SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Webster Financial Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: _________________________________________________
2) Form, Schedule or Registration Statement No.: ___________________________
3) Filing Party: __________________________________________________________
4) Date Filed: _____________________________________________________________
<PAGE>
WEBSTER FINANCIAL
CORPORATION
[LOGO]
March 19, 1998
TO THE SHAREHOLDERS OF
WEBSTER FINANCIAL CORPORATION:
You are cordially invited to attend the annual meeting of
shareholders (the "Annual Meeting") of Webster Financial Corporation ("Webster")
to be held on Thursday, April 23, 1998, at 4:00 p.m., local time, at the
Sheraton Four Points Hotel, 3580 East Main Street, Waterbury, Connecticut 06705.
At the Annual Meeting, Webster's shareholders will be asked:
(i) to elect three directors, each to serve for a three-year term; (ii) to amend
Webster's 1992 Stock Option Plan to increase the number of shares of common
stock available for issuance thereunder by 700,000 shares, to increase the
number of shares subject to options that may be granted to any officer or other
employee during any calendar year and to extend the term of the Plan to February
23, 2008; (iii) to approve the material terms of Webster's Qualified
Performance-Based Compensation Plan; (iv) to ratify the appointment of KPMG Peat
Marwick LLP as independent auditors of Webster for the year ending December 31,
1998; and (v) to transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The Board of Directors unanimously recommends that you vote
FOR the election of all the Board's three nominees for election as directors and
FOR each of the other proposals listed above. You are encouraged to read the
accompanying Proxy Statement, which provides information regarding Webster and
the matters to be voted on at the Annual Meeting. Also enclosed is our 1997
annual report to shareholders.
It is important that your shares be represented at the Annual
Meeting. Whether or not you plan to attend the Annual Meeting, you are requested
to complete, date, sign and return the enclosed proxy card in the enclosed
postage paid envelope.
MATTERS TO BE ADDRESSED AT THE ANNUAL MEETING ARE SEPARATE AND
DISTINCT FROM MATTERS TO BE ADDRESSED AT THE SPECIAL MEETING OF WEBSTER'S
SHAREHOLDERS IN EARLY APRIL. YOU ARE URGED TO READ THE ENCLOSED MATERIALS
CAREFULLY AND TO RETURN THE ENCLOSED PROXY CARD FOR THE ANNUAL MEETING WHETHER
OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING.
Sincerely,
/s/ James C. Smith
James C. Smith
Chairman and Chief Executive Officer
<PAGE>
WEBSTER FINANCIAL CORPORATION
WEBSTER PLAZA
WATERBURY, CONNECTICUT 06702
(203) 753-2921
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 1998
-------------------
TO THE SHAREHOLDERS OF
WEBSTER FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders
(the "Annual Meeting") of Webster Financial Corporation ("Webster") will be held
on Thursday, April 23, 1998, at 4:00 p.m., local time, at the Sheraton Four
Points Hotel, 3580 East Main Street, Waterbury, Connecticut 06705, for the
following purposes:
1. Election of Directors. To elect three directors, each to
serve for a three-year term (Proposal 1);
2. Amendment of 1992 Stock Option Plan. To amend Webster's
1992 Stock Option Plan to increase the number of shares of Common Stock
available for issuance thereunder, to increase the number of shares subject to
options that may be granted to any officer or other employee during any calendar
year and to extend the term of the Plan (Proposal 2);
3. Approval of Qualified Performance-Based Compensation Plan.
To approve the material terms of Webster's Qualified Performance-Based
Compensation Plan (Proposal 3);
4. Ratification of Appointment of Auditors. To ratify the
appointment by the Board of Directors of the firm of KPMG Peat Marwick LLP as
independent auditors of Webster for the fiscal year ending December 31, 1998
(Proposal 4); and
5. Other Business. To transact such other business as may
properly come before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on
March 4, 1998, as the record date for the determination of shareholders entitled
to notice of and to vote at the Annual Meeting. Only shareholders of record at
the close of business on that date will be entitled to notice of and to vote at
the Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
/s/ James C. Smith
James C. Smith
Chairman and Chief Executive Officer
Waterbury, Connecticut
March 19, 1998
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE DATE, SIGN AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
WEBSTER FINANCIAL CORPORATION
WEBSTER PLAZA
WATERBURY, CONNECTICUT 06702
(203) 753-2921
-----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 1998
-----------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement (the "Proxy Statement") is being
furnished to the shareholders of Webster Financial Corporation, a Delaware
corporation ("Webster" or the "Corporation"), as part of the solicitation of
proxies by its board of directors (the "Board of Directors" or the "Board") from
holders of its outstanding shares of common stock, par value $.01 per share (the
"Common Stock"), for use at the Annual Meeting of Shareholders of Webster to be
held on Thursday, April 23, 1998, at 4:00 p.m., local time, at the Sheraton Four
Points Hotel, 3580 East Main Street, Waterbury, Connecticut 06705, (the "Annual
Meeting") and at any adjournments thereof. The Proxy Statement, together with
the enclosed proxy card, is being mailed to shareholders of Webster on or about
March 19, 1998.
The Annual Meeting has been called for the following purposes:
(i) to elect three directors, each to serve for a three-year term (Proposal 1);
(ii) to amend Webster's 1992 Stock Option Plan to increase the number of shares
of Common Stock available for issuance thereunder by 700,000 shares, to increase
the number of shares subject to options that may be granted to any officer or
other employee during any calendar year and to extend the term of the Plan to
February 23, 2008 (Proposal 2); (iii) to approve the material terms of Webster's
Qualified Performance-Based Compensation Plan (Proposal 3); (iv) to ratify the
appointment by the Board of Directors of the firm of KPMG Peat Marwick LLP as
independent auditors of Webster for the year ending December 31, 1998 (Proposal
4); and (v) to transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
If the enclosed form of proxy is properly executed and
returned to Webster in time to be voted at the Annual Meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR THE ELECTION OF THE
BOARD'S NOMINEES AS DIRECTORS, FOR AMENDMENT OF WEBSTER'S 1992 STOCK OPTION
PLAN, FOR APPROVAL OF THE MATERIAL TERMS OF WEBSTER'S QUALIFIED
PERFORMANCE-BASED COMPENSATION PLAN AND FOR RATIFICATION OF THE APPOINTMENT OF
WEBSTER'S INDEPENDENT AUDITORS. Except for procedural matters incident to the
conduct of the Annual Meeting, the Board of Directors does not know of any
matters other than those described in the Notice of Annual Meeting that are to
come before the Annual Meeting. If any other matters are properly brought before
the Annual Meeting, the persons named in the proxy will vote the shares
represented by such proxy on such matters as determined by a majority of the
Board of Directors.
The presence of a shareholder at the Annual Meeting will not
automatically revoke such shareholder's proxy. A shareholder may, however,
revoke a proxy at any time before it is voted by delivering a written notice of
revocation or a duly executed proxy bearing a later date to James M. Sitro, Vice
President, Investor Relations, Webster Financial Corporation, Webster Plaza,
Waterbury, Connecticut 06702, or by attending the Annual Meeting and voting in
person.
<PAGE>
The cost of soliciting proxies for the Annual Meeting will be
borne by Webster. In addition to use of the mails, proxies may be solicited
personally or by telephone or telecopy by directors, officers and employees, who
will not be specially compensated for such activities. Webster will also request
persons, firms and companies holding shares in their names or in the name of
their nominees, which are beneficially owned by others, to send proxy materials
to and obtain proxies from such beneficial owners and will reimburse such
holders for their reasonable expenses incurred in that connection. Webster also
has retained D.F. King & Co., Inc., a proxy soliciting firm, to assist in the
solicitation of proxies at a fee of $4,000, plus reimbursement of certain
out-of-pocket expenses.
The securities which can be voted at the Annual Meeting
consist of shares of Common Stock of Webster with each share entitling its owner
to one vote on all matters properly presented at the Annual Meeting. There is no
cumulative voting of shares. The Board of Directors has fixed the close of
business on March 4, 1998 as the record date for the determination of
shareholders of Webster entitled to notice of and to vote at the Annual Meeting.
On the record date, there were 4,791 holders of record of the 13,672,899 shares
of Common Stock then outstanding and eligible to be voted at the Annual Meeting.
The presence, in person or by proxy, of at least one-third of
the total number of outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting.
Assuming the presence of a quorum at the Annual Meeting, directors will be
elected by a plurality of the votes of the shares of Common Stock present in
person or represented by proxy and entitled to vote. The affirmative vote of a
majority of the votes cast is required to approve the amendment of Webster's
1992 Stock Option Plan, to approve the material terms of Webster's Qualified
Performance-Based Compensation Plan and to ratify the appointment of the
Corporation's independent auditors. Shareholders' votes will be tabulated by the
persons appointed by the Board of Directors to act as inspectors of election for
the Annual Meeting. Abstentions and broker non-votes will be treated as shares
that are present, or represented, and entitled to vote for purposes of
determining the presence of a quorum at the Annual Meeting. Broker non-votes
will not be counted as a vote cast or entitled to vote on any matter presented
at the Annual Meeting. Abstentions will not be counted in determining the number
of votes cast in connection with any matter presented at the Annual Meeting.
A copy of the annual report to shareholders for the fiscal
year ended December 31, 1997 accompanies this Proxy Statement. WEBSTER IS
REQUIRED TO FILE AN ANNUAL REPORT ON FORM 10-K FOR ITS 1997 FISCAL YEAR WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). SHAREHOLDERS MAY OBTAIN, FREE OF
CHARGE, A COPY OF THE FORM 10-K BY WRITING TO JAMES M. SITRO, VICE PRESIDENT,
INVESTOR RELATIONS, WEBSTER FINANCIAL CORPORATION, WEBSTER PLAZA, WATERBURY,
CONNECTICUT 06702.
ELECTION OF DIRECTORS
(PROPOSAL 1)
At the Annual Meeting, three directors will be elected to
serve for three-year terms. Unless otherwise specified on the proxy, it is the
intention of the persons named in the proxy to vote the shares represented by
each properly executed proxy for the election as directors of the persons named
below as nominees. The Board of Directors believes that the nominees will stand
for election and will serve if elected as directors. If, however, any person
nominated by the Board fails to stand for election or is unable to accept
election, the proxies will be voted for the election of such other person as the
Board of Directors may recommend. Assuming the presence of a quorum at the
Annual Meeting, directors will be elected by a plurality of the votes of the
shares of Common Stock present in person or represented by proxy and entitled to
vote at the Annual Meeting. There are no cumulative voting rights in the
election of directors.
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<PAGE>
The Board of Directors currently consists of 11 members, and
is divided into three classes, one of which is composed of three directors and
two of which are composed of four directors. The term of office of only one
class of directors expires in each year, and their successors are elected for
terms of up to three years and until their successors are elected and qualified.
Under the terms of Webster's proposed acquisition of Eagle
Financial Corp., Webster will invite three former Eagle directors, Messrs.
Richard H. Alden, George T. Carpenter and John F. McCarthy, to serve as members
of the Board of the Corporation. Under the terms of Webster's January 1997
acquisition of DS Bancor, Inc. ("DS Bancor"), Webster added two former DS Bancor
directors, Messrs. Apicella and DiAdamo, to serve on the Board of the
Corporation for terms expiring in 1999 and 1998, respectively. Webster also
agreed that one of the two former DS Bancor directors will be renominated when
his term expires. Mr. DiAdamo has been renominated by the Board of Directors for
election at the Annual Meeting.
INFORMATION AS TO NOMINEES AND OTHER DIRECTORS
The following table sets forth the names of the Board of
Directors' nominees for election as directors and the current directors of
Webster whose offices continue beyond the Annual Meeting. Also set forth is
certain other information with respect to each such person's age at December 31,
1997, the periods during which such person has served as a director of Webster
and positions currently held with Webster and its wholly owned subsidiary,
Webster Bank.
<TABLE>
<CAPTION>
POSITIONS HELD WITH
DIRECTOR NOMINEES FOR A AGE AT DIRECTOR EXPIRATION WEBSTER AND
THREE-YEAR TERM: DECEMBER 31, 1997 SINCE OF TERM WEBSTER BANK
- --------------- ----------------- ----- ------- ------------
<S> <C> <C> <C>
Joel S. Becker 49 1986 1998 Director
Harry P. DiAdamo, Jr. 54 1997 1998 Director
James C. Smith 48 1986 1998 Chairman,
President, Chief
Executive Officer
and Director
CONTINUING DIRECTORS:
- --------------------
Achille A. Apicella 54 1997 1999 Director
O. Joseph Bizzozero, Jr. 63 1986 2000 Director
John J. Crawford 53 1996 2000 Director
Robert A. Finkenzeller 47 1986 2000 Director
Walter R. Griffin 76 1987 1999 Director
J. Gregory Hickey 68 1994 1999 Director
C. Michael Jacobi 55 1993 1999 Director
Sister Marguerite Waite, C.S.J. 59 1990 2000 Director
</TABLE>
ACHILLE A. APICELLA is President of Apicella, Testa & Company
P.C., a certified public accounting firm in Shelton, Connecticut. He served as a
director of DS Bancor and Derby Savings Bank, which were acquired by Webster in
January 1997.
-3-
<PAGE>
JOEL S. BECKER is Chairman of the Board and Chief Executive
Officer of Torrington Supply Co., Inc., Waterbury, Connecticut.
O. JOSEPH BIZZOZERO, JR. is a practicing physician and the
President of Bizzozero Assoc. P.C. (since September 1996). Prior to September
1996, he was the President and Chief Executive Officer of the BCB Medical Group.
Dr. Bizzozero has been affiliated with Waterbury Hospital since 1969. He is also
an Associate Clinical Professor of Medicine at the Yale University School of
Medicine.
JOHN J. CRAWFORD is President and Chief Executive Officer of
the South Central Connecticut Regional Water Authority. Since October 1990, Mr.
Crawford has been President, Chief Executive Officer and a director of Aristotle
Corporation, New Haven, Connecticut (a manufacturer of women's apparel since
1994). From 1990 until October 1992, Mr. Crawford was President and Chief
Executive Officer of First Constitution Bank, which was acquired by Webster Bank
in October 1992. Subsequent to that acquisition and until April 1996, Mr.
Crawford served as a consultant to Webster Bank.
HARRY P. DIADAMO, JR. served as President and Chief Executive
Officer of DS Bancor and Derby Savings Bank, which were acquired by Webster in
January 1997.
ROBERT A. FINKENZELLER is President of Eyelet Crafters, Inc.,
a Waterbury-based company which manufactures deep drawn metal parts for the
cosmetics, writing instrument and drapery hardware fields.
WALTER R. GRIFFIN is a principal of Griffin, Griffin &
O'Brien, P.C., in Waterbury, Connecticut. Griffin, Griffin & O'Brien, P.C.
serves as Webster's and Webster Bank's general counsel.
J. GREGORY HICKEY is the retired Managing Partner of the
Hartford office of Ernst & Young, LLP, an independent auditing firm.
C. MICHAEL JACOBI is President, Chief Executive Officer and a
director of Timex Corporation, Middlebury, Connecticut, a manufacturer of
timepieces. Mr. Jacobi served as Vice President of Marketing and Sales of Timex
Corporation from 1981 to 1992. He became Executive Vice President and Chief
Operating Officer in April 1992, President and Chief Operating Officer in
December 1992, and President and Chief Executive Officer in December 1993.
JAMES C. SMITH is Chairman, President, Chief Executive Officer
and a director of Webster and Webster Bank, having been elected Chairman in 1995
and Chief Executive Officer in 1987. He joined Webster Bank in 1975, and was
elected President and Chief Operating Officer of Webster Bank in 1982 and of
Webster in 1986. Mr. Smith is a director of MacDermid, Incorporated, Waterbury,
Connecticut, a manufacturer and wholesaler of specialty chemicals.
SISTER MARGUERITE WAITE, C.S.J., is President, Chief Executive
Officer and Treasurer of St. Mary's Hospital, Waterbury, Connecticut. Prior to
her election as President in 1986, Sister Marguerite Waite was Vice President
and Chief Operating Officer of St. Mary's Hospital.
CERTAIN BOARD COMMITTEES; NOMINATIONS BY SHAREHOLDERS
The Board of Directors has appointed a standing Audit
Committee that conducted four meetings during 1997. The Audit Committee oversees
the Corporation's financial reporting process, the system of internal financial
and accounting controls, the audit process and compliance with applicable laws
and regulations. The Audit Committee reviews the Corporation's annual
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<PAGE>
financial statements, including management's discussion and analysis and
regulatory examination findings. The Audit Committee recommends the appointment
of independent auditors. The members of the Audit Committee currently are
Messrs. Crawford (Chairman), Apicella, Hickey and Jacobi.
The Board of Directors also has appointed a Personnel
Resources Committee that reviews employee compensation on an annual basis and
makes recommendations to the full Board regarding compensation. The Personnel
Resources Committee also makes recommendations to the Stock Option Committee
concerning long-term incentive awards. All recommendations of the Personnel
Resources Committee regarding the compensation of executive officers (other than
long-term incentive awards) are approved by Webster's Board of Directors which
has ultimate responsibility over such matters. During 1997, the Personnel
Resources Committee held two meetings. The members of the Personnel Resources
Committee currently are Mr. Becker (Chairman), Dr. Bizzozero, Mr. Finkenzeller
and Sister Marguerite Waite.
The Stock Option Committee makes final determinations
concerning the granting of stock options under Webster's 1992 Stock Option Plan
and administers Webster's Performance Incentive Plan. If Webster's shareholders
approve the material terms of the Qualified Performance-Based Compensation Plan,
the Stock Option Committee also will administer that plan. During 1997, the
Stock Option Committee held six meetings. The members of the Stock Option
Committee, which consists of all disinterested non-employee directors of the
Corporation, are Messrs. Becker (Chairman) and Apicella, Dr. Bizzozero, Messrs.
Crawford, DiAdamo, Finkenzeller, Hickey and Jacobi and Sister Marguerite Waite.
During 1997, Webster held eleven meetings of its Board of
Directors. Each incumbent director attended at least 75% of the aggregate of (i)
the total number of meetings held by the Board of Directors during the period
that such individual served and (ii) the total number of meetings held by all
committees of the Board on which the director served during the period that such
individual served.
The Board has appointed a Corporate Governance Committee to
make initial recommendations to the full Nominating Committee. The members of
the Corporate Governance Committee are Messrs. Smith (Chairman), DiAdamo,
Griffin and Jacobi.
The Board of Directors acts as the full Nominating Committee
for selecting nominees for election as directors. Webster's Bylaws also permit
shareholders eligible to vote at the Annual Meeting to make nominations for
directors but only if such nominations are made pursuant to timely notice in
writing to the Secretary of Webster. To be timely, notice must be delivered to,
or mailed to and received at, the principal executive offices of Webster not
less than 30 days nor more than 90 days prior to the date of the meeting,
provided that at least 45 days' notice or prior public disclosure of the date of
the Annual Meeting is given or made to shareholders. If less than 45 days'
notice or prior public disclosure of the date of the Annual Meeting is given or
made to shareholders, notice by the shareholder to be timely must be received by
Webster not later than the close of business on the 15th day following the day
on which such notice of the date of the Annual Meeting was mailed or such public
disclosure was made. Public disclosure of the date of the Annual Meeting was
made by the issuance of a press release on March 2, 1998 and by filing a Current
Report on Form 8-K under the Securities Exchange Act of 1934, as amended (the
"1934 Act") with the SEC on March 4, 1998. A shareholder's notice of nomination
must also set forth certain information specified in Article III, Section 13 of
the Corporation's Bylaws concerning each person the shareholder proposes to
nominate for election and the nominating shareholder.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ELECTION OF ALL OF ITS DIRECTOR NOMINEES.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information with
respect to the five highest paid executive officers of Webster, each of whom is
elected to serve for a one-year period. Each such officer currently holds the
same positions with Webster Bank and serves pursuant to an employment agreement
with Webster and Webster Bank. See "Management -- Employment Agreements."
<TABLE>
<CAPTION>
AGE AT POSITIONS HELD WITH WEBSTER
NAME DECEMBER 31, 1997 AND WEBSTER BANK
---- ----------------- ----------------
<S> <C> <C>
James C. Smith 48 Chairman, President, Chief Executive Officer
and Director
John V. Brennan 45 Executive Vice President, Chief Financial Officer
and Treasurer
William T. Bromage 52 Executive Vice President -- Business Banking
Peter K. Mulligan 53 Executive Vice President -- Consumer and Small
Business Banking
Ross M. Strickland 48 Executive Vice President -- Mortgage Banking
</TABLE>
Information concerning the principal occupation of these
executive officers of Webster and Webster Bank during at least the last five
years is set forth below.
JAMES C. SMITH is Chairman, President, Chief Executive Officer
and a director of Webster and Webster Bank, having been elected Chairman in 1995
and Chief Executive Officer in 1987. Mr. Smith joined Webster Bank in 1975 and
was elected President and Chief Operating Officer of Webster Bank in 1982 and of
Webster in 1986.
JOHN V. BRENNAN is Executive Vice President, Chief Financial
Officer and Treasurer of Webster and Webster Bank. Mr. Brennan, a certified
public accountant, joined Webster Bank in 1986 as Senior Vice President and
Treasurer. He was elected Chief Financial Officer in 1990 and Executive Vice
President in 1991. Prior to joining Webster Bank, he was a senior manager with
the accounting firm of KPMG Peat Marwick LLP.
WILLIAM T. BROMAGE is Executive Vice President -- Business
Banking of Webster and Webster Bank, positions he has held since May 1996. Prior
to joining Webster, he was a Consultant at Aetna Life & Casualty in Hartford,
Connecticut from 1994 to 1995. Before his association with Aetna, he was
Executive Vice President in Credit Administration at Shawmut National
Corporation since 1990 and had served Shawmut in other positions since 1969.
PETER K. MULLIGAN is Executive Vice President -- Consumer and
Small Business Banking of Webster and Webster Bank, positions he has held since
employment in 1995. Prior to joining Webster Bank, he was the Director of
Product Management, Retail Sales and Insurance at The Bank of Boston, and served
as the Executive Vice President of the Banking Division at The Society for
Savings, Hartford, Connecticut from 1988 until 1992. Society was acquired by The
Bank of Boston in 1992.
ROSS M. STRICKLAND is Executive Vice President -- Mortgage
Banking of Webster and Webster Bank, positions he has held since his employment
in 1991. Prior to joining Webster
-6-
<PAGE>
Bank, he was Executive Vice President of Residential Lending with the former
Northeast Savings, F.A., Hartford, Connecticut, from 1988 to 1991. Prior to
joining Northeast Savings, he was National Sales Manager, Credit Resources
Group, for Shearson Lehman Brothers.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by
Webster or Webster Bank for services rendered in all capacities to Webster and
its subsidiaries during 1997, 1996 and 1995 to the Chief Executive Officer of
Webster and to each of the four most highly compensated executive officers of
Webster other than the Chief Executive Officer serving at December 31, 1997
("the named executive officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
-------------------
ANNUAL COMPENSATION SECURITIES ALL
NAME AND ------------------- UNDERLYING OTHER
PRINCIPAL POSITIONS YEAR SALARY BONUS (a) OPTIONS (#) COMPENSATION (b)
- ------------------- ---- ------ --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
James C. Smith 1997 $475,000 $639,739 22,000 $41,388
Chairman, President, 1996 390,000 627,724(c) 20,750 39,850
Chief Executive Officer 1995 330,000 198,000 50,000 22,044
and a Director
John V. Brennan 1997 203,462 231,340 7,300 26,503
Executive Vice President, 1996 170,000 177,488 6,100 26,140
Chief Financial Officer and 1995 155,000 77,500 6,000 16,517
Treasurer
William T. Bromage 1997 180,000 98,500 6,000 20,471
Executive Vice President 1996 146,537 -- 12,500 --
-- Business Banking 1995 -- -- -- --
Peter K. Mulligan 1997 170,000 93,100 6,000 23,044
Executive Vice President -- 1996 156,904 106,100 6,100 17,477
Consumer and Small Business 1995 95,846 33,600 11,000 --
Banking
Ross M. Strickland 1997 170,000 242,634 6,000 25,138
Executive Vice President 1996 160,000 150,492 6,000 25,686
-- Mortgage Banking 1995 155,000 51,600 11,500 16,296
</TABLE>
- ---------------------------
(a) Cash bonuses awarded to the named executive officers for fiscal 1997 were
composed of one or more of the following components: (i) a bonus paid
pursuant to Webster's EVA Incentive Plan, (ii) a restricted stock-related
bonus and, in the case of Mr. Strickland, (iii) a special bonus. Mr. Smith
was awarded an EVA bonus of $346,700 and a restricted stock-related bonus
of $293,039. Mr. Brennan was awarded an EVA bonus of $115,000 and a
restricted stock-related bonus of $116,340. Mr. Bromage and Mr. Mulligan
were awarded EVA bonuses of $98,500 and $93,100, respectively. Mr.
Strickland was awarded an EVA bonus of $93,100, a restricted stock-related
bonus of $139,534 and a special bonus of $10,000. The EVA Incentive Plan
and the general terms thereof are described below in "Personnel Resources
Committee Report on Executive Compensation -- The Economic Value Added
Incentive Plan."
(b) All Other Compensation includes amounts contributed or allocated, as the
case may be, to the Webster Bank 401(k) plan (the "401(k) Plan"), the
Webster Bank non-contributory employee stock ownership plan (the "ESOP"),
cash dividends paid on restricted stock, and the Webster Bank nonqualified
supplemental retirement plan, on behalf of each executive officer. For 1997
matching contributions made by Webster Bank to the 401(k) Plan on behalf of
Messrs. Smith, Brennan, Mulligan and Strickland were $4,750 each. Mr.
Bromage received a matching
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<PAGE>
contribution of $2,492. In addition, for 1997, Messrs. Smith, Brennan,
Bromage, Mulligan and Strickland were allocated 270 shares each pursuant to
the ESOP, having a value based on the market value of Webster's Common
Stock at the date of allocation of $17,979. In 1997, Messrs. Smith, Brennan
and Strickland received cash dividends on restricted stock of $9,453,
$2,536 and $2,094, respectively. In 1997, Webster Bank also allocated
$9,206, $1,238, $315 and $315 to the supplemental matching contributions
accounts of Messrs. Smith, Brennan, Mulligan and Strickland, respectively,
pursuant to the Webster Bank nonqualified supplemental retirement plan.
(c) Includes the value of 7,954 shares of restricted stock with a market value
of $300,562 as of December 31, 1996 awarded to Mr. Smith in lieu of a cash
payment pursuant to Webster's Performance Incentive Plan. The value of each
share of the restricted stock granted to Mr. Smith under the Performance
Incentive Plan was valued at $37.7875, which reflects the average price of
Webster's Common Stock during the last five trading days of fiscal year
1996.
Executive officers are eligible to participate in Webster
Bank's nonqualified deferred compensation plan. Under the terms of the plan,
executive officer participants may elect to defer all or any portion of their
bonuses. Deferred amounts are credited by Webster Bank to bookkeeping reserve
accounts for each participant. Such accounts, plus accrued interest, are payable
upon termination of service, disability or death of the participant, in a lump
sum or in ten annual installments at the participant's election. For 1997, none
of the executive officers elected to defer the bonus portion of his annual
compensation.
OPTION GRANTS
The following table contains information with respect to
grants of stock options to each of the named executive officers during the year
ended December 31, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS DURING 1997
INDIVIDUAL GRANTS (a)
------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE EXPIRATION FOR OPTION TERM
NAME GRANTED IN FISCAL YEAR PRICE DATE ---------------
- ---- ------- -------------- ----- ---- 5% 10%
---------- ---------
<S> <C> <C> <C> <C> <C> <C>
James C. Smith............. 22,000 (b) 13.07% $63.50 Dec. 15, 2007 $995,032 $2,411,911
John V. Brennan............ 7,300 (b) 4.34% $63.50 Dec. 15, 2007 $330,170 $800,316
William T. Bromage......... 6,000 (b) 3.56% $63.50 Dec. 15, 2007 $271,372 $657,794
Peter K. Mulligan.......... 6,000 (b) 3.56% $63.50 Dec. 15, 2007 $271,372 $657,794
Ross M. Strickland......... 6,000 (b) 3.56% $63.50 Dec. 15, 2007 $271,372 $657,794
</TABLE>
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(a) All option grants were made at 100% of the fair market value of the Common
Stock on the date of grant. Options not immediately exercisable may become
exercisable in full, or with respect to certain option grants, in part,
under certain circumstances, including a "change in control" of Webster or
Webster Bank.
(b) Options will become exercisable in full after three years following the
date of grant.
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OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to
each of the named executive officers concerning the exercise of stock options
during 1997 and the value of all unexercised options held by each of such
individuals at December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1997
AND FISCAL YEAR-END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 1997 DECEMBER 31, 1997
NAME ON EXERCISE REALIZED (a) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (b)
---- ----------- ------------ ------------------------- -----------------------------
<S> <C> <C> <C> <C>
James C. Smith........ -- -- 120,218/33,532 $5,245,528/$534,850
John V. Brennan....... 3,300 $188,775 28,232/15,418 $1,364,733/$325,522
William T. Bromage.... -- -- --/18,500 $0/$392,063
Peter K. Mulligan..... -- -- 8,982/14,118 $323,709/$317,247
Ross M. Strickland.... -- -- 28,652/15,468 $1,379,530/$396,116
</TABLE>
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(a) Based on the market value of Common Stock at date of exercise, less the
exercise price.
(b) Based on the market value of Common Stock at December 31, 1997, less the
exercise price, of all unexercised stock options having an exercise price
less than such market value.
RETIREMENT PLANS
Webster Bank maintains a defined benefit pension plan (the
"Pension Plan") for eligible employees of Webster Bank. The Pension Plan is a
qualified plan under the Internal Revenue Code of 1986, as amended (the "Code"),
and complies with the requirements of the Employee Retirement Income Security
Act of 1974, as amended. All employees of Webster Bank are eligible to
participate in the Pension Plan upon attaining age 21 and completing one year of
service.
Benefits under the Pension Plan are funded solely by
contributions made by Webster Bank. Under the Pension Plan's benefit formula, a
participant's monthly normal retirement benefit will equal the sum of: (a) his
or her accrued benefit as of December 31, 1986 (adjusted through August 31, 1996
to reflect certain future increases in compensation), plus (b) the sum of 2% of
the participant's monthly compensation for each year of credited service
beginning on or after January 1, 1987. Benefits may not, in general, be based on
more than 30 years of credited service. The normal form of benefit is an annuity
for the participant's lifetime with a minimum of 120 monthly payments
guaranteed. A Pension Plan participant becomes 100% vested in the benefits under
the Pension Plan upon completion of five years of service. Benefit payments to a
participant or beneficiary may commence upon a participant's early retirement
date (age 55), normal retirement date (generally age 65), deferred retirement
date or death. Participants may elect to receive their benefits in one of
several optional forms, including a lump sum or periodic payments during the
participant's lifetime or during the lifetime of the participant and his or her
surviving spouse or designated beneficiary. The lump sum option has been
eliminated for benefits earned after January 26, 1998.
The Board of Directors of Webster Bank has adopted a
nonqualified supplemental retirement plan (the "Supplemental Plan") for certain
management and other highly compensated employees who are also participants in
the Pension Plan to provide supplemental retirement income benefits which are
not currently available because annual compensation in excess of $160,000
(subject to cost of living increases) may not be used in the calculation of
retirement benefits under
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<PAGE>
the Code and because pension benefits are currently subject to a maximum of
$130,000 (subject to cost of living increases). Benefits under the Supplemental
Plan are payable in monthly installments. The Supplemental Plan also provides
certain management and other highly compensated employees who are participants
in the 401(k) Plan with supplemental matching contributions. See "Management --
Executive Compensation -- Summary Compensation Table."
The estimated annual benefits payable from the Pension Plan
upon retirement at normal retirement age for Messrs. Smith, Brennan, Bromage,
Mulligan and Strickland are $98,290, $86,470, $47,730, $46,510 and $74,500,
respectively. In addition, the estimated annual supplemental retirement income
benefits payable to Messrs. Smith, Brennan, Bromage, Mulligan and Strickland
under the Supplemental Plan are $183,280, $39,500, $6,120, $15,460 and $23,790,
respectively.
COMPENSATION OF DIRECTORS
During 1997, each non-employee director of Webster received an
annual retainer of 355 shares of Webster Common Stock with an aggregate value of
$12,000 at the date of grant, pursuant to the Directors' Retainer Fees Plan
adopted by shareholders at the 1996 Annual Meeting (the "Fees Plan"). Under the
Fees Plan, each non-employee director is granted shares of Common Stock equal to
the annual retainer (currently $12,000) divided by the average quarterly value
as of the grant date, on an annual basis. The average quarterly value is based
on the average of the closing prices of Common Stock of the four calendar
quarters preceding the grant date, which is the date of each Annual Meeting of
shareholders. A pro-rated retainer is paid to any director who is first elected
to the Board or a subsidiary board other than at an Annual Meeting. Shares of
Common Stock granted under the Fees Plan are subject to vesting requirements and
other substantial risks of forfeiture. In addition, effective as of April 17,
1997, each non-employee director received $1,000 for each Board meeting attended
and $500 for each committee meeting attended ($700 if a committee chairman).
Non-employee directors of Webster receive no additional compensation for serving
as directors or committee members of Webster Bank. Employee directors of Webster
receive no additional compensation for serving as directors or committee members
of Webster or its subsidiaries.
Directors are eligible to participate in Webster Bank's
nonqualified deferred compensation plan. Under the terms of the plan, director
participants may elect to defer all or any portion of their directors' fees.
Deferred amounts are credited by Webster Bank to bookkeeping reserve accounts
for each participant. Such accounts, plus accrued interest, are payable upon
termination of service, disability or death of the participant, in a lump sum or
in ten annual installments at the participant's election. For 1997, only Mr.
Griffin elected to defer compensation.
The Board of Directors of Webster adopted in 1992, with
shareholder approval, the 1992 Stock Option Plan for the benefit of directors,
officers and other full-time employees of Webster and its subsidiaries. The 1992
Stock Option Plan was amended in 1994 with shareholder approval. The option
exercise price for options to non-employee directors is 100% of the fair market
value of the Common Stock on the date of grant of the option. Options granted to
non-employee directors may be exercised at any time after grant. The 1992 Stock
Option Plan was amended in 1996 to provide that the number of options granted to
non-employee directors upon election or re-election shall be 2,000 shares. A
director elected to the Board for less than a three-year term will be entitled
to an option for 2,000 shares on a pro-rated basis for the number of months of
his or her term as a percentage of 36 months. Messrs. Becker and DiAdamo each
will be granted options to purchase 2,000 shares upon reelection by the
shareholders at the Annual Meeting. At the Annual Meeting, shareholders will
consider an amendment to the 1992 Stock Option Plan. See "Proposed Amendment to
1992 Stock Option Plan."
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<PAGE>
EMPLOYMENT AGREEMENTS
Webster and Webster Bank entered into revised employment
agreements with Messrs. Smith, Brennan, Bromage, Mulligan and Strickland
effective January 1, 1998, as amended, which replaced the prior employment
agreements with Messrs. Smith, Brennan, Mulligan and Strickland dated January 1,
1997 and the employment agreement with Mr. Bromage dated October 21, 1996.
Webster also entered into change of control employment agreements with those
officers effective December 15, 1997. James C. Smith serves as Chairman,
President and Chief Executive Officer of both Webster and Webster Bank; Mr.
Brennan serves as Executive Vice President, Treasurer and Chief Financial
Officer of both Webster and Webster Bank; Mr. Bromage serves as Executive Vice
President -- Business Banking of both Webster and Webster Bank; Mr. Mulligan
serves as Executive Vice President -- Consumer and Small Business Banking of
both Webster and Webster Bank; and Mr. Strickland serves as Executive Vice
President -- Mortgage Banking of both Webster and Webster Bank.
Under their respective employment agreements, each executive
officer may receive annual cost of living increases and may also receive a merit
increase as determined by the Boards of Directors of Webster and Webster Bank.
Each executive officer is eligible to receive discretionary bonuses as may be
authorized by the Boards of Directors of Webster and Webster Bank and shall be
eligible to participate in any plan of Webster or Webster Bank relating to stock
options, stock purchases, pension, thrift, employee stock ownership, group life
insurance and medical coverage or other retirement or employee benefits that
Webster or Webster Bank has adopted or may adopt for the benefit of its
executive employees. In addition, each executive officer is provided with an
automobile or an automobile allowance for business use. The employment
agreements provide for initial terms of three years ending December 31, 2000
with renewals for one additional year following each anniversary date with the
approval of the Board of Directors, unless the executive officer gives written
notice to the contrary. Those agreements will terminate upon the "Effective
Date" of their respective change of control employment agreements (which are
discussed below). The 1998 base salaries for Messrs. Smith, Brennan, Bromage,
Mulligan and Strickland are $550,000, $235,000, $210,000, $200,000, and $195,000
respectively, which salaries may not be reduced under the employment agreements
without the consent of the executive officer.
The Boards of Directors of Webster and Webster Bank may
terminate the executive officer's employment at any time during the term of an
employment agreement. Unless the termination is for "cause" (as defined
therein), such executive officers would be entitled (a) to receive a lump sum
payment from Webster Bank equal to the sum of (x) the executive officer's then
current annual base salary and (y) the amount of any bonuses paid pursuant to
Webster's and Webster Bank's annual incentive compensation plan during the then
current fiscal year multiplied by a fraction the numerator of which is the
number of full months during the then current fiscal year in which the executive
officer was employed and the denominator of which is 12, and (b) subject to
certain limitations, to continue to be entitled to medical and dental coverage
for one year (or the remaining term of the agreement, if less) or until the
executive officer accepts other employment on a substantially full time basis if
earlier.
If during the term of the employment agreement an executive
officer terminates his employment without the consent of the Board of Webster or
Webster Bank, then the employment agreement, among other things, would restrict
him from having any other employment for one year or the remaining term of the
agreement plus six months, whichever is less, with a commercial bank, savings
bank, savings and loan association, or mortgage banking company, or a holding
company affiliate of any of the foregoing, which has an office out of which the
executive officer would be primarily based, located within 35 miles of Webster
Bank's home office.
Under the change of control employment agreements, Webster and
Messrs. Smith, Brennan, Bromage, Mulligan and Strickland, respectively, agreed
that the employment of each executive officer would continue for a period of two
years following the "Effective Date" under such
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<PAGE>
agreements (the "Employment Period"). The "Effective Date" is generally the date
on which a "change of control" (as defined below) of Webster occurs, except
that, if the executive officer's employment with Webster is terminated before a
change of control at the request of a third party who is effecting a change of
control or otherwise in connection with or anticipation of a change of control,
the Effective Date is the day before the date of such termination, provided, in
either case, that the Effective Date occurs during the "change of control
period" (defined as the two-year period ending on December 15, 1999, except
that, beginning on December 15, 1998 and on each annual anniversary of such
date, unless previously terminated, the change of control period will be
extended automatically so as to terminate two years from such date, unless
Webster has given the executive officer at least 60 days prior notice that the
change of control period will not be so extended). As noted above, upon the
Effective Date under the change of control employment agreements, the employment
agreements of these officers with Webster and Webster Bank will terminate and
the change of control employment agreements will supersede such agreements.
During the Employment Period, each executive officer will
receive an annual base salary at a rate at least equal to 12 times his highest
monthly base salary from Webster and its affiliated companies during the
12-month period before the Effective Date (including any salary that was earned
but deferred). The base salary will be reviewed at least annually and shall not
be reduced from the amount then in effect. In addition, each executive officer
shall be awarded for each fiscal year ending during the Employment Period an
annual bonus in cash at least equal to his highest bonus under the EVA Incentive
Plan or any comparable bonus under any predecessor or successor plan for the
last three full fiscal years before the Effective Date. Each executive officer
will be entitled to participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other peer executives
of Webster and affiliated companies and the incentive, savings and retirement
benefit opportunities afforded to the executive officer shall not be less
favorable than those provided to him during the 120-day period before the
Effective Date (or, if more favorable to the executive officer, those provided
generally to other peer executives of Webster and affiliated companies). Each
executive officer and his family will also be eligible to participate in and
shall receive all welfare benefits (including medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance) applicable generally to other peer executives of Webster and
affiliated companies and the welfare benefits provided to the executive officer
shall not be less favorable than those provided to him during the 120-day period
before the Effective Date (or, if more favorable to the executive officer, those
provided generally to other peer executives of Webster and affiliated
companies). Each executive officer will be entitled to prompt reimbursement of
expenses and to fringe benefits during the Employment Period (including tax and
financial planning services, payment of club dues and, if applicable, use of an
automobile and payment of related expenses) in accordance with the most
favorable policies in effect with respect to such matters for such executive
officer during the 120-day period before the Effective Date (or, if more
favorable to the executive officer, those provided generally to other peer
executives of Webster and affiliated companies). Similar provisions will apply
to the office, support staff and vacation time to be provided to the executive
officers during the Employment Period.
If the employment of the executive officer is terminated
during the Employment Period by Webster without "cause" (as defined therein) and
other than because of his "disability" (as defined therein) or by the executive
officer with "good reason" (as defined therein), Webster will be required to pay
the executive officer a lump sum cash amount equal to the sum of: (i) the sum of
(a) his base salary through the termination date to the extent not previously
paid, (b) a prorated bonus (reflecting the number of days he was employed during
the fiscal year) based on the higher of the bonus required to be paid for such
fiscal year under the agreement or the bonus paid or payable for the most
recently completed fiscal year and (c) any previously deferred compensation and
any accrued vacation pay; (ii) three times the sum of the executive officer's
base salary and bonus (based on the higher of the two amounts described in
(i)(b) above); and (iii) the excess of (a) the actuarial equivalent of the
benefit the executive officer would have been entitled to receive under the
Pension Plan and the Supplemental Plan if his employment had continued for three
years after the date of termination based on the compensation amounts that would
have been required to be paid to him under the change of control employment
agreement over (b) the actuarial equivalent of his actual
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<PAGE>
benefit under the Pension Plan and the Supplemental Plan as of the termination
date. In such event, Webster will also be required to: (i) continue benefits to
the executive officer and his family at least equal to those that would have
been provided to them under the change of control employment agreement if the
executive officer's employment had continued for at least three years after the
termination date; (ii) provide outplacement services to the executive officer at
its expense and (iii) pay or provide to the executive officer any other amounts
or benefits to which he is entitled under any agreement or plan of Webster and
its affiliated companies. If the executive officer would be subject to the
excise tax imposed by Section 4999 of the Code (relating to excess parachute
payments) on any payment or distribution by Webster or its affiliates to or for
the benefit of the executive officer, Webster will pay to the executive officer
a gross-up amount sufficient (after all taxes) to pay such excise tax (including
interest and penalties with respect to any such taxes). However, if the payments
and distributions do not exceed 110% of the maximum amount that could be paid to
the executive officer such that no excise tax would be imposed, no gross-up
payment will be made and the payments and distributions will be reduced to such
maximum amount.
For purposes of the change of control employment agreements, a
"change of control" means: (1) the acquisition by any individual, entity or
group (a "Person") of beneficial ownership of 20% or more of either (i) the
outstanding shares of the Common Stock of Webster or (ii) the combined voting
power of the then outstanding voting securities of Webster entitled to vote
generally in the election of directors ("Voting Securities"), except that any
such acquisition (a) directly from Webster, (b) by Webster, (c) by any employee
benefit plan or trust of Webster or any controlled corporation, or (d) pursuant
to a transaction that complies with clauses (3)(i), (ii) and (iii) below will
not constitute a change of control; (2) individuals who, as of December 15,
1997, constituted the Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors, except that
any individual becoming a director after such date whose election, or nomination
for election by the shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board of Directors; or (3)
consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of Webster or the
acquisition of assets of another entity (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the outstanding Common Stock and Voting Securities immediately before the
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock (the "Resulting Common
Stock") and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors (the "Resulting Voting
Securities"), as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns Webster or all or substantially all of Webster's
assets either directly or through one or more subsidiaries) (the "Resulting
Corporation") in substantially the same proportions as their ownership,
immediately before the Business Combination, of the outstanding Common Stock and
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan or trust of Webster or the Resulting Corporation) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then outstanding
Resulting Common Stock or the combined voting power of the Resulting Voting
Securities, except to the extent that such ownership existed before the Business
Combination and (iii) at least a majority of the members of the board of
directors of the Resulting Corporation were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board of Directors, providing for such Business Combination; or (4) approval by
the shareholders of Webster of a complete liquidation or dissolution of Webster.
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<PAGE>
PERSONNEL RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Personnel Resources Committee of the Board of Directors
comprises four non-employee directors. The Committee recommends to the full
Board of Directors, which has ultimate responsibility over such matters,
executive officer salaries, bonuses and certain other forms of compensation, and
recommends to the Stock Option Committee, consisting of all disinterested
non-employee directors, long-term incentive awards. All recommendations of the
Personnel Resources Committee regarding executive officer compensation for the
1997 fiscal year were approved by the Board of Directors or the Stock Option
Committee, as the case may be.
Set forth below is a report addressing Webster's compensation
policies for fiscal year 1997 as they affected Webster's executive officers.
Compensation Policies for Executive Officers. Webster's
executive compensation policies are designed to provide competitive levels of
compensation, to assist Webster in attracting and retaining qualified executives
and to encourage superior performance. In determining levels of executive
officers' overall compensation, the Personnel Resources Committee considers the
qualifications and experience of the persons concerned, the size of the
institution and the complexity of its operation, the financial condition,
including earnings, of the institution, the compensation paid to other persons
employed by the institution and the compensation paid to persons having similar
duties and responsibilities at financial institutions comparable to Webster. The
Personnel Resources Committee employs outside consultants and refers to
published survey data in establishing compensation.
Relationship of Performance to Executive Compensation.
Compensation paid to Webster's executive officers for 1997 consisted of the
following components: base salary, bonuses, long-term incentives (awards of
stock options) and participation in other Webster employee benefit plans.
Webster did not make any awards of restricted stock or performance units for
1997. While each of these components has a separate purpose and may have a
different relative value to the total, a significant portion of the total
compensation package is highly dependent on the financial success of Webster and
total return to shareholders. Generally, base salaries for executive officers
are at the median of salaries paid for similar positions at other financial
institutions comparable to Webster. Short-term and long-term incentive
compensation plans are designed to provide significant compensation
opportunities when Webster meets or exceeds its financial and other goals. The
value of long-term incentive compensation such as stock options is dependent
primarily on the market price of Webster's Common Stock and the value of
performance units is dependent on the return on average equity over a three year
period. Webster's executive officers may earn lower total compensation than that
for similar positions at financial institutions comparable to Webster should the
Corporation not meet its goals, and they may earn higher than average total
compensation than that for similar positions at financial institutions
comparable to Webster when Webster meets or exceeds its goals. For 1997, the
Personnel Resources Committee intended that total compensation for executive
officers be at or above the median for similar positions at financial
institutions comparable to Webster.
Base Salary. The Personnel Resources Committee reviews
executive base salaries annually in January. Base salary is intended to signal
the internal value of the position and to track with the external marketplace.
All of the named executive officers serve pursuant to employment agreements
which provide for a minimum base salary that may not be reduced without the
consent of the executive officer. In establishing the 1997 salary for each
executive officer, the Personnel Resources Committee considered the officer's
responsibilities, qualifications and experience, the size of the institution and
the complexity of its operations, the financial condition of the institution
(based primarily on levels of earnings, nonperforming assets and capital) and
compensation paid to persons having similar duties and responsibilities at
financial institutions comparable to Webster. Base salaries for executive
officers increased in 1997 primarily due to the record operating earnings for
1996 and the increased size and complexity of the institution. The
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Committee also considered the successful acquisition and integration or twenty
Shawmut branches and related assets and liabilities and the signing of a
definitive agreement to acquire DS Bancor.
The Economic Value Added Incentive Plan. In 1997, Webster
adopted an Economic Value Added ("EVA"(R) 1) Incentive Plan ("EVA Incentive
Plan"), the purpose of which is to provide incentive compensation to certain key
employees, including all executive officers, in a form which relates the
financial reward to an increase in Webster's economic value. The EVA Incentive
Plan was developed based upon the recommendations and advice of Webster's
consultant, Stern Stewart & Co., a nationally recognized financial advisory
firm. In general, EVA is the net operating profit of Webster after taxes, less a
capital charge. The capital charge is intended to represent the return expected
by the providers of Webster's capital, and is determined on the basis of a
formula that takes into account the risk and cost of providing such capital.
Management is of the view that EVA is the financial performance measure most
closely correlated with shareholder value.
The EVA Incentive Plan for Webster comprises the Chief
Executive Officer and other senior officers approved for participation by the
Personnel Resources Committee. The Personnel Resources Committee makes
recommendations to the Board of Directors for awards under the Plan.
The 1997 EVA Incentive Plan formula calls for the bonuses of
executive officers to be determined on the basis of EVA performance of the
Corporation versus a previously agreed to target. The target bonuses are set
relative to executive officers' responsibilities with such bonuses not to exceed
45% to 60% of the recipient's base salary. To the extent that the EVA
improvement target is exceeded, additional bonuses can be earned through the
application of a bonus multiple which increases as EVA improvement increases.
This bonus multiple is then applied to the target bonus set in January each
year, and results in a "declared bonus" award. The declared bonus award is
placed into an individual's "bonus bank" from which that year's target bonus and
1/3 of the remaining bonus bank balance are paid each year. Awards to the
executive officers for 1997 performance were based entirely on corporate EVA
improvement which substantially exceeded the EVA improvement target.
Certain executive officers also received an additional bonus
in recognition of Webster's 1996 operating results. In awarding the additional
bonus, which was intended to assist in the retention of Webster Common Stock,
the Personnel Resources Committee took into account the tax benefits to Webster
and the anticipated tax liability of the executive officers resulting from the
vesting in 1997 of grants of restricted stock made in 1992 and 1994.
Long-Term Incentive Compensation. Webster uses stock options
and performance unit awards and, from time to time, restricted stock awards to
provide long-term incentive compensation. The Personnel Resources Committee
makes recommendations to the Stock Option Committee for awards under the 1992
Stock Option Plan and the Performance Incentive Plan. Long-term compensation,
which emphasizes long-term results, is targeted at 75% to 100% of the
recipient's base salary depending upon the executive officer's responsibilities.
The Board of Directors endorses the position that stock
ownership by management is beneficial in aligning management's and shareholders'
interests in the enhancement of shareholder value. The purpose of stock option
awards is to provide an opportunity for the recipients to acquire or increase a
proprietary interest in Webster, thereby creating a stronger incentive to expend
maximum effort for the long-term growth and success of Webster and encouraging
recipients to remain in the employ of Webster. Officers and other full-time
employees of Webster and its subsidiaries are eligible for grants under the
Corporation's 1992 Stock Option Plan. Stock options with vesting restrictions
are normally granted each year as a component of
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1 EVA(R) is a registered trademark of Stern Stewart & Co.
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<PAGE>
long-term compensation with the size of the grants generally tied to and
weighted approximately equally based on an officer's responsibility level, base
salary and performance. The number of options held is not considered when
determining the option awards for executive officers. During 1997, 47,300 stock
options were granted to Webster's executive officers.
The purpose of Webster's restricted stock awards is to attract
and retain executive officers whose actions will impact Webster's long-term
operating results and to motivate such executives by providing them with an
immediate ownership stake in the business. Recipients are paid dividends on the
shares and have voting rights. All restricted stock awards under Webster's
restricted stock plan have vesting requirements. Fifty percent of the restricted
stock vests after three years, and the remainder after five years. The
restricted stock awards are generally considered part of the officer's targeted
long-term compensation during the vesting period. In addition to providing a
direct relationship between shareholder value and the value of the benefit to
the officer, restricted stock is a powerful retention device as the shares are
not conveyed to the executive until vesting restrictions have been satisfied. No
shares of restricted stock have been granted pursuant to Webster's restricted
stock plan since 1994.
The purpose of the Performance Incentive Plan is to further
the growth and profitability of Webster by providing long-term incentives that
are dependent on achieving a specified return on average equity over a
three-year period. Executive officers are granted awards of performance units
for a performance period of three consecutive fiscal years. During that
performance period, a specified return on average equity must be attained in
order to trigger a payout to the executive officers. No performance units were
granted to executive officers in 1997. The material terms of the Performance
Incentive Plan were approved by shareholders at the 1996 annual meeting.
Other. In addition to the compensation paid to executive
officers as described above, executive officers received certain benefits
pursuant to the 401(k) Plan, ESOP and the Pension Plan. In addition, executive
officers received certain benefits under Webster's nonqualified supplemental
retirement plan that are otherwise limited by Internal Revenue Service caps on
qualified plans.
CEO Compensation. The Personnel Resources Committee, in
determining the compensation for the Chief Executive Officer, considers
Webster's size and complexity, financial condition and results and progress in
meeting strategic objectives. The Chief Executive Officer's 1997 base salary was
increased by 21.8% to $475,000 based on the Corporation's increase in size and
complexity of operations, its 1996 financial results and its progress in meeting
strategic objectives. Base salary for the Chief Executive Officer was deemed to
be at the median for financial institutions comparable to Webster. For 1997, the
Personnel Resources Committee intended that total compensation for the Chief
Executive Officer be above the median for financial institutions comparable to
Webster. The Chief Executive Officer's bonus was determined under the EVA
Incentive Plan in accordance with the 1997 EVA incentive formula. For 1997
performance, under the EVA bonus formula, the Chief Executive Officer's bonus
payout was $346,700, with a bonus bank balance to be taken into account under
the EVA formula in computing future EVA bonus awards. The Chief Executive
Officer also received an additional bonus of $293,039 in recognition of
Webster's 1996 operating results. In awarding the additional bonus, which was
intended to assist in the retention of Webster Common Stock, the Personnel
Resources Committee took into account the tax benefits to Webster and the
anticipated tax liability of the Chief Executive Officer resulting from the
vesting in 1997 of grants of restricted stock made in 1992. Regarding long-term
incentive compensation during 1997, stock options were granted to the Chief
Executive Officer in accordance with Webster's 1992 Stock Option Plan.
-16-
<PAGE>
Internal Revenue Code Section 162(m). In 1993, the Code was
amended to disallow publicly traded companies from receiving a tax deduction on
compensation paid to executive officers in excess of $1 million (section 162(m)
of the Code), unless, among other things, the compensation meets the
requirements for performance-based compensation. In structuring Webster's
compensation programs and in determining executive compensation, the Committee
takes into consideration the deductibility limit for compensation.
<TABLE>
<CAPTION>
BOARD OF DIRECTORS STOCK OPTION COMMITTEE PERSONNEL RESOURCES COMMITTEE
- ------------------ ---------------------- -----------------------------
<S> <C> <C>
Achille A. Apicella Achille A. Apicella Joel S. Becker
Joel S. Becker Joel S. Becker (Chairman)
O. Joseph Bizzozero, Jr (Chairman) O. Joseph Bizzozero, Jr.
John J. Crawford O. Joseph Bizzozero, Jr. Robert A. Finkenzeller
Harry P. DiAdamo, Jr. John J. Crawford Sister Marguerite Waite
Robert A. Finkenzeller Harry P. DiAdamo, Jr.
Walter R. Griffin Robert A. Finkenzeller
J. Gregory Hickey J. Gregory Hickey
C. Michael Jacobi C. Michael Jacobi
James C. Smith Sister Marguerite Waite
(Chairman)
Sister Marguerite Waite
</TABLE>
Compensation Committee Interlocks and Insider Participation
Walter R. Griffin is a principal of the law firm of Griffin,
Griffin & O'Brien, P.C., which serves as general counsel for Webster and Webster
Bank. As general counsel, the firm of Griffin, Griffin & O'Brien, P.C. received
$207,381 for general legal services rendered to Webster and its subsidiaries for
1997. The firm also represents Webster Bank in certain loan closings and related
transactions. In 1997, $73,100 in fees were paid to the firm by borrowers (or
other related parties) in connection with such loan closing services.
From time to time Webster Bank makes loans to its directors
and executive officers for the financing of their homes, as well as home
improvement and consumer loans. It is the belief of management that these loans
are made in the ordinary course of business, are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and neither involve more than
normal risk of collectibility nor present other unfavorable features. At
February 28, 1998, loans to directors, executive officers and members of their
immediate families and affiliates totaled $1,014,867.
COMPARATIVE COMPANY PERFORMANCE
The following table sets forth comparative information
regarding Webster's cumulative shareholder return on its Common Stock over the
last five fiscal years. Total shareholder return is measured by dividing total
dividends (assuming dividend reinvestment) plus share price change for a period
by the share price at the beginning of the measurement period. Webster's
cumulative shareholder return over a five-year period is based on an investment
of $100 on December 31, 1992 and is compared to the cumulative total return of
the Standard & Poor's 500 Index ("S&P 500 Index") and the SNL All Bank and
Thrift Index.
-17-
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
WEBSTER, S&P 500 INDEX AND SNL ALL BANK AND THRIFT INDEX
[GRAPHIC APPEARS HERE]
<TABLE>
<CAPTION>
PERIOD ENDING
--------------------------------------------------------------------------
INDEX 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WEBSTER FINANCIAL CORPORATION 100.00 135.88 112.58 184.40 235.00 432.91
S&P 500 100.00 110.08 111.53 153.44 188.52 251.44
SNL ALL BANK & THRIFT INDEX 100.00 110.97 108.52 168.94 234.17 359.47
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires Webster's directors and
officers, and persons who own more than 10% of its Common Stock, to file with
the SEC initial reports of ownership of Webster's equity securities and to file
subsequent reports when there are changes in such ownership. Based on a review
of reports submitted to Webster, the Corporation believes that during the fiscal
year ended December 31, 1997, all Section 16(a) filing requirements applicable
to Webster's officers, directors, and more than 10% owners were complied with on
a timely basis.
-18-
<PAGE>
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of March 4, 1998
with respect to the amount of Webster Common Stock beneficially owned by each
director of Webster, each nominee for election as a director, each of the named
executive officers and by all directors and executive officers of Webster as a
group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND POSITION(S) AND NATURE OF COMMON STOCK
WITH WEBSTER BENEFICIAL OWNERSHIP (a) OUTSTANDING
------------ ------------------------ ------------
<S> <C> <C>
Achille A. Apicella
Director.................................. 13,340 *
Joel S. Becker
Director.................................. 9,800 *
O. Joseph Bizzozero, Jr.
Director.................................. 7,643 *
John V. Brennan
Executive Vice President, Chief
Financial Officer and Treasurer........... 65,618 *
William T. Bromage
Executive Vice President --
Business Banking.......................... 510 *
John J. Crawford
Director.................................. 4,234 *
Harry P. DiAdamo, Jr.
Director.................................. 80,042 *
Robert A. Finkenzeller
Director.................................. 5,869 *
Walter R. Griffin
Director.................................. 28,161 *
J. Gregory Hickey
Director.................................. 8,913 *
C. Michael Jacobi
Director.................................. 6,077 *
Peter K. Mulligan
Executive Vice President --
Consumer and Small Business Banking....... 18,347 *
James C. Smith
Chairman, President and
Chief Executive Officer................... 271,427 1.97%
Ross M. Strickland
Executive Vice President --
Mortgage Banking.......................... 55,656 *
Sister Marguerite Waite, C.S.J.
Director.................................. 6,865 *
All directors and executive
officers as a group (15 persons).......... 582,502 4.19%
</TABLE>
- -------------------
(a) In accordance with Rule 13d-3 under the 1934 Act, a person is deemed to be
the beneficial owner, for purposes of this table, of any shares of Common
Stock if such person has or
-19-
<PAGE>
shares voting power and/or investment power with respect to such security,
or has the right to acquire beneficial ownership at any time within 60 days
from March 4, 1998. As used herein, "voting power" includes the power to
vote or direct the voting of shares and "investment power" includes the
power to dispose or direct the disposition of shares.
The table includes shares owned by spouses or other immediate family
members over which the persons named in the table possess shared voting
and/or shared investment power as follows: Mr. Becker, 1,008 shares; Dr.
Bizzozero, 572 shares; Mr. DiAdamo, 505 shares; Mr. Griffin, 9,966 shares;
Mr. Hickey, 503 shares; Mr. Smith, 34,761 shares; Sister Waite, 110 shares;
and all directors and executive officers as a group, 47,425 shares. The
table also includes the following: 237,962 shares subject to outstanding
options which are exercisable within 60 days from March 4, 1998: 38,350
shares held in the 401(k) Plan by the officers; 12,490 shares of restricted
stock; and 20,062 shares held in the ESOP that have been allocated to the
accounts of officers. All other shares included in the table are held by
persons who exercise sole voting and sole investment power over such
shares.
Outstanding options reflected in the table were held as follows: Mr.
Apicella, 5,661 shares; Mr. Becker, 2,200 shares; Dr. Bizzozero, 3,100
shares; Mr. Brennan, 30,732 shares; Mr. Crawford, 2,667 shares; Mr.
Finkenzeller, 3,100 shares; Mr. Griffin, 3,100 shares; Mr. Hickey, 5,300
shares; Mr. Jacobi, 5,300 shares; Mr. Mulligan, 11,482 shares; Mr. Smith,
125,018 shares; Mr. Strickland, 33,902 shares; and Sister Marguerite Waite,
6,400 shares.
* Less than 1% of Common Stock outstanding.
PRINCIPAL HOLDERS OF VOTING SECURITIES OF WEBSTER
The following table sets forth information at March 4, 1998
with respect to ownership of Webster Common Stock by each person believed by
management to be the beneficial owner of more than 5% of the outstanding Webster
Common Stock. The information set forth below is based on the most recent
Schedule 13D or 13G filed on behalf of such person with the SEC.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS AND NATURE OF COMMON STOCK
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
------------------- -------------------- -----------
<S> <C> <C>
Neuberger & Berman, LLC..................... 980,800 (a) 7.17%
</TABLE>
- -------------------
(a) Neuberger & Berman, LLC reports that it has sole voting power over 470,000
shares, shared voting power over 510,800 shares and shared dispositive
power over 980,800 shares. Neuberger & Berman, LLC and Neuberger & Berman
Management Incorporated serve as sub-advisor and investment manager,
respectively, of Neuberger & Berman's various mutual funds. No other
Neuberger & Berman, LLC advisory client has an interest of more than 5% of
Webster.
-20-
<PAGE>
PROPOSED AMENDMENT TO 1992 STOCK OPTION PLAN
(PROPOSAL 2)
The Webster Financial Corporation 1992 Stock Option Plan was
established by the Board of Directors of the Corporation in 1992, approved by
the shareholders of the Corporation at the 1992 annual meeting, and was amended
by the shareholders of the Corporation in 1994 and 1996. As of March 4, 1998,
there were approximately 1,166 full-time employees of the Corporation and its
subsidiaries, 10 non-employee directors of the Corporation and 2 non-employee
directors of Webster's banking subsidiary (not also serving as directors of the
Corporation) who were eligible to participate in the 1992 Stock Option Plan.
The Board of Directors has voted to amend the 1992 Stock
Option Plan, subject to shareholder approval at the Annual Meeting: (i) to
increase the number of shares of Common Stock reserved for issuance under the
1992 Stock Option Plan by 700,000 shares, from 780,500 to 1,480,500 shares; (ii)
to increase the number of shares available for grants to any single employee
during any calendar year from 50,000 to 250,000; and (iii) to extend the term of
the 1992 Stock Option Plan from March 23, 2002 to February 23, 2008. The number
of shares reserved for issuance is subject to adjustment upon the occurrence of
certain events as described below. See "Description of the Plan."
The Board of Directors of the Corporation believes that stock
options are important to attract and to encourage the continued service of
directors, officers and other key employees by facilitating their purchase of a
stock interest in the Corporation. The number of individuals eligible to receive
grants under the 1992 Stock Option Plan has increased significantly as a result
of acquisitions made by the Corporation. As of March 4, 1998, 147,495 shares
remain for future option grants under the 1992 Stock Option Plan. Approval of
the proposed amendment will increase the number of shares available for issuance
under the 1992 Stock Option Plan by 700,000 shares.
The Board of Directors has concluded that it is advisable that
the Corporation and its shareholders continue to have the incentive of stock
options available as a means of attracting and retaining directors, officers and
key employees. This objective is served by amending the 1992 Stock Option Plan
to increase the number of available shares and to extend the term of the 1992
Stock Option Plan. The Board has also concluded that the Corporation needs added
flexibility to make larger grants to one or more employees during a single
calendar year and is therefore proposing to increase the existing 50,000 share
limit to 250,000 shares. As the Corporation progresses, officers and key
employees are continually being retained in or moving into positions where, in
the judgment of the Board of Directors, an initial or increased option will be a
valuable incentive and will serve to the ultimate benefit of shareholders.
The amendment to the 1992 Stock Option Plan is subject to
shareholder approval at the Annual Meeting. By submitting the amendment for
shareholder approval at the Annual Meeting, the Corporation intends to continue
to comply with the plan requirements pertaining to options qualifying as
"incentive stock options" for federal income tax purposes and to the deduction
for such purposes of the full amount to which the Corporation is entitled with
respect to options granted under the Plan (see "Federal Income Tax Consequences
of the 1992 Stock Option Plan" below).
DESCRIPTION OF THE PLAN
The 1992 Stock Option Plan provides for the grant of options
that are intended to qualify as "incentive stock options" under Section 422 of
the Code and the regulations promulgated thereunder to full-time employees as
well as the grant of nonqualifying options to directors and employees of the
Corporation and its subsidiaries.
-21-
<PAGE>
The 1992 Stock Option Plan is administered by the Personnel
Resources Committee, which consists of at least three outside directors
appointed by the Board of Directors. The Personnel Resources Committee makes
recommendations to the Stock Option Committee concerning the granting of
options. The Stock Option Committee makes all final determinations concerning
the employees of the Corporation and its subsidiaries to whom incentive and
nonqualifying options will be granted. Under the 1992 Stock Option Plan, a
nonqualifying option for 2,000 shares will be granted to each non-employee
director upon election or reelection to Webster's Board of Directors, except
that, if a non-employee director is elected to the Board for less than a
three-year term, the director will be entitled to receive an option for 2,000
shares on a pro-rated basis for the number of months of his or her term as a
percentage of 36 months. Upon their reelection, the two non-employee
director-nominees at the Annual Meeting will each receive an option for 2,000
shares.
The option exercise price under the 1992 Stock Option Plan may
not be less than 100% of the fair market value of the Common Stock on the date
of grant of the option (or 110% in the case of an incentive stock option granted
to an optionee beneficially owning more than 10% of the outstanding Common
Stock). The maximum option term is 10 years (or five years in the case of an
incentive stock option granted to an optionee beneficially owning more than 10%
of the outstanding Common Stock). Options may be exercised at any time after
grant, except as otherwise provided in the particular option agreement. Under
the proposed amendment, the limitation on the number of shares that may be
subject to options granted to any employee under the 1992 Stock Option Plan in
any calendar year will be increased from 50,000 to 250,000 shares. There is also
a $100,000 limit on the value of stock (determined at the time of grant) covered
by incentive stock options that first become exercisable by an optionee in any
calendar year. No option may be granted after the expiration of the term of the
1992 Stock Option Plan (which would be extended to February 23, 2008 under the
proposed amendment). Options are non-transferable other than by reason of the
death of the optionee.
Payment for shares purchased under the 1992 Stock Option Plan
may be made either in cash or by exchanging shares of Common Stock of the
Corporation with a fair market value equal to the total option exercise price
and paying cash for any difference. Options may, if permitted by the particular
option agreement, be exercised by directing that certificates for the shares
purchased be delivered to a licensed broker as agent for the optionee, provided
that the broker tenders to the Corporation cash or cash equivalents equal to the
option exercise price plus the amount of any taxes that the Corporation may be
required to withhold in connection with the exercise of the option.
If an employee's employment with the Corporation or its
subsidiaries terminates by reason of death or permanent and total disability,
his or her options, whether or not then exercisable, may be exercised within one
year after such death or disability unless a different date is otherwise
provided in the particular option agreement (but not later than the date the
option would otherwise expire). If the employee's employment terminates for any
reason other than death or disability, options held by such optionee terminate
three months after the date of such termination unless a different date is
otherwise provided in the particular option agreement (but not later than the
date the option would otherwise expire). An option granted to a non-employee
director will not terminate until the expiration of the ten year term of the
option regardless of whether the non-employee director continues to serve as a
director.
If the outstanding shares of Common Stock are increased or
decreased or changed into or exchanged for a different number or kind of shares
or securities of the Corporation, by reason of merger, consolidation,
reorganization, recapitalization, reclassification, stock split-up, combination
of shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares without receipt of
consideration by the Corporation, an appropriate and proportionate adjustment
will be made in the number and kinds of shares subject to the 1992 Stock Option
Plan, and in the number, kinds, and per share exercise price of shares subject
to the unexercised portion of options granted prior to any such change. Any
-22-
<PAGE>
such adjustment in an outstanding option, however, will be made without a change
in the total price applicable to the unexercised portion of the option but with
a corresponding adjustment in the per share option price.
Upon any dissolution or liquidation of the Corporation, or
upon a reorganization, merger or consolidation in which the Corporation is not
the surviving corporation, or upon the sale of all or substantially all of the
assets of the Corporation to another corporation, or upon any transaction
approved by the Board of Directors which results in any person or entity owning
80% or more of the total combined voting power of all classes of stock of the
Corporation, the 1992 Stock Option Plan and the options issued thereunder will
terminate, unless provision is made in connection with such transaction for the
continuation of the Plan and/or the assumption of the options or for the
substitution for such options of new options covering the stock of a successor
corporation or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kinds of shares and the per share exercise price. In the event
of such termination, all outstanding options will be exercisable in full during
such period immediately prior to the occurrence of such termination as the Board
of Directors in its discretion will determine.
The Board of Directors may amend the 1992 Stock Option Plan
with respect to shares of the Common Stock as to which options have not been
granted. However, the Corporation's shareholders must approve any amendment that
would (i) materially change the requirements as to eligibility to receive
options; (ii) increase the maximum number of shares in the aggregate for which
options may be granted (except for adjustments upon changes in capitalization);
(iii) change the minimum option price; (iv) increase the maximum period during
which options may be exercised; (iv) extend the term of this Plan, or (vi)
materially increase the benefits accruing to eligible individuals under this
Plan.
The Board of Directors at any time may terminate or suspend
the 1992 Stock Option Plan. Unless previously terminated, this Plan will
terminate automatically at the end of its term (which would be extended to
February 23, 2008 under the proposed amendment). No termination, suspension or
amendment of this Plan may, without the consent of the optionee to whom an
option has been granted, adversely affect the rights of the holder of the
option.
PLAN BENEFITS
As of March 4, 1998, options to purchase 633,005 shares of
Common Stock (250,039 of which were incentive stock options and 382,966 of which
were nonqualifying options) were outstanding under the 1992 Stock Option Plan.
The option exercise price under the 1992 Stock Option Plan may not be less than
100% of the fair market value of the Common Stock on the date of grant of the
option (or 110% in the case of an incentive stock option granted to an optionee
beneficially owning more than 10% of the outstanding Common Stock). The table
below provides certain information regarding stock options granted to date under
the 1992 Stock Option Plan to the Chief Executive Officer and each of the other
four most highly compensated officers of the Corporation serving at December 31,
1997, to each nominee as a director, to all executive officers of the
Corporation as a group, to all non-employee directors of the Corporation as a
group and to all employees of the Corporation and its subsidiaries as a group
(including officers who are not executive officers).
-23-
<PAGE>
PLAN BENEFITS
<TABLE>
<CAPTION>
1992 STOCK OPTION PLAN
------------------------------------------------------------
NAME AND POSITION EXERCISE PRICE NUMBER OF OPTIONS
- ---------------------------------------------------- -------------------------- ------------------------------
<S> <C> <C>
James C. Smith
Chairman, President, Chief Executive $17.6182 11,000 (a)
Officer and Director (and Director 20.7500 16,350 (a)
Nominee) 18.5000 33,650 (a)
19.8750 34,400 (a)
28.1250 3,500 (b)
28.1250 12,100 (a)
28.0000 2,300 (c)
38.1875 932 (d)
38.1875 17,518 (a)
63.5000 22,000 (e)
Joel S. Becker
Director (and Director Nominee) $24.6250 1,100 (a)
John V. Brennan
Executive Vice President, Chief Financial $17.6182 4,620 (a)
Officer and Treasurer 20.7500 5,000 (a)
18.5000 5,500 (a)
28.1250 3,000 (b)
28.1250 3,000 (a)
38.1875 3,482 (a)
38.1875 2,618 (d)
63.5000 7,300 (e)
William T. Bromage
Executive Vice President $35.5000 7,500 (f)
-- Business Banking 38.1875 5,000 (g)
63.5000 6,000 (e)
Harry P. DiAdamo, Jr. -- --
Director (and Director Nominee)
Peter K. Mulligan
Executive Vice President $22.5000 2,500 (h)
-- Consumer and Small Business Banking 22.5000 2,500 (a)
28.1250 3,000 (b)
28.1250 3,000 (a)
38.1875 3,482 (a)
38.1875 2,618 (d)
63.5000 6,000 (f)
Ross M. Strickland
Executive Vice President $17.6182 4,620 (a)
--Mortgage Banking 20.7500 5,000 (a)
19.8750 5,500 (a)
28.1250 1,600 (b)
28.1250 4,400 (a)
38.1870 3,382 (a)
38.1875 2,618 (d)
63.5000 6,000 (e)
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
1992 STOCK OPTION PLAN
------------------------------------------------------------
NAME AND POSITION EXERCISE PRICE NUMBER OF OPTIONS
- ---------------------------------------------------- -------------------------- ------------------------------
<S> <C> <C>
Executive Officer Group comprised of the five
executive officers named above
(5 persons) $31.9512 (i) 262,990
Non-employee Director Group (10 persons) $26.8117 (j) 26,767
Non-executive Officer Employee Group $36.4923 (k) 250,233
(45 persons)
</TABLE>
- ------------------------
(a) Option currently exercisable in full.
(b) Option will become exercisable in full on December 19, 1998.
(c) Option will become exercisable in full on January 22, 1999.
(d) Option will become exercisable in full on December 23, 1999.
(e) Option will become exercisable in full on December 15, 2000.
(f) Option will become exercisable in full on October 21, 1998.
(g) Option will become exercisable in full on December 23, 1998.
(h) Option will become exercisable in full on April 17, 1998.
(i) Weighted average exercise price of options granted to executive officers.
(j) Weighted average exercise price of options granted to non-employee
directors.
(k) Weighted average exercise price of options granted to non-executive officer
employees.
Based on the closing sales price of Webster's Common Stock on
March 4, 1998 of $63.75, the aggregate market value of the shares underlying the
options to purchase 659,007 shares outstanding as of such date under the 1992
Stock Option Plan is $42,011,696.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1992 STOCK OPTION PLAN
The grant of an option is not a taxable event for the optionee
or the Corporation. With respect to "incentive stock options," an optionee will
not recognize taxable income upon grant or exercise of an incentive option, and
any gain realized upon a disposition of shares received pursuant to the exercise
of an incentive option will be taxed as long term capital gain if the optionee
holds the shares for at least two years after the date of grant and for one year
after the date of exercise. However, the excess of the fair market value of the
shares subject to an incentive option on the exercise date over the option
exercise price will be included in the optionee's alternative minimum taxable
income in the year of exercise (except that, if the optionee is subject to
certain securities law restrictions, the determination of the amount included in
alternative minimum taxable income may be delayed, unless the optionee elects
within 30 days following exercise to have income determined without regard to
such restrictions) for purposes of the alternative
-25-
<PAGE>
minimum tax. This excess increases the optionee's basis in the shares for
purposes of the alternative minimum tax but not for purposes of the regular
income tax. An optionee may be entitled to a credit against regular tax
liability in future years for minimum taxes paid with respect to the exercise of
incentive options (e.g., for a year in which the shares are sold at a gain). The
Corporation and its subsidiaries will not be entitled to any business expense
deduction with respect to the grant or exercise of an incentive option, except
as discussed below.
For the exercise of an incentive option to qualify for the
foregoing tax treatment, the optionee generally must be an employee of the
Corporation or a subsidiary from the date the option is granted through a date
within three months before the date of exercise. In the case of an optionee who
is disabled, this three-month period is extended to one year. In the case of an
employee who dies, the three-month period and the holding period for shares
received pursuant to the exercise of the option are waived.
If all of the requirements for incentive option treatment are
met except for the special holding period rules set forth above, the optionee
will recognize ordinary income upon the disposition of the shares in an amount
equal to the excess of the fair market value of the shares at the time the
option is exercised over the option exercise price. However if the optionee is
subject to certain restrictions under the securities laws at the time the option
is exercised, the measurement date may be delayed, unless the optionee has made
a special tax election within 30 days after the date of exercise to have taxable
income determined without regard to such restrictions. The balance of the
realized gain, if any, will be long or short term capital gain, depending upon
whether or not the shares are sold more than one year after the option is
exercised. If the optionee sells the shares prior to the satisfaction of the
holding period rules but at a price below the fair market value of the shares at
the time the option is exercised (or other applicable measurement date), the
amount of ordinary income (and the amount included in alternative minimum
taxable income, if the sale occurs during the same year as the option was
exercised) will be limited to the excess of the amount realized on the sale over
the option exercise price. If the Corporation complies with applicable reporting
requirements, it will be allowed a business expense deduction to the extent the
optionee recognizes ordinary income, subject to applicable limitations on the
deduction of amounts becoming vested as a result of a change in control.
If an optionee exercises an incentive option by tendering
shares of Common Stock with a fair market value equal to part or all of the
option exercise price, the exchange of shares will be treated as a nontaxable
exchange (except that this treatment would not apply if the optionee acquired
the shares being transferred pursuant to the exercise of an incentive option and
has not satisfied the special holding period requirements summarized above). If
the exercise is treated as a tax free exchange, the optionee would have no
taxable income from the exchange and exercise (other than minimum taxable income
as discussed above) and the tax basis of the shares exchanged would be treated
as the substituted basis for the shares received. These rules would not apply if
the optionee used shares received pursuant to the exercise of an incentive
option or another statutory option) as to which the optionee has not satisfied
the applicable holding period requirement. In that case, the exchange would be
treated as a taxable disqualifying disposition of the exchanged shares, with the
result that the excess of the fair market value of the shares tendered over the
optionee's basis in the shares would be taxable.
Upon exercising a non-qualifying option, an optionee will
recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the Common Stock on the date of
exercise (except that, if the optionee is subject to certain restrictions
imposed by the securities laws, the measurement date may be delayed, unless the
optionee makes a special tax election within 30 days after exercise to have
income determined without regard to the restrictions). If the Corporation
complies with applicable reporting requirements, it will be entitled to a
business expense deduction in the same amount, subject to applicable limitations
on the deduction of amounts becoming vested as a result of a change in control.
Upon a subsequent sale or exchange of shares acquired pursuant to the exercise
of a nonqualifying option, the optionee will have taxable gain or loss, measured
by the difference between the amount realized on the
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disposition and the tax basis of the shares (generally, the amount paid for the
shares plus the amount treated as ordinary income at the time the option was
exercised).
If the optionee surrenders shares of Common Stock in payment
of part or all of the exercise price for non-qualifying options, no gain or loss
will be recognized with respect to the shares surrendered (regardless of whether
the shares were acquired pursuant to the exercise of an incentive option) and
the optionee will be treated as receiving an equivalent number of shares
pursuant to the exercise of the option in a nontaxable exchange. The basis of
the shares surrendered will be treated as the substituted tax basis for an
equivalent number of option shares received and the new shares will be treated
as having been held for the same holding period as had expired with respect to
the transferred shares. However, the fair market value of any shares received in
excess of the number of shares surrendered (i.e., the difference between the
aggregate option exercise price and the aggregate fair market value of the
shares received pursuant to the exercise of the option) will be taxed as
ordinary income.
REQUIRED VOTE
The approval by an affirmative vote of the holders of a
majority of the shares present in person, or represented by proxy, and entitled
to vote at the Annual Meeting is required to approve the amendment to the 1992
Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 1992 STOCK OPTION PLAN. IF NOT OTHERWISE SPECIFIED, PROXIES
WILL BE VOTED FOR APPROVAL.
APPROVAL OF MATERIAL TERMS OF THE
QUALIFIED PERFORMANCE-BASED COMPENSATION PLAN
(PROPOSAL 3)
The Qualified Performance-Based Compensation Plan (the "Plan")
was adopted effective January 1, 1998, subject to shareholder approval. The Plan
is designed to further the growth and profitability of Webster by providing
selected key employees with the opportunity to earn additional cash compensation
based on business results, thereby enabling Webster to motivate key employees to
achieve high profitability for the Corporation. The Plan is intended to satisfy
the requirements of Section 162(m) of the Code with respect to the deduction of
qualified performance-based compensation.
Under Section 162(m) of the Code and the regulations
promulgated thereunder, a federal income tax business expense deduction is
generally not allowed for annual compensation in excess of $1 million paid by a
publicly traded corporation to its Chief Executive Officer and to the four other
most highly compensated officers (the "covered employees"). Under those
provisions, however, there is an exemption to permit the deduction of "qualified
performance-based compensation." To qualify for such exemption, (i) the
compensation must be paid solely on account of the attainment of one or more
pre-established, objective performance goals; (ii) the performance goals under
which compensation is paid must be established by a compensation committee
comprised solely of two or more directors who qualify as "outside directors" for
purposes of the exemption; (iii) the material terms under which the compensation
is to be paid must be disclosed to and subsequently approved in a separate vote
by shareholders of the corporation before payment is made; and (iv) the
compensation committee must certify in writing before payment of the
compensation that the performance goals and any other material terms were in
fact satisfied.
The Board of Directors believes that where Webster can seek to
accomplish its compensation objectives in a manner that maximizes the
deductibility of compensation for federal income tax purposes, the Corporation
should seek to do so. Accordingly, the Board of Directors
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seeks shareholder approval of the material terms of the Plan so that any awards
under the Plan will be deemed to be "qualified performance-based compensation"
under Section 162(m) of the Code and the regulations thereunder. No payment of
any compensation will be made under the Plan unless the Plan has been approved
within one year of its adoption by Webster's shareholders, in a separate vote by
a majority of the votes cast in person, or by proxy, and entitled to vote on the
issue at a duly held meeting of the shareholders.
DESCRIPTION OF THE MATERIAL TERMS OF THE PLAN
The following summary of the material terms of the Plan is
qualified in its entirety by reference to the terms of the Plan, a copy of which
is attached to this Proxy Statement as Exhibit A. Undefined capitalized terms
are defined in Exhibit A.
The Plan is administered by a committee of not less than three
directors appointed by the Board of Directors, each of whom is an "outside
director" within the meaning of the regulations implementing Section 162(m) of
the Code (the "Committee"). The Board has appointed the Stock Option Committee
to serve as the Committee under the Plan. The Committee has full authority to
make, interpret and approve all rules for the administration of the Plan. The
performance goal under the Plan is the attainment of positive Income Before
Taxes (defined as Webster's net income for a fiscal year or one or more fiscal
quarters, before provision for taxes on income, merger and acquisition expenses
and awards under the Plan, as determined by Webster's independent accountants).
A participant's Performance Bonus under the Plan will be a specified percentage
(not more than 2%) of Income Before Taxes. The Committee selects participants
and establishes the specific Performance Bonus percentages. The Committee
retains negative discretion to reduce the amount of any Performance Bonus
payable under the Plan, including a reduction to zero. The reduction in the
Performance Bonus payable to one participant will not have the effect of
increasing the amount that is payable to any other participant. The Committee
can condition the payment of a Performance Bonus under the Plan upon the
satisfaction of such objective or subjective standards as the Committee shall
determine to be appropriate in its sole discretion. In practice, it is
anticipated that the Committee will consider economic value added, as determined
for purposes of Webster's EVA Incentive Plan in exercising its discretion under
the Plan. See "Management -- Personnel Resources Committee Report on Executive
Compensation -- The Economic Value Added Incentive Plan." Before any payment can
be made under the Plan, the Committee must certify in writing that the
performance goal of positive Income Before Taxes was in fact satisfied.
Participants in the Plan will not be eligible to receive awards under the EVA
Incentive Plan in addition to amounts payable under the Plan. Webster does not
currently anticipate making further awards under the Corporation's Performance
Incentive Plan, the material terms of which were approved by shareholders at the
1996 annual meeting.
The Chief Executive Officer of Webster is a participant in the
Plan. During the first 90 days of each fiscal year, the Committee selects as
participants any other individuals that the Committee determines, in its
discretion, are or may be "covered employees" of Webster for purposes of the
limitation on the deduction of compensation imposed under Section 162(m) of the
Code.
The Committee also establishes the Performance Bonus
percentage for each participant within 90 days of the beginning of a fiscal
year. However, if an individual becomes eligible to be a participant after the
end of such 90-day period, the Committee may designate such individual as a
participant and may award a Performance Bonus to such individual, provided that
the performance goal in such case will be the attainment of positive Income
Before Taxes for fiscal quarters after the quarter in which such individual
became a Plan participant.
Performance Bonuses are payable in cash at such times and on
such terms as determined by the Committee in its sole discretion (or if no such
determination is made, in a cash lump sum as soon as reasonably practicable
after the end of the fiscal year).
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<PAGE>
Webster has no obligation to reserve or otherwise fund in
advance any amounts that are or may become payable under the Plan. The funds for
payments under the Plan may be commingled with other funds of the Corporation
and need not in any way be segregated from other assets or funds held by
Webster. Moreover, the Board may at any time suspend, modify, or amend the Plan
in whole or in part. However, no amendment to materially increase benefits,
materially modify the requirements as to eligibility or to change the material
terms of the performance goal under the Plan will be effective unless such
change is disclosed to and approved by the shareholders of Webster. The Plan
will terminate on the date of the first shareholders meeting of Webster that
occurs in 2003, unless shareholders re-approve the Plan before that date.
REQUIRED VOTE
The approval by an affirmative vote of the holders of a
majority of the votes cast in person, or represented by proxy, and entitled to
vote at the Annual Meeting is required to approve the material terms of the
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
MATERIAL TERMS OF THE QUALIFIED PERFORMANCE-BASED COMPENSATION PLAN. IF NOT
OTHERWISE SPECIFIED, PROXIES WILL BE VOTED FOR APPROVAL.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 4)
The Board of Directors has appointed the firm of KPMG Peat
Marwick LLP to continue as independent auditors for Webster for the year ending
December 31, 1998, subject to ratification of such appointment by the
shareholders. KPMG Peat Marwick LLP was appointed as the independent auditors of
Webster Bank in 1985, has performed audits for Webster Bank for the years ended
December 31, 1983 through 1997, and has similarly performed audits for Webster
for the years ended December 31, 1986 through 1997. Unless otherwise indicated,
properly executed proxies will be voted in favor of ratifying the appointment of
KPMG Peat Marwick LLP, independent certified public accountants, to audit the
books and accounts of Webster for the year ending December 31, 1998. No
determination has been made as to what action the Board of Directors would take
if the shareholders do not ratify the appointment.
Assuming the presence of a quorum at the Annual Meeting, the
affirmative vote of the holders of at least a majority of the votes cast is
required to ratify the appointment of KPMG Peat Marwick LLP as Webster's
independent auditors for the year ending December 31, 1998.
Representatives of KPMG Peat Marwick LLP are expected to be
present at the Annual Meeting. They will be given an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS WEBSTER'S INDEPENDENT AUDITORS FOR
THE YEAR ENDING DECEMBER 31, 1998.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
FOR INCLUSION IN PROXY STATEMENT
Any shareholder proposal intended for inclusion in Webster's
proxy statement and form of proxy relating to Webster's 1999 Annual Meeting of
shareholders must be received by Webster's Secretary at Webster Plaza,
Waterbury, Connecticut 06702 by November 19, 1998, pursuant to the proxy
soliciting regulations of the SEC. Nothing in this paragraph shall be deemed
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<PAGE>
to require Webster to include in its proxy statement and form of proxy for such
meeting any shareholder proposal which does not meet the requirements of the SEC
in effect at the time.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors
does not know of any other matters to be presented for action by the
shareholders at the Annual Meeting. If, however, any other matters not now known
are properly brought before the meeting, the persons named in the accompanying
proxy will vote such proxy in accordance with the determination of a majority of
the Board of Directors.
By Order of the Board of Directors
/s/ James C. Smith
James C. Smith
Chairman and Chief Executive Officer
Waterbury, Connecticut
March 19, 1998
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<PAGE>
EXHIBIT A
---------
WEBSTER FINANCIAL CORPORATION
QUALIFIED PERFORMANCE-BASED COMPENSATION PLAN
1. ADOPTION AND PURPOSE.
--------------------
1.1 Webster Financial Corporation ("Webster") hereby adopts
this Qualified Performance-Based Compensation Plan (the "Plan"), effective as of
January 1, 1998.
1.2 The purposes of the Plan are to enhance Webster's ability
to attract and retain highly qualified executives and to provide additional
financial incentives to such executives to promote the success of Webster and
its subsidiaries.
1.3 Remuneration payable under the Plan is intended to
constitute "qualified performance-based compensation" for purposes of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and Section
1.162-27 of the Treasury Regulations thereunder (the "Regulations") and the Plan
shall be construed consistently with such purpose. The performance goal under
which compensation will be paid under the Plan shall be based on the attainment
of positive Income Before Taxes, as defined below.
2. DEFINITIONS.
-----------
For purposes of interpreting the Plan and related documents, the
following definitions shall apply:
2.1 "Board" means the Board of Directors of Webster.
2.2 "Code" means the Internal Revenue Code of 1986, as
amended, or the corresponding provisions of any subsequent internal revenue law.
2.3 "Committee" means a committee appointed by the Board to
administer the Plan and comprised of not less than three directors of Webster,
each of whom shall qualify in all respects as an "outside director" for purposes
of Code ss. 162(m) and ss. 1.162-27(e)(3) of the Regulations.
2.4 "Effective Date" means January 1, 1998.
2.5 "Eligible Executive" means the chief executive officer of
Webster and each other individual that the Committee determines, in its
discretion, is or may be a "covered employee" of Webster within the meaning of
Code ss. 162(m) and ss. 1.162-27(c)(2) of the Regulations.
2.6 "Expiration Date" means the date of the first shareholders
meeting of Webster that occurs in the fifth calendar year following the calendar
year in which the shareholders of Webster approved the Plan (or, in the event
shareholders shall have approved the Plan on more than one occasion, the year in
which the most recent such shareholder approval occurred).
2.7 "Fiscal Year" means each fiscal year of Webster commencing
on or after the Effective Date and before the Expiration Date.
2.8 "Income Before Taxes" means Webster's net income for a
Fiscal Year or one or more fiscal quarters, before (i) provision for taxes on
income, (ii) merger and acquisition expenses and (iii) awards under the Plan, as
determined and reported to the Committee by Webster's independent accountants.
A-1
<PAGE>
2.9 "Performance Bonus" means an annual bonus opportunity
amount determined by the Committee and stated as a specified percentage (not in
excess of 2%) of Income Before Taxes.
2.10 "Regulations" means the Treasury Regulations promulgated
under the Code, as amended from time to time.
2.11 "Webster" means Webster Financial Corporation, a Delaware
corporation.
3. ADMINISTRATION OF THE PLAN.
--------------------------
The Plan shall be administered by the Committee. The Committee shall
have the authority to establish and administer the performance goal and to
certify the attainment of the performance goal as described in Section 6 below.
The Committee shall have the full power and authority to construe, interpret and
administer the Plan and shall have the exclusive right to make awards under the
Plan and to exercise negative discretion pursuant to Section 5 below. The
Committee may take action at a meeting or by written consent in accordance with
the By Laws of Webster. The performance goal may be ratified by the Board.
4. ELIGIBILITY.
-----------
Eligibility under this Plan is limited to Eligible Executives
designated by the Committee, in its discretion.
5. AWARDS.
------
Not later than 90th day of each Fiscal Year, the Committee, in its sole
discretion, shall designate one or more Eligible Executives to be participants
in the Plan and shall specify the performance goal, which shall be based on the
attainment of positive Income Before Taxes, and the other terms and conditions
for the determination and payment of a Performance Bonus to each such Eligible
Executive for such Fiscal Year. The Performance Bonus payable to an Eligible
Executive with respect to any Fiscal Year shall not exceed 2% of Income Before
Taxes for such year. The Committee may condition the payment of a Performance
Bonus upon the satisfaction of such objective or subjective standards as the
Committee shall determine to be appropriate, in its sole discretion, including,
without limitation, economic value added as determined pursuant to Webster's EVA
Incentive Compensation Plan, and the Committee shall retain the discretion to
reduce the amount of any Performance Bonus that would otherwise be payable to an
Eligible Executive (including, without limitation, a reduction in such amount to
zero). The Committee's exercise of such discretion with respect to an Eligible
Executive shall not have the effect of increasing the Performance Bonus that is
payable to any other Eligible Executive. If an individual becomes an Eligible
Executive after the end of such 90-day period, the Committee may award a
Performance Bonus to such Eligible Executive for the Fiscal Year on such terms
and conditions as the Committee shall determine, provided that the performance
goal with respect to such Performance Bonus shall be based on attainment of
positive Income Before Taxes for fiscal quarters after the quarter in which such
individual became an Eligible Executive.
6. COMMITTEE CERTIFICATION.
-----------------------
As soon as reasonably practicable after the end of each Fiscal Year,
Webster's independent accountants shall determine and report to the Committee
the amount of the Income Before Taxes for such Fiscal Year and the Committee
shall determine the extent to which the performance goal has been attained with
respect to each Performance Bonus for such Fiscal Year. The Committee shall
certify in writing the attainment of the performance goal and the amount of each
Performance Bonus for such Fiscal Year.
A-2
<PAGE>
7. PAYMENT OF PERFORMANCE BONUSES.
------------------------------
Performance Bonuses shall be paid in cash at such times and on such
terms as determined by the Committee in its sole discretion (or if no such
determination is made, in a single sum as soon as reasonably practicable after
the end of the Fiscal Year).
8. CONTINUATION OF SERVICE.
-----------------------
Nothing in the Plan shall confer upon any person any right to continue
to serve as an officer or employee of Webster or of any subsidiary or affiliate
of Webster.
9. WITHHOLDING.
-----------
Webster shall have the right to withhold, or require an Eligible
Executive to remit to Webster, an amount sufficient to satisfy any applicable
federal, state, local or foreign withholding tax requirements imposed with
respect to the payment of any Performance Bonus.
10. NONTRANSFERABILITY; UNFUNDED PLAN.
---------------------------------
The rights and benefits under this Plan are personal to an Eligible
Executive and shall not be subject to any voluntary or involuntary alienation,
assignment, pledge, transfer, or other disposition. In the event of an Eligible
Executive's death, any payment to which the Eligible Executive may be entitled
under the Plan shall be made to his or her beneficiary last designated in a
written notice delivered to the Committee or in the absence of such designation,
to the Eligible Executive's estate. Webster shall have no obligation to reserve
or otherwise fund in advance any amounts that are or may in the future become
payable under this Plan. Any funds that Webster, acting in its sole discretion,
determines to reserve for future payments under this Plan may be commingled with
other funds of Webster and need not in any way be segregated from other assets
or funds held by Webster. An Eligible Executive's rights to payment under the
Plan shall be limited to those of a general creditor of Webster.
11. ADOPTION, AMENDMENT, SUSPENSION AND TERMINATION
-----------------------------------------------
OF THE PLAN.
-----------
11.1 The Plan shall be effective as of the date of adoption by
the Board, subject to approval of the Plan within one year thereafter by a
majority of the votes cast at a duly held meeting of the shareholders of the
company, provided, however, that upon approval of the Plan by the shareholders
of Webster, all Performance Bonuses awarded under the Plan on or after the
Effective Date shall be fully effective as if the shareholders had approved the
Plan on the Effective Date.
11.2 Subject to the limitations of this Section 11.2, the
Board may at any time suspend or terminate the Plan, and may amend it from time
to time in such respects as the Board may deem advisable; provided, however, the
Board shall not amend the Plan in the following respects without the approval of
shareholders then sufficient to approve the Plan in the first instance:
(a) To materially increase the benefits accruing to
any Eligible Executive under the Plan (for example, to increase the maximum
percentage of Income Before Taxes that may be paid to an Eligible Executive
pursuant to a Performance Bonus awarded under the Plan).
(b) To materially modify the requirements as to
eligibility for participation in the Plan.
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<PAGE>
(c) To change the material terms of the performance
goal under the Plan.
11.3 No Performance Bonus may be awarded during any suspension
or after the termination of the Plan, and no amendment, suspension or
termination of the Plan shall, without the consent of the person affected
thereby, alter or impair any rights or obligations under any Performance Bonus
previously awarded under the Plan. This Plan shall terminate upon the payment or
cancellation of all of the Performance Bonuses awarded hereunder before the
Expiration Date, unless previously terminated by the Board pursuant to this
Section 11.
12. GOVERNING LAW.
-------------
The validity, interpretation and effect of this Plan, and the rights of
all persons hereunder, shall be governed by and determined in accordance with
the laws of Delaware, other than the choice of law rules thereof.
* * * * *
This Plan was duly approved by the Board at a meeting held on the 23rd
day of February, 1998 and by the shareholders of Webster at a meeting held on
the _____ day of _________________, 1998.
------------------------------
Secretary
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<PAGE>
WEBSTER FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Webster Financial Corporation ("Webster"
or the "Corporation") hereby appoints Walter R. Griffin and C. Michael Jacobi,
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 annual
meeting of shareholders (the "Annual Meeting") to be held at 4:00 p.m., local
time, on Thursday, April 23, 1998, at the Sheraton Four Points Hotel, 3580 East
Main Street, Waterbury, Connecticut, and at any adjournments 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 FOR THE ELECTION OF
THE NOMINEES LISTED IN PROPOSAL 1, FOR AMENDMENT OF WEBSTER'S 1992 STOCK OPTION
PLAN (PROPOSAL 2), FOR APPROVAL OF THE MATERIAL TERMS OF WEBSTER'S QUALIFIED
PERFORMANCE-BASED COMPENSATION PLAN (PROPOSAL 3), FOR THE RATIFICATION OF
WEBSTER'S APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL 4) AND IN ACCORDANCE
WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS AS TO ANY OTHER
MATTERS. The undersigned shareholder may revoke this proxy at any time before it
is voted by delivering to the Vice President, Investor Relations of the
Corporation either a written revocation of the proxy or a duly executed proxy
bearing a later date, or by appearing at the Annual Meeting and voting in
person. The undersigned shareholder hereby acknowledges receipt of the Notice of
Annual Meeting and Proxy Statement.
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL
CARDS IN THE ACCOMPANYING ENVELOPE.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
|X| Please mark your votes as in this example.
1. To elect three directors for three-year terms (Proposal 1).
FOR WITHHOLD AUTHORITY
all nominees listed to vote for all nominees listed below.
[ ] [ ]
NOMINEES: Joel S. Becker
Harry P. DiAdamo, Jr.
James C. Smith
WITHHOLD AUTHORITY to vote for the following nominees only: (write the
name of the nominee(s) in the space below).
2. To amend Webster's 1992 Stock Option Plan (Proposal 2).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve the material terms of Webster's Qualified
Performance-Based Compensation Plan (Proposal 3).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To ratify the appointment by the Board of Directors of the firm
KPMG Peat Marwick LLP, as independent auditors of the Corporation
for the fiscal year ending December 31, 1998 (Proposal 4).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. The Proxies are authorized to vote upon such other business as may
properly come before the meeting, or any adjournments thereof, in
accordance with the determination of a majority of the
Corporation's Board of Directors.
- -------------------------------------------------------- Date:
SIGNATURE(S) OF SHAREHOLDER OR AUTHORIZED REPRESENTATIVE -----------------
NOTE: 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.
