<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
WESTPORT BANCORP, INC.
......................................................................
(Name of Issuer)
COMMON STOCK, PAR VALUE $.01 PER SHARE
......................................................................
(Title of Class of Securities)
961243102
......................................................................
(CUSIP Number)
THOMAS P. BILBAO
97 SHORE ROAD
OLD GREENWICH, CT 06970
PHONE 203 222-6911
......................................................................
(Name, Address and Telephone Number of Person to Receive Notices and
Communications)
April 29, 1995
......................................................................
(Date of Event which Requires Filing of this Statement)
Check the following box if a fee is being paid with this statement /X/
Cover Page 1 of 2
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1) Names of Reporting Persons, S.S. or I.R.S. Identification
Nos. of Above Persons................................
THOMAS P. BILBAO
- ---------------------------------------------------------------------------
2) Check the Appropriate Box if a Member of a Group (see
Instructions)............................................
(a) . . . . . . . . . . . . . . . . . . . . . . . . .
(b) . . . . . . . . . . . . . . . . . . . . . . . . .
- ---------------------------------------------------------------------------
3) SEC Use Only.............................................
- ---------------------------------------------------------------------------
4) Source of Funds (See Instructions).................. PF
- ---------------------------------------------------------------------------
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e).................
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6) Citizenship or Place of Organization................ U.S.
- ---------------------------------------------------------------------------
Number of (7) Sole Voting Power . . . . . . . . . 204,267
Shares Bene- --------------------------------------------------------------
ficially (8) Shared Voting Power . . . . . . . . 0
Owned by --------------------------------------------------------------
Each Report- (9) Sole Dispositive Power. . . . . . . 204,267
ing Person --------------------------------------------------------------
With (10) Shared Dispositive Power. . . . . . 0
- ---------------------------------------------------------------------------
11) Aggregate Amount Beneficially Owned by Each Reporting
Person . . . . . . . . . . . . . . . . . . 204,267
- ---------------------------------------------------------------------------
12) Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions). . . . . . . . . . . . . .
- ---------------------------------------------------------------------------
13) Percent of Class Represented by Amount in Row (11). . 5.8%
- ---------------------------------------------------------------------------
14) Type of Reporting Person (See Instructions). . . . . . IN
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Cover Page 2 of 2
<PAGE> 3
CUSIP NO. 961243102
WESTPORT BANCORP, INC.
SCHEDULE 13D
THOMAS P. BILBAO
Page 1 of 5 Pages
ITEM 1. SECURITY AND ISSUER
This statement relates to the Common Stock of Westport
Bancorp, Inc., Par Value $.01 Per Share (Note: all shares of
Westport Bancorp, Inc. Series A Convertible Preferred Stock
owned by Mr. Bilbao being treated herein as fully converted
based on 1 Preferred share equaling 100 Common shares) issued
by Westport Bancorp, Inc. which has its principal executive
offices at 87 Post Road East, Westport, CT 06880.
ITEM 2. IDENTITY AND BACKGROUND
(a) This statement is filed by Thomas P. Bilbao, a
natural person.
(b) The residence address of Mr. Bilbao is 97 Shore Road,
Old Greenwich, CT 06970.
(c) Mr. Bilbao is an Executive Vice President and Chief
Operating Officer of Westport Bancorp, Inc., a
Delaware holding company and The Westport Bank &
Trust Company, a bank and trust company chartered
under Connecticut law. Both companies maintain
executive offices at 87 Post Road East, Westport, CT
06880.
(d) Mr. Bilbao has never been convicted in a criminal
proceeding.
(e) Mr. Bilbao has never been a party to any judicial or
administrative civil proceeding relating to federal
or state securities laws.
(f) Mr. Bilbao is a United States of America citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The source and amount of funds or other consideration used or
to be used by Mr. Bilbao in making purchases of the common
stock of Westport Bancorp, Inc. of which he is the beneficial
owner are as follows:
25,000 shares represent Common Stock which Mr. Bilbao would
own if he were to convert all of his 250 shares of Series A
Convertible Preferred Stock, purchased directly from Westport
Bancorp, Inc. with $25,000 of personal funds and which can
<PAGE> 4
CUSIP NO. 961243102
WESTPORT BANCORP, INC.
SCHEDULE 13D
Thomas P. Bilbao
Page 2 of 5 Pages
be converted into Common Stock without further payment; 12,500
shares represent Common Stock which Mr. Bilbao would own if he
were to exercise all of his Warrants, effective January 1,
1994, to purchase Common Stock by paying $0.75 per common
share, as set forth in the Warrant Certificate attached
hereto. The Warrants were acquired by Mr. Bilbao with the
Series A Convertible Preferred Stock purchase at no additional
cost; and
166,667 shares represent Common Stock which Mr. Bilbao would
own if he were to exercise all of his stock options to
purchase Common Stock of Westport Bancorp, Inc. at $2.00 per
share pursuant to an Option Agreement dated December 17, 1992,
which options were granted as consideration for Mr. Bilbao's
employment and were exercisable within 60 days of the date of
this schedule.
Note: 100 shares are held for Mr. Bilbao by the Westport
Bancorp ESOP which were purchased pursuant to the terms of the
ESOP.
ITEM 4. PURPOSE OF TRANSACTION
The shares beneficially owned by Mr. Bilbao are, in fact, not
actually owned by Mr. Bilbao and will not be actually owned by
him until such time as Mr. Bilbao does any one or more of the
following: A) exercises his rights to convert all of his
Convertible Preferred Stock into Common Stock of Westport
Bancorp, Inc.; B) exercises his rights under all of the
Warrants he holds as owner of Convertible Preferred Stock; and
C) exercises all of the options he is presently entitled to
exercise pursuant to an Option Agreement between himself and
Westport Bancorp, Inc.
The aforesaid Option Agreement provides that Mr. Bilbao will
become entitled to exercise certain option rights to purchase
250,000 shares, therein fully described and generally
summarized as follows: two-thirds of the options are known as
"Group A Options" which become exercisable over a period of
five years, twenty percent of such options being exercisable
each year commencing April 29, 1993 and continuing thereafter
through April 29, 1997, with all Group A options
<PAGE> 5
CUSIP NO. 961243102
WESTPORT BANCORP, INC.
SCHEDULE 13D
Thomas P. Bilbao
Page 3 of 5 Pages
exercisable until December 16, 2002, when they will expire;
and one-third of the options are known as "Group B Options"
which become exercisable over a period of three years, sixty
percent of the options becoming exercisable on January 1,
1994, and twenty percent becoming exercisable on January 1,
1995 and 1996, respectively, with expiration of the Group B
Options effective on December 16, 2002.
The Convertible Preferred Stock of Westport Bancorp, Inc.
owned by Mr. Bilbao may be converted into shares of Westport
Bancorp, Inc. Common Stock on the basis of one Convertible
Preferred share upon conversion becoming one hundred shares of
Common Stock.
The Westport Bancorp, Inc. Warrants owned by Mr. Bilbao can be
exercised by him to purchase shares of Westport Bancorp, Inc.
Common Stock upon payment of $.75 per share.
Mr. Bilbao also participates in the Westport Bank & Trust
Company employee benefit plan known as the Employee Stock
Ownership Plan (ESOP) and he may be entitled to acquire
additional shares of Westport Bancorp, Inc. as a participant
in the ESOP.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The aggregate number and percentage of shares of Westport
Bancorp, Inc. Common Stock beneficially owned by Mr. Bilbao is
204,267 shares which represent 5.8% of the Common Stock of
Westport Bancorp, Inc.
(b) As to the number of shares of Westport Bancorp, Inc.
Common Stock beneficially owned by Mr. Bilbao he has:
sole power to vote or to
direct the vote as to. . . . . 204,267 shares;
shared power to vote or to
direct the vote as to. . . . . 0 shares;
<PAGE> 6
CUSIP NO. 961243102
WESTPORT BANCORP, INC.
SCHEDULE 13D
Thomas P. Bilbao
Page 4 of 5 Pages
sole power to dispose or to
direct the disposition of. . . 204,267 shares; and
shared power to dispose or to
direct the disposition of. . . 0 shares.
(c) On January 1, 1995, Mr. Bilbao became entitled to
exercise options to purchase 16,667 shares of Westport Bancorp
Common Stock and on April 29, 1995, Mr. Bilbao became further
entitled to exercise options to purchase 33,333 shares of
Westport Bancorp, Inc. Common Stock for $2.00 per share
pursuant to the terms of his Option Agreement with Westport
Bancorp, Inc. On January 1, 1994, Mr. Bilbao also became
entitled to exercise rights to purchase 12,500 shares of
Westport Bancorp, Inc. Common Stock for $.75 per share
pursuant to Warrants owned by Mr. Bilbao.
(d) This subparagraph does not apply to Mr. Bilbao.
(e) This subparagraph does not apply to Mr. Bilbao.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
There are no contracts, arrangements, understandings or
relationships between Mr. Bilbao and any other person or
entity or group of persons or entities with respect to any
securities of Westport Bancorp, Inc., other than the contracts
set forth in Items 3 and 4 above.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Appended to this statement are copies of Mr. Bilbao's Option
Agreement with Westport Bancorp, Inc. dated December 17, 1992;
a copy of Mr. Bilbao's Warrant Certificate; and a copy of the
Westport Bancorp, Inc. Prospectus for 8,067,871 Shares of
Common Stock, Par Value $.01 Per Share, which contains
a description of both the Convertible Preferred Stock of
Westport Bancorp, Inc., shares of which are owned by Mr.
Bilbao, as well as a description of the
<PAGE> 7
CUSIP NO. 961243102
WESTPORT BANCORP, INC.
SCHEDULE 13D
Thomas P. Bilbao
Page 5 of 5 Pages
Warrants owned by Mr. Bilbao, which were issued by Westport
Bancorp, Inc. in conjunction with its offering of Convertible
Preferred Stock.
NOTE: The foregoing computations of percent of class represented and percent of
the Common Stock of Westport Bancorp. Inc., are based on the status of Common
Stock issued before April 24, 1995, at which time other shareholders began to
exercise warrants to purchase Common Stock of Westport Bancorp, Inc., and to
convert Convertible Preferred Shares into Common Shares.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
May 8, 1995
......................................................................
Date
s/Thomas P. Bilbao
......................................................................
Signature
Thomas P. Bilbao
......................................................................
Name/Title
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE
FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001)
<PAGE> 8
EXHIBIT INDEX
--------------
Exhibit
No. Description
------- -----------
Ex-99.A Appended to this statement are copies of Mr. Bilbao's Option
Agreement with Westport Bancorp, Inc. dated December 17, 1992;
a copy of Mr. Bilbao's Warrant Certificate; and a copy of the
Westport Bancorp, Inc. Prospectus for 8,067,871 Shares of
Common Stock, Par Value $.01 Per Share, which contains
a description of both the Convertible Preferred Stock of
Westport Bancorp, Inc., shares of which are owned by Mr.
Bilbao, as well as a description of the Warrants owned by Mr.
Bilbao, which were issued by Westport Bancorp, Inc. in
conjunction with its offering of Convertible Preferred Stock.
<PAGE> 1
STOCK OPTION PLAN AND AGREEMENT
This Stock Option Plan and Agreement ("Agreement") is made effective
the 17th day of December, 1992, by and between WESTPORT BANCORP, INC.
("Bancorp"), a Delaware corporation having its principal place of business in
Westport, Connecticut, and THOMAS P. BILBAO (the "Executive"), an individual
residing in the Town of Fairfield, Connecticut.
THE BACKGROUND OF THIS AGREEMENT IS AS FOLLOWS:
Executive is the Executive Vice President and Chief Operating Officer
of Bancorp and of The Westport Bank & Trust Company (the "Bank"). To provide
Executive with ongoing incentives for superior performance, the Board of
Directors of Bancorp has approved the grant of stock options to Executive,
subject to the condition that the grant of the stock options be approved by
Bancorp's shareholders at the 1993 Annual Meeting of Bancorp's shareholders.
The exercise price of the stock options will be the fair market value of
Bancorp common stock on the date of grant, December 17, 1992.
In consideration of the mutual covenants herein contained, Bancorp and
Executive agree as follows:
1. Grant of Stock Options. Bancorp grants to Executive options to
purchase a total of 250,000 shares of Bancorp common stock, par value $0.01, at
the price and on the terms determined as provided herein (the "Options").
This grant is conditioned upon the approval of the grant by the affirmative
vote of the holders of a majority of the votes present or represented by proxy
at the 1993 Annual Meeting of Bancorp Shareholders, If the grant is not
approved, it shall immediately and without further action be and become null,
void and without further effect on the date of the 1993 Annual Meeting of
Bancorp Shareholders.
2. Option Price. The purchase price per share of the Bancorp common
stock covered by the Options shall be $2.00 per share, the fair market value of
Bancorp common stock on December 17, 1992 (subject to adjustment as provided in
Section 10 of this Agreement).
3. Vesting. If the Options are approved by the shareholders of
Bancorp, the Options shall become exercisable in the following manner:
(i) Two-thirds of the New Options (the "Group A Options")
shall become exercisable over a period of five years, beginning on
April 29, 1993. Twenty percent of the
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Group A Options shall become exercisable on April 29, 1993, and twenty
percent shall become exercisable on each April 29th thereafter through
April 29, 1997.
(ii) The remaining one-third of the New Options (the "Group B
Options") shall become exercisable over a period of three years,
beginning on January 1, 1994. Sixty percent of the Group B Options
shall become exercisable on January 1, 1994, twenty percent shall
become exercisable on January 1, 1995, and the remaining twenty
percent shall become exercisable on January 1, 1996.
In determining the number of Options that become exercisable or that expire
(see Section 4 of this Agreement) on any given date, all fractions shall be
rounded to the nearest whole number. Notwithstanding the foregoing, all of the
Options that have not already expired or been exercised shall become
exercisable immediately in the event that a Change in Control occurs. For
purposes of this Agreement, the term "Change in Control" shall have the meaning
assigned thereto in Section 9(a) of the Employment Agreement dated June 16,
1992 by and among Executive, Bancorp and the Bank.
4. Term of Options. The Options are granted and made effective on
the date on which the Options become exercisable pursuant to Section 3 of this
Agreement. The Group A Options shall terminate, expire, and no longer be
exercisable, to the extent not previously exercised or surrendered, on December
16, 2002, unless sooner terminated pursuant to the provisions of this
Agreement. The Group B Options shall terminate, expire, and no longer be
exercisable on December 16, 2002, unless sooner terminated pursuant to the
provisions of this Agreement. The period during which Options will be
exercisable hereunder shall be referred to herein as the "Option Period".
5. Exercise of Options. During the Option Period, Executive (or such
other person as is provided in Section 10) may exercise Options only by
delivering written notice to Bancorp setting forth Executive's irrevocable
election to purchase all or any part of the shares of Bancorp common stock that
are the subject of the Options (the "Optioned Shares"). The notice must be
accompanied by payment to Bancorp of the full purchase price for the shares of
Bancorp common stock being purchased, at the election of Executive: (a) in cash
or by certified check; (b) by tendering to Bancorp shares of Bancorp common
stock, then owned by him for a period of not less than six (6) months, having a
fair market value equal to the cash exercise price applicable to the purchase
price of the shares as to which an option is being exercised; or (c) partly in
cash and partly in shares of the Bancorp common stock valued at fair market
value (defined in Section 7). Executive shall not have any rights of a
shareholder of Bancorp with respect to any Optioned Shares except insofar as
the Option has been exercised with respect to such Optioned Shares. No
Optioned Shares shall be issued until full payment in accordance with this
Section 5 shall have been received.
<PAGE> 3
PAGE 3
6. Restriction on Exercise. The Options may not be exercised if the
issuance of the shares of Bancorp common stock upon such exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation. As a condition to the exercise of the Options,
Bancorp may require Executive to make any reasonable representation and
warranty to Bancorp as may be required by any applicable law or regulation.
Executive understands and agrees that the foregoing representations and
warranties shall be relied upon and shall be specifically enforceable by
Bancorp.
7. Determination of Fair Market Value. For purposes of this
Agreement, the fair market value of Bancorp common stock shall be determined as
of a particular date: (i) if the stock is listed or admitted to trading on a
national securities exchange or reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), the closing price of
Bancorp common stock reported by such exchange or NASDAQ for the business day
immediately preceding the day on which the New Option is exercised (or, if no
closing price was reported for such day, then the closing price for the next
preceding day for which a closing price was reported), or (ii) if the stock is
not then listed or admitted to trading on a national securities exchange or
reported by NASDAQ, such amount as shall be determined by the Board of
Directors of Bancorp on the basis of such factors as it deems relevant.
8. Termination. Executive specifically acknowledges that the Options
shall automatically terminate (i) immediately if the condition of Section 1 is
not timely satisfied; (ii) upon termination of Executive's employment with
Bancorp, if Executive shall voluntarily leave the employ of Bancorp or if
Executive's employment shall be terminated for cause, as defined in Section
8(a) of the Employment Agreement (iii) 90 days after the termination of
Executive's employment with Bancorp for any reason other than disability, death
or cause; and (iv) one year after Executive's death or disability. No Optioned
Shares shall vest after the date of Executive's termination of employment.
For purposes of this Agreement, employment by any direct or indirect subsidiary
of Bancorp shall be deemed to be employment by Bancorp.
9. Non-Transferability of Options. The Options may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised only by Executive during his life, and in the
event of his death while employed by Bancorp, only by Executive's legal
representative or the legal representative of his estate. The terms of the
Options shall be binding upon the executors, administrators, heirs, and
successors of Executive.
10. Effect of Change of Stock Subject to the Options. If during the
term of this Agreement, shares of stock of Bancorp shall at any time be changed
or exchanged by reason of a stock dividend, split-up, combination of shares,
recapitalization,
<PAGE> 4
PAGE 4
merger, consolidation or other corporate reorganization, the number and class
of shares subject to the Options and constituting Optioned Shares, and the
purchase price of Optioned Shares as set forth in this Agreement, shall be
appropriately adjusted (to the nearest whole share in each case) so as to
maintain the proportionate number of Optioned Shares without changing the
aggregate option price. The determination of Bancorp's Board of Directors as
to the terms of any such adjustment shall be conclusive and binding.
11. Representations. Executive represents and warrants to Bancorp
that he is acquiring the Options and will be acquiring the shares of Bancorp
common stock subject to the Options for his own account for investment and not
with a view toward distribution thereof.
12. Tax Considerations.
(a) Executive acknowledges that (i) pursuant to the Internal
Revenue Code of 1986, as amended and currently in effect (the "Code"), the
difference between the fair market value of the Optioned Shares on the date he
exercises an Option and the exercise price of the Option will be taxable income
to him in the year he exercises the Option; and (ii) Bancorp may be required to
withhold federal, state or local taxes with respect to the compensation income,
if any, realized by the Executive upon an exercise of Options. If Bancorp
determines that such withholding is required, Executive agrees either to
provide Bancorp at the time of any exercise of an Option with funds equal to
the amount of taxes that Bancorp determines must be withheld or to make other
arrangements satisfactory to Bancorp regarding such payment, including
authorizing Bancorp to withhold such amounts from any payments to which he is
entitled. All matters with respect to the withholding of taxes resulting from
an exercise of Options shall be determined by the Board of Directors of Bancorp
and such determination shall be conclusive and binding.
(b) The Options do not constitute and are not intended to be
"incentive stock options" within the meaning of Section 422A of the Code.
13. Securities Considerations. Executive acknowledges that the
Options are subject to the approval of Bancorp's shareholders.
14. Corporate Law Status of Shares. The shares of Bancorp common
stock issuable upon exercise of the Options in accordance herewith, upon
issuance, delivery and payment for such shares in accordance with Section 5,
shall constitute validly issued outstanding shares of capital stock of Bancorp.
When so paid for, such shares will be fully paid and nonassessable. Throughout
the Option Period (subject to the early termination thereof under Section 9),
Bancorp shall have full legal right and authority to issue and deliver the
Optioned Shares as contemplated by this
<PAGE> 5
Page 5
Agreement. Executive shall have none of the rights of a shareholder until the
Optioned Shares are in fact issued and delivered to him.
15. Reservation of Shares. During the Option Period, Bancorp shall
reserve from its authorized and unissued common stock, or from its treasury
stock (or part from both), a sufficient number of shares to provide for the
delivery of the Optioned Shares upon exercise of the Options in accordance
herewith and subject to the provisions of Section 5. If the Options should
expire, lapse or otherwise become unexercisable for any reason specified in or
contemplated by this Agreement, to the extent that the Options shall not have
been exercised as to the full number of the Optioned Shares subject thereto,
the unpurchased Optioned Shares shall be deemed freed automatically from any
such reservation.
16. Resolution of Controversies. Any dispute or disagreement
that may arise under, or in any way may relate to, the interpretation,
construction or application of this Agreement shall be subject to determination
by the Bancorp Board of Directors. Any determination made by the Bancorp
Board of Directors shall be final, binding and conclusive for all purposes.
17. Notices. All notices, requests, demands, or other communications
required, permitted or contemplated by this Agreement shall be deemed
effectively served, delivered or otherwise made (a) upon receipt if manually
delivered, or (b) upon the delivery date shown on the returned receipt (or if
delivery is refused on the date presented for delivery) if mailed by the United
States registered or certified mail, postage prepaid, return receipt requested,
and if intended for Bancorp, directed to Bancorp at 87 Post Road East,
Westport, Connecticut 06880; or if intended for Executive, directed to him at
his address as set forth most recently on Bancorp's employment records. Either
party may, by notice delivered in accordance with this Section 17, notify the
other party of a different address for all future notices, which will be
effective upon delivery to the other party.
18. Modification and Waiver. No modification or waiver of any of the
provisions of this Agreement shall be binding upon either Bancorp or Executive
unless made in writing and signed by the Executive and countersigned on behalf
of Bancorp by an executive officer of Bancorp other than Executive.
19. Acceptance. The Options shall be subject to all of the terms and
provisions of this Agreement. Executive hereby agrees to accept as binding,
conclusive, and final all decisions or interpretations of the Board of
Directors of Bancorp upon any questions arising under the Options.
20. Governing Law. This Agreement shall be governed by the laws of
the United States, where applicable, and otherwise by the laws of the State of
Delaware.
<PAGE> 6
Page 6
WESTPORT BANCORP, INC,
Attest:
[sig]
- ---------------------------------- By: /s/ DAVID A. ROSOW
----------------------------
David A. Rosow
Chairman of the
Board of Directors
Attest:
[sig] /s/ THOMAS P. BILBAO
- ---------------------------------- ------------------------------
Thomas P. Bilbao
<PAGE> 7
SHARES OF COMMON STOCK ACQUIRED UPON THE EXERCISE OF THIS WARRANT CERTIFICATE
(i) HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE, (ii) MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS SO REGISTERED OR QUALIFIED OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION
OR QUALIFICATION IS AVAILABLE, AND (iii) ARE SUBJECT TO THE CONDITIONS AND
RESTRICTIONS ON TRANSFER SPECIFIED IN THIS WARRANT CERTIFICATE. NO TRANSFER
OF ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT CERTIFICATE SHALL BE
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
No. of Warrants: 12,500 Warrant No. 22
WARRANT CERTIFICATE
To Purchase Shares of Common Stock of
WESTPORT BANCORP, INC.
Not Transferable or Exercisable Except
Upon the Conditions Herein Specified
VOID AFTER December 31, 1996
THIS IS TO CERTIFY THAT, for value received, Thomas P. Bilbao
Individual Retirement Account or his registered assigns (the "Holder"), is
entitled at any time on or after January 1, 1994, and on or before the
Expiration Date, to purchase from WESTPORT BANCORP, INC., a bank holding
company organized and existing pursuant to the laws of the State of Delaware,
12,500 shares of Common Stock, in whole or in part, at a purchase price of $.75
per share, all on the terms and conditions and pursuant to the provisions
hereinafter set forth.
The Warrants shall be void and all rights represented hereby shall
cease on the Expiration Date (as defined in Section 1).
The Warrants are part of an authorized issue of 2,335,000 Warrants,
representing the right to purchase an aggregate minimum of 2,335,000 shares of
Common Stock reserved for issuance by the Company upon the exercise of the
Warrants.
Certain terms used in this Warrant are defined in Section 1 hereof.
<PAGE> 8
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The Warrants are subject to the following provisions, terms and
conditions:
Section 1. Definitions. The terms defined in this Section, whenever
used in this Warrant, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified.
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after February 14, 1992, other than Warrant Stock,
Employee Stock, Rights Distribution Stock and Series A Convertible Preferred
Stock.
"Commission" shall mean the Securities and Exchange Commission, or any
other Federal agency then administering the Securities Act.
"Common Stock" shall mean the Company's authorized common stock, $.01
par value per share, as constituted as of the close of business on February 14,
1992, and any stock into which such common stock may thereafter be changed on
one or more or a succession of occasions as a result of a stock split, stock
dividend or combination or reclassification of shares, or through a merger,
consolidation, reorganization or recapitalization, or by any other means, and,
in addition to such common stock, shall also include capital stock of the
Company of any other class, which is not preferred as to dividends or assets
over any other class of stock of the Company and which is not subject to
redemption; provided that the shares of Common Stock receivable upon exercise
of the Warrants shall include only shares designated as Common Stock of the
Company as of the close of business on February 14, 1992.
"Company" shall mean Westport Bancorp, Inc., a bank holding company
organized and existing pursuant to the laws of the State of Delaware, and any
successor corporation by merger, consolidation or otherwise.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities that are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the arrival of a specified
date or the happening of a specified event.
"Employee Stock" shall mean the shares of Common Stock issued in
connection with any and all employee compensation and
<PAGE> 9
-3-
benefit plans, stock option plans, employee agreements and contracts of the
Company.
"Exercise Price" per share of Common Stock on any date herein
specified shall be equal to seventy five cents ($.75) per share of Common
Stock.
"Expiration Date" shall mean December 31, 1996.
"Issuance Date" shall mean February 18, 1992.
"Offering" shall mean the Company's private placement offering dated
December 17, 1991, of a minimum of 35,000 and a maximum of 65,000 units, each
unit consisting of one share of Series A Convertible Preferred Stock and 50
warrants, each warrant granting the holder thereof the right to purchase one
share of Common Stock at the Exercise Price.
"Outstanding", when used with reference to Common Stock shall mean, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company, and shall include all shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in
shares of Common Stock.
"Person" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization or a government or any agency or
political subdivision thereof.
"Purchase Price" shall mean the amount resulting from multiplying the
Exercise Price by the number of shares of Common Stock the Holder is entitled
to receive upon proper exercise of this Warrant.
"Rights Distribution" shall mean the distribution to the
holders of Common Stock of certain Common Stock purchase rights which entitle
each such holder to purchase one share of Common Stock for each two shares of
Common Stock owned of record on the record date established for such Rights
Distribution, at the following prices: (i) until the last day of the calendar
month following the month in which registration of the underlying Common Stock
becomes effective (the "First Purchase Date"), at $1.50 per share; (ii) from
and after the First Purchase Date and until the last day of the sixth month
following the First Purchase Date (the "Second Purchase Date"), at $2.00 per
share; and (iii) from and after the Second Purchase Date, at $3.00 per share.
The Rights Distribution shall have been authorized by the
<PAGE> 10
-4-
Board of Directors of the Company on or prior to February 29, 1992.
"Rights Distribution Stock" shall mean the shares of Common Stock
issued in connection with the Rights Distribution.
"Securities Act" shall mean the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
"Series A Convertible Preferred Stock" shall mean the Company's
authorized Series A Convertible Preferred Stock, $ .01 par value per share.
Each share of Series A Convertible Preferred Stock is convertible into 100
shares of Common Stock.
"Subsidiary" shall mean any corporation at least a majority of the
outstanding voting stock of which shall at the time be owned by the Company or
by one or more Subsidiaries or by the Company and one or more Subsidiaries.
"Transfer", as used in Section 8, shall include, but not be limited
to, any disposition of any Warrant or Warrant Stock or of any interest therein
that would constitute a sale thereof within the meaning of the Securities Act.
"Warrants" shall mean the Warrant Certificate, dated as of February
18, 1992, issued by the Company to a Holder, evidencing rights to purchase
shares of Common Stock, and all Warrants issued upon transfer, division or
combination of, or in substitution for, any thereof (including any new Warrants
referred to in Section 9). All Warrants shall at all times be identical as to
terms and conditions and date, except as to the number of shares of Common
Stock for which they may be executed.
"Warrant Stock" shall mean, as of any date, shares of Common Stock on
such date issued (initially or upon subsequent transfer) as a result of the
exercise of the Warrants.
Section 2. Exercise of Warrant.
A. Manner of Exercise. This Warrant may be exercised at any time or
from time to time on or after January 1, 1994, on any day which is not a
Saturday, Sunday or public holiday under the laws of the State of Connecticut,
for all or any part of the number of shares of Common Stock specified in the
first paragraph of this Warrant; provided, however, that this Warrant shall be
void and all rights represented hereby shall cease unless
<PAGE> 11
-5-
exercised before 5:00 P.M., New York City time, on the Expiration Date. In
order to exercise this Warrant, in whole or in part, the Holder hereof shall
deliver to the Company at its office to which notices are to be given in
accordance with Section 10, (i) a written notice of such Holder's election to
exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased (the "Notice"), (ii) cash or a check in the amount
of the Purchase Price for the number of shares of Common Stock for which this
Warrant is being exercised, and (iii) this Warrant. The Notice shall not be
given less than 30 days nor more than 90 days after the Holder hereof has given
to the Company such Holder's written statement that such Holder intends to
exercise this Warrant (a "Statement of Intention"). If the Notice is not given
within such 30 to 90 day period following the giving of a Statement of
Intention, the Notice may be given thereafter only during the 30 to 90 day
period following a subsequent Statement of Intention. The Notice may be in the
form of the Exercise Form appearing at the end of this Warrant. Upon receipt
of the Notice, the Company shall, as promptly as practicable, and in any event
within five days thereafter, execute or cause to be executed and deliver to
such Holder a certificate or certificates, dated the date of delivery of the
Notice, representing the aggregate number of shares of Common Stock issuable
upon such exercise as hereinafter provided, any and all of which certificates
shall bear the restrictive legend set forth in Section 8. Except as provided
in Section 8, the stock certificate or certificates so delivered shall be
registered in the name of such Holder or, subject to Section 8, such other name
as shall be designated in the Notice. This Warrant shall be deemed to have
been exercised and the shares of Common Stock issuable upon such exercise shall
be deemed to have been issued, and such Holder or any other person so
designated to be named therein shall be deemed to have become a Holder of
record of such shares for all purposes, as of the date the Notice and said cash
or check and this Warrant are received by the Company as aforesaid. If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing the shares of Common
Stock issuable upon such exercise, deliver to such Holder a new Warrant
evidencing the rights of such Holder to purchase the unpurchased shares
of Common Stock called for by this Warrant, which new Warrant shall in all
other respects be identical with this Warrant, or, at the request of such
Holder, appropriate notation may be made on this Warrant and the same returned
to such Holder.
B. Payment of Taxes, etc. All shares of Common Stock which shall be
issued upon the exercise of this Warrant shall be
<PAGE> 12
-6-
duly and validly issued, fully paid and nonassessable, and the Company shall
pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed in respect of, the issue or delivery thereof (other
than taxes measured by or based on income and stock transfer taxes payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of a registered Holder of this Warrant).
C. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon any exercise of any Warrant, but the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the current market price per share of Common
Stock on the business day next preceding the day of exercise. As used in this
Section C, the term "current market price" at any time means the daily average
closing price for a period of thirty business days ending on the business day
before the date for which such price is to be determined. The closing price
for each business day will be either (i) the last sale price as quoted on the
principal national securities exchange upon which the Common Stock (or other
capital stock or securities) is listed or admitted to trading, or, if the
Common Stock (or other capital stock or securities) is not so listed or
admitted, (ii) the average of the closing bid and asked prices as quoted on the
National Association of Securities Dealers Automated Quotations System. If,
for any reason, such closing prices cannot reasonably be determined, then the
current market price will be determined by any reasonable method selected by
the Board of Directors of the Company.
Section 3. Transfer, Division and Combination. Subject to Section
8, the transfer of this Warrant and all rights hereunder, in whole or in part,
is registrable on the books of the Company to be maintained for such purpose
upon surrender of this Warrant at the principal office of the Company referred
to in Section 10, together with delivery of a written assignment hereof duly
executed by the Holder or his agent or attorney and payment of funds sufficient
to pay any stock transfer taxes payable upon the making of such transfer.
Upon such surrender and payment the Company shall, subject to Section 8,
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in such instrument of assignment,
and this Warrant shall promptly be cancelled. A Warrant, if properly assigned
in compliance with Section 8, may
<PAGE> 13
-7-
be exercised by a new Holder for the purchase of Common Stock without having a
new Warrant issued.
This Warrant may, subject to Section 8, be divided or combined with
other Warrants upon presentation hereof at the aforesaid office or agency of
the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued signed by the Holder
hereof or his agent or attorney. Subject to compliance with the preceding
paragraph and with Section 8, as to any Transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
The Company shall pay all taxes (other than taxes measured by or based
on income and stock transfer taxes payable in respect of any transfer involved
in the issuance and delivery of any Warrant in a name other than that of the
registered Holder of the Warrant presented under this Section 3) and all
expenses and other charges payable in connection with the preparation, issue
and delivery of Warrants under this Section, and agrees to maintain at its
aforesaid offices or agency, books for the registration and the registration of
transfer of the Warrants.
Section 4. Adjustments. The number of shares of Common Stock and the
price at which such shares may be purchased upon exercise of this Warrant,
shall be subject to adjustment from time to time as set forth in this Section.
A. Subdivisions and Combinations. In case at any time or from time
to time the Company shall:
(1) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(2) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then the number of shares of Common Stock thereafter constituting Warrant Stock
shall be adjusted so as to consist of the same number of shares that a record
holder of the number of shares of Common Stock constituting Warrant Stock
immediately prior to the happening of such event would own or be entitled to
receive after the happening of such event.
B. Issuance of Additional Shares of Common Stock. In case at any
time or from time to time the Company shall (except
<PAGE> 14
-8-
as hereinafter provided) issue or sell any Additional Shares of Common Stock,
then the number of shares of Common Stock thereafter constituting Warrant Stock
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock constituting Warrant Stock immediately prior to such adjustment
by a fraction (i) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock, plus the number of Additional Shares of Common Stock
deemed to be outstanding pursuant to Subsections 4(C) and 4(D) immediately
prior to the issuance of Additional Shares of Common Stock as contemplated by
this Subsection 4(B), plus the number of such Additional Shares of Common Stock
so issued as contemplated by this Subsection 4(B) and (ii) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such Additional Shares of Common Stock, plus the
number of Additional Shares of Common Stock deemed to be outstanding pursuant
to Subsections 4(C) and 4(D) immediately prior to the issuance of Additional
Shares of Common Stock as contemplated by this Subsection 4(B). The provisions
of this Subsection shall not apply to any issuance of Additional Shares of
Common Stock for which an adjustment is provided under Subsection A of this
Section. No adjustment of the number of shares of Common Stock constituting
Warrant Stock shall be made under this Subsection upon the issuance of any
Additional Shares of Common Stock that are issued pursuant to the exercise of
any warrants or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any Convertible Securities, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities
(or upon the issuance of any warrant or other rights therefor) pursuant to
Subsections C or D of this Section, or if such Additional Shares are issued in
connection with the Series A Convertible Preferred Stock issued pursuant to the
Offering, or the Rights Distribution Stock, issued pursuant to the Rights
Distribution.
C. Issuance of Warrants or Other Rights. Other than the Offering and
the Rights Distribution, in case at any time or from time to time the Company
shall issue or sell, any warrants or other rights to subscribe for or purchase
any Additional Shares of Common Stock or any Convertible Securities, whether or
not the rights to exercise, exchange or convert thereunder are immediately
exercisable, then the number of shares of Common Stock thereafter constituting
Warrant Stock shall be adjusted as provided in Subsection B of this Section on
the basis that the maximum number of Additional Shares of Common Stock issuable
pursuant to all such warrants or other rights or necessary to
<PAGE> 15
-9-
effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding.
D. Issuance of Convertible Securities. Other than the Offering and
the Rights Distribution, in case at any time or from time to time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger or otherwise) issue or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, then the number of shares of Common
Stock thereafter constituting Warrant Stock shall be adjusted as provided in
Subsection B of this Section on the basis that the maximum number of Additional
Shares of Common Stock necessary to effect the conversion or exchange of all
such Convertible Securities shall be deemed to have been issued and
outstanding. No adjustment of the number of shares of Common Stock
constituting Warrant Stock shall be made under this Subsection upon the
issuance of any Convertible Securities that are issued pursuant to the exercise
of any warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants
or other rights pursuant to Subsection C of this Section.
E. Superseding Adjustment of Warrant Stock. If, at any time after
any adjustment of the number of shares of Common Stock constituting Warrant
Stock shall have been made pursuant to the foregoing Subsections C or D of this
Section on the basis of the issuance of warrants or other rights or the
issuance of other Convertible Securities, such warrants or rights or the right
of conversion or exchange under such other Convertible Securities shall expire,
and a portion of such warrants or rights, or the right of conversion or
exchange in respect of a portion of such Convertible Securities, as the case
may be, shall not have been exercised, such previous adjustment shall be
rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled, shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of such rights or options or other Convertible Securities on
the basis of treating the number of Additional Shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the previous exercise of
such warrants or rights or such right of conversion or exchange under such
Convertible Securities, as having been issued on the date or dates of such
exercise and, if and to the extent called for by
<PAGE> 16
-10-
the foregoing provisions of this Section on the basis aforesaid, a new
adjustment of the number of shares constituting Warrant Stock shall be made,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled.
F. Other Provisions Applicable to Adjustments Under this Section.
The following provisions shall be applicable to the making of adjustments of
the number of shares of Common Stock constituting Warrant Stock heretofore
provided in this Section:
(1) Treasury Stock. The sale or other disposition of any
issued shares of Common Stock owned or held by or for the account of
the Company shall be deemed an issuance thereof for the purposes of
this Section.
(2) When Adjustments to be Made. The adjustments required by
the preceding Subsections of this Section shall be made whenever and
as often as any specified event requiring an adjustment shall occur,
except that no adjustment of the number of shares of Common Stock
constituting Warrant Stock that would otherwise be required shall be
made (except in the case of a subdivision or combination of shares of
the Common Stock, as provided for in Subsection A) unless and until
such adjustment either by itself or with other adjustments not
previously made adds or subtracts at least 5% to or from the number of
shares of Common Stock constituting Warrant Stock immediately prior to
the making of such adjustment. Any adjustment representing a change
of less than such minimum amount (except as aforesaid) shall be
carried forward and made as soon as such adjustment, together with
other adjustments required by this Section and not previously made,
would result in a minimum adjustment. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
(3) Fractional Interests. In computing adjustments under this
Section, fractional interests in Common Stock shall be taken into
account to the nearest one-thousandth of a share.
(4) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution or subscription or purchase rights and
shall, thereafter and before the distribution to shareholders thereof,
legally abandon its plan to pay or deliver such distribution,
subscription or purchase rights, then thereafter no
<PAGE> 17
-11-
adjustment shall be required by reason of the taking of such record
and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
G. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, merge or consolidate into another corporation, or
sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation are to
be received by or distributed to the holders of Common Stock of the Company,
then each holder of a Warrant shall have the right thereafter to receive, upon
exercise of such Warrant, Warrant Stock comprising the number of shares of
common stock of the successor or acquiring corporation receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock
constituting Warrant Stock immediately prior to such event. If, pursuant to
the terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) are to be received by or distributed to the holders of Common
Stock of the Company in addition to common stock of the successor or acquiring
corporation, the Holder hereof shall be entitled to receive the same amount of
cash, shares or other securities or property that such Holder would have been
entitled to if such Holder owned the shares that may be purchased pursuant to
this Warrant. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be deemed appropriate (as determined by resolution of
the Board of Directors of the Company) in order to provide for adjustments of
Warrant Stock which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section. For the purposes of this Section
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of
stock or other securities
<PAGE> 18
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which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section shall similarly apply
to successive reorganizations, reclassifications, mergers, consolidations or
dispositions of assets.
H. Other Action Affecting Common Stock. In case at any time or from
time to time the Company shall take any action affecting its Common Stock,
other than an action described in any of Subsections A to H, inclusive, of this
Section, then, unless in the good faith opinion of the Board of Directors of
the Company such action will not have a materially adverse effect upon the
rights of the holders of the Warrants, the number of shares of Common Stock or
other stock constituting Warrant Stock, shall be adjusted in such manner and at
such time as the Board of Directors of the Company may in good faith determine
to be equitable in the circumstances.
Section 5. Notices to Warrant Holders. If at any time prior to the
full exercise of the Warrants evidenced hereby:
(a) The Company shall authorize the issue of any options,
warrants or rights pro rata to all holders of Common Stock entitling
them to subscribe for or purchase any shares of stock of the Company
or to receive any other rights; or
(b) There shall occur any reclassification of the Common
Stock, or any consolidation or merger of the Company with or into
another corporation or person (other than a consolidation or merger in
which the Company is the continuing corporation and which does not
result in any reclassification of the Common Stock) or a sale or
transfer to another corporation or person of all or substantially all
of the properties of the Company; or
(c) There shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company;
then, and in each of such cases, the Company shall deliver to the
registered Holder hereof at its last address appearing on the books of
the Company, as promptly as practicable but in any event at least 15
days prior to the applicable record date (or
<PAGE> 19
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determination date) mentioned below, a notice stating, to the extent
such information is available, (i) the date on which a record is to be
taken for the purpose of such, issuance or rights, or, if a record is
not to be taken, the date as of which the Holders of Common Shares of
record to be entitled to such, issuance or rights are to be
determined, or (ii) the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or
winding up is expected to become effective and the date as of which it
is expected that holders of Common Stock of record shall be entitled
to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution or winding up.
In addition to the foregoing, while this Warrant Certificate
remains outstanding, the Company will mail to the Holder copies of all
reports and correspondence which the Company mails to its
stockholders.
Section 6. Reservation and Authorization of Common Stock; Approval of
any Governmental Authority. The Company shall at all times reserve and keep
available for issuance upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable shall, when issued upon exercise of any Warrant, be
duly and validly issued and fully paid and non-assessable.
Before taking any action which would result in an adjustment pursuant
to Section 4 hereof, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof and from any Person from
whom any such authorization or consent may be required.
Section 7. Stock and Warrant Transfer Books. The Company will not at
any time, except upon dissolution, liquidation or winding up of the Company,
close its stock transfer books or Warrant transfer books so as to result in
preventing or delaying the exercise or transfer of any Warrant.
Section 8. Restrictions on Transferability of Warrant Stock;
Registration. The Warrants and the Warrant Stock shall not be transferable,
hypothecated or assigned before satisfaction of the conditions specified in
this Section. The Holder of this
<PAGE> 20
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Warrant, by acceptance of this Warrant, agrees to be bound by the provisions of
this Section.
A. Restrictive Legend. Unless and until otherwise permitted by
this Section, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (i) HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE,
(ii) MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS SO REGISTERED OR QUALIFIED
OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE,
AND (iii) ARE SUBJECT TO THE CONDITIONS AND RESTRICTIONS ON TRANSFER SPECIFIED
IN A CERTAIN WARRANT CERTIFICATE, DATED AS OF FEBRUARY 24, 1992, ISSUED BY
WESTPORT BANCORP, INC., A BANK HOLDING CORPORATION ORGANIZED AND EXISTING
PURSUANT TO THE LAWS OF THE STATE OF DELAWARE (THE "COMPANY"). NO TRANSFER OF
THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL
SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF THE FORM OF SAID WARRANT
CERTIFICATE IS ON FILE WITH THE SECRETARY OF THE COMPANY."
B. Termination of Restrictions. Notwithstanding the foregoing
provisions of this Section, the restrictions imposed by this Section upon the
transferability of the Warrant Stock shall cease and terminate as to any
particular Warrant or share of Warrant Stock when the sale of such security
shall have been effectively registered under the Securities Act and sold by the
holder thereof in accordance with such registration or sold by the holder
thereof to an underwriter for its own account and not with a view to or for
resale in connection with such registration. Whenever the restrictions imposed
by this Section shall terminate as to this Warrant, as hereinabove provided,
the Company shall cause to be stamped or otherwise imprinted upon this Warrant,
at the request of the holder hereof, without expense to such Holder, a legend
in substantially the following form:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WARRANT STOCK CONTAINED
IN SECTION 8 HEREOF TERMINATED ON ____________, AND ARE OF NO FURTHER
FORCE OR EFFECT."
All Warrant Stock issued upon registration of transfer, division or combination
of, or in substitution for, any Warrant Stock or Warrants entitled to bear such
legend shall have a similar legend
<PAGE> 21
-15-
endorsed thereon. Whenever the restrictions imposed by this Section shall
terminate as to any Warrant Certificate, as hereinabove provided, the Holder
thereof shall be entitled to receive from the Company without expense to such
Holder, a new certificate for Common Stock not bearing the restrictive legend
set forth in Subsection A of this Section.
C. Supplying Information. The Company shall cooperate with each
seller of any Warrant or any Warrant Stock in supplying such information as may
be necessary for such seller to complete and file any reporting forms presently
or hereafter required by the Commission as a condition to the availability of
an exemption from the Securities Act for the sale of any Warrant or Warrant
Stock.
D. Indemnification. Each holder of any Warrant or any Warrant Stock
obtained by the exercise thereof shall, by acceptance thereof, agree to
indemnify and hold harmless the Company, its directors and officers and each
other Person, if any, who controls the Company against any losses, claims,
damages, or liabilities, joint or several, to which the Company or any such
director or officer or any such Person may become subject under the Securities
Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement under which
securities were registered under the Securities Act for sale by such holder,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or any alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such alleged untrue statement or alleged omission was made in such
registration statement, preliminary prospectus, prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such holder
specifically stating it is for use therein, and shall reimburse the Company or
such director, officer or other Person for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
loss, claim, damage, liability or action.
Section 9. Loss or Mutilation. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of reasonable discretion) of the
ownership of and the loss, theft, destruction or mutilation of this Warrant and
(in case of loss,
<PAGE> 22
-16-
theft or destruction) of indemnity satisfactory to it in the exercise of its
reasonable discretion (it being understood that the written agreement of Holder
shall be sufficient indemnity) and in case of mutilation upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a new
Warrant of like tenor.
Section 10. Notice Generally. Any notice, demand or delivery
pursuant to the provisions hereof shall be sufficiently given or made if sent
by first class mail, postage prepaid, addressed to Holder at its last known
address appearing on the books of the Company, or, except as herein otherwise
expressly provided, to the Company at its principal office at 87 Post Road
East, WestPort, Connecticut 06880, or such other address as shall have been
furnished to the party giving or making such notice, demand or delivery.
Section 11. Limitation of Liability. No provision hereof, in
the absence of affirmative action by the Holder hereof to purchase shares of
Common Stock, and no mere enumeration here in of the rights or privileges of
the Holder hereof, shall give rise to any liability of such Holder for the
purchase price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
Section 12. Governing Law. This Warrant shall be governed by and
shall be construed and enforced in accordance with the laws of the State of
Connecticut without regard to its conflict of law rules.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
<PAGE> 23
-17-
Dated and effective as of February 24, 1992.
WESTPORT BANCORP, INC.
By /s/MICHAEL H. FLYNN
--------------------
Michael H. Flynn
Its President
Attest:
/s/ JOHN H. JEVNE
- ------------------
John H. Jevne
Its Secretary
<PAGE> 24
-18-
EXERCISE FORM
(To be executed only upon an exercise of Warrant)
The undersigned owner of this Warrant irrevocably exercises this
Warrant for and purchases the number of shares of Common Stock of Westport
Bancorp, Inc., purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant, such number of shares being shares of Common Stock, and requests that
certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to _______________ whose address is
______________________________ and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this Warrant,
that a new Warrant of like tenor and date for the balance of the shares of
Common Stock issuable thereunder be delivered to the undersigned.
Dated:
----------------------------------------------------
(Signature of Owner)
----------------------------------------------------
(Street Address)
----------------------------------------------------
(City) (State) (Zip Code)
<PAGE> 25
-19-
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned owner of this Warrant hereby sells,
assigns and transfers unto the Assignee named below all of the rights of the
undersigned under this Warrant, with respect to the number of shares of Common
Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- ------------------------------
and does hereby irrevocably constitute and appoint as its Attorney
________________ to register such transfer on the books of The Westport Bancorp,
Inc., maintained for the purpose, with full power of substitution in the
premises.
Dated: Signature:
----------------------
Witness:
-----------------------
<PAGE> 26
The Common Stock is traded on NASDAQ under the symbol "WBAT" and, on
September 30, 1992, the last reported sale price of the Common Stock was
$2.125.
HOLDERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
"RISK FACTORS AND SPECIAL CONSIDERATIONS."
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, THE CONNECTICUT DEPARTMENT OF
BANKING, THE FEDERAL DEPOSIT INSURANCE CORPORATION, ANY STATE
SECURITIES COMMISSION OR BY ANY OTHER GOVERNMENT AGENCY OR
OFFICIAL, NOR HAVE ANY OF THE FOREGOING PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------------------
THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THE RIGHTS,
CONVERSION OF THE PREFERRED STOCK AND THE EXERCISE OF THE WARRANTS ARE NOT
BANK ACCOUNTS, SAVINGS ACCOUNTS OR DEPOSITS AND WILL NOT BE INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION.
--------------------------------
<TABLE>
<CAPTION>
Price Underwriting Proceeds to
to Discounts and issuer or
Public Commissions other persons(1)(2)
------ --------------- -------------------
<S> <C> <C> <C>
Purchase Rights
Per Share $1.50 $0 $1.50
Total $1,594,307 $0 $1,594,307(3)
Warrants(4)
Per Share $.75 $0 $ .75
Total $1,751,250 $0 $1,751,250
</TABLE>
(1) The "total other expenses of issuance and distribution" is assumed to
be $100,000. The amount of proceeds shown does not reflect a
deduction of expenses.
(2) A total of 4,670,000 shares of Common Stock may be acquired through
the exercise of the conversion rights of the Preferred Stock Holders.
The Company will realize no additional proceeds from such conversion.
-2-
<PAGE> 27
(3) Assumes full subscription of 1,062,871 shares at $1.50 per share and
that all of the Rights Holders fully and immediately exercise their
Rights.
(4) Assumes full subscription for 2,335,000 shares and that all
outstanding Warrants are exercised.
-----------------------------------
The date of this Prospectus is October 1, 1992.
-3-
<PAGE> 28
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by
the Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission located at 75 Park
Place, 14th Floor, New York, New York 10007 and Room 1204, Everett McKinley
Dirkson Building, 219 South Dearborn Street, Chicago, Illinois 60604. Copies
of such material can be obtained upon written request addressed to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, reports, proxy statements and other
information concerning the Company may be inspected at the offices of the
National Association of Securities Dealers Automated Quotation System, 1735 K
Street, Northwest, 3rd Floor, Marketing Listing Qualifications Department,
Washington, D.C. 20006, on which the shares of Common Stock are traded.
The Company has filed with the Commission a Registration Statement on Form S-3
(together with any amendments thereto, the "Registration Statement") under the
Securities Act, with respect to the shares of Common Stock issuable upon the
exercise of the Rights, the conversion of the Preferred Stock and the exercise
of the Warrants. This Prospectus does not contain all the information set
forth in the Registration Statement. Such additional information may be
obtained from the Commission's principal office in Washington, D.C. Statements
contained in this Prospectus or in any document incorporated in this Prospectus
by reference as to the contents of any contract or other document referred to
herein or therein are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
-4-
<PAGE> 29
DOCUMENTS INCORPORATED BY REFERENCE
There are hereby incorporated in this Prospectus by reference the
following documents of the Company filed with the Commission pursuant
to the 1934 Act:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1991, as amended by Form 8 dated September 18, 1992 and by Form 8
dated September 28, 1992.
2. Quarterly Report on Form 10-Q for the period ended March 31,
1992, as amended by Form 8 dated September 18, 1992.
3. Quarterly Report on Form 10-Q for the period ended June 30,
1992, as amended by Form 8 dated September 18, 1992.
All documents filed with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the securities shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that any statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any and all of
the information that has been incorporated by reference in this Prospectus (not
including exhibits to the information that are incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
that the Prospectus incorporates). Requests should be directed to: Westport
Bancorp, Inc., 87 Post Road East, Westport, Connecticut 06880, telephone
number: (203) 222-6911, Attention: Secretary.
-5-
<PAGE> 30
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere
in this Prospectus. This summary is necessarily incomplete and is qualified in
its entirety by the more detailed information and financial statements
appearing elsewhere herein or incorporated by reference hereto.
THE COMPANY
Westport Bancorp, Inc. (the "Company") is a bank holding company
incorporated in 1983 under the laws of the state of Delaware. The Company's
principal asset is its sole subsidiary, The Westport Bank & Trust Company (the
"Bank"), which the Company acquired in 1984. The Bank is a Connecticut
chartered bank and trust company whose predecessor was organized in 1852. The
Bank's deposit accounts are insured by the Federal Deposit Insurance
Corporation (the "FDIC"). The Company is regulated and examined by the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"). The
Bank is regulated and examined by the FDIC and the Banking Commissioner of the
State of Connecticut (the "Commissioner").
The Company has had significant losses in each of the past three years
and in the first six months of 1992, resulting primarily from significant
deterioration in the Bank's loan portfolio. The viability of the Company is
dependent upon the Bank's ability to comply with the terms of a Cease and
Desist Order issued by the FDIC (as amended, the "Order") and with the terms of
an agreement with the Federal Reserve Bank of New York ("FRBNY") and the
Commissioner (the "Agreement"). The Order requires the Bank to meet certain
prescribed capital levels, maintain sufficient liquidity and ultimately return
to profitable operation. The Agreement imposes certain limitations on the
Company's cash expenditures, incurrence of debt and payment of dividends and
requires submission of an operating plan to improve earnings and a plan to
improve and maintain the capital ratios specified in the Order, all of which
plans have been submitted. See "Risk Factors and Special Considerations -
Operating History and Financial Condition; Capital Requirements."
The executive office of the Company is located at 87 Post Road East,
Westport, Connecticut 06880; its telephone number is (203) 222-6911.
THE OFFERING
This Prospectus relates to the offering and sale from time to time of
up to 1,062,871 shares of Common Stock to be issued pursuant to
non-transferable stock purchase rights ("Rights") granted to stockholders of
record at the close of business on February 21, 1992 (the "Record Date"). Each
holder of Rights has the right to purchase one share of Common Stock for every
two shares of Common Stock held on the Record Date for the following prices:
-6-
<PAGE> 31
(i) $1.50 per share from the date hereof through and including
November 30, 1992;
(ii) $2.00 per share from December 1, 1992 through and
including May 31, 1993; and
(iii) $3.00 per share from June 1, 1993 through and including
May 31, 1994, at which time the Rights will expire.
In addition, on February 24, 1992, pursuant to a private placement
memorandum dated December 17, 1991 (the "Private Placement Memorandum"), the
Company sold to investors 46,700 investment units in a private placement of
securities for aggregate gross proceeds of $4,670,000 (the "Private
Placement"). Each investment unit consisted of one share of Series A
Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock")
(each such share being convertible into 100 shares of Common Stock at any time
and being entitled to 100 votes on all matters which may come before the
shareholders) and 50 warrants ("Warrants") to purchase common stock, par value
$.01 per share, at a purchase price of $.75 per share during the period
commencing January 1, 1994 and ending December 31, 1996. This Prospectus is
being used in connection with the offering and sale from time to time of up to
7,005,000 shares of Common Stock to be issued by the Company pursuant to the
conversion of the Preferred Stock and the exercise of the Warrants.
RISK FACTORS AND SPECIAL CONSIDERATIONS
In making an investment decision, holders of Rights, Preferred Stock,
and Warrants should carefully consider the following factors in addition to
those described elsewhere in this Prospectus.
Operating History and Financial Condition; Regulatory Compliance
The Company has had significant losses in each of the past three years
and in the first six months of 1992, resulting primarily from the significant
deterioration in the Bank's loan portfolio. These losses totaled $4,659,000,
$6,335,000 and $5,887,000 for the 1989, 1990 and 1991 fiscal years,
respectively, and $1,062,000 for the first six months of 1992. The economy in
the Bank's market area, Fairfield County, Connecticut, and in New England
generally, has been affected severely by declining real estate market values,
as well as by a significant decline in economic activity and a resulting
increase in unemployment. The decline in real estate values has had a
material, negative effect on the condition of the Bank's loan portfolio, as
real estate that collateralizes the Bank's loans has decreased in value, and as
borrowers, affected by the deterioration in the regional economy, have become
less able to meet their obligations to make principal and interest payments to
the Bank. Accordingly, non-performing assets, past due loans, provisions for
loan losses and charge-offs of loans have all increased significantly.
-7-
<PAGE> 32
On March 12, 1990, the Board of Directors of the Bank entered into a
Memorandum of Understanding (the "MOU") with the Commissioner and the FDIC,
pursuant to which the Board of Directors of the Bank agreed to take certain
actions to improve the financial condition of the Bank, including increasing its
capital ratios. In July 1991, the Board of Directors of the Bank was notified
that the Commissioner and the FDIC had certain substantial concerns relating to
the financial condition of the Bank arising out of an examination of the Bank
as of April 8, 1991, conducted jointly by the Connecticut Department of Banking
and the FDIC.
On September 25, 1991, the Bank entered into a stipulation and consent
agreement (the "Stipulation Agreement") with the FDIC and the Commissioner,
pursuant to which the Bank agreed to take certain actions and to discontinue
certain others, and the FDIC, on October 8, 1991, issued a cease and desist
order (the "Order") based on the terms of the Stipulation Agreement.
On November 19, 1991, the Company entered into the Agreement with the
FRBNY and the Commissioner pursuant to which the Company has agreed, among
other things, to certain limitations on cash expenditures, the incurring of any
debt by the Company or the payment of cash dividends by the Company without the
prior written consent of the FRBNY and the Commissioner. The Company has also
agreed to provide the FRBNY and the Commissioner with an acceptable operating
plan consisting of the Company's goals and strategies for improving the
earnings of the Bank and the Company, along with a plan to improve and maintain
the minimum leverage capital ratios specified in the Order, all of which plans
have been submitted. See "Risk Factors and Special Considerations - Capital
Requirements."
The future success of the Company is dependent upon the Bank's ability
to comply with the terms of the Order which requires, among other things, that
the Bank meet prescribed capital levels, continue to maintain sufficient
liquidity and ultimately return to profitable operation. The Bank's ability to
comply with the terms of the Order is largely dependent upon its ability to
continue the resolution and conversion of its non-performing loans into
performing loans. See "Risk Factors and Special Considerations - Capital
Requirements."
In light of current conditions and the possibility of further
deterioration in the real estate market, additional loan loss provisions may be
necessary and additional charge-offs of loans may occur. The Company cannot
predict the likelihood of economic recovery in the Bank's market area or in New
England in the foreseeable future, and if the regional economy does not improve
or continues to deteriorate, the financial condition and results of operations
of the Company will likely deteriorate further.
In February 1992, $4,320,000 in net proceeds from the Private
Placement were contributed to the Bank to increase its regulatory capital
levels, and the net proceeds of this Offering will be so contributed. See "Use
of Proceeds." Notwithstanding such capital infusions to the Bank, the financial
-8-
<PAGE> 33
condition of the Bank may continue to deteriorate without an improvement in the
condition of the Bank's loan portfolio. Non-performing assets, which include
nonaccrual loans, loans 90 days or more past due on accrual status and other
real estate owned, were $26,072,000 (approximately 10.7% of total assets) at
December 31, 1991, a decrease of approximately 13.2% from the $30,044,000 of
non-performing assets (approximately 10.9% of total assets) at December 31,
1990. Non-performing assets were $21,394,000 (8.6% of total assets) at June
30, 1992, a 17.9% decrease from the $26,072,000 of non-performing assets at
December 31, 1991. Whether additional loans will become classified as
non-performing will depend, among other things, on whether economic conditions
and real estate values continue to deteriorate. The level of non-performing
assets will also depend on the extent to which loans return to performing
assets and the Bank is successful in disposing of other real estate owned.
Earnings for the remainder of 1992 will continue to be constrained by
the high level of non-performing assets, the expenses of collecting problem
loans and the carrying costs of other real estate owned. At December 31, 1991,
the allowance for loan losses was $4,276,000, a decrease of 22.3% from the
allowance of $5,504,000 at December 31, 1990. At June 30, 1992, the allowance
for loan losses was $4,804,000, a 12.3% increase over the allowance at December
31, 1991, reflecting approximate charge-offs of loans (net of recoveries of
$260,000) during the first six months of 1992 of $872,000 and provision made
for loan losses of $1,400,000. The Company believes that the allowance for
loan losses is adequate. While the Company uses available information to
recognize possible loan losses, future additions to the allowance may be
necessary based on changes in economic conditions, particularly in the Bank's
service area, Fairfield County, Connecticut. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the
Bank's allowance for loan losses. Such agencies may recommend that the Bank
recognize additions to the allowance based on their judgments of information
available to them at the time of their examination. Other real estate owned
(including insubstance foreclosures) were a total of $5,047,000 at December 31,
1991, an approximate decrease of 34.3% from $7,680,000 at December 31, 1990.
At June 30, 1992, other real estate owned (including insubstance foreclosures)
were $6,382,000, an increase of 26.5% over the $5,047,000 at December 31, 1991.
Although the Bank is ultimately in a better position to dispose of real estate
actually acquired on foreclosures, because of the often lengthy process
involved to gain title to property which serves as collateral on defaulted
loans, the continuing significant balance in other real estate owned reflects
the substantial deterioration in the Bank's loan portfolio over the last
several years.
Independent Auditors' Report
The independent auditors' report on the 1991 consolidated financial
statements of the Company expresses an unqualified opinion that includes an
explanatory paragraph relating to circumstances that raise substantial doubt
about the Company's ability to continue as a going concern.
-9-
<PAGE> 34
Regulatory Capital Requirements
Beginning December 31, 1990, bank regulatory authorities established
capital adequacy assessment guidelines designed to more appropriately consider
the credit risk inherent in the assets and off-balance sheet activities of a
financial institution. The risk-based capital structure is being phased in over
a two-year transition period with the final standards becoming fully effective
at year-end 1992.
The Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") has established minimum "risk-based" and "leverage" capital
ratios for bank holding companies, and the Federal Deposit Insurance
Corporation (the "FDIC") has established substantially similar minimum capital
ratios for banks (as discussed in more detail below). Under the risk-based
capital guidelines, the ratio is calculated by dividing qualifying capital by
risk-weighted assets. The guidelines established two separate categories of
qualifying capital. In the Company's case, Tier 1 capital consists of
stockholders' equity and Tier 2 capital consists of the allowable portion of
the allowance for loan losses. The total assets base used for the computation
is modified to include items on and off the balance sheet, with each item being
assigned a "risk weight" for the determination of the capital to risk-weighted
assets.
At December 31, 1991, the Company's total risk-based capital ratio and
Tier 1 capital ratio, calculated in accordance with the guidelines in effect at
year-end 1991, were 4.9% and 3.9%, respectively. These same ratios
calculated under 1992 requirements were 4.7% and 3.5%. The December 31, 1991
leverage ratio was 2.6%.
At June 30, 1992 the Company's capital ratios reflect the additional
Tier 1 capital from the issuance of investment units consisting of convertible
preferred stock and warrants to purchase common stock. The total risk-based
capital ratio and Tier 1 capital ratio, calculated in accordance with the 1990
guidelines, were 7.08% and 6.18%, respectively. These ratios calculated under
1992 guidelines were 6.85% and 5.58%, respectively. The June 30, 1992 leverage
ratio was 3.81%.
-10-
<PAGE> 35
A comparison of the Company's capital ratios at June 30, 1992 and
December 31, 1991 with the minimum regulatory requirements and the amount of
the excess or deficiency is summarized in the table below.
<TABLE>
<CAPTION>
At June 30, 1992 At December 31, 1991
1990 1992 1990 1992
Guidelines Guidelines Guidelines Guidelines
---------- ---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Tier 1 Capital:
Preferred Equity $ 4,320 $ 4,320 $ 0 $ 0
Common Equity 5,044 5,044 6,125 6,125
-------- -------- -------- --------
Stockholders' Equity 9,364 9,364 6,125 6,125
Tier 2 Capital:
Allowable portion of
allowance for loan
losses 2,558 2,132 2,671 2,225
-------- -------- -------- --------
Total Capital $ 11,922 $ 11,496 $ 8,796 $ 8,350
======== ======== ======== ========
Risk Weighted Assets $168,286 $167,860 $176,427 $175,981
======== ======== ======== ========
Quarterly Average of
Total Assets $245,800 $245,800 $237,680 $237,680
======== ======== ======== ========
Total Capital to Risk
Weighted Assets 7.08% 6.85% 4.9% 4.7%
========= ========= ========= =========
Minimum Requirement 7.25% 8.0% 7.25% 8.0%
--------- --------- --------- ---------
Deficiency $(286) $ (1,930) $ (4,146) $ (5,807)
--------- --------- --------- ---------
Tier 1 Capital to Risk
Weighted Assets 6.18% 5.58% 3.9% 3.5%
========= ========= ========= =========
Minimum Requirement 3.625% 4.0% 3.625% 4.0%
========= ========= ========= =========
Excess (Deficiency) $ 4,300 $ 2,652 $ 485 $ (880)
--------- --------- --------- ---------
Tier 1 Capital to
Average Assets
(Leverage Ratio) 3.81% 3.81% 2.6% 2.6%
========= ========= ========= =========
Minimum Requirement 4.0% 4.0% 4.0% 4.0%
--------- --------- --------- ---------
Deficiency $ (467) $ (467) $ (3,327) $ (3,327)
========= ========= ========= =========
</TABLE>
-11-
<PAGE> 36
In conjunction with the completion of the Company's sale of securities
pursuant to the Private Placement and the Company's contribution of the net
proceeds to the capital of the Bank, the FDIC and the FRBNY revised the Order
and the Agreement to require that the Bank's Tier I leverage capital ratio be
at least 4.0% at February 29, 1992, 4.5% at June 30, 1993 and 5.5% at September
30, 1994.
At June 30, 1992, the Company's leverage ratio was 3.81% (.19
percentage points or $467,000 below the current required minimum level).
During the third quarter of 1992, the following transactions have occurred that
will affect the Company's capital position at the end of the quarter:
- On July 7, 1992, the Bank realized a gain of $650,000 on the
sale of $26.2 million of mortgage-backed securities.
- In September 1992, the Bank realized an approximate gain of
$570,000 on the sale of its credit card portfolio.
- On September 29, 1992 the Bank sold its mortgage-backed
security fund investment of approximately $43 million and
recognized a loss of approximately $560,000. In addition, it
sold approximately $10 million of U.S. Treasury securities on
which it recognized a gain of approximately $330,000.
Approximately $45 million of the proceeds will be invested and
managed by outside investment managers pursuant to investment
guidelines established by the Bank and the remainder will be
reinvested and continue to be managed by the Bank. The entire
portfolio will be classified as "available for sale" and will
be carried in the financial statements at the lower of cost or
market value.
Management has notified the Regulatory Agencies of the short-fall in
the Company's leverage and risk-based capital ratios at June 30, 1992, and
believes the Regulatory Agencies will not impose sanctions on or take adverse
action against the Company as a result of such short-fall.
The Company's ability to meet the total capital to risk-weighted asset
ratio requirements (7.25% at September 30, 1992 and 8.0% at December 31, 1992)
and its ability to meet leverage ratio requirements (4% at September 30, 1992
and December 31, 1992) depend upon its success in raising additional capital or
in generating profits from operations or from sales of assets. The Company has
no current intentions to reduce significantly asset levels or otherwise change
the risk profile of its assets. The Company is pursuing its plan to reduce the
levels of nonperforming assets, increase earning assets and control operating
costs and, ultimately, return to profitable operations.
If operations continue to be unprofitable, and if the Company and the
Bank do not meet the capital requirements of the Order and the Agreement, it
will become necessary to seek relief from certain of those requirements from
-12-
<PAGE> 37
the regulatory authorities, or to enhance capital, or both. Bank holding
companies and banks which do not comply with minimum capital requirements are
considered to be operating in an unsafe and unsound condition and may be
subject to certain regulatory actions, including revocation of the Bank's
deposit insurance or the appointment of a conservator or receiver and/or the
closing of the Bank. If the Bank is closed, liquidated or sold to another
institution, it is virtually certain that all stockholders will lose their
entire investment in the Company.
Principal Stockholder
As of June 30, 1992, there were 2,125,742 shares of Common Stock and
46,700 shares of Preferred Stock issued and outstanding. As of such date, Mr.
David Rosow, Chairman of the Board of Directors of the Company, beneficially
owned 1,222,150 shares of Common Stock (which amount includes his ownership of
222,150 shares of Common Stock, and assumes full conversion of his Preferred
Stock) and 10,000 shares of Preferred Stock, representing approximately 39.1%
of the issued and outstanding shares of Common Stock (adjusted for conversion
of Mr. Rosow's Preferred Stock), 21.4% of the issued and outstanding shares of
Preferred Stock and 18% of the voting power of the Company. Such shares
include 1,221,150 shares of Common Stock and 10,000 shares of Preferred Stock
owned by Jean D. Rosow, Mr. Rosow's wife, as to which shares Mr. Rosow has a
general proxy to vote. In conjunction with the Private Placement, the Company
and the Rosows terminated an agreement entered into in December 1990, pursuant
to which the Rosows had agreed to certain limitations on their future
acquisitions of the Company's Common Stock.
Dividends
The Company has not paid any dividends on the Common Stock since the
second quarter of 1989, and does not anticipate paying any dividends on the
Common Stock in the foreseeable future. Holders of the Preferred Stock are
entitled to receive dividends only if and when declared by the Board of
Directors of the Company. The ability of the Company to pay dividends on the
Preferred Stock or Common Stock is dependent on the ability of the Bank to pay
dividends to the Company. Pursuant to the Order, the Bank is prohibited from
paying dividends to the Company without the prior written consent of the
Regional Director of the FDIC and the Commissioner. Pursuant to the Agreement,
the Company is prohibited from paying dividends to its stockholders without the
prior written consent of the FRBNY and the Commissioner. Consequently, the
future dividend policy of the Bank and the Company will, in addition to
financial ability, be dependent upon the regulatory restrictions of the FDIC,
the FRBNY and the Commissioner.
Competition
Competition in the financial services industry in Connecticut is
strong. Numerous commercial banks, savings banks, savings and loan
associations, mortgage brokers, finance companies, credit unions, insurance
companies, money
-13-
<PAGE> 38
market funds, investment firms and private lenders compete with the Bank for
deposits, loans and employees. Many of these competitors have significantly
greater resources than the Bank, offer a wide range of deposit, loan and
mortgage instruments and banking services, and are able to conduct more
intensive and broader-based promotion efforts to reach both commercial and
individual customers. Recent legislation and economic conditions have resulted
in an increase in the potential for and actual level of competition for the
Bank's services. Certain recent bank failures in the Bank's market area have
resulted in the acquisition of such banks' deposits, assets and banking
locations by very large, out-of-state bank holding companies. Although the
Bank believes that such acquisitions may enhance the Bank's position as a
source of loans to small and medium-size businesses, which usually are not
sought by larger institutions similar to those which have now come into the
Bank's market, there exists the possibility that such larger and
better-financed banks may seek to compete for that business.
USE OF PROCEEDS
The Company will contribute all of the funds raised pursuant to the
exercise of Warrants and Rights, after the payment of related expenses, to the
Bank in order to assist the Bank in meeting the leverage capital ratio
requirements of the Order and the Agreement. The net proceeds will be added to
the liquidity of the Bank and will be available for lending and investing
activities. See "Risk Factors and Special Considerations - Capital
Requirements."
DETERMINATION OF OFFERING PRICES
Each Right may be exercised for one share of Common Stock at a
purchase price of:
(i) $1.50 per share from the date hereof through and including
November 30, 1992;
(ii) $2.00 per share from December 1, 1992 through and
including May 31, 1993; and
(iii) $3.00 per share from June 1, 1993 through and including
May 31, 1994.
Each Warrant issued with the Preferred Stock in the Private Placement
may be exercised for one share of Common Stock at a purchase price of $.75 per
share during the period commencing January 1, 1994 and ending December 31,
1996.
The foregoing purchase prices for the Common Stock, which were set at
the time of the commencement of the Company's Private Placement, have been
determined by the Company's Board of Directors and no assurances can be given
that shares of the Common Stock, once registered under the Securities Act of
-14-
<PAGE> 39
1933, as amended, will trade at prices comparable to their respective offering
prices. In determining the offering prices, considerations addressed by the
Board included the Company's losses from operations and the deterioration in
its financial condition during the three-year period prior to the Private
Placement, the existing and pro forma net worth of the Company, the possible
effects of the issuance of additional Common Stock on the market for the Common
Stock and the effect on the condition of the Bank of an infusion of capital
resulting from the contribution of funds to be raised in the Private Placement
and the Rights Offering. Although the closing prices for the Common Stock
traded through NASDAQ has ranged between a high of $3.00 and a low of $1.75
since the completion of the Private Placement on February 21, 1992, and closed
at $2.125 on September 30, 1992, trading volume generally has been very low, so
that there can be no assurances that such prices would be sustained if large
numbers of shares of Common Stock were offered for sale in a short period of
time.
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<PAGE> 40
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1992, as adjusted to give effect to the exercise of the
maximum number of Rights. No adjustment has been made to give effect to the
conversion of the Preferred Stock, as the Company will not receive additional
consideration upon such conversion, nor to exercise of the Warrants, which may
only occur, if at all, on or after January 1, 1994.
<TABLE>
<CAPTION>
June 30, Adjusted for
1992 Exercise of Rights (1)
-------- ----------------------
(IN THOUSANDS)
<S> <C> <C>
Liabilities and stockholders' equity:
Liabilities:
Deposit accounts $237,820 $237,820
Other borrowed money 435 435
Other liabilities 2,560 2,560
-------- --------
Total liabilities 240,815 240,815
Stockholders' equity:
Preferred stock, Series A
Convertible - $.01 par value;
authorized, 2,000,000 shares;
outstanding, 46,700 shares 1 1
Common stock - $.01 par
value; authorized,
20,500,000 shares;
outstanding, 2,125,742 21 32
at June 30, 1992 and
3,187,613 as adjusted for
exercise of rights
Additional paid in capital:
Preferred 4,319 4,319
Common 15,988 17,472
Accumulated deficit (10,965) (10,965)
-------- --------
Total stockholders'
equity 9,364 10,859
-------- --------
Total liabilities
and stockholders'
equity $250,179 $251,674
======== ========
</TABLE>
(1) Assumes full subscription of 1,062,871 shares at $1.50 per share, less
registration costs of $100,000.
-16-
<PAGE> 41
PLAN OF DISTRIBUTION
The Common Stock offered hereby is being offered by the Company directly
to holders of Rights, Preferred Stock and Warrants. The Company has not
employed any brokers, dealers or underwriters in connection with the Offering,
and no underwriting commissions, fees or discounts will be paid in connection
with the Offering. Certain employees of the Company may solicit responses from
Holders to the Offering, but such employees will not receive any commissions or
compensation for such services other than their normal employment compensation.
EXERCISE OF RIGHTS;
CONVERSION OF PREFERRED STOCK; AND EXERCISE OF WARRANTS
Holders who desire to exercise Rights should complete, date and sign the
Rights Exercise Form in accordance with the instructions set forth in the
Rights Exercise Form Information Sheet, which, along with a Rights Exercise
Form, accompanies this Prospectus as Exhibit A, and return it to the Company to
the attention of its Secretary, on or before the applicable expiration date,
together with payment in full of the appropriate exercise price. Any questions
concerning the procedure for conversion of the Preferred Stock or exercise of
the Warrants or Rights should be directed to the Company's Secretary.
Holders who desire to convert shares of Preferred Stock or exercise
Warrants are referred to Exhibits E and F of the Private Placement Memorandum
for the procedure to be followed to receive shares of Common Stock.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, as amended by Form 8 dated September 18, 1992 and by
Form 8 dated September 28, 1992 (the "Form 10-K") have been audited by Deloitte
& Touche, independent certified public accountants. Their report expresses an
unqualified opinion that includes an explanatory paragraph relating to
circumstances that raise substantial doubt about the Company's ability to
continue as a going concern, which report is incorporated by reference herein.
The foregoing consolidated financial statements have been so incorporated in
reliance upon the report of such firm given upon the authority of such firm as
experts in auditing and accounting.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware Corporation Law permits a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any action
-17-
<PAGE> 42
(other than an action by or in the right of the corporation, i.e., a
"derivative action") by reason of the fact that he is or was a director,
officer, employee or agent of the corporation against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement reasonably
incurred by such person if he or she acted in good faith and in a manner such
individual reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to a criminal action, which he or she had no
reason to believe was unlawful. A similar standard of care is applicable in
the case of derivative actions, except that indemnification only extends to
expenses incurred in connection with the defense or settlement of such an
action and requires court approval before there can be any indemnification if
the person seeking indemnification has been found liable to the corporation.
Consequently, directors and officers may be entitled under those provisions to
indemnification for grossly negligent business decisions. Employees and agents
of the Company may be indemnified and granted an advancement of litigation
expenses to the extent authorized from time to time by the Board of Directors
of the Company.
Indemnification may be made by the Company only upon the determination
that such director, officer, employee or agent has complied with the standard
of conduct set forth above. Such determination must be made on a case by case
basis by: (i) a majority vote of disinterested directors; (ii) in instances
where a quorum of disinterested directors is unavailable, then by independent
legal counsel in a written opinion; or (iii) by a vote of the Company's
stockholders.
Delaware corporate law permits corporations such as the Company to
maintain indemnification insurance against any liability asserted against an
officer or director and arising out of the individual's position, whether or
not pursuant to Delaware law the particular corporation would have the power to
indemnify such individual. The Company maintains director and officer
liability insurance for the benefit of the directors and officers of the
corporation.
The Company's by-laws contain indemnification provisions which mirror the
indemnification provisions discussed above and which are contained in Delaware
Corporation Law. Specifically, the by-laws require that the Company indemnify
to the fullest extent permitted by law individuals who were, or are a party to
a threatened, pending or completed legal action of any type by reason of the
fact that such individual served the Company as a director, officer or
employee. The by-laws also require that such person have acted in good faith
and in a manner which the officer or director reasonably believed to be in the
best interests of the Company. Similarly, the by-laws provide for
indemnification of directors, officers or employees in derivative suits in the
same manner as is provided for pursuant to Delaware General Corporate law.
Such indemnification provisions as are set forth in statutes and the
Company's by-laws are not exclusive of any other right an individual seeking
indemnification may be entitled to under any agreement, vote of stockholders
-18-
<PAGE> 43
or vote of disinterested directors. Any indemnification rights set forth under
law, bylaw or agreement continue after such person has ceased to hold office
and such rights inure to the benefit of the heirs, executors and administrators
of any person so eligible for indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
-19-
<PAGE> 44
EXHIBIT A
INFORMATION SHEET
for Exercise of Rights
WHO IS ELIGIBLE.
Each shareholder of Westport Bancorp, Inc. (the "Company") is entitled to
purchase one additional share of Common Stock for every two shares of Common
Stock held of record by such shareholder ( a "Rights Holder") on February 21,
1992 (the "Record Date").
EXERCISE PRICE.
The Rights are exerciseable during the following periods and for the
following prices:
<TABLE>
<CAPTION>
Period of Exercise
Exercise Through and
Price From Including
- -------- ----
<S> <C> <C>
$1.50 The date hereof November 30, 1992
$2.00 December 1, 1992 May 31, 1993
$3.00 June 1, 1993 May 31, 1994
</TABLE>
WHAT YOU MUST DELIVER.
In order to exercise the Rights, Rights Holders must deliver to the
Company a duly executed Rights Exercise Form and payment for the Common Stock
such Rights Holder intends to purchase.
WHERE TO SEND COMPLETED FORM AND PAYMENT.
Completed Rights Exercise Forms and payment for shares of Common Stock
should be forwarded to:
Westport Bancorp, Inc.
87 Post Road East
Westport, Connecticut 06880
Attention: Secretary
-20-
<PAGE> 45
METHOD OF PAYMENT.
Payment must be made by a bank certified check, a cashier's check, or, in
the case of a Rights Holder who maintains an account at Westport Bank & Trust
Company, a personal check drawn on such account, payable to the order of
"Westport Bancorp, Inc." Payment may also be made in cash at the offices of the
Company. Cash payments should not be mailed.
PAYMENT AND EXERCISE DEADLINES.
Payment and a duly executed Rights Exercise Form must be received by 5:00
p.m. New York time on or before the last day of each purchase period in order
to purchase shares at the exercise price in effect during such purchase period;
provided, however, that the Rights shall be void and all rights represented
thereby shall cease unless exercised before 5:00 p.m. New York time, on the
last day of the third purchase period.
FAILED OR MISDIRECTED DELIVERY OF RIGHTS EXERCISE FORM OR PAYMENT.
The risk of failed or misdirected delivery of Rights Exercise Forms and
payments to the Company will be borne by such Rights Holder and not by the
Company.
NON-TRANSFERABILITY.
The Rights are non-transferable.
DATE OF ISSUANCE OF COMMON STOCK.
The Rights will be deemed to have been exercised and the Common Stock
issuable upon such exercise shall be deemed to have been issued, and such
Rights Holder or other person so designated to be named therein shall be deemed
to have become the shareholder of record of such shares for all purposes, as of
the date the Rights Exercise Form and payment are received by the Company.
FRACTIONAL SHARES.
Fractional Shares will not be issued. In the event that the grant of the
Rights results in the Rights Holder being entitled to a fractional share, the
number of shares such Rights Holder is entitled to purchase shall be rounded up
to the next whole number.
-21-
<PAGE> 46
RIGHTS EXERCISE FORM
(To be executed if holder desires to
exercise the Rights.)
To: WESTPORT BANCORP, INC.
The undersigned hereby irrevocably elects to exercise Rights to purchase
______ shares of Common Stock of Westport Bancorp, Inc., at a price of
$____ per share*, which payment is delivered herewith, and requests that
certificates for such Common Shares be issued in the name of and be delivered
to:
- --------------------------------------------------------------------------------
(Print Name)
- --------------------------------------------------------------------------------
(Social Security or other identifying number)
- --------------------------------------------------------------------------------
(Address)
- ---------------------------------------------
(Telephone)
Please date and sign exactly as your name appears on your present stock
certificate. All joint owners should sign. When signing as a fiduciary,
representative or corporate officer, give full title as such.
Date: _____________, 19__
-------------------------------------------
(Signature)
------------------------------------------
(Signature)
- --------------------------
*$1.50 from the date hereof through and including November 30, 1992.
$2.00 from December 1, 1992 through and including May 31, 1993.
$3.00 from June 1, 1993 through and including May 31, 1994.
-22-
