such that the net amount retained by you, after deduction of the Excise
Tax on Total Payments and any federal and state income tax and Excise Tax upon
the payment provided for by this paragraph 3, shall be equal to the Total
Payments. The parties agree that any calculations required pursuant to this
paragraph 3 shall be made by the Company; provided, however, that if you object
in writing to the Company's determination within 60 days, the determination
shall be made by a "Big Five" accounting firm selected by the Company and
subject to your reasonable consent. The determination made by such accounting
firm shall be binding on you and the Company. The parties further agree that
they shall reasonably cooperate with each other in connection with any
administrative or judicial proceedings concerning the existence or liability for
Excise Tax with respect to the amounts payable hereunder. The Company agrees to
indemnify you and hold you harmless for any penalties, interest or expenses you
may be required to pay in the event it is determined that Excise Tax is owed.
You hereby agree that you will not take any position on your income tax return
or otherwise that is inconsistent with the positions of the Company with respect
to the treatment of any payment, including the Non-Compete Amount, which may be
contended is a "parachute payment" under Section 280G of the Code.
4. For purposes of Section 3(a) of the Executive Retention Agreement
between NECB and you dated as of October 16, 1997, as amended on June 29, 1999
(the "Prior Agreement"), your employment will be deemed terminated by the
Company for a reason other than "Cause" (as defined therein) as of the Effective
Time and, as soon as reasonably practicable following the Effective Time and
within 30 days of the Effective Time, the Company shall make a lump sum payment
to you equal to $348,287, subject to reduction as provided for in Section 3(b)
of the Prior Agreement. Notwithstanding the foregoing, upon the Company's
request given
<PAGE>
Anson C. Hall
June 29, 1999
Page 3
in writing not less than 45 days prior to the Effective Time, you hereby agree
that you will provide services to the Company on the same basis as you provided
services to NECB immediately prior to the Effective Time, for a period of up to
six months following the Effective Time (but in no event later than June 30,
2000 without your consent), at your current base pay; provided, however, that in
the event you receive and accept a bone fide employment opportunity that is not
in violation of the covenants set forth in paragraph 1 hereof, you may cease
providing services to the Company prior to the end of the period requested by
the Company.
5. In the event of a breach or threatened breach of paragraph 1, you
agree that the Company shall be entitled to injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened breach, and you
acknowledge that damages would be inadequate and insufficient. With respect to
any provision of paragraph 1 finally determined by a court of competent
jurisdiction to be unenforceable, you and the Company hereby agree that such
court shall have jurisdiction to reform this Agreement or any provision hereof
so that it is enforceable to the maximum extent permitted by law, and the
parties agree to abide by such court's determination. If any of the covenants of
paragraph 1 are determined to be wholly or partially unenforceable in any
jurisdiction, such determination shall not be a bar to or in any way diminish
the rights of the Company to enforce any such covenant in any other
jurisdiction.
6. The existence of Excise Tax shall not affect the obligations of the
parties to perform their respective covenants under paragraphs 1 and 2.
7. This Agreement shall be governed by and subject to the jurisdiction
of the laws of the State of Connecticut applicable to contracts made and to be
performed within such State.
8. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. This Agreement
may not be amended or terminated without the prior written consent of the
parties hereto, provided that the parties agree to the modifications or
amendments as are contemplated by paragraph 2. In the event of your death after
the Effective Time, the Non-Compete Amount shall be payable to your
beneficiaries or your estate.
9. This Agreement shall terminate and have no further force and effect
without liability of any kind to any of the parties hereto, upon termination of
the Merger Agreement without consummation of the merger contemplated thereby.
Immediately following the Effective Time, this Agreement shall supersede any
other employment, severance or change of control agreement between you and NECB,
including, without limitation, the Prior Agreement. As used in this Agreement,
the term "affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
<PAGE>
Anson C. Hall
June 29, 1999
Page 4
10. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
Very truly yours,
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
------------------------
Accepted and Agreed to:
By: /s/ Anson C. Hall
----------------------------
Anson C. Hall
Accepted and Agreed to:
NEW ENGLAND COMMUNITY
BANCORP, INC.
By: /s/ David A. Lentini
----------------------------
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Webster Financial Corporation
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the proxy
statement/prospectus.
/s/ KPMG LLP
Hartford, Connecticut
September 28, 1999
-5-
Exhibit 23.5
Shatswell, MacLeod & Company, P.C.
Certified Public Accountants
83 Pine Street
West Peabody, Massachusetts 01960-3635
Telephone (978) 535-0208
Facsimile (978) 535-9908
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement on Form S-4 of Webster Financial Corporation of our report dated
January 29, 1999, relating to the consolidated balance sheets of New England
Community Bancorp, Inc. and Subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of income, changes in stockholder's equity
and cash flows for each of the years in the three-year period ending December
31, 1998, which report is included in the December 31, 1998 annual report on
Form 10-K of New England Community Bancorp, Inc.
/s/ Shatswell, MacLeod & Company, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
West Peabody, Massachusetts
September 27, 1999
-6-
Exhibit 23.6
A.G. Edwards & Sons, Inc.
One Boston Place
Suite 3660
Boston, Massachusetts 02108
(617) 619-9600
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion of the opinion of A.G. Edwards &
Sons, Inc. in the Form S-4 Registration Statement of Webster Financial
Corporation ("WBST") and the Proxy Statement of New England Community Bancorp,
Inc. ("NECB") to be filed with the Securities and Exchange Commission in
connection with the proposed consolidation of WBST and NECB and to the
references to the work completed by our firm as financial advisor to NECB,
therein. In giving such consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"expert" as used in the Securities Act of 1933 as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ A.G. Edwards & Sons, Inc.
A.G. Edwards & Sons, Inc.
September 27, 1999
-7-
Exhibit 23.7
HAS ASSOCIATES, INC.
76 Northeastern Blvd., P.O. Box 84
Suite 34 Boston, MA 02171
Nashua, NH 03062 (617) 472-5086
(603) 880-4529 Fax: (617) 472-6903
Fax (603) 880-4351 [email protected]
September 27, 1999
Board of Directors
New England Community Bancorp, Inc.
176 Broad Street
Windsor, CT 06095
CONSENT OF HAS ASSOCIATES, INC.:
We hereby consent to the use of our opinion letter dated September 27,
1999, to the Board of Directors of New England Community Bancorp, Inc., attached
as Appendix B to Webster Financial Corporation's Proxy Statement/Prospectus on
Form S-4 ("S-4") and to the references to our firm in the S-4 under the headings
"Summary - Fairness Opinion of New England Community Bancorp's Financial
Advisor", "The Merger - Background of the Merger", "The Merger - Recommendation
of the New England Community Bancorp Board of Directors and Reasons for the
Merger", "The Merger - Opinion of New England Community Bancorp's Financial
Advisor". In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder and we do not thereby admit that we are experts
with respect to any part of the Registration Statement under the meaning of the
term "expert" as used in the Securities Act.
/s/ HAS Associates, Inc.
HAS Associates, Inc.
September 27,1999
-8-
Exhibit 99.1
WEBSTER FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Webster Financial Corporation hereby
appoints James C. Smith, Joel S. Becker and Richard H. Alden, or either of them,
with full power of substitution in each, as proxies to cast all votes which the
undersigned shareholder is entitled to cast at the Special Meeting of
shareholders to be held at 2:00 p.m., local time, on Tuesday, November 9, 1999,
1999, at the Sheraton Waterbury Hotel, 3580 East Main Street, Waterbury,
Connecticut 06705, and at any adjournments thereof, upon the following matters.
The undersigned shareholder hereby revokes any proxy or proxies heretofore
given.
This proxy will be voted as directed by the undersigned shareholder.
UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED: (1) TO APPROVE AND
ADOPT AN AGREEMENT AND PLAN OF MERGER, DATED AS OF JUNE 29, 1999, BETWEEN
WEBSTER AND NEW ENGLAND COMMUNITY BANCORP, INC., PURSUANT TO WHICH NECB WILL BE
ACQUIRED BY WEBSTER, THE MERGER PROVIDED FOR THEREIN, AND THE OTHER TRANSACTIONS
CONTEMPLATED BY THE AGREEMENT AND PLAN OF MERGER; (2) TO APPROVE AND ADOPT AN
AMENDMENT TO THE WEBSTER CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK; AND (3) ANY OTHER BUSINESS IN ACCORDANCE WITH
THE DETERMINATION OF A MAJORITY OF THE WEBSTER BOARD OF DIRECTORS. The
undersigned may revoke this proxy at any time before it is voted by (i)
delivering to John D. Benjamin, Senior Vice President and Assistant Secretary of
Webster a written notice of revocation before the special meeting, (ii)
delivering to Webster a duly executed proxy bearing a later date before the
special meeting, or (iii) by attending the special meeting and voting in person.
The undersigned shareholder hereby acknowledges receipt of a Notice of Special
Meeting of Webster and a joint proxy statement/prospectus of Webster and NECB,
dated ________, 1999.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
PROPOSAL 1:
To approve and adopt the agreement and plan of merger, dated
as of June 29, 1999, between Webster Financial Corporation and
New England Community Bancorp, Inc., the merger of NECB into
Webster and the other transactions contemplated by the merger
agreement, as described in the joint proxy
statement/prospectus.
[__] FOR [___] AGAINST [___] ABSTAIN
PROPOSAL 2:
To amend Webster's Second Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of
common stock from 50,000,000 to 200,000,000.
[__] FOR [___] AGAINST [___] ABSTAIN
PROPOSAL 3:
The proxies are authorized to vote upon such other business as
may properly come before the special meeting, or any
adjournments or postponements of the meeting, including,
without limitation, a motion to adjourn the special meeting to
another time and/or place for the purpose of soliciting
additional proxies in order to approve the merger agreement
and the merger or otherwise.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
Date:
---------------------------------
---------------------------------------
---------------------------------------
Signature(s) of Shareholder(s) or
Authorized Representative(s)
Please date and sign exactly as your
name appears on this proxy card. Each
executor, administrator, trustee,
guardian, attorney-in-fact and other
fiduciary should sign and indicate his
or her full title. When stock has been
issued in the name of two or more
persons, all persons should sign.
Exhibit 99.2
NEW ENGLAND COMMUNITY BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of New England Community Bancorp, Inc.
hereby appoints David A. Lentini and Anson C. Hall, or either of them, with full
power of substitution in each, as proxies to cast all votes which the
undersigned shareholder is entitled to cast at the Special Meeting of
shareholders to be held at 10:00 a.m., local time, on Tuesday, November 9, 1999,
at The Hartford Golf Club, 134 Norwood Road, West Hartford, Connecticut,
06117-2238, and at any adjournments thereof, upon the following matters. The
undersigned shareholder hereby revokes any proxy or proxies heretofore given.
This proxy will be voted as directed by the undersigned shareholder.
UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED: (1) TO APPROVE AND
ADOPT AN AGREEMENT AND PLAN OF MERGER, DATED AS OF JUNE 29, 1999, BETWEEN
WEBSTER FINANCIAL CORPORATION AND NEW ENGLAND COMMUNITY BANCORP, INC., PURSUANT
TO WHICH NECB WILL BE ACQUIRED BY WEBSTER, THE MERGER PROVIDED FOR THEREIN, AND
THE OTHER TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND PLAN OF MERGER; AND (2)
ANY OTHER BUSINESS IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE
NECB BOARD OF DIRECTORS. The undersigned may revoke this proxy at any time
before it is voted by (i) delivering to Anson C. Hall, Vice President and
Treasurer of NECB a written notice of revocation before the special meeting,
(ii) delivering to NECB a duly executed proxy bearing a later date before the
special meeting, or (iii) by attending the special meeting and voting in person.
The undersigned shareholder hereby acknowledges receipt of a Notice of a Special
Meeting of NECB and the joint proxy statement/prospectus of Webster and NECB
dated ______, 1999.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
PROPOSAL 1:
To approve and adopt the agreement and plan of merger, dated
as of June 29, 1999, between Webster Financial Corporation and
New England Community Bancorp, Inc., the merger of NECB into
Webster and the other transactions contemplated by the merger
agreement, as described in the joint proxy
statement/prospectus.
[__] FOR [___] AGAINST [___] ABSTAIN
PROPOSAL 2:
The proxies are authorized to vote upon such other business as
may properly come before the special meeting, or any
adjournments or postponements of the meeting, including,
without limitation, a motion to adjourn the special meeting to
another time and/or place for the purpose of soliciting
additional proxies in order to approve the merger agreement
and the merger or otherwise.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
Date:
---------------------------------
---------------------------------------
---------------------------------------
Signature(s) of Shareholder(s) or
Authorized Representative(s)
Please date and sign exactly as your
name appears on this proxy card. Each
executor, administrator, trustee,
guardian, attorney-in-fact and other
fiduciary should sign and indicate his
or her full title. When stock has been
issued in the name of two or more
persons, all persons should sign.
