As filed with the Securities and Exchange Commission on February 8, 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 6712 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. David W. Ferguson, Esq.
Margaret Rhinelander Rizzi, Esq. Davis Polk & Wardwell
Hogan & Hartson L.L.P. 450 Lexington Avenue
555 Thirteenth Street, N.W. New York, NY 10017
Washington, D.C. 20004 (212) 450-4370
(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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------- --------------------- ------------------------- -------------------------- ----------------------
Title of each class of
securities to be Amount to be Proposed maximum offering Proposed maximum aggregate Amount of
registered registered price per unit offering price registration fee
- ------------------------- --------------------- ------------------------- -------------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock, par value 1,738,082 $23.84 * $41,435,874.88* $11,519.17*
$.01 per share
- ------------------------- --------------------- ------------------------- -------------------------- ----------------------
</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 Village Bancorp, Inc. as reported on the
Nasdaq Stock Market's SmallCap Market and calculated as of February 2, 1999
and the exchange ratio prescribed by the Agreement and Plan of Merger.
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 VILLAGE BANCORP, INC.
WEBSTER PLAZA 25 PROSPECT STREET
WATERBURY, CT 06702 RIDGEFIELD, CT 06877
------------- -------------
PROSPECTUS PROXY STATEMENT
1,738,082 SHARES OF COMMON STOCK
----------------------
DEAR VILLAGE BANCORP SHAREHOLDER:
Village Bancorp, Inc. and Webster Financial Corporation have entered into
an agreement and plan of merger, dated as of November 11, 1998, which provides
for Village Bancorp to merge into Webster Financial. If the merger takes place,
Village Bancorp's common stock will be converted at the choice of the
shareholder into either cash, Webster Financial's common stock, or a combination
of cash and Webster Financial's common stock. Dissenting shares will be treated
differently. The merger agreement limits the amount of cash that can be paid. If
you want to receive cash, you must submit the election form sent to you with
this proxy statement/prospectus.
The Village Bancorp board of directors has scheduled a special meeting of
shareholders to vote on the merger agreement that will be held on ____________,
___, 1999 at ___:___ __.m., local time, at The Village Bank & Trust Company, 25
Prospect Street, Ridgefield, Connecticut, 06877. The merger will not take place
unless Village Bancorp shareholders who own at least two-thirds of Village
Bancorp's outstanding stock approve the merger agreement and the other
conditions of the merger agreement are satisfied. If these conditions are met,
we expect the merger to take place during the second quarter of 1999.
Webster Financial's common stock is traded on the Nasdaq Stock Market's
National Market Tier under the symbol WBST. On November 10, 1998, which was the
last trading day before the public announcement of the merger, the closing price
for a share of Webster Financial's common stock was $26.50.
WEBSTER FINANCIAL'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 PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES OF WEBSTER
FINANCIAL'S COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
----------------------
This proxy statement/prospectus is being mailed to Village Bancorp shareholders
on or about __________ __, 1999.
The date of this proxy statement/prospectus is __________ __, 1999.
<PAGE>
VILLAGE BANCORP, INC.
25 PROSPECT STREET
RIDGEFIELD, CONNECTICUT 06877
-------------------
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
____________ ___, 1999
---------------------
A special meeting of shareholders of Village Bancorp, Inc. will be held on
____________ ___, 1999, at ____ __.m. at The Village Bank & Trust Company, 25
Prospect Street, Ridgefield, Connecticut, 06877 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 November 11, 1998,
between Webster Financial Corporation and Village Bancorp, the
merger of Village Bancorp into Webster Financial and the other
transactions contemplated by the merger agreement, as described
in the attached proxy statement/prospectus.
2. To transact any other business that properly comes before the
shareholder meeting, or any adjournments or postponements of the
meeting, including, without limitation, a motion to adjourn the
shareholder 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 shareholder meeting or any
adjournments or postponements of the meeting only if you were a holder of record
of Village Bancorp's common stock at the close of business on ________ ____,
1999. If you held Village Bancorp's common stock on that day, you are entitled
to dissent from the merger under Sections 33-855 to 33-872 of the Connecticut
General Statutes. A copy of these sections is attached to the proxy
statement/prospectus.
VILLAGE BANCORP'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR
TO AND IN THE BEST INTERESTS OF VILLAGE BANCORP'S SHAREHOLDERS, HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT. The affirmative vote of
two-thirds of the shares of Village Bancorp's common stock outstanding on
_______ __, 1999 is required to approve the merger agreement.
The required vote of Village Bancorp's shareholders is based on the total
number of outstanding shares of Village Bancorp's common stock and not on the
number of shares which are actually voted. IF YOU DO NOT SUBMIT A PROXY CARD OR
VOTE IN PERSON AT THE SHAREHOLDER MEETING, OR IF YOU ABSTAIN FROM VOTING, YOU
EFFECTIVELY ARE VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SHAREHOLDER
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SHAREHOLDER 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 Village Bancorp's board of directors, by subsequently filing
another proxy or by attending the shareholder meeting and voting in person.
By order of the Board of Directors
ROBERT V. MACKLIN
President and Chief Executive Officer
Ridgefield, Connecticut
____________ ___, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER... Certificate of Incorporation and
Bylaw Provisions................
SUMMARY ................................ Applicable Law......................
RECENT DEVELOPMENT ......................
SHAREHOLDER MEETING...................... WHERE YOU CAN FIND MORE
Matters to be Considered at the INFORMATION.........................
Shareholder Meeting.............
Record Date and Voting.............. INCORPORATION OF DOCUMENTS
Required Vote; Revocability of BY REFERENCE........................
Proxies.........................
Solicitation of Proxies............. ADJOURNMENT OF SHAREHOLDER
MEETING.............................
THE MERGER...............................
The Parties......................... SHAREHOLDER PROPOSALS....................
Background of the Merger............
Recommendation of the Village OTHER MATTERS............................
Bancorp Board of Directors and
Reasons for the Merger.......... EXPERTS..................................
Purpose and Effects of the Merger...
Structure........................... LEGAL MATTERS............................
Exchange Ratio......................
Election Form and Exchange of Shares Appendix A
Options............................. Opinion of Morgan Lewis
Regulatory Approvals................ Githens & Ahn, Inc..................A-1
Conditions to the Merger............
Conduct of Business Pending Appendix B
the Merger...................... Sections 33-855 to 33-872 of the
Third Party Proposals............... Connecticut General Statutes......B-1
Expenses; Breakup Fee...............
Opinion of Village Bancorp's No person is authorized to give any
Financial Advisor............... information or to make any
Representations and Warranties...... representation not contained in this
Termination and Amendment of proxy statement/ prospectus, and, if
the Merger Agreement............ given or made, that information or
Federal Income Tax Consequences..... representation should not be relied upon
Accounting Treatment................ as having been authorized. This proxy
Resales of Webster Financial's statement/prospectus does not constitute
Common Stock Received in the an offer to sell, or a solicitation of
Merger.......................... an offer to purchase, any of Webster
Dissenters' Appraisal Rights........ Financial's common stock offered by this
Arrangements with and Payments to proxy statement/ prospectus, or the
Village Bancorp Directors, solicitation of a proxy, in any
Executive Officers and Employees jurisdiction in which it is unlawful to
Indemnification..................... make that kind of offer or solicitation.
Option Agreement.................... Neither the delivery of this proxy
statement/prospectus nor any
SELECTED DATA............................ distribution of Webster Financial's
common stock offered pursuant to this
MARKET PRICES AND DIVIDENDS.............. proxy statement/prospectus shall, under
Webster Financial's Common Stock.... any circumstances, create an implication
Village Bancorp's Common Stock...... that there has been no change in the
affairs of Village Bancorp or Webster
DESCRIPTION OF WEBSTER FINANCIAL'S Financial or the information in this
CAPITAL STOCK AND COMPARISON document or the documents or reports
OF SHAREHOLDER RIGHTS............... incorporated by reference into this
Webster Financial's Common Stock.... document since the date of this proxy
Webster Financial's Preferred Stock. statement/prospectus.
Senior Notes........................
Capital Securities..................
</TABLE>
3
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS VILLAGE BANCORP PROPOSING TO MERGE WITH WEBSTER FINANCIAL? HOW WILL
I BENEFIT?
A: In our opinion, the business potential for the combination of Webster
Financial and Village Bancorp exceeds what Village Bancorp could accomplish
individually. We expect that the merger will enhance shareholder value for
all shareholders.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign, date and
return it as soon as possible. If you sign and send in your proxy and do
not indicate how you want to vote, your proxy will be voted in favor of the
merger agreement. If you do not return your proxy card or vote in person at
the shareholder meeting, or if you abstain from voting, you effectively are
voting against the merger agreement. You can choose to attend the
shareholder meeting and vote your shares in person instead of completing
and returning your 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 shareholder meeting by following the directions on
page ___.
Please note that the proxy card is different from the election form which
allows you to choose to receive cash in the merger. To vote on the merger
agreement, you need to follow the instructions above.
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: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: If you want to receive cash for some or all of your Village Bancorp shares,
you should complete an election form and send your Village Bancorp stock
certificates to Webster Financial's exchange agent. If you do not submit an
election form, after the merger takes place, you will receive instructions
on how to exchange your Village Bancorp certificates for Webster Financial
certificates.
Q: WHAT WILL VILLAGE BANCORP SHAREHOLDERS RECEIVE IN THE MERGER?
A: If the merger takes place, each share of Village Bancorp common stock will
be converted at the choice of the shareholder into either $23.50 in cash,
$23.50 worth of Webster Financial's common stock based on a 15 day average
closing market price of Webster Financial's common stock, or a combination
of cash and Webster Financial's common stock. Dissenting shares will be
treated differently. If the 15 day average of Webster Financial's common
stock is greater than $27.50, shares of Village Bancorp's common stock will
be converted into .8545 of a share of Webster Financial's common stock. If
the 15 day average is less than $19.50, shares of Village Bancorp's common
stock will be converted into 1.2051 shares of Webster Financial's common
stock. Furthermore, if the 15 day average is less than $17.55, Village
Bancorp can terminate the merger agreement unless Webster decides to
increase the exchange ratio so that Village Bancorp's shareholders will
receive $21.15 worth of Webster Financial's common stock based on the 15
day average. Webster Financial will pay cash instead of issuing fractional
shares. For information about the limit on the amount of cash that can be
paid in the merger, see page ____.
An election form was sent to you. If you want to receive cash in the merger
in exchange for some or all of the Village
4
<PAGE>
Bancorp shares that you own, you must follow the instructions in the form
and submit a properly completed election form. If you do not submit a
properly completed election form, you effectively are choosing to receive
only Webster Financial's common stock in the merger unless you dissent from
the merger. See pages ____ for more information about completing the
election form.
Q: IF I WANT TO RECEIVE CASH IN THE MERGER, WILL I DEFINITELY RECEIVE CASH?
A: The amount of cash that can be paid is limited. Even if you choose to
receive cash for some or all of your shares of Village Bancorp common
stock, it is possible that you will receive either cash and shares of
Webster Financial's common stock or just Webster Financial's common stock
in exchange for your Village Bancorp shares because of this limitation.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Before the merger takes place, Village Bancorp expects to continue to pay
regular quarterly cash dividends on its common stock, which currently are
$0.09 per share. After the merger, any dividends will be based on what
Webster Financial pays. Webster Financial presently pays dividends at a
quarterly dividend rate of $0.11 per share. An exchange ratio of ___ would
mean an equivalent dividend of $___ per share for Village Bancorp's common
stock.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the merger you should call or write to
Robert V. Macklin, President and Chief Executive Officer, Village Bancorp,
Inc., 25 Prospect Street, P. O. Box 366, Ridgefield, Connecticut 06877,
telephone (203) 438-9551. A copy of the merger agreement including each of
its exhibits and the other documents described in this proxy
statement/prospectus will be provided to you promptly without charge 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.
5
<PAGE>
SUMMARY
The following is a brief summary of some of the information located
elsewhere in this proxy statement/prospectus. BEFORE YOU VOTE, YOU SHOULD GIVE
CAREFUL CONSIDERATION TO ALL OF THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS DOCUMENT.
THE PARTIES (PAGE ___)
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
Webster Financial is a Delaware corporation and the holding company of Webster
Bank, Webster Financial's federal savings bank subsidiary. Both Webster
Financial and Webster Bank are headquartered in Waterbury, Connecticut. Deposits
at Webster Bank are insured by the Federal Deposit Insurance Corporation. At
September 30, 1998, Webster Financial had total consolidated assets of $9.2
billion, total deposits of $5.6 billion, and shareholders' equity of $565.9
million, or 6.2% of total assets.
VILLAGE BANCORP, INC.
25 Prospect Street
Ridgefield, Connecticut 06877
(203) 438-9551
Village Bancorp is a Connecticut corporation and the holding company of The
Village Bank & Trust Company, a Connecticut-chartered commercial bank which is
wholly owned by Village. Both Village Bancorp and Village Bank are headquartered
in Ridgefield, Connecticut. Deposits at Village Bank are insured by the Federal
Deposit Insurance Corporation. At September 30, 1998, Village Bancorp had total
consolidated assets of $230.2 million, total deposits of $210.8 million, and
shareholders' equity of $17.2 million, or 7.48% of total assets.
THE SHAREHOLDER MEETING
(PAGE ___)
A special meeting of Village Bancorp shareholders will be held on ____________
___, 1999, at ____ __.m. at The Village Bank & Trust Company, 25 Prospect
Street, Ridgefield, Connecticut, 06877 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 shareholder
meeting, or any adjournments or postponements of the meeting, including a
motion to adjourn the shareholder meeting to another time and/or place to
solicit additional proxies in favor of the merger agreement and the merger
or otherwise.
THE RECOMMENDATION OF THE VILLAGE BANCORP BOARD TO SHAREHOLDERS (PAGE ___)
The Village Bancorp board of directors unanimously approved the merger agreement
and the merger and unanimously recommends that you vote FOR approval of these
matters.
RECORD DATE; VOTING POWER
(PAGE ___)
You are entitled to vote at the shareholder meeting if you owned shares of
Village Bancorp's common stock on ____________ ___, 1999. You will have one vote
for each share of Village Bancorp's common stock that you owned on that date.
VOTE REQUIRED (PAGE ___)
The affirmative vote of the holders of two-thirds of the issued and outstanding
shares of Village Bancorp's common stock entitled to vote at the shareholder
meeting is required to approve the merger agreement, the merger and the other
transactions contemplated by the merger agreement. Please remember that the vote
required to approve the merger agreement is based on the total number of
outstanding shares, and not on the number of shares which are actually voted.
SHARE OWNERSHIP AND INTERESTS OF VILLAGE BANCORP'S MANAGEMENT AND THEIR
AFFILIATES (PAGE ___)
At the close of business on __, 1999, excluding all options to purchase Village
Bancorp's common stock, the directors and executive officers of Village Bancorp
and their affiliates owned a total of _____ shares of Village
6
<PAGE>
Bancorp's common stock, which was approximately ___% of the outstanding shares
of Village Bancorp's common stock on that date. The directors and executive
officers have agreed to vote their shares in favor of the merger agreement.
You should note that Village Bancorp's directors and executive officers have
interests in the merger as directors and/or employees that are different from,
or in addition to, yours as a Village Bancorp shareholder. These interests are
described at page _____.
REGULATORY APPROVALS (PAGE ___)
For the merger to take place, we need to receive the regulatory approvals of the
Office of Thrift Supervision and the Connecticut Commissioner of Banking. We
also need to receive the approval or waiver of the Board of Governors of the
Federal Reserve System. We will file applications with these regulators soon.
DISSENTERS' RIGHTS (PAGE ___)
Under Connecticut law, you are entitled to dissenters' rights of appraisal in
connection with the merger. If you want to exercise dissenters' rights, you must
follow carefully the procedures described at pages ____ to ____ of this document
and Appendix B.
FEDERAL INCOME TAX CONSEQUENCES (PAGE ___)
In general, you will not recognize gain or loss for federal income tax purposes
as a result of the merger, except if you receive cash.
TAX MATTERS ARE VERY COMPLICATED. YOU SHOULD CONSULT YOUR TAX ADVISOR FOR A FULL
EXPLANATION OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
FAIRNESS OPINION OF VILLAGE BANCORP'S FINANCIAL ADVISOR (PAGE ___)
In deciding to approve the merger, Village Bancorp's board of directors
considered an opinion of Morgan Lewis Githens & Ahn, Inc., Village Bancorp's
financial advisor. The opinion concluded that the proposed consideration to be
received by the holders of Village Bancorp's common stock in the merger is fair
to the shareholders from a financial point of view. An update of this opinion is
attached as Appendix A to this document. WE ENCOURAGE YOU TO READ THIS OPINION
CAREFULLY.
TERMINATION OF THE MERGER AGREEMENT (PAGE ___)
The merger agreement specifies a number of situations when the agreement may be
terminated by Webster Financial or Village Bancorp, which are described on page
__ of this document. One of the instances when Village Bancorp can terminate the
merger agreement is if the 15 day average closing market price that will be used
to determine the exchange ratio is less than $17.55, unless Webster decides to
increase the exchange ratio so that Village Bancorp's shareholders will receive
$21.15 worth of Webster Financial's common stock based on the 15 day average.
OPTION AGREEMENT (PAGE ___)
Village Bancorp and Webster Financial entered into an option agreement in
connection with the merger agreement. Village Bancorp granted Webster Financial
an option to purchase 19.9% of Village Bancorp's common stock. If specific
events occur, which are described in the option agreement Webster can exercise
this option. The option agreement is intended to discourage other parties from
making alternative acquisition-related proposals, even if a proposal of that
kind is for a higher price per share for Village Bancorp's common stock than the
price per share to be paid under the merger agreement.
ACCOUNTING TREATMENT (PAGE ___)
The merger will be accounted for as a purchase transaction for accounting and
financial reporting purposes.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE ___)
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 operations of Webster Financial, Village
Bancorp, Webster Bank, Village Bank, the surviving corporation or the surviving
bank. When we use words like
7
<PAGE>
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 the
future financial results of Webster Financial, Village Bancorp, Webster Bank,
Village Bank, the surviving corporation or the surviving bank 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.
8
<PAGE>
MARKET PRICES OF COMMON STOCK
Webster Financial's common stock is traded on the Nasdaq Stock Market's
National Market Tier under the trading symbol WBST. Village Bancorp's common
stock is traded on the Nasdaq Stock Market's SmallCap Market under the trading
symbol VBNK. The table below presents the per share closing prices of Webster
Financial's common stock and Village Bancorp's common stock on the Nasdaq stock
markets noted above as of the dates specified and the pro forma equivalent
market value of Webster Financial's common stock to be issued for Village
Bancorp's common stock in the merger. November 10, 1998 was the last trading
date prior to announcement of the merger agreement. Village Bancorp's pro forma
equivalent market value was determined by multiplying the respective closing
prices of Webster Financial's common stock by the exchange ratio calculated
based on the average of the daily closing prices per share of Webster
Financial's common stock for the 15 consecutive trading days on which shares of
Webster Financial's common stock were actually traded prior to ________ __,
1999, which is the most recent practicable date prior to the date of this proxy
statement/prospectus. For more information about the exchange ratio, see "THE
MERGER -- Exchange Ratio," and for more information about the stock prices and
dividends of Webster Financial and Village Bancorp, see "MARKET PRICES AND
DIVIDENDS."
<TABLE>
<CAPTION>
Village Bancorp's
Last Reported Sale Price Common Stock
------------------------ Pro Forma
Date Webster Financial's Village Bancorp's Equivalent Market
Common Stock Common Stock Value
------------ ------------ -----
<S> <C> <C> <C>
November 10, 1998....................... $26.50 $21.00 $*
_________ __, 1999...................... * * *
</TABLE>
- ----------
* To be calculated subsequently
Village Bancorp's shareholders are advised to obtain current market
quotations for Webster Financial's common stock. It is expected that the market
price of Webster Financial's common stock will fluctuate between the date of
this proxy statement/prospectus and the date on which the merger takes place. No
assurance can be given as to the market price of Webster Financial's common
stock at the time of the merger.
9
<PAGE>
COMPARATIVE PER SHARE DATA
The table below presents comparative selected historical per share data of
Webster Financial and Village Bancorp, pro forma combined per share data for
Webster Financial and Village Bancorp and equivalent pro forma per share data of
Village Bancorp. The financial data is based on, and should be read in
conjunction with, the historical consolidated financial statements and the notes
to those financial statements of Webster Financial and Village Bancorp. All
financial data presented for Webster Financial prior to December 31, 1997 has
been restated to reflect the financial results of Webster Financial and Eagle
Financial Corp., which was acquired by Webster Financial in April 1998. All per
share data of Webster Financial, Village Bancorp and pro forma are presented on
a diluted basis and have been adjusted retroactively to give effect to stock
dividends. The pro forma data is not necessarily indicative of results which
will be obtained on a combined basis. Village Bancorp equivalent pro forma per
share amounts are calculated by multiplying the pro forma combined amounts by
the exchange ratio calculated based on the average daily closing prices per
share of Webster Financial's common stock for the 15 consecutive trading days on
which shares of Webster Financial's common stock were actually traded prior to
_______ __, 1999, which is the most recent practicable date prior to the date of
this proxy statement/prospectus. See "THE MERGER -- Exchange Ratio."
<TABLE>
<CAPTION>
At or for the Nine
Months Ended At or for the Year
September 30, 1998 Ended December 31, 1997
------------------ -----------------------
<S> <C> <C>
Net Income per diluted Common Share:
Webster Financial -- historical $ 1.27 $ 1.07
Village Bancorp -- historical 0.81 0.61
Pro Forma Combined 1.25 1.05
Village Bancorp
Equivalent Pro Forma * *
Cash Dividends per Common Share:
Webster Financial-- historical 0.32 0.40
Village Bancorp-- historical 0.27 0.36
Pro Forma Combined 0.32 0.40
Village Bancorp
Equivalent Pro Forma * *
Book Value per Common Share:
Webster Financial-- historical 14.91 13.78
Village Bancorp -- historical 8.88 8.32
Pro Forma Combined 14.62 13.50
Village Bancorp
Equivalent Pro Forma * *
</TABLE>
- ----------
* To be calculated subsequently
For more detailed information about the matters discussed in this
summary, you should review the table of contents of this document,
which you can find at page ___.
RECENT DEVELOPMENT
On January 21, 1999, Webster Financial reported a 27% increase in net
operating income to $24.5 million, or $0.64 per diluted share, for the fourth
quarter ended December 31, 1998, compared to $19.3 million, or $0.50 per diluted
share, for the fourth quarter ended December 31, 1997. Net income for the fourth
quarter, which included a net non-recurring $3.2 million income tax charge, was
$21.3 million, compared to $19.3 million for the same period in 1997.
For the full year 1998, Webster Financial reported a 35% increase in net
operating income to a record $86.9 million, or $2.25 per diluted share, compared
to $64.5 million, or $1.68 per diluted share, for the previous year. Net income
for 1998, including acquisition related expenses and non-recurring tax items,
was $70.5 million, or $1.83 per diluted share, compared to net income for 1997
of $41.1 million, or $1.07 per diluted share, including non-recurring items.
Non-recurring items for 1998 consisted of $18.9 million of acquisition related
expenses and provisions and the non-recurring income tax charge of $3.2 million.
Non-recurring items for 1997 consisted of $39.7 million of acquisition related
expenses and provisions.
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SHAREHOLDER MEETING
MATTERS TO BE CONSIDERED AT THE SHAREHOLDER MEETING
This proxy statement/prospectus is first being mailed to the holders of
Village Bancorp's common stock on or about ____________ ___, 1999. It is
accompanied by a proxy card furnished in connection with the solicitation of
proxies by the Village Bancorp board of directors for use at the special meeting
of Village Bancorp's shareholders and an election form that permits you to
indicate that you would like to receive cash in the merger. The shareholder
meeting is scheduled to be held on __________ ___, 1999, at ___ _.m., at The
Village Bank & Trust Company, 25 Prospect Street, Ridgefield, Connecticut,
06877. At the shareholder meeting, the holders of Village Bancorp's common stock
will consider and vote upon: (i) the proposal to approve and adopt the merger
agreement, the merger and the other transactions contemplated by the merger
agreement, and (ii) any other business that properly comes before the
shareholder meeting, or any adjournments or postponements of the meeting,
including, without limitation, a motion to adjourn the shareholder 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 Village Bancorp board of directors has fixed the close of business on
____________ ___, 1999 as the record date for determining the Village Bancorp
shareholders entitled to receive notice of and to vote at the shareholder
meeting. Only holders of record of Village Bancorp's common stock at the close
of business on that day will be entitled to vote at the shareholder meeting or
at any adjournment or postponement of the meeting. At the close of business on
____________ ___, 1999, there were _______________ shares of Village Bancorp's
common stock outstanding that are entitled to vote at the shareholder meeting,
held by approximately ______ shareholders of record. Village Bancorp is not
authorized to issue preferred stock.
Each holder of Village Bancorp's common stock on the record date will be
entitled to one vote for each share held of record upon each matter properly
submitted at the shareholder meeting or at any adjournment or postponement of
the meeting. The presence, in person or by proxy, of the holders of a majority
of Village Bancorp's common stock entitled to vote at the shareholder 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
shareholder 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 two-thirds of the issued and outstanding shares of Village
Bancorp's common stock entitled to be voted at the shareholder meeting,
abstentions and broker non-votes will have the same effect as a vote against the
merger agreement.
If a quorum is not obtained, or if fewer shares of Village Bancorp'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 shareholder
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 shareholder
meeting would be required to approve any adjournment of the shareholder meeting.
If your proxy card is properly executed and received by Village Bancorp in
time to be voted at the shareholder 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.
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The Village Bancorp board of directors is not aware of any matters other
than the proposal to approve the merger agreement and the merger or a proposal
to adjourn or postpone the shareholder meeting as necessary that may properly
come before the shareholder meeting. If any other matters properly come before
the shareholder 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 Village Bancorp board of directors.
The proxy card is different from the election form used to elect to receive
cash in the merger. To vote on the merger agreement, you need to properly
complete the proxy card or attend the shareholder meeting and vote in person.
For information about the election form, see "THE MERGER -- Election Form and
Exchange of Shares."
YOU SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. IF YOU
COMPLETE AN ELECTION FORM, YOU SHOULD FORWARD YOUR VILLAGE BANCORP STOCK
CERTIFICATES TO THE EXCHANGE AGENT. IF YOU DO NOT COMPLETE AN ELECTION FORM, IF
THE MERGER TAKES PLACE, VILLAGE BANCORP STOCK CERTIFICATES SHOULD BE DELIVERED
IN ACCORDANCE WITH INSTRUCTIONS THAT WILL BE SENT TO YOU BY WEBSTER FINANCIAL'S
EXCHANGE AGENT PROMPTLY AFTER THE EFFECTIVE TIME OF THE MERGER.
REQUIRED VOTE; REVOCABILITY OF PROXIES
The affirmative vote of the holders of at least two-thirds of the issued
and outstanding shares of Village Bancorp's common stock entitled to be voted at
the shareholder meeting is required in order to approve and adopt the merger
agreement, the merger of Village Bancorp and Webster Financial and the other
transactions contemplated by the merger agreement.
THE REQUIRED VOTE OF VILLAGE BANCORP'S SHAREHOLDERS IS BASED ON THE TOTAL
NUMBER OF OUTSTANDING SHARES OF VILLAGE BANCORP'S COMMON STOCK AND NOT ON THE
NUMBER OF SHARES WHICH ARE ACTUALLY VOTED. IF YOU DO NOT SUBMIT A PROXY CARD OR
VOTE IN PERSON AT THE SHAREHOLDER MEETING, OR IF YOU ABSTAIN FROM VOTING, YOU
EFFECTIVELY ARE VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
All of the directors and executive officers of Village Bancorp beneficially
owned as of __________ __, 1999, excluding all options to purchase shares of
Village Bancorp common stock, a total of _______________ shares of Village
Bancorp's common stock, which was approximately ___% of the outstanding shares
of Village Bancorp's common stock on that date. All of the directors and
executive officers of Village Bancorp have entered into a stockholder agreement
with Webster Financial, in which they each agreed, among other things, to
transfer restrictions and to vote all shares of Village Bancorp's common stock
that they have the right to vote, whether owned as of the date of the
stockholder agreement or acquired after that date, in favor of the merger
agreement, the merger and the other transactions contemplated by the merger
agreement and against any third party merger proposal. No separate consideration
was paid to any of the directors or executive officers for entering into the
stockholder agreement. Webster Financial required that the stockholder agreement
be executed as a condition to Webster Financial entering into the merger
agreement.
If you submit a proxy card, attending the shareholder meeting will not
automatically revoke your proxy. However, you may revoke a proxy at any time
before it is voted by (i) delivering to Enrico J. Addessi, Secretary of the
board of directors of Village Bancorp, Inc., 25 Prospect Street, P. O. Box 366,
Ridgefield, Connecticut 06877, a written notice of revocation before the
shareholder meeting, (ii) delivering to Village Bancorp a duly executed proxy
bearing a later date before the shareholder meeting, or (iii) attending the
shareholder meeting and voting in person.
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Village Bancorp and Webster Financial 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 two-thirds of the
issued and outstanding shares of Village Bancorp's common stock entitled to
vote. 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
Village Bancorp may solicit proxies for the shareholder 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 Village Bancorp. In addition, Village Bancorp has retained D.F. King & Co.,
Inc., a proxy solicitation firm, to assist in proxy solicitation for the
shareholder meeting. The fee to be paid to that firm is $5,000, plus reasonable
out-of-pocket expenses. The fee will be paid by Webster Financial. Village
Bancorp 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 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, the
option agreement and the stockholder agreement, all of which are incorporated by
reference into this document and the material features of which are described in
this proxy statement/prospectus. A copy of the merger agreement including each
of its exhibits and the other documents described in this proxy
statement/prospectus will be provided to you promptly without charge 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.
THE PARTIES
Webster Financial and Village Bancorp have entered into the merger
agreement. Under the merger agreement, Webster Financial will acquire Village
Bancorp through the merger of Village Bancorp into Webster Financial. The merger
agreement also provides for The Village Bank & Trust Company, which is a wholly
owned subsidiary of Village Bancorp, to merge into Webster Bank, a wholly owned
subsidiary of Webster Financial.
WEBSTER FINANCIAL. Webster Financial is a Delaware corporation and the
holding company of Webster Bank, Webster Financial's federal savings bank
subsidiary. Both Webster Financial and Webster Bank are headquartered in
Waterbury, Connecticut. Webster Financial can be found on the Internet at
http://websterbank.com. Deposits at Webster Bank are insured by the Federal
Deposit Insurance Corporation. Through Webster Bank, Webster Financial currently
serves customers from over 100 banking offices, three commercial banking centers
and more than 174 ATMs located in Hartford, New Haven, Fairfield, Litchfield and
Middlesex Counties in Connecticut, in addition to telephone banking, video
banking and PC banking. Webster Financial's mission is to help individuals,
families and businesses achieve their financial goals. Webster Financial
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 Financial has established a leading
position in the banking and trust and investment services market in Connecticut.
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On November 4, 1998, Webster Financial announced that it had signed a
definitive merger agreement to acquire Maritime Bank & Trust Company. At
September 30, 1998, Maritime had total consolidated assets of $103.7 million,
total deposits of $91.2 million, and stockholders' equity of $7.1 million, or
6.8% of total assets. The Maritime transaction will be accounted for as a
purchase.
At September 30, 1998, Webster Financial had total consolidated assets of
$9.2 billion, total deposits of $5.6 billion, and shareholders' equity of $565.9
million or 6.2% of total assets. Webster Financial's consolidated financial
statements as of September 30, 1998 include Eagle Financial Corp., which was
acquired by Webster Financial on April 15, 1998. At September 30, 1998, Webster
Financial had loans receivable, net of $4.9 billion, which included $3.8 billion
in residential mortgage loans, $386.1 million in commercial real estate loans,
$314.9 million in commercial and industrial loans and $494.5 million in consumer
loans, consisting primarily of home equity loans. At September 30, 1998,
nonaccrual loans and other real estate owned were $35.7 million. At that date,
Webster Financial's allowance for loan losses was $57.0 million, or 192.7% of
nonaccrual loans, and its total allowance for loan and other real estate owned
losses was $57.3 million, or 160.4% of nonaccrual loans and other real estate
owned. For additional information about Webster Financial that is incorporated
by reference into this document, see "WHERE YOU CAN FIND MORE INFORMATION."
Webster Financial, 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.
VILLAGE BANCORP. Village Bancorp is a Connecticut corporation and the
holding company of Village Bank, a Connecticut-chartered commercial bank which
is wholly owned by Village Bancorp. Both Village Bancorp and Village Bank are
headquartered in Ridgefield, Connecticut. Deposits at Village Bank are insured
by the Federal Deposit Insurance Corporation. Village Bancorp is engaged
principally in the business of attracting deposits from the general public and
investing those deposits in residential and real estate loans, and in consumer
and small business loans. Village Bancorp currently serves customers from six
banking offices located in the communities of Ridgefield, Danbury, Wilton,
Westport and New Milford, Connecticut.
At September 30, 1998, Village Bancorp had total consolidated assets of
$230.2 million, total deposits of $210.8 million, and shareholders' equity of
$17.2 million, or 7.48% of total assets. At September 30, 1998, Village Bancorp
had loans receivable, net, of $148.9 million, which included $105.0 million in
residential mortgage loans, $11.2 million in commercial real estate loans, $18.6
million in commercial loans and $15.4 million in home equity credit lines and
consumer installment loans. At September 30, 1998, nonperforming loans were $1.1
million. At that date, Village Bancorp's allowance for loan losses was $1.2
million, or 104.2% of nonperforming loans. For additional information about
Village Bancorp that is incorporated by reference into this document, see "WHERE
YOU CAN FIND MORE INFORMATION."
Village Bancorp, as a bank holding company, is regulated by the Board of
Governors of the Federal Reserve System. Village Bank, as a
Connecticut-chartered commercial bank, is regulated by the Connecticut
Commissioner of Banking and by the Federal Deposit Insurance Corporation.
BACKGROUND OF THE MERGER
The Village Bancorp board of directors and Village Bancorp's management
have focused on enhancing shareholder value over time since the formation of
Village Bancorp as the publicly owned holding company of Village Bank in 1983.
The Village Bancorp board and Village Bancorp's management have periodically
reviewed Village Bancorp's business objectives, strategic alternatives, short-
and long-term profit outlook and return on equity, as well as the liquidity and
market value of Village Bancorp's common stock. The Village Bancorp board
retained Morgan Lewis Githens & Ahn,
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Inc., referred to in this section as Morgan Lewis, a nationally recognized
investment banking firm familiar with Village Bancorp and comparable companies,
to explore strategic alternatives. With the assistance of Morgan Lewis, the
Village Bancorp board considered a number of strategic alternatives available to
Village Bancorp to enhance shareholder value in light of the entry of larger,
regional banks and other non-banking competition into the markets serviced by
Village Bank and the deposit and product competition from these kinds of
entities.
During the summer of 1998, the Village Bancorp board and Village Bancorp's
management met with Morgan Lewis and reviewed Village Bancorp's business,
operations and prospects. Morgan Lewis discussed a number of strategic
alternatives available to Village Bancorp, including the possibility of a
business combination with a community bank similar to Village Bancorp or with a
larger banking institution that was more diversified as to geographic regions
served and product offerings. The Village Bancorp board authorized Morgan Lewis
to contact potential acquirors.
Morgan Lewis compiled a package of relevant materials about Village Bancorp
and distributed the package to potential acquirors identified by Village Bancorp
and Morgan Lewis. Village Bancorp asked four parties who responded to perform
due diligence before submitting final proposals. Upon completion of the due
diligence, including meetings between the senior management of Village Bancorp
and the senior management of each of the four potential acquirors, three of the
parties submitted final proposals.
Following a detailed evaluation of each of these proposals, including a
further review of strategic alternatives available to Village Bancorp and a
review of the Village Bancorp board's fiduciary responsibilities and legal
obligations with Village Bancorp's legal counsel and Morgan Lewis, the Village
Bancorp board authorized Morgan Lewis to pursue negotiations with Webster
Financial regarding a strategic merger. Those negotiations continued through
November 9, 1998, when the Village Bancorp board met to consider the merger
agreement, the merger of Village Bancorp and Webster Financial and the option
agreement. After carefully reviewing the drafts of the merger agreement and the
option agreement and considering a presentation by Morgan Lewis regarding the
fairness of the merger consideration from a financial point of view to Village
Bancorp's shareholders, the Village Bancorp board approved the merger agreement,
the merger and the option agreement.
RECOMMENDATION OF THE VILLAGE BANCORP BOARD OF DIRECTORS AND REASONS FOR THE
MERGER
The Village Bancorp board of directors has approved the merger agreement
and has determined that the merger of Village Bancorp and Webster Financial is
in the best interests of Village Bancorp and its shareholders. THE VILLAGE
BANCORP BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THE MERGER AGREEMENT, THE
MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. In
reaching its decision to approve the merger agreement, the Village Bancorp board
consulted with its financial advisor, Morgan Lewis, and considered the
following:
o The Village Bancorp board's familiarity with, and review of, the
business, financial condition, results of operations and prospects of
Village Bancorp, including, but not limited to, its potential growth,
development, productivity and profitability and the business risks
associated with these considerations;
o Village Bancorp'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;
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o The potential appreciation in market and book value of Village
Bancorp's common stock on both a short-and long-term basis, as a
stand-alone entity;
o The extensive process Village Bancorp and Morgan Lewis used to obtain
acquisition proposals and preliminary bids, and the conclusion that
Webster Financial's bid was more favorable than any other indication
of interest received from the other companies;
o Information concerning Webster Financial's business, financial
condition, results of operations, asset quality and prospects,
including the long-term growth potential of Webster Financial common
stock, the future growth prospects of Webster Financial combined with
Village Bancorp following the merger, the potential synergies expected
from the merger and the business risks associated with the merger;
o The terms of the merger agreement, the option agreement and the
transactions and agreements contemplated by these agreements,
including without limitation, that Webster Financial's offer of
Webster Financial's common stock in exchange for Village Bancorp's
common stock can be effected on a tax-free basis for Village Bancorp's
shareholders and the fact that the provisions of the merger agreement
that allow an adjustment in the exchange ratio provide substantial
protection to Village Bancorp's shareholders if the price of Webster
Financial's common stock declines before the merger takes place;
o The potential for appreciation and growth in the market and book value
of Webster Financial's common stock following the proposed merger;
o Morgan Lewis' presentation to the Village Bancorp board on November 9,
1998 and the opinion of Morgan Lewis that the merger consideration to
be paid pursuant to the merger agreement is fair to Village Bancorp's
shareholders from a financial point of view;
o The advantages and disadvantages of Village Bancorp remaining an
independent institution or affiliating with a larger institution;
o The option agreement, including the possibility that the existence of
the option agreement could discourage third parties from offering to
acquire Village Bancorp by increasing the financial cost of an
acquisition by a third party, and the recognition that Village
Bancorp's entering into the option agreement was a condition to
Webster Financial's willingness to enter into the merger agreement;
o The likelihood of receiving all of the regulatory approvals required
for the merger to take place;
o The short- and long-term interests of Village Bancorp and its
shareholders, the interests of Village Bancorp's employees, customers,
creditors and suppliers, and the interests of the Village Bancorp
community that may benefit from an appropriate affiliation with a
larger institution with increased economies of scale and with a
greater capacity to serve all of the banking needs of the community;
and
o The compatibility with respect to businesses and management
philosophies of Village Bancorp and Webster Financial, and Webster
Financial's strong commitment to the communities it serves.
The discussion in this section of the information and factors considered by
the Village Bancorp board is not intended to be exhaustive but includes all
material factors considered by the
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board. In reaching its determination to approve and recommend the merger, the
Village Bancorp 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 opinion of Morgan Lewis referred to
above, the Village Bancorp board unanimously approved the merger agreement, the
merger, the other transactions contemplated by the merger agreement, and the
option agreement, as being in the best interests of Village Bancorp and its
shareholders.
PURPOSE AND EFFECTS OF THE MERGER
The purpose of the merger is to enable Webster Financial to acquire the
assets and business of Village Bancorp. After the merger, Village Bank's six
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 Village Bank's banking offices in Fairfield and Litchfield
Counties, Connecticut. The assets and business of Village Bank's banking offices
will broaden Webster Financial's existing operations in Fairfield and Litchfield
Counties where Webster Bank currently has nine banking offices. Webster
Financial expects to achieve reductions in the current operating expenses of
Village Bancorp upon the consolidation of Village Bank's operations into Webster
Bank. Upon completion of the merger, except as discussed below, the issued and
outstanding shares of Village Bancorp's common stock automatically will be
converted into cash, shares of Webster Financial's common stock, or a
combination of cash and Webster Financial's common stock. See "-- Exchange
Ratio."
STRUCTURE
The merger will occur through the merger of Village Bancorp into Webster
Financial, with Webster Financial the surviving corporation. When the merger
takes place, except as discussed below, each outstanding share of Village
Bancorp's common stock will be converted into either $23.50 in cash or the
equivalent of $23.50 of Webster Financial's common stock, subject to adjustment,
plus cash to be paid instead of fractional shares. Shares held as treasury stock
or held directly or indirectly by Village Bancorp, Webster Financial or any of
their subsidiaries, other than trust account shares and shares related to a
previously contracted debt, will be canceled. Dissenting shares will not be
automatically converted. See "--Dissenters' Appraisal Rights."
We expect that the merger will take place in the second 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 August 31, 1999, the merger agreement may be terminated unless Village
Bancorp and Webster Financial both agree to extend it.
The merger agreement permits Webster Financial to modify the structure of
the transactions contemplated by and described in the merger agreement so long
as (i) there are no material adverse federal income tax consequences to Village
Bancorp's shareholders from the modification, (ii) the consideration to be paid
to Village Bancorp's shareholders under the merger agreement is not changed or
reduced in amount, and (iii) the modification will not be reasonably likely to
delay materially or jeopardize receipt of any required regulatory approvals.
Webster Financial presently has no intent to modify the structure.
EXCHANGE RATIO
The merger agreement provides that at the effective time of the merger,
except as discussed below, each outstanding share of Village Bancorp's common
stock automatically will be converted into either $23.50 in cash, the equivalent
of $23.50 of Webster Financial's common stock based on a
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15 day average closing market price of Webster Financial's common stock, or a
combination of cash and Webster Financial's common stock. The following
paragraphs describe the limit on the amount of cash that can be paid in the
merger and when the exchange ratio may be adjusted. Shares held as treasury
stock and shares held directly or indirectly by Village Bancorp, Webster
Financial or any of their subsidiaries, other than trust account shares and
shares related to a previously contracted debt, will be canceled. Dissenting
shares will not be converted into the right to receive shares of Webster
Financial's common stock unless and until Village Bancorp shareholders who
dissent fail to perfect or effectively withdraw or lose their right of payment
under applicable law. If dissenting shares lose their right of payment under
applicable law, all of these shares will be converted into the right to receive
Webster Financial's common stock.
An election form was sent to you with this proxy statement/prospectus. If
you want to receive cash in the merger in exchange for some or all of the
Village Bancorp common stock that you own, you must follow the instructions in
the form and submit a properly completed election form. For information about
completing your election form, see the section below captioned "--Election Form
and Exchange of Shares."
IN THE MERGER AGREEMENT, WEBSTER FINANCIAL AND VILLAGE BANCORP AGREED THAT
NO MORE THAN 20% OF THE TOTAL VALUE OF THE MERGER CONSIDERATION COULD BE USED TO
PAY VILLAGE BANCORP SHAREHOLDERS WHO CHOOSE TO RECEIVE CASH INSTEAD OF WEBSTER
FINANCIAL'S COMMON STOCK, TO PAY CASH INSTEAD OF FRACTIONAL SHARES AND TO PAY
ANY DISSENTERS. If too many Village Bancorp shareholders decide that they want
to receive cash instead of Webster Financial's common stock, those shareholders
will receive a prorated amount of cash, and the remainder of the merger
consideration that they are entitled to receive will be paid to them in Webster
Financial's common stock. If the amount of cash paid instead of fractional
shares or to be paid to dissenters exceeds the 20% limit, no cash would be paid
to Village Bancorp shareholders who choose to receive cash instead of Webster
Financial's common stock.
The exchange ratio for the conversion of Village Bancorp's common stock
into Webster Financial's common stock will be determined by dividing $23.50 by a
15 day average closing market price of Webster Financial's common stock,
computed to four decimal places. The 15 day average will be the average of the
daily closing prices per share for Webster Financial's common stock for the 15
consecutive trading days during which Webster Financial's common stock is
actually traded as reported on the Nasdaq Stock Market's National Market Tier
ending on the day before the receipt of the last required federal bank
regulatory approval or waiver required for the merger of Village Bank into
Webster Bank. Nonetheless, if the 15 day average price is greater than $27.50,
the exchange ratio will be 0.8545. If the 15 day average price is less than
$19.50, the exchange ratio will be 1.2051, unless Village Bancorp gives Webster
Financial notice of its intention to terminate the merger agreement because the
15 day average price is less than $17.55. If Village Bancorp takes this action,
Webster Financial can decide that the exchange ratio will be determined by
dividing $21.15 by the 15 day average price, computed to four decimal places,
and the merger agreement will remain in effect.
For example, based on the $____ average of the daily closing prices per
share for Webster Financial's common stock for the 15 consecutive trading days
on which shares of Webster Financial's common stock were actually traded prior
to ____________ ___, 1999, the most recent practicable date prior to the date of
this proxy statement/prospectus, the exchange ratio would be ______. Based on
the ____ shares of Village Bancorp's common stock outstanding on ____________
___, 1999 and an exchange ratio of ______, if none of Village Bancorp's
shareholders receives cash, Webster Financial would issue up to ____________
shares of Webster Financial common stock to Village Bancorp shareholders in the
merger, plus cash instead of fractional shares. These numbers do not reflect the
additional shares of Webster Financial common stock to be issued in the event of
the exercise prior to the merger of the ______ existing options to purchase
___________ shares of Village Bancorp's common stock.
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Because the market price of Webster Financial's common stock is subject to
fluctuation, the exchange ratio may materially increase or decrease prior to the
merger. No assurance can be given as to the market price of Webster Financial's
common stock at the time of the merger. A change in the market price of Webster
Financial's common stock would not alter the obligation of Webster Financial or
Village Bancorp to consummate the merger, except as provided above.
Certificates for fractions of shares of Webster Financial's common stock
will not be issued. Under the merger agreement, instead of a fractional share of
Webster Financial's common stock, a Village Bancorp shareholder will be entitled
to receive an amount of cash equal to (i) the fraction of a share of Webster
Financial's common stock to which the shareholder would otherwise be entitled
multiplied by (ii) the average of the daily closing prices per share for Webster
Financial's common stock for the 15 consecutive trading days on which shares of
Webster Financial's common stock are actually traded as reported on the Nasdaq
Stock Market's National Market Tier ending on the third trading day preceding
the closing date of the merger. After the merger takes place, no holder of
Village Bancorp's common stock will be entitled to any dividends or any other
rights in respect of any fraction. In this document, we use the term purchase
price to refer to the cash, the shares of Webster Financial's common stock and
any cash to be paid instead of a fraction of a share of Webster Financial's
common stock payable to each holder of Village Bancorp's common stock.
The conversion of Village Bancorp's common stock into cash and/or shares of
Webster Financial's common stock at the exchange ratio will occur automatically
upon the merger. Pursuant to the merger agreement, after the effective time of
the merger, Webster Financial will cause its exchange agent to pay the purchase
price to each Village Bancorp shareholder who surrenders the appropriate
documents to the exchange agent.
ELECTION FORM AND EXCHANGE OF SHARES
We have prepared an election form which was sent to you with this proxy
statement/prospectus. You should use the election form to indicate whether you
want to receive cash and/or shares of Webster Financial's common stock in
exchange for the shares of Village Bancorp's common stock that you own. If you
held Village Bancorp common stock on _______ __, 1999, you are eligible to
submit an election form for the shares that you owned at the close of business
on that day. If you have lost your election form, call or write to James R.
Umbarger, Executive Vice President of Village Bancorp, Inc., 25 Prospect Street,
P. O. Box 366, Ridgefield, Connecticut 06877, telephone (203) 438-9551 as soon
as possible so that Village Bancorp can send you a replacement election form.
In the election form, you need to specify the number of shares that you
owned on _______ __, 1999 that you want to be converted into the right to
receive cash in the merger and the number of shares that you owned on that day
that you want to be converted into the right to receive shares of Webster
Financial's common stock in the merger. IF YOU DO NOT SUBMIT A PROPERLY
COMPLETED ELECTION FORM, YOU EFFECTIVELY ARE CHOOSING TO RECEIVE ONLY WEBSTER
FINANCIAL'S COMMON STOCK IN THE MERGER UNLESS YOU DISSENT FROM THE MERGER.
A PROPERLY COMPLETED ELECTION FORM WILL BE EFFECTIVE ONLY IF WEBSTER
FINANCIAL'S EXCHANGE AGENT RECEIVES THE FOLLOWING DOCUMENTS NO LATER THAN 5:00
P.M. NEW YORK CITY TIME ON ________ ___, 1999: (1) your election form, executed
and completed in accordance with the instructions contained in the election form
and (2) your Village Bancorp common stock certificate(s) and the related
letter(s) of transmittal with the endorsements, stock powers and signature
guarantees that may be required by the letter of transmittal or a guarantee of
delivery of the certificate(s) that complies with the requirements in the letter
of transmittal, provided that the certificate(s) are in fact delivered by the
time set forth in the guarantee of delivery.
Once you submit an election form, you can revoke it by delivering one of
the following documents to the exchange agent prior to 5:00 p.m. on _______ __,
1999: (1) a written notice of
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revocation, if you want to revoke completely your previously submitted election
form, or (2) a properly completed revised election form that identifies the
certificate(s) to which the revised election form applies, if you want to change
your previous election but not revoke it completely. If you deliver a revised
election form for any Village Bancorp common stock certificate to the exchange
agent prior to 5:00 p.m. on _______ __, 1999, you will revoke all prior election
forms for all shares evidenced by that certificate. Unless you give the exchange
agent different instructions, if you revoke an election form, the exchange agent
will send you any certificates previously delivered to the exchange agent which
relate to that election form.
If the merger agreement is terminated, all election forms delivered to the
exchange agent will be revoked and the exchange agent will send your Village
Bancorp common stock certificates that were previously sent to the exchange
agent to you.
As soon as practicable after the effective time of the merger, the exchange
agent will mail a letter of transmittal and instructions for use in surrendering
certificates to each shareholder who held Village Bancorp's common stock
immediately before the effective time who did not submit an effective election
form.
Webster Financial will deposit with the exchange agent the cash and
certificates representing the total number of shares of Webster Financial common
stock to be issued to Village Bancorp shareholders in exchange for Village
Bancorp's common stock, along with cash to be paid instead of fractional shares.
The exchange agent will not be obligated to deliver the purchase price to any
shareholder until the holder surrenders the certificate(s) representing shares
of Village Bancorp's common stock for exchange, or, if not available, an
appropriate affidavit of loss and indemnity agreement and/or a bond that may be
required by Webster Financial. No dividends or distributions on Webster
Financial's common stock payable to any Village Bancorp shareholder will be paid
until the shareholder surrenders the certificate(s) representing the shares of
Village Bancorp's common stock for exchange. No interest will be paid or accrued
to Village Bancorp shareholders on cash instead of fractional shares or unpaid
dividends and distributions, if any.
If any certificate representing shares of Webster Financial'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 shall 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 (i) 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 (ii) 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 Village Bancorp's stock transfer books of shares of Village Bancorp'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 Financial's common stock.
Any portion of the purchase price made available to the exchange agent that
remains unclaimed by Village Bancorp shareholders for one year after the
effective time of the merger will be returned to Webster Financial. Any Village
Bancorp shareholder who has not exchanged shares of Village Bancorp's common
stock for the purchase price in accordance with the merger agreement before that
time may look only to Webster Financial for payment of the purchase price for
these shares and any unpaid dividends or distributions after that time.
Nonetheless, Webster Financial, Village Bancorp, the exchange agent or any other
person will not be liable to any Village Bancorp shareholder for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
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STOCK CERTIFICATES FOR SHARES OF VILLAGE BANCORP'S COMMON STOCK SHOULD NOT
BE RETURNED TO VILLAGE BANCORP WITH THE ENCLOSED PROXY CARD. IF YOU WANT TO
RECEIVE CASH FOR SOME OR ALL OF YOUR VILLAGE BANCORP SHARES, YOU SHOULD COMPLETE
AN ELECTION FORM AND SEND YOUR VILLAGE BANCORP STOCK CERTIFICATES TO WEBSTER
FINANCIAL'S EXCHANGE AGENT. IF YOU DO NOT SUBMIT AN ELECTION FORM, AFTER THE
MERGER TAKES PLACE, YOU WILL RECEIVE INSTRUCTIONS ON HOW TO EXCHANGE YOUR
VILLAGE BANCORP CERTIFICATES FOR WEBSTER FINANCIAL CERTIFICATES.
OPTIONS
As of _______ __, 1999, there were outstanding options to purchase _____
shares of Village Bancorp's common stock at an average exercise price of $___
per share. Under the merger agreement, shares of Village Bancorp's common stock
issued prior to when the merger takes place upon the exercise of outstanding
Village Bancorp options will be converted into Webster Financial's common stock
at the exchange ratio. Each Village Bancorp option that is not exercised
immediately prior to the effective time of the merger automatically will be
converted into an option to purchase shares of Webster Financial'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. The duration and other terms of the
Village Bancorp options will otherwise be unchanged.
REGULATORY APPROVALS
For the merger of Webster Financial and Village Bancorp and the merger of
Webster Bank and Village Bank to take place, we must receive approvals of the
Office of Thrift Supervision, referred to in this section as the OTS, and the
Connecticut Commissioner of Banking, and the approval or waiver of the Board of
Governors of the Federal Reserve System. In this section, we refer to these
approvals as the required regulatory approvals. Webster Financial and Village
Bancorp have agreed to use their best efforts to obtain the required regulatory
approvals.
Webster Bank will file with the OTS an application for approval of the
merger of Webster Bank and Village Bank. 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, referred to in
this section 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
Village Bank 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. Village Bank currently has a satisfactory CRA rating from
the Federal Deposit Insurance Corporation. The OTS regulations require
publication of notice and an opportunity for public comment concerning the
applications filed in connection with the bank merger, and authorize the OTS to
hold informal and formal meetings in connection with the applications if the
OTS, after reviewing the applications or other materials, determines it
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 proxy
statement/prospectus, Webster Financial 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 precise length
of the period will be determined by the OTS in consultation with the Department
of Justice. The commencement
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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 will be filed with the Connecticut Commissioner of
Banking in connection with Webster Financial's acquisition of Village Bancorp
and Village 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 Financial 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.
Webster Financial also will request 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.
Webster Financial and Village Bancorp 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 Financial and Village Bancorp are not
required to complete the merger unless the following conditions are satisfied:
(i) the merger agreement is not terminated on or before the effective time of
the merger; (ii) the merger agreement and the merger are approved by the
affirmative vote of the holders of at least two-thirds of the issued and
outstanding shares of Village Bancorp's common stock entitled to vote at the
shareholder meeting; (iii) the Webster Financial common stock to be issued in
the merger is authorized for quotation on the Nasdaq Stock Market's National
Market Tier; (iv) 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 contains a non-customary condition
that Webster Financial reasonably considers to be burdensome or which alters the
benefits for which Webster Financial bargained in the merger agreement; (v) the
registration statement filed with the SEC is effective and is not subject to a
stop order or any threatened stop order; (vi) no injunction preventing the
merger from taking place is in effect and completing the merger continues to be
legal; and (vii) Webster Financial and Village Bancorp receive a favorable tax
opinion from Webster Financial's counsel.
Webster Financial is not required to complete the merger unless the
following additional conditions are satisfied or waived: (i) the representations
and warranties of Village Bancorp 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 Village Bancorp; (ii) Village Bancorp
performs in all material respects all covenants and agreements contained in the
merger agreement to be performed
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by Village Bancorp by the effective time; (iii) Village Bancorp and Village Bank
obtain the consents, approvals or waivers of other persons that are required in
connection with the merger agreement or to permit the succession by the
surviving corporation or the surviving bank under any lease or other agreement,
except where the failure or failures to obtain consents, approvals or waivers
would not have a material adverse effect on the surviving corporation or the
surviving bank; (iv) no proceeding initiated by any governmental entity seeking
an injunction preventing the merger from taking place is pending; and (v)
Webster Financial receives a comfort letter of Village Bancorp's independent
public accountants.
Village Bancorp is not required to complete the merger unless the following
additional conditions are satisfied or waived: (i) the representations and
warranties of Webster Financial 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 Financial; (ii) Webster Financial
performs in all material respects all covenants and agreements contained in the
merger agreement required to be performed by it by the effective time; (iii)
Webster Financial and Webster Bank obtain the consents, approvals or waivers of
other persons that are required in connection with the merger agreement under
any lease or other agreement to which Webster Financial or Webster Bank is a
party or otherwise bound, except where the failure or failures to obtain
consents, approvals or waivers would not have a material adverse effect; and
(iv) no proceeding initiated by any governmental entity seeking an injunction
preventing the merger from taking place is pending.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement contains various restrictions on the operations of
Village Bancorp prior to the effective time of the merger. In general, the
merger agreement obligates Village Bancorp 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 Village Bancorp. The merger agreement prohibits Village
Bancorp from declaring any dividends or other distributions on its capital stock
other than regular quarterly cash dividends on Village Bancorp's common stock
and splitting, combining or reclassifying any of its capital stock. Village
Bancorp may not issue or authorize or propose the issuance of any securities,
other than the issuance of additional shares of Village Bancorp's common stock
upon the exercise or fulfillment of rights or options issued or existing under
Village Bancorp's stock option plan in accordance with their present terms or
the option for 388,466 shares of Village Bancorp's common stock held by Webster
Financial. Village Bancorp generally may not repurchase shares of its capital
stock. Also, under the terms of the merger agreement, Village Bancorp may not
amend its articles of incorporation or bylaws, or change its methods of
accounting in effect at December 31, 1997, except as required by changes in
regulatory or generally accepted accounting principles. The merger agreement
also restricts Village Bancorp from increasing employee or director benefit
arrangements or compensation, other than normal annual increases in pay for
employees consistent with past practices, including the granting of stock
options and entering into any new employment or severance agreements. It also
restricts Village Bancorp from paying any bonuses other than specified types of
bonuses.
THIRD PARTY PROPOSALS
Under the merger agreement, Village Bancorp 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 takeover proposal or hold
substantive discussions or negotiations regarding this kind of proposal. There
is a similar prohibition on providing third parties with information that
relates to this kind of inquiry or proposal, unless the Village Bancorp board of
directors, based on advice of counsel, reasonably determines in the exercise of
its fiduciary duty that this kind of information must be furnished.
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EXPENSES; BREAKUP FEE
The merger agreement generally provides for Webster Financial and Village
Bancorp to pay their own expenses relating to the merger agreement, with Webster
Financial paying the filing and other fees paid to the SEC. However, if the
merger agreement is terminated by Webster Financial or Village Bancorp as a
result of a material breach of a representation, warranty, covenant or other
agreement contained in the merger agreement by the other party, or if Webster
Financial terminates the merger agreement because Village Bancorp (i) fails to
hold the shareholder meeting on a timely basis, (ii) fails to recommend to its
shareholders approval of the merger agreement, (iii) fails to oppose any third
party proposal that is inconsistent with the merger agreement, or (iv) violates
the merger agreement's restriction on discussions and negotiations with third
parties regarding acquisition transactions, the merger agreement provides for
the non-terminating party to pay all reasonable expenses of the terminating
party up to $200,000, plus a breakup fee of $400,000. If the merger agreement is
terminated by Webster Financial because Village Bancorp fails to obtain the
approval of its shareholders necessary to complete the merger, Webster Financial
is entitled to have all of its reasonable expenses up to $200,000 paid by
Village Bancorp. If a specified third party public event occurs prior to the
shareholder meeting and Village Bancorp fails to obtain the approval of its
shareholders, Webster Financial is entitled to have all of its reasonable
expenses up to $200,000, plus a breakup fee of $400,000, paid by Village
Bancorp. Some of the events described in this section that would permit Webster
Financial to terminate the merger agreement also would constitute preliminary
purchase events under the option agreement. The option agreement provides that
if Webster Financial exercises the option for 388,466 shares of Village
Bancorp's common stock granted to Webster Financial by Village Bancorp and sells
option shares to an unaffiliated third party, expenses and any break up fee paid
by Village Bancorp to Webster Financial under the merger agreement could be
refunded partially or fully to Village Bancorp. See "-- Option Agreement."
OPINION OF VILLAGE BANCORP'S FINANCIAL ADVISOR
Pursuant to an April 21, 1998 engagement letter Village Bancorp retained
Morgan Lewis Githens & Ahn, Inc., referred to in this section as Morgan Lewis,
as an independent financial advisor. Morgan Lewis is a nationally recognized
investment banking firm. As part of its investment banking business, Morgan
Lewis is regularly engaged in the valuation of bank and bank holding company
securities in connection with mergers and acquisitions and other corporate
transactions. As Village Bancorp's financial advisor, Morgan Lewis was involved
in the discussions with various financial institutions that resulted in the
negotiations and offer by Webster Financial, which led to the merger agreement.
Village Bancorp's board of directors asked Morgan Lewis, as its financial
advisor, to render its opinion as to the fairness from a financial point of view
of the merger consideration. At the November 9, 1998 meeting at which Village
Bancorp's board approved the merger agreement, Morgan Lewis delivered its oral
opinion to Village Bancorp's board that as of November 9, 1998, the merger
consideration was fair from a financial point of view to Village Bancorp's
shareholders. Morgan Lewis subsequently confirmed its oral opinion in a written
opinion dated November 11, 1998, which was the date when the merger agreement
was executed.
Morgan Lewis has delivered to Village Bancorp's board an updated written
opinion, dated __________ __, 1999 which states that the merger consideration is
fair from a financial point of view to Village Bancorp's shareholders. The
updated fairness opinion describes the procedures followed, assumptions made,
matters considered and qualifications and limitations on the review undertaken
by Morgan Lewis. The updated opinion is attached as Appendix A to this proxy
statement/prospectus and is incorporated by reference into this document. The
description of the Morgan Lewis opinion in this section is qualified in its
entirety by reference to Appendix A. WE URGE VILLAGE BANCORP SHAREHOLDERS TO
READ THE FAIRNESS OPINION IN ITS ENTIRETY IN CONSIDERING THE PROPOSED MERGER.
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The Morgan Lewis fairness opinion was provided to Village Bancorp's board
for its information and is directed only to the fairness from a financial point
of view of the merger consideration. It does not address the underlying business
decision of Village Bancorp to engage in the merger or any other aspect of the
merger. It does not constitute a recommendation to any holder of shares of
Village Bancorp's common stock as to how a shareholder should vote at the
shareholder meeting with respect to the merger agreement or any other matter.
In connection with rendering its opinion, Morgan Lewis performed a variety
of financial analyses. The following is a summary of these analyses, but does
not purport to be a complete description of the analyses. The preparation of a
fairness opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analyses or summary description. Morgan Lewis
believes that its analyses must be considered as a whole and that focusing on
portions of its analyses and factors considered without considering all factors
and analyses could create an incomplete view of the analyses and processes
underlying its opinion.
In performing its analyses, Morgan Lewis made numerous assumptions with
respect to industry performance, business and economic conditions, and various
other matters, many of which cannot be predicted and are beyond the control of
Village Bancorp, Webster Financial and Morgan Lewis. The estimates contained in
the analyses of Morgan Lewis are not necessarily indicative of future results or
values, which may be significantly more or less favorable than the estimates.
Estimates of the values of companies do not purport to be appraisals of or
necessarily reflect the prices at which companies or their securities actually
may be sold. Because these kinds of estimates are inherently subject to
uncertainty, Village Bancorp, Webster Financial and Morgan Lewis do not assume
responsibility for their accuracy.
STOCK TRADING HISTORY. Morgan Lewis reviewed the historical trading prices
and volumes for Village Bancorp's common stock for the one-year period ending
October 10, 1998 and compared these prices to the performance of the Standard
and Poor's Index, as well as a select group of small-cap banks during the same
period.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. Using publicly available
information, Morgan Lewis compared selected financial and market trading
information, including balance sheet composition, asset quality ratios, loan
loss reserve levels, profitability, capital adequacy, dividends and trading
multiples, for Village Bancorp and for a group of publicly traded companies that
Morgan Lewis deemed to be similar to Village Bancorp in some respects. This
group of companies consisted of Cornerstone Bank, First International Bancorp,
Inc., New England Community Bancorp, Inc., NMBT Corporation and NewMil Bancorp,
Inc.
Morgan Lewis also used publicly available information to perform a similar
comparison of selected financial and market trading information for Webster
Financial and for a group of publicly traded companies that Morgan Lewis deemed
to be similar to Webster Financial in some respects. This group of companies
consisted of BankBoston Corporation, Fleet Financial Group, Inc., Greenpoint
Financial Corporation, HUBCO, Inc. and Summit Bancorp.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Morgan Lewis reviewed publicly
available information regarding 32 selected business combinations since
September 1997 in the banking industry. Morgan Lewis reviewed the ratios of
price to last twelve months earnings per share, price to tangible book value,
price to book value, tangible book premium to core deposits, price to total
assets and price to total deposits in each transaction and computed high, low,
mean, and median ratios and premiums for the respective groups of transactions.
These multiples were applied to Village Bancorp's financial information as of
September 30, 1998 and for the fiscal 1998 and 1999 projected periods. Based
upon the median multiples for these transactions, the implied per share value of
Village Bancorp's common stock ranged from approximately $20.65 to approximately
$23.50.
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DISCOUNTED CASH FLOW AND TERMINAL VALUE ANALYSIS. Morgan Lewis also
performed a discounted cash flow analysis which estimated the future stream of
Village Bancorp's cash flow and after-tax dividends, referred to in this section
as free cash flow, under various scenarios, assuming that Village Bancorp
performed in accordance with the earnings forecasts of its management. To
approximate the value of Village Bancorp's common stock at the end of the
five-year period, Morgan Lewis applied price to earnings multiples ranging from
14.5x to 16.5x. The free cash flows and terminal values were then discounted to
present values using different discount rates ranging from 10% to 14% chosen to
reflect different assumptions regarding required rates of return to holders or
prospective buyers of Village Bancorp's common stock. This analysis, assuming
the current dividend payout ratio, indicated an imputed range of values per
share of Village Bancorp's common stock between $21.50 and $23.80. In connection
with its analysis, Morgan Lewis extensively used sensitivity analyses to
illustrate the effects that changes in the underlying assumptions would have on
the resulting present value and discussed these changes with Village Bancorp's
board. These sensitivity analyses included variations with respect to the growth
rate of assets, net interest spread, non-interest income, non-interest expenses
and dividend payout ratio.
PRO FORMA MERGER ANALYSIS. Morgan Lewis performed pro forma merger analyses
that combined Webster Financial's and Village Bancorp's current estimated income
statements and balance sheets based on projections provided by the management of
Webster Financial and Village Bancorp. Assumptions and analyses of the economic
environment, accounting treatment, acquisition adjustments, operating
efficiencies, balance sheet enhancements, and other adjustments were used to
arrive at a base case pro forma analysis to determine the pro forma effect of
the merger on Webster Financial. In analyzing the projections of Webster
Financial's pro forma earnings per share and tangible book value per share,
Morgan Lewis used an exchange ratio of .8545 shares of Webster Financial's
common stock for each share of Village Bancorp's common stock, which is the
ratio that would apply if the 15 day average closing price of Webster
Financial's common stock is greater than $27.50. This analysis indicated that
the merger would be accretive to Webster Financial's earnings per share in each
of the years ended 1999 and 2000, and slightly dilutive to tangible book value
per share for all periods analyzed. Based upon the same assumptions, this
analysis indicated that the merger would be accretive to a Village Bancorp
shareholder's earnings per share and tangible book value per share when compared
to Village Bancorp's stand alone projections. This analysis was based on
estimates of expected cost savings and other consolidation efficiencies to be
achieved following the merger, and numerous other assumptions, including
assumptions with respect to the anticipated expenses and non-recurring charges
to be incurred by Webster Financial in connection with the merger. Village
Bancorp shareholders should be aware that if the merger takes place, actual
results achieved by the combined company will vary from the estimated results
and the variations may be material.
In connection with rendering its opinion, Morgan Lewis reviewed, among
other things: (i) the merger agreement and its exhibits; (ii) the option
agreement; (iii) Webster Financial's audited consolidated financial statements
and management's discussion and analysis of financial condition and results of
operations contained in its Annual Reports on Form 10-K for the three years
ended December 31, 1997; (iv) Village Bancorp's audited consolidated financial
statements and management's discussion and analysis of financial condition and
results of operations contained in its Annual Reports on Form 10-K for the three
fiscal years ended December 31, 1997; (v) Webster Financial's unaudited
consolidated financial statements and management's discussion and analysis of
the financial condition and results of operations contained in its Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998; (vi) Village Bancorp's unaudited consolidated financial
statements and management's discussion and analysis of financial condition and
results of operations contained in its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998; (vii)
particular information provided by Village Bancorp's management including
financial forecasts relating to the business, earnings, cash flow, assets and
prospects of Village Bancorp; (viii) particular information provided by Webster
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Financial's management, including financial forecasts relating to the business,
earnings, cash flow, assets and prospects of Webster Financial; (ix) the views
of Village Bancorp's senior management regarding Village Bancorp's past and
current business operations, results of operations, financial condition and
future prospects; (x) the views of Webster Financial's senior management
regarding Webster Financial's past and current business operations, results of
operations, financial condition, and future prospects; (xi) the publicly
reported historical market price and trading activity for Webster Financial's
common stock and Village Bancorp's common stock, including a comparison of
particular financial and stock market information for Webster Financial and
Village Bancorp with similar publicly available information for other companies
with publicly traded securities; (xii) a comparison of Village Bancorp's results
of operations with those of companies that Morgan Lewis deemed to be reasonably
similar to Village Bancorp; (xiii) a comparison of the proposed financial terms
of the merger with the financial terms of other mergers and acquisitions that
Morgan Lewis deemed to be relevant; and (xiv) other information, financial
studies, analyses and investigations, and financial, economic, and market
criteria as Morgan Lewis considered relevant.
In preparing its opinion, Morgan Lewis relied on the accuracy and
completeness of all the information supplied or otherwise made available to it
by Village Bancorp or Webster Financial, and did not independently verify that
information or make an independent appraisal or evaluation of the assets or
liabilities of Village Bancorp or Webster Financial. With respect to the
financial forecasts furnished by Village Bancorp, Morgan Lewis assumed that they
were reasonably prepared and reflected the best currently available estimates
and judgments of Village Bancorp's management as to the expected future
financial performance of Village Bancorp. Morgan Lewis also assumed that there
has been no material change in Village Bancorp's and Webster Financial's assets,
financial condition, results of operations, business or prospects since the date
of the last financial statements noted above. Morgan Lewis also assumed that the
merger will be free of federal tax to Village Bancorp, Webster Financial and the
Village Bancorp's shareholders except for any cash consideration and any cash
paid instead of fractional shares.
COMPENSATION OF FINANCIAL ADVISOR. Under the Morgan Lewis engagement
letter, Village Bancorp will pay Morgan Lewis a transaction fee related to the
merger, a substantial portion of which is contingent on the merger taking place.
The engagement letter provides that this fee will equal 1 3/4% of the total
consideration paid to Village Bancorp's shareholders in the merger up to $50
million, and 1% of the value of the consideration in excess of $50 million. The
engagement letter provides for an annual retainer fee of $100,000, to be paid
quarterly in advance by Village Bancorp to Morgan Lewis. Village Bancorp also
has agreed to pay Morgan Lewis a fee of $50,000 for rendering the fairness
opinion. The annual retainer fee and the fee for the fairness opinion will be
credited against the fee paid in relation to the merger. Village Bancorp has
agreed to reimburse Morgan Lewis for its reasonable out-of-pocket expenses
related to its engagement and to indemnify Morgan Lewis and its affiliates and
their respective partners, directors, officers, employees, agents, and
controlling persons against specified expenses and liabilities, including
liabilities under securities laws. In the past, Morgan Lewis provided other
investment banking services to Village Bancorp and has received its customary
compensation for those services.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Village Bancorp made representations and
warranties to Webster Financial. The material representations and warranties of
Village Bancorp are the following: (i) the organization and good standing of
Village Bancorp and Village Bank; (ii) insurance of Village Bank's deposit
accounts by the Federal Deposit Insurance Corporation; (iii) capitalization and
subsidiaries; (iv) corporate power and authority; (v) the execution and delivery
of the merger agreement, the bank merger agreement and the option agreement;
(vi) consents and approvals required for the agreements and the merger; (vii)
loan portfolio and reports; (viii) financial statements, exchange act filings
and books and records; (ix) broker's fees; (x) absence of any material adverse
change in Village Bancorp; (xi) legal proceedings; (xii) tax matters; (xiii)
employee benefit plans; (xiv) particular types
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of contracts; (xv) regulatory matters; (xvi) state takeover laws and articles of
incorporation takeover provisions; (xvii) environmental matters; (xviii) loss
reserves; (xix) properties and assets; (xx) insurance matters; (xxi) compliance
with applicable laws; (xxii) loan information; (xxiii) affiliates and the
stockholder agreement; (xxiv) ownership of Webster Financial's common stock;
(xxv) the Village Bancorp rights agreement; (xxvi) receipt of the fairness
opinion of Morgan Lewis Githens & Ahn, Inc.; (xxvii) Year 2000 compliance; and
(xviii) intellectual property.
In the merger agreement, Webster Financial made representations and
warranties to Village Bancorp. The material representations and warranties of
Webster Financial are the following: (i) the organization and good standing of
Webster Financial and the chartering of Webster Bank; (ii) capitalization; (iii)
corporate power and authority; (iv) the execution and delivery of the merger
agreement, the bank merger agreement and the option agreement; (v) consents and
approvals required for the agreements and the merger; (vi) reports; (vii)
financial statements, exchange act filings and books and records; (viii) absence
of any material adverse change in Webster Financial; (ix) legal proceedings; (x)
tax matters; (xi) employee benefit plans; (xii) compliance with applicable laws;
(xiii) regulatory matters; and (xiv) Year 2000 compliance.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
The merger agreement may be terminated by Webster Financial or Village
Bancorp as long as the terminating party is not in violation of the merger
agreement as summarized below:
o by mutual written consent of Webster Financial and Village
Bancorp;
o by Webster Financial or Village Bancorp if (a) 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; (b) the merger has not taken place on or
before August 31, 1999; or (c) Village Bancorp's shareholders do
not approve the merger agreement;
o by Webster Financial, if there is a breach of any representation,
warranty, covenant or agreement in the merger agreement by
Village Bancorp, if the breach or breaches would have a material
adverse effect on Village Bancorp and the breach is not cured
within 30 days after receiving notice of the breach;
o by Village Bancorp, if there is a breach of any representation,
warranty, covenant or agreement in the merger agreement by
Webster Financial, if the breach or breaches would have a
material adverse effect on Webster Financial and the breach is
not cured within 30 days after receiving notice of the breach;
o by Webster Financial, if Village Bancorp or its board of
directors (a) fails to hold the shareholder meeting on a timely
basis; (b) fails to recommend to Village Bancorp's shareholders
approval of the merger agreement and the merger; (c) fails to
oppose any third party proposal that is inconsistent with the
merger agreement; or (d) violates the merger agreement's
restriction on inquiries, discussions, negotiations and providing
information to third parties regarding acquisition transactions;
and
o by Village Bancorp, if the average closing market price for a
specified 15 day period is less than $17.55 unless Webster
Financial decides that the exchange
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ratio will be adjusted to equal the number obtained by dividing
$21.15 by the 15 day average trading price, rounded to four
decimal places.
The merger agreement also permits, subject to applicable law, the boards of
directors of Webster Financial and Village Bancorp to: (i) amend the merger
agreement except as provided below; (ii) extend the time for performance of any
of the obligations or other acts of the other party; (iii) waive any
inaccuracies in the representations and warranties contained in the merger
agreement or in any document delivered under the merger agreement; or (iv) waive
compliance with any of the agreements or conditions contained in the merger
agreement. After approval of the merger agreement by Village Bancorp'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 Village Bancorp's shareholders under the
merger agreement.
FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material federal income tax
consequences of the merger. 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 proxy statement/prospectus. 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 Village Bancorp's common stock hold their shares as a capital asset.
The summary does not address the tax consequences that may be applicable to
particular Village Bancorp shareholders in light of their individual
circumstances or to Village Bancorp shareholders who are subject to special tax
rules, like tax-exempt organizations, dealers in securities, financial
institutions, insurance companies, non-United States persons, shareholders who
acquired shares of Village Bancorp's common stock pursuant to the exercise of
options or otherwise as compensation or through a qualified retirement plan and
shareholders who hold shares of Village Bancorp's common stock as part of a
straddle, hedge, or conversion transaction. This summary also does not address
any consequences arising under the tax laws of any state, locality, or foreign
jurisdiction.
One of the conditions for the merger to take place is that Webster
Financial and Village Bancorp must receive an opinion from Hogan & Hartson
L.L.P., Webster Financial's special counsel, that the merger will be treated for
federal income tax purposes as a tax-free reorganization within the meaning of
Section 368(a) of the Code. The opinion of Hogan & Hartson L.L.P. 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 representations to be
provided to Hogan & Hartson L.L.P. by Webster Financial and Village Bancorp that
relate to the satisfaction of specific requirements to a reorganization within
the meaning of Section 368(a) of the Code, including limitations on repurchases
by Webster Financial of shares of Webster Financial's common stock to be issued
upon the merger. 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 opinion or that these positions
will be upheld by the courts if challenged by the Internal Revenue Service. If
this opinion is not received, or if the material tax consequences described in
the opinion materially differ from the consequences stated below, we will not
close the merger unless Village Bancorp resolicits shareholders.
If, as concluded in the opinion of counsel, the merger qualifies as a
tax-free reorganization within the meaning of Section 368(a) of the Code, then:
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(1) Except as discussed in (6) below with respect to cash received in
lieu of fractional shares, a Village Bancorp shareholder who
exchanges his or her Village Bancorp common stock solely for
Webster Financial's common stock pursuant to the merger will
recognize no gain or loss on the exchange.
(2) A Village Bancorp shareholder who exchanges his or her Village
Bancorp common stock solely for cash, whether pursuant to an
election to receive cash in the exchange or pursuant to the
exercise of dissenters' rights, will recognize either gain, loss
or ordinary income on the difference between the shareholder's
adjusted basis in his or her Village Bancorp common stock and the
amount of cash received. Because the classification of the amount
recognized as either gain, loss or ordinary income can vary
between shareholders, Village Bancorp shareholders should consult
their own tax advisors to determine the specific tax consequences
to them.
(3) A Village Bancorp shareholder who exchanges his or her Village
Bancorp common stock for a combination of Webster Financial
common stock and cash (i) will not recognize any loss on the
exchange and (ii) will recognize either gain or ordinary income
to the extent of the lesser of the amount of cash received and
the excess of the fair market value of the Webster Financial
common stock and cash received over the Village Bancorp
shareholder's tax basis in the Village Bancorp common stock
surrendered. Because the classification of the amount recognized
as either gain or ordinary income can vary between shareholders,
Village Bancorp shareholders should consult their own tax
advisors to determine the specific tax consequences to them.
(4) The aggregate tax basis of Webster Financial's common stock
received by a Village Bancorp shareholder in the merger will be
the same as the shareholder's aggregate tax basis in Village
Bancorp's common stock surrendered in exchange therefor reduced
by the amount of cash received, if any, and increased by the
amount of gain recognized, if any.
(5) The holding period of Webster Financial's common stock received
by a Village Bancorp shareholder in the merger will include the
holding period of Village Bancorp's common stock surrendered in
exchange therefor, assuming Village Bancorp's common stock was
held as a capital asset.
(6) The receipt by a Village Bancorp shareholder of cash instead of
fractional shares of Webster Financial's common stock will be
treated as if the fractional shares were distributed as part of
the merger and then were redeemed by Webster Financial. These
cash payments will be treated as distributions in full payment in
exchange for the stock redeemed, subject to the conditions and
limitations of Section 302 of the Code.
(7) None of Webster Financial, Webster Bank, Village Bancorp nor
Village Bank will recognize any gain or loss as a result of the
merger.
Unless an exemption applies, the exchange agent will be required to
withhold, and will withhold, 31% of any cash payments to which a Village Bancorp
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
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backup withholding, unless an applicable exemption exists and is proved in a
manner satisfactory to Webster Financial and the exchange agent.
The federal income tax consequences set forth above are based upon present
law, are for general information only and do not purport to be a complete
analysis or listing of all potential tax effects which may apply to a holder of
Village Bancorp's common stock. The tax effects that are applicable to a
particular holder of Village Bancorp's common stock may be different from the
tax effects that are applicable to other holders of Village Bancorp's common
stock, including the application and effect of state, local and other tax laws,
and thus, holders of Village Bancorp's common stock are urged to consult their
own tax advisors.
As described above in the section titled "-- Options," holders of options
to purchase Village Bancorp's common stock that are outstanding at the effective
time of the merger will have their Village Bancorp options converted into
options to purchase shares of Webster Financial's common stock. The assumption
of the options by Webster Financial should not be a taxable event and former
holders of Village Bancorp options who hold options to purchase Webster
Financial's common stock after the merger should be subject to the same federal
income tax treatment upon exercise of those options as would have applied if
they had exercised their Village Bancorp options.
Holders of Village Bancorp options are urged to consult their own tax
advisors as to the specific tax consequences to them of the merger, including
tax return reporting requirements, available elections, the applicability and
effect of federal, state, local and other applicable tax laws, and the effect of
any proposed changes in the tax laws.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase transaction for accounting
and financial reporting purposes.
RESALES OF WEBSTER FINANCIAL'S COMMON STOCK RECEIVED IN THE MERGER
Webster Financial is registering the sale of the shares of its common stock
to be issued in the merger under the Securities Act of 1933. The shares will be
freely transferable under the Securities Act, except for shares received by
Village Bancorp shareholders who are deemed to be affiliates of Village Bancorp
before the merger or affiliates of Webster Financial. These affiliates may only
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 proxy statement/prospectus does not cover any resales of Webster
Financial's common stock by Webster Financial or Village Bancorp affiliates.
Affiliates will generally include individuals or entities who control, are
controlled by or are under common control with Village Bancorp or Webster
Financial, and may include officers or directors, as well as principal
shareholders of Village Bancorp or Webster Financial.
DISSENTERS' APPRAISAL RIGHTS
Under Section 33-856 of the Connecticut General Statutes, when shareholder
approval is required for a merger under Section 33-817 of the Connecticut
General Statutes, a shareholder who dissents from the merger is entitled to
assert dissenters' rights under Sections 33-855 to 33-872 of the Connecticut
General Statutes. In this section, we use the term, dissenters' rights to refer
to the rights set forth in those sections of the Connecticut General Statutes.
Because shareholder approval is required for the merger of Webster Financial and
Village Bancorp under Section 33-817, you are entitled to dissent from the
merger. In accordance with Sections 33-855 through 33-872, if the merger takes
place, Village Bancorp shareholders who do not vote in favor of the merger will
have
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the right to demand the purchase of their shares at their fair value, which
means the value of the shares immediately before the merger takes place,
excluding any increase or decrease in value in anticipation of the merger, if
they fully comply with the provisions of Sections 33-855 to 33-872 of the
Connecticut General Statutes.
This section presents a brief summary of the procedures set forth in
Sections 33-855 to 33-872 which must be followed by holders of shares of Village
Bancorp's common stock who wish to dissent from the merger and demand the
purchase of their shares at their fair value. This summary is qualified in its
entirety by reference to Sections 33-855 to 33-872. A complete text of these
sections is attached to this proxy statement/prospectus as Appendix B.
Dissenting shareholders are advised to seek independent counsel concerning
exercising their dissenters' rights. This proxy statement/prospectus constitutes
notice to holders of shares of Village Bancorp's common stock concerning the
availability of dissenters' rights under Sections 33-855 to 33-872 of the
Connecticut General Statutes.
Dissenting shareholders must satisfy all of the conditions of Sections
33-855 to 33-872. Before the vote on the adoption of the merger agreement occurs
at the shareholder meeting, each dissenting shareholder must give written notice
to the Secretary of Village Bancorp of the shareholder's intent to demand
payment for his shares if the merger takes place. This notice must be in
addition to and separate from any abstention or any vote, in person or by proxy,
cast against approval of the merger.
NEITHER VOTING AGAINST, ABSTAINING FROM VOTING, OR FAILING TO VOTE ON THE
ADOPTION OF THE MERGER AGREEMENT WILL CONSTITUTE NOTICE OF INTENT TO DEMAND
PAYMENT OR DEMAND FOR PAYMENT OF FAIR VALUE WITHIN THE MEANING OF SECTIONS
33-855 TO 33-872.
A dissenting shareholder may NOT vote for approval of the merger agreement.
If a Village Bancorp shareholder returns a signed proxy but does not specify in
the proxy a vote AGAINST adoption of the merger agreement or an instruction to
abstain, the proxy will be voted FOR adoption of the merger agreement, which
will have the effect of waiving the rights of that Village Bancorp shareholder
to have his shares purchased at fair value. Abstaining from voting or voting
against the adoption of the merger agreement will NOT constitute a waiver of a
shareholder's rights.
After the vote is taken at the shareholder meeting, if the merger is
approved, no later than 10 days after the merger takes place, a dissenters'
notice will be sent to each dissenting shareholder who has given the written
notice described above and did not vote in favor of the merger. The dissenters'
notice will state the results of the vote on the merger agreement, where the
payment demand must be sent, where and when certificates for certificated shares
must be deposited. It will set a date, not fewer than thirty nor more than sixty
days after delivery of the notice, by which the payment demand must be received
from the dissenting shareholder. The notice will include a form for demanding
payment that will require the dissenting shareholder to certify whether or not
the shareholder acquired beneficial ownership of the shares before November 11,
1998. PLEASE NOTE THAT SHARES ACQUIRED AFTER NOVEMBER 11, 1998, REFERRED TO IN
THIS SECTION AS AFTER ACQUIRED SHARES, MAY BE SUBJECT TO DIFFERENT TREATMENT IN
ACCORDANCE WITH SECTION 33-867 OF THE CONNECTICUT GENERAL STATUTES THAN SHARES
ACQUIRED BEFORE THAT DATE. The dissenters' notice also will include a copy of
Sections 33-855 to 33-872 of the Connecticut General Statutes. A dissenting
shareholder who receives a dissenters' notice must comply with the terms of the
notice. A dissenting shareholder who does so by demanding payment, depositing
his certificates in accordance with the terms of the notice and certifying that
beneficial ownership was acquired before November 11, 1998 will retain all other
rights of a shareholder until these rights are canceled or modified by the
merger. A dissenting shareholder who receives a dissenters' notice and does not
comply with the terms of the notice is not entitled to payment for his shares
under Sections 33-855 to 33-872 of the Connecticut General Statutes.
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Dissenters' rights under Sections 33-855 through 33-872 may be asserted
either by a beneficial shareholder or a record shareholder. A record shareholder
may assert dissenters' rights as to fewer than every share registered in his
name only if he dissents with respect to all shares beneficially owned by any
one person. A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if he submits the record shareholder's written consent
before or at the time he asserts dissenters' rights and he does so for all
shares that he beneficially owns or over which he has the power to direct the
vote.
After the merger takes place, or upon receipt of a payment demand, Webster
Financial will pay each dissenting shareholder who complied with the terms of
the dissenters' notice the amount Webster Financial estimates to be the fair
value of the shares, plus accrued interest. Within 30 days of payment, if a
dissenting shareholder believes that the amount paid is less than the fair value
of the shares or that the interest due is incorrectly calculated, the
shareholder may notify Webster Financial in writing of his own estimate of the
fair value of the shares and interest due. If this kind of claim is made by a
dissenting shareholder, and it cannot be settled, Webster Financial will
petition the court to determine the fair value of the shares and accrued
interest within 60 days after receiving the payment demand.
The costs and expenses of a court proceeding will be determined by the
court and generally are to be assessed against Webster Financial, but these
costs and expenses may be assessed as the court deems equitable against any or
all dissenting shareholders who are parties to the proceeding if the court finds
the action of the dissenting shareholders in failing to accept Webster
Financial's offer was arbitrary, vexatious or not in good faith. These expenses
may include the fees and expenses of counsel and experts employed by the
respective parties.
All written notices of intent to demand payment of fair value should be
sent or delivered to Enrico J. Addessi, Secretary of Village Bancorp, Inc., 25
Prospect Street, P. O. Box 366, Ridgefield, Connecticut 06877. Village Bancorp
suggests that shareholders use registered or certified mail, return receipt
requested, for this purpose.
HOLDERS OF SHARES OF VILLAGE BANCORP'S COMMON STOCK CONSIDERING DEMANDING
THE PURCHASE OF THEIR SHARES AT FAIR VALUE SHOULD KEEP IN MIND THAT THE FAIR
VALUE OF THEIR SHARES DETERMINED UNDER SECTIONS 33-855 TO 33-872 COULD BE MORE,
THE SAME, OR LESS THAN THE MERGER CONSIDERATION THEY ARE ENTITLED TO RECEIVE
PURSUANT TO THE MERGER AGREEMENT IF THEY DO NOT DEMAND THE PURCHASE OF THEIR
SHARES AT FAIR VALUE. ALSO, SHAREHOLDERS SHOULD CONSIDER THE FEDERAL INCOME TAX
CONSEQUENCES OF EXERCISING DISSENTERS' APPRAISAL RIGHTS.
THIS SUMMARY IS NOT A COMPLETE STATEMENT OF THE PROVISIONS OF THE
CONNECTICUT GENERAL STATUTES RELATING TO THE RIGHTS OF DISSENTING HOLDERS OF
SHARES OF VILLAGE BANCORP'S COMMON STOCK AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SECTIONS 33-855 THROUGH 33-872 OF THE CONNECTICUT GENERAL STATUTES,
WHICH ARE ATTACHED AS APPENDIX B TO THIS DOCUMENT. HOLDERS OF SHARES OF VILLAGE
BANCORP'S COMMON STOCK INTENDING TO DEMAND THE PURCHASE OF THEIR SHARES AT FAIR
VALUE ARE URGED TO REVIEW APPENDIX B CAREFULLY AND TO CONSULT WITH LEGAL COUNSEL
SO AS TO BE IN STRICT COMPLIANCE WITH THE REQUIREMENTS FOR EXERCISING
DISSENTERS' RIGHTS.
ARRANGEMENTS WITH AND PAYMENTS TO VILLAGE BANCORP DIRECTORS, EXECUTIVE OFFICERS
AND EMPLOYEES
The non-employee directors of Village Bancorp serving immediately prior to
the effective time of the merger will be invited to serve on an advisory board
to Webster Bank after the merger for a period of 24 months. These advisory
directors each will be paid for their service for the 24 month period up to
$16,000 based on an annual retainer of $4,000 per year, payable in quarterly
installments, and quarterly meeting attendance fees of $1,000 for each meeting
attended in person.
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The Chairman of the board of Village Bancorp, Edward J. Hannafin, will be
invited to serve as chairman of the advisory board and will be paid for his
service up to an additional $4,000, based on a quarterly retainer of $500.
Webster Financial has agreed to honor existing written deferred
compensation, employment, change of control and severance contracts with
directors and employees of Village Bancorp and Village Bank to the extent that
these contracts do not provide for any payments that are not deductible or that
constitute parachute payments under the Internal Revenue Code of 1986, as
amended, referred to in this section as the Code.
Village Bank has entered into agreements with five executives providing for
payments following a termination of employment or specified other events, after
a change in control occurs. The five executives who are covered by these
agreements are Village Bank's President and Chief Executive Officer, Robert V.
Macklin, its Executive Vice President and Chief Operating Officer, James R.
Umbarger, Jr., its Vice President and Senior Trust Officer, Kenneth M. Griffin
and Senior Vice Presidents George W. Hermann and Gerard P. Shpunt.
Under amendments to the agreements with Messrs. Macklin and Umbarger dated
July 11, 1997, Village Bank will be obligated to pay to each executive or his
estate, in the event of his death, an aggregate amount equal to 2.99 times the
average annual salary of the executive for the five most recent calendar years
including the current year if the executive's employment terminates for any
reason, including death, disability and voluntary or involuntary termination,
within one year after a change in control. The term change of control is defined
in the agreement. The payments will be made in installments over a two-year
period, starting on the termination date. If the employment of Mr. Macklin or
Mr. Umbarger terminates for any reason during the second year following a change
in control, Village Bank will be required to pay the terminated executive or his
estate an aggregate amount equal to 1.99 times his average annual salary, over a
one-year period beginning on the termination date. In addition, while payments
are being made to the executive under the agreement, Village Bank will be
required to continue to pay for and provide to the executive insurance and
medical plans available to Village Bank's employees. Similar provisions apply in
the event that the annual salary of Mr. Macklin or Mr. Umbarger is reduced after
a change in control. However, the agreements provide that the aggregate present
value of all payments in the nature of compensation to either executive that are
contingent on a change in control may not exceed 2.99 times the executive's base
amount, as defined for purposes of section 280G of the Code that relates to
parachute payments.
Under the agreements with Messrs. Griffin, Hermann and Shpunt, following
(i) an involuntary termination of employment without cause, as defined in the
agreements, or (ii) a relocation outside a 60-mile radius from Village Bank's
Ridgefield, Connecticut office of the executive's place of employment within one
year after a change in control, as defined in the agreements, Village Bank will
be obligated to pay the terminated or relocated executive an aggregate amount
equal to the executive's average annual salary for the current and two most
recent calendar years. Payments will be made in installments over a one-year
period, and Village Bank will be obligated to pay for and provide the executive
during that period insurance and medical plans available to its employees.
Similar provisions will apply in the event that the salary of the executive is
reduced after a change in control.
The merger of Village Bank and Webster Bank will constitute a change in
control for purposes of the agreements described above.
In addition, each director, officer and other employee of Village Bancorp
or Village Bank who has at least three years of service and whose employment or
service is terminated in relation to the merger will receive severance payments.
In the case of an officer or employee, the total amount payable will be equal to
the product of (i) his or her full and partial years of service multiplied by
(ii)
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three weeks salary and (iii) a percentage factor equal to 10% times his or her
years of employment up to 10 years. Each director will receive payments equal in
total to the product of (i) the average annual director fees he or she received
for the past two years multiplied by (ii) his or her years of service and (iii)
a percentage factor equal to 10% times his or her years of service up to 10
years. The severance amounts will be paid weekly to employees and monthly to
directors, on the date the salary or director fee is normally paid. The
aggregate present value of all payments in the nature of compensation including
severance that are made to a director, officer or employee and that are
contingent on a change of control may not exceed 2.99 times the base amount of
the director, officer or employee. The term base amount is defined in section
280G of the Code. On this basis, if the merger takes place the severance amounts
to be paid to the directors of Village Bancorp would be approximately as
follows: Mr. Addessi, $40,182; Mr. Boa, $36,390; Mr. Carey, $57,571; Ms. Cook,
$26,258; Mr. DiNapoli, $48,044; Mr. Hannafin, $97,066; Mr. Knapp, $20,536; Mr.
Lecher, $39,115; Mr. Resendes, $26,727; Mr. Reynolds, $33,325; and Mr. Scala,
$53,494.
For Messrs. Macklin, Umbarger, Griffin, Hermann and Shpunt, the total
combined amounts payable under the agreements discussed above and the Village
Bancorp severance policy would be approximately as follows: for Mr. Macklin,
$540,279; for Mr. Umbarger, $401,771; for Mr. Griffin, $95,000; for Mr. Hermann,
$85,418; and for Mr. Shpunt, $77,549.
Webster Bank will offer a position of at-will employment to each
non-officer or non-managerial branch office personnel of Village Bank in good
standing at the effective time of the merger at his or her existing branch
location or within 20 miles of the employee's place of employment as of the
effective time. Village Bank employees who become employees of Webster Bank at
the effective time will be given credit for service at Village Bank for
eligibility and vesting purposes under the 401(k) and employee stock ownership
plans of Webster Bank, but not the defined benefit pension plan. Webster Bank
will use its reasonable best efforts in connection with reviewing applicants for
employment positions to give Village Bank employees who are not offered
positions at the effective time the same consideration that is given to Webster
Financial or Webster Bank employees for these kinds of positions in accordance
with existing policies and will provide outplacement assistance and severance as
described above to employees of Village Bank who are not offered positions at
the effective time.
INDEMNIFICATION
In the merger agreement, Webster Financial 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 Village Bancorp to the
fullest extent permitted under applicable law and Webster Financial's restated
certificate of incorporation and bylaws or the federal stock charter and by-laws
of Webster Bank, with respect to any claims made against the person because he
or she is or was a director, officer or employee of Village Bancorp or in
connection with the merger agreement. Webster Financial also agreed to use
commercially reasonable efforts to cover the officers and directors of Village
Bancorp under a directors' and officers' liability insurance policy for a total
premium cost of not more than $141,000 for a period of at least two years after
the effective time.
OPTION AGREEMENT
As a condition of and inducement to Webster Financial's entering into the
merger agreement, Webster Financial and Village Bancorp entered into the option
agreement immediately after the execution of the merger agreement. Pursuant to
the option agreement, Village Bancorp granted Webster Financial an option,
referred to in this section as the Village Bancorp option, which entitles
Webster Financial to purchase, subject to the terms of the option agreement, up
to 388,466 fully paid and nonassessable shares of Village Bancorp's common
stock, or approximately 19.99% of the shares of Village Bancorp's common stock
then outstanding, under the circumstances described below, at a price per share
of $20.00, which price is subject to adjustment. The Village Bancorp option is
35
<PAGE>
intended to discourage the making of alternative acquisition-related proposals
and, under specified circumstances, to significantly increase the cost to a
potential third party of acquiring Village Bancorp compared to its cost had
Village Bancorp not entered into the option agreement. Therefore, the Village
Bancorp option is likely to discourage third parties from proposing a competing
offer to acquire Village Bancorp even if the offer involves a higher price per
share for Village Bancorp's common stock than the per share consideration to be
paid pursuant to 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 proxy statement/prospectus,
will be provided to you without charge 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.
Subject to applicable law and regulatory restrictions, Webster Financial
may exercise the Village Bancorp option, in whole or in part, following the
occurrence of a purchase event as defined below, provided that the Village
Bancorp option is not terminated first upon the occurrence of an exercise
termination event, as defined below. Purchase event means, in substance, either
(a) the acquisition by any third party of beneficial ownership of 25% or more of
the outstanding Village Bancorp common stock, (b) the entry by Village Bancorp,
without the prior written consent of Webster Financial, into a letter of intent
or definitive agreement to engage in an acquisition transaction, as defined
below, with any third party, except that the percentage referred to in clause
(iii) of the definition of acquisition transaction shall be 25%, or (c) the
recommendation by Village Bancorp's board of directors that its shareholders
approve or accept any acquisition transaction, as defined below, with any third
party, except that the percentage referred to in clause (iii) of the definition
below of acquisition transaction shall be 25%.
For purposes of the option agreement, the term acquisition transaction
means (i) a merger, consolidation or other business combination involving
Village Bancorp, (ii) a purchase, lease or other acquisition of all or
substantially all of the assets and/or liabilities of Village Bancorp, or (iii)
a purchase or other acquisition, including through merger, consolidation, share
exchange or otherwise, of beneficial ownership of securities representing 10% or
more of the voting power of Village Bancorp.
The option agreement defines an exercise termination event to mean the
earliest to occur of the following events: (i) the time immediately prior to the
effective time of the merger; (ii) 12 months after the first occurrence of a
purchase event; (iii) 12 months after the termination of the merger agreement
following the occurrence of a preliminary purchase event as defined below,
unless clause (vii) of this paragraph is applicable; (iv) upon the termination
of the merger agreement, prior to the occurrence of a purchase event or
preliminary purchase event, (A) by both parties, if the merger agreement is
terminated by mutual written consent; (B) by either Webster Financial or Village
Bancorp, if the merger agreement has been terminated as a result of regulatory
denial or requested withdrawal of a regulatory application, or if the merger has
not occurred by August 31, 1999; or (C) by Village Bancorp, if the merger
agreement is terminated as a result of a material breach of any representation,
warranty, covenant or other agreement by Webster Financial; (v) 12 months after
the termination of the merger agreement, if the Village Bancorp shareholders
have failed to approve the merger agreement; (vi) 12 months after the
termination of the merger agreement by Webster Financial as a result of a
material breach of any representation, warranty, covenant or other agreement by
Village Bancorp, if the breach was not willful or intentional by Village
Bancorp; or (vii) 24 months after the termination of the merger agreement by
Webster Financial as a result of a willful or intentional material breach of any
representation, warranty, covenant or agreement by Village Bancorp.
The option agreement defines preliminary purchase event to include (i)
Village Bancorp's entry, without the prior written consent of Webster Financial,
into a letter of intent or definitive
36
<PAGE>
agreement to engage in an acquisition transaction with any third party, or the
recommendation by Village Bancorp's board of directors that its shareholders
approve or accept any acquisition transaction with any third party; (ii) an
acquisition by any third party of beneficial ownership of 10% or more of the
outstanding shares of Village Bancorp's common stock; (iii) the making of a bona
fide proposal for an acquisition transaction by any third party to Village
Bancorp, or a public announcement or written communication that is publicly
disclosed to Village Bancorp's shareholders as to any third party proposing to
engage in an acquisition transaction and Village Bancorp's shareholders do not
approve the merger; (iv) a willful or intentional breach by Village Bancorp of
any representation, warranty, covenant or agreement that would entitle Webster
Financial to terminate the merger agreement; (v) the failure to hold or the
cancellation of the shareholder meeting for the purpose of voting on the merger
agreement before the merger agreement is terminated; (vi) for any reason
whatsoever, the failure of Village Bancorp's board of directors to recommend, or
the withdrawal or modification in a manner adverse to Webster Financial of a
recommendation that Village Bancorp's shareholders approve the merger agreement,
or if Village Bancorp or its board of directors fails to oppose any proposal by
any person other than Webster Financial or any subsidiary of Webster Financial;
or (vii) a filing by any third party of an application or notice with any
regulatory authority for approval to engage in an acquisition transaction.
The Village Bancorp option may not be assigned by Webster Financial to any
other person without the express written consent of Village Bancorp, except that
Webster Financial may assign its rights under the option agreement to a wholly
owned subsidiary or may assign its rights in whole or in part after the
occurrence of a preliminary purchase event. Upon the occurrence of a purchase
event prior to an exercise termination event, at the request of Webster
Financial, Village Bancorp will be obligated (i) to prepare and keep current an
offering circular which meets the standards of a shelf registration statement
filed with the SEC with respect to the shares to be issued upon exercise of the
Village Bancorp option under applicable federal and state securities laws, and
(ii) to repurchase the Village Bancorp option, and any shares of Village
Bancorp's common stock thus far purchased pursuant to the Village Bancorp
option, at prices determined as set forth in the option agreement, except to the
extent prohibited by applicable law, regulation or administrative policy.
In the event that prior to an exercise termination event, Village Bancorp
enters into a letter of intent or definitive agreement (i) to consolidate or
merge with any third party, and Village Bancorp is not the continuing or
surviving corporation in the consolidation or merger; (ii) to permit any third
party to merge into Village Bancorp, and Village Bancorp is the continuing or
surviving corporation, but, in connection with the merger, the then outstanding
shares of Village Bancorp'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 Village Bancorp's common stock will represent
after the merger less than 50% of the outstanding shares and share equivalents
of the merged company; or (iii) 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 Village Bancorp
option will, upon the completion of that transaction, be converted into, or
exchanged for, a substitute option, at the election of Webster Financial, of
either (x) the acquiring corporation or (y) 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 a exercise price as is set forth in
the option agreement and will otherwise have the same terms as the Village
Bancorp 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.
The option agreement provides that if (i) Webster Financial exercises the
Village Bancorp option and sells option shares to an unrelated third party, (ii)
Village Bancorp has paid expenses of Webster Financial and, if applicable, a
break-up fee in connection with the termination of the merger agreement, and
(iii) the total amount before taxes of the net cash received by Webster
Financial for sale of the option shares less Webster Financial's total purchase
price for the option shares is more than $2.5 million, then Webster Financial
will return to Village Bancorp the amount
37
<PAGE>
described in clause (iii) of this paragraph up to the amount of the expenses and
any break-up fee previously paid by Village Bancorp to Webster Financial.
SELECTED DATA
The tables below present summary historical financial and other data for
Webster Financial and Village Bancorp as of the dates and for the periods
indicated. This summary data is based upon and should be read in conjunction
with Webster Financial's and Village Bancorp's historical consolidated financial
statements and related notes that are incorporated by reference into this
document. For historical information, see "WHERE YOU CAN FIND MORE INFORMATION."
The historical consolidated financial statements of Webster Financial and
Village Bancorp for the periods ended September 30, 1998 and 1997 are unaudited.
The selected consolidated financial data for these periods that is presented in
the following tables is derived from unaudited financial information. All
adjustments necessary for a fair presentation of financial position and results
of operations of interim periods have been included. All financial data
presented for Webster Financial prior to December 31, 1997 has been restated to
reflect the financial results of Webster Financial and Eagle Financial Corp.,
which was acquired by Webster Financial in April 1998. All per share data of
Webster Financial and Village Bancorp have been adjusted retroactively to give
effect to stock dividends or stock splits.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA - WEBSTER FINANCIAL
FINANCIAL CONDITION
AND OTHER DATA - WEBSTER FINANCIAL
(DOLLARS IN THOUSANDS) AT SEPTEMBER 30, AT DECEMBER 31,
----------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets........................ $ 9,163,686 $ 8,817,767 $ 9,095,887 $ 7,368,941 $ 6,479,567 $6,114,613 $5,054,572
Loans receivable, net............... 4,931,885 4,906,859 4,954,813 4,737,883 3,977,725 4,007,710 3,281,388
Investment securities............... 3,688,241 3,340,301 3,589,273 2,105,173 2,000,185 1,558,401 1,289,107
Intangible assets (a)............... 81,037 80,829 78,493 81,936 26,720 31,093 17,944
Deposits............................ 5,621,371 5,650,442 5,719,030 5,826,264 5,060,822 5,044,336 4,163,757
Federal Home Loan Bank advances
and other borrowings.............. 2,654,126 2,422,275 2,549,597 957,835 834,557 613,791 452,755
Shareholders' equity................ 565,916 494,016 517,262 472,824 460,791 364,112 327,676
Number of banking offices........... 104 114 114 120 109 108 91
<CAPTION>
OPERATING DATA - WEBSTER FINANCIAL FOR THE
(DOLLARS IN THOUSANDS) NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income................. $ 182,691 $ 187,043 $ 251,050 $ 222,118 $ 188,646 $ 182,100 $ 153,428
Provision for loan losses........... 5,300 22,138 24,813 13,054 9,864 7,149 9,886
Noninterest income.................. 53,530 30,077 42,264 52,009 33,316 21,378 24,052
Noninterest expenses:
Acquisition related expenses..... 17,400 29,792 29,792 500 4,271 700 --
Other noninterest expenses....... 136,891 129,535 171,871 173,977 142,592 140,260 112,502
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total noninterest expenses..... 154,291 159,327 201,663 174,477 146,863 140,960 112,502
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes.......... 76,630 35,655 66,838 86,596 65,235 55,369 55,092
Income taxes........................ 27,426 13,814 25,725 32,602 23,868 17,958 23,672
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income before cumulative
change .......................... 49,204 21,841 41,113 53,994 41,367 37,411 31,420
Cumulative change (b)............... -- -- -- -- -- 97 6,408
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.......................... 49,204 21,841 41,113 53,994 41,367 37,508 37,828
Preferred stock dividends........... -- -- -- 1,149 1,296 1,716 2,653
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income available to common
shareholders..................... $ 49,204 $ 21,841 $ 41,113 $ 52,845 $ 40,071 $ 35,792 $ 35,175
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See footnotes on the following page
38
<PAGE>
SIGNIFICANT STATISTICAL DATA - WEBSTER FINANCIAL
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Net income per common share:
Basic.............................. $ 1.30 $ 0.58 $ 1.10 $ 1.44 $ 1.18 $ 1.16 $ 1.02(c)
Diluted............................ $ 1.27 $ 0.56 $ 1.07 $ 1.36 $ 1.12 $ 1.09 $ 0.95(c)
Dividends declared per common
share.............................. $ 0.32 $ 0.30 $ 0.40 $ 0.34 $ 0.32 $ 0.26 $ 0.25
Return on average shareholders'
equity ............................ 12.44% 6.07% 8.44% 11.32% 10.05% 10.52% 11.66%(c)
Interest rate spread.................. 2.58% 3.05% 3.00% 3.12% 2.98% 3.23% 3.11%
Net interest margin................... 2.76% 3.27% 3.19% 3.24% 3.14% 3.36% 3.25%
Noninterest expenses to average
assets............................. 2.20% 2.65% 2.45% 2.42% 2.34% 2.45% 2.28%
Noninterest expenses (excluding
foreclosed property, acquisition
related, capital securities and
preferred dividends of subsidiary
corporation expenses) to average
assets............................. 1.74% 1.97% 2.40% 2.35% 2.22% 2.24% 2.01%
AT END OF PERIOD:
Diluted weighted average shares (000's) 38,650 37,698 38,473 39,560 36,797 34,533 32,161
Book value per common share .......... $ 14.91 $ 13.26 $ 13.78 $ 12.73 $ 12.24 $ 10.96 $ 10.58
Tangible book value per common
share.............................. $ 12.78 $ 11.09 $ 11.69 $ 10.48 $ 11.50 $ 9.98 $ 9.95
Shareholders' equity to total assets.. 6.18% 5.61% 5.69% 6.42% 7.11% 5.95% 6.48%
</TABLE>
- ----------
(a) The increase in the core deposit intangible in 1996 is a result of specific
assets and liabilities purchased in the acquisition of Shawmut Bank
Connecticut National Association, now Fleet National Bank of Connecticut.
(b) Reflects cumulative change in method of accounting for income taxes adopted
by Webster Financial in 1993 in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109.
(c) Does not give effect to $6.4 million of additional income in 1993 resulting
from the cumulative change of Webster Financial's adoption of Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
109. Giving effect to the cumulative change, (i) basic net income per
common share for 1993 was $2.42 and diluted net income per common share for
1993 was $2.30; and (ii) return on average shareholders' equity for 1993
was 12.92%.
39
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA - VILLAGE BANCORP
FINANCIAL CONDITION
AND OTHER DATA - VILLAGE BANCORP
(DOLLARS IN THOUSANDS) AT SEPTEMBER 30, AT DECEMBER 31,
----------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(a)
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets........................ $ 230,173 $ 216,870 $ 222,549 $ 179,550 $ 174,277 $ 157,241 $ 152,890
Loans, net.......................... 148,894 138,465 146,350 125,480 118,280 104,774 92,231
Investment securities............... 45,022 48,370 53,809 32,904 34,562 35,817 41,574
Deposits............................ 210,844 198,689 230,808 162,625 158,539 143,421 138,946
Shareholders' equity................ 17,210 15,771 15,873 15,297 14,148 13,054 13,006
Number of banking offices........... 6 6 6 4 4 4 3
<CAPTION>
OPERATING DATA - VILLAGE BANCORP FOR THE
(DOLLARS IN THOUSANDS) NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income................. $ 7,273 $ 6,116 $ 8,366 $ 7,840 $ 7,694 $ 7,002 $ 6,744
Provision (credit) for loan losses.. (123) 45 60 120 210 311 45
Noninterest income.................. 581 419 568 490 567 600 870
Noninterest expenses................ 5,707 5,054 7,111 5,919 5,751 5,865 5,923
------------ --------- ----------- ----------- ----------- ----------- -----------
Income before income taxes.......... 2,270 1,436 1,763 2,291 2,300 1,426 1,646
Provision for income taxes.......... 686 481 585 471 984 719 652
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.......................... $ 1,584 $ 955 $ 1,178 $ 1,820 $ 1,316 $ 707 $ 994
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See notes on the following page
40
<PAGE>
SIGNIFICANT STATISTICAL DATA - VILLAGE BANCORP
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(a)
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Net income - basic earnings (b)....... $ 0.82 $ 0.50 $ 0.62 $ 0.96 $ 0.70 $ 0.37 $ 0.53
Net income - diluted earnings (b)..... $ 0.81 $ 0.49 $ 0.61 $ 0.95 $ 0.69 $ 0.37 $ 0.53
Cash dividends declared per common
share.............................. $ 0.27 $ 0.27 $ 0.36 $ 0.34 $ 0.24 $ 0.32 $ 0.26
Return on average shareholders'
equity (annualized)................ 12.92% 8.20% 7.52% 12.45% 9.72% 5.40% 7.75%
Interest rate spread.................. 4.38% 4.13% 4.09% 4.37% 4.57% 4.68% 4.74%
Net yield on interest earning assets.. 4.71% 4.54% 4.50% 4.84% 5.06% 5.00% 5.06%
Noninterest expenses to average
assets............................. 3.39% 3.47% 3.54% 3.43% 3.55% 3.92% 4.13%
AT END OF PERIOD:
Diluted weighted average shares (000's) 1,968 1,932 1,942 1,919 1,901 1,900 1,890
Book value per common share........... $ 8.88 $ 8.28 $ 8.32 $ 8.03 $ 7.44 $ 6.89 $ 6.90
Tangible book value per common
share (c).......................... $ 8.88 $ 8.28 $ 8.32 $ 8.03 $ 7.44 $ 6.89 $ 6.90
Stockholders' equity to total assets.. 7.48% 7.27% 7.13% 8.52% 8.12% 8.30% 8.51%
</TABLE>
- ----------
NOTES:
(a) Village Bancorp acquired Liberty National Bank in 1994 in a transaction
accounted for as a pooling of interests. Prior historical financial data
includes both entities. Village Bancorp had net operating loss
carryforwards for federal income tax purposes of approximately $1.3 million
at September 30, 1998 which resulted from the acquisition of Liberty
National Bank. Due to limitations on the use of the net operating loss
carryforwards, a valuation allowance has been established to reduce the net
operating loss carryforwards to an amount that, more likely than not, will
be realized.
(b) Village Bancorp measures compensation cost for stock-based compensation
plans in accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," which is
permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." If the fair value based method
of accounting prescribed by this statement for measuring compensation cost
had been used, Village Bancorp's net income and earnings per share would
have been reduced to the amounts disclosed in Village Bancorp's 1997
consolidated financial statements that are incorporated by reference into
this document.
(c) The tangible book value per common share of Village Bancorp is total
stockholders' equity divided by total common shares outstanding at the end
of the respective period.
41
<PAGE>
MARKET PRICES AND DIVIDENDS
WEBSTER FINANCIAL'S COMMON STOCK
The table below sets forth the range of high and low sale prices of Webster
Financial's common stock as reported on the Nasdaq Stock Market's National
Market Tier, as well as cash dividends paid during the periods indicated,
restated to reflect the two-for-one split of Webster Financial'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
</TABLE>
On November 10, 1998, the last trading day prior to the public announcement
of the merger, the closing price of Webster Financial's common stock on the
Nasdaq Stock Market's National Market Tier was $26.50. On __________ ___, 1999,
the most recent practicable date prior to the printing of this proxy
statement/prospectus, the closing price of Webster Financial's common stock on
the Nasdaq Stock Market's National Market Tier was $ * .
VILLAGE BANCORP'S COMMON STOCK
The table below sets forth the range of high and low sale prices of Village
Bancorp's common stock as reported on the Nasdaq Stock Market's SmallCap Market,
as well as cash dividends paid during the periods indicated, restated to reflect
a two-for-one stock dividend in November 1997:
<TABLE>
<CAPTION>
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
<S> <C> <C> <C>
Quarter Ended:
March 31, 1997 $11.50 $ 10.50 $ 0.09
June 30, 1997 11.75 10.50 0.09
September 30, 1997 12.75 11.13 0.09
December 31, 1997 22.00 13.00 0.09
March 31, 1998 22.25 18.50 0.09
June 30, 1998 22.88 19.75 0.09
September 30, 1998 20.00 18.75 0.09
December 31, 1998 24.00 19.50 0.09
</TABLE>
On November 10, 1998, the last trading day prior to the public announcement
of the merger, the closing price of Village Bancorp's common stock on the Nasdaq
Stock Market's SmallCap Market was $21.00. On __________ ___, 1999, the most
recent practicable date prior to the printing of this proxy
statement/prospectus, the closing price of Village Bancorp's common stock on the
Nasdaq Stock Market's SmallCap Market was $ * .
- ----------
* To be calculated subsequently
42
<PAGE>
DESCRIPTION OF WEBSTER FINANCIAL'S CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS
Set forth below is a description of Webster Financial's capital stock, as
well as a summary of the material differences between the rights of holders of
Village Bancorp common stock and their prospective rights as holders of Webster
Financial's common stock. If the merger agreement is approved and the merger
takes place, the holders of Village Bancorp's common stock will become holders
of Webster Financial's common stock. As a result, Webster Financial'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 shareholders of Village Bancorp's common stock. The rights of
those shareholders are currently governed by the articles of incorporation, as
amended, and the bylaws of Village Bancorp and the applicable provisions of the
Connecticut Business Corporation Act, referred to in this section as the
Connecticut corporation law.
The following comparison is based on the current terms of the governing
documents of Webster Financial and Village Bancorp and on the provisions of the
Delaware corporation law and the Connecticut corporation law. The discussion is
intended to highlight important similarities and differences between the rights
of holders of Webster Financial's common stock and Village Bancorp's common
stock.
WEBSTER FINANCIAL'S COMMON STOCK
Webster Financial is authorized to issue 50,000,000 shares of common stock,
par value $.01 per share. As of _________ __, 1999 _____ shares of Webster
Financial's common stock were issued and outstanding and Webster Financial had
outstanding stock options granted to directors, officers and other employees for
______ shares of Webster Financial's common stock. Each share of Webster
Financial's common stock has the same relative rights and is identical in all
respects to each other share of Webster Financial's common stock. Webster
Financial's common stock is non-withdrawable capital, is not of an insurable
type and is not insured by the Federal Deposit Insurance Corporation or any
other governmental entity.
Holders of Webster Financial'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. Holders of Webster Financial's common stock
do not have the right to cumulate their votes for the election of directors, and
they have no preemptive or conversion rights with respect to any shares that may
be issued. Webster Financial's common stock is not subject to additional calls
or assessments by Webster Financial, and all shares of Webster Financial's
common stock currently outstanding are fully paid and nonassessable. For a
discussion of the voting rights of Webster Financial's common stock,
classification of Webster Financial's board of directors and provisions of
Webster Financial's restated certificate of incorporation and bylaws that may
prevent a change in control of Webster Financial or that would operate only with
respect to an extraordinary corporate transaction involving Webster Financial or
its subsidiaries, see "-- Certificate of Incorporation and Bylaw Provisions."
Holders of Webster Financial'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 Financial 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 Financial's common stock. In addition, as
43
<PAGE>
described below, the indenture for Webster Financial's senior notes places
restrictions on Webster Financial'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 Financial, the holders of Webster Financial'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 Financial available for distribution, in cash or
in kind, after payment or provision for payment of all debts and liabilities of
Webster Financial and after the liquidation preferences of all outstanding
shares of any class of stock having preference over Webster Financial's common
stock have been fully paid or set aside.
WEBSTER FINANCIAL'S PREFERRED STOCK
Webster Financial's restated 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 Financial's common stock.
Webster Financial'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 Financial adopted the rights agreement to
protect shareholders in the event of an inadequate takeover offer or to deter
coercive or unfair takeover tactics. Each right entitles a holder to purchase
1/1,000th of a share of Series C Stock upon the occurrence of specified events.
As of the date of this proxy statement/prospectus, no shares of Webster
Financial's Series C Stock have been issued.
SENIOR NOTES
The 8 3/4% Senior Notes due 2000 were issued by Webster Financial in an
aggregate principal amount of $40,000,000 pursuant to an indenture, dated as of
June 15, 1993, between Webster Financial 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 Financial'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 Financial and not of its
subsidiaries. The senior notes may not be redeemed by Webster Financial prior to
maturity. This limitation on redemption is not expected to have an anti-takeover
effect since the senior notes would be assumed by any acquirer of Webster
Financial. The indenture contains covenants that limit Webster Financial'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
Financial'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 Financial's assets unless particular conditions are satisfied. The
indenture also requires that Webster Financial maintain a specified level of
liquid assets at the holding company level.
RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. The indenture limits the amount of
funded indebtedness which Webster Financial may incur or guarantee at the
holding company level. Funded indebtedness includes any obligation of Webster
Financial 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 Financial may
not incur or guarantee any funded indebtedness if, immediately after giving
effect thereto, the amount of funded indebtedness of Webster Financial at the
holding company level, including the senior notes, would be greater than 90% of
Webster Financial's consolidated net worth. As of September 30, 1998,
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Webster Financial's consolidated net worth was $565.9 million and it had $41.4
million of funded indebtedness.
RESTRICTED DISTRIBUTIONS. Under the indenture, Webster Financial may not,
directly or indirectly, make any restricted distribution, except in capital
stock of Webster Financial, if, at the time or after giving effect to the
distribution: (a) an event of default shall have occurred and be continuing
under the indenture; (b) Webster Bank would fail to meet any of the applicable
minimum capital requirements under Office of Thrift Supervision regulations; (c)
Webster Financial would fail to maintain sufficient liquid assets to comply with
the terms of the covenant described under "Liquidity Maintenance" below; or (d)
the aggregate amount of all restricted distributions subsequent to September 30,
1993 would exceed the sum of (i) $5 million, plus (ii) 75% of Webster
Financial's aggregate consolidated net income, or if the aggregate consolidated
net income shall be 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 (iii) 100% of the net proceeds received by Webster
Financial from any capital stock issued by Webster Financial other than to a
subsidiary subsequent to September 30, 1993. As of September 30, 1998, Webster
Financial had the ability to pay $257.3 million in restricted distributions.
Restricted distribution means: (a) any dividend, distribution or other
payment on the capital stock of Webster Financial or any subsidiary other than a
wholly owned subsidiary, except for dividends, distributions or payments payable
in capital stock; (b) any payment to purchase, redeem, acquire or retire any
capital stock of Webster Financial or the capital stock of any subsidiary other
than a wholly owned subsidiary; and (c) any payment by Webster Financial of
principal whether a prepayment, redemption or at maturity of, or to acquire, any
indebtedness for borrowed money issued or guaranteed by Webster Financial, other
than the senior notes or pursuant to a guarantee by Webster Financial of any
borrowing by any employee stock ownership plan established by Webster Financial
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 Financial at a time when the senior notes
were rated in 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 Financial
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 Financial for 12
full calendar months immediately following each determination date under the
indenture, provided that Webster Financial will not be required to maintain
liquid assets in that amount once the senior notes have been rated BBB- or
higher by Standard & Poor's for six calendar months and remain rated in that
category.
CAPITAL SECURITIES
In January 1996, Webster Financial raised $100 million through the sale of
capital securities that will be used for general corporate purposes. Webster
Financial formed a business trust for the purpose of issuing capital securities
and investing the net proceeds in capital debentures.
Prior to its acquisition by Webster Financial, Eagle Financial Corp. raised
$50 million through the sale of capital securities to be used for general
corporate purposes. Eagle 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 Financial in
April 1998, Webster Financial assumed all of Eagle's rights and obligations with
respect to the Eagle capital securities and capital debentures.
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CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The following discussion is a general summary of provisions of Webster
Financial's restated certificate of incorporation and bylaws, and a comparison
of those provisions to similar types of provisions in the articles of
incorporation and bylaws of Village Bancorp. The discussion is necessarily
general and, with respect to provisions contained in Webster Financial's
restated certificate of incorporation and bylaws, reference should be made to
the document in question. Some of the provisions included in Webster Financial's
restated certificate of incorporation and bylaws may serve to entrench current
management and to prevent a change in control of Webster Financial 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 Financial and to discourage other takeover attempts.
DIRECTORS. Some of the provisions of Webster Financial's restated
certificate of incorporation and bylaws will impede changes in majority control
of Webster Financial's board of directors. The restated 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 restated certificate of incorporation further provides that the size of the
board of directors shall be within a 7 to 15 director range. The bylaws
currently provide that there shall be 14 directors. The bylaws also provide that
(i) 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; (ii) each
director is required to own not less than 100 shares of Webster Financial's
common stock; and (iii) more than three consecutive absences from regular
meetings of the board of directors, unless excused by a board resolution, shall
automatically constitute a resignation. Webster Financial's bylaws also contain
a provision prohibiting particular contracts and transactions between Webster
Financial and its directors and officers and some other entities unless specific
procedural requirements are satisfied.
The bylaws of Village Bancorp provide that the number of directors shall
not be less than 13 nor more than 25 and that the board of directors will be
divided into three classes with staggered terms. Village Bancorp's bylaws also
provide that not less than three-quarters of the directors shall be residents of
the State of Connecticut, all directors shall be shareholders and no person
shall be eligible for election to the board after reaching the age of 70.
Webster Financial's restated 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, shall be filled for the
remainder of the unexpired term by a majority vote of the directors then in
office. Webster Financial's restated 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.
Village Bancorp's bylaws provide that any vacancy on the board of
directors, including any newly created directorships, may be filled by the board
by an affirmative vote of a majority of the directors remaining in office. A
director elected to fill a vacancy shall be elected for the unexpired term of
the office or until shareholders fill the vacancy at an annual or special
meeting. Village Bancorp's bylaws provide that unless provided in a contract of
the corporation, any director may resign or be removed at any time. Removal of a
director, with or without cause, can be effected by the affirmative vote of the
holders of a majority of the stock entitled to vote, or a three-quarter's vote
of the board of directors.
Webster Financial'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
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acted upon at an annual meeting of shareholders. The articles of incorporation
and bylaws of Village Bancorp do not contain similar provisions.
CALL OF SPECIAL MEETINGS. Webster Financial's restated 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 Village
Bancorp provide that a special meeting of shareholders may be called at any time
by the Chairman, the Vice Chairman, the President or the board of directors, and
shall be called by the Chairman upon written request of the holders of not less
than one-tenth of the outstanding capital stock.
SHAREHOLDER ACTION WITHOUT A MEETING. Webster Financial's restated
certificate of incorporation and Village Bancorp's bylaws provide that
shareholders may act by unanimous written consent.
LIMITATION ON LIABILITY OF DIRECTORS AND INDEMNIFICATION. Webster
Financial's restated 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 (i) for
any breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for any payment of a
dividend or approval of a stock repurchase that is illegal under Section 174 of
the Delaware corporation law, or (iv) for any transaction from which a director
derived an improper personal benefit.
The articles of incorporation of Village Bancorp provide that no member of
the board of directors shall be personally liable to the corporation, or its
members, or to its shareholders, for monetary damages for breach of duty as a
director in an amount that is greater than the compensation received by the
director for serving the corporation during the year of violation if the breach
did not, (1) involve a knowing and culpable violation of law by the director,
(2) enable the director or an associate, as defined in Section 33-374(d) of the
Connecticut General Statutes, to receive an improper economic gain, (3) show a
lack of good faith and a conscious disregard for the duty of the director to the
corporation under circumstances in which the director was aware that his conduct
or omission created an unjustifiable risk of serious injury to the corporation,
(4) constitute a sustained and unexcused pattern or inattention that amounted to
an abdication of the director's duty to the corporation, or (5) create liability
under Section 36-9 of the Connecticut General Statutes.
Webster Financial's bylaws provide for indemnification of directors,
officers, trustees, employees and agents of Webster Financial, 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
Financial, by reason of the fact that the person is or was serving in that kind
of capacity for or on behalf of Webster Financial. The bylaws provide that
Webster Financial 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
Financial, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Similarly, the bylaws
provide that Webster Financial 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 Financial, 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 Financial; provided, however, that no
indemnification shall be made against expenses in respect of any claim, issue,
or matter as to which the person is adjudged to be liable to Webster Financial
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
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indemnified is, in view of all the circumstances of the case, fairly and
reasonably entitled to indemnity for these expenses or amounts paid in
settlement. In addition, Webster Financial'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 Financial or is acting
in this kind of capacity for another business organization or entity at Webster
Financial's request, against any liability asserted against the person and
incurred in that capacity, or arising out of that status, whether or not Webster
Financial would have the power or obligation to indemnify him against that kind
of liability under the indemnification provisions of Webster Financial's bylaws.
Village Bancorp's bylaws authorize the board of directors to indemnify and
reimburse each director, officer and employee of the corporation for necessary
expenses in connection with 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
except where the person is finally adjudged to be liable for negligence or
misconduct in the performance of their duties.
CUMULATIVE VOTING. Webster Financial's restated certificate of
incorporation denies cumulative voting rights in the election of directors.
Village Bancorp's articles of incorporation and bylaws do not contain a
provision regarding cumulative voting rights.
PREEMPTIVE RIGHTS. Webster Financial's restated certificate of
incorporation and Village Bancorp's articles of incorporation provide that
shareholders do not have any preemptive rights regarding the entity's
securities.
NOTICE OF SHAREHOLDER MEETINGS. Webster Financial'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. Village Bancorp's bylaws require that notice of
an annual or special shareholder meeting be given not less than 7 nor more than
50 days prior to a meeting.
QUORUM. Webster Financial's bylaws provide that the holders of one-third of
the capital stock issued and outstanding and entitled to vote at a meeting
constitutes a quorum. The bylaws of Village Bancorp provide that the holders of
a majority of the stock entitled to vote at a meeting constitutes a quorum,
except as otherwise specifically provided by law or Village Bancorp's articles
of incorporation or bylaws.
GENERAL VOTE. Webster Financial's bylaws provide that any matter brought
before a meeting of shareholders shall be decided by the affirmative vote of a
majority of the votes cast on the matter except as otherwise required by law or
Webster Financial's restated certificate of incorporation or bylaws. Village
Bancorp's bylaws provide that at all shareholders meetings, all questions shall
be determined by a majority vote of the shareholders present unless the manner
of deciding the question is specifically regulated by statute.
RECORD DATE. Webster Financial'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 shall not be less than 20 nor more than 50 days
before the date of the meeting or other action. Village Bancorp's bylaws provide
that the record date shall be not less than 10 nor more than 70 days prior to
the date of the meeting.
AUTHORIZED AND OUTSTANDING COMMON STOCK. See "-- Webster Financial's Common
Stock" as to authorized and currently outstanding shares of Webster Financial's
common stock. The articles of incorporation of Village Bancorp authorize
10,000,000 shares of Village Bancorp's common stock, par value $3.33 per share,
of which ___________ shares were outstanding as of _________ __, 1999. In
addition, as of _________ __, 1999, there were outstanding options to purchase
Village Bancorp's common stock granted to officers and other employees of
Village Bancorp for __________
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shares of Village Bancorp's common stock, plus the option for 388,466 shares of
Village Bancorp's common stock granted to Webster Financial in connection with
the merger.
AUTHORIZED SERIAL PREFERRED STOCK. See "-- Webster Financial Preferred
Stock" as to the authorized shares of serial preferred stock of Webster
Financial. Village Bancorp is not authorized to issue any preferred stock.
DIVIDEND AND LIQUIDATION RIGHTS. For a description of the provisions of
Webster Financial's restated certification of incorporation with respect to
dividends and liquidation rights, see "-- Webster Financial's Common Stock."
Village Bancorp's bylaws provide that the board of directors may declare
dividends, which may be paid in cash, property or shares of the capital stock of
the corporation, subject to any limitations in the articles of incorporation or
law.
APPROVALS FOR ACQUISITIONS OF CONTROL AND OFFERS TO ACQUIRE CONTROL.
Webster Financial'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 Financial'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.
Furthermore, no person may make an offer to acquire 10% or more of Webster
Financial's voting stock without obtaining prior approval of the offer by at
least two-thirds of Webster Financial'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 of Webster Financial or any of its
subsidiaries, and the provisions remain effective only so long as an insured
institution is a majority-owned subsidiary of Webster Financial. 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 Financial,
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 articles of incorporation and
bylaws of Village Bancorp do not contain a similar provision.
PROCEDURES FOR BUSINESS COMBINATIONS. Webster Financial's restated
certificate of incorporation requires that business combinations between Webster
Financial or any majority-owned subsidiary of Webster Financial and a 10% or
more shareholder or its affiliates or associates, referred to collectively in
this section as the interested shareholder, either (i) be approved by at least
80% of the total number of outstanding shares of voting stock of Webster
Financial, or (ii) be approved by at least two-thirds of Webster Financial's
continuing directors, which means those directors unaffiliated with the
interested shareholder and serving prior to the interested shareholder becoming
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 Financial'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
Financial or any merger or consolidation of Webster Financial with any of its
subsidiaries or any other transaction which has the effect of increasing the
proportionate ownership interest of the interested shareholder. Webster
Financial's restated certificate of incorporation excludes employee stock
purchase plans and other employee benefit plans of Webster Financial and any of
its subsidiaries from the definition of interested shareholder. The articles of
incorporation and bylaws of Village Bancorp do not contain a similar business
combination provision.
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ANTI-GREENMAIL. Webster Financial's restated certificate of incorporation
requires approval by a majority of the outstanding shares of voting stock before
Webster Financial may directly or indirectly purchase or otherwise acquire any
voting stock beneficially owned by a holder of 5% percent or more of Webster
Financial'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 Financial 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
Financial 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 articles
of incorporation and bylaws of Village Bancorp do not contain a similar
provision.
CRITERIA FOR EVALUATING OFFERS. Webster Financial's restated 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 articles of
incorporation and bylaws of Village Bancorp do not contain a similar provision.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to Webster
Financial's restated certificate of incorporation must be approved by at least
two-thirds of Webster Financial'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 shareholder actions. 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 Financial'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 articles of incorporation of Village Bancorp provide that the articles
of incorporation may be amended in the manner prescribed by statute. Village
Bancorp's bylaws provide that the bylaws may be amended by the affirmative vote
of the holders of a majority of the stock entitled to vote at a shareholder
meeting and by the affirmative vote of the directors holding a majority of the
directorship at a meeting of the board of directors, and that notice of the
proposed amendment must be included in the notice of the meeting. The bylaws of
Village Bancorp also provide that no bylaw amendment shall become effective
until filed with the Office of the Secretary of State of Connecticut and where
necessary, approved by the appropriate state or federal regulatory agency, if
required by law.
APPLICABLE LAW
The following discussion is a general summary of particular Delaware and
Connecticut statutory provisions and federal statutory and regulatory provisions
that may be deemed to have an anti-takeover effect.
DELAWARE TAKEOVER STATUTE. Section 203 of the Delaware corporation law
applies to Delaware corporations with a class of voting stock listed on a
national securities exchange, authorized for quotation on the Nasdaq Stock
Market, or held of record by 2,000 or more persons,
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and restricts transactions which may be entered into by the corporation and some
of its shareholders. Section 203 provides, in essence, that a shareholder
acquiring more than 15% of the outstanding voting stock of a corporation subject
to the statute and that person's affiliates and associates, referred to in this
section as an interested stockholder, but less than 85% of its shares may not
engage in specified business combinations with the corporation for a period of
three years subsequent to the date on which the shareholder became an interested
stockholder unless (i) prior to that date the corporation's board of directors
approved either the business combination or the transaction in which the
shareholder became an interested stockholder or (ii) at or subsequent to that
time the business combination is approved by the corporation's board of
directors and authorized at an annual or special meeting of shareholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder. Section 203 defines the
term business combination to include a wide variety of transactions with or
caused by an interested stockholder in which the interested stockholder receives
or could receive a benefit on other than a pro rata basis with other
shareholders, including mergers, consolidations, specified types of asset sales,
specified issuances of additional shares to the interested stockholder,
transactions with the corporation which increase the proportionate interest of
the interested stockholder or transactions in which the interested stockholder
receives specified other benefits.
CONNECTICUT REGULATORY RESTRICTIONS ON ACQUISITIONS OF STOCK. Connecticut
banking statutes prohibit any person from directly or indirectly offering to
acquire or acquiring voting stock of a Connecticut-chartered commercial bank,
like Village Bank, a federal savings bank having its principal office in
Connecticut, like Webster Bank, or a holding company of that kind of entity,
like Webster Financial or Village Bancorp, that would result in the person
becoming, directly or indirectly, the beneficial owner of more than 10% of any
class of voting stock of that entity unless the person had previously filed an
acquisition statement with the Connecticut Commissioner of Banking and the offer
or acquisition has not been disapproved by the Connecticut Commissioner.
FEDERAL LAW. 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
thereof, without giving at least 60 days prior written notice providing
specified information to the appropriate federal banking agency. In the case of
Webster Financial and Webster Bank, the appropriate federal banking agency is
the Office of Thrift Supervision and in the case of Village Bancorp and Village
Bank, the appropriate federal banking agency is the Board of Governors of the
Federal Reserve System or the Federal Deposit Insurance Corporation. 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
Office of Thrift Supervision, the Federal Deposit Insurance Corporation or the
Board of Governors of the Federal Reserve System may prohibit the acquisition of
control if the agency finds, among other things, that (i) the acquisition would
result in a monopoly or substantially lessen competition; (ii) the financial
condition of the acquiring person might jeopardize the financial stability of
the institution; or (iii) 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 Financial and Village Bancorp 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 Financial or Village Bancorp 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
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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 Financial can be found on the Internet at
http://www.websterbank.com. Village Bancorp can be found on the Internet at
http://www.villagebank.com. Webster Financial's common stock is traded on the
Nasdaq Stock Market's National Market Tier under the trading symbol WBST.
Village Bancorp's common stock is traded on the Nasdaq Stock Market's SmallCap
Market under the trading symbol VBNK.
Webster Financial has filed with the SEC a registration statement on Form
S-4 under the Securities Act of 1933 relating to Webster Financial's common
stock to be issued to Village Bancorp's shareholders in the merger. As permitted
by the rules and regulations of the SEC, this 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 proxy statement/prospectus or in any document incorporated by
reference into this 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 proxy statement/prospectus being qualified in all respects by reference to
the document.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows Webster Financial and Village Bancorp to incorporate by
reference information into this proxy statement/prospectus, which means that
Webster Financial and Village Bancorp can disclose important information to you
by referring you to another document filed separately with the SEC. The
information that Webster Financial and Village Bancorp incorporate by reference
is considered a part of this proxy statement/prospectus, except for any
information superseded by information presented in this proxy
statement/prospectus. This proxy statement/prospectus incorporates important
business and financial information about Webster Financial, Village Bancorp and
their subsidiaries that is not included in or delivered with this document. All
documents subsequently filed by Webster Financial and Village Bancorp pursuant
to Sections 13(a), 13(c) 14 or 15(d) of the Securities Exchange Act of 1934
prior to _____________, ___, 1999 are deemed to be incorporated by reference
into this proxy statement/prospectus.
WEBSTER FINANCIAL DOCUMENTS
This proxy statement/prospectus incorporates by reference the documents
listed below that Webster Financial has filed with the SEC:
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
o Annual Report on Form 10-K which Year ended December 31, 1997
was updated by the Current Report
on Form 8-K filed on July 23, 1998
o Quarterly Report on Form 10-Q For the quarter ended March 31, 1998
o Quarterly Report on Form 10-Q For the quarter ended June 30, 1998
o Quarterly Report on Form 10-Q For the quarter ended September 30, 1998
o Current Report on Form 8-K/A Filed January 26, 1998
o Current Report on Form 8-K/A Filed January 26, 1998
o Current Report on Form 8-K/A Filed February 6, 1998
o Current Report on Form 8-K Filed March 4, 1998
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o Current Report on Form 8-K Filed March 19, 1998
o Current Report on Form 8-K Filed April 30, 1998
o Current Report on Form 8-K which Filed July 23, 1998
restated portions of the 1997
annual report to shareholders
o Current Report on Form 8-K Filed October 30, 1998
o Current Report on Form 8-K Filed November 23, 1998
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 ____________ ___, 1999.
VILLAGE BANCORP DOCUMENTS
This proxy statement/prospectus incorporates by reference the documents
listed below that Village Bancorp has filed with the SEC:
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
o Annual Report on Form 10-K Year ended December 31, 1997
o Quarterly Report on Form 10-Q as For the quarter ended March 31, 1998
amended by Form 10-Q/A
o Quarterly Report on Form 10-Q For the quarter ended June 30, 1998
o Quarterly Report on Form 10-Q For the quarter ended September 30, 1998
o Current Report on Form 8-K Filed November 18, 1998
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR WRITE
TO: JAMES R. UMBARGER, EXECUTIVE VICE PRESIDENT OF VILLAGE BANCORP, INC., 25
PROSPECT STREET, P .O. BOX 366, RIDGEFIELD, CONNECTICUT 06877, TELEPHONE (203)
438-9551. IN ORDER TO OBTAIN TIMELY DELIVERY OF DOCUMENTS, YOU SHOULD REQUEST
INFORMATION AS SOON AS POSSIBLE, BUT NO LATER THAN ____________ ___, 1999.
ADJOURNMENT OF SHAREHOLDER MEETING
The holders of Village Bancorp's common stock will be asked to approve, if
necessary, the adjournment of the shareholder meeting to solicit further votes
in favor of the merger agreement. If you vote against the merger agreement, your
proxy may not be used by management to vote in favor of an adjournment pursuant
to its discretionary authority.
SHAREHOLDER PROPOSALS
Any proposal which a Webster Financial shareholder wishes to have included
in the proxy materials for Webster Financial's 1999 annual meeting pursuant to
SEC Rule 14a-8 must have been received by Webster Financial at its principal
executive offices at Webster Plaza, Waterbury, Connecticut 06702 by November 19,
1998. Any other proposal for consideration by shareholders at Webster
Financial's 1999 annual meeting must be received by Webster Financial by March
23, 1999.
If the merger agreement is approved and the merger takes place, Village
Bancorp will not have an annual meeting of shareholders in 1999. If the merger
does not take place, Village Bancorp anticipates that its 1999 annual meeting
will be held in April 1999. Any proposal intended to be
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presented by a Village Bancorp shareholder for inclusion in Village Bancorp's
proxy statement for its 1999 annual meeting must have been received by Village
Bancorp at its principal executive offices at 25 Prospect Street, Ridgefield,
Connecticut 06877 by December 8, 1998.
OTHER MATTERS
We do not expect that any matters other than those described in this proxy
statement/prospectus will be brought before the shareholder meeting. If any
other matters are presented, however, it is the intention of the persons named
in the Village Bancorp proxy to vote proxies in accordance with the
determination of a majority of Village Bancorp's board of directors, including,
without limitation, a motion to adjourn or postpone the shareholder 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 Financial, as restated to
include Eagle Financial Corp., at December 31, 1997 and 1996, and for each of
the years in the three-year period ended December 31, 1997, have been
incorporated by reference into this proxy statement/prospectus and in the
registration statement in reliance on the report of KPMG LLP, independent
certified public accountants, which is incorporated by reference into this proxy
statement/prospectus and in the registration statement and upon the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements of Village Bancorp, incorporated into
this proxy statement/prospectus by reference from Village Bancorp's Annual
Report on Form 10-K for the year ended December 31, 1997, have been audited by
Deloitte & Touche LLP, 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.
LEGAL MATTERS
The validity of Webster Financial's common stock to be issued in the merger
has been passed upon by Hogan & Hartson L.L.P., Washington, D.C. Additionally,
Hogan & Hartson L.L.P. will be passing upon tax matters in connection with the
merger.
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APPENDIX A
* To be updated prior to the mailing of the Proxy Statement/Prospectus
November 11, 1998
Village Bancorp, Inc.
25 Prospect Street
Ridgefield, CT 06877
Attention: Board of Directors
Dear Members of the Board of Directors:
Village Bancorp, Inc. (the "Company") and Webster Financial Corporation
("Webster"), propose to enter into an agreement and plan of merger (the "Merger
Agreement") pursuant to which the Company will be merged with and into Webster
(the "Merger"). Under the terms of the Merger Agreement, at the effective time
of the Merger, each issued and outstanding share of common stock, par value
$3.33 per share, of the Company (the "Shares") (other than Shares held by the
Company, Webster or any of their respective subsidiaries, all of which Shares
shall be canceled and retired, and Dissenting Shares (as defined in the Merger
Agreement)) will be converted into the right to receive, at the election of the
holder thereof and subject to certain proration provisions, either: (i) $23.50
in cash (the "Cash Consideration") subject to a Maximum Cash Number (as defined
in the Merger Agreement), or (ii) a number of shares of Webster common stock,
par value $.01 per share ("Webster Common Stock") determined by dividing $23.50
by the Base Trading Price (as defined in the Merger Agreement). For purposes of
our opinion, the term "Consideration" means the aggregate amount of the Cash
Consideration and the Webster Common Stock to be received by the holders of the
Shares in the Merger as set forth in clauses (i) and (ii) in the immediately
preceding sentence. The terms and conditions of the Merger, including the terms
limiting the aggregate amount of the Cash Consideration and the cash to be paid
in respect of fractional shares and Dissenting Shares, are more fully set forth
in the Merger Agreement.
You have asked us whether, in our opinion, the proposed Consideration to be
received by the holders of the Shares in the Merger is fair to such holders from
a financial point of view.
In arriving at the opinion set forth below, we have reviewed such documents
and taken such actions as we have deemed appropriate, including, but not limited
to:
1. Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31,
1997 and the Company's Forms 10-Q and the related unaudited financial
information for the quarterly periods ended March 31, 1998, June 30,
1998, and September 30, 1998;
2. Reviewed Webster's Annual Reports, Forms 10-K and related financial
information for the three fiscal years ended December 31, 1997 and
Webster's Forms 10-Q and the related unaudited financial information
for the quarterly periods ended March 31, 1998, June 30, 1998, and
September 30, 1998;
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Village Bancorp, Inc.
Page 2 of 3
3. Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company furnished to us by the Company;
4. Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of Webster
furnished to us by Webster;
5. Conducted discussions with members of senior management of the Company
and Webster concerning their respective businesses and prospects;
6. Reviewed the historical market prices and trading activity for the
Shares and compared it with that of certain publicly traded companies
which we deemed to be similar to the Company;
7. Reviewed the historical market prices and trading activity for Webster
Common Stock;
8. Compared the results of operations of the Company with those of
certain companies that we deemed to be reasonably similar to the
Company;
9. Compared the proposed financial terms of the Merger with the financial
terms of certain other mergers and acquisitions that we deemed to be
relevant;
10. Reviewed a draft of the Merger Agreement dated November 11, 1998; and
11. Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Company and
Webster, and we have not independently verified such information or undertaken
an independent appraisal or evaluation of the assets or liabilities of the
Company or Webster. With respect to the financial forecasts furnished to us by
the Company, we have assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgment of the Company's management
as to the expected future financial performance of the Company. We have also
assumed that the Merger will be free of federal tax to the Company, Webster and
holders of Shares (other than in respect of the Cash Consideration and any cash
paid in lieu of fractional shares). Our opinion is based upon general economic,
market, monetary and other conditions as they exist and can be evaluated, and
the information made available to us, as of the date hereof. We express no
opinion as to what the value of Webster Common Stock actually will be when
issued to the holders of the Shares upon consummation of the Merger.
This opinion is addressed to the Board of Directors of the Company and does
not constitute a recommendation to any shareholders as to how such shareholders
should vote on the proposed Merger. We also express no opinion and make no
recommendation as to whether the holders of the Shares should elect to receive
Cash Consideration or Webster Common Stock.
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Village Bancorp, Inc.
Page 3 of 3
We have acted as financial advisor to the Company in connection with this
opinion and will receive a fee for our services, a significant portion of which
is contingent upon consummation of the Merger.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Consideration to be received by the holders of the Shares in the
Merger is fair to such holders from a financial point of view.
Very truly yours,
MORGAN LEWIS GITHENS & AHN
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APPENDIX B
SECTIONS 33-855 TO 33-872 OF THE CONNECTICUT GENERAL STATUTES
SS. 33-855. DEFINITIONS
As used in sections 33-855 to 33-872, inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when and in
the manner required by sections 33-860 to 33-868, inclusive.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SS. 33-856. RIGHT TO DISSENT
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a
party (A) if shareholder approval is required for the merger by section 33-817
or the certificate of incorporation and the shareholder is entitled to vote on
the merger or (B) if the corporation is a subsidiary that is merged with its
parent under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
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(4) An amendment of the certificate of incorporation that materially
and adversely affects rights in respect of a dissenter's shares because it: (A)
Alters or abolishes a preferential right of the shares; (B) creates, alters or
abolishes a right in respect of redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the shares; (C) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities; (D) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or (E)
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under section
33-668; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the certificate of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as holder
of such shares against the corporate transactions described in this section,
whether or not he proceeds as provided in sections 33-855 to 33-872, inclusive.
SS. 33-857. DISSENT BY NOMINEES AND BENEFICIAL OWNERS
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if: (1) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
SS.SS. 33-858, 33-859. RESERVED FOR FUTURE USE
SS. 33-860. NOTICE OF DISSENTERS' RIGHTS
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under sections 33-855 to 33-872, inclusive, and be accompanied by a copy
of said sections.
(b) If corporate action creating dissenters' rights under section 33-856 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 33-862.
SS. 33-861. NOTICE OF INTENT TO DEMAND PAYMENT
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) shall deliver to the corporation before
the vote is taken written notice of his intent to demand
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payment for his shares if the proposed action is effectuated and (2) shall not
vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
of this section is not entitled to payment for his shares under sections 33-855
to 33-872, inclusive.
SS. 33-862. DISSENTERS' NOTICE
(a) If proposed corporate action creating dissenters' rights under section
33-856 is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after the
corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days after
the date the subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
SS. 33-863. DUTY TO DEMAND PAYMENT
(a) A shareholder sent a dissenters' notice described in section 33-862
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to subdivision (3) of subsection (b) of said section and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) of this section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
SS. 33-864. SHARE RESTRICTIONS
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 33-866.
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(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
SS. 33-865. PAYMENT
(a) Except as provided in section 33-867, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with section 33-863 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by: (1) The corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, a statement of changes
in shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a statement of the dissenter's right to demand payment under section 33-868; and
(5) a copy of sections 33-855 to 33-872, inclusive.
SS. 33-866. FAILURE TO TAKE ACTION
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
SS. 33-867. AFTER-ACQUIRED SHARES
(a) A corporation may elect to withhold payment required by section 33-865
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under
section 33-868.
SS. 33-868. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865
or offered under section 33-867 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
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(2) The corporation fails to make payment under section 33-865 within
sixty days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
of this section within thirty days after the corporation made or offered payment
for his shares.
SS.SS. 33-869, 33-870. RESERVED FOR FUTURE USE
SS. 33-871. COURT ACTION
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the superior court for
the judicial district where a corporation's principal office or, if none in this
state, its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the superior court for the judicial district where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under section 33-867.
SS. 33-872. COURT COSTS AND COUNSEL FEES
(a) The court in an appraisal proceeding commenced under section 33-871
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under section 33-868.
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(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (1) Against
the corporation and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of sections
33-860 to 33-868, inclusive; or (2) against either the corporation or a
dissenter, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by sections 33-855 to
33-872, inclusive.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
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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 Financial's
Restated Certificate of Incorporation, as amended, and the provisions of Article
IX of the Webster Financial's Bylaws, as amended.
Webster Financial 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
Financial, or are or were serving at the request of Webster Financial 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 Financial, 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 Financial's Bylaws provide for indemnification of directors,
officers, trustees, employees and agents of Webster Financial, 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
Financial) by reason of the fact that such person is or was serving in such a
capacity for or on behalf of Webster Financial. Webster Financial 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 Financial, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Similarly, Webster Financial 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 Financial, 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 Financial; 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
Financial 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 Financial may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
trustee, employee, or agent of Webster Financial or is acting in such capacity
for another business organization or entity at Webster Financial'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
Financial would have the power or obligation to indemnify him against such
liability under the provisions of Article IX of Webster Financial's Bylaws.
Article 6 of Webster Financial's Restated Certificate of Incorporation
provides that no director will be personally liable to Webster Financial 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 Financial 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
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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.
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 Financial pursuant to the foregoing provisions, or otherwise, Webster
Financial 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 Financial of expenses incurred or paid by a director, officer or
controlling person of Webster Financial 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 Financial 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.
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<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
Exhibit
No. Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of November 11, 1998, by and
between Webster Financial Corporation ("Webster Financial") and
Village Bancorp, Inc. ("Village Bancorp").
2.2 Option Agreement, dated as of November 11, 1998, between Village
Bancorp and Webster Financial.
2.3 Village Bancorp, Inc. Stockholder Agreement, dated as of November 11,
1998, by and among Webster Financial and the stockholders of Village
Bancorp identified therein.
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the securities
registered hereunder, including the consent of that firm.
8 Form of opinion of Hogan & Hartson L.L.P as to certain tax matters,
including consent of that firm.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5 and
Exhibit 8).
23.2 Consent of KPMG LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Morgan Lewis Githens & Ahn, Inc.
24 Power of attorney.
99.1 Form of Village Bancorp proxy card.
99.2 Form of cash election form.*
- ----------
* To be filed by amendment.
(B) Not required.
(C) See Appendix A to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS.
(a) Webster Financial 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;
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<PAGE>
(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) (ss. 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 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 Financial hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of Webster
Financial'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 Financial 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 Financial 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 Financial 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 (ss. 230.415 of this chapter), 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
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<PAGE>
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 Financial 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 Financial 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.
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<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 February 8, 1999.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
---------------------------------
James C. Smith
Chairman and Chief Executive Officer
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 February 8, 1999.
Name: Title:
/s/ James C. Smith
- ------------------------------
James C. Smith Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ John V. Brennan
- ------------------------------
John V. Brennan Executive Vice President, Chief Financial
Officer and Treasurer (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.
/s/ George T. Carpenter* Director
- ------------------------------
George T. Carpenter
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<PAGE>
/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/ Walter R. Griffin* Director
- ------------------------------
Walter R. Griffin
/s/ J. Gregory Hickey* Director
- ------------------------------
J. Gregory Hickey
/s/ C. Michael Jacobi* Director
- ------------------------------
C. Michael Jacobi
/s/ John F. McCarthy* Director
- ------------------------------
John F. McCarthy
/s/ Sister Marguerite Waite* Director
- ------------------------------
Sister Marguerite Waite
By: /s/ John V. Brennan
------------------------------
*By Power of Attorney
John V. Brennan
II-7
<PAGE>
EXHIBIT INDEX
Exhibit
No. Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of November 11, 1998, by and
between Webster Financial Corporation ("Webster Financial") and
Village Bancorp, Inc. ("Village Bancorp").
2.2 Option Agreement, dated as of November 11, 1998, between Village
Bancorp and Webster Financial.
2.3 Village Bancorp, Inc. Stockholder Agreement, dated as of November 11,
1998, by and among Webster Financial and the stockholders of Village
Bancorp identified therein.
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the securities
registered hereunder, including the consent of that firm.
8 Form of opinion of Hogan & Hartson L.L.P as to certain tax matters,
including consent of that firm.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5 and
Exhibit 8).
23.2 Consent of KPMG LLP
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of Morgan Lewis Githens & Ahn, Inc.
24 Power of attorney.
99.1 Form of Village Bancorp proxy card.
99.2 Form of cash election form.*
- ----------
* To be filed by amendment.
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WEBSTER FINANCIAL CORPORATION
AND
VILLAGE BANCORP, INC.
DATED AS OF
NOVEMBER 11, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..........................................................1
1.1 The Merger.........................................................1
1.2 Effective Time.....................................................1
1.3 Effects of the Merger..............................................2
1.4 Conversion of Village Common Stock.................................2
1.5 The Bank Merger....................................................4
1.6 Options............................................................4
1.7 Certificate of Incorporation.......................................5
1.8 Bylaws.............................................................5
1.9 Directors and Officers.............................................5
1.10 Tax Consequences...................................................5
ARTICLE II EXCHANGE OF SHARES.................................................5
2.1 Webster to Make Cash and Shares Available..........................5
2.2 Exchange of Cash and Shares.......................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF VILLAGE.........................8
3.1 Corporate Organization.............................................8
3.2 Capitalization.....................................................8
3.3 Authority; No Violation............................................9
3.4 Consents and Approvals............................................10
3.5 Loan Portfolio; Reports...........................................11
3.6 Financial Statements; Exchange Act Filings; Books and
Records..........................................................11
3.7 Broker's Fees.....................................................12
3.8 Absence of Certain Changes or Events..............................12
3.9 Legal Proceedings.................................................12
3.10 Taxes and Tax Returns.............................................13
3.11 Employee Benefit Plans............................................13
3.12 Certain Contracts.................................................14
3.13 Agreements with Regulatory Agencies...............................15
3.14 State Takeover Laws; Articles of Incorporation....................15
3.15 Environmental Matters.............................................15
3.16 Reserves for Losses...............................................16
3.17 Properties and Assets.............................................16
3.18 Insurance.........................................................17
3.19 Compliance with Applicable Laws...................................17
3.20 Loans.............................................................18
3.21 Affiliates........................................................19
3.22 Ownership of Webster Common Stock.................................19
3.23 Village Rights Agreement..........................................19
3.24 Fairness Opinion..................................................19
3.25 Year 2000 Compliance..............................................19
3.26 Intellectual Property.............................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WEBSTER.........................20
4.1 Corporate Organization............................................20
4.2 Capitalization....................................................20
4.3 Authority; No Violation...........................................21
4.4 Consents, Approvals and Reports...................................22
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4.5 Financial Statements; Exchange Act Filings; Books and
Records..........................................................23
4.6 Absence of Certain Changes or Events..............................23
4.7 Legal Proceedings.................................................23
4.8 Taxes and Tax Returns.............................................23
4.9 Employee Benefit Plans............................................24
4.10 Compliance with Applicable Laws...................................24
4.11 Agreements with Regulatory Agencies...............................24
4.12 Year 2000 Compliance..............................................24
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS..........................25
5.1 Covenants of Village..............................................25
5.2 Covenants of Webster..............................................28
5.3 Merger Covenants..................................................28
5.4 Compliance with Antitrust Laws....................................28
ARTICLE VI ADDITIONAL AGREEMENTS.............................................29
6.1 Regulatory Matters................................................29
6.2 Access to Information.............................................30
6.3 Shareholder Meeting...............................................31
6.4 Legal Conditions to Merger........................................31
6.5 Stock Exchange Listing............................................31
6.6 Employees; Employment and Other Agreements........................31
6.7 Indemnification...................................................32
6.8 Subsequent Interim and Annual Financial Statements................33
6.9 Additional Agreements.............................................34
6.10 Advice of Changes.................................................34
6.11 Current Information...............................................34
6.12 Execution and Authorization of Bank Merger Agreement..............34
6.13 Change in Structure...............................................34
6.14 Transaction Expenses of Village...................................35
ARTICLE VII CONDITIONS PRECEDENT.............................................35
7.1 Conditions to Each Party's Obligation To Effect the
Merger...........................................................35
7.2 Conditions to Obligations of Webster..............................36
7.3 Conditions to Obligations of Village..............................37
ARTICLE VIII TERMINATION AND AMENDMENT.......................................38
8.1 Termination.......................................................38
8.2 Effect of Termination.............................................39
8.3 Amendment.........................................................39
8.4 Extension; Waiver.................................................40
ARTICLE IX GENERAL PROVISIONS................................................40
9.1 Closing...........................................................40
9.2 Nonsurvival of Representations, Warranties, Covenants
and Agreements....................................................40
9.3 Expenses; Breakup Fee.............................................40
9.4 Notices...........................................................41
9.5 Interpretation....................................................42
9.6 Counterparts......................................................42
9.7 Entire Agreement..................................................42
9.8 Governing Law.....................................................42
9.9 Enforcement of Agreement..........................................42
9.10 Severability......................................................43
9.11 Publicity.........................................................43
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9.12 Assignment; Limitation of Benefits................................43
9.13 Additional Definitions............................................43
EXHIBITS
A Form of Articles of Combination and Bank Merger Agreement
B Form of Option Agreement
C Form of Certificate of Merger
D Form of Village Bancorp, Inc. Stockholder Agreement
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of November 11, 1998 (this
"Agreement"), is entered into by and between Webster Financial Corporation, a
Delaware corporation ("Webster"), and Village Bancorp, Inc., a Connecticut
corporation ("Village").
WHEREAS, the Boards of Directors of Webster and Village have determined
that it is in the best interests of their respective companies and shareholders
to consummate the business combination transaction provided for herein in which
Village will, subject to the terms and conditions set forth herein, merge with
and into Webster, with Webster being the "Surviving Corporation" (the "Merger");
WHEREAS, prior to the consummation of the Merger, Webster and Village will
respectively cause Webster Bank, a federally chartered savings bank and wholly
owned subsidiary of Webster ("Webster Bank"), and The Village Bank & Trust
Company, a Connecticut chartered bank and wholly owned subsidiary of Village
("Village Bank"), to enter into articles of combination and bank merger
agreement, in the form attached hereto as Exhibit A (the "Bank Merger
Agreement"), providing for the merger (the "Bank Merger") of Village Bank with
and into Webster Bank, with Webster Bank being the "Surviving Bank" of the Bank
Merger, and it is intended that the Bank Merger be consummated immediately after
consummation of the Merger;
WHEREAS, as an inducement to Webster to enter into this Agreement, Village
will enter into an option agreement, in substantially the form attached hereto
as Exhibit B (the "Option Agreement"), with Webster immediately following the
execution of this Agreement pursuant to which Village will grant Webster an
option to purchase, under certain circumstances, an aggregate of 388,466 newly
issued shares of common stock, par value $3.33 per share, of Village ("Village
Common Stock") upon the terms and conditions therein contained; 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.
Subject to the terms and conditions of this Agreement, in accordance with
the General Corporation Law of the State of Delaware, as amended (the "Delaware
Corporation Law") and the Connecticut Business Corporation Act, as amended (the
"Connecticut Corporation Law"), at the Effective Time (as defined in Section 1.2
hereof), Village shall merge into Webster, with Webster being the Surviving
Corporation in the Merger. Upon consummation of the Merger, the corporate
existence of Village shall cease and the Surviving Corporation shall continue to
exist as a Delaware corporation.
1.2 EFFECTIVE TIME.
The Merger shall become effective on the Closing Date (as defined in
Section 9.1 hereof), as set forth in the certificate of merger (the "Certificate
of Merger") in the form attached hereto as Exhibit C, which shall be filed with
the Secretaries of State of the States of Connecticut and Delaware on the
Closing Date. The term "Effective Time" shall be the date and time when the
Merger becomes effective on the Closing Date, as set forth in the Certificate of
Merger.
<PAGE>
1.3 EFFECTS OF THE MERGER.
At and after the Effective Time, the Merger shall have the effects set
forth in Sections 259 and 261 of the Delaware Corporation Law and Sections
33-820 and 33-821 of the Connecticut Corporation Law.
1.4 CONVERSION OF VILLAGE COMMON STOCK.
(a) At the Effective Time, subject to Sections 1.4(c), 1.4(d), 2.2(g)
and 8.1(h) hereof, shares of Village Common Stock outstanding immediately prior
to the Effective Time (other than Dissenting Shares as defined in Section 1.4(e)
hereof), shall, at the election of holders of such shares, be converted and
exchangeable into either
(i) the right to receive $23.50 in cash, without interest, or
(ii) the right to receive that number of shares of Webster common
stock, par value $.01 per share ("Webster Common Stock") determined by
dividing $23.50 by the Base Period Trading Price (as defined below), as may
be adjusted as provided below, computed to four decimal places (the
"Exchange Ratio"); provided, however, that if the Base Period Trading Price
shall be greater than $27.50, the Exchange Ratio shall be 0.8545 and if the
Base Period Trading Price shall be less than $19.50, the Exchange Ratio
shall be 1.2051. Notwithstanding the foregoing, if the number of shares of
Village Common Stock as to which Village stockholders elect to receive cash
(the "Cash Election Number") exceeds the Maximum Cash Number, then the
number of shares entitled to receive cash shall be prorated as provided
below so that no more than the Maximum Cash Number shall be converted into
cash. The "Maximum Cash Number" shall be 20% of the total value of the
merger consideration, less the total amount of cash payable in lieu of
fractional shares and that may be payable to Dissenting Shares, and shall
be calculated by the following formula:
[.2 x (O x Y)] - [F + (D x Y)];
where
D = the aggregate number of Dissenting Shares
F = the aggregate of cash payable in respect of fractional shares as
provided in Section 1.4(d) hereof
O = the aggregate number of outstanding shares of Village Common Stock as
of the Effective Time
Y = the Closing Value (as defined in Section 1.4(d) hereof) multiplied by
the Exchange Ratio
If the amount of cash payable in lieu of fractional shares and that
may be payable to Dissenting Shares exceeds 20% of the product of [O x Y] (in
accordance with the above formula), the Maximum Cash Number shall be zero. If
the Cash Election Number exceeds the Maximum Cash Number, then the number of
shares held by each shareholder electing to receive cash for some or all of its
shares shall be determined by multiplying the number of shares as to which that
shareholder elected to receive cash by a cash proration factor (the "Cash
Proration Factor") equal to the quotient obtained by dividing the Maximum Cash
Number by the Cash Election Number and rounding down to the next whole number.
All shares of Village Common Stock, other than shares converted into the right
to receive cash in accordance with the preceding sentence or entitled to receive
cash pursuant
2
<PAGE>
to Sections 1.4(d) or 1.4(e) hereof, shall be converted into the right to
receive Webster Common Stock in accordance with Section 1.4(a)(ii) above, and a
Stock Election (as defined in Section 2.2(b) hereof) shall be deemed to have
been made with respect to such shares. For purposes of this Agreement, the term
"Base Period Trading Price" shall mean the average of the daily closing prices
per share for Webster Common Stock for the 15 consecutive trading days during
which shares of Webster Common Stock are actually traded (as reported on The
Nasdaq Stock Market, Inc. National Market Tier ("Nasdaq")) ending on the day
preceding the receipt of the last required federal bank regulatory approval or
waiver required to effect the Bank Merger (such period herein called the "Base
Period"). For purposes of this Agreement, references to Webster Common Stock
shall be deemed to include, where appropriate, references to the right to
receive shares of Webster's Series C Participating Preferred Stock pursuant to
the Rights Agreement, dated as of February 5, 1996, as amended, between Webster
and American Stock Transfer & Trust Company (the "Rights Agreement").
(b) All of the shares of Village Common Stock converted into Webster
Common Stock or cash 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
Village Common Stock shall thereafter represent the right to receive (i) the
number of whole shares of Webster Common Stock or cash determined in accordance
with Section 1.4(a) hereof and (ii) if applicable, cash in lieu of fractional
shares determined in accordance with Section 1.4(d) hereof. Certificates
previously representing shares of Village Common Stock shall be exchanged for
certificates representing whole shares of Webster Common Stock, cash and cash in
lieu of fractional shares issued in consideration therefor, as the case may be,
upon the surrender of such Certificates in accordance with Section 2.2 hereof,
without any interest thereon. If 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 Village Common Stock that are
owned by Village as treasury stock and all shares of Village Common Stock that
are owned directly or indirectly by Webster or Village or any of their
respective Subsidiaries (as defined in Section 9.13 hereof) (other than shares
of Village 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, whether held directly or
indirectly by Webster or Village, as the case may be, being referred to herein
as "Trust Account Shares") and other than any shares of Village Common Stock
held by Webster or Village or any of their respective Subsidiaries in respect of
a debt previously contracted (any such shares, whether held directly or
indirectly by Webster or Village, 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 Village or any Village Subsidiary (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 Village 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 closing time average 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 fifteen
consecutive trading days on which shares of Webster Common Stock are actually
traded (as reported on the Nasdaq) ending on the third trading day preceding the
Closing Date (the "Closing Value"). Following consummation of the Merger, no
holder of Village Common Stock shall be entitled to dividends or any other
rights in respect of any such fraction.
3
<PAGE>
(e) Notwithstanding anything in this Agreement to the contrary and
unless otherwise provided by applicable law, shares of Village Common Stock that
are issued and outstanding immediately prior to the Effective Time and that are
owned by shareholders who have properly dissented (the "Dissenting Shares")
within the meaning of Sections 33-855 through 33-872 of the Connecticut Business
Corporation Act, as amended (the "Connecticut Corporation Law"), shall not be
converted into the right to receive shares of Webster Common Stock or cash, as
the case may be, unless and until such shareholders shall have failed to perfect
or shall have effectively withdrawn or lost their right of payment under
applicable law. If any such shareholder shall have failed to perfect or shall
have effectively withdrawn or lost such right of payment, each share of Village
Common Stock held by such shareholder shall thereupon be deemed to have been
converted into the right to receive and become exchangeable for, at the
Effective Time, shares of Webster Common Stock pursuant to Section 1.4(a)(ii)
hereof.
(f) Village shall give Webster (i) prompt notice of any written notice
of intent to demand payment for shares filed pursuant to Section 33-861 of the
Connecticut Corporation Law received by Village, withdrawals of such notices,
and any other instruments served in connection with such notices pursuant to the
Connecticut Corporation Law and received by Village and (ii) the opportunity to
direct all negotiations and proceedings with respect to such notices under the
Connecticut Corporation Law consistent with the obligations of Village
thereunder. Village shall not, except with the prior written consent of Webster,
(x) make any payment with respect to any such notice, (y) offer to settle or
settle any such notices or (z) waive any failure to timely deliver a written
notice in accordance with the Connecticut Corporation Law.
1.5 THE BANK MERGER.
(a) Immediately upon the Effective Time, Village Bank will merge with
and into Webster Bank in the Bank Merger, with Webster Bank being the Surviving
Bank of the Bank Merger.
(b) As a result of the Bank Merger, (i) each share of Village Bank
common stock issued and outstanding immediately prior to the Effective Time
shall be canceled and (ii) the 1,000 shares of Webster Bank common stock issued
and outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall constitute the only shares of capital stock of the
Surviving Bank issued and outstanding immediately after the Effective Time.
(c) The Bank Merger shall have the effects set forth at 12 C.F.R.ss.
552.13(l) and Section 36a-126(b) of the Banking Law of Connecticut (the
"Connecticut Banking Law").
1.6 OPTIONS.
At the Effective Time, each option granted by Village to purchase shares of
Village Common Stock under the 1996 Stock Option Plan for Key Employees (the
"Village Stock Plan") 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 Village Stock Plan);
(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 Village Common Stock subject to the
option immediately before the Effective Time, multiplied by the
Exchange Ratio, provided that any fractional shares of Webster Common
Stock resulting from such multiplication shall be rounded down 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
4
<PAGE>
Village 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 shall be and is intended to be effected in a
manner which is consistent with Section 424(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The duration and other terms of the option
immediately after the Effective Time shall be the same as the corresponding
terms in effect immediately before the Effective Time, except that all
references to Village or Village Bank in the Village Stock Plan (and the
corresponding references in the option agreement documenting such option) shall
be deemed to be references to Webster or Webster Bank, as appropriate.
1.7 CERTIFICATE OF INCORPORATION.
At the Effective Time, the Restated Certificate of Incorporation, as
amended (the "Certificate of Incorporation"), of Webster, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation.
1.8 BYLAWS.
At the Effective Time, the Bylaws, as amended (the "Bylaws"), of Webster,
as in effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation.
1.9 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. The non-employee directors of Village serving immediately prior to
the Effective Time will be invited to serve on an advisory board to Webster Bank
after the Bank Merger for 24 months. Such advisory directors each will be paid
for such service up to $4,000 annually, based on a quarterly retainer of $1,000,
and quarterly meeting attendance fees of $1,000 for each meeting attended in
person. The Chairman of the Board of Village will be invited to serve as the
chairman of the advisory board, and will be paid for such service up to an
additional $2,000 annually, based on a quarterly retainer of $500.
1.10 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.
ARTICLE II
EXCHANGE OF SHARES
2.1 WEBSTER TO MAKE CASH AND 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 cash (such certificates for shares of Webster
Common Stock and cash being hereinafter referred to as the "Exchange Fund") to
be issued or paid pursuant to Sections 1.4 and Section 2.2(a) hereof in exchange
for outstanding shares of Village Common Stock.
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2.2 EXCHANGE OF CASH AND SHARES.
(a) Prior to the date of the special meeting of Village's shareholders
(the "Special Meeting") contemplated by Section 6.3 hereof, Webster shall
prepare a form, subject to review and comment by Village (an "Election Form"),
pursuant to which a holder of shares of Village Common Stock may specify the
number of shares owned by such holder that such holder desires to be converted
into a right to receive cash in the Merger and the number of such shares owned
by such holder that such holder desires to be converted into a right to receive
shares of Webster Common Stock in the Merger. Village shall cause an Election
Form (and a letter of transmittal for use in exchanging Certificates for Webster
Common Stock or cash, as the case may be) to be included with the proxy
statement/prospectus to be sent to Village's shareholders in connection with the
Special Meeting (the "Proxy Statement/Prospectus") and mailed to each holder of
shares of Village Common Stock as of the record date for such meeting (such
shareholders hereinafter referred to as "Election Eligible Shareholders"). Only
Election Eligible Shareholders shall have the right to receive and submit an
Election Form.
(b) Each Election Eligible Shareholder (other than holders of Village
Common Stock which, in accordance with Section 1.4(c) hereof, are to be canceled
in the Merger) shall have the right to specify in an Election Form the number of
shares owned by such holder that such holder desires to have converted into a
right to receive cash in the Merger (a "Cash Election") and the number of Shares
owned by such holder that such holder desires to have converted into a right to
receive shares of Webster Common Stock in the Merger (a "Stock Election");
provided that any holders of Non-Electing Shares shall be deemed to have made a
Stock Election. For purposes of this Agreement, "Non-Electing Shares" means all
shares (other than Dissenting Shares and shares that are to be canceled in the
Merger) of Village Common Stock outstanding at the Effective Time as to which
neither an effective Cash Election nor an effective Stock Election was made as
of the Election Deadline. A Cash Election or a Stock Election shall be effective
only if the Exchange Agent appointed by Webster pursuant to Section 2.1 hereof
shall be received no later than 5:00 p.m. New York City time on the date
specified on such Election Form, which date shall be no earlier than the fifth
business day preceding the date of the Special Meeting (the "Election Deadline")
(i) an Election Form covering the shares to which such Cash Election and/or
Stock Election applies, executed and completed in accordance with the
instructions set forth in such Election Form and (ii) the Certificate or
Certificates and the related letter(s) of transmittal in such form and with such
endorsements, stock powers and signature guarantees as may be required by the
letter of transmittal or a guarantee of delivery of such Certificates that
complies with the requirements set forth in the letter of transmittal, provided
that such Certificates are in fact delivered by the time set forth in such
guarantee of delivery. A Cash Election or Stock Election may be revoked or
changed only by delivering to the Exchange Agent, prior to the Election
Deadline, a written notice of revocation or, in the case of a change, a properly
completed revised Election Form that identifies the Certificates to which such
revised Election Form applies. Delivery to the Exchange Agent prior to the
Election Deadline of a revised Election Form with respect to any Certificate
shall result in the revocation of all prior Election Forms with respect to all
shares evidenced by such Certificate. Any termination of this Agreement in
accordance with Article 8 shall result in the revocation of all Election Forms
delivered to the Exchange Agent on or prior to the date of such termination. If
an Election Form is revoked (either by delivery of a written notice of
revocation or by delivery of a revised Election Form), the Certificates to which
such Election Form applies, if previously delivered to the Exchange Agent, shall
be returned to the person revoking such Election Form unless such person
otherwise instructs the Exchange Agent.
(c) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a Certificate or Certificates who
did not submit an effective Cash Election or Stock Election 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
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representing the shares of Webster Common Stock and the cash in lieu of
fractional shares into which the shares of Village Common Stock represented by
such Certificate or Certificates shall have been converted pursuant to this
Agreement. Village 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 Village
Common Stock shall have become entitled pursuant to the provisions of Section
1.4(a)(ii) 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.
(d) 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 Village Common Stock shall have been converted.
(e) 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 or cash is to be paid to a person other than the
registered holder, it shall be a condition of the issuance or payment 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 or payment 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.
(f) 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
Village of the shares of Village 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
Agent, they shall be canceled and exchanged for certificates representing shares
of Webster Common Stock as provided in this Article II.
(g) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Village for one year after the Effective Time may be returned to
Webster. Any shareholders of Village who have not complied with this Article II
before such portion of the Exchange Fund is returned to Webster shall thereafter
look only to Webster for payment of their shares of Webster Common Stock and/or
cash, as the case may be, and unpaid dividends and distributions on Webster
Common Stock deliverable in respect of each share of Village Common Stock such
shareholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of Webster,
Village, the Exchange Agent or any other person shall be liable to any former
holder of shares of Village Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(h) 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
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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/or cash, as the case may be, deliverable in respect thereof
pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VILLAGE
Village hereby makes the following representations and warranties to
Webster as set forth in this Article III, each of which is being relied upon by
Webster as a material inducement to enter into and perform this Agreement. All
of the disclosure schedules of Village referenced below and thereby required of
Village pursuant to this Agreement, which disclosure schedules shall be
cross-referenced to the specific sections and subsections of this Agreement and
delivered herewith, are referred to herein as the "Village Disclosure Schedule."
3.1 CORPORATE ORGANIZATION.
(a) Village is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Connecticut. Village has the
corporate power and corporate 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 business conducted by it or the character or location of any
properties or assets owned or leased by it makes such licensing or qualification
necessary. Village is duly registered as a bank holding company with the Board
of Governors of the Federal Reserve System (the "Federal Reserve System") under
the Banking Holding Company Act of 1956, as amended (the "BHCA"). The Articles
of Incorporation, as amended (the "Articles of Incorporation"), and By-Laws of
Village, 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.
(b) Village Bank is a state chartered bank duly organized, validly
existing and in good standing under the laws of the State of Connecticut. The
deposit accounts of Village Bank are insured by the Federal Deposit Insurance
Corporation (the "FDIC") through the Bank Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required in connection
therewith have been paid by Village Bank. Village Bank has the corporate power
and corporate 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
business conducted by it or the character or the location of any properties or
assets owned or leased by it makes such licensing or qualification necessary.
The Articles of Incorporation, as amended (the "Articles of Incorporation"), and
Bylaws, as amended (the "Bylaws"), of Village Bank, 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.
3.2 CAPITALIZATION.
(a) The authorized capital stock of Village consists of 10,000,000
shares of Village Common Stock. As of the date hereof, there are (i) 1,942,334
shares of Village Common Stock issued and outstanding and no shares of Village
Common Stock held in Village's treasury, (ii) no shares of Village Common Stock
reserved for issuance upon exercise of outstanding stock options or otherwise,
except for (x) 137,500 shares of Village Common Stock reserved for issuance
pursuant to the Village Stock Plan (of which options for 91,700 shares are
currently outstanding), (y) 388,466 shares of Village Common Stock reserved for
issuance upon exercise of the option to be issued to Webster pursuant to the
Option Agreement, and (z) shares of Village Common Stock reserved for issuance
pursuant to the
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terms of the Rights Agreement, dated as of September 16, 1996, between Village
and American Stock Transfer & Trust Company (the "Village Rights Agreement").
All of the issued and outstanding shares of Village 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, the aforementioned options to purchase
91,700 shares of Village Common Stock issued pursuant to the Village Stock Plan
and the rights issued pursuant to the Village Rights Agreement, Village 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 Village Common Stock or any other equity security of
Village or any securities representing the right to purchase or otherwise
receive any shares of Village Common Stock or any other equity security of
Village. The names of the optionees, the date of each option to purchase Village
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 Village Stock Plan are set forth in Section 3.2(a) of the
Village Disclosure Schedule. Since June 30, 1998, Village 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 prior to July 9, 1998 under the
Village Stock Plan.
(b) Section 3.2(b) of the Village Disclosure Schedule sets forth a
true, correct and complete list of all Subsidiaries of Village as of the date of
this Agreement. Village 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 thereof. No Village 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. Except as set forth at
Section 3.2(b) of the Village Disclosure Schedule, Village does not directly or
indirectly engage in any non-banking activities.
3.3 AUTHORITY; NO VIOLATION.
(a) Village has full corporate power and corporate 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 Village. The Board of Directors of Village has directed that
this Agreement, the Merger and the other transactions contemplated hereby be
submitted to Village's shareholders for approval at the Special Meeting and,
except for the approval of this Agreement, the Merger and the other transactions
contemplated hereby by the requisite vote of Village's shareholders, no other
corporate proceedings on the part of Village (except for matters related to
setting the date, time, place and record date for the Special Meeting) are
necessary to approve this Agreement, the Bank Merger Agreement or the Option
Agreement or to consummate the transactions contemplated hereby or thereby. This
Agreement has been, and the Option Agreement will be, duly and validly executed
and delivered by Village and (assuming due authorization, execution and delivery
by Webster) will constitute valid and binding obligations of Village,
enforceable against Village 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) Village Bank has full corporate power and corporate 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
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contemplated thereby have been duly and validly approved by the Board of
Directors of Village Bank and by Village as the sole shareholder of Village
Bank. No other corporate proceedings on the part of Village Bank will be
necessary to consummate the transactions contemplated thereby. The Bank Merger
Agreement will be duly and validly executed and delivered by Village Bank and
will (assuming due authorization, execution and delivery by Webster Bank)
constitute a valid and binding obligation of Village Bank, enforceable against
Village 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 Village or the Bank Merger Agreement by Village Bank, nor the
consummation by Village or Village Bank, as the case may be, of the transactions
contemplated hereby or thereby, nor compliance by Village or Village Bank with
any of the terms or provisions hereof or thereof, will (i) violate any provision
of the Articles of Incorporation or By-Laws of Village or the Articles of
Incorporation or Bylaws of Village Bank, as the case may be, or (ii) assuming
that the consents and approvals referred to in Section 3.4(a) hereof are duly
obtained, (x) violate any Laws (as defined in Section 9.13 hereof) applicable to
Village, Village 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
Village or Village 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 Village or Village Bank is a party, or
by which they or any of their respective properties or assets may be bound or
affected, except in the case of clause (ii), for such matters as would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect (as defined in Section 9.13 hereof) on Village or Village Bank or
materially impair their ability to consummate the transactions contemplated by
this Agreement.
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 Federal Reserve Board
under the BHCA and the Office of Thrift Supervision (the "OTS") under the Home
Owners Loan Act of 1933 (the "HOLA") and the Bank Merger Act and approval of
such applications and notices, (ii) the filing of any required applications or
notices with the FDIC and the OTS as to the subsidiary activities of Village
Bank which become service corporation or operating subsidiaries of Webster Bank
and approval of such applications and notices, (iii) the filing of applications
and notices with the Banking Commissioner of the State of Connecticut (the
"Connecticut Commissioner") and approval of such applications and notices as to
the Merger and the Bank Merger (the "State Banking Approvals"), (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 Village Common Stock pursuant to the Option Agreement, if not
exempt, (v) the filing with the Securities and Exchange Commission (the "SEC")
of a registration statement on Form S-4 (the "Registration Statement") to
register the shares of Webster Common Stock to be issued in connection with the
Merger (including the shares of Webster Common Stock that may be issued upon the
exercise of the options referred to in Section 1.6 hereof), which will include
the Proxy Statement/Prospectus, (vi) the approval of this Agreement by the
requisite vote of the shareholders of Village, (vii) the filing of the
Certificate of Merger with the Secretary of State of Connecticut pursuant to the
Connecticut Corporation Law, (viii) the filing of the Certificate of Merger with
the Secretary of State of Delaware pursuant to the Delaware Corporation Law,
(ix) the filings with the Secretary of State of Connecticut and the OTS required
in connection with the Bank Merger Agreement, (x) such filings, authorizations
and approvals as are required to be made or obtained under the securities or
"Blue Sky" laws of various states or with The Nasdaq Stock Market, Inc. (or such
other exchange as may be applicable) in connection with the issuance of the
shares of Webster Common Stock pursuant to
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this Agreement, and (xi) such filings, authorizations, approvals or consents
that are set forth in Section 3.4(a) of the Village Disclosure Schedule, no
consents or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (1) the execution and delivery by Village of this
Agreement and the Option Agreement, (2) the execution and delivery by Village
Bank of the Bank Merger Agreement, (3) the consummation by Village of the
Merger, the Option Agreement and the other transactions contemplated hereby or
thereby, (4) the consummation by Village Bank of the Bank Merger and 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 Village, Village Bank, Webster or Webster
Bank, or materially impair the ability of Webster to consummate the transactions
contemplated hereby or thereby.
(b) Village hereby represents to Webster that it has no Knowledge (as
defined in Section 9.13 hereof) of any reason why approval or effectiveness of
any of the applications, notices or filings referred to in Section 3.4(a) hereof
cannot be obtained or granted on a timely basis.
3.5 LOAN PORTFOLIO; REPORTS.
(a) Except as set forth at Section 3.5(a) of the Village Disclosure
Schedule, as of December 31, 1997 and thereafter through and including the date
of this Agreement, neither Village nor Village Bank is 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 shareholder of Village or any of its Subsidiaries, or
any Affiliated Person (as defined in Section 9.13 hereof) of the foregoing.
(b) Village and Village 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 with (i) the Federal
Reserve Board, (ii) the FDIC, (iii) the Connecticut Commissioner and any other
state banking commissions or any other state regulatory authority (each a "State
Regulator"), (iv) the SEC and (v) except for such matters as would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect on Village or Village Bank or materially impair their ability to
consummate the transactions contemplated by this Agreement, The Nasdaq Stock
Market Small Cap Market and any other self-regulatory organization ("SROs")
(collectively "Regulatory Agencies"). Except for normal examinations conducted
by a Regulatory Agency in the regular course of the business of Village and its
Subsidiaries, no Governmental Entity is conducting, or has conducted, any
proceeding or investigation into the business or operations of Village or
Village Bank, no such proceeding or investigation is pending, nor do Village or
Village Bank have any Knowledge of any threatened proceeding or investigation.
3.6 FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; BOOKS AND RECORDS.
(a) Village has previously delivered to Webster true, correct and
complete copies of (a) the consolidated balance sheets of Village and its
Subsidiaries as of December 31 for the years 1995, 1996, and 1997 and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the years 1994 through 1997, inclusive, as reported in Village's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 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 Deloitte &
Touche LLP, independent public accountants with respect to Village, and (b) the
unaudited condensed consolidated balance sheets of Village and Subsidiaries as
of June 30, 1998 and the related comparative unaudited condensed consolidated
statements of income and cash flows for the six month periods ended June 30,
1997 and 1998. The financial statements referred to in this Section 3.6(a)
(including the related notes, where applicable) fairly present, and the
financial statements referred to in Section 6.8
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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 Village 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, in all material respects, 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 generally accepted accounting
principles ("GAAP") 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. Village's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 and all reports filed under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act since December 31, 1994
comply in all material respects with the appropriate requirements for such
reports under the Exchange Act, and Village has previously delivered or made
available to Webster true, correct and complete copies of such reports. The
books and records of Village and Village Bank have been, and are being,
maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements.
(b) Except and to the extent (i) reflected, disclosed or provided for
in the financial statements as of December 31, 1997 referred to above, (ii) of
liabilities incurred since December 31, 1997 in the ordinary course of business
and consistent with past practice, and (iii) of liabilities related to this
Agreement, Village has no liabilities, whether absolute, accrued, contingent or
otherwise, except for such liabilities as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect on Village
or Village Bank.
3.7 BROKER'S FEES.
Neither Village nor any Village 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 Bank Merger
Agreement or the Option Agreement, except that Village has engaged, and will pay
a fee or commission to Morgan Lewis Githens & Ahn, Inc. ("Morgan Lewis") in
accordance with the terms of a letter agreement between Morgan Lewis and
Village, dated April 23, 1998, a true, complete and correct copy of which has
been previously delivered by Village to Webster.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in Village's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, or in any Current or Quarterly Report
of Village on Form 8-K or Form 10-Q filed on or before the date of this
Agreement, a true, correct and complete copy of which has previously been
delivered to Webster, since December 31, 1997, (i) neither Village nor any of
its Subsidiaries has incurred any material liability, except as contemplated by
this Agreement or in the ordinary course of their business consistent with their
past practices, and (ii) no event has occurred which has had, or is likely to
have, individually or in the aggregate, a Material Adverse Effect on Village.
(b) Since December 31, 1997, Village 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) Except as set forth at Section 3.9(a) of the Village Disclosure
Schedule, neither Village nor any of its Subsidiaries is a party to any, and
there are no pending or, to the Knowledge of Village or Village Bank,
threatened, legal, administrative, arbitration or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against or in
which Village or any of
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its Subsidiaries is a party, directly or in a fiduciary capacity, that include a
claim or claims in excess of $10,000, or which challenge the validity or
propriety of the transactions contemplated by this Agreement, the Bank Merger
Agreement or the Option Agreement.
(b) There is no injunction, order, judgment, or decree imposed upon
Village, any of its Subsidiaries or the assets of Village or any of its
Subsidiaries.
3.10 TAXES AND TAX RETURNS.
Each of Village and its Subsidiaries has duly filed all federal and state
tax returns required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all material respects) and has duly paid
or made provision for the payment of all material taxes and other governmental
charges which have been incurred or are due or claimed to be due from it by
federal and state taxing authorities on or prior to the date hereof other than
taxes or other charges which are not yet delinquent and which have not been
finally determined. All liability with respect to the income tax returns of
Village and its Subsidiaries has been satisfied for all years to and including
1997. The Internal Revenue Service (the "IRS") has not notified Village of, or
otherwise asserted, that there are any material deficiencies with respect to the
income tax returns of Village subsequent to 1991. There are no material disputes
pending, or claims asserted for, taxes or assessments upon Village or any of its
Subsidiaries, nor has Village 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, federal and state returns which are accurate and complete in all
material respects have been filed by Village and its Subsidiaries for all
periods for which returns were due with respect to income tax withholding,
social security and unemployment taxes and the amounts shown on such federal and
state returns to be due and payable have been paid in full or adequate provision
therefor has been included by Village in its consolidated financial statements
as of December 31, 1997 and June 30, 1998.
3.11 EMPLOYEE BENEFIT PLANS.
(a) Section 3.11(a) of the Village 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 Village or any of its Subsidiaries or any other
entity which together with Village would be deemed a "single employer" within
the meaning of Section 4001 of ERISA or Code Sections 414(b), (c) or (m) or
under which Village or any such Subsidiary has any liability (collectively, the
"Plans").
(b) No Plan is subject to any of the following: (i) Section 302 of
ERISA; (ii) Title IV of ERISA and (iii) Section 412 of the Code. No Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of ERISA.
(c) Village has heretofore delivered to Webster true, correct and
complete copies of (i) each of the Plans that is currently in effect or under
which Village or any Village Subsidiary has any liability (an "Existing Plan")
and all related documents, (ii) the most recent determination letter from the
IRS (if applicable) for each Existing Plan, (ii) the current summary plan
description and any summaries of material modifications for each Existing Plan,
(iii) all agreements currently in force with fiduciaries and service providers
relating to each Existing Plan, (iv) annual reports (Form 5500 series) with
respect to all Plans filed for the preceding six plan years, and (v) all
substantive correspondence relating to any Plan addressed to or received from
the IRS, the Department of Labor, the Pension Benefit Guaranty Corporation or
any other governmental agency within the last six years or, if earlier, with
respect to any matter that is ongoing.
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(d) (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) no Plan
provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees of Village
or any Village Subsidiary beyond their retirement or other termination of
service, other than (A) coverage mandated by applicable Law, (B) death benefits
or retirement benefits under a Plan that is a "qualified" plan within the
meaning of Section 401(a) of the Code, (y) deferred compensation benefits under
a Plan that are accrued as liabilities on the financial statements referred to
in Section 3.6(a) hereof and, for purposes of Section 7.2(a) hereof, on the
financial statements referred to in Section 6.8 hereof, or (C) benefits the full
cost of which is borne by the current or former employee (or his beneficiary);
(iv) all contributions or other amounts payable by Village or any Village
Subsidiary with respect to each Plan in respect of current or prior plan years
have been paid or accrued in accordance with the terms of such Plan and
applicable Law and in the ordinary course of Village's business; (v) neither
Village nor any Village Subsidiary has engaged in a transaction in connection
with which Village or any Village Subsidiary could be 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; (vi) there
are no pending or, to the Knowledge of Village, 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; (vii) all Plans could be terminated as of
the Effective Time without any liability materially in excess of the amounts
accrued with respect to such Plans on the June 30, 1998 financial statements
referenced in Section 3.6(a) hereof and, for purposes of Section 7.2(a) hereof,
on the financial statements referred to in Section 6.8 hereof; and (viii) no
Plan, program, agreement or other arrangement, either individually or
collectively, provides for any material payment by Village or any Village
Subsidiary that would not be deductible under Code Sections 162(a)(1), 162(m) or
404 or that would constitute a "parachute payment" within the meaning of Code
Section 280G. For purposes of clause (i) of this Section 3.11(d), in the event
that there is a disqualifying defect that is correctable under an existing IRS
program for an expenditure not in excess of $50,000, the failure of such Plan to
be qualified shall not be considered to have a Material Adverse Effect on
Village pursuant to Section 7.2(a) of this Agreement.
3.12 CERTAIN CONTRACTS.
(a) Except as set forth at Section 3.12(a) of the Village Disclosure
Schedule, neither Village 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, the Bank Merger
Agreement or the Option 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, Village, the Surviving Corporation,
Webster Bank, Village Bank or the Surviving Bank 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 Village or Village
Bank, (iv) with or to a labor union or guild (including any collective
bargaining agreement) or (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, the Bank Merger Agreement or the Option 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, the Bank Merger Agreement or
the Option Agreement. Village has previously delivered to Webster true, correct
and complete copies of all employment, consulting and deferred compensation
agreements to which Village or any of its Subsidiaries is a party. Section
3.12(a) of the Village Disclosure Schedule sets forth a list of all material
contracts (as defined in Item 601(b)(10) of Regulation S-K) of Village. Each
contract, arrangement or commitment of the type described in this Section
3.12(a), whether or not set forth at Section 3.12(a) of the Village Disclosure
Schedule, is referred to herein as a "Village Contract," and neither Village nor
any of its Subsidiaries has received notice of,
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nor to the Knowledge of Village and Village Bank, has there been, any violation
of any Village Contract.
(b) (i) Each Village Contract is valid, binding with respect to
Village (or any of its Subsidiaries, as applicable) and in full force and
effect, (ii) Village and each of its Subsidiaries has in all material respects
performed all obligations required to be performed by it to date under each
Village 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 Village or any of its Subsidiaries under any such Village Contract.
3.13 AGREEMENTS WITH REGULATORY AGENCIES.
None of Village, any Village Subsidiary nor any of their affiliates is
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 has
adopted any board resolutions at the request of (each 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 Village, any Village Subsidiary or any of their
affiliates been advised by any Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
3.14 STATE TAKEOVER LAWS; ARTICLES OF INCORPORATION.
The Board of Directors of Village has approved this Agreement, the Bank
Merger Agreement and the Option Agreement, and has approved Village entering
into this Agreement and the Option Agreement, and the transactions contemplated
hereby and thereby, such that under the Connecticut Corporation Law and
Village's Articles of Incorporation, the only vote of Village's stockholders
necessary to consummate the transactions contemplated hereby (including the
Merger and issuance under the Option Agreement) is the approval of this
Agreement, the Merger and the other transactions contemplated hereby by the
affirmative vote of at least two-thirds of the issued and outstanding shares of
Village Common Stock.
3.15 ENVIRONMENTAL MATTERS.
(a) Each of Village and the Village Subsidiaries is in compliance in
all 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, except for such matters as would
not individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect on Village or the Village Subsidiaries or materially impair their
ability to consummate the transactions contemplated by this Agreement;
(b) There is no suit, claim, action, proceeding, investigation or
notice pending, or to the Knowledge of Village or Village Bank, threatened, in
which Village or any Village Subsidiary has been or, with respect to threatened
suits, claims, actions, proceedings, investigations or notices, is threatened to
be, named as a defendant or, to the Knowledge of Village or Village Bank,
threatened with respect to past or present actions or events that could form the
basis of any such suit, claim, action, proceeding, investigation or notice (x)
for alleged noncompliance (including by any predecessor), with any environmental
law, rule or regulation or (y) relating to any release or threatened release
into the environment of any Hazardous Material, whether or not occurring at or
on a site owned, leased or operated by Village or any Village Subsidiary, except
for such matters as would not individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on Village or the Village
Subsidiaries or materially impair their ability to consummate the transactions
contemplated by this Agreement;
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(c) To the Knowledge of Village and Village Bank, during the period of
Village's or any Village Subsidiary's ownership or operation of any of its
properties, there has not been any release of Hazardous Material in, on, under
or affecting any such property.
(d) To the Knowledge of Village and Village Bank, neither Village nor
any Village 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 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 a site owned, leased or operated by such person on 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, 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.
(f) Except as set forth at Section 3.15(f) of the Village Disclosure
Schedule, no real property owned or leased by Village or Village Bank as other
real estate owned ("OREO") or otherwise, or owned or controlled by Village or
Village Bank as a trustee or fiduciary meets the statutory criteria of an
"Establishment" as that term is defined pursuant to Section 22a-134(3) of the
General Statutes of Connecticut.
3.16 RESERVES FOR LOSSES.
All reserves or other allowances for possible losses reflected in Village's
most recent financial statements referred to in Section 3.6(a) hereof as of
December 31, 1997 and June 30, 1998 comply in all material respects with all
Laws. Neither Village nor Village Bank has been notified by the Federal Reserve
Board, the FDIC, the Connecticut Commissioner or Village's independent auditor,
in writing or otherwise, that such reserves are inadequate or that the practices
and policies of Village or Village Bank in establishing such reserves and in
accounting for delinquent and classified assets generally fail to comply with
applicable accounting or regulatory requirements, or that the Federal Reserve
Board, the FDIC, the Connecticut Commissioner or Village's independent auditor
believes such reserves to be inadequate or inconsistent with the historical loss
experience of Village or Village Bank. Village has previously furnished Webster
with a complete list of all extensions of credit and OREO that have been
classified by any bank examiner (regulatory or internal) as other loans
specially mentioned, special mention, substandard, doubtful, loss, classified or
criticized, credit risk assets, concerned loans or words of similar import.
Village agrees to update such list no less frequently than monthly after the
date of this Agreement until the earlier of the Closing Date or the date that
this Agreement is terminated in accordance with Section 8.1 hereof. All OREO
held by Village or Village Bank 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 Village Disclosure Schedule lists (i) all real property
owned by Village and each Village Subsidiary; (ii) each real property lease,
sublease or installment purchase arrangement to which Village or any Village
Subsidiary is a party; (iii) a description of each contract for the purchase,
sale, or development of real estate to which Village or any Village Subsidiary
is a party; and (iv) all individual items of Village's or any Village
Subsidiary's tangible personal property and equipment with a book value of
$25,000 or more or having any annual lease payment of $10,000 or more. Except
for (a) items reflected in Village's consolidated financial statements as of
December 31, 1997 referred to in Section 3.6(a) hereof, (b) exceptions to title
that do not interfere materially with Village's or any Village 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
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(and reflected on the financial statements referred to in Section 3.6(a) above),
(d) properties and assets sold or transferred in the ordinary course of business
consistent with past practices since December 31, 1997, (e) exceptions set forth
in a related title policy or lease, and (f) items listed at Section 3.17 of the
Village Disclosure Schedule, Village and each Village 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
Village as of December 31, 1997, free and clear of all liens, claims, charges
and other encumbrances. Village and each Village Subsidiary, as lessees, have
the right under valid and subsisting leases to occupy, use and possess all
property leased by them, and there has not occurred under any such lease any
breach, violation or default by Village or Village Bank, and neither Village nor
any Village Subsidiary has experienced any uninsured damage or destruction with
respect to such properties since December 31, 1997. All properties and assets
material to Village and each Village Subsidiary are in such operating condition
and repair that they are suitable for the purposes for which they are currently
utilized and comply with all Laws relating thereto now in effect. Neither
Village nor any Village Subsidiary is in default with respect to any such lease,
except for such defaults as would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect on Village or the Village
Subsidiaries or materially impair their ability to consummate the transactions
contemplated by this Agreement, and there has occurred no default by Village or
Village Bank or event which with the lapse of time or the giving of notice, or
both, would constitute a material default under any such lease.
3.18 INSURANCE.
Section 3.18 of the Village Disclosure Schedule contains a true, correct
and complete list of all insurance policies and bonds maintained by Village and
any Village Subsidiary, including the name of the insurer, the policy number,
the type of policy and any applicable deductibles, and all such insurance
policies and bonds (or other insurance policies and bonds that have, from time
to time, in respect of the nature of the risks insured against and amount of
coverage provided, been substantially similar in kind and amount) are in full
force and effect and have been in full force and effect as of the times they
were supposed to cover. As of the date hereof, neither Village nor any Village
Subsidiary has received any notice of cancellation or amendment of any such
policy or bond or is in default under any such policy or bond, no coverage
thereunder is being disputed and all claims thereunder have been filed in a
timely fashion. The existing insurance carried by Village and the Village
Subsidiaries is and will continue to be, in respect of the nature of the risks
insured against and the amount of coverage provided, sufficient for compliance
by Village and the Village Subsidiaries with all requirements of Laws and
agreements to which Village or any of the Village Subsidiaries is subject or is
party, except for such noncompliance as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect on Village
or the Village Subsidiaries or materially impair their ability to consummate the
transactions contemplated by this Agreement. True, correct and complete copies
of all such policies and bonds reflected at Section 3.18 of the Village
Disclosure Schedule, as in effect on the date hereof, have been delivered or
made available to Webster.
3.19 COMPLIANCE WITH APPLICABLE LAWS.
(a) Except for such noncompliance as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect on Village
or the Village Subsidiaries or materially impair their ability to consummate the
transactions contemplated by this Agreement, each of Village and any Village
Subsidiary has complied with all Laws applicable to it or to the operation of
its business. Neither Village nor any Village 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.
(b) Without in any way limiting the foregoing, Village Bank has
complied in all material respects with all Laws applicable to the provision of
products and services to customers through electronic delivery channels,
including, without limitation, Laws that govern advertising,
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proper use of customer information and insurance logos, the timing and manner of
providing disclosures and notices to customers, receipt of proper signatures and
authorizations, recordkeeping, and, to the extent applicable, the Interagency
Statement on Retail Sales of Nondeposit Investment Products. Any services
provided by third parties in connection with Village Bank's electronic banking
activities are provided under written agreements that provide for the
confidentiality of customer information, ownership of records, and safety of
customer assets. To the Knowledge of Village and Village Bank, there has been no
unauthorized access through electronic means to customer information or records
held at Village Bank or fraudulent use of customer information or accounts
through electronic access to the information or accounts held at Village Bank.
True, correct and complete copies of all contracts, agreements and licenses of
Village and Village Bank related to the provision of products and services
through electronic delivery channels have been delivered to Webster.
3.20 LOANS.
As of the date hereof:
(a) Except for such noncompliance as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect on Village
or the Village Subsidiaries or materially impair their ability to consummate the
transactions contemplated by this Agreement, all loans owned by Village or any
Village Subsidiary, or in which Village or any Village Subsidiary has an
interest, comply in all respects with all Laws, including, but not limited to,
applicable usury statutes, underwriting and recordkeeping requirements and the
Truth in Lending Act, the Equal Credit Opportunity Act, and the Real Estate
Settlement Procedures Act, and other applicable consumer protection statutes and
the regulations thereunder.
(b) All loans owned by Village or any Village Subsidiary, or in which
Village or any Village Subsidiary has an interest, have been made by Village in
accordance with board of director-approved loan policies. Each of Village and
each Village 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 and the related loan file of
Village Bank, 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 all loans owned by Village and each Village
Subsidiary are with full recourse to the borrowers unless otherwise indicated in
the related loan documents. Except as set forth at Section 3.20(b) of the
Village Disclosure Schedule, which shall be provided to Webster within 10 days
of the date of this Agreement, all loans purchased or originated by Village or
any Village Subsidiary and subsequently sold by Village or any Village
Subsidiary have been sold without recourse to Village or any Village Subsidiary
and without any liability under any yield maintenance or similar obligation.
True, correct and complete copies of loan delinquency reports as of October 30,
1998 prepared by Village and each Village Subsidiary, which reports include all
loans delinquent or otherwise in default, have been furnished to Webster. True,
correct and complete copies of the currently effective lending policies and
practices of Village and each Village Subsidiary also have been furnished to
Webster.
(c) Except as set forth at Section 3.20(c) of the Village Disclosure
Schedule, each outstanding loan participation sold by Village or any Village
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 Village or any
Village Subsidiary) proportionately to the share of such loan represented by
such participation without any recourse of such other lender or participant to
Village or any Village Subsidiary for payment or repurchase of the amount of
such loan represented by the participation or liability under any yield
maintenance or similar obligation. Village and any Village Subsidiary have
properly fulfilled in all respects its contractual responsibilities and duties
in any loan in which it acts as the lead lender or servicer and has complied
with its duties as required under applicable regulatory requirements.
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(d) Village and each Village 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, except for such
matters as would not, individually or in the aggregate, be reasonably expected
to have a Material Adverse Effect on Village or the Village Subsidiaries or
materially impair their ability to consummate the transactions contemplated by
this Agreement.
(e) Section 3.20(e) of the Village Disclosure Schedule sets forth a
list of all loans or other extensions of credit to all directors, officers and
employees, or any other person covered by Regulation O of the Federal Reserve
Board.
3.21 AFFILIATES.
Each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act")) of Village is listed at Section 3.21 of the Village
Disclosure Schedule. Each such person has delivered to Webster, concurrently
with the execution of this Agreement, a stockholder agreement in the form
attached hereto as Exhibit D (the "Village Stockholder Agreement").
3.22 OWNERSHIP OF WEBSTER COMMON STOCK.
Except as set forth at Section 3.22 of the Village Disclosure Schedule,
neither Village nor any of its directors, officers, affiliates or associates (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 case, any shares of outstanding capital stock of Webster
(other than those agreements, arrangements or understandings specifically
contemplated hereby).
3.23 VILLAGE RIGHTS AGREEMENT.
Village has taken or will take all action (including, if required,
redeeming all of the outstanding Village rights issued pursuant to the Village
Rights Agreement or amending or terminating the Village Rights Agreement) so
that the entering into of this Agreement and the Option Agreement and the
consummation of the transactions contemplated hereby and thereby do not and will
not result in the grant of any rights to any person under the Village Rights
Agreement or enable or require the Village rights to be exercised, distributed
or triggered.
3.24 FAIRNESS OPINION.
Village has received an opinion from Morgan Lewis to the effect that, in
its opinion, the consideration to be paid to stockholders of Village hereunder
is fair to such stockholders from a financial point of view (the "Fairness
Opinion"), and Morgan Lewis has consented to the inclusion of the Fairness
Opinion in the Registration Statement.
3.25 YEAR 2000 COMPLIANCE.
Village and the Village Subsidiaries have taken all reasonable steps
necessary to address the software, accounting and record keeping issues raised
in order to be substantially Year 2000 compliant on or before the end of 1999
and Village does not expect the future cost of addressing such issues to be
material. Neither Village nor any Village Subsidiary has received a rating of
less than satisfactory from any bank regulatory agency with respect to Year 2000
compliance. Village and the Village Subsidiaries are in compliance with all
guidelines provided by the FDIC and the Federal Financial Institution's
Examination Council regarding Year 2000 issues, except for such noncompliance as
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on Village or the Village Subsidiaries or materially
impair their ability to consummate the transactions contemplated by this
Agreement.
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3.26 INTELLECTUAL PROPERTY.
None of Village or any Village Subsidiaries has any material undisclosed
liability with respect to (i) patents, trademarks, trade names, service marks,
copyrights and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs and applications (in both source code and object code
form), and tangible or intangible proprietary information or material that are
used in the business of Village or such Village Subsidiary or (ii) licenses,
sublicenses and other agreements as to which Village or such Village Subsidiary
is a party and pursuant to which Village or such Village Subsidiary is
authorized to use any third party patents, trademarks or copyrights, including
software which are incorporated in, are or form a part of any Village or Village
Subsidiary product.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WEBSTER
Webster hereby makes the following representations and warranties to
Village as set forth in this Article IV, each of which is being relied upon by
Village as a material inducement to enter into and perform this Agreement.
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 corporate 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 or
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 the HOLA. The Certificate of Incorporation and Bylaws of Webster, copies
of which have previously been made available to Village, 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 power and corporate 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 or 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 Village, 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 consists of 50,000,000
shares of Webster Common Stock, of which 37,943,394 shares were outstanding (net
of 410,030 treasury shares) at September 30, 1998 and 3,000,000 shares of serial
preferred stock, par value $.01 per share ("Webster Preferred Stock"), none of
which were outstanding at September 30, 1998. At such date, there were options
outstanding to purchase 2,357,590 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 security of Webster or any securities representing
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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
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 serial preferred stock, par value $.01 per
share, none of which are issued and 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 corporate 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. No other corporate proceedings on the part of Webster
are necessary to consummate the transactions contemplated hereby or thereby.
This Agreement has been, and the Option Agreement will be, duly and validly
executed and delivered by Webster and (assuming due authorization, execution and
delivery by Village) will constitute valid and binding obligations of Webster,
enforceable against Webster 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) Webster Bank has full corporate power and corporate 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 duly and
validly approved by the Board of Directors of Webster Bank and by Webster as the
sole shareholder of Webster Bank. All corporate proceedings on the part of
Webster Bank necessary to consummate the transactions contemplated thereby will
have been taken prior to the Effective Time. The Bank Merger Agreement will be
duly and validly executed and delivered by Webster Bank and (assuming due
authorization, execution and delivery by Village Bank) 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 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, nor compliance by Webster or Webster Bank with
any of the terms or provisions hereof or thereof, will (i) violate any provision
of the 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(a) hereof are duly obtained, (x)
violate any Laws applicable to Webster, 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
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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, except in the case of clause (ii), for such matters as would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect on Webster or Webster Bank or materially impair their ability to
consummate the transactions contemplated by the Agreement.
4.4 CONSENTS, APPROVALS AND REPORTS.
(a) Except for (i) the filing of applications and notices, as
applicable, as to the Merger and the Bank Merger with the Federal Reserve Board
under the BHCA and the OTS under HOLA and the Bank Merger Act and approval of
such applications and notices, (ii) the filing of any required applications or
notices with the FDIC and the OTS as to the subsidiary activities of Village
Bank which become service corporations or operating subsidiaries of Webster Bank
and approval of such applications and notices, (iii) the filing and approval of
the State Banking Approvals, (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 Village Common
Stock pursuant to the Option Agreement, if not exempt, (v) the filing with the
SEC of the Registration Statement, (vi) the approval of this Agreement by the
requisite vote of the shareholders of Village, (vii) the filing of the
Certificate of Merger with the Secretary of State of Connecticut pursuant to the
Connecticut Corporation Law, (viii) the filing of the Certificate of Merger with
the Secretary of State of Delaware pursuant to the Delaware Corporation Law,
(ix) the filings with the Secretary of State of Connecticut and the OTS required
in connection with the Bank Merger Agreement, (x) such filings, authorizations
and approvals as are required to be made or obtained under the securities or
"Blue Sky" laws of various states or with The Nasdaq Stock Market, Inc. (or such
other exchange as may be applicable) in connection with the issuance of the
shares of Webster Common Stock pursuant to this Agreement, and (xi) any
necessary filings, authorizations, approvals or consents of third parties, 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 execution and delivery by Webster Bank of the Bank Merger Agreement, (3)
the consummation by Webster of the Merger and the other transactions
contemplated hereby, and (4) the consummation by Webster Bank of the Bank Merger
and 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 Village, Village Bank, Webster or
Webster Bank, or materially impair the ability of Webster to consummate the
transactions contemplated hereby or thereby.
(b) Webster hereby represents to Village that 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) hereof cannot be obtained or granted on a
timely basis.
(c) Webster and Webster Bank have 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, 1994, with (i) the
OTS, (ii) each State Regulator, (iii) the SEC and (iv) except for such matters
as would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on Webster or Webster Bank or materially impair their
ability to consummate the transactions contemplated by this Agreement, any SRO
(with reference to Webster and Webster Bank, "SRO" shall refer to Nasdaq and any
other self-regulatory organization). Except for normal examinations conducted by
a Regulatory Agency in the regular course of 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, 1994.
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4.5 FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; BOOKS AND RECORDS.
Webster has previously delivered to Village true, correct and complete
copies of (a) the consolidated statements of condition of Webster and its
Subsidiaries as of December 31 for the fiscal years 1996 and 1997 and the
related consolidated statements of income, comprehensive income, shareholders'
equity and cash flows for the fiscal years ended 1995 through 1997, inclusive,
as reported in Webster's Current Report on Form 8-K filed with the SEC on July
23, 1998 under the Exchange Act, in each case accompanied by the audit report of
KPMG LLP, independent public accountants with respect to Webster, and (b) the
unaudited consolidated statement of condition of Webster and its Subsidiaries as
of September 30, 1998 and the related comparative unaudited statements of
operations and cash flows for the nine month periods ended September 30, 1997
and 1998. 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, in all material
respects, 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 during the periods involved, except as indicated in such statements or
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, 1997 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 Village 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.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as disclosed in Webster's filings with the SEC on any of Forms 10-K,
10-Q and 8-K during 1998, true, correct and complete copies of which have
previously been delivered to Village, since December 31, 1997, no event has
occurred which has had, or is likely to have, individually or in the aggregate,
a Material Adverse Effect on Webster.
4.7 LEGAL PROCEEDINGS.
(a) Neither Webster nor Webster Bank is a party to any, and there are
no pending or, to the Knowledge of Webster or Webster Bank, threatened, legal,
administrative, arbitration or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Webster or
Webster Bank which challenge the validity or propriety of the transactions
contemplated by this Agreement, the Bank Merger Agreement or the Option
Agreement.
(b) There is no injunction, order, judgment or decree imposed upon
Webster, Webster Bank or the assets of Webster or Webster Bank.
4.8 TAXES AND TAX RETURNS.
Each of Webster and its Subsidiaries has duly filed all federal and state
tax returns required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all material respects) and/or has duly
paid or made provision for the payment of all material taxes and other
governmental charges which have been incurred or are due or claimed to be due
from it by federal and
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state taxing authorities on or prior to the date hereof other than taxes or
other charges (a) which (x) are not yet delinquent or (y) are being contested in
good faith and (b) which have not been finally determined. In addition, federal
and state returns which are accurate and complete in all material respects have
been filed by Webster and its Subsidiaries for all periods for which returns
were due with respect to income tax withholding, social security and
unemployment taxes and the amounts shown on such federal and state returns to be
due and payable have been paid in full or adequate provision therefor has been
included by Webster in its consolidated financial statements as of December 31,
1997 and September 30, 1998.
4.9 EMPLOYEE BENEFIT PLANS.
Webster has heretofore made available for inspection, or delivered (if
requested) to Village true, correct and complete copies of each employee benefit
plan arrangement or agreement that is maintained as of the date of this
Agreement (the "Webster Plans") by Webster or any of its Subsidiaries. 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 Webster Plan. The Webster Plans are in compliance in all material respects
with the applicable requirements of ERISA and the Code. Each Webster Plan
intended to be "qualified" within the meaning of Section 401(a) of the Code is
so qualified, except that in the event that there is a disqualifying defect that
is correctable under an existing IRS program for an expenditure not in excess of
$50,000, the failure of such Webster Plan to be qualified shall not be
considered to have a Material Adverse Effect on Webster pursuant to Section
7.3(a) of this Agreement.
4.10 COMPLIANCE WITH APPLICABLE LAWS.
(a) Except for such noncompliance as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect on Webster
or Webster Bank or materially impair their ability to consummate the
transactions contemplated by this Agreement, each of Webster and Webster Bank
has complied in all material respects with all Laws applicable to it or to the
operation of its business. Neither Webster nor Webster Bank 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.
4.11 AGREEMENTS WITH REGULATORY AGENCIES.
Neither Webster nor any of its affiliates is 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 has adopted
any board resolutions at the request of 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 Webster,
nor Webster Bank been advised by any Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
4.12 YEAR 2000 COMPLIANCE.
Webster and Webster Bank have taken all reasonable steps necessary to
address the software, accounting and record keeping issues raised in order to be
substantially Year 2000 compliant on or before the end of 1999 and Webster does
not expect the future cost of addressing such issues to be material except as
described in Webster's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997. Neither Webster nor Webster Bank has received a rating of
less than satisfactory from any bank regulatory agency with respect to Year 2000
compliance. Webster and Webster Bank are in compliance with all guidelines
provided by the OTS and the Federal Financial Institution's Examination Council
regarding Year 2000 issues, except for such noncompliance as would not,
individually or in the aggregate, be reasonably expected to have a
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Material Adverse Effect on Webster or Webster Bank or materially impair their
ability to consummate the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 COVENANTS OF VILLAGE.
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 Bank Merger Agreement or the Option Agreement or with the prior written
consent of Webster, Village and each Village Subsidiary shall carry on their
respective businesses in the ordinary course consistent with past practices and
consistent with prudent banking practices. Village will use its reasonable
efforts to (x) preserve its business organization and that of each Village
Subsidiary intact, (y) keep available to itself and Webster the present services
of the employees of Village and each Village Subsidiary and (z) preserve for
itself and Webster the goodwill of the customers of Village and each Village
Subsidiary and others with whom business relationships exist. Without limiting
the generality of the foregoing, and except as set forth in the Village
Disclosure Schedule or as otherwise contemplated by this Agreement or consented
to by Webster in writing, Village shall not, and shall not permit any Village
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 Village of $.09 per share on the Village Common
Stock with declaration, record and payment dates corresponding to the quarterly
dividends paid by Village during its fiscal year ended December 31, 1997 and
except that any Village Subsidiary may declare and pay dividends and
distributions to Village); provided, however, that under no circumstances shall
Village declare, set aside or pay any dividends if it would result in the
holders of Village Common Stock receiving more than four dividend payments in
either of 1998 or 1999, when considered with anticipated Webster dividends based
on past practice, nor shall Village be prohibited from declaring, setting aside
or paying dividends consistent herewith if the Closing Date is such that holders
of Village Common Stock would receive fewer than four dividends in fiscal 1998
or 1999, when considered with anticipated Webster dividends based on past
practice, and it being further understood that the parties hereto intend for
Village to pay its regular quarterly cash dividends to stockholders as to any
completed fiscal quarter prior to the Effective Time;
(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 or existing pursuant to
the Village Stock Plan in accordance with their present terms, all to the extent
outstanding and in existence on the date of this Agreement, and except pursuant
to the Option Agreement, or (ii) repurchase, redeem or otherwise acquire (except
for the acquisition of Trust Account Shares and DPC Shares, as such terms are
defined in Section 1.4(c) hereof), any shares of the capital stock of Village or
any Village Subsidiary, or any securities convertible into or exercisable for
any shares of the capital stock of Village or any Village 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 Village Common Stock pursuant to stock
options or similar rights to acquire Village Common Stock granted pursuant to
the Village Stock Plan and outstanding prior to the date of this Agreement, in
each case in accordance with their present terms and (ii) pursuant to the Option
Agreement;
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(d) amend its Articles of Incorporation, By-Laws or other similar
governing documents;
(e) authorize or permit any of its officers, directors, employees or
agents to, directly or indirectly, solicit, initiate or encourage any inquiries
relating to, or the making of any proposal from, hold substantive discussions or
negotiations with or provide any information to, any person, entity or group
(other than Webster) concerning any Acquisition Transaction (as defined below).
Notwithstanding the foregoing, Village may provide information in connection
with a possible Acquisition Transaction if the Board of Directors of Village,
based upon advice of counsel, reasonably determines in the exercise of its
fiduciary duty that such information must be furnished. Village shall promptly
communicate to Webster the material terms of any proposal, whether written or
oral, which it may receive in respect of any Acquisition Transaction and whether
it is providing information in connection with, or which may lead to, an
Acquisition Transaction with a third party. Village will promptly cease and
cause to be terminated any existing activities, discussions or negotiations
previously conducted with any parties other than Webster with respect to any of
the foregoing. As used in this Agreement, "Acquisition Transaction" shall mean
any offer, proposal or expression of interest relating to (i) any tender or
exchange offer, (ii) merger, consolidation or other business combination
involving Village or any Village Subsidiary, or (iii) the acquisition in any
manner of a substantial equity interest in, or a substantial portion of the
assets and/or liabilities, out of the ordinary course of business, of, Village
or Village Bank other than the transactions contemplated or permitted by this
Agreement, the Bank Merger Agreement and the Option Agreement;
(f) make capital expenditures aggregating in excess of $25,000, except
for ongoing maintenance, repairs and replacements;
(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, the Bank Merger Agreement or the Option Agreement, except, in every
case, as may be required by applicable law;
(j) change its methods of accounting in effect at December 31, 1997
except as required by changes in GAAP or regulatory accounting principles as
concurred to by Webster'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 other agreement, arrangement, plan or policy relating to one or more of its
current or former directors, officers, employees or independent contractors,
(ii) increase in any manner the compensation of any employee or director, except
that in connection with scheduled annual evaluations of employees, Village Bank
shall be permitted to award compensation increases not in excess of 4.5% in any
individual case in the ordinary course of business and consistent with past
practice, (iii) 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, stock units or
performance units or shares), (iv) 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, (v) hire any new employee at an
annual base
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compensation in excess of $35,000, (vi) pay expenses of any employees or
directors for attending conventions or similar meetings which conventions or
meetings are held after the date hereof, (vii) promote to a rank of vice
president or more senior any employee, (viii) pay any retention or other bonuses
or any severance, to any employee, except that Village shall be permitted to pay
year-end bonuses during December 1998 to directors, officers and employees in an
aggregate amount not to exceed $120,000 on a basis reasonably consistent with
its past practice in 1997 in accordance with the allocation set forth at Section
5.1(k) of the Village Disclosure Schedule, or (ix) make any nondeductible
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;
(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;
(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 Village or any Village Subsidiary without the
written consent of Webster as provided below, which shall not be unreasonably
withheld or delayed;
(p) make any investment, or incur deposit liabilities, other than in
the ordinary course of business consistent with past practices, including
deposit pricing, and which would not change the risk profile of Village Bank
based on its existing deposit and lending policies or make any equity
investments;
(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 Village
Bank lending policies, (ii) commercial business loans in excess of $500,000,
(iii) unsecured consumer loans in excess of $25,000, (iv) commercial real estate
first mortgage loans in excess of $300,000 as to any loan or $500,000 in the
aggregate as to related loans, or loans to related persons, 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 $300,000,
except in each case for loans for which written applications have been received
by Village Bank as of the date hereof and as set forth at Section 5.1(r) of the
Village Disclosure Schedule;
(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, except in
accordance with past practice; or
(u) agree or commit to do any of the actions set forth in (a) - (t)
above.
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The consent of Webster to any action by Village or any Village Subsidiary that
is not permitted by any of the preceding paragraphs shall be evidenced by a
writing signed by the Chairman, Chief Executive Officer and President or any
Executive Vice President of Webster. With respect to the foregoing, to the
extent that Village or Village Bank is required to take any action pursuant to a
requirement of a federal or state bank regulatory authority, they shall be
permitted to do so upon receipt of Webster's written consent, which shall not be
unreasonably withheld or delayed.
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 Village's prior written consent, Webster shall not, and shall
not permit Webster Bank to:
(a) take any action that will result in (i) any of Webster's
representations and warranties set forth in this Agreement being or becoming
untrue, unless the failure of such representations or warranties to be true
would not, individually or in the aggregate, have a Material Adverse Effect on
Webster, or (ii) 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, the
Bank Merger Agreement or the Option Agreement, except, in every case, as may be
required by applicable law; or
(b) take any other action that would materially adversely affect the
ability of Webster and Webster Bank to consummate the transactions contemplated
by this Agreement.
5.3 MERGER COVENANTS.
(a) Notwithstanding that Village believes that it has established all
reserves and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, Village 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, Village 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,
Village's loan, accrual and reserve policies to those policies of Webster to the
extent appropriate, provided, that any change in Village's policies in
connection with such matters need not be effected until the parties receive all
necessary governmental and stockholder approvals and consents to consummate the
transactions contemplated hereby.
(b) If it becomes necessary under Nasdaq rules or applicable laws to
obtain Webster shareholder approval of this Agreement, the Merger or the other
transactions contemplated hereby, Webster shall take all steps necessary to
obtain the approval of its shareholders as promptly as possible. In connection
therewith, Webster shall take all steps necessary to duly call, give notice and
convene a meeting of its shareholders for such purpose.
5.4 COMPLIANCE WITH ANTITRUST LAWS.
Each of Webster and Village shall use its reasonable best efforts to
resolve objections, if any, which may be asserted with respect to the Merger
under antitrust laws, including, without limitation, the Hart-Scott-Rodino Act.
In the event a suit is threatened or instituted challenging the Merger as
violative of antitrust laws, each of Webster and Village shall use its
reasonable best efforts to avoid the filing of, or resist or resolve such suit.
Webster and Village shall use their reasonable best efforts to take such action
as may be required: (a) by the Antitrust Division of the Department of Justice
or the Federal Trade Commission in order to resolve such objections as either of
them may have to the Merger under antitrust laws, or (b) by any federal or state
court of the United States, in any suit brought by a private party or
governmental entity challenging the Merger as violative of
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antitrust laws, in order to avoid the entry of, or to effect the dissolution of,
any injunction, temporary restraining order, or other order which has the effect
of preventing the consummation of the Merger. Reasonable best efforts shall not
include, among other things and to the extent Webster so desires, the
willingness of Webster to accept an order agreeing to the divestiture, or the
holding separate, of any assets of Webster or Village.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS.
(a) Upon the execution and delivery of this Agreement, Webster and
Village (as to information to be included therein pertaining to Village) shall
promptly cause to be prepared and filed with the SEC the Registration Statement.
Webster and Village shall use their reasonable best efforts to have the
Registration Statement declared effective by the SEC as soon as possible after
the filing. 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 Village
is discovered which should be set forth in an amendment of, or a supplement to,
the Registration Statement, including the Prospectus/Proxy Statement (including,
without limitation, any change in the Fairness Opinion), Village shall promptly
inform Webster and shall furnish Webster 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, Village (if prior to the meeting of shareholders 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
shareholders 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 the Bank Merger Agreement and Village shall furnish all information
concerning Village and the holders of Village 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
reasonable 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 and the Bank Merger). Village
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
Village 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 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 contemplation of the transactions contemplated herein.
(c) Village shall, upon request, furnish Webster with all information
concerning Village and its directors, officers and shareholders and such other
matters as may be reasonably necessary or advisable in connection with the
Registration Statement or any other statement, filing,
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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 Village 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, Village shall accord to the officers, employees,
accountants, counsel and other representatives of Webster and Webster Bank,
access, during normal business hours during the period prior to the Effective
Time, to all its and Village Bank's properties, books, contracts, commitments
and records and, during such period, Village shall make available to Webster (i)
a copy of each report, schedule, registration statement and other document filed
or received by it (including Village Bank) during such period pursuant to the
requirements of federal securities laws or federal or state banking laws and
(ii) all other information concerning its (including Village Bank) business,
properties and personnel as Webster may reasonably request. Webster shall
receive notice of all meetings of Village and Village Bank's Board of Directors
and any committees thereof, and of any management committees (in all cases, at
least as timely as all Village and Village Bank, as the case may be,
representatives to such meetings are required to be provided notice). Up to two
representatives of Webster shall be permitted to attend all meetings of the
Board of Directors (except for the portion of such meetings which relate to the
Merger or an Acquisition Transaction or such other matters deemed confidential
("Confidential Matters") of Village or Village Bank, as the case may be) and
such meetings of committees of the Board of Directors and management of Village
and Village Bank which Webster desires. 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 Village dated
July 16, 1998 (the "Confidentiality Agreement").
(b) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, Webster shall, and shall cause Webster Bank to,
afford to the officers, employees, accountants, counsel and other
representatives of Village, access, during normal business hours during the
period prior to the Effective Time, to such information regarding Webster as
shall be reasonably necessary for Village to fulfill its obligations pursuant to
this Agreement or which may be reasonably necessary for Village 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. Village 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) Village shall provide Webster with true, correct and complete
copies of all financial and other information provided to directors of Village
and Village Bank in connection with meetings of their Boards of Directors or
committees thereof, which information shall be provided to Webster concurrently
with its provision to the directors of Village or Village Bank, as applicable.
(e) Village acknowledges that Webster is in or may be in the process
of acquiring other businesses, banks and financial institutions and that in
connection with such acquisitions, information concerning Village may be
required to be included in the registration statements, if any, for the sale of
securities of Webster or in SEC reports in connection with such acquisitions.
Village agrees to provide Webster with any information, certificates, documents
or other materials about
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Village as are reasonably necessary to be included in such other SEC reports or
registration statements, including registration statements which may be filed by
Webster prior to the Effective Time. Village shall use its reasonable best
efforts to cause its attorneys and accountants to provide Webster and any
underwriters for Webster with any consents, comfort letters, opinion letters,
reports or information which are necessary to complete the registration
statements and applications for any such acquisition or issuance of securities.
Webster shall reimburse Village for reasonable expenses thus incurred by Village
should the transactions contemplated by this Agreement be terminated for any
reason.
6.3 SHAREHOLDER MEETING.
Village shall take all steps necessary to duly call, give notice of,
convene and hold the Special Meeting of its shareholders within 45 days after
the Registration Statement becomes effective for the purpose of voting upon the
approval of this Agreement, the Merger and the other transactions contemplated
hereby. Management and the Board of Directors of Village shall recommend to
Village's shareholders approval of this Agreement, the Merger, and the other
transactions contemplated hereby, together with any matters incident thereto,
and shall oppose any third party proposal or other action that is inconsistent
with this Agreement or the consummation of the transactions contemplated hereby,
unless the Board of Directors of Village reasonably determines, based upon the
advice of Village's legal counsel, that such recommendation or opposition, as
the case may be, would constitute a breach of the exercise of its fiduciary
duty. Village and Webster shall coordinate and cooperate with respect to the
foregoing matters.
6.4 LEGAL CONDITIONS TO MERGER.
Each of Webster and Village shall use their reasonable best efforts (a) to
take, or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party with
respect to the 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 Village or
Webster in connection with the Merger and the other transactions contemplated by
this Agreement.
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 Nasdaq (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; EMPLOYMENT AND OTHER AGREEMENTS.
(a) To the extent permissible under the applicable provisions of the
Code and ERISA, for purposes of crediting periods of service for eligibility to
participate and vesting, but not for benefit accrual purposes, under the Webster
Bank 401(k) Plan and the Webster Bank Employee Stock Ownership Plan (but not
under the Webster Bank Defined Benefit Pension Plan), and for purposes of
determining the number of weeks of paid vacation time to which a non-officer
employee is entitled, in the case of individuals who are employees of Village
Bank at the Effective Time and who become employees of Webster Bank, periods of
service with Village Bank before the Effective Time shall be treated as if such
service had been with Webster Bank. Individuals who are employees of Village
Bank at the Effective Time and who become employees of Webster Bank shall be
eligible to participate in the Webster Bank Defined Benefit Pension Plan and in
any other employee benefit plan (within the
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meaning of ERISA Section 3(3)) maintained by Webster Bank on the same terms and
conditions as apply generally to other employees of Webster Bank.
(b) Webster Bank will pay severance in accordance with Village Bank's
written severance policies, true, correct and complete copies of which are set
forth at Section 6.6(b) of the Village Disclosure Schedule.
(c) Webster will cause Webster Bank to offer a position of at-will
employment to each of Village Bank's non-officer or non-managerial branch office
personnel in good standing as of the Effective Time at their existing branch
location or within 20 miles of the employee's place of employment as of the
Effective Time. In addition, Webster will use its reasonable best efforts in
connection with reviewing applicants for employment positions to give Village
Bank employees who are not offered positions at the Effective Time the same
consideration as is afforded Webster or Webster Bank employees for such position
in accordance with existing formal or informal policies. Webster will provide
outplacement assistance to Village Bank employees who are not offered positions
at the Effective Time.
(d) 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 Village and Village Bank
that are specifically listed at Section 3.12(a) of the Village Disclosure
Schedule; provided, however, that in making the foregoing agreement, except as
otherwise required by law, Webster will honor such contracts only to the extent
that, as represented at Section 3.11 hereof, none of such deferred compensation,
employment, change of control and severance contracts, nor any other Plan,
program, agreement or other arrangement, either individually or collectively,
provides for any payment by Village or any Village Subsidiary that would not be
deductible under Code Sections 162(a)(1), 162(m) or 404 or that would constitute
a "parachute payment" within the meaning of Code Section 280G.
(e) Not later than 60 days after the date of this Agreement, Village
Bank will file with the IRS an application for a determination letter with
respect to the qualified status under Section 401(a) of the Code of the Village
Bank & Trust Company 401(k) Incentive Savings & Salary Reduction Plan, as
adopted effective August 1, 1996 and as amended (if applicable) thereafter, and
the tax exempt status of the trust related thereto, and Village Bank will use
its reasonable best efforts to obtain such determination letter from the IRS,
including, without limitation, adoption of such amendments and the taking of
such other actions as may be required by the IRS as a condition to the issuance
of a favorable determination letter, provided, however, that Village Bank shall
not be required to make such filing if, within 10 days after the date of this
Agreement, it provides to Webster a copy of a current determination letter from
the IRS with respect to the 401(k) Plan upon which Village Bank is entitled to
rely or establishes that the 401(k) Plan is a standardized plan and that it is
entitled to rely upon an opinion letter issued by the IRS with respect to such
plan. Village Bank will provide to Webster a copy of such determination letter
request at the time it is filed and thereafter will promptly provide Webster
with copies of any other correspondence or written communications provided to or
received from the IRS with respect to such request
(f) Not later than 10 days after the date of this Agreement, Village
will provide to Webster an estimated computation of the amount that would be
payable pursuant to Village's written 1996 change of control severance policy to
each of the directors of Village in the event of termination of their service at
the Effective Time.
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
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any time prior to the date of this Agreement, or who becomes prior to the
Effective Time, a director or officer or employee of Village (the "Indemnified
Parties") is, or is threatened to be, made a party based in whole or in part on,
or arising in whole or in part out of, or pertaining to (i) the fact that he is
or was a director, officer or employee of Village or any of their respective
predecessors or (ii) this Agreement or any of the transactions contemplated
hereby, whether in any case asserted or arising before or after the Effective
Time, the parties hereto agree to cooperate and to defend against and respond
thereto to the extent permitted by applicable law and the Articles of
Incorporation and By-Laws of Village. 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 and the Certificate of Incorporation and
Bylaws of Webster or the Charter and By-Laws of Webster Bank, as the case may
be, each such Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorney's fees and
expenses), 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). Webster shall have no obligation to advance
expenses incurred in connection with a threatened or pending action, suit or
preceding in advance of final disposition of such action, suit or proceeding,
unless (i) Webster would be permitted to advance such expenses pursuant to the
Delaware Corporation Law and Webster's Certificate of Incorporation or Bylaws,
and (ii) Webster receives an undertaking by the Indemnified Party to repay such
amount if it is determined that such party is not entitled to be indemnified by
Webster pursuant to the Delaware Corporation Law and Webster's Certificate of
Incorporation or Bylaws. Any Indemnified Party wishing to claim indemnification
under this Section 6.7, upon learning of any such claim, action, suit,
proceeding or investigation, shall 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 two 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 commercially reasonable efforts to cause the
persons serving as officers and directors of Village immediately prior to the
Effective Time to be covered by a directors' and officers' liability insurance
policy ("Tail Insurance") of substantially the same coverage and amounts
containing terms and conditions which are generally not less advantageous than
Village's current policy with respect to acts or omissions occurring prior to
the Effective Time which were committed by such officers and directors in their
capacity as such for an aggregate premium cost for the Tail Insurance of not
more than $141,000 and for a period not less than two years.
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 Village and Village 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 and Annual
Reports on Form 10-K promptly after filing such reports with the SEC.
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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 the Bank
Merger Agreement, or to vest the Surviving Corporation or the Surviving Bank
with full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger, or the constituent banks to the
Bank Merger, as the case may be, the proper officers and directors of each party
to this Agreement and Webster's and Village's Subsidiaries shall take all such
necessary action as may be reasonably requested by Webster.
6.10 ADVICE OF CHANGES.
Webster and Village shall promptly advise the other party of any change or
event that, individually or in the aggregate, has or would be reasonably likely
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, Village will promptly supplement
or amend the Village 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) hereof, as the case may be, or the compliance by Village with
the covenants set forth in Section 5.1 hereof.
6.11 CURRENT INFORMATION.
During the period from the date of this Agreement to the Effective Time,
Village 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 Village.
Village will promptly notify Webster of any material change in the normal course
of business or in the operation of the properties of Village 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 Village, and will keep Webster fully informed of such
events.
6.12 EXECUTION AND AUTHORIZATION OF BANK MERGER AGREEMENT.
Prior to the Effective Time, (a) Webster and Village shall approve the Bank
Merger Agreement as the sole shareholder of Webster Bank and Village Bank,
respectively, and (b) Webster Bank and Village Bank shall execute and deliver
the Bank Merger Agreement.
6.13 CHANGE IN STRUCTURE.
Webster may elect to modify the structure of the transactions contemplated
by this Agreement as noted herein so long as (i) there are no material adverse
federal income tax consequences to the Village shareholders as a result of such
modification, (ii) the consideration to be paid to the Village shareholders
under this Agreement is not thereby changed or reduced in amount, and (iii) such
modification will not be reasonably likely to delay materially or jeopardize
receipt of any Requisite Regulatory Approvals. In the event that Webster elects
to change the structure of the Merger, the parties agree to modify this
Agreement and the various exhibits hereto to reflect such revised structure. In
such event, Webster shall prepare appropriate amendments to this Agreement and
the exhibits hereto for execution by the parties hereto. Webster and Village
agree to cooperate fully with each other to effect such amendments.
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6.14 TRANSACTION EXPENSES OF VILLAGE.
(a) For planning purposes, Village shall, within 15 days from the date
hereof, provide Webster with its estimated budget of transaction-related
expenses reasonably anticipated to be payable by Village in connection with this
transaction, including the fees and expenses of counsel, accountants, investment
bankers and other professionals. Village shall promptly notify Webster if or
when it determines that it will expect to exceed its budget.
(b) Promptly after the execution of this Agreement, Village shall ask
all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements. Village shall accrue and/or
pay all of such amounts as soon as possible.
(c) Village shall advise Webster monthly of all out-of-pocket expenses
which Village has incurred in connection with this transaction.
(d) Webster, in reasonable consultation with Village, shall make all
arrangements with respect to the printing and mailing of the Proxy
Statement/Prospectus. Village, if it reasonably deems necessary, or otherwise
upon the request of Webster, also shall engage (at Webster's expense) a proxy
solicitation firm reasonably acceptable to Webster under terms and conditions
reasonably acceptable to Webster, to assist in the solicitation of proxies for
the Special Meeting of shareholders of Village. Village agrees to cooperate as
to such matters.
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) SHAREHOLDER APPROVAL.
This Agreement, the Merger and the other transactions contemplated
thereby shall have been approved and adopted by the affirmative vote of the
holders of at least two-thirds of the issued and outstanding shares of Village
Common Stock entitled to vote thereon.
(B) STOCK EXCHANGE LISTING.
The shares of Webster Common Stock which shall be issued in the Merger
(including the Webster Common Stock that may be issued upon exercise of the
options referred to in Section 1.6 hereof) upon consummation of the Merger shall
have been authorized for quotation on the Nasdaq (or such other exchange on
which the Webster Common Stock may become listed).
(C) OTHER APPROVALS.
All regulatory approvals required to consummate the transactions
contemplated hereby shall have been obtained 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"). No Requisite
Regulatory Approval shall contain a non-customary condition that Webster
reasonably determines to be burdensome or otherwise alter the benefits for which
it bargained in this Agreement.
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(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, the Option Agreement
or the Certificate of Merger shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger.
(F) FEDERAL TAX OPINION.
Webster and Village shall have received from Hogan & Harston L.L.P,
Webster's special counsel, an opinion to Webster and Village, in form and
substance reasonably satisfactory to Webster and Village, 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 time
of such opinion, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, such counsel may require and, to the extent such counsel deems
necessary or appropriate, may rely upon representations made in certificates of
officers of Village, 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.
The representations and warranties of Village 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; provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on
Village. Such determination of aggregate Material Adverse Effect shall be made
as if there were no materiality qualifications in such representations and
warranties. Webster shall have received a certificate signed on behalf of
Village by each of the President and Chief Executive Officer and the Executive
Vice President and Chief Financial Officer of Village to the foregoing effect.
(B) PERFORMANCE OF COVENANTS AND AGREEMENTS.
Village 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 Village by each of the President and Chief Executive Officer and the
Executive Vice President and Chief Financial Officer of Village to such effect.
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(C) CONSENTS UNDER AGREEMENTS.
The consent, approval or waiver of each person (other than the
Requisite Regulatory Approvals) whose consent or approval shall be required in
connection with the transactions contemplated hereby or in order to permit the
succession by the Surviving Corporation or the Surviving Bank, as applicable,
pursuant to the Merger or the Bank Merger to any obligation, right or interest
of Village or Village Bank under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument shall have been
obtained except for those, the failure of which to obtain, will not result in a
Material Adverse Effect on the Surviving Corporation or the Surviving Bank.
(D) NO PENDING GOVERNMENTAL ACTIONS.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(E) ACCOUNTANT'S COMFORT LETTER.
Village shall have caused to be delivered on the respective dates
thereof to Webster "comfort letters" from Deloitte & Touche LLP, Village's
independent public accountants, dated the date on which the Registration
Statement or last amendment thereto shall become effective, and dated the date
of the Closing (defined in Section 9.1 hereof), and addressed to Webster and
Village, with respect to Village's financial data presented in the Proxy
Statement/Prospectus, which letters shall be based upon Statements on Auditing
Standards Nos. 72 and 76.
7.3 CONDITIONS TO OBLIGATIONS OF VILLAGE.
The obligation of Village to effect the Merger is also subject to the
satisfaction or waiver by Village at or prior to the Effective Time of the
following conditions:
(A) REPRESENTATIONS AND WARRANTIES.
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; provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on
Webster. Such determination of aggregate Material Adverse Effect shall be made
as if there were no materiality qualifications in such representations and
warranties. Village shall have received a certificate signed on behalf of
Webster by each of the Chairman, Chief Executive Officer and President and the
Executive Vice President, Chief Financial Officer and Treasurer of Webster to
the foregoing effect.
(B) PERFORMANCE OF COVENANTS AND AGREEMENTS.
Webster shall have each 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. Village shall have received a certificate signed
on behalf of Webster by each of the Chairman, Chief Executive Officer and
President and the Executive Vice President, Chief Financial Officer and
Treasurer of Webster to the foregoing effect.
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(C) CONSENTS UNDER AGREEMENTS.
The consent or approval or waiver of each person (other than the
Requisite Regulatory Approvals) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument to which Webster or Webster Bank is a party or is otherwise bound
shall have been obtained, except for those, the failure of which to obtain, will
not result in a Material Adverse Effect.
(D) NO PENDING GOVERNMENTAL ACTIONS.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
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 the matters presented in connection with the
Merger by the shareholders of Village:
(a) by mutual consent of Webster and Village 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 Village 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 pursuant to this Section 8.1(b), 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 Village if the Merger shall not have been
consummated on or before August 31, 1999, 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 Webster or by Village (provided that Village is not in breach
of its obligations under Section 6.3 hereof) if the approval of the shareholders
of Village required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of shareholders or at any adjournment or postponement thereof;
(e) by either Webster or Village (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, has had or is likely to have a Material Adverse Effect on the
breaching party, and such breach shall not have been cured
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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 Village (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 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; and
(g) by Webster, if the management of Village or its Board of
Directors, for any reason, (i) fails to call and hold within 45 days of the
effectiveness of the Registration Statement the Special Meeting of Village's
shareholders to consider and approve this Agreement, the Merger and the other
transactions contemplated hereby, (ii) fails to recommend to shareholders the
approval of this Agreement, the Merger and the other transactions contemplated
hereby, (iii) fails to oppose any third party proposal that is inconsistent with
the transactions contemplated by this Agreement or (iv) violates Section 5.1(e)
of this Agreement.
(h) by Village, upon written notice delivered to Webster, as provided
below in this subsection (h), if the Base Period Trading Price shall be less
than $17.55, unless Webster elects, as provided below in this subsection (h),
that the Exchange Ratio shall be adjusted to equal that number obtained by
dividing $21.15 by the Base Period Trading Price, rounded to four decimal places
(the "Adjusted Exchange Ratio"). If Village elects to exercise its termination
right pursuant to this subsection (h), it shall give written notice to Webster
within three business days following the end of the Base Period. During the
three business-day period commencing with its receipt of such notice, Webster
shall have the option of agreeing to change the Exchange Ratio to the Adjusted
Exchange Ratio. If Webster makes the election contemplated by the preceding
sentence, then within such three business-day period Webster shall give written
notice to Village of such election and the Adjusted Exchange Ratio, whereupon no
termination shall have occurred pursuant to this subsection (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
Adjusted Exchange Ratio pursuant to this subsection (h).
8.2 EFFECT OF TERMINATION.
In the event of termination of this Agreement by either Webster or Village
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 shareholders of Village; provided, however,
that after any approval of the transactions contemplated by this Agreement by
Village's shareholders, there may not be, without further approval of such
shareholders, any amendment of this Agreement which reduces the amount or
changes the form of the consideration to be delivered to Village shareholders
hereunder other than as contemplated by this Agreement. This
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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 third day after the later to occur of (x) the date the last
Requisite Regulatory Approval is received and all applicable waiting periods
have expired and (y) the date the approval of Village's shareholders is
received, (ii) if elected by Webster, the last business day of the month in
which the date specified in the immediately preceding clause occurs, or (iii)
such other date, place and time as the parties may agree (the "Closing Date").
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS 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; BREAKUP FEE.
All costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense. All filing and other fees paid to the SEC in connection with this
Agreement shall be borne by Webster. In the event that this Agreement is
terminated by either Webster or Village by reason of a material breach pursuant
to Sections 8.1(e) or (f) hereof or by Webster pursuant to Section 8.1(g)
hereof, the other party shall pay all documented, reasonable costs and expenses
up to $200,000 incurred by the terminating party in connection with this
Agreement and the transactions contemplated hereby, plus a breakup fee of
$400,000. Except as set forth in the next sentence, in the event that this
Agreement is terminated by Webster under Section 8.1(d) hereof by reason of
Village shareholders not having given any required approval, Village shall pay
all documented, reasonable costs and expenses up to $200,000 incurred by Webster
in connection with this Agreement and the transactions contemplated hereby. If
this Agreement is terminated by Webster under Section 8.1(d) by reason of
Village shareholders not having given any required approval, and there shall
have been prior to the Special Meeting a "Third Party Public Event" (as defined
below), Village shall pay all documented, reasonable costs and expenses up to
$200,000 incurred by Webster in connection with this Agreement and the
transactions contemplated hereby, plus a breakup fee of $400,000. For purposes
of this Section 9.3, a "Third Party Public Event"
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shall refer to any of the following events: (i) any person (as defined at
Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the rules and regulations
thereunder), other than Webster or any Webster Subsidiary, shall have made a
bona fide proposal to Village or, by a public announcement or written
communication that is or becomes the subject of public disclosure, to Village's
shareholders to engage in an Acquisition Transaction (including, without
limitation, any situation in which any person other than Webster or any Webster
Subsidiary shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the Securities
Act, with respect to a tender offer or exchange offer to purchase any shares of
Village Common Stock such that, upon consummation of such offer, such person
would have beneficial ownership of 10.0% or more of the then outstanding shares
of Village Common Stock); or (ii) any director, officer or affiliate of Village
shall have, by any means which becomes the subject of public disclosure,
communicated opposition to this Agreement, the Merger or other transactions
contemplated hereby, or otherwise takes action to influence the vote of Village
shareholders against this Agreement, the Merger and the transactions
contemplated hereby.
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 (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004
Attn.: Stuart G. Stein, Esq.
and
(b) if to Village, to:
Village Bancorp, Inc.
25 Prospect Street
Ridgefield, CT 06877
Attn.: Robert V. Macklin
President and Chief Executive Officer
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with copies (which shall not constitute notice) to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attn.: David W. Ferguson, Esq.
Collins, Hannafin, Garamella, Jaber & Tuozzolo, P.C.
148 Deer Hill Avenue
Danbury, CT 06810
Attn.: Edward J. Hannafin, 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, the Bank Merger Agreement, the Option Agreement, the
Certificate of Merger and the Village Stockholder Agreement.
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.
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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 Nasdaq (or such other
exchange on which the Webster Common Stock may become listed), so long as this
Agreement is in effect, neither Webster nor Village shall, or shall permit any
of Webster's or Village'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 Bank Merger Agreement, the Option Agreement, the Certificate of
Merger or the Village Stockholder 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 10% or greater shareholder,
spouse or other person living in the same household of such shareholder, or any
company, partnership or trust in which any of the foregoing persons is an
officer, 10% or greater shareholder, general partner or 10% or greater trust
beneficiary.
"Knowledge": with respect to Webster, Webster Bank, Village or Village
Bank, as the case may be, means actual knowledge of that entity's executive
officers and directors.
"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, Webster Bank, Village
or Village Bank, as the case may be, means a condition, event, change or
occurrence that is reasonably likely to have a material adverse effect upon (A)
the financial condition, results of operations, business or properties of such
entity (other than as a result of changes in laws or regulations or accounting
rules of general applicability or interpretations thereof) or (B) the ability of
such entity to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement, the Bank Merger Agreement,
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the Certificate of Merger and, in the case of Village, the Option Agreement;
provided that (i) the taking of any action pursuant to this Agreement, (ii) any
adverse development caused by any action of Webster or Webster Bank (in the case
of an adverse development affecting Village or Village Bank) or Village or
Village Bank (in the case of any adverse development affecting Webster or
Webster Bank) that is not permitted by or in contravention of the covenants of
this Agreement, (iii) any changes affecting the banking industry generally or
banks conducting business in Connecticut in particular shall not be considered
in determining whether a Material Adverse Effect has occurred.
"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.
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IN WITNESS WHEREOF, Webster and Village 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
ATTEST:
By: /s/ Harriet Munrett Wolfe By: /s/ James C. Smith
---------------------------------- -------------------------------------
Harriet Munrett Wolfe James C. Smith
Senior Vice President, Counsel Chairman and Chief Executive Officer
and Secretary
VILLAGE BANCORP, INC.
ATTEST:
By: /s/ James R. Umbrager By: /s/ Robert V. Macklin
---------------------------------- -------------------------------------
James R. Umbrager Robert V. Macklin
Executive Vice President and President and Chief Executive Officer
Chief Financial Officer
EXHIBIT 2.2
OPTION AGREEMENT
THE TRANSFER OF THE OPTION GRANTED BY
THIS AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS.
This OPTION AGREEMENT, dated as of November 11, 1998 (this
"Agreement"), is entered into between VILLAGE BANCORP, INC., Connecticut
corporation ("Issuer"), and WEBSTER FINANCIAL CORPORATION, a Delaware
corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Plan"), which was executed by the
parties thereto prior to the execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into the
Plan and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Plan, the parties hereto
agree as follows:
SECTION 1. Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 388,466
fully paid and nonassessable shares of common stock, par value $3.33 per share
of Issuer ("Issuer Common Stock") (which number of shares is equal to 19.99% of
the number of outstanding shares of Issuer Common Stock on the date hereof), at
a price per share equal to $20.00 (the "Initial Price"); provided, however, that
in the event Issuer issues or agrees to issue any additional shares of Issuer
Common Stock (other than shares issued upon the exercise of options outstanding
as of the date of the Plan in accordance with their terms pursuant to its
existing stock option plans), or grants one or more options to purchase
additional shares of Issuer Common Stock at a price less than the Initial Price,
as adjusted pursuant to Section 5(b) hereof, such price shall be equal to such
lesser price (such price, as adjusted, is hereinafter referred to as the "Option
Price"). The number of shares of Issuer Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at any
time and from time to time following the occurrence of a Purchase Event (as
defined below); provided, however, that the Option shall terminate and be of no
further force and effect upon the earliest to occur of the following events
(which are collectively referred to as an "Exercise Termination Event"):
(i) The time immediately prior to the Effective Time;
(ii) 12 months after the first occurrence of a Purchase Event;
(iii) 12 months after the termination of the Plan following the
occurrence of a Preliminary Purchase Event (as defined below), unless
clause (vii) of this Section 2(a) is applicable;
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(iv) upon the termination of the Plan, prior to the occurrence of a
Purchase Event or Preliminary Purchase Event, by Issuer pursuant to
Sections 8.1(e) or (f) of the Plan, both parties pursuant to Section 8.1(a)
of the Plan, or by either party pursuant to Section 8.1(b) or (c) of the
Plan;
(v) 12 months after the termination of the Plan, by either party
pursuant to Section 8.1(d) of the Plan based on the required vote of
Issuer's shareholders not being received;
(vi) 12 months after the termination of the Plan, by Grantee pursuant
to Section 8.1(e) or (f) thereof as a result of a breach by Issuer, unless
such breach was willful or intentional; or
(vii) 24 months after the termination of the Plan, by Grantee pursuant
to Section 8.1(e) or (f) thereof as a result of a willful or intentional
breach by Issuer.
(b) The term "Preliminary Purchase Event" shall mean any of the
following events or transactions occurring on or after the date hereof and prior
to an Exercise Termination Event:
(i) Issuer without having received Grantee's prior written
consent, shall have entered into any letter of intent or definitive
agreement to engage in an Acquisition Transaction (as defined below) with
any Person (as defined below) 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 with any Person (as the term "person" is defined in
Sections 3(a)9 and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules and regulations thereunder)
other than Grantee or any Grantee Subsidiary. For purposes of this
Agreement "Acquisition Transaction" shall mean (x) a merger, consolidation
or other business combination involving Issuer, (y) a purchase, lease or
other acquisition of all or substantially all of the assets and/or
liabilities of Issuer, (z) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of Beneficial
Ownership (as the term "beneficial ownership" is defined in Regulation
13d-3(a) of the Exchange Act) of securities representing 10.0% or more of
the voting power of Issuer;
(ii) Any Person (other than Grantee, any Grantee Subsidiary or
any current affiliate of Issuer) shall have acquired Beneficial Ownership
of 10.0% or more of the outstanding shares of Issuer Common Stock;
(iii) (a) Any Person (other than Grantee or any Grantee
Subsidiary) shall have made a bona fide proposal to Issuer or, by a public
announcement or written communication that is or becomes the subject of
public disclosure, to Issuer's shareholders to engage in an Acquisition
Transaction (including, without limitation, any situation in which any
Person other than Grantee or any Grantee Subsidiary shall have commenced
(as such term is defined in Rule 14d-2 under the Exchange Act), or shall
have filled a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would have Beneficial Ownership of
10.0% or more of the then outstanding shares of Issuer Common Stock (such
an offer being referred to herein as a "Tender Offer" or an "Exchange
Offer", respectively)), and (b) the shareholders of Issuer do not approve
the Merger, as defined in the Plan, at the Special Meeting, as defined in
the Plan;
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(iv) There shall exist a willful or intentional breach under the
Plan by Issuer and such breach would entitle Grantee to terminate the Plan;
(v) The Special Meeting of Issuer's shareholders held for the
purpose of voting on the Plan shall not have been held pursuant to the Plan
or shall have been canceled prior to termination of the Plan, or for any
reason whatsoever Issuer's Board of Directors shall have failed to
recommend, or shall have withdrawn or modified in a manner adverse to
Grantee the recommendation of Issuer's Board of Directors, that Issuer's
shareholders approve the Plan, or if Issuer or Issuer's Board of Directors
fails to oppose any proposal by any Person (other than Grantee or any
Grantee Subsidiary); or
(vi) Any Person (other than Grantee or any Grantee Subsidiary)
shall have filed an application or notice with the Board of Governors of
the Federal Reserve System (the "FRB"), the Federal Deposit Insurance
Corporation (the "FDIC"), the Connecticut Banking Commissioner (the
"Commissioner"), or other regulatory or administrative agency or commission
(each, a "Governmental Authority") for approval to engage in an Acquisition
Transaction.
(c) The term "Purchase Event" shall mean any of the following events
or transactions occurring on or after the date hereof and prior to an Exercise
Termination Event:
(i) The acquisition by any Person (other than Grantee or any
Grantee Subsidiary) of Beneficial Ownership (other than on behalf of the
Issuer) of 25% or more of the then outstanding Issuer Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i) except that the percentage referred to in clause (z)
thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event known to Issuer; provided,
however, that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the "Option Notice," the
date of which being hereinafter referred to as the "Notice Date") specifying (i)
the total number of shares of Issuer Common Stock it will purchase pursuant to
such exercise and (ii) the time (which shall be on a business day that is not
less than three nor more than 10 business days from the Notice Date) on which
the closing of such purchase shall take place (the "Closing Date"); such closing
to take place at the principal office of the Issuer; provided, however, that, if
prior notification to or approval of the FDIC, the FRB, the Commissioner or any
other Governmental Authority is required in connection with such purchase (each,
a "Notification" or an "Approval," as the case may be), (a) Grantee shall
promptly file the required notice or application for approval
("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof, any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. On or prior to the Closing Date, Grantee shall have the right to revoke
its exercise of the Option by written notice to the Issuer given not less than
three business days prior to the Closing Date.
(f) At the closing referred to in Section 2(e) hereof, Grantee shall
pay to Issuer the aggregate purchase price for the number of shares of Issuer
Common Stock specified in the
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Option Notice in immediately available funds by wire transfer to a bank account
designated by Issuer; provided, however, that failure or refusal of Issuer to
designate such a bank account shall not preclude Grantee from exercising the
Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f) hereof, Issuer shall deliver to
Grantee a certificate or certificates representing the number of shares of
Issuer Common Stock specified in the Option Notice and, if the Option should be
exercised in part only, a new Option evidencing the rights of Grantee thereof to
purchase the balance of the shares of Issuer Common Stock purchasable hereunder.
(h) Certificates for Issuer Common Stock delivered at a closing
hereunder shall be endorsed with a restrictive legend substantially as follows:
The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended, and applicable state securities laws.
It is understood and agreed that the reference to the resale restrictions of the
Securities Act in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if Grantee shall have delivered to Issuer
a copy of a letter from the staff of the Securities and Exchange Commission (the
"SEC") or Governmental Authority responsible for administering any applicable
state securities laws or an opinion of counsel, in form and substance
satisfactory to Issuer's counsel, to the effect that such legend is not required
for purposes of the Securities Act or applicable state securities laws. In
addition such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by Grantee to Issuer of an Option Notice and the
tender of the applicable purchase price in immediately available funds on the
Closing Date, unless prohibited by applicable law, Grantee shall be deemed to be
the holder of record of the number of shares of Issuer Common Stock specified in
the Option Notice, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Issuer Common
Stock shall not then actually be delivered to Grantee. Issuer shall pay all
expenses and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2 in
the name of Grantee.
SECTION 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option that number of authorized and reserved shares of Issuer Common Stock
equal to the maximum number of shares of Issuer Common Stock at any time and
from time to time issuable hereunder, all of which shares will, upon issuance
pursuant hereto, be duly authorized, validly issued, fully paid, nonassessable,
and delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights; (ii) that it will not, by
amendment of its articles of incorporation 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 reasonable action as may from time to time be
requested by the Grantee, at Grantee's expense (including (x) complying with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. ss. 18a and regulations promulgated thereunder and (y) in the event
prior approval of or notice to the FDIC, the FRB, the Commissioner or any other
Governmental Authority, under the Change in Bank Control Act of 1978, as
amended, the Bank Holding Company Act, as amended, Section 36a-181 or Section
36a-184, as applicable, of the Connecticut Bank Holding Company Act, or any
other applicable federal or state banking law, is necessary before the Option
may be exercised, cooperating with Grantee in preparing such applications or
notices and providing such information to each such Governmental Authority as it
may require in order to permit Grantee to exercise the Option and
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Issuer duly and effectively to issue shares of Issuer Common Stock pursuant
hereto; and (iv) to take all action provided herein to protect the rights of
Grantee against dilution.
SECTION 4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of Grantee, upon presentation and surrender of
this Agreement at the 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 Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
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.
SECTION 5. The number of shares of Issuer Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in the type or number of shares of
Issuer Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or other issuances of additional shares (other than pursuant to the exercise of
the Option), the type and number of shares of Issuer Common Stock purchasable
upon exercise hereof shall be appropriately adjusted and proper provision shall
be made so that, in the event that any additional shares of Issuer Common Stock
are to be issued or otherwise become outstanding as a result of any such change
(other than pursuant to an exercise of the Option), the number of shares of
Issuer Common Stock that remain subject to the Option shall be increased or
decreased (as applicable) so that, after such issuance and together with the
shares of Issuer Common Stock previously issued pursuant to the exercise of the
Option (as adjusted on account of any of the foregoing changes in the Issuer
Common Stock), the Option shall equal to 19.9% of the number of shares of Issuer
Common Stock then issued and outstanding.
(b) Whenever the number of shares of Issuer Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Issuer Common Stock purchasable after the adjustment.
SECTION 6. (a) Upon the occurrence of a Purchase Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee (whether
on its own behalf or on behalf of any subsequent holder of the Option (or part
thereof) or of any of the shares of Issuer Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration statement with the
SEC, under the Securities Act covering any shares issued and issuable pursuant
to the Option and shall use its reasonable best efforts to cause such
registration statement to become effective, and to remain current and effective
for a period not in excess of 180 days from the day such registration statement
first becomes effective, in order to permit the sale or other disposition of any
shares of Issuer Common Stock issued upon total or partial exercise of the
Option ("Option Shares") in accordance with any plan of disposition requested by
Grantee. Grantee shall have the right to demand two such registrations which
right shall be transferable. Grantee shall provide all information reasonably
requested by Issuer for inclusion in any offering circular or, if applicable,
registration statement to be filed hereunder. In connection with any such
offering circular or, if applicable, registration statement, Issuer and Grantee
shall provide each other with representations, warranties, indemnities and other
agreements customarily given in connection with such registration. If requested
by Grantee in connection with such registration, Issuer and Grantee shall become
a party to any underwriting agreement relating to the sale of such shares, but
only to the
5
<PAGE>
extent of obligating themselves in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements. Notwithstanding the foregoing, if Grantee revokes any exercise
notice or fails to exercise any Option with respect to any exercise notice
pursuant to Section 2(e) hereof, Issuer shall not be obligated to continue any
registration process with respect to the sale of Option Shares issuable upon the
exercise of such Option and Grantee shall not be deemed to have demanded
registration of Option Shares.
(b) In the event that Grantee requests Issuer to prepare an offering
circular or, if applicable, to file a registration statement following the
failure to obtain any approval required to exercise the Option as described in
Section 9 hereof, the closing of the sale or other disposition of the Issuer
Common Stock or other securities pursuant to such offering circular or, if
applicable, registration statement shall occur substantially simultaneously with
the exercise of the Option.
(c) Concurrently with the preparation and filing of a registration
statement under Section 6(a) hereof, Issuer shall also make all filings required
to comply with state securities laws in such number of states as Grantee may
reasonably request.
SECTION 7. (a) Upon the occurrence of a Purchase Event that occurs prior to
an Exercise Termination Event, (i) at the request (the date of such request
being the "Option Repurchase Request Date") of Grantee, Issuer shall repurchase,
subject to compliance with applicable law and out of funds legally available
therefor, the Option from Grantee at a price (the "Option Repurchase Price")
equal to the amount by which (A) the market/offer price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares for which the
Option may then be exercised and (ii) at the request (the date of such request
being the "Option Share Repurchase Request Date") of the owner of Option Shares
from time to time (the "Owner"), 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 Issuer Common Stock at which a
tender offer or exchange offer therefor has been made after the date hereof and
on or prior to the Option Repurchase Request Date or the Option Share Repurchase
Request Date, as the case may be, (ii) the price per share of Issuer Common
Stock paid or to be paid by any third party pursuant to an agreement with Issuer
(whether by way of a merger, consolidation or otherwise), (iii) the average of
the 20 highest last sale prices for shares of Issuer Common Stock as reported
within the 90-day period ending on the Option Repurchase Request Date or the
Option Share Repurchase Request Date, as the case may be, and (iv) in the event
of a sale of all or substantially all 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 an investment banking firm selected by Grantee
or the Owner, as the case may be, and reasonably acceptable to Issuer, divided
by the number of shares of Issuer Common Stock outstanding at the time of such
sale. In determining the market/offer price, the value of consideration other
than cash shall be the value determined by an investment banking firm selected
by Grantee or the Owner, as the case may be, and reasonably acceptable to
Issuer. The investment banking firm's determination shall be conclusive and
binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and/or 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 Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within 30 business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price.
6
<PAGE>
(c) Issuer hereby undertakes to use its reasonable best efforts to
obtain all required regulatory, shareholder and legal approvals and to file any
required notices as promptly as practicable in order to accomplish any
repurchase contemplated by this Section 7. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation from repurchasing any
Option and/or any Option Shares in full, Issuer shall promptly so notify Grantee
and/or the Owner and thereafter deliver or cause to be delivered, from time to
time, to Grantee 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 Section 7(b)
hereof is prohibited as referred to above, from delivering to Grantee and/or the
Owner, as appropriate, the Option Repurchase Price or the Option Share
Repurchase Price, respectively, in full, Grantee or the Owner, as appropriate,
may revoke its notice of repurchase of the Option or the Option Shares either in
whole or in part whereupon, in the case of a revocation in part, Issuer shall
promptly (i) deliver to Grantee and/or the Owner, as appropriate, that portion
of the Option Purchase Price or the Option Share Repurchase Price that Issuer is
not prohibited from delivering after taking into account any such revocation and
(ii) deliver, as appropriate, either (A) to Grantee, a new Agreement evidencing
the right of Grantee to purchase that number of shares of Issuer Common Stock
equal to the number of shares of Issuer Common Stock purchasable immediately
prior to the delivery of the notice of repurchase less the number of shares of
Issuer Common Stock covered by the portion of the Option repurchased or, (B) to
the Owner, a certificate for the number of Option Shares covered by the
revocation.
(d) Issuer shall not enter into any agreement with any Person (other
than Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other Person assumes all the obligations of Issuer pursuant to this Section 7 in
the event that Grantee or the Owner elects, in its sole discretion, to require
such other Person to perform such obligations.
SECTION 8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into a letter of intent or definitive agreement (i) to
consolidate or merge with any Person (other than Grantee or a Grantee
Subsidiary), and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any Person (other than Grantee or a
Grantee Subsidiary) to merge into Issuer, and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer 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 Issuer Common Stock shall after such merger represent less
than 50% of the outstanding shares and 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 a Grantee Subsidiary) then, and in each such
case, such letter of intent or definitive agreement governing such transaction
shall make proper provision so that the Option shall, upon the consummation of
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 Grantee, of either (x) the Acquiring Corporation (as defined below)
or (y) any person that controls the Acquiring Corporation (the Acquiring
Corporation and any such controlling person being hereinafter referred to as the
"Substitute Option Issuer").
(b) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as is hereinafter defined) as is equal to the
market/offer price (as defined in Section 7 hereof) multiplied by the number of
shares of Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Option Price multiplied by a
fraction in which the numerator is the number of shares of Issuer Common Stock
for which the Option was theretofore exercisable and the denominator is the
number of shares for which the Substitute Option is exercisable.
7
<PAGE>
(c) The Substitute Option shall otherwise 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 Grantee, provided, further that the terms
of the Substitute Option shall include (by way of example and not limitation)
provisions for the repurchase of the Substitute Option and Substitute Common
Stock by the Substitute Option Issuer on the same terms and conditions as
provided in Section 7 hereof.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving corporation, and (iii) the transferee of all or any substantial
part of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock issued
by the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one-year period 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 Issuer Common Stock issued by Issuer,
the corporation merging into Issuer or by any company which controls or is
controlled by such merging corporation, as Grantee may elect.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.99% of the shares of
Substitute Common Stock outstanding immediately prior to the issuance of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than such number of shares of Substitute Common Stock but for this
clause (e), the Substitute Option Issuer shall make a cash payment to Grantee
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 Grantee and the Substitute Option Issuer. In addition,
the provisions of Section 5(a) hereof shall not apply to the issuance of any
Substitute Option and for purposes of applying Section 5(a) hereof thereafter to
any Substitute Option, the percentage referred to in Section 5(a) hereof shall
thereafter equal the percentage that the percentage of the shares of Substitute
Common Stock subject to the Substitute Option bears to the number of shares of
Substitute Common Stock outstanding.
SECTION 9. Notwithstanding Sections 2, 6 and 7 hereof, if Grantee has given
the notice referred to in one or more of such Sections, the exercise of the
rights specified in any such Section shall be extended (a) if the exercise of
such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise; provided,
that in no event shall any closing date occur more than 12 months after the
related notice date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the OTS, the
FDIC, the Commissioner or any other Governmental Authority despite the best
efforts of Issuer or the Substitute Option Issuer, as the case may be, to obtain
such approvals, the exercise of the rights shall be deemed to have been
rescinded as of the related notice date. In the event (a) Grantee receives
official notice that an approval of the OTS, the FDIC, the Commissioner or any
other Governmental Authority required for the purchase and sale of the Option
Shares will not be issued or granted or (b) a closing date has not occurred
within 12 months after the related notice date due to
8
<PAGE>
the failure to obtain any such required approval, Grantee shall be entitled to
exercise the Option in connection with the concurrent resale of the Option
Shares pursuant to a registration statement as provided in Section 6 hereof.
Nothing contained in this Agreement shall restrict Grantee from specifying
alternative means of exercising rights pursuant to Sections 2, 6 or 7 hereof in
the event that the exercising of any such rights shall not have occurred due to
the failure to obtain any required approval referred to in this Section 9.
SECTION 10. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has the requisite 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 approved 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 executed and delivered by, and
constitutes a valid and binding obligation of, Issuer, enforceable against
Issuer in accordance with its terms, subject to any required Governmental
Approval, and except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.
(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
Issuer Common Stock equal to the maximum number of shares of Issuer 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,
encumbrances and security interests and not subject to any preemptive rights.
SECTION 11. (a) Neither of the parties hereto may assign any of its rights
or delegate any of its obligations under this Agreement or the Option created
hereunder to any other Person without the express written consent of the other
party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event. The term "Grantee" as
used in this Agreement shall also be deemed to refer to Grantee's permitted
assigns.
(b) Any assignment of rights of Grantee to any permitted assignee of
Grantee hereunder shall bear the restrictive legend at the beginning thereof
substantially as follows:
The transfer of the option represented by this assignment and the
related option agreement is subject to resale restrictions arising under
the Securities Act of 1933, as amended, and applicable state securities
laws.
SECTION 12. Each of Grantee and Issuer will use its reasonable 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
FDIC, the FRB, the Commissioner and any other Governmental Authority for
approval to acquire the shares issuable hereunder.
SECTION 13. 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. Both
9
<PAGE>
parties further agree to waive any requirement for the securing or posting of
any bond in connection with the obtaining of any such equitable relief and that
this provision is without prejudice to any other rights that the parties hereto
may have for any failure to perform this Agreement.
SECTION 14. 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 Grantee is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7 hereof, the full number of shares of Issuer
Common Stock provided in Section 1 hereof (as adjusted pursuant hereto), it is
the express intention of Issuer to allow Grantee to acquire or to require Issuer
to repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
SECTION 15. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in the manner
and at the respective addresses of the parties set forth in the Plan.
SECTION 16. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto shall be governed by and
construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).
SECTION 17. This Agreement may be executed in counterparts, each of which
shall be considered one and the same agreement and each of which shall be deemed
to be an original, and shall become effective when counterparts have been signed
by each of the parties and delivered to the other party, it being understood
that all parties need not sign the same counterpart.
SECTION 18. 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.
SECTION 19. Except as otherwise expressly provided herein or in the Plan,
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.
SECTION 20. Capitalized terms used in this Agreement and not defined herein
but defined in the Plan shall have the meanings assigned thereto in the Plan.
SECTION 21. Nothing contained in this Agreement shall be deemed to
authorize or require Issuer or Grantee to breach any provision of the Plan or
any provision of law applicable to the Grantee or Issuer.
SECTION 22. In the event that any selection or determination is to be made
by Grantee or the Owner hereunder and at the time of such selection or
determination there is more than one Grantee or Owner, such selection shall be
made by a majority in interest of such Grantees or Owners.
10
<PAGE>
SECTION 23. In the event of any exercise of the option by Grantee, Issuer
and such Grantee shall execute and deliver all other documents and instruments
and take all other action that may be reasonably necessary in order to
consummate the transactions provided for by such exercise.
SECTION 24. Except to the extent Grantee exercises the Option, Grantee
shall have no rights to vote or receive dividends or have any other rights as a
shareholder with respect to shares of Issuer Common Stock covered hereby.
SECTION 25. Notwithstanding anything to the contrary herein or in the Plan,
if Grantee has any Excess Total Profit, and if the Issuer has paid any cash to
Grantee pursuant to Section 9.3 of the Plan (the total amount of such payment
actually made is herein referred to as the "Termination Fees"), then Grantee
shall return to Issuer any Excess Total Profit up to the amount of the
Termination Fees. As used herein, the term "Excess Total Profit" shall mean the
positive dollar amount, if any, determined by subtracting $2,500,000 from the
Total Profit. As used herein, the term "Total Profit" shall mean (x) the
aggregate amount (before taxes) of the net cash received by Grantee pursuant to
the sale of shares of Issuer Common Stock received pursuant to this Option (or
any other securities into or for which such shares are converted or exchanged)
to any unaffiliated party, less (y) Grantee's aggregate purchase price for such
shares.
11
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Option Agreement to
be executed and delivered on its behalf by their respective officers thereunto
duly authorized, all as of the date first above written.
VILLAGE BANCORP, INC.
By: /s/ Robert V. Macklin
-------------------------------------
Robert V. Macklin
President and Chief Executive Officer
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
-------------------------------------
James C. Smith
Chairman and Chief Executive Officer
EXHIBIT 2.3
VILLAGE BANCORP, INC.
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of November 11, 1998, is entered
into by and among Webster Financial Corporation, a Delaware corporation
("Webster"), and the 13 stockholders of Village Bancorp, Inc., a Connecticut
corporation ("Village"), named on Schedule I hereto (collectively, the
"Stockholders"), who are directors, executive officers and the only "affiliates"
(for purposes of Rule 145 under the Securities Act of 1933, as amended) of
Village.
WHEREAS, Webster and Village have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Agreement"), which is conditioned
upon the execution of this Stockholder Agreement and which provides for, among
other things, the acquisition of Village by Webster, to be effected by the
merger of Village with and into Webster, in a stock for cash and/or stock
transaction (the "Merger"); and
WHEREAS, in order to induce Webster to enter into or proceed with the
Agreement, each of the Stockholders agrees to, among other things, vote in favor
of the Agreement, the Merger and the other transactions contemplated by the
Agreement in his/her capacity as a stockholder of Village;
NOW, THEREFORE in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. OWNERSHIP OF VILLAGE COMMON STOCK. Each Stockholder represents and
warrants that the number of shares of Village common stock, par value $3.33 per
share ("Village Common Stock"), set forth opposite such Stockholder's name on
Schedule I hereto is the total number of shares of Village Common Stock over
which such person has "beneficial ownership" within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended, except that the
provisions of Rule 13d-3(d)(1)(i) shall be considered without any limit as to
time.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and agrees
that:
(a) Such Stockholder shall, at any meeting of the holders of Village
Common Stock called for the purpose, vote or cause to be voted all shares of
Village Common Stock in which such Stockholder has the sole or shared right to
vote (whether owned as of the date hereof or hereafter acquired) (i) in favor of
the Agreement, the Merger and the other transactions contemplated by the
Agreement and (ii) against any plan or proposal pursuant to which Village is to
be acquired by or merged with, or pursuant to which Village proposes to sell all
or substantially all of its assets and liabilities to, any person, entity or
group (other than Webster or any affiliate thereof).
(b) Such Stockholder shall not, prior to the consummation of the
Merger or the earlier termination of this Stockholder Agreement in accordance
with its terms, sell, pledge, transfer or otherwise dispose of the shares of
Village Common Stock over which such Stockholder has sole or shared dispositive
power; provided, however, that this Section 2(b) shall not apply to a pledge
existing as of October 27, 1998.
<PAGE>
(c) Such Stockholder shall not in his/her capacity as a stockholder of
Village directly or indirectly encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than Webster or an affiliate thereof) concerning any merger, sale of all
or substantially all of the assets or liabilities not in the ordinary course of
business, sale of shares of capital stock or similar transaction involving
Village. Nothing herein shall impair such Stockholder's fiduciary obligations as
a director of Village.
(d) Such Stockholder shall use his/her best efforts to take or cause
to be taken all action, and to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Merger contemplated by the Agreement.
(e) Such Stockholder shall comply with all applicable federal and
state securities laws in connection with any sale of Webster common stock, par
value $.01 per share ("Webster Common Stock") received in exchange for Village
Common Stock in the Merger, including the trading and volume limitations as to
sales by affiliates contained in Rule 145 under the Securities Act of 1933, as
amended.
(f) Except as set forth in the attached Schedule II, such Stockholder
has no present plan or intent, and as of the effective time of the Merger, shall
have no present plan or intent, to engage in a sale, exchange, transfer (other
than an intrafamily gift), distribution (including a distribution by a
corporation to its shareholders), redemption, or reduction in any way of such
Stockholder's risk of ownership by short sale or otherwise, or other disposition
(not including a bona fide pledge), directly or indirectly, with respect to any
of the shares of Webster Common Stock to be received by such Stockholder upon
the Merger (except for cash received for fractional shares).
3. TERMINATION. The parties agree and intend that this Stockholder
Agreement is a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by the mutual
written consent of the parties hereto and shall be automatically terminated in
the event that the Agreement is terminated in accordance with its terms;
provided, however, that if the holders of Village Common Stock fail to approve
the Agreement or Village fails to hold a stockholders' meeting to vote on the
Agreement, then (i) Section 2(a) clause (ii) hereof shall continue in effect as
to any plan or proposal received by Village from any person, entity or group
(other than Webster or any affiliate thereof) prior to the termination of the
Agreement or within 135 days after such termination and (ii) Section 2(b) hereof
shall continue in effect to preclude a sale, except upon consummation of such
plan or proposal.
4. NOTICES. Notices may be provided to Webster and the Stockholders in the
manner specified in the Agreement, with all notices to the Stockholders being
provided to them at the addresses set forth at Schedule I.
5. GOVERNING LAW. This Stockholder Agreement shall be governed by the laws
of the State of Delaware, without giving effect to the principles of conflicts
of laws thereof.
6. COUNTERPARTS. This Stockholder Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original, and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
party, it being understood that all parties need not sign the same counterpart.
7. HEADINGS. The Section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Stockholder Agreement.
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<PAGE>
8. REGULATORY APPROVAL. If any provision of this Stockholder Agreement
requires the approval of any regulatory authority in order to be enforceable,
then such provision shall not be effective until such approval is obtained;
provided, however, that the foregoing shall not affect the enforceability of any
other provision of this Stockholder Agreement.
[Signature Page Follows]
3
<PAGE>
IN WITNESS WHEREOF, Webster Financial Corporation, by a duly authorized
officer, and each of the Stockholders have caused this Stockholder Agreement to
be executed and delivered as of the day and year first above written.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
James C. Smith
Chairman and Chief Executive Officer
STOCKHOLDERS:
/s/ Enrico J. Addessi /s/ Jose P. Boa
- ------------------------------------ ------------------------------------
Enrico J. Addessi Jose P. Boa
/s/ Richard O. Carey
- ------------------------------------ ------------------------------------
Richard O. Carey
/s/ Jeanne M. Cook /s/ Nicholas R. DiNapoli
- ------------------------------------ ------------------------------------
Jeanne M. Cook Nicholas R. DiNapoli
/s/ Edward J. Hannafin /s/ Joseph L. Knapp
- ------------------------------------ ------------------------------------
Edward J. Hannafin Joseph L. Knapp
/s/ Carl H. Lecher /s/ Robert V. Macklin
- ------------------------------------ ------------------------------------
Carl H. Lecher Robert V. Macklin
/s/ Antonio M. Resendes /s/ Thomas F. Reynolds
- ------------------------------------ ------------------------------------
Antonio M. Resendes Thomas F. Reynolds
/s/ Robert Scala /s/ James R. Umbarger
- ------------------------------------ ------------------------------------
Robert Scala James R. Umbarger
4
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares of
Village Common Stock
Name and Address of Stockholder Beneficially Owned
- ------------------------------- ------------------
<S> <C> <C>
Enrico J. Addessi 387 Main Street, Ridgefield CT 06877 33,064
Jose P. Boa 29 Forty Acre Mtn. Rd., Danbury CT 06810 25,776
Richard O. Carey P.O. Box 557, Washington Depot CT 06794 37,186
Jeanne M. Cook 103 Peaceable Ridge Road, Ridgefield CT 06877 4,840
Nicholas D. DiNapoli Suite 102, 90 Grove St., Ridgefield CT 06877 49,282
Edward J. Hannafin 148 Deer Hill Ave., Danbury CT 06810 31,310
Joseph L. Knapp P.O. Box 325, Ridgefield CT 06877 13,722
Carl H. Lecher 154 Main Street, Ridgefield CT 06877 9,560
Robert V. Macklin 16 Colonial Rd., New Fairfield CT 06812 26,806
Antonio M. Resendes 133 Codfish Hill Rd., Bethel CT 06801 9,828
Thomas F. Reynolds 90 Grove St., Suite 101, Ridgefield CT 06877 280
Robert Scala 35 Orchard St., Stonington CT 06378 13,390
James R. Umbarger 124 Candlewood Mt. Rd., New Milford CT 06776 25,992
</TABLE>
<PAGE>
SCHEDULE II
None.
EXHIBIT 5
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004
February 8, 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 Financial"), in connection with its registration
statement on Form S-4 (the "Registration Statement") filed with the Securities
and Exchange Commission relating to the proposed offering of up to 1,738,082
shares of Webster Financial's common stock, par value $.01 per share, all of
which shares (the "Shares") are to be issued by Webster Financial in accordance
with the terms of the Agreement and Plan of Merger, dated as of November 11,
1998, by and between Webster Financial and Village 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.
ss. 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 Financial, 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 Financial, with amendments thereto, as certified
by the Secretary of Webster Financial on the date hereof as then being
complete, accurate and in effect.
5. Resolutions of the Board of Directors of Webster Financial adopted at
a meeting held on October 26, 1998, as certified by the Secretary of
Webster Financial 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 natural persons, the
authenticity, accuracy
<PAGE>
Board of Directors
Webster Financial Corporation
February 8, 1999
Page 2
and completeness of all documents submitted to us, and the conformity with the
original documents of all documents submitted to us as certified, telecopied,
photostatic, or reproduced copies. 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 the General
Corporation Law of the State of Delaware. 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
Financial 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 under the General Corporation Law of the State of
Delaware.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement on the date of this opinion letter and should not be quoted in whole
or in part or otherwise be referred to, nor filed with or furnished to any
governmental agency or other person or entity, without the prior written consent
of this firm.
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
[FORM OF TAX OPINION]
________ __, 1999
Board of Directors
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
Board of Directors
Village Bancorp, Inc.
25 Prospect Street
Ridgefield, Connecticut 06877
Gentlemen/Ladies:
This opinion is being delivered to you in accordance with Section 7.1(f) of
the Agreement and Plan of Merger (the "Agreement"), dated as of November 11,
1998, by and between Webster Financial Corporation ("Webster"), a Delaware
corporation and Village Bancorp, Inc. ("Village"), a Connecticut corporation.
Pursuant to the Agreement, Village will be merged with and into Webster (the
"Merger"). The Agreement also provides for The Village Bank & Trust Company
("Village Bank"), a Connecticut-chartered bank and wholly owned subsidiary of
Village, to merge with and into Webster Bank ("Webster Bank"), a
federally-chartered savings bank and wholly owned subsidiary of Webster (the
"Bank Merger").
In connection with the preparation of this opinion, we have examined and
with your consent relied upon the following documents (including all exhibits
and schedules thereto): (1) the Agreement; (2) the Registration Statement on
Form S-4 of Webster (File No. 333-_________) filed with the Securities and
Exchange Commission on February __, 1999, as amended by Pre-Effective Amendment
No. 1 thereto filed with the Securities and Exchange Commission on _________ __,
1999 (the "Registration Statement") and/or the Proxy Statement/Prospectus of
Webster and Village; (3) representations and certifications made to us by
Webster (attached hereto as Exhibit A); (4) representations and certifications
made to us by Village (attached hereto as Exhibit B); (5) such other instruments
and documents related to the formation, organization and operation of Webster
and Village or to the consummation of the Merger and the Bank Merger and the
transactions contemplated thereby as we have deemed necessary or appropriate. 1/
- ----------
1/ All capitalized terms used herein and not otherwise defined shall have the
same meaning as they have in the Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
<PAGE>
Webster Financial Corporation
Village Bancorp, Inc.
__________ __ 1999
Page 2
The Proposed Transaction
Based solely upon our review of the documents set forth above, and upon
such information as Webster and Village have provided to us (which we have not
attempted to verify in any respect), and in reliance upon such documents and
information, we understand that the proposed transaction and the relevant facts
with respect thereto are as follows:
Webster is the holding company of Webster Bank. Through Webster Bank,
Webster currently serves customers from over 100 banking offices, three
commercial banking centers and more than 174 ATMs located in Hartford, New
Haven, Fairfield, Litchfield and Middlesex Counties in Connecticut, in addition
to telephone banking, video banking and PC banking. On November 4, 1998, Webster
announced that it had signed a definitive merger agreement to acquire Maritime
Bank & Trust Company ("Maritime Bank") (the "Maritime Bank Merger"). Pursuant to
the Maritime Bank Merger, Maritime Bank will merge with and into Webster Bank.
Village is the holding company of Village Bank. Both Village and Village
Bank are headquartered in Ridgefield, Connecticut. Village is engaged
principally in the business of attracting deposits from the general public and
investing those deposits in residential and real estate loans, and in consumer
and small business loans. Village currently serves customers from six banking
offices located in the communities of Ridgefield, Danbury, Wilton, Westport and
New Milford, Connecticut.
The purpose of the Merger and the Bank Merger is to enable Webster to
acquire the assets and business of Village and Village Bank. After the Merger
and the Bank Merger, Village Bank's six 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 Village Bank's
banking offices in Fairfield and Litchfield Counties, Connecticut. The assets
and business of Village Bank's banking offices will broaden Webster's existing
operations in Fairfield and Litchfield Counties where Webster Bank currently has
nine banking offices. Webster expects to achieve reductions in the current
operating expenses of Village upon the consolidation of Village Bank's
operations into Webster Bank.
It is proposed that pursuant to the Agreement, the General Corporation Law
of the State of Delaware and the Connecticut Business Corporation Act, Village
merge with and into Webster. As a result of the Merger, Village's corporate
existence will cease and Webster will be the surviving corporation. As the
surviving corporation, Webster will succeed to all of the assets and liabilities
of Village.
By virtue of the Merger, each share of Village Common Stock issued and
outstanding prior to the Effective Time (other than Dissenting Shares and
certain other shares) will be converted into either: (a) the right to receive
$23.50 in cash, without interest; (b) the right to receive that number of shares
of Webster Common Stock determined by dividing $23.50 by the Base Period Trading
Price, as may be adjusted pursuant to the Agreement (the "Exchange Ratio"),
provided, however, that if the Base Period Trading Price is greater than $27.50,
the Exchange Ratio will be 0.8545 and if the Base Period Trading Price is less
than $19.50, the Exchange Ratio will be 1.2051; or (c) a combination of cash and
Webster Common Stock.
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
Village Common Stock otherwise entitled to a fraction of a share of Webster
Common Stock will 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
<PAGE>
Webster Financial Corporation
Village Bancorp, Inc.
__________ __ 1999
Page 3
would otherwise be entitled, multiplied by (ii) the closing time average market
value of the Webster Common Stock, which will be deemed to be the average of the
daily closing prices per share for Webster Common Stock for the fifteen
consecutive trading days on which shares of Webster Common Stock are actually
traded ending on the third trading day preceding the Closing Date.
Shares of Village Common Stock that are issued and outstanding immediately
prior to the Effective Time and that are owned by shareholders who have properly
dissented within the meaning of the applicable provisions of the Connecticut
Business Corporation Act will not be converted into the right to receive shares
of Webster Common Stock or cash, as the case may be, unless and until such
shareholders have failed to perfect or have effectively withdrawn or lost their
right to payment under applicable law.
No more than 20 percent of the total value of the Merger consideration may
be used to pay Village shareholders who elect to receive cash instead of Webster
Common Stock, to pay cash instead of fractional shares and to pay any
dissenters. If too many Village shareholders elect to receive cash instead of
Webster Common Stock, those Village shareholders will receive a prorated amount
of cash and the remainder of the Merger consideration that they are entitled to
receive will be paid to them in Webster Common Stock. If the amount of cash paid
instead of fractional shares or to be paid to dissenters exceeds the 20 percent
limit, no cash will be paid to Village shareholders who elect cash instead of
Webster Common Stock.
At the Effective Time, each option granted by Village to purchase shares of
Village Common Stock under the Village Stock Plan which is outstanding and
unexercised immediately prior thereto will be converted automatically into an
option to purchase shares of Webster Common Stock, with adjustment in the number
of shares and exercise price to reflect the Exchange Ratio.
Immediately upon the Effective Time, Village Bank will merge with and into
Webster Bank in the Bank Merger, with Webster Bank being the Surviving Bank in
the Bank Merger. As a result of the Bank Merger, each share of Village Bank
common stock issued and outstanding immediately prior to the Effective Time will
be canceled and the 1,000 shares of Webster Bank common stock issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding and will constitute the only shares of capital stock of the
Surviving Bank issued and outstanding immediately after the Effective Time.
Assumptions and Representations
In connection with rendering this opinion, we have assumed or obtained
representations (and, with your consent, are relying thereon, without any
independent investigation or review thereof, although we are not aware of any
material facts or circumstances contrary to or inconsistent therewith) that:
1. All information contained in each of the documents we have examined and
relied upon in connection with the preparation of this opinion is accurate and
completely describes all material facts relevant to our opinion, all copies are
accurate and all signatures are genuine. We have also assumed that there has
been (or will be by the Effective Time of the Merger) due execution and delivery
of all documents where due execution and delivery are prerequisites to the
effectiveness thereof.
2. The Merger will be consummated in accordance with applicable state law
and will qualify as a statutory merger under applicable state law.
3. All representations made in the exhibits hereto are true, correct, and
complete in all material respects. Any representation or statement made "to the
best of knowledge" or similarly qualified is correct without such qualification.
<PAGE>
Webster Financial Corporation
Village Bancorp, Inc.
__________ __ 1999
Page 4
4. The Merger will be consummated in accordance with the Agreement and as
described in the Proxy Statement/Prospectus (including satisfaction of all
covenants and conditions to the obligations of the parties without amendment or
waiver thereof); both Webster and Village will comply with all reporting
obligations with respect to the Merger required under the Code and the Treasury
Regulations thereunder; and the Agreement and all other documents and
instruments referred to therein or in the Proxy Statement/Prospectus are valid
and binding in accordance with their terms.
Opinion - Federal Income Tax Consequences
Based upon and subject to the assumptions and qualifications set forth
herein, it is our opinion that for Federal income tax purposes the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below:
1. This opinion represents and is based upon our best judgment regarding
the application of relevant current provisions of the Code and interpretations
of the foregoing as expressed in existing court decisions, administrative
determinations (including the practices and procedures of the Internal Revenue
Service (the "IRS") in issuing private letter rulings, which are not binding on
the IRS except with respect to the taxpayer that receives such a ruling) and
published rulings and procedures all as of the date hereof. An opinion of
counsel merely represents counsel's best judgment with respect to the probable
outcome on the merits and is not binding on the IRS or the courts. There can be
no assurance that positions contrary to our opinions will not be taken by the
IRS, or that a court considering the issues would not hold contrary to such
opinions. Neither Webster nor Village has requested a ruling from the IRS (and
no ruling will be sought) as to any of the federal income tax consequences
addressed in this opinion. Furthermore, no assurance can be given that future
legislative, judicial or administrative changes, on either a prospective or
retroactive basis, would not adversely affect the accuracy of the opinion
expressed herein. Nevertheless, we undertake no responsibility to advise you of
any new developments in the law or in the application or interpretation of the
federal income tax laws.
2. This letter addresses only the specific tax opinion set forth above.
This letter does not address any other federal, state, local or foreign tax
consequences that may result from the Merger or the Bank Merger or any other
transaction (including any transaction undertaken in connection with the
Merger).
3. We express no opinion regarding, among other things, the tax
consequences of the Merger (including the opinion set forth above) as applied to
specific shareholders of Village or that may be relevant to particular classes
of Village shareholders, such as dealers in securities, corporate shareholders
subject to the alternative minimum tax, foreign persons, and holders of shares
acquired upon exercise of stock options or in other compensatory transactions.
In addition, we express no opinion regarding the tax consequences to a holder of
an option to purchase shares of Village Common Stock who receives an option to
purchase shares of Webster Common Stock in exchange therefor pursuant to the
Merger.
4. Our opinion set forth herein is based upon the description of the
contemplated transactions as set forth above in the section captioned "The
Proposed Transaction," the Agreement and the Proxy Statement/Prospectus. If the
actual facts relating to any aspect of the transactions differ from this
description in any material respect, our opinion may become inapplicable. No
opinion is expressed as to any transaction other than those set forth in the
section captioned "The Proposed Transaction," the Agreement and the Proxy
Statement/Prospectus or to any transaction whatsoever, including the Merger, if
all the transactions described in the section
<PAGE>
Webster Financial Corporation
Village Bancorp, Inc.
__________ __ 1999
Page 5
captioned "The Proposed Transaction," the Agreement and the Proxy
Statement/Prospectus are not consummated in accordance with the terms of the
section captioned "The Proposed Transaction," the Agreement and the Proxy
Statement/Prospectus and without waiver or breach of any material provision
thereof or if all of the representations, warranties, statements and assumptions
upon which we relied are not true and accurate at all relevant times. In the
event any one of the statements, representations, warranties or assumptions upon
which we have relied to issue this opinion is incorrect, our opinion might be
adversely affected and may not be relied upon.
This opinion is provided to Webster and Village only, and without our prior
consent, may not be relied upon, used, circulated, quoted or otherwise referred
to in any manner by any person, firm, governmental authority or entity
whatsoever other than reliance thereon by Webster, Village and the Village
shareholders. Notwithstanding the prior sentence, we hereby consent to the use
of the opinion letter as an exhibit to the Registration Statement and to the use
of our name in the Registration Statement and the filing of our opinion with the
Office of Thrift Supervision. In giving the consent, we do not thereby admit
that we are an "expert" within the meaning of the Securities Act of 1933, as
amended.
Sincerely yours,
EXHIBIT 23.2
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 Prospectus.
/s/ KPMG LLP
Hartford, Connecticut
February 8, 1999
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Webster Financial Corporation on Form S-4 of our report dated January 23, 1998,
incorporated by reference in the Annual Report on Form 10-K for the year ended
December 31, 1997 of Village Bancorp, Inc. ("Village") and appearing in the
Village Annual Report to Shareholders and to the reference to us under the
heading "Experts" in the Proxy Statement/Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
Stamford, Connecticut
February 8, 1999
EXHIBIT 23.4
MORGAN LEWIS GITHENS & AHN, INC.
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0104
TELEPHONE (212) 593-3700
-------------
TELECOPIER (212) 593-3706
CONSENT OF MORGAN LEWIS GITHENS & AHN
We hereby consent to the use of our opinion letter dated November 11, 1998,
to the Board of Directors of Village Bancorp, attached as Appendix A 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 Village Bancorp's Financial Advisor", "The Merger -- Background of
the Merger", "The Merger -- Recommendation of the Village Bancorp Board of
Directors and Reasons for the Merger", "The Merger -- Opinion of Village
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.
MORGAN LEWIS GITHENS & AHN, INC.
/s/ John A. Morgan
By: John A. Morgan
February 8, 1999
EXHIBIT 24
POWER OF ATTORNEY
FOR THE ACQUISITION OF VILLAGE BANCORP, INC.
Each director whose signature appears below appoints 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 of substitution in such director's name,
place and stead, in any and all capacities to sign the Registration Statement on
Form S-4 and any amendments to the 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.
This Power of Attorney may be signed in counterparts.
[Signatures on following page]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney on
October 26, 1998.
/s/ Richard H. Alden /s/ Achille A. Apicella
- -------------------------------- --------------------------------
Richard H. Alden Achille A. Apicella
/s/ Joel S. Becker /s/ O. Joseph Bizzozero, Jr.
- -------------------------------- --------------------------------
Joel S. Becker O. Joseph Bizzozero, Jr.
/s/ George T. Carpenter /s/ John J. Crawford
- -------------------------------- --------------------------------
George T. Carpenter John J. Crawford
/s/ Harry P. DiAdamo, Jr. /s/ Robert A. Finkenzeller
- -------------------------------- --------------------------------
Harry P. DiAdamo, Jr. Robert A. Finkenzeller
/s/ Walter R. Griffin /s/ J. Gregory Hickey
- -------------------------------- --------------------------------
Walter R. Griffin J. Gregory Hickey
/s/ C. Michael Jacobi /s/ John F. McCarthy
- -------------------------------- --------------------------------
C. Michael Jacobi John F. McCarthy
/s/ James C. Smith /s/ Sister Marguerite Waite
- -------------------------------- --------------------------------
James C. Smith Sister Marguerite Waite
EXHIBIT 99.1
REVOCABLE PROXY
VILLAGE BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Village Bancorp, Inc. ("Village Bancorp")
hereby appoints Enrico J. Addessi and Joseph L. Knapp, or any 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 ___ __.m. on ______ __, 1999 at The Village Bank &
Trust Company, 25 Prospect Street, Ridgefield, Connecticut, 06877, and at any
adjournments or postponements 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 NOVEMBER 11, 1998, BETWEEN WEBSTER
FINANCIAL CORPORATION AND VILLAGE BANCORP, THE MERGER PROVIDED FOR THEREIN,
PURSUANT TO WHICH VILLAGE BANCORP WILL BE ACQUIRED BY WEBSTER FINANCIAL
CORPORATION, AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND PLAN
OF MERGER AND (2) OTHERWISE IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY
OF VILLAGE BANCORP'S BOARD OF DIRECTORS. The undersigned shareholder may revoke
this proxy at any time before it is voted by (i) delivering to the Secretary of
Village Bancorp's Board of Directors a written notice of revocation before the
shareholder meeting, (ii) delivering to Village Bancorp a duly executed proxy
bearing a later date before the shareholder meeting, or (iii) attending the
shareholder meeting and voting in person. The undersigned shareholder hereby
acknowledges receipt of the Notice of Special Meeting of Village Bancorp and the
proxy statement/prospectus.
If you receive more than one proxy card, please sign and return all cards
in the accompanying envelope.
(continued and to be signed and dated on reverse side)
--------------
SEE
REVERSE SIDE
--------------
<PAGE>
--------------
X
--------------
Please mark your
votes as this.
-------------
COMMON
Proposal 1 : To approve and adopt an Agreement and Plan of Merger, dated as of
November 11, 1998, between Webster Financial Corporation and
Village Bancorp, Inc., the merger provided for therein, pursuant
to which Village Bancorp, Inc. will be acquired by Webster
Financial Corporation, and the other transactions contemplated by
the Agreement and Plan of Merger.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Other Matters: The proxies are authorized to vote upon such other business as
may properly come before the shareholder meeting, or any
adjournments or postponements of the meeting, including, without
limitation, a motion to adjourn the shareholder meeting to
another time and/or place for the purpose of soliciting
additional proxies in order to approve the Agreement and Plan of
Merger and the merger provided for therein or otherwise, in
accordance with the determination of a majority of the Village
Bancorp, Inc. Board of Directors.
Date:
-----------------------------------
-----------------------------------
-----------------------------------
Signature of Shareholder or
Authorized Representative
Please date and sign exactly as name appears hereon. 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 should sign.
