Delaware		6021		06-1187536
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

Stuart G. Stein, Esq. R. Daniel Keating, Esq. Hogan & Hartson L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004 Telephone: (202) 637-8575 Facsimile: (202) 637-5910		Ronald H. Janis, Esq. Pitney Hardin LLP 7 Times Square New York, NY 10036 Telephone: (212) 297-5800 Facsimile: (212) 682-3485

Proposed Maximum

Proposed Maximum

Amount of

Title of Each Class of

Amount

Offering

Aggregate

Registration

Securities to be Registered

to be Registered(1)

Price per Share

Offering Price(2)(3)

Fee(3)

Common Stock, par value $.01 per share

4,009,000

N/A

$173,435,625

$18,558

(1)	The maximum number of shares of common stock of Webster Financial Corporation issuable to stockholders of NewMil Bancorp, Inc. upon consummation of the merger of NewMil with and into Webster.
(2)	Estimated pursuant to Rule 457(f)(1) under the Securities Act of 1933, as amended, solely for the purpose of determining the registration fee, based on the aggregate market value of the shares of NewMil Bancorp, Inc. common stock expected to be exchanged in connection with the merger and computed by multiplying (a) the average of the high and low prices of NewMil Bancorp, Inc. common stock as reported on The Nasdaq National Market on June 22, 2006 by (b) 4,357,679, representing the maximum number of shares of NewMil Bancorp, Inc. common stock expected to be exchanged in connection with the merger.
(3)	Calculated by multiplying (a) the proposed maximum aggregate offering price for all securities to be registered ($173,435,625) by (b) 0.000107.

The information in this proxy statement/ prospectus is not complete and may be changed. Webster Financial may not issue the shares of its common stock to be issued in connection with the merger described in this proxy statement/prospectus until the registration statement filed with the SEC is effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Any representation to the contrary is a criminal offense.

WEBSTER FINANCIAL CORPORATION		NEWMIL BANCORP, INC.
Webster Plaza		19 Main Street
Waterbury, CT 06702		New Milford, CT 06776
(203) 465-4364		(860) 355-7600
PROSPECTUS		PROXY STATEMENT

		Page
QUESTIONS AND ANSWERS ABOUT THE MERGER			ii
SUMMARY			1
RISK FACTORS			10
STOCKHOLDER MEETING			11
Matters to be Considered at the Special Meeting			11
Record Date and Voting			11
Required Vote; Revocability of Proxies			12
Solicitation of Proxies			12
THE MERGER			13
The Parties			13
Background of the Merger			13
Reasons for the Merger and Recommendation of the NewMil’s Board of Directors			15
Purpose and Effects of the Merger			18
Structure			18
Merger Consideration			18
Surrender of Stock Certificates			19
Regulatory Approvals			20
Conditions to the Merger			21
Conduct of Business Pending the Merger			22
Third Party Proposals			24
Expenses; Breakup Fee			25
Fairness Opinion of Keefe, Bruyette & Woods, Inc.			25
Representations and Warranties			31
Termination and Amendment of the Merger Agreement			33
Material Federal Income Tax Consequences			34
Accounting Treatment			36
Resales of Webster’s Common Stock Received in the Merger			36
Employee Benefits			36
Support Agreements			37
Interests of NewMil Directors and Executive Officers in the Merger That are Different Than Yours			37
DESCRIPTION OF CAPITAL STOCK AND COMPARISON OF STOCKHOLDER RIGHTS			38
Webster’s Common Stock			38
NewMil’s Common Stock			39
Webster’s Preferred Stock			39
Certificate of Incorporation and Bylaw Provisions			39
Applicable Law			44
ADDITIONAL INFORMATION			45
WHERE YOU CAN FIND MORE INFORMATION			45
INCORPORATION OF DOCUMENTS BY REFERENCE			46
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			47
STOCKHOLDER PROPOSALS			47
OTHER MATTERS			48
EXPERTS			48
LEGAL MATTERS			48
Appendix A
Agreement and Plan of Merger			A-1
Appendix B
Opinion of Keefe, Bruyette & Woods, Inc.			B-1
Opinion of Hogan & Hartson L.L.P.
Opinion of Hogan & Hartson L.L.P
Consent of KPMG LLP
Consent of PricewaterhouseCoppers LLP
Consent of Keefe, Bruyette & Woods, Inc.
Form of NewMil Proxy Card

 

QUESTIONS AND ANSWERS ABOUT THE MERGER

Q:		Why are Webster and NewMil proposing the transaction?
A:		Webster and NewMil have a shared commitment to providing exceptional service to customers. NewMil believes that the proposed merger will enable NewMil to align with a partner to provide its customers access to a broader array of financial services while continuing to provide the same level of customer satisfaction from the same employees their customers have come to know and trust.
Q:		What will I receive in the merger?
A:		If the merger agreement is approved and the merger is subsequently completed, NewMil stockholders will receive $41.00 in Webster common stock for each share of NewMil common stock so long as Webster’s average stock price is between $44.85 and $50.25 based upon the average closing price on The New York Stock Exchange of shares of Webster common stock for the ten consecutive trading days ending on the third trading day prior to the date the merger is consummated. If the average closing price of Webster common stock is less than $44.85, the exchange ratio will be fixed at .9142. If the average closing price of Webster common stock is greater than $50.25, the exchange ratio will be fixed at .8159. Webster will pay cash instead of issuing fractional shares. See “Merger Consideration” on page 19.
Q:		What happens to my future dividends?
A:		Before the merger takes place, NewMil expects to continue to pay regular quarterly cash dividends on its common stock, which currently are $0.22 per share. After the merger, any dividends will be based on what Webster pays. Webster presently pays dividends on its common stock at a quarterly dividend rate of $0.25 per share.
Q:		How many votes are needed to approve the merger?
A:		A majority of the outstanding shares of NewMil’s common stock must vote in favor of the merger agreement in order for it to be adopted and for the merger to be approved. Accordingly, the failure to vote on this proposal will have the same effect as a vote AGAINST the proposal.
		Each of the executive officers and directors of NewMil individually has entered into an agreement with Webster to vote his or her shares of NewMil common stock in favor of the merger agreement and against any competing proposal. These stockholders held approximately [     ]% of NewMil’s outstanding common stock as of [          ], 2006.
Q:		What do I need to do now?
A:		Just indicate on the enclosed proxy card how you want to vote, and sign, date and return it as soon as possible in the enclosed envelope. If you sign and send in your proxy card and do not indicate how you want to vote, your proxy card will be voted FOR approval of the merger agreement and the merger. Not returning a proxy card, or not voting in person at the special meeting or abstaining from voting, will have the same effect as voting AGAINST the merger agreement and the merger.
		You can choose to attend the special meeting and vote your shares in person instead of completing and returning a proxy card.
		Do not send your NewMil stock certificates with your proxy card.
Q:		Can I change my vote after I have mailed my signed proxy card?
A:		Yes. There are three ways for you to revoke your proxy and change your vote. First, you may send a written notice to the Secretary of NewMil at 19 Main Street, New Milford, CT 06776 stating that you would like to revoke your proxy. Second, you may complete and submit a new proxy card. Third, you may vote in person at the special meeting. If you have instructed a broker to vote your shares, you must follow directions received from your broker to change your vote.
Q:		Do I have appraisal rights?
A:		Holders of Webster common stock and NewMil common stock do not have appraisal rights in connection with the merger.

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Q:		Who can vote?
A:		You are entitled to vote at the NewMil special meeting if you owned shares of NewMil common stock at the close of business on [          ], 2006. You will have one vote for each share of NewMil common stock that you owned at that time.
Q:		If my shares are held in street name by my broker, will my broker vote my shares for me?
A:		Your broker does not have discretion to vote your shares for you on the merger proposal. Your broker will be able to vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares, following the directions your broker provides. Shares that are not voted because you do not instruct your broker effectively will be counted as votes AGAINST the merger.
Q:		When will the merger close?
A:		The merger is expected to close in the fourth quarter of 2006.
Q:		What do I do with my stock certificates?
A:		Please DO NOT send your stock certificates with your proxy card. If you are a holder of NewMil common stock you will receive written instructions from the exchange agent after the merger is completed on how to exchange your stock certificates for the merger consideration.
Q:		What needs to be done to complete the merger?
A:		Completion of the merger depends on a number of conditions being met. In addition to compliance with the merger agreement, these include:
		1. Approval of the merger agreement and merger by NewMil stockholders.
		2. Approval of the merger by federal and state regulatory authorities.
		3. Approval by The New York Stock Exchange of listing of Webster’s common stock to be issued in the merger.
		4. Receipt by NewMil of an opinion of counsel stating that the merger will qualify as a “reorganization” for United States federal income tax purposes.
		5. The absence of any injunction or legal restraint blocking the merger or government proceedings trying to block the merger.
		6. The effectiveness of the registration statement of which this proxy statement/prospectus is a part.
		When the law permits, Webster or NewMil could decide to complete the merger even though one or more of these conditions hasn’t been met. We can’t be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.
Q:		What will happen to NewMil Bank’s bank branches following the merger?
A:		After the merger, Webster expects to consolidate up to five of NewMil’s and Webster’s branch banking locations based on the close proximity of these branches. The remaining NewMil branches will be operated as branches of Webster Bank.
Q:		Who should I call with questions or to obtain copies of this proxy statement/prospectus and other documents?
A:		B. Ian McMahon

		A copy of the merger agreement including each of its exhibits and the other documents described in this proxy statement/prospectus will be provided to you promptly without charge if you call or write to Terrance K. Mangan, Senior Vice President, Investor Relations, Webster Financial Corporation, Webster Plaza, Waterbury, Connecticut 06702, telephone (203) 578-2318. Such documents were also filed as exhibits to the registration statement filed with the SEC to register the shares of Webster’s common stock to be issued in the merger. See “Where You Can Find More Information” on page 45.

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1

2

3

4

5

6

7

8

9

 

RISK FACTORS

10

 

STOCKHOLDER MEETING

 

Matters to be Considered at the Special Meeting

	•	the proposal to approve and adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement, and
	•	any other business that properly comes before the special meeting, or any adjournments or postponements of the meeting, including, without limitation, a motion to adjourn the special meeting to another time and/or place for the purpose of soliciting additional proxies in order to approve the merger agreement and the merger or otherwise.

 

Record Date and Voting

11

 

Required Vote; Revocability of Proxies

	•	delivering to the Secretary of NewMil, 19 Main Street, New Milford, Connecticut 06776, a written notice of revocation before the special meeting,
	•	delivering to NewMil a duly executed proxy bearing a later date before the special meeting, or
	•	attending the special meeting and voting in person.

 

Solicitation of Proxies

12

 

THE MERGER

 

The Parties

 

Background of the Merger

13

14

 

Reasons for the Merger and the Recommendation of NewMil’s Board of Directors

15

	•	Merger consideration to NewMil stockholders.  NewMil’s Board of Directors took into account the proposed merger consideration for NewMil stockholders. NewMil’s Board of Directors assessed the merger consideration in light of the following factors:

	•	Based upon its discussions with other potential acquirors, the Board of Directors believed the consideration represented the best value reasonably available;
	•	The price to be paid per share of NewMil’s common stock in the transaction represented a premium of 42% over the closing sale price of NewMil’s common stock on April 24, 2006 (the trading day immediately prior to the public announcement of the transaction);
	•	The potential for Webster stock price appreciation;
	•	The multiples, including price to book value, price to earnings and price to tangible book value, price to assets and core deposit premium implied by Webster’s proposal compared favorably to those which may be realized in comparable transactions;
	•	The dramatically increased trading liquidity of the larger Webster franchise; and
	•	The belief that the transaction will be tax-free to NewMil stockholders.

	•	Financial strength.  NewMil’s Board of Directors considered the expected financial strength of the combined company following the merger, the ability of the combined company to realize cost savings and to take advantage of various business opportunities with greater financial resources.
	•	Financial analyses and KBW opinion.  NewMil’s Board of Directors evaluated the financial analyses and financial presentation of MG Advisors as well as the written opinion of KBW dated April 24, 2006, that, as of such date and based on and subject to the considerations set forth in its opinion, the merger consideration was fair, from a financial point of view, to holders of NewMil common stock. See “Fairness Opinion of Keefe, Bruyette & Woods, Inc.” beginning on page 25.

	•	Comparison of prospects of the merged entity and a stand alone strategy.  NewMil’s Board of Directors considered what it believed to be a number of strategic advantages of the merger in comparison to a stand alone strategy. Webster’s franchise represents one of the most attractive commercial banking franchises in the greater New York metropolitan area.
	•	Enhanced regional retail banking presence.  NewMil’s Board of Directors considered that a merger with Webster would create a strong regional banking franchise by combining Webster’s strong banking presence in the northeastern United States with NewMil’s strong retail banking franchise in the western Connecticut area.
	•	Attractive markets.  NewMil’s Board of Directors noted the complementary nature of NewMil’s and Webster’s geographic markets for consumer financial service products, which it believed to present a desirable strategic opportunity for geographic expansion and diversification.

	•	Ability to integrate.  NewMil’s Board of Directors took note of the integration record of Webster. In this regard, NewMil’s Board of Directors noted that customer and employee disruption from consolidations in the transition phase should not be significant due to the complementary nature of the markets served by NewMil and Webster.

16

	•	Similarity of business strategy, philosophy and culture.  NewMil’s Board of Directors noted that NewMil and Webster share a similar commitment to their stockholders, customers, employees and the communities they serve and are both focused on maintaining strong profitability with high asset quality, which NewMil’s Board of Directors believed would facilitate the process of integration of these two organizations.

	•	Continued independence.  NewMil’s Board of Directors considered the substantial consolidation that is occurring among depository institutions, the high level of competition in banking, and financial services generally, and the increasing importance of scale in the industry. NewMil’s Board of Directors further considered the risks and potential problems involved in a strategy involving growth and the fact that a number of NewMil’s major competitors have substantially greater market share in NewMil’s market area.
	•	Superiority of value.  NewMil’s Board of Directors noted that based on its own experience and the advice of MG Advisors, the probability of receiving a higher value offer from another competing franchise in the near term was low.
	•	Alternative strategic transactions.  NewMil’s Board of Directors also noted that, while the merger agreement prohibits NewMil from seeking alternative transactions, it permits NewMil to consider and react appropriately to alternative combination proposals made on an unsolicited basis and that the termination fee should not unreasonably deter another bidder.

	•	Its knowledge of Webster’s business, operations, financial condition, earnings, asset quality and prospects;
	•	Its review of the reports of management and outside advisors concerning the operations, financial condition and prospects of Webster.
	•	Its review with its legal advisors of the provisions of the merger agreement. Some of the features of the merger agreement that NewMil’s Board of Directors considered are:

	•	The formula by which the merger consideration will be adjusted in the event Webster’s pre-closing stock price is above or below certain levels.
	•	The high level of probability that the transaction will close.
	•	Its ability to comply with its fiduciary duties if NewMil receives a superior acquisition proposal; and

	•	The challenges of integrating the businesses and operations of two unique financial institutions;
	•	The possibility that anticipated transaction synergies, including anticipated cost savings, revenue enhancements and growth prospects, would not be achieved or would be achieved later than planned;
	•	The requirement to pay Webster a $8.75 million termination fee plus expenses in certain circumstances;
	•	The possibility that Webster’s base period trading price falls below $44.85, which would result in a decline in the value of the merger consideration to be received by NewMil stockholders;
	•	The risks associated with possible delays in obtaining necessary regulatory and stockholder approvals; and

17

 

 

NewMil’s Board of Directors realized that there can be no assurance about future results, including results expected or considered in the factors listed above. However, the Board of Directors concluded that the potential positive factors outweighed the potential risks of consummating the merger.

 

The foregoing discussion of the factors considered by the NewMil Board of Directors in evaluating the merger agreement is not intended to be exhaustive, but rather, includes all material factors considered by the NewMil Board of Directors. In reaching its decision to approve the merger agreement and the merger, the NewMil Board of Directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The NewMil Board of Directors considered all these factors as a whole, and overall considered them to be favorable to, and to support, its determination.

 

The purpose of the merger is to enable Webster to acquire the assets and business of NewMil through the merger of Webster and NewMil. After the merger, Webster expects to consolidate up to five of NewMil’s and Webster’s branch banking locations based on the close proximity of these branches. The remaining NewMil branches will be operated as branches of Webster Bank.

 

Webster expects to achieve reductions in the current operating expenses of NewMil upon the consolidation of NewMil Bank’s operations into Webster Bank. Upon completion of the merger, except as discussed below, the issued and outstanding shares of NewMil’s common stock automatically will be converted into the merger consideration. See “Merger Consideration” on page 19.

 

NewMil will merge with and into Webster, with Webster surviving following the merger. Prior to the consummation of the merger, Webster and NewMil will cause Webster Bank and NewMil Bank to enter into a merger agreement providing for the merger of NewMil Bank with and into Webster Bank, with Webster Bank being the surviving bank. When the merger takes place, except as discussed below, each issued and outstanding share of NewMil’s common stock will be converted into the right to receive shares of Webster’s common stock based on the merger consideration, as described below. Cash will be paid instead of fractional shares of Webster common stock. Shares of NewMil’s common stock held as treasury stock or held directly or indirectly by NewMil, Webster or any of their respective subsidiaries, other than trust account shares and shares related to a previously contracted debt, will be canceled and shall cease to exist.

 

Webster and NewMil expect that the merger will take place in the fourth quarter of 2006, after the receipt of all required regulatory and stockholder approvals and the expiration of all regulatory waiting periods. If the merger does not take place by December 31, 2006, the merger agreement may be terminated by either party unless both parties agree to extend it, provided, however, that if regulatory approval or the stockholder meeting is pending, the termination date shall automatically be extended for an additional 30 days.

 

The merger agreement provides that NewMil stockholders will have the right, with respect to each of their shares of NewMil common stock, to receive $41.00 in Webster common stock for each share of NewMil common stock so long as Webster’s average stock price is between $44.85 and $50.25 based upon the average closing price on The New York Stock Exchange of shares of Webster common stock for the ten consecutive trading days ending on the third trading day prior to the date the merger is consummated. If the average closing price of Webster common stock is less than $44.85, the exchange ratio will be fixed at .9142. If the average closing price of Webster common stock is greater than $50.25, the exchange ratio will be fixed at .8159.

NewMil Stock Options.  Upon completion of the merger, each NewMil stock option which is outstanding and unexercised immediately before the merger, shall be automatically converted into an option to purchase shares of Webster common stock in an amount and at an exercise price determined on the following basis, and as otherwise subject to the terms of the 2004 Amended and Restated Stock Option and Incentive Plan for Officers and Key Employees and the 2004 Amended and Restated Stock Option Plan for Outside Directors:

 

 

The adjustment will be made in a manner consistent with Section 424(a) of the Internal Revenue Code of 1986, as amended (the “Code”). The duration and other terms of the NewMil options will otherwise be unchanged except that all references to NewMil in any of the NewMil stock plans (and corresponding references in any option agreement documenting such option) shall be deemed to be references to Webster.

 

Certificates for fractions of shares of Webster’s common stock will not be issued. In lieu of fractional shares, a NewMil stockholder will be entitled to receive an amount of cash equal to the fraction of a share of Webster’s common stock to which the stockholder would otherwise be entitled multiplied by the average of the daily closing prices per share for Webster’s common stock for the five consecutive trading days immediately preceding, but not including, the trading day before the closing date of the merger.

 

The conversion of NewMil’s common stock into merger consideration will occur automatically upon completion of the merger. Under the merger agreement, after the effective time of the merger, Webster will cause its exchange agent to pay the “purchase price” to each NewMil stockholder who surrenders the appropriate documents to the exchange agent. In this document, we use the term “purchase price” to refer to the (i) shares of Webster’s common stock and (ii) any cash to be paid instead of a fraction of a share of Webster’s common stock, payable to each holder of NewMil’s common stock.

 

Webster will deposit with the exchange agent the certificates representing Webster’s common stock and cash to be issued to NewMil stockholders in exchange for NewMil’s common stock. As soon as practicable after the completion of the merger but no later than ten business days, the exchange agent will mail to NewMil stockholders a letter of transmittal, together with instructions for the exchange of their NewMil stock certificates for the merger consideration. Upon surrendering his or her certificate(s) representing shares of NewMil’s common stock, together with the signed letter of transmittal, the NewMil stockholder shall be entitled to receive (i) certificate(s) representing the number of whole shares of Webster’s common stock determined in accordance with the exchange ratio, and (ii) a check representing the amount of cash in lieu of fractional shares. NewMil stockholders will not be paid dividends or other distributions declared after the merger with respect to any Webster common stock into which their shares have been converted until they surrender their NewMil stock certificates for exchange. No interest will be paid or accrue to NewMil stockholders on the cash in lieu of fractional shares or unpaid dividends and distributions, if any. After the effective time of the merger, there will be no further transfers of NewMil common stock. NewMil stock certificates presented for transfer after the completion of the merger will be canceled and exchanged for the merger consideration.

 

If your stock certificates have been lost, stolen or destroyed, you will have to prove your ownership of these certificates and certify that they were lost, stolen or destroyed before you receive any consideration for

your shares. Upon request, American Stock Transfer & Trust Company will send you instructions on how to provide evidence of ownership.

 

If any certificate representing shares of Webster’s common stock is to be issued in a name other than that in which the certificate for shares surrendered in exchange is registered, or cash is to be paid to a person other than the registered holder, it will be a condition of issuance or payment that the certificate so surrendered be properly endorsed or otherwise be in proper form for transfer and that the person requesting the exchange either:

 

 

Any portion of the purchase price made available to the exchange agent that remains unclaimed by NewMil stockholders for six months after the effective time of the merger will be returned to Webster. Any NewMil stockholder who has not exchanged shares of NewMil’s common stock for the purchase price in accordance with the merger agreement before that time may look only to Webster for payment of the purchase price for these shares and any unpaid dividends or distributions after that time. Nonetheless, Webster, NewMil, the exchange agent or any other person will not be liable to any NewMil stockholder for any amount properly delivered to a public official under applicable abandoned property, escheat or similar laws.

 

For the merger of Webster Bank and NewMil Bank to take place, we must receive approvals of the Office of the Comptroller of the Currency, referred to in this section as the “OCC,” and the Connecticut Commissioner of Banking. In this section, we refer to these approvals as the “required regulatory approvals.” Webster and NewMil have agreed to cooperate to obtain the required regulatory approvals.

 

Webster Bank has filed with the OCC an application for approval of the merger of Webster Bank and NewMil Bank, and received the required approval of the OCC on          , 2006. We refer to that merger in this section as the “bank merger.” The bank merger is subject to the approval of the OCC under the National Bank Merger and Consolidation Act, the Bank Merger Act provisions of the Federal Deposit Insurance Act and related OCC regulations. These approvals require consideration by the OCC of various factors, including assessments of the competitive effect of the contemplated transaction, the managerial and financial resources and future prospects of the resulting institution, the effectiveness of the institutions involved in combating money laundering, and the effect of the contemplated transaction on the convenience and needs of the communities to be served. The Community Reinvestment Act of 1977, commonly referred to as the “CRA,” also requires that the OCC, in deciding whether to approve the bank merger, assess the records of performance of Webster Bank and NewMil Bank in meeting the credit needs of the communities they serve, including low and moderate income neighborhoods. As part of the review process, it is not unusual for the OCC to receive protests and other adverse comments from community groups and others. Webster Bank currently has an “outstanding” CRA rating from the OCC. NewMil Bank currently has an “outstanding” CRA rating from the FDIC. The OCC regulations require publication of notice and an opportunity for public comment concerning the applications filed in connection with the bank merger, and authorize the OCC to hold informal and formal meetings in connection with the applications if the OCC, after reviewing the applications or other materials, determines it desirable to do so or receives a request for an informal meeting. The bank merger may not take place for a period of 15 to 30 days following OCC approval, during which time the Department of Justice has authority to challenge the merger on antitrust grounds. The OCC will determine the precise length of the period in consultation with the Department of Justice. The commencement of an antitrust action would stay the effectiveness of any approval granted by the OCC unless a court specifically orders otherwise. If the Department of Justice does not start a legal action during the waiting period, it may not challenge the transaction afterward, except in an action under Section 2 of the Sherman Antitrust Act.

 

Conditions to the Merger

	•	the merger agreement and the merger are approved and adopted by the affirmative vote of the holders of at least a majority of the outstanding shares of NewMil’s common stock;
	•	all required regulatory approvals are obtained and remain in full force and effect or are waived, all statutory waiting periods related to these approvals have expired, and none of the regulatory approvals contains a non-customary condition that materially alters the benefits for which Webster bargained for in the merger agreement;
	•	the Registration Statement, which includes this proxy statement/prospectus, is declared effective by the SEC, and no stop order suspending the effectiveness of the Registration Statement is issued and no proceedings for that purpose are initiated or threatened by the SEC; and
	•	no order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the merger or any of the other transactions contemplated by the merger agreement from taking place is in effect, and no statute, rule, regulation, order, injunction or decree is enacted, entered, promulgated or enforced by any governmental entity which prohibits, restricts or makes illegal the consummation of the merger.

	•	the representations and warranties of NewMil contained in the merger agreement are true and correct in all material respects as of the date of the merger agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the closing date of the merger as though made on and as of the closing date;

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	•	NewMil performs in all material respects all covenants and agreements contained in the merger agreement to be performed by NewMil at or prior to the closing date;
	•	NewMil obtains the consents, approvals or waivers of each person whose consent or approval is required in order to permit the succession by Webster Bank pursuant to the merger to any obligation, right or interest of NewMil Bank under any loan or credit agreement, note, mortgage, indenture, lease, license or other agreement or instrument, except where the failure to obtain consents, approvals or waivers will not have a material adverse effect on NewMil Bank or Webster Bank;
	•	NewMil obtains the consents, approvals or waivers of each person whose consent or approval is required in order to permit the succession by Webster pursuant to the merger to any obligation, right or interest of NewMil under any loan or credit agreement, note, mortgage, indenture, lease, license or other agreement or instrument, except where the failure to obtain consents, approvals or waivers will not have a material adverse effect on NewMil or Webster;
	•	no changes, other than changes contemplated by the merger agreement, in the business, operations, condition (financial or otherwise), assets or liabilities of NewMil or any of its subsidiaries (regardless of whether or not such events or changes are inconsistent with the representations and warranties given in the merger agreement), have occurred that individually or in the aggregate have or would reasonably be expected to have a material adverse effect on NewMil; and
	•	NewMil delivers to Webster a “comfort letter” from PricewaterhouseCoopers LLP, NewMil’s independent registered public accounting firm, with respect to NewMil’s financial data presented in the proxy statement/prospectus.

	•	the representations and warranties of Webster contained in the merger agreement are true and correct in all material respects as of the date of the merger agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the closing date of the merger as though made on and as of the closing date;
	•	Webster performs in all material respects all covenants and agreements contained in the merger agreement required to be performed by it at or prior to the closing date;
	•	the consent, approval or waiver of each person whose consent or approval is required in connection with the transactions contemplated by the merger agreement under any loan or credit agreement, note, mortgage, indenture, lease, license or other agreement or instrument to which Webster is a party or is otherwise bound shall be obtained;
	•	the shares of Webster common stock to be issued in the merger are approved for listing on The New York Stock Exchange; and
	•	NewMil shall have received an opinion of counsel stating that the merger will qualify as a “reorganization” for United States federal income tax purposes.

 

Conduct of Business Pending the Merger

	•	declaring any dividends or other distributions on its capital stock other than regular quarterly cash dividends on NewMil’s common stock not to exceed $0.22 per share;
	•	splitting, combining or reclassifying any of its capital stock;

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	•	repurchasing, redeeming or otherwise acquiring any shares of the capital stock of NewMil or any securities convertible into or exercisable for any shares of the capital stock of NewMil;
	•	issuing or authorizing or proposing the issuance of any securities, other than the issuance of additional shares of NewMil’s common stock upon the exercise or fulfillment of rights or options issued or existing under NewMil’s stock option plan in accordance with their present terms;
	•	amending its certificate of incorporation or bylaws;
	•	making capital expenditures in excess of $50,000, individually, or $350,000 in the aggregate;
	•	entering any new line of business;
	•	acquiring either an equity interest in or the assets of other business organizations except in connection with foreclosures, settlements or troubled loan restructurings, or in the ordinary course of business consistent with prudent banking practices;
	•	taking any action that may result in any of its representations and warranties contained in the merger agreement becoming untrue or in any of the applicable conditions contained in the merger agreement not being satisfied, except, in each case, as required by applicable law;
	•	changing its methods of accounting in effect at December 31, 2005, except as required by changes in regulatory or generally accepted accounting principles;
	•	adopting, amending, renewing or terminating any plan or agreement between NewMil or its subsidiaries and one or more of its current or former directors or officers, except as required by applicable law or the merger agreement or in order to maintain qualification pursuant to the Code;
	•	increasing the compensation of any director, executive officer or employee who is party to an employment or severance agreement or paying any benefit not required by any plan or agreement;
	•	entering into, modifying or renewing any arrangements between NewMil or its subsidiaries and their employees who are not directors or executive officers and who are not party to an employment or severance agreement that provide for the payment of compensation or benefits in excess of 3.5% of such employee’s base salary except NewMil may increase the salary of one or more such employees by more than 3.5% up to $50,000 in the aggregate;
	•	entering into, modifying or renewing any agreement or arrangement providing for the payment of compensation or benefits to any director, executive officer or employee who is party to an employment or severance agreement;
	•	hiring any new employee at an annual rate of compensation in excess of $30,000;
	•	paying the expenses of any directors or employees for attending out-of-state conventions or similar meetings;
	•	promoting any employee to a rank higher than vice president;
	•	paying any retention or other bonuses to any employees other than annual bonuses in accordance with NewMil’s bonus plan and past practice;
	•	incurring any indebtedness for borrowed money or assuming the obligations of a third party, except for short-term borrowings with a maturity of six months or less or borrowings under NewMil’s existing lines of credit in the ordinary course consistent with past practices;
	•	selling, purchasing, opening or closing any banking or other office, except as permitted under the merger agreement;
	•	making any equity investments in real estate, other than in connection with foreclosures or settlements in lieu of foreclosures or troubled loan restructurings, in the ordinary course of business consistent with past banking practices;

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	•	making any new loans or modifying the terms of any existing loans with any affiliated person of NewMil other than in the ordinary course of business;
	•	incurring any deposit liabilities, other than in the ordinary course of business consistent with past practice, which would change the risk profile of NewMil based on its existing deposit and lending policies;
	•	purchasing any loans or selling, purchasing or leasing any real property other than in a manner consistent with past practices;
	•	originating (a) any loans except in accordance with existing NewMil lending policies and practices, (b) residential mortgage loans in excess of $1,000,000, (c) 30 year residential mortgage loans without interest rate, terms, appraisal, and underwriting that do not make them immediately available for sale in the secondary market, (d) unsecured consumer loans in excess of $25,000, (e) commercial business loans in excess of $2,500,000 as to any loan or $5,000,000 in the aggregate as to related loans or loans to related persons, (f) commercial real estate first mortgage loans in excess of $2,500,000 as to any loan or $5,000,000 in the aggregate as to related loans or loans to related borrowers, or (g) modifications and/or extensions of any commercial business or commercial real estate loans in the amounts set forth in the preceding clauses (e) and (f) other than in the ordinary course of business consistent with past practice; provided, however, that any loans made by NewMil in excess of $500,000 shall be reviewed and approved in advance by the Chief Executive Officer of NewMil;
	•	making any investments other than in overnight federal funds and U.S. Treasuries that have a maturity date that does not exceed three months;
	•	taking any actions that would prevent the transactions contemplated by the merger agreement from qualifying as a reorganization under section 368(a) of the Code;
	•	selling or purchasing any mortgage loan servicing rights; or
	•	agreeing or committing to do any of the actions listed above.

 

Third Party Proposals

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Expenses; Breakup Fee

 

Fairness Opinion of Keefe, Bruyette & Woods, Inc.

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	•	reviewed, among other things,

	•	the merger agreement,
	•	Annual Reports to stockholders and Annual Reports on Form 10-K of Webster,
	•	Quarterly Reports on Form 10-Q of Webster,
	•	Annual Reports to stockholders and Annual Reports on Form 10-K of NewMil, and
	•	Quarterly Reports on Form 10-Q of NewMil;

	•	held discussions with members of senior management of NewMil and Webster regarding

	•	past and current business operations,
	•	regulatory relationships,
	•	financial condition, and
	•	future prospects of the respective companies;

	•	reviewed the market prices, valuation multiples, publicly reported financial condition and results of operations for NewMil and Webster and compared them with those of certain publicly traded companies that KBW deemed to be relevant;
	•	compared the proposed financial terms of the merger with the financial terms of certain other transactions that KBW deemed to be relevant; and
	•	performed other studies and analyses that it considered appropriate.

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	•	the merger will be completed substantially in accordance with the terms set forth in the merger agreement;
	•	the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement are true and correct;
	•	each party to the merger agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents;
	•	all conditions to the completion of the merger will be satisfied without any waivers; and
	•	in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, will be imposed that will have a material adverse effect on the future results of operations or financial condition of the combined entity or the contemplated benefits of the merger, including the cost savings and related expenses expected to result from the merger.

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Associated Banc-Corp		FirstMerit Corporation
BancorpSouth, Inc.		Fulton Financial Corporation
BOK Financial Corporation		Huntington Bancshares Incorporated
City National Corporation		Mercantile Bankshares Corporation
Colonial BancGroup, Inc.		Sky Financial Group, Inc.
Commerce Bancorp, Inc.		South Financial Group, Inc.
Commerce Bancshares, Inc.		Synovus Financial Corp.
Compass Bancshares, Inc.		TCF Financial Corporation
First Citizens BancShares, Inc.		Valley National Bancorp
First Horizon National Corporation		Zions Bancorporation

Bancorp Rhode Island, Inc.		Lakeland Bancorp, Incorporated
Cambridge Bancorp		Merchants Bancshares, Inc.
Century Bancorp, Inc.		Northway Financial, Inc.
Enterprise Bancorp, Inc.		Slade’s Ferry Bancorp
First Morris Bank & Trust		U.S.B. Holding Co., Inc.
Greater Community Bancorp		Wainwright Bank & Trust Company
Hudson Valley Holding Corp.		Washington Trust Bancorp, Inc.
Independent Bank Corp.		Westbank Corporation

American Bancorp of New Jersey, Inc.		LSB Corporation
Benjamin Franklin Bancorp, Inc.		MASSBANK Corp.
Berkshire Hills Bancorp, Inc.		New Hampshire Thrift Bancshares, Inc.
Brookline Bancorp, Inc.		PennFed Financial Services, Inc.
Central Bancorp, Inc.		Provident New York Bancorp
Hingham Institution for Savings

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																		NewMil
														NewMil Bank				Thrift Peer
						Webster Peer								Peer Group				Group
		Webster				Group Median				NewMil				Median				Median
Core Return on Average Assets			0.97%				1.31%				0.95%				0.88%				0.75%
Core Return on Average Equity			10.39%				14.37%				15.25%				11.26%				6.32%
Net Interest Margin			3.26%				3.70%				3.30%				3.66%				3.10%
Fee Income/Revenue			29.4%				31.4%				13.7%				15.9%				10.2%
Efficiency Ratio			61.5%				56.8%				60.3%				67.9%				64.0%

																		NewMil
														NewMil Bank				Thrift Peer
						Webster Peer								Peer Group				Group
		Webster				Group Median				NewMil				Median				Median
Equity / Assets			9.16%				9.13%				6.07%				7.42%				11.69%
Tangible Equity / Tangible Assets			5.48%				6.69%				5.19%				6.18%				8.47%
Loans / Deposits			104.2%				96.2%				80.8%				82.7%				105.3%
Securities / Assets			20.1%				20.6%				36.9%				30.9%				21.6%
Loan Loss Reserves / Loans			1.22%				1.18%				0.99%				1.23%				0.91%
NPA/Loans + OREO			0.53%				0.37%				0.06%				0.34%				0.06%
Net Charge Offs / Average Loans			0.05%				0.17%				0.03%				0.03%				0.01%

																		NewMil
														NewMil Bank				Thrift Peer
						Webster Peer								Peer Group				Group
		Webster				Group Median				NewMil				Median				Median
One Year Price Change			9.1	%			10.8	%			10.1	%			1.4	%			8.1	%
Market / Book Value			1.53	x			2.08	x			2.23	x			1.68	x			1.37	x
Market / Tangible Book Value			2.62	x			3.04	x			2.63	x			2.10	x			1.67	x
Price / 2006 GAAP ESP			14.3	x			14.8	x			13.8	x			15.8	x			19.8	x
Price / 2007 GAAP ESP			13.1	x			13.5	x			13.3	x			15.0	x			20.4	x
Dividend Yield			2.3	%			2.9	%			3.0	%			2.6	%			2.1	%
2006 Dividend Payout			32.4	%			42.6	%			40.4	%			41.3	%			26.2	%

Acquiror		Acquiree
Partners Trust Financial Group, Inc. (MHC)		BSB Bancorp, Inc.
Banknorth Group, Inc.		CCBT Financial Companies, Inc.
Banknorth Group, Inc.		First & Ocean BanCorp
Citizens Financial Group, Inc.		Community Bancorp, Inc.

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Acquiror		Acquiree
Hudson City Bancorp, Inc.		Sound Federal Bancorp, Inc.
Berkshire Hills Bancorp Inc.		Woronoco Bancorp, Inc.
Banknorth Group, Inc.		BostonFed Bancorp, Inc.
First Niagara Financial Group, Inc.		Hudson River Bancorp, Inc.
Provident Bancorp, Inc.		Warwick Community Bancorp, Inc.
Banknorth Group, Inc.		Foxborough Savings Bank
Seacoast Financial Services Corp.		Abington Bancorp, Inc.
Webster Financial Corporation		FIRSTFED AMERICA BANCORP, INC.
First Niagara Financial Group, Inc.		Troy Financial Corporation
New Haven Savings Bank		Alliance Bancorp of New England, Inc.
New Haven Savings Bank		Connecticut Bancshares, Inc.
Sovereign Bancorp, Inc.		First Essex Bancorp, Inc.
Citizens Financial Group, Inc.		Port Financial Corp.

						Bank Comparable				Thrift Comparable
		Webster / NewMil				Transactions Median				Transactions Median
Price / LTM EPS			19.5	x			22.8	x			20.4	x
Price / Estimated EPS			18.2	x			18.3	x			18.6	x
Price / Book Value			3.16	x			2.53	x			2.12	x
Price / Tangible Book Value			3.73	x			2.60	x			2.54	x
Core Deposit Premium			23.0	%			17.5	%			20.8	%

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