As filed with the Securities and Exchange Commission on November 8, 1996
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
Webster Financial Corporation
(Exact name of registrant as specified in its charter)
Delaware 6712 06-1187536
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
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:
<TABLE>
<S> <C>
Stuart G. Stein, Esq. Stanford N. Goldman, Jr., Esq.
Hogan & Hartson L.L.P. Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
555 Thirteenth Street, N.W. One Financial Center
Washington, D.C. 20004 Boston, MA 02111
(202) 637-8575 (617) 542-6000
</TABLE>
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.
--------------------
Calculation of Registration Fee
<TABLE>
<CAPTION>
=================================================================================================
Proposed Amount
securities to be Amount to be Proposed maximum maximum aggregate of registration
registered registered price per unit offering price fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par 4,681,658 $41.125* $192,533,185* $58,343.39*
value $.01 per share
=================================================================================================
</TABLE>
* Estimated pursuant to Rule 457(f)(1) and Rule 457(c) under the Securities
Act of 1933 based upon the average of the high and low prices for shares of
common stock of DS Bancor, Inc. as reported on The Nasdaq National Market
calculated on the basis of November 6, 1996 and the exchange ratio
prescribed by the Agreement and Plan of Merger.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
DS BANCOR, INC.
33 ELIZABETH STREET
DERBY, CONNECTICUT 06418
_____________ ___, 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
_____________ __, 1997, at ___ a.m. at ______________________________________,
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 the 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
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.
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
______________, 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
_______________, 1997, at ____a.m. at ________________________________________,
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, withplus 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
_________ __, 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
____________ ___, 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
___________ __, 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
____________ __, 1997, at ___ a.m. at _________________________________,
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., Inc. ("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, 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
<PAGE>
COMPLETE, DATE AND SIGN THE 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.
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
__________ ___, 1997
-------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Webster
Meeting") of Webster Financial Corporation ("Webster") will be held on
_______________, 1997, at _____a.m. at ________________________________________,
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
_________ __, 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
____________ __, 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 ____________ ___, 1997, at ___ a.m. at
______________________________________________, Connecticut, and to the special
meeting of shareholders of Webster (the "Webster Meeting") to be held on
________________ ___, 1997, at ____ a.m. at
___________________________________________, 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 ____________ ___, 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
-1-
<PAGE>
additional shares with the Securities and Exchange Commission ("SEC") and seek
further shareholder approval.
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
____________ ___, 1996 (the most recent practicable date prior to the printing
of this Joint Proxy Statement/Prospectus) of $____*____, the Exchange Ratio
would be _________*_________. 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 the 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 ("BIF"), THE SAVINGS
ASSOCIATION INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENTAL AGENCY.
- ----------
* Data/information to be calculated/provided immediately prior to effectiveness
of Registration Statement.
-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 herein
defined) 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 (203) 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 _______________ __, 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 Reportss on Form 10-Q
for the quarterss ended March 31, 1996, June 30, 1996 and September 30, 1996;
and (iii) Webster's Current Report on Form 8-K filed with the SEC on October 9,
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
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<PAGE>
" DESCRIPTION OF WEBSTER CAPITAL STOCK AND COMPARISON OF SHAREHOLDER RIGHTS."
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 ________________ [DATE FIVE BUSINESS DAYS PRIOR TO
THE MEETINGS].
-5-
<PAGE>
TABLE OF CONTENTS
Page
Available Information .....................................................
Incorporation of Certain Documents
by Reference .........................................................
Merger Summary ............................................................
The Parties ..........................................................
The Merger ...........................................................
Comparison of Shareholder Rights .....................................
Market Prices of Common Stock ........................................
Comparative Per Share Data ...........................................
Summary Financial and Other
Data ............................................................
Risk Factors ..............................................................
Growth through Acquisitions ..........................................
Legislative and General Regulatory
Developments ....................................................
Sources of Funds for Cash Dividends ..................................
Effect of Interest Rate Fluctuations .................................
DS Bancor Meeting .........................................................
Matters to be Considered at the
DS Bancor Meeting ...............................................
Record Date and Voting ...............................................
Vote Required; Revocability of
Proxies .........................................................
Solicitation of Proxies ..............................................
Webster Meeting ...........................................................
Matters to be Considered at the
Webster Meeting .................................................
Record Date and Voting ...............................................
Vote Required; Revocability of
Proxies .........................................................
Solicitation of Proxies ..............................................
The Merger ................................................................
The Parties ..........................................................
Background of the Merger .............................................
Recommendation of the DS Bancor Board
of Directors and Reasons for
the Merger.......................................................
Recommendation of the Webster Board of
Directors and Reasons for the
Issuance.........................................................
Purpose and Effects of the Merger ....................................
Structure ............................................................
Exchange Ratio .......................................................
Regulatory Approvals .................................................
Conditions to the Merger .............................................
Conduct of Business Pending
the Merger ......................................................
Third Party Proposals ................................................
Expenses; Breakup Fee ................................................
Opinion of DS Bancor Financial Advisor ...............................
Opinion of Webster Financial Advisor .................................
Certain Provisions of the Merger
Agreement .......................................................
Termination and Amendment of
the Merger Agreement ............................................
Certain Federal Income Tax
Consequences ....................................................
Accounting Treatment .................................................
Resales of Webster Common Stock
Received in the Merger ..........................................
No Appraisal Rights ..................................................
Interests of Certain Persons in
the Merger - Arrangements with
and Payments to DS Bancor .......................................
Directors and Executive Officers.................................
Indemnification ......................................................
Options ..............................................................
Option Agreement .....................................................
Amendment to Webster's Restated Certificate
of Incorporation .....................................................
Pro Forma Combined Financial
Statements............................................................
Market Prices and Dividends................................................
Webster Common Stock .................................................
DS Bancor Common Stock ...............................................
Description of Webster Capital Stock and
Comparison of Shareholder Rights .....................................
Webster Common Stock .................................................
Series B Stock .......................................................
Series A Stock .......................................................
Series C Stock .......................................................
Senior Notes .........................................................
Certificate of Incorporation and Bylaw
Provisions ......................................................
Applicable Law .......................................................
Adjournment of DS Bancor and Webster
Meetings .............................................................
Shareholder Proposals .....................................................
Other Matters .............................................................
Experts ...................................................................
Legal Matters .............................................................
Appendix A
Opinion of Alex. Brown & Sons
Incorporated .........................................................
Appendix B
Opinion of Merrill Lynch & Co. .......................................
-6-
<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 Shelton into Webster, with Webster being the surviving holding
company, and (ii) Derby will be merged into Webster Bank (the "Bank Merger"),
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<PAGE>
with 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." See "The MERGER -- Exchange Ratio." 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. 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 $__*__ 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 ____________ ___, 1996 (the
most recent practicable date prior to the date of this Joint Proxy
Statement/Prospectus), the Exchange Ratio would be ___*___. 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 ________ shares of DS Bancor Common Stock outstanding on ___________ ___,
1996 and the Exchange Ratio of __*__, Webster would issue up to ______*______
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 _____*_____ existing stock options held by directors,
officers and employees of DS Bancor.
- ----------
* Data/information to be calculated/provided immediately prior to
effectiveness of Registration Statement.
-8-
<PAGE>
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."
DS Bancor Meeting. The DS Bancor Meeting will be held on __________ ___,
1997 at ______a.m. at __________________________________, Connecticut, at which
time the holders of record of DS Bancor Common Stock at the close of business on
_______________ __, 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 ___*___ shares of DS Bancor Common Stock
(excluding all stock options) or approximately _*_% 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 _________ __, 1997, at
______a.m. at ________________________, Connecticut, at which time the holders
of record of Webster Common Stock at the close of business on
___________________, 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 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
- ----------
* Data/information to be calculated/provided immediately prior to effectiveness
of Registration Statement.
-9-
<PAGE>
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."
Fairness Opinions. 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 the date of its opinionsuch 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 See "The Merger -- Alex. Brown Fairness Opinionused 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 the fairness of the terms of the Merger. On
October 6, 1996, Merrill Lynch delivered its written fairness opinion to Webster
with respect to the terms of the Merger. See "THE MERGER -- Opinion of Webster
Financial Advisor." A copy of Merrill Lynch's opinion letter dated October 6,
1996 is attached at 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. Applications or waiver requests as to such approvals have
been filed and are pending, or will be filed. 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 the DS Bancor Common
Stock will not be entitled to any dissenters' appraisal rights with respect to
the Merger since the 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
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<PAGE>
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.
Termination. The Merger Agreement is subject to termination at the option
of Shelton or 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, or prior to such date upon the occurrence of certain events. See
"THE MERGER -- Termination and Amendment of Merger Agreement."
Exchange of DS Bancor Common Stock Certificates. Upon consummation of the
Merger (the "Effective Time")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
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<PAGE>
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 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 $ *
December 31, 1995....................... 29.50 25.50 *
September 30, 1996...................... 35.25 37.00 *
October 7, 1996 (b)..................... 35.25 38.38 *
__________ __, 1996 (c)................. * * *
</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 _______________ __, 1996 (the most recent practicable date prior
to the date of this Joint Proxy Statements/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.
* Data/information to be calculated/provided immediately prior to
effectiveness of Registration Statement.
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,
------------------------------- ------------------------------------------
(unaudited)
Net Income per fully diluted Common Share: 1995 1994 1993
---- ---- ----
<S> <C> <C> <C> <C>
Webster -- historical before non-
recurring expenses (a) $ 2.24 $ 2.76 $ 2.87 $ 2.04(b)
Webster -- historical after non-recurring expenses 1.92 2.30 2.44 2.04(b)
DS Bancor -- historical 2.16 2.45 1.86 1.63(b)
Pro Forma Combined before non-
recurring expenses (a)(c) 2.11 2.53 2.44 1.79
Pro Forma Combined after non-recurring expenses(c) 1.88 2.31 2.15 1.79
DS Bancor Equivalent Pro Forma (d) * * * *
Cash Dividends per Common Share:
Webster -- historical .50 .64 .52 .50
DS Bancor -- historical .18 -- -- --
Pro Forma Combined .39 .44 .34 .29
DS Bancor Equivalent Pro Forma (d) * * * *
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) 22.74 23.29 19.79 19.41
DS Bancor Equivalent Pro Forma (d) * * * *
</TABLE>
- ----------
(a) Excludes 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.
(b) Does not give effect to additional income in 1993 resulting from the
cumulative effect of change in 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 ______________ __, 1996 (the most recent
practicable date prior to the date of this Joint Proxy
Statement/Prospectus). See "THE MERGER -- Exchange Ratio."
* Data/information to be calculated/provided immediately prior to effectiveness
of Registration Statement.
-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
--------- --------- --------- --------- --------- --------- ------
(unaudited)
<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
--------- --------- --------- --------- --------- --------- ------
(unaudited)
<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
--------- --------- --------- --------- --------- --------- ------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
For The Period:
Before non-recurring expenses:(c)
Net income per common share:
Primary............................ $ 2.46 $ 2.19 $ 2.97 $ 3.21 $ 2.25 (d) $ 1.18 $ 0.68
Fully Diluted...................... $ 2.24 $ 2.04 $ 2.76 $ 2.87 $ 2.04 (d) $ 1.16 $ 0.68
Return on average assets ............. 0.74% 0.69% 0.70% 0.79% 0.60% (d) 0.43% 0.32%
Return on average shareholders' equity 13.03% 12.75% 12.85% 14.77% 11.11% (d) 6.87% 4.06%
Noninterest expenses (excluding
foreclosed property expenses and
provisions) to average assets ..... 2.36% 2.26% 2.20% 2.40% 2.09% 2.23% 1.95%
After non-recurring expenses:
Net income per common share:
Primary............................ $ 2.04 $ 2.19 $ 2.44 $ 2.69 $ 2.25 (d) $ 1.18 $ 0.68
Fully Diluted...................... $ 1.92 $ 2.04 $ 2.30 $ 2.44 $ 2.04 (d) $ 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% 0.69% 0.58% 0.67% 0.60%(d) 0.43% 0.32%
Return on average shareholders' equity 11.14% 12.75% 10.70% 12.55% 11.11%(d) 6.87% 4.06%
Noninterest expenses to average assets 2.60% 2.40% 2.53% 2.86% 2.30% 2.64% 2.45%
Noninterest expenses (excluding
foreclosed property expenses and
provisions) to average assets...... 2.54% 2.26% 2.40% 2.61% 2.09% 2.23% 1.95%
Other data:
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 acquisition.
(b) Reflects cumulative change in method of accounting for income taxes adopted
by Webster in 1993 in accordance with FASB 109.
(c) Excludes 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 Bank Connecticut National
Association (now Fleet National Bank of Connecticut) ("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) 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
--------- --------- --------- --------- --------- --------- ------
(unaudited)
<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
--------- --------- --------- --------- --------- --------- ------
(unaudited)
<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
--------- --------- --------- --------- --------- --------- ------
(unaudited)
<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>
<TABLE>
<CAPTION>
Significant Statistical Data - Pro Forma - Unaudited
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:
Before the non-recurring expenses:(a)
Net income per common share:
Primary............................ $ 2.21 $ 1.92 $ 2.64 $ 2.59 $ 1.89 $ 1.26 $ 0.49
Fully Diluted...................... $ 2.11 $ 1.83 $ 2.53 $ 2.44 $ 1.79 $ 1.25 $ 0.49
Return on average assets.............. 0.72% 0.66% 0.68% 0.69% 0.54% 0.51% 0.25%
Return on average shareholders' equity 12.12% 11.72% 11.95% 12.75% 10.04% 7.47% 3.02%
Noninterest expenses (excluding
foreclosed property expenses and
provisions) to average assets...... 2.20% 2.13% 2.09% 2.23% 2.02% 2.04% 1.84%
After non-recurring expenses:
Net income per common share:
Primary............................ $ 1.96 $ 1.92 $ 2.30 $ 2.26 $ 1.89 $ 1.26 $ 0.49
Fully Diluted...................... $ 1.88 $ 1.83 $ 2.21 $ 2.15 $ 1.79 $ 1.25 $ 0.49
Cash dividends paid per common share.. $ 0.39 $ 0.31 $ 0.44 $ 0.34 $ 0.29 $ 0.28 $ 0.34
Return on average assets ............. 0.66% 0.66% 0.60% 0.61% 0.54% 0.51% 0.25%
Return on average shareholders' equity 11.09% 11.72% 10.47% 11.23% 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% 2.13% 2.23% 2.38% 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 .......... $ 22.82 $ 22.52 $ 23.29 $ 19.79 $ 19.41 $ 19.27 $ 16.08
Tangible book value per common share.. $ 18.75 $ 21.76 $ 22.65 $ 18.93 $ 17.55 $ 16.85 $ 15.92
Common shares outstanding (000's) .... 11,780 10,465 11,747 10,445 8,639 8,446 8,468
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% 94.55% 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%
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</TABLE>
(a) Excludes 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.
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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
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<PAGE>
company under OTS 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
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<PAGE>
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 ______________ ___, 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 ______________ ___, 1997, at
_____ a.m., at _____________________________________, 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
____________ ___, 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 _________ shares of DS Bancor Common Stock
outstanding and entitled to vote at the DS Bancor Meeting, held by approximately
____ 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
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<PAGE>
DS Bancor Meeting. If any other matters properly come before the DS Bancor
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 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 _______ shares of DS Bancor Common Stock
(excluding all stock options) or approximately ___% 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 _________ ___, 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 ______________ ___, 1997, at _____
a.m., at ________________________________, 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 purpose 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
______________ __, 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 _____________ shares of Webster Common Stock outstanding
and entitled to vote at the Webster Meeting, held by approximately ___
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, DS Bancor or the trustee of
the Webster ESOP, and will be tabulated by ______________, which is the
[recordkeeper] for the Webster ESOP.
To be effective, directions to the trustee of the Webster ESOP must be
received by the [recordkeeper] at __________________________, ATTN.: Webster
ESOP Vote, by the close of business
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<PAGE>
(5:00 p.m. E.S.T.) on _____________ ___, 1997. Directions to the trustee
received after the close of business on ______________ __, 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,
_____*_____ shares of Webster Common Stock would be issued to the holders of the
_____*_____ then outstanding shares of DS Bancor Common Stock and ____*____
shares of Webster Common Stock would be issued or reserved for issuance with
respect to the exercise of the ___*___ 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
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* Data/information to be calculated/provided immediately prior to
effectiveness of Registration Statement.
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<PAGE>
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.
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
(____%) 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
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<PAGE>
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 long-term growth strategy or pursuing a possible merger partner or sale of DS
Bancor. The members of the Strategic 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 of 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 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 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, 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, 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;
(iv) Information concerning the business, financial
condition, results of operations, asset quality and
prospects of Webster, including the long-term growth
potential of Webster Common Stock, the future growth
prospects of Webster, combined with DS Bancor,
following the proposed Merger and the potential
synergies expected from the Merger and the business
risks associated therewith;
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<PAGE>
(v) The potential for appreciation and growth for the
market and book value of Webster Common Stock,
following the proposed Merger;
(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 and other significant terms of the
proposed Merger including the terms and conditions of
the Merger Agreement and the Option Agreement;
(viii) The benefits of a business combination with a larger
holding company, such as Webster, with a significant
presence in south central Connecticut;
(ix) 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;
(x) 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;
(xi) The fact that DS Bancor had conducted an extensive
solicitation of interest from other likely potential
acquirors of DS Bancor; and
(xii) 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 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. 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 and recommendations of
Webster's management in considering the Merger. Webster also consulted with its
outside financial advisor, Merrill Lynch as to certain issues concerning the
Merger, including the fairness of the terms of the Merger. 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 expand its regional community bank presence in an area which
has been impacted by the recent acquisitions and franchise consolidation in the
Connecticut banking industry, (ii) enable Webster to more quickly and
economically fulfill its strategic objective to expand its customer base and
better meet the needs of its existing customers in New Haven, Fairfield and
Hartford Counties, and (iii) achieve significant cost savings over the aggregate
expense of Webster's and DS Bancor's operations.
In reaching its conclusion that the Merger and the issuance are fair
to, and in the best interests of, Webster and its shareholders, Webster Board of
Directors also considered, among other
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<PAGE>
things, the following factors: (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 long-term positive effects of the transaction
on Webster's earnings; (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; (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
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<PAGE>
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
zelay materially or jeopardize receipt of any required regulatory approvals.
Webster presently has no intent to modify the structure.
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> <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.
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<PAGE>
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 ____________ ___, 1996 (the
most recent practicable date prior to the date of this Joint Proxy
Statement/Prospectus), the Exchange Ratio would be ___*___. 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 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 ____*____ shares of DS Bancor Common Stock outstanding on
___________ ___, 1996 and an Exchange Ratio of ____*____, Webster would issue up
to ______*______ 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 _____*_____ 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
- ----------
* Data/information to be calculated/provided immediately prior to
effectiveness of Registration Statement.
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<PAGE>
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.
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 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. Applications or waiver requests as to such approvals
have been filed and are pending, or will be filed.
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).
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<PAGE>
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 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
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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, 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
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$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.
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") earnings, 1996 estimated earnings, 1997 estimated earnings, asset
quality ratios and loan loss reserve levels, for DS Bancor and several peer
groups of savings bank organizations.
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,
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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's 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 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
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 EPS(1) EPS(2) premium premium
- ----------------- ----- ---------- ------ --- --- ------- -------
<S> <C> <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) Nationwide - Mean 151.7% 158.9% 14.6% 15.1x 14.5x 8.0% 30.5%
High 248.4% 257.4% 27.8% 29.9x 24.2x 18.5% 74.1%
Low 105.8% 106.0% 6.6% 11.3x 9.8x 2.8% -3.4%
(b) Regional Transactions-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 earnings per share.
(2) Forward one year earnings per share based on I/B/E/S estimates.
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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 was 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 received by current DS Bancor
shareholders in aggregate are presented in the following table:
DS Bancor
Balance sheet items contribution
- ------------------- ------------
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%
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
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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.
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 its written opinion to the effect 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 reconfirmed in writing
as of the date of the Joint Proxy Statement/Prospectus.
The full text of Merrill Lynch's 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 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 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
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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 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
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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.
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 than 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
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increase in projected earnings per Webster Common Stock equivalent share and
tangible book value per Webster Common 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 form 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
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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 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 in 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.
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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. 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 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, the 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
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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 1.44 x, compared to a mean of 1.32x for the Webster
Composite, (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 premium 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
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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; (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
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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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the principal 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),
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. 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.
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(5) Neither Webster, Merger Sub, nor DS Bancor will recognize
any gain or loss as a result of the Merger.
The preceding discussion is intended only as a summary of certain
federal income tax consequences of the Merger and does not purport to be a
complete analysis or discussion of all potential tax effects relevant thereto.
Thus, 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.
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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.
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 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 (collectively, the
"Indemnitees"), 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.
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<PAGE>
OPTIONS
As of the DS Bancor Record Date, there were outstanding options to
purchase _______ shares of DS Bancor Common Stock at an average exercise price
of $____ per share. These options are held as follows: ________ options by
non-employee directors; ________, _______ and ________ options by Messrs.
DiAdamo, Santoro and Wells, respectively; and _________ 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 ______
outstanding options held by directors, officers and other employees of DS Bancor
will also be converted into Webster Common Stock at the Exchange Ratio, which
would involve the issuance of up to ______ additional shares of Webster Common
Stock as part of the Merger. 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 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 purpose of 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
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<PAGE>
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 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
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<PAGE>
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 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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<PAGE>
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,
___________ shares were issued and outstanding on the Webster Record Date, and
________, _________, and ________ 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 1,200,000 presently authorized shares of the
Series B Stock, ________ 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, _____ shares of authorized
but not outstanding and unreserved shares of Webster Common Stock remained
available for future issuance (before giving effect to the approximately __*__
shares to be issued in the Merger based on recent market trading prices of
Webster Common Stock, and ___*___ if all existing options of DS Bancor are
exercised prior to the Merger) and _________ and _________ shares, respectively,
of Webster's Series B Stock and Series C Stock, remained available for future
issuance. 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, ___*___ shares of Webster Common Stock will be issued in
connection with the Merger based on a __*__ Exchange Ratio ( ___*___ if all
existing options of DS Bancor are exercised prior to the Merger). Therefore,
giving effect to the Merger, of the then __________ shares of authorized Webster
Common Stock,
- ----------
* Data/information to be calculated/provided immediately prior to
effectiveness of Registration Statement.
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<PAGE>
________ will be issued and outstanding (including all existing options of DS
Bancor) and ________, _______, and ________, respectively, will be reserved for
issuance with respect to Webster stock options, 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 __*__ Exchange Ratio), ____*____
shares of authorized but not outstanding and unreserved shares of Webster Common
Stock (____*____ if all existing options of DS Bancor are exercised prior to the
Merger) and ________ and ____________ shares of Series B Stock and Series C
Stock, respectively, will be available for future 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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<PAGE>
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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<PAGE>
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 (3,338)(d) 120
Paid In Capital 137,396 44,579 (4,715)(a,d) 177,260
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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<PAGE>
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 $ 1.96
============= ========== =============
Fully Diluted $ 1.92 $ 2.16 $ 1.88
============= ========== =============
</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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<PAGE>
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 $ 1.92
============= ========== =============
Fully Diluted $ 2.04 $ 1.71 $ 1.83
============= ========== =============
</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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<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 $ 2.30
============= ========== =============
Fully Diluted $ 2.30 $ 2.45 $ 2.31
============= ========== =============
</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 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 $ 2.26
============= ========== =============
Fully Diluted $ 2.44 $ 1.86 $ 2.15
============= ========== =============
</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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<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 $ 1.89
============= ========== =============
Fully Diluted $ 2.04 $ 1.63 $ 1.79
============= ========== =============
</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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<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>
<CAPTION>
<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>
(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 1.21127 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 _________,1996)
</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 _____________ __, 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 $______.
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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 _________,1996)
</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 ____________ ___, 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 $-----.
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.
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<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, _____ 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 ______________ additional shares of Webster Common Stock, or a total of
______________ shares of Webster Common Stock then outstanding. Webster has
outstanding stock options granted to directors, officers and other employees for
______________ 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 are entitled to receive dividends when
and as declared by the Board of Directors of Webster out of assets legally
available for distribution. No dividends or other distributions may be declared
or paid on Webster Common Stock, however, unless all accumulated dividends have
been paid concurrently on the Series B Stock or any other class of stock having
preference 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 or dissolution of Webster, the
holders of Webster Common Stock would be entitled to receive, after payment or
provision for payment of all debts and liabilities of Webster and after payment
of the liquidation preferences of all outstanding shares of preferred stock, all
remaining assets of Webster available for distribution, in cash or in kind.
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<PAGE>
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,
__________ shares of Series B Stock were outstanding on the Webster Record Date.
The Series B Stock ranks prior to the Webster Common 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) 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 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 all the Series B Stock,
voting as a single class, will be entitled to elect two additional directors
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 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 days notice, at the applicable
redemption price, plus accumulated and unpaid dividends. The redemption price
initially will be $104.50 per share effective as of January 15, 1997 and will
decline to $100.00 after January 15, 2003. 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 following a notice of redemption by Webster.
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.
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<PAGE>
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.
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
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<PAGE>
A Stock, which was previously redeemed), 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 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 Bylaws provide that the size
of the Board of Directors, within the seven to 15 range specified in the
Restated Certificate of Incorporation, may be increased or decreased only by a
two-thirds vote of the Board of Directors and by a vote of two-thirds of the
shares eligible to be voted at a duly constituted meeting of shareholders called
for such purpose. The 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, may be filled for the remainder of the
unexpired term by a majority vote of the directors then in office. 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 Restated Certificate of Incorporation provides that a
director may be removed only for cause and then only by the affirmative vote of
two-thirds of the total shares eligible to vote at a duly constituted meeting of
the shareholders called expressly 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 called for such purpose.
The provisions of DS Bancor's Amended and Restated Certificate of
Incorporation and Bylaws with regard to directors are substantially identical as
those of Webster's, except that the
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range as to the number of directors is nine to 16 in DS Bancor's Amended and
Restated Certificate of Incorporation.
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 or
the president of Webster or by its 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.
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 __________ 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 ______
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.
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. 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 approvals
of two-thirds of Webster's outstanding voting shares 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 a two-thirds vote 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. These limitations on
offers and purchases do not apply to the employee stock ownership plan or other
employee benefits plans of Webster.
DS Bancor's Amended and Restated Certificate of Incorporation contains
substantially identical provisions as to approvals for acquisition of control of
DS Bancor, except that specified state and federal regulatory approvals are
required.
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 (collectively, the "Interested Shareholder") either (i) be
approved by at least 80% of the total number of outstanding voting shares of
Webster, or (ii) be approved by two-thirds of Webster's continuing Board of
Directors (persons 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:
mergers, consolidations and stock exchanges; a sale, lease, exchange, mortgage,
pledge or
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<PAGE>
other transfer of assets other than in the usual and regular course of business;
an issuance by Webster of its equity securities having a market value in excess
of 5% of aggregate market value of its outstanding shares; the adoption of any
plan of liquidation of Webster or any subsidiary proposed by an Interested
Shareholder; and any reclassification of securities or recapitalization of
Webster which has the effect of increasing the proportionate equity ownership
interest of the Interested Shareholder. DS Bancor's Amended and Restated
Certificate of Incorporation contains a substantially identical provision as to
business combinations.
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.
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 as to Derby.
Amendment to Certificate of Incorporation and Bylaws. Amendments to
Webster's Restated Certificate of Incorporation must be approved by a two-thirds
vote of Webster's Board of Directors and also by a majority of the outstanding
shares of Webster's voting stock; provided, however, that approval by two-thirds
of the outstanding voting stock is generally required for certain provisions. In
addition, the provisions regarding certain business combinations may be amended
only by the same "80 percent" shareholder vote required to approve a business
combination with a 10% shareholder. Webster's Bylaws may be amended by a
two-thirds vote of the Board of Directors or a two-thirds vote of the total
shares eligible to be voted at a duly constituted meeting of shareholders.
Amendments to DS Bancor's Amended and Restated Certificate of Incorporation and
Bylaws are subject to substantially identical provisions as those of Webster's.
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 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
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<PAGE>
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 it 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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<PAGE>
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 office 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.
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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<PAGE>
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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<PAGE>
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
A-2
<PAGE>
APPENDIX B
October 6, 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") propose to enter 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 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 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;
<PAGE>
(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 a October 4, 1996 draft of the 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
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<PAGE>
fee for our services. We have within the past two years provided financial
advisory, investment 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
<PAGE>
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 4.1 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.
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<PAGE>
2.3 Stockholder Agreement, dated as of October 7, 1996, by and among the
Registrant and the stockholders of DS Bancor identified therein.
4.1 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 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. as to
certain tax matters.*
8.2 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.*
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.*
99.1 Section 145 of the Delaware General Corporation Law.
99.2 Form of Webster proxy card.
99.3 Form of DS Bancor proxy card.
- ----------
* To be filed by amendment
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;
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<PAGE>
(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 (ss.
230.415 of this chapter), will be filed as a part of an amendment to
the registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a 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.
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<PAGE>
(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 8th day of November, 1996.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
----------------------------
James C. Smith
Chairman and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below appoints James C. Smith or John V. Brennan, jointly and severally,
each in his own capacity, his true and lawful attorneys-in-fact, with full power
of substitution for him and in his name, place and stead, in any and all
capacities to sign any amendments to this Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 8th day of November, 1996.
Signature Title
- --------- -----
/s/ James C. Smith Chairman and Chief Executive Officer
- -------------------------------------- (Principal Executive Officer)
James C. Smith
/s/ John V. Brennan Executive Vice President, Chief
- -------------------------------------- Financial Officer and Treasurer
John V. Brennan (Principal Financial Officer)
/s/ Peter J. Swiatek Controller
- -------------------------------------- (Principal Accounting Officer)
Peter J. Swiatek
/s/ Joel S. Becker Director
- --------------------------------------
Joel S. Becker
/s/ O. Joseph Bizzozero, Jr. Director
- --------------------------------------
O. Joseph Bizzozero, Jr.
II-5
<PAGE>
/s/ John J. Crawford Director
- --------------------------------------
John J. Crawford
/s/ Robert A. Finkenzeller Director
- --------------------------------------
Robert A. Finkenzeller
/s/ Walter R. Griffin Director
- --------------------------------------
Walter R. Griffin
/s/ J. Gregory Hickey Director
- --------------------------------------
J. Gregory Hickey
/s/ C. Michael Jacobi Director
- --------------------------------------
C. Michael Jacobi
/s/ Harold W. Smith Director
- --------------------------------------
Harold W. Smith
/s/ Sr. Marguerite F. Waite Director
- --------------------------------------
Sr. Marguerite F. Waite, C.S.J.
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
--- -------
<S> <C>
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.
4.1 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 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. as to certain
tax matters.*
8.2 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.*
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.*
99.1 Section 145 of the Delaware General Corporation Law.
99.2 Form of Webster proxy card
99.3 Form of DS Bancor proxy card
- ----------
* To be filed by amendment
</TABLE>
II-7
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
WEBSTER FINANCIAL CORPORATION
WEBSTER ACQUISITION CORP.,
AND DS BANCOR, INC.
October 7, 1996
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 7, 1996, by and among
Webster Financial Corporation, a Delaware corporation ("Webster"), Webster
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Webster
("Merger Sub"), and DS Bancor, Inc., a Delaware corporation ("DS Bancor"). (DS
Bancor and Merger Sub are herein sometimes collectively referred to herein as
the "Constituent Corporations".)
WHEREAS, the Boards of Directors of Webster and DS Bancor have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transaction provided
for herein in which Merger Sub will, subject to the terms and conditions set
forth herein, merge (the "Merger") with and into DS Bancor, with DS Bancor being
the Surviving Corporation (as defined) and becoming a wholly-owned subsidiary of
Webster and immediately following said Merger, Webster intends that the
Surviving Corporation will merge with and into Webster (the "Subsidiary
Merger"); and
WHEREAS, prior to the consummation of the Merger, Webster and DS Bancor
will respectively cause Webster Bank, a federal savings bank and wholly-owned
subsidiary of Webster, and Derby Savings Bank ("Derby"), a Connecticut chartered
state savings bank and wholly-owned subsidiary of DS Bancor, to enter into a
merger agreement, in the form attached hereto as Exhibit A (the "Bank Merger
Agreement"), providing for the merger (the "Bank Merger") of Derby with and into
Webster Bank, and it is intended that the Bank Merger be consummated immediately
after consummation of the Merger and the Subsidiary Merger; and
WHEREAS, as an inducement to Webster to enter into this Agreement, DS
Bancor will enter into an option agreement, in the form attached hereto as
Exhibit B (the "Option Agreement"), with Webster immediately following the
execution of this Agreement pursuant to which DS Bancor will grant Webster
options to purchase, under certain circumstances, an aggregate of 564,296 newly
issued shares of common stock, par value $1.00 per share, of DS Bancor upon the
terms and conditions therein contained; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement, in accordance
with the Delaware General Corporation Law (the "DGCL"), at the Effective Time
(as defined in Section 1.2 hereof), Merger Sub shall merge into DS Bancor, with
DS Bancor being the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") in the Merger and becoming a wholly-owned subsidiary of
Webster. Upon consummation of the Merger, the separate corporate existence of
Merger Sub shall terminate.
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1.2 Effective Time.
The Merger shall become effective on the Closing Date (as defined in
Section 9.1 hereof), as set forth in the certificate of merger (the "Certificate
of Merger") which shall be filed with the Secretary of State of Delaware (the
"Secretary of State") on the Closing Date . The term "Effective Time" shall be
the date and time when the Merger becomes effective on the Closing Date, as set
forth in the Certificate of Merger.
1.3 Effects of the Merger.
At and after the Effective Time, the Merger shall have the effects set
forth in Section 259 and 261 of the DGCL.
1.4 Conversion of DS Bancor Common Stock.
(a) At the Effective Time, subject to Sections 2.2(e), 1.4(b)
and 8.1(h) hereof, each share of the common stock, par value $1.00 per share, of
DS Bancor (the "DS Bancor Common Stock") issued and outstanding prior to the
Effective Time shall, by virtue of this Agreement and without any action on the
part of the holder thereof, be converted into and exchangeable for that number
of shares of Webster Common Stock, par value $.01 per share, determined by
dividing $43.00 by the Base Period Trading Price (as defined below), as may be
adjusted as provided below, computed to five decimal places (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,
that if the Base Period Trading Price shall be less than $31.50, the Exchange
Ratio shall be 1.36508. The number of shares of Webster Common Stock issuable
with respect to each share of DS Bancor Common Stock, as determined as set forth
herein, is called the "Merger Consideration." For purposes of this Agreement,
the term "Base Period Trading Price" shall mean the average of the daily closing
prices per share for Webster Common Stock for the 15 consecutive trading days
which shares of Webster Common Stock are actually traded (as reported on the
Nasdaq Stock Market National Market System) ending on the day preceding the
receipt of the last required federal bank regulatory approval (such period
herein called the "Base Period"). All of the shares of DS Bancor Common Stock
converted into Webster Common Stock pursuant to this Article I shall no longer
be outstanding and shall automatically be canceled and shall cease to exist, and
each certificate (each a "Certificate") previously representing any such shares
of DS Bancor Common Stock shall thereafter represent the right to receive (i)
the number of whole shares of Webster Common Stock and (ii) cash in lieu of
fractional shares into which the shares of DS Bancor Common Stock represented by
such Certificate have been converted pursuant to this Section 1.4(a) and Section
2.2(e) hereof. Certificates previously representing shares of DS Bancor Common
Stock shall be exchanged for certificates representing whole shares of Webster
Common Stock and cash in lieu of fractional shares issued in consideration
therefor upon the surrender of such Certificates in accordance with Section 2.2
hereof, without any interest thereon. If prior to the Effective Time Webster
should split or combine its common stock, or pay a dividend or other
distribution in such common stock, then the Exchange Ratio shall be
appropriately adjusted to reflect such split, combination, dividend or
distribution.
(b) At the Effective Time, all shares of DS Bancor Common
Stock that are owned by DS Bancor as treasury stock and all shares of DS Bancor
Common Stock that are owned directly or indirectly by Webster or DS Bancor or
any of their respective Subsidiaries (other than shares of DS Bancor Common
Stock held directly or indirectly in trust accounts, managed accounts and the
like or otherwise held in a fiduciary capacity that are beneficially owned by
third parties (any such shares, and shares of Webster Common Stock which are
similarly held, whether held directly or indirectly by Webster or DS Bancor, as
the case may be, being referred to herein as "Trust Account Shares") and other
than any shares of DS Bancor Common Stock held by Webster or DS Bancor or any of
their respective Subsidiaries in respect of a debt previously contracted (any
such shares of DS Bancor Common Stock, and shares of Webster Common Stock which
are similarly held, whether held directly
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or indirectly by Webster or DS Bancor, being referred to herein as "DPC Shares")
shall be canceled and shall cease to exist and no stock of Webster or other
consideration shall be delivered in exchange therefor. All shares of Webster
Common Stock that are owned by DS Bancor or any of its Subsidiaries (other than
Trust Account Shares and DPC Shares) shall become treasury stock of Webster.
1.5 Conversion of Merger Sub Common Stock.
Each of the shares of the common stock, par value $.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
become shares of the Surviving Corporation after the Merger and shall thereafter
constitute all of the issued and outstanding shares of the Surviving
Corporation.
1.6 Options.
At the Effective Time, each option granted by DS Bancor to purchase
shares of DS Bancor Common Stock which is outstanding and unexercised
immediately prior thereto shall be converted automatically into an option to
purchase shares of Webster Common Stock in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the Derby
Savings Bank Stock Option Plan, as amended (the "1985 Option Plan") or the DS
Bancor, Inc. 1994 Stock Option Plan (the "1994 Option Plan") (the 1985 Option
Plan and the 1994 Option Plan, collectively, "DS Bancor Stock Plans");
(1) The number of shares of Webster Common Stock to be subject
to the option immediately after the Effective Time shall be
equal to the product of the number of shares of DS Bancor
Common Stock subject to the option immediately before the
effective time, multiplied by the Exchange Ratio, provided
that any fractional shares of Webster Common Stock resulting
from such multiplication shall be rounded down to the nearest
share;
(2) The exercise price per share of Webster Common Stock under
the option immediately after the Effective Time shall be equal
to the exercise price per share of DS Bancor Common Stock
under the option immediately before the Effective Time divided
by the Exchange Ratio, provided that such exercise price shall
be rounded to the nearest cent; and
(3) For purposes of the DS Bancor Stock Plans, service as an
advisory director of Webster Bank shall be deemed to be
service.
The adjustment provided herein shall be and is intended to be effected in a
manner which is consistent with Section 424(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The duration and other terms of the option
immediately after the Effective Time shall be the same as the corresponding
terms in effect immediately before the Effective Time, except that all
references to DS Bancor in the 1994 Plan and all references to Derby Savings
Bank in the 1985 Plan (and the corresponding references in the option agreement
documenting such option) shall be deemed to be references to Webster.
1.7 Certificate of Incorporation.
At the Effective Time, the Certificate of Incorporation of DS Bancor,
as in effect at the Effective Time, shall be the Certificate of Incorporation of
the Surviving Corporation.
1.8 By-Laws.
At the Effective Time, the By-Laws of DS Bancor, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation.
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1.9 Directors and Officers.
At the Effective Time, the directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation. Two directors of DS Bancor, to be selected by the
Board of Directors of Webster, shall be invited to serve as additional members
of the Board of Directors of Webster, one of whom shall serve until Webster's
1998 annual meeting, one of whom shall serve until Webster's 1999 annual meeting
and one of whom shall be renominated when his or her term expires. Webster
Bank's Board of Directors will be expanded after the Bank Merger to add such two
additional directors. 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.
Such advisory directors will each be paid for such service up to $50,000 based
on a quarterly retainer of $4,750 and quarterly meeting attendance fees of
$1,500 for each meeting attended, provided, however, that while any such
advisory director also serves as a director of Webster such director shall not
receive any compensation as an advisory director pursuant hereto.
1.10 Tax Consequences.
It is intended that the Merger, either alone or in conjunction with the
Subsidiary Merger, shall constitute a reorganization within the meaning of
Section 368(a) of the Code, and that this Agreement shall constitute a "plan of
reorganization" for the purposes of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.1 Webster to Make Shares Available.
At or prior to the Effective Time, Webster shall deposit, or shall
cause to be deposited, with Webster's transfer agent, American Stock Transfer &
Trust Company, or such other bank or trust company as Webster may select (the
"Exchange Agent"), for the benefit of the holders of Certificates, for exchange
in accordance with this Article II, certificates representing the shares of
Webster Common Stock and the cash in lieu of fractional shares (such cash and
certificates for shares of Webster Common Stock, being hereinafter referred to
as the "Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant
to Section 2.2(a) in exchange for outstanding shares of DS Bancor Common Stock.
2.2 Exchange of Shares.
(a) As soon as practicable after the Effective Time, and in no
event later than three business days thereafter, the Exchange Agent shall mail
to each holder of record of a Certificate or Certificates a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing the
shares of Webster Common Stock and the cash in lieu of fractional shares into
which the shares of DS Bancor Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. DS Bancor
shall have the right to review both the letter of transmittal and the
instructions. Upon surrender of a Certificate for exchange and cancellation to
the Exchange Agent, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole shares of Webster Common Stock
to which such holder of DS Bancor Common Stock shall have become entitled
pursuant to the provisions of Article I hereof and (y) a check representing the
amount of cash in lieu of fractional shares, if any, which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article II, and the Certificate so surrendered
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<PAGE>
shall forthwith be canceled. No interest will be paid or accrued on the cash in
lieu of fractional shares and unpaid dividends and distributions, if any,
payable to holders of Certificates.
(b) No dividends or other distributions declared after the
Effective Time with respect to Webster Common Stock and payable to the holders
of record thereof shall be paid to the holder of any unsurrendered Certificate
until the holder thereof shall surrender such Certificate in accordance with
this Article II. After the surrender of a Certificate in accordance with this
Article II, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of Webster Common Stock
represented by such Certificate. No holder of an unsurrendered Certificate shall
be entitled, until the surrender of such Certificate, to vote the shares of
Webster Common Stock into which his DS Bancor Common Stock shall have been
converted.
(c) If any certificate representing shares of Webster Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
(or accompanied by an appropriate instrument of transfer) and otherwise in
proper form for transfer, and that the person requesting such exchange shall pay
to the Exchange Agent in advance any transfer or other taxes required by reason
of the issuance of a certificate representing shares of Webster Common Stock in
any name other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(d) 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
which were issued and outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates representing such shares are presented
for transfer to the Exchange Agent, they shall be canceled and exchanged for
certificates representing shares of Webster Common Stock as provided in this
Article II.
(e) Notwithstanding anything to the contrary contained herein,
no certificates or scrip representing fractional shares of Webster Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Webster Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a shareholder of
Webster. In lieu of the issuance of any such fractional share, Webster shall pay
to each former shareholder of DS Bancor who otherwise would be entitled to
receive a fractional share of Webster Common Stock an amount in cash determined
by multiplying (i) 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 (or any other securities exchange on which Webster Common
Stock is then traded) for the five trading days immediately preceding the fifth
trading day before the Closing Date by (ii) the fraction of a share of Webster
Common Stock to which such holder would otherwise be entitled to receive
pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by
the shareholders of DS Bancor for twelve months after the Effective Time shall
be returned to Webster. Any shareholders of DS Bancor who have not theretofore
complied with this Article II shall thereafter look only to Webster for payment
of their shares of Webster Common Stock, cash in lieu of fractional shares and
unpaid dividends and distributions on Webster Common Stock deliverable in
respect of each share of DS Bancor Common Stock such shareholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Webster, DS Bancor, the Exchange
Agent or any other person shall be liable to any former holder of shares of DS
Bancor Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
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<PAGE>
(g) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Webster, the posting by such person of a bond in such amount as Webster may
reasonably direct as indemnity against claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the shares of Webster Common Stock and
cash in lieu of fractional shares deliverable in respect thereof pursuant to
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DS BANCOR
Except as set forth in a disclosure schedule which is being delivered
to Webster concurrently herewith (the "DS Bancor Disclosure Schedule"), DS
Bancor hereby represents and warrants to Webster and Merger Sub as follows:
3.1 Corporate Organization
(a) DS Bancor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. DS Bancor
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
any material business conducted by it or the character or location of any
material properties or assets owned or leased by it makes such licensing or
qualification necessary. DS Bancor is duly registered as a bank holding company
with the Board of Governors of the Federal Reserve System ("FRB") under the
Banking Holding Company Act of 1956, as amended ("BHCA"). The Certificate of
Incorporation and By-Laws of DS Bancor, copies of which have previously been
delivered to Webster, are true, correct and complete copies of such documents as
in effect as of the date of this Agreement.
(b) Derby is a state chartered savings bank duly organized,
validly existing and in good standing under the laws of the State of
Connecticut. The deposit accounts of Derby are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund (the "BIF")
to the fullest extent permitted by law, and all premiums and assessments
required in connection therewith have been paid by Derby. Derby is the only
subsidiary of DS Bancor that is a "Significant Subsidiary" as such term is
defined in Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC"). Derby has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted and is duly licensed or qualified to do business in each jurisdiction
in which the nature of any material business conducted by it or the character or
the location of any material properties or assets owned or leased by it makes
such licensing or qualification necessary. The Certificate of Incorporation and
By-Laws of Derby, copies of which have previously been delivered to Webster, are
true, correct and complete copies of such documents as in effect as of the date
of this Agreement.
3.2 Capitalization.
(a) The authorized capital stock of DS Bancor consists of
6,000,000 shares of DS Bancor Common Stock and 2,000,000 shares of serial
preferred stock, no par value (the "DS Bancor Preferred Stock"). As of the date
hereof, there are (x) 3,031,527 shares of DS Bancor Common Stock issued and
outstanding and an additional 339,500 shares of DS Bancor Common Stock held in
DS Bancor's treasury, (y) no shares of DS Bancor Common Stock reserved for
issuance upon exercise of outstanding stock options or otherwise, except for
453,080 shares of DS Bancor Common Stock reserved for issuance pursuant to the
DS Bancor Stock Plans (of which options for 398,058 shares are currently
outstanding) and (ii) 564,296 shares of DS Bancor Common Stock reserved for
issuance upon exercise of the option to be issued to Webster pursuant to the
Option Agreement, and (z) no shares of DS Bancor Preferred Stock issued or
outstanding, held in DS Bancor's treasury or reserved for issuance upon
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exercise of outstanding stock options or otherwise. All of the issued and
outstanding shares of DS Bancor Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. Except for the
Option Agreement, DS Bancor does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of DS Bancor Common
Stock or DS Bancor Preferred Stock or any other equity security of DS Bancor or
any securities representing the right to purchase or otherwise receive any
shares of DS Bancor Common Stock or any other equity security of DS Bancor. The
names of the optionees, the date of each option to purchase DS Bancor Common
Stock granted, the number of shares subject to each such option, the expiration
date of each such option, and the price at which each such option may be
exercised under the DS Bancor Stock Plan are set forth in Section 3.2(a) of the
DS Bancor Disclosure Schedule. Since December 31, 1995 DS Bancor has not issued
any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock, other than pursuant to the
exercise of director or employee stock options granted prior to June 30, 1996,
under the DS Bancor Stock Plans.
(b) Section 3.2(b) of the DS Bancor Disclosure Schedule sets
forth a true, correct and complete list of all Subsidiaries of DS Bancor as of
the date of this Agreement. DS Bancor owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of each of its Subsidiaries, free
and clear of all liens, charges, encumbrances and security interests whatsoever,
and all of such shares are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No DS Bancor Subsidiary has or is bound by
any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such Subsidiary.
3.3 Authority; No Violation.
(a) DS Bancor has full corporate power and authority to
execute and deliver this Agreement and the Option Agreement and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved by the Board
of Directors of DS Bancor. The Board of Directors of DS Bancor has directed that
this Agreement and the transactions contemplated hereby be submitted to DS
Bancor's shareholders for approval at a special meeting of such shareholders
and, except for the adoption of this Agreement by the requisite vote of DS
Bancor's shareholders, no other corporate proceedings on the part of DS Bancor
(except for matters related to setting the date, time, place and record date for
the special meeting) are necessary to approve this Agreement or the Option
Agreement or to consummate the transactions contemplated hereby or thereby. This
Agreement has been, and the Option Agreement will be, duly and validly executed
and delivered by DS Bancor and (assuming due authorization, execution and
delivery by Webster and Merger Sub of this Agreement and by Webster of the
Option Agreement) will constitute valid and binding obligations of DS Bancor,
enforceable against DS Bancor in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Derby has full corporate power and authority to execute
and deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly approved by the Board of Directors of Derby and by DS Bancor as the sole
shareholder of Derby. No other corporate proceedings on the part of Derby will
be necessary to consummate the transactions contemplated thereby. The Bank
Merger Agreement, upon execution and delivery by Derby, will be duly and validly
executed and delivered by Derby and will (assuming due
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<PAGE>
authorization, execution and delivery by Webster Bank) constitute a valid and
binding obligation of Derby, enforceable against Derby in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(c) Neither the execution and delivery of this Agreement and
the Option Agreement by DS Bancor or the Bank Merger Agreement by Derby, nor the
consummation by DS Bancor or Derby, as the case may be, of the transactions
contemplated hereby or thereby, nor compliance by DS Bancor or Derby with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
Certificate of Incorporation or By-Laws of DS Bancor or the Certificate of
Incorporation or By-Laws of Derby, or (ii) assuming that the consents and
approvals referred to in Section 3.4 hereof are duly obtained, (x) violate any
Laws (as defined in Section 9.13) applicable to DS Bancor or Derby, or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of DS Bancor or
Derby under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which DS Bancor or Derby is a party, or by which
they or any of their respective properties or assets may be bound or affected.
3.4 Consents and Approvals.
(a) Except for (i) the filing of applications and notices, as
applicable, as to the Merger and the Bank Merger with the FRB under the BHCA and
the Office of Thrift Supervision ("OTS") under the Home Owners Loan Act of 1933
("HOLA") and the Bank Merger Act and approval of such applications and notices,
(ii) the filing of any required applications or notices with the FDIC and OTS as
to the subsidiary activities of Derby which become service corporation or
operating subsidiaries of Webster Bank and approval of such applications and
notices, (iii) the filing of applications and notices with the Banking
Commissioner of the State of Connecticut (the "Connecticut Commissioner") and
approval of such applications and notices as to the Merger and the Bank Merger
(the "State Banking Approvals"), (iv) the filing with the Connecticut
Commissioner of an acquisition statement pursuant to Section 36a-184 of the
Banking Law of the State of Connecticut prior to the acquisition of more than
10% of the DS Bancor Common Stock pursuant to the Option Agreement, if not
exempt, (v) the filing with the SEC of a registration statement on Form S-4 to
register the shares of Webster Common Stock to be issued in connection with the
Merger (including the shares of Webster Common Stock that may be issued upon the
exercise of the options referred to in Section 1.6 hereof), which will include
the joint proxy statement/prospectus to be used in soliciting the approval of DS
Bancor's shareholders at a special meeting to be held in connection with this
Agreement and the transactions contemplated hereby (the "Proxy
Statement/Prospectus"), (vi) the approval of this Agreement by the requisite
vote of the shareholders of DS Bancor, (vii) the approval for the issuance of
Webster Common Stock hereunder by a majority of shares of Webster Common Stock
voted at a meeting of Webster shareholders at which a quorum is present, (viii)
the filing of the Certificate of Merger with the Secretary of State pursuant to
the DGCL, (ix) the filings required by the Bank Merger Agreement, (x) the
filings required for the Subsidiary Merger, and (xi) such filings,
authorizations or approvals as may be set forth in Section 3.4 of the DS Bancor
Disclosure Schedule, no consents or approvals of or filings or registrations
with any court, administrative agency or commission or other governmental
authority or instrumentality (each a "Governmental Entity"), or with any third
party are necessary in connection with (1) the execution and delivery by DS
Bancor of this Agreement and the Option Agreement, (2) the consummation by DS
Bancor of the Merger and the other transactions contemplated hereby, (3) the
execution and delivery by Derby of the Bank Merger Agreement, (4) the
consummation by DS Bancor of the Option Agreement; and (5) the consummation by
Derby of the Bank Merger and the transactions contemplated thereby,
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except, in each case, for such consents, approvals or filings, the failure of
which to obtain will not have a material adverse effect on the ability of
Webster to consummate the transactions contemplated hereby.
(b) DS Bancor hereby represents to Webster that it has no
knowledge of any reason why approval or effectiveness of any of the
applications, notices or filings referred to in Section 3.4(a) cannot be
obtained or granted on a timely basis.
3.5 Loan Portfolio; Reports.
(a) As of September 30, 1996 and thereafter through and
including the date of this Agreement, neither DS Bancor nor Derby is a party to
any written or oral loan agreement, note or borrowing arrangement (including,
without limitation, leases, credit enhancements, commitments, guarantees and
interest-bearing assets) (collectively, "Loans"), with any director, officer or
five percent or greater shareholder of DS Bancor or any of its Subsidiaries, or
any Affiliated Person (as defined in Section 9.13) of the foregoing.
(b) DS Bancor and Derby have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since September 30, 1996
with (i) the FRB, (ii) the FDIC, (iii) the Connecticut Commissioner and any
other state banking commissions or any other state regulatory authority (each a
"State Regulator"), (iv) the SEC and (v) any other self-regulatory organization
("SRO") (collectively "Regulatory Agencies"). Except for normal examinations
conducted by a Regulatory Agency in the regular course of the business of DS
Bancor and its Subsidiaries, no Governmental Entity is conducting, or has
conducted, any proceeding or investigation into the business or operations of DS
Bancor or Derby since September 30, 1993.
3.6 Financial Statements; Exchange Act Filings; Books and Records.
DS Bancor has previously delivered to Webster true, correct and
complete copies of (a) the consolidated statements of position of DS Bancor and
its Subsidiaries as of December 31 for the fiscal years 1993 and 1994, and 1995
and the related consolidated statements of earnings, stockholders' equity and
cash flows for the fiscal years 1992 through 1995, inclusive, as reported in DS
Bancor's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
filed with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in each case accompanied by the audit report of Friedberg,
Smith & Co., P.C., independent public accountants with respect to DS Bancor, and
(b) the unaudited consolidated statements of position of DS Bancor and its
Subsidiaries as of June 30, 1996 and the related comparative unaudited
consolidated statements of earnings, cash flows and changes in stockholders'
equity for the six month periods ended June 30, 1996 and 1995 as reported in DS
Bancor's Quarterly Report on Form 10-Q filed with the SEC under the Exchange
Act. The financial statements referred to in this Section 3.6 (including the
related notes, where applicable) fairly present, and the financial statements
referred to in Section 6.9 hereof will fairly present (subject, in the case of
the unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and consolidated financial
condition of DS Bancor and its Subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth; each of such statements (including
the related notes, where applicable) comply, and the financial statements
referred to in Section 6.9 hereof will comply, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section 6.9
hereof will be prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except in
each case as indicated in such statements or in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q. DS Bancor's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 and all
subsequently filed reports under Sections 13(a), 13 (c), 14 or 15(d) of the
Exchange Act comply in all material respects with the appropriate requirements
for such reports under the Exchange Act, and DS Bancor has previously
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delivered to Webster true, correct and complete copies of such reports. The
books and records of DS Bancor and Derby have been, and are being, maintained in
all material respects in accordance with GAAP and any other applicable legal and
accounting requirements.
3.7 Broker's Fees.
Neither DS Bancor nor any DS Bancor Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement, the Bank Merger
Agreement or the Option Agreement, except that DS Bancor has engaged, and will
pay a fee or commission to Alex. Brown & Sons Incorporated in accordance with
the terms of a letter agreement, as amended, between Alex. Brown & Sons
Incorporated and DS Bancor, a true, complete and correct copy of which has been
previously delivered by DS Bancor to Webster.
3.8 Absence of Certain Changes or Events.
(a) Except as disclosed in DS Bancor's Annual Report on Form
10-K for the fiscal year ended December 31, 1995, or in any Current or Quarterly
Report of DS Bancor on Form 8-K or Form 10-Q filed prior to the date of this
Agreement, since December 31, 1995 (i) neither DS Bancor nor any of its
Subsidiaries has incurred any material liability, except as contemplated by the
Agreement or in the ordinary course of their business consistent with their past
practices, and (ii) no event has occurred which has had, or is likely to have,
individually or in the aggregate, a Material Adverse Effect (as defined Section
9.13) on DS Bancor.
(b) Since December 31, 1995 DS Bancor and its Subsidiaries
have carried on their respective businesses in the ordinary and usual course
consistent with their past practices.
3.9 Legal Proceedings.
(a) Neither DS Bancor nor any of its Subsidiaries is a party
to any, and there are no pending or threatened, legal, administrative,
arbitration or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against DS Bancor or any of its Subsidiaries in
which there is a reasonable probability of any material recovery against or
other material effect upon DS Bancor or any of its Subsidiaries or which
challenge the validity or propriety of the transactions contemplated by this
Agreement, the Bank Merger Agreement or the Option Agreement as to which there
is a reasonable probability of success.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon DS Bancor, any of its Subsidiaries or the
assets of DS Bancor or any of its Subsidiaries.
3.10 Taxes and Tax Returns.
Each of DS Bancor and its Subsidiaries has duly filed all Federal and
state tax returns required to be filed by it on or prior to the date hereof (all
such returns being accurate and complete in all material respects) and has duly
paid or made provisions for the payment of all material taxes and other
governmental charges which have been incurred or are due or claimed to be due
from it by Federal and state taxing authorities on or prior to the date hereof
other than taxes or other charges (a) which (x) are not yet delinquent or (y)
are being contested in good faith and set forth in Section 3.10 of the DS Bancor
Disclosure Schedule and (b) which have not been finally determined. All
liability with respect to the income tax returns of DS Bancor and its
Subsidiaries has been satisfied for all years to and including 1995. The
Internal Revenue Service ("IRS") has not notified DS Bancor of, or otherwise
asserted, that there are any material deficiencies with respect to the income
tax returns of DS Bancor subsequent to 1993. There are no material disputes
pending, or claims asserted for, Taxes or assessments upon DS Bancor or any of
its Subsidiaries, nor has DS Bancor or any of its Subsidiaries been requested to
give
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any currently effective waivers extending the statutory period of limitation
applicable to any Federal or state income tax return for any period. In
addition, Federal and state returns which are accurate and complete in all
material respects have been filed by DS Bancor and its Subsidiaries for all
periods for which returns were due with respect to income tax withholding,
Social Security and unemployment taxes and the amounts shown on such Federal and
state returns to be due and payable have been paid in full or adequate provision
therefor has been included by DS Bancor in its consolidated financial statements
as of December 31, 1995.
3.11 Employee Plans.
(a) Section 3.11 of the DS Bancor Disclosure Schedule sets
forth a true and complete list of each employee benefit plan (within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), arrangement or agreement that is maintained as of the date
of this Agreement (the "Plans") by DS Bancor or any of its Subsidiaries, all of
which together with DS Bancor would be deemed a "single employer" within the
meaning of Section 4001 of ERISA or Code Sections 414(b), (c) or (m)).
(b) DS Bancor has heretofore delivered to Webster true,
correct and complete copies of each of the Plans and all related documents,
including but not limited to (i) the actuarial report for such Plan (if
applicable) for each of the last five years, (ii) the most recent determination
letter from the Internal Revenue Service (if applicable) for such Plan, (iii)
the current summary plan description and any summaries of material modification,
(iv) all annual reports (Form 5500 series) for each Plan filed for the preceding
five plan years, (v) all agreements with fiduciaries and service providers
relating to the Plan, and (vi) all substantive correspondence relating to any
such Plan addressed to or received from the Internal Revenue Service, the
Department of Labor, the Pension Benefit Guaranty Corporation or any other
governmental agency.
(c) (i) Each of the Plans has been operated and in all
material respects administered in compliance with applicable Laws, including but
not limited to ERISA and the Code, (ii) each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified,
(iii) with respect to each Plan which is subject to Title IV of ERISA, the
present value of accrued benefits under such Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Plan's actuary with respect to such Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such Plan
allocable to such accrued benefits, (iv) no Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former employees of DS Bancor or any DS Bancor Subsidiary
beyond their retirement or other termination of service, other than (w) coverage
mandated by applicable Law, (x) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the books of DS Bancor
or any DS Bancor Subsidiary, or (z) benefits the full cost of which is borne by
the current or former employee (or his beneficiary), (v) no liability under the
Title IV of ERISA has been incurred by DS Bancor or any DS Bancor Subsidiary
that has not been satisfied in full, and no condition exists that presents a
material risk to DS Bancor or any DS Bancor Subsidiary incurring a material
liability thereunder, (vi) no Plan is a "multi employer pension plan," as such
term is defined in Section 3(37) of ERISA, (vii) all contributions or other
amounts payable by DS Bancor or any DS Bancor Subsidiary as of the Effective
Time with respect to each Plan in respect of current or prior plan years have
been paid or accrued in accordance with generally accepted accounting practices
and Section 412 of the Code, (viii) neither DS Bancor nor any DS Bancor
Subsidiary has engaged in a transaction in connection with which DS Bancor or
any DS Bancor Subsidiary could be subject to either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section
4975 or 4976 of the Code, (ix) to the knowledge of DS Bancor, there are no
pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the plans or any trusts related
thereto, and (x) all Plans (other than Plans providing for the payment of
benefits from the general assets of DS Bancor or any DS Bancor Subsidiary) could
be terminated as of the Effective Time without
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material liability; (xi) no Plan, program, agreement or other arrangement,
either individually or collectively, provides for any payment by DS Bancor or
any DS Bancor Subsidiary that would not be deductible under Code Sections
162(a)(1) or 404 or that would constitute a "parachute payment" within the
meaning of Code Section 280G; (xii) no "accumulated funding deficiency" as
defined in Section 302(a)(2) of ERISA or Section 412 of the Code, whether or not
waived, and no "unfunded current liability" as determined under Section 412(l)
of the Code exists with respect to any Plan; and (xiii) no Plan has experienced
a "reportable event" (as such term is defined in Section 4043(b) of ERISA) that
is not subject to an administrative or statutory waiver from the reporting
requirement.
3.12 Certain Contracts.
(a) Neither DS Bancor nor any of its Subsidiaries is a party
to or bound by any contract, arrangement or commitment (i) with respect to the
employment of any directors, officers, employees or consultants, (ii) which,
upon the consummation of the transactions contemplated by this Agreement or the
Bank Merger Agreement will (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of severance pay or
otherwise) becoming due from Webster, DS Bancor, Derby, the Surviving
Corporation, Webster Bank or any of their respective Subsidiaries to any
director, officer or employee thereof, (iii) which materially restricts the
conduct of any line of business by DS Bancor or Derby, (iv) with or to a labor
union or guild (including any collective bargaining agreement) or (v) (including
any stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the Bank Merger Agreement,
or the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement or the Bank Merger
Agreement. DS Bancor has previously delivered to Webster true, correct and
complete copies of all employment, consulting and deferred compensation
agreements to which DS Bancor or any of its Subsidiaries is a party. Section
3.12(a) of the DS Bancor Disclosure Schedule sets forth a list of all material
contracts (as defined in Item 601(b)(10) of Regulation S-K) of DS Bancor. Each
contract, arrangement or commitment of the type described in this Section
3.12(a), whether or not set forth in Section 3.12(a) of the DS Bancor Disclosure
Schedule, is referred to herein as a "DS Bancor Contract," and neither DS Bancor
nor any of its Subsidiaries has received notice of, nor do any executive
officers of such entities know of, any violation of any DS Bancor Contract.
(b) (i) Each DS Bancor Contract is valid and binding and in
full force and effect, (ii) DS Bancor and each of its Subsidiaries has in all
material respects performed all obligations required to be performed by it to
date under each DS Bancor Contract, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of DS Bancor or any of its Subsidiaries under any
such DS Bancor Contract.
3.13 Agreements with Regulatory Agencies.
Neither DS Bancor nor Derby is subject to any cease-and-desist or other
order issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or has adopted any board resolutions at the
request of (each, whether or not set forth on Section 3.13 of the DS Bancor
Disclosure Schedule, a "Regulatory Agreement"), any Governmental Entity that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor has
DS Bancor or Derby been advised by any Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement.
3.14 State Takeover Laws.
The Board of Directors of DS Bancor has approved the offer of Webster
to enter into this Agreement, this Agreement, the Bank Merger Agreement and the
Option Agreement such that the provisions of Section 203 of the DGCL Article 10
Subsection 4 and Article 12 Subsection 1 of DS
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Bancor's Certificate of Incorporation will not, assuming the accuracy of the
representations contained in Section 4.8 hereof, apply to the offer to enter
into this Agreement, this Agreement, the Bank Merger Agreement or the Option
Agreement or any of the transactions contemplated hereby or thereby.
3.15 Environmental Matters.
(a) Each of DS Bancor and the DS Bancor Subsidiaries is in
compliance in all material respects with all applicable federal and state laws
and regulations relating to pollution or protection of the environment
(including without limitation, laws and regulations relating to emissions,
discharges, releases and threatened releases of Hazardous Material (as
hereinafter defined), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials;
(b) There is no suit, claim, action, proceeding, investigation
or notice pending or to the knowledge of DS Bancor and Derby Savings Bank's
executive officers or of such other officers who such executive officers deem
appropriate as set forth on the DS Bancor Disclosure Schedule threatened (or
past or present actions or events that could form the basis of any such suit,
claim, action, proceeding, investigation or notice), in which DS Bancor or any
DS Bancor Subsidiary has been or, with respect to threatened suits, claims,
actions, proceedings, investigations or notices may be, named as a defendant (x)
for alleged material noncompliance (including by any predecessor), with any
environmental law, rule or regulation or (y) relating to any material release or
threatened release into the environment of any Hazardous Material, whether or
not occurring at or on a site owned, leased or operated by DS Bancor or any DS
Bancor Subsidiary;
(c) To the knowledge of DS Bancor and Derby Savings Bank's
executive officers or of such other officers who such executive officers deem
appropriate as set forth on the DS Bancor Disclosure Schedule, during the period
of DS Bancor's or any DS Bancor Subsidiary's ownership or operation of any of
its properties, there has not been any material release of Hazardous Materials
in, on, under or affecting any such property.
(d) To the knowledge of DS Bancor and Derby Savings Bank's
executive officers or of such other officers who such executive officers deem
appropriate as set forth on the DS Bancor Disclosure Schedule, neither DS Bancor
nor any DS Bancor Subsidiary has made or participated in any loan to any person
who is subject to any suit, claim, action, proceeding, investigation or notice,
pending or threatened, with respect to (i) any alleged material noncompliance as
to any property securing such loan with any environmental law, rule or
regulation, or (ii) the release or the threatened release into the environment
of any Hazardous Material at a site owned, leased or operated by such person on
any property securing such loan.
(e) For purposes of this section 3.15, the term "Hazardous
Material" means any hazardous waste, petroleum product, polychlorinated
biphenyl, chemical, pollutant, contaminant, pesticide, radioactive substance, or
other toxic material, or other material or substance (in each such case, other
than small quantities of such substances in retail containers) regulated under
any applicable environmental or public health statute, law, ordinance, rule or
regulation.
3.16 Reserves for Losses.
All reserves or other allowances for possible losses reflected in DS
Bancor's most recent financial statements referred to in Section 3.6 complied
with all Laws and are adequate under GAAP. Neither DS Bancor nor Derby has been
notified by the OTS, the FDIC, the Connecticut Commissioner or DS Bancor's
independent auditor, in writing or otherwise, that such reserves are inadequate
or that the practices and policies of DS Bancor or Derby in establishing such
reserves and in accounting for delinquent and classified assets generally fail
to comply with applicable accounting or regulatory requirements, or that the
OTS, the FDIC, the Connecticut Commissioner or DS Bancor's independent
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auditor believes such reserves to be inadequate or inconsistent with the
historical loss experience of DS Bancor or Derby. DS Bancor has previously
furnished Webster with a complete list of all extensions of credit and other
real estate owned ("OREO") that have been classified by any bank examiner
(regulatory or internal) as other loans specially mentioned, special mention,
substandard, doubtful, loss, classified or criticized, credit risk assets,
concerned loans or words of similar import. DS Bancor agrees to update such list
no less frequently than monthly after the date of this Agreement until the
earlier of the Closing Date or the date that this Agreement is terminated in
accordance with Section 8.1. All OREO held by DS Bancor or Derby is being
carried net of reserves at the lower of cost or net realizable value.
3.17 Properties and Assets.
Section 3.17 of the DS Bancor Disclosure Schedule lists (i) all real
property owned by DS Bancor and each DS Bancor Subsidiary; (ii) each real
property lease, sublease or installment purchase arrangement to which DS Bancor
or any DS Bancor Subsidiary is a party; (iii) a description of each contract for
the purchase, sale, or development of real estate to which DS Bancor or any DS
Bancor Subsidiary is a party; and (iv) all items of DS Bancor's or any DS Bancor
Subsidiary's tangible personal property and equipment with a book value of
$50,000 or more or having any annual lease payment of $25,000 or more. Except
for (a) items reflected in DS Bancor's consolidated financial statements as of
December 31, 1995 referred to in Section 3.6 hereof, (b) exceptions to title
that do not interfere materially with DS Bancor's or any DS Bancor Subsidiary's
use and enjoyment of owned or leased real property (other than OREO), (c) liens
for current real estate taxes not yet delinquent, or being contested in good
faith, properly reserved against (and reflected on the financial statements
referred to in Section 3.6 above), (d) properties and assets sold or transferred
in the ordinary course of business consistent with past practices since December
31, 1995, and (e) items listed in Section 3.17 of the DS Bancor Disclosure
Schedule, DS Bancor and each DS Bancor Subsidiary have good and, as to owned
real property, marketable and insurable title to all their properties and
assets, reflected in its consolidated financial statements of DS Bancor as of
December 31, 1995, free and clear of all liens, claims, charges and other
encumbrances. DS Bancor and each DS Bancor Subsidiary, as lessees, have the
right under valid and subsisting leases to occupy, use and possess all property
leased by them, and there has not occurred under any such lease any material
breach, violation or default by DS Bancor or Derby, and neither DS Bancor nor
any DS Bancor Subsidiary has experienced any material uninsured damage or
destruction with respect to such properties since December 31, 1995. All
properties and assets used by DS Bancor and each DS Bancor Subsidiary are in
good operating condition and repair suitable for the purposes for which they are
currently utilized and comply in all material respects with all Laws relating
thereto now in effect or scheduled to come into effect. DS Bancor and each DS
Bancor Subsidiary enjoy peaceful and undisturbed possession under all leases for
the use of all property under which they are the lessees, and all leases to
which DS Bancor or any DS Bancor Subsidiary is a party are valid and binding
obligations in accordance with the terms thereof. Neither DS Bancor nor any DS
Bancor Subsidiary is in material default with respect to any such lease, and
there has occurred no default by DS Bancor or Derby or event which with the
lapse of time or the giving of notice, or both, would constitute a material
default under any such lease. There are no Laws, conditions of record, or other
impediments which interfere with the intended use by DS Bancor or any DS Bancor
Subsidiary of any of the property owned, leased, or occupied by them.
3.18 Insurance.
Section 3.18 of the DS Bancor Disclosure Schedule contains a true,
correct and complete a list of all insurance policies and bonds maintained by DS
Bancor and any DS Bancor Subsidiary, including the name of the insurer, the
policy number, the type of policy and any applicable deductibles, and all such
insurance policies and bonds (or other insurance policies and bonds that have,
from time to time, in respect of the nature of the risks insured against and
amount of coverage provided, been substantially similar in kind and amount to
that customarily carried by parties similarly situated who own properties and
engage in businesses substantially similar to that of DS Bancor and any DS
Bancor
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Subsidiary) are in full force and effect and have been in full force and effect.
As of the date hereof, neither DS Bancor nor any DS Bancor Subsidiary has
received any notice of cancellation or amendment of any such policy or bond or
is in default under any such policy or bond, no coverage thereunder is being
disputed and all material claims thereunder have been filed in a timely fashion.
The existing insurance carried by DS Bancor and DS Bancor Subsidiaries is and
will continue to be, in respect of the nature of the risks insured against and
the amount of coverage provided, substantially similar in kind and amount to
that customarily carried by parties similarly situated who own properties and
engage in businesses substantially similar to that of DS Bancor and the DS
Bancor Subsidiaries, and is sufficient for compliance by DS Bancor and the DS
Bancor Subsidiaries with all requirements of Law and agreements to which DS
Bancor or any of the DS Bancor Subsidiaries is subject or is party. True,
correct and complete copies of all such policies and bonds reflected at Section
3.18 of the DS Bancor Disclosure Statement, as in effect on the date hereof,
have been delivered to Webster.
3.19 Liquidation Account.
The liquidation account established by Derby in connection with its
conversion from the mutual to stock form has been eliminated as provided under
Connecticut law.
3.20 Compliance with Applicable Laws.
Each of DS Bancor and any DS Bancor Subsidiary has complied in all
material respects with all Laws applicable to it or to the operation of its
business. Neither DS Bancor nor any DS Bancor Subsidiary has received any notice
of any material alleged or threatened claim, violation, or liability under any
such Laws that has not heretofore been cured and for which there is no remaining
liability.
3.21 Loans.
As of the date hereof:
(a) All loans owned by DS Bancor or any DS Bancor Subsidiary,
or in which DS Bancor or any DS Bancor Subsidiary has an interest, comply in all
material respects with all Laws, including, but not limited to, applicable usury
statutes, underwriting and recordkeeping requirements and the Truth in Lending
Act, the Equal Credit Opportunity Act, and the Real Estate Procedures Act, and
other applicable consumer protection statutes and the regulations thereunder.
(b) All loans owned by DS Bancor or any DS Bancor Subsidiary,
or in which DS Bancor or any DS Bancor Subsidiary has an interest, have been
made or acquired by DS Bancor in accordance with board of director-approved loan
policies and all of such loans are collectible, except to the extent reserves
have been made against such loans in DS Bancor's consolidated financial
statements at June 30, 1996 referred to in Section 3.6 hereof. Each of DS Bancor
and each DS Bancor Subsidiary holds mortgages contained in its loan portfolio
for its own benefit to the extent of its interest shown therein; such mortgages
evidence liens having the priority indicated by their terms, subject, as of the
date of recordation or filing of applicable security instruments, only to such
exceptions as are discussed in attorneys' opinions regarding title or in title
insurance policies in the mortgage files relating to the loans secured by real
property or are not material as to the collectability of such loans; and all
loans owned by DS Bancor and each DS Bancor Subsidiary are with full recourse to
the borrowers, and each of DS Bancor and any DS Bancor Subsidiary has taken no
action which would result in a waiver or negation of any rights or remedies
available against the borrower or guarantor, if any, on any loan. All applicable
remedies against all borrowers and guarantors are enforceable except as may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights and except as may be limited by the exercise of judicial
discretion in applying principles of equity. All loans purchased or originated
by DS Bancor or any DS Bancor Subsidiary and subsequently sold by DS Bancor or
any DS Bancor Subsidiary have been sold without recourse to DS Bancor or any DS
Bancor Subsidiary and without any liability under any yield maintenance or
similar obligation. True,
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correct and complete copies of loan delinquency reports as of August 31, 1996
prepared by DS Bancor and each DS Bancor Subsidiary, which reports include all
loans delinquent or otherwise in default, have been furnished to Webster. True,
correct and complete copies of the currently effective lending policies and
practices of DS Bancor and each DS Bancor Subsidiary also have been furnished to
Webster.
(c) Each outstanding loan participation sold by DS Bancor or
any DS Bancor Subsidiary was sold with the risk of non-payment of all or any
portion of that underlying loan to be shared by each participant (including DS
Bancor or any DS Bancor Subsidiary) proportionately to the share of such loan
represented by such participation without any recourse of such other lender or
participant to DS Bancor or any DS Bancor Subsidiary for payment or repurchase
of the amount of such loan represented by the participation or liability under
any yield maintenance or similar obligation. DS Bancor and any DS Bancor
Subsidiary have properly fulfilled in all material respects its contractual
responsibilities and duties in any loan in which it acts as the lead lender or
servicer and has complied in all material respects with its duties as required
under applicable regulatory requirements.
(d) DS Bancor and each DS Bancor Subsidiary have properly
perfected or caused to be properly perfected all security interests, liens, or
other interests in any collateral securing any loans made by it.
3.22 Affiliates; Certain Executive Officers.
Each director and 5% or greater shareholder and any other person who is
an "affiliate" (for purposes of Rule 145 under the Securities Act and for
purposes of qualifying the Merger for "pooling-of-interests" accounting
treatment) of DS Bancor has delivered to Webster, concurrently with the
execution of this Agreement, a shareholders agreement in the form of Exhibit C
hereto (the "Stockholders Agreement"). The Stockholders Agreement has been duly
and validly executed and delivered by each person that is a party thereto
(assuming due authorization, execution and delivery by Webster and/or DS Bancor,
as applicable) and constitutes the valid and binding obligation of such person,
enforceable against such person in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
3.23 Ownership of Webster Common Stock.
Neither DS Bancor nor any of its direct or indirect subsidiaries (i)
beneficially own, directly or indirectly, or (ii) is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding or voting,
any shares of outstanding capital stock of Webster.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WEBSTER
Webster hereby represents and warrants to DS Bancor as follows:
4.1 Corporate Organization.
(a) Webster is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Webster has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
Webster is duly registered as a savings and loan holding company with the OTS
under HOLA. The Certificate of Incorporation and By-Laws of Webster, copies
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of which have previously been made available to DS Bancor, are true, correct and
complete copies of such documents as in effect as of the date of this Agreement.
(b) Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(c) Webster Bank is a federal savings bank chartered by the
OTS under the laws of the United States with its main office in the State of
Connecticut. Webster Bank has the corporate power and authority to own or lease
all of its properties and assets and to carry on business as is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such licensing or
qualification necessary. The Charter and By-Laws of Webster Bank, copies of
which have previously been made available to DS Bancor, are true, correct and
complete copies of such documents as in effect as of the date of this Agreement.
4.2 Capitalization.
(a) The authorized capital stock of Webster consists of
14,000,000 shares of Webster Common Stock, of which 8,108,472 shares were
outstanding (net of 394,424 treasury shares) at September 30, 1996 and 3,000,000
shares of serial preferred stock, par value $.01 per share ("Webster Preferred
Stock"), of which 150,869 shares of Series B Cumulative Convertible Preferred
Stock (the "Series B Stock") were outstanding at September 30, 1996. At such
date, there were options outstanding to purchase 596,940 shares of Webster
Common Stock. All of the issued and outstanding shares of Webster Common Stock
and Series B Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except as
set forth above, Webster does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Webster Common
Stock or Webster Preferred Stock or any other equity securities of Webster or
any securities presenting the right to purchase or otherwise receive any shares
of Webster Common Stock or Webster Preferred Stock, other than a warrant to
purchase 300,000 shares of Webster Common Stock issued to Fleet Financial Group
and a contingent payment arrangement with Fleet Financial Group as described in
the Form 8-K filed by Webster with the Securities and Exchange Commission for
such event. The shares of Webster Common Stock to be issued pursuant to the
Merger are authorized and, at the Effective Time, all such shares will be
validly issued, fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof.
(b) The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, par value $.01 per share, all of which are issued
and outstanding and owned by Webster free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are duly
authorized and validly issued and fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to ownership thereof.
(c) The authorized capital stock of Webster Bank consists of
1,000 shares of common stock, par value $.01 per share, all of which are issued
and outstanding. The outstanding shares of common stock of Webster Bank are
owned by Webster free and clear of all liens, charges, encumbrances and security
interests whatsoever, and all of such shares are duly authorized and validly
issued and fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to ownership thereof.
4.3 Authority; No Violation.
(a) Webster has full corporate power and authority to execute
and deliver this Agreement and the Option Agreement and to consummate the
transactions contemplated hereby and
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thereby. The execution and delivery of this Agreement and the Option Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Webster. No other corporate
proceedings on the part of Webster are necessary to consummate the transactions
contemplated hereby, except for the approval of this Agreement by a majority of
shares of Webster Common Stock voted at a meeting of Webster's shareholders at
which a quorum is present. This Agreement has been, and the Option Agreement
will be, duly and validly executed and delivered by Webster and (assuming due
authorization, execution and delivery by DS Bancor) will constitute valid and
binding obligations of Webster, enforceable against Webster in accordance with
their terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar law affecting creditors' rights and remedies generally.
(b) Merger Sub has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Merger Sub and by Webster as the sole
shareholder of Merger Sub. No other corporate proceedings on the part of Merger
Sub will be necessary to consummate the transactions contemplated hereby. This
Agreement, upon execution and delivery by Merger Sub, will be duly and validly
executed and delivered by Merger Sub and will (assuming due authorization,
execution and delivery by DS Bancor) constitute a valid and binding obligation
of Merger Sub, enforceable against Merger Sub in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
(c) Webster Bank has full corporate power and authority to
execute and deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby will be duly and
validly approved by the Board of Directors of Webster Bank and by Webster as the
sole shareholder of Webster Bank prior to the Effective Time. All corporate
proceedings on the part of Webster Bank necessary to consummate the transactions
contemplated thereby will have been taken prior to the Effective Time. The Bank
Merger Agreement, upon execution and delivery by Webster Bank, will be duly and
validly executed and delivered by Webster Bank and will (assuming due
authorization, execution and delivery by Derby) constitute a valid and binding
obligation of Webster Bank, enforceable against Webster Bank in accordance with
its terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(d) Except as set forth in Section 4.3(d) of the disclosure
schedule which is being delivered by Webster to DS Bancor concurrently herewith
(the "Webster Disclosure Schedule"), neither the execution and delivery of this
Agreement by Webster or Merger Sub, the Option Agreement by Webster or the Bank
Merger Agreement by Webster Bank, nor the consummation by Webster, Merger Sub or
Webster Bank, as the case may be, of the transactions contemplated hereby or
thereby, nor compliance by Webster, Merger Sub or Webster Bank with any of the
terms or provisions hereof or thereof, will (i) violate any provision of the
Certificate of Incorporation or ByLaws of Webster, the Certificate of
Incorporation or By-Laws of Merger Sub or the Charter or By-Laws of Webster
Bank, as the case may be, or (ii) assuming that the consents and approvals
referred to in Section 4.4 are duly obtained, (x) violate any Laws applicable to
Webster, Merger Sub, Webster Bank or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the respective
properties or assets of Webster, Webster Bank or Merger Sub under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
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Webster, Webster Bank or Merger Sub is a party, or by which they or any of their
respective properties or assets may be bound or affected.
4.4 Regulatory Approvals.
(a) Except for (i) the filing of applications and notices, as
applicable, as to the Merger and the Bank Merger with the FRB under the BHCA and
the OTS under HOLA and the Bank Merger Act and approval of such applications and
notices, (ii) the filing of any required applications or notices with the FDIC
and OTS as to the subsidiary activities of Derby which become service
corporation or operating subsidiaries of Webster Bank and approval of such
applications and notices, (iii) the State Banking Approvals, (iv) the filing
with the Connecticut Commissioner of an acquisition statement pursuant to
Section 36a-184 of the Banking Law of the State of Connecticut prior to the
acquisition of more than 10% of the DS Bancor Common Stock pursuant to the
Option Agreement, if not exempt, (v) the filing with the SEC of a registration
statement on Form S-4 to register the shares of Webster Common Stock to be
issued in connection with the Merger (including the shares of Webster Common
Stock that may be issued upon the exercise of the options referred to in Section
1.6 hereof), which will include the Proxy Statement/Prospectus, (vi) the
approval of this Agreement by the requisite vote of the shareholders of DS
Bancor, (vii) the approval for the issuance of Webster Common Stock hereunder by
a majority of shares of Webster Common Stock voted at a meeting of Webster's
shareholders at which a quorum is present, (viii) the filing of the Certificate
of Merger with the Secretary of State pursuant to the DGCL, (ix) the filings
required by the Bank Merger Agreement, (x) the filings required for the
Subsidiary Merger, and (xi) such filings and approvals as are required to be
made or obtained under the securities or "Blue Sky" laws of various states or
with Nasdaq (or such other exchange as may be applicable) in connection with the
issuance of the shares of Webster Common Stock pursuant to this Agreement, no
consents or approvals of or filings or registrations with any Governmental
Entity are necessary in connection with (1) the execution and delivery by
Webster and Merger Sub of this Agreement and the Option Agreement, (2) the
consummation by Webster and Merger Sub of the Merger and the other transactions
contemplated hereby, (3) the execution and delivery by Webster Bank of the Bank
Merger Agreement, and (4) the consummation by Webster Bank of the transactions
contemplated by the Bank Merger Agreement except for such consents, approvals or
filings the failure of which to obtain will not have a material adverse effect
on the ability of DS Bancor, Inc. to consummate the transactions contemplated
thereby.
(b) Webster hereby represents to DS Bancor that it has no
knowledge of any reason why approval or effectiveness of any of the
applications, notices or filings referred to in Section 4.4(a) cannot be
obtained or granted on a timely basis.
(c) Webster and Webster Bank have filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since June 30, 1995, with
(i) OTS, (ii) the Connecticut Commissioner and any other state banking
commissions or any other state regulatory authority (each a "State Regulator"),
(iii) the SEC and (iv) any other self-regulatory organization ("SRO")
(collectively "Regulatory Agencies"). Except for normal examinations conducted
by a Regulatory Agency in the regular course of the business of Webster and its
Subsidiaries, no Governmental Entity is conducting, or has conducted, any
proceeding or investigation into the business or operations of Webster since
September 30, 1993.
4.5 Financial Statements; Exchange Act Filings; Books and Records.
Webster has previously delivered to DS Bancor true, correct and
complete copies of (a) the consolidated balance sheets of Webster and its
Subsidiaries as of December 31 for the fiscal years 1994 and 1995 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the fiscal years 1993 through 1995, inclusive, as reported in
Webster's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
filed with the SEC under the Exchange Act, in each case accompanied by the audit
report of KPMG Peat Marwick LLP, independent public accountants
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with respect to Webster, and (b) the unaudited consolidated balance sheet of
Webster and its Subsidiaries as of June 30, 1996 and the related comparative
unaudited consolidated statements of income, changes in shareholders' equity and
cash flows for the three month periods then ended June 30, 1996 and 1995. The
financial statements referred to in this Section 4.5 (including the related
notes, where applicable) fairly present, and the financial statements referred
to in Section 6.9 hereof will fairly present (subject, in the case of the
unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and consolidated financial
condition of Webster and its Subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth; each of such statements (including
the related notes, where applicable) comply, and the financial statements
referred to in Section 6.9 hereof will comply, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section 6.9
hereof will be, prepared in accordance with GAAP consistently applied during the
periods involved, except as indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q. Webster's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 and all subsequently filed
reports under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act comply in
all material respects with the appropriate requirements for such reports under
the Exchange Act, and Webster has previously delivered to DS Bancor true,
correct and complete copies of such reports. The books and records of Webster
and First Federal have been, and are being, maintained in all material respects
in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
4.6 Absence of Certain Changes or Events.
Except as may be set forth in Section 4.6 of the Webster Disclosure
Schedule, or as disclosed in Webster's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, true, correct and complete copies of which have
previously been delivered to DS Bancor, since December 31, 1995, no event has
occurred which has had, individually or in the aggregate, a Material Adverse
Effect on Webster.
4.7 Compliance with Applicable Law.
Except as set forth in Section 4.7 of the Webster Disclosure Schedule,
Webster and each Webster Subsidiary has complied in all material respects with
all Laws applicable to it or to the operation of its business. Except as set
forth in Section 4.7 of the Webster Disclosure Schedule, neither Webster nor any
Webster Subsidiary has received any notice of any alleged or, threatened claim,
violation of or liability or potential responsibility under any such Laws that
has not heretofore been cured and for which there is no remaining liability.
4.8 Ownership of DS Bancor Common Stock; Affiliates and Associates
(a) Neither Webster nor any of its affiliates or associates
(as such terms are defined under the Exchange Act), (i) beneficially own,
directly or indirectly, or (ii) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, more than five percent of the outstanding capital stock of DS Bancor,
excluding the shares of DS Bancor Common Stock issuable pursuant to the Option
Agreement to be executed subsequent to the execution of the Agreement.
(b) Neither Webster nor any of its Subsidiaries is an
"affiliate" (as such term is defined in DGCL ss.203(c) (1)) or an "associate"
(as such term is defined in DGCL ss.203(c) (2)) of DS Bancor.
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4.9 Employee Benefit Plans.
Except as set forth in Section 4.9 of the Webster Disclosure Schedule,
Webster's proxy statement for its 1996 Annual Meeting of Shareholders sets forth
a true and complete description of each employee benefit plan arrangement or
agreement that is maintained as of the date of this Agreement (the "Webster
Plans") by Webster or any of its Subsidiaries, all of which together with
Webster would be deemed a "single employer" within the meaning of Section 4001
of ERISA. Webster has heretofore made available for inspection, or delivered (if
requested) to DS Bancor true, correct and complete copies of each of the Webster
Plans. No "accumulated funding deficiency" as defined in Section 302(a)(2) of
ERISA or Section 412 of the Code, whether or not waived, and no "unfunded
current liability" as determined under Section 412(l) of the Code exists with
respect to any Webster Plan. The Webster Plans are in compliance in all material
respects with the applicable requirements of ERISA and the Code.
4.10 Agreements with Regulatory Agencies.
Except as set forth in Section 4.10 of the Webster Disclosure Schedule,
neither Webster nor any of its affiliates is subject to any cease-and-desist or
other order issued by, or is a party to any written agreement, consent agreement
or memorandum of understanding with, or has adopted any board resolutions at the
request of any Governmental Entity that restricts the conduct of its business or
that in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor has Webster, nor Webster Bank been advised by
any Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
4.11 Reserves for Losses.
All reserves or other allowances for possible losses reflected in
Webster's most recent financial statements referred to in Section 4.5 complied
with all Laws, and Webster has not been notified by the OTS or Webster's
independent auditor, in writing or otherwise, that such reserves are inadequate
or that the practices and policies of Webster in establishing such reserves and
in accounting for delinquent and classified assets generally fail to comply with
applicable accounting or regulatory requirements, or that the OTS or Webster's
independent auditor believes such reserves to be inadequate or inconsistent with
the historical loss experience of Webster.
4.12 Legal Proceedings.
Except as set forth in Section 4.12 of the Webster Disclosure Schedule,
neither Webster nor any of its Subsidiaries is a party to any, and there are no
pending or threatened, legal, administrative proceedings, claims, actions or
governmental or regulatory investigations against Webster or any of its
Subsidiaries which challenge the validity or propriety of the transactions
contemplated by this Agreement, the Bank Merger Agreement or the Option
Agreement as to which there is a reasonable probability of success.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of DS Bancor.
During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement, the Bank Merger Agreement or the Option Agreement or with the prior
written consent of Webster, DS Bancor and each DS Bancor Subsidiary shall carry
on their respective businesses in the ordinary course consistent with past
practices and consistent with prudent banking practices. DS Bancor will use its
reasonable efforts to (x) preserve its business organization and that of each DS
Bancor Subsidiary intact, (y) keep available
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to itself and Webster the present services of the employees of DS Bancor and
each DS Bancor Subsidiary and (z) preserve for itself and Webster the goodwill
of the customers of DS Bancor and each DS Bancor Subsidiary and others with whom
business relationships exist. Without limiting the generality of the foregoing,
and except as set forth in the DS Bancor Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to by Webster in writing, DS Bancor
shall not, and shall not permit any DS Bancor Subsidiary to:
(a) declare or pay any dividends on, or make other
distributions in respect of, any of its capital stock (except for the payment of
regular quarterly cash dividends by DS Bancor of $.06 per share on the DS Bancor
Common Stock with declaration, record and payment dates corresponding to the
quarterly dividends paid by DS Bancor during its fiscal year ended December 31,
1995 and except that any DS Bancor Subsidiary may declare and pay dividends and
distributions to DS Bancor);
(b) (i) split, combine or reclassify any shares of its capital
stock or issue, authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock except
upon the exercise or fulfillment of rights or options issued or existing
pursuant to the DS Bancor Stock Plan in accordance with their present terms, all
to the extent outstanding and in existence on the date of this Agreement, and
except pursuant to the Option Agreement, or (ii) repurchase, redeem or otherwise
acquire (except for the acquisition of Trust Account Shares and DPC Shares, as
such terms are defined in Section 1.4(c) hereof), any shares of the capital
stock of DS Bancor or any DS Bancor Subsidiary, or any securities convertible
into or exercisable for any shares of the capital stock of DS Bancor or any DS
Bancor Subsidiary;
(c) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of DS Bancor Common Stock pursuant to
stock options or similar rights to acquire DS Bancor Common Stock granted
pursuant to the DS Bancor Stock Plan and outstanding prior to the date of this
Agreement, in each case in accordance with their present terms and (ii) pursuant
to the Option Agreement;
(d) amend its Certificate of Incorporation, By-Laws or other
similar governing documents;
(e) authorize or permit any of its officers, directors,
employees or agents to, directly or indirectly, solicit, initiate or encourage
any inquiries relating to, or the making of any proposal from, hold substantive
discussions or negotiations with or provide any information to, any person,
entity or group (other than Webster) concerning any Acquisition Transaction (as
defined below) (an "Acquisition Transaction"). Notwithstanding the foregoing, DS
Bancor may enter into discussions or negotiations or provide information in
connection with a possible Acquisition Transaction if the Board of Directors of
DS Bancor, 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. DS Bancor shall
promptly communicate to Webster the material terms of any proposal, whether
written or oral, which it may receive in respect of any such Acquisition
Transaction and the fact that it is having discussions or negotiations with a
third party about an Acquisition Transaction. DS Bancor will promptly cease and
cause to be terminated any existing activities, discussions or negotiations
previously conducted with any parties other than Webster with respect to any of
the foregoing. As used in this Agreement, Acquisition Transaction shall mean any
offer, proposal or expression of interest relating to (i) any tender or exchange
offer, (ii) merger, consolidation or other business combination involving DS
Bancor or any DS Bancor Subsidiary, or (iii) the acquisition in any manner of a
substantial equity interest in, or a substantial portion of the assets, out of
the ordinary course of business, of, DS Bancor or Derby other than the
transactions contemplated or permitted by this Agreement, the Bank Merger
Agreement and the Option Agreement:
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(f) make capital expenditures aggregating in excess of
$100,000, except for capital expenditures specified in DS Bancor's budget for
the fiscal year ending December 31, 1996 (the "DS Bancor 1996 Budget"), a true,
complete and correct copy of which has been provided to Webster prior to the
date hereof;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or consolidating
with, or by purchasing an equity interest in or the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any assets, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings, or in the ordinary course of business
consistent with prudent banking practices;
(i) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue or in any of the conditions to the
Merger set forth in Article VII not being satisfied, or in a violation of any
provision of this Agreement or the Bank Merger Agreement, except, in every case,
as may be required by applicable law;
(j) change its methods of accounting in effect at December 31,
1995 except as required by changes in GAAP or regulatory accounting principles
as concurred to by DS Bancor's independent auditors;
(k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any Plan or
any agreement, arrangement, plan or policy between DS Bancor or any DS Bancor
Subsidiary and one or more of its current or former directors or officers or
(ii) except for annual increases in the compensation of employees in the
ordinary course of business consistent with past practices (or in the case of
Messrs. DiAdamo, Santoro and Wells annual increases consistent with past
practices and not to exceed 6%) or except as required by applicable law, (A)
increase in any manner the compensation of any employee or director or pay any
benefit not required by any plan or agreement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares), (B) except for arrangements related to legal services provided
by Hoyle & Sponheimer, enter into, modify or renew any contract, agreement,
commitment or arrangement providing for the payment to any director, officer or
employee of compensation or benefits, (C) hire any new employee at an annual
compensation in excess of $50,000, (D) pay expenses of any non-employee
directors for attending conventions or similar meetings which conventions or
meetings are held after the date hereof, or (E) pay any retention or other
bonuses to any employees other than (i) the nineteen persons identified on the
DS Bancor Disclosure Schedule, in the aggregate and not to exceed $516,000,
which retention bonuses shall be conditioned on such persons continuing
employment with Webster Bank for a period of 120 days following the Effective
Time or (ii) as otherwise mutually agreed upon by Webster;
(l) except for short-term borrowings with a maturity of one year or
less by Derby in the ordinary course of business consistent with past practices,
incur any indebtedness for borrowed money, assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other individual, corporation or other entity;
(m) sell, purchase, enter into a lease, relocate, open or close any
banking or other office, or file an application pertaining to such action with
any Governmental Entity;
(n) make any equity investment or commitment to make such an investment
in real estate or in any real estate development project, other than in
connection with foreclosure, settlements in lieu
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of foreclosure, or troubled loan or debt restructuring, in the ordinary course
of business consistent with past banking practices;
(o) make any new loans to, modify the terms of any existing loan to, or
engage in any other transactions (other than routine banking transactions) with,
any Affiliated Person of DS Bancor or any DS Bancor Subsidiary;
(p) make any investment, or incur deposit liabilities, other than in
the ordinary course of business consistent with past practices, including
deposit pricing, and which would not change the risk profile of Derby based on
its existing deposit and primarily 1-4 family residential lending policies or
make any equity investments;
(q) purchase any loans or sell, purchase or lease any real property,
except for the sale of real estate that is the subject of a casualty loss or
condemnation or the sale of OREO on a basis consistent with past practices;
(r) originate (i) any loans except in accordance with existing Derby
lending policies, (ii) unsecured consumer loans in excess of $10,000, (iii)
commercial real estate first mortgage loans in excess of $250,000 as to any loan
or $500,000 in the aggregate as to related loans, or loans to related persons,
or (iv) land acquisition loans to borrowers who intend to construct a residence
on such land in excess of the lesser of 75% of the appraised value of such land
or $100,000, except in each case for loans for which written applications have
been received by Derby.;
(s) make any investments in derivative securities or engage in any
forward commitment, futures transaction, financial options transaction, hedging
or arbitrage transaction or covered asset trading activities;
(t) sell or purchase any mortgage loan servicing rights; or
(u) agree or commit to do any of the actions set forth in (a) - (t)
above.
The consent of Webster to any action by DS Bancor or any DS Bancor Subsidiary
that is not permitted by any of the preceding paragraphs shall be evidenced by a
writing signed by the President or any Executive Vice President of Webster.
5.2 Covenants of Webster.
During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with DS Bancor's prior written consent, Webster, and Webster Bank
shall carry on their respective businesses in the ordinary course and use all
reasonable efforts to preserve intact their present business organizations and
relationships. Without limiting the generality of the foregoing and except as
set forth on Section 5.2 of the Webster Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to in writing by DS Bancor, Webster
shall not, and shall not permit Webster Bank to:
(a) declare or pay any extraordinary or special dividends on
or make any other extraordinary or special distributions in respect of any of
its capital stock (except that Webster Bank may declare and pay extraordinary or
special dividends and distributions to Webster and except that Webster may
increase the quarterly cash dividend rate on the Webster Common Stock);
(b) take any action that will result in (i) any of Webster's
representations and warranties set forth in this Agreement being or becoming
untrue, unless the failure of such representations or warranties to be true
would not, individually or in the aggregate, have a Material Adverse Effect on
Webster, or (ii) any of the conditions to the Merger set forth in Article VII
not being
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satisfied or in a violation of any provision of this Agreement or the Bank
Merger Agreement, except, in every case, as may be required by applicable law;
(c) change its methods of accounting in effect at December
31,1995, except in accordance with changes in GAAP or regulatory accounting
principles as concurred to by Webster's independent auditors;
(d) take any other action that would materially adversely
affect or materially delay the ability of Webster to obtain the Requisite
Regulatory Approvals or otherwise materially adversely affect Webster's and
Webster Bank's ability to consummate the transactions contemplated by this
Agreement;
(e) purchase or acquire, directly or indirectly, a number of
shares of DS Bancor equal to or greater than 5% of the issued and outstanding
number of such shares of DS Bancor Common Stock; or
(f) agree or commit to do any of the actions set forth in (a)
- - (e) above.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.
(a) Upon the execution and delivery of this Agreement, Webster
and DS Bancor (as to information to be included therein pertaining to DS Bancor)
shall promptly cause to be prepared and filed with the SEC a registration
statement of Webster on Form S-4, including the Proxy Statement/Prospectus (the
"Registration Statement") for the purpose of registering the Webster Common
Stock to be issued in the Merger (including the Webster Common Stock that may be
issued upon exercise of the options referred to in Section 1.6 hereof), and for
soliciting the approval of this Agreement and the Merger by the shareholders of
DS Bancor and for soliciting the approval by the shareholders of Webster for the
issuance of the Webster Common Stock to DS Bancor's shareholders as part of the
Merger. Webster and DS Bancor shall use their best efforts to have the
Registration Statement declared effective by the SEC as soon as possible after
the filing. DS Bancor shall cooperate with Webster in responding to and
considering any questions or comments from the SEC staff regarding the
information contained in the Registration Statement concerning DS Bancor. If at
any time after the Registration Statement is filed with the SEC, and prior to
the Closing Date, any event relating to DS Bancor is discovered by DS Bancor,
which should be set forth in an amendment of, or a supplement to, the
Registration Statement, including the Prospectus/Proxy Statement, DS Bancor
shall promptly so inform Webster, and shall furnish Webster with all necessary
information relating to such event. If at any time after the Registration
Statement is filed with the SEC, and prior to the Closing Date, any event
relating to Webster is discovered by Webster, which should be set forth in an
amendment of, or a supplement to, the Registration Statement, including the
Prospectus/Proxy Statement, Webster shall promptly cause an appropriate
amendment to the Registration Statement to be filed with the SEC. Webster shall
thereupon cause an appropriate amendment to the Registration Statement to be
filed with the SEC. Upon the effectiveness of the amendment to the Registration
Statement with the SEC, DS Bancor (if prior to the meeting of DS Bancor's
shareholders pursuant to Section 6.3 hereof) will take all necessary action as
promptly as practicable to permit an appropriate amendment or supplement to be
transmitted to DS Bancor's shareholders entitled to vote at such meeting.
Webster shall also use all reasonable efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Bank Merger Agreement and DS
Bancor shall furnish all information concerning DS Bancor and the holders of DS
Bancor Common Stock as may be reasonably requested in connection with any such
action.
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(b) The parties hereto shall cooperate with each other and use
their best efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including without
limitation the Merger and the Bank Merger). DS Bancor and Webster shall have the
right to review in advance, and to the extent practicable each will consult the
other on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to DS Bancor or Webster, as the case
may be, which appear in any filing made with, or written materials submitted to,
any third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement; provided, however, that nothing contained herein
shall be deemed to provide either party with a right to review any information
provided to any Governmental Entity on a confidential basis in connection with
the transactions contemplated hereby. In exercising the foregoing right, each of
the parties hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to contemplation of the transactions
contemplated herein.
(c) DS Bancor shall, upon request, furnish Webster with all
information concerning DS Bancor and its Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Registration Statement or any other statement, filing,
notice or application made by or on behalf of Webster or Webster Bank to any
Governmental Entity in connection with the Merger, the Bank Merger or the other
transactions contemplated by this Agreement.
(d) Webster and DS Bancor shall promptly advise each other
upon receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval will not be obtained or that
the receipt of any such approval will be materially delayed.
6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable Laws
relating to the exchange of information, DS Bancor shall, and shall cause each
DS Bancor Subsidiary to, afford to the officers, employees, accountants, counsel
and other representatives of Webster, access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, DS Bancor shall, and
shall cause each DS Bancor Subsidiary to, make available to Webster (i) a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of Federal
securities laws or Federal or state banking laws and (ii) all other information
concerning its business, properties and personnel as Webster may reasonably
request. Two designated representatives of Webster shall be invited to attend
all meetings of the boards of directors (except for the portion of such meetings
which relate to the Merger or an Acquisition Transaction or such other matters
deemed confidential by the Boards of Directors of DS Bancor or Derby) and such
meetings of committees of the boards of directors and management of DS Bancor
and each DS Bancor Subsidiary which pertains to ALCO and loan approvals. Webster
will hold all such information in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement which Webster
entered into with DS Bancor.
(b) Upon reasonable notice and subject to applicable Laws
relating to the exchange of information, Webster shall, and shall cause Webster
Bank to, afford to the officers, employees, accountants, counsel and other
representatives of DS Bancor, access, during normal business hours
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during the period prior to the Effective Time, to such information regarding
Webster and Webster Bank as shall be reasonably necessary for DS Bancor to
fulfill its obligations pursuant to this Agreement or which may be reasonably
necessary for DS Bancor to confirm that the representations and warranties of
Webster contained herein are true and correct and that the covenants of Webster
contained herein have been performed in all material respects. During the period
from the date of this Agreement to the Effective Time, Webster will cause one or
more of its designated representatives to confer monthly with representatives of
DS Bancor and to report the general status of the ongoing operations of Webster,
Webster Bank, and DS Bancor. DS Bancor will hold all such information in
confidence to the extent required by, and in accordance with, the provisions of
the confidentially agreement which DS Bancor entered into with Webster.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations and warranties of
the other set forth herein.
(d) DS Bancor shall provide Webster with true, correct and
complete copies of all financial and other information provided to directors of
DS Bancor in connection with meetings of its Board of Directors or committees
thereof, which information shall be provided to Webster concurrently with its
provision to directors of DS Bancor.
6.3 Shareholder Meetings.
DS Bancor shall take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders within 35 days after the
Registration Statement becomes effective for the purpose of voting upon the
approval of this Agreement and the Merger (the "Special Meeting"). Management
and the Board of Directors of DS Bancor shall recommend to DS Bancor's
shareholders approval of this Agreement and the transactions contemplated
hereby, together with any matters incident thereto, and shall oppose any third
party proposal or other action that is inconsistent with this Agreement or the
consummation of the transactions contemplated hereby, unless the Board of
Directors of DS Bancor, following receipt of written advice of DS Bancor's legal
counsel, reasonably determines that such recommendation or opposition, as the
case may be, would constitute a breach of the exercise of its fiduciary duty.
Webster shall take all steps necessary to duly call, give notice of, convene and
hold a meeting of its shareholders within 35 days after the Registration
Statement becomes effective for the purpose of voting to approve the issuance of
the Webster Common Stock pursuant to this Agreement and, through its Board of
Directors, shall recommend to its shareholders approval of such issuance. DS
Bancor and Webster shall coordinate and cooperate with respect to the foregoing
matters.
6.4 Legal Conditions to Merger.
Each of Webster and DS Bancor shall use their reasonable best efforts
(a) to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
with respect to the Merger or the Bank Merger and, subject to the conditions set
forth in Article VII hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by DS Bancor or Webster in connection with the Merger and the Bank Merger and
the other transactions contemplated by this Agreement.
6.5 Publication of Combined Financial Results.
Webster shall use its best efforts to publish as soon as possible but
no later than 30 business days after the end of the first month after the
Effective Time in which there are at least 30 days of post-Merger combined
operations (which month may be the month in which the Effective Time occurs),
combined sales and net income figures as contemplated by and in accordance with
the terms of SEC Accounting Series Release No. 135.
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6.6 Stock Exchange Listing.
Webster shall cause the shares of Webster Common Stock to be issued in
the Merger and pursuant to options referred to herein to be approved for
quotation on the Nasdaq National Market (or such other exchange on the which the
Webster Common Stock has become listed, or approved for listing) prior to or at
the Effective Time.
6.7 Employee Plans.
(a) To the extent permissible under the applicable provisions
of the Code and ERISA, for purposes of crediting periods of service for
eligibility to participate and vesting, but not for benefit accrual purposes,
under employee pension benefit plans (within the meaning of ERISA Section 3(2))
maintained by Webster or Webster Bank, as applicable, (other than Webster's
employee stock ownership plan), individuals who are employees of DS Bancor or
Derby at the Effective Time will be credited with periods of service with DS
Bancor or Derby before the Effective Time as if such service had been with
Webster or Webster Bank, as applicable. Similar credit shall also be given by
Webster or Webster Bank in calculating other retirement plan, vacation and
similar benefits for such employees of DS Bancor or Derby after the Merger.
(b) Webster and Webster Bank will follow the DS Bancor and
Derby severance policy as to employees of DS Bancor or Derby whose employment is
terminated in connection with the Merger either because an employee's position
is eliminated or an employee is not offered comparable employment (i.e., not
offered employment for a position of generally similar job description or
responsibilities) within six months of the Effective Time of the Merger (except
for such employees who have existing employment or severance agreements or whose
employment is terminated for non-performance, cause or like reason). Payments
under such policy will be based on one week of base salary (or one week of
average weekly hourly wages, calculated on a weekly average basis for the
quarter ended June 30, 1996 in the case of hourly employees) for each full year
of employment with DS Bancor or Derby with a minimum of four weeks, up to an
aggregate of 39 weeks for employees with the rank of vice president or above,
and up to an aggregate of 26 weeks for all other employees, with payments to be
made upon employment termination.
(c) It is the intent of Webster and Webster Bank in connection
with reviewing applicants for employment positions to give DS Bancor, Inc. or
Derby Saving Bank employees who are not offered positions at the Effective Time
the same consideration as is afforded Webster or Webster Bank employees for such
position in accordance with existing formal or informal policies.
6.8 Indemnification; Directors' and Officers' Insurance.
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative, in
which any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of DS Bancor or any of its Subsidiaries (the "Indemnified Parties") is,
or is threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he is or was a
director, officer or employee of DS Bancor, any of the DS Bancor Subsidiaries or
any of their respective predecessors or (ii) this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use their
best efforts to defend against and respond thereto to the extent permitted by
the DGCL and the Certificate of Incorporation and By-Laws of DS Bancor. It is
understood and agreed that after the Effective Time, Webster shall indemnify and
hold harmless, as and to the fullest extent permitted by the DGCL and the
Certificate of Incorporation and By-Laws of Webster, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorney's fees and expenses in advance of the final disposition of
any claim, suit, proceeding or investigation to each Indemnified Party to the
fullest permitted by law upon
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receipt of any undertaking required by applicable law), judgments, fines and
amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time), the Indemnified Parties
may retain counsel reasonably satisfactory to Webster; provided, however, that
(1) Webster shall have the right to assume the defense thereof and upon such
assumption Webster shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if Webster
elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are issues which raise
conflicts of interest between Webster and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to Webster, and
Webster shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (2) Webster shall be obligated pursuant to this paragraph
to pay for only one firm of counsel for each Indemnified Party, and (3) Webster
shall not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld or delayed). Webster
shall have no obligation to advance expenses incurred in connection with a
threatened or pending action, suit or preceding in advance of final disposition
of such action, suit or proceeding, unless (i) Webster would be permitted to
advance such expenses pursuant to the DGCL and Webster's Certificate of
Incorporation or By-Laws, and (ii) Webster receives an undertaking by the
Indemnified Party to repay such amount if it is determined that such party is
not entitled to be indemnified by Webster pursuant to the DGCL and Webster's
Certificate of Incorporation or By-Laws. Any Indemnified Party wishing to claim
Indemnification under this Section 6.8, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify Webster thereof, provided that
the failure to so notify shall not affect the obligations of Webster under this
Section 6.8 except to the extent such failure to notify materially prejudices
Webster. Webster's obligations under this Section 6.8 continue in full force and
effect for a period of twelve years from the Effective Time; provided, however,
that all rights to indemnification in respect of any claim (a "Claim") asserted
or made within such period shall continue until the final disposition of such
Claim.
(b) Webster shall use best efforts to cause the persons
serving as officers and directors of DS Bancor immediately prior to the
Effective Time to be covered by the directors' and officers' liability insurance
policy ("DS Bancor Tail Insurance") maintained by DS Bancor (provided that
Webster may substitute therefor policies of substantially the same coverage and
amounts containing terms and conditions which are generally not less
advantageous than such policy) with respect to acts or omissions occurring prior
to the Effective Time which were committed by such officers and directors in
their capacity as such for an aggregate premium cost for the DS Bancor Tail
Insurance of $200,000 and for a period not greater than four years but in no
event (even if the premium cost exceeds $200,000) less than two years.
(c) In the event Webster or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Webster
assume the obligations set forth in this section.
(d) The provisions of this Section 6.8 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives after the Effective Time.
6.9 Subsequent Interim and Annual Financial Statements.
As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter (other than the fourth fiscal quarter),
Webster will deliver to DS Bancor and DS Bancor will deliver to Webster their
respective Quarterly Reports on Form 10-Q, as filed with the SEC under the
Exchange Act. Each party shall deliver to the other any Current Reports on Form
8-K promptly after
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filing such reports with the SEC. As soon as reasonably available, but in no
event later than March 31, 1997 (if this Agreement is still in effect and the
Merger has not been consummated by that date), DS Bancor will deliver to Webster
and Webster will deliver to DS Bancor its Annual Report on Form 10-K for the
fiscal year ending December 31, 1996, as filed with the SEC under the Exchange
Act.
6.10 Additional Agreements.
In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, or the Bank
Merger Agreement, or to vest the Surviving Corporation or Webster Bank with full
title to all properties, assets, rights, approvals, immunities and franchises of
any of the parties to the Merger or the Bank Merger, the proper officers and
directors or each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by, and at
the sole expense of, Webster.
6.11 Advice of Changes.
Webster and DS Bancor shall promptly advise the other party of any
change or event that, individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect on it or to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein. From time to time prior to the Effective Time, each
party will promptly supplement or amend the Disclosure Schedules delivered in
connection with the execution of this Agreement to reflect any matter which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedules or which is
necessary to correct any information in such Disclosure Schedules which has been
rendered inaccurate thereby. No supplement or amendment to such Disclosure
Schedules shall have any effect for the purpose of determining satisfaction of
the conditions set forth in Sections 7.2(a) or 7.3(a) hereof, as the case may
be, or the compliance by DS Bancor or Webster, as the case may be, with the
respective covenants set forth in Sections 5.1 and 5.2 hereof.
6.12 Current Information.
During the period from the date of this Agreement to the Effective
Time, DS Bancor will cause one or more of its designated representatives to
confer on a regular and frequent basis (not less than monthly) with
representatives of Webster and to report the general status of the ongoing
operations of DS Bancor and each DS Bancor Subsidiary. DS Bancor will promptly
notify Webster of any material change in the normal course of business or in the
operation of the properties of DS Bancor or any DS Bancor Subsidiary and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of significant litigation involving DS Bancor or any DS Bancor Subsidiary, and
will keep Webster fully informed of such events.
6.13 Execution and Authorization of Bank Merger Agreement.
Prior to the Effective Time, (a) Webster shall (i) cause the Board of
Directors of Webster Bank to approve the Bank Merger Agreement, and (ii) cause
Webster Bank to execute and deliver the Bank Merger Agreement, and (iii) approve
the Bank Merger Agreement as the sole stockholder of Webster Bank, and (b) DS
Bancor shall (i) cause the Board of Directors of Derby to approve the Bank
Merger Agreement, (ii) cause Derby to execute and deliver the Bank Merger
Agreement, and (iii) approve the Bank Merger Agreement as the sole shareholder
of Derby.
6.14 Change in Structure.
In the event that Webster elects to change the structure of the Bank
Merger, the parties agree to modify this Agreement and the various exhibits
hereto to reflect such revised structure. Such revised structure may include but
is not limited to providing (i) for Derby or Webster Bank to convert
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its charter, or (ii) for Derby or Webster to change insurance funds covering its
deposits from or to BIF or SAIF, or (iii) for Derby to merge into Webster Bank
with either as the surviving bank. Webster may also change the corporate name of
Webster Bank to such other name as the Board of Directors of Webster may select.
Webster may elect to modify the structure of the transactions contemplated by
this Agreement as noted herein 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 the DS Bancor
shareholders under this 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. In such events, Webster
shall prepare appropriate amendments to this Agreement and the exhibits hereto
for execution by the parties hereto. Webster and DS Bancor agree to cooperate
fully with each other to effect such amendments.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approvals.
This 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
issuance of the Webster Common Stock in the Merger shall have been approved by
the affirmative vote of a majority of shares of Webster Common Stock voted at a
meeting where a quorum is present.
(b) Stock Exchange Listing.
The shares of Webster Common Stock which shall be issued in
the Merger (including the Webster Common Stock that may be issued upon exercise
of the options referred to in Section 1.6 hereof) upon consummation of the
Merger shall have been authorized for quotation on the Nasdaq National Market
(or such other exchange on which the Webster Common Stock may become listed).
(c) Other Approvals.
All regulatory approvals required to consummate the
transactions contemplated hereby (including the Merger and the Bank Merger)
shall have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired (all such
approvals and the expiration of all such waiting periods being referred to
herein as the "Requisite Regulatory Approvals"). No Requisite Regulatory
Approval shall contain a non-customary condition that is reasonably determined
by the parties hereto to be burdensome.
(d) Registration Statement.
The Registration Statement shall have become effective under
the Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality.
No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger, the
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Bank Merger or any of the other transactions contemplated by this Agreement or
the Bank Merger Agreement shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger or the Bank Merger.
(f) Federal Tax Opinion.
Webster and DS Bancor shall have received from Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. and from Fried, Frank, Harris, Shriver &
Jacobson (a partnership including professional corporations), DS Bancor's
special tax counsel, respectively, an opinion, in form and substance reasonably
satisfactory to Webster and DS Bancor, respectively, dated as of the Effective
Time, substantially to the effect that on the basis of facts, representations,
and assumptions set forth in such opinions which are consistent with the state
of facts existing at the Effective Time, the Merger (either above or in
conjunction with the Subsidiary Merger) and the Bank Merger will be treated for
Federal income tax purposes as reorganizations within the meaning of Section 368
of the Code. In rendering such opinion, such counsel may require and, to the
extent such counsel deems necessary or appropriate, may rely upon
representations made in certificates of officers of DS Bancor, Webster, Merger
Sub, their respective affiliates and others.
7.2 Conditions to Obligations of Webster and Merger Sub.
The obligation of Webster and Merger Sub to effect the Merger is also
subject to the satisfaction or waiver by Webster at or prior to the Effective
Time of the following conditions:
(a) Representations and Warranties.
The representations and warranties of DS Bancor set forth in
this Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date;
provided, however, that, for purposes of this paragraph, such representations
and warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on DS
Bancor. Such determination of aggregate Material Adverse Effect shall be made as
if there were no materiality qualifications in such representations and
warranties. Webster shall have received a certificate signed on behalf of DS
Bancor by the Chief Executive Officer and the Chief Financial Officer of DS
Bancor to the foregoing effect.
(b) Performance of Covenants and Agreements of DS Bancor.
DS Bancor shall have performed in all material respects all
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing Date. Webster shall have received a certificate signed
on behalf of DS Bancor by the Chief Executive Officer and the Chief Financial
Officer of DS Bancor to such effect.
(c) Consents Under Agreements.
The consent, approval or waiver of each person (other than the
Governmental Entities referred to in Section 7.1(c)) whose consent or approval
shall be required in order to permit the succession by the Surviving Corporation
or Webster Bank pursuant to the Merger or the Bank Merger, as the case may be,
to any obligation, right or interest of DS Bancor or any Subsidiary of DS Bancor
under any loan or credit agreement, note, mortgage, indenture, lease, license or
other agreement or instrument shall have been obtained except for those, the
failure of which to obtain, will not result in a Material Adverse Effect on the
Surviving Corporation.
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(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(e) Legal Opinion.
Webster shall have received the opinions of Hogan & Hartson
L.L.P. (as to federal banking and securities laws, and Delaware corporate law),
and Hoyle & Sponheimer (as to Connecticut law), counsel to DS Bancor, dated the
Closing Date, as to such matters as Webster may reasonably request. As to any
matter in such opinion which involves matters of fact, such counsel may rely
upon the certificates of officers and directors of DS Bancor, and of public
officials reasonably acceptable to Webster.
(f) Accountant's Comfort Letter.
DS Bancor shall have caused to be delivered on the respective
dates thereof to Webster "comfort letters" from DS Bancor's independent public
accountants dated the date on which the Registration Statement or last amendment
thereto shall become effective, and dated the date of the Closing, and addressed
to Webster and DS Bancor, with respect to DS Bancor's financial data presented
in the Proxy Statement/Prospectus, which letters shall be based upon Statements
on Auditing Standards Nos. 72 and 76.
(g) Pooling of Interests.
Webster shall have promptly received opinions of KPMG Peat
Marwick LLP, independent accountants, dated (i) within two weeks of the date
hereof and (ii) not less than 20 days nor more than 40 days prior to the
Effective Time to the effect that the Merger will be accounted for as a pooling
of interests and such opinion shall not have been withdrawn. The foregoing shall
not apply in the event that Webster prior to the effectiveness of the
Registration Statement advises DS Bancor that as a result of actions taken or to
be taken by Webster subsequent to the date hereof the Merger is to be accounted
for as a purchase.
7.3 Conditions to Obligations of DS Bancor.
The obligation of DS Bancor to effect the Merger is also subject to the
satisfaction or waiver by DS Bancor at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties.
The representations and warranties of Webster set forth in
this Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date;
provided, however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on
Webster. Such determination of aggregate Material Adverse Effect shall be made
as if there were no materiality qualifications in such representations and
warranties. DS Bancor shall have received a certificate signed on behalf of
Webster by the Chief Executive Officer and the Chief Financial Officer of
Webster to the foregoing effect.
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(b) Performance of Obligations of Webster.
Webster and Merger Sub shall have each performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date. DS Bancor shall have received a
certificate signed on behalf of Webster by the Chief Executive Officer and the
Chief Financial Officer of Webster to such effect.
(c) Consents Under Agreements.
The consent or approval of each person (other than the
Governmental Entities referred to in Section 7.1(c)) whose consent or approval
shall be required in connection with the transactions contemplated hereby under
any loan or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which Webster or Webster Bank is a party or is
otherwise bound shall have been obtained.
(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(e) Legal Opinion.
DS Bancor shall have received the opinion of Mintz, Levin,
Cohn, Ferris, Glovsky & Popeo, P.C., counsel to Webster, dated the Closing Date,
as to such matters as DS Bancor may reasonably request. As to any matter in such
opinion which involves matters of fact or matters relating to laws (other than
Federal banking and securities law and Delaware corporate law), such counsel may
rely upon the certificates of officers and directors of Webster and of public
officials and opinions of local counsel, reasonably acceptable to DS Bancor.
(f) Fairness Opinion.
DS Bancor shall have received an opinion from Alex. Brown &
Sons Incorporated that the transactions contemplated by this 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 shall be dated as of the date of this Agreement and delivered
concurrently with its execution. In the event that Webster shall exercise its
option to treat the Merger as a purchase rather than pooling of interest for
accounting purposes, DS Bancor shall have received a fairness opinion from Alex.
Brown & Sons Incorporated with respect to such purchase transaction not later
than the date of the proxy statement transmitted to DS Bancor stockholders which
includes such opinion.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination.
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of DS Bancor or Webster, if applicable:
(a) by mutual consent of Webster and DS Bancor in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Webster or DS Bancor upon written notice to the
other party (i) 30 days after the date on which any request or application for a
Requisite Regulatory Approval shall have
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<PAGE>
been denied or withdrawn at the request or recommendation of the Governmental
Entity which must grant such Requisite Regulatory Approval, unless within the
30-day period following such denial or withdrawal the parties agree to file, and
have filed with the applicable Governmental Entity, a petition for rehearing or
an amended application, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 8.1(b), if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein;
(c) by either Webster or DS Bancor if the Merger shall not
have been consummated on or before June 30, 1997, unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either Webster or DS Bancor (provided that the
terminating party is not in breach of its obligations under Section 6.3) if the
approval of the shareholders of DS Bancor or any approval of the shareholders of
Webster required for the consummation of the Merger shall not have been obtained
by reason of the failure to obtain the required vote at a duly held meeting of
shareholders or at any adjournment or postponement thereof;
(e) by either Webster or DS Bancor (provided that the
terminating party is not then in breach of any representation, warranty,
covenant or other agreement contained herein that, individually or in the
aggregate, would give the other party the right to terminate this Agreement) if
there shall have been a breach of any of the representations or warranties set
forth in this Agreement on the part of the other party, if such breach,
individually or in the aggregate, has had or is likely to have a Material
Adverse Effect on the breaching party, and such breach shall not have been cured
within 30 days following receipt by the breaching party of written notice of
such breach from the other party hereto or such breach, by its nature, cannot be
cured prior to the Closing;
(f) by either Webster or DS Bancor (provided that the
terminating party is not then in breach of any representations, warranty,
covenant or other agreement contained herein that, individually or in the
aggregate, would give the other party the right to terminate this Agreement) if
there shall have been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of the other party, and such breach
shall not have been cured within 30 days following receipt by the breaching
party of written notice of such breach from the other party hereto or such
breach, by its nature, cannot be cured prior to the Closing; and
(g) by Webster, if the management of DS Bancor or its Board of
Directors, for any reason, (i) fails to call and hold within 35 days of the
effectiveness of the Registration Statement a special meeting of DS Bancor's
shareholders to consider and approve this Agreement and the transactions
contemplated hereby, (ii) fails to recommend to shareholders the approval of
this Agreement and the transactions contemplated hereby, unless the Board of
Directors of DS Bancor, following receipt of written advice of DS Bancor's legal
counsel, reasonably determines that said recommendation would constitute a
breach of the exercise of its fiduciary duty, (iii) fails to oppose any third
party proposal that is inconsistent with the transactions contemplated by this
Agreement, unless the Board of Directors of DS Bancor, following receipt of
written advice of DS Bancor's legal counsel, reasonably determines that such
opposition would constitute a breach of the exercise of its fiduciary duty or
(iv) violates Section 5.1(e) of this Agreement or would have violated Section
5.1(e) but for the fiduciary duty exception.
(h) by DS Bancor, upon written notice delivered to Webster, if
the Base Period Trading Price shall be less than $28.00 unless Webster elects
(by written instrument delivered to DS Bancor within two (2) calendar days after
receipt of notice from DS Bancor that DS Bancor elects to terminate the
Agreement pursuant to this Subsection 8.1(h)) that the Exchange Ratio shall be
equal the number resulting from dividing $38.22 by the Base Trading Price.
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8.2 Effect of Termination.
In the event of termination of this Agreement by either Webster or DS
Bancor as provided in Section 8.1, this Agreement shall forthwith become void
and have no effect except (i) the last sentences of Sections 6.2(a) and 6.2(b)
and Sections, 8.2, 8.3, 9.2 and 9.3 shall survive any termination of this
Agreement, and (ii) notwithstanding anything to the contrary contained in this
Agreement, no party shall be relieved or released from any liabilities or
damages arising out of its willful or intentional breach of any provision of
this Agreement.
8.3 Amendment.
Subject to compliance with applicable law, this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Board of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the shareholders of DS Bancor or
Webster (if required); provided, however, that after any approval of the
transactions contemplated by this Agreement by DS Bancor's shareholders, there
may not be, without further approval of such shareholders, any amendment of this
Agreement which reduces the amount or changes the form of the consideration to
be delivered to DS Bancor shareholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such extension or waiver
or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing.
Subject to the terms and conditions of this Agreement and the Merger
Agreement, the closing of the Merger (the "Closing") will take place at 10:00
a.m. at the main offices of Webster on (i) the fifth day after the last
Requisite 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 specified in the immediately preceding clause occurs (provided
such Closing occurs not more than 15 days after the date specified in the
immediately preceding clause), or (iii) such other date, place and time as the
parties may agree (the "Closing Date").
9.2 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement (other
than pursuant to the Option Agreement, which shall terminate in accordance with
its terms) shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Effective Time.
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<PAGE>
9.3 Expenses; Breakup Fee.
All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense, except (i) as otherwise provided in this paragraph, (ii) the costs and
expenses of printing the Proxy Statement/Prospectus shall be shared equally by
the parties, and (iii) all filing and other fees paid to the SEC in connection
with this Agreement shall be borne by Webster. In the event that this Agreement
is terminated by either Webster or DS Bancor by reason of a material breach
pursuant to Section 8.1(e) or (f) hereof or by Webster pursuant to Section
8.1(g) hereof, the other party shall pay all documented, reasonable costs and
expenses up to $500,000 incurred by the terminating party in connection with
this Agreement and the transactions contemplated hereby plus a breakup fee of
$250,000. In the event that this Agreement is terminated by either Webster or DS
Bancor under Section 8.1(d) by reason of the other party's shareholders not
having given any required approval, such other party shall pay all documented,
reasonable costs and expenses up to $500,000 incurred by the terminating party
in connection with this Agreement and the transactions contemplated hereby.
9.4 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (with confirmation),
mailed by registered or certified mail (return receipt requested) or delivered
by an express courier (with confirmation) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Webster, to:
Webster Plaza
145 Bank Street
Waterbury, Connecticut 06702
Attn: James C. Smith
Chairman, President and Chief Executive
Officer
with a copy (which shall not constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Stanford N. Goldman, Jr., Esq.
and
(b) if to DS Bancor, to:
DS Bancor
33 Elizabeth Street
Derby, CT 06418
Attn: Harry P. DiAdamo, Jr.
President, Treasurer, and Chief Executive
Officer
with a copy (which shall not constitute notice) to:
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<PAGE>
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, DC 20004
Attn: Stuart Stein, Esq.
9.5 Interpretation.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
9.6 Counterparts.
This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
9.7 Entire Agreement.
This Agreement (including the disclosure schedules, documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
confidentiality agreement dated August 7, 1996, entered into between DS Bancor
and Webster, the Bank Merger Agreement, the Option Agreement and the Stockholder
Agreement.
9.8 Governing Law.
This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware, without regard to any applicable conflicts of
law.
9.9 Enforcement of Agreement.
The parties hereto agree that irreparable damage would occur in the
event that the provisions of this Agreement were not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.10 Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
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<PAGE>
9.11 Publicity.
Except as otherwise required by law or the rules of Nasdaq National
Market (or such other exchange on which the Webster Common Stock may become
listed), so long as this Agreement is in effect, neither Webster nor DS Bancor
shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions contemplated
by this Agreement, the Bank Merger Agreement, the Option Agreement or the
Stockholder Agreement without the consent of the other party, which consent
shall not be unreasonably withheld.
9.12 Assignment; Limitation of Benefits.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise specifically provided in Section 6.8 hereof,
this Agreement (including the documents and instruments referred to herein) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder, and the covenants, undertakings and agreements set out
herein shall be solely for the benefit of, and shall be enforceable only by, the
parties hereto and their permitted assigns.
9.13 Additional Definitions.
In addition to any other definitions contained in this Agreement, the
following words, terms and phrases shall have the following meanings when used
in this Agreement.
"Affiliated Person": any director, officer or 5% or greater
shareholder, spouse or other person living in the same household of such
director, officer or shareholder, or any company, partnership or trust in which
any of the foregoing persons is an officer, 5% or greater shareholder, general
partner or 5% or greater trust beneficiary.
"Laws": any and all statutes, laws, ordinances, rules, regulations,
orders, permits, judgments, injunctions, decrees, case law and other rules of
law enacted, promulgated or issued by any Governmental Entity.
"Material Adverse Effect": with respect to Webster or DS Bancor, means
a condition, event, change or occurrence that is reasonably likely to have a
material adverse effect upon (A) the financial condition, results of operations,
business or properties of Webster or DS Bancor and its respective Subsidiaries,
taken as a whole (other than as a result of (i) changes in laws or regulations
or accounting rules of general applicability or interpretations thereof, or (ii)
decreases in capital under Financial Accounting Standards No. 115 attributable
to general increases in interest rates), or (B) the ability of Webster or DS
Bancor to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement and, in the case of DS Bancor, the Option
Agreement.
"Subsidiary": with respect to any party means any corporation,
partnership or other organization, whether incorporated or unincorporated, which
is consolidated with such party for financial reporting purposes.
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<PAGE>
IN WITNESS WHEREOF, Webster, Merger Sub and DS Bancor have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
WEBSTER FINANCIAL CORPORATION
ATTEST:
By: /s/ Lee A. Gagnon By: /s/ James C. Smith
------------------------------ --------------------------
Lee A. Gagnon James C. Smith
Secretary Chairman, President and
Chief Executive Officer
WEBSTER ACQUISITION CORP.
ATTEST:
By: /s/ Lee A. Gagnon By: /s/ James C. Smith
------------------------------ --------------------------
Lee A. Gagnon James C. Smith
Secretary Chairman, President and
Chief Executive Officer
DS BANCOR
ATTEST:
By: /s/ Ann Mester By: /s/ Harry P. DiAdamo, Jr.
------------------------------ --------------------------
Ann Mester Harry P. DiAdamo, Jr.
Secretary President, Treasurer, and
Chief Executive Officer
E-41
Exhibit 2.2
OPTION AGREEMENT
THE TRANSFER OF THE OPTION GRANTED BY THIS
AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS.
OPTION AGREEMENT, dated as of October 7, 1996 (this "Agreement"),
between DS BANCOR, INC., a Delaware corporation ("Issuer"), and WEBSTER
FINANCIAL CORPORATION, a Delaware corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of October 7, 1996 (the "Plan"), which was executed by the
parties hereto prior to the execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into the
Plan and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Plan, the parties hereto
agree as follows:
SECTION 1. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 564,296 fully paid and non-assessable shares of Common Stock, par value $1.00
per share of Issuer ("Issuer Common Stock") (which number of shares is equal to
18.6% of the number of outstanding shares of Issuer Common Stock on the date
hereof), at a price per share equal to $36.50 (the "Initial Price"); provided,
however, that in the event Issuer issues or agrees to issue any additional
shares of Issuer Common Stock (other than shares issued upon the exercise of
options outstanding as of the date of the Plan in accordance with their terms
pursuant to existing stock option plans), or grants one or more options to
purchase additional shares of issuer common stock at a price less than the
Initial Price, as adjusted pursuant to Section 5(b) hereof, such price shall be
equal to such lesser price (such price, as adjusted, is hereinafter referred to
as the "Option Price"). The number of shares of Issuer Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at
any time and from time to time following the occurrence of a Purchase Event (as
defined below); provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of the following events (which are
collectively referred to as an "Exercise Termination Event"):
(i) The time immediately prior to the Effective Time;
(ii) 12 months after the first occurrence of a Purchase
Event,
(iii) 18 months after the termination of the Plan
following the occurrence of a Preliminary Purchase Event (as defined
below), unless clause (vii) is applicable;
(iv) upon the termination of the Plan, prior to the
occurrence of a Purchase Event or Preliminary Purchase Event, by DS
Bancor pursuant to Section 8.1(h) of the Plan, both parties pursuant to
Section 8.1(a) of the Plan, by either party pursuant to Section 8.1(b)
or (c) of the Plan or
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Section 8.1(d) of the Plan based on any required vote of Grantee's
stockholders not being received, or by Issuer pursuant to Section
8.1(e) or (f) of the Plan;
(v) 135 days after the termination of the Plan, by
either party pursuant to Section 8.1(d) of the Plan based on the
required vote of Issuer's stockholders not being received, if no
Purchase Event or Preliminary Purchase Event has occurred prior to the
meeting of stockholders (or any adjournment or postponement thereof)
held to vote on the Plan;
(vi) nine months after the termination of the Plan, by
Grantee pursuant to Section 8.1(e) or (f) thereof as a result of a
breach by Issuer, unless such breach was willful or intentional; or
(vii) 24 months after the termination of the Plan, by
Grantee pursuant to Section 8.1(e) or (f) thereof as a result of a
willful or intentional breach by Issuer, or by Grantee pursuant to
Section 8.1(g) of the Plan.
(b) The term "Preliminary Purchase Event" shall mean any of
the following events or transactions occurring on or after the date hereof and
prior to an Exercise Termination Event:
(i) Issuer without having received Grantee's prior
written consent, shall have entered into any letter of intent or
definitive agreement to engage in an Acquisition Transaction (as
defined below) with any person (as defined below) other than Grantee or
any of its subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the shareholders of
Issuer approve or accept any Acquisition Transaction with any Person
(as the term "person" is defined in Section 3(a)9 and 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder) other than Grantee or any Grantee Subsidiary.
For purposes of this Agreement "Acquisition Transaction" shall mean (x)
a merger, consolidation or other business combination involving Issuer,
(y) a purchase, lease or other acquisition of all or substantially all
of the assets of Issuer, (z) a purchase or other acquisition (including
by way of merger. consolidation, share exchange or otherwise) of
Beneficial Ownership (as the term "beneficial ownership" is defined in
Regulation 13d-3(a) of the Exchange Act) of securities representing 15%
or more of the voting power of Issuer; provided, however that
"Acquisition Transaction" shall not include a transaction entered into
after the termination of the Plan in which the Issuer is the surviving
entity, if in connection with such transaction, no person acquires
Beneficial Ownership of 15 percent or more of the total voting power of
the Issuer to be outstanding after giving effect to such transaction
and in which the aggregate voting power of Issuer acquired by all
persons is less than 25 percent of the total voting power of Issuer;
(ii) Any Person (other than Grantee, any Grantee
Subsidiary or any current affiliate of Issuer) shall have acquired
Beneficial Ownership of 15% or more of the outstanding shares of Issuer
Common Stock;
(iii) (a) Any Person (other than Grantee or any
Grantee Subsidiary) shall have made a bona fide proposal to Issuer or,
by a public announcement or written communication that is or becomes
the subject of public disclosure, to Issuer's shareholders to engage in
an Acquisition Transaction (including, without limitation, any
situation in which any Person other than Grantee or any Grantee
Subsidiary shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filled a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to a tender offer or exchange offer to purchase any shares
of Issuer Common Stock such that, upon consummation of such offer, such
person would have Beneficial Ownership of 15% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred
to herein as a "Tender Offer" or an "Exchange Offer", respectively))
(b) such bona fide proposal is not withdrawn or such public
announcement or written communication is not publicly withdrawn and (c)
stockholders of Issuer do not approve the Merger, as defined in the
Plan, at the Special Meeting, as defined in the Plan;
(iv) There shall exist a willful or intentional
breach under the Plan by Issuer and such breach would entitle Grantee
to terminate the Plan;
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<PAGE>
(v) The special meeting of Issuers' shareholders held
for the purpose of voting on the Plan, shall not have been held or
shall have been canceled prior to termination of the Plan, or Issuer's
Board of Directors shall have failed to recommend, or shall have
withdrawn or modified in a manner adverse to Grantee the recommendation
of Issuer's Board of Directors, that Issuer's shareholders approve the
Plan, or if Issuer or Issuer's Board of Directors fails to oppose any
proposal by any Person (other than Grantee or any Grantee Subsidiary);
or
(vi) Any Person (other than Grantee or any Grantee
Subsidiary) shall have filed and have had accepted for processing (or
been deemed informationally complete) an application or notice with the
Office of Thrift Supervisor (the "OTS") the Federal Deposit Insurance
Corporation (the "FDIC"), the Connecticut Banking Commissioner (the
"Commissioner"), or other regulatory or administrative agency or
commission (each, a "Governmental Authority") for approval to engage in
an Acquisition Transaction.
(c) The term "Purchase Event" shall mean any of the following
events or transactions occurring on or after the date hereof and prior to an
Exercise Termination Event:
(i) The acquisition by any Person (other than Grantee
or any Grantee Subsidiary) of Beneficial Ownership (other than on
behalf of the Issuer) of 25% or more of the then outstanding Issuer
Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event
described in Section 2(b)(i) except that the percentage referred to in
clause (z) thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event known to Issuer;
provided, however, that the giving of such notice by Issuer shall not be a
condition to the right of Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the "Option
Notice" and the date of which being hereinafter referred to as the "Notice
Date") specifying (i) the total number of shares of Issuer Common Stock it will
purchase pursuant to such exercise and (ii) the time (which shall be on a
business day that is not less than three nor more than ten business days from
the Notice Date) on which the closing of such purchase shall take place (the
"Closing Date"); such closing to take place at the principal office of the
Issuer; provided, that, if prior notification to or approval of the OTS, the
FDIC, the Commissioner or any other Governmental Authority is required in
connection with such purchase (each, a "Notification" or an "Approval," as the
case may be), (a) Grantee shall promptly file the required notice or application
for approval ("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof, any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. On or prior to the Closing Date, Grantee shall have the right to revoke
its exercise of the Option by written notice to the Issuer given not less than
three business days prior to the Closing Date.
(f) At the closing referred to in Section 2(e) hereof, Grantee
shall pay to Issuer the aggregate purchase price for the number of shares of
Issuer Common Stock specified in the Option Notice in immediately available
funds by wire transfer to a bank account designated by Issuer; provided,
however, that failure or refusal of Issuer to designate such a bank account
shall not preclude Grantee from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(f) hereof, Issuer shall
deliver to Grantee a certificate or certificates representing the number of
shares of Issuer Common Stock specified in the Option Notice and, if the Option
should be exercised in part only, a new Option evidencing the rights of Grantee
thereof to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder.
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(h) Certificates for Issuer Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend substantially as
follows:
The transfer of the shares represented by this certificate is
subject to resale restrictions arising under the Securities Act of
1933, as amended, and applicable state securities laws and to certain
provisions of an agreement between DS Bancor, Inc., and Webster
Financial Corporation, dated as of October 7, 1996. A copy of such
agreement is on file at the principal office of DS Bancor, Inc., and
will be provided to the holder hereof without charge upon receipt by DS
Bancor, Inc., of a written request therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the Securities and Exchange
Commission (the "SEC") or Governmental Authority responsible for administering
any applicable state securities laws or an opinion of counsel, in form and
substance satisfactory to Issuer's counsel, to the effect that such legend is
not required for purposes of the Securities Act or applicable state securities
laws; (ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with the provisions of
this Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In addition
such certificates shall bear any other legend as may be required by law.
(i) Upon the giving by Grantee to Issuer of an Option Notice
and the tender of the applicable purchase price in immediately available funds
on the Closing Date, unless prohibited by applicable law, Grantee shall be
deemed to be the holder of record of the number of shares of Issuer Common Stock
specified in the Option Notice, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Issuer Common Stock shall not then actually be delivered to Grantee. Issuer
shall pay all expenses and other charges that may be payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
2 in the name of Grantee.
SECTION 3. Issuer agrees: (i) that it shall at all times until
the termination of this Agreement have reserved for issuance upon the exercise
of the Option that number of authorized and reserved shares of Issuer Common
Stock equal to the maximum number of shares of Issuer Common Stock at any time
and from time to time issuable hereunder, all of which shares will, upon
issuance pursuant hereto, be duly authorized, validly issued, fully paid,
non-assessable, and delivered free and clear of all claims, liens, encumbrances
and security interests and not subject to any preemptive rights; (ii) that it
will not, by amendment of its certificate of incorporation or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all reasonable action as may from
time to time be requested by the Grantee, at Grantee's expense (including (x)
complying with all premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. ss. 18a and regulations promulgated
thereunder and (y)in the event prior approval of or notice to the OTS, the FDIC,
the Commissioner or any other Governmental Authority, under the Home Owners Loan
Act of 1933, as amended, the Change in Bank Control Act of 1978, as amended,
Section 36a-181 or Section 36a- 184, as applicable, of the Connecticut Bank
Holding Company Act, or any other applicable federal or state banking law, is
necessary before the Option may be exercised, cooperating with Grantee in
preparing such applications or notices and providing such information to each
such Governmental Authority as it may require in order to permit Grantee to
exercise the Option and Issuer duly and effectively to issue shares of Issuer
Common Stock pursuant hereto; and (iv) to take all action provided herein to
protect the rights of Grantee against dilution.
SECTION 4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein- in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any agreements and related options for which this Agreement (and the
Option granted hereby) may
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be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date.
SECTION 5. The number of shares of Issuer Common Stock
purchasable upon the exercise of the Option shall be subject to adjustment from
time to time as follows:
(a) In the event of any change in the type or number
of shares of Issuer Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or other issuances of additional
shares (other than pursuant to the exercise of the Option), the type
and number of shares of Issuer Common Stock purchasable upon exercise
hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Issuer Common
Stock are to be issued or otherwise become outstanding as a result of
any such change (other than pursuant to an exercise of the Option), the
number of shares of Issuer Common Stock that remain subject to the
Option shall be increased or decreased (as applicable) so that, after
such issuance and together with shares of Issuer Common Stock
previously issued pursuant to the exercise of the Option (as adjusted
on account of any of the foregoing changes in the Issuer Common Stock),
the Option shall equal 18.6% of the number of shares of Issuer Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Issuer Common
Stock purchasable upon exercise hereof is adjusted as provided in this
Section 5, the Option Price shall be adjusted by multiplying the Option
Price by a fraction, the numerator of which shall be equal to the
number of shares of Issuer Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the number of
shares of Issuer Common Stock purchasable after the adjustment.
SECTION 6. (a) Upon the occurrence of a Purchase Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee (whether on its own behalf or on behalf of any subsequent holder of the
Option (or part thereof) or of any of the shares of Issuer Common Stock issued
pursuant hereto), promptly prepare, file and keep current a shelf registration
statement under the Securities Act covering any shares issued and issuable
pursuant to the Option and shall use its reasonable best efforts to cause such
registration statement to become effective, and to remain current and effective
for a period not in excess of 180 days from the day such registration statement
first becomes effective, in order to permit the sale or other disposition of any
shares of Issuer Common Stock issued upon total or partial exercise of the
Option ("Option Shares") in accordance with any plan of disposition requested by
Grantee. Grantee shall have the right to demand one such registration which
right shall not be transferable except to an affiliate of Grantee. Grantee shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. In connection with any such
registration, Issuer and Grantee shall provide each other with representations,
warranties, indemnities and other agreements customarily given in connection
with such registration. If requested by Grantee in connection with such
registration, Issuer and Grantee shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating themselves in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements.
Notwithstanding the foregoing, if Grantee revokes any exercise notice or fails
to exercise any Option with respect to any exercise notice pursuant to Section
2(e) hereof, Issuer shall not be obligated to continue any registration process
with respect to the sale of Option Shares issuable upon the exercise of such
Option and Grantee shall not be deemed to have demanded registration of Option
Shares.
(b) In the event that Grantee requests Issuer to file a
registration statement following the failure to obtain any approval required to
exercise the Option as described in Section 9 hereof, the closing of the sale or
other disposition of the Issuer Common Stock or other securities pursuant to
such registration statement shall occur substantially simultaneously with the
exercise of the Option.
(c) Concurrently with the filing of a registration statement
under Section 6(a) hereof, Issuer shall also make all filings required to comply
with state securities laws in such number of states as Grantee may reasonably
request.
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SECTION 7. (a) Upon the occurrence of a Purchase Event that
occurs prior to an Exercise Termination Event, (i) at the request (the date of
such request being the "Option Repurchase Request Date") of Grantee, Issuer
shall repurchase, subject to compliance with applicable law and out of funds
legally available therefor, the Option from Grantee at a price (the "Option
Repurchase Price") equal to the amount by which (A) the market/offer price (as
defined below) exceeds (B) the Option Price, multiplied by the number of shares
for which the Option may then be exercised and (ii) at the request (the date of
such request being the "Option Share Repurchase Request Date") of the owner of
Option Shares from time to time (the "Owner"), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Issuer Common Stock
at which a tender offer or exchange offer therefor has been made after the date
hereof and on or prior to the Option Repurchase Request Date or the Option Share
Repurchase Request Date, as the case may be, (ii) the price per share of Issuer
Common Stock paid or to be paid by any third party pursuant to an agreement with
Issuer (whether by way of a merger, consolidation or otherwise), (iii) the
average of the 20 highest last sale prices for shares of Issuer Common Stock as
reported within the 90-day period ending on the Option Repurchase Request Date
or the Option Share Repurchase Request Date, as the case may be, and (iv) in the
event of a sale of all or substantially all of Issuer's assets, the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by an investment banking firm selected
by Grantee or the Owner, as the case may be, and reasonably acceptable to
Issuer, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be the value determined by an investment
banking firm selected by Grantee or the Owner, as the case may be, and
reasonably acceptable to Issuer. The investment banking firm's determination
shall be conclusive and binding on all parties. For purposes of this Section 7,
Purchase Event shall have the true meaning as set forth in Section 2(c) hereof
except that in both subclause (i) and (ii) the applicable percentage of stock
shall be 50% rather than 25%.
(b) Grantee or the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and/or any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within 30 business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price.
(c) Issuer hereby undertakes to use its reasonable best
efforts to obtain all required regulatory, shareholder and legal approvals and
to file any required notices as promptly as practicable in order to accomplish
any repurchase contemplated by this Section 7. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation, or as a consequence of
the provision as to "well capitalized" in Section 7(a) hereof, from repurchasing
any Option and/or any Option Shares in full, Issuer shall promptly so notify
Grantee and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to Grantee and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to Section
7(b) hereof is prohibited as referred to above, from delivering to Grantee
and/or the Owner, as appropriate, the Option Repurchase Price or the Option
Share Repurchase Price, respectively, in full, Grantee or the Owner, as
appropriate, may revoke its notice of repurchase of the Option or the Option
Shares either in whole or in part whereupon, in the case of a revocation in
part, Issuer shall promptly (i) deliver to Grantee and/or the Owner, as
appropriate. that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering after taking into
account any such revocation and (ii) deliver, as appropriate, either (A) to
Grantee, a new Agreement evidencing the right of Grantee to purchase that number
of shares of Issuer Common Stock equal to the number of shares of Issuer Common
Stock purchasable immediately prior to the delivery of the notice of repurchase
less the number of shares of Issuer Common Stock covered by the portion of the
Option repurchased or, (B) to the Owner, a certificate for the number of Option
Shares covered by the revocation.
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<PAGE>
(d) Issuer shall not enter into any agreement with any Person
(other than Grantee or a Grantee Subsidiary) for an Acquisition Transaction
unless the other Person assumes all the obligations of Issuer pursuant to this
Section 7 in the event that Grantee or the Owner elects, in its sole discretion,
to require such other Person to perform such obligations.
(e) Notwithstanding the foregoing provisions of this Section
7, Issuer shall not be required to deliver or cause to be delivered to Grantee
the Option Repurchase Price or to the Owner the Option Share Repurchase Price to
the extent that such delivery would prevent the Acquisition Transaction
described in Section 2(b)(1) from being accounted for as a "poolings of
interest," as determined by Issuer's independent accountants. Issuer shall
advise Grantee or the Owner within 15 business days after either Grantee or
Owner requests information from Issuer as to whether, and to the extent that,
Issuer intends to rely upon this Section 7(e) to preclude Grantee or Owner from
otherwise exercising their rights under this Section 7.
SECTION 8. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into a letter of intent or definitive
agreement (i) to consolidate or merge with any Person (other than Grantee or a
Grantee Subsidiary), and Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any Person (other
than Grantee or a Grantee Subsidiary) to merge into Issuer, and Issuer shall be
the continuing or surviving corporation, but, in connection with such merger.
the then outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property or the then outstanding shares of Issuer Common Stock shall 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 Person (other than Grantee or a Grantee
Subsidiary) then, and in each such case, such letter of intent or definitive
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below) or (y) any person that controls the Acquiring
Corporation (the Acquiring Corporation and any such controlling person being
hereinafter referred to as the "Substitute Option Issuer").
(b) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock (as is hereinafter defined) as is equal to
the market/offer price (as defined in Section 7 hereof) multiplied by the number
of shares of Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The exercise
price of the Substitute Option per share of the Substitute Common Stock (the
"Substitute Purchase Price") shall then be equal to the Option Price multiplied
by a fraction in which the numerator is the number of shares of Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(c) The Substitute Option shall otherwise have the same terms
as the Option, provided that if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Grantee, provided, further that
the terms of the Substitute Option shall include (by way of example and not
limitation) provisions for the repurchase of the Substitute Option and
Substitute Common Stock by the Substitute Option Issuer on the same terms and
conditions as provided in Section 7 hereof.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving corporation, and (iii) the transferee of
all or any substantial part of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common
stock issued by the Substitute Option Issuer upon exercise of the
Substitute Option.
(iii) "Average Price" shall mean the average closing
price of a share of Substitute Common Stock for the one-year period
immediately preceding the consolidation, merger or sale in
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question. but in no event higher than the closing price of the shares
of Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a share of
Issuer Common Stock issued by Issuer, the corporation merging into
Issuer or by any company which controls or is controlled by such
merging corporation, as Grantee may elect.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of Substitute Common Stock outstanding immediately prior to the
issuance of the Substitute Option. In the event that the Substitute Option would
be exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (e), the Substitute Option Issuer shall make a
cash payment to Grantee equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (e) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (e). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee and the Substitute Option
Issuer. In addition, the provisions of Section 5(a) hereof shall not apply to
the issuance of any Substitute Option and for purposes of applying Section 5(a)
hereof thereafter to any Substitute Option the percentage referred to in Section
5(a) hereof shall thereafter equal the percentage that the percentage of the
shares of Substitute Common Stock subject to the Substitute Option bears to the
number of shares of Substitute Common Stock outstanding.
SECTION 9. Notwithstanding Sections 2, 6 and 7 hereof, if
Grantee has given the notice referred to in one or more of such Sections, the
exercise of the rights specified in any such Section shall be extended (a) if
the exercise of such rights requires obtaining regulatory approvals (including
any required waiting periods) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and (b) to the extent necessary to
avoid liability under Section 16(b) of the Exchange Act by reason of such
exercise; provided that in no event shall any closing date occur more than 12
months after the related notice date, and, if the closing date shall not have
occurred within such period due to the failure to obtain any required approval
by the OTS, the FDIC, the Commissioner or any other Governmental Authority
despite the best efforts of Issuer or the Substitute Option Issuer, as the case
may be, to obtain such approvals, the exercise of the rights shall be deemed to
have been rescinded as of the related notice date. In the event (a) Grantee
receives official notice that an approval of the OTS, the FDIC. the Commissioner
or any other Governmental Authority required for the purchase and sale of the
Option Shares will not be issued or granted or (b) a closing date has not
occurred within 12 months after the related notice date due to the failure to
obtain any such required approval, Grantee shall be entitled to exercise the
Option in connection with the concurrent resale of the Option Shares pursuant to
a registration statement as provided in Section 6 hereof. Nothing contained in
this Agreement shall restrict Grantee from specifying alternative means of
exercising rights pursuant to Sections 2,6 or 7 hereof in the event that the
exercising of any such rights shall not have occurred due to the failure to
obtain any required approval referred to in this Section 9.
SECTION 10. Issuer hereby represents and warrants to Grantee
as follows:
(a) Issuer has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved by
the Board of Directors of Issuer and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Issuer,
enforceable against Issuer in accordance with its terms, subject to any required
Governmental Approval, and except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Issuer Common Stock equal to the maximum number of shares of Issuer
Common Stock at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant hereto, will be duly authorized, validly issued,
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fully paid, non-assessable, and will be delivered free and clear of all claims,
liens, encumbrances and security interests and not subject to any preemptive
rights.
SECTION 11. (a) Neither of the parties hereto may assign any
of its rights or delegate any of its obligations under this Agreement or the
Option created hereunder to any other Person without the express written consent
of the other party, except that Grantee may assign this Agreement to a wholly
owned subsidiary of Grantee and Grantee may assign its rights hereunder in whole
or in part after the occurrence of a Preliminary Purchase Event. The term
"Grantee" as used in this Agreement shall also be deemed to refer to Grantee's
permitted assigns.
(b) Any assignment of rights of Grantee to any permitted
assignee of Grantee hereunder shall bear the restrictive legend at the beginning
thereof substantially as follows:
The transfer of the option represented by this assignment and
the related option agreement is subject to resale restrictions arising
under the Securities Act of 1933, as amended, and applicable state
securities laws and to certain provisions of an agreement between DS
Bancor, Inc., and Webster Financial Corporation dated as of October 7,
1996. A copy of such agreement is on file at the principal office of DS
Bancor, Inc., and will be provided to any permitted assignee of the
Option without charge upon receipt of a written request therefor.
SECTION 12. Each of Grantee and Issuer will use its reasonable
efforts to make all filings with, and to obtain consents of, all third parties
and Governmental Authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
OTS, the FDIC, the Commissioner and any other Governmental Authority for
approval to acquire the shares issuable hereunder.
SECTION 13. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief. Both parties further
agree to waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such equitable relief and that this
provision is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
SECTION 14. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that Grantee is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7 hereof, the full number of shares
of Issuer Common Stock provided in Section 1(a) hereof (as adjusted pursuant
hereto), it is the express intention of Issuer to allow Grantee to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
SECTION 15. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable. telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Plan.
SECTION 16. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed by
and construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).
SECTION 17. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement and shall be effective at the time of
execution and delivery.
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SECTION 18. Except as otherwise expressly provided herein,
each of the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated hereunder.
SECTION 19. Except as otherwise expressly provided herein or
in the Plan, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
SECTION 20. Capitalized terms used in this Agreement and not
defined herein but defined in the Plan shall have the meanings assigned thereto
in the Plan.
SECTION 21. Nothing contained in this Agreement shall be
deemed to authorize or require Issuer or Grantee to breach any provision of the
Plan or any provision of law applicable to the Grantee or Issuer.
SECTION 22. In the event that any selection or determination
is to be made by Grantee or the Owner hereunder and at the time of such
selection or determination there is more than one Grantee or Owner, such
selection shall be made by a majority in interest of such Grantees or Owners.
SECTION 23. In the event of any exercise of the option by
Grantee, Issuer and such Grantee shall execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
SECTION 24. Except to the extent Grantee exercises the Option,
Grantee shall have no rights to vote or receive dividends or have any other
rights as a shareholder with respect to shares of Issuer Common Stock covered
hereby.
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IN WITNESS WHEREOF, each of the parties has caused this Option
Agreement to be executed and delivered on its behalf by their officers thereunto
duly authorized, all as of the date first above written.
DS BANCOR, INC.,
By: /s/ Harry P. DiAdamo, Jr.
-------------------------------------
Harry P. DiAdamo, Jr.
President and Chief Executive Officer
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
-------------------------------------
James C. Smith, Chairman, President
and Chief Executive Officer
E-52
Exhibit 2.3
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of October 7, 1996, is
entered into by and among Webster Financial Corporation ("Webster"), a Delaware
corporation, and the thirteen stockholders of DS Bancor, Inc. ("DS Bancor"), a
Delaware corporation, named on Schedule I hereto (collectively the
"Stockholders"), who are directors or executive officers of DS Bancor.
WHEREAS, Webster, Webster Acquisition Corp., a wholly-owned
subsidiary of Webster ("Merger Sub") and DS Bancor have entered into an
Agreement and Plan of Merger, dated as of October ___, 1996 ("Agreement"), which
is conditioned upon the concurrent execution of this Stockholder Agreement and
which provides for, among other things, the merger of Merger Sub with and into
DS Bancor, in a stock-for-stock transaction pursuant to which DS Bancor will
become a wholly-owned subsidiary of Webster (the "Merger");
WHEREAS in order to induce Webster to enter into or proceed
with the Agreement, each of the Stockholders agrees to, among other things, vote
in favor of the Agreement, the Merger and the other transactions contemplated by
the Agreement in his/her capacity as a stockholder of DS Bancor;
NOW, THEREFORE in consideration of the premises, the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. Ownership of DS Bancor Common Stock. Each Stockholder represents and
warrants that he/she has or shares the right to vote and dispose of the number
of shares of common stock of DS Bancor, par value $1.00 per share ("DS Bancor
Stock"), set forth opposite such Stockholder's name on Schedule I hereto.
2. Agreements of the Stockholders. Each Stockholder covenants and
agrees that:
(a) Such Stockholder shall, at any meeting of DS Bancor
stockholders called for the purpose, vote or cause to be voted all
shares of DS Bancor Stock in which such Stockholder has the right to
vote (whether owned as of the date hereof or hereafter acquired) (i) in
favor of the Agreement, the Merger and the other transactions
contemplated by the Agreement and (ii) against any plan or proposal
pursuant to which DS Bancor is to be acquired by or merged with, or
pursuant to which DS Bancor proposes to sell all or substantially all
of its assets and liabilities to, any person, entity or group (other
than Webster or any affiliate thereof) unless the Board of Directors,
following receipt of written advice of DS Bancor's legal counsel,
reasonably determines, that voting against said 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
stockholders.
(b) Except as otherwise expressly permitted hereby, such Stockholder
shall not, prior to the consummation of the Merger or the earlier termination of
this Stockholder Agreement in accordance with its terms, sell, pledge, transfer
or otherwise dispose of his/her shares of DS Bancor Stock; provided, however,
that, this Section 2(b) shall not apply (i) to a pledge existing as of the date
E-53
<PAGE>
of this Agreement, (ii) to a sale, pledge, transfer or other disposition of
shares of DS Bancor Stock acquired subsequent to the date hereof upon the
exercise of options under the DS Bancor Stock Option Plan by a Stockholder who
is an executive officer of DS Bancor, if, in the case of (i), or (ii) such sale,
pledge, transfer or other disposition occurs no later than the 31st day
preceding the consummation of the Merger. To enable Stockholders to comply with
the foregoing provision, Webster will notify the Stockholders at least 45 days
in advance of the date that Webster anticipates that the Merger will be
consummated.
(c) Such Stockholder shall not in his/her capacity as a stockholder of
DS Bancor directly or indirectly encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than Webster or an affiliate thereof) concerning any merger, sale of
substantial assets or liabilities not in the ordinary course of business, sale
of shares of capital stock or similar transaction involving DS Bancor. Nothing
herein shall impair such Stockholders' fiduciary obligations as a director of DS
Bancor.
(d) Such Stockholder shall use his/her best efforts to take or cause to
be taken all action, and to do or cause to be done all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the Merger contemplated by this Stockholder Agreement.
(e) Such Stockholder shall not, prior to the public release by Webster
of an earnings report to its stockholders covering at least one month of
operations after consummation of the Merger (the "Restricted Period"), sell,
pledge (other than the replacement of an existing pledge of DS Bancor Stock),
transfer or otherwise dispose of the shares of Webster Stock to be received by
him/her for his/her shares of DS Bancor Stock upon consummation of the Merger;
it being agreed that Webster shall cause such earnings report to be publicly
released within 30 days after the end of the first month of operations after
consummation of the Merger.
(f) Such Stockholder shall comply with all applicable federal and state
securities laws in connection with any sale of Webster Stock received in
exchange for DS Bancor Stock in the Merger, including the trading and volume
limitations as to sales by affiliates contained in Rule 145 under the Securities
Act of 1933, as amended.
(g) Such Stockholder shall not sell or otherwise dispose of a number of
shares of his DS Bancor Common Stock or, during the Restricted Period shares of
Webster Common Stock which are exchanged for said shares (i) which is greater
than 10% of his total beneficial ownership of said shares as of the date of the
first such sale (ii) which in the aggregate with shares sold or otherwise
disposed of by all other Stockholders will be greater than 1% of the issued and
outstanding shares of DS Bancor as of the date of the first such sale. For
purposes of this computation, outstanding stock options that currently are
exercisable would be considered as outstanding or beneficially owned after such
options are converted to common stock equivalents using the treasury stock
method in accordance with generally accepted accounting principles.
3. Successors and Assigns. A Stockholder may sell, pledge, transfer or
otherwise dispose of his/her shares of DS Bancor Stock, provided that such
Stockholder obtains prior written consent of Webster and that any acquiror of
such DS Bancor Stock agree in writing to be bound by this Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms; provided,
however, that if the DS Bancor
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<PAGE>
stockholders fail to approve the Agreement or DS Bancor fails to hold a
stockholders meeting to vote on the Agreement, then (i) Section 2(a) clause (ii)
hereof shall continue in effect as to any plan or proposal received by DS Bancor
from any person, entity or group (other than Webster or any affiliate thereof)
prior to the termination of the Agreement or within 135 days after such
termination and (ii) Section 2(b) hereof shall continue in effect to preclude a
sale other than pursuant to normal brokers transactions on the Nasdaq Stock
Market, pledge other than to a bona fide financial institution or recognized
securities dealer, transfer, or other disposition directly or indirectly to any
such person, entity or group in connection with any such plan or proposal,
except upon consummation of such plan or proposal.
5. Notices. Notices may be provided to Webster and the Stockholders in
the manner specified in the Agreement, with all notices to the Stockholders
being provided to them at DS Bancor in the manner specified in such section.
6. Governing Law. This Stockholder Agreement shall be governed by the
laws of the State of Delaware, without giving effect to the principles of
conflicts of laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. Headings. The Section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Stockholder Agreement.
9. Regulatory Approval. If any provision of this Agreement requires the
approval of any regulatory authority in order to be enforceable, then such
provision shall not be affective until such approval is obtained; provided,
however, that the foregoing shall not affect the enforceability of any other
provision of this Agreement.
10. Pooling of Interest. In the event that Webster elects to have the
Merger accounted for as a purchase rather than a pooling of interest, this
Agreement shall be modified to the extent that restrictions contained herein are
based only on requirements for a pooling of interest.
E-55
<PAGE>
IN WITNESS WHEREOF, Webster, by a duly authorized officer, and each of
the Stockholders have caused this Stockholder Agreement to be executed and
delivered as of the day and year first above written.
WEBSTER FINANCIAL CORPORATION DS BANCOR, INC.
By: /s/ James C. Smith /s/ Michael F. Daddona, Jr.
-------------------------------- ---------------------------------
James C. Smith Michael F. Daddona, Jr.
Chairman, President and
Chief Executive Officer /s/ John F. Costigan
---------------------------------
John F. Costigan
/s/ Achille A. Apicella
---------------------------------
Achille A. Apicella, CPA
/s/ Walter R. Archer
---------------------------------
Walter R. Archer, Jr.
/s/ Harry P. DiAdamo, Jr.
---------------------------------
Harry P. DiAdamo, Jr.
/s/ Angelo E. Dirienzo
---------------------------------
Angelo E. Dirienzo
/s/ Laura J. Donahue
---------------------------------
Laura J. Donahue, Esq.
/s/ Christopher H. B. Mills
---------------------------------
Christopher H.B. Mills
/s/ John M. Rak
---------------------------------
John M. Rak
/s/ John P. Sponheimer
---------------------------------
John P. Sponheimer, Esq.
/s/ Gary M. Tompkins
---------------------------------
Gary M. Tompkins
/s/ Alfred T. Santoro ex pg # 2(A)
---------------------------------
Alfred T. Santoro
/s/ Thomas H. Wells ex pg # 2(A)
---------------------------------
Thomas H. Wells
E-56
Exhibit 5
HOGAN & HARTSON LLP
555 13TH STREET, N.W.
WASHINGTON, D.C. 20004
November 8, 1996
Board of Directors
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06720
Ladies and Gentlemen:
We are acting as special counsel to Webster Financial
Corporation (the "Corporation"), a Delaware corporation, in connection with its
registration on Form S-4 (the "Registration Statement") filed with the
Securities and Exchange Commission relating to the proposed offering of shares
of Common Stock, par value $.01 per share, all of which shares (the "Shares")
are to be issued by the Corporation in accordance with the terms of the
Agreement and Plan of Merger dated as of October 7, 1996 (the "Agreement"),
between the Corporation, Webster Acquisition Corp. and DS Bancor, Inc. ("DS
Bancor"). This opinion letter is furnished to you at your request to enable you
to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. ss.
229.601(b)(5), in connection with the Registration Statement.
For purposes of this opinion letter, we have examined copies of
the following documents:
1. An executed copy of the Registration Statement;
2. An executed copy of the Agreement;
3. The Restated Certificate of Incorporation of the Corporation, with
amendments thereto, as certified by the Secretary of the Corporation
on the date hereof as then being complete, accurate and in effect;
4. The Bylaws of the Corporation, as amended, as certified by the
Secretary of the Corporation on the date hereof as then being
complete, accurate and in effect; and
5. Resolutions of the Board of Directors of the Corporation adopted at a
meeting held on October 6, 1996, as certified by the Secretary of the
Corporation on the date hereof as then being complete, accurate and in
effect, relating to, among other things, the issuance of the Shares
and arrangements in connection therewith.
In our examination of the aforesaid documents, we have assumed
the genuineness of all signatures, the legal capacity of natural persons, the
authenticity, accuracy
E-57
<PAGE>
Board of Directors
Webster Financial Corporation
November 8, 1996
Page 2
and completeness of all documents submitted to us, and the conformity with the
original documents of all documents submitted to us as certified, telecopied,
photostatic, or reproduced copies. This opinion letter is given, and all
statements herein are made, in the context of the foregoing.
This opinion letter is based as to matters of law solely on
the General Corporation Law of the State of Delaware. We express no opinion
herein as to any other laws, statutes, regulations, or ordinances.
Based upon, subject to and limited by the foregoing, we are of
the opinion that following (i) effectiveness of the Registration Statement, (ii)
issuance of the Shares pursuant to the terms of the Agreement, and (iii) receipt
by the Corporation of the consideration for the Shares specified in the
Agreement and resolutions of the Board of Directors, the Shares will be validly
issued, fully paid and nonassessable under the General Corporation Law of the
State of Delaware.
We assume no obligation to advise you of any changes in the
foregoing subsequent to the delivery of this opinion letter. This opinion letter
has been prepared solely for your use in connection with the filing of the
Registration Statement on the date of this opinion letter and should not be
quoted in whole or in part or otherwise be referred to, nor filed with or
furnished to any governmental agency or other person or entity, without the
prior written consent of this firm.
We hereby consent to the filing of this opinion letter as
Exhibit 5 to the Registration Statement. In giving this consent, we do not
thereby admit that we are an "expert" within the meaning of the Securities Act
of 1933, as amended.
Very truly yours,
/s/ Hogan & Hartson L.L.P.
E-58
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 L.L.P.
Hartford, Connecticut
November 8, 1996
E-59
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 on November 8, 1996.
/s/ FRIEDBERG, SMITH & CO., P.C.
Bridgeport, Connecticut
November 8, 1996
E-60
Exhibit 23.6
CONSENT OF ALEX. BROWN & SONS INCORPORATED
We hereby consent to the reference to our firm and to the
inclusion of the copy of our opinion letter as Appendix A in the Joint Proxy
Statement/Prospectus which is a part of the Registration Statement filed by
Webster Financial Corporation on Form S-4 under the Securities Act of 1933, as
amended. By giving this consent, we do not thereby admit 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.
ALEX. BROWN & SONS INCORPORATED
By: /s/ Howard J. Loewenberg
-----------------------------
Howard J. Loewenberg
Principal
Baltimore, Maryland
November 5, 1996
E-61
Exhibit 99.1
ss. 145. Indemnification of officers, directors, employees and agents;
insurance.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section.
E-62
<PAGE>
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
E-63
REVOCABLE PROXY Exhibit 99.2
DS BANCOR, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned shareholder of DS Bancor, Inc. ("DS Bancor")
hereby appoints ________________________, or any of them, with full power of
substitution in each, as proxies to cast all votes which the undersigned
shareholder is entitled to cast at the special meeting of shareholders (the "DS
Bancor Meeting") to be held at ________ a.m. on ___________ ___, 1997 at
_________________________________, Connecticut, and at any adjournments or
postponements thereof, upon the following matters. The undersigned shareholder
hereby revokes any proxy or proxies heretofore given.
This proxy will be voted as directed by the undersigned
shareholder. UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED: (1)
TO APPROVE AND ADOPT AN AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER 7,
1996, AMONG WEBSTER FINANCIAL CORPORATION ("WEBSTER"), WEBSTER ACQUISITION CORP.
AND DS BANCOR, AND THE MERGER PROVIDED FOR THEREIN, PURSUANT TO WHICH DS BANCOR
WILL BE ACQUIRED BY WEBSTER, AND (2) OTHERWISE IN ACCORDANCE WITH THE
DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS OF DS BANCOR. The
undersigned shareholder may revoke this proxy at any time before it is voted by
(i) delivering to the Secretary of DS Bancor 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 undersigned shareholder hereby
acknowledges receipt of DS Bancor's Notice of Special Meeting and Joint Proxy
Statement/Prospectus.
If you receive more than one proxy card, please sign and
return all cards in the accompanying envelope.
(continued and to be signed and dated on reverse side)
------------------------
See
Reverse Side
------------------------
E-64
<PAGE>
------------
X
------------
Please mark your
votes as this.
-------------
COMMON
Proposal 1: To approve and adopt an Agretment and Plan of Merger, dated as
of October 7, 1996, among Webster, Webster Acquisition Corp.
and DS Bancor, and the merger provided for therein, pursuant to
which DS Bancor will be acquired by Webster.
FOR AGAINST ABSTAIN
|_| |_| |_|
Other Matters: The proxies are authorized to vote upon 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, in accordance
with the determination of a majority of DS Bancor's Board of
Directors.
Date:
--------------------------------
--------------------------------
--------------------------------
Signature of Shareholder or
Authorized Representative
Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary should
sign and indicate his or her full title. When stock has been issued in the name
of two or more persons, all should sign.
E-65
REVOCABLE PROXY Exhibit 99.3
WEBSTER FINANCIAL CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned shareholder of Webster Financial Corporation
("Webster") hereby appoints _________________________, or any of them, with full
power of substitution in each, as proxies to cast all votes which the
undersigned shareholder is entitled to cast at the special meeting of
shareholders (the "Webster Meeting") to be held at _____ a.m. on _____________
__, 1997, at _______________________, Connecticut, and at any adjournments or
postponements thereof, upon the following matters. The undersigned shareholder
hereby revokes any proxy or proxies heretofore given.
This proxy will be voted as directed by the undersigned
shareholder. UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED: (1)
TO APPROVE THE ISSUANCE OF UP TO 4,681,658 ADDITIONAL SHARES OF WEBSTER COMMON
STOCK IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND PLAN
OF MERGER, DATED AS OF OCTOBER 7, 1996, AMONG WEBSTER, WEBSTER ACQUISITION CORP.
AND DS BANCOR, INC. (THE "MERGER AGREEMENT"), (2) TO APPROVE THE AMENDMENT TO
WEBSTER'S RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED ("RESTATED
CERTIFICATE OF INCORPORATION") TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
WEBSTER COMMON STOCK FROM 14,000,000 TO 30,000,000, AND (3) IN ACCORDANCE WITH
THE DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS OF WEBSTER AS TO OTHER
MATTERS. The undersigned shareholder may revoke this proxy at any time before it
is voted by (i) delivering to the Secretary of Webster 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 undersigned shareholder hereby
acknowledges receipt of Webster's Notice of Special Meeting and Joint Proxy
Statement/Prospectus.
If you receive more than one proxy card, please sign and
return all cards in the accompanying envelope.
(continued and to be signed and dated on reverse side)
------------------------
See
Reverse Side
------------------------
E-66
<PAGE>
----------------
X
----------------
Please mark your votes as
this.
-----------------
COMMON
Proposal 1: To approve the issuance of up to 4,681,658 shares of Webster
Common Stock in connection with the acquisition of DS Bancor,
Inc. by Webster pursuant to the Merger Agreement.
FOR AGAINST ABSTAIN
|_| |_| |_|
Proposal 2: 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.
Other Matters: The proxies are authorized to vote upon 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, in accordance with the determination of a
majority of Webster's Board of Directors.
Date:
Date:
--------------------------------
--------------------------------
--------------------------------
Signature of Shareholder or
Authorized Representative
Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary should
sign and indicate his or her full title. When stock has been issued in the name
of two or more persons, all should sign.
E-67
