_____________, 1997
Board of Directors
Webster Financial Corporation
Webster Plaza
145 Bank Street
Waterbury, Connecticut 06702
Board of Directors
People's Savings Financial Corp.
123 Broad Street
New Britain, Connecticut 06053
Dear Board Members:
On April 4, 1997, Webster Financial Corporation, a Delaware
corporation ("Webster"), Webster Subsidiary Corporation, a Delaware corporation
and wholly-owned subsidiary of Webster ("Merger Sub"), and People's Savings
Financial Corp., a Connecticut corporation ("People's Corp.") entered into an
agreement and plan of merger (the "Merger Agreement") pursuant to which Merger
Sub will be merged into People's Corp. (the "Merger"), with People's Corp.
surviving. In connection with the Merger, you have requested that we render to
you our opinion with respect to certain Federal income tax consequences of the
Merger.
Documents Reviewed
------------------
In connection with the preparation of this opinion, we have
examined and relied upon the following documents (including all exhibits and
schedules thereto) (the "Reviewed Documents"): (1) the Merger Agreement; (2)
representations and certifications made to us by Webster (attached hereto as
Exhibit A); (3) representations and certifications made to us by People's Corp.
(attached hereto as Exhibit B); (4) the covenants and agreements made by certain
holders of People's Common Stock in paragraph 2(h) of that certain People's
Corp. Stockholder Agreement attached to the Registration Statement (as defined
below) as Exhibit 2.3 thereto (attached hereto as Exhibit C); (5) the
Registration Statement on Form S-4 of Webster (No. 333-27571 filed with the
Securities and Exchange Commission (the "SEC") on May 21, 1997, as amended by
Pre-Effective Amendment No. 1 thereto filed with the SEC on June __, 1997 (the
"Registration Statement"); and (6) such
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Webster Financial Corporation
People's Savings Financial Corp.
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other instruments and documents related to the formation, organization and
operation of Webster, Merger Sub and People's Corp. or to the consummation of
the Merger as we have deemed necessary or appropriate.1/
The Merger
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Based solely upon our review of the documents set forth above,
and upon such information as Webster, Merger Sub and People's Corp. have
provided to us (which we have not attempted to verify in any respect), and in
reliance upon such documents and information, we understand that the proposed
transaction and the relevant facts with respect thereto are as follows:
Webster is a Delaware corporation and the holding company of
Webster Bank, its wholly-owned federal savings bank subsidiary ("Webster Bank"),
both of which are headquartered in Waterbury, Connecticut. Deposits at Webster
Bank are Federal Deposit Insurance Corporation ("FDIC") insured. Through Webster
Bank, Webster currently serves customers from 78 banking offices located in New
Haven, Fairfield, Litchfield, Hartford and Middlesex Counties in Connecticut.
Webster's focus is on providing financial services to individuals, families and
businesses. Webster emphasizes three business lines - consumer banking, business
banking and mortgage banking; each supported by centralized administration,
marketing, finance and operations. Webster, as a holding company, is regulated
by the Office of Thrift Supervision (the "OTS"). Webster Bank, as a federal
savings bank, also is regulated by the OTS and as to certain matters by the
FDIC.
Merger Sub, a Delaware corporation, is a wholly-owned
subsidiary of Webster formed solely to facilitate the Merger. The separate
corporate existence of Merger Sub will terminate upon the Merger.
People's Corp. is a Connecticut corporation and the holding
company of People's Savings Bank & Trust ("PSB&T"), its wholly-owned
Connecticut-chartered savings bank subsidiary, both of which are headquartered
in New Britain, Connecticut. Deposits at PSB&T are FDIC insured. Through PSB&T,
People's
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1/ All capitalized terms used herein and not otherwise defined shall have the
same meaning as they have in the Registration Statement. All section references,
unless otherwise indicated, are to the Internal Revenue Code of 1986, as amended
(the "Code").
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Webster Financial Corporation
People's Savings Financial Corp.
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Corp. is engaged primarily in the business of attracting deposits from the
public and using such deposits, with other funds, to make various types of loans
and investments. Through PSB&T, People's Corp. currently serves customers from
nine banking offices and three trust offices located primarily in Hartford and
New Haven Counties, Connecticut. Its principal market area encompasses the City
of New Britain and the Towns of Berlin, Newington, Southington, Rocky Hill,
Plainville and Meriden. People's Corp., as a holding company, is regulated
primarily by the Board of Governors of the Federal Reserve System at the federal
level and by the Connecticut Commissioner of Banking (the "Connecticut
Commissioner"). PSB&T, as a state-chartered savings bank, is regulated by the
Connecticut Commissioner and by the FDIC.
The purpose of the Merger is to enable Webster to acquire the
assets and business of People's Corp. and PSB&T. After the Merger, certain of
PSB&T's nine banking offices will be operated as banking offices of Webster Bank
and certain of such offices will be consolidated with Webster Bank offices. The
Merger will result in an expansion of Webster's primary market area to include
PSB&T's banking offices and trust offices in Hartford and New Haven Counties in
Connecticut. The assets and business of PSB&T's banking offices will broaden
Webster's existing operations in Hartford and New Haven Counties where Webster
currently has 67 banking offices. The addition of PSB&T's trust offices will
strengthen Webster's franchise by increasing market share and by the addition of
trust and investment management services, which will expand Webster's ability to
address the financial needs of its consumer and business banking customers.
Webster expects to achieve reductions in the current operating expenses of PSB&T
upon the consolidation of PSB&T's operations into Webster Bank, which would
cause the closing of certain of PSB&T's or Webster's existing banking offices as
well as certain reductions in administrative and support personnel.
The Merger Agreement provides for the acquisition of People's
Corp. by Webster through the merger of Merger Sub with and into People's Corp.,
with People's Corp. being the surviving corporation and a wholly-owned
subsidiary of Webster. Upon consummation of the Merger, except as discussed
below, each issued and outstanding share of People's Corp. common stock, par
value $1.00 per share ("People's Common Stock"), other than dissenting and
certain other shares, will be converted into ____ shares of Webster common
stock, par value $0.01 per share ("Webster Common Stock") (the "Exchange
Ratio").
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Webster Financial Corporation
People's Savings Financial Corp.
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Shares of People's Common Stock held as treasury stock or
held, directly or indirectly, by Webster, People's Corp. or any of their
subsidiaries (other than shares held in a fiduciary capacity or in respect of a
debt previously contracted) will be canceled. Dissenting shares of People's
Common Stock will not be automatically converted.
Certificates for fractions of shares of Webster Common Stock
will not be issued. Under the Merger Agreement, in lieu of a fractional share of
Webster Common Stock, each holder of People's Common Stock will be entitled to
receive an amount of cash equal to the fraction of a share of Webster Common
Stock to which such holder would otherwise be entitled multiplied by the average
(without respect to the number of shares traded) of the daily closing prices of
Webster Common Stock, as reported on The Nasdaq National Market, for the 15
consecutive trading days ending on the third day preceding the closing date of
the Merger. Following consummation of the Merger, no holder of People's Common
Stock will be entitled to any dividends or any other rights in respect of any
such fraction.
As of June 12, 1997, there were outstanding options to
purchase 182,500 shares of People's Common Stock pursuant to the stock option
plans of People's Corp. held by directors, officers and employees of People's
Corp. (each, a "People's Option"), at an average exercise price of $18.70 per
share. Under the Merger Agreement, shares of People's Common Stock issued prior
to consummation of the Merger upon the exercise of outstanding People's Options
will be converted into Webster's Common Stock at the Exchange Ratio, and each
People's Option that is not exercised immediately prior to the date and time at
which the Merger becomes effective (the "Effective Time") will be converted
automatically into an option to purchase shares of Webster Common Stock, with
adjustment in the number of shares and exercise price to reflect the Exchange
Ratio.
Under Connecticut law, holders of People's Common Stock are
entitled to dissenters' rights of appraisal in connection with the Merger.
Shares of People's Common Stock that are issued and outstanding immediately
prior to the Effective Time that are owned by shareholders who properly dissent
from the Merger pursuant to the applicable provisions of the Connecticut General
Statutes ("Dissenting Shareholders") shall not be converted into the right to
receive shares of Webster Common Stock, unless and until such shareholders shall
have failed to perfect or shall have effectively withdrawn or lost their right
of payment under applicable law. If any such shareholder shall have failed to
perfect or shall have effectively withdrawn or lost such right of payment, the
shares of People's Common
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Webster Financial Corporation
People's Savings Financial Corp.
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Stock held by such shareholder shall thereupon be deemed to have been converted
into the right to receive and become exchangeable for, at the Effective Time,
shares of Webster Common Stock pursuant to the Merger Agreement. All payments
made to Dissenting Shareholders in connection with the exercise by such
shareholders of their dissenters' rights will be made by People's Corp. using
the assets of People's Corp.
Webster intends that after the consummation of the Merger, (i)
People's Corp., as the surviving corporation in the Merger and at that time a
wholly-owned subsidiary of Webster, will be merged into Webster, with Webster
being the surviving holding company, in a transaction that qualifies as a
statutory merger under the laws of the States of Delaware and Connecticut (the
"Upstream Merger"), and (ii) PSB&T (which will then be a wholly-owned subsidiary
of Webster) will be merged into Webster Bank (the "Bank Merger"). However, the
Upstream Merger will not be consummated until after all payments to be made to
Dissenting Shareholders pursuant to the exercise by such shareholders of their
dissenter's rights, if any, in fact, have been made. Webster Bank will be the
federal savings bank resulting from the Bank Merger.
Assumptions and Representations
-------------------------------
In connection with rendering this opinion, we have assumed or
obtained representations (and are relying thereon, without any independent
investigation or review thereof) that:
1. All information contained in the Reviewed Documents is
accurate.
2. The information presented in the Reviewed Documents or
otherwise furnished to us accurately and completely describes all material facts
relevant to our opinion.
3. There has been (or will be by the Effective Time) due
execution and delivery of the Reviewed Documents where due execution and
delivery are prerequisites to effectiveness thereof.
4. All of the Reviewed Documents are authentic, all copies of
original documents conform to the originals, and all such original documents are
authentic.
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Webster Financial Corporation
People's Savings Financial Corp.
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5. All of the obligations imposed by the Reviewed Documents
have been and will continue to be performed or satisfied in accordance with
their terms.
6. The Merger will be effective under the applicable state
law.
7. All representations made in the exhibits hereto are true,
correct, and complete in all material respects. Any representation or statement
made "to the best of knowledge" or similarly qualified is correct without such
qualification.
Opinion - Federal Income Tax Consequences
-----------------------------------------
Based upon and subject to the assumptions and qualifications
set forth herein, it is our opinion that for Federal income tax purposes the
following will result:
(a) The Merger will qualify as a tax-free reorganization under
the provisions of section 368(a) of the Code.
(b) No gain or loss will be recognized to the People's Corp.
shareholders on the exchange of their People's Common Stock solely for Webster
Common Stock (section 354(a)(1)).
(c) The tax basis of the Webster Common Stock to be received
by the shareholders of People's Corp. will be the same as the basis of the
People's Common Stock to be surrendered in exchange therefor (section
358(a)(1)).
(d) The holding period of the Webster Common Stock received by
the shareholders of People's Corp. will include the period during which People's
Common Stock surrendered was held, provided the People's Common Stock
surrendered was held as a capital asset by the shareholders of People's Corp. at
the Effective Time (section 1223(1)).
(e) The payment of cash to a People's Corp. shareholder in
lieu of fractional share interests of Webster Common Stock will be treated for
Federal income tax purposes as if the fractional shares were distributed as part
of the exchange and then redeemed by Webster. These cash payments will be
treated as distributions in full payment in exchange for the stock redeemed, as
provided in Section 302(a) of the Code.
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Webster Financial Corporation
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(f) Neither Webster, Merger Sub, nor People's Corp. will
recognize any gain or loss as a result of the Merger.
(g) None of opinions (a) through (f) herein will be affected
by the Upstream Merger.
Our opinion set forth herein is based upon the description of
Merger as set forth above in the section captioned "The Merger," in the Merger
Agreement, and in the Registration Statement. For purposes of rendering our
opinion, we have not made an independent investigation of the facts set forth in
any of the Reviewed Documents. If the actual facts relating to any aspect of the
Merger differ from this description in any material respect, our opinion may
become inapplicable.
Further, our opinion is based upon the Code, Treasury
Regulations thereunder (including proposed and temporary Treasury Regulations),
and interpretations of the foregoing as expressed in court decisions,
administrative determinations, and legislative history as of the date hereof.
These provisions and interpretations are subject to changes, which may or may
not be retroactive in effect, that might result in material modifications of our
opinion.
Our opinion is not intended to address the tax consequences to
a holder of a People's Option who receives an option to purchase shares of
Webster Common Stock in exchange therefor pursuant to the Merger. We hereby
consent to the use of this opinion letter as an exhibit to the Registration
Statement and to the use of our name in the Registration Statement. In addition,
we hereby consent to making this opinion letter available to the shareholders of
People's Corp.
Sincerely yours,
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