As filed with the Securities and Exchange Commission on September 29, 1999
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 6022 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. Robert M. Taylor III, Esq.
Steven E. Ballew, Esq. Day, Berry and Howard LLP
Hogan & Hartson L.L.P. City Place 1
555 Thirteenth Street, N.W. Hartford, Connecticut 06103-3499
Washington, D.C. 20004 (860) 275-0100
(202) 637-8575
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box.[ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Title of each class of Proposed maximum Proposed maximum
securities to be Amount to be offering price per aggregate offering Amount of
registered registered unit* price* registration fee*
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Common Stock, par value
$.01 per share 8,054,374 $25.81 $207,883,393 $15,909**
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
* Estimated pursuant to Rule 457(f)(1) and Rule 457(c) under the Securities
Act of 1933, as amended, based upon the average of the high and low prices
for shares of common stock of New England Community Bancorp, Inc. as
reported on the Nasdaq Stock Market's National Market Tier and calculated as
of September 27, 1999 and the exchange ratio prescribed by the agreement and
plan of merger.
** Reduced by the $41,883 filing fee previously paid pursuant to Rule 457(b).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
WEBSTER FINANCIAL CORPORATION NEW ENGLAND COMMUNITY BANCORP, INC.
WEBSTER PLAZA 175 BROAD STREET, P. O. BOX 130
WATERBURY, CT 06702 WINDSOR, CT 06095
(203) 753-2921 (860) 610-3600
------------- -------------
PROSPECTUS JOINT PROXY STATEMENT
The boards of directors of Webster Financial Corporation and New
England Community Bancorp, Inc. have each approved a merger agreement. This
agreement provides that NECB will merge into Webster, subject to customary
conditions such as shareholder and regulatory approvals.
If the merger takes place, NECB shareholders will receive 1.06 shares
of Webster's common stock for each share of NECB's common stock you own,
representing a value of $27.26 based on the September 27, 1999 closing price of
Webster's common stock. Webster could opt to increase the exchange ratio in
specific circumstances where NECB could otherwise terminate the merger
agreement. In addition, the conversion of your shares of NECB common stock
generally will not be taxable, except for the receipt of cash instead of
fractional shares. Webster's common stock is traded on the Nasdaq Stock Market's
National Market Tier under the symbol WBST.
This document contains important information about Webster, NECB, the
merger and the conditions that must be satisfied before the merger can occur.
Please give all the information your careful attention.
Your vote is very important. The merger agreement and the merger must
be approved by the holders of at least a majority of outstanding shares of
common stock of each of our companies. To vote your shares, you may use the
enclosed proxy card or attend the special shareholders meeting each of us will
hold to allow you to consider and vote on the merger. To approve the merger
agreement, you MUST vote FOR the proposal by following the instructions on the
enclosed proxy card. If you do not vote at all, that will, in effect, count as a
vote against the proposal. We urge you to vote FOR this proposal.
/s/ James C. Smith /s/ David A. Lentini
- ------------------ --------------------
James C. Smith David A. Lentini
Chairman and Chief Executive Officer Chairman, President and Chief Executive Officer
Webster Financial Corporation New England Community Bancorp, Inc.
----------------------------
WEBSTER'S COMMON STOCK HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION, OR THE
FEDERAL DEPOSIT INSURANCE CORPORATION, NOR HAS ANY OF THESE INSTITUTIONS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this joint proxy statement/prospectus is September 29, 1999
and first mailed to shareholders on October 1, 1999
WEBSTER FINANCIAL CORPORATION
WEBSTER PLAZA
WATERBURY, CT 06702
-------------------
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
NOVEMBER 9, 1999
-------------------
A special meeting of shareholders of Webster Financial Corporation will
be held on November 9, 1999, at 2:00 p.m. at the Sheraton Waterbury Hotel, 3580
East Main Street, Waterbury, Connecticut 06705, for the following purposes:
1. To consider and vote on a proposal to approve and adopt the
agreement and plan of merger, dated as of June 29, 1999,
between Webster Financial Corporation and New England
Community Bancorp, Inc., the merger of NECB into Webster and
the other transactions contemplated by the merger agreement,
as described in the attached joint proxy statement/prospectus.
2. To consider and vote upon a proposal to approve and adopt the
amendment to Webster's certificate of incorporation to
increase the number of authorized shares of Webster's common
stock from 50,000,000 to 200,000,000; and
3. To transact any other business that properly comes before the
special meeting, or any adjournments or postponements of the
meeting, including, without limitation, a motion to adjourn
the special meeting to another time and/or place for the
purpose of soliciting additional proxies in order to approve
the merger agreement and the merger or otherwise.
The board of directors of Webster has fixed the close of business on
September 24, 1999 as the record date for the determination of shareholders of
Webster entitled to notice of and to vote at the special meeting. Only holders
of record of Webster's common stock at the close of business on that day will be
entitled to notice of and to vote at the special meeting or any adjournments or
postponements thereof.
WEBSTER'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AND THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION ARE ADVISABLE AND ARE FAIR TO AND
IN THE BEST INTERESTS OF WEBSTER'S SHAREHOLDERS, HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE MERGER AND THE CERTIFICATE AMENDMENT, AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE TO APPROVE THE ABOVE-LISTED PROPOSALS.
The affirmative vote of a majority of the shares of Webster's common
stock outstanding on September 24, 1999 is required to approve the merger
agreement and the merger. The required vote of Webster's shareholders on the
merger is based on the total number of shares of Webster's common stock
outstanding. NOT RETURNING A PROXY CARD, OR NOT VOTING IN PERSON AT THE SPECIAL
MEETING OR ABSTAINING FROM VOTING WILL HAVE THE SAME EFFECT AS VOTING AGAINST
THE ABOVE-LISTED PROPOSALS.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. A shareholder who executes a proxy may revoke it
at any time before it is exercised by giving written notice to the Secretary of
Webster's board of directors, by subsequently filing another proxy or by
attending the special meeting and voting in person.
By order of the Board of Directors
/s/ James C. Smith
------------------------------------------
James C. Smith
Chairman and Chief Executive Officer
Waterbury, Connecticut
September 29, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD.
NEW ENGLAND COMMUNITY BANCORP, INC.
175 BROAD STREET, P. O. BOX 130
WINDSOR, CONNECTICUT 06095
-------------------
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
NOVEMBER 9, 1999
-------------------
A special meeting of shareholders of New England Community Bancorp,
Inc. will be held on November 9, 1999, at 10:00 a.m. at the Hartford Golf Club,
134 Norwood Road, West Hartford, Connecticut, 06117-2238 for the following
purposes:
1. To consider and vote on a proposal to approve and adopt the
agreement and plan of merger, dated as of June 29, 1999,
between Webster Financial Corporation and NECB, the merger of
NECB into Webster and the other transactions contemplated by
the merger agreement, as described in the attached joint proxy
statement/prospectus.
2. To transact any other business that properly comes before the
special meeting, or any adjournments or postponements of the
meeting, including, without limitation, a motion to adjourn
the special meeting to another time and/or place for the
purpose of soliciting additional proxies in order to approve
the merger agreement and the merger or otherwise.
You are entitled to notice and to vote at the special meeting or any
adjournments or postponements of the meeting only if you were a holder of record
of NECB's common stock at the close of business on September 24, 1999.
NECB'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS ADVISABLE
AND IS FAIR TO AND IN THE BEST INTERESTS OF NECB'S SHAREHOLDERS, HAS APPROVED
THE MERGER AGREEMENT AND THE MERGER, AND RECOMMENDS THAT YOU VOTE TO APPROVE THE
MERGER AGREEMENT AND THE MERGER.
The affirmative vote of a majority of the shares of NECB's common stock
outstanding on September 24, 1999 is required to approve the merger agreement
and the merger. The required vote of NECB's shareholders is based on the total
number of shares of NECB's common stock outstanding and not on the number of
shares which are actually voted. NOT RETURNING A PROXY CARD, OR NOT VOTING IN
PERSON AT THE SPECIAL MEETING OR ABSTAINING FROM VOTING WILL HAVE THE SAME
EFFECT AS VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. A shareholder who executes a proxy may revoke it
at any time before it is exercised by giving written notice to the Secretary of
NECB's board of directors, by subsequently filing another proxy or by attending
the special meeting and voting in person.
By order of the Board of Directors
/s/ David A. Lentini
------------------------------------------
David A. Lentini
President and Chief Executive Officer
Windsor, Connecticut
September 29, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT
THE MERGER............................. ii
SUMMARY ................................... 1
SELECTED FINANCIAL DATA..................... 7
SELECTED UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA OF
WEBSTER AND NECB ........................... 10
THE MEETINGS................................ 12
The Webster Special Meeting............ 12
Matters to be Considered at the
Special Meeting................. 12
Record Date and Voting............. 12
Required Vote; Revocability of
Proxies......................... 13
Solicitation of Proxies............ 14
The NECB Special Meeting....................14
Matters to be Considered at the
Special Meeting................. 14
Record Date and Voting............. 14
Required Vote; Revocability of
Proxies......................... 15
Solicitation of Proxies............ 16
THE MERGER.................................. 17
The Parties............................ 17
Background of the Merger............... 18
Recommendation of the NECB
Board of Directors and Reasons
for the Merger..................... 19
Recommendation of the Webster
Board of Directors and Reasons
for the Merger..................... 20
Purpose and Effects of the Merger...... 21
Structure.............................. 21
Exchange Ratio......................... 22
Options................................ 23
Regulatory Approvals................... 23
Conditions to the Merger............... 25
Conduct of Business Pending
the Merger......................... 26
Third Party Proposals.................. 26
Expenses; Breakup Fee.................. 26
Fairness Opinions of NECB's
Financial Advisors................. 27
A.G. Edwards & Sons, Inc...... 27
HAS Associates, Inc........... 33
Representations and Warranties......... 37
Termination and Amendment of
the Merger Agreement............... 38
Federal Income Tax Consequences........ 40
Accounting Treatment................... 42
Resales of Webster's Common
Stock Received in the Merger....... 42
Employee Benefits...................... 43
Absence of Dissenters' Rights.......... 43
Interests of NECB Directors and
Executive Officers in the
Merger that are Different
Than Yours......................... 43
Existing NECB Executive
Retention Agreements...... 43
Letter Agreements with
Webster................... 44
NECB Stock Options............ 45
Board Membership.............. 45
Indemnification............... 45
Option Agreement....................... 45
MARKET PRICES AND DIVIDENDS................. 48
Webster's Common Stock................. 48
NECB's Common Stock.................... 49
DESCRIPTION OF CAPITAL STOCK
AND COMPARISON OF
SHAREHOLDER RIGHTS..................... 49
Webster's Common Stock................. 49
NECB's Common Stock.................... 50
Webster's Preferred Stock and
Shareholder Rights Agreement........ 51
NECB's Preferred Stock................. 52
Webster's Senior Notes................. 52
Webster's Capital Securities........... 54
Certificate of Incorporation
and Bylaw Provisions.............. 54
Applicable Law......................... 58
WHERE YOU CAN FIND MORE
INFORMATION............................ 58
INCORPORATION OF DOCUMENTS
BY REFERENCE........................... 59
Webster Documents...................... 59
NECB Documents......................... 60
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS......................... 60
SHAREHOLDER PROPOSALS....................... 61
OTHER MATTERS............................... 61
EXPERTS..................................... 61
INDEPENDENT PUBLIC
ACCOUNTANTS............................ 62
LEGAL MATTERS............................... 62
FINANCIAL INFORMATION....................... 63
AMENDMENT TO WEBSTER'
CERTIFICATE OF
INCORPORATION.......................... 69
Appendix A
Opinion of A. G. Edwards & Sons, Inc.. A-1
Appendix B
Opinion of HAS Associates, Inc......... B-1
i
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE WEBSTER AND NECB PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: In general, we believe that the business potential for the combination of
Webster and NECB exceeds what Webster or NECB could accomplish by itself.
We expect that the merger will enhance shareholder value for all
shareholders.
More specifically, we believe that the combined companies will be stronger
than either Webster or NECB on a stand-alone basis. After the merger,
Webster will be the fifth largest New England-based bank with approximately
$10 billion in assets. As a result of the merger, the Webster franchise in
New England will be significantly expanded by entering the New Hampshire
market and by a strengthened business presence in three counties in
Connecticut. Further, the products and services available to NECB customers
will be expanded.
The proposed transaction is expected to have a positive impact on Webster's
earnings per share in the first year. It should also result in financial
benefits from combining the operations of the two companies. The stability
and continuity of Webster after the merger will be enhanced because one
member of NECB's board of directors has agreed to serve on the board of
directors of Webster and Webster Bank.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If you own NECB's common stock, each share will be converted into 1.06
shares of Webster's common stock, representing a value of $28.00 based on
the September 17, 1999 price of Webster's common stock. However, if the
price of Webster's common stock falls below thresholds established in the
merger agreement, NECB may terminate the merger unless Webster decides to
increase the 1.06 exchange ratio. See "The Merger--Termination and
Amendment of the Merger Agreement."
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Before the merger takes place, NECB expects to continue to pay regular
quarterly cash dividends on its common stock, which currently are $.12 per
share. After the merger, any dividends will be based on what Webster pays.
Webster presently also pays dividends at a quarterly dividend rate of $.12
per share. An exchange ratio of 1.06 would mean an equivalent dividend of
$.13 per share for NECB's common stock.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on the enclosed proxy card how you want to vote, and sign,
date and return it as soon as possible in the enclosed envelope. If you
sign and send in your proxy card and do not indicate how you want to vote,
your proxy card will be voted FOR approval of the merger agreement and the
merger. Not returning a proxy card, or not voting in person at the special
meeting or abstaining from voting, will have the same effect as voting
AGAINST the merger agreement and the merger.
You can choose to attend the special meeting and vote your shares in person
instead of completing and returning a proxy card. If you do complete and
return a proxy card, you may change your vote at any time up to and
including the time of the vote on the day of the special meeting by
following the directions on pages 13 and 15.
Q: WHO CAN VOTE?
A: You are entitled to vote at the Webster special meeting if you owned shares
of Webster's common stock at the close of business on September 24, 1999.
You will have one vote for each share of Webster's common stock that you
owned at that time.
ii
You are entitled to vote at the NECB special meeting if you owned shares of
NECB's common stock at the close of business on September 24, 1999. You
will have one vote for each share of NECB's common stock that you owned at
that time.
Q: IF MY SHARES ARE HELD IN STREET NAME BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions to your
broker on how you want your shares voted.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. There are three ways for you to revoke your proxy and change your
vote. First, you may send a written notice to the person to whom you
submitted your proxy stating that you would like to revoke your proxy.
Second, you may complete and submit a new proxy card. Third, you may vote
in person at the special meeting. If you have instructed a broker to vote
your shares, you must follow directions received from your broker to change
your vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger takes place, NECB shareholders will receive
instructions on how to exchange NECB certificates for Webster certificates.
You do not need to send in your Webster stock certificates at any time in
connection with the merger.
Q: WHAT NEEDS TO BE DONE TO COMPLETE THE MERGER?
A: Our obligations to complete the merger depend on a number of conditions
being met. In addition to our compliance with the merger agreement, these
include:
1. Approval of the merger agreement and merger by both the Webster and
NECB shareholders.
2. Approval of the merger by federal and state regulatory authorities.
3. Receipt of a legal opinion that, for United States tax purposes, NECB
shareholders who exchange their shares for shares of Webster's common
stock will not recognize any gain or loss as a result of the merger,
except in connection with the payment of cash instead of fractional
shares. This opinion will be subject to various limitations and we
recommend that you read the fuller description of tax consequences
provided in this document beginning on page 40.
4. In the case of Webster, receipt of an opinion from Webster's
independent public accountant that the merger will qualify for "pooling
of interests" accounting treatment.
5. Approval by Nasdaq of listing of Webster's common stock to be issued in
the merger.
6. The absence of any injunction or legal restraint blocking the merger or
government proceedings trying to block the merger.
When the law permits, Webster or NECB could decide to complete the merger
even though one or more of these conditions hasn't been met. We can't be
certain when, or if, the conditions to the merger will be satisfied or
waived, or that the merger will be completed.
Q: WHOM CAN I CALL WITH QUESTIONS OR TO OBTAIN COPIES OF THIS PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS?
A: James M. Sitro, Vice President, Investor Relations, Webster Financial
Corporation, Webster Plaza, Waterbury, Connecticut 06702, telephone (203)
578-2399
Anson C. Hall, Vice President and Treasurer, New England Community Bancorp,
Inc., 175 Broad Street, P.O.
iii
Box 130, Windsor, Connecticut 06095, telephone (860) 683-4610.
A copy of the merger agreement including each of its exhibits and the other
documents described in this joint proxy statement/prospectus will be
provided to you promptly without charge if you call or write to Mr. Sitro
or Mr. Hall at these numbers or addresses. Such documents were also filed
as exhibits to the registration statement filed with the SEC to register
the shares of Webster's common stock to be issued in the merger. See "Where
You Can Find More Information."
iv
SUMMARY
The following is a brief summary of information located elsewhere in
this document. It does not contain all of the information that is important to
you. Before you vote, you should give careful consideration to all of the
information contained in or incorporated by reference into this document to
fully understand the merger. See "Where You Can Find More Information" on page
56. Each item in this summary refers to the page where that subject is discussed
in more detail.
GENERALLY TAX FREE TRANSACTION FOR NECB SHAREHOLDERS (PAGE 40)
NECB and Webster have structured the merger so that, in general, none of
Webster, NECB or NECB shareholders will recognize gain or loss for federal
income tax purposes in the merger, except to the extent shareholders receive
cash instead of fractional shares. NECB and Webster will not be obligated to
complete the merger unless we receive legal opinions to that effect. Different
tax consequences may apply to you because of your individual circumstances or
because special tax rules apply to you, for example, if you:
o are a tax-exempt organization;
o are a dealer in securities;
o are a financial institution;
o are an insurance company;
o are a non-United States person;
o are subject to the alternative minimum tax;
o are a trader in securities who elects to apply a mark-to-market method
of accounting;
o acquired your shares of NECB's common stock from the exercise of
options or otherwise as compensation or through a qualified retirement
plan; or
o hold shares of NECB's common stock as part of a straddle, hedge, or
conversion transaction.
TAX MATTERS ARE VERY COMPLICATED. YOU SHOULD CONSULT YOUR TAX ADVISOR FOR A FULL
EXPLANATION OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
BOARDS OF DIRECTORS RECOMMEND APPROVAL (PAGE 19)
The Webster and NECB boards of directors approved the merger agreement and the
merger and recommend that you vote FOR approval of these matters.
NECB'S FINANCIAL ADVISORS SAY CONSIDERATION FAIR, FROM A FINANCIAL POINT OF
VIEW, TO NECB SHAREHOLDERS (PAGE 27)
In deciding to approve the merger, NECB's board of directors considered opinions
of A.G. Edwards & Sons, Inc. and HAS Associates, Inc., NECB's financial
advisors. The opinions concluded that the proposed consideration to be received
by the holders of NECB's common stock in the merger is fair to the shareholders
from a financial point of view. These opinions are attached as Appendix A and B
to this document. WE ENCOURAGE YOU TO READ THESE OPINIONS CAREFULLY IN ORDER
COMPLETELY TO UNDERSTAND THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATION
OF THE REVIEW MADE BY A.G. EDWARDS AND HAS ASSOCIATES, IN PROVIDING THESE
OPINIONS.
ABSENCE OF DISSENTERS' APPRAISAL RIGHTS IN THE MERGER (PAGE 43)
The holders of NECB and Webster's common stock have no dissenters' appraisal
rights in connection with the merger.
DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS (PAGE 49)
The rights of NECB shareholders after the merger will be governed by the
certificate of incorporation and bylaws of Webster rather than the certificate
of incorporation and bylaws of NECB. These rights will continue also to be
governed by the General Corporation Law of the state of Delaware since both
Webster and NECB are incorporated in Delaware. Some of the provisions included
in Webster's certificate of incorporation and bylaws may serve to prevent a
change in control of Webster even if desired by a majority of the shareholders.
Such provisions are not currently included in NECB's certificate of
incorporation and bylaws. These provisions are:
1
o a board of directors divided into three classes, with directors in each
class elected for three-year staggered terms;
o removal of a director only for cause by a two-thirds vote of the
shareholders at a shareholders' meeting;
o shareholder action by written consent only if the vote is unanimous;
o various provisions requiring a holder of 10% or more of Webster's
common stock to seek certain approvals from the Webster board of
directors and/or shareholders before acquiring additional shares or
entering into a business combination with Webster; and
o supermajority approvals to amend the certificate of incorporation and
bylaws of Webster.
o A shareholder rights agreement designed to protect against an
inadequate tender offer or to deter coercive or unfair takeover
tactics.
WEBSTER WILL USE "POOLING OF INTERESTS" ACCOUNTING TREATMENT (PAGE 42)
The merger will be accounted for as a "pooling of interests" for accounting and
financial reporting purposes.
NECB MANAGEMENT'S MONETARY INTEREST IN THE MERGER (PAGE 43)
Some of the directors and executive officers of NECB have interests in the
merger in addition to their interests as shareholders of NECB. David A. Lentini,
Frank A. Falvo, Anson C. Hall and Donat A. Fournier each have existing NECB
retention agreements. The merger will constitute a change in control for
purposes of those retention agreements. Webster and each of these executives
have entered into an agreement, by which the employment of the executives is
terminated without cause, each executive agrees not to solicit Webster employees
or customers or to compete with Webster, and Webster agrees to make payments
based on the executive's rights under his retention agreement. The aggregate
payment to be made to the executives as a group will be $4,559,407.
REGULATORY APPROVALS WE MUST OBTAIN FOR THE MERGER (PAGE 23)
For the merger to take place, we need to receive the regulatory approvals of the
United States Office of Thrift Supervision and the Connecticut and New Hampshire
Commissioners of Banking. We have filed applications with these regulators.
As of the date of this document, we haven't yet received the required approvals.
While we don't know of any reason why we would not be able to obtain the
necessary approvals in a timely manner, we can't be certain when or if we will
get them.
TERMINATION OF THE MERGER AGREEMENT (PAGE 38)
The merger agreement specifies a number of situations when we may terminate the
agreement. The merger agreement may be terminated at any time prior to the
effective time by our mutual consent and by either of us under specified
circumstances, including if the merger is not consummated by June 29, 2000, if
we do not receive the needed shareholder or regulatory approvals or if the other
party breaches its agreements. NECB may terminate if Webster's common stock
price falls below a threshold set forth in the merger agreement and Webster does
not increase the exchange ratio pursuant to a prescribed formula.
Regardless of whether the merger is completed, we will each pay our own fees and
expenses, except that we will evenly divide the costs and expenses that we've
incurred in printing and mailing this document and the registration fees that we
will have to pay to the Securities and Exchange Commission.
OPTION TO DISCOURAGE OTHER PARTIES FROM MAKING OTHER PROPOSALS TO ACQUIRE NECB
(PAGE 45)
In connection with the merger agreement, NECB granted Webster an option to
purchase shares not to exceed 19.9% of NECB's outstanding common stock at an
exercise price of $22.14. The option agreement is intended to
2
discourage other parties from making alternative acquisition-related proposals
to NECB.
In addition to the option to purchase NECB's common stock, under the
circumstances mentioned in the next paragraph, Webster may require NECB to
repurchase the option or shares acquired upon a previous exercise of the option
at a predetermined price. Alternatively, upon the occurrence of these
circumstances, Webster may surrender the option and/or any shares received upon
a previous exercise of the option and receive a payment of $5,000,000.
Webster cannot exercise its option unless a business combination or acquisition
transaction concerning NECB or related activities, including the sale of a
substantial amount of NECB's assets or stock are proposed or occur. We do not
know of any event that has occurred as of the date of this document that would
permit Webster to exercise its option.
WEBSTER'S CERTIFICATE AMENDMENT TO INCREASE AUTHORIZED SHARES (PAGE 69)
Webster shareholders are also being asked to authorize an amendment to Webster's
certificate of incorporation to increase the number of authorized shares of
common stock from 50,000,000 to 200,000,000 shares.
INFORMATION ABOUT THE SPECIAL MEETINGS (PAGE 12)
A special meeting of Webster shareholders will be held on November 9, 1999, at
2:00 p.m. at the Sheraton Waterbury Hotel, 3580 East Main Street, Waterbury,
Connecticut 06705, for the following purposes:
o to vote on the merger agreement, the merger and the other transactions
contemplated by the merger agreement;
o to vote on a proposed amendment to Webster's certificate of
incorporation; and
o to address any other matters that properly come before the special
meeting, or any adjournments or postponements of the meeting, including
a motion to adjourn the special meeting to another time and/or place to
solicit additional proxies in favor of the merger agreement and the
merger or otherwise.
A special meeting of NECB shareholders will be held on November 9, 1999, at
10:00 a.m. at the Hartford Golf Club, 134 Norwood Road, West Hartford,
Connecticut, 06117-2238 for the following purposes:
o to vote on the merger agreement, the merger and the other transactions
contemplated by the merger agreement; and
o to address any other matters that properly come before the special
meeting, or any adjournments or postponements of the meeting, including
a motion to adjourn the special meeting to another time and/or place to
solicit additional proxies in favor of the merger agreement and the
merger or otherwise.
THE COMPANIES INVOLVED IN THE MERGER (PAGE 17)
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
Webster is a Delaware corporation and the holding company of Webster Bank,
Webster's federal savings bank subsidiary. Both Webster and Webster Bank are
headquartered in Waterbury, Connecticut. At June 30, 1999, Webster had total
consolidated assets of $9.1 billion, total deposits of $5.7 billion, and
shareholders' equity of $565 million, or 6.24% of total assets.
NEW ENGLAND COMMUNITY BANCORP, INC.
175 Broad Street
P.O. Box 130
Windsor, Connecticut 06095
(860) 610-3600
NECB is a Delaware corporation and a multi-bank holding company of New England
Bank and Trust Company, The Equity Bank, Community Bank and Olde Port Bank and
Trust. NECB is headquartered in Windsor, Connecticut. At June 30, 1999, NECB had
total consolidated assets of $808 million, total
3
deposits of $641 million, and shareholders' equity of $69.6 million, or 8.6% of
total assets.
Immediately after the merger of NECCB with and into Webster, NECB's subsidiary
banks will merge into Webster Bank.
4
SHARE INFORMATION AND MARKET PRICES
Both Webster's and NECB's common stock are traded on the Nasdaq Stock
Market's National Market Tier under the trading symbols "WBST" and "NECB",
respectively. The table below presents the per share closing prices of Webster's
and NECB's common stock on Nasdaq as of the dates specified and the pro forma
equivalent market value of the 1.06 shares of Webster's common stock to be
exchanged for each share of NECB's common stock in the merger. June 29, 1999 was
the last trading date before public announcement of the merger agreement. NECB's
pro forma equivalent market value was determined by multiplying the closing
price of Webster's common stock on June 29, 1999 by an exchange ratio of 1.06.
For more information about the exchange ratio and how it may be increased, see
"The Merger -- Exchange Ratio," and for more information about the stock prices
and dividends of Webster and NECB, see "Market Prices and Dividends."
NECB's
Last Reported Sale Price Common Stock
------------------------------------ Pro Forma
Webster's NECB's Equivalent Market
Date Common Stock Common Stock Value
- ---- ------------ ------------ -----------------
June 29, 1999....................... $28.38 $26.75 $30.08
September 27, 1999.................. $25.75 $26.00 $27.26
NECB's shareholders are advised to obtain current market quotations for
Webster's common stock. The market price of Webster's common stock will
fluctuate between the date of this joint proxy statement/prospectus and the date
on which the merger takes place. No assurance can be given as to the market
price of Webster's common stock at the time of the merger, although NECB may
terminate the merger agreement if Webster's common stock price falls below a
certain threshold and Webster does not increase the exchange ratio pursuant to a
prescribed formula. See "The Merger -- Termination and Amendment to the Merger
Agreement."
COMPARATIVE PER SHARE DATA
The following table shows historical information about net income per
share, cash dividends per share and book value per share, and similar
information reflecting the merger, which we refer to as "pro forma" information.
In presenting the comparative pro forma information for the time periods shown,
we assumed that we had been merged throughout those periods.
We also assumed that we will treat our companies as if they had always
been combined for accounting and financial reporting purposes--a method known as
"pooling of interests" accounting. The information listed as "equivalent pro
forma" was obtained by multiplying the pro forma amounts by the exchange ratio
of 1.06. We present this information to reflect the fact that NECB shareholders
will receive more than one share of Webster's common stock for each share of
NECB's common stock exchanged in the merger.
We expect that we will incur merger and integration charges as a result
of combining our companies. We also anticipate that the merger will provide the
combined company with financial benefits that include reduced operating
expenses. These changes and benefits are not reflected in the pro forma data.
While helpful in illustrating the financial characteristics of the combined
company under one set of assumptions, the pro forma information does not reflect
these anticipated financial benefits and, accordingly, does not attempt to
predict or suggest future results. It also does not necessarily reflect what the
historical results of the combined company would have been had our companies
been combined.
The per share data gives effect to all previous stock splits of
Webster's common stock.
The information in the following table is based on, and you should read
it together with, the
5
historical financial information that we have presented in
our prior filings with the SEC. We are incorporating this material into this
document by reference. See "Where You Can Find More Information" on page 56 for
a description of where you can find our prior filings.
At or for the At or for the At or for the At or for the
Six Months Ended Year Ended Year Ended Year Ended
June 30, December 31, December 31, December 31,
1999 1998 1997 1996
--------- -------- -------- ------
Net Income per Common Share (Basic):
Webster -- historical.......................... $ 1.23 $ 1.86 $ 1.10 $ 1.44
NECB -- historical ............................ 0.62 1.07 0.93 1.06
Pro Forma Combined ............................ 1.13 1.74 1.07 1.38
Equivalent Pro Forma .......................... 1.20 1.84 1.14 1.46
Net Income per Common Share (Diluted):
Webster -- historical.......................... 1.20 1.83 1.07 1.36
NECB -- historical............................. 0.61 1.05 0.92 1.06
Pro Forma Combined............................. 1.11 1.70 1.05 1.32
Equivalent Pro Forma .......................... 1.18 1.81 1.11 1.40
Cash Dividends per Common Share:
Webster -- historical......................... 0.23 0.44 0.40 0.34
NECB -- historical............................ 0.24 0.39 0.33 0.26
Pro Forma Combined............................ 0.23 0.43 0.39 0.33
Equivalent Pro Forma ......................... 0.24 0.46 0.42 0.35
Book Value per Common Share:
Webster -- historical......................... 14.88 14.87
NECB -- historical............................ 10.08 10.43
Pro Forma Combined............................ 14.14 14.16
Equivalent Pro Forma ......................... 14.99 15.01
6
SELECTED FINANCIAL DATA
The tables below present summary historical financial and other data
for Webster and NECB as of the dates and for the periods indicated. This summary
data is based on and should be read in conjunction with Webster's and NECB's
historical consolidated financial statements and related notes which we have
presented in our prior filings with the SEC and which are incorporated by
reference into this document. For historical information, see "Where You Can
Find More Information." You should read all of the selected financial
information we provide in the following tables together with this historical
financial information and the unaudited pro forma financial information we
provide in this document, which you can find beginning at page 61. All
adjustments necessary for a fair presentation of financial position and results
of operations have been included. The historical operating results of both
Webster and NECB for the six months ended June 30, 1999 and 1998, respectively,
are not necessarily indicative of results which may be expected for the entire
year, nor are the pro forma amounts necessarily indicative of the results of
operations or the combined financial position that would have resulted had the
merger been consummated at the beginning of the periods presented. All financial
data presented for Webster before December 31, 1998 have been restated to
reflect the financial results of Webster and Eagle Financial Corp., which was
acquired by Webster in April 1998. All per share data of Webster and NECB have
been adjusted retroactively to give effect to stock dividends and stock splits.
SELECTED CONSOLIDATED FINANCIAL DATA - WEBSTER
(DOLLARS IN THOUSANDS)
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
1999 1998 1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------ ------------
FINANCIAL CONDITION AND
OTHER DATA
Total assets.............. $9,056,990 $9,189,143 $9,033,917 $9,095,887 $7,368,941 $6,479,567 $6,114,613
Loans receivable, net..... 5,278,808 4,920,663 4,993,509 4,995,851 4,737,883 3,977,725 4,007,710
Securities................ 3,111,234 3,737,024 3,462,090 3,589,273 2,105,173 2,000,185 1,558,401
Intangible assets......... 139,338 83,550 78,380 78,493 81,936 26,720 31,093
Deposits.................. 5,719,866 5,736,374 5,651,273 5,719,030 5,826,264 5,060,822 5,044,336
Federal Home Loan Bank
advances and other
borrowings............. 2,476,449 2,570,566 2,513,481 2,549,597 957,835 834,557 613,791
Shareholders' equity...... 565,438 548,426 554,879 517,262 472,824 460,791 364,112
Number of banking offices. 115 101 101 114 120 109 108
OPERATING DATA
Net interest income....... $ 130,675 $123,048 $ 245,435 $ 251,050 $ 222,118 $ 188,646 $ 182,100
Provision for loan losses. 4,100 3,800 6,800 24,813 13,054 9,864 7,149
Noninterest income:
Nonrecurring income:.... -- -- -- 546 15,904 -- --
Other income............ 39,657 37,136 74,163 41,718 36,105 33,316 21,378
---------- ----------- ---------- ---------- ---------- ---------- ----------
Total noninterest income 39,657 37,136 74,163 42,264 52,009 33,316 21,378
Noninterest expenses:
Acquisition-related
expenses............ -- 17,400 17,400 29,792 500 4,271 700
Other noninterest expenses 98,083 90,911 180,389 171,871 173,977 142,592 140,260
---------- ----------- ---------- ---------- ---------- ---------- ----------
Total noninterest
expenses............ 98,083 108,311 197,789 201,663 174,477 146,863 140,960
---------- ----------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 68,149 48,073 115,009 66,838 86,596 65,235 55,369
Income taxes.............. 23,171 18,952 44,544 25,725 32,602 23,868 17,861
---------- ----------- ---------- ---------- ---------- ---------- ----------
Net income................ 44,978 29,121 70,465 41,113 53,994 41,367 37,508
Preferred stock dividends. -- -- -- -- 1,149 1,296 1,716
---------- ----------- ---------- ---------- ---------- ---------- ----------
Income available to common
shareholders............ $ 44,978 $29,121 $ 70,465 $ 41,113 $ 52,845 $ 40,071 $ 35,792
========== ========== ========== ========== ========== ========== ==========
7
SIGNIFICANT STATISTICAL DATA - WEBSTER
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
FOR THE PERIOD:
Net income per common share:
Basic.......................... $ 1.23 $ 0.77 $ 1.86 $ 1.10 $ 1.44 $ 1.18 $ 1.16
Diluted........................ $ 1.20 $ 0.75 $ 1.83 $ 1.07 $ 1.36 $ 1.12 $ 1.09
Cash dividends per common share.. $ 0.23 $ 0.22 $ 0.44 $ 0.40 $ 0.34 $ 0.32 $ 0.26
Return on average shareholders'
equity......................... 16.91% 11.25% 13.16% 8.44% 11.32% 10.05% 10.52%
Interest rate spread............. 2.99% 2.59% 2.64% 3.00% 3.12% 2.98% 3.23%
Net interest margin.............. 3.12% 2.76% 2.81% 3.19% 3.24% 3.14% 3.36%
Noninterest expenses to average
assets......................... 2.19% 2.29% 2.13% 2.45% 2.42% 2.34% 2.45%
Noninterest expenses (excluding
foreclosed property,
acquisition related, capital
securities, preferred dividends
and intangible amortization
expenses) to average assets.... 1.86% 1.61% 1.63% 1.91% 2.30% 2.09% 2.09%
Ratio of earnings to fixed
charges........................ 2.00 1.57 1.72 1.61 2.40 2.25 2.47
AT END OF PERIOD:
Diluted weighted average
shares (000's)................. 37,338 38,679 38,571 38,473 39,560 36,797 34,533
Book value per common share...... $ 14.88 $ 14.31 $ 14.87 $ 13.78 $ 12.73 $ 12.24 $ 10.96
Tangible book value per
common share................... $ 11.21 $ 12.13 $ 12.77 $ 11.69 $ 10.48 $ 11.50 $ 9.98
Shareholders' equity to total
assets......................... 6.24% 5.97% 6.14% 5.69% 6.42% 7.11% 5.95%
Nonaccrual assets to total
assets......................... 0.39% 0.41% 0.32% 0.59% 0.98% 1.46% 1.80%
Allowance for loan losses to
nonaccrual loans............... 197.63% 190.72% 217.14% 141.23% 100.40% 90.93% 102.96%
Allowances for nonaccrual assets
to nonaccrual assets........... 174.89% 149.04% 191.37% 112.23% 78.78% 64.94% 62.72%
8
SELECTED CONSOLIDATED FINANCIAL DATA AND SIGNIFICANT STATISTICAL DATA - NECB
(DOLLARS IN THOUSANDS)
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
FINANCIAL CONDITION AND
OTHER DATA 1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- -------
Total assets................ $ 808,398 $ 805,882 $ 803,887 $ 806,888 $ 692,628 $ 584,378 $ 446,288
Loans, net.................. 514,907 526,180 513,609 529,067 452,180 376,251 292,533
Deposits.................... 640,721 670,954 660,951 691,966 612,625 527,231 406,395
Shareholders' equity........ 69,592 72,976 73,350 68,341 62,263 49,017 32,274
Number of banking offices... 18 17 18 14 13 9 7
OPERATING DATA
Net interest income......... $ 18,452 $ 18,601 $ 37,176 $ 34,708 $ 30,525 $ 22,220 $ 19,645
Provision for loan losses... 333 805 1,303 1,636 2,687 2,125 3,291
Noninterest income.......... 4,489 4,268 8,475 5,459 4,824 3,646 3,182
Noninterest expenses........ 15,835 14,228 31,644 27,870 22,709 18,679 17,533
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes.. 6,773 7,836 12,704 10,661 9,953 5,062 2,003
Income tax expense.......... 2,428 3,211 5,150 4,162 3,111 254 481
--------- --------- --------- --------- --------- --------- ---------
Net income.................. $ 4,345 $ 4,625 $ 7,554 $ 6,499 $ 6,842 $ 4,808 $ 1,522
========= ========= ========= ========= ========= ========= =========
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
SIGNIFICANT STATISTICAL DATA FOR
THE PERIOD: 1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- -------
Net income per common share-
Basic...................... $ 0.62 $ 0.66 $ 1.07 $ 0.93 $ 1.06 $ 0.97 $ 0.39
Diluted.................... $ 0.61 $ 0.64 $ 1.05 $ 0.92 $ 1.06 $ 0.97 $ 0.39
Cash dividends declared per common
share........................ $ 0.24 $ 0.19 $ 0.39 $ 0.326 $ 0.255 $ 0.186 $ 0.045
Return on average shareholders'
equity....................... 11.99% 13.21% 10.38% 9.91% 12.50% 13.15% 5.46%
Interest rate spread........... 4.39% 4.37% 4.30% 4.51% 4.54% 4.43% 4.53%
Net interest 5.19% 5.21% 5.19% 5.36% 5.32% 5.30% 5.03%
margin......................
Noninterest expenses to
average assets............... 4.07% 3.64% 4.08% 3.98% 3.65% 4.12% 4.14%
Ratio of earnings to fixed
charges...................... 3.88 5.29 4.32 4.99 9.72 6.01 3.78
AT END OF PERIOD:
Diluted weighted average
shares (000's)................ 7,105 7,254 7,204 7,069 6,485 4,974 3,883
Book value per common share..... $ 10.08 $ 10.38 $ 10.43 $ 9.74 $ 8.72 $ 7.81 $ 7.47
Tangible book value per
common share................. $ 9.41 $ 9.66 $ 9.74 $ 8.99 $ 8.09 $ 7.74 $ 7.47
Shareholders' equity to total
assets....................... 8.61% 9.06% 9.12% 8.47% 8.99% 8.39% 7.23%
Nonaccrual assets to total
assets........................ 1.01% .91% 0.66% 1.22% 1.18% 1.51% 2.10%
Allowance for loan losses to
nonaccrual loans.............. 157.60% 180.66% 188.99% 122.80% 114.70% 104.10% 84.90%
9
SELECTED UNAUDITED PRO FORMA COMBINED
FINANCIAL DATA OF WEBSTER AND NECB
(DOLLARS IN THOUSANDS)
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
FINANCIAL CONDITION AND OTHER
DATA 1999 1998 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------
Total assets.................. $9,861,982 $9,995,025 $9,837,804 $9,902,775 $8,061,569 $7,063,945 $6,560,901
Loans receivable, net......... 5,793,715 5,446,843 5,507,118 5,524,918 5,190,063 4,353,976 4,299,840
Securities.................... 3,325,698 3,926,888 3,664,513 3,770,670 2,263,374 2,141,773 1,647,640
Intangible assets............. 143,989 88,592 83,227 83,731 86,400 27,122 31,093
Deposits...................... 6,360,587 6,407,328 6,312,224 6,410,996 6,438,889 5,588,053 5,450,731
Federal Home Loan Bank
advances and other
borrowings................. 2,568,489 2,624,170 2,575,608 2,588,178 963,614 835,585 617,587
Shareholders' equity.......... 623,574 621,402 628,229 585,603 535,087 509,808 396,386
Number of banking offices..... 133 118 119 132 138 123 120
OPERATING DATA
Net interest income........... $ 149,127 $ 141,649 $ 282,611 $ 285,758 $ 252,643 $ 210,866 $ 201,745
Provision for loan losses..... 4,433 4,605 8,103 26,449 15,741 11,989 10,440
Noninterest income:
Nonrecurring income......... -- -- -- 546 15,904 -- --
Other noninterest
income...................... 44,146 41,404 82,638 47,177 40,929 36,962 24,560
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest income.. 44,146 41,404 82,638 47,723 56,833 36,962 24,560
Noninterest expenses:
Acquisition-related expenses -- 17,590 20,993 29,792 500 4,271 700
Other noninterest expenses 113,918 104,949 208,440 199,741 196,686 161,271 157,793
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest
expenses................ 113,918 122,539 229,433 229,533 197,186 165,542 158,493
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 74,922 55,909 127,713 77,499 96,549 70,297 57,372
Income taxes.................. 25,599 22,163 49,694 29,887 35,713 24,122 18,342
---------- ----------- ---------- ---------- ---------- ---------- ----------
Net income.................... 49,323 33,746 78,019 47,612 60,836 46,175 39,030
Preferred stock dividends..... -- -- -- -- 1,149 1,296 1,716
---------- ---------- ---------- ---------- ---------- ----------- ----------
Income available to common
shareholders................ $ 49,323 $ 33,746 $ 78,019 $ 47,612 $ 59,687 $ 44,879 $ 37,314
========== ========== ========== ========== ========== ========== ==========
10
SELECTED UNAUDITED PROFORMA COMBINED
FINANCIAL DATA OF WEBSTER AND NECB
SIGNIFICANT STATISTICAL DATA
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AT OR FOR THE YEAR ENDED DECEMBER 31,
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- -------
FOR THE PERIOD:
Net income per common share:
Basic.......................... $ 1.13 $ 0.75 $ 1.74 $ 1.07 $ 1.38 $ 1.15 $ 1.07
Diluted........................ $ 1.11 $ 0.73 $ 1.70 $ 1.05 $ 1.32 $ 1.10 $ 1.02
Cash dividends per common share.. $ 0.23 $ 0.22 $ 0.43 $ 0.39 $ 0.33 $ 0.31 $ 0.24
Return on average shareholders'
equity......................... 16.30% 11.48% 12.82% 8.61% 11.44% 10.30% 10.17%
Interest rate spread............. 3.10% 2.69% 2.74% 3.12% 3.22% 3.04% 3.31%
Net interest margin.............. 3.31% 2.94% 2.98% 3.36% 3.40% 3.26% 3.47%
Noninterest expenses to average
assets......................... 2.34% 2.38% 2.28% 2.57% 2.52% 2.46% 2.56%
Noninterest expenses (excluding
foreclosed property,
acquisition related, capital
securities, preferred dividends
and intangible amortization
expenses) to average assets.... 2.02% 1.79% 1.78% 2.04% 2.40% 2.22% 2.21%
Ratio of earnings to fixed
charges........................ 2.07 1.65 1.78 1.69 2.53 2.32 2.49
AT END OF PERIOD:
Diluted weighted average
shares (000's).................
Book value per common share...... $ 14.14 $ 13.70 $ 14.16 $ 13.15 $ 12.08 $ 11.61 $ 10.56
Tangible book value per
common share................... $ 10.92 $ 11.75 $ 12.29 $ 11.27 $ 10.10 $ 10.96 $ 9.69
Shareholders' equity to total
assets......................... 6.44% 6.22% 6.39% 5.91% 6.64% 7.22% 6.04%
Nonaccrual assets to total
assets......................... 0.44% 0.45% 0.36% 0.68% 1.04% 1.49% 1.83%
Allowance for loan losses to
nonaccrual loans............... 190.68% 189.12% 212.25% 137.74% 102.30% 92.49% 100.65%
Allowances for nonaccrual assets
to nonaccrual assets........... 165.68% 147.28% 182.29% 108.43% 78.69% 66.67% 62.21%
11
THE MEETINGS
THE WEBSTER SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
We are first mailing this document to the holders of Webster's common
stock on or about October 1, 1999. It is accompanied by a proxy card furnished
in connection with the solicitation of proxies by the Webster board of directors
for use at the special meeting of Webster's shareholders. The special meeting is
scheduled to be held on November 9, 1999, at 2:00 p.m., at the Sheraton
Waterbury Hotel, 3580 East Main Street, Waterbury, Connecticut 06705. At the
special meeting, the holders of Webster's common stock will consider and vote
on:
o the proposal to approve and adopt the merger agreement, the
merger and the other transactions contemplated by the merger
agreement, including an increase in the exchange ratio;
o the proposal to amend Webster's certificate of incorporation
to increase the number of authorized shares of common stock
from 50,000,000 to 200,000,000; and
o any other business that properly comes before the special
meeting, or any adjournments or postponements of the meeting,
including, without limitation, a motion to adjourn the special
meeting to another time and/or place for the purpose of
soliciting additional proxies in order to approve the merger
agreement and the merger or otherwise.
RECORD DATE AND VOTING
The Webster board of directors has fixed the close of business on
September 24, 1999 as the record date for determining the Webster shareholders
entitled to receive notice of and to vote at the special meeting. Only holders
of record of Webster's common stock at the close of business on that day will be
entitled to vote at the special meeting or at any adjournment or postponement of
the meeting. At the close of business on September 24, 1999, there were
38,117,759 shares of Webster's common stock outstanding and entitled to vote at
the special meeting, held by approximately 6,999 shareholders of record.
Each holder of Webster's common stock on September 24, 1999 will be
entitled to one vote for each share held of record on each matter that is
properly submitted at the special meeting or any adjournment or postponement of
the meeting. The presence, in person or by proxy, of the holders of one-third of
Webster's common stock entitled to vote at the special meeting is necessary to
constitute a quorum. Shares of Webster's common stock present in person at the
special meeting but not voting, and shares of Webster's common stock for which
we have received proxies indicating that their holders have abstained, will be
counted as present at the special meeting for purposes of determining whether we
have a quorum for transacting business. Brokers who hold shares of Webster's
common stock in nominee or "street" name for customers who are the beneficial
owners of those shares may not give a proxy to vote those shares on the merger
agreement without specific instructions from those customers. However, shares
represented by proxies returned by a broker holding these shares in "street"
name will be counted for purposes of determining whether a quorum exists, even
if those shares aren't voted by their beneficial owners in matters where the
broker cannot vote the shares in its discretion (so-called "broker non-votes").
Approval of the merger agreement requires the affirmative vote of the
holders of at least a majority of the shares of Webster's common stock issued
and outstanding. Thus, abstentions and broker non-votes will have the same
effect as votes against the merger agreement. Approval of the certificate
amendment requires the approval of a majority of the shares voted at a meeting
at which a quorum is present. The presence, in person or by proxy, of at least
one-third of the total number of outstanding shares of common stock entitled to
vote at the meeting is necessary to constitute a
12
quorum. See "Amendment to Webster's Certificate of Incorporation" for more
information about this proposed action, including the reasons for the amendment.
If a quorum is not obtained, or if fewer shares of Webster's common
stock are voted in favor of the proposals to approve the merger agreement and
merger than the number required for approval, it is expected that the special
meeting will be adjourned to allow additional time for obtaining additional
proxies. In that event, proxies will be voted to approve an adjournment, except
for proxies as to which instructions have been given to vote against the merger
agreement. The holders of a majority of the shares present at the special
meeting would be required to approve any adjournment of the special meeting or
any other such business that properly comes before the special meeting.
If Webster receives your properly executed proxy card in time to be
voted at the special meeting, the shares represented by the proxy card will be
voted in accordance with the instructions marked on the proxy card. EXECUTED
PROXIES WITH NO INSTRUCTIONS INDICATED ON THE PROXY CARD WILL BE VOTED FOR THE
PROPOSAL TO APPROVE THE MERGER AGREEMENT, THE MERGER AND THE CERTIFICATE
AMENDMENT.
The Webster board of directors is not aware of any other matters that
may properly come before the special meeting. If any other matters properly come
before the special meeting, the persons named in the accompanying proxy will
vote the shares represented by all properly executed proxies on those matters as
determined by a majority of the Webster board of directors.
TO VOTE FOR THE PROPOSALS, YOU NEED TO PROPERLY COMPLETE THE PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE OR ATTEND THE SPECIAL MEETING AND VOTE IN
PERSON.
REQUIRED VOTE; REVOCABILITY OF PROXIES
The affirmative vote of the holders of at least a majority of the
shares of Webster's common stock issued and outstanding on September 24, 1999 is
required to approve the merger agreement and the merger.
All of the directors and executive officers of Webster beneficially
owned as of September 24, 1999, excluding all options to purchase shares of
Webster's common stock, a total of 801,196 shares of Webster's common stock,
which was approximately 2.1% of the outstanding shares of Webster's common stock
on that date. It is expected that each director and executive officer of Webster
will vote his or her shares of Webster's common stock for approval of the merger
agreement, the merger and the certificate amendment.
If you submit a proxy card, attending the special meeting will not
automatically revoke your proxy. You may revoke a proxy at any time before it is
voted by:
o delivering to John D. Benjamin, Senior Vice President and
Assistant Secretary, of Webster Financial Corporation, Webster
Financial Plaza, Waterbury, Connecticut 06702, a written
notice of revocation before the special meeting,
o delivering to Webster a duly executed proxy bearing a later
date before the special meeting, or
o attending the special meeting and voting in person.
Simply attending the special meeting without voting will not
automatically revoke your proxy.
The board of directors of Webster believes that the terms of the merger
agreement, the merger and the certificate amendment are fair to and in the best
interest of, Webster and its shareholders. THE BOARD OF DIRECTORS OF WEBSTER
APPROVED THE MERGER AGREEMENT, THE MERGER AND THE
13
CERTIFICATE AMENDMENT AND RECOMMENDS THAT HOLDERS OF WEBSTER'S COMMON STOCK VOTE
FOR APPROVAL OF THESE MATTERS.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of Webster may solicit proxies for the special meeting from shareholders
personally or by telephone or telegram without receiving additional compensation
for these activities. The cost of soliciting proxies will be paid by Webster. In
addition, Webster has retained D.F. King & Co., Inc., a proxy solicitation firm,
to assist in proxy solicitation for the special meeting. The fee to be paid to
that firm is $6,500 plus reasonable out-of-pocket expenses, will be paid by
Webster. Webster also will make arrangements with brokerage firms and other
custodians, nominees and fiduciaries to send proxy materials to their principals
and will reimburse those parties for their expenses in doing so.
THE NECB SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
We are first mailing this document to the holders of NECB's common
stock on or about October 1, 1999. It is accompanied by a proxy card furnished
in connection with the solicitation of proxies by the NECB board of directors
for use at the special meeting of NECB's shareholders on November 9, 1999, at
10:00 a.m., at the Hartford Golf Club, 134 Norwood Road, West Hartford,
Connecticut 06117-2238. At the special meeting, the holders of NECB's common
stock will consider and vote on:
o the proposal to approve and adopt the merger agreement, the
merger and the other transactions contemplated by the merger
agreement, and
o any other business that properly comes before the special
meeting, or any adjournments or postponements of the meeting,
including, without limitation, a motion to adjourn the special
meeting to another time and/or place for the purpose of
soliciting additional proxies in order to approve the merger
agreement and the merger or otherwise.
RECORD DATE AND VOTING
The NECB board of directors has fixed the close of business on
September 24, 1999 as the record date for determining the NECB shareholders
entitled to receive notice of and to vote at the special meeting. Only holders
of record of NECB's common stock at the close of business on that day will be
entitled to vote at the special meeting or at any adjournment or postponement of
the meeting. At the close of business on September 24, 1999, there were
6,928,790 shares of NECB's common stock outstanding and entitled to vote at the
special meeting, held by approximately 3,137 shareholders of record.
Each holder of NECB's common stock on September 24, 1999 will be
entitled to one vote for each share held of record on each matter that is
properly submitted at the special meeting or any adjournment or postponement of
the meeting. The presence, in person or by proxy, of the holders of one-third of
NECB's common stock issued and outstanding and entitled to vote at the special
meeting is necessary to constitute a quorum. Abstentions and broker non-votes
will be included in the calculation of the number of shares represented at the
special meeting in order to determine whether a quorum has been achieved. Since
approval of the merger agreement requires the affirmative vote of the holders of
at least a majority of the shares of NECB's common stock issued and outstanding,
abstentions and broker non-votes will have the same effect as a vote against the
merger agreement.
14
If a quorum is not obtained, or if fewer shares of NECB's common stock
are voted in favor of the proposal for approval of the merger agreement than the
number required for approval, it is expected that the special meeting will be
adjourned to allow additional time for obtaining additional proxies. In that
event, proxies will be voted to approve an adjournment, except for proxies as to
which instructions have been given to vote against the merger agreement. The
holders of a majority of the shares present at the special meeting would be
required to approve any adjournment of the special meeting or any other such
business that properly comes before the special meeting.
If your proxy card is properly executed and received by NECB in time to
be voted at the special meeting, the shares represented by the proxy card will
be voted in accordance with the instructions marked on the proxy card. EXECUTED
PROXIES WITH NO INSTRUCTIONS INDICATED ON THE PROXY CARD WILL BE VOTED TO
APPROVE THE MERGER AGREEMENT AND THE MERGER.
The NECB board of directors is not aware of any other matters that may
properly come before the special meeting. If any other matters properly come
before the special meeting, the persons named in the accompanying proxy will
vote the shares represented by all properly executed proxies on those matters as
determined by a majority of the NECB board of directors.
To vote on the merger agreement, you need to properly complete the
proxy card and return it in the enclosed envelope or attend the special meeting
and vote in person.
YOU SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. IF
THE MERGER TAKES PLACE, NECB STOCK CERTIFICATES SHOULD BE DELIVERED IN
ACCORDANCE WITH INSTRUCTIONS THAT WILL BE SENT TO YOU BY WEBSTER'S EXCHANGE
AGENT PROMPTLY AFTER THE EFFECTIVE TIME OF THE MERGER.
REQUIRED VOTE; REVOCABILITY OF PROXIES
In order to approve and adopt the merger agreement, the merger of NECB
and Webster and the other transactions contemplated by the merger agreement, the
holders of at least a majority of the shares of NECB's common stock issued and
outstanding on September 24, 1999, must affirmatively vote FOR the merger
agreement and the merger.
THE REQUIRED VOTE OF NECB'S SHAREHOLDERS IS BASED ON THE TOTAL NUMBER
OF OUTSTANDING SHARES OF NECB'S COMMON STOCK AND NOT ON THE NUMBER OF SHARES
WHICH ARE ACTUALLY VOTED. NOT RETURNING A PROXY CARD, NOT VOTING IN PERSON AT
THE SPECIAL MEETING AND ABSTAINING FROM VOTING WILL HAVE THE SAME EFFECT AS
VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
All of the directors and executive officers of NECB beneficially owned
as of September 24, 1999, excluding all options to purchase shares of NECB's
common stock, a total of 339,538 shares of NECB's common stock, which was
approximately 4.9% of the outstanding shares of NECB's common stock on that
date. We expect all of these persons to vote their shares in favor of the merger
agreement and the merger. Additionally, Webster owned 84,200 shares of NECB's
common stock as of September 24, 1999, all of which we expect will be voted in
favor of the merger agreement and merger.
If you submit a proxy card, attending the special meeting will not
automatically revoke your proxy. However, you may revoke a proxy at any time
before it is voted by:
o delivering to Anson C. Hall, Vice President and Treasurer of
New England Community Bancorp, Inc., 175 Broad Street, P.O.
Box 130, Windsor, Connecticut 06095, a written notice of
revocation before the special meeting,
o delivering to NECB a duly executed proxy bearing a later date
before the special meeting, or
15
o attending the special meeting and voting in person.
Simply attending the special meeting without voting will not
automatically revoke your proxy.
NECB and Webster are not obligated to complete the merger unless, among
other things, the merger agreement and the merger are approved by the
affirmative vote of the holders of at least a majority of the shares of NECB's
common stock issued and outstanding on September 24, 1999. For a description of
the conditions to the merger, see "The Merger -- Conditions to the Merger."
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of NECB may solicit proxies for the special meeting from shareholders personally
or by telephone or telecopier without receiving additional compensation for
these activities. The cost of soliciting proxies will be paid by NECB. NECB also
will make arrangements with brokerage firms and other custodians, nominees and
fiduciaries to send proxy materials to their principals and will reimburse those
parties for their expenses in doing so.
16
THE MERGER
The information in this section is qualified in its entirety by
reference to the full text of the merger agreement including each of its
exhibits and the option agreement, all of which are incorporated by reference
into this document and the material features of which are described in this
joint proxy statement/prospectus. A copy of the merger agreement including each
of its exhibits and the other documents described in this joint proxy
statement/prospectus will be provided to you promptly without charge if you call
or write to James M. Sitro, Vice President, Investor Relations, Webster
Financial Corporation, Webster Plaza, Waterbury, Connecticut 06702, telephone
(203) 578-2399 or Anson C. Hall, Vice President and Treasurer, New England
Community Bancorp, Inc. 175 Broad Street, P.O. Box 130, Windsor, Connecticut
06095, telephone (860)683-4610. Such documents were also filed as exhibits to
the registration statement filed with the SEC to register the shares of
Webster's common stock to be issued in the merger. See "Where You Can Find More
Information."
THE PARTIES
Webster and NECB have entered into a merger agreement. Under this
agreement, Webster will acquire NECB through the merger of NECB into Webster.
The merger agreement also provides for each of New England Bank and Trust
Company, The Equity Bank, Community Bank and, subject to Webster's discretion,
Olde Port Bank and Trust (collectively, the "NECB Subsidiary Banks"), which are
wholly owned subsidiaries of NECB, to merge into Webster Bank, a wholly owned
subsidiary of Webster.
WEBSTER. Webster is a Delaware corporation and the holding company of
Webster Bank, Webster's federally chartered savings bank subsidiary. Both
Webster and Webster Bank are headquartered in Waterbury, Connecticut. Deposits
at Webster Bank are insured by the FDIC. Through Webster Bank, Webster currently
serves customers from 115 banking offices, three commercial banking centers and
180 ATMs located in Hartford, New Haven, Fairfield, Litchfield and Middlesex
Counties in Connecticut. Webster's mission is to help individuals, families and
businesses achieve their financial goals. Webster emphasizes five business lines
- -- consumer banking, business banking, mortgage banking, trust and investment
services and insurance services -- each supported by centralized administration
and operations. Through a number of recent acquisitions of other financial
service firms, including banks and thrifts, a trust company and an insurance
firm, Webster has established a leading position in the banking and trust and
investment services market in Connecticut.
At June 30, 1999, Webster had total consolidated assets of $9.1
billion, total deposits of $5.7 billion, and shareholders' equity of $565
million or 6.24% of total assets. At that date, Webster also had loans
receivable, net of $5.3 billion, which included $3.8 billion in residential
mortgage loans, $511 million in commercial real estate loans, $534 million in
commercial and industrial loans and $493 million in consumer loans, consisting
primarily of home equity loans. At June 30, 1999, nonaccrual loans and other
real estate owned were $35.0 million. At that date, Webster's allowance for loan
losses was $61.4 million, or 198% of nonaccrual loans, and its total allowance
for loan and other real estate owned losses was $61.6 million, or 175% of
nonaccrual loans and other real estate owned. For additional information about
Webster that is incorporated by reference into this document, see "Incorporation
of Documents by Reference."
Webster, as a savings and loan holding company, is regulated by the
Office of Thrift Supervision. Webster Bank, as a federal savings bank, also is
regulated by the Office of Thrift Supervision and to some extent by the Federal
Deposit Insurance Corporation.
NECB. NECB is a Delaware corporation and the holding company of the
NECB Subsidiary Banks. NECB is headquartered in Windsor, Connecticut. Deposits
at the NECB Subsidiary Banks are insured by the FDIC. NECB operates the NECB
Subsidiary Banks as community-oriented banking institutions dedicated to
providing personalized service. NECB believes that its
17
maintenance of professional, personalized service has resulted in its ability to
obtain and service many of the desirable, small to medium-sized business in its
market area.
At June 30, 1999, NECB had total consolidated assets of $808 million,
total deposits of $641 million, and shareholders' equity of $69.6 million, or
8.6% of total assets. At that date, NECB also had loans receivable, net, of $515
million, which included $116 million in residential mortgage loans, $210 million
in commercial real estate loans, $152 million in commercial loans and $40
million in home equity credit lines and consumer installment loans. At June 30,
1999, nonperforming assets were $8.2 million. At that date, NECB's allowance for
loan losses was $10.3 million, or 158% of nonperforming loans. For additional
information about NECB that is incorporated by reference into this document, see
"Incorporation of Documents by Reference."
NECB, as a bank holding company, is regulated by the Board of Governors
of the Federal Reserve System. The NECB Subsidiary Banks, as Connecticut or New
Hampshire-chartered commercial banks, are regulated by the Connecticut and New
Hampshire Commissioners of Banking and by the FDIC.
BACKGROUND OF THE MERGER
Over the past several years, the board of directors and management of
NECB have considered a variety of strategic alternatives, including remaining
independent, acquiring other small institutions and being acquired by a larger
organization.
In April of 1999, the NECB board met and discussed, in light of recent
developments in the competitive landscape in Connecticut and New England, issues
concerning the consolidation within the banking industry, the competitive
banking environment in Connecticut and New England, bank stock valuations and
the future earning potential of NECB.
A majority of the NECB directors agreed to investigate further a
possible strategic business combination of NECB with another financial
institution. A project committee of outside directors was formed with Director
James A. Cotter as Chairman. The project committee was directed to formulate a
list of other potential partners, recommend a methodology to be utilized in
evaluating potential transactions and oversee the process. The project committee
was to report its findings and progress to the full NECB board of directors.
The NECB project committee met on a number of occasions throughout May,
1999. During this time the project committee recommended to the NECB Board that
HAS Associates and A.G. Edwards be engaged as financial advisors for NECB for a
possible business combination transaction.
At these meetings the NECB project committee, along with Thomas Collins
of HAS Associates and John Howland of A.G. Edwards, discussed procedural and
communication issues relevant to identifying and negotiating with a potential
merger partner for NECB, and HAS Associates and A.G. Edwards presented detailed
information on potential merger partners, including valuation analysis, stock
market performance and comparable transactions analysis.
In early June, 1999 NECB's financial advisors reported to the project
committee on preliminary discussions with potential merger partners and updated
the committee on all indications of interest submitted. The project committee,
after discussion and review, determined to invite two potential merger partners
to conduct due diligence on NECB. Later in June, these two potential merger
partners conducted their due diligence.
The NECB project committee met again on June 24, 1999. HAS Associates
and A.G. Edwards updated the committee on the results of the due diligence
activities and the status of the proposals of the two prospective merger
partners, both of which called for a stock-for-stock merger with NECB.
18
After this meeting, the full NECB board of directors met with their
legal and financial advisors. The project committee and the financial advisors
updated the board of directors on terms and conditions of the two proposals. An
in-depth discussion took place comparing the two proposals received. NECB's
financial advisors presented detailed financial analyses of the two potential
partners and their proposals. During the course of the meeting, David Lentini,
chairman, had telephone conversations with the presidents and chief executive
officers of each of the other parties to seek clarification of the exchange
ratio and other terms. After these conversations and further discussion by the
board, a motion was made and approved to accept Webster's proposed exchange
ratio of 1.06 shares of Webster's common stock for each share of NECB's common
stock.
The NECB board of directors met again on June 29, 1999. NECB's legal
counsel and financial advisors reviewed the contents of a proposed merger
agreement from Webster. After a lengthy discussion, a motion was made and
approved to enter into the merger agreement with Webster.
RECOMMENDATION OF THE NECB BOARD OF DIRECTORS AND REASONS FOR THE MERGER
The NECB board, with the assistance of its financial and legal
advisors, has evaluated the financial, legal and market considerations bearing
on the decision to recommend the merger agreement. The terms of the merger
agreement, including the exchange ratio, are the result of arms-length
negotiations between NECB and Webster and their representatives. In reaching its
determination that the merger agreement is fair to, and in the best interest of,
NECB and the holders of NECB's common stock, the NECB board considered a number
of factors, both from a short-term and long-term perspective. The factors which
the NECB board considered, without assigning any relative or specific weights,
included, without limitation, the following:
o NECB board's review of NECB's business, financial condition,
results of operations, management and prospects, including,
but not limited to, its potential growth, development,
productivity and profitability;
o the current and prospective environment in which NECB
operates, including regional economic conditions, the
competitive environment for banking and other financial
institutions generally and the trend toward consolidation in
the financial services industry;
o information concerning the business, financial condition,
results of operations and prospects of Webster, including
recent acquisitions by Webster, the recent performance of
Webster's common stock, historical data of Webster, customary
statistical measurements of Webster's financial performance,
Webster's expectations of future business prospects and
earnings based upon discussions with representatives of
Webster;
o the value to be received by holders of NECB's common stock
pursuant to the merger agreement in relation to the historical
trading prices and book value of NECB's common stock;
o the information presented to the NECB board by its financial
advisors with respect to the merger agreement and their
opinion that, as of the date of such opinion, the exchange
ratio is fair, from a financial point of view, to NECB's
shareholders;
o the financial and other significant terms of the Webster
offer;
o the review by the NECB board with its legal and financial
advisors of the provisions of the merger agreement and option
agreement;
o the future growth prospects of NECB and Webster following the
merger and the potential business benefit expected from the
merger, including potential expense reductions and increases
in efficiency;
19
o the expectation that Webster will continue to provide quality
service to the community and customers served by NECB and the
prospects for future expansion of the products and services
offered by Webster in its market area;
o the compatibility of the respective business and management
philosophies of NECB and Webster, and the prospect that a
member of the NECB Board would serve as a director of Webster
and Webster Bank, which is considered by the NECB Board to
enhance the prospect for a smooth transition after the merger
and the prospects that the interests of NECB's current
shareholders and NECB's customers and employees would not be
overlooked after the merger; and
o the less attractive alternative strategic courses available to
NECB, including remaining independent and the other potential
strategic business combination transactions.
The discussion in this section of the information and factors
considered by the NECB board is not intended to be exhaustive but includes the
material factors considered by the board. In reaching its determination to
approve and recommend the merger, the NECB board did not assign any relative or
specific weights to the factors considered. Individual directors may have given
differing weights to different factors. After deliberating on the merger and the
other transactions contemplated by the merger agreement, and considering, among
other things, the matters discussed above and the fairness opinions of A.G.
Edwards and HAS Associates referred to above, the NECB board approved the merger
agreement, the merger, the other transactions contemplated by the merger
agreement, and the option agreement, as being fair to, and in the best interests
of NECB and its shareholders.
RECOMMENDATION OF THE WEBSTER BOARD OF DIRECTORS AND REASONS FOR THE MERGER
In reaching its decision to approve the merger agreement, the Webster
board considered the following:
o Webster board's familiarity with and review of a range of
strategic alternatives designed to enhance shareholder value;
o Webster's current and prospective operating environment,
including national and local economic conditions, the highly
competitive environment for financial institutions generally,
the changing regulatory environment, and the trend toward
consolidation in the financial services industry;
o Information concerning NECB's business, financial condition,
results of operations, asset quality and prospects, including
the future growth prospects of NECB combined with Webster
following the proposed merger and the business risks
associated with the merger;
o Expanding the Webster franchise in New England by entering
Tolland County in Connecticut and the New Hampshire market and
strengthening Webster's business presence in Hartford and
Litchfield Counties in Connecticut;
o The scale, scope and strength of the combined companies,
making Webster, after the merger, the fifth largest New
England based bank with approximately $10 billion in assets;
o The anticipated financial impact of the proposed transaction
on the combined company's future financial performance,
including, without limitation, the expected positive impact on
Webster's earnings per share in the first year;
o The expectation that the merger would result in financial
benefits from combining the operations of the two companies,
including an advantageous cost structure relative to
competitors and to Webster on a stand-alone basis;
20
o The potential for appreciation and growth in the market and
book value of Webster's common stock following the proposed
merger;
o The terms of the merger agreement and the transactions and
agreements contemplated by the merger agreement;
o The short- and long-term interests of Webster and its
shareholders, the interests of Webster's employees, customers,
creditors and suppliers, and the interests of the Webster
community that may benefit from the acquisition of NECB;
o The compatibility of the businesses and management
philosophies of Webster and NECB; and
o The likelihood of receiving all of the regulatory approvals
required for the merger to take place.
The discussion in this section of the information and factors
considered by the Webster board is not intended to be exhaustive but includes
all material factors considered by the board. In reaching its determination to
approve and recommend the merger, the Webster board did not assign any relative
or specific weights to the factors considered. Individual directors may have
given differing weights to different factors. After deliberating on the merger
and the other transactions contemplated by the merger agreement, and
considering, among other things, the matters discussed above, the Webster board
unanimously approved the merger agreement, the merger and the other transactions
contemplated by the merger agreement, as being in the best interests of Webster
and its shareholders.
PURPOSE AND EFFECTS OF THE MERGER
The purpose of the merger is to enable Webster to acquire the assets
and business of NECB. After the merger, it is expected that the majority of the
NECB Subsidiary Banks' branch banking offices will remain open and will be
operated as banking offices of Webster Bank.
The merger will result in an expansion of Webster Bank's primary market
area to include NECB Subsidiary Banks' banking offices in Connecticut and New
Hampshire. The assets and business of NECB Subsidiary Banks' banking offices
will broaden Webster's existing operations in Hartford and Litchfield Counties,
where Webster Bank currently has banking offices, and expand its operations into
Tolland County and New Hampshire. Webster expects to achieve reductions in the
current operating expenses of NECB upon the consolidation of the NECB Subsidiary
Bank's operations into Webster Bank. Upon completion of the merger, except as
discussed below, the issued and outstanding shares of NECB's common stock
automatically will be converted into shares of Webster's common stock. See "--
Exchange Ratio."
STRUCTURE
NECB will merge into Webster, with Webster as the surviving
corporation. When the merger takes place, except as discussed below, each issued
and outstanding share of NECB's common stock will be converted into the right to
receive Webster's common stock based on the exchange ratio, as described below.
Webster will reissue 400,100 shares of Webster common stock held as transfer
shares as part of the shares issued to NECB shareholders in the merger. Cash
will be paid instead of fractional shares. Shares of NECB's common stock held as
treasury stock or held directly or indirectly by NECB, Webster or any of their
subsidiaries, other than trust account shares and shares related to a previously
contracted debt, will be canceled.
We expect that the merger will take place in the fourth quarter of
1999, or as soon as possible after we receive all required regulatory and
shareholder approvals and all regulatory waiting periods expire. If the merger
does not take place by June 29, 2000, the merger agreement may be terminated by
either of us unless we both agree to extend it.
21
The merger agreement permits Webster to modify the structure of this
transaction so long as:
o there are no material adverse federal income tax consequences
to NECB's shareholders from the modification;
o the consideration to be paid to NECB's shareholders under the
merger agreement is not changed or reduced in amount; and
o the modification will not be reasonably likely to delay
materially or jeopardize receipt of any required regulatory
approvals. Webster presently has no intent to modify the
structure of the merger.
EXCHANGE RATIO
The merger agreement provides that at the effective time of the merger,
except as discussed below, each outstanding share of NECB's common stock
automatically will be converted into the right to receive 1.06 shares of
Webster's common stock representing a value of $28.00 based on the September 17,
1999 price of Webster's common stock. However, if the price of Webster's common
stock falls below thresholds set forth in the merger agreement, NECB may
terminate the merger unless Webster decides to increase the 1.06 exchange ratio,
which would result in Webster issuing more shares of its common stock to
complete the merger. See "--Termination and Amendment of the Merger Agreement."
Shares of NECB's common stock held as treasury stock and shares held
directly or indirectly by NECB, Webster or any of their subsidiaries, other than
trust account shares and shares related to a previously contracted debt, will be
canceled. If, prior to the effective time, Webster should split its common
stock, or pay a dividend or other distribution in its common stock, then the
exchange ratio will be adjusted to reflect the split, combination, dividend or
distribution.
Certificates for fractions of shares of Webster's common stock will not
be issued. Instead of a fractional share of Webster's common stock, a NECB
shareholder will be entitled to receive an amount of cash equal to the fraction
of a share of Webster's common stock to which the shareholder would otherwise be
entitled multiplied by the average of the daily closing prices per share for
Webster's common stock for the 20 consecutive trading days on which shares of
Webster's common stock are actually traded as reported on Nasdaq ending on the
third trading day before the closing date of the merger. In this document, we
use the term "purchase price" to refer to the shares of Webster's common stock
and any cash to be paid instead of a fraction of a share of Webster's common
stock payable to each holder of NECB's common stock.
The conversion of NECB's common stock into shares of Webster's common
stock at the exchange ratio will occur automatically upon completion of the
merger. Under the merger agreement, after the effective time of the merger,
Webster will cause its exchange agent to pay the purchase price to each NECB
shareholder who surrenders the appropriate documents to the exchange agent.
Webster will deposit with the exchange agent the certificates
representing the Webster's common stock to be issued to NECB shareholders in
exchange for NECB's common stock, along with cash to be paid instead of
fractional shares. As soon as practicable after the merger takes place, the
exchange agent will mail a letter of transmittal and instructions for use in
surrendering certificates to each shareholder who held NECB's common stock
immediately before the effective time. Upon surrendering his or her
certificate(s) representing shares of NECB's common stock, together with the
signed letter of transmittal, the shareholder shall be entitled to receive
promptly certificate(s) representing a number of shares of Webster's common
stock determined in accordance with the exchange ratio and a check representing
the amount of cash in lieu of fractional shares, if any. No dividends or
distributions on Webster's common stock payable to any NECB shareholder will be
paid until the shareholder surrenders the certificate(s) representing the shares
of NECB's common stock
22
for exchange. No interest will be paid or accrued to NECB shareholders on cash
instead of fractional shares or unpaid dividends and distributions, if any.
If any certificate representing shares of Webster's common stock is to
be issued in a name other than that in which the certificate for shares
surrendered in exchange is registered, or cash is to be paid to a person other
than the registered holder, it will be a condition of issuance or payment that
the certificate so surrendered be properly endorsed or otherwise be in proper
form for transfer and that the person requesting the exchange either:
o pay to the exchange agent in advance any transfer or other
taxes required by reason of the issuance of a certificate or
payment to a person other than the registered holder of the
certificate surrendered, or
o establish to the satisfaction of the exchange agent that the
tax has been paid or is not payable.
After the close of business on the day before the merger takes place, there will
be no transfers on NECB's stock transfer books of shares of NECB's common stock,
and any shares of this kind that are presented to the exchange agent after the
merger takes place will be canceled and exchanged for certificates for shares of
Webster's common stock.
Any portion of the purchase price made available to the exchange agent
that remains unclaimed by NECB shareholders for one year after the effective
time of the merger will be returned to Webster. Any NECB shareholder who has not
exchanged shares of NECB's common stock for the purchase price in accordance
with the merger agreement before that time may look only to Webster for payment
of the purchase price for these shares and any unpaid dividends or distributions
after that time. Nonetheless, Webster, NECB, the exchange agent or any other
person will not be liable to any NECB shareholder for any amount properly
delivered to a public official under applicable abandoned property, escheat or
similar laws.
STOCK CERTIFICATES FOR SHARES OF NECB'S COMMON STOCK SHOULD NOT BE
RETURNED TO NECB WITH THE ENCLOSED PROXY CARD. AFTER THE MERGER TAKES PLACE, YOU
WILL RECEIVE INSTRUCTIONS ON HOW TO EXCHANGE YOUR NECB CERTIFICATES FOR WEBSTER
CERTIFICATES.
OPTIONS
As of the record date, there were outstanding options to purchase
471,894 shares of NECB's common stock at an average exercise price of $13.43 per
share. Under the merger agreement, shares of NECB's common stock issued before
the merger takes place upon the exercise of outstanding NECB options will be
converted into Webster's common stock at the exchange ratio. Each NECB option
that is outstanding and unexercised immediately before the effective time shall
be converted automatically into an option to purchase shares of Webster's common
stock, with adjustment in the number of shares and exercise price to reflect the
exchange ratio. The adjustment will be made in a manner consistent with Section
424(a) of the Internal Revenue Code of 1986, as amended. The duration and other
terms of the NECB options will otherwise be unchanged except that all references
to NECB or any of the NECB Subsidiary Banks in the NECB Stock Plans (and in any
option agreement documenting such option) shall be deemed to be references to
Webster or Webster Bank, as applicable.
REGULATORY APPROVALS
For the merger of Webster and NECB and the merger of Webster Bank and
the NECB Subsidiary Banks to take place, we must receive approvals of the Office
of Thrift Supervision, referred to in this section as the "OTS", the Connecticut
Commissioner of Banking and the New Hampshire Commissioner of Banking. In this
section, we refer to these approvals as the
23
"required regulatory approvals". Webster and NECB have agreed to use their best
efforts to obtain the required regulatory approvals.
Webster Bank has filed with the OTS an application for approval of the
merger of Webster Bank and the NECB Subsidiary Banks. We refer to that merger in
this section as the "bank merger". The bank merger is subject to the approval of
the OTS under the Home Owners' Loan Act of 1933, the Bank Merger Act provisions
of the Federal Deposit Insurance Act and related OTS regulations. These
approvals require consideration by the OTS of various factors, including
assessments of the competitive effect of the contemplated transactions, the
managerial and financial resources and future prospects of the resulting
institutions, and the effect of the contemplated transactions on the convenience
and needs of the communities to be served. The Community Reinvestment Act of
1977, commonly referred to as the "CRA", also requires that the OTS, in deciding
whether to approve the bank merger, assess the records of performance of Webster
Bank and the NECB Subsidiary Banks in meeting the credit needs of the
communities they serve, including low and moderate income neighborhoods. As part
of the review process, it is not unusual for the OTS to receive protests and
other adverse comments from community groups and others. Webster Bank currently
has an outstanding CRA rating from the OTS. Each of the NECB Subsidiary Banks
currently has a satisfactory CRA rating from the FDIC. The OTS regulations
require publication of notice and an opportunity for public comment concerning
the application filed in connection with the bank merger, and authorize the OTS
to hold informal and formal meetings in connection with the application if the
OTS, after reviewing the application or other materials, determines it is
desirable to do so or receives a request for an informal meeting. Any meeting or
comments provided by third parties could prolong the period during which the
bank merger is subject to review by the OTS. As of the date of this joint proxy
statement/prospectus, Webster is not aware of any protests, adverse comments or
requests for a meeting filed with the OTS concerning the bank merger. The bank
merger may not take place for a period of 15 to 30 days following OTS approval,
during which time the Department of Justice has authority to challenge the bank
merger on antitrust grounds. The OTS will determine the precise length of the
period in consultation with the Department of Justice. The commencement of an
antitrust action would stay the effectiveness of any approval granted by the OTS
unless a court specifically orders otherwise. If the Department of Justice does
not start a legal action during the waiting period, it may not challenge the
transaction afterward, except in an action under Section 2 of the Sherman
Antitrust Act.
An acquisition statement has been filed with the Connecticut
Commissioner of Banking in connection with Webster's acquisition of NECB and New
England Bank & Trust, The Equity Bank and Community Bank, the merger and bank
merger. In reviewing the acquisition statement, the Connecticut Commissioner
will review and consider, among other things, whether the investment and lending
policies of Webster Bank are consistent with safe and sound banking practices
and will benefit the economy of the state, whether the services or proposed
services of Webster Bank are consistent with safe and sound banking practices
and will benefit the economy of the state, the competitive effects of the
transaction, and the financial and managerial resources of Webster and Webster
Bank. The Connecticut Commissioner also will review Webster Bank's record under
the CRA. The Connecticut Commissioner may, at his discretion, hold a public
hearing on the proposed transaction.
In connection with the merger of Webster Bank and NECB's subsidiary
bank in New Hampshire, Olde Port Bank and Trust, Webster Bank has filed an
application with the New Hampshire Banking Commissioner requesting approval of
the merger and the establishment by Webster Bank of branches in New Hampshire.
In reviewing the applications, the New Hampshire Commissioner will review
whether the merger will promote the public interests and the interests of the
institutions involved and their shareholders and depositors.
Webster requested and received on September 9,1999 from the Board of
Governors of the Federal Reserve System a waiver of any application filing
requirement under the Bank Holding Company Act of 1956 that would otherwise
apply to the merger.
24
Webster and NECB are not aware of any other material governmental
approvals that are required for the merger and the bank merger to take place
that are not described above. If any other approval or action is required, we
presently expect that we would seek the approval or take the necessary action.
THE MERGER AND THE BANK MERGER CANNOT TAKE PLACE WITHOUT THE REQUIRED
REGULATORY APPROVALS, WHICH WE HAVE NOT RECEIVED YET. THERE IS NO ASSURANCE THAT
WE WILL RECEIVE THESE APPROVALS, AND IF WE DO, WHEN WE WILL RECEIVE THEM. ALSO,
THERE IS NO ASSURANCE THAT THE DEPARTMENT OF JUSTICE WILL NOT CHALLENGE THE
MERGER, OR, IF A CHALLENGE IS MADE, WHAT THE RESULT OF A CHALLENGE WOULD BE.
CONDITIONS TO THE MERGER
Under the merger agreement, Webster and NECB are not required to
complete the merger unless the following conditions are satisfied:
o the merger agreement is not terminated on or before the
effective time of the merger;
o the merger agreement and the merger are approved by the
affirmative vote of the holders of at least a majority of the
issued and outstanding shares of NECB's common stock entitled
to vote at the special meeting and a majority of the issued
and outstanding shares of Webster's common stock entitled to
vote at the special meeting;
o the Webster's common stock to be issued in the merger
(including stock which may be issued upon the exercise of
stock options) is authorized for quotation on the Nasdaq Stock
Market's National Market Tier (or such other exchange on which
the stock may become listed);
o all required regulatory approvals are obtained and remain in
full force and effect, all statutory waiting periods related
to these approvals expire, and none of the regulatory
approvals or statutory waiting periods contains a provision
that Webster reasonably considers to be unduly burdensome;
o the registration statement filed with the Securities and
Exchange Commission cover the shares of Webster's common stock
to be issued in the merger is effective and is not subject to
a stop order or any threatened stop order;
o no order, injunction or decree preventing the merger from
taking place is in effect and the completion of the merger
continues to be legal; and
o Webster and NECB receive a favorable tax opinion from
Webster's counsel which is reasonably satisfactory to Webster
and NECB.
Webster is not required to complete the merger unless the following
additional conditions are satisfied or waived:
o the representations and warranties of NECB contained in the
merger agreement are true and correct as of the date of the
merger agreement and as of the effective time of the merger,
except where the failure or failures to be true and correct
would not have a material adverse effect on NECB;
o NECB performs in all material respects all covenants and
agreements contained in the merger agreement to be performed
by NECB by the effective time; and
o Webster receives the written opinion of KPMG LLP, Webster's
independent public accountant, advising that, as of the
effective time, the merger will be accounted for as a "pooling
of interests."
NECB is not required to complete the merger unless the following
additional conditions are satisfied or waived:
25
o the representations and warranties of Webster contained in the
merger agreement are true and correct as of the date of the
merger agreement and as of the effective time of the merger,
except where the failure or failures to be true and correct
would not have a material adverse effect on Webster; and
o Webster performs in all material respects all covenants and
agreements contained in the merger agreement required to be
performed by it by the effective time.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement contains various restrictions on the operations of
NECB (including the NECB Subsidiary Banks) before the effective time of the
merger. In general, the merger agreement obligates NECB to continue to carry on
its businesses in the ordinary course consistent with past practices and with
prudent banking practices, with specific limitations on the lending activities
and other operations of NECB. The merger agreement prohibits NECB from:
o declaring any dividends or other distributions on its capital
stock other than regular quarterly cash dividends on NECB's
common stock and dividends by any NECB subsidiary to NECB;
o splitting, combining or reclassifying any of its capital
stock;
o issuing or authorizing or proposing the issuance of any
securities, other than the issuance of additional shares of
NECB's common stock upon the exercise or fulfillment of rights
or options issued or existing under NECB's stock option plan
in accordance with their present terms or the stock option
granted to Webster at the time the merger agreement was
signed;
o amending its articles of incorporation or bylaws;
o changing its methods of accounting in effect at December 31,
1998, except as required by changes in regulatory or generally
accepted accounting principles;
o increasing employee or director benefit arrangements or
compensation, other than limited increases in pay for
employees consistent with past practices, including the
granting of stock options and entering into any new employment
or severance agreements; and
o paying any bonuses except for bonuses totaling $250,000 as
agreed to in advance by Webster.
THIRD PARTY PROPOSALS
Under the merger agreement, NECB generally may not authorize or permit
any of its officers, directors, employees or agents to solicit, initiate or
encourage any inquiries relating to any third party proposal relating to a
tender offer or exchange offer or acquisition of a substantial equity interest
in or acquisition of a substantial portion of the assets of or any merger or
consolidation with NECB and/or the NECB Subsidiary Banks. There is also a
prohibition against holding substantive discussions or negotiations and
providing confidential information regarding these kinds of proposals.
Nevertheless, the NECB board of directors may disregard these restrictions if,
based on advice of counsel, it reasonably determines in the exercise of its
fiduciary duty that this kind of information must be furnished and discussions
and negotiations must be entered into.
EXPENSES; BREAKUP FEE
The merger agreement generally provides that all costs and expenses
incurred in connection with the merger agreement and the transactions
contemplated by the merger agreement shall be paid for by the party incurring
such expense, except that Webster and NECB will split all filing and other fees
paid to the SEC in connection with the merger and printing fees in connection
with this
26
joint proxy statement/prospectus. However, if the merger agreement is terminated
by Webster or NECB as a result of a material breach of a representation,
warranty, covenant or other agreement contained in the merger agreement by the
other party, the merger agreement provides for the non-terminating party to pay
all documented reasonable expenses of the terminating party up to $1,500,000.
Some of the events would also permit Webster to terminate the merger agreement
as well as exercise its rights under the option agreement. See "--Option
Agreement."
FAIRNESS OPINIONS OF NECB'S FINANCIAL ADVISORS
A. G. EDWARDS & SONS, INC.
On May 21, 1999, NECB engaged A.G. Edwards to act as its financial
advisor and to render an opinion as to the fairness, from a financial point of
view, to NECB shareholders of the merger consideration to be received in
connection with the merger.
A.G. Edwards is a nationally recognized securities and investment
banking firm engaged in, among other things, the evaluation of businesses and
their securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive bidding, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes. A.G. Edwards was selected by NECB as its financial advisor
based upon this expertise, the reputation of A.G. Edwards in investment banking
and mergers and acquisitions and A.G. Edwards' expertise in providing financial
advisory services to banking institutions and the banking industry generally.
A.G. Edwards is not aware of any past, present or contemplated relationship
between A.G. Edwards, NECB, NECB's directors, officers or shareholders or
Webster which, in its opinion, would affect its ability to render a fair and
independent opinion in this matter.
On June 29, 1999, at the meeting at which the NECB board approved and
adopted the merger agreement and the transactions contemplated by the merger
agreement, A.G. Edwards rendered its oral and written opinion to the NECB board
that, as of such date, the merger consideration was fair, from a financial point
of view, to NECB shareholders. The opinion has been updated as of the date of
this document.
The full text of the A.G. Edwards updated opinion, which describes,
among other things, assumptions made, procedures followed, matters considered
and limitations of the scope of the review undertaken by A.G. Edwards in
rendering its opinion, is attached as Appendix A to this document. NECB
shareholders are urged to, and should, read the A. G. Edwards opinion carefully
and in its entirety. The opinion was directed to the NECB board and addresses
only the fairness, from a financial point of view, to NECB shareholders of the
merger consideration to be received pursuant to the merger agreement and does
not constitute a recommendation to any holder of NECB capital stock as to how to
vote with respect to the merger agreement and the merger. The summary of the
opinion set forth in this document is qualified in its entirety by reference to
the full text of such opinion.
In connection with rendering its opinion, A.G. Edwards reviewed, among
other things:
o the merger agreement and exhibits thereto;
o the stock option agreement;
o NECB's audited consolidated financial statements and management's
discussion and analysis of financial condition and results of
operations contained in its annual report for the years ended
December 31, 1998 and December 31, 1997;
o Webster's audited consolidated financial statements and
management's discussion and analysis of financial condition and
results of operations contained in its annual report for the
fiscal years ended December 31, 1998 and December 31, 1997;
27
o expressions of interest for NECB by potential bidders other than
Webster;
o financial analyses and forecasts of NECB prepared by and reviewed
with management of NECB and the views of senior management of NECB
regarding NECB's past and current business operations, results of
these operations, financial condition and future prospects;
o financial analyses and forecasts of Webster prepared by, and
reviewed with, management of Webster and the views of senior
management of Webster regarding Webster's past and current
business operations, results of these operations, financial
condition, and future prospects as well as information relating to
the strategic, financial and operational benefits anticipated from
the merger;
o the pro forma impact of the merger on NECB and Webster;
o the publicly reported historical price and trading activity for
Webster's common stock and NECB's common stock, including a
comparison of certain financial and stock market information for
Webster and NECB with similar publicly available information for
certain other companies, the securities of which are publicly
traded;
o the financial terms of recent business combinations of banking
institutions, to the extent publicly available;
o the current market environment generally and the banking
environment in particular; and such other information, financial
studies, analyses and investigations and financial, economic and
market criteria as A.G. Edwards considered relevant.
In rendering its opinion, A.G. Edwards has reviewed the pro forma
impact of the merger as if it will be accounted for as a "pooling of interests"
business combination in accordance with U.S. generally accepted accounting
principals and has assumed that the merger will be consummated on the terms
contained in the merger agreement, without any waiver of any material terms or
conditions by NECB.
In rendering its opinion, A.G. Edwards has relied upon and assumed,
without independent verification, the accuracy and completeness of all financial
and other information, publicly available, or furnished to, or otherwise
discussed with A.G. Edwards for the purposes of the opinion. With respect to
financial projections and other information provided to or otherwise discussed
with A.G. Edwards, A.G. Edwards assumed and was advised by the senior management
of NECB and Webster, respectively, that such projections and other information
were reasonably prepared on a basis that reflects the best currently available
estimates and judgments of the senior management of NECB and Webster,
respectively. The board of NECB did not specifically engage A.G. Edwards to, and
therefore A.G. Edwards did not, verify the accuracy or completeness of any such
information. A.G. Edwards did not conduct a physical inspection of any of the
properties or facilities of NECB or Webster or analyze any loan or asset
documentation, nor did it make or obtain any independent evaluation or
appraisals of any such properties or facilities or of any loans, investments or
financial assets and liabilities. Furthermore, A.G. Edwards is not an expert in
the evaluation of allowances for loan losses, and it did not make an independent
evaluation of the adequacy of the allowances for loan losses of NECB and
Webster, nor did it review the loan portfolios of NECB or Webster. A.G. Edwards
has relied upon the assurances of the management of NECB and Webster that the
respective managements are not aware of any facts that would make such
information inaccurate or misleading. A.G. Edwards did not express an opinion as
to what the value of Webster's common stock will be when issued to the holders
of NECB's common stock pursuant to the merger, or the price at which Webster's
common stock will trade subsequent to the merger. A.G. Edwards' opinion is
necessarily based upon financial and other conditions and circumstances existing
and disclosed to it as of June 29, 1999.
The following is a summary of the material analyses performed by A.G.
Edwards in arriving at its opinion:
28
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. A.G. Edwards used
publicly available information to compare selected financial and market trading
information for NECB and a comparable group of selected banking institutions.
The institutions in the NECB comparable group were selected by A.G. Edwards
based on their geographic proximity and similarity of business lines to NECB's.
The NECB comparable group was comprised of:
o Arrow Financial Corporation;
o Bank Rhode Island;
o CCBT Bancorp, Inc.;
o CNB Financial Group;
o First of Long Island Corporation;
o Granite State Bankshares, Inc.;
o Independent Bank Corp.;
o Merchants Bancshares, Inc.;
o NBT Bancorp, Inc.; and
o Premier National Bancorp Inc.
A.G. Edwards reviewed financial information that included, among other
things, stock price to the last twelve months earnings per share, stock price to
tangible book value per share, stock price to book value per share, and current
dividend yield. A.G. Edwards calculated the following ratios for NECB using
implied valuations based on the consideration to be received for NECB's common
stock:
NECB NECB COMPARABLE GROUP
---- ---------------------
Price/Last Twelve Month's
Earnings 21.8x 14.1x
Price/Tangible Book Value 314.3% 203.2%
Price/Book Value 293.6% 202.4%
Current Dividend Yield 1.7% 2.6%
A.G. Edwards also used publicly available information to perform a
similar comparison of selected financial and market trading information for
Webster versus a comparable group of selected publicly traded commercial bank
holding companies. The companies in the Webster comparable group were selected
by A.G. Edwards based on their geographic proximity and similar business lines
to Webster's. The Webster comparable group was comprised of:
o Charter One Financial, Inc.;
o Chittenden Corporation;
o Hudson United Bancorp;
o M&T Bank Corporation;
o North Fork Bancorporation;
o People's Bank;
o Peoples Heritage Financial Group, Inc.;
o Sovereign Bancorp, Inc.; and
o Summit Bancorp.
29
A.G. Edwards reviewed financial information that included, among other
things, stock price to last twelve months earnings per share (excluding
non-recurring charges), stock price to tangible book value per share, stock
price to book value per share and current dividend yield. A.G. Edwards observed
the following results:
WEBSTER WEBSTER COMPARABLE GROUP
------- ------------------------
Price/Last Twelve Months Earnings 13.0x 14.8x
Price/Tangible Book Value 235.0% 262.6%
Price/Book Value 199.2% 234.3%
Current Dividend Yield 1.5% 2.8%
ANALYSIS OF SELECTED MERGER TRANSACTIONS. A.G. Edwards reviewed three
groups of selected merger and acquisition transactions involving public
commercial banking and savings institutions from Connecticut, New England and
nationwide and compared these merger transactions with the merger.
o The Connecticut merger comparables included nine commercial
banking and savings institution mergers and corporate
transactions announced since January 1, 1994 in which the
selling institution was headquartered in Connecticut and the
aggregate deal size was in excess of $100 million and less
than $1 billion.
o The New England merger comparables were comprised of sixteen
mergers and corporate transactions of commercial banking and
savings institutions announced since January 1, 1996 in which
the selling institution was headquartered in New England
(Connecticut, New Hampshire, Maine, Massachusetts, Rhode
Island and Vermont) and the aggregate deal size was greater
than $100 million and less than $1 billion.
o The nationwide merger comparables included fifty-two mergers
and corporate transactions announced since January 1, 1997 in
which the selling institution was a commercial banking
institution headquartered in the United States and the
aggregate deal size was in excess of $100 million but less
than $300 million.
A.G. Edwards reviewed, among other things, the ratios of stock price to
last twelve months earnings per share, stock price to tangible book value per
share and stock price to book value per share in each transaction and compared
the medians of these ratios to the same ratios for the merger. The merger ratios
were calculated based on a $28.43 stock price for Webster's common stock. A.G.
Edwards observed the following results:
30
CONNECTICUT MERGER NEW ENGLAND MERGER NATIONAL MERGER
MERGER COMPARABLES COMPARABLES COMPARABLES
------ ----------- ----------- -----------
Price/Last Twelve Months Earnings 21.9x 19.2x 21.4x 23.8x
Price/Tangible Book Value 314% 204% 244% 295%
Price/Book Value 294% 204% 215% 283%
PRO FORMA MERGER ANALYSIS. A.G. Edwards analyzed the impact of the
merger on NECB's equivalent pro forma earnings per share, NECB's equivalent pro
forma tangible book value per share, NECB's equivalent pro forma book value per
share and equivalent pro forma dividend yield. For purposes of this paragraph,
equivalent pro forma means the product of (1) the associated pro forma Webster
financial items listed below and (2) the 1.06 exchange ratio. Such analysis was
based on consensus earnings estimates, NECB's and Webster's respective
management projections and expense savings as well as consolidation efficiencies
as estimated by Webster's management. A.G. Edwards observed that, before taking
into account any restructuring charges to be incurred by Webster in connection
with the merger, and assuming a price of Webster common stock of $28.43, the
merger would result in the following equivalent pro forma per share effects:
NECB WEBSTER
---- -------
Earnings 49% to 55% increase 0.5% to 2.1% increase
Tangible Book Value 25% increase 5.1% decrease
Book Value 35% increase 6.2% decrease
Dividend Yield 1.7% 1.5%
ANALYSIS OF THE MERGER PREMIUMS TO MARKET VALUE. A.G. Edwards analyzed
the merger premiums of the consideration to be received by NECB shareholders to
the market value of NECB's common stock one day, one week, two weeks, one month,
three months and one year prior to June 16, 1999 and June 26, 1999. The merger
premiums were compared versus means and medians produced using the same
parameters for comparable transactions included in the Connecticut merger
comparables, The New England merger comparables, and the nationwide merger
comparables. A.G. Edwards selected June 16, 1999 to reflect more accurately the
trading price for NECB's common stock prior to unusual trading activity which
preceded the public announcement of the merger. A.G. Edwards also analyzed and
compared the merger premiums as a result of the market price for NECB as of June
26, 1999. The merger premiums reflected the following ranges:
31
RANGE OF MERGER CONNECTICUT MERGER NEW ENGLAND MERGER NATIONAL MERGER
PREMIUMS COMPARABLES COMPARABLES COMPARABLES
-------- ----------- ----------- -----------
June 16, 1999 34.7% - 56.6% 11.2% - 80.3% 18.6% - 79.2% 20.0% - 73.2%
June 26, 1999 17.1% - 52.6% 11.2% - 80.3% 18.6% - 79.2% 20.0% - 73.2 %
EXCHANGE RATIO ANALYSIS. A.G. Edwards reviewed the historical prices of
NECB's and Webster's common stock, respectively, and the resulting market-based
exchange ratios, which is the ratio obtained by dividing the price of NECB's
common stock by the price of Webster's common stock on a particular date, since
January 1997 and compared them to the proposed exchange ratio of 1.06.
o Based upon the closing stock prices of NECB's and Webster's
common stock on June 16, 1999 of $19.88 and $27.00
respectively, the market-based exchange ratio was 0.74.
o The maximum and minimum exchange ratio for the period from
January 1, 1997 to June 16, 1999 were 0.84 and 0.63,
respectively.
PRESENT VALUE ANALYSIS. A.G. Edwards reviewed the projected net income
statements for the years 1999 through 2003 as prepared by the management of NECB
on a GAAP basis and performed a discounted present value analysis of NECB based
on these projections. In performing the present value analysis, A.G. Edwards (1)
discounted the net income for each projected year back to June 29, 1999 and (2)
added the sum to the present value as of June 29, 1999 to the capitalized
terminal value of the net income for 2003.
o The terminal value was determined based on anticipated
earnings growth rates and various terminal multiples that A.G.
Edwards believed to be reasonable for such an analysis.
o Based on this analysis, A.G. Edwards calculated a range of
values for NECB's common stock as of June 29, 1999, of between
$21.60 and $28.80.
The descriptions above do not purport to be a complete description of
all the analyses performed by A.G. Edwards in arriving at its opinion. The
preparation of a fairness opinion is a complex process and is not susceptible to
partial analysis or summary description. In rendering its opinion, A.G. Edwards
applied its judgment to a variety of complex analyses and assumptions,
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any analysis or factor considered by it. Furthermore,
selecting any portion of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion. In addition,
A.G. Edwards may have relied upon various analyses and factors more or less than
others, and may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be A.G. Edwards' view of the
actual value of NECB or Webster. In performing its analyses, A.G. Edwards made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
NECB or Webster. The assumptions made and judgments applied by A.G. Edwards in
rendering its opinion are not readily susceptible to description beyond that
described in the written text of the opinion itself. Any estimates contained in
the opinion do not necessarily indicate future results or actual values, which
may be significantly more or less favorable than those suggested by these
estimates. A.G. Edwards does not assume responsibility if future results are
different from those it projected.
32
The analyses performed were prepared solely as part of A.G. Edwards' analysis of
the fairness, from a financial point of view, to NECB shareholders of the
consideration to be received in the merger and were conducted in connection with
the delivery of the opinion. As described above, the opinion to the NECB board
was one of the many factors taken into consideration by the NECB board in making
its determination to approve the merger agreement and the merger. The decision
to enter into the merger agreement was solely that of the NECB board.
The terms of the engagement of A.G. Edwards by NECB are described in a
letter agreement between A.G. Edwards and NECB. Under the terms of this
engagement letter, as compensation for rendering its financial advisory services
and its opinion to the board of NECB, NECB agreed to pay A.G. Edwards a fee of
$50,000 on the date of the engagement letter, and a fee, payable upon the
delivery of an opinion, of $300,000; these fees have been paid. NECB has also
agreed to pay to A.G. Edwards, upon the closing of the merger, an aggregate fee
equal to 0.35% of the total value of the merger, or approximately $700,000. NECB
has agreed to reimburse A.G. Edwards for reasonable fees of A.G. Edwards'
counsel and for A.G. Edwards' travel and out-of-pocket expenses incurred in
connection with its engagement. NECB has also agreed to indemnify A.G. Edwards
against certain liabilities in connection with the engagement of A.G. Edwards.
HAS ASSOCIATES, INC.
On May 21, 1999, NECB also engaged HAS Associates, Inc. to act as its
financial advisor in connection with the possible business combination of NECB
and another financial institution. Under the terms of its engagement, HAS agreed
to assist NECB in analyzing, structuring, negotiating and effecting such a
transaction. NECB selected HAS because HAS is a regional investment banking firm
with experience in such transactions and is familiar with NECB and its business.
As part of its investment banking business, HAS is engaged in the valuation of
financial institutions and their securities in connection with mergers and
acquisitions.
As part of its engagement, representatives of HAS attended the meeting
of the NECB board held on June 29, 1999 at which the NECB board considered and
approved the merger agreement. At the same meeting, HAS rendered an oral
opinion, subsequently confirmed in writing, that, as of that date, the exchange
ratio by which NECB's common stock will be converted into Webster's common stock
was fair to the holders of shares of NECB's common stock from a financial point
of view. Such opinion was reconfirmed in writing as of the date of this
document.
The full text of HAS' written opinion dated as of the date of this
document is attached as Exhibit B and is incorporated into this document by
reference. The description of the opinion in this document is qualified in its
entirety by reference to Exhibit B. We urge NECB shareholders to read HAS'
opinion in its entirety for a description of the procedures followed,
assumptions made, matters considered, and qualifications and limitations on the
review undertaken by HAS in connection with rendering its opinion.
HAS' opinion is directed to the NECB board and addresses only the
fairness, from a financial point of view, of the exchange ratio to the NECB
shareholders. It does not address the underlying business decision to proceed
with the merger and does not constitute a recommendation to any NECB shareholder
as to how the shareholder should vote at the NECB special meeting with respect
to the merger or any other matter related thereto.
In connection with its opinion, HAS reviewed, analyzed and relied upon
material relating to the financial and operating conditions of NECB including,
among other things, the following:
o the merger agreement;
o annual reports to shareholders and annual reports on Form 10-K
for the two years ended December 31, 1998 and 1997, of NECB
and Webster;
33
o quarterly reports on Form 10-Q, proxy solicitation material of
NECB and Webster and certain other communications from NECB
and Webster to its shareholders;
o other financial information concerning the business and
operations of NECB furnished to HAS by NECB for purposes of
its analysis, including certain internal financial analyses
and forecasts for NECB prepared by the senior management of
NECB;
o the corporate minutes of NECB for three years;
o audit reports certified by the independent accountants of NECB
and Webster for three years;
o regulatory filings of NECB for three years;
o NECB and Webster policies and procedures, material loan files,
and their investment portfolios; and
o material publicly available information with respect to
banking companies and the nature and terms of other
transactions HAS considered relevant to its inquiry.
In addition, HAS reviewed market information concerning Webster,
analyzed data concerning private and publicly owned banks in New England,
reviewed stock market data of other banks generally deemed comparable whose
securities are publicly traded, publicly available information concerning
certain recent business combinations, and additional financial and other
information as HAS deemed necessary.
In preparing its opinion, HAS, with NECB's consent, assumed and relied
on the accuracy and completeness of all financial and other information supplied
or otherwise made available to it by NECB and Webster, including that
contemplated in the items listed above. HAS has not assumed responsibility for
independently verifying this information or undertaken an independent evaluation
or appraisal of the assets or liabilities, contingent or otherwise, of NECB or
Webster, nor has it been furnished any evaluation or appraisal of these assets
and liabilities. HAS' opinion is predicated on the merger receiving the tax and
accounting treatment contemplated in the merger agreement. HAS' opinion was
necessarily based on economic, market and other conditions as in effect on, and
the information made available to it as of, the date of its opinion. HAS'
opinion was rendered without regard to the necessity for, or level of, any
restrictions, obligations, undertakings or divestitures which may be imposed or
required in the course of obtaining regulatory approval for the merger.
In connection with rendering its oral opinion on June 29, 1999, HAS
performed a variety of financial analyses, consisting of those summarized below.
The summary set forth below does not purport to be a complete description of the
analyses performed by HAS in this regard, although it describes all material
analyses performed by HAS. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to a
partial analysis or summary description.
Accordingly, notwithstanding the separate factors summarized below, HAS
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors considered by it, without considering all
analyses and factors, or attempting to ascribe relative weights to some or all
such analyses and factors, could create an incomplete view of the evaluation
process underlying HAS' opinion.
In performing its analyses, HAS made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of NECB, Webster and HAS. The
analyses performed by HAS are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of HAS' analysis of
the fairness to the shareholders of NECB of the conversion ratio and were
provided to the NECB board in connection with the delivery of HAS' opinion. HAS
gave the various analyses described below
34
approximately similar weight and did not draw any specific conclusions from or
with regard to any one method of analysis. With respect to the comparison of
selected companies' analysis and the analysis of selected merger transactions
summarized below, no company or transaction utilized as a comparison is
identical to NECB, Webster or the merger.
Accordingly, an analysis of comparable companies and comparable
business combinations is not mathematical; rather, it involves complex
considerations and judgments concerning the differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading values or announced merger transaction values, as the case
may be, of the companies concerned. The analyses do no purport to be appraisals
or to reflect the process at which NECB and Webster might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. In addition, as described above, HAS' opinion was one of many
factors taken into consideration by the NECB board.
The following is a summary of the material analyses presented by HAS to
the NECB board in connection with its opinion.
ANALYSES OF SELECTED MERGER TRANSACTIONS. HAS reviewed certain
financial data related to all deal transactions in the Northeast and Ohio
announced between June 30, 1998 and June 30, 1999 with a deal value in a range
of $175M to $500M.
The transactions included in the comparable transaction group were:
o Hudson United Bancorp (NJ)/JeffBanks Inc. (PA)
o Sky Financial Group Inc. (OH)/ Mahoning National Bancorp Inc. (OH)
o Fifth Third Bancorp (OH)/Emerald Financial Corporation (OH)
o Summit Bancorp (NJ)/Prime Bancorp Inc. (PA)
o BB&T Corporation (NC)/Mason-Dixon Bancshares, Inc. (MD)
o Chittenden Corporation (VT)/Vermont Financial Services Corp. (VT)
o Sky Financial Group Inc. (OH)/First Western Bancorp Inc. (PA)
o Sovereign Bancorp (PA)/Peoples Bancorp Inc. (NJ)
o FirstMerit Corporation (OH)/Signal Corp. (OH)
o Banknorth Group Inc. (VT)/Evergreen Bancorp Inc. (NY)
o Citizens Bancshares Inc. (OH)/ Ohio Bank (OH)
o Peoples Heritage Financial Group (ME)/SIS Bancorp Inc. (MA)
o Richmond County Financial Corp. (NY)/Bayonne Bancshares Inc. (NJ)
o First Commonwealth Financial Corporation (PA)/Southwest National
Corporation (PA)
- ----------------------------------------------------- ------------------ ----------------- -------------------
Transaction Comparable Comparable Group
Multiple Group Average Median
- ----------------------------------------------------- ------------------ ----------------- -------------------
- ----------------------------------------------------- ------------------ ----------------- -------------------
Deal Price/Earnings Per Share 27.59x 28.40x 27.53x
- ----------------------------------------------------- ------------------ ----------------- -------------------
Deal Price/Book Value 290% 289% 313%
- ----------------------------------------------------- ------------------ ----------------- -------------------
Deal Price/Tangible Book Value 310% 324% 326%
- ----------------------------------------------------- ------------------ ----------------- -------------------
Deal Price/Total Assets 27.79% 29.28% 29.11%
- ----------------------------------------------------- ------------------ ----------------- -------------------
Deal Price/Deposits 34.44% 40.64% 39.80%
- ----------------------------------------------------- ------------------ ----------------- -------------------
No company or transaction used as a comparison in the above analysis is
identical to NECB, Webster or the merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared.
35
SELECTED PEER GROUP ANALYSES. HAS compared the financial performance
and market performance of NECB and Webster based on various financial measures
of earnings performance, capital adequacy and asset quality to a group of
comparable sized New England and/or Northeastern banks. For purposes of such
analysis, the financial information used by HAS was for the period ended March
31, 1999.
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
NECB WEBSTER NECB Peer Group WEBSTER Peer
Average Group Median
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Return on Average Assets 0.95 0.79 1.13 0.97
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Return on Average Equity 10.21 13.37 14.06 11.40
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Net Interest Margin 5.19 2.84 3.82 3.90
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Equity/Assets 9.17 5.79 8.08 8.93
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Non-performing Assets/Assets 1.02 0.34 0.44 0.46
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Efficiency Ratio 59.21 55.81 58.73 51.30
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Price/ Last Twelve Months' Earnings 26.38 14.86 13.65 26.55
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Price / Book 277.2 198.8 174.2 238.2
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Price/ Tangible Book 296.7 234.5 179.7 277.1
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Price/Assets 25.43 11.52 14.08 20.00
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
CONTRIBUTION ANALYSIS. HAS analyzed the pro forma contribution of NECB
and Webster to the combined company, assuming a 100% stock exchange at 1.06
shares of Webster's common stock for each share of NECB's common stock with the
following results:
WEBSTER NECB Total
------- ---- -----
Assets 90.7% 9.3% 100.0%
Loans 90.7 9.3 100.0
Deposits 89.7 10.3 100.0
Earnings 90.6 9.4 100.0
Equity 86.6 13.4 100.0
DISCOUNTED CASH FLOW ANALYSIS. HAS estimated the present value of the
future cash flows that would accrue to a holder of NECB's common stock assuming
the shareholder held the stock through the year 2003 and then sold it at the end
of that period.
HAS based this analysis on several factors. These included, but were
not limited to, an earnings per share of $1.09 in 1998 and estimated 1999
earnings per share of $1.31 and a 20% earnings per share growth rate thereafter.
HAS assumed a 38% dividend payout ratio for NECB through the year 2003. HAS
calculated a terminal value at December 31, 2003 by multiplying NECB's projected
2003 earnings by a price/earnings multiple of 15X for the trailing twelve month
earnings. HAS also did a similar analysis using a terminal value of 13X to 16X
and EPS growth rates in a range of 18% to 21% for comparative purposes.
36
o The range of values was at a low of $20.30 to a high of
$27.75.
The final analysis of the discounted cash flow relied upon the 13X
multiple.
o The terminal valuation and the estimated dividends were
discounted at a rate of 15% producing a present value of
$25.11.
HAS determined these values by adding the present value of the estimated future
dividends stream that NECB could generate over the period beginning January 1,
1998 and ending December 31, 2003.
The discounted cash flow analysis is a widely used valuation
methodology. It relies on numerous assumptions, including asset and earnings
growth rates, dividend payout rates, terminal values and discount rates. The
analysis did not claim to be indicative of the actual values or expected values
of NECB's common stock.
In connection with its opinion dated as of the date of this document,
HAS performed procedures to update, as necessary, certain of the analyses
described above and reviewed the assumptions on which such analyses described
above were based and the factors considered in connection therewith. Some ratios
did change due to updated information and pricing, but these changes were
immaterial.
HAS was retained by the NECB board as an independent contractor to act
as financial adviser to NECB with respect to the merger. HAS, as part of its
investment banking business, is engaged in the valuation of banking businesses
and their securities in connection with mergers and acquisitions, and valuations
for estate, corporate and other purposes.
HAS and NECB entered into a letter agreement dated May 21, 1999
relating to the services HAS would provide in connection with the merger. Under
the agreement, NECB agreed to pay HAS a fee of 0.35% of the total value of the
deal or approximately, $700,000. In the letter agreement, NECB agreed to
indemnify HAS against certain liabilities related to engagement, including
liabilities under the federal securities laws.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, NECB made representations and warranties to
Webster. The material representations and warranties of NECB are the following:
o the proper organization and good standing of NECB and the NECB
Subsidiary Banks;
o insurance of the NECB Subsidiary Banks' deposit accounts by
the FDIC;
o capitalization of NECB and ownership of shares of NECB
Subsidiary Banks;
o the existence of corporate power and authority to execute,
deliver and perform its various obligations under the
transaction documents;
o receipt of all consents and approvals required to complete the
merger;
o accurate disclosure of loan portfolio and timely file of
reports;
o proper presentation of financial statements;
o no broker's fees other than to A.G. Edwards and HAS
Associates;
o the absence of any material adverse change in NECB;
o the absence of legal proceedings;
o timely filing of tax returns and absence of tax claims;
o existence of employee benefit plans and compliance with
applicable law;
37
o existence of material contracts and their effectiveness;
o absence of supervisory agreements with banking regulators;
o compliance with environmental law;
o adequacy of loss reserves;
o existence of properties and assets, absence of encumbrances,
and existence of good title;
o existence of insurance policies and their material compliance
with applicable laws;
o existence of loans, their material compliance with applicable
laws, proper organization of loan information, and proper
perfection of security interests;
o affiliates and the stockholder agreement regarding ownership
of Webster's common stock;
o existence of loan participation interests sold;
o receipt of the fairness opinions of A.G. Edwards and HAS;
o Year 2000 compliance; and
o accuracy of information regarding NECB to be included in this
document.
In the merger agreement, Webster made representations and warranties to
NECB. The material representations and warranties of Webster are the following:
o the proper organization and good standing of Webster and
Webster Bank;
o capitalization of Webster;
o existence of corporate power and authority to execute, deliver
and perform Webster's obligations under the transaction
documents;
o receipt of regulatory consents and approvals to complete the
merger;
o proper presentation of financial statements;
o absence of any material adverse change in Webster;
o absence of material legal proceedings;
o timely filing of tax returns and absence of tax claims;
o compliance with applicable laws;
o receipt of accounting opinion regarding "pooling of interests"
accounting for the merger; and
o Year 2000 compliance.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
Before or after our stockholders approve the merger agreement, it may
be terminated:
o by mutual written consent of Webster and NECB;
o by Webster or NECB if:
o 30 days pass after any required regulatory approval
is denied or regulatory application is withdrawn at a
regulator's request unless action is taken during the
30 day period for a rehearing or to file an amended
application;
o the merger has not taken place on or before June 29,
2000, unless the failure to complete the merger by
that date is due to the terminating party's failure
to perform its obligations in the merger agreement;
or
38
o Webster's or NECB's shareholders do not approve the
merger agreement;
o by Webster or NECB, if the board of directors of the other
shall have withdrawn, modified, or changed, in a manner
adverse to the terminating party, its approval or
recommendation of the merger agreement;
o by Webster, provided that Webster is not in breach of any
representation, warranty or covenant contained in the merger
agreement, if there is a breach of any representation,
warranty, covenant or agreement in the merger agreement by
NECB, if the breach or breaches would entitle Webster not to
consummate the merger if the breach occurred or continued on
the date of the closing of the merger and the breach is not
cured within 30 days after receiving written notice of the
breach; and
o by NECB, provided that NECB is not in breach of any
representation, warranty or covenant contained in the merger
agreement, if there is a breach of any representation,
warranty, covenant or agreement in the merger agreement by
Webster, if the breach or breaches would entitle NECB not to
consummate the merger if the breach occurred or continued on
the date of the closing of the merger and the breach is not
cured within 30 days after receiving written notice of the
breach.
In addition, the merger agreement provides NECB with a termination
right in the event that, generally, the price of Webster's common stock falls by
more than 20% on an absolute basis and underperforms the price performance of a
group of peer savings and loan holding companies by more than fifteen percentage
points. More specifically, during the 10-day period starting two days after we
receive approval of the merger from the OTS, NECB's board can terminate the
merger agreement if both of the following conditions are met:
o the average closing price of Webster's common stock (the
"Webster closing price") on Nasdaq over the twenty days ending
on the date of OTS approval (the "measurement period") is less
than $22.70; and
o the ratio of Webster's closing price to $28.38 (the closing
price of Webster's common stock on June 29, 1999, the last
Nasdaq trading date before we executed the merger agreement),
is more than 0.15 less than the ratio of the average price
over the measurement period of an index of Webster peer
financial institutions (the "index group") to the price of
that index on June 29, 1999.
For five days after Webster receives notice that NECB intends to
exercise its termination right, Webster can opt to increase the exchange ratio
according to a formula in the merger agreement. This formula generally provides
for an increase with the effect that the dollar value of the revised merger
consideration per share of NECB's common stock, based on the Webster closing
price, would be equal to the value that would have been received by an NECB
stockholder if the Webster closing price was the minimum necessary so that one
of the two conditions described above would not have been met. If Webster elects
to increase the exchange ratio according to this formula, then NECB will no
longer have its right to terminate the merger agreement and the exchange ratio
will be revised accordingly. Because the formula is dependent on the future
price of Webster's common stock and that of the index group, it is not possible
presently to determine what the adjusted conversion ratio would be, but, in
general, the ratio would be increased and, consequently, more shares of
Webster's common stock issued, to take into account the extent the average price
of Webster's common stock exceeded the decline in the average price of the
common stock of the index group.
39
The price of the index group on any date is determined based on the
weighted average closing prices on that date of each of 16 financial
institutions. The weightings are based on the number of outstanding shares of
each of the companies. The companies comprising the index group, and their
weightings, are as follows:
Sovereign Bancorp, Inc........................ 16.13% Astoria Financial Corporation........... 5.48%
Dime Bancorp, Incorporated..................... 10.93 Keystone Financial, Inc............... 4.78
Peoples Heritage Financial Group, Inc........... 10.22 Staten Island Bancorp, Inc............ 4.15
Roslyn Bancorp, Inc........................... 7.55 Hudson United Bancorp................. 3.88
Fulton Financial Corporation.................. 6.79 Susquehanna Bancshares, Inc........... 3.63
Independence Community Bank Corp................ 6.58 Richmond County Financial Corp........ 3.21
People's Bank (MHC)........................... 6.16 Commerce Bancorp, Inc................. 2.70
Valley National Bancorp....................... 5.70 Queens County Bancorp, Inc............ 2.12
If:
o the common stock of any of the companies in the index group
stops being publicly traded, or
o any of the companies in the index group announces a proposal
to be acquired, or
o any of the companies in the index group announces a proposal
to acquire another company or companies in transactions with a
value of more than 25% of the acquiror's market capitalization
on June 29, 1999,
that company will be removed from the index group and the weights will be
redistributed proportionately among the remaining companies.
The merger agreement also permits, subject to applicable law, the
boards of directors of Webster and NECB to:
o amend the merger agreement except as provided below;
o extend the time for performance of any of the obligations or
other acts of the other party;
o waive any inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered
under the merger agreement; or
o waive compliance with any of the agreements or conditions
contained in the merger agreement.
After approval of the merger agreement by NECB's shareholders, no
amendment of the merger agreement may be made without further shareholder
approval if the amendment would reduce the amount or change the form of the
consideration to be delivered to NECB's shareholders under the merger agreement.
FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material federal income tax
consequences of the merger to NECB shareholders. The summary is based on the
Internal Revenue Code of 1986, as amended, referred to in this section as the
Code, applicable U.S. Treasury regulations under the Code, administrative
rulings and judicial authority, all as of the date of this document. All of the
foregoing authorities are subject to change, and any change could affect the
continuing validity of this summary. The summary assumes that the holders of
shares of NECB's common stock hold their shares as a capital asset. The summary
does not address the tax consequences that may be applicable to particular NECB
shareholders in light of their individual circumstances or to NECB shareholders
who are subject to special tax rules, including:
40
o tax-exempt organizations;
o dealers in securities;
o financial institutions;
o insurance companies;
o non-United States persons;
o shareholders who acquired shares of NECB's common stock
through the exercise of options or otherwise as compensation
or through a qualified retirement plan;
o shareholders who are subject to the alternative minimum tax;
o shareholders who hold shares of NECB's common stock as part of
a straddle, hedge, or conversion transaction; and
o traders in securities who elect to apply a mark-to-market
method of accounting.
This summary also does not address any consequences arising under the tax laws
of any state, locality, or foreign jurisdiction or under any federal laws other
than those pertaining to the federal income tax.
One of the conditions for the merger to take place is that Webster and
NECB must receive opinions from their counsel, Wachtell, Lipton, Rosen & Katz,
and Day, Berry and Howard LLP, respectively, dated as of the effective date that
the merger and each of the mergers included in the bank merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and that Webster and NECB will each be a party to the
reorganization in respect of the merger within the meaning of Section 368(b) of
the Code, and that, accordingly,
o no gain or loss will be recognized by Webster or NECB as a
result of the merger or by the constituent banks as a result
of the bank merger,
o no gain or loss will be recognized by the shareholders of NECB
who exchange all of their NECB's common stock solely for
Webster's common stock in the merger (except with respect to
cash received in lieu of a fractional share interest in
Webster's common stock), and
o the aggregate tax basis of the Webster's common stock received
(including a fractional share interest deemed received) by
shareholders who exchange all of their NECB's common stock
solely for Webster's common stock in the merger will be the
same as the aggregate tax basis of the NECB's common stock
surrendered in exchange for the Webster's common stock.
The opinions will be based on the Code, the U.S. Treasury regulations
promulgated under the Code and related administrative interpretations and
judicial decisions, all as in effect as of the effective time of the merger, on
the assumption that the merger takes place as described in the merger agreement,
and on the basis of facts, representations or assumptions set forth or referred
to in the opinions. Unlike a ruling from the Internal Revenue Service, an
opinion of counsel is not binding on the Internal Revenue Service and there can
be no assurance that the Internal Revenue Service will not take a position
contrary to one or more of the positions reflected in the opinions or that those
positions will be upheld by the courts if challenged by the Internal Revenue
Service.
In addition, Webster and NECB have received opinions of Wachtell,
Lipton, Rosen & Katz and Day, Berry, and Howard LLP, respectively, dated as of
the date of this document. Accordingly,
o Except as discussed below with respect to cash received in
lieu of fractional shares, a NECB shareholder who exchanges
all of his or her NECB's common stock solely for Webster's
common stock pursuant to the merger will recognize no gain or
loss on the exchange.
41
o The aggregate tax basis of the Webster's common stock received
(including a fractional share interest deemed received) by a
NECB shareholder who exchanged all of its NECB's common stock
solely for Webster's common stock in the merger will be the
same as the shareholder's aggregate tax basis in the NECB's
common stock surrendered in exchange for the Webster's common
stock.
o The holding period of the Webster's common stock received by a
NECB shareholder in the merger (including a fractional share
interest deemed received) will include the holding period of
the NECB's common stock surrendered in exchange for the
Webster's common stock.
o The receipt by a NECB shareholder of cash instead of
fractional shares of Webster's common stock will be treated as
if the fractional shares were distributed as part of the
merger and then were redeemed by Webster. In general, NECB
shareholders should recognize capital gain or loss for U.S.
federal income tax purposes measured by the difference between
the amount of cash received and the portion of the tax basis
of the share of NECB's common stock allocable to the
fractional share interest. This will be a long-term capital
gain or loss if the holding period for the share of Webster's
common stock (determined as described above) is more than one
year at the effective time.
o None of Webster, Webster Bank, NECB nor the NECB Subsidiary
Banks will recognize any gain or loss as a result of the
merger or the bank merger.
Unless an exemption applies, the exchange agent will be required to
withhold, and will withhold, 31% of any cash payments to which a NECB
shareholder or other payee is entitled pursuant to the merger, unless the
shareholder or other payee provides his or her tax identification number (social
security number or employer identification number) and certifies that the number
is correct. Each shareholder and, if applicable, each other payee, is required
to complete and sign the Form W-9 that will be included as part of the
transmittal letter to avoid being subject to backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to Webster
and the exchange agent.
The federal income tax consequences set forth above are based upon
present law and do not purport to be a complete analysis or listing of all
potential tax effects that may apply to a holder of NECB's common stock. The tax
effects that are applicable to a particular holder of NECB's common stock may be
different from the tax effects that are applicable to other holders of NECB's
common stock, including the application and effect of state, local and other tax
laws other than those pertaining to the federal income tax, and thus, holders of
NECB's common stock are urged to consult their own tax advisors.
ACCOUNTING TREATMENT
It is a condition to Webster's obligations to complete the merger that
Webster receives a written opinion from KPMG LLP, Webster's independent public
accountant, to the effect that the merger will be accounted for as a "pooling of
interests." See "-- Conditions to the Merger." Under the "pooling of interests"
method of accounting, the historical basis of the assets and liabilities of
Webster and NECB will be combined and carried forward at their historically
recorded amounts.
RESALES OF WEBSTER'S COMMON STOCK RECEIVED IN THE MERGER
Webster is registering the sale of the shares of its common stock to be
issued in the merger under the securities act. The shares will be freely
transferable under the Securities Act, except for shares received by NECB
shareholders who are deemed to be affiliates of NECB before the merger and/or
affiliates of Webster thereafter. These affiliates only may resell their shares
pursuant to an effective registration statement under the Securities Act
covering the shares, in compliance with Securities Act Rule 145 or under another
exemption from the Securities Act's registration requirements. This joint proxy
statement/prospectus does not cover any resales of Webster's common
42
stock by Webster or NECB affiliates. Affiliates will generally include
individuals or entities who control, are controlled by or are under common
control with NECB or Webster, and may include officers or directors, as well as
principal shareholders of NECB or Webster.
EMPLOYEE BENEFITS
To the extent permissible under applicable law, the NECB Subsidiary
Banks' employees who become employees of Webster Bank at the effective time
generally will be given credit for service at the NECB Subsidiary Banks for the
following purposes:
o eligibility to participate in and the satisfaction of vesting
and service requirements for retirement benefits (such as
early, normal and disability retirement benefits), but not for
benefit accrual purposes, under the Webster Bank 401(k)
savings plan and the Webster Bank defined benefit pension plan
(and not for any purpose under the Webster Financial employee
stock ownership plan), and
o eligibility to participate in and levels of benefits under the
Webster welfare benefit and vacation plans.
In addition, following the effective time, Webster will provide full
time NECB employees whose employment is terminated within one year of the
effective date by Webster other than for cause or by the employee for good
reason with severance payments equal to two weeks' base pay per year of credited
service with a minimum benefit of four weeks' base pay and a maximum benefit of
26 weeks' base pay.
Webster has agreed to honor existing written deferred compensation,
employment, change of control and severance contracts with directors and
employees of NECB and the NECB Subsidiary Banks that were disclosed to Webster
prior to the execution of the merger agreement.
ABSENCE OF DISSENTERS' RIGHTS
Under the Delaware General Corporation Law, holders of NECB's and
Webster's common stock are not entitled to assert dissenters' rights in
connection with the merger.
INTERESTS OF NECB DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER THAT ARE
DIFFERENT THAN YOURS
In considering the recommendation of the NECB board of directors, the
NECB shareholders should be aware that certain members of NECB's senior
management and of the NECB board of directors have interests in the transaction
that are different from, or in addition to, the interests of shareholders
generally. The NECB board of directors knew about these additional interests,
and considered them when approving the merger agreement.
EXISTING NECB EXECUTIVE RETENTION AGREEMENTS. NECB is a party to
executive retention agreements with the following NECB executive officers:
NAME TITLE
---- -----
David A. Lentini Chairman, President and Chief Executive Officer
Frank A. Falvo Executive Vice President
Anson C. Hall Vice President, Chief Financial Officer and Treasurer
Donat A. Fournier Vice President and Senior Loan Officer
Each of these retention agreements provides that if, during the three
year period following a "change in control" of NECB, the executive's employment
is terminated other than for cause or the
43
executive terminates his employment for good reason, NECB is required to pay to
the executive a lump sum consisting of:
o three times the sum of the executive's highest annual base
salary in effect during the twelve months preceding his
termination of employment or the change in control, if higher,
plus his highest incentive bonus compensation during the three
years before the change in control for David A. Lentini, and
two times the executive's highest annual base salary in effect
during the twelve months preceding his termination of
employment or the change in control, if higher, plus his
highest incentive bonus compensation during the three years
before the change in control for the other three executives;
o a pro rata bonus for the year in which executive's employment
is terminated; and
o the amount of what NECB's matching contribution to the
executive's 401(k) retirement account would have been if the
executive had received the above amounts over a three-year
period in Mr. Lentini's case and over a two year period in the
case of the other three executives.
In addition, the executive is entitled to have transferred to him title to the
company car then used by the executive, all stock options and shares of
restricted stock vest, the executive will be entitled to continue to receive
benefits and to accrue service credit under NECB's employee benefit plans and to
the continuation of his country club membership for a period of three years
following the termination, and the executive will be provided with outplacement
services.
Any of the payments to an executive described above will be reduced,
but not below zero, to the extent necessary so that these payments, together
with any other payments in the nature of compensation or a benefit to the
executive, will not subject the executive to the excise tax described in Section
4999 of the Code.
The merger will constitute a change in control for purposes of the
retention agreements. For purposes of the retention agreements with each of
Messrs. Lentini, Falvo, Hall and Fournier, each of these NECB executives will be
deemed to have been terminated other than for cause upon completion of the
merger and the letter agreements with Webster will then supersede the retention
agreements. See "-- Letter Agreements with Webster."
LETTER AGREEMENTS WITH WEBSTER. In connection with the signing of the
merger agreement, Webster entered into letter agreements with each of Messrs.
Lentini, Falvo, Hall and Fournier. Under the letter agreements, each of the
executive agrees, during a "restricted period" of up to 24 months after the
consummation of the merger, to:
o hold in a fiduciary capacity for the benefit of Webster, and
not disclose, any and all secret or confidential information,
knowledge or data relating to Webster obtained by the
executive during his employment by Webster;
o not employ or solicit the employment of any person who was
during the previous twelve months an employee, representative,
officer or director of Webster;
o not attempt to persuade any Webster client or customer to
cease to do business or to reduce the amount of business the
client or customer has customarily done or contemplates doing
with Webster, and not to solicit the business of any Webster
client or customer other than on behalf or for the benefit of
Webster; and
o not engage in or become associated with the banking business
in any county in Connecticut (other than Fairfield County in
the case of Mr. Fournier) or in the Portsmouth, New Hampshire
area, other than through employment with Webster.
The letter agreements provide that, upon completion of the merger, each
executive will be deemed to have been terminated other than for cause for
purposes of the NECB retention
44
agreements described above, and will receive payments based on the executive's
rights under the retention agreement and in consideration for the
non-competition and other restrictions described above. The aggregate amount
payable to the executives as a group under their letter agreements is
$4,559,407. If any payment to an executive under his letter agreement or
otherwise is determined to be subject to the excise tax under Section 4999 of
the Code, Webster will make additional payments such that the amount retained by
the executive after application of the excise tax and federal and state income
taxes will equal the total payments amount the executive would have retained
under the letter agreement.
NECB STOCK OPTIONS. Pursuant to the merger agreement, upon consummation
of the merger, each outstanding option or other right to acquire shares of
NECB's common stock (whether or not vested) will cease to represent the right to
acquire shares of NECB's common stock and will be converted into and become a
right with respect to Webster's common stock. In connection with the merger, the
unvested stock options to purchase NECB's common stock granted by NECB to
Messrs. Lentini, Falvo, Hall and Fournier and to the non-employee directors of
NECB who cease serving as directors following the merger will vest. Assuming we
complete the merger on November 10, 1999, NECB expects that approximately
156,200 options held by these executive officers and 33,000 options held by the
non-employee directors will vest in connection with the merger.
BOARD MEMBERSHIP. As of the effective time, Webster will appoint one
person from among those serving on the NECB board of directors to serve as a
director on Webster's board of directors for a period to terminate at the annual
meeting of Webster stockholders next following the first anniversary of the
effective time. Additionally, that person shall also be added to the board of
Webster Bank.
INDEMNIFICATION. In the merger agreement, Webster agreed to indemnify,
defend and hold harmless each person who is, has been, or before the effective
time of the merger becomes, a director, officer or employee of NECB to the
fullest extent permitted under applicable law and Webster's restated certificate
of incorporation and bylaws or the federal stock charter and by-laws of Webster
Bank, for any claims made against the person because he or she is or was a
director, officer or employee of NECB or in connection with the merger
agreement. Webster also agrees to use commercially reasonable efforts to cover
for a period of at least two years after the effective time the officers and
directors of NECB under a directors' and officers' liability insurance policy of
substantially the same coverage and amounts for a total premium cost of not more
than 200% of the current amount expended by NECB to maintain this insurance.
OPTION AGREEMENT
As a condition of and inducement to Webster's entering into the merger
agreement, Webster and NECB entered into the option agreement immediately after
the execution of the merger agreement. Under the option agreement, NECB granted
Webster an option, referred to in this section as the "NECB option", which
entitles Webster to purchase, subject to the terms of the option agreement, up
to 1,400,252 fully paid and nonassessable shares of NECB's common stock, or
approximately 19.9% of the shares of NECB's common stock then outstanding, under
the circumstances described below, at a price per share of $22.14. That price is
subject to adjustment in specified circumstances. The NECB option is intended to
discourage the making of alternative acquisition-related proposals and, under
specified circumstances, may significantly increase the cost to a potential
third party of acquiring NECB compared to its cost had NECB not entered into the
option agreement. Therefore, the NECB option is likely to discourage third
parties from proposing a competing offer to acquire NECB even if the offer
involves a higher price per share for NECB's common stock than the per share
consideration to be paid under the merger agreement.
The following brief summary of the option agreement is qualified in its
entirety by reference to the option agreement. A copy of the option agreement,
as well as the other documents described in this document, will be provided to
you without charge if you call or write to James M. Sitro, Vice
45
President, Investor Relations, Webster Financial Corporation, Webster Plaza,
Waterbury, Connecticut 06702, telephone (203) 578-2399.
Subject to applicable law and regulatory restrictions, Webster may
exercise the NECB option, in whole or in part, following the occurrence of both
an initial triggering event as defined below and a subsequent triggering event
as defined below. An initial triggering event means, in substance:
o the entry by NECB, without the prior written consent of
Webster, into a letter of intent or definitive agreement to
engage in an acquisition transaction with any third party;
o the acquisition of any other person of beneficial ownership or
the right to acquire beneficial ownership of 10% or more of
the outstanding shares of common stock;
o the recommendation by NECB's board of directors that its
shareholders approve or accept any acquisition transaction
with any third party;
o any third party makes a proposal, which is or becomes public,
to NECB or its shareholders to enter into an acquisition
transaction;
o after a third party proposal for an acquisition is made to
NECB, NECB breaches its covenants under the merger agreement
with regard to such situation; or
o a third party files a regulatory application with regard to an
acquisition transaction with NECB.
A subsequent triggering event, as defined in the option agreement
includes either:
o the acquisition by any person of beneficial ownership of 20%
or more of the then outstanding common stock, or
o entering into an agreement to enter into an acquisition
transaction, except that the percentage referred to in that
definition is 20% instead of 10%.
For purposes of the option agreement, the term "acquisition
transaction" means:
o a merger, consolidation or other business combination
involving NECB or its subsidiaries,
o a purchase, lease or other acquisition of all or substantially
all of the assets and/or deposits of NECB or its subsidiaries,
or
o a purchase or the acquisition, including through merger,
consolidation, share exchange or otherwise, of beneficial
ownership of securities representing 10% or more of the voting
power of NECB.
The NECB option terminates on the occurrence of any of the following
events:
o the effective time of the merger;
o the termination of the merger agreement in accordance with the
provisions provided therein, if such termination occurs prior
to the occurrence of an initial triggering event, except if
the termination is due to a volitional breach by NECB; or
o the passage of 12 months after termination of the merger
agreement if such termination follows the occurrence of an
initial triggering event or if the termination is due to a
volitional breach by NECB.
There are provisions that could extend the term of the NECB option, but in no
event beyond 18 months from the termination of the merger agreement.
46
The NECB option may not be assigned by Webster to any other person
without the express written consent of NECB, except that Webster may assign its
rights in whole or in part after the occurrence of a subsequent triggering
event, as defined above. There are provisions that the NECB option is to be
assigned widely so that no person is able to acquire rights to purchase more
than 2% of the NECB's common stock if Webster has not received all federal
regulatory approvals needed to complete the merger.
In the event that before the NECB option is terminated, NECB enters
into a letter of intent or definitive agreement:
o to consolidate or merge with any third party, and NECB is not
the continuing or surviving corporation in the consolidation
or merger;
o to permit any third party to merge into NECB, and NECB is the
continuing or surviving corporation, but, in connection with
the merger, the then outstanding shares of NECB's common stock
will be changed into or exchanged for stock or other
securities of any third party or cash or any other property or
the then outstanding shares of NECB's common stock will
represent after the merger less than 50% of the outstanding
shares and share equivalents of the merged company; or
o to sell or otherwise transfer all or substantially all of its
assets to any third party, then the agreement governing the
transaction must make proper provision so that the NECB option
will, upon the completion of that transaction, be converted
into, or exchanged for, a substitute option, at the election
of Webster, of either
o the acquiring corporation, or
o any person that controls the acquiring corporation.
The substitute option will be exercisable for shares of the issuer's common
stock in a number and at an exercise price in accordance with the option
agreement and will otherwise have the same terms as the NECB option, except that
the number of shares subject to the substitute option may not exceed 19.99% of
the issuer's outstanding shares of common stock.
There are provisions in the option agreement permitting Webster to
receive cash payments from NECB, or the issuer of the substitute option, upon
surrender of the NECB option and/or shares previously acquired in full or
partial exercise of the NECB option. These shares are described in this
discussion as the "option shares." One provision, in general, permits Webster to
surrender the NECB option and/or the option shares and receive on a per share
basis the difference between the price Webster would have paid for to NECB, or
the issuer of the substitute option, upon exercise of the option and the price
per share paid by a third party in a merger, consolidation or similar
transaction with NECB, or any purchase, lease or other acquisition of all or a
substantial portion of NECB's assets or the acquisition of 50% or more of the
then outstanding common stock of NECB, or the highest closing price over the
preceding six months, in the case of the issue of the substitute option.
Another provision, in general, permits Webster to surrender the NECB
option and any option shares then owned by Webster and receive a $5,000,000 cash
payment if any of the third party transactions described in the last paragraph
occurs. As a result of this provision, Webster would expect to receive a minimum
of $5,000,000 as a result of the grant of the option if NECB enter into the
transactions described in which a third party directly or indirectly acquires
control of NECB during the term of the option.
47
MARKET PRICES AND DIVIDENDS
WEBSTER'S COMMON STOCK
The table below sets forth the range of high and low sale prices of
Webster's common stock as reported on the Nasdaq, as well as cash dividends paid
during the periods indicated, restated to reflect the two-for-one split of
Webster's common stock in April 1998:
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
March 31,1999.................. 31.63 27.38 0.11
June 30, 1999.................. 34.13 26.13 0.12
Period Ended:
September 27, 1999............... 28.81 24.75 0.12
On June 29, 1999, the last trading day before the public announcement
of the merger, the closing price of Webster's common stock on the Nasdaq was
$28.38. On September 27, 1999, the most recent practicable date before the
printing of this document, the closing price of Webster's common stock on the
Nasdaq was $25.75.
48
NECB'S COMMON STOCK
The table below sets forth the range of high and low sale prices of
NECB's common stock as reported on the Nasdaq, as well as cash dividends paid
during the periods indicated, restated to reflect a ten percent stock dividend
in November 1997:
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
Quarter Ended:
March 31, 1997................. $18.38 $14.88 $ 0.076
June 30, 1997.................. 17.50 15.00 0.076
September 30, 1997............. 24.75 16.88 0.084
December 31, 1997.............. 25.75 20.93 0.09
March 31, 1998................. 26.88 23.38 0.09
June 30, 1998.................. 26.00 21.63 0.10
September 30, 1998............. 24.25 17.00 0.10
December 31, 1998.............. 21.00 13.93 0.10
March 31,1999.................. 20.88 19.38 0.12
June 30, 1999.................. 28.88 18.00 0.12
Period Ended:
September 27, 1999............. 29.38 25.25 0.12
On June 29, 1999, the last trading day before the public announcement
of the merger, the closing price of NECB's common stock on the Nasdaq was
$26.63. On September 27, 1999, the most recent practicable date before the
printing of this document, the closing price of NECB's common stock on the
Nasdaq was $26.00.
DESCRIPTION OF CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS
Set forth below is a description of Webster's capital stock, as well as
a summary of the material differences between the rights of holders of NECB's
common stock and their prospective rights as holders of Webster's common stock.
If the merger agreement is approved and the merger takes place, the holders of
NECB's common stock will become holders of Webster's common stock. As a result,
Webster's restated certificate of incorporation, as amended, and bylaws, as
amended, and the applicable provisions of the General Corporation Law of the
State of Delaware, referred to in this section as the "Delaware corporation
law", will govern the rights of current holders of NECB's common stock. The
rights of those shareholders are governed at the present time by the amended and
restated certificate of incorporation and the bylaws of NECB and the applicable
provisions of the Delaware corporation law.
The following comparison is based on the current terms of the governing
documents of Webster and NECB and on the provisions of the Delaware corporation
law. The discussion is intended to highlight important similarities and
differences between the rights of holders of Webster's common stock and NECB's
common stock.
WEBSTER'S COMMON STOCK
Webster is authorized to issue 50,000,000 shares of common stock, par
value $.01 per share. If the proposed amendment is authorized, the total number
of shares of common stock Webster would be authorized to issue would increase to
200,000,000. As of June 30, 1999, 38,008,607 shares
49
of Webster's common stock were outstanding and Webster had outstanding stock
options granted to directors, officers and other employees for another 2,303,541
shares of Webster's common stock. Each share of Webster's common stock has the
same relative rights and is identical in all respects to each other share of
Webster's common stock. Webster's common stock is non-withdrawable capital, is
not of an insurable type and is not insured by the FDIC or any other
governmental entity.
Holders of Webster's common stock are entitled to one vote per share on
each matter properly submitted to shareholders for their vote, including the
election of directors. Webster's common stock is not subject to additional calls
or assessments by Webster, and all shares of Webster's common stock currently
outstanding are fully paid and nonassessable. For a discussion of the voting
rights of Webster's common stock, its lack of preemptive rights, the
classification of Webster's board of directors and provisions of Webster's
restated certificate of incorporation and bylaws that may prevent a change in
control of Webster or that would operate only in an extraordinary corporate
transaction involving Webster or its subsidiaries, see "-- Restated Certificate
of Incorporation and Bylaw Provisions."
Holders of Webster's common stock and any class or series of stock
entitled to participate with it are entitled to receive dividends declared by
the board of directors of Webster out of any assets legally available for
distribution. No dividends or other distributions may be declared or paid,
however, unless all accumulated dividends and any sinking fund, retirement fund
or other retirement payments have been paid, declared or set aside on any class
of stock having preference as to payments of dividends over Webster's common
stock. In addition, as described below, the indenture for Webster's senior notes
places restrictions on Webster's ability to pay dividends on its common stock.
See "-- Senior Notes."
In the unlikely event of any liquidation, dissolution or winding up of
Webster, the holders of Webster's common stock and any class or series of stock
entitled to participate with it would be entitled to receive all remaining
assets of Webster available for distribution, in cash or in kind, after payment
or provision for payment of all debts and liabilities of Webster and after the
liquidation preferences of all outstanding shares of any class of stock having
preference over Webster's common stock have been fully paid or set aside.
NECB'S COMMON STOCK
The certificate of incorporation of NECB authorizes 20,000,000 shares
of NECB's common stock, par value $ .10 per share, of which 7,036,494 shares
were outstanding as of June 30, 1999. In addition, as of June 30, 1999, there
were outstanding options to purchase NECB's common stock granted to officers and
other employees of NECB for 496,356 shares of NECB's common stock, plus the
option for 1,400,252 shares of NECB's common stock granted to Webster in
connection with the merger.
Each share of NECB's common stock also has the same relative rights and
is identical in all respect to each other share of NECB's common stock. As with
the Webster's common stock, the NECB's common stock is non-withdrawable capital,
is not of an insurable type and is not insured by the FDIC or any other
governmental entity.
Holders of the NECB's common stock also are entitled to one vote per
share on each matter properly submitted to shareholders for their vote,
including the election of directors. Holders of the NECB's common stock have
distribution and liquidation rights similar to those of holders of the Webster's
common stock. The NECB's common stock is also not subject to additional calls or
assessments by NECB, and all shares of NECB's common stock currently outstanding
are fully paid and nonassessable. For a discussion of the voting rights of
NECB's common stock, its lack of preemptive rights and provisions in NECB's
amended and restated certificate of incorporation which may prevent a change in
control of NECB, see "--Certificate of Incorporation and Bylaw Provisions."
50
WEBSTER'S PREFERRED STOCK AND SHAREHOLDER RIGHTS AGREEMENT
Webster's certificate of incorporation authorizes its board of
directors, without further shareholder approval, to issue up to 3,000,000 shares
of serial preferred stock for any proper corporate purpose. In approving any
issuance of serial preferred stock, the board of directors has broad authority
to determine the rights and preferences of the serial preferred stock, which may
be issued in one or more series. These rights and preferences may include
voting, dividend, conversion and liquidation rights that may be senior to
Webster's common stock.
Webster's Series C participating preferred stock was authorized in
connection with a rights agreement, which was adopted in February 1996 and
amended in October 1998. Webster adopted the rights agreement to protect
shareholders in the event of an inadequate takeover offer or to deter coercive
or unfair takeover tactics. The rights agreement is a complicated document, but,
in general, each right entitles a holder to purchase for $100, 1/1,000th of a
share of series C preferred stock upon the occurrence of specified events. As of
the date of this document, no shares of Webster's Series C preferred stock have
been issued.
The rights will be distributed upon the earliest of:
o 10 business days following a public announcement that a person
or group of affiliated or associated persons (referred to in
this discussion as an "acquiring person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding shares of Webster's common stock,
o 10 business days following the commencement of a tender offer
or exchange offer that, if consummated, would result in a
person or group beneficially owning 15% or more of such
outstanding shares of Webster's common stock, or
o 10 business days after the Webster board has declared any
person to be an adverse person (as explained in the next
paragraph).
The Webster board, by a majority vote, shall declare a person to be an
"adverse person" upon making:
o a determination that the person, alone or together with its
affiliates and associates, has or will become the beneficial
owner of 10% or more of the outstanding shares of Webster's
common stock (provided that this determination will not be
effective until the person has become the beneficial owner of
10% or more of the outstanding shares of Webster's common
stock), and
o a determination, after reasonable inquiry and investigation,
including consultation with anyone as the Webster board deems
appropriate, that
o the beneficial ownership by this person is intended
to cause, is reasonably likely to cause or will cause
Webster to repurchase the Webster's common stock
beneficially owned by the person or to cause pressure
on Webster to take action or enter into a transaction
or series of transactions intended to provide such
person with short-term financial gain under
circumstances where the Webster board believes that
the best long-term interests of Webster and the
Webster shareholders would not be served by taking
such action or entering into such transactions or
series of transactions at that time,
o the beneficial ownership is causing or is reasonably
likely to cause a material adverse impact (including,
but not limited to, impairment of relationships with
customers or impairment of Webster's ability to
maintain its competitive position) on the business or
prospects of Webster or
51
o the beneficial ownership is otherwise determined to
be not in the best interests of Webster and the
Webster shareholders, employees, customers and the
communities in which Webster and its subsidiaries do
business.
However, the Webster board may not declare a person to be an adverse person if,
prior to the time that the person acquired 10% or more of the shares of
Webster's common stock then outstanding, the person provided to the Webster
board a written statement of the person's purpose and intentions with respect to
the acquisition of Webster's common stock, and the Webster board deemed it
appropriate not to declare the person an adverse person. The Webster board may
impose conditions on its determination (such as the person not acquiring more
than a specified amount of Webster's common stock).
In the event that the Webster board determines that a person is an
adverse person or a person becomes the beneficial owner of 15% or more of the
then outstanding shares of Webster's common stock, each holder of a right, will
have the right to receive:
o upon exercise and payment of the exercise price, Webster's
common stock (or, in certain circumstances, cash, property or
other securities of Webster) having a value equal to two times
the exercise price of the right or
o at the discretion of the Webster board, upon exercise and
without payment of the exercise price, Webster's common stock
(or, in certain circumstances, cash, property or other
securities of Webster) having a value equal to the difference
between the exercise price of the right and the value of the
consideration that would be payable under the bullet point
above.
The rights are not exercisable until distributed and will expire at the close of
business on February 4, 2006, unless earlier redeemed by Webster as described
below. A copy of the Webster rights agreement has been filed with the SEC. See
"Where You Can Find More Information" for information on where you can obtain a
copy. A copy of the Webster rights agreement also is available free of charge
from Webster. This summary description of the Webster rights does not purport to
be complete and is qualified in its entirety by reference to the rights
agreement.
NECB'S PREFERRED STOCK
NECB's certificate of incorporation authorizes 200,000 shares of serial
preferred stock, without par value. None are outstanding.
WEBSTER'S SENIOR NOTES
The 8 3/4% Senior Notes due on June 30, 2000 were issued by Webster in
an aggregate principal amount of $40,000,000 under an indenture, dated as of
June 15, 1993, between Webster and Chemical Bank, as trustee. Chemical Bank is
now known as The Chase Manhattan Bank. Particular provisions of the indenture
are summarized below because of their impact on Webster's common stock. The
senior notes bear interest at 8 3/4% payable semi-annually on each June 30 and
December 30 until maturity on June 30, 2000. The senior notes are unsecured
general obligations only of Webster and not of its subsidiaries. The senior
notes may not be redeemed by Webster prior to June 30, 2000. The indenture
contains covenants that limit Webster's ability at the holding company level to
incur additional funded indebtedness, to make restricted distributions, to
engage in specified dispositions affecting Webster Bank or its voting stock, to
create specified liens upon Webster's assets at the holding company level,
including a negative pledge clause, and to engage in mergers, consolidations, or
a sale of substantially all of Webster's assets unless specified conditions are
satisfied. The indenture does not affect Webster's ability to consummate the
merger with NECB. The indenture also requires that Webster maintain a specified
level of liquid assets at the holding company level.
52
RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. The indenture limits the
amount of funded indebtedness which Webster may incur or guarantee at the
holding company level. Funded indebtedness includes any obligation of Webster
with a maturity in excess of one year for borrowed money, for the deferred
purchase price of property or services, for capital lease payments, or related
to the guarantee of these kinds of obligations. Webster may not incur or
guarantee any funded indebtedness if, immediately after giving effect to it, the
amount of funded indebtedness of Webster at the holding company level, including
the senior notes, would be greater than 90% of Webster's consolidated net worth.
As of June 30, 1999, Webster's consolidated net worth was $565.4 million and it
had $74.0 million of funded indebtedness.
RESTRICTED DISTRIBUTIONS. Under the indenture, Webster may not,
directly or indirectly, make any restricted distribution, except in capital
stock of Webster, if, at the time or after giving effect to the distribution:
o an event of default has occurred and is continuing under the
indenture;
o Webster Bank would fail to meet any of the applicable minimum
capital requirements under Office of Thrift Supervision
regulations;
o Webster would fail to maintain sufficient liquid assets to
comply with the terms of the covenant described under
"Liquidity Maintenance" below; or
o the aggregate amount of all restricted distributions
subsequent to September 30, 1993 would exceed the sum of
o $5 million, plus
o 75% of Webster's aggregate consolidated net income,
or if the aggregate consolidated net income is a
deficit, minus 100% of the deficit, accrued on a
cumulative basis in the period commencing on June 30,
1993 and ending on the last day of the fiscal quarter
immediately preceding the date of the restricted
distribution, and plus
o 100% of the net proceeds received by Webster from any
capital stock issued by Webster other than to a
subsidiary subsequent to September 30, 1993. As of
June 30 1999, Webster had the ability to pay $306.9
million in restricted distributions.
Restricted distribution means:
o any dividend, distribution or other payment on the capital
stock of Webster or any subsidiary other than a wholly owned
subsidiary, except for dividends, distributions or payments
payable in capital stock;
o any payment to purchase, redeem, acquire or retire any capital
stock of Webster or the capital stock of any subsidiary other
than a wholly owned subsidiary; and
o any payment by Webster of principal, whether a prepayment,
redemption or at maturity of, or to acquire, any indebtedness
for borrowed money issued or guaranteed by Webster, other than
the senior notes or under a guarantee by Webster of any
borrowing by any employee stock ownership plan established by
Webster or a wholly owned subsidiary, except that any payment
of, or to acquire, any indebtedness for borrowed money of this
kind that is not subordinated to the senior notes will not
constitute a restricted distribution if the indebtedness was
issued or guaranteed by Webster at a time when the senior
notes were rated on the same or higher rating category as the
rating assigned to the senior notes by Standard & Poor's at
the time the senior notes were issued.
LIQUIDITY MAINTENANCE. The indenture requires that Webster maintain at
all times, on an unconsolidated basis, liquid assets in an amount equal to or
greater than 150% of the aggregate interest expense on the senior notes and all
other indebtedness for borrowed money of Webster for 12 full calendar months
immediately following each determination date under the indenture, provided that
Webster will not be required to maintain liquid assets in that amount once the
senior notes have
53
been rated BBB- or higher by Standard & Poor's for six calendar months and
remain rated in that category.
WEBSTER'S CAPITAL SECURITIES
In January 1996, Webster raised $100 million through the sale of
capital securities that will be used for general corporate purposes. Webster
formed a business trust for the purpose of issuing capital securities and
investing the net proceeds in subordinated debentures issued by Webster.
Before its acquisition by Webster, Eagle Financial Corp. raised $50
million through the sale of capital securities to be used for general corporate
purposes. Eagle also formed a business trust for the purpose of issuing capital
securities and investing the net proceeds in the Eagle capital debentures. In
connection with the acquisition of Eagle by Webster in April 1998, Webster
assumed all of Eagle's rights and obligations with respect to the Eagle capital
securities and capital debentures.
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The following discussion is a general summary of provisions of
Webster's certificate of incorporation and bylaws, and a comparison of those
provisions to similar types of provisions in the certificate of incorporation
and bylaws of NECB. The discussion is necessarily general and, for provisions
contained in Webster's certificate of incorporation and bylaws or in NECB's
certificate of incorporation and bylaws, reference should be made to the
documents in question. Some of the provisions included in Webster's certificate
of incorporation and bylaws may serve to discourage a change in control of
Webster even if desired by a majority of shareholders. These provisions are
designed to encourage potential acquirers to negotiate directly with the board
of directors of Webster and to discourage other takeover attempts.
DIRECTORS. Some of the provisions of Webster's certificate of
incorporation and bylaws will impede changes in majority control of Webster's
board of directors. The certificate of incorporation provides that the board of
directors will be divided into three classes, with directors in each class
elected for three-year staggered terms. The certificate of incorporation further
provides that the size of the board of directors is to be within a 7 to 15
director range. The bylaws currently provide that there are to be 14 directors.
The bylaws also provide that:
o to be eligible for nomination as a director, a nominee must be
a resident of the State of Connecticut at the time of his
nomination or, if not then a resident, have been previously a
resident for at least three years;
o each director is required to own not less than 100 shares of
Webster's common stock; and
o more than three consecutive absences from regular meetings of
the board of directors, unless excused by a board resolution,
will automatically constitute a resignation.
Webster's bylaws also contain a provision prohibiting particular contracts and
transactions between Webster and its directors and officers and some other
entities unless specific procedural requirements are satisfied.
NECB has one class of directors who are elected to one-year terms or
until a successor has been elected or until the director's death, resignation or
removal. The bylaws of NECB provide that the number of directors shall be fixed
from time to time by resolution of the board of directors but will not be less
than three (3) and that all directors are to be stockholders.
Webster's certificate of incorporation and bylaws provide that a
vacancy occurring in the board of directors, including a vacancy created by any
increase in the number of directors, is to be filled for the remainder of the
unexpired term by a majority vote of the directors then in office. Similarly,
NECB's bylaws provide that any vacancy on the board of directors, including any
newly
54
created directorships, may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director, unless
otherwise provided by the amended and restated certificate of incorporation or
the laws of the State of Delaware.
Webster's certificate of incorporation provides that a director may be
removed only for cause and then only by the affirmative vote of at least
two-thirds of the total votes eligible to be voted at a duly constituted meeting
of shareholders called for that purpose and that 30 days' written notice must be
provided to any director or directors whose removal is to be considered at a
shareholders' meeting.
NECB's directors may be removed with or without cause by a majority of
the shares entitled to vote under Delaware law.
Webster's bylaws impose restrictions on the nomination by shareholders
of candidates for election to the board of directors and the proposal by
shareholders of business to be acted upon at an annual meeting of shareholders.
The certificate of incorporation and bylaws of NECB contain similar provisions.
CALL OF SPECIAL MEETINGS. Webster's certificate of incorporation
provides that a special meeting of shareholders may be called at any time but
only by the Chairman, the President or by the board of directors. Shareholders
are not authorized to call a special meeting. The bylaws of NECB contain similar
provisions.
SHAREHOLDER ACTION WITHOUT A MEETING. Webster's certificate of
incorporation provides that shareholders may act by written consent without a
meeting but only if the vote is unanimous. Under Delaware law, NECB shareholders
may act without a meeting, with signed consents of the number of shareholders
required to approve such action.
LIMITATION ON LIABILITY OF DIRECTORS AND INDEMNIFICATION. Webster's
certificate of incorporation provides that no director shall be personally
liable to the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director other than liability:
o for any breach of the director's duty of loyalty to the
corporation or its shareholders,
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
o for any payment of a dividend or approval of a stock
repurchase that is illegal under Section 174 of the Delaware
corporation law, or
o for any transaction from which a director derived an improper
personal benefit. The certificate of incorporation of NECB
contains similar provisions.
Webster's bylaws also provide for indemnification of directors,
officers, trustees, employees and agents of Webster, and for those serving in
those roles with other business organizations or entities, in the event that the
person was or is made a party to or is threatened to be made a party to any
civil, criminal, administrative, arbitration or investigative action, suit, or
proceeding, other than an action by or in the right of Webster, by reason of the
fact that the person is or was serving in that kind of capacity for or on behalf
of Webster. The bylaws provide that Webster will indemnify any person of this
kind against expenses including attorneys' fees, judgments, fines, penalties and
amounts paid in settlement if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
Webster, and, for any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Similarly, the bylaws provide that Webster
will indemnify these persons for expenses reasonably incurred and settlements
reasonably paid in actions, suits, or proceedings brought by or in the right of
Webster, if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of Webster; provided,
however, that no indemnification may be made against expenses for
55
any claim, issue, or matter as to which the person is adjudged to be liable to
Webster or against amounts paid in settlement unless and only to the extent that
there is a determination made by the appropriate party set forth in Webster's
bylaws that the person to be indemnified is, in view of all the circumstances of
the case, fairly and reasonably entitled to indemnity for expenses or amounts
paid in settlement. In addition, Webster's bylaws permit the corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, trustee, employee, or agent of Webster or is acting in this
kind of capacity for another business organization or entity at Webster's
request, against any liability asserted against the person and incurred in that
capacity, or arising out of that status, whether or not Webster would have the
power or obligation to indemnify him against that kind of liability under the
indemnification provisions of Webster's bylaws.
The indemnification provisions in NECB's certificate of incorporation
and bylaws are less extensive than Webster's. NECB's certificate of
incorporation and bylaws which authorize the corporation to indemnify any person
who has or is a party or is threatened to be made a party to any action, suit or
proceeding in which a person is made a party because of that person's status as
a director, officer or employee to the maximum extent permitted by Section 145
of the Delaware corporation law except where the person is finally adjudged to
be liable for negligence or misconduct in the performance of their duties.
CUMULATIVE VOTING. Neither Webster nor NECB stockholders may cumulate
voting rights in the election of directors.
PREEMPTIVE RIGHTS. Both Webster's certificate of incorporation and
NECB's amended and restated certificate of incorporation provide that
shareholders do not have any preemptive rights regarding the entity's
securities.
NOTICE OF MEETINGS. Webster's bylaws require that notice be given not
less than 20 nor more than 50 days prior to each annual or special meeting of
shareholders. NECB's bylaws require that notice of an annual or special meeting
be given not less than 10 days prior to a meeting. Under Delaware law, NECB is
generally not permitted to give such notice more than 60 days before the meeting
date.
QUORUM. Webster's and NECB's bylaws each provide that the holders of
one-third of the capital stock issued and outstanding and entitled to vote at a
meeting constitutes a quorum.
GENERAL VOTE. Webster's bylaws provide that any matter brought before a
meeting of shareholders will be decided by the affirmative vote of a majority of
the votes cast on the matter except as otherwise required by law or Webster's
certificate of incorporation or bylaws. NECB's bylaws contain similar
provisions.
RECORD DATE. Webster's bylaws provide that the record date for
determination of shareholders entitled to notice of or to vote at a meeting and
for other specified purposes may not be less than 10 nor more than 60 days
before the date of the meeting or other action. NECB's bylaws provide that the
record date may not be less than 10 nor more than 50 days prior to the date of
the meeting.
APPROVALS FOR ACQUISITIONS OF CONTROL AND OFFERS TO ACQUIRE CONTROL.
Webster's certificate of incorporation prohibits any person, whether an
individual, company or group acting in concert, from acquiring beneficial
ownership of 10% or more of Webster's voting stock, unless the acquisition has
received the prior approval of at least two-thirds of the outstanding shares of
voting stock at a duly called meeting of shareholders held for that purpose and
of all required federal regulatory authorities. Also, no person may make an
offer to acquire 10% or more of Webster's voting stock without obtaining prior
approval of the offer by at least two-thirds of Webster's board of directors or,
alternatively, before the offer is made, obtaining approval of the acquisition
from the Office of Thrift Supervision. These provisions do not apply to the
purchase of shares by underwriters in connection with a public offering or
employee stock ownership plan or other employee benefit plan
56
of Webster or any of its subsidiaries, and the provisions remain effective only
so long as an insured financial institution is a majority-owned subsidiary of
Webster. Shares acquired in excess of these limitations are not entitled to vote
or take other shareholder action or be counted in determining the total number
of outstanding shares in connection with any matter involving shareholder
action. These excess shares are also subject to transfer to a trustee, selected
by Webster, for the sale on the open market or otherwise, with the expenses of
the trustee to be paid out of the proceeds of the sale. The certificate of
incorporation and bylaws of NECB do not contain a similar provision.
PROCEDURES FOR BUSINEss COMBINATIONS. Webster's certificate of
incorporation requires that business combinations between Webster or any
majority-owned subsidiary of Webster and a 10% or more shareholder or its
affiliates or associates, referred to collectively in this section as the
interested shareholder, either be approved by at least 80% of the total number
of outstanding shares of voting stock of Webster, or be approved by at least
two-thirds of Webster's continuing directors, which means those directors
unaffiliated with the interested shareholder and serving before the interested
shareholder became an interested shareholder, or meet specified price and
procedure requirements that provide for consideration per share generally equal
to or greater than that paid by the interested shareholder when it acquired its
block of stock. The types of business combinations with an interested
shareholder covered by this provision include: any merger, consolidation and
share exchange; any sale, lease, exchange, mortgage, pledge or other transfer of
assets other than in the usual and regular course of business; an issuance or
transfer of equity securities having an aggregate market value in excess of 5%
of the aggregate market value of Webster's outstanding shares; the adoption of
any plan or proposal of liquidation proposed by or on behalf of an interested
shareholder; and any reclassification of securities, recapitalization of Webster
or any merger or consolidation of Webster with any of its subsidiaries or any
other transaction which has the effect of increasing the proportionate ownership
interest of the interested shareholder. Webster's restated certificate of
incorporation excludes employee stock purchase plans and other employee benefit
plans of Webster and any of its subsidiaries from the definition of interested
shareholder. The certificate of incorporation and bylaws of NECB do not contain
a similar provision.
ANTI-GREENMAIL. Webster's certificate of incorporation requires
approval by a majority of the outstanding shares of voting stock before Webster
may directly or indirectly purchase or otherwise acquire any voting stock
beneficially owned by a holder of 5% percent or more of Webster's voting stock,
if the holder has owned the shares for less than two years. Any shares
beneficially held by the person are required to be excluded in calculating
majority shareholder approval. This provision would not apply to a pro rata
offer made by Webster to all of its shareholders in compliance with the
Securities Exchange Act of 1934 and the rules and regulations under that statute
or a purchase of voting stock by Webster if the board of directors has
determined that the purchase price per share does not exceed the fair market
value of that voting stock. The certificate of incorporation and bylaws of NECB
do not contain a similar provision.
CRITERIA FOR EVALUATING OFFERS. Webster's certificate of incorporation
provides that the board of directors, when evaluating any acquisition offers,
shall give due consideration to all relevant factors, including, without
limitation, the economic effects of acceptance of the offer on depositors,
borrowers and employees of its insured institution subsidiaries and on the
communities in which its subsidiaries operate or are located, as well as on the
ability of its subsidiaries to fulfill the objectives of insured institutions
under applicable federal statutes and regulations. The certificate of
incorporation and bylaws of NECB do not contain a similar provision.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to
Webster's certificate of incorporation must be approved by at least two-thirds
of Webster's board of directors at a duly constituted meeting called for that
purpose and also by shareholders by the affirmative vote of at least a majority
of the shares entitled to vote thereon at a duly called annual or special
meeting; provided, however, that approval by the affirmative vote of at least
two-thirds of the shares entitled to vote thereon is required to amend the
provisions regarding amendment of the certificate of incorporation, directors,
bylaws, approval for acquisitions of control and offers to acquire control,
criteria for evaluating offers, the calling of special meetings of shareholders,
greenmail, and
57
shareholder action by written consent. In addition, the provisions regarding
business combinations may be amended only by the affirmative vote of at least
80% of the shares entitled to vote thereon. Webster's bylaws may be amended by
the affirmative vote of at least two-thirds of the board of directors or by
shareholders by at least two-thirds of the total votes eligible to be voted, at
a duly constituted meeting called for that purpose.
The voting requirements to amend NECB's certificate of incorporation
and bylaws are less stringent. The amended and restated certificate of
incorporation of NECB provides that the bylaws may be made, altered, amended or
repealed by the board of directors. NECB's bylaws provide that the bylaws may be
altered, amended or repealed either by the affirmative vote of the holders of a
majority of the stock issued and outstanding and entitled to vote in respect
thereof and represented in person or by proxy at any annual or special meeting
of the stockholders, or by the board of directors at any regular or special
meeting of the board.
APPLICABLE LAW
The following discussion is a general summary of particular federal
statutory and regulatory provisions that may be deemed to have an anti-takeover
effect. This discussion is applicable both to Webster and NECB.
Federal law provides that, subject to some exemptions, no person acting
directly or indirectly or through or in concert with one or more other persons
may acquire control of an insured institution or holding company of an insured
institution, without giving at least 60 days prior written notice providing
specified information to the appropriate federal banking agency. In the case of
Webster and Webster Bank, the appropriate federal banking agency is the OTS and
in the case of NECB and the NECB Subsidiary Banks, the appropriate federal
banking agency is the Federal Reserve Board or the FDIC. Control is defined for
this purpose as the power, directly or indirectly, to direct the management or
policies of an insured institution or to vote 25% or more of any class of voting
securities of an insured institution. Control is presumed to exist where the
acquiring party has voting control of at least 10% of any class of the
institution's voting securities and other conditions are present. The OTS, the
FDIC or the Federal Reserve may prohibit the acquisition of control if the
agency finds, among other things, that:
o the acquisition would result in a monopoly or substantially
lessen competition;
o the financial condition of the acquiring person might
jeopardize the financial stability of the institution; or
o the competence, experience or integrity of any acquiring
person or any of the proposed management personnel indicates
that it would not be in the interest of the depositors or the
public to permit the acquisition of control by that person.
WHERE YOU CAN FIND MORE INFORMATION
Webster and NECB file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that Webster
or NECB files with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet site that contains reports, proxy and information
statements and other information about issuers that file electronically with the
SEC. The address of the SEC's Internet site is http://www.sec.gov. Webster can
be found on the Internet at http://www.websterbank.com. NECB can be found on the
Internet at http://www.necbancorp.com. Webster's common stock is traded on the
Nasdaq Stock Market's National Market Tier under the trading symbol WBST. NECB's
common stock is traded on the Nasdaq under the trading symbol NECB.
58
Webster has filed with the SEC a registration statement on Form S-4
under the Securities Act relating to Webster's common stock to be issued to
NECB's shareholders in the merger. As permitted by the rules and regulations of
the SEC, this joint proxy statement/prospectus does not contain all the
information set forth in the registration statement. You can obtain that
additional information from the SEC's principal office in Washington, D.C. or
the SEC's Internet site as described above. Statements contained in this joint
proxy statement/prospectus or in any document incorporated by reference into
this joint proxy statement/prospectus about the contents of any contract or
other document are not necessarily complete and, in each instance where the
contract or document is filed as an exhibit to the registration statement,
reference is made to the copy of that contract or document filed as an exhibit
to the registration statement, with each statement of that kind in this joint
proxy statement/prospectus being qualified in all respects by reference to the
document.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows Webster and NECB to incorporate by reference information
into this joint proxy statement/prospectus, which means that Webster and NECB
can disclose important information to you by referring you to another document
filed separately with the SEC. The information that Webster and NECB incorporate
by reference is considered a part of this joint proxy statement/prospectus,
except for any information superseded by information presented in this joint
proxy statement/prospectus. This joint proxy statement/prospectus incorporates
important business and financial information about Webster, NECB and their
subsidiaries that is not included in or delivered with this document.
WEBSTER DOCUMENTS
This joint proxy statement/prospectus incorporates by reference the
documents listed below that Webster has filed with the SEC:
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
o Annual Report on Form 10-K Year ended December 31, 1998
o Quarterly Report on Form 10-Q For the quarter ended March 31, 1999
o Quarterly Report on Form 10-Q For the quarter ended June 30, 1999
o Current Report on Form 8-K Filed February 25, 1999
o Current Report on Form 8-K Filed April 9, 1999
o Current Report on Form 8-K Filed May 6, 1999
o Current Report on Form 8-K Filed July 13, 1999
o For description of Webster common stock
o Form 8-A Filed December 2, 1986
o Current Report on Form 8-K Filed October 30, 1998
o Current Report on Form 8-K Filed November 25, 1996
o Current Report on Form 8-K Filed February 12, 1996
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR
WRITE TO: JAMES M. SITRO, VICE PRESIDENT, INVESTOR RELATIONS OF WEBSTER
FINANCIAL CORPORATION, WEBSTER PLAZA, WATERBURY, CONNECTICUT 06702, TELEPHONE
(203) 578-2399. IN ORDER TO OBTAIN TIMELY DELIVERY OF DOCUMENTS, YOU SHOULD
REQUEST INFORMATION AS SOON AS POSSIBLE, BUT NO LATER THAN OCTOBER 26, 1999.
59
NECB DOCUMENTS
This joint proxy statement/prospectus incorporates by reference the
documents listed below that NECB has filed with the SEC:
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
o Annual Report on Form 10-K Year ended December 31, 1998
o Quarterly Report on Form 10-Q For the quarter ended March 31, 1999
as amended by Form 10-Q/A
o Quarterly Report on Form 10-Q For the quarter ended June 30, 1999
o For description of NECB common stock
Form 8-A Filed April 30, 1986
(Filed by Olde Windsor Bancorp, Inc.)
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR
WRITE TO: ANSON C. HALL, VICE PRESIDENT AND TREASURER OF NEW ENGLAND COMMUNITY
BANCORP, INC., TELEPHONE (860) 683-4610. IN ORDER TO OBTAIN TIMELY DELIVERY OF
DOCUMENTS, YOU SHOULD REQUEST INFORMATION AS SOON AS POSSIBLE, BUT NO LATER THAN
OCTOBER 26, 1999.
Webster and NECB incorporate by reference additional documents that
either company may file with the SEC between the date of this document and the
respective dates of the Webster and the NECB special meetings. These documents
include periodic reports, such as annual reports on form 10-K, quarterly reports
on form 10-Q and current reports on form 8-K, as well as proxy statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document, and in
documents that we incorporate by reference. These kinds of statements are
subject to risks and uncertainties. Forward-looking statements include the
information concerning possible or assumed future results of our operations.
When we use words like believes, expects, anticipates or similar expressions, we
are making forward-looking statements.
You should note that many factors, some of which are discussed
elsewhere in this document and in the documents that we incorporate by
reference, could affect our future financial results and could cause those
results to differ materially from those expressed in our forward-looking
statements. These factors include the following:
o the effect of economic conditions;
o inability to realize expected cost savings in connection with
business combinations and other acquisitions;
o higher than expected costs related to integration of combined
or merged businesses;
o deposit attrition; o adverse changes in interest rates;
o change in any applicable law, rule, regulation or practice
with respect to tax or accounting issues or otherwise; and
o adverse changes or conditions in capital or financial markets.
The forward-looking statements are made as of the date of this
document, and we assume no obligation to update the forward-looking statements
or to update the reasons why actual results could differ from those projected in
the forward-looking statements.
No person is authorized to give any information or to make any
representation not contained in this document, and, if given or made, that
information or representation should not be relied upon as having been
authorized. This document does not constitute an offer to sell, or a
solicitation of an
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offer to purchase, any of Webster's common stock offered by
this document, or the solicitation of a proxy, in any jurisdiction in which it
is unlawful to make that kind of offer or solicitation. Neither the delivery of
this document nor any distribution of Webster's common stock offered pursuant to
this joint proxy statement/prospectus shall, under any circumstances, create an
implication that there has been no change in the affairs of NECB or Webster or
the information in this document or the documents or reports incorporated by
reference into this document since the date of this document.
SHAREHOLDER PROPOSALS
Any proposal which a NECB shareholder wishes to have included in NECB's
proxy statement and form of proxy relating to NECB's 2000 annual meeting of
shareholders under Rule 14a-8 of the SEC must be received by NECB at its
principal executive offices at 175 Broad Street, P.O. Box 130, Windsor,
Connecticut 06095, not less than 60 days nor more than 90 days prior to the date
of the meeting, or by April 10, 2000. Nothing in this paragraph shall be deemed
to require NECB to include in its proxy statement and form of proxy for such
meeting any shareholder proposal which does not meet the requirements of the SEC
in effect at the time. If the merger agreement is approved and the merger takes
place, NECB will not have an annual meeting of shareholders in 2000. If the
merger does not take place, NECB anticipates that its 2000 annual meeting will
be held in April 2000.
Any proposal which a Webster shareholder wishes to have included in
Webster's proxy statement and form of proxy relating to Webster's 2000 annual
meeting of shareholders under Rule 14a-8 of the SEC must be received by
Webster's secretary at Webster Plaza, Waterbury, Connecticut 06702 by November
20, 1999. Nothing in this paragraph shall be deemed to require Webster to
include in its proxy statement and form of proxy for such meeting any
shareholder proposal which does not meet the requirements of the SEC in effect
at the time. Any other proposal for consideration by shareholders at Webster's
2000 annual meeting of shareholders must be delivered to, or mailed to and
received by, the secretary of Webster not less that 30 days nor more than 90
days prior to the date of the meeting if Webster gives at least 45 days' notice
or prior public disclosure of the meeting date to shareholders.
OTHER MATTERS
We do not expect that any matters other than those described in this
document will be brought before the special meetings. If any other matters are
presented, however, it is the intention of the persons named in the Webster or
NECB proxy card, to vote proxies in accordance with the determination of a
majority of Webster's or NECB's board of directors, as the case may be
including, without limitation, a motion to adjourn or postpone the special
meeting to another time and/or place for the purpose of soliciting additional
proxies in order to approve the merger agreement or otherwise.
EXPERTS
The consolidated financial statements of Webster at December 31, 1998
and 1997, and for each of the years in the three-year period ended December 31,
1998, have been incorporated by reference into this document and in the
registration statement in reliance on the report of KPMG LLP, independent
certified public accountants, which is incorporated by reference into this
document and into the registration statement, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of NECB, incorporated into this
document by reference from NECB's Annual Report on Form 10-K for the year ended
December 31, 1998 and 1997, have been audited by Shatswell, MacLeod & Company,
P.C., independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of that firm given upon their authority as experts in accounting and auditing.
61
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG LLP will be present at the Webster special
meeting, and representatives of Shatswell, MacLeod & Company, P.C. will be
present at the NECB special meeting. In each case, such representatives will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
LEGAL MATTERS
The validity of Webster's common stock to be issued in the merger has
been passed upon by Hogan & Hartson L.L.P., Washington, D.C. Day, Berry and
Howard LLP and Wachtell, Lipton, Rosen & Katz will be passing upon certain tax
matters in connection with the merger.
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FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information and explanatory notes are presented to show the impact on the
historical financial positions and results of operations of Webster and NECB of
the merger under the "pooling of interests" method of accounting. The unaudited
pro forma condensed combined financial information combines the historical
financial information of Webster and NECB as of June 30, 1999 and for the six
months ended June 30, 1999 and 1998 and for the year ended December 31, 1998.
The unaudited pro forma condensed combined statements of income give effect to
the merger as if the merger occurred at the beginning of each period covered by
such statements of income. The pro forma condensed combined statement of
condition assumes the merger was consummated on June 30, 1999.
The pro forma condensed combined financial information as of June 30,
1999 and for the six months ended June 30, 1999 and 1998 and the year ended
December 31, 1998, is based on and derived from, and should be read in
conjunction with, the historical consolidated financial statements and the
related notes thereto of Webster, which are incorporated by reference herein,
and the historical consolidated financial statements and the related notes
thereto of NECB, which we incorporate into this document by reference. See
"Where You Can Find More Information."
The pro forma condensed combined financial statements do not give
effect to the anticipated cost savings or potential revenue enhancements in
connection with the merger. The pro forma data is presented for comparative
purposes only and is not necessarily indicative of the future financial position
or results of operations of the combined company or of the combined financial
position or the results of operations that would have been realized had the
merger been consummated during the periods or as of the dates for which the pro
forma data are presented.
63
PRO FORMA COMBINED STATEMENT OF CONDITION
JUNE 30, 1999
(UNAUDITED)
WEBSTER NECB PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------ ----------- --------
(IN THOUSANDS)
ASSETS
Cash and Due from Depository Institutions...... $ 161,332 $ 33,040 $ $ 194,372
Interest-bearing Deposits...................... 6,658 7,803 14,461
Securities:
Trading, at Fair Value....................... 70,561 -- 70,561
Available for Sale, at Fair Value............ 2,693,847 212,663 (2,321)(a) 2,904,189
Held to Maturity............................. 346,826 4,122 350,948
Loans Receivable, Net.......................... 5,278,808 514,907 5,793,715
Accrued Interest Receivable.................... 55,883 5,560 61,443
Premises and Equipment, Net.................... 85,883 13,454 (1,250)(c) 98,087
Foreclosed Properties, Net..................... 3,939 1,641 5,580
Intangible Assets.............................. 139,338 4,651 143,989
Cash Surrender Value of Life Insurance......... 144,788 -- 144,788
Prepaid Expenses and Other Assets.............. 69,127 10,557 165(b) 79,849
----------- ----------- ----------- -----------
Total Assets................................... $ 9,056,990 $ 808,398 $ (3,406) $ 9,861,982
=========== =========== ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits..................................... $ 5,719,866 $ 640,721 $ $ 6,360,587
Federal Home Loan Bank Advances.............. 1,394,404 49,290 1,443,694
Other Borrowings............................. 1,082,045 42,750 1,124,795
Advanced Payments by Borrowers for Taxes
and Insurance............................... 10,976 3,063 14,039
Accrued Expenses and Other Liabilities....... 84,684 2,982 7,750(c) 95,416
----------- ----------- ----------- -----------
Total Liabilities............................ 8,291,975 738,806 7,750 9,038,531
----------- ----------- ------------ -----------
Corporation-Obligated Mandatorily Redeemable
Capital Securities of Subsidiary Trusts..... 150,000 -- -- 150,000
----------- ----------- ------------ -----------
Preferred Stock of Subsidiary Corporation.... 49,577 -- -- 49,577
----------- ----------- ------------ -----------
SHAREHOLDERS' EQUITY:
Common Stock................................. 385 704 (632)(d) 457
Paid In Capital.............................. 254,102 61,921 (3,957)(a)(b)(d) 312,066
Retained Earnings............................ 351,352 11,869 (9,000)(c) 354,221
Less Treasury Stock at Cost.................. (13,286) (2,681) 2,681(d) (13,286)
Accumulated Other Comprehensive Loss......... (25,987) (2,221) (248)(a) (28,456)
Less Employee Stock Ownership Plan Shares
Purchased with Debt......................... (1,128) -- -- (1,128)
------------ ----------- ---------------- ------------
Total Shareholders' Equity................... 565,438 69,592 (11,156) 623,874
----------- ----------- ------------- -----------
Total Liabilities And Shareholders' Equity... $ 9,056,990 $ 808,398 $ (3,406) $ 9,861,982
=========== =========== ============= ===========
The pro forma combined statement of condition has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the merger.
See accompanying notes to pro forma combined financial statements.
64
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
WEBSTER NECB PRO FORMA
(HISTORICAL) (HISTORICAL) COMBINED
------------ ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME:
Loans ...................................................... $ 188,894 $ 22,150 $ 211,044
Securities and Interest-bearing Deposits.................... 102,528 6,267 108,795
----------- ----------- -----------
Total Interest Income...................................... 291,422 28,417 319,839
----------- ----------- -----------
INTEREST EXPENSE:
Deposits.................................................... 95,486 8,175 103,661
Borrowings.................................................. 65,261 1,790 67,051
----------- ----------- -----------
Total Interest Expense..................................... 160,747 9,965 170,712
----------- ----------- -----------
Net Interest Income........................................ 130,675 18,452 149,127
Provision for Loan Losses..................................... 4,100 333 4,433
----------- ----------- -----------
Net Interest Income After Provision for Loan Losses......... 126,575 18,119 144,694
----------- ----------- -----------
NONINTEREST INCOME:
Fees and Service Charges.................................... 26,943 1,950 28,893
Gain on Sale of Loans and Loan Servicing, Net............... 1,439 1,915 3,354
Gain on Sale of Securities, Net............................. 3,419 499 3,918
Other Noninterest Income.................................... 7,856 125 7,981
----------- ----------- -----------
Total Noninterest Income................................... 39,657 4,489 44,146
----------- ----------- -----------
NONINTEREST EXPENSES:
Salaries and Employee Benefits.............................. 42,396 7,838 50,234
Occupancy Expense of Premises............................... 8,771 1,479 10,250
Furniture and Equipment Expenses............................ 9,481 1,027 10,508
Marketing Expenses.......................................... 4,350 353 4,703
Foreclosed Property Expenses and Provisions, Net............ 10 146 156
Intangibles Amortization.................................... 5,610 235 5,845
Capital Securities Expenses................................. 7,323 -- 7,323
Dividends on Preferred Stock of Subsidiary Corporation...... 2,000 -- 2,000
Acquisition-related Expenses................................ -- 1,353 1,353
Other Operating Expenses.................................... 18,142 3,404 21,546
----------- ----------- -----------
Total Noninterest Expenses................................. 98,083 15,835 113,918
----------- ----------- -----------
Income before Income Taxes.................................... 68,149 6,773 74,922
Income Taxes.................................................. 23,171 2,428 25,599
----------- ----------- -----------
NET INCOME.................................................... $ 44,978 $ 4,345 $ 49,323
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic....................................................... $ 1.23 $ 0.62 $ 1.13(e)
============ ============ ============
Diluted..................................................... $ 1.20 $ 0.61 $ 1.11(e)
============ ============ ============
The pro forma combined statement of income has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the merger.
See accompanying notes to pro forma combined financial statements.
65
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
WEBSTER NECB PRO FORMA
(HISTORICAL) (HISTORICAL) COMBINED
------------ ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME:
Loans ...................................................... $ 382,906 $ 47,730 $ 430,636
Securities and Interest-bearing Deposits.................... 239,547 12,054 251,601
----------- ----------- -----------
Total Interest Income...................................... 622,453 59,784 682,237
----------- ----------- -----------
INTEREST EXPENSE:
Deposits.................................................... 221,288 19,893 241,181
Borrowings.................................................. 155,730 2,715 158,445
----------- ----------- -----------
Total Interest Expense..................................... 377,018 22,608 399,626
----------- ----------- -----------
Net Interest Income........................................ 245,435 37,176 282,611
Provision for Loan Losses..................................... 6,800 1,303 8,103
----------- ----------- -----------
Net Interest Income After Provision for Loan Losses......... 238,635 35,873 274,508
----------- ----------- -----------
NONINTEREST INCOME:
Fees and Service Charges.................................... 43,181 3,693 46,874
Gain on Sale of Loans and Loan Servicing, Net............... 3,290 2,840 6,130
Gain on Sale of Securities, Net............................. 15,351 1,664 17,015
Other Noninterest Income.................................... 12,341 278 12,619
----------- ----------- -----------
Total Noninterest Income................................... 74,163 8,475 82,638
----------- ----------- -----------
NONINTEREST EXPENSES:
Salaries and Employee Benefits.............................. 76,861 15,645 92,506
Occupancy Expense of Premises............................... 16,295 2,773 19,068
Furniture and Equipment Expenses............................ 17,363 1,972 19,335
Marketing Expenses.......................................... 6,604 801 7,405
Foreclosed Property Expenses and Provisions, Net............ 576 27 603
Intangibles Amortization.................................... 9,642 391 10,033
Capital Securities Expense.................................. 14,708 -- 14,708
Dividends on Preferred Stock of Subsidiary Corporation...... 4,151 -- 4,151
Acquisition-related Expenses................................ 17,400 3,593 20,993
Other Operating Expenses.................................... 34,189 6,442 40,631
----------- ----------- -----------
Total Noninterest Expenses................................. 197,789 31,644 229,433
----------- ----------- -----------
Income before Income Taxes.................................... 115,009 12,704 127,713
Income Taxes.................................................. 44,544 5,150 49,694
----------- ----------- -----------
NET INCOME.................................................... $ 70,465 $ 7,554 $ 78,019
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic....................................................... $ 1.86 $ 1.07 $ 1.74(e)
============ ============ ============ -
Diluted..................................................... $ 1.83 $ 1.05 $ 1.70(e)
============ ============ ============
The pro forma combined statement of income has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the merger.
See accompanying notes to pro forma combined financial statements.
66
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
WEBSTER NECB PRO FORMA
(HISTORICAL) (HISTORICAL) COMBINED
------------ ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME:
Loans ...................................................... $ 192,893 $ 24,198 $ 217,091
Securities and Interest-bearing Deposits.................... 125,934 5,923 131,857
----------- ----------- -----------
Total Interest Income...................................... 318,827 30,121 348,948
----------- ----------- -----------
INTEREST EXPENSE:
Deposits.................................................... 113,693 10,291 123,984
Borrowings.................................................. 82,086 1,229 83,315
----------- ----------- -----------
Total Interest Expense..................................... 195,779 11,520 207,299
----------- ----------- -----------
Net Interest Income........................................ 123,048 18,601 141,649
Provision for Loan Losses..................................... 3,800 805 4,605
----------- ----------- -----------
Net Interest Income After Provision for Loan Losses......... 119,248 17,796 137,044
----------- ----------- -----------
NONINTEREST INCOME:
Fees and Service Charges.................................... 19,065 1,813 20,878
Gain on Sale of Loans and Loan Servicing, Net............... 2,565 873 3,438
Gain on Sale of Securities, Net............................. 10,126 1,417 11,543
Other Noninterest Income.................................... 5,380 165 5,545
----------- ----------- -----------
Total Noninterest Income................................... 37,136 4,268 41,404
----------- ----------- -----------
NONINTEREST EXPENSES:
Salaries and Employee Benefits.............................. 38,756 7,807 46,563
Occupancy Expense of Premises............................... 7,767 1,411 9,178
Furniture and Equipment Expenses............................ 8,638 987 9,625
Marketing Expenses.......................................... 4,029 452 4,481
Foreclosed Property Expenses and Provisions, Net............ 559 (114) 445
Intangibles Amortization.................................... 4,662 195 4,857
Capital Securities Expense.................................. 7,354 -- 7,354
Dividends on Preferred Stock of Subsidiary Corporation...... 2,076 -- 2,076
Acquisition-related Expenses................................ 17,400 190 17,590
Other Operating Expenses.................................... 17,070 3,300 20,370
----------- ----------- -----------
Total Noninterest Expenses................................. 108,311 14,228 122,539
----------- ----------- -----------
Income before Income Taxes.................................... 48,073 7,836 55,909
Income Taxes.................................................. 18,952 3,211 22,163
----------- ----------- -----------
NET INCOME.................................................... $ 29,121 $ 4,625 $ 33,746
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic....................................................... $ 0.77 $ 0.66 $ 0.75(e)
=========== ============ ============
Diluted..................................................... $ 0.75 $ 0.64 $ 0.73(e)
=========== ============ ============
The pro forma combined statement of income has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the merger.
See accompanying notes to pro forma combined financial statements.
67
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Represents the conversion to treasury stock and subsequent
retirement of NECB common stock owned by Webster.
(b) Represents the reversal of the tax effect of the gain on NECB
common stock currently owned by Webster.
(c) Represents the estimated merger costs that will be incurred by
Webster and NECB. These costs are not reflected in the pro forma
combined statements of income since these items do not have a
continuing impact on Webster. The following table summarizes the
financial impact of the additional accruals as reflected in the pro
forma combined statement of financial condition (in thousands):
Acquisition-related expenses:
Transaction costs (including investment bankers,
attorneys and accountants).......................... $1,900
Compensation (severance and related costs)................ 5,650
Writedown of fixed assets in preparation of sale.......... 1,250
Conversion and miscellaneous expenses..................... 3,800
Total acquisition-related expenses........................ 10,700
Total pre-tax adjustments................................. 12,600
Income tax effect......................................... (3,600)
Net after-tax adjustments.................................$ 9,000
The above estimated acquisition-related expenses that will be incurred
by Webster and NECB include only those expenses that are estimated to
be incurred as a result of the acquisition. Compensation costs include
estimated severance to NECB employees and other related expenses as a
result of merging administrative staff and consolidating overlapping
branch locations. The writedown of fixed assets represents the
estimated loss on the sale of fixed assets due to consolidated of
overlapping branch locations.
(d) Represents the issuance of Webster's common stock at the aggregate
$0.01 per share par value and the elimination of shares of NECB
treasury stock and the net effect on paid in capital.
(e) Pro forma combined Webster and NECB net income per common share
data have been determined based upon the combined historical net income
of Webster and NECB and the combined historical weighted average common
equivalent shares of Webster and NECB. For the purposes of this
determination, the historical weighted average common shares
outstanding of NECB was multiplied by 1.06, the exchange ratio. See
"The Merger - Exchange Ratio."
68
AMENDMENT TO WEBSTER'S CERTIFICATE OF INCORPORATION
Webster stockholders will also vote on the certificate amendment at the
Webster special meeting. Approval of the certificate amendment by Webster
shareholders is not a condition to Webster's or NECB's obligation to consummate
the merger.
Article 4 of Webster's certificate of incorporation presently provides
that the total number of all shares of all classes of stock which Webster has
the authority to issue is 53,000,000 shares, consisting of 50,000,000 shares of
common stock and 3,000,000 shares of preferred stock, par value $0.01 per share.
The proposed amendment to Article 4 of the certificate of incorporation is to
increase the number of authorized shares of common stock from 50,000,000 to
200,000,000. This increase will be effected by amending the first sentence of
Article 4 of the certificate of incorporation to read as follows:
"The total number of shares of all classes of the capital
stock which the Corporation has authority to issue is two hundred three
million (203,000,000), of which two hundred million (200,000,000) shall
be common stock, par value $.01 per share, amounting in the aggregate
to two million dollars ($2,000,000), and three million (3,000,000)
shall be serial preferred stock, par value $.01 per share, amounting in
the aggregate to thirty thousand dollars ($30,000)."
Of the 50,000,000 presently authorized shares of common stock,
38,117,759 shares were issued and outstanding on September 24, 1999, and there
were options outstanding to purchase 2,208,214 shares of Webster's common stock.
An additional 7,255,265 shares are expected to be newly issued in connection
with the merger and options for an additional 500,208 shares will be issued to
individuals who now hold options to buy NECB common stock issued by NECB.
Accordingly, at September 24, 1999, and giving effect to the merger, only
1,918,554 shares of authorized but not outstanding and unreserved shares of
common stock remained available for future issuance. At September 24, 1999, no
shares of Webster preferred stock were outstanding. Since the number of
authorized and unissued shares of Webster's common stock is already limited, if
the merger is consummated, substantially all of Webster's authorized shares will
have been issued or reserved for issuance.
The board of directors believes that the lack of authorized common
stock available for future issuance would unnecessarily limit Webster's ability
to pursue opportunities for future financings, acquisitions, mergers and other
transactions. Webster would also be limited in its ability to effectuate future
stock splits or stock dividends. The board of directors believes the increase in
the authorized shares is necessary to provide Webster with the flexibility to
act in the future without the delay and expense incidental to obtaining
shareholder approval each time an opportunity requiring the issuance of shares
may arise.
Other than with respect to the NECB transaction and currently
outstanding options issued by Webster to its directors and employees, as of the
date of this document and the stock plans under which those Webster options have
been issued, Webster has no plans or commitments that would involve the issuance
of the additional shares of common stock. The increase in the authorized shares
of Webster's common stock will allow the Webster board of directors to consider
and, if in the best interests of Webster shareholders, take advantage of merger
or acquisition opportunities. As part of its business strategy, Webster
continually considers potential strategic business combination and other
acquisition opportunities, and it is the policy of Webster not to comment on
such matters publicly until a definitive agreement has been reached regarding a
particular transaction. In addition, the discretion vested in the Webster board
of directors to authorize the issuance and sale of authorized but unissued
shares of Webster's common stock could, under some circumstances, be used to
discourage certain potential business combinations that some Webster
shareholders may believe to be in the best interests of Webster shareholders and
make more difficult management changes that may occur if a potential business
combination were successful, although Webster has no current intention to issue
shares of Webster's common stock for such purpose.
69
In general, the authorized but unissued shares of Webster's common
stock may be issued by the board of directors without a future shareholder vote.
Under applicable provisions of Delaware law and the Nasdaq rules, however,
issuances of additional shares of common stock, in transactions where Webster
may be issuing shares of common stock and securities convertible into common
stock exceeding 20% of the shares of common stock outstanding immediately prior
to such merger, will require the approval of the Webster shareholders.
The authorization of additional shares of common stock under this
proposal will have no dilutive effect upon the proportionate voting power of the
present shareholders of Webster. However, to the extent that shares are
subsequently issued to persons other than the present stockholders and/or in
proportions other than the proportion that presently exists, such issuance could
have a substantial dilutive effect on present shareholders with respect to
voting rights, book value of their stock and earnings per share.
THE WEBSTER BOARD RECOMMENDS THAT WEBSTER SHAREHOLDERS VOTE FOR THE
CERTIFICATE AMENDMENT. The affirmative vote of the holders of a majority of the
shares of Webster's common stock entitled to vote on this matter and present in
person or by proxy, at the special meeting, as long as a quorum is present.
70
Appendix A
A.G. EDWARDS & SONS, INC.
Investment Banking
One North Jefferson
St. Louis, Missouri 63103
September 27, 1999
Board of Directors
New England Community Bancorp, Inc.
Old Windsor Mall
Windsor, CT 06095
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders (the "Stockholders") of the outstanding shares of
common stock of New England Community Bancorp ("New England") of the Merger
Consideration (as defined below) to be received in the proposed merger (the
"Merger") of New England with and into Webster Financial Corporation ("Webster")
pursuant to an Agreement and Plan of Merger dated June 30, 1999 (the
"Agreement").
Pursuant to the Agreement, each share of the common stock of New England will be
converted into 1.06 shares of Webster common stock, and cash in lieu of
fractional shares (the "Merger Consideration").
A.G. Edwards & Sons, Inc. ("Edwards"), as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with New England through our engagement with the
Board of Directors with respect to the Merger. As part of our engagement for
this transaction, we will receive a fee for rendering our fairness opinion. We
will also receive a fee at the closing of the Merger equal to a percentage of
the total Merger Consideration received by the Stockholders. We are not aware of
any present or contemplated relationship between A.G. Edwards, New England, or
New England's directors and officers or the Stockholders, or Webster, its
directors, officers or stockholders, which, in our opinion, would affect our
ability to render a fair and independent opinion in this matter.
In connection with this opinion, we have, among other things:
(i) reviewed the Agreement and related documents;
(ii) reviewed expressions of interest for New England by other
potential bidders with the New England Board of Directors;
A-1
(iii) held discussions with management of New England and Webster
regarding the nature and extent of the terms of the Merger;
(iv) reviewed publicly available information regarding New England
and Webster which we deemed relevant, including New England's
and Webster's annual and quarterly reports, proxy statements
and other relevant filings with the Securities and Exchange
Commission through the fiscal period ended March 31, 1999, as
well as research reports and analyst opinions;
(v) reviewed financial projections for New England for fiscal
years 1999 through 2003 as provided by New England's
management;
(vi) investigated certain other internal operating and financial
information regarding New England and Webster supplied to us
by the management of New England and Webster, respectively,
concerning the business, operations and financial prospects of
New England and Webster, individually and as combined
entities;
(vii) reviewed the industry and market segments in which New England
and Webster each operate;
(viii) reviewed the reported price and trading activity for the
common stocks of New England and Webster;
(ix) reviewed publicly available information concerning certain
other companies that we believe to be relevant in evaluating
New England and Webster and the trading of their respective
securities;
(x) reviewed information relating to the nature and financial
terms of certain other mergers or acquisitions that we
consider relevant in evaluating the Merger; and
(xi) assessed such other information that we consider relevant to
our analysis.
In rendering our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all financial and other
information publicly available or that was supplied or otherwise made available
to us by New England and Webster. We have not been engaged to, and therefore we
have not, verified the accuracy or completeness of any such information. We have
been informed and assumed that the financial projections supplied to, discussed
with or otherwise made available to us reflect the best currently available
estimates and judgments of the managements of New England and Webster, in each
case on a stand-alone basis and after giving effect to the Merger, including,
without limitation, the projected cost savings and operating synergies resulting
from the Merger as projected by the management of Webster. We have not
independently verified such information or assumptions, nor do we express any
opinion with respect thereto.
We have not conducted a physical inspection of any of the properties or
facilities of New England or Webster or analyzed any loan or asset
documentation, nor have we made, obtained or reviewed any independent evaluation
or appraisals of any such properties or facilities or of any loans, investments
or financial assets and liabilities. Furthermore, we are not experts in the
evaluation of allowances for loan losses and we have not made an independent
evaluation of the adequacy of the allowances for loan losses of New England or
Webster or reviewed the loan portfolios of New England or Webster beyond what
was
A-2
required to conduct our due diligence review of the Merger. We have relied upon
the assurances of the management of New England and Webster that they are not
aware of any facts or circumstances that would make such information inaccurate
or misleading.
In performing our analysis, we made numerous assumptions with respect to the
industry and markets in which New England and Webster operate, general business
and economic conditions and government regulations, each of which are beyond the
control of New England or Webster. The analysis we performed is not necessarily
indicative of actual values or actual future results that may be significantly
more or less favorable than suggested by such analysis. We do not express any
opinion as to what the value of the Webster common stock will be when issued to
the Stockholders pursuant to the Merger, or the price at which Webster common
stock will trade subsequent to the Merger.
In rendering our opinion, we have assumed that the Merger will be accounted for
as a "pooling-of-interests" business combination in accordance with U.S.
Generally Accepted Accounting Principles and that the Merger will be consummated
on the terms contained in the Agreement, without any waiver of any material
terms or conditions by New England or Webster.
This letter is for the information of the New England Board of Directors and
does not constitute a recommendation as to how any Stockholder should vote with
respect to the Merger. This opinion may not be summarized, excerpted from or
otherwise publicly referred to without our prior written consent, except that
this opinion may be included in its entirety in any proxy materials distributed
to the Stockholders regarding the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Merger Consideration to be received, pursuant to the Agreement is
fair, from a financial point of view, to the New England Stockholders.
Very truly yours,
A.G. Edwards & Sons, Inc.
By:/s/ John H. Howland
John H. Howland
Vice President
- Investment Banking
A-3
APPENDIX B
HAS ASSOCIATES, INC.
76 Northeastern Blvd. Suite 34 P.O. Box 84
Nashua, N.H. 03062 Boston, MA 02171
September 27, 1999
Board of Directors
New England Community Bancorp, Inc.
176 Broad Street
Windsor, CT 06095
Members of the Board:
You have requested our opinion as to the fairness to the stockholders of
New England Community Bancorp, Inc., Windsor, Connecticut ("NECB"), from a
financial point of view, of the terms of the Agreement and Plan of Merger ("the
Merger") by and between NECB and Webster Financial Corporation ("Webster"), a
Connecticut corporation. Shareholders of NECB who do not exercise their right to
dissent will receive the per share merger consideration which will be payable in
common stock of Webster. The exchange ratio will be 1.05 shares of Webster
common stock for each share of NECB common stock.
In connection with its opinion, HAS, among other things: (1) reviewed NECB'
Annual Reports and related audited financial information for the three fiscal
years ended December 31, 1998; (2) reviewed Webster's Annual Reports and related
audited financial information for the three fiscal years ended December 31,
1998; (3) reviewed certain limited financial information relating to the
respective businesses, earnings, assets and prospects of NECB and Webster
furnished to HAS by senior management of NECB and Webster as well as projected
cost savings and related expenses expected to result from the Merger furnished
to it by senior management of NECB and Webster; (4) conducted certain limited
discussions with members of senior management of NECB and Webster concerning the
respective businesses, financial condition, earnings, assets, liabilities,
operations, regulatory condition, contingencies and prospects of NECB and
Webster and their respective views as to the future financial performance of
NECB, Webster and the Combined Company, as the case may be, following the
Merger; (5) reviewed the historical market prices and trading activity for NECB
and Webster Common Stock and compared them with that of certain publicly traded
companies which HAS deemed to be relevant; (6) compared the respective results
of operations of NECB and Webster with those of certain companies which HAS
deemed to be relevant; (7) compared the proposed financial terms of the Merger
contemplated by the Agreement with the financial terms of certain other mergers
and acquisitions which HAS deemed to be relevant; (8) reviewed the amount and
timing of the expected savings following the Merger as prepared, and discussed
with it; (9) considered, based upon information provided by Webster's senior
B-1
management, the pro forma impact of the Merger on the earnings and book value
per share, consolidated capitalization and certain balance sheet and
profitability ratios of Webster; (10) reviewed the most recent Agreement; and
(11) reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as HAS deemed necessary.
In conducting its review and arriving at its opinion, HAS relied upon and
assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and HAS did not attempt to
verify such information independently or undertake an independent appraisal of
the assets and liabilities of NECB. HAS relied upon the accuracy and opinion of
the audit reports prepared by the Bank's independent accountants. HAS assumes no
responsibility for the accuracy and completeness of the financial and other
information relied upon.
We have acted as financial advisor to the Board of NECB in connection with
the Merger and will receive a fee for this service.
In reliance upon and subject to the foregoing, it is our opinion that, as
of September 27, 1999, the per share merger consideration to be received by the
shareholders of NECB and the financial terms of the Merger were, and as of the
date hereof, such terms are, fair, from a financial point of view, to the
current shareholders of NECB.
This letter is furnished to you in connection with the Merger and we
consent to its inclusion in the Registration Statement and proxy solicitation
material.
Sincerely,
/s/ HAS Associates Inc.
HAS Associates, Inc.
B-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to the provisions of Article 6 of Webster's
certificate of incorporation, and the provisions of Article IX of the Webster's
bylaws, as amended.
Webster is a Delaware corporation subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware (the "Delaware Corporation Law"). Section 145 of the Delaware
Corporation Law provides for the indemnification, under certain circumstances,
of persons who are or were directors, officers, employees or agents of Webster,
or are or were serving at the request of Webster in such a capacity with another
business organization or entity, against expenses, judgments, fines and amounts
paid in settlement in actions, suits or proceedings, whether civil, criminal,
administrative, or investigative, brought or threatened against or involving
such persons because of such person's service in any such capacity. In the case
of actions brought by or in the right of Webster, Section 145 provides for
indemnification only of expenses, and only upon a determination by the Court of
Chancery or the court in which such action or suit was brought that, in view of
all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses.
Webster's bylaws provide for indemnification of directors, officers,
trustees, employees and agents of Webster, and for those serving in such roles
with other business organizations or entities, in the event that such person was
or is made a party to (or is threatened to be made a party to) any civil,
criminal, administrative, arbitration or investigative action, suit, or
proceeding (other than an action by or in the right of Webster) by reason of the
fact that such person is or was serving in such a capacity for or on behalf of
Webster. Webster will indemnify any such person against expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid in settlement if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of Webster, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Similarly, Webster shall indemnify such persons for
expenses reasonably incurred and settlements reasonably paid in actions, suits,
or proceedings brought by or in the right of Webster, if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of Webster; provided, however, that no
indemnification shall be made against expenses in respect of any claim, issue,
or matter as to which such person is adjudged to be liable to Webster or against
amounts paid in settlement unless and only to the extent that there is a
determination made by the appropriate party set forth in the bylaws that the
person to be indemnified is, in view of all the circumstances of the case,
fairly and reasonably entitled to indemnity for such expenses or amounts paid in
settlement. In addition, Webster may purchase and maintain insurance on behalf
of any person who is or was a director, officer, trustee, employee, or agent of
Webster or is acting in such capacity for another business organization or
entity at Webster's request, against any liability asserted against such person
and incurred in such capacity, or arising out of such person's status as such,
whether or not Webster would have the power or obligation to indemnify him
against such liability under the provisions of Article IX of Webster's bylaws.
Article 6 of Webster's restated certificate of incorporation provides
that no director will be personally liable to Webster or its shareholders for
monetary damages for breach of fiduciary duty as a director other than liability
for any breach of such director's duty of loyalty to Webster or its
shareholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for any payment of a
dividend or approval of a stock repurchase that is illegal under Section 174 of
the Delaware Corporation Law, or for any transaction from which the director
derived an improper personal benefit.
II-1
The foregoing indemnity and insurance provisions have the effect of
reducing directors' and officers' exposure to personal liability for actions
taken in connection with their respective positions.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Webster pursuant to the foregoing provisions, or otherwise, Webster has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Webster of
expenses incurred or paid by a director, officer or controlling person of
Webster in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, Webster will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-2
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
Exhibit
No. Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of June 29, 1999, by and
between Webster Financial Corporation ("Webster") and New England
Community Bancorp, Inc. ("NECB").
2.2 Stock Option Agreement, dated as of June 29, 199, between NECB and
Webster.
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the
securities registered hereunder, including the consent of that
firm.
8.1 Opinion of Day, Berry and Howard LLP as to certain tax matters,
including the consent of that firm.
8.2 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax
matters, including the consent of that firm.
10.1 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and David A. Lentini, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(g) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.2 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Frank A. Falvo, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(j) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.3 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Donat A. Fournier, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(h) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.4 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Anson C. Hall, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997(filed
as Exhibit 10(I) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.5 Non-Compete Agreement, dated as of June 29, 1999, by and between
David A. Lentini and Webster Financial Corporation.
10.6 Non-Compete Agreement, dated as of June 29, 1999, by and between
Frank A. Falvo and Webster Financial Corporation.
10.7 Non-Compete Agreement, dated as of June 29, 1999, by and between
Donat A. Fournier and Webster Financial Corporation.
10.8 Non-Compete Agreement, dated as of June 29, 1999, by and between
Anson C. Hall and Webster Financial Corporation.
II-3
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5).
23.2 Consent of Day, Berry and Howard LLP (included as part of Exhibit
8).
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included as part of
Exhibit 8).
23.4 Consent of KPMG LLP.
23.5 Consent of Shatswell, MacLeod & Company, P.C.
23.6 Consent of A.G. Edwards, Inc.
23.7 Consent of HAS Associates, Inc.
24 Power of attorney (included on signature page).
99.1 Form of Webster proxy card.
99.2 Form of NECB proxy card
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(B) Not required.
(C) See Appendix A and Appendix B to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS.
(a) Webster hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of the
securities offered would not exceed that which was
registered) and any deviation from the low or high end
of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule
424(b) (Section 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of the
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or
II-4
any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) Webster hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing
of Webster's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(c) Webster hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c),
Webster undertakes that such reoffering prospectus will
contain the information called for by the applicable
registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information
called for by the other Items of the applicable form.
(d) Webster undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii)
that purports to meet the requirements of section 10(a)(3)
of the Securities Act of 1933 and is used in connection with
an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and
that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(e) The undertaking concerning indemnification is included as
part of the response to Item 20.
(f) Webster hereby undertakes to respond to requests for
information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail
or other equally prompt means. This includes information
contained in documents filed subsequent to the effective
date of the registration statement through the date of
responding to the request.
(g) Webster hereby undertakes to supply by means of a
post-effective amendment all information concerning a
transaction, and the company being acquired involved
therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Waterbury,
State of Connecticut, on September 28, 1999.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
------------------------------------
James C. Smith
Chairman and Chief Executive Officer
Each person whose signature appears below James C. Smith or John V.
Brennan, jointly and severally, each in his own capacity, as true and lawful
attorneys-in-fact, with full power or substitution in such person's name, place
and stead, in any and all capacities to sign any amendments to this Registration
Statement on Form S-4 and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on September 23, 1999.
Name: Title:
/s/ James C. Smith Chairman and Chief Executive Officer
- ------------------------------ (Principal Executive Officer)
James C. Smith
/s/ John v. Brennan Executive Vice President, Chief Financial
- ------------------------------ Officer and Treasurer
John V. Brennan (Principal Financial Officer and
Principal Accounting Officer)
/s/ Richard H. Alden Director
- ------------------------------
Richard H. Alden
/s/ Achille A. Apicella Director
- ------------------------------
Achille A. Apicella
/s/ Joel S. Becker Director
- ------------------------------
Joel S. Becker
/s/ O. Joseph Bizzozero, Jr. Director
- ------------------------------
O. Joseph Bizzozero, Jr.
II-6
/s/ George T. Carpenter Director
- ------------------------------
George T. Carpenter
/s/ John J. Crawford Director
- ------------------------------
John J. Crawford
/s/ Harry P. DiAdamo, Jr. Director
- ------------------------------
Harry P. DiAdamo, Jr.
/s/ Robert A. Finkenzeller Director
- ------------------------------
Robert A. Finkenzeller
/s/ C. Michael Jacobi Director
- ------------------------------
C. Michael Jacobi
/s/ John F. McCarthy Director
- ------------------------------
John F. McCarthy
/s/ Sister Marguerite Waite Director
- ------------------------------
Sister Marguerite Waite
II-7
EXHIBIT INDEX
Exhibit
No. Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of June 29, 1999, by and
between Webster Financial Corporation ("Webster") and New England
Community Bancorp, Inc. ("NECB").
2.2 Stock Option Agreement, dated as of June 29, 199, between NECB and
Webster.
5 Opinion of Hogan & Hartson L.L.P. as to the validity of securities
registered hereunder, including the consent of that firm.
8.1 Opinion of Day, Berry and Howard LLP as to certain tax matters,
including the consent of that firm.
8.2 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax
matters, including the consent of that firm.
10.1 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and David A. Lentini, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(g) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.2 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Frank A. Falvo, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997(filed
as Exhibit 10(j) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.3 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Donat A. Fournier, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(h) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.4 Executive Retention Agreement, dated as of June 29, 1999 by and
between NECB and Anson C. Hall, amending provisions of the
Executive Retention Agreement, dated as of October 16, 1997 (filed
as Exhibit 10(i) to NECB's Annual Report on Form 10-K filed with
the SEC on March 31, 1998 and incorporated by reference in this
document).
10.5 Non-Compete Agreement, dated as of June 29, 1999, by and between
David A. Lentini and Webster Financial Corporation.
10.6 Non-Compete Agreement, dated as of June 29, 1999, by and between
Frank A. Falvo and Webster Financial Corporation.
10.7 Non-Compete Agreement, dated as of June 29, 1999, by and between
Donat A. Fournier and Webster Financial Corporation.
10.8 Non-Compete Agreement, dated as of June 29, 1999, by and between
Anson C. Hall and Webster Financial Corporation.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5).
23.2 Consent of Day, Berry and Howard LLP (included as part of Exhibit
8).
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included as part of
Exhibit 8).
23.4 Consent of KPMG LLP.
23.5 Consent of Shatswell, MacLeod & Company, P.C.
23.6 Consent of A.G. Edwards, Inc.
23.7 Consent of HAS Associates, Inc.
24 Power of attorney (included on signature page).
99.1 Form of Webster proxy card.
99.2 Form of NECB proxy card
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