As filed with the Securities and Exchange Commission on February 25, 1999
Registration No. 333-71141
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 6035 06-1187536
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
John V. Brennan
Executive Vice President,
Chief Financial Officer and Treasurer
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
(203) 578-2335
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
Stuart G. Stein, Esq. William W. Bouton, Esq.
Margaret Rhinelander Rizzi, Esq. Tyler, Cooper & Alcorn L.L.P.
Hogan & Hartson L.L.P. City Place, 35th Floor
555 Thirteenth Street, N.W. Hartford, CT 06103-3488
Washington, D.C. 20004 (860) 725-6210
(202) 637-8575
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================
Title of each class of Proposed maximum
securities to be Amount to be Proposed maximum aggregate offering Amount of
registered registered offering price per price registration fee
unit
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 349,311 $29.50* $10,304,674.50* $2,864.70*
$.01 per share
===========================================================================================================
</TABLE>
* Estimated pursuant to Rule 457(f)(1) under the Securities Act of 1933, as
amended, and based upon the average of the high and low prices for shares of
common stock of Maritime Bank & Trust Company as reported and calculated as of
February 18, 1999 and the exchange ratio prescribed by the Agreement and Plan
of Merger.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
WEBSTER FINANCIAL CORPORATION MARITIME BANK & TRUST COMPANY
WEBSTER PLAZA 130 WESTBROOK ROAD
WATERBURY, CONNECTICUT 06702 ESSEX, CONNECTICUT 06426-1149
------------------ ------------------
PROSPECTUS PROXY STATEMENT
----------------------
1,229,447 SHARES OF COMMON STOCK
----------------------
DEAR MARITIME SHAREHOLDER:
Maritime Bank & Trust Company and Webster Financial Corporation have
entered into an agreement and plan of merger, dated as of November 3, 1998,
which provides for Maritime to merge into Webster Bank, a wholly owned
subsidiary of Webster Financial. If the merger takes place, Maritime's common
stock will be converted into Webster Financial's common stock based on a 15 day
average closing market price of Webster Financial common stock. Dissenting
shares will be treated differently.
The Maritime board of directors has scheduled a special meeting of Maritime
shareholders to vote on the merger agreement that will be held on April 20, 1999
at 4:30 p.m., local time, at Maritime's main office, 130 Westbrook Road, Essex,
Connecticut. The merger agreement and the merger must be approved at the meeting
by at least two-thirds of Maritime's common stock issued on February 23, 1999.
If the merger agreement and the merger are approved and other customary
conditions are met, we expect the merger to take place during the second quarter
of 1999.
Webster Financial's common stock is traded on the Nasdaq Stock Market's
National Market Tier under the symbol WBST. On November 3, 1998, which was the
last trading day before the public announcement of the merger, the closing price
for a share of Webster Financial's common stock was $24.94.
WEBSTER FINANCIAL'S COMMON STOCK HAS NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR THE
FEDERAL DEPOSIT INSURANCE CORPORATION, NOR HAS ANY OF THESE INSTITUTIONS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
This proxy statement/prospectus is being mailed to Maritime shareholders
on or about March __, 1999.
The date of this proxy statement/prospectus is __________ __, 1999.
1
<PAGE>
MARITIME BANK & TRUST COMPANY
130 WESTBROOK ROAD
ESSEX, CONNECTICUT 06426-1149
-------------------
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
APRIL 20, 1999
---------------------
A special meeting of shareholders of Maritime Bank & Trust Company will
be held on April 20, 1999, at 4:30 p.m. at Maritime's main office, 130 Westbrook
Road, Essex, Connecticut for the following purposes:
1. To consider and vote on a proposal to approve and adopt the
agreement and plan of merger, dated as of November 3, 1998, among
Webster Financial Corporation, Webster Bank and Maritime, the
merger of Maritime into Webster Bank and the other transactions
contemplated by the merger agreement, as described in the attached
proxy statement/prospectus.
2. To transact any other business that properly comes before the
shareholder meeting, or any adjournments or postponements of the
meeting, including, without limitation, a motion to adjourn the
shareholder meeting to another time and/or place for the purpose
of soliciting additional proxies in order to approve the merger
agreement and the merger or otherwise.
You are entitled to notice and to vote at the shareholder meeting or
any adjournments or postponements of the meeting only if you were a holder of
record of Maritime's common stock at the close of business on February 23, 1999.
If you held Maritime's common stock on that day, you are entitled to dissent
from the merger under Sections 33-855 to 33-872 of the Connecticut General
Statutes. A copy of these sections is attached to the proxy
statement/prospectus.
MARITIME'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO
AND IN THE BEST INTERESTS OF MARITIME'S SHAREHOLDERS, HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT. The affirmative vote of
two-thirds of the shares of Maritime's common stock issued on February 23, 1999
is required to approve the merger agreement and the merger.
The required vote of Maritime's shareholders is based on the total
number of shares of Maritime's common stock issued and not on the number of
shares which are actually voted. NOT RETURNING A PROXY CARD, NOT VOTING IN
PERSON AT THE SHAREHOLDER MEETING AND ABSTAINING FROM VOTING WILL HAVE THE SAME
EFFECT AS VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SHAREHOLDER
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SHAREHOLDER MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT AS SOON AS POSSIBLE IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. A shareholder who executes a proxy may
revoke it at any time before it is exercised by giving written notice to the
Secretary of Maritime, by subsequently filing another proxy or by attending the
shareholder meeting and voting in person.
By order of the Board of Directors
WILLIAM R. ATTRIDGE
Chief Executive Officer and President
Essex, Connecticut
March ___, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.. 4 Capital Securities................. 49
Certificate of Incorporation and
SUMMARY................................. 6 Bylaw Provisions............... 50
Applicable Law..................... 55
RECENT DEVELOPMENT...................... 11
WHERE YOU CAN FIND MORE
SHAREHOLDER MEETING..................... 11 INFORMATION........................ 56
Matters to be Considered at the
Shareholder Meeting............. 11 INCORPORATION OF
Voting............................. 11 DOCUMENTS BY REFERENCE............. 56
Required Vote; Revocability of
Proxies......................... 12 ADJOURNMENT OF SHAREHOLDER
Solicitation of Proxies............ 13 MEETING............................ 57
THE MERGER.............................. 13 SHAREHOLDER PROPOSALS................... 57
The Parties........................ 13
Background of the Merger........... 14 OTHER MATTERS........................... 57
Recommendation of the Maritime
Board of Directors and Reasons for EXPERTS................................. 58
the Merger...................... 15
Purpose and Effects of the Merger.. 16 LEGAL MATTERS........................... 58
Structure.......................... 17
Exchange Ratio..................... 17
Options............................ 19
Regulatory Approvals............... 19 Appendix A
Conditions to the Merger........... 20 Opinion of Ostrowski & Company, Inc.. A-1
Conduct of Business Pending
the Merger...................... 21 Appendix B
Third Party Proposals.............. 22 Sections 33-855 to 33-872 of the
Expenses; Breakup Fee.............. 22 Connecticut General Statutes....... B-1
Opinion of Maritime's Financial
Advisor......................... 22 Appendix C
Representations and Warranties..... 27 Audited Financial Statements of
Termination and Amendment of Maritime Bank & Trust Company at
the Merger Agreement............ 27 December 31, 1998 and 1997 and for
Federal Income Tax Consequences.... 28 the years ended December 31, 1998,
Accounting Treatment............... 30 1997, and 1996..................... C-1
Resales of Webster Financial's Common
Stock Received in the Merger... 30
Dissenters' Appraisal Rights....... 30
Arrangements with and Payments to
Maritime Directors, Executive
Officers and Employees......... 32
Indemnification.................... 33
Option Agreement................... 33
SELECTED DATA........................... 36
INFORMATION ABOUT MARITIME ............. 39
Business........................... 39
Supervision and Regulation......... 39
Management's Discussion and Analysis
of Financial Conditions and
Results of Operations.......... 39
Security Ownership of Greater than
5% Shareholders and Management.. 44
MARKET PRICES AND DIVIDENDS............. 46
Webster Financial's Common Stock... 46
Maritime's Common Stock............ 46
DESCRIPTION OF WEBSTER FINANCIAL'S
CAPITAL STOCK AND COMPARISON
OF SHAREHOLDER RIGHTS.............. 47
Webster Financial's Common Stock... 47
Webster Financial's Preferred Stock 48
Senior Notes....................... 48
</TABLE>
3
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS MARITIME PROPOSING TO MERGE WITH WEBSTER BANK? HOW WILL I
BENEFIT?
A: In our opinion, the business potential for the combination of Webster
Financial and Maritime exceeds what Maritime could accomplish
individually. We expect that the merger will enhance shareholder value
for all shareholders.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign, date
and return it as soon as possible. If you sign and send in your proxy
card and do not indicate how you want to vote, your proxy card will be
voted for approval of the merger agreement. Not returning your proxy
card, not voting in person at the shareholder meeting and abstaining
from voting will have the same effect as voting against the merger
agreement.
You can choose to attend the shareholder meeting and vote your shares
in person instead of completing and returning your proxy card. If you
do complete and return a proxy card, you may change your vote at any
time up to and including the time of the vote on the day of the
shareholder meeting by following the directions on page 12.
Q: IF MY SHARES ARE HELD IN STREET NAME BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions to
your broker on how you want your shares voted.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger takes place, you will receive instructions on how
to exchange your Maritime certificates for Webster Financial
certificates.
Q: WHAT WILL MARITIME SHAREHOLDERS RECEIVE IN THE MERGER?
A: If the merger takes place, each share of Maritime's common stock will
be converted automatically into Webster Financial's common stock based
on a 15 day average closing market price of Webster Financial common
stock. Webster Financial will pay cash instead of issuing fractional
shares.
If the 15 day average price is between $17.50 and $24.45, shares of
Maritime's common stock will be converted into $26.67 worth of Webster
Financial common stock. If the 15 day average price is greater than
$24.45, shares of Maritime's common stock will be converted into 1.091
shares of Webster Financial common stock. If the 15 day average price
is less than $17.50, shares of Maritime's common stock will be
converted into 1.524 shares of Webster Financial common stock.
If the 15 day average price is less than $17.50, Maritime can terminate
the merger agreement unless Webster Financial decides to increase the
exchange ratio so that Maritime's shareholders will receive $26.67
worth of Webster Financial common stock based on the 15 day average
price.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Before the merger takes place, Maritime expects to continue to pay
regular quarterly cash dividends on its common stock, which currently
are $0.13 per share. Webster Financial presently pays dividends at a
quarterly dividend rate of $0.11 per share. An exchange ratio of 1.091
would mean an equivalent dividend of $0.12 per share for Maritime's
common stock.
4
<PAGE>
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the merger you should call or write to
William R. Attridge, President, Maritime Bank & Trust Company, 130
Westbrook Road, Essex, Connecticut 06426-1149, telephone (860)
767-1166. A copy of the merger agreement including each of its exhibits
and the other documents described in this proxy statement/prospectus
will be provided to you promptly without charge if you call or write to
James M. Sitro, Vice President, Investor Relations, Webster Financial
Corporation, Webster Plaza, Waterbury, Connecticut 06702, telephone
(203) 578-2399.
5
<PAGE>
SUMMARY
The following is a brief summary of information located elsewhere in
this proxy statement/ prospectus. BEFORE YOU VOTE, YOU SHOULD GIVE CAREFUL
CONSIDERATION TO ALL OF THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS DOCUMENT.
THE PARTIES (PAGE 13)
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
Webster Financial is a Delaware corporation and the holding company of Webster
Bank, Webster Financial's federal savings bank subsidiary. Both Webster
Financial and Webster Bank are headquartered in Waterbury, Connecticut. Deposits
at Webster Bank are insured by the FDIC. At December 31, 1998, Webster Financial
had total consolidated assets of $9.0 billion, total deposits of $5.7 billion,
and shareholders' equity of $554.9 million, or 6.1% of total assets.
MARITIME BANK & TRUST COMPANY
130 Westbrook Road
Essex, Connecticut 06426-1149
(860) 767-1166
Maritime is a Connecticut-chartered commercial bank headquartered in Essex,
Connecticut. Deposits at Maritime are insured by the FDIC. At December 31, 1998,
Maritime had total consolidated assets of $101.4 million, total deposits of
$89.0 million, and stockholders' equity of $7.2 million, or 7.0% of total
assets.
THE SHAREHOLDER MEETING (PAGE 11)
A special meeting of Maritime shareholders will be held on April 20, 1999, at
4:30 p.m. at Maritime's main office, 130 Westbrook Road, Essex, Connecticut for
the following purposes:
o vote on the merger agreement, the merger and the other transactions
contemplated by the merger agreement; and
o address any other matters that properly come before the shareholder meeting,
or any adjournments or postponements of the meeting, including a motion to
adjourn the shareholder meeting to another time and/or place to solicit
additional proxies in favor of the merger agreement and the merger or
otherwise.
THE RECOMMENDATION OF THE MARITIME BOARD TO SHAREHOLDERS (PAGE 15)
The Maritime board of directors unanimously approved the merger agreement and
the merger and unanimously recommends that you vote for approval of these
matters.
VOTING POWER (PAGE 11)
You are entitled to vote at the shareholder meeting if you owned shares of
Maritime's common stock on February 23, 1999. You will have one vote for each
share of Maritime's common stock that you owned on that date.
VOTE REQUIRED (PAGE 12)
For the merger to take place, the holders of two-thirds of the shares of
Maritime's common stock that were issued on February 23, 1999 must approve the
merger agreement, the merger and the other transactions contemplated by the
merger agreement. Please remember that the vote required to approve the merger
agreement and the merger is based on the total number of shares that were issued
on that date, and not on the number of shares which are actually voted
SHARE OWNERSHIP AND INTERESTS OF MARITIME'S MANAGEMENT AND THEIR AFFILIATES
(PAGES 12 AND 23)
At the close of business on February 23, 1999, excluding all options to purchase
Maritime's common stock, Maritime's directors and executive officers and their
affiliates owned a total of 287,982 shares of Maritime's common stock, which was
approximately 40.5% of the total number of shares of Maritime's common stock
that were issued on that date. Maritime's directors have agreed to vote their
shares in favor of the merger agreement.
6
<PAGE>
You should note that Maritime's directors and executive officers have interests
in the merger as directors and employees that are different from yours as a
Maritime shareholder. These interests are described at page 32.
REGULATORY APPROVALS (PAGE 19)
For the merger to take place, we need to receive the regulatory approvals of the
Office of Thrift Supervision and the Connecticut Commissioner of Banking. We
have filed applications with these regulators.
DISSENTERS' APPRAISAL RIGHTS (PAGE 30)
Under Connecticut law, you are entitled to dissenters' rights of appraisal in
connection with the merger. If you want to exercise dissenters' rights, you must
follow carefully the procedures described at pages 30 to 33 of this document and
Appendix B.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 28)
You will not recognize gain or loss for federal income tax purposes if you
receive shares of Webster Financial common stock in exchange for shares of
Maritime common stock in the merger, except to the extent you receive cash
instead of fractional shares. However, different tax consequences may apply to
you because of your individual circumstances or because special tax rules apply
to you, for example, if you:
o are a tax-exempt organization
o are a dealer in securities
o are a financial institution
o are an insurance company
o are a non-United States person
o acquired your shares of Maritime common stock from the exercise of
options or othewise as compensation or through a qualified retirement
plan or
o hold shares of Maritime common stock as part of a straddle, hedge, or
conversion transaction
TAX MATTERS ARE VERY COMPLICATED. YOU SHOULD CONSULT YOUR TAX ADVISOR FOR A FULL
EXPLANATION OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
FAIRNESS OPINION OF MARITIME'S FINANCIAL ADVISOR (PAGE 22)
In deciding to approve the merger, Maritime's board of directors considered an
opinion of Ostrowski & Company, Inc., Maritime's financial advisor. The opinion
concluded that the terms of the merger agreement are fair to Maritime
shareholders from a financial point of view. An update of this opinion is
attached as Appendix A to this document. WE ENCOURAGE YOU TO READ THIS OPINION
CAREFULLY.
TERMINATION OF THE MERGER AGREEMENT (PAGE 27)
The merger agreement specifies a number of situations when the agreement may be
terminated by Webster Financial or Maritime, which are described on page 28 of
this document. One of the instances when Maritime can terminate the merger
agreement is if the 15 day average closing market price that will be used to
determine the exchange ratio is less than $17.50, unless Webster Financial
decides to increase the exchange ratio so that Maritime's shareholders will
receive $26.67 worth of Webster Financial's common stock based on the 15 day
average.
OPTION AGREEMENT (PAGE 33)
Maritime and Webster Financial entered into an option agreement in connection
with the merger agreement. Maritime granted Webster Financial an option to
purchase 19.9% of Maritime's common stock. If specific events occur, which are
described in the option agreement, Webster can exercise this option. The option
agreement is intended to discourage other parties from making alternative
acquisition-related proposals, even if a proposal of that kind is for a higher
price per share for Maritime's common stock than the price per share to be paid
under the merger agreement.
ACCOUNTING TREATMENT (PAGE 30)
The merger will be accounted for as a purchase transaction for accounting and
financial reporting purposes.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
We have made forward-looking statements in this document, and in documents that
we incorporate by reference. These kinds of statements are subject to risks and
uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of Webster Financial, Webster
Bank, Maritime or the surviving bank. When we use words like believes, expects,
anticipates or similar expressions, we are making forward-looking statements.
You should note that many factors, some of which are discussed elsewhere in this
document and in the documents that we incorporate by reference, could affect the
future financial results of Webster Financial, Webster Bank, Maritime or the
surviving bank and could cause those results to differ materially from those
expressed in our forward-looking statements.
7
<PAGE>
These factors include the following:
o the effect of economic conditions;
o inability to realize expected cost savings in connection with business
combinations and other acquisitions;
o higher than expected costs related to integration of combined or merged
businesses; deposit attrition;
o adverse changes in interest rates;
o change in any applicable law, rule, regulation or practice related to tax or
accounting issues or otherwise; and
o adverse changes or conditions in capital or financial markets.
No person is authorized to give any information or to make any representation
not contained in this proxy statement/prospectus, and, if given or made, that
information or representation should not be relied upon as having been
authorized. This proxy statement/ prospectus does not constitute an offer to
sell, or a solicitation of an offer to purchase, any of Webster Financial's
common stock offered by this proxy statement/ prospectus, or the solicitation of
a proxy, in any jurisdiction in which it is unlawful to make that kind of an
offer or solicitation. Neither the delivery of this proxy statement/prospectus
nor any distribution of Webster Financial's common stock offered pursuant to
this proxy statement/ prospectus shall, under any circumstances, create an
implication that there has been no change in the affairs of Maritime or Webster
Financial or the information in this document or the documents or reports
incorporated by reference into this document since the date of this proxy
statement/ prospectus.
8
<PAGE>
MARKET PRICES OF COMMON STOCK
Webster Financial's common stock is traded on the Nasdaq Stock Market's
National Market Tier under the trading symbol WBST. Maritime's common stock is
not registered under the federal securities laws and is not listed on any
exchange or automated quotation system. However, it does trade on the
over-the-counter bulletin board. The table below presents the per share closing
prices of Webster Financial's common stock on the Nasdaq Stock Market's National
Market Tier as of the dates specified, the per share closing prices of
Maritime's common stock on the over-the-counter bulletin board as of the dates
specified and the pro forma equivalent market value of Webster Financial's
common stock to be issued for Maritime's common stock in the merger. November 3,
1998 was the last trading date prior to announcement of the merger agreement.
Maritime's pro forma equivalent market value was determined by multiplying the
closing prices of Webster Financial's common stock on the specified date by the
exchange ratio of 1.091, calculated based on the average of the daily closing
prices per share of Webster Financial's common stock for the 15 consecutive
trading days on which shares of Webster Financial's common stock were actually
traded prior to February 23, 1999, the most recent practicable date prior to the
date of this proxy statement/prospectus. For more information about the exchange
ratio, see "THE MERGER -- Exchange Ratio," and for more information about the
stock prices and dividends of Webster Financial and Maritime, see "MARKET PRICES
AND DIVIDENDS."
Maritime's
Last Reported Sale Price Common Stock
-------------------------------- Pro Forma
Webster Financial's Maritime's Equivalent Market
Date Common Stock Common Stock Value
- ---- ------------ ------------ -----
November 3, 1998 ........ $24.94 $20.00 $ 27.21
February 23, 1999........ 30.13 29.50 32.87
Maritime's shareholders are advised to obtain current market quotations
for Webster Financial's common stock. It is expected that the market price of
Webster Financial's common stock will fluctuate between the date of this proxy
statement/prospectus and the date on which the merger takes place. No assurance
can be given as to the market price of Webster Financial's common stock at the
time of the merger.
9
<PAGE>
COMPARATIVE PER SHARE DATA
The table below presents comparative selected historical per share data
of Webster Financial and Maritime, pro forma combined per share data for Webster
Financial and Maritime and equivalent pro forma per share data of Maritime. The
financial data is based on, and should be read in conjunction with, the
historical financial statements and the notes to those financial statements of
Webster Financial and Maritime. All financial data presented for Webster
Financial prior to December 31, 1997 has been restated to reflect the financial
results of Webster Financial and Eagle Financial Corp., which was acquired by
Webster Financial in April 1998. All per share data of Webster Financial,
Maritime and pro forma are presented on a diluted basis and have been adjusted
retroactively to give effect to stock dividends. The pro forma data is not
necessarily indicative of results which will be obtained on a combined basis.
Maritime equivalent pro forma per share amounts are calculated by multiplying
the pro forma combined amounts by the exchange ratio calculated based on the
average daily closing prices per share of Webster Financial's common stock for
the 15 consecutive trading days on which shares of Webster Financial's common
stock were actually traded prior to February 23, 1999, the most recent
practicable date prior to the date of this proxy statement/prospectus. See "THE
MERGER -- Exchange Ratio."
At or for the
Year Ended
December 31, 1998
-----------------
Net Income per diluted Common Share:
Webster Financial -- historical .. $ 1.83
Maritime -- historical ........... 1.18
Pro Forma Combined ............... 1.81
Maritime Equivalent Pro Forma .... 1.97
Cash Dividends per Common Share:
Webster Financial -- historical .. 0.44
Maritime -- historical ........... 0.45
Pro Forma Combined ............... 0.44
Maritime Equivalent Pro Forma .... 0.48
Book Value per Common Share:
Webster Financial -- historical .. 14.87
Maritime -- historical ........... 10.20
Pro Forma Combined ............... 14.83
Maritime Equivalent Pro Forma .... 16.18
For more detailed information about the matters discussed in this summary,
you should review the table of contents of this document,
which you can find at page 3.
10
<PAGE>
RECENT DEVELOPMENT
On January 21, 1999, Webster Financial reported a 27% increase in net
operating income to $24.5 million, or $0.64 per diluted share, for the fourth
quarter ended December 31, 1998, compared to $19.3 million, or $0.50 per diluted
share, for the fourth quarter ended December 31, 1997. Net income for the fourth
quarter, which included a net non-recurring $3.2 million income tax charge, was
$21.3 million, compared to $19.3 million for the same period in 1997.
For the full year 1998, Webster Financial reported a 35% increase in
net operating income to a record $86.9 million, or $2.25 per diluted share,
compared to $64.5 million, or $1.68 per diluted share, for the previous year.
Net income for 1998, including acquisition related expenses and non-recurring
tax items, was $70.5 million, or $1.83 per diluted share, compared to net income
for 1997 of $41.1 million, or $1.07 per diluted share, including non-recurring
items. Non-recurring items for 1998 consisted of $18.9 million of acquisition
related expenses and provisions and the non-recurring income tax charge of $3.2
million. Non-recurring items for 1997 consisted of $39.7 million of acquisition
related expenses and provisions.
SHAREHOLDER MEETING
MATTERS TO BE CONSIDERED AT THE SHAREHOLDER MEETING
This proxy statement/prospectus is first being mailed to the holders of
Maritime's common stock on or about March ___, 1999. It is accompanied by a
proxy card furnished in connection with the solicitation of proxies by the
Maritime board of directors for use at the special meeting of Maritime's
shareholders. The shareholder meeting is scheduled to be held on April 20, 1999,
at 4:30 p.m., at Maritime's main office, 130 Westbrook Road, Essex, Connecticut.
At the shareholder meeting, the holders of Maritime's common stock will consider
and vote on: (i) the proposal to approve and adopt the merger agreement, the
merger and the other transactions contemplated by the merger agreement, and (ii)
any other business that properly comes before the shareholder meeting, or any
adjournments or postponements of the meeting, including, without limitation, a
motion to adjourn the shareholder meeting to another time and/or place for the
purpose of soliciting additional proxies in order to approve the merger
agreement and the merger or otherwise.
VOTING
The Maritime board of directors has fixed the close of business on
February 23, 1999 as the date for determining the Maritime shareholders entitled
to receive notice of and to vote at the shareholder meeting. Only holders of
record of Maritime's common stock at the close of business on that day will be
entitled to vote at the shareholder meeting or at any adjournment or
postponement of the meeting. At the close of business on February 23, 1999,
there were 711,023 shares of Maritime's common stock outstanding and that are
entitled to vote at the shareholder meeting, held by approximately 282
shareholders of record. Maritime is not authorized to issue preferred stock.
Each holder of Maritime's common stock on February 23, 1999 will be
entitled to one vote for each share held of record upon each matter that
properly comes before the shareholder meeting or at any adjournment or
postponement of the meeting. The presence, in person or by proxy, of the holders
of a majority of the voting power of Maritime's common stock issued and
outstanding and entitled to be voted at the shareholder meeting is necessary to
constitute a quorum. Abstentions and broker non-votes will be included in the
calculation of the number of shares represented at the shareholder meeting in
order to determine whether a quorum has been achieved. Since approval of the
merger agreement requires the affirmative vote of the holders of at least
two-thirds of the shares
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of Maritime's common stock issued and outstanding on February 23, 1999,
abstentions and broker non-votes will have the same effect as a vote against the
merger agreement.
If a quorum is not present, or if fewer shares of Maritime's common
stock are voted in favor of the proposal for approval of the merger agreement
than the number required for approval, it is expected that the shareholder
meeting will be adjourned to allow additional time for obtaining additional
proxies. In that event, proxies will be voted to approve an adjournment, except
for proxies as to which instructions have been given to vote against the merger
agreement. In the absence of a quorum, an officer entitled to preside at or act
as secretary of the shareholder meeting will have the power to adjourn the
meeting until a quorum is present. If a quorum is obtained, an adjournment of
the meeting will be approved if the votes cast favoring adjournment exceed the
votes cast opposing adjournment.
If your proxy card is properly executed and received by Maritime in
time to be voted at the shareholder meeting, the shares represented by the proxy
card will be voted in accordance with the instructions marked on the proxy card.
EXECUTED PROXIES WITH NO INSTRUCTIONS INDICATED ON THE PROXY CARD WILL BE VOTED
FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
The Maritime board of directors is not aware of any matters other than
the proposal to approve the merger agreement and the merger or a proposal to
adjourn or postpone the shareholder meeting as necessary that may properly come
before the shareholder meeting. If any other matters properly come before the
shareholder meeting, the persons named in the accompanying proxy will vote the
shares represented by all properly executed proxies on those matters as
determined by a majority of the Maritime board of directors.
YOU SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. IF
THE MERGER TAKES PLACE, MARITIME STOCK CERTIFICATES SHOULD BE DELIVERED IN
ACCORDANCE WITH INSTRUCTIONS THAT WILL BE SENT TO YOU BY WEBSTER FINANCIAL'S
EXCHANGE AGENT PROMPTLY AFTER THE MERGER TAKES PLACE.
REQUIRED VOTE; REVOCABILITY OF PROXIES
The affirmative vote of the holders of at least two-thirds of the
shares of Maritime's common stock issued and outstanding on February 23, 1999 is
required to approve and adopt the merger agreement, the merger of Maritime into
Webster Bank and the other transactions contemplated by the merger agreement.
THE REQUIRED VOTE OF MARITIME'S SHAREHOLDERS IS BASED ON THE TOTAL
NUMBER OF OUTSTANDING SHARES OF MARITIME'S COMMON STOCK AND NOT ON THE NUMBER OF
SHARES WHICH ARE ACTUALLY VOTED. NOT RETURNING A PROXY CARD, NOT VOTING IN
PERSON AT THE SHAREHOLDER MEETING AND ABSTAINING FROM VOTING WILL HAVE THE SAME
EFFECT AS VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER.
All of the directors and executive officers of Maritime beneficially
owned as of February 23, 1999, excluding all options to purchase shares of
Maritime common stock, a total of 287,982 shares of Maritime's common stock,
which was approximately 40.5% of the outstanding shares of Maritime's common
stock on that date. All of the directors, including the officer who serves as
the Chief Executive Officer and President of Maritime, have entered into a
stockholder agreement with Webster Financial, in which they each agreed, among
other things, to transfer restrictions and to vote all shares of Maritime's
common stock that they have the right to vote, whether owned as of the date of
the stockholder agreement or acquired after that date, in favor of the merger
agreement, the merger and the other transactions contemplated by the merger
agreement and against any third party merger proposal. No separate consideration
was paid to any of the directors for entering into
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the stockholder agreement. Webster Financial required that the stockholder
agreement be executed as a condition to Webster Financial entering into the
merger agreement.
If you submit a proxy card, attending the shareholder meeting will not
automatically revoke your proxy. However, you may revoke a proxy at any time
before it is voted by (i) delivering to Nicholas Lewitz, Jr., Secretary of
Maritime Bank & Trust Company, 130 Westbrook Road, Essex, Connecticut
06426-1149, a written notice of revocation before the shareholder meeting, (ii)
delivering to Maritime a duly executed proxy bearing a later date before the
shareholder meeting, or (iii) attending the shareholder meeting and voting in
person.
Maritime and Webster Financial are not obligated to complete the merger
unless, among other things, the merger agreement and the merger are approved by
the affirmative vote of the holders of at least two-thirds of the shares of
Maritime's common stock issued and outstanding on February 23, 1999. For a
description of the conditions to the merger, see "THE MERGER -- Conditions to
the Merger."
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of Maritime may solicit proxies for the shareholder meeting from shareholders
personally or by telephone or telegram without receiving additional compensation
for these activities. The cost of soliciting proxies will be paid by Maritime.
In addition, Maritime has retained D.F. King & Co., Inc., a proxy solicitation
firm, to assist in proxy solicitation for the shareholder meeting. The fee to be
paid to that firm, $4,500 plus reasonable out-of-pocket expenses, will be paid
by Webster Financial. Maritime also will make arrangements with brokerage firms
and other custodians, nominees and fiduciaries to send proxy materials to their
principals and will reimburse those parties for their expenses in doing so.
THE MERGER
The information in this section is qualified in its entirety by
reference to the full text of the merger agreement including each of its
exhibits, the option agreement and the stockholder agreement, all of which are
incorporated by reference into this document and the material features of which
are described in this proxy statement/prospectus. A copy of the merger agreement
including each of its exhibits and the other documents described in this proxy
statement/prospectus will be provided to you promptly without charge if you call
or write to James M. Sitro, Vice President, Investor Relations, Webster
Financial Corporation, Webster Plaza, Waterbury, Connecticut 06702, telephone
(203) 578-2399.
THE PARTIES
Webster Financial, Webster Bank and Maritime have entered into the
merger agreement. Under the merger agreement, Webster Financial will acquire
Maritime through the merger of Maritime into Webster Bank, a wholly owned
subsidiary of Webster Financial.
WEBSTER FINANCIAL. Webster Financial is a Delaware corporation and the
holding company of Webster Bank, Webster Financial's federal savings bank
subsidiary. Both Webster Financial and Webster Bank are headquartered in
Waterbury, Connecticut. Webster Financial can be found on the Internet at
http://www.websterbank.com. Deposits at Webster Bank are insured by the FDIC.
Through Webster Bank, Webster Financial currently serves customers from over 100
banking offices, three commercial banking centers and more than 174 ATMs located
in Hartford, New Haven, Fairfield, Litchfield and Middlesex Counties in
Connecticut. Webster Financial's mission is to help individuals, families and
businesses achieve their financial goals. Webster Financial emphasizes five
business lines -- consumer banking,
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business banking, mortgage banking, trust and investment services and insurance
services -- each supported by centralized administration and operations. Through
a number of recent acquisitions of other financial service firms, including
banks and thrifts, a trust company and an insurance firm, Webster Financial has
established a leading position in the banking and trust and investment services
market in Connecticut.
On November 11, 1998, Webster Financial announced that it had signed a
definitive merger agreement to acquire Village Bancorp, Inc., the holding
company of The Village Bank & Trust Company. At December 31, 1998, Village had
total consolidated assets of $237.2 million and total deposits of $217.2
million. The Village transaction will be accounted for as a purchase.
At December 31, 1998, Webster Financial had total consolidated assets
of $9.0 billion, total deposits of $5.7 billion, and shareholders' equity of
$554.9 million or 6.1% of total assets. Webster Financial's consolidated
financial statements as of December 31, 1998 include Eagle Financial Corp.,
which was acquired by Webster Financial on April 15, 1998. At December 31, 1998,
Webster Financial had loans receivable, net of $5.0 billion, which included $3.7
billion in residential mortgage loans, $416.2 million in commercial real estate
loans, $401.7 million in commercial and industrial loans and $481.4 million in
consumer loans, consisting primarily of home equity loans. At December 31, 1998,
nonaccrual loans and other real estate owned were $28.9 million. At that date,
Webster Financial's allowance for loan losses was $55.1 million, or 217.1% of
nonaccrual loans, and its total allowance for loan and other real estate owned
losses was $55.3 million, or 190.0% of nonaccrual loans and other real estate
owned. For additional information about Webster Financial that is incorporated
by reference into this document, see "WHERE YOU CAN FIND MORE INFORMATION."
Webster Financial, as a savings and loan holding company, is regulated
by the Office of Thrift Supervision. Webster Bank, as a federal savings bank,
also is regulated by the Office of Thrift Supervision and to some extent by the
FDIC.
MARITIME. Maritime is a Connecticut-chartered commercial bank
headquartered in Essex, Connecticut. Deposits at Maritime are insured by the
FDIC. Maritime is engaged principally in the business of attracting deposits
from the general public and investing those deposits in residential real estate
loans, and in consumer and small business loans. Maritime currently serves
customers from three banking offices located in Middlesex and New London
Counties, Connecticut.
At December 31, 1998, Maritime had total consolidated assets of $101.4
million, total deposits of $89.0 million, and stockholders' equity of $7.2
million, or 7.0% of total assets. At December 31, 1998, Maritime had loans
receivable, net of $70.8 million, which included $36.0 million in residential
real estate loans, $19.0 million in commercial real estate loans, $9.4 million
in commercial loans and $7.4 million in home equity credit lines and consumer
installment loans. At December 31, 1998, nonperforming loans were $274,641. At
that date, Maritime's allowance for loan losses was $1.0 million, or 360% of
nonperforming loans. For additional information about Maritime, see "INFORMATION
ABOUT MARITIME" and Appendix C.
Maritime, as a Connecticut-chartered commercial bank, is regulated by
the Connecticut Commissioner of Banking and by the FDIC.
BACKGROUND OF THE MERGER
Maritime was incorporated in 1991 as a Connecticut-chartered commercial
bank headquartered in Essex, Connecticut. The board of directors and management
of Maritime periodically have reviewed the objectives of Maritime and various
strategic alternatives available to Maritime. These reviews involved evaluation
of Maritime's existing franchise and opportunities to enhance shareholder value
through expansion. Maritime has considered and pursued various
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expansion opportunities, including establishing branch offices in Old Lyme and
Old Saybrook, Connecticut.
More recently, the Maritime board of directors became concerned about
Maritime's ability to enhance shareholder value because of consolidation in the
banking industry and Maritime's need to raise capital to fund further
significant expansion. In the summer of 1998, Maritime's board of directors
decided to pursue determining the value of the Maritime franchise from a merger
and acquisition perspective, as compared to remaining independent. Maritime
engaged Ostrowski & Company, Inc. as its financial advisor to assist in that
evaluation.
In September 1998, Ostrowski & Company, Inc. compiled a package of
relevant materials about Maritime. Four of the eleven banks Ostrowski & Company,
Inc. contacted requested the package. Three banks responded with proposals after
receiving the package. Maritime's board of directors decided to pursue further
negotiations with Webster Financial principally because its proposal contained
the highest offer.
Over the next three weeks, Webster Financial performed a detailed due
diligence investigation of Maritime, including an examination of the books and
records of Maritime and meetings with management officials. Maritime also
performed due diligence activities regarding Webster Financial. Upon completion
of the due diligence, the Maritime board asked Webster Financial to finalize its
proposal in the form of a definitive agreement. The parties then negotiated
concerning the definitive agreement's final terms. On October 15, October 30 and
November 2, Maritime's board met and considered Webster Financial's offer and
Maritime's strategic alternatives. Those negotiations and considerations
continued through November 3, 1998. On that date, the Maritime board of
directors approved the definitive merger agreement and the merger.
RECOMMENDATION OF THE MARITIME BOARD OF DIRECTORS AND REASONS FOR THE MERGER
The board of directors of Maritime has approved the merger agreement
and has determined that the merger is fair to and in the best interests of
Maritime and its shareholders. THE MARITIME BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE MERGER. The Maritime board
of directors believes that the merger will enable holders of Maritime's common
stock to realize increased value due to the premium over market price, net
income per share and book value per share of Maritime's common stock. The board
also believes that the merger may enable Maritime shareholders to participate in
opportunities for appreciation of Webster Financial's common stock. See "--
Opinion of Maritime Financial Advisor" below. In reaching its decision to
approve the merger agreement, the board consulted with its outside counsel
regarding the legal terms of the merger and the board's fiduciary obligations in
its consideration of the proposed merger, its financial advisor, Ostrowski &
Company, Inc. regarding the financial aspects and fairness of the proposed
merger agreement, as well as with management of Maritime. Without assigning any
relative or specific weight, Maritime's board considered the following factors,
which are all of the material factors considered, both from a short-term and
long-term perspective:
o The Maritime board's familiarity with, and review of, the
business, financial condition, results of operations and prospects
of Maritime, including, but not limited to, its potential growth,
development, productivity and profitability and the business risks
associated with the merger;
o The current and prospective environment in which Maritime
operates, including national and local economic conditions, the
highly competitive environment for financial institutions
generally, the increased regulatory burden on financial
institutions, and the trend toward consolidation in the financial
services industry;
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o The potential appreciation in market and book value of Maritime's
common stock on both a short- and long-term basis, as a
stand-alone entity;
o The proposals of the two other interested parties;
o Information concerning Webster Financial's business, financial
condition, results of operations, asset quality and prospects
including the long-term growth potential of Webster Financial's
common stock, the future growth prospects of Webster Financial
combined with Maritime following the proposed merger, the
potential synergies expected from the merger and the business
risks associated with the merger;
o The fact that the exchange of Webster Financial's common stock for
Maritime's common stock can be effected on a tax-free basis for
Maritime shareholders, and the potential for appreciation and
growth for the market and book value of Webster Financial's common
stock following the proposed merger;
o The oral presentation of Ostrowski & Company, Inc. that the terms
of the merger agreement are fair to the holders of Maritime's
common stock from a financial point of view;
o The advantages and disadvantages of Maritime remaining an
independent institution or affiliating with a larger institution;
o The short- and long-term interests of Maritime and its
shareholders, the interests of the employees, customers, creditors
and suppliers of Maritime, and the interests of the Maritime
community that could be served to advantage by an appropriate
affiliation with a larger institution with increased economies of
scale and with a greater capacity to serve all of the banking
needs of the community; and
o The compatibility of the businesses and management philosophies of
Maritime and Webster Financial, and Webster Financial's strong
commitment to the communities it serves.
On the basis of these considerations, the merger agreement was
approved, and the board of directors recommends that you vote for the approval
of the merger agreement and the merger.
PURPOSE AND EFFECTS OF THE MERGER
The purpose of the merger is to enable Webster Financial to acquire the
assets and business of Maritime. After the merger, it is anticipated that
Maritime's three branch banking offices will remain open and will be operated as
banking offices of Webster Bank.
The merger will result in an expansion of Webster Bank's primary market
area to include Maritime's banking offices in Middlesex County, where Webster
Financial currently operates banking offices, and New London County,
Connecticut, where Webster Financial currently does not have any offices.
Webster Financial expects to achieve reductions in the current operating
expenses of Maritime upon the consolidation of Maritime's operations into
Webster Bank. Upon completion of the merger, except as discussed below, the
issued and outstanding shares of Maritime's common stock automatically will be
converted into Webster Financial's common stock based on a 15 day average
closing market price of Webster Financial's common stock. See "-- Exchange
Ratio."
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STRUCTURE
The merger will occur through the merger of Maritime into Webster Bank,
with Webster Bank the surviving bank. When the merger takes place, except as
discussed below, each outstanding share of Maritime's common stock will be
converted into Webster Financial common stock, plus cash to be paid instead of
fractional shares. Shares held as treasury stock or held directly or indirectly
by Maritime, Webster Financial or any of Webster Financial's subsidiaries, other
than trust account shares and shares related to a previously contracted debt,
will be canceled. Dissenting shares will not be automatically converted. See
"--Dissenters' Appraisal Rights."
We expect that the merger will take place in the second quarter of
1999, or as soon as possible after we receive all required regulatory and
shareholder approvals and all regulatory waiting periods expire. If the merger
does not take place by September 30, 1999, the merger agreement may be
terminated unless Maritime and Webster Financial both agree to extend it.
The merger agreement permits Webster Financial to modify the structure
of this transaction so long as (i) there are no material adverse federal income
tax consequences to Maritime's shareholders from the modification, (ii) the
consideration to be paid to Maritime's shareholders under the merger agreement
is not changed or reduced in amount, and (iii) the modification will not be
reasonably likely to delay materially or jeopardize receipt of any required
regulatory approvals. Webster Financial presently has no intent to modify the
structure.
EXCHANGE RATIO
The merger agreement provides that at the effective time of the merger,
except as discussed below, each outstanding share of Maritime's common stock
automatically will be converted into Webster Financial common stock based on a
15 day average closing market price of Webster Financial's common stock. Shares
held as treasury stock and shares held directly or indirectly by Maritime,
Webster Financial or any of Webster Financial's subsidiaries, other than trust
account shares and shares related to a previously contracted debt, will be
canceled. Dissenting shares will not be converted into the right to receive
shares of Webster Financial's common stock unless and until Maritime
shareholders who dissent fail to perfect or effectively withdraw or lose their
right of payment under applicable law. See "--Dissenters' Appraisal Rights" and
Appendix B.
The exchange ratio for the conversion of Maritime's common stock into
Webster Financial's common stock will be determined by a 15 day average closing
market price of Webster Financial's common stock, computed to three decimal
places. The 15 day average will be the average of the daily closing prices per
share for Webster Financial's common stock for the 15 consecutive trading days
during which Webster Financial's common stock is actually traded as reported on
the Nasdaq Stock Market's National Market Tier ending on the day before the
receipt of the last required federal bank regulatory approval or waiver required
for the merger. If the 15 day average price is between $17.50 and $24.45, shares
of Maritime's common stock will be converted into $26.67 worth of Webster
Financial's common stock. If the 15 day average price is greater than $24.45,
the exchange ratio will be 1.091. If the 15 day average price is less than
$17.50, the exchange ratio will be 1.524 unless Maritime gives Webster Financial
notice of its intention to terminate the merger agreement because the 15 day
average price is less than $17.50. If Maritime takes this action, Webster
Financial can decide that the exchange ratio will be determined by dividing
$26.67 by the 15 day average price, computed to three decimal places, and the
merger agreement will remain in effect.
For example, based on the $29.90 average of the closing prices per
share for Webster Financial's common stock for the 15 consecutive trading days
on which shares of Webster Financial common stock were actually traded prior to
February 23, 1999, the most recent practicable date prior to the date of this
proxy statement/prospectus, the exchange ratio would be 1.091. Based on the
711,023 shares of Maritime's common stock outstanding on February 23, 1999 and
an exchange ratio
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of 1.091, Webster Financial would issue up to 775,726 shares of Webster
Financial common stock to Maritime shareholders in the merger, plus cash instead
of fractional shares. These numbers do not reflect the additional shares of
Webster Financial common stock to be issued in the event of the exercise prior
to the merger of the 95,700 existing options to purchase Maritime's common stock
outstanding on February 23, 1999.
Because the market price of Webster Financial's common stock is subject
to fluctuation, the exchange ratio may materially increase or decrease prior to
the merger. No assurance can be given as to the market price of Webster
Financial's common stock at the time of the merger. A change in the market price
of Webster Financial's common stock would not alter the obligation of Webster
Financial or Maritime to consummate the merger, except as provided above.
Certificates for fractions of shares of Webster Financial's common
stock will not be issued. Under the merger agreement, instead of a fractional
share of Webster Financial's common stock, a Maritime shareholder will be
entitled to receive an amount of cash equal to (i) the fraction of a share of
Webster Financial's common stock to which the shareholder would otherwise be
entitled multiplied by (ii) the average of the daily closing prices per share
for Webster Financial's common stock for the 15 consecutive trading days on
which shares of Webster Financial's common stock are actually traded as reported
on the Nasdaq Stock Market's National Market Tier ending on the third trading
day before the closing date of the merger. After the merger takes place, no
holder of Maritime's common stock will be entitled to any dividends or any other
rights for any fraction. In this document, we use the term purchase price to
refer to the total number of shares of Webster Financial's common stock and any
cash to be paid instead of a fraction of a share payable to each holder of
Maritime's common stock.
The conversion of Maritime's common stock into shares of Webster
Financial's common stock at the exchange ratio will occur automatically upon the
merger. Under the merger agreement, after the merger takes place, Webster
Financial will cause its exchange agent to pay the purchase price to each
Maritime shareholder who surrenders the certificate(s) representing their shares
to the exchange agent, together with a properly executed letter of transmittal.
As soon as practicable after the merger takes place, the exchange agent
will mail a letter of transmittal and instructions for use in surrendering
certificates to each shareholder who held Maritime's common stock immediately
before the effective time of the merger. Webster Financial will deposit with the
exchange agent certificates representing the total number of shares of Webster
Financial common stock to be issued to Maritime shareholders in exchange for
Maritime's common stock, along with the cash to be paid instead of fractional
shares. The exchange agent will not be required to deliver the purchase price to
any shareholder until the holder surrenders the certificate(s) representing
shares of Maritime's common stock for exchange, or, if not available, an
appropriate affidavit of loss and indemnity agreement and/or a bond that may be
required by Webster Financial. No dividends or distributions on Webster
Financial's common stock payable to any Maritime shareholder will be paid until
the shareholder surrenders the certificate(s) representing the shares of
Maritime's common stock for exchange. No interest will be paid or accrued to
Maritime shareholders on cash instead of fractional shares or unpaid dividends
and distributions, if any.
If any certificate representing shares of Webster Financial's common
stock is to be issued in a name other than that in which the certificate for
shares surrendered in exchange is registered, it will be a condition of issuance
that the certificate surrendered be properly endorsed or otherwise be in proper
form for transfer and that the person requesting the exchange either (i) pay to
the exchange agent in advance any transfer or other taxes required by reason of
the issuance of a certificate to a person other than the registered holder of
the certificate surrendered or (ii) establish to the satisfaction of the
exchange agent that the tax has been paid or is not payable. After the close of
business on the day before the merger takes place, there will be no transfers on
Maritime's stock
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transfer books of shares of Maritime's common stock, and any shares of this kind
that are presented to the exchange agent after the merger takes place will be
canceled and exchanged for the purchase price.
Any portion of the purchase price made available to the exchange agent
that remains unclaimed by Maritime shareholders for six months after the
effective time of the merger will be returned to Webster Financial. Any Maritime
shareholder who has not exchanged shares of Maritime's common stock for the
purchase price in accordance with the merger agreement before that time may look
only to Webster Financial for payment of the purchase price for these shares and
any unpaid dividends or distributions after that time. Nonetheless, Webster
Financial, Maritime, the exchange agent or any other person will not be liable
to any Maritime shareholder for any amount properly delivered to a public
official under applicable abandoned property, escheat or similar laws.
STOCK CERTIFICATES FOR SHARES OF MARITIME'S COMMON STOCK SHOULD NOT BE
RETURNED TO MARITIME WITH THE ENCLOSED PROXY CARD AND SHOULD ONLY BE FORWARDED
TO THE EXCHANGE AGENT AFTER RECEIPT OF THE LETTER OF TRANSMITTAL.
OPTIONS
As of February 23, 1999, there were outstanding options to purchase
95,700 shares of Maritime's common stock at an average exercise price of $6.67
per share. Under the merger agreement, shares of Maritime's common stock issued
before the merger takes place upon the exercise of outstanding Maritime options
will be converted into Webster Financial's common stock at the exchange ratio.
Each Maritime option that is not exercised immediately before the merger takes
place automatically will be converted into an option to purchase shares of
Webster Financial's common stock, with adjustment in the number of shares and
exercise price to reflect the exchange ratio. The adjustment will be made in a
manner consistent with Section 424(a) of the Internal Revenue Code of 1986. The
duration and other terms of the Maritime options will otherwise be unchanged.
REGULATORY APPROVALS
For the merger of Maritime and Webster Bank to take place, we must
receive approvals of the Office of Thrift Supervision, referred to in this
section as the OTS, and the Connecticut Commissioner of Banking. In this
section, we refer to these approvals as the required regulatory approvals.
Webster Financial, Webster Bank and Maritime have agreed to use their best
efforts to obtain the required regulatory approvals.
Webster Bank has filed with the OTS an application for approval of the
merger. The merger is subject to the approval of the OTS under the Home Owners'
Loan Act of 1933, the Bank Merger Act provisions of the Federal Deposit
Insurance Act and related OTS regulations. These approvals require consideration
by the OTS of various factors, including assessments of the competitive effect
of the contemplated transactions, the managerial and financial resources and
future prospects of the resulting institutions, and the effect of the
contemplated transactions on the convenience and needs of the communities to be
served. The Community Reinvestment Act of 1977, referred to in this section as
the CRA, also requires that the OTS, in deciding whether to approve the merger,
assess the records of performance of Webster Bank and Maritime in meeting the
credit needs of the communities they serve, including low and moderate income
neighborhoods. As part of the review process, it is not unusual for the OTS to
receive protests and other adverse comments from community groups and others.
Webster Bank currently has an outstanding CRA rating from the OTS. Maritime
currently has a satisfactory CRA rating from the FDIC. The OTS regulations
require publication of notice and an opportunity for public comment concerning
the applications filed in connection with the merger, and authorize the OTS to
hold informal and formal meetings in
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connection with the applications if the OTS, after reviewing the applications or
other materials, determines that it is desirable to do so or receives a request
for an informal meeting. Any meeting or comments provided by third parties could
prolong the period during which the merger is subject to review by the OTS. As
of the date of this proxy statement/prospectus, Webster Financial is not aware
of any protests, adverse comments or requests for a meeting filed with the OTS
concerning the merger. The merger may not take place for a period of 15 to 30
days following OTS approval, during which time the Department of Justice has
authority to challenge the merger on antitrust grounds. The precise length of
the period will be determined by the OTS in consultation with the Department of
Justice. The commencement of an antitrust action would stay the effectiveness of
any approval granted by the OTS unless a court specifically orders otherwise. If
the Department of Justice does not start a legal action during the waiting
period, it may not challenge the transaction afterward, except in an action
under Section 2 of the Sherman Antitrust Act.
An acquisition statement has been filed with the Connecticut
Commissioner of Banking in connection with Webster Financial's acquisition of
Maritime and the merger. In reviewing the acquisition statement, the Connecticut
Commissioner will review and consider, among other things, whether the
investment and lending policies of Webster Bank are consistent with safe and
sound banking practices and will benefit the economy of the state, whether the
services or proposed services of Webster Bank are consistent with safe and sound
banking practices and will benefit the economy of the state, the competitive
effects of the transaction, and the financial and managerial resources of
Webster Financial and Webster Bank. The Connecticut Commissioner also will
review Webster Bank's record under the CRA. The Connecticut Commissioner may, at
his discretion, hold a public hearing on the proposed transaction.
Webster Financial and Maritime are not aware of any other material
governmental approvals that are required for the merger to take place that are
not described above. If any other approval or action is required, we presently
expect that we would seek the approval or take the necessary action.
THE MERGER CANNOT TAKE PLACE WITHOUT THE REQUIRED REGULATORY APPROVALS,
WHICH WE HAVE NOT RECEIVED YET. THERE IS NO ASSURANCE THAT WE WILL RECEIVE THESE
APPROVALS, AND IF WE DO, WHEN WE WILL RECEIVE THEM. ALSO, THERE IS NO ASSURANCE
THAT THE DEPARTMENT OF JUSTICE WILL NOT CHALLENGE THE MERGER, OR, IF A CHALLENGE
IS MADE, WHAT THE RESULT OF A CHALLENGE WOULD BE.
CONDITIONS TO THE MERGER
Under the merger agreement, Webster Financial and Maritime are not
required to complete the merger unless the following conditions are satisfied:
(i) the merger agreement is not terminated on or before the effective time of
the merger; (ii) the merger agreement and the merger are approved by the
affirmative vote of the holders of at least two-thirds of the issued and
outstanding shares of Maritime's common stock entitled to vote at the
shareholder meeting; (iii) the Webster Financial common stock to be issued in
the merger is authorized for quotation on the Nasdaq Stock Market's National
Market Tier; (iv) all required regulatory approvals are obtained and remain in
full force and effect, all statutory waiting periods related to these approvals
expire, and none of the regulatory approvals contains a non-customary condition
that Webster Financial reasonably considers to be burdensome or which alters the
benefits for which Webster Financial bargained in the merger agreement; (v) the
registration statement filed with the SEC is effective and is not subject to a
stop order or any threatened stop order; (vi) no injunction preventing the
merger from taking place is in effect and completing the merger continues to be
legal; and (vii) Webster Financial receives a favorable tax opinion from Webster
Financial's counsel.
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Webster Financial and Webster Bank are not required to complete the
merger unless the following additional conditions are satisfied or waived: (i)
the representations and warranties of Maritime contained in the merger agreement
are true and correct as of the date of the merger agreement and as of the
effective time of the merger, except where the failure or failures to be true
and correct would not have a material adverse effect on Maritime; (ii) Maritime
performs in all material respects all covenants and agreements contained in the
merger agreement to be performed by Maritime by the effective time; (iii)
Maritime obtains the consents, approvals or waivers of other persons that are
required in connection with the merger agreement or to permit the succession by
the surviving bank under any lease or other agreement, except where the failure
or failures to obtain consents, approvals or waivers would not have a material
adverse effect on the surviving bank; (iv) no proceeding initiated by any
governmental entity seeking an injunction preventing the merger from taking
place is pending; and (v) Webster Financial receives specified legal opinions of
Maritime's counsel and a comfort letter of Maritime's independent public
accountants.
Maritime is not required to complete the merger unless the following
additional conditions are satisfied or waived: (i) the representations and
warranties of Webster Financial contained in the merger agreement are true and
correct as of the date of the merger agreement and as of the effective time of
the merger, except where the failure or failures to be true and correct would
not have a material adverse effect on Webster Financial; (ii) Webster Financial
and Webster Bank each performs in all material respects all covenants and
agreements contained in the merger agreement required to be performed by it by
the effective time; (iii) Webster Financial and Webster Bank obtain consents,
approvals or waivers of other persons that are required in connection with the
merger agreement under any lease or other agreement to which Webster Financial
or Webster Bank is a party or otherwise bound, except where the failure or
failures to obtain the consents, approvals or waivers would not have a material
adverse effect; and (iv) no proceeding initiated by any governmental entity
seeking an injunction preventing the merger from taking place is pending.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement contains various restrictions on the operations of
Maritime prior to the effective time of the merger. In general, the merger
agreement obligates Maritime to continue to carry on its businesses in the
ordinary course consistent with past practices and with prudent banking
practices, with specific limitations on the lending activities and other
operations of Maritime. The merger agreement prohibits Maritime from declaring
any dividends or other distributions on its capital stock other than regular
quarterly cash dividends on Maritime's common stock and splitting, combining or
reclassifying any of its capital stock. Maritime may not issue or authorize or
propose the issuance of any securities, other than the issuance of additional
shares of Maritime's common stock upon the exercise or fulfillment of rights or
options issued or existing under Maritime's stock option plan in accordance with
their present terms or the option for 141,004 shares of Maritime's common stock
held by Webster Financial. Maritime generally may not repurchase shares of its
capital stock. Also, under the terms of the merger agreement, Maritime may not
amend its certificate of incorporation or bylaws, or change its methods of
accounting in effect at December 31, 1997, except as required by changes in
regulatory or generally accepted accounting principles. The merger agreement
also restricts Maritime from increasing employee or director benefit
arrangements or compensation, other than normal annual increases in pay for
employees consistent with past practices, including the granting of stock
options and entering into any new employment or severance agreements. It also
restricts Maritime from paying any bonuses other than specified types of
bonuses.
THIRD PARTY PROPOSALS
Under the merger agreement Maritime generally may not authorize or
permit any of its officers, directors, employees or agents to solicit, initiate
or encourage any inquiries relating to any third party takeover proposal or hold
substantive discussions or negotiations regarding this kind of
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proposal. There is a similar prohibition on providing third parties with
information that relates to this kind of inquiry or proposal, unless the
Maritime board of directors, after receiving written advice of counsel,
reasonably determines in the exercise of its fiduciary duty that this kind of
information must be furnished.
EXPENSES; BREAKUP FEE
The merger agreement generally provides for Webster Financial and
Maritime to pay their own expenses relating to the merger agreement, with
Webster Financial paying the filing and other fees paid to the SEC. However, if
the merger agreement is terminated by Webster Financial or Maritime as a result
of a material breach of a representation, warranty, covenant or other agreement
contained in the merger agreement by the other party, or if Webster Financial
terminates the merger agreement because Maritime (i) fails to hold the
shareholder meeting on a timely basis, (ii) fails to recommend to its
shareholders approval of the merger agreement, (iii) fails to oppose any third
party proposal that is inconsistent with the merger agreement, or (iv) violates
the merger agreement's restriction on discussions and negotiations with third
parties regarding acquisition transactions, the merger agreement provides for
the non-terminating party to pay all reasonable expenses of the terminating
party up to $100,000, plus a breakup fee of $350,000. If the merger agreement is
terminated by Webster Financial because Maritime fails to obtain the approval of
its shareholders necessary to complete the merger, Webster Financial is entitled
to have all of its reasonable expenses up to $100,000 paid by Maritime. If a
specified third party public event occurs before the shareholder meeting and
Maritime fails to obtain the approval of its shareholders, Webster Financial is
entitled to have all of its reasonable expenses up to $100,000, plus a break-up
fee of $350,000, paid by Maritime. Some of the events described in this section
that would permit Webster Financial to terminate the merger agreement would
constitute preliminary purchase events under the option agreement. See "--
Option Agreement."
OPINION OF MARITIME'S FINANCIAL ADVISOR
Maritime has retained Ostrowski & Company, Inc., referred to in this
section as O&Co, as its financial advisor since 1995. O&Co currently is
providing services to Maritime, including advice and assistance relating to the
evaluation and execution of mergers and acquisitions under an engagement letter
dated July 28, 1998. Maritime selected O&Co as its financial advisor on the
basis of O&Co's in-depth knowledge of the bank and thrift industry and the
qualifications, experience and reputation of its personnel in the banking and
investment communities, as well as its experience in the valuation of bank and
thrift institutions and their securities in connection with mergers and
acquisitions and other corporate transactions.
As part of the advisory services described above, Maritime's board of
directors requested O&Co's opinion as to the fairness, from a financial point of
view, to the holders of Maritime's common stock of the terms of the merger
agreement, dated November 3, 1998, among Webster Financial, Webster Bank and
Maritime. Under the terms of the merger agreement, Maritime will be acquired by
Webster Financial through the merger of Maritime into Webster Bank. The merger
agreement provides that at the effective time of the merger, each outstanding
share of Maritime's common stock will be converted into Webster Financial common
stock. The exchange ratio for the conversion will be determined by a 15 day
average closing market price of Webster Financial's common stock, computed to
three decimal places. The 15 day average will be the average of the daily
closing prices per share for Webster Financial's common stock for the 15
consecutive trading days during which Webster Financial's common stock is
actually traded as reported on the Nasdaq Stock Market, Inc.'s National Market
Tier ending on the day before the receipt of the last required federal bank
regulatory approval or waiver required for the merger. If the 15 day average
price is between $17.50 and $24.45, shares of Maritime's common stock will be
converted into $26.67 worth of Webster Financial's common stock. If the 15 day
average price is greater than $24.45, the exchange ratio will be 1.091. If the
15 day average price is less than $17.50, the exchange ratio will be 1.524
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unless Maritime gives Webster notice of its intention to terminate the merger
agreement because the 15 day average price is below $17.50. If Maritime takes
this action, Webster Financial can decide that the exchange ratio will be
determined by dividing $26.67 by the 15 day average price, computed to three
decimal places. For more information about the exchange of Maritime's common
stock, see "-- Exchange Ratio."
On November 3, 1998, O&Co orally delivered its opinion to Maritime's
board of directors. The opinion concluded that as of that date, the terms of the
merger agreement are fair, from a financial point of view, to Maritime's
shareholders. There were no limitations imposed by Maritime on O&Co in
connection with its rendering of the fairness opinion.
THE FULL TEXT OF O&CO'S UPDATED FAIRNESS OPINION DATED FEBRUARY 25,
1999 IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED INTO THIS DOCUMENT BY REFERENCE. THE DESCRIPTION OF THE FAIRNESS
OPINION IN THIS SECTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX A.
HOLDERS OF MARITIME'S COMMON STOCK ARE URGED TO READ THE OPINION IN ITS
ENTIRETY. The opinion describes the procedures followed, assumptions made,
matters considered and qualifications of the review undertaken by O&Co in
connection with the opinion. O&Co's opinion is directed solely to the fairness,
from a financial point of view, of the terms of the merger agreement and does
not constitute any recommendation to Maritime's board of directors or to the
holders of Maritime's common stock as to any vote at the shareholder meeting.
In connection with providing the fairness opinion, O&Co examined and
relied upon, among other things: a draft of the merger agreement dated November
3, 1998; annual reports to shareholders, proxy statements and related audited
financial statements for Maritime for each of the three fiscal years ended
December 31, 1995, 1996 and 1997; unaudited interim financial reports for
Maritime for the quarters ended March 31, 1998, June 30, 1998 and September 30,
1998; other financial information for Maritime, including pro forma financial
statements and management's estimates relating to, among other things, earnings,
asset quality, loan delinquencies and capital; annual reports to shareholders,
proxy statements and related audited financial statements for Webster Financial
for each of the three fiscal years ended December 31, 1995, 1996 and 1997;
unaudited interim financial reports for the quarters ended March 31, 1998, June
30, 1998 and September 30, 1998; and other financial information for Webster
Financial, including pro forma financial statements and management's estimates
relating to, among other things, earnings, asset quality, loan delinquencies and
capital. O&Co discussed historical financial performance and condition, market
area economic conditions, future business prospects and financial forecasts with
executive management of Maritime and Webster Financial. O&Co also reviewed
comparable financial, operating and market data for the banking industry and
selected peer groups; compared the terms of the merger agreement with other bank
and thrift merger and acquisition transactions; and considered additional
financial and other information that O&Co deemed relevant.
In preparing its opinion, O&Co relied upon the accuracy, completeness
and fair presentation of all information supplied or otherwise made available to
O&Co by or on behalf of Maritime and Webster Financial. O&Co has not
independently verified that information or undertaken an independent evaluation
or appraisal of the assets or liabilities of Maritime or Webster Financial, nor
was O&Co furnished any evaluations or appraisals of this kind. O&Co has been
advised that the forecasts of expected future financial performance reflect the
best currently available estimates and judgment of the executive management.
O&Co's opinion is necessarily based upon the information available to it and the
market, economic and other conditions, as they existed and could be evaluated,
as of the date of the opinion.
In connection with providing its fairness opinion to Maritime's board
of directors, O&Co performed a variety of financial analyses. The following is a
summary of the material terms of the analyses but it does not purport to be a
complete description of O&Co's analyses or presentations to Maritime's board of
directors. The preparation of a fairness opinion is a complex process involving
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subjective judgments and does not necessarily lend itself to partial analyses or
summary description. O&Co believes that its analyses must be considered as a
whole and that selecting portions of the analyses and the factors considered in
these analyses, without considering all factors and analyses, could create an
incomplete view of the analyses and the processes underlying its opinion.
In performing its analyses, O&Co made numerous assumptions regarding
industry performance, business and economic conditions and various other
matters, many of which may be more or less favorable than actual results.
Estimates of values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
No company or transaction utilized in O&Co's analyses was identical to Maritime
or Webster Financial or to the terms of the merger agreement. Because these
kinds of estimates are inherently subject to uncertainty, O&Co assumes no
responsibility for their accuracy.
Stock Trading History
O&Co examined the quarterly trading price trends for banks and thrifts
headquartered in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey,
New York, Pennsylvania, Rhode Island and Vermont that were similar to Maritime
and Webster Financial for the period beginning with the second quarter 1997
through the third quarter 1998. In this section, those states are referred to as
the Northeast and the term LTM refers to latest twelve months. The comparable
trading group established for Maritime was community banks with assets under $1
billion and the comparable trading group for Webster Financial was large
community thrifts with assets from $1 billion to $10 billion. From the second
quarter 1997 through the third quarter 1998, the average quarterly
price/earnings ratio for Northeast community bank stocks ranged from a low of
16.3 times LTM earnings for the second quarter 1997 and a high of 21.4 times LTM
earnings for the first quarter 1998. For the third quarter 1998 the average was
17.2 times LTM earnings. The quarterly average of Northeast community bank stock
prices measured as a percentage of book value for the same time period ranged
from a low of 199% for the second quarter 1997 and a high of 264% for the first
quarter 1998. The average for the third quarter 1998 was 210% of book value. At
February 23, 1999, Maritime's directors and executive officers held
approximately 40.5% of the outstanding shares of Maritime's common stock,
excluding options to purchase shares of Maritime's common stock. Maritime's
common stock is not listed on any exchange and trades infrequently. Although
bid/ask prices are available for Maritime's common stock, its infrequent trading
activity limits the comparability of trading market data for Maritime.
Between the second quarter 1997 and the third quarter 1998, the
quarterly average price/earnings ratio for Northeast large community thrift
stocks ranged from a low of 15.6 times LTM earnings for the third quarter 1998
and a high of 22.4 times LTM earnings for the first quarter 1998. The average
for the third quarter 1998 was 15.6 times LTM earnings. The lowest quarterly
average for Northeast large community thrift stocks measured as a percentage of
book value was 154% for the third quarter 1998, and the highest value of 225%
was for the first quarter 1998. During the same time period, Webster Financial
traded at its lowest multiple of 14.6 times LTM earnings in the third quarter
1998 and its highest multiple of 31.2 times LTM earnings in the fourth quarter
1997. Measured as a percentage of book value, Webster Financial traded at its
lowest value of 170% of book value in the third quarter 1998 and its highest
value of 248% of book value in both the fourth quarter 1997 and the first
quarter 1998.
Contribution Analysis
O&Co prepared a contribution analysis showing the percentage
contributed by Maritime to the combined company on a pro forma basis of assets
and deposits at September 30, 1998. This analysis showed that Maritime's
shareholders would contribute 1.1% of pro forma consolidated assets and 1.6% of
pro forma consolidated deposits. Maritime's contribution to net income was
considered based upon nine months ended September 30, 1998 results annualized
for both companies
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adjusted for particular purchase accounting adjustments resulting from the
transaction. Based on these assumptions, Maritime would contribute 1.3% to
consolidated pro forma earnings and Maritime's shareholders would receive
approximately 2.3% of the pro forma ownership of the combined company based on
the number of outstanding shares of Webster Financial's common stock as of
September 30, 1998.
Comparable Company Analysis
O&Co compared the financial condition and operating performance of
Maritime with a peer group of Nasdaq and exchange-listed financial institutions
with assets less than $150 million. Maritime reported a return on average assets
of 1.08%, and return on average equity of 13.83%, based on six months ended June
30, 1998 results annualized, and an equity to assets ratio of 7.38% as of June
30, 1998. Based on trailing twelve months earnings through June 30, 1998, the
peer group averaged a return on average assets of 1.05%, an average return on
average equity of 8.68% and an average equity to assets ratio of 13.79% as of
June 30, 1998. Maritime reported a slightly higher return on assets and return
on equity and a lower equity to asset ratio than its peer group.
O&Co compared the financial condition and operating performance of
Webster Financial with a peer group of Nasdaq and exchange-listed thrifts with
assets between $5 billion and $15 billion. Based on June 30, 1998 financial data
and operating data of twelve months ended June 30, 1998, Webster Financial
reported a return of average assets of 0.65%, a return on average equity of
12.08% and an equity to assets ratio of 5.97%. The peer group had an average
return on average assets of 1.04%, an average return on average equity of 11.77%
and an average equity to assets ratio of 8.52%. Webster Financial's operating
performance, which included non-recurring merger related charges, and its equity
to assets ratio were below its peer group.
O&Co also compared the trading performance of Webster Financial with
this peer group. On October 30, 1998, the closing price of Webster Financial's
common stock on the Nasdaq Stock Market, Inc.'s National Market Tier was $24.69,
or 14.8 times earnings for the twelve months ended June 30, 1998 and 173% of
reported June 30, 1998 book value, compared to the peer group averages for these
same measures of 14.0 times trailing twelve months earnings for the twelve
months ended June 30, 1998, and 173% of reported June 30, 1998 book value.
Webster Financial's trading performance was comparable to its peers on both an
earnings multiple and book value basis.
Analysis of Selected Merger Transactions
O&Co reviewed financial data for acquisitions of commercial banks and
thrifts in the Northeast announced between January 1997 and September 1998. O&Co
also reviewed acquisitions of commercial banks and thrifts in Connecticut
between January 1997 and September 1998. O&Co calculated the average multiple of
price to target's earnings for trailing 12 months, the average percentage of
price to book value and the average premium, which is price in excess of
reported equity, as a percentage of deposits, on a quarterly basis beginning
January 1, 1997 through September 30, 1998. Comparisons were made for Maritime
based on the proposed transaction to the averages for these calculations based
on transactions announced in the third quarter 1998. Maritime comparisons are
based on or for results annualized for nine months ended September 30, 1998 and
an exchange value of $26.67 per share: (i) price as a multiple to earnings for
Northeast banks 25.2 times, Northeast thrifts 27.6 times, and Connecticut
transactions 25.2 times, compared with the value of the proposed transaction of
26.7 times Maritime's September 30, 1998 results annualized; (ii) price as a
percentage of book value for Northeast banks of 312%, Northeast thrifts of 217%,
and Connecticut transactions of 221%, compared with the value of the proposed
transaction of 304% of Maritime's September 30, 1998 book value; (iii) premium
as a percentage of deposits for Northeast banks of 25.5%, Northeast thrifts of
14.9%, and Connecticut transactions of 7.1%, compared with the value of the
proposed transaction of a premium of 15.9% of Maritime's deposits.
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Impact Analysis
O&Co analyzed the changes in the amount of earnings per share and book
value for Maritime based upon nine months ended September 30, 1998 results
annualized for both companies adjusted for particular purchase accounting
adjustments. The analyses considered, among other things, the impact on diluted
earnings per share and book value per share of Maritime's common stock
outstanding at September 30, 1998 and the exercise of all outstanding options to
purchase Maritime's common stock.
The estimated equivalent 1998 annual earnings per equivalent share of
Maritime's common stock was $1.82 or 68% higher than Maritime's estimated 1998
earnings per share; book value per equivalent share of Maritime's common stock
was $16.26 or 85% higher than Maritime's book value per share as of September
30, 1998; and the annual cash dividends for each equivalent share of Maritime's
common stock was $0.48. Maritime currently pays an annual cash dividend of $0.48
per share.
Discounted Cash Flow Analysis
O&Co performed an analysis which estimated the future cash flows to
Maritime's shareholders over a three year period under various circumstances,
assuming Maritime performed in accordance with the earnings forecasts of its
management. To approximate the terminal value of Maritime's common stock at the
end of the three-year period, O&Co applied price to earnings multiples ranging
from 16.0 times to 23.4 times, which resulted in values that equated to
percentages of projected book value ranging from 261% to 380%. The terminal
values were then discounted to present values using discount rates ranging from
10.0% to 17.5%, chosen to reflect assumptions regarding rates of return and risk
premiums required by holders or prospective holders of Maritime's common stock.
This analysis resulted in a range of present values per share of $19.23 to
$34.98.
Remaining Independent Scenario
O&Co discussed with Maritime's management and board of directors the
various expenses associated with remaining as an independent company while
achieving acceptable shareholder returns. In order to survive independently in a
highly competitive market, Maritime would have to broaden its product and
service offerings to attract and retain customers. This strategy would require a
near-term investment in Maritime through the attraction and retention of
additional qualified professionals and a substantial investment in technology.
Moreover, the potential benefit of new products and services is long-term with
no certainty as to the degree of success and Maritime's operating performance
could suffer in the short-term with adverse implications to shareholder value.
Compensation of Financial Advisor
Under the O&Co engagement letter, Maritime agreed to pay O&Co an
advisory fee for advice and assistance in connection with the merger, including
rendering a written opinion as to the fairness of the proposed transaction, from
a financial point of view, to Maritime's shareholders. The advisory fee is to
equal 1.5% of the value of the transaction, or approximately $325,000. Maritime
has agreed to make interim payments to O&Co before the merger takes place which
will be credited against the total advisory fee. Maritime will have made interim
payments to O&Co totaling $55,000 as of the mailing of this proxy
statement/prospectus. In addition, Maritime has paid O&Co approximately $19,500
for general advisory services provided in 1997, 1998 and 1999. Under the O&Co
engagement letter, Maritime also agreed to reimburse O&Co for its reasonable
out-of-pocket expenses, including legal fees, incurred in connection with O&Co's
engagement and to indemnify
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O&Co and its directors, officers, employees, agents and controlling persons
against expenses and liabilities.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Maritime made representations and warranties
to Webster Financial and Webster Bank. The material representations and
warranties of Maritime are the following: (i) the organization and good standing
of Maritime; (ii) insurance of Maritime's deposit accounts by the FDIC; (iii)
capitalization; (iv) corporate power and authority; (v) the execution and
delivery of the merger agreement, the bank merger agreement and the option
agreement; (vi) consents and approvals required for the agreements and the
merger; (vii) loan portfolio and reports; (viii) financial statements and books
and records; (ix) broker's fees; (x) absence of any material adverse change in
Maritime; (xi) legal proceedings; (xii) tax matters; (xiii) employee benefit
plans; (xiv) contracts; (xv) regulatory matters; (xvi) state takeover laws and
certificate of incorporation takeover provisions; (xvii) environmental matters;
(xviii) loss reserves; (xix) properties and assets; (xx) insurance matters;
(xxi) compliance with applicable laws; (xxii) loan information; (xxiii)
affiliates and the stockholder agreement; (xxiv) ownership of Webster
Financial's common stock; (xxv) receipt of the fairness opinion of Ostrowski &
Company, Inc.; and (xxvi) Year 2000 compliance.
In the merger agreement, Webster Financial made representations and
warranties to Maritime. The material representations and warranties of Webster
Financial are the following: (i) the organization and good standing of Webster
Financial and the chartering of Webster Bank; (ii) capitalization; (iii)
corporate power and authority; (iv) the execution and delivery of the merger
agreement, the option agreement and the bank merger agreement; (v) consents and
approvals required for the agreements and the merger; (vi) reports; (vii)
financial statements, exchange act filings and books and records; (viii) the
absence of any material adverse change in Webster Financial; (ix) ownership of
Maritime's common stock; (x) employee benefit plans; (xi) regulatory matters;
and (xii) Year 2000 compliance.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
The merger agreement may be terminated by Webster Financial or Maritime
as long as the terminating party is not in violation of the merger agreement as
summarized below:
o by mutual written consent of Webster Financial and Maritime;
o by Webster Financial or Maritime if (a) 30 days pass after
any required regulatory approval is denied or regulatory
application is withdrawn at a regulator's request unless
action is taken during the 30 day period for a rehearing or
to file an amended application; (b) the merger has not taken
place on or before September 30, 1999; or (c) Maritime's
shareholders do not approve the merger agreement;
o by Webster Financial, if there is a breach of any
representation, warranty, covenant or agreement in the
merger agreement by Maritime, if the breach or breaches
would have a material adverse effect on Maritime and the
breach is not cured within 30 days after receiving notice of
the breach;
o by Maritime, if there is a breach of any representation,
warranty, covenant or agreement in the merger agreement by
Webster Financial, if the breach or breaches would have a
material adverse effect on Webster Financial and the breach
is not cured within 30 days after receiving notice of the
breach;
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o by Webster Financial, if Maritime or its board of directors
(a) fails to hold the shareholder meeting on a timely basis;
(b) fails to recommend to Maritime's shareholders approval
of the merger agreement and the merger; (c) fails to oppose
any third party proposal that is inconsistent with the
merger agreement; or (d) violates the merger agreement's
restriction on inquiries, discussions, negotiations and
providing information to third parties regarding acquisition
transactions; and
o by Maritime, if the average closing market price for a
specified 15 day period is less than $17.50, unless Webster
Financial decides that the exchange ratio will be adjusted
to equal the number obtained by dividing $26.67 by the 15
day average price, rounded to three decimal places.
The merger agreement also permits, subject to applicable law, the
boards of directors of Webster Financial and Maritime to: (i) amend the merger
agreement, except as provided below; (ii) extend the time for performance of any
of the obligations or other acts of the other parties; (iii) waive any
inaccuracies in the representations and warranties contained in the merger
agreement or in any document delivered under the merger agreement; or (iv) waive
compliance with any of the agreements or conditions contained in the merger
agreement. After approval of the merger agreement by Maritime's shareholders, no
amendment of the merger agreement may be made without further shareholder
approval if the amendment would reduce the amount or change the form of the
consideration to be delivered to Maritime's shareholders under the merger
agreement.
FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material federal income tax
consequences of the merger. The summary is based on the Internal Revenue Code of
1986, as amended, referred to in this section as the Code, applicable U.S.
Treasury regulations under the Code, administrative rulings and judicial
authority, all as of the date of this proxy statement/prospectus. All of the
foregoing authorities are subject to change, and any change could affect the
continuing validity of this summary. The summary assumes that the holders of
shares of Maritime's common stock hold their shares as a capital asset. The
summary does not address the tax consequences that may be applicable to
particular Maritime shareholders in light of their individual circumstances or
to Maritime shareholders who are subject to special tax rules, like tax-exempt
organizations, dealers in securities, financial institutions, insurance
companies, non-United States persons, shareholders who acquired shares of
Maritime's common stock from the exercise of options or otherwise as
compensation or through a qualified retirement plan and shareholders who hold
shares of Maritime's common stock as part of a straddle, hedge, or conversion
transaction. This summary also does not address any consequences arising under
the tax laws of any state, locality, or foreign jurisdiction.
One of the conditions for the merger to take place is that Webster
Financial must receive an opinion from Hogan & Hartson L.L.P., Webster
Financial's special counsel, that the merger will be treated for federal income
tax purposes as a tax-free reorganization within the meaning of Section 368(a)
of the Code. The opinion must be reasonably satisfactory to Maritime and Webster
Financial. The opinion of Hogan & Hartson L.L.P. will be based on the Code, the
U.S. Treasury regulations promulgated under the Code and related administrative
interpretations and judicial decisions, all as in effect as of the effective
time of the merger, on the assumption that the merger takes place as described
in the merger agreement, and on representations to be provided to Hogan &
Hartson L.L.P. by Webster Financial and Maritime that relate to the satisfaction
of specific requirements to a reorganization within the meaning of Section
368(a) of the Code, including limitations on repurchases by Webster Financial of
shares of Webster Financial's common stock to be issued upon the merger. Unlike
a ruling from the Internal Revenue Service, an opinion of counsel is not binding
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<PAGE>
on the Internal Revenue Service and there can be no assurance that the Internal
Revenue Service will not take a position contrary to one or more of the
positions reflected in the opinion or that these positions will be upheld by the
courts if challenged by the Internal Revenue Service. If this opinion is not
received, or if the material tax consequences described in the opinion
materially differ from the consequences stated below, we will not close the
merger unless Maritime resolicits shareholders.
If, as concluded in the opinion of counsel, the merger qualifies as a
tax-free reorganization within the meaning of Section 368(a) of the Code, then:
(1) Except as discussed in (4) below regarding cash received
instead of a fractional share of Webster Financial's common
stock, a Maritime shareholder will recognize no gain or loss
upon the exchange of Maritime's common stock for Webster
Financial's common stock in the merger.
(2) The tax basis of Webster Financial's common stock received
by a Maritime shareholder in the merger will be the same as
the shareholder's aggregate tax basis in Maritime's common
stock surrendered in exchange therefor.
(3) The holding period of Webster Financial's common stock
received by a Maritime shareholder in the merger will
include the holding period of Maritime's common stock
surrendered in exchange therefor, assuming Maritime's common
stock was held as a capital asset.
(4) The receipt by a Maritime shareholder of cash instead of
fractional shares of Webster Financial's common stock will
be treated as if the fractional shares were distributed as
part of the merger and then were redeemed by Webster
Financial. These cash payments will be treated as
distributions in full payment in exchange for the stock
redeemed, subject to the conditions and limitations of
Section 302(a) of the Code.
(5) None of Webster Financial, Webster Bank nor Maritime will
recognize any gain or loss as a result of the merger.
The shareholders of Maritime are urged to consult their own tax
advisors as to the specific tax consequences to them of the merger, including
tax return reporting requirements, the applicability and effect of federal,
state, local and other applicable tax laws, and the effect of any proposed
changes in the tax laws.
As described above in the section titled "-- Options," holders of
options to purchase Maritime's common stock that are outstanding at the
effective time of the merger will have their Maritime options converted into
options to purchase shares of Webster Financial's common stock. The assumption
of the options by Webster Financial should not be a taxable event and former
holders of Maritime options who hold options to purchase Webster Financial's
common stock after the merger should be subject to the same federal income tax
treatment upon exercise of those options as would have applied if they had
exercised their Maritime options.
Holders of Maritime options are urged to consult their own tax advisors
as to the specific tax consequences to them of the merger, including tax return
reporting requirements, available elections, the applicability and effect of
federal, state, local and other applicable tax laws, and the effect of any
proposed changes in the tax laws.
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<PAGE>
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase transaction for
accounting and financial reporting purposes.
RESALES OF WEBSTER FINANCIAL'S COMMON STOCK RECEIVED IN THE MERGER
Webster Financial is registering the sale of the shares of its common
stock to be issued in the merger under the Securities Act of 1933. The shares
will be freely transferable under the Securities Act, except for shares received
by Maritime shareholders who are deemed to be affiliates of Maritime before the
merger or affiliates of Webster Financial. These affiliates may only resell
their shares under an effective registration statement under the Securities Act
covering the shares, in compliance with Securities Act Rule 145 or under another
exemption from the Securities Act's registration requirements. This proxy
statement/prospectus does not cover any resales of Webster Financial's common
stock by Webster Financial or Maritime affiliates. Affiliates will generally
include individuals or entities who control, are controlled by or are under
common control with Maritime or Webster Financial, and may include officers or
directors, as well as principal shareholders of Maritime or Webster Financial.
DISSENTERS' APPRAISAL RIGHTS
Because Maritime is a constituent bank in the merger of Maritime and
Webster Bank, the Banking Law of Connecticut provides that you are entitled to
dissent from the merger. In this section, we use the term dissenters' rights to
refer to the rights set forth in Sections 33-855 to 33-872 of the Connecticut
General Statutes. In accordance with Sections 33-855 through 33-872, if the
merger takes place, Maritime shareholders who do not vote in favor of the merger
will have the right to demand the purchase of their shares at their fair value
if they fully comply with the provisions of Sections 33-855 to 33-872 of the
Connecticut General Statutes. Fair value means the value of the shares
immediately before the merger takes place, excluding any increase or decrease in
value in anticipation of the merger.
This section presents a brief summary of the procedures set forth in
Sections 33-855 to 33-872 which must be followed by holders of shares of
Maritime's common stock who wish to dissent from the merger and demand the
purchase of their shares at their fair value. This summary is qualified in its
entirety by reference to Sections 33-855 to 33-872. A complete text of these
sections is attached to this proxy statement/prospectus as Appendix B.
Dissenting shareholders are advised to seek independent counsel concerning
exercising their dissenters' rights. This proxy statement/prospectus constitutes
notice to holders of shares of Maritime's common stock concerning the
availability of dissenters' rights under Sections 33-855 to 33-872 of the
Connecticut General Statutes.
DISSENTING SHAREHOLDERS MUST SATISFY ALL OF THE CONDITIONS OF SECTIONS
33-855 TO 33-872. Before the vote on the adoption of the merger agreement occurs
at the shareholder meeting, each dissenting shareholder must give written notice
to the President of Maritime of the shareholder's intent to demand payment for
his shares if the merger takes place. This notice must be in addition to and
separate from any abstention or any vote, in person or by proxy, cast against
approval of the merger.
NEITHER VOTING AGAINST, ABSTAINING FROM VOTING, OR FAILING TO VOTE ON
THE ADOPTION OF THE MERGER AGREEMENT WILL CONSTITUTE NOTICE OF INTENT TO DEMAND
PAYMENT OR DEMAND FOR PAYMENT OF FAIR VALUE WITHIN THE MEANING OF SECTIONS
33-855 TO 33-872.
A dissenting shareholder may NOT vote for approval of the merger
agreement. If a Maritime shareholder returns a signed proxy but does not specify
in the proxy a vote against adoption of the
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<PAGE>
merger agreement or an instruction to abstain, the proxy will be voted FOR
adoption of the merger agreement, which will have the effect of waiving the
rights of that Maritime shareholder to have his shares purchased at fair value.
Abstaining from voting or voting against the adoption of the merger agreement
will NOT constitute a waiver of a shareholder's rights.
After the vote is taken at the shareholder meeting, if the merger is
approved, no later than 10 days after the merger takes place, a dissenters'
notice will be sent to each dissenting shareholder who has given the written
notice described above and did not vote in favor of the merger. The dissenters'
notice will state the results of the vote on the merger agreement, where the
payment demand must be sent, where and when certificates for certificated shares
must be deposited. It will set a date, not fewer than thirty nor more than sixty
days after delivery of the notice, by which the payment demand must be received
from the dissenting shareholder. The notice will include a form for demanding
payment that will require the dissenting shareholder to certify whether or not
the shareholder acquired beneficial ownership of the shares before November 4,
1998. PLEASE NOTE THAT SHARES ACQUIRED AFTER NOVEMBER 4, 1998, REFERRED TO IN
THIS SECTION AS AFTER ACQUIRED SHARES, MAY BE SUBJECT TO DIFFERENT TREATMENT IN
ACCORDANCE WITH SECTION 33-867 OF THE CONNECTICUT GENERAL STATUTES THAN SHARES
ACQUIRED BEFORE THAT DATE. The dissenters' notice also will include a copy of
Sections 33-855 to 33-872 of the Connecticut General Statutes. A dissenting
shareholder who receives a dissenters' notice must comply with the terms of the
notice. A dissenting shareholder who does so by demanding payment, depositing
his certificates in accordance with the terms of the notice and certifying that
beneficial ownership was acquired before November 4, 1998 will retain all other
rights of a shareholder until these rights are canceled or modified by the
merger. A dissenting shareholder who receives a dissenters' notice and does not
comply with the terms of the notice is not entitled to payment for his shares
under Sections 33-855 to 33-872 of the Connecticut General Statutes.
Dissenters' rights under Sections 33-855 through 33-872 may be asserted
either by a beneficial shareholder or a record shareholder. A record shareholder
may assert dissenters' rights as to fewer than every share registered in his
name only if he dissents for all shares beneficially owned by any one person. A
beneficial shareholder may assert dissenters' rights as to shares held on his
behalf only if he submits the record shareholder's written consent before or at
the time he asserts dissenters' rights and he does so for all shares that he
beneficially owns or over which he has the power to direct the vote.
After the merger takes place, or upon receipt of a payment demand,
Webster Financial will pay each dissenting shareholder who complied with the
terms of the dissenters' notice the amount Webster Financial estimates to be the
fair value of the shares, plus accrued interest. Within 30 days of payment, if a
dissenting shareholder believes that the amount paid is less than the fair value
of the shares or that the interest due is incorrectly calculated, the
shareholder may notify Webster Financial in writing of his own estimate of the
fair value of the shares and interest due. If this kind of claim is made by a
dissenting shareholder and it cannot be settled, Webster Financial will petition
the court to determine the fair value of the shares and accrued interest within
60 days after receiving the payment demand.
The costs and expenses of a court proceeding will be determined by the
court and generally are to be assessed against Webster Financial, but these
costs and expenses may be assessed as the court deems equitable against any or
all dissenting shareholders who are parties to the proceeding if the court finds
the action of the dissenting shareholders in failing to accept Webster
Financial's offer was arbitrary, vexatious or not in good faith. These expenses
may include the fees and expenses of counsel and experts employed by the
parties.
All written notices of intent to demand payment of fair value should be
sent or delivered to William R. Attridge, President, Maritime Bank & Trust
Company, 130 Westbrook Road, Essex,
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Connecticut 06426-1149. Maritime suggests that shareholders use registered or
certified mail, return receipt requested, for this purpose.
HOLDERS OF SHARES OF MARITIME'S COMMON STOCK CONSIDERING DEMANDING THE
PURCHASE OF THEIR SHARES AT FAIR VALUE SHOULD KEEP IN MIND THAT THE FAIR VALUE
OF THEIR SHARES DETERMINED UNDER SECTIONS 33-855 TO 33-872 COULD BE MORE, THE
SAME, OR LESS THAN THE MERGER CONSIDERATION THEY ARE ENTITLED TO RECEIVE UNDER
THE MERGER AGREEMENT IF THEY DO NOT DEMAND THE PURCHASE OF THEIR SHARES AT FAIR
VALUE. ALSO, SHAREHOLDERS SHOULD CONSIDER THE FEDERAL INCOME TAX CONSEQUENCES OF
EXERCISING DISSENTERS' APPRAISAL RIGHTS.
THIS SUMMARY IS NOT A COMPLETE STATEMENT OF THE PROVISIONS OF THE
CONNECTICUT GENERAL STATUTES RELATING TO THE RIGHTS OF DISSENTING HOLDERS OF
SHARES OF MARITIME'S COMMON STOCK AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SECTIONS 33-855 THROUGH 33-872 OF THE CONNECTICUT GENERAL STATUTES, WHICH ARE
ATTACHED AS APPENDIX B TO THIS DOCUMENT. HOLDERS OF SHARES OF MARITIME'S COMMON
STOCK INTENDING TO DEMAND THE PURCHASE OF THEIR SHARES AT FAIR VALUE ARE URGED
TO REVIEW APPENDIX B CAREFULLY AND TO CONSULT WITH LEGAL COUNSEL SO AS TO BE IN
STRICT COMPLIANCE WITH THE REQUIREMENTS FOR EXERCISING DISSENTERS' RIGHTS.
ARRANGEMENTS WITH AND PAYMENTS TO MARITIME DIRECTORS, EXECUTIVE OFFICERS AND
EMPLOYEES
The non-employee directors of Maritime serving immediately prior to the
effective time of the merger will be invited to serve on an advisory board to
Webster Bank after the merger for a period of up to 24 months. These advisory
directors each will be paid for their service for the 24 month period up to
$15,000 based on an annual retainer of $3,500 per year, payable in quarterly
installments, and quarterly meeting attendance fees of $1,000 for each meeting
attended in person.
Webster Financial has agreed to honor existing written deferred
compensation, employment, change of control and severance contracts with
Maritime's directors and employees to the extent that these contracts do not
provide for any payments that are not deductible or that constitute parachute
payments under the Internal Revenue Code of 1986, as amended, referred to in
this section as the Code. Maritime has no contracts of this kind with any of its
directors. The employment agreement with the Chief Executive Officer and
President of Maritime, William R. Attridge, was amended in connection with the
merger. As amended, the agreement provides that upon consummation of the merger,
Mr. Attridge will be entitled to a severance payment equal to three years of his
base salary in effect at that time, plus compensation for unused vacation time,
but limited to the maximum amount that can be paid without adverse tax
consequences under Section 280G of the Code. On this basis, the severance
payable to Mr. Attridge if the merger takes place would be approximately
$447,000. Under the amended employment agreement, Webster Bank will employ Mr.
Attridge for two years following the merger as Senior Vice President Commercial
Banking/Business Development at an annual salary of $105,000 during the first 12
months and $110,000 for the second 12 months, with an annual target bonus of 25%
of his annual salary under Webster Bank's Economic Value Added Incentive Plan,
which is Webster Financial's bonus plan. No minimum or maximum bonus amount is
specified. Mr. Attridge also will be eligible to participate in particular
employee benefit plans and his previous service with Maritime will be included
in determining his eligibility and vesting under Webster Bank's 401(k) and
employee stock ownership plans. If Webster Bank terminates Mr. Attridge's
employment without cause, as defined in the amended employment agreement, or Mr.
Attridge terminates his employment with good reason, as defined in the amended
employment agreement, Webster Bank will be obligated to continue to pay him
compensation in accordance with the amended employment agreement through the
remaining term of the agreement. If this kind of termination occurs during the
first 12 months of employment, Mr. Attridge will be obligated to mitigate
damages by seeking other reasonably comparable employment for which he is
reasonably qualified and amounts payable following the termination by Webster
Bank will be reduced by amounts received by Mr. Attridge from other employment.
No reduction of this kind will
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<PAGE>
apply if the termination occurs after the first 12 months of employment. Under
existing termination agreements of Maritime, severance payments will be made
upon consummation of the merger to Marla R. Boegart, Maritime's Senior Vice
President, Retail Banking, Consumer Lending, Steven J. Cronen, Maritime's Senior
Vice President and Senior Loan Officer, and Douglas J. Pierce, Maritime's Senior
Vice President, Controller and Treasurer, equal to one year of their base salary
then in effect, plus compensation for any unused vacation time.
In addition, each Maritime employee other than Mr. Attridge who has
more than one year of service and who remains in Maritime's employ until the
effective date of the merger will receive a lump sum change of control payment
equal to his or her full and partial years of service multiplied by two weeks
salary. Each Maritime employee who meets this standard also will receive a
severance payment equal to his or her full and partial years of service
multiplied by two weeks salary if his or her employment is terminated within one
year after the effective date. On this basis, assuming the merger takes place in
April 1999 and the officers are severed within one year of the change of
control, Webster Financial would pay total combined change of control and
severance payments of approximately $97,184 for Ms. Boegart, $107,444 for Mr.
Cronen and $104,897 for Mr. Pierce.
Webster Bank will offer a position of at-will employment to each
non-officer or non-managerial branch office personnel of Maritime in good
standing at the effective time of the merger at his or her existing branch
location or within 20 miles of the employee's place of employment as of the
effective time. Maritime employees who become employees of Webster Bank at the
effective time will be given credit for service at Maritime for eligibility and
vesting purposes under the 401(k) and employee stock ownership plans of Webster
Bank, but not the defined benefit pension plan. Webster Bank will use its
reasonable best efforts in connection with reviewing applicants for employment
positions to give Maritime employees who are not offered positions at the
effective time the same consideration that is given to Webster Financial or
Webster Bank employees for positions of this kind in accordance with existing
policies and will provide outplacement assistance and severance as described
above to employees of Maritime who are not offered positions at the effective
time.
INDEMNIFICATION
In the merger agreement, Webster Financial agreed to indemnify, defend
and hold harmless each person who is, has been, or before the effective time of
the merger becomes, a director, officer or employee of Maritime to the fullest
extent permitted under applicable law and Webster Financial's restated
certificate of incorporation and bylaws or the federal stock charter and by-laws
of Webster Bank, for any claims made against the person because he or she is or
was a director, officer or employee of Maritime or in connection with the merger
agreement. Webster Financial also agreed to use commercially reasonable efforts
to cover the officers and directors of Maritime under a directors' and officers'
liability insurance policy for a total premium cost of not more than $100,000
and for a period of at least two years after the effective time.
OPTION AGREEMENT
As a condition of and inducement to Webster Financial's entering into
the merger agreement, Webster Financial and Maritime entered into the option
agreement immediately after the execution of the merger agreement. Under the
option agreement, Maritime granted Webster Financial an option, referred to in
this section as the Maritime option, which entitles Webster Financial to
purchase, subject to the terms of the option agreement, up to 141,004 fully paid
and nonassessable shares of Maritime's common stock, or approximately 19.99% of
the shares of Maritime's common stock then outstanding, under the circumstances
described below, at a price per share of $22.00. That price is subject to
adjustment in specified circumstances. The Maritime option is intended to
discourage the making of alternative acquisition-related proposals and, under
specified circumstances, to significantly increase the cost to a potential third
party of acquiring Maritime compared to its cost had Maritime not entered into
the option agreement. Therefore, the Maritime
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<PAGE>
option is likely to discourage third parties from proposing a competing offer to
acquire Maritime even if the offer involves a higher price per share for
Maritime's common stock than the per share consideration to be paid under the
merger agreement.
The following brief summary of the option agreement is qualified in its
entirety by reference to the option agreement. A copy of the option agreement,
as well as the other documents described in this proxy statement/prospectus,
will be provided to you without charge if you call or write to James M. Sitro,
Vice President, Investor Relations, Webster Financial Corporation, Webster
Plaza, Waterbury, Connecticut 06702, telephone (203) 578-2399.
Subject to applicable law and regulatory restrictions, Webster
Financial may exercise the Maritime option, in whole or in part, following the
occurrence of a purchase event, as defined below, provided that the Maritime
option is not terminated first upon the occurrence of an exercise termination
event, as defined below. A purchase event means, in substance, (a) the
acquisition by any third party of beneficial ownership of 25% or more of
Maritime's outstanding common stock, (b) the entry by Maritime, without the
prior written consent of Webster Financial, into a letter of intent or
definitive agreement to engage in an acquisition transaction, as defined below,
with any third party, except that the percentage referred to in clause (iii) of
the definition of acquisition transaction is 25%, or (c) the recommendation by
Maritime's board of directors that its shareholders approve or accept any
acquisition transaction with any third party, except that the percentage
referred to in clause (iii) of the definition of acquisition transaction is 25%.
For purposes of the option agreement, the term acquisition transaction
means (i) a merger, consolidation or other business combination involving
Maritime, (ii) a purchase, lease or other acquisition of all or substantially
all of the assets and/or liabilities of Maritime, or (iii) a purchase or the
acquisition, including through merger, consolidation, share exchange or
otherwise, of beneficial ownership of securities representing 10% or more of the
voting power of Maritime.
The option agreement defines an exercise termination event to mean the
earliest to occur of the following events: (i) the time immediately prior to the
effective time of the merger; (ii) 12 months after the first occurrence of a
purchase event; (iii) 12 months after the termination of the merger agreement
following the occurrence of a preliminary purchase event, as defined below,
unless clause (vii) of this paragraph is applicable; (iv) upon the termination
of the merger agreement, prior to the occurrence of a purchase event or
preliminary purchase event, (A) by both parties, if the merger agreement is
terminated by mutual written consent; (B) by either Webster Financial or
Maritime, if the merger agreement has been terminated as a result of regulatory
denial or requested withdrawal of a regulatory application, or if the merger has
not occurred by September 30, 1999; or (C) by Maritime, if the merger agreement
is terminated as a result of a material breach of any representation, warranty,
covenant or other agreement by Webster Financial; (v) 12 months after the
termination of the merger agreement if the Maritime shareholders have failed to
approve the merger agreement; (vi) 12 months after the termination of the merger
agreement by Webster Financial as a result of a material breach of any
representation, warranty, covenant or other agreement by Maritime if the breach
was not willful or intentional by Maritime; or (vii) 24 months after the
termination of the merger agreement by Webster Financial as a result of a
willful or intentional material breach of any representation, warranty, covenant
or agreement by Maritime.
A preliminary purchase event, as defined in the option agreement,
includes (i) Maritime's entry, without the prior written consent of Webster
Financial, into a letter of intent or definitive agreement to engage in an
acquisition transaction with any third party, or the recommendation by
Maritime's board of directors that its shareholders approve or accept any
acquisition transaction with any third party; (ii) an acquisition by any third
party of beneficial ownership of 10% or more of the outstanding shares of
Maritime's common stock; (iii) the making of a bona fide proposal for an
acquisition transaction by any third party to Maritime, or a public announcement
or written communication that is publicly disclosed to Maritime's shareholders
as to any third party proposing
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<PAGE>
to engage in an acquisition transaction and Maritime's shareholders do not
approve the merger; (iv) a willful or intentional breach by Maritime of any
representation, warranty, covenant or agreement that would entitle Webster
Financial to terminate the merger agreement; (v) the failure to hold or the
cancellation of the shareholder meeting for the purpose of voting on the merger
agreement before the merger agreement is terminated; (vi) for any reason
whatsoever, the failure of Maritime's board of directors to recommend, or the
withdrawal or modification in a manner adverse to Webster Financial of a
recommendation that Maritime's shareholders approve the merger agreement, or if
Maritime or its board of directors fails to oppose any proposal by any person
other than Webster Financial or any subsidiary of Webster Financial; or (vii) a
filing by any third party of an application or notice with any regulatory
authority for approval to engage in an acquisition transaction.
The Maritime option may not be assigned by Webster Financial to any
other person without the express written consent of Maritime, except that
Webster Financial may assign its rights under the option agreement to a wholly
owned subsidiary or may assign its rights in whole or in part after the
occurrence of a preliminary purchase event. Upon the occurrence of a purchase
event prior to an exercise termination event, at the request of Webster
Financial, Maritime will be obligated (i) to prepare and keep current an
offering circular which meets the standards of a shelf registration statement
filed with the Securities and Exchange Commission for the shares to be issued
upon exercise of the Maritime option under applicable federal and state
securities laws, and (ii) to repurchase the Maritime option, and any shares of
Maritime's common stock thus far purchased under the Maritime option at prices
determined as set forth in the option agreement, except to the extent prohibited
by applicable law, regulation or administrative policy.
In the event that prior to an exercise termination event, Maritime
enters into a letter of intent or definitive agreement (i) to consolidate or
merge with any third party and Maritime is not the continuing or surviving
corporation in the consolidation or merger; (ii) to permit any third party to
merge into Maritime and Maritime is the continuing or surviving corporation,
but, in connection with the merger, the then outstanding shares of Maritime's
common stock will be changed into or exchanged for stock or other securities of
any third party or cash or any other property or the then outstanding shares of
Maritime's common stock will represent after the merger less than 50% of the
outstanding shares and share equivalents of the merged company; or (iii) to sell
or otherwise transfer all or substantially all of its assets to any third party,
then the agreement governing the transaction must make proper provision so that
the Maritime option will, upon the completion of that transaction, be converted
into, or exchanged for, a substitute option, at the election of Webster
Financial, of either (x) the acquiring corporation or (y) any person that
controls the acquiring corporation. The substitute option will be exercisable
for shares of the issuer's common stock in a number and at an exercise price in
accordance with the option agreement and will otherwise have the same terms as
the Maritime option, except that the number of shares subject to the substitute
option may not exceed 19.99% of the issuer's outstanding shares of common stock.
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SELECTED DATA
The tables below present summary historical financial and other data
for Webster Financial and Maritime as of the dates and for the periods
indicated. This summary data is based on and should be read in conjunction with
Webster Financial's historical consolidated financial statements and related
notes that are incorporated by reference into this document and Maritime's
historical financial statements and related notes that appear elsewhere in this
document. For Webster Financial's historical information, see "WHERE YOU CAN
FIND MORE INFORMATION." For Maritime's historical information, see Appendix C to
this document. All adjustments necessary for a fair presentation of financial
position and results of operations of interim periods have been included. All
financial data presented for Webster Financial prior to December 31, 1998 has
been restated to reflect the financial results of Webster Financial and Eagle
Financial Corp., which was acquired by Webster Financial in April 1998. All per
share data of Webster Financial has been adjusted retroactively to give effect
to stock dividends and stock splits.
SELECTED CONSOLIDATED FINANCIAL DATA - WEBSTER FINANCIAL
<TABLE>
<CAPTION>
FINANCIAL CONDITION
AND OTHER DATA - WEBSTER FINANCIAL
(DOLLARS IN THOUSANDS) AT DECEMBER 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total assets........................ $ 9,033,917 $ 9,095,887 $ 7,368,941 $ 6,479,567 $ 6,114,613
Loans receivable, net............... 4,993,509 4,995,851 4,737,883 3,977,725 4,007,710
Investment securities............... 3,462,090 3,589,273 2,105,173 2,000,185 1,558,401
Intangible assets (a)............... 78,380 78,493 81,936 26,720 31,093
Deposits............................ 5,651,273 5,719,030 5,826,264 5,060,822 5,044,336
Federal Home Loan Bank advances
and other borrowings............. 2,513,481 2,549,597 957,835 834,557 613,791
Shareholders' equity................ 554,879 517,262 472,824 460,791 364,112
Number of banking offices........... 101 114 120 109 108
<CAPTION>
OPERATING DATA - WEBSTER FINANCIAL
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net interest income................. $ 245,435 $ 251,050 $ 222,118 $ 188,646 $ 182,100
Provision for loan losses........... 6,800 24,813 13,054 9,864 7,149
Noninterest income.................. 74,163 42,264 52,009 33,316 21,378
Noninterest expenses:
Acquisition related expenses..... 17,400 29,792 500 4,271 700
Other noninterest expenses....... 180,389 171,871 173,977 142,592 140,260
--------- ---------- ---------- ---------- ----------
Total noninterest expenses..... 197,789 201,663 174,477 146,863 140,960
--------- ---------- ---------- ---------- ----------
Income before income taxes.......... 115,009 66,838 86,596 65,235 55,369
Income taxes........................ 44,544 25,725 32,602 23,868 17,958
--------- ---------- ---------- ---------- ----------
Net income.......................... 70,465 41,113 53,994 41,367 37,508
Preferred stock dividends........... -- -- 1,149 1,296 1,716
--------- ---------- ---------- ---------- ----------
Income available to common
shareholders..................... $ 70,465 $ 41,113 $ 52,845 $ 40,071 $ 35,792
========= ========== ========== ========== ==========
</TABLE>
See footnote on the following page
36
<PAGE>
<TABLE>
<CAPTION>
SIGNIFICANT STATISTICAL DATA - WEBSTER FINANCIAL
AT OR FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Net income per common share:
Basic ................................... $ 1.86 $ 1.10 $ 1.44 $ 1.18 $ 1.16
Diluted ................................. $ 1.83 $ 1.07 $ 1.36 $ 1.12 $ 1.09
Dividends declared per common
share ................................... $ 0.44 $ 0.40 $ 0.34 $ 0.32 $ 0.26
Return on average shareholders'
equity .................................. 13.16% 8.44% 11.32% 10.05% 10.52%
Interest rate spread ....................... 2.64% 3.00% 3.12% 2.98% 3.23%
Net interest margin ........................ 2.81% 3.19% 3.24% 3.14% 3.36%
Noninterest expenses to average
assets .................................. 2.13% 2.45% 2.42% 2.34% 2.45%
Noninterest expenses (excluding
foreclosed property, acquisition
related, capital securities and
preferred dividends of subsidiary
corporation expenses) to average
assets .................................. 1.73% 1.90% 2.34% 2.15% 2.23%
AT END OF PERIOD:
Diluted weighted average shares (000's) .... 38,571 38,473 39,560 36,797 34,533
Book value per common share ................ $ 14.87 $ 13.78 $ 12.73 $ 12.24 $ 10.96
Tangible book value per common
share ................................... $ 12.77 $ 11.69 $ 10.48 $ 11.50 $ 9.98
Shareholders' equity to total assets ....... 6.14% 5.69% 6.42% 7.11% 5.95%
</TABLE>
(a) The increase in the core deposit intangible in 1996 is a result of specific
assets and liabilities purchased in the acquisition of Shawmut Bank
Connecticut National Association, now Fleet National Bank of Connecticut.
37
<PAGE>
SELECTED FINANCIAL DATA - MARITIME
<TABLE>
<CAPTION>
FINANCIAL CONDITION
AND OTHER DATA - MARITIME AT DECEMBER 31,
----------------------------------------------------------
(DOLLARS IN THOUSANDS) 1998 1997 1996 1995 1994
-------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Total assets......................... $ 101,401 $ 83,064 $69,911 $56,383 $43,295
Loans, net........................... 70,759 56,077 44,432 37,459 32,322
Investments in available-for-sale
securities (at fair value)........ 21,142 19,950 17,432 12,434 6,969
Total deposits....................... 89,013 72,311 63,847 50,840 38,480
Total stockholders' equity........... 7,191 6,516 5,864 5,282 4,548
Number of banking offices............ 3 3 3 2 1
<CAPTION>
OPERATING DATA - MARITIME
(DOLLARS IN THOUSANDS) FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Total interest and dividend income... $ 7,426 $ 6,054 $ 4,817 $4,098 $3,062
Total interest expense............... 3,028 2,283 1,759 1,438 932
-------- ------- ------- ------ ------
Net interest and dividend income..... 4,398 3,771 3,058 2,660 2,130
Provision for loan losses............ 315 240 160 125 90
-------- ------- ------- ------ ------
Net interest and dividend income
after provision for loan losses.. 4,083 3,531 2,898 2,535 2,040
Total other income................... 433 332 268 199 199
Securities gains (losses), net....... 23 2 (36) (34) (14)
Total expenses....................... 3,015 2,526 2,017 1,687 1,307
-------- ------- ------- ------ ------
Income before income taxes........ 1,524 1,339 1,113 1,013 918
Income taxes......................... 607 538 454 431 373
-------- ------- ------- ------ ------
Net income....................... $ 917 $ 801 $ 659 $ 582 $ 545
======== ======= ======= ====== ======
<CAPTION>
SIGNIFICANT STATISTICAL DATA - MARITIME
AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Net earnings per common share (a)..... $ 1.30 $ 1.14 $ 0.95 $ 0.84 $ 0.79
Net earnings per common share,
assuming dilution (a).............. $ 1.18 $ 1.07 $ 0.91 $ 0.81 $ 0.79
Cash dividends declared (a)........... $ 0.45 $ 0.32 $ 0.23 $ 0.15 $ 0.03
Dividend payout ratio................. 0.35% 0.28% 0.24% 0.19% 0.04%
Risk based capital ratio.............. 11.68% 12.93% 13.33% 13.79% 16.00%
Loan loss reserve / loans............. 1.41% 1.33% 1.64% 1.60% 1.67%
Nonperforming assets / total assets... 0.28% 0.30% 0.17% 0.10% 0.43%
Net interest margin................... 4.73% 5.20% 5.40% 5.70% 5.52%
Return on average assets ............. 0.95% 1.04% 1.08% 1.15% 1.30%
Return on average equity.............. 13.27% 12.97% 11.89% 11.77% 12.27%
AT END OF PERIOD:
Diluted weighted average shares (000's) 776 750 728 721 694
Book value per common share (a)....... $ 10.20 $ 9.24 $ 8.37 $ 7.61 $ 6.55
Stockholders' equity to total assets.. 7.09% 7.84% 8.39% 9.37% 10.50%
</TABLE>
- ----------
(a) Reflects three-for-two stock split in August 1998.
38
<PAGE>
INFORMATION ABOUT MARITIME
BUSINESS
Maritime is a Connecticut-chartered commercial bank headquartered in
Essex, Connecticut. Deposits at Maritime are FDIC insured. Maritime is engaged
principally in the business of attracting deposits from the general public and
investing those deposits in residential real estate loans, and in consumer and
small business loans. Maritime currently serves customers from three banking
offices located in Middlesex and New London Counties, Connecticut.
At December 31, 1998, Maritime had total assets of $101.4 million,
total deposits of $89.0 million, and shareholders' equity of $7.2 million, or
7.0% of total assets. At December 31, 1998, Maritime had loans receivable, net
of $70.8 million, which included $36.0 million in residential real estate loans,
$19.0 million in commercial real estate loans, $9.4 million in commercial loans
and $7.4 million in home equity credit lines and consumer installment loans. At
December 31, 1998, nonperforming loans were $274,641. At that date, Maritime's
allowance for loan losses was $1.0 million, or 360% of nonperforming loans.
SUPERVISION AND REGULATION
Maritime, as a state-chartered commercial bank, is regulated by the
Connecticut Commissioner of Banking and by the FDIC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is Maritime's management's discussion and analysis of
financial condition and results of operations. This discussion should be read in
conjunction with Maritime's financial data appearing elsewhere in this proxy
statement/prospectus and Maritime's historical financial statements and notes
attached as Appendix C to this document.
FINANCIAL CONDITION. At December 31, 1998, Maritime had total assets
of $101.4 million. Funds derived from shareholders' capital, deposits and
borrowings are intended primarily to support Maritime's lending activities. As
of the years ended December 31, 1996, December 31, 1997, and December 31, 1998,
outstanding loans were $45.2 million, $56.8 million and $71.8 million,
respectively, and represented 65%, 68% and 71%, respectively, of Maritime's
assets. The composition of the outstanding loan portfolio as of December 31,
1998, December 31, 1997 and December 31, 1996 was as follows:
<TABLE>
<CAPTION>
As of December 31,
--------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Commercial, financial and agricultural $ 9,412,303 $ 8,243,568 $ 7,806,073
Consumer 3,525,308 3,759,310 3,444,780
Real estate
Residential 35,990,697 28,877,041 23,154,761
Commercial 19,013,297 14,262,896 9,912,403
Construction/land development 3,840,869 1,689,807 691,633
Other 12,026 12,026 188,607
----------- ----------- -----------
Total loans $71,794,500 $56,844,648 $45,198,257
=========== =========== ===========
Percent of total assets 70.8% 68.4% 64.7%
</TABLE>
As of December 31, 1998, non-performing loans amounted to $274,641. At
December 31, 1998, the allowance for loan losses was $1.0 million or 1.41% of
total loans. Maritime maintains an allowance for loan losses to absorb potential
future losses. The allowance for loan losses is deemed to be adequate by
management.
39
<PAGE>
Those funds not used to support lending activities have been invested
in various securities. At December 31, 1998 these investments were as follows:
<TABLE>
<CAPTION>
Amortized
Cost Basis Fair Value
----------- -----------
<S> <C> <C>
Debt securities issued by the U.S. Treasury
and other U.S. government corporations and
agencies $12,421,393 $12,574,726
Debt securities issued by foreign governments 100,000 100,000
Mortgage-backed securities 7,416,240 7,453,396
Other securities 996,636 1,014,100
----------- -----------
$20,934,269 $21,142,222
=========== ===========
</TABLE>
The following table reflects outstanding deposit balances as of the
dates indicated:
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Demand - consumer $ 1,018,502 $ 916,578 $ 1,039,262
Demand - business 16,611,361 13,065,672 11,504,559
NOW 11,464,876 9,385,727 7,893,689
Savings and money market 31,658,575 27,378,831 24,146,939
Certificates of deposit 28,259,547 21,564,322 19,262,451
----------- ----------- -----------
Total deposits $89,012,861 $72,311,130 $63,846,900
=========== =========== ===========
</TABLE>
During 1997, the growth in loans exceeded the growth of deposits, and
at December 31, 1997, Maritime had outstanding borrowings of $4.0 million from
the Federal Home Loan Bank. As of December 31, 1998, Maritime had outstanding
borrowings of $5.0 million from the Federal Home Loan Bank with a maturity of
approximately 5 years.
RESULTS OF OPERATIONS. Maritime's earnings have and will continue to
depend primarily on the difference between interest income and interest expense,
or net interest income, and the extent to which net interest income will exceed
all other operating expenses.
NET INCOME. For the year ended December 31, 1998, net income
increased $115,000, or 14.4%, to $917,000 from $801,000 for the year ended
December 31, 1997. For the year ended December 31, 1997, net income increased
$142,000, or 21.5% from $659,000 for the year ended December 31, 1996. These
increases in net income reflect primarily growth in interest income as a result
of growth in Maritime's loan portfolio.
NET INTEREST INCOME. Net interest income increased $627,000, or
16.6%, to $4.4 million for the year ended December 31, 1998 from $3.8 million
for the year ended December 31, 1997. The net interest spread, or difference
between the yield on interest-earning assets and cost of funds, declined from
5.27% at December 31, 1997 to 4.44% at December 31, 1998. Net interest income
increased during 1997 to $3.8 million from $3.1 million in 1996, a 22.6%
increase. The net interest spread increased during 1997 to 5.25% at December 31,
1997 from 5.12% at December 31, 1996. The recent decrease in spreads is a
function of severe rate competition for loans and the general decline in
interest rate indices that determine consumer and commercial loan rates, as well
as competition for deposits that has kept deposit rates from declining to the
same degree as loan rates.
NET INTEREST MARGIN. Continuous growth in Maritime's loan
portfolio increased the net interest margin in absolute dollars. However, the
net interest margin decreased from 5.20% for the year ended December 31, 1997,
to 4.87% for the year ended December 31, 1998. The net interest margin as a
percentage decreased from 5.40% in 1996 to 5.20% in 1997. The competitive
factors mentioned above regarding net interest spread caused these decreases.
40
<PAGE>
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses was $1.0
million at December 31, 1998. Maritime makes a monthly provision to the
allowance for loan losses account based on the relative risk level of each
category of loans. At December 31, 1998, the allowance for loan loss account was
at 1.41% of total loans, and was 360% of non-performing loans. At December 31,
1997, the allowance for loan losses was $750,000, and the allowance for loan
loss account was at 1.33% of total loans. At December 31, 1997, the allowance
for loan losses was 298.7% of non-performing loans. The composition and quality
of the loan portfolio is reviewed continuously to assess the adequacy of the
allowance for loan losses.
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT. Maritime's primary
liquidity, which consists of cash, federal funds sold and marketable investment
securities maturing in less than one year, is managed to provide sufficient
funds to meet Maritime's cash needs, including funding loan and investment
opportunities and providing reserves against unforeseen withdrawal of customer
deposits. At December 31, 1998 and December 31, 1997, Maritime's primary
liquidity ratio was 9.64% and 5.0%, respectively, of total assets, and within
the 5% to 15% guideline considered appropriate by Maritime's asset/liability
management policy. Maritime has not relied on brokered deposits or jumbo
certificates of deposit as a source of funding.
Maritime has adopted policies and guidelines relative to the interest
rate sensitivity of Maritime's assets and liabilities. The actual rate
sensitivity of Maritime's assets and liabilities are reviewed monthly and
compared to Maritime's policies and guidelines, as well as to industry peer
groups.
Maritime reviews, on a quarterly basis, a performance profile prepared
by an outside consultant that measures the performance of Maritime against a
national peer group, evaluates liquidity, cash flow stability, financial
feasibility and the effect of possible interest rate changes on the earnings and
capital of Maritime. This process is overseen by Maritime's investment and asset
and liability management committee, which consists of three directors and two
senior officers of Maritime.
Maritime is a voluntary member of the Federal Home Loan Bank and is
entitled to various benefits, including borrowing capabilities that may assist
Maritime to better match the maturities of assets and liabilities. Prior to
1997, Maritime minimally utilized its borrowing capabilities. In 1997 and early
1998, Maritime increased its utilization and has borrowed both short- term and
long-term from the Federal Home Loan Bank to fund the growth in loans and to
diminish and somewhat neutralize the potential negative effect of future
interest rate changes. Maritime also has borrowing capabilities at correspondent
banks, which it has utilized periodically.
CAPITAL. At December 31, 1998, Maritime's Tier I capital-to-asset
ratio was 6.84%, well above the regulatory minimum and sufficient to qualify
Maritime as a well-capitalized institution under the FDIC's capital regulations.
During 1994, Maritime began to pay a quarterly cash dividend. Maritime has
increased the quarterly cash dividend from 3.3 cents per share in the third
quarter of 1994 to 10 cents per share for the first quarter of 1998, both
adjusted for a three-for-two stock split in August 1998. Maritime's stated
intention is to steadily increase the quarterly cash dividend as long as the
dividend can be supported by a corresponding increase in earnings.
INFLATION AND CHANGING PRICES. The financial statements and related
data presented in this proxy statement/prospectus have been prepared in
accordance with generally accepted accounting principles which require the
measurement of financial position and operating results in terms of historical
dollars, without considering changes in the relative purchasing power of money
over time due to inflation.
YEAR 2000. Maritime has taken a number of steps to minimize the
potential impact to it of the prospective failure of computers to continue to
accurately process information following
41
<PAGE>
December 31, 1999 -- the Year 2000 challenge. Following guidelines provided by
state and federal banking regulators, Maritime has engaged in a process of
identifying, evaluating, testing and implementing Year 2000 issues and
appropriate remedial measures.
Maritime has completed the identification and evaluation process and,
as a consequence, converted its data processing system in 1998 to a national
vendor. Maritime's testing process has begun and is expected to be complete by
May 1, 1999. All corrective measures will be completed by June 30, 1999 for any
systems material to Maritime's operations. Systems not corrected by that date
will be replaced with compliant systems, although Maritime does not expect that
replacement will be necessary.
The approximate cost of Maritime's Year 2000 compliance activities
through December 31, 1998 was $3,000. Maritime estimates the cost of additional
Year 2000 compliance through January 1, 2000 to be approximately $10,000.
Maritime currently believes it is in compliance with regulatory guidelines
concerning Year 2000. Maritime has begun a process of attempting to identify
Year 2000 problems involving substantial customers. That process is expected to
be completed by June 30, 1999. Maritime's operations could be materially and
adversely affected if either its systems or those of its customers fail to work
effectively due to unresolved and/or undetected Year 2000 problems.
RECENT ACCOUNTING PRONOUNCEMENTS. In this section, we refer to the
Financial Accounting Standards Board as FASB and to Statements of Financial
Accounting Standards as SFAS.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES. In June 1996, the FASB issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." SFAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
based on consistent application of a financial-components approach that focuses
on control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components approach,
after a transfer of financial assets, an entity recognizes all financial and
servicing assets it controls and liabilities it has incurred and does not
recognize financial assets it no longer controls and liabilities that have been
extinguished. The financial-components approach focuses on the assets and
liabilities that exist after the transfer. Many of these assets and liabilities
are components of financial assets that existed prior to the transfer. If a
transfer does not meet the criteria for a sale, the transfer is accounted for as
a secured borrowing with a pledge of collateral. SFAS No. 125 is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, applied prospectively. Earlier or retroactive
application of SFAS No. 125 was not permitted. The adoption of the non-deferred
provisions of SFAS No. 125 as of January 1, 1997 and the adoption as of January
1, 1998 of the deferred provisions of SFAS No. 125 did not have a material
impact on Maritime's financial statements.
REPORTING COMPREHENSIVE INCOME. In June 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components, revenues,
expenses, gains and losses, in a full set of general purpose financial
statements. SFAS No. 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. It does not require a specific format for that
financial statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that financial
statement. SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a
42
<PAGE>
statement of financial position. It does not address issues of recognition or
measurement for comprehensive income and its components. SFAS No. 130 is
effective for fiscal years beginning after December 31, 1997. Reclassification
of financial statements for earlier periods provided for comparative purposes is
required. Maritime does not expect that upon adoption, SFAS No. 130 will have a
material effect on its financial statements.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. In
June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way public business enterprises report information about operating segments in
financial statements. SFAS No. 131 is effective for financial statements for
periods beginning after December 15, 1997. Maritime does not expect that under
SFAS No. 131 it will be required to report additional information because its
present organization consists of only one operating segment as defined by this
statement.
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS. In
February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which was an amendment of FASB
Statements of Financial Accounting Standards Nos. 87, 88 and 106. SFAS No. 132
revises employers' disclosures about pension and other postretirement benefit
plans, though it does not change the measurement or recognition of those plans.
Maritime will adopt SFAS No. 132 for the fiscal year beginning January 1, 1998.
Adoption of SFAS No. 132 will not have a material impact on Maritime's financial
position or results of operations.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In June
1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
for derivative instruments, including particular derivative instruments embedded
in other contracts, which are referred to collectively as derivatives in this
paragraph. It requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. It is not expected that the adoption
of SFAS No. 133 will have a material impact on Maritime's financial statements.
At this time, Maritime does not plan to adopt SFAS No. 133 early. Also, on
adoption of SFAS No. 133, Maritime has no plan to use the window of opportunity
to reclassify held-to-maturity securities available-for-sale.
43
<PAGE>
SECURITY OWNERSHIP OF GREATER THAN 5% SHAREHOLDERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Maritime's common stock as of February 23, 1999: (i) by each person
(or group of affiliated persons) known by Maritime to be the beneficial owner of
more than 5% of its outstanding common stock; (ii) by each of Maritime's named
executive officers as defined in Item 402 of Regulation S-B; (iii) by each
Maritime director; and (iv) by all of Maritime's executive officers and
directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME BENEFICIALLY OWNED OUTSTANDING
---- ------------------ -----------
<S> <C> <C>
William R. Attridge (1) 19,782 2.7%
Diana Atwood-Johnson (2) 64,200 8.9%
H. Judson Carr (3) 66,900 9.3%
Eleanor D. Champion (4) 3,000 *
William A. Childress (5) 300 *
Richard J. Hertz (6) 43,250 6.0%
Nicholas Lewitz, Jr. (7) 32,550 4.5%
Richard R. Manning (8) 44,850 6.2%
Stanley F. Prymas (9) 44,475 6.2%
John W. Rafal (10) 43,430 6.0%
Samuel J. Riggio (11) 27,450 3.8%
Gene R. Schiavone (12) 27,600 3.9%
George W. Whelen IV (13) 56,175 7.8%
All executive officers and directors
as a group
(13 persons) . 352,182 45.4%
</TABLE>
- ----------
* Less than 1% of the outstanding shares of Maritime's common stock.
(1) Mr. Attridge's address is c/o Maritime Bank & Trust Co., 130 Westbrook
Road, Essex, CT 06426-1149. Includes 9,000 currently exercisable options
granted under Maritime's stock option plan to purchase shares of Maritime's
common stock at $6.67 per share.
(2) Ms. Atwood-Johnson's address is 12 Tantummaheag Road, Old Lyme, CT 06371.
Includes 10,350 currently exercisable options granted under Maritime's
stock option plan to purchase shares of Maritime's common stock at $6.67
per share.
44
<PAGE>
(3) Mr. Carr's address is 61 River Road, Essex, CT 06426. Includes 10,650
currently exercisable options granted under Maritime's stock option plan to
purchase shares of Maritime's common stock at $6.67 per share.
(4) Ms. Champion's address is 104 N. Main Street, Essex, CT 06426.
(5) Mr. Childress' address is 43 Sheffield Street, Old Saybrook, CT 06475.
(6) Mr. Hertz's address is 68 Estates Drive, Santa Fe, NM 87501. Includes 8,400
currently exercisable options granted under Maritime's stock option plan to
purchase shares of Maritime's common stock at $6.67 per share.
(7) Mr. Lewitz's address is 198 Fairview Road, Westbrook, CT 06475. Includes
6,900 currently exercisable options granted under Maritime's stock option
plan to purchase shares of Maritime's common stock at $6.67 per share.
(8) Mr. Manning's address is 2850 NE IXth Court, Pompano Beach, FL 33062.
Includes 11,100 currently exercisable options granted under Maritime's
stock option plan to purchase shares of Maritime's common stock at $6.67
per share
(9) Mr. Prymas' address is 26 Hemlock Terrace Extension, Deep River, CT 06417.
Includes 8,250 currently exercisable options granted under Maritime's stock
option plan to purchase shares of Maritime's common stock at $6.67 per
share.
(10) Mr. Rafal's address is 4 Johnnycake Hill Road, Old Lyme, CT 06371. Includes
7,500 currently exercisable options granted under Maritime's stock option
plan to purchase shares of Maritime's common stock at $6.67 per share.
(11) Mr. Riggio's address is 10 Warsaw Street, Deep River, CT 06417. Includes
6,750 currently exercisable options granted under Maritime's stock option
plan to purchase shares of Maritime's common stock at $6.67 per share
(12) Mr. Schiavone's address is Box 580, Essex, CT 06426.
(13) Mr. Whelen's address is 18 Hill Road, Old Saybrook, CT 06475. Includes
9,300 currently exercisable options granted under Maritime's stock option
plan to purchase shares of Maritime's common stock at $6.67 per share.
45
<PAGE>
MARKET PRICES AND DIVIDENDS
WEBSTER FINANCIAL'S COMMON STOCK
The table below sets forth the range of high and low sale prices of
Webster Financial's common stock as reported on the Nasdaq Stock Market's
National Market Tier, as well as cash dividends paid during the periods
indicated, restated to reflect the two-for-one split of Webster Financial's
common stock in April 1998:
<TABLE>
<CAPTION>
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
<S> <C> <C> <C>
Quarter Ended:
March 31, 1997 $20.69 $17.56 $0.10
June 30, 1997 22.88 17.31 0.10
September 30, 1997 29.88 21.69 0.10
December 31, 1997 33.88 28.50 0.10
March 31, 1998 35.00 28.56 0.10
June 30, 1998 36.25 31.44 0.11
September 30, 1998 34.63 20.63 0.11
December 31, 1998 28.13 18.88 0.11
</TABLE>
On November 3, 1998, the last trading day prior to the public
announcement of the merger, the closing price of Webster Financial's common
stock on the Nasdaq Stock Market's National Market Tier was $24.94. On February
23, 1999, the most recent practicable date prior to the printing of this proxy
statement/prospectus, the closing price of Webster Financial's common stock on
the Nasdaq Stock Market's National Market Tier was $30.13.
MARITIME'S COMMON STOCK
Maritime's common stock is not registered under the federal securities
laws and is not listed on any exchange or automated quotation system. However,
it does trade on the over-the-counter bulletin board. Maritime's common stock is
not actively traded, and the prices for Maritime common stock reported on the
bulletin board may not provide an adequate measure of the fair market value of
the shares. The table below sets forth the range of high and low sales prices of
Maritime's common stock as reported on the over-the-counter bulletin board, as
well as cash dividends paid, during the periods indicated, restated to reflect
the three-for-two split of Maritime's common stock in August 1998:
<TABLE>
<CAPTION>
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
<S> <C> <C> <C>
Quarter Ended:
March 31, 1997 $11.58 $10.42 $0.07
June 30, 1997 11.17 10.67 0.08
September 30, 1997 13.67 12.17 0.08
December 31, 1997 13.71 13.71 0.09
March 31, 1998 19.33 16.83 0.10
June 30, 1998 23.33 18.33 0.11
September 30, 1998 24.00 19.83 0.12
December 31, 1998 28.50 20.00 0.12
</TABLE>
46
<PAGE>
DESCRIPTION OF WEBSTER FINANCIAL'S CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS
Set forth below is a description of Webster Financial's capital stock,
as well as a summary of the material differences between the rights of holders
of Maritime common stock and their prospective rights as holders of Webster
Financial's common stock. If the merger agreement is approved and the merger
takes place, the holders of Maritime's common stock will become holders of
Webster Financial's common stock. As a result, Webster Financial's restated
certificate of incorporation, as amended, and bylaws, as amended, and the
applicable provisions of the General Corporation Law of the State of Delaware,
referred to in this section as the Delaware corporation law, will govern the
rights of current holders of Maritime's common stock. The rights of those
shareholders are governed at the present time by the certificate of
incorporation and the second amended and restated bylaws of Maritime and the
applicable provisions of the Connecticut Business Corporation Act, referred to
in this section as the Connecticut corporation law.
The following comparison is based on the current terms of the governing
documents of Webster Financial and Maritime and on the provisions of the
Delaware corporation law and the Connecticut corporation law. The discussion is
intended to highlight important similarities and differences between the rights
of holders of Webster Financial's common stock and Maritime's common stock.
WEBSTER FINANCIAL'S COMMON STOCK
Webster Financial is authorized to issue 50,000,000 shares of common
stock, par value $.01 per share. As of February 8, 1999, 36,370,019 shares of
Webster Financial's common stock were issued and outstanding and Webster
Financial had outstanding stock options granted to directors, officers and other
employees for 1,823,096 shares of Webster Financial's common stock. Each share
of Webster Financial's common stock has the same relative rights and is
identical in all respects to each other share of Webster Financial's common
stock. Webster Financial's common stock is non-withdrawable capital, is not of
an insurable type and is not insured by the FDIC or any other governmental
entity.
Holders of Webster Financial's common stock are entitled to one vote
per share on each matter properly submitted to shareholders for their vote,
including the election of directors. Holders of Webster Financial's common stock
do not have the right to cumulate their votes for the election of directors, and
they have no preemptive or conversion rights for any shares that may be issued.
Webster Financial's common stock is not subject to additional calls or
assessments by Webster Financial, and all shares of Webster Financial's common
stock currently outstanding are fully paid and nonassessable. For a discussion
of the voting rights of Webster Financial's common stock, classification of
Webster Financial's board of directors and provisions of Webster Financial's
restated certificate of incorporation and bylaws that may prevent a change in
control of Webster Financial or that would operate only in an extraordinary
corporate transaction involving Webster Financial or its subsidiaries, see "--
Certificate of Incorporation and Bylaw Provisions."
Holders of Webster Financial's common stock and any class or series of
stock entitled to participate with it are entitled to receive dividends declared
by the board of directors of Webster Financial out of any assets legally
available for distribution. No dividends or other distributions may be declared
or paid, however, unless all accumulated dividends and any sinking fund,
retirement fund or other retirement payments have been paid, declared or set
aside on any class of stock having preference as to payments of dividends over
Webster Financial's common stock. In addition, as described below, the indenture
for Webster Financial's senior notes places restrictions on Webster Financial's
ability to pay dividends on its common stock. See "-- Senior Notes."
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In the unlikely event of any liquidation, dissolution or winding up of
Webster Financial, the holders of Webster Financial's common stock and any class
or series of stock entitled to participate with it would be entitled to receive
all remaining assets of Webster Financial available for distribution, in cash or
in kind, after payment or provision for payment of all debts and liabilities of
Webster Financial and after the liquidation preferences of all outstanding
shares of any class of stock having preference over Webster Financial's common
stock have been fully paid or set aside.
WEBSTER FINANCIAL'S PREFERRED STOCK
Webster Financial's restated certificate of incorporation authorizes
its board of directors, without further shareholder approval, to issue up to
3,000,000 shares of serial preferred stock for any proper corporate purpose. In
approving any issuance of serial preferred stock, the board of directors has
broad authority to determine the rights and preferences of the serial preferred
stock, which may be issued in one or more series. These rights and preferences
may include voting, dividend, conversion and liquidation rights that may be
senior to Webster Financial's common stock.
Webster Financial's Series C Participating Preferred Stock was
authorized in connection with a rights agreement, which was adopted in February
1996 and amended in October 1998. Webster Financial adopted the rights agreement
to protect shareholders in the event of an inadequate takeover offer or to deter
coercive or unfair takeover tactics. Each right entitles a holder to purchase
1/1,000th of a share of series C preferred stock upon the occurrence of
specified events. As of the date of this proxy statement/prospectus, no shares
of Webster Financial's series C preferred stock have been issued.
SENIOR NOTES
The 8 3/4% Senior Notes due 2000 were issued by Webster Financial in an
aggregate principal amount of $40,000,000 under an indenture, dated as of June
15, 1993, between Webster Financial and Chemical Bank, as trustee. Chemical Bank
is now known as The Chase Manhattan Bank. Particular provisions of the indenture
are summarized below because of their impact on Webster Financial's common
stock. The senior notes bear interest at 8 3/4% payable semi-annually on each
June 30 and December 30 until maturity on June 30, 2000. The senior notes are
unsecured general obligations only of Webster Financial and not of its
subsidiaries. The senior notes may not be redeemed by Webster Financial prior to
maturity. This limitation on redemption is not expected to have an anti-takeover
effect since the senior notes would be assumed by any acquirer of Webster
Financial. The indenture contains covenants that limit Webster Financial's
ability at the holding company level to incur additional funded indebtedness, to
make restricted distributions, to engage in specified dispositions affecting
Webster Bank or its voting stock, to create specified liens upon Webster
Financial's assets at the holding company level including a negative pledge
clause, and to engage in mergers, consolidations, or a sale of substantially all
of Webster Financial's assets unless specified conditions are satisfied. The
indenture also requires that Webster Financial maintain a specified level of
liquid assets at the holding company level.
RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. The indenture limits the
amount of funded indebtedness which Webster Financial may incur or guarantee at
the holding company level. Funded indebtedness includes any obligation of
Webster Financial with a maturity in excess of one year for borrowed money, for
the deferred purchase price of property or services, for capital lease payments,
or related to the guarantee of these kinds of obligations. Webster Financial may
not incur or guarantee any funded indebtedness if, immediately after giving
effect thereto, the amount of funded indebtedness of Webster Financial at the
holding company level, including the senior notes, would be greater than 90% of
Webster Financial's consolidated net worth. As of December 31, 1998, Webster
Financial's consolidated net worth was $554.9 million and it had $41.4 million
of funded indebtedness.
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RESTRICTED DISTRIBUTIONS. Under the indenture, Webster Financial may
not, directly or indirectly, make any restricted distribution, except in capital
stock of Webster Financial, if, at the time or after giving effect to the
distribution: (a) an event of default has occurred and be continuing under the
indenture; (b) Webster Bank would fail to meet any of the applicable minimum
capital requirements under Office of Thrift Supervision regulations; (c) Webster
Financial would fail to maintain sufficient liquid assets to comply with the
terms of the covenant described under "Liquidity Maintenance" below; or (d) the
aggregate amount of all restricted distributions subsequent to September 30,
1993 would exceed the sum of (i) $5 million, plus (ii) 75% of Webster
Financial's aggregate consolidated net income, or if the aggregate consolidated
net income is a deficit, minus 100% of the deficit, accrued on a cumulative
basis in the period commencing on June 30, 1993 and ending on the last day of
the fiscal quarter immediately preceding the date of the restricted
distribution, and plus (iii) 100% of the net proceeds received by Webster
Financial from any capital stock issued by Webster Financial other than to a
subsidiary subsequent to September 30, 1993. As of December 31, 1998, Webster
Financial had the ability to pay $273.2 million in restricted distributions.
Restricted distribution means: (a) any dividend, distribution or other
payment on the capital stock of Webster Financial or any subsidiary other than a
wholly owned subsidiary, except for dividends, distributions or payments payable
in capital stock; (b) any payment to purchase, redeem, acquire or retire any
capital stock of Webster Financial or the capital stock of any subsidiary other
than a wholly owned subsidiary; and (c) any payment by Webster Financial of
principal, whether a prepayment, redemption or at maturity of, or to acquire,
any indebtedness for borrowed money issued or guaranteed by Webster Financial,
other than the senior notes or under a guarantee by Webster Financial of any
borrowing by any employee stock ownership plan established by Webster Financial
or a wholly owned subsidiary, except that any payment of, or to acquire, any
indebtedness for borrowed money of this kind that is not subordinated to the
senior notes will not constitute a restricted distribution if the indebtedness
was issued or guaranteed by Webster Financial at a time when the senior notes
were rated in the same or higher rating category as the rating assigned to the
senior notes by Standard & Poor's at the time the senior notes were issued.
LIQUIDITY MAINTENANCE. The indenture requires that Webster Financial
maintain at all times, on an unconsolidated basis, liquid assets in an amount
equal to or greater than 150% of the aggregate interest expense on the senior
notes and all other indebtedness for borrowed money of Webster Financial for 12
full calendar months immediately following each determination date under the
indenture, provided that Webster Financial will not be required to maintain
liquid assets in that amount once the senior notes have been rated BBB- or
higher by Standard & Poor's for six calendar months and remain rated in that
category.
CAPITAL SECURITIES
In January 1996, Webster Financial raised $100 million through the sale
of capital securities that will be used for general corporate purposes. Webster
Financial formed a business trust for the purpose of issuing capital securities
and investing the net proceeds in capital debentures.
Prior to its acquisition by Webster Financial, Eagle Financial Corp.
raised $50 million through the sale of capital securities to be used for general
corporate purposes. Eagle formed a business trust for the purpose of issuing
capital securities and investing the net proceeds in the Eagle capital
debentures. In connection with the acquisition of Eagle by Webster Financial in
April 1998, Webster Financial assumed all of Eagle's rights and obligations with
respect to the Eagle capital securities and capital debentures.
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CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The following discussion is a general summary of provisions of Webster
Financial's restated certificate of incorporation and bylaws, and a comparison
of those provisions to similar types of provisions in the certificate of
incorporation and second amended and restated bylaws of Maritime. The discussion
is necessarily general and, for provisions contained in Webster Financial's
restated certificate of incorporation and bylaws, reference should be made to
the document in question. Some of the provisions included in Webster Financial's
restated certificate of incorporation and bylaws may serve to entrench current
management and to prevent a change in control of Webster Financial even if
desired by a majority of shareholders. These provisions are designed to
encourage potential acquirers to negotiate directly with the board of directors
of Webster Financial and to discourage other takeover attempts.
DIRECTORS. Some of the provisions of Webster Financial's restated
certificate of incorporation and bylaws will impede changes in majority control
of Webster Financial's board of directors. The restated certificate of
incorporation provides that the board of directors will be divided into three
classes, with directors in each class elected for three-year staggered terms.
The restated certificate of incorporation further provides that the size of the
board of directors is to be within a 7 to 15 director range. The bylaws
currently provide that there are to be 14 directors. The bylaws also provide
that (i) to be eligible for nomination as a director, a nominee must be a
resident of the State of Connecticut at the time of his nomination or, if not
then a resident, have been previously a resident for at least three years; (ii)
each director is required to own not less than 100 shares of Webster Financial's
common stock; and (iii) more than three consecutive absences from regular
meetings of the board of directors, unless excused by a board resolution, will
automatically constitute a resignation. Webster Financial's bylaws also contain
a provision prohibiting particular contracts and transactions between Webster
Financial and its directors and officers and some other entities unless specific
procedural requirements are satisfied.
Webster Financial's restated certificate of incorporation and bylaws
provide that a vacancy occurring in the board of directors, including a vacancy
created by any increase in the number of directors, will be filled for the
remainder of the unexpired term by a majority vote of the directors then in
office. Webster Financial's restated certificate of incorporation provides that
a director may be removed only for cause and then only by the affirmative vote
of at least two-thirds of the total votes eligible to be voted at a duly
constituted meeting of shareholders called for that purpose and that 30 days'
written notice must be provided to any director or directors whose removal is to
be considered at a shareholders' meeting.
The provisions of the certificate of incorporation and bylaws of
Maritime with regard to directors are similar to those of Webster Financial. The
certificate of incorporation and the bylaws of Maritime provide that the board
of directors is divided into three classes, with directors in each class elected
for three-year staggered terms. The certificate of incorporation and bylaws
provide that the number of directors is not to be less than 7 nor more than 16,
and that for any 12-month period, the number of positions on the board of
directors may be increased or decreased by no more than two unless (A) the
Maritime board of directors, by the affirmative vote of at least 66 2/3% of the
entire board of directors and a majority, in any event not less than seven, of
the continuing directors, adopt a resolution approving the change or (B) the
shareholders of Maritime, by the affirmative vote of at least 66 2/3% of the
voting power of the then outstanding voting shares and the shares of voting
stock held by a majority of independent shareholders, approve the change.
Maritime's certificate of incorporation provides that any vacancies on
the board of directors and any newly created directorships may be filled by the
board by a vote of 66 2/3% of the directors then in office, and that directors
elected in this manner hold office until the next election of the class of
directors to which they are assigned. Maritime's certificate of incorporation
provides that any director or the entire board may be removed at any time with
or without cause by the affirmative
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vote of the holders of at least 66 2/3% of the voting power of the voting stock
that elected the director at a meeting of shareholders called for that purpose.
Webster Financial's bylaws impose restrictions on the nomination by
shareholders of candidates for election to the board of directors and the
proposal by shareholders of business to be acted upon at an annual meeting of
shareholders. The certificate of incorporation of Maritime also contains
restrictions on shareholder nominations of directors but does not contain a
provision concerning the proposal by shareholders of other business to be acted
upon at an annual meeting.
CALL OF SPECIAL MEETINGS. Webster Financial's restated certificate of
incorporation provides that a special meeting of shareholders may be called at
any time but only by the Chairman, the President or by the board of directors.
Shareholders are not authorized to call a special meeting. The certificate of
incorporation of Maritime provides that a special meeting of shareholders may be
called at any time by the Chairman, the President or the board of directors, and
shall be called by the President upon written request of Maritime's shareholders
when required by Section 33-326 of the Connecticut General Statutes, now Section
33-696 of the Connecticut corporation law.
SHAREHOLDER ACTION WITHOUT A MEETING. Webster Financial's restated
certificate of incorporation provides that shareholders may act by written
consent only if they are unanimous. Under the Connecticut corporation law,
Maritime's shareholders also may act by unanimous written consent.
LIMITATION ON LIABILITY OF DIRECTORS AND INDEMNIFICATION. Webster
Financial's restated certificate of incorporation provides that no director
shall be personally liable to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director other than liability (i) for
any breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for any payment of a
dividend or approval of a stock repurchase that is illegal under Section 174 of
the Delaware corporation law, or (iv) for any transaction from which a director
derived an improper personal benefit.
Webster Financial's bylaws provide for indemnification of directors,
officers, trustees, employees and agents of Webster Financial, and for those
serving in those roles with other business organizations or entities, in the
event that the person was or is made a party to or is threatened to be made a
party to any civil, criminal, administrative, arbitration or investigative
action, suit, or proceeding, other than an action by or in the right of Webster
Financial, by reason of the fact that the person is or was serving in that kind
of capacity for or on behalf of Webster Financial. The bylaws provide that
Webster Financial will indemnify any person of this kind against expenses
including attorneys' fees, judgments, fines, penalties and amounts paid in
settlement if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of Webster
Financial, and, for any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. Similarly, the bylaws provide that Webster
Financial will indemnify these persons for expenses reasonably incurred and
settlements reasonably paid in actions, suits, or proceedings brought by or in
the right of Webster Financial, if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of Webster Financial; provided, however, that no indemnification may
be made against expenses for any claim, issue, or matter as to which the person
is adjudged to be liable to Webster Financial or against amounts paid in
settlement unless and only to the extent that there is a determination made by
the appropriate party set forth in Webster Financial's bylaws that the person to
be indemnified is, in view of all the circumstances of the case, fairly and
reasonably entitled to indemnity for expenses or amounts paid in settlement. In
addition, Webster Financial's bylaws permit the corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
trustee, employee, or agent of Webster Financial or is acting in this kind of
capacity for another business organization or entity at Webster Financial's
request, against any liability
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asserted against the person and incurred in that capacity, or arising out of
that status, whether or not Webster Financial would have the power or obligation
to indemnify him against that kind of liability under the indemnification
provisions of Webster Financial's bylaws.
The certificate of incorporation of Maritime provides that the
corporation shall have all of the indemnification and other powers set forth at
Section 33-320a of the Connecticut General Statutes, now Sections 33-770 through
33-778 of the Connecticut corporation law, and permits indemnification and the
advance of expenses in other circumstances. It also authorizes Maritime to
obtain insurance for these kinds of liabilities.
CUMULATIVE VOTING. Webster Financial's restated certificate of
incorporation denies cumulative voting rights in the election of directors.
Maritime's bylaws contain a similar provision.
PREEMPTIVE RIGHTS. Webster Financial's restated certificate of
incorporation and Maritime's certificate of incorporation provide that
shareholders do not have any preemptive rights regarding the offering or sale of
the entity's securities.
NOTICE OF SHAREHOLDER MEETINGS. Webster Financial's bylaws require that
notice be given not less than 20 nor more than 50 days prior to each annual or
special meeting of shareholders. The bylaws of Maritime require that notice of
each shareholder meeting be given not less than 10 nor more than 60 days prior
to a meeting.
QUORUM. Webster Financial's bylaws provide that the holders of
one-third of the capital stock issued and outstanding and entitled to vote at a
meeting constitutes a quorum. The bylaws of Maritime provide that the holders of
a majority of the voting power of the issued and outstanding stock entitled to
vote at a meeting constitutes a quorum, except as otherwise provided by law or
Maritime's certificate of incorporation or bylaws.
GENERAL VOTE. Webster Financial's bylaws provide that any matter
brought before a meeting of shareholders will be decided by the affirmative vote
of a majority of the votes cast on the matter except as otherwise required by
law or Webster Financial's restated certificate of incorporation or bylaws. The
bylaws of Maritime provide that action on any matter other than the election of
directors is approved if the votes cast favoring the action exceed the votes
cast opposing the action except as otherwise provided by Connecticut law, the
certificate of incorporation or the bylaws. Maritime's bylaws provide that
directors are elected by a plurality of the votes cast by the shares entitled to
vote at a meeting.
RECORD DATE. Webster Financial's bylaws provide that the record date
for determination of shareholders entitled to notice of or to vote at a meeting
and for other specified purposes may not be less than 20 nor more than 50 days
before the date of the meeting or other action. The bylaws of Maritime provide
that the record date may not be less than 10 nor more than 70 days prior to the
date of the meeting or other action.
AUTHORIZED AND OUTSTANDING COMMON STOCK. See "-- Webster Financial's
Common Stock" as to authorized and currently outstanding shares of Webster
Financial's common stock. The certificate of incorporation of Maritime
authorizes 1,500,000 shares of Maritime's common stock, par value $.67 per
share, of which 711,023 shares were outstanding as of February 23, 1999. In
addition, as of February 23, 1999, there were outstanding options to purchase
Maritime's common stock granted to directors, officers and others for 95,700
shares of Maritime's common stock, plus the option for 141,004 shares of
Maritime's common stock granted to Webster Financial in connection with the
merger.
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AUTHORIZED SERIAL PREFERRED STOCK. See "-- Webster Financial Preferred
Stock" as to the authorized shares of serial preferred stock of Webster
Financial. Maritime is not authorized to issue any preferred stock.
DIVIDEND AND LIQUIDATION RIGHTS. For a description of the provisions of
Webster Financial's restated certification of incorporation that relate to
dividends and liquidation rights, see "-- Webster Financial's Common Stock." The
bylaws of Maritime provide that, except for dividends payable in shares of
Maritime's common stock, Maritime's board of directors, subject to any
restrictions contained in Maritime's certificate of incorporation, may declare
and pay dividends on the shares of its common stock only to the extent allowed
under Section 36a-110 of the Connecticut General Statutes.
APPROVALS FOR ACQUISITIONS OF CONTROL AND OFFERS TO ACQUIRE CONTROL.
Webster Financial's certificate of incorporation prohibits any person, whether
an individual, company or group acting in concert, from acquiring beneficial
ownership of 10% or more of Webster Financial's voting stock, unless the
acquisition has received the prior approval of at least two-thirds of the
outstanding shares of voting stock at a duly called meeting of shareholders held
for that purpose and of all required federal regulatory authorities. Also, no
person may make an offer to acquire 10% or more of Webster Financial's voting
stock without obtaining prior approval of the offer by at least two-thirds of
Webster Financial's board of directors or, alternatively, before the offer is
made, obtaining approval of the acquisition from the Office of Thrift
Supervision. These provisions do not apply to the purchase of shares by
underwriters in connection with a public offering or employee stock ownership
plan or other employee benefit plan of Webster Financial or any of its
subsidiaries, and the provisions remain effective only so long as an insured
institution is a majority-owned subsidiary of Webster Financial. Shares acquired
in excess of these limitations are not entitled to vote or take other
shareholder action or be counted in determining the total number of outstanding
shares in connection with any matter involving shareholder action. These excess
shares are also subject to transfer to a trustee, selected by Webster Financial,
for the sale on the open market or otherwise, with the expenses of the trustee
to be paid out of the proceeds of the sale. The certificate of incorporation and
bylaws of Maritime do not contain a similar provision.
PROCEDURES FOR BUSINESS COMBINATIONS. Webster Financial's restated
certificate of incorporation requires that business combinations between Webster
Financial or any majority-owned subsidiary of Webster Financial and a 10% or
more shareholder or its affiliates or associates, referred to collectively in
this section as the interested shareholder, either (i) be approved by at least
80% of the total number of outstanding shares of voting stock of Webster
Financial, or (ii) be approved by at least two-thirds of Webster Financial's
continuing directors, which means those directors unaffiliated with the
interested shareholder and serving prior to the interested shareholder becoming
an interested shareholder, or meet specified price and procedure requirements
that provide for consideration per share generally equal to or greater than that
paid by the interested shareholder when it acquired its block of stock. The
types of business combinations with an interested shareholder covered by this
provision include: any merger, consolidation and share exchange; any sale,
lease, exchange, mortgage, pledge or other transfer of assets other than in the
usual and regular course of business; an issuance or transfer of equity
securities having an aggregate market value in excess of 5% of the aggregate
market value of Webster Financial's outstanding shares; the adoption of any plan
or proposal of liquidation proposed by or on behalf of an interested
shareholder; and any reclassification of securities, recapitalization of Webster
Financial or any merger or consolidation of Webster Financial with any of its
subsidiaries or any other transaction which has the effect of increasing the
proportionate ownership interest of the interested shareholder. Webster
Financial's restated certificate of incorporation excludes employee stock
purchase plans and other employee benefit plans of Webster Financial and any of
its subsidiaries from the definition of interested shareholder.
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The certificate of incorporation of Maritime contains similar
provisions as to business combinations, except that it provides that in addition
to approval by the board of directors and the affirmative vote of the holders of
at least 80% of the voting power of the then outstanding shares of voting stock,
the affirmative vote of the holders of at least two-thirds of the voting power
of the outstanding shares of voting stock held by independent stockholders also
is required. Also, the certificate of incorporation of Maritime provides that
these voting requirements do not apply if the business combination is approved
or exempted from the business combination requirements by the board of directors
prior to the time the related person becomes a related person or if fair price
and procedure requirements are satisfied. Maritime's certificate of
incorporation does not contain exceptions from the definition of related person
similar to the Webster Financial provisions noted above.
ANTI-GREENMAIL. Webster Financial's restated certificate of
incorporation requires approval by a majority of the outstanding shares of
voting stock before Webster Financial may directly or indirectly purchase or
otherwise acquire any voting stock beneficially owned by a holder of 5% percent
or more of Webster Financial's voting stock, if the holder has owned the shares
for less than two years. Any shares beneficially held by the person are required
to be excluded in calculating majority shareholder approval. This provision
would not apply to a pro rata offer made by Webster Financial to all of its
shareholders in compliance with the Securities Exchange Act of 1934 and the
rules and regulations under that statute or a purchase of voting stock by
Webster Financial if the board of directors has determined that the purchase
price per share does not exceed the fair market value of that voting stock. The
certificate of incorporation and bylaws of Maritime do not contain a similar
provision.
CRITERIA FOR EVALUATING OFFERS. Webster Financial's restated
certificate of incorporation provides that the board of directors, when
evaluating any acquisition offers, shall give due consideration to all relevant
factors, including, without limitation, the economic effects of acceptance of
the offer on depositors, borrowers and employees of its insured institution
subsidiaries and on the communities in which its subsidiaries operate or are
located, as well as on the ability of its subsidiaries to fulfill the objectives
of insured institutions under applicable federal statutes and regulations. The
certificate of incorporation and bylaws of Maritime do not contain a similar
provision.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to
Webster Financial's restated certificate of incorporation must be approved by at
least two-thirds of Webster Financial's board of directors at a duly constituted
meeting called for that purpose and also by shareholders by the affirmative vote
of at least a majority of the shares entitled to vote thereon at a duly called
annual or special meeting; provided, however, that approval by the affirmative
vote of at least two-thirds of the shares entitled to vote thereon is required
to amend the provisions regarding amendment of the certificate of incorporation,
directors, bylaws, approval for acquisitions of control and offers to acquire
control, criteria for evaluating offers, the calling of special meetings of
shareholders, greenmail, and shareholder action by written consent. In addition,
the provisions regarding business combinations may be amended only by the
affirmative vote of at least 80% of the shares entitled to vote thereon. Webster
Financial's bylaws may be amended by the affirmative vote of at least two-thirds
of the board of directors or by shareholders by at least two-thirds of the total
votes eligible to be voted, at a duly constituted meeting called for that
purpose.
The certificate of incorporation of Maritime provides that the
affirmative vote of a majority and the voting power of the voting stock is
required to amend the certificate of incorporation, unless otherwise required by
law or the certificate of incorporation. The certificate of incorporation
further provides that the affirmative vote of the holders of at least 80% of the
voting power of the outstanding voting stock and a majority of the shares of
voting stock held by independent shareholders is required to approve an
amendment of any provision of the certificate of incorporation that would have
the effect of modifying or permitting circumvention of the business combinations
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provisions in the certificate of incorporation, unless the amendment is
recommended by a vote of at least 66 2/3% of the whole board of directors and a
majority, in any event not less that 7, of the continuing directors, in which
case only the majority vote described above would be required. The certificate
of incorporation of Maritime provides that the bylaws may be amended by the
board of directors by the affirmative vote of both 66 2/3% of the whole board of
directors and a majority, in any event not less than 7, of the continuing
directors. Maritime's certificate of incorporation also provides that Maritime's
shareholders may amend the bylaws by the affirmative vote of the holders of at
least 66 2/3% of the voting power of the outstanding voting stock and a majority
of the shares of voting stock held by independent stockholders.
APPLICABLE LAW
The following discussion is a general summary of particular Delaware
and Connecticut statutory provisions and federal statutory and regulatory
provisions that may be deemed to have an anti-takeover effect.
DELAWARE TAKEOVER STATUTE. Section 203 of the Delaware corporation law
applies to Delaware corporations with a class of voting stock listed on a
national securities exchange, authorized for quotation on the Nasdaq Stock
Market, or held of record by 2,000 or more persons, and restricts transactions
which may be entered into by the corporation and some of its shareholders.
Section 203 provides, in essence, that a shareholder acquiring more than 15% of
the outstanding voting stock of a corporation subject to the statute and that
person's affiliates and associates, referred to in this section as an interested
stockholder, but less than 85% of its shares may not engage in specified
business combinations with the corporation for a period of three years after the
date on which the shareholder became an interested stockholder unless (i) prior
to that date the corporation's board of directors approved either the business
combination or the transaction in which the shareholder became an interested
stockholder or (ii) at or after that time the business combination is approved
by the corporation's board of directors and authorized at an annual or special
meeting of shareholders by the affirmative vote of at least 66 (% of the
outstanding voting stock of the corporation not owned by the interested
stockholder. Section 203 defines the term business combination to include a wide
variety of transactions with or caused by an interested stockholder in which the
interested stockholder receives or could receive a benefit on other than a pro
rata basis with other shareholders, including mergers, consolidations, specified
types of asset sales, specified issuances of additional shares to the interested
stockholder, transactions with the corporation which increase the proportionate
interest of the interested stockholder or transactions in which the interested
stockholder receives specified other benefits.
CONNECTICUT REGULATORY RESTRICTIONS ON ACQUISITIONS OF STOCK.
Connecticut banking statutes prohibit any person from directly or indirectly
offering to acquire or acquiring voting stock of a Connecticut-chartered
commercial bank, like Maritime, a federal savings bank having its principal
office in Connecticut, like Webster Bank, or a holding company of that kind of
entity, like Webster Financial, that would result in the person becoming,
directly or indirectly, the beneficial owner of more than 10% of any class of
voting stock of that entity unless the person had previously filed an
acquisition statement with the Connecticut Commissioner of Banking and the offer
or acquisition has not been disapproved by the Connecticut Commissioner.
FEDERAL LAW. Federal law provides that, subject to some exemptions, no
person acting directly or indirectly or through or in concert with one or more
other persons may acquire control of an insured institution or holding company
thereof, without giving at least 60 days prior written notice providing
specified information to the appropriate federal banking agency. In the case of
Webster Financial and Webster Bank, the appropriate federal banking agency is
the Office of Thrift Supervision and in the case of Maritime, the appropriate
federal banking agency is the FDIC. Control is defined for this purpose as the
power, directly or indirectly, to direct the management or policies of an
insured institution or to vote 25% or more of any class of voting securities of
an insured
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institution. Control is presumed to exist where the acquiring party has voting
control of at least 10% of any class of the institution's voting securities and
other conditions are present. The Office of Thrift Supervision or the FDIC may
prohibit the acquisition of control if the agency finds, among other things,
that (i) the acquisition would result in a monopoly or substantially lessen
competition; (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution; or (iii) the competence,
experience or integrity of any acquiring person or any of the proposed
management personnel indicates that it would not be in the interest of the
depositors or the public to permit the acquisition of control by that person.
WHERE YOU CAN FIND MORE INFORMATION
Webster Financial files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that Webster
Financial files with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet site that contains reports, proxy and information
statements and other information about issuers that file electronically with the
SEC. The address of the SEC's Internet site is http://www.sec.gov. Webster
Financial can be found on the Internet at http://www.websterbank.com. Webster
Financial's common stock is traded on the Nasdaq Stock Market's National Market
Tier under the trading symbol WBST.
Webster Financial has filed with the SEC a registration statement on
Form S-4 under the Securities Act of 1933 relating to Webster Financial's common
stock to be issued to Maritime's shareholders in the merger. As permitted by the
rules and regulations of the SEC, this proxy statement/prospectus does not
contain all the information set forth in the registration statement. You can
obtain that additional information from the SEC's principal office in
Washington, D.C. or the SEC's Internet site as described above. Statements
contained in this proxy statement/prospectus or in any document incorporated by
reference into this proxy statement/prospectus about the contents of any
contract or other document are not necessarily complete and, in each instance
where the contract or document is filed as an exhibit to the registration
statement, reference is made to the copy of that contract or document filed as
an exhibit to the registration statement, with each statement of that kind in
this proxy statement/prospectus being qualified in all respects by reference to
the document.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows Webster Financial to
incorporate by reference information into this proxy statement/prospectus, which
means that Webster Financial can disclose important information to you by
referring you to another document filed separately with the SEC. The information
that Webster Financial incorporates by reference is considered a part of this
proxy statement/prospectus, except for any information superseded by information
presented in this proxy statement/prospectus. This proxy statement/prospectus
incorporates important business and financial information about Webster
Financial and its subsidiaries that is not included in or delivered with this
document. All documents subsequently filed by Webster Financial pursuant to
Sections 13(a), 13(c) 14 or 15(d) of the Securities Exchange Act of 1934 before
April 20, 1999 are deemed to be incorporated by reference into this proxy
statement/prospectus.
This proxy statement/prospectus incorporates by reference the
documents listed below that Webster Financial has filed with the SEC:
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FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
o Annual Report on Form 10-K Year ended December 31, 1997
which was updated by the Current Report
on Form 8-K filed on July 23, 1998
o Quarterly Report on Form 10-Q For the quarter ended March 31, 1998
o Quarterly Report on Form 10-Q For the quarter ended June 30, 1998
o Quarterly Report on Form 10-Q For the quarter ended September 30,
1998
o Current Report on Form 8-K/A Filed January 26, 1998
o Current Report on Form 8-K/A Filed January 26, 1998
o Current Report on Form 8-K/A Filed February 6, 1998
o Current Report on Form 8-K Filed March 4, 1998
o Current Report on Form 8-K Filed March 19, 1998
o Current Report on Form 8-K Filed April 30, 1998
o Current Report on Form 8-K Filed July 23, 1998
which restated portions of the 1997
annual report to shareholders
o Current Report on Form 8-K Filed October 30, 1998
o Current Report on Form 8-K Filed November 23, 1998
o Current Report on Form 8-K Filed February 25, 1999
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR
WRITE TO: JAMES M. SITRO, VICE PRESIDENT, INVESTOR RELATIONS, WEBSTER FINANCIAL
CORPORATION, WEBSTER PLAZA, WATERBURY, CONNECTICUT 06702, TELEPHONE (203)
578-2399. IN ORDER TO OBTAIN TIMELY DELIVERY OF DOCUMENTS, YOU SHOULD REQUEST
INFORMATION AS SOON AS POSSIBLE, BUT NO LATER THAN APRIL 13, 1999.
ADJOURNMENT OF SHAREHOLDER MEETING
The holders of Maritime's common stock will be asked to approve, if
necessary, the adjournment of the shareholder meeting to solicit further votes
in favor of the merger agreement. If you vote against the merger agreement, your
proxy may not be used by management to vote in favor of an adjournment under its
discretionary authority.
SHAREHOLDER PROPOSALS
Any proposal which a Webster Financial shareholder wishes to have
included in the proxy materials for Webster Financial's 1999 annual meeting
under SEC Rule 14a-8 must have been received by Webster at Webster Financial's
principal executive offices at Webster Plaza, Waterbury, Connecticut 06702 by
November 19, 1998. Any other proposal for consideration by shareholders at
Webster Financial's 1999 annual meeting must be received by Webster Financial by
March 23, 1999.
OTHER MATTERS
We do not expect that any matters other than those described in this
proxy statement/ prospectus will be brought before the shareholder meeting. If
any other matters are presented, however, it is the intention of the persons
named in the Maritime proxy card to vote proxies in accordance with the
determination of a majority of Maritime's board of directors, including, without
limitation, a motion to adjourn or postpone the shareholder meeting to another
time and/or place for the purpose of soliciting additional proxies in order to
approve the merger agreement or otherwise.
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EXPERTS
The consolidated financial statements of Webster Financial as restated
to include Eagle Financial Corp. at December 31, 1997 and 1996, and for each of
the years in the three-year period ended December 31, 1997, have been
incorporated by reference into this proxy statement/prospectus and in the
registration statement in reliance on the report of KPMG LLP, independent
certified public accountants, which is incorporated by reference into this proxy
statement/prospectus and in the registration statement, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements of Maritime at December 31, 1998 and 1997, and
for each of the years in the three-year period ended December 31, 1998 are
attached at Appendix C to this proxy statement/prospectus in reliance on the
report of Shatswell, MacLeod & Company, P.C., independent certified public
accountants, which is attached at Appendix C to this proxy statement/prospectus,
incorporated into this proxy statement/prospectus and given upon the authority
of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of Webster Financial's common stock to be issued in the
merger has been passed upon by Hogan & Hartson L.L.P., Washington, D.C.
Additionally, Hogan & Hartson L.L.P. has passed upon tax matters in connection
with the merger.
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APPENDIX A
OSTROWSKI & COMPANY, INC.
BANK AND THRIFT ADVISORS
20 COMMERCE DRIVE 1520 HIGHLAND AVENUE
SUITE 201 SUITE 201
CRANFORD, NJ 07016-3612 CHESHIRE, CT 06410-1265
908-497-0049 203-699-1445
FAX: 908-497-1592 FAX: 203-699-1447
February 25, 1999
Board of Directors
Maritime & Bank Trust Company
130 Westbrook Road
Essex, CT 06426-1149
Members of the Board:
You have requested an update of our opinion as to the fairness, from a
financial point of view, of the terms of an Agreement and Plan of Merger dated
November 3, 1998 (the "Merger Agreement"), by and among Webster Financial
Corporation ("Webster") and its principal subsidiary Webster Bank and Maritime
Bank & Trust Company ("Maritime"), to the holders of Maritime common stock, par
value $.67 per share ("Maritime Common Stock").
As provided for in the Merger Agreement, Webster will acquire Maritime
through the merger of Maritime with and into Webster Bank (the "Merger"). The
Merger Agreement provides that each outstanding share of Maritime Common Stock
shall be converted automatically into and be exchangeable for the number of
shares of Webster common stock, par value $.01 per share ("Webster Common
Stock"), determined by dividing $26.67 by the Base Period Trading Price (as
defined below), as may be adjusted as provided below, computed to three decimal
places (the "Exchange Ratio"); provided, however, that if the Base Period
Trading Price shall be greater than $24.45, the Exchange Ratio shall be 1.091
and if the Base Period Trading Price shall be less than $17.50, the Exchange
Ratio shall be 1.524. Further, if the Base Period Trading Price shall be less
than $17.50, Maritime Bank may elect to exercise its right to terminate the
Merger Agreement. Upon such election, Webster shall have the option to adjust
the Exchange Ratio to equal that number obtained by dividing $26.67 by the Base
Period Trading Price, rounded to three decimal places (the "Adjusted Exchange
Ratio"). If Webster elects to make such adjustment, no termination shall have
occurred. For the purposes of the Merger Agreement, the "Base Period Trading
Price" shall mean the average of the daily closing prices per share for Webster
Common Stock for the 15 consecutive trading days during which shares of Webster
Common Stock are actually traded (as reported on The Nasdaq Stock Market, Inc.
National Market Tier ("Nasdaq")) ending on the day preceding the receipt of the
last required federal bank regulatory approval or waiver required to effect the
Merger.
In connection with executing the Merger Agreement, Maritime entered into an
Option Agreement with Webster dated November 3, 1998 (the "Option Agreement"),
pursuant to which Maritime has granted Webster an option to acquire up to
141,004 fully paid and nonassessable shares of Maritime Common Stock at a price
of $22.00 per share. Webster may exercise this Option upon the occurrence of
certain events specified in the Option Agreement.
A-1
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OSTROWSKI & COMPANY, INC.
Board of Directors
February 25, 1999
Page 2
Ostrowski & Company, Inc., as part of its bank and thrift advisory
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
purposes. We are familiar with Maritime, having provided advisory services to
Maritime and have received and will receive fees from Maritime in connection
with issuing this opinion as to the fairness, from a financial point of view, of
the terms of the proposed transaction as set forth in the Merger Agreement to
the holders of Maritime Common Stock.
In connection with providing this update of our opinion, we have examined
and relied upon, among other things: the Merger Agreement; the Option Agreement;
annual reports to shareholders, proxy statements and related audited financial
statements for Maritime and Webster for each of the three fiscal years ended
December 31, 1995, 1996, 1997; audited financial statements for the fiscal year
ended December 31, 1998 for Maritime; certain unaudited interim financial
reports for Maritime and Webster for the quarters ended March 31, 1998, June 30,
1998 and September 30, 1998, and for the quarter and fiscal year ended December
31, 1998 for Webster; certain other financial information for Maritime and
Webster, including proforma financial statements and managements' estimates
relating to, among other things, earnings, asset quality, loan delinquencies and
capital. We have conducted discussions with executive management of Maritime and
Webster concerning historical financial performance and condition, market area
economic conditions, future business prospects and financial forecasts. We have
reviewed comparable financial, operating and market data for the banking
industry and selected peer groups; compared the terms of the Merger Agreement
with other bank and thrift merger and acquisition transactions; and have
considered such additional financial and other information deemed relevant.
In preparing our opinion, we have relied upon the accuracy, completeness
and fair presentation of all information supplied or otherwise made available to
us by, or on behalf of, Maritime and Webster. We have not independently verified
such information or undertaken an independent evaluation or appraisal of the
assets or liabilities of Maritime or Webster, nor have we been furnished any
such evaluations or appraisals. With respect to forecasts of expected future
financial performance, we have been advised that they reflect the best currently
available estimates and judgment of executive management. This opinion is
necessarily based upon the information available to us and the market, economic
and other conditions, as they exist and can be evaluated, as of the date of this
letter.
This opinion is directed solely to the fairness, from a financial point of
view, of the terms of the Merger Agreement to the holders of Maritime Common
Stock ("Maritime Shareholders") and does not constitute a recommendation to any
Maritime Shareholder as to how such Maritime Shareholder should vote with
respect to the Merger Agreement.
In reliance upon and subject to the foregoing, it is our opinion that as of
the date hereof, the terms of the Merger Agreement are fair, from a financial
point of view, to Maritime Shareholders.
Very truly yours,
/s/ OSTROWSKI & COMPANY, INC.
OSTROWSKI & COMPANY, INC.
A-2
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APPENDIX B
SECTIONS 33-855 TO 33-872 OF THE CONNECTICUT GENERAL STATUTES
SS. 33-855. DEFINITIONS
As used in sections 33-855 to 33-872, inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when and in
the manner required by sections 33-860 to 33-868, inclusive.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SS. 33-856. RIGHT TO DISSENT
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a
party (A) if shareholder approval is required for the merger by section 33-817
or the certificate of incorporation and the shareholder is entitled to vote on
the merger or (B) if the corporation is a subsidiary that is merged with its
parent under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
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(4) An amendment of the certificate of incorporation that materially
and adversely affects rights in respect of a dissenter's shares because it: (A)
Alters or abolishes a preferential right of the shares; (B) creates, alters or
abolishes a right in respect of redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the shares; (C) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities; (D) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or (E)
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under section
33-668; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the certificate of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as holder
of such shares against the corporate transactions described in this section,
whether or not he proceeds as provided in sections 33-855 to 33-872, inclusive.
SS. 33-857. DISSENT BY NOMINEES AND BENEFICIAL OWNERS
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if: (1) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
SS.SS. 33-858, 33-859. RESERVED FOR FUTURE USE
SS. 33-860. NOTICE OF DISSENTERS' RIGHTS
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under sections 33-855 to 33-872, inclusive, and be accompanied by a copy
of said sections.
(b) If corporate action creating dissenters' rights under section 33-856 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 33-862.
SS. 33-861. NOTICE OF INTENT TO DEMAND PAYMENT
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) shall deliver to the corporation before
the vote is taken written notice of his intent to demand
B-2
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payment for his shares if the proposed action is effectuated and (2) shall not
vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
of this section is not entitled to payment for his shares under sections 33-855
to 33-872, inclusive.
SS. 33-862. DISSENTERS' NOTICE
(a) If proposed corporate action creating dissenters' rights under section
33-856 is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after the
corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days after
the date the subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
SS. 33-863. DUTY TO DEMAND PAYMENT
(a) A shareholder sent a dissenters' notice described in section 33-862
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to subdivision (3) of subsection (b) of said section and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) of this section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
SS. 33-864. SHARE RESTRICTIONS
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 33-866.
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(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
SS. 33-865. PAYMENT
(a) Except as provided in section 33-867, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with section 33-863 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by: (1) The corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, a statement of changes
in shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a statement of the dissenter's right to demand payment under section 33-868; and
(5) a copy of sections 33-855 to 33-872, inclusive.
SS. 33-866. FAILURE TO TAKE ACTION
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
SS. 33-867. AFTER-ACQUIRED SHARES
(a) A corporation may elect to withhold payment required by section 33-865
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under
section 33-868.
SS. 33-868. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865
or offered under section 33-867 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
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(2) The corporation fails to make payment under section 33-865 within
sixty days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
of this section within thirty days after the corporation made or offered payment
for his shares.
SS.SS. 33-869, 33-870. RESERVED FOR FUTURE USE
SS. 33-871. COURT ACTION
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the superior court for
the judicial district where a corporation's principal office or, if none in this
state, its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the superior court for the judicial district where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under section 33-867.
SS. 33-872. COURT COSTS AND COUNSEL FEES
(a) The court in an appraisal proceeding commenced under section 33-871
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under section 33-868.
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(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (1) Against
the corporation and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of sections
33-860 to 33-868, inclusive; or (2) against either the corporation or a
dissenter, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by sections 33-855 to
33-872, inclusive.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
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APPENDIX C
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report.............................................. C-2
Balance Sheets............................................................ C-3
Statements of Income...................................................... C-4
Statements of Changes in Stockholders' Equity............................. C-5
Statements of Cash Flows.................................................. C-6
Notes to Financial Statements............................................. C-8
The accompanying notes are an integral part of these financial statements.
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To the Board of Directors
Maritime Bank & Trust Company
Essex, Connecticut
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of Maritime Bank & Trust Company
as of December 31, 1998 and 1997 and the related statements of income, changes
in stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1998. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Maritime Bank & Trust Company
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Shatswell, MacLeod & Company, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
January 14, 1999
C-2
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MARITIME BANK & TRUST COMPANY
BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
- ------ ------------ ------------
<S> <C> <C>
Cash and due from banks $ 3,906,274 $ 3,119,636
Federal funds sold 2,300,000 1,000,000
------------ ------------
Cash and cash equivalents 6,206,274 4,119,636
Investments in available-for-sale securities (at fair value) 21,142,222 19,949,988
Federal Home Loan Bank stock, at cost 375,300 375,300
Loans, net 70,759,150 56,077,271
Premises and equipment 1,984,102 1,823,502
Accrued interest receivable 598,769 513,310
Other assets 335,116 205,163
------------ ------------
Total assets $101,400,933 $ 83,064,170
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 17,629,863 $ 13,982,250
Savings and NOW deposits 43,123,451 36,764,558
Time deposits 28,259,547 21,564,322
------------ ------------
Total deposits 89,012,861 72,311,130
Advances from Federal Home Loan Bank of Boston 4,979,381 4,000,000
Other liabilities 217,615 237,087
------------ ------------
Total liabilities 94,209,857 76,548,217
------------ ------------
Stockholders' equity:
Common stock, $.666667 par value in 1998 $1.00 par value in 1997;
authorized 1,500,000 shares; issued and outstanding 705,023 shares
in 1998 and 705,030 shares in 1997 470,016 470,020
Paid-in capital 4,207,128 4,207,266
Retained earnings 2,389,722 1,788,090
Accumulated other comprehensive income 124,210 50,577
------------ ------------
Total stockholders' equity 7,191,076 6,515,953
------------ ------------
Total liabilities and stockholders' equity $101,400,933 $ 83,064,170
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
C-3
<PAGE>
MARITIME BANK & TRUST COMPANY
STATEMENTS OF INCOME
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans $ 5,793,300 $ 4,687,054 $ 3,942,748
Interest and dividends on securities:
Taxable 1,388,410 1,249,978 736,186
Dividends on equity securities 35,089 39,262 70,277
Other interest 209,147 78,383 67,722
----------- ----------- -----------
Total interest and dividend income 7,425,946 6,054,677 4,816,933
----------- ----------- -----------
Interest expense:
Interest on deposits 2,696,085 2,197,967 1,758,626
Interest on advances from Federal Home Loan Bank 327,423 80,156
Interest on other borrowed funds 4,110 5,090 152
----------- ----------- -----------
Total interest expense 3,027,618 2,283,213 1,758,778
----------- ----------- -----------
Net interest and dividend income 4,398,328 3,771,464 3,058,155
Provision for loan losses 315,000 240,000 160,000
----------- ----------- -----------
Net interest and dividend income after provision
for loan losses 4,083,328 3,531,464 2,898,155
----------- ----------- -----------
Other income:
Service charges on deposit accounts 112,669 103,135 89,921
Gain on sale of other real estate owned 17,981
Securities gains (losses), net 22,648 1,971 (36,288)
Other income 302,413 228,920 177,695
----------- ----------- -----------
Total other income 455,711 334,026 231,328
----------- ----------- -----------
Other expense:
Salaries and employee benefits 1,605,095 1,336,379 1,072,887
Occupancy expense 260,675 228,632 190,375
Equipment expense 160,194 140,163 107,654
Stationery and supplies expense 82,262 77,370 80,800
Directors fees expense 84,800 68,300 45,000
Advertising and marketing expense 69,489 73,535 77,539
Data processing expense 209,158 142,137 75,760
Other expense 543,822 459,828 366,886
----------- ----------- -----------
Total other expense 3,015,495 2,526,344 2,016,901
----------- ----------- -----------
Income before income taxes 1,523,544 1,339,146 1,112,582
Income taxes 607,000 538,000 453,500
----------- ----------- -----------
Net income $ 916,544 $ 801,146 $ 659,082
=========== =========== ===========
Earnings per common share $ 1.30 $ 1.14 $ .95
=========== =========== ===========
Earnings per common share, assuming dilution $ 1.18 $ 1.07 $ .91
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
C-4
<PAGE>
MARITIME BANK & TRUST COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Accumulated
Other
Common Stock Comprehensive
------------ Paid-in Retained Income
Shares Amount Capital Earnings (Loss) Total
------ ------ ------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995, as
previously reported 462,820 $462,820 $4,137,064 $ 710,529 $(28,869) $5,281,544
Three-for-two stock split as of
August 28, 1998 and equivalent
change in par value 231,410
----------- ----------- ------------- --------------- ------------ ----------------
Balance, December 31, 1995
as adjusted 694,230 462,820 4,137,064 710,529 (28,869) 5,281,544
Comprehensive income:
Net income 659,082
Net change in unrealized holding
loss on available-for-sale securities,
net of tax effect of $850 38,679
Comprehensive income 697,761
Dividends declared ($.23 per share) (157,358) (157,358)
Exercised stock options 6,300 4,200 37,800 42,000
----------- ----------- ------------- --------------- ------------ ----------------
Balance, December 31, 1996 700,530 467,020 4,174,864 1,212,253 9,810 5,863,947
Comprehensive income:
Net income 801,146
Net change in unrealized holding
gain on available-for-sale securities,
net of tax effect of $28,202 40,767
Comprehensive income 841,913
Dividends declared ($.32 per share) (225,309) (225,309)
Exercised stock options 4,500 3,000 32,402 35,402
----------- ----------- ------------- --------------- ------------ ----------------
Balance, December 31, 1997 705,030 470,020 4,207,266 1,788,090 50,577 6,515,953
Comprehensive income:
Net income 916,544
Net change in unrealized holding
gain on available-for-sale securities,
net of tax effect 73,633
Comprehensive income 990,177
Dividends declared ($.45 per share) (314,912) (314,912)
Retirement of fractional shares (7) (4) (138) (142)
----------- ----------- ------------- --------------- ------------ ----------------
Balance, December 31, 1998 705,023 $470,016 $4,207,128 $2,389,722 $124,210 $7,191,076
======= ======== ========== ========== ======== ==========
Reclassification disclosure for the year ended December 31, 1998:
Net unrealized gains on available-for-sale securities $144,980
Less reclassification adjustment for realized gains in net income 22,648
----------
Other comprehensive income before income tax effect 122,332
Income tax expense (48,699)
----------
Other comprehensive income, net of tax $ 73,633
=========
</TABLE>
Accumulated other comprehensive income as of December 31, 1998, 1997 and 1996
consists of net unrealized holding gains (losses) on available-for-sale
securities, net of taxes.
The accompanying notes are an integral part of these financial statements.
C-5
<PAGE>
MARITIME BANK & TRUST COMPANY
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 916,544 $ 801,146 $ 659,082
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 315,000 240,000 160,000
Depreciation and amortization 170,646 147,372 112,266
Deferred tax expense (benefit) (120,925) 1,161 6,039
Increase (decrease) in taxes payable (42,498) 3,677 (26,460)
Increase in interest receivable (85,459) (76,330) (88,534)
Increase in interest payable 17,519 12,594 7,352
Increase in accrued expenses 2,564 23,219 18,257
Increase in prepaid expenses (8,225) (210) (16,185)
Increase (decrease) in other liabilities 2,942 7,603 (75,807)
(Increase) decrease in other assets (49,501) (16,653) 28,828
(Accretion) amortization of securities, net 6,132 (10,809) (3,484)
Amortization of organization costs 4,013
Securities (gains) losses, net (22,648) (1,971) 36,288
Gain on sale of other real estate owned (17,981)
Loss on disposals of fixed assets 17,379
Change in unearned income 13,973 (15,924) (40,218)
------------ ------------ ------------
Net cash provided by operating activities 1,115,462 1,114,875 781,437
------------ ------------ ------------
Cash flows from investing activities:
Purchases of available-for-sale securities (9,559,075) (12,120,306) (11,295,979)
Purchases of Federal Home Loan Bank stock (186,000) (18,500)
Proceeds from sales of available-for-sale securities 2,007,344 2,441,922 2,971,684
Proceeds from maturities of available-for-sale securities 6,498,345 7,242,037 3,332,909
Net increase in loans (15,187,350) (11,877,674) (7,093,732)
Recoveries of loans previously charged off 9,070 8,825
Capital expenditures (348,625) (545,503) (200,034)
Proceeds from sales of fixed assets 2,302
Proceeds from sale of other real estate owned 185,409
------------ ------------ ------------
Net cash used in investing activities (16,394,882) (15,034,397) (12,303,652)
------------ ------------ ------------
Cash flows from financing activities:
Net increase in demand deposits, NOW
and savings accounts 10,006,506 6,162,359 10,324,990
Net increase in time deposits 6,695,225 2,301,871 2,682,315
Dividends paid (314,912) (225,309) (157,358)
Fractional shares paid in cash (142)
Proceeds from stock issuance 30,000 42,000
Advances from Federal Home Loan Bank 14,474,000 18,000,000
Repayments of advances from
Federal Home Loan Bank (13,494,619) (14,000,000)
------------ ------------ ------------
Net cash provided by financing activities 17,366,058 12,268,921 12,891,947
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 2,086,638 (1,650,601) 1,369,732
Cash and cash equivalents at beginning of year 4,119,636 5,770,237 4,400,505
------------ ------------ ------------
Cash and cash equivalents at end of year $ 6,206,274 $ 4,119,636 $ 5,770,237
============ ============ ============
</TABLE>
C-6
<PAGE>
MARITIME BANK & TRUST COMPANY
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998, 1997 and 1996
(continued)
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Supplemental disclosures:
Interest paid $3,010,099 $2,270,619 $1,751,426
Income taxes paid 770,423 533,162 473,921
Loans transferred to other real estate owned 167,428
</TABLE>
The accompanying notes are an integral part of these financial statements.
C-7
<PAGE>
MARITIME BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - NATURE OF OPERATIONS
Maritime Bank & Trust Company (Bank) is a state chartered bank, which was
incorporated in 1989 and is headquartered in Essex, Connecticut. The Bank
operates its business from three banking offices located in Connecticut. The
Bank is engaged principally in the business of attracting deposits from the
general public and investing those deposits in residential and commercial real
estate loans, and in consumer and small business loans.
NOTE 2 - ACCOUNTING POLICIES
The accounting and reporting policies of the Bank conform to generally accepted
accounting principles and predominant practices within the banking industry. The
financial statements of the Bank were prepared using the accrual basis of
accounting. The significant accounting policies of the Bank are summarized below
to assist the reader in better understanding the financial statements and other
data contained herein.
PERVASIVENESS OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from the
estimates.
CASH AND CASH EQUIVALENTS:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, cash items, due from banks and federal funds sold.
SECURITIES:
Investments in debt securities are adjusted for amortization of premiums
and accretion of discounts. Gains or losses on sales of investment
securities are computed on a specific identification basis.
The Bank classifies debt and equity securities into one of three
categories: held-to-maturity, available-for-sale, or trading. This security
classification may be modified after acquisition only under certain
specified conditions. In general, securities may be classified as
held-to-maturity only if the Bank has the positive intent and ability to
hold them to maturity. Trading securities are defined as those bought and
held principally for the purpose of selling them in the near term. All
other securities must be classified as available-for-sale.
-- Held-to-maturity securities are measured at amortized cost in the
balance sheet. Unrealized holding gains and losses are not
included in earnings or in a separate component of capital. They
are merely disclosed in the notes to the financial statements.
-- Available-for-sale securities are carried at fair value on the
balance sheet. Unrealized holding gains and losses are not
included in earnings, but are reported
C-8
<PAGE>
as a net amount (less expected tax) in a separate component of
capital until realized.
-- Trading securities are carried at fair value on the balance
sheet. Unrealized holding gains and losses for trading securities
are included in earnings.
LOANS:
Loans receivable that management has the intent and ability to hold until
maturity or payoff are reported at their outstanding principal balances
reduced by amounts due to borrowers on unadvanced loans, any charge-offs,
the allowance for loan losses and any deferred fees or costs on originated
loans, or unamortized premiums or discounts on purchased loans.
Interest on loans is recognized on a simple interest basis.
Loan origination and commitment fees and certain direct origination costs
are deferred, and the net amount amortized as an adjustment of the related
loan's yield. The Bank is amortizing these amounts over the contractual
life of the related loans.
Cash receipts of interest income on impaired loans is credited to principal
to the extent necessary to eliminate doubt as to the collectibility of the
net carrying amount of the loan. Some or all of the cash receipts of
interest income on impaired loans is recognized as interest income if the
remaining net carrying amount of the loan is deemed to be fully
collectible. When recognition of interest income on an impaired loan on a
cash basis is appropriate, the amount of income that is recognized is
limited to that which would have been accrued on the net carrying amount of
the loan at the contractual interest rate. Any cash interest payments
received in excess of the limit and not applied to reduce the net carrying
amount of the loan are recorded as recoveries of charge-offs until the
charge-offs are fully recovered.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is increased by provisions charged to current
operations and is decreased by loan losses, net of recoveries. The
provision for loan losses is based on management's evaluation of current
and anticipated economic conditions, changes in the character and size of
the loan portfolio, and other indicators.
The Bank considers a loan to be impaired when, based on current information
and events, it is probable that the Bank will be unable to collect all
amounts due according to the contractual terms of the loan agreement. The
Bank measures impaired loans by either the present value of expected future
cash flows discounted at the loan's effective interest rate, the loan's
observable market price, or the fair value of the collateral if the loan is
collateral dependent.
The Bank considers for impairment all loans, except large groups of smaller
balance homogeneous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at the lower of cost or fair
value, leases, and convertible or nonconvertible debentures and bonds and
other debt securities. The Bank considers its residential real estate loans
and consumer loans that are not individually significant to be large groups
of smaller balance homogeneous loans.
Factors considered by management in determining impairment include payment
status, net worth and collateral value. An insignificant payment delay or
an insignificant shortfall in payment does not in itself result in the
review of a loan for impairment. The Bank reviews its loans for impairment
on a loan-by-loan basis. The Bank does not apply impairment to aggregations
of loans that have risk characteristics in common with other impaired
loans. Interest on a loan is not generally accrued when the loan becomes
ninety or more days
C-9
<PAGE>
overdue. The Bank may place a loan on nonaccrual status but not classify it
as impaired, if (i) it is probable that the Bank will collect all amounts
due in accordance with the contractual terms of the loan or (ii) the loan
is an individually insignificant residential mortgage loan or consumer
loan. Impaired loans are charged-off when management believes that the
collectibility of the loan's principal is remote. Substantially all of the
Bank's loans that have been identified as impaired have been measured by
the fair value of existing collateral.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Cost and related allowances for depreciation and
amortization of premises and equipment retired or otherwise disposed of are
removed from the respective accounts with any gain or loss included in
income or expense. Depreciation and amortization are calculated principally
on the straight-line method over the estimated useful lives of the assets.
OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSURES:
Other real estate owned includes properties acquired through foreclosure
and properties classified as in-substance foreclosures in accordance with
Financial Accounting Standards Board Statement No. 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructuring." These properties
are carried at the lower of cost or estimated fair value less estimated
costs to sell. Any writedown from cost to estimated fair value required at
the time of foreclosure or classification as in-substance foreclosure is
charged to the allowance for loan losses. Expenses incurred in connection
with maintaining these assets, subsequent writedowns and gains or losses
recognized upon sale are included in other expense.
In accordance with Statement of Financial Accounting Standards No. 114
"Accounting by Creditors for Impairment of a Loan," the Bank classifies
loans as in-substance repossessed or foreclosed if the Bank receives
physical possession of the debtor's assets regardless of whether formal
foreclosure proceedings take place.
INCOME TAXES:
The Bank recognizes income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are established for
the temporary differences between the accounting basis and the tax basis of
the Bank's assets and liabilities at enacted tax rates expected to be in
effect when the amounts related to such temporary differences are realized
or settled.
EMPLOYEE BENEFITS:
The Bank has a 401(k) plan covering substantially all employees. Under the
plan, the Bank contributes two percent of all eligible participants' salary
and fifty percent of the participant's first six percent that they
contribute.
FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires that the Bank disclose
estimated fair value for its financial instruments. Fair value methods and
assumptions used by the Bank in estimating its fair value disclosures are
as follows:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and cash equivalents approximate those assets' fair values.
C-10
<PAGE>
Securities (including mortgage-backed securities): Fair values for
securities are based on quoted market prices, where available. If quoted
market prices are not available, fair values are based on quoted market
prices of comparable instruments.
Loans receivable: For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying
values. The fair values for other loans are estimated using discounted cash
flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. The carrying amount
of accrued interest approximates its fair value.
Accrued interest receivable: The carrying amount of accrued interest
receivable approximates its fair value.
Deposit liabilities: The fair values disclosed for demand deposits (e.g.,
interest and non-interest checking, passbook savings and money market
accounts) are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on
time deposits.
Federal Home Loan Bank Advances: Fair values for FHLB advances are
estimated using a discounted cash flow technique that applies interest
rates currently being offered on advances to a schedule of aggregated
expected monthly maturities on FHLB advances.
Off-balance sheet instruments: The fair value of commitments to originate
loans is estimated using the fees currently charged to enter similar
agreements, taking into account the remaining terms of the agreements and
the present creditworthiness of the counterparties. For fixed-rate loan
commitments and the unadvanced portion of loans, fair value also considers
the difference between current levels of interest rates and the committed
rates. The fair value of letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them
or otherwise settle the obligation with the counterparties at the reporting
date.
STOCK BASED COMPENSATION:
The Bank recognizes stock-based compensation using the intrinsic value
approach set forth in APB Opinion No. 25 rather than the fair value method
introduced in SFAS No. 123. Entities electing to follow the provisions of
APB No. 25 must make pro forma disclosure of net income and earnings per
share, as if the fair value method of accounting defined in SFAS No. 123
had been applied. The Bank has made the pro forma disclosures required by
SFAS No. 123.
EARNINGS PER SHARE:
Statement of Financial Accounting Standards No. 128 (SFAS No. 128),
"Earnings per Share" is effective for periods ending after December 15,
1997. SFAS No. 128 simplifies the standards of computing earnings per share
(EPS) previously found in APB Opinion No. 15. It replaces the presentation
of primary EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to
C-11
<PAGE>
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings
of the entity. Diluted EPS is computed similarly to fully diluted EPS
pursuant to APB Opinion No. 15.
The Bank has computed and presented EPS for the years ended December 31,
1998, 1997 and 1996 in accordance with SFAS No. 128. EPS as so computed
does not differ materially from EPS that would have resulted if APB Opinion
No. 15 had been applied.
NOTE 3 - INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
Investments in available-for-sale securities have been classified in the balance
sheets according to management's intent. The carrying amount of securities and
their approximate fair values are as follows as of December 31:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C>
December 31, 1998:
Corporate debt securities $ 996,636 $ 17,464 $ $ 1,014,100
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies 12,421,393 153,333 12,574,726
Debt securities issued by foreign governments 100,000 100,000
Mortgage-backed securities 7,416,240 62,192 25,036 7,453,396
----------- -------- ------- -----------
$20,934,269 $232,989 $25,036 $21,142,222
=========== ======== ======= ===========
December 31, 1997:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies $11,988,283 $ 59,215 $ 2,448 $12,045,050
Debt securities issued by foreign governments 100,000 100,000
Mortgage-backed securities 7,776,083 48,885 20,030 7,804,938
----------- -------- ------- -----------
$19,864,366 $108,100 $22,478 $19,949,988
=========== ======== ======= ===========
</TABLE>
The scheduled maturities of investments in available-for-sale securities were as
follows as of December 31, 1998:
<TABLE>
<CAPTION>
Amortized
Cost Fair
Basis Value
--------- -----
<S> <C> <C>
Debt securities other than mortgage-backed securities:
Due within one year $ 1,998,511 $ 2,016,600
Due after one year through five years 8,226,623 8,326,466
Due after five years through ten years 3,292,895 3,345,760
Mortgage-backed securities 7,416,240 7,453,396
------------ ------------
$20,934,269 $21,142,222
</TABLE>
During 1998, proceeds from sales of investments in available-for-sale securities
amounted to $2,007,344. Gross realized gains on those sales amounted to $9,882.
There were no gross realized losses during 1998. During 1997, proceeds from
sales of investments in available-for-sale securities amounted to $2,441,922.
Gross realized losses on those sales amounted to $1,800. Gross realized gains on
those sales amounted to $3,771. During 1996, proceeds from sales of investments
in available-for-sale securities amounted to $2,971,684. Gross realized losses
on those sales amounted to $42,701. Gross realized gains on those sales amounted
to $6,413.
C-12
<PAGE>
There were no securities of issuers whose aggregate carrying amount exceeded 10%
of stockholders' equity as of December 31, 1998.
A total carrying amount of $5,446,020 of debt securities was pledged to secure
lines of credit with financial institutions and public funds on deposit as of
December 31, 1998.
NOTE 4 - LOANS
Loans consisted of the following as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Commercial, financial and agricultural $ 9,412,303 $ 8,243,568
Real estate - construction and land development 3,840,869 1,689,807
Real estate - residential 35,990,697 28,877,041
Real estate - commercial 19,013,297 14,262,896
Consumer 3,525,308 3,759,310
Other 12,026 12,026
------------ ------------
71,794,500 56,844,648
Unearned income (23,572) (9,599)
Allowance for loan losses (1,011,778) (757,778)
------------ ------------
Net loans $70,759,150 $56,077,271
============ ============
</TABLE>
Changes in the allowance for loan losses were as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
----------- -------- --------
<S> <C> <C> <C>
Balance at beginning of period $ 757,778 $740,236 $609,507
Loans charged-off (70,070) (231,283) (29,271)
Recoveries of loans previously charged off 9,070 8,825
Provision for loan losses 315,000 240,000 160,000
----------- -------- --------
Balance at end of period $1,011,778 $757,778 $740,236
=========== ======== ========
</TABLE>
Certain directors and executive officers of the Bank and companies in which they
have significant ownership interest were customers of the Bank during 1998.
Total loans to such persons and their companies amounted to $2,457,547 as of
December 31, 1998. During 1998, payments of $356,100 were made and advances
totaled $901,000.
C-13
<PAGE>
Information about loans that meet the definition of an impaired loan in
Statement of Financial Accounting Standards No. 114 is as follows as of December
31:
<TABLE>
<CAPTION>
1998 1997
------------------------ -----------------------
Recorded Related Recorded Related
Investment Allowance Investment Allowance
In Impaired For Credit In Impaired For Credit
Loans Losses Loans Losses
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Loans for which there is a related allowance
for credit losses $ 0 $ 0 $ 64,980 $ 37,000
Loans for which there is no related allowance
for credit losses 141,742
-------- -------- -------- --------
Totals $141,742 $ 0 $ 64,980 $ 37,000
======== ======== ======== ========
Average recorded investment in impaired loans
during the year ended December 31 $ 15,902 $209,296
======== ========
Related amount of interest income recognized during the
time, in the year ended December 31, that the loans were
impaired
Total recognized $ 0 $ 0
======== ========
Amount recognized using a cash-basis method
of accounting $ 0 $ 0
======== ========
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
The following is a summary of premises and equipment as of December 31:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Land $ 303,000 $ 303,000
Buildings 1,426,877 1,501,301
Leasehold improvements 80,347 79,877
Furniture and equipment 743,792 572,142
----------- -----------
2,554,016 2,456,320
Accumulated depreciation and amortization (569,914) (632,818)
----------- -----------
$ 1,984,102 $ 1,823,502
=========== ===========
</TABLE>
NOTE 6 - DEPOSITS
The aggregate amount of time deposit accounts (including CDs), each with a
minimum denomination of $100,000, was approximately $4,737,160 and $3,309,457 as
of December 31, 1998 and 1997, respectively.
For time deposits as of December 31, 1998, the aggregate amount of maturities
for years ended December 31, are:
1999 $24,975,063
2000 and 2001 2,540,306
Thereafter 744,178
-----------
$28,259,547
===========
C-14
<PAGE>
NOTE 7 - ADVANCES FROM FEDERAL HOME LOAN BANK OF BOSTON
Advances consist of funds borrowed from the Federal Home Loan Bank of Boston
(FHLB).
Maturities of advances from the Federal Home Loan Bank of Boston for the five
fiscal years ending after December 31, 1998 and thereafter are summarized as
follows:
<TABLE>
<CAPTION>
INTEREST RATE RANGE AMOUNT
------------------- ------
<S> <C> <C> <C>
1999 5.91% - 6.01% $ 683,070
2000 5.91 - 6.01 724,870
2001 5.91 - 6.01 769,802
2002 5.91 - 6.01 819,349
2003 5.91 - 6.01 870,026
2004 through 2005 5.91 - 6.01 1,112,264
-----------
$4,979,381
==========
</TABLE>
Advances are secured by the Bank's stock in that institution, its residential
real estate mortgage portfolio and the remaining U.S. government and agencies
obligations not otherwise pledged.
NOTE 8 - INCOME TAXES
The components of income tax expense are as follows for the years ended December
31:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal $ 573,340 $ 402,121 $ 332,495
State 154,585 134,718 114,966
--------- --------- ---------
727,925 536,839 447,461
--------- --------- ---------
Deferred:
Federal (102,212) 520 5,805
State (18,713) 641 234
--------- --------- ---------
(120,925) 1,161 6,039
--------- --------- ---------
Total income tax expense $ 607,000 $ 538,000 $ 453,500
========= ========= =========
</TABLE>
The reasons for the differences between the statutory federal income tax rates
and the effective tax rates are summarized as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
% of % of % of
Income Income Income
------ ------ ------
<S> <C> <C> <C>
Federal income tax at statutory rate 34.0% 34.0% 34.0%
Increase (decrease) in tax resulting from:
Dividends received deduction (.2) (.3) (1.0)
Capital loss carryover 1.3
Other (.5)
Unallowable expenses .1 .1 .2
State tax, net of federal tax benefit 5.9 6.4 6.8
---- ---- ----
39.8% 40.2% 40.8%
==== ==== ====
</TABLE>
C-15
<PAGE>
The Bank had gross deferred tax assets and gross deferred tax liabilities as
follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 292,603 $ 186,442
Deferred loan fees/costs, net 12,090 9,631
Deferred income 4,564 4,194
Interest on non-performing loans 2,913 1,936
--------- ---------
Gross deferred tax assets 312,170 202,203
--------- ---------
Deferred tax liabilities:
Unrealized gain on available-for-sale securities (83,743) (35,045)
Accelerated depreciation (30,184) (39,688)
Deferred state tax refund (2,588) (4,042)
--------- ---------
Gross deferred tax liabilities (116,515) (78,775)
--------- ---------
Net deferred tax assets $ 195,655 $ 123,428
========= =========
</TABLE>
Deferred tax assets have not been reduced by a valuation allowance because
management believes that it is more likely than not that the full amount of
deferred tax assets will be realized.
As of December 31, 1998, the Bank had no operating loss and tax credit
carryovers for tax purposes.
NOTE 9 - STOCK COMPENSATION PLAN
The Bank has a fixed option, stock-based compensation plan, which is described
below. The Bank applies APB Opinion 25 and related Interpretations in accounting
for its plan. Accordingly, no compensation cost has been recognized for its
fixed stock option plan. Had compensation cost been determined based on the fair
value at the grant dates for awards consistent with the method of SFAS No. 123
the Bank's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C> <C>
Net income As reported $916,544 $801,146
Pro forma $916,544 $793,346
Earnings per common share As reported $1.30 $1.14
Pro forma $1.30 $1.13
Earnings per common share,
assuming dilution As reported $1.18 $1.07
Pro forma $1.18 $1.06
</TABLE>
Under the 1991 Employee Stock Option Plan, the Bank may grant options to its
Directors and Management for shares of common stock. To date, all options under
the plan have been granted. Under the plan, the exercise price of each option
equals the market price of the Bank's stock on the date of grant and an option's
maximum term is 10 years.
The fair value of stock options granted in 1997 was calculated using the
following assumptions: volatility of 10%; dividend yield of 2%; risk-free rate
of 6.4% and estimated life of 9 years.
C-16
<PAGE>
A summary of the status of the Bank's plan as of December 31, 1998, 1997 and
1996 and changes during the years ending on those dates is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------- -------------------------------- -------------------------------
Weighted-Average Weighted-Average Weighted-Average
Price Shares Exercise Price Shares Exercise Price Shares Exercise Price
- ----- -------- --------------------- -------- ---------------------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 101,700 $6.75 103,200 $6.67 109,500 $6.67
Granted 0 3,000 9.33 0
Exercised 0 (4,500) 6.67 (6,300) 6.67
Forfeited 0 0 0
------- ------- -------
Outstanding at end of
year 101,700 $6.75 101,700 $6.75 103,200 $6.67
======= ======= =======
Options exercisable at
year-end 101,700 101,700 103,200
Weighted-average fair
value of options granted
during the year N/A $2.60 N/A
</TABLE>
The following table summarizes information about fixed stock options outstanding
as of December 31, 1998:
Options Outstanding and Exercisable
-----------------------------------
Number Remaining
Exercise Price as of 12/31/98 Contractual Life
-------------- -------------- ----------------
$6.67 98,700 4 years
9.33 3,000 8.1 years
-------
101,700
=======
The earnings per share data, numbers of options and option prices per share
shown in this note have been adjusted to reflect the three-for-two stock split
in 1998. See Note 17.
NOTE 10 - EMPLOYEE BENEFITS
Employees who have attained age 21 are eligible for membership in the 401(k)
plan during the first quarter beginning after their employment date.
The provisions of the 401(k) plan allow eligible employees to contribute up to
15% of their annual salary with matching contributions by the Bank for
employees. Contributions made by the Bank vest after one full year of service.
The Bank contributes 2% of all eligible participants' salary and matches 50% of
the first 6% contributed by the participants'. The Bank's expense under this
plan was $60,964, $50,635 and $35,729 for 1998, 1997 and 1996, respectively.
The Bank has employment agreements with the President and three other officers
of the Bank. The agreements include provisions for certain benefits to the
officers if a change in control, as defined, occurs.
NOTE 11 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possibly additional discretionary - actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines
C-17
<PAGE>
that involve quantitative measures of the Bank's assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1998, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1998, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based
and Tier 1 leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
The Bank's actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
------ ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital (to Risk Weighted Assets) $7,916 11.68% $5,422 greater than $6,778 greater than
or equal to 8.0% or equal to 10.0%
Tier 1 Capital (to Risk Weighted Assets) 7,067 10.43 2,711 greater than 4,067 greater than
or equal to 4.0 or equal to 6.0
Tier 1 Capital (to Average Assets) 7,067 6.84 4,132 greater than 5,164 greater than
or equal to 4.0 or equal to 5.0
As of December 31, 1997:
Total Capital (to Risk Weighted Assets) 7,158 12.93 4,430 greater than 5,538 greater than
or equal to 8.0 or equal to 10.0
Tier 1 Capital (to Risk Weighted Assets) 6,465 11.66 2,218 greater than 3,327 greater than
or equal to 4.0 or equal to 6.0
Tier 1 Capital (to Average Assets) 6,465 7.99 3,237 greater than 4,046 greater than
or equal to 4.0 or equal to 5.0
</TABLE>
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES
As of December 31, 1998, the Bank was obligated under non-cancelable operating
leases for bank premises and equipment expiring between 1999 and 2002. The total
minimum rental due in future periods under these existing agreements is as
follows as of December 31, 1998:
1999 $59,652
2000 17,970
2001 9,727
2002 7,298
-------
$94,647
=======
Certain leases contain provisions for escalation of minimum lease payments
contingent upon increases in real estate taxes and percentage increases in the
consumer price index. The total rental expense amounted to $72,966, $68,351 and
$52,591 for the years ended December 31, 1998, 1997 and 1996, respectively.
C-18
<PAGE>
NOTE 13 - FINANCIAL INSTRUMENTS
The Bank is party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include outstanding loan commitments, unused lines of
credit and standby letters of credit. The instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in the
balance sheets. The contract amounts of those instruments reflect the extent of
involvement the Bank has in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for loan commitments and standby letters of
credit is represented by the contractual amounts of those instruments. The Bank
uses the same credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments.
Commitments to originate loans are agreements to lend to a customer provided
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the borrower. Collateral held varies, but may include
secured interests in mortgages, accounts receivable, inventory, property, plant
and equipment and income-producing properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance by a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. Of the total standby letters of
credit outstanding as of December 31, 1998, $50,000 are secured by deposit
accounts held within the Bank.
The estimated fair values of the Bank's financial instruments, all of which are
held or issued for purposes other than trading, are as follows as of December
31:
<TABLE>
<CAPTION>
1998 1997
----------------------------- -------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $6,206,274 $6,206,274 $ 4,119,636 $ 4,119,636
Available-for-sale securities 21,142,222 21,142,222 19,949,988 19,949,988
Federal Home Loan Bank stock 375,300 375,300 375,300 375,300
Loans 70,759,150 71,324,000 56,077,271 56,246,000
Accrued interest receivable 598,769 598,769 513,310 513,310
Financial liabilities:
Deposits 89,012,861 89,220,000 72,311,130 72,362,000
Advances from Federal Home Loan Bank 4,979,381 5,071,000 4,000,000 4,000,000
</TABLE>
The carrying amounts of financial instruments shown in the above table are
included in the balance sheets under the indicated captions. Accounting policies
related to financial instruments are described in Note 2.
C-19
<PAGE>
Notional amounts to financial instrument liabilities with off-balance sheet
credit risk are as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Outstanding loan commitments $ 99,000 $1,036,000
Unadvanced portions of commercial lines of credit 3,993,902 4,152,288
Unadvanced portions of home equity loans 4,257,791 3,230,039
Unadvanced portions of consumer loans 77,093 71,155
Unadvanced portions of construction loans 1,062,600 311,543
Standby letters of credit 97,606 95,830
---------- ----------
$9,587,992 $8,896,855
========== ==========
</TABLE>
There is no material difference between the notional amounts and the estimated
fair values of the above off-balance sheet liabilities.
The Bank has no derivative financial instruments subject to the provisions of
SFAS No. 119, "Disclosure About Derivative Financial Instruments and Fair Value
of Financial Instruments."
NOTE 14 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of the Bank's business activity is with customers located within the state.
There are no concentrations of credit to borrowers that have similar economic
characteristics. The majority of the Bank's loan portfolio is comprised of loans
collateralized by real estate located in the state of Connecticut.
NOTE 15 - EARNINGS PER SHARE (EPS)
The earnings per share and dividends per share computations for 1997 and 1996
have been restated to reflect the three-for-two stock split described in Note
17.
C-20
<PAGE>
Reconciliation of the numerators and the denominators of the basic and diluted
per share computations for net income are as follows:
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Year ended December 31, 1998
Basic EPS
Net income and income available to common stockholders $916,544 705,023 $1.30
Effect of dilutive securities, options 71,429
-------- -------
Diluted EPS
Income available to common stockholders and assumed
conversions $916,544 776,452 $1.18
======== =======
Year ended December 31, 1997
Basic EPS
Net income and income available to common stockholders $801,146 704,759 $1.14
Effect of dilutive securities, options 45,093
-------- -------
Diluted EPS
Income available to common stockholders and assumed
conversions $801,146 749,852 $1.07
======== =======
Year ended December 31, 1996
Basic EPS
Net income and income available to common stockholders $659,082 695,039 $ .95
Effect of dilutive securities, options 32,949
-------- -------
Diluted EPS
Income available to common stockholders and assumed
conversions $659,082 727,988 $ .91
======== =======
</TABLE>
NOTE 16 - AGREEMENT AND PLAN OF MERGER
The Board of Directors of Maritime Bank & Trust Company ("Maritime") has agreed
to an Agreement and Plan of Merger, dated as of November 3, 1998, among Webster
Financial Corporation ("Webster"), Webster Bank and Maritime which provides for
Maritime to merge into Webster Bank, a wholly owned subsidiary of Webster. If
the merger takes place, each issued and outstanding share of Maritime's common
stock (other than dissenting and certain other shares) will be converted into
$26.67 worth of Webster's common stock based on a 15 day average closing market
price of Webster's common stock. If the 15 day average is greater than $24.45,
shares of Maritime's common stock will be converted into 1.091 shares of
Webster's common stock. If the 15 day average is less than $17.50, Maritime's
common stock will be converted into 1.524 shares of Webster's common stock.
Webster will pay cash instead of issuing fractional shares. The merger is
subject to the approval of the Bank's stockholders and regulators.
NOTE 17 - STOCK SPLIT
On August 28, 1998 the Bank effected a three-for-two split of common stock and
made an equivalent change in the par value of the common stock from $1.00 per
share to $.666667 per share. No change in common stock and paid-in capital was
necessary. The effect of the stock split has been retroactively reflected as of
December 1997 and 1996 in the balance sheets and December 31, 1995 through 1997
in the statements of changes in stockholders' equity. All references to the
number of common shares and per share amounts elsewhere in the financial
statements and related footnotes have been restated as appropriate to reflect
the effect of the split for all periods presented.
C-21
<PAGE>
NOTE 18 - RECLASSIFICATION
Certain amounts in the prior year have been reclassified to be consistent with
the current year's statement presentation.
C-22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to the provisions of Article 6 of Webster Financial's
Restated Certificate of Incorporation, as amended, and the provisions of Article
IX of the Webster Financial's Bylaws, as amended.
Webster Financial is a Delaware corporation subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware (the "Delaware Corporation Law"). Section 145 of the Delaware
Corporation Law provides for the indemnification, under certain circumstances,
of persons who are or were directors, officers, employees or agents of Webster
Financial, or are or were serving at the request of Webster Financial in such a
capacity with another business organization or entity, against expenses,
judgments, fines and amounts paid in settlement in actions, suits or
proceedings, whether civil, criminal, administrative, or investigative, brought
or threatened against or involving such persons because of such person's service
in any such capacity. In the case of actions brought by or in the right of
Webster Financial, Section 145 provides for indemnification only of expenses,
and only upon a determination by the Court of Chancery or the court in which
such action or suit was brought that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses.
Webster Financial's Bylaws provide for indemnification of directors,
officers, trustees, employees and agents of Webster Financial, and for those
serving in such roles with other business organizations or entities, in the
event that such person was or is made a party to (or is threatened to be made a
party to) any civil, criminal, administrative, arbitration or investigative
action, suit, or proceeding (other than an action by or in the right of Webster
Financial) by reason of the fact that such person is or was serving in such a
capacity for or on behalf of Webster Financial. Webster Financial will indemnify
any such person against expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the best
interests of Webster Financial, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Similarly, Webster Financial shall indemnify such persons for expenses
reasonably incurred and settlements reasonably paid in actions, suits, or
proceedings brought by or in the right of Webster Financial, if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of Webster Financial; provided, however, that
no indemnification shall be made against expenses in respect of any claim,
issue, or matter as to which such person is adjudged to be liable to Webster
Financial or against amounts paid in settlement unless and only to the extent
that there is a determination made by the appropriate party set forth in the
Bylaws that the person to be indemnified is, in view of all the circumstances of
the case, fairly and reasonably entitled to indemnity for such expenses or
amounts paid in settlement. In addition, Webster Financial may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
trustee, employee, or agent of Webster Financial or is acting in such capacity
for another business organization or entity at Webster Financial's request,
against any liability asserted against such person and incurred in such
capacity, or arising out of such person's status as such, whether or not Webster
Financial would have the power or obligation to indemnify him against such
liability under the provisions of Article IX of Webster Financial's Bylaws.
Article 6 of Webster Financial's Restated Certificate of Incorporation
provides that no director will be personally liable to Webster Financial or its
shareholders for monetary damages for breach of fiduciary duty as a director
other than liability for any breach of such director's duty of loyalty to
Webster Financial or its shareholders, for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, for any
payment of a dividend or
II-1
<PAGE>
approval of a stock repurchase that is illegal under Section 174 of the Delaware
Corporation Law, or for any transaction from which the director derived an
improper personal benefit.
The foregoing indemnity and insurance provisions have the effect of
reducing directors' and officers' exposure to personal liability for actions
taken in connection with their respective positions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Webster Financial pursuant to the foregoing provisions, or otherwise, Webster
Financial has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Webster Financial of expenses incurred or paid by a director, officer or
controlling person of Webster Financial in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, Webster Financial will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
Exhibit
No. Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of November 3, 1998, by
and among Webster Financial Corporation ("Webster Financial"),
Webster Bank and Maritime Bank & Trust Company ("Maritime").*
2.2 Option Agreement, dated as of November 3, 1998, between Maritime
and Webster Financial. *
2.3 Maritime Bank & Trust Company Stockholder Agreement, dated as of
November 3, 1998, by and among Webster Financial and the
stockholders of Maritime identified therein. *
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the
securities registered hereunder, including the consent of that
firm.
8 Opinion of Hogan & Hartson L.L.P as to certain tax matters,
including the consent of that firm.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5
and Exhibit 8).
23.2 Consent of KPMG LLP.
23.3 Consent of Shatswell, MacLeod & Company, P.C.
23.4 Consent of Ostrowski & Company, Inc.
24 Power of attorney. *
99 Form of Maritime proxy card. *
- ----------
* Previously filed
(B) Not required.
(C) See Appendix A to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS.
(a) Webster Financial hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the
II-3
<PAGE>
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar
value of the securities offered would not exceed that
which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule
424(b) (ss. 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of the
Registration Fee" table in the effective registration
statement;
(iii)To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) Webster Financial hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of Webster Financial's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Webster Financial hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), Webster Financial
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other Items of
the applicable form.
(d) Webster Financial undertakes that every prospectus (i) that is
filed pursuant to paragraph (c) immediately preceding, or (ii)
that purports to meet the requirements of section 10(a)(3) of the
Securities Act of 1933 and is used in connection with an offering
of securities subject to Rule 415 (ss. 230.415 of this chapter),
will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
(e) The undertaking concerning indemnification is included as part of
the response to Item 20.
(f) Webster Financial hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(g) Webster Financial hereby undertakes to supply by means of a
post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration
Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waterbury, State of
Connecticut, on February 25, 1999.
WEBSTER FINANCIAL CORPORATION
By:/s/ James C. Smith
------------------------------------
James C. Smith
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on February 25, 1999.
Name: Title:
/s/ James C. Smith Chairman and Chief Executive Officer
- -------------------------------- (Principal Executive Officer)
James C. Smith
/s/ John V. Brennan Executive Vice President, Chief Financial
- -------------------------------- Officer and Treasurer
John V. Brennan (Principal Financial Officer and
Principal Accounting Officer)
/s/ Richard H. Alden* Director
- --------------------------------
Richard H. Alden
/s/ Achille A. Apicella* Director
- --------------------------------
Achille A. Apicella
/s/ Joel S. Becker* Director
- --------------------------------
Joel S. Becker
/s/ O. Joseph Bizzozero, Jr.* Director
- --------------------------------
O. Joseph Bizzozero, Jr.
/s/ George T. Carpenter* Director
- --------------------------------
George T. Carpenter
II-6
<PAGE>
/s/ John J. Crawford* Director
- --------------------------------
John J. Crawford
/s/ Harry P. DiAdamo, Jr.* Director
- --------------------------------
Harry P. DiAdamo, Jr.
/s/ Robert A. Finkenzeller* Director
- --------------------------------
Robert A. Finkenzeller
/s/ Walter R. Griffin* Director
- --------------------------------
Walter R. Griffin
/s/ J. Gregory Hickey* Director
- --------------------------------
J. Gregory Hickey
/s/ C. Michael Jacobi* Director
- --------------------------------
C. Michael Jacobi
/s/ John F. McCarthy* Director
- --------------------------------
John F. McCarthy
/s/ Sister Marguerite Waite* Director
- --------------------------------
Sister Marguerite Waite
By:/s/ John V. Brennan
--------------------------------
*By Power of Attorney
John V. Brennan
II-7
<PAGE>
EXHIBIT INDEX
Exhibit
No. Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of November 3, 1998, by
and among Webster Financial Corporation ("Webster Financial"),
Webster Bank and Maritime Bank & Trust Company ("Maritime").*
2.2 Option Agreement, dated as of November 3, 1998, between Maritime
and Webster Financial. *
2.3 Maritime Bank & Trust Company Stockholder Agreement, dated as of
November 3, 1998, by and among Webster Financial and the
stockholders of Maritime identified therein. *
5 Opinion of Hogan & Hartson L.L.P. as to the validity of the
securities registered hereunder, including the consent of that
firm.
8 Opinion of Hogan & Hartson L.L.P as to certain tax matters,
including the consent of that firm.
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5
and Exhibit 8).
23.2 Consent of KPMG LLP.
23.3 Consent of Shatswell, MacLeod & Company, P.C.
23.4 Consent of Ostrowski & Company, Inc.
24 Power of attorney. *
99 Form of Maritime proxy card. *
- ----------
* Previously filed
EXHIBIT 5
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004
February 25, 1999
Board of Directors
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
Ladies and Gentlemen:
We are acting as special counsel to Webster Financial Corporation, a
Delaware corporation ("Webster Financial"), in connection with its registration
statement on Form S-4 (the "Registration Statement") (File No. 333-71141), as
amended by Pre-Effective Amendment No. 1 thereto, filed with the Securities and
Exchange Commission relating to the proposed offering of up to 1,229,447 shares
of Webster Financial's common stock, par value $.01 per share, all of which
shares (the "Shares") are to be issued by Webster Financial in accordance with
the terms of the Agreement and Plan of Merger, dated as of November 3, 1998, by
and among Webster Financial, Webster Bank and Maritime Bank & Trust Company (the
"Agreement"). This opinion letter is furnished to you at your request to enable
you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R.
ss. 229.601(b)(5), in connection with Pre-Effective Amendment No. 1 to the
Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. Executed copies of the Registration Statement and Pre-Effective
Amendment No. 1 thereto.
2. An executed copy of the Agreement.
3. The Restated Certificate of Incorporation of Webster Financial, with
amendments thereto, as certified by the Secretary of Webster Financial
on the date hereof as then being complete, accurate and in effect.
4. The Bylaws of Webster Financial, with amendments thereto, as certified
by the Secretary of Webster Financial on the date hereof as then being
complete, accurate and in effect.
5. Resolutions of the Board of Directors of Webster Financial adopted at
a meeting held on October 26, 1998, as certified by the Secretary of
Webster Financial on the date hereof as then being complete, accurate
and in effect, relating to, among other things, the issuance of the
Shares and arrangements in connection therewith.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity, accuracy
<PAGE>
Board of Directors
Webster Financial Corporation
February 25, 1999
Page 2
and completeness of all documents submitted to us, and the conformity with the
original documents of all documents submitted to us as certified, telecopied,
photostatic, or reproduced copies. This opinion letter is given, and all
statements herein are made, in the context of the foregoing.
This opinion letter is based as to matters of law solely on the General
Corporation Law of the State of Delaware. We express no opinion herein as to any
other laws, statutes, regulations, or ordinances.
Based upon, subject to and limited by the foregoing, we are of the opinion
that following (i) effectiveness of the Registration Statement, as amended, (ii)
issuance of the Shares pursuant to the terms of the Agreement, and (iii) receipt
by Webster Financial of the consideration for the Shares specified in the
Agreement and resolutions of the Board of Directors, the Shares will be validly
issued, fully paid and nonassessable under the General Corporation Law of the
State of Delaware.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of Pre-Effective
Amendment No. 1 to the Registration Statement on the date of this opinion letter
and should not be quoted in whole or in part or otherwise be referred to, nor
filed with or furnished to any governmental agency or other person or entity,
without the prior written consent of this firm.
We hereby consent to the filing of this opinion letter as Exhibit 5 to
Pre-Effective Amendment No. 1 to the Registration Statement and to the reference
to this firm under the caption "Legal Matters" in the Proxy Statement/Prospectus
constituting a part of Pre-Effective Amendment No. 1 to the Registration
Statement. In giving this consent, we do not thereby admit that we are an
"expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
HOGAN & HARTSON L.L.P.
EXHIBIT 8
February 25, 1999
Board of Directors
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
Board of Directors
Maritime Bank & Trust Company
130 Westbrook Road
Essex, Connecticut 06426-1149
Gentlemen/Ladies:
This opinion is being delivered to you in accordance with Section 7.1(f) of
the Agreement and Plan of Merger (the "Agreement"), dated as of November 3,
1998, by and among Webster Financial Corporation ("Webster"), a Delaware
corporation, Webster Bank ("Webster Bank"), a federally chartered savings bank
and a wholly owned subsidiary of Webster, and Maritime Bank & Trust Company
("Maritime Bank"), a Connecticut-chartered commercial bank. Pursuant to the
Agreement, Maritime Bank will be merged with and into Webster Bank (the
"Merger").
In connection with the preparation of this opinion, we have examined and
with your consent relied upon the following documents (including all exhibits
and schedules thereto): (1) the Agreement; (2) the Registration Statement on
Form S-4 of Webster (File No. 333-71141) filed with the Securities and Exchange
Commission on January 25, 1999, as amended by Pre-Effective Amendment No. 1
thereto filed with the Securities and Exchange Commission on the date hereof
(the "Registration Statement") and/or the Proxy Statement/Prospectus of Webster
and Maritime Bank; (3) representations and certifications made to us by Webster
(attached hereto as Exhibit A); (4) representations and certifications made to
us by Maritime Bank (attached hereto as Exhibit B); (5) such other instruments
and documents related to the formation, organization and operation of Webster,
Webster Bank and Maritime Bank or to the consummation of the Merger and the
transactions contemplated thereby as we have deemed necessary or appropriate. 1/
- --------
1/ All capitalized terms used herein and not otherwise defined shall have the
same meaning as they have in the Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
<PAGE>
Board of Directors
Webster Financial Corporation
Maritime Bank & Trust Company
February 25, 1999
Page 2
The Proposed Transaction
Based solely upon our review of the documents set forth above, and upon
such information as Webster, Webster Bank and Maritime Bank have provided to us
(which we have not attempted to verify in any respect), and in reliance upon
such documents and information, we understand that the proposed transaction and
the relevant facts with respect thereto are as follows:
Webster is the owner of all of the outstanding stock of Webster Bank.
Through Webster Bank, Webster currently serves customers from over 100 banking
offices, three commercial banking centers and more than 174 ATMs located in
Hartford, New Haven, Fairfield, Litchfield and Middlesex Counties in
Connecticut. On November 11, 1998, Webster announced that it had signed a
definitive merger agreement to acquire Village Bancorp, Inc. ("Village"), the
holding company of The Village Bank & Trust Company ("Village Bank") (the
"Village Merger"). Pursuant to the Village Merger, Village will merge with and
into Webster and Village Bank will merge with and into Webster Bank.
Maritime Bank is a Connecticut-chartered commercial bank headquartered in
Essex, Connecticut. Maritime Bank is engaged principally in the business of
attracting deposits from the general public and investing those deposits in
residential real estate loans, and in consumer and small business loans.
Maritime Bank currently serves customers from three banking offices located in
Middlesex and New London Counties, Connecticut.
The purpose of the Merger is to enable Webster to acquire the assets and
business of Maritime Bank. After the Merger, it is anticipated that Maritime
Bank's three branch banking offices will remain open and will be operated as
banking offices of Webster Bank. The Merger will result in an expansion of
Webster Bank's primary market area to include Maritime Bank's banking offices in
Middlesex County, where Webster currently operates banking offices, and New
London County, Connecticut, where Webster currently does not have any offices.
Webster expects to achieve reductions in the current operating expenses of
Maritime Bank upon the consolidation of Maritime Bank's operations into Webster
Bank.
It is proposed that pursuant to the Agreement, the Banking Law of
Connecticut, the Home Owners' Loan Act and the rules and regulations of the
Office of Thrift Supervision thereunder, Maritime Bank merge with and into
Webster Bank. As a result of the Merger, Maritime Bank's corporate existence
will cease and Webster Bank will be the surviving bank and a wholly-owned
subsidiary of Webster. As the surviving bank, Webster Bank will succeed to all
of the assets and liabilities of Maritime Bank.
By virtue of the Merger, each share of Maritime Bank Common Stock issued
and outstanding prior to the Effective Time (other than Dissenting Shares and
certain other shares) will be converted into and exchangeable for that number of
shares of Webster Common Stock determined as provided in the Agreement.
Certificates for fractions of shares of Webster Common Stock will not be issued.
In lieu of a fraction of a share of Webster Common Stock, each holder of
Maritime Bank Common Stock otherwise entitled to a fraction of a share of the
Webster Common Stock will be entitled to receive an amount of cash equal to (i)
the fraction of a share of the Webster Common Stock to which such holder would
otherwise be entitled, multiplied by (ii) the closing time average market value
of the Webster Common Stock, which shall be deemed to be the average of the
daily closing prices per share for Webster Common Stock for the fifteen
consecutive trading days on which shares of Webster Common Stock are actually
traded ending on the third trading day preceding the Closing Date. Shares of
Maritime Bank Common Stock that are issued and outstanding immediately prior to
the Effective Time and that are owned by shareholders who have properly
dissented within the meaning of the applicable provisions of the Connecticut
Business Corporation Act will not be
<PAGE>
Board of Directors
Webster Financial Corporation
Maritime Bank & Trust Company
February 25, 1999
Page 3
converted into the right to receive shares of Webster Common Stock, unless and
until such shareholders have failed to perfect or have effectively withdrawn or
lost their right to payment under applicable law.
At the Effective Time, each option granted by Maritime Bank to purchase
shares of Maritime Bank Common Stock under the Maritime Bank Stock Plan which is
outstanding and unexercised immediately prior thereto will be converted
automatically into an option to purchase shares of Webster Common Stock, with
adjustment in the number of shares and exercise price to reflect the Exchange
Ratio.
Assumptions and Representations
In connection with rendering this opinion, we have assumed or obtained
representations (and, with your consent, are relying thereon, without any
independent investigation or review thereof, although we are not aware of any
material facts or circumstances contrary to or inconsistent therewith) that:
1. All information contained in each of the documents we have examined and
relied upon in connection with the preparation of this opinion is accurate and
completely describes all material facts relevant to our opinion, all copies are
accurate and all signatures are genuine. We have also assumed that there has
been (or will be by the Effective Time of the Merger) due execution and delivery
of all documents where due execution and delivery are prerequisites to the
effectiveness thereof.
2. The Merger will be consummated in accordance with applicable state and
federal law and will qualify as a statutory merger under applicable state and
federal law.
3. All representations made in the exhibits hereto are true, correct, and
complete in all material respects. Any representation or statement made "to the
best of knowledge" or similarly qualified is correct without such qualification.
4. The Merger will be consummated in accordance with the Agreement and as
described in the Proxy Statement/Prospectus (including satisfaction of all
covenants and conditions to the obligations of the parties without amendment or
waiver thereof); each of Webster, Webster Bank and Maritime Bank will comply
with all reporting obligations with respect to the Merger required under the
Code and the Treasury Regulations thereunder; and the Agreement and all other
documents and instruments referred to therein or in the Proxy
Statement/Prospectus are valid and binding in accordance with their terms.
Opinion - Federal Income Tax Consequences
Based upon and subject to the assumptions and qualifications set forth
herein, it is our opinion that for Federal income tax purposes the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below:
1. This opinion represents and is based upon our best judgment regarding
the application of relevant current provisions of the Code and interpretations
of the foregoing as expressed in existing court decisions, administrative
determinations (including the practices and procedures of the Internal Revenue
Service (the "IRS") in issuing private letter rulings, which are
<PAGE>
Board of Directors
Webster Financial Corporation
Maritime Bank & Trust Company
February 25, 1999
Page 4
not binding on the IRS except with respect to the taxpayer that receives such a
ruling) and published rulings and procedures all as of the date hereof. An
opinion of counsel merely represents counsel's best judgment with respect to the
probable outcome on the merits and is not binding on the IRS or the courts.
There can be no assurance that positions contrary to our opinions will not be
taken by the IRS, or that a court considering the issues would not hold contrary
to such opinions. Neither Webster nor Maritime Bank has requested a ruling from
the IRS (and no ruling will be sought) as to any of the federal income tax
consequences addressed in this opinion. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
opinion expressed herein. Nevertheless, we undertake no responsibility to advise
you of any new developments in the law or in the application or interpretation
of the federal income tax laws.
2. This letter addresses only the specific tax opinion set forth above.
This letter does not address any other federal, state, local or foreign tax
consequences that may result from the Merger or any other transaction (including
any transaction undertaken in connection with the Merger).
3. We express no opinion regarding, among other things, the tax
consequences of the Merger (including the opinion set forth above) as applied to
specific shareholders of Maritime Bank or that may be relevant to particular
classes of Maritime Bank shareholders, such as dealers in securities, corporate
shareholders subject to the alternative minimum tax, foreign persons, and
holders of shares acquired upon exercise of stock options or in other
compensatory transactions. In addition, we express no opinion regarding the tax
consequences to a holder of an option to purchase shares of Maritime Bank Common
Stock who receives an option to purchase shares of Webster Common Stock in
exchange therefor pursuant to the Merger.
4. Our opinion set forth herein is based upon the description of the
contemplated transactions as set forth above in the section captioned "The
Proposed Transaction," the Agreement and the Proxy Statement/Prospectus. If the
actual facts relating to any aspect of the transactions differ from this
description in any material respect, our opinion may become inapplicable. No
opinion is expressed as to any transaction other than those set forth in the
section captioned "The Proposed Transaction," the Agreement and the Proxy
Statement/Prospectus or to any transaction whatsoever, including the Merger, if
all the transactions described in the section captioned "The Proposed
Transaction," the Agreement and the Proxy Statement/Prospectus are not
consummated in accordance with the terms of the section captioned "The Proposed
Transaction," the Agreement and the Proxy Statement/Prospectus and without
waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
<PAGE>
Board of Directors
Webster Financial Corporation
Maritime Bank & Trust Company
February 25, 1999
Page 5
This opinion is provided to Webster and Maritime Bank only, and without our
prior consent, may not be relied upon, used, circulated, quoted or otherwise
referred to in any manner by any person, firm, governmental authority or entity
whatsoever other than reliance thereon by Webster, Maritime Bank and the
Maritime Bank shareholders. Notwithstanding the prior sentence, we hereby
consent to the use of the opinion letter as an exhibit to the Registration
Statement and to the use of our name in the Registration Statement and the
filing of our opinion with the Office of Thrift Supervision. In giving the
consent, we do not thereby admit that we are an "expert" within the meaning of
the Securities Act of 1933, as amended.
Sincerely yours,
HOGAN & HARTSON L.L.P.
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Webster Financial Corporation:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the proxy
statement/prospectus.
/s/ KPMG LLP
Hartford, Connecticut
February 25, 1999
EXHIBIT 23.3
Consent of Independent Public Accountants
We consent to the incorporation in this Registration Statement on Form S-4 of
Webster Financial Corporation, of our report dated January 14, 1999, on our
audits of the financial statements of Maritime Bank & Trust Company as of
December 31, 1998 and 1997 and for each of the years in the three-year period
ended December 31, 1998 and to the reference to our firm under the heading
"Experts" in the Proxy Statement/Prospectus.
/s/ Shatswell, MacLeod & Company, P.C.
Shatswell, MacLeod & Company, P.C.
West Peabody, Massachusetts
February 25, 1999
EXHIBIT 23.4
Consent of Ostrowski & Company, Inc.
We hereby consent to the use of our name in the Form S-4 Registration Statement
of Webster Financial Corporation ("Webster") and any amendments thereto relating
to the registration of shares of Webster's common stock to be issued in
connection with Webster's proposed acquisition of Maritime Bank & Trust Company.
We also consent to the inclusion of our opinion letter dated February 25, 1999
as an appendix to the Proxy Statement/Prospectus included as part of the
Registration Statement, and the references to our opinion included in the Proxy
Statement/Prospectus.
/s/ Ostrowski & Company, Inc.
Cranford, New Jersey
February 25, 1999
