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________________________________________________________________________________
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission and the FDIC only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14-11(c) or Section
240.14a-12
JOINT FILING BY:
PEOPLE'S BANK AND NORWICH FINANCIAL CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[x] Fee paid previously with preliminary materials: $32,247.82
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Note: Filing fee payable to the Commission only. No filing fee is payable to the
FDIC pursuant to 12 C.F.R. 'SS' 335.801(a).
________________________________________________________________________________
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[Logo]
BRIDGEPORT CENTER
850 MAIN STREET
BRIDGEPORT, CONNECTICUT 06604-4913
January 12, 1998
Dear People's Bank Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend a
Special Meeting of People's Bank shareholders to be held at Bridgeport Center,
850 Main Street, Bridgeport, Connecticut on Thursday, February 19, 1998, at
10:00 a.m.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger (the 'Merger Agreement'),
pursuant to which Norwich Financial Corp. and The Norwich Savings Society will
be merged into People's Bank. Upon consummation of the merger, each outstanding
share of common stock of Norwich Financial Corp. will be converted into the
right to receive either cash or shares of common stock of People's Bank, subject
to the election and allocation procedures described in the accompanying Joint
Proxy Statement-Offering Memorandum.
Consummation of the proposed merger is subject to certain conditions,
including obtaining the requisite approvals of the shareholders of People's Bank
and Norwich Financial Corp. and appropriate regulatory authorities. THESE AND
OTHER DETAILS CONCERNING THE PROPOSED MERGER ARE DESCRIBED IN THE ACCOMPANYING
JOINT PROXY STATEMENT-OFFERING MEMORANDUM AND THE APPENDICES THERETO, AND I URGE
YOU TO READ ALL OF THESE IMPORTANT MATERIALS CAREFULLY.
Because of the significance of the proposed merger to People's Bank, your
vote is especially important. In order for the merger to be consummated, the
merger and Merger Agreement must be approved by an affirmative vote of the
holders of at least two-thirds of the outstanding shares of common stock of
People's Bank. Consequently, an abstention or failure to vote will have the same
practical effect as a vote against the merger.
THE BOARD OF DIRECTORS, BY UNANIMOUS VOTE, HAS APPROVED THE TERMS OF THE
MERGER AGREEMENT AND BELIEVES THE MERGER IS FAIR TO, AND IS IN THE BEST
INTERESTS OF, PEOPLE'S BANK AND ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE 'FOR' THE PROPOSAL TO APPROVE THE MERGER
AND THE MERGER AGREEMENT.
I hope you will be able to attend the meeting. However, whether or not you
expect to attend in person, I urge you to complete, sign and return the enclosed
proxy card promptly to ensure that your shares will be represented at the
Special Meeting. If you do attend the Special Meeting, you will, of course, be
entitled to vote in person.
If you require assistance in completing your proxy card or have questions
about voting procedures or the other matters addressed in the Joint Proxy
Statement-Offering Memorandum, please feel free to call Jane Sharpe, Vice
President, in our Shareholder Relations Department at (203) 338-7228.
Sincerely,
/s/ DAVID E.A. CARSON
DAVID E.A. CARSON
Chief Executive Officer
and Chairman of the Board
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[Logo]
BRIDGEPORT CENTER
850 MAIN STREET
BRIDGEPORT, CONNECTICUT 06604-4913
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 19, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
'People's Special Meeting') of People's Bank ('People's') will be held on
February 19, 1998, at 10:00 a.m. local time at Bridgeport Center, 850 Main
Street, Bridgeport, Connecticut for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of September 3, 1997 (the 'Merger
Agreement'), by and among People's, Norwich Financial Corp. ('NFC'), a
Delaware corporation, and The Norwich Savings Society ('NSS'), a
Connecticut stock savings bank and wholly-owned subsidiary of NFC, pursuant
to which, among other things, (i) NFC and NSS would merge with and into
People's, with People's as the surviving entity (the 'Merger'), and (ii)
each outstanding share of common stock, par value $0.01 per share, of NFC
('NFC Common Stock') would be converted, subject to the election and
allocation procedures provided in the Merger Agreement, into the right to
receive either (x) a number of shares of common stock, without par value
('People's Common Stock'), of People's (the 'Per Share Stock
Consideration') or (y) an amount in cash without interest (the 'Per Share
Cash Consideration'). The Per Share Stock Consideration and the Per Share
Cash Consideration will be determined based on a formula set forth in the
Merger Agreement which takes into consideration (i) the average of the
per-share closing prices of People's Common Stock as reported by the Nasdaq
Stock Market National Market System for the ten consecutive trading-day
period ending on the date on which the last of the regulatory approvals
required for consummation of the Merger occurs (such date, the 'Valuation
Date,' and such average price, the 'Valuation Period Market Value') and
(ii) the total number of shares of NFC Common Stock outstanding (or in
respect of which options to acquire NFC Common Stock have been exercised)
on the Valuation Date. APPENDIX I TO THE ACCOMPANYING JOINT PROXY
STATEMENT-OFFERING MEMORANDUM SETS FORTH THE PER SHARE STOCK CONSIDERATION
AND PER SHARE CASH CONSIDERATION PAYABLE AT VARIOUS ASSUMED VALUATION
PERIOD MARKET VALUES. Approval and adoption of the Merger Agreement will
constitute approval and adoption of the Merger.
2. To act on any other proposal that may properly come before the
People's Special Meeting or any adjournment or postponement thereof.
A copy of the Merger Agreement is attached as Appendix A to the
accompanying Joint Proxy Statement-Offering Memorandum.
The Board of Directors of People's has fixed the close of business on
January 7, 1998, as the record date for determination of shareholders entitled
to notice of and to vote at the People's Special Meeting or at any adjournments
or postponements thereof (the 'People's Record Date'). Record holders of
People's Common Stock as of the People's Record Date are entitled to vote at the
People's Special Meeting, and the affirmative vote of the holders of two-thirds
of the outstanding shares of People's Common Stock is required to approve the
Merger Agreement and the Merger.
A list of the holders of People's Common Stock entitled to vote at the
People's Special Meeting will be available for inspection on written request by
any People's shareholder at People's headquarters located at Bridgeport Center,
850 Main Street, Bridgeport, Connecticut 06604-4913 during normal business hours
beginning two days after the date of this Notice and continuing through the date
of the People's Special Meeting.
Holders of People's Common Stock have dissenters' appraisal rights in
connection with the Merger. See 'DISSENTERS' RIGHTS' in the accompanying Joint
Proxy Statement-Offering Memorandum for a description of the manner in which
such rights may be exercised.
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THE BOARD OF DIRECTORS OF PEOPLE'S HAS APPROVED THE MERGER AGREEMENT AND
BELIEVES THE MERGER IS FAIR TO, AND IS IN THE BEST INTERESTS OF, PEOPLE'S AND
ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE 'FOR' APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
EACH SHAREHOLDER IS URGED TO COMPLETE AND RETURN PROMPTLY THE ACCOMPANYING
PROXY, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE PEOPLE'S SPECIAL MEETING.
The prompt return of each shareholder's signed proxy will aid People's in
reducing the expense of additional proxy solicitation. The giving of such proxy
does not affect a shareholder's right to vote in person in the event the
shareholder attends the People's Special Meeting.
By Order of the Board of Directors
/s/ SANDRA J. BROWN
SANDRA J. BROWN
Corporate Secretary
Bridgeport, Connecticut
January 12, 1998
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4 BROADWAY
NORWICH, CONNECTICUT 06360
January 12, 1998
Dear Shareholder:
You are cordially invited to attend a special meeting of the shareholders
of Norwich Financial Corp. ('NFC') to be held on February 19, 1998 at 10:00
a.m., local time, at the Ramada Hotel, 10 Laura Boulevard, Norwich, Connecticut.
At the meeting, holders of NFC common stock will be asked to consider and
vote upon a proposal to approve the Agreement and Plan of Merger dated as of
September 3, 1997 (the 'Merger Agreement') by and among People's Bank, a
Connecticut stock savings bank ('People's'), NFC, and The Norwich Savings
Society ('NSS'), a Connecticut stock savings bank and wholly owned subsidiary of
NFC, pursuant to which NFC and NSS will be merged (the 'Merger') with and into
People's.
If the Merger is approved and consummated, each share of NFC common stock
will be converted, subject to the election and allocation procedures provided in
the Merger Agreement, into the right to receive either shares of People's common
stock or an amount in cash without interest. The number of shares of People's
common stock and the amount of cash will be determined based on a formula
described in the Merger Agreement. It is expected that the Merger generally will
be tax free to the NFC shareholders to the extent they receive stock rather than
cash consideration.
Consummation of the Merger is subject to certain conditions, including
obtaining the requisite approvals of NFC and People's shareholders and
appropriate regulatory authorities.
THE NFC BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE MERGER AGREEMENT. NFC'S FINANCIAL ADVISOR, KEEFE, BRUYETTE &
WOODS, INC. HAS RENDERED A WRITTEN OPINION TO THE NFC BOARD OF DIRECTORS DATED
THE DATE OF THE ENCLOSED JOINT PROXY STATEMENT-OFFERING MEMORANDUM TO THE EFFECT
THAT, AS OF SUCH DATE AND BASED UPON AND SUBJECT TO CERTAIN MATTERS STATED IN
SUCH OPINION, THE CONSIDERATION IN THE MERGER IS FAIR, FROM A FINANCIAL POINT OF
VIEW, TO HOLDERS OF NFC COMMON STOCK.
A Notice of Special Meeting of Shareholders and a Joint Proxy
Statement-Offering Memorandum which describes the Merger and the background to
the transaction are enclosed. I URGE YOU TO READ ALL OF THESE MATERIALS
(INCLUDING THE APPENDICES THERETO) CAREFULLY.
A proxy card is enclosed. Please indicate your voting instructions and
sign, date, and mail the proxy card promptly in the return envelope provided.
Whether or not you plan to attend the meeting in person, it is important that
you return the enclosed proxy card so that your shares are voted. FAILURE TO
VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT.
I strongly support the Merger and join with the other members of the NFC
Board of Directors in enthusiastically recommending the Merger to you.
Very truly yours,
/s/ DANIEL R. DENNIS, JR.
DANIEL R. DENNIS, JR.
Chairman, President and
Chief Executive Officer
<PAGE>
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[Logo]
4 BROADWAY
NORWICH, CONNECTICUT 06360
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 19, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the 'NFC
Special Meeting') of Norwich Financial Corp. ('NFC') will be held on February
19, 1998, at 10:00 a.m. local time at the Ramada Hotel, 10 Laura Boulevard,
Norwich, Connecticut, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of September 3, 1997 (the 'Merger
Agreement'), by and among People's Bank, a Connecticut stock savings bank
('People's'), NFC, a Delaware corporation, and The Norwich Savings Society
('NSS'), a Connecticut stock savings bank and wholly-owned subsidiary of
NFC, pursuant to which among other things (i) NFC and NSS would merge with
and into People's, with People's as the surviving entity (the 'Merger'),
and (ii) each outstanding share of common stock, par value $0.01 per share,
of NFC ('NFC Common Stock') would be converted, subject to the election and
allocation procedures provided in the Merger Agreement, into the right to
receive either (x) a number of shares of common stock, without par value
('People's Common Stock'), of People's (the 'Per Share Stock
Consideration') or (y) an amount in cash without interest (the 'Per Share
Cash Consideration'). The Per Share Stock Consideration and the Per Share
Cash Consideration will be determined based on a formula set forth in the
Merger Agreement which takes into consideration (i) the average of the
per-share closing prices of People's Common Stock as reported by the Nasdaq
Stock Market National Market System for the ten consecutive trading-day
period ending on the date on which the last of the regulatory approvals
required for consummation of the Merger occurs (such date, the 'Valuation
Date,' and such average price, the 'Valuation Period Market Value') and
(ii) the total number of shares of NFC Common Stock outstanding (or in
respect of which options to acquire NFC Common Stock have been exercised)
on the Valuation Date. APPENDIX I TO THE ACCOMPANYING JOINT PROXY
STATEMENT-OFFERING MEMORANDUM SETS FORTH THE PER SHARE STOCK CONSIDERATION
AND PER SHARE CASH CONSIDERATION PAYABLE AT VARIOUS ASSUMED VALUATION
PERIOD MARKET VALUES. Approval and adoption of the Merger Agreement will
constitute approval and adoption of the Merger.
2. To act on any other proposal that may properly come before the NFC
Special Meeting or any adjournment or postponement thereof.
A copy of the Merger Agreement is attached as Appendix A to the
accompanying Joint Proxy Statement-Offering Memorandum.
The Board of Directors of NFC has fixed the close of business on January 5,
1998, as the record date for determination of shareholders entitled to notice of
and to vote at the NFC Special Meeting or at any adjournments or postponements
thereof (the 'NFC Record Date'). Record holders of NFC Common Stock as of the
NFC Record Date are entitled to vote at the NFC Special Meeting, and the
affirmative vote of the holders of a majority of the outstanding shares of NFC
Common Stock is required to approve the Merger Agreement and Merger.
A list of the shareholders of NFC entitled to vote at the NFC Special
Meeting, the address of each such shareholder and the number of shares
registered in the name of each such shareholder will be available for
examination by any shareholder of NFC for any purpose germane to the NFC Special
Meeting at 4 Broadway, Norwich, Connecticut, during ordinary business hours, for
a period of ten days prior to the NFC Special Meeting and at the NFC Special
Meeting.
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Holders of NFC Common Stock have dissenters' appraisal rights in connection
with the Merger. See 'DISSENTERS' RIGHTS' in the accompanying Joint Proxy
Statement-Offering Memorandum for a description of the manner in which such
rights may be exercised.
THE BOARD OF DIRECTORS OF NFC HAS APPROVED THE MERGER AGREEMENT AND
BELIEVES THE MERGER IS FAIR TO, AND IS IN THE BEST INTERESTS OF, THE NFC
SHAREHOLDERS. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE 'FOR' APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
EACH SHAREHOLDER IS URGED TO COMPLETE AND RETURN PROMPTLY THE ACCOMPANYING
PROXY WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE NFC SPECIAL MEETING. The
prompt return of each shareholder's signed proxy will help assure a quorum and
aid NFC in reducing the expense of additional proxy solicitation. The giving of
such proxy does not affect a shareholder's right to vote in person in the event
the shareholder attends the NFC Special Meeting.
By Order of the Board of Directors
/s/ DAPHNE P. CANNATA
DAPHNE P. CANNATA
Corporate Secretary
Norwich, Connecticut
January 12, 1998
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JOINT PROXY STATEMENT
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PEOPLE'S BANK NORWICH FINANCIAL CORP.
SPECIAL MEETING OF SHAREHOLDERS SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 19, 1998 TO BE HELD ON FEBRUARY 19, 1998
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OFFERING MEMORANDUM OF PEOPLE'S BANK
------------------------
This Joint Proxy Statement-Offering Memorandum is being furnished to
shareholders of People's Bank, a Connecticut stock savings bank ('People's'), in
connection with the solicitation of proxies by the Board of Directors of
People's (the 'People's Board') for use at the special meeting of shareholders
of People's (including any adjournment or postponement thereof, the 'People's
Special Meeting') to be held on Thursday, February 19, 1998 at 10:00 a.m. local
time at Bridgeport Center, 850 Main Street, Bridgeport, Connecticut. At the
People's Special Meeting, holders of the common stock, no par value per share,
of People's ('People's Common Stock') are being asked to consider and vote upon
a proposal to approve and adopt the Agreement and Plan of Merger, dated as of
September 3, 1997 (the 'Merger Agreement'), by and among People's, Norwich
Financial Corp. ('NFC'), a Delaware corporation, and The Norwich Savings Society
('NSS'), a Connecticut stock savings bank and a wholly-owned subsidiary of NFC,
providing for the merger of NFC and NSS with and into People's (the 'Merger'). A
copy of the Merger Agreement is attached hereto as Appendix A and is
incorporated herein by reference.
This Joint Proxy Statement-Offering Memorandum also is being furnished to
shareholders of NFC in connection with the solicitation of proxies by the Board
of Directors of NFC (the 'NFC Board') for use at the special meeting of
shareholders of NFC (including any adjournment or postponement thereof, the 'NFC
Special Meeting') to be held on Thursday, February 19, 1998 at 10:00 a.m. local
time at the Ramada Hotel, 10 Laura Boulevard, Norwich, Connecticut. At the NFC
Special Meeting, holders of the common stock, $0.01 par value per share ('NFC
Common Stock'), of NFC are being asked to consider and vote upon a proposal to
approve and adopt the Merger Agreement.
This Joint Proxy Statement-Offering Memorandum also constitutes an
informational disclosure statement of People's with respect to the shares of
People's Common Stock issuable to holders of NFC Common Stock upon consummation
of the Merger, as described below. This Joint Proxy Statement-Offering
Memorandum and forms of proxy are first being mailed to shareholders of People's
and NFC on or about January 13, 1998.
Upon consummation of the Merger (the 'Effective Time'), NFC and NSS will
merge with and into People's, which will be the surviving entity. Each share of
People's Common Stock outstanding immediately prior to the Effective Time will
remain outstanding and will be unchanged after the Merger, except to the extent
a holder of such shares chooses to exercise dissenters' appraisal rights with
(continued on following page)
THE SECURITIES ISSUABLE IN THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR
AGENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE 'FDIC') OR THE STATE OF
CONNECTICUT DEPARTMENT OF BANKING, NOR HAS ANY SUCH COMMISSION, AGENCY OR ENTITY
PASSED ON THE ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT-OFFERING
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE SECURITIES ARE NOT DEPOSITS. THESE SECURITIES ARE NOT INSURED BY THE
FDIC OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
------------------------
The date of this Joint Proxy Statement-Offering Memorandum is January 12, 1998.
<PAGE>
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(continued from previous page)
respect to such shares under the applicable provisions of Connecticut law. Each
outstanding share of NFC Common Stock (other than shares with respect to which
dissenters' appraisal rights are perfected and certain shares held by NFC or
People's), including each attached right (an 'NFC Right') issued pursuant to the
Rights Agreement dated as of November 21, 1989, as amended (the 'NFC Rights
Agreement') between NFC and the Rights Agent named therein, will be converted,
subject to the election and allocation procedures described herein, into the
right to receive either (x) a number of shares of People's Common Stock (the
'Per Share Stock Consideration') or (y) an amount in cash without interest (the
'Per Share Cash Consideration'). The Per Share Stock Consideration and the Per
Share Cash Consideration will be determined based on a formula set forth in the
Merger Agreement which takes into consideration (i) the average of the per-share
closing prices of People's Common Stock as reported by the Nasdaq Stock Market
National Market System ('Nasdaq') for the ten consecutive trading-day period
ending on the date on which the last of the regulatory approvals required for
consummation of the Merger occurs (such date, the 'Valuation Date,' and such
average price, the 'Valuation Period Market Value') and (ii) the total number of
shares of NFC Common Stock outstanding (or in respect of which options to
acquire NFC Common Stock ('Options') have been exercised) on the Valuation Date
(the 'Valuation Period Share Number'). The value of the Per Share Stock
Consideration and the Per Share Cash Consideration will be equal on the
Valuation Date using the Valuation Period Market Value as the representative
price of People's Common Stock on that date.
If January 7, 1998 had been the Valuation Date, (a) the Valuation Period
Market Value would have been $36.819; (b) the aggregate consideration payable to
holders of NFC Common Stock would have consisted of $75,972,866 (after giving
effect to the exercise of Options and cash payments in settlement of unexercised
Options) and 2,805,208 shares of People's Common Stock; (c) the Per Share Stock
Consideration would have consisted of 0.8784 shares of People's Common Stock;
and (d) the Per Share Cash Consideration and the value of the Per Share Stock
Consideration would each have been equal to $32.34. The Valuation Period Market
Value will not actually be determined until the Valuation Date (which has not
yet occurred), and additional Options may be exercised prior to that date.
Consequently, the Valuation Period Market Value, the cash portion of the
aggregate consideration to be paid, the number of shares of People's Common
Stock to be issued in connection with the Merger, the Per Share Stock
Consideration, and the value of the Per Share Cash Consideration and Per Share
Stock Consideration may differ from the amounts shown in the example. The actual
market price of People's Common Stock on the date shares are received by a
former holder of shares of NFC Common Stock may be more or less than the
Valuation Period Market Value. APPENDIX I TO THIS JOINT PROXY STATEMENT-OFFERING
MEMORANDUM SETS FORTH THE PER SHARE STOCK CONSIDERATION AND PER SHARE CASH
CONSIDERATION PAYABLE AT VARIOUS ASSUMED VALUATION PERIOD MARKET VALUES.
The holders of People's Common Stock and NFC Common Stock each have
dissenters' appraisal rights in connection with the Merger. See 'DISSENTERS'
RIGHTS.'
The People's Common Stock is, and after the Merger will be, listed on
Nasdaq. The last reported sale price of People's Common Stock as reported by
Nasdaq was $34.94 per share on January 9, 1998 and $29.50 per share on September
3, 1997, the last trading day preceding public announcement of the proposed
Merger. Such prices are not necessarily indicative of the Valuation Period
Market Value. The last reported sale price of NFC Common Stock as reported by
Nasdaq was $30.88 per share on January 9, 1998 and $28.50 per share on September
3, 1997.
2
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TABLE OF CONTENTS
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AVAILABLE INFORMATION...................................................................................... 6
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION................................................ 7
SUMMARY.................................................................................................... 8
General............................................................................................... 8
The Companies......................................................................................... 8
People's Special Meeting and Vote Required............................................................ 9
NFC Special Meeting and Vote Required................................................................. 10
The Merger............................................................................................ 10
Election Procedures................................................................................... 11
Conditions to the Merger.............................................................................. 11
Recommendations of Boards of Directors................................................................ 12
Opinion of People's Financial Advisor................................................................. 12
Opinion of NFC's Financial Advisor.................................................................... 12
Effective Time of the Merger.......................................................................... 12
Waiver; Amendment; Termination; Expenses.............................................................. 13
Certain Federal Income Tax Consequences............................................................... 13
Interests of Certain Persons in the Merger............................................................ 13
The Stock Option Agreement............................................................................ 16
The NFC Fee Agreement................................................................................. 16
The Holdings Support Letter........................................................................... 17
Amendment to the NFC Rights Agreement................................................................. 17
Holding Company Structure; Post-Merger Ownership of People's Common Stock............................. 17
Dissenters' Rights.................................................................................... 18
Accounting Treatment.................................................................................. 19
Regulatory Approvals.................................................................................. 19
Share Information and Market Prices................................................................... 19
COMPARATIVE UNAUDITED PER SHARE DATA....................................................................... 20
SELECTED FINANCIAL DATA.................................................................................... 22
Selected Historical Financial Data of People's........................................................ 23
Selected Historical Financial Data of NFC............................................................. 25
Selected Pro Forma Financial Data..................................................................... 26
PEOPLE'S SPECIAL MEETING................................................................................... 27
General............................................................................................... 27
Proxies............................................................................................... 27
Record Date and Voting Rights......................................................................... 27
Recommendation of the People's Board.................................................................. 28
NFC SPECIAL MEETING........................................................................................ 28
General............................................................................................... 28
Proxies............................................................................................... 29
Record Date and Voting Rights......................................................................... 29
Recommendation of the NFC Board....................................................................... 30
THE MERGER................................................................................................. 31
Description of the Merger............................................................................. 31
Background of the Merger.............................................................................. 32
Reasons of People's for the Merger.................................................................... 34
Reasons of NFC and NSS for the Merger................................................................. 35
Opinion of People's Financial Advisor................................................................. 37
Opinion of NFC's Financial Advisor.................................................................... 41
The Effective Time.................................................................................... 45
Merger Consideration.................................................................................. 45
Election Procedures................................................................................... 47
Exchange Procedures................................................................................... 49
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Dissenting NFC Shares................................................................................. 50
Representations and Warranties........................................................................ 51
Conduct of Business Prior to the Merger and Other Covenants........................................... 51
Conditions to the Merger.............................................................................. 54
Termination of the Merger Agreement................................................................... 55
Amendment; Extension; Waiver.......................................................................... 56
Expenses; Payment to NFC.............................................................................. 57
Certain Federal Income Tax Consequences............................................................... 57
Interests of Certain Persons in the Merger............................................................ 59
The Stock Option Agreement............................................................................ 63
The NFC Fee Agreement................................................................................. 66
The Holdings Support Letter........................................................................... 67
Amendment to the NFC Rights Agreement................................................................. 67
Accounting Treatment.................................................................................. 67
Regulatory Matters.................................................................................... 68
Dividend Reinvestment and Stock Purchase Plan......................................................... 69
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................................................. 70
Management and Operations after the Merger............................................................ 70
1998 and 1999 Earnings Estimates...................................................................... 73
PRICE RANGE OF COMMON STOCK AND DIVIDENDS.................................................................. 74
Market Prices......................................................................................... 74
Dividends............................................................................................. 74
INFORMATION ABOUT PEOPLE'S................................................................................. 75
General............................................................................................... 75
Operations............................................................................................ 75
Year 2000............................................................................................. 76
Holding Company Structure............................................................................. 77
INFORMATION ABOUT NFC...................................................................................... 78
General............................................................................................... 78
Operations............................................................................................ 79
CERTAIN REGULATORY CONSIDERATIONS.......................................................................... 79
Connecticut Law....................................................................................... 79
FDIC Regulation....................................................................................... 80
Federal Reserve System Regulations.................................................................... 82
Federal Home Loan Bank System......................................................................... 82
Consumer Regulation................................................................................... 82
Other Aspects of Federal and State Law................................................................ 83
PEOPLE'S CAPITAL STOCK..................................................................................... 83
General............................................................................................... 83
Common Stock.......................................................................................... 83
Preferred Stock....................................................................................... 83
Transfer Agent and Registrar.......................................................................... 84
Certain Restrictions on Acquisitions of People's Capital Stock........................................ 84
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 87
Security Ownership of Certain Beneficial Owners of People's Common Stock.............................. 87
Security Ownership of People's Management............................................................. 87
Security Ownership of NFC's Management................................................................ 89
Security Ownership of Certain Beneficial Owners of NFC Common Stock................................... 90
COMPARATIVE RIGHTS OF SHAREHOLDERS OF PEOPLE'S AND NFC..................................................... 91
Capitalization........................................................................................ 91
Rights Plan........................................................................................... 91
Dividends and Repurchases............................................................................. 93
</TABLE>
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Anti-Greenmail Provision.............................................................................. 94
Special Meetings of Shareholders; Action Without Meeting.............................................. 94
Shareholder Nominations............................................................................... 95
Mergers, Consolidations and Sales of Assets........................................................... 96
Dissenters' Rights.................................................................................... 96
Preemptive Rights..................................................................................... 97
Dissolution........................................................................................... 97
Board of Directors.................................................................................... 97
Removal of Directors.................................................................................. 97
Amendments to Certificate of Incorporation............................................................ 98
Amendments to Bylaws.................................................................................. 98
Limitation of Liability............................................................................... 98
Other Differences..................................................................................... 99
DISSENTERS' RIGHTS......................................................................................... 99
LEGAL OPINION.............................................................................................. 104
EXPERTS.................................................................................................... 104
SHAREHOLDER PROPOSALS...................................................................................... 104
OTHER MATTERS.............................................................................................. 105
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION......................................................... 106
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 113
APPENDIX A................................................................................................. A-1
APPENDIX B................................................................................................. B-1
APPENDIX C................................................................................................. C-1
APPENDIX D................................................................................................. D-1
APPENDIX E................................................................................................. E-1
APPENDIX F................................................................................................. F-1
APPENDIX G................................................................................................. G-1
APPENDIX H................................................................................................. H-1
APPENDIX I................................................................................................. I-1
</TABLE>
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AVAILABLE INFORMATION
NFC is subject to the information reporting requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the 'Commission'). The reports, proxy
statements and other information filed by NFC with the Commission may be
inspected and copied at the Commission's public reference room located at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the public reference facilities in the Commission's regional offices located
at 7 World Trade Center, 13th Floor, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
material may be obtained at prescribed rates by writing to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
Certain of such reports, proxy statements and other information are also
available from the Commission over the Internet at http://www.sec.gov.
People's also is subject to the information reporting requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the FDIC. Such reports, proxy statements and other
information filed by People's may be obtained from the FDIC at prescribed rates
by addressing written requests for such copies to Mr. Lawrence Pierce, Chief,
Registration, Disclosure and Securities Operations Unit, Division of
Supervision, FDIC, 550 17th Street, N.W., Room 6043, Washington, D.C. 20429,
facsimile number (202) 898-3909. In addition, such documents may be inspected
and copied at the public reference facilities of the FDIC at 1776 F Street,
N.W., Washington, D.C. 20006.
Statements contained in this Joint Proxy Statement-Offering Memorandum, or
in any document incorporated by reference herein, as to the contents of any
document referred to herein or therein, are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an exhibit
to one or more reports filed by NFC with the Commission or by People's with the
FDIC, or to such other document, each such statement being qualified in all
respects by such reference.
THIS JOINT PROXY STATEMENT-OFFERING MEMORANDUM INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SEE
'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.' THE DOCUMENTS RELATING TO
PEOPLE'S (EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN) ARE
AVAILABLE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS
JOINT PROXY STATEMENT-OFFERING MEMORANDUM IS DELIVERED, WITHOUT CHARGE, UPON
WRITTEN OR ORAL REQUEST TO JANE S. SHARPE, VICE PRESIDENT, SHAREHOLDER
RELATIONS, PEOPLE'S BANK, BRIDGEPORT CENTER, 850 MAIN STREET, BRIDGEPORT,
CONNECTICUT 06604-4913, TELEPHONE NUMBER (203) 338-7228. THE DOCUMENTS RELATING
TO NFC (EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN) ARE
AVAILABLE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS
JOINT PROXY STATEMENT-OFFERING MEMORANDUM IS DELIVERED, WITHOUT CHARGE, UPON
WRITTEN OR ORAL REQUEST TO INVESTOR RELATIONS, NORWICH FINANCIAL CORP., P.O. BOX
1048, NORWICH, CONNECTICUT 06360, TELEPHONE NUMBER (860) 889-2621 EXT. 2246.
PEOPLE'S OR NFC, AS THE CASE MAY BE, WILL SEND THE REQUESTED DOCUMENTS BY
FIRST-CLASS MAIL WITHIN ONE BUSINESS DAY OF THE RECEIPT OF THE REQUEST. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED NO
LATER THAN FIVE BUSINESS DAYS BEFORE THE APPLICABLE MEETING DATE. PERSONS
REQUESTING COPIES OF EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS WILL BE CHARGED THE COSTS OF
REPRODUCTION AND MAILING.
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT-OFFERING MEMORANDUM, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PEOPLE'S OR
NFC. THIS JOINT PROXY STATEMENT-OFFERING MEMORANDUM DOES NOT CONSTITUTE THE
SOLICITATION OF A PROXY OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
PURCHASE ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER TO
SELL OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT-OFFERING MEMORANDUM NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF PEOPLE'S OR NFC
SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE. PEOPLE'S HAS SUPPLIED ALL INFORMATION CONTAINED IN THIS
JOINT PROXY STATEMENT-OFFERING MEMORANDUM RELATING TO PEOPLE'S AND ITS
SUBSIDIARIES, AND NFC HAS SUPPLIED ALL INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT-OFFERING MEMORANDUM RELATING TO NFC AND ITS SUBSIDIARIES.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
CERTAIN MATTERS DISCUSSED HEREIN ARE FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THIS JOINT PROXY STATEMENT-OFFERING MEMORANDUM
CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF EACH OF PEOPLE'S AND NFC ON A
STAND-ALONE BASIS AND OF PEOPLE'S ON A PRO FORMA COMBINED BASIS FOLLOWING THE
CONSUMMATION OF THE MERGER, INCLUDING STATEMENTS RELATING TO (A) THE COST
SAVINGS AND THE IMPACT ON REPORTED EARNINGS THAT ARE EXPECTED TO RESULT FROM THE
MERGER (SEE 'THE MERGER -- REASONS OF PEOPLE'S FOR THE MERGER', ' -- REASONS OF
NFC AND NSS FOR THE MERGER' AND 'MANAGEMENT AND OPERATIONS AFTER THE
MERGER -- 1998 AND 1999 EARNINGS ESTIMATES'); (B) THE IMPACT OF THE MERGER ON
REVENUES; AND (C) THE COSTS EXPECTED TO BE INCURRED IN CONNECTION WITH THE
MERGER (SEE 'UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION'). THESE
FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT
MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES:
(1) EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE FULLY REALIZED OR REALIZED
WITHIN THE EXPECTED TIME FRAME; (2) REVENUES FOLLOWING THE MERGER ARE LOWER THAN
EXPECTED, OR DEPOSIT ATTRITION OR CUSTOMER LOSS FOLLOWING THE MERGER IS GREATER
THAN EXPECTED; (3) COMPETITIVE PRESSURES AMONG DEPOSITORY INSTITUTIONS INCREASE
SIGNIFICANTLY; (4) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF THE
BUSINESSES OF PEOPLE'S AND NFC ARE GREATER THAN EXPECTED; (5) CHANGES IN THE
INTEREST RATE ENVIRONMENT REDUCE MARGINS; (6) GENERAL ECONOMIC OR BUSINESS
CONDITIONS, EITHER NATIONALLY OR IN THE LOCATIONS IN WHICH PEOPLE'S WILL BE
DOING BUSINESS, ARE LESS FAVORABLE THAN EXPECTED RESULTING IN, AMONG OTHER
THINGS, A DETERIORATION IN CREDIT QUALITY OR A REDUCED DEMAND FOR CREDIT; (7)
LEGISLATIVE OR REGULATORY CHANGES ADVERSELY AFFECT THE BUSINESSES IN WHICH
PEOPLE'S WILL BE ENGAGED; AND (8) CHANGES IN THE SECURITIES MARKETS AND IN THE
PRICES OF SECURITIES TRADED ON THOSE MARKETS. THE FORWARD-LOOKING EARNINGS
ESTIMATES INCLUDED IN THIS JOINT PROXY STATEMENT-OFFERING MEMORANDUM HAVE NOT
BEEN EXAMINED OR COMPILED BY THE INDEPENDENT AUDITORS OF PEOPLE'S OR NFC NOR
HAVE SUCH AUDITORS APPLIED ANY PROCEDURES THERETO. ACCORDINGLY, SUCH AUDITORS DO
NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE ON THEM.
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SUMMARY
The information below is qualified in its entirety by, and reference is
made to, the more detailed information appearing elsewhere in this Joint Proxy
Statement-Offering Memorandum, including the accompanying Appendices and the
documents incorporated by reference in this Joint Proxy Statement-Offering
Memorandum. Each shareholder is urged to read this Joint Proxy
Statement-Offering Memorandum and the Appendices hereto in their entirety and
with care. As used in this Joint Proxy Statement-Offering Memorandum, the term
'People's' refers to People's and, unless the context otherwise requires, its
direct and indirect subsidiaries, and the term 'NFC' refers to NFC and, unless
the context otherwise requires, its direct and indirect subsidiaries.
GENERAL
This Joint Proxy Statement-Offering Memorandum, the notice of the People's
Special Meeting to be held on February 19, 1998, the notice of the NFC Special
Meeting to be held on February 19, 1998 and the forms of proxy solicited in
connection therewith are first being mailed to holders of People's Common Stock
('People's Shareholders') and holders of NFC Common Stock ('NFC Shareholders')
on or about January 13, 1998.
At the People's Special Meeting, People's Shareholders will consider and
vote on a proposal to approve and adopt the Merger Agreement pursuant to which,
among other things, (i) NFC and NSS will merge with and into People's, with
People's as the surviving entity; and (ii) each outstanding share of NFC Common
Stock will be converted, subject to the election and allocation procedures
described in the Merger Agreement, into either (x) the Per Share Stock
Consideration or (y) the Per Share Cash Consideration (see 'THE MERGER -- Merger
Consideration'). Approval and adoption of the Merger Agreement will constitute
approval and adoption of the Merger.
At the NFC Special Meeting, NFC Shareholders will consider and vote on a
proposal to approve and adopt the Merger Agreement. Approval and adoption of the
Merger Agreement will constitute approval and adoption of the Merger.
A copy of the Merger Agreement is attached hereto as Appendix A and is
incorporated herein by reference.
THE COMPANIES
People's. People's is a stock savings bank chartered under the laws of
Connecticut and based in Bridgeport, Connecticut. People's is the largest
independent bank headquartered in Connecticut, with $7.7 billion in total assets
as of September 30, 1997. People's offers diversified consumer and commercial
financial services primarily within the state of Connecticut, and operates a
nationwide credit card program. People's had the largest deposit market share in
Fairfield County as of June 1996, and was the leading residential mortgage
originator in both Connecticut and Fairfield County in 1996. People's offers a
wide range of banking, fiduciary and other financial services and seeks to
develop total business relationships with its corporate, individual and
institutional customers. In addition to the traditional banking services of
accepting deposits and making loans, People's provides specialized services
tailored to specific markets, including personal, institutional and employee
benefit trust services, personal financial and investment services, mutual funds
access and cash management services. People's credit card business had
outstanding managed credit card receivables of $3.3 billion as of September 30,
1997.
People's provides its customers with access to a worldwide automated teller
machine network, 24-hour telephone banking services, PC banking services and
interactive video banking. At September 30, 1997, People's had 73 traditional
branches and 37 supermarket branches in locations throughout most of
Connecticut, and in 1996 established a limited branch in the United Kingdom to
further expand its credit card business. Over the next year, People's expects to
open approximately 8 additional full service supermarket branches in Connecticut
Stop & Shop superstores.
As of September 30, 1997, People's had total stockholders' equity of $697
million. People's Tier 1 leverage capital ratio at that date was 8.4%, its Tier
1 risk-based capital ratio was 10.4%, and its total
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risk-based capital ratio was 14.0%. For the nine months ended September 30,
1997, People's net income was $67.2 million.
People's was organized in 1842 as a mutual savings bank, and in 1988,
People's converted to a capital stock savings bank. That process also resulted
in the formation of People's Mutual Holdings ('Holdings'), a mutual-form bank
holding company that as of January 7, 1998 owned approximately 59.6% of People's
Common Stock.
For further information concerning People's, see 'SELECTED FINANCIAL DATA',
'INFORMATION ABOUT PEOPLE'S' and 'UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION' herein and the People's documents incorporated by reference herein
as described under 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.'
The principal executive offices of People's are located at Bridgeport
Center, 850 Main Street, Bridgeport, Connecticut 06604-4913 (telephone number
(203) 338-7171).
NFC. NFC was organized under the laws of the State of Delaware on December
10, 1987, to operate principally as a bank holding company for NSS. NSS is the
sole direct subsidiary of NFC and its principal asset. At September 30, 1997,
NFC had on a consolidated basis assets of $701 million, deposits of $595
million, net loans of $475 million and shareholders' equity of $82 million.
NSS was originally chartered as a mutual savings bank in 1824. On November
14, 1986, NSS converted from a mutual savings bank to a capital stock savings
bank, effected through the issuance of 5,741,151 shares of common stock. On
August 10, 1988, NFC acquired all of the outstanding common stock of NSS in
exchange for NFC Common Stock on a one-for-one basis. NSS is headquartered in
Norwich, which is located in New London County in southeastern Connecticut. The
branch network of NSS currently consists of 16 full service branches in eastern
Connecticut, located in the towns of Colchester, East Lyme, Griswold, Groton,
Ledyard, Mansfield, Montville, Mystic, New London, Norwich, Plainfield and
Waterford, in addition to its main office. Substantially all of NSS's depositors
reside in these areas and the surrounding communities.
For further information concerning NFC, see 'SELECTED FINANCIAL DATA',
'INFORMATION ABOUT NFC' and 'UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION'
herein and the NFC documents incorporated by reference herein as described under
'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.'
The principal executive offices of NFC are located at 4 Broadway, Norwich,
Connecticut 06360 (telephone number (860) 889-2621).
PEOPLE'S SPECIAL MEETING AND VOTE REQUIRED
The People's Special Meeting will be held on February 19, 1998, at 10:00
a.m., local time, at Bridgeport Center, 850 Main Street, Bridgeport,
Connecticut. At that time, the People's Shareholders will be asked to approve
and adopt the Merger Agreement and the Merger. The record holders of People's
Common Stock at the close of business on January 7, 1998 (the 'People's Record
Date') are entitled to notice of and to vote at the People's Special Meeting. On
the People's Record Date, there were approximately 7,400 holders of record of
People's Common Stock and 61,162,425 shares of People's Common Stock
outstanding.
Each share of People's Common Stock entitles its holder to one vote. All
such shares vote together as a single class, and the affirmative vote of the
holders of two-thirds of all outstanding shares of People's Common Stock is
required to approve the Merger Agreement. As of the People's Record Date, the
directors and executive officers of People's beneficially owned 1,047,539 shares
of People's Common Stock, or approximately 1.7% of the shares entitled to vote
at the People's Special Meeting. People's expects that each director and
executive officer of People's will vote the shares of People's Common Stock
beneficially owned by him or her for approval of the Merger Agreement. As of the
People's Record Date, Holdings beneficially owned 36,450,000 shares of People's
Common Stock, or 59.6% of the shares entitled to vote at the People's Special
Meeting. Pursuant to the terms of a letter
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agreement with NFC and NSS dated September 3, 1997 (the 'Holdings Support
Letter'), Holdings has agreed, subject to the terms thereof, and is expected, to
vote all of the shares of People's Common Stock owned by it for approval of the
Merger Agreement. See 'THE MERGER -- The Holdings Support Letter.' The shares of
People's Common Stock beneficially owned by Holdings and by directors and
executive officers of People's constitute a quorum for the transaction of
business at the People's Special Meeting. If all such shares are voted in favor
of the Merger Agreement, the affirmative vote of an additional 5.4% of the
outstanding shares of People's Common Stock will be required in order to obtain
the required two-thirds affirmative vote. As of the People's Record Date, NFC
and its directors and executive officers beneficially owned 2,000 shares of
People's Common Stock, or significantly less than 1% of the shares entitled to
vote at the People's Special Meeting. See 'PEOPLE'S SPECIAL MEETING.'
NFC SPECIAL MEETING AND VOTE REQUIRED
The NFC Special Meeting will be held on February 19, 1998 at 10:00 a.m.,
local time, at the Ramada Hotel, 10 Laura Boulevard, Norwich, Connecticut, at
which time the NFC Shareholders will be asked to approve and adopt the Merger
Agreement and the Merger. The record holders of NFC Common Stock at the close of
business on January 5, 1998 (the 'NFC Record Date') are entitled to notice of
and to vote at the NFC Special Meeting. On the NFC Record Date, there were
approximately 1,915 holders of record of NFC Common Stock and 5,542,941 shares
of NFC Common Stock outstanding.
The affirmative vote of the holders of a majority of the outstanding shares
of NFC Common Stock is required to approve the Merger Agreement. As of the NFC
Record Date, the directors and executive officers of NFC beneficially owned
approximately 414,001 shares of NFC Common Stock, or approximately 7.14% of the
shares entitled to vote at the NFC Special Meeting. NFC expects that each
director and executive officer of NFC will vote the shares of NFC Common Stock
beneficially owned by him or her for approval of the Merger Agreement. As of the
NFC Record Date, People's and its directors and executive officers did not own
any shares of NFC Common Stock, beneficially or otherwise. See 'NFC SPECIAL
MEETING.'
THE MERGER
In the Merger, subject to the terms and conditions of the Merger Agreement,
NFC and NSS will simultaneously merge with and into People's, which will be the
surviving entity. Each outstanding share of NFC Common Stock (other than shares
with respect to which dissenters' appraisal rights are perfected, and certain
shares held by NFC or People's), including each attached NFC Right, will
automatically be converted, subject to certain election and allocation
procedures, into the right to receive either the Per Share Stock Consideration
or the Per Share Cash Consideration. The Per Share Stock Consideration and the
Per Share Cash Consideration will be determined based on a formula set forth in
the Merger Agreement which takes into consideration the Valuation Period Market
Value and the Valuation Period Share Number. The value of the Per Share Stock
Consideration and the Per Share Cash Consideration will be equal on the
Valuation Date using the Valuation Period Market Value as the representative
price of People's Common Stock on that date.
The Merger Agreement provides that People's will issue 2,945,594 shares of
People's Common Stock as part of the consideration to be paid in the Merger.
This number of shares is subject to adjustment within a range, or 'collar',
depending on the Valuation Period Market Value of People's Common Stock. If the
Valuation Period Market Value is $27.875 (the midpoint of the collar), no
adjustment is made. If the Valuation Period Market Value is less than $27.875
but not less than $26.48 (the 'Floor'), the number of shares of People's Common
Stock to be issued will increase proportionately so that the number of shares to
be issued multiplied by the Valuation Period Market Value will equal
$82,108,433. In similar fashion, if the Valuation Period Market Value is greater
than $27.875 but not greater than $29.27 (the 'Ceiling'), the number of shares
of People's Common Stock to be issued will decrease proportionately so that the
number of shares of People's Common Stock to be
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issued multiplied by the Valuation Period Market Value will also equal
$82,108,433. If the Valuation Period Market Value is greater than the Ceiling or
less than the Floor, the number of shares of People's Common Stock to be issued
is adjusted as if the Valuation Period Market Value were equal to the Ceiling or
the Floor (as the case may be). Consequently, the maximum number of shares of
People's Common Stock to be issued in connection with the Merger is 3,100,771 if
the Valuation Period Market Value is at or below the Floor, and the minimum
number of shares of People's Common Stock to be issued in connection with the
Merger is 2,805,208 if the Valuation Period Market Value is at or above the
Ceiling.
If January 7, 1998 had been the Valuation Date, (a) the Valuation Period
Market Value would have been $36.819; (b) the aggregate consideration payable to
holders of NFC Common Stock would have consisted of $75,972,866 (after giving
effect to the exercise of Options and cash payments in settlement of unexercised
Options) and 2,805,208 shares of People's Common Stock; (c) the Per Share Stock
Consideration would have consisted of 0.8784 shares of People's Common Stock;
and (d) the Per Share Cash Consideration and the value of the Per Share Stock
Consideration would each have been equal to $32.34. The Valuation Period Market
Value will not actually be determined until the Valuation Date (which has not
yet occurred), and additional Options may be exercised prior to that date.
Consequently, the Valuation Period Market Value, the cash portion of the
aggregate consideration to be paid, the number of shares of People's Common
Stock to be issued in connection with the Merger, the Per Share Stock
Consideration, and the value of the Per Share Cash Consideration and Per Share
Stock Consideration may differ from the amounts shown in the example. The actual
market price of People's Common Stock on the date shares are received by a
former holder of shares of NFC Common Stock may be more or less than the
Valuation Period Market Value.
APPENDIX I TO THIS JOINT PROXY STATEMENT-OFFERING MEMORANDUM SETS FORTH THE
PER SHARE STOCK CONSIDERATION AND THE PER SHARE CASH CONSIDERATION PAYABLE AT
VARIOUS ASSUMED VALUATION PERIOD MARKET VALUES.
ELECTION PROCEDURES
The right of an NFC Shareholder to receive the Per Share Stock
Consideration or the Per Share Cash Consideration is subject to certain election
and allocation procedures described under 'THE MERGER -- Election Procedures.'
The number of shares of People's Common Stock to be issued in connection with
the Merger will be fixed within the limits prescribed by the collar, according
to the Valuation Period Market Value of People's Common Stock. The amount of
cash payable in connection with the Merger is also fixed, except for
dollar-for-dollar adjustments to account for the exercise price of Options
exercised before the Valuation Date. No guarantee can be given that an election
by a holder of NFC Common Stock to receive People's Common Stock or cash will be
honored. See 'THE MERGER -- Election Procedures.'
The federal income tax consequences to an NFC Shareholder resulting from
the receipt of cash will be different than those resulting from the receipt of
People's Common Stock. Each shareholder should consider these tax consequences
in making an election. For a discussion of the federal income tax consequences
of the receipt of cash or stock consideration, see 'THE MERGER -- Certain
Federal Income Tax Consequences.'
CONDITIONS TO THE MERGER
The Merger is subject to the satisfaction of certain conditions, including
among others, the approval of the Merger Agreement by the affirmative votes of
the respective holders of at least two-thirds of the outstanding shares of
People's Common Stock and a majority of the outstanding shares of NFC Common
Stock, and the approval of the Merger by appropriate regulatory agencies. See
'THE MERGER -- Conditions to the Merger.'
For additional information relating to the Merger, see 'THE MERGER.'
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RECOMMENDATIONS OF BOARDS OF DIRECTORS
THE PEOPLE'S BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY. THE PEOPLE'S BOARD BELIEVES THAT THE MERGER
IS FAIR TO, AND IN THE BEST INTERESTS OF, PEOPLE'S AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT PEOPLE'S SHAREHOLDERS VOTE 'FOR' APPROVAL OF THE
MERGER AGREEMENT. FOR A DISCUSSION OF THE FACTORS CONSIDERED BY THE PEOPLE'S
BOARD IN REACHING ITS CONCLUSIONS, SEE 'THE MERGER -- BACKGROUND OF THE MERGER'
AND ' -- REASONS OF PEOPLE'S FOR THE MERGER.'
THE NFC BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY. THE NFC BOARD BELIEVES THAT THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF, NFC AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT NFC SHAREHOLDERS VOTE 'FOR' APPROVAL OF THE MERGER AGREEMENT.
FOR A DISCUSSION OF THE FACTORS CONSIDERED BY THE NFC BOARD IN REACHING ITS
CONCLUSIONS, SEE 'THE MERGER -- BACKGROUND OF THE MERGER' AND ' -- REASONS OF
NFC AND NSS FOR THE MERGER.'
OPINION OF PEOPLE'S FINANCIAL ADVISOR
Goldman, Sachs & Co. ('Goldman Sachs'), which has served as financial
advisor to People's in connection with the Merger, delivered its written opinion
dated September 3, 1997 to the People's Board to the effect that as of the date
of such opinion the aggregate consideration to be paid pursuant to the Merger
Agreement was fair to People's. Goldman Sachs subsequently delivered to the
People's Board an updated written opinion dated the date of this Joint Proxy
Statement-Offering Memorandum to the effect that as of the date hereof the
aggregate consideration to be paid by People's pursuant to the Merger Agreement
was fair to People's.
The full text of the updated written opinion of Goldman Sachs dated the
date of this Joint Proxy Statement-Offering Memorandum, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Appendix E and is
incorporated herein by reference. Goldman Sachs' opinion was provided for the
information and assistance of the People's Board in connection with its
consideration of the transactions contemplated by the Merger Agreement, and such
opinion does not constitute a recommendation as to how any holder of shares of
People's Common Stock should vote with respect to such transaction. Holders of
shares of People's Common Stock are urged to, and should, read such opinion in
its entirety. See 'THE MERGER -- Opinion of People's Financial Advisor.'
OPINION OF NFC'S FINANCIAL ADVISOR
Keefe, Bruyette & Woods, Inc. ('Keefe Bruyette'), which has served as
financial advisor to NFC in connection with the Merger, has rendered its written
opinion to the NFC Board that the consideration proposed to be received by NFC
Shareholders in the Merger is fair, from a financial point of view, to such
holders. Such opinion was delivered to the NFC Board as of the date of its
meeting of September 3, 1997, and again on the date of this Joint Proxy
Statement-Offering Memorandum. A copy of the opinion delivered by Keefe Bruyette
dated the date hereof is attached hereto as Appendix F and should be read in its
entirety with respect to assumptions made, matters considered and limits on the
review undertaken by Keefe Bruyette in rendering such opinion. See 'THE
MERGER -- Opinion of NFC's Financial Advisor.'
EFFECTIVE TIME OF THE MERGER
Subject to the prior satisfaction or waiver of certain conditions set forth
in the Merger Agreement and described under 'THE MERGER -- Conditions to the
Merger,' the parties will cause the Effective Time to occur on (i) the third
business day after the date on which (or at the election of People's, the last
day of the month in which) all such conditions, to the extent not waived, are
satisfied; or (ii) such other date as People's and NFC may agree. It is
currently anticipated that the Effective Time will occur on or before March 2,
1998.
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WAIVER; AMENDMENT; TERMINATION; EXPENSES
At any time prior to the Effective Time, the parties, by action taken or
authorized by their respective Boards of Directors, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties to the Merger Agreement, (ii) waive any
inaccuracies in the representations and warranties contained in the Merger
Agreement or in any document delivered pursuant thereto, (iii) waive compliance
with any of the agreements or conditions contained therein (other than those
which the Merger Agreement explicitly provides cannot be waived, see 'THE
MERGER -- Conditions to the Merger'), and (iv) amend the Merger Agreement,
provided that after any approval of the Merger Agreement by the NFC
Shareholders, there may not be, without further approval of such shareholders,
any extension, waiver or amendment of the Merger Agreement or any portion
thereof which reduces the amount or changes the form of the consideration to be
delivered to NFC's shareholders under the Merger Agreement in any material
respect other than as contemplated by the Merger Agreement.
The Merger Agreement may be terminated, under circumstances set forth
therein, (a) by the mutual consent of People's and NFC, (b) by either People's
or NFC if certain regulatory approvals are not obtained or are obtained subject
to certain conditions, (c) by either People's or NFC if the Merger has not been
consummated by June 30, 1998, except to the extent that the failure of the
Merger then to be consummated is due to the failure of the party seeking to
terminate the Merger Agreement to perform its obligations under the Merger
Agreement, (d) by either People's or NFC if (i) there is a material adverse
change in the business or financial condition of the other party, (ii) the other
party materially breaches its representations, warranties or covenants, in each
case after inability or failure to cure within 30 days, (iii) the other party's
Board of Directors fails to recommend approval of the Merger Agreement by such
party's shareholders, or (iv) any required approval of the shareholders of the
other party is not obtained, or (e) by NFC if the Valuation Period Market Value
is below $20.91 (unless People's elects to increase the consideration to be
received by NFC Shareholders in the manner specified in the Merger Agreement).
See 'THE MERGER -- Termination of the Merger Agreement.'
All costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby will be paid by the party incurring such
costs and expenses, except that printing expenses and Commission filing fees
will be shared equally between NFC and People's.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the 'Code'). It is
anticipated that, under federal law as currently in effect, (i) an NFC
Shareholder who receives solely People's Common Stock will recognize neither
gain nor loss on the exchange; (ii) an NFC Shareholder who receives a
combination of People's Common Stock and cash will recognize any gain realized
on the exchange to the extent of the lesser of the total amount of gain realized
or the total amount of cash received, but no loss will be recognized, and any
gain recognized may be treated as ordinary income if the receipt of cash has the
effect of the distribution of a dividend; and (iii) an NFC Shareholder who
receives only cash will recognize any gain realized and will be permitted to
recognize any loss realized. The obligation of People's to consummate the Merger
is conditioned on the receipt by People's of an opinion of its counsel, Cleary,
Gottlieb, Steen & Hamilton, regarding certain federal income tax consequences of
the Merger. The obligations of NFC and NSS to consummate the Merger are
conditioned on the receipt by NFC of an opinion of its counsel, Day, Berry &
Howard, regarding certain federal income tax consequences of the Merger. For a
more complete description of the federal income tax consequences of the Merger,
see 'THE MERGER -- Certain Federal Income Tax Consequences.'
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Boards and management of NFC and NSS may be deemed
to have interests in the Merger that are in addition to their interests as NFC
Shareholders.
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Directors of NFC and NSS. Under the Outside Director Retainer Continuation
Plan For Norwich Financial Corp. and The Norwich Savings Society, each
non-employee director of NFC and NSS will receive a benefit equal to the product
of (x) the number of completed years of service, not to exceed ten and (y) the
amount of the annual retainer then in effect. Upon a change-in-control of NFC
(which will result from the Merger), the benefit is paid in a lump sum. Each of
the NFC non-employee directors, Paul R. Duevel, Anthony P. Halsey, Jeremiah J.
Lowney, Jr., Robert T. Ramsdell, Richard P. Reed, and Martin C. Shapiro will be
entitled to receive a lump sum payment of $80,000.
NFC directors were permitted to defer receipt of director's fees pursuant
to deferred compensation agreements effective in 1987 and 1990. Deferred amounts
were invested in life insurance policies owned by NSS. The 1987 and 1990
agreements will be amended and restated in the form of one consolidated 1998
agreement for each director.
In 1995, NSS adopted the Non-Qualified Deferred Compensation Plan for the
benefit of directors and certain key employees of NFC and NSS. Under this plan,
deferred amounts are allocated to accounts which are deemed to be invested in
funds held by a rabbi trust. The account balance is payable to the participant
in ten annual installments. Under the Merger Agreement, People's has agreed to
maintain the Deferred Compensation Plan and related rabbi trust until the end of
the ten-year payment period.
Under the Merger Agreement, each holder of an Option granted under a Stock
Option Plan of NFC will be entitled to receive a cash payment from People's in
settlement of such Option. Each non-employee director of NFC and NSS will be
entitled to receive a cash payment for his or her Options. Based upon the number
of Options held as of January 7, 1998, and assuming that date had been the
Valuation Date and the Per Share Cash Consideration and the Average Per Share
Consideration therefore each would be $32.34 (see 'THE MERGER -- Merger
Consideration'), Messrs. Duevel, Halsey, Lowney, Ramsdell, Reed and Shapiro
would be entitled to payments of $433,452.50, $169,872.50, $316,127.50,
$311,752.50, $433,452.50 and $433,452.50, respectively, in exchange for Options
previously granted to them under the NFC Stock Option Plans for outside
directors.
Under the Merger Agreement, one director of NFC, to be selected by the
People's Board, will serve as an additional member of the People's Board.
Jeremiah J. Lowney, Jr., D.D.S., currently a member of the NFC Board, is
expected to be appointed as a member of the People's Board. Also, pursuant to
the Holdings Support Letter, Holdings will elect one individual serving on the
NFC Board to serve as a member of Holdings' Board of Trustees. Martin C.
Shapiro, currently a member of the NFC Board, is expected to be appointed as a
member of Holdings' Board of Trustees. In addition, the non-employee Directors
of NFC other than Dr. Lowney will be invited to serve on an advisory board to
People's.
Executive Officers of NFC and NSS. Daniel R. Dennis, Jr., Michael J. Hartl,
James F. Dewey and Daphne P. Cannata (collectively, the 'Executives') are
parties to employment agreements (collectively, the 'Agreements') with NSS
and/or NFC. Under the Agreements, the term of employment for Mr. Dennis is a
continuously renewing period of three years, the terms of employment for Mr.
Hartl and Ms. Cannata are each continuously renewing periods of two years, and
the term of employment for Mr. Dewey is a continuously renewing period of one
year (all such terms of employment collectively referenced as the 'Term' or
'Terms'). The Terms of Messrs. Hartl and Dewey and (effective as of September 3,
1997) of Ms. Cannata automatically extend for one additional year on the date of
a Change-in-Control of NSS as defined in the Agreements.
The Agreements provide that if the Executive's employment is terminated
other than for Cause or Disability, or if the Executive voluntarily resigns for
Good Reason, the Executive will receive severance pay equal to his or her then
base salary through the remainder of the Term. In the case of Mr. Dennis, he
also would be paid termination benefits equivalent to those he would have
received under the NSS retirement plans had he continued employment until the
end of his Term. In the event of a Change-in-Control, each Agreement provides
that total payments to an Executive will not exceed the amount that would
constitute an 'excess parachute payment' within the meaning of Section 280G of
the Code. The Agreements also contain confidentiality and non-competition
provisions.
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NSS and NFC amended the Agreements of Messrs. Dennis and Hartl and Ms.
Cannata effective September 3, 1997. The Agreements were amended to provide that
on termination of employment, they will receive, in a lump sum payment, the
value of their covenants not to compete and not to disclose confidential
information. Any such amounts reduce otherwise payable severance payments. Mr.
Hartl's and Ms. Cannata's Agreements also were amended to pay them benefits
equivalent to those they would have received under the NSS retirement plans had
they continued employment until the end of their Term. In addition, the Term of
Ms. Cannata's Agreement was extended one year in the event that there is a
Change-in-Control with respect to NSS. NFC, NSS and People's have agreed that
NSS will pay to Mr. Dennis at or before the Effective Time an amount equal to
the value of his Agreement, estimated to be approximately $950,000, in
consideration of his release of all rights he may have under the Agreement. Mr.
Dennis and People's expect to enter into a new employment agreement after the
Effective Time pursuant to which Mr. Dennis will be employed for a term of three
years as a Senior Vice President of People's with responsibilities for the
Norwich Region at an annual base salary of approximately $215,000. If Messrs.
Hartl or Dewey or Ms. Cannata is terminated other than for Cause or Disability,
or if they voluntarily resign for Good Reason, it is estimated that they would
be entitled to be paid approximately $683,000, $211,000 and $410,000,
respectively, under the Agreements.
James R. Brown, who was also a party to an employment agreement with NSS,
retired from service effective November 21, 1997. As a result, his agreement was
terminated, and he was paid a $25,000 retirement bonus.
Richard R. Cascio, Senior Vice President, Lending, of NSS, entered into a
severance pay agreement with NSS in February 1988 that becomes effective upon a
change in control of NSS, which would occur upon consummation of the Merger. If
Mr. Cascio's employment is terminated other than for Cause, Disability, death or
retirement or if he resigns for Good Reason during the one-year period following
the Effective Time, he would be entitled to receive approximately $100,000.
Under the Merger Agreement, each holder of an Option granted under a Stock
Option Plan of NFC will be entitled to receive in settlement for each Option not
exercised prior to the Valuation Date a cash payment from People's in an amount
equal to the excess, if any, of the Average Per Share Consideration over the per
share exercise price of such Option, multiplied by the number of shares covered
by such Option. Based upon the number of Options held as of January 7, 1998, and
assuming that date had been the Valuation Date and the Per Share Cash
Consideration and the Average Per Share Consideration therefore each would be
$32.34 (see 'THE MERGER -- Merger Consideration'), Messrs. Dennis, Hartl, Brown,
Cascio and Dewey and Ms. Cannata would be entitled to receive $1,078,801.75,
$458,934.75, $125,970.00, $192,441.00, $334,315.00 and $473,711.50,
respectively, in exchange for Options previously granted to them under NFC's
Stock Option Plans; Richard W. Dennison, Senior Vice President of NSS, would
receive $162,935.00 in exchange for Options previously granted to him under
NFC's Stock Option Plans (Mr. Dennison is not a party to employment or severance
pay agreements); and all executive officers of NFC as a group would be entitled
to receive $2,827,109.00 in settlement of such Options.
People's has agreed to indemnify the present and former officers and
directors of NFC and NSS with respect to claims arising from facts or events
which occurred prior to the Effective Time. For six years following the
Effective Time, People's has agreed to provide, subject to certain limitations
set forth in the Merger Agreement, that portion of directors and officers'
liability insurance that serves to reimburse the present and former directors
and officers of NFC and NSS with respect to claims arising from facts or events
which occurred prior to the Effective Time.
Other Employees of NFC and NSS. Under the Merger Agreement, People's will
amend its retirement plans to provide that, for former employees of NFC or NSS
hired by People's, an employee's period of employment with NSS or NFC will be
considered employment with People's for eligibility, vesting, early retirement
and disability benefits. People's also has agreed that, with the exception of
its Enhanced Senior Pension Plan, all benefits payable by People's to former
employees of NSS and NFC under any retirement plan maintained by People's will
not be offset by any benefits accrued by employees of NSS or NFC before the
Effective Time. In addition, under the Merger Agreement,
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employees of NSS and NFC who are not offered jobs that are comparable in
compensation and responsibilities will be paid severance amounts equal to two
weeks' salary for each full year of employment with NSS (plus a fraction for any
partial year based on the number of full months completed). NSS employees who
are employed by People's after the Effective Time but who are terminated without
cause by People's within one year following the Effective Time will receive the
above-described severance payment. Further, under the Merger Agreement, NSS
employees mutually agreed upon by People's, NSS and NFC who are employed by
People's until an agreed upon release date following the Merger will be paid a
retention bonus in an amount agreed upon by People's, NSS and NFC.
See 'THE MERGER -- Interests of Certain Persons in the Merger.'
THE STOCK OPTION AGREEMENT
As an inducement to People's to enter into the Merger Agreement, and in
consideration of its efforts in furtherance of the Merger, NFC (as issuer)
entered into the Stock Option Agreement, dated as of September 3, 1997 (the
'Stock Option Agreement'). The Stock Option Agreement is attached hereto as
Appendix B. Pursuant to the Stock Option Agreement, NFC granted People's an
irrevocable option (the 'NFC Option') to purchase from NFC up to 1,081,036
shares of NFC Common Stock (subject to adjustment in certain circumstances, but
in no event to exceed 19.9% of the shares of NFC Common Stock outstanding upon
exercise thereof), at a price of $25.00 per share. The $25.00 exercise price was
determined through negotiations, taking into account the closing sale price of
NFC Common Stock on the date on which agreement was reached with respect to
certain key economic terms of the Merger, subject to agreement on additional
terms, completion of definitive agreements and approval of the Merger Agreement
by the People's Board and the NFC Board. People's may exercise the NFC Option
only under certain limited and specifically defined circumstances (none of
which, to the knowledge of People's and NFC, has occurred as of the date
hereof). At the request of the holder of the NFC Option, under certain
circumstances, NFC will repurchase for a formula price the NFC Option and any
shares of NFC Common Stock purchased upon the exercise of the NFC Option and
beneficially owned by such holder at that time. Notwithstanding anything in the
Stock Option Agreement to the contrary, the Total Profit (as defined in the
Stock Option Agreement) that People's may derive directly from the NFC Option
will not exceed $3 million.
The purchase of any shares of NFC Common Stock pursuant to the NFC Option
is subject to compliance with applicable law, including receipt of any necessary
approvals under the Bank Holding Company Act of 1956, as amended (the 'BHCA').
In the event that the shareholders of NFC or People's fail to approve the
Merger Agreement, either People's or NFC may terminate the Merger Agreement. See
'THE MERGER -- Termination of the Merger Agreement.' If such termination occurs
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event (as
such terms are defined in the Stock Option Agreement), the Stock Option
Agreement will automatically terminate at such time. However, if a Purchase
Event occurs prior to the termination of the Merger Agreement (or in certain
circumstances after termination of the Merger Agreement if at the time of such
termination a Preliminary Purchase Event has occurred) People's will be entitled
to exercise the NFC Option in accordance with its terms.
See 'THE MERGER -- The Stock Option Agreement.'
THE NFC FEE AGREEMENT
As an inducement to People's to enter into the Merger Agreement, and in
consideration of People's undertaking efforts in furtherance of the Merger, NFC
entered into a letter agreement with People's, dated as of September 3, 1997
(the 'NFC Fee Agreement'). The NFC Fee Agreement is attached hereto as Appendix
C. Pursuant to the NFC Fee Agreement, NFC will pay People's a cash fee of $7
million only under certain limited and specifically defined circumstances (none
of which, to the
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knowledge of NFC and People's, has occurred as of the date hereof). See 'THE
MERGER -- The NFC Fee Agreement.'
Certain aspects of the Stock Option Agreement and the NFC Fee Agreement may
have the effect of discouraging persons who might now, or prior to the Effective
Time, be interested in acquiring all of or a significant interest in NFC from
considering or proposing such an acquisition, even if such persons were prepared
to offer to pay consideration to shareholders of NFC which had a higher current
market price than the consideration to be received for each share of NFC Common
Stock pursuant to the Merger Agreement.
THE HOLDINGS SUPPORT LETTER
As an inducement to NFC and NSS to enter into the Merger Agreement, and in
consideration of their efforts in furtherance of the Merger, Holdings has agreed
in the Holdings Support Letter to vote all shares of People's Common Stock owned
by Holdings in favor of the Merger Agreement (subject to the conditions and
events of termination specified in the Merger Agreement) at any meeting of
shareholders of People's called to consider and take action with respect
thereto, provided that such agreement will terminate if the People's Board fails
to recommend, or modifies, withdraws or changes in a manner adverse to NFC its
recommendation for, approval of the Merger Agreement and the Merger. The
Holdings Support Letter is attached hereto as Appendix D.
AMENDMENT TO THE NFC RIGHTS AGREEMENT
In connection with the execution of the Merger Agreement, NFC amended the
NFC Rights Agreement to provide, among other things, that (i) no holder of an
NFC Right or Right Certificate (as defined in the NFC Rights Agreement) or any
NFC Common Stock may exercise an NFC Right prior to the Effective Time and (ii)
all of the NFC Rights shall automatically expire and cease to be exercisable at
the Effective Time.
HOLDING COMPANY STRUCTURE; POST-MERGER OWNERSHIP OF PEOPLE'S COMMON STOCK
As of January 7, 1998, Holdings owned approximately 59.6% of the
outstanding shares of People's Common Stock. Following the issuance of People's
Common Stock upon consummation of the Merger, Holdings will continue to own
36,450,000 shares of People's Common Stock, representing approximately 57.0% of
the shares of People's Common Stock anticipated to be outstanding following
consummation of the Merger. Upon consummation of the Merger, persons who
previously owned shares of NFC Common Stock will own approximately 4.5% of the
shares of People's Common Stock then anticipated to be outstanding. Persons
other than Holdings who owned shares of People's Common Stock immediately prior
to consummation of the Merger will own approximately 38.5% of the shares of
People's Common Stock then anticipated to be outstanding. After the Merger, by
virtue of its ownership of a majority of People's outstanding shares, Holdings
will be able to elect all of the members of the People's Board and will
generally be able to affect significantly the outcome of all matters presented
for consideration by the shareholders of People's.
As a mutual bank holding company, Holdings has no shares of capital stock.
Holdings' Board of Trustees is required under Holdings' Articles of
Incorporation to consider the impact of its actions on a variety of
constituencies, including the depositors, employees and debtholders of People's
and the well-being of communities in which People's conducts business, but not
the shareholders of People's. It is the Trustees' belief that the interests of
the shareholders of People's and those of Holdings' other constituencies are, in
many circumstances, congruent, inasmuch as increased profitability of People's
also furthers the interests of these constituencies. Accordingly, the Board of
Trustees of Holdings has historically considered the interests of People's
shareholders in making business decisions, although it is not required to do so.
Except for a comparatively minor amount used to fund operations of
Holdings, Holdings has waived the payment of cash dividends during those periods
since 1988 in which People's has been able
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to pay cash dividends to its shareholders. There can be no assurance that in the
future Holdings will continue to waive cash dividends at all or to the extent
waived to date. People's and Holdings are aware that recent orders issued by
federal bank regulatory agencies granting conditional approval for second-step
conversions in which the mutual holding company undergoes a full
'demutualization' have required dilution of the public minority shareholders'
interest to reflect the amount of dividends previously waived by the parent
holding company. Neither People's nor the Board of Trustees of Holdings has
expressed any intention to undertake a second-step conversion in the future;
indeed it is unclear as to whether Connecticut law provides for such a
second-step conversion. See 'INFORMATION ABOUT PEOPLE'S -- Holding Company
Structure.'
DISSENTERS' RIGHTS
Under the Delaware General Corporation Law (the 'DGCL'), NFC Shareholders
who follow the procedures set forth in Section 262 of the DGCL will be entitled
to have their shares of NFC Common Stock appraised by the Delaware Court of
Chancery and to receive payment of the 'fair value' of such shares, exclusive of
any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, as determined by such
court.
An NFC Shareholder wishing to exercise appraisal rights must deliver to
NFC, before the taking of the vote on the Merger, a written demand for appraisal
of his or her shares of NFC Common Stock. A vote against the Merger shall not
constitute such a demand. An NFC Shareholder who votes in favor of the Merger
will be precluded from exercising appraisal rights. Written demands for
appraisals should be addressed to Norwich Financial Corp., 4 Broadway, Norwich,
Connecticut 06360, Attention: Corporate Secretary. Within 10 days after the
Effective Time of the Merger, People's will notify each NFC Shareholder who
complied with the procedures described in Section 262 and has not voted in favor
of the Merger that the Merger has become effective. Within 120 days after the
Effective Time, People's or any shareholder who has complied with Section 262
may file a petition in the Delaware Court of Chancery demanding a determination
of the fair value of the shares of NFC Common Stock of all shareholders who have
complied with Section 262.
Any holder of NFC Common Stock who duly demands appraisal under the DGCL at
or prior to the NFC Special Meeting will be entitled to payment for such shares
('Dissenting NFC Shares') only to the extent permitted by and in accordance with
the provisions of the DGCL, and such shares will not be converted into the Per
Share Stock Consideration or the Per Share Cash Consideration. Dissenting NFC
Shares will be treated as No Election Shares for purposes of the allocation
provisions of the Merger Agreement. An NFC Shareholder may withdraw his or her
demand for appraisal and may, subject to the allocation procedures described
below, accept the applicable Per Share Stock Consideration or Per Share Cash
Consideration at any time within 60 days after the Effective Time. See 'THE
MERGER -- Dissenting NFC Shares' and 'DISSENTERS' RIGHTS.'
Any holder of People's Common Stock who, prior to the vote taken with
respect to the Merger at the People's Special Meeting, submits a written demand
for payment for his or her shares of People's Common Stock will be entitled to
payment for such shares ('Dissenting People's Shares'), subject to compliance
with applicable provisions of the Connecticut Business Corporation Act (the
'CTBCA'). THE EXERCISE OF DISSENTERS' APPRAISAL RIGHTS BY HOLDERS OF SHARES OF
PEOPLE'S COMMON STOCK WILL HAVE NO EFFECT ON THE PER SHARE STOCK CONSIDERATION
OR PER SHARE CASH CONSIDERATION PAYABLE TO HOLDERS OF NFC COMMON STOCK PURSUANT
TO THE MERGER, OR ON THE ALLOCATION OF STOCK AND CASH AMONG NFC SHAREHOLDERS IN
ACCORDANCE WITH THE PROVISIONS OF THE MERGER AGREEMENT. See 'DISSENTERS'
RIGHTS.'
The foregoing is not a complete statement of the law pertaining to
dissenters' appraisal rights under the applicable provisions of the DGCL or the
CTBCA, the texts of which are set forth as Appendices G and H hereto,
respectively. Any NFC Shareholder or People's Shareholder who wishes to exercise
dissenters' appraisal rights should review carefully the procedures contained
therein.
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ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for by the purchase method
of accounting under generally accepted accounting principles. See 'THE
MERGER -- Accounting Treatment.'
REGULATORY APPROVALS
The Merger is subject to the approval of the FDIC and the Connecticut
Commissioner of Banking (the 'Commissioner'). People's and NFC have filed all
required applications for regulatory review and approval with the FDIC and the
Commissioner in connection with the Merger, and People's obtained FDIC approval
of the Merger on December 29, 1997. The Merger may not be consummated until
expiration of applicable waiting periods. There can be no assurance that the
necessary approvals of the Commissioner will be obtained or as to the date of
any such approvals.
People's and Holdings have obtained a waiver from the Board of Governors of
the Federal Reserve System (the 'Federal Reserve Board') of any requirement that
People's or Holdings file an application under the BHCA, or that People's
register as a bank holding company, in connection with the Merger.
See 'THE MERGER -- Conditions to the Merger' and ' -- Regulatory Matters.'
SHARE INFORMATION AND MARKET PRICES
People's Common Stock is traded on Nasdaq as a National Market security and
reported by Nasdaq under the symbol 'PBCT.' As of the People's Record Date,
there were 61,162,425 shares of People's Common Stock outstanding held by
approximately 7,400 holders of record. NFC Common Stock is traded on Nasdaq as a
National Market security and reported by Nasdaq under the symbol 'NSSB.' As of
the NFC Record Date, there were 5,542,941 shares of NFC Common Stock outstanding
held by approximately 1,915 holders of record.
The following table sets forth the last sale price reported by Nasdaq for
shares of People's Common Stock on September 3, 1997, the last trading day
preceding public announcement of the proposed Merger, and on January 9, 1998. It
also sets forth the last reported sale prices per share reported by Nasdaq for
shares of NFC Common Stock on September 3, 1997 and January 9, 1998.
<TABLE>
<CAPTION>
PEOPLE'S COMMON STOCK NFC COMMON STOCK
--------------------- ----------------
<S> <C> <C>
September 3, 1997........................................ $ 29.50 $28.50
January 9, 1998.......................................... $ 34.94 $30.88
</TABLE>
For additional information regarding the market prices of People's Common
Stock and NFC Common Stock during the previous three years, see 'PRICE RANGE OF
COMMON STOCK AND DIVIDENDS -- Market Prices.'
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COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth selected comparative per share data for each
of People's and NFC (i) on a historical basis and (ii) on a pro forma basis
assuming the Merger had been consummated at the beginning of the periods
presented. The unaudited pro forma data has been prepared giving effect to the
Merger as a purchase. See 'THE MERGER -- Accounting Treatment.' The NFC pro
forma equivalent amounts are presented with respect to each set of pro forma
information, and have been calculated by multiplying the corresponding pro forma
combined amounts per share of People's Common Stock by the Exchange Ratio
described in footnote (1) to the table.
The unaudited pro forma comparative per share data reflects the Merger
based upon preliminary purchase accounting and Merger-related adjustments.
Changes to these preliminary adjustments are expected as evaluations of assets
and liabilities are completed and as additional information becomes available.
See 'UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.'
People's expects that the combined company will achieve substantial
benefits from the Merger including operating cost savings and revenue
enhancements. However, the unaudited pro forma comparative per share data does
not reflect any potential operating cost savings or revenue enhancements which
are expected to result from the consolidation of operations, and therefore does
not purport to be indicative of the expected results of future operations.
The comparative per share data presented herein should be read in
conjunction with (i) the historical consolidated financial statements and the
related notes thereto of People's and NFC, included in the documents described
under 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE' and (ii) the additional
pro forma information included herein under 'UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION.' The historical operating results of both People's and
NFC for the nine months ended September 30, 1997 are not necessarily indicative
of results which may be expected for the entire year, nor are the pro forma
amounts necessarily indicative of the results of operations or the combined
financial position that would have resulted had the Merger been consummated at
the beginning of the periods presented. The historical financial information of
both People's and NFC includes all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of their financial
position and operating results as of and for the nine months ended September 30,
1997.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Earnings per common share (primary):
People's
Historical..................................................... $ 1.09 $ 1.32
Pro forma combined for the Merger.............................. 1.05 1.24
NFC
Historical..................................................... 1.08 1.18
Pro forma equivalent for the Merger(1)......................... 0.98 1.16
Cash dividends declared per common share:
People's
Historical..................................................... $ 0.48 $ 0.53
Pro forma combined for the Merger(2)........................... 0.48 0.53
NFC
Historical..................................................... 0.50 0.59
Pro forma equivalent for the Merger(1)......................... 0.45 0.50
</TABLE>
(table continued on next page)
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(table continued from previous page)
<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Stockholders' equity per common share:
People's
Historical..................................................... $11.41 $ 10.16
Pro forma combined for the Merger.............................. 12.32 11.13
NFC
Historical..................................................... 15.05 14.17
Pro forma equivalent for the Merger(1)......................... 11.55 10.44
</TABLE>
- ------------
(1) Pro forma equivalent amounts for the Merger have been calculated by
multiplying the pro forma combined amounts by an assumed Exchange Ratio of
0.9379. This Exchange Ratio would apply if the Valuation Period Market Value
were equal to the closing market price of People's Common Stock at September
30, 1997 of $32.06 per share, which is the price utilized for the purposes
of preparing the pro forma information included under 'UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION'. See also 'THE MERGER -- Merger
Consideration' and Appendix I.
(2) Pro forma combined dividends per share assumes that the Merger will not
result in any change in the historical levels of dividends declared by
People's on a per-share basis.
21
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The following tables present (i) summary selected financial data for each
of People's and NFC on a historical basis and (ii) summary unaudited pro forma
selected financial data reflecting the consummation by People's of the Merger.
The unaudited pro forma selected financial data have been prepared giving effect
to the Merger using the purchase method of accounting. For a description of the
effect of purchase accounting on the Merger and the historical financial
statements of People's, see 'THE MERGER -- Accounting Treatment,' and 'UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION.'
The summary unaudited pro forma selected financial data reflect the Merger
based upon preliminary purchase accounting and other Merger-related adjustments.
Actual adjustments, which may include adjustments to additional assets,
liabilities and other items, will be made on the basis of appraisals and
evaluations as of the Effective Time and, therefore, are likely to differ from
those reflected in the summary unaudited pro forma selected financial data.
People's expects that the combined company will achieve substantial
benefits from the Merger, including operating cost savings and revenue
enhancements. However, the summary unaudited pro forma selected financial data
do not reflect any potential operating cost savings or revenue enhancements
which are expected to result from the consolidation of operations of People's
and NFC, and therefore do not purport to be indicative of the expected results
of future operations.
The historical financial information of each of People's and NFC (and
certain of the related historical financial ratios) as of and for each of the
years in the five-year period ended December 31, 1996 have been derived from
their respective audited consolidated financial statements. The comparable
historical financial data as of and for the nine-month periods ended September
30, 1997 and 1996 have been derived from the unaudited consolidated financial
statements of each of People's and NFC. In the opinion of management of each of
People's and NFC, their respective unaudited consolidated financial statements
include all adjustments, consisting of only normal recurring accruals, necessary
to present fairly the financial position and results of operations for such
interim periods. Operating results of each of People's and NFC for the nine
months ended September 30, 1997 are not necessarily indicative of operating
results which may be expected for the entire year. The historical financial data
set forth below should be read in conjunction with the aforementioned audited
and unaudited consolidated financial statements of each of People's and NFC. See
'AVAILABLE INFORMATION' and 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.'
22
<PAGE>
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF PEOPLE'S
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, AS OF OR FOR THE YEARS ENDED DECEMBER 31,
--------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income.......................................... $396.9 $354.8 $480.0 $455.8 $414.0 $379.1 $420.0
Interest expense...................................................... 204.4 182.7 245.5 224.2 167.4 159.6 213.7
------ ------ ------ ------ ------ ------ ------
Net interest income.............................................. 192.5 172.1 234.5 231.6 246.6 219.5 206.3
Provision for loan losses............................................. 31.9 38.5 51.1 39.9 50.9 56.0 96.5
------ ------ ------ ------ ------ ------ ------
Net interest income after provision for loan losses.............. 160.6 133.6 183.4 191.7 195.7 163.5 109.8
------ ------ ------ ------ ------ ------ ------
Non-interest income:
Fee-based revenues:
Credit card securitization income................................ 59.4 48.5 66.1 68.5 32.0 9.0 --
Credit card fees................................................. 28.4 20.2 29.1 24.0 31.1 33.0 23.8
Service charges on deposit accounts.............................. 23.4 20.1 27.6 24.8 23.3 22.5 20.0
Residential mortgage loan servicing fees......................... 4.7 4.6 6.2 6.0 6.4 8.9 10.3
Net brokerage commissions........................................ 7.3 5.5 7.4 5.5 5.0 7.3 5.6
Other............................................................ 10.5 9.3 12.4 11.3 10.8 11.4 11.0
------ ------ ------ ------ ------ ------ ------
Total fee-based revenues.................................... 133.7 108.2 148.8 140.1 108.6 92.1 70.7
Net security gains.................................................... 28.7 10.2 15.2 7.6 4.8 9.6 32.3
Net gains (losses) on sales of residential mortgage loans available
for sale............................................................ 12.7 4.5 5.4 4.0 (3.5) 11.0 9.6
Net gains on sales of other consumer loans............................ -- 6.0 6.0 -- -- 8.3 --
Loss on real estate investments....................................... (1.3) (1.7) (2.1) (1.8) (6.4) (5.9) (13.9)
Other................................................................. 3.2 2.7 3.4 2.2 3.1 3.0 4.6
------ ------ ------ ------ ------ ------ ------
Total non-interest income................................... 177.0 129.9 176.7 152.1 106.6 118.1 103.3
------ ------ ------ ------ ------ ------ ------
Non-interest expense:
Compensation and benefits........................................ 106.5 92.4 124.2 110.9 102.3 90.2 81.4
Occupancy and equipment.......................................... 36.9 31.6 43.2 40.5 39.1 36.2 36.7
Professional and outside service fees............................ 26.9 20.6 28.5 22.2 18.5 16.8 15.1
Advertising and promotion........................................ 28.7 18.2 25.4 11.8 13.8 10.2 7.0
Loss on real estate acquired in settlement of loans.............. 1.8 3.1 4.3 6.8 19.5 24.1 20.6
Federal deposit insurance premiums............................... 0.5 -- -- 5.4 11.9 14.3 11.7
Other............................................................ 30.3 26.4 33.4 32.2 32.3 48.2 33.0
------ ------ ------ ------ ------ ------ ------
Total non-interest expense.................................. 231.6 192.3 259.0 229.8 237.4 240.0 205.5
------ ------ ------ ------ ------ ------ ------
Income before income taxes, extraordinary credit and cumulative
effect of accounting changes................................... 106.0 71.2 101.1 114.0 64.9 41.6 7.6
Income tax (expense) benefit.......................................... (38.8) (11.7) (21.0) (43.0) 4.9 (0.3) (3.3)
------ ------ ------ ------ ------ ------ ------
Income before extraordinary credit and cumulative effect of
accounting changes............................................. 67.2 59.5 80.1 71.0 69.8 41.3 4.3
Extraordinary credit -- tax benefit resulting from utilization of net
operating loss carryforwards........................................ -- -- -- -- -- -- 2.7
------ ------ ------ ------ ------ ------ ------
Income before cumulative effect of accounting changes............ 67.2 59.5 80.1 71.0 69.8 41.3 7.0
Cumulative effect of change in method of accounting for securities in
1994 and income taxes in 1993....................................... -- -- -- -- 0.3 15.0 --
------ ------ ------ ------ ------ ------ ------
Net income....................................................... $ 67.2 $ 59.5 $ 80.1 $ 71.0 $ 70.1 $ 56.3 $ 7.0
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Net income applicable to common stock............................ $ 67.2 $ 58.9 $ 79.5 $ 68.8 $ 65.1 $ 53.4 $ 7.0
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
</TABLE>
23
<PAGE>
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF PEOPLE'S (CONT'D)
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, AS OF OR FOR THE YEARS ENDED DECEMBER 31,
--------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected statistical operating data:
Interest rate spread -- managed portfolio(1)..................... 3.58% 3.64% 3.65% 3.75% 4.05% 3.97% 3.78%
Interest rate spread -- owned portfolio(1)....................... 3.05 3.06 3.11 3.37 3.91 3.91 3.78
Net interest margin -- managed portfolio(1)...................... 4.16 4.16 4.18 4.25 4.40 4.25 4.00
Net interest margin -- owned portfolio(1)........................ 3.69 3.65 3.70 3.92 4.28 4.19 4.00
Return on average assets(1)...................................... 1.15 1.13 1.13 1.09 1.11 0.97 0.12
Return on average stockholders' equity(1)........................ 13.7 13.9 13.8 14.0 15.6 14.7 2.3
Ratio of non-interest expense to average assets(1)............... 3.95 3.65 3.65 3.52 3.77 4.14 3.56
Efficiency ratio -- managed portfolio............................ 55.6 55.2 54.9 52.9 59.2 65.7 63.2
Efficiency ratio -- owned portfolio.............................. 65.7 64.6 63.8 58.2 61.1 66.1 63.2
Per share data (2):
Net income per common share:
Primary..................................................... $ 1.09 $ 0.98 $ 1.32 $ 1.21 $ 1.26 $ 1.09 $ 0.15
Fully diluted............................................... 1.09 0.97 1.31 1.16 1.15 1.05 0.15
Common stock dividends paid...................................... 0.48 0.38 0.53 0.43 0.31 0.04 --
Total dividend payout ratio(3)................................... 18.7% 16.6% 17.1% 15.4% 13.6% 5.9% -- %
Financial condition data:
Balances:
Total assets -- managed portfolio........................... $9,768 $8,670 $8,979 $8,062 $7,284 $6,600 $5,691
Total assets -- owned portfolio............................. 7,731 7,237 7,645 6,862 6,484 6,400 5,691
Loans, net -- managed portfolio............................. 7,099 6,160 6,523 5,578 5,084 4,514 4,188
Loans, net -- owned portfolio............................... 5,062 4,726 5,189 4,378 4,284 4,314 4,188
Securities, net............................................. 1,768 1,699 1,703 1,686 1,512 1,459 779
Deposits.................................................... 5,615 5,100 5,245 4,836 4,654 4,721 4,934
Borrowings.................................................. 1,274 1,451 1,695 1,392 1,297 1,193 399
Stockholders' equity........................................ 697 598 618 550 469 426 307
Ratios:
Average stockholders' equity to average assets.............. 8.4% 8.1% 8.2% 7.8% 7.1% 6.6% 5.2%
Stockholders' equity to total assets........................ 9.0 8.3 8.1 8.0 7.2 6.6 5.4
Tier 1 leverage capital..................................... 8.4 7.7 7.9 7.6 7.1 6.7 5.4
Tier 1 risk-based capital................................... 10.4 10.6 10.0 10.9 10.1 9.5 7.4
Total risk-based capital.................................... 14.0 11.8 13.9 12.1 11.3 10.7 8.7
Non-performing loans to total loans......................... 1.07 1.93 1.79 2.01 2.42 4.57 6.41
Non-performing assets to total assets....................... 0.76 1.42 1.32 1.38 1.91 3.90 6.04
Allowance for loan losses to non-performing loans........... 154.9 94.2 92.9 83.9 73.5 39.8 30.7
Net charge-offs to average loans(1):
Managed portfolio...................................... 1.87 1.71 1.72 1.49 1.40 1.48 2.61
Owned portfolio........................................ 0.84 0.75 0.81 0.99 1.27 1.47 2.61
</TABLE>
- ------------
(1) Information for the nine-month periods is annualized.
(2) Restated to reflect the three-for-two stock split completed in May 1997.
(3) Reflects the waiver of common stock dividends paid on substantially all of
the shares owned by Holdings, and includes cash dividends paid on
noncumulative convertible preferred stock issued in May 1993 and retired in
September 1996.
24
<PAGE>
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF NFC
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AS OF OR FOR THE YEARS ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(E) (F)
<S> <C> <C> <C> <C> <C> <C> <C>
Highlights at end of period
Total assets............................. $700,860 $694,443 $683,299 $675,332 $593,665 $580,230 $570,569
Loans, net of unearned income
Mortgage............................ 351,662 347,618 350,781 304,226 256,113 243,750 236,593
Commercial and other................ 51,355 46,225 47,422 39,300 32,387 31,396 34,320
Consumer............................ 85,502 76,804 78,908 71,715 58,741 60,363 67,890
Allowance for loan losses........... (13,283) (15,544) (13,928) (13,168) (8,654) (9,689) (12,343)
Total loans, net.................... 475,236 455,103 463,183 402,073 338,587 325,820 326,460
Investments(a)........................... 171,962 187,980 171,710 228,040 217,978 203,762 188,488
Deposits, excluding escrow............... 594,882 594,256 585,080 567,783 485,372 482,209 484,344
Borrowed funds........................... 15,652 16,349 11,928 22,400 36,400 24,400 15,365
Stockholders' equity..................... 81,776 74,825 76,498 76,020 65,534 65,578 65,773
Highlights for the period
Interest income.......................... 39,505 39,141 52,289 47,139 37,784 36,828 43,187
Interest expense......................... 17,594 19,311 25,342 22,797 17,477 19,045 25,731
Net interest income...................... 21,911 19,830 26,947 24,342 20,307 17,783 17,456
Provision for loan losses................ 600 800 1,400 5,500 3,370 -- (426)
Net securities gains..................... 438 264 366 86 290 1,140 1,138
Other noninterest income................. 3,028 2,604 3,501 2,824 2,225 2,209 1,914
Other operating expense.................. 14,497 13,597 18,136 16,379 18,631 18,159 19,299
Income before income taxes............... 10,280 8,301 11,278 5,373 821 2,973 1,635
Income tax provision (benefit)........... 4,210 3,591 4,627 (100) (2,926) 1,040 204
Net income.......................... 6,070 4,710 6,651 5,473 3,747 1,933 1,431
Selected statistical data
Return on average assets(b).............. 1.17% 0.89% 0.95% 0.87% 0.65% 0.35% 0.24%
Return on average equity(b).............. 10.34 8.30 8.91 7.59 5.62 2.94 2.20
Average equity to average assets......... 11.29 10.71 10.64 11.46 11.56 11.82 11.04
Net interest rate spread(c).............. 3.61 3.17 3.25 3.29 3.11 2.77 2.47
Net interest margin(d)................... 4.44 3.94 4.04 4.04 3.68 3.33 3.11
Primary earnings per share............... $ 1.08 $ 0.84 $ 1.18 $ 1.00 $ 0.72 $ 0.37 $ 0.27
Book value per share..................... 15.05 13.90 14.17 13.58 12.71 12.66 12.62
Dividends paid per share................. 0.50 0.47 0.59 0.51 0.13 0.35 --
Dividend payout ratio.................... 46.30% 55.95% 50.00% 51.00% 18.06% 94.59% -- %
Combined allowance for possible losses to
total non-performing assets............ 158.13 171.97 199.17 140.43 93.27 42.37 34.82
</TABLE>
- ------------
(a) Including interest bearing deposits with other banks, federal funds sold,
short term investments, mortgage-backed and related securities, investment
securities and Federal Home Loan Bank of Boston stock.
(b) Information for the nine-month periods is annualized.
(c) The percentage difference between the yield on earning assets, including
loan fees, and cost of interest bearing liabilities.
(d) Net interest income divided by average earning assets.
(e) Reflects the acquisition of Seconn Holding Company in January 1996. The
acquisition was accounted for as a purchase.
(f) Reflects the acquisition of The Bank of Mystic, Inc. in April 1995. The
acquisition was accounted for as a purchase.
25
<PAGE>
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED AS OF OR FOR THE
SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1996
----------------- -----------------
(DOLLARS IN MILLIONS, EXCEPT FOR PER
SHARE DATA)
<S> <C> <C>
Condensed income statement:
Interest and dividend income.................................... $ 429.9 $ 523.5
Interest expense................................................ 219.1 266.9
----------------- -----------------
Net interest income........................................ 210.8 256.6
Provision for loan losses....................................... 32.5 52.5
Non-interest income............................................. 180.5 180.5
Amortization of goodwill........................................ 4.3 5.8
Other non-interest expense...................................... 245.3 276.1
----------------- -----------------
Income before income taxes................................. 109.2 102.7
Income tax expense.............................................. 41.8 23.9
----------------- -----------------
Net income................................................. $ 67.4 $ 78.8
----------------- -----------------
----------------- -----------------
Per share data:
Net income per common share:
Primary......................................................... $ 1.05 $ 1.24
Fully diluted................................................... 1.05 1.23
Dividends paid(1)............................................... 0.48 0.53
Selected statistical operating data:
Net interest margin -- managed portfolio(2)..................... 4.13% 4.11%
Net interest margin -- owned portfolio(2)....................... 3.69 3.66
Return on average assets(2)..................................... 1.05 1.01
Return on average stockholders' equity(2)....................... 12.10 11.77
Financial condition data:
Balances:
Total assets -- managed portfolio............................... $10,489.5 $ 9,687.4
Total assets -- owned portfolio................................. 8,452.4 8,354.1
Loans, net -- owned portfolio................................... 5,544.7 5,660.4
Deposits........................................................ 6,216.4 5,839.0
Borrowings...................................................... 1,289.6 1,706.5
Stockholders' equity............................................ 787.4 707.9
Ratios:
Stockholders' equity to total assets............................ 9.3% 8.5%
Tier 1 leverage capital......................................... 7.6 7.0
Tier 1 risk-based capital....................................... 9.4 8.9
Total risk-based capital........................................ 12.8 12.6
</TABLE>
- ------------
(1) Pro forma combined dividends per share assumes that the Merger will not
result in any change in the historical levels of dividends declared by
People's on a per-share basis.
(2) Information for the nine-month period is annualized.
26
<PAGE>
<PAGE>
PEOPLE'S SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Offering Memorandum is first being mailed to
People's Shareholders on or about January 13, 1998 and is accompanied by the
notice of Special Meeting and a form of proxy that is solicited by the People's
Board for use at the People's Special Meeting to be held on February 19, 1998,
at 10:00 a.m., local time, at Bridgeport Center, 850 Main Street, Bridgeport,
Connecticut, and at any adjournments or postponements thereof. At the People's
Special Meeting, People's Shareholders will be asked, in accordance with the
shareholder approval requirements of Connecticut law, to consider and vote upon
approval and adoption of the Merger Agreement. Approval and adoption of the
Merger Agreement will constitute approval and adoption of the Merger. Section
36a-125 of the Banking Law of Connecticut (the 'CTBL') requires approval of the
Merger Agreement by the affirmative vote of the holders of two-thirds of the
outstanding shares of People's Common Stock. The People's Shareholders may also
be asked to vote upon a proposal to adjourn or postpone the People's Special
Meeting, which adjournment or postponement could be used for the purpose, among
others, of allowing additional time for the soliciting of additional votes to
approve the Merger Agreement.
For purposes of this Joint Proxy Statement-Offering Memorandum, the
approval and adoption of the Merger Agreement and the Merger are collectively
referred to as the 'approval of the Merger Agreement.'
PROXIES
The accompanying form of proxy is for use at the meeting if a People's
Shareholder will be unable to attend in person or wishes to have his or her
shares voted by proxy even if such shareholder does attend the meeting. The
proxy may be revoked by the shareholder, at any time before it is exercised, by
submitting to the Corporate Secretary of People's written notice of revocation
or a properly executed proxy bearing a later date or by attending the meeting
and electing to vote in person. However, attendance at the People's Special
Meeting will not in and of itself constitute revocation of a proxy. Written
notices of revocation and other communications with respect to the revocation of
People's proxies should be addressed to People's Bank, Bridgeport Center, 850
Main Street, Bridgeport, Connecticut 06604-4913, Attention: Corporate Secretary.
All shares represented by valid proxies received pursuant to this solicitation,
and not revoked before they are exercised, will be voted in the manner specified
therein. If no specification is made, the proxies will be voted in favor of
approval of the Merger Agreement; provided that no proxy that is voted against
approval of the Merger Agreement will be voted in favor of any adjournment or
postponement of the People's Special Meeting for the purpose of soliciting
additional proxies.
The entire cost of soliciting the proxies from the People's Shareholders
will be borne by People's (but NFC and People's have each agreed to pay one-half
of the printing costs of this Joint Proxy Statement-Offering Memorandum and
related materials). In addition to the solicitation of proxies by mail, People's
will request banks, brokers and other record holders to send proxies and proxy
material to the beneficial owners of the stock and secure their voting
instructions, if necessary. People's will reimburse such record holders for
their reasonable expenses in so doing. People's has also made arrangements with
D.F. King & Co. to assist it in soliciting proxies from banks, brokers and
nominees and has agreed to pay $4,000 plus expenses for such services. If
necessary, People's may also use its regular employees, who will not be
specially compensated, to solicit proxies from shareholders, either personally
or by telephone, telegram, facsimile or special delivery letter.
RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of the CTBCA, the People's Board has fixed
January 7, 1998 as the People's Record Date for determination of People's
Shareholders entitled to notice of and to vote at the People's Special Meeting.
Accordingly, only holders of record of shares of People's Common Stock at the
close of business on that date will be entitled to notice of and to vote at the
People's Special Meeting. On the People's Record Date, there were approximately
7,400 holders of record of People's Common Stock and 61,162,425 shares of
People's Common Stock outstanding.
27
<PAGE>
<PAGE>
Shares representing a majority of the outstanding shares of People's Common
Stock must be present in person or by proxy at the People's Special Meeting in
order for a quorum to be present in connection with the approval of the Merger
Agreement. Shares of People's Common Stock present but not voting, and shares
for which proxies have been received but with respect to which holders of such
shares have abstained, will be counted as present for purposes of determining
the presence or absence of a quorum for the transaction of business at such
meeting. Furthermore, shares represented by proxies returned by a broker holding
such shares in nominee or 'street' name will be counted for purposes of
determining whether a quorum exists, even if such shares are not voted in
matters where discretionary voting by the broker is not allowed ('broker
non-votes'). Abstentions from voting and broker non-votes will not be deemed to
have been cast either 'for' or 'against' approval of the Merger Agreement, but
will have the practical effect of a vote against approval of the Merger
Agreement.
Each share of People's Common Stock entitles a holder of record on the
People's Record Date to one vote. All such shares vote together as a single
class and the affirmative vote of the holders of two-thirds of the outstanding
shares of People's Common Stock is required to approve the Merger Agreement. As
of the People's Record Date, the directors and executive officers of People's
beneficially owned 1,047,539 shares of People's Common Stock or approximately
1.7% of the shares entitled to vote at the People's Special Meeting. People's
expects that each director and executive officer of People's will vote the
shares of People's Common Stock beneficially owned by him or her for approval of
the Merger Agreement. As of the People's Record Date, Holdings beneficially
owned 36,450,000 shares of People's Common Stock, or approximately 59.6% the
shares entitled to vote at the People's Special Meeting. Pursuant to the terms
of the Holdings Support Letter, Holdings has agreed, subject to the terms
thereof, and is expected, to vote all of the shares of People's Common Stock
owned by it for approval of the Merger Agreement. The shares of People's Common
Stock beneficially owned by Holdings and by directors and executive officers of
People's constitute a quorum for the transaction of business at the People's
Special Meeting. If all such shares are voted in favor of the Merger Agreement,
the affirmative vote of an additional 5.4% of the outstanding shares of People's
Common Stock will be required in order to obtain the required two-thirds
affirmative vote. As of the People's Record Date, NFC and its directors and
executive officers beneficially owned 2,000 shares of People's Common Stock, or
significantly less than 1% of the shares entitled to vote at the People's
Special Meeting.
For additional information with respect to beneficial ownership of People's
Common Stock by persons and entities owning more than 5% of such stock and more
detailed information with respect to beneficial ownership of People's Common
Stock by directors and executive officers of People's, see 'SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.'
RECOMMENDATION OF THE PEOPLE'S BOARD
The People's Board has unanimously approved the Merger Agreement. The
People's Board believes that the Merger is in the best interests of People's and
its shareholders and unanimously recommends that the People's Shareholders vote
'FOR' approval of the Merger Agreement. See 'THE MERGER -- Reasons of People's
for the Merger.'
BECAUSE THE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE
OF THE HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF PEOPLE'S COMMON STOCK,
ABSTENTIONS AND BROKER NON-VOTES, OR THE FAILURE OF A PEOPLE'S SHAREHOLDER (OR A
BROKER WITH DISCRETIONARY AUTHORITY TO VOTE SHARES) TO SUBMIT A PROXY CARD (OR
VOTE IN PERSON AT THE PEOPLE'S SPECIAL MEETING), WILL HAVE THE SAME EFFECT AS A
NEGATIVE VOTE. ACCORDINGLY, THE PEOPLE'S BOARD URGES PEOPLE'S SHAREHOLDERS TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
NFC SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Offering Memorandum is first being mailed to NFC
Shareholders on or about January 13, 1998, and is accompanied by the Notice of
Special Meeting and a form of proxy that is solicited by the NFC Board for use
at the NFC Special Meeting to be held on February 19, 1998, at 10:00 a.m. local
time, at the Ramada Hotel, 10 Laura Boulevard, Norwich, Connecticut, and at any
28
<PAGE>
<PAGE>
adjournments or postponements thereof. The purpose of the NFC Special Meeting is
to take action with respect to the approval and adoption of the Merger
Agreement. Approval and adoption of the Merger Agreement will constitute
approval and adoption of the Merger. The NFC Shareholders may also be asked to
vote upon a proposal to adjourn or postpone the NFC Special Meeting, which
adjournment or postponement could be used for the purpose, among others, of
allowing additional time for the soliciting of additional votes to approve the
Merger Agreement.
PROXIES
The accompanying form of proxy is for use at the NFC Special Meeting if an
NFC Shareholder is unable to attend in person or wishes to have his or her
shares voted by proxy even if such shareholder does attend the meeting. A
shareholder may revoke any proxy given pursuant to this solicitation by
submitting to the Corporate Secretary of NFC, prior to or at the NFC Special
Meeting, a written notice revoking the proxy or a properly executed proxy
relating to the same shares bearing a later date or by attending the meeting and
electing to vote in person. However, attendance at the NFC Special Meeting will
not in and of itself constitute a revocation of a proxy. All written notices of
revocation and other communications with respect to the revocation of NFC
proxies should be addressed to Norwich Financial Corp., 4 Broadway, Norwich,
Connecticut 06360, Attention: Corporate Secretary. For such notice of revocation
or later proxy to be valid, however, it must actually be received by NFC prior
to the vote of the shareholders at the NFC Special Meeting. All shares
represented by valid proxies received pursuant to this solicitation, and not
revoked before they are exercised, will be voted in the manner specified
therein. If no specification is made, the proxies will be voted in favor of
approval of the Merger Agreement. The NFC Board is unaware of any other matters
that may be presented for action at the NFC Special Meeting. If other matters do
properly come before the NFC Special Meeting, however, it is intended that
shares represented by proxies in the accompanying form will be voted or not
voted by the persons named in the proxies in their discretion; provided that no
proxy that is voted against approval of the Merger Agreement will be voted in
favor of any adjournment or postponement of the NFC Special Meeting for the
purpose of soliciting additional proxies.
All costs of solicitation of proxies from holders of NFC Common Stock will
be borne by NFC (but NFC and People's have each agreed to pay one-half of the
printing costs of this Joint Proxy Statement-Offering Memorandum and related
materials). Solicitation of proxies may be made in person or by mail, telephone
or facsimile, by directors, officers and employees of NFC, who will not be
specially compensated for such solicitation. Nominees, fiduciaries and other
custodians will be requested to forward solicitation materials to beneficial
owners and to secure their voting instructions, if necessary, and will be
reimbursed for the expenses incurred in sending proxy materials to beneficial
owners. In addition, NFC has engaged the services of Morrow & Co. to assist the
solicitation of proxies at an estimated cost of $5,500, plus expenses.
RECORD DATE AND VOTING RIGHTS
The NFC Board has fixed January 5, 1998 as the NFC Record Date for the
determination of NFC Shareholders entitled to receive notice of and to vote at
the NFC Special Meeting. On the NFC Record Date, there were approximately 1,915
holders of record of NFC Common Stock and 5,542,941 shares of NFC Common Stock
outstanding. Each share of NFC Common Stock outstanding on the NFC Record Date
entitles a holder of record on the NFC Record Date to one vote as to (i) the
approval of the Merger Agreement and (ii) any other proposal that may properly
come before the NFC Special Meeting.
Shares representing a majority of the outstanding shares of NFC Common
Stock must be represented in person or by proxy at the NFC Special Meeting in
order for a quorum to be present in connection with the approval of the Merger
Agreement. NFC intends to count shares of NFC Common Stock present in person at
the NFC Special Meeting but not voting, and shares of NFC Common Stock for which
it has received proxies but with respect to which holders of such shares have
abstained, as present at the NFC Special Meeting for purposes of determining the
presence or absence of a quorum for the transaction of business at such meeting.
Furthermore, shares represented by proxies returned by a broker holding such
shares in nominee or 'street' name will be counted for purposes of determining
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whether a quorum exists, even if such shares are not voted in matters where
discretionary voting by the broker is not allowed ('broker non-votes').
Abstentions from voting and broker non-votes will not be deemed to have been
cast either 'for' or 'against' approval of the Merger Agreement, but will have
the practical effect of a vote against approval of the Merger Agreement.
Under the terms of the DGCL, approval of the Merger Agreement will require
the affirmative vote of the holders of a majority of the outstanding shares of
NFC Common Stock entitled to vote at the NFC Special Meeting. As of the NFC
Record Date, directors and executive officers of NFC beneficially owned 414,001
shares NFC Common Stock, or approximately 7.14% of the shares entitled to vote
at the NFC Special Meeting. NFC expects that each director and executive officer
of NFC will vote the shares of NFC stock beneficially owned by him or her for
approval of the Merger Agreement. As of the NFC Record Date, People's and its
directors and executive officers did not own any shares of NFC Common Stock,
beneficially or otherwise.
For additional information with respect to beneficial ownership of NFC
Common Stock by persons and entities owning more than 5% of such stock and more
detailed information with respect to beneficial ownership of NFC Common Stock by
directors and executive officers of NFC, see 'SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.'
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF NFC COMMON STOCK,
ABSTENTIONS AND BROKER NON-VOTES, OR THE FAILURE OF A NFC SHAREHOLDER (OR A
BROKER WITH DISCRETIONARY AUTHORITY TO VOTE SHARES) TO SUBMIT A PROXY CARD (OR
VOTE IN PERSON AT THE NFC SPECIAL MEETING), WILL HAVE THE SAME EFFECT AS A
NEGATIVE VOTE. ACCORDINGLY, THE NFC BOARD URGES NFC SHAREHOLDERS TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
RECOMMENDATION OF THE NFC BOARD
The NFC Board has unanimously approved the Merger Agreement and the
transactions contemplated thereby. The NFC Board believes that the Merger is in
the best interests of NFC and its shareholders and recommends that the NFC
Shareholders vote 'FOR' approval of the Merger Agreement. See 'THE
MERGER -- Reasons of NFC and NSS for the Merger.'
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THE MERGER
The following summary of certain terms and provisions of the Merger
Agreement, which describes all material terms and provisions thereof, is
qualified in its entirety by reference to the other information contained
elsewhere in this Joint Proxy Statement-Offering Memorandum, including the
Appendices hereto and the documents incorporated herein by reference. A copy of
the Merger Agreement (excluding the Schedules thereto) is set forth in Appendix
A to this Joint Proxy Statement-Offering Memorandum and is incorporated herein
by reference, and reference is made thereto for a complete description of the
terms of the Merger. Shareholders are urged to read the Merger Agreement and
each of the other Appendices hereto carefully.
DESCRIPTION OF THE MERGER
Subject to the prior satisfaction or waiver of certain conditions set forth
in the Merger Agreement and described under ' -- Conditions to the Merger,' the
Merger will become effective upon the filing of certificates of merger in the
offices of the secretaries of State of Delaware and Connecticut and the filing
of a copy of the Merger Agreement, together with the Commissioner's approval
thereof, with the office of the Connecticut Secretary of State, or such later
date as provided for in the certificates of merger (the 'Effective Time'). At
the Effective Time, (i) NFC and NSS will merge with and into People's, (ii) the
separate corporate existence of each of NFC and NSS will terminate, and (iii)
People's will be the surviving entity and will continue its corporate existence
and operate as a Connecticut stock savings bank. At and after the Effective
Time, the Merger will have the effects set forth in Section 33-820 of the CTBCA,
Section 36a-125 of the CTBL, and Subchapter IX of the DGCL.
At the Effective Time, each share of NFC Common Stock then issued and
outstanding, including each NFC Right, will automatically cease to be
outstanding by virtue of the Merger and without any action by any party or
shareholder. Each such share and attached NFC Right (except for (i) shares held
by NFC as treasury shares, shares owned or held by any direct or indirect
subsidiary of NFC (other than such shares held as security for an obligation to
NFC or such subsidiary), and shares held by People's other than in a fiduciary
or trust capacity for the benefit of third parties (collectively, 'Cancellable
Shares') and (ii) Dissenting NFC Shares) will be converted, subject to the
election and allocation procedures described herein, into the right to receive
either (x) the Per Share Stock Consideration or (y) the Per Share Cash
Consideration. The Per Share Stock Consideration and the Per Share Cash
Consideration will be determined based on a formula set forth in the Merger
Agreement which takes into consideration the Valuation Period Market Value and
the Valuation Period Share Number. The value of the Per Share Stock
Consideration and the Per Share Cash Consideration will be equal on the
Valuation Date using the Valuation Period Market Value as the representative
price of People's Common Stock on that date. The actual market price of People's
Common Stock on the date shares are received by a former holder of shares of NFC
Common Stock may be more or less than the Valuation Period Market Value.
APPENDIX I TO THIS JOINT PROXY STATEMENT-OFFERING MEMORANDUM SETS FORTH THE
PER SHARE STOCK CONSIDERATION AND PER SHARE CASH CONSIDERATION PAYABLE AT
VARIOUS ASSUMED VALUATION PERIOD MARKET VALUES. See ' -- Merger Consideration,'
' -- Election Procedures,' and ' -- Exchange Procedures.'
In addition, at the Effective Time (1) each share of preferred stock, par
value $0.01, of NFC, none of which is outstanding, will automatically be
canceled and will cease to exist with no payment being made therefor, (2) all
Cancellable Shares will be canceled and will cease to exist and no consideration
will be delivered in exchange therefor, and (3) each share of People's Common
Stock outstanding immediately prior to the Effective Time will remain
outstanding and will be unchanged after the Merger, except to the extent a
holder of such shares chooses to exercise dissenters' appraisal rights with
respect to such shares under the CTBL and the CTBCA. See 'DISSENTERS' RIGHTS.'
Each holder of an outstanding and exercisable option (an 'Option') granted
under an employee or director stock option plan, program or arrangement of NFC
(all such plans, 'Stock Option Plans') (i) may not exercise such Option on or
after the Valuation Date and (ii) will be entitled to receive in settlement for
each such Option a cash payment from People's in an amount equal to the excess,
if any, of the Average Per Share Consideration (as defined in the Merger
Agreement, see ' -- Merger
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Consideration') over the per share exercise price of such Option, multiplied by
the number of shares of NFC Common Stock covered by such Option. All such
Options will be canceled and of no further effect as of the Effective Time. See
' -- Merger Consideration.'
BACKGROUND OF THE MERGER
NFC/NSS has traditionally pursued a strategy of expanding its business
through internal growth, together with selected expansion by acquisition. During
late 1996 and early 1997, with the assistance of Keefe Bruyette, the NFC Board
began an assessment of the strategic alternatives available to NFC/NSS to
enhance shareholder value. Specifically, the NFC Board examined the relative
merits of NFC/NSS remaining independent or actively seeking a merger with
another financial institution.
In its analysis the NFC Board identified a number of issues that would need
to be addressed if NFC/NSS were to remain independent, including: (1)
formulating strategies to compete effectively with mutual savings banks, credit
unions and other bank and non-bank financial service providers; (2) the
limitations on NFC's ability to grow through acquisitions given the lack of
suitable acquisition candidates in NFC's market area; (3) examining and
capitalizing on additional economic opportunities within the institutions'
market area; (4) upgrading technology and systems; (5) re-aligning senior
management responsibilities and enlarging the NFC Board; (6) expanding product
offerings and entering new business lines; (7) developing additional sales and
marketing capabilities; (8) leveraging capital and altering balance sheet mix;
(9) developing solutions to 'year 2000' operational problems; and (10) changing
NFC's and NSS's respective names and charters. The NFC Board concluded that
addressing and resolving the identified issues was not likely to be a cost
effective alternative for an institution the size of NFC/NSS, and that a more
viable approach from an economic perspective would be to seek merger
opportunities.
The NFC Board explored a number of alternative ways of addressing the
issues identified. These included a possible merger of equals with a comparably
sized institution, the possibility of expansion through multiple small
acquisitions, and the possibility of being acquired by a larger institution.
Factors that would optimize the value of NFC/NSS as an acquisition candidate
were considered to be NSS's excellent earning record, its high spreads and
margins and its presence in an area with a thriving local economy. These
considerations, combined with attractive market prices for bank stocks and
stocks generally, were identified as conditions likely to produce an attractive
return for the shareholders of NFC in any potential acquisition transaction.
Preliminary discussions were held with a possible merger partner during early
1997, but an agreement on terms was not reached.
In July 1997, the NFC Board determined that it would be in the best
interests of NFC/NSS to maintain control of any acquisition process, rather than
passively awaiting an offer. With this objective, the NFC Board established a
minimum target purchase price and requested that Keefe Bruyette obtain
expressions of interest from large regional banking organizations. By July 31,
1997, Keefe Bruyette had received nonbinding indications of interest in
acquiring NFC/NSS from seven organizations, including People's. Each of these
organizations had executed a confidentiality agreement. On August 1, 1997, a
special meeting of the NFC Board was held during which Keefe Bruyette updated
the NFC Board on the status of the solicitation process. Keefe Bruyette
indicated that of the seven institutions that initially had expressed interest,
two had chosen not to submit specific bids. On August 7, 1997, another special
meeting of the NFC Board was held, at which the NFC Board decided to eliminate
from consideration two additional organizations (based upon lower bids submitted
by those organizations and the determination by one of those organizations not
to participate in the acquisition process established by the NFC Board for all
bidders) and to invite the remaining three organizations, including People's, to
make a final presentation of their respective proposals to the NFC Board.
Following that meeting, Keefe Bruyette contacted each of the three organizations
and invited it to proceed further in its consideration of a potential
transaction. Each organization was then provided with certain confidential
information with respect to NFC/NSS and the opportunity to meet with certain
members of senior management of NFC/NSS. The three organizations reviewed
materials and engaged in discussions with NFC/NSS senior management during the
period between August 8 and August 25, 1997.
Also on August 7, 1997, at a regularly scheduled meeting of the Executive
Committee of the People's Board, senior management of People's reported on the
request for expressions of interest in
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NFC/NSS and the submission of People's nonbinding expression of interest.
Between August 8 and August 21, members of People's management reviewed
information provided by NFC/NSS and engaged in discussions with senior
management of NFC/NSS and Keefe Bruyette. At the regular meeting of the People's
Board on August 21, 1997, senior management discussed the possible transaction
with the People's Board. The review included information concerning NFC/NSS and
the potential benefits and financial aspects of such a transaction. A
representative of Goldman Sachs presented certain financial information,
including information concerning transactions involving comparable financial
institutions. At the August 21 meeting, the People's Board authorized submission
of another offer to NFC and Keefe Bruyette.
On August 25, 1997, representatives of each of the three remaining
organizations (including People's) made separate presentations regarding their
proposals to the NFC Board and responded to questions. The NFC Board held two
meetings on August 26, 1997 for the purpose of evaluating the proposals and
clarifying various issues. On August 26, 1997, Keefe Bruyette notified People's
that NFC was seriously considering the People's proposal. At that time, Keefe
Bruyette indicated that NFC was interested in downside price protection in the
event of a decline in the price of People's Common Stock and also an increase in
the purchase price offered by People's. After consideration, People's agreed to
increase its proposed aggregate stock consideration to reflect a price of
approximately $28.74 per share (an increase in the purchase price of
approximately $0.24 per share based on the closing price of People's Common
Stock on August 25, 1997 and based on consideration of approximately half stock
and half cash). People's also offered to include a five percent 'collar' both
above and below a price of $27.875 per share of People's Common Stock. People's
modifications to its offer were based on the conditions that NFC would forbear
from declaring and paying its quarterly cash dividend (or any special dividend)
ordinarily scheduled to be declared and paid in February 1998, and that there
would be no further improvements to People's offer. The proposal of People's was
selected by the NFC Board as the most attractive based upon a number of factors,
including maximization of value for the shareholders of NFC, organizational
'fit' considering each bank's culture, philosophy, goals and objectives and
positioning in the marketplace, and considerations pertaining to employees,
customers and the community served.
On August 27, 1997, negotiations to finalize the terms of the proposed
transaction continued and an agreement was reached with respect to certain key
economic terms of the potential merger, subject to agreement on additional
terms, completion of definitive agreements and approval of the merger by the
People's Board and the NFC Board. Negotiation of the remaining terms surrounding
the merger, as ultimately embodied in definitive agreements, continued to
September 3, 1997. On that date, an agreement was reached as to the terms of the
definitive agreements for consideration by the parties' respective Boards of
Directors. The NFC Board held additional meetings on August 28 and August 31 as
part of this process.
On September 3, 1997, the Boards of Directors of NFC and NSS met with legal
and financial advisors to NFC/NSS to review the terms of the proposed
transaction and the related documents, drafts of which had been provided prior
to the meeting. At the meeting, Keefe Bruyette delivered its oral opinion (which
was confirmed in writing as of that date) that the consideration to be paid to
the NFC shareholders in the proposed transaction was fair to the NFC
Shareholders from a financial point of view. After completing a final review of
the documents, the Board of Directors of NFC then adopted formal resolutions
approving the Merger Agreement, the Stock Option Agreement and the NFC Fee
Agreement, and the Board of Directors of NSS adopted a formal resolution
approving the Merger Agreement. On September 3, NFC also approved the
transaction as the sole shareholder of NSS.
On September 3, 1997, the People's Board and the Board of Trustees of
Holdings met with legal and financial advisors to People's and with the legal
advisors to Holdings to review the terms of the proposed transaction and the
related documents, drafts of which had been provided prior to the meetings. At
the meeting, People's management reviewed the proposed transaction, including
events leading up to September 3, 1997, the terms of the transaction, the
results of People's due diligence review of the financial condition and
operations of NFC/NSS, the strategic benefits expected to result from the
proposed transaction and the financial impact of the proposed transaction.
People's legal advisors reviewed the terms of the proposed Merger Agreement and
the other proposed agreements,
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and the procedures remaining after receipt of the approvals of the People's
Board and the NFC Board, including the submission of regulatory applications and
the holding of shareholder meetings by each of People's and NFC. At the meeting,
Goldman Sachs made a presentation regarding certain financial aspects of the
proposed transaction and delivered its oral opinion (which was confirmed in
writing on that date) that the consideration to be paid by People's pursuant to
the Merger Agreement was fair to People's. After consideration of the foregoing
matters, which are more specifically described under ' -- Reasons of People's
for the Merger,' the People's Board unanimously approved the Merger Agreement,
the Stock Option Agreement, the NFC Fee Agreement and the transactions
contemplated thereby. The People's Board also recommended at that time to the
Board of Trustees of Holdings that it approve and enter into the Holdings
Support Letter.
The Board of Trustees of Holdings then met separately with its own counsel
to review the proposed transaction and its impact on Holdings and the
constituencies of Holdings. After consideration of these matters, the Board of
Trustees of Holdings approved the Holdings Support Letter and the undertakings
contemplated thereby.
People's, NFC and NSS executed the definitive agreements relating to the
Merger on September 3, 1997, and People's and NFC issued a public announcement
concerning the transaction on September 4, 1997.
REASONS OF PEOPLE'S FOR THE MERGER
In reaching its determination to approve the Merger Agreement and recommend
approval of the Merger by the People's Shareholders, the People's Board
considered a number of factors, including, without limitation, the following:
(1) The People's Board considered (i) NFC's franchise, especially its
leading market position in southeastern Connecticut (with particular
emphasis on New London county, where NFC is ranked first in deposit market
share and in residential mortgage originations), (ii) that the Merger
represented an opportunity to leverage People's infrastructure, technology,
products, marketing, and lines of business over an area of Connecticut
largely unserved by People's, an opportunity to reach a substantial number
of new households through NFC's established distribution network, and the
possibility of achieving significant expense savings and operating
efficiencies through, among other things, the elimination of duplicate
efforts (see 'MANAGEMENT AND OPERATIONS AFTER THE MERGER'), (iii) that the
Merger is expected to provide revenue growth opportunities based on the
combined company's leadership in the majority of its markets, its broad
product line and sales productivity, the number of products sold per
household, its delivery channels and its brand name, (iv) that the deposit
base of NFC represents a relatively low-cost source of funding, and (v) the
delays and uncertainties People's would encounter in attempting to obtain a
similar market position in that area of the state by means other than the
Merger.
(2) The People's Board considered its review of the financial
condition, results of operations and business operations and prospects of
NFC, as well as the results of People's due diligence review of NFC. In
that regard, the People's Board concluded that NFC is a high quality
franchise with a respected and capable management team with a compatible
approach to customer service, credit quality and shareholder value.
(3) The People's Board considered its evaluation of the financial
terms of the Merger and their effect on People's Shareholders. Based on the
stock price of People's at the date the People's Board approved the Merger
Agreement, the People's Board took into account the accretion to reported
earnings per share expected to occur in 1998 and 1999 as a result of the
Merger, as well as the accretive effect of the Merger on cash earnings per
share for those same years. (Cash earnings per share represent reported
earnings per share adjusted to exclude the amortization of intangibles.)
The People's Board also considered the possibility that the Valuation
Period Market Value could exceed the upper limit of the price 'collar,'
which would result in less accretion to reported earnings per share in each
of those years or might have a dilutive effect on reported earnings per
share for one or both such years. The People's Board noted that if the
Valuation Period Market Value exceeded the upper limit of the price
'collar,' there would be no effect on the projected
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accretion to cash earnings per share. People's also considered the impact
of incremental intangible assets resulting from the Merger. The combined
company's ability to achieve such results is dependent upon various
factors, a number of which will be beyond its control, including the
regulatory environment, economic conditions, unanticipated changes in
business conditions, and inflation. There can be no assurance as to the
predictability of any of these factors. See 'MANAGEMENT AND OPERATIONS
AFTER THE MERGER.'
(4) The People's Board considered the advice of its financial advisor,
Goldman Sachs, and reviewed the detailed financial analyses, pro forma
results and other information presented by Goldman Sachs. The People's
Board considered the opinion of Goldman Sachs (including the assumptions
and financial information relied upon by Goldman Sachs in arriving at such
opinion) that, as of the date of the meeting of the People's Board at which
the Merger Agreement was approved, the consideration to be paid by People's
pursuant to the Merger Agreement was fair to People's (see ' -- Opinion of
People's Financial Advisor').
(5) The People's Board considered its belief that the Merger would
enhance shareholder value by, among other things: diversifying the combined
company's customer base, revenue stream, loan portfolio and funding
sources; providing People's an immediate and substantial presence in a
rapidly growing part of Connecticut and an area already targeted by
People's as a desirable area into which to expand; and reducing the
combined company's exposure to localized economic risk, business sector
risk and operational risk.
(6) The People's Board considered the nonfinancial terms of the Merger
Agreement and related agreements, including the benefits potentially
realizable by persons affiliated with NFC (see ' -- Interests of Certain
Persons in the Merger') and holders of options to acquire shares of NFC
Common Stock (see ' -- Description of the Merger').
(7) The People's Board considered the likelihood that the Merger would
receive requisite regulatory approvals and waivers (see ' -- Regulatory
Matters').
The foregoing discussion of the information and the factors considered by
the People's Board is not intended to be exhaustive but is believed to include
all material factors considered by the People's Board. In reaching its
determination to approve the Merger, the People's Board did not assign any
relative or specific weights to the foregoing factors, and individual directors
may have given differing weights to differing factors. After deliberating with
respect to the Merger Agreement and the transactions contemplated thereby, and
considering, among other things, the matters discussed above, the People's Board
unanimously approved the Merger Agreement and the transactions contemplated
thereby as being in the best interests of People's and its shareholders.
BASED ON THE FOREGOING FACTORS, THE PEOPLE'S BOARD UNANIMOUSLY RECOMMENDS
THAT PEOPLE'S SHAREHOLDERS VOTE 'FOR' APPROVAL OF THE MERGER AGREEMENT.
REASONS OF NFC AND NSS FOR THE MERGER
In determining to approve the Merger Agreement, the Stock Option Agreement,
the NFC Fee Agreement and the transactions contemplated thereby, the NFC Board
considered, among others, the following factors:
(1) The NFC Board considered the terms of the Merger Agreement, the
Stock Option Agreement, the NFC Fee Agreement and the transactions
contemplated thereby. The NFC Board took into account the historical
trading ranges for People's Common Stock and NFC Common Stock, the Exchange
Ratio, the potential impact of the Merger on the price of People's Common
Stock over the short term and the long term, the resulting relative
interests of NFC's and People's shareholders in the equity of the combined
company, and the potential for increased earnings and book value per share
for NFC Shareholders. The NFC Board considered the effect of the collar
provision and the fixed cash component of the aggregate consideration to be
paid under the Merger Agreement. The NFC Board considered that under the
Merger Agreement it would have the right to terminate the Merger Agreement
in the event of a specified significant decline in the price of People's
Common Stock prior to the consummation of the Merger unless People's then
elected to increase the Exchange Ratio in the manner specified in the
Merger Agreement. With respect to the
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Stock Option Agreement and the NFC Fee Agreement, the NFC Board was aware
that the existence of such agreements might discourage third parties from
seeking to acquire NFC by increasing the cost of such an acquisition and
might also preclude any third party from being able to effect a merger with
NFC that would qualify for pooling of interests accounting treatment. See
' -- Termination of the Merger Agreement,' ' -- The Stock Option Agreement'
and ' -- The NFC Fee Agreement.'
(2) The NFC Board considered: the discussions held with other banking
organizations which had expressed interest in a business combination
transaction with NFC; that such organizations were believed to be the most
likely to be interested in, and also financially and otherwise capable of,
engaging in a business combination with NFC; the fact that all such
organizations were given an opportunity to review confidential information
regarding NFC and to make a business combination proposal; the terms of the
proposals received by NFC from three banking organizations (including
People's); and the fact that the implied value of the consideration to be
paid to NFC Shareholders in the Merger was higher (based on an assumed
Valuation Period Market Value equal to the closing price of People's Common
Stock on September 2, 1997) than the implied values of the consideration
offered in the other proposals submitted.
(3) The NFC Board considered the advice of its financial advisor,
Keefe Bruyette, and reviewed the detailed financial analyses, pro forma
results and other information presented by Keefe Bruyette. The NFC Board
considered the opinion of Keefe Bruyette (including the assumptions and
financial information and projections relied upon by it in arriving at such
opinion) that, as of September 3, 1997 and based upon the matters described
in its oral opinion as of that date, the consideration to be received in
the Merger by NFC Shareholders was fair, from a financial point of view, to
such holders. (For a discussion of the opinion of Keefe Bruyette, including
a summary of the procedures followed, the matters considered, the scope of
the review undertaken and the assumptions made with respect thereto, see
' -- Opinion of NFC's Financial Advisor.')
(4) The NFC Board recognized that the combined company would be more
likely than NFC alone to possess the financial and technological resources
to compete more effectively in the rapidly changing marketplace for banking
and financial services and more effective in fulfilling NFC's long-term
objective of increasing its overall size and enhancing its market presence,
while maintaining its asset quality and credit standards. The NFC Board
considered, for example, the combined company's enhanced ability to expand
its commercial penetration in its market area due to increased commercial
lending capability resulting from the Merger. The NFC Board also considered
the substantial technological capabilities of People's and its ability to
provide state-of-the-art products and services to NFC's customers, and the
likelihood that such capabilities and ability would enhance the ability of
the combined company to compete in the future with other banks and
non-banking providers of financial services. The NFC Board also considered
the opportunity for revenue enhancement by offering People's greater array
of commercial and consumer products and investment management services
through NFC's branches and offices. The NFC Board also took into account
the expectation that the Merger would result in economies of scale and cost
synergies. See 'MANAGEMENT AND OPERATIONS AFTER THE MERGER.'
(5) The NFC Board took into account that the value of NFC's franchise
would be preserved and customer continuity would be enhanced through the
election or appointment of Mr. Dennis as a senior officer of People's, with
oversight responsibility for the Norwich region, and through the
designation of one member of the NFC Board to serve as a member of the
People's Board and a different member of the NFC Board to serve as a member
of Holdings' Board of Trustees following consummation of the Merger. The
NFC Board also considered the potential effects of the Merger on NFC's
employees.
(6) The NFC Board considered the complementary nature of the
businesses, business strategies and products of NFC and People's, including
the fact that both companies possess compatible and complementary
management philosophies and strategic objectives.
(7) The NFC Board considered the general impact the Merger would have
on the various constituencies served by NFC, including its customers and
others. The NFC Board took into account that the combined entity would be
able to offer a more extensive range of products and
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banking services to NFC's customers. The NFC Board also took into account
the favorable rating of People's under the Community Reinvestment Act.
(8) The NFC Board considered information with respect to, among other
things, the historical financial results of People's and reviewed
information with respect to People's business, operations, financial
condition and future prospects. The NFC Board considered the results of the
due diligence investigation conducted by NFC's management.
(9) The NFC Board considered that the Merger is expected to be
tax-free for federal income tax purposes to NFC shareholders to the extent
they receive shares of People's Common Stock in the Merger rather than
cash. See ' -- Certain Federal Income Tax Consequences.'
(10) The NFC Board considered the nature of, and likelihood of
obtaining, the regulatory approvals that would be required with respect to
the Merger. See ' -- Regulatory Matters.'
(11) The NFC Board took into account the current and prospective
economic and competitive environment facing the financial services industry
generally and each of NFC and People's in particular.
In reaching its determination to approve the Merger Agreement, the Stock
Option Agreement, the NFC Fee Agreement and the transactions contemplated
thereby, the NFC Board did not assign any relative or specific weights to the
various factors considered by it, and individual directors may have given
differing weights to different factors. The foregoing discussion of the
information and factors considered by the NFC Board is not intended to be
exhaustive but is believed to include all material factors considered by the NFC
Board. There is no guarantee that People's will achieve or receive any of the
benefits, cost savings or synergies described above. See 'CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING INFORMATION.'
FOR THE REASONS DESCRIBED ABOVE, THE NFC BOARD UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND BELIEVES THE MERGER IS FAIR TO, AND IS IN THE BEST
INTERESTS OF, ITS SHAREHOLDERS. ACCORDINGLY, THE NFC BOARD UNANIMOUSLY
RECOMMENDS THAT THE NFC SHAREHOLDERS VOTE 'FOR' APPROVAL OF THE MERGER
AGREEMENT.
OPINION OF PEOPLE'S FINANCIAL ADVISOR
On September 3, 1997, Goldman Sachs delivered its written opinion to the
People's Board to the effect that as of the date of such opinion the aggregate
consideration to be paid pursuant to the Merger Agreement was fair to People's.
Goldman Sachs subsequently delivered to the People's Board an updated written
opinion dated the date of this Joint Proxy Statement-Offering Memorandum to the
effect that as of the date hereof the aggregate consideration to be paid by
People's pursuant to the Merger Agreement was fair to People's.
THE FULL TEXT OF THE UPDATED WRITTEN OPINION OF GOLDMAN SACHS DATED THE
DATE OF THIS JOINT PROXY STATEMENT-OFFERING MEMORANDUM WHICH SETS FORTH
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN
CONNECTION WITH THE OPINION, IS ATTACHED AS APPENDIX E TO THIS JOINT PROXY
STATEMENT-OFFERING MEMORANDUM AND IS INCORPORATED HEREIN BY REFERENCE. PEOPLE'S
SHAREHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Merger Agreement; (ii) this Joint Proxy Statement-Offering Memorandum;
(iii) Annual Reports to Shareholders on Forms F-2 and 10-K, respectively, of
People's and NFC for the five years ended December 31, 1996; (iv) certain
interim reports to shareholders and Quarterly Reports on Forms F-4 and 10-Q,
respectively, of People's and NFC; (v) certain other communications from
People's and NFC to their respective shareholders; (vi) certain internal
financial analyses and forecasts for People's and NFC that were prepared by
their respective managements; and (vii) certain internal financial forecasts for
People's and NFC on a combined basis, after giving effect to the Merger,
prepared by the management of People's. Goldman Sachs also held discussions with
members of the senior managements of People's and NFC regarding the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the Merger Agreement and the past and current business operations, financial
condition, and future prospects of their respective companies. In addition,
Goldman Sachs reviewed the
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reported price and trading activity for the People's Common Stock and NFC Common
Stock, compared certain financial and stock market information for People's and
NFC with similar information for certain other companies the securities of which
are publicly traded, reviewed the financial terms of certain recent business
combinations in the savings industry specifically and in other industries
generally and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it, and Goldman Sachs assumed such
accuracy and completeness for purposes of rendering its opinion. In that regard,
Goldman Sachs assumed, with the consent of People's, that the financial
forecasts, including, without limitation, projected cost savings and operating
synergies resulting from the Merger and projections regarding under-performing
and non-performing assets and net charge-offs were reasonably prepared on a
basis reflecting the best currently available judgments and estimates of
People's, and that such forecasts will be realized in the amounts and at the
times contemplated thereby. Goldman Sachs is not an expert in the evaluation of
loan and lease portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto, and Goldman Sachs assumed, with the
consent of People's, that such allowances for each of People's and NFC are in
the aggregate adequate to cover all such losses. In addition, Goldman Sachs did
not review individual credit files, Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities of People's or NFC, and
Goldman Sachs has not been furnished with any such evaluation or appraisal.
Goldman Sachs' opinion was provided for the information and assistance of
the People's Board in connection with its consideration of the transactions
contemplated by the Merger Agreement and such opinion does not constitute a
recommendation as to how any holder of shares of People's Common Stock should
vote with respect to such transaction. Goldman Sachs' opinion addresses only the
fairness to People's of the consideration to be paid by it; the opinion does not
address fairness to any other person.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its written opinion to the People's
Board on September 3, 1997. Goldman Sachs utilized substantially the same type
of analyses in connection with providing the written opinion dated the date of
this Joint Proxy Statement-Offering Memorandum attached hereto as Appendix E.
(i) Historical Stock Trading Analysis and Indexed Stock Price
Histories. Goldman Sachs reviewed the monthly historical closing prices and
trading volumes for shares of NFC Common Stock during the period from July
31, 1987 to July 31, 1997. Goldman Sachs also reviewed for shares of NFC
Common Stock (a) daily indexed historical trading prices for the period
from September 2, 1996 to September 1, 1997, (b) weekly indexed historical
trading prices for the period from September 2, 1994 to August 29, 1997,
and (c) monthly indexed historical trading prices for the period from
August 31, 1992 to August 31, 1997, in each case as compared to shares of
People's Common Stock and to a composite of small-capitalization thrifts
comprised of BostonFed Bancorp Inc., Dime Financial Corp., First Bell
Bancorp Inc., Progressive Bank Inc. and Medford Savings Bank.
(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information, ratios and public market multiples relating
to People's and NFC to corresponding financial information, ratios and
public market multiples for (a) a group of Northeastern U.S. banks
comprised of First Union, Fleet Financial, BankBoston, North Fork Bancorp,
HUBCO Inc. and Banknorth Group (the 'Selected Banks'); (b) a group of
large-capitalization thrifts comprised of GreenPoint Financial, Dime
Bancorp, Sovereign Bancorp and Webster Financial (the 'Large-Capitalization
Thrifts'); and (c) a group of small-capitalization thrifts comprised of
Dime Financial Corp., Medford Savings Bank, Progressive Bank Inc.,
BostonFed Bancorp Inc. and First Bell Bancorp Inc. (together with the
Large-Capitalization Thrifts, the 'Selected Thrifts').
The multiples of People's and NFC were calculated using a price of
$28.375 per share of People's Common Stock and a price of $29.00 per share
of NFC Common Stock, the closing prices of such shares on Nasdaq on
September 2, 1997. The multiples and ratios for People's, NFC, the Selected
Banks and the Selected Thrifts were based on the most recent publicly
available information.
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Goldman Sachs considered, among other multiples and ratios, (a) recent
market price as a percentage of 52 week high, (b) price-to-earnings ('P/E')
ratios based on 1997 ('1997E P/E') and 1998 ('1998E P/E') Institutional
Brokers Estimate System ('IBES') earnings per share ('EPS') estimates, (c)
IBES five year growth rates, (d) common equity as a percentage of assets,
(e) tangible common equity as a percentage of tangible assets, (f)
non-performing assets as a percentage of loans and other real estate owned,
(g) reserves as a percentage of non-performing loans, (h) return on average
assets ('ROAA'), (i) return on average common equity ('ROACE'), (j) market
price as a multiple of book value, (l) market price as a multiple of
tangible book value, (i) dividend yield, (j) non-interest income as a
percentage of revenues and (k) efficiency ratio.
Goldman Sachs' analysis indicated that: (i) recent market price as a
percentage of 52 week high ranged from 94% to 100% with a median of 96% for
the Selected Banks, and from 89% to 104% with a median of 95% for the
Selected Thrifts, as compared with 95% for People's and 100% for NFC; (ii)
1997E P/E ranged from 13.7x to 15.3x with a median of 14.2x for the
Selected Banks, and from 9.6x to 17.8x with a median of 14.7x for the
Selected Thrifts, as compared with 18.9x for People's and 22.3x for NFC;
(iii) 1998E P/E ranged from 12.6x to 13.5x with a median of 12.8x for the
Selected Banks, and from 11.3x to 15.1x with a median of 13.2x for the
Selected Thrifts, as compared with 16.7x for People's and 19.3x for NFC;
(iv) IBES five year growth rates ranged from 10.0% to 14.0% with a median
of 11.5% for the Selected Banks, and from 7.0% to 15.0% with a median of
10.0% for the Selected Thrifts, as compared with 10.0% for both People's
and NFC; (v) common equity as a percentage of assets ranged from 6.3% to
7.6% with a median of 7.2% for the Selected Banks, and from 4.0% to 10.3%
with a median of 8.6% for the Selected Thrifts, as compared with 8.5% for
People's and 11.2% for NFC; (vi) tangible common equity as a percentage of
tangible assets ranged from 5.1% to 6.5% with a median of 5.9% for the
Selected Banks, and from 3.1% to 9.8% with a median of 7.7% for the
Selected Thrifts, as compared with 8.5% for People's and 10.2% for NFC;
(vii) non-performing assets as a percentage of loans and other real estate
owned ranged from 0.7% to 1.8% with a median of 0.9% for the Selected
Banks, and from 0.1% to 4.7% with a median of 0.9% for the Selected
Thrifts, as compared with 1.5% for People's and 1.9% for NFC; (viii)
reserves as a percentage of non-performing loans ranged from 125% to 290%
with a median of 201% for the Selected Banks, and from 30% to 437% with a
median of 140% for the Selected Thrifts, as compared with 130% for People's
and 189% for NFC; (ix) ROAA ranged from 0.97% to 1.47% with a median of
1.22% for the Selected Banks, and from 0.42% to 1.92% with a median of
0.99% for the Selected Thrifts, as compared with 1.14% for People's and
1.11% for NFC; (x) ROACE ranged from 13.7% to 18.9% with a median of 16.3%
for the Selected Banks, and from 5.0% to 23.5% with a median of 10.6% for
the Selected Thrifts, as compared with 13.8% for People's and 10.2% for
NFC; (xi) market price as a multiple of book value ranged from 1.83x to
3.25x with a median of 2.90x for the Selected Banks, and from 1.24x to
2.23x with a median of 1.83x for the Selected Thrifts, as compared with
2.60x for People's and 1.97x for NFC; (xii) market price as a multiple of
tangible book value ranged from 2.17x to 3.85x with a median of 3.61x for
the Selected Banks, and from 1.28x to 3.25x with a median of 2.00x for the
Selected Thrifts, as compared with 2.60x for People's and 2.19x for NFC;
(xiii) dividend yield ranged from 2.3% to 2.8% with a median of 2.4% for
the Selected Banks, and from 0.5% to 2.5% with a median of 1.5% for the
Selected Thrifts, as compared with 2.4% for People's and 1.9% for NFC;
(xiv) non-interest income as a percentage of revenues ranged from 11% to
38% with a median 28% for the Selected Banks, and from 3% to 17% with a
median of 10% for the Selected Thrifts, as compared with 42% for People's
and 11% for NFC; (xv) efficiency ratio ranged from 38% to 62% with a median
of 55% for the Selected Banks, and from 29% to 65% with a median of 50% for
the Selected Thrifts, as compared with 68% for People's and 54% for NFC.
(iii) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to selected thrift acquisitions in the Northeastern
U.S. greater than $25 million in 1997 (the '1997 Northeastern U.S. Thrift
Transactions') and 1996 (the '1996 Northeastern U.S. Thrift Transactions'
and, together with the 1997 Northeastern U.S. Thrift Transactions, the
'Northeastern Thrift Transactions'). Such analysis indicated that for the
1997 Northeastern U.S. Thrift Transactions and the 1996 Northeastern U.S.
Thrift Transactions (for which certain data points were not publicly
available), respectively, median (a) transaction value was $100.1 million
and $93.7 million, (b) price
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as a multiple of tangible book value was 1.80x and 1.70x, (c) price as a
multiple of book value was 1.78x and 1.65x, (d) price as a multiple of last
12 months ('LTM') EPS was 18.2x and 15.1x, (e) premium to core deposits was
11.2% and 7.6%, and (f) estimated cost savings was 35.0% and 34.5%.
Goldman Sachs also analyzed certain information relating to thrift
merger transactions greater than $100 million (some of which were among the
Northeastern Thrift Transactions) in 1997 (the '1997 Selected
Transactions'), 1996 (the '1996 Selected Transactions') and 1995 (the '1995
Selected Transactions'). Such analysis indicated, with certain data points
not being publicly available, that for the 1997 Selected Transactions, the
1996 Selected Transactions and the 1995 Selected Transactions,
respectively, (a) transaction value was a mean of $1,183, $550 and $257
million, and a median of $342, $280 and $208 million; (b) price as a
multiple of book value was a mean of 2.0x, 1.5x, and 1.5x and a median of
1.7x, 1.6x and 1.4x; (c) price (reduced to reflect excess capital) as a
multiple of adjusted tangible book value was a mean of 2.6x, 1.8x and 1.8x,
and a median of 2.4x, 1.8x and 1.7x; (d) price as a multiple of tangible
book value was a mean of 1.9x, 1.6x and 1.5x, and a median of 1.7x, 1.7x
and 1.5x; (e) price as a multiple of LTM EPS was a mean of 19.9x, 18.9x and
17.3x, and a median of 18.1x, 15.1x and 15.2x; (f) premium to deposits was
a mean of 15.3%, 8.8% and 7.9%, and a median of 15.7%, 7.8% and 7.6%; and
(g) premium to market price was a mean of 22.8%, 16.5% and 19.5%, and a
median of 18.3%, 12.1% and 16.2%.
(iv) Summary of Implied Transaction Premiums and Multiples. Goldman
Sachs reviewed certain implied transaction premiums and multiples with
respect to the Merger based on a transaction price of $28.60 per share of
NFC Common Stock. The analysis indicated implied premiums (discount) per
share of NFC Common Stock of 34.6%, 27.8% and (1.4%), respectively, as
compared with the closing price per share of NFC Common Stock on July 2,
August 1 and September 2, 1997. The analysis also indicated that a
transaction price of $28.60 represented multiples of 20.7x, 2.3x and 2.0x,
respectively, to LTM EPS, June 30, 1997 tangible book value and June 30,
1997 book value, and implied a premium to June 30, 1997 deposits of 15.0%.
(v) Summary Pro Forma Merger Analysis. Goldman Sachs analyzed the pro
forma EPS impact per share of People's Common Stock of an acquisition of
NFC at a transaction price of $28.74 paid 49.9% in cash and 50.1% in
People's Common Stock, and assuming cost savings of 40% of NFC's
non-interest expense. Based on (a) earnings estimates provided to Goldman
Sachs by People's and IBES earnings estimates (adjusted based on
discussions with People's management) for NFC for the years 1997-2000 and
(b) IBES earnings estimates (adjusted, in the case of NFC, based on
discussions with People's management) for People's and NFC for the years
1997-2000, such analyses indicated that in the years 1998-2000 the Merger
ranged from neutral to accretive on an EPS basis per share of People's
Common Stock.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible of partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
People's or NFC or the contemplated transaction. The analyses were prepared
solely for purposes of Goldman Sachs' providing its opinion to the People's
Board as to the fairness of the consideration to be paid pursuant to the Merger
Agreement and do not purport to be appraisals or necessarily reflect the prices
at which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of People's, NFC, Goldman Sachs or any other
person assumes responsibility if future results are materially different from
those forecast.
As described above, Goldman Sachs' opinion to the People's Board was one of
many factors taken into consideration by the People's Board in making its
determination to approve the Merger Agreement. The foregoing summary does not
purport to be a complete description of the analyses
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performed by Goldman Sachs and is qualified by reference to the written opinion
of Goldman Sachs set forth in Appendix E hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with People's, having provided certain investment banking services to
People's from time to time, including having acted as a co-manager in an
offering by People's of subordinated notes in 1996, having acted as sole manager
in several asset securitization transactions undertaken by People's in 1994 and
1993, and having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Merger Agreement.
People's selected Goldman Sachs as its financial advisor because it is a
nationally recognized investment banking firm that has substantial experience in
transactions similar to the Merger.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of People's and/or NFC for its own account and for the account of
customers.
Pursuant to a letter agreement dated July 25, 1997 (the 'Engagement
Letter'), People's engaged Goldman Sachs to act as its financial advisor in
connection with the Merger. Pursuant to the terms of the Engagement Letter,
People's has agreed to pay Goldman Sachs $1.5 million upon consummation of the
Merger. People's has agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including attorney's fees, and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws.
OPINION OF NFC'S FINANCIAL ADVISOR
Keefe Bruyette has delivered to the NFC Board its written opinion dated the
date of this Joint Proxy Statement-Offering Memorandum to the effect that as of
such date the consideration to be paid in the Merger is fair, from a financial
point of view, to NFC Shareholders. Keefe Bruyette's opinion is addressed to the
NFC Board and does not constitute a recommendation as to how any NFC Shareholder
should vote with respect to the Merger Agreement. In connection with its opinion
dated the date of this Joint Proxy Statement-Offering Memorandum, Keefe Bruyette
updated certain analyses performed in connection with its opinion delivered on
September 3, 1997 and reviewed the assumptions on which such analyses were based
and the factors considered in connection therewith.
THE FULL TEXT OF THE OPINION OF KEEFE BRUYETTE, WHICH SETS FORTH A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS JOINT PROXY
STATEMENT-OFFERING MEMORANDUM AS APPENDIX F AND IS INCORPORATED HEREIN BY
REFERENCE. SHAREHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. THE
FOLLOWING SUMMARY OF THE OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF THE OPINION.
In rendering its opinion, Keefe Bruyette (i) reviewed, among other things,
the Merger Agreement, Annual Reports to shareholders and Annual Reports on Form
10-K of NFC and Form F-2 of People's for the four years ended December 31, 1996,
certain interim reports to shareholders and Quarterly Reports on Form 10-Q of
NFC and Form F-4 of People's and certain internal financial analyses and
forecasts for NFC prepared by management; (ii) held discussions with members of
senior management of NFC and People's regarding past and current business
operations, regulatory relationships, financial condition and future prospects
of the respective companies; (iii) compared certain financial and stock market
information for NFC and People's with similar information for certain other
companies the securities of which are publicly traded; (iv) reviewed the
financial terms of certain recent business combinations in the banking industry;
and (v) performed such other studies and analyses as it considered appropriate.
In conducting its review and arriving at its opinion, Keefe Bruyette relied
upon and assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and Keefe Bruyette did not
attempt to verify such information independently. Keefe Bruyette
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relied upon the management of NFC as to the reasonableness and achievability of
the financial and operating forecasts and projections (and assumptions and bases
therefor) provided to Keefe Bruyette and assumed that such forecasts and
projections reflected the best available estimates and judgments of such
management and that such forecasts and projections will be realized in the
amounts and in the time periods estimated by such management. Keefe Bruyette
also assumed, without independent verification, that the aggregate allowances
for loan losses for NFC and People's are adequate to cover such losses. Keefe
Bruyette did not make or obtain any evaluations or appraisals of the property of
NFC or People's, nor did Keefe Bruyette examine any individual credit files.
The following is a summary of the material financial analyses employed by
Keefe Bruyette in connection with providing its opinion and does not purport to
be a complete description of all analyses employed by Keefe Bruyette.
(a) Financial Summary of the People's Offer. Keefe Bruyette calculated
multiples which are based on an assumed per share purchase price of $28.74 (as
described below), when compared to NFC's June 30, 1997 stated book value of
$14.70, its estimated tangible book value per share of $13.33, and its 1997 and
1998 earnings estimate (provided by Keefe Bruyette's Equity Research Department)
of $1.45 and $1.60, respectively, per share and its trailing 12 months (June 30,
1996 to June 30, 1997) earnings per share of $1.38. Based on this data, the
price to stated fully diluted book value multiple was 1.96 times, the price to
stated fully diluted tangible book value per share was 2.16 times, the price to
the 1997 and 1998 earnings estimates per share was 19.8 and 18.0 times,
respectively, and the multiple of price to the trailing 12 months earnings was
20.8 times. Keefe Bruyette also described the transaction structure and the
conditions under which the number of shares of People's Common Stock to be
issued would change and the effect that this would have on the per share
consideration received by NFC Shareholders. In addition, Keefe Bruyette
described the allocation procedures as set forth in the Merger Agreement. For
illustrative purposes, Keefe Bruyette assumed that the per share consideration
to be paid to NFC Shareholders was $28.74 (derived by adding the value of the
stock and cash consideration paid to NFC Shareholders assuming a People's stock
price of $27.88 and dividing this sum by the estimated fully diluted shares
outstanding of NFC Common Stock).
(b) Discounted Cash Flow Analysis. Keefe Bruyette estimated the present
value of the future cash flows that could accrue to a holder of a share of NFC
Common Stock through the year 2002. The analysis was based on several
assumptions, including an earnings per share of $1.60 in 1998 and a 10% earnings
per share growth rate. A 40% dividend payout ratio was assumed for NFC through
the year 2002. A terminal value was calculated for 2002 by multiplying NFC's
projected 2002 earnings by a price/earnings multiple of 14 times trailing
earnings. The terminal valuation and the estimated earnings were discounted at a
rate of 12%, producing a present value of $21.29. Keefe Bruyette also presented
a table showing the foregoing analysis with a range of discount rates from 12%
to 14% and a range of price-to-earnings multiples of 12x to 20x, resulting in a
range of present values for a share of NFC Common Stock of $17.15 to $29.27.
These values were determined by adding (i) the present value of the estimated
future dividend stream that NFC could generate over the period beginning January
1998 and ending in December 2002, and (ii) the present value of the 'terminal
value' of NFC Common Stock.
Keefe Bruyette repeated this analysis using an earnings growth rate of 8%
for NFC. The result of this analysis was a present value of $19.88 at a 14 times
trailing earnings terminal multiple and a 12% discount rate. Keefe Bruyette also
presented a table showing the foregoing analysis with a range of discount rates
from 12% to 14% and a range of price-to-earnings multiples of 12x to 20x,
resulting in a range of present values for a share of NFC Common Stock of $16.02
to $27.29. Keefe Bruyette stated that the discounted cash flow analysis is a
widely-used valuation methodology but noted that it relies on numerous
assumptions, including asset and earnings growth rates, dividend payout rates,
terminal values and discount rates. The analysis did not purport to be
indicative of the actual values or expected values of NFC Common Stock.
(c) Analysis of Selected Merger Transactions. Keefe Bruyette reviewed
certain financial data related to a set of recent comparable bank and thrift
holding company acquisitions in New England, selected nationwide thrift
acquisitions, and selected nationwide bank only transactions.
Keefe Bruyette calculated an average of the New England comparable group's
multiple of the targets' earnings (trailing 12 months) as 12.66 times compared
to a multiple of 20.8 times associated with
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People's proposal; an average premium to the targets' stated book value of 186%
compared to a premium of 196% associated with the People's proposal; an average
premium to the targets' tangible book value of 189% compared to a premium of
216% associated with People's proposal; an average premium to the targets' core
deposits (net of tangible equity) of 20.97% compared to 15.10% associated with
People's proposal; and an average price to assets ratio of 17.68% compared to
23.00% associated with People's proposal.
For the nationwide thrift transactions, Keefe Bruyette calculated an
average multiple of the targets' earnings (trailing 12 months) of 15.47 times
compared to a multiple of 20.8 times associated with People's proposal; an
average premium to the targets' stated book value of 181% compared to a premium
of 196% associated with the People's proposal; an average premium to the
targets' tangible book value of 186% compared to a premium of 216% associated
with People's proposal; an average premium to the targets' core deposits (net of
tangible equity) of 24.38% compared to 15.10% associated with People's proposal;
and an average price to assets ratio of 17.18% compared to 23.00% associated
with People's proposal.
For the nationwide bank transactions, Keefe Bruyette calculated an average
multiple of the targets' earnings (trailing 12 months) of 16.78 times compared
to a multiple of 20.8 times associated with People's proposal; an average
premium to the targets' stated book value of 248% compared to a premium of 196%
associated with the People's proposal; an average premium to the targets'
tangible book value of 263% compared to a premium of 216% associated with
People's proposal; an average premium to the targets' core deposits (net of
tangible equity) of 27.32% compared to 15.10% associated with People's proposal;
and an average price to assets ratio of 22.72% compared to 23.00% associated
with People's proposal.
No company or transaction used as a comparison in the above analysis is
identical to NFC, People's or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared.
(d) Financial Impact Analysis. Keefe Bruyette performed a pro forma merger
analysis that combined projected income statement and balance sheet information.
Assumptions regarding the accounting treatment, acquisition adjustments, cost
savings, revenue enhancements and treatment of NFC employee stock options were
used to calculate the financial impact that the acquisition would have on
certain projected financial results of People's. This analysis indicated that
the Merger is expected to be neutral to estimated earnings in 1998, increase the
fully diluted book value, and decrease both the tangible book value and the
leverage ratio. This analysis was based on analyst estimates of People's and
NFC's 1998 earnings per share and on People's management's estimates of expected
cost savings and revenue enhancements in connection with the Merger. These
projections were discussed with the management of NFC. The actual results
achieved by the combined company will vary from the projected results, and the
variations may be material.
(e) Selected Peer Group Analysis. Keefe Bruyette compared the financial
performance and market performance of People's based on various financial
measures of earnings performance, operating efficiency, capital adequacy and
asset quality and various measures of market performance, including market/book
values, price to earnings and dividend yields to those of a group of comparable
holding companies. For purposes of such analysis, the financial information used
by Keefe Bruyette was as of and for the quarter ended June 30, 1997 and the
market price information was as of August 28, 1997. The companies in the peer
group were large New England thrifts which had total assets ranging from
approximately $500 million to $6 billion.
Keefe Bruyette's analysis showed the following concerning People's and
NFC's financial performance: that its return on equity for the quarter ended
June 30, 1997 was 13.51% and 10.04% respectively, compared with an average of
13.21% for the peer group; that its return on assets for the quarter ended June
30, 1997 was 1.13% and 1.11%, respectively, compared with an average of 1.05%
for the group; that its net interest margin for the quarter ended June 30, 1997
was 3.42% and 4.36%, respectively, compared with an average of 3.65%; that its
efficiency ratio for the quarter ended June 30, 1997 was 72.79% and 54.86%,
respectively, compared with an average of 54.91%; that its equity to
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assets ratio was 8.48% and 11.17%, respectively, compared to an average of
8.11%; that its ratio of nonperforming assets to total loans and other real
estate owned was 1.32% and 2.35%, respectively, compared to an average of 1.12%;
and that its ratio of loan loss reserve to nonperforming loans was 130% and
189%, respectively, compared to an average of 166%.
Keefe Bruyette's analysis further showed the following concerning People's
and NFC's market performance: that People's and NFC's price to earnings multiple
based on 1997 estimated earnings was 18.50 and 17.28 times, respectively,
compared to an average for the group of 15.20 times; that their price to book
value multiples were 2.54 and 1.70 times, respectively, compared to a group
average of 1.72 times; and that their dividend yields were 2.40% and 2.23%,
respectively, compared to an average for the group of 2.13%. For purposes of the
above calculations, all earnings estimates are based upon the published
estimates of Keefe Bruyette's equity research department.
(f) Other Analysis. Keefe Bruyette also reviewed selected investment
research reports, earnings estimates, historical stock price performance
relative to the S&P 500 and to an index of bank and thrift stocks, and other
financial data for NFC and People's.
The summary contained herein provides a description of the material
analyses prepared by Keefe Bruyette in connection with the rendering of its
opinion. The summary set forth above does not purport to be a complete
description of the analyses performed by Keefe Bruyette in connection with the
rendering of its opinion. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Keefe
Bruyette believes that its analyses and the summary set forth above must be
considered as a whole and that selecting portions of its analyses without
considering all analyses, or selecting part of the above summary, without
considering all factors and analyses, would create an incomplete view of the
processes underlying the analyses set forth in Keefe Bruyette's presentations
and opinion. The ranges of valuations resulting from any particular analysis
described above should not be taken to be Keefe Bruyette's view of the actual
value of NFC and People's. The fact that any specific analysis has been referred
to in the summary above is not meant to indicate that such analysis was given
greater weight than any other analyses.
In performing its analyses, Keefe Bruyette made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of NFC and People's. The
analyses performed by Keefe Bruyette are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of Keefe Bruyette's analysis of the fairness, from a financial point of
view, of the consideration to be paid in the Merger. This was provided to the
NFC Board in connection with the delivery of Keefe Bruyette's opinion. The
analyses do not purport to be appraisals or to reflect the prices at which a
company actually might be sold or the prices at which any securities may trade
at the present time or at any time in the future. In addition, as described
above, Keefe Bruyette's opinion, along with its presentation to the NFC Board,
was just one of many factors taken into consideration by the NFC Board in
unanimously approving the Merger Agreement.
Keefe Bruyette, as part of its investment banking business, is continually
engaged in the valuation of banking businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bidding, secondary distributions of listed and unlisted securities, private
placements and evaluations for estate, corporate and other purposes. As
specialists in the securities of banking companies, Keefe Bruyette has
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of its business as a broker-dealer, Keefe Bruyette may, from
time to time, purchase securities from, and sell securities to, NFC and People's
and as a market maker in securities Keefe Bruyette may from time to time have a
long or short position in, and buy or sell, debt or equity securities of NFC and
People's for Keefe Bruyette's own account and for the accounts of its customers.
Pursuant to the executed engagement letter between NFC and Keefe Bruyette,
NFC has agreed to pay Keefe Bruyette a cash fee equal to 1.0% of the market
value of the total consideration paid to NFC Shareholders upon closing of the
transaction. If January 7, 1998 had been the Valuation Date, such fee would have
been approximately $1.79 million. At the signing of the engagement letter, a
cash fee of $100,000 was paid and an additional cash fee of $100,000 will be
paid at the mailing of this Joint Proxy
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Statement-Offering Memorandum. The balance of the 1.0% less the $200,000
previously remunerated will be paid at the closing of the Merger. Pursuant to
the Keefe Bruyette engagement letter, NFC also agreed to reimburse Keefe
Bruyette for reasonable out-of-pocket expenses and disbursements incurred in
connection with its retention and to indemnify Keefe Bruyette against certain
liabilities, including liabilities under the federal securities laws.
THE EFFECTIVE TIME
Subject to the prior satisfaction or waiver of certain conditions set forth
in the Merger Agreement and described under ' -- Conditions to the Merger,' the
parties will cause the Effective Time to occur on (i) the third business day
after the date on which (or at the election of People's, the last day of the
month in which) all such conditions, to the extent not waived, are satisfied; or
(ii) such other date as People's and NFC may agree. It is currently anticipated
that the Effective Time will occur on or before March 2, 1998.
MERGER CONSIDERATION
The value of the Per Share Stock Consideration (basing the value of the Per
Share Stock Consideration on the Valuation Period Market Value of People's
Common Stock) and the Per Share Cash Consideration will be equal and will be
calculated on the basis of the 'Average Per Share Consideration' defined under a
formula described below. Under the Merger Agreement, if the Valuation Period
Market Value of People's Common Stock is $27.875, which was the market price of
People's Common Stock at the time at which People's submitted its final bid to
acquire NFC, the number of shares of People's Common Stock into which each share
of NFC Common Stock would be converted (the 'Exchange Ratio') will be 1.0310 and
the Per Share Cash Consideration will be $28.74. At a market price of People's
Common Stock of $27.875, 1.0310 shares of People's Common Stock would have a
market value of $28.74. In such circumstances the total number of shares of
People's Common Stock (the 'Stock Amount') available for distribution to holders
of NFC Common Stock in connection with the Merger will be 2,945,594, and the
total amount of cash available for distribution to holders of NFC Common Stock
in connection with the Merger will be $81,671,000 (the 'Base Cash
Consideration'), plus certain amounts described below to adjust for the exercise
of Options prior to the Valuation Date and minus certain amounts described below
to make cash payments to cancel Options not exercised prior to the Valuation
Date.
The initial Per Share Stock Consideration, Per Share Cash Consideration,
Stock Amount and the Base Cash Consideration were determined on a fully diluted
basis and reflect an aggregate offer for all common stock and common stock
equivalents of NFC. Accordingly, a portion of the Base Cash Consideration will
not be distributed to holders of NFC Common Stock but will instead be paid to
cancel all Options which are outstanding and unexercised as of the Valuation
Date (such amount, as determined in accordance with the formula set forth below,
the 'Aggregate Option Settlement Amount'). The Base Cash Consideration will also
be increased by the aggregate exercise price received by NFC in payment for
shares of NFC Common Stock issued as a result of the exercise of Options between
the date of the Merger Agreement and the Valuation Date (such aggregate exercise
price, the 'Cash Adjustment').
The Stock Amount is subject to a 'collar' provision which is designed to
hold constant the value of the portion of the Merger consideration consisting of
People's Common Stock, to the extent that the Valuation Period Market Value is
not more than 5% above, nor more than 5% below, a notional mid-point value of
$27.875. The collar operates to ensure that, so long as the Valuation Period
Market Value remains within 5% of $27.875 in either direction, the Per Share
Cash Consideration will remain unchanged and the Stock Amount and Exchange Ratio
will be adjusted so that the value of the Per Share Stock Consideration
(calculating the value of the Per Share Stock Consideration using the Valuation
Period Market Value of People's Common Stock) will be equal to $28.74. If the
Valuation Period Market Value is outside the collar, the Exchange Ratio and the
Per Share Cash Consideration will each be adjusted pursuant to a formula
designed to apportion the effect of fluctuations in the value of People's Common
Stock between the Per Share Stock Consideration and the Per Share Cash
Consideration so that, calculating the value of the Per Share Stock
Consideration using the Valuation
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Period Market Value of People's Common Stock, the Per Share Stock Consideration
and Per Share Cash Consideration will be equal in value on the Valuation Date.
The foregoing collar provision and equalization of the value of the Per
Share Stock Consideration and Per Share Cash Consideration will be effected as
follows. First, the Stock Amount will be adjusted to reflect application of the
collar provision. If the Valuation Period Market Value of People's Common Stock
is less than $27.875, the Stock Amount will be equal to the amount obtained by
(A) multiplying 2,945,594 by $27.875 and (B) dividing the product thereof by the
greater of (i) the Valuation Period Market Value and (ii) $26.48 (which is the
'floor' of the collar). If the Valuation Period Market Value is greater than
$27.875, the Stock Amount will be equal to the amount obtained by (A)
multiplying 2,945,594 by $27.875 and (B) dividing the product thereof by the
lesser of (i) the Valuation Period Market Value and (ii) $29.27 (which is the
'ceiling' of the collar). Notwithstanding the foregoing, if the Valuation Period
Market Value is less than $26.48, People's may in its discretion increase the
Stock Amount and decrease the Base Cash Consideration so long as (i) the Average
Per Share Consideration (as defined below) remains equal to that resulting from
the application of the preceding sentence and (ii) the percentage of the
Aggregate Consideration (as defined below) accounted for by cash is not less
than that which would exist if the Valuation Period Market Value were equal to
$26.48.
Based on the revised Stock Amount calculated in accordance with the
foregoing paragraph, the Per Share Stock Consideration and Per Share Cash
Consideration will be adjusted as follows. The Per Share Stock Consideration
will be adjusted by adjusting the Exchange Ratio such that the product of the
Exchange Ratio (rounded to the nearest 1/1000th of a share) and the Valuation
Period Market Value will equal the Average Per Share Consideration. The Per
Share Cash Consideration will be adjusted to equal the Average Per Share
Consideration.
For purposes of the adjustments described in the preceding paragraphs, the
following terms are defined in the Merger Agreement as follows:
'Aggregate Consideration' means (x) the product of (i) the Stock Amount (as
adjusted) times (ii) the Valuation Period Market Value, plus (y) the Base Cash
Consideration plus the Cash Adjustment, if any, minus (z) the Aggregate Option
Settlement Amount.
'Aggregate Option Settlement Amount' means, as determined on the Valuation
Date, (i) (x) the number of unexercised Options times (y) the Fully Diluted Per
Share Consideration minus (ii) the aggregate exercise price of all unexercised
Options.
'Average Per Share Consideration' means the Aggregate Consideration divided
by the Valuation Period Share Number (rounded to the nearest cent).
'Fully Diluted Common Stock Number' means, as determined on the Valuation
Date, the sum of (a) the Valuation Period Share Number and (b) the number of
shares of NFC Common Stock issuable upon exercise of all unexercised Options.
'Fully Diluted Per Share Consideration' means, as determined on the
Valuation Date, (i) (x) the product of the Stock Amount (as adjusted) and the
Valuation Period Market Value, plus (y) the Base Cash Consideration (plus the
Cash Adjustment, if any) plus (z) the aggregate exercise price of all
unexercised Options, divided by (ii) the Fully Diluted Common Stock Number.
'Unexercised Options' refers to in-the-money Options (i.e., Options having
an exercise price lower than the market price of NFC Common Stock on the
Valuation Date).
If the Valuation Period Market Value were $27.875 (the midpoint of the
collar), the Per Share Stock Consideration would consist of 1.0310 shares of
People's Common Stock, and the Per Share Cash Consideration and the value of the
Per Share Stock Consideration would each be $28.74. If the Valuation Period
Market Value were $26.48 (the 'floor' of the collar), the Per Share Stock
Consideration would consist of 1.0853 shares of People's Common Stock, and the
Per Share Cash Consideration and the value of the Per Share Stock Consideration
would be $28.74. If the Valuation Period Market Value were $29.27 (the 'ceiling'
of the collar), the Per Share Stock Consideration would consist of 0.9819 shares
of People's Common Stock, and the Per Share Cash Consideration and the value of
the Per Share Stock Consideration would be $28.74. If the Valuation Period
Market Value were $24.00 (below the floor), the Per Share Stock Consideration
would consist of 1.1429 shares of People's
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Common Stock, and the Per Share Cash Consideration and the value of the Per
Share Stock Consideration would be $27.43. If the Valuation Period Market Value
were $32.00 (above the ceiling), the Per Share Stock Consideration would consist
of 0.9388 shares of People's Common Stock, and the Per Share Cash Consideration
and the value of the Per Share Stock Consideration would be $30.04.
If January 7, 1998 had been the Valuation Date, (a) the Valuation Period
Market Value would have been $36.819; (b) the aggregate consideration payable to
holders of NFC Common Stock would have consisted of $75,972,866 (after giving
effect to the exercise of Options and cash payments in settlement of unexercised
Options) and 2,805,208 shares of People's Common Stock; (c) the Per Share Stock
Consideration would have consisted of 0.8784 shares of People's Common Stock;
and (d) the Per Share Cash Consideration and the value of the Per Share Stock
Consideration would each have been equal to $32.34. The Valuation Period Market
Value will not actually be determined until the Valuation Date (which has not
yet occurred), and additional Options may be exercised prior to that date.
Consequently, the Valuation Period Market Value, the cash portion of the
aggregate consideration to be paid, the number of shares of People's Common
Stock to be issued in connection with the Merger, the Per Share Stock
Consideration, and the value of the Per Share Cash Consideration and Per Share
Stock Consideration may differ from the amounts shown in the example.
SEE APPENDIX I TO THIS JOINT PROXY STATEMENT-OFFERING MEMORANDUM, WHICH
SETS FORTH THE PER SHARE STOCK CONSIDERATION AND PER SHARE CASH CONSIDERATION
PAYABLE AT VARIOUS ASSUMED VALUATION PERIOD MARKET VALUES.
Although the Exchange Ratio will be based on the Valuation Period Market
Value, the market price of People's Common Stock may fluctuate and, on the date
of receipt of the shares of People's Common Stock and thereafter, may be more or
less than the Valuation Period Market Value. For example, if the Valuation Date
had been January 7, 1998 as illustrated above, a holder of shares of NFC Common
Stock receiving shares of People's Common Stock in the Merger would receive
0.8784 shares of People's Common Stock in exchange for each share of NFC Common
Stock held by such person. That number of shares of People's Common Stock would
be treated as having a value of $32.34, or 0.8784 times the Valuation Period
Market Value of $36.819. If the actual market price of a share of People's
Common Stock on the date such shares are delivered in exchange for shares of NFC
Common Stock were $37.00 (more than the Valuation Period Market Value), then the
Per Share Stock Consideration would have an actual value of $32.50, or 0.8784
times $37.00, on the date of receipt. If the actual market price of a share of
People's Common Stock on the date such shares are delivered in exchange for
shares of NFC Common Stock were $35.00 (less than the Valuation Period Market
Value), then the Per Share Stock Consideration would have an actual value of
$30.74, or 0.8784 times $35.00, on the date of receipt.
Each holder of an outstanding and exercisable Option to purchase shares of
NFC Common Stock on the Valuation Date (i) may not exercise such Option on or
after the Valuation Date and (ii) will be entitled to receive in settlement for
each Option so held a cash payment in an amount equal to the excess, if any, of
the Average Per Share Consideration over the per share exercise price of such
Option, multiplied by the number of shares of NFC Common Stock covered by such
Option. All such Options will be canceled and of no further effect as of the
Effective Time.
If, prior to the Effective Time (i) NFC declares a stock dividend or
distribution upon or subdivides, splits up, reclassifies or combines the NFC
Common Stock, or declares a dividend or makes a distribution on the NFC Common
Stock in any security convertible into or exchangeable for NFC Common Stock, or
(ii) People's declares a stock dividend or distribution upon or subdivides,
splits up, reclassifies or combines the People's Common Stock or declares a
dividend or makes a distribution on the People's Common Stock in any security
convertible into or exchangeable for People's Common Stock, appropriate
adjustment or adjustments will be made to the Per Share Cash Consideration, the
Per Share Stock Consideration and the Stock Amount.
ELECTION PROCEDURES
Election forms and other appropriate and customary transmittal materials in
such form as People's and NFC mutually agree ('Election Forms') will be mailed
30 days prior to the anticipated Effective
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Time or on such other earlier date as NFC and People's mutually agree ('Mailing
Date') to each holder of record of NFC Common Stock as of five business days
prior to the Mailing Date ('Election Form Record Date'). The Election Forms will
specify that delivery will be effected, and risk of loss and title to the
certificates representing NFC Common Stock ('Certificates') will pass, only upon
proper delivery of such Certificates to an exchange agent designated by People's
(the 'Exchange Agent').
Each Election Form will permit the holder (or the beneficial owner through
appropriate and customary documentation and instructions) either (i) to elect to
receive only People's Common Stock with respect to such holder's NFC Common
Stock ('Stock Election Shares'); (ii) to elect to receive only cash with respect
to such holder's NFC Common Stock ('Cash Election Shares'); or (iii) to indicate
that such holder makes no election ('No Election Shares'). Dissenting NFC Shares
will be treated as No Election Shares.
Any NFC Common Stock with respect to which the holder (or the beneficial
owner, as the case may be) has not submitted to the Exchange Agent an effective,
properly completed Election Form on or before 5:00 p.m. on the 25th day
following the Mailing Date (or such other time and date as People's and NFC may
mutually agree) (the 'Election Deadline') will also be deemed to be No Election
Shares.
Any election will have been properly made only if the Exchange Agent has
actually received a properly completed Election Form by the Election Deadline.
An Election Form will be deemed properly completed only if accompanied by one or
more Certificates (or customary affidavits and indemnification regarding the
loss or destruction of such Certificates or the guaranteed delivery of such
Certificates) representing all shares of NFC Common Stock covered by such
Election Form, together with duly executed transmittal materials included in the
Election Form. Any Election Form may be revoked or changed by the person
submitting such Election Form at or prior to the Election Deadline. In the event
an Election Form is revoked prior to the Election Deadline, the shares of NFC
Common Stock represented by such Election Form will become No Election Shares
and People's will cause the Certificates to be promptly returned without charge
to the person submitting the Election Form upon written request to that effect
from the person who submitted the Election Form. Subject to the terms of the
Merger Agreement and of the Election Form, the Exchange Agent will have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any good faith decisions of the Exchange Agent regarding
such matters will be binding and conclusive. Neither People's nor the Exchange
Agent will be under any obligation to notify any person of any defect in an
Election Form.
THE NUMBER OF SHARES OF PEOPLE'S COMMON STOCK TO BE ISSUED IN CONNECTION
WITH THE MERGER WILL BE FIXED WITHIN THE LIMITS PRESCRIBED BY THE COLLAR,
ACCORDING TO THE VALUATION PERIOD MARKET VALUE OF THE PEOPLE'S COMMON STOCK. THE
AMOUNT OF CASH PAYABLE IN CONNECTION WITH THE MERGER IS ALSO FIXED, EXCEPT FOR
DOLLAR-FOR-DOLLAR ADJUSTMENTS TO ACCOUNT FOR THE EXERCISE PRICE OF OPTIONS
EXERCISED BEFORE THE VALUATION DATE. NO GUARANTEE CAN BE GIVEN THAT AN ELECTION
BY A HOLDER OF NFC COMMON STOCK TO RECEIVE PEOPLE'S COMMON STOCK OR CASH WILL BE
HONORED. RATHER, THE ELECTION BY EACH HOLDER OF NFC COMMON STOCK WILL BE SUBJECT
TO THE ELECTION AND ALLOCATION PROCEDURES DESCRIBED BELOW. THUS, HOLDERS OF NFC
COMMON STOCK MAY NOT RECEIVE THEIR PREFERRED FORM OF CONSIDERATION.
Within 5 business days after the Election Deadline, unless the Effective
Time has not yet occurred, in which case as soon after the Effective Time as
practicable, People's will cause the Exchange Agent to effect the allocation
among the holders of NFC Common Stock of rights to receive People's Common Stock
and/or cash in the Merger in accordance with the Election Forms as follows: (1)
if the number of shares of People's Common Stock that would be issued upon
conversion in the Merger of the Stock Election Shares is less than the Stock
Amount, then: (a) all Stock Election Shares will be converted into the right to
receive the Per Share Stock Consideration, (b) the Exchange Agent will then
select first from among the No Election Shares and then (if necessary) from
among the Cash Election Shares, by a pro rata selection process (as described
below), a sufficient number of shares ('Stock Designated Shares'), such that the
number of shares of People's Common Stock that will be issued in the Merger
equals as closely as practicable the Stock Amount, and all Stock Designated
Shares will be converted into the right to receive the Per Share Stock
Consideration, and (c) the Cash Election Shares and any No Election Shares which
are not Stock Designated Shares will be converted into the right to receive the
Per Share Cash Consideration; (2) if the number of shares of People's Common
Stock that would be
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issued upon conversion in the Merger of the Stock Election Shares is greater
than the Stock Amount, then: (a) all Cash Election Shares and No Election Shares
will be converted into the right to receive the Per Share Cash Consideration,
(b) the Exchange Agent will then select from among the Stock Election Shares, by
a pro rata selection process (as described below), a sufficient number of shares
('Cash Designated Shares') such that the number of shares of People's Common
Stock that will be issued in the Merger equals as closely as practicable the
Stock Amount, and all Cash Designated Shares will be converted into the right to
receive the Per Share Cash Consideration, and (c) the Stock Election Shares
which are not Cash Designated Shares will be converted into the right to receive
the Per Share Stock Consideration; (3) if the number of shares of People's
Common Stock that would be issued upon conversion into People's Common Stock of
the Stock Election Shares is equal or nearly equal (as determined by the
Exchange Agent) to the Stock Amount, then the preceding clauses (1) and (2) and
the following clause (4) will not apply and all Stock Election Shares will be
converted into the right to receive the Per Share Stock Consideration, and all
Cash Election Shares and No Election Shares will be converted into the right to
receive the Per Share Cash Consideration; or (4) if the number of shares of
People's Common Stock that would be issued upon the conversion into People's
Common Stock of the Stock Election Shares and No Election Shares would equal or
nearly equal (as determined by the Exchange Agent) the Stock Amount, then the
foregoing clauses (1) through (3) will not apply, and all Cash Election Shares
will be converted into the right to receive the Per Share Cash Consideration and
all Stock Election Shares and No Election Shares will be converted into the
right to receive the Per Share Stock Consideration. The pro rata selection
process to be used by the Exchange Agent will consist of such equitable
proration processes as are mutually determined by People's and NFC and will
apply equally to all NFC shareholders (including insiders and affiliates of
NFC).
For a discussion of the federal income tax consequences of the receipt of
cash or stock consideration, see ' -- Certain Federal Income Tax Consequences.'
EXCHANGE PROCEDURES
Each previous holder of a Certificate who has surrendered such Certificate
together with duly executed transmittal materials included in the Election Form
to People's or, at the election of People's, the Exchange Agent, pursuant to
procedures described in ' -- Election Procedures' will, upon acceptance thereof
by People's or the Exchange Agent, be entitled to a certificate or certificates
representing the number of full shares of People's Common Stock or cash into
which the Certificate so surrendered will have been converted pursuant to the
Merger Agreement and any distribution previously declared and not yet paid with
respect to such shares of People's Common Stock, all without interest.
HOLDERS OF NFC COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL MATERIALS FROM THE EXCHANGE AGENT OR PEOPLE'S.
The Exchange Agent will accept Certificates upon compliance with such
reasonable terms and conditions as People's or the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with customary exchange
practices. Certificates will be required to be appropriately endorsed or
accompanied by such instruments of transfer as People's or the Exchange Agent
may reasonably require. Each outstanding Certificate will, until duly
surrendered to People's or the Exchange Agent, be deemed to evidence ownership
of the consideration into which the stock previously represented by such
Certificate will have been converted pursuant to this Agreement.
After the Effective Time, holders of Certificates will cease to have rights
with respect to the stock previously represented by such Certificates, and their
sole rights will be to exchange such Certificates for the consideration provided
for in the Merger Agreement. After the Effective Time, there will be no further
transfer of Certificates on the records of NFC, and if such Certificates are
presented to NFC for transfer, they will be canceled against delivery of the
consideration provided therefor in the Merger Agreement. People's will not be
obligated to deliver the consideration to which any former holder of NFC Common
Stock is entitled as a result of the Merger until such holder surrenders the
Certificates as provided in the Merger Agreement.
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No dividends declared by People's will be remitted to any person entitled
to receive People's Common Stock under the Merger Agreement and such person will
not be entitled to vote such People's Common Stock or otherwise receive property
in respect thereof as set forth in Section 36a-125(h) of the CTBL, until such
person surrenders the Certificate representing the right to receive such
People's Common Stock, at which time such dividends will be remitted to such
person, without interest and less any taxes that may have been imposed thereon.
No certificates or scrip for fractional shares of People's Common Stock
will be issued in the Merger. Each holder who otherwise would have been entitled
to a fraction of a share of People's Common Stock will receive in lieu thereof
cash (without interest) in an amount determined by multiplying the fractional
share interest to which such holder would otherwise be entitled by the closing
sale price for People's Common Stock as reported on Nasdaq (as reported in The
Wall Street Journal) for the trading day immediately preceding the Effective
Time. No such holder will be entitled to dividends, voting rights or any other
rights with respect to any fractional share.
Neither the Exchange Agent nor any party to the Merger Agreement nor any
affiliate thereof will be liable to any holder of stock represented by any
Certificate for any consideration paid to a public official pursuant to
applicable abandoned property, escheat or similar laws.
People's and the Exchange Agent will be entitled to rely upon the stock
transfer books of NFC to establish the identity of those persons entitled to
receive consideration specified in the Merger Agreement, which books will be
conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any Certificate, People's and the Exchange
Agent will be entitled to deposit any consideration represented thereby in
escrow with an independent third party (including by means of an interpleader
action) and thereafter be relieved with respect to any claims relating thereto.
DISSENTING NFC SHARES
Dissenting NFC Shares held by NFC Shareholders who comply with all of the
relevant provisions of Section 262 of the DGCL will not be converted into or be
exchangeable for the right to receive the applicable Per Share Stock
Consideration or Per Share Cash Consideration (unless and until such holders
have failed to perfect or have effectively withdrawn or lost their dissenters'
rights of appraisal under the DGCL), but will instead be entitled to all
applicable appraisal rights as are prescribed by the DGCL. Among the relevant
provisions of Section 262 are the requirements that a shareholder deliver to
NFC, before the taking of the vote on the Merger, a written demand for appraisal
of his or her shares of NFC Common Stock, that the shareholder not vote in favor
of the Merger, and that, within 120 days after the Effective Time, such
shareholder file an appropriate petition in the Delaware Court of Chancery
demanding a determination of the fair value of the shares of NFC Common Stock.
Written demands for appraisal should be addressed to: Norwich Financial Corp., 4
Broadway, Norwich, Connecticut 06360, Attention: Corporate Secretary. Dissenting
NFC Shares will be treated as No Election Shares for purposes of the allocation
procedures of the Merger Agreement described in ' -- Election Procedures.' An
NFC Shareholder may withdraw his or her demand for appraisal and may accept the
applicable Per Share Stock Consideration or Per Share Cash Consideration at any
time within 60 days after the Effective Time. See 'DISSENTERS' RIGHTS' and the
full text of Section 262 of the DGCL, a copy of which is attached hereto as
Appendix G and is incorporated herein by reference.
NFC will give People's (i) prompt notice of any written objections to the
Merger and any written demands for the payment of the fair value of any shares,
withdrawals of such demands, and any other instruments received by NFC pursuant
to the DGCL and (ii) the opportunity to direct all negotiations and proceedings
with respect to such demands under the DGCL. NFC will not voluntarily make any
payment with respect to any demands for payment of fair value and will not,
except with the prior written consent of People's, settle or offer to settle any
such demands.
For a discussion of the rights of People's Shareholders to exercise
dissenters' appraisal rights in connection with the Merger, see 'DISSENTERS'
RIGHTS'.
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REPRESENTATIONS AND WARRANTIES
NFC and NSS, on the one hand, and People's, on the other hand, have made
certain representations and warranties to each other in the Merger Agreement as
to, among other things, the authorization, validity, binding effect and
enforceability of the Merger Agreement, various corporate matters, capital
structure, necessary regulatory approvals, accuracy of financial statements and
regulatory reports, absence of material adverse changes, absence of certain
legal proceedings and regulatory actions, compliance with laws and certain fees
payable in connection with the proposed transactions. Each of NFC and NSS have
also made certain representations and warranties to People's with respect to,
among other things, taxes, labor matters, its employee benefit plans and
agreements, title to its assets, environmental matters, its allowances for
possible loan losses, its material contracts, its insurance, its books and
records, its risk management instruments, antitakeover laws and agreements
applicable to it, and certain other matters. Certain of the representations and
warranties of the parties, the accuracy of which is a condition to the closing
of the transactions contemplated by the Merger Agreement, contain exceptions for
conditions, events, changes or occurrences that would not have a material
adverse effect on the party making such representation or warranty. The
representations and warranties of the parties will not survive beyond the
Effective Time.
CONDUCT OF BUSINESS PRIOR TO THE MERGER AND OTHER COVENANTS
Prior to the Effective Time, each of NFC and NSS will conduct its business,
and will cause each of its subsidiaries to conduct its business, only in the
ordinary course consistent with past practice and consistent with prudent
business and/or banking practice, will use all reasonable efforts to preserve
and maintain the properties and investment practices of NFC and its
subsidiaries, and will comply in all material respects with all laws applicable
to it and its subsidiaries or to the conduct of their respective businesses.
Each of NFC and NSS will use all reasonable efforts to preserve intact its
business organization, to keep available the present services of its employees,
and to preserve the goodwill of its customers and others with whom business
relationships exist. Each of NFC and NSS will, until the consummation of the
transactions contemplated by the Merger Agreement, keep all of its insurance
policies in full force and effect. In addition, NFC and NSS will take, and cause
their respective subsidiaries to take, all action requested by People's to avoid
any accrual of benefits on or after the Effective Time under any bonus,
vacation, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted
stock, stock appreciation or stock option plans, any employment or severance
contracts, any medical, dental, disability, severance, health and life plans,
any other employee benefit and fringe benefit plans, contracts or arrangements
and any 'change of control' or similar provisions in any plan, contract or
arrangement maintained or contributed to by NFC, NSS and their respective
subsidiaries for the benefit of current or former officers, employees,
directors, or their beneficiaries (collectively, 'Compensation and Benefit
Plans'), such action including termination of any such Compensation and Benefit
Plans as of the Effective Time; provided, however, that any such request by
People's to cease accruals under or terminate any Pension Plan subject to
Section 204(h) of the Employee Retirement Income Security Act will be made not
less than 45 days before the effective date of such cessation of accruals or
termination. At the request of People's, NFC and NSS will give any notices of
termination necessary to effect no later than July 31, 1998 the termination of
any of their existing service contracts. Until the consummation of the Merger,
and except as otherwise consented to or approved by People's or as permitted or
required by the Merger Agreement, neither NFC, NSS nor any of their subsidiaries
will take any of the following actions:
(a) change any provision of its Certificate of Incorporation or Bylaws
or similar governing documents;
(b) change the number of issued shares of its capital stock, or issue
or grant any option, warrant, call, commitment, subscription, right to
purchase or agreement of any character relating to its authorized or issued
capital stock, or any securities convertible into shares of such stock, or
split, combine or reclassify any shares of its capital stock, declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock or
redeem or otherwise acquire the Rights or any shares of its capital stock,
except as
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necessary to secure its position pursuant to a debt previously contracted;
provided, however, that NFC may issue and deliver shares of NFC Common
Stock upon the due exercise of Options outstanding on the date of the
Merger Agreement and receipt of payment thereunder;
(c) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
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 in the ordinary course of business, which would be material
to NFC, NSS or such subsidiary;
(d) take any action that is intended to or would result in any of its
representations and warranties set forth in the Merger Agreement being or
becoming untrue in any material respect, or in any of the conditions to the
Merger not being satisfied, or in a violation of any provision of the
Merger Agreement except, in every case, as may be required by applicable
law;
(e) make any material change in its methods of accounting in effect at
December 31, 1996, except as required by changes in GAAP or regulatory
accounting principles as concurred in by NSS's independent auditors;
(f) take or cause to be taken any action which would, or may
reasonably be expected to, significantly delay or otherwise adversely
affect the regulatory approvals required to consummate the Merger;
(g) terminate the employment of, or decrease in any material respect,
the duties, obligations, responsibilities, or position of the President,
Executive Vice President or any Senior Vice President of NFC, NSS or any
subsidiary;
(h) except as disclosed to People's, enter into or amend any written
employment, consulting, severance or similar agreements or arrangements
with any of its directors, officers or employees, or grant any salary or
wage increase or increase any employee benefit (including incentive or
bonus payments), except (i) for normal individual increases in compensation
to employees in the ordinary course of business consistent with past
practice, (ii) for other changes as are provided for herein or as may be
required by law, (iii) to satisfy contractual obligations existing as of
the date hereof and, if material, disclosed to People's, or (iv) for
additional grants of awards to newly hired employees consistent with past
practice;
(i) except as disclosed to People's, enter into or amend (except (A)
as may be required by applicable law or (B) to satisfy contractual
obligations existing as of the date of the Merger Agreement and, if
material, disclosed to People's) any pension, retirement, stock option,
stock purchase, savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related thereto, in
respect of any of its directors, officers or other employees, including
without limitation taking any action that accelerates the vesting or
exercise of any benefits payable thereunder;
(j) sell, transfer, mortgage, encumber or otherwise dispose of or
discontinue any portion of its assets, business or properties, which is
material to it and its subsidiaries taken as a whole, or acquire (other
than by way of foreclosures or acquisitions of control in a bona fide
fiduciary capacity or in satisfaction of debts previously contracted in
good faith, in each case in the ordinary and usual course of business
consistent with past practice) all or any portion of, the assets, business
or properties of any other entity which is material to it and its
subsidiaries taken as a whole;
(k) except in the ordinary course of business consistent with past
practice, enter into or terminate any material contract, agreement or
lease, or amend or modify in a material respect any of its existing
material contracts, agreements or leases;
(l) except in the ordinary course of business consistent with past
practice, settle any claim, action or proceeding involving money damages
that is material to it and its subsidiaries, taken as a whole;
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(m) except as required by applicable law or regulation, (i) implement
or adopt any material change in its interest rate risk management policies,
procedures or practices; (ii) fail to follow its existing policies or
practices with respect to managing its exposure to interest rate risk; or
(iii) fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk;
(n) incur any additional borrowings (deposits, including certificates
of deposit, will not be deemed to be borrowings within the meaning of this
section), other than under its existing line of credit with a Federal Home
Loan Bank, or pledge any of its assets to secure any borrowings other than
as required pursuant to the terms of its borrowings in effect as of the
date of the Merger Agreement; or
(o) agree to do any of the foregoing.
Until the Effective Time, except as expressly contemplated or permitted by
the Merger Agreement or with the prior written consent of NFC, which will not be
unreasonably withheld, People's will not, and will not permit any of its
subsidiaries to:
(a) take any action that is intended or would result in any of its
representations and warranties set forth in the Merger Agreement being or
becoming untrue in any material respect, or in any of the conditions to the
Merger not being satisfied, or in a violation of any provision of the
Merger Agreement, or would, or is reasonably likely to, prevent or impede
the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code; except, in every case, as may be required by
applicable law;
(b) make a material change in its methods of accounting in effect at
December 31, 1996, except in accordance with changes in GAAP or regulatory
accounting principles as concurred in by People's independent certified
public accountants;
(c) take or cause to be taken any action which would, or may
reasonably be expected to, significantly delay or otherwise adversely
affect the regulatory approvals required to consummate the Merger; or
(d) agree to do any of the foregoing.
The Merger Agreement also contains various covenants by the parties,
including those requiring the parties (1) to prepare and file this Joint Proxy
Statement-Offering Memorandum; (2) to cooperate and use their best efforts to
prepare and file all applications and to obtain all necessary or advisable
regulatory approvals; (3) to provide the other party with reasonable access to
information regarding such party under the condition that no such confidential
information be shared with any third party except as required by applicable law;
(4) to obtain all necessary shareholder approvals (subject to the fiduciary
obligations of the NFC Board and the People's Board as described in the Merger
Agreement); (5) to use their best efforts to comply with applicable legal
requirements and to consummate the transactions contemplated by the Merger
Agreement; (6) to refrain from making any public statements regarding the Merger
Agreement or any of the transactions contemplated thereby prior to the Effective
Time without the other party's approval (except to the extent required by
applicable securities or banking laws); (7) with respect to NFC and NSS, to
refrain from soliciting or encouraging any alternative business combination
transactions (subject to the fiduciary obligations of NFC's Board); (8) with
respect to NFC, to refrain from declaring or paying any regular cash dividend
(or any special dividend) to shareholders during the first quarter of 1998; and
(9) with respect to NFC, to coordinate with People's the declaration of NFC's
second quarter dividend, it being the intention of the parties that holders of
NFC Common Stock will not receive more than one dividend, or fail to receive one
dividend, for such calendar quarter with respect to their shares of NFC Common
Stock (including any shares of People's Common Stock any such holder receives in
exchange therefor in the Merger).
In addition, People's has agreed to indemnify the present and former
officers and directors of NFC and NSS to the fullest extent permitted by
Connecticut law, the People's Articles of Incorporation and the People's Bylaws
with respect to claims, actions or proceedings arising out of actions or
omissions occurring at or prior to the Effective Time. For six years following
the Effective Time, People's has agreed to provide, subject to certain
limitations set forth in the Merger Agreement, that portion of directors and
officers' liability insurance that serves to reimburse the present and former
directors and
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officers of NFC and NSS with respect to claims arising from facts or events
which occurred prior to the Effective Time.
People's has agreed to provide employees of NFC, NSS and its subsidiaries
who are offered and accept employment with People's or any of its subsidiaries
with benefits comparable to those provided to its own employees in similar
positions and with comparable terms of service. People's has further agreed to
preserve in specified respects the rights of NFC directors, officers and
employees under their existing pension, deferred compensation and other employee
benefit plans. See ' -- Interests of Certain Persons in the Merger.' People's
has also agreed to take all reasonable steps to cause the shares of People's
Common Stock to be issued in the Merger to be approved for inclusion for
quotation on Nasdaq.
CONDITIONS TO THE MERGER
The respective obligations of each party under the Merger Agreement are
subject to the fulfillment at or prior to the Effective Time of the following
conditions, none of which may be waived: (a) the Merger Agreement and the Merger
and the transactions contemplated thereby shall have been approved and adopted
by the affirmative votes of the holders of at least two-thirds of the
outstanding shares of People's Common Stock, and a majority of the outstanding
shares of NFC Common Stock, respectively; (b) the Merger Agreement and the
transactions contemplated thereby shall have been approved by, or waivers shall
have been received from, each regulatory authority having appropriate
jurisdiction and all appropriate waiting periods shall have expired; and (c)
neither People's nor NFC nor any of their respective subsidiaries shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction which prevents or delays the consummation of the Merger.
The obligations of People's under the Merger Agreement are further subject
to the satisfaction, at or prior to the Effective Time, of the following
conditions, any one or more of which may be waived by People's: (a) each of the
obligations of NFC and NSS required to be performed by it at or prior to the
Effective Time pursuant to the terms of the Merger Agreement shall have been
duly performed and complied with in all material respects and the
representations and warranties of NFC and NSS contained in the Merger Agreement
shall be true and correct in all material respects as of the date of the Merger
Agreement and as of the Effective Time as though made at and as of the Effective
Time (except as otherwise contemplated by the Merger Agreement); (b) all action
required to be taken by, or on the part of, NFC and NSS to authorize the
execution, delivery and performance of the Merger Agreement by NFC and NSS and
the consummation of the transactions contemplated thereby shall have been duly
and validly taken by the Board of Directors and shareholders of NFC and NSS; (c)
any and all permits, approvals and waivers of governmental bodies and regulatory
authorities and material consents and authorizations of other third parties
which are required with respect to and are necessary in connection with the
consummation of the Merger and the other transactions contemplated by the Merger
Agreement shall have been obtained by NFC, NSS and People's, provided that the
foregoing condition will not be met if any such permit, approval or waiver is,
in the reasonable judgment of People's, subject to any condition or requirement
which People's determines to be materially adverse or materially burdensome or
to substantially deprive People's of the benefits which it anticipates receiving
in the Merger or the other transactions contemplated by the Merger Agreement (a
'Burdensome Condition'); and (d) People's shall have received opinions of
counsel (i) in respect of certain tax matters and (ii) covering matters
customarily covered in opinions of counsel in transactions of the type
contemplated by the Merger Agreement.
The obligations of NFC and NSS under the Merger Agreement are further
subject to the satisfaction, at or prior to the Effective Time, of the following
conditions, any one or more of which may be waived by NFC and NSS: (a) each of
the obligations of People's required to be performed by it at or prior to the
Effective Time pursuant to the Merger Agreement shall have been performed and
complied with in all material respects and the representations and warranties of
People's contained in the Merger Agreement shall be true and correct in all
material respects as of the date of the Merger Agreement and as of the Effective
Time as though made at and as of the Effective Time (except as otherwise
contemplated by the Merger Agreement); (b) all action required to be taken by,
or on the part of People's to authorize the execution, delivery and performance
of the Merger Agreement by People's
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and the consummation of the transactions contemplated thereby shall have been
duly and validly taken by the Board of Directors of People's and the
shareholders of People's; (c) the shares of People's Common Stock to be issued
in the Merger shall have been approved for inclusion for quotation on Nasdaq,
subject to official notice of issuance; and (d) NFC shall have received opinions
of counsel (i) in respect of certain tax matters and (ii) covering matters
customarily covered in opinions of counsel in transactions of the type
contemplated by the Merger Agreement.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time (whether before or after the approval of the Merger Agreement and the
transactions contemplated thereby by the shareholders of People's or NFC): (a)
by mutual consent of People's and NFC 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 People's or NFC upon written notice to the other
party (i) 45 days after the date on which any request or application for a
regulatory permit, approval or waiver required to consummate the Merger is
denied or withdrawn at the request or recommendation of the governmental entity
which must grant such requisite regulatory approval or (ii) 45 days after the
date on which People's determines that any such permit, approval or waiver is
subject to a Burdensome Condition, unless within the 45-day period following
such denial, withdrawal or determination a petition for rehearing or an amended
application has been filed with the applicable governmental entity, provided
that such denial or request or recommendation for withdrawal shall not be due to
the failure of the party seeking to terminate the Merger Agreement to perform or
observe in any material respect the covenants and agreements of such party set
forth therein; (c) by either People's or NFC if the Merger has not been
consummated on or before June 30, 1998, unless the failure of the Closing to
occur by such date is due to the failure of the party seeking to terminate the
Merger Agreement to perform or observe in any material respect the covenants and
agreements of such party set forth therein; (d) by NFC if (i) a material adverse
change has occurred in the business, operations, assets, or financial condition
of People's taken as a whole from that disclosed by People's in People's
quarterly report on Form F-4 for the period ended June 30, 1997, (ii) there is a
material breach in any representation, warranty, covenant, agreement or
obligation of People's under the Merger Agreement and such breach has not been
or cannot be remedied within 30 days after receipt by People's of notice in
writing from NFC to People's specifying the nature of such breach and requesting
that it be remedied, (iii) the Board of Directors of People's fails to recommend
or has withdrawn, modified or changed in a manner adverse to NFC its
recommendation of the Merger Agreement and the Merger and the transactions
contemplated thereby, or (iv) any approval of the shareholders of People's
contemplated by the Merger Agreement has not 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 People's if (i) a material
adverse change has occurred in the business, operations, assets or financial
condition of NFC and its subsidiaries taken as a whole from that disclosed by
NFC in NFC's quarterly report on Form 10-Q for the period ended June 30, 1997;
(ii) there is a material breach in any representation, warranty, covenant,
agreement or obligation of NFC under the Merger Agreement and such breach has
not been or cannot be remedied within 30 days after receipt by NFC of notice in
writing from People's specifying the nature of such breach and requesting that
it be remedied; (iii) the Board of Directors of NFC fails to recommend or has
withdrawn, modified or changed in a manner adverse to People's its
recommendation of, the Merger Agreement and the Merger and the transactions
contemplated thereby; or (iv) any approval of the shareholders of NFC
contemplated by the Merger Agreement has not 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; (f) by People's if any waiver of the
Federal Reserve Board which is requested with respect to the consummation of the
Merger and the other transactions contemplated by the Merger Agreement has been
denied, contains a Burdensome Condition, or in People's reasonable judgment,
after consultation with outside counsel, is unlikely to be received without the
imposition of a Burdensome Condition; or (g) by NFC, if its Board of Directors
so determines by a vote of a majority of the members of its entire Board, at any
time during the 10-day period commencing with the date on which the last of the
regulatory approvals required for consummation of the Merger occurs (the
'Determination Date'), if
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the Valuation Period Market Value on the Determination Date is less than $20.91
(a 'Termination Event').
If NFC elects to exercise its termination right described in (g) above, it
shall give prompt written notice to People's (provided that such notice of
election to terminate may be withdrawn at any time within the aforementioned
10-day period). During the 7-day period commencing with its receipt of such
notice, People's will have the option of increasing the consideration to be
received by holders of NFC Common Stock by increasing the Aggregate
Consideration (whether by means of increasing the Stock Amount or the cash
portion of the Aggregate Consideration) such that the Aggregate Consideration
will be at least equal to (1) the Threshold Stock Value plus (2) the Base Cash
Consideration plus the Cash Adjustment, if any, minus (3) the Aggregate Option
Settlement Amount. If within such 7-day period, People's increases the
consideration in accordance with the foregoing, it shall give prompt written
notice to NFC of such election and the revised Exchange Ratio, whereupon no
termination will have occurred pursuant to the termination right described in
(g) above, and the Merger Agreement will remain in effect in accordance with its
terms (except as the Exchange Ratio will have been so modified).
For purposes of the procedures described in the immediately preceding
paragraph the following terms are defined in the Merger Agreement as follows:
'Stock Value' means the Stock Amount (determined after giving effect
to the adjustments described in 'Adjustment to Consideration') times the
Valuation Period Market Value.
'Threshold Stock Value' means the Stock Value determined at a
Valuation Period Market Value equal to $20.91.
Whether a Termination Event will occur will not be known until the
Valuation Date. If such date were the date of this Joint Proxy
Statement-Offering Memorandum, no such right of termination would exist. The NFC
Board has made no decision as to whether it would exercise its termination right
in the event of a Termination Event, and the People's Board has made no decision
as to whether it would exercise its correlative right to increase the Aggregate
Consideration. In the event a Termination Event occurs, each of the People's
Board and the NFC Board would, consistent with its fiduciary duties, take into
account all relevant facts and circumstances as they exist at such time, and
would consult with its respective financial advisors and legal counsel. Approval
of the Merger Agreement by the NFC Shareholders at the NFC Special Meeting, and
by the People's Shareholders at the People's Special Meeting, will confer on the
NFC Board and the People's Board, respectively, the power, consistent with the
fiduciary duties of such Boards, to elect to consummate the Merger
notwithstanding the occurrence of a Termination Event (in the case of the NFC
Board) or to elect to increase the Aggregate Consideration should NFC exercise
its termination right (in the case of the People's Board) without any further
action by or resolicitation of the votes of, the shareholders of NFC or
People's, as the case may be.
In the event of termination of the Merger Agreement by either People's or
NFC in accordance with its terms, the Merger Agreement will become void and have
no further effect except (i) the provisions of the Merger Agreement providing
for continued confidentiality of confidential information, indemnification,
allocation of expenses and the payment to NFC described in ' -- Expenses;
Payment to NFC' will survive any termination of the Merger Agreement, (ii) the
Stock Option Agreement and the NFC Fee Agreement will survive and be subject to
the termination and other provisions thereof, and (iii) no party will be
relieved or released from any liabilities or damages arising out of its breach
of any representation, warranty, or other provision of the Merger Agreement.
AMENDMENT; EXTENSION; WAIVER
Subject to compliance with applicable law, the Merger Agreement may be
amended by the parties by action taken or authorized by their respective Boards
of Directors at any time before or after approval of the matters presented in
connection with the Merger by the shareholders of NFC or People's, provided that
after any approval of the transactions contemplated by the Merger Agreement by
NFC's shareholders, there may not be, without further approval of such
shareholders, any amendment of the Merger Agreement which reduces the amount or
changes the form of the
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consideration to be delivered to NFC's shareholders under the Merger Agreement
in any material respect other than as contemplated by the Merger Agreement.
At any time prior to the Effective Time, each party, by action taken or
authorized by its Board of Directors, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations or other acts of
the other parties to the Merger Agreement, (ii) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant thereto and (iii) waive compliance with any of the
agreements or conditions contained therein (other than those which the Merger
Agreement explicitly provides cannot be waived, see ' -- Conditions to the
Merger'), provided that after any approval of the Merger Agreement and the
transactions contemplated thereby by NFC's shareholders, there may not be,
without further approval of such shareholders, any extension or waiver of the
Merger Agreement or any portion thereof which reduces the amount or changes the
form of the consideration to be delivered to NFC's shareholders under the Merger
Agreement in any material respect other than as contemplated by the Merger
Agreement.
EXPENSES; PAYMENT TO NFC
All costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby will be paid by the party incurring such
costs and expenses, except that printing expenses and Commission filing fees
will be shared equally between NFC and People's.
The Merger Agreement provides that, if People's terminates the Merger
Agreement under the circumstances described below, People's will make a payment
to NFC as follows. If People's terminates the Merger Agreement because any
requested waiver of the Federal Reserve Board has been denied, contains a
Burdensome Condition, or in People's reasonable judgment, after consultation
with outside counsel, is unlikely to be received without the imposition of a
Burdensome Condition, People's will pay to NFC a cash fee of (i) $5 million if
such termination occurs on or prior to March 3, 1998, (ii) $8 million if such
termination occurs from March 4, 1998 through and including June 2, 1998, or
(iii) $9 million if such termination occurs from June 3, 1998 through and
including June 30, 1998. If NFC terminates the Merger Agreement because the
Merger has not been consummated on or before June 30, 1998 (as described in
' -- Termination of the Merger Agreement'), and as of June 30, 1998 any
requested waiver of the Federal Reserve Board has not been received or contains
a Burdensome Condition, People's will pay to NFC a cash fee of $9 million,
provided that no such fee will be payable if any fee is payable under the
circumstances described in the immediately preceding sentence.
People's and Holdings have obtained a waiver from the Federal Reserve Board
of any requirement that People's or Holdings file an application under the BHCA,
or that People's register as a bank holding company, in connection with the
Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The obligations of People's, NFC and NSS to consummate the Merger are
subject to the receipt of the opinions of tax counsel outlined below. None of
People's, NFC or NSS has requested or will request an advance ruling from the
Internal Revenue Service (the 'IRS') as to the tax consequences of the Merger.
The opinions of tax counsel outlined below are not binding on the IRS or the
courts, and there can be no assurance that the IRS will not challenge the
conclusions expressed in such opinions, or that a court will not sustain such a
challenge.
The obligation of People's to consummate the Merger is conditioned on the
receipt by People's of an opinion of its counsel, Cleary, Gottlieb, Steen &
Hamilton, to the effect that under federal law as currently in effect, (a) the
proposed Merger will qualify for treatment as a tax-free reorganization under
Section 368 of the Code; and (b) no gain or loss will be recognized by People's
upon the Merger. See 'THE MERGER -- Conditions to the Merger.' In the event that
(i) People's fails to receive the foregoing tax opinion, (ii) People's
determines to waive this condition to its obligation to consummate the Merger,
and (iii) the material federal income tax consequences to People's are different
than those described herein, People's will resolicit the People's Shareholders
prior to consummation of the Merger.
The obligations of NFC and NSS to consummate the Merger are conditioned on
the receipt by NFC of an opinion of its counsel, Day, Berry & Howard, to the
effect that under federal law as
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currently in effect, (a) the Merger will qualify for treatment as a tax-free
reorganization under Section 368 of the Code; (b) no gain or loss will be
recognized by NFC or NSS upon the Merger; and (c) no gain or loss will be
recognized by the shareholders of NFC with respect to the stock portion of the
consideration received upon consummation of the Merger. See 'THE
MERGER -- Conditions to the Merger.' In the event that (i) NFC fails to receive
the foregoing tax opinion; (ii) NFC and NSS determine to waive this condition to
their obligations to consummate the Merger, and (iii) the material federal
income tax consequences to NFC, NSS or the NFC Shareholders are different than
those described herein, NFC will resolicit the NFC Shareholders prior to
consummation of the Merger.
The above-described tax opinions will be based upon certain customary
representations and assumptions (including satisfaction of the continuity of
interest requirement) to be referred to in the opinion letters.
A holder of shares of NFC Common Stock who exchanges such shares solely for
shares of People's Common Stock would recognize neither gain nor loss on such
exchange. Gain, if any, realized by a holder of shares of NFC Common Stock upon
the exchange of such shares for a combination of shares of People's Common Stock
and cash would be recognized to the extent of the lesser of the total amount of
gain realized or the amount of cash received, but no loss would be recognized by
such holder on such exchange. A holder of NFC Common Stock who receives only
cash in the Merger would recognize any gain realized and would be permitted to
recognize any loss realized.
Any gain recognized by a shareholder of NFC who received a combination of
People's Common Stock and cash pursuant to the Merger will be treated as capital
gain if the NFC Common Stock exchanged was held as a capital asset at the
Effective Time, unless the receipt of the cash has the effect of the
distribution of a dividend for federal income tax purposes, in which case such
recognized gain will be treated as ordinary dividend income to the extent of
such shareholder's ratable share of NFC's accumulated earnings and profits. For
purposes of determining whether the cash received pursuant to the Merger will be
treated as a dividend for federal income tax purposes, a shareholder of NFC will
be treated as if such shareholder first exchanged all of such shareholder's
shares solely for People's Common Stock and then People's immediately redeemed a
portion of such People's Common Stock in exchange for the cash such shareholder
actually received. In most circumstances, gain recognized by a shareholder of
NFC who exchanges such shareholder's shares for a combination of People's Common
Stock and cash will be capital gain.
Cash received by a holder of shares of NFC Common Stock in lieu of any
fractional share interest in People's Common Stock will result in the
recognition of gain or loss for federal income tax purposes, measured by the
difference between the amount of cash received and the portion of the adjusted
tax basis of NFC Common Stock allocable to such fractional share interest. Such
gain or loss will constitute capital gain or loss, provided that such NFC Common
Stock was held as a capital asset as of the Effective Time.
The tax basis of the shares of People's Common Stock received by holders of
shares of NFC Common Stock upon the exchange of such shares pursuant to the
Merger will be the same as the tax basis of the shares of NFC Common Stock
exchanged, increased by the amount of any gain recognized (whether treated as
capital gain or a dividend) and decreased by the amount of any cash received.
The holding period of such shares of People's Common Stock will include the
period that such shares of NFC Common Stock were held by the holder, provided
that such shares of NFC Common Stock were held by the holder as a capital asset
as of the Effective Time.
THE FOREGOING IS A SUMMARY OF THE MATERIAL ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED MERGER UNDER THE CODE AND IS FOR GENERAL
INFORMATION ONLY. IT DOES NOT INCLUDE CONSEQUENCES OF STATE, LOCAL OR OTHER TAX
LAWS OR CONSEQUENCES TO PARTICULAR SHAREHOLDERS HAVING SPECIAL SITUATIONS.
SHAREHOLDERS OF NFC SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF
FEDERAL, STATE AND LOCAL TAX LAWS AND TAX CONSEQUENCES OF SUBSEQUENT SALES OF
PEOPLE'S COMMON STOCK.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Boards and management of NFC and NSS may be deemed
to have interests in the Merger that are in addition to their interests as NFC
Shareholders. The NFC Board was aware of these interests in approving the Merger
Agreement and the transactions contemplated thereby.
Directors of NFC and NSS. Effective July 1, 1997, the NFC Board and the
Board of Directors of NSS (the 'NSS Board') adopted the Outside Director
Retainer Continuation Plan for Norwich Financial Corp. and The Norwich Savings
Society (the 'Director Continuation Plan'). The Director Continuation Plan
benefits each director of NFC and NSS who is not an employee of NFC or NSS and
who has served as a director for at least one year. The Director Continuation
Plan provides that upon termination of service as a director, the director or
his or her beneficiary shall receive a benefit equal to the product of (x) the
number of completed years of service on the NFC Board or the NSS Board, as the
case may be, not to exceed ten and (y) the amount of the annual retainer then in
effect for directors of NFC or NSS, as the case may be; however, persons who
became directors after July 1, 1997 are limited to five years of service. Upon a
change-in-control of NFC (which will result from the Merger), the benefit is
paid in a lump sum. Otherwise, payment is made in quarterly installments over a
period corresponding to the number of years of the director's service. The
current annual retainer paid to NFC directors is $8,000. Directors do not
receive any additional annual retainer for membership on the NSS Board. Upon
consummation of the Merger, each of Messrs. Duevel, Halsey, Lowney, Ramsdell,
Reed and Shapiro will be entitled to receive a lump sum payment of $80,000.
NFC's directors were permitted to defer receipt of directors' fees pursuant
to deferred compensation agreements adopted by the NSS Board and made effective
in 1987 and 1990. Under the 1987 agreements, directors deferred their annual
fees over a four-year period. Deferred amounts were invested in life insurance
policies owned by NSS. Benefits are payable upon retirement, termination,
disability or death in defined monthly installments over a period of 120 months.
Under the 1990 agreements, deferred amounts are credited with an annual rate of
return of 11% and the accumulated deferred amounts are payable, either in a lump
sum or in ten annual installments, as determined by NSS, upon retirement,
termination, disability or death. NSS invested the deferred amounts in life
insurance policies owned by NSS. No deferrals were made under the 1990
agreements after June 30, 1995. Five of the current members of the NSS Board and
the NFC Board have deferred fees under the 1990 agreements. Four current
directors have deferred fees under the 1987 agreements. Prior to the Effective
Time, the NSS Board and the NFC Board will amend and restate the 1987 and 1990
agreements in the form of one consolidated 1998 agreement for each director.
Substantive amendments to the agreements will be the substitution, effective
September 3, 1997, of an 8 1/2% assumed earnings rate for amounts deferred under
the 1990 agreements and a guaranty that payments will be made over a ten-year
period.
Effective July 1, 1995, NSS adopted a new non-qualified deferred
compensation plan known as the Non-Qualified Deferred Compensation Plan (the
'Deferred Compensation Plan') for the benefit of directors and certain key
employees of NFC and NSS. Under the Deferred Compensation Plan, deferred amounts
are allocated to accounts which are deemed to be invested, at the participant's
direction, in investment funds held by a rabbi trust which NSS has established
to satisfy its obligation with respect to benefits promised under the terms of
the Deferred Compensation Plan. Each participant's account is adjusted by the
gains and losses attributable to the investment of the account in the funds
selected by the participant which are held by the rabbi trust. The account
balance is payable to the participant in ten annual installments. A participant
may designate an irrevocable payment commencement date at the time he or she
elects to participate in the Deferred Compensation Plan. If the participant does
not indicate a payment commencement date, payment begins at age 65 or, in the
case of an employee, such earlier date as the participant terminates employment.
A participant may petition to receive a single lump sum distribution. The
decision to grant such request will be made by the NSS Board or its delegate.
Benefits also are payable to a participant's beneficiaries or estate if a
participant dies prior to receiving his or her entire Deferred Compensation Plan
account. Under the Merger Agreement, People's has agreed to maintain the
Deferred Compensation Plan and related rabbi trust on the same or substantially
similar terms until the end of the ten-year payment period for each of the
participants.
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Under the Merger Agreement, one director of NFC, to be selected by the
People's Board, will serve as an additional member of the People's Board (with
an initial term ending not earlier than at the 1998 annual meeting of People's
Shareholders and subject to reelection for a full three-year term). The Human
Resources Committee of the People's Board has recommended the appointment of
Jeremiah J. Lowney, Jr., D.D.S. as a director of People's. Also, pursuant to the
Holdings Support Letter, Holdings will elect one individual serving on the NFC
Board (other than the NFC director selected to serve on the People's Board) to
serve as a member of Holdings' Board of Trustees. The election of this
individual will be at Holdings' sole discretion after considering
recommendations received from the NFC Board. It is anticipated that Holdings'
Board of Trustees will appoint Martin C. Shapiro, a director of NFC, as a
Trustee of Holdings. Mr. Shapiro, age 57, is a private investor and corporate
consultant. He is the retired President and Chief Executive Officer of M.S.
Chambers & Son, Inc., a rotogravure engraving, engineering and graphic arts
tooling company. In addition, the non-employee Directors of NFC serving
immediately prior to the Effective Time (other than Dr. Lowney) will be invited
to serve on an advisory board to People's for the southeastern region of
Connecticut after the Merger with an initial term ending at the 1998 annual
meeting of People's Shareholders and subject to reelection annually.
Under the Merger Agreement, each holder of an Option granted under a Stock
Option Plan of NFC will be entitled to receive in settlement for each Option so
held and not exercised prior to the Valuation Date a cash payment from People's
in an amount equal to the excess, if any, of the Average Per Share Consideration
over the per share exercise price of such Option, multiplied by the number of
shares covered by each Option. Based upon the number of Options held as of
January 7, 1998, and assuming that date had been the Valuation Date and the Per
Share Cash Consideration and the Average Per Share Consideration therefore each
would be $32.34 (see 'THE MERGER -- Merger Consideration'), Messrs. Duevel,
Halsey, Lowney, Ramsdell, Reed and Shapiro would be entitled to payments of
$433,452.50, $169,872.50, $316,127.50, $311,752.50, $433,452.50 and $433,452.50,
respectively, in exchange for Options previously granted to them under the NFC
Stock Option Plans for outside directors.
Executive Officers of NFC and NSS. Messrs. Dennis, Hartl, Brown and Dewey
entered into employment agreements with NSS in 1986, and Ms. Cannata (together
with Messrs. Dennis, Hartl, Brown and Dewey, the 'Executive' or 'Executives')
entered into an employment agreement with NSS in 1989 (together with the
employment agreements of Messrs. Dennis, Hartl, Brown and Dewey, the 'Agreement'
or the 'Agreements'). Mr. Dennis is Chairman, President and Chief Executive
Officer of NFC and NSS; Mr. Hartl is Executive Vice President, Treasurer and
Chief Financial Officer of NFC and NSS; Mr. Brown was, until his retirement
effective November 21, 1997, Senior Vice President, Lending of NSS; Mr. Dewey is
Senior Vice President, Marketing and Branch Administration of NSS; and Ms.
Cannata is Vice President and Corporate Secretary of NFC and Senior Vice
President, General Administration and Corporate Secretary of NSS. The Agreements
were amended and restated in 1995 and 1996 at which time NFC also became a party
to the Agreements of Mr. Dennis, Mr. Hartl and Ms. Cannata. Under the
Agreements, the term of employment for Mr. Dennis is a continuously renewing
period of three years, the terms of employment for Mr. Hartl and Ms. Cannata are
each continuously renewing periods of two years, and the term of employment for
Mr. Dewey is, and for Mr. Brown was, a continuously renewing period of one year
(all such terms of employment collectively referenced as the 'Term' or 'Terms').
A Term automatically ends if the Executive is terminated for Cause, as defined
in the Agreement; voluntarily resigns other than for Good Reason as defined in
the Agreement; suffers a Disability, also as defined the Agreement; retires in
accordance with the retirement policy of NSS; dies; or attains the age of 65.
Mr. Brown retired from service with NSS effective November 21, 1997. As a
result, his Agreement was terminated and he was paid a $25,000 retirement bonus.
At any time during the Term, NFC and/or NSS, depending on the Executive
affected, may give written notice to the Executive of the desire to modify or
amend the Agreement. If the Agreement has not been modified or amended within 60
days of such written notice, the Term of the Agreement will automatically be
converted to a fixed period commencing after the expiration of the 60 days. The
fixed period for Mr. Dennis is three years. The fixed periods for Mr. Hartl and
Ms. Cannata are each two years, and the fixed period for Mr. Dewey is one year.
In addition, the Terms of Messrs. Hartl and Dewey and (effective September 3,
1997) Ms. Cannata automatically extend for one additional year on the date of a
Change-in-Control of NSS as defined in the Agreements. (A Change-in-Control will
result
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from the Merger.) Such automatic extensions, however, would not be effective for
any subsequent or successive Change-in-Control.
The Agreements provide that if the Executive's employment is terminated
other than for Cause or Disability, or if the Executive voluntarily resigns for
Good Reason, the Executive will receive, in addition to certain other benefits,
severance pay equal to his or her then base salary through the remainder of the
Term. From the Executive's severance pay would be subtracted amounts payable to
the Executive under any NSS severance pay plan, if there is such a plan in
effect at that time. In the case of Mr. Dennis, he also would be paid on
termination: (i) an amount equal to the aggregate amount that NSS would have
contributed on his behalf under the NSS Thrift Plan, assuming the Thrift Plan
had remained in effect and Mr. Dennis had continued to be employed by NSS until
the end of his Term; and (ii) an amount equal to the discounted present value of
the difference between the annual benefits that he would have received under the
NSS Retirement Plan and any Supplemental Retirement Plan if Mr. Dennis had
continued to be employed by NSS until the end of his Term and the annual
benefits actually payable to Mr. Dennis under the NSS Retirement Plan and any
Supplemental Plan.
In the event the Executive's employment is terminated by NSS during the
Term for any reason other than Cause or Disability, or if the Executive
voluntarily resigns for Good Reason, severance pay due to the Executive under
the Agreement is payable, at the option of NSS, either in installments in
accordance with the normal payroll practices of NSS or in a lump sum equal to
the commuted value of such salary determined by discounting all payments at a
rate equal to the bond equivalent yield of the latest two-year Treasury Bill
auctions. If the Executive's termination were to occur after a Change-in-
Control, the severance payment would be a lump sum calculated without the
previously described discount. In the event of a Change-in-Control, each
Agreement provides that total payments to an Executive will not exceed the
amount that would constitute an 'excess parachute payment' within the meaning of
Section 280G of the Code. An independent certified public accounting firm
retained by NSS will determine whether any payment to an Executive would
constitute an 'excess parachute payment.'
The Agreements also contain confidentiality provisions effective following
termination of employment, as well as non-competition provisions prohibiting
each of the Executives from obtaining employment in a competing business in the
market area of NSS for a period of two years for Messrs. Dennis and Hartl and
Ms. Cannata and one year for Mr. Dewey. In the event that Ms. Cannata's
employment terminates after a Change-in-Control, Ms. Cannata's non-competition
period is one year.
NSS and NFC amended the Agreements of Messrs. Dennis and Hartl and Ms.
Cannata effective September 3, 1997. The Agreement of Mr. Dennis was amended to
provide that on termination of employment, Mr. Dennis will receive, in a lump
sum payment, the value of his agreement to keep certain information confidential
and his covenant not to compete, with the amount to be determined by an
independent certified public accounting firm retained by NSS. Any amount so
determined reduces severance payments otherwise payable to Mr. Dennis. Mr.
Dennis's Agreement was also amended to give him the right to select the order in
which benefits payable under the Agreement would be reduced or eliminated to
avoid the payment to him of any excess parachute payments within the meaning of
Section 280G of the Code.
Mr. Hartl's Agreement was amended to provide that on termination of
employment, Mr. Hartl will receive, in a lump sum payment, the value of his
agreement to keep certain information confidential and his covenant not to
compete, with the amount to be determined by an independent certified public
accounting firm retained by NSS. Any amount so determined reduces severance
payments otherwise payable to Mr. Hartl. Mr. Hartl's Agreement also was amended
to contain the provisions described above in items (i) and (ii) under the
discussion of Mr. Dennis's Agreement. Mr. Hartl's Agreement was further amended
to give him the right to select the order in which benefits payable under the
Agreement would be reduced or eliminated to avoid the payment to him of any
excess parachute payments within the meaning of Section 280G of the Code.
Ms. Cannata's Agreement also was amended. The amendment to Ms. Cannata's
Agreement is identical to that described above for Mr. Hartl and, in addition,
the Term of her Agreement was extended one year in the event that there is a
Change-in-Control with respect to NSS, thus extending the Term from two years to
three years in the event of a Change-in-Control.
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NFC, NSS and People's have mutually agreed that NSS will pay to Mr. Dennis
at or before the Effective Time an amount equal to the value of his Agreement,
estimated to be approximately $950,000, in consideration of his release of all
rights he may have under the Agreement. Mr. Dennis and People's expect to enter
into a new employment agreement after the Effective Time pursuant to which Mr.
Dennis will be employed for a term of three years as a Senior Vice President of
People's with responsibilities for the Norwich Region. It is expected that Mr.
Dennis will receive an annual base salary of approximately $215,000 during the
term of the new agreement. If People's terminates Mr. Dennis' employment for any
reason other than Cause, death or Disability or if Mr. Dennis resigns for Good
Reason, as such terms are expected to be defined in the new agreement, it is
expected that People's will pay to Mr. Dennis his salary for the remainder of
the term of the new agreement. If People's terminates Mr. Dennis' employment for
Cause, death or Disability or if Mr. Dennis resigns without Good Reason, it is
expected that People's will pay to Mr. Dennis, or his beneficiary in the event
of his death, an amount equal to approximately $2,500 times the number of months
remaining under the unexpired term of the new agreement. If Messrs. Hartl or
Dewey or Ms. Cannata is terminated other than for Cause or Disability, or if
they voluntarily resign for Good Reason, it is estimated that they would be
entitled to be paid approximately $683,000, $211,000 and $410,000, respectively,
under the Agreements. These amounts reflect the additional benefits described
above payable by reason of the extension of their Agreements for one additional
year on account of a change-in-control, which would occur upon the consummation
of the Merger.
Richard R. Cascio, Senior Vice President, Lending of NSS, entered into a
severance pay agreement with NSS in February 1988 that becomes effective upon a
change in control of NSS, which would occur upon the consummation of the Merger.
Under the severance pay agreement, if Mr. Cascio's employment is terminated
during the one-year period that begins on the date of the change in control for
any reason other than Cause, Disability, death or retirement or if Mr. Cascio
resigns for Good Reason, as such terms are defined in the agreement, NSS will
pay Mr. Cascio a lump sum amount equal to his annualized compensation for the
year in which the change in control occurs. The agreement contains
noncompetition provisions prohibiting Mr. Cascio from obtaining employment in a
competing business in New London, Windham or Tolland Counties, Connecticut,
during the term of the agreement and for a period of one year after his
termination. If Mr. Cascio's employment is terminated other than for Cause,
Disability, death or retirement or if he resigns for Good Reason during the
one-year period following the Effective Time, he would be entitled to receive
approximately $100,000.
Under the Merger Agreement, each holder of an Option granted under a Stock
Option Plan of NFC will be entitled to receive in settlement for each Option not
exercised prior to the Valuation Date a cash payment from People's in an amount
equal to the excess, if any, of the Average Per Share Consideration over the per
share exercise price of such Option, multiplied by the number of shares covered
by such Option. Based upon the number of Options held as of January 7, 1998, and
assuming that date had been the Valuation Date and the Per Share Cash
Consideration and the Average Per Share Consideration therefore each would be
$32.34 (see 'THE MERGER -- Merger Consideration'), Messrs. Dennis, Hartl, Brown,
Cascio and Dewey and Ms. Cannata would be entitled to receive $1,078,801.75,
$458,934.75, $125,970.00, $192,441.00, $334,315.00 and $473,711.50,
respectively, in exchange for Options previously granted to them under NFC's
Stock Option Plans; Richard W. Dennison, Senior Vice President of NSS, would
receive $162,935.00 in exchange for Options previously granted to him under
NFC's Stock Option Plans (Mr. Dennison is not a party to employment or severance
pay agreements); and all executive officers of NFC as a group would be entitled
to receive $2,827,109.00 in settlement of such Options.
People's has agreed to indemnify the present and former officers and
directors of NFC and NSS to the fullest extent permitted by Connecticut law, the
People's Articles of Incorporation and the People's Bylaws with respect to
claims, actions or proceedings arising out of actions or omissions occurring as
of or prior to the Effective Time. For six years following the Effective Time,
People's has agreed to provide, subject to certain limitations set forth in the
Merger Agreement, that portion of directors' and officers' liability insurance
that serves to reimburse the present and former directors and officers of NFC
and NSS with respect to claims arising from facts or events which occurred prior
to the Effective Time.
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Other Employees of NFC and NSS. Under the Merger Agreement, People's will
amend its retirement plans to provide that for former employees of NFC and NSS
hired by People's, the employee's period of employment with NSS or NFC or banks
with which they merged will be considered employment with People's for purposes
of satisfying the waiting period for eligibility, vesting requirements and
service requirements for early retirement or disability benefits under People's
retirement plans. People's also has agreed that with the exception of its
Enhanced Senior Pension Plan, all benefits payable by People's to former
employees of NSS and NFC under any retirement plan maintained by People's will
not be offset by any benefits accrued by employees of NSS or NFC before the
Effective Time. People's has further agreed not to amend any frozen or
terminated retirement plan maintained by NSS or NFC except to make changes
required by law, affecting plan administration, necessary for plan qualification
or to effect a plan merger. In the event of any plan merger, any outstanding
participant promissory notes related to participant loans will be transferred to
the surviving plan. Service with NSS or NFC will be taken into account under
People's vacation and other benefit programs.
In addition, under the Merger Agreement, employees of NSS who are not
offered jobs that are comparable in compensation and responsibilities and that
do not require a commute exceeding 25 miles or the employee's current commute,
if greater (except for jobs at existing NSS facilities), and who remain employed
by NSS until the Effective Time, will be paid severance amounts equal to two
weeks' salary for each full year of employment with NSS (plus a fraction for any
partial year based on the number of full months completed). In addition,
non-officer employees will receive a minimum benefit of two to four weeks'
salary, and officers will receive a minimum benefit of eight weeks' salary. NSS
employees who are employed by People's after the Effective Time but who are
terminated without cause by People's within one year following the Effective
Time will receive the above-described severance payment.
Also, under the Merger Agreement, NSS will pay annual bonuses under its
existing incentive bonus plan for 1997 that will not exceed $210,000 in the
aggregate.
Further, under the Merger Agreement, NSS employees mutually agreed upon by
People's, NSS and NFC who are employed by NSS and People's until an agreed upon
release date following the Merger will be paid a retention bonus in an amount
agreed upon by People's, NSS and NFC.
THE STOCK OPTION AGREEMENT
As an inducement to People's to enter into the Merger Agreement, and in
consideration of People's undertaking of efforts in furtherance of the
transactions contemplated thereby, NFC (as issuer) entered into the Stock Option
Agreement with People's (as grantee), pursuant to which NFC granted to People's
the NFC Option to purchase from NFC up to 1,081,036 shares of NFC Common Stock
(subject to adjustment in certain circumstances, but in no event to exceed 19.9%
of the shares of NFC Common Stock outstanding upon any exercise of such option)
at a price of $25.00 per share. The $25.00 exercise price was determined through
negotiations, taking into account the closing sale price of NFC Common Stock on
the date on which agreement was reached with respect to certain key economic
terms of the Merger, subject to agreement on additional terms, completion of
definitive agreements and approval of the Merger by the People's Board and the
NFC Board. The purchase of any shares of NFC Common Stock pursuant to the NFC
Option is subject to compliance with applicable law, including the receipt of
necessary approvals under the BHCA.
If People's is not in material breach of the Stock Option Agreement or the
Merger Agreement and if no injunction or other court order against delivery of
the shares covered by the NFC Option is in effect, People's may exercise the NFC
Option, in whole or in part, at any time and from time to time following the
happening of certain events (each a 'Purchase Event'), including: (1) without
People's prior written consent, NFC taking certain actions (each an 'Acquisition
Transaction'), including authorizing, recommending, proposing or entering into
an agreement with any third party to effect (a) a merger, consolidation or
similar transaction involving NFC or any of its significant subsidiaries, (b)
the sale, lease, exchange or other disposition of 25% or more of the
consolidated assets or deposits of NFC and its subsidiaries, or (c) the
issuance, sale or other disposition of securities representing 25% or more of
the voting power of NFC or any of its significant subsidiaries, in each case
except as otherwise
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permitted by the Stock Option Agreement; or (2) any third party acquiring or
having the right to acquire securities representing 25% or more of the voting
power of NFC or any of its significant subsidiaries, except as otherwise
permitted by the Stock Option Agreement; provided that the NFC Option will
terminate upon the earliest to occur of certain events, including: (A)
consummation of the Merger; (B) termination of the Merger Agreement prior to the
happening of a Purchase Event or Preliminary Purchase Event (as hereafter
defined) (other than a termination by People's under certain circumstances
described in the Stock Option Agreement (a 'Default Termination')); (C) 15
months after a Default Termination; (D) 15 months after termination of the
Merger Agreement (other than by reason of a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; (E) the date on
which the shareholders of People's have voted and failed to approve the Merger
Agreement (unless NFC is then in material breach of its covenants or agreements
contained in the Merger Agreement, or unless prior to such date the shareholders
of NFC have also voted and failed to approve the Merger Agreement); (F)
termination of the Merger Agreement by NFC because the Board of Directors of
People's has failed to recommend or has withdrawn, modified or changed in a
manner adverse to NFC its recommendation of the Merger Agreement and the Merger
and the transactions contemplated thereby (see ' -- Termination of the Merger
Agreement'); or (G) termination of the Merger Agreement by People's because any
requested waiver of the Federal Reserve Board has been denied, contains a
Burdensome Condition or in the reasonable judgment of People's, after
consultation with outside counsel, is unlikely to be received without the
imposition of a Burdensome Condition (see ' -- Termination of the Merger
Agreement').
The term 'Preliminary Purchase Event' is defined in the Stock Option
Agreement to mean the occurrence of certain events, including: (1) commencement
by any third party of a tender or exchange offer to purchase 15% or more of the
outstanding shares of NFC Common Stock; (2) failure of the shareholders of NFC
to approve the Merger Agreement or the failure of the NFC Special Meeting to
have been held or cancellation of such meeting prior to the termination of the
Merger Agreement, or the NFC Board withdrawing or modifying in any manner
adverse to People's the recommendations of the NFC Board with respect to the
Merger Agreement, in each case after public announcement that a third party has:
(a) proposed to engage in an Acquisition Transaction, or (b) commenced a tender
offer or exchange offer to purchase 15% or more of the outstanding shares of NFC
Common Stock, or (c) filed an application under certain federal statutes
relating to the regulation of banks and other financial institutions or their
holding companies, to engage in an Acquisition Transaction; (3) the making of
any third party proposal to NFC or its shareholders, publicly or in any writing
that becomes publicly disclosed, to engage in an Acquisition Transaction; (4)
after a proposal by a third party to NFC or its shareholders to engage in an
Acquisition Transaction, NFC's breach of any representation or covenant in the
Merger Agreement which would entitle People's to terminate the Merger Agreement;
(5) any third party filing an application with any federal or state bank
authority for approval to engage in an Acquisition Transaction; or (6) NFC or
any of its directors, officers or agents invites, encourages or solicits a
tender or exchange offer or a Takeover Proposal (as defined in the Merger
Agreement).
To the knowledge of NFC and People's, no Purchase Event or Preliminary
Purchase Event has occurred as of the date of this Joint Proxy
Statement-Offering Memorandum.
Until such time as the right to exercise the NFC Option terminates, and
subject to the receipt of any required regulatory approvals, at the request of
the holder at any time commencing upon the first occurrence of a Repurchase
Event (as defined below) and ending twelve months immediately thereafter, NFC is
required to repurchase from the holder (i) the NFC Option and (ii) all shares of
NFC Common Stock purchased by the holder pursuant to the Stock Option Agreement
with respect to which the holder then has beneficial ownership. The repurchase
will be at an aggregate price equal to the sum of: (x) the aggregate exercise
price paid by the holder for any shares of NFC Common Stock acquired pursuant to
the NFC Option with respect to which the holder then has beneficial ownership,
(y) the excess, if any, of (A) the Applicable Price (as defined below) for each
share of NFC Common Stock over (B) the exercise price (subject to adjustment as
provided in the Stock Option Agreement), multiplied by the number of shares of
NFC Common Stock with respect to which the NFC Option has not been exercised,
and (z) the excess, if any, of the Applicable Price over the exercise price
(subject to adjustment as provided in the Stock Option Agreement) paid (or, in
the case of shares of NFC Common Stock covered by the NFC Option with respect to
which the NFC Option has been exercised
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but the closing date for such purchase has not occurred, payable) by the holder
for each share of NFC Common Stock with respect to which the NFC Option has been
exercised and with respect to which the holder then has beneficial ownership,
multiplied by the number of such shares. As used in the Stock Option Agreement,
the term 'Applicable Price' means the highest of (i) the highest price per share
of NFC Common Stock paid for any such share by the person or groups described in
subsection (x) of the definition of Repurchase Event (as defined below), (ii)
the price per share of NFC Common Stock received by holders of NFC Common Stock
in connection with any merger or other business combination transaction
described in subsections (i) through (iii) in the next paragraph (with respect
to substitute options), or (iii) the highest closing sale price per share of NFC
Common Stock on Nasdaq (or if NFC Common Stock is not traded on Nasdaq, the
highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source chosen by the holder) during the 40 business days preceding the date upon
which the holder exercises the repurchase right described in this paragraph. In
the event of a sale of less than all of NFC's assets, the Applicable Price will
be the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of NFC as determined by a nationally recognized
investment banking firm selected by People's and reasonably acceptable to NFC,
divided by the number of shares of the NFC Common Stock outstanding at the time
of such sale. As used in the Stock Option Agreement a 'Repurchase Event' occurs
if (i) any person (other than People's or any subsidiary of People's) acquires
beneficial ownership of (as such term is defined in Rule l3d-3 promulgated under
the Exchange Act), or the right to acquire beneficial ownership of, or any
'group'(as such term is defined under the Exchange Act) is formed which
beneficially owns or has the right to acquire beneficial ownership of, 50% or
more of the then outstanding shares of NFC Common Stock, or (ii) any of the
merger or other business combination transactions described in subsections (i)
through (iii) in the next paragraph (with respect to substitute options) is
consummated.
In the event that prior to the termination of the Stock Option Agreement,
NFC enters into an agreement (i) to consolidate with or merge into any person,
other than People's or one of its subsidiaries, and will not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than People's or one of its subsidiaries, to merge into NFC with
NFC as the continuing or surviving corporation, but, in connection therewith,
the then outstanding shares of NFC Common Stock are changed into or exchanged
for stock or other securities of NFC or any other person or cash or any other
property, or the outstanding shares of NFC Common Stock 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 or deposits to any person, other than People's or one of its
subsidiaries, then such agreement will provide that the NFC Option be converted
or exchanged for an option (a 'Substitute Option') to purchase shares of common
stock of, at the holder's option, either (x) the continuing or surviving
corporation of a merger or consolidation or the transferee of all or
substantially all of NFC's assets, or (y) any person controlling such continuing
or surviving corporation or transferee. The number of shares subject to the
Substitute Option and the exercise price per share will be determined in
accordance with a formula in the Stock Option Agreement. To the extent possible,
the Substitute Option will contain terms and conditions that are the same as
those in the Stock Option Agreement.
Notwithstanding anything to the contrary contained in the Stock Option
Agreement, in no event will People's Total Profit (as defined below) exceed $3
million and, if it otherwise would exceed such amount, People's, at its sole
election, will either (i) reduce the number of shares of NFC Common Stock
subject to the NFC Option, (ii) deliver to NFC for cancellation the shares of
NFC Common Stock purchased pursuant to the NFC Option, (iii) pay cash to NFC, or
(iv) any combination thereof, so that People's will not actually realize Total
Profit in excess of $3 million after taking into account the foregoing actions.
In addition, the NFC Option may not be exercised for a number of shares as
would, as of the date of exercise, result in a Notional Total Profit (as defined
below) of more than $3 million; provided, that this limitation will not restrict
any exercise of the NFC Option permitted by the Stock Option Agreement on any
subsequent date.
The term 'Total Profit' is defined in the Stock Option Agreement to mean
the aggregate amount (before taxes) of the following: (i) the amount received by
People's pursuant to NFC's repurchase of the NFC Option (or any portion
thereof), (ii) (x) the amount received by People's pursuant to NFC's
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repurchase of shares of NFC Common Stock purchased pursuant to the NFC Option,
less (y) People's purchase price for such shares, (iii) (x) the net cash amounts
received by People's pursuant to the sale of NFC Common Stock purchased pursuant
to the NFC Option (or any other securities into which such shares may be
converted or exchanged) to any unaffiliated party, less (y) People's purchase
price of such shares, (iv) any amounts received by People's on the transfer of
the NFC Option (or any portion thereof) to any unaffiliated party, and (v) any
equivalent amount with respect to the Substitute Option.
The term 'Notional Total Profit' with respect to any number of shares of
NFC Common Stock as to which People's may propose to exercise the NFC Option
will be the Total Profit determined as of the date of such proposed exercise
assuming that the NFC Option were exercised on such date for such number of
shares and assuming that such shares, together with all other NFC Common Stock
purchased pursuant to the NFC Option held by People's and its affiliates as of
such date, were sold for cash at the closing market price for the NFC Common
Stock as of the close of business on the preceding trading day (less customary
brokerage commissions).
From and after the occurrence of a Purchase Event, NFC is required (but not
more than once during any calendar year and subject to certain other conditions
described in the Stock Option Agreement), if requested by any holder, including
People's and any permitted transferee (a 'Selling Shareholder'), as
expeditiously as possible to prepare and file a registration statement under the
Securities Act if such registration is necessary in order to permit the sale or
other disposition of any or all shares of NFC Common Stock or other securities
that have been acquired by or are issuable to the Selling Shareholder upon
exercise of the NFC Option in accordance with the intended method of sale or
other disposition stated by the Selling Shareholder in such request, and NFC is
required to use its best efforts to qualify such shares or other securities for
sale under any applicable state securities laws. The Selling Shareholder also
has the right, as described in the Stock Option Agreement, to include the
Selling Shareholder's shares in certain underwritten public offerings of NFC
Common Stock by NFC after the exercise of the NFC Option. Except where
applicable state law prohibits such payments, NFC will pay all expenses,
excluding discounts and commissions but including liability insurance if NFC so
desires or the underwriters so require, in connection with each registration
described above.
The Stock Option Agreement is attached hereto as Appendix B and is
incorporated by reference herein, and reference is made thereto for the complete
terms of the Stock Option Agreement and the NFC Option. The foregoing discussion
is qualified in its entirety by reference to the Stock Option Agreement.
THE NFC FEE AGREEMENT
As an inducement to People's to enter into the Merger Agreement, and in
consideration of People's undertaking of efforts in furtherance of the
transactions contemplated thereby, NFC entered into the NFC Fee Agreement with
People's. Pursuant to the NFC Fee Agreement, NFC will pay People's a termination
fee if the Merger Agreement is terminated in certain events. A cash fee of $7
million would generally become payable if, prior to a 'Nullifying Event' (as
defined below), the Merger Agreement is terminated after or concurrently with a
Purchase Event (as defined in the Stock Option Agreement, see ' -- The Stock
Option Agreement'). The NFC Fee Agreement defines the term 'Nullifying Event' to
mean any of the following events occurring and continuing at a time when NFC is
not in material breach of any of its covenants or agreements contained in the
Merger Agreement: (i) People's materially breached any of its covenants or
agreements contained in the Merger Agreement such that NFC is entitled to
terminate the Merger Agreement, (ii) the shareholders of People's having voted
and failed to approve the Merger Agreement at the meeting of People's
shareholders called for such purpose (unless the Merger Agreement has not been
approved at the meeting of NFC shareholders which was held on or prior to such
date called for such purpose), or (iii) the Board of Directors of People's
having failed to approve or recommend the approval of the Merger Agreement or
having withdrawn, modified or changed in any manner adverse to NFC its approval
or recommendation of the approval of the Merger Agreement or having resolved or
publicly announced its intention to do any of the foregoing.
To the knowledge of NFC and People's, no Purchase Event has occurred as of
the date of this Joint Proxy Statement-Offering Memorandum.
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The NFC Fee Agreement is attached hereto as Appendix C and is incorporated
by reference herein, and reference is made thereto for the complete terms of the
NFC Fee Agreement. The foregoing discussion is qualified in its entirety by
reference to the NFC Fee Agreement.
The Stock Option Agreement and the NFC Fee Agreement are intended to
increase the likelihood that the Merger will be consummated in accordance with
the terms set forth in the Merger Agreement. Consequently, certain aspects of
the Stock Option Agreement and the NFC Fee Agreement may have the effect of
discouraging persons who might now, or prior to the Effective Time, be
interested in acquiring all of or a significant interest in NFC from considering
or proposing such an acquisition, even if such persons were prepared to offer to
pay consideration to shareholders of NFC which had a higher current market price
than the consideration to be received for each share of NFC Common Stock
pursuant to the Merger Agreement.
THE HOLDINGS SUPPORT LETTER
As an inducement to NFC and NSS to enter into the Merger Agreement, and in
consideration of their efforts in furtherance of the transactions contemplated
thereby, Holdings has agreed in the Holdings Support Letter to vote all shares
of People's Common Stock owned by Holdings in favor of the Merger Agreement and
the Merger (subject to the conditions and events of termination specified in the
Merger Agreement), and the transactions contemplated thereby, at any meeting of
shareholders of People's called to consider and take action with respect
thereto, provided that such agreement will terminate if the Board of Directors
of People's fails to recommend, or modifies, withdraws or changes in a manner
adverse to NFC its recommendation for approval of the Merger Agreement and the
Merger.
The Holdings Support Letter is attached hereto as Appendix D and is
incorporated by reference herein, and reference is made thereto for the complete
terms of the Holdings Support Letter. The foregoing discussion is qualified in
its entirety by reference to the Holdings Support Letter.
AMENDMENT TO THE NFC RIGHTS AGREEMENT
Each share of NFC Common Stock has attached to it an NFC Right issued
pursuant to the NFC Rights Agreement. See 'COMPARATIVE RIGHTS OF SHAREHOLDERS OF
PEOPLE'S AND NFC -- Rights Agreement.' In connection with the execution of the
Merger Agreement, NFC amended the NFC Rights Agreement to provide, among other
things, that (i) no holder of an NFC Right or Right Certificate or any NFC
Common Stock may exercise an NFC Right prior to the Effective Time and (ii) all
of the NFC Rights shall expire and cease to be exercisable at the Effective
Time.
ACCOUNTING TREATMENT
Upon consummation of the Merger, the transaction will be accounted for as a
purchase, and all of the assets and liabilities of NFC will be recorded in
People's consolidated financial statements at their estimated fair value at the
Effective Time. The amount by which the purchase price paid by People's exceeds
the fair value of the net assets acquired by People's through the Merger will be
recorded as goodwill. Preliminary purchase accounting estimates made in
connection with the preparation of the unaudited pro forma financial information
included in this Joint Proxy Statement-Offering Memorandum indicated that the
Merger would result in identifiable intangibles and goodwill of approximately
$104.0 million and yearly amortization of identifiable intangibles and goodwill
of approximately $5.8 million. The final purchase accounting adjustments,
including the actual amount of goodwill and yearly amortization that will result
from the Merger, will be made on the basis of appraisals and evaluations as of
the Effective Time and therefore are likely to differ from the estimates set
forth above. Identifiable intangibles will be amortized on a straight-line basis
over the estimated remaining life of the acquired customer relationships and
goodwill will be amortized on a straight-line basis over the estimated period
benefited. People's consolidated financial statements will include the
operations of NFC after the Effective Time. The unaudited pro forma financial
information included in this Joint Proxy Statement-Offering Memorandum reflects
the Merger using the purchase method of accounting. See 'COMPARATIVE UNAUDITED
PER SHARE DATA,' 'SELECTED FINANCIAL DATA' and 'UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION.'
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REGULATORY MATTERS
FDIC. The Merger is subject to prior approval by the FDIC under the Federal
Deposit Insurance Act (the 'FDIA'). The FDIA provides that no merger involving
an insured depository institution may be approved which would result in a
monopoly or (i) which would be in furtherance of any combination or conspiracy
to monopolize, or to attempt to monopolize, the business of banking in any part
of the United States, or (ii) whose effect in any section of the country may be
substantially to lessen competition, or to tend to create a monopoly, or which
in any other manner would be in restraint of trade, unless the FDIC finds that
the anticompetitive effects of the proposed merger are clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the community to be served. In conducting a review of
any application for a merger, the FDIC is required to consider the financial and
managerial resources and future prospects of the existing and proposed
institutions and the convenience and needs of the community to be served. In
addition, under the Community Reinvestment Act of 1977, as amended, the FDIC
must take into account the record of performance of the existing institutions in
meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by such institutions.
The FDIC granted its approval of the Merger on December 29, 1997. The
Merger may not be consummated until 15 days after the FDIC's approval, during
which time the United States Department of Justice may challenge the Merger on
antitrust grounds. The commencement of an antitrust action would stay the
effectiveness of the regulatory agency's approval unless a court specifically
ordered otherwise. People's and NFC believe that the Merger does not raise
substantial antitrust or other significant regulatory concerns.
Connecticut. The Merger is subject to the approval of the Commissioner
pursuant to Sections 36a-125 and 36a-184 of the CTBL. Applications for such
approval have been filed with the Commissioner. Under applicable Connecticut
law, in considering approval of the Merger, the Commissioner is required to
determine whether the Merger will promote public convenience, whether benefits
to the public clearly outweigh possible adverse effects, including, but not
limited to, an undue concentration of resources and decreased or unfair
competition, and whether the terms of the Merger are reasonable and in
accordance with law and sound public policy. The Commissioner will approve the
Merger if he determines that those requirements will be satisfied. The
Commissioner may not approve the Merger, however, unless the Commissioner
considers whether: (1) the investment and lending policies of the constituent
corporations, or the proposed investment and lending policies of the Resulting
Bank (as defined in the CTBL), are consistent with safe and sound banking
practices and will benefit the economy of the state; (2) the services or
proposed services of the Resulting Bank are consistent with safe and sound
banking practices and will benefit the economy of the state; (3) the constituent
corporations have sufficient capital to ensure, and agree to ensure, that the
Resulting Bank will comply with applicable minimum capital requirements; (4) the
constituent corporations have sufficient managerial resources to operate the
Resulting Bank in a safe and sound manner; and (5) the Merger will not
substantially lessen competition in the banking industry of the state. The
Commissioner may not approve the Merger unless the Commissioner finds, in
accordance with applicable regulations, that the constituent corporations have a
record of compliance with the requirements of the federal Community Reinvestment
Act of 1977, as amended, provisions of the CTBL concerning community
reinvestment, and applicable consumer protection laws. The Commissioner may not
approve the Merger if it would result in a monopoly, or would be in furtherance
of any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in the State of Connecticut or if the Commissioner
determines that the effect of the Merger may be to substantially lessen
competition, or would tend to create a monopoly, or would be in restraint of
trade, unless the Commissioner finds that the anti-competitive effects of the
Merger are clearly outweighed in the public interest by the probable effect of
the Merger in meeting the convenience and needs of the community to be served.
Federal Reserve Board. People's and Holdings have obtained a waiver from
the Federal Reserve Board of any requirement that People's or Holdings file an
application under the BHCA, or that People's register as a bank holding company,
in connection with the Merger.
Status of Regulatory Approvals and Other Information. People's and NFC have
filed all applications and notices and have taken other appropriate action with
respect to any requisite approvals or other action of any governmental
authority. The Merger Agreement provides that the obligations of each of
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People's and NFC to consummate the Merger is conditioned upon the receipt of all
requisite regulatory approvals, including the approvals of the FDIC and the
Commissioner, and receipt of the waiver by the Federal Reserve Board. As noted
above, approval of the Merger has been obtained from the FDIC and a waiver has
been obtained from the Federal Reserve Board. The applications filed with the
Commissioner are pending at this time.
People's and NFC are not aware of any governmental approvals or actions
that may be required for consummation of the Merger other than as described
above. Should any other approval or action be required, People's and NFC
currently contemplate that such approval or action would be sought.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS AND WAIVERS. THERE CAN BE NO ASSURANCES THAT THE NECESSARY REGULATORY
APPROVALS WILL BE OBTAINED OR AS TO THE DATES OF ANY SUCH APPROVALS. THERE CAN
ALSO BE NO ASSURANCE THAT SUCH APPROVALS WILL NOT CONTAIN A CONDITION OR
REQUIREMENT WHICH CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS SET
FORTH IN THE MERGER AGREEMENT. SEE ' -- CONDITIONS TO THE MERGER.' THERE CAN
LIKEWISE BE NO ASSURANCE THAT THE UNITED STATES DEPARTMENT OF JUSTICE WILL NOT
CHALLENGE THE MERGER, OR, IF SUCH A CHALLENGE IS MADE, AS TO THE RESULT THEREOF.
See ' -- Conditions to the Merger' and ' -- Termination of the Merger
Agreement.'
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
People's maintains a dividend reinvestment and stock purchase plan that
allows participating shareholders to reinvest quarterly cash dividends paid on
People's Common Stock in additional shares. Shares purchased with reinvested
cash dividends are acquired in the open market at the market price of People's
Common Stock on the relevant quarterly investment date. The plan also permits
participants to invest in additional shares of People's Common Stock through
optional cash purchases of not less than $100 each and not more than $10,000 in
the aggregate per month. Optional cash purchases are invested in People's Common
Stock at the market price of the Common Stock at the time of purchase on any of
12 monthly investment dates each year. It is anticipated that People's will
continue its dividend reinvestment and stock purchase plan and that NFC
Shareholders who receive shares of People's Common Stock in the Merger will have
the right to participate therein.
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MANAGEMENT AND OPERATIONS AFTER THE MERGER
MANAGEMENT AND OPERATIONS AFTER THE MERGER
In the Merger Agreement, People's agreed to cause one person now serving as
a director of NFC and selected by the People's Board to serve as an additional
member of the People's Board at the Effective Time. The term of service of the
person selected to become a member of the People's Board shall not expire
earlier than the 1998 annual meeting of People's Shareholders. Upon expiration
of such term, such person shall be subject to reelection as a director of
People's for a full three-year term of service. The Human Resources Committee of
the People's Board has recommended the appointment of Dr. Lowney as a director
of People's. Set forth below is certain information about Dr. Lowney and each
other person who currently is expected to be a member of the People's Board as
of the Effective Time.
EXECUTIVE OFFICER DIRECTORS
David E.A. Carson has been Chief Executive Officer since January 1, 1985
and Chairman of the Board since July 6, 1988. Mr. Carson served as President of
People's from January 1, 1983 to December 31, 1997. Mr. Carson is a member of
the Board of Directors of the United Illuminating Company, and is a Trustee of
American Skandia Trust, Mass Mutual Institutional Funds, and MML Series
Investment Fund.
Mr. Carson was first elected a director of People's in 1983 and is a
Trustee of Holdings. He is a member of the Executive Committee of the People's
Board. Mr. Carson is 63 years old.
James P. Biggs became President of People's on January 1, 1998. Prior to
that time Mr. Biggs was an Executive Vice President (Marketing and Regional
Banking division) of People's, a position he had held since 1984.
Mr. Biggs was first elected as a director in 1992 and is a member of the
Executive and Investment Committees. Mr. Biggs is 57 years old.
NON-OFFICER DIRECTORS
George P. Carter is the President of Connecticut Foods, Inc., a corporation
that owns two restaurants in Connecticut. Mr. Carter is also Chairman of the
Board and Chief Executive Officer of Franchise Associates, Inc., operator and
franchisor of Howard Johnson Restaurants.
Mr. Carter was first elected to the Board in 1976 and is a Trustee of
Holdings. He is the Chairman of People's Audit Committee and is a member of
People's Executive and Loan Review Committees. Mr. Carter is 61 years old.
Joseph E. Clancy is the Chairman of the Board of Bridgeport Machines, Inc.,
a manufacturer of machine tools and controls.
Mr. Clancy became a director of People's in 1991 and is a Trustee of
Holdings. He is Chairman of People's Investment Committee and a member of
People's Human Resources Committee. Mr. Clancy is 67 years old.
George R. Dunbar served as Chief Administrative Officer of the City of
Bridgeport from 1990 to 1991, and in 1992 became President of Dunbar Associates,
LLC, a public management consulting firm. Dr. Dunbar is also a director of Acme
United Corporation.
Dr. Dunbar was first elected to the People's Board in 1973 and is a member
of the People's Executive and Loan Review Committees. He is also a Trustee of
Holdings. Dr. Dunbar is 74 years old.
Jerry Franklin is the President and Chief Executive Officer of Connecticut
Public Broadcasting Inc., a position he has held since 1985. Mr. Franklin serves
as a member of a presidential task force initiated under the American Assembly
Program to develop policy options for urban centers; is a Senior Fellow of the
American Leadership Forum, a national leadership organization dedicated to
educational, urban and health care needs; and is a member of the Board of
Trustees of Connecticut Children's Medical Center. Mr. Franklin is 50 years old.
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Mr. Franklin was elected to the People's Board in 1997 and is a member of
People's Audit and Investment Committees.
Eunice S. Groark, an attorney in Hartford, Connecticut, served as
Lieutenant Governor of the State of Connecticut from 1991 until January 1995.
Prior to 1991, Mrs. Groark was Corporation Counsel for the City of Hartford,
Connecticut. She was a visiting professor of government at Wesleyan University
through December 1997, and was a Fellow at the Institute of Politics at the
Kennedy School of Government at Harvard University from September to December
1996.
Mrs. Groark was first elected to the People's Board in 1995 and is a member
of People's Audit and Trust Committees. She is 59 years old.
Samuel W. Hawley has been associated with People's since 1933. He was Chief
Executive Officer of People's from 1956 through 1975 and Chairman of the Board
from 1971 to 1980.
Mr. Hawley was first elected to the People's Board in 1948 and has been the
Chairman of People's Executive Committee since 1980. He is also a member of
People's Trust and Investment Committees. Mr. Hawley, who is 87 years old, is
also a Trustee of Holdings.
Betty Ruth Hollander is the Chairman and Chief Executive Officer of Omega
Technologies, Inc., a manufacturer and distributor of instrumentation for the
process control industry. Mrs. Hollander is also a director of Dayton-Hudson
Corporation.
Mrs. Hollander was first elected as a member of the People's Board in 1982
and is a member of People's Loan Review Committee. Mrs. Hollander, who is 68
years old, is also a Trustee of Holdings.
Saul Kwartin was a practicing attorney and a partner with the law firm of
Wofsey, Rosen, Kweskin & Kuriansky in Stamford, Connecticut until August 1992,
when he became of counsel to that firm.
Mr. Kwartin was first elected as a member of People's Board in 1981 and is
the Chairman of the Trust Committee and a member of the Loan Review Committee.
Mr. Kwartin is 70 years old.
Jeremiah J. Lowney, Jr., D.D.S. is an orthodontist whose practice has been
based in the Norwich area for more than five years. Dr. Lowney serves as a
director of NFC and NSS and is expected to become a member of the People's Board
at the Effective Time. He is 61 years old.
Jack E. McGregor is a principal in the investment firm of Bridgeport
Waterfront Investors, LLC and is of counsel to the law firm of Cohen and Wolf,
P.C. Mr. McGregor was Chairman of the Board of Aquarion Company, a diversified
water management company, until October 1, 1996. Mr. McGregor served as Aquarion
Company's President from 1987 to 1995 and Chief Executive Officer from 1990 to
1995. Mr. McGregor is also a director of Aquarion Company and Bay State Gas
Company.
Mr. McGregor has been a director of People's since 1989. He is a member of
the Executive, Audit and Human Resources Committees. Mr. McGregor is 63 years
old.
James A. Thomas has served as a member of the Board of Trustees of Holdings
since 1992. Mr. Thomas is Associate Dean at Yale Law School, a position he has
held since 1969, and served as Master of Saybrook College of Yale University
from 1990 to 1996. Mr. Thomas was elected to the People's Board in 1997, and is
a member of the Loan Review and Trust Committees.
Mr. Thomas is also a director of United Illuminating Company and Yale-New
Haven Hospital. Mr. Thomas is 58 years old.
Wilmot F. Wheeler, Jr. is the Chairman of the Board of Jelliff Corp., a
wire products manufacturer. Mr. Wheeler held various positions with Manhattan
National Corp., an insurance company, from 1972 until his retirement in 1992,
including Chairman and Chief Executive Officer from 1986 to 1987. Mr. Wheeler is
also the Vice President and a director of the William T. Morris Foundation, a
charitable foundation.
Mr. Wheeler was first elected to the People's Board in 1975 and is the
Chairman of People's Loan Review Committee and a member of People's Executive
and Human Resources Committees. He is also a Trustee of Holdings. Mr. Wheeler is
74 years old.
Additional information about such persons is contained in People's and
NFC's Proxy Statements for their respective 1997 annual meetings of
shareholders, the People's Annual Report on Form F-2 for
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the year ended December 31, 1996 (the '1996 People's F-2') and NFC's Annual
Report on Form 10-K for the year ended December 31, 1996 (the '1996 NFC 10-K').
See 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE' and 'AVAILABLE
INFORMATION.'
Directors who are not employed by People's are paid a basic annual retainer
of $8,500 per year, plus an additional $2,000 per year for service as a
committee chairman, except for the chairmen of the Loan Review and Audit
Committees, who each receive an additional $4,000 per year. Non-employee
directors also receive an attendance fee of $750 for each board or committee
meeting attended, except for the chairmen of the Loan Review and Audit
Committees, who each receive an attendance fee of $950 at meetings when serving
as chairman of the committee.
Directors who are not employees of People's may defer all or a part of
their director compensation in accordance with the terms of the Amended and
Restated Deferred Compensation Plan for Directors. Under this plan, a director
may defer retainer and meeting fees until such time as the director ceases to be
a member of the People's Board. Amounts deferred under the plan earn interest at
market rates until paid.
Effective as of April 16, 1997, the People's Board adopted the People's
Bank Directors' Stock Unit Plan. Under the Directors' Stock Unit Plan, each
director who is not an employee will be granted an annual award of 200 stock
units immediately following each annual meeting of shareholders. A stock unit
has an initial value equal to the fair market value (the price reported by
Nasdaq) of a share of People's Common Stock on the grant date. Stock units
awarded to a director are credited to that director's account. Each director's
account is periodically credited with additional stock units ('Additional
Units') having a value (as of the payment or distribution date) equal to the
value of any cash dividends paid or other distributions made with respect to a
share of People's Common Stock, multiplied by the number of stock units credited
to such director's account immediately prior to such transaction. Stock units
will be adjusted as a result of stock dividends, stock splits and similar
transactions affecting People's Common Stock.
Upon the effective date of the Directors' Stock Unit Plan, each continuing
director's account was credited with stock units having an aggregate value (as
of December 31, 1996) equal to the lump sum present value (with certain
adjustments) of the benefits credited to the director as a result of the now-
terminated Directors' Retirement Plan.
Stock units attributable to annual grants, together with Additional Units
attributable directly or indirectly thereto, will be paid in cash as of the
third anniversary of the grant date or, if earlier, at the director's cessation
of service, based on the fair market value of the People's Common Stock at the
time payment is made. Stock units attributable to the amount converted from the
Directors' Retirement Plan, together with Additional Units attributable directly
or indirectly thereto, will be paid in the same manner as of the fifth
anniversary of the conversion or, if earlier, the cessation of service. In the
event of a director's death, his or her account will be paid in cash to his or
her beneficiary. Payment under this plan will also be made upon a Change in
Control, as such term is defined in the plan.
In the Holdings Support Letter, Holdings agreed to elect one person now
serving as a director of NFC (other than the person selected to become a member
of the People's Board) to serve as a member of Holdings' Board of Trustees at or
promptly following the Effective Time. It is anticipated that Holdings' Board of
Trustees will appoint Martin C. Shapiro as a Trustee of Holdings.
Also pursuant to the Merger Agreement, all persons (other than Dr. Lowney)
who, immediately prior to the Effective Time, are members of the Norwich Board
but are not also employees of NFC or of NSS will be invited to serve on an
advisory board to People's for the southeastern region of Connecticut, with an
initial term ending at the 1998 annual meeting of People's shareholders and
subject to reelection annually by the People's Board of Directors.
Following the Merger, People's intends to combine the operations of
People's and NSS. As of the date of this Joint Proxy Statement-Offering
Memorandum, no final determination with respect to such matters has been made.
Additionally, People's intends to manage the activities of its banking
operations in southeastern Connecticut through the People's Norwich Region to be
formed after the Merger. It is anticipated that Daniel R. Dennis, Jr., who
currently serves as President and Chief Executive Officer of
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NFC and NSS, will become a Senior Vice President of People's and will have
oversight responsibility for the Norwich Region. See 'THE MERGER -- Interests of
Certain Persons in the Merger.'
For additional information regarding management and operations of the
combined company, see 'INFORMATION ABOUT PEOPLE'S' and 'INFORMATION ABOUT NFC.'
1998 AND 1999 EARNINGS ESTIMATES
In analyzing the anticipated financial impact of the Merger, People's
prepared certain earnings estimates for the combined company as of September 3,
1997, the date on which the People's Board considered the Merger Agreement. As a
base line for these earnings, People's used consensus 'street' earnings per
share estimates published by IBES for both People's and NFC. The IBES estimates
for People's stand-alone fully diluted earnings per share were $1.70 and $1.87
for 1998 and 1999, respectively. From the IBES base, People's made certain
adjustments to reflect preliminary purchase accounting estimates and adjustments
regarding cost savings and revenue enhancements expected to be realized from the
Merger to derive a combined company fully diluted earnings per share estimate of
$1.70 (0.1% accretive) in 1998 and $1.92 (2.5% accretive) in 1999.
The significant assumptions utilized by People's in preparing those
estimates at that time included the following:
The Merger would be consummated in the first quarter of 1998.
The aggregate transaction value would be approximately $164 million based
on the closing price of People's Common Stock of $29.50 on September 3,
1997.
People's would have average fully diluted common shares outstanding of
approximately 64.9 million in 1998 and 1999. An estimated 2.89 million
shares would be issued in the Merger.
Before-tax cost savings relating to the Merger would total approximately
$3.8 million in 1998 and approximately $7.5 million in 1999. The majority
of these projected cost savings would result from eliminating
redundancies and centralizing back-office and staff units.
The Merger would result in after-tax revenue enhancements and funding
advantages totaling approximately $1.4 million and approximately $1.6
million in 1998 and 1999, respectively. These projected revenue
enhancements and funding advantages assumed, among other things, improved
product delivery processes, higher market penetration for fee-related
business activities and lower deposit and discretionary funding costs.
Certain of the foregoing assumptions have changed since the People's Board
considered the Merger on September 3, 1997. For example, the assumed number of
average fully diluted shares of People's Common Stock outstanding for 1998 and
1999 has been changed to approximately 63.9 million and approximately 64.4
million, respectively, with 2.8 million shares issued in the Merger. In
addition, because the Merger will be accounted for as a purchase (creating
goodwill) and the amortization of goodwill is reflected as an expense that
reduces reported earnings per share (see 'THE MERGER -- Accounting Treatment'),
fluctuations in the market price of People's Common Stock will have an effect on
pro forma earnings per share. Based on the closing price of People's Common
Stock on January 7, 1998, the aggregate transaction value would be $183.7
million (an increase of $19.3 million from the value used in the above
assumptions). This change would have the effect of increasing the amount of
goodwill to be amortized. Based on the IBES estimates for People's stand-alone
fully diluted earnings per share used previously ($1.70 and $1.87 for 1998 and
1999, respectively) and reflecting the revised assumptions referred to above,
People's would derive a combined company fully diluted earnings per share
estimate of $1.71 (0.8% accretive) in 1998 and $1.92 (2.6% accretive) in 1999.
The combined company's ability to achieve earnings estimates is dependent
upon various factors, a number of which will be beyond the control of People's,
including the regulatory environment, economic conditions, unanticipated changes
in business conditions and inflation, and no assurances can be given with
respect to the ultimate level and composition of expense savings and revenue
enhancements to be realized, or that such expense savings and revenue
enhancements will be realized in the time frame currently anticipated. In
addition, these earnings estimates will vary based on the final transaction
value as determined by People's Common Stock price during the period prior to
the
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Effective Time as specified in the Merger Agreement. As a result of these and
other factors, there will be differences between the earnings estimates
presented herein and actual results, and these differences could be material.
THE COMPONENTS OF THESE EARNINGS ESTIMATES HAVE NOT BEEN INCLUDED IN ANY OF THE
UNAUDITED PRO FORMA FINANCIAL INFORMATION INCLUDED IN THIS JOINT PROXY
STATEMENT-OFFERING MEMORANDUM. THERE IS NO GUARANTEE THAT PEOPLE'S WILL ACHIEVE
OR RECEIVE ANY OF THE COST SAVINGS OR REVENUE ENHANCEMENTS DESCRIBED ABOVE. SEE
'CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION.'
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
People's Common Stock is traded on Nasdaq as a National Market security and
reported by Nasdaq under the symbol 'PBCT.' As of People's Record Date, People's
Common Stock was held of record by approximately 7,400 persons. The following
table sets forth the high and low sale prices of People's Common Stock as
reported by Nasdaq for the periods indicated, adjusted to reflect the three-
for-two stock split effected in May 1997.
NFC's Common Stock is traded on Nasdaq as a National Market security and
reported by Nasdaq under the symbol 'NSSB.' The following table sets forth the
high and low sale prices for NFC Common Stock as reported by Nasdaq for the
indicated periods. As of the NFC Record Date, NFC Common Stock was held of
record by approximately 1,915 persons.
<TABLE>
<CAPTION>
PEOPLE'S NFC
SALES PRICES SALES PRICES
---------------- ----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
First Quarter......................................................... $10.08 $ 7.58 $11.25 $ 9.50
Second Quarter........................................................ 11.00 9.50 12.00 10.50
Third Quarter......................................................... 14.33 10.75 15.50 11.25
Fourth Quarter........................................................ 15.42 12.33 15.00 12.25
YEAR ENDED DECEMBER 31, 1996:
First Quarter......................................................... 14.83 12.33 14.75 12.56
Second Quarter........................................................ 15.33 13.08 15.50 12.38
Third Quarter......................................................... 17.00 13.50 18.00 14.00
Fourth Quarter........................................................ 20.08 15.92 20.75 17.25
YEAR ENDED DECEMBER 31, 1997:
First Quarter......................................................... 24.33 18.92 23.25 18.00
Second Quarter........................................................ 28.38 18.92 22.63 18.50
Third Quarter......................................................... 32.62 25.38 29.38 20.75
Fourth Quarter........................................................ 39.13 28.75 33.00 26.75
</TABLE>
DIVIDENDS
The following table sets forth cash dividends declared per share of
People's Common Stock and NFC Common Stock, respectively, for the periods
indicated. The dividend information for People's has been adjusted to reflect
the three-for-two stock split effected in May 1997. The ability of either
People's or NFC to pay cash dividends to its shareholders is subject to certain
restrictions. See 'CERTAIN REGULATORY CONSIDERATIONS.'
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<TABLE>
<CAPTION>
PEOPLE'S NFC
DIVIDENDS DIVIDENDS
--------- ---------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
First Quarter......................................................................... $ .09 $ .08
First Quarter (Special)............................................................... -- .15*
Second Quarter........................................................................ .11 .08
Third Quarter......................................................................... .11 .10
Fourth Quarter........................................................................ .12 .10
YEAR ENDED DECEMBER 31, 1996:
First Quarter......................................................................... .12 .10
First Quarter (Special)............................................................... -- .15*
Second Quarter........................................................................ .13 .10
Third Quarter......................................................................... .13 .12
Fourth Quarter........................................................................ .15 .12
YEAR ENDED DECEMBER 31, 1997:
First Quarter......................................................................... .15 .12
First Quarter (Special)............................................................... -- .10*
Second Quarter........................................................................ .17 .14
Third Quarter......................................................................... .17 .14
Fourth Quarter........................................................................ .19 .14
</TABLE>
- ------------
* Special dividend declared by the NFC Board.
INFORMATION ABOUT PEOPLE'S
GENERAL
People's is a stock savings bank chartered under the laws of Connecticut.
People's is the largest independent bank headquartered in Connecticut, with $7.7
billion in total assets as of September 30, 1997, and is the leading mortgage
lender in the state. Directly and through operating subsidiaries, People's
offers diversified consumer and commercial financial services primarily within
the state of Connecticut and a nationwide credit card program. The principal
executive offices of People's are located at Bridgeport Center, 850 Main Street,
Bridgeport, Connecticut 06604. Its telephone number is (203) 338-7171.
OPERATIONS
People's offers a wide range of banking, fiduciary and other financial
services and seeks to develop total business relationships with its corporate,
individual and institutional customers. In addition to traditional banking
services of accepting deposits and making loans, People's provides specialized
services tailored to specific markets, including personal, institutional, and
employee benefit trust services, personal financial services, customer access to
mutual funds, cash management services, certain international banking services,
and municipal banking and finance services. People's has a nationwide credit
card program and provides its customers with access to a worldwide automated
teller machine network, 24-hour telephone banking services, PC banking services
and interactive video banking. At September 30, 1997, People's had 73
traditional branches and 37 supermarket branches in locations throughout most of
Connecticut.
People's has two major lines of business: consumer banking and commercial
banking. Within consumer banking, People's offers products and services such as
a nationwide credit card program and residential mortgage loans, home equity
credit lines, other secured and unsecured consumer loans, consumer demand
deposit accounts, Pay-By-Phone services, NOW accounts, savings and money market
accounts, certificates of deposit, individual retirement accounts, trust,
investment advisory and financial management services and savings bank life
insurance. People's also provides discount brokerage services and mutual funds
sales through its wholly owned subsidiary, People's Securities, Inc. Through its
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commercial banking business, People's provides individuals and businesses with
products and services such as secured and unsecured commercial loans, commercial
demand deposit accounts, asset-based lending services and cash management
services. In addition, People's extends commercial real estate loans for
income-producing properties primarily located in Connecticut.
People's began its credit card program in 1985 and expanded it nationally
as a result of the success of the initial program. The June 1997 Nilson Report
ranked People's as the 26th largest VISA'r'* USA, Inc. and MasterCard'r'*
International Incorporated credit card issuer in the United States as of March
1997 on the basis of outstanding balances. People's further expanded its credit
card operations in 1996 by establishing a limited branch in the United Kingdom.
People's periodically securitizes credit card receivables in the secondary
market through the issuance of asset-backed certificates. People's managed
credit card portfolio totaled $3.3 billion at September 30, 1997, including $2.0
billion of outstanding asset-backed certificates.
People's has historically maintained a significant securities portfolio
consisting of both debt and equity securities. This portfolio is utilized for
tax planning, liquidity management and asset diversification and to enhance
returns on earning assets, to the extent permitted by regulatory capital
requirements and applicable legal restrictions.
Deposits have traditionally been People's primary source of funds for its
lending and investment activities. In addition to deposits, People's derives
funds from principal repayments on loans and other investments, from the sale of
loans and investment securities, from borrowings, from the securitization and
sale of asset-backed certificates, and from operating activities.
For additional information about People's, including its management, see
the 1996 People's F-2 and People's Proxy Statement for its 1997 Annual Meeting
of Shareholders. See 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE' and
'AVAILABLE INFORMATION.'
YEAR 2000
People's, like all institutions that utilize computer technology, is facing
significant challenges associated with the inability of many existing computer
systems to process time-sensitive data accurately beyond the year 1999 (referred
to as the 'Year 2000 Issue'). The Year 2000 Issue is the result of computer
programs using two digits rather than four in date fields that define the year.
Any computer programs used by People's that have time-sensitive software may
recognize a date field using '00' as the year 1900 rather than the year 2000. If
not modified or replaced, these programs could cause system failures or
miscalculations, which could adversely affect People's ability to process
customer transactions or provide customer service.
People's has conducted a comprehensive review of its computer systems to
identify all systems that could be affected by the Year 2000 Issue and has
developed an implementation plan (including establishing priorities for
mission-critical applications) to modify or replace all affected systems and
test them for Year 2000 compliance. People's expects programming changes for
mission-critical applications to be completed and testing to be well under way
by December 31, 1998. Other applications requiring programming changes should
also be completed by December 31, 1998 to allow for testing in 1999.
People's is also monitoring the activities of its third-party vendors in
developing and implementing plans to address the Year 2000 Issue. While People's
expects its Year 2000 plan to be completed on a timely basis, there can be no
assurance that the systems of other companies on which People's systems may rely
also will be completed in a timely fashion. In addition, People's exchanges data
with a number of other entities, such as credit bureaus and governmental
entities. The failure of these entities adequately to address the Year 2000
Issue could adversely affect People's ability to conduct its business.
Costs associated with modifying existing system applications have been and
will continue to be expensed as incurred. People's does not expect incremental
costs associated with application modifications for Year 2000 compliance to be
material. However, as People's progresses in implementing its plan for
addressing the Year 2000 Issue, current estimates of costs could change,
including as a result
- ------------
*VISA'r' and MasterCard'r' are registered trademarks of VISA USA, Inc. and
MasterCard International Incorporated, respectively.
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of the failure of third-party vendors and other entities adequately to address
the Year 2000 Issue in a timely fashion. There can be no assurance that People's
will not experience cost overruns or delays in connection with its plan for
replacing or modifying systems.
HOLDING COMPANY STRUCTURE
In 1988, People's became a capital stock savings bank as part of a
reorganization from its original form as a mutual savings bank. That process
also resulted in the formation of Holdings, a mutual-form bank holding company
that is subject to regulation by the Federal Reserve Board. At January 7, 1998,
Holdings owned 36,450,000 shares, or approximately 59.6% of the total number of
outstanding shares, of People's Common Stock, which is the only class of
People's capital stock now outstanding. Following the issuance of People's
Common Stock upon consummation of the Merger, persons who previously owned
shares of NFC Common Stock will own in the aggregate between 2,805,208 and
3,100,771 shares of People's Common Stock, representing approximately 4.4% to
4.8% of the shares of People's Common Stock then anticipated to be outstanding.
Persons other than Holdings who owned shares of People's Common Stock
immediately prior to consummation of the Merger will own approximately 38.6% to
38.5% of the shares of People's Common Stock then anticipated to be outstanding.
Holdings will continue to own 36,450,000 shares of People's Common Stock,
representing approximately 57.0% to 56.7% of the shares of People's Common Stock
anticipated to be outstanding following consummation of the Merger. By virtue of
its ownership of a majority of People's outstanding shares, Holdings is and will
be able to elect all of the members of the People's Board and will generally be
able to affect significantly the outcome of all matters presented for
consideration by the shareholders of People's.
The Board of Trustees of Holdings has 18 members, eight of whom are also
directors of People's. Certain information concerning the members of the Board
of Trustees of Holdings who are not directors of People's is set forth below.
For information concerning directors of People's who also serve on the Board of
Trustees of Holdings, see 'MANAGEMENT AND OPERATIONS AFTER THE MERGER.'
Jean A. Adnopoz is Associate Clinical Professor of the Yale School of
Medicine and Coordinator of Community Child Development Programs at the Yale
Child Study Center, Yale University. Mrs. Adnopoz was first elected to the Board
of Trustees in 1983 and is a member of the Executive Committee of the Board.
Mrs. Adnopoz is 65 years old.
Robert B. Bruner is a consultant with Affiliated Health Systems of
Connecticut, Inc. and President of Mount Sinai Hospital Foundation. Mr. Bruner
was formerly President and Executive Director of Mount Sinai Hospital, Hartford,
Connecticut. Mr. Bruner was first elected to the Board of Trustees in 1983 and
is a member of the Executive Committee of the Board. Mr. Bruner is 64 years old.
John L. Flannery retired as Vice President of Holdings and Treasurer and
Senior Executive Vice President of People's in September 1991. Mr. Flannery
became the Vice Chairman of the Board of Trustees in September 1991. He was
first elected to the Board of Trustees in 1983 and is a member of the Executive
Committee of the Board. Mr. Flannery is 70 years old.
Norwick R.G. Goodspeed is the Chairman of the Board of Trustees and was
first elected to the Board in 1968. Mr. Goodspeed was Chief Executive Officer of
People's from 1975 through 1984 and Chairman of the Board of Directors of
People's from March 1, 1980 until July 6, 1988. Mr. Goodspeed is 75 years old.
Leonard N. Mainiero retired as Executive Vice President of People's in
1994, a position he held since 1980. Mr. Mainiero served in various capacities
for People's since 1954, and was elected to the Board of Trustees in 1992. He is
on the Executive Committee of the Board. Mr. Mainiero is 68 years old.
John F. Merchant is an attorney in private practice, having served as
Consumer Counsel for the State of Connecticut from 1991 until 1997. He was first
elected to the Board of Trustees in 1969 and served as a director of People's
from 1969 until 1997. Mr. Merchant is 64 years old.
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John G. Phelan is the President of Fletcher-Thompson, Inc., an
architectural firm. He was elected to the Board of Trustees in 1973 and is on
the Executive Committee of the Board. Mr. Phelan is 65 years old.
Glenda Copes Reed is Vice President of Corporate Real Estate for Aetna,
Inc., Hartford, Connecticut. She was elected to the Board of Trustees in 1983.
Ms. Reed is 54 years old.
Robert L. Rosensweig is of counsel with the law firm of Shipman & Goodwin
in Hartford, Connecticut. Mr. Rosensweig was elected to the Board of Trustees in
1983 and is Chairman of the Audit Committee. Mr. Rosensweig is 69 years old.
Frederick J. Ross is a consultant and private investor. He was elected to
the Board of Trustees in 1981 and is on the Executive Committee of the Board.
Mr. Ross is 71 years old.
The Board of Trustees of Holdings makes all determinations as to how shares
of People's owned by Holdings are voted.
Holdings differs in significant respects from an ordinary bank holding
company. Holdings is a corporation without shares of capital stock, and
Holdings' Board of Trustees, in making certain business decisions, is required
under Holdings' Articles of Incorporation to consider the impact of its actions
on a variety of constituencies. These include the depositors, employees and
debtholders of People's, and the well-being of the communities in which People's
conducts business, but do not include the shareholders of People's. Thus,
Holdings will act in a manner which furthers the general interests of these
various constituencies. It is the Trustees' belief, however, that the interests
of the shareholders of People's and those of Holdings' other constituencies are,
in many circumstances, congruent, inasmuch as increased profitability of
People's also furthers the interests of these constituencies. Accordingly, the
Board of Trustees of Holdings has historically considered the interests of
People's shareholders in making business decisions, although it is not required
to do so.
Except for a comparatively minor amount used to fund the operations of
Holdings, Holdings has waived the payment of cash dividends during those periods
since 1988 in which People's has been able to pay cash dividends to its
shareholders. Through December 31, 1997, approximately $110 million of cash
dividends have been waived by Holdings. There can be no assurance that Holdings
will continue to waive cash dividends to the extent waived to date. Moreover,
Holdings retains the right to accept payment of cash dividends on all of the
People's Common Stock which it owns, in its discretion, in the future. In
addition, in connection with People's issuance of convertible preferred stock in
1993, Holdings made 1,000,000 shares of its People's Common Stock available for
use in satisfying the conversion rights of preferred shareholders.
People's and Holdings are aware of recent orders issued by federal bank
regulatory agencies granting conditional approval for certain fundamental
changes affecting the corporate structure of mutual holding companies, including
second-step conversions in which a mutual holding company undergoes a full
'demutualization'. Orders issued in second-step conversions have required
dilution of the public minority shareholders' interest to reflect the amount of
cash dividends previously waived by the parent holding company. Neither People's
nor the Board of Trustees of Holdings has expressed any intention to undertake a
second-step conversion in the future; indeed, it is unclear as to whether
Connecticut law provides for such a second-step conversion.
INFORMATION ABOUT NFC
GENERAL
NFC was organized under the laws of the State of Delaware on December 10,
1987, to operate principally as a bank holding company for NSS. NSS is the sole
direct subsidiary of NFC and its principal asset. At September 30, 1997, NFC had
on a consolidated basis assets of $701 million, deposits of $595 million, net
loans of $475 million and shareholders' equity of $82 million.
NSS was originally chartered as a mutual savings bank in 1824. On November
14, 1986, NSS converted from a mutual savings bank to a capital stock savings
bank, effected through the issuance of 5,741,151 shares of common stock. On
August 10, 1988, NFC acquired all of the outstanding common stock of NSS in
exchange for NFC Common Stock on a one-for-one basis. Headquartered in Norwich,
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which is located in New London County, and about midway along the New York to
Boston corridor with convenient access via interstate highways and Amtrak
service, NSS serves communities throughout eastern Connecticut with 16 full
service branch offices located in the towns of Colchester, East Lyme, Griswold,
Groton, Ledyard, Mansfield, Montville, Mystic, New London, Norwich, Plainfield
and Waterford, in addition to the main office and a complementary network of 20
ATM machines. NSS's customer base is essentially comprised of depositors from
area communities. The composition of these area communities includes
residential, shoreline and industrial areas in addition to the urban areas of
Norwich, New London, Groton and Willimantic.
OPERATIONS
NSS originates real estate, commercial and consumer loans in southeastern
Connecticut, funding its operations primarily through the taking of deposits in
the same market area. In addition to traditional banking services, NSS also
offers a full range of investment products including brokerage services through
Liberty Securities Corporation and insurance products through the Savings Bank
Life Insurance Company.
NSS is permitted by statute to invest its funds in a variety of assets, of
which the primary forms are loans and investment securities. NSS's loan
portfolio includes variable and fixed-rate real estate loans, consumer loans and
commercial and industrial loans. NSS is authorized under its charter to engage
in residential and commercial mortgage activity within areas outside the State
of Connecticut. As a matter of policy, NSS restricts its mortgage activities to
properties located within the State of Connecticut. NSS has placed its primary
emphasis on residential mortgage lending directly to individual applicants,
utilizing its branch office network and mortgage originators. NSS also solicits
applications from builders and developers, but these loans are generally limited
to nonspeculative projects.
NSS has full commercial lending powers, subject only to applicable
restrictions of Connecticut law on loans to any one borrower. The majority of
NSS's commercial business loan portfolio consists of loans which adjust
periodically to a margin over a contractual index and therefore are rate
sensitive.
NSS's consumer loans include second mortgages, home equity lines of credit,
home improvement loans, automobile loans, boat loans, recreational vehicle
loans, education loans, personal loans, cash reserve loans and land loans. NSS
originates for its own portfolio both fixed rate second mortgage loans and lines
of credit secured by the equity in the borrower's primary residence. NSS also
makes educational loans under the Connecticut Guaranteed Student Loan Program.
The interest on loans in this program is partially subsidized and fully
guaranteed by the federal government.
Under Connecticut law, NSS may invest in a wide variety of investment
securities including mortgage-backed securities, U.S. Government and agency
obligations, corporate debt obligations, municipal obligations and marketable
common or preferred stocks listed on a national securities exchange, and shares
of registered investment companies. In addition to providing for liquidity
requirements, NSS maintains investment portfolios to employ funds not currently
required for its various lending activities.
NSS seeks to attract money market and demand deposit accounts as well as
certificates of deposit from both personal and business sources. Individual
Retirement Accounts and passbook savings are also primary sources of funds.
For additional information about NFC and NSS, including their management,
see the 1996 NFC Form 10-K and NFC's Proxy Statement for its 1997 Annual Meeting
of Shareholders. See 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE' and
'AVAILABLE INFORMATION.'
CERTAIN REGULATORY CONSIDERATIONS
CONNECTICUT LAW
General. As state-chartered capital stock savings banks, People's and NSS
are subject to applicable provisions of Connecticut law and the regulations
adopted thereunder by the Commissioner. The Commissioner administers the
Connecticut banking laws, which contain comprehensive provisions for
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the regulation of savings banks. People's and NSS are subject to periodic
examination by, and the reporting requirements of, the Commissioner.
Savings banks in Connecticut have the power to accept savings, time and
demand deposits, and to pay interest on deposits. Savings banks may make
residential and other real estate loans, consumer and commercial loans (secured
and unsecured), issue credit cards, market insurance of any type (other than
title insurance) and sell annuities, and may offer various other banking
services to their customers.
Lending and Investment. Connecticut law does not generally restrict the
size of a savings bank's loan portfolio to a specified percentage of assets or
equity capital. An aggregate limit of 8% of assets is placed on mortgage loans
that do not conform to certain of the requirements of Connecticut law with
respect to making such loans. Moreover, a savings bank's loans to any one
borrower may not exceed 15% of equity capital and reserves for loan and lease
losses plus an additional 10% for fully secured loans. This limit is subject to
exemptions and is exclusive of investment securities of the obligor.
A Connecticut savings bank may invest in a wide variety of debt and equity
securities. For example, a Connecticut savings bank may invest up to 25% of its
assets in marketable debt securities and interests in mutual funds that invest
solely in marketable debt securities ('debt mutual funds') that are rated in the
three highest rating categories by a rating agency recognized by the
Commissioner (or if they are not rated, that are determined by the board of
directors to be a prudent investment), subject to limitations on holdings of the
securities of any one issuer. These percentage of capital and assets
restrictions do not apply to, among other instruments, general obligations of
the U.S., its agencies or U.S. government-sponsored enterprises or of
Connecticut, or securities guaranteed by the U.S. or for which the full faith
and credit of the U.S. or Connecticut is pledged. A Connecticut savings bank may
also invest up to 25% of its assets in equity securities and mutual funds (other
than debt mutual funds), subject to limitations on holdings of the securities of
any one issuer. In addition, a Connecticut savings bank may acquire 10% or more
of the equity securities of a bank or bank holding company and may, with the
approval of the Commissioner, purchase 51% or more of a corporation or other
entity that engages only in activities that the bank may engage in directly. The
Federal Deposit Insurance Corporation Improvement Act of 1991 ('FDICIA') and
regulations promulgated thereunder impose additional limits on the ability of
state-chartered banks and savings banks to invest in equity securities. See
' -- FDIC Regulation.'
Acquisitions. Under Connecticut law, no person may acquire the beneficial
ownership of more than 10% of the voting securities or 25% or more of any class
of voting securities of a Connecticut savings bank without the prior approval of
the Commissioner.
Federal and Connecticut law provide for largely unrestricted interstate
banking. Accordingly, out-of-state banking institutions may now acquire
Connecticut banks that have been in existence for at least five years (unless
the Commissioner waives the five-year requirement) so long as the home state of
the acquiring institutions would allow a Connecticut institution to acquire a
bank in that state. Such out-of-state institutions may form their own banking
institutions in Connecticut. The acquisition or establishment cannot take place
if the out-of-state acquiror would thereby control 30% or more of the deposits
in Connecticut, subject to the Commissioner's waiver of the requirement.
Out-of-state acquirors may also establish new branches in the state subject to
certain requirements and limitations. The impact of already completed mergers
and of possible future mergers under interstate banking laws cannot be
determined at this time.
FDIC REGULATION
General. The deposit accounts of People's and NSS are insured by the FDIC's
Bank Insurance Fund ('BIF'), up to a maximum of $100,000 per insured depositor.
As deposit insurer and as the primary federal regulator of state-chartered banks
(including, for this purpose, savings banks such as People's and NSS) that are
not members of the Federal Reserve System ('non-member banks'), the FDIC issues
regulations, conducts periodic examinations, requires the filing of reports and
generally supervises the operations of People's and NSS. The approval of the
FDIC is required prior to any merger or consolidation or the establishment or
relocation of an office facility. This supervision and regulation is intended
primarily for the protection of depositors. Any insured institution or
non-member
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bank which does not operate in accordance with or conform to applicable FDIC
regulations, policies and directives may be sanctioned for noncompliance.
Lending and Investment. FDICIA requires that, with some limited exceptions,
the permitted investments of state-chartered banks must mirror those of national
banks. Similarly, FDICIA provides that state-chartered banks and their
subsidiaries may engage (as principal) only in those activities permitted to
national banks and their subsidiaries. While national banks are generally not
permitted to invest in equity securities, FDICIA contains an exception
permitting the continued investment by certain state-chartered banks in equity
securities listed on national securities exchanges and in shares of companies
registered under the Investment Company Act of 1940, subject to restrictions as
to amount. No similar statutory exception exists with respect to FDICIA's
prohibition on direct equity investments in real estate. Rather, FDICIA required
that a state-chartered bank engaged in equity investments in real estate prepare
a plan of divestiture for such real estate investments and complete such
divestiture no later than December 19, 1996.
Federal Deposit Insurance. Deposits in People's and NSS are separately
insured by the FDIC to the applicable maximum limits. The FDIC bases an
institution's deposit insurance assessment rate partly upon whether the
institution is 'well capitalized,' 'adequately capitalized,' or 'less than
adequately capitalized.' Each insured depository institution is also assigned to
one of three 'supervisory subgroups' based on reviews by the institution's
primary federal or state regulator, statistical analyses of financial
statements, and other information relevant to gauging the risk posed by the
institution. Based on these capital and supervisory subgroups, each institution
is assigned an FDIC assessment rate, which, for 1997 and the first semi-annual
assessment period of 1998, ranges from 0% to 0.27% of deposits. The FDIC has
authority to increase these percentages to maintain the BIF at its designated
reserve ratio, and it may raise the reserve ratios of the deposit insurance
funds if justified by circumstances raising a significant risk of substantial
future losses to the funds. In addition, since January 1, 1997 People's and NSS
have been required to pay an additional annual assessment which is used to pay
debt service on certain obligations issued by the Financing Corporation in
connection with funding operations of the Federal Savings and Loan Insurance
Corporation prior to the latter's dissolution in 1989.
Regulatory Capital. The FDIC also requires non-member banks to meet certain
minimum capital requirements. The FDIC's requirements define capital in a manner
consistent with the risk-based capital categories described below and require a
minimum leverage standard of 3% Tier 1 (or core) capital to total assets for the
most highly rated banks that are not anticipating or experiencing significant
growth and have well diversified risk. All other non-member banks are required
to meet a minimum leverage ratio that is an additional 100 to 200 basis points
above this minimum, a requirement which the FDIC has proposed to change to 4% of
total assets.
The FDIC has also adopted supplementary capital regulations based on
international risk-based capital standards. Under these requirements, an
institution is required to maintain minimum levels of capital based upon its
total 'risk-weighted assets.' For purposes of these requirements, 'capital' is
comprised of both Tier 1 capital and Tier 2 capital. Tier 1 capital consists
primarily of common stock and limited amounts of certain types of perpetual
preferred stock. Tier 2 capital consists of the allowance for loan losses
(subject to certain limitations), certain preferred stock, subordinated debt and
convertible securities. In determining total capital, the amount of Tier 2
capital may not exceed the amount of Tier 1 capital. A bank's total
'risk-weighted assets' are determined by assigning the bank's assets and
off-balance sheet items (e.g., letters of credit) to one of four risk categories
based upon their relative credit risk. Under the regulations, the greater the
risk associated with an asset, the greater the amount of such assets that will
be subject to the capital requirements. The FDIC's rules require banks to
maintain minimum capital ratios of Tier 1 and total capital to risk-weighted
assets of 4% and 8%, respectively.
While these provisions specifically address credit risk, as part of its
overall evaluation of a non-member bank's capital adequacy, the FDIC will assess
interest rate risk exposure, liquidity, funding and market risks, the quality
and level of earnings, investments or loan portfolio concentrations, the quality
of loans and investments, the effectiveness of loan and investment policies and
management's ability to monitor and control financial and operating risks,
including the risk presented by concentration of credit and nontraditional
activities. Effective on January 1, 1997 (with mandatory compliance required on
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January 1, 1998), the FDIC has required banks with significant exposure to
market risk (that is, banks that engage in a substantial amount of trading of
securities and other assets) to measure that risk using their own internal
value-at-risk models (subject to parameters contained in the rule) and to hold a
commensurate amount of regulatory capital.
FDICIA increased the supervisory powers of the FDIC and the other federal
regulatory agencies with regard to undercapitalized depository institutions.
Banking regulators defined five capital categories by regulation: institutions
that are well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized. The purpose of
these categories is to allow federal regulatory agencies to monitor
undercapitalized institutions more closely in order to take appropriate and
prompt regulatory action to minimize the potential for significant loss to the
deposit insurance fund. Institutions in the first two categories operate with
few restrictions. Institutions in the other three categories may be required to
raise additional capital, curtail growth, limit interest rates paid, divest
subsidiaries and limit executive compensation. Regulators are also empowered to
remove top management and call for election of new directors. FDICIA also allows
for the appointment of a conservator or receiver of any insured depository
institution if the institution is undercapitalized and either has no reasonable
prospect of becoming adequately capitalized, fails to become adequately
capitalized as required, or fails to submit or materially implement a capital
plan.
FEDERAL RESERVE SYSTEM REGULATIONS
Federal Reserve Board regulations require depository institutions to
maintain reserves against their transaction accounts. These regulations
generally require that depository institutions maintain a reserve of 3% against
transaction accounts totaling $47.8 million or less (except that $4.7 million in
the transaction accounts is exempt from the reserve requirement) and a reserve
of $1,434,000 plus 10% of that portion of total transaction accounts in excess
of $47.8 million. These amounts and percentages are subject to adjustment by the
Federal Reserve Board.
Pursuant to the BHCA, the Federal Reserve Board has power to regulate the
activities of bank holding companies, such as NFC and Holdings. The Federal
Reserve Board generally prohibits bank holding companies and their subsidiaries
from engaging in activities other than banking, managing banks, or controlling
banks, or activities which are 'so closely related to banking as to be a proper
incident thereto.' Permissible activities include servicing activities rendered
on behalf of the holding company and its subsidiaries, ownership of voting
securities of a company that, in the aggregate, represent less than 5% of the
outstanding shares of any class of voting securities of any company, acting as
investment or financial advisor within certain limitations, and providing
securities brokerage services.
Under the BHCA, a bank holding company is required to obtain the prior
approval of the Federal Reserve Board to acquire, with certain exceptions, more
than 5% of the outstanding voting stock of any bank or bank holding company, to
acquire all or substantially all of the assets of a bank or to merge or
consolidate with another bank holding company.
The Federal Reserve Board has established capital adequacy guidelines for
bank holding companies that are similar to the FDIC capital adequacy guidelines
described above.
FEDERAL HOME LOAN BANK SYSTEM
Each of People's and NSS is a member of the Federal Home Loan Bank of
Boston (the 'FHLB of Boston'), which is one of twelve regional Federal Home Loan
Banks. The FHLB of Boston provides a credit facility for member institutions. It
makes advances to members in accordance with the policies and procedures
established by the Board of Directors of the FHLB of Boston. Advances from the
FHLB of Boston are secured by the member's stock in the FHLB of Boston, certain
types of mortgage loans and other assets.
CONSUMER REGULATION
As lenders, People's and NSS are subject to a number of federal and state
consumer protection laws. The Truth in Lending Act requires lenders, including
credit card issuers, to make certain
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disclosures along with their applications and solicitations. The Equal Credit
Opportunity Act (the 'ECOA') prohibits lenders from making credit decisions on
certain bases such as sex, race, marital status, religion, national origin and
age. In order to protect borrowers from such discrimination, the ECOA requires
lenders to disclose the reasons they took adverse action against an applicant.
The Fair Credit Reporting Act (the 'FCRA') generally regulates credit reporting
agencies, but also imposes some duties on lenders as users of consumer credit
reports. For instance, the FCRA requires that lenders notify consumers when they
take adverse action based upon information obtained from credit reporting
agencies.
OTHER ASPECTS OF FEDERAL AND STATE LAW
People's and NSS are also subject to various federal and state statutory
and regulatory provisions covering, among other things, security procedures,
currency reporting, insider and affiliated party transactions, management
interlocks, community reinvestment, electronic funds transfers and funds
availability.
PEOPLE'S CAPITAL STOCK
GENERAL
People's is authorized by its Articles of Incorporation (the 'People's
Articles') to issue up to 100,000,000 shares of Common Stock and 10,000,000
shares of preferred stock. There were 61,162,425 shares of People's Common Stock
issued and outstanding as of December 31, 1997.
COMMON STOCK
Each holder of People's Common Stock is entitled to one vote for each share
held on all matters voted upon by shareholders. Shareholders are not permitted
to cumulate their votes for the election of directors.
If People's were to be liquidated, holders of People's Common Stock would
be entitled to receive any remaining assets of People's, in cash or in kind,
after payment of all liabilities and of all amounts reserved in liquidation
accounts as well as amounts payable to holders of equity securities senior to
the People's Common Stock, if any.
Holders of People's Common Stock are entitled to preemptive rights with
respect to any additional shares of People's Common Stock or securities
convertible into People's Common Stock that may be issued for cash (except
pursuant to stock options or option plans approved by shareholders). Preemptive
rights may be waived by a holder of People's Common Stock. People's Shareholders
will not have preemptive rights with respect to the shares of People's Common
Stock to be issued in the Merger. People's Common Stock is not subject to call
or redemption and may not be redeemed or repurchased without the consent of the
FDIC.
The authorized but unissued and unreserved shares of People's Common Stock
will be available for general corporate purposes, including but not limited to
possible issuance in exchange for capital notes, as stock dividends or stock
splits, in future mergers or acquisitions, under a cash dividend reinvestment
plan, upon conversion of convertible preferred stock, for employee benefit
plans, or in a future underwritten or other public offering. Except as described
above or as otherwise required to approve the transactions in which the
additional authorized shares of People's Common Stock would be issued, no
shareholder approval will be required for the issuance of these shares.
PREFERRED STOCK
People's is currently authorized by its Articles of Incorporation to issue
up to 10,000,000 shares of no par value preferred stock. The People's Board has
broad authority to designate and establish the terms of one or more series of
preferred stock. Among other matters, the People's Board is authorized to
establish voting powers, designations, preferences and relative, participating,
optional or other special rights of each such series and any qualifications,
limitations and restrictions thereon.
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The CTBL limits the voting rights that may be conferred on any class of
preferred stock issued by People's only to such voting rights as are required by
the CTBCA to be granted to the holders of such class of stock. The CTBL also
restricts the liquidation priority that may be afforded to the holders of any
class of preferred stock issued by People's to an amount equal to such holders'
original investment in the stock, plus an amount equal to any dividends earned
but unpaid prior to liquidation.
In 1993, the People's Board approved the issuance of 1,380,000 shares of
8.50% Noncumulative Convertible Preferred Stock, Series A (the 'Series A
Preferred Stock'). All shares of Series A Preferred Stock issued pursuant to
such approval have been converted into shares of People's Common Stock. No
shares of Series A Preferred Stock or of any other series of preferred stock are
currently outstanding.
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, LLC is the transfer agent, dividend
disbursement agent and registrar for shares of People's Common Stock.
CERTAIN RESTRICTIONS ON ACQUISITIONS OF PEOPLE'S CAPITAL STOCK
Connecticut Law. Section 36a-194(e) of the CTBL allows the Commissioner to
seek the appointment of a receiver and to institute proceedings to dissolve a
Connecticut mutual holding company (in this case, Holdings) if the holding
company ceases to own at least 51% of each outstanding class of 'ordinarily
voting' equity securities of the subsidiary bank (in this case, People's).
Sections 33-840 to 33-845, inclusive, of the CTBCA contain certain fair
price and procedural requirements which are applicable to 'business
combinations' involving 'interested shareholders' and People's. Such
transactions must be approved by super-majority votes of shareholders. The
purpose of these statutory provisions is to discourage two-tier acquisitions, in
which one price is offered for a controlling block of stock, and then a lower
price or a less desirable form of consideration, or both, is paid for the
remainder of the outstanding stock in a subsequent business combination. The
transactions contemplated by the Merger Agreement do not come within the scope
of these provisions.
Federal Law. The FDIC has adopted a regulation pursuant to the Change in
Bank Control Act of 1978 which requires persons who at any time intend to
acquire control of an insured bank (such as People's) to give prior written
notice to the FDIC. Control for the purpose of this regulation includes cases in
which the acquiring party has voting control of at least 25% of the target
institution's voting stock or the power to direct the management or policies of
the institution. Control is presumed to exist, subject to rebuttal by
appropriate contrary evidence, where the acquiring party has voting control of
at least 10% of the target's voting stock and (1) the bank's shares are
registered pursuant to Section 12 of the Securities Exchange Act of 1934 (as is
the case for People's), or (2) the acquiring party would be the largest
shareholder of the institution. The statute and underlying regulations authorize
the FDIC to disapprove the change in control on certain specified grounds. These
provisions are designed primarily to protect the interests of the target bank's
depositors.
Articles of Incorporation and Bylaws of People's. Certain provisions of
People's Articles and the Bylaws of People's (the 'People's Bylaws') are
designed to discourage certain types of transactions which involve an actual or
threatened change in control of People's.
People's Articles provide that the People's Board will be divided into
three classes, with directors in each class elected for three-year terms.
People's Bylaws provide that the number of positions on the Board of
Directors -- within the range of 9 to 16 directors -- may be increased or
decreased only by the Board of Directors. People's Bylaws also impose
restrictions on the ability of shareholders to nominate candidates for the Board
of Directors. People's Articles and Bylaws provide that vacancies created by an
increase in the number of directorships can be filled for the unexpired term
only by the People's Board. Vacancies occurring for any other reason, such as
death or resignation, would likewise be filled by the remaining directors.
Article VIII of People's Articles requires People's Board to evaluate any
proposed business combination, any proposal by another person or persons acting
as a group to effect a business
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combination, or a tender or exchange offer involving People's or any subsidiary
thereof, in light of various business and non-business factors. Factors which
the People's Board must consider, in addition to the adequacy of the amount to
be paid in connection with any such transaction, include (a) the social and
economic effects of the transaction on People's and its subsidiaries,
affiliates, employees, depositors, borrowers from and other customers of
People's, creditors, and the relevant constituencies of the communities in which
People's and its subsidiaries and affiliates operate or are located, (b) the
business and financial condition and earnings prospects (present and
anticipated) of People's and its subsidiaries and affiliates, (c) the business
and financial condition and earnings prospects of the acquiring person or group,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
acquisition, and other foreseeable financial obligations of the acquiring person
or group, and the possible effects of such factors upon People's and its
subsidiaries and affiliates and the relevant constituencies of the communities
in which People's and its subsidiaries and affiliates operate or are located,
and (d) the competence, experience, and integrity of the acquiring person or
group and its management.
The term 'business combination' in Article VIII of People's Articles
encompasses four categories of transactions: (1) the sale, exchange, lease,
transfer or other disposition to or with any person or group, or any affiliate
or associate of such person or group, by People's or any of its subsidiaries (in
a single transaction or in a series of related transactions) of all,
substantially all, or any substantial part, of its or their assets or businesses
(including, without limitation, any securities issued by a subsidiary of
People's); (2) the purchase, exchange, lease or other acquisition, by People's
or any of its subsidiaries (in a single transaction or in a series of related
transactions), of all or substantially all, or any substantial part, of the
assets or businesses of any person or group or any affiliate or associate of
such person or group; (3) any merger or consolidation of People's or any
subsidiary thereof into or with any person or group or affiliate or associate of
such person or group, irrespective of which person or group is the surviving
entity in such merger or consolidation; and (4) the acquisition upon the
issuance thereof of beneficial ownership by any person or group of People's
Common Stock or securities convertible into People's Common Stock or any voting
securities or securities convertible into voting securities of any subsidiary of
People's, or the acquisition, upon the issuance thereof, of beneficial ownership
by any person or group of any rights, warrants or options to acquire any of the
foregoing, or any combination of the foregoing, if such person or group prior to
such acquisition owned, or as a result of such acquisition would own, more than
5% of the People's Common Stock or more than 5% of the voting securities of a
subsidiary then issued and outstanding (assuming full conversion of all
securities owned or to be acquired by such person or group which are or would be
convertible into People's Common Stock or voting securities of a subsidiary).
Articles of Incorporation of Holdings. Any 'business combination' involving
People's will be subject to the review and approval of the Board of Trustees of
Holdings as the owner of a majority of the outstanding shares of People's Common
Stock. Article VIII of Holdings' Articles of Incorporation requires the Board of
Trustees to evaluate any proposed business combination or proposal by another
person or persons acting as a group to effect a business combination or a tender
offer or exchange offer involving Holdings or any subsidiary thereof (including
People's) in light of various business and non-business factors. Factors which
the Board of Trustees must evaluate, in addition to the adequacy of the amount
to be paid in connection with any such transaction, include (a) the social and
economic effects of the transaction on Holdings and its subsidiaries (including
People's), the employees of Holdings and the employees of such subsidiaries,
depositors of People's, borrowers and other customers, creditors and the
relevant constituencies of the communities in which Holdings and its
subsidiaries operate or are located, (b) the business and financial condition
and earnings prospects (present and anticipated) of Holdings and its
subsidiaries, (c) the business and financial condition and earnings prospects of
the acquiring person or group, including, but not limited to, debt service and
other existing financial obligations, financial obligations to be incurred in
connection with the acquisition, and other foreseeable financial obligations of
the acquiring person or group, and the possible effects of such factors upon
Holdings and its subsidiaries and the relevant constituencies of the communities
in which Holdings and its subsidiaries operate or are located, and (d) the
competence, experience, and integrity of the acquiring person or group and its
management.
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The term 'business combination' in Article VIII of Holdings' Articles of
Incorporation encompasses four categories of transactions: (1) the sale,
exchange, lease, transfer or other disposition to or with any person or group,
or any affiliate or associate of such person or group, by Holdings or any of its
subsidiaries (in a single transaction or in a series of related transactions) of
all or substantially all, or any substantial part, of its or their assets or
businesses (including, without limitation, any securities issued by a subsidiary
of Holdings); (2) the purchase, exchange, lease or other acquisition, by
Holdings or any of its subsidiaries (in a single transaction or in a series of
related transactions), of all or substantially all, or any substantial part, of
the assets or business of any person or group or any affiliate or associate of
any such person or group; (3) any merger or consolidation of Holdings or any
subsidiary thereof into or with any person or group or affiliate or associate of
such person or group, irrespective of which person or group is the surviving
entity in such merger or consolidation; and (4) the acquisition upon the
issuance thereof of beneficial ownership by any person or group of any voting
securities or securities convertible into voting securities of any subsidiary of
Holdings, or the acquisition, upon the issuance thereof, of beneficial ownership
by any person or group of any rights, warrants or options to acquire any of the
foregoing, or any combination of the foregoing, if such person or group prior to
such acquisition owned, or as a result of such acquisition would own, more than
5% of the voting securities of a subsidiary then issued and outstanding
(assuming full conversion of all securities owned or to be acquired by such
person or group which are or would be convertible into voting securities of a
subsidiary).
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF PEOPLE'S COMMON STOCK
As reflected in the following table, as of September 30, 1997, Holdings
beneficially owned 36,450,000 shares of People's Common Stock. In addition,
based on the 1997 Annual Report for the Oakmark Family of Funds dated as of
September 30, 1997, filed with the Commission by Harris Associates LP ('Harris')
on Form N-30D, two funds that are advised by Harris owned a total of 3,538,500
shares of People's Common Stock as of that date. Holdings and the two funds
advised by Harris are the only persons known to or believed by People's to be
the beneficial owner of more than 5% of the shares of People's Common Stock.
Holdings has sole voting and investment power with respect to the shares owned
by it. People's does not know how voting or investment power over the shares
owned by the two funds advised by Harris may be allocated, nor does People's
have more current information concerning the ownership of shares of People's
Common Stock by entities advised by or otherwise affiliated with Harris.
<TABLE>
<CAPTION>
PEOPLE'S COMMON STOCK
--------------------------------
TITLE PERCENT
OF NAME AND ADDRESS OF AMOUNT AND NATURE OF OF
CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ------- ------------------------------------------------------------------- -------------------- ---------
<S> <C> <C> <C>
Common People's Mutual Holdings
Bridgeport Center
850 Main Street
Bridgeport, Connecticut 06604...................................... 36,450,000 59.6%
Common Oakmark Select Fund
Oakmark Small Cap Fund
c/o Harris Associates LP
Two North LaSalle Street
Suite 500
Chicago, Illinois 60602-3790....................................... 3,538,500* 5.8%
</TABLE>
- ------------
* 698,500 shares owned by Oakmark Select Fund and 2,840,000 shares owned by
Oakmark Small Cap Fund.
SECURITY OWNERSHIP OF PEOPLE'S MANAGEMENT
The following table sets forth, as of January 7, 1998, the beneficial
ownership of People's Common Stock by each director, the Chief Executive
Officer, the four most highly compensated executive officers (other than the
Chief Executive Officer) who were serving as executive officers during the
previous fiscal year, and by all directors and executive officers as a group.
Except as indicated in the notes following the table, each person has sole
voting and investment power with respect to the shares listed as being
beneficially owned by such person.
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<TABLE>
<CAPTION>
PEOPLE'S COMMON STOCK
----------------------------------------
AMOUNT AND NATURE OF PERCENT OF
NAME AND POSITION WITH PEOPLE'S BENEFICIAL OWNERSHIP CLASS
- ---------------------------------------------------------------------- -------------------- ----------
<S> <C> <C>
James P. Biggs
Director, President................................................... 82,027(a)(b)(c) *
David E. A. Carson
Chairman and Chief Executive Officer.................................. 246,786(b)(c)(d) *
George P. Carter
Director.............................................................. 8,611 *
Joseph E. Clancy
Director.............................................................. 16,704(e) *
George R. Dunbar
Director.............................................................. 10,589(f) *
Jerry Franklin
Director.............................................................. 450 *
Eunice S. Groark
Director.............................................................. 1,500 *
Samuel W. Hawley
Director.............................................................. 12,353(g) *
Betty Ruth Hollander
Director.............................................................. 217,680(h) *
John A. Klein
Executive Vice President.............................................. 41,158(b)(c) *
Saul Kwartin
Director.............................................................. 9,000(i) *
Jack E. McGregor
Director.............................................................. 3,106(j) *
George W. Morriss
Executive Vice President and
Chief Financial Officer............................................... 32,053(b)(c)(k) *
James A. Thomas
Director.............................................................. 1,450(l) *
Louis H. Ulizio, Jr.
Executive Vice President.............................................. 74,912(b)(c) *
Wilmot F. Wheeler, Jr.
Director.............................................................. 54,336(m) *
All Directors and Executive Officers as a Group (21 persons).......... 1,047,539(b)(c)(n) 1.70%
</TABLE>
- ------------
* Denotes beneficial ownership of less than one percent of the outstanding
shares of People's Common Stock.
(a) Includes 5,434 shares held for the benefit of Mr. Biggs and his spouse in
individual retirement accounts. Mr. Biggs disclaims beneficial ownership of
shares held in his spouse's individual retirement account. Also includes
21,000 shares owned by an estate of which Mr. Biggs is the executor, and
1,764 shares held by a trust of which Mr. Biggs is the co-trustee. Mr. Biggs
became President of People's effective January 1, 1998.
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(b) Includes shares of People's Common Stock allocated under People's 401(k)
Employee Savings Plan (the 'Savings Plan') to the participants listed below
who have Savings Plan balances invested in the People's Bank Stock Fund.
<TABLE>
<CAPTION>
NAME SHARES
- ------------------------------------------------------------------------- -------
<S> <C>
James P. Biggs........................................................... 28,104
David E. A. Carson....................................................... 17,345
John A. Klein............................................................ 10,946
George W. Morriss........................................................ 9,866
Louis H. Ulizio, Jr...................................................... 14,987
All Directors and Executive Officers as a Group.......................... 161,060
</TABLE>
(c) Includes shares of People's Common Stock which the persons listed below have
the right to acquire within 60 days from January 7, 1998, whether upon the
exercise of stock options or otherwise:
<TABLE>
<CAPTION>
NAME SHARES
- ------------------------------------------------------------------------- -------
<S> <C>
James P. Biggs........................................................... 25,725
David E. A. Carson....................................................... 125,850
John A. Klein............................................................ 30,212
George W. Morriss........................................................ 20,300
Louis H. Ulizio, Jr...................................................... 59,925
All Directors and Executive Officers as a Group.......................... 398,024
</TABLE>
(d) Includes 25,338 shares owned by Mr. Carson's spouse, as to which Mr. Carson
disclaims beneficial ownership. Mr. Carson ceased serving as President of
People's effective January 1, 1998.
(e) All shares are held for the benefit of Mr. Clancy in an individual
retirement account.
(f) Includes 750 shares owned by Dr. Dunbar's spouse; 352 shares owned by his
daughter; and 397 shares held by his spouse as custodian under the
Connecticut Uniform Transfers to Minors Act.
(g) Includes 1,500 shares owned by Mr. Hawley's spouse.
(h) Includes 154,500 shares owned jointly by Mrs. Hollander and her spouse;
6,000 shares held for Mrs. Hollander's benefit in an individual retirement
account; and 57,180 shares held in an individual retirement account for the
benefit of Mrs. Hollander's spouse. Mrs. Hollander disclaims beneficial
ownership of shares owned for the benefit of her spouse.
(i) Includes 1,818 shares of People's Common Stock held by Mr. Kwartin's spouse,
and 1,764 shares owned jointly by Mr. Kwartin and his spouse.
(j) All shares are held for the benefit of Mr. McGregor in an individual
retirement account.
(k) Includes 900 shares owned by Mr. Morriss' spouse, 244 shares held by Mr.
Morriss as a custodian under the Connecticut Uniform Transfers to Minors
Act, and 243 shares owned by his son.
(l) Includes 297 shares owned by Mr. Thomas's spouse; 175 shares owned jointly
by his spouse and his daughter; and 264 shares owned by his son.
(m) Includes 32,646 shares owned by a limited partnership of which Mr. Wheeler
is a general partner, and 12,090 shares held for Mr. Wheeler's benefit in a
Keogh account.
(n) Includes shares owned by a former director of People's and by a senior
officer of People's, each of whom became an executive officer effective
January 1, 1998.
SECURITY OWNERSHIP OF NFC'S MANAGEMENT
Set forth below is certain information regarding the ownership of NFC
Common Stock as of January 5, 1998 by the directors and certain executive
officers of NFC and NSS. Each director and officer has sole voting and
investment power with respect to the shares listed as being beneficially owned
by him or her. Beneficially owned shares include those issuable within 60 days
of January 5, 1998 upon exercise of options.
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<TABLE>
<CAPTION>
PERCENT
NAME AND POSITION WITH NFC/NSS COMMON STOCK OPTIONS TOTAL OF CLASS
- ------------------------------------------------------------------------------- ------- ------- --------
<S> <C> <C> <C> <C>
James R. Brown
Senior Vice President, Lending of NSS (retired on November 21,
1997)............................................................ 137(a) 8,000(b) 8,137 .15%
Daphne P. Cannata
Vice President and Corporate Secretary of NFC; Senior Vice
President, General Administration and Corporate Secretary of
NSS.............................................................. 14,808(a) 23,600(b) 38,408 .69
Richard R. Cascio
Senior Vice President, Lending of NSS............................ 195(a) 8,650(b) 8,845 .16
Daniel R. Dennis, Jr.
Director of NFC and NSS; Chairman, President and Chief Executive
Officer of NFC and NSS........................................... 29,140(a) 58,700(b) 87,840 1.57
Richard W. Dennison
Senior Vice President, Systems and Operations of NSS............. 284(a) 9,000(b) 9,284 .17
James F. Dewey
Senior Vice President, Marketing and Branch Administration of
NSS.............................................................. 5,386 16,000(b) 21,386 .38
Paul R. Duevel
Director of NFC and NSS.......................................... 4,095 21,000(c) 25,095 .45
Anthony P. Halsey
Director of NFC and NSS.......................................... 41,195 9,000(c) 50,195 .90
Michael J. Hartl
Director of NFC and NSS; Executive Vice President, Treasurer and
Chief Financial Officer of NFC and NSS........................... 16,750(a) 24,900(b) 41,650 .75
Jeremiah J. Lowney, Jr., D.D.S.
Director of NFC and NSS.......................................... 9,000 16,000(c) 25,000 .45
Robert T. Ramsdell
Director of NFC and NSS.......................................... 2,500 16,000(c) 18,500 .33
Richard P. Reed
Director of NFC and NSS.......................................... 2,891 21,000(c) 23,891 .43
Martin C. Shapiro
Director of NFC and NSS.......................................... 34,770 21,000(c) 55,770 1.00
All directors and executive officers as a group (13 persons)....... 161,151 252,850 414,001 7.14
</TABLE>
- ------------
(a) Includes 137; 9,551; 195; 23,798; 284 and 16,750 shares of Norwich Common
Stock held by NSS's Thrift Plan for the benefit of Mr. Brown, Ms. Cannata,
Mr. Cascio, Mr. Dennis, Mr. Dennison, and Mr. Hartl, respectively.
(b) Shares issuable upon exercise of options granted pursuant to NFC's employee
stock option plans.
(c) Shares issuable upon exercise of options granted pursuant to NFC's stock
option plans for outside directors.
On a pro forma basis, using the assumptions set forth in 'COMPARATIVE
UNAUDITED PER SHARE DATA' for calculating pro forma equivalents and assuming the
persons listed in the above table exercised all Options prior to the Valuation
Date and received People's Common Stock in exchange for all of their shares of
NFC Common Stock, (i) each person and (ii) all directors and executive officers
of NFC as a group would beneficially own less than one percent of the total
number of shares of People's Common Stock outstanding after the Merger.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF NFC COMMON STOCK
As of January 5, 1998, the following person was the only person known to
NFC to be the beneficial owner of more than 5% of the outstanding shares of NFC
Common Stock. In preparing the following
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table, NFC has relied upon information supplied by such person in its Schedule
13F filed with the Commission.
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- ---------------------------------------------------------------------- ------------------------- ----------------
<S> <C> <C>
Dimensional Fund Advisors, Inc.
1099 Ocean Avenue
11th Floor
Santa Monica, CA 90401.............................................. 288,600 5.21%
</TABLE>
On a pro forma basis, using the assumptions set forth in 'COMPARATIVE
UNAUDITED PER SHARE DATA' for calculating pro forma equivalents and assuming the
entity listed in the above table received People's Common Stock in exchange for
all of its shares of NFC Common Stock, such entity would beneficially own less
than one percent of the total number of shares of People's Common Stock
outstanding after the Merger.
COMPARATIVE RIGHTS OF SHAREHOLDERS OF PEOPLE'S AND NFC
Upon the consummation of the Merger as contemplated in the Merger
Agreement, the NFC Shareholders who receive shares of People's Common Stock in
full or partial exchange for their shares of NFC Common Stock will become
shareholders of People's. Since People's is governed by the laws of Connecticut
and NFC is a Delaware corporation, NFC Shareholders who receive People's Common
Stock will become subject to the privileges and restrictions provided in the
CTBL and the CTBCA. In addition, the rights presently enjoyed by NFC
Shareholders under the relevant provisions of the Certificate of Incorporation
of NFC (the 'NFC Certificate') and the Bylaws of NFC (the 'NFC Bylaws') differ
in some respects from the rights they would have as shareholders of People's
under the relevant provisions of the People's Articles and the People's Bylaws.
This summary contains a list of the material differences but is not meant to be
relied upon as an exhaustive list or a detailed description of the provisions
discussed, and is qualified in its entirety by reference to the People's
Articles, the People's Bylaws, the NFC Certificate, the NFC Bylaws, the CTBL,
the CTBCA, the DGCL, and the NFC Rights Agreement. The summary does not discuss
any rights or restrictions arising under federal law.
CAPITALIZATION
Under the NFC Certificate, the capitalization of NFC consists of 25,000,000
shares of NFC Common Stock and 1,000,000 shares of preferred stock, par value
$0.01 per share. Each share of NFC Common Stock has attached to it a NFC Right.
See ' -- Rights Plan.' Under the DGCL, changes in authorized capital stock are
not subject to regulatory approval and there is no minimum amount of required
capital stock.
Under the People's Articles, the capitalization of People's consists of
100,000,000 shares of People's Common Stock and 10,000,000 shares of preferred
stock, without par value. Under the CTBL, the Commissioner must approve an
increase or decrease in People's authorized capital stock or the par value
thereof. In addition, the authorized capital stock of People's could not be
reduced below the minimum requirements for a new capital stock bank, unless
otherwise approved by the Commissioner.
Under both Connecticut and Delaware law, shares may be issued from time to
time to such persons and for such consideration as the board of directors may
determine, without requiring further action by the shareholders, unless such
action is required by applicable law. For a discussion of certain limitations on
the ability of People's Board to authorize the issuance of additional shares of
People's Common Stock or securities convertible into shares of People's Common
Stock, see ' -- Preemptive Rights.'
RIGHTS PLAN
On November 21, 1989, the NFC Board declared a dividend distribution of one
NFC Right for each outstanding share of NFC Common Stock. Subsequent to that
date and prior to the occurrence of a Distribution Date (described below), NFC
Rights are deemed to be delivered with each share of NFC Common Stock issued by
NFC. Each NFC Right entitles the registered holder to purchase from NFC a unit
consisting of one one-hundredth of a share (a 'Unit') of Series A Preferred
Stock, at a purchase
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price of $45 per Unit, subject to adjustment. The description and terms of the
NFC Rights are summarized below and are set forth in the NFC Rights Agreement.
At the present time, the NFC Rights are attached to all NFC Common Stock
certificates representing outstanding shares, and no separate NFC rights
certificates ('NFC Rights Certificates') have been or will be distributed. The
NFC Rights will separate from the NFC Common Stock and a Distribution Date will
occur upon the earliest of (i) 10 business days following a public announcement
that a person or group of affiliated or associated persons (an 'Acquiring
Person') has acquired, or obtained the right to acquire, beneficial ownership of
20 percent or more of the outstanding shares of NFC Common Stock (the 'Stock
Acquisition Date'); (ii) 10 business days (or such later date as may be
determined by the NFC Board) following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 20
percent or more of such outstanding shares of NFC Common Stock; and (iii) 10
business days following the determination by the NFC Board, upon a determination
of at least a majority of the unaffiliated 'Continuing Directors' (as defined
below) who are not officers of NFC, that, with respect to any person who has,
alone or together with his affiliates or associates, become the beneficial owner
of 10 percent or more of the shares of NFC Common Stock outstanding (a) such
beneficial ownership by such person is intended to cause NFC to repurchase the
NFC Common Stock beneficially owned by such person or to cause pressure on NFC
to take action or enter into a transaction or series of transactions intended to
provide such person with short-term financial gain under circumstances where
such directors determine that the best long-term interests of NFC and its
stockholders would not be served by taking such action or entering into such
transaction or series of transactions at that time or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with customers,
impairment of NFC's ability to maintain its competitive position or impairment
of NFC's business reputation or ability to deal with governmental agencies) on
the business or prospects of NFC (any such person being referred to herein and
in the NFC Rights Agreement as an 'Adverse Person').
The NFC Rights are not exercisable until the Distribution Date and will
expire at the close of business on December 4, 1999 unless earlier redeemed by
NFC as described below or except as provided below.
Effective September 3, 1997, the NFC Rights Agreement was amended to
provide that no holder of a NFC Right or NFC Right Certificate or any NFC Common
Stock may exercise any NFC Right prior to the Effective Time of the Merger and
that all of the NFC Rights shall expire and shall cease to be exercisable at the
Effective Time. See 'THE MERGER -- Amendment to the NFC Rights Agreement.'
In addition, the amendment provided that neither Holdings nor People's
shall be deemed to be an Acquiring Person or an Adverse Person by virtue of
entering into the Merger Agreement or the Stock Option Agreement, or exercising
the Option granted by the Stock Option Agreement or consummating the Merger.
In the event that (i) a person becomes the beneficial owner of 20 percent
or more of the then outstanding shares of NFC Common Stock (except pursuant to
an offer for all outstanding shares of NFC Common Stock which a majority of the
unaffiliated Continuing Directors who are not officers of NFC determine to be
fair to and otherwise in the best interests of NFC and its stockholders), or
(ii) the NFC Board determines, upon the determination by at least a majority of
the unaffiliated Continuing Directors who are not officers of NFC, that a person
is an Adverse Person, each holder of a NFC Right will thereafter have the right
to receive, upon exercise of such NFC Right, NFC Common Stock (or, in certain
circumstances, cash, property or other securities of NFC) having a value (based
on the lowest closing price of NFC Common Stock during the twelve-month period
preceding such event) equal to two times the exercise price of the NFC Right.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all NFC Rights that are, or (under certain
circumstances specified in the NFC Rights Agreement) were, beneficially owned by
any Acquiring Person or Adverse Person will be null and void. However, NFC
Rights are not exercisable following the occurrence of either of the events set
forth above until such time as the NFC Rights are no longer redeemable by NFC as
set forth below.
In the event that, at any time following the Stock Acquisition Date or the
determination that someone is an Adverse Person (i) NFC is acquired in a merger
or other business combination
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transaction in which NFC is not the surviving company or in which it is the
surviving company but the NFC Common Stock is changed or exchanged (other than a
merger which follows an offer described in the preceding paragraph) or (ii) more
than 50 percent of NFC's assets, cash flow or earning power is sold or
transferred, each holder of a NFC Right (except NFC Rights which previously have
been voided as set forth above) shall thereafter have the right to receive, upon
exercise of such NFC Right, common stock of the acquiring company having a value
equal to two times the exercise price of the NFC Right. The events set forth in
this paragraph and in the preceding paragraph are referred to as the 'Triggering
Events.'
In general, at any time until 10 business days following the Stock
Acquisition Date, NFC may redeem the NFC Rights in whole, but not in part, at a
price of $.01 per NFC Right (payable in cash, NFC Common Stock or other
consideration deemed appropriate by the NFC Board). Under certain circumstances
set forth in the NFC Rights Agreement, the decision to redeem the NFC Rights
will require the concurrence of a majority of the Continuing Directors. NFC may
not redeem the NFC Rights if the NFC Board has previously declared a person to
be an Adverse Person. Immediately upon the action of the NFC Board ordering
redemption of the NFC Rights, the NFC Rights will terminate, and the only right
of the holders of NFC Rights will be to receive the $.01 redemption price.
The term 'Continuing Directors' means any member of the NFC Board who was a
member of the NFC Board prior to the date of the NFC Rights Agreement, and any
person who is subsequently elected to the NFC Board if such person is
recommended or approved by a majority of the Continuing Directors, but will not
include an Acquiring Person, an Adverse Person, or an affiliate or associate of
any such Person or any representative of any of the foregoing.
Until a NFC Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of NFC including, without limitation, the right to vote
or to receive dividends.
Other than those provisions relating to the principal economic terms of the
NFC Rights, any of the provisions of the NFC Rights Agreement may be amended by
the NFC Board prior to the Distribution Date. After the Distribution Date, the
provisions of the NFC Rights Agreement may be amended by the NFC Board (in
certain circumstances, with the concurrence of the Continuing Directors) in
order to cure any ambiguity, to make changes which do not adversely affect the
interest of holders of NFC Rights, or to shorten or lengthen any time period
under the NFC Rights Agreement; provided, however, that no amendment to adjust
the time period governing redemption shall be made at such time as the NFC
Rights are not redeemable.
The NFC Rights have certain anti-takeover effects. The NFC Rights will
cause substantial dilution to a person or group that attempts to acquire NFC in
a manner defined as a Triggering Event unless the offer is conditioned on a
substantial number of NFC Rights being acquired. The NFC Rights, however, should
not affect any prospective offeror willing to make an offer for all outstanding
shares of NFC Common Stock and other voting securities at a fair price and
otherwise in the best interests of NFC and its shareholders as determined by the
NFC Board or affect any prospective offeror willing to negotiate with the NFC
Board. The NFC Rights should not interfere with any merger or other business
combination approved by the NFC Board since the NFC Board may, at its option, at
any time until ten business days following the Stock Acquisition Date, redeem
all, but not less than all, of the then outstanding NFC Rights at the $.01
redemption price. In addition by virtue of the amendments described above, the
NFC Rights will not interfere with the Merger.
People's does not maintain any plan or arrangement similar to the NFC
Rights Agreement, and there are not outstanding or issuable to the holders of
People's Common Stock any rights similar to the NFC Rights.
DIVIDENDS AND REPURCHASES
Under the DGCL, NFC may, unless otherwise restricted by its certificate of
incorporation, pay dividends in cash, property or shares of capital stock out of
surplus or, if no surplus exists, out of net profits for the fiscal year in
which declared or out of net profits for the preceding fiscal year (provided
that such payment will not reduce capital below the amount of capital
represented by all classes of stock having a preference upon the distribution of
assets).
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Under the CTBL, People's may, except for dividends payable in shares of its
capital stock, only declare a dividend from its net profits, provided that the
total of all dividends declared by People's in any calendar year cannot, unless
specifically approved by the Commissioner, exceed the total of its net profits
of that year combined with its retained net profits of the preceding two years.
Subject to the approval of the Commissioner, People's may declare and pay stock
dividends in its own authorized but unissued shares to the extent of its surplus
earnings, provided such shares are issued at not less than the par value
thereof, if any.
Under the DGCL, a corporation may repurchase or redeem its shares only out
of surplus and only if such purchase does not impair capital. However, a
corporation may redeem preferred stock out of capital if such shares will be
retired upon redemption and the stated capital of the corporation is thereupon
reduced in accordance with the DGCL.
Under the CTBL, People's may, subject to the approval of the Commissioner,
acquire and dispose of its own stock, provided no such acquisition reduces
People's equity capital below the minimum required for a capital stock
Connecticut bank.
Under Delaware law, shareholders are not liable for any improper dividends,
repurchases or redemptions made by a corporation.
Connecticut law does not specifically impose, or protect a shareholder
from, personal liability with respect to improper dividends, repurchases or
redemptions made by a corporation. However, under the CTBCA, a shareholder may
be personally liable for actions taken by a corporation to the extent of such
shareholder's own acts or conduct.
ANTI-GREENMAIL PROVISION
The NFC Certificate prohibits NFC, under certain circumstances, from
purchasing shares of NFC's capital stock from an Interested Securityholder
unless the purchase is approved by the affirmative vote of a majority of the
voting stock outstanding and entitled to vote thereon, excluding voting stock
beneficially held by the Interested Securityholder. Voting stock means the
issued and outstanding shares of NFC entitled to vote on the election of
directors. An Interested Securityholder is a person who has beneficially owned
3% or more of NFC Common Stock for less than two years.
It has become a common tactic for certain speculators to acquire a block of
stock in a company, and then attempt to coerce management into repurchasing
these shares, typically at a substantial premium over the market price, by
engaging in various disruptive tactics such as the threat of a proxy fight
and/or a bid to take over control of the company. If the company succumbs to
this tactic, commonly known as 'greenmail,' and repurchases the speculator's
stock interest, valuable corporate resources may be diverted to the benefit of
one shareholder to the detriment of the company and the other shareholders of
the company.
The anti-greenmail provision is intended to discourage the accumulation of
holdings in NFC by interests disruptive to NFC and its shareholders by
transferring to the shareholders the decision-making power for any such
repurchases which reach or exceed the 3% threshold and by putting the decision
for this use of corporate assets in the hands of those affected by a repurchase
decision.
The anti-greenmail provision may have the effect of discouraging
accumulations of the capital stock of NFC that could be beneficial to NFC's
shareholders. The NFC Board believes, however, that the potential benefits of
the provision to shareholders outweigh any possible disadvantages that may
occur.
People's Articles contain no similar anti-greenmail provision with respect
to purchases of People's Common Stock from an interested securityholder of
People's.
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION WITHOUT MEETING
Pursuant to the DGCL, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken by stockholders of a
Delaware corporation may be taken without a meeting and without a stockholder
vote, if a written consent setting forth the action to be taken is signed by the
holders of shares of outstanding stock having the requisite number of votes that
would be necessary to authorize such action at a meeting of stockholders. Under
the NFC Certificate, any action
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required or permitted to be taken by the stockholders of NFC must be effected at
a duly called annual or special meeting of such holders and may not be effected
by any consent in writing. Under the DGCL and the NFC Bylaws, a special meeting
of stockholders of NFC may be called at any time by the Chairman or the NFC
Board. The foregoing provisions of the NFC Certificate and the NFC Bylaws are
intended to give all of the stockholders of NFC the opportunity to participate
in determining any proposed action and would prevent a majority or other
designated proportion of the voting power of NFC from using the written consent
procedure to take stockholder action.
The CTBCA permits shareholder action (other than in connection with the
election of directors) to be taken pursuant to less than unanimous written
consent, if the corporation's certificate of incorporation so allows and if the
shareholders signing the consent hold in the aggregate the percentage of shares
that would be required to approve the proposed action if presented for decision
at a regular or special meeting of shareholders. Written notice of proposed
action to be taken by less than unanimous written consent must be sent to each
shareholder entitled to vote, at least 20 days before the proposed action is to
be taken. The proposed action must be submitted to a vote at a shareholders'
meeting, and may not be taken by less than unanimous written consent, if the
holders of at least 10% of the shares entitled to vote object in writing to the
taking of such action by less than unanimous written consent. People's Articles
permit shareholder action by less than unanimous written consent.
Under Connecticut law, special meetings of People's shareholders may be
called by the board of directors or by such other persons as are authorized to
do so by the Articles or the Bylaws of People's. The CTBCA also requires that a
special meeting of shareholders be called upon the written request to the
corporate secretary from the holders of at least 10% of the shares entitled to
vote on a particular issue.
SHAREHOLDER NOMINATIONS
Nominations of persons for election to the NFC Board may be made by the NFC
Board or by any stockholder of any outstanding class of capital stock of NFC
entitled to vote for the election of directors at a stockholder meeting who
complies with certain notice procedures set forth in the NFC Bylaws. Such
nominations, other than those made by or at the direction of the NFC Board, must
be made pursuant to timely notice in writing to the Secretary of NFC. To be
timely, a stockholder's notice must be delivered to or mailed to the Secretary
of NFC not less than 60 calendar days nor more than 90 calendar days prior to
the meeting; provided, however, that in the event that less than 50 calendar
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be mailed or
given to the Secretary of NFC not later than the close of business on the
seventh day following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made. A stockholder's notice must set
forth (a) as to each person whom the stockholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of NFC which are beneficially
owned by such person and (iv) any other information relating to such person that
is required to be disclosed in solicitation of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including without limitation such person's written
consent to being named in the proxy statement as nominee and to serving as a
director if elected); and (b) as to the stockholder giving the notice (i) the
name and address, as they appear on NFC's books, of such stockholder, and (ii)
the class and number of shares of NFC that are beneficially owned by such
stockholder.
Nominations of persons for election as directors of People's may be made
only by the People's Board or by an owner of record of People's Common Stock. To
be valid, shareholder nominations must comply with the procedures set forth in
People's Articles. Nominations for consideration at an annual meeting must be
received by the corporate secretary of People's at least 120 days in advance of
the meeting date; nominations for consideration at any special meeting of
shareholders must be received by the corporate secretary by the close of
business on the seventh day following the earlier of (a) the date on which
notice of the meeting was first given to shareholders, or (b) the date on which
a public announcement of the meeting is first made. Each such notice of
nomination must include: (1) the name and address of each shareholder of record
who intends to appear in person or by proxy to make the
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nomination, and the name and address of the person or persons to be nominated;
(2) a description of all arrangements or understandings between the shareholder
and each proposed nominee and any other person or persons (naming them),
pursuant to which the nomination is to be made; (3) such other information
regarding the prospective nominee as would have been required to be included in
a proxy statement filed pursuant to the proxy rules of the Commission; and (4)
the consent of the proposed nominee to serve as a director of People's if
nominated and elected.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
Under the NFC Certificate, certain business combinations, including
mergers, consolidations, share exchanges, sales of all or substantially all
assets, liquidations, dissolutions or reclassifications, between NFC and the
Interested Stockholder must meet certain fair price and procedural provisions.
An Interested Stockholder is a holder of 10% or more of the voting power of the
outstanding shares of voting stock of NFC. If the provisions are not met, the
holders of at least 80% of the voting power of the outstanding shares of the
voting stock and two-thirds of the voting power of the outstanding shares of the
voting stock other than those held by the Interested Stockholder must approve
the transaction. Alternatively, if the transaction is approved by the NFC Board
before the Interested Stockholder first became an Interested Stockholder, the
foregoing voting requirements would not apply. Additionally, such voting
requirements will not be applicable if certain fair price and procedural
provisions are met. In general, the fair price provisions require that
stockholders whose stock is acquired in a business combination be paid at least
as much as the highest price the Interested Stockholder paid for shares within
the two prior years or the price that the Interested Stockholder paid in the
transaction by which the Interested Stockholder first became an Interested
Stockholder, whichever is higher. The procedural provisions include prohibitions
against omissions of preferred stock dividends, reductions in common stock
dividends and acquisitions by the Interested Stockholder of more stock of NFC.
In the event that the fair price and procedure requirements were met or the
requisite approval of the NFC Board were given with respect to a particular
business combination, the normal voting requirements of the DGCL would apply.
Under Delaware law the following corporate acts require the approval by a
majority of the outstanding stock of the corporation entitled to vote thereon:
(i) a merger or consolidation, (ii) an amendment to the NFC Certificate or NFC
Bylaws, (iii) dissolution of the corporation or (iv) the sale, lease or exchange
of all or substantially all of the property or assets of the corporation. A sale
of less than substantially all of the assets of NFC, a merger of NFC with a
company in which it owns 90% or more of the outstanding capital stock or a
reclassification of NFC's securities not involving an amendment to the NFC
Certificate would not require stockholder approval.
The foregoing fair price and procedural provisions do not apply to the
Merger.
For a discussion of provisions of the CTBCA, federal law, People's Articles
and Bylaws, and Holdings' Articles and Bylaws that may affect the procedures to
be followed in connection with a merger, consolidation or asset sale involving
People's, see 'PEOPLE'S CAPITAL STOCK -- Certain Restrictions on Acquisitions of
People's Capital Stock.' Under the CTBL, the merger or consolidation of People's
with any other entity (whether or not People's is the surviving entity), or the
sale of substantially all of People's assets, would require approval by a
majority of the members of People's Board, and by the holders of two-thirds of
the outstanding shares of each class of People's capital stock, whether or not
such class of stock would ordinarily be entitled to vote. This is more
restrictive than the DGCL, under which shareholder approval of a merger in which
the Delaware corporation would be the surviving entity is not required in
certain situations.
DISSENTERS' RIGHTS
The DGCL provides dissenters' rights of appraisal to stockholders of a
corporation such as NFC in a merger or consolidation. Where the right of
appraisal is available to a stockholder objecting to such a transaction,
appraisal is generally his or her exclusive remedy as holder of such shares with
respect to a claim of failure to pay a fair price for such shares in connection
with such transactions. See 'DISSENTERS' RIGHTS'.
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The CTBL requires banks to provide dissenters' appraisal rights pursuant to
the CTBCA in a merger or consolidation, including transactions in which the bank
would be the surviving entity. See 'DISSENTERS' RIGHTS'. Shareholders of
People's consequently would be entitled to dissenters' appraisal rights in
situations in which NFC's shareholders would not have such rights, if NFC and
People's were in the same relative position in a particular transaction.
PREEMPTIVE RIGHTS
Under the NFC Certificate, holders of NFC Common Stock do not have
preemptive rights to subscribe for or purchase shares of any class of NFC
capital stock now or hereafter authorized. Without preemptive rights, a
stockholder's ownership of NFC is subject to dilution if additional shares are
issued by NFC.
The holders of People's Common Stock generally have preemptive rights with
respect to the issuance by People's of additional shares of Common Stock or
securities convertible into shares of Common Stock. Such rights may be waived by
a shareholder. Preemptive rights do not apply, however, if shares of Common
Stock are to be issued in certain specified types of transactions, including a
transaction (such as the Merger) where shares are to be issued in exchange for
consideration other than cash.
DISSOLUTION
Under Delaware law, voluntary dissolution of NFC requires the adoption of a
resolution by a majority of the NFC Board and by the affirmative vote of the
majority of the holders of the voting power of the outstanding shares entitled
to vote thereon.
Under Connecticut law, the voluntary dissolution of People's may be
effected by adoption of a resolution by the Board of Directors to that effect,
if such resolution is approved by the holders of at least two-thirds of the
shares of People's Common Stock and by the Commissioner.
BOARD OF DIRECTORS
Under the NFC Certificate, NFC is managed by a Board of Directors
consisting of not fewer than three nor more than 18 directors. The NFC Board is
divided into three classes. The term of office of one class expires each year.
The division of the NFC Board into three classes has the effect of making it
more difficult to change the composition of the NFC Board. At least two
stockholder meetings will be required for stockholders to effect a change in
control of the NFC Board. The longer period required to elect a majority of the
NFC Board will help to assure continuity and stability of NFC's management and
policies. The additional time required to change control of the NFC Board,
however, may tend to perpetuate incumbent management and may discourage certain
tender offers, including offers which some stockholders may feel would be in
their best interests.
The People's Bylaws provide for management of People's by a Board of
Directors consisting of at least nine but no more than 16 members, with the
precise number to be established from time to time by action of the Board. The
People's Board, like the NFC Board, is divided into three classes, with the term
of one class expiring each year at the People's annual meeting.
REMOVAL OF DIRECTORS
The NFC Bylaws provide that any director may be removed from office at any
time, with cause, by the concurrent vote of the holders of not less than 80% of
the issued and outstanding shares entitled to vote, at any meeting of
stockholders called for that purpose. If there is an Interested Stockholder, the
vote must include not less than two-thirds of the vote held by stockholders
other than the Interested Stockholder. 'Cause' means either conviction of a
felony or gross negligence or willful misconduct in the performance of a duty to
NFC as determined in good faith by a vote of not less than a majority of the NFC
Board.
A director of People's may be removed from office at any time, with or
without cause, by the affirmative vote of the holders of 51% of the shares of
stock entitled to vote in the election of directors.
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AMENDMENTS TO CERTIFICATE OF INCORPORATION
In general, any amendment of the NFC Certificate will require the approval
of the holders of only a majority of the outstanding shares of NFC Common Stock
entitled to vote thereon. The amendment, however, of certain provisions of the
NFC Certificate, including those dealing with the classification of the NFC
Board, the calling of special meetings of stockholders, business combinations
with Interested Stockholders of NFC, the filling of vacancies on the NFC Board,
removal of directors, notice of stockholder nominations of candidates for the
election of directors, the taking of stockholders' actions by written consent,
anti-greenmail, the limitation on acquisitions of more than 10% of the voting
stock of NFC, the addition of an article imposing cumulative voting in the
election of directors, and any amendment of the procedure for amending the
foregoing provisions, must be approved by the affirmative vote of the holders of
not less than 80% of the outstanding NFC Common Stock. If there is an Interested
Stockholder, such 80% vote must include the affirmative vote of not less than
two-thirds of the voting power of the NFC Common Stock held by stockholders
other than the Interested Stockholder.
In general, any amendment to the People's Articles will require the
approval of the holders of a majority of the outstanding shares of People's
Common Stock. An amendment changing the name of People's, however, requires
approval by the holders of two-thirds of the outstanding shares of Common Stock.
In addition, because People's is a state-chartered capital stock bank, any
amendment to the People's Articles which changes the number of shares or par
value of the authorized capital stock of People's, or which would effect a name
change, must be approved by the Commissioner.
AMENDMENTS TO BYLAWS
The DGCL provides that the power to adopt, amend or repeal bylaws shall be
in the stockholders entitled to vote, provided that any corporation may, in
addition, in its certificate of incorporation, confer power to adopt, amend, or
repeal bylaws upon the directors. The NFC Certificate provides that the NFC
Board has the power from time to time to adopt, amend or repeal the NFC Bylaws;
however, the affirmative vote of 80% of the voting power of the issued and
outstanding shares entitled to vote thereon is required to amend the NFC Bylaw
provisions dealing with special meetings, the classification of the NFC Board,
stockholder nomination of director candidates, removal of directors, filling of
vacancies on the NFC Board and the amendment of the NFC Bylaws. If there is an
Interested Stockholder, such 80% vote must include the affirmative vote of not
less than two-thirds of the voting power of the issued and outstanding shares
entitled to vote thereon held by stockholders other than the Interested
Stockholder.
People's Bylaws may be amended by majority action of the People's Board.
Further, the People's Bylaws may be amended by affirmative vote of the holders
of a majority of the shares of People's Common Stock. Any action taken by the
shareholders with respect to the amendment of the People's Bylaws will prevail
over any inconsistent action taken by the Board of Directors with respect to the
Bylaws.
LIMITATION OF LIABILITY
The DGCL permits a corporation to include in its certificate of
incorporation a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that the provision does not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct as a knowing violation
of law, (iii) relating to the unlawful payment of a dividend or unlawful stock
purchase or redemption, or (iv) for transactions for which the director derived
an improper personal benefit. The NFC Certificate contains such a provision.
Under Delaware common law, a director's legal obligations to a corporation
and its stockholders include a duty of care. The duty of care requires that a
director act on an informed basis with due care and diligence. Absent the above
provisions permitted by Delaware law, directors can be held liable under
Delaware law for 'gross negligence' in connection with decisions made in the
performance of
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their duty of care and, in addition, there exists case law in Delaware which
suggests that directors can be held liable for 'simple negligence' in suits
alleging loss to the corporation due to a director's inattention to a particular
matter. Under the NFC Certificate, a Director would not be personally liable for
failure to satisfy his duty of care under either standard. However, the
liability of a Director would otherwise remain unchanged under Delaware law.
Thus, a Director would still be liable for a breach of the duty of loyalty to
NFC, a failure to act in good faith, intentional misconduct, a knowing violation
of law, and improper personal benefit or for declaring an illegal dividend or
stock purchase or redemption. Moreover, the NFC Certificate would not relieve
Directors of personal liability for any actions taken in their capacity as
officers of NFC and would have no effect on the availability of equitable
remedies, such as an injunction or rescission, when Directors breach their duty
of care. However, equitable remedies may not be available to stockholders as a
practical matter. For example, a stockholder may not learn of actions by the NFC
Board in time to obtain an effective injunction against such actions. The NFC
Certificate also would not affect a Director's liability based solely on
violations of the federal securities laws, nor would it affect a Director's
liability to parties other than NFC or the stockholders of NFC.
Under Connecticut common law, a director's legal obligations to the
corporation and its shareholders also include a duty of care. The CTBL permits a
bank to include in its charter a provision limiting the personal liability of
its directors, except where the action (i) involves a knowing and culpable
violation of law; (ii) enables a director or an associate to receive an improper
economic gain; (iii) shows a lack of good faith and a conscious disregard for
the duty of the director to the bank; (iv) constitutes a sustained and unexcused
pattern of inattention that amounts to an abdication of the director's duty to
the bank; or (v) creates liability on the director's part to the bank for the
violation or assent to the violation of any provision of the CTBL. People's
Articles contain such a provision limiting the personal liability of directors.
OTHER DIFFERENCES
There are certain practical differences between the position of an owner of
shares of capital stock in the majority-owned banking subsidiary of a mutual
holding company (such as People's) and the position of an owner of shares of
capital stock in a bank holding company (such as NFC) that is not governed by
the provisions of the CTBL applicable to mutual holding companies. See
'INFORMATION ABOUT PEOPLE'S -- Holding Company Structure' for a discussion of
the mutual holding company relationship.
DISSENTERS' RIGHTS
NFC. NFC Shareholders are entitled to dissenters' appraisal rights under
Section 262 of the DGCL. The following discussion is not a complete statement of
the law pertaining to dissenters' appraisal rights under the DGCL, and is
qualified in its entirety by the full text of Section 262, which is reprinted in
its entirety as Appendix G to this Joint Proxy Statement-Offering Memorandum.
All references in Section 262 and in this summary to a 'shareholder' are to the
record holder of the shares of NFC Common Stock.
Under the DGCL, NFC Shareholders who follow the procedures set forth in
Section 262 will be entitled to have their shares of NFC Common Stock appraised
by the Delaware Court of Chancery and to receive payment of the 'fair value' of
such shares, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, as
determined by such court.
Under Section 262, where a merger is to be submitted for approval at a
meeting of shareholders, the corporation, not less than 20 days prior to the
meeting, must notify each of its shareholders who was such on the record date of
such meeting with respect to shares for which dissenters' appraisal rights are
available under Section 262, that dissenters' appraisal rights are available and
include in such notice a copy of Section 262. ANY SHAREHOLDER WHO WISHES TO
EXERCISE SUCH APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE HIS OR HER RIGHT TO DO
SO SHOULD REVIEW THE FOLLOWING DISCUSSION AND APPENDIX G CAREFULLY
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BECAUSE FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SPECIFIED WILL
RESULT IN THE LOSS OF APPRAISAL RIGHTS UNDER THE DGCL.
An NFC Shareholder wishing to exercise dissenters' appraisal rights must
deliver to NFC, before the taking of the vote on the Merger Agreement, a written
demand for appraisal of his or her shares of NFC Common Stock. Written demands
for appraisal should be addressed to: Norwich Financial Corp., 4 Broadway,
Norwich, Connecticut 06360, Attention: Corporate Secretary. The written demand
for appraisal should specify the shareholder's name and mailing address and that
the shareholder is thereby demanding appraisal of his or her shares of NFC
Common Stock. A vote against the Merger will not constitute such a demand. AN
NFC SHAREHOLDER WHO VOTES IN FAVOR OF THE MERGER AGREEMENT WILL BE PRECLUDED
FROM EXERCISING APPRAISAL RIGHTS.
Only a holder of record of shares of NFC Common Stock is entitled to assert
appraisal rights for the shares of NFC Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as his or her name appears on the stock
certificates. If the shares of NFC Common Stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of NFC Common
Stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand should be executed by or on behalf of all joint
owners. An authorized agent may execute a demand for appraisal on behalf of a
holder of record; however, the agent must identify the record owner or owners
and expressly disclose the fact that, in executing the demand, the agent is
agent for such owner or owners. A record holder such as a broker who holds
shares of NFC Common Stock as nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of NFC Common Stock held for other
beneficial owners; in such case, the written demand should set forth the number
of shares of NFC Common Stock as to which appraisal is sought, and where no
number of shares of NFC Common Stock is expressly mentioned, the demand will be
presumed to cover all shares of NFC Common Stock held in the name of the record
owner. Shareholders who hold their shares of NFC Common Stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such a nominee.
Within 120 days after the Effective Time, People's or any shareholder who
has complied with Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the shares of NFC Common
Stock of all shareholders who have complied with Section 262. It is the
obligation of the shareholders to initiate all necessary action to perfect their
appraisal rights within the time prescribed in Section 262. A shareholder may
withdraw his or her demand for appraisal and may accept the applicable Per Share
Stock Consideration or Per Share Cash Consideration at any time within 60 days
after the Effective Time. Such shareholder's shares of NFC Common Stock will be
treated as No Election Shares for purposes of the allocation provisions of the
Merger Agreement.
Within 10 days after the Effective Time of the Merger, People's will notify
each NFC Shareholder who complied with the procedures described in Section 262
and has not voted in favor of the Merger that the Merger has become effective.
Within 120 days after the Effective Time of the Merger, any shareholder who
has complied with the requirements of Section 262, upon written request, will be
entitled to receive from People's a statement setting forth the aggregate number
of shares not voted in favor of the Merger Agreement and with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. Such written statement shall be mailed to the shareholder within 10
days after his or her written request for such a statement is received by
People's or within 10 days after expiration of the period for delivery of
demands for appraisal, whichever is later.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the shareholders
entitled to appraisal rights and will appraise the 'fair value' of their shares
of NFC Common Stock, exclusive of any element of value arising from the
accomplishment or expectation of the Merger. SHAREHOLDERS CONSIDERING SEEKING
APPRAISAL SHOULD BE AWARE THAT THE FAIR VALUE OF THEIR SHARES OF NFC COMMON
STOCK AS DETERMINED UNDER SECTION 262 COULD BE MORE THAN, THE SAME AS OR LESS
THAN THE CONSIDERATION THAT WOULD HAVE BEEN RECEIVED IN THE MERGER AND THAT
APPRAISALS AND OPINIONS FROM FINANCIAL ADVISORS AS TO FAIRNESS FROM A FINANCIAL
POINT OF VIEW ARE
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NOT NECESSARILY OPINIONS AS TO FAIR VALUE UNDER SECTION 262. The Delaware
Supreme Court has stated that 'proof of value by any techniques or methods which
are generally considered acceptable in the financial community and otherwise
admissible in court' may be considered in the appraisal proceedings. The Court
will also determine the amount of interest, if any, to be paid upon the amounts
to be received by persons whose shares of NFC Common Stock have been appraised.
The costs of the action may be determined by the Court and taxed upon the
parties as the Court deems equitable. Upon application of a shareholder, the
Court may also order that all or a portion of the expenses incurred by any
shareholder in connection with an appraisal, including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts utilized in the
appraisal proceeding, be charged pro rata against the value of all of the shares
of NFC Common Stock entitled to appraisal.
Any holder of NFC Common Stock who has duly demanded an appraisal in
compliance with Section 262 will not, after the Effective Time, be entitled to
vote the shares of NFC Common Stock subject to such demand for any purpose or be
entitled to the payment of dividends or other distributions on those shares
(except dividends or other distributions payable to holders of record of shares
of NFC Common Stock as of a date prior to the Effective Time).
If any shareholder who demands appraisal of his or her shares of NFC Common
Stock under Section 262 fails to perfect, or effectively withdraws or loses, the
right to appraisal, as provided in the DGCL, the shares of NFC Common Stock
beneficially owned by such shareholder will be converted into the right to
receive the applicable Per Share Stock Consideration or Per Share Cash
Consideration pursuant to the terms of the Merger Agreement. See 'THE
MERGER -- Merger Consideration.' A shareholder will fail to perfect, or
effectively lose or withdraw, the right to appraisal if the shareholder fails to
follow the procedures set forth in Section 262, including the failure to file a
petition for appraisal within 120 days after the Effective Time, or if the
shareholder delivers to NFC a written withdrawal of his or demand for appraisal
and acceptance of the Merger Agreement, except that any such attempt to withdraw
made more than 60 days after the Effective Time will require the written
approval of People's. Notwithstanding the foregoing, no appraisal proceeding in
the Court of Chancery may be dismissed without the prior approval of such Court.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH
EVENT A SHAREHOLDER WILL BE ENTITLED TO RECEIVE THE APPLICABLE PER SHARE STOCK
CONSIDERATION OR PER SHARE CASH CONSIDERATION PURSUANT TO THE TERMS OF THE
MERGER AGREEMENT, SEE 'THE MERGER -- MERGER CONSIDERATION'). FOR PURPOSES OF THE
ALLOCATION PROVISIONS OF THE MERGER AGREEMENT, SUCH SHAREHOLDER'S SHARES OF NFC
COMMON STOCK WILL BE TREATED AS NO ELECTION SHARES.
People's. Connecticut law provides appraisal rights for dissenting
shareholders of People's under Section 36a-125(h) of the CTBL, as amended, and
Sections 33-855 to 33-872, inclusive, of the CTBCA, as amended.
Under Section 36a-125(h) of the CTBL, a holder of People's Common Stock who
dissents from the Merger may assert dissenters' appraisal rights under the
applicable provisions of the CTBCA. To exercise dissenters' appraisal rights
under Sections 33-855 to 33-872 of the CTBCA, a People's Shareholder must
satisfy all of the following conditions:
(i) The People's Shareholder must deliver to People's a written notice
of his or her intent to demand payment for his or her shares of People's
Common Stock if the Merger is consummated, before the vote on the Merger is
taken at the People's Special Meeting. The demand must be in addition to
and separate from any proxy or vote against the Merger and must be
submitted to People's Bank, Bridgeport Center, 850 Main Street, Bridgeport,
Connecticut 06604, Attention: Corporate Secretary;
(ii) The People's Shareholder must not vote any of his or her shares
of People's Common Stock in favor of the Merger; and
(iii) The People's Shareholder must deliver to People's, within the
time period specified in the dissenters' notice (the 'Dissenters' Notice',
described below) sent to him by People's, a written demand for payment
which complies with the requirements of Section 33-863 of the CTBCA (the
'Demand').
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A VOTE AGAINST THE MERGER WILL NOT OF ITSELF SATISFY THE REQUIREMENT THAT A
DISSENTING PEOPLE'S SHAREHOLDER DELIVER HIS OR HER WRITTEN NOTICE OF INTENT TO
DEMAND PAYMENT IF THE MERGER IS CONSUMMATED PRIOR TO THE TIME THE VOTE ON THE
MERGER IS TAKEN, NOR WILL SUCH VOTE SATISFY ANY OTHER NOTICE REQUIREMENT UNDER
CONNECTICUT LAW WITH RESPECT TO DISSENTERS' APPRAISAL RIGHTS.
A demand for dissenters' appraisal rights must be executed by or for the
shareholder of record fully and correctly, as the shareholder's name appears on
the share certificate. A beneficial owner of shares of People's Common Stock who
is not the record owner may assert his or her dissenters' appraisal rights with
respect to all (but not less than all) shares held on his or her behalf if the
beneficial owner submits to People's at or before the assertion of his or her
appraisal rights a written consent of the record holder. A record owner, such as
a broker, who holds People's Common Stock for others, may assert dissenters'
appraisal rights with respect to less than all of the shares of People's Common
Stock held of record by such person. In that event, the record owner must assert
dissenters' appraisal rights with respect to all shares owned beneficially by
the same person, and must provide People's with the name and address of each
person on whose behalf dissenters' appraisal rights are being exercised.
If the Merger is approved at the People's Special Meeting, People's must
send a Dissenters' Notice to each People's Shareholder who has satisfied the
requirements of items (i) and (ii) above. The Dissenter's Notice must be sent no
later than ten days after consummation of the Merger, and must:
(a) State where the Demand must be sent, and where and when stock
certificates representing certificated shares of People's Common Stock must
be deposited;
(b) Inform holders of uncertificated shares of People's Common Stock
to what extent transfer of such shares will be restricted following
People's receipt of the Demand;
(c) Supply a form for making the Demand, specifying the date the
Merger was first publicly announced (September 4, 1997) and requiring that
the dissenting shareholder certify whether he or she acquired beneficial
ownership of his or her shares of People's Common Stock before that date;
and
(d) Set a date by which People's must receive the Demand (which may
not be sooner than 30 days following the date the Dissenters' Notice is
sent or later than 60 days after such notice is sent).
The Dissenters' Notice must also be accompanied by a copy of Sections 33-855 to
33-872, inclusive, of the CTBCA.
A shareholder who receives a Dissenters' Notice must submit his or her
Demand, must make the requested certification as to the date he or she acquired
shares of People's Common Stock, and must make deposit of all certificated
shares of People's Common Stock, all within the time specified by, and otherwise
in accordance with the provisions of, the Dissenters' Notice. A SHAREHOLDER WHO
FAILS TO SUBMIT A DEMAND IN THE SPECIFIED MANNER IS NOT ENTITLED TO PAYMENT FOR
HIS OR HER SHARES OF PEOPLE'S COMMON STOCK UNDER SECTIONS 33-855 TO 33-872 OF
THE CTBCA.
If the Merger is not consummated within 60 days after the date specified in
the Dissenters' Notice for the submission of a Demand and the deposit of share
certificates, People's must return all share certificates previously deposited
and must release all transfer restrictions imposed on all uncertificated shares.
People's may subsequently take action to consummate the Merger, but would then
have to send a new Dissenters' Notice and repeat the payment demand procedure
described above.
People's must pay each shareholder who owned his or her shares of People's
Common Stock before September 4, 1997 and who complies with the requirements set
forth in the preceding paragraph an amount People's estimates to be the 'fair
value' of the shares of People's Common Stock owned by such shareholder, plus
interest accrued from the date the Merger is consummated to the date of payment.
The 'fair value' of shares of People's Common Stock is the value of such shares
immediately prior to consummation of the Merger, less any appreciation or
depreciation in value in anticipation of the Merger. Payment must be made as
soon as the Merger is consummated, or upon receipt of the Demand (whichever is
later), and must be accompanied by a copy of: (1) certain financial information
regarding People's; (2) a statement of People's estimate of the fair value of
the shares for which payment is being made; (3) an explanation of how the
accrued interest was calculated; (4) a statement
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of the shareholder's right to demand payment under applicable provisions of the
CTBCA; and (5) a copy of Sections 33-855 to 33-872, inclusive, of the CTBCA.
People's may elect to withhold payment from a shareholder who has submitted
a Demand but who acquired beneficial ownership of his or her shares of People's
Common Stock on or after September 4, 1997 ('After-Acquired Shares'). In lieu of
making such payment, People's may, following consummation of the Merger,
estimate the fair value of After-Acquired Shares (plus accrued interest), and
offer to pay the amount so determined to the owner of such shares only if the
shareholder agrees to accept the offered amount in full satisfaction of his or
her Demand. The offer must be accompanied by a statement of People's estimate of
the fair value of the shares with respect to which the offer is being made, an
explanation of how the accrued interest was calculated, and a statement of the
shareholder's right to demand payment under Section 33-868 of the CTBCA.
People's has not yet determined whether it will proceed in this fashion with
respect to After-Acquired Shares.
A shareholder who receives payment or an offer of payment with respect to
his or her shares of People's Common Stock may submit his or her own written
estimate of the fair value of his or her shares of People's Common Stock and the
amount of interest due, and may (1) demand payment of the difference between the
amount calculated by the demanding shareholder and the amount previously paid to
such shareholder by People's for such shares, or (2) in the case of
After-Acquired Shares, reject People's offer of payment and demand payment of
the amount calculated by the demanding shareholder. However, such action may
only be taken if:
(a) The shareholder believes that the amount paid or offered by
People's is less than the fair value of his or her shares of People's
Common Stock or that the interest due is incorrectly calculated;
(b) The shares are not After-Acquired Shares and People's fails to
make payment within 60 days after the date specified in the Dissenters'
Notice for demanding payment; or
(c) The Merger has not been consummated within 60 days after the date
specified in the Dissenters' Notice for the submission of a Demand, and
People's fails to (i) return all share certificates previously deposited or
(ii) release all transfer restrictions imposed on all uncertificated
shares.
A shareholder who has the right to submit his or her own estimate of value and
demand for payment as described in this paragraph must notify People's in
writing of his or her demand within 30 days after People's makes or offers to
make payment for his or her shares. FAILURE TO SUBMIT SUCH WRITTEN NOTIFICATION
WITHIN THE 30-DAY PERIOD WILL BE TREATED AS A WAIVER OF SUCH SHAREHOLDER'S RIGHT
TO DEMAND PAYMENT IN AN AMOUNT EXCEEDING THE AMOUNT PREVIOUSLY PAID OR OFFERED
BY PEOPLE'S.
Within 60 days after People's receipt of a valid demand for payment as
described in the preceding paragraph, and if any such demand for payment remains
unsettled at that time, People's shall file in the Superior Court of
Connecticut, Judicial District of Fairfield at Bridgeport, a petition requesting
that court determine the fair value of the shares and interest payable thereon.
All dissenters, whether or not residents of Connecticut, whose demands for
payment have not been settled will be made parties to such proceeding as in an
action against their shares. A copy of the petition will be served on each such
dissenter in the manner provided by law. The court shall have plenary and
exclusive jurisdiction to determine the fair value of the shares of People's
Common Stock made the subject of the action. The court may appoint one or more
appraisers to receive evidence and recommend a decision on the question of fair
value. Each shareholder who is made a party to the action will be entitled to
judgment for the amount by which the fair value of his or her shares of People's
Common Stock is found to exceed the amount previously remitted (if any),
together with interest. The CTBCA does not set forth a specific method by which
the court is to determine the fair value of the shares.
If People's fails to file a petition within 60 days after receiving a
demand for payment, each shareholder who properly made a demand for payment
which remains unsettled will be entitled to receive from People's the amount
demanded by him or her, together with interest.
The costs and expenses associated with a judicial determination of the fair
value of dissenting shares will be determined, if necessary, by the court and
assessed against People's. However, the court may assess costs and expenses
against all or some of the dissenting shareholders if it decides that
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shareholders' actions in making demand for payment were arbitrary, vexatious or
not in good faith. Similarly, fees and expenses of counsel and experts for the
respective parties will be assessed, if necessary, as the court deems equitable,
based upon the actions of People's in complying with the CTBCA and the actions
of the dissenting shareholders in pursuing their rights under the CTBCA.
Finally, if the court determines that services of counsel for any dissenter were
of substantial benefit to other dissenters, it may award counsel reasonable fees
paid from the amounts awarded to the dissenters who were benefited.
The foregoing is a brief summary of the applicable provisions of the CTBCA
regarding dissenters' rights of appraisal. FAILURE TO FOLLOW THESE PROCEDURES
EXACTLY WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS. This summary contains
material information relating to the rights of People's Shareholders to obtain
payment of the fair value of their shares of People's Common Stock under the
CTBCA. This summary does not, however, restate every provision of the law, and
is qualified in its entirety by reference to the full text of the applicable
provisions of the CTBCA which appears as Exhibit H to this Joint Proxy
Statement-Offering Memorandum.
LEGAL OPINION
The validity of the People's Common Stock to be issued in the Merger will
be passed upon by William T. Kosturko, Esq., Executive Vice President and
General Counsel of People's. Mr. Kosturko is also a People's Shareholder and
holds options to purchase additional shares of People's Common Stock.
EXPERTS
The consolidated financial statements of People's Bank and subsidiaries as
of December 31, 1996 and 1995, and for each of the years in the three-year
period ended December 31, 1996, have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of Norwich Financial Corp. and
subsidiary as of December 31, 1996 and 1995, and for each of the years in the
three-year period ended December 31, 1996, have been incorporated by reference
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP covering the December 31, 1996 consolidated financial
statements of Norwich Financial Corp. and subsidiary refers to a change in the
method of accounting for investments in 1994.
Separate representatives of KPMG Peat Marwick LLP are expected to be
present at the People's Special Meeting and the NFC Special Meeting. In each
case, such representatives will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
In accordance with applicable FDIC regulations, People's established
December 8, 1997 as the date by which People's Shareholders had to submit
proposals for shareholder action to be taken at People's 1998 annual meeting of
shareholders. Unless the date of the 1998 annual meeting is postponed
significantly, proposals for shareholder action at that meeting will no longer
be accepted, and no such proposals will be included in People's 1998 proxy
materials.
NFC will hold a 1998 annual meeting of shareholders only if the Merger is
not consummated. In the event that such a meeting is held on the date originally
contemplated at the time of NFC's proxy statement for its 1997 annual meeting
(the '1997 NFC Proxy'), any proposals of shareholders intended to be presented
at the 1998 annual meeting must have been received by the Secretary of NFC
before December 10, 1997 in order to be considered for inclusion in NFC's 1998
proxy materials. If the date of the 1998 annual meeting is changed by more than
30 days from the date originally contemplated at the
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time of the 1997 NFC Proxy, such proposal must be received by NFC a reasonable
time before the solicitation is made.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Offering Memorandum, the NFC
Board and the People's Board know of no matters that will be presented for
consideration at the respective Special Meetings other than as described in this
Joint Proxy Statement-Offering Memorandum. If any other matters should properly
come before either Special Meeting or any adjournments or postponements thereof
and be voted upon, the enclosed proxies will be deemed to confer discretionary
authority on the individuals named as proxies therein to vote the shares
represented by such proxies as to any such matters. The persons named as proxies
intend to vote or not to vote in accordance with the recommendation of the
respective managements of NFC and People's.
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
This section sets forth (i) a Pro Forma Combined Statement of Condition as
of September 30, 1997, (ii) Pro Forma Combined Statements of Income for the nine
months ended September 30, 1997 and for the year ended December 31, 1996, and
(iii) the related notes thereto (collectively, the 'Unaudited Pro Forma Combined
Financial Information'). The Unaudited Pro Forma Combined Financial Information
should be read in conjunction with the historical consolidated financial
statements and the related notes thereto of People's and of NFC, included in the
documents described under 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.'
The Pro Forma Combined Statement of Condition combines the historical
consolidated statements of condition of (i) People's and subsidiaries and (ii)
NFC and subsidiary, as of September 30, 1997, as if the Merger had been
effective on that date giving effect to the pro forma purchase accounting and
other Merger-related adjustments described in the accompanying notes. The
Unaudited Pro Forma Combined Statements of Income combine the historical
consolidated statements of income of (i) People's and subsidiaries and (ii) NFC
and subsidiary, for the nine months ended September 30, 1997 and for the year
ended December 31, 1996, as if the Merger had been effective at the beginning of
the respective periods giving effect to the pro forma purchase accounting and
other Merger-related adjustments described in the accompanying notes.
The Unaudited Pro Forma Combined Financial Information reflects the
application of the purchase method of accounting. Under this method, the total
purchase price will be allocated to the assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. As described in the
accompanying notes, the estimated fair values of the assets and liabilities of
NFC and subsidiary have been combined with the historical carrying amounts of
the assets and liabilities of People's and subsidiaries. However, changes to the
pro forma adjustments reflected herein are expected as evaluations of assets and
liabilities are completed and as additional information becomes available. In
addition, the final purchase price allocation will be affected by events and
transactions subsequent to September 30, 1997, such as (i) the results of
operations and changes in financial position of NFC and subsidiary, and (ii)
changes in the market price of People's Common Stock. Accordingly, the final
combined amounts will differ from the pro forma combined amounts presented
herein.
The Unaudited Pro Forma Combined Financial Information is intended for
informational purposes only and is not necessarily indicative of the future
financial position or future results of operations of the combined company, or
of the financial position or results of operations of the combined company that
would have actually occurred had the Merger been in effect as of the date or for
the periods presented. People's expects that the combined company will achieve
substantial benefits from the Merger including operating cost savings and
revenue enhancements. However, the Unaudited Pro Forma Combined Financial
Information does not reflect any potential operating cost savings or revenue
enhancements which are expected to result from the consolidation of operations,
and therefore does not purport to be indicative of the expected results of
future operations.
The historical financial information of both People's and NFC includes all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of their financial position and operating results as of and
for the nine months ended September 30, 1997. The historical operating results
of both People's and NFC for the nine months ended September 30, 1997 are not
necessarily indicative of results which may be expected for the entire year. For
purposes of the Unaudited Pro Forma Combined Financial Information, certain
reclassifications have been made to NFC's historical amounts to conform to
People's classifications.
106
<PAGE>
<PAGE>
PEOPLE'S AND SUBSIDIARIES AND NFC AND SUBSIDIARY
PRO FORMA COMBINED STATEMENT OF CONDITION
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
PEOPLE'S NFC ADJUSTMENTS
-------- ------ -------------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks........................................................ $ 230.1 $ 21.8 $--
Short-term investments......................................................... 144.8 60.1 --
Securities:
Available for sale........................................................ 1,373.3 111.8 (84.3)(A)
Held to maturity.......................................................... 395.1 -- --
-------- ------ -------------
Total securities, net................................................ 1,768.4 111.8 (84.3)
-------- ------ -------------
Loans, net:
Residential mortgage...................................................... 2,168.9 191.2 2.8 (B)
Commercial mortgage....................................................... 860.8 160.4 3.6 (B)
Commercial................................................................ 623.9 51.4 1.8 (B)
Credit card............................................................... 1,217.1 0.1 --
Other consumer............................................................ 276.7 85.4 (0.4)(B)
-------- ------ -------------
Total loans.......................................................... 5,147.4 488.5 7.8
Less allowance for loan losses............................................ (85.7) (13.3) --
-------- ------ -------------
Total loans, net..................................................... 5,061.7 475.2 7.8
-------- ------ -------------
Goodwill....................................................................... -- 7.5 96.5 (C)
Other assets................................................................... 526.2 24.5 0.3 (D)
-------- ------ -------------
Total assets......................................................... $7,731.2 $700.9 $ 20.3
-------- ------ -------------
-------- ------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest-bearing...................................................... $ 943.3 $ 75.6 $--
Savings, NOW and money market............................................. 2,164.2 206.7 --
Time...................................................................... 2,507.0 314.5 5.1 (E)
-------- ------ -------------
Total deposits....................................................... 5,614.5 596.8 5.1
-------- ------ -------------
Borrowings:
Federal Home Loan Bank advances........................................... 714.6 15.6 --
Repurchase agreements..................................................... 237.2 -- --
Federal funds purchased................................................... 174.0 -- --
Subordinated notes........................................................ 148.2 -- --
-------- ------ -------------
Total borrowings..................................................... 1,274.0 15.6 --
-------- ------ -------------
Other liabilities.............................................................. 145.2 6.7 7.1 (F)
-------- ------ -------------
Total liabilities.................................................... 7,033.7 619.1 12.2
-------- ------ -------------
Stockholders' equity:
Common stock.............................................................. 61.1 0.1 (0.1)(G)
2.8 (H)
Additional paid-in capital................................................ 94.9 58.7 (58.7)(G)
87.1 (H)
Treasury stock............................................................ -- (6.2) 6.2 (G)
Retained earnings......................................................... 520.1 27.3 (27.3)(G)
Net unrealized gain on securities, net of tax............................. 21.4 1.9 (1.9)(G)
-------- ------ -------------
Total stockholders' equity........................................... 697.5 81.8 8.1
-------- ------ -------------
Total liabilities and stockholders' equity........................... $7,731.2 $700.9 $ 20.3
-------- ------ -------------
-------- ------ -------------
<CAPTION>
PRO FORMA
COMBINED
---------
(IN MILLIONS)
<S> <C>
ASSETS
Cash and due from banks........................................................ $ 251.9
Short-term investments......................................................... 204.9
Securities:
Available for sale........................................................ 1,400.8
Held to maturity.......................................................... 395.1
---------
Total securities, net................................................ 1,795.9
---------
Loans, net:
Residential mortgage...................................................... 2,362.9
Commercial mortgage....................................................... 1,024.8
Commercial................................................................ 677.1
Credit card............................................................... 1,217.2
Other consumer............................................................ 361.7
---------
Total loans.......................................................... 5,643.7
Less allowance for loan losses............................................ (99.0)
---------
Total loans, net..................................................... 5,544.7
---------
Goodwill....................................................................... 104.0
Other assets................................................................... 551.0
---------
Total assets......................................................... $8,452.4
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest-bearing...................................................... 1,018.9
Savings, NOW and money market............................................. 2,370.9
Time...................................................................... 2,826.6
---------
Total deposits....................................................... 6,216.4
---------
Borrowings:
Federal Home Loan Bank advances........................................... 730.2
Repurchase agreements..................................................... 237.2
Federal funds purchased................................................... 174.0
Subordinated notes........................................................ 148.2
---------
Total borrowings..................................................... 1,289.6
---------
Other liabilities.............................................................. 159.0
---------
Total liabilities.................................................... 7,665.0
---------
Stockholders' equity:
Common stock.............................................................. 63.9
Additional paid-in capital................................................ 182.0
Treasury stock............................................................ --
Retained earnings......................................................... 520.1
Net unrealized gain on securities, net of tax............................. 21.4
---------
Total stockholders' equity........................................... 787.4
---------
Total liabilities and stockholders' equity........................... $8,452.4
---------
---------
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Information.
107
<PAGE>
<PAGE>
PEOPLE'S AND SUBSIDIARIES AND NFC AND SUBSIDIARY
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
PEOPLE'S NFC ADJUSTMENTS
-------- ----- -----------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest and dividend income:
Residential mortgage.......................................................... $127.7 $12.0 $(1.5)(I)
Commercial mortgage........................................................... 56.1 10.9 (1.2)(I)
Commercial.................................................................... 42.8 3.6 (0.2)(I)
Credit card................................................................... 83.5 -- --
Other consumer................................................................ 16.0 5.3 0.1 (I)
-------- ----- -----------
Total interest on loans.................................................. 326.1 31.8 (2.8)
Securities.................................................................... 64.6 5.1 (3.7)(J)
Short-term investments........................................................ 6.2 2.6 --
-------- ----- -----------
Total interest and dividend income....................................... 396.9 39.5 (6.5)
-------- ----- -----------
Interest expense:
Deposits...................................................................... 132.3 17.0 (2.9)(K)
Borrowings.................................................................... 72.1 0.6 --
-------- ----- -----------
Total interest expense................................................... 204.4 17.6 (2.9)
-------- ----- -----------
Net interest income...................................................... 192.5 21.9 (3.6)
Provision for loan losses......................................................... 31.9 0.6 --
-------- ----- -----------
Net interest income after provision for loan losses........................... 160.6 21.3 (3.6)
-------- ----- -----------
Non-interest income:
Fee-based revenues:
Credit card securitization income............................................. 59.4 -- --
Credit card fees.............................................................. 28.4 -- --
Service charges on deposit accounts........................................... 23.4 1.8 --
Residential mortgage loan servicing fees...................................... 4.7 0.5 --
Net brokerage commissions..................................................... 7.3 -- --
Other......................................................................... 10.5 0.5 --
-------- ----- -----------
Total fee-based revenues................................................. 133.7 2.8 --
Net security gains............................................................ 28.7 0.4 --
Net gains on sales of residential mortgage loans available for sale........... 12.7 0.3 --
Loss on real estate investments............................................... (1.3) -- --
Other......................................................................... 3.2 -- --
-------- ----- -----------
Total non-interest income................................................ 177.0 3.5 --
-------- ----- -----------
Non-interest expense:
Compensation and benefits..................................................... 106.5 7.3 --
Occupancy and equipment....................................................... 36.9 2.7 (0.6)(L)
Professional and outside service fees......................................... 26.9 1.4 --
Advertising and promotion..................................................... 28.7 0.4 --
Loss on real estate acquired in settlement of loans........................... 1.8 0.1 --
Amortization of goodwill...................................................... -- 0.5 3.8 (M)
Other......................................................................... 30.8 2.1 0.3 (N)
-------- ----- -----------
Total non-interest expense............................................... 231.6 14.5 3.5
-------- ----- -----------
Income before income taxes............................................... 106.0 10.3 (7.1)
Income tax expense................................................................ 38.8 4.2 (1.2)(O)
-------- ----- -----------
Net income.................................................................... $ 67.2 $6.1 $(5.9)
-------- ----- -----------
-------- ----- -----------
Net income applicable to common stock......................................... $ 67.2 $6.1 $(5.9)
-------- ----- -----------
-------- ----- -----------
Net income per common share:
Primary.................................................................. $ 1.09 $1.08
-------- -----
-------- -----
Fully diluted............................................................ $ 1.09 $1.07
-------- -----
-------- -----
Average common shares:
Primary.................................................................. 61.54 5.62
-------- -----
-------- -----
Fully diluted............................................................ 61.57 5.68
-------- -----
-------- -----
<CAPTION>
PRO FORMA
COMBINED
---------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C>
Interest and dividend income:
Residential mortgage.......................................................... $ 138.2
Commercial mortgage........................................................... 65.8
Commercial.................................................................... 46.2
Credit card................................................................... 83.5
Other consumer................................................................ 21.4
---------
Total interest on loans.................................................. 355.1
Securities.................................................................... 66.0
Short-term investments........................................................ 8.8
---------
Total interest and dividend income....................................... 429.9
---------
Interest expense:
Deposits...................................................................... 146.4
Borrowings.................................................................... 72.7
---------
Total interest expense................................................... 219.1
---------
Net interest income...................................................... 210.8
Provision for loan losses......................................................... 32.5
---------
Net interest income after provision for loan losses........................... 178.3
---------
Non-interest income:
Fee-based revenues:
Credit card securitization income............................................. 59.4
Credit card fees.............................................................. 28.4
Service charges on deposit accounts........................................... 25.2
Residential mortgage loan servicing fees...................................... 5.2
Net brokerage commissions..................................................... 7.3
Other......................................................................... 11.0
---------
Total fee-based revenues................................................. 136.5
Net security gains............................................................ 29.1
Net gains on sales of residential mortgage loans available for sale........... 13.0
Loss on real estate investments............................................... (1.3)
Other......................................................................... 3.2
---------
Total non-interest income................................................ 180.5
---------
Non-interest expense:
Compensation and benefits..................................................... 113.8
Occupancy and equipment....................................................... 39.0
Professional and outside service fees......................................... 28.3
Advertising and promotion..................................................... 29.1
Loss on real estate acquired in settlement of loans........................... 1.9
Amortization of goodwill...................................................... 4.3
Other......................................................................... 33.2
---------
Total non-interest expense............................................... 249.6
---------
Income before income taxes............................................... 109.2
Income tax expense................................................................ 41.8
---------
Net income.................................................................... $ 67.4
---------
---------
Net income applicable to common stock......................................... $ 67.4
---------
---------
Net income per common share:
Primary.................................................................. $ 1.05
---------
---------
Fully diluted............................................................ $ 1.05
---------
---------
Average common shares:
Primary.................................................................. 64.34
---------
---------
Fully diluted............................................................ 64.37
---------
---------
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Information.
108
<PAGE>
<PAGE>
PEOPLE'S AND SUBSIDIARIES AND NFC AND SUBSIDIARY
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
PEOPLE'S NFC ADJUSTMENTS
-------- ----- -----------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest and dividend income:
Residential mortgage.......................................................... $164.0 $14.3 $(2.0)(I)
Commercial mortgage........................................................... 67.0 14.8 (1.6)(I)
Commercial.................................................................... 52.2 4.2 (0.3)(I)
Credit card................................................................... 82.2 -- --
Other consumer................................................................ 19.2 6.8 0.1 (I)
-------- ----- -----------
Total interest on loans.................................................. 384.6 40.1 (3.8)
Securities.................................................................... 90.0 10.6 (5.0)(J)
Short-term investments........................................................ 5.4 1.6 --
-------- ----- -----------
Total interest and dividend income....................................... 480.0 52.3 (8.8)
-------- ----- -----------
Interest expense:
Deposits...................................................................... 162.5 24.3 (3.9)(K)
Borrowings.................................................................... 83.0 1.0 --
-------- ----- -----------
Total interest expense................................................... 245.5 25.3 (3.9)
-------- ----- -----------
Net interest income...................................................... 234.5 27.0 (4.9)
Provision for loan losses......................................................... 51.1 1.4 --
-------- ----- -----------
Net interest income after provision for loan losses........................... 183.4 25.6 (4.9)
-------- ----- -----------
Non-interest income:
Fee-based revenues:
Credit card securitization income............................................. 66.1 -- --
Credit card fees.............................................................. 29.1 -- --
Service charges on deposit accounts........................................... 27.6 1.9 --
Residential mortgage loan servicing fees...................................... 6.2 0.6 --
Net brokerage commissions..................................................... 7.4 -- --
Other......................................................................... 12.4 0.6 --
-------- ----- -----------
Total fee-based revenues................................................. 148.8 3.1 --
Net security gains................................................................ 15.2 0.4 --
Net gains on sales of residential mortgage loans available for sale............... 5.4 -- --
Net gain on sale of other consumer loans.......................................... 6.0 -- --
Loss on real estate investments................................................... (2.1) -- --
Other............................................................................. 3.4 0.3 --
-------- ----- -----------
Total non-interest income................................................ 176.7 3.8 --
-------- ----- -----------
Non-interest expense:
Compensation and benefits..................................................... 124.2 9.5 --
Occupancy and equipment....................................................... 43.2 3.6 (0.8)(L)
Professional and outside service fees......................................... 28.5 1.6 --
Advertising and promotion..................................................... 25.4 0.5 --
Loss on real estate acquired in settlement of loans........................... 4.3 -- --
Amortization of goodwill...................................................... -- 0.6 5.2 (M)
Other......................................................................... 33.4 2.3 0.4 (N)
-------- ----- -----------
Total non-interest expense............................................... 259.0 18.1 4.8
-------- ----- -----------
Income before income taxes............................................... 101.1 11.3 (9.7)
Income tax expense................................................................ 21.0 4.6 (1.7)(O)
-------- ----- -----------
Net income.................................................................... $ 80.1 $6.7 $(8.0)
-------- ----- -----------
-------- ----- -----------
Net income applicable to common stock......................................... $ 79.5 $6.7 $(8.0)
-------- ----- -----------
-------- ----- -----------
Net income per common share:
Primary.................................................................. $ 1.32 $1.18
-------- -----
-------- -----
Fully diluted............................................................ $ 1.31 $1.17
-------- -----
-------- -----
Average common shares:
Primary.................................................................. 60.29 5.62
-------- -----
-------- -----
Fully diluted............................................................ 61.41 5.67
-------- -----
-------- -----
<CAPTION>
PRO FORMA
COMBINED
---------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C>
Interest and dividend income:
Residential mortgage.......................................................... $ 176.3
Commercial mortgage........................................................... 80.2
Commercial.................................................................... 56.1
Credit card................................................................... 82.2
Other consumer................................................................ 26.1
---------
Total interest on loans.................................................. 420.9
Securities.................................................................... 95.6
Short-term investments........................................................ 7.0
---------
Total interest and dividend income....................................... 523.5
---------
Interest expense:
Deposits...................................................................... 182.9
Borrowings.................................................................... 84.0
---------
Total interest expense................................................... 266.9
---------
Net interest income...................................................... 256.6
Provision for loan losses......................................................... 52.5
---------
Net interest income after provision for loan losses........................... 204.1
---------
Non-interest income:
Fee-based revenues:
Credit card securitization income............................................. 66.1
Credit card fees.............................................................. 29.1
Service charges on deposit accounts........................................... 29.5
Residential mortgage loan servicing fees...................................... 6.8
Net brokerage commissions..................................................... 7.4
Other......................................................................... 13.0
---------
Total fee-based revenues................................................. 151.9
Net security gains................................................................ 15.6
Net gains on sales of residential mortgage loans available for sale............... 5.4
Net gain on sale of other consumer loans.......................................... 6.0
Loss on real estate investments................................................... (2.1)
Other............................................................................. 3.7
---------
Total non-interest income................................................ 180.5
---------
Non-interest expense:
Compensation and benefits..................................................... 133.7
Occupancy and equipment....................................................... 46.0
Professional and outside service fees......................................... 30.1
Advertising and promotion..................................................... 25.9
Loss on real estate acquired in settlement of loans........................... 4.3
Amortization of goodwill...................................................... 5.8
Other......................................................................... 36.1
---------
Total non-interest expense............................................... 281.9
---------
Income before income taxes............................................... 102.7
Income tax expense................................................................ 23.9
---------
Net income.................................................................... $ 78.8
---------
---------
Net income applicable to common stock......................................... $ 78.2
---------
---------
Net income per common share:
Primary.................................................................. $ 1.24
---------
---------
Fully diluted............................................................ $ 1.23
---------
---------
Average common shares:
Primary.................................................................. 63.09
---------
---------
Fully diluted............................................................ 64.21
---------
---------
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Information.
109
<PAGE>
<PAGE>
PEOPLE'S AND SUBSIDIARIES AND NFC AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
The Merger will be accounted for by People's under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16 and
related pronouncements; accordingly, this method has been applied in preparing
the Unaudited Pro Forma Combined Financial Information. Under the purchase
method of accounting, the total purchase price will be allocated to the assets
acquired and liabilities assumed based on their estimated fair values at the
Effective Time. The estimated fair values of the assets and liabilities of NFC
and subsidiary as of September 30, 1997 have been combined with the historical
carrying amounts of the assets and liabilities of People's and subsidiaries at
that date for purposes of presenting the Unaudited Pro Forma Combined Statement
of Condition. However, the purchase accounting and Merger-related adjustments
included herein will change as evaluations of assets and liabilities are
completed and as additional information becomes available. In addition, the
final purchase price allocation will be affected by events and transactions
subsequent to September 30, 1997, such as (i) the results of operations and
changes in financial position of NFC and subsidiary, and (ii) changes in the
market price of People's Common Stock. Accordingly, the final combined amounts
will differ from the pro forma combined amounts presented herein.
The Unaudited Pro Forma Combined Financial Information is intended for
informational purposes only and is not necessarily indicative of the future
financial position or future results of operations of the combined company, or
of the financial position or results of operations of the combined company that
would have actually occurred had the Merger been in effect as of the date or for
the periods presented. People's expects that the combined company will achieve
substantial benefits from the Merger including operating cost savings and
revenue enhancements. However, the Unaudited Pro Forma Combined Financial
Information does not reflect any potential operating cost savings or revenue
enhancements which are expected to result from the consolidation of operations,
and therefore does not purport to be indicative of the expected results of
future operations.
NOTE 2. PURCHASE PRICE
The Merger Agreement provides that, at the Effective Time and subject to
the election and allocation procedures provided for therein, each share of NFC
Common Stock outstanding at the Effective Time (other than treasury shares and
with certain other exceptions), will be converted into and become the right to
receive either (i) 1.0310 shares of People's Common Stock or (ii) $28.74 in
cash, each subject to adjustment in specified circumstances as illustrated in
Appendix I. The Merger Agreement also provides that, subject to adjustment, (i)
the aggregate number of shares of People's Common Stock that shall be issued in
the Merger shall equal 2,945,594 (the 'Stock Amount') and (ii) the aggregate
amount of cash that shall be paid in the Merger shall equal $81,671,000 (the
'Base Cash Consideration') including payments made for the settlement of
unexercised stock options with respect to NFC Common Stock. Under the Merger
Agreement, the Stock Amount will be adjusted (i) upward if the Valuation Period
Market Value is less than $27.875 (subject to a 'Floor Value' of $26.48), or
(ii) downward if the Valuation Period Market Value is greater than $27.875
(subject to a 'Ceiling Value' of $29.27). The adjusted Stock Amount shall not
exceed 3,100,771 shares or be less than 2,805,208 shares. Based on the adjusted
Stock Amount, the Merger Agreement provides for related adjustments to the Per
Share Stock Consideration and the Per Share Cash Consideration.
Based on the closing market price of People's Common Stock at September 30,
1997 of $32.06 per share, the Stock Amount would equal 2,805,208 shares with a
total market value of $89.9 million. The total purchase price, including cash
consideration and transaction costs, would be as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Total market value of the Stock Amount................................ $ 89.9
Base Cash Consideration(1)............................................ 81.7
Estimated transaction costs(2)........................................ 2.6
-------
Total purchase price........................................ $174.2
-------
-------
</TABLE>
110
<PAGE>
<PAGE>
(1) Represents cash of $73.4 million for the acquisition of NFC Common Stock and
cash of $8.3 million for the settlement of 446,050 unexercised stock options
at an average cost of $18.52 per option (such per option settlement cost
equals the 'Fully Diluted Per Share Consideration' of $30.07 less the
average option exercise price of $11.55 per share).
(2) Represents estimated direct costs to be incurred by People's in connection
with the acquisition, principally for investment banking, legal and other
professional services.
At September 30, 1997 there were 5,432,341 shares of NFC Common Stock
outstanding. If that day's closing price of $32.06 for People's Common Stock
were the Valuation Period Market Value, the consideration payable for each
outstanding share of NFC Common Stock (whether payable in cash or in shares of
People's Common Stock) would be valued at $30.07 and the Exchange Ratio (Per
Share Stock Consideration) would be 0.9379, each as illustrated in Appendix I.
Based on these assumptions, approximately 2,990,945 shares of NFC Common Stock
would be exchanged for shares of People's Common Stock, and approximately
2,441,396 shares of NFC Common Stock would be exchanged for cash.
People's will determine the actual purchase price for accounting purposes
in accordance with the consensus reached in FASB Emerging Issues Task Force
Issue No. 95-19, Determination of the Measurement Date of the Market Price of
Securities Issued in a Purchase Business Combination. Since the Merger Agreement
provides for subsequent changes in the Stock Amount, application of the
consensus in Issue No. 95-19 will require measurement of the stock component of
the purchase price for accounting purposes based on the average market price of
People's Common Stock for a short period of time (a few days) prior to the
consummation of the Merger. Accordingly, the ultimate purchase price for
accounting purposes cannot be predicted with certainty at this time. However,
based on the closing market price of People's Common Stock of $36.375 per share
as of January 7, 1998, the Stock Amount would equal 2,805,208 shares with a
total market value of $102.0 million, and the total purchase price and resulting
goodwill each would be $12.1 million greater than the amounts used in preparing
the Unaudited Pro Forma Combined Financial Information.
NOTE 3. ALLOCATION OF PURCHASE PRICE
The total purchase price has been allocated as follows for purposes of the
accompanying Unaudited Pro Forma Combined Financial Information:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Total purchase price (note 2)......................................... $174.2
-------
-------
Net assets of NFC based on historical carrying amounts as of September
30, 1997............................................................ $ 81.8
Elimination of pre-existing goodwill reflected in net assets.......... (7.5)
Increase (decrease) in net assets to reflect estimated fair value
adjustments under the purchase method of accounting (see note 4):
Loans................................................................. 7.8
Other assets:
Mortgage servicing rights........................................ 1.9
Real estate assets and equipment................................. (3.1)
Time deposits......................................................... (5.1)
Accrual of liability for Merger-related costs......................... (7.1)
Deferred tax effect of fair value adjustments and Merger-related
costs............................................................... 1.5
-------
Fair value of net assets acquired..................................... $ 70.2
-------
-------
Total purchase price in excess of fair value of net assets
acquired.................................................. $104.0
-------
-------
</TABLE>
When the ultimate allocation of purchase price is made, the 'total purchase
price in excess of fair value of net assets acquired' will be recorded as
identifiable intangible assets and as goodwill. People's expects that
identifiable intangible assets will be limited to a core deposit intangible
which will be
111
<PAGE>
<PAGE>
amortized on a straight-line basis over the estimated remaining life of the
acquired customer relationships. The remaining amount of the excess purchase
price will be considered goodwill which will be amortized on a straight-line
basis over the estimated period benefited. People's has not yet finalized its
estimate of the core deposit intangible. However, for purposes of the Unaudited
Pro Forma Combined Financial Information, (i) the combined amount of intangible
assets and their amortization have been labeled 'goodwill' and (ii) an estimated
composite amortization period of 18 years has been used based on expected
periods of 10 years for the core deposit intangible and 20 years for goodwill.
NOTE 4. PRO FORMA ADJUSTMENTS
The following are descriptions of the pro forma purchase accounting and
other Merger-related adjustments, labeled (A) through (O), which have been
reflected in the accompanying Pro Forma Combined Statement of Condition and Pro
Forma Combined Statements of Income:
PRO FORMA COMBINED STATEMENT OF CONDITION
(A) Represents a decrease of $84.3 million from the planned sale of available
for sale securities to fund (i) the cash portion of the purchase price
($81.7 million) and (ii) People's estimated transaction costs ($2.6
million).
(B) Represent adjustments to record the acquired loans at estimated fair value
based on interest rates as of September 30, 1997, resulting in a net
premium of $7.8 million.
(C) The net adjustment of $96.5 million represents (i) an increase of $104.0
million to record the estimated goodwill related to the Merger (see note 3)
and (ii) a decrease of $7.5 million to eliminate the pre-existing goodwill
related to prior acquisitions by NFC.
(D) Represents the following:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Estimated fair value of previously unrecognized mortgage servicing
rights.............................................................. $ 1.9
Adjustment to record certain acquired real estate assets and equipment
at estimated fair value less costs to sell.......................... (3.1)
Increase in net deferred tax assets for the estimated tax effects of
fair value adjustments and Merger-related costs..................... 1.5
-------
Total adjustment to other assets............................ $ 0.3
-------
-------
</TABLE>
(E) Represents an adjustment to record NFC's time deposit liabilities at
estimated fair value based on interest rates as of September 30, 1997,
resulting in a net premium of $5.1 million.
(F) Represents the accrual of the following estimated Merger-related costs
totaling $7.1 million: payments of $2.9 million pursuant to
change-in-control provisions of certain agreements with NFC officers and
directors; NFC investment banking fees of $1.6 million; and employee
severance, lease termination and other merger-related costs of $2.6
million.
(G) Represents the elimination of NFC's historical stockholders' equity
balances.
(H) Represents the assumed issuance by People's of 2,805,208 common shares as
the Stock Amount, at a total market value of $89.9 million based on the
closing market price of $32.06 at September 30, 1997. See note 2.
PRO FORMA COMBINED STATEMENT OF INCOME
(I) Represents additional amortization of premiums as a result of recording
acquired loans at estimated fair value. See adjustment (B) above. Premiums
are being amortized over the average period to repricing or maturity, by
portfolio, or an average period of approximately 2 years.
(J) Represents the estimated reduction in interest income as a result of the
planned sale of certain securities to fund the cash portion of the purchase
price and transaction costs. See adjustment (A)
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above. The reduction was calculated based on the average yield earned on
NFC's securities portfolios during 1996, or approximately 6%.
(K) Represents amortization of premium as a result of recording NFC's time
deposits at estimated fair value. See adjustment (E) above. Premium is
being amortized over the average remaining period to contractual maturity,
or approximately 1 year.
(L) Represents decreases in (i) depreciation expense and (ii) other occupancy
expenses (holding and operating costs) as a result of writing-down certain
real estate assets and equipment expected to be disposed of after the
Merger. Approximately two-thirds of the total adjustment is attributable to
depreciation expense. See adjustment (D) above.
(M) Represents (i) the amortization of goodwill related to the Merger on a
straight-line basis over a period of 18 years, less (ii) the reversal of
amortization of NFC's pre-existing goodwill. See note 3 and adjustment (C)
above.
(N) Represents amortization of mortgage servicing assets recognized in
connection with the Merger. See adjustment (D) above. Servicing assets are
being amortized over the estimated period of net servicing income, or
approximately 10 years.
(O) Represents the tax effect, at a combined federal and state statutory rate
of 37.2%, of pro forma adjustments (I), (J), (K), (L), and (N) reflected in
the Combined Statements of Income. Amortization of goodwill recorded in the
Merger will not be tax deductible. As described in note 3, People's expects
to separately recognize an identifiable core deposit intangible in its
final purchase price allocation. Unlike non-deductible goodwill which has
no tax effect, amortization of the core deposit intangible would have a
deferred tax effect and the amount of the pro forma tax adjustments would
change accordingly.
NOTE 5. NET INCOME PER COMMON SHARE
Pro forma primary net income per common share was calculated by dividing
pro forma net income applicable to common stock by the average number of
People's common and common-equivalent shares assumed to be outstanding during
the period. Pro forma fully diluted net income per common share was calculated
by dividing pro forma net income by the average number of People's common and
common-equivalent shares assumed to be outstanding during the period. In making
these pro forma calculations, average outstanding shares include the additional
2,805,208 People's common shares (the Stock Amount) assumed to be issued in
connection with the Merger (see note 2).
People's completed a three-for-two stock split in May 1997, resulting in
the issuance of 20.3 million common shares. People's historical per share data
and the pro forma combined per share data have been computed as if the
additional shares had been issued at the beginning of the periods presented.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by NFC are incorporated
herein by reference: (a) the 1996 NFC 10-K; (b) NFC's Quarterly Reports on Form
10-Q for the quarterly periods ended March 31, 1997, June 30, 1997 and September
30, 1997; (c) NFC's Proxy Statement for the Annual Meeting of Shareholders held
on May 16, 1997; and (d) NFC's Current Reports on Form 8-K dated September 3,
1997 and January 12, 1998.
The following documents initially filed with the FDIC by People's and
subsequently filed by NFC with the Commission as exhibits to a Current Report on
Form 8-K dated January 12, 1998, are incorporated herein by reference: (a) the
1996 People's F-2; (b) People's Quarterly Reports on Form F-4 for the quarters
ended March 31, 1997, June 30, 1997, and September 30, 1997; (c) People's Proxy
Statement for the Annual Meeting of Shareholders held on April 17, 1997; (d)
People's Current Report on Form F-3 for the months of May and September, 1997;
and (e) the description of the People's Common Stock contained in Item 13 of
Amendment No. 2 dated December 30, 1997 to People's Registration Statement on
Form F-1 and any amendment or report updating such description filed on or after
the date of this Joint Proxy Statement-Offering Memorandum and prior to the time
at which the People's Special Meeting and the NFC Special Meeting have each been
finally adjourned.
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All documents filed by either People's or NFC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the time at which the People's Special Meeting and the NFC Special Meeting
have each been finally adjourned shall be deemed to be incorporated herein by
reference and to be a part hereof from the date of such filing. Documents filed
by People's with the FDIC pursuant to the Exchange Act subsequent to the date
hereof and incorporated herein by reference will be filed by NFC as exhibits to
one or more Forms 8-K with the Commission. Any statement contained herein or in
a document incorporated or deemed to be incorporated herein by reference shall
be deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any other subsequently filed document which
also is, or is deemed to be, incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part hereof, except as so modified or superseded.
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Appendix A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PEOPLE'S BANK,
NORWICH FINANCIAL CORP.
AND
THE NORWICH SAVINGS SOCIETY
DATED AS OF SEPTEMBER 3, 1997
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TABLE OF CONTENTS
ARTICLE I - THE MERGER............................................1
1.01 The Merger.............................................1
1.02 Effective Time.........................................2
1.03 Effects of the Merger..................................2
1.04 Conversion of Target Holding Company Stock.............2
1.05 Election Procedures....................................3
1.06 Adjustments to the Merger Consideration................6
1.07 Adjustments for Dilution and Other Matters.............8
1.08 Exchange Procedures....................................8
1.09 Dissenting Shares......................................9
1.10 Options...............................................10
1.11 No Fractional Shares..................................10
1.12 Tax Consequences......................................10
ARTICLE II - CORPORATE GOVERNANCE................................10
2.01 Other Matters.........................................10
2.02 Directors.............................................11
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF TARGET
HOLDING COMPANY AND TARGET BANK............................11
3.01 Corporate Organization................................11
3.02 Capitalization........................................13
3.03 Authority; No Violation...............................14
3.04 Consents and Approvals................................16
3.05 Financial Statements..................................16
3.06 Absence of Certain Changes or Events..................17
3.07 Legal Proceedings.....................................17
3.08 Compliance with Applicable Law........................18
3.09 Taxes.................................................18
3.10 Employee Benefit and Other Plans......................19
3.11 Certain Contracts.....................................21
3.12 Target Holding Company Reports........................22
3.13 Environmental Matters.................................23
3.14 Target Holding Company Information....................23
3.15 Insurance.............................................24
3.16 Broker's Fees.........................................24
3.17 Agreements with Regulatory Agencies...................24
3.18 Material Interests of Certain Persons.................24
3.19 Labor Matters.........................................24
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3.20 Takeover Laws; Article XVII of Target Holding
Company Certificate...................................25
3.21 Allowance for Loan Losses.............................25
3.22 Risk Management Instruments...........................25
3.23 Properties............................................26
3.24 Rights Agreement......................................26
3.25 Other Liabilities.....................................27
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF
THE BANK...................................................27
4.01 Corporate Organization................................27
4.02 Capitalization........................................27
4.03 Authority; No Violation...............................28
4.04 Consents and Approvals................................28
4.05 Financial Statements..................................29
4.06 Broker's Fees.........................................30
4.07 Absence of Certain Changes or Events..................30
4.08 Legal Proceedings.....................................30
4.09 FDIC Reports..........................................30
4.10 Bank Information......................................30
4.11 Compliance With Applicable Law........................31
4.12 Agreements with Regulatory Agencies...................31
4.13 Regulatory Approvals..................................31
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS............31
5.01 Covenants of Target Holding Company and Target Bank...31
5.02 Covenants of the Bank.................................34
ARTICLE VI - ADDITIONAL AGREEMENTS...............................35
6.01 Regulatory Matters....................................35
6.02 Access to Information.................................36
6.03 Shareholder Approval..................................37
6.04 Legal Conditions to Merger............................38
6.05 Stock Listing.........................................38
6.06 Employee Benefit Plans................................38
6.07 Interim Financial Statements..........................41
6.08 Additional Agreements.................................41
6.09 Disclosure Supplements................................41
6.10 Current Information...................................42
6.11 Public Announcements..................................42
6.12 Indemnification.......................................42
6.13 No Solicitation.......................................44
6.14 Offering Circular.....................................44
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6.15 Dividends.............................................44
ARTICLE VII - CONDITIONS PRECEDENT...............................45
7.01 Conditions to Each Party's Obligations Under
This Agreement........................................45
7.02 Conditions to the Obligations of the Bank Under This
Agreement.............................................45
7.03 Conditions to the Obligations of Target
Holding Company and Target Bank Under This
Agreement.............................................47
ARTICLE VIII - CLOSING...........................................48
8.01 Time and Place........................................48
8.02 Deliveries at the Closing.............................48
ARTICLE IX - TERMINATION AND AMENDMENT...........................48
9.01 Termination...........................................48
9.02 Effect of Termination.................................51
9.03 Amendment.............................................51
9.04 Extension; Waiver.....................................51
ARTICLE X - MISCELLANEOUS........................................52
10.01 Payment to Target Holding Company....................52
10.02 Expenses.............................................52
10.03 Non-Survival of Representations and Warranties.......52
10.04 Notification of Certain Matters......................53
10.05 Notices..............................................53
10.06 Parties in Interest..................................54
10.07 Complete Agreement...................................54
10.08 Counterparts.........................................54
10.09 Governing Law........................................55
10.10 Interpretation.......................................55
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 3,
1997, by and among People's Bank, a Connecticut stock savings
bank (the "Bank"), Norwich Financial Corp., a Delaware
corporation ("Target Holding Company") and The Norwich Savings
Society, a Connecticut stock savings bank and a wholly-owned
subsidiary of Target Holding Company ("Target Bank").
WHEREAS, the Boards of Directors of the Bank, Target
Holding Company and Target Bank have determined that it is in the
best interests of their respective companies and of the
shareholders of the Bank and Target Holding Company to consummate
the business combination transaction provided for herein in which
Target Holding Company and Target Bank will, subject to the terms
and conditions set forth herein, merge with and into the Bank
(the "Merger"); and
WHEREAS, in order to protect the integrity of this
Agreement, (i) the Bank and Target Holding Company are entering
into, as of the date of this Agreement, a stock option agreement
(the "Stock Option Agreement"), providing for the issuance by
Target Holding Company of shares of Target Holding Company Common
Stock in certain events, as set forth therein, (ii) the Bank and
Target Holding Company are entering into, as of the date of this
Agreement, a termination fee agreement (the "Fee Letter"),
providing for the payment by Target Holding Company of a fee to
the Bank upon certain events set forth therein, and (iii)
People's Mutual Holdings, a Connecticut mutual bank holding
company, has by a letter agreement of even date herewith (the
"Support Agreement") agreed, subject to the terms thereof, to
vote its shares of Bank Common Stock in favor of the Merger
(subject to the terms and conditions of this Agreement) at any
meeting of shareholders of the Bank called to consider and take
action with respect thereto; 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
1.01 The Merger. Subject to the terms and conditions of
this Agreement, in accordance with applicable law, at the
Effective Time (as defined in Section 1.02 hereof), Target
Holding Company and Target Bank shall merge with and into the
Bank. The Bank shall be the surviving entity (hereinafter
sometimes called the "Surviving Bank") in the Merger, and shall
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continue its corporate existence and operate as a Connecticut
stock savings bank under the laws of the State of Connecticut.
Upon consummation of the Merger, the separate corporate existence
of each of Target Holding Company and Target Bank shall
terminate. Each outstanding share of stock of Target Bank
immediately prior to the Effective Time shall be cancelled and
extinguished with no payment being made therefor, and each
outstanding share of stock of Target Holding Company immediately
prior to the Effective Time shall be converted into the right to
receive payment in the Merger as provided in Section 1.04 below.
The name of the Surviving Bank shall be "People's Bank" at the
Effective Time.
1.02 Effective Time. The Merger shall become effective (the
"Effective Time") upon the later of (i) the filing with the
Secretary of State of the State of Delaware of a Certificate of
Merger (the "Delaware Secretary" and the "Delaware Certificate of
Merger"), (ii) the filing with the Secretary of State of the
State of Connecticut of a Certificate of Merger (the "Connecticut
Secretary" and the "Connecticut Certificate of Merger") together
with the approval of the Merger by the Banking Commissioner of
the State of Connecticut (the "Commissioner") along with a copy
of this Agreement, or (iii) such later date as provided for in
the Delaware Certificate of Merger and the Connecticut
Certificate of Merger.
1.03 Effects of the Merger. At and after the Effective
Time, the Merger shall have the effects set forth in Sections
33-820 and 36a-125 of the Connecticut General Statutes (the
"CGS") and Subchapter IX of The Delaware General Corporation Law
(the "DGCL"). The Surviving Bank will not have or exercise any
powers other than those now exercised or exercisable by the Bank
or Target Bank.
1.04 Conversion of Target Holding Company Stock. At the
Effective Time, by virtue of the Merger and without any action on
the part of the Bank, Target Holding Company, the Target Bank or
the holder of any of the following securities:
(a) Each share of the common stock, without par value, of
the Bank ("Bank Common Stock") issued and outstanding immediately
prior to the Effective Time shall remain outstanding and shall be
unchanged after the Merger, except to the extent a holder of
shares of Bank Common Stock shall become entitled to payment of
the fair value of such shares under the Connecticut Business
Corporation Act.
(b) Each share of the common stock, par value $.01 per
share ("Target Holding Company Common Stock"), of the Target
Holding Company issued and outstanding immediately prior to the
Effective Time, including each attached right (a "Right") issued
pursuant to the Rights Agreement, dated as of November 21, 1989,
as amended (the "Preferred Stock Rights Plan"), between the
Target Holding Company and the Rights Agent named therein, shall
cease to be outstanding and (except for (i) shares held by Target
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-3-
Holding Company as treasury shares, (ii) shares owned or
held by any direct or indirect subsidiary of Target Holding
Company (other than such shares held as security for an
obligation to Target Holding Company or such subsidiary), (iii)
shares held by the Bank other than in a fiduciary or trust
capacity for the benefit of third parties, and (iv) Dissenting
Shares (as defined in Section 1.09)) shall be converted into and
become the right to receive, at the election of the holder
thereof, either:
(A) 1.0310 (the "Exchange Ratio," which Exchange Ratio
shall be subject to adjustment pursuant to Section 1.06) shares
of Bank Common Stock (as so adjusted pursuant to Section 1.06,
the "Per Share Stock Consideration"); or
(B) $28.74 in cash (as adjusted pursuant to Section
1.06, the "Per Share Cash Consideration"); provided, however,
that the aggregate number of shares of Bank Common Stock that
shall be issued in the Merger shall be equal to 2,945,594 (the
"Stock Amount") (subject to adjustment pursuant to Section 1.06),
and the aggregate amount of cash that shall be paid in the Merger
shall be equal to $81,671,000 (as adjusted pursuant to Section
1.06(a), the "Base Cash Consideration") plus any Cash Adjustment
as defined in Section 1.06, minus the Aggregate Option Settlement
Amount (as defined in Section 1.06); and provided further, that
the above elections shall be subject to the operation of Section
1.05.
(c) Each share of preferred stock, par value $.01, of
Target Holding Company shall automatically be canceled and shall
cease to exist with no payment being made therefor.
(d) (i) All shares of Target Holding Company Common Stock
that are held by Target Holding Company as treasury shares, (ii)
all shares of Target Holding Company Common Stock that are owned
or held directly or indirectly by any direct or indirect
subsidiary of Target Holding Company (other than such shares held
as security for an obligation to Target Holding Company or such
subsidiary), and (iii) all shares of Target Holding Company
Common Stock held by the Bank other than in a fiduciary or trust
capacity for the benefit of third parties shall be canceled and
shall cease to exist and no stock of the Bank or other
consideration shall be delivered in exchange therefor.
1.05 Election Procedures. Election forms and other
appropriate and customary transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and
title to the certificates theretofore representing Target Holding
Company Common Stock ("Certificates") shall pass, only upon
proper delivery of such Certificates to an exchange agent
designated by the Bank (the "Exchange Agent")) in such form as
the Bank and Target Holding Company shall mutually agree
("Election Forms") shall be mailed 30 days prior to the
anticipated Effective Time or on such other earlier date as
Target Holding Company and the Bank shall mutually agree
("Mailing Date") to each holder of record of Target Holding
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Company Common Stock as of five business days prior to the
Mailing Date ("Election Form Record Date").
Each Election Form shall permit the holder (or the
beneficial owner through appropriate and customary documentation
and instructions) either (i) to elect to receive only Bank Common
Stock with respect to such holder's Target Holding Company Common
Stock ("Stock Election Shares"); (ii) to elect to receive only
cash with respect to such holder's Target Holding Company Common
Stock ("Cash Election Shares"); or (iii) to indicate that such
holder makes no election ("No Election Shares"). Dissenting
Shares (as defined below) shall be treated as No Election Shares.
Any Target Holding Company Common Stock with respect to
which the holder (or the beneficial owner, as the case may be)
shall not have submitted to the Exchange Agent an effective,
properly completed Election Form on or before 5:00 p.m. on the
25th day following the Mailing Date (or such other time and date
as the Bank and Target Holding Company may mutually agree) (the
"Election Deadline") shall also be deemed to be No Election
Shares.
Any such election shall have been properly made only if the
Exchange Agent shall have actually received a properly completed
Election Form by the Election Deadline. An Election Form shall be
deemed properly completed only if accompanied by one or more
Certificates (or customary affidavits and indemnification
regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares
of Target Holding Company Common Stock covered by such Election
Form, together with duly executed transmittal materials included
in the Election Form. Any Election Form may be revoked or changed
by the person submitting such Election Form at or prior to the
Election Deadline. In the event an Election Form is revoked prior
to the Election Deadline, the shares of Target Holding Company
Common Stock represented by such Election Form shall become No
Election Shares and the Bank shall cause the Certificates to be
promptly returned without charge to the person submitting the
Election Form upon written request to that effect from the person
who submitted the Election Form. Subject to the terms of this
Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election,
revocation or change has been properly or timely made and to
disregard immaterial defects in the Election Forms, and any good
faith decisions of the Exchange Agent regarding such matters
shall be binding and conclusive. Neither Bank nor the Exchange
Agent shall be under any obligation to notify any person of any
defect in an Election Form.
Within five business days after the Election Deadline,
unless the Effective Time has not yet occurred, in which case as
soon after the Effective Time as practicable, the Bank shall
cause the Exchange Agent to effect the allocation among the
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holders of Target Holding Company Common Stock of rights to
receive Bank Common Stock and/or cash in the Merger in accordance
with the Election Forms, subject to the following procedures.
(i) Stock Elections Less Than the Stock Amount. If the
number of shares of Bank Common Stock that would be issued upon
conversion in the Merger of the Stock Election Shares is less
than the Stock Amount, then:
(A) all Stock Election Shares shall be converted
into the right to receive the Per Share Stock
Consideration,
(B) the Exchange Agent shall then select first
from among the No Election Shares and then (if
necessary) from among the Cash Election Shares, by a
pro rata selection process (as described below), a
sufficient number of shares ("Stock Designated
Shares"), such that the number of shares of Bank
Common Stock that will be issued in the Merger equals
as closely as practicable the Stock Amount, and all
Stock Designated Shares shall be converted into the
right to receive the Per Share Stock Consideration,
and
(C) the Cash Election Shares and the No Election
Shares which are not Stock Designated Shares shall be
converted into the right to receive the Per Share Cash
Consideration.
(ii) Stock Elections More Than the Stock Amount. If the
number of shares of Bank Common Stock that would be issued upon
conversion in the Merger of the Stock Election Shares is greater
than the Stock Amount, then:
(A) all Cash Election Shares and No Election
Shares shall be converted into the right to receive
the Per Share Cash Consideration,
(B) the Exchange Agent shall then select from
among the Stock Election Shares, by a pro rata
selection process (as described below), a sufficient
number of shares ("Cash Designated Shares") such that
the number of shares of Bank Common Stock that will be
issued in the Merger equals as closely as practicable
the Stock Amount, and all Cash Designated Shares shall
be converted into the right to receive the Per Share
Cash Consideration, and
(C) the Stock Election Shares which are not Cash
Designated Shares shall be converted into the right to
receive the Per Share Stock Consideration.
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(iii) Stock Elections Equal to the Stock Amount. If the
number of shares of Bank Common Stock that would be issued upon
conversion into Bank Common Stock of the Stock Election Shares is
equal or nearly equal (as determined by the Exchange Agent) to
the Stock Amount, then subparagraphs (i) and (ii) above and
subparagraph (iv) below shall not apply and all Stock Election
Shares shall be converted into the right to receive the Per Share
Stock Consideration, and all Cash Election Shares and No Election
Shares shall be converted into the right to receive the Per Share
Cash Consideration; or
(iv) Stock Elections and No Elections Equal to the Stock
Amount. If the number of shares of Bank Common Stock that would
be issued upon the conversion into Bank Common Stock of the Stock
Election Shares and No Election Shares would equal or nearly
equal (as determined by the Exchange Agent) the Stock Amount,
then subparagraphs (i), (ii) and (iii) above shall not apply, and
all Cash Election Shares shall be converted into the right to
receive the Per Share Cash Consideration and all Stock Election
Shares and No Election Shares shall be converted into the right
to receive the Per Share Stock Consideration.
The pro rata selection process to be used by the Exchange
Agent shall consist of such equitable proration processes as
shall be mutually determined by Bank and Target Holding Company.
1.06 Adjustments to the Merger Consideration. (a) The Stock
Amount shall be adjusted as of the end of the ten (10)
consecutive trading-day period (the "Valuation Period") during
which the shares of Bank Common Stock are traded on the NASDAQ
Stock Market National Market System ("NASDAQ") ending on the date
on which the last of the regulatory approvals required for the
consummation of the Merger occurs (the "Valuation Date"). If the
Valuation Period Market Value of Bank Common Stock is less than
$27.875, the Stock Amount shall be equal to the amount obtained
by (A) multiplying 2,945,594 by $27.875 and (B) dividing the
product thereof by the Floor Value. If the Valuation Period
Market Value is greater than $27.875, the Stock Amount shall be
equal to the amount obtained by (A) multiplying 2,945,594 by
$27.875 and (B) dividing the product thereof by the Ceiling
Value. Notwithstanding the foregoing, if the Valuation Period
Market Value shall be below the Floor Value, the Bank may in its
discretion increase the Stock Amount and decrease the Base Cash
Consideration so long as (i) the Average Per Share Consideration
shall remain equal to that resulting from the application of the
preceding sentence and (ii) the percentage of the Aggregate
Consideration accounted for by cash shall not be less than that
which would exist if the Valuation Period Market Value were equal
to the Floor Value.
(b) Based on the revised Stock Amount calculated under
Section 1.06(a), the Per Share Stock Consideration and Per Share
Cash Consideration shall be adjusted as follows. The Per Share
Stock Consideration shall be adjusted by adjusting the Exchange
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Ratio such that the product of the Exchange Ratio (rounded
to the nearest 1/1000th of a share) and the Valuation Period
Market Value shall equal the Average Per Share Consideration. The
Per Share Cash Consideration shall be adjusted to equal the
Average Per Share Consideration.
(c) For purposes of this Section 1.06, the following
definitions shall apply:
"Aggregate Consideration" shall mean (x) the product of (i)
the Stock Amount (as adjusted in Section 1.06(a)) times (ii) the
Valuation Period Market Value, plus (y) the Base Cash
Consideration plus the Cash Adjustment, if any, minus (z) the
Aggregate Option Settlement Amount.
"Aggregate Option Settlement Amount" means, as determined
on the Valuation Date, (i) (x) the number of unexercised Options
times (y) the Fully Diluted Per Share Consideration minus (ii)
the aggregate exercise price of all unexercised Options.
"Average Per Share Consideration" shall mean the Aggregate
Consideration divided by the Valuation Period Share Number
(rounded to the nearest cent).
"Cash Adjustment" means the aggregate exercise price
received by Target Holding Company in respect of all Options
exercised prior to the Valuation Date.
"Ceiling Value" shall mean the lesser of (a) the Valuation
Period Market Value and (b) $29.27.
"Floor Value" shall mean the greater of (a) the Valuation
Period Market Value and (b) $26.48.
"Fully Diluted Common Stock Number" means, as determined on
the Valuation Date, the sum of (a) the Valuation Period Share
Number and (b) the number of shares of Target Holding Company
Common Stock issuable upon exercise of all unexercised Options.
"Fully Diluted Per Share Consideration" means, as
determined on the Valuation Date, (i) (x) the product of the
Stock Amount (as adjusted in Section 1.06(a)) and the Valuation
Period Market Value, plus (y) the Base Cash Consideration (plus
the Cash Adjustment, if any) plus (z) the aggregate exercise
price of all unexercised Options divided by (ii) the Fully
Diluted Common Stock Number.
"Valuation Period Market Value" shall mean the average of
the closing sale prices for the Bank Common Stock as reported on
NASDAQ (as reported in The Wall Street Journal or in the absence
thereof, by another authoritative source) during the Valuation
Period.
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"Unexercised Options" shall refer to in the money Options.
"Valuation Period Share Number" shall mean the total number
of shares of Target Holding Company Common Stock outstanding, or
in respect of which an Option has been exercised (other than
shares referred to in Section 1.04(d)), on the Valuation Date.
1.07 Adjustments for Dilution and Other Matters. If prior
to the Effective Time, and subject to the provisions of Article
V, (i) Target Holding Company shall declare a stock dividend or
distribution upon or subdivide, split up, reclassify or combine
the Target Holding Company Common Stock, or declare a dividend or
make a distribution on the Target Holding Company Common Stock in
any security convertible into or exchangeable for Target Holding
Company Common Stock, or (ii) the Bank shall declare a stock
dividend or distribution upon or subdivide, split up, reclassify
or combine the Bank Common Stock or declare a dividend or make a
distribution on the Bank Common Stock in any security convertible
into or exchangeable for Bank Common Stock, appropriate
adjustment or adjustments will be made to the Per Share Cash
Consideration, the Per Share Stock Consideration and the Stock
Amount.
1.08 Exchange Procedures. (a) Subject to Section 1.07, each
previous holder of a Certificate that has surrendered such
Certificate together with duly executed transmittal materials
included in the Election Form to the Bank or, at the election of
the Bank, the Exchange Agent, pursuant to Section 1.05 will, upon
acceptance thereof by the Bank or the Exchange Agent, be entitled
to a certificate or certificates representing the number of full
shares of Bank Common Stock or cash into which the Certificate so
surrendered shall have been converted pursuant to this Agreement
and any distribution theretofore declared and not yet paid with
respect to such shares of Bank Common Stock, all without
interest.
(b) The Exchange Agent shall accept Certificates upon
compliance with such reasonable terms and conditions as the Bank
or the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with customary exchange practices.
Certificates shall be appropriately endorsed or accompanied by
such instruments of transfer as the Bank or the Exchange Agent
may reasonably require.
(c) Each outstanding Certificate shall until duly
surrendered to the Bank or the Exchange Agent be deemed to
evidence ownership of the consideration into which the stock
previously represented by such Certificate shall have been
converted pursuant to this Agreement.
(d) After the Effective Time, holders of Certificates shall
cease to have rights with respect to the stock previously
represented by such Certificates, and their sole rights shall be
to exchange such Certificates for the consideration provided for
in this Agreement. After the Effective Time, there shall be no
further transfer on the records of Target Holding Company of
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Certificates, and if such Certificates are presented to Target
Holding Company for transfer, they shall be canceled against
delivery of the consideration provided therefor in this
Agreement. The Bank shall not be obligated to deliver the
consideration to which any former holder of Target Holding
Company Common Stock is entitled as a result of the Merger until
such holder surrenders the Certificates as provided herein. No
dividends declared will be remitted to any person entitled to
receive Bank Common Stock under this Agreement and such person
shall not be entitled to vote such Bank Common Stock or otherwise
receive property in respect thereof as set forth in Section
36a-125(h) of the C.G.S., until such person surrenders the
Certificate representing the right to receive such Bank Common
Stock, at which time such dividends shall be remitted to such
person, without interest and less any taxes that may have been
imposed thereon. Certificates surrendered for exchange by any
person constituting an "affiliate" of Target Holding Company for
purposes of Rule 145 of the Securities Act of 1933, as amended
(together with the rules and regulations thereunder, the
"Securities Act"), shall not be exchanged for certificates
representing Bank Common Stock until the Bank has received a
written agreement from such person in a form reasonably
acceptable to the parties. The Target Holding Company shall cause
each person who may be deemed to be an affiliate for such purpose
to execute and deliver to the Bank an agreement in such form on
or before the date of mailing of the Joint Proxy Statement.
Neither the Exchange Agent nor any party to this Agreement nor
any affiliate thereof shall be liable to any holder of stock
represented by any Certificate for any consideration paid to a
public official pursuant to applicable abandoned property,
escheat or similar laws. The Bank and the Exchange Agent shall be
entitled to rely upon the stock transfer books of Target Holding
Company to establish the identity of those persons entitled to
receive consideration specified in this Agreement, which books
shall be conclusive with respect thereto. In the event of a
dispute with respect to ownership of stock represented by any
Certificate, the Bank and the Exchange Agent shall be entitled to
deposit any consideration represented thereby in escrow with an
independent third party (including by means of an interpleader
action) and thereafter be relieved with respect to any claims
thereto.
1.09 Dissenting Shares. (a) "Dissenting Shares" means any
shares of Target Holding Company Common Stock held by any holder
who duly demands appraisal under the DGCL at or prior to the
Target Holding Company meeting approving the Merger. Any holders
of Dissenting Shares shall be entitled to payment for such shares
only to the extent permitted by and in accordance with the
provisions of the DGCL; provided, however, that for purposes of
Section 1.05, Dissenting Shares shall be deemed to be No Election
Shares.
(b) Target Holding Company shall give the Bank (i) prompt
notice of any written objections to the Merger and any written
demands for the payment of the fair value of any shares,
withdrawals of such demands, and any other instruments served
pursuant to the DGCL received by Target Holding Company and (ii)
the opportunity to direct all negotiations and proceedings with
respect to such demands under the DGCL. Target Holding Company
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shall not voluntarily make any payment with respect to any
demands for payment of fair value and shall not, except with the
prior written consent of the Bank, settle or offer to settle any
such demands.
1.10 Options. Each holder of an outstanding and exercisable
option on the Valuation Date to purchase shares of Target Holding
Company Common Stock heretofore granted under an employee or
Director stock option plan, program or arrangement of Target
Holding Company (such options, "Options" and all such plans,
"Stock Option Plans") (i) may not exercise such Option on or
after the Valuation Date and (ii) will be entitled to receive in
settlement for each Option so held a cash payment from the Bank
in an amount equal to the excess, if any, of the Average Per
Share Consideration over the per share exercise price of such
Option, multiplied by the number of shares of Target Holding
Company Common Stock covered by such Option. All such Options
shall be canceled and of no further effect as of the Effective
Time.
1.11 No Fractional Shares. Notwithstanding any other
provision of this Agreement, neither certificates nor scrip for
fractional shares of Bank Common Stock shall be issued in the
Merger. Each holder who otherwise would have been entitled to a
fraction of a share of Bank Common Stock shall receive in lieu
thereof cash (without interest) in an amount determined by
multiplying the fractional share interest to which such holder
would otherwise be entitled by the closing sale price for the
Bank Common Stock as reported on NASDAQ (as reported in The Wall
Street Journal) for the trading day immediately preceding the
Effective Time. No such holder shall be entitled to dividends,
voting rights or any other rights of any fractional share.
1.12 Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"),
and that this Agreement shall constitute a "plan of
reorganization" for purposes of Section 368 of the Code.
ARTICLE II
CORPORATE GOVERNANCE
2.01 Other Matters. At and after the Effective Time: (i)
the Surviving Bank's main office shall be located in Bridgeport,
Connecticut, (ii) except as provided in Section 2.02 below, the
Directors and officers of the Bank holding office immediately
prior to the Effective Time shall be the Surviving Bank's
Directors and officers, (iii) the Articles of Incorporation and
Bylaws of the Bank existing immediately prior to the Effective
Time shall be the Articles of Incorporation and Bylaws of the
Surviving Bank, (iv) the authorized capital stock of the
Surviving Bank at the Effective Time shall consist of 100,000,000
shares of common stock, without par value, and 10,000,000 shares
of preferred stock, without par value, and (v) the
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minimum number of Directors of the Surviving Bank shall be 9 and
the maximum number of Directors of the Surviving Bank shall be 16
as set forth in the Bylaws of the Surviving Bank defined in
clause (iii) of this Section 2.01.
2.02 Directors. At the Effective Time, the Bank shall take
such action as shall be necessary to cause one director of Target
Holding Company, to be selected by the Board of Directors of the
Bank, to serve as an additional member of the Board of Directors
of the Bank (with an initial term ending not earlier than at the
1998 annual meeting and subject to reelection thereat for a full
three-year term). The non-employee Directors of Target Holding
Company serving immediately prior to the Effective Time will be
invited to serve on an advisory board to the Bank for the
southeastern region of Connecticut after the Merger with an
initial term ending at the 1998 annual meeting and subject to
reelection annually.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
HOLDING COMPANY AND TARGET BANK
Target Holding Company and Target Bank hereby jointly and
severally represent and warrant to the Bank as follows:
3.01 Corporate Organization.
(a) Target Holding Company is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. Target Holding Company has the
corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which the nature
of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such
licensing or qualification necessary. Target Holding Company is
duly registered as a bank holding company under the Bank Holding
Company Act (the "BHC Act"). The copies of Target Holding
Company's Certificate of Incorporation and Bylaws, each certified
by its Secretary as of the date of this Agreement, which are
being delivered to the Company herewith, are complete and correct
copies in effect as of the date of this Agreement.
(b) Except as listed on the attached Schedule 3.01(b)
of the Disclosure Schedule being provided concurrently herewith
(the "Disclosure Schedule"), Target Holding Company does not have
any direct or indirect wholly-owned Subsidiaries or capital stock
or other equity ownership interest in any corporation,
partnership or other entity which totals 5% or
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more of such entity's total equity. Except as disclosed on
Schedule 3.01(b), Target Holding Company or Target Bank, as the
case may be, owns, directly or indirectly, at least 99% of the
issued and outstanding capital stock of each of its respective
Subsidiaries, and no equity securities of any of such
Subsidiaries are or may become required to be issued (other than
to Target Holding Company or Target Bank) by reason of any
outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or
issuance of any shares of such Subsidiary's capital stock. There
are no contracts, commitments, understandings or arrangements by
which any of such Subsidiaries is or may be bound to sell or
otherwise transfer any shares of the capital stock of any such
Subsidiary (other than to Target Holding Company or Target Bank),
there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such
shares (other than to Target Holding Company or Target Bank), and
all of the shares of capital stock of each such subsidiary held
by Target Holding Company or Target Bank are fully paid and
nonassessable and are owned by Target Holding Company or Target
Bank free and clear of any charge, mortgage, pledge, security
interest, restriction, claim, lien or encumbrance. Neither Target
Holding Company nor Target Bank owns (other than in a bona fide
fiduciary capacity or in satisfaction of a debt previously
contracted) beneficially, directly or indirectly, any shares of
any equity securities or similar interests of any person, or any
interests in a partnership or joint venture of any kind other
than as set forth in Schedule 3.01(b). Each Subsidiary of Target
Holding Company and Target Bank has been duly organized and is
validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do
business and in good standing in the jurisdictions where its
ownership or leasing of property or the conduct of its business
requires it to be so qualified. Each of such Subsidiaries has in
effect all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties
and assets and to carry on its business as it is now conducted.
As used in this Agreement, the word "Subsidiary," when used in
respect to any party, means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is
consolidated with such party for financial statement purposes.
(c) Target Bank is a capital stock savings bank duly
organized, validly existing and in good standing under the
banking laws of the State of Connecticut. Target Bank has the
corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now
being conducted. Target Bank has all necessary federal, state and
local banking authorizations to own or lease its properties and
assets and to carry on its business as it is being conducted. The
accounts of depositors of Target Bank are insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation (the "FDIC") in accordance with law and with the
regulations of the FDIC and all premiums and assessments required
in connection therewith have been paid. The copies of Target
Bank's Certificate of Incorporation and Bylaws, each certified by
its Secretary as of the date of this Agreement, which
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are being delivered to the Company herewith, are complete and
correct copies in effect as of the date of this Agreement.
(d) The minute books of Target Holding Company and
Target Bank and their Subsidiaries, respectively, copies of which
have been previously delivered or made available to the Bank,
contain complete and accurate records of all meetings through
July 31, 1997, and other corporate actions of their respective
shareholders and Board of Directors (including committees of
their respective Boards of Directors).
3.02 Capitalization.
(a) The authorized capital stock of Target Holding
Company consists solely of 26,000,000 shares, consisting of
25,000,000 shares of Target Holding Company Common Stock, $.01
par value, and 1,000,000 shares of preferred stock, $.01 par
value ("Preferred Stock"). As of the date of this Agreement,
there are 5,432,341 shares of Target Holding Company Common Stock
issued and outstanding, 521,540 shares held in Target Holding
Company's treasury, and (except as described below) no shares
reserved for issuance upon exercise of outstanding Options. There
are no Options which have been exercised in respect of which
shares are not issued and outstanding on the date hereof. The
aggregate number of Options outstanding and unexercised as of the
date hereof under all of Target Holding Company's Stock Option
Plans is 446,050. At the date of this Agreement, no shares of
preferred stock are outstanding and no shares of Target Holding
Company Preferred Stock have heretofore been issued or are
outstanding. All issued and outstanding shares of Target Holding
Company Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. Except for 446,050 shares
of Target Holding Company Common Stock reserved for issuance upon
exercise of outstanding stock options that have been granted
pursuant to Target Holding Company's Stock Option Plans, and
125,000 shares of Preferred Stock reserved for issuance upon
exercise of the Rights (the "Target Holding Company Rights")
distributed to holders of Target Holding Company Common Stock
pursuant to the Preferred Stock Rights Plan (as described in
Target Holding Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996) of Target Holding Company,
Target Holding Company 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 Target Holding Company capital stock or
any security representing the right to purchase or otherwise
receive any capital stock of Target Holding Company, except
pursuant to this Agreement or the Stock Option Agreement. None of
the shares of capital stock of Target Holding Company has been
issued in violation of the preemptive rights of any person.
(b) The authorized capital stock of Target Bank
consists of 50,000,000 shares, consisting of 45,000,000 shares of
common stock, $1.00 par value ("Target Bank Common
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Stock"), and 5,000,000 shares of preferred stock, no par value.
As of the date of this Agreement, there are 5,747,451 shares of
Target Bank Common Stock issued and outstanding, all of which are
held by Target Holding Company, and no shares held in Target
Bank's treasury or reserved for issuance. At the date of this
Agreement, no shares of preferred stock are outstanding or
reserved for issuance and no shares of Target Bank preferred
stock have heretofore been issued or are outstanding. All issued
and outstanding shares of Target Bank Common Stock have been duly
authorized and validly issued and are fully paid and
nonassessable. Target Bank 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 Target Bank capital stock or any
security representing the right to purchase or otherwise receive
any capital stock of Target Bank. None of the shares of capital
stock of Target Bank are subject to any preemptive rights or were
issued in violation of the preemptive rights or subscription
rights of any person.
3.03 Authority; No Violation.
(a) Target Holding Company has all necessary corporate
power and authority to execute and deliver this Agreement, the
Stock Option Agreement and the Fee Letter and to consummate the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the Stock Option Agreement and the
Fee Letter by Target Holding Company and the consummation by
Target Holding Company of the transactions contemplated by this
Agreement have been duly and validly approved by the Board of
Directors of Target Holding Company (including with respect to
all actions to be taken by Target Holding Company in its capacity
as shareholder of Target Bank). The Board of Directors of Target
Holding Company has directed that this Agreement and the Merger
and the transactions contemplated hereby be submitted to Target
Holding Company's shareholders for consideration at a meeting of
such shareholders and, except for the adoption of this Agreement
by the requisite vote of Target Holding Company's shareholders,
no other corporate proceedings on the part of Target Holding
Company are necessary to approve this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Target Holding Company
and (assuming adoption of the Agreement by the requisite vote of
Target Holding Company's shareholders, and due authorization,
execution and delivery by the Bank) constitutes a legal, valid
and binding obligation of Target Holding Company, enforceable
against Target Holding Company in accordance with its terms,
except as enforcement may be limited by general principles of
equity, whether applied in a court of law or a court of equity,
and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Neither the execution and delivery of this
Agreement, the Stock Option Agreement or the Fee Letter by Target
Holding Company, nor the consummation by Target
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Holding Company of the transactions contemplated hereby or
thereby, nor compliance by Target Holding Company with any of the
terms or provisions hereof or thereof, will (i) violate any
provision of the Certificate of Incorporation or Bylaws of Target
Holding Company or (ii) assuming that the consents and approvals
referred to in Section 3.04 hereof are duly obtained, (x) violate
any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Target Holding Company
or any of its Subsidiaries, or (y) violate, result in a breach of
any provision of, constitute a default under, or result in the
creation of any material lien, pledge, security interest, charge
or other encumbrance upon any of the properties or assets of
Target Holding Company 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 Target Holding Company is a party, or by which it or any of
its properties or assets may be bound or affected. The Stock
Option Agreement and the Fee Letter do not violate any provisions
of the Certificate of Incorporation or Bylaws of Target Holding
Company.
(c) Target Bank has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated thereby. Target Holding Company in
its capacity as sole shareholder of Target Bank has held all
meetings, taken all votes and taken all other corporate action
necessary to effect approval of this Agreement and the
transactions contemplated hereby by Target Bank. No other
corporate proceedings on the part of Target Bank are necessary to
consummate the transactions contemplated thereby. The Agreement
has been duly and validly executed and delivered by Target Bank
and will (assuming due authorization, execution and delivery by
the Bank) constitute a legal, valid and binding obligation of
Target Bank, enforceable against Target 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.
(d) Neither the execution and delivery of this
Agreement by Target Bank, nor the consummation by Target Bank of
the transactions contemplated thereby, nor compliance by Target
Bank with any of the terms or provisions thereof, will (i)
violate any provision of the Certificate of Incorporation or
Bylaws of Target Bank or (ii) assuming that the consents and
approvals referred to in Section 3.04 hereof are duly obtained,
(x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Target
Bank or any of its Subsidiaries, or (y) violate, result in a
breach of any provision of, constitute a default under, or result
in the creation of any material lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets
of Target 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
Target Bank is a party, or by which it or any of its properties
or assets may be bound or affected.
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3.04 Consents and Approvals. Except for (i) the filing of
applications and notices or requests for waivers, as applicable,
with the Board of Governors of the Federal Reserve System (the
"FRB") under the BHC Act, and approval of such applications and
notices or granting of such waivers, (ii) the filing of
applications and notices, as applicable, with the FDIC under the
Bank Merger Act and approval of such applications and notices,
(iii) the filing of applications with the Commissioner under
Sections 36a-125 and 36a-184 of the CGS, and approvals of such
applications, (iv) the approval of the Merger and this Agreement
by the requisite vote of the shareholders of Target Holding
Company, (v) the filing of the Connecticut Certificate of Merger
with the Connecticut Secretary, (vi) the filing of the Delaware
Certificate of Merger with the Delaware Secretary, (vii) the
filing of the Commissioner's approval of the Merger with the
Connecticut Secretary, (viii) the filing of this Agreement with
the Connecticut Secretary, and (ix) such filings, authorizations
or approvals as may be set forth in Schedule 3.04, no consents or
approvals of or filings or registrations with any governmental
entity or with any third party or under any law, rule,
regulations, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument are necessary in
connection with the execution and delivery by Target Holding
Company and Target Bank of this Agreement and the consummation by
Target Holding Company and Target Bank of the Merger and the
other transactions contemplated hereby.
3.05 Financial Statements. Target Holding Company has
previously delivered to the Bank copies of (a) the consolidated
balance sheets of Target Holding Company and its Subsidiaries as
of December 31 for each of the two fiscal years 1995 and 1996 and
the related consolidated statements of income, changes in
shareholders' equity and cash flows for the fiscal years 1995 and
1996, as included in Target Holding Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 filed with
the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and (b) the unaudited consolidated balance sheets of Target
Holding Company and its Subsidiaries as of June 30, 1997, and the
related unaudited consolidated statements of income, changes in
shareholders' equity and cash flows for the six month period then
ended as reported in Target Holding Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1997 filed with the SEC
under the Exchange Act. The June 30, 1997 consolidated balance
sheet of Target Holding Company (including the related notes,
where applicable) fairly presents in all material respects the
consolidated financial position of Target Holding Company and its
Subsidiaries as of the date thereof, and the other financial
statements referred to in this Section 3.05 (including the
related notes where applicable) fairly present in all material
respects the results of the consolidated operations and changes
in shareholders' equity and consolidated financial position of
Target Holding Company and its Subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth;
each of the foregoing financial statements (including the related
notes, where applicable) ("Financial Statements") complies in all
material respects with the applicable accounting requirements and
with the published rules and regulations of the SEC
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with respect thereto, and each of such statements (including the
related notes, where applicable) has been prepared in accordance
with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q. Without limiting the
generality of the foregoing, the financial statements as of, and
for, the six month period ending June 30, 1997 were prepared on a
basis consistent with Target Holding Company's audited financials
for the year ended December 31, 1996. The books and records of
Target Holding Company have been, and are being, maintained in
all material respects in accordance with applicable legal and
accounting requirements and reflect only valid transactions.
3.06 Absence of Certain Changes or Events. Except as may be
reflected in the Target Holding Company's Form 10-Q for the six
months ended June 30, 1997 or set forth in Schedule 3.06, since
December 31, 1996:
(a) there has not been any material adverse change in
the Target Holding Company and its Subsidiaries, their
businesses or operations taken as a whole;
(b) there has not been any incurrence by the Target
Holding Company or Target Bank of any liability that has
had, or to the knowledge of the Target Holding Company or
Target Bank, could reasonably be expected to have, a
material adverse effect on the Target Holding Company and
its Subsidiaries taken as a whole; and
(c) there has not been any change in any of the
accounting methods or practices of the Target Holding
Company or any of its Subsidiaries other than changes
required by applicable law or GAAP.
3.07 Legal Proceedings. There are no pending or to the
knowledge of Target Holding Company or Target Bank, threatened,
legal, administrative, arbitral or other proceedings, claims,
actions or governmental investigations of any nature against
Target Holding Company or Target Bank or any Subsidiary thereof,
as to which there is, in the judgment of the Target Holding
Company or Target Bank, a reasonable likelihood of adverse
determination and which if adversely determined, would,
individually or in the aggregate, (i) have a material adverse
effect on Target Holding Company or Target Bank and their
Subsidiaries, or their business or operations taken as a whole,
or (ii) as of the date hereof, prevent or materially and
adversely affect Target Holding Company's or Target Bank's
ability to consummate the transactions contemplated hereby. Set
forth in Schedule 3.07 hereto is a list of any pending or to the
knowledge of the Target Holding Company or Target Bank,
threatened, legal, administrative, arbitral or other proceeding,
claim, action or governmental investigation of any nature against
the Target Holding Company or Target Bank or any Subsidiary
thereof which involves a claim of $100,000 or more.
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3.08 Compliance with Applicable Law. Each of Target Holding
Company, Target Bank and each of their Subsidiaries holds, and
has at all times held, all material licenses, franchises, permits
and authorizations necessary for the lawful conduct of its
respective business under and pursuant to all, and has complied
with and is not in default under any, applicable law, statute,
order, rule or regulation of any governmental entity relating to
Target Holding Company, Target Bank or any of their Subsidiaries,
except where the failure to hold such license, franchise, permit
or authorization or such noncompliance or default would not have
a material adverse effect on Target Holding Company or Target
Bank, and neither Target Holding Company, Target Bank nor any of
their Subsidiaries has received notice of any material violations
of any of the above.
3.09 Taxes. Target Holding Company and its Subsidiaries
have properly and accurately completed and duly filed in correct
form and in a timely manner all federal, state, local and foreign
information and tax returns required to be filed by them (all
such returns being accurate and complete in all material
respects) and have duly paid or made provisions for the payment
of all taxes and other charges which have been incurred or are
due or claimed to be due from them by federal, state, local or
foreign taxing authorities (including, without limitation, those
due in respect of its properties, income, business, capital
stock, deposits, franchises, licenses, sales and payrolls). The
amounts set up as reserves for taxes on the Financial Statements
for the period ended December 31, 1996 are, with such exceptions
as are not material, sufficient in the aggregate for the payment
of all unpaid federal, state, local and foreign taxes (including
any interest or penalties thereon and including reserves for
local real estate or other property taxes in an amount which is
at least as great as the amount of such taxes paid in any prior
year), whether or not disputed, accrued or applicable for the
period ended December 31, 1996 or for any year or period prior
thereto, and for which Target Holding Company or any Subsidiary
may be liable in its own right or as transferee of the assets of,
or successor to, any corporation, person, association,
partnership, joint venture or other entity. The federal and state
income tax returns of Target Holding Company and its Subsidiaries
are not presently being examined by the Internal Revenue Service
or the Department of Revenue Services, nor have Target Holding
Company or any Subsidiary been notified of a pending examination.
To the best of Target Holding Company's knowledge, there are no
pending or threatened questions relating to, or claims asserted
for, taxes or assessments upon Target Holding Company or any
Subsidiary nor has Target Holding Company or any Subsidiary given
or been requested to give any waivers extending the statutory
period of limitation applicable to any federal, state, local or
foreign income tax return for any period other than that given in
prior years for which the years are now closed. Proper and
accurate amounts have been withheld by Target Holding Company and
its Subsidiaries from their employees for all prior periods in
compliance with the tax withholding provisions of applicable
federal, state and local laws; federal, state, local and foreign
returns, accurate and complete in all material respects, have
been filed by Target Holding Company and its Subsidiaries for all
periods for which returns were due with respect to income tax
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withholding, Social Security, property, sales, retirement plan
and unemployment taxes; and the amounts shown on such returns to
be due and payable have been paid in full or adequate provision
therefor has been included by Target Holding Company in its
consolidated financial statements as of December 31, 1996. Target
Holding Company and Target Bank have no reason to believe that
any conditions exist that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section
368(a) of the Code.
3.10 Employee Benefit and Other Plans.
Schedule 3.10 contains a complete list of all bonus,
vacation, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock appreciation and
stock option plans, all employment or severance contracts, all
medical, dental, disability, severance, health and life plans,
all other employee benefit and fringe benefit plans, contracts or
arrangements and any "change of control" or similar provisions in
any plan, contract or arrangement maintained or contributed to by
Target Holding Company, Target Bank and their respective
Subsidiaries for the benefit of officers, former officers,
employees, former employees, directors, former directors, or the
beneficiaries of any of the foregoing (collectively,
"Compensation and Benefit Plans").
(a) True and complete copies of each of Target Holding
Company's and Target Bank's Compensation and Benefit Plans,
including, but not limited to, any trust instruments and/or
insurance contracts, if any, and all amendments thereto have been
supplied or made available to the Bank.
(b) Each of Target Holding Company's, Target Bank's
and their respective Subsidiaries' Compensation and Benefit Plans
has been administered in accordance with the terms thereof. All
"employee benefit plans" within the meaning of Section 3(3) of
ERISA, other than "multiemployer plans" within the meaning of
Section 3(37) of ERISA ("Multiemployer Plans"), covering
employees or former employees of Target Holding Company, Target
Bank and their respective Subsidiaries ("Plans"), to the extent
subject to ERISA, are in compliance with ERISA, the Code, the Age
Discrimination in Employment Act and all other applicable laws.
Each Compensation and Benefit Plan of Target Holding Company,
Target Bank and their respective Subsidiaries which is an
"employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service
as set forth in Schedule 3.10(b) and neither Target Holding
Company nor Target Bank is aware of any circumstances reasonably
likely to result in a determination by the IRS that any such plan
is not qualified. There is no pending or, to the knowledge of
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Target Holding Company or Target Bank, threatened litigation or
governmental audit, examination or investigation relating to the
Plans.
(c) No liability under Title IV of ERISA has been or
is expected to be incurred by Target Holding Company, Target Bank
or their respective Subsidiaries with respect to any ongoing,
frozen or terminated "single-employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained
by any of them, or the single-employer plan of any entity which
is considered one employer with Target Holding Company, Target
Bank or their respective Subsidiaries under Section 4001(a)(14)
of ERISA or Section 414 of the Code (an "ERISA Affiliate").
Neither Target Holding Company, Target Bank nor their respective
Subsidiaries nor any ERISA Affiliate of Target Holding Company,
Target Bank or their respective Subsidiaries presently
contributes to a Multiemployer Plan or a multiple employer plan
(as described in Section 4064(a) of ERISA), nor have they
contributed to such a plan within this calendar year or any of
the preceding five calendar years. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plan of Target Holding
Company, Target Bank or their respective Subsidiaries or by any
ERISA Affiliate within the past 12 months.
(d) All contributions, premiums and payments required
to have been made under the terms of any Compensation and Benefit
Plan of Target Holding Company, Target Bank or their respective
Subsidiaries have been made. Neither any Pension Plan of Target
Holding Company, Target Bank or their respective Subsidiaries nor
any single-employer plan of an ERISA Affiliate of Target Holding
Company, Target Bank or their respective Subsidiaries has an
"accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither Target Holding Company, Target Bank nor their respective
Subsidiaries has provided, or is required to provide, security to
any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(e) Under each Pension Plan of Target Holding Company,
Target Bank or their respective Subsidiaries which is a
single-employer plan, as of June 30, 1996, the actuarially
determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the
basis of the actuarial assumptions contained in the Pension
Plan's June 30, 1996 actuarial valuation) did not exceed the then
current value of the assets of such Pension Plan. Target Holding
Company and Target Bank will make the minimum funding
contribution to such Pension Plan in 1997 with respect to the
actuarial valuation as of June 30, 1997.
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(f) Except as set forth in Schedule 3.10(f), neither
Target Holding Company, Target Bank nor their respective
Subsidiaries has any obligations under any Compensation and
Benefit Plans to provide benefits, including death or medical
benefits, with respect to employees of Target Holding Company,
Target Bank or their respective Subsidiaries beyond their
retirement or other termination of service other than (A)
coverage mandated by Part 6 of Title I of ERISA or Section 4980B
of the Code, (B) retirement or death benefits under any employee
pension benefit plan (as defined under Section 3(2) of ERISA),
(C) disability benefits under any employee welfare plan that have
been fully provided for by insurance or otherwise, or (D)
benefits in the nature of severance pay.
(g) Except as set forth in Schedule 3.10(g), neither
the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
current or former director or employee of Target Holding Company,
Target Bank or their respective Subsidiaries under any
Compensation and Benefit Plan or otherwise from Target Holding
Company, Target Bank or their respective Subsidiaries, (ii)
increase any benefits otherwise payable under any Compensation
and Benefit Plan or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
3.11 Certain Contracts.
(a) Except as set forth in Schedule 3.11(a), or as
filed as an Exhibit to a report on Form 10-K for the fiscal year
ended December 31, 1996, neither Target Holding Company, Target
Bank nor any Subsidiary is a party to or bound by, nor have any
bids or proposals been made by or to Target Holding Company,
Target Bank or any Subsidiary with respect to, any written or
oral, express or, to the best of Target Holding Company's or
Target Bank's knowledge, implied:
(1) contract with or arrangement for any
Director, officer, employee, former employee, agent or
consultant with respect to employment, salary, bonus,
percentage or incentive compensation, pension,
deferred compensation or retirement payments, or any
profit sharing, stock option, stock purchase or other
employee benefit plan or arrangement;
(2) collective bargaining or union contract or
agreement;
(3) contract or agreement for the future purchase
by it of any materials, equipment, services, or
supplies, which continues for a period of more than 12
months (including periods covered by any option to
renew by either
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party), or which provides for a price in excess of the
prevailing market price or is in excess of normal
operating requirements over its remaining term;
(4) contract containing covenants purporting to limit
its freedom to compete;
(5) contract or commitment to which present or
former Directors or officers of Target Holding
Company, Target Bank or any Subsidiary or any of their
"affiliates" or "associates" (as such terms are
defined in the rules and regulations promulgated under
the Securities Act) are parties; or
(6) "material contract" within the meaning of
Item 601(b)(10) of the SEC's Regulation S-K required
to be filed as exhibits to Target Holding Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and Quarterly Reports on Form 10-Q
for the quarterly period ended June 30, 1997.
(b) Except as set forth in Schedule 3.11(b), neither
Target Holding Company, Target Bank nor any Subsidiary has
committed a default with respect to any material contract,
agreement or commitment to which it is a party, by which its
respective assets, business or operations may be bound or
affected or under which it or its respective assets, business or
operations receives benefits, and neither Target Holding Company,
Target Bank nor any Subsidiary has received notice of any such
default, nor has Target Holding Company, Target Bank or any
Subsidiary knowledge of any facts or circumstances which would
reasonably indicate that Target Holding Company, Target Bank or
any Subsidiary will be or may be in such default under any such
contract, agreement, arrangement, commitment or other instrument
subsequent to the date hereof.
3.12 Target Holding Company Reports. Target Holding Company
has previously delivered or will deliver to, or made or will make
available for inspection by, the Bank an accurate and complete
copy of each registration statement in the form in which it
became effective, final prospectus and definitive proxy statement
filed by Target Holding Company with the SEC, pursuant to the
Securities Act or Exchange Act since January 1, 1993, and each
communication concerning the financial condition of Target
Holding Company mailed by Target Holding Company to its
shareholders since January 1, 1993, and each annual report on
Form 10-K, quarterly report on Form 10-Q, current report on Form
8-K filed with the SEC for and since the year ended December 31,
1992 and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed
by Target Holding Company or any of its Subsidiaries subsequent
to December 31, 1993 under the Securities Act, or under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form filed,
or to be filed, with the SEC. The most recently mailed prospectus,
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report, communication and proxy statement did not contain,
and no other registration statement, prospectus, report, proxy
statement or communication has contained, as of their respective
dates, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading. Target
Holding Company has timely filed all material reports,
registrations and statements, together with any amendment
required to be filed since January 1, 1993 with any applicable
regulatory authority, including, but not limited to, (i) the SEC,
(ii) the FDIC, (iii) any state regulatory authority or (iv) any
self-regulatory organization and has paid all fees and
assessments due and payable in connection therewith.
3.13 Environmental Matters. Except as set forth in
Schedule 3.13:
(a) As used in this Agreement, "Environmental Laws"
means all applicable local, state and federal environmental,
health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Clean Water Act, the Federal Clean Air Act, and the
Occupational Safety and Health Act, each as amended, the
regulations promulgated thereunder, and their state counterparts.
(b) Neither the conduct nor operation of Target
Holding Company, Target Bank or any of their respective
Subsidiaries nor any condition of any property presently or
previously owned, leased or operated by any of them violates or
violated in any material respect Environmental Laws and no
condition has existed or event has occurred with respect to any
of them or any such property that, with notice or the passage of
time, or both, is reasonably likely to result in any material
liability under Environmental Laws. Neither Target Holding
Company nor Target Bank nor any of their respective Subsidiaries
has received any notice from any person or entity that it or its
Subsidiaries or the operation or condition of any property ever
owned, leased, operated, held as collateral or held as a
fiduciary by any of them are or were in any material respect in
violation of or otherwise are alleged to have material liability
under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or
other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or
originating from any such property.
3.14 Target Holding Company Information. No representation
or warranty contained in this Agreement, and no statement or
information contained in any certificate, list or other writing
furnished to the Bank pursuant to the provisions hereof,
including without limitation for inclusion in any regulatory
application, filing or report, contains or will contain any
untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein
not misleading. No
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information material to the Merger and which is necessary to
make the representations and warranties herein contained not
misleading, has been withheld from, or has not been delivered in
writing to, the Bank.
3.15 Insurance. Each of Target Holding Company, Target Bank
and their respective Subsidiaries is presently insured, and since
January 1, 1995, has been insured, for reasonable amounts against
such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured.
Set forth in Schedule 3.15 is an accurate and complete list of
all policies of insurance, including the amounts thereof, owned
by Target Holding Company, Target Bank or any Subsidiary or in
which Target Holding Company, Target Bank or any Subsidiary is
named as the insured party. All such policies are valid,
outstanding and enforceable.
3.16 Broker's Fees. Neither Target Holding Company, Target
Bank nor any Subsidiary, nor any of their respective officers,
Directors or employees has employed any broker or finder or
incurred any liability for any broker's fees, commissions or
finder's fees in connection with the transactions contemplated
herein, except as disclosed in the attached Schedule 3.16.
3.17 Agreements with Regulatory Agencies. Except as set
forth in Schedule 3.17, neither Target Holding Company, Target
Bank nor any Subsidiary 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
received an extraordinary supervisory letter from (any such
order, agreement, memorandum or letter, a "Regulatory
Agreement"), any regulatory agency or other governmental entity,
nor has Target Holding Company, Target Bank or any Subsidiary
been notified by any regulatory agency or other governmental
entity that it is considering issuing or requesting any
Regulatory Agreement.
3.18 Material Interests of Certain Persons. Except as
disclosed in Target Holding Company's proxy statement for its
1997 annual meeting of shareholders, no officer or Director of
Target Holding Company, or any "associate" (as such term is
defined in Rule 14a-l under the Exchange Act) of any such officer
or Director, has any material interest in any material contract
or property (real or personal), tangible or intangible, used in
or pertaining to the business of Target Holding Company that
would be required to be disclosed in a proxy statement to
shareholders under Regulation 14A of the Exchange Act, other than
this Agreement.
3.19 Labor Matters. Neither Target Holding Company nor
Target Bank nor any of their respective Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor
organization, nor is Target Holding Company, Target Bank or any
of their respective Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiaries has committed an
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unfair labor practice (within the meaning of the National
Labor Relations Act) or seeking to compel it or such Subsidiaries
to bargain with any labor organization as to wages and conditions
of employment, nor is there any strike or other labor dispute
involving Target Holding Company, Target Bank or any of their
respective Subsidiaries pending, or to the knowledge of Target
Holding Company or Target Bank, threatened, nor is Target Holding
Company, Target Bank or any of their respective Subsidiaries
aware of any activity involving it or its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in
other organizational activity.
3.20 Takeover Laws; Article XVII of Target Holding Company
Certificate. Target Holding Company and Target Bank have taken
all action required to be taken by each of them in order to
exempt this Agreement, the Stock Option Agreement and the Fee
Letter, and the transactions contemplated hereby and thereby
from, and this Agreement, the Stock Option Agreement and the Fee
Letter and the transactions contemplated hereby and thereby are
exempt from, the requirements of any "moratorium", "control
share", "fair price" or other antitakeover laws and regulations
of any state (collectively, "Takeover Laws"), including, without
limitation (i) the State of Delaware in the case of the
representations and warranties of Target Holding Company,
including Section 203 of the DGCL, and (ii) the State of
Connecticut in the case of the representations and warranties of
Target Bank. The transactions contemplated by this Agreement and
the Stock Option Agreement and the Fee Letter have been duly
approved by the Target Holding Company Board for purposes of
Article XVII of the Target Holding Company Certificate of
Incorporation.
3.21 Allowance for Loan Losses. The allowance for loan
losses (the "Allowance") shown on the consolidated statement of
financial condition of Target Holding Company and Target Bank set
forth in the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 referred to in Section 3.05 is, and the
Allowance shown on each consolidated statement of financial
condition of Target Holding Company and Target Bank set forth in
any document filed with the SEC referred to in Section 3.12 or in
any financial reports submitted to any Regulatory Authority filed
subsequent to such Annual Report is, in each case as of the dates
thereof, adequate as determined in accordance with GAAP, and
Target Holding Company has established appropriate reserves in
accordance with GAAP in such financial statements for all other
extensions of credit (including letters of credit and commitments
to make loans or extend credit) by Target Holding Company and
Target Bank and for the off balance sheet exposures of Target
Holding Company and Target Bank.
3.22 Risk Management Instruments. Except as disclosed in
Schedule 3.22, none of Target Holding Company, Target Bank nor
any of their respective Subsidiaries is a party to or has agreed
to enter into an exchange-traded or over-the-counter swap,
forward, future, option, cap, floor or collar financial contract,
or any other contract not included on its statement of financial
condition which is a financial derivative contract (including
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various combinations thereof) (each a "Derivatives Contract").
All Derivatives Contracts and other interest rate risk manage-
ment arrangements, whether entered into for account of
Target Holding Company or Target Bank, or for the account of one
or more of its Subsidiaries or their customers, were entered into
(i) in accordance with prudent banking practices and all
applicable laws, rules, regulations and regulatory policies and
(ii) with counterparties believed to be financially responsible
at the time; and each of them constitutes the valid and legally
binding obligation of Target Holding Company, Target Bank, or
their respective Subsidiaries, as the case may be, enforceable in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer, and similar laws of general
applicability relating to or affecting creditors' rights or by
general equity principles), and are in full force and effect.
None of Target Holding Company, Target Bank nor any of their
respective Subsidiaries, nor to their knowledge any other party
thereto, is in breach of any of its obligations under any such
agreement or arrangement.
3.23 Properties. Except as set forth in Schedule 3.23, all
buildings, and all fixtures, equipment and other property and
assets held under leases or subleases by Target Holding Company,
Target Bank or any of their respective Subsidiaries are held
under valid instruments enforceable in accordance with their
respective terms. All of the equipment of Target Holding Company,
Target Bank and their respective Subsidiaries in regular use has
been well maintained and is in good serviceable condition,
reasonable wear and tear excepted. Except as set forth in
Schedule 3.23, and except for liens arising in the ordinary
course of business after the date hereof, Target Holding Company,
Target Bank and their respective Subsidiaries have good and
marketable title, free and clear of all liens, to all of their
properties and assets, whether tangible or intangible, real,
personal, or mixed, reflected in their financial statements as
being owned by Target Holding Company, Target Bank or their
respective Subsidiaries as of the date hereof. Each of Target
Holding Company, Target Bank and their respective Subsidiaries
has insurable title (subject only to standard title insurance
policy exceptions as determined by customary practices in the
area in which such properties are located) to its owned real
properties (other than real estate owned as a result of
foreclosure, transfer in lieu of foreclosure or other transfer in
satisfaction of a debtor's obligation previously contracted).
3.24 Rights Agreement. Target Holding Company has taken all
action (including adopting an amendment specifying that the Bank
is not an "Acquiring Person" or "Adverse Person" within the
meaning of such plan or terminating the Preferred Stock Rights
Plan) so that the entering into of this Agreement and the
consummation of the transactions contemplated hereby do not and
will not result in the grant of any rights to any person under
the Preferred Stock Rights Plan or enable or require Target
Holding Company Rights to be exercised, distributed or triggered.
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3.25 Other Liabilities. Except as set forth in Schedule
3.25, neither Target Holding Company nor Target Bank nor any of
their respective Subsidiaries has any material obligations or
liabilities (contingent or otherwise) except obligations and
liabilities (i) which are fully accrued or reserved against in
the consolidated financial statements of Target Holding Company
and its Subsidiaries (or otherwise reflected in Target Holding
Company's Form 10-Q for the six months ended June 30, 1997), or
(ii) which were incurred after June 30, 1997 in the ordinary
course of business consistent with past practice.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE BANK
The Bank hereby represents and warrants to Target Holding
Company as follows:
4.01 Corporate Organization.
The Bank is a Connecticut chartered stock savings bank duly
organized, validly existing and in good standing under the laws
of the State of Connecticut. The Bank has the corporate power and
authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted. The Bank has
all necessary federal, state and local banking authorization to
own or lease its properties and assets and to carry on its
business as it is being conducted. The accounts of depositors of
the Bank are insured by the BIF of the FDIC in accordance with
law and with the regulations of the FDIC and all premiums and
assessments required in connection therewith have been paid. The
copies of the Bank's Articles of Incorporation and Bylaws, each
certified by its Secretary as of the date of this Agreement,
which are being delivered to Target Holding Company herewith, are
complete and correct copies in effect as of the date of this
Agreement. Except as set forth in Schedule 4.01, the Bank does
not have any wholly-owned Subsidiaries.
4.02 Capitalization.
The authorized capital stock of the Bank consists of
110,000,000 shares, consisting of 100,000,000 shares of common
stock, without par value ("Bank Common Stock"), and 10,000,000
shares of preferred stock, without par value. As of the date of
this Agreement, there are 61,125,869 shares of Bank Common Stock
issued and outstanding, 36,450,000 of which are held by People's
Mutual Holdings, no shares are held in the Bank's treasury and
638,026 shares are reserved for issuance. At the date of this
Agreement, no shares of preferred stock are outstanding or
reserved for issuance and no shares of Bank preferred stock are
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outstanding. All issued and outstanding shares of Bank Common
Stock have been duly authorized and validly issued and are fully
paid and nonassessable.
4.03 Authority; No Violation.
(a) The Bank has all necessary corporate power and
authority to execute and deliver this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
Stock Option Agreement by the Bank and the consummation by the
Bank of the transactions contemplated hereby and thereby have
been duly and validly approved by the Bank, and no other
corporate proceedings on the part of the Bank are necessary to
consummate the transactions contemplated hereby or thereby, other
than the approval of the Merger and this Agreement by the
shareholders of the Bank. This Agreement and the Stock Option
Agreement have been duly and validly executed and delivered by
the Bank and (assuming due authorization, execution and delivery
by the other parties hereto and thereto) constitute valid and
binding obligations of the Bank, enforceable against the Bank in
accordance with the terms thereof, 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) Neither the execution and delivery of this
Agreement or the Stock Option Agreement by the Bank nor the
consummation by the Bank of the transactions contemplated hereby
or thereby, nor compliance by the Bank with any of the terms or
provisions hereof or thereof, will (i) violate any provision of
the Articles of Incorporation or Bylaws of the Bank or (ii)
assuming that the consents and approvals referred to in Section
4.04 are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to the Bank or any of its Subsidiaries, or (y)
violate, result in a breach of any provision of, constitute a
default under, or result in the creation of any material lien,
pledge, security interest, charge or other encumbrance upon any
of the respective properties or assets of the Bank or any of its
Subsidiaries 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 the
Bank or any of Subsidiaries is a party, or by which they or any
of their respective properties or assets may be bound or
affected.
4.04 Consents and Approvals. Except for (i) the filing of
applications and notices or requests for waivers, as applicable,
with the FRB under the BHC Act, and approval of such applications
and notices or granting of such waivers, (ii) the filing of
applications and notices, as applicable, with the FDIC under the
Bank Merger Act and approval of such applications and notices,
(iii) the filing of applications with the Commissioner under
Sections 36a-125 and 36a-184 of the CGS and approvals of such
applications, (iv) the approval of the Merger and this
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Agreement by the requisite vote of the shareholders of the Bank,
(v) the filing with the FDIC of the Proxy Statement and the
resolution of any comments of the FDIC received with respect to
the Offering Circular for the Bank Common Stock to be issued in
connection with the Merger, (vi) the filing of the Connecticut
Certificate of Merger, together with the Commissioner's approval
of the Merger and this Agreement with the Connecticut Secretary,
(vii) the filing of the Delaware Certificate of Merger with the
Delaware Secretary, (viii) any state securities law filings or
approvals and (ix) such filings, authorizations or approvals as
may be set forth in Schedule 4.04, no consents or approvals of or
filings or registrations with any governmental entity or with any
third party are necessary in connection with the execution and
delivery by the Bank of this Agreement and the consummation by
the Bank of the Merger and the other transactions contemplated
hereby.
4.05 Financial Statements. The Bank has previously
delivered to Target Holding Company copies of (a) the
consolidated balance sheets of the Bank and its Subsidiaries as
of December 31 for the fiscal years 1995 and 1996 and the related
consolidated statements of income, changes in shareholders'
equity and cash flows for the fiscal years 1995 and 1996, as
reported in the Bank's Annual Report on Form F-2 for the fiscal
year ended December 31, 1996 filed with the FDIC under the
Exchange Act, and (b) the unaudited consolidated balance sheet of
the Bank and its Subsidiaries as of June 30, 1997 and the related
unaudited consolidated statement of income, changes in
shareholders' equity and cash flows for the six-month period then
ended as reported in the Bank's Quarterly Report on Form F-4 for
the period ended June 30, 1997 filed with the FDIC under the
Exchange Act. The June 30, 1997 consolidated balance sheet of the
Bank (including the related notes, where applicable) fairly
presents in all material respects the consolidated financial
position of the Bank and its Subsidiaries as of the date thereof,
and the other financial statements referred to in this Section
4.05 (including the related notes where applicable) fairly
present in all material respects the results of the consolidated
operations and changes in shareholders' equity and consolidated
financial position of the Bank 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) complies in all material respects with the
applicable accounting requirements and with the published rules
and regulations of the FDIC with respect thereto, and each of
such statements (including the related notes, where applicable)
has been prepared in accordance with regulatory accounting
principles consistently applied during the periods involved,
except as indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form F-4. Without limiting
the generality of the foregoing, the financial statements as of,
and for, the six-month period ending June 30, 1997 were prepared
on a basis consistent with the Bank's audited financials for the
year ended December 31, 1996. The books and records of the Bank
have been, and are being, maintained in all material respects in
accordance with applicable legal and accounting requirements and
reflect only valid transactions.
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4.06 Broker's Fees. Neither the Bank, nor any 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, except as disclosed
in the attached Schedule 4.06.
4.07 Absence of Certain Changes or Events. Except as may be
reflected in the Bank's Form F-4 for the six months ended June
30, 1997 or set forth in Schedule 4.07, since December 31, 1996:
(a) there has not been any material adverse change in the
Bank and its Subsidiaries, their businesses or operations taken
as a whole;
(b) there has not been any incurrence by the Bank of
any liability that has had, or to the knowledge of the
Bank, could reasonably be expected to have, a material
adverse effect on the Bank and its Subsidiaries taken as a
whole; and
(c) there has not been any change in any of the
accounting methods or practices of the Bank or any of its
Subsidiaries other than changes required by applicable law
or regulatory accounting principles.
4.08 Legal Proceedings. Except as described in the Bank's
Form F-2 for the year ended December 31, 1996, there are no
pending or to the knowledge of the Bank, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or
governmental investigations of any nature against the Bank or any
Subsidiary, as to which there is, in the judgment of the Bank, a
reasonable likelihood of adverse determination and which if
adversely determined, would, individually or in the aggregate,
(i) have a material adverse effect on the Bank or any
Subsidiaries, or their business or operations taken as a whole,
or (ii) as of the date hereof, prevent or materially and
adversely affect the Bank's ability to consummate the
transactions contemplated hereby.
4.09 FDIC Reports. The Bank has previously made available
to Target Holding Company a true and complete, in all material
respects, copy of each (a) final offering circular, report,
schedule and definitive proxy statement filed since January 1,
1994 by the Bank with the FDIC pursuant to the Exchange Act (the
"Bank Reports") and, as of their respective dates, no such Bank
Reports contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading.
4.10 Bank Information. The information provided in writing
by the Bank for inclusion in the Proxy Statement will not contain
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any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light
of the circumstances in which they are made, not misleading.
4.11 Compliance With Applicable Law. The Bank and each of
its Subsidiaries holds, and has at all times held, all material
licenses, franchises, permits and authorizations necessary for
the lawful conduct of its respective business under and pursuant
to all, and has complied with and is not in default under any,
applicable law, statute, order, rule or regulation of any
governmental entity relating to the Bank or any of its
Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such non-compliance or
default would not have a material adverse effect on the Bank, and
neither the Bank nor any of its Subsidiaries has received notice
of any material violations of, any of the above.
4.12 Agreements with Regulatory Agencies. Neither the Bank
nor any of its Subsidiaries is subject to, is a party to, or has
received any, Regulatory Agreement with or from any regulatory
agency or other governmental entity, nor has the Bank or any of
the Subsidiaries been notified by any regulatory agency or other
governmental entity that it is considering issuing or requesting
any Regulatory Agreement.
4.13 Regulatory Approvals. The Bank, as of the date hereof,
is not aware of any reason why the regulatory approvals required
to be obtained by it to consummate the Merger would not be
obtained within a time frame customary for transactions of the
nature contemplated hereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01 Covenants of Target Holding Company and Target Bank.
During the period from the date of this Agreement to the
Effective Time, each of Target Holding Company and Target Bank
will conduct its business, and will cause each Subsidiary to
conduct its business, only in the ordinary course consistent with
past practice and consistent with prudent business and/or banking
practice, will use all reasonable efforts to preserve and
maintain the properties and investment practices of Target
Holding Company and those of its Subsidiaries wherever located,
and will comply in all material respects with all laws applicable
to it and its Subsidiaries or to the conduct of their respective
businesses. Each of Target Holding Company and Target Bank will
use all reasonable efforts to preserve intact its business
organization and that of its Subsidiaries, to keep available the
present services of its employees of Target Holding Company and
those of its Subsidiaries, and to preserve the goodwill of its
customers and those of its Subsidiaries and others with whom
business relationships exist. Each of Target Holding
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Company and Target Bank will, from the date hereof until at least
through the consummation of the transactions contemplated by this
Agreement, keep all insurance policies set forth in Schedule 3.15
in full force and effect. In addition, Target Holding Company and
Target Bank agree to take all action and to cause their
respective Subsidiaries to take all action requested by the Bank
to avoid any accrual of benefits on or after the Effective Time
under any Compensation and Benefit Plans described in Section
3.10, including termination of any such Compensation and Benefit
Plans as of the Effective Time; provided, however, that any such
request by the Bank to cease accruals under or terminate any
Pension Plan subject to Section 204(h) of the Code shall be made
not less than 45 days before the effective date of such cessation
of accruals or termination. At the request of the Bank, Target
Holding Company and Target Bank agree to give any notices of
termination necessary to effect no later than July 31, 1998 the
termination of any of their existing service contracts. Each of
Target Holding Company and Target Bank agrees that from the date
hereof to the consummation of the Merger, and except as otherwise
consented to or approved by a duly authorized officer of the Bank
in writing or as permitted or required by this Agreement, neither
Target Holding Company, Target Bank nor any Subsidiary will:
(a) change any provision of its Certificate of
Incorporation or Bylaws or similar governing documents;
(b) change the number of issued shares of its capital
stock, or issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character
relating to its authorized or issued capital stock, or any
securities convertible into shares of such stock, or split,
combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of
its capital stock or redeem or otherwise acquire the Rights or
any shares of its capital stock, except as necessary to secure
its position pursuant to a debt previously contracted; provided,
however, that Target Holding Company may issue and deliver shares
of Target Holding Company Common Stock upon the due exercise of
Options outstanding on the date hereof and receipt of payment
thereunder;
(c) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of 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 in the ordinary course of business, which
would be material to Target Holding Company, Target Bank or such
Subsidiary;
(d) take any action that is intended to or would
result in any of its representations and warranties set forth in
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this Agreement being or becoming untrue in any material
respect, 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 except, in every case, as may be
required by applicable law;
(e) make any material change in its methods of
accounting in effect at December 31, 1996, except as required by
changes in GAAP or regulatory accounting principles as concurred
in by Target Bank's independent auditors;
(f) take or cause to be taken any action which would,
or may reasonably be expected to, significantly delay or
otherwise adversely affect the regulatory approvals required to
consummate the Merger;
(g) terminate the employment of, or decrease in any
material respect, the duties, obligations, responsibilities, or
position of the President, Executive Vice President or any Senior
Vice President of Target Holding Company, Target Bank or any
Subsidiary;
(h) except as set forth in Schedule 5.01(h), enter
into or amend any written employment, consulting, severance or
similar agreements or arrangements with any of its directors,
officers or employees, or grant any salary or wage increase or
increase any employee benefit (including incentive or bonus
payments), except (i) for normal individual increases in
compensation to employees in the ordinary course of business
consistent with past practice, (ii) for other changes as are
provided for herein or as may be required by law, (iii) to
satisfy contractual obligations existing as of the date hereof
and, if material, set forth in the Disclosure Schedule, or (iv)
for additional grants of awards to newly hired employees
consistent with past practice;
(i) except as set forth in Schedule 5.01(i), enter
into or amend (except (A) as may be required by applicable law or
(B) to satisfy contractual obligations existing as of the date
hereof and, if material, set forth in the Disclosure Schedule)
any pension, retirement, stock option, stock purchase, savings,
profit sharing, deferred compensation, consulting, bonus, group
insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related
thereto, in respect of any of its directors, officers or other
employees, including without limitation taking any action that
accelerates the vesting or exercise of any benefits payable
thereunder;
(j) sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue any portion of its assets, business or
properties, which is material to it and its Subsidiaries taken as
a whole, or acquire (other than by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in
each case in the ordinary and usual course of business consistent
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with past practice) all or any portion of, the assets,
business or properties of any other entity which is material to
it and its Subsidiaries taken as a whole;
(k) except in the ordinary course of business
consistent with past practice, enter into or terminate any
material contract, agreement or lease, or amend or modify in a
material respect any of its existing material contracts,
agreements or leases;
(l) except in the ordinary course of business
consistent with past practice, settle any claim, action or
proceeding involving money damages that is material to it and its
Subsidiaries, taken as a whole;
(m) except as required by applicable law or
regulation, (i) implement or adopt any material change in its
interest rate risk management policies, procedures or practices;
(ii) fail to follow its existing policies or practices with
respect to managing its exposure to interest rate risk; or (iii)
fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk;
(n) incur any additional borrowings (deposits,
including certificates of deposit, shall not be deemed to be
borrowings within the meaning of this section), other than under
its existing line of credit with a Federal Home Loan Bank or
pledge any of its assets to secure any borrowings other than as
required pursuant to the terms of its borrowings in effect as of
the date hereof; or
(o) agree to do any of the foregoing.
5.02 Covenants of the Bank. During the period from the date
of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior
written consent of Target Holding Company, which shall not be
unreasonably withheld, the Bank shall not, and shall not permit
any of its Subsidiaries to:
(a) take any action that is intended or would result
in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, 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, or would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code; except, in every case, as
may be required by applicable law;
(b) make a material change in its methods of
accounting in effect at December 31, 1996, except in accordance
with changes in GAAP or regulatory accounting principles as
concurred in by the Company's independent certified public
accountants;
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(c) take or cause to be taken any action which would,
or may reasonably be expected to, significantly delay or
otherwise adversely affect the regulatory approvals required to
consummate the Merger; or
(d) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Regulatory Matters.
(a) The Bank and Target Holding Company shall promptly
prepare and file with the FDIC and the SEC, respectively, a joint
proxy statement for the meetings of their respective shareholders
called for the purpose of approving this Agreement (the "Proxy
Statement"). Each of the Bank and Target Holding Company shall
use their reasonable best efforts to have the Proxy Statement
approved as promptly as practicable after such filing, and each
shall thereafter promptly mail the Proxy Statement to its
shareholders.
(b) The parties hereto shall cooperate with each other
and use their best efforts to prepare and file promptly all
necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable
all permits, consents, waivers, approvals and authorizations of
all third parties and governmental entities which are necessary
or advisable to consummate the transactions contemplated by this
Agreement. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits,
consents, waivers, 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 completion of the transactions contemplated herein.
(c) The Bank and Target Holding Company shall, upon
request, furnish each other with all information concerning
themselves, their respective Subsidiaries, directors, officers
and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement or
any other statement, filing, notice or application made by or on
behalf of the Bank, Target Holding Company or any of their
respective Subsidiaries to any governmental entity in connection
with the Merger and the other transactions contemplated hereby.
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(d) The Bank, on the one hand, and Target Holding
Company and Target Bank, on the other hand, shall promptly
furnish each other with copies of written communications received
by such party, as the case may be, or any of their respective
Subsidiaries from, or (other than confidential information in
respect of the Bank) delivered by any of the foregoing to, any
governmental entity in respect of the transactions contemplated
hereby.
6.02 Access to Information.
(a) Upon reasonable notice and subject to applicable
laws relating to the exchange of information, Target Holding
Company shall afford to the officers, employees, accountants,
counsel and other representatives of the Bank, access, during
normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments and
records relating to the ownership, operation, obligations and
liabilities of Target Holding Company and its Subsidiaries,
including, but not limited to, their respective books of account
(including general ledgers), tax records, minute books of
Directors' and shareholders' meetings, Certificate of
Incorporation, Bylaws, contracts and agreements, public filings
with any regulatory authority, plans affecting its employees, and
any other business activities or prospects in which the Bank may
have a reasonable interest. During such period, Target Holding
Company shall make available to the Bank (i) a copy of each
report, schedule, and other document filed or received by Target
Holding Company or any Subsidiary during such period pursuant to
the requirements of federal securities laws or federal or state
banking laws and (ii) all other information concerning their
respective businesses, properties and personnel as the Bank may
reasonably request (other than information which Target Holding
Company or any Subsidiary is not permitted to disclose under
applicable law). As to information which Target Holding Company
or any Subsidiary is not permitted by law to disclose, Target
Holding Company will, upon request from the Bank, use all
reasonable efforts to obtain any consent, approval or waiver that
may be required for such disclosure.
(b) Neither Target Holding Company nor Target Bank
shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the
rights of the customers of such party, jeopardize the
attorney-client privilege of the institution in possession or
control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The
parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(c) All information furnished pursuant to this
Agreement shall be held in confidence to the extent required by,
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and in accordance with, the provisions of the
confidentiality agreements, dated July 14 and August 29, 1997
among the Bank, Target Holding Company and Keefe, Bruyette &
Woods, Inc. (the "Confidentiality Agreements").
6.03 Shareholder Approval.
(a) Target Holding Company shall take all steps
necessary to duly call, give notice of, convene and hold a
meeting of its shareholders to be held as soon as is reasonably
practicable for the purpose of voting upon the approval of this
Agreement and the Merger and the transactions contemplated hereby
and thereby (the "Target Shareholder Meeting"). Subject to the
remainder of this Section 6.03(a), Target Holding Company will,
through its Board of Directors, recommend to its shareholders
approval of this Agreement and the Merger and the transactions
contemplated hereby and thereby and such other matters as may be
submitted to its shareholders in connection with this Agreement.
Except as expressly permitted by this Section 6.03, the Board of
Directors of Target Holding Company shall not fail to recommend,
or withdraw, modify, or change or propose publicly to withdraw,
modify, or change in a manner adverse to the Bank, the approval
or recommendation by such Board of Directors of the Merger or the
adoption and approval of the matters to be considered at the
Target Shareholder Meeting. The Board of Directors may fail to
recommend or withdraw, modify or change the recommendation of the
Merger in a manner adverse to the Bank if the Board determines in
its good faith judgment, based as to legal matters on the advice
of its outside legal counsel, that the making of such
recommendation, or the failure to withdraw, modify or change its
recommendation, would constitute a breach of the fiduciary duties
of the Board of Directors under applicable law. Notwithstanding
the foregoing, in the event that there is pending, or has been a
public announcement of, a Takeover Proposal (as defined in
Section 6.13), the Board of Directors may not withdraw, modify or
change its approval or recommendation of the Merger or the
approval of the matters to be considered at the Target
Shareholders Meeting unless (i) the Target Holding Company is not
in breach of any of the material terms of this Agreement, (ii)
the Board determines in its good faith judgment, based as to
legal matters on the advice of its outside legal counsel, that
the making of such recommendation, or the failure to withdraw,
modify or change its recommendation, would constitute a breach of
the fiduciary duties of the Board of Directors under applicable
law, and (iii) the Bank does not, within 10 business days of
delivery of any such Takeover Proposal to the Bank by Target
Holding Company, offer to increase either or both of the Per
Share Stock Consideration and Per Share Cash Consideration to
provide at least substantially the same value as the economic
terms as set forth in such Takeover Proposal (provided that the
Bank may substitute cash for any non-cash consideration (or vice
versa) provided for under such Takeover Proposal so long as a
substantially equivalent economic value is provided to the
shareholders of Target Holding Company). Nothing in this Section
6.03(a) shall modify the obligations of Target Holding Company
and Target Bank under Section 6.13 hereof.
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(b) The Bank shall take all steps necessary to duly
call, give notice of, convene and hold a meeting of its
shareholders to be held as soon as is reasonably practicable for
the purpose of voting upon the approval of this Agreement and the
transactions contemplated hereby. Subject to the remainder of
this Section 6.03(b), the Bank will, through its Board of
Directors, recommend to its shareholders approval of this
Agreement and the transactions contemplated hereby and such other
matters as may be submitted to its shareholders in connection
with this Agreement. The Board of Directors may fail to make such
recommendation, or withdraw, modify or change any such
recommendation in a manner adverse to Target Holding Company, if
such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the
making of such recommendation, or the failure to withdraw, modify
or change its recommendation, would constitute a breach of the
fiduciary duties of the members of such Board of Directors under
applicable law.
6.04 Legal Conditions to Merger. Subject to the other
provisions of this Agreement (including, without limitation,
Sections 7.02(c) and 9.01), each of the Bank and Target Holding
Company shall, and the Bank and Target Holding Company shall
cause each of their respective Subsidiaries to, use its 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 or its
Subsidiaries 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,
waiver, authorization, order or approval of, or any exemption by,
any governmental entity and any other third party which is
required to be obtained by Target Holding Company or the Bank or
any of their respective Subsidiaries in connection with the
Merger, and the other transactions contemplated by this
Agreement.
6.05 Stock Listing. The Bank shall take all reasonable
steps to cause the shares of Bank Common Stock to be issued in
the Merger to be approved for inclusion for quotation on the
NASDAQ National Market System, subject to official notice of
issuance, prior to the Effective Time.
6.06 Employee Benefit Plans.
(a) From and after the Effective Time and subject to
applicable law (and except as provided in (b) below), the Bank
shall provide the employees of Target Holding Company, Target
Bank and its Subsidiaries who are offered employment with the
Bank or any of its Subsidiaries, and who accept such employment,
with benefits comparable to those provided to its own employees
in similar positions and with comparable terms of service with
the Bank or its Subsidiaries, as reasonably determined by the
Bank and its Subsidiaries.
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(b) A description of employee benefits provided by the
Bank is set forth on Schedule 6.06(b) attached hereto. There is
no collective bargaining agreement applicable to the employees of
the Bank. For the purpose of satisfying the waiting period for
eligibility, vesting requirements and service requirements for
any early retirement or disability benefits in the Bank's Pension
Plans (but such prior service shall not be considered for benefit
accrual or other purposes) the Bank shall amend to the extent
necessary its Pension Plans to provide that the time period of
employment with Target Holding Company or Target Bank, and any
period of service required to be taken into account under the
terms of the Pension Plans maintained by Target Holding Company
and Target Bank as in effect at the Effective Time, including,
without limitation, service with the Bank of Mystic and SECONN,
will be considered as employment with the Bank for such purposes.
Except for benefits provided under the Enhanced Senior Pension
Plan, all benefits provided from and after the Effective Time to
employees of Target Holding Company, Target Bank and its
Subsidiaries under any Pension Plan maintained by the Bank or
with respect to which the Bank or any successor to the Bank may
have a liability shall not be offset by any benefits accrued by
employees of Target Holding Company, Target Bank or its
Subsidiaries before the Effective Time. All optional forms of
benefit, within the meaning of Section 411(d)(6) of the Code,
available under any Pension Plan maintained by Target Holding
Company, Target Bank or its Subsidiaries before the Effective
Time shall be retained with respect to benefits accrued under any
such Pension Plan. In addition, the Bank agrees not to amend the
terms of any Pension Plan maintained by Target Holding Company,
Target Bank or its Subsidiaries with respect to which accruals
have ceased or which has been terminated, except for such changes
as may be required by law or changes solely affecting the
administration of such Pension Plan or changes necessary to
maintain the continued qualification of such Pension Plan or an
amendment solely to merge such Pension Plan into a Pension Plan
maintained by the Bank. In the event of any merger as of or after
the Effective Time of Target Bank's Thrift Plan into a Pension
Plan maintained by the Bank, the promissory notes with respect to
participant loans outstanding from accounts transferred in
connection with such merger shall be transferred to the Pension
Plan maintained by the Bank and shall not become due and payable
by reason of the merger. In addition, the time period of
employment and employee status (full-time, part-time, temporary,
etc.) with Target Holding Company or Target Bank and any period
of service taken into account under the benefits programs
maintained by Target Holding Company or Target Bank at the
Effective Time will be considered along with employee status with
the Bank for the purpose of determining earned vacation and
eligibility for all of the Bank's other benefits programs.
(c) The Bank will use reasonable efforts to determine
as soon as is reasonably practicable those employees of Target
Bank to whom it will extend offers of employment following the
Effective Time and will use its best efforts to communicate such
decisions to Target Bank no later than 60 days before the
Effective Time. The Bank and Target Bank will cooperate up to the
Effective Time in any effort to minimize any loss of Target Bank
employment, including consideration for employment vacancies
occurring at the Bank; but
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nothing herein shall create any legal obligation on the part of
the Bank to hire Target Bank employees.
(d) In the event that the Bank does not offer a Target
Bank employee a position following the Effective Time that is
comparable as to compensation and responsibilities and does not
require such employee to commute to the employee's primary place
of employment, a distance greater than (i) such Target Bank
Employee's current commute at the Effective Time; or (ii) 25
miles, except neither such limit shall apply if a position is
offered at any one of the Target Bank's facilities in existence
at the Effective Time, and such employee has remained employed by
Target Bank until the Effective Time, then such Target Bank
employee shall be paid as follows. Target Holding Company or
Target Bank, or if either Target Holding Company or Target Bank
does not, the Bank, will pay each such employee, in one lump sum
subject to applicable withholding, two (2) weeks salary for each
full year of employment with Target Bank (plus a fraction for any
partial year based on the number of full months completed);
provided that employees in grades one through nine will receive a
minimum benefit of 2 weeks' salary, employees in grades 10 and
above will receive a minimum benefit of 4 weeks' salary and
officers will receive a minimum benefit of 8 weeks' salary
subject, however, in each case, to such employee's having
executed and delivered a general release of all claims and
potential claims relating to such employee's employment and/or
the failure of the Bank to retain such employee, in form and
substance satisfactory to Target Holding Company, Target Bank and
the Bank. For any Target Bank employee whose compensation is
based in whole or in part upon commissions, the severance pay
described in this section will be calculated using the average
weekly gross earnings paid to said employee over the twelve (12)
month period immediately preceding the Effective Time. Target
Bank employees who remain employed with Target Bank until the
Effective Time and are offered and accept positions with the Bank
following the Effective Time, but who are terminated from such
positions by the Bank for any reason except cause within one year
following the Effective Time, will also receive from the Bank
severance pay on the terms set forth above including execution of
a general release of all claims and potential claims in form and
substance satisfactory to the Bank. Any such employee terminated
thereafter would be paid only in accordance with the Bank's then
existing severance policy, if any. Target Bank employees who are
terminated will be paid in full for all accrued vacation and
personal days.
(e) Target Bank shall pay the annual bonuses for 1997,
normally paid to employees following year end, in December 1997
and such bonuses shall be calculated without reduction or offset
for expenses and costs arising in connection with transactions
contemplated by this Agreement. In no event shall such bonuses
exceed $210,000 in the aggregate.
(f) Target Bank employees mutually agreed upon by the
Bank, Target Holding Company and Target Bank who the Bank has
determined to terminate but who remain employed with Target Bank
until after the Effective Time and until their agreed upon
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release date in order to effect an orderly transition in
connection with the Merger will be paid a retention bonus in an
amount to be determined by the mutual agreement of Target Holding
Company, Target Bank and the Bank. Any such Target Bank employees
who remain employed after the Effective Time but terminate prior
to their agreed upon release date will be paid a share of such
retention bonus as mutually agreed by the Bank, Target Holding
Company and Target Bank.
(g) The Bank shall continue to maintain the 1995
Non-Qualified Deferred Compensation Plan for the benefit of the
directors of Target Holding Company and Target Bank and the rabbi
trust related thereto on the same or substantially similar terms
until all of the directors participating in such plan and related
rabbi trust have been paid in full the benefits accrued under
said plan over the ten-year payment period specified in said
plan.
(h) The Bank, Target Holding Company and Target Bank
will use their best efforts to negotiate and resolve as soon as
administratively practicable the matters set forth in Schedule
6.06(h).
6.07 Interim Financial Statements. As soon as reasonably
available, but in no event later than 45 days after the end of
each fiscal quarter ending after the date of this Agreement and
prior to the Effective Time, the Bank will deliver to Target
Holding Company and Target Holding Company will deliver to the
Bank their respective Quarterly Reports and any current reports,
as filed with the FDIC and the SEC under the Exchange Act,
respectively.
6.08 Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to
carry out the purpose of this Agreement, or to vest the Bank with
full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger,
the proper officers and Directors of each party to this Agreement
and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by, and at the sole expense
of, the Bank.
6.09 Disclosure Supplements. From time to time prior to the
Effective Time, each party will promptly supplement or amend the
Schedules 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 Schedules or which is necessary
to correct any information in such Schedules which has been
rendered inaccurate thereby. No supplement or amendment to such
Schedules shall have any effect for the purposes of determining
satisfaction of the conditions set forth in Sections 7.02(a) or
7.03(a) hereof, as the case may be, or the compliance by Target
Holding Company or the Bank as the case may be, with the
respective covenants set forth in Sections 5.01 and 5.02 hereof.
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6.10 Current Information. During the period from the date
of this Agreement to the Effective Time, Target Holding Company
will cause one or more of its designated representatives, and any
other representative reasonably requested by the Bank, to be
available, upon the reasonable request of the Bank, to confer on
a regular and frequent basis with representatives of the Bank and
to report the general status of the ongoing operations of Target
Holding Company and its Subsidiaries. Target Holding Company and
its Subsidiaries will promptly notify the Bank of any significant
change in the normal course of business of Target Holding Company
and its Subsidiaries or in the operation of their properties, and
of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or
the institution or the threat of any significant litigation
involving Target Holding Company or any Subsidiary and will keep
the Bank reasonably informed of such events and permit the Bank
access to all significant materials prepared in connection
therewith. With respect to any regulatory examination of Target
Bank, including any such examination currently in progress or
that may be commenced prior to the Effective Time, Target Holding
Company will keep the Bank advised of all reports, preliminary or
otherwise, received from examiners, but only to the extent
permitted by law and otherwise subject to applicable disclosure
laws, will provide the Bank with a copy of any such written
report, and will use all reasonable efforts to obtain any
consent, approval or waiver that may be required for such
disclosure.
6.11 Public Announcements. Except to the extent required
otherwise by the securities laws or any Connecticut or federal
banking laws, with respect to which Target Holding Company and
the Bank may act upon the advice of their respective legal
counsel, neither Target Holding Company, nor the Bank, nor any of
their respective Subsidiaries, shall issue any press release or
otherwise make any public statement with respect to this
Agreement or any of the transactions contemplated hereby prior to
the Effective Time without obtaining the consent to or approval
thereof from the other party, which consent or approval shall not
be unreasonably withheld.
6.12 Indemnification.
(a) Following the Effective Date and without
limitation as to time, the Bank shall indemnify, defend and hold
harmless the present and former directors and officers of Target
Holding Company and Target Bank (each, an "Indemnified Party")
against all costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of actions
or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by
this Agreement) to the fullest extent that the Bank is permitted
to indemnify its directors and officers under the laws of the
State of Connecticut and the Bank's Articles of Incorporation
("Bank Articles") and by-laws as in effect on the date hereof;
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provided that any determination required to be made with respect to
whether an officer's or director's conduct complies with the
standards set forth under Connecticut law, the Bank Articles and
the Bank's by-laws shall be made by independent counsel (which
shall not be counsel that provides material services to the Bank)
selected by the Bank and reasonably acceptable to such officer or
director; and provided, further, that in the absence of
applicable state judicial precedent to the contrary, such
counsel, in making such determination, shall presume such
officer's or director's conduct complied with such standard and
the Bank shall have the burden to demonstrate that such officer's
or director's conduct failed to comply with such standard.
(b) For a period of six years from the Effective Time,
the Bank shall provide that portion of director's and officer's
liability insurance that serves to reimburse the present and
former officers and directors of Target Holding Company and
Target Bank (determined as of the Effective Time) (as opposed to
Target Holding Company or Target Bank) with respect to claims
against such directors and officers arising from facts or events
which occurred before the Effective Time, which insurance shall
contain at least the same coverage and amounts, and contain terms
and conditions no less advantageous, as that coverage currently
provided by Target Holding Company or Target Bank, as applicable;
provided, however, that in no event shall the Bank be required to
expend more than 200% of the current amount expended by Target
Holding Company or Target Bank, as applicable (the "Insurance
Amount") to maintain or procure all such directors and officers
insurance coverage; provided, further, that if the Bank is unable
to maintain or obtain the insurance called for by this Section
6.12(b), the Bank shall obtain as much comparable insurance as is
available for the Insurance Amount; provided, further, that
officers and directors of Target Holding Company or Target Bank
may be required to make application and provide customary
representations and warranties to the Bank's insurance carrier
for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim
indemnification under Section 6.12(a), upon learning of any
claim, action, suit, proceeding or investigation described above,
shall promptly notify the Bank thereof; provided that the failure
so to notify shall not affect the obligations of the Bank under
Section 6.12(a) unless and to the extent such failure materially
increases the Bank's liability under such subsection (a).
(d) If the Bank or any of its successors or assigns
shall consolidate with or merge into any other entity and shall
not be the continuing or surviving entity of such consolidation
or merger or shall transfer all or substantially all of its
assets to any entity, then and in each case, proper provision
shall be made so that the successors and assigns of the Bank
shall assume the obligations set forth in this Section 6.12.
(e) The Bank shall pay all reasonable costs, including
attorneys' fees, that may be incurred by any Indemnified Party in
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enforcing the indemnity and other obligations provided for
in this Section 6.12. The rights of each Indemnified Party
hereunder shall be in addition to any other rights such
Indemnified Party may have under applicable law.
6.13 No Solicitation. Each of Target Holding Company and
Target Bank shall not, and shall cause its Subsidiaries and its
Subsidiaries' officers, directors, agents, advisors and
affiliates not to, solicit or encourage inquiries or proposals
with respect to, or engage in any negotiations concerning, or
provide any confidential information to, or have any discussions
with, any person relating to, any Takeover Proposal; shall
immediately cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this
Agreement with any parties other than the Bank, with respect to
any of the foregoing; and shall promptly (within 24 hours) advise
the Bank following the receipt by it of any Takeover Proposal and
the substance thereof (including the identity of the person
making such Takeover Proposal), and advise the Bank of any
developments with respect to such Takeover Proposal immediately
upon the occurrence thereof. Notwithstanding the foregoing, the
Board of Directors of the Target Holding Company, on behalf of
the Target Holding Company, may furnish or cause to be furnished
information and may participate in discussions and negotiations
directly or through its representatives if such Board of
Directors determines in its good faith judgment, based as to
legal matters on the advice of its outside legal counsel, that
the failure to provide such information or participate in such
negotiations and discussions would constitute a breach of the
fiduciary duties of the Board of Directors under applicable law.
"Takeover Proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation or other business
combination involving the Target Holding Company, Target Bank or
any of their Subsidiaries, or any proposal or offer to acquire in
any manner a substantial equity interest in, or a substantial
portion of the assets or deposits of, Target Holding Company or
Target Bank other than the transactions contemplated by this
Agreement and the Stock Option Agreement.
6.14 Offering Circular. Each of the Bank and Target Holding
Company agrees to cooperate in the preparation of an offering
circular (the "Offering Circular") to be filed by the Bank with
the FDIC in connection with the issuance of the Bank Common Stock
in the Merger, and each of Target Holding Company and Target Bank
agrees to furnish to the Bank all information concerning Target
Holding Company and Target Bank, its Subsidiaries, officers,
directors and stockholders as may be reasonably requested in
connection therewith.
6.15 Dividends.
(a) Target Holding Company agrees that it will not
declare or pay any cash dividend (or any special dividend) to
shareholders during the first quarter of 1998. Notwithstanding
Section 5.01(b) hereof, during the second quarter of 1998 Target
Holding Company may declare and pay a cash dividend in an amount
per share equal to the ordinary cash dividend paid in May 1997,
using a declaration and payment schedule consistent therewith.
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(b) Subject to Section 6.15(a), with respect to the
dividend to be paid by Target Holding Company during the second
quarter of 1998 Target Holding Company shall coordinate with the
Bank the declaration of any dividends in respect of Target
Holding Company Common Stock and the record date and payment date
relating thereto, it being the intention of the parties hereto
that holders of Target Holding Company Common Stock shall not
receive more than one dividend or except as otherwise provided
above in this Section 6.15, fail to receive one dividend, for
such calendar quarter with respect to their shares of Target
Holding Company Common Stock (including any shares of Bank Common
Stock any such holder receives in exchange therefor in the
Merger).
ARTICLE VII
CONDITIONS PRECEDENT
7.01 Conditions to Each Party's Obligations Under This
Agreement. The respective obligations of each party under this
Agreement shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions, none of which may be
waived:
(a) This Agreement and the Merger and the transactions
contemplated hereby and thereby shall have been approved and
adopted by the affirmative votes of the respective holders of at
least two-thirds of each class of the outstanding shares of the
Bank, and a majority of the outstanding shares of Target Holding
Company, respectively.
(b) This Agreement and the transactions contemplated
hereby shall have been approved by, or waivers shall have been
received from, each regulatory authority having appropriate
jurisdiction and all appropriate waiting periods shall have
expired.
(c) Neither the Bank nor Target Holding Company nor
any of their respective Subsidiaries shall be subject to any
order, decree or injunction of a court or agency of competent
jurisdiction which prevents or delays the consummation of the
Merger.
7.02 Conditions to the Obligations of the Bank Under This
Agreement. The obligations of the Bank under this Agreement shall
be further subject to the satisfaction, at or prior to the
Effective Time, of the following conditions, any one or more of
which may be waived by the Bank:
(a) Each of the obligations of Target Holding Company
and Target Bank required to be performed by it at or prior to the
Effective Time pursuant to the terms of this Agreement shall have
been duly performed and complied with in all material respects
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and the representations and warranties of Target Holding Company and
Target Bank contained in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as
of the Effective Time as though made at and as of the Effective
Time (except as otherwise contemplated by this Agreement), and
the Bank shall have received a certificate to that effect dated
the Effective Time signed by the President and by the Chief
Financial Officer of each of Target Holding Company and Target
Bank.
(b) All action required to be taken by, or on the part
of, Target Holding Company and Target Bank to authorize the
execution, delivery and performance of this Agreement by Target
Holding Company and Target Bank and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken by the Board of Directors and shareholders of Target
Holding Company and Target Bank.
(c) Any and all permits, approvals and waivers of
governmental bodies and regulatory authorities and material
consents and authorizations of other third parties shall have
been obtained by Target Holding Company and Target Bank and the
Bank which are required with respect to and are necessary in
connection with the consummation of the Merger and the other
transactions contemplated hereby; provided, however, that the
condition set forth in this Section 7.02(c) to the Bank's
obligation to effect the Merger shall not be met if any such
permit, approval or waiver is, in the reasonable judgment of the
Bank, subject to any condition or requirement which the Bank
determines to be materially adverse or materially burdensome or
to substantially deprive the Bank of the benefits which it
anticipates to receive in the Merger or the other transactions
contemplated by this Agreement (a "Burdensome Condition").
(d) The Bank shall have received an opinion, dated the
date of Closing, from counsel to Target Holding Company, in form
and substance reasonably satisfactory to the Bank covering
matters customarily covered in opinions of counsel in
transactions of this type.
(e) The Bank shall have received at the time of
execution of this Agreement, in form and substance reasonably
satisfactory to the Bank, an opinion from Goldman Sachs & Co., or
such other investment banker as may be selected by the Bank, that
the terms of the Merger are fair to the Bank from a financial
point of view.
(f) The Bank shall have received an opinion from its
tax counsel to the effect that, for federal income tax purposes,
(i) the transactions described in this Agreement will qualify for
treatment as a tax-free reorganization under Section 368 of the
Code; (ii) no gain or loss will be recognized by the Bank upon
the Merger; and (iii) such other matters as the Bank reasonably
deems appropriate and necessary.
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Target Holding Company and its Subsidiaries will furnish
the Bank with such certificates of their officers or others and
such other documents as the Bank may reasonably request.
7.03 Conditions to the Obligations of Target Holding
Company and Target Bank Under This Agreement. The obligations of
Target Holding Company and Target Bank under this Agreement shall
be further subject to the satisfaction, at or prior to the
Effective Time, of the following conditions, any one or more of
which may be waived by Target Holding Company and Target Bank:
(a) Each of the obligations of the Bank required to be
performed by it at or prior to the Effective Time pursuant to
this Agreement shall have been performed and complied with in all
material respects and the representations and warranties of the
Bank contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the
Effective Time as though made at and as of the Effective Time
(except as otherwise contemplated by this Agreement), and Target
Holding Company shall have received a certificate to that effect
dated the Effective Time signed by the President and Chief
Financial Officer of the Bank.
(b) All action required to be taken by, or on the part
of the Bank to authorize the execution, delivery and performance
of this Agreement by the Bank and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken by the Board of Directors of the Bank and the shareholders
of the Bank.
(c) Target Holding Company and Target Bank shall have
received an opinion, dated the date of Closing, from counsel to
the Bank, in form and substance reasonably satisfactory to Target
Holding Company and Target Bank covering matters customarily
covered in opinions of counsel in transactions of this type.
(d) Target Holding Company shall have received at the
time of execution of this Agreement, in form and substance
reasonably satisfactory to Target Holding Company, an opinion
from Keefe, Bruyette & Woods, Inc., or such other investment
banker as may be selected by Target Holding Company, that the
terms of the Merger are fair to Target Holding Company and its
shareholders from a financial point of view.
(e) Target Holding Company shall have received an
opinion from its tax counsel to the effect that, for federal
income tax purposes, (i) the transactions described in this
Agreement will qualify for treatment as a tax-free reorganization
under Section 368 of the Code; (ii) no gain or loss will be
recognized by Target Holding Company or Target Bank upon the
Merger; (iii) no gain or loss will be recognized by the
shareholders of Target Holding Company with respect to the stock
portion of the consideration received upon consummation of the
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Merger; and (iv) such other matters as Target Holding Company
reasonably deems appropriate and necessary.
(f) The shares of Bank Common Stock to be issued in
the Merger shall be approved for inclusion for quotation on the
NASDAQ National Market System, subject to official notice of
issuance.
The Bank will furnish Target Holding Company with such
certificates of its officers or others and such other documents
as Target Holding Company may reasonably request.
ARTICLE VIII
CLOSING
8.01 Time and Place. Subject to the satisfaction of the
conditions of Article VII hereof, the closing (the "Closing") of
the transactions contemplated hereby shall take place at the
offices of Pullman & Comley, LLC, Bridgeport, Connecticut, at
10:00 A.M., on the third business day after the date on which (or
at the election of the Bank, the last day of the month in which)
all of the conditions contained in Article VII, to the extent not
waived, are satisfied; or at such other place, at such other
time, or on such other date as the Bank and Target Holding
Company may mutually agree upon for the Closing to take place
(the "Closing Date").
8.02 Deliveries at the Closing. At the Closing, there shall
be delivered to the Bank and Target Holding Company the opinions,
certificates, and other documents and instruments required to be
delivered under Article VII hereof.
ARTICLE IX
TERMINATION AND AMENDMENT
9.01 Termination. Notwithstanding any other provision of
this Agreement, this Agreement may be terminated at any time
prior to the Effective Time (whether before or after the approval
of this Agreement and the transactions contemplated hereby by the
shareholders of the Bank or Target Holding Company):
(a) by mutual consent of the Bank and Target Holding
Company 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;
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(b) by either the Bank or Target Holding Company upon
written notice to the other party (i) 45 days after the date on
which any request or application for a regulatory permit,
approval or waiver required to consummate the Merger shall have
been denied or withdrawn at the request or recommendation of the
governmental entity which must grant such requisite regulatory
approval or (ii) 45 days after the date on which the Bank
determines that any such permit, approval or waiver is subject to
a Burdensome Condition, unless within the 45 day period following
such denial, withdrawal or determination a petition for rehearing
or an amended application has been filed with the applicable
governmental entity; provided, however, that no party shall have
the right to terminate this Agreement pursuant to this Section
9.01(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 in any material
respect the covenants and agreements of such party set forth
herein;
(c) by either the Bank or Target Holding Company if
the Merger shall not have been consummated on or before June 30,
1998, time being of the essence, 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
in any material respect the covenants and agreements of such
party set forth herein;
(d) by Target Holding Company if (i) there shall have
occurred a material adverse change in the business, operations,
assets, or financial condition of the Bank taken as a whole from
that disclosed by the Bank in the Bank's quarterly report on Form
F-4 for the six months ended June 30, 1997; (ii) there is a
material breach in any representation, warranty, covenant,
agreement or obligation of the Bank hereunder and such breach
shall not have been or cannot be remedied within 30 days after
receipt by the Bank of notice in writing from Target Holding
Company to the Bank specifying the nature of such breach and
requesting that it be remedied; (iii) the Board of Directors of
the Bank shall have failed to recommend or shall have withdrawn,
modified or changed in a manner adverse to Target Holding Company
its recommendation of, this Agreement and the Merger and the
transactions contemplated hereby and thereby; or (iv) any
approval of the stockholders of the Bank contemplated by this
Agreement shall not have been obtained by reason of the failure
to obtain the required vote at a duly held meeting of
stockholders or at any adjournment or postponement thereof; or
(e) by the Bank, if (i) there shall have occurred a
material adverse change in the business, operations, assets or
financial condition of Target Holding Company and its
Subsidiaries taken as a whole from that disclosed by Target
Holding Company in Target Holding Company's quarterly report on
Form 10-Q for the six months ended June 30, 1997; (ii) there is a
material breach in any representation, warranty, covenant,
agreement or obligation of Target Holding Company hereunder and
such breach shall not have been or cannot be remedied within 30
days after receipt by Target Holding Company of notice in writing
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from the Bank specifying the nature of such breach and
requesting that it be remedied; (iii) the Board of Directors of
Target Holding Company shall have failed to recommend or shall
have withdrawn, modified or changed in a manner adverse to the
Bank its recommendation of, this Agreement and the Merger and the
transactions contemplated hereby and thereby; or (iv) any
approval of the stockholders of Target Holding Company
contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote at a duly held
meeting of stockholders or at any adjournment or postponement
thereof;
(f) by the Bank if any waiver of the FRB which is
requested with respect to the consummation of the Merger and the
other transactions contemplated hereby shall have been denied,
shall contain a Burdensome Condition, or in the Bank's reasonable
judgment, after consultation with outside counsel, is unlikely to
be received without the imposition of a Burdensome Condition; or
(g) by Target Holding Company, if (either before or
after the approval of this Agreement and the transactions
contemplated hereby by the shareholders of Target Holding
Company) its Board of Directors so determines by a vote of a
majority of the members of its entire Board, at any time during
the ten-day period commencing with the Determination Date, if the
Valuation Period Market Value on the Determination Date shall be
less than $20.91.
Notwithstanding the foregoing, if Target Holding Company
elects to exercise its termination right pursuant to this
subsection (g), it shall give prompt written notice to the Bank
(provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned ten-day period).
During the seven-day period commencing with its receipt of such
notice, the Bank shall have the option of increasing the
consideration to be received by holders of Target Holding Company
Common Stock hereunder by increasing the Aggregate Consideration
(whether by means of increasing the Stock Amount or the cash
portion of the Aggregate Consideration) such that the Aggregate
Consideration shall be at least equal to an amount equal to (a)
the Threshold Stock Value plus (b) the Base Cash Consideration
plus the Cash Adjustment, if any, minus (c) the Aggregate Option
Settlement Amount. If the Bank makes an election contemplated by
the preceding sentences, within such seven-day period, it shall
give prompt written notice to Target Holding Company of such
election and the revised Exchange Ratio, whereupon no termination
shall have occurred pursuant to this subsection (g) and this
Agreement shall remain in effect in accordance with its terms
(except as the Exchange Ratio shall have been so modified), and
any references in this Agreement to "Exchange Ratio" shall
thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this subsection (g).
For purposes of this subsection (g), the following
terms shall have the meanings indicated:
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"Determination Date" means the date on which the last
of the regulatory approvals required for consummation of the
Merger shall have occurred.
"Stock Value" means the Stock Amount (determined after
giving effect to Section 1.06) times the Valuation Period Market
Value.
"Threshold Stock Value" means the Stock Value determined
at a Valuation Period Market Value equal to $20.91.
9.02 Effect of Termination. In the event of termination of
this Agreement by either the Bank or Target Holding Company as
provided in Section 9.01, this Agreement shall forthwith become
void and have no further effect except (i) Sections 6.02(c),
6.12, 9.02, 10.01 and 10.02 shall survive any termination of this
Agreement, (ii) the Stock Option Agreement and the Fee Letter
shall survive and be subject to the termination and other
provisions thereof, and (iii) 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
breach of any representation, warranty, or other provision of
this Agreement.
9.03 Amendment. Subject to compliance with applicable law,
this Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at
any time before or after approval of the matters presented in
connection with the Merger by the shareholders of Target Holding
Company or the Bank; provided, however, that after any approval
of the transactions contemplated by this Agreement by Target
Holding Company'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 Target Holding Company's shareholders
hereunder in any material respect other than as contemplated by
this Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
9.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their
respective Board of Directors, may, to the extent legally
allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions
contained herein (other than those contained in Section 7.01);
provided, however, that after any approval of this Agreement and
the transactions contemplated hereby by Target Holding Company's
shareholders, there may not be, without further approval of such
shareholders, any extension or waiver of this Agreement or any
portion thereof which reduces the amount or changes the form of
the consideration to be delivered to Target Holding Company's
shareholders hereunder in any material respect other than as
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contemplated by this Agreement. 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 shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X
MISCELLANEOUS
10.01 Payment to Target Holding Company.
(a) If the Bank shall terminate this Agreement pursuant to
Section 9.01(f) hereof, or otherwise because any requested waiver
of the FRB shall not have been received or shall contain a
Burdensome Condition, the Bank shall pay to Target Holding
Company a cash fee as follows: (i) $5 million if such termination
shall occur on or prior to March 3, 1998; (ii) $8 million if such
termination shall occur from March 4, 1998 through and including
June 2, 1998; or (iii) $9 million if such termination shall occur
from June 3, 1998 through and including June 30, 1998.
(b) If Target Holding Company shall terminate this
Agreement pursuant to Section 9.01(c) hereof and as of June 30,
1998 any requested waiver of the FRB shall not have been received
or shall contain a Burdensome Condition, the Bank shall pay to
Target Holding Company a cash fee of $9 million; provided,
however, that no fee shall be payable under this Section 10.01(b)
if any fee is payable under Section 10.01(a) hereof.
(c) Any fee payable pursuant to Section 10.01(a) or (b)
hereof shall be payable in immediately available funds on or
before the second business day following termination of this
Agreement by the Bank or the second business day following the
Bank's receipt of written notice from Target Holding Company
effecting termination of this Agreement.
10.02 Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby, including, without limitation, attorney, accountant, and
investment banker fees and expenses, shall be paid by the party
incurring such costs and expenses, provided, however, that
printing expenses and SEC and FDIC filing and registration fees
shall be shared equally between Target Holding Company and the
Bank.
10.03 Non-Survival of Representations and Warranties. The
respective representations and warranties of the Bank, Target
Bank and Target Holding Company contained in this Agreement or in
any instrument or certificate delivered pursuant hereto by the
Bank or Target Holding Company shall expire on and be terminated
and extinguished at the Effective Time; provided, however,
that after the Effective Time, any such representation or warranty of
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the Bank or Target Holding Company or Target Bank shall not be
deemed to be terminated or extinguished so as to deprive the Bank
of any defense at law or in equity which it would otherwise have
to any claim against it by any person, firm, corporation or other
legal entity, including, without limitation, any shareholder or
former shareholder of Target Holding Company.
10.04 Notification of Certain Matters. Target Holding
Company shall give prompt notice to the Bank and the Bank shall
give prompt notice to Target Holding Company, of (i) the
occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the
Effective Time, and (ii) any material failure of Target Holding
Company or the Bank, as the case may be, or of any officer,
Director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that no such
notifications shall affect the representations or warranties of
the parties or the conditions to the obligations of the parties
hereunder.
10.05 Notices. All notices or other communications hereunder
shall be in writing and shall be deemed given if delivered
personally or mailed by prepaid certified first class mail
(return receipt requested) or by recognized overnight delivery
service addressed as follows:
(a) If to the Bank, to:
William T. Kosturko, Esq.
Executive Vice President
and General Counsel
People's Bank
850 Main Street
Bridgeport, CT 06604
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(b) If to Target Holding Company or Target Bank, to:
Norwich Financial Corp.
4 Broadway
Norwich, CT 06360
Attn: Daniel R. Dennis, Jr.
President and Chief Executive Officer
Copy to:
Day, Berry & Howard
CityPlace I
Hartford, CT 06103
Attention: Paul F. McAlenney, Esq.
or such other address as shall be furnished in writing by either
party, and any such notice or communication shall be deemed to
have been given as of the date of receipt.
10.06 Parties in Interest. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that
neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either party hereto
without the prior written consent of the other party, and that
nothing in this Agreement, except Section 6.12, is intended to
confer, expressly or by implication, upon any other person any
rights or remedies under or by reason of this Agreement. If any
provision or part of this Agreement is deemed unenforceable, the
enforceability of the other provisions and parts shall not be
affected.
10.07 Complete Agreement. This Agreement, the Stock Option
Agreement, the Fee Letter and the documents and other writings
referred to herein or delivered pursuant thereto, contain the
entire agreement and understanding of the parties with respect to
its subject matter, other than the Confidentiality Agreements.
There are no restrictions, agreements, premises, warranties,
covenants or undertakings other than those expressly set forth
herein or therein. Except as set forth in the first sentence of
this Section 10.07, this Agreement supersedes all prior
agreements and understandings between the parties, both written
and oral, with respect to its subject matter.
10.08 Counterparts. This 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.
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10.09 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut
without regard to the conflict of law principles thereof (except
to the extent that mandatory provisions of federal law or of the
State of Delaware with respect to Target Holding Company are
applicable).
10.10 Interpretation. The Article and Section headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a
Section of, or Exhibit or Schedule to, this Agreement unless
otherwise indicated. When the words "include" or "includes" or
"including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." No provision of
this Agreement shall be construed to require the Bank, Target
Holding Company, Target Bank or any of their respective
Subsidiaries or affiliates to take any action which would violate
applicable law (whether statutory or common law), rule or
regulation.
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IN WITNESS WHEREOF, the Bank, Target Holding Company and
Target Bank have caused this Agreement to be executed by their
duly authorized officers as of the day and year first above
written and each of the Bank and Target Bank have caused this
Agreement to be executed by a majority of its directors as
required pursuant to Section 36a-125 of the CGS.
PEOPLE'S BANK
By /s/ David E.A. Carson
----------------------
David E.A. Carson
Its President and
Chief Executive Officer
Attest:
/s/ Sandra J. Brown
- --------------------------
Secretary
NORWICH FINANCIAL CORP.
By /s/ Daniel R. Dennis, Jr.
-------------------------
Daniel R. Dennis, Jr.
Its President and
Chief Executive Officer
Attest:
/s/ Daphne P. Cannata
- --------------------------
Secretary
THE NORWICH SAVINGS SOCIETY
By /s/ Daniel R. Dennis, Jr.
-------------------------
Daniel R. Dennis, Jr.
Its President and
Chief Executive Officer
Attest:
/s/ Daphne P. Cannata
- --------------------------
Secretary
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We hereby confirm, as of this 3rd day of September, 1997,
our approval of the foregoing Agreement and Plan of Merger by and
among Norwich Financial Corp., the Norwich Savings Society and
People's Bank.
DIRECTORS OF ACQUIROR BANK
/s/ James P. Biggs /s/ Samuel W. Hawley
- ------------------------- ---------------------------
James P. Biggs Samuel W. Hawley
/s/ David E.A. Carson /s/ Betty Ruth Hollander
- ------------------------- ---------------------------
David E.A. Carson Betty Ruth Hollander
/s/ George P. Carter
- ------------------------- ---------------------------
George P. Carter Saul Kwartin
/s/ Joseph E. Clancy /s/ Jean M. LaVecchia
- ------------------------- ---------------------------
Joseph E. Clancy Jean M. LaVecchia
/s/ George R. Dunbar /s/ Jack E. McGregor
- ------------------------- ---------------------------
George R. Dunbar Jack E. McGregor
/s/ Jerry Franklin /s/ James A. Thomas
- ------------------------- ---------------------------
Jerry Franklin James A. Thomas
/s/ Eunice S. Groark /s/ Wilmot F. Wheeler, Jr.
- ------------------------- ---------------------------
Eunice S. Groark Wilmot F. Wheeler, Jr.
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We hereby confirm, as of this 3rd day of September, 1997,
our approval of the foregoing Agreement and Plan of Merger by and
among Norwich Financial Corp., The Norwich Savings Society and
People's Bank.
DIRECTORS OF TARGET HOLDING COMPANY
AND TARGET BANK
/s/ Daniel R. Dennis, Jr. /s/ Anthony P. Halsey
- ------------------------- ---------------------------
Daniel R. Dennis, Jr. Anthony P. Halsey
/s/ Michael J. Hartl
- ------------------------- ---------------------------
Michael J. Hartl Jeremiah J. Lowney, Jr.
/s/ Robert T. Ramsdell /s/ Richard P. Reed
- ------------------------- ---------------------------
Robert T. Ramsdell Richard P. Reed
/s/ Paul R. Duevel
- ------------------------- ---------------------------
Martin C. Shapiro Paul R. Duevel
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Appendix B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 3, 1997 (the
"Agreement"), by and between Norwich Financial Corp., a Delaware
corporation ("Issuer"), and People's Bank, a Connecticut stock
savings bank ("Grantee").
RECITALS
(A) Merger Agreement. Grantee, Issuer and Target Bank, a
Connecticut stock savings bank and a wholly-owned subsidiary of
Issuer ("Target Bank") have, as of the date hereof, entered into
an Agreement and Plan of Merger (the "Merger Agreement"),
providing for, among other things, the merger of Issuer and
Target Bank with and into Grantee, with Grantee being the
survivor of each merger.
(B) Condition to Merger Agreement. As a condition and
inducement to Grantee's pursuit of the transactions contemplated
by the Merger Agreement, and in consideration therefor, Issuer
has agreed to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein and in the Merger Agreement, and intending to be
legally bound hereby, Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in
the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase a number of shares of common
stock, par value $.01 per share ("Issuer Common"), of Issuer up
to 1,081,036 of such shares (as adjusted as set forth herein, the
"Option Shares", which shall include the Option Shares before and
after any transfer of such Option Shares, but in no event shall
the number of Option Shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Issuer
Common) at a purchase price per Option Share (as adjusted as set
forth herein, the "Purchase Price") equal to $25.00.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the
agreements or covenants contained in this Agreement or the
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Merger Agreement, and (ii) no preliminary or permanent injunction
or other order against the delivery of shares covered by the
Option issued by any court of competent jurisdiction in the
United States shall be in effect, the Holder may exercise the
Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no
further force or effect upon the earliest to occur of (A) the
Effective Time, (B) termination of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event (as hereinafter
defined) other than a termination thereof by Grantee pursuant to
Section 9.01(e)(ii) of the Merger Agreement (but only if the
breach of Issuer giving rise to such termination was willful) (a
termination of the Merger Agreement by Grantee pursuant to
Section 9.01(e)(ii) thereof as a result of a willful breach by
Issuer being referred to herein as a "Default Termination"), (C)
fifteen (15) months after a Default Termination, (D) fifteen (15)
months after termination of the Merger Agreement (other than by
reason of a Default Termination) following the occurrence of a
Purchase Event or a Preliminary Purchase Event, (E) the date on
which the shareholders of the Grantee shall have voted and failed
to adopt and approve the Merger Agreement at the meeting of the
Grantee's shareholders called for such purpose (unless (1) Issuer
shall then be in material breach of its covenants or agreements
contained in the Merger Agreement or (2) on or prior to such
date, the shareholders of Issuer shall have also voted and failed
to approve the Merger Agreement), (F) termination of the Merger
Agreement by Issuer pursuant to Section 9.01(d)(iii) thereof, or
(G) termination of the Merger Agreement by Grantee pursuant to
Section 9.01(f) thereof; provided, that any purchase of shares
upon exercise of the Option shall be subject to compliance with
applicable law. The term "Holder" shall mean the holder or
holders of the Option from time to time, and which initially is
Grantee. The rights set forth in Section 8 hereof shall terminate
when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent,
Issuer shall have recommended, publicly proposed or
publicly announced an intention to authorize, recommend or
propose, or entered into an agreement with any person
(other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction
involving Issuer or any of its significant subsidiaries
(other than transactions solely between Issuer's
subsidiaries that are not violative of the Merger
Agreement), (B) the disposition, by sale, lease, exchange
or otherwise, of assets or deposits of Issuer or any of its
significant subsidiaries representing in either case 25% or
more of the consolidated assets or deposits of Issuer and
its subsidiaries, or (C) the issuance, sale or other
disposition by Issuer of (including by way of merger,
consolidation, share exchange or any similar transaction)
securities representing 25% or more of the voting power of
Issuer or any of its significant subsidiaries, other than,
in each case of (A), (B), or (C), any merger, consolidation
or similar transaction involving Issuer or any of its
significant subsidiaries in which the voting securities of
Issuer outstanding immediately prior thereto
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continue to represent (by either remaining outstanding or
being converted into the voting securities of the surviving
entity of any such transaction) at least 65% of the
combined voting power of the voting securities of the
Issuer or the surviving entity outstanding immediately
after the consummation of such merger, consolidation, or
similar transaction (provided any such transaction is not
violative of the Merger Agreement)(each of (A), (B), or
(C), an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial
ownership (as such term is defined in Rule l3d-3
promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such
term is defined in Section 13(d)(3) of the Exchange Act),
other than a group of which Grantee or any subsidiary of
Grantee is a member, shall have been formed which
beneficially owns, or has the right to acquire beneficial
ownership of, 25% or more of the voting power of Issuer or
any of its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means
any of the following events:
(i) any person (other than Grantee or any
subsidiary of Grantee) 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 Issuer Common such that, upon
consummation of such offer, such person would own or
control 15% or more of the then outstanding shares of
Issuer Common (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer," respectively); or
(ii) the shareholders shall not have approved the
Merger Agreement by the requisite vote at the meeting of
the Issuer's shareholders called for that purpose (the
"Issuer Meeting"), the Issuer Meeting shall not have been
held or shall have been canceled prior to termination of
the Merger Agreement, or Issuer's Board of Directors shall
have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with
respect to the Merger Agreement, in each case after it
shall have been publicly announced that any person (other
than Grantee or any subsidiary of Grantee) shall have (A)
made, or disclosed an intention to make, a bona fide
proposal to engage in an Acquisition Transaction, (B)
commenced a Tender Offer or filed a registration statement
under the Securities Act with respect to an Exchange Offer,
or (C) filed an application (or given a notice), whether in
draft or final form, under the Home Owners' Loan Act, as
amended, the Bank Holding Company Act of 1956, as amended,
the Bank Merger Act, as amended, or the Change in Bank
Control Act of 1978, as amended, for approval to engage in
an Acquisition Transaction; or
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(iii) any person (other than Grantee or any
subsidiary of Grantee) shall have made a bona fide proposal
to Issuer or its shareholders by public announcement, or
written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction;
or
(iv) after a proposal is made by a third party to
Issuer or its shareholders to engage in an Acquisition
Transaction, or such third party states its intention to
the Issuer to make such a proposal if the Merger Agreement
terminates, Issuer shall have breached any representation,
warranty, covenant or agreement contained in the Merger
Agreement and such breach would entitle Grantee to
terminate the Merger Agreement under Article IX thereof
(without regard to the cure period provided for therein
unless such cure is promptly effected without jeopardizing
consummation of the Merger pursuant to the terms of the
Merger Agreement); or
(v) any person (other than Grantee or any
subsidiary of Grantee), other than in connection with a
transaction to which Grantee has given its prior written
consent, shall have filed an application or notice with any
federal or state governmental authority (a "Regulatory
Authority") for approval to engage in an Acquisition
Transaction; or
(vi) Issuer or any of its directors, officers or
agents takes any material direct or indirect action with
the intention of inviting, encouraging or soliciting a
Tender Offer, an Exchange Offer or an Acquisition Proposal.
As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Preliminary Purchase Event or Purchase
Event, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Holder to
exercise the Option.
(e) In the event Holder wishes to exercise the Option,
it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such
exercise and (ii) a place and date not earlier than three (3)
business days nor later than fifteen (15) business days from the
Notice Date for the closing (the "Closing") of such purchase (the
"Closing Date"); provided that the first notice of exercise shall
be sent to Issuer within one hundred eighty (180) days after the
first Purchase Event of which Grantee has been notified. If prior
notification to or approval of any Regulatory Authority is
required in connection with such purchase, Issuer shall cooperate
with Holder in the filing of the required notice or application
for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and
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any mandatory waiting periods). Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to
Issuer, in immediately available funds by wire transfer to a bank
account designated by Issuer, an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased
on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in
Section 13(f).
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as
provided in Section 4(a), (i) Issuer shall deliver to Holder (A)
a certificate or certificates representing the Option Shares to
be purchased at such Closing, which Option Shares shall be free
and clear of all liens and subject to no preemptive rights, and
(B), if the Option is exercised in part only, an executed new
agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common
purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise
dispose of such Option Shares in violation of applicable federal
and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at
each Closing shall be endorsed with a restrictive legend which
shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK
OPTION AGREEMENT DATED SEPTEMBER 3, 1997. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the portion of the above legend
relating to the Securities Act shall be removed by delivery of
substitute certificate(s) without such legend if Holder shall
have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel in form and substance reasonably
satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written
notice of exercise of the Option provided for under Section 3(e),
the tender of the applicable purchase price in immediately
available funds and the tender of this Agreement to Issuer,
Holder shall be deemed
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to be the holder of record of the shares of Issuer Common
issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that
certificates representing such shares of Issuer Common shall not
then be actually delivered to Holder. Issuer shall pay all
expenses, and any and all United States federal, state, and local
taxes and other charges that may be payable in connection with
the preparation, issuance and delivery of stock certificates
under this Section in the name of Holder or its assignee,
transferee, or designee.
(e) Issuer agrees (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Issuer Common so that the Option
may be exercised without additional authorization of Issuer
Common after giving effect to all other options, warrants,
convertible securities and other rights to purchase Issuer
Common, (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations
or conditions to be observed or performed hereunder by Issuer,
(iii) promptly to take all action as may from time to time be
required (including (A) complying with all premerger
notification, reporting and waiting period requirements, and (B)
in the event prior approval of or notice to any Regulatory
Authority is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or
notices and providing such information to such Regulatory
Authority as it may require) in order to permit Holder to
exercise the Option and Issuer duly and effectively to issue
shares of the Issuer Common pursuant hereto, and (iv) promptly to
take all action provided herein to protect the rights of Holder
against dilution.
5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee (and Holder, if different than
Grantee) as follows:
(a) Corporate Authority. Issuer has full corporate power
and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby; the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer, and no other
corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions so
contemplated; this Agreement has been duly and validly executed
and delivered by Issuer.
(b) Beneficial Ownership. To the best knowledge of
Issuer, as of the date of this Agreement, no person or group has
beneficial ownership of more than 10% of the issued and
outstanding shares of Issuer Common.
(c) Shares Reserved for Issuance; Capital Stock. Issuer
has taken all necessary corporate action to authorize and reserve
and 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
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Option, that number of shares of Issuer Common equal to the
maximum number of shares of Issuer Common at any time and from
time to time purchasable upon exercise of the Option, and all
such shares, upon issuance pursuant to the Option, will be duly
authorized, validly issued, fully paid and nonassessable, and
will be delivered free and clear of all claims, liens,
encumbrances, and security interests (other than those created by
this Agreement) and not subject to any preemptive rights.
(d) No Violations. The execution, delivery and
performance of this Agreement does not or will not, and the
consummation by Issuer of any of the transactions contemplated
hereby will not, constitute or result in (A) a breach or
violation of, or a default under, its certificate of
incorporation or by-laws, or the comparable governing instruments
of any of its subsidiaries, or (B) a breach or violation of, or a
default under, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of
time or both) or under any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or
non-governmental permit or license to which it or any of its
subsidiaries is subject, that would in any case give any other
person the ability to prevent or enjoin Issuer's performance
under this Agreement in any material respect.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has full corporate
power and authority to enter into this Agreement and, subject to
obtaining the approvals referred to in this Agreement, to
consummate the transactions contemplated by this Agreement; the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Grantee; and this
Agreement has been duly executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common by
reason of a stock dividend, stock split, split-up,
recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities subject
to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the
agreements governing such transaction so that Holder shall
receive, upon exercise of the Option, the number and class of
shares or other securities or property that Holder would have
received in respect of Issuer Common if the Option had been
exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional shares of Issuer
Common are issued after the date of this Agreement (other than
pursuant to an event described in the first sentence of this
Section 7(a), upon exercise of any option to purchase Issuer
Common outstanding on the date hereof or upon conversion into
Issuer Common of any convertible security of Issuer outstanding
on the date hereof), the number of shares of Issuer Common
subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of Issuer Common
previously issued pursuant hereto, equals 19.9% of the number of
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shares of Issuer Common then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the
Option. No provision of this Section 7 shall be deemed to affect
or change, or constitute authorization for any violation of, any
of the covenants or representations in the Merger Agreement.
(b) In the event that Issuer shall enter into an
agreement (i) to consolidate with or merge into any person, other
than Grantee or one of its subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares of Issuer Common shall be
changed into or exchanged for stock or other securities of Issuer
or any other person or cash or any other property or the
outstanding shares of Issuer Common immediately prior to such
merger 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 or deposits to any person, other than Grantee or
one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions
so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein,
be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Holder, of either (x) the Acquiring
Corporation (as hereinafter defined), (y) any person that
controls the Acquiring Corporation, or (z) in the case of a
merger described in clause (ii), Issuer (such person being
referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as
the Option, provided, that, if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to Holder. Substitute Option Issuer shall also enter into an
agreement with Holder in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common (as hereinafter defined) as
is equal to the Assigned Value (as hereinafter defined)
multiplied by the number of shares of Issuer Common for which the
Option was theretofore exercisable, but not exercised as of the
date of the transaction giving rise to the Substitute Option,
divided by the Average Price (as hereinafter defined). The
exercise price of the Substitute Option per share of Substitute
Common (the "Substitute Option Price") shall then be equal to the
Purchase Price multiplied by a fraction in which the numerator is
the number of shares of Issuer Common for which the Option was
theretofore exercisable and the denominator is the number of
shares of the Substitute Common for which the Substitute Option
is exercisable.
(e) The following terms have the meanings indicated:
(1) "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
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merger in which Issuer is the continuing or surviving
person, or (iii) the transferee of all or substantially all
of Issuer's assets (or a substantial part of the assets of
its subsidiaries taken as a whole).
(2) "Substitute Common" shall mean the shares of
capital stock (or similar equity interest) with the
greatest voting power in respect of the election of
directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute
Option Issuer.
(3) "Assigned Value" shall mean the highest of
(w) the price per share of Issuer Common at which a Tender
Offer or an Exchange Offer therefor has been made, (x) the
price per share of Issuer Common to be paid by any third
party pursuant to an agreement with Issuer, (y) the highest
closing price for shares of Issuer Common within the six
(6) month period immediately preceding the consolidation,
merger, or sale in question and (z) in the event of a sale
of all or substantially all of Issuer's assets or deposits
an amount equal to (i) the sum of the price paid in such
sale for such assets (and/or deposits) and the current
market value of the remaining assets of Issuer, as
determined by a nationally recognized investment banking
firm selected by Holder and reasonably acceptable to Issuer
divided by (ii) the number of shares of Issuer Common
outstanding at such time. In the event that a Tender Offer
or an Exchange Offer is made for Issuer Common or an
agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the
securities or other property issuable or deliverable in
exchange for Issuer Common shall be determined by a
nationally recognized investment banking firm selected by
Holder and reasonably acceptable to Issuer.
(4) "Average Price" shall mean the average
closing price of a share of Substitute Common for the one
year immediately preceding the consolidation, merger, or
sale in question, but in no event higher than the closing
price of the shares of Substitute Common on the day
preceding such consolidation, merger or sale; provided that
if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of
common stock issued by Issuer, the person merging into
Issuer or by any company which controls such person, as
Holder may elect.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the aggregate of the shares of Substitute Common
outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more
than 19.9% of the aggregate of the shares of Substitute Common
but for the limitation in the first sentence of this Section
7(f), Substitute Option Issuer shall make a cash payment to
Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in the first
sentence of this Section 7(f) over (ii) the value of the
Substitute Option after giving effect to the limitation in the
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first sentence of this Section 7(f). This difference in
value shall be determined by a nationally recognized investment
banking firm selected by Holder and reasonably acceptable to
Substitute Option Issuer.
(g) Issuer shall not enter into any transaction
described in Section 7(b) unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assume in
writing all the obligations of Issuer hereunder and take all
other actions that may be necessary so that the provisions of
this Section 7 are given full force and effect (including,
without limitation, any action that may be necessary so that the
holders of the other shares of common stock issued by Substitute
Option Issuer are not entitled to exercise any rights by reason
of the issuance or exercise of the Substitute Option and the
shares of Substitute Common are otherwise in no way
distinguishable from or have lesser economic value (other than
any diminution in value resulting from the fact that the
Substitute Common are restricted securities, as defined in Rule
144 under the Securities Act or any successor provision) than
other shares of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a) and
receipt of any required regulatory approvals as hereinafter set
forth, at the request of Holder at any time commencing upon the
first occurrence of a Repurchase Event (as defined in Section
8(d)) and ending twelve (12) months immediately thereafter,
Issuer shall repurchase from Holder (i) the Option, and (ii) all
shares of Issuer Common purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date
on which Holder exercises its rights under this Section 8 is
referred to as the "Request Date". Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal
to the sum of:
(i) the aggregate Purchase Price paid by Holder
for any shares of Issuer Common acquired pursuant to the
Option with respect to which Holder then has beneficial
ownership;
(ii) the excess, if any, of (x) the Applicable
Price (as defined below) for each share of Issuer Common
over (y) the Purchase Price (subject to adjustment pursuant
to Section 7), multiplied by the number of shares of Issuer
Common with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to
Section 7) paid (or, in the case of Option Shares with
respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each
share of Issuer Common with respect to which the Option has
been exercised and with respect to which Holder then has
beneficial ownership, multiplied by the number of such
shares.
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(b) If Holder exercises its rights under this Section
8, Issuer shall, within ten (10) business days after the Request
Date, pay the Section 8 Repurchase Consideration to Holder in
immediately available funds, and contemporaneously with such
payment, Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common purchased
thereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then
free and clear of all liens. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any
Regulatory Authority is required in connection with the payment
of all or any portion of the Section 8 Repurchase Consideration,
Holder shall have the ongoing option to revoke its request for
repurchase pursuant to Section 8, in whole or in part, or to
require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and
each party shall cooperate with the other in the filing of any
such notice or application and the obtaining of any such
approval). If any Regulatory Authority disapproves of any part of
Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Holder. If any
Regulatory Authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the
repurchase request, or (ii) to the extent permitted by such
Regulatory Authority, to determine whether the repurchase should
apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of
shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination
under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all
of Holder's rights under this Section 8 shall terminate on the
date of termination of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of
Issuer Common paid for any such share by the person or groups
described in Section 8(d)(i), (ii) the price per share of Issuer
Common received by holders of Issuer Common in connection with
any merger or other business combination transaction described in
Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common on NASDAQ (or if
Issuer Common is not traded on NASDAQ, the highest bid price per
share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the forty (40)
business days preceding the Request Date; provided, however, that
in the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized
investment banking firm selected by Holder and reasonably
acceptable to Issuer, divided by the number of shares of the
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Issuer Common outstanding at the time of such sale. If the
consideration to be offered, paid or received pursuant to either
of the foregoing clauses (i) or (ii) shall be other than in cash,
the value of such consideration shall be determined in good faith
by an independent nationally recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership of (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act), or the
right to acquire beneficial ownership of, or any "group" (as such
term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of
Issuer Common, or (ii) any of the transactions described in
Section 7(b)(i), 7(b)(ii) or 7(b)(iii) shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. From and after the
occurrence of a Purchase Event, Issuer shall, subject to the
conditions of Section 9(c) below, if requested by any Holder,
including Grantee and any permitted transferee ("Selling
Shareholder"), as expeditiously as possible prepare and file a
registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other
disposition of any or all shares of Issuer Common or other
securities that have been acquired by or are issuable to the
Selling Shareholder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by
the Selling Shareholder in such request, including without
limitation a "shelf" registration statement under Rule 415 under
the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any
time after the exercise of the Option proposes to register any
shares of Issuer Common under the Securities Act in connection
with an underwritten public offering of such Issuer Common,
Issuer will promptly give written notice to the Selling
Shareholders of its intention to do so and, upon the written
request of any Selling Shareholder given within fifteen (15) days
after receipt of any such notice (which request shall specify the
number of shares of Issuer Common intended to be included in such
underwritten public offering by the Selling Shareholder), Issuer
will cause all such shares for which a Selling Shareholder
requests participation in such registration to be so registered
and included in such underwritten public offering; provided,
however, that Issuer may elect to not cause any such shares to be
so registered (i) if the underwriters in good faith object for
valid business reasons, or (ii) in the case of a registration
solely to implement an employee benefit plan or a registration
filed on Form S-4 of the Securities Act or any successor Form;
provided, further, however, that such election pursuant to (i)
may only be made two times. If some but not all the shares of
Issuer Common, with respect to which Issuer shall have received
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requests for registration pursuant to this Section 9(b),
shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among the
Selling Shareholders desiring to register their shares pro rata
in the proportion that the number of shares requested to be
registered by each such Selling Shareholder bears to the total
number of shares requested to be registered by all such Selling
Shareholders then desiring to have Issuer Common registered for
sale.
(c) Conditions to Required Registration. Issuer shall
use all reasonable efforts to cause each registration statement
referred to in Section 9(a) above to become effective and to
obtain all consents or waivers of other parties which are
required therefor and to keep such registration statement
effective; provided, however, that Issuer may delay any
registration of Option Shares required pursuant to Section 9(a)
above for a period not exceeding ninety (90) days provided Issuer
shall in good faith determine that any such registration would
adversely affect an offering or contemplated offering of other
securities by Issuer, and Issuer shall not be required to
register Option Shares under the Securities Act pursuant to
Section 9(a) above:
(i) on more than one occasion during any calendar year;
(ii) within ninety (90) days after the effective
date of a registration referred to in Section 9(b) above
pursuant to which the Selling Shareholder or Selling
Shareholders concerned were afforded the opportunity to
register such shares under the Securities Act and such
shares were registered as requested; and
(iii) unless a request therefor is made to Issuer
by Selling Shareholders that hold at least 25% or more of
the aggregate number of Option Shares (including shares of
Issuer Common issuable upon exercise of the Option) then
outstanding.
In addition to the foregoing, Issuer shall not be
required to maintain the effectiveness of any registration
statement after the expiration of nine (9) months from the
effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps,
under all applicable state securities laws to the extent
necessary to permit the sale or other disposition of the Option
Shares so registered in accordance with the intended method of
distribution for such shares; provided, however, that Issuer
shall not be required to consent to general jurisdiction or
qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to
do business.
(d) Expenses. Except where applicable state law
prohibits such payments, Issuer will pay all expenses (including
without limitation registration fees, qualification fees, blue
sky fees and expenses (including the fees and expenses of
counsel), legal expenses, including the reasonable fees and
expenses of one counsel to the holders whose Option Shares are
being registered, printing expenses and the costs of special
audits or "cold comfort" letters, expenses of underwriters,
excluding discounts and commissions but including liability
insurance if Issuer so
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desires or the underwriters so require, and the reasonable fees
and expenses of any necessary special experts) in connection with
each registration pursuant to Section 9(a) or 9(b) above
(including the related offerings and sales by holders of Option
Shares) and all other qualifications, notifications or exemptions
pursuant to Section 9(a) or 9(b) above.
(e) Indemnification. In connection with any registration
under Section 9(a) or 9(b) above, Issuer hereby indemnifies the
Selling Shareholders, and each underwriter thereof, including
each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against
all expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement of a material fact
contained in any registration statement or prospectus or
notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged
untrue statement that was included by Issuer in any such
registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in
reliance upon, and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling
person of Issuer shall be indemnified by such Selling
Shareholders, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue statement that was included by
Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such Holder or such
underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under
this Section 9(e) of notice of the commencement of any action
against such indemnified party in respect of which indemnity or
reimbursement may be sought against any indemnifying party under
this Section 9(e), such indemnified party shall notify the
indemnifying party in writing of the commencement of such action,
but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any
indemnified party under this Section 9(e). In case notice of
commencement of any such action shall be given to the
indemnifying party as above provided, the indemnifying party
shall be entitled to participate in and, to the extent it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own
expense, with counsel chosen by it and reasonably satisfactory to
such indemnified party. The indemnified party shall have the
right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall
be paid by the indemnified party unless (i) the indemnifying
party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more
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legal defenses may be available to the indemnifying party
that may be contrary to the interest of the indemnified party, in
which case the indemnifying party shall not be entitled to assume
the defense of such action notwithstanding its obligation to bear
fees and expenses of such counsel. No indemnifying party shall be
liable for any settlement entered into without its consent, which
consent may not be unreasonably withheld.
If the indemnification provided for in this Section
9(e) is unavailable to a party otherwise entitled to be
indemnified in respect of any expenses, losses, claims, damages
or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by
such party to be indemnified as a result of such expenses,
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received by Issuer,
the Selling Shareholders and the underwriters from the offering
of the securities and also the relative fault of Issuer, the
Selling Shareholders and the underwriters in connection with the
statements or omissions which resulted in such expenses, losses,
claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party
as a result of the expenses, losses, claims, damages and
liabilities referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or
claim; provided, however, that in no case shall any Selling
Shareholder be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option
Shares included in the offering. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Any
obligation by any Holder to indemnify shall be several and not
joint with other Holders.
In connection with any registration pursuant to
Section 9(a) or 9(b) above, Issuer and each Selling Shareholder
(other than Grantee) shall enter into an agreement containing the
indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with
all reporting requirements and will do all such other things as
may be necessary to permit the expeditious sale at any time of
any Option Shares by the Selling Shareholders thereof in
accordance with and to the extent permitted by any rule or
regulation promulgated by the SEC from time to time, including,
without limitation, Rule 144A. Issuer shall at its expense
provide the Selling Shareholders with any information necessary
in connection with the completion and filing of any reports or
forms required to be filed by them under the Securities Act or
the Exchange Act, or required pursuant to any state securities
laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in
connection with the issuance and the sale of the Option Shares
and in connection with the exercise of the Option, and will
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save the Selling Shareholders harmless, without limitation as to
time, against any and all liabilities with respect to all such
taxes.
10. Quotation Listing. If Issuer Common or any other
securities to be acquired in connection with the exercise of the
Option are then authorized for quotation or trading or listing on
any securities exchange, Issuer, upon the request of Holder, will
promptly file an application, if required, to authorize for
quotation or trading or listing the shares of Issuer Common or
other securities to be acquired upon exercise of the Option on
such securities exchange and will use its best efforts to obtain
approval, if required, of such quotation or listing as soon as
practicable.
11. Division of Option. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option
of Holder, 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 in the aggregate the same number of shares of Issuer
Common purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other Agreements and related Options
for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and
date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
12. Limitation on Total Profit and Notional Total
Profit.
(a) Notwithstanding anything to the contrary contained
herein, in no event shall Grantee's Total Profit (as defined
below in Section 12(c) hereof) exceed $3 million and, if it
otherwise would exceed such amount, Grantee, at its sole
election, shall either (i) reduce the number of shares of Issuer
Common subject to the Option, (ii) deliver to Issuer for
cancellation Option Shares previously purchased by Grantee, (iii)
pay cash to Issuer, or (iv) any combination thereof, so that
Grantee's actually realized Total Profit shall not exceed $3
million after taking into account the foregoing actions.
(b) Notwithstanding anything to the contrary contained
herein, the Option may not be exercised for a number of shares as
would, as of the date of exercise, result in a Notional Total
Profit (as defined below in Section 14(d) hereof) of more than $3
million; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent
date.
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(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount
received by Grantee pursuant to Issuer's repurchase of the Option
(or any portion thereof) pursuant to Section 8 hereof, (ii)(x)
the amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 8 hereof, less (y) Grantee's
purchase price for such Option Shares, (iii)(x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares shall be
converted or exchanged) to any unaffiliated party, less (y)
Grantee's purchase price of such Option Shares, (iv) any amounts
received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated party, and (v) any equivalent amount
with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose
to exercise the Option shall be the Total Profit determined as of
the date of such proposed exercise assuming that the Option were
exercised on such date for such number of shares and assuming
that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at
the closing market price for the Issuer Common as of the close of
business on the preceding trading day (less customary brokerage
commissions).
(e) Grantee agrees, promptly following any exercise of all or
any portion of the Option, and subject to its rights under
Section 8 hereof, to use commercially reasonable efforts promptly
to maximize the value of Option Shares purchased taking into
account market conditions, the number of Option Shares, the
potential negative impact of substantial sales on the market
price for Issuer Common, and the availability of an effective
registration statement to permit public sale of Option Shares.
13. Miscellaneous.
(a) Expenses. Each of the parties hereto shall bear and
pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is entitled
to the benefits of such provision. This Agreement may not be
modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiaries;
Severability. This Agreement, together with the Merger Agreement
and the other documents and instruments referred to herein and
therein, between Grantee and Issuer (i) constitutes the entire
agreement and supersedes all prior agreements and understandings,
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both written and oral, between the parties with respect to
the subject matter hereof, and (ii) is not intended to confer
upon any person other than the parties hereto (other than the
indemnified parties under Section 9(e) and any transferees of the
Option Shares or any permitted transferee of this Agreement
pursuant to Section 13(h)) any rights or remedies hereunder. If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or Regulatory Authority
to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of 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 Authority determines that the Option does not permit
Holder to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common as provided in Section 3
(as may be adjusted herein), it is the express intention of
Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) 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.
(e) Descriptive Headings. The descriptive headings
contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(f) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or mailed by
registered or certified mail (return receipt requested) to the
parties at the addresses set forth in the Merger Agreement (or at
such other address for a party as shall be specified by like
notice).
(g) Counterparts. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed and delivered,
it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent
of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a
Purchase Event. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the
Option by Holder, Issuer and Holder shall execute and deliver all
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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.
(j) Specific Performance. The parties hereto agree that
this Agreement may be enforced by either party through specific
performance, injunctive relief and other equitable relief. Both
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.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers
thereunto duty authorized, all as of the day and year first
written above.
NORWICH FINANCIAL CORP.
By /s/ Daniel R. Dennis, Jr.
-------------------------
Name: Daniel R. Dennis, Jr.
Title: President and Chief Executive
Officer
PEOPLE'S BANK
By /s/ David E.A. Carson
---------------------
Name: David E.A. Carson
Title: President and Chief Executive
Officer
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Appendix C
NORWICH FINANCIAL CORP.
4 Broadway
Norwich, CT 06360
September 3, 1997
People's Bank
850 Main Street
Bridgeport, CT 06604-4913
Attn: David E. A. Carson
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger (the "Merger
Agreement") as of even date herewith by and among Acquiror Bank (the "Bank"),
Target Holding Company ("Target Holding Company") and Target Bank ("Target
Bank") and to the Stock Option Agreement (the "Option Agreement") as of even
date herewith among Target Holding Company and the Bank. Capitalized terms used
but not defined herein shall have the meanings ascribed to them in the Merger
Agreement or the Option Agreement, as the case may be.
In order to induce the Bank to enter into the Merger Agreement,
and in consideration of the Bank's undertaking of efforts in furtherance of the
transactions contemplated thereby, Target Holding Company agrees as follows.
1. Representations and Warranties. Target Holding Company hereby
represents and warrants to the Bank that Target Holding Company has all
requisite corporate power and authority to enter into this letter agreement
(this "Agreement") and to perform its obligations set forth herein. The
execution, delivery and performance of this Agreement have been duly and validly
authorized by all necessary corporate action on the part of Target Holding
Company. This Agreement has been duly executed and delivered by Target Holding
Company.
2. Termination Fee. Unless a Nullifying Event (as defined herein) shall
have occurred and be continuing at the time the Merger Agreement is terminated,
in the event that the Merger Agreement is terminated pursuant to Article IX
thereof (regardless of whether such termination is by the Bank or Target Holding
Company) and prior to or concurrently with such termination a Purchase Event (as
defined in the Option Agreement) shall have occurred, Target Holding Company
shall pay to the Bank a cash fee of seven million dollars ($7 million). Such fee
shall
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be payable in immediately available funds on or before the second business day
following such termination of the Merger Agreement.
As used herein, "Nullifying Event" shall mean any of the
following events occurring and continuing at a time when Target Holding Company
is not in material breach of any of its covenants or agreements contained in the
Merger Agreement: (i) the Bank shall be in material breach of any of its
covenants or agreements contained in the Merger Agreement such that Target
Holding Company shall be entitled to terminate the Merger Agreement pursuant to
Section 9.01(d)(ii) thereof, (ii) the shareholders of the Bank shall have voted
and failed to approve the Merger Agreement at the meeting of the Bank
shareholders called for such purpose (unless the Merger Agreement shall not have
been approved at the meeting of Target Holding Company shareholders which was
held on or prior to such date called for such purpose), or (iii) the Board of
Directors of the Bank shall have failed to approve or recommend the approval of
the Merger Agreement or shall have withdrawn, modified or changed in any manner
adverse to Target Holding Company its approval or recommendation of the approval
of the Merger Agreement or shall have resolved or publicly announced its
intention to do any of the foregoing.
3. Miscellaneous. To the extent that Target Holding Company is
prohibited by applicable law or regulation, or by administrative actions or
policy of a Federal or state financial institution supervisory agency having
jurisdiction over it, from making the payment required to be paid by Target
Holding Company herein in full, it shall immediately so notify the Bank and
thereafter deliver or cause to be delivered, from time to time, to the Bank, the
portion of the payments required to be paid by it herein that it is no longer
prohibited from paying, within five business days after the day on which Target
Holding Company is no longer so prohibited; provided, however, that if Target
Holding Company at any time is prohibited by applicable law or regulation, or by
administrative actions or policy of a Federal or state financial institution
supervisory agency having jurisdiction over it, from making the payments
required hereunder in full, it shall (i) use its reasonable best efforts to
obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to make such payments, (ii) within
five days of the submission or receipt of any documents relating to any such
regulatory and legal approvals, provide the Bank with copies of the same, and
(iii) keep the Bank advised of both the status of any such request for
regulatory and legal approvals, as well as any discussions with any relevant
regulatory or other third party reasonably related to the same.
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.
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This Agreement and any amendments hereto may be executed in two
counterparts, each of which shall be considered one and the same agreement and
shall become effective when both counterparts have been signed and delivered, it
being understood that both parties need not sign the same counterpart.
Nothing contained herein shall be deemed to authorize Target
Holding Company or the Bank to breach any provision of the Merger Agreement.
Please confirm your agreement with the understandings set forth
herein by signing and returning to us the enclosed copy of this Agreement.
Very truly yours,
NORWICH FINANCIAL CORP.
By: /s/ Daniel R. Dennis, Jr.
Name: Daniel R. Dennis, Jr.
Title: President and Chief Executive Officer
Accepted and agreed to as of
the date first above written:
PEOPLE'S BANK
By: /s/ David E.A. Carson
Name: David E.A. Carson
Title: President and Chief Executive Officer
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Appendix D
[PEOPLE'S MUTUAL HOLDINGS LETTERHEAD]
September 3, 1997
Norwich Financial Corp. The Norwich Savings Society
4 Broadway 4 Broadway
Norwich, CT 06360 Norwich, CT 06360
Ladies and Gentlemen:
We are providing this letter to you in connection with the Agreement and
Plan of Merger (the "Merger Agreement") as of even date herewith by and among
People's Bank, The Norwich Savings Society ("NSS") and Norwich Financial Corp.
("NFC"). Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Merger Agreement.
In order to induce NFC and NSS to enter into the Merger Agreement, and
in consideration of your undertaking of efforts in furtherance of the
transactions contemplated hereby, we agree as follows:
1. Ownership of Stock. We hereby represent that, as of the date hereof, we
are the beneficial owner of and have sole voting and dispositive power
over 36,450,000 shares of common stock, without par value, of People's
Bank ("People's Bank Common Stock"), representing approximately 59% of
the shares of People's Bank Common Stock outstanding.
2. Agreement to Vote. In our capacity as a shareholder of People's Bank, we
hereby agree to vote all shares of People's Bank Common Stock owned by
us in favor of the Merger Agreement and the Merger (subject to the
conditions and events of termination specified in the Merger Agreement),
and the transactions contemplated thereby, at any meeting of
shareholders of People's Bank called to consider and take action with
respect thereto; provided, however, that the undertaking in this Section
2 shall terminate if the Board of Directors of People's Bank shall not
have recommended, or shall have modified, withdrawn or changed in a
manner adverse to NFC its recommendation for approval of the Merger
Agreement and the Merger.
3. Trusteeship. We agree to elect, as of the Effective Time, or promptly
thereafter, one director serving on NFC's Board of Directors as of the
Effective Time (which director shall be a person other than the NFC
director selected to serve on People's Bank's Board of Directors) to
serve as a member of our Board of Trustees. Our selection of such
director shall be in our sole discretion after considering any
recommendations received from NFC's Board of Directors.
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4. Other Matters. We hereby represent and warrant to you that we have all
requisite corporate power and authority to enter into this letter
agreement (the "Agreement") and to perform our obligations set forth
herein. The execution, delivery and performance of this Agreement have
been duly and validly authorized by all necessary corporate action on
our part. This Agreement has been duly executed and delivered by us.
We shall promptly submit this Agreement to the Banking Commissioner of
the State of Connecticut for approval pursuant to Section 36a-112(b) of the
Connecticut General Statutes and shall promptly notify your of the
Commissioner's response.
This Agreement shall be governed and construed according to the laws of
the State of Connecticut without regard to any applicable conflicts of law
rules.
Please confirm your agreement with the understanding set forth herein by
signing and returning to us the enclosed copy of this Agreement.
Very truly yours,
PEOPLE'S MUTUAL HOLDINGS
By: /s/ David E.A. Carson
___________________________
Name: David E.A. Carson
Title: President and Chief
Executive Officer
Accepted and agreed to as of the date
first above written:
NORWICH FINANCIAL CORP.
By: /s/ Daniel R. Dennis, Jr.
_____________________________
Name: Daniel R. Dennis, Jr.
Title: President and Chief Executive Officer
THE NORWICH SAVINGS SOCIETY
By: /s/ Daniel R. Dennis, Jr.
_____________________________
Name: Daniel R. Dennis, Jr.
Title: President and Chief Executive Officer
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<S> <C> <C> <C>
Goldman, Sachs & Co. | 85 Broad Street | New York, New York 10004
Tel: 212-902-1000
<Logo>
</TABLE>
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APPENDIX E
January 12, 1998
Board of Directors
People's Bank
Bridgeport Center
850 Main Street
Bridgeport, CT 06604
Ladies and Gentlemen:
You have requested our opinion as to the fairness to People's Bank (the
'Company') of the aggregate consideration (the 'Merger Consideration') to be
paid by the Company to the holders of outstanding shares of Common Stock, par
value $.01 per share (the 'Norwich Common Stock'), of Norwich Financial Corp.
('Norwich'), and to holders of outstanding employee stock options in respect of
Norwich Common Stock, pursuant to the mergers of Norwich and its wholly-owned
subsidiary, Norwich Savings Bank ('Norwich Savings'), into the Company
(together, the 'Mergers') as contemplated by the Agreement and Plan of Merger
dated as of September 3, 1997 among Norwich, Norwich Savings and the Company
(the 'Agreement'). Pursuant to the Agreement and subject to adjustment (based in
part on the average closing price of the Company Common Stock (as defined below)
over a specified valuation period) as set forth therein, the Merger
Consideration will consist of 2,945,594 shares of Common Stock, without par
value (the 'Company Common Stock'), of the Company and $81,671,000 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time, including having acted as a co-manager in an
offering by the Company of subordinated notes in 1996, having acted as sole
manager in several asset securitization transactions undertaken by the Company
in 1994 and 1993 and having acted as the Company's financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Joint Proxy Statement-Offering Memorandum relating to the Special
Meetings of Shareholders of the Company and Norwich to be held in connection
with the Agreement; the Annual Reports to Stockholders and Annual Reports on
Forms F-2 and 10-K, respectively, of the Company and Norwich for the five years
ended December 31, 1996; certain interim reports to stockholders and Quarterly
Reports on Forms F-4 and 10-Q, respectively, of the Company and Norwich; certain
other communications from the Company and Norwich to their respective
stockholders; certain internal
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New York|London|Tokyo|Boston|Chicago|Dallas|Frankfurt|George Town|Hong Kong|
Houston|Los Angeles|Memphis|Miami|Milan|Montreal|Osaka|Paris|Philadelphia|
San Francisco|Singapore|Sydney|Toronto|Vancouver|Zurich
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People's Bank
January 12, 1998
Page Two
financial analyses and forecasts for the Company and Norwich prepared by their
respective managements; and certain internal financial forecasts for the Company
and Norwich on a combined basis, after giving effect to the Mergers, prepared by
the management of the Company. We have also held discussions with members of the
senior managements of the Company and Norwich regarding the strategic rationale
for, and the potential benefits of, the transaction contemplated by the
Agreement and the past and current business operations, financial condition and
future prospects of their respective companies. In addition, we have reviewed
the reported price and trading activity for the shares of Company Common Stock
and Norwich Common Stock, compared certain financial and stock market
information for the Company and Norwich with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the savings industry
specifically and other industries generally and performed such other studies and
analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In that regard, we have assumed, with
your consent, that the financial forecasts, including, without limitation,
projected cost savings and operating synergies resulting from the Mergers and
projections regarding under-performing and non-performing assets and net
charge-offs, have been reasonably prepared on a basis reflecting the best
currently available judgments and estimates of the Company and that such
forecasts will be realized in the amounts and at the times contemplated thereby.
We are not experts in the evaluation of loan and lease portfolios for purposes
of assessing the adequacy of the allowances for losses with respect thereto and
have assumed, with your consent, that such allowances for each of the Company
and Norwich are in the aggregate adequate to cover all such losses. In addition,
we have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of the Company or Norwich
and we have not been furnished with any such evaluation or appraisal.
Our advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of the Company's securities should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Merger
Consideration to be paid pursuant to the Agreement is fair to the Company.
Very truly yours,
/s/ Goldman, Sachs & Co.
(GOLDMAN, SACHS & CO.)
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APPENDIX F
[KEEFE, BRUYETTE & WOODS, INC. LETTERHEAD]
January 12, 1998
Board of Directors
Norwich Financial Corp.
Four Broadway
Norwich, CT 06360
Gentlemen:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the common shareholders of Norwich Financial
Corp. ('Norwich') of the consideration in the proposed merger (the 'Merger') of
Norwich with and into People's Bank ('Peoples'), pursuant to the Agreement and
Plan of Merger ('Agreement') dated as of September 3, 1997 between Norwich and
Peoples. Under the terms of the Merger, shareholders of Norwich will receive
2,945,594 shares of People's common stock (subject to adjustment as described in
the Agreement) and $81,671,000 in cash (subject to adjustment as described in
the Agreement) (together, the 'Consideration'). Subject to the election and
allocation procedures set forth in the Agreement, Norwich shareholders may elect
to receive cash or People's common stock, no par value, in exchange for their
shares of Norwich common stock, $.01 par value. It is our understanding that the
Merger will be structured as a purchase accounting transaction under generally
accepted accounting practices.
Keefe, Bruyette & Woods, Inc. as part of its investment banking business,
is continually engaged in the valuation of banking businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking companies, we have
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of our business as a broker-dealer, we may, from time to time,
purchase securities from, and sell securities to, Norwich and Peoples and as a
market maker in securities we may from time to time have a long or short
position in, and buy or sell, debt or equity securities of Norwich and Peoples
for our own account and for the accounts of our customers. To the extent we have
any such position as of the date of this opinion it has been disclosed to
Norwich. We have acted exclusively for the Board of Directors of Norwich in
rendering this fairness opinion and will receive a fee from Norwich for our
services.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
Norwich and Form F-2 of Peoples for the four years ended December 31, 1996;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of
Norwich and Form F-4 of Peoples, and certain internal financial analyses and
forecasts for Norwich prepared by management. We also have held discussions with
members of the senior management of Norwich and Peoples regarding the past and
current business operations, regulatory relationships, financial condition and
future prospects of their respective companies. In addition, we have compared
certain financial and stock market information for Norwich and Peoples with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the banking industry and performed such other studies and
analyses as we considered appropriate.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of Norwich as to the reasonableness and achievability
of the financial and operating forecasts and projections (and the assumptions
and bases therefor) provided to us, and we have assumed that such forecasts and
projections reflect the best currently available estimates and judgments of
Norwich and that such forecasts and projections will be
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realized in the amounts and in the time periods currently estimated by such
management. We have also assumed, without independent verification, that the
aggregate allowances for loan losses for Norwich and Peoples are adequate to
cover such losses. In rendering our opinion, we have not made or obtained any
evaluations or appraisals of the property of Norwich or Peoples, nor have we
examined any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of
Norwich and Peoples; (ii) the assets and liabilities of Norwich and Peoples; and
(iii) the nature and terms of certain other merger transactions involving banks
and bank holding companies. We have also taken into account our assessment of
general economic, market and financial conditions and our experience in other
transactions, as well as our experience in securities valuation and our
knowledge of the banking industry generally. Our opinion is necessarily based
upon conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration in the Merger is fair, from a financial point of
view, to the common shareholders of Norwich.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
KEEFE, BRUYETTE & WOODS, INC.
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APPENDIX G
DGCL SECTION 262
'SS'262 APPRAISAL RIGHTS.- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to 'SS'228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to 'SS'251 (other than a merger effected pursuant to 'SS'251
(g) of this title), 'SS'252, 'SS'254, 'SS'257, 'SS'258, 'SS'263 or 'SS'264 of
this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
'SS'251 of this title.
(2) Notwithstanding paragraph (l) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to 'SS'251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts in respect
thereof;
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b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under 'SS'253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(l) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall include
in such notice a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to take
such action must do so by a separate written demand as herein provided. Within
l0 days after the effective date of such merger or consolidation, the surviving
or resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in favor of
or
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consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
'SS'228 or 'SS'253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section; provided
that, if the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice may, and,
if given on or after the effective date of the merger or consolidation, shall,
also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within
20 days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or (ii)
the surviving or resulting corporation shall send such a second notice to all
such holders on or within l0 days after such effective date; provided, however,
that if such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is required
to give either notice that such notice has been given shall, in the absence
of fraud, be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the notice is
given on or after the effective date of the merger or consolidation, the record
date shall be such effective date. If no record date is fixed and the notice
is given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
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subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also by given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such
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<PAGE>
is required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided.
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(1) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
120, L. '97, eff. 7-1-97.)
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APPENDIX H
CTBCA 'SS''SS' 33-855-872
DISSENTERS' RIGHTS
(A)
RIGHT TO DISSENT AND OBTAIN
PAYMENT FOR SHARES
SEC. 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.
SEC. 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;
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(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;
(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.
SEC. 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: (l) 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.
SECS. 33-858 AND 33-859. Reserved for future use.
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(B)
PROCEDURES FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 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.
SEC. 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 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.
SEC. 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
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(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
SEC. 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 canceled 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.
SEC. 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.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 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 33-860; and
(5) a copy of section 33-855 to 33-872, inclusive.
SEC. 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.
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(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.
SEC. 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.
SEC. 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;
(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.
SECS. 33-869 AND 33-870. Reserved for future use.
(C)
JUDICIAL APPRAISAL OF SHARES
SEC. 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
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<PAGE>
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 afteracquired shares for which
the corporation elected to withhold payment under section 33-867.
SEC. 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 find equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment under section 33-868.
(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
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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.
--------------------
As revised through end of 1997 regular and special legislative sessions
--------------------
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<PAGE>
APPENDIX I
<TABLE>
<CAPTION>
PER SHARE STOCK
VALUATION PERIOD CONSIDERATION (SHARES OF PER SHARE CASH
MARKET VALUE PEOPLE'S COMMON STOCK) CONSIDERATION
----------------- ----------------------- ---------------
<S> <C> <C>
$ 20.910(a) 1.2339 $ 25.80
21.000 1.2310 25.85
22.000 1.1986 26.37
23.000 1.1696 26.90
24.000 1.1429 27.43
25.000 1.1184 27.96
26.000 1.0954 28.48
26.480(b) 1.0853 28.74
27.000 1.0644 28.74
27.875(c) 1.0310 28.74
28.000 1.0264 28.74
29.000 0.9910 28.74
29.270(d) 0.9819 28.74
30.000 0.9697 29.09
31.000 0.9535 29.56
32.000 0.9388 30.04
32.060(e) 0.9379 30.07
33.000 0.9248 30.52
34.000 0.9115 30.99
35.000 0.8991 31.47
36.000 0.8875 31.95
37.000 0.8765 32.43
38.000 0.8658 32.90
39.000 0.8559 33.38
40.000 0.8465 33.86
</TABLE>
On January 7, 1998 the closing price of People's Common Stock was $36.375
and the closing price of NFC Common Stock was $31.75. If the Valuation Date had
been January 7, 1998, the Valuation Period Market Value would have been $36.819.
Any increase in the number of outstanding shares of NFC Common Stock
between September 3, 1997 and the Valuation Date resulting from the exercise of
Options will be taken into account in calculating the Per Share Merger
Consideration, but will not result in any change to the values shown in the
above table.
- ------------
(a) Price below which NFC may elect to terminate the Merger, unless People's
elects to increase the per share merger consideration to be at least equal
to such price.
(b) Floor of price collar.
(c) Midpoint of price collar.
(d) Ceiling of price collar.
(e) Price at which pro forma data was calculated.
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as...................................'SS'
The registerd trademark symbol shall be expressed as.......................'r'
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<PAGE>
ANNEX A
PEOPLE'S BANK
Proxy Solicited on Behalf of the Board of Directors
for the Special Meeting of Shareholders, February 19, 1998
The undersigned hereby appoints George R. Dunbar, Jack E. McGregor, Wilmot
F. Wheeler, Jr., or any two of them, and their respective substitutes or
delegates, as proxies to represent and to vote, as specified on the reverse side
hereof, all of the shares of capital stock of the Bank which the undersigned may
be entitled to vote at the Special Meeting of Shareholders to be held on
February 19, 1998 and at any postponement or adjournment thereof; and in the
discretion of the proxies, their substitutes or delegates, to vote such shares
and to represent the undersigned in respect of other matters properly brought
before the meeting.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED BY THE
SIGNING SHAREHOLDER ON THE REVERSE SIDE HEREOF. UNLESS AN "AGAINST" OR "ABSTAIN"
VOTE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSAL NO. 1.
Continued on reverse side
FOLD AND DETACH HERE
<PAGE>
<PAGE>
Please mark
your vote as [X]
indicated in
the example
The Board of Directors recommends a vote FOR proposal No. 1.
PROPOSAL NO. 1-Approval of an Agreement and Plan of Merger, dated as of
September 3, 1997, among People's Bank, Norwich Financial Corp. and The Norwich
Savings Society, pursuant to which Norwich Financial Corp. and The Norwich
Savings Society would merge with and into People's Bank, with People's as the
surviving entity, and each outstanding share of common stock of Norwich
Financial Corp. would be converted, subject to certain election and allocation
procedures, into the right to receive either a number of shares of People's Bank
common stock or an amount in cash, without interest. Details concerning the
proposed merger are described in the accompanying Joint Proxy Statement-Offering
Memorandum.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please sign exactly as name appears
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title. Joint
owners should each sign.
Date:___________________________ , 1998
_______________________________________
_______________________________________
(Signature(s) of Shareholder(s))
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ACCOMPANYING ENVELOPE
FOLD AND DETACH HERE
<PAGE>
<PAGE>
PROXY PROXY
NORWICH FINANCIAL CORP.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING
TO BE HELD ON FEBRUARY 19, 1998 AT 10:00 A.M. AT THE RAMADA HOTEL,
10 LAURA BOULEVARD, NORWICH, CONNECTICUT.
The undersigned hereby appoints Daniel R. Dennis, Jr. and Daphne P.
Cannata, and each or any of them, an attorney, with full power to vote any and
all shares of Common Stock, par value $.01 per share, of Norwich Financial Corp.
held by the undersigned at the Special Meeting of its shareholders on February
19, 1998, and at any adjournment thereof, upon all matters that may properly
come before the meeting, including the matters described in the Joint Proxy
Statement-Offering Memorandum furnished herewith. At their discretion, the
attorneys are authorized to vote upon such other business as may properly come
before the meeting.
(Continued and to be signed on other side)
FOLD AND DETACH HERE
<PAGE>
<PAGE>
This proxy, when properly executed, will be voted in the Please Mark
manner directed herein by the undersigned shareholder. your vote as [X]
If no direction is made, this proxy will be voted FOR the indicated in
approval of the Agreement and Plan of Merger. the example
The Board of Directors recommends a vote FOR
the approval of the Agreement and Plan of Merger.
Approval of the Agreement and Plan of Merger, dated as of September 3, 1997, by
and among People's Bank, Norwich Financial Corp. and The Norwich Savings
Society, as more fully described in the accompanying Joint Proxy Statement -
Offering Memorandum.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I plan to attend the Special Meeting: [ ]
________________________________________
Please sign on the above line exactly as
your name appears on this proxy.
________________________________________
For joint accounts, each owner should
sign. Executors, administrators,
trustees, etc., should so indicate when
signing.
Please sign this proxy and return it Dated:___________________________, 1998
promptly whether or not you expect to
attend the Special Meeting. You may
nevertheless vote in person if you do
attend.
FOLD AND DETACH HERE
<PAGE>
<PAGE>
PUTNAM FIDUCIARY TRUST COMPANY
As Trustee Under the People's Bank
401(k) Employee Savings Plan
Voting Instructions
The undersigned hereby instructs Putnam Fiduciary Trust Company, as Trustee
under the People's Bank 401(k) Employee Savings Plan, to vote or cause to be
voted, as specified on the reverse side hereof, all of the shares of Common
Stock of the Bank credited to the account of the undersigned under the 401(k)
Employee Savings Plan at the Special Meeting of Shareholders to be held on
February 19, 1998 and at any postponement or adjournment thereof. Except for the
matters specified on the reverse side hereof, the Trustee will not vote upon any
other business brought before the meeting. Please complete this card and mail it
in the enclosed envelope. It must be received no later than February 13, 1998.
continued on reverse side
FOLD AND DETACH HERE
<PAGE>
<PAGE>
Please mark
your vote as [X]
indicated in
the example
PROPOSAL NO. 1-Approval of an Agreement and Plan of Merger, dated as of
September 3, 1997, among People's Bank, Norwich Financial Corp. and The Norwich
Savings Society, pursuant to which Norwich Financial Corp. and The Norwich
Savings Society would merge with and into People's Bank, with People's as the
surviving entity, and each outstanding share of common stock of Norwich
Financial Corp. would be converted, subject to certain election and allocation
procedures, into the right to receive either a number of shares of People's Bank
common stock or an amount in cash, without interest. Details concerning the
proposed merger are described in the accompanying Joint Proxy Statement-Offering
Memorandum.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The instructions relate only to shares
owned under the People's Bank 401 (k)
Employee Savings Plan. People's Bank
shares owned otherwise than under the
Employee Savings Plan may be voted in
person at the Special Meeting, or by
signing, dating and returning the
separate proxy card supplied by People's
Bank. Please sign exactly as your name
appears hereon and return this card to
Putnam Fiduciary Trust Company, or its
designee, in the envelope provided. The
shares represented hereby will be voted
as instructed. Please mail this card as
soon as possible. It must be received by
February 13, 1998. By signing this card,
you acknowledge receipt of the Joint
Proxy Statement-Offering Memorandum with
respect to the Special Meeting.
Date:____________________________, 1998
_______________________________________
_______________________________________
PLEASE SIGN AND DATE THIS PROXY AND Signature of Participant
RETURN IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE
FOLD AND DETACH HERE
<PAGE>
<PAGE>
Annex B
QUESTIONS AND ANSWERS REGARDING
THE MERGER BETWEEN
PEOPLE'S BANK AND NORWICH FINANCIAL CORP.
This question and answer material is not and is not intended to
be a summary of the terms of merger described below or of the relevant
information or shareholder considerations with respect to the merger. A Joint
Proxy Statement-Offering Memorandum with respect to the merger has been prepared
and distributed and accompanies or precedes this material. This material is not
intended to be distributed except when accompanied or preceded by the Joint
Proxy Statement-Offering Memorandum. Each shareholder is urged to read the Joint
Proxy Statement-Offering Memorandum in full.
Q. What is the purpose of the Norwich Special Meeting?
A. At the Norwich Special Meeting, the Norwich shareholders will be asked
to consider and vote on the merger of Norwich and The Norwich Savings
Society into People's Bank.
Q. When will the merger occur?
A. The merger is expected to close in the first quarter of 1998, after all
conditions to the merger are satisfied, including the receipt of
regulatory approvals from banking authorities and approvals of the
Norwich and People's shareholders.
Q. How much is People's paying in the merger?
A. People's has agreed to pay $81,671,000 in cash and 2,945,594 shares of
People's common stock (subject to possible adjustment within a collar)
for all of the outstanding shares and unexercised options to acquire
shares of Norwich. Based on a closing price of $27.875 per share of
People's common stock on the date People's submitted its final offer to
Norwich, the per-share value of the transaction was initially equal to
$28.74.
Q. What happens if the price of People's stock increases above, or
decreases below, $27.875?
A. The stock component is subject to a "collar", under which, on the
valuation date described below, the stock portion of the merger
consideration will be adjusted to compensate for People's stock price
(averaged over the period described below) being above or below $27.875,
within a 5% limit. This means that the number of shares of People's to
be issued in the merger will increase (to offset a decrease in the price
of People's common stock) and will decrease (to offset an increase in
the price of People's common stock), but only to compensate for a 5%
difference in the stock price in either direction from the collar
midpoint of $27.875. If People's stock price is higher than
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$29.27, or less than $26.48, there is no further adjustment to the
number of People's shares comprising the stock component (below a
minimum of 2,805,208 shares or above a maximum of 3,100,772 shares) and
the aggregate value of the stock component will therefore rise or fall
to the extent People's stock price is outside the 5% collar. However, as
approximately half of the overall merger consideration is a fixed amount
of cash ($81,671,000), the effect of any increase or decrease in the
price of People's stock is proportionately reduced.
Q. When will any adjustment under the "collar" be made to the amount of
People's common stock that will be paid in the merger?
A. Any adjustment to the stock consideration required by the collar will be
made on the valuation date. This is the date all regulatory approvals
for the merger have been received. The adjustment will be based on the
10-day average closing sales price of People's common stock ending on
the valuation date.
Q. Has the valuation date occurred?
A. No, not yet. Applications have been made to the appropriate regulatory
authorities, and Norwich and People's are waiting to receive the
necessary approvals.
Q. How much will I receive in exchange for each share of Norwich that I
hold?
A. We cannot determine the amount you will receive right now, because the
price of a share of People's stock may change between now and the
valuation date. As indicated above, any adjustments that might be
required by the price collar will be made with reference to the average
closing price of People's common stock for the ten days ending with the
valuation date. This ten day average is called the valuation period
market value. Therefore, the number of shares of People's stock to be
issued and the actual per-share value a Norwich shareholder will receive
cannot be determined until that valuation period market value can be
calculated at a future date. The valuation period market value will
affect the per share consideration whether an individual receives cash,
stock or a mix.
APPENDIX I TO THE JOINT PROXY STATEMENT-OFFERING MEMORANDUM SETS FORTH
THE AMOUNT OF CASH AND THE NUMBER OF SHARES OF PEOPLE'S COMMON STOCK
THAT WOULD BE PAID (SUBJECT TO THE SHAREHOLDER ELECTION PROCEDURES) FOR
EACH SHARE OF NORWICH COMMON STOCK HELD AT VARIOUS ASSUMED VALUATION
PERIOD MARKET VALUES.
Q. Is there any minimum value that a Norwich shareholder will receive?
A. No. However, Norwich has the right to terminate the Merger Agreement if
the valuation period market value is less than $20.91. If this should
occur, and Norwich elects to terminate the Agreement, People's has a
period of seven days in which to
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agree to increase the merger consideration up to a specified minimum
level. In that event, the merger would go forward.
Q. Will I receive cash or shares of People's common stock?
A. You may make an election to receive all stock or all cash or you may
choose "no election". However, because of the limits on the amounts of
cash and stock constituting the total consideration that People's will
pay in the merger, there can be no assurance that a Norwich shareholder
choosing all stock or all cash will receive payment in the form he or
she would prefer. It is likely that many Norwich shareholders will
receive some mix of cash and stock for their Norwich shares, even those
Norwich shareholders who elect all stock or all cash. Decisions on the
final allocation of the merger consideration will be made by an
independent exchange agent based upon equitable proration principles.
Q. Will Norwich shareholders receiving "all cash", "all stock" or a "mix"
of cash and stock receive the same total value?
A. Yes, as calculated on the valuation date. The cash consideration per
share in the "all cash" election and the stock consideration per share
in the "all stock" election will be determined such that they will
result in the same per share value based on the valuation period market
value of a share of People's stock. Any mix of cash and stock will also
reflect this same per share value. However, the actual market price of
People's common stock on the date such shares are received by Norwich
shareholders may be more or less than the valuation period market value.
Q. How can I learn more about the merger?
A. You should review carefully the Joint Proxy Statement-Offering
Memorandum that accompanies this pamphlet. It includes a thorough
description of the terms of the merger, including a copy of the Merger
Agreement. Other important information that you should consider in
determining whether or not to vote in favor of the merger is also
contained in the Joint Proxy Statement-Offering Memorandum.
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ANNEX C
One Post Office Square
Boston, Massachusetts 02109
617 292-1000
[LOGO PUTNAM INVESTMENTS]
TO: Participants in the People's Bank Stock Fund of the
401(k) Employee Savings Plan
DATE: January 14, 1998
SUBJECT: Special Meeting of Shareholders
We have enclosed a Joint Proxy Statement - Offering Memorandum (the "Proxy
Statement") relating to the Special Meeting of the Shareholders of People's
Bank, which will be held at 10:00 a.m. on Thursday, February 19, 1998, at
Bridgeport Center. The purpose of the Special Meeting is to consider and vote
upon a proposal to approve an Agreement and Plan of Merger, dated as of
September 3, 1997, among People's Bank, Norwich Financial Corp. and The Norwich
Savings Society, pursuant to which Norwich Financial Corp. and The Norwich
Savings Society would merge with and into People's Bank, with People's as the
surviving entity, and each outstanding share of common stock of Norwich
Financial Corp. would be converted, subject to certain election and allocation
procedures, into the right to receive either a number of shares of People's Bank
common stock or an amount in cash, without interest. Details concerning the
proposed merger are described in the accompanying Joint Proxy Statement -
Offering Memorandum.
As a participant in the People's Bank Stock Fund of the 401(k) Employee Savings
Plan (the "Savings Plan"), you have the right to vote shares of the Bank's
Common Stock credited to your account in the Savings Plan.
Enclosed with the Proxy Statement is a special Savings Plan proxy card. The card
indicates the number of shares you own through the Bank Stock Fund and which you
are entitled to vote. Please complete the special proxy card as soon as possible
and return it in the business reply envelope provided. Based on the terms of the
Savings Plan and the related trust agreement, Putnam Fiduciary Trust Company
serves as the trustee of the Savings Plan and, as such, is required to vote the
number of shares indicated on your card strictly in accordance with your
instruction.
You may not use the regular proxy card or any other form of proxy card for
purposes of voting shares credited to your account under the Savings Plan. If
you do not return the special proxy card, your shares will not be voted. Putnam
must receive your completed proxy card no later than February 13, 1998. Also,
because Putnam is the trustee for shares held through the Savings Plan, you may
not vote any Savings Plan shares in person at the Special Meeting.
As provided in the Savings Plan and trust agreement, your votes will be held in
confidence and may not be disclosed to the Bank or any of its officers or
employees.
If you have any questions concerning your shares or the voting procedures
outlined above, please call the Human Resources Department at extension 2572.
[LOGO]
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