<PAGE>
As filed with the Securities and Exchange Commission on December 16, 1996
Registration No. 333-15891
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________
WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 6712 06-1187536
(State of (Primary Standard Industrial (I.R.S. Employer
Incorporation) Classification Code Number) Identification No.)
________________________
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
________________________
John V. Brennan
Executive Vice President,
Chief Financial Officer and Treasurer
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
(203) 578-2335
(Name, address including zip code, and telephone number,
including area code, of registrant's agent for service)
________________________
Copies to:
Stuart G. Stein, Esq. Stanford N. Goldman, Jr., Esq.
Hogan & Hartson L.L.P. Mintz, Levin, Cohn, Ferris, Glovsky &
555 Thirteenth Street, N.W. Popeo, P.C.
Washington, D.C. 20004 One Financial Center
(202) 637-8575 Boston, MA 02111
(617) 542-6000
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
DS BANCOR, INC.
33 ELIZABETH STREET
DERBY, CONNECTICUT 06418
December ___, 1996
TO THE SHAREHOLDERS OF
DS BANCOR, INC.:
You are cordially invited to attend a special meeting of shareholders
(the "DS Bancor Meeting") of DS Bancor, Inc. ("DS Bancor") to be held on January
23, 1997, at 10:00 a.m. at the Trumbull Marriott, 180 Hawley Lane, Trumbull,
Connecticut.
As described in the enclosed Joint Proxy Statement/Prospectus, at the
DS Bancor Meeting you will be asked to approve the Agreement and Plan of Merger,
dated as of October 7, 1996, among Webster Financial Corporation ("Webster"),
Webster Acquisition Corp. ("Merger Sub") and DS Bancor (the "Merger Agreement"),
and the merger provided for therein, pursuant to which DS Bancor would be
acquired by Webster. The Merger Agreement provides for the acquisition of DS
Bancor to occur by merging Merger Sub, a wholly-owned subsidiary of Webster
formed for such purpose, into DS Bancor (the "Merger"). Upon the Merger, each
outstanding share of DS Bancor common stock ("DS Bancor Common Stock") will be
converted into a certain number of shares of Webster common stock ("Webster
Common Stock"), plus cash to be paid in lieu of fractional shares. It is
intended that such conversion will qualify as a tax-free exchange for federal
income tax purposes.
Each share of DS Bancor Common Stock will entitle its holder to one
vote. Consummation of Webster's acquisition of DS Bancor is subject to certain
conditions, including approval of the Merger Agreement by at least two-thirds of
the outstanding shares of DS Bancor Common Stock entitled to be voted at the DS
Bancor Meeting and the receipt of certain regulatory approvals. Consummation of
the transaction is also subject to approval by the holders of Webster Common
Stock of the issuance of additional shares of Webster Common Stock in connection
with the transactions contemplated by the Merger Agreement. Approval of a
proposed amendment to Webster's restated certificate of incorporation, as
amended, which also is being sought by Webster, is not a condition to the Merger
Agreement.
Alex. Brown & Sons Incorporated ("Alex. Brown"), DS Bancor's financial
advisor in connection with the Merger, has delivered its written opinion to DS
Bancor's Board of Directors that, as of the date of the Merger Agreement, the
consideration to be received by the holders of DS Bancor Common Stock in the
Merger was fair to such holders from a financial point of view. The written
opinion of Alex. Brown is reproduced in full as Appendix A to the accompanying
----------
Joint Proxy Statement/Prospectus.
YOUR BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MERGER PROVIDED FOR THEREIN AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF
THE MERGER AGREEMENT AND THE MERGER PROVIDED FOR THEREIN.
<PAGE>
THE REQUIRED VOTE OF THE DS BANCOR SHAREHOLDERS WITH RESPECT TO THE
MERGER AGREEMENT IS BASED UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF DS
BANCOR COMMON STOCK AND NOT UPON THE NUMBER OF SHARES WHICH ARE ACTUALLY VOTED.
ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD OR TO VOTE IN PERSON AT THE DS
BANCOR MEETING OR THE ABSTENTION FROM VOTING BY A SHAREHOLDER WILL HAVE THE SAME
EFFECT AS A VOTE "AGAINST" THE MERGER AGREEMENT AND THE MERGER PROVIDED FOR
THEREIN.
You are urged to carefully read the Joint Proxy Statement/Prospectus,
which provides you with a description of the Webster Common Stock and the terms
of the Merger. A copy of the Merger Agreement (including each of the exhibits
thereto) and the other documents described in the accompanying Joint Proxy
Statement/Prospectus will be provided without charge upon oral or written
request to Lee A. Gagnon, Executive Vice President, Chief Operating Officer and
Secretary of Webster Financial Corporation, Webster Plaza, Waterbury,
Connecticut 06702, telephone (203) 578-2217. IT IS VERY IMPORTANT THAT YOUR
SHARES BE REPRESENTED AT THE DS BANCOR MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE DS BANCOR MEETING, YOU ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-
PAID ENVELOPE. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT
THE DS BANCOR MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER
AGREEMENT.
If you have any questions or need assistance in voting your shares,
please call D.F. King & Co., Inc., who is assisting us, toll free at 1-800-487-
4870.
Sincerely,
HARRY P. DIADAMO, JR.
President and Chief Executive Officer
<PAGE>
DS BANCOR, INC.
33 ELIZABETH STREET
DERBY, CONNECTICUT 06418
___________________
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
JANUARY 23, 1997
___________________
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "DS
Bancor Meeting") of DS Bancor, Inc. ("DS Bancor") will be held on January 23,
1997, at 10:00 a.m. at the Trumbull Marriott, 180 Hawley Lane, Trumbull,
Connecticut for the following purposes:
1. To consider and vote upon a proposal to approve and adopt
the Agreement and Plan of Merger, dated as of October 7,
1996, among Webster Financial Corporation ("Webster"),
Webster Acquisition Corp. ("Merger Sub") and DS Bancor (the
"Merger Agreement") and the merger provided for therein. As
more fully described in the accompanying Joint Proxy
Statement/Prospectus, the Merger Agreement provides for DS
Bancor to be acquired by Webster by merging Merger Sub, a
wholly-owned subsidiary of Webster formed for such purpose,
into DS Bancor (the "Merger"). As part of the Merger, each
outstanding share of DS Bancor common stock ("DS Bancor
Common Stock") will be converted into a certain number of
shares of Webster common stock, plus cash to be paid in lieu
of fractional shares; and
2. To transact such other business as may properly come before
the DS Bancor Meeting, or any adjournments or postponements
thereof, including, without limitation, a motion to adjourn
the DS Bancor Meeting to another time and/or place for the
purpose of soliciting additional proxies in order to approve
the Merger Agreement and the Merger provided for therein or
otherwise.
The Board of Directors of DS Bancor has fixed the close of business on
December 6, 1996 as the record date for the determination of shareholders of DS
Bancor entitled to notice of and to vote at the DS Bancor Meeting. Only holders
of record of the DS Bancor Common Stock at the close of business on that date
will be entitled to notice of and to vote at the DS Bancor Meeting or any
adjournments or postponements thereof.
By Order of the Board of Directors
HARRY P. DIADAMO, JR.
President and Chief Executive Officer
Derby, Connecticut
December ___, 1996
WE URGE YOU TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR
NOT YOU PLAN TO ATTEND THE DS BANCOR MEETING IN PERSON. YOUR PROXY MAY BE
REVOKED IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT IS VOTED AT THE DS BANCOR MEETING.
<PAGE>
WEBSTER FINANCIAL CORPORATION
WEBSTER PLAZA
WATERBURY, CONNECTICUT 06702
December __, 1996
TO THE SHAREHOLDERS OF
WEBSTER FINANCIAL CORPORATION:
You are cordially invited to attend a special meeting of shareholders
(the "Webster Meeting") of Webster Financial Corporation ("Webster") to be held
on January 23, 1997, at 4:00 p.m. at the Courtyard by Marriott, 63 Grand Street,
Waterbury, Connecticut.
As described in the enclosed Joint Proxy Statement/Prospectus, at the
Webster Meeting, you will be asked to approve: (i) the issuance of up to
4,681,658 shares of Webster common stock ("Webster Common Stock") in connection
with the acquisition by Webster of DS Bancor, Inc. ("DS Bancor") pursuant to the
Agreement and Plan of Merger, dated as of October 7, 1996, among Webster,
Webster Acquisition Corp. ("Merger Sub") and DS Bancor (the "Merger Agreement"),
and (ii) the amendment to Webster's restated certificate of incorporation, as
amended (the "Restated Certificate of Incorporation"), to increase Webster's
authorized capital stock by increasing the number of authorized shares of
Webster Common Stock from 14,000,000 to 30,000,000. Under the Merger Agreement,
upon Webster's acquisition of DS Bancor, each outstanding share of DS Bancor
common stock will be converted into a certain number of shares of Webster Common
Stock, plus cash to be paid in lieu of fractional shares.
Each share of Webster Common Stock will entitle its holder to one vote
on each matter properly presented at the Webster Meeting. The holders of
Webster's Series B 7 1/2% Cumulative Convertible Preferred Stock are not
entitled to vote at the Webster Meeting. Consummation of Webster's acquisition
of DS Bancor is subject to certain conditions, including approval of the
issuance of the Webster Common Stock by a majority of the total votes cast on
the proposal and the receipt of certain regulatory approvals. Consummation of
the transaction also is subject to the approval by DS Bancor shareholders of the
Merger Agreement. As to the proposed amendment to the Restated Certificate of
Incorporation, the affirmative vote of a majority of the outstanding shares of
Webster Common Stock entitled to vote is required. Approval of the proposed
amendment to Webster's Restated Certificate of Incorporation is not a condition
to the Merger Agreement.
Merrill Lynch & Co. ("Merrill Lynch"), Webster's financial advisor in
connection with the Merger, has delivered its opinion that the exchange ratio,
taken as a whole, is fair to Webster from a financial point of view. The
written opinion of Merrill Lynch is reproduced in full as Appendix B to the
----------
accompanying Joint Proxy Statement/Prospectus.
YOUR BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE ISSUANCE OF THE
ADDITIONAL SHARES OF WEBSTER COMMON STOCK IN CONNECTION WITH THE MERGER
AGREEMENT AND THE PROPOSED AMENDMENT TO WEBSTER'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF WEBSTER COMMON
STOCK AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF SUCH MATTERS.
You are urged to carefully read the Joint Proxy Statement/Prospectus,
which provides you with a description of the issuance of the Webster Common
Stock and the terms of the Merger pursuant to which such shares will be issued
and of the amendment to Webster's Restated Certificate of Incorporation. A copy
of the Merger Agreement (including each of the exhibits thereto) and the other
documents described in the accompanying Joint Proxy Statement/Prospectus will be
provided without charge upon oral or written request to Lee A. Gagnon, Executive
Vice President, Chief Operating Officer and Secretary of Webster Financial
Corporation, Webster Plaza, Waterbury,
<PAGE>
Connecticut 06702, telephone (203) 578-2217. IT IS VERY IMPORTANT THAT YOUR
SHARES BE REPRESENTED AT THE WEBSTER MEETING. WHETHER OR NOT YOU PLAN TO ATTEND
THE WEBSTER MEETING, YOU ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE AMENDMENT.
If you have any questions or need assistance in voting your shares,
please call D.F. King & Co., Inc., who is assisting us, toll free at 1-800-769-
6414.
Sincerely,
JAMES C. SMITH
Chairman, President and Chief Executive Officer
<PAGE>
WEBSTER FINANCIAL CORPORATION
WEBSTER PLAZA
WATERBURY, CONNECTICUT 06702
___________________
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
JANUARY 23, 1997
___________________
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the
"Webster Meeting") of Webster Financial Corporation ("Webster") will be held on
January 23, 1997, at 4:00 p.m. at the Courtyard by Marriott, 63 Grand Street,
Waterbury, Connecticut, for the following purposes:
1. To consider and vote upon a proposal to approve the issuance
of up to 4,681,658 shares of Webster common stock ("Webster
Common Stock") in connection with the transactions
contemplated by the Agreement and Plan of Merger, dated as
of October 7, 1996 (the "Merger Agreement"), among Webster,
Webster Acquisition Corp. ("Merger Sub") and DS Bancor, Inc.
("DS Bancor"). As more fully described in the accompanying
Joint Proxy Statement/Prospectus, the Merger Agreement
provides for DS Bancor to be acquired by Webster by merging
Merger Sub, a wholly-owned subsidiary of Webster formed for
such purpose, into DS Bancor (the "Merger"). As part of the
Merger, each outstanding share of DS Bancor common stock
will be converted into a certain number of shares of Webster
Common Stock, plus cash to be paid in lieu of fractional
shares;
2. To consider and vote upon a proposal to amend Webster's
restated certificate of incorporation, as amended, to
increase Webster's authorized capital stock by increasing
the number of authorized shares of Webster Common Stock from
14,000,000 to 30,000,000; and
3. To transact such other business as may properly come before
the Webster Meeting, or any adjournments or postponements
thereof, including, without limitation, a motion to adjourn
the Webster Meeting to another time and/or place for the
purpose of soliciting additional proxies in order to approve
the issuance of Webster Common Stock or otherwise.
Each share of Webster Common Stock will entitle its holder to one vote
on each matter properly presented at the Webster Meeting. The holders of Series
B 7 1/2% Cumulative Convertible Preferred Stock are not entitled to vote at the
Webster Meeting.
<PAGE>
The Board of Directors of Webster has fixed the close of business on
December 6, 1996 as the record date for the determination of shareholders of
Webster entitled to notice of and to vote at the Webster Meeting. Only holders
of record of Webster Common Stock at the close of business on that date will be
entitled to notice of and to vote at the Webster Meeting or any adjournments or
postponements thereof.
By Order of the Board of Directors
JAMES C. SMITH
Chairman, President and Chief Executive Officer
Waterbury, Connecticut
December __, 1996
WE URGE YOU TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND
RETURN IT AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR
NOT YOU PLAN TO ATTEND THE WEBSTER MEETING IN PERSON. YOUR PROXY MAY BE REVOKED
IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AT
ANY TIME BEFORE IT IS VOTED AT THE WEBSTER MEETING.
<PAGE>
DS BANCOR, INC. WEBSTER FINANCIAL CORPORATION
33 ELIZABETH STREET WEBSTER PLAZA
DERBY, CONNECTICUT 06418 WATERBURY, CONNECTICUT 06702
JOINT PROXY STATEMENT
______________________
WEBSTER FINANCIAL CORPORATION
PROSPECTUS
4,681,658 SHARES OF COMMON STOCK
______________________
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
DS Bancor, Inc. ("DS Bancor") and to shareholders of Webster Financial
Corporation ("Webster"). This Joint Proxy Statement/Prospectus relates to the
special meeting of shareholders of DS Bancor (the "DS Bancor Meeting") to be
held on January 23, 1997, at 10:00 a.m. at the Trumbull Marriott, 180 Hawley
Lane, Trumbull, Connecticut, and to the special meeting of shareholders of
Webster (the "Webster Meeting") to be held on January 23, 1997, at 4:00 p.m. at
the Courtyard by Marriott, 63 Grand Street, Waterbury, Connecticut, and to any
adjournments or postponements of the DS Bancor Meeting and the Webster Meeting.
This Joint Proxy Statement/Prospectus is first being mailed to shareholders of
DS Bancor and to shareholders of Webster on or around December ___, 1996.
At the DS Bancor Meeting, the principal item of business will be to
consider and vote upon the approval and adoption of the Agreement and Plan of
Merger, dated as of October 7, 1996, among Webster, Webster Acquisition Corp.
("Merger Sub"), and DS Bancor (the "Merger Agreement") and the merger provided
for therein. At the Webster Meeting, the principal items of business will be:
(i) to consider and vote upon a proposal to approve the issuance of up to
4,681,658 shares of Webster common stock, par value $.01 per share ("Webster
Common Stock") in connection with the acquisition of DS Bancor by Webster
pursuant to the Merger Agreement, and (ii) to consider and vote upon a proposal
to approve an amendment to Webster's restated certificate of incorporation, as
amended ("Restated Certificate of Incorporation") to increase Webster's
authorized capital stock by increasing the number of authorized shares of
Webster Common Stock from 14,000,000 to 30,000,000. The holders of Webster's
Series B 7 1/2% Cumulative Convertible Preferred Stock ("Series B Stock") are
not entitled to vote at the Webster Meeting. Approval of the proposed amendment
to Webster's Restated Certificate of Incorporation is not a condition to the
Merger Agreement.
The Merger Agreement provides for DS Bancor to be acquired by Webster
through a merger of Merger Sub, a wholly-owned subsidiary of Webster formed for
such purpose, into DS Bancor (the "Merger"). As part of the Merger, each issued
and outstanding share of DS Bancor common stock, par value $1.00 per share ("DS
Bancor Common Stock"), will be converted into a specified number of shares of
Webster Common Stock (the "Exchange Ratio"). Cash will be paid in lieu of
fractional shares. The Exchange Ratio will be determined by dividing $43.00 by
the Base Period Trading Price (defined below), computed to five decimal places.
The Exchange Ratio is subject to adjustment such that if the Base Period Trading
Price is greater than $38.50, the Exchange Ratio shall be 1.11688 and if the
Base Period Trading Price is less than $31.50, the Exchange Ratio shall be
1.36508. Furthermore, if the Base Period Trading Price is less than $28.00, the
Merger Agreement may be terminated by DS Bancor unless Webster elects that the
Exchange Ratio shall be equal to the number resulting from dividing $38.22 by
the Base Period Trading Price, which may require Webster to register additional
shares with the Securities and Exchange Commission ("SEC") and seek further
shareholder approval.
-1-
<PAGE>
The "Base Period Trading Price" will be the average of the daily closing
prices per share for Webster Common Stock for the 15 consecutive trading days on
which shares of Webster Common Stock are actually traded (as reported on The
Nasdaq National Market) ending on the day preceding the receipt of the last
required federal bank regulatory approval. Based on the average of the daily
closing prices per share for Webster Common Stock for the 15 consecutive trading
days on which shares of Webster Common Stock were actually traded prior to
December 6, 1996 (the most recent practicable date prior to the printing of this
Joint Proxy Statement/Prospectus) of $36.73, the Exchange Ratio would be
1.17071. Because the market price of Webster Common Stock is subject to
fluctuation, the Exchange Ratio for the number of shares of Webster Common Stock
that holders of DS Bancor Common Stock will receive in the Merger may materially
increase or decrease prior to the Merger. No assurance can be given as to the
market price of Webster Common Stock at the time of the Merger. See "MARKET
PRICES AND DIVIDENDS." In connection with the Merger Agreement, DS Bancor has
granted Webster an irrevocable option (the "Option") to purchase up to 564,296
newly issued shares of DS Bancor Common Stock at a purchase price of $36.50 per
share (which price is subject to adjustment) upon the occurrence of certain
events. The Merger is subject to various conditions, including approvals of
applicable federal and Connecticut regulatory authorities. DS Bancor and Webster
expect that the Merger will be consummated in the first quarter of 1997, or as
soon as possible after the receipt of all regulatory and shareholder approvals
and the expiration of all regulatory waiting periods. If the Merger is not
consummated by June 30, 1997, the Merger Agreement will be terminated unless DS
Bancor and Webster mutually consent to an extension. For a more detailed
description of the Merger and the Option, see "THE MERGER."
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Webster with respect to up to 4,681,658 shares of Webster Common Stock subject
to issuance in connection with the acquisition of DS Bancor by Webster pursuant
to the Merger Agreement.
THE WEBSTER COMMON STOCK OFFERED HEREBY INVOLVES RISK. DS BANCOR
SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE MATTERS DISCLOSED UNDER "RISK
FACTORS" BEGINNING AT PAGE 21 RELATING TO CERTAIN FACTORS RELEVANT TO AN
ASSESSMENT OF WEBSTER AND THE WEBSTER COMMON STOCK.
THE WEBSTER COMMON STOCK HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC,
ANY STATE SECURITIES COMMISSION, THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), OR THE CONNECTICUT COMMISSIONER
OF BANKING (THE "CONNECTICUT COMMISSIONER"), NOR HAS THE SEC, ANY STATE
SECURITIES COMMISSION, THE OTS, THE FDIC, OR THE CONNECTICUT COMMISSIONER PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES OF WEBSTER
COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND ARE
NOT INSURED BY THE FDIC, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION
INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENTAL AGENCY.
-2-
<PAGE>
The information set forth in this Joint Proxy Statement/Prospectus
concerning DS Bancor has been furnished by DS Bancor. The information concerning
Webster and Merger Sub has been furnished by Webster. The descriptions of the
Merger Agreement, the Option Agreement and the Stockholder Agreement (as defined
herein) and other documents in this Joint Proxy Statement/Prospectus are
qualified by reference to the text of those documents, which are incorporated
herein by reference, copies of which will be provided without charge upon
written or oral request addressed to Lee A. Gagnon, Executive Vice President,
Chief Operating Officer and Secretary of Webster Financial Corporation, Webster
Plaza, Waterbury, Connecticut 06702, telephone (208) 578-2217.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT/ PROSPECTUS, OR
INCORPORATED BY REFERENCE HEREIN, IN CONNECTION WITH THE SOLICITATION OF PROXIES
BY DS BANCOR OR WEBSTER OR THE OFFERING OF WEBSTER COMMON STOCK MADE HEREBY,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY DS BANCOR OR WEBSTER. THIS JOINT PROXY
STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO PURCHASE, ANY WEBSTER COMMON STOCK OFFERED BY THIS JOINT PROXY
STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, OR SOLICITATION OF AN
OFFER, OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/ PROSPECTUS NOR ANY DISTRIBUTION OF THE WEBSTER COMMON
STOCK OFFERED PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF DS BANCOR OR WEBSTER OR THE INFORMATION HEREIN OR THE DOCUMENTS OR
REPORTS INCORPORATED BY REFERENCE SINCE THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS.
______________________
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS DECEMBER __, 1996.
-3-
<PAGE>
AVAILABLE INFORMATION
DS Bancor and Webster are both subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder, and in accordance therewith file reports,
proxy statements and other information with the SEC. Such reports, proxy
statements and other information can be obtained at prescribed rates from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, such reports, proxy statements and other information filed
by DS Bancor and Webster may be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611 and 7 World Trade Center, Suite 1300, New York, New York 10048.
The SEC maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The address of the SEC's Web site is (http://www.sec.gov). Webster
Common Stock and DS Bancor Common Stock are traded on The Nasdaq National
Market. Reports, proxy statements and other information concerning Webster and
DS Bancor can be inspected at the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Webster has filed with the SEC a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the Webster Common Stock to be issued to the
shareholders of DS Bancor in connection with the acquisition of DS Bancor by
Webster pursuant to the Merger Agreement. As permitted by the rules and
regulations of the SEC, this Joint Proxy Statement/Prospectus does not contain
all the information set forth in the Registration Statement. Such additional
information may be obtained from the SEC's principal office in Washington, D.C.
as set forth above. Statements contained in this Joint Proxy
Statement/Prospectus or in any document incorporated by reference herein as to
the contents of any contract or other document are not necessarily complete and,
in each instance where such contract or document is filed as an exhibit to the
Registration Statement, reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by DS Bancor with the SEC (File No. 0-16193)
under the Exchange Act are hereby incorporated in this Joint Proxy
Statement/Prospectus by reference: (i) DS Bancor's Annual Report on Form 10-K
for the year ended December 31, 1995; (ii) DS Bancor's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30,
1996; and (iii) DS Bancor's Current Report on Form 8-K filed with the SEC on
October 16, 1996.
The following documents filed by Webster with the SEC (File No. 0-15213)
under the Exchange Act are hereby incorporated in this Joint Proxy
Statement/Prospectus by reference: (i) Webster's Annual Report on Form 10-K for
the year ended December 31, 1995; (ii) Webster's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996; and
(iii) Webster's Current Reports on Form 8-K filed with the SEC on October 9,
1996 and November 25, 1996.
All documents filed by DS Bancor or Webster pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement/Prospectus and prior to the date of the DS Bancor Meeting and
the Webster Meeting shall be deemed to be incorporated by reference in this
Joint Proxy Statement/Prospectus. In lieu of incorporating by reference the
description of the capital stock of Webster which is contained in a registration
statement filed under the Exchange Act, such description is included in this
Joint Proxy Statement/Prospectus. See "DESCRIPTION OF WEBSTER CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS."
-4-
<PAGE>
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 Joint Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other 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 Joint
Proxy Statement/Prospectus. Webster will provide without charge to each person,
including any beneficial owner, to whom a copy of this Joint Proxy
Statement/Prospectus is delivered, upon written or oral request of such person,
a copy of any or all of the documents incorporated herein by reference and not
delivered herewith (not including exhibits to the information incorporated by
reference unless such exhibits are specifically incorporated by reference into
the text of such documents).
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST FROM: LEE A. GAGNON, EXECUTIVE VICE PRESIDENT, CHIEF
OPERATING OFFICER AND SECRETARY, WEBSTER FINANCIAL CORPORATION, WEBSTER PLAZA,
WATERBURY, CONNECTICUT 06702; TELEPHONE (203) 578-2217. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AS SOON AS
POSSIBLE, BUT NO LATER THAN JANUARY 16, 1997.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................ 4
Incorporation of Certain Documents
by Reference....................................................... 4
Merger Summary....................................................... 7
The Parties........................................................ 7
The Merger......................................................... 7
Comparison of Shareholder Rights................................... 12
Market Prices of Common Stock...................................... 12
Comparative Per Share Data......................................... 13
Summary Financial and Other
Data............................................................ 15
Risk Factors......................................................... 21
Growth through Acquisitions........................................ 21
Legislative and General Regulatory
Developments.................................................... 21
Sources of Funds for Cash Dividends................................ 22
Effect of Interest Rate Fluctuations............................... 22
DS Bancor Meeting.................................................... 23
Matters to be Considered at the
DS Bancor Meeting............................................... 23
Record Date and Voting............................................. 23
Vote Required; Revocability of
Proxies......................................................... 24
Solicitation of Proxies............................................ 25
Webster Meeting...................................................... 26
Matters to be Considered at the
Webster Meeting................................................. 26
Record Date and Voting............................................. 26
Vote Required; Revocability of
Proxies......................................................... 28
Solicitation of Proxies.............................................. 28
The Merger........................................................... 29
The Parties........................................................ 29
Background of the Merger........................................... 30
Recommendation of the DS Bancor Board
of Directors and Reasons for
the Merger...................................................... 31
Recommendation of the Webster Board of
Directors and Reasons for the
Issuance........................................................ 32
Purpose and Effects of the Merger.................................. 33
Structure.......................................................... 33
Exchange Ratio..................................................... 34
Regulatory Approvals............................................... 36
Conditions to the Merger........................................... 36
Conduct of Business Pending
the Merger...................................................... 37
Third Party Proposals.............................................. 37
Expenses; Breakup Fee.............................................. 38
Opinion of DS Bancor Financial Advisor............................. 38
Opinion of Webster Financial Advisor............................... 42
Certain Provisions of the Merger
Agreement....................................................... 48
Termination and Amendment of
the Merger Agreement............................................ 49
Certain Federal Income Tax
Consequences.................................................... 50
Accounting Treatment............................................... 51
Resales of Webster Common Stock
Received in the Merger.......................................... 51
No Appraisal Rights................................................ 51
Interests of Certain Persons in
the Merger - Arrangements with
and Payments to DS Bancor
Directors and Executive Officers................................ 51
Indemnification.................................................... 52
Options............................................................ 52
Option Agreement................................................... 53
Amendment to Webster's Restated Certificate
of Incorporation................................................... 56
Pro Forma Combined Financial
Statements......................................................... 58
Market Prices and Dividends.......................................... 66
Webster Common Stock............................................... 66
DS Bancor Common Stock............................................. 67
Description of Webster Capital Stock and
Comparison of Shareholder Rights................................... 68
Webster Common Stock............................................... 68
Series B Stock..................................................... 69
Series A Stock..................................................... 70
Series C Stock..................................................... 70
Senior Notes....................................................... 70
Certificate of Incorporation and Bylaw
Provisions...................................................... 71
Applicable Law..................................................... 74
Adjournment of DS Bancor and Webster
Meetings........................................................... 76
Shareholder Proposals................................................ 76
Other Matters........................................................ 76
Experts.............................................................. 76
Legal Matters........................................................ 77
Appendix A
Opinion of Alex. Brown & Sons
Incorporated....................................................... A-1
Appendix B
Opinion of Merrill Lynch & Co. .................................... B-1
</TABLE>
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<PAGE>
MERGER SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus. This summary is not intended to be a
complete description and is qualified in its entirety by reference to the more
detailed information contained elsewhere in this Joint Proxy
Statement/Prospectus. SHAREHOLDERS OF DS BANCOR AND OF WEBSTER ARE URGED BEFORE
VOTING TO GIVE CAREFUL CONSIDERATION TO ALL OF THE INFORMATION CONTAINED IN OR
INCORPORATED BY REFERENCE INTO THIS JOINT PROXY STATEMENT/PROSPECTUS.
THE PARTIES
WEBSTER. Webster is a Delaware corporation and the holding company of
Webster Bank, its wholly-owned federal savings bank subsidiary which is
headquartered in Waterbury, Connecticut. Deposits at Webster Bank are FDIC
insured. Through Webster Bank, Webster currently serves customers from 63
banking offices located in New Haven, Fairfield, Litchfield, Hartford and
Middlesex Counties in Connecticut. Webster's focus is on providing financial
services to individuals, families and businesses. Webster emphasizes three
business lines - consumer banking, business banking and mortgage banking; each
supported by centralized administration, marketing, finance and operations.
Webster Bank's goal is to provide banking services that are fairly priced,
reliable and convenient.
At September 30, 1996, Webster had total consolidated assets of $4.0
billion, total deposits of $3.0 billion, and shareholders' equity of $216.7
million, or 5.44% of total assets. Webster Common Stock is quoted on The Nasdaq
National Market under the symbol "WBST". The address of Webster's principal
executive offices is Webster Financial Corporation, Webster Plaza, Waterbury,
Connecticut 06702, and its telephone number is (203) 753-2921. See "THE MERGER--
The Parties."
MERGER SUB. Merger Sub, a Delaware corporation, is a wholly-owned
subsidiary of Webster formed solely to facilitate the Merger. The separate
corporate existence of Merger Sub will terminate upon the Merger. See "THE
MERGER -- The Parties."
DS BANCOR. DS Bancor, a Delaware corporation, is the holding company of
Derby Savings Bank ("Derby"), a Connecticut-chartered savings bank headquartered
in Derby, Connecticut. Deposits at Derby are FDIC insured. Through Derby, DS
Bancor is engaged primarily in the business of attracting deposits from the
general public and investing those funds primarily in residential mortgage
loans. Derby also makes commercial mortgage and consumer loans. Through Derby,
DS Bancor currently serves customers from 23 banking offices located primarily
in south central Connecticut. Its general market area is western New Haven,
eastern Fairfield and Hartford Counties. Derby provides a wide range of retail
deposit and credit services, with special emphasis on residential real estate
lending.
At September 30, 1996, DS Bancor had total consolidated assets of $1.3
billion, total deposits of $1.0 billion, and shareholders' equity of $86.5
million, or 6.87% of total assets. DS Bancor Common Stock is quoted on The
Nasdaq National Market under the symbol "DSBC". The address of DS Bancor's
principal executive offices is DS Bancor, Inc., 33 Elizabeth Street, Derby,
Connecticut 06418, and its telephone number is (203) 736-1000. See "THE MERGER--
The Parties."
THE MERGER
GENERAL. The Merger Agreement provides for the acquisition of DS Bancor by
Webster through the merger of Merger Sub into DS Bancor, with DS Bancor as the
surviving corporation (the "Surviving Corporation"). Immediately after the
consummation of the Merger, (i) Webster intends that the Surviving Corporation
will be merged into Webster, with Webster being the surviving holding company,
and (ii) Derby will be merged into Webster Bank (the "Bank Merger"), with
-7-
<PAGE>
Webster Bank as the surviving federal savings bank. Webster Bank will remain
headquartered in Waterbury, Connecticut as an FDIC insured federally chartered
savings bank.
At the Effective Time (as defined below) of the Merger, each outstanding
share of DS Bancor Common Stock, except for shares held as treasury stock or
held, directly or indirectly, by Webster, DS Bancor or any of their subsidiaries
(other than shares held in a fiduciary capacity ("Trust Account Shares") or in
respect of a debt previously contracted ("DPC Shares"), which shall be canceled,
will be converted into a certain number of shares of Webster Common Stock, plus
cash to be paid in lieu of fractional shares. See "The MERGER -- Exchange
Ratio." The Merger will not change the outstanding Webster Common Stock held by
Webster shareholders prior to the Merger.
DS Bancor and Webster expect that the Merger will be consummated in the
first quarter of 1997, or as soon as possible after the receipt of all
regulatory and shareholder approvals and the expiration of all regulatory
waiting periods. If the Merger is not consummated by June 30, 1997, the Merger
Agreement will be terminated unless DS Bancor and Webster mutually consent to an
extension. See "THE MERGER -- Structure."
EXCHANGE RATIO. The Merger Agreement provides that at the Effective Time,
each issued and outstanding share of DS Bancor Common Stock (other than shares
held, directly or indirectly, by DS Bancor, Webster or any of their subsidiaries
(other than Trust Account Shares or DPC Shares), which shall be canceled) will
be converted automatically at the Exchange Ratio into a specified number of
shares of Webster Common Stock. The Exchange Ratio will be determined by
dividing $43.00 by the Base Period Trading Price computed to five decimal
places. Cash will be paid in lieu of fractional shares. The Exchange Ratio is
subject to adjustment such that if the Base Period Trading Price is greater than
$38.50, the Exchange Ratio shall be 1.11688 and if the Base Period Trading Price
is less than $31.50, the Exchange Ratio shall be 1.36508. Furthermore, if the
Base Period Trading Price is less than $28.00, the Merger Agreement may be
terminated by DS Bancor unless Webster elects that the Exchange Ratio shall be
equal to the number resulting from dividing $38.22 by the Base Period Trading
Price, which may require Webster to register additional shares with the SEC and
seek further shareholder approval.
Based on the $36.73 average of the daily closing prices per share for
Webster Common Stock for the 15 consecutive trading days on which shares of
Webster Common Stock were actually traded prior to December 6, 1996 (the most
recent practicable date prior to the date of this Joint Proxy
Statement/Prospectus), the Exchange Ratio would be 1.17071. Because the market
price of Webster Common Stock is subject to fluctuation, the Exchange Ratio for
shares of Webster Common Stock that holders of DS Bancor Common Stock will
receive in the Merger may materially increase or decrease prior to the Merger.
No assurance can be given as to the Exchange Ratio at the time of the Merger.
See "MARKET PRICES AND DIVIDENDS." Such variance would not alter Webster's or DS
Bancor's obligation to consummate the Merger, except as provided above. Based on
the 3,037,784 shares of DS Bancor Common Stock outstanding on December 6, 1996
and the Exchange Ratio of 1.17071, Webster would issue up to 3,556,364 shares of
Webster Common Stock to the DS Bancor shareholders in the Merger, plus cash in
lieu of fractional shares. These numbers do not reflect additional shares of
Webster Common Stock to be issued in the event of the exercise prior to the
Merger of the 391,801 existing stock options held by directors, officers and
employees of DS Bancor.
A table setting forth a range of potential Base Period Trading Prices, and
resultant Exchange Ratios and pro forma market value equivalents of DS Bancor
Common Stock is provided below at "THE MERGER -- Exchange Ratio."
-8-
<PAGE>
DS BANCOR MEETING. The DS Bancor Meeting will be held on January 28, 1997
at 10:00 a.m. at the Trumbull Marriott, 180 Hawley Lane, Trumbull, Connecticut,
at which time the holders of record of DS Bancor Common Stock at the close of
business on December 6, 1996 (the "DS Bancor Record Date") will be asked to
consider and vote upon: (i) a proposal to approve and adopt the Merger Agreement
and the Merger provided for therein, and (ii) such other matters as may properly
be brought before the DS Bancor Meeting or any adjournments or postponements
thereof. The affirmative vote of the holders of two-thirds of the outstanding
shares of DS Bancor Common Stock entitled to vote at the DS Bancor Meeting is
required to approve and adopt the Merger Agreement and the Merger provided for
therein.
All of the directors of DS Bancor, who beneficially owned as of the DS
Bancor Record Date, an aggregate of 787,088 shares of DS Bancor Common Stock
(excluding all stock options) or approximately 25.9% of the outstanding shares
of DS Bancor, have entered into a stockholder agreement with Webster, dated as
of October 7, 1996 (the "Stockholder Agreement"), pursuant to which they have
each agreed, among other things, to vote all shares of DS Bancor Common Stock
with respect to which they have the right to vote in favor of the Merger
Agreement, the Merger and the other transactions contemplated by the Merger
Agreement and against any third party merger proposal. The executive officers of
DS Bancor and Derby also entered into the Stockholder Agreement insofar as it
relates to transfer restrictions and certain other matters. No separate
consideration was paid to any of the directors or executive officers for
entering into the Stockholder Agreement. Webster required that the Stockholder
Agreement be executed as a condition to Webster entering into the Merger
Agreement. See "DS BANCOR MEETING."
The Board of Directors of DS Bancor believes that the terms of the Merger
Agreement are fair to, and in the best interests of, DS Bancor and its
shareholders. THE BOARD OF DIRECTORS OF DS BANCOR UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE MERGER PROVIDED FOR THEREIN AND RECOMMENDS THAT HOLDERS
OF DS BANCOR COMMON STOCK VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER PROVIDED FOR THEREIN. For a discussion of the factors
considered by the Board of Directors in reaching its decision, see "THE MERGER
Background of the Merger" and "-- Recommendation of the DS Bancor Board of
Directors and Reasons for the Merger."
WEBSTER MEETING. The Webster Meeting will be held on January 23, 1997, at
4:00 p.m. at the Courtyard by Marriott, 63 Grand Street, Waterbury, Connecticut,
at which time the holders of record of Webster Common Stock at the close of
business on December 6, 1996 (the "Webster Record Date") will be asked to
consider and vote upon: (i) a proposal to approve the issuance of up to
4,681,658 shares of Webster Common Stock in connection with the acquisition of
DS Bancor by Webster pursuant to the Merger Agreement, (ii) the amendment of
Webster's Restated Certificate of Incorporation to increase Webster's authorized
capital stock by increasing the number of authorized shares of Webster Common
Stock from 14,000,000 to 30,000,000, and (iii) such other business as may
properly be brought before the Webster Meeting or any adjournments or
postponements thereof. The Merger is conditioned on the approval by the Webster
shareholders of the issuance of these shares of Webster Common Stock, which
approval requires an affirmative vote of a majority of the total votes cast on
the proposal. The Board of Directors of Webster believes that the terms of the
Merger Agreement are fair to, and in the best interests of Webster and its
shareholders. THE BOARD OF DIRECTORS OF WEBSTER UNANIMOUSLY APPROVED THE
ISSUANCE OF THE SHARES OF WEBSTER COMMON STOCK IN CONNECTION WITH THE MERGER
AGREEMENT AND THE PROPOSED AMENDMENT TO WEBSTER'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF WEBSTER COMMON
STOCK AND RECOMMENDS THAT THE HOLDERS OF WEBSTER COMMON STOCK VOTE "FOR"
APPROVAL OF SUCH MATTERS. For a discussion of the factors considered by the
Board of Directors in reaching its decision, see "THE MERGER -- Background of
the Merger" and "-- Recommendation of the Webster Board of Directors and Reasons
for the Issuance."
-9-
<PAGE>
FAIRNESS OPINIONS. On October 7, 1996, Alex. Brown & Sons Incorporated
("Alex. Brown") delivered its written opinion to the Board of Directors of DS
Bancor to the effect that, as of such date, the terms of the Merger Agreement,
including the Exchange Ratio, are fair, from a financial point of view, to DS
Bancor and its shareholders. The receipt of this opinion was a condition to DS
Bancor's obligations under the Merger Agreement. The opinion of Alex. Brown
describes the matters considered and the scope of the review undertaken in
rendering such opinion. Alex. Brown's opinion and presentations to the DS Bancor
Board, together with a review by the DS Bancor Board of the assumptions used by
Alex. Brown, were among the factors considered by the DS Bancor Board in
reaching its determination to approve the Merger Agreement and the Merger
provided for therein. On October 7, 1996, the date that Alex. Brown delivered
its opinion, Webster Common Stock closed at $35.25 per share. The Merger
Agreement does not provide for an update by Alex. Brown of its opinion. See "THE
MERGER -- Opinion of DS Bancor Financial Advisor." A copy of Alex. Brown's
opinion letter dated October 7, 1996 is attached as Appendix A to this Joint
----------
Proxy Statement/Prospectus and should be read by DS Bancor shareholders in its
entirety.
The Board of Directors of Webster reviewed financial analyses and
recommendations of Webster's management in considering the Merger. Webster also
consulted with Merrill Lynch & Co. ("Merrill Lynch") as to certain issues
concerning the Merger, including whether the Exchange Ratio is fair to Webster
from a financial point of view. On October 6, 1996, Merrill Lynch delivered a
written fairness opinion to Webster with respect to the terms of the Merger,
which was updated by Merrill Lynch in an opinion dated the date of this Joint
Proxy Statement/Prospectus. See "THE MERGER -- Opinion of Webster Financial
Advisor." A copy of Merrill Lynch's updated opinion letter is attached as
Appendix B to this Joint Proxy Statement/Prospectus and should be read by
- ----------
Webster shareholders in its entirety.
REGULATORY APPROVALS. In order for the Merger to be consummated, the
approvals of the Connecticut Commissioner and the OTS and the approval or waiver
of the Board of Governors of the Federal Reserve System ("Federal Reserve
Board") are required. On December 13, 1996, the Federal Reserve Board waived
its application requirement. Applications as to the OTS and the Connecticut
Commissioner approvals were filed in November 1996 and are pending. See "THE
MERGER -- Regulatory Approvals."
ACCOUNTING TREATMENT. The Merger is intended to qualify as a "pooling of
interests" for accounting and financial reporting purposes. Consummation of the
Merger is conditioned upon the Merger so qualifying. See "THE MERGER --
Accounting Treatment."
FEDERAL INCOME TAX CONSEQUENCES. It is intended that the Merger will
qualify as a tax-free reorganization for federal income tax purposes so that DS
Bancor shareholders generally should not recognize gain or loss as a result of
exchanging their DS Bancor Common Stock for the Webster Common Stock issued in
the Merger. See "THE MERGER -- Certain Federal Income Tax Consequences."
NO APPRAISAL RIGHTS. Under Delaware law, holders of DS Bancor Common Stock
will not be entitled to any dissenters' appraisal rights with respect to the
Merger since DS Bancor Common Stock is traded on The Nasdaq National Market. The
holders of Webster Common Stock have no dissenters' appraisal rights. See "THE
MERGER -- No Appraisal Rights."
EFFECTIVE TIME. The Merger will become effective on the filing of a
certificate of merger with the Secretary of State of the State of Delaware in
accordance with applicable law or on such later date as the certificate of
merger may specify (the "Effective Time"). The certificate of merger will be
filed (i) on the fifth day after the last required regulatory approval is
received and all applicable waiting periods have expired, (ii) if elected by
Webster, the last business day of the month in which the date set forth in (i)
above occurs, or (iii) at such other time as the parties may agree. DS Bancor
and Webster expect that the Merger will be consummated in the first quarter of
1997, or as soon as possible after the receipt of all regulatory and shareholder
approvals and the expiration of all regulatory waiting periods. If the Merger is
not consummated by June 30, 1997, the Merger Agreement will be terminated unless
DS Bancor and Webster mutually consent to an extension.
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<PAGE>
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time by the mutual consent of DS Bancor and Webster and by either
of them individually under certain specified circumstances, including if the
Merger is not consummated by June 30, 1997. See "THE MERGER -- Termination and
Amendment of Merger Agreement."
EXCHANGE OF DS BANCOR COMMON STOCK CERTIFICATES. Upon the Effective Time,
each holder of a certificate representing DS Bancor Common Stock issued and
outstanding immediately prior to the Merger will, upon the surrender thereof
(duly endorsed, if required) to Webster's transfer agent, American Stock
Transfer & Trust Company (the "Exchange Agent"), be entitled to receive a
certificate representing the number of whole shares of Webster Common Stock into
which such DS Bancor Common Stock will have been automatically converted as part
of the Merger. The Exchange Agent will mail a letter of transmittal with
instructions to all holders of record of DS Bancor Common Stock immediately
prior to the Effective Time for use in surrendering their certificates for DS
Bancor Common Stock in exchange for new certificates representing Webster Common
Stock. CERTIFICATES SHOULD NOT BE SURRENDERED BY DS BANCOR SHAREHOLDERS UNTIL
----------------------------------------------------------------------
THE LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. See "THE MERGER --
- -------------------------------------------------------
Exchange Ratio."
OPTION AGREEMENT. As a condition of and inducement to Webster's entering
into the Merger Agreement, Webster and DS Bancor entered into an option
agreement, dated as of October 7, 1996 (the "Option Agreement"), immediately
after their execution of the Merger Agreement. The Option Agreement may have the
effect of discouraging the making of alternative acquisition-related proposals,
even if such proposal is for a higher price per share for DS Bancor Common Stock
than the price per share consideration to be paid pursuant to the Merger
Agreement.
If the Option granted pursuant to the Option Agreement becomes exercisable,
Webster may purchase at a price of $36.50 per share up to 564,296 newly issued
shares of DS Bancor Common Stock, or approximately 18.6% of the DS Bancor Common
Stock then outstanding. The Option would become exercisable primarily upon the
occurrence of certain events that create the potential for a third party to
acquire DS Bancor. To the knowledge of DS Bancor, no event that would permit
exercise of the Option has occurred as of the date hereof. If the Option becomes
exercisable, Webster or any permitted transferee of Webster may, under certain
circumstances, require DS Bancor to repurchase, for a formula price, the Option
(in lieu of its exercise) or any shares of DS Bancor Common Stock purchased upon
exercise of the Option. See "THE MERGER -- Option Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER - ARRANGEMENTS WITH AND
PAYMENTS TO DS BANCOR DIRECTORS AND EXECUTIVE OFFICERS. The Merger Agreement
provides for two DS Bancor directors (selected by the Board of Directors of
Webster) to be invited to serve as additional members of the Boards of Directors
of Webster and Webster Bank upon consummation of the Merger. One director will
serve until Webster's 1998 annual meeting and one will serve until Webster's
1999 annual meeting; also, one of the two will be renominated when his or her
term expires. In addition, the directors of DS Bancor serving immediately prior
to the Effective Time, including the two directors who will serve on the Board
of Directors of Webster, will be invited to serve on an advisory board to
Webster Bank after the Bank Merger for a period of 24 months, with their
compensation as advisory directors to be based on a quarterly retainer of $4,750
and a quarterly meeting attendance fee of $1,500. Such fees will not be payable
to the DS Bancor directors who also serve as Webster directors. See "THE MERGER
Interests of Certain Persons in the Merger - Arrangements with and Payments to
DS Bancor Directors and Executive Officers."
Pursuant to existing employment and severance agreements of DS Bancor or
Derby, as modified and limited by the Merger Agreement, severance payments will
be made upon the consummation of the Merger to Harry P. DiAdamo, Jr., Alfred T.
Santoro and Thomas H. Wells. These payments, which are limited to the maximum
amount that can be paid without adverse tax consequences under Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), will be based on
three times their respective average annual compensation that was paid by Derby
and includible in their gross income for federal tax purposes for the calendar
years 1992 through
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<PAGE>
1996, reduced by $1.00. Such severance amounts will reflect the amount of
taxable compensation income reported by Messrs. DiAdamo, Santoro and Wells from
employment by Derby in 1996, including taxable income attributable to stock
options exercised during 1996. Messrs. DiAdamo, Santoro and Wells have agreed to
limit the maximum amount by which their severance payments will be increased as
a consequence of their 1996 nonqualified stock option exercises, and their
disqualifying dispositions of stock acquired by 1996 incentive stock option
exercises, to an amount of additional severance based on the market price of DS
Bancor Common Stock being $40 per share at the times of such exercises or
dispositions, as applicable.
Based on three times their respective average annual compensation paid by
Derby and includible in gross income for federal tax purposes for the calendar
years 1992 through 1996, and assuming that all nonqualified options held by
Messrs. DiAdamo, Santoro and Wells are exercised, and that shares that can be
purchased upon the exercise of all incentive stock options held by them are
disposed of in disqualifying dispositions, in each case at a time when such per
share price is $40, the severance payable to Messrs. DiAdamo, Santoro and Wells
upon consummation of the Merger would be $2.7 million, $1.7 million and
$837,000, respectively.
Also upon consummation of the Merger, Webster Bank has agreed to employ Mr.
Wells for a ten month period as an officer to assist in the transition at a
salary of $10,000 per month and to retain him as a part-time consultant for six
months thereafter at a salary of $7,500 per month. See "THE MERGER -- Interests
of Certain Persons in the Merger - Arrangements with and Payments to DS Bancor
Directors and Executive Officers."
Webster has agreed to (i) indemnify the directors, officers and employees
of DS Bancor and Derby as to certain matters, and (ii) subject to the conditions
set forth in the Merger Agreement, use its best efforts to cause the persons
serving as officers and directors of DS Bancor immediately prior to the
Effective Time to be covered by directors' and officers' liability insurance for
a period of at least two years. See "THE MERGER -- Indemnification."
COMPARISON OF SHAREHOLDER RIGHTS
If the Merger is consummated, the holders of DS Bancor Common Stock will
become holders of Webster Common Stock. There are certain differences between
the rights of Webster shareholders and DS Bancor shareholders. For a summary of
such differences, see "DESCRIPTION OF WEBSTER CAPITAL STOCK AND COMPARISON OF
SHAREHOLDER RIGHTS."
MARKET PRICES OF COMMON STOCK
Both Webster Common Stock and DS Bancor Common Stock are traded on The
Nasdaq National Market. The symbol for Webster Common Stock is "WBST". The
symbol for DS Bancor Common Stock is "DSBC".
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<PAGE>
The following table sets forth per share closing prices of the Webster
Common Stock and the DS Bancor Common Stock on The Nasdaq National Market as of
the dates specified and the pro forma equivalent market value of the Webster
Common Stock to be issued for the DS Bancor Common Stock in the Merger. See
"MARKET PRICES AND DIVIDENDS."
<TABLE>
<CAPTION>
DS Bancor
Common Stock
Last Reported Sale Price Pro Forma
----------------------------------
Date Webster DS Bancor Equivalent Market
- ----
Common Stock Common Stock Value (a)
------------ ------------ ----------------
<S> <C> <C> <C>
December 30, 1994....................... $18.50 $22.25 $21.66
December 31, 1995....................... 29.50 25.50 34.54
September 30, 1996...................... 35.25 37.00 41.27
October 7, 1996 (b)..................... 35.25 38.38 41.27
December 6, 1996 (c).................... 37.12 42.44 43.45
</TABLE>
___________________
(a) Determined by multiplying the respective closing prices of the Webster
Common Stock by the Exchange Ratio calculated based on the average daily
closing prices per share of Webster Common Stock for the 15 consecutive
trading days on which shares of Webster Common Stock were actually traded
prior to December 6, 1996 (the most recent practicable date prior to the
date of this Joint Proxy Statement/Prospectus). See "THE MERGER --
Exchange Ratio."
(b) Last trading date prior to announcement of the execution of the Merger
Agreement.
(c) The most recent practicable date prior to the date of this Joint Proxy
Statement/Prospectus.
Shareholders are advised to obtain current market quotations for Webster
Common Stock. It is expected that the market price of Webster Common Stock will
fluctuate between the date of this Joint Proxy Statement/Prospectus and the date
on which the Merger is consummated. Because the number of shares of Webster
Common Stock to be received by DS Bancor shareholders in the Merger is not
fixed, the Exchange Ratio for the number of shares of Webster Common Stock that
the holders of DS Bancor Common Stock will receive in the Merger may increase or
decrease prior to the Merger. No assurance can be given as to the market price
of Webster Common Stock at the time of the Merger.
COMPARATIVE PER SHARE DATA
Following are certain comparative selected historical per share data of
Webster and of DS Bancor, pro forma combined per share data of Webster and DS
Bancor, and equivalent pro forma per share data of DS Bancor. The financial data
is based on, and should be read in conjunction with, the historical consolidated
financial statements and the notes thereto of Webster and of DS Bancor and the
pro forma combined financial statements and the notes thereto appearing in or
incorporated by reference elsewhere into this Joint Proxy Statement/Prospectus.
All per share data of Webster, DS Bancor and pro forma are presented on a fully
diluted basis and have been adjusted retroactively to give effect to stock
dividends. The pro forma data is not necessarily indicative of results which
will be obtained on a combined basis. The pro forma data has not been adjusted
to reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the Merger.
-13-
<PAGE>
<TABLE>
<CAPTION>
At or for the Nine Months Ended
September 30, 1996 At or for the Year Ended December 31,
------------------ ----------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C> <C>
Net Income per fully diluted Common
Share:
Webster -- historical (a) $1.92 $2.30 $2.44 $2.04(b)
DS Bancor -- historical 2.16 2.45 1.86 1.63(b)
Pro Forma Combined (a)(c) 1.90 2.23 2.17 1.82
DS Bancor Equivalent Pro Forma (d) 2.22 2.61 2.54 2.13
Cash Dividends per Common Share:
Webster -- historical .50 .64 .52 .50
DS Bancor -- historical .18 -- -- --
Pro Forma Combined .50 .64 .52 .50
DS Bancor Equivalent Pro Forma (d) .58 .75 .61 .58
Book Value per Common Share:
Webster -- historical 24.86 23.87 20.59 19.90
DS Bancor -- historical 28.53 26.68 22.19 22.66
Pro Forma Combined (c) 23.06 23.54 20.03 19.68
DS Bancor Equivalent Pro Forma (d) 26.99 27.56 23.45 23.04
</TABLE>
__________________________
(a) Includes non-recurring expenses of $5.2 million, $6.4 million and $5.7
million for the nine months ended September 30, 1996 and the years ended
December 31, 1995 and 1994, respectively. Webster historical net income per
common share calculated on a fully diluted basis, excluding non-recurring
expenses, was $2.24, $2.76 and $2.87 for the nine months ended September 30,
1996 and for the years ended December 31, 1995 and 1994, respectively. Pro
forma combined net income per common share calculated on a fully diluted
basis, excluding non-recurring expenses, was $2.13, $2.55 and $2.46 for the
nine months ended September 30, 1996 and for the years ended December 31,
1995 and 1994, respectively.
(b) Does not give effect to additional income in 1993 resulting from the
cumulative effect of the change in the method of accounting for income taxes
adopted by each of Webster and DS Bancor in 1993 in accordance with
Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 109 ("FASB 109"), which resulted in an increase of $.79 per
share in Webster's net income for 1993 and an increase of $.51 per share in
DS Bancor's net income for 1993.
(c) Pro forma combined amounts shown above reflect the proposed acquisition of
DS Bancor on a pooling of interests basis for each period shown as if the
Merger had occurred at the beginning of such period.
(d) DS Bancor equivalent pro forma per share amounts are calculated by
multiplying the pro forma combined amounts by the Exchange Ratio calculated
based on the average daily closing prices per share of Webster Common Stock
for the 15 consecutive trading days on which shares of Webster Common Stock
were actually traded prior to December 6, 1996 (the most recent practicable
date prior to the date of this Joint Proxy Statement/Prospectus). See "THE
MERGER -- Exchange Ratio."
-14-
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
The following tables present summary historical financial and other data
for Webster and DS Bancor as of the dates and for the periods indicated. This
summary data is based upon, and should be read in conjunction with, the
historical and pro forma consolidated financial statements and notes thereto of
Webster and DS Bancor and notes thereto appearing or incorporated by reference
elsewhere herein. As to historical information, see "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." For pro forma information, see "-- Comparative Per
Share Data" above and "PRO FORMA COMBINED FINANCIAL STATEMENTS" appearing
elsewhere herein. All adjustments necessary for a fair presentation of financial
position and results of operations of interim periods have been included. The
pro forma amounts are not necessarily indicative of results which will be
obtained on a combined basis. The pro forma data has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the Merger.
SELECTED CONSOLIDATED FINANCIAL DATA - WEBSTER
<TABLE>
<CAPTION>
FINANCIAL CONDITION
AND OTHER DATA - WEBSTER
(DOLLARS IN THOUSANDS) AT SEPTEMBER 30, AT DECEMBER 31,
---------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets.......................... $3,984,454 $3,332,932 $3,219,670 $3,053,851 $2,483,403 $2,367,722 $1,173,489
Loans receivable, net................. 2,450,294 1,872,542 1,891,956 1,869,216 1,467,935 1,522,168 701,478
Securities............................ 1,150,263 1,113,315 1,044,640 828,758 669,764 438,323 332,440
Segregated assets, net................ 82,905 116,365 104,839 137,096 176,998 223,907 -
Core deposit intangible (a)........... 45,608 4,916 4,729 5,457 11,829 15,463 1,402
Deposits.............................. 3,021,818 2,431,068 2,400,202 2,431,945 1,966,574 1,995,079 990,054
FHL Bank advances and
other borrowings..................... 685,205 675,509 553,114 414,375 312,152 193,864 73,772
Shareholders' equity.................. 216,667 174,673 209,973 156,807 126,273 129,195 83,067
Number of banking offices............. 63 45 45 45 39 39 22
</TABLE>
<TABLE>
<CAPTION>
OPERATING DATA - WEBSTER AT OR FOR THE NINE MONTHS
(DOLLARS IN THOUSANDS) ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income....................... $ 196,891 $ 161,790 $ 218,811 $ 190,820 $ 154,589 $ 111,021 $ 90,901
Interest expense...................... 111,049 96,194 131,533 98,464 80,803 61,205 60,015
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income................... 85,842 65,596 87,278 92,356 73,786 49,816 30,886
Provision for loan losses............. 3,000 1,395 3,100 3,155 4,597 5,574 4,285
Noninterest income.................... 18,109 15,357 21,975 13,629 10,703 8,407 5,150
Noninterest expenses:
Non-recurring expenses.............. 5,230 - 6,371 5,700 - - -
Foreclosed property expenses, net... 1,522 3,392 4,025 6,949 5,085 6,135 5,089
Other noninterest expenses.......... 66,496 52,698 69,191 66,646 49,912 33,018 20,550
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest expenses........ 73,248 56,090 79,587 79,295 54,997 39,153 25,639
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes............ 27,703 23,468 26,566 23,535 24,895 13,496 6,112
Income taxes.......................... 9,876 7,439 8,246 4,850 10,595 7,083 2,774
Net income before cumulative change... 17,827 16,029 18,320 18,685 14,300 6,413 3,338
Cumulative change (b)................. - - - - 4,575 - -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............................ 17,827 16,029 18,320 18,685 18,875 6,413 3,338
Preferred stock dividends............. 927 972 1,296 1,716 2,653 581 -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income available to common
shareholders......................... $ 16,900 $ 15,057 $ 17,024 $ 16,969 $ 16,222 $ 5,832 $ 3,338
========== ========== ========== ========== ========== ========== ==========
Loan originations during period...... $ 402,573 $ 287,475 $ 417,372 $ 745,618 $ 390,337 $ 283,926 $ 133,418
Net increase (decrease) in deposits... 621,616 (877) (31,743) 466,410 (28,505) 1,005,025 157,543
Loans serviced for others............. 710,867 937,066 753,053 949,337 357,699 409,190 183,273
Capitalized mortgage loan servicing
rights............................... 2,135 3,624 2,683 4,427 1,337 3,163 20
</TABLE>
See footnotes on the following page
-15-
<PAGE>
<TABLE>
<CAPTION>
SIGNIFICANT STATISTICAL DATA - WEBSTER
AT OR FOR THE NINE MONTHS
ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------ ----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD: (C)
Net income per common
share:
Primary.................... $ 2.04(d) $ 2.19 $ 2.44(d) $ 2.69(d) $ 2.25(f) $ 1.18 $ 0.68
Fully Diluted.............. $ 1.92(d) $ 2.04 $ 2.30(d) $ 2.44(d) $ 2.04(f) $ 1.16 $ 0.68
Cash dividends paid per
common share................ $ 0.50 $ 0.48 $ 0.64 $ 0.52 $ 0.50 $ 0.48 $ 0.48
Return on average assets..... 0.63%(e) 0.69% 0.58%(e) 0.67%(e) 0.60%(f) 0.43% 0.32%
Return on average
shareholders' equity........ 11.14%(e) 12.75% 10.70%(e) 12.55%(e) 11.11%(f) 6.87% 4.06%
Noninterest expenses to
average assets.............. 2.60% 2.40% 2.53% 2.86% 2.30%(f) 2.64% 2.45%
Noninterest expenses
(excluding foreclosed
property expenses and
provisions) to
average assets............. 2.54%(e) 2.26% 2.40%(e) 2.61%(e) 2.09% 2.23% 1.95%
Average shareholders'
equity to average assets.... 5.50% 5.39% 5.44% 5.37% 5.39% 6.29% 7.94%
Interest rate spread......... 3.17% 2.83% 2.78% 3.29% 3.13% 3.32% 2.81%
Net yield on average
earning assets.............. 3.22% 2.96% 2.89% 3.34% 3.23% 3.50% 3.14%
Ratio of earnings to fixed
charges..................... 1.95x 1.91x 1.70x 1.93x 2.50x 2.85x 1.90x
AT END OF PERIOD:
Book value per common share.. $ 24.86 $ 23.16 $ 23.87 $ 20.59 $ 19.90 $ 21.29 $ 16.88
Tangible book value per
common share................ $ 21.60 $ 22.44 $ 23.28 $ 19.78 $ 17.58 $ 18.13 $ 16.60
Common shares outstanding
(000's)..................... 8,108 6,800 8,078 6,780 5,088 4,895 4,920
Shareholders' equity to
total assets................ 5.44% 5.24% 6.52% 5.13% 5.08% 5.46% 7.08%
Nonaccrual assets to total
assets...................... 0.85% 1.73% 1.71% 2.10% 2.41% 2.83% 2.83%
Allowance for loan losses
to nonaccrual loans......... 155.11% 112.94% 110.45% 134.04% 135.79% 108.71% 77.15%
Allowances for nonaccrual
assets to
nonaccrual assets.......... 102.06% 75.94% 76.39% 77.01% 77.32% 76.95% 36.07%
</TABLE>
_______________________
(a) The increase in the core deposit intangible in 1996 is a result of certain
assets and liabilities purchased in the Shawmut Bank Connecticut National
Association (now Fleet National Bank of Connecticut) ("Shawmut")
acquisition.
(b) Reflects cumulative change in method of accounting for income taxes adopted
by Webster in 1993 in accordance with FASB 109.
(c) Includes non-recurring expenses of $5.2 million ($4.7 million for a special
assessment related to recapitalization of the SAIF and $500,000 for
conversion costs related to the Shawmut acquisition), $6.4 million ($3.3
million of expenses related to the Shelton Bancorp, Inc. ("Shelton")
acquisition, $2.1 million of expenses related to changing the name of and
merging together Webster's banking subsidiaries, and $1.0 million of
expenses related to charges incurred in the preparation for acquisition of
20 banking offices of Shawmut), and $5.7 million ($5.0 million related to
the write-down of the First Constitution Bank ("First Constitution") core
deposit intangible asset and $700,000 of expenses related to the Shoreline
Bank & Trust Company ("Shoreline") acquisition) for the nine months ended
September 30, 1996 and for the years ended December 31, 1995 and 1994,
respectively.
(d) Net income per common share calculated on a primary and fully diluted basis,
excluding non-recurring expenses, was $2.46 and $2.24, respectively, for the
nine months ended September 30, 1996, $2.97 and $2.76, respectively, for the
year ended December 31, 1995, and $3.21 and $2.87, respectively, for the
year ended December 31, 1994.
(e) Return on average assets, excluding non-recurring expenses, was .74%, .70%
and .79% for the nine months ended September 30, 1996, and the years ended
December 31, 1995 and 1994, respectively. Return on average shareholders'
equity, excluding non-recurring expenses, was 13.03%, 12.85% and 14.77% for
the nine months ended September 30, 1992 and the years ended December 31,
1995 and 1994, respectively. Noninterest expenses (excluding foreclosed
property expenses and provisions) to average assets, excluding non-recurring
expenses, was 2,36%, 2.20% and 2.40% for the nine months ended September 30,
1996, and the years ended December 31, 1995 and 1994, respectively.
(f) Does not give effect to $4.6 million of additional income in 1993 resulting
from the cumulative change of Webster's adoption of FASB 109. Giving effect
to such cumulative change, (i) net income per common share for 1993 was
$3.13 on a primary basis and $2.73 on a fully diluted basis; (ii) return on
average assets for 1993 was .79%; and (iii) return on average shareholders'
equity for 1993 was 14.66%.
-16-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA - DS BANCOR
<TABLE>
<CAPTION>
FINANCIAL CONDITION
AND OTHER DATA - DS BANCOR AT SEPTEMBER 30, AT DECEMBER 31,
----------------- ----------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1995 1994 1993 1992 1991
---------- --------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............................. $1,259,423 $1,237,523 $1,254,483 $1,222,690 $1,194,121 $1,190,707 $669,545
Loans receivable, net.................... 877,284 852,747 875,339 839,427 779,287 708,022 508,660
Securities............................... 338,025 339,009 329,981 331,045 330,621 278,132 106,294
Core deposit intangible (a).............. 2,304 3,013 2,836 3,545 4,254 4,963 -
Deposits................................. 1,029,989 1,045,123 1,058,145 1,027,746 1,006,221 994,931 522,180
FHL Bank advances and other borrowings... 128,185 103,572 96,876 111,145 106,441 122,862 86,072
Shareholders' equity..................... 86,488 78,151 80,809 67,137 66,440 58,585 53,104
Number of banking offices................ 23 23 22 22 23 22 10
</TABLE>
<TABLE>
<CAPTION>
OPERATING DATA - DS BANCOR AT OR FOR THE NINE MONTHS
(DOLLARS IN THOUSANDS) ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------- ---------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income.......................... $ 67,638 $ 63,919 $ 86,589 $ 77,282 $ 74,335 $ 54,144 $ 57,796
Interest expense......................... 38,684 37,785 51,575 42,818 43,816 31,885 39,469
---------- ---------- ---------- ---------- ---------- ---------- --------
Net interest income...................... 28,954 26,134 35,014 34,464 30,519 22,259 18,327
Provision for loan losses................ 2,950 1,825 2,525 2,325 2,475 1,375 4,400
Noninterest income....................... 2,634 2,349 3,684 3,101 7,343 3,071 1,695
Noninterest expenses:
Foreclosed property
expenses, net......................... 1,093 1,400 1,776 2,904 4,801 3,747 2,547
Other noninterest expenses............. 16,169 16,388 21,764 22,706 22,312 12,150 10,619
---------- ---------- ---------- ---------- ---------- ---------- --------
Total noninterest expenses........... 17,262 17,788 23,540 25,610 27,113 15,897 13,166
---------- ---------- ---------- ---------- ---------- ---------- --------
Income before income taxes............... 11,376 8,870 12,633 9,630 8,274 8,058 2,456
Income taxes............................. 4,449 3,581 5,020 3,920 3,348 3,217 1,645
---------- ---------- ---------- ---------- ---------- ---------- --------
Net income before
cumulative change....................... 6,927 5,289 7,613 5,710 4,926 4,841 811
Cumulative change (b).................... - - - - 1,548 - -
---------- ---------- ---------- ---------- ---------- ---------- --------
Net income available to common
shareholders............................ $ 6,927 $ 5,289 $ 7,613 $ 5,710 $ 6,474 $ 4,841 $ 811
========== ========== ========== ========== ========== ========== ========
Loan originations during period.......... $ 133,969 $ 96,860 $ 138,731 $ 256,025 $ 267,155 $ 221,329 $ 85,061
Net increase (decrease) in deposits...... (28,156) 17,377 30,399 21,525 11,290 472,751 50,526
Loans serviced for others................ 148,440 150,500 147,100 129,300 149,900 445,200 87,600
Capitalized mortgage loan servicing
rights.................................. 464 331 316 380 618 1,155 -
</TABLE>
See footnotes on the following page
-17-
<PAGE>
<TABLE>
<CAPTION>
SIGNIFICANT STATISTICAL DATA - DS BANCOR
AT OR FOR THE NINE MONTHS
ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- --------- ------- --------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD
Net income per common share:
Primary....................................... $ 2.19 $ 1.71 $ 2.46 $ 1.86 $ 1.65(c) $ 1.65 $ 0.28
Fully Diluted................................. $ 2.16 $ 1.71 $ 2.45 $ 1.86 $ 1.63(c) $ 1.65 $ 0.28
Cash dividends paid per common share $ 0.18 - - - - - $ 0.19
Return on average assets........................ 0.74% 0.59% 0.63% 0.47% 0.41%(c) 0.66% 0.13%
Return on average shareholders' equity.......... 10.96% 9.40% 9.95% 8.34% 7.84%(c) 8.44% 1.47%
Average shareholders' equity to average assets.. 6.78% 6.23% 6.31% 5.58% 5.26% 7.80% 8.54%
Interest rate spread............................ 2.85% 2.69% 2.67% 2.76% 2.55% 3.04% 2.68%
Net yield on average earning assets............. 3.19% 2.98% 2.97% 2.94% 2.68% 3.24% 3.02%
Noninterest expenses to average assets.......... 1.85% 1.97% 1.94% 2.09% 2.27% 2.16% 2.04%
Noninterest expenses (excluding foreclosed
property expenses and provisions) to
average assets................................. 1.74% 1.82% 1.79% 1.85% 1.87% 1.65% 1.65%
Ratio of earnings to fixed charges.............. 3.23x 3.03x 3.10x 2.26x 2.18x 2.22x 1.35x
AT END OF PERIOD:
Book value per common share..................... $28.53 $25.83 $26.68 $22.19 $22.66 $19.98 $18.13
Tangible book value per common share............ $27.77 $24.83 $25.74 $21.00 $21.21 $18.29 $18.13
Common shares outstanding (000's) 3,031 3,025 3,029 3,025 2,932 2,932 2,929
Shareholders' equity to total assets............ 6.87% 6.32% 6.44% 5.49% 5.56% 4.92% 7.93%
Non-performing assets to total assets........... 1.62% 1.58% 1.39% 1.74% 2.45% 3.18% 6.01%
Allowance for loan losses to
non-performing loans........................... 46.45% 46.54% 50.16% 45.23% 57.83% 97.78% 23.42%
Allowances for non-performing assets to
non-performing assets.......................... 36.17% 35.39% 40.29% 34.10% 27.41% 38.00% 10.15%
</TABLE>
__________________
(a) Reflects the unamortized balance of the core deposit intangible resulting
from the acquisition of certain assets and liabilities of the former Burritt
Interfinancial Bancorporation from the FDIC in December 1992.
(b) Reflects cumulative change in method of accounting for income taxes adopted
by DS Bancor in 1993 in accordance with FASB 109.
(c) Does not give effect to $1.5 million of additional income in 1993 resulting
from the cumulative change of DS Bancor's adoption of FASB 109. Giving
effect to such cumulative change, (i) net income per common share for 1993
was $2.17 on a primary basis and $2.14 on a fully diluted basis; (ii) return
on average assets for 1993 was .54%; and (iii) return on average
shareholders' equity for 1993 was 10.30%.
-18-
<PAGE>
PRO FORMA COMBINED FINANCIAL DATA - UNAUDITED
<TABLE>
<CAPTION>
FINANCIAL CONDITION
AND OTHER DATA - PRO FORMA
(DOLLARS IN THOUSANDS) AT SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets.......................... $5,230,587 $4,570,455 $4,474,153 $4,276,541 $3,677,524 $3,558,429 $1,843,034
Loans receivable, net................. 3,321,928 2,725,289 2,767,295 2,708,643 2,247,222 2,230,190 1,210,138
Securities............................ 1,483,458 1,452,324 1,374,621 1,159,803 1,000,385 716,455 438,734
Segregated assets, net................ 82,905 116,365 104,839 137,096 176,998 223,907 -
Core deposit intangible............... 47,912 7,929 7,565 9,061 16,083 20,426 1,402
Deposits.............................. 4,051,807 3,476,191 3,458,347 3,459,691 2,972,795 2,990,010 1,512,234
FHL Bank advances and other
borrowings.......................... 813,390 779,081 649,990 525,520 418,593 316,726 158,844
Shareholders' equity.................. 283,865 252,824 290,782 223,944 192,713 187,780 136,171
Number of banking offices............. 86 68 67 67 62 61 32
</TABLE>
<TABLE>
<CAPTION>
OPERATING DATA - PRO FORMA AT OR FOR THE NINE MONTHS
(DOLLARS IN THOUSANDS) ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income....................... $ 264,529 $ 225,709 $ 305,400 $ 268,102 $ 228,924 $ 165,165 $ 148,697
Interest expense...................... 149,733 133,979 183,108 141,282 124,619 93,090 99,484
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income................... 114,796 91,730 122,292 126,820 104,305 72,075 49,213
Provision for loan losses............. 5,950 3,220 5,625 5,480 7,072 6,949 8,685
Noninterest income.................... 20,743 17,706 25,659 16,730 18,046 11,478 6,845
Noninterest expenses:
Non-recurring expenses.............. 5,230 - 6,371 5,700 - - -
Foreclosed property expenses, net... 2,615 4,792 5,801 9,853 9,886 9,882 7,636
Other noninterest expenses.......... 82,665 69,086 90,955 89,352 72,224 45,168 31,169
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest expenses........ 90,510 73,878 103,127 104,905 82,110 55,050 38,805
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes............ 39,079 32,338 39,199 33,165 33,169 21,554 8,568
Income taxes.......................... 14,325 11,020 13,266 8,770 13,943 10,300 4,419
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before cumulative change.... 24,754 21,318 25,933 24,395 19,226 11,254 4,149
Cumulative change..................... - - - - 6,123 - -
---------- ---------- ---------- ---------- ---------- ----------
Net income............................ 24,754 21,318 25,933 24,395 25,349 11,254 4,149
Preferred stock dividends............. 927 972 1,296 1,716 2,653 581 -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income available to common
shareholders......................... $ 23,827 $ 20,346 $ 24,637 $ 22,679 $ 22,696 $ 10,673 $ 4,149
========== ========== ========== ========== ========== ========== ==========
Loan originations during period....... $ 536,542 $ 384,335 $ 556,103 $1,001,643 $ 657,492 $ 505,255 $ 218,479
Net increase (decrease) in deposits... 593,460 16,500 (1,344) 487,935 (17,215) 1,477,776 208,069
Loans serviced for others............. 859,307 1,087,566 900,153 1,078,637 507,599 854,390 270,873
Capitalized mortgage loan servicing
rights............................... 2,408 3,955 2,999 4,807 1,955 3,163 20
</TABLE>
-19-
<PAGE>
SIGNIFICANT STATISTICAL DATA - PRO FORMA COMBINED - UNAUDITED
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS
ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------------------- --------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD: (a)
Net income per common
share:
Primary................... $ 1.99(b) $ 1.94 $ 2.33(b) $ 2.29(b) $ 1.91 $ 1.27 $ 0.50
Fully Diluted............. $ 1.90(b) $ 1.85 $ 2.23(b) $ 2.17(b) $ 1.82 $ 1.26 $ 0.50
Cash dividends paid per
common share............... $ 0.50 $ 0.48 $ 0.64 $ 0.52 $ 0.50 $ 0.48 $ 0.48
Return on average assets.... 0.66%(c) 0.66% 0.60%(c) 0.61%(c) 0.54% 0.51% 0.25%
Return on average
shareholders' equity....... 11.09%(c) 11.72% 10.47%(c) 11.23%(c) 10.04% 7.47% 3.02%
Average shareholders'
equity to average assets... 5.95% 5.62% 5.69% 5.44% 5.35% 6.79% 8.17%
Interest rate spread........ 3.15% 2.83% 2.79% 3.16% 2.97% 3.26% 2.80%
Net yield on average
earning assets............. 3.24% 2.97% 2.92% 3.22% 3.05% 3.42% 3.09%
Noninterest expenses to
average assets............. 2.41% 2.28% 2.37% 2.62% 2.29% 2.48% 2.29%
Noninterest expenses
(excluding foreclosed
property expenses and
provisions) to
average assets............ 2.34%(c) 2.13% 2.23%(c) 2.38%(c) 2.02% 2.04% 1.84%
Ratio of earnings to fixed
charges..................... 2.15x 2.08x 1.80x 2.01x 2.40x 2.54x 1.62x
AT END OF PERIOD:
Book value per common share. $ 23.06 $ 22.78 $ 23.54 $ 20.03 $ 19.68 $ 19.55 $ 16.31
Tangible book value per
common share............... $ 18.95 $ 22.02 $ 22.89 $ 19.15 $ 17.80 $ 17.10 $ 16.14
Common shares outstanding
(000's).................... 11,657 10,342 11,623 10,322 8,520 8,327 8,350
Shareholders' equity to
total assets............... 5.43% 5.53% 6.50% 5.24% 5.24% 5.28% 7.39%
Nonaccrual assets to total
assets..................... 1.03% 1.67% 1.62% 1.99% 2.42% 2.94% 3.98%
Allowance for loan losses
to nonaccrual loans........ 124.66% 9 94.37% 107.29% 98.14% 87.08% 31.15%
Allowances for nonaccrual
assets to
nonaccrual assets......... 87.81% 65.57% 67.72% 66.32% 60.92% 62.88% 21.86%
</TABLE>
__________________________
(a) Includes non-recurring expenses of $5.2 million ($4.7 million for a special
assessment related to recapitalization of the SAIF and $500,000 for
conversion costs related to the Shawmut acquisition), $6.4 million ($3.3
million of expenses related to the Shelton acquisition, $2.1 million of
expenses related to changing the name of and merging together Webster's
banking subsidiaries, and $1.0 million of expenses related to charges
incurred in the preparation for acquisition of 20 banking offices of
Shawmut), and $5.7 million ($5.0 million related to the write-down of the
First Constitution core deposit intangible asset and $700,000 of expenses
related to the Shoreline acquisition) for the nine months ended September
30, 1996 and for the years ended December 31, 1995 and 1994, respectively.
(b) Net income per common share calculated on a primary and fully diluted basis
excluding non-recurring expenses was $2.24 and $2.13, respectively, for the
nine months ended September 30, 1996, $2.68 and $2.55 for the year ended
December 31, 1995, and $2.62 and $2.46, respectively, for the year ended
December 31, 1994.
(c) Return on average assets excluding non-recurring expenses was .72%, .68% and
.69% for the nine months ended September 30, 1996, and the years ended
December 31, 1995 and 1994, respectively. Return on average shareholders'
equity excluding non-recurring expenses was 12.12%, 11.95% and 12.75% for
the nine months ended September 30, 1996 and the years ended December 31,
1995 and 1994, respectively. Noninterest expenses (excluding foreclosed
property expenses and provisions) to average assets excluding non-recurring
expenses was 2.20%, 2.09% and 2.23% for the nine months ended September 30,
1996, and the years ended December 31, 1995 and 1994, respectively.
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<PAGE>
RISK FACTORS
DS Bancor shareholders should consider, among other matters, the following
factors in voting upon the proposal to approve and adopt the Merger Agreement
and the Merger provided for therein, consummation of which will result in
holders of DS Bancor Common Stock receiving shares of Webster Common Stock.
These factors also should be considered by Webster shareholders in voting on the
proposal to approve the issuance of Webster Common Stock to DS Bancor
shareholders as part of the Merger.
GROWTH THROUGH ACQUISITIONS
Since 1991, Webster has experienced significant growth, primarily as a
result of acquisitions of other financial institutions. In September 1991,
Webster Bank acquired certain assets and liabilities of Suffield Bank from the
FDIC in an assisted transaction. In that acquisition, which was accounted for as
a purchase transaction, among other things, Webster Bank assumed $247 million of
deposit liabilities. In 1992, Webster Bank acquired most of the assets, all of
the deposits and certain other liabilities of First Constitution, New Haven,
Connecticut, from the FDIC in an assisted transaction. This acquisition
increased Webster Bank's assets by $1.3 billion and, at that time, doubled the
number of its banking offices. The First Constitution acquisition also was
accounted for as a purchase transaction.
In March 1994, Webster completed a conversion/acquisition of Bristol
Savings Bank ("Bristol"). Upon that acquisition, which was accounted for as a
purchase transaction, Webster acquired five full-service banking offices with
$453 million in deposits, as well as Bristol's mortgage banking subsidiary. Also
in 1994, Webster acquired Shoreline in a transaction accounted for as a pooling
of interests. Shoreline had total assets of $51 million, deposit liabilities of
$47 million and shareholders' equity of $4 million.
In November 1995, Webster acquired Shelton, the holding company of Shelton
Savings Bank, a state-chartered savings bank headquartered in Shelton,
Connecticut. In that transaction, which was accounted for as a pooling of
interests, Webster acquired from Shelton approximately $298 million of assets,
including $224 million of loans, and approximately $273 million of deposits.
In February 1996, Webster acquired 20 branch banking offices from Shawmut.
In that transaction, which was accounted for as a purchase, Webster Bank assumed
approximately $845 million in deposits and acquired approximately $586 million
in loans.
LEGISLATIVE AND GENERAL REGULATORY DEVELOPMENTS
Webster is subject to various regulatory restrictions as a savings and loan
holding company, primarily by the OTS and the Connecticut Commissioner. Webster
Bank is, and following the Merger will be, subject to extensive regulation by
the OTS as its primary federal regulator and also to regulation as to certain
matters by the FDIC. The OTS and FDIC have adopted numerous regulations and
undertaken other regulatory initiatives, and further regulations and initiatives
may be adopted. Future legislation or regulatory developments could have an
adverse effect on Webster Bank.
Under recently enacted legislation, the Secretary of the Treasury is
required to report to Congress no later than March 31, 1997 with respect to the
development of a common charter for all federal and national financial
institutions and the abolition of separate and distinct charters between banks
and savings associations. If legislation with respect to the development of a
common charter is enacted, Webster Bank may be required to convert its federal
savings bank charter to either a new federal type of bank charter or to a state
depository institution charter. Future legislation also may result in Webster
becoming regulated at the holding company level by the Federal Reserve Board
rather than by the OTS. Regulation by the Federal Reserve Board could subject
Webster to capital requirements that are not currently applicable to Webster as
a holding company under OTS
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<PAGE>
regulation and may result in statutory limitations on the type of business
activities in which Webster may engage at the holding company level, which
business activities currently are not restricted. Webster is unable to predict
whether such legislation will be enacted.
SOURCES OF FUNDS FOR CASH DIVIDENDS
The principal sources of funds for Webster's payments of cash dividends on
the Webster Common Stock and its Series B Stock, as well as for the payment of
principal and interest on its $40 million principal amount of 8 3/4% Senior
Notes due 2000 (the "Senior Notes"), are cash dividends from Webster Bank and
liquid assets at the holding company level. At September 30, 1996, at the
holding company level, Webster had liquid investments of $23.1 million. Webster
Bank is, and following the Merger will be, subject to certain regulatory
requirements that affect its ability to pay cash dividends to Webster. The
Series B Stock ranks prior to the Webster Common Stock as to payment of cash
dividends. In addition, the Senior Notes contain certain covenants that affect
Webster's ability to pay cash dividends on the Webster Common Stock. See
"DESCRIPTION OF WEBSTER CAPITAL STOCK AND COMPARISON OF SHAREHOLDER RIGHTS" and
"MARKET PRICES AND DIVIDENDS."
EFFECT OF INTEREST RATE FLUCTUATIONS
Webster's consolidated results of operations depend to a large extent on
the level of its net interest income, which is the difference between interest
income from interest-earning assets (such as loans and investments) and interest
expense on interest-bearing liabilities (such as deposits and borrowings). If
interest-rate fluctuations cause Webster's cost of funds to increase faster than
the yield on its interest-bearing assets, net interest income will be reduced.
Webster measures its interest-rate risk using simulation, price elasticity and
other methods.
Based on Webster's asset/liability mix at September 30, 1996, management's
simulation analysis of the effects of changing interest rates projects that an
instantaneous +/-200 basis point fluctuation in interest rates would decrease
net interest income for the following twelve months by less than 5%. Based on
Webster's asset-liability mix at September 30, 1996, management of Webster
believes its interest risk is reasonable. Management of Webster also believes
that the addition of DS Bancor's assets and liabilities does not significantly
alter the pro forma interest rate risk of Webster.
While Webster uses various monitors of interest-rate risk, Webster is
unable to predict future fluctuations in interest rates or the specific impact
thereof. The market values of most of its financial assets are sensitive to
fluctuations in market interest rates. Fixed-rate investments, mortgage-backed
securities and mortgage loans decline in value and fixed-rate liabilities rise
in value as interest rates rise. Although Webster's investment and mortgage-
backed securities portfolios have grown in recent quarters, most of the growth
has been in adjustable-rate securities or short-term securities with durations
of less than three years.
Changes in interest rates also can affect the amount of loans originated by
Webster, as well as the value of its loans and other interest-earning assets and
its ability to realize gains on the sale of such assets and liabilities. The
extent to which borrowers prepay loans also is affected by prevailing interest
rates. When interest rates increase, borrowers are less likely to prepay their
loans; whereas, when interest rates decrease, borrowers are more likely to
prepay loans. Funds generated by prepayments may be invested at a lower rate.
Prepayments may adversely affect the value of mortgage loans, the levels of such
assets that are retained in their portfolio, net interest income and loan
servicing income. Similarly, prepayments on mortgage-backed securities also may
affect adversely the value of these securities and interest income.
Increases in interest rates may cause depositors to shift funds from
accounts that have a comparatively lower cost such as regular savings accounts
to accounts with a higher cost such as certificates of deposit. If the cost of
deposits increases at a rate that is greater than the increase in yields on
interest-earning assets, the interest-rate spread is negatively affected.
Changes in the asset and liability mix also affect the interest-rate spread.
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<PAGE>
DS BANCOR MEETING
MATTERS TO BE CONSIDERED AT THE DS BANCOR MEETING
This Joint Proxy Statement/Prospectus is first being mailed to the holders
of DS Bancor Common Stock on or about December ___, 1996, and is accompanied by
a proxy card furnished in connection with the solicitation of proxies by the DS
Bancor Board of Directors for use at the DS Bancor Meeting. The DS Bancor
Meeting is scheduled to be held on January 23, 1997, at 10:00 a.m., at the
Trumbull Marriott, 180 Hawley Lane, Trumbull, Connecticut. At the DS Bancor
Meeting, the holders of DS Bancor Common Stock will consider and vote upon: (i)
the proposal to approve and adopt the Merger Agreement and the Merger provided
for therein, and (ii) such other business as may properly come before the DS
Bancor Meeting, or any adjournments or postponements thereof including, without
limitation, a motion to adjourn the DS Bancor Meeting to another time and/or
place for the purpose of soliciting additional proxies in order to approve the
Merger Agreement and the Merger provided for therein or otherwise.
RECORD DATE AND VOTING
The Board of Directors of DS Bancor has fixed the close of business on
December 6, 1996 as the DS Bancor Record Date for the determination of the
holders of DS Bancor Common Stock entitled to receive notice of and to vote at
the DS Bancor Meeting. Only holders of record of DS Bancor Common Stock at the
close of business on that date will be entitled to vote at the DS Bancor Meeting
or at any adjournment or postponement thereof. At the close of business on the
DS Bancor Record Date, there were 3,037,784 shares of DS Bancor Common Stock
outstanding and entitled to vote at the DS Bancor Meeting, held by approximately
833 shareholders of record. No shares of preferred stock of DS Bancor are
issued and outstanding.
Each holder of DS Bancor Common Stock on the DS Bancor Record Date will be
entitled to one vote for each share held of record upon each matter properly
submitted at the DS Bancor Meeting or at any adjournment or postponement
thereof. The presence, in person or by proxy, of the holders of at least one-
third of the shares of DS Bancor Common Stock issued and outstanding and
entitled to be voted at the DS Bancor Meeting is necessary to constitute a
quorum. Abstentions and broker non-votes will be included in the calculation of
the number of shares represented at the DS Bancor Meeting for purposes of
determining whether a quorum has been achieved. Since approval of the Merger
Agreement requires the affirmative vote of the holders of at least two-thirds of
the outstanding shares of DS Bancor Common Stock entitled to be voted at the DS
Bancor Meeting, abstentions and broker non-votes will have the same effect as a
vote against the Merger Agreement.
If a quorum is not obtained, or if fewer shares of DS Bancor Common Stock
are voted in favor of the proposal for approval of the Merger Agreement than the
number required for approval, it is expected that the DS Bancor Meeting will be
adjourned for the purpose of allowing additional time for obtaining additional
proxies. In such event, proxies will be voted to approve an adjournment, except
for proxies as to which instructions have been given to vote against the Merger
Agreement. The holders of a majority of the shares cast on the matter at the DS
Bancor Meeting would be required to approve any adjournment of the DS Bancor
Meeting.
If the enclosed proxy card is properly executed and received by DS Bancor
in time to be voted at the DS Bancor Meeting, the shares represented thereby
will be voted in accordance with the instructions marked thereon. EXECUTED
PROXIES WITH NO INSTRUCTIONS INDICATED THEREON WILL BE VOTED "FOR" THE PROPOSAL
TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER PROVIDED FOR THEREIN.
The Board of Directors of DS Bancor is not aware of any matters other than
the proposal to approve and adopt the Merger Agreement and the Merger provided
for therein (or a proposal to adjourn or postpone the DS Bancor Meeting as
necessary) that may be properly brought before the DS Bancor Meeting. If any
other matters properly come before the DS Bancor Meeting, the persons
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<PAGE>
named in the accompanying proxy will vote the shares represented by all properly
executed proxies on such matters in such manner as shall be determined by a
majority of the Board of Directors of DS Bancor.
DS BANCOR SHAREHOLDERS SHOULD NOT FORWARD ANY DS BANCOR COMMON STOCK
CERTIFICATES WITH THEIR PROXY CARDS. IF THE MERGER IS CONSUMMATED, STOCK
CERTIFICATES SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A
LETTER OF TRANSMITTAL WHICH WOULD BE SENT TO DS BANCOR SHAREHOLDERS BY THE
EXCHANGE AGENT PROMPTLY AFTER THE EFFECTIVE TIME.
VOTE REQUIRED; REVOCABILITY OF PROXIES
The affirmative vote of at least two-thirds of the outstanding shares of DS
Bancor Common Stock entitled to be voted at the DS Bancor Meeting is required in
order to approve and adopt the Merger Agreement and the Merger provided for
therein.
THE REQUIRED VOTE OF THE DS BANCOR SHAREHOLDERS WITH RESPECT TO THE MERGER
AGREEMENT IS BASED UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF DS BANCOR
COMMON STOCK AND NOT UPON THE NUMBER OF SHARES WHICH ARE ACTUALLY VOTED.
ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD OR TO VOTE IN PERSON AT THE DS
BANCOR MEETING OR THE ABSTENTION FROM VOTING BY A SHAREHOLDER WILL HAVE THE SAME
EFFECT AS A VOTE "AGAINST" THE MERGER AGREEMENT AND THE MERGER PROVIDED FOR
THEREIN.
All of the directors of DS Bancor, who beneficially owned, as of the DS
Bancor Record Date, an aggregate of 787,038 shares of DS Bancor Common Stock
(excluding all stock options) or approximately 25.9% of the outstanding shares
of DS Bancor, have entered into the Stockholder Agreement with Webster pursuant
to which they have each agreed, among other things, to certain transfer
restrictions and to vote all shares of DS Bancor Common Stock with respect to
which they have the right to vote (whether owned as of the date of the
Stockholder Agreement or thereafter acquired) in favor of the Merger Agreement,
the Merger and the other transactions contemplated by the Merger Agreement and
against any third party merger proposal (unless the DS Bancor Board of
Directors, following receipt of written advice of counsel, reasonably determines
that voting against such plan or proposal would constitute a breach of the
exercise of its fiduciary duty because such plan or proposal would be in the
best interest of DS Bancor shareholders). The executive officers of DS Bancor
and Derby also entered into the Stockholder Agreement insofar as it relates to
transfer restrictions and certain other matters. No separate consideration was
paid to any of the directors or the executive officers for entering into the
Stockholder Agreement. Webster required that the Stockholder Agreement be
executed as a condition to Webster entering into the Merger Agreement.
The presence of a shareholder at the DS Bancor Meeting will not
automatically revoke such shareholder's proxy. However, a shareholder may revoke
a proxy at any time prior to its exercise by (i) delivering to Ann Mester,
Secretary, DS Bancor, Inc., 33 Elizabeth Street, Derby, Connecticut 06418, a
written notice of revocation prior to the DS Bancor Meeting, (ii) delivering to
DS Bancor prior to the DS Bancor Meeting a duly executed proxy bearing a later
date, or (iii) attending the DS Bancor Meeting and voting in person.
The obligations of DS Bancor and Webster to consummate the Merger Agreement
are subject, among other things, to the condition that the Merger Agreement and
the Merger shall have been approved and adopted by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of DS Bancor Common
Stock entitled to vote thereon. The approval of the issuance of additional
Webster Common Stock in connection with the transactions contemplated by the
Merger Agreement is also required. See "THE MERGER -- Conditions to the
Merger."
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<PAGE>
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
DS Bancor may solicit proxies for the DS Bancor Meeting from shareholders
personally or by telephone or telegram without additional remuneration therefor.
In addition, Webster, on behalf of itself and DS Bancor, has retained D.F. King
& Co., Inc., a proxy solicitation firm, to assist in such solicitation. The fee
to be paid to such firm is an aggregate $8,500 for both Webster and DS Bancor,
plus reasonable out-of-pocket expenses. Such fee will be proportionately paid by
Webster and DS Bancor. DS Bancor will also make arrangements with brokerage
firms and other custodians, nominees and fiduciaries to send proxy materials to
their principals and will reimburse such parties for their expenses in doing so.
The cost of soliciting proxies will be paid by DS Bancor.
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<PAGE>
WEBSTER MEETING
MATTERS TO BE CONSIDERED AT THE WEBSTER MEETING
This Joint Proxy Statement/Prospectus is first being mailed to the holders
of Webster capital stock on or about December ___, 1996, and is accompanied by a
proxy card furnished in connection with the solicitation of proxies by the
Webster Board of Directors for use at the Webster Meeting. The Webster Meeting
is scheduled to be held on January 23, 1997, at 4:00 p.m., at the Courtyard by
Marriott, 63 Grand Street, Waterbury, Connecticut. At the Webster Meeting, the
holders of Webster Common Stock will consider and vote upon: (i) the proposal to
approve the issuance of up to 4,681,658 shares of Webster Common Stock in
connection with the acquisition of DS Bancor by Webster pursuant to the Merger
Agreement, (ii) the proposal to approve the amendment to Webster's Restated
Certificate of Incorporation to increase Webster's authorized capital stock by
increasing the number of authorized shares of Webster Common Stock from
14,000,000 to 30,000,000, and (iii) such other business as may properly come
before the Webster Meeting, or any adjournments or postponements thereof,
including, without limitation, a motion to adjourn the Webster Meeting to
another time and/or place for the purposes of soliciting additional proxies in
order to approve the issuance of Webster Common Stock or otherwise.
RECORD DATE AND VOTING
The Board of Directors of Webster has fixed the close of business on
December 6, 1996, as the Webster Record Date for the determination of the
holders of Webster Common Stock entitled to receive notice of and to vote at the
Webster Meeting. Only holders of record of Webster Common Stock at the close of
business on that date will be entitled to vote at the Webster Meeting or at any
adjournment or postponement thereof. At the close of business on the Webster
Record Date, there were 8,010,137 shares of Webster Common Stock outstanding and
entitled to vote at the Webster Meeting, held by approximately 2,611
shareholders of record. Holders of Webster's Series B Stock are not entitled to
vote at the Webster Meeting.
Each holder of Webster Common Stock on the Webster Record Date will be
entitled to one vote for each share held of record upon each matter properly
submitted at the Webster Meeting or at any adjournment or postponement thereof.
The presence, in person or by proxy, of at least one-third of the outstanding
shares of Webster Common Stock issued and outstanding and entitled to be voted
at the Webster Meeting is necessary to constitute a quorum. Abstentions and
broker non-votes will be included in the calculation of the number of shares
represented at the Webster Meeting for purposes of determining whether a quorum
has been achieved. Abstentions will have the same effect as a vote against the
amendment to Webster's Restated Certificate of Incorporation.
Each participant in the Webster employee stock ownership plan ("Webster
ESOP") will receive a form to be used to instruct the trustees of the Webster
ESOP how to vote the Webster Common Stock held by the Webster ESOP that is
allocated to such participant. The Webster ESOP provides that each participant
shall direct the trustee of the Webster ESOP as to the manner in which shares
allocated to such participant are to be voted. The Webster ESOP provides that
the trustee will vote such shares as instructed. The Webster ESOP also provides
that the trustee of the Webster ESOP shall vote all allocated shares for which
the trustee has not received directions from the applicable participant in its
sole discretion. The Webster ESOP provides that the trustee shall vote all
unallocated shares in the same manner and proportion in which the allocated
shares are voted (taking into account any such shares that are voted by the
trustee because no instructions were received from the participant). The trustee
of the Webster ESOP is Fleet Bank, N.A.
The directions of participants regarding the voting of the shares allocated
to them will not be disclosed to Webster or DS Bancor, and will be tabulated by
Fleet Bank, N.A.
To be effective, directions to Fleet Bank, N.A. must be received at
One Constitution Plaza, Hartford, Connecticut 06115, ATTN.: Webster ESOP Vote,
by the close of business (5:00 p.m. E.S.T.)
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<PAGE>
on January 21, 1997. Directions to the trustee received after the close
of business on January 21, 1997, or received at a different address, will
not be effective. A participant or beneficiary in the Webster ESOP who is
otherwise a Webster shareholder should (i) complete and return directions to the
Webster ESOP trustee with respect to shares of Webster Common Stock held by the
Webster ESOP that are allocated to such participant and (ii) complete and return
the enclosed proxy with respect to such other shares of Webster Common Stock.
The Merger is conditioned on the approval by the Webster shareholders of
the issuance of additional shares of Webster Common Stock in connection with the
Merger Agreement, which approval requires the affirmative vote of a majority of
the total votes cast on the proposal by the Webster shareholders entitled to
vote at the Webster Meeting. Approval by the Webster shareholders of the
issuance of the additional shares is also necessary under the rules of The
Nasdaq National Market. As of the Webster Record Date, of the shares of
additional Webster Common Stock proposed to be issued as part of the Merger,
3,556,364 shares of Webster Common Stock would be issued to the holders of the
3,037,784 then outstanding shares of DS Bancor Common Stock and 457,842 shares
of Webster Common Stock would be issued or reserved for issuance with respect to
the exercise of the 391,081 then outstanding options to purchase DS Bancor
Common Stock held by directors, officers and employees of DS Bancor.
Approval of the proposal to amend Webster's Restated Certificate of
Incorporation to increase Webster's authorized capital stock by increasing the
number of authorized shares of Webster Common Stock from 14,000,000 to
30,000,000 requires the affirmative vote of a majority of the outstanding shares
of Webster Common Stock entitled to vote at the Webster Meeting.
If a quorum is not obtained, or if fewer shares of Webster Common Stock are
voted in favor of approval of the proposal authorizing the issuance of the
additional Webster Common Stock in connection with the Merger Agreement than the
number required for approval, it is expected that the Webster Meeting will be
adjourned for the purpose of allowing additional time for obtaining additional
proxies. In such event, proxies will be voted to approve an adjournment, except
for proxies as to which instructions have been given to vote against the
proposal authorizing the issuance of the additional Webster Common Stock. The
holders of a majority of the shares cast at the Webster Meeting would be
required to approve any adjournment of the Webster Meeting.
If the enclosed proxy card is properly executed and received by Webster in
time to be voted at the Webster Meeting, the shares represented thereby will be
voted in accordance with the instructions marked thereon. EXECUTED PROXIES WITH
NO INSTRUCTIONS INDICATED THEREON WILL BE VOTED "FOR" APPROVAL OF THE PROPOSAL
AUTHORIZING THE ISSUANCE OF THE ADDITIONAL WEBSTER COMMON STOCK IN CONNECTION
WITH THE MERGER AGREEMENT AND "FOR" APPROVAL OF THE PROPOSAL AUTHORIZING THE
AMENDMENT TO WEBSTER'S RESTATED CERTIFICATE OF INCORPORATION.
The Board of Directors of Webster is not aware of any matters other than
the proposal to approve the issuance of the additional shares of Webster Common
Stock in connection with the Merger Agreement or the proposal to amend Webster's
Restated Certificate of Incorporation to increase the number of authorized
shares of Webster Common Stock (or a proposal to adjourn or postpone the Webster
Meeting as necessary) that may be properly brought before the Webster Meeting.
If any other matters properly come before the Webster Meeting, the persons named
in the accompanying proxy will vote the shares represented by all properly
executed proxies on such matters in such manner as shall be determined by a
majority of the Board of Directors of Webster.
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<PAGE>
VOTE REQUIRED; REVOCABILITY OF PROXIES
The affirmative vote of a majority of the total votes cast on the proposal
at the Webster Meeting is required to approve the issuance of the additional
shares of Webster Common Stock in connection with Merger Agreement. The
affirmative vote of a majority of the outstanding shares of Webster Common Stock
entitled to vote at the Webster Meeting is required to approve the amendment to
Webster's Restated Certificate of Incorporation to increase the number of
authorized shares of Webster Common Stock from 14,000,000 to 30,000,000.
THE REQUIRED VOTE OF THE WEBSTER SHAREHOLDERS WITH RESPECT TO THE AMENDMENT
OF WEBSTER'S RESTATED CERTIFICATE OF INCORPORATION IS BASED UPON THE TOTAL
NUMBER OF OUTSTANDING SHARES OF WEBSTER COMMON STOCK AND NOT UPON THE NUMBER OF
SHARES WHICH ARE ACTUALLY VOTED. ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD
OR TO VOTE IN PERSON AT THE WEBSTER MEETING OR THE ABSTENTION FROM VOTING BY A
SHAREHOLDER WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE AMENDMENT TO
WEBSTER'S RESTATED CERTIFICATE OF INCORPORATION.
Approval of the amendment to Webster's Restated Certificate of
Incorporation is not a condition to the Merger Agreement.
The presence of a shareholder at the Webster Meeting will not automatically
revoke such shareholder's proxy. However, a shareholder may revoke a proxy at
any time prior to its exercise by (i) delivering to Lee A. Gagnon, Executive
Vice President, Chief Operating Officer and Secretary, Webster Financial
Corporation, Webster Plaza, Waterbury, Connecticut 06702, a written notice of
revocation prior to the Webster Meeting, (ii) delivering to Webster prior to the
Webster Meeting a duly executed proxy bearing a later date, or (iii) attending
the Webster Meeting and voting in person.
The obligations of Webster and DS Bancor to consummate the Merger are
subject, among other things, to the condition that the issuance of additional
shares of Webster Common Stock shall have been approved by the affirmative vote
of a majority of the total votes cast on the proposal. Approval of the Merger
Agreement and the Merger provided for therein by the affirmative vote of two-
thirds of the outstanding shares of DS Bancor Common Stock entitled to vote
thereon is also required. See "THE MERGER -- Conditions to the Merger."
As of the Webster Record Date, the Webster ESOP owned 409,592 shares (5.1%)
of the Webster Common Stock outstanding and entitled to vote at the Webster
Meeting. Of the shares of Webster Common Stock held by the Webster ESOP, 190,963
have been allocated to the accounts of participants as of the Webster Record
Date and 218,629 remain unallocated. The Webster ESOP provides that each
participant shall direct the trustee of the Webster ESOP as to the manner in
which shares allocated to such participant are to be voted. The trustee has
discretion to vote unallocated shares and allocated shares for which no
instructions are received. See "-- Record Date and Voting."
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
Webster may solicit proxies for the Webster Meeting from shareholders personally
or by telephone or telegram without additional remuneration therefor. In
addition, Webster, on behalf of itself and DS Bancor, has retained D.F. King &
Co., Inc., a proxy solicitation firm, to assist in such solicitation. The fee to
be paid to such firm is an aggregate $8,500 for both Webster and DS Bancor, plus
reasonable out-of-pocket expenses. Such fee will be proportionately paid by
Webster and DS Bancor. Webster will also make arrangements with brokerage firms
and other custodians, nominees and fiduciaries to send proxy materials to their
principals and will reimburse such parties for their expenses in doing so. The
cost of soliciting proxies will be paid by Webster.
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<PAGE>
THE MERGER
The information in this Section is qualified in its entirety by reference
to the full text of the Merger Agreement (including each of the exhibits
thereto), the Stockholder Agreement and the Option Agreement, all of which are
incorporated herein by reference and the material features of which are
described in this Joint Proxy Statement/Prospectus. A copy of the Merger
--------------------
Agreement (including each of exhibits thereto) and the other documents described
- --------------------------------------------------------------------------------
in this Joint Proxy Statement/Prospectus will be provided promptly without
- --------------------------------------------------------------------------
charge upon oral or written request addressed to Lee A. Gagnon, Executive Vice
- ------------------------------------------------------------------------------
President, Chief Operating Officer and Secretary, Webster Financial Corporation,
- --------------------------------------------------------------------------------
Webster Plaza, Waterbury, Connecticut 06702, telephone (203) 578-2217.
- ----------------------------------------------------------------------
THE PARTIES
The Merger Agreement was entered into among Webster, Merger Sub and DS
Bancor. The Merger Agreement provides for, among other things, Webster's
acquisition of DS Bancor through the merger of Merger Sub, a wholly-owned
subsidiary of Webster, into DS Bancor.
WEBSTER. Webster is a Delaware corporation and the holding company of
Webster Bank, its wholly-owned federal savings bank subsidiary which is
headquartered in Waterbury, Connecticut. Deposits at Webster Bank are FDIC
insured. Through Webster Bank, Webster currently serves customers from 63
banking offices located in New Haven, Fairfield, Litchfield, Hartford and
Middlesex Counties in Connecticut. Webster's focus is on providing financial
services to individuals, families and businesses. Webster emphasizes three
business lines - consumer banking, business banking and mortgage banking; each
supported by centralized administration, marketing, finance and operations.
Webster Bank's goal is to provide banking services that are fairly priced,
reliable and convenient.
At September 30, 1996, Webster had total consolidated assets of $4.0
billion, total deposits of $3.0 billion, and shareholders' equity of $216.7
million or 5.44% of total assets. At September 30, 1996, Webster had loans
receivable, net of $2.5 billion, which included $1.9 billion in residential
mortgage loans, $213.3 million in commercial real estate loans, $165.5 million
in commercial and industrial loans and $237.7 million in consumer loans
(consisting primarily of home equity loans). In addition, Segregated Assets, net
were $82.9 million at September 30, 1996, which were comprised of commercial and
industrial, commercial real estate and multi-family loans. At September 30,
1996, nonaccrual loans and other real estate owned ("OREO") were $33.7 million.
At that date, Webster's allowance for loan losses was $34.4 million, or 155.1%
of nonaccrual loans, and its total allowance for loan and OREO losses was $34.9
million, or 102.1% of nonaccrual loans and OREO. Additional information
regarding Webster is incorporated herein by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
Webster, as a holding company, is regulated primarily by the OTS at the
federal level and by the Connecticut Commissioner. Webster Bank, as a federal
savings bank, is regulated primarily by the OTS and as to certain matters by the
FDIC.
MERGER SUB. Merger Sub, a Delaware corporation, is a wholly-owned
subsidiary of Webster formed solely to facilitate the Merger. The separate
corporate existence of Merger Sub will terminate upon the Merger.
DS BANCOR. DS Bancor, a Delaware corporation, is the bank holding company
of Derby, a Connecticut-chartered savings bank headquartered in Derby,
Connecticut. Deposits at Derby are FDIC insured. Through Derby, DS Bancor is
engaged primarily in the business of attracting deposits from the general public
and investing those funds primarily in residential mortgage loans. Derby also
makes commercial mortgage and consumer loans. Through Derby, DS Bancor currently
serves customers from 23 banking offices located primarily in south central
Connecticut. Its general market area is western New Haven, eastern Fairfield and
Hartford Counties.
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<PAGE>
At September 30, 1996, DS Bancor had total consolidated assets of $1.3
billion, total deposits of $1.0 billion, and shareholders' equity of $86.5
million, or 6.87% of total assets. At September 30, 1996, DS Bancor had loans
receivable, net of $877.3 million, which included $675.3 million in residential
mortgage loans, $63.1 million in commercial real estate loans and $129.8 million
in home equity credit lines and consumer installment loans. At September 30,
1996, nonperforming loans and OREO were $20.4 million. At that date, DS
Bancor's allowance for loan losses was $7.4 million, or 46.5% of nonperforming
loans, and its total allowance for loan losses and OREO was $7.4 million, or
36.2% of nonperforming loans and OREO. Additional information regarding DS
Bancor is incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
DS Bancor, as a holding company, is regulated primarily by the Federal
Reserve Board at the federal level and by the Connecticut Commissioner. Derby,
as a state-chartered savings bank, is regulated by the Connecticut Commissioner
and by the FDIC.
BACKGROUND OF THE MERGER
In February 1996, the DS Bancor Board of Directors appointed a Strategic
Planning Committee to, among other things, review and analyze the various
strategic alternatives available to DS Bancor, including, but not limited to,
following or modifying DS Bancor's existing business plan in pursuit of a long-
term growth strategy or pursuing a possible merger partner or sale of DS Bancor.
The members of the Strategic Planning Committee were Messrs. Sponheimer
(Chairman), Archer, Daddona, DiAdamo and Mills.
In March 1996, the Strategic Planning Committee engaged Alex. Brown to
serve as DS Bancor's financial advisor to evaluate strategic alternatives for DS
Bancor, including a possible third party sale of DS Bancor.
In April 1996, after Alex. Brown completed its strategic review, the
Strategic Planning Committee authorized Alex. Brown to identify potential merger
partners and acquirors of DS Bancor and to prepare and distribute information
packages with respect to DS Bancor to such parties in order to obtain
expressions of interest as to a potential transaction with DS Bancor.
In June 1996, Alex. Brown contacted a total of 10 national and super-
regional banks headquartered in New York, New Jersey and New England that were
identified by Alex. Brown as potentially interested in acquiring or merging with
DS Bancor and as the most likely candidates to pay the highest premium to
acquire or merge with DS Bancor. Of these 10, nine entered into confidentiality
agreements with DS Bancor and were furnished with information packages. In July
1996, DS Bancor received preliminary indications of interest from three of the
nine potential transaction candidates. The preliminary indications of interest
each were for acquisition transactions in which shareholders of DS Bancor would
receive either stock or cash. The stated per share valuation of the preliminary
indications of interest ranged to as high as $41.00, subject to increase in the
event of certain asset sales and expense reductions. In each case, the
preliminary indications of interest were subject to completion of an on-site due
diligence review of DS Bancor.
In August 1996, DS Bancor's Board of Directors authorized senior management
to work with Alex. Brown to schedule on-site due diligence by the parties who
had expressed an interest in acquiring DS Bancor. Also during August 1996,
Webster, which had previously informally expressed an interest in acquiring DS
Bancor, was contacted. Following such contact, Webster executed a
confidentiality agreement and was furnished with a copy of the information
package furnished to other potential acquirors. Following that, Webster
furnished DS Bancor with a preliminary indication of interest at $43.00 per
share in a stock-for-stock exchange, subject to completion of an on-site due
diligence review of DS Bancor. The due diligence by all potential acquirors was
conducted during the latter weeks of August and early September 1996.
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<PAGE>
Following completion of the due diligence reviews, the four parties
submitted revised acquisition proposals. Based upon its evaluation of the four
proposals, on September 27, 1996, the Board of Directors authorized senior
management and Alex. Brown to proceed with negotiation of an acquisition
agreement with Webster on the basis of Webster having furnished the bid with the
highest value. On October 7, 1996, upon consideration of the strategic
alternatives available to DS Bancor, the Board of Directors approved the
acquisition of DS Bancor by Webster and authorized the execution and delivery by
DS Bancor of the Merger Agreement.
RECOMMENDATION OF THE DS BANCOR BOARD OF DIRECTORS AND REASONS FOR THE MERGER
The DS Bancor Board of Directors unanimously approved the Merger Agreement
and the Merger provided for therein and determined that the Merger is fair to,
and in the best interests of, DS Bancor and its shareholders. THE DS BANCOR
BOARD THEREFORE UNANIMOUSLY RECOMMENDS THAT HOLDERS OF DS BANCOR COMMON STOCK
VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER PROVIDED FOR
THEREIN. The DS Bancor Board believes that the Merger will enable holders of DS
Bancor Common Stock to realize increased value due to the premium over market
price, net income per share of DS Bancor Common Stock and book value per share
of DS Bancor Common Stock, as provided by the Exchange Ratio. The relative
multiples implied by the Exchange Ratio ($43.00 implied per share value to DS
Bancor shareholders as of October 7, 1996) represented a premium to market price
as of October 4, 1996 of 15.4%, 16.7 times last 12 months core earnings per
share for the period ended June 30, 1996 and 164.5% of book value as of June 30,
1996. The Board also believes that the Merger may enable DS Bancor's
shareholders to participate in opportunities for appreciation of Webster Common
Stock. See " --Background of the Merger" above and " -- Opinion of DS Bancor
Financial Adviser" below. In reaching its decision to approve the Merger
Agreement, the DS Bancor Board consulted with its legal advisor regarding the
legal terms of the Merger and the DS Bancor Board's fiduciary obligations in its
consideration of the proposed Merger, with its financial advisor, Alex. Brown,
regarding the financial aspects and fairness of the proposed Merger, as well as
with management of DS Bancor, and, without assigning any relative or specific
weight, considered the following material factors, many of which are subjective
in nature, both from a short-term and long-term perspective:
(i) The DS Bancor Board's familiarity with, and review of, DS
Bancor's business, financial condition, results of
operations and prospects, including, but not limited to, its
potential growth, development, productivity and
profitability and the business risks associated therewith;
(ii) The current and prospective environment in which DS Bancor
operates, including national and local economic conditions,
the highly competitive environment for financial
institutions generally, the increased regulatory burden on
financial institutions, and the trend toward consolidation
in the financial services industry;
(iii) The potential appreciation in market and book value of DS
Bancor Common Stock on both a short- and long-term basis, as
a stand alone entity, in comparison to the proposed purchase
price being offered by Webster;
(iv) Information derived from publicly available data
and discussions with Webster management concerning the
business, financial condition, results of operations and
asset quality of Webster;
(v) The competitive position and future growth prospects of
Webster as the second largest bank headquartered in
Connecticut following the Merger, the potential synergies
resulting from the closure of certain branch offices and
consolidation of the two companies' operations and the
related potential for appreciation and growth in earnings
and book value of Webster as a result of the proposed
Merger;
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<PAGE>
(vi) The presentations of Alex. Brown regarding the Merger and
the written opinion of Alex. Brown that the merger
consideration is fair, from a financial point of view, to
the holders of DS Bancor Common Stock (see "-- Opinion of
Financial Adviser" below);
(vii) The financial terms and other conditions of the Merger
Agreement and the Option Agreement;
(viii) The expectation that Webster will continue to provide
quality service to the communities and customers served by
DS Bancor and Webster's capacity, as a larger institution
with a larger capital base, to provide a wider range of
services, enhanced access to credit, and greater convenience
to such customers and communities;
(ix) The compatibility with respect to businesses and management
philosophies of DS Bancor and Webster and Webster's strong
commitment to the Connecticut communities it serves;
(x) The fact that DS Bancor had conducted an extensive
solicitation of interest from other likely potential
acquirors of DS Bancor and Webster had furnished the bid
with the highest value; and
(xi) DS Bancor's belief that further delay in approving the
Merger might result in Webster's withdrawing its acquisition
proposal.
RECOMMENDATION OF THE WEBSTER BOARD OF DIRECTORS AND REASONS FOR THE ISSUANCE
The Webster Board of Directors unanimously approved the Merger Agreement
and the Merger provided for therein and determined that the Merger is fair to,
and in the best interests of, Webster and its shareholders. The Webster Board
also unanimously approved the issuance of shares of Webster Common Stock in
connection with the acquisition of DS Bancor by Webster pursuant to the Merger
Agreement. THE WEBSTER BOARD THEREFORE UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
WEBSTER COMMON STOCK VOTE TO APPROVE THE ISSUANCE OF ADDITIONAL WEBSTER COMMON
STOCK IN CONNECTION WITH THE MERGER AGREEMENT. The Board of Directors of Webster
reviewed financial analyses performed by Webster's management, including the
results of management's due diligence, covering DS Bancor's asset quality,
reserve adequacy, operations, products, markets, deposits and other liabilities,
capital, historical financial performance, human resource issues, synergies,
merger related costs, contingent liabilities and post-Merger combined financial
performance. Webster's management recommended to the Board of Directors that the
Merger be approved. Webster also consulted with its outside financial advisor,
Merrill Lynch, as to certain issues concerning the Merger, including whether the
Exchange Ratio is fair to Webster from a financial point of view. See "--Opinion
of Webster Financial Advisor."
The Webster Board of Directors concluded that the Merger and the issuance
of Webster Common Stock in the Merger is in the best interests of Webster and
its shareholders because, among other reasons, the Merger would: (i) enable
Webster to increase its market share in Connecticut; establish Webster as
second in deposit market share in its primary markets of Hartford and New Haven
Counties; (ii) enhance Webster's opportunities as a provider of regional
community banking services to better meet the needs of its existing customers
due to the availability of more locations thereby providing additional customer
convenience and enhancing Webster's ability to offer new products to its
customer base; and (iii) achieve earnings growth due to increased assets
combined with significant cost savings over the aggregate expense of Webster's
and DS Bancor's operations as a result of the consolidation of a number of
Derby's and Webster Bank's branches into nearby Webster Bank or Derby locations
and the elimination of overlapping administration and operations functions.
In reaching its conclusion that the Merger and the issuance are fair to,
and in the best interests of, Webster and its shareholders, the other material
factors that the Webster Board of Directors also considered, without assigning
any relative or specific weight, included: (i) its knowledge of the business,
operations, assets, book value, financial condition, operating results
(including financial characteristics such as net worth, earnings, deposits,
assets and financial ratios) and prospects of DS Bancor and Derby based on an
in-depth due diligence review; (ii) current industry, economic and market
conditions; (iii) the presentation of Merrill Lynch regarding the Merger and the
written opinion of Merrill Lynch; (iv) the expected short-term and long-term
positive effects of the transaction on Webster's
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<PAGE>
earnings including that Webster expects the transaction to be accretive to
earnings per share in 1997; (v) a comparison of prices known to management to
have been paid in certain local and regional financial institution mergers and
acquisitions in the recent period (see "--Opinion of Webster Financial
Advisor -- Analysis of Selected Thrift Merger Transactions"); (vi) the terms of
the Merger Agreement, which were the product of arms' length negotiations;
(vii) the structure and accounting treatment of the Merger; (viii) regulatory
aspects of the proposed transaction; and (ix) the opportunity for Webster
shareholders to participate in a larger financial institution.
PURPOSE AND EFFECTS OF THE MERGER
The purpose of the Merger is to enable Webster to acquire the assets and
business of DS Bancor and Derby. After the Merger, certain of Derby's 23
banking offices will be operated as banking offices of Webster Bank and certain
of such offices will be consolidated with Webster Bank offices.
The Merger will result in an expansion of Webster's primary market area to
include Derby's banking offices in western New Haven, eastern Fairfield and
Hartford Counties in Connecticut. The assets and business of Derby's 23 banking
offices will broaden Webster's existing operations in New Haven, Fairfield and
Hartford Counties where Webster currently has 61 banking offices. Webster
expects to achieve reductions in the current operating expenses of DS Bancor
upon the consolidation of Derby's operations into Webster Bank, which would
cause the closing of certain of Derby's existing banking offices as well as
certain reductions in administrative and support personnel. Upon consummation
of the Merger, the issued and outstanding shares of DS Bancor Common Stock will
automatically be converted into Webster Common Stock based on the Exchange
Ratio. See "-- Exchange Ratio."
STRUCTURE
The Merger will be effected by merging Merger Sub, a wholly-owned
subsidiary of Webster formed to facilitate the Merger, into DS Bancor, which
will then be the Surviving Corporation. Immediately after the consummation of
the Merger, (i) Webster intends that the Surviving Corporation, a wholly-owned
subsidiary of Webster, will be merged into Webster, with Webster being the
surviving holding company, and (ii) Derby (which will then be a wholly-owned
subsidiary of Webster) will be merged into Webster Bank. Webster Bank will be
the federal savings bank resulting from the Bank Merger.
Upon consummation of the Merger, each outstanding share of DS Bancor Common
Stock, except for shares held as treasury stock or held, directly or indirectly,
by DS Bancor or Webster or any of their subsidiaries (other than Trust Account
Shares or DPC Shares), will be converted into a certain number of shares of
Webster Common Stock, plus cash to be paid in lieu of fractional shares. The
Merger will not change the outstanding Webster Common Stock held by the Webster
shareholders.
DS Bancor and Webster expect that the Merger will be consummated in the
first quarter of 1997, or as soon as possible after the receipt of all
regulatory and shareholder approvals and the expiration of all regulatory
waiting periods. If the Merger is not consummated by June 30, 1997, the Merger
Agreement will be terminated unless DS Bancor and Webster mutually consent to an
extension.
Notwithstanding any provision of the Merger Agreement to the contrary,
Webster may elect to modify the structure of the transactions contemplated by
the Merger Agreement as noted therein so long as (i) there are no material
adverse federal income tax consequences to the DS Bancor shareholders as a
result of such modification, (ii) the consideration to be paid to DS Bancor
shareholders under the Merger Agreement is not thereby changed or reduced in
amount, and (iii) such modification will not be reasonably likely to delay
materially or jeopardize receipt of any required regulatory approvals. Webster
presently has no intent to modify the structure.
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<PAGE>
In addition, the Merger Agreement permits Webster to make modifications to
the structure of the Bank Merger.
EXCHANGE RATIO
The Merger Agreement provides that at the Effective Time, each issued
outstanding share of DS Bancor Common Stock (other than shares held, directly or
indirectly, by DS Bancor, Webster or any of their subsidiaries (other than Trust
Account Shares or DPC Shares)) will be converted automatically into a specified
number of shares of Webster Common Stock at the Exchange Ratio. The Exchange
Ratio will be determined by dividing $43.00 by the Base Period Trading Price,
computed to five decimal places. The Exchange Ratio is subject to an adjustment
such that if the Base Period Trading Price is greater than $38.50, the Exchange
Ratio shall be 1.11688 and if the Base Period Trading Price is less than $31.50,
the Exchange Ratio shall be 1.36508. Furthermore, if the Base Period Trading
Price is less than $28.00, the Merger Agreement may be terminated by DS Bancor
unless Webster elects that the Exchange Ratio shall be equal to the number
resulting from dividing $38.22 by the Base Period Trading Price. However,
Webster's seeking of approval for the issuance of up to 4,681,658 shares of
Webster Common Stock in connection with the Merger is based on the number of
shares which would be issued if the Base Period Trading Price is $28.00.
Accordingly, if the Base Period Trading Price is less than $28.00 and DS Bancor
elects to terminate the Merger Agreement, Webster cannot increase the Exchange
Ratio as described above without seeking further shareholder approval and
registering additional shares with the SEC.
At the Effective Time, all shares of treasury stock and all shares of DS
Bancor Common Stock held by Webster, DS Bancor or any of their subsidiaries
(other than Trust Account Shares or DPC Shares) shall be canceled.
The following table sets forth a range of possible Base Period Trading
Prices of Webster Common Stock, the resultant Exchange Ratio for each such Base
Period Trading Price, and the equivalent pro forma market value of a share of DS
Bancor Common Stock.
<TABLE>
<CAPTION>
BASE DS BANCOR BASE DS BANCOR
PERIOD PRO FORMA PERIOD PRO FORMA
TRADING EXCHANGE MARKET TRADING EXCHANGE MARKET
PRICE RATIO VALUE (a) PRICE RATIO VALUE (a)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$28.00 1.36508 $38.22 $34.50 1.24638 $43.00
$28.50 1.36508 $38.90 $35.00 1.22857 $43.00
$29.00 1.36508 $39.59 $35.50 1.21127 $43.00
$29.50 1.36508 $40.27 $36.00 1.19444 $43.00
$30.00 1.36508 $40.95 $36.50 1.17808 $43.00
$30.50 1.36508 $41.63 $37.00 1.16216 $43.00
$31.00 1.36508 $42.32 $37.50 1.14667 $43.00
$31.50 1.36508 $43.00 $38.00 1.13158 $43.00
$32.00 1.34375 $43.00 $38.50 1.11688 $43.00
$32.50 1.32308 $43.00 $39.00 1.11688 $43.56
$33.00 1.30303 $43.00 $39.50 1.11688 $44.12
$33.50 1.28358 $43.00 $40.00 1.11688 $44.68
$34.00 1.26470 $43.00 $40.50 1.11688 $45.23
</TABLE>
(a) Calculated by multiplying the Base Period Trading Price by the Exchange
Ratio.
Based on the $36.73 average of the daily closing prices per share for
Webster Common Stock for the 15 consecutive trading days on which shares of
Webster Common Stock were actually traded prior to December 6, 1996 (the most
recent practicable date prior to the date of this Joint Proxy
Statement/Prospectus), the Exchange Ratio would be 1.17071. Because the market
price of Webster
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<PAGE>
Common Stock is subject to fluctuation, the Exchange Ratio for the number of
shares of Webster Common Stock that holders of DS Bancor Common Stock will
receive in the Merger may materially increase or decrease prior to the Merger.
No assurance can be given as to the Exchange Ratio at the time of the Merger.
See "MARKET PRICES AND DIVIDENDS." Such variance would not alter Webster's or DS
Bancor's obligation to consummate the Merger, except as provided above. Based on
the 3,037,784 shares of DS Bancor Common Stock outstanding on December 6, 1996
and an Exchange Ratio of 1.17071, Webster would issue up to 3,556,364 shares of
Webster Common Stock in the Merger, plus cash in lieu of fractional shares.
These numbers do not reflect additional shares of Webster Common Stock to be
issued in the event of the exercise prior to the Merger of the 391,801 existing
stock options held by directors, officers and employees of DS Bancor.
Certificates for fractions of shares of Webster Common Stock will not be
issued. Under the Merger Agreement, in lieu of a fractional share of Webster
Common Stock, each holder of DS Bancor Common Stock will be entitled to receive
an amount of cash equal to the fraction of a share of Webster Common Stock to
which such holder would otherwise be entitled multiplied by the average (without
respect to the number of shares traded) of the high and low sales prices of
Webster Common Stock, as reported on The Nasdaq National Market, for the five
trading days immediately preceding the fifth trading day before the closing date
of the Merger. Following consummation of the Merger, no holder of DS Bancor
Common Stock would be entitled to any dividends or other rights in respect of
any such fraction. The aggregate number of shares of Webster Common Stock,
along with any cash to be paid in lieu of a fraction of a share of Webster
Common Stock, payable to each holder of DS Bancor Common Stock, is hereinafter
referred to as the "Purchase Price."
The conversion of DS Bancor Common Stock held by shareholders of DS Bancor
into shares of Webster Common Stock at the Exchange Ratio will occur
automatically upon the Merger. Pursuant to the Merger Agreement, on or after
the Effective Time, Webster will cause the Exchange Agent to make payment of the
Purchase Price to each holder of shares of DS Bancor Common Stock who surrenders
the certificate or certificates representing such shares to the Exchange Agent,
together with a duly executed letter of transmittal.
The Exchange Agent will mail a letter of transmittal as soon as practicable
after the Effective Time to each holder of record of DS Bancor Common Stock
immediately prior to the Effective Time. Webster will cause to be deposited
with the Exchange Agent certificates representing the aggregate number of shares
of Webster Common Stock to be issued to DS Bancor shareholders, along with the
cash to be paid in lieu of fractional shares. The Exchange Agent shall not be
obligated, however, to deliver or cause to be delivered the Purchase Price to
which any holder of DS Bancor Common Stock would otherwise be entitled as a
result of the Merger until such holder surrenders the certificate or
certificates representing the shares of DS Bancor Common Stock for exchange, or,
if not available, an appropriate affidavit of loss and indemnity agreement
and/or a bond as may be required by Webster. Likewise, no dividends or
distributions with respect to Webster Common Stock payable to any such holder
will be paid until such holder surrenders the certificate or certificates
representing the shares of DS Bancor Common Stock for exchange. No interest
will be paid or accrued to DS Bancor's shareholders on cash in lieu of
fractional shares or unpaid dividends and distributions, if any.
If any certificate representing shares of Webster Common Stock is to be
issued in a name other than that in which the certificate for such shares
surrendered in exchange is registered, it shall be a condition of such issuance
that the certificate so surrendered shall be properly endorsed or otherwise be
in proper form for transfer and that the person requesting such exchange shall
either (i) pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate to a person other than the
registered holder of the certificate surrendered or (ii) establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable. After the Effective Time, there shall be no transfers on the stock
transfer books of DS Bancor of the shares of DS Bancor Common Stock outstanding
immediately prior to the Effective Time and any such shares presented to the
Exchange Agent at or after the Effective Time shall be canceled and exchanged
for the Purchase Price.
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<PAGE>
ANY PORTION OF THE PURCHASE PRICE MADE AVAILABLE TO THE EXCHANGE AGENT THAT
REMAINS UNCLAIMED BY DS BANCOR'S SHAREHOLDERS FOR 12 MONTHS AFTER THE EFFECTIVE
TIME WILL BE RETURNED TO WEBSTER. ANY SHAREHOLDER OF DS BANCOR WHO HAS NOT
EXCHANGED SHARES OF DS BANCOR COMMON STOCK FOR THE PURCHASE PRICE IN ACCORDANCE
WITH THE MERGER AGREEMENT PRIOR TO THAT TIME SHALL THEREAFTER LOOK ONLY TO
WEBSTER FOR PAYMENT OF THE PURCHASE PRICE IN RESPECT OF SUCH SHARES AND ANY
UNPAID DIVIDENDS OR DISTRIBUTIONS. NOTWITHSTANDING THE FOREGOING, NONE OF
WEBSTER, DS BANCOR, THE EXCHANGE AGENT OR ANY OTHER PERSON WILL BE LIABLE TO ANY
SHAREHOLDER OF DS BANCOR FOR ANY AMOUNT PROPERLY DELIVERED TO A PUBLIC OFFICIAL
PURSUANT TO APPLICABLE ABANDONED PROPERTY, ESCHEAT OR SIMILAR LAWS.
STOCK CERTIFICATES FOR SHARES OF DS BANCOR COMMON STOCK SHOULD NOT BE
---
RETURNED TO DS BANCOR WITH THE ENCLOSED PROXY CARD AND SHOULD ONLY BE FORWARDED
TO THE EXCHANGE AGENT AFTER RECEIPT OF THE LETTER OF TRANSMITTAL.
REGULATORY APPROVALS
Consummation of the Merger is conditioned upon the receipt of required
regulatory approvals or waivers from the OTS, the Connecticut Commissioner and
the Federal Reserve Board. On December 13, 1996, the Federal Reserve Board
waived its application requirement. Applications as to the OTS and Connecticut
Commissioner approvals were filed in November 1996 and are pending. No other
regulatory approvals are required to effect the Merger pursuant to the Merger
Agreement. Neither DS Bancor nor Webster is aware of any reasons why all
required regulatory approvals or waivers should not be obtained. See "--
Conditions to the Merger."
CONDITIONS TO THE MERGER
The respective obligations of the parties under the Merger Agreement to
consummate the Merger are subject to the satisfaction of the following
conditions: (i) the Merger Agreement shall not have been terminated on or
before the Effective Time; (ii) the Merger Agreement and the Merger shall have
been approved by an affirmative vote of the holders of at least two-thirds of
the outstanding shares of DS Bancor Common Stock entitled to vote thereon at the
DS Bancor Meeting; (iii) the issuance of Webster Common Stock to the DS Bancor
shareholders as part of the Merger shall have been approved by a majority of the
total votes cast on the proposal at the Webster Meeting; (iv) the Webster Common
Stock which shall be issued in the Merger (including the shares that may be
issued upon the exercise of DS Bancor options prior to the Effective Time) shall
have been authorized for quotation on The Nasdaq National Market; (v) all
required regulatory approvals shall have been obtained and shall remain in full
force and effect, all statutory waiting periods in respect thereof shall have
expired, and no such regulatory approvals shall contain a non-customary
condition that the parties reasonably deem to be burdensome; (vi) the
Registration Statement shall have become effective and shall not be subject to a
stop order or any threatened stop order; (vii) no injunction preventing
consummation of the Merger, the Bank Merger or any of the other transactions
contemplated by the Merger Agreement or the Bank Merger Agreement shall be in
effect and such consummation continues to be legal; and (viii) favorable tax
opinions from Webster's counsel and DS Bancor's special tax counsel shall have
been received by Webster and DS Bancor, respectively (which opinions were
received).
The obligations of Webster and Merger Sub under the Merger Agreement to
consummate the Merger are subject further to the satisfaction or waiver of
certain conditions, including the following: (i) the representations and
warranties of DS Bancor contained in the Merger Agreement shall be true and
correct when made on the date of the Merger Agreement and as of the Effective
Time, except where such failure or failures would not have a material adverse
effect on DS Bancor; (ii) DS Bancor shall have in all material respects
performed all covenants and agreements contained in the Merger Agreement to be
performed by DS Bancor at or prior to the Effective Time; (iii) DS Bancor shall
have obtained the consent, approval or waiver of other persons whose consent or
approval is
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<PAGE>
required to permit the succession by the Surviving Corporation or Webster Bank
under any lease or other agreement, except where such failure or failures would
not have a material adverse effect on DS Bancor; (iv) no proceeding initiated by
any governmental entity seeking an injunction shall be pending; (v) specified
legal opinions of DS Bancor's counsel and comfort letter of DS Bancor's
independent public accountants shall have been received by Webster; and (vi)
Webster shall have received favorable accounting opinions from KPMG Peat Marwick
LLP as to the Merger being accounted for as a pooling of interests, and such
opinions shall not have been withdrawn.
The obligations of DS Bancor under the Merger Agreement to consummate the
Merger are subject further to the satisfaction or waiver of certain conditions,
including the following: (i) the representations and warranties of Webster
contained in the Merger Agreement shall be true and correct when made on the
date of the Merger Agreement and as of the Effective Time, except where such
failure or failures would not have a material adverse effect on Webster; (ii)
Webster and Merger Sub each shall have in all material respects performed all
obligations contained in the Merger Agreement required to be performed by it at
or prior to the Effective Time; (iii) Webster shall have obtained the consent or
approval of other persons in connection with the transactions contemplated by
the Merger Agreement that is required under any lease or other agreement to
which Webster or Webster Bank is a party or otherwise bound; (iv) no proceeding
initiated by any governmental entity seeking an injunction shall be pending; (v)
specified legal opinions of Webster's counsel shall have been received by DS
Bancor; and (vi) DS Bancor shall have received an opinion from Alex. Brown that
the transactions contemplated by the Merger Agreement and the consideration to
be received by holders of DS Bancor Common Stock are fair from a financial point
of view to the holders of DS Bancor Common Stock (which opinion has been
received and is attached as Appendix A to this Joint Proxy
----------
Statement/Prospectus).
CONDUCT OF BUSINESS PENDING THE MERGER
The Merger Agreement contains various restrictions on the operations of DS
Bancor and the DS Bancor subsidiaries prior to the Effective Time. In general,
the Merger Agreement obligates DS Bancor and each DS Bancor subsidiary to
continue to carry on their respective businesses in the ordinary course
consistent with past practices and with prudent banking practices, with certain
specific limitations on DS Bancor's lending activities and other operations. DS
Bancor and each DS Bancor subsidiary also are prohibited by the Merger Agreement
from declaring any dividends on their capital stock other than specified
dividends on the DS Bancor Common Stock; splitting, combining or reclassifying
any of their capital stock; issuing or authorizing or proposing the issuance of
any securities, other than the issuance of additional shares of DS Bancor Common
Stock upon exercise of certain existing stock options held by directors,
officers and employees of DS Bancor or the Option held by Webster; or
repurchasing certain specified shares of capital stock. Also, under the terms
of the Merger Agreement, DS Bancor and each DS Bancor subsidiary may not amend
their certificates of incorporation or bylaws, nor may they change their methods
of accounting in effect at December 31, 1995, except as required by changes in
regulatory or generally accepted accounting principles. In addition, the Merger
Agreement restricts DS Bancor from increasing employee or director benefit
arrangements or compensation other than annual increases for employees in the
ordinary course consistent with past practices (in the case of Messrs. DiAdamo,
Santoro and Wells, not to exceed 6%), including the granting of stock options
and entering into any new employment or severance agreements, or paying any
bonuses other than to certain specified persons not to exceed a specified
aggregate amount and subject to such persons continuing their employment with
Webster Bank for a specified period of time.
THIRD PARTY PROPOSALS
The Merger Agreement provides generally that DS Bancor and each DS Bancor
subsidiary shall not, nor shall DS Bancor authorize or permit any of its
officers, directors, employees or agents, to, solicit, initiate or encourage any
inquiries relating to, or the making of, any third party takeover proposal.
There is a similar prohibition as to any discussion or negotiation of any third
party takeover proposal, or providing third parties with information relating to
such inquiry or proposal,
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<PAGE>
unless the DS Bancor Board of Directors, following receipt of written advice of
counsel, reasonably determines in the exercise of its fiduciary duty that such
discussions or negotiations should be commenced or such information must be
furnished.
EXPENSES; BREAKUP FEE
The Merger Agreement generally provides for Webster and DS Bancor to pay
their own expenses relating to the Merger Agreement, with an equal sharing of
the costs of printing this Joint Proxy Statement/Prospectus and Webster paying
the SEC filing fees for registering the Webster Common Stock to be issued in the
Merger. However, if the Merger Agreement is terminated by Webster or DS Bancor
as a result of a material breach of a representation, warranty, covenant or
other agreement contained therein by the other party, or if Webster terminates
the Merger Agreement by reason of DS Bancor (i) failing to hold the DS Bancor
Meeting on a timely basis; (ii) failing to recommend to its shareholders
approval of the Merger Agreement and the transactions contemplated thereby;
(iii) failing to oppose any third party takeover proposal (with respect to (ii)
and (iii), unless the DS Bancor Board of Directors, following receipt of written
advice of counsel, reasonably determines that such recommendation or opposition,
as applicable, would constitute a breach of the exercise of its fiduciary duty);
or (iv) as a result of DS Bancor violating the restrictions on third party
takeover proposals (without regard to the fiduciary duty exception), the Merger
Agreement provides for the non-terminating party to pay all reasonable expenses
of the terminating party up to $500,000, plus a breakup fee of $250,000. If the
Merger Agreement is terminated by either Webster or DS Bancor as a result of the
non-terminating party failing to obtain the approval of its shareholders
necessary to consummate the Merger, the terminating party is entitled to have
all of its reasonable expenses up to $500,000 paid by the non-terminating party.
Certain events described above that would permit Webster to terminate the Merger
Agreement would also constitute Preliminary Purchase Events (as defined) under
the Option. See "THE MERGER -- Option Agreement."
OPINION OF DS BANCOR FINANCIAL ADVISOR
DS Bancor retained Alex. Brown to act as DS Bancor's financial advisor in
connection with the Merger and related matters. Alex. Brown was selected to act
as DS Bancor's financial advisor based upon its qualifications, expertise and
reputation. Alex. Brown regularly publishes research reports regarding the
financial services industry and the businesses and securities of publicly owned
companies in that industry.
On October 7, 1996, at the meeting at which the DS Bancor Board approved
and adopted the Merger Agreement, Alex. Brown delivered a written opinion to the
DS Bancor Board of Directors that, as of such date, the Exchange Ratio to be
received by the shareholders of DS Bancor was fair to the shareholders of DS
Bancor from a financial point of view (the "Opinion"). The Exchange Ratio will
be determined by dividing $43.00 by the Base Period Trading Price computed to
five decimal places. The Exchange Ratio is subject to adjustment such that if
the Base Period Trading Price is greater than $38.50, the Exchange Ratio shall
be 1.11688 and if the Base Period Trading Price is less than $31.50, the
Exchange Ratio shall be 1.36508. Furthermore, if the Base Period Trading Price
is less than $28.00, the Merger Agreement may be terminated by DS Bancor unless
Webster elects that the Exchange Ratio shall be equal to the number resulting
from dividing $38.22 by the Base Period Trading Price. No limitations were
imposed by the DS Bancor Board of Directors upon Alex. Brown with respect to the
investigations made or procedures followed by it in rendering the Opinion.
The full text of the Opinion, which sets forth assumptions made, matters
considered and limits on the review undertaken, is attached hereto as Appendix A
----------
and is incorporated herein by reference. DS Bancor shareholders are urged to
read the Opinion in its entirety. The following summary of the Opinion is
qualified in its entirety by reference to the full text of the Opinion.
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<PAGE>
In rendering the Opinion, Alex. Brown (i) reviewed the Merger Agreement,
certain publicly available business and financial information concerning DS
Bancor and Webster, and certain internal financial analyses and forecasts for DS
Bancor and Webster prepared by their respective managements; (ii) held
discussions with members of senior management of DS Bancor and Webster regarding
the past and current business operations, financial condition and future
prospects of their organizations; (iii) reviewed the reported price and trading
activity for DS Bancor Common Stock and Webster Common Stock and compared
certain financial and stock market information for each of DS Bancor and Webster
with similar information for certain other financial institutions, the
securities of which are publicly traded; (iv) reviewed the financial terms of
certain recent business combinations in the financial institutions industry
which Alex. Brown deemed comparable in whole or in part; and (v) performed such
other studies and analyses as Alex. Brown considered appropriate.
Alex. Brown relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by and
discussed with it for purposes of its Opinion. With respect to the financial
forecasts reviewed by Alex. Brown in rendering its Opinion, Alex. Brown assumed
that such financial forecasts were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the respective managements
of each of DS Bancor and Webster as to the future financial performance of DS
Bancor and Webster. Alex. Brown did not make an independent evaluation or
appraisal of the assets or liabilities of DS Bancor or Webster nor was it
furnished with any such appraisal.
The summary set forth below does not purport to be a complete description
of the analyses performed by Alex. Brown in this regard. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors discussed below, Alex. Brown believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. No
one of the analyses performed by Alex. Brown was assigned a greater significance
than any other. In performing its analyses, Alex. Brown made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond DS Bancor's or Webster's
control. The analyses performed by Alex. Brown are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the values of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
Analysis of Selected Publicly Traded Companies. In preparing the Opinion,
Alex. Brown, using publicly available information, compared selected financial
information, including book value, tangible book value, latest twelve months
("LTM") core earnings, 1996 estimated earnings, 1997 estimated earnings, asset
quality ratios and loan loss reserve levels, for DS Bancor (as of June 30,
1996) and several peer groups of savings bank organizations (as of June 30,
1996).
The first peer group was comprised of all savings banks in the United
States that possessed asset bases between $1 billion and $5 billion ("National
Comparables Group"); this peer group was then segmented into those savings banks
headquartered in the Northeast Region (Connecticut, Massachusetts, Maine, New
Hampshire, and Rhode Island) ("Regional Comparables Group"). The Regional
Comparables Group included Andover Bancorp, Inc. (MA), CFX Corporation (NH),
Eagle Financial Corp. (CT), Peoples Heritage Financial Group (ME), SIS Bancorp,
Inc. (MA), Walden Bancorp, Inc. (MA), and Webster (CT). As of October 4, 1996,
the relative multiples implied by the market price of DS Bancor Common Stock and
the mean market price of the common stock of the National Comparables Group and
Regional Comparables Group, respectively, to such selected financial data was:
to LTM core earnings 13.3x for DS Bancor and 13.1x and 12.2x for the National
Comparables Group and Regional Comparables Group, respectively; to 1996
Institutional Brokerage Estimation Service ("I/B/E/S") estimated earnings per
share, 12.5x for DS Bancor and 12.2x and 11.5x for the National Comparables
Group and Regional Comparables Group, respectively; to 1997
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I/B/E/S estimated earnings per share, 11.5x for DS Bancor and 11.1x and 10.9x
for the National Comparables Group and Regional Comparables Group, respectively;
to stated book value, 134% for DS Bancor and 129% and 141% for the National
Comparables Group and Regional Comparables Group, respectively; to tangible book
value, 138% for DS Bancor and 139% and 163% for the National Comparables Group
and Regional Comparables Group, respectively; and to total assets, 9.0% for DS
Bancor and 10.7% and 10.8% for the National Comparables Group and Regional
Comparables Group, respectively.
Analysis of Selected Acquisition Transactions. In preparing the Opinion,
Alex. Brown analyzed certain selected merger and acquisition transactions for
savings banks based upon the acquisition price relative to stated book value,
tangible book value, LTM earnings, forward one year earnings (based on I/B/E/S
estimates), total assets and the premiums to core deposits and market price. The
market price premium is measured against the market price of the common stock
one month prior to the acquisition announcement (in DS Bancor's case, September
4, 1996). The analysis included a review and comparison of the mean multiples
represented by a sample of recently effected or pending savings bank
acquisitions nationwide having a transaction value greater than $100 million
which were announced since January 1, 1995 (a total of 31 transactions),
("National Transactions"), as segmented into: (i) transactions in which the
selling savings bank was headquartered in the Northeast Region (10) ("Regional
Transactions") and (ii) transactions in which the selling savings bank achieved
a return on average assets ("ROAA") less than 0.80% in the year of its announced
acquisition (13) ("Profitability-Segmented Transactions"). DS Bancor's
annualized ROAA was 0.74% for the 6 months ended June 30, 1996.
The relative multiples implied by the Exchange Ratio ($43.00 implied per
share value to DS Bancor shareholders as of October 7, 1996) and each of the
selected acquisition transaction segmentations, respectively, are provided in
the following table:
<TABLE>
<CAPTION>
Purchase Price to:
---------------------------------------------------------
Book Tangible LTM Forward Core Deposits Market
Transaction Group value book value Assets Core EPS(1) EPS(2) premium premium
- ----------------- ----- ---------- ------ ----------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSIDERATION ($43.00 PER SHARE) 164.5% 169.7% 11.0% 16.7X 13.5X 5.8% 14.7%
Comparable Acquisition
Transactions:
(A) NATIONAL - MEAN 151.7% 158.9% 14.6% 15.1X 14.5X 8.0% 30.5%
High 248.4% 257.4% 27.8% 9.9x 24.2x 18.5% 74.1%
Low 105.8% 106.0% 6.6% 1.3x 9.8x 2.8% -3.4%
(B) REGIONAL - MEAN 148.2% 153.8% 14.6% 13.7X 13.4X 7.2% 25.9%
High 168.9% 196.2% 22.4% 16.2x 20.9x 10.7% 62.5%
Low 119.0% 119.0% 8.9% 11.6x 9.8x 2.8% 5.8%
(C) PROFITABILITY-SEGMENTED-MEAN 145.0% 155.6% 12.1% 16.9X 15.8X 6.8% 32.9%
High 183.7% 188.1% 21.7% 21.9x 18.8x 10.9% 50.8%
Low 105.8% 114.7% 6.6% 12.4x 11.6x 3.3% 15.0%
</TABLE>
- -----------------------------
(1) Latest twelve months core earnings per share (excludes gain on sale of
securities and the non-recurring income and/or expenses).
(2) Forward one year earnings per share based on I/B/E/S estimates.
Contribution Analysis. Alex. Brown also determined the contribution by DS
Bancor of key historical balance sheet items (including assets, loans, deposits,
stated equity and tangible equity) and selected historical and estimated income
statement items (including latest twelve months net income, 1996 I/B/E/S
estimated earnings and 1997 I/B/E/S estimated earnings) to the resulting pro
forma entity, as compared to the ownership percentage of the pro forma entity's
common stock that
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<PAGE>
would be received by current DS Bancor shareholders in aggregate as a result of
the acquisition (as of the Exchange Ratio on October 4, 1996).
The relative levels of contribution by DS Bancor in these selected areas
and the level of pro forma ownership that would be received by current DS Bancor
shareholders in aggregate are presented in the following table:
<TABLE>
<CAPTION>
DS BANCOR
BALANCE SHEET ITEMS CONTRIBUTION
- ------------------- ------------
<S> <C>
Assets 24.7%
Loans 25.8%
Deposits 24.9%
Equity 28.2%
Tangible Equity 32.7%
DS BANCOR
NET INCOME ITEMS CONTRIBUTION
- ---------------- ------------
LTM Net Income 30.8%
I/B/E/S 1996E Earnings 24.8%
I/B/E/S 1997E Earnings 24.1%
DS BANCOR PRO FORMA
OWNERSHIP OF WEBSTER 30.2%
</TABLE>
Impact on DS Bancor Shareholders. Based on the Exchange Ratio as of
October 4, 1996, Alex. Brown determined the expected effect of the transaction
to the current holders of DS Bancor Common Stock as described below: On a pro
forma basis, LTM earnings per current DS Bancor Common Stock share would be
$2.79, a 1.5% decline from DS Bancor's stand alone earnings per share of $2.83.
Book value per share on a pro forma basis would be $27.98 per current DS Bancor
Common Stock share, which represents a 7.0% increase from DS Bancor's stand
alone fully-diluted book value of $26.14. Dividends per share would increase
230.0% from DS Bancor's stand alone dividend of $0.24 per share to $0.79 per
current DS Bancor Common Stock share on a pro forma basis.
These pro forma values and their resulting implications to current DS
Bancor shareholders are based on historical Webster financials and DS Bancor
financials and do not reflect any adjustments (expense savings or restructuring
costs) relating to the Merger. As such the values discussed above are not
necessarily indicative of actual values, which may be significantly more or less
than such estimates.
Discounted Dividend Analysis. Using discounted cash flow analysis, Alex.
Brown estimated the present value of the future dividend streams that DS Bancor
could produce over a five year period, under different assumptions as to
dividend payout ratios, if DS Bancor performed in accordance with management's
forecasts and certain variants thereof. Alex. Brown also estimated the terminal
value for DS Bancor's common equity after the five year period by applying
earnings acquisition multiples (14.5 - 16.0 times) currently being received by
savings bank institutions with similar profitability ratios as DS Bancor is
projected to have during its calendar year ended December 31, 2000. The range of
multiples used reflected a variety of scenarios regarding the growth and
profitability prospects of DS Bancor. The dividend streams and terminal values
were then discounted to present values using discount rates ranging from 14.0%
to 15.0%, which reflect different assumptions regarding the required rates of
return of holders or prospective buyers of DS Bancor's common equity. The
discounted dividend stream analysis indicated a reference range of between
$33.84 and $38.65 per share of DS Bancor Common Stock.
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<PAGE>
Compensation of Financial Advisor. Pursuant to the terms of an engagement
letter dated March 22, 1996, DS Bancor is required to pay Alex. Brown a fee of
$100,000 for acting as financial advisor in connection with the Merger,
including rendering the Opinion. In addition, DS Bancor has agreed to pay Alex.
Brown an additional fee of $750,000, plus expenses, upon consummation of the
Merger. Whether or not the Merger is consummated, DS Bancor also has agreed to
indemnify Alex. Brown and certain related persons against certain liabilities
relating to or arising out of its engagement.
OPINION OF WEBSTER FINANCIAL ADVISOR
Webster engaged Merrill Lynch to act as its exclusive financial advisor in
connection with the Merger. Pursuant to the terms of its engagement, Merrill
Lynch agreed to assist Webster in analyzing, structuring, negotiating and
effecting an acquisition transaction with DS Bancor. Webster selected Merrill
Lynch because Merrill Lynch is a nationally recognized investment banking firm
with substantial experience in transactions similar to the Merger and is
familiar with Webster and its business. As part of its investment banking
business, Merrill Lynch is continually engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions.
As part of its engagement, representatives of Merrill Lynch attended the
meeting of the Webster Board held on October 6, 1996 at which the Webster Board
considered the Merger Agreement. On October 6, 1996, Merrill Lynch rendered a
written opinion that, as of such date, the Exchange Ratio (see "--Exchange
Ratio") pursuant to the Merger Agreement was fair to Webster from a financial
point of view. Such opinion was updated in writing as of the date of the Joint
Proxy Statement/Prospectus.
The full text of Merrill Lynch's updated written opinion dated as of the
date of the Joint Proxy Statement/Prospectus is attached as Appendix B to this
----------
Joint Proxy Statement/Prospectus and is incorporated herein by reference. The
description of the opinion set forth herein is qualified in its entirety by
reference to Appendix B. Webster shareholders are urged to read the opinion in
----------
its entirety for a description of the procedures followed, assumptions made,
matters considered, and qualifications and limitations on the view undertaken by
Merrill Lynch in connection therewith.
MERRILL LYNCH'S OPINION IS DIRECTED TO THE WEBSTER BOARD AND ADDRESSES ONLY
THE EXCHANGE RATIO. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION TO
PROCEED WITH THE MERGER AND DOES NOT CONSTITUTE, NOR SHALL IT BE CONSTRUED AS, A
RECOMMENDATION TO ANY WEBSTER SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE
AT THE WEBSTER MEETING OR ANY OTHER MATTER IN CONNECTION THEREWITH.
Merrill Lynch has informed Webster that in arriving at its written opinion,
Merrill Lynch, among other things: (i) reviewed Webster's Annual Reports to
Shareholders, Annual Reports on Form 10-K and related financial information for
the three fiscal years ended December 31, 1995 and Webster's Quarterly Reports
on Form 10-Q and related unaudited financial information for each of the three
months ended September 30, 1996, June 30,1996 and March 31, 1996; (ii) reviewed
DS Bancor's Annual Reports to Shareholders, Annual Reports on Form 10-K and
related financial information for the three fiscal years ended December 31, 1995
and DS Bancor's Quarterly Reports on Form 10-Q and related unaudited financial
information for each of the three months ended September 30, 1996, June 30, 1996
and March 31, 1996; (iii) reviewed certain limited financial information
relating to the financial condition, businesses, earnings, assets and prospects
of Webster and DS Bancor relating to the future financial performance of Webster
following the Merger, including financial forecasts and assumptions regarding
projected cost savings resulting from the Merger, furnished to it by senior
management of Webster and of DS Bancor; (iv) conducted certain limited
discussions with members of senior management of Webster and of DS Bancor
concerning the respective financial condition, businesses, earnings, assets and
prospects of Webster and DS Bancor and their respective views as to the future
financial performance of Webster, DS Bancor and the combined entity, as the case
may be, following the Merger; (v) reviewed the historical market prices and
trading activity for DS Bancor's common
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<PAGE>
shares and Webster's common shares and compared them, respectively, with those
of certain publicly traded companies which it deemed to be relevant; (vi)
compared the respective results of operations of Webster and DS Bancor with
those of certain publicly traded companies which it deemed to be relevant; (vii)
compared the financial terms of the Merger contemplated by the Merger Agreement
with the financial terms of certain other mergers and acquisitions which it
deemed to be relevant; (viii) reviewed the amount and timing of the projected
cost savings for DS Bancor and Webster following the Merger as prepared, and
discussed with it, by senior management of Webster; (ix) considered, based upon
information provided by Webster's senior management, the pro forma effects of
the Merger on Webster's capitalization ratios and projected earnings, book and
tangible book value per share; (x) reviewed the Merger Agreement; and (xi)
reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as it deemed necessary.
In preparing its opinion, Merrill Lynch assumed and relied upon the
accuracy and completeness of all financial and other information supplied or
otherwise made available to it for purposes of its opinion, and Merrill Lynch
has not independently verified such information or undertaken an independent
evaluation or appraisal of the assets or liabilities of Webster or DS Bancor nor
has it been furnished any such evaluation or appraisal. Merrill Lynch is not an
expert in the evaluation of allowance for loan losses, and it has not made an
independent evaluation of the adequacy of the allowances for loan losses of
Webster or DS Bancor nor has it reviewed any individual credit files, and it has
assumed that the aggregate allowance for loan losses of Webster and DS Bancor
are adequate to cover such losses and will be adequate on a pro forma basis for
the combined entity. Merrill Lynch has also assumed and relied upon the senior
management of Webster referred to above as to the reasonableness and
achievability of the financial and operating forecasts furnished by Webster and
DS Bancor (and the assumptions and bases therefore). In that regard, Merrill
Lynch has assumed with Webster's consent that such information, including,
without limitation, financial forecasts, projected cost savings, operating
synergies and after-tax merger and reorganization charges resulting from the
Merger and projections regarding underperforming and nonperforming assets, net
charge-offs, and adequacy of reserves, reflect the best currently available
estimates and judgment of the senior management of Webster and DS Bancor as to
the expected future financial performance of Webster, DS Bancor, and the
combined entity, as the case may be. Merrill Lynch's opinion was necessarily
based on economic, market and other conditions as in effect on, and the
information made available to it as of, the date of its opinion.
Merrill Lynch's opinion has been rendered without regard to the necessity
for, or level of, any restrictions, obligations, undertakings or divestitures
which may be imposed or required in the course of obtaining regulatory approvals
for the Merger.
In connection with rendering its opinion dated October 6, 1996, Merrill
Lynch performed a variety of financial analyses, consisting of those summarized
below. The summary set forth below does not purport to be a complete description
of the analyses performed by Merrill Lynch in this regard, although it describes
the material terms of the analyses performed. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to a partial analysis or summary description. Accordingly,
notwithstanding the separate factors summarized below, Merrill Lynch believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and factors considered by it, without considering all analyses and
factors, or attempting to ascribe relative weights to some or all such analyses
and factors, could create an incomplete view of the evaluation process
underlying Merrill Lynch's opinion. In addition, while Merrill Lynch gave the
various analyses approximately similar weight, it may have used them for
different purposes and may have deemed various assumptions more or less probable
than other assumptions, so that the ranges of valuations resulting from any
particular analysis described below should not be taken to be Merrill Lynch's
view of the actual value of Webster and DS Bancor. The fact that any specific
analysis has been referred to in the summary below is not meant to indicate that
such analysis was given more weight than any other analysis.
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In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Webster and DS Bancor.
The analyses performed by Merrill Lynch are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Merrill Lynch's analysis of the fairness to Webster of the Exchange Ratio and
were provided to the Webster Board in connection with the delivery of Merrill
Lynch's opinion. With respect to the comparison of selected companies analysis
and the analysis of selected thrift merger transactions summarized below, no
public company utilized as a comparison is identical to Webster or DS Bancor and
such analyses necessarily involve complex considerations and judgments
concerning the differences in financial and operating characteristics of the
companies and other factors that could affect the public trading values of the
companies concerned. The analyses performed by Merrill Lynch are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable then suggested by such analyses. The analyses do not purport
to be appraisals or to reflect the prices at which DS Bancor might actually be
sold or the prices at which any securities may trade at the present time or at
any time in the future. In addition, as described above, Merrill Lynch's opinion
is just one of many factors taken into consideration by the Webster Board of
Directors. See "-- Recommendation of Webster Board of Directors and Reasons for
the Issuance."
The projections furnished to Merrill Lynch and used by it in certain of its
analyses were prepared by the senior management of Webster and DS Bancor.
Webster does not publicly disclose internal management projections of the type
provided to Merrill Lynch in connection with its review of the Merger, and as a
result, such projections were not prepared with a view towards public
disclosure. The projections were based on numerous variables and assumptions
which are inherently uncertain, including, without limitation, factors related
to general economic and competitive conditions, and accordingly, actual results
could vary significantly from those set forth in such projections.
The following is a summary of the material analyses presented by Merrill
Lynch to the Webster Board on October 6, 1996 (the "Merrill Lynch Report") in
connection with its October 6, 1996 opinion.
Summary of Proposal. Merrill Lynch reviewed the terms of the proposed
transaction, including the Exchange Ratio and the aggregate transaction value.
Merrill Lynch reviewed the implied value of the Exchange Ratio based upon the
closing share price of Webster Common Stock on October 1, 1996. This analysis
showed that the implied value of the Exchange Ratio was approximately $43.00 per
share of DS Bancor Common Stock, for a total value of approximately $136.6
million (including the book value of DS Bancor shares held by Webster on
September 30, 1996). Based on the aggregate consideration offered using the
October 1, 1996 price for Webster Common Stock, Merrill Lynch calculated the
price to market, price to book, price to tangible book, and price to earnings
multiples, and the implied deposit premium paid (defined as the transaction
value minus the tangible book value divided by total deposits) in the
contemplated transaction. This analysis yielded a price to market multiple of
1.14x, a price to book value multiple of 1.62x, a price to tangible book value
multiple of 1.67x, a price to earnings multiple of 14.12x (based on DS Bancor's
earnings for the three months ended June 30, 1996 annualized), and an implied
deposit premium of 5.33%.
Pro Forma Merger Analysis. Merrill Lynch analyzed certain pro forma
effects resulting from the Merger. Merrill Lynch analyzed three Exchange Ratios,
1.11688, 1.22857 and 1.36508, based on Base Period Trading Prices of $38.50,
$35.00 and $31.50, respectively, representing the range of Exchange Ratios (see
"-- Exchange Ratio"). This analysis indicated that at a Base Period Trading
Price of $31.50 the transaction would result in an increase in projected
earnings per Webster Common Stock equivalent share and a decrease in projected
book value per Webster Common Stock equivalent share and tangible book value per
Webster Common Stock equivalent share, and at Base Period Trading Prices of
$35.00 and $38.50, the transaction would result in an increase in projected
earnings per Webster Common Stock equivalent share and tangible book value per
Webster Common
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Stock equivalent share and a decrease in projected book value per Webster Common
Stock equivalent share. In this analysis, Merrill Lynch assumed that DS Bancor
performed in accordance with the earnings forecast provided to Merrill Lynch by
Webster senior management, which included projected cost savings and earning
enhancement assumptions and after-tax merger and reorganization charge
assumptions.
Discounted Dividend Stream Analysis. Using a discounted dividend stream
analysis, Merrill Lynch estimated the present value of the future streams of
after tax cash flows that DS Bancor could produce on a stand-alone basis from
1997 through 2001 and distribute to shareholders ("dividendable net income"). In
this analysis, Merrill Lynch assumed that DS Bancor performed in accordance with
the earnings forecasts, including projected cost savings, earnings enhancements
and after-tax merger and reorganization charges resulting from the Merger,
provided to Merrill Lynch by Webster's senior management, and that DS Bancor's
tangible common equity to tangible asset ratios would be maintained at a minimum
5.00% level. Merrill Lynch estimated the terminal values for the DS Bancor
Common Stock at 8.0, 9.0 and 10.0 times DS Bancor's 2002 estimated operating
income (defined as net income before intangible amortization). The dividendable
net income streams and terminal values were then discounted to present values
using different discount rates (ranging from 13% to 15%) chosen to reflect
different assumptions regarding the required rates of return of holders or
prospective buyers of Webster Common Stock. This discounted dividend stream
analysis indicated a reference range of between $38.71 and $48.40 per share for
DS Bancor Common Stock. The analysis was based upon Webster senior management's
projections, which were based upon many factors and assumptions, many of which
are beyond the control of Webster and DS Bancor. As indicated above, this
analysis is not necessarily indicative of actual values or future results and
does not purport to reflect the prices at which any securities may trade at the
present or at any time in the future. Merrill Lynch noted that the discounted
dividend stream analysis was included because it is a widely used valuation
methodology, but noted that the results of such methodology are highly dependent
upon the numerous assumptions that must be made, including earnings growth
rates, dividend payout rates, terminal values and discount rates.
Merrill Lynch also estimated the present value of the dividendable net
income that Webster could produce on a stand-alone basis from 1997 through 2001.
In this analysis, Merrill Lynch assumed that Webster performed in accordance
with the earnings forecasts provided to Merrill Lynch by Webster's senior
management and projected the maximum dividends that would permit Webster's
tangible common equity to tangible asset ratio to be maintained at a minimum
level of 4.44%, equal to Webster's projected tangible equity to tangible asset
ratio at December 31, 1996. Merrill Lynch estimated the terminal values for
Webster Common Stock at 9.0x and 10.0x Webster's year 2002 estimated operating
income. The dividendable income streams and terminal values were then discounted
to present values using a discount rate of 14%. This discounted dividend stream
analysis indicated a reference range of between $31.97 and $34.24 per share of
Webster Common Stock. The analysis was based upon Webster's senior management
projections, which were based upon many factors and assumptions, many of which
are beyond the control of Webster. As indicated above, this analysis did not
purport to be indicative of actual future results and did not purport to reflect
the prices at which shares of Webster Common Stock may trade before or after the
Merger.
Finally, Merrill Lynch estimated the present value of the dividendable net
income that the combined institution could produce from 1997 through 2001. In
this analysis, Merrill Lynch assumed that the combined institution performed in
accordance with the earnings forecasts provided to Merrill Lynch by Webster's
senior management and projected the maximum dividends that would permit the
combined institution's tangible common equity to tangible asset ratio to be
maintained at a minimum level of 4.82%, equal to the combined institution's
projected tangible equity to tangible asset ratio at December 31, 1996. Merrill
Lynch estimated the terminal values for the combined institution's common stock
at 9.0x and 10.0x the combined institution's year 2002 estimated operating
income. The dividendable income streams and terminal values were then discounted
to present values using a discount rate of 14%. Assuming the projected cost
savings resulting from the Merger as provided to Merrill Lynch by Webster's
senior management and after-tax merger and reorganization charges, this
discounted dividend stream analysis indicated a reference range of
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between $32.38 and $34.69 per share of Webster Common Stock, assuming an
Exchange Ratio of 1.36508 based on a Base Period Trading Price of $31.50, a
reference range of between $33.35 and $35.73 per share of Webster Common Stock,
assuming an Exchange Ratio of 1.22857 based on a Base Period Trading Price of
$35.00, and a reference range of between $34.18 and $36.62 per share of Webster
Common Stock, assuming an Exchange Ratio of 1.11688 based on a Base Period
Trading Price of $38.50. The analysis was based upon Webster's and DS Bancor's
senior management projections, which were based upon many factors and
assumptions, many of which are beyond the control of Webster and DS Bancor. As
indicated above, this analysis did not purport to be indicative of actual future
results and did not purport to reflect the prices at which shares of Webster
Common Stock may trade before or after the Merger.
Analysis of Selected Thrift Merger Transactions. Merrill Lynch reviewed
publicly available information regarding nationwide thrift merger transactions
with a value greater than $75 million which had occurred since January 1, 1995.
Merrill Lynch compared the price to market, price to book value, price to
tangible book value, price to earnings and the implied deposit premium paid in
the contemplated transaction and such selected thrift merger transactions. This
analysis yielded a range of price to market multiples of approximately 0.97x to
1.63x with a mean of 1.28x and a median of 1.26x (compared with a transaction
multiple of 1.14x for DS Bancor using the October 1, 1996 price for Webster
Common Stock), a range of price to book value multiples of approximately 0.97x
to 2.52x with a mean of 1.62x and a median of 1.63x (compared with a transaction
multiple of 1.62x for DS Bancor using the October 1, 1996 price for Webster
Common Stock), a range of price to tangible book value multiples of
approximately 1.08x to 2.64x with a mean of 1.68x and a median of 1.69x
(compared with a transaction multiple of 1.67x for DS Bancor using the October
1, 1996 price for Webster Common Stock), a range of price to earnings multiples
of approximately 7.01x to 24.69x with a mean of 15.76x and a median of 15.08x
(compared with a transaction multiple of 14.12x for DS Bancor using the October
1, 1996 price for Webster Common Stock and annualized earnings for DS Bancor for
the three months ended June 30, 1996) and a range of implied deposit premiums
paid of approximately 2.80% to 19.02% with a mean of 8.27% and a median of 7.25%
(compared with an implied transaction premium of 5.33% for DS Bancor using the
October 1, 1996 price for Webster Common Stock). This analysis yielded an
overall imputed reference range per share of DS Bancor Common Stock of $19.77 to
$87.03, and $42.53 to $52.30 based on the mean and median imputed range.
Merrill Lynch also reviewed publicly available information regarding New
England thrift merger transactions with a value greater than $20 million which
had occurred since January 1, 1995. Merrill Lynch compared the price to market,
price to book value, price to tangible book value, price to earnings and the
implied deposit premium paid, in the contemplated transaction and such selected
thrift merger transactions. This analysis yielded a range of price to market
multiples of approximately 0.90x to 1.60x with a mean of 1.33x and a median of
1.40x (compared with a transaction multiple of 1.14x for DS Bancor using the
October 1, 1996 price for Webster Common Stock), a range of price to book value
multiples of approximately 0.94x to 1.86x with a mean of 1.62x and a median of
1.63x (compared with a transaction multiple of 1.62x for DS Bancor using the
October 1, 1996 price for Webster Common Stock), a range of price to tangible
book value multiples of approximately 0.96x to 1.86x with a mean of 1.60x and a
median of 1.66x (compared with a transaction multiple of 1.67x for DS Bancor
using the October 1, 1996 price for Webster Common Stock), a range of price to
earnings multiples of approximately 8.72x to 17.87x with a mean of 13.70x and a
median of 13.04x (compared with a transaction multiple of 14.12x for DS Bancor
using the October 1, 1996 price for Webster Common Stock and annualized earnings
for DS Bancor for the three months ended June 30, 1996), and a range of implied
deposit premiums paid of approximately 3.33% to 8.30% with a mean of 5.85% and a
median of 5.77% (compared with an implied transaction premium of 5.33% for DS
Bancor using the October 1, 1996 price for Webster Common Stock). This analysis
yielded an overall imputed reference range per share of DS Bancor Common Stock
of $31.97 to $60.40, and $37.93 to $54.36 based on the mean and median imputed
range.
Merrill Lynch also reviewed publicly available information regarding
Connecticut thrift merger transactions with a value greater than $20 million
which had occurred since January 1, 1994.
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Merrill Lynch compared the price to market, price to book value, price to
tangible book value, price to earnings and the implied price to deposit premium
paid, in the contemplated transaction and such selected thrift merger
transactions. This analysis yielded a range of price to market multiples of
approximately 1.29x to 1.60x with a mean of 1.45x and a median of 1.46x
(compared with a transaction multiple of 1.14x for DS Bancor using the October
1, 1996 price for Webster Common Stock), a range of price to book value
multiples of approximately 1.62x to 1.86x with a mean of 1.76x and a median of
1.77x (compared with a transaction multiple of 1.62x for DS Bancor using the
October 1, 1996 price for Webster Common Stock), a range of price to tangible
book value multiples of approximately 1.62x to 1.86x with a mean of 1.79x and a
median of 1.83x (compared with a transaction multiple of 1.67x for DS Bancor
using the October 1, 1996 price for Webster Common Stock), a range of price to
earnings multiples of approximately 13.86x to 16.60x with a mean of 15.23x and a
median of 15.23x (compared with a transaction multiple of 14.12x for DS Bancor
using the October 1, 1996 price for Webster Common Stock and annualized earnings
for DS Bancor for the three months ended June 30, 1996), and a range of implied
deposit premiums paid of approximately 4.43% to 6.36% with a mean of 5.09% and a
median of 4.78% (compared with an implied transaction premium of 5.33% for DS
Bancor using the October 1, 1996 price for Webster Common Stock). This analysis
yielded overall imputed reference ranges per share of DS Bancor Common Stock of
$39.09 to $60.40, and $41.01 to $54.93 based on the mean and median imputed
range.
No company or transaction used in the above analysis as a comparison is
identical to Webster, DS Bancor or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared. Mathematical
analysis (such as determining the mean or median) is not, in itself, a
meaningful method of using comparable data.
Comparison of Selected Companies. In connection with the Merrill Lynch
Report, Merrill Lynch compared selected operating and stock market results of DS
Bancor to the publicly available corresponding data of Webster and certain other
companies which Merrill Lynch deemed to be relevant, including Dime Financial,
Eagle Financial, Peoples Savings Bank of New Britain and SIS Bancorp
(collectively the "DS Bancor Composite"). This comparison showed, among other
things, that (i) as of September 30, 1996, the ratio of DS Bancor's market price
to fully taxed core earnings for the twelve months ended June 30, 1996 was
13.12x, compared to a mean of 13.26x for the DS Bancor Composite, (ii) as of
September 30, 1996, the ratio of DS Bancor's market price to book value per
share at June 30, 1996 was 1.33x, compared to a mean of 1.37x for the DS Bancor
Composite, (iii) as of September 30, 1996, the ratio of DS Bancor's market price
to tangible book value per share at June 30, 1996 was 1.37x, compared to a mean
of 1.58x for the DS Bancor Composite, (iv) as of September 30, 1996, the ratio
of DS Bancor's market price to estimated earnings for the twelve month period
ending December 31, 1997 was 11.64x, compared to a mean of 10.02x for the DS
Bancor Composite (assuming I/B/E/S earnings estimates for both DS Bancor and the
DS Bancor Composite), (v) for the twelve month period ended June 30, 1996, DS
Bancor's return on average assets was 0.72% compared to a mean of 0.81% for the
DS Bancor Composite, (vi) for the twelve month period ended June 30,1996, DS
Bancor's return on average equity was 10.98% compared to a mean of 10.56% for
the DS Bancor Composite, (vii) at June 30, 1996, DS Bancor's ratio of
nonperforming loans to total loans was 2.12% compared to a mean of 1.39% for the
DS Bancor Composite, and (viii) at June 30, 1996, DS Bancor's ratio of loan loss
reserves to nonperforming assets was 35.13% compared to a mean of 114.89% for
the DS Bancor Composite.
Merrill Lynch also compared selected operating and stock market results of
Webster to the publicly available corresponding data of certain other companies
which Merrill Lynch deemed to be relevant, including ALBANK Financial, Andover
Bancorp, Eagle Financial, Peoples Heritage Financial, RCSB Financial and SIS
Bancorp (collectively the "Webster Composite"). This comparison showed, among
other things, that (i) as of September 30, 1996, the ratio of Webster's market
price to earnings for the twelve months ended June 30, 1996 was 14.04x, compared
to a mean of 12.07x for the Webster Composite, (ii) as of September 30, 1996,
the ratio of Webster's market price to book value per share at June 30, 1996 was
1.44x, compared to a mean of 1.32x for the Webster Composite,
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(iii) as of September 30, 1996, the ratio of Webster's market price to tangible
book value per share ended June 30, 1996 was 1.89x, compared to a mean of 1.46x
for the Webster Composite, (iv) as of September 30, 1996, the ratio of Webster's
market price to estimated earnings for the twelve month period ending December
31, 1997 was 10.28x, compared to a mean of 10.06x for the Webster Composite
(assuming I/B/E/S earnings estimates for both Webster and the Webster
Composite), (v) for the twelve month period ended June 30, 1996, Webster's
return on average assets was 0.60% compared to a mean of 0.91% for the Webster
Composite, (vi) for the twelve month period ended June 30, 1996, Webster's
return on average equity was 10.69% compared to a mean of 10.86% for the Webster
Composite, (vii) at June 30, 1996, Webster's ratio of nonperforming loans to
total loans was 1.51% compared to a mean of 1.35% for the Webster Composite, and
(viii) at June 30, 1996, Webster's ratio of loan loss reserves to nonperforming
assets was 82.08% compared to a mean of 99.20% for the Webster Composite.
Mark-to-Market Analysis. Merrill Lynch evaluated the estimated market
value of key components of DS Bancor's balance sheet, including, among other
things, DS Bancor's investment securities and mortgage-backed securities
portfolios, loan portfolio and premises and equipment. This analysis indicated a
valuation of approximately $41.18 to $47.63 per share of DS Bancor Common Stock
(on a fully diluted basis) based on a range of implied deposit premia of 4% to
6%, before any credit quality related to the portfolios was analyzed.
In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, Merrill Lynch performed procedures to update as
appropriate certain of the analyses described above and review the assumptions
on which such analyses were based and the factors considered in connection
therewith. Merrill Lynch did not perform any analyses in addition to those
described above in updating its October 6, 1996 opinion.
Merrill Lynch has been retained by the Board of Directors of Webster as an
independent contractor to act as financial adviser to Webster with respect to
the Merger. Merrill Lynch is a nationally recognized investment banking firm
which, among other things, regularly engages in the valuation of businesses and
securities, including banking institutions, in connection with mergers and
acquisitions. In addition, within the past three years, Merrill Lynch has
provided financial advisory, investment banking and other services to Webster
and has received customary fees for the rendering of such services. In the
ordinary course of business, Merrill Lynch and its affiliates may trade the
securities of DS Bancor or Webster for its own accounts and the accounts of its
customers, and accordingly, may from time to time hold a long or short position
in such securities.
Merrill Lynch will receive a fee for investment banking services related to
the Merger and related advisory work of $650,000. Merrill Lynch will also be
reimbursed for its reasonable out-of-pocket expenses incurred in connection with
its advisory work, including the reasonable fees and disbursements of its legal
counsel, and will be indemnified against certain liabilities related to or
arising out of the Merger, including liabilities arising under the securities
laws.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
Under the Merger Agreement, DS Bancor has made certain representations and
warranties to Webster and Merger Sub. The material representations and
warranties of DS Bancor are those with regard to (i) the organization and good
standing of DS Bancor and Derby; (ii) capitalization; (iii) the corporate power
and authority of DS Bancor; (iv) the execution and delivery of the Merger
Agreement and the Option Agreement; (v) consents and approvals required for the
Merger and the Bank Merger; (vi) loan portfolio and reports of DS Bancor and
Derby; (vii) financial statements and books and records of DS Bancor; (viii)
brokers' fees; (ix) absence of any material adverse change in DS Bancor; (x)
legal proceedings; (xi) tax matters; (xii) employee benefit plans; (xiii)
certain contracts; (xiv) certain regulatory matters; (xv) state takeover laws;
(xvi) environmental matters; (xvii) loss reserves; (xviii) properties and assets
of DS Bancor and each DS Bancor subsidiary; (xix) insurance matters; (xx)
liquidation account of Derby; (xxi) compliance with applicable laws;
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(xxii) loan information; (xxiii) agreements with affiliates, directors and
executive officers; and (xxiv) ownership of Webster Common Stock.
Under the Merger Agreement, Webster has made certain representations and
warranties to DS Bancor. The material representations and warranties of Webster
are those with regard to (i) the organization and good standing of Webster and
Merger Sub and the chartering of Webster Bank; (ii) capitalization; (iii) the
corporate power and authority of Webster, Merger Sub and Webster Bank; (iv) the
execution and delivery of the Merger Agreement and the Option Agreement; (v)
consents and approvals required for the Merger and the Bank Merger; (vi)
financial statements and books and records of Webster; (vii) the absence of any
material adverse change in Webster; (viii) compliance with applicable laws; (ix)
ownership of DS Bancor Common Stock; (x) employee benefit plans; (xi) certain
regulatory matters; (xii) loss reserves; and (xiii) legal proceedings.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
The Merger Agreement may be terminated by Webster or DS Bancor (provided
the terminating party is not in violation of the Merger Agreement) as summarized
below:
(i) by mutual written consent of Webster and DS Bancor;
(ii) by Webster or DS Bancor if (a) 30 days after any required
regulatory approval is denied or regulatory application is withdrawn at a
regulator's request, unless action is timely taken for a rehearing or to file an
amended application; (b) the Merger has not occurred on or before June 30, 1997;
or (c) DS Bancor's shareholders fail to approve the Merger Agreement or
Webster's shareholders fail to approve the issuance of the additional shares of
Webster Common Stock in connection with the Merger Agreement;
(iii) by Webster, in the event of a breach of any representation,
warranty, covenant or agreement contained in the Merger Agreement by DS Bancor,
if such breach or breaches would have a material adverse effect on DS Bancor;
(iv) by DS Bancor, in the event of a breach of any representation,
warranty, covenant or agreement contained in the Merger Agreement by Webster, if
such breach or breaches would have a material adverse effect on Webster;
(v) by Webster, if DS Bancor or its Board of Directors (a) fails to
hold the DS Bancor Meeting on a timely basis; (b) fails to recommend to DS
Bancor's shareholders the approval of the Merger Agreement and the transactions
contemplated thereby; (c) fails to oppose any third party takeover proposals
(with respect to (b) and (c), unless such opposition would constitute a breach
of the Board of Directors' fiduciary duties); or (d) violates the covenant
relating to third party proposals (without regard to the fiduciary duty
exception); and
(vi) by DS Bancor, if the Base Period Trading Price is less than
$28.00 unless Webster elects that the Exchange Ratio shall be equal to the
number resulting from dividing $38.22 by the Base Period Trading Price.
The Merger Agreement also provides that subject to applicable law, the
Board of Directors of the parties may (i) amend the Merger Agreement (except as
provided below); (ii) extend the time for the performance of any of the
obligations or other acts of the other parties thereto; (iii) waive any
inaccuracies in the representations and warranties contained in the Merger
Agreement or in any document delivered pursuant thereto; or (iv) waive
compliance with any of the agreements or conditions contained in the Merger
Agreement. After approval of the Merger Agreement by DS Bancor's shareholders,
no amendment of the Merger Agreement may be made without further shareholder
approval, if the amendment would reduce the amount or change the form of the
consideration to be delivered to the DS Bancor shareholders under the Merger
Agreement.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material federal income tax
consequences of the Merger. The summary is based upon the Code, applicable
Treasury Regulations thereunder, administrative rulings, and judicial authority,
all as of the date hereof. All of the foregoing are subject to change, and any
such change could affect the continuing validity of this summary. The summary
assumes that the holders of shares of DS Bancor Common Stock hold such shares as
a capital asset. The summary does not address the tax consequences that may be
applicable to a particular DS Bancor shareholder subject to special tax rules,
such as tax-exempt organizations, dealers in securities, financial institutions,
insurance companies, non-United States persons, shareholders who acquired shares
of DS Bancor Common Stock pursuant to the exercise of options or otherwise as
compensation or through a qualified retirement plan, and shareholders who hold
shares of DS Bancor Common Stock as part of a "straddle," "hedge," or
"conversion transaction." This summary also does not address any consequences
arising under the tax laws of any state, locality, or foreign jurisdiction.
Consummation of the Merger is subject to the prior receipt by Webster of an
opinion from its counsel, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., and
by DS Bancor of an opinion from its special tax counsel, Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), both
opinions to be dated as of the Effective Time, that the Merger (either alone or
in conjunction with the merger of the Surviving Corporation into Webster) will
be treated for federal income tax purposes as a tax-free reorganization within
the meaning of Section 368 of the Code. The opinions will not bind the Internal
Revenue Service ("IRS") or a court and thus, in considering whether the Merger
qualifies as a tax-free reorganization within the meaning of Section 368 of the
Code, the IRS or a court could reach a conclusion contrary to that reached in
the opinions. Unless Webster and DS Bancor mutually agree otherwise, the Merger
will not be consummated unless the opinions of counsel are received.
If, as concluded in the opinions of counsel, the Merger (either alone or in
conjunction with the merger of the Surviving Corporation into Webster) qualifies
as a tax-free reorganization within the meaning of Section 368 of the Code,
then:
(1) Except as discussed in (4) below with respect to cash received in
lieu of a fractional share of Webster Common Stock, a DS Bancor shareholder
will recognize no gain or loss upon the exchange of DS Bancor Common Stock
for Webster Common Stock pursuant to the Merger.
(2) The tax basis of the Webster Common Stock received by a DS Bancor
shareholder in the Merger will be the same as the shareholder's tax basis
in the DS Bancor Common Stock surrendered in exchange therefor.
(3) The holding period of the Webster Common Stock received by a DS
Bancor shareholder in the Merger will include the holding period of the DS
Bancor Common Stock surrendered in exchange therefor (assuming the DS
Bancor Common Stock was held as a capital asset).
(4) A DS Bancor shareholder who receives cash in lieu of a fractional
share of Webster Common Stock will be treated as having received the cash
in exchange for the fractional share. Generally, the shareholder will
recognize gain or loss (capital gain or loss if the shareholder held its DS
Bancor Common Stock as a capital asset) equal to the difference between the
shareholder's basis in the fractional share (determined under (2) above)
and the cash received in lieu of the fractional share.
(5) Neither Webster, Merger Sub, nor DS Bancor will recognize any
gain or loss as a result of the Merger.
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DS Bancor shareholders are urged to consult their own tax advisors as to
the specific tax consequences to them of the Merger, including tax return
reporting requirements, the applicability and effect of federal, state, local
and other applicable tax laws, and the effect of any proposed changes in the tax
laws.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. Under the pooling of interests method of
accounting, the recorded assets and liabilities of DS Bancor will be carried
forward to Webster at their recorded amounts. Revenues and expenses of Webster
will include revenues and expenses of DS Bancor for the entire fiscal year of
Webster in which the Merger occurs, and the reported revenues and expenses of DS
Bancor for prior periods will be combined with those of Webster, whose financial
statements will then be restated.
Webster has received an opinion of its independent accountants, KPMG Peat
Marwick LLP, to the effect that the Merger will be accounted for as a pooling of
interests and will receive an update of such opinion prior to the Effective
Time. Webster's obligation to consummate the Merger is conditioned upon such
opinion not being withdrawn.
RESALES OF WEBSTER COMMON STOCK RECEIVED IN THE MERGER
The shares of Webster Common Stock to be issued in the Merger will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued to any DS Bancor shareholder who may be
deemed to be an "affiliate" of DS Bancor for purposes of Rule 145 under the
Securities Act. Affiliates may not sell their shares of Webster Common Stock
acquired in connection with the Merger, except pursuant to an effective
registration statement under the Securities Act covering such shares, in
compliance with Rule 145 or another applicable exemption from the registration
requirements of the Securities Act. This Joint Proxy Statement/Prospectus does
not cover any resales of Webster Common Stock received by persons who may be
deemed to be affiliates of DS Bancor. Persons who may be deemed to be affiliates
of DS Bancor generally include individuals or entities who control, are
controlled by or are under common control with DS Bancor, and may include
certain officers or directors, as well as principal shareholders of DS Bancor.
NO APPRAISAL RIGHTS
Pursuant to Section 262(b) of the Delaware General Corporation Law, the
shareholders of a constituent corporation in a merger generally are not entitled
to appraisal rights if the shares of stock they own are, as of the record date
fixed to determine shareholders entitled to notice of and to vote at the meeting
to act upon the agreement providing for such merger, either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc., or held of record by more than 2,000 shareholders.
Since DS Bancor Common Stock is traded on The Nasdaq National Market, the
holders of DS Bancor Common Stock will not be entitled to any dissenters'
appraisal rights with respect to the Merger. The holders of Webster Common Stock
have no dissenters' appraisal rights.
INTERESTS OF CERTAIN PERSONS IN THE MERGER - ARRANGEMENTS WITH AND PAYMENTS TO
DS BANCOR DIRECTORS AND EXECUTIVE OFFICERS
The Merger Agreement provides for two DS Bancor directors (selected by the
Board of Directors of Webster) to be invited to serve as additional members of
the Boards of Directors of Webster and Webster Bank upon consummation of the
Merger. One director will serve until Webster's 1998 annual meeting and one will
serve until Webster's 1999 annual meeting; also, one of
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the two will be renominated when his or her term expires. In addition, the
directors of DS Bancor serving immediately prior to the Effective Time,
including the two directors who will serve on the Board of Directors of Webster,
will be invited to serve on an advisory board to Webster Bank after the Bank
Merger for a period of 24 months, with their compensation as advisory directors
to be based on a quarterly retainer of $4,750 and a quarterly meeting attendance
fee of $1,500. Such fees will not be payable to the DS Bancor directors who also
serve as Webster directors.
Pursuant to existing employment and severance agreements of DS Bancor or
Derby, as modified and limited by the Merger Agreement, severance payments will
be made upon the consummation of the Merger to Harry P. DiAdamo, Jr., Alfred T.
Santoro and Thomas H. Wells. These payments, which are limited to the maximum
amount that can be paid without adverse tax consequences under Section 280G of
the Code, will be based on three times their respective average annual
compensation that was paid by Derby and includible in their gross income for
federal tax purposes for the calendar years 1992 through 1996, reduced by $1.00.
Such severance amounts will reflect the amount of taxable compensation income
reported by Messrs. DiAdamo, Santoro and Wells from employment by Derby in 1996,
including taxable income attributable to stock options exercised during 1996.
Messrs. DiAdamo, Santoro and Wells have agreed to limit the maximum amount by
which their severance payments will be increased as a consequence of their 1996
nonqualified stock option exercises, and their disqualifying dispositions of
stock acquired by 1996 incentive stock option exercises, to an amount of
additional severance based on the market price of DS Bancor Common Stock being
$40 per share at the times of such exercises or dispositions, as applicable.
Based on three times their respective average annual compensation paid by
Derby and includible in gross income for federal tax purposes for the calendar
years 1992 through 1996, and assuming that all options held by Messrs. DiAdamo,
Santoro and Wells are exercised, and that the shares that can be purchased upon
the exercise of all incentive stock options held by them are disposed of in
disqualifying dispositions, in each case at a time when such per share price is
$40, the severance payable to Messrs. DiAdamo, Santoro and Wells upon
consummation of the Merger would be $2.7 million, $1.7 million and $837,000,
respectively.
Also upon consummation of the Merger, Webster Bank has agreed to employ Mr.
Wells for a ten month period as an officer to assist in the transition at a
salary of $10,000 per month and to retain him as a part-time consultant for six
months thereafter at a salary of $7,500 per month.
INDEMNIFICATION
In the Merger Agreement, Webster has agreed to indemnify, defend and hold
harmless each person who is, has been, or becomes prior to the Effective Time, a
director, officer or employee of DS Bancor or Derby, to the fullest extent
permitted under applicable law or DS Bancor's Amended and Restated Certificate
of Incorporation and Bylaws, as applicable, with respect to any claims made
against such person because he or she is or was a director, officer or employee
of DS Bancor or Derby or in connection with the Merger Agreement. In the Merger
Agreement, Webster has also agreed to cover DS Bancor's officers and directors
under a directors' and officers' liability insurance policy for a period of at
least two years after the Effective Time and, so long as the premium does not
exceed the total amount of $200,000, up to four years.
OPTIONS
As of the DS Bancor Record Date, there were outstanding options to purchase
391,801 shares of DS Bancor Common Stock at an average exercise price of $20.912
per share. These options are held as follows: 45,744 options by non-employee
directors; 141,746, 115,922 and 29,039 options by Messrs. DiAdamo, Santoro
and Wells, respectively; and 59,350 options by other officers and employees.
Under the Merger Agreement, shares of DS Bancor Common Stock issued prior to
consummation of the Merger upon the exercise of the 391,801 outstanding options
held by directors, officers and other employees of DS Bancor will also be
converted into Webster Common Stock at the Exchange Ratio.
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Any options that are not exercised immediately prior to the Effective Time of
the Merger will be converted automatically into options to purchase Webster
Common Stock, with adjustment in the number of shares and exercise price to
reflect the Exchange Ratio. The duration and other terms of these options will
otherwise be unchanged. For purposes of the options held by the non-employee
directors of DS Bancor, service as an advisory director of Webster Bank will
constitute service (and such options will continue to be exercisable during
their original terms for up to three months after such service ends). Options
previously granted to Messrs. DiAdamo and Santoro will expire upon or after
termination of employment, as provided in the applicable option agreement (such
agreements generally provide for exercise during 30 days or, in the case of
options granted under the 1994 Stock Option Plan, three months after termination
of employment, except in the case of retirement, disability or death). Service
as an officer (but not as a consultant) by Mr. Wells will constitute continued
service for the purpose of the exercise of his options. Options held by other
officers and employees of DS Bancor will continue in effect for their original
terms as long as they are employees of Webster Bank and will continue to be
exercisable after termination of such employment only to the extent provided in
the applicable option agreement.
OPTION AGREEMENT
As a condition of and inducement to Webster's entering into the Merger
Agreement, Webster and DS Bancor entered into the Option Agreement immediately
after the execution of the Merger Agreement. Pursuant to the Option Agreement,
DS Bancor granted Webster the Option, which entitles Webster to purchase,
subject to the terms thereof, up to 564,296 fully paid and nonassessable shares
of DS Bancor Common Stock, or approximately 18.6% of the shares of DS Bancor
Common Stock then outstanding, under the circumstances described below, at a
price of $36.50, subject to adjustment in certain circumstances. The Option is
intended to significantly increase the cost to a potential third party of
acquiring DS Bancor, under specified circumstances, compared to its cost had DS
Bancor not entered into the Option Agreement and, therefore, is likely to
discourage third parties from proposing a competing offer to acquire DS Bancor,
even if such offer involves a higher price per share for the DS Bancor Common
Stock than the per share consideration to be paid pursuant to the Merger
Agreement.
The following brief summary of certain provisions of the Option Agreement
is qualified in its entirety by reference to the Option Agreement. A copy of the
Option Agreement as well as the other documents described in this Joint Proxy
Statement/Prospectus will be provided without charge upon oral or written
request to Lee A. Gagnon, Executive Vice President, Chief Operating Officer and
Secretary of Webster Financial Corporation, Webster Plaza, Waterbury,
Connecticut 06702, telephone (203) 578-2217.
Subject to applicable law and regulatory restrictions, Webster may exercise
the Option, in whole or in part, following the occurrence of a "Purchase Event"
(as defined below), provided that the Option shall not have first terminated
upon the occurrence of an "Exercise Termination Event" (as defined below).
"Purchase Event" means, in substance, either (i) the acquisition by any third
party of beneficial ownership of 25% or more of the outstanding DS Bancor Common
Stock or (ii) the entry by DS Bancor into a letter of intent or definitive
agreement to engage in an Acquisition Transaction (as defined below) with any
third party, or the recommendation by the Board of Directors of DS Bancor that
its shareholders approve or accept any Acquisition Transaction with any third
party.
For purposes of the Option Agreement, "Acquisition Transaction" means (x) a
merger, consolidation or other business combination, involving DS Bancor, (y) a
purchase, lease or other acquisition of all or substantially all of the assets
of DS Bancor, or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of beneficial ownership of
25% or more of the voting power of DS Bancor as to a Purchase Event (described
above) or 15% as to a Preliminary Purchase Event (defined below).
The Option Agreement defines an "Exercise Termination Event" to mean the
earliest to occur of the following: (i) the time immediately prior to the
Effective Time of the Merger; (ii) 12 months
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after the first occurrence of a Purchase Event; (iii) 18 months after the
termination of the Merger Agreement following the occurrence of a Preliminary
Purchase Event; (iv) upon the termination of the Merger Agreement, prior to the
occurrence of a Purchase Event or Preliminary Purchase Event, (A) by DS Bancor,
if the Base Period Trading Price of Webster Common Stock is less than $28.00
unless Webster takes certain specified action; (B) by both parties, if the
Merger Agreement is terminated by mutual consent; (C) by either Webster or DS
Bancor, if the Merger Agreement has been terminated as a result of regulatory
denial or requested withdrawal of a regulatory application, if the Merger has
not occurred by June 30, 1997, or if the Merger Agreement is terminated because
the approval of the shareholders of Webster or DS Bancor is not obtained; or (D)
by DS Bancor, if the Merger Agreement is terminated as a result of a material
breach of any representation, warranty, covenant or other agreement by Webster;
(v) 135 days after the termination of the Merger Agreement, if the DS Bancor
shareholders have failed to approve the Merger Agreement and no Purchase Event
or Preliminary Purchase Event has occurred prior to the DS Bancor Meeting; (vi)
nine months after the termination of the Merger Agreement by Webster as a result
of a material breach or breaches of any representation, warranty, covenant or
other agreement by DS Bancor, if such breach or breaches were not willful or
intentional by DS Bancor; or (vii) 24 months after the termination of the Merger
Agreement by Webster (A) as a result of a willful or intentional material breach
or breaches of any representation, warranty, covenant or agreement by DS Bancor;
or (B) as a result of a failure of DS Bancor or its Board of Directors to hold
the DS Bancor Meeting on a timely basis, to recommend to DS Bancor's
shareholders that they approve the Merger Agreement (with a fiduciary duty
exception), or to oppose any third party takeover proposal (with a fiduciary
duty exception), or based on a violation by DS Bancor of the covenant on third
party takeover proposals (without regard to the fiduciary duty exception).
"Preliminary Purchase Event", as defined in the Option Agreement, includes
(i) the entry by DS Bancor into a letter of intent or definitive agreement to
engage in an Acquisition Transaction with any third party, or the recommendation
by the Board of Directors of DS Bancor that its shareholders approve or accept
any Acquisition Transaction with any third party; (ii) an acquisition by any
third party of beneficial ownership of 15% or more of the outstanding DS Bancor
Common Stock; (iii) the making of a bona fide proposal for an Acquisition
Transaction by any third party to DS Bancor, or a public announcement or written
communication that is publicly disclosed to DS Bancor's shareholders as to a
third party engaging in an Acquisition Transaction; (iv) a willful or
intentional material breach by DS Bancor of any representation, warranty,
covenant or agreement that would entitle Webster to terminate the Merger
Agreement; (v) a failure by DS Bancor's shareholders to approve the Merger
Agreement, a withdrawal or modification in any manner adverse to Webster by DS
Bancor's Board of Directors of its approval recommendation as to the Merger
Agreement, or a failure by DS Bancor or its Board of Directors to oppose any
third party takeover proposal; or (vi) a filing by any third party of an
application or notice with any regulatory authority for approval to engage in an
Acquisition Transaction.
The Option may not be assigned by Webster to any other person without the
express written consent of DS Bancor, except that Webster may assign its rights
under the Option Agreement to a wholly-owned subsidiary or may assign its rights
in whole or in part after the occurrence of a Preliminary Purchase Event. DS
Bancor also has agreed to prepare and file a registration statement if the
Option is exercised with respect to the shares to be issued upon exercise of the
Option under applicable federal and state securities laws. Upon the occurrence
of a Purchase Event prior to an Exercise Termination Event, at the request of
Webster, DS Bancor will be obligated to repurchase the Option, and any shares of
DS Bancor Common Stock theretofore purchased pursuant to the Option, at prices
determined as set forth in the Option Agreement, except to the extent prohibited
by applicable law, regulation or administrative policy or to the extent that the
repurchase would cause Derby's capital to fall below the minimum level required
by the FDIC for Derby to be deemed a "well-capitalized institution" or if such
repurchase would preclude an Acquisition Transaction from being accounted for as
a pooling of interests.
In the event that prior to an Exercise Termination Event, DS Bancor enters
into a letter of intent or definitive agreement (i) to consolidate or merge with
any third party, and DS Bancor is not
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the continuing or surviving corporation in such consolidation or merger; (ii) to
permit any third party to merge into DS Bancor and DS Bancor is the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of DS Bancor Common Stock shall be changed into or exchanged
for stock or other securities of any third party or cash or any other property
or the then outstanding shares of DS Bancor Common Stock will after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company; or (iii) to sell or otherwise transfer all or substantially all
of its assets to any third party, then, and in each such case, the agreement
governing such transaction must make proper provision so that the Option shall,
upon the consummation of such transaction, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of Webster, of either (x)
the acquiring corporation or (y) any person that controls the acquiring
corporation. The Substitute Option will be exercisable for shares of the
issuer's common stock in such number and at such exercise price as is set forth
in the Option Agreement and will otherwise have the same terms as the Option,
except that the number of shares subject to the Substitute Option may not exceed
19.9% of the issuer's outstanding shares of common stock.
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AMENDMENT TO WEBSTER'S RESTATED
CERTIFICATE OF INCORPORATION
The Webster Board of Directors unanimously approved the amendment to
Webster's Restated Certificate of Incorporation to increase Webster's authorized
capital stock by increasing the number of authorized shares of Webster Common
Stock from 14,000,000 to 30,000,000, and determined that such amendment is
advisable and in the best interests of Webster and its shareholders. THE WEBSTER
BOARD THEREFORE UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF WEBSTER COMMON STOCK
VOTE TO APPROVE THE AMENDMENT TO WEBSTER'S RESTATED CERTIFICATE OF
INCORPORATION.
Webster's Restated Certificate of Incorporation currently provides that the
total number of shares of all classes of capital stock that Webster has the
authority to issue is 17,000,000, consisting of 14,000,000 shares of Webster
Common Stock and 3,000,000 shares of serial preferred stock, par value $.01 per
share. The proposed amendment to Webster's Restated Certificate of Incorporation
is to increase the number of authorized shares of Webster Common Stock from
14,000,000 to 30,000,000, resulting in an increase in the authorized capital
stock that Webster has the authority to issue from 17,000,000 to 33,000,000.
Such increase will be effected by amending the first sentence of the first
paragraph of Article 4 of Webster's Restated Certificate of Incorporation to
read as follows:
"The total number of shares of all classes of the capital stock which
the Corporation has authority to issue is thirty-three million
(33,000,000), of which thirty million (30,000,000) shall be common
stock, par value $.01 per share, amounting in the aggregate to three
hundred thousand dollars ($300,000), and three million (3,000,000)
shall be serial preferred stock, par value $.01 per share, amounting
in the aggregate to thirty thousand dollars ($30,000)."
Of the 14,000,000 presently authorized shares of Webster Common Stock,
8,010,137 shares were issued and outstanding on the Webster Record Date, and
491,825, 300,000, and 679,438 shares, respectively, were reserved for issuance
with respect to Webster stock options, the warrant issued by Webster to Fleet
Financial Group, Inc. for 300,000 shares of Webster Common Stock (the "Webster
Warrant") and Webster's Series B Stock (which is convertible into Webster Common
Stock). Of the 250,000 presently authorized shares of the Series B Stock,
118,369 shares were issued and outstanding on the Webster Record Date. No shares
of Webster's Series A Cumulative Perpetual Preferred Stock, par value $.01 per
share ("Series A Stock") or Series C Participating Preferred Stock, par value
$.01 per share ("Series C Stock") are issued and outstanding. Accordingly, on
the Webster Record Date, 4,518,600 shares of authorized but not outstanding and
unreserved shares of Webster Common Stock remained available for future issuance
(before giving effect to the approximately 3,556,364 shares to be issued in the
Merger based on a 1.17071 Exchange Ratio as described below, and 457,842 if all
existing options of DS Bancor are exercised prior to the Merger). No shares of
Webster's Series A Stock remain available for future issuance. For a description
of Webster's capital stock, see "DESCRIPTION OF WEBSTER CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS."
If the Merger Agreement and the Merger provided for therein and the
amendment to Webster's Restated Certificate of Incorporation are approved, at
the Effective Time, 3,556,364 shares of Webster Common Stock will be issued in
connection with the Merger 4,014,206 if all existing options of DS Bancor are
exercised prior to the Merger), based on a 1.17071 Exchange Ratio calculated
based on the average daily closing prices per share of Webster Common Stock for
the 15 consecutive days on which shares of Webster Common Stock were actually
traded prior to December 6, 1996. Therefore, giving effect to the Merger, of the
then 30,000,000 shares of authorized Webster Common Stock, 11,566,501 will be
issued and outstanding (including all existing options of DS Bancor) and
949,667, 300,000, and 679,438, respectively, will be reserved for issuance with
respect to Webster stock options prior to the Merger, the Webster Warrant and
the potential conversion of the issued and outstanding shares of the Series B
Stock. Accordingly, after the Merger (based on a
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1.17071 Exchange Ratio), 16,962,236 shares of authorized but not outstanding and
unreserved shares of Webster Common Stock (16,504,394 if all existing options of
DS Bancor are exercised prior to the Merger) would be available for
issuance.
Approval of the proposed amendment to Webster's Restated Certificate of
Incorporation is not a condition to the Merger Agreement.
Although Webster has no present intention of issuing authorized but
unissued and unreserved shares of Webster capital stock other than in connection
with the Merger, Webster stock options, the Webster Warrant and the potential
conversion of Series B Stock, the Webster Board of Directors believes that the
increased number of shares of Webster Common Stock will benefit Webster by
making a sufficient number of shares available in the future for use in
connection with possible stock dividends or stock splits, the raising of
additional capital through a potential public offering or private placement,
possible future mergers or acquisitions, under a cash dividend reinvestment or
stock purchase plan or under an employee stock ownership plan. The unissued and
unreserved shares of Webster Common Stock and Webster preferred stock will be
available for any proper corporate purpose, as authorized from time to time by
the Board of Directors, without further approval by the shareholders of Webster,
except as otherwise required by law.
Webster shareholders do not have any preemptive or stock purchase rights to
purchase additional shares of Webster Common Stock, whether now or hereafter
authorized. Further issuances of additional shares of Webster Common Stock or
securities convertible into Webster Common Stock, therefore, may have a dilutive
effect on existing shareholders.
As a Delaware corporation, Webster is taxed on its authorized capital
stock. In general, the annual franchise tax is $90 on the first 10,000 shares
and the further sum of $50 on each additional 10,000 shares or part thereof.
Currently, Webster's annual franchise tax is $85,000. Increasing the number of
authorized shares of Webster Common Stock to 30,000,000 will result in an annual
franchise tax of $150,000.
In the event of a proposed merger, tender offer or other attempt to gain
control of Webster of which management does not approve, it might be possible
for the Board of Directors to approve the issuance of shares of Webster Common
Stock or Webster preferred stock in a transaction that could have the effect of
frustrating or impeding such takeover attempt. The Board of Directors has no
current intention to issue authorized but unissued shares for such purpose. The
Board of Directors is not aware of any specific effort to accumulate Webster's
capital stock in order to obtain control by means of a merger, tender offer or
otherwise.
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PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Pro Forma Combined Statement of Financial Condition as of
September 30, 1996 combines the historical consolidated statements of financial
condition of Webster and DS Bancor as if the Merger had occurred on September
30, 1996, after giving effect to the pro forma adjustments described in the
accompanying notes. The Pro Forma Combined Statements of Income for the nine
months ended September 30, 1996 and 1995, and for the years ended December 31,
1995, 1994 and 1993 are presented as if the Merger had been consummated at the
beginning of each period presented.
The pro forma combined financial statements should be read in conjunction
with the separate historical consolidated financial statements and notes of
Webster and of DS Bancor incorporated by reference herein. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." The pro forma combined financial statements are
not necessarily indicative of the consolidated financial position or results of
future operations of the combined entity or of the actual results that would
have been achieved had the Merger been consummated prior to the periods
indicated.
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WEBSTER FINANCIAL CORPORATION
DS BANCOR, INC.
PRO FORMA COMBINED STATEMENT OF CONDITION
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Webster DS Bancor Pro Forma Pro Forma
(historical) (historical) Adjustments Combined
------------- ------------- ------------- -------------
(In Thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Depository Institutions $ 71,763 $ 15,854 $ - $ 87,617
Interest-bearing Deposits 66,308 - - 66,308
Securities 1,150,263 338,025 (4,830)(a) 1,483,458
Loans Receivable, Net 2,450,294 877,284 (5,650)(c) 3,321,928
Accrued Interest Receivable 25,648 7,547 - 33,195
Premises and Equipment, Net 49,159 6,975 (3,350)(c) 52,784
Segregated Assets, Net 82,905 - - 82,905
Other Real Estate Acquired Through Fore-
closure and In-Substance Foreclosure, Net 11,528 4,515 - 16,043
Core Deposit Intangible 45,608 2,304 - 47,912
Prepaid Expenses and Other Assets 30,978 6,919 540 (b) 38,437
---------- ---------- --------- ----------
TOTAL ASSETS $3,984,454 $1,259,423 $(13,290) $5,230,587
========== ========== ========= ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits $3,021,818 $1,029,989 $ - $4,051,807
Federal Home Loan Bank Advances 476,700 128,185 - 604,885
Other Borrowings 208,505 - - 208,505
Advanced Payments by Borrowers for Taxes
and Insurance 9,862 5,277 - 15,139
Accrued Expenses and Other Liabilities 50,902 9,484 6,000(c) 66,386
---------- ---------- -------- ----------
Total Liabilities 3,767,787 1,172,935 6,000 4,946,722
SHAREHOLDERS' EQUITY
Common Stock 87 3,371 (3,336)(d) 122
Paid In Capital 137,396 44,579 (4,717)(a,d) 177,258
Retained Earnings 88,907 43,051 (15,750)(a,b,c) 116,208
Less Treasury Stock at Cost (7,149) (4,513) 4,513 (d) (7,149)
Less Employee Stock Ownership Plan Shares
Purchased with Debt (2,574) - - (2,574)
---------- ---------- -------- ----------
Total Shareholders' Equity 216,667 86,488 (19,290) 283,865
---------- ---------- -------- ----------
TOTAL LIABILITIES AND SHARE-
HOLDERS' EQUITY $3,984,454 $1,259,423 $(13,290) $5,230,587
========== ========== ======== ==========
</TABLE>
The pro forma combined statement of condition has not been adjusted to
reflect any of the improvements in operating efficiencies that Webster
anticipates may occur in the future due to the Merger with DS Bancor.
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WEBSTER FINANCIAL CORPORATION
DS BANCOR, INC.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Webster DS Bancor Pro Forma
(historical) (historical) Combined
----------- ----------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Loans and Segregated Assets $145,991 $52,463 $198,454
Securities 50,900 15,175 66,075
-------- ------- --------
Total Interest Income 196,891 67,638 264,529
INTEREST EXPENSE:
Interest on Deposits 85,424 34,149 119,573
Interest on Borrowings 25,625 4,535 30,160
-------- ------- --------
Total Interest Expense 111,049 38,684 149,733
Net Interest Income 85,842 28,954 114,796
Provision for Loan Losses 3,000 2,950 5,950
-------- ------- --------
Net Interest Income After Provision for Loan Losses 82,842 26,004 108,846
NONINTEREST INCOME:
Fees and Service Charges 13,334 1,334 14,668
Gain on Sale of Loans, Securities and Mortgaged-Backed
Securities, Net 2,032 448 2,480
Other Noninterest Income 2,743 852 3,595
-------- ------- --------
Total Noninterest Income 18,109 2,634 20,743
-------- ------- --------
NONINTEREST EXPENSES:
Salaries and Employee Benefits 33,389 8,436 41,825
Occupancy Expense of Premises 7,010 1,492 8,502
Furniture and Equipment Expenses 6,480 826 7,306
Federal Deposit Insurance Premiums 1,580 2 1,582
Other Real Estate Owned Expenses and Provisions, Net 1,522 1,093 2,615
Non-Recurring Expenses 5,230 - 5,230
Other Operating Expenses 18,037 5,413 23,450
-------- ------- --------
Total Noninterest Expenses 73,248 17,262 90,510
-------- ------- --------
Income Before Income Taxes 27,703 11,376 39,079
Income Taxes 9,876 4,449 14,325
-------- ------- --------
NET INCOME: 17,827 6,927 24,754
Preferred Stock Dividends 927 - 927
-------- ------- --------
Net Income Available to Common Shareholders $ 16,900 $ 6,927 $ 23,827
======== ======= ========
NET INCOME PER COMMON SHARE:(e)
Primary $ 2.04 $ 2.19 $ 1.99
======== ======= ========
Fully Diluted $ 1.92 $ 2.16 $ 1.90
======== ======= ========
</TABLE>
The pro forma combined statement of income has not been adjusted to reflect
any of the improvements in operating efficiencies that Webster anticipates may
occur in the future due to the Merger with DS Bancor.
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WEBSTER FINANCIAL CORPORATION
DS BANCOR, INC.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Webster DS Bancor Pro Forma
(historical) (historical) Combined
----------- ----------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Loans and Segregated Assets $115,540 $47,911 $163,451
Securities 46,250 16,008 62,258
-------- ------- --------
Total Interest Income 161,790 63,919 225,709
INTEREST EXPENSE:
Interest on Deposits 72,808 33,933 106,741
Interest on Borrowings 23,386 3,852 27,238
-------- ------- --------
Total Interest Expense 96,194 37,785 133,979
Net Interest Income 65,596 26,134 91,730
Provision for Loan Losses 1,395 1,825 3,220
-------- ------- --------
Net Interest Income After Provision for Loan Losses 64,201 24,309 88,510
NONINTEREST INCOME:
Fees and Service Charges 10,590 1,158 11,748
Gain on Sale of Loans, Securities and Mortgaged-Backed
Securities Net 2,271 461 2,732
Other Noninterest Income 2,496 730 3,226
-------- ------- --------
Total Noninterest Income 15,357 2,349 17,706
-------- ------- --------
NONINTEREST EXPENSES:
Salaries and Employee Benefits 27,884 7,865 35,749
Occupancy Expense of Premises 4,513 1,318 5,831
Furniture and Equipment Expenses 4,523 949 5,472
Federal Deposit Insurance Premiums 3,272 1,338 4,610
Other Real Estate Owned Expenses and Provisions, Net 3,392 1,400 4,792
Other Operating Expenses 12,506 4,918 17,424
-------- ------- --------
Total Noninterest Expenses 56,090 17,788 73,878
-------- ------- --------
Income Before Income Taxes 23,468 8,870 32,338
Income Taxes 7,439 3,581 11,020
-------- ------- --------
NET INCOME: 16,029 5,289 21,318
Preferred Stock Dividends 972 - 972
-------- ------- --------
Net Income Available to Common Shareholders $ 15,057 $ 5,289 $ 20,346
======== ======= ========
NET INCOME PER COMMON SHARE:(e)
Primary $ 2.19 $ 1.71 $ 1.94
======== ======= ========
Fully Diluted $ 2.04 $ 1.71 $ 1.85
======== ======= ========
</TABLE>
The pro forma combined statement of income has not been adjusted to reflect
any of the improvements in operating efficiencies that Webster anticipates may
occur in the future due to the Merger with DS Bancor.
-61-
<PAGE>
WEBSTER FINANCIAL CORPORATION
DS BANCOR, INC.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Webster DS Bancor Pro Forma
(historical) (historical) Combined
----------- ----------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Loans and Segregated Assets $154,488 $65,148 $219,636
Securities 64,323 21,441 85,764
-------- ------- --------
Total Interest Income 218,811 86,589 305,400
INTEREST EXPENSE:
Interest on Deposits 98,135 46,267 144,402
Interest on Borrowings 33,398 5,308 38,706
-------- ------- --------
Total Interest Expense 131,533 51,575 183,108
Net Interest Income 87,278 35,014 122,292
Provision for Loan Losses 3,100 2,525 5,625
-------- ------- --------
Net Interest Income After Provision for Loan Losses 84,178 32,489 116,667
NONINTEREST INCOME:
Fees and Service Charges 14,131 1,513 15,644
Gain on Sale of Loans, Securities and
Mortgage-Backed Securities, Net 4,289 979 5,268
Other Noninterest Income 3,555 1,192 4,747
-------- ------- --------
Total Noninterest Income 21,975 3,684 25,659
-------- ------- --------
NONINTEREST EXPENSES:
Salaries and Employee Benefits 37,608 10,559 48,167
Occupancy Expense of Premises 6,390 1,814 8,204
Furniture and Equipment Expenses 5,999 1,363 7,362
Federal Deposit Insurance Premiums 3,990 1,518 5,508
Other Real Estate Owned Expenses and
Provisions, Net 4,025 1,776 5,801
Non-Recurring Expenses 6,371 - 6,371
Other Operating Expenses 15,204 6,510 21,714
-------- ------- --------
Total Noninterest Expenses 79,587 23,540 103,127
-------- ------- --------
Income Before Income Taxes 26,566 12,633 39,199
Income Taxes 8,246 5,020 13,266
-------- ------- --------
NET INCOME: 18,320 7,613 25,933
Preferred Stock Dividends 1,296 - 1,296
-------- ------- --------
Net Income Available to Common Shareholders $ 17,024 $ 7,613 $ 24,637
======== ======= ========
NET INCOME PER COMMON SHARE:(e)
Primary $ 2.44 $ 2.46 $ 2.33
======== ======= ========
Fully Diluted $ 2.30 $ 2.45 $ 2.23
======== ======= ========
</TABLE>
The pro forma combined statement of income has not been adjusted to reflect
any of the improvements in operating efficiencies that Webster anticipates may
occur in the future due to the Merger with DS Bancor.
-62-
<PAGE>
WEBSTER FINANCIAL CORPORATION
DS BANCOR, INC.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Webster DS Bancor Pro Forma
(historical) (historical) Combined
----------- ----------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Loans and Segregated Assets $139,648 $56,802 $196,450
Securities 51,172 20,480 71,652
-------- ------- --------
Total Interest Income 190,820 77,282 268,102
INTEREST EXPENSE:
Interest on Deposits 76,835 36,008 112,843
Interest on Borrowings 21,629 6,810 28,439
-------- ------- --------
Total Interest Expense 98,464 42,818 141,282
Net Interest Income 92,356 34,464 126,820
Provision for Loan Losses 3,155 2,325 5,480
-------- ------- --------
Net Interest Income After Provision for
Loan Losses 89,201 32,139 121,340
NONINTEREST INCOME:
Fees and Service Charges 12,188 1,366 13,554
Gain (Loss) on Sale of Loans, Securities and
Mortgage-Backed Securities, Net (1,182) 648 (534)
Other Noninterest Income 2,623 1,087 3,710
-------- ------- --------
Total Noninterest Income 13,629 3,101 16,730
-------- ------- --------
NONINTEREST EXPENSES:
Salaries and Employee Benefits 34,943 10,132 45,075
Occupancy Expense of Premises 5,696 2,094 7,790
Furniture and Equipment Expenses 5,976 1,039 7,015
Federal Deposit Insurance Premiums 5,742 2,770 8,512
Other Real Estate Owned Expenses and
Provisions, Net 6,949 2,904 9,853
Non-Recurring Expenses 5,700 - 5,700
Other Operating Expenses 14,289 6,671 20,960
-------- ------- --------
Total Noninterest Expenses 79,295 25,610 104,905
-------- ------- --------
Income Before Income Taxes 23,535 9,630 33,165
Income Taxes 4,850 3,920 8,770
-------- ------- --------
NET INCOME: 18,685 5,710 24,395
Preferred Stock Dividends 1,716 - 1,716
-------- ------- --------
Net Income Available to Common Shareholders $ 16,969 $ 5,710 $ 22,679
======== ======= ========
NET INCOME PER COMMON SHARE:(e)
Primary $ 2.69 $ 1.86 $ 2.29
======== ======= ========
Fully Diluted $ 2.44 $ 1.86 $ 2.17
======== ======= ========
</TABLE>
The pro forma combined statement of income has not been adjusted to reflect
any of the improvements in operating efficiencies that Webster anticipates may
occur in the future due to the Merger with DS Bancor.
-63-
<PAGE>
WEBSTER FINANCIAL CORPORATION
DS BANCOR, INC.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
Webster DS Bancor Pro Forma
(historical) (historical) Combined
----------- ----------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Loans and Segregated Assets $121,372 $53,428 $174,800
Securities 33,217 20,907 54,124
-------- ------- --------
Total Interest Income 154,589 74,335 228,924
INTEREST EXPENSE:
Interest on Deposits 68,687 37,599 106,286
Interest on Borrowings 12,116 6,217 18,333
-------- ------- --------
Total Interest Expense 80,803 43,816 124,619
Net Interest Income 73,786 30,519 104,305
Provision for Loan Losses 4,597 2,475 7,072
-------- ------- --------
Net Interest Income After Provision for Loan Losses 69,189 28,044 97,233
NONINTEREST INCOME:
Fees and Service Charges 7,912 5,099 13,011
Gain on Sale of Loans, Securities and Mortgage-Backed
Securities, Net 1,880 1,256 3,136
Other Noninterest Income 911 988 1,899
-------- ------- --------
Total Noninterest Income 10,703 7,343 18,046
-------- ------- --------
NONINTEREST EXPENSES:
Salaries and Employee Benefits 22,336 9,614 31,950
Occupancy Expense of Premises 4,757 2,148 6,905
Furniture and Equipment Expenses 4,066 907 4,973
Federal Deposit Insurance Premiums 3,921 2,435 6,356
Other Real Estate Owned Expenses and Provisions, Net 5,085 4,801 9,886
Other Operating Expenses 14,832 7,208 22,040
-------- ------- --------
Total Noninterest Expenses 54,997 27,113 82,110
-------- ------- --------
Income Before Income Taxes 24,895 8,274 33,169
Income Taxes 10,595 3,348 13,943
-------- ------- --------
Income Before Cumulative Change 14,300 4,926 19,226
Cumulative Change 4,575 1,548 6,123
-------- ------- --------
NET INCOME: 18,875 6,474 25,349
Preferred Stock Dividends 2,653 - 2,653
-------- ------- --------
Net Income Available to Common Shareholders $ 16,222 $ 6,474 $ 22,696
======== ======= ========
NET INCOME PER COMMON SHARE:(e)
Primary $ 2.25 $ 1.65 $ 1.91
======== ======= ========
Fully Diluted $ 2.04 $ 1.63 $ 1.82
======== ======= ========
</TABLE>
The pro forma combined statement of income has not been adjusted to reflect
any of the improvements in operating efficiencies that Webster anticipates may
occur in the future due to the Merger with DS Bancor.
-64-
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Represents the conversion to treasury stock and subsequent retirement of
130,500 shares of DS Bancor Common Stock owned by Webster.
(b) Represents the reversal of the tax effect of the gain on DS Bancor Common
Stock currently owned by Webster.
(c) Represents the estimated merger costs that will be incurred by Webster and
DS Bancor. These costs are not reflected in the Pro Forma Combined
Statements of Income since these items do not have a continuing impact upon
Webster. The following table summarizes the financial impact of the
additional accruals as reflected in the Pro Forma Combined Statement of
Financial Condition (in thousands):
<TABLE>
<S> <C>
Credit Related:
Additions to allowances for loan losses
to conform to Webster credit policies $ 5,650
Merger Related Costs:
Compensation (severance and related costs) 7,400
Data processing contract termination 3,800
Writedown of fixed assets in preparation for sale 3,350
Transaction costs (including investment bankers,
attorneys and accountants) 2,000
Conversion and miscellaneous expenses 3,300
------
Total merger-related costs 19,850
------
Total pre-tax adjustments 25,500
Income tax effect (10,500)
------
Net after tax adjustments $ 15,000
------
</TABLE>
The above estimated Merger related costs that will be incurred by Webster
and DS Bancor include only those expenses that are estimated to be incurred
from the transaction. Compensation costs include estimated severance to DS
Bancor employees and other related expenses as a result of merging
administrative staff and consolidating overlapping branch locations. Prior
to the execution of the Merger Agreement, DS Bancor had entered into a
long-term contract for data processing. As a result of the Merger, Webster
will no longer need the services of the data processor but is obligated to
pay consideration for terminating the contract. The writedown of fixed
assets represents the estimated loss on sale of excess fixed assets due to
consolidation of overlapping branch locations.
(d) Represents the elimination of DS Bancor's historical aggregate $1.00 per
share par value of $3.4 million, the issuance of Webster Common Stock at
the aggregate $0.01 per share par value of $33,000, the elimination of DS
Bancor's treasury stock and the net effect on paid in capital.
(e) Pro Forma Combined Webster and DS Bancor Net Income per Common Share data
have been determined based upon (i) the combined historical net income of
Webster and DS Bancor and (ii) the combined historical weighted average
common equivalent shares of Webster and DS Bancor. For purposes of this
determination, DS Bancor's historical weighted average common shares
outstanding were multiplied by an assumed 1.17071 Exchange Ratio. See "THE
MERGER -- Exchange Ratio."
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<PAGE>
MARKET PRICES AND DIVIDENDS
WEBSTER COMMON STOCK
The following sets forth the range of high and low sale prices of Webster
Common Stock as reported on The Nasdaq National Market, as well as cash
dividends paid during the periods indicated:
<TABLE>
<CAPTION>
Market Price Cash
------------ ----
High Low Dividends Paid
---- --- --------------
<S> <C> <C> <C>
Quarter Ended:
March 31, 1994 $22.25 $18.50 $0.13
June 30, 1994 24.75 18.38 0.13
September 30, 1994 25.50 22.50 0.13
December 31, 1994 23.50 17.25 0.13
March 31, 1995 22.25 18.00 0.16
June 30, 1995 26.00 21.25 0.16
September 30, 1995 31.00 23.00 0.16
December 31, 1995 29.50 24.50 0.16
March 31, 1996 30.25 27.50 0.16
June 30, 1996 29.25 26.75 0.16
September 30, 1996 35.75 28.00 0.18
(through December 6, 1996) 37.62 33.62 0.18
</TABLE>
On October 7, 1996, the last trading day prior to the public announcement
of the Merger, the closing price of Webster Common Stock on The Nasdaq National
Market was $35.25. On December 6, 1996 (the most recent practicable date prior
to the printing of this Joint Proxy Statement/Prospectus), the closing price of
Webster Common Stock on The Nasdaq National Market was $37.12
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<PAGE>
DS BANCOR COMMON STOCK
<TABLE>
<CAPTION>
Market Price Cash
------------ ----
High Low Dividends Paid
---- --- --------------
<S> <C> <C> <C>
Quarter Ended:
March 31, 1994 $ 27.50 $ 21.25 $ --
June 30, 1994 33.75 25.00 --
September 30, 1994 30.50 25.75 --
December 31, 1994 28.50 21.00 --
March 31, 1995 27.50 21.75 --
June 30, 1995 26.75 23.00 --
September 30, 1995 29.13 25.25 --
December 31, 1995 26.50 23.33 --
March 31, 1996 33.50 24.75 .06
June 30, 1996 36.75 28.75 .06
September 30, 1996 38.50 32.31 .06
(through December 6, 1996) 42.44 37.25 .06
</TABLE>
On October 7, 1996, the last trading day prior to the public announcement
of the Merger, the closing price of DS Bancor Common Stock on The Nasdaq
National Market was $38.38. On December 6, 1996 (the most recent practicable
date prior to the printing of this Joint Proxy Statement/Prospectus), the
closing price of DS Bancor Common Stock on The Nasdaq National Market was
$42.44.
Shareholders are advised to obtain current market quotations for Webster
Common Stock. It is expected that the market price of Webster Common Stock will
fluctuate between the date of this Joint Proxy Statement/Prospectus and the date
on which the Merger is consummated. Because the number of shares of Webster
Common Stock to be received by DS Bancor shareholders in the Merger is not
fixed, the Exchange Ratio for the number of shares of Webster Common Stock that
the holders of DS Bancor Common Stock would receive in the Merger may increase
or decrease prior to the Merger.
-67-
<PAGE>
DESCRIPTION OF WEBSTER CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS
Set forth below is a description of Webster's capital stock, as well as a
summary of the material differences between the rights of holders of DS Bancor
Common Stock and their prospective rights as holders of Webster Common Stock. If
the Merger Agreement is approved and adopted and the Merger consummated, the
holders of DS Bancor Common Stock will become holders of Webster Common Stock.
As a result, Webster's Restated Certificate of Incorporation and Bylaws, and the
applicable provisions of Delaware law, will govern the rights of current
shareholders of DS Bancor Common Stock. The rights of those shareholders are
currently governed by the Amended and Restated Certificate of Incorporation and
Bylaws of DS Bancor, and the applicable provisions of Delaware law.
The following comparison is based on the current terms of the governing
documents of Webster and DS Bancor and on the provisions of Delaware law, which
is applicable to both Webster and DS Bancor. The discussion is intended to
highlight important similarities and differences between the rights of holders
of Webster Common Stock and DS Bancor Common Stock.
WEBSTER COMMON STOCK
Webster is authorized to issue 14,000,000 shares of Webster Common Stock
and, if the amendment to approve the increase in the authorized number of shares
of Webster Common Stock is approved by shareholders at the Webster Meeting,
Webster will be authorized to issue a total of 30,000,000 shares of Webster
Common Stock. As of the Webster Record Date, 8,010,137 shares of Webster Common
Stock were issued and outstanding and after giving effect to the conversion of
the outstanding Series B Stock of Webster described below, there would be
679,438 additional shares of Webster Common Stock, or a total of 8,689,575
shares of Webster Common Stock then outstanding. As of the Webster Record Date,
Webster had outstanding stock options granted to directors, officers and other
employees for 491,825 shares of Webster Common Stock. Webster has issued a
warrant to Fleet Financial Group, Inc. for 300,000 shares of Webster Common
Stock. Each share of Webster Common Stock has the same relative rights and is
identical in all respects to each other share of Webster Common Stock. The
Webster Common Stock is non-withdrawable capital, is not of an insurable type
and is not insured by the FDIC or any other governmental entity.
Holders of Webster Common Stock are entitled to one vote per share on each
matter properly submitted to shareholders for their vote, including the election
of directors. Holders of Webster Common Stock do not have the right to cumulate
their votes for the election of directors, and they have no pre-emptive or
conversion rights with respect to any shares that may be issued. Webster Common
Stock is not subject to additional calls or assessments by Webster, and all
shares of Webster Common Stock currently outstanding are fully paid and
nonassessable.
Holders of Webster Common Stock and any class or series of stock entitled
to participate therewith are entitled to receive dividends when and as declared
by the Board of Directors of Webster out of any assets legally available for
distribution. No such dividends or other distributions may be declared or paid,
however, unless all accumulated dividends and any sinking fund, retirement fund
or other retirement payments have been paid, declared or set aside on the Series
B Stock or any other class of stock having preference as to payments of
dividends over the Webster Common Stock. In addition, as described below, the
Indenture (as defined below) for the Senior Notes places certain restrictions on
Webster's ability to pay dividends on Webster Common Stock. See "-- Senior
Notes."
In the unlikely event of any liquidation, dissolution or winding up of
Webster, the holders of Webster Common Stock and any class or series of stock
entitled to participate therewith would be entitled to receive, after payment or
provision for payment of all debts and liabilities of Webster and after the
liquidation preferences of all outstanding shares of any class of stock having
preference
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<PAGE>
over the Webster Common Stock have been fully paid or set aside, all
remaining assets of Webster available for distribution, in cash or in kind.
SERIES B STOCK
Webster's Restated Certificate of Incorporation authorizes its Board of
Directors, without further shareholder approval, to issue up to 3,000,000 shares
of serial preferred stock for any proper corporate purpose. In approving any
issuance of serial preferred stock, the Board of Directors has broad authority
to determine the rights and preferences of the serial preferred stock, which may
be issued in one or more series. These rights and preferences may include
voting, dividend, conversion and liquidation rights that may be senior to the
Webster Common Stock.
Of the 3,000,000 authorized shares of serial preferred stock, Webster is
authorized to issue up to 250,000 shares of Series B Stock, 118,369 shares of
which were outstanding on the Webster Record Date. The Series B Stock ranks
prior to the Webster Common Stock and any other class or series of stock ranking
junior to the Series B Stock with respect to dividends and amounts distributable
upon liquidation. The Series B Stock is entitled to receive, when declared by
the Board of Directors out of funds of Webster legally available therefor,
cumulative quarterly cash dividends at an annual rate of 7 1/2%. Unless full
cumulative dividends on the Series B Stock have been paid, dividends (other than
in Webster Common Stock, other stock ranking junior to the Series B Stock and
rights to acquire the foregoing) may not be paid or declared upon the Webster
Common Stock. Upon any liquidation of Webster, the holders of the Series B Stock
will be entitled to receive out of the assets of Webster available for
distribution to its shareholders before any distribution is made to holders of
the Webster Common Stock and any class or series of stock ranking junior to
Series B Stock an amount equal to $100 per share, plus an amount equal to all
dividends accumulated and unpaid on the Series B Stock to the date of final
distribution.
Except as indicated below or as required by law, holders of the Series B
Stock have no voting rights. If at any time six quarterly dividends payable on
the Series B Stock are accrued and unpaid, the number of directors of Webster is
required to be increased by two and the holders of a majority of the Series B
Stock, voting as a single class, will be entitled to elect two additional
directors (and to elect directors with respect to any such vacancies) until all
dividends accumulated on the Series B Stock have been paid in full. In addition,
without the vote or consent of the holders of at least two-thirds of the Series
B Stock then outstanding, Webster may not (i) amend, alter or repeal any of the
provisions of its Restated Certificate of Incorporation or certificate of
designation so as to affect adversely the preference or power of the Series B
Stock; (ii) authorize any reclassification of the Series B Stock; or (iii) issue
any shares of any class or series of stock of Webster ranking prior to the
shares of the Series B Stock as to dividends or upon liquidation, or reclassify
any authorized stock of Webster into any such prior shares or issue any
obligation or security convertible into or evidencing the right to purchase any
such prior shares. Accordingly, the voting rights of the holders of Series B
Stock could under certain circumstances operate to restrict the flexibility
which Webster would otherwise have in connection with any future issuances of
equity securities or changes to its capital structure.
The Series B Stock is not subject to any mandatory redemption at the
election of the holder or sinking fund provision. The Series B Stock may be
redeemed for cash at the option of Webster, in whole or in part, at any time on
or after January 15, 1997, on at least 15 but nor more than 60 days' notice, at
the applicable redemption price, plus accumulated and unpaid dividends. Webster
has announced its intent to redeem the Series B Stock as of January 15,
1997 at a redemption price of $104.50. Holders of Series B Stock have the right,
at their option, at any time to convert the Series B Stock into a number of
fully paid and nonassessable shares of Webster Common Stock equal to $100.00 for
each share surrendered for conversion divided by the conversion price, subject
to certain exceptions.
-69-
<PAGE>
SERIES A STOCK
Webster's Series A Stock was issued in connection with the First
Constitution acquisition. See "RISK FACTORS -- Growth through Acquisitions." All
of the shares of Series A Stock that were authorized and issued have been
redeemed.
SERIES C STOCK
Webster's Series C Stock was authorized in connection with a Stockholders'
Rights Plan, which was adopted in January 1996. Webster adopted the
Stockholders' Rights Plan to protect shareholders in the event of an inadequate
takeover offer or to deter coercive or unfair takeover tactics. Each right
entities a holder to purchase 1/1,000th of a share of Series C Stock upon the
occurrence of certain specified events. As of the date of this Joint Proxy
Statement/Prospectus, no shares of Series C Stock have been issued.
SENIOR NOTES
The 8 3/4% Senior Notes due 2000 were issued by Webster in an aggregate
principal amount of $40,000,000 pursuant to an Indenture (the "Indenture"),
dated as of June 15, 1993, between Webster and Chemical Bank, as trustee (the
"Trustee"). Certain provisions of the Indenture are summarized below because of
their impact on the Webster Common Stock. The Senior Notes bear interest at 8
3/4% payable semi-annually on each June 30 and December 30 until maturity on
June 30, 2000. The Senior Notes are unsecured general obligations only of
Webster and not of its subsidiaries. The Senior Notes may not be redeemed by
Webster prior to maturity. This provision is not expected to have an anti-
takeover effect, since the Notes would be assumed by any acquirer of Webster.
The Indenture contains covenants that limit Webster's ability at the holding
company level to incur additional Funded Indebtedness (defined below), to make
Restricted Distributions (defined below), to engage in certain dispositions
affecting Webster Bank or its voting stock, to create certain liens upon
Webster's assets at the holding company level (including a negative pledge
clause), and to engage in mergers, consolidations, or a sale of substantially
all of Webster's assets unless certain conditions are satisfied. The Indenture
also requires that Webster maintain a specified level of liquid assets at the
holding company level.
RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. The Indenture limits the amount
of Funded Indebtedness which Webster may incur or guarantee at the holding
company level. Funded Indebtedness includes any obligation of Webster with a
maturity in excess of one year for borrowed money, for the deferred purchase
price of property or services, for capital lease payments, or related to the
guarantee of such obligations. Webster may not incur or guarantee any Funded
Indebtedness if, immediately after giving effect thereto, the amount of Funded
Indebtedness of Webster at the holding company level, including the Senior
Notes, would be greater than 90% of Webster's consolidated net worth. As of
September 30, 1996, Webster's consolidated net worth was $216.7 million and it
had $42.5 million of Funded Indebtedness.
RESTRICTED DISTRIBUTIONS. Under the Indenture, Webster may not, directly
or indirectly, make any Restricted Distribution, except in capital stock of
Webster, if, at the time or after giving effect thereto: (a) an event of default
shall have occurred and be continuing under the Indenture; (b) Webster Bank
would fail to meet any of the applicable minimum capital requirements under OTS
regulations; (c) Webster would fail to maintain sufficient liquid assets to
comply with the terms of the covenant described under "Liquidity Maintenance"
below; or (d) the aggregate amount of all Restricted Distributions subsequent to
March 31, 1993 would exceed the sum of (i) $5 million, plus (ii) 75% of
Webster's aggregate consolidated net income (or if such aggregate consolidated
net income shall be a deficit, minus 100% of such deficit) accrued on a
cumulative basis in the period commencing on June 30, 1993 and ending on the
last day of the fiscal quarter immediately preceding the date of the Restricted
Distribution, and plus (iii) 100% of the net proceeds received by Webster from
any capital stock issued by Webster (other than to a subsidiary) subsequent to
March 31, 1993. As of September 30, 1996, Webster had the ability to pay $107.3
million in Restricted Distributions.
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<PAGE>
Restricted Distribution means: (a) any dividend, distribution or other
payment (except for dividends, distributions or payments payable in capital
stock or dividends on the Series B Stock) on the capital stock of Webster or any
subsidiary (other than a wholly owned subsidiary); (b) any payment to purchase,
redeem, acquire or retire any capital stock of Webster (other than the Series A
Stock, which was previously redeemed) or the capital stock of any subsidiary
(other than a wholly-owned subsidiary); and (c) any payment by Webster of
principal (whether a prepayment, redemption or at maturity) of, or to acquire,
any indebtedness for borrowed money issued or guaranteed by Webster (other than
the Senior Notes or pursuant to a guarantee by Webster of any borrowing by any
employee stock ownership plan established by Webster or a wholly owned
subsidiary), except that any such payment of, or to acquire, any such
indebtedness for borrowed money that is not subordinated to the Senior Notes
will not constitute a Restricted Distribution if such indebtedness was issued or
guaranteed by Webster at a time when the Senior Notes were rated in the same or
higher rating category as the rating assigned to the Senior Notes by Standard &
Poor's ("S&P") at the time the Senior Notes were issued.
LIQUIDITY MAINTENANCE. The Indenture requires that Webster maintain at all
times, on an unconsolidated basis, liquid assets in an amount equal to or
greater than 150% of the aggregate interest expense on the Senior Notes and all
other indebtedness for borrowed money of Webster for 12 full calendar months
immediately following each determination date under the Indenture, provided that
Webster will not be required to maintain such liquid assets once the Senior
Notes have been rated "BBB-" or higher by S&P for six calendar months and remain
rated in such category.
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
GENERAL. Certain provisions included in Webster's Restated Certificate of
Incorporation and Bylaws may serve to entrench current management and to prevent
a change in control of Webster even if desired by a majority of shareholders.
These provisions are designed to encourage potential acquirers to negotiate
directly with the Board of Directors of Webster and to discourage other takeover
attempts. The following discussion is a general summary of certain provisions of
Webster's Restated Certificate of Incorporation and Bylaws, and a comparison of
those provisions to similar types of provisions in DS Bancor's Amended and
Restated Certificate of Incorporation and Bylaws. The discussion is necessarily
general and, with respect to provisions contained in Webster's Restated
Certificate of Incorporation and Bylaws, reference should be made to the
document in question, each of which is an exhibit to Webster's registration
statement.
DIRECTORS. Certain provisions of Webster's Restated Certificate of
Incorporation and Bylaws will impede changes in majority control of Webster's
Board of Directors. The Restated Certificate of Incorporation provides that the
Board of Directors will be divided into three classes, with directors in each
class elected for three-year staggered terms. The Restated Certificate of
Incorporation further provides that the size of the Board of Directors shall be
within a 7 to 15 range. The Bylaws currently provide that there shall be
eight directors and will be amended to increase the size of the Board to 10 upon
the Merger.
Webster's Restated Certificate of Incorporation provides that a vacancy
occurring in the Board of Directors, including a vacancy created by any increase
in the number of directors, shall be filled for the remainder of the unexpired
term by a majority vote of the directors then in office. Webster's Restated
Certificate of Incorporation provides that a director may be removed only for
cause and then only by the affirmative vote of at least two-thirds of the total
votes eligible to be voted at a duly constituted meeting of shareholders called
for that purpose. The Restated Certificate of Incorporation also provides that
30 days' written notice must be provided to any director or directors whose
removal is to be considered at a shareholders' meeting.
The provisions of DS Bancor's Amended and Restated Certificate of
Incorporation and Bylaws with regard to directors are substantially similar as
those of Webster. The range as to the number of directors is 9 to 16 in DS
Bancor's Amended and Restated Certificate of Incorporation and Bylaws.
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Also, with respect to a shareholder vote on the removal of a director, if there
are one or more Interested Shareholders (defined below), in addition to the two-
thirds shareholder vote, the affirmative vote of not less than a majority of the
voting power of the issued and outstanding shares entitled to vote thereon
(excluding shares held by an Interested Shareholder) is required, and the
written notice to a director of a shareholder meeting at which the removal of
the director will be considered must be given at least 30 but not more than 60
days prior to the meeting.
The Bylaws also impose certain restrictions on the nomination by
shareholders of candidates for election to the Board of Directors or the
proposal by shareholders of business to be acted upon at an annual meeting of
shareholders. Webster's Bylaws provide that to be eligible for nomination as a
director, a nominee must be a resident of the State of Connecticut at the time
of his nomination or, if not then a resident, have been previously a resident
for at least three years. Webster's Bylaws further provide that each director is
required to own not less than 100 shares of Webster Common Stock. Webster's
Bylaws also provide that three consecutive absences from regular meetings of the
Board of Directors, unless excused by a Board resolution, shall automatically
constitute a resignation. DS Bancor's Bylaws provide that after May 31, 1986,
each director is required to own not less than 500 shares of DS Bancor Common
Stock. DS Bancor's Bylaws also provide that no person shall be eligible for
election or re-election as a director after such person reaches the age of 69
years, and that at the next annual meeting, such director will be classified as
an honorary director for the remainder of his term as a director.
CALL OF SPECIAL MEETINGS. Webster's Restated Certificate of Incorporation
contains a provision which provides that a special meeting of shareholders may
be called at any time but only by the chairman of the board, the president or by
the Board of Directors. Shareholders are not authorized to call a special
meeting. DS Bancor's Amended and Restated Certificate of Incorporation is the
same as to special meetings.
SHAREHOLDER ACTION WITHOUT A MEETING. Webster's Restated Certificate of
Incorporation provides that shareholders may act by unanimous written consent.
DS Bancor's Amended and Restated Certificate of Incorporation provides that any
action required or permitted to be taken by shareholders must be taken at a duly
called annual or special meeting and not by any consent in writing.
LIMITATION ON LIABILITY OF DIRECTORS. Both Webster's Restated Certificate
of Incorporation and DS Bancor's Amended and Restated Certificate of
Incorporation provide that no director shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director other than liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for any payment of a dividend or approval of a stock
repurchase that is illegal under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which a director derived an improper
personal benefit. DS Bancor's Amended and Restated Certificate of Incorporation
further provides that any repeal or modification of this provision shall be
prospective only.
CUMULATIVE VOTING. The certificates of incorporation of both Webster and
DS Bancor deny cumulative voting rights in the election of directors.
AUTHORIZED AND OUTSTANDING COMMON STOCK. See "-- Webster Common Stock" as
to authorized and currently outstanding shares of Webster Common Stock. DS
Bancor has 6,000,000 authorized shares of common stock, par value $1.00 per
share, of which 3,037,784 shares were outstanding as of the DS Bancor Record
Date. In addition, as of the DS Bancor Record Date, DS Bancor had outstanding
stock options granted to directors, officers and other employees for 391,801
shares of DS Bancor Common Stock, plus the Option for 564,296 shares of DS
Bancor Common Stock granted to Webster in connection with the Merger.
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AUTHORIZED AND OUTSTANDING SERIAL PREFERRED STOCK. See "-- Series B
Stock," "-- Series A Stock" and "-- Series C Stock" as to the authorized and
currently outstanding shares of serial preferred stock of Webster. DS Bancor's
Amended and Restated Certificate of Incorporation authorizes 2,000,000 shares of
serial preferred stock, no par value, of which no shares have been issued and
are outstanding.
APPROVALS FOR ACQUISITIONS OF CONTROL AND OFFERS TO ACQUIRE CONTROL.
Webster's Restated Certificate of Incorporation prohibits any person (whether an
individual, company or group acting in concert) from acquiring beneficial
ownership of 10% or more of Webster's voting stock, unless the acquisition has
received the prior approval of at least two-thirds of Webster's outstanding
shares of voting stock at a duly called meeting held for such purpose and of all
required federal regulatory authorities. Furthermore, no person may make an
offer to acquire 10% or more of Webster's voting stock without obtaining prior
approval of the offer by at least two-thirds of Webster's Board of Directors or,
alternatively, before the offer is made, obtaining approval of the acquisition
from the OTS. These provisions do not apply to the purchase of shares by
underwriters in connection with a public offering, and the provisions remain
effective only so long as an insured institution is a majority-owned subsidiary
of Webster. Shares acquired in excess of these limitations are not entitled to
vote or take other shareholder action or be counted in determining the total
number of outstanding shares of voting stock in connection with any matter
involving shareholder action. These excess shares are also subject to transfer
to a trustee, selected by Webster, for the sale on the open market or otherwise,
with the expenses of the trustee to be paid out of the proceeds of such sale.
The limitations on offers and purchases do not apply to the Webster ESOP or
other employee benefit plans of Webster.
DS Bancor's Amended and Restated Certificate of Incorporation contains
substantially identical provisions as to approvals for an acquisition of control
of DS Bancor, except that specified state and federal regulatory approvals are
required. DS Bancor's Amended and Restated Certificate of Incorporation does not
contain the limitation discussed above with respect to a majority-owned
subsidiary and does not provide an exception for employee stock purchase plans
or other employee benefit plans. Also, DS Bancor's Amended and Restated
Certificate of Incorporation provides that an offer to acquire control is
subject to (i) the prior approval of the Board of Directors or, alternatively,
(ii) the prior approval of certain federal and state regulatory authorities and
that with respect to an approval pursuant to clause (ii), that the person making
the offer must furnish such filings concurrently to the Board of Directors.
PROCEDURES FOR CERTAIN BUSINESS COMBINATIONS. Webster's Restated
Certificate of Incorporation requires that certain business combinations between
Webster (or any majority-owned subsidiary thereof) and a 10% or more shareholder
or its affiliates or associates (collectively, the "Interested Shareholder")
either (i) be approved by at least 80% of the total number of outstanding shares
of voting stock of Webster, or (ii) be approved by at least two-thirds of
Webster's continuing directors (persons unaffiliated with the Interested
Shareholder and serving prior to the Interested Shareholder becoming such) or
involve consideration per share generally equal to that paid by the Interested
Shareholder when it acquired its block of stock. The types of business
combinations with an Interested Shareholder covered by this provision include:
any merger, consolidation and stock exchange; any sale, lease, exchange,
mortgage, pledge or other transfer of assets other than in the usual and regular
course of business; an issuance of equity securities having an aggregate market
value in excess of 5% of aggregate market value of Webster's outstanding shares;
the adoption of any plan or proposal of liquidation proposed by or on behalf of
an Interested Shareholder; and any reclassification of securities,
recapitalization of Webster or any merger or consolidation of Webster with any
of its subsidiaries or any other transaction which has the effect of increasing
the proportionate ownership interest of the Interested Shareholder. DS Bancor's
Amended and Restated Certificate of Incorporation contains substantially
similar provisions as to business combinations, except that in addition to the
vote described under clause (i), the affirmative vote of the holders of two-
thirds of the voting power of the voting stock is also required (excluding for
the purposes of calculating the affirmative vote and the total number of
outstanding shares, all shares of voting stock beneficially owned by an
Interested Shareholder). Webster's Restated Certificate of Incorporation
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excludes employee stock purchase plans and other employee benefit plans from the
definition of "Interested Shareholder."
ANTI-GREENMAIL. Webster's Restated Certificate of Incorporation requires
approval by a majority of the outstanding voting stock before Webster may
directly or indirectly purchase or otherwise acquire any voting stock
beneficially owned by a holder of 5% percent or more of Webster's voting stock,
if such holder has owned the shares for less than two years. Any shares
beneficially held by such person would be excluded in calculating majority
shareholder approval. This provision would not apply to a pro rata offer made by
Webster to all of its shareholders in compliance with the Exchange Act and the
rules and regulations thereunder or a purchase of voting stock by Webster if the
Board of Directors has determined that the purchase price per share does not
exceed the fair market value of such voting stock. DS Bancor's Amended and
Restated Certificate of Incorporation contains a similar provision, except that
it does not contain the market value exception described above.
CRITERIA FOR EVALUATING OFFERS. Webster's Restated Certificate of
Incorporation provides that the Board of Directors, when evaluating any
acquisition offers, shall give due consideration to all relevant factors,
including, without limitation, the economic effects of acceptance of the offer
on depositors, borrowers and employees of its insured institution subsidiaries
and on the communities in which such subsidiaries operate or are located, as
well as on the ability of such subsidiaries to fulfill the objectives of insured
institutions under applicable federal statutes and regulations. DS Bancor's
Amended and Restated Certificate of Incorporation contains a substantially
identical provision which requires that the Board of Directors consider the
ability of such subsidiaries to fulfill the objectives of insured institutions
under applicable Connecticut statutes and regulations.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to
Webster's Restated Certificate of Incorporation must be approved by at least
two-thirds of Webster's Board of Directors at a duly constituted meeting called
for such purpose and also by the shareholders by the affirmative vote of at
least a majority of the shares entitled to vote thereon at a duly called annual
or special meeting; provided, however, that approval by the affirmative vote of
at least two-thirds of the shares entitled to vote thereon is generally required
for certain provisions. In addition, the provisions regarding certain business
combinations may be amended only by the affirmative vote of at least 80% of the
shares entitled to vote thereon. Webster's Bylaws may be amended by the
affirmative vote of at least two-thirds of the Board of Directors or by
shareholders by at least two-thirds of the total votes eligible to be voted, at
a duly constituted meeting called for such purpose. Amendments to DS Bancor's
Amended and Restated Certificate of Incorporation are subject to substantially
similar provisions as those of Webster's, except that if there are one or more
Interested Shareholders, the provisions regarding certain business combinations
may only be amended by the affirmative vote of both (i) the holders of at least
80% of the total number of shares of voting stock and (ii) the holders of at
least two-thirds of the total number of outstanding shares of voting stock
(excluding for the purpose of calculating both the affirmative vote and the
number of shares outstanding, all shares beneficially owned by an Interested
Shareholder). Amendments to DS Bancor's Bylaws are subject to substantially
similar provisions as Webster's Bylaws, however, if there are at the time one
or more Interested Shareholders, in addition to the two-thirds vote, the
affirmative vote of not less than a majority of the voting power of the issued
and outstanding shares entitled to vote thereon is required (excluding shares
held by an Interested Shareholder).
APPLICABLE LAW
The following discussion is a general summary of certain provisions of
Delaware, Connecticut and federal statutory and regulatory provisions that may
be deemed to have an "anti-takeover" effect.
DELAWARE TAKEOVER STATUTE. Section 203 of the Delaware General Corporation
Law (the "Delaware Takeover Statute") applies to Delaware corporations with a
class of voting stock listed on
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a national securities exchange, authorized for quotation on an inter-dealer
quotation system, or held of record by 2,000 or more persons, and restricts
transactions which may be entered into by such a corporation and certain of its
shareholders. The Delaware Takeover Statute provides, in essence, that a
shareholder acquiring more than 15% of the outstanding voting shares of a
corporation subject to the statute (an "Interested Person") but less than 85% of
such shares may not engage in certain "Business Combinations" (as defined) with
the corporation for a period of three years subsequent to the date on which the
shareholder became an Interested Person unless (i) prior to such date the
corporation's board of directors approved either the Business Combination or the
transaction in which the shareholder became an Interested Person or (ii) the
Business Combination is approved by the corporation's board of directors and
authorized by a vote of at least two-thirds of the outstanding voting stock of
the corporation not owned by the Interested Person.
The Delaware Takeover Statute defines the term "Business Combination" to
include a wide variety of transactions with or caused by an Interested Person in
which the Interested Person receives or could receive a benefit on other than a
pro rata basis with other shareholders, including mergers, certain asset sales,
certain issuances of additional shares to the Interested Person, transactions
with the corporation which increase the proportionate interest of the Interested
Person or transactions in which the Interested Person receives certain other
benefits.
CONNECTICUT REGULATORY RESTRICTIONS ON ACQUISITIONS OF STOCK. Connecticut
banking statutes prohibit any person from directly or indirectly offering to
acquire or acquiring voting stock of a Connecticut-chartered savings bank (such
as Derby), a federal savings bank having its principal office in Connecticut
(such as Webster Bank) or a holding company of any such entity (such as Webster
or DS Bancor), that would result in such person becoming, directly or
indirectly, the beneficial owner of more than 10% of any class of voting stock
of such entity unless such person had previously filed an acquisition statement
with the Connecticut Commissioner and such offer or acquisition has not been
disapproved by the Connecticut Commissioner.
FEDERAL LAW. Federal law provides that, subject to certain exemptions, no
person acting directly or indirectly or through or in concert with one or more
other persons may acquire "control" of an insured institution or holding company
thereof, without giving at least 60 days prior written notice providing
specified information to the appropriate federal banking agency (i.e., the OTS
in the case of Webster and Webster Bank and the FDIC in the case of DS Bancor
and Derby). "Control" is defined for this purpose as the power, directly or
indirectly, to direct the management or policies of an insured institution or to
vote 25 percent or more of any class of voting securities of an insured
institution. Control is presumed to exist where the acquiring party has voting
control of at least 10 percent of any class of the institution's voting
securities which is registered under Section 12 of the Exchange Act and is
actively traded. The term "actively traded" is defined in the regulation to mean
securities that are either listed on a securities exchange or quoted on The
Nasdaq National Market. The OTS or FDIC may prohibit the acquisition of control
if such agency finds, among other things, that (i) the acquisition would result
in a monopoly or substantially lessen competition; (ii) the financial condition
of the acquiring person might jeopardize the financial stability of the
institution; or (iii) the competence, experience or integrity of any acquiring
person or any of the proposed management personnel indicates that it would not
be in the interest of the depositors or the public to permit the acquisition of
control by such person.
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ADJOURNMENT OF DS BANCOR AND WEBSTER MEETINGS
The holders of DS Bancor Common Stock will be asked to approve, if
necessary, the adjournment of the DS Bancor Meeting to solicit further votes in
favor of the Merger Agreement. The proxies of DS Bancor shareholders voting
against the Merger Agreement may not be used by management to vote in favor of
an adjournment pursuant to its discretionary authority.
The holders of Webster Common Stock will be asked to approve, if necessary,
the adjournment of the Webster Meeting to solicit further votes in favor of the
issuance of additional Webster Common Stock in connection with the Merger
Agreement. The proxies of Webster shareholders voting against the issuance may
not be used to vote in favor of an adjournment pursuant to its discretionary
authority.
SHAREHOLDER PROPOSALS
Any proposal which a Webster stockholder wishes to have included in the
proxy materials of Webster with respect to Webster's 1997 Annual Meeting must be
received by Webster at Webster's principal executive offices at Webster Plaza,
Waterbury, Connecticut 06702 no later than November 24, 1996.
If the Merger Agreement is approved and adopted and the Merger is
consummated, there will not be an annual meeting of DS Bancor's shareholders in
1997. However, if the Merger is not consummated, DS Bancor anticipates that its
1997 annual meeting will be held in April 1997. Therefore, any proposal intended
to be presented by a DS Bancor shareholder for inclusion in DS Bancor's proxy
statement for its 1997 annual meeting must be received by DS Bancor at its
principal executive offices no later than November 29, 1996.
OTHER MATTERS
It is not expected that any matters other than those described in this
Joint Proxy Statement/Prospectus will be brought before the DS Bancor Meeting or
the Webster Meeting. If any other matters are presented, however, it is the
intention of the persons named in the DS Bancor proxy and the Webster proxy to
vote such proxy in accordance with the determination of a majority of the Board
of Directors of DS Bancor and Webster, respectively, including, without
limitation, a motion to adjourn or postpone the DS Bancor Meeting to another
time and/or place for the purpose of soliciting additional proxies in order to
approve the Merger Agreement or otherwise and a motion to adjourn or postpone
the Webster Meeting to another time and/or place for the purpose of soliciting
additional proxies in order to approve the issuance of additional Webster Common
Stock in connection with the Merger Agreement or otherwise.
EXPERTS
The consolidated financial statements of Webster at December 31, 1995 and
1994, and for each of the years in the three year period ended December 31,
1995, incorporated by reference into the Registration Statement, have been so
incorporated in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated herein by reference and upon the
authority of said firm as experts in accounting and auditing. The report refers
to the fact that Webster changed its method of accounting for mortgage servicing
rights in 1995 and income taxes in 1993.
The consolidated financial statements of DS Bancor at December 31, 1995 and
1994, and for each of the years in the three year period ended December 31,
1995, incorporated by reference into this Joint Proxy Statement/Prospectus, have
been so incorporated in reliance upon the report of Friedberg, Smith & Co.,
P.C., independent certified public accountants, incorporated herein by reference
and upon the authority of that firm as experts in accounting and auditing.
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LEGAL MATTERS
The validity of the Webster Common Stock to be issued in the Merger has
been passed upon by Hogan & Hartson L.L.P., Washington, D.C. Fried, Frank,
Harris, Shriver & Jacobson and Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
have passed upon certain tax matters in connection with the Merger.
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APPENDIX A
October 7, 1996
The Board of Directors of
DS Bancor, Inc.
33 Elizabeth Street
Derby, CT 06418
Dear Lady and Gentlemen:
You have requested our opinion as to the fairness, from a financial
point of view, of the consideration to be received by shareholders of DS Bancor,
Inc. (the "Company") from Webster Financial Corporation ("Webster") pursuant to
the Agreement and Plan of Merger among Webster Financial Corporation, Webster
Acquisition Corp., and DS Bancor, Inc. dated as of October 7, 1996 (the
"Agreement"). Pursuant to the Agreement, each share of Common Stock, par value
$1.00 per share, of DS Bancor ("DS Bancor Common Stock") shall be converted into
and exchangeable for that number of shares of Webster Common Stock, par value
$0.01 per share ("Webster Common Stock") determined by dividing $43.00 by the
Base Period Trading Price (as defined in the Agreement) (the "Exchange Ratio"),
provided, however, if the Base Period Trading Price shall be greater than
$38.50, the Exchange Ratio shall be 1.11688; provided, further, however, if the
Base Period Trading Price shall be less than $31.50, the Exchange Ratio shall be
1.36508; provided, further, if the Base Period Trading Price shall be less than
$28.00, the Agreement may be terminated by the Company unless Webster elects
that the Exchange Ratio shall be equal to the number resulting from dividing
$38.22 by the Base Period Trading Price (the "Merger Consideration").
Alex. Brown & Sons Incorporated, as a customary part of its investment
banking business, is engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings, private
placements and valuations for estate, corporate and other purposes. We have
acted as financial advisor to the Board of Directors of the Company in
connection with the transactions described above and will receive a fee for our
services, a significant portion of which is contingent upon the consummation of
the DS Bancor, Inc. transaction contemplated by the Agreement. Alex. Brown &
Sons Incorporated regularly publishes research reports regarding the financial
services industry and the businesses and securities of publicly owned companies
in that industry.
In connection with this opinion, we have reviewed certain publicly
available financial information concerning the Company and Webster and certain
internal financial analyses and other information furnished to us by the Company
and Webster. We have also held discussions with members of the senior management
of the Company and Webster regarding the business and prospects of the Company
and Webster, respectively. In addition, we have (i) reviewed the reported price
and trading activity for DS Bancor Common Stock and Webster Common Stock, (ii)
compared
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DS Bancor, Inc.
October 7, 1996
Page 2
certain financial and stock market information for the Company and Webster,
respectively, with similar information for certain comparable companies whose
securities are publicly traded, (iii) reviewed the Agreement and compared the
financial terms of the Agreement with those of certain recent business
combinations of other savings banks and commercial banks which we deemed
comparable in whole or in part and (iv) performed such other studies and
analyses and considered such other factors as we deemed appropriate.
We have not independently verified the information described above and
for purposes of this opinion have assumed the accuracy, completeness and
fairness thereof. With respect to information relating to the prospects of the
Company and Webster, we have assumed that such information reflects the best
currently available estimates and judgments of the managements of the Company
and Webster, respectively, as to the likely future financial performance of the
Company and Webster. In addition, we have not made an independent evaluation or
appraisal of the assets or liabilities of the Company or Webster, nor have we
been furnished with any such evaluation or appraisal. Our opinion is based on
market, economic and other conditions as they exist and can be evaluated as of
the date of this letter.
Based upon and subject to the foregoing, it is our opinion that, as of
the date of this letter, the Merger Consideration is fair, from a financial
point of view, to the holders of DS Bancor Common Stock.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
By:/s/ Alex. Brown & Sons Incorporated
--------------------------------------------
Donald W. Delson
Managing Director
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APPENDIX B
December __, 1996
Board of Directors
Webster Financial Corporation
Webster Plaza, 145 Bank Street
Waterbury, CT 06720
Members of the Board:
Webster Financial Corporation (the "Company") and DS Bancor, Inc. (the
"Subject Company") entered into an agreement dated as of October 7, 1996 (the
"Agreement"), pursuant to which the Subject Company will be merged with and into
the Company in a transaction (the "Merger") in which each outstanding share of
the Subject Company's common stock (the "Subject Company Shares") will be
converted, as more fully described in the Agreement, into the right to receive a
number of shares of common stock of the Company ("Company Shares") equal to the
Exchange Ratio (as determined pursuant to the Agreement). The terms and
conditions of the Merger are more fully set forth in the Agreement and certain
related agreements.
You have asked us whether, in our opinion, the Exchange Ratio is fair to
the Company from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports to Shareholders, the Company's
Annual Reports on Form 10-K and related financial information for the
three fiscal years ended December 31, 1995 and the Company's Quarterly
Reports on Form 10-Q and related unaudited financial information for
each of the three months ended September 30, 1996, June 30, 1996 and
March 31, 1996;
(2) Reviewed the Subject Company's Annual Reports to Shareholders, the
Subject Company's Annual Reports on Form 10-K and related financial
information for the three fiscal years ended December 31, 1995 and the
Company's Quarterly Reports on Form 10-Q and related unaudited
financial information for each of the three months ended September 30,
1996, June 30, 1996 and March 31, 1996;
(3) Reviewed certain limited financial information, including financial
forecasts and assumptions regarding projected cost savings resulting
from the Merger, relating to the respective financial condition,
businesses, earnings, assets and prospects of the Company and the
Subject Company relating to the future financial performance of the
Company following the Merger, furnished to us by senior management of
the Company and of the Subject Company;
(4) Conducted certain limited discussions with members of senior
management of the Company and of the Subject Company concerning the
respective financial condition, businesses, earnings, assets and
prospects of the Company and the Subject Company and their respective
view as to the future financial performance of the Company, the
Subject Company and the combined entity, as the case may be, following
the Merger;
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(5) Reviewed the historical market prices and trading activity for the
Subject Company Shares and the Company Shares and compared them,
respectively, with those of certain publicly traded companies which we
deemed to be relevant;
(6) Compared the respective results of operations of the Company and the
Subject Company with those of certain publicly traded companies which
we deemed to be relevant;
(7) Compared the financial terms of the Merger contemplated by the
Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(8) Reviewed the amount and timing of the projected cost savings for the
Subject Company and the Company following the Merger as prepared, and
discussed with us, by senior management of the Company and the Subject
Company;
(9) Considered, based upon information provided by the senior management
of the Company and the Subject Company, the pro forma effects of the
Merger on the Company's capitalization ratios and projected earnings,
book and tangible book value per share;
(10) Reviewed the Agreement, the Option Agreement and the Stockholder
Agreement; and
(11) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary to the rendering of this opinion.
In preparing our opinion, we have assumed and relied upon the accuracy and
completeness of all financial and other information supplied or otherwise made
available to us for purposes of this opinion, and we have not independently
verified such information or undertaken an independent evaluation or appraisal
of the assets or liabilities of the Company or the Subject Company nor have we
been furnished any such evaluation or appraisal. We are not experts in the
evaluation of allowance for loan losses, and we have not made an independent
evaluation of the adequacy of the allowances for loan losses of the Company or
the Subject Company nor have we reviewed any individual credit files, and we
have assumed that the aggregate allowance for loan losses of the Company and the
Subject Company is adequate to cover such losses and will be adequate on a pro
forma basis for the combined entity. We have also assumed and relied upon the
senior management of the Company referred to above as to the reasonableness and
achievability of the financial and operating forecasts (and the assumptions and
bases therefore) provided to, and discussed with, us by the Company and the
Subject Company. In that regard, we have assumed with your consent that such
information, including, without limitation, financial forecasts, projected cost
savings and operating synergies resulting from the Merger and projections
regarding underperforming and nonperforming assets, net charge-offs, and
adequacy of reserves, reflect the best currently available estimates and
judgment of the senior management of the Company and the Subject Company as to
the expected future financial performance of the Company, the Subject Company,
and the combined entity, as the case may be. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
Our opinion has been rendered without regard to the necessity for, or level
of, any restrictions, obligations, undertakings or divestitures which may be
imposed or required in the course of obtaining regulatory approvals for the
merger.
We have been retained by the Board of Directors of the Company as an
independent contractor to act as financial advisor to the Company with respect
to the Merger and will receive a fee for our services. We have within the past
two years provided financial advisory, investment
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banking and other services to the Company and received customary fees for the
rendering of such services. In addition, in the ordinary course of our
securities business, we may actively trade debt and/or equity securities of the
Company and the Subject Company and their respective affiliates for our own
account and the accounts of our customers, and we therefore may from time to
time hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of the Company and does
not constitute, nor shall it be deemed to constitute, a recommendation to any
stockholder of the Company as to how such stockholder should vote at any
stockholder meeting of the Company that may be held in connection with the
Merger. This opinion is directed only to the Exchange Ratio.
On the basis of, and subject to the foregoing, we are of the opinion that
the Exchange Ratio, taken as a whole, is fair to the Company from a financial
point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By:/s/ Michael F. Barry
----------------------------
Director - Merrill Lynch & Co.
Investment Banking Group
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
------------------------------------------
Section 145 of the Delaware General Corporation Law sets forth certain
circumstances under which directors, officers, employees and agents may be
indemnified against liability that they may incur in their capacity as such.
Section 145 of the Delaware General Corporation Law, which is filed as Exhibit
99.1 to this Registration Statement, is incorporated herein by reference.
Article Nine of the Registrant's By-laws, entitled "Indemnification,"
provides for indemnification of the Registrant's directors, officers, employees
and agents under certain circumstances. Article Nine of the Registrant's By-
laws, which are filed as Exhibit 3.6 to this Registration Statement, is
incorporated herein by reference.
The Registrant also has the power to purchase and maintain insurance on
behalf of its directors and officers. The Registrant has in effect a policy of
liability insurance covering its directors and officers, the effect of which is
to reimburse the directors and officers of the Registrant against certain
damages and expenses resulting from certain claims made against them caused by
their negligent act, error or omission.
The foregoing indemnity and insurance provisions have the effect of
reducing directors' and officers' exposure to personal liability for actions
taken in connection with their respective positions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
------------------------------------------
(A) EXHIBITS.
2.1 Agreement and Plan of Merger, dated as of October 7, 1996, among the
Registrant, Webster Acquisition Corp. and DS Bancor, Inc. ("DS
Bancor").*
2.2 Option Agreement, dated as of October 7, 1996, between DS Bancor and
the Registrant.*
2.3 Stockholder Agreement, dated as of October 7, 1996, by and among the
Registrant and the stockholders of DS Bancor identified therein.*
3.1 Restated Certificate of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3(a) to the Registrant's Form 10-K
filed on March 27, 1987).
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3.2 Certificate of Amendment of Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 4.2 of the Registrant's
Registration Statement on Form S-2, Registration No. 33-54980, filed
on November 25, 1992).
3.3 Certificate of Designation for the Series A Cumulative Perpetual
Preferred Stock (incorporated herein by reference from the
Registrant's Form 8-K filed on October 19, 1992).
3.4 Certificate of Designation for the Series B 7-1/2% Cumulative
Convertible Preferred Stock (incorporated herein by reference to
Exhibit 4.4 to Pre-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form S-2, Registration No. 33-54980, filed
on December 22, 1992).
3.5 Certificate of Designation for the Series C Participating Preferred
Stock (incorporated herein by reference to Exhibit 2 to the
Registrant's Form 8-K filed on February 12, 1996).
3.6 Bylaws of the Registrant, as amended to date (incorporated herein by
reference to Exhibit 3.5 to the Registrant's Annual Report on Form 10-
K for the year ended December 31, 1994).
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the securities
registered hereunder, including the consent of that firm.*
8.1 Form of opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
as to certain tax matters.
8.2 Form of opinion of Fried, Frank, Harris, Shriver & Jacobson as to
certain tax matters.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of
Exhibit 5).*
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included as part of Exhibit 8.1)
23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Friedberg, Smith & Co., P.C.
23.6 Consent of Alex. Brown & Sons Incorporated.*
23.7 Consent of Merrill Lynch & Co.
24 Power of attorney (incorporated herein by reference from the signature
page of the Registration Statement on Form S-4 filed by the Registrant
on November 8, 1996).
99.1 Section 145 of the Delaware General Corporation Law.*
99.2 Form of DS Bancor proxy card.*
99.3 Form of Webster proxy card.*
_______________
* Previously filed.
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<PAGE>
ITEM 22. UNDERTAKINGS.
------------
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section
15(d) of the Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(d) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports
to meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415 ((S)
230.415 of this chapter), will be filed as a part of an
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<PAGE>
amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(e) The undertaking concerning indemnification is included as part of the
response to Item 20.
(f) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of
responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in the registration statement when it became
effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waterbury, State of
Connecticut, on the 16th day of December, 1996.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
--------------------------------
James C. Smith
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 16th day of December, 1996.
Signature Title
- --------- -----
/s/James C. Smith Chairman and Chief Executive Officer
- ----------------------------
James C. Smith (Principal Executive Officer)
/s/ John V. Brennan Executive Vice President, Chief
- ----------------------------
John V. Brennan Financial Officer and Treasurer
(Principal Financial Officer)
/s/ Peter J. Swiatek Controller
- ----------------------------
Peter J. Swiatek (Principal Accounting Officer)
/s/ John V. Brennan* Director
- ----------------------------
Joel S. Becker
/s/ John V. Brennan* Director
- ----------------------------
O. Joseph Bizzozero, Jr.
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<PAGE>
/s/ John V. Brennan* Director
- ---------------------
John J. Crawford
/s/ John V. Brennan* Director
- ---------------------
Robert A. Finkenzeller
/s/ John V. Brennan* Director
- ---------------------
Walter R. Griffin
/s/ John V. Brennan* Director
- ---------------------
J. Gregory Hickey
/s/ John V. Brennan* Director
- ---------------------
C. Michael Jacobi
/s/ John V. Brennan* Director
- ---------------------
Harold W. Smith
/s/ John V. Brennan* Director
- ---------------------
Sr. Marguerite F. Waite, C.S.J.
*As power of attorney
II-6
<PAGE>
EXHIBIT INDEX
Exhibit
- ------- Exhibit
No. -------
---
2.1 Agreement and Plan of Merger, dated as of October 7, 1996, among the
Registrant, Webster Acquisition Corp. and DS Bancor, Inc. ("DS Bancor").*
2.2 Option Agreement, dated as of October 7, 1996, between DS Bancor and the
Registrant.*
2.3 Stockholder Agreement, dated as of October 7, 1996, by and among the
Registrant and the stockholders of DS Bancor identified therein.*
3.1 Restated Certificate of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3(a) to the Registrant's Form 10-K filed
on March 27, 1987).
3.2 Certificate of Amendment of Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 4.2 of the Registrant's
Registration Statement on Form S-2, Registration No. 33-54980, filed on
November 25, 1992).
3.3 Certificate of Designation for the Series A Cumulative Perpetual
Preferred Stock (incorporated herein by reference from the Registrant's
Form 8-K filed on October 19, 1992).
3.4 Certificate of Designation for the Series B 7-1/2% Cumulative Convertible
Preferred Stock (incorporated herein by reference to Exhibit 4.4 to Pre-
Effective Amendment No. 2 to the Registrant's Registration Statement on
Form S-2, Registration No. 33-54980, filed on December 22, 1992).
3.5 Certificate of Designation for the Series C Participating Preferred Stock
(incorporated herein by reference to Exhibit 2 to the Registrant's Form
8-K filed on February 12, 1996).
3.6 Bylaws of the Registrant, as amended to date (incorporated herein by
reference to Exhibit 3.5 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994).
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the securities
registered hereunder, including the consent of that firm.*
8.1 Form of opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. as
to certain tax matters.
8.2 Form of opinion of Fried, Frank, Harris, Shriver & Jacobson as to certain
tax matters.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5).*
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (included
as part of Exhibit 8.1).
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<PAGE>
23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Friedberg, Smith & Co., P.C.
23.6 Consent of Alex. Brown & Sons Incorporated.*
23.7 Consent of Merrill Lynch & Co.
24 Power of attorney (incorporated herein by reference from the signature
page of the Registration Statement on Form S-4 filed by the Registrant on
November 8, 1996).
99.1 Section 145 of the Delaware General Corporation Law.*
99.2 Form of DS Bancor proxy card.*
99.3 Form of Webster proxy card.*
_____________________________
* Previously filed.
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<PAGE>
Exhibit 8.1
-----------
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
RE: FEDERAL INCOME TAX OPINION
--------------------------
Dear Sirs:
You have requested our opinion as to whether the proposed merger (the
"Merger") of Webster Acquisition Corp. ("Merger Sub") into DS Bancor, Inc. ("DS
Bancor"), either alone or in conjunction with the subsequent merger (the
"Subsidiary Merger") of DS Bancor into Webster Financial Corporation
("Webster"), will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"). You have also requested our opinion as to whether the
proposed merger (the "Bank Merger") of Derby Savings Bank ("Derby") into Webster
Bank ("Webster Bank"), which will occur immediately after the Subsidiary Merger,
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368 of the Code.
In reaching the opinions expressed below, we have reviewed and relied
upon the following (collectively, the "Documents"): (i) the Agreement and Plan
of Merger, dated October 7, 1996, among Webster, Merger Sub, and DS Bancor; (ii)
the Bank Merger Agreement, dated [ ], between Webster Bank and
Derby; (iii) the Stockholder Agreement, dated October 7, 1996, among Webster and
13 officers and directors of DS Bancor and Derby; (iv) the Joint Proxy
Statement/Prospectus ("Proxy Statement/Prospectus") contained in the
Registration Statement on Form S-4 ("Registration Statement") of DS Bancor and
Webster, dated [ ]; (v) the Officers' Certificates, dated as of the
date hereof, executed by officers of DS Bancor and Webster; and (vi) such other
materials and information as we have deemed appropriate.
The opinions expressed below are based upon existing laws,
regulations, Internal Revenue Service positions, and judicial decisions, any of
which may be changed at any time with retroactive effect. We assume no
obligation to modify or supplement our opinions if, after the date hereof, any
such laws, regulations, positions, or decisions change or we become aware of any
facts that might change our opinions.
Based upon and subject to the foregoing, and assuming that the Merger,
the Subsidiary Merger, and the Bank Merger occur in accordance with all the
terms of, and as described in, the Documents, it is our opinion that:
1. The Merger, either alone or in conjunction with the Subsidiary
Merger, will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368 of the Code.
2. The Bank Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368 of the
Code.
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<PAGE>
Webster Financial Corporation
Page 2
The opinions expressed herein are solely for the benefit of Webster and
Merger Sub and may not be relied upon in any manner or for any purpose by any
other person or entity, or quoted in whole or in part, without our prior written
consent except as noted below.
We hereby consent to the inclusion of this opinion as Exhibit 8.1 to the
Registration Statement and to the use of our name in the Proxy
Statement/Prospectus under the caption "Legal Matters."
Very truly yours,
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<PAGE>
Exhibit 8.2
-----------
FRIED, FRANK, HARRIS SHRIVER & JACOBSON
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004-1980
DS Bancor, Inc.
33 Elizabeth Street
Derby, Connecticut 06418
RE: U.S. FEDERAL INCOME TAX OPINION
-------------------------------
Dear Sirs:
You have requested our opinion as to whether the proposed merger (the
"Merger") of Webster Acquisition Corp. ("Merger Sub") into DS Bancor, Inc. ("DS
Bancor"), either alone or in conjunction with the subsequent merger (the
"Subsidiary Merger") of DS Bancor into Webster Financial Corporation
("Webster"), will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"). You have also requested our opinion as to whether the
proposed merger (the "Bank Merger") of Derby Savings Bank ("Derby") into Webster
Bank ("Webster Bank"), which will occur immediately after the Subsidiary Merger,
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368 of the Code.
In reaching the opinions expressed below, we have reviewed and relied
upon the following (collectively, the "Documents"): (i) the Agreement and Plan
of Merger, dated October 7, 1996, among Webster, Merger Sub, and DS Bancor; (ii)
the Bank Merger Agreement, dated [ ], between Webster Bank and Derby;
(iii) the Stockholder Agreement, dated October 7, 1996, among Webster and 13
officers and directors of DS Bancor and Derby; (iv) the Joint Proxy
Statement/Prospectus of DS Bancor and Webster, dated [ ]; (v) the Officers'
Certificates, dated as of the date hereof, executed by officers of DS Bancor and
Webster; and (vi) such other materials and information as we have deemed
appropriate.
The opinions expressed below are based upon existing laws,
regulations, Internal Revenue Service positions, and judicial decisions, any of
which may be changed at any time with retroactive effect. We assume no
obligation to modify or supplement our opinions if, after the date hereof, any
such laws, regulations, positions, or decisions change or we become aware of any
facts that might change our opinions.
Based upon and subject to the foregoing, and assuming that the Merger,
the Subsidiary Merger, and the Bank Merger occur in accordance with all the
terms of, and as described in, the Documents, it is our opinion that:
1. The Merger, either alone or in conjunction with the Subsidiary
Merger, will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368 of the Code.
2. The Bank Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368 of the
Code.
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<PAGE>
DS Bancor, Inc.
Page 2
The opinions expressed herein are solely for the benefit of DS Bancor and
may not be relied upon in any manner or for any purpose by any other person or
entity, or quoted in whole or in part, without our prior written consent.
Very truly yours,
E-4
<PAGE>
Exhibit 23.3
------------
CONSENT OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
---------------------------------------------------
We hereby consent to the references to our firm in, and the inclusion
of our opinion as to certain tax matters as an Exhibit to, the Joint Proxy
Statement/Prospectus which is part of the Registration Statement filed by
Webster Financial Corporation on Form S-4 with the Securities and Exchange
Commission with respect to the proposed merger of Webster Acquisition Corp. into
DS Bancor. In giving this consent, we do not hereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended.
Fried, Frank, Harris, Shriver & Jacobson
By: /s/ Richard A. Wolfe
---------------------------------------
Richard A. Wolfe
December 16, 1996
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<PAGE>
Exhibit 23.4
------------
Consent of Independent Auditors
-------------------------------
The Board of Directors
Webster Financial Corporation:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Joint Proxy
Statement/Prospectus. Our report refers to changes in the methods of accounting
for mortgage servicing rights in 1995 and income taxes in 1993.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
December 16, 1996
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<PAGE>
Exhibit 23.5
------------
Consent of Independent Auditors
-------------------------------
The Board of Directors
DS Bancor, Inc.
We consent to the use of our reports, incorporated herein by reference, on the
consolidated statements of position of DS Bancor, Inc. and Subsidiary as of
December 31, 1995 and 1994 and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 1995, and to the reference to our firm under the
heading "Experts" in the Joint Proxy Statement/Prospectus of Webster Financial
Corporation and DS Bancor, Inc. included in the Registration Statement on Form
S-4 filed by Webster Financial Corporation.
/s/ Friedberg, Smith & Co., P.C.
Bridgeport, Connecticut
December 16, 1996
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<PAGE>
Exhibit 23.7
------------
CONSENT OF MERRILL LYNCH
We hereby consent to the use of our opinion letter dated December ___, 1996
to the Board of Directors of Webster Financial Corporation included as Appendix
B to the Proxy Statement which forms a part of the Registration Statement on
From S-4 relating to the proposed merger of DS Bancor, Inc. with and into
Webster Financial Corporation and to the references to such opinion in such
Proxy Statement under the caption "Opinion of Webster Financial Advisor". In
giving such consent, we do not admit and we hereby disclaim that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Michael F. Barry
--------------------------------
Michael F. Barry
Director-Merrill Lynch & Co.
Investment Banking Group
December 16, 1996
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