As filed with the Securities and Exchange Commission on May 12, 2000
Registration No. 333-33228
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C> <C>
Delaware 6022 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)
------------------------
Peter J. Swiatek
Controller
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
(203) 578-2259
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
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<S> <C>
Stuart G. Stein, Esq. William W. Bouton III, Esq.
Steven E. Ballew, Esq. Robert J. Metzler, Esq.
Hogan & Hartson L.L.P. Tyler Cooper & Alcorn, LLP
555 Thirteenth Street, N.W. City Place - 35th Floor
Washington, D.C. 20004 Hartford, Connecticut 06103-3488
(202) 637-8575 (860) 725-6210
</TABLE>
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
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 Proposed maximum
securities to be Amount to be offering price per aggregate offering Amount of
registered registered unit* price* registration fee*
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 33,958 $31.94 $1,084,618 $286.34
$.01 per share
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Estimated pursuant to Rule 457(f)(1) and Rule 457(c) under the Securities
Act of 1933, as amended, based upon the average of the high and low prices
for shares of common stock of MECH Financial, Inc. as reported on the Nasdaq
Stock Market's National Market Tier and calculated as of May 10, 2000 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 MECH FINANCIAL, INC.
WEBSTER PLAZA 100 PEARL STREET
WATERBURY, CT 06702 HARTFORD, CT 06103
(203) 753-2921 (860) 293-4000
-------------- --------------
PROSPECTUS PROXY STATEMENT
The boards of directors of Webster Financial Corporation ("Webster")
and MECH Financial, Inc. ("MECH") have each approved an agreement and plan of
merger. This agreement provides that MECH will merge into Webster, subject to
customary conditions such as shareholder and regulatory approvals.
If the merger takes place, you will receive 1.52 shares of Webster's
common stock for each share of MECH's common stock you own, representing a value
of $33.06 based on the May 9, 2000 price of Webster's common stock. Webster
could opt to increase the exchange ratio in specific circumstances where MECH
could otherwise terminate the merger agreement. In addition, the conversion of
your shares of MECH common stock generally will not be taxable, except for the
receipt of cash instead of fractional shares. Webster's common stock is traded
on the Nasdaq Stock Market's National Market Tier under the symbol WBST.
This document contains important information about Webster, MECH, the
merger and the conditions that must be satisfied before the merger can occur.
Please give all the information your careful attention.
Your vote is very important. The merger agreement and the merger must
be approved by the holders of at least a majority of outstanding shares of
MECH's common stock. To vote your shares, you may use the enclosed proxy card or
attend the special shareholders meeting we will hold to allow you to consider
and vote on the merger. To approve the merger agreement, you MUST vote FOR the
proposal by following the instructions on the enclosed proxy card. If you do not
vote at all, that will, in effect, count as a vote against the proposal. We urge
you to vote FOR this proposal.
/s/ Edgar C. Gerwig
Edgar C. Gerwig
Chairman, President and Chief Executive Officer
MECH Financial, Inc.
----------------------------
WEBSTER'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 HAVE ANY OF THESE INSTITUTIONS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this proxy statement/prospectus is May 12, 2000
and first mailed to shareholders on May 16, 2000
<PAGE>
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT
WEBSTER AND MECH THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS DOCUMENT. THIS
INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR WRITE TO JAMES M.
SITRO, SENIOR VICE PRESIDENT, INVESTOR RELATIONS OF WEBSTER FINANCIAL
CORPORATION, WEBSTER PLAZA, WATERBURY, CONNECTICUT 06702, TELEPHONE (203)
578-2299 OR TO TERESA E. KNOX, INVESTOR RELATIONS OFFICER, MECH FINANCIAL, INC.,
100 PEARL STREET, HARTFORD, CONNECTICUT 06103, TELEPHONE (860) 293-4000. IN
ORDER TO OBTAIN TIMELY DELIVERY OF DOCUMENTS, YOU SHOULD REQUEST INFORMATION AS
SOON AS POSSIBLE, BUT NO LATER THAN JUNE 1, 2000.
<PAGE>
MECH FINANCIAL, INC.
100 PEARL STREET
HARTFORD, CONNECTICUT 06103
-------------------
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
JUNE 20, 2000
-------------------
A special meeting of shareholders of MECH Financial, Inc. ("MECH") will
be held on June 20, 2000, at 10:00 a.m. at the Hartford Club, 46 Prospect
Avenue, Hartford, Connecticut 06103 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 December 1, 1999,
between Webster Financial Corporation and MECH, the merger of
MECH into Webster 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
special meeting, or any adjournments or postponements of the
meeting, including, without limitation, a motion to adjourn
the special 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 special meeting or any
adjournments or postponements of the meeting only if you were a holder of record
of MECH's common stock at the close of business on April 28, 2000.
MECH'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS ADVISABLE
AND IS FAIR TO AND IN THE BEST INTEREST OF MECH'S SHAREHOLDERS, HAS APPROVED THE
MERGER AGREEMENT AND THE MERGER, AND RECOMMENDS THAT YOU VOTE TO APPROVE THE
MERGER AGREEMENT AND THE MERGER.
The affirmative vote of a majority of the shares of MECH's common stock
outstanding on April 28, 2000 is required to approve the merger agreement and
the merger. The required vote of MECH's shareholders is based on the total
number of shares of MECH's common stock outstanding and not on the number of
shares which are actually voted. NOT RETURNING A PROXY CARD, OR NOT VOTING IN
PERSON AT THE SPECIAL MEETING OR 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 SPECIAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD 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
MECH's board of directors, by subsequently filing another proxy or by attending
the special meeting and voting in person.
By order of the Board of Directors
/s/ Edgar C. Gerwig
Edgar C. Gerwig
Chairman, President and Chief Executive Officer
Hartford, Connecticut
May 16, 2000
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE
AND RETURN YOUR PROXY CARD.
<PAGE>
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS ABOUT THE MERGER...................................... 1
SUMMARY..................................................................... 4
SELECTED FINANCIAL DATA SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL
DATA OF WEBSTER AND MECH............................................... 9
THE MEETING................................................................ 12
The MECH Special Meeting.............................................. 12
Matters to be Considered at the Special Meeting................... 12
Record Date and Voting............................................ 12
Required Vote; Revocability of Proxies............................ 13
Solicitation of Proxies........................................... 14
THE MERGER................................................................. 15
The Parties........................................................... 15
Background of the Merger.............................................. 16
Recommendation of the MECH Board of Directors and Reasons
for the Merger.................................................... 17
Purpose and Effects of the Merger..................................... 18
Structure............................................................. 18
Exchange Ratio........................................................ 18
Options............................................................... 20
Regulatory Approvals.................................................. 20
Conditions to the Merger.............................................. 21
Conduct of Business Pending the Merger................................ 23
Third Party Proposals................................................. 24
Expenses; Breakup Fee................................................. 24
Fairness Opinions of MECH's Financial Advisor
Keefe, Bruyette & Woods, Inc. ............................... 25
Representations and Warranties........................................ 33
Termination and Amendment of the Merger Agreement..................... 34
Federal Income Tax Consequences....................................... 36
Accounting Treatment.................................................. 38
Resales of Webster's Common Stock Received in the Merger.............. 38
Employee Benefits..................................................... 39
Dissenters' Appraisal Rights.......................................... 39
Interests of MECH Directors and Executive Officers in the
Merger that are Different Than Yours.............................. 41
Existing MECH Change of Control Agreements................... 42
Letter Agreements with Webster............................... 42
Consulting Agreement with Webster............................ 43
MECH Stock Options........................................... 43
Board Membership............................................. 43
Indemnification....................................................... 43
Option Agreement...................................................... 44
MARKET PRICES AND DIVIDENDS................................................ 46
Webster's Common Stock................................................ 46
MECH's Common Stock................................................... 47
DESCRIPTION OF CAPITAL STOCK AND COMPARISON OF SHAREHOLDER RIGHTS.......... 47
Webster's Common Stock................................................ 48
MECH's Common Stock................................................... 48
Webster's Preferred Stock and Shareholder Rights Agreement............ 49
MECH's Preferred Stock................................................ 50
Webster's Senior Notes................................................ 50
Webster's Capital Securities.......................................... 52
Certificate of Incorporation and Bylaw Provisions..................... 52
Applicable Law........................................................ 57
WHERE YOU CAN FIND MORE INFORMATION........................................ 59
INCORPORATION OF DOCUMENTS BY REFERENCE.................................... 59
Webster Documents..................................................... 59
MECH Documents........................................................ 60
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS....................... 60
SHAREHOLDER PROPOSALS...................................................... 61
OTHER MATTERS.............................................................. 61
EXPERTS.................................................................... 61
INDEPENDENT PUBLIC ACCOUNTANTS............................................. 62
LEGAL MATTERS.............................................................. 62
FINANCIAL INFORMATION......................................................
Appendix A
Opinion of Keefe, Bruyette & Woods, Inc............................... A-1
Appendix B
Sections 33-855 to 33-872 of the Connecticut Business Corporation Act. B-1
i
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE WEBSTER AND MECH PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: In general, we believe that the business potential for the combination of
Webster and MECH exceeds what MECH could accomplish by itself. We expect
that the merger will enhance shareholder value for all shareholders.
More specifically, we believe that the combined companies will be stronger
than either Webster or MECH on a stand-alone basis. After the merger,
Webster will be the fifth largest New England-based bank with approximately
$11 billion in assets. As a result of the merger, the Webster franchise in
New England will be significantly expanded by a strengthened business
presence in Connecticut, particularly in the Hartford market. Further, the
products and services available to MECH customers will be expanded.
The proposed transaction is expected to have a positive impact on Webster's
earnings per share in the first year. It should also result in financial
benefits from combining the operations of the two companies. The stability
and continuity of Webster after the merger will be enhanced because one
member of MECH's board of directors has agreed to serve on the board of
directors of Webster and Webster Bank.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the merger takes place, each share of MECH's common stock will be
converted into 1.52 shares of Webster's common stock, representing a value
of $33.06 based on the May 9, 2000 price of Webster's common stock. Webster
will pay cash instead of issuing fractional shares. However, if the price
of Webster's common stock falls below thresholds established in the merger
agreement, MECH may terminate the merger unless Webster decides to increase
the 1.52 exchange ratio. Dissenting shares will be treated differently. See
"The Merger--Termination and Amendment of the Merger Agreement."
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Before the merger takes place, MECH expects to continue to pay regular
quarterly cash dividends on its common stock, which currently are $0.20 per
share. After the merger, any dividends will be based on what Webster pays.
Webster presently pays dividends at a quarterly dividend rate of $0.16 per
share. An exchange ratio of 1.52 would mean an equivalent dividend of $0.24
per share for MECH's common stock.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on the enclosed proxy card how you want to vote, and sign,
date and return it as soon as possible in the enclosed envelope. 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 and the
merger. Not returning a proxy card, or not voting in person at the special
meeting or abstaining from voting, will have the same effect as voting
AGAINST the merger agreement and the merger.
You can choose to attend the special meeting and vote your shares in person
instead of completing and returning a proxy card. If you do complete and
1
<PAGE>
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 special meeting by
following the directions on pages 12 and 13.
Q: WHO CAN VOTE?
A: You are entitled to vote at the MECH special meeting if you owned shares of
MECH's common stock at the close of business on April 28, 2000. You will
have one vote for each share of MECH's common stock that you owned at that
time.
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: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. There are three ways for you to revoke your proxy and change your
vote. First, you may send a written notice to the Secretary of MECH's board
of directors stating that you would like to revoke your proxy. Second, you
may complete and submit a new proxy card. Third, you may vote in person at
the special meeting. If you have instructed a broker to vote your shares,
you must follow directions received from your broker to change your vote.
Q: WHEN WILL THE MERGER CLOSE?
A: The merger is expected to close as soon as possible after the receipt of
MECH shareholder and regulatory approvals. The Connecticut Commissioner of
Banking, the Connecticut Attorney General and the OTS are reviewing the
claims made in a lawsuit filed against MS Bank involving certain mortgage
loans, and this review may delay the receipt of required regulatory
approvals.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger takes place, MECH shareholders will receive
instructions on how to exchange MECH certificates for Webster certificates.
Q: WHAT NEEDS TO BE DONE TO COMPLETE THE MERGER?
A: Our obligations to complete the merger depend on a number of conditions
being met. In addition to our compliance with the merger agreement, these
include:
1. Approval of the merger agreement and merger by MECH shareholders.
2. Approval of the merger by federal and state regulatory authorities.
3. Receipt of a legal opinion that, for United States tax purposes, MECH
shareholders who exchange their shares for shares of Webster's common
stock will not recognize any gain or loss as a result of the merger,
except in connection with the payment of cash instead of fractional
shares. This opinion will be subject to various limitations and we
recommend that you read the fuller description of tax consequences
provided in this document beginning on page 36.
4. Approval by Nasdaq of listing of Webster's common stock to be issued in
the merger.
5. The absence of any injunction or legal restraint blocking the merger or
government proceedings trying to block the merger.
When the law permits, Webster or MECH could decide to complete the merger
even though one or more of these conditions hasn't been met. We can't be
certain when, or if, the conditions to the merger will be satisfied or
waived, or that the merger will be completed.
Q: WHOM CAN I CALL WITH QUESTIONS OR TO OBTAIN COPIES OF THIS PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS?
A: Thomas M. Wood
Executive Vice President and Treasurer
MECH Financial, Inc.
100 Pearl Street
Hartford, Connecticut 06103
telephone (860) 241-2872
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, Senior
Vice President, Investor Relations,
2
<PAGE>
Webster Financial Corporation, Webster Plaza, Waterbury, Connecticut 06702,
telephone (203) 578-2399. Such documents were also filed as exhibits to the
registration statement filed with the SEC to register the shares of
Webster's common stock to be issued in the merger. See "Where You Can Find
More Information."
3
<PAGE>
SUMMARY
The following is a brief summary of information located elsewhere in
this document. It does not contain all of the information that is important to
you. Before you vote, you should give careful consideration to all of the
information contained in or incorporated by reference into this document to
fully understand the merger. See "Where You Can Find More Information" on page
59. Each item in this summary refers to the page where that subject is discussed
in more detail
GENERALLY TAX FREE TRANSACTION FOR MECH SHAREHOLDERS (PAGE 36)
You will not recognize gain or loss for federal income tax purposes in the
merger, except to the extent you receive cash instead of fractional shares or if
you dissent from the merger. MECH and Webster will not be obligated to complete
the merger unless we receive legal opinions to that effect. 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 are subject to the alternative minimum tax;
o are a trader in securities who elects to apply a mark-to-market method of
accounting;
o acquired your shares of MECH's common stock from the exercise of options or
otherwise as compensation or through a qualified retirement plan; or
o hold shares of MECH's 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.
MECH BOARD OF DIRECTORS RECOMMEND APPROVAL (PAGE 17)
The MECH board of directors approved the merger agreement and the merger and
recommends that you vote FOR approval of these matters.
MECH'S FINANCIAL ADVISOR SAYS CONSIDERATION IS FAIR, FROM A FINANCIAL POINT OF
VIEW, TO MECH SHAREHOLDERS (PAGE 25)
In deciding to approve the merger, MECH's board of directors considered the
opinion of Keefe, Bruyette & Woods, Inc., MECH's financial advisor. The opinion
concluded that the proposed consideration to be received by the holders of
MECH's common stock in the merger is fair to the shareholders from a financial
point of view. This opinion is attached as Appendix A to this document. WE
ENCOURAGE YOU TO READ THIS OPINION CAREFULLY IN ORDER COMPLETELY TO UNDERSTAND
THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATION OF THE REVIEW MADE BY
KEEFE, BRUYETTE & WOODS, INC. IN PROVIDING THIS OPINION.
DISSENTERS' APPRAISAL RIGHTS IN THE MERGER (PAGE 39)
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 39 and 40 of this document
and Appendix B.
DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS (PAGE 47)
The rights of MECH shareholders after the merger will be governed by the
certificate of incorporation and bylaws of Webster rather than the certificate
of incorporation and bylaws of MECH. These rights will be governed by the
General Corporation Law of the state of Delaware, not the Connecticut Business
Corporation Act, since Webster is incorporated in Delaware. Some of the
provisions included in Webster's certificate of incorporation and bylaws may
serve to prevent a change in control of Webster even if desired by a majority of
the shareholders. These provisions are:
4
<PAGE>
o removal of a director only for cause by a two-thirds vote of the
shareholders at a shareholders' meeting;
o somewhat higher supermajority voting requirements to amend certificate of
incorporation and bylaws; and
o a shareholder rights agreement designed to protect against an inadequate
tender offer or to deter coercive or unfair takeover tactics.
MECH MANAGEMENT'S MONETARY INTEREST IN THE MERGER (PAGES 13 AND 41)
At the close of business on April 28, 2000, excluding all options to purchase
MECH common stock, MECH's directors and executive officers and their affiliates
owned a total of 176,652 shares of MECH's common stock, which was approximately
3.42% of the total number of shares of MECH's common stock that were outstanding
on that date. MECH directors and executive officers have agreed to vote their
shares in favor of the merger agreement and merger.
MECH's directors and executive officers have interests in the merger as
directors and employees that are different from yours as a MECH shareholder.
These interests are described at page 41.
REGULATORY APPROVALS WE MUST OBTAIN FOR THE MERGER (PAGE 20)
For the merger to take place, we need to receive the regulatory approvals of the
United States Office of Thrift Supervision and the Connecticut Commissioner of
Banking. We have filed applications with these regulators. We have received a
waiver from the Board of Governors of the Federal Reserve System from
application filing requirements under the Bank Holding Company Act.
As of the date of this document, we haven't yet received the required approvals.
We can't be certain when or if we will obtain them.
TERMINATION OF THE MERGER AGREEMENT (PAGE 34)
The merger agreement specifies a number of situations when Webster and MECH may
terminate the agreement, which are described on page 34. The merger agreement
may be terminated at any time prior to the effective time by our mutual consent
and by either of us under specified circumstances, including if the merger is
not consummated by August 31, 2000, if we do not receive the needed shareholder
or regulatory approvals or if the other party breaches its agreements. MECH may
terminate if Webster's common stock price falls below thresholds set forth in
the merger agreement and Webster does not increase the exchange ratio pursuant
to a prescribed formula.
Regardless of whether the merger is completed, we will each pay our own fees and
expenses, except that Webster will pay the costs and expenses incurred in
printing and mailing this document and the filing and registration fees to the
Securities and Exchange Commission, the Connecticut Commissioner of Banking and
the OTS.
OPTION TO DISCOURAGE OTHER PARTIES FROM MAKING OTHER PROPOSALS TO ACQUIRE MECH
(PAGE 43)
In connection with the merger agreement, MECH granted Webster an option to
purchase shares not to exceed 19.99% of MECH's outstanding common stock at an
exercise price of $34.50. The option agreement is intended to discourage other
parties from making alternative acquisition-related proposals to MECH.
In addition to the option to purchase MECH's common stock, under the
circumstances mentioned in the next paragraph, Webster may require MECH to
repurchase the option or shares acquired upon a previous exercise of the option
at a predetermined price. Alternatively, upon the occurrence of these
circumstances, Webster may surrender the option and/or any shares received upon
a previous exercise of the option and receive a payment price as set forth in
the option agreement.
Webster cannot exercise its option unless a business combination or acquisition
transaction
5
<PAGE>
concerning MECH or related activities, including the sale of a substantial
amount of MECH's assets or stock are proposed or occur. We do not know of any
event that has occurred as of the date of this document that would permit
Webster to exercise its option.
INFORMATION ABOUT THE SPECIAL MEETING (PAGE 12)
A special meeting of MECH shareholders will be held on June 20, 2000, at 10:00
a.m. at the Hartford Club, 46 Prospect Avenue, Hartford, Connecticut, 06103 for
the following purposes:
o to vote on the merger agreement, the merger and the other transactions
contemplated by the merger agreement; and
o to address any other matters that properly come before the special meeting,
or any adjournments or postponements of the meeting, including a motion to
adjourn the special meeting to another time and/or place to solicit
additional proxies in favor of the merger agreement and the merger or
otherwise.
THE COMPANIES INVOLVED IN THE MERGER (PAGE 15)
WEBSTER FINANCIAL CORPORATION
Webster Plaza
Waterbury, Connecticut 06702
(203) 753-2921
Webster is a Delaware corporation and the holding company of Webster Bank,
Webster's federal savings bank subsidiary. Both Webster and Webster Bank are
headquartered in Waterbury, Connecticut. At December 31, 1999, Webster had total
consolidated assets of $9.9 billion, total deposits of $6.2 billion, and
shareholders' equity of $636 million, or 6.42% of total assets.
MECH FINANCIAL, INC.
100 Pearl Street
Hartford, Connecticut 06103
(860) 293-4000
MECH is a Connecticut corporation and the bank holding company of Mechanics
Savings Bank. Both MECH and Mechanics Savings Bank are headquartered in
Hartford, Connecticut. At December 31, 1999, MECH had total consolidated assets
of $1.1 billion, total deposits of $642 million, and shareholders' equity of $94
million, or 8.39% of total assets.
Immediately after the merger of MECH with and into Webster, MECH's subsidiary
bank, Mechanics Savings Bank, will merge into Webster Bank.
6
<PAGE>
SHARE INFORMATION AND MARKET PRICES
Both Webster's and MECH's common stock are traded on the Nasdaq Stock Market's
National Market Tier under the trading symbols "WBST" and "MECH," respectively.
The table below presents the per share closing prices of Webster's and MECH's
common stock on Nasdaq as of the dates specified and the pro forma equivalent
market value of the 1.52 shares of Webster's common stock to be exchanged for
each share of MECH's common stock in the merger. November 30, 1999 was the last
trading date before public announcement of the merger agreement. MECH's pro
forma equivalent market value was determined by multiplying the closing price of
Webster's common stock on November 30, 1999 by an exchange ratio of 1.52. For
more information about the exchange ratio and how it may be increased, see "The
Merger -- Exchange Ratio," and for more information about the stock prices and
dividends of Webster and MECH, see "Market Prices and Dividends."
<TABLE>
<CAPTION>
MECH's
Last Reported Sale Price Common Stock
----------------------------------- Pro Forma
Webster's MECH's Equivalent Market
Date Common Stock Common Stock Value
- ------------------------------------- ------------ ------------ -----------------
<S> <C> <C> <C>
November 30, 1999.................... $26.63 $34.50 $40.48
May 9, 2000.......................... $21.75 $32.19 $33.06
</TABLE>
MECH's shareholders are advised to obtain current market quotations for
Webster's common stock. The market price of Webster'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's common stock at the time of the merger, although MECH may terminate
the merger agreement if Webster's common stock price falls below certain
thresholds and Webster does not increase the exchange ratio pursuant to a
prescribed formula. See "The Merger -- Termination and Amendment to the Merger
Agreement."
COMPARATIVE PER SHARE DATA
The following table shows historical information about net income per
share, cash dividends per share and book value per share, and similar
information reflecting the merger, which we refer to as "pro forma" information.
In presenting the comparative pro forma information for the time periods shown,
we assumed that we had been merged throughout those periods.
We also assumed that the merger will be accounted for as a "purchase"
for accounting and financial reporting purposes. The information listed as
"equivalent pro forma" was obtained by multiplying the pro forma amounts by the
exchange ratio of 1.52. We present this information to reflect the fact that
MECH shareholders will receive more than one share of Webster's common stock for
each share of MECH's common stock exchanged in the merger.
We expect that we will incur merger and integration charges as a result
of combining our companies. We also anticipate that the merger will provide the
combined company with financial benefits that include reduced operating
expenses. These changes and benefits are not reflected in the pro forma data.
While helpful in illustrating the financial characteristics of the combined
company under one set of assumptions, the pro forma information does not reflect
these anticipated financial benefits and, accordingly, does not attempt to
predict or suggest future results. It also does not necessarily reflect what the
historical results of the combined company would have been had our companies
been combined.
The per share data gives effect to all previous stock splits of
Webster's common stock.
7
<PAGE>
The information in the following table is based on, and you should read
it together with, the historical financial information that we have presented in
our prior filings with the SEC, and which is incorporated into this document by
reference. See "Where You Can Find More Information" on page 59 for a
description of where you can find our prior filings.
<TABLE>
<CAPTION>
At or for the At or for the At or for the At or for the
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1999 1998 1997 1996
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Net Income per Common Share (Basic):
Webster - historical........................... $2.14 $1.72 $1.06 $1.38
MECH - historical ............................. 2.88 1.66 2.52 0.22
Pro Forma Combined ............................ 2.22 1.72 1.21 1.26
Equivalent Pro Forma .......................... 3.37 2.61 1.84 1.92
Net Income per Common Share (Diluted):
Webster - historical........................... 2.10 1.69 1.04 1.32
MECH - historical.............................. 2.78 1.63 2.49 0.22
Pro Forma Combined............................. 2.17 1.69 1.19 1.21
Equivalent Pro Forma .......................... 3.30 2.56 1.80 1.84
Cash Dividends per Common Share:
Webster - historical........................... 0.47 0.44 0.40 0.33
MECH - historical.............................. 0.75 0.45 -- --
Pro Forma Combined............................. 0.50 0.44 0.36 0.29
Equivalent Pro Forma .......................... 0.76 0.67 0.54 0.45
Book Value per Common Share:
Webster - historical........................... 14.09 14.02 N/A N/A
MECH - historical.............................. 18.53 18.00 N/A N/A
Pro Forma Combined............................. 14.47 14.44 N/A N/A
Equivalent Pro Forma .......................... 21.99 21.95 N/A N/A
</TABLE>
8
<PAGE>
SELECTED FINANCIAL DATA
The tables below present summary historical financial and other data
for Webster and MECH as of the dates and for the periods indicated. This summary
data is based on and should be read in conjunction with Webster's and MECH's
historical consolidated financial statements and related notes which we have
presented in our prior filings with the SEC and which are incorporated by
reference into this document. For historical information, see "Where You Can
Find More Information." All adjustments necessary for a fair presentation of
financial position and results of operations have been included. All per share
data of Webster and MECH have been adjusted retroactively to give effect to
stock dividends and stock splits.
SELECTED CONSOLIDATED FINANCIAL DATA - WEBSTER
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION AND
OTHER DATA
Total assets.............. $9,931,744 $9,836,029 $9,902,775 $8,061,569 $7,063,945
Loans receivable, net..... 6,022,236 5,507,118 5,524,918 5,265,733 4,353,976
Securities................ 3,066,901 3,662,829 3,770,670 2,263,374 2,141,773
Intangible assets......... 138,829 83,227 83,731 86,400 27,122
Deposits.................. 6,191,091 6,312,974 6,411,505 6,441,412 5,588,053
Federal Home Loan Bank
advances and other
borrowings.............. 2,788,445 2,575,608 2,588,178 963,614 835,595
Shareholders' equity...... 635,667 626,454 585,603 535,087 509,808
Number of banking offices. 120 119 132 138 123
OPERATING DATA
Net interest income....... $ 303,513 $ 282,611 $ 285,758 $ 252,643 $ 210,866
Provision for loan losses. 9,000 8,103 26,449 15,741 11,989
Noninterest income:
Nonrecurring income:.... -- -- 546 15,904 --
Other income............ 92,630 82,638 47,177 40,929 36,962
---------- ---------- ---------- ---------- ----------
Total noninterest income 92,630 82,638 47,723 56,833 36,962
Noninterest expenses:
Acquisition-related
expenses............. 9,500 20,993 31,989 500 4,271
Other noninterest expenses 234,961 208,440 197,544 196,686 161,271
---------- ---------- ---------- ---------- ----------
Total noninterest
expenses............. 244,461 229,433 229,533 197,186 165,542
---------- ---------- ---------- ---------- ----------
Income before income taxes 142,682 127,713 77,499 96,549 70,297
Income taxes.............. 47,332 49,694 29,887 35,713 24,122
---------- ---------- ---------- ---------- ----------
Net income................ 95,350 78,019 47,612 60,836 46,175
Preferred stock dividends. -- -- -- 1,149 1,296
---------- ---------- ---------- ---------- ----------
Income available to common
shareholders............ $ 95,350 $ 78,019 $ 47,612 $ 59,687 $ 44,879
========== ========== ========== ========== ==========
</TABLE>
9
<PAGE>
SIGNIFICANT STATISTICAL DATA - WEBSTER
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Net income per common share:
Basic........................ $ 2.14 $ 1.72 $ 1.06 $ 1.38 $ 1.15
Diluted...................... $ 2.10 $ 1.69 $ 1.04 $ 1.32 $ 1.10
Cash dividends per common share $ 0.47 $ 0.44 $ 0.40 $ 0.33 $ 0.31
Return on average shareholders'
equity....................... 15.33% 12.82% 8.61% 11.44% 10.30%
Interest rate spread........... 3.18% 2.83% 3.18% 3.22% 3.04%
Net interest margin............ 3.32% 2.97% 3.35% 3.40% 3.26%
Noninterest expenses to average
assets....................... 2.51% 2.28% 2.57% 2.52% 2.46%
Noninterest expenses (excluding
foreclosed property, acquisition
related, capital securities,
preferred dividends and
intangible amortization
expenses) to average assets... 2.07% 1.78% 2.04% 2.40% 2.22%
AT END OF PERIOD:
Diluted weighted average
shares (000's)............... 45,393 46,118 45,966 46,434 42,069
Book value per common share.... $ 14.09 $ 14.02 $ 13.15 $ 12.08 $11.61
Tangible book value per
common share.................. $ 11.02 $ 12.16 $ 11.27 $ 10.10 $10.96
Shareholders' equity to total
assets........................ 6.40% 6.37% 5.91% 6.64% 7.22%
Nonaccrual assets to total
assets........................ 0.44% 0.36% 0.68% 1.04% 1.49%
Allowance for loan losses to
nonaccrual loans.............. 189.24% 212.25% 132.74% 102.30% 92.49%
Allowances for nonaccrual assets
to nonaccrual assets......... 167.79% 181.25% 108.43% 78.69% 66.67%
</TABLE>
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA AND SIGNIFICANT STATISTICAL DATA - MECH
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
FINANCIAL CONDITION AND
OTHER DATA 1999 1998 1997 1996 1995
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets..................... $1,119,693 $1,019,369 $892,371 $746,685 $662,201
Loans, net....................... 741,722 651,858 571,112 494,291 517,789
Deposits......................... 641,764 706,195 667,564 655,043 620,802
Shareholders' equity............. 93,931 95,368 88,549 74,840 23,726
Number of banking offices........ 16 16 14 14 14
OPERATING DATA
Net interest income.............. $ 35,951 $ 31,778 $ 29,262 $ 26,051 $ 25,598
Provision for loan losses........ -- 600 9,100 6,400 12,850
Noninterest income............... 10,011 8,276 8,104 5,187 5,838
Noninterest expenses............. 23,964 23,096 22,998 23,962 31,326
---------- ---------- ---------- -------- --------
Income before income taxes....... 21,998 16,358 5,268 876 (12,740)
Income tax expense (benefit)..... 7,101 7,419 (7,808) (266) 1,540
---------- ---------- ---------- -------- --------
Income before extraordinary expense 14,897 8,939 13,076 1,142 (14,280)
---------- ---------- ---------- -------- --------
Extraordinary expense............ 435 243 -- -- --
Net income....................... $ 14,462 $ 8,696 $ 13,076 $ 1,142 $(14,280)
========== ========== ========== ======== ========
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
SIGNIFICANT STATISTICAL DATA FOR THE
PERIOD: 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net income per common share- Basic $ 2.88 $ 1.66 $ 2.52 $ 0.22 $ n/a
Diluted.............................. $ 2.78 $ 1.63 $ 2.49 $ 0.22 $ n/a
Cash dividends declared per common
share................................ $ 0.75 $ 0.45 $ -- $ -- $ n/a
Return on average shareholders'
equity............................... 15.81% 9.40% 15.99% 2.34% (39.13)%
Interest rate spread................... 2.97% 3.10% 3.38% 3.63% 4.03%
Net interest margin.................... 3.49% 3.61% 3.90% 4.03% 4.24%
Noninterest expenses to
average assets........................ 2.21% 2.43% 2.84% 3.44% 4.71%
AT END OF PERIOD:
Diluted weighted average
shares (000's)........................ 5,199 5,332 5,242 5,170 --
Book value per common share............ $ 18.53 $ 18.00 $ 16.73 $ 14.15 $ --
Tangible book value per
common share.......................... $ 18.40 $ 17.86 $ 16.73 $ 14.15 $ --
Shareholders' equity to total assets... 8.39% 9.36% 9.92% 10.02% 3.58%
Nonaccrual assets to total assets...... 0.18% 0.29% 0.32% 1.05% 2.47%
Allowance for loan losses to nonaccrual
loans................................. 553.97% 417.12% 495.80% 101.62% 70.91%
</TABLE>
11
<PAGE>
SHAREHOLDER MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
We are first mailing this document to the holders of MECH's common
stock on or about May 16, 2000. It is accompanied by a proxy card furnished in
connection with the solicitation of proxies by the MECH board of directors for
use at the special meeting of MECH's shareholders on June 20, 2000, at 10:00
a.m., at the Hartford Club, 46 Prospect Avenue, Hartford, Connecticut 06103. At
the special meeting, the holders of MECH's common stock will consider and vote
on:
o the proposal to approve and adopt the merger agreement, the merger
and the other transactions contemplated by the merger agreement,
and
o any other business that properly comes before the special meeting,
or any adjournments or postponements of the meeting, including,
without limitation, a motion to adjourn the special 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.
RECORD DATE AND VOTING
The MECH board of directors has fixed the close of business on April
28, 2000 as the record date for determining the MECH shareholders entitled to
receive notice of and to vote at the special meeting. Only holders of record of
MECH's common stock at the close of business on that day will be entitled to
vote at the special meeting or at any adjournment or postponement of the
meeting. At the close of business on April 28, 2000, there were 5,164,527 shares
of MECH's common stock outstanding and entitled to vote at the special meeting,
held by approximately 4,857 shareholders of record.
Each holder of MECH's common stock on April 28, 2000 will be entitled
to one vote for each share held of record on each matter that is properly
submitted at the special meeting or any adjournment or postponement of the
meeting. The presence, in person or by proxy, of the holders of a majority of
MECH's common stock issued and outstanding and entitled to vote at the special
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
special 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 a majority of the shares of MECH's common stock issued and outstanding,
abstentions and broker non-votes will have the same effect as a vote against the
merger agreement.
If a quorum is not obtained, or if fewer shares of MECH'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 special 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. The
holders of a majority of the shares present at the special meeting would be
required to approve any adjournment of the special meeting or any other such
business that properly comes before the special meeting.
If your proxy card is properly executed and received by MECH in time to
be voted at the special 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
MERGER AGREEMENT AND THE MERGER.
12
<PAGE>
The MECH board of directors is not aware of any other matters that may
properly come before the special meeting. If any other matters properly come
before the special 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 MECH board of directors.
To vote on the merger agreement, you need to complete the proxy card
properly and return it in the enclosed envelope or attend the special meeting
and vote in person.
YOU SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. IF
THE MERGER TAKES PLACE, MECH STOCK CERTIFICATES SHOULD BE DELIVERED IN
ACCORDANCE WITH INSTRUCTIONS THAT WILL BE SENT TO YOU BY WEBSTER'S EXCHANGE
AGENT PROMPTLY AFTER THE EFFECTIVE TIME OF THE MERGER.
REQUIRED VOTE; REVOCABILITY OF PROXIES
In order to approve and adopt the merger agreement, the merger of MECH
and Webster and the other transactions contemplated by the merger agreement, the
holders of at least a majority of the shares of MECH's common stock issued and
outstanding on April 28, 2000, must affirmatively vote FOR the merger agreement
and the merger.
THE REQUIRED VOTE OF MECH'S SHAREHOLDERS IS BASED ON THE TOTAL NUMBER
OF OUTSTANDING SHARES OF MECH'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 SPECIAL 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 MECH beneficially owned
as of April 28, 2000, excluding all options to purchase shares of MECH's common
stock, a total of 176,652 shares of MECH's common stock, which was approximately
3.42% of the outstanding shares of MECH's common stock on that date. We expect
all of these persons to vote their shares in favor of the merger agreement and
the merger. Additionally, Webster owned 198,250 shares of MECH's common stock as
of April 28, 2000, all of which we expect will be voted in favor of the merger
agreement and merger. Webster may sell shares of MECH common stock before we
mail this proxy statement/prospectus.
If you submit a proxy card, attending the special meeting will not
automatically revoke your proxy. However, you may revoke a proxy at any time
before it is voted by:
o delivering to Lael K. Noel, Corporate Secretary, MECH Financial,
Inc., 100 Pearl Street, Hartford, Connecticut 06103, a written
notice of revocation before the special meeting,
o delivering to MECH a duly executed proxy bearing a later date
before the special meeting, or
o attending the special meeting and voting in person.
Simply attending the special meeting without voting will not automatically
revoke your proxy.
MECH and Webster 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 a majority of the shares of MECH's
common stock issued and outstanding on April 28, 2000. For a description of the
conditions to the merger, see "The Merger -- Conditions to the Merger."
13
<PAGE>
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of MECH may solicit proxies for the special meeting from shareholders personally
or by telephone or telecopier without receiving additional compensation for
these activities. The cost of soliciting proxies will be paid by MECH. In
addition, MECH has retained D.F. King & Co., Inc., a proxy solicitation firm, to
assist in proxy solicitation for the special meeting. MECH 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.
14
<PAGE>
THE MERGER
The information in this section is qualified in its entirety by
reference to the full text of the merger agreement including each of its
exhibits and the option 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, Senior Vice President, Investor Relations, Webster Financial Corporation,
Webster Plaza, Waterbury, Connecticut 06702, telephone (203) 578-2399. Such
documents were also filed as exhibits to the registration statement filed with
the SEC to register the shares of Webster's common stock to be issued in the
merger. See "Where You Can Find More Information."
THE PARTIES
Webster and MECH have entered into an agreement and plan of merger.
Under this agreement, Webster will acquire MECH through the merger of MECH into
Webster. The merger agreement also provides for Mechanics Savings Bank, referred
to herein as MS Bank, a wholly owned subsidiary of MECH, to merge into Webster
Bank, a wholly owned subsidiary of Webster.
WEBSTER. Webster is a Delaware corporation and the holding company of
Webster Bank, Webster's federally chartered savings bank subsidiary. Both
Webster and Webster Bank are headquartered in Waterbury, Connecticut. Deposits
at Webster Bank are insured by the FDIC. Through Webster Bank, Webster currently
serves customers from 120 banking offices, three commercial banking centers and
214 ATMs located in Hartford, New Haven, Fairfield, Litchfield, Middlesex and
Tolland Counties in Connecticut and in Portsmouth, New Hampshire. Webster's
mission is to help individuals, families and businesses achieve their financial
goals. Webster emphasizes five business lines -- consumer banking, 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 has established a
leading position in the banking and trust and investment services market in
Connecticut.
At December 31, 1999, Webster had total consolidated assets of $9.9
billion, total deposits of $6.2 billion, and shareholders' equity of $636
million or 6.42% of total assets. At that date, Webster also had loans
receivable, net of $6.0 billion, which included $4.0 billion in residential
mortgage loans, $741 million in commercial real estate loans, $919 million in
commercial and industrial loans and $536 million in consumer loans, consisting
primarily of home equity loans. At December 31, 1999, nonaccrual loans and other
real estate owned were $38.4 million. At that date, Webster's allowance for loan
losses was $73 million, or 189.24% of nonaccrual loans, and its total allowance
for loan and other real estate owned losses was $73 million, or 167.79% of
nonaccrual loans and other real estate owned. For additional information about
Webster that is incorporated by reference into this document, see "Incorporation
of Documents by Reference."
Webster, 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 Federal
Deposit Insurance Corporation.
MECH. MECH is a Connecticut corporation and the holding company of MS
Bank, a Connecticut-chartered savings bank. MECH is headquartered in Hartford,
Connecticut. MS Bank operates 16 branch locations in the greater Hartford area.
Deposits at MS Bank are insured by the FDIC. MECH operates MS Bank as a
community-oriented banking institution dedicated to providing personalized
service. MECH believes that its maintenance of professional, personalized
service has resulted in its ability to obtain and service many of the desirable,
small- to medium-sized businesses in its market area. MS Bank provides a wide
range of traditional deposit and lending services, as well as securities
brokerage and other non-deposit products.
15
<PAGE>
At December 31, 1999, MECH had total consolidated assets of $1.1
billion, total deposits of $642 million, and shareholders' equity of $94
million, or 8.4% of total assets. At that date, MECH also had loans receivable,
net of $742 million, which included $482 million in residential mortgage loans,
$156 million in commercial real estate loans, $36 million in commercial and
industrial loans and $76 million in consumer loans. At December 31, 1999,
nonaccrual loans and other real estate owned were $2.3 million. At that date,
MECH's allowance for loan losses was $11.0 million, or 554% of nonaccrual loans,
and its total allowance for loan and other real estate owned losses was $11.1
million, or 485% of nonaccrual loans and other real estate owned. For additional
information about MECH that is incorporated by reference into this document, see
"Incorporation of Documents by Reference."
MECH, as a bank holding company, is regulated by the Board of Governors
of the Federal Reserve System. MS Bank, as a Connecticut-chartered savings bank,
is regulated by the Connecticut Commissioner of Banking and by the FDIC.
BACKGROUND OF THE MERGER
MECH Financial, Inc. was formed on January 1, 1998 as the bank holding
company for its sole subsidiary, MS Bank. MS Bank was organized in 1861 as a
Connecticut-chartered mutual savings bank headquartered in Hartford,
Connecticut. MS Bank converted from mutual to capital stock form effective June
26, 1996. MECH's activities are exclusively associated with its ownership of MS
Bank.
MECH's Board of Directors and its management have continuously
emphasized MECH's objective to enhance shareholder value since its 1996
conversion to stock form. Connecticut law discourages the sale of converted
institutions until 3 years have passed since conversion (the "Protected
Period"). MECH used the Protected Period to effectuate a number of actions
designed to improve MECH's competitive position, including sale of a substantial
portion of non- or under-performing assets, sale of its one-half interest in the
partnership that owned the downtown Hartford building in which its headquarters
offices are located, formation of the holding company, exploration of potential
acquisition opportunities, purchase of 2 branches from another institution, and
adoption and effectuation of a stock repurchase plan. During the Protected
Period, MECH was occasionally contacted by representatives of other financial
institutions expressing an interest in discussing an affiliation with MECH.
From time to time during the Protected Period, management of MECH
consulted with Keefe, Bruyette & Woods, Inc. ("KBW") on the future prospects for
MECH from a financial perspective. On March 16, 1999, KBW addressed MECH's Board
of Directors on strategic alternatives and potential affiliation parties for
MECH. This evaluation process continued for the next several months, with the
Board of Directors generally agreeing with management that it would be
advisable, following the expiration of the Protected Period, to explore
potential, strategic affiliations. During the evaluation period, MECH held
discussions with one institution about affiliation, but MECH determined to
pursue other possibilities. On July 6, 1999 KBW was formally engaged by MECH to
provide financial and investment banking advice and to assist in identifying
potential affiliation parties. Shortly thereafter, two institutions which had
previously expressed interest in MECH were approached about a possible
transaction; both institutions expressed interest, but not at levels attractive
to MECH's Board of Directors.
In October, 1999 the Board authorized KBW to approach additional
institutions about a possible transaction. KBW was authorized to and did
approach approximately 10 institutions. Several institutions expressed interest
and, on November 19, 1999, Webster submitted a formal proposal which MECH
management determined to be sufficiently attractive to merit further
discussions. Those discussions resulted in a revised proposal on November 23,
1999 which was discussed with the MECH's Board at a November 24, 1999 meeting.
The consensus of the Board was to allow Webster to conduct due diligence and
refine its proposal into a proposed definitive agreement. Management, KBW and
counsel acted in accordance with these directives and
16
<PAGE>
negotiated a definitive agreement which was presented to and approved, with
changes, by the Board of MECH on December 1, 1999.
RECOMMENDATION OF THE MECH BOARD OF DIRECTORS AND REASONS FOR THE MERGER
The Board of Directors of MECH has approved the merger agreement and
has determined that the merger is fair to and in the best interests of MECH and
its shareholders. MECH's Board of Directors believes that the merger will enable
holders of MECH's common stock to realize increased value due to the premium
over MECH's market price and book value per share offered by Webster. The Board
also believes that the merger may enable MECH shareholders to participate in
opportunities for appreciation of Webster's common stock. 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,
KBW regarding the financial aspects and fairness of the proposed merger
agreement, as well as with management of MECH. Without assigning any relative or
specific weight, MECH's Board considered the following factors, which are all
the material factors considered, both from a short-term and long-term
perspective:
o MECH Board's familiarity with, and review of, the business,
financial condition, results of operations and prospects of MECH,
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 MECH 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;
o The potential appreciation in market and book value of MECH's
common stock on both a short-and long-term basis, as a stand-alone
entity;
o The proposal by the Financial Accounting Standards Board ("FASB")
to eliminate pooling of interests accounting treatment by year end
2000 and its potential effect on acquisition values;
o Information concerning Webster's business, financial condition,
results of operations, asset quality and prospects including the
long-term growth potential of Webster's common stock, the future
growth prospects of Webster combined with MECH 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's common stock for MECH's
common stock can be effected on a tax-free basis for MECH
shareholders, and the potential for appreciation and growth for
the market and book value of Webster's common stock following the
proposed merger;
o The oral presentation of KBW that the terms of the merger
agreement are fair to the holders of MECH's common stock from a
financial point of view;
o The advantages and disadvantages of MECH remaining an independent
institution or affiliating with a larger institution;
o The short- and long-term interests of MECH and its shareholders,
the interests of the employees, customers, creditors and suppliers
of MECH, and the interests of MECH's communities all of which can
be served to advantage by an appropriate affiliation with a
17
<PAGE>
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
MECH and Webster, and Webster's strong commitment to the
communities it serves.
On the basis of these considerations, the merger agreement was approved
by MECH's board of directors.
PURPOSE AND EFFECTS OF THE MERGER
The purpose of the merger is to enable Webster to acquire the assets
and business of MECH. After the merger, it is expected that some of MS Banks'
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 MS Bank's banking offices in Connecticut. The assets and
business of MS Bank's banking offices will broaden Webster's existing operations
in Hartford County, where Webster Bank currently has banking offices. Webster
expects to achieve reductions in the current operating expenses of MECH upon the
consolidation of MS Bank's operations into Webster Bank. Upon completion of the
merger, except as discussed below, the issued and outstanding shares of MECH's
common stock automatically will be converted into shares of Webster's common
stock. See "-- Exchange Ratio."
STRUCTURE
MECH will merge into Webster, with Webster as the surviving
corporation. When the merger takes place, except as discussed below, each issued
and outstanding share of MECH's common stock will be converted into the right to
receive Webster's common stock based on the exchange ratio, as described below.
Cash will be paid instead of fractional shares. Shares of MECH's common stock
held as treasury stock or held directly or indirectly by MECH, Webster or any of
their subsidiaries, other than trust account shares and shares related to a
previously contracted debt, will be canceled and shall cease to exist.
We expect that the merger will take place in the second quarter of
2000, 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 August 31, 2000, the merger agreement may be terminated
by either of us unless we both agree to extend it.
The merger agreement permits Webster to modify the structure of this
transaction so long as:
o there are no material adverse federal income tax consequences to
MECH's shareholders from the modification;
o the consideration to be paid to MECH's shareholders under the
merger agreement is not changed or reduced in amount; and
o the modification will not be reasonably likely to delay materially
or jeopardize receipt of any required regulatory approvals.
Webster presently has no intent to modify the structure of the
merger.
EXCHANGE RATIO
The merger agreement provides that at the effective time of the merger,
except as discussed below, each outstanding share of MECH's common stock
automatically will be converted into the right to receive 1.52 shares of
Webster's common stock representing a value of $33.06 based on the May 9, 2000
closing price of Webster's common stock. However, if the price of Webster's
common stock falls below thresholds set forth in the merger agreement, MECH may
terminate the
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merger unless Webster decides to increase the 1.52 exchange ratio, which would
result in Webster issuing more shares of its common stock to complete the
merger. See "--Termination and Amendment of the Merger Agreement."
Shares of MECH's common stock held as treasury stock and shares held
directly or indirectly by MECH, Webster or any of their subsidiaries, other than
trust account shares and shares related to a previously contracted debt, will be
canceled. If, prior to the effective time, Webster should split its common
stock, or pay a dividend or other distribution in its common stock, then the
exchange ratio will be adjusted to reflect the split, combination, dividend or
distribution.
Certificates for fractions of shares of Webster's common stock will not
be issued. Instead of a fractional share of Webster's common stock, a MECH
shareholder will be entitled to receive an amount of cash equal to the fraction
of a share of Webster's common stock to which the shareholder would otherwise be
entitled multiplied by the average of the daily closing prices per share for
Webster's common stock for the 15 consecutive trading days on which shares of
Webster's common stock are actually traded as reported on Nasdaq ending on the
third trading day before the closing date of the merger. In this document, we
use the term "purchase price" to refer to the shares of Webster's common stock
and any cash to be paid instead of a fraction of a share of Webster's common
stock payable to each holder of MECH's common stock.
The conversion of MECH's common stock into shares of Webster's common
stock at the exchange ratio will occur automatically upon completion of the
merger. Under the merger agreement, after the effective time of the merger,
Webster will cause its exchange agent to pay the purchase price to each MECH
shareholder who surrenders the appropriate documents to the exchange agent.
Webster will deposit with the exchange agent the certificates
representing Webster's common stock to be issued to MECH shareholders in
exchange for MECH's common stock, along with cash to be paid instead of
fractional shares. 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 MECH's common stock
immediately before the effective time. Upon surrendering his or her
certificate(s) representing shares of MECH's common stock, together with the
signed letter of transmittal, the MECH shareholder shall be entitled to receive
promptly certificate(s) representing a number of shares of Webster's common
stock determined in accordance with the exchange ratio and a check representing
the amount of cash in lieu of fractional shares, if any. No dividends or
distributions on Webster's common stock payable to any MECH shareholder will be
paid until the shareholder surrenders the certificate(s) representing the shares
of MECH's common stock for exchange. No interest will be paid or accrued to MECH
shareholders on cash instead of fractional shares or unpaid dividends and
distributions, if any.
If any certificate representing shares of Webster's common stock is to
be issued in a name other than that in which the certificate for shares
surrendered in exchange is registered, or cash is to be paid to a person other
than the registered holder, it will be a condition of issuance or payment that
the certificate so surrendered be properly endorsed or otherwise be in proper
form for transfer and that the person requesting the exchange either:
o pay to the exchange agent in advance any transfer or other taxes
required by reason of the issuance of a certificate or payment to
a person other than the registered holder of the certificate
surrendered, or
o 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 MECH's stock transfer books of shares of MECH's common
stock, and any shares of this kind that
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are presented to the exchange agent after the merger takes place will be
canceled and exchanged for certificates for shares of Webster's common stock.
Any portion of the purchase price made available to the exchange agent
that remains unclaimed by MECH shareholders for six months after the effective
time of the merger will be returned to Webster. Any MECH shareholder who has not
exchanged shares of MECH's common stock for the purchase price in accordance
with the merger agreement before that time may look only to Webster for payment
of the purchase price for these shares and any unpaid dividends or distributions
after that time. Nonetheless, Webster, MECH, the exchange agent or any other
person will not be liable to any MECH shareholder for any amount properly
delivered to a public official under applicable abandoned property, escheat or
similar laws.
Stock certificates for shares of MECH's common stock should NOT be
returned to MECH with the enclosed proxy card. After the merger takes place, you
will receive instructions on how to exchange your MECH certificates for Webster
certificates.
OPTIONS
As of the record date, there were outstanding options to purchase
314,247 shares of MECH's common stock at an average exercise price of $20.65 per
share. Any unvested options will vest when the merger is completed. Under the
merger agreement, shares of MECH's common stock issued before the merger takes
place upon the exercise of outstanding MECH options will be converted into
Webster's common stock at the exchange ratio. Each MECH option that is
outstanding and unexercised immediately before the effective time shall be
converted automatically into an option to purchase shares of Webster'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, as amended. The duration and other
terms of the MECH options will otherwise be unchanged except that all references
to MECH or MS Bank in any of the MECH stock plans (and corresponding references
in any option agreement documenting such option) shall be deemed to be
references to Webster or Webster Bank, as applicable.
REGULATORY APPROVALS
For the merger of Webster and MECH and the merger of Webster Bank and
MS 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 and receive a waiver from the Board of Governors of the
Federal Reserve System. In this section, we refer to these approvals as the
"required regulatory approvals". Webster and MECH 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 of Webster Bank and MS Bank. We refer to that merger in this section as
the "bank merger". The bank 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 transaction, the managerial and financial
resources and future prospects of the resulting institution, and the effect of
the contemplated transaction on the convenience and needs of the communities to
be served. The Community Reinvestment Act of 1977, commonly referred to as the
"CRA", also requires that the OTS, in deciding whether to approve the bank
merger, assess the records of performance of Webster Bank and MS Bank 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. MS
Bank 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 bank 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 it 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 bank merger is subject to review by the OTS.
As of the date of this proxy statement/prospectus, Webster is aware of one
adverse comment by a party in litigation with MS Bank filed with the OTS
concerning the bank merger. The bank 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 bank merger on antitrust grounds. The OTS
will determine the precise length of the period 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's acquisition of MECH and MS
Bank, the merger and bank 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 and MS 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 and Webster Bank. The Connecticut Commissioner also will
review the records of Webster Bank and MS Bank under the CRA. The Connecticut
Commissioner may, at his discretion, hold a public hearing on the proposed
transaction.
Several individuals who obtained home mortgage loans from MS Bank in
1994-1997 have filed a lawsuit alleging that MS Bank committed certain
violations of law when it made the loans. Webster and MECH have been informed
that the OTS, the Connecticut Commissioner of Banking and the Connecticut
Attorney General are reviewing the claims made in this lawsuit in connection
with their review of the merger and the bank merger. This review could result in
delays in the processing of, or even the withholding of approval for, the
foregoing applications.
Webster has requested and received from the Board of Governors of the
Federal Reserve System a waiver of any application filing requirement under the
Bank Holding Company Act of 1956 that would otherwise apply to the merger.
Webster and MECH are not aware of any other material governmental
approvals that are required for the merger and the bank 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 AND THE BANK 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 ON ANTITRUST GROUNDS FOLLOWING OTS APPROVAL, OR, IF A CHALLENGE IS MADE,
WHAT THE RESULT OF A CHALLENGE WOULD BE.
CONDITIONS TO THE MERGER
Under the merger agreement, Webster and MECH are not required to
complete the merger unless the following conditions are satisfied:
o the merger agreement is not terminated on or before the effective
time of the merger;
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o the merger agreement and the merger are approved by the
affirmative vote of the holders of at least a majority of the
issued and outstanding shares of MECH's common stock entitled to
vote at the special meeting;
o Webster's common stock to be issued in the merger (including stock
which may be issued upon the exercise of stock options) is
authorized for quotation on the Nasdaq Stock Market's National
Market Tier (or such other exchange on which the stock may become
listed);
o 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 or
statutory waiting periods contains a non-customary provision that
Webster reasonably considers to be burdensome or otherwise alters
the benefits of the merger agreement;
o the registration statement filed with the Securities and Exchange
Commission to cover the shares of Webster's common stock to be
issued in the merger is effective and is not subject to a stop
order or any threatened stop order;
o no order, injunction or decree preventing the merger from taking
place is in effect and the completion of the merger continues to
be legal; and
o Webster and MECH receive a favorable tax opinion from Webster's
counsel that is reasonably satisfactory to Webster and MECH.
Webster is not required to complete the merger unless the following
additional conditions are satisfied or waived:
o the representations and warranties of MECH contained in the merger
agreement are true and correct in all material respects as of the
date of the merger agreement and as of the effective time of the
merger;
o MECH performs in all material respects all covenants and
agreements contained in the merger agreement to be performed by
MECH by the effective time;
o MECH and MS Bank obtain the consents, approvals or waivers of
other persons that are required to permit Webster and Webster Bank
to succeed to any obligations, rights or interests of MECH and MS
Bank respectively under any agreement, except where the failure to
obtain consents, approvals or waivers would not have a material
adverse effect on Webster or Webster Bank;
o no proceeding initiated by any governmental entity seeking an
injunction preventing the merger from taking place is pending;
o no changes, other than changes contemplated by the merger
agreement, in the business, operations, condition, assets or
liabilities of MECH or any of its subsidiaries occur that have or
would have a material adverse effect on MECH; and
o Webster receives the written opinion of Tyler Cooper & Alcorn, LLP
counsel to MECH, dated as of the closing date, as to such matters
as Webster reasonably requests.
MECH is not required to complete the merger unless the following
additional conditions are satisfied or waived:
o the representations and warranties of Webster contained in the
merger agreement are true and correct in all material respects as
of the date of the merger agreement and as of the effective time
of the merger;
o Webster performs in all material respects all covenants and
agreements contained in the merger agreement required to be
performed by it by the effective time;
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o Webster and Webster Bank obtain the consents, approvals or waivers
of other persons that are required in connection with the
transaction contemplated by the merger;
o no proceeding initiated by any governmental entity seeking an
injunction preventing the merger from taking place is pending;
o MECH receives the written opinion of Hogan & Hartson L.L.P.,
special counsel to Webster, dated the closing date, as to the
authorization, validity and non-assessibility of the Webster
common stock to be issued in the transaction; and
o no changes, other than changes contemplated by the merger
agreement, in the business, operations, condition, assets or
liabilities of Webster or any of its subsidiaries occur that have
or would have a material adverse effect on Webster.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement contains various restrictions on the operations of
MECH (including MS Bank) before the effective time of the merger. In general,
the merger agreement obligates MECH 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 MECH. The merger agreement prohibits MECH from:
o declaring any dividends or other distributions on its capital
stock other than regular quarterly cash dividends on MECH's common
stock and dividends by any MECH subsidiary to MECH;
o splitting, combining or reclassifying any of its capital stock;
o issuing or authorizing or proposing the issuance of any
securities, other than the issuance of additional shares of MECH's
common stock upon the exercise or fulfillment of rights or options
issued or existing under MECH's stock option plan in accordance
with their present terms or the stock option granted to Webster at
the time the merger agreement was signed;
o amending its certificate of incorporation or bylaws;
o making capital expenditures aggregating in excess of $100,000;
o entering any new line of business;
o acquiring an equity interest in the assets of other business
organizations except in connection with foreclosures, settlements
or loan restructurings in the ordinary course of business
consistent with prudent banking practices;
o changing its methods of accounting in effect at December 31, 1998,
except as required by changes in regulatory or generally accepted
accounting principles;
o adopting or amending any employment agreements between MECH or its
subsidiaries and their employees and directors other than merit
increases consistent with past business practices, not to exceed
4% of the aggregate MECH payroll as of December 1, 1999 and 4% of
base pay for senior vice presidents or higher;
o entering into, modifying or renewing any agreement or arrangement
providing for the payment to any director, officer or employer of
compensation or benefits;
o hiring any new employee at an annual compensation in excess of
$35,000;
o paying any retention payments to employees except for retention
payment bonuses totaling in the aggregate no more than $150,000;
o incurring any indebtedness for borrowed money or assuming the
obligations of a third party, except for Federal Home Loan Bank
borrowings in the ordinary course consistent
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with past practices or to provide cash needed which results
from a Year 2000 extraordinary event;
o selling, opening or closing any banking or other office;
o making any equity investments in real estate, other than in
connection with foreclosures or settlements in lieu of
foreclosures in the ordinary course of business consistent with
past banking practices;
o making any new loans or modifying any existing loans with any
affiliated person of MECH;
o making any investment, or incurring any deposit liabilities, other
than in the ordinary course of business consistent with past
practice;
o purchasing any loans or selling, purchasing or leasing any real
property other than consistent with past practices;
o originating residential non-conforming loans in excess of
$400,000, unsecured consumer loans in excess of $25,000,
commercial business loans or commercial real estate loans in
excess of $1,000,000 as to any loan or $1,500,000 in the aggregate
as to related loans or to loans to related persons, or land
acquisition loans to borrowers who intend to construct a residence
thereon in excess of the lesser of 75% of the appraised value of
such land or $100,000;
o making any investment in an equity, debt or derivative security
issued or guaranteed by an entity exempt from federal, state or
local taxation;
o engaging in any forward commitment, futures transaction, financial
options transactions, hedging or arbitrage transaction or covered
trading activities or making any investment in any investment
security with a maturity of more than one year; or
o selling or purchasing any mortgage loan servicing rights.
THIRD PARTY PROPOSALS
Under the merger agreement, MECH 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 proposal relating to a
tender offer or exchange offer or acquisition of a substantial equity interest
in or acquisition of a substantial portion of the assets of or any merger or
consolidation with MECH and/or MS Bank. There is also a prohibition against
holding substantive discussions or negotiations and providing confidential
information regarding these kinds of proposals. Nevertheless, the MECH board of
directors may disregard these restrictions if, based on advice of counsel, it
reasonably determines in the exercise of its fiduciary duty that this kind of
information must be furnished and discussions and negotiations must be entered
into.
EXPENSES; BREAKUP FEE
The merger agreement generally provides that all costs and expenses
incurred in connection with the merger agreement and the transactions
contemplated by the merger agreement shall be paid for by the party incurring
such expense, except that Webster will pay all filing and other fees paid to the
SEC, the Connecticut Banking Commission and the OTS in connection with the
merger and printing fees in connection with this proxy statement/prospectus.
However, if the merger agreement is terminated by Webster or MECH as a result of
a material breach of a representation, warranty, covenant or other agreement
contained in the merger agreement by the other party, the merger agreement
provides for the non-terminating party to pay all documented reasonable expenses
of the terminating party up to $1,500,000. In the event the merger agreement is
terminated by Webster due to MECH's entering into another acquisition
transaction or a willful material breach, MECH shall pay all documented,
reasonable costs of Webster up to $1,500,000, plus
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a breakup fee of $3,000,000. In the event MECH shareholders do not approve the
merger agreement after a third party announces a competing acquisition proposal
for at least 10% of MECH's common stock or any director, officer or 5% holder of
MECH's common stock announces opposition to the merger agreement, MECH shall
also pay all documented reasonable cost of Webster up to $1,500,000, plus a
breakup fee of $3,000,000. Some of these events would also permit Webster to
exercise its rights under the option agreement. See "--Option Agreement."
FAIRNESS OPINION OF KEEFE BRUYETTE & WOODS, INC.
On July 6, 1999, MECH engaged Keefe, Bruyette & Woods, Inc. ("KBW") to
act as its financial advisor and to render an opinion as to the fairness, from a
financial point of view, to MECH shareholders of the merger consideration to be
received in connection with the merger.
KBW is a nationally recognized securities and investment banking firm
engaged in, among other things, the evaluation of banking and financial service
businesses and their securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, competitive bidding, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. KBW was selected by MECH as
its financial advisor based upon this expertise, the reputation of KBW in
investment banking and mergers and acquisitions and KBW's expertise in providing
financial advisory services to banking institutions and the banking industry
generally.
As part of its engagement, representatives of KBW attended the meeting
of the MECH board held on December 1, 1999 at which the MECH board considered
and approved the merger agreement. At the December 1, 1999 meeting, KBW rendered
an oral opinion (subsequently confirmed in writing) that, as of such date, the
exchange ratio was fair to the holders of shares of MECH common stock from a
financial point of view. Such opinion was reconfirmed in writing as of the date
of this proxy statement/prospectus.
The full text of KBW's written opinion dated as of the date of this
Proxy Statement/Prospectus is attached as Appendix A to this document. MECH
stockholders are urged to read the opinion in its entirety for a description of
the procedures followed, assumptions made, matters considered, and
qualifications and limitations on the review undertaken by KBW in connection
therewith.
KBW'S OPINION IS DIRECTED TO THE MECH BOARD AND ADDRESSES ONLY THE
EXCHANGE RATIO. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION TO PROCEED
WITH THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY MECH SHAREHOLDER
AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING WITH RESPECT TO
THE MERGER OR ANY OTHER RELATED MATTER.
In connection with rendering its opinion, KBW reviewed, among other
things:
o the merger agreement and exhibits thereto;
o the stock option agreement;
o MECH's audited consolidated financial statements and management's
discussion and analysis of financial condition and results of
operations contained in its annual report for the years ended
December 31, 1998 and December 31, 1997;
o Webster's audited consolidated financial statements and
management's discussion and analysis of financial condition and
results of operations contained in its annual report for the
fiscal years ended December 31, 1998, December 31, 1997, and
December 31, 1996;
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o discussions held with potential bidders for MECH other than
Webster;
o financial analyses and forecasts of MECH prepared by and reviewed
with management of MECH and the views of senior management of MECH
regarding MECH's past and current business operations, results of
these operations, financial condition and future prospects;
o reviewed with senior management of Webster their past and current
business operations, results of these operations, financial
condition, and future prospects as well as information relating to
the strategic, financial and operational benefits anticipated from
the merger;
o the pro forma impact of the merger on MECH and Webster;
o the publicly reported historical price and trading activity for
Webster's common stock and MECH's common stock, including a
comparison of certain financial and stock market information for
Webster and MECH with similar publicly available information for
certain other companies, the securities of which are publicly
traded;
o the financial terms of recent business combinations of banking
institutions, to the extent publicly available; and
o the current market environment generally and the banking
environment in particular; and such other information, financial
studies, analyses and investigations and financial, economic and
market criteria as KBW considered relevant.
In preparing its opinion, KBW assumed and relied on the accuracy and
completeness of all financial and other information supplied or otherwise made
available to it by MECH and Webster, including that contemplated in the items
above, and KBW has not assumed responsibility for independently verifying such
information or undertaken an independent evaluation or appraisal of the assets
or liabilities, contingent or otherwise, of MECH or Webster or any of their
subsidiaries, nor has it been furnished any such evaluation or appraisal. KBW is
not an expert in the evaluation of allowances for loan losses, and has not made
an independent evaluation of the adequacy of the allowance for loan losses of
MECH or Webster, nor has KBW reviewed any individual credit files relating to
MECH or Webster, and has assumed that the respective aggregate allowances for
loan losses for both MECH and Webster are adequate to cover such losses and will
be adequate on a pro forma basis for the combined entity. In addition, it has
not conducted any physical inspection of the properties or facilities of MECH or
Webster. With MECH's consent, KBW also assumed and relied upon the senior
management of MECH and Webster as to the reasonableness and achievability of the
financial forecasts (and the assumptions and bases therefore) provided to, and
discussed with, KBW. In that regard, KBW has assumed that such forecasts,
including without limitation, financial forecasts, evaluations of contingencies,
expected savings and operating synergies resulting from the merger and
projections regarding underperforming and non-performing assets, net
charge-offs, adequacy of reserves, future economic conditions and results of
operations reflect the best currently available estimates and judgments of the
senior management of MECH and Webster and/or the combined entity, as the case
may be. KBW's opinion is predicated on the merger receiving the tax and
accounting treatment contemplated in the merger agreement. KBW's opinion was
necessarily based on economic, market and other conditions as in effect on, and
the information made available to it as of, the date of its opinion.
KBW's opinion was rendered without regard to the necessity for, or
level of, any restrictions, obligations, undertakings or divestitures which may
be imposed or required in the course of obtaining regulatory approval for the
merger.
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In connection with rendering its opinion, KBW performed a variety of
financial analyses, consisting of those summarized below. The summary set forth
below does not purport to be a complete description of the analyses performed by
KBW in this regard, although it describes all material analyses performed by
KBW. The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to a partial analysis or summary
description. Accordingly, notwithstanding the separate factors summarized below,
KBW believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors considered by it, without considering all
analyses and factors, or attempting to ascribe relative weights to some or all
such analyses and factors, could create an incomplete view of the evaluation
process underlying KBW's opinion.
In performing its analyses, KBW made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of MECH, Webster and KBW. The
analyses performed by KBW are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of KBW's analysis
of the fairness to the shareholders of MECH of the exchange ratio and were
provided to the MECH Board in connection with the delivery of KBW's opinion. KBW
gave the various analyses described below approximately similar weight and did
not draw any specific conclusions from or with regard to any one method of
analysis. With respect to the comparison of selected companies analysis and the
analysis of selected merger transactions summarized below, no company utilized
as a comparison is identical to MECH or Webster. Accordingly, an analysis of
comparable companies and comparable business combinations is not mathematical;
rather it involves complex considerations and judgments concerning the
differences in financial and operating characteristics of the companies and
other factors that could affect the public trading values or announced merger
transaction values, as the case may be, of the companies concerned. The analyses
do not purport to be appraisals or to reflect the prices at which MECH and
Webster might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future. In addition, as described
above, KBW's opinion is just one of many factors taken into consideration by the
MECH Board.
The projections furnished to KBW and used by it in certain of its
analyses were prepared by the senior management of MECH. MECH does not publicly
disclose internal management projections of the type provided to KBW in
connection with its review of the merger, and as a result, such projections were
not prepared with a view towards public disclosure. The projections were based
on numerous variables and assumptions which are inherently uncertain, including,
without limitation, factors related to general economic and competitive
conditions. Accordingly, actual results could vary significantly from those set
forth in such projections.
The following is a summary of the material analyses presented by KBW to
the MECH Board on December 1, 1999 (the "KBW Report") in connection with its
opinion.
SUMMARY OF PROPOSAL. KBW calculated transaction multiples
which were based on the values obtained by multiplying the exchange ratio of
1.520 by:
o $26.63, the last reported sale price for Webster's Common Stock
before the public announcement of the execution of the merger
agreement; and
o $26.99, the six month average closing price for Webster's common
stock for the period ended November 30, 1999.
MECH's September 30, 1999 stated book value was $18.39, stated tangible book
value was $18.26, and last twelve months ending September 30, 1999 and 2000
earnings per share estimates (based on KBW estimates for 1999 and 2000) were
$2.46, $2.60 and $2.85, respectively. Based on this data, the following
multiples were calculated:
27
<PAGE>
<TABLE>
<CAPTION>
BASED ON BASED ON WEBSTER'S
WEBSTER'S LAST TRADE 6 MONTH AVERAGE
-------------------- ---------------
<S> <C> <C>
Price/last twelve months
earnings (for the period ending
September 30, 1999) 16.5x 16.7x
Price/estimated 1999 EPS 15.6x 15.8x
Price/estimated 2000 EPS 14.2x 14.4x
Price/book value 220% 223%
Price/tangible book value 222% 225%
</TABLE>
ANALYSIS OF SELECTED MERGER TRANSACTIONS. KBW reviewed selected merger
and acquisition transactions involving thrifts and savings institutions from New
England and compared these merger transactions with the Merger.
The New England merger comparables were comprised of fourteen mergers
and corporate transactions of savings banks and thrifts announced since December
31, 1996 in which the selling institution was headquartered in New England
(Connecticut, New Hampshire, Maine, Massachusetts, Rhode Island and Vermont) and
the aggregate deal value was greater than $50 million and less than $500
million. The fourteen merger transactions analyzed were as follows:
ACQUIROR TARGET
- -------- ------
Peoples Heritage Financial SIS Bancorp, Inc.
Summit Bancorp NSS Bancorp
Hudson United Bancorp Dime Financial Corp.
Seacoast Financial Sandwich Bancorp
UST Corp. Affiliated Community Bancorp
UST Corp. Somerset Savings Bank
Webster Financial Corp. Eagle Financial Corporation
Eastern Bank Corporation, Inc. Emerald Isle Bancorp
People's Bank Norwich Financial Corporation
Granite State Bankshares, Inc. Primary Bank
Webster Financial Corp. People's Savings Financial
CFX Corporation Community Bankshares, Inc.
CFX Corporation Portsmouth Bank Shares
Eagle Financial Corporation MidConn Bank
KBW reviewed, among other things, the ratios of stock price to book
value per share, stock price to tangible book value per share, stock price to
last twelve months earnings per share, the transaction value to deposits, and
the transaction value to assets in each transaction, and compared the averages
and medians of these ratios to the same ratios for the merger. The merger ratios
were calculated based on both the $26.63 closing stock price for Webster's
common stock on November 30, 1999, and $26.99, the six month average closing
price for Webster. KBW observed the following results:
28
<PAGE>
<TABLE>
<CAPTION>
WEBSTER/MECH COMPARABLE GROUP
TRANSACTION MULTIPLES
--------------------------------------- -------------------------
BASED ON BASED ON SIX
NOVEMBER 30, MONTH AVERAGE
1999 WEBSTER ANNOUNCED ANNOUNCED
WEBSTER PRICE PRICE AVERAGE MEDIAN
------------- ----- ------- ------
<S> <C> <C> <C> <C>
Deal Price / Book Value 220% 223% 225% 235%
Deal Price / Tangible 222% 225% 236% 236%
Deal Price / Last 12 16.5x 16.7x 21.1x 19.9x
Months Earnings per
Share (ending Sept. 30,
1999)
Deal Price / Total 31.8% 32.2% 27.8% 26.2%
Deposits
Deal Price / Total 19.3% 19.5% 21.0% 20.2%
Assets
</TABLE>
No company or transaction used as a comparison in the above analysis is
identical to Webster, MECH or the merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgements concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared.
RELATIVE MULTIPLE PAID ANALYSIS. KBW analyzed the relative multiple
Webster is paying (forward 2000 P/E paid for MECH divided by the forward 2000
P/E of Webster) for MECH, and compared it to the averages and medians produced
using the same parameters for comparable transactions included in the New
England merger comparables. The premiums paid over the buyers, P/E yielded the
following results.
PREMIUM PAID OVER
BUYER'S PRICE/EARNINGS RATIO
----------------------------
New England Merger Comparables - Average 1.33x
New England Merger Comparables - Median 1.26x
Webster / MECH 1.43x
SELECTED PEER GROUPS ANALYSES. KBW compared the financial performance
and market performance of MECH, based on various financial measures of earnings
performance, operating efficiency, capital adequacy and asset quality and
various measures of market performance, including market/book values, price to
earnings and dividend yields to those of a group of comparable publicly traded
savings banks and thrifts. For purposes of such analysis, the financial
information used by KBW was as of and for the quarter ended September 30, 1999,
and stock price information was as of November 30, 1999. The companies in the
MECH peer group were selected by KBW based on their geographic proximity and
similarity of business lines with MECH. The MECH peer group was comprised of:
o American Bank of Connecticut
o Andover Bancorp, Inc.
o Bancorp Connecticut, Inc.
29
<PAGE>
o First Essex Bancorp, Inc.
o First Federal Savings & Loan of East Hartford
o MASSBANK Corp.
o Medford Bancorp, Inc.
o MetroWest Bank
o Seacoast Financial Services
The results of these comparisons are set forth in the following table.
<TABLE>
<CAPTION>
MECH PEER
GROUP MECH PEER
MECH AVERAGE GROUP MEDIAN
------- ----------- --------------
<S> <C> <C> <C>
Return on Average Assets 1.27% 1.11% 1.09%
Return on Average Equity 15.33% 13.10% 14.21%
Net Interest Margin 3.41% 3.32% 3.32%
Efficiency Ratio 52.08% 51.04% 50.41%
Tangible Equity / Tangible Assets 8.32% 8.41% 7.86%
Loan Loss Reserves / Loans 1.55% 1.35% 1.10%
Net Charge Offs / Average Loans 0.30% 0.03% 0.05%
Non-performing Assets / Loans + 0.42% 0.64% 0.50%
Other Real Estate Owned
Stock Price / Book Value 1.88x 1.46x 1.52x
Stock Price / Tangible Book Value 1.89x 1.53x 1.59x
Stock Price / 1999 Earnings per 13.27x 11.56x 11.32x
Share (Estimated)
Stock Price / 2000 Earnings per 12.11x 10.72x 10.38x
Share (Estimated)
Dividend Yield 2.32% 3.22% 3.47%
</TABLE>
For purposes of the above calculations, MECH's 1999 and 2000 EPS estimates were
from KBW, all other earnings estimates are from IBES, a nationally recognized
earnings consolidator.
KBW also compared the financial performance and market performance of
Webster, based on the same financial measures to those of a group of comparable
publicly traded banking companies. For purposes of such analysis, the financial
information used by KBW was as of and for the quarter ended September 30, 1999,
and stock price information was as of November 30, 1999. The companies in the
Webster peer group were selected by KBW based on their geographic proximity and
similarity of business lines to Webster's. The Webster peer group was comprised
of:
o Charter One Financial, Inc.
o Chittenden Corporation
o Fulton Financial Corporation
o Keystone Financial, Inc.
o M&T Bank Corporation
o North Fork Bancorp
o Peoples Heritage Financial
o Roslyn Bancorp, Inc.
o Summit Bancorp
30
<PAGE>
The results of these comparisons are set forth in the following table:
<TABLE>
<CAPTION>
MECH PEER
GROUP MECH PEER
MECH AVERAGE GROUP MEDIAN
------- ----------- --------------
<S> <C> <C> <C>
Return on Average Assets 1.10% 1.42% 1.43%
Return on Average Equity 17.56% 17.78% 16.16%
Net Interest Margin 3.25% 3.93% 4.07%
Efficiency Ratio 53.52% 46.69% 48.57%
Tangible Equity / Tangible Assets 4.94% 7.14% 7.15%
Loan Loss Reserves / Loans 1.16% 1.33% 1.36%
Net Charge Offs / Average Loans 0.05% 0.38% 0.25%
Non-performing Assets / Loans + 0.69% 0.53% 0.46%
Other Real Estate Owned
Stock Price / Book Value 1.77x 2.27x 2.03x
Stock Price / Tangible Book Value 2.32x 2.63x 2.35x
Stock Price / 1999 Earnings per 10.87x 13.02x 12.58x
Share (Estimated)
Stock Price / 2000 Earnings per 9.93x 11.32x 11.58x
Share (Estimated)
Dividend Yield 1.80% 3.04% 2.92%
</TABLE>
CONTRIBUTION ANALYSIS. KBW analyzed the relative contribution of each
of Webster and MECH to the pro forma balance sheet and income statement items of
the combined entity, including assets, loans, deposits, common equity, 1998 net
income, estimated 1999 and 2000 net income. KBW compared the relative
contribution of such balance sheet and income statement items with the estimated
pro forma ownership for Webster and MECH based on an exchange ratio of 1.520.
The results of KBW's analysis are set forth in the following table.
WEBSTER MECH
--------- --------
Total Assets 89.9% 10.1%
Total Loans 89.1% 10.9%
Total Deposits 90.3% 9.7%
Total Common Equity 87.5% 12.5%
1998 Net Income 90.0% 10.0%
Estimated 1999 Net Income 88.5% 11.5%
Estimated 2000 Net Income 89.3% 10.7%
Ownership 85.3% 14.7%
PRO FORMA MERGER ANALYSIS. KBW analyzed the impact of the merger on
MECH's equivalent pro forma earnings per share, MECH's equivalent pro forma cash
earnings per share, MECH's equivalent pro forma book value per share, and MECH's
equivalent pro forma tangible book value per share under both pooling of
interests accounting and purchase accounting scenarios. For purposes of this
paragraph, equivalent pro forma means the product of (1) the associated pro
forma Webster financial items listed below and (2) the 1.52 exchange ratio. KBW
observed that, before taking into account any restructuring charges that may be
incurred by Webster in connection with the merger, the merger would result in
the following equivalent pro forma per share effects:
31
<PAGE>
MECH WEBSTER
---- -------
Earnings Per Share 45.0% Increase 1.5% Increase
Cash Earnings Per Share 56.4% Increase 0.1% Increase
Book Value 14.7% Increase 2.1% Decrease
Tangible Book Value 6.5% Decrease 1.2% Increase
This analysis was based on KBW's estimate of MECH 2000 earnings per
share and utilized the IBES consensus for Webster's 2000 earnings per share, and
on Webster's management's estimates of the expected cost savings from the
merger. These projections were discussed with the management of each of MECH and
Webster. The actual results achieved by Webster following the merger may vary
from the projected results, and the variations may be material.
DISCOUNTED CASH FLOW ANALYSIS. KBW estimated the present value of the
future cash flows that would accrue to a holder of a share of MECH's common
stock assuming the shareholder held the share over a five year period and then
sold it at the end of the holding period. This analysis was based on several
assumptions, including the earnings per share for MECH, the growth rate in
earnings per share, dividend payout ratios, and terminal values, all of which
were based on values which KBW believed to be reasonable for such an analysis. A
12% discount rate was applied to the terminal valuation and the estimated
dividends. KBW presented a table showing the analysis with a range of terminal
multiples from 11.5 times to 17.5 times and a range of earnings growth rates
from 8.0% to 11.0%, resulting in a range of present values for a share of MECH's
common stock of $26.51 to $41.89. These values were determined by adding (i) the
present value of the estimated future dividend stream that MECH could generate
over the period, and (ii) the present value of the "terminal value" of MECH's
common stock.
KBW stated that the discounted cash flow analysis is a widely used
valuation methodology but noted that it relies on numerous assumptions,
including earnings growth rates, dividend payout rates, terminal values and
discount rates. The analysis did not purport to be indicative of the actual
values or expected values of MECH's common stock.
In connection with its opinion dated as of the date of this proxy
statement/prospectus, KBW performed procedures to update, as necessary, certain
of the analyses described above and reviewed the assumptions on which such
analyses described above were based and the factors considered in connection
therewith. KBW did not perform any analyses in addition to those described above
in its December 1, 1999 opinion.
KBW has been retained by the Board of Directors of MECH as an
independent contractor to act as financial adviser to MECH with respect to the
merger. KBW as part of its investment banking business, is continually engaged
in the valuation of banking businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. As specialists in the
securities of banking companies, KBW has experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of its business as a
broker-dealer, KBW may, from time to time, purchase securities from, and sell
securities to, Webster and MECH and as a market maker in securities KBW may from
time to time have a long or short position in, and buy or sell, debt or equity
securities of Webster and MECH for KBW's own account and for the accounts of its
customers.
MECH and KBW have entered into a letter agreement dated July 6, 1999
relating to the services to be provided by KBW in connection with the merger.
MECH has agreed to pay KBW a cash fee, referred to as the contingent fee, equal
to 1.00% of the market value of the aggregate consideration received by
shareholders of MECH. MECH has agreed to pay this fee as follows:
32
<PAGE>
$200,000 at the time the merger is announced, an additional cash fee of $200,000
at the time of the mailing of the proxy materials to holders of MECH's common
stock, and the balance of the contingent fee at the time the merger closes.
Pursuant to the KBW engagement agreement, MECH also agreed to reimburse KBW for
reasonable out-of-pocket expenses and disbursements incurred in connection with
its retention and to indemnify KBW against certain liabilities, including
liabilities under the federal securities laws.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, MECH made representations and warranties to
Webster. The material representations and warranties of MECH are the following:
o the proper organization and good standing of MECH, MS Bank and
Mechanics Investment Services, Inc.;
o insurance of the MS Bank's deposit accounts by the FDIC;
o capitalization of MECH and ownership of shares of MS Bank and
other MECH subsidiaries;
o the existence of corporate power and authority of MECH and MS Bank
to execute, deliver and perform its various obligations under the
transaction documents;
o board approval of the merger agreement, bank merger agreement and
option agreement;
o a listing of all consents and approvals required to complete the
merger;
o accurate disclosure of loan portfolio and timely filing of
reports;
o proper presentation of financial statements;
o MECH's filings with the SEC comply in all material respects with
applicable requirements;
o no broker's fees other than a financial advisor fee to Keefe,
Bruyette & Woods;
o the absence of any material adverse change in MECH;
o the absence of legal proceedings;
o timely filing of tax returns and absence of tax claims;
o existence of employee benefit plans and material compliance with
applicable law;
o existence of material contracts and their effectiveness;
o absence of regulatory agreements with banking regulators;
o material compliance with environmental law;
o adequacy of loss reserves;
o existence of properties and assets, absence of encumbrances, and
existence of good title;
o existence of insurance policies;
o operations in material compliance with applicable laws;
o existence of loans, their material compliance with applicable
laws, proper organization of loan information, and proper
perfection of security interests;
o receipt of stockholder agreements by affiliates of MECH with
regard to supporting the merger agreement and limiting transfer of
shares of MECH's common stock owned;
o absence of MECH or its directors' and affiliates' ownership of
Webster common stock, except as listed in the disclosure schedule;
33
<PAGE>
o Year 2000 compliance;
o absence of any material undisclosed liability related to
intellectual property;
o accuracy of information regarding MECH to be included in this
document; and
o receipt of the fairness opinion of Keefe, Bruyette and Woods.
In the merger agreement, Webster made representations and warranties to
MECH. The material representations and warranties of Webster are the following:
o the proper organization and good standing of Webster and Webster
Bank;
o capitalization of Webster and ownership of shares of Webster Bank;
o existence of corporate power and authority to execute, deliver and
perform Webster's and Webster Bank's obligations under the
transaction documents;
o a listing of all regulatory consents and approvals to complete the
merger;
o proper presentation of financial statements;
o Webster's filings with the SEC comply in all material respects
with applicable requirements;
o absence of material regulatory agreements or legal proceedings;
o absence of any material adverse change in Webster;
o compliance with applicable laws; and
o Year 2000 compliance.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
Before or after MECH stockholders approve the merger agreement, it may
be terminated:
o by mutual written consent of Webster and MECH;
o by Webster or MECH if:
o 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;
o the merger has not taken place on or before August 31, 2000,
unless the failure to complete the merger by that date is due
to the terminating party's failure to perform its obligations
in the merger agreement; or
o MECH's shareholders do not approve the merger agreement;
o by Webster, provided that Webster is not in breach of any
representation, warranty or covenant contained in the merger
agreement, if there is a breach of any representation, warranty,
covenant or agreement in the merger agreement by MECH, if the
breach or breaches would entitle Webster not to consummate the
merger if the breach occurred or continued on the date of the
closing of the merger and the breach is not cured within 30 days
after receiving written notice of the breach;
o by MECH, provided that MECH is not in breach of any
representation, warranty or covenant contained in the merger
agreement, if there is a breach of any representation, warranty,
covenant or agreement in the merger agreement by Webster, if the
breach or breaches would entitle MECH not to consummate the merger
if the breach occurred or continued on the date of the closing of
the merger and the breach is not cured within 30 days after
receiving written notice of the breach; and
34
<PAGE>
o by Webster, if MECH fails to call and hold within 40 days of the
effectiveness of the registration statement filed with the SEC a
meeting of MECH shareholders to approve the merger agreement,
fails to recommend that MECH shareholders approve the merger and
merger agreement or fails to oppose a competing third party
proposal.
In addition, the merger agreement provides MECH with a termination
right during the 10-day period starting two days after we receive approval of
the merger from the OTS, if both of the following conditions are met:
o the average closing price of Webster's common stock (the "Webster
closing price") on Nasdaq over the twenty days ending on the date
of OTS approval (the "measurement period") is less than $21.30
(product of 0.80 and $26.63, the November 30, 1999 closing price);
and
o the ratio of Webster's closing price to $26.63 (the closing price
of Webster's common stock on November 30, 1999, the last Nasdaq
trading date before we executed the merger agreement), is more
than 0.15 less than the ratio of the average price over the
measurement period of an index of Webster peer financial
institutions (the "index group") to the price of that index on
November 30, 1999.
For five days after Webster receives notice that MECH intends to
exercise its termination right, Webster can opt to increase the exchange ratio
according to a formula in the merger agreement. This formula generally provides
for an increase with the effect that the dollar value of the revised merger
consideration per share of MECH's common stock, based on the Webster closing
price, would be equal to the value that would have been received by a MECH
shareholder if the Webster closing price was the minimum necessary so that one
of the two conditions described above would not have been met. If Webster elects
to increase the exchange ratio according to this formula, then MECH will no
longer have its right to terminate the merger agreement and the exchange ratio
will be revised accordingly. Because the formula is dependent on the future
price of Webster's common stock and that of the index group, it is not possible
presently to determine what the adjusted conversion ratio would be, but, in
general, the ratio would be increased and, consequently, more shares of
Webster's common stock issued, to take into account the extent the average price
of Webster's common stock exceeded the decline in the average price of the
common stock of the index group.
The price of the index group on any date is determined based on the
weighted average closing prices on that date of the bank and savings and loan
holding companies to be agreed upon. The weightings are based on the number of
outstanding shares of each of the companies. The companies comprising the index
group, and their weightings, are as follows:
<TABLE>
<CAPTION>
Company Symbol Weighing (%)
- ------- ------ ------------
<S> <C> <C>
Peoples Heritage Financial Group, Inc. PHBK 11.67%
Astoria Financial Corporation ASFC 11.60
Valley National Bancorp VLY 10.48
Roslyn Bancorp, Inc. RSLN 9.58
People's Bank (MHC) PBCT 9.23
Fulton Financial Corporation FULT 9.16
Commerce Bancorp, Inc. CBH 8.53
Chittenden Corporation CHZ 6.33
Independence Community Bancorp ICBC 5.70
Staten Island Bancorp, Inc. SIB 5.17
Susquehanna Bancshares, Inc. SUSQ 4.33
Queens County Bancorp, Inc. QCSB 4.22
Richmond County Financial Corp. RCBK 4.01
-----
100.0%
</TABLE>
35
<PAGE>
If:
o the common stock of any of the companies in the index group stops
being publicly traded, or
o any of the companies in the index group announces a proposal to be
acquired, or
o any of the companies in the index group announces a proposal to
acquire another company or companies in transactions with a value
of more than 25% of the acquiror's market capitalization on
November 30, 1999,
that company will be removed from the index group and the weights will be
redistributed proportionately among the remaining companies.
The merger agreement also permits, subject to applicable law, the
boards of directors of Webster and MECH to:
o amend the merger agreement except as provided below;
o extend the time for performance of any of the obligations or other
acts of the other party;
o waive any inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered
under the merger agreement; or
o waive compliance with any of the agreements or conditions
contained in the merger agreement.
After approval of the merger agreement by MECH'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 MECH's shareholders under the merger agreement.
FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material federal income tax
consequences of the merger to MECH shareholders. 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 document. 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 MECH's common stock hold their shares as a capital asset. The summary
does not address the tax consequences that may be applicable to particular MECH
shareholders in light of their individual circumstances or to MECH shareholders
who are subject to special tax rules, including:
o tax-exempt organizations;
o dealers in securities;
o financial institutions;
o insurance companies;
o non-United States persons;
o shareholders who acquired shares of MECH's common stock through
the exercise of options or otherwise as compensation or through a
qualified retirement plan;
36
<PAGE>
o shareholders who are subject to the alternative minimum tax;
o shareholders who hold shares of MECH's common stock as part of a
straddle, hedge, or conversion transaction; and
o traders in securities who elect to apply a mark-to-market method
of accounting.
This summary also does not address any consequences arising under the tax laws
of any state, locality, or foreign jurisdiction or under any federal laws other
than those pertaining to the federal income tax.
One of the conditions for the merger to take place is that Webster and
MECH must receive an opinion from Webster's counsel, Hogan & Hartson L.L.P.,
dated as of the effective date that the merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code. 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 and MECH 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 of shares of Webster
common stock to be issued upon the merger. Unlike a ruling from the Internal
Revenue Service, an opinion of counsel is not binding 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, the merger will not occur unless MECH resolicits its
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 common stock, a
MECH shareholder will recognize no gain or loss upon the
exchange of MECH common stock for Webster common stock
in the merger.
(2) The tax basis of Webster common stock received by a MECH
shareholder in the merger will be the same as the
shareholder's aggregate tax basis in MECH common stock
surrendered in exchange therefor.
(3) The holding period of Webster common stock received by a
MECH shareholder in the merger will include the holding
period of MECH common stock surrendered in exchange
therefor, assuming MECH common stock was held as a
capital asset.
(4) The receipt by a MECH shareholder of cash instead of
fractional shares of Webster common stock will be
treated as if the fractional shares were distributed as
part of the merger and then were redeemed by Webster.
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) Neither Webster nor MECH will recognize any gain or loss
as a result of the merger.
Unless an exemption applies, the exchange agent will be required to
withhold, and will withhold, 31% of any cash payments to which a MECH
shareholder or other payee is entitled
37
<PAGE>
pursuant to the merger, unless the shareholder or other payee provides his or
her tax identification number (social security number or employer identification
number) and certifies that the number is correct. Each shareholder and, if
applicable, each other payee, is required to complete and sign the Form W-9 that
will be included as part of the transmittal letter to avoid being subject to
backup withholding, unless an applicable exemption exists and is proved in a
manner satisfactory to Webster and the exchange agent.
The federal income tax consequences set forth above are based upon
present law and do not purport to be a complete analysis or listing of all
potential tax effects that may apply to a holder of MECH's common stock. The tax
effects that are applicable to a particular holder of MECH common stock may be
different from the tax effects that are applicable to other holders of MECH
common stock, including the application and effect of state, local and other tax
laws other than those pertaining to the federal income tax, and thus, holders of
MECH common stock are urged to consult their own tax advisors.
As described above in the section titled "-- Options," holders of
options to purchase MECH common stock that are outstanding at the effective time
of the merger will have their MECH options converted into options to purchase
shares of Webster common stock. The assumption of the options by Webster should
not be a taxable event and former holders of MECH options who hold options to
purchase Webster 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 MECH options.
Holders of MECH 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.
ACCOUNTING TREATMENT
The merger, if completed, will be treated as a purchase by Webster and
MECH for accounting purposes. Accordingly, under generally accepted accounting
principles, the assets and liabilities of MECH will be recorded on the books of
Webster at their respective fair values at the time of the consummation of the
merger. It is anticipated that any excess of the value of the consideration paid
by Webster in the merger over the fair market value of MECH will be amortized
over periods ranging from seven to twenty years.
RESALES OF WEBSTER'S COMMON STOCK RECEIVED IN THE MERGER
Webster is registering the sale of the shares of its common stock to be
issued in the merger under the Securities Act. The shares will be freely
transferable under the Securities Act, except for shares received by MECH
shareholders who are deemed to be affiliates of MECH before the merger and/or
affiliates of Webster thereafter. These affiliates only may resell their shares
pursuant to 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's common stock by
Webster or MECH affiliates. Affiliates will generally include individuals or
entities who control, are controlled by or are under common control with MECH or
Webster, and may include officers or directors, as well as principal
shareholders of MECH or Webster.
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EMPLOYEE BENEFITS
To the extent permissible under applicable law, MS Bank employees who
become employees of Webster Bank at the effective time generally will be given
credit for service at MECH or MS Bank for the following purposes:
o eligibility to participate in and the satisfaction of vesting
requirements (but not for benefit accrual purposes) under the
Webster Bank 401(k) savings plan and the Webster Bank defined
benefit pension plan (but not for any purpose under the Webster
employee stock ownership plan), and
o eligibility to participate in and levels of benefits under the
Webster welfare benefit and vacation plans.
Employees of MECH and MS Bank who become employees of Webster or Webster Bank
will be eligible immediately to participate in Webster or Webster Bank's health
and welfare plans on the same basis that they were eligible under the former
corresponding MECH and MS Bank plans and restrictions relating to preexisting
conditions will be waived for such employees and their covered dependents.
In addition, following the effective time, Webster will provide full
time MECH and MS Bank employees whose employment is terminated within one year
of the effective date by Webster with severance payments equal to that provided
by MECH, MS Bank, Webster or Webster Bank prior to December 1, 1999, whichever
provides the greater benefits to the employee.
Webster Bank will offer employment with reasonably comparable positions
and compensation to all non-managerial branch personnel of MS Bank. Further,
Webster Bank will offer to MECH or MS Bank employees who are not retained
opportunities for employment with Webster Bank as vacancies occur, subject to
such employee's qualifications. Webster has agreed to honor existing written
deferred compensation, employment, change of control and severance contracts
with directors and employees of MECH and MS Bank that were disclosed to Webster
prior to the execution of the merger agreement.
DISSENTERS' APPRAISAL RIGHTS
Under Section 33-856 of the Connecticut Business Corporation Act, when
shareholder approval is required for a merger under Section 33-817 of the
Connecticut Business Corporation Act, a shareholder who dissents from the merger
is entitled to assert dissenters' rights under Sections 33-855 to 33-872 of the
Connecticut Business Corporation Act. In this section, we use the term
dissenters' rights to refer to the rights set forth in those sections of the
Connecticut Business Corporation Act. Because shareholder approval is required
for the merger of Webster Financial and MECH under Section 33-817, you are
entitled to dissent from the merger. In accordance with Sections 33-855 through
33-872, if the merger takes place, MECH 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 Business Corporation Act. 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 if you wish to dissent from the
merger and demand the purchase of your shares at their fair value. 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 MECH's common stock concerning the
availability of dissenters' rights under Sections 33-855 to 33-872 of the
Connecticut Business Corporation Act.
Dissenting shareholders must satisfy all of the conditions of Sections
33-855 to 33-872:
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o Before the vote on the adoption of the merger agreement occurs at
the shareholder meeting, each dissenting shareholder must give
written notice to the Secretary of MECH of the shareholder's
intent to demand payment for his or her 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.
o A dissenting shareholder may NOT vote for approval of the merger
agreement. If a MECH shareholder returns a signed proxy but does
not specify in the proxy a vote against adoption of the 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 MECH 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, and where and when share certificates 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 December 2, 1999. Please note
that shares acquired after December 2, 1999, referred to in this section as
after acquired shares, may be subject to different treatment in accordance with
Section 33-867 of the Connecticut Business Corporation Act than shares acquired
before that date.
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 December 2, 1999
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
Business Corporation Act.
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 shareholder of record'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 will pay each dissenting shareholder who complied with the terms of the
dissenters' notice the amount Webster 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 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 will petition the court to determine the fair
value of the shares and accrued interest within 60 days after receiving the
payment demand.
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The costs and expenses of a court proceeding will be determined by the
court and generally will be assessed against Webster, 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'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 Lael K. Noel, Corporate Secretary, MECH Financial, Inc.,
100 Pearl Street, Hartford, Connecticut 06103. MECH suggests that shareholders
use registered or certified mail, return receipt requested, for this purpose.
Holders of shares of MECH'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 Business Corporation Act relating to the rights of dissenting
holders of shares of MECH's common stock and is qualified in its entirety by
reference to Sections 33-855 through 33-872 of the Connecticut Business
Corporation Act, which are attached as Appendix B to this document. Holders of
shares of MECH'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.
INTERESTS OF MECH DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER THAT ARE
DIFFERENT THAN YOURS
In considering the recommendation of the MECH board of directors, the
MECH shareholders should be aware that certain members of MECH's senior
management and of the MECH board of directors have interests in the transaction
that are different from, or in addition to, the interests of shareholders
generally. The MECH board of directors knew about these additional interests and
considered them when approving the merger agreement.
Webster has agreed to honor existing written deferred compensation,
employment, change of control and severance contracts with directors and
employees of MECH and MS Bank 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.
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EXISTING CHANGE IN CONTROL AGREEMENTS. MECH and MS Bank have entered
into agreements with eight executives providing for payments following a
termination of employment or specified other events, after a change in control
occurs. The change in control agreements are with the following MECH executive
officers:
NAME TITLE
---- -----
Edgar C. Gerwig Chairman, President and Chief Executive Officer
Thomas M. Wood Executive Vice President and Treasurer
Richard W. Stout, Jr. Executive Vice President
Eugene B. Marinelli Senior Vice President
Mary D. Negro Senior Vice President
Brian A. Orenstein Senior Vice President and Controller
Gary J. Roman Senior Vice President
Gregory A. White Senior Vice President
Each of these agreements provides that if there is a "change in
control" of MECH, while the executive is a full time officer of MECH, the
executive is entitled to receive within 90 days following the date of the change
of control, a severance payment in the form of a lump sum cash payment equal to
three times the greater of:
o the executive's compensation for services rendered for the last
full calendar year immediately preceding the change in control, or
o the executive's average annual compensation with respect to the
three most recent taxable years ending before the date on which
the change of control occurs.
For the purposes of the change in control agreements, compensation includes the
amount of base salary and bonus, if any, paid to the executive by MECH and MS
Bank, including any and all amounts that may have been deferred by the executive
under deferral plans or long-term compensation plans. In no event shall the
severance amount exceed one dollar less than an aggregate amount which would
cause all or any portion of the severance amount to be deemed a "parachute
payment" under Section 280G of the Code.
The merger will constitute a change in control for purposes of the
retention agreements. For purposes of the change of control with each of these
MECH executives employment will be deemed to have been terminated other than for
cause upon completion of the merger. The executed letter agreements between
Messrs. Orenstein, Stout and Wood, respectively, and Webster will then supersede
the corresponding change of control agreements. See "-- Letter Agreements with
Webster."
LETTER AGREEMENTS WITH WEBSTER. In connection with the signing of the
merger agreement, Webster entered into letter agreements with each of Messrs.
Orenstein, Stout and Wood. Under the letter agreements, each of the executives
agrees, for a period of nine months commencing on the day following the
effective time of the merger, to:
o hold in a fiduciary capacity for the benefit of Webster and its
affiliates, and not disclose, any and all secret or confidential
information, knowledge or data relating to Webster or MECH
obtained by the executive during his employment by Webster or
MECH;
o not employ or solicit the employment of any person who was during
the previous twelve months an employee, representative, officer or
director of Webster;
o not attempt to persuade any Webster client or customer to cease to
do business or to reduce the amount of business the client or
customer has customarily done or contemplates doing with Webster,
and not to solicit the business of any Webster client or customer
other than on behalf or for the benefit of Webster; and
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o not engage in or become associated with the banking business or
competitive industry in any county in Connecticut, excluding New
London County for Mr. Stout, other than through employment with
Webster.
The letter agreements provide that, upon completion of the merger, each
executive will be deemed to have been terminated other than for cause for
purposes of the MECH change in control agreements described above, and will
receive payments based on the executive's rights under the change in control
agreement and in consideration for the non-competition and other restrictions
described above. The aggregate amount payable to the executives as a group under
their letter agreements is $461,641. If any payment to an executive under his
letter agreement or otherwise is determined to be subject to the excise tax
under Section 4999 of the Code, Webster will make additional payments such that
the amount retained by the executive after application of the excise tax and
federal and state income taxes will equal the total payments amount the
executive would have retained under the letter agreement.
CONSULTING AGREEMENT WITH WEBSTER. In connection with the signing of
the merger agreement, Webster entered into a consulting agreement with Mr. Edgar
C. Gerwig. Under the consulting agreement, Mr. Gerwig agrees for a period of six
months to commence immediately following the effective time of the merger to
provide advisory and consulting services to Webster as an independent
contractor.
The consulting agreement provides that, upon completion of the merger,
Mr. Gerwig will be deemed to have been terminated other than for cause for
purposes of the MECH change in control agreements described above, and will
receive payments based on his rights under the change in control agreement and
in consideration for the non-competition and other restrictions described above.
MECH STOCK OPTIONS. Pursuant to the merger agreement, upon consummation
of the merger, each outstanding option or other right to acquire shares of
MECH's common stock (whether or not vested) will cease to represent the right to
acquire shares of MECH's common stock and will be converted into and become a
right with respect to Webster's common stock.
BOARD MEMBERSHIP. As of the completion of the merger, Webster will
invite Edgar C. Gerwig from the MECH board of directors to serve as an
additional member of Webster's board of directors for a period to terminate at
the annual meeting of Webster's shareholders which takes place after one year
from the completion of the merger; provided however, that Webster shall have no
obligation to invite Mr. Gerwig to serve on the Webster board of directors if
Mr. Gerwig is not both President of MECH and a member in good standing of MECH's
board of directors immediately prior to the effective time. Additionally, Mr.
Gerwig shall also be invited to serve as an additional member of Webster Bank's
board of directors for a period to terminate at the annual meeting of Webster
Bank's shareholders which takes place three years after the completion of the
merger; provided however, that Webster Bank shall have no obligation to invite
Mr. Gerwig to serve on the Webster Bank board of directors if Mr. Gerwig is not
both President of MECH and a member in good standing of MECH's board of
directors immediately prior to the effective time.
INDEMNIFICATION. In the merger agreement, Webster agreed to indemnify,
defend and hold harmless each person who is, has been, or before the completion
of the merger becomes, a director, officer or employee of MECH to the fullest
extent permitted under applicable law and Webster's 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 MECH or in connection with the merger agreement. Webster also
agrees to cover for a period of three years after the completion of the merger
the officers and directors of MECH under either MECH's policy in existence on
December 1, 1999, the date of the merger agreement, or under a directors' and
officers' liability insurance policy of substantially the same coverage and
amounts for a total premium cost of not more than 200% of the current amount
expended by MECH to maintain this insurance.
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OPTION AGREEMENT
As a condition of and inducement to Webster's entering into the merger
agreement, Webster and MECH have also entered into an option agreement. Under
the option agreement, MECH granted Webster an option, referred to in this
section as the "MECH option," which entitles Webster to purchase, subject to the
terms of the option agreement, up to 994,150 shares of MECH's common stock which
is equal to approximately 19.99% of the total number of shares of MECH's common
stock then outstanding at a price per share of $34.50. That price is subject to
adjustment in specified circumstances. The MECH option is intended to discourage
the making of alternative acquisition-related proposals and, under specified
circumstances, may significantly increase the cost to a potential third party of
acquiring MECH compared to its cost had MECH not entered into the option
agreement. Therefore, the MECH option is likely to discourage third parties from
proposing a competing offer to acquire MECH even if the offer involves a higher
price per share for MECH'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 document, will be provided to
you without charge if you call or write to James M. Sitro, Senior Vice
President, Investor Relations, Webster Financial Corporation, Webster Plaza,
Waterbury, Connecticut 06702, telephone (203) 578-2399.
Subject to applicable law, regulatory restrictions and MECH's
certificate of incorporation, Webster may exercise the MECH option, in whole or
in part, following the occurrence of both a preliminary purchase event and a
purchase event both as defined below. A preliminary purchase event means, in
substance:
o the entry by MECH, without the prior written consent of Webster,
into a letter of intent or definitive agreement to engage in an
acquisition transaction, as defined below, with any third party;
o the acquisition of any other person of beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the
outstanding shares of MECH's common stock;
o any third party makes a proposal, which is or becomes public, to
MECH or its shareholders to enter into an acquisition transaction;
o a third party files a regulatory application with regard to an
acquisition transaction with MECH;
o MECH willfully breaches the merger agreement permitting Webster to
terminate thereunder; or
o for any reason whatsoever, MECH's board of directors fails to
recommend, withdraws or modifies its recommendation that MECH's
shareholders approve the merger agreement or if the board fails to
oppose a competing acquisition transaction.
A purchase event, as defined in the option agreement includes either:
o the acquisition by any person of beneficial ownership of 25% or
more of the then outstanding common stock of MECH;
o entering into an agreement to enter into an acquisition
transaction, as defined in the next paragraph, except that the
percentage referred to in that definition is 25% instead of 10%;
or
o termination of the merger agreement by Webster due to willful or
intentional breach by MECH.
For purposes of the option agreement, the term "acquisition
transaction" means:
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o a merger, acquisition, consolidation or other business combination
involving MECH or its subsidiaries,
o a purchase, lease or other acquisition of all or substantially all
of the assets of MECH or its subsidiaries, or
o 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 MECH.
The MECH option terminates and, thus, may no longer be exercised by
Webster upon the occurrence of any of the following events:
o the completion of the merger;
o 12 months after the first occurrence of a purchase event, as
defined above;
o 12 months after the termination of the merger agreement following
the occurrence of a preliminary purchase event, as defined above,
unless Webster terminated the agreement as a result of a willful
or intentional material breach of any representation, warranty,
covenant or agreement by MECH, or if the MECH board of directors
fails to take some necessary action or MECH enters into an
acquisition transaction with a third party. In such case, the
option will terminate 24 months after the termination of the
merger agreement;
o upon 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 or MECH, if the merger agreement
has been terminated as a result of regulatory denial or requested
withdrawal of a regulatory application; if the merger has not
occurred by August 31, 2000; or if the exchange ratio falls below
certain thresholds set forth in the merger agreement and Webster
does not agree to increase the ratio; or (c) by MECH, if the
merger agreement is terminated as a result of a material breach of
any representation, warranty, covenant or other agreement Webster;
o 18 months after the termination of the merger agreement, if the
MECH shareholders have failed to approve the merger agreement; or
o 18 months after the termination of the merger agreement by Webster
as a result of material breach of any representation, warranty,
covenant or other agreement by MECH, if the breach was not willful
or intentional by MECH.
The MECH option may not be assigned by Webster or MECH to any other
person without the express written consent of the other party, except that
Webster may assign its rights in whole or in part after the occurrence of a
preliminary purchase event, as defined above.
In the event that before the MECH option is terminated, MECH enters
into a letter of intent or definitive agreement:
o to consolidate or merge with any third party, and MECH is not the
continuing or surviving corporation in the consolidation or
merger;
o to permit any third party to merge into MECH, and MECH is the
continuing or surviving corporation, but, in connection with the
merger, the then outstanding shares of MECH'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 MECH's common stock will represent after the merger less
than 50% of the outstanding shares and share equivalents of the
merged company; or
o to sell or otherwise transfer all or substantially all of its
assets to any third party.
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In that case, then the agreement governing the transaction must make proper
provision so that the MECH option will, upon the completion of that transaction,
be converted into, or exchanged for, a substitute option, at the election of
Webster, of either
o the acquiring corporation, or
o 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 MECH 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.
Upon the occurrence of a purchase event, as defined above, prior to the
termination of the option, at the request of Webster, MECH will be obligated to
o prepare, file and keep current for a period of one year an
offering circular which meets the standards of a shelf
registration statement filed with the SEC with respect to the
shares to be issued upon exercise of the MECH option under
applicable federal and state securities laws, and
o to repurchase the MECH option, and any shares of MECH's common
stock thus far purchased pursuant to the MECH option, at prices
determined as set forth in the option agreement, except to the
extent prohibited by applicable law, regulation or administrative
policy.
MARKET PRICES AND DIVIDENDS
WEBSTER'S COMMON STOCK
The table below sets forth the range of high and low sale prices of
Webster's common stock as reported on Nasdaq, as well as cash dividends paid
during the periods indicated, restated to reflect the two-for-one split of
Webster's common stock in April 1998:
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
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 0.11
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
March 31, 1999................. 31.13 27.44 0.11
June 30, 1999.................. 32.00 26.19 0.12
September 30, 1999............. 28.81 24.75 0.12
December 31, 1999.............. 28.75 21.88 0.12
March 31, 2000................. 24.19 20.13 0.14
Period Ended:
May 9, 2000.................... 23.19 20.44 --
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On November 30, 1999, the last trading day before the public
announcement of the merger, the closing price of Webster's common stock on
Nasdaq was $26.63. On May 9, 2000, the most recent practicable date before the
printing of this document, the closing price of Webster's common stock on the
Nasdaq was $21.75.
MECH'S COMMON STOCK
The table below sets forth the range of high and low sale prices of
MECH's common stock as reported on the Nasdaq, as well as cash dividends paid
during the periods indicated:
Market Price
------------ Cash
High Low Dividends Paid
---- --- --------------
Quarter Ended:
MECHANICS SAVINGS BANK
STOCK PRICE
March 31, 1997................. $19.00 $15.50 $ --
June 30, 1997.................. 19.00 17.00 --
September 30, 1997............. 26.25 18.88 --
December 31, 1997.............. 28.00 24.00 --
MECH FINANCIAL STOCK
PRICE
March 31, 1998................. $30.50 $24.13 $ --
June 30, 1998.................. 31.50 27.88 0.15
September 30, 1998............. 31.81 21.88 0.15
December 31, 1998.............. 29.00 20.63 0.15
March 31,1999.................. $34.00 $27.88 $0.15
June 30, 1999.................. 37.50 29.75 0.20
September 30, 1999............. 39.38 33.00 0.20
December 31, 1999.............. 37.31 31.75 0.20
March 31, 2000................. 35.50 28.88 0.20
Period Ended:
May 9, 2000.................... 34.13 29.69 --
On November 30, 1999, the last trading day before the public
announcement of the merger, the closing price of MECH's common stock on the
Nasdaq was $34.50. On May 9, 2000, the most recent practicable date before the
printing of this document, the closing price of MECH's common stock on the
Nasdaq was $32.19.
DESCRIPTION OF CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS
Set forth below is a description of Webster's capital stock, as well as
a summary of the material differences between the rights of holders of MECH's
common stock and their prospective rights as holders of Webster's common stock.
If the merger agreement is approved and the merger takes place, the holders of
MECH's common stock will become holders of Webster's common stock. As a result,
Webster'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 MECH's common stock. The
rights of those shareholders are governed at the present time by the certificate
of incorporation and the bylaws of MECH and the applicable provisions of the
Connecticut Business Corporation Act.
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The following comparison is based on the current terms of the governing
documents of Webster and MECH and on the provisions of the Delaware corporation
law. The discussion is intended to highlight important similarities and
differences between the rights of holders of Webster's common stock and MECH's
common stock.
WEBSTER'S COMMON STOCK
Webster is authorized to issue 200,000,000 shares of common stock, par
value $.01 per share. As of December 31, 1999, 45,103,770 shares of Webster's
common stock were outstanding and Webster had outstanding stock options granted
to directors, officers and other employees for another 2,924,905 shares of
Webster's common stock. Each share of Webster's common stock has the same
relative rights and is identical in all respects to each other share of
Webster's common stock. Webster'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'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. Webster's common stock is not subject to additional calls
or assessments by Webster, and all shares of Webster's common stock currently
outstanding are fully paid and nonassessable. For a discussion of the voting
rights of Webster's common stock, its lack of preemptive rights, the
classification of Webster's board of directors and provisions of Webster's
certificate of incorporation and bylaws that may prevent a change in control of
Webster or that would operate only in an extraordinary corporate transaction
involving Webster or its subsidiaries, see "-- Restated Certificate of
Incorporation and Bylaw Provisions."
Holders of Webster'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 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's common
stock. In addition, as described below, the indenture for Webster's senior notes
places restrictions on Webster's ability to pay dividends on its common stock.
See "-- Senior Notes."
In the unlikely event of any liquidation, dissolution or winding up of
Webster, the holders of Webster'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 available for distribution, in cash or in kind, after payment
or provision for payment of all debts and liabilities of Webster and after the
liquidation preferences of all outstanding shares of any class of stock having
preference over Webster's common stock have been fully paid or set aside.
MECH'S COMMON STOCK
The certificate of incorporation of MECH authorizes 15,000,000 shares
of MECH's common stock, par value $.01 per share, of which 5,045,369 shares were
outstanding as of December 31, 1999. In addition, as of December 31, 1999, there
were outstanding options to purchase MECH's common stock granted to officers and
other employees of MECH for 434,169 shares of MECH's common stock. In addition,
options for 994,150 shares of MECH's common stock were granted to Webster in
connection with the merger.
Each share of MECH's common stock also has the same relative rights and
is identical in all respects to each other share of MECH's common stock. As with
Webster's common stock, MECH'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.
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Holders of MECH's common stock also are entitled to one vote per share
on each matter properly submitted to shareholders for their vote, including the
election of directors. Holders of MECH's common stock have distribution and
liquidation rights similar to those of holders of Webster's common stock. MECH's
common stock is also not subject to additional calls or assessments by MECH, and
all shares of MECH's common stock currently outstanding are fully paid and
nonassessable. For a discussion of the voting rights of MECH's common stock, its
lack of preemptive rights and provisions in MECH's certificate of incorporation
which may prevent a change in control of MECH, see "--Certificate of
Incorporation and Bylaw Provisions."
WEBSTER'S PREFERRED STOCK AND SHAREHOLDER RIGHTS AGREEMENT
Webster's 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's common stock.
Webster'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 adopted the rights agreement to protect
shareholders in the event of an inadequate takeover offer or to deter coercive
or unfair takeover tactics. The rights agreement is a complicated document, but,
in general, each right entitles a holder to purchase for $100, 1/1,000th of a
share of series C preferred stock upon the occurrence of specified events. As of
the date of this document, no shares of Webster's Series C preferred stock have
been issued.
The rights will be distributed upon the earliest of:
o 10 business days following a public announcement that a person or
group of affiliated or associated persons (referred to in this
discussion as an "acquiring person") has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Webster's common stock,
o 10 business days following the commencement of a tender offer or
exchange offer that, if consummated, would result in a person or
group beneficially owning 15% or more of such outstanding shares
of Webster's common stock, or
o 10 business days after the Webster board has declared any person
to be an adverse person (as explained in the next paragraph).
The Webster board, by a majority vote, shall declare a person to be an
"adverse person" upon making:
o a determination that the person, alone or together with its
affiliates and associates, has or will become the beneficial owner
of 10% or more of the outstanding shares of Webster's common stock
(provided that this determination will not be effective until the
person has become the beneficial owner of 10% or more of the
outstanding shares of Webster's common stock), and
o a determination, after reasonable inquiry and investigation,
including consultation with anyone as the Webster board deems
appropriate, that
o the beneficial ownership by this person is intended to cause,
is reasonably likely to cause or will cause Webster to
repurchase Webster's common stock beneficially owned by the
person or to cause pressure on Webster to take action or
enter into a transaction or series of transactions intended
to provide such person with short-term financial gain under
circumstances where the Webster board believes that the best
long-term interests of Webster and the Webster shareholders
would not be served by
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taking such action or entering into such transactions or
series of transactions at that time,
o the beneficial ownership is causing or is reasonably likely
to cause a material adverse impact (including, but not
limited to, impairment of relationships with customers or
impairment of Webster's ability to maintain its competitive
position) on the business or prospects of Webster or
o the beneficial ownership is otherwise determined to be not in
the best interests of Webster and the Webster shareholders,
employees, customers and the communities in which Webster and
its subsidiaries do business.
However, the Webster board may not declare a person to be an adverse person if,
prior to the time that the person acquired 10% or more of the shares of
Webster's common stock then outstanding, the person provided to the Webster
board a written statement of the person's purpose and intentions with respect to
the acquisition of Webster's common stock, and the Webster board deemed it
appropriate not to declare the person an adverse person. The Webster board may
impose conditions on its determination (such as the person not acquiring more
than a specified amount of Webster's common stock).
In the event that the Webster board determines that a person is an
adverse person or a person becomes the beneficial owner of 15% or more of the
then outstanding shares of Webster's common stock, each holder of a right, will
have the right to receive:
o upon exercise and payment of the exercise price, Webster's common
stock (or, in certain circumstances, cash, property or other
securities of Webster) having a value equal to two times the
exercise price of the right or
o at the discretion of the Webster board, upon exercise and without
payment of the exercise price, Webster's common stock (or, in
certain circumstances, cash, property or other securities of
Webster) having a value equal to the difference between the
exercise price of the right and the value of the consideration
that would be payable under the bullet point above.
The rights are not exercisable until distributed and will expire at the close of
business on February 4, 2006, unless earlier redeemed by Webster as described
below. A copy of the Webster rights agreement has been filed with the SEC. See
"Where You Can Find More Information" for information on where you can obtain a
copy. A copy of the Webster rights agreement also is available free of charge
from Webster. This summary description of the Webster rights does not purport to
be complete and is qualified in its entirety by reference to the rights
agreement.
MECH'S PREFERRED STOCK
MECH's certificate of incorporation authorizes 1,000,000 shares of
serial preferred stock, par value $.01 per share. None are outstanding.
WEBSTER'S SENIOR NOTES
The 8 3/4% Senior Notes due on June 30, 2000 were issued by Webster in
an aggregate principal amount of $40,000,000 under an indenture, dated as of
June 15, 1993, between Webster 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'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 and not of its subsidiaries. The senior
notes may not be redeemed by Webster prior to June 30, 2000. The indenture
contains covenants that limit Webster's ability at the holding company level to
incur additional funded indebtedness, to make restricted distributions, to
engage in
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specified dispositions affecting Webster Bank or its voting stock, to create
specified liens upon Webster's assets at the holding company level, including a
negative pledge clause, and to engage in mergers, consolidations, or a sale of
substantially all of Webster's assets unless specified conditions are satisfied.
The indenture does not affect Webster's ability to consummate the merger with
MECH. The indenture also requires that Webster maintain a specified level of
liquid assets at the holding company level.
RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. The indenture limits the
amount of funded indebtedness which Webster may incur or guarantee at the
holding company level. Funded indebtedness includes any obligation of Webster
with a maturity in excess of one year for borrowed money, for the deferred
purchase price of property or services, for capital lease payments, or related
to the guarantee of these kinds of obligations. Webster may not incur or
guarantee any funded indebtedness if, immediately after giving effect to it, the
amount of funded indebtedness of Webster at the holding company level, including
the senior notes, would be greater than 90% of Webster's consolidated net worth.
As of December 31, 1999, Webster's consolidated net worth was $636 million and
it had $79 million of funded indebtedness.
RESTRICTED DISTRIBUTIONS. Under the indenture, Webster may not,
directly or indirectly, make any restricted distribution, except in capital
stock of Webster, if, at the time or after giving effect to the distribution:
o an event of default has occurred and is continuing under the
indenture;
o Webster Bank would fail to meet any of the applicable minimum
capital requirements under Office of Thrift Supervision
regulations;
o Webster would fail to maintain sufficient liquid assets to comply
with the terms of the covenant described under "Liquidity
Maintenance" below; or
o the aggregate amount of all restricted distributions subsequent to
September 30, 1993 would exceed the sum of
o $5 million, plus
o 75% of Webster'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
o 100% of the net proceeds received by Webster from any
capital stock issued by Webster other than to a subsidiary
subsequent to September 30, 1993. As of December 31, 1999,
Webster had the ability to pay $362 million in restricted
distributions.
Restricted distribution means:
o any dividend, distribution or other payment on the capital stock
of Webster or any subsidiary other than a wholly owned subsidiary,
except for dividends, distributions or payments payable in capital
stock;
o any payment to purchase, redeem, acquire or retire any capital
stock of Webster or the capital stock of any subsidiary other than
a wholly owned subsidiary; and
o any payment by Webster of principal, whether a prepayment,
redemption or at maturity of, or to acquire, any indebtedness for
borrowed money issued or guaranteed by Webster, other than the
senior notes or under a guarantee by Webster of any borrowing by
any employee stock ownership plan established by Webster 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 at a time when the
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senior notes were rated on 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 maintain at
all times, on an unconsolidated basis, liquid assets in an amount equal to or
greater than 150% of the aggregate interest expense on the senior notes and all
other indebtedness for borrowed money of Webster for 12 full calendar months
immediately following each determination date under the indenture, provided that
Webster will not be required to maintain 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.
WEBSTER'S CAPITAL SECURITIES
In January 1996, Webster raised $100 million through the sale of
capital securities that were used for general corporate purposes. Webster formed
a business trust for the purpose of issuing capital securities and investing the
net proceeds in subordinated debentures issued by Webster.
Before its acquisition by Webster, Eagle Financial Corp. raised $50
million through the sale of capital securities to be used for general corporate
purposes. Eagle also 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 in April 1998, Webster
assumed all of Eagle's rights and obligations with respect to the Eagle capital
securities and capital debentures.
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The following discussion is a general summary of provisions of
Webster's certificate of incorporation and bylaws, and a comparison of those
provisions to similar types of provisions in the certificate of incorporation
and bylaws of MECH. The discussion is necessarily general and, for provisions
contained in Webster's certificate of incorporation and bylaws or in MECH's
certificate of incorporation and bylaws, reference should be made to the
documents in question. Some of the provisions included in Webster's certificate
of incorporation and bylaws may serve to discourage a change in control of
Webster even if desired by a majority of shareholders. These provisions are
designed to encourage potential acquirers to negotiate directly with the board
of directors of Webster and to discourage other takeover attempts.
DIRECTORS. Some of the provisions of Webster's certificate of
incorporation and bylaws will impede changes in majority control of Webster's
board of directors. The 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 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:
o 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;
o each director is required to own not less than 100 shares of
Webster's common stock; and
o 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's bylaws also contain a provision prohibiting particular contracts and
transactions between Webster and its directors and officers and some other
entities unless specific procedural requirements are satisfied.
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Like Webster, MECH also has three classes of directors, with directors
in each class elected for three-year staggered terms. Unlike Webster, MECH's
certificate of incorporation provides that:
o directors need not be residents of the State of Connecticut;
o at the time of election, each director must own in his individual
capacity only one or more shares of MECH stock;
o no director attaining the age of seventy 70 years shall be
eligible to be elected; and
o the position of any director who fails to attend six consecutive
meetings of the board shall become vacant if the majority of the
board of directors determines that such absence was without good
cause.
Webster's 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, is to be filled for the remainder of the
unexpired term by a majority vote of the directors then in office. Similarly,
MECH's bylaws provide that any vacancy on the board of directors may be filled
by a majority of the directors then in office, although less than a quorum.
Webster's 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.
MECH's directors may be removed at any time with cause by the
affirmative vote of at least two-thirds of the directors then in office or in
accordance with the provisions of the Connecticut Business Corporation Act.
Webster'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 bylaws of MECH contain similar provisions.
CALL OF SPECIAL MEETINGS. Webster's 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. MECH's certificate of
incorporation contains a similar provision.
SHAREHOLDER ACTION WITHOUT A MEETING. Webster's certificate of
incorporation provides that shareholders may act by written consent without a
meeting but only if the vote is unanimous. MECH's certificate of incorporation
provides that shareholder action must be effected at a duly called annual or
special meeting and may not be effected by written consent.
LIMITATION ON LIABILITY OF DIRECTORS AND INDEMNIFICATION. Webster's
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:
o for any breach of the director's duty of loyalty to the
corporation or its shareholders,
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
o for any payment of a dividend or approval of a stock repurchase
that is illegal under Section 174 of the Delaware corporation law,
or
o for any transaction from which a director derived an improper
personal benefit.
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MECH's certificate of incorporation provides that the personal
liability to the corporation or its shareholders of a person who is or was a
director of the corporation for monetary damages for breach of duty as a
director shall be limited to the amount of compensation received by the director
for serving the corporation during the year of the violation if such breach did
not:
o involve a knowing and culpable violation of law by the director;
o enable the director or an associate thereof to receive an improper
personal economic gain;
o show lack of good faith and a conscious disregard for the duty of
the director to the corporation under circumstances in which the
director was aware that his conduct or omission created an
unjustifiable risk of serious injury to the corporation;
o constitute a sustained and unexcused pattern of inattention that
amounted to an abdication of the director's duty to the
corporation; or
o constitute an unlawful distribution.
Webster's bylaws also provide for indemnification of directors,
officers, trustees, employees and agents of Webster, 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, by reason of the
fact that the person is or was serving in that kind of capacity for or on behalf
of Webster. The bylaws provide that Webster 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, and, for any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Similarly, the bylaws provide that Webster
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, 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; 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 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'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'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 or is acting in this kind of capacity for
another business organization or entity at Webster's request, against any
liability asserted against the person and incurred in that capacity, or arising
out of that status, whether or not Webster would have the power or obligation to
indemnify him against that kind of liability under the indemnification
provisions of Webster's bylaws.
MECH's bylaws provide that the company shall indemnify its directors,
officers, employees and agents to the maximum extent permissible and/or required
by applicable law. Under Connecticut law, MECH must indemnify any such persons
against reasonable expenses, including attorneys' fees, when that person is
successful in defense of a legal suit or proceeding, whether civil, criminal,
administrative or investigative. In addition, MECH may indemnify any such person
against reasonable expenses, including attorneys' fees, if that person was or is
made a party to or is threatened to be made a party to any suit or proceeding,
whether civil, criminal, administrative or investigative, other than an action
by or in the right of MECH in which that person was adjudged liable to MECH, 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 MECH, and, for any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful.
Indemnification under these circumstances may only be made if ordered by a court
or if authorized in a specific case upon a determination that
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the applicable standard of conduct has been met. Such a determination may be
made by a majority of MECH's disinterested directors, by independent legal
counsel, or by MECH's shareholders. In addition, Connecticut law allows MECH to
purchase and maintain insurance to the same extent allowed by Webster's bylaws.
CUMULATIVE VOTING. Neither Webster nor MECH shareholders may cumulate
voting rights in the election of directors.
PREEMPTIVE RIGHTS. Both Webster's certificate of incorporation and
MECH's certificate of incorporation provide that shareholders do not have any
preemptive rights regarding the entity's securities.
NOTICE OF MEETINGS. Webster'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. MECH's bylaws require that notice of an annual or special meeting
be given not less than 10 nor more than 60 days prior to a meeting.
QUORUM. Webster'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. MECH's bylaws provide that the holders of a majority of
the issued and outstanding shares of stock of the company entitled to vote at a
meeting constitutes a quorum.
GENERAL VOTE. Webster'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's
certificate of incorporation or bylaws. MECH's bylaws contain a similar
provision.
RECORD DATE. Webster'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 10 nor more than 60 days
before the date of the meeting or other action. MECH's bylaws provide that the
board of directors may set a record date which shall not be a date earlier than
the date on which such action is taken by the board of directors, nor more than
70 nor less than 10 days before the particular event requiring such
determination is to occur.
APPROVALS FOR ACQUISITIONS OF CONTROL AND OFFERS TO ACQUIRE CONTROL.
Webster'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'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's voting stock without obtaining prior
approval of the offer by at least two-thirds of Webster's board of directors or,
alternatively, before the offer is made, obtaining approval of the acquisition
from the 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 or any
of its subsidiaries, and the provisions remain effective only so long as an
insured financial institution is a majority-owned subsidiary of Webster. Shares
acquired in excess of these limitations are not entitled to vote or take other
shareholder action or be counted in determining the total number of outstanding
shares in connection with any matter involving shareholder action. These excess
shares are also subject to transfer to a trustee, selected by Webster, for the
sale on the open market or otherwise, with the expenses of the trustee to be
paid out of the proceeds of the sale.
MECH's certificate of incorporation provides a similar prohibition with
regard to the acquisition of shares. However, MECH's certificate does not
require an affirmative vote of the board of directors before an offer is made,
but rather requires that the offeror notify the board of directors in writing of
its intention to make an offer and that the board of directors has not, within
15 days after receipt of such notice, disapproved such offer before the offer is
made.
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PROCEDURES FOR BUSINESS COMBINATIONS. Webster's certificate of
incorporation requires that business combinations between Webster or any
majority-owned subsidiary of Webster and a 10% or more shareholder or its
affiliates or associates, referred to collectively in this section as the
interested shareholder, either be approved by at least 80% of the total number
of outstanding shares of voting stock of Webster, or be approved by at least
two-thirds of Webster's continuing directors, which means those directors
unaffiliated with the interested shareholder and serving before the interested
shareholder became 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's outstanding shares; the adoption of
any plan or proposal of liquidation proposed by or on behalf of an interested
shareholder; and any reclassification of securities, recapitalization of Webster
or any merger or consolidation of Webster with any of its subsidiaries or any
other transaction which has the effect of increasing the proportionate ownership
interest of the interested shareholder. Webster's restated certificate of
incorporation excludes employee stock purchase plans and other employee benefit
plans of Webster and any of its subsidiaries from the definition of interested
shareholder. MECH's certificate of incorporation contains a similar provision.
ANTI-GREENMAIL. Webster's certificate of incorporation requires
approval by a majority of the outstanding shares of voting stock before Webster
may directly or indirectly purchase or otherwise acquire any voting stock
beneficially owned by a holder of 5% or more of Webster'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 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 if the board of directors has determined that the
purchase price per share does not exceed the fair market value of that voting
stock.
MECH's certificate of incorporation contains a similar provision,
except that the applicable percentage is 3% and it does not contain the market
value exception described above.
CRITERIA FOR EVALUATING OFFERS. Webster's 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.
MECH's 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 long-term as well as
the short-term interests of the corporation, the interests of the shareholders,
long-term as well as short-term, including the possibility that those interests
may be best served by the continued independence of the corporation, the
interests of the corporation's employees, customers, creditors and suppliers,
and community and societal considerations including those of any community in
which any office or other facility of the corporation is located.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to
Webster's certificate of incorporation must be approved by at least two-thirds
of Webster'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,
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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'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.
Generally, amendments to MECH's certificate of incorporation must be
approved by at least a majority of MECH's board of directors and also by
shareholders by the affirmative vote of a majority of the shares entitled to
vote thereon at a duly called annual or special meeting; provided, however that
the provisions in MECH's certificate of incorporation concerning business
combinations, special meeting of shareholders, vacancies on the board, director
liability, removal of directors, nominations for director, action by
shareholders, greenmail, approval for certain acquisitions and offers to acquire
voting stock, considerations for merger, consolidation or other offers, and
limitations on certain combination transactions may not be repealed or amended
in any respect and no article imposing cumulative voting in the election of
directors may be added, unless such action is approved by the affirmative vote
of the holders of not less than 60% of the voting power of the issued and
outstanding shares of the corporation entitled to vote for the election of
directors, and if there is an interested shareholder, the affirmative vote of
not less than 60% of the voting power of the issued and outstanding shares of
the corporation entitled to vote for the election of directors held by
shareholders other than the interested shareholder. In general, an interested
shareholder is someone or a group which owns and/or has the right to acquire ten
percent or more of MECH's common stock.
MECH's bylaws may be altered or amended by the board at any meeting by
a majority vote of the directors on the entire board or at any meeting of the
shareholders by a majority in interest of the stock entitled to vote, provided
however, that in order to amend or repeal or to adopt any provision inconsistent
with certain provisions of the articles concerning shareholders' meetings,
directors or concerning amendment of bylaws, any vote of shareholders shall
require the affirmative vote of the holders of at least 60% of the voting power
of all of the issued and outstanding shares of the company then entitled to vote
for the election of directors, and if there is an interested shareholder, the
affirmative vote of 60% of the voting powers of all of the issued and
outstanding shares of the company entitled to vote for the election of directors
held by shareholders other than the interested shareholder, and any action of
directors shall require the affirmative vote of a majority of the directors then
in office.
APPLICABLE LAW
The following discussion is a general summary of particular federal and
state 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 before
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 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 2/3% 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
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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 TAKEOVER STATUTE AND REGULATORY RESTRICTIONS ON
ACQUISITIONS OF STOCK. Section 33-844 of the Connecticut Business Corporation
Act applies to Connecticut corporations with a class of voting stock registered
on a national securities exchange and restricts transactions which may be
entered into by the corporation and some of its shareholders. Section 844
provides, in general, that a shareholder acquiring more than 10% 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
shareholder, may not engage in specified business combinations, as discussed
below, with the corporation for a period of five years after the date on which
the shareholder became an interested shareholder unless the business combination
is approved by the corporation's board of directors and a majority of the
non-employee directors of the Company. Section 843 defines the term business
combination to include a wide variety of transactions with or caused by an
interested shareholder or its affiliates in which the interested shareholder
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 shareholder or transactions in which the interested shareholder
receives specified other benefits.
Connecticut banking statutes prohibit any person from directly or
indirectly offering to acquire or acquiring voting stock of a
Connecticut-chartered savings bank, like MS Bank, a federal savings bank having
its principal office in Connecticut, like Webster Bank, or a holding company of
that kind of entity, like MECH or Webster, 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
of an insured institution, without giving at least 60 days prior written notice
providing specified information to the appropriate federal banking agency. In
the case of Webster and Webster Bank, the appropriate federal banking agency is
the Office of Thrift Supervision and in the case of MECH and MS Bank, the
appropriate federal banking agency is the Board of Governors of the Federal
Reserve System or 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 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,
the FDIC or the Board of Governors of the Federal Reserve System may prohibit
the acquisition of control if the agency finds, among other things, that:
o the acquisition would result in a monopoly or substantially lessen
competition;
o the financial condition of the acquiring person might jeopardize
the financial stability of the institution; or
o 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.
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WHERE YOU CAN FIND MORE INFORMATION
Webster and MECH file 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
or MECH 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 can
be found on the Internet at http://www.wbst.com. MECH can be found on the
Internet at http://www.mechanicsbank.com. Webster's common stock is traded on
the Nasdaq Stock Market's National Market Tier under the trading symbol WBST.
MECH's common stock is traded on the Nasdaq under the trading symbol MECH.
Webster has filed with the SEC a registration statement on Form S-4
under the Securities Act relating to Webster's common stock to be issued to
MECH'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 SEC allows Webster and MECH to incorporate by reference information
into this proxy statement/prospectus, which means that Webster and MECH can
disclose important information to you by referring you to another document filed
separately with the SEC. The information that Webster and MECH incorporate 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, MECH and their subsidiaries
that is not included in or delivered with this document.
WEBSTER DOCUMENTS
This proxy statement/prospectus incorporates by reference the documents
listed below that Webster has filed with the SEC:
<TABLE>
<CAPTION>
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
<S> <C>
o Annual Report on Form 10-K Year ended December 31, 1999
o Current Report on Form 8-K Filed February 9, 2000
o For description of Webster common stock
o Form 8-A Filed December 2, 1986
o Current Report on Form 8-K Filed October 30, 1998
o Current Report on Form 8-K Filed November 25, 1996
o Current Report on Form 8-K Filed February 12, 1996
</TABLE>
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR
WRITE TO: JAMES M. SITRO, SENIOR VICE PRESIDENT, INVESTOR RELATIONS OF WEBSTER
FINANCIAL CORPORATION,
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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 JUNE 1, 2000.
MECH DOCUMENTS
This proxy statement/prospectus incorporates by reference the documents
listed below that MECH has filed with the SEC:
FILINGS PERIOD OF REPORT OR DATE FILED
- ------- ------------------------------
o Annual Report on Form 10-K Year ended December 31, 1999
o For description of MECH common stock
o Form 8-A Filed December 29, 1997
THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR
WRITE TO: TERESA E. KNOX, INVESTOR RELATIONS OFFICER, MECH FINANCIAL, INC., 100
PEARL STREET, HARTFORD, CONNECTICUT 06103, TELEPHONE (860) 293-4000. IN ORDER TO
OBTAIN TIMELY DELIVERY OF DOCUMENTS, YOU SHOULD REQUEST INFORMATION AS SOON AS
POSSIBLE, BUT NO LATER THAN JUNE 1, 2000.
Webster and MECH incorporate by reference additional documents that
either company may file with the SEC between the date of this document and the
respective dates of the Webster and the MECH special meetings. These documents
include periodic reports, such as annual reports on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K, as well as proxy statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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 our operations.
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 our future financial results and could cause those
results to differ materially from those expressed in our forward-looking
statements. 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;
o deposit attrition;
o adverse changes in interest rates;
o change in any applicable law, rule, regulation or practice with
respect to tax or accounting issues or otherwise; and
o adverse changes or conditions in capital or financial markets.
The forward-looking statements are made as of the date of this
document, and we assume no obligation to update the forward-looking statements
or to update the reasons why actual results could differ from those projected in
the forward-looking statements.
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No person is authorized to give any information or to make any
representation not contained in this document, and, if given or made, that
information or representation should not be relied upon as having been
authorized. This document does not constitute an offer to sell, or a
solicitation of an offer to purchase, any of Webster's common stock offered by
this document, or the solicitation of a proxy, in any jurisdiction in which it
is unlawful to make that kind of offer or solicitation. Neither the delivery of
this document nor any distribution of Webster'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 MECH or Webster or
the information in this document or the documents or reports incorporated by
reference into this document since the date of this document.
SHAREHOLDER PROPOSALS
Any proposal which a MECH shareholder wishes to have included in MECH's
proxy statement and form of proxy relating to MECH's 2000 annual meeting of
shareholders under Rule 14a-8 of the SEC must be received by MECH at its
principal executive offices at 100 Pearl Street, Hartford, Connecticut 06103 by
July 1, 2000. Nothing in this paragraph shall be deemed to require MECH to
include in its proxy statement and form of proxy for such meeting any
shareholder proposal which does not meet the requirements of the SEC in effect
at the time. If the merger agreement is approved and the merger takes place,
MECH will not have an annual meeting of shareholders in 2000. If the merger does
not take place, MECH anticipates that its 2000 annual meeting will be held in
September 2000.
OTHER MATTERS
We do not expect that any matters other than those described in this
document will be brought before the special meeting. If any other matters are
presented, however, it is the intention of the persons named in the MECH proxy
card, to vote proxies in accordance with the determination of a majority of
MECH's board of directors, including, without limitation, a motion to adjourn or
postpone the special meeting to another time and/or place for the purpose of
soliciting additional proxies in order to approve the merger agreement or
otherwise.
EXPERTS
The consolidated financial statements of Webster at December 31, 1999
and 1998, and for each of the years in the three-year period ended December 31,
1999, have been incorporated by reference into this document and in the
registration statement in reliance on the report of KPMG LLP, independent
certified public accountants, which is incorporated by reference into this
document and into the registration statement, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of MECH, at December 31, 1999 and
1998 and for the two-year period ended December 31, 1999, incorporated into this
document by reference from the MECH Annual Report on Form 10-K for the year
ended December 31, 1999, have been audited by KPMG LLP, independent certified
public accountant, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of that
firm given upon their authority as experts in accounting and auditing. The
consolidated financial statements of Mechanics Savings Bank and subsidiaries for
the year ended December 31, 1997, incorporated in this document by reference
from the MECH Annual Report on Form 10-K for the year ended December 31, 1999,
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
INDEPENDENT PUBLIC ACCOUNTANTS
A representative of KPMG LLP will be present at the MECH special
meeting. The representative will have the opportunity to make a statement if
he/she desires to do so and is expected to be available to respond to
appropriate questions.
LEGAL MATTERS
The validity of Webster's common stock to be issued in the merger has
been passed upon by Hogan & Hartson L.L.P., Washington, D.C. Hogan & Hartson
will be passing upon certain tax matters in connection with the merger. Tyler
Cooper & Alcorn LLP, Hartford, Connecticut will be passing upon certain legal
matters for MECH in connection with the merger.
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Appendix A
FAIRNESS OPINION OF KEEFE, BRUYETTE & WOODS, INC.
KEEFE BRUYETTE & WOODS, INC.
Specialists in Banking & Financial Services
One Financial Plaza
Hartford, Connecticut 06103
May 12, 2000
Board of Directors
MECH Financial, Inc.
100 Pearl Street
Hartford, CT 06103
Members of the Board:
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to the shareholders of MECH Financial,
Inc. ("MECH") of the exchange ratio in the proposed merger (the "Merger") of
MECH with and into Webster Financial ("Webster"), pursuant to the Agreement and
Plan of Merger, dated as of December 1, 1999, between MECH and Webster as
amended by Amendment Number 1, dated December 21, 1999 (the "Agreement"). Under
the terms of the Agreement, upon consummation of the Merger holders of
outstanding shares of common stock of MECH will receive 1.520 shares of common
stock of Webster (the "Exchange Ratio") for each share of MECH common stock
exchanged therefor, plus cash in lieu of any fractional share interest. Keefe,
Bruyette & Woods, Inc. ("KBW") has assumed for purposes of its opinion, that the
Merger will be consummated on the terms contemplated by the Agreement.
KBW as part of its investment banking business is continually engaged
in the valuation of banking businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. As specialists in the
securities of banking companies we have experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of our business as a
broker-dealer, we may, from time to time, purchase securities from, and sell
securities to MECH and Webster and as a market maker in securities, we may from
time to time have a long or short position in, and buy or sell, debt or equity
securities of MECH and Webster for our own account and for the accounts of our
customers. To the extent we have any such position as of the date of this
opinion it has been disclosed to MECH. We have acted as a financial advisor to
the Board of Directors of MECH in rendering this fairness opinion and will
receive a fee from MECH for our services.
In connection with this opinion, we have reviewed, among other things,
the Agreement and the related Stock Option Agreement; Annual Reports to
Shareholders of MECH and Webster for the three years ended December 31, 1998;
certain interim reports to shareholders and Quarterly Reports on Form 10-Q of
MECH and Webster, and certain internal financial analyses and budget forecasts
for MECH and Webster prepared by management. We also have held discussions with
members of the senior management of MECH and Webster regarding the past and
current business operations, regulatory relationships, financial condition and
future prospects of their respective companies. In addition, we have compared
certain financial and stock market information for MECH and Webster with similar
information for certain other companies the securities of which are publicly
traded,
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reviewed the financial terms of certain recent business combinations in the
banking industry and performed such other studies and analyses as we considered
appropriate.
In conducting our review and arriving at our opinion, we have relied
upon and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of MECH and Webster as to the reasonableness and
achievability of the forecasts (and the assumptions and bases therefor) provided
to us, and we have assumed that such forecasts reflect the best currently
available estimates and judgments of MECH and Webster and that such forecasts
will be realized in the amounts and in the time period currently estimated by
such managements. We have also assumed that the aggregate allowances for loan
losses for MECH and Webster are adequate to cover such losses. In rendering our
opinion, we have not made or obtained any evaluations or appraisals of the
property of MECH or Webster nor have we examined any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of MECH
and Webster; (ii) the assets and liabilities of MECH and Webster; and (iii) the
nature and terms of certain other merger transactions involving banks and bank
holding companies. We have also taken into account our assessment of general
economic, market and financial conditions and our experience in other
transactions, as well as our experience in securities valuation and our
knowledge of the banking industry generally. Our opinion is necessarily based
upon conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Exchange Ratio pursuant to the Agreement is fair, from a
financial point of view, to the common shareholders of MECH.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
---------------------------------
KEEFE, BRUYETTE & WOODS, INC.
A-2
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APPENDIX B
SECTIONS 33-855 TO 33-872 OF THE CONNECTICUT BUSINESS CORPORATION ACT
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;
(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,
B-1
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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 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.
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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.
(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
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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;
(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.
B-4
<PAGE>
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.
(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.
B-5
<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's
certificate of incorporation, and the provisions of Article IX of the Webster's
bylaws, as amended.
Webster 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,
or are or were serving at the request of Webster 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, 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's bylaws provide for indemnification of directors, officers,
trustees, employees and agents of Webster, 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) by reason of the
fact that such person is or was serving in such a capacity for or on behalf of
Webster. Webster 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, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Similarly, Webster 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, 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; 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 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 may purchase and maintain insurance on behalf
of any person who is or was a director, officer, trustee, employee, or agent of
Webster or is acting in such capacity for another business organization or
entity at Webster'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 would have the power or obligation to indemnify him
against such liability under the provisions of Article IX of Webster's bylaws.
Article 6 of Webster's restated certificate of incorporation provides
that no director will be personally liable to Webster 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 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 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.
II-1
<PAGE>
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 pursuant to the foregoing provisions, or otherwise, Webster 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 of
expenses incurred or paid by a director, officer or controlling person of
Webster 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 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 December 1, 1999 by and
between Webster Financial Corporation ("Webster") and MECH
Financial, Inc. ("MECH") (filed as Exhibit 2.1 to Webster's
Current Report on Form 8-K filed with the SEC on December 10, 1999
and incorporated by reference in this document.)
2.2 Amendment Number 1 to the Agreement and Plan of Merger, dated as
of December 21, 1999 by and between Webster and MECH.**
2.3 Option Agreement, dated as of December 1, 1999, between MECH and
Webster (filed as Exhibit 2.2 to Webster's Current Report on Form
8-K filed with the SEC on December 10, 1999 and incorporated by
reference on this document.)
5.1 Form of opinion of Hogan & Hartson L.L.P. as to the validity of
the securities registered hereunder, including the consent of that
firm.
8 Form of opinion of Hogan & Hartson, L.L.P., as to certain tax
matters, including the consent of that firm.
10.1 Non-Compete Agreements, dated as of January 10, 2000 by and
between Webster and Brian A. Orenstein, Richard W. Stout, Jr. and
Thomas M. Wood, respectively.**
10.2 Consulting Agreement, dated January 20, 2000 by and between
Webster and Edgar C. Gerwig.**
10.3 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Edgar C.
Gerwig (filed as Exhibit 10.1 to MECH's filing on Form 8-A12G
filed with the SEC on December 29, 1997 and incorporated by
reference in this document) dated January 1, 1998 by and among
Mechanics Savings Bank, MECH Financial, Inc. and Edgar C. Gerwig
(filed as Exhibit 10.10 to MECH's Annual Report on Form 10-K,
filed with the SEC on March 20, 1998 and incoporated by reference
in this document.)
10.4 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Thomas M.
Wood (filed as Exhibit 10.2 to MECH's filing on Form 8-A2G filed
with the SEC on December 29, 1997 and incorporated by reference in
this document) dated January 1, 1998 by and among Mechanics
Savings Bank, MECH Financial, Inc. and Thomas M. Wood (filed as
Exhibit 10.11 to MECH's Annual Report on Form 10-K, filed with the
SEC on March 20, 1995 and incorporated by reference in this
document.
II-3
<PAGE>
10.5 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 Amendment No. 1 to the Change of Control Agreement,
dated as of June 28, 1996 by and between Mechanics Savings Bank
and Richard W. Stout, Jr. (filed as Exhibit 10.3 to MECH's filing
on Form 8-A12G filed with the SEC on December 29, 1997 and
incorporated by reference in this document), dated January 1, 1998
by and among Mechanics Savings Bank, MECH Financial, Inc. and
Richard W. Stout, Jr. (filed as Exhibit 10.12 to MECH's Annual
Report on Form 10-K, filed with the SEC on March 20, 1998 and
incorporated by reference in this document).
10.6 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Eugene B.
Marinelli (filed as Exhibit 10.4 to MECH's filing on Form 8-A12G
filed with the SEC on December 29, 1997 and incorporated by
reference in this document), dated January 1, 1998 by and among
Mechanics Savings Bank, MECH Financial, Inc. Eugene B. Marinelli
(filed as Exhibit 10.13 to MECH's Annual Report on Form 10-K,
filed with the SEC on March 20, 1998 and incorporated by reference
in this document).
10.7 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Marcy D.
Negro (filed as Exhibit 10.5 to MECH's filing on Form 8-A12G filed
with the SEC on December 29, 1997 and incorporated by reference in
this document), dated January 1, 1998 by and among Mechanics
Savings Bank, MECH Financial, Inc. and Marcy D. Negro (filed as
Exhibit 10.14 to MECH's Annual Report on Form 10-K, filed with the
SEC on March 20, 1998 and incorporated by reference in this
document).
10.8 Amendment No. 1 to the of Control Agreement, dated as of June 28,
1996 by and between Mechanics Savings Bank and Brian A. Orenstein
(filed as Exhibit 10.6 to MECH's filing on Form 8-A12G filed with
the SEC on December 29, 1997 and incorporated by reference in this
document), dated January 1, 1998 by and among Mechanics Savings
Bank, MECH Financial, Inc. and Brian A. Orenstein (filed as
Exhibit 10.15 to MECH's Annual Report on Form 10-K, filed with the
SEC on March 20, 1998 and incorporated by reference in this
document).
10.9 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Gary J.
Roman (filed as Exhibit 10.7 to MECH's filing on Form 8-A12G filed
with the SEC on December 29, 1997 and incorporated by reference in
this document), dated January 1, 1998 by and among Mechanics
Savings Bank, MECH Financial, Inc. and Gary J. Roman (filed as
Exhibit 10.16 to MECH's Annual Report on Form 10-K, filed with the
SEC on March 20, 1998 and incorporated by reference in this
document).
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5).
23.2 Consent of Hogan & Hartson, L.L.P. (included as part of Exhibit
8).
23.3 Consent of KPMG LLP (for Webster).
II-4
<PAGE>
23.4 Consent of KPMG LLP (for MECH).
23.5 Consent of PricewaterhouseCoopers LLP
23.6 Consent of Keefe, Bruyette & Woods, Inc.
24 Power of attorney (included on signature page).**
99 Form of MECH proxy card.**
- -----------------------
**Previously filed on Form S-4, filed with the SEC on March 24, 2000.
(B) Not required.
(C) See Appendix A to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS.
(a) Webster hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement. 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.
II-5
<PAGE>
(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 hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of Webster'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 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 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 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, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) The undertaking concerning indemnification is included as part of the
response to Item 20.
(f) Webster 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 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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Pre-Effective Amendment No. 2 to the
Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waterbury, State of
Connecticut, on May 11, 2000.
WEBSTER FINANCIAL CORPORATION
By: /s/ James C. Smith
------------------------------------
James C. Smith
Chairman and Chief Executive Officer
Each person whose signature appears below appoints James C.
Smith or Harriet Munrett Wolfe, jointly and severally, each in his or her own
capacity, as true and lawful attorneys-in-fact, with full power or substitution
in such person's name, place and stead, in any and all capacities to sign any
amendments to this Registration Statement on Form S-4 and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities indicated on May 11, 2000.
Name: Title:
---- -----
/s/ James C. Smith Chairman and Chief Executive Officer
- ------------------------------- (Principal Executive Officer)
James C. Smith
/s/ Peter J. Swiatek* Controller
- -------------------------------
Peter J. Swiatek
/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.
<PAGE>
/s/ George T. Carpenter* Director
- -------------------------------
George T. Carpenter
/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/ P. Anthony Giorgio* Director
- -------------------------------
P. Anthony Giorgio
/s/ C. Michael Jacobi* Director
- -------------------------------
C. Michael Jacobi
/s/ John F. McCarthy* Director
- -------------------------------
John F. McCarthy
- ------------------------------- Director
Michael G. Morris
/s/ Sister Marguerite Waite* Director
- -------------------------------
Sister Marguerite Waite
/s/ James C. Smith
- -------------------------------
*By Power of Attorney
<PAGE>
EXHIBIT INDEX
Exhibit
No. Exhibit
--- -------
2.1 Agreement and Plan of Merger, dated as of December 1, 1999 by and
between Webster Financial Corporation ("Webster") and MECH
Financial, Inc. ("MECH") (filed as Exhibit 2.1 to Webster's
Current Report on Form 8-K filed with the SEC on December 10, 1999
and incorporated by reference in this document.)
2.2 Amendment Number 1 to the Agreement and Plan of Merger, dated as
of December 21, 1999 by and between Webster and MECH.**
2.3 Option Agreement, dated as of December 1, 1999, between MECH and
Webster (filed as Exhibit 2.2 to Webster's Current Report on Form
8-K filed with the SEC on December 10, 1999 and incorporated by
reference in this document.)
5.1 Form of opinion of Hogan & Hartson L.L.P. as to the validity of
the securities registered hereunder, including the consent of that
firm.
8 Form of opinion of Hogan & Hartson, L.L.P., as to certain tax
matters, including the consent of that firm.
10.1 Non-Compete Agreements, dated as of January 10, 2000 by and
between Webster and Brian A. Orenstein, Richard W. Stout, Jr. and
Thomas M. Wood, respectively.**
10.2 Consulting Agreement, dated January 20, 2000 by and between
Webster and Edgar C. Gerwig.**
10.3 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Edgar C.
Gerwig (filed as Exhibit 10.1 to MECH's filing on Form 8-A12G
filed with the SEC on December 29, 1997 and incorporated by
reference in this document), dated January 1, 1998 by and among
Mechanics Savings Bank, MECH Financial, Inc. and Edgar C. Gerwig
(filed as Exhibit 10.10 to MECH's Annual Report on Form 10-K,
filed with the SEC on March 20, 1998 and incorporated by reference
in this document).
10.4 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Thomas M.
Wood (filed as Exhibit 10.2 to MECH's filing on Form 8-A12G filed
with the SEC on December 29, 1997 and incorporated by reference in
this document), dated January 1, 1998 by and among Mechanics
Savings Bank, MECH Financial, Inc. and Thomas M. Wood (filed as
Exhibit 10.11 to MECH's Annual Report on Form 10-K, filed with the
SEC on March 20, 1998 and incorporated by reference in this
document).
<PAGE>
10.5 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Richard W.
Stout, Jr. (filed as Exhibit 10.3 to MECH's filing on Form 8-A12G
filed with the SEC on December 29, 1997 and incorporated by
reference in this document), dated January 1, 1998 by and among
Mechanics Savings Bank, MECH Financial, Inc. and Richard W. Stout,
Jr. (filed as Exhibit 10.12 to MECH's Annual Report on Form 10-K,
filed with the SEC on March 20, 1998 and incorporated by reference
in this document).
10.6 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Eugene B.
Marinelli (filed as Exhibit 10.4 to MECH's filing on Form 8-A12G
filed with the SEC on December 29, 1997 and incorporated by
reference in this document), dated January 1, 1998 by and among
Mechanics Savings Bank, MECH Financial, Inc. Eugene B. Marinelli
(filed as Exhibit 10.13 to MECH's Annual Report on Form 10-K,
filed with the SEC on March 20, 1998 and incorporated by reference
in this document).
10.7 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Marcy D.
Negro (filed as Exhibit 10.5 to MECH's filing on Form 8-A12G filed
with the SEC on December 29, 1997 and incorporated by reference in
this document), dated January 1, 1998 by and among Mechanics
Savings Bank, MECH Financial, Inc. and Marcy D. Negro (filed as
Exhibit 10.14 to MECH's Annual Report on Form 10-K, filed with the
SEC on March 20, 1998 and incorporated by reference in this
document).
10.8 Amendment No. 1 to the of Control Agreement, dated as of June 28,
1996 by and between Mechanics Savings Bank and Brian A. Orenstein
(filed as Exhibit 10.6 to MECH's filing on Form 8-A12G filed with
the SEC on December 29, 1997 and incorporated by reference in this
document), dated January 1, 1998 by and among Mechanics Savings
Bank, MECH Financial, Inc. and Brian A. Orenstein (filed as
Exhibit 10.15 to MECH's Annual Report on Form 10-K, filed with the
SEC on March 20, 1998 and incorporated by reference in this
document).
10.9 Amendment No. 1 to the Change of Control Agreement, dated as of
June 28, 1996 by and between Mechanics Savings Bank and Gary J.
Roman (filed as Exhibit 10.7 to MECH's filing on Form 8-A12G filed
with the SEC on December 29, 1997 and incorporated by reference in
this document), dated January 1, 1998 by and among Mechanics
Savings Bank, MECH Financial, Inc. and Gary J. Roman (filed as
Exhibit 10.16 to MECH's Annual Report on Form 10-K, filed with the
SEC on March 20, 1998 and incorporated by reference in this
document).
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5).
23.2 Consent of Hogan & Hartson, L.L.P. (included as part of Exhibit
8).
23.3 Consent of KPMG LLP (for Webster).
<PAGE>
23.4 Consent of KPMG LLP (for MECH).
23.5 Consent of PricewaterhouseCoopers LLP
23.6 Consent of Keefe, Bruyette & Woods, Inc.
24 Power of attorney (included on signature page).**
99 Form of MECH proxy card.**
**Previously filed on Form S-4, filed with the SEC on March 24, 2000.
Exhibit 5.1
FORM OF LEGAL OPINION
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004
__________, 2000
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"), in connection with its
registration statement on Form S-4 (the "Registration Statement") (File No.
333-33228), as amended, filed with the Securities and Exchange Commission
relating to the proposed offering of up to 8,293,778 shares of Webster's common
stock, par value $.01 per share, all of which shares (the "Shares") may be
issued by Webster in accordance with the terms of the Agreement and Plan of
Merger, dated as of December 1, 1999, and amended as of December 21, 1999, by
and between Webster and MECH Financial, Inc. (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 the Registration Statement.
For purposes of this opinion letter, we have examined copies
of the following documents:
1. An executed copy of the Registration Statement and
Pre-Effective Amendments No. 1 and No. 2 thereto.
2. An executed copy of the Agreement.
3. The Second Restated Certificate of Incorporation of
Webster, as certified by the Secretary of Webster on the
date hereof as then being complete, accurate and in
effect.
4. The Bylaws of Webster, as certified by the Secretary of
Webster on the date hereof as then being complete,
accurate and in effect.
5. Resolutions of the Board of Directors of Webster adopted
at a meeting held on December ___, 1999, as certified by
the Secretary of Webster 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 all natural persons, the accuracy and
completeness of all documents submitted
<PAGE>
to us, the authenticity of all original documents, and the conformity with the
original documents of all documents submitted to us as copies (including
telecopies). 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 Delaware General Corporation Law, as amended. We express no opinion herein
as to any other laws, statutes, ordinances, rules, or regulations. As used
herein, the term "Delaware General Corporation Law, as amended" includes the
statutory provisions contained therein, all applicable provisions of the
Delaware Constitution and reported judicial decisions interpreting these laws.
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 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.
This opinion letter has been prepared for your use in
connection with the Registration Statement and speaks as of the date hereof. We
assume no obligation to advise you of any changes in the foregoing subsequent to
the delivery of this opinion letter.
We hereby consent to the filing of this opinion letter as
Exhibit 5.01 to the Registration Statement and to the reference to this firm
under the caption "Legal Matters" in the prospectus constituting a part of 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
FORM OF TAX OPINION
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004
_____________, 2000
Board of Directors
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
Board of Directors
MECH Financial, Inc.
100 Pearl Street
Hartford, Connecticut 06103
Gentlemen and 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 December 1, 1999, as amended on December 21, 1999, by and between Webster
Financial Corporation ("Webster"), a Delaware corporation and MECH Financial,
Inc. ("MECH"), a Delaware corporation. Pursuant to the Agreement, MECH will be
merged with and into Webster (the "Merger"). The Agreement also provides for
Mechanics Savings Bank ("MS Bank"), a Connecticut chartered savings bank and
wholly owned subsidiary of MECH, to merge with and into Webster Bank ("Webster
Bank"), a federally chartered savings bank and wholly owned subsidiary of
Webster (the "Bank 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 Bancorp (File No. 333-33228) filed with the
Securities and Exchange Commission ("SEC") on March 24, 2000, as amended and
declared effective by the SEC on May ____, 2000 (the "Registration Statement")
and the Proxy Statement/Prospectus included as a part thereof; (3)
representations and certifications made to us by Webster; (4) representations
and certifications made to us by MECH; and (5) such other instruments and
documents related to the formation, organization and operation of Webster and
MECH or to the consummation of the Merger and the Bank Merger and the
transactions contemplated thereby as we have deemed necessary or appropriate.
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").
The Proposed Transaction
Based solely upon our review of the documents set forth above,
and upon such information as Webster and MECH have provided to us and in
reliance upon such documents and information, we understand that the proposed
transaction and the relevant facts with respect thereto are as follows:
<PAGE>
Webster is the holding company of Webster Bank. Both Webster
and Webster Bank are headquartered in Waterbury, Connecticut. Webster Bank
offers full service business and retail banking services throughout Connecticut.
MECH is the holding company of MS Bank. MS Bank is
headquartered in the Hartford, Connecticut. MS Bank conducts business from
branch locations throughout the greater Hartford area. Historically, MS Bank has
been engaged in the business of attracting deposits from the general public and
earning income on those funds through various lending and investment activities.
It is proposed that pursuant to the Agreement and the General
Corporation Law of the State of Delaware, MECH will merge with and into Webster.
As a result of the Merger, MECH's corporate existence will cease and Webster
will be the Surviving Corporation. As the Surviving Corporation, Webster will
succeed to all of the assets and liabilities of MECH. Immediately after
consummation of the Merger, MS Bank will merge with and into Webster Bank in the
Bank Merger, with Webster Bank as the Surviving Bank.
The purpose of the Merger and the Bank Merger is to enable
Webster to acquire the assets and business of MECH. After the Merger and the
Bank Merger, it is expected that some of MS Banks' branch banking offices will
remain open and will be operated as banking offices of Webster Bank. The Merger
and the Bank Merger will result in an expansion of Webster Bank's primary market
area to include MS Bank's banking offices in Connecticut. The assets and
business of MS Bank's banking offices will broaden Webster's existing operations
in Hartford County, where Webster Bank currently has banking offices. Webster
expects to achieve reductions in the current operating expenses of MECH upon the
consolidation of MS Bank's operations into Webster Bank.
By virtue of the Merger, each share of MECH Common Stock
issued and outstanding prior to the Effective Time (other than certain shares to
be canceled) will be converted into and exchangeable for 1.52 shares of Webster
Common Stock. 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 MECH Common Stock otherwise entitled to a fraction of a share of
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 actual market value of the Webster
Common Stock, which will be deemed to be the average of the daily closing prices
per share for Webster Common Stock for the twenty consecutive trading days on
which shares of Webster Common Stock are actually traded (as reported on the
Nasdaq Stock Market National Market System) ending on the third trading day
preceding the Closing Date. Under Section 33-856 of the Connecticut Business
Corporation Act, MECH shareholders are entitled to dissent from the Merger.
At the Effective Time, each option granted by MECH to purchase
shares of MECH Common Stock 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
<PAGE>
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 law and will qualify as a statutory merger under applicable
state law.
3. All representations made to us are true, correct, and
complete. 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); both Webster and MECH 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 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 MECH 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 the Bank Merger or 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 MECH or that may be relevant to particular
classes of MECH 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 MECH Common Stock
who receives an option to purchase shares of Webster Common Stock in exchange
therefor pursuant to the Merger.
<PAGE>
4. Our opinion set forth herein is based upon the description
of the contemplated transactions as set forth above in the section of this
letter captioned "The Proposed Transaction," and in the Agreement and the Proxy
Statement/Prospectus (the "Transactions"). 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 the Transactions or to any transaction whatsoever,
including the Merger, if the Transactions are not consummated in accordance with
the terms of the Agreement 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.
This opinion is provided to Webster and MECH 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, MECH and the MECH
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. 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 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Webster Financial Corporation
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the joint prospectus/proxy
statement.
/s/ KPMG LLP
- ------------------------
KPMG LLP
Hartford, Connecticut
May 12, 2000
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
MECH Financial, Inc.:
We consent to the use of our report incorporated herein and to the reference to
our firm under the heading "Experts" in the joint prospectus/proxy statement.
/s/ KPMG LLP
Hartford, Connecticut
May 12, 2000
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Webster Financial Corporation on Form S-4 of our report dated January 20, 1998,
on our audits of the consolidated financial statements of Mechanics Savings Bank
and subsidiaries as of December 31, 1997, which report is included in the 1999
Annual Report on Form 10-K of MECH Financial, Inc., which is incorporated by
reference herein. We also consent to the reference to us under the heading
"Experts" in such registration statement.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
May 11, 2000
Exhibit 23.6
CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
May 12, 2000
We hereby consent to the use of our opinion letter to the Board of
Directors of MECH Financial, Inc. ("MECH") dated May 12, 2000 to be included as
an exhibit in the Form S-4 Registration Statement filed by Webster Financial
Corp. ("Webster") in connection with the proposed merger between Webster and
MECH, and to all references to our firm in such Registration Statement. In
giving such consent we do not admit that we come within the category of persons
whose consent is required under, and we do not admit that we are "experts" for
the purposes of, the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
KEEFE, BRUYETTE & WOODS, INC.
By: /s/ Frederick W. Wassmundt
-------------------------------
Name: Frederick W. Wassmundt
Title: Vice President
