SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Webster Financial Corporation
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(Name of Registrant as Specified In Its Charter)
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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[Webster Logo]
March 21, 2003
TO THE SHAREHOLDERS OF
WEBSTER FINANCIAL CORPORATION:
You are cordially invited to attend the Webster Financial
Corporation Annual Meeting of Shareholders to be held on Thursday, April 24,
2003, at 4:00 p.m., at the Courtyard by Marriott, 63 Grand Street, Waterbury,
Connecticut 06702.
At the Annual Meeting, you will be asked: (i) to elect three
directors to serve for three-year terms; (ii) to amend Webster's 1992 Stock
Option Plan to increase the number of shares of common stock available for
issuance thereunder by 2,200,000 shares and to extend the term of the 1992 Stock
Option Plan to March 20, 2013, (iii) to approve the Qualified Performance-Based
Compensation Plan for an additional five year term; (iv) to ratify the
appointment of KPMG LLP as independent auditors of Webster for the year ending
December 31, 2003; and (v) to transact any other business that properly comes
before the Annual Meeting or any adjournments of the meeting.
The Board of Directors unanimously recommends that you vote FOR
the election of all the Board's nominees for election as directors and FOR each
of the other proposals listed above. We encourage you to read the accompanying
Proxy Statement, which provides information regarding Webster and the matters to
be voted on at the Annual Meeting. Also enclosed is our 2002 annual report to
shareholders.
It is important that your shares be represented at the Annual
Meeting. Whether or not you plan to attend the Annual Meeting, you may vote your
common shares via a toll-free telephone number or on the Internet or you may
complete, date, sign and return the enclosed proxy card in the enclosed postage
paid envelope. If you attend the meeting and prefer to vote in person, you may
do so.
Sincerely,
/s/ JAMES C. SMITH
James C. Smith
Chairman and Chief Executive Officer
WEBSTER FINANCIAL CORPORATION
WEBSTER PLAZA
WATERBURY, CONNECTICUT 06702
(203) 753-2921
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 24, 2003
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TO THE SHAREHOLDERS OF
WEBSTER FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders
(the "Annual Meeting") of Webster Financial Corporation ("Webster") will be held
on Thursday, April 24, 2003, at 4:00 p.m., local time, at the Courtyard by
Marriott, 63 Grand Street, Waterbury, Connecticut 06702, for the following
purposes:
1. Election of Directors. To elect three directors to serve
for three-year terms (Proposal 1);
2. Amendment of 1992 Stock Option Plan. To amend Webster's
1992 Stock Option Plan to increase the number of shares of Common Stock
available for issuance thereunder and to extend the term of the Plan (Proposal
2);
3. Approval of Qualified Performance-Based Compensation
Plan. To approve the Qualified Performance-Based Compensation Plan for an
additional five year term (Proposal 3);
4. Ratification of Appointment of Auditors. To ratify the
appointment by the Board of Directors of KPMG LLP as independent auditors of
Webster for the fiscal year ending December 31, 2003 (Proposal 4); and
5. Other Business. To transact any other business that
properly comes before the Annual Meeting or any adjournments of the meeting, in
accordance with the determination of a majority of Webster's Board of Directors.
The Board of Directors has fixed the close of business on March
4, 2003 as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting. Only shareholders of record at the
close of business on that date will be entitled to notice of and to vote at the
Annual Meeting or any adjournments of the meeting.
By order of the Board of Directors
/s/ JAMES C. SMITH
James C. Smith
Chairman and Chief Executive Officer
Waterbury, Connecticut
March 21, 2003
IT IS IMPORTANT THAT YOU VOTE PROMPTLY. THEREFORE, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING, PLEASE VOTE YOUR COMMON SHARES VIA THE TOLL-FREE
TELEPHONE NUMBER LISTED ON THE PROXY CARD, THE INTERNET OR BY MAIL.
WEBSTER FINANCIAL CORPORATION
WEBSTER PLAZA
WATERBURY, CONNECTICUT 06702
(203) 753-2921
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 24, 2003
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SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement (the "Proxy Statement") is being furnished
to the shareholders of Webster Financial Corporation, a Delaware corporation
("Webster" or the "Corporation"), as part of the solicitation of proxies by its
Board of Directors from holders of its outstanding shares of common stock, par
value $.01 per share (the "Common Stock"), for use at the Annual Meeting of
Shareholders of Webster to be held on Thursday, April 24, 2003, at 4:00 p.m.,
local time, at the Courtyard by Marriott, 63 Grand Street, Waterbury,
Connecticut 06702 (the "Annual Meeting") and at any adjournments of the meeting.
The Proxy Statement, together with the enclosed proxy card, is being mailed to
shareholders of Webster on or about March 21, 2003.
The Annual Meeting has been called for the following purposes:
(i) to elect three directors to serve for three-year terms (Proposal 1); (ii) to
amend Webster's 1992 Stock Option Plan to increase the number of shares of
common stock available for issuance thereunder by 2,200,000 shares and to extend
the term of the Plan (Proposal 2); (iii) to approve the Qualified
Performance-Based Compensation Plan for an additional five year term (Proposal
3); (iv) to ratify the appointment by the Board of Directors of the firm of KPMG
LLP as independent auditors of Webster for the year ending December 31, 2003
(Proposal 4); and (v) to transact any other business that properly comes before
the Annual Meeting or any adjournments of the meeting.
If you vote using the enclosed form of proxy, your shares will
be voted in accordance with the instructions indicated. EXECUTED BUT UNMARKED
PROXIES WILL BE VOTED FOR THE ELECTION OF THE BOARD'S NOMINEES AS DIRECTORS, FOR
THE AMENDMENT OF THE 1992 STOCK OPTION PLAN, FOR THE APPROVAL OF THE QUALIFIED
PERFORMANCE-BASED COMPENSATION PLAN, AND FOR THE RATIFICATION OF THE APPOINTMENT
OF WEBSTER'S INDEPENDENT AUDITORS. Except for procedural matters incident to the
conduct of the Annual Meeting, the Board of Directors does not know of any
matters other than those described in the Notice of Annual Meeting that are to
come before the Annual Meeting. If any other matters are properly brought before
the Annual Meeting, the persons named in the proxy will vote the shares
represented by such proxy on such matters as determined by a majority of the
Board of Directors. The proxies confer discretionary authority to vote on any
matter of which Webster did not have notice at least 30 days prior to the date
of the Annual Meeting.
The presence of a shareholder at the Annual Meeting will not
automatically revoke that shareholder's proxy. A shareholder may, however,
revoke a proxy at any time before it is voted (i) by delivering either a written
notice of revocation of the proxy or a duly executed proxy bearing a later date
to Terrence K. Mangan, Senior Vice President, Investor Relations, Webster
Financial Corporation, Webster Plaza, Waterbury, Connecticut 06702, (ii) by
re-voting by telephone or on the Internet, or (iii) by attending the Annual
Meeting and voting in person.
The cost of soliciting proxies for the Annual Meeting will be
borne by Webster. In addition to use of the mails, proxies may be solicited
personally or by telephone or telecopy by directors, officers and employees, who
will not be specially compensated for such activities. Webster also will request
persons, firms and companies holding shares in their names or in the name of
their
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nominees, which are beneficially owned by others, to send proxy materials to and
obtain proxies from those beneficial owners and will reimburse those holders for
their reasonable expenses incurred in that connection. Webster also has retained
Morrow & Co., Inc., a proxy soliciting firm, to assist in the solicitation of
proxies at a fee of $7,000, plus reimbursement of certain out-of-pocket
expenses.
WHO CAN VOTE. The securities which can be voted at the Annual
Meeting consist of shares of Common Stock of Webster with each share entitling
its owner to one vote on all matters properly presented at the Annual Meeting.
There is no cumulative voting of shares. The Board of Directors has fixed the
close of business on March 4, 2003 as the record date for the determination of
shareholders of Webster entitled to notice of and to vote at the Annual Meeting.
On the record date, there were 11,041 holders of record of the 45,613,072 shares
of Common Stock then outstanding and eligible to be voted at the Annual Meeting.
VOTING. If your Common Stock is held by a broker, bank or other
nominee (i.e., in "street name"), you should receive instructions from that
person or entity that you must follow in order to have your shares of Common
Stock voted. If you hold your Common Stock in your own name and not through a
broker or another nominee, you may vote your shares of Common Stock:
- by using the toll-free telephone number listed on the
proxy card,
- by using the Internet website listed on the proxy card,
- by signing, dating and mailing the proxy card in the
enclosed postage-paid envelope, or
- by attending the Annual Meeting and voting in person.
Whichever of these methods you select to transmit your instructions, the proxy
holders will vote your Common Stock in accordance with your instructions. If you
give a proxy without specific voting instructions, your proxy will be voted by
the proxy holders as recommended by the Board of Directors.
Vote by Telephone. If you hold your Common Stock in your own
name and not through your broker or another nominee, you can vote your shares of
Common Stock by telephone by dialing the toll-free telephone number printed on
your proxy card. Telephone voting is available 24 hours a day until 8:00 a.m.
(E.D.T.) on April 24, 2003. Easy-to-follow voice prompts allow you to vote your
shares of Common Stock and confirm that your instructions have been properly
recorded. Our telephone voting procedures are designed to authenticate
shareholders by using the individual control numbers on your proxy card. IF YOU
VOTE BY TELEPHONE, YOU DO NOT NEED TO RETURN YOUR PROXY CARD.
Vote by Internet. If you hold your Common Stock in your own name
and not through your broker or another nominee, you can choose to vote via the
Internet. The website for Internet voting is printed on your proxy card.
Internet voting is available 24 hours a day until 8:00 a.m. (E.D.T.) on April
24, 2003. As with telephone voting, you will be given the opportunity to confirm
that your instructions have been properly recorded. IF YOU VOTE VIA THE
INTERNET, YOU DO NOT NEED TO RETURN YOUR PROXY CARD.
Vote by Mail. You can vote by mail by signing, dating and
returning the enclosed proxy card in the enclosed postage paid envelope.
The presence, in person or by proxy, of at least one-third of
the total number of outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting for the
election of directors and the ratification of the appointment of the
Corporation's independent auditors. Assuming the presence of a quorum at the
Annual Meeting, directors will be elected by a plurality of the votes of the
shares of Common Stock present in person or represented by proxy and entitled to
vote. The affirmative vote of the majority of the votes cast is required to
amend the 1992 Stock Option Plan, to approve the Qualified Performance-Based
Compensation Plan, and to ratify the appointment of the Corporation's
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independent auditors. Shareholders' votes will be tabulated by the persons
appointed by the Board of Directors to act as inspectors of election for the
Annual Meeting. Abstentions and broker non-votes will be treated as shares that
are present, or represented, and entitled to vote for purposes of determining
the presence of a quorum at the Annual Meeting. Broker non-votes will not be
counted as a vote cast on any matter presented at the Annual Meeting.
Abstentions will not be counted in determining the number of votes cast in
connection with any matter presented at the Annual Meeting.
A copy of our annual report to shareholders for the fiscal year
ended December 31, 2002 and a copy of our annual report on Form 10-K accompany
this Proxy Statement. WEBSTER IS REQUIRED TO FILE AN ANNUAL REPORT ON FORM 10-K
FOR ITS 2002 FISCAL YEAR WITH THE SECURITIES AND EXCHANGE COMMISSION.
SHAREHOLDERS MAY OBTAIN, FREE OF CHARGE, A COPY OF THE FORM 10-K BY WRITING TO
TERRENCE K. MANGAN, SENIOR VICE PRESIDENT, INVESTOR RELATIONS, WEBSTER FINANCIAL
CORPORATION, WEBSTER PLAZA, WATERBURY, CONNECTICUT 06702. OUR 2002 ANNUAL REPORT
TO SHAREHOLDERS AND OUR FORM 10-K ALSO ARE AVAILABLE ON OUR WEBSITE,
WWW.WBST.COM.
ELECTION OF DIRECTORS
(PROPOSAL 1)
At the Annual Meeting, three directors will be elected to serve
for three-year terms. Unless otherwise specified on the proxy, it is the
intention of the persons named in the proxy to vote the shares represented by
each properly executed proxy for the election as directors of the persons named
below as nominees. The Board of Directors believes that the nominees will stand
for election and will serve if elected as directors. If, however, any person
nominated by the Board fails to stand for election or is unable to accept
election, the proxies will be voted for the election of such other person as the
Board of Directors may recommend. Assuming the presence of a quorum at the
Annual Meeting, directors will be elected by a plurality of the votes of the
shares of Common Stock present in person or represented by proxy and entitled to
vote at the Annual Meeting. There are no cumulative voting rights in the
election of directors.
John F. McCarthy, whose term ends as of the Annual Meeting, will
be retiring from the Board of Directors as of the date of the Annual Meeting,
but will continue to serve as a member of the Board of Directors of the Bank for
two years. The Board of Directors greatly appreciates the service and
contributions of Mr. McCarthy to the success of Webster.
The Board of Directors currently consists of 9 members, and is
divided into three classes, of three directors, respectively. The term of office
of only one class of directors expires in each year, and their successors are
elected for terms of up to three years and until their successors are elected
and qualified.
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INFORMATION AS TO NOMINEES AND OTHER DIRECTORS
The following table sets forth the names of the Board of
Directors' nominees for election as directors and the current directors of
Webster. Also set forth is certain other information with respect to each such
person's age at December 31, 2002, the periods during which such person has
served as a director of Webster and positions currently held with Webster and
its wholly owned subsidiary, Webster Bank.
POSITIONS
HELD WITH
AGE AT DIRECTOR EXPIRATION WEBSTER AND COMMITTEE
12/31/2002 SINCE OF TERM WEBSTER BANK MEMBERSHIP
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DIRECTOR NOMINEES FOR
A THREE-YEAR TERM:
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Robert A. Finkenzeller 52 1986 2003 Director Audit; Nominating and Corporate
Governance
Roger A. Gelfenbien* 59 * * * *
Michael G. Morris 56 2000 2003 Director Executive; Audit
DIRECTORS:
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Joel S. Becker 54 1986 2004 Director Compensation
William T. Bromage 57 2001 2004 President, Chief --
Operating
Officer and
Director;
Vice Chairman
of Webster Bank
George T. Carpenter 62 1998 2005 Director Executive; Compensation
John J. Crawford 58 1996 2005 Director Executive; Nominating and
Corporate Governance;
Compensation (Chairman)
C. Michael Jacobi 60 1993 2005 Director Executive; Audit (Chairman)
John F. McCarthy** 62 1998 2003 Director Audit; Nominating and Corporate
Governance (Chairman)
James C. Smith 53 1986 2004 Chairman, Executive (Chairman)
Chief Executive
Officer and
Director
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* New Director Nominee
** Retiring Director of Webster
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JOEL S. BECKER is Chairman of the Board and Chief Executive
Officer of Torrington Supply Co., Inc., a Waterbury, Connecticut based wholesale
distributor of plumbing, heating, and industrial pipe valve and fitting supplies
to contractors and industry. Mr. Becker is a member of the Compensation
Committee.
WILLIAM T. BROMAGE is President, Chief Operating Officer and a
director of Webster and Webster Bank and Vice Chairman of Webster Bank. Mr.
Bromage was elected President in April 2000 and Chief Operating Officer in
January 2002. From September 1999 to April 2000, he served as Senior Executive
Vice President -- Business Banking and Corporate Development of Webster and
Webster Bank. From May 1996 to August 1999, Mr. Bromage served as Executive Vice
President -- Business Banking of Webster and Webster Bank. Prior to joining
Webster, he was a Consultant at Aetna Life & Casualty in Hartford, Connecticut
from 1995 to March 1996. Before his association with Aetna, he was Executive
Vice President in Credit Administration at Shawmut National Corporation since
1990 and had served Shawmut in other positions since 1969.
GEORGE T. CARPENTER has been President and Treasurer of S.
Carpenter Construction Co. and Carpenter Realty Co. since 1977, which firms are
headquartered in Bristol, Connecticut. Mr. Carpenter is a director of the Barnes
Group, Inc., a manufacturer of springs and aircraft parts and a distributor of
automobile parts, which is headquartered in Bristol, Connecticut. Prior to the
acquisition of Eagle by Webster in April 1998, Mr. Carpenter served as a
director of Eagle since 1988 and a director of Eagle Bank or one of its
predecessors since 1972. Mr. Carpenter is a member of the Executive Committee,
and the Compensation Committee.
JOHN J. CRAWFORD is President of Strategem LLC, a newly formed
company which provides consulting services to the business and not-for-profit
community on business and financial strategies. Mr. Crawford served as
President, Chief Executive Officer and a director of Aristotle Corporation, a
New Haven, Connecticut based education training company, from October 1992
through December 2003. Mr. Crawford continues to serve on the Board of Directors
of Aristotle Corporation. From 1994 until December 2000, he served as President
and Chief Executive Officer of the South Central Connecticut Regional Water
Authority, New Haven, Connecticut. From 1990 until October 1992, Mr. Crawford
was President and Chief Executive Officer of First Constitution Bank, which was
acquired by Webster Bank in October 1992. Subsequent to that acquisition and
until April 1996, Mr. Crawford served as a consultant to Webster Bank. Mr.
Crawford is Chairman of the Compensation Committee, and a member of the
Executive Committee, and the Nominating and Corporate Governance Committee.
ROBERT A. FINKENZELLER is President of Eyelet Crafters, Inc., a
Waterbury, Connecticut based company that manufactures deep drawn metal parts
for the cosmetics, writing instrument and drapery hardware fields. Mr.
Finkenzeller is a member of the Audit Committee, and the Nominating and
Corporate Governance Committee.
ROGER A. GELFENBIEN was the Managing Partner in Andersen
Consulting's (now Accenture) Hartford, Connecticut office from 1989 until his
retirement in 1999. He joined Andersen Consulting as a manager in 1978 and was
promoted to partner in 1983. His experience with Andersen Consulting included
participation on engagements for several State of Connecticut agencies, local
governments, insurance companies and banks. Mr. Gelfenbien was Comptroller of
the City of Bridgeport from 1971 through 1975, and for three years was director
of planning and financial services of a major Hartford insurance company. Prior
to that, he was with Ernst & Ernst (now Ernst & Young). Mr. Gelfenbien is a
certified public accountant. He is Chairman of the University of Connecticut
Board of Trustees and has participated in the development of UConn 2000, a major
state-funded capital program with the purpose of revitalizing the University and
its main campus. He is the former Chairman of the University's Foundation. Mr.
Gelfenbien is a past President of the Greater Hartford Jaycees, and served as
the 1996 Honorary Chairman of the Canon Greater Hartford Open. He has served as
a member of the board of directors of the Greater Hartford Chamber of Commerce.
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C. MICHAEL JACOBI is President, Chief Executive Officer and a
director of Katy Industries, Inc., a public company headquartered in Middlebury,
Connecticut engaged in the design, manufacture and distribution of maintenance
and electrical products, and a member of the board of directors of KINO
Holdings, Inc., a privately held company headquartered in Garrett, Indiana
engaged in the design, manufacture and distribution of electronic training
products for sporting dogs and pet companion dogs under the brand names Innotek
and Invisible Fence. Mr. Jacobi has been associated with Katy Industries since
June 2001 and with KINO Holdings since August 2000. From October 1999 until
April 2000 he was Chairman of Timex Watches Limited (India), a public company
headquartered in New Delhi, India and from July 1999 until April 2000 he was
Chairman and Chief Executive Officer of Beepware Paging Products, L.L.C.,
Waterbury, Connecticut, a company jointly owned by Timex Corporation and
Motorola, Inc. Mr. Jacobi served as President and Chief Executive Officer of
Timex Corporation, headquartered in Middlebury, Connecticut from December 1993
to August 1999. Mr. Jacobi is a certified public accountant. He is a member of
the board of directors and chairman of the audit committee of Corrections
Corporation of America (CCA), a publicly held company headquartered in
Nashville, Tennessee engaged in the ownership and management of prisons for the
federal, state and local governments. Mr. Jacobi is Chairman of the Audit
Committee, and a member of the Executive Committee.
JOHN F. MCCARTHY has been the President of J&M Sales Co., Inc.,
a Torrington, Connecticut based beverage distributorship since 1970 and
President of Alliance Beverage Company, Wallingford, Connecticut since 2002.
From 1979 to December 2002, he was the Vice President of Thames River Recycling
Co. in Middletown, Connecticut. Prior to the acquisition of Eagle by Webster in
April 1998, Mr. McCarthy served as a director of Eagle since 1986 and a director
of Eagle Bank or one of its predecessors since 1984. Mr. McCarthy is Chairman of
the Nominating and Corporate Governance Committee, and a member of the Audit
Committee.
MICHAEL G. MORRIS is Chairman, President and Chief Executive
Officer of Northeast Utilities, an electric utility holding company
headquartered in Berlin, Connecticut. From 1994 until August 1997, Mr. Morris
was President and Chief Executive Officer of Consumers Energy Company, a natural
gas and electric utility in Dearborn, Michigan. Mr. Morris is a director of the
Edison Electric Institute, the American Gas Association, Nuclear Electric
Insurance Limited, St. Francis Care, Inc., Connecticut Business & Industry
Association, and the Spinnaker Exploration Co. Mr. Morris is also a regent of
Eastern Michigan University. Mr. Morris is a member of the Executive Committee,
and the Audit Committee.
JAMES C. SMITH is Chairman, Chief Executive Officer and a
director of Webster and Webster Bank, having been elected Chairman in 1995 and
Chief Executive Officer in 1987. Mr. Smith joined Webster Bank in 1975, and was
elected President, Chief Operating Officer and a director of Webster Bank in
1982 and of Webster in 1986. Mr. Smith served as President of Webster and
Webster Bank until April 2000. Mr. Smith, who served as a member of the Board of
Directors of the American Bankers Association until December 2002, is Chairman
of the Corporate Governance Task Force of the American Bankers Association. He
is a director of MacDermid, Incorporated (NYSE: MRD), a manufacturer and
wholesaler of specialty chemical products, and St. Mary's Hospital, both of
Waterbury, Connecticut. Mr. Smith is co-chair of the Governor's Council on
Economic Competitiveness and Technology in Connecticut, and is active in
numerous community and economic development organizations. Mr. Smith is Chairman
of the Executive Committee.
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CERTAIN BOARD COMMITTEES; NOMINATIONS BY SHAREHOLDERS
The Board of Directors has appointed a standing Audit Committee
that oversees the Corporation's financial reporting process, the system of
internal financial and accounting controls, the audit process and compliance
with applicable laws and regulations. The Audit Committee reviews the
Corporation's annual financial statements, including management's discussion and
analysis, and regulatory examination findings. The Audit Committee recommends
the appointment of independent auditors and is responsible for the oversight of
the Corporation's independent auditors. A copy of the Audit Committee's charter
which has been adopted by the Board of Directors is attached at the end of this
Proxy Statement. During 2002, the Audit Committee held five meetings. The
members of the Audit Committee currently are Messrs. Jacobi (Chairman),
Finkenzeller, McCarthy and Morris. Each of the members of the Audit Committee
meets the independence requirements of the rules of the New York Stock Exchange
and applicable rules and regulations of the Securities and Exchange Commission.
The Board of Directors has appointed a Compensation Committee,
formerly named the Personnel Resources Committee. The Compensation Committee
reviews employee compensation on an annual basis and makes recommendations to
the non-employee members of the Board of Directors regarding compensation. The
Committee also makes recommendations to the non-employee members of the Board of
Directors concerning long-term incentive awards. All recommendations of the
Compensation Committee regarding the compensation and long-term incentive awards
of executive officers are subject to approval by the non-employee members of
Webster's Board of Directors which has ultimate responsibility over such
matters. During 2002, the Compensation Committee held three meetings. The
members of the Compensation Committee currently are Messrs. Crawford (Chairman),
Becker, and Carpenter and Dr. Bizzozero. Dr. Bizzozero is a member of the Board
of Directors of Webster Bank.
In 2002, the Stock Option Committee made determinations
concerning the granting of stock options and restricted stock under Webster's
1992 Stock Option Plan and administered Webster's Qualified Performance-Based
Compensation Plan. During 2002, the Stock Option Committee held seven meetings.
The members of the Stock Option Committee, which consisted of all non-employee
directors of the Corporation, were Messrs. Crawford (Chairman), Becker,
Carpenter, Finkenzeller, Jacobi, McCarthy and Morris. Beginning in 2003, the
Compensation Committee will perform the duties formerly assigned to the Stock
Option Committee, except that all recommendations of the Compensation Committee
regarding the compensation and long-term incentive awards of executive officers
are subject to approval by the non-employee members of Webster's Board of
Directors which has ultimate responsibility over such matters.
During 2002, Webster held eight meetings of its Board of
Directors. Each incumbent director attended at least 75% of the aggregate of (i)
the total number of meetings held by the Board of Directors during the period
that the individual served and (ii) the total number of meetings held by all
committees of the Board on which the individual served during the period that
the individual served.
The Board has appointed a Nominating and Corporate Governance
Committee that has overall responsibility for recommending corporate governance
process and board operations for the Corporation. The Nominating and Corporate
Governance Committee identifies director candidates, reviews the qualifications
and experience of each person considered as a nominee for election or reelection
as a director, and recommends director nominees to fill vacancies on the Board
and for approval by the Board of Directors and the shareholders. During 2002,
the Nominating and Corporate Governance Committee held three meetings. The
members of the Nominating and Corporate Governance Committee are Messrs.
McCarthy (Chairman), Crawford, Finkenzeller, and Gerwig. Mr. Gerwig is a member
of the Board of Directors of Webster Bank.
In connection with the 2003 Annual Meeting, the Nominating and
Corporate Governance Committee met two times. Webster's Bylaws also permit
shareholders eligible to vote at
7
the Annual Meeting to make nominations for directors, but only if such
nominations are made pursuant to timely notice in writing to the Secretary of
Webster. To be timely, notice must be delivered to, or mailed to and received
at, the principal executive offices of Webster not less than 30 days nor more
than 90 days prior to the date of the meeting, provided that at least 45 days'
notice or prior public disclosure of the date of the Annual Meeting is given or
made to shareholders. If less than 45 days' notice or prior public disclosure of
the date of the Annual Meeting is given or made to shareholders, notice by the
shareholder to be timely must be received by Webster not later than the close of
business on the 15th day following the day on which such notice of the date of
the Annual Meeting was mailed or such public disclosure was made. Public
disclosure of the date of the Annual Meeting was made by the issuance of a press
release on February 18, 2003 and by filing a Current Report on Form 8-K under
the Securities Exchange Act of 1934, as amended, with the Securities and
Exchange Commission on February 24, 2003. A shareholder's notice of nomination
must also set forth certain information specified in Article III, Section 13 of
the Corporation's Bylaws concerning each person the shareholder proposes to
nominate for election and the nominating shareholder.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF ALL OF ITS DIRECTOR NOMINEES.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by Webster
or Webster Bank for services rendered in all capacities to Webster and its
subsidiaries during 2002, 2001, and 2000 to the Chief Executive Officer of
Webster and to each of the other four most highly compensated executive officers
of Webster serving at December 31, 2002 (the "named executive officers").
Webster has not granted any stock appreciation rights to its executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION
-------------------------
Securities
Name and Restricted Stock Underlying All Other
Principal Positions Year Salary ($) Bonus ($)(a) Award(s) ($) (b) Options (#) Compensation ($)(d)
------------------- ---- ---------- ------------ ---------------- ----------- -------------------
James C. Smith................. 2002 $ 619,000 $ 557,100 $ 324,513 62,525 $ 77,052
Chairman, Chief Executive 2001 595,000 693,800 748,035 (c) 61,975 76,798
Officer and Director. 2000 595,000 660,400 282,844 247,925 70,449
William T. Bromage............. 2002 $ 359,000 $ 269,300 $ 156,842 30,219 $ 38,854
President and Chief 2001 345,000 338,200 378,750 (c) 29,950 35,736
Operating
Officer and Director. 2000 329,423 (e) 327,600 136,860 129,800 28,912
William J. Healy............... 2002 $ 286,000 $ 200,200 $ 99,959 19,259 $ 25,534
Executive Vice President and 2001 194,617 (f) 238,700 266,197 34,100 9,082
Chief Financial Officer 2000 -- -- -- -- --
Peter K. Mulligan.............. 2002 $ 260,000 $ 238,400 $ 147,262 17,508 $ 28,891
Senior Executive Vice 2001 250,000 225,100 218,813 (c) 17,350 28,320
President -- Retail 2000 231,854 (e) 213,800 79,265 69,450 24,170
Banking......................
Ross M. Strickland............. 2002 $ 216,300 $ 219,100 $ 116,276 7,283 $ 26,030
Executive Vice President-- 2001 216,300 199,200 124,674 (c) 7,500 32,983
Consumer Finance............. 2000 216,300 157,100 34,215 7,500 30,697
Webster Bank
-----------------------------
(a) Mr. Smith received a bonus under the Qualified Performance-Based
Compensation Plan of $557,100, the target amount. Messrs. Bromage, Healy,
Mulligan and Strickland received bonuses under the Annual Incentive Plan of
$269,300, $200,200, $238,400 and $219,100, respectively. The target bonus is
paid in cash and the balance is paid in restricted stock.
8
2002 BONUSES
------------
(DOLLARS IN THOUSANDS)
RESTRICTED
TOTAL CASH STOCK
NAME TARGET % TARGET $ BONUS PAYMENT PAYMENT
---- --------- -------- ----- ------- -------
James C. Smith 90.0% $557.1 $557.1 $557.1 $ 0.0
William T. Bromage 75.0% $269.3 $269.3 $269.3 $ 0.0
William J. Healy 70.0% $200.2 $200.2 $200.2 $ 0.0
Peter K. Mulligan 70.0% $182.0 $238.4 $182.0 $56.4
Ross M. Strickland 65.0% $140.6 $219.1 $140.6 $78.5
The general terms of the Qualified Performance-Based Compensation Plan and
the Annual Incentive Plan are described below in "Compensation Committee
Report on Executive Compensation."
(b) Granted under the 1992 Stock Option Plan. As of December 31, 2002, the
executive officers held the following shares of unvested restricted stock:
Mr. Smith, 43,685 shares with a value of $1,520,238; Mr. Bromage, 21,526
shares with a value of $749,104; Mr. Healy, 11,500 shares with a value of
$400,200; Mr. Mulligan, 12,463 shares with a value of $433,712; and Mr.
Strickland, 6,205 shares with a value of $215,934. The December 31, 2002
values of these shares are based on the closing price of the Company's
Common Stock on the New York Stock Exchange of $34.80, on December 31, 2002.
Dividends are paid on a quarterly basis.
(c) Amount includes restricted stock grants related to the one-time conversion
in 2001, of previously earned bonuses from cash to restricted stock upon the
discontinuation of a previous bonus plan.
(d) All Other Compensation includes amounts contributed or allocated, as the
case may be, to the Webster Bank 401(k) plan (the "401(k) Plan"), the
Webster Bank non-contributory employee stock ownership plan (the "ESOP"),
cash dividends paid on restricted stock, and the Webster Bank nonqualified
supplemental retirement plan, on behalf of each executive officer. It also
includes a car allowance for each executive officer and a premium on a life
insurance policy which provides a benefit of one times base salary, the same
benefit as for all other full-time employees, for Mr. Smith. For 2002
matching contributions made by Webster Bank to the 401(k) Plan on behalf of
Messrs. Smith, Bromage, Healy, Mulligan and Strickland were $4,330, $5,100,
$4,158, $5,100, and $4,141, respectively. In addition, for 2002, Messrs.
Smith, Bromage, Mulligan and Strickland were allocated 17.2329 shares of
Webster's Common Stock, each pursuant to the ESOP, having a value based on
the market value of Webster's Common Stock at the date of allocation of
$599.70. In 2002, Messrs. Smith, Bromage, Healy, Mulligan and Strickland
received cash dividends on restricted stock of $42,605, $16,684, $6,153,
$9,691, and $8,141, respectively. In 2002, Webster Bank also allocated
$14,239, $5,669, $4,422, $ 2,700, and $2,347 to the supplemental matching
contributions accounts of Messrs. Smith, Bromage, Healy, Mulligan and
Strickland, respectively, pursuant to the Webster Bank nonqualified
supplemental retirement plan.
(e) Mr. Bromage's annual compensation was $300,000 from January 1, 2000 to April
20, 2000; thereafter it was $345,000. Mr. Mulligan's annual compensation was
$216,300 from January 1, 2000 to July 1, 2000; thereafter, it was $250,000.
(f) Mr. Healy joined the Company on March 30, 2001.
Executive officers are eligible to participate in Webster Bank's
nonqualified deferred compensation plan. Under the terms of the plan, executive
officer participants may elect to defer all or any portion of their bonuses.
Deferred amounts are credited by Webster Bank to bookkeeping reserve accounts
for each participant. Such accounts, plus accrued interest, are payable upon
termination of service, disability or death of the participant, in a lump sum or
in ten annual installments at the participant's election. For 2002, none of the
executive officers elected to defer the bonus portion of his annual
compensation.
9
OPTION GRANTS
The following table contains information with respect to grants
of stock options to each of the named executive officers during the year ended
December 31, 2002.
OPTION GRANTS DURING 2002
INDIVIDUAL GRANTS (a)
------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED (#) (b) IN FISCAL YEAR PRICE ($/SH) DATE PRESENT VALUE ($) (c)
---- --------------- -------------- ------------ --- ---------------------
James C. Smith...... 62,525 13.29% $34.60 12/16/2012 $ 649,010
William T. Bromage.. 30,219 6.42% $34.60 12/16/2012 $ 313,673
William J. Healy.... 19,259 4.09% $34.60 12/16/2012 $ 199,908
Peter K. Mulligan... 17,508 3.72% $34.60 12/16/2012 $ 181,733
Ross M. Strickland.. 7,283 1.55% $34.60 12/16/2012 $ 75,598
------------------------------
(a) All option grants were made at 100% of the fair market value of the Common
Stock on the date of grant. Options not immediately exercisable may become
exercisable in full, or with respect to certain option grants, in part,
under certain circumstances when a "change in control" of Webster or Webster
Bank has occurred.
(b) Options will become exercisable based on the following vesting schedule:
one-fourth vests after one year; one-fourth vests after two years;
one-fourth vests after three years and the remaining one-fourth vests after
four years.
(c) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an employee may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised. There is no assurance that the value realized
by an employee will be at or near the value estimated by the Black-Scholes
model. The estimated values under that model are based on assumptions as to
variables such as the expected term of the option, the risk-free interest
rate for the expected term of the option (based upon the rate available on
the date of grant on a zero-coupon U.S. government issue), stock price
volatility (based on the Corporation's historical stock price over a range
of years), and the expected future estimated dividend yield (based upon the
dividend yield at date of grant).
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to each
of the named executive officers concerning the exercise of stock options during
2002 and the value of all unexercised options held by each of such individuals
at December 31, 2002.
AGGREGATED OPTION EXERCISES IN 2002
AND FISCAL YEAR-END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 2002 (#) DECEMBER 31, 2002 ($)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (a)
---- --------------- ------------- ------------------------- -----------------------------
James C. Smith....... 0 -- 752,200/372,425 $7,106,823/ $3,292,521
William T. Bromage... 0 -- 69,300/189,969 $752,908/ $1,715,676
William J. Healy..... 0 -- 0/ 48,359 $ 0/ $ 140,587
Peter K. Mulligan.... 0 -- 62,700/104,308 $864,796/ $ 922,263
Ross M. Strickland... 0 -- 72,898/ 22,283 $1,141,539/ $ 128,581
---------------------
(a) Based on the closing sales price of Webster Common Stock on the New York
Stock Exchange on December 31, 2002 of $34.80, less the exercise price, of
all unexercised stock options having an exercise price less than such market
value.
10
RETIREMENT PLANS
Webster Bank maintains a defined benefit pension plan (the
"Pension Plan") for eligible employees of Webster Bank. The Pension Plan is a
qualified plan under the Internal Revenue Code of 1986, as amended (the "Code"),
and complies with the requirements of the Employee Retirement Income Security
Act of 1974, as amended. All employees of Webster Bank are eligible to
participate in the Pension Plan upon attaining age 21 and completing one year of
service.
Benefits under the Pension Plan are funded solely by
contributions made by Webster Bank. Under the Pension Plan's benefit formula, a
participant's monthly normal retirement benefit will equal the sum of: (a) his
or her accrued benefit as of December 31, 1986 (adjusted through August 31, 1996
to reflect certain future increases in compensation), plus (b) the sum of 2% of
the participant's monthly compensation for each year of credited service
beginning on or after January 1, 1987. In general, benefits may not be based on
more than 30 years of credited service. The normal form of benefit is an annuity
for the participant's lifetime with a minimum of 120 monthly payments
guaranteed. A Pension Plan participant becomes 100% vested in the benefits under
the Pension Plan upon completion of five years of service. Benefit payments to a
participant or beneficiary may commence upon a participant's early retirement
date (age 55), normal retirement date (generally age 65), deferred retirement
date or death. Participants may elect to receive their benefits in one of
several optional forms, including a lump sum or periodic payments during the
participant's lifetime or during the lifetime of the participant and his or her
surviving spouse or designated beneficiary. The lump sum option has been
eliminated for benefits earned after January 26, 1998.
The Board of Directors of Webster Bank has adopted a
nonqualified supplemental retirement plan (the "Supplemental Plan"), which was
amended and restated effective January 1, 2003, for certain management and other
highly compensated employees who are also participants in the Pension Plan to
provide supplemental retirement income benefits which are not currently
available because annual compensation in excess of $200,000 (subject to cost of
living increases) may not be used in the calculation of retirement benefits
under the Code and because pension benefits are currently subject to a maximum
of $160,000 (subject to cost of living increases). Benefits under the
Supplemental Plan are payable in monthly installments. The Supplemental Plan
also provides certain management and other highly compensated employees who are
participants in the 401(k) Plan with supplemental matching contributions. See
"Executive Compensation - Summary Compensation Table."
The estimated annual benefits payable from the Pension Plan upon
retirement at normal retirement age for Messrs. Smith, Bromage, Healy, Mulligan
and Strickland are $108,620, $55,330, $31,400, $53,310 and $84,580,
respectively. In addition, the estimated annual supplemental retirement income
benefits payable to Messrs. Smith, Bromage, Healy, Mulligan and Strickland under
the Supplemental Plan are $573,610, $99,540, $39,480, $55,080 and $60,340,
respectively.
COMPENSATION OF DIRECTORS
During 2002, each non-employee director of Webster received an
annual retainer of 445 shares of Webster Common Stock with an aggregate value of
$15,000 at the date of grant pursuant to the 2001 Directors Retainer Fees Plan,
which provides for the payment of annual retainer fees to non-employee directors
in shares of Common Stock as adopted by shareholders at the 2001 Annual Meeting
(the "Fees Plan"). Under the Fees Plan, each non-employee director is granted
shares of Common Stock equal to the annual retainer (currently $15,000) divided
by the average four quarter value as of the grant date. The average four quarter
value is based on the average of the closing prices of Common Stock at the end
of the four calendar quarters preceding the grant date, which is the date of
each annual meeting of shareholders. Shares of Common Stock granted under the
Fees Plan are subject to vesting requirements and other substantial risks of
forfeiture.
11
In addition, effective as of April 27, 2000, each non-employee
director received $1,000 for each Webster or Webster Bank Board meeting
attended, $750 for each committee meeting attended and $500 for each telephonic
Webster or Webster Bank Board meeting and $375 for each telephonic committee
meeting called by Webster. Non-employee directors of Webster and Webster Bank
received a total of $1,500 for separate Board meetings of Webster and Webster
Bank that were held on the same day. In 2002, Chairpersons of the Audit
Committee and the Compensation Committee also received an annual retainer of
$5,000. Non-employee directors of Webster receive no other additional
compensation for serving as directors or committee members of Webster Bank.
Employee directors of Webster receive no additional compensation for serving as
directors or committee members of Webster or its subsidiaries.
Directors are eligible to participate in Webster Bank's
nonqualified deferred compensation plan. Under the terms of the plan, director
participants may elect to defer all or any portion of their directors' fees.
Deferred amounts are credited by Webster Bank to bookkeeping reserve accounts
for each participant. Such accounts, plus accrued interest, are payable upon
termination of service, disability or death of the participant, in a lump sum or
in ten annual installments at the participant's election.
The Board of Directors of Webster adopted in 1992, with
shareholder approval, the 1992 Stock Option Plan for the benefit of directors,
officers and other full-time employees of Webster and its subsidiaries. The
option exercise price for options to non-employee directors is 100% of the fair
market value of the Common Stock on the date of grant of the option. Options
granted to non-employee directors may be exercised at any time after grant. In
1996, the 1992 Stock Option Plan was amended to increase the number of shares
reserved for issuance under the plan and to provide that the number of options
granted to non-employee directors upon election or re-election shall be 4,000
shares (as adjusted for the April 1998 two-for-one split of Webster's Common
Stock), with a director elected to the Board for less than a three-year term
entitled to an option for 4,000 shares on a pro-rated basis for the number of
months of his or her term as a percentage of 36 months. In 2001, the 1992 Plan
was amended to provide for discretionary grants of options to non-employee
directors and to discontinue automatic grants of options to non-employee
directors. During 2002, each non-employee director of Webster received a
discretionary option grant under the 1992 Stock Option Plan of 4,000 shares.
During 2002, each non-employee director of Webster Bank, who was not also a
director of Webster, received a discretionary option grant under the 1992 Stock
Option Plan of 2,000 shares.
EMPLOYMENT AGREEMENTS
Webster and Webster Bank have employment agreements with Messrs.
Smith, Healy, Bromage and Mulligan. Webster and Webster Bank entered into
employment agreements with Messrs. Smith, Bromage and Mulligan effective January
1, 1998 and with Mr. Healy, effective March 30, 2001. Webster also entered into
change of control employment agreements with Messrs. Smith, Bromage, and
Mulligan effective December 15, 1997 and with Mr. Healy, effective March 30,
2001. Mr. Smith serves as Chairman, Chief Executive Officer and a director of
both Webster and Webster Bank; Mr. Bromage serves as President, Chief Operating
Officer and a director of Webster and Webster Bank and Vice Chairman of Webster
Bank; Mr. Healy serves as Executive Vice President and Chief Financial Officer
of both Webster and Webster Bank, and Mr. Mulligan serves as Senior Executive
Vice President -- Retail Banking of both Webster and Webster Bank.
Under their respective employment agreements, each executive
officer may receive annual cost of living increases and may also receive a merit
increase as determined by the Boards of Directors of Webster and Webster Bank.
Each executive officer is eligible to receive discretionary bonuses as may be
authorized by the Boards of Directors of Webster and Webster Bank and shall be
eligible to participate in any plan of Webster or Webster Bank relating to stock
options, stock purchases, pension, thrift, employee stock ownership, group life
insurance and medical coverage or other retirement or employee benefits that
Webster or Webster Bank has adopted or may adopt for the benefit of its
executive employees. In addition, each executive officer is provided with an
12
automobile allowance for business use. Messrs. Smith, Bromage, and Mulligan's
employment agreements provide for initial terms of three years ending December
31, 2000 with renewals for one additional year following each anniversary date
with the approval of the Board of Directors, unless the executive officer gives
written notice to the contrary. The employment agreements of Messrs. Smith,
Bromage and Mulligan have been renewed each year as of each anniversary date.
Mr. Healy's employment agreement provides for an initial term ending December
31, 2003 with renewals for one additional year following each anniversary date
with the approval of the Board of Directors, unless the executive officer gives
written notice to the contrary. Those agreements will terminate upon the
"Effective Date" of their respective change of control employment agreements,
which are discussed below. The 2003 base salaries for Messrs. Smith, Bromage,
Healy and Mulligan are $700,000, $400,000, $297,000, and $270,000, respectively.
Their salaries may not be reduced under the employment agreements without the
consent of the executive officer.
The Boards of Directors of Webster and Webster Bank may
terminate the executive officer's employment at any time during the term of an
employment agreement. Unless the termination is for "cause" (as defined
therein), the executive officers would be entitled (a) to receive a lump sum
payment from Webster Bank equal to the sum of (x) the executive officer's then
current annual base salary and (y) the amount of any bonuses paid pursuant to
Webster's and Webster Bank's annual incentive compensation plan during the then
current fiscal year multiplied by a fraction the numerator of which is the
number of full months during the then current fiscal year in which the executive
officer was employed and the denominator of which is 12, and (b) subject to
certain limitations, to continue to be entitled to medical and dental coverage
for one year (or the remaining term of the agreement, if less) or until the
executive officer accepts other employment on a substantially full time basis if
earlier.
If during the term of the employment agreement an executive
officer terminates his employment without the consent of the Board of Webster or
Webster Bank, then the employment agreement, among other things, would restrict
him from having any other employment for one year or the remaining term of the
agreement plus six months, whichever is less, with a commercial bank, savings
bank, savings and loan association, or mortgage banking company, or a holding
company affiliate of any of the foregoing, which has an office out of which the
executive officer would be primarily based, located within 35 miles of Webster
Bank's home office.
Under the change of control employment agreements, Webster and
Messrs. Smith, Bromage, Healy, and Mulligan, respectively, agreed that the
employment of each executive officer would continue for a period of two years
following the "Effective Date" under such agreements (the "Employment Period").
The "Effective Date" is generally the date on which a "change of control" (as
defined below) of Webster occurs, except that, if the executive officer's
employment with Webster is terminated before a change of control at the request
of a third party who is effecting a change of control or otherwise in connection
with or in anticipation of a change of control, the Effective Date is the day
before the date of such termination, provided, in either case, that the
Effective Date occurs during the "change of control period" (defined for Messrs.
Smith, Bromage, and Mulligan as the two-year period ending on December 15, 2003,
except that on December 15, 2002 and on each annual anniversary of such date,
unless previously terminated, the change of control period will be extended
automatically so as to terminate two years from such date, unless Webster has
given the executive officer at least 60 days prior notice that the change of
control period will not be so extended, and for Mr. Healy as the two-year period
ending on March 30, 2003, except that on March 30, 2002 and on each annual
anniversary of such date, unless previously terminated, the change of control
period will be extended automatically so as to terminate two years from such
date, unless Webster has given the executive officer at least 60 days prior
notice that the change of control period will not be so extended). As noted
above, upon the Effective Date under the change of control employment
agreements, the employment agreements of these officers with Webster and Webster
Bank will terminate and the change of control employment agreements will
supersede those agreements.
During the Employment Period, each executive officer will
receive an annual base salary at a rate at least equal to 12 times his highest
monthly base salary from Webster and its
13
affiliated companies during the 12-month period before the Effective Date
(including any salary that was earned but deferred). The base salary will be
reviewed at least annually and will not be reduced from the amount then in
effect. In addition, each executive officer shall be awarded for each fiscal
year ending during the Employment Period an annual bonus in cash at least equal
to his highest bonus under the Annual Incentive Plan or any comparable bonus
under any predecessor or successor plan for the last three full fiscal years
before the Effective Date. Each executive officer will be entitled to
participate in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other peer executives of Webster and
affiliated companies and the incentive, savings and retirement benefit
opportunities afforded to the executive officer shall not be less favorable than
those provided to him during the 120-day period before the Effective Date (or,
if more favorable to the executive officer, those provided generally to other
peer executives of Webster and affiliated companies). Each executive officer and
his family also will be eligible to participate in and shall receive all welfare
benefits (including medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance) applicable generally
to other peer executives of Webster and affiliated companies and the welfare
benefits provided to the executive officer shall not be less favorable than
those provided to him during the 120-day period before the Effective Date (or,
if more favorable to the executive officer, those provided generally to other
peer executives of Webster and affiliated companies). Each executive officer
will be entitled to prompt reimbursement of expenses and to fringe benefits
during the Employment Period (including tax and financial planning services,
payment of club dues and, if applicable, use of an automobile and payment of
related expenses) in accordance with the most favorable policies in effect with
respect to such matters for such executive officer during the 120-day period
before the Effective Date (or, if more favorable to the executive officer, those
provided generally to other peer executives of Webster and affiliated
companies). Similar provisions will apply to the office, support staff and
vacation time to be provided to the executive officers during the Employment
Period.
If the employment of the executive officer is terminated during
the Employment Period by Webster without "cause" (as defined therein) and other
than because of his "disability" (as defined therein) or by the executive
officer with "good reason" (as defined therein), Webster will be required to pay
the executive officer a lump sum cash amount equal to the sum of: (i) the sum of
(a) his base salary through the termination date to the extent not previously
paid, (b) a prorated bonus reflecting the number of days he was employed during
the fiscal year based on the higher of the bonus required to be paid for such
fiscal year under the agreement or the bonus paid or payable for the most
recently completed fiscal year and (c) any previously deferred compensation and
any accrued vacation pay; (ii) three times the sum of the executive officer's
base salary and bonus (based on the higher of the two amounts described in
(i)(b) above); and (iii) the excess of (a) the actuarial equivalent of the
benefit the executive officer would have been entitled to receive under the
Pension Plan and the Supplemental Plan if his employment had continued for three
years after the date of termination based on the compensation amounts that would
have been required to be paid to him under the change of control employment
agreement over (b) the actuarial equivalent of his actual benefit under the
Pension Plan and the Supplemental Plan as of the termination date. In such
event, Webster also will be required to: (i) continue benefits to the executive
officer and his family at least equal to those that would have been provided to
them under the change of control employment agreement if the executive officer's
employment had continued for at least three years after the termination date;
(ii) provide outplacement services to the executive officer at its expense and
(iii) pay or provide to the executive officer any other amounts or benefits to
which he is entitled under any agreement or plan of Webster and its affiliated
companies. If the executive officer would be subject to the excise tax imposed
by Section 4999 of the Code (relating to excess parachute payments) on any
payment or distribution by Webster or its affiliates to or for the benefit of
the executive officer, Webster will pay to the executive officer a gross-up
amount sufficient (after all taxes) to pay such excise tax (including interest
and penalties with respect to any such taxes). However, if the payments and
distributions do not exceed 110% of the maximum amount that could be paid to the
executive officer such that no excise tax would be imposed, no gross-up payment
will be made and the payments and distributions will be reduced to such maximum
amount.
14
For purposes of the change of control employment agreements, a
"change of control" means: (1) the acquisition by any individual, entity or
group (a "Person") of beneficial ownership of 20% or more of either (i) the
outstanding shares of the Common Stock of Webster or (ii) the combined voting
power of the then outstanding voting securities of Webster entitled to vote
generally in the election of directors ("Voting Securities"), except that any
such acquisition (a) directly from Webster, (b) by Webster, (c) by any employee
benefit plan or trust of Webster or any controlled corporation, or (d) pursuant
to a transaction that complies with clauses (3)(i), (ii) and (iii) below will
not constitute a change of control; (2) individuals who, as of December 15, 1997
(for Messrs. Smith, Bromage and Mulligan), and, as of March 30, 2001 (for Mr.
Healy), constituted the Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors, except that
any individual becoming a director after such date whose election, or nomination
for election by the shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board of Directors; or (3)
consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of Webster or the
acquisition of assets of another entity (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the outstanding Common Stock and Voting Securities immediately before the
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock (the "Resulting Common
Stock") and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors (the "Resulting Voting
Securities"), as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns Webster or all or substantially all of Webster's
assets either directly or through one or more subsidiaries) (the "Resulting
Corporation") in substantially the same proportions as their ownership,
immediately before the Business Combination, of the outstanding Common Stock and
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan or trust of Webster or the Resulting Corporation) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then outstanding
Resulting Common Stock or the combined voting power of the Resulting Voting
Securities, except to the extent that such ownership existed before the Business
Combination and (iii) at least a majority of the members of the Board of
Directors of the Resulting Corporation were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board of Directors, providing for such Business Combination; or (4) approval by
the shareholders of Webster of a complete liquidation or dissolution of Webster.
15
EQUITY COMPENSATION PLAN INFORMATION*
-------------------------------------------------------------------------------------------------
Plan category Number of Securities Weighted-average Number of securities
to be issued upon exercise price of remaining available
exercise of outstanding options, for future issuance
outstanding options, warrants and rights under equity
warrants and rights compensation plans
(excluding securities
reflected in column
(a) (b) (a)) (c)
-------------------------------------------------------------------------------------------------
EQUITY COMPENSATION
PLANS APPROVED BY
SECURITY HOLDERS (1) 3,122,011 $26.5598 408,213
-------------------------------------------------------------------------------------------------
EQUITY COMPENSATION None None None
PLANS NOT APPROVED BY
SECURITY HOLDERS
-------------------------------------------------------------------------------------------------
Total 3,122,011 $26.5598 408,213
-------------------------------------------------------------------------------------------------
*The table does not include 161,575 options assumed in mergers and acquisitions
transactions on an aggregated basis.
(1) A narrative description of the 1992 Stock Option Plan may be found under
Proposal 2 of this proxy statement on page 24. A narrative description of the
2001 Directors Retainer Fees Plan may be found under "Compensation of Directors"
on page 11 of this proxy statement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors comprises
four non-employee directors. The Committee recommends to the non-employee
members of the Board of Directors, which has ultimate responsibility over such
matters, executive officer salaries, bonuses and certain other forms of
compensation, including long-term incentive awards. All recommendations of the
Compensation Committee regarding executive officer compensation for the 2002
fiscal year were approved by the Board of Directors or the Stock Option
Committee.
Set forth below is a report addressing Webster's compensation
policies for fiscal year 2002 as they affected Webster's executive officers.
Compensation Policies for Executive Officers. Webster's
executive compensation policies are designed to provide competitive levels of
compensation, to assist Webster in attracting and retaining qualified executives
and to encourage superior performance. In determining levels of executive
officers' overall compensation, the Compensation Committee considers the
qualifications and experience of the persons concerned, the size of the
institution and the complexity of its operations, the financial condition,
including income, of the institution, the compensation paid to other persons
employed by the institution and the compensation paid to persons having similar
duties and responsibilities in comparable financial institutions. The
Compensation Committee employs outside consultants and refers to published
survey data in establishing compensation.
Relationship of Performance to Executive Compensation.
Compensation paid to Webster's executive officers in 2002 consisted of the
following components: base salary, bonuses, long-term incentives (awards of
stock options and restricted stock) and participation in Webster employee
benefit plans. While each of these components has a separate purpose and may
have a different relative value to the total, a significant portion of the total
compensation package is highly dependent on the financial success of Webster and
shareholder return. Generally, base salaries for executive officers approximate
the average of salaries paid for comparable positions at other financial
institutions. Short-term and long-term incentive compensation plans are designed
to provide significant compensation opportunities when Webster meets or exceeds
its financial and strategic goals. The ultimate value of long-term incentive
compensation such as stock options and
16
restricted stock is dependent primarily on the performance of Webster's Common
Stock. Webster's executive officers' compensation is tied to Webster's goals and
their compensation may be lower or higher than average total compensation for
similar positions at comparable financial institutions depending on whether or
not Webster meets or exceeds its goals.
For 2002, the Compensation Committee intended that total
compensation for executive officers other than the Chief Executive Officer be at
the average for comparable financial institutions based on their past practices,
recognizing that Webster achieved its Board approved financial plan targets, has
grown responsibly and has made significant progress in pursuit of its strategic
and financial objectives.
Base Salary. The Compensation Committee reviews executive base
salaries annually in January. Base salary considers the internal value of the
position and tracks with the external marketplace. In 2002, the executive
officers listed on page 8, all served pursuant to employment agreements that
provide for a minimum base salary that may not be reduced without the consent of
the executive officer. In establishing the 2002 salary for each executive
officer, the Compensation Committee considered the officer's responsibilities,
qualifications and experience, the size of the institution and the complexity of
its operations, the financial condition of the institution (based on levels of
income, asset quality and capital), and compensation paid to persons having
similar duties and responsibilities in comparable financial institutions. Base
salaries for executive officers, which were unchanged in 2001, increased in 2002
due in large part to positive financial performance in 2001 and to the increased
size and complexity of the institution.
Annual Incentive Plan. The Incentive Plan for Webster was
adopted by the Board of Directors on February 26, 2001 after a thorough review
of incentive plans and performance metrics used by a large sample of regional
and national banks conducted by William M. Mercer, Inc. The Incentive Plan
covers senior officers, other than the Chief Executive Officer, approved for
participation in the Incentive Plan by the Compensation Committee. The
Compensation Committee makes recommendations to the Board of Directors for
awards under the Incentive Plan.
The Incentive Plan formula calls for the bonuses of executive
officers to be determined on the basis of the following metrics: achievement of
the corporate financial plan; an improvement in adjusted return on average
equity compared to Peer Group; and, where applicable, the achievement of line of
business financial plans. Target is achieved if Webster meets its annual
financial plan and if the adjusted return in average equity improves relative to
Webster's Peer Group. In the case of executive officers that are line of
business heads, the line of business must also achieve its annual financial
plan. The target bonuses are set relative to executive officers'
responsibilities with such target bonuses equal to 65% to 75% of the recipient's
base salary. Additional or lesser bonuses may be earned to the extent that
performance exceeds or falls short of the target, through the application of a
bonus multiplier which equals "1" when the target is met and which increases or
decreases to the extent that performance exceeds or falls short of the target.
Awards to the executive officers under the Incentive Plan are based 30% to 100%
on corporate performance and 0% to 70% on line of business performance,
depending on the executive officer's responsibilities. Awards for 2002 amounted
to 100% of target for corporate performance and ranged from 162% to 187% of
target for the line of business performance.
Qualified Performance-Based Compensation Plan. The Qualified
Performance-Based Compensation Plan (the "Plan") was adopted by the Board of
Directors effective January 1, 1998, and approved by shareholders at the 1998
annual meeting for a five year term to expire at the Annual Meeting. The Board
of Directors has approved the Plan for an additional five year term, subject to
shareholder approval. The Plan is designed to further the growth and
profitability of Webster by providing the Chief Executive Officer and other
selected executive officers as may be determined by the Compensation Committee,
with the opportunity to earn annual incentive compensation based on business,
financial and strategic results, thereby enabling Webster to motivate key
employees to achieve high profitability and strategic objectives for the
Corporation. The Plan is intended to satisfy the requirements of Section 162(m)
of the Code with respect to the
17
deduction of qualified performance-based compensation. The Chief Executive
Officer was the only participant in the Plan for 2002, and his bonus was
determined based on attainment of the designated performance objectives under
the Plan, achieving the corporate financial plan and an improvement in the
adjusted return on average equity compared to Webster's Peer Group.
Long-Term Incentive Compensation. The Board of Directors
endorses the position that stock ownership by management is beneficial in
aligning management's and shareholders' interests in the enhancement of
shareholder value. To that end, Webster has established formal stock ownership
guidelines for all executive officers. Executive officers must own Webster stock
with a value of twice their base salaries. The CEO must own Webster stock with a
value of three times his base salary.
Webster uses stock options and restricted stock awards to
provide long-term incentive compensation. The Compensation Committee makes
recommendations to the Stock Option Committee for awards under the Corporation's
1992 Stock Option Plan. Long-term compensation, which emphasizes long-term
results, is targeted at 50% to 125% (excluding the CEO) of the recipient's base
salary depending upon the executive officer's responsibilities. For 2002,
one-third of long-term compensation was paid in restricted stock and two-thirds
was paid in stock options.
The purpose of stock option awards is to provide an opportunity
for the recipients to acquire or increase a proprietary interest in Webster,
thereby creating a stronger incentive to expend maximum effort for the long-term
growth and success of Webster and encouraging recipients to remain in the employ
of Webster. Officers and other full-time employees of Webster and its
subsidiaries are eligible for grants under the Corporation's 1992 Stock Option
Plan. Stock options are normally granted each year as a component of long-term
compensation with the size of the grants generally tied to and weighted
approximately equally based on an officer's responsibility level, base salary
and performance. The number of options held is not considered when determining
the option awards for executive officers. During 2002, 74,269 stock options were
granted to Webster's executive officers other than the Chief Executive Officer.
The purpose of Webster's restricted stock awards is to attract
and retain executive officers whose actions will have an impact on Webster's
long-term operating results and to motivate such executives by providing them
with an immediate ownership stake in the business. Recipients are paid dividends
on the shares and have voting rights. All restricted stock awards have vesting
requirements of that range from three years to five years. In addition to
providing a direct relationship between shareholder value and the value of the
benefit to the officer, restricted stock is a powerful retention device as the
shares are not conveyed to the executive until vesting restrictions have been
satisfied. During 2002, 14,926 shares of restricted stock were awarded to
executive officers other than the Chief Executive Officer, of which 3,786 shares
related to the 2002 bonus awards, a part of which was paid in restricted stock
rather than cash for the portion of the award that exceeded the target bonus
payments.
Other. In addition to the compensation paid to executive
officers as described above, executive officers received, along with and on the
same terms as other employees, certain benefits pursuant to the 401(k) Plan, the
Employee Stock Purchase Plan, the ESOP and the Pension Plan. In addition,
executive officers received certain benefits under Webster's nonqualified
supplemental retirement plan that are otherwise limited by Internal Revenue Code
caps on qualified plans.
CEO Compensation. The Compensation Committee, in determining the
compensation for the Chief Executive Officer, considers Webster's size and
complexity, financial condition and results and progress in meeting strategic
objectives. The Chief Executive Officer's base salary which was unchanged in
2001, increased in 2002 due in large part to positive financial performance in
2001 and to the increased size and complexity of the institution. The CEO's
annual bonus was determined under the Qualified Performance-Based Compensation
Plan, the material terms of which were approved by shareholders at the 1998
annual meeting for a five year term to expire at the Annual Meeting. The Board
of Directors has approved the Plan for an additional five year term, subject to
18
shareholder approval. The Committee determined that for 2002, in addition to
attainment of the performance objectives under the Plan, it would base the CEO's
target bonus, which was set at 90% of base salary, primarily on achieving the
Board approved corporate financial plan (50%) and achieving an improvement in
the adjusted return on average equity against Webster's Peer Group (50%). The
CEO's annual bonus payment was $557,100 for 2002, which amounted to 100% of
target bonus. The target bonus was paid in cash.
Regarding long-term incentive compensation, targeted at 150% of
base salary in 2002, the CEO received an annual grant of 62,525 stock options
and an award of 9,379 restricted shares which were made in accordance with the
Corporation's 1992 Stock Option Plan.
For 2002, the Compensation Committee intended that total
compensation for the Chief Executive Officer, be at approximately the average
for comparable financial institutions based on their past practices, recognizing
that Webster achieved its financial plan targets. The Committee also noted that
Webster has grown responsibly and has made significant progress in pursuit of
its strategic objectives.
Internal Revenue Code Section 162(m). In 1993, the Code was
amended to disallow publicly traded companies from receiving a tax deduction on
compensation paid to executive officers in excess of $1 million (section 162(m)
of the Code), unless, among other things, the compensation meets the
requirements for performance-based compensation. In structuring Webster's
compensation programs and in determining executive compensation, the Committee
takes into consideration the deductibility limit for compensation.
Compensation Committee
John J. Crawford (Chairman)
Joel S. Becker
George T. Carpenter
O. Joseph Bizzozero, Jr. (director of Webster Bank only)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From time to time Webster Bank makes loans to its directors and
executive officers and related persons and entities for the financing of homes,
as well as home improvement, consumer and commercial loans. It is the belief of
management that these loans are made in the ordinary course of business, are
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other persons,
and neither involve more than normal risk of collectibility nor present other
unfavorable features.
George T. Carpenter, a director of Webster and Webster Bank, is
the President and Treasurer of Carpenter Realty Co. ("Carpenter Realty") and S.
Carpenter Construction Co. ("Carpenter Construction"). During fiscal 1998,
Webster Bank entered into a 15 year lease for office space with Carpenter Realty
for an annual rent for the first five years of the lease of $61,200. Webster
Bank entered into a three-year lease with Carpenter Realty effective March 1,
2000 for storage and work space at an annual rate of $10,923.
AUDIT COMMITTEE REPORT
The Corporation's Audit Committee currently has four members,
Messrs. Jacobi (Chairman), Finkenzeller, McCarthy and Morris. As of the date of
this Proxy Statement, each of the Committee members is an "independent director"
under the New York Stock Exchange rules. The Audit Committee's responsibilities
are described in a written charter that was adopted by the Corporation's Board
of Directors. The Audit Committee's charter is attached at the end of this Proxy
Statement.
19
The Audit Committee has reviewed and discussed the Corporation's
audited financial statements for the fiscal year ended December 31, 2002 with
Webster's management. The Audit Committee has discussed with KPMG LLP, the
Corporation's independent auditors, the matters required to be discussed by SAS
No. 61, Communication with Audit Committees. The Audit Committee has received
the written disclosures and the letter from KPMG LLP required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees,
and has discussed with KPMG LLP the independence of KPMG LLP. Based on the
review and discussions described in this paragraph, the Audit Committee
recommended to Webster's Board of Directors that the Corporation's audited
financial statements for the year ended December 31, 2002 be included in the
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
2002 for filing with the Securities and Exchange Commission.
Audit Committee
C. Michael Jacobi (Chairman)
Robert A. Finkenzeller
John F. McCarthy
Michael G. Morris
CERTAIN RELATIONSHIPS
For a description of loans made to Webster Bank's directors,
executive officers and related persons and entities, see "Compensation Committee
Interlocks and Insider Participation."
20
COMPARATIVE COMPANY PERFORMANCE
The following table sets forth comparative information regarding
Webster's cumulative shareholder return on its Common Stock over the last five
fiscal years. Total shareholder return is measured by dividing total dividends
(assuming dividend reinvestment) for the measurement period plus share price
change for a period by the share price at the beginning of the measurement
period. Webster's cumulative shareholder return over a five-year period is based
on an investment of $100 on December 31, 1997 and is compared to the cumulative
total return of the Standard & Poor's 500 Index ("S&P 500 Index"), the SNL All
Bank and Thrift Index and a peer group index prepared by SNL Securities LC. The
peer group index includes 48 bank and thrift companies with reported market
capitalizations between $750 million and $2 billion at December 31, 2002, with
the returns of each issuer in the group weighted according to the issuer's
respective stock market capitalization at the beginning of each period for which
a return is indicated. Webster's market capitalization was $1.6 billion at
December 31, 2002.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
WEBSTER, S&P 500 INDEX, SNL ALL BANK & THRIFT INDEX
AND SNL SECURITIES LC PEER GROUP INDEX
WEBSTER FINANCIAL CORPORATION
[TOTAL RETURN PERFORMANCE CHART]
PERIOD ENDING
------------------------------------------------------------------------------------------
INDEX 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
------------------------------------------------------------------------------------------------------------------------------
Webster Financial Corporation 100.00 83.72 73.09 90.18 102.59 115.64
S&P 500 100.00 128.55 155.60 141.42 124.63 96.95
SNL All Bank & Thrift Index 100.00 106.15 101.55 122.68 124.49 116.97
Webster Financial Peer Group* 100.00 92.53 83.46 104.49 113.98 119.58
*Webster Financial Peer Group consists of banks and thrifts with common market
capitalization between $750M and $2B.
21
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires Webster's directors, certain officers and persons who own more
than 10 percent of its Common Stock to file with the Securities and Exchange
Commission initial reports of ownership of Webster's equity securities and to
file subsequent reports when there are changes in such ownership. Based on a
review of reports submitted to Webster, the Corporation believes that during the
fiscal year ended December 31, 2002, all Section 16(a) filing requirements
applicable to Webster's directors, officers and more than 10% owners were
complied with on a timely basis, except for one report for Mr. Strickland
reporting one transaction.
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of March 4, 2003
with respect to the amount of Webster Common Stock beneficially owned by each
director of Webster, each nominee for election as a director, each of the named
executive officers and by all directors and executive officers of Webster as a
group.
NUMBER OF SHARES PERCENT OF
NAME AND POSITION(s) AND NATURE OF COMMON STOCK
WITH WEBSTER BENEFICIAL OWNERSHIP (a) OUTSTANDING
------------ ------------------------ -----------
Joel S. Becker
Director.......................... 37,531 *
William T. Bromage
President, Chief Operating Officer,
Director.......................... 115,433 *
George T. Carpenter
Director.......................... 112,472 *
John J. Crawford
Director.......................... 35,010 *
Robert A. Finkenzeller
Director (and Director Nominee)... 24,813 *
Roger A. Gelfenbien
Director Nominee.................. 0 *
William J. Healy
Executive Vice President
and Chief Financial Officer....... 16,332 *
C. Michael Jacobi
Director.......................... 30,696 *
John F. McCarthy
Director.......................... 78,044 *
Michael G. Morris
Director (and Director Nominee).. 11,654 *
Peter K. Mulligan
Senior Executive Vice President --
Retail Banking.................... 96,533 *
James C. Smith
Chairman, Chief Executive Officer,
Director.......................... 977,129 2.11%
22
NUMBER OF SHARES PERCENT OF
NAME AND POSITION(s) AND NATURE OF COMMON STOCK
WITH WEBSTER BENEFICIAL OWNERSHIP (a) OUTSTANDING
------------ ------------------------ -----------
Ross M. Strickland
Executive Vice President --
Consumer Finance.................. 135,862 *
All Directors and executive
officers as a group (13 persons).. 1,671,509 3.58%
----------------------------
* Less than 1% of Common Stock outstanding.
(a) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, a person is deemed to be the beneficial owner, for purposes
of this table, of any shares of Common Stock if such person has or
shares voting power and/or investment power with respect to the
security, or has the right to acquire beneficial ownership at any time
within 60 days from March 4, 2003. As used herein, "voting power"
includes the power to vote or direct the voting of shares and
"investment power" includes the power to dispose or direct the
disposition of shares.
The table includes shares owned by spouses, other immediate family
members and others over which the persons named in the table possess
shared voting and/or shared investment power as follows: Mr. Becker,
2,016 shares; Mr. Carpenter, 54,654 shares; Mr. McCarthy, 29,340 shares;
Mr. Smith, 77,254 shares; and all directors and executive officers as a
group, 163,264 shares. The table also includes the following: 1,072,632
shares subject to outstanding options which are exercisable within 60
days from March 4, 2003; 74,016 shares held in the 401(k) Plan by
executive officers; 4,465 shares purchased by executive officers through
the Employee Stock Purchase Plan that are held by American Stock
Transfer & Trust Company; 94,492 shares of restricted stock that were
not vested as of March 4, 2003; and 31,305 shares held in the ESOP that
have been allocated to the accounts of executive officers. All other
shares included in the table are held by persons who exercise sole
voting and sole investment power over such shares.
Outstanding options reflected in the table were held as follows: Mr.
Becker, 14,200 shares; Mr. Bromage, 79,300 shares; Mr. Carpenter, 29,220
shares; Mr. Crawford, 17,334 shares; Mr. Finkenzeller, 16,200 shares;
Mr. Jacobi, 22,600 shares; Mr. McCarthy, 27,220 shares; Mr. Morris,
10,000 shares; Mr. Mulligan, 62,700 shares; Mr. Smith, 730,200 shares,
and Mr. Strickland, 63,658 shares.
23
PRINCIPAL HOLDERS OF VOTING SECURITIES OF WEBSTER
The following table sets forth information as of March 4, 2003
with respect to the beneficial ownership of Common Stock by any person or group
as defined in Section 13(d)(3) of the Exchange Act who is known to the Company
to be the beneficial owner of more than 5 percent of the Common Stock.
NUMBER OF SHARES;
NATURE OF PERCENT OF
BENEFICIAL COMMON STOCK
NAMES AND ADDRESSES OF BENEFICIAL OWNERS OWNERSHIP (1) OWNED
---------------------------------------- ------------- ------------
Private Capital Management ("PCM")............ 2,724,294 (2) 5.9%
8889 Pelican Bay Blvd.
Naples, Florida 34108
---------------------
(1) Based on information in the most recent Schedule 13D or 13G filed with
the Securities and Exchange Commission (the "Commission") pursuant to
the Exchange Act, unless otherwise indicated. In accordance with Rule
13d-3 under the Exchange Act, a person is deemed to be the beneficial
owner, for purposes of this table, of any shares of Common Stock if such
person has or shares voting power and/or investment power with respect
to the security, or has the right to acquire beneficial ownership at any
time within 60 days from March 4, 2003. As used herein, "voting power"
includes the power to vote or direct the voting of shares and
"investment power" includes the power to dispose or direct the
disposition of shares.
(2) Bruce S. Sherman is the Chief Executive Officer and Gregg J. Powers is
President of PCM. PCM reports that it is an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940. PCM
also reports that Messrs. Sherman and Powers exercise shared dispositive
and shared voting power, respectively, over 2,731,294 and 2,724,294
shares, held by PCM's clients and managed by PCM. PCM also reports that
Messrs. Sherman and Powers disclaim beneficial ownership of the shares
held by PCM's clients and disclaim the existence of a group.
24
PROPOSED AMENDMENT TO 1992 STOCK OPTION PLAN
(PROPOSAL 2)
The Webster Financial Corporation 1992 Stock Option Plan was
established by the Board of Directors of the Corporation in 1992, approved by
the shareholders of the Corporation at the 1992 annual meeting, and was amended
by the shareholders of the Corporation in 1994, 1996 and 1998. The 1992 Stock
Option Plan was amended and restated in its entirety in April 2001. The Board of
Directors believes the 1992 Stock Option Plan is vital to attract and keep the
best talent in this competitive marketplace.
As of March 4, 2003, there were approximately 2,535 full-time
employees of the Corporation and its subsidiaries, 7 non-employee directors of
the Corporation and 2 non-employee directors of Webster's banking subsidiary
(not also serving as directors of the Corporation) who were eligible to
participate in the 1992 Stock Option Plan.
The Board of Directors has voted to amend the 1992 Stock Option
Plan, subject to shareholder approval at the Annual Meeting: (i) to increase the
number of shares of Common Stock reserved for issuance under the 1992 Stock
Option Plan by 2,200,000 shares, from 4,461,000 shares, of which, 3,122,011 were
outstanding as of March 4, 2003 and 345,897 remain available for issuance, to
6,661,000 shares and (ii) to extend the term of the 1992 Stock Option Plan from
February 23, 2008 to March 20, 2013. Of the proposed increase of 2.2 million
shares, no more than 220,000 of such shares may be granted as restricted stock
awards. The number of shares reserved for issuance is subject to adjustment upon
the occurrence of certain events as described below. See "Description of the
Plan."
The Board of Directors of the Corporation believes that stock
options are important to attract and to encourage the continued service of
directors, officers and other key employees by facilitating their purchase of a
stock interest in the Corporation. The number of individuals eligible to receive
grants under the 1992 Stock Option Plan has increased significantly as a result
of acquisitions made by the Corporation. As of March 4, 2003, 345,897 shares
remain for future option grants under the 1992 Stock Option Plan. Approval of
the proposed amendment will increase the number of shares available for issuance
under the 1992 Stock Option Plan by 2.2 million shares.
The Board of Directors has concluded that it is advisable that
the Corporation and its shareholders continue to have the incentive of stock
options available as a means of attracting and retaining directors, officers and
key employees. This objective is served by amending the 1992 Stock Option Plan
to increase the number of available shares. As the Corporation progresses,
officers and key employees are continually being retained in or moving into
positions where, in the judgment of the Board of Directors, an initial or
increased option will be a valuable incentive and will serve to the ultimate
benefit of shareholders.
The amendment to the 1992 Stock Option Plan is subject to
shareholder approval at the Annual Meeting. By submitting the amendment for
shareholder approval at the Annual Meeting, the Corporation intends to continue
to comply with the plan requirements pertaining to options qualifying as
"incentive stock options" for federal income tax purposes and to the deduction
for such purposes of the full amount to which the Corporation is entitled with
respect to options granted under the Plan (see "Federal Income Tax Consequences
of the 1992 Stock Option Plan" below).
DESCRIPTION OF THE PLAN
The 1992 Stock Option Plan provides for the grant of options
that are intended to qualify as "incentive stock options" under Section 422 of
the Code and the regulations promulgated
25
thereunder to full-time employees as well as the grant of nonqualifying options
and restricted stock to directors and employees of the Corporation and its
subsidiaries.
The 1992 Stock Option Plan is administered by the Compensation
Committee, which consists of at least three independent, outside directors
appointed by the Board of Directors. The Compensation Committee makes
recommendations to the non-employee members of the Board of Directors concerning
the granting of options. The non-employee members of the Board of Directors make
all final determinations concerning the employees of the Corporation and its
subsidiaries to whom incentive and nonqualifying options will be granted.
The option exercise price under the 1992 Stock Option Plan may
not be less than 100% of the fair market value of the Common Stock on the date
of grant of the option (or 110% in the case of an incentive stock option granted
to an optionee beneficially owning more than 10% of the outstanding Common
Stock). The maximum option term is 10 years (or five years in the case of an
incentive stock option granted to an optionee beneficially owning more than 10%
of the outstanding Common Stock). Options may be exercised at any time after
grant, except as otherwise provided in the particular option agreement. The
limitation on the number of shares that may be subject to options granted to any
employee under the 1992 Stock Option Plan in any calendar year is 250,000
shares. There is also a $100,000 limit on the value of stock (determined at the
time of grant) covered by incentive stock options that first become exercisable
by an optionee in any calendar year. No option may be granted after the
expiration of the term of the 1992 Stock Option Plan, February 23, 2008 (which
would be extended to March 20, 2013 under the proposed amendment). Options are
non-transferable other than by reason of the death of the optionee, unless
otherwise specified in the grant agreement. Options and restricted stock awards
granted from the proposed 2.2 million shares will have a minimum one year
service requirement.
Payment for shares purchased under the 1992 Stock Option Plan
may be made either in cash or by exchanging shares of Common Stock of the
Corporation with a fair market value equal to the total option exercise price
and paying cash for any difference. Options may, if permitted by the particular
option agreement, be exercised by directing that certificates for the shares
purchased be delivered to a licensed broker as agent for the optionee, provided
that the broker tenders to the Corporation cash or cash equivalents equal to the
option exercise price plus the amount of any taxes that the Corporation may be
required to withhold in connection with the exercise of the option.
No Option granted under the 1992 Stock Plan may be amended or
modified so as to reduce the option price of the option. In addition, no option
can be cancelled nor can a new option with a lower option price be granted so
that the effect would be the same as reducing the option price. No other action
can be taken to reprice any option if such amendment, modification or other
repricing would result in a charge against the earnings of the Corporation or
any of its affiliates.
If an employee's employment with the Corporation or its
subsidiaries terminates by reason of death or permanent and total disability,
his or her options, whether or not then exercisable:
- may be exercised within one year after such death or
disability unless a different date is otherwise provided in
the particular option agreement (but not later than the date
the option would otherwise expire).
If the employee's employment terminates for any reason other
than normal retirement after attaining the age of sixty-five, death or
disability:
26
- options held by such optionee terminate three months after
the date of such termination unless a different date is
otherwise provided in the particular option agreement (but
not later than the date the option would otherwise expire).
If an employee's employment with the Corporation or its
subsidiaries terminates by reason of normal retirement (i.e., attaining the age
of sixty-five), his or her options, whether or not exercisable at the date of
termination of employment or service due to normal retirement:
- may be exercised at any time before the expiration of the
ten year term of the option unless a different date is
otherwise provided in the particular option agreement (but
not later than the date the option would otherwise expire).
An option granted to a non-employee director will not terminate until the
expiration of the ten year term of the option regardless of whether the
non-employee director continues to serve as a director.
An appropriate and proportionate adjustment will be made in the
number and kinds of shares subject to the 1992 Stock Option Plan, and in the
number, kinds, and per share exercise price of shares subject to the unexercised
portion of options granted prior to any such change, if the outstanding shares
of Common Stock are increased or decreased or changed into or exchanged for a
different number or kind of shares or securities of the Corporation, by reason
of:
- merger,
- consolidation,
- reorganization,
- recapitalization,
- reclassification,
- stock split-up,
- combination of shares,
- exchange of shares,
- stock dividend or
- other distribution payable in capital stock, or other
increase or decrease in such shares without receipt of
consideration by the Corporation.
Any such adjustment in an outstanding option, however, will be made without a
change in the total price applicable to the unexercised portion of the option
but with a corresponding adjustment in the per share option price.
The 1992 Stock Option Plan and the options issued thereunder
will terminate under the following circumstances:
- upon any dissolution or liquidation of the Corporation, or
- upon a reorganization, merger or consolidation in which the
Corporation is not the surviving corporation, or upon the
sale of all or substantially all of the assets of the
Corporation to another corporation, or
- upon any transaction approved by the Board of Directors
which results in any person or entity owning 80% or more of
the total combined voting power of all classes of stock of
the Corporation,
unless provision is made in connection with such transaction:
- for the continuation of the Plan, and/or
27
- the assumption of the options, or
- for the substitution for such options of new options
covering the stock of a successor corporation or a parent or
subsidiary thereof, with appropriate adjustments as to the
number and kinds of shares and the per share exercise price.
In the event of such termination, all outstanding options will be exercisable in
full during such period immediately prior to the occurrence of such termination
as the Board of Directors in its discretion will determine.
The Board of Directors may amend the 1992 Stock Option Plan with
respect to shares of the Common Stock as to which options have not been granted.
However, the Corporation's shareholders must approve any amendment to the 1992
Stock Option Plan that would
(i) materially change the requirements as to eligibility to
receive options;
(ii) increase the maximum number of shares in the aggregate
for which options may be granted (except for adjustments
upon changes in capitalization);
(iii) provide for a repricing of options;
(iv) increase the maximum period during which options may be
exercised;
(v) extend the term of this Plan, or
(vi) materially increase the benefits accruing to eligible
individuals under this Plan.
The Board of Directors at any time may terminate or suspend the
1992 Stock Option Plan. Unless previously terminated, this Plan will terminate
automatically at the end of its term, February 23, 2008 (which would be extended
to March 20, 2013 under the proposed amendment). No termination, suspension or
amendment of this Plan may, without the consent of the optionee to whom an
option has been granted, adversely affect the rights of the holder of the
option.
PLAN BENEFITS
As of March 4, 2003, options to purchase 3,122,011 shares of
Common Stock (975,747 of which were incentive stock options and 2,146,264 of
which were nonqualifying options) were outstanding under the 1992 Stock Option
Plan. The option exercise price under the 1992 Stock Option Plan may not be less
than 100% of the fair market value of the Common Stock on the date of grant of
the option (or 110% in the case of an incentive stock option granted to an
optionee beneficially owning more than 10% of the outstanding Common Stock).
FEDERAL INCOME TAX CONSEQUENCES OF THE 1992 STOCK OPTION PLAN
The grant of an option is not a taxable event for the optionee
or the Corporation. With respect to "incentive stock options," an optionee will
not recognize taxable income upon grant or exercise of an incentive option, and
any gain realized upon a disposition of shares received pursuant to the exercise
of an incentive option will be taxed as long term capital gain if the optionee
holds the shares for at least two years after the date of grant and for one year
after the date of exercise. However, the excess of the fair market value of the
shares subject to an incentive option on the exercise date over the option
exercise price will be included in the optionee's alternative minimum
28
taxable income in the year of exercise (except that, if the optionee is subject
to certain securities law restrictions, the determination of the amount included
in alternative minimum taxable income may be delayed, unless the optionee elects
within 30 days following exercise to have income determined without regard to
such restrictions) for purposes of the alternative minimum tax. This excess
increases the optionee's basis in the shares for purposes of the alternative
minimum tax but not for purposes of the regular income tax. An optionee may be
entitled to a credit against regular tax liability in future years for minimum
taxes paid with respect to the exercise of incentive options (e.g., for a year
in which the shares are sold at a gain). The Corporation and its subsidiaries
will not be entitled to any business expense deduction with respect to the grant
or exercise of an incentive option, except as discussed below.
For the exercise of an incentive option to qualify for the
foregoing tax treatment, the optionee generally must be an employee of the
Corporation or a subsidiary from the date the option is granted through a date
within three months before the date of exercise. There is no difference in the
treatment for one who terminates employment prior to or after attaining normal
retirement age. In the case of an optionee who is disabled, this three-month
period is extended to one year. In the case of an employee who dies, the
three-month period and the holding period for shares received pursuant to the
exercise of the option are waived.
If all of the requirements for incentive option treatment are
met except for the special holding period rules set forth above, the optionee
will recognize ordinary income upon the disposition of the shares in an amount
equal to the excess of the fair market value of the shares at the time the
option is exercised over the option exercise price. However, if the optionee is
subject to certain restrictions under the securities laws at the time the option
is exercised, the measurement date may be delayed, unless the optionee has made
a special tax election within 30 days after the date of exercise to have taxable
income determined without regard to such restrictions. The balance of the
realized gain, if any, will be long or short term capital gain, depending upon
whether or not the shares are sold more than one year after the option is
exercised. If the optionee sells the shares prior to the satisfaction of the
holding period rules but at a price below the fair market value of the shares at
the time the option is exercised (or other applicable measurement date), the
amount of ordinary income (and the amount included in alternative minimum
taxable income, if the sale occurs during the same year as the option was
exercised) will be limited to the excess of the amount realized on the sale over
the option exercise price. If the Corporation complies with applicable reporting
requirements, it will be allowed a business expense deduction to the extent the
optionee recognizes ordinary income, subject to applicable limitations on the
deduction of amounts becoming vested as a result of a change in control.
If an optionee exercises an incentive option by tendering shares
of Common Stock with a fair market value equal to part or all of the option
exercise price, the exchange of shares will be treated as a nontaxable exchange
(except that this treatment would not apply if the optionee acquired the shares
being transferred pursuant to the exercise of an incentive option and has not
satisfied the special holding period requirements summarized above). If the
exercise is treated as a tax free exchange, the optionee would have no taxable
income from the exchange and exercise (other than minimum taxable income as
discussed above) and the tax basis of the shares exchanged would be treated as
the substituted basis for the shares received. These rules would not apply if
the optionee used shares received pursuant to the exercise of an incentive
option or another statutory option) as to which the optionee has not satisfied
the applicable holding period requirement. In that case, the exchange would be
treated as a taxable disqualifying disposition of the exchanged shares, with the
result that the excess of the fair market value of the shares tendered over the
optionee's basis in the shares would be taxable.
Upon exercising a non-qualifying option, an optionee will
recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the
29
Common Stock on the date of exercise (except that, if the optionee is subject to
certain restrictions imposed by the securities laws, the measurement date may be
delayed, unless the optionee makes a special tax election within 30 days after
exercise to have income determined without regard to the restrictions). If the
Corporation complies with applicable reporting requirements, it will be entitled
to a business expense deduction in the same amount, subject to applicable
limitations on the deduction of amounts becoming vested as a result of a change
in control. Upon a subsequent sale or exchange of shares acquired pursuant to
the exercise of a nonqualifying option, the optionee will have taxable gain or
loss, measured by the difference between the amount realized on the disposition
and the tax basis of the shares (generally, the amount paid for the shares plus
the amount treated as ordinary income at the time the option was exercised).
If the optionee surrenders shares of Common Stock in payment of
part or all of the exercise price for non-qualifying options, no gain or loss
will be recognized with respect to the shares surrendered (regardless of whether
the shares were acquired pursuant to the exercise of an incentive option) and
the optionee will be treated as receiving an equivalent number of shares
pursuant to the exercise of the option in a nontaxable exchange. The basis of
the shares surrendered will be treated as the substituted tax basis for an
equivalent number of option shares received and the new shares will be treated
as having been held for the same holding period as had expired with respect to
the transferred shares. However, the fair market value of any shares received in
excess of the number of shares surrendered (i.e., the difference between the
aggregate option exercise price and the aggregate fair market value of the
shares received pursuant to the exercise of the option) will be taxed as
ordinary income.
REQUIRED VOTE
The approval by an affirmative vote of the holders of a majority
of the shares present in person, or represented by proxy, and entitled to vote
at the Annual Meeting is required to approve the amendment to the 1992 Stock
Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 1992 STOCK OPTION PLAN. IF NOT OTHERWISE SPECIFIED, PROXIES
WILL BE VOTED FOR APPROVAL.
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APPROVAL OF THE
QUALIFIED PERFORMANCE-BASED COMPENSATION PLAN
(PROPOSAL 3)
The Qualified Performance-Based Compensation Plan (the "Plan")
was adopted effective January 1, 1998, and was approved by shareholders on April
23, 1998 for a five year term to expire at the Annual Meeting. The Board of
Directors has approved the Plan for another five year term, subject to
shareholder approval. The Plan is designed to further the growth and
profitability of Webster by providing selected key employees with the
opportunity to earn incentive compensation based on business, financial, and
strategic results, thereby enabling Webster to motivate key employees to achieve
high profitability and strategic objectives for the Corporation. The Plan is
intended to satisfy the requirements of Section 162(m) of the Code with respect
to the deduction of qualified performance-based compensation. No awards will be
made under the Plan after the 2003 Annual Meeting unless, the Plan is
re-approved by shareholders at the Annual Meeting by a majority of the votes
cast in person, or by proxy, and entitled to vote on the issue at a duly held
meeting of the shareholders.
Under Section 162(m) of the Code and the regulations promulgated
thereunder, a federal income tax business expense deduction is generally not
allowed for annual compensation in excess of $1 million paid by a publicly
traded corporation to its Chief Executive Officer and to the four other most
highly compensated officers (the "covered employees"). Under those provisions,
however, there is an exemption to permit the deduction of "qualified
performance-based compensation." To qualify for such exemption, (i) the
compensation must be paid solely on account of the attainment of one or more
pre-established, objective performance goals; (ii) the performance goals under
which compensation is paid must be established by a compensation committee
comprised solely of two or more directors who qualify as "outside directors" for
purposes of the exemption; (iii) the material terms under which the compensation
is to be paid must be disclosed to and subsequently approved in a separate vote
by shareholders of the corporation before payment is made; and (iv) the
compensation committee must certify in writing before payment of the
compensation that the performance goals and any other material terms were in
fact satisfied.
The Board of Directors believes that where Webster can seek to
accomplish its compensation objectives in a manner that maximizes the
deductibility of compensation for federal income tax purposes, the Corporation
should seek to do so. Accordingly, the Board of Directors seeks shareholder
re-approval of the material terms of the Plan so that future awards under the
Plan will be deemed to be "qualified performance-based compensation" under
Section 162(m) of the Code and the regulations thereunder.
DESCRIPTION OF THE MATERIAL TERMS OF THE PLAN
The following summary of the material terms of the Plan is
qualified in its entirety by reference to the terms of the Plan, a copy of which
is attached to this Proxy Statement as Exhibit A. Undefined capitalized terms
are defined in Exhibit A.
The Plan is administered by the Compensation Committee which
consists of not less than three directors appointed by the Board of Directors,
each of whom is an "outside director" within the meaning of the regulations
implementing Section 162(m) of the Code (the "Committee"). The Committee has
full authority to make, interpret and approve all rules for the administration
of the Plan. The performance goal under the Plan is the attainment of positive
Income Before Taxes (defined as Webster's net income for a fiscal year or one or
more fiscal quarters, before provision for taxes on income, merger and
acquisition expenses and awards under the Plan, as determined by Webster's
independent accountants). A participant's Performance Bonus under the Plan will
be a specified percentage (not more than 2%) of Income Before Taxes, or a
specified percentage of base
31
salary (not more than 2% of Income Before Taxes). The Committee selects
participants and establishes the specific Performance Bonus percentages. The
Committee retains negative discretion to reduce the amount of any Performance
Bonus payable under the Plan, including a reduction to zero. The reduction in
the Performance Bonus payable to one participant will not have the effect of
increasing the amount that is payable to any other participant. The Committee
can condition the payment of a Performance Bonus under the Plan upon the
satisfaction of such objective or subjective standards as the Committee shall
determine to be appropriate in its sole discretion. Before any payment can be
made under the Plan, the Committee must certify in writing that the performance
goal of positive Income Before Taxes was in fact satisfied.
The Chief Executive Officer of Webster is a participant in the
Plan. During the first 90 days of each fiscal year, the Committee can select as
participants any other individuals that the Committee determines, in its
discretion, are or may be "covered employees" of Webster for purposes of the
limitation on the deduction of compensation imposed under Section 162(m) of the
Code. No other employees have participated in the Plan to date.
The Committee establishes the performance goal for each
participant within 90 days of the beginning of a fiscal year. However, if an
individual becomes eligible to be a participant after the end of such 90-day
period, the Committee may designate such individual as a participant and may
award a Performance Bonus to such individual, provided that the performance goal
in such case will be the attainment of positive Income Before Taxes for fiscal
quarters after the quarter in which such individual became a Plan participant.
Performance Bonuses are payable in cash or restricted stock at
such times and on such terms as determined by the Committee in its sole
discretion (or if no such determination is made, in a cash lump sum as soon as
reasonably practicable after the end of the fiscal year).
Webster has no obligation to reserve or otherwise fund in
advance any amounts that are or may become payable under the Plan. The funds for
payments under the Plan may be commingled with other funds of the Corporation
and need not in any way be segregated from other assets or funds held by
Webster. Moreover, the Board may at any time suspend, modify, or amend the Plan
in whole or in part. However, no amendment to materially increase benefits,
materially modify the requirements as to eligibility or to change the material
terms of the performance goal under the Plan will be effective unless such
change is disclosed to and approved by the shareholders of Webster. The Plan
will terminate on the date of the first shareholders meeting of Webster that
occurs in 2008, unless shareholders re-approve the Plan before that date.
REQUIRED VOTE
The approval by an affirmative vote of the holders of a majority
of the votes cast in person, or represented by proxy, and entitled to vote at
the Annual Meeting is required to approve the material terms of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
MATERIAL TERMS OF THE QUALIFIED PERFORMANCE-BASED COMPENSATION PLAN. IF NOT
OTHERWISE SPECIFIED, PROXIES WILL BE VOTED FOR APPROVAL.
32
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 4)
The Board of Directors has appointed the firm of KPMG LLP to
continue as independent auditors for Webster for the year ending December 31,
2003, subject to ratification of the appointment by Webster's shareholders. KPMG
LLP was appointed as the independent auditors of Webster Bank in 1985, has
performed audits for Webster Bank for the years ended December 31, 1983 through
2002, and has similarly performed audits for Webster for the years ended
December 31, 1986 through 2002. Unless otherwise indicated, properly executed
proxies will be voted in favor of ratifying the appointment of KPMG LLP,
independent certified public accountants, to audit the books and accounts of
Webster for the year ending December 31, 2003. No determination has been made as
to what action the Board of Directors would take if Webster's shareholders do
not ratify the appointment.
Assuming the presence of a quorum at the Annual Meeting, the
affirmative vote of the majority of the votes cast is required to ratify the
appointment of KPMG LLP as Webster's independent auditors for the year ending
December 31, 2003.
Representatives of KPMG LLP are expected to be present at the
Annual Meeting. They will be given an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS WEBSTER'S INDEPENDENT AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 2003.
AUDITOR FEE INFORMATION
AGGREGATE FEES BILLED BY KPMG LLP
FOR THE 2002 FISCAL YEAR
FINANCIAL INFORMATION
SYSTEMS DESIGN AND
AUDIT FEES (1) IMPLEMENTATION FEES (2) ALL OTHER FEES (3)
---------- ------------------- --------------
$512,500 None $322,778
(1) The aggregate fees billed by KPMG LLP for professional services rendered for
the audit of the Corporation's annual financial statements for the fiscal
year ended December 31, 2002 and the reviews of the financial statements
included in the Corporation's Quarterly Reports on Form 10-Q for that fiscal
year.
(2) KPMG LLP did not render any professional services related to financial
information systems design and implementation to the Corporation for the
fiscal year ended December 31, 2002.
(3) The aggregate fees billed by KPMG LLP for services rendered other than the
services described under "Audit Fees" for the fiscal year ended December 31,
2002. All other fees include $79,000 of audit related services comprised of
consultation on accounting issues, review of SEC registration statements and
due diligence/acquisition audit assistance; $52,137 of tax related services
and $191,641 of advisory services which represents the cost of loaned KPMG
LLP staff provided to Webster to assist in a conversion to a new item
processing technology and system during the year.
The Audit Committee of the Board of Directors has considered and
determined that the provision of the services covered by "All Other Fees" is
compatible with maintaining the independence of KPMG LLP.
33
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
FOR INCLUSION IN PROXY STATEMENT
Any proposal which a Webster shareholder wishes to have included
in Webster's proxy statement and form of proxy relating to Webster's 2004 annual
meeting of shareholders under Rule 14a-8 of the Securities and Exchange
Commission must be received by Webster's Secretary at Webster Plaza, Waterbury,
Connecticut 06702 by November 21, 2003. Nothing in this paragraph shall be
deemed to require Webster to include in its proxy statement and form of proxy
for the meeting any shareholder proposal which does not meet the requirements of
the Securities and Exchange Commission in effect at the time. Any other proposal
for consideration by shareholders at Webster's 2004 annual meeting of
shareholders must be delivered to, or mailed to and received by, the Secretary
of Webster not less that 30 days nor more than 90 days prior to the date of the
meeting if Webster gives at least 45 days' notice or prior public disclosure of
the meeting date to shareholders.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors
does not know of any other matters to be presented for action by the
shareholders at the Annual Meeting. If, however, any other matters not now known
properly come before the meeting, the persons named in the accompanying proxy
will vote the proxy in accordance with the determination of a majority of the
Board of Directors.
By order of the Board of Directors
/s/ JAMES C. SMITH
James C. Smith
Chairman and Chief Executive Officer
Waterbury, Connecticut
March 21, 2003
34
APPENDIX A
AUDIT COMMITTEE CHARTER
STATEMENT OF POLICY
The Audit Committee for Webster Financial Corporation (the "Corporation"), which
is composed solely of directors who are independent of management and free from
any relationship that would interfere with the exercise of independent judgment,
serves as the Audit Committee of the Corporation, and its subsidiaries,
including Webster Bank (the "Bank"), and its subsidiaries, including Webster
Trust Company, N. A. (the "Trust Company"), and Webster Investment Services,
Inc. (the "Broker/Dealer").
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities to the shareholders, potential
shareholders, and investment community by reviewing: the financial reports and
other financial information provided by the Corporation to any governmental body
or the public; the Corporation's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established; compliance by the Corporation with legal and regulatory
requirements and the Corporation's auditing, accounting and financial reporting
processes generally, and the independent accountant's qualifications and
independence. Consistent with this function, the Audit Committee should
encourage continuous improvement of, and should foster adherence to, the
Corporation's policies, procedures and practices at all levels. The Audit
Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
- Review and appraise the audit efforts of the Corporation's
independent accountants and internal auditing department.
- Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal
auditing department, and the Board of Directors.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission to be included in the Corporation's annual
proxy statement. The independent auditors are ultimately accountable to the
Board of Directors and the Audit Committee.
COMPOSITION
The Audit Committee shall comprise no fewer than three directors as determined
by the Board of Directors of the Corporation, each of whom shall be independent
directors, and free from any relationship that, in the opinion of the Board,
would interfere with the exercise of his or her independent judgment as a member
of the Audit Committee. The members of the Audit Committee shall meet the
independence, experience and expertise requirements of the New York Stock
Exchange, Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder. In
addition, the Corporation, its Board of Directors, and the Audit Committee shall
comply with all applicable laws, rules, regulations and guidelines, including,
without limitation, those contained in 12 USC Sec. 1831m, Part 363 of the rules
and regulations of the Federal Deposit Insurance Corporation, which establish
criteria for an independent audit committee. All members of the Audit Committee
shall have a working familiarity with basic finance and accounting practices,
and at least two members of the Audit Committee shall have accounting or related
financial management and banking expertise. Committee members may
35
enhance their familiarity with finance, accounting and risk management by
participating in educational programs conducted by the Corporation's General
Auditor, members of management, or an outside consultant.
The members of the Audit Committee, and its Chair, shall be elected by the Board
of Directors of the Corporation at its annual organizational meeting, may be
removed and replaced by the Board of Directors, and shall serve until their
successors are duly elected and qualified.
MEETINGS
The Audit Committee shall meet at least four times annually, or more frequently
as circumstances dictate. In order to foster open communication, the Audit
Committee should meet at its discretion with the Corporation's General Auditor
and the independent accountants in separate executive sessions to discuss any
matters that the Audit Committee or each of these groups believe should be
discussed privately.
PRACTICES
In carrying out its responsibilities, the Audit Committee will adopt practices
which will enable the Committee to best react to changing conditions and to
ensure that the corporate accounting and reporting practices, the system of
internal controls, and the fiduciary activities conducted are in accordance with
all requirements and are of the highest quality.
In performing their duties and responsibilities, Committee members are entitled
to rely in good faith on information, opinions, reports or statements prepared
or presented by:
- One or more officers or employees of the Corporation whom the
Committee member reasonably believes to be reliable and
competent in the matters presented;
- Counsel, independent auditors or other persons as to matters
which the Committee member reasonably believes to be within the
professional or expert competence of such person; or
- Another committee of the Board as to matters within its
designated authority which committee the Committee member
reasonably believes to merit confidence.
The Audit Committee shall:
AUDIT ADMINISTRATION
1. Hold regular meetings as may be necessary, and special meetings
as may be called by the Chair of the Audit Committee or at the
request of the independent accountants or the Corporation's
General Auditor.
2. Consult with management for input regarding the Audit
Committee's responsibilities, but may not delegate these
responsibilities.
3. Form and delegate authority to subcommittees when appropriate.
4. On an annual basis, receive from the independent accountants a
formal written statement delineating all relationships between
the independent accountants and the Corporation, consistent with
Independence Standards Board Standard 1, discuss with the
independent accountants the independent accountants'
independence,
36
actively engage in a dialogue with the independent accountants
with respect to any disclosed relationships or services that may
impact objectivity and independence of the independent
accountants, and take, or recommend that the full Board of
Directors take, appropriate action to oversee the independence
of the independent accountants.
5. Review the experience and qualifications of the senior members
of the independent accountant's team.
6. Obtain and review a report from the independent accountants, at
least annually, describing (a) the independent accountant's
internal quality-control procedures, (b) any material issues
raised by the most recent quality-control review, or peer
review, of the independent accountant, or by any inquiry or
investigation by governmental or professional authorities within
the preceding five years, respecting one or more independent
audits carried out by the independent accountant, and any steps
taken to deal with any such issues, and (c) to assess the
independent accountant's independence, all relationships between
the independent accountant and the Corporation.
7. On an annual basis, review the Audit Committee's Independent
Accountants Retention Guidelines.
8. Review and approve all audit engagement fees and terms and any
non-audit engagements (to the extent permitted under applicable
law) with the independent accountants.
9. Review the qualifications and the quality control procedures of
the independent accountants. Evaluate the performance of the
independent accountants and make recommendations to the Board of
Directors regarding the selection, appointment, replacement or
termination of the independent accountants. The independent
accountants shall be ultimately accountable to the Board of
Directors and the Audit Committee, as representatives of
shareholders.
10. Confer with the independent accountants and the internal
auditors concerning the scope of their audits of the
Corporation, the Bank and its subsidiaries, and review and
approve the independent accountants' annual engagement letter.
11. Review activities, organizational structure, and qualifications
of the internal audit department and the appointment and
replacement of the Corporation's General Auditor.
12. Review with the Corporation's General Counsel legal matters that
may have a material impact on the financial statements,
compliance policies, and any material reports or inquiries
received from regulators or governmental agencies.
13. Obtain from the independent accountants assurance that Section
10A of the Private Securities Litigation Reform Act of 1995 has
not been implicated.
14. Retain independent counsel, independent accountants, or others
where appropriate, without seeking Board approval, for any
matters related to the discharge of the duties and
responsibilities assigned to the Audit Committee. As determined
by the Audit Committee, the Corporation shall provide
appropriate funding for payment of compensation to any such
advisors.
37
15. Review and reassess the adequacy of the Audit Committee Charter
and the Audit Committee's own performance annually, and
recommend any proposed changes to the Board of Directors for
approval.
16. Report through its Chair to the Board of Directors at the
Board's next regularly scheduled meeting following the meeting
of the Audit Committee matters reviewed by the Audit Committee.
17. Discuss with the independent accountants, Statement on Auditing
Standards No. 61 matters. In particular:
(a) The adoption of, or changes to, the Corporation's
significant auditing and accounting principles and
practices as suggested by the independent accountant,
internal auditors, or management.
(b) Any "management" or "internal control" letter issued, or
proposed to be issued, by the independent accountant and
the Corporation's response thereto.
(c) Any difficulties encountered in the course of the audit
work, including any restrictions on the independent
accountant's scope of activities or access to requested
information, and any significant disagreements with
management.
18. Make a recommendation to the Board of Directors as to whether
the financial statements should be included in the Corporation's
Annual Report on Form 10-K.
19. Approve the report of Audit Committee to be included in the
Corporation's Proxy Statement for its Annual Meeting of
Shareholders.
20. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Audit Committee
or the Board deems necessary or appropriate.
21. Review with the full Board any issues that arise with respect to
the quality and integrity of the Corporation's financial
statements.
SYSTEM OF INTERNAL CONTROL
1. Review and approve annual audit plans; direct the internal
auditors or the independent accountants to specific matters or
areas deemed by the Audit Committee to be of special
significance; and authorize the performance of supplemental
reviews or audits, as the Audit Committee may deem desirable.
2. Review and discuss with management and the independent
accountants the Corporation's audited annual financial
statements and the independent accountants' opinion rendered
with respect to such financial statements. This review shall
include the nature and extent of any significant changes in
accounting principles or initiatives, off-balance sheet
structures (if any), management's discussion and analysis and
accounting estimates, and disagreements with management.
3. Review with financial management and the independent accountants
the Corporation's annual audited and quarterly financial
statements, including the Corporation's disclosures made under
"Management's Discussion and Analysis of
38
Financial Condition and Results of Operations", and in the case
of quarterly financial statements, the results of the
independent accountant's reviews of the quarterly financial
statements.
4. Review with management and the independent accountants the
effect of regulatory and accounting initiatives as well as
off-balance sheet structures of the Corporation's financial
statements.
5. Review with management the Corporation's earnings press
releases, including the use of "pro forma" or non-GAAP financial
measures, as well as financial information and earnings guidance
provided to analysts and rating agencies.
6. Review with the Chief Risk Officer, the General Auditor, and the
independent accountants the Corporation's major financial risk
exposures and the steps management has taken to monitor and
control such exposure. The Audit Committee shall meet at least
annually with the Chief Risk Officer to review the Corporation's
Enterprise Risk Management process.
7. Review the adequacy of the Bank, the Trust Company, and the
Broker/Dealer systems of internal controls by obtaining from the
independent accountants and internal auditors their
recommendations regarding internal controls and other matters
relating to the accounting procedures of the Corporation and the
Bank and its subsidiaries and reviewing the correction of
controls deemed to be deficient.
8. Meet at least quarterly with the chief financial officer, the
Corporation's General Auditor and the independent accountants in
separate executive sessions, in order to ensure that
independent, direct communication between the Boards of
Directors, chief financial officer, the Corporation's General
Auditor and independent accountants is provided.
9. Review the appointment and replacement of the General Auditor.
10. Review the significant reports to management prepared by the
internal auditing function and management's responses thereto.
11. Discuss with the independent accountants the Corporation's
internal audit function and any recommended changes in the
planned scope of the internal audit.
12. Review with the full Board any issues that arise with respect to
the performance of the internal audit function.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
1. Oversee the Corporation's policies on business ethics and
conduct.
2. Obtain reports from management, the General Auditor responsible
for the internal audit function and the independent accountant,
that address conformity with applicable legal and regulatory
requirements and the Corporation's Code of Business Conduct and
Ethics by the Corporation and its subsidiaries. Review reports
and disclosures of insider and affiliated party transactions.
Review with the full Board any issues that arise with respect to
the Corporation's compliance with legal and regulatory
requirements and with the Corporation's Code of Business Conduct
and Ethics.
39
3. Review regulatory examination findings. Discuss with management,
the General Auditor, and the independent accountants, any
correspondence with regulators or governmental agencies and any
employee complaints or published reports, which raise material
issues regarding the Corporation's financial statements or
accounting policies.
4. Discuss with the Corporation's General Counsel legal matters
that may have a material impact on the financial statements, and
with the Corporation's Senior Compliance Officer legal matters
that may have an impact on the Corporation's compliance
policies.
5. Establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting,
internal accounting controls or auditing matters.
6. Establish procedures for the confidential, anonymous submission
by employees of the Corporation or any subsidiary of concerns
regarding questionable accounting or auditing matters.
LOAN REVIEW ACTIVITIES
1. On an annual basis, review and approve the Loan Review Policy
and Procedures.
2. Review activities, organizational structure, and qualifications
of the Independent Loan Review Department.
3. Receive written reports from the Loan Review Manager on control
deficiencies and the correction of same.
4. On an annual basis, review management's methodology and
conclusions regarding the adequacy of the allowance for loan
losses.
FIDUCIARY ACTIVITIES - WEBSTER TRUST COMPANY, N. A.
1. Ensure that, at least once during each calendar year, suitable
audits of the Trust Company's affairs and fiduciary activities
are performed. Such audits may be performed by the internal
auditors, or by independent auditors retained for such purpose.
Written audit reports shall be presented to the Audit Committee
and the Board of Directors of the Trust Company at their next
regularly scheduled meetings.
2. Discuss with the internal or independent accountants whether the
Trust Company is operating in a sound condition, and whether
adequate internal controls and procedures are being maintained,
whether fiduciary powers have been administered according to
law, Part 9 of the Regulations of the Comptroller of the
Currency, and sound fiduciary principles.
3. Recommend to the Board of Directors of the Trust Company such
changes in the manner of conducting the affairs and fiduciary
activities of the Trust Company as shall be deemed advisable.
4. The Audit Committee may designate the Corporation's General
Auditor to represent it at meetings of the Board of Directors of
the Trust Company.
40
BROKER/DEALER ACTIVITIES - WEBSTER INVESTMENT SERVICES, INC.
1. Ensure that, at least once during each calendar year, suitable
audits of the Broker/Dealer are performed. Such audits may be
performed by the internal auditors, or by independent auditors
retained for such purpose. Written audit reports shall be
presented to the Audit Committee and the Board of Directors of
the Broker/Dealer at their next regularly scheduled meetings.
2. Discuss with the internal or independent auditors whether the
Broker/Dealer is operating in a sound condition, whether
adequate internal controls and procedures are being maintained,
and whether the Broker/Dealer is in compliance with SEC
guidelines, NASD rules and applicable securities laws and
regulations.
3. Recommend to the Board of Directors of the Broker/Dealer such
changes in the manner of conducting the affairs and activities
of the Broker/Dealer as shall be deemed advisable.
4. The Audit Committee may designate the Corporation's General
Auditor to represent it at meetings of the Board of Directors of
the Broker/Dealer.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Corporation's financial
statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable
rules and regulations. These are the responsibilities of management and
the independent accountant.
Adopted by the Board of Directors as of January 27, 2003.
41
EXHIBIT A
WEBSTER FINANCIAL CORPORATION
QUALIFIED PERFORMANCE-BASED COMPENSATION PLAN
1. ADOPTION AND PURPOSE.
1.1 Webster Financial Corporation ("Webster") hereby adopts
this Qualified Performance-Based Compensation Plan (the "Plan"), effective as of
January 1, 2003.
1.2 The purposes of the Plan are to enhance Webster's
ability to attract and retain highly qualified executives and to provide
additional financial incentives to such executives to promote the success of
Webster and its subsidiaries.
1.3 Remuneration payable under the Plan is intended to
constitute "qualified performance-based compensation" for purposes of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and Section
1.162-27 of the Treasury Regulations thereunder (the "Regulations") and the Plan
shall be construed consistently with such purpose. The performance goal under
which compensation will be paid under the Plan shall be based on the attainment
of positive Income Before Taxes, as defined below.
2. DEFINITIONS.
For purposes of interpreting the Plan and related documents, the
following definitions shall apply:
2.1 "Board" means the Board of Directors of Webster.
2.2 "Code" means the Internal Revenue Code of 1986, as
amended, or the corresponding provisions of any subsequent internal revenue law.
2.3 "Committee" means a committee appointed by the Board to
administer the Plan and comprised of not less than three directors of Webster,
each of whom shall qualify in all respects as an "outside director" for purposes
of Code Section 162(m) and Section 1.162-27(e)(3) of the Regulations.
2.4 "Effective Date" means January 1, 2003.
2.5 "Eligible Executive" means the chief executive
officer of Webster and each other individual that the Committee determines, in
its discretion, is or may be a "covered employee" of Webster within the meaning
of Code Section 162(m) and Section 1.162-27(c)(2) of the Regulations.
2.6 "Expiration Date" means the date of the first
shareholders meeting of Webster that occurs in the fifth calendar year following
the calendar year in which the shareholders of Webster approved the Plan (or, in
the event shareholders shall have approved the Plan on more than one occasion,
the year in which the most recent such shareholder approval occurred).
2.7 "Fiscal Year" means each fiscal year of Webster
commencing on or after the Effective Date and before the Expiration Date.
2.8 "Income Before Taxes" means Webster's net income for a
Fiscal Year or one or more fiscal quarters, before (i) provision for taxes on
income, (ii) merger and acquisition expenses
42
and (iii) awards under the Plan, as determined and reported to the Committee by
Webster's independent accountants.
2.9 "Performance Bonus" means an annual bonus opportunity
amount determined by the Committee and stated as a specified percentage (not
more than 2%) of Income Before Taxes or as a specified percentage of base salary
(not more than 2% of Income Before Taxes).
2.10 "Regulations" means the Treasury Regulations promulgated
under the Code, as amended from time to time.
2.11 "Webster" means Webster Financial Corporation, a
Delaware corporation.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee. The Committee shall
have the authority to establish and administer the performance goal and to
certify the attainment of the performance goal as described in Section 6 below.
The Committee shall have the full power and authority to construe, interpret and
administer the Plan and shall have the exclusive right to make awards under the
Plan and to exercise negative discretion pursuant to Section 5 below. The
Committee may take action at a meeting or by written consent in accordance with
the Bylaws of Webster. The performance goal may be ratified by the Board.
4. ELIGIBILITY.
Eligibility under this Plan is limited to Eligible Executives designated
by the Committee, in its discretion.
5. AWARDS.
Not later than the 90th day of each Fiscal Year, the Committee, in its
sole discretion, shall designate one or more Eligible Executives to be
participants in the Plan and shall specify the performance goal, which shall be
based on the attainment of positive Income Before Taxes, and the other terms and
conditions for the determination and payment of a Performance Bonus to each such
Eligible Executive for such Fiscal Year. The Performance Bonus payable to an
Eligible Executive with respect to any Fiscal Year shall not exceed 2% of Income
Before Taxes for such year. The Committee may condition the payment of a
Performance Bonus upon the satisfaction of such objective or subjective
standards as the Committee shall determine to be appropriate, in its sole
discretion, including, without limitation, achieving a Board approved corporate
financial plan and/or achieving certain targeted returns. The Committee shall
retain the discretion to reduce the amount of any Performance Bonus that would
otherwise be payable to an Eligible Executive (including, without limitation, a
reduction in such amount to zero). The Committee's exercise of such discretion
with respect to an Eligible Executive shall not have the effect of increasing
the Performance Bonus that is payable to any other Eligible Executive. If an
individual becomes an Eligible Executive after the end of such 90-day period,
the Committee may award a Performance Bonus to such Eligible Executive for the
Fiscal Year on such terms and conditions as the Committee shall determine,
provided that the performance goal with respect to such Performance Bonus shall
be based on attainment of positive Income Before Taxes for fiscal quarters after
the quarter in which such individual became an Eligible Executive.
6. COMMITTEE CERTIFICATION.
As soon as reasonably practicable after the end of each Fiscal Year,
Webster's independent accountants shall determine and report to the Committee
the amount of the Income Before Taxes for
43
such Fiscal Year and the Committee shall determine the extent to which the
performance goal has been attained with respect to each Performance Bonus for
such Fiscal Year. The Committee shall certify in writing the attainment of the
performance goal and the amount of each Performance Bonus for such Fiscal Year.
7. PAYMENT OF PERFORMANCE BONUSES.
Performance Bonuses shall be paid in cash or restricted stock at such
times and on such terms as determined by the Committee in its sole discretion
(or if no such determination is made, in a single sum as soon as reasonably
practicable after the end of the Fiscal Year).
8. CONTINUATION OF SERVICE.
Nothing in the Plan shall confer upon any person any right to continue
to serve as an officer or employee of Webster or of any subsidiary or affiliate
of Webster.
9. WITHHOLDING.
Webster shall have the right to withhold, or require an Eligible
Executive to remit to Webster, an amount sufficient to satisfy any applicable
federal, state, local or foreign withholding tax requirements imposed with
respect to the payment of any Performance Bonus.
10. NONTRANSFERABILITY; UNFUNDED PLAN.
The rights and benefits under this Plan are personal to an Eligible
Executive and shall not be subject to any voluntary or involuntary alienation,
assignment, pledge, transfer, or other disposition. In the event of an Eligible
Executive's death, any payment to which the Eligible Executive may be entitled
under the Plan shall be made to his or her beneficiary last designated in a
written notice delivered to the Committee or in the absence of such designation,
to the Eligible Executive's estate. Webster shall have no obligation to reserve
or otherwise fund in advance any amounts that are or may in the future become
payable under this Plan. Any funds that Webster, acting in its sole discretion,
determines to reserve for future payments under this Plan may be commingled with
other funds of Webster and need not in any way be segregated from other assets
or funds held by Webster. An Eligible Executive's rights to payment under the
Plan shall be limited to those of a general creditor of Webster.
11. ADOPTION, AMENDMENT, SUSPENSION AND TERMINATION
OF THE PLAN.
11.1 The Plan shall be effective as of the date of adoption
by the Board, subject to approval of the Plan within one year thereafter by a
majority of the votes cast at a duly held meeting of the shareholders of the
company, provided, however, that upon approval of the Plan by the shareholders
of Webster, all Performance Bonuses awarded under the Plan on or after the
Effective Date shall be fully effective as if the shareholders had approved the
Plan on the Effective Date.
11.2 Subject to the limitations of this Section 11.2, the
Board may at any time suspend or terminate the Plan, and may amend it from time
to time in such respects as the Board may deem advisable; provided, however, the
Board shall not amend the Plan in the following respects without the approval of
shareholders then sufficient to approve the Plan in the first instance:
44
(a) To materially increase the benefits accruing to
any Eligible Executive under the Plan (for example, to increase the maximum
percentage of Income Before Taxes that may be paid to an Eligible Executive
pursuant to a Performance Bonus awarded under the Plan).
(b) To materially modify the requirements as to
eligibility for participation in the Plan.
(c) To change the material terms of the performance
goal under the Plan.
11.3 No Performance Bonus may be awarded during any
suspension or after the termination of the Plan, and no amendment, suspension or
termination of the Plan shall, without the consent of the person affected
thereby, alter or impair any rights or obligations under any Performance Bonus
previously awarded under the Plan. This Plan shall terminate upon the payment or
cancellation of all of the Performance Bonuses awarded hereunder before the
Expiration Date, unless previously terminated by the Board pursuant to this
Section 11.
12. GOVERNING LAW.
The validity, interpretation and effect of this Plan, and the rights of
all persons hereunder, shall be governed by and determined in accordance with
the laws of Delaware, other than the choice of law rules thereof.
* * * * *
This Plan was duly approved by the Board at a meeting held on the _____
day of February, 2003 and by the shareholders of Webster at a meeting held on
the _____ day of _________________, 2003.
-------------------------------
Secretary
45
WEBSTER FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Webster Financial Corporation ("Webster" or
the "Corporation") hereby appoints Joel S. Becker, John J. Crawford, and C.
Michael Jacobi, or any of them, with full power of substitution in each, as
proxies to cast all votes which the undersigned shareholder is entitled to cast
at the annual meeting of shareholders (the "Annual Meeting") to be held at 4:00
p.m., local time, on Thursday, April 24, 2003, at the Courtyard by Marriott, 63
Grand Street, Waterbury, Connecticut, and at any adjournments of the meeting,
upon the following matters. The undersigned shareholder hereby revokes any proxy
or proxies heretofore given.
This proxy will be voted as directed by the undersigned shareholder.
UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
THE NOMINEES LISTED IN PROPOSAL 1; FOR THE AMENDMENTS TO THE 1992 STOCK OPTION
PLAN (PROPOSAL 2); FOR THE APPROVAL OF THE QUALIFIED PERFORMANCE-BASED
COMPENSATION PLAN (PROPOSAL 3); AND FOR THE RATIFICATION OF WEBSTER'S
APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL 4); AND IN ACCORDANCE WITH THE
DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS AS TO ANY OTHER MATTERS.
The undersigned shareholder may revoke this proxy at any time before it is voted
by delivering either a written notice of revocation of the proxy or a duly
executed proxy bearing a later date to the Senior Vice President, Investor
Relations of the Corporation, by re-voting by telephone or on the Internet, or
by attending the Annual Meeting and voting in person. The undersigned
shareholder hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement.
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS
IN THE ACCOMPANYING ENVELOPE.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
ANNUAL MEETING OF SHAREHOLDERS OF
WEBSTER FINANCIAL CORPORATION
APRIL 24, 2003
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible, or
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call, or
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
COMPANY NUMBER ______________
ACCOUNT NUMBER ______________
CONTROL NUMBER IS ______________
DO NOT RETURN YOUR PROXY CARD IF YOU VOTE BY TELEPHONE OR INTERNET
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
|X| Please mark your votes as in this example.
1. To elect three directors to serve for three-year terms (Proposal 1).
FOR WITHHOLD AUTHORITY NOMINEES: ROBERT A. FINKENZELLER
all nominees listed to vote for all ROGER A. GELFENBIEN
nominees listed at right MICHAEL G. MORRIS
[ ] [ ]
WITHHOLD AUTHORITY to vote for the following nominees only:
(write the name of the nominee(s) in the space below).
--------------------------------------------------------------------
2. To amend Webster's 1992 Stock Option Plan to increase the number of
shares of Common Stock available for issuance thereunder and to
extend the term of the Plan (Proposal 2).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve the Qualified Performance-Based Compensation Plan for
an additional five year term (Proposal 3).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To ratify the appointment by the Board of Directors of the firm of
KPMG LLP as independent auditors of Webster for the fiscal year
ending December 31, 2003 (Proposal 4).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. The Proxies are authorized to vote upon any other business that
properly comes before the Annual Meeting or any adjournments of the
meeting, in accordance with the determination of a majority of
Webster's Board of Directors.
To change the address on your account, please check the box at
right and indicate your new address in the address space above.
Please note that changes to the registered names(s) on the account
may not be submitted via this method. [ ]
Date: , 2003
------------------------------------------------ -------------
SIGNATURE(S) OF SHAREHOLDER(S) OR AUTHORIZED REPRESENTATIVE(S)
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.