As filed with the Securities and Exchange Commission on February 8, 1999
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 6712 06-1187536
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
John V. Brennan
Executive Vice President,
Chief Financial Officer and Treasurer
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
(203) 578-2335
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
Stuart G. Stein, Esq. David W. Ferguson, Esq.
Margaret Rhinelander Rizzi, Esq. Davis Polk & Wardwell
Hogan & Hartson L.L.P. 450 Lexington Avenue
555 Thirteenth Street, N.W. New York, NY 10017
Washington, D.C. 20004 (212) 450-4370
(202) 637-8575
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- ------------------------- --------------------- ------------------------- -------------------------- ----------------------
Title of each class of
securities to be Amount to be Proposed maximum offering Proposed maximum aggregate Amount of
registered registered price per unit offering price registration fee
- ------------------------- --------------------- ------------------------- -------------------------- ----------------------
Common Stock, par value 1,738,082 $23.84 * $41,435,874.88* $11,519.17*
$.01 per share
- ------------------------- --------------------- ------------------------- -------------------------- ----------------------
* Estimated pursuant to Rule 457(f)(1) and Rule 457(c) under the Securities
Act of 1933, as amended, based upon the average of the high and low prices
for shares of common stock of Village Bancorp, Inc. as reported on the
Nasdaq Stock Market's SmallCap Market and calculated as of February 2, 1999
and the exchange ratio prescribed by the Agreement and Plan of Merger.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
WEBSTER FINANCIAL CORPORATION VILLAGE BANCORP, INC.
WEBSTER PLAZA 25 PROSPECT STREET
WATERBURY, CT 06702 RIDGEFIELD, CT 06877
------------- -------------
PROSPECTUS PROXY STATEMENT
1,738,082 SHARES OF COMMON STOCK
----------------------
DEAR VILLAGE BANCORP SHAREHOLDER:
Village Bancorp, Inc. and Webster Financial Corporation have entered into
an agreement and plan of merger, dated as of November 11, 1998, which provides
for Village Bancorp to merge into Webster Financial. If the merger takes place,
Village Bancorp's common stock will be converted at the choice of the
shareholder into either cash, Webster Financial's common stock, or a combination
of cash and Webster Financial's common stock. Dissenting shares will be treated
differently. The merger agreement limits the amount of cash that can be paid. If
you want to receive cash, you must submit the election form sent to you with
this proxy statement/prospectus.
The Village Bancorp board of directors has scheduled a special meeting of
shareholders to vote on the merger agreement that will be held on ____________,
___, 1999 at ___:___ __.m., local time, at The Village Bank & Trust Company, 25
Prospect Street, Ridgefield, Connecticut, 06877. The merger will not take place
unless Village Bancorp shareholders who own at least two-thirds of Village
Bancorp's outstanding stock approve the merger agreement and the other
conditions of the merger agreement are satisfied. If these conditions are met,
we expect the merger to take place during the second quarter of 1999.
Webster Financial's common stock is traded on the Nasdaq Stock Market's
National Market Tier under the symbol WBST. On November 10, 1998, which was the
last trading day before the public announcement of the merger, the closing price
for a share of Webster Financial's common stock was $26.50.
WEBSTER FINANCIAL'S COMMON STOCK HAS NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION, OR THE
FEDERAL DEPOSIT INSURANCE CORPORATION, NOR HAS ANY OF THESE INSTITUTIONS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES OF WEBSTER
FINANCIAL'S COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
----------------------
This proxy statement/prospectus is being mailed to Village Bancorp shareholders
on or about __________ __, 1999.
The date of this proxy statement/prospectus is __________ __, 1999.
VILLAGE BANCORP, INC.
25 PROSPECT STREET
RIDGEFIELD, CONNECTICUT 06877
-------------------
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
____________ ___, 1999
---------------------
A special meeting of shareholders of Village Bancorp, Inc. will be held on
____________ ___, 1999, at ____ __.m. at The Village Bank & Trust Company, 25
Prospect Street, Ridgefield, Connecticut, 06877 for the following purposes:
1. To consider and vote on a proposal to approve and adopt the
agreement and plan of merger, dated as of November 11, 1998,
between Webster Financial Corporation and Village Bancorp, the
merger of Village Bancorp into Webster Financial and the other
transactions contemplated by the merger agreement, as described
in the attached proxy statement/prospectus.
2. To transact any other business that properly comes before the
shareholder meeting, or any adjournments or postponements of the
meeting, including, without limitation, a motion to adjourn the
shareholder meeting to another time and/or place for the purpose
of soliciting additional proxies in order to approve the merger
agreement and the merger or otherwise.
You are entitled to notice and to vote at the shareholder meeting or any
adjournments or postponements of the meeting only if you were a holder of record
of Village Bancorp's common stock at the close of business on ________ ____,
1999. If you held Village Bancorp's common stock on that day, you are entitled
to dissent from the merger under Sections 33-855 to 33-872 of the Connecticut
General Statutes. A copy of these sections is attached to the proxy
statement/prospectus.
VILLAGE BANCORP'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR
TO AND IN THE BEST INTERESTS OF VILLAGE BANCORP'S SHAREHOLDERS, HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT. The affirmative vote of
two-thirds of the shares of Village Bancorp's common stock outstanding on
_______ __, 1999 is required to approve the merger agreement.
The required vote of Village Bancorp's shareholders is based on the total
number of outstanding shares of Village Bancorp's common stock and not on the
number of shares which are actually voted. IF YOU DO NOT SUBMIT A PROXY CARD OR
VOTE IN PERSON AT THE SHAREHOLDER MEETING, OR IF YOU ABSTAIN FROM VOTING, YOU
EFFECTIVELY ARE VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SHAREHOLDER
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SHAREHOLDER MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS SOON AS
POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE. A shareholder who executes a
proxy may revoke it at any time before it is exercised by giving written notice
to the Secretary of Village Bancorp's board of directors, by subsequently filing
another proxy or by attending the shareholder meeting and voting in person.
By order of the Board of Directors
ROBERT V. MACKLIN
President and Chief Executive Officer
Ridgefield, Connecticut
____________ ___, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD.
2
TABLE OF CONTENTS
PAGE PAGE
---- ----
QUESTIONS AND ANSWERS ABOUT THE MERGER... Certificate of Incorporation and
Bylaw Provisions................
SUMMARY ................................ Applicable Law......................
RECENT DEVELOPMENT ......................
SHAREHOLDER MEETING...................... WHERE YOU CAN FIND MORE
Matters to be Considered at the INFORMATION.........................
Shareholder Meeting.............
Record Date and Voting.............. INCORPORATION OF DOCUMENTS
Required Vote; Revocability of BY REFERENCE........................
Proxies.........................
Solicitation of Proxies............. ADJOURNMENT OF SHAREHOLDER
MEETING.............................
THE MERGER...............................
The Parties......................... SHAREHOLDER PROPOSALS....................
Background of the Merger............
Recommendation of the Village OTHER MATTERS............................
Bancorp Board of Directors and
Reasons for the Merger.......... EXPERTS..................................
Purpose and Effects of the Merger...
Structure........................... LEGAL MATTERS............................
Exchange Ratio......................
Election Form and Exchange of Shares Appendix A
Options............................. Opinion of Morgan Lewis
Regulatory Approvals................ Githens & Ahn, Inc..................A-1
Conditions to the Merger............
Conduct of Business Pending Appendix B
the Merger...................... Sections 33-855 to 33-872 of the
Third Party Proposals............... Connecticut General Statutes......B-1
Expenses; Breakup Fee...............
Opinion of Village Bancorp's No person is authorized to give any
Financial Advisor............... information or to make any
Representations and Warranties...... representation not contained in this
Termination and Amendment of proxy statement/ prospectus, and, if
the Merger Agreement............ given or made, that information or
Federal Income Tax Consequences..... representation should not be relied upon
Accounting Treatment................ as having been authorized. This proxy
Resales of Webster Financial's statement/prospectus does not constitute
Common Stock Received in the an offer to sell, or a solicitation of
Merger.......................... an offer to purchase, any of Webster
Dissenters' Appraisal Rights........ Financial's common stock offered by this
Arrangements with and Payments to proxy statement/ prospectus, or the
Village Bancorp Directors, solicitation of a proxy, in any
Executive Officers and Employees jurisdiction in which it is unlawful to
Indemnification..................... make that kind of offer or solicitation.
Option Agreement.................... Neither the delivery of this proxy
statement/prospectus nor any
SELECTED DATA............................ distribution of Webster Financial's
common stock offered pursuant to this
MARKET PRICES AND DIVIDENDS.............. proxy statement/prospectus shall, under
Webster Financial's Common Stock.... any circumstances, create an implication
Village Bancorp's Common Stock...... that there has been no change in the
affairs of Village Bancorp or Webster
DESCRIPTION OF WEBSTER FINANCIAL'S Financial or the information in this
CAPITAL STOCK AND COMPARISON document or the documents or reports
OF SHAREHOLDER RIGHTS............... incorporated by reference into this
Webster Financial's Common Stock.... document since the date of this proxy
Webster Financial's Preferred Stock. statement/prospectus.
Senior Notes........................
Capital Securities..................
3
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS VILLAGE BANCORP PROPOSING TO MERGE WITH WEBSTER FINANCIAL? HOW WILL
I BENEFIT?
A: In our opinion, the business potential for the combination of Webster
Financial and Village Bancorp exceeds what Village Bancorp could accomplish
individually. We expect that the merger will enhance shareholder value for
all shareholders.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign, date and
return it as soon as possible. If you sign and send in your proxy and do
not indicate how you want to vote, your proxy will be voted in favor of the
merger agreement. If you do not return your proxy card or vote in person at
the shareholder meeting, or if you abstain from voting, you effectively are
voting against the merger agreement. You can choose to attend the
shareholder meeting and vote your shares in person instead of completing
and returning your proxy card. If you do complete and return a proxy card,
you may change your vote at any time up to and including the time of the
vote on the day of the shareholder meeting by following the directions on
page ___.
Please note that the proxy card is different from the election form which
allows you to choose to receive cash in the merger. To vote on the merger
agreement, you need to follow the instructions above.
Q: IF MY SHARES ARE HELD IN STREET NAME BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions to your
broker on how you want your shares voted.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: If you want to receive cash for some or all of your Village Bancorp shares,
you should complete an election form and send your Village Bancorp stock
certificates to Webster Financial's exchange agent. If you do not submit an
election form, after the merger takes place, you will receive instructions
on how to exchange your Village Bancorp certificates for Webster Financial
certificates.
Q: WHAT WILL VILLAGE BANCORP SHAREHOLDERS RECEIVE IN THE MERGER?
A: If the merger takes place, each share of Village Bancorp common stock will
be converted at the choice of the shareholder into either $23.50 in cash,
$23.50 worth of Webster Financial's common stock based on a 15 day average
closing market price of Webster Financial's common stock, or a combination
of cash and Webster Financial's common stock. Dissenting shares will be
treated differently. If the 15 day average of Webster Financial's common
stock is greater than $27.50, shares of Village Bancorp's common stock will
be converted into .8545 of a share of Webster Financial's common stock. If
the 15 day average is less than $19.50, shares of Village Bancorp's common
stock will be converted into 1.2051 shares of Webster Financial's common
stock. Furthermore, if the 15 day average is less than $17.55, Village
Bancorp can terminate the merger agreement unless Webster decides to
increase the exchange ratio so that Village Bancorp's shareholders will
receive $21.15 worth of Webster Financial's common stock based on the 15
day average. Webster Financial will pay cash instead of issuing fractional
shares. For information about the limit on the amount of cash that can be
paid in the merger, see page ____.
An election form was sent to you. If you want to receive cash in the merger
in exchange for some or all of the Village
4
Bancorp shares that you own, you must follow the instructions in the form
and submit a properly completed election form. If you do not submit a
properly completed election form, you effectively are choosing to receive
only Webster Financial's common stock in the merger unless you dissent from
the merger. See pages ____ for more information about completing the
election form.
Q: IF I WANT TO RECEIVE CASH IN THE MERGER, WILL I DEFINITELY RECEIVE CASH?
A: The amount of cash that can be paid is limited. Even if you choose to
receive cash for some or all of your shares of Village Bancorp common
stock, it is possible that you will receive either cash and shares of
Webster Financial's common stock or just Webster Financial's common stock
in exchange for your Village Bancorp shares because of this limitation.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Before the merger takes place, Village Bancorp expects to continue to pay
regular quarterly cash dividends on its common stock, which currently are
$0.09 per share. After the merger, any dividends will be based on what
Webster Financial pays. Webster Financial presently pays dividends at a
quarterly dividend rate of $0.11 per share. An exchange ratio of ___ would
mean an equivalent dividend of $___ per share for Village Bancorp's common
stock.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the merger you should call or write to
Robert V. Macklin, President and Chief Executive Officer, Village Bancorp,
Inc., 25 Prospect Street, P. O. Box 366, Ridgefield, Connecticut 06877,
telephone (203) 438-9551. A copy of the merger agreement including each of
its exhibits and the other documents described in this proxy
statement/prospectus will be provided to you promptly without charge if you
call or write to James M. Sitro, Vice President, Investor Relations of
Webster Financial Corporation, Webster Plaza, Waterbury, Connecticut 06702,
telephone (203) 578-2399.
5
SUMMARY
The following is a brief summary of some of the information located
elsewhere in this proxy statement/prospectus. BEFORE YOU VOTE, YOU SHOULD GIVE
CAREFUL CONSIDERATION TO ALL OF THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS DOCUMENT.
THE PARTIES (PAGE ___)
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
Webster Financial is a Delaware corporation and the holding company of Webster
Bank, Webster Financial's federal savings bank subsidiary. Both Webster
Financial and Webster Bank are headquartered in Waterbury, Connecticut. Deposits
at Webster Bank are insured by the Federal Deposit Insurance Corporation. At
September 30, 1998, Webster Financial had total consolidated assets of $9.2
billion, total deposits of $5.6 billion, and shareholders' equity of $565.9
million, or 6.2% of total assets.
VILLAGE BANCORP, INC.
25 Prospect Street
Ridgefield, Connecticut 06877
(203) 438-9551
Village Bancorp is a Connecticut corporation and the holding company of The
Village Bank & Trust Company, a Connecticut-chartered commercial bank which is
wholly owned by Village. Both Village Bancorp and Village Bank are headquartered
in Ridgefield, Connecticut. Deposits at Village Bank are insured by the Federal
Deposit Insurance Corporation. At September 30, 1998, Village Bancorp had total
consolidated assets of $230.2 million, total deposits of $210.8 million, and
shareholders' equity of $17.2 million, or 7.48% of total assets.
THE SHAREHOLDER MEETING
(PAGE ___)
A special meeting of Village Bancorp shareholders will be held on ____________
___, 1999, at ____ __.m. at The Village Bank & Trust Company, 25 Prospect
Street, Ridgefield, Connecticut, 06877 for the following purposes:
o to vote on the merger agreement, the merger and the other transactions
contemplated by the merger agreement; and
o to address any other matters that properly come before the shareholder
meeting, or any adjournments or postponements of the meeting, including a
motion to adjourn the shareholder meeting to another time and/or place to
solicit additional proxies in favor of the merger agreement and the merger
or otherwise.
THE RECOMMENDATION OF THE VILLAGE BANCORP BOARD TO SHAREHOLDERS (PAGE ___)
The Village Bancorp board of directors unanimously approved the merger agreement
and the merger and unanimously recommends that you vote FOR approval of these
matters.
RECORD DATE; VOTING POWER
(PAGE ___)
You are entitled to vote at the shareholder meeting if you owned shares of
Village Bancorp's common stock on ____________ ___, 1999. You will have one vote
for each share of Village Bancorp's common stock that you owned on that date.
VOTE REQUIRED (PAGE ___)
The affirmative vote of the holders of two-thirds of the issued and outstanding
shares of Village Bancorp's common stock entitled to vote at the shareholder
meeting is required to approve the merger agreement, the merger and the other
transactions contemplated by the merger agreement. Please remember that the vote
required to approve the merger agreement is based on the total number of
outstanding shares, and not on the number of shares which are actually voted.
SHARE OWNERSHIP AND INTERESTS OF VILLAGE BANCORP'S MANAGEMENT AND THEIR
AFFILIATES (PAGE ___)
At the close of business on __, 1999, excluding all options to purchase Village
Bancorp's common stock, the directors and executive officers of Village Bancorp
and their affiliates owned a total of _____ shares of Village
6
Bancorp's common stock, which was approximately ___% of the outstanding shares
of Village Bancorp's common stock on that date. The directors and executive
officers have agreed to vote their shares in favor of the merger agreement.
You should note that Village Bancorp's directors and executive officers have
interests in the merger as directors and/or employees that are different from,
or in addition to, yours as a Village Bancorp shareholder. These interests are
described at page _____.
REGULATORY APPROVALS (PAGE ___)
For the merger to take place, we need to receive the regulatory approvals of the
Office of Thrift Supervision and the Connecticut Commissioner of Banking. We
also need to receive the approval or waiver of the Board of Governors of the
Federal Reserve System. We will file applications with these regulators soon.
DISSENTERS' RIGHTS (PAGE ___)
Under Connecticut law, you are entitled to dissenters' rights of appraisal in
connection with the merger. If you want to exercise dissenters' rights, you must
follow carefully the procedures described at pages ____ to ____ of this document
and Appendix B.
FEDERAL INCOME TAX CONSEQUENCES (PAGE ___)
In general, you will not recognize gain or loss for federal income tax purposes
as a result of the merger, except if you receive cash.
TAX MATTERS ARE VERY COMPLICATED. YOU SHOULD CONSULT YOUR TAX ADVISOR FOR A FULL
EXPLANATION OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
FAIRNESS OPINION OF VILLAGE BANCORP'S FINANCIAL ADVISOR (PAGE ___)
In deciding to approve the merger, Village Bancorp's board of directors
considered an opinion of Morgan Lewis Githens & Ahn, Inc., Village Bancorp's
financial advisor. The opinion concluded that the proposed consideration to be
received by the holders of Village Bancorp's common stock in the merger is fair
to the shareholders from a financial point of view. An update of this opinion is
attached as Appendix A to this document. WE ENCOURAGE YOU TO READ THIS OPINION
CAREFULLY.
TERMINATION OF THE MERGER AGREEMENT (PAGE ___)
The merger agreement specifies a number of situations when the agreement may be
terminated by Webster Financial or Village Bancorp, which are described on page
__ of this document. One of the instances when Village Bancorp can terminate the
merger agreement is if the 15 day average closing market price that will be used
to determine the exchange ratio is less than $17.55, unless Webster decides to
increase the exchange ratio so that Village Bancorp's shareholders will receive
$21.15 worth of Webster Financial's common stock based on the 15 day average.
OPTION AGREEMENT (PAGE ___)
Village Bancorp and Webster Financial entered into an option agreement in
connection with the merger agreement. Village Bancorp granted Webster Financial
an option to purchase 19.9% of Village Bancorp's common stock. If specific
events occur, which are described in the option agreement Webster can exercise
this option. The option agreement is intended to discourage other parties from
making alternative acquisition-related proposals, even if a proposal of that
kind is for a higher price per share for Village Bancorp's common stock than the
price per share to be paid under the merger agreement.
ACCOUNTING TREATMENT (PAGE ___)
The merger will be accounted for as a purchase transaction for accounting and
financial reporting purposes.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE ___)
We have made forward-looking statements in this document, and in documents that
we incorporate by reference. These kinds of statements are subject to risks and
uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of Webster Financial, Village
Bancorp, Webster Bank, Village Bank, the surviving corporation or the surviving
bank. When we use words like
7
believes, expects, anticipates or similar expressions, we are making
forward-looking statements.
You should note that many factors, some of which are discussed elsewhere in this
document and in the documents that we incorporate by reference, could affect the
future financial results of Webster Financial, Village Bancorp, Webster Bank,
Village Bank, the surviving corporation or the surviving bank and could cause
those results to differ materially from those expressed in our forward-looking
statements. These factors include the following:
o the effect of economic conditions;
o inability to realize expected cost savings in connection with business
combinations and other acquisitions;
o higher than expected costs related to integration of combined or merged
businesses;
o deposit attrition;
o adverse changes in interest rates;
o change in any applicable law, rule, regulation or practice with respect to
tax or accounting issues or otherwise; and
o adverse changes or conditions in capital or financial markets.
8
MARKET PRICES OF COMMON STOCK
Webster Financial's common stock is traded on the Nasdaq Stock Market's
National Market Tier under the trading symbol WBST. Village Bancorp's common
stock is traded on the Nasdaq Stock Market's SmallCap Market under the trading
symbol VBNK. The table below presents the per share closing prices of Webster
Financial's common stock and Village Bancorp's common stock on the Nasdaq stock
markets noted above as of the dates specified and the pro forma equivalent
market value of Webster Financial's common stock to be issued for Village
Bancorp's common stock in the merger. November 10, 1998 was the last trading
date prior to announcement of the merger agreement. Village Bancorp's pro forma
equivalent market value was determined by multiplying the respective closing
prices of Webster Financial's common stock by the exchange ratio calculated
based on the average of the daily closing prices per share of Webster
Financial's common stock for the 15 consecutive trading days on which shares of
Webster Financial's common stock were actually traded prior to ________ __,
1999, which is the most recent practicable date prior to the date of this proxy
statement/prospectus. For more information about the exchange ratio, see "THE
MERGER -- Exchange Ratio," and for more information about the stock prices and
dividends of Webster Financial and Village Bancorp, see "MARKET PRICES AND
DIVIDENDS."
Village Bancorp's
Last Reported Sale Price Common Stock
------------------------ Pro Forma
Date Webster Financial's Village Bancorp's Equivalent Market
Common Stock Common Stock Value
------------ ------------ -----
November 10, 1998....................... $26.50 $21.00 $*
_________ __, 1999...................... * * *
- ----------
* To be calculated subsequently
Village Bancorp's shareholders are advised to obtain current market
quotations for Webster Financial's common stock. It is expected that the market
price of Webster Financial's common stock will fluctuate between the date of
this proxy statement/prospectus and the date on which the merger takes place. No
assurance can be given as to the market price of Webster Financial's common
stock at the time of the merger.
9
COMPARATIVE PER SHARE DATA
The table below presents comparative selected historical per share data of
Webster Financial and Village Bancorp, pro forma combined per share data for
Webster Financial and Village Bancorp and equivalent pro forma per share data of
Village Bancorp. The financial data is based on, and should be read in
conjunction with, the historical consolidated financial statements and the notes
to those financial statements of Webster Financial and Village Bancorp. All
financial data presented for Webster Financial prior to December 31, 1997 has
been restated to reflect the financial results of Webster Financial and Eagle
Financial Corp., which was acquired by Webster Financial in April 1998. All per
share data of Webster Financial, Village Bancorp and pro forma are presented on
a diluted basis and have been adjusted retroactively to give effect to stock
dividends. The pro forma data is not necessarily indicative of results which
will be obtained on a combined basis. Village Bancorp equivalent pro forma per
share amounts are calculated by multiplying the pro forma combined amounts by
the exchange ratio calculated based on the average daily closing prices per
share of Webster Financial's common stock for the 15 consecutive trading days on
which shares of Webster Financial's common stock were actually traded prior to
_______ __, 1999, which is the most recent practicable date prior to the date of
this proxy statement/prospectus. See "THE MERGER -- Exchange Ratio."
At or for the Nine
Months Ended At or for the Year
September 30, 1998 Ended December 31, 1997
------------------ -----------------------
Net Income per diluted Common Share:
Webster Financial -- historical $ 1.27 $ 1.07
Village Bancorp -- historical 0.81 0.61
Pro Forma Combined 1.25 1.05
Village Bancorp
Equivalent Pro Forma * *
Cash Dividends per Common Share:
Webster Financial-- historical 0.32 0.40
Village Bancorp-- historical 0.27 0.36
Pro Forma Combined 0.32 0.40
Village Bancorp
Equivalent Pro Forma * *
Book Value per Common Share:
Webster Financial-- historical 14.91 13.78
Village Bancorp -- historical 8.88 8.32
Pro Forma Combined 14.62 13.50
Village Bancorp
Equivalent Pro Forma * *
- ----------
* To be calculated subsequently
For more detailed information about the matters discussed in this
summary, you should review the table of contents of this document,
which you can find at page ___.
RECENT DEVELOPMENT
On January 21, 1999, Webster Financial reported a 27% increase in net
operating income to $24.5 million, or $0.64 per diluted share, for the fourth
quarter ended December 31, 1998, compared to $19.3 million, or $0.50 per diluted
share, for the fourth quarter ended December 31, 1997. Net income for the fourth
quarter, which included a net non-recurring $3.2 million income tax charge, was
$21.3 million, compared to $19.3 million for the same period in 1997.
For the full year 1998, Webster Financial reported a 35% increase in net
operating income to a record $86.9 million, or $2.25 per diluted share, compared
to $64.5 million, or $1.68 per diluted share, for the previous year. Net income
for 1998, including acquisition related expenses and non-recurring tax items,
was $70.5 million, or $1.83 per diluted share, compared to net income for 1997
of $41.1 million, or $1.07 per diluted share, including non-recurring items.
Non-recurring items for 1998 consisted of $18.9 million of acquisition related
expenses and provisions and the non-recurring income tax charge of $3.2 million.
Non-recurring items for 1997 consisted of $39.7 million of acquisition related
expenses and provisions.
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SHAREHOLDER MEETING
MATTERS TO BE CONSIDERED AT THE SHAREHOLDER MEETING
This proxy statement/prospectus is first being mailed to the holders of
Village Bancorp's common stock on or about ____________ ___, 1999. It is
accompanied by a proxy card furnished in connection with the solicitation of
proxies by the Village Bancorp board of directors for use at the special meeting
of Village Bancorp's shareholders and an election form that permits you to
indicate that you would like to receive cash in the merger. The shareholder
meeting is scheduled to be held on __________ ___, 1999, at ___ _.m., at The
Village Bank & Trust Company, 25 Prospect Street, Ridgefield, Connecticut,
06877. At the shareholder meeting, the holders of Village Bancorp's common stock
will consider and vote upon: (i) the proposal to approve and adopt the merger
agreement, the merger and the other transactions contemplated by the merger
agreement, and (ii) any other business that properly comes before the
shareholder meeting, or any adjournments or postponements of the meeting,
including, without limitation, a motion to adjourn the shareholder meeting to
another time and/or place for the purpose of soliciting additional proxies in
order to approve the merger agreement and the merger or otherwise.
RECORD DATE AND VOTING
The Village Bancorp board of directors has fixed the close of business on
____________ ___, 1999 as the record date for determining the Village Bancorp
shareholders entitled to receive notice of and to vote at the shareholder
meeting. Only holders of record of Village Bancorp's common stock at the close
of business on that day will be entitled to vote at the shareholder meeting or
at any adjournment or postponement of the meeting. At the close of business on
____________ ___, 1999, there were _______________ shares of Village Bancorp's
common stock outstanding that are entitled to vote at the shareholder meeting,
held by approximately ______ shareholders of record. Village Bancorp is not
authorized to issue preferred stock.
Each holder of Village Bancorp's common stock on the record date will be
entitled to one vote for each share held of record upon each matter properly
submitted at the shareholder meeting or at any adjournment or postponement of
the meeting. The presence, in person or by proxy, of the holders of a majority
of Village Bancorp's common stock entitled to vote at the shareholder meeting is
necessary to constitute a quorum. Abstentions and broker non-votes will be
included in the calculation of the number of shares represented at the
shareholder meeting in order to determine whether a quorum has been achieved.
Since approval of the merger agreement requires the affirmative vote of the
holders of at least two-thirds of the issued and outstanding shares of Village
Bancorp's common stock entitled to be voted at the shareholder meeting,
abstentions and broker non-votes will have the same effect as a vote against the
merger agreement.
If a quorum is not obtained, or if fewer shares of Village Bancorp's common
stock are voted in favor of the proposal for approval of the merger agreement
than the number required for approval, it is expected that the shareholder
meeting will be adjourned to allow additional time for obtaining additional
proxies. In that event, proxies will be voted to approve an adjournment, except
for proxies as to which instructions have been given to vote against the merger
agreement. The holders of a majority of the shares present at the shareholder
meeting would be required to approve any adjournment of the shareholder meeting.
If your proxy card is properly executed and received by Village Bancorp in
time to be voted at the shareholder meeting, the shares represented by the proxy
card will be voted in accordance with the instructions marked on the proxy card.
EXECUTED PROXIES WITH NO INSTRUCTIONS INDICATED ON THE PROXY CARD WILL BE VOTED
FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
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The Village Bancorp board of directors is not aware of any matters other
than the proposal to approve the merger agreement and the merger or a proposal
to adjourn or postpone the shareholder meeting as necessary that may properly
come before the shareholder meeting. If any other matters properly come before
the shareholder meeting, the persons named in the accompanying proxy will vote
the shares represented by all properly executed proxies on those matters as
determined by a majority of the Village Bancorp board of directors.
The proxy card is different from the election form used to elect to receive
cash in the merger. To vote on the merger agreement, you need to properly
complete the proxy card or attend the shareholder meeting and vote in person.
For information about the election form, see "THE MERGER -- Election Form and
Exchange of Shares."
YOU SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. IF YOU
COMPLETE AN ELECTION FORM, YOU SHOULD FORWARD YOUR VILLAGE BANCORP STOCK
CERTIFICATES TO THE EXCHANGE AGENT. IF YOU DO NOT COMPLETE AN ELECTION FORM, IF
THE MERGER TAKES PLACE, VILLAGE BANCORP STOCK CERTIFICATES SHOULD BE DELIVERED
IN ACCORDANCE WITH INSTRUCTIONS THAT WILL BE SENT TO YOU BY WEBSTER FINANCIAL'S
EXCHANGE AGENT PROMPTLY AFTER THE EFFECTIVE TIME OF THE MERGER.
REQUIRED VOTE; REVOCABILITY OF PROXIES
The affirmative vote of the holders of at least two-thirds of the issued
and outstanding shares of Village Bancorp's common stock entitled to be voted at
the shareholder meeting is required in order to approve and adopt the merger
agreement, the merger of Village Bancorp and Webster Financial and the other
transactions contemplated by the merger agreement.
THE REQUIRED VOTE OF VILLAGE BANCORP'S SHAREHOLDERS IS BASED ON THE TOTAL
NUMBER OF OUTSTANDING SHARES OF VILLAGE BANCORP'S COMMON STOCK AND NOT ON THE
NUMBER OF SHARES WHICH ARE ACTUALLY VOTED. IF YOU DO NOT SUBMIT A PROXY CARD OR
VOTE IN PERSON AT THE SHAREHOLDER MEETING, OR IF YOU ABSTAIN FROM VOTING, YOU
EFFECTIVELY ARE VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
All of the directors and executive officers of Village Bancorp beneficially
owned as of __________ __, 1999, excluding all options to purchase shares of
Village Bancorp common stock, a total of _______________ shares of Village
Bancorp's common stock, which was approximately ___% of the outstanding shares
of Village Bancorp's common stock on that date. All of the directors and
executive officers of Village Bancorp have entered into a stockholder agreement
with Webster Financial, in which they each agreed, among other things, to
transfer restrictions and to vote all shares of Village Bancorp's common stock
that they have the right to vote, whether owned as of the date of the
stockholder agreement or acquired after that date, in favor of the merger
agreement, the merger and the other transactions contemplated by the merger
agreement and against any third party merger proposal. No separate consideration
was paid to any of the directors or executive officers for entering into the
stockholder agreement. Webster Financial required that the stockholder agreement
be executed as a condition to Webster Financial entering into the merger
agreement.
If you submit a proxy card, attending the shareholder meeting will not
automatically revoke your proxy. However, you may revoke a proxy at any time
before it is voted by (i) delivering to Enrico J. Addessi, Secretary of the
board of directors of Village Bancorp, Inc., 25 Prospect Street, P. O. Box 366,
Ridgefield, Connecticut 06877, a written notice of revocation before the
shareholder meeting, (ii) delivering to Village Bancorp a duly executed proxy
bearing a later date before the shareholder meeting, or (iii) attending the
shareholder meeting and voting in person.
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Village Bancorp and Webster Financial are not obligated to complete the
merger unless, among other things, the merger agreement and the merger are
approved by the affirmative vote of the holders of at least two-thirds of the
issued and outstanding shares of Village Bancorp's common stock entitled to
vote. For a description of the conditions to the merger, see "The Merger --
Conditions to the Merger."
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
Village Bancorp may solicit proxies for the shareholder meeting from
shareholders personally or by telephone or telegram without receiving additional
compensation for these activities. The cost of soliciting proxies will be paid
by Village Bancorp. In addition, Village Bancorp has retained D.F. King & Co.,
Inc., a proxy solicitation firm, to assist in proxy solicitation for the
shareholder meeting. The fee to be paid to that firm is $5,000, plus reasonable
out-of-pocket expenses. The fee will be paid by Webster Financial. Village
Bancorp also will make arrangements with brokerage firms and other custodians,
nominees and fiduciaries to send proxy materials to their principals and will
reimburse those parties for their expenses in doing so.
THE MERGER
The information in this Section is qualified in its entirety by reference
to the full text of the merger agreement including each of its exhibits, the
option agreement and the stockholder agreement, all of which are incorporated by
reference into this document and the material features of which are described in
this proxy statement/prospectus. A copy of the merger agreement including each
of its exhibits and the other documents described in this proxy
statement/prospectus will be provided to you promptly without charge if you call
or write to James M. Sitro, Vice President, Investor Relations of Webster
Financial Corporation, Webster Plaza, Waterbury, Connecticut 06702, telephone
(203) 578-2399.
THE PARTIES
Webster Financial and Village Bancorp have entered into the merger
agreement. Under the merger agreement, Webster Financial will acquire Village
Bancorp through the merger of Village Bancorp into Webster Financial. The merger
agreement also provides for The Village Bank & Trust Company, which is a wholly
owned subsidiary of Village Bancorp, to merge into Webster Bank, a wholly owned
subsidiary of Webster Financial.
WEBSTER FINANCIAL. Webster Financial is a Delaware corporation and the
holding company of Webster Bank, Webster Financial's federal savings bank
subsidiary. Both Webster Financial and Webster Bank are headquartered in
Waterbury, Connecticut. Webster Financial can be found on the Internet at
http://websterbank.com. Deposits at Webster Bank are insured by the Federal
Deposit Insurance Corporation. Through Webster Bank, Webster Financial currently
serves customers from over 100 banking offices, three commercial banking centers
and more than 174 ATMs located in Hartford, New Haven, Fairfield, Litchfield and
Middlesex Counties in Connecticut, in addition to telephone banking, video
banking and PC banking. Webster Financial's mission is to help individuals,
families and businesses achieve their financial goals. Webster Financial
emphasizes five business lines -- consumer banking, business banking, mortgage
banking, trust and investment services and insurance services -- each supported
by centralized administration and operations. Through a number of recent
acquisitions of other financial service firms, including banks and thrifts, a
trust company and an insurance firm, Webster Financial has established a leading
position in the banking and trust and investment services market in Connecticut.
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On November 4, 1998, Webster Financial announced that it had signed a
definitive merger agreement to acquire Maritime Bank & Trust Company. At
September 30, 1998, Maritime had total consolidated assets of $103.7 million,
total deposits of $91.2 million, and stockholders' equity of $7.1 million, or
6.8% of total assets. The Maritime transaction will be accounted for as a
purchase.
At September 30, 1998, Webster Financial had total consolidated assets of
$9.2 billion, total deposits of $5.6 billion, and shareholders' equity of $565.9
million or 6.2% of total assets. Webster Financial's consolidated financial
statements as of September 30, 1998 include Eagle Financial Corp., which was
acquired by Webster Financial on April 15, 1998. At September 30, 1998, Webster
Financial had loans receivable, net of $4.9 billion, which included $3.8 billion
in residential mortgage loans, $386.1 million in commercial real estate loans,
$314.9 million in commercial and industrial loans and $494.5 million in consumer
loans, consisting primarily of home equity loans. At September 30, 1998,
nonaccrual loans and other real estate owned were $35.7 million. At that date,
Webster Financial's allowance for loan losses was $57.0 million, or 192.7% of
nonaccrual loans, and its total allowance for loan and other real estate owned
losses was $57.3 million, or 160.4% of nonaccrual loans and other real estate
owned. For additional information about Webster Financial that is incorporated
by reference into this document, see "WHERE YOU CAN FIND MORE INFORMATION."
Webster Financial, as a savings and loan holding company, is regulated by
the Office of Thrift Supervision. Webster Bank, as a federal savings bank, also
is regulated by the Office of Thrift Supervision and to some extent by the
Federal Deposit Insurance Corporation.
VILLAGE BANCORP. Village Bancorp is a Connecticut corporation and the
holding company of Village Bank, a Connecticut-chartered commercial bank which
is wholly owned by Village Bancorp. Both Village Bancorp and Village Bank are
headquartered in Ridgefield, Connecticut. Deposits at Village Bank are insured
by the Federal Deposit Insurance Corporation. Village Bancorp is engaged
principally in the business of attracting deposits from the general public and
investing those deposits in residential and real estate loans, and in consumer
and small business loans. Village Bancorp currently serves customers from six
banking offices located in the communities of Ridgefield, Danbury, Wilton,
Westport and New Milford, Connecticut.
At September 30, 1998, Village Bancorp had total consolidated assets of
$230.2 million, total deposits of $210.8 million, and shareholders' equity of
$17.2 million, or 7.48% of total assets. At September 30, 1998, Village Bancorp
had loans receivable, net, of $148.9 million, which included $105.0 million in
residential mortgage loans, $11.2 million in commercial real estate loans, $18.6
million in commercial loans and $15.4 million in home equity credit lines and
consumer installment loans. At September 30, 1998, nonperforming loans were $1.1
million. At that date, Village Bancorp's allowance for loan losses was $1.2
million, or 104.2% of nonperforming loans. For additional information about
Village Bancorp that is incorporated by reference into this document, see "WHERE
YOU CAN FIND MORE INFORMATION."
Village Bancorp, as a bank holding company, is regulated by the Board of
Governors of the Federal Reserve System. Village Bank, as a
Connecticut-chartered commercial bank, is regulated by the Connecticut
Commissioner of Banking and by the Federal Deposit Insurance Corporation.
BACKGROUND OF THE MERGER
The Village Bancorp board of directors and Village Bancorp's management
have focused on enhancing shareholder value over time since the formation of
Village Bancorp as the publicly owned holding company of Village Bank in 1983.
The Village Bancorp board and Village Bancorp's management have periodically
reviewed Village Bancorp's business objectives, strategic alternatives, short-
and long-term profit outlook and return on equity, as well as the liquidity and
market value of Village Bancorp's common stock. The Village Bancorp board
retained Morgan Lewis Githens & Ahn,
14
Inc., referred to in this section as Morgan Lewis, a nationally recognized
investment banking firm familiar with Village Bancorp and comparable companies,
to explore strategic alternatives. With the assistance of Morgan Lewis, the
Village Bancorp board considered a number of strategic alternatives available to
Village Bancorp to enhance shareholder value in light of the entry of larger,
regional banks and other non-banking competition into the markets serviced by
Village Bank and the deposit and product competition from these kinds of
entities.
During the summer of 1998, the Village Bancorp board and Village Bancorp's
management met with Morgan Lewis and reviewed Village Bancorp's business,
operations and prospects. Morgan Lewis discussed a number of strategic
alternatives available to Village Bancorp, including the possibility of a
business combination with a community bank similar to Village Bancorp or with a
larger banking institution that was more diversified as to geographic regions
served and product offerings. The Village Bancorp board authorized Morgan Lewis
to contact potential acquirors.
Morgan Lewis compiled a package of relevant materials about Village Bancorp
and distributed the package to potential acquirors identified by Village Bancorp
and Morgan Lewis. Village Bancorp asked four parties who responded to perform
due diligence before submitting final proposals. Upon completion of the due
diligence, including meetings between the senior management of Village Bancorp
and the senior management of each of the four potential acquirors, three of the
parties submitted final proposals.
Following a detailed evaluation of each of these proposals, including a
further review of strategic alternatives available to Village Bancorp and a
review of the Village Bancorp board's fiduciary responsibilities and legal
obligations with Village Bancorp's legal counsel and Morgan Lewis, the Village
Bancorp board authorized Morgan Lewis to pursue negotiations with Webster
Financial regarding a strategic merger. Those negotiations continued through
November 9, 1998, when the Village Bancorp board met to consider the merger
agreement, the merger of Village Bancorp and Webster Financial and the option
agreement. After carefully reviewing the drafts of the merger agreement and the
option agreement and considering a presentation by Morgan Lewis regarding the
fairness of the merger consideration from a financial point of view to Village
Bancorp's shareholders, the Village Bancorp board approved the merger agreement,
the merger and the option agreement.
RECOMMENDATION OF THE VILLAGE BANCORP BOARD OF DIRECTORS AND REASONS FOR THE
MERGER
The Village Bancorp board of directors has approved the merger agreement
and has determined that the merger of Village Bancorp and Webster Financial is
in the best interests of Village Bancorp and its shareholders. THE VILLAGE
BANCORP BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THE MERGER AGREEMENT, THE
MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. In
reaching its decision to approve the merger agreement, the Village Bancorp board
consulted with its financial advisor, Morgan Lewis, and considered the
following:
o The Village Bancorp board's familiarity with, and review of, the
business, financial condition, results of operations and prospects of
Village Bancorp, including, but not limited to, its potential growth,
development, productivity and profitability and the business risks
associated with these considerations;
o Village Bancorp's current and prospective operating environment,
including national and local economic conditions, the highly
competitive environment for financial institutions generally, the
changing regulatory environment, and the trend toward consolidation in
the financial services industry;
15
o The potential appreciation in market and book value of Village
Bancorp's common stock on both a short-and long-term basis, as a
stand-alone entity;
o The extensive process Village Bancorp and Morgan Lewis used to obtain
acquisition proposals and preliminary bids, and the conclusion that
Webster Financial's bid was more favorable than any other indication
of interest received from the other companies;
o Information concerning Webster Financial's business, financial
condition, results of operations, asset quality and prospects,
including the long-term growth potential of Webster Financial common
stock, the future growth prospects of Webster Financial combined with
Village Bancorp following the merger, the potential synergies expected
from the merger and the business risks associated with the merger;
o The terms of the merger agreement, the option agreement and the
transactions and agreements contemplated by these agreements,
including without limitation, that Webster Financial's offer of
Webster Financial's common stock in exchange for Village Bancorp's
common stock can be effected on a tax-free basis for Village Bancorp's
shareholders and the fact that the provisions of the merger agreement
that allow an adjustment in the exchange ratio provide substantial
protection to Village Bancorp's shareholders if the price of Webster
Financial's common stock declines before the merger takes place;
o The potential for appreciation and growth in the market and book value
of Webster Financial's common stock following the proposed merger;
o Morgan Lewis' presentation to the Village Bancorp board on November 9,
1998 and the opinion of Morgan Lewis that the merger consideration to
be paid pursuant to the merger agreement is fair to Village Bancorp's
shareholders from a financial point of view;
o The advantages and disadvantages of Village Bancorp remaining an
independent institution or affiliating with a larger institution;
o The option agreement, including the possibility that the existence of
the option agreement could discourage third parties from offering to
acquire Village Bancorp by increasing the financial cost of an
acquisition by a third party, and the recognition that Village
Bancorp's entering into the option agreement was a condition to
Webster Financial's willingness to enter into the merger agreement;
o The likelihood of receiving all of the regulatory approvals required
for the merger to take place;
o The short- and long-term interests of Village Bancorp and its
shareholders, the interests of Village Bancorp's employees, customers,
creditors and suppliers, and the interests of the Village Bancorp
community that may benefit from an appropriate affiliation with a
larger institution with increased economies of scale and with a
greater capacity to serve all of the banking needs of the community;
and
o The compatibility with respect to businesses and management
philosophies of Village Bancorp and Webster Financial, and Webster
Financial's strong commitment to the communities it serves.
The discussion in this section of the information and factors considered by
the Village Bancorp board is not intended to be exhaustive but includes all
material factors considered by the
16
board. In reaching its determination to approve and recommend the merger, the
Village Bancorp board did not assign any relative or specific weights to the
factors considered. Individual directors may have given differing weights to
different factors. After deliberating on the merger and the other transactions
contemplated by the merger agreement, and considering, among other things, the
matters discussed above and the fairness opinion of Morgan Lewis referred to
above, the Village Bancorp board unanimously approved the merger agreement, the
merger, the other transactions contemplated by the merger agreement, and the
option agreement, as being in the best interests of Village Bancorp and its
shareholders.
PURPOSE AND EFFECTS OF THE MERGER
The purpose of the merger is to enable Webster Financial to acquire the
assets and business of Village Bancorp. After the merger, Village Bank's six
branch banking offices will remain open and will be operated as banking offices
of Webster Bank.
The merger will result in an expansion of Webster Bank's primary market
area to include Village Bank's banking offices in Fairfield and Litchfield
Counties, Connecticut. The assets and business of Village Bank's banking offices
will broaden Webster Financial's existing operations in Fairfield and Litchfield
Counties where Webster Bank currently has nine banking offices. Webster
Financial expects to achieve reductions in the current operating expenses of
Village Bancorp upon the consolidation of Village Bank's operations into Webster
Bank. Upon completion of the merger, except as discussed below, the issued and
outstanding shares of Village Bancorp's common stock automatically will be
converted into cash, shares of Webster Financial's common stock, or a
combination of cash and Webster Financial's common stock. See "-- Exchange
Ratio."
STRUCTURE
The merger will occur through the merger of Village Bancorp into Webster
Financial, with Webster Financial the surviving corporation. When the merger
takes place, except as discussed below, each outstanding share of Village
Bancorp's common stock will be converted into either $23.50 in cash or the
equivalent of $23.50 of Webster Financial's common stock, subject to adjustment,
plus cash to be paid instead of fractional shares. Shares held as treasury stock
or held directly or indirectly by Village Bancorp, Webster Financial or any of
their subsidiaries, other than trust account shares and shares related to a
previously contracted debt, will be canceled. Dissenting shares will not be
automatically converted. See "--Dissenters' Appraisal Rights."
We expect that the merger will take place in the second quarter of 1999, or
as soon as possible after we receive all required regulatory and shareholder
approvals and all regulatory waiting periods expire. If the merger does not take
place by August 31, 1999, the merger agreement may be terminated unless Village
Bancorp and Webster Financial both agree to extend it.
The merger agreement permits Webster Financial to modify the structure of
the transactions contemplated by and described in the merger agreement so long
as (i) there are no material adverse federal income tax consequences to Village
Bancorp's shareholders from the modification, (ii) the consideration to be paid
to Village Bancorp's shareholders under the merger agreement is not changed or
reduced in amount, and (iii) the modification will not be reasonably likely to
delay materially or jeopardize receipt of any required regulatory approvals.
Webster Financial presently has no intent to modify the structure.
EXCHANGE RATIO
The merger agreement provides that at the effective time of the merger,
except as discussed below, each outstanding share of Village Bancorp's common
stock automatically will be converted into either $23.50 in cash, the equivalent
of $23.50 of Webster Financial's common stock based on a
17
15 day average closing market price of Webster Financial's common stock, or a
combination of cash and Webster Financial's common stock. The following
paragraphs describe the limit on the amount of cash that can be paid in the
merger and when the exchange ratio may be adjusted. Shares held as treasury
stock and shares held directly or indirectly by Village Bancorp, Webster
Financial or any of their subsidiaries, other than trust account shares and
shares related to a previously contracted debt, will be canceled. Dissenting
shares will not be converted into the right to receive shares of Webster
Financial's common stock unless and until Village Bancorp shareholders who
dissent fail to perfect or effectively withdraw or lose their right of payment
under applicable law. If dissenting shares lose their right of payment under
applicable law, all of these shares will be converted into the right to receive
Webster Financial's common stock.
An election form was sent to you with this proxy statement/prospectus. If
you want to receive cash in the merger in exchange for some or all of the
Village Bancorp common stock that you own, you must follow the instructions in
the form and submit a properly completed election form. For information about
completing your election form, see the section below captioned "--Election Form
and Exchange of Shares."
IN THE MERGER AGREEMENT, WEBSTER FINANCIAL AND VILLAGE BANCORP AGREED THAT
NO MORE THAN 20% OF THE TOTAL VALUE OF THE MERGER CONSIDERATION COULD BE USED TO
PAY VILLAGE BANCORP SHAREHOLDERS WHO CHOOSE TO RECEIVE CASH INSTEAD OF WEBSTER
FINANCIAL'S COMMON STOCK, TO PAY CASH INSTEAD OF FRACTIONAL SHARES AND TO PAY
ANY DISSENTERS. If too many Village Bancorp shareholders decide that they want
to receive cash instead of Webster Financial's common stock, those shareholders
will receive a prorated amount of cash, and the remainder of the merger
consideration that they are entitled to receive will be paid to them in Webster
Financial's common stock. If the amount of cash paid instead of fractional
shares or to be paid to dissenters exceeds the 20% limit, no cash would be paid
to Village Bancorp shareholders who choose to receive cash instead of Webster
Financial's common stock.
The exchange ratio for the conversion of Village Bancorp's common stock
into Webster Financial's common stock will be determined by dividing $23.50 by a
15 day average closing market price of Webster Financial's common stock,
computed to four decimal places. The 15 day average will be the average of the
daily closing prices per share for Webster Financial's common stock for the 15
consecutive trading days during which Webster Financial's common stock is
actually traded as reported on the Nasdaq Stock Market's National Market Tier
ending on the day before the receipt of the last required federal bank
regulatory approval or waiver required for the merger of Village Bank into
Webster Bank. Nonetheless, if the 15 day average price is greater than $27.50,
the exchange ratio will be 0.8545. If the 15 day average price is less than
$19.50, the exchange ratio will be 1.2051, unless Village Bancorp gives Webster
Financial notice of its intention to terminate the merger agreement because the
15 day average price is less than $17.55. If Village Bancorp takes this action,
Webster Financial can decide that the exchange ratio will be determined by
dividing $21.15 by the 15 day average price, computed to four decimal places,
and the merger agreement will remain in effect.
For example, based on the $____ average of the daily closing prices per
share for Webster Financial's common stock for the 15 consecutive trading days
on which shares of Webster Financial's common stock were actually traded prior
to ____________ ___, 1999, the most recent practicable date prior to the date of
this proxy statement/prospectus, the exchange ratio would be ______. Based on
the ____ shares of Village Bancorp's common stock outstanding on ____________
___, 1999 and an exchange ratio of ______, if none of Village Bancorp's
shareholders receives cash, Webster Financial would issue up to ____________
shares of Webster Financial common stock to Village Bancorp shareholders in the
merger, plus cash instead of fractional shares. These numbers do not reflect the
additional shares of Webster Financial common stock to be issued in the event of
the exercise prior to the merger of the ______ existing options to purchase
___________ shares of Village Bancorp's common stock.
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Because the market price of Webster Financial's common stock is subject to
fluctuation, the exchange ratio may materially increase or decrease prior to the
merger. No assurance can be given as to the market price of Webster Financial's
common stock at the time of the merger. A change in the market price of Webster
Financial's common stock would not alter the obligation of Webster Financial or
Village Bancorp to consummate the merger, except as provided above.
Certificates for fractions of shares of Webster Financial's common stock
will not be issued. Under the merger agreement, instead of a fractional share of
Webster Financial's common stock, a Village Bancorp shareholder will be entitled
to receive an amount of cash equal to (i) the fraction of a share of Webster
Financial's common stock to which the shareholder would otherwise be entitled
multiplied by (ii) the average of the daily closing prices per share for Webster
Financial's common stock for the 15 consecutive trading days on which shares of
Webster Financial's common stock are actually traded as reported on the Nasdaq
Stock Market's National Market Tier ending on the third trading day preceding
the closing date of the merger. After the merger takes place, no holder of
Village Bancorp's common stock will be entitled to any dividends or any other
rights in respect of any fraction. In this document, we use the term purchase
price to refer to the cash, the shares of Webster Financial's common stock and
any cash to be paid instead of a fraction of a share of Webster Financial's
common stock payable to each holder of Village Bancorp's common stock.
The conversion of Village Bancorp's common stock into cash and/or shares of
Webster Financial's common stock at the exchange ratio will occur automatically
upon the merger. Pursuant to the merger agreement, after the effective time of
the merger, Webster Financial will cause its exchange agent to pay the purchase
price to each Village Bancorp shareholder who surrenders the appropriate
documents to the exchange agent.
ELECTION FORM AND EXCHANGE OF SHARES
We have prepared an election form which was sent to you with this proxy
statement/prospectus. You should use the election form to indicate whether you
want to receive cash and/or shares of Webster Financial's common stock in
exchange for the shares of Village Bancorp's common stock that you own. If you
held Village Bancorp common stock on _______ __, 1999, you are eligible to
submit an election form for the shares that you owned at the close of business
on that day. If you have lost your election form, call or write to James R.
Umbarger, Executive Vice President of Village Bancorp, Inc., 25 Prospect Street,
P. O. Box 366, Ridgefield, Connecticut 06877, telephone (203) 438-9551 as soon
as possible so that Village Bancorp can send you a replacement election form.
In the election form, you need to specify the number of shares that you
owned on _______ __, 1999 that you want to be converted into the right to
receive cash in the merger and the number of shares that you owned on that day
that you want to be converted into the right to receive shares of Webster
Financial's common stock in the merger. IF YOU DO NOT SUBMIT A PROPERLY
COMPLETED ELECTION FORM, YOU EFFECTIVELY ARE CHOOSING TO RECEIVE ONLY WEBSTER
FINANCIAL'S COMMON STOCK IN THE MERGER UNLESS YOU DISSENT FROM THE MERGER.
A PROPERLY COMPLETED ELECTION FORM WILL BE EFFECTIVE ONLY IF WEBSTER
FINANCIAL'S EXCHANGE AGENT RECEIVES THE FOLLOWING DOCUMENTS NO LATER THAN 5:00
P.M. NEW YORK CITY TIME ON ________ ___, 1999: (1) your election form, executed
and completed in accordance with the instructions contained in the election form
and (2) your Village Bancorp common stock certificate(s) and the related
letter(s) of transmittal with the endorsements, stock powers and signature
guarantees that may be required by the letter of transmittal or a guarantee of
delivery of the certificate(s) that complies with the requirements in the letter
of transmittal, provided that the certificate(s) are in fact delivered by the
time set forth in the guarantee of delivery.
Once you submit an election form, you can revoke it by delivering one of
the following documents to the exchange agent prior to 5:00 p.m. on _______ __,
1999: (1) a written notice of
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revocation, if you want to revoke completely your previously submitted election
form, or (2) a properly completed revised election form that identifies the
certificate(s) to which the revised election form applies, if you want to change
your previous election but not revoke it completely. If you deliver a revised
election form for any Village Bancorp common stock certificate to the exchange
agent prior to 5:00 p.m. on _______ __, 1999, you will revoke all prior election
forms for all shares evidenced by that certificate. Unless you give the exchange
agent different instructions, if you revoke an election form, the exchange agent
will send you any certificates previously delivered to the exchange agent which
relate to that election form.
If the merger agreement is terminated, all election forms delivered to the
exchange agent will be revoked and the exchange agent will send your Village
Bancorp common stock certificates that were previously sent to the exchange
agent to you.
As soon as practicable after the effective time of the merger, the exchange
agent will mail a letter of transmittal and instructions for use in surrendering
certificates to each shareholder who held Village Bancorp's common stock
immediately before the effective time who did not submit an effective election
form.
Webster Financial will deposit with the exchange agent the cash and
certificates representing the total number of shares of Webster Financial common
stock to be issued to Village Bancorp shareholders in exchange for Village
Bancorp's common stock, along with cash to be paid instead of fractional shares.
The exchange agent will not be obligated to deliver the purchase price to any
shareholder until the holder surrenders the certificate(s) representing shares
of Village Bancorp's common stock for exchange, or, if not available, an
appropriate affidavit of loss and indemnity agreement and/or a bond that may be
required by Webster Financial. No dividends or distributions on Webster
Financial's common stock payable to any Village Bancorp shareholder will be paid
until the shareholder surrenders the certificate(s) representing the shares of
Village Bancorp's common stock for exchange. No interest will be paid or accrued
to Village Bancorp shareholders on cash instead of fractional shares or unpaid
dividends and distributions, if any.
If any certificate representing shares of Webster Financial's common stock
is to be issued in a name other than that in which the certificate for shares
surrendered in exchange is registered or cash is to be paid to a person other
than the registered holder, it shall be a condition of issuance or payment that
the certificate so surrendered be properly endorsed or otherwise be in proper
form for transfer and that the person requesting the exchange either (i) pay to
the exchange agent in advance any transfer or other taxes required by reason of
the issuance of a certificate or payment to a person other than the registered
holder of the certificate surrendered or (ii) establish to the satisfaction of
the exchange agent that the tax has been paid or is not payable. After the close
of business on the day before the merger takes place, there will be no transfers
on Village Bancorp's stock transfer books of shares of Village Bancorp's common
stock, and any shares of this kind that are presented to the exchange agent
after the merger takes place will be canceled and exchanged for certificates for
shares of Webster Financial's common stock.
Any portion of the purchase price made available to the exchange agent that
remains unclaimed by Village Bancorp shareholders for one year after the
effective time of the merger will be returned to Webster Financial. Any Village
Bancorp shareholder who has not exchanged shares of Village Bancorp's common
stock for the purchase price in accordance with the merger agreement before that
time may look only to Webster Financial for payment of the purchase price for
these shares and any unpaid dividends or distributions after that time.
Nonetheless, Webster Financial, Village Bancorp, the exchange agent or any other
person will not be liable to any Village Bancorp shareholder for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
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STOCK CERTIFICATES FOR SHARES OF VILLAGE BANCORP'S COMMON STOCK SHOULD NOT
BE RETURNED TO VILLAGE BANCORP WITH THE ENCLOSED PROXY CARD. IF YOU WANT TO
RECEIVE CASH FOR SOME OR ALL OF YOUR VILLAGE BANCORP SHARES, YOU SHOULD COMPLETE
AN ELECTION FORM AND SEND YOUR VILLAGE BANCORP STOCK CERTIFICATES TO WEBSTER
FINANCIAL'S EXCHANGE AGENT. IF YOU DO NOT SUBMIT AN ELECTION FORM, AFTER THE
MERGER TAKES PLACE, YOU WILL RECEIVE INSTRUCTIONS ON HOW TO EXCHANGE YOUR
VILLAGE BANCORP CERTIFICATES FOR WEBSTER FINANCIAL CERTIFICATES.
OPTIONS
As of _______ __, 1999, there were outstanding options to purchase _____
shares of Village Bancorp's common stock at an average exercise price of $___
per share. Under the merger agreement, shares of Village Bancorp's common stock
issued prior to when the merger takes place upon the exercise of outstanding
Village Bancorp options will be converted into Webster Financial's common stock
at the exchange ratio. Each Village Bancorp option that is not exercised
immediately prior to the effective time of the merger automatically will be
converted into an option to purchase shares of Webster Financial's common stock,
with adjustment in the number of shares and exercise price to reflect the
exchange ratio. The adjustment will be made in a manner consistent with Section
424(a) of the Internal Revenue Code of 1986. The duration and other terms of the
Village Bancorp options will otherwise be unchanged.
REGULATORY APPROVALS
For the merger of Webster Financial and Village Bancorp and the merger of
Webster Bank and Village Bank to take place, we must receive approvals of the
Office of Thrift Supervision, referred to in this section as the OTS, and the
Connecticut Commissioner of Banking, and the approval or waiver of the Board of
Governors of the Federal Reserve System. In this section, we refer to these
approvals as the required regulatory approvals. Webster Financial and Village
Bancorp have agreed to use their best efforts to obtain the required regulatory
approvals.
Webster Bank will file with the OTS an application for approval of the
merger of Webster Bank and Village Bank. We refer to that merger in this section
as the bank merger. The bank merger is subject to the approval of the OTS under
the Home Owners' Loan Act of 1933, the Bank Merger Act provisions of the Federal
Deposit Insurance Act and related OTS regulations. These approvals require
consideration by the OTS of various factors, including assessments of the
competitive effect of the contemplated transactions, the managerial and
financial resources and future prospects of the resulting institutions, and the
effect of the contemplated transactions on the convenience and needs of the
communities to be served. The Community Reinvestment Act of 1977, referred to in
this section as the CRA, also requires that the OTS, in deciding whether to
approve the bank merger, assess the records of performance of Webster Bank and
Village Bank in meeting the credit needs of the communities they serve,
including low and moderate income neighborhoods. As part of the review process,
it is not unusual for the OTS to receive protests and other adverse comments
from community groups and others. Webster Bank currently has an outstanding CRA
rating from the OTS. Village Bank currently has a satisfactory CRA rating from
the Federal Deposit Insurance Corporation. The OTS regulations require
publication of notice and an opportunity for public comment concerning the
applications filed in connection with the bank merger, and authorize the OTS to
hold informal and formal meetings in connection with the applications if the
OTS, after reviewing the applications or other materials, determines it
desirable to do so or receives a request for an informal meeting. Any meeting or
comments provided by third parties could prolong the period during which the
bank merger is subject to review by the OTS. As of the date of this proxy
statement/prospectus, Webster Financial is not aware of any protests, adverse
comments or requests for a meeting filed with the OTS concerning the bank
merger. The bank merger may not take place for a period of 15 to 30 days
following OTS approval, during which time the Department of Justice has
authority to challenge the bank merger on antitrust grounds. The precise length
of the period will be determined by the OTS in consultation with the Department
of Justice. The commencement
21
of an antitrust action would stay the effectiveness of any approval granted by
the OTS unless a court specifically orders otherwise. If the Department of
Justice does not start a legal action during the waiting period, it may not
challenge the transaction afterward, except in an action under Section 2 of the
Sherman Antitrust Act.
An acquisition statement will be filed with the Connecticut Commissioner of
Banking in connection with Webster Financial's acquisition of Village Bancorp
and Village Bank, the merger and bank merger. In reviewing the acquisition
statement, the Connecticut Commissioner will review and consider, among other
things, whether the investment and lending policies of Webster Bank are
consistent with safe and sound banking practices and will benefit the economy of
the state, whether the services or proposed services of Webster Bank are
consistent with safe and sound banking practices and will benefit the economy of
the state, the competitive effects of the transaction, and the financial and
managerial resources of Webster Financial and Webster Bank. The Connecticut
Commissioner also will review Webster Bank's record under the CRA. The
Connecticut Commissioner may, at his discretion, hold a public hearing on the
proposed transaction.
Webster Financial also will request from the Board of Governors of the
Federal Reserve System a waiver of any application filing requirement under the
Bank Holding Company Act of 1956 that would otherwise apply to the merger.
Webster Financial and Village Bancorp are not aware of any other material
governmental approvals that are required for the merger and the bank merger to
take place that are not described above. If any other approval or action is
required, we presently expect that we would seek the approval or take the
necessary action.
THE MERGER AND THE BANK MERGER CANNOT TAKE PLACE WITHOUT THE REQUIRED
REGULATORY APPROVALS, WHICH WE HAVE NOT RECEIVED YET. THERE IS NO ASSURANCE THAT
WE WILL RECEIVE THESE APPROVALS, AND IF WE DO, WHEN WE WILL RECEIVE THEM. ALSO,
THERE IS NO ASSURANCE THAT THE DEPARTMENT OF JUSTICE WILL NOT CHALLENGE THE
MERGER, OR, IF A CHALLENGE IS MADE, WHAT THE RESULT OF A CHALLENGE WOULD BE.
CONDITIONS TO THE MERGER
Under the merger agreement, Webster Financial and Village Bancorp are not
required to complete the merger unless the following conditions are satisfied:
(i) the merger agreement is not terminated on or before the effective time of
the merger; (ii) the merger agreement and the merger are approved by the
affirmative vote of the holders of at least two-thirds of the issued and
outstanding shares of Village Bancorp's common stock entitled to vote at the
shareholder meeting; (iii) the Webster Financial common stock to be issued in
the merger is authorized for quotation on the Nasdaq Stock Market's National
Market Tier; (iv) all required regulatory approvals are obtained and remain in
full force and effect, all statutory waiting periods related to these approvals
expire, and none of the regulatory approvals contains a non-customary condition
that Webster Financial reasonably considers to be burdensome or which alters the
benefits for which Webster Financial bargained in the merger agreement; (v) the
registration statement filed with the SEC is effective and is not subject to a
stop order or any threatened stop order; (vi) no injunction preventing the
merger from taking place is in effect and completing the merger continues to be
legal; and (vii) Webster Financial and Village Bancorp receive a favorable tax
opinion from Webster Financial's counsel.
Webster Financial is not required to complete the merger unless the
following additional conditions are satisfied or waived: (i) the representations
and warranties of Village Bancorp contained in the merger agreement are true and
correct as of the date of the merger agreement and as of the effective time of
the merger, except where the failure or failures to be true and correct would
not have a material adverse effect on Village Bancorp; (ii) Village Bancorp
performs in all material respects all covenants and agreements contained in the
merger agreement to be performed
22
by Village Bancorp by the effective time; (iii) Village Bancorp and Village Bank
obtain the consents, approvals or waivers of other persons that are required in
connection with the merger agreement or to permit the succession by the
surviving corporation or the surviving bank under any lease or other agreement,
except where the failure or failures to obtain consents, approvals or waivers
would not have a material adverse effect on the surviving corporation or the
surviving bank; (iv) no proceeding initiated by any governmental entity seeking
an injunction preventing the merger from taking place is pending; and (v)
Webster Financial receives a comfort letter of Village Bancorp's independent
public accountants.
Village Bancorp is not required to complete the merger unless the following
additional conditions are satisfied or waived: (i) the representations and
warranties of Webster Financial contained in the merger agreement are true and
correct as of the date of the merger agreement and as of the effective time of
the merger, except where the failure or failures to be true and correct would
not have a material adverse effect on Webster Financial; (ii) Webster Financial
performs in all material respects all covenants and agreements contained in the
merger agreement required to be performed by it by the effective time; (iii)
Webster Financial and Webster Bank obtain the consents, approvals or waivers of
other persons that are required in connection with the merger agreement under
any lease or other agreement to which Webster Financial or Webster Bank is a
party or otherwise bound, except where the failure or failures to obtain
consents, approvals or waivers would not have a material adverse effect; and
(iv) no proceeding initiated by any governmental entity seeking an injunction
preventing the merger from taking place is pending.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement contains various restrictions on the operations of
Village Bancorp prior to the effective time of the merger. In general, the
merger agreement obligates Village Bancorp to continue to carry on its
businesses in the ordinary course consistent with past practices and with
prudent banking practices, with specific limitations on the lending activities
and other operations of Village Bancorp. The merger agreement prohibits Village
Bancorp from declaring any dividends or other distributions on its capital stock
other than regular quarterly cash dividends on Village Bancorp's common stock
and splitting, combining or reclassifying any of its capital stock. Village
Bancorp may not issue or authorize or propose the issuance of any securities,
other than the issuance of additional shares of Village Bancorp's common stock
upon the exercise or fulfillment of rights or options issued or existing under
Village Bancorp's stock option plan in accordance with their present terms or
the option for 388,466 shares of Village Bancorp's common stock held by Webster
Financial. Village Bancorp generally may not repurchase shares of its capital
stock. Also, under the terms of the merger agreement, Village Bancorp may not
amend its articles of incorporation or bylaws, or change its methods of
accounting in effect at December 31, 1997, except as required by changes in
regulatory or generally accepted accounting principles. The merger agreement
also restricts Village Bancorp from increasing employee or director benefit
arrangements or compensation, other than normal annual increases in pay for
employees consistent with past practices, including the granting of stock
options and entering into any new employment or severance agreements. It also
restricts Village Bancorp from paying any bonuses other than specified types of
bonuses.
THIRD PARTY PROPOSALS
Under the merger agreement, Village Bancorp generally may not authorize or
permit any of its officers, directors, employees or agents to solicit, initiate
or encourage any inquiries relating to any third party takeover proposal or hold
substantive discussions or negotiations regarding this kind of proposal. There
is a similar prohibition on providing third parties with information that
relates to this kind of inquiry or proposal, unless the Village Bancorp board of
directors, based on advice of counsel, reasonably determines in the exercise of
its fiduciary duty that this kind of information must be furnished.
23
EXPENSES; BREAKUP FEE
The merger agreement generally provides for Webster Financial and Village
Bancorp to pay their own expenses relating to the merger agreement, with Webster
Financial paying the filing and other fees paid to the SEC. However, if the
merger agreement is terminated by Webster Financial or Village Bancorp as a
result of a material breach of a representation, warranty, covenant or other
agreement contained in the merger agreement by the other party, or if Webster
Financial terminates the merger agreement because Village Bancorp (i) fails to
hold the shareholder meeting on a timely basis, (ii) fails to recommend to its
shareholders approval of the merger agreement, (iii) fails to oppose any third
party proposal that is inconsistent with the merger agreement, or (iv) violates
the merger agreement's restriction on discussions and negotiations with third
parties regarding acquisition transactions, the merger agreement provides for
the non-terminating party to pay all reasonable expenses of the terminating
party up to $200,000, plus a breakup fee of $400,000. If the merger agreement is
terminated by Webster Financial because Village Bancorp fails to obtain the
approval of its shareholders necessary to complete the merger, Webster Financial
is entitled to have all of its reasonable expenses up to $200,000 paid by
Village Bancorp. If a specified third party public event occurs prior to the
shareholder meeting and Village Bancorp fails to obtain the approval of its
shareholders, Webster Financial is entitled to have all of its reasonable
expenses up to $200,000, plus a breakup fee of $400,000, paid by Village
Bancorp. Some of the events described in this section that would permit Webster
Financial to terminate the merger agreement also would constitute preliminary
purchase events under the option agreement. The option agreement provides that
if Webster Financial exercises the option for 388,466 shares of Village
Bancorp's common stock granted to Webster Financial by Village Bancorp and sells
option shares to an unaffiliated third party, expenses and any break up fee paid
by Village Bancorp to Webster Financial under the merger agreement could be
refunded partially or fully to Village Bancorp. See "-- Option Agreement."
OPINION OF VILLAGE BANCORP'S FINANCIAL ADVISOR
Pursuant to an April 21, 1998 engagement letter Village Bancorp retained
Morgan Lewis Githens & Ahn, Inc., referred to in this section as Morgan Lewis,
as an independent financial advisor. Morgan Lewis is a nationally recognized
investment banking firm. As part of its investment banking business, Morgan
Lewis is regularly engaged in the valuation of bank and bank holding company
securities in connection with mergers and acquisitions and other corporate
transactions. As Village Bancorp's financial advisor, Morgan Lewis was involved
in the discussions with various financial institutions that resulted in the
negotiations and offer by Webster Financial, which led to the merger agreement.
Village Bancorp's board of directors asked Morgan Lewis, as its financial
advisor, to render its opinion as to the fairness from a financial point of view
of the merger consideration. At the November 9, 1998 meeting at which Village
Bancorp's board approved the merger agreement, Morgan Lewis delivered its oral
opinion to Village Bancorp's board that as of November 9, 1998, the merger
consideration was fair from a financial point of view to Village Bancorp's
shareholders. Morgan Lewis subsequently confirmed its oral opinion in a written
opinion dated November 11, 1998, which was the date when the merger agreement
was executed.
Morgan Lewis has delivered to Village Bancorp's board an updated written
opinion, dated __________ __, 1999 which states that the merger consideration is
fair from a financial point of view to Village Bancorp's shareholders. The
updated fairness opinion describes the procedures followed, assumptions made,
matters considered and qualifications and limitations on the review undertaken
by Morgan Lewis. The updated opinion is attached as Appendix A to this proxy
statement/prospectus and is incorporated by reference into this document. The
description of the Morgan Lewis opinion in this section is qualified in its
entirety by reference to Appendix A. WE URGE VILLAGE BANCORP SHAREHOLDERS TO
READ THE FAIRNESS OPINION IN ITS ENTIRETY IN CONSIDERING THE PROPOSED MERGER.
24
The Morgan Lewis fairness opinion was provided to Village Bancorp's board
for its information and is directed only to the fairness from a financial point
of view of the merger consideration. It does not address the underlying business
decision of Village Bancorp to engage in the merger or any other aspect of the
merger. It does not constitute a recommendation to any holder of shares of
Village Bancorp's common stock as to how a shareholder should vote at the
shareholder meeting with respect to the merger agreement or any other matter.
In connection with rendering its opinion, Morgan Lewis performed a variety
of financial analyses. The following is a summary of these analyses, but does
not purport to be a complete description of the analyses. The preparation of a
fairness opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analyses or summary description. Morgan Lewis
believes that its analyses must be considered as a whole and that focusing on
portions of its analyses and factors considered without considering all factors
and analyses could create an incomplete view of the analyses and processes
underlying its opinion.
In performing its analyses, Morgan Lewis made numerous assumptions with
respect to industry performance, business and economic conditions, and various
other matters, many of which cannot be predicted and are beyond the control of
Village Bancorp, Webster Financial and Morgan Lewis. The estimates contained in
the analyses of Morgan Lewis are not necessarily indicative of future results or
values, which may be significantly more or less favorable than the estimates.
Estimates of the values of companies do not purport to be appraisals of or
necessarily reflect the prices at which companies or their securities actually
may be sold. Because these kinds of estimates are inherently subject to
uncertainty, Village Bancorp, Webster Financial and Morgan Lewis do not assume
responsibility for their accuracy.
STOCK TRADING HISTORY. Morgan Lewis reviewed the historical trading prices
and volumes for Village Bancorp's common stock for the one-year period ending
October 10, 1998 and compared these prices to the performance of the Standard
and Poor's Index, as well as a select group of small-cap banks during the same
period.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. Using publicly available
information, Morgan Lewis compared selected financial and market trading
information, including balance sheet composition, asset quality ratios, loan
loss reserve levels, profitability, capital adequacy, dividends and trading
multiples, for Village Bancorp and for a group of publicly traded companies that
Morgan Lewis deemed to be similar to Village Bancorp in some respects. This
group of companies consisted of Cornerstone Bank, First International Bancorp,
Inc., New England Community Bancorp, Inc., NMBT Corporation and NewMil Bancorp,
Inc.
Morgan Lewis also used publicly available information to perform a similar
comparison of selected financial and market trading information for Webster
Financial and for a group of publicly traded companies that Morgan Lewis deemed
to be similar to Webster Financial in some respects. This group of companies
consisted of BankBoston Corporation, Fleet Financial Group, Inc., Greenpoint
Financial Corporation, HUBCO, Inc. and Summit Bancorp.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Morgan Lewis reviewed publicly
available information regarding 32 selected business combinations since
September 1997 in the banking industry. Morgan Lewis reviewed the ratios of
price to last twelve months earnings per share, price to tangible book value,
price to book value, tangible book premium to core deposits, price to total
assets and price to total deposits in each transaction and computed high, low,
mean, and median ratios and premiums for the respective groups of transactions.
These multiples were applied to Village Bancorp's financial information as of
September 30, 1998 and for the fiscal 1998 and 1999 projected periods. Based
upon the median multiples for these transactions, the implied per share value of
Village Bancorp's common stock ranged from approximately $20.65 to approximately
$23.50.
25
DISCOUNTED CASH FLOW AND TERMINAL VALUE ANALYSIS. Morgan Lewis also
performed a discounted cash flow analysis which estimated the future stream of
Village Bancorp's cash flow and after-tax dividends, referred to in this section
as free cash flow, under various scenarios, assuming that Village Bancorp
performed in accordance with the earnings forecasts of its management. To
approximate the value of Village Bancorp's common stock at the end of the
five-year period, Morgan Lewis applied price to earnings multiples ranging from
14.5x to 16.5x. The free cash flows and terminal values were then discounted to
present values using different discount rates ranging from 10% to 14% chosen to
reflect different assumptions regarding required rates of return to holders or
prospective buyers of Village Bancorp's common stock. This analysis, assuming
the current dividend payout ratio, indicated an imputed range of values per
share of Village Bancorp's common stock between $21.50 and $23.80. In connection
with its analysis, Morgan Lewis extensively used sensitivity analyses to
illustrate the effects that changes in the underlying assumptions would have on
the resulting present value and discussed these changes with Village Bancorp's
board. These sensitivity analyses included variations with respect to the growth
rate of assets, net interest spread, non-interest income, non-interest expenses
and dividend payout ratio.
PRO FORMA MERGER ANALYSIS. Morgan Lewis performed pro forma merger analyses
that combined Webster Financial's and Village Bancorp's current estimated income
statements and balance sheets based on projections provided by the management of
Webster Financial and Village Bancorp. Assumptions and analyses of the economic
environment, accounting treatment, acquisition adjustments, operating
efficiencies, balance sheet enhancements, and other adjustments were used to
arrive at a base case pro forma analysis to determine the pro forma effect of
the merger on Webster Financial. In analyzing the projections of Webster
Financial's pro forma earnings per share and tangible book value per share,
Morgan Lewis used an exchange ratio of .8545 shares of Webster Financial's
common stock for each share of Village Bancorp's common stock, which is the
ratio that would apply if the 15 day average closing price of Webster
Financial's common stock is greater than $27.50. This analysis indicated that
the merger would be accretive to Webster Financial's earnings per share in each
of the years ended 1999 and 2000, and slightly dilutive to tangible book value
per share for all periods analyzed. Based upon the same assumptions, this
analysis indicated that the merger would be accretive to a Village Bancorp
shareholder's earnings per share and tangible book value per share when compared
to Village Bancorp's stand alone projections. This analysis was based on
estimates of expected cost savings and other consolidation efficiencies to be
achieved following the merger, and numerous other assumptions, including
assumptions with respect to the anticipated expenses and non-recurring charges
to be incurred by Webster Financial in connection with the merger. Village
Bancorp shareholders should be aware that if the merger takes place, actual
results achieved by the combined company will vary from the estimated results
and the variations may be material.
In connection with rendering its opinion, Morgan Lewis reviewed, among
other things: (i) the merger agreement and its exhibits; (ii) the option
agreement; (iii) Webster Financial's audited consolidated financial statements
and management's discussion and analysis of financial condition and results of
operations contained in its Annual Reports on Form 10-K for the three years
ended December 31, 1997; (iv) Village Bancorp's audited consolidated financial
statements and management's discussion and analysis of financial condition and
results of operations contained in its Annual Reports on Form 10-K for the three
fiscal years ended December 31, 1997; (v) Webster Financial's unaudited
consolidated financial statements and management's discussion and analysis of
the financial condition and results of operations contained in its Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998; (vi) Village Bancorp's unaudited consolidated financial
statements and management's discussion and analysis of financial condition and
results of operations contained in its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998; (vii)
particular information provided by Village Bancorp's management including
financial forecasts relating to the business, earnings, cash flow, assets and
prospects of Village Bancorp; (viii) particular information provided by Webster
26
Financial's management, including financial forecasts relating to the business,
earnings, cash flow, assets and prospects of Webster Financial; (ix) the views
of Village Bancorp's senior management regarding Village Bancorp's past and
current business operations, results of operations, financial condition and
future prospects; (x) the views of Webster Financial's senior management
regarding Webster Financial's past and current business operations, results of
operations, financial condition, and future prospects; (xi) the publicly
reported historical market price and trading activity for Webster Financial's
common stock and Village Bancorp's common stock, including a comparison of
particular financial and stock market information for Webster Financial and
Village Bancorp with similar publicly available information for other companies
with publicly traded securities; (xii) a comparison of Village Bancorp's results
of operations with those of companies that Morgan Lewis deemed to be reasonably
similar to Village Bancorp; (xiii) a comparison of the proposed financial terms
of the merger with the financial terms of other mergers and acquisitions that
Morgan Lewis deemed to be relevant; and (xiv) other information, financial
studies, analyses and investigations, and financial, economic, and market
criteria as Morgan Lewis considered relevant.
In preparing its opinion, Morgan Lewis relied on the accuracy and
completeness of all the information supplied or otherwise made available to it
by Village Bancorp or Webster Financial, and did not independently verify that
information or make an independent appraisal or evaluation of the assets or
liabilities of Village Bancorp or Webster Financial. With respect to the
financial forecasts furnished by Village Bancorp, Morgan Lewis assumed that they
were reasonably prepared and reflected the best currently available estimates
and judgments of Village Bancorp's management as to the expected future
financial performance of Village Bancorp. Morgan Lewis also assumed that there
has been no material change in Village Bancorp's and Webster Financial's assets,
financial condition, results of operations, business or prospects since the date
of the last financial statements noted above. Morgan Lewis also assumed that the
merger will be free of federal tax to Village Bancorp, Webster Financial and the
Village Bancorp's shareholders except for any cash consideration and any cash
paid instead of fractional shares.
COMPENSATION OF FINANCIAL ADVISOR. Under the Morgan Lewis engagement
letter, Village Bancorp will pay Morgan Lewis a transaction fee related to the
merger, a substantial portion of which is contingent on the merger taking place.
The engagement letter provides that this fee will equal 1 3/4% of the total
consideration paid to Village Bancorp's shareholders in the merger up to $50
million, and 1% of the value of the consideration in excess of $50 million. The
engagement letter provides for an annual retainer fee of $100,000, to be paid
quarterly in advance by Village Bancorp to Morgan Lewis. Village Bancorp also
has agreed to pay Morgan Lewis a fee of $50,000 for rendering the fairness
opinion. The annual retainer fee and the fee for the fairness opinion will be
credited against the fee paid in relation to the merger. Village Bancorp has
agreed to reimburse Morgan Lewis for its reasonable out-of-pocket expenses
related to its engagement and to indemnify Morgan Lewis and its affiliates and
their respective partners, directors, officers, employees, agents, and
controlling persons against specified expenses and liabilities, including
liabilities under securities laws. In the past, Morgan Lewis provided other
investment banking services to Village Bancorp and has received its customary
compensation for those services.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Village Bancorp made representations and
warranties to Webster Financial. The material representations and warranties of
Village Bancorp are the following: (i) the organization and good standing of
Village Bancorp and Village Bank; (ii) insurance of Village Bank's deposit
accounts by the Federal Deposit Insurance Corporation; (iii) capitalization and
subsidiaries; (iv) corporate power and authority; (v) the execution and delivery
of the merger agreement, the bank merger agreement and the option agreement;
(vi) consents and approvals required for the agreements and the merger; (vii)
loan portfolio and reports; (viii) financial statements, exchange act filings
and books and records; (ix) broker's fees; (x) absence of any material adverse
change in Village Bancorp; (xi) legal proceedings; (xii) tax matters; (xiii)
employee benefit plans; (xiv) particular types
27
of contracts; (xv) regulatory matters; (xvi) state takeover laws and articles of
incorporation takeover provisions; (xvii) environmental matters; (xviii) loss
reserves; (xix) properties and assets; (xx) insurance matters; (xxi) compliance
with applicable laws; (xxii) loan information; (xxiii) affiliates and the
stockholder agreement; (xxiv) ownership of Webster Financial's common stock;
(xxv) the Village Bancorp rights agreement; (xxvi) receipt of the fairness
opinion of Morgan Lewis Githens & Ahn, Inc.; (xxvii) Year 2000 compliance; and
(xviii) intellectual property.
In the merger agreement, Webster Financial made representations and
warranties to Village Bancorp. The material representations and warranties of
Webster Financial are the following: (i) the organization and good standing of
Webster Financial and the chartering of Webster Bank; (ii) capitalization; (iii)
corporate power and authority; (iv) the execution and delivery of the merger
agreement, the bank merger agreement and the option agreement; (v) consents and
approvals required for the agreements and the merger; (vi) reports; (vii)
financial statements, exchange act filings and books and records; (viii) absence
of any material adverse change in Webster Financial; (ix) legal proceedings; (x)
tax matters; (xi) employee benefit plans; (xii) compliance with applicable laws;
(xiii) regulatory matters; and (xiv) Year 2000 compliance.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
The merger agreement may be terminated by Webster Financial or Village
Bancorp as long as the terminating party is not in violation of the merger
agreement as summarized below:
o by mutual written consent of Webster Financial and Village
Bancorp;
o by Webster Financial or Village Bancorp if (a) 30 days pass after
any required regulatory approval is denied or regulatory
application is withdrawn at a regulator's request unless action
is taken during the 30 day period for a rehearing or to file an
amended application; (b) the merger has not taken place on or
before August 31, 1999; or (c) Village Bancorp's shareholders do
not approve the merger agreement;
o by Webster Financial, if there is a breach of any representation,
warranty, covenant or agreement in the merger agreement by
Village Bancorp, if the breach or breaches would have a material
adverse effect on Village Bancorp and the breach is not cured
within 30 days after receiving notice of the breach;
o by Village Bancorp, if there is a breach of any representation,
warranty, covenant or agreement in the merger agreement by
Webster Financial, if the breach or breaches would have a
material adverse effect on Webster Financial and the breach is
not cured within 30 days after receiving notice of the breach;
o by Webster Financial, if Village Bancorp or its board of
directors (a) fails to hold the shareholder meeting on a timely
basis; (b) fails to recommend to Village Bancorp's shareholders
approval of the merger agreement and the merger; (c) fails to
oppose any third party proposal that is inconsistent with the
merger agreement; or (d) violates the merger agreement's
restriction on inquiries, discussions, negotiations and providing
information to third parties regarding acquisition transactions;
and
o by Village Bancorp, if the average closing market price for a
specified 15 day period is less than $17.55 unless Webster
Financial decides that the exchange
28
ratio will be adjusted to equal the number obtained by dividing
$21.15 by the 15 day average trading price, rounded to four
decimal places.
The merger agreement also permits, subject to applicable law, the boards of
directors of Webster Financial and Village Bancorp to: (i) amend the merger
agreement except as provided below; (ii) extend the time for performance of any
of the obligations or other acts of the other party; (iii) waive any
inaccuracies in the representations and warranties contained in the merger
agreement or in any document delivered under the merger agreement; or (iv) waive
compliance with any of the agreements or conditions contained in the merger
agreement. After approval of the merger agreement by Village Bancorp's
shareholders, no amendment of the merger agreement may be made without further
shareholder approval if the amendment would reduce the amount or change the form
of the consideration to be delivered to Village Bancorp's shareholders under the
merger agreement.
FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material federal income tax
consequences of the merger. The summary is based on the Internal Revenue Code of
1986, as amended, referred to in this section as the Code, applicable U.S.
Treasury regulations under the Code, administrative rulings and judicial
authority, all as of the date of this proxy statement/prospectus. All of the
foregoing authorities are subject to change, and any change could affect the
continuing validity of this summary. The summary assumes that the holders of
shares of Village Bancorp's common stock hold their shares as a capital asset.
The summary does not address the tax consequences that may be applicable to
particular Village Bancorp shareholders in light of their individual
circumstances or to Village Bancorp shareholders who are subject to special tax
rules, like tax-exempt organizations, dealers in securities, financial
institutions, insurance companies, non-United States persons, shareholders who
acquired shares of Village Bancorp's common stock pursuant to the exercise of
options or otherwise as compensation or through a qualified retirement plan and
shareholders who hold shares of Village Bancorp's common stock as part of a
straddle, hedge, or conversion transaction. This summary also does not address
any consequences arising under the tax laws of any state, locality, or foreign
jurisdiction.
One of the conditions for the merger to take place is that Webster
Financial and Village Bancorp must receive an opinion from Hogan & Hartson
L.L.P., Webster Financial's special counsel, that the merger will be treated for
federal income tax purposes as a tax-free reorganization within the meaning of
Section 368(a) of the Code. The opinion of Hogan & Hartson L.L.P. will be based
on the Code, the U.S. Treasury regulations promulgated under the Code and
related administrative interpretations and judicial decisions, all as in effect
as of the effective time of the merger, on the assumption that the merger takes
place as described in the merger agreement, and on representations to be
provided to Hogan & Hartson L.L.P. by Webster Financial and Village Bancorp that
relate to the satisfaction of specific requirements to a reorganization within
the meaning of Section 368(a) of the Code, including limitations on repurchases
by Webster Financial of shares of Webster Financial's common stock to be issued
upon the merger. Unlike a ruling from the Internal Revenue Service, an opinion
of counsel is not binding on the Internal Revenue Service and there can be no
assurance that the Internal Revenue Service will not take a position contrary to
one or more of the positions reflected in the opinion or that these positions
will be upheld by the courts if challenged by the Internal Revenue Service. If
this opinion is not received, or if the material tax consequences described in
the opinion materially differ from the consequences stated below, we will not
close the merger unless Village Bancorp resolicits shareholders.
If, as concluded in the opinion of counsel, the merger qualifies as a
tax-free reorganization within the meaning of Section 368(a) of the Code, then:
29
(1) Except as discussed in (6) below with respect to cash received in
lieu of fractional shares, a Village Bancorp shareholder who
exchanges his or her Village Bancorp common stock solely for
Webster Financial's common stock pursuant to the merger will
recognize no gain or loss on the exchange.
(2) A Village Bancorp shareholder who exchanges his or her Village
Bancorp common stock solely for cash, whether pursuant to an
election to receive cash in the exchange or pursuant to the
exercise of dissenters' rights, will recognize either gain, loss
or ordinary income on the difference between the shareholder's
adjusted basis in his or her Village Bancorp common stock and the
amount of cash received. Because the classification of the amount
recognized as either gain, loss or ordinary income can vary
between shareholders, Village Bancorp shareholders should consult
their own tax advisors to determine the specific tax consequences
to them.
(3) A Village Bancorp shareholder who exchanges his or her Village
Bancorp common stock for a combination of Webster Financial
common stock and cash (i) will not recognize any loss on the
exchange and (ii) will recognize either gain or ordinary income
to the extent of the lesser of the amount of cash received and
the excess of the fair market value of the Webster Financial
common stock and cash received over the Village Bancorp
shareholder's tax basis in the Village Bancorp common stock
surrendered. Because the classification of the amount recognized
as either gain or ordinary income can vary between shareholders,
Village Bancorp shareholders should consult their own tax
advisors to determine the specific tax consequences to them.
(4) The aggregate tax basis of Webster Financial's common stock
received by a Village Bancorp shareholder in the merger will be
the same as the shareholder's aggregate tax basis in Village
Bancorp's common stock surrendered in exchange therefor reduced
by the amount of cash received, if any, and increased by the
amount of gain recognized, if any.
(5) The holding period of Webster Financial's common stock received
by a Village Bancorp shareholder in the merger will include the
holding period of Village Bancorp's common stock surrendered in
exchange therefor, assuming Village Bancorp's common stock was
held as a capital asset.
(6) The receipt by a Village Bancorp shareholder of cash instead of
fractional shares of Webster Financial's common stock will be
treated as if the fractional shares were distributed as part of
the merger and then were redeemed by Webster Financial. These
cash payments will be treated as distributions in full payment in
exchange for the stock redeemed, subject to the conditions and
limitations of Section 302 of the Code.
(7) None of Webster Financial, Webster Bank, Village Bancorp nor
Village Bank will recognize any gain or loss as a result of the
merger.
Unless an exemption applies, the exchange agent will be required to
withhold, and will withhold, 31% of any cash payments to which a Village Bancorp
shareholder or other payee is entitled pursuant to the merger, unless the
shareholder or other payee provides his or her tax identification number (social
security number or employer identification number) and certifies that the number
is correct. Each shareholder and, if applicable, each other payee, is required
to complete and sign the Form W-9 that will be included as part of the
transmittal letter to avoid being subject to
30
backup withholding, unless an applicable exemption exists and is proved in a
manner satisfactory to Webster Financial and the exchange agent.
The federal income tax consequences set forth above are based upon present
law, are for general information only and do not purport to be a complete
analysis or listing of all potential tax effects which may apply to a holder of
Village Bancorp's common stock. The tax effects that are applicable to a
particular holder of Village Bancorp's common stock may be different from the
tax effects that are applicable to other holders of Village Bancorp's common
stock, including the application and effect of state, local and other tax laws,
and thus, holders of Village Bancorp's common stock are urged to consult their
own tax advisors.
As described above in the section titled "-- Options," holders of options
to purchase Village Bancorp's common stock that are outstanding at the effective
time of the merger will have their Village Bancorp options converted into
options to purchase shares of Webster Financial's common stock. The assumption
of the options by Webster Financial should not be a taxable event and former
holders of Village Bancorp options who hold options to purchase Webster
Financial's common stock after the merger should be subject to the same federal
income tax treatment upon exercise of those options as would have applied if
they had exercised their Village Bancorp options.
Holders of Village Bancorp options are urged to consult their own tax
advisors as to the specific tax consequences to them of the merger, including
tax return reporting requirements, available elections, the applicability and
effect of federal, state, local and other applicable tax laws, and the effect of
any proposed changes in the tax laws.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase transaction for accounting
and financial reporting purposes.
RESALES OF WEBSTER FINANCIAL'S COMMON STOCK RECEIVED IN THE MERGER
Webster Financial is registering the sale of the shares of its common stock
to be issued in the merger under the Securities Act of 1933. The shares will be
freely transferable under the Securities Act, except for shares received by
Village Bancorp shareholders who are deemed to be affiliates of Village Bancorp
before the merger or affiliates of Webster Financial. These affiliates may only
resell their shares pursuant to an effective registration statement under the
Securities Act covering the shares, in compliance with Securities Act Rule 145
or under another exemption from the Securities Act's registration requirements.
This proxy statement/prospectus does not cover any resales of Webster
Financial's common stock by Webster Financial or Village Bancorp affiliates.
Affiliates will generally include individuals or entities who control, are
controlled by or are under common control with Village Bancorp or Webster
Financial, and may include officers or directors, as well as principal
shareholders of Village Bancorp or Webster Financial.
DISSENTERS' APPRAISAL RIGHTS
Under Section 33-856 of the Connecticut General Statutes, when shareholder
approval is required for a merger under Section 33-817 of the Connecticut
General Statutes, a shareholder who dissents from the merger is entitled to
assert dissenters' rights under Sections 33-855 to 33-872 of the Connecticut
General Statutes. In this section, we use the term, dissenters' rights to refer
to the rights set forth in those sections of the Connecticut General Statutes.
Because shareholder approval is required for the merger of Webster Financial and
Village Bancorp under Section 33-817, you are entitled to dissent from the
merger. In accordance with Sections 33-855 through 33-872, if the merger takes
place, Village Bancorp shareholders who do not vote in favor of the merger will
have
31
the right to demand the purchase of their shares at their fair value, which
means the value of the shares immediately before the merger takes place,
excluding any increase or decrease in value in anticipation of the merger, if
they fully comply with the provisions of Sections 33-855 to 33-872 of the
Connecticut General Statutes.
This section presents a brief summary of the procedures set forth in
Sections 33-855 to 33-872 which must be followed by holders of shares of Village
Bancorp's common stock who wish to dissent from the merger and demand the
purchase of their shares at their fair value. This summary is qualified in its
entirety by reference to Sections 33-855 to 33-872. A complete text of these
sections is attached to this proxy statement/prospectus as Appendix B.
Dissenting shareholders are advised to seek independent counsel concerning
exercising their dissenters' rights. This proxy statement/prospectus constitutes
notice to holders of shares of Village Bancorp's common stock concerning the
availability of dissenters' rights under Sections 33-855 to 33-872 of the
Connecticut General Statutes.
Dissenting shareholders must satisfy all of the conditions of Sections
33-855 to 33-872. Before the vote on the adoption of the merger agreement occurs
at the shareholder meeting, each dissenting shareholder must give written notice
to the Secretary of Village Bancorp of the shareholder's intent to demand
payment for his shares if the merger takes place. This notice must be in
addition to and separate from any abstention or any vote, in person or by proxy,
cast against approval of the merger.
NEITHER VOTING AGAINST, ABSTAINING FROM VOTING, OR FAILING TO VOTE ON THE
ADOPTION OF THE MERGER AGREEMENT WILL CONSTITUTE NOTICE OF INTENT TO DEMAND
PAYMENT OR DEMAND FOR PAYMENT OF FAIR VALUE WITHIN THE MEANING OF SECTIONS
33-855 TO 33-872.
A dissenting shareholder may NOT vote for approval of the merger agreement.
If a Village Bancorp shareholder returns a signed proxy but does not specify in
the proxy a vote AGAINST adoption of the merger agreement or an instruction to
abstain, the proxy will be voted FOR adoption of the merger agreement, which
will have the effect of waiving the rights of that Village Bancorp shareholder
to have his shares purchased at fair value. Abstaining from voting or voting
against the adoption of the merger agreement will NOT constitute a waiver of a
shareholder's rights.
After the vote is taken at the shareholder meeting, if the merger is
approved, no later than 10 days after the merger takes place, a dissenters'
notice will be sent to each dissenting shareholder who has given the written
notice described above and did not vote in favor of the merger. The dissenters'
notice will state the results of the vote on the merger agreement, where the
payment demand must be sent, where and when certificates for certificated shares
must be deposited. It will set a date, not fewer than thirty nor more than sixty
days after delivery of the notice, by which the payment demand must be received
from the dissenting shareholder. The notice will include a form for demanding
payment that will require the dissenting shareholder to certify whether or not
the shareholder acquired beneficial ownership of the shares before November 11,
1998. PLEASE NOTE THAT SHARES ACQUIRED AFTER NOVEMBER 11, 1998, REFERRED TO IN
THIS SECTION AS AFTER ACQUIRED SHARES, MAY BE SUBJECT TO DIFFERENT TREATMENT IN
ACCORDANCE WITH SECTION 33-867 OF THE CONNECTICUT GENERAL STATUTES THAN SHARES
ACQUIRED BEFORE THAT DATE. The dissenters' notice also will include a copy of
Sections 33-855 to 33-872 of the Connecticut General Statutes. A dissenting
shareholder who receives a dissenters' notice must comply with the terms of the
notice. A dissenting shareholder who does so by demanding payment, depositing
his certificates in accordance with the terms of the notice and certifying that
beneficial ownership was acquired before November 11, 1998 will retain all other
rights of a shareholder until these rights are canceled or modified by the
merger. A dissenting shareholder who receives a dissenters' notice and does not
comply with the terms of the notice is not entitled to payment for his shares
under Sections 33-855 to 33-872 of the Connecticut General Statutes.
32
Dissenters' rights under Sections 33-855 through 33-872 may be asserted
either by a beneficial shareholder or a record shareholder. A record shareholder
may assert dissenters' rights as to fewer than every share registered in his
name only if he dissents with respect to all shares beneficially owned by any
one person. A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if he submits the record shareholder's written consent
before or at the time he asserts dissenters' rights and he does so for all
shares that he beneficially owns or over which he has the power to direct the
vote.
After the merger takes place, or upon receipt of a payment demand, Webster
Financial will pay each dissenting shareholder who complied with the terms of
the dissenters' notice the amount Webster Financial estimates to be the fair
value of the shares, plus accrued interest. Within 30 days of payment, if a
dissenting shareholder believes that the amount paid is less than the fair value
of the shares or that the interest due is incorrectly calculated, the
shareholder may notify Webster Financial in writing of his own estimate of the
fair value of the shares and interest due. If this kind of claim is made by a
dissenting shareholder, and it cannot be settled, Webster Financial will
petition the court to determine the fair value of the shares and accrued
interest within 60 days after receiving the payment demand.
The costs and expenses of a court proceeding will be determined by the
court and generally are to be assessed against Webster Financial, but these
costs and expenses may be assessed as the court deems equitable against any or
all dissenting shareholders who are parties to the proceeding if the court finds
the action of the dissenting shareholders in failing to accept Webster
Financial's offer was arbitrary, vexatious or not in good faith. These expenses
may include the fees and expenses of counsel and experts employed by the
respective parties.
All written notices of intent to demand payment of fair value should be
sent or delivered to Enrico J. Addessi, Secretary of Village Bancorp, Inc., 25
Prospect Street, P. O. Box 366, Ridgefield, Connecticut 06877. Village Bancorp
suggests that shareholders use registered or certified mail, return receipt
requested, for this purpose.
HOLDERS OF SHARES OF VILLAGE BANCORP'S COMMON STOCK CONSIDERING DEMANDING
THE PURCHASE OF THEIR SHARES AT FAIR VALUE SHOULD KEEP IN MIND THAT THE FAIR
VALUE OF THEIR SHARES DETERMINED UNDER SECTIONS 33-855 TO 33-872 COULD BE MORE,
THE SAME, OR LESS THAN THE MERGER CONSIDERATION THEY ARE ENTITLED TO RECEIVE
PURSUANT TO THE MERGER AGREEMENT IF THEY DO NOT DEMAND THE PURCHASE OF THEIR
SHARES AT FAIR VALUE. ALSO, SHAREHOLDERS SHOULD CONSIDER THE FEDERAL INCOME TAX
CONSEQUENCES OF EXERCISING DISSENTERS' APPRAISAL RIGHTS.
THIS SUMMARY IS NOT A COMPLETE STATEMENT OF THE PROVISIONS OF THE
CONNECTICUT GENERAL STATUTES RELATING TO THE RIGHTS OF DISSENTING HOLDERS OF
SHARES OF VILLAGE BANCORP'S COMMON STOCK AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SECTIONS 33-855 THROUGH 33-872 OF THE CONNECTICUT GENERAL STATUTES,
WHICH ARE ATTACHED AS APPENDIX B TO THIS DOCUMENT. HOLDERS OF SHARES OF VILLAGE
BANCORP'S COMMON STOCK INTENDING TO DEMAND THE PURCHASE OF THEIR SHARES AT FAIR
VALUE ARE URGED TO REVIEW APPENDIX B CAREFULLY AND TO CONSULT WITH LEGAL COUNSEL
SO AS TO BE IN STRICT COMPLIANCE WITH THE REQUIREMENTS FOR EXERCISING
DISSENTERS' RIGHTS.
ARRANGEMENTS WITH AND PAYMENTS TO VILLAGE BANCORP DIRECTORS, EXECUTIVE OFFICERS
AND EMPLOYEES
The non-employee directors of Village Bancorp serving immediately prior to
the effective time of the merger will be invited to serve on an advisory board
to Webster Bank after the merger for a period of 24 months. These advisory
directors each will be paid for their service for the 24 month period up to
$16,000 based on an annual retainer of $4,000 per year, payable in quarterly
installments, and quarterly meeting attendance fees of $1,000 for each meeting
attended in person.
33
The Chairman of the board of Village Bancorp, Edward J. Hannafin, will be
invited to serve as chairman of the advisory board and will be paid for his
service up to an additional $4,000, based on a quarterly retainer of $500.
Webster Financial has agreed to honor existing written deferred
compensation, employment, change of control and severance contracts with
directors and employees of Village Bancorp and Village Bank to the extent that
these contracts do not provide for any payments that are not deductible or that
constitute parachute payments under the Internal Revenue Code of 1986, as
amended, referred to in this section as the Code.
Village Bank has entered into agreements with five executives providing for
payments following a termination of employment or specified other events, after
a change in control occurs. The five executives who are covered by these
agreements are Village Bank's President and Chief Executive Officer, Robert V.
Macklin, its Executive Vice President and Chief Operating Officer, James R.
Umbarger, Jr., its Vice President and Senior Trust Officer, Kenneth M. Griffin
and Senior Vice Presidents George W. Hermann and Gerard P. Shpunt.
Under amendments to the agreements with Messrs. Macklin and Umbarger dated
July 11, 1997, Village Bank will be obligated to pay to each executive or his
estate, in the event of his death, an aggregate amount equal to 2.99 times the
average annual salary of the executive for the five most recent calendar years
including the current year if the executive's employment terminates for any
reason, including death, disability and voluntary or involuntary termination,
within one year after a change in control. The term change of control is defined
in the agreement. The payments will be made in installments over a two-year
period, starting on the termination date. If the employment of Mr. Macklin or
Mr. Umbarger terminates for any reason during the second year following a change
in control, Village Bank will be required to pay the terminated executive or his
estate an aggregate amount equal to 1.99 times his average annual salary, over a
one-year period beginning on the termination date. In addition, while payments
are being made to the executive under the agreement, Village Bank will be
required to continue to pay for and provide to the executive insurance and
medical plans available to Village Bank's employees. Similar provisions apply in
the event that the annual salary of Mr. Macklin or Mr. Umbarger is reduced after
a change in control. However, the agreements provide that the aggregate present
value of all payments in the nature of compensation to either executive that are
contingent on a change in control may not exceed 2.99 times the executive's base
amount, as defined for purposes of section 280G of the Code that relates to
parachute payments.
Under the agreements with Messrs. Griffin, Hermann and Shpunt, following
(i) an involuntary termination of employment without cause, as defined in the
agreements, or (ii) a relocation outside a 60-mile radius from Village Bank's
Ridgefield, Connecticut office of the executive's place of employment within one
year after a change in control, as defined in the agreements, Village Bank will
be obligated to pay the terminated or relocated executive an aggregate amount
equal to the executive's average annual salary for the current and two most
recent calendar years. Payments will be made in installments over a one-year
period, and Village Bank will be obligated to pay for and provide the executive
during that period insurance and medical plans available to its employees.
Similar provisions will apply in the event that the salary of the executive is
reduced after a change in control.
The merger of Village Bank and Webster Bank will constitute a change in
control for purposes of the agreements described above.
In addition, each director, officer and other employee of Village Bancorp
or Village Bank who has at least three years of service and whose employment or
service is terminated in relation to the merger will receive severance payments.
In the case of an officer or employee, the total amount payable will be equal to
the product of (i) his or her full and partial years of service multiplied by
(ii)
34
three weeks salary and (iii) a percentage factor equal to 10% times his or her
years of employment up to 10 years. Each director will receive payments equal in
total to the product of (i) the average annual director fees he or she received
for the past two years multiplied by (ii) his or her years of service and (iii)
a percentage factor equal to 10% times his or her years of service up to 10
years. The severance amounts will be paid weekly to employees and monthly to
directors, on the date the salary or director fee is normally paid. The
aggregate present value of all payments in the nature of compensation including
severance that are made to a director, officer or employee and that are
contingent on a change of control may not exceed 2.99 times the base amount of
the director, officer or employee. The term base amount is defined in section
280G of the Code. On this basis, if the merger takes place the severance amounts
to be paid to the directors of Village Bancorp would be approximately as
follows: Mr. Addessi, $40,182; Mr. Boa, $36,390; Mr. Carey, $57,571; Ms. Cook,
$26,258; Mr. DiNapoli, $48,044; Mr. Hannafin, $97,066; Mr. Knapp, $20,536; Mr.
Lecher, $39,115; Mr. Resendes, $26,727; Mr. Reynolds, $33,325; and Mr. Scala,
$53,494.
For Messrs. Macklin, Umbarger, Griffin, Hermann and Shpunt, the total
combined amounts payable under the agreements discussed above and the Village
Bancorp severance policy would be approximately as follows: for Mr. Macklin,
$540,279; for Mr. Umbarger, $401,771; for Mr. Griffin, $95,000; for Mr. Hermann,
$85,418; and for Mr. Shpunt, $77,549.
Webster Bank will offer a position of at-will employment to each
non-officer or non-managerial branch office personnel of Village Bank in good
standing at the effective time of the merger at his or her existing branch
location or within 20 miles of the employee's place of employment as of the
effective time. Village Bank employees who become employees of Webster Bank at
the effective time will be given credit for service at Village Bank for
eligibility and vesting purposes under the 401(k) and employee stock ownership
plans of Webster Bank, but not the defined benefit pension plan. Webster Bank
will use its reasonable best efforts in connection with reviewing applicants for
employment positions to give Village Bank employees who are not offered
positions at the effective time the same consideration that is given to Webster
Financial or Webster Bank employees for these kinds of positions in accordance
with existing policies and will provide outplacement assistance and severance as
described above to employees of Village Bank who are not offered positions at
the effective time.
INDEMNIFICATION
In the merger agreement, Webster Financial agreed to indemnify, defend and
hold harmless each person who is, has been, or before the effective time of the
merger becomes, a director, officer or employee of Village Bancorp to the
fullest extent permitted under applicable law and Webster Financial's restated
certificate of incorporation and bylaws or the federal stock charter and by-laws
of Webster Bank, with respect to any claims made against the person because he
or she is or was a director, officer or employee of Village Bancorp or in
connection with the merger agreement. Webster Financial also agreed to use
commercially reasonable efforts to cover the officers and directors of Village
Bancorp under a directors' and officers' liability insurance policy for a total
premium cost of not more than $141,000 for a period of at least two years after
the effective time.
OPTION AGREEMENT
As a condition of and inducement to Webster Financial's entering into the
merger agreement, Webster Financial and Village Bancorp entered into the option
agreement immediately after the execution of the merger agreement. Pursuant to
the option agreement, Village Bancorp granted Webster Financial an option,
referred to in this section as the Village Bancorp option, which entitles
Webster Financial to purchase, subject to the terms of the option agreement, up
to 388,466 fully paid and nonassessable shares of Village Bancorp's common
stock, or approximately 19.99% of the shares of Village Bancorp's common stock
then outstanding, under the circumstances described below, at a price per share
of $20.00, which price is subject to adjustment. The Village Bancorp option is
35
intended to discourage the making of alternative acquisition-related proposals
and, under specified circumstances, to significantly increase the cost to a
potential third party of acquiring Village Bancorp compared to its cost had
Village Bancorp not entered into the option agreement. Therefore, the Village
Bancorp option is likely to discourage third parties from proposing a competing
offer to acquire Village Bancorp even if the offer involves a higher price per
share for Village Bancorp's common stock than the per share consideration to be
paid pursuant to the merger agreement.
The following brief summary of the option agreement is qualified in its
entirety by reference to the option agreement. A copy of the option agreement,
as well as the other documents described in this proxy statement/prospectus,
will be provided to you without charge if you call or write to James M. Sitro,
Vice President, Investor Relations of Webster Financial Corporation, Webster
Plaza, Waterbury, Connecticut 06702, telephone (203) 578-2399.
Subject to applicable law and regulatory restrictions, Webster Financial
may exercise the Village Bancorp option, in whole or in part, following the
occurrence of a purchase event as defined below, provided that the Village
Bancorp option is not terminated first upon the occurrence of an exercise
termination event, as defined below. Purchase event means, in substance, either
(a) the acquisition by any third party of beneficial ownership of 25% or more of
the outstanding Village Bancorp common stock, (b) the entry by Village Bancorp,
without the prior written consent of Webster Financial, into a letter of intent
or definitive agreement to engage in an acquisition transaction, as defined
below, with any third party, except that the percentage referred to in clause
(iii) of the definition of acquisition transaction shall be 25%, or (c) the
recommendation by Village Bancorp's board of directors that its shareholders
approve or accept any acquisition transaction, as defined below, with any third
party, except that the percentage referred to in clause (iii) of the definition
below of acquisition transaction shall be 25%.
For purposes of the option agreement, the term acquisition transaction
means (i) a merger, consolidation or other business combination involving
Village Bancorp, (ii) a purchase, lease or other acquisition of all or
substantially all of the assets and/or liabilities of Village Bancorp, or (iii)
a purchase or other acquisition, including through merger, consolidation, share
exchange or otherwise, of beneficial ownership of securities representing 10% or
more of the voting power of Village Bancorp.
The option agreement defines an exercise termination event to mean the
earliest to occur of the following events: (i) the time immediately prior to the
effective time of the merger; (ii) 12 months after the first occurrence of a
purchase event; (iii) 12 months after the termination of the merger agreement
following the occurrence of a preliminary purchase event as defined below,
unless clause (vii) of this paragraph is applicable; (iv) upon the termination
of the merger agreement, prior to the occurrence of a purchase event or
preliminary purchase event, (A) by both parties, if the merger agreement is
terminated by mutual written consent; (B) by either Webster Financial or Village
Bancorp, if the merger agreement has been terminated as a result of regulatory
denial or requested withdrawal of a regulatory application, or if the merger has
not occurred by August 31, 1999; or (C) by Village Bancorp, if the merger
agreement is terminated as a result of a material breach of any representation,
warranty, covenant or other agreement by Webster Financial; (v) 12 months after
the termination of the merger agreement, if the Village Bancorp shareholders
have failed to approve the merger agreement; (vi) 12 months after the
termination of the merger agreement by Webster Financial as a result of a
material breach of any representation, warranty, covenant or other agreement by
Village Bancorp, if the breach was not willful or intentional by Village
Bancorp; or (vii) 24 months after the termination of the merger agreement by
Webster Financial as a result of a willful or intentional material breach of any
representation, warranty, covenant or agreement by Village Bancorp.
The option agreement defines preliminary purchase event to include (i)
Village Bancorp's entry, without the prior written consent of Webster Financial,
into a letter of intent or definitive
36
agreement to engage in an acquisition transaction with any third party, or the
recommendation by Village Bancorp's board of directors that its shareholders
approve or accept any acquisition transaction with any third party; (ii) an
acquisition by any third party of beneficial ownership of 10% or more of the
outstanding shares of Village Bancorp's common stock; (iii) the making of a bona
fide proposal for an acquisition transaction by any third party to Village
Bancorp, or a public announcement or written communication that is publicly
disclosed to Village Bancorp's shareholders as to any third party proposing to
engage in an acquisition transaction and Village Bancorp's shareholders do not
approve the merger; (iv) a willful or intentional breach by Village Bancorp of
any representation, warranty, covenant or agreement that would entitle Webster
Financial to terminate the merger agreement; (v) the failure to hold or the
cancellation of the shareholder meeting for the purpose of voting on the merger
agreement before the merger agreement is terminated; (vi) for any reason
whatsoever, the failure of Village Bancorp's board of directors to recommend, or
the withdrawal or modification in a manner adverse to Webster Financial of a
recommendation that Village Bancorp's shareholders approve the merger agreement,
or if Village Bancorp or its board of directors fails to oppose any proposal by
any person other than Webster Financial or any subsidiary of Webster Financial;
or (vii) a filing by any third party of an application or notice with any
regulatory authority for approval to engage in an acquisition transaction.
The Village Bancorp option may not be assigned by Webster Financial to any
other person without the express written consent of Village Bancorp, except that
Webster Financial may assign its rights under the option agreement to a wholly
owned subsidiary or may assign its rights in whole or in part after the
occurrence of a preliminary purchase event. Upon the occurrence of a purchase
event prior to an exercise termination event, at the request of Webster
Financial, Village Bancorp will be obligated (i) to prepare and keep current an
offering circular which meets the standards of a shelf registration statement
filed with the SEC with respect to the shares to be issued upon exercise of the
Village Bancorp option under applicable federal and state securities laws, and
(ii) to repurchase the Village Bancorp option, and any shares of Village
Bancorp's common stock thus far purchased pursuant to the Village Bancorp
option, at prices determined as set forth in the option agreement, except to the
extent prohibited by applicable law, regulation or administrative policy.
In the event that prior to an exercise termination event, Village Bancorp
enters into a letter of intent or definitive agreement (i) to consolidate or
merge with any third party, and Village Bancorp is not the continuing or
surviving corporation in the consolidation or merger; (ii) to permit any third
party to merge into Village Bancorp, and Village Bancorp is the continuing or
surviving corporation, but, in connection with the merger, the then outstanding
shares of Village Bancorp's common stock will be changed into or exchanged for
stock or other securities of any third party or cash or any other property or
the then outstanding shares of Village Bancorp's common stock will represent
after the merger less than 50% of the outstanding shares and share equivalents
of the merged company; or (iii) to sell or otherwise transfer all or
substantially all of its assets to any third party, then, the agreement
governing the transaction must make proper provision so that the Village Bancorp
option will, upon the completion of that transaction, be converted into, or
exchanged for, a substitute option, at the election of Webster Financial, of
either (x) the acquiring corporation or (y) any person that controls the
acquiring corporation. The substitute option will be exercisable for shares of
the issuer's common stock in a number and at a exercise price as is set forth in
the option agreement and will otherwise have the same terms as the Village
Bancorp option, except that the number of shares subject to the substitute
option may not exceed 19.99% of the issuer's outstanding shares of common stock.
The option agreement provides that if (i) Webster Financial exercises the
Village Bancorp option and sells option shares to an unrelated third party, (ii)
Village Bancorp has paid expenses of Webster Financial and, if applicable, a
break-up fee in connection with the termination of the merger agreement, and
(iii) the total amount before taxes of the net cash received by Webster
Financial for sale of the option shares less Webster Financial's total purchase
price for the option shares is more than $2.5 million, then Webster Financial
will return to Village Bancorp the amount
37
described in clause (iii) of this paragraph up to the amount of the expenses and
any break-up fee previously paid by Village Bancorp to Webster Financial.
SELECTED DATA
The tables below present summary historical financial and other data for
Webster Financial and Village Bancorp as of the dates and for the periods
indicated. This summary data is based upon and should be read in conjunction
with Webster Financial's and Village Bancorp's historical consolidated financial
statements and related notes that are incorporated by reference into this
document. For historical information, see "WHERE YOU CAN FIND MORE INFORMATION."
The historical consolidated financial statements of Webster Financial and
Village Bancorp for the periods ended September 30, 1998 and 1997 are unaudited.
The selected consolidated financial data for these periods that is presented in
the following tables is derived from unaudited financial information. All
adjustments necessary for a fair presentation of financial position and results
of operations of interim periods have been included. All financial data
presented for Webster Financial prior to December 31, 1997 has been restated to
reflect the financial results of Webster Financial and Eagle Financial Corp.,
which was acquired by Webster Financial in April 1998. All per share data of
Webster Financial and Village Bancorp have been adjusted retroactively to give
effect to stock dividends or stock splits.
SELECTED CONSOLIDATED FINANCIAL DATA - WEBSTER FINANCIAL
FINANCIAL CONDITION
AND OTHER DATA - WEBSTER FINANCIAL
(DOLLARS IN THOUSANDS) AT SEPTEMBER 30, AT DECEMBER 31,
----------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets........................ $ 9,163,686 $ 8,817,767 $ 9,095,887 $ 7,368,941 $ 6,479,567 $6,114,613 $5,054,572
Loans receivable, net............... 4,931,885 4,906,859 4,954,813 4,737,883 3,977,725 4,007,710 3,281,388
Investment securities............... 3,688,241 3,340,301 3,589,273 2,105,173 2,000,185 1,558,401 1,289,107
Intangible assets (a)............... 81,037 80,829 78,493 81,936 26,720 31,093 17,944
Deposits............................ 5,621,371 5,650,442 5,719,030 5,826,264 5,060,822 5,044,336 4,163,757
Federal Home Loan Bank advances
and other borrowings.............. 2,654,126 2,422,275 2,549,597 957,835 834,557 613,791 452,755
Shareholders' equity................ 565,916 494,016 517,262 472,824 460,791 364,112 327,676
Number of banking offices........... 104 114 114 120 109 108 91
OPERATING DATA - WEBSTER FINANCIAL FOR THE
(DOLLARS IN THOUSANDS) NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income................. $ 182,691 $ 187,043 $ 251,050 $ 222,118 $ 188,646 $ 182,100 $ 153,428
Provision for loan losses........... 5,300 22,138 24,813 13,054 9,864 7,149 9,886
Noninterest income.................. 53,530 30,077 42,264 52,009 33,316 21,378 24,052
Noninterest expenses:
Acquisition related expenses..... 17,400 29,792 29,792 500 4,271 700 --
Other noninterest expenses....... 136,891 129,535 171,871 173,977 142,592 140,260 112,502
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total noninterest expenses..... 154,291 159,327 201,663 174,477 146,863 140,960 112,502
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes.......... 76,630 35,655 66,838 86,596 65,235 55,369 55,092
Income taxes........................ 27,426 13,814 25,725 32,602 23,868 17,958 23,672
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income before cumulative
change .......................... 49,204 21,841 41,113 53,994 41,367 37,411 31,420
Cumulative change (b)............... -- -- -- -- -- 97 6,408
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.......................... 49,204 21,841 41,113 53,994 41,367 37,508 37,828
Preferred stock dividends........... -- -- -- 1,149 1,296 1,716 2,653
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income available to common
shareholders..................... $ 49,204 $ 21,841 $ 41,113 $ 52,845 $ 40,071 $ 35,792 $ 35,175
=========== =========== =========== =========== =========== =========== ===========
See footnotes on the following page
38
SIGNIFICANT STATISTICAL DATA - WEBSTER FINANCIAL
AT OR FOR THE
NINE MONTHS
ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
FOR THE PERIOD:
Net income per common share:
Basic.............................. $ 1.30 $ 0.58 $ 1.10 $ 1.44 $ 1.18 $ 1.16 $ 1.02(c)
Diluted............................ $ 1.27 $ 0.56 $ 1.07 $ 1.36 $ 1.12 $ 1.09 $ 0.95(c)
Dividends declared per common
share.............................. $ 0.32 $ 0.30 $ 0.40 $ 0.34 $ 0.32 $ 0.26 $ 0.25
Return on average shareholders'
equity ............................ 12.44% 6.07% 8.44% 11.32% 10.05% 10.52% 11.66%(c)
Interest rate spread.................. 2.58% 3.05% 3.00% 3.12% 2.98% 3.23% 3.11%
Net interest margin................... 2.76% 3.27% 3.19% 3.24% 3.14% 3.36% 3.25%
Noninterest expenses to average
assets............................. 2.20% 2.65% 2.45% 2.42% 2.34% 2.45% 2.28%
Noninterest expenses (excluding
foreclosed property, acquisition
related, capital securities and
preferred dividends of subsidiary
corporation expenses) to average
assets............................. 1.74% 1.97% 2.40% 2.35% 2.22% 2.24% 2.01%
AT END OF PERIOD:
Diluted weighted average shares (000's) 38,650 37,698 38,473 39,560 36,797 34,533 32,161
Book value per common share .......... $ 14.91 $ 13.26 $ 13.78 $ 12.73 $ 12.24 $ 10.96 $ 10.58
Tangible book value per common
share.............................. $ 12.78 $ 11.09 $ 11.69 $ 10.48 $ 11.50 $ 9.98 $ 9.95
Shareholders' equity to total assets.. 6.18% 5.61% 5.69% 6.42% 7.11% 5.95% 6.48%
- ----------
(a) The increase in the core deposit intangible in 1996 is a result of specific
assets and liabilities purchased in the acquisition of Shawmut Bank
Connecticut National Association, now Fleet National Bank of Connecticut.
(b) Reflects cumulative change in method of accounting for income taxes adopted
by Webster Financial in 1993 in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109.
(c) Does not give effect to $6.4 million of additional income in 1993 resulting
from the cumulative change of Webster Financial's adoption of Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
109. Giving effect to the cumulative change, (i) basic net income per
common share for 1993 was $2.42 and diluted net income per common share for
1993 was $2.30; and (ii) return on average shareholders' equity for 1993
was 12.92%.
39
SELECTED CONSOLIDATED FINANCIAL DATA - VILLAGE BANCORP
FINANCIAL CONDITION
AND OTHER DATA - VILLAGE BANCORP
(DOLLARS IN THOUSANDS) AT SEPTEMBER 30, AT DECEMBER 31,
----------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(a)
Total assets........................ $ 230,173 $ 216,870 $ 222,549 $ 179,550 $ 174,277 $ 157,241 $ 152,890
Loans, net.......................... 148,894 138,465 146,350 125,480 118,280 104,774 92,231
Investment securities............... 45,022 48,370 53,809 32,904 34,562 35,817 41,574
Deposits............................ 210,844 198,689 230,808 162,625 158,539 143,421 138,946
Shareholders' equity................ 17,210 15,771 15,873 15,297 14,148 13,054 13,006
Number of banking offices........... 6 6 6 4 4 4 3
OPERATING DATA - VILLAGE BANCORP FOR THE
(DOLLARS IN THOUSANDS) NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income................. $ 7,273 $ 6,116 $ 8,366 $ 7,840 $ 7,694 $ 7,002 $ 6,744
Provision (credit) for loan losses.. (123) 45 60 120 210 311 45
Noninterest income.................. 581 419 568 490 567 600 870
Noninterest expenses................ 5,707 5,054 7,111 5,919 5,751 5,865 5,923
------------ --------- ----------- ----------- ----------- ----------- -----------
Income before income taxes.......... 2,270 1,436 1,763 2,291 2,300 1,426 1,646
Provision for income taxes.......... 686 481 585 471 984 719 652
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.......................... $ 1,584 $ 955 $ 1,178 $ 1,820 $ 1,316 $ 707 $ 994
=========== =========== =========== =========== =========== =========== ===========
See notes on the following page
40
SIGNIFICANT STATISTICAL DATA - VILLAGE BANCORP
AT OR FOR THE
NINE MONTHS
ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(a)
FOR THE PERIOD:
Net income - basic earnings (b)....... $ 0.82 $ 0.50 $ 0.62 $ 0.96 $ 0.70 $ 0.37 $ 0.53
Net income - diluted earnings (b)..... $ 0.81 $ 0.49 $ 0.61 $ 0.95 $ 0.69 $ 0.37 $ 0.53
Cash dividends declared per common
share.............................. $ 0.27 $ 0.27 $ 0.36 $ 0.34 $ 0.24 $ 0.32 $ 0.26
Return on average shareholders'
equity (annualized)................ 12.92% 8.20% 7.52% 12.45% 9.72% 5.40% 7.75%
Interest rate spread.................. 4.38% 4.13% 4.09% 4.37% 4.57% 4.68% 4.74%
Net yield on interest earning assets.. 4.71% 4.54% 4.50% 4.84% 5.06% 5.00% 5.06%
Noninterest expenses to average
assets............................. 3.39% 3.47% 3.54% 3.43% 3.55% 3.92% 4.13%
AT END OF PERIOD:
Diluted weighted average shares (000's) 1,968 1,932 1,942 1,919 1,901 1,900 1,890
Book value per common share........... $ 8.88 $ 8.28 $ 8.32 $ 8.03 $ 7.44 $ 6.89 $ 6.90
Tangible book value per common
share (c).......................... $ 8.88 $ 8.28 $ 8.32 $ 8.03 $ 7.44 $ 6.89 $ 6.90
Stockholders' equity to total assets.. 7.48% 7.27% 7.13% 8.52% 8.12% 8.30% 8.51%
- ----------
NOTES:
(a) Village Bancorp acquired Liberty National Bank in 1994 in a transaction
accounted for as a pooling of interests. Prior historical financial data
includes both entities. Village Bancorp had net operating loss
carryforwards for federal income tax purposes of approximately $1.3 million
at September 30, 1998 which resulted from the acquisition of Liberty
National Bank. Due to limitations on the use of the net operating loss
carryforwards, a valuation allowance has been established to reduce the net
operating loss carryforwards to an amount that, more likely than not, will
be realized.
(b) Village Bancorp measures compensation cost for stock-based compensation
plans in accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," which is
permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." If the fair value based method
of accounting prescribed by this statement for measuring compensation cost
had been used, Village Bancorp's net income and earnings per share would
have been reduced to the amounts disclosed in Village Bancorp's 1997
consolidated financial statements that are incorporated by reference into
this document.
(c) The tangible book value per common share of Village Bancorp is total
stockholders' equity divided by total common shares outstanding at the end
of the respective period.
41
MARKET PRICES AND DIVIDENDS
WEBSTER FINANCIAL'S COMMON STOCK
The table below sets forth the range of high and low sale prices of Webster
Financial's common stock as reported on the Nasdaq Stock Market's National
Market Tier, as well as cash dividends paid during the periods indicated,
restated to reflect the two-for-one split of Webster Financial's common stock in
April 1998:
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
Quarter Ended:
March 31, 1997 $20.69 $17.56 $0.10
June 30, 1997 22.88 17.31 0.10
September 30, 1997 29.88 21.69 0.10
December 31, 1997 33.88 28.50 0.10
March 31, 1998 35.00 28.56 0.10
June 30, 1998 36.25 31.44 0.11
September 30, 1998 34.63 20.63 0.11
December 31, 1998 28.13 18.88 0.11
On November 10, 1998, the last trading day prior to the public announcement
of the merger, the closing price of Webster Financial's common stock on the
Nasdaq Stock Market's National Market Tier was $26.50. On __________ ___, 1999,
the most recent practicable date prior to the printing of this proxy
statement/prospectus, the closing price of Webster Financial's common stock on
the Nasdaq Stock Market's National Market Tier was $ * .
VILLAGE BANCORP'S COMMON STOCK
The table below sets forth the range of high and low sale prices of Village
Bancorp's common stock as reported on the Nasdaq Stock Market's SmallCap Market,
as well as cash dividends paid during the periods indicated, restated to reflect
a two-for-one stock dividend in November 1997:
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
Quarter Ended:
March 31, 1997 $11.50 $ 10.50 $ 0.09
June 30, 1997 11.75 10.50 0.09
September 30, 1997 12.75 11.13 0.09
December 31, 1997 22.00 13.00 0.09
March 31, 1998 22.25 18.50 0.09
June 30, 1998 22.88 19.75 0.09
September 30, 1998 20.00 18.75 0.09
December 31, 1998 24.00 19.50 0.09
On November 10, 1998, the last trading day prior to the public announcement
of the merger, the closing price of Village Bancorp's common stock on the Nasdaq
Stock Market's SmallCap Market was $21.00. On __________ ___, 1999, the most
recent practicable date prior to the printing of this proxy
statement/prospectus, the closing price of Village Bancorp's common stock on the
Nasdaq Stock Market's SmallCap Market was $ * .
- ----------
* To be calculated subsequently
42
DESCRIPTION OF WEBSTER FINANCIAL'S CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS
Set forth below is a description of Webster Financial's capital stock, as
well as a summary of the material differences between the rights of holders of
Village Bancorp common stock and their prospective rights as holders of Webster
Financial's common stock. If the merger agreement is approved and the merger
takes place, the holders of Village Bancorp's common stock will become holders
of Webster Financial's common stock. As a result, Webster Financial's restated
certificate of incorporation, as amended, and bylaws, as amended, and the
applicable provisions of the General Corporation Law of the State of Delaware,
referred to in this section as the Delaware corporation law, will govern the
rights of current shareholders of Village Bancorp's common stock. The rights of
those shareholders are currently governed by the articles of incorporation, as
amended, and the bylaws of Village Bancorp and the applicable provisions of the
Connecticut Business Corporation Act, referred to in this section as the
Connecticut corporation law.
The following comparison is based on the current terms of the governing
documents of Webster Financial and Village Bancorp and on the provisions of the
Delaware corporation law and the Connecticut corporation law. The discussion is
intended to highlight important similarities and differences between the rights
of holders of Webster Financial's common stock and Village Bancorp's common
stock.
WEBSTER FINANCIAL'S COMMON STOCK
Webster Financial is authorized to issue 50,000,000 shares of common stock,
par value $.01 per share. As of _________ __, 1999 _____ shares of Webster
Financial's common stock were issued and outstanding and Webster Financial had
outstanding stock options granted to directors, officers and other employees for
______ shares of Webster Financial's common stock. Each share of Webster
Financial's common stock has the same relative rights and is identical in all
respects to each other share of Webster Financial's common stock. Webster
Financial's common stock is non-withdrawable capital, is not of an insurable
type and is not insured by the Federal Deposit Insurance Corporation or any
other governmental entity.
Holders of Webster Financial's common stock are entitled to one vote per
share on each matter properly submitted to shareholders for their vote,
including the election of directors. Holders of Webster Financial's common stock
do not have the right to cumulate their votes for the election of directors, and
they have no preemptive or conversion rights with respect to any shares that may
be issued. Webster Financial's common stock is not subject to additional calls
or assessments by Webster Financial, and all shares of Webster Financial's
common stock currently outstanding are fully paid and nonassessable. For a
discussion of the voting rights of Webster Financial's common stock,
classification of Webster Financial's board of directors and provisions of
Webster Financial's restated certificate of incorporation and bylaws that may
prevent a change in control of Webster Financial or that would operate only with
respect to an extraordinary corporate transaction involving Webster Financial or
its subsidiaries, see "-- Certificate of Incorporation and Bylaw Provisions."
Holders of Webster Financial's common stock and any class or series of
stock entitled to participate with it are entitled to receive dividends declared
by the board of directors of Webster Financial out of any assets legally
available for distribution. No dividends or other distributions may be declared
or paid, however, unless all accumulated dividends and any sinking fund,
retirement fund or other retirement payments have been paid, declared or set
aside on any class of stock having preference as to payments of dividends over
Webster Financial's common stock. In addition, as
43
described below, the indenture for Webster Financial's senior notes places
restrictions on Webster Financial's ability to pay dividends on its common
stock. See "-- Senior Notes."
In the unlikely event of any liquidation, dissolution or winding up of
Webster Financial, the holders of Webster Financial's common stock and any class
or series of stock entitled to participate with it would be entitled to receive
all remaining assets of Webster Financial available for distribution, in cash or
in kind, after payment or provision for payment of all debts and liabilities of
Webster Financial and after the liquidation preferences of all outstanding
shares of any class of stock having preference over Webster Financial's common
stock have been fully paid or set aside.
WEBSTER FINANCIAL'S PREFERRED STOCK
Webster Financial's restated certificate of incorporation authorizes its
board of directors, without further shareholder approval, to issue up to
3,000,000 shares of serial preferred stock for any proper corporate purpose. In
approving any issuance of serial preferred stock, the board of directors has
broad authority to determine the rights and preferences of the serial preferred
stock, which may be issued in one or more series. These rights and preferences
may include voting, dividend, conversion and liquidation rights that may be
senior to Webster Financial's common stock.
Webster Financial's Series C Participating Preferred Stock was authorized
in connection with a rights agreement, which was adopted in February 1996 and
amended in October 1998. Webster Financial adopted the rights agreement to
protect shareholders in the event of an inadequate takeover offer or to deter
coercive or unfair takeover tactics. Each right entitles a holder to purchase
1/1,000th of a share of Series C Stock upon the occurrence of specified events.
As of the date of this proxy statement/prospectus, no shares of Webster
Financial's Series C Stock have been issued.
SENIOR NOTES
The 8 3/4% Senior Notes due 2000 were issued by Webster Financial in an
aggregate principal amount of $40,000,000 pursuant to an indenture, dated as of
June 15, 1993, between Webster Financial and Chemical Bank, as trustee. Chemical
Bank is now known as The Chase Manhattan Bank. Particular provisions of the
indenture are summarized below because of their impact on Webster Financial's
common stock. The senior notes bear interest at 8 3/4% payable semi-annually on
each June 30 and December 30 until maturity on June 30, 2000. The senior notes
are unsecured general obligations only of Webster Financial and not of its
subsidiaries. The senior notes may not be redeemed by Webster Financial prior to
maturity. This limitation on redemption is not expected to have an anti-takeover
effect since the senior notes would be assumed by any acquirer of Webster
Financial. The indenture contains covenants that limit Webster Financial's
ability at the holding company level to incur additional funded indebtedness, to
make restricted distributions, to engage in specified dispositions affecting
Webster Bank or its voting stock, to create specified liens upon Webster
Financial's assets at the holding company level, including a negative pledge
clause, and to engage in mergers, consolidations, or a sale of substantially all
of Webster Financial's assets unless particular conditions are satisfied. The
indenture also requires that Webster Financial maintain a specified level of
liquid assets at the holding company level.
RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. The indenture limits the amount of
funded indebtedness which Webster Financial may incur or guarantee at the
holding company level. Funded indebtedness includes any obligation of Webster
Financial with a maturity in excess of one year for borrowed money, for the
deferred purchase price of property or services, for capital lease payments, or
related to the guarantee of these kinds of obligations. Webster Financial may
not incur or guarantee any funded indebtedness if, immediately after giving
effect thereto, the amount of funded indebtedness of Webster Financial at the
holding company level, including the senior notes, would be greater than 90% of
Webster Financial's consolidated net worth. As of September 30, 1998,
44
Webster Financial's consolidated net worth was $565.9 million and it had $41.4
million of funded indebtedness.
RESTRICTED DISTRIBUTIONS. Under the indenture, Webster Financial may not,
directly or indirectly, make any restricted distribution, except in capital
stock of Webster Financial, if, at the time or after giving effect to the
distribution: (a) an event of default shall have occurred and be continuing
under the indenture; (b) Webster Bank would fail to meet any of the applicable
minimum capital requirements under Office of Thrift Supervision regulations; (c)
Webster Financial would fail to maintain sufficient liquid assets to comply with
the terms of the covenant described under "Liquidity Maintenance" below; or (d)
the aggregate amount of all restricted distributions subsequent to September 30,
1993 would exceed the sum of (i) $5 million, plus (ii) 75% of Webster
Financial's aggregate consolidated net income, or if the aggregate consolidated
net income shall be a deficit, minus 100% of the deficit, accrued on a
cumulative basis in the period commencing on June 30, 1993 and ending on the
last day of the fiscal quarter immediately preceding the date of the restricted
distribution, and plus (iii) 100% of the net proceeds received by Webster
Financial from any capital stock issued by Webster Financial other than to a
subsidiary subsequent to September 30, 1993. As of September 30, 1998, Webster
Financial had the ability to pay $257.3 million in restricted distributions.
Restricted distribution means: (a) any dividend, distribution or other
payment on the capital stock of Webster Financial or any subsidiary other than a
wholly owned subsidiary, except for dividends, distributions or payments payable
in capital stock; (b) any payment to purchase, redeem, acquire or retire any
capital stock of Webster Financial or the capital stock of any subsidiary other
than a wholly owned subsidiary; and (c) any payment by Webster Financial of
principal whether a prepayment, redemption or at maturity of, or to acquire, any
indebtedness for borrowed money issued or guaranteed by Webster Financial, other
than the senior notes or pursuant to a guarantee by Webster Financial of any
borrowing by any employee stock ownership plan established by Webster Financial
or a wholly owned subsidiary, except that any payment of, or to acquire, any
indebtedness for borrowed money of this kind that is not subordinated to the
senior notes will not constitute a restricted distribution if the indebtedness
was issued or guaranteed by Webster Financial at a time when the senior notes
were rated in the same or higher rating category as the rating assigned to the
senior notes by Standard & Poor's at the time the senior notes were issued.
LIQUIDITY MAINTENANCE. The indenture requires that Webster Financial
maintain at all times, on an unconsolidated basis, liquid assets in an amount
equal to or greater than 150% of the aggregate interest expense on the senior
notes and all other indebtedness for borrowed money of Webster Financial for 12
full calendar months immediately following each determination date under the
indenture, provided that Webster Financial will not be required to maintain
liquid assets in that amount once the senior notes have been rated BBB- or
higher by Standard & Poor's for six calendar months and remain rated in that
category.
CAPITAL SECURITIES
In January 1996, Webster Financial raised $100 million through the sale of
capital securities that will be used for general corporate purposes. Webster
Financial formed a business trust for the purpose of issuing capital securities
and investing the net proceeds in capital debentures.
Prior to its acquisition by Webster Financial, Eagle Financial Corp. raised
$50 million through the sale of capital securities to be used for general
corporate purposes. Eagle formed a business trust for the purpose of issuing
capital securities and investing the net proceeds in the Eagle capital
debentures. In connection with the acquisition of Eagle by Webster Financial in
April 1998, Webster Financial assumed all of Eagle's rights and obligations with
respect to the Eagle capital securities and capital debentures.
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CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The following discussion is a general summary of provisions of Webster
Financial's restated certificate of incorporation and bylaws, and a comparison
of those provisions to similar types of provisions in the articles of
incorporation and bylaws of Village Bancorp. The discussion is necessarily
general and, with respect to provisions contained in Webster Financial's
restated certificate of incorporation and bylaws, reference should be made to
the document in question. Some of the provisions included in Webster Financial's
restated certificate of incorporation and bylaws may serve to entrench current
management and to prevent a change in control of Webster Financial even if
desired by a majority of shareholders. These provisions are designed to
encourage potential acquirers to negotiate directly with the board of directors
of Webster Financial and to discourage other takeover attempts.
DIRECTORS. Some of the provisions of Webster Financial's restated
certificate of incorporation and bylaws will impede changes in majority control
of Webster Financial's board of directors. The restated certificate of
incorporation provides that the board of directors will be divided into three
classes, with directors in each class elected for three-year staggered terms.
The restated certificate of incorporation further provides that the size of the
board of directors shall be within a 7 to 15 director range. The bylaws
currently provide that there shall be 14 directors. The bylaws also provide that
(i) to be eligible for nomination as a director, a nominee must be a resident of
the State of Connecticut at the time of his nomination or, if not then a
resident, have been previously a resident for at least three years; (ii) each
director is required to own not less than 100 shares of Webster Financial's
common stock; and (iii) more than three consecutive absences from regular
meetings of the board of directors, unless excused by a board resolution, shall
automatically constitute a resignation. Webster Financial's bylaws also contain
a provision prohibiting particular contracts and transactions between Webster
Financial and its directors and officers and some other entities unless specific
procedural requirements are satisfied.
The bylaws of Village Bancorp provide that the number of directors shall
not be less than 13 nor more than 25 and that the board of directors will be
divided into three classes with staggered terms. Village Bancorp's bylaws also
provide that not less than three-quarters of the directors shall be residents of
the State of Connecticut, all directors shall be shareholders and no person
shall be eligible for election to the board after reaching the age of 70.
Webster Financial's restated certificate of incorporation and bylaws
provide that a vacancy occurring in the board of directors, including a vacancy
created by any increase in the number of directors, shall be filled for the
remainder of the unexpired term by a majority vote of the directors then in
office. Webster Financial's restated certificate of incorporation provides that
a director may be removed only for cause and then only by the affirmative vote
of at least two-thirds of the total votes eligible to be voted at a duly
constituted meeting of shareholders called for that purpose and that 30 days'
written notice must be provided to any director or directors whose removal is to
be considered at a shareholders' meeting.
Village Bancorp's bylaws provide that any vacancy on the board of
directors, including any newly created directorships, may be filled by the board
by an affirmative vote of a majority of the directors remaining in office. A
director elected to fill a vacancy shall be elected for the unexpired term of
the office or until shareholders fill the vacancy at an annual or special
meeting. Village Bancorp's bylaws provide that unless provided in a contract of
the corporation, any director may resign or be removed at any time. Removal of a
director, with or without cause, can be effected by the affirmative vote of the
holders of a majority of the stock entitled to vote, or a three-quarter's vote
of the board of directors.
Webster Financial's bylaws impose restrictions on the nomination by
shareholders of candidates for election to the board of directors and the
proposal by shareholders of business to be
46
acted upon at an annual meeting of shareholders. The articles of incorporation
and bylaws of Village Bancorp do not contain similar provisions.
CALL OF SPECIAL MEETINGS. Webster Financial's restated certificate of
incorporation provides that a special meeting of shareholders may be called at
any time but only by the Chairman, the President or by the board of directors.
Shareholders are not authorized to call a special meeting. The bylaws of Village
Bancorp provide that a special meeting of shareholders may be called at any time
by the Chairman, the Vice Chairman, the President or the board of directors, and
shall be called by the Chairman upon written request of the holders of not less
than one-tenth of the outstanding capital stock.
SHAREHOLDER ACTION WITHOUT A MEETING. Webster Financial's restated
certificate of incorporation and Village Bancorp's bylaws provide that
shareholders may act by unanimous written consent.
LIMITATION ON LIABILITY OF DIRECTORS AND INDEMNIFICATION. Webster
Financial's restated certificate of incorporation provides that no director
shall be personally liable to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director other than liability (i) for
any breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for any payment of a
dividend or approval of a stock repurchase that is illegal under Section 174 of
the Delaware corporation law, or (iv) for any transaction from which a director
derived an improper personal benefit.
The articles of incorporation of Village Bancorp provide that no member of
the board of directors shall be personally liable to the corporation, or its
members, or to its shareholders, for monetary damages for breach of duty as a
director in an amount that is greater than the compensation received by the
director for serving the corporation during the year of violation if the breach
did not, (1) involve a knowing and culpable violation of law by the director,
(2) enable the director or an associate, as defined in Section 33-374(d) of the
Connecticut General Statutes, to receive an improper economic gain, (3) show a
lack of good faith and a conscious disregard for the duty of the director to the
corporation under circumstances in which the director was aware that his conduct
or omission created an unjustifiable risk of serious injury to the corporation,
(4) constitute a sustained and unexcused pattern or inattention that amounted to
an abdication of the director's duty to the corporation, or (5) create liability
under Section 36-9 of the Connecticut General Statutes.
Webster Financial's bylaws provide for indemnification of directors,
officers, trustees, employees and agents of Webster Financial, and for those
serving in those roles with other business organizations or entities, in the
event that the person was or is made a party to or is threatened to be made a
party to any civil, criminal, administrative, arbitration or investigative
action, suit, or proceeding, other than an action by or in the right of Webster
Financial, by reason of the fact that the person is or was serving in that kind
of capacity for or on behalf of Webster Financial. The bylaws provide that
Webster Financial will indemnify any person of this kind against expenses
including attorneys' fees, judgments, fines, penalties and amounts paid in
settlement if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of Webster
Financial, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Similarly, the bylaws
provide that Webster Financial will indemnify these persons for expenses
reasonably incurred and settlements reasonably paid in actions, suits, or
proceedings brought by or in the right of Webster Financial, if the person acted
in good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of Webster Financial; provided, however, that no
indemnification shall be made against expenses in respect of any claim, issue,
or matter as to which the person is adjudged to be liable to Webster Financial
or against amounts paid in settlement unless and only to the extent that there
is a determination made by the appropriate party set forth in the bylaws that
the person to be
47
indemnified is, in view of all the circumstances of the case, fairly and
reasonably entitled to indemnity for these expenses or amounts paid in
settlement. In addition, Webster Financial's bylaws permit the corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, trustee, employee, or agent of Webster Financial or is acting
in this kind of capacity for another business organization or entity at Webster
Financial's request, against any liability asserted against the person and
incurred in that capacity, or arising out of that status, whether or not Webster
Financial would have the power or obligation to indemnify him against that kind
of liability under the indemnification provisions of Webster Financial's bylaws.
Village Bancorp's bylaws authorize the board of directors to indemnify and
reimburse each director, officer and employee of the corporation for necessary
expenses in connection with any action, suit or proceeding in which a person is
made a party because of that person's status as a director, officer or employee
except where the person is finally adjudged to be liable for negligence or
misconduct in the performance of their duties.
CUMULATIVE VOTING. Webster Financial's restated certificate of
incorporation denies cumulative voting rights in the election of directors.
Village Bancorp's articles of incorporation and bylaws do not contain a
provision regarding cumulative voting rights.
PREEMPTIVE RIGHTS. Webster Financial's restated certificate of
incorporation and Village Bancorp's articles of incorporation provide that
shareholders do not have any preemptive rights regarding the entity's
securities.
NOTICE OF SHAREHOLDER MEETINGS. Webster Financial's bylaws require that
notice be given not less than 20 nor more than 50 days prior to each annual or
special meeting of shareholders. Village Bancorp's bylaws require that notice of
an annual or special shareholder meeting be given not less than 7 nor more than
50 days prior to a meeting.
QUORUM. Webster Financial's bylaws provide that the holders of one-third of
the capital stock issued and outstanding and entitled to vote at a meeting
constitutes a quorum. The bylaws of Village Bancorp provide that the holders of
a majority of the stock entitled to vote at a meeting constitutes a quorum,
except as otherwise specifically provided by law or Village Bancorp's articles
of incorporation or bylaws.
GENERAL VOTE. Webster Financial's bylaws provide that any matter brought
before a meeting of shareholders shall be decided by the affirmative vote of a
majority of the votes cast on the matter except as otherwise required by law or
Webster Financial's restated certificate of incorporation or bylaws. Village
Bancorp's bylaws provide that at all shareholders meetings, all questions shall
be determined by a majority vote of the shareholders present unless the manner
of deciding the question is specifically regulated by statute.
RECORD DATE. Webster Financial's bylaws provide that the record date for
determination of shareholders entitled to notice of or to vote at a meeting and
for other specified purposes shall not be less than 20 nor more than 50 days
before the date of the meeting or other action. Village Bancorp's bylaws provide
that the record date shall be not less than 10 nor more than 70 days prior to
the date of the meeting.
AUTHORIZED AND OUTSTANDING COMMON STOCK. See "-- Webster Financial's Common
Stock" as to authorized and currently outstanding shares of Webster Financial's
common stock. The articles of incorporation of Village Bancorp authorize
10,000,000 shares of Village Bancorp's common stock, par value $3.33 per share,
of which ___________ shares were outstanding as of _________ __, 1999. In
addition, as of _________ __, 1999, there were outstanding options to purchase
Village Bancorp's common stock granted to officers and other employees of
Village Bancorp for __________
48
shares of Village Bancorp's common stock, plus the option for 388,466 shares of
Village Bancorp's common stock granted to Webster Financial in connection with
the merger.
AUTHORIZED SERIAL PREFERRED STOCK. See "-- Webster Financial Preferred
Stock" as to the authorized shares of serial preferred stock of Webster
Financial. Village Bancorp is not authorized to issue any preferred stock.
DIVIDEND AND LIQUIDATION RIGHTS. For a description of the provisions of
Webster Financial's restated certification of incorporation with respect to
dividends and liquidation rights, see "-- Webster Financial's Common Stock."
Village Bancorp's bylaws provide that the board of directors may declare
dividends, which may be paid in cash, property or shares of the capital stock of
the corporation, subject to any limitations in the articles of incorporation or
law.
APPROVALS FOR ACQUISITIONS OF CONTROL AND OFFERS TO ACQUIRE CONTROL.
Webster Financial's certificate of incorporation prohibits any person, whether
an individual, company or group acting in concert, from acquiring beneficial
ownership of 10% or more of Webster Financial's voting stock, unless the
acquisition has received the prior approval of at least two-thirds of the
outstanding shares of voting stock at a duly called meeting of shareholders held
for that purpose and of all required federal regulatory authorities.
Furthermore, no person may make an offer to acquire 10% or more of Webster
Financial's voting stock without obtaining prior approval of the offer by at
least two-thirds of Webster Financial's board of directors or, alternatively,
before the offer is made, obtaining approval of the acquisition from the Office
of Thrift Supervision. These provisions do not apply to the purchase of shares
by underwriters in connection with a public offering or employee stock ownership
plan or other employee benefit plan of Webster Financial or any of its
subsidiaries, and the provisions remain effective only so long as an insured
institution is a majority-owned subsidiary of Webster Financial. Shares acquired
in excess of these limitations are not entitled to vote or take other
shareholder action or be counted in determining the total number of outstanding
shares in connection with any matter involving shareholder action. These excess
shares are also subject to transfer to a trustee, selected by Webster Financial,
for the sale on the open market or otherwise, with the expenses of the trustee
to be paid out of the proceeds of the sale. The articles of incorporation and
bylaws of Village Bancorp do not contain a similar provision.
PROCEDURES FOR BUSINESS COMBINATIONS. Webster Financial's restated
certificate of incorporation requires that business combinations between Webster
Financial or any majority-owned subsidiary of Webster Financial and a 10% or
more shareholder or its affiliates or associates, referred to collectively in
this section as the interested shareholder, either (i) be approved by at least
80% of the total number of outstanding shares of voting stock of Webster
Financial, or (ii) be approved by at least two-thirds of Webster Financial's
continuing directors, which means those directors unaffiliated with the
interested shareholder and serving prior to the interested shareholder becoming
an interested shareholder, or meet specified price and procedure requirements
that provide for consideration per share generally equal to or greater than that
paid by the interested shareholder when it acquired its block of stock. The
types of business combinations with an interested shareholder covered by this
provision include: any merger, consolidation and share exchange; any sale,
lease, exchange, mortgage, pledge or other transfer of assets other than in the
usual and regular course of business; an issuance or transfer of equity
securities having an aggregate market value in excess of 5% of the aggregate
market value of Webster Financial's outstanding shares; the adoption of any plan
or proposal of liquidation proposed by or on behalf of an interested
shareholder; and any reclassification of securities, recapitalization of Webster
Financial or any merger or consolidation of Webster Financial with any of its
subsidiaries or any other transaction which has the effect of increasing the
proportionate ownership interest of the interested shareholder. Webster
Financial's restated certificate of incorporation excludes employee stock
purchase plans and other employee benefit plans of Webster Financial and any of
its subsidiaries from the definition of interested shareholder. The articles of
incorporation and bylaws of Village Bancorp do not contain a similar business
combination provision.
49
ANTI-GREENMAIL. Webster Financial's restated certificate of incorporation
requires approval by a majority of the outstanding shares of voting stock before
Webster Financial may directly or indirectly purchase or otherwise acquire any
voting stock beneficially owned by a holder of 5% percent or more of Webster
Financial's voting stock, if the holder has owned the shares for less than two
years. Any shares beneficially held by the person are required to be excluded in
calculating majority shareholder approval. This provision would not apply to a
pro rata offer made by Webster Financial to all of its shareholders in
compliance with the Securities Exchange Act of 1934 and the rules and
regulations under that statute or a purchase of voting stock by Webster
Financial if the board of directors has determined that the purchase price per
share does not exceed the fair market value of that voting stock. The articles
of incorporation and bylaws of Village Bancorp do not contain a similar
provision.
CRITERIA FOR EVALUATING OFFERS. Webster Financial's restated certificate of
incorporation provides that the board of directors, when evaluating any
acquisition offers, shall give due consideration to all relevant factors,
including, without limitation, the economic effects of acceptance of the offer
on depositors, borrowers and employees of its insured institution subsidiaries
and on the communities in which its subsidiaries operate or are located, as well
as on the ability of its subsidiaries to fulfill the objectives of insured
institutions under applicable federal statutes and regulations. The articles of
incorporation and bylaws of Village Bancorp do not contain a similar provision.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to Webster
Financial's restated certificate of incorporation must be approved by at least
two-thirds of Webster Financial's board of directors at a duly constituted
meeting called for that purpose and also by shareholders by the affirmative vote
of at least a majority of the shares entitled to vote thereon at a duly called
annual or special meeting; provided, however, that approval by the affirmative
vote of at least two-thirds of the shares entitled to vote thereon is required
to amend the provisions regarding amendment of the certificate of incorporation,
directors, bylaws, approval for acquisitions of control and offers to acquire
control, criteria for evaluating offers, the calling of special meetings of
shareholders, greenmail, and shareholder actions. In addition, the provisions
regarding business combinations may be amended only by the affirmative vote of
at least 80% of the shares entitled to vote thereon. Webster Financial's bylaws
may be amended by the affirmative vote of at least two-thirds of the board of
directors or by shareholders by at least two-thirds of the total votes eligible
to be voted, at a duly constituted meeting called for that purpose.
The articles of incorporation of Village Bancorp provide that the articles
of incorporation may be amended in the manner prescribed by statute. Village
Bancorp's bylaws provide that the bylaws may be amended by the affirmative vote
of the holders of a majority of the stock entitled to vote at a shareholder
meeting and by the affirmative vote of the directors holding a majority of the
directorship at a meeting of the board of directors, and that notice of the
proposed amendment must be included in the notice of the meeting. The bylaws of
Village Bancorp also provide that no bylaw amendment shall become effective
until filed with the Office of the Secretary of State of Connecticut and where
necessary, approved by the appropriate state or federal regulatory agency, if
required by law.
APPLICABLE LAW
The following discussion is a general summary of particular Delaware and
Connecticut statutory provisions and federal statutory and regulatory provisions
that may be deemed to have an anti-takeover effect.
DELAWARE TAKEOVER STATUTE. Section 203 of the Delaware corporation law
applies to Delaware corporations with a class of voting stock listed on a
national securities exchange, authorized for quotation on the Nasdaq Stock
Market, or held of record by 2,000 or more persons,
50
and restricts transactions which may be entered into by the corporation and some
of its shareholders. Section 203 provides, in essence, that a shareholder
acquiring more than 15% of the outstanding voting stock of a corporation subject
to the statute and that person's affiliates and associates, referred to in this
section as an interested stockholder, but less than 85% of its shares may not
engage in specified business combinations with the corporation for a period of
three years subsequent to the date on which the shareholder became an interested
stockholder unless (i) prior to that date the corporation's board of directors
approved either the business combination or the transaction in which the
shareholder became an interested stockholder or (ii) at or subsequent to that
time the business combination is approved by the corporation's board of
directors and authorized at an annual or special meeting of shareholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder. Section 203 defines the
term business combination to include a wide variety of transactions with or
caused by an interested stockholder in which the interested stockholder receives
or could receive a benefit on other than a pro rata basis with other
shareholders, including mergers, consolidations, specified types of asset sales,
specified issuances of additional shares to the interested stockholder,
transactions with the corporation which increase the proportionate interest of
the interested stockholder or transactions in which the interested stockholder
receives specified other benefits.
CONNECTICUT REGULATORY RESTRICTIONS ON ACQUISITIONS OF STOCK. Connecticut
banking statutes prohibit any person from directly or indirectly offering to
acquire or acquiring voting stock of a Connecticut-chartered commercial bank,
like Village Bank, a federal savings bank having its principal office in
Connecticut, like Webster Bank, or a holding company of that kind of entity,
like Webster Financial or Village Bancorp, that would result in the person
becoming, directly or indirectly, the beneficial owner of more than 10% of any
class of voting stock of that entity unless the person had previously filed an
acquisition statement with the Connecticut Commissioner of Banking and the offer
or acquisition has not been disapproved by the Connecticut Commissioner.
FEDERAL LAW. Federal law provides that, subject to some exemptions, no
person acting directly or indirectly or through or in concert with one or more
other persons may acquire control of an insured institution or holding company
thereof, without giving at least 60 days prior written notice providing
specified information to the appropriate federal banking agency. In the case of
Webster Financial and Webster Bank, the appropriate federal banking agency is
the Office of Thrift Supervision and in the case of Village Bancorp and Village
Bank, the appropriate federal banking agency is the Board of Governors of the
Federal Reserve System or the Federal Deposit Insurance Corporation. Control is
defined for this purpose as the power, directly or indirectly, to direct the
management or policies of an insured institution or to vote 25% or more of any
class of voting securities of an insured institution. Control is presumed to
exist where the acquiring party has voting control of at least 10% of any class
of the institution's voting securities and other conditions are present. The
Office of Thrift Supervision, the Federal Deposit Insurance Corporation or the
Board of Governors of the Federal Reserve System may prohibit the acquisition of
control if the agency finds, among other things, that (i) the acquisition would
result in a monopoly or substantially lessen competition; (ii) the financial
condition of the acquiring person might jeopardize the financial stability of
the institution; or (iii) the competence, experience or integrity of any
acquiring person or any of the proposed management personnel indicates that it
would not be in the interest of the depositors or the public to permit the
acquisition of control by that person.
WHERE YOU CAN FIND MORE INFORMATION
Webster Financial and Village Bancorp file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
that Webster Financial or Village Bancorp files with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the
51
SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports,
proxy and information statements and other information about issuers that file
electronically with the SEC. The address of the SEC's Internet site is
http://www.sec.gov. Webster Financial can be found on the Internet at
http://www.websterbank.com. Village Bancorp can be found on the Internet at
http://www.villagebank.com. Webster Financial's common stock is traded on the
Nasdaq Stock Market's National Market Tier under the trading symbol WBST.
Village Bancorp's common stock is traded on the Nasdaq Stock Market's SmallCap
Market under the trading symbol VBNK.
Webster Financial has filed with the SEC a registration statement on Form
S-4 under the Securities Act of 1933 relating to Webster Financial's common
stock to be issued to Village Bancorp's shareholders in the merger. As permitted
by the rules and regulations of the SEC, this proxy statement/prospectus does
not contain all the information set forth in the registration statement. You can
obtain that additional information from the SEC's principal office in
Washington, D.C. or the SEC's Internet site as described above. Statements
contained in this proxy statement/prospectus or in any document incorporated by
reference into this proxy statement/prospectus about the contents of any
contract or other document are not necessarily complete and, in each instance
where the contract or document is filed as an exhibit to the registration
statement, reference is made to the copy of that contract or document filed as
an exhibit to the registration statement, with each statement of that kind in
this proxy statement/prospectus being qualified in all respects by reference to
the document.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows Webster Financial and Village Bancorp to incorporate by
reference information into this proxy statement/prospectus, which means that
Webster Financial and Village Bancorp can disclose important information to you
by referring you to another document filed separately with the SEC. The
information that Webster Financial and Village Bancorp incorporate by reference
is considered a part of this proxy statement/prospectus, except for any
information superseded by information presented in this proxy
statement/prospectus. This proxy statement/prospectus incorporates important
business and financial information about Webster Financial, Village Bancorp and
their subsidiaries that is not included in or delivered with this document. All
documents subsequently filed by Webster Financial and Village Bancorp pursuant
to Sections 13(a), 13(c) 14 or 15(d) of the Securities Exchange Act of 1934
prior to _____________, ___, 1999 are deemed to be incorporated by reference
into this proxy statement/prospectus.
WEBSTER FINANCIAL DOCUMENTS
This proxy statement/prospectus incorporates by reference the documents
listed below that Webster Financial has filed with the SEC:
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
o Annual Report on Form 10-K which Year ended December 31, 1997
was updated by the Current Report
on Form 8-K filed on July 23, 1998
o Quarterly Report on Form 10-Q For the quarter ended March 31, 1998
o Quarterly Report on Form 10-Q For the quarter ended June 30, 1998
o Quarterly Report on Form 10-Q For the quarter ended September 30, 1998
o Current Report on Form 8-K/A Filed January 26, 1998
o Current Report on Form 8-K/A Filed January 26, 1998
o Current Report on Form 8-K/A Filed February 6, 1998
o Current Report on Form 8-K Filed March 4, 1998
52
o Current Report on Form 8-K Filed March 19, 1998
o Current Report on Form 8-K Filed April 30, 1998
o Current Report on Form 8-K which Filed July 23, 1998
restated portions of the 1997
annual report to shareholders
o Current Report on Form 8-K Filed October 30, 1998
o Current Report on Form 8-K Filed November 23, 1998
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR WRITE
TO: JAMES M. SITRO, VICE PRESIDENT, INVESTOR RELATIONS OF WEBSTER FINANCIAL
CORPORATION, WEBSTER PLAZA, WATERBURY, CONNECTICUT 06702, TELEPHONE (203)
578-2399. IN ORDER TO OBTAIN TIMELY DELIVERY OF DOCUMENTS, YOU SHOULD REQUEST
INFORMATION AS SOON AS POSSIBLE, BUT NO LATER THAN ____________ ___, 1999.
VILLAGE BANCORP DOCUMENTS
This proxy statement/prospectus incorporates by reference the documents
listed below that Village Bancorp has filed with the SEC:
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
o Annual Report on Form 10-K Year ended December 31, 1997
o Quarterly Report on Form 10-Q as For the quarter ended March 31, 1998
amended by Form 10-Q/A
o Quarterly Report on Form 10-Q For the quarter ended June 30, 1998
o Quarterly Report on Form 10-Q For the quarter ended September 30, 1998
o Current Report on Form 8-K Filed November 18, 1998
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR WRITE
TO: JAMES R. UMBARGER, EXECUTIVE VICE PRESIDENT OF VILLAGE BANCORP, INC., 25
PROSPECT STREET, P .O. BOX 366, RIDGEFIELD, CONNECTICUT 06877, TELEPHONE (203)
438-9551. IN ORDER TO OBTAIN TIMELY DELIVERY OF DOCUMENTS, YOU SHOULD REQUEST
INFORMATION AS SOON AS POSSIBLE, BUT NO LATER THAN ____________ ___, 1999.
ADJOURNMENT OF SHAREHOLDER MEETING
The holders of Village Bancorp's common stock will be asked to approve, if
necessary, the adjournment of the shareholder meeting to solicit further votes
in favor of the merger agreement. If you vote against the merger agreement, your
proxy may not be used by management to vote in favor of an adjournment pursuant
to its discretionary authority.
SHAREHOLDER PROPOSALS
Any proposal which a Webster Financial shareholder wishes to have included
in the proxy materials for Webster Financial's 1999 annual meeting pursuant to
SEC Rule 14a-8 must have been received by Webster Financial at its principal
executive offices at Webster Plaza, Waterbury, Connecticut 06702 by November 19,
1998. Any other proposal for consideration by shareholders at Webster
Financial's 1999 annual meeting must be received by Webster Financial by March
23, 1999.
If the merger agreement is approved and the merger takes place, Village
Bancorp will not have an annual meeting of shareholders in 1999. If the merger
does not take place, Village Bancorp anticipates that its 1999 annual meeting
will be held in April 1999. Any proposal intended to be
53
presented by a Village Bancorp shareholder for inclusion in Village Bancorp's
proxy statement for its 1999 annual meeting must have been received by Village
Bancorp at its principal executive offices at 25 Prospect Street, Ridgefield,
Connecticut 06877 by December 8, 1998.
OTHER MATTERS
We do not expect that any matters other than those described in this proxy
statement/prospectus will be brought before the shareholder meeting. If any
other matters are presented, however, it is the intention of the persons named
in the Village Bancorp proxy to vote proxies in accordance with the
determination of a majority of Village Bancorp's board of directors, including,
without limitation, a motion to adjourn or postpone the shareholder meeting to
another time and/or place for the purpose of soliciting additional proxies in
order to approve the merger agreement or otherwise.
EXPERTS
The consolidated financial statements of Webster Financial, as restated to
include Eagle Financial Corp., at December 31, 1997 and 1996, and for each of
the years in the three-year period ended December 31, 1997, have been
incorporated by reference into this proxy statement/prospectus and in the
registration statement in reliance on the report of KPMG LLP, independent
certified public accountants, which is incorporated by reference into this proxy
statement/prospectus and in the registration statement and upon the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements of Village Bancorp, incorporated into
this proxy statement/prospectus by reference from Village Bancorp's Annual
Report on Form 10-K for the year ended December 31, 1997, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference and have been so incorporated in reliance upon
the report of that firm given upon their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of Webster Financial's common stock to be issued in the merger
has been passed upon by Hogan & Hartson L.L.P., Washington, D.C. Additionally,
Hogan & Hartson L.L.P. will be passing upon tax matters in connection with the
merger.
54
APPENDIX A
* To be updated prior to the mailing of the Proxy Statement/Prospectus
November 11, 1998
Village Bancorp, Inc.
25 Prospect Street
Ridgefield, CT 06877
Attention: Board of Directors
Dear Members of the Board of Directors:
Village Bancorp, Inc. (the "Company") and Webster Financial Corporation
("Webster"), propose to enter into an agreement and plan of merger (the "Merger
Agreement") pursuant to which the Company will be merged with and into Webster
(the "Merger"). Under the terms of the Merger Agreement, at the effective time
of the Merger, each issued and outstanding share of common stock, par value
$3.33 per share, of the Company (the "Shares") (other than Shares held by the
Company, Webster or any of their respective subsidiaries, all of which Shares
shall be canceled and retired, and Dissenting Shares (as defined in the Merger
Agreement)) will be converted into the right to receive, at the election of the
holder thereof and subject to certain proration provisions, either: (i) $23.50
in cash (the "Cash Consideration") subject to a Maximum Cash Number (as defined
in the Merger Agreement), or (ii) a number of shares of Webster common stock,
par value $.01 per share ("Webster Common Stock") determined by dividing $23.50
by the Base Trading Price (as defined in the Merger Agreement). For purposes of
our opinion, the term "Consideration" means the aggregate amount of the Cash
Consideration and the Webster Common Stock to be received by the holders of the
Shares in the Merger as set forth in clauses (i) and (ii) in the immediately
preceding sentence. The terms and conditions of the Merger, including the terms
limiting the aggregate amount of the Cash Consideration and the cash to be paid
in respect of fractional shares and Dissenting Shares, are more fully set forth
in the Merger Agreement.
You have asked us whether, in our opinion, the proposed Consideration to be
received by the holders of the Shares in the Merger is fair to such holders from
a financial point of view.
In arriving at the opinion set forth below, we have reviewed such documents
and taken such actions as we have deemed appropriate, including, but not limited
to:
1. Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31,
1997 and the Company's Forms 10-Q and the related unaudited financial
information for the quarterly periods ended March 31, 1998, June 30,
1998, and September 30, 1998;
2. Reviewed Webster's Annual Reports, Forms 10-K and related financial
information for the three fiscal years ended December 31, 1997 and
Webster's Forms 10-Q and the related unaudited financial information
for the quarterly periods ended March 31, 1998, June 30, 1998, and
September 30, 1998;
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Village Bancorp, Inc.
Page 2 of 3
3. Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company furnished to us by the Company;
4. Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of Webster
furnished to us by Webster;
5. Conducted discussions with members of senior management of the Company
and Webster concerning their respective businesses and prospects;
6. Reviewed the historical market prices and trading activity for the
Shares and compared it with that of certain publicly traded companies
which we deemed to be similar to the Company;
7. Reviewed the historical market prices and trading activity for Webster
Common Stock;
8. Compared the results of operations of the Company with those of
certain companies that we deemed to be reasonably similar to the
Company;
9. Compared the proposed financial terms of the Merger with the financial
terms of certain other mergers and acquisitions that we deemed to be
relevant;
10. Reviewed a draft of the Merger Agreement dated November 11, 1998; and
11. Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Company and
Webster, and we have not independently verified such information or undertaken
an independent appraisal or evaluation of the assets or liabilities of the
Company or Webster. With respect to the financial forecasts furnished to us by
the Company, we have assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgment of the Company's management
as to the expected future financial performance of the Company. We have also
assumed that the Merger will be free of federal tax to the Company, Webster and
holders of Shares (other than in respect of the Cash Consideration and any cash
paid in lieu of fractional shares). Our opinion is based upon general economic,
market, monetary and other conditions as they exist and can be evaluated, and
the information made available to us, as of the date hereof. We express no
opinion as to what the value of Webster Common Stock actually will be when
issued to the holders of the Shares upon consummation of the Merger.
This opinion is addressed to the Board of Directors of the Company and does
not constitute a recommendation to any shareholders as to how such shareholders
should vote on the proposed Merger. We also express no opinion and make no
recommendation as to whether the holders of the Shares should elect to receive
Cash Consideration or Webster Common Stock.
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Village Bancorp, Inc.
Page 3 of 3
We have acted as financial advisor to the Company in connection with this
opinion and will receive a fee for our services, a significant portion of which
is contingent upon consummation of the Merger.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Consideration to be received by the holders of the Shares in the
Merger is fair to such holders from a financial point of view.
Very truly yours,
MORGAN LEWIS GITHENS & AHN
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APPENDIX B
SECTIONS 33-855 TO 33-872 OF THE CONNECTICUT GENERAL STATUTES
SS. 33-855. DEFINITIONS
As used in sections 33-855 to 33-872, inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when and in
the manner required by sections 33-860 to 33-868, inclusive.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SS. 33-856. RIGHT TO DISSENT
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a
party (A) if shareholder approval is required for the merger by section 33-817
or the certificate of incorporation and the shareholder is entitled to vote on
the merger or (B) if the corporation is a subsidiary that is merged with its
parent under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
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(4) An amendment of the certificate of incorporation that materially
and adversely affects rights in respect of a dissenter's shares because it: (A)
Alters or abolishes a preferential right of the shares; (B) creates, alters or
abolishes a right in respect of redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the shares; (C) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities; (D) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or (E)
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under section
33-668; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the certificate of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as holder
of such shares against the corporate transactions described in this section,
whether or not he proceeds as provided in sections 33-855 to 33-872, inclusive.
SS. 33-857. DISSENT BY NOMINEES AND BENEFICIAL OWNERS
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if: (1) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
SS.SS. 33-858, 33-859. RESERVED FOR FUTURE USE
SS. 33-860. NOTICE OF DISSENTERS' RIGHTS
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under sections 33-855 to 33-872, inclusive, and be accompanied by a copy
of said sections.
(b) If corporate action creating dissenters' rights under section 33-856 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 33-862.
SS. 33-861. NOTICE OF INTENT TO DEMAND PAYMENT
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) shall deliver to the corporation before
the vote is taken written notice of his intent to demand
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payment for his shares if the proposed action is effectuated and (2) shall not
vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
of this section is not entitled to payment for his shares under sections 33-855
to 33-872, inclusive.
SS. 33-862. DISSENTERS' NOTICE
(a) If proposed corporate action creating dissenters' rights under section
33-856 is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after the
corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days after
the date the subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
SS. 33-863. DUTY TO DEMAND PAYMENT
(a) A shareholder sent a dissenters' notice described in section 33-862
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to subdivision (3) of subsection (b) of said section and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) of this section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
SS. 33-864. SHARE RESTRICTIONS
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 33-866.
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(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
SS. 33-865. PAYMENT
(a) Except as provided in section 33-867, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with section 33-863 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by: (1) The corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, a statement of changes
in shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a statement of the dissenter's right to demand payment under section 33-868; and
(5) a copy of sections 33-855 to 33-872, inclusive.
SS. 33-866. FAILURE TO TAKE ACTION
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
SS. 33-867. AFTER-ACQUIRED SHARES
(a) A corporation may elect to withhold payment required by section 33-865
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under
section 33-868.
SS. 33-868. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865
or offered under section 33-867 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
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(2) The corporation fails to make payment under section 33-865 within
sixty days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
of this section within thirty days after the corporation made or offered payment
for his shares.
SS.SS. 33-869, 33-870. RESERVED FOR FUTURE USE
SS. 33-871. COURT ACTION
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the superior court for
the judicial district where a corporation's principal office or, if none in this
state, its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the superior court for the judicial district where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under section 33-867.
SS. 33-872. COURT COSTS AND COUNSEL FEES
(a) The court in an appraisal proceeding commenced under section 33-871
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under section 33-868.
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(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (1) Against
the corporation and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of sections
33-860 to 33-868, inclusive; or (2) against either the corporation or a
dissenter, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by sections 33-855 to
33-872, inclusive.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to the provisions of Article 6 of Webster Financial's
Restated Certificate of Incorporation, as amended, and the provisions of Article
IX of the Webster Financial's Bylaws, as amended.
Webster Financial is a Delaware corporation subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware (the "Delaware Corporation Law"). Section 145 of the Delaware
Corporation Law provides for the indemnification, under certain circumstances,
of persons who are or were directors, officers, employees or agents of Webster
Financial, or are or were serving at the request of Webster Financial in such a
capacity with another business organization or entity, against expenses,
judgments, fines and amounts paid in settlement in actions, suits or
proceedings, whether civil, criminal, administrative, or investigative, brought
or threatened against or involving such persons because of such person's service
in any such capacity. In the case of actions brought by or in the right of
Webster Financial, Section 145 provides for indemnification only of expenses,
and only upon a determination by the Court of Chancery or the court in which
such action or suit was brought that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses.
Webster Financial's Bylaws provide for indemnification of directors,
officers, trustees, employees and agents of Webster Financial, and for those
serving in such roles with other business organizations or entities, in the
event that such person was or is made a party to (or is threatened to be made a
party to) any civil, criminal, administrative, arbitration or investigative
action, suit, or proceeding (other than an action by or in the right of Webster
Financial) by reason of the fact that such person is or was serving in such a
capacity for or on behalf of Webster Financial. Webster Financial will indemnify
any such person against expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the best
interests of Webster Financial, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Similarly, Webster Financial shall indemnify such persons for expenses
reasonably incurred and settlements reasonably paid in actions, suits, or
proceedings brought by or in the right of Webster Financial, if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of Webster Financial; provided, however, that
no indemnification shall be made against expenses in respect of any claim,
issue, or matter as to which such person is adjudged to be liable to Webster
Financial or against amounts paid in settlement unless and only to the extent
that there is a determination made by the appropriate party set forth in the
Bylaws that the person to be indemnified is, in view of all the circumstances of
the case, fairly and reasonably entitled to indemnity for such expenses or
amounts paid in settlement. In addition, Webster Financial may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
trustee, employee, or agent of Webster Financial or is acting in such capacity
for another business organization or entity at Webster Financial's request,
against any liability asserted against such person and incurred in such
capacity, or arising out of such person's status as such, whether or not Webster
Financial would have the power or obligation to indemnify him against such
liability under the provisions of Article IX of Webster Financial's Bylaws.
Article 6 of Webster Financial's Restated Certificate of Incorporation
provides that no director will be personally liable to Webster Financial or its
shareholders for monetary damages for breach of fiduciary duty as a director
other than liability for any breach of such director's duty of loyalty to
Webster Financial or its shareholders, for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, for any
payment of a dividend or
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approval of a stock repurchase that is illegal under Section 174 of the Delaware
Corporation Law, or for any transaction from which the director derived an
improper personal benefit.
The foregoing indemnity and insurance provisions have the effect of
reducing directors' and officers' exposure to personal liability for actions
taken in connection with their respective positions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Webster Financial pursuant to the foregoing provisions, or otherwise, Webster
Financial has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Webster Financial of expenses incurred or paid by a director, officer or
controlling person of Webster Financial in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, Webster Financial will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
Exhibit
No. Exhibit
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2.1 Agreement and Plan of Merger, dated as of November 11, 1998, by and
between Webster Financial Corporation ("Webster Financial") and
Village Bancorp, Inc. ("Village Bancorp").
2.2 Option Agreement, dated as of November 11, 1998, between Village
Bancorp and Webster Financial.
2.3 Village Bancorp, Inc. Stockholder Agreement, dated as of November 11,
1998, by and among Webster Financial and the stockholders of Village
Bancorp identified therein.
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the securities
registered hereunder, including the consent of that firm.
8 Form of opinion of Hogan & Hartson L.L.P as to certain tax matters,
including consent of that firm.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5 and
Exhibit 8).
23.2 Consent of KPMG LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Morgan Lewis Githens & Ahn, Inc.
24 Power of attorney.
99.1 Form of Village Bancorp proxy card.
99.2 Form of cash election form.*
- ----------
* To be filed by amendment.
(B) Not required.
(C) See Appendix A to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS.
(a) Webster Financial hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
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(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of the securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) (ss. 230.424(b)
of this chapter) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
the Registration Fee" table in the effective registration
statement;
(iii)To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) Webster Financial hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of Webster
Financial's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Webster Financial hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning
of Rule 145(c), Webster Financial undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(d) Webster Financial undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports
to meet the requirements of section 10(a)(3) of the Securities Act of
1933 and is used in connection with an offering of securities subject
to Rule 415 (ss. 230.415 of this chapter), will be filed as a part of
an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a
II-4
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undertaking concerning indemnification is included as part of the
response to Item 20.
(f) Webster Financial hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of
responding to the request.
(g) Webster Financial hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in the Registration Statement when it became
effective.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waterbury, State of
Connecticut, on February 8, 1999.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
---------------------------------
James C. Smith
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on February 8, 1999.
Name: Title:
/s/ James C. Smith
- ------------------------------
James C. Smith Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ John V. Brennan
- ------------------------------
John V. Brennan Executive Vice President, Chief Financial
Officer and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
/s/ Richard H. Alden* Director
- ------------------------------
Richard H. Alden
/s/ Achille A. Apicella* Director
- ------------------------------
Achille A. Apicella
/s/ Joel S. Becker* Director
- ------------------------------
Joel S. Becker
/s/ O. Joseph Bizzozero, Jr.* Director
- ------------------------------
O. Joseph Bizzozero, Jr.
/s/ George T. Carpenter* Director
- ------------------------------
George T. Carpenter
II-6
/s/ John J. Crawford* Director
- ------------------------------
John J. Crawford
/s/ Harry P. DiAdamo, Jr.* Director
- ------------------------------
Harry P. DiAdamo, Jr.
/s/ Robert A. Finkenzeller* Director
- ------------------------------
Robert A. Finkenzeller
/s/ Walter R. Griffin* Director
- ------------------------------
Walter R. Griffin
/s/ J. Gregory Hickey* Director
- ------------------------------
J. Gregory Hickey
/s/ C. Michael Jacobi* Director
- ------------------------------
C. Michael Jacobi
/s/ John F. McCarthy* Director
- ------------------------------
John F. McCarthy
/s/ Sister Marguerite Waite* Director
- ------------------------------
Sister Marguerite Waite
By: /s/ John V. Brennan
------------------------------
*By Power of Attorney
John V. Brennan
II-7
EXHIBIT INDEX
Exhibit
No. Exhibit
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2.1 Agreement and Plan of Merger, dated as of November 11, 1998, by and
between Webster Financial Corporation ("Webster Financial") and
Village Bancorp, Inc. ("Village Bancorp").
2.2 Option Agreement, dated as of November 11, 1998, between Village
Bancorp and Webster Financial.
2.3 Village Bancorp, Inc. Stockholder Agreement, dated as of November 11,
1998, by and among Webster Financial and the stockholders of Village
Bancorp identified therein.
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the securities
registered hereunder, including the consent of that firm.
8 Form of opinion of Hogan & Hartson L.L.P as to certain tax matters,
including consent of that firm.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5 and
Exhibit 8).
23.2 Consent of KPMG LLP
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of Morgan Lewis Githens & Ahn, Inc.
24 Power of attorney.
99.1 Form of Village Bancorp proxy card.
99.2 Form of cash election form.*
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* To be filed by amendment.