1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12

Webster Financial Corporation

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(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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WEBSTER FINANCIAL CORPORATION
[LOGO]

March 21, 2001

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 26, 2001, 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 the 1992 Stock Option Plan to increase
the number of shares of common stock available for issuance under the plan, to
provide for discretionary grants of options to non-employee directors and to
discontinue automatic grants of options to non-employee directors; (iii) to
approve and adopt Webster's 2001 Directors Retainer Fees Plan; (iv) to ratify
the appointment of KPMG LLP as independent auditors of Webster for the year
ending December 31, 2001; 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 2000 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 26, 2001
------------------------

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 26, 2001, 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;

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 under the plan, to provide for discretionary grants of options to
non-employee directors and to discontinue automatic grants of options to
non-employee directors;

3. Approval of 2001 Directors Retainer Fees Plan. To approve and
adopt Webster's 2001 Directors Retainer Fees Plan;

4. Ratification of Appointment of Auditors. 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, 2001; 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 February 28,
2001 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, 2001

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 26, 2001
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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 26, 2001, 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, 2001.

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 under the plan, to provide for discretionary grants
of options to non-employee directors and to discontinue automatic grants of
options to non-employee directors (Proposal 2); (iii) to approve and adopt
Webster's 2001 Directors Retainer Fees Plan (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, 2001 (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 TO THE 1992 STOCK OPTION PLAN, FOR APPROVAL OF WEBSTER'S 2001
DIRECTORS RETAINER FEES PLAN AND FOR RATIFICATION OF THE APPOINTMENT OF
WEBSTER'S INDEPENDENT AUDITORS. Except for procedural matters incident to the
conduct of the Annual Meeting, the Board of Directors does not know of any
matters other than those described in the Notice of Annual Meeting that are to
come before the Annual Meeting. If any other matters are properly brought before
the Annual Meeting, the persons named in the proxy will vote the shares
represented by such proxy on such matters as determined by a majority of the
Board of Directors. The 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 by delivering either a written
notice of revocation of the proxy or a duly executed proxy bearing a later date
to James M. Sitro, Senior Vice President, Investor Relations, Webster Financial
Corporation, Webster Plaza, Waterbury, Connecticut 06702, by re-voting by
telephone or on the Internet, or 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

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
D. F. King & 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 February 28, 2001 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 12,437 holders of record of the 49,104,678 shares
of Common Stock then outstanding and eligible to be voted at the Annual Meeting.

VOTING BY PROXY HOLDERS. If your Common Stock is held by a broker, bank
or other nominee (i.e., in "street name"), you will 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 in
one of three ways:

- by using the toll-free telephone number listed on the proxy card,
- by using the Internet website listed on the proxy card, or
- by signing, dating and mailing the proxy card in the enclosed
postage-paid envelope.

Whichever of these methods you select to transmit your instructions, the proxy
holders will vote your Common Stock in accordance with those 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 26, 2001. 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 26, 2001. 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, the approval of Webster's 2001 Directors Retainer Fees
Plan 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

approve Webster's 2001 Directors Retainer Fees Plan and to ratify the
appointment of the Corporation's independent auditors. A majority of all
outstanding voting stock, either present in person or by proxy, and voting on
the amendment is necessary to constitute a quorum at the Annual Meeting for the
amendment to the 1992 Stock Option Plan. Assuming the presence of a quorum at
the Annual Meeting, a majority of the votes cast is required to approve the
amendment to the 1992 Stock Option Plan. 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, 2000 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 2000 FISCAL YEAR WITH THE SECURITIES AND EXCHANGE COMMISSION. SHAREHOLDERS
MAY OBTAIN, FREE OF CHARGE, A COPY OF THE FORM 10-K BY WRITING TO JAMES M.
SITRO, SENIOR VICE PRESIDENT, INVESTOR RELATIONS, WEBSTER FINANCIAL CORPORATION,
WEBSTER PLAZA, WATERBURY, CONNECTICUT 06702. OUR 2000 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.

Under the terms of Webster's April 1998 acquisition of Eagle Financial
Corp. ("Eagle"), Webster invited three former Eagle directors, Messrs. Richard
H. Alden, George T. Carpenter and John F. McCarthy, to serve as members of the
Board of the Corporation for terms expiring in 2001, 1999 and 2000,
respectively. The Board of Directors renominated Mr. Carpenter at the 1999
Annual Meeting and renominated Mr. McCarthy at the 2000 Annual Meeting. Mr.
Alden, whose term expires at the 2001 Annual Meeting, has decided to retire from
the Board as of the date of the Annual Meeting. Under the terms of Webster's
December 1999 acquisition of New England Community Bancorp, Inc., Webster
invited a former director of New England Community Bancorp, Dr. P. Anthony
Giorgio, to serve as a member of the Board of the Corporation for a term
expiring in 2001. Dr. Giorgio will be retiring from the Board as of the date of
the Annual Meeting but will continue to serve as a member of Webster Bank's
Board of Directors. Webster invited Edgar C. Gerwig, the former Chairman,
President and Chief Executive Officer of MECH Financial, Inc., to serve as a
member of the Board of the Corporation for a term expiring in 2002 under the
terms of Webster's June 2000 acquisition of MECH Financial, Inc. Harry P.
DiAdamo, who joined the Boards of Directors of the Corporation and Webster Bank
in January 1997 and whose terms were to expire at the Annual Meeting, resigned
from those positions effective February 26, 2001. The Board of Directors greatly
appreciates his service and contributions to the success of the Corporation and
Webster Bank.

The Board of Directors currently consists of 14 members, and is divided
into three classes, which are composed of four, six and four 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. After the Annual Meeting, the Board
of Directors will consist of 13 members, divided into three classes of three,
six and four directors, respectively.

INFORMATION AS TO NOMINEES AND OTHER DIRECTORS

The following table sets forth the names of the Board of Directors'
nominees for election as directors and the current directors of Webster whose
offices continue beyond the Annual Meeting. Also set forth is certain other
information with respect to each such person's age at December 31, 2000, 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
DECEMBER 31, 2000 SINCE OF TERM WEBSTER BANK
----------------- ----- ------- ------------

DIRECTOR NOMINEES FOR
A THREE-YEAR TERM:
- ------------------

Joel S. Becker 52 1986 2001 Director

William T. Bromage 55 -- -- President of Webster
and Webster Bank,
Vice Chairman and
Director of Webster
Bank (and Director
Nominee of Webster)

James C. Smith 51 1986 2001 Chairman,
Chief Executive
Officer and Director

CONTINUING DIRECTORS:

Achille A. Apicella 57 1997 2002 Director

O. Joseph Bizzozero, Jr. 66 1986 2002 Director

George T. Carpenter 60 1998 2002 Director

John J. Crawford 56 1996 2002 Director

Robert A. Finkenzeller 50 1986 2003 Director

Edgar C. Gerwig 59 2000 2002 Director

C. Michael Jacobi 58 1993 2002 Director

John F. McCarthy 60 1998 2003 Director

Michael G. Morris 54 2000 2003 Director

Sister Marguerite Waite, C.S.J. 62 1990 2003 Director
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ACHILLE A. APICELLA, C.P.A., is President of Apicella, Testa & Company
P.C., a certified public accounting firm in Shelton, Connecticut. He served as a
director of DS Bancor, Inc. and Derby Savings Bank, which were acquired by
Webster in January 1997.

JOEL S. BECKER is Chairman of the Board and Chief Executive Officer of
Torrington Supply Co., Inc., a Waterbury-based wholesale distributor of
plumbing, heating, and industrial pipe valve and fitting supplies to contractors
and industry.

O. JOSEPH BIZZOZERO, JR. is a practicing physician and has been President
of Bizzozero Assoc. P.C. since September 1996. Prior to September 1996, he was
President and Chief Executive Officer of the BCB Medical Group. Dr. Bizzozero
has been affiliated with Waterbury Hospital since 1969 and is an Associate
Clinical Professor of Medicine at the Yale University School of Medicine.

WILLIAM T. BROMAGE is President of Webster and President, Vice Chairman
and a director of Webster Bank, positions he has held since April 2000. Mr.
Bromage has been nominated for election as a director of Webster at the Annual
Meeting. 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.

JOHN J. CRAWFORD is President, Chief Executive Officer and a director of
Aristotle Corporation, a New Haven, Connecticut based education training
company, a position he has held since October 1992. 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.

ROBERT A. FINKENZELLER is President of Eyelet Crafters, Inc., a
Waterbury-based company that manufactures deep drawn metal parts for the
cosmetics, writing instrument and drapery hardware fields.

EDGAR C. GERWIG served as President, Chief Executive Officer and Chairman
of the Board of MECH Financial, Inc. and Mechanics Savings Bank, which were
acquired by Webster in June 2000. Subsequent to that acquisition through
December 2000, Mr. Gerwig served as a consultant to Webster.

C. MICHAEL JACOBI is Chairman and Interim President of KINO Holdings,
Inc., a privately held company headquartered in Garret, Indiana engaged in
manufacturing and distribution of electronic training products for sporting dogs
and companion pets under the brand names Innotek and Invisible Fence. Mr. Jacobi
has been associated with this company since August 2000. From October 1999 until
April 2000 he was Chairman of Timex Watches Limited (India), a publicly held
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. He
is a director of Corrections Corporation of America, a publicly held company
headquartered in Nashville, Tennessee engaged in the ownership and operation of
correctional facilities. Mr. Jacobi is a certified public accountant and has
served on corporate boards in Europe and Asia.

JOHN F. MCCARTHY has been the President of J&M Sales Co., Inc., a
Torrington, Connecticut based beverage distributorship since 1970 and he has
been the Vice President of Thames River Recycling Co. in Middletown, Connecticut
since 1979. 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.

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 Connecticut Yankee
Atomic Power Company, the Institute of Nuclear Power Operations, the Nuclear
Energy Institute, the Edison Electric Institute, the Association of Edison
Illuminating Companies, Nuclear Electric Insurance Limited and the Connecticut
Business and Industry Association. Mr. Morris is also a regent of Eastern
Michigan University.

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 and Chief Operating Officer 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 is a member of the Board of Directors 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,
serves as a director of the Connecticut Business and Industry Association and is
active in numerous community and economic organizations.

SISTER MARGUERITE WAITE, C.S.J., is President, Chief Executive Officer
and Treasurer of St. Mary's Hospital, Waterbury, Connecticut. Prior to her
election as President in 1986, Sister Marguerite Waite was Vice President and
Chief Operating Officer of St. Mary's Hospital.

CERTAIN BOARD COMMITTEES; NOMINATIONS BY SHAREHOLDERS

The Board of Directors has appointed a standing Audit Committee that
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. A copy of the Audit Committee's charter is attached at
the end of this Proxy Statement. During 2000, the Audit Committee held seven
meetings. The members of the Audit Committee currently are Messrs. Jacobi
(Chairman), Apicella, Giorgio and McCarthy.

The Board of Directors has appointed a Personnel Resources Committee that
reviews employee compensation on an annual basis and makes recommendations to
the full Board regarding compensation. The Personnel Resources Committee also
makes recommendations to the Stock Option Committee concerning long-term
incentive awards. All recommendations of the Personnel Resources Committee
regarding the compensation of executive officers (other than long-term incentive
awards, which are acted on by the Stock Option Committee) are approved by
Webster's Board of Directors which has ultimate responsibility over such
matters. During 2000, the Personnel

Resources Committee held two meetings. The members of the Personnel Resources
Committee currently are Messrs. Crawford (Chairman) and Becker, Dr. Bizzozero
and Messrs. Carpenter and Morris.

The Stock Option Committee makes final determinations concerning the
granting of stock options and restricted stock under Webster's 1992 Stock Option
Plan and administers Webster's Qualified Performance-Based Compensation Plan.
During 2000, the Stock Option Committee held seven meetings. The members of the
Stock Option Committee, which consists of all non-employee outside directors of
the Corporation, currently are Messrs. Crawford (Chairman), Alden, Apicella and
Becker, Dr. Bizzozero, Messrs. Carpenter, Finkenzeller, Gerwig, Giorgio, Jacobi,
McCarthy and Morris and Sister Marguerite Waite.

During 2000, Webster held nine 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 director served during the period that the individual
served.

The Board has appointed a Corporate Governance Committee that has overall
responsibility for recommending corporate governance process and board
operations for the Corporation. The Corporate Governance Committee identifies
director candidates, reviews the qualifications and experience of each person
considered as a nominee for election as a director, and makes initial
recommendations to the Board of Directors, which serves as the Nominating
Committee. During 2000, the Corporate Governance Committee held four meetings.
The members of the Corporate Governance Committee are Messrs. Smith (Chairman),
Alden, Finkenzeller and Gerwig and Sister Marguerite Waite.

The Board of Directors acts as the full Nominating Committee for
selecting nominees for election as directors. Webster's Bylaws also permit
shareholders eligible to vote at the Annual Meeting to make nominations for
directors, but only if such nominations are made pursuant to timely notice in
writing to the Secretary of Webster. To be timely, notice must be delivered to,
or mailed to and received at, the principal executive offices of Webster not
less than 30 days nor more than 90 days prior to the date of the meeting,
provided that at least 45 days' notice or prior public disclosure of the date of
the Annual Meeting is given or made to shareholders. If less than 45 days'
notice or prior public disclosure of the date of the Annual Meeting is given or
made to shareholders, notice by the shareholder to be timely must be received by
Webster not later than the close of business on the 15th day following the day
on which such notice of the date of the Annual Meeting was mailed or such public
disclosure was made. Public disclosure of the date of the Annual Meeting was
made by the issuance of a press release on February 2, 2001 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 6, 2001. 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.

MANAGEMENT

EXECUTIVE OFFICERS

The following table sets forth certain information for the four executive
officers of Webster, each of whom is elected to serve for a one-year period.
Each officer currently serves pursuant to an employment agreement with Webster
and Webster Bank. See "Employment Agreements" below.

AGE AT POSITIONS HELD WITH WEBSTER
NAME DECEMBER 31, 2000 AND WEBSTER BANK
- ---- ----------------- -----------------

James C. Smith 51 Chairman, Chief Executive Officer
and Director

William T. Bromage 55 President of Webster and Webster Bank,
Vice Chairman and Director of Webster Bank
(and Director Nominee of Webster)

Peter K. Mulligan 56 Senior Executive Vice President --
Retail Banking

Ross M. Strickland 51 Executive Vice President -- Consumer Finance

Information concerning the principal occupation of these executive
officers of Webster and Webster Bank during at least the last five years is set
forth below.

JAMES C. SMITH is Chairman, Chief Executive Officer and a director of
Webster and Webster Bank, having been elected Chairman in 1995 and Chief
Executive Officer in 1987. Mr. Smith joined Webster Bank in 1975, and was
elected President and Chief Operating Officer of Webster Bank in 1982 and of
Webster in 1986. Mr. Smith is a member of the Board of Directors of the American
Bankers Association. Mr. Smith served as President of Webster and Webster Bank
until April 2000. 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,
serves as a director of the Connecticut Business and Industry Association and is
active in numerous community and economic organizations.

PETER K. MULLIGAN is Senior Executive Vice President -- Retail Banking of
Webster and Webster Bank, positions he has held since June 2000. From 1995 until
June 2000, he served as Executive Vice President -- Consumer and Small Business
Banking of Webster and Webster Bank. Prior to joining Webster Bank, he was the
Director of Product Management, Retail Sales and Insurance at The Bank of Boston
from 1992 to 1995, and served as the Executive Vice President of

12
the Banking Division at The Society for Savings, Hartford, Connecticut from 1988
until 1992. Society was acquired by The Bank of Boston in 1992.

ROSS M. STRICKLAND is Executive Vice President -- Consumer Finance of
Webster and Webster Bank, positions he has held since July 2000. From 1991 to
July 2000, Mr. Strickland served as Executive Vice President -- Mortgage Banking
of Webster Bank. Prior to joining Webster Bank, he was Executive Vice President
of Residential Lending with the former Northeast Savings, F.A., Hartford,
Connecticut, from 1988 to 1991. Prior to joining Northeast Savings, he was
National Sales Manager, Credit Resources Group, for Shearson Lehman Brothers.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by Webster or
Webster Bank for services rendered in all capacities to Webster and its
subsidiaries during 2000, 1999 and 1998 to the Chief Executive Officer of
Webster and to each of the other three most highly compensated executive
officers of Webster serving at December 31, 2000 (the "named executive
officers"). Webster has not granted any stock appreciation rights to its
executive officers.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
-------------------
NAME AND
PRINCIPAL POSITIONS YEAR SALARY ($) BONUS ($) (a)
- ------------------- ---- ---------- -------------

James C. Smith...................... 2000 $595,000 $ 660,400
Chairman, 1999 572,000 751,900
Chief Executive Officer 1998 550,000 1,424,000 (d)
and a Director

William T. Bromage.................. 2000 $329,423 (f) $327,600
President 1999 233,077 265,400
1998 210,000 351,000 (d)

Peter K. Mulligan................... 2000 $231,854 (f) $213,800
Senior Executive Vice President -- 1999 208,000 189,600
Retail Banking 1998 200,000 432,000 (d)

Ross M. Strickland.................. 2000 $216,300 $157,100
Executive Vice President -- 1999 208,000 209,900
Consumer Finance 1998 200,000 548,000 (d)

LONG-TERM
COMPENSATION AWARDS
----------------------------

RESTRICTED SECURITIES ALL
NAME AND STOCK UNDERLYING OTHER COMP-
PRINCIPAL POSITIONS AWARD(s) (b) OPTIONS (#) ENSATION ($)(c)
- ------------------- ------------ ----------- ---------------

James C. Smith...................... 12,400 247,925 $70,449
Chairman, 19,300 44,700 $52,482
Chief Executive Officer -- 400,000 (e) 45,467
and a Director

William T. Bromage.................. 6,000 129,800 $28,912
President 5,950 23,550 22,052
-- 8,750 (e) 36,172

Peter K. Mulligan................... 3,425 69,450 $24,170
Senior Executive Vice President -- 3,500 8,150 21,324
Retail Banking -- 8,350 (e) 25,072

Ross M. Strickland.................. 1,500 7,500 $30,697
Executive Vice President -- 3,500 8,150 26,836
Consumer Finance -- 8,350 (e) 25,037

- ---------------------------

(a) Cash bonuses awarded to the named executive officers for fiscal 2000 were
composed of: (i) a bonus paid under Webster's Qualified Performance-Based
Compensation Plan or (ii) a bonus paid under Webster's Economic Value
Added ("EVA") Incentive Plan. Under the Qualified Performance-Based
Compensation Plan Mr. Smith was paid a bonus of $660,400. Messrs. Bromage,
Mulligan and Strickland were awarded EVA bonuses of $327,600, $213,800 and
$157,100 respectively. The following table shows the calculations of
bonuses paid under the two plans.

2000 BONUSES
------------
(DOLLARS IN THOUSANDS)
(PAID) (PAID)
BEGINNING EARNED (PAID) 1/3 OF TOTAL REMAINING
NAME BANK BONUS TOTAL BANK TARGET BONUS REMAINING BANK PAID BANK
---- ------------- -------- ---------- ------------ -------------- -------- ----------

James C. Smith $472.8 $436.5 $909.3 $535.5 $124.9 $660.4 $249.0
William T. Bromage 179.2 285.5 464.7 258.8 68.8 327.6 137.1
Peter K. Mulligan 98.1 193.0 291.1 175.0 38.8 213.8 77.3
Ross M. Strickland 138.6 51.4 190.0 140.6 16.5 157.1 32.9

In any given year, the maximum bonus payment is the officer's target
amount (percentage of base salary) plus one third of the cumulative
bonuses in excess of the target. The remaining amount becomes the
beginning bank for the following year.

The general terms of the Qualified Performance-Based Compensation Plan
and The EVA Incentive Plan (including the bonus bank and a definition
thereof) are described below in "Personnel Resources Committee Report on
Executive Compensation."

(b) Granted under the 1992 Stock Option Plan. Dividends are paid on a
quarterly basis.

(c) 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 for Mr. Smith. For 2000 matching
contributions made by Webster Bank to the 401(k) Plan on behalf of
Messrs. Smith, Bromage, Mulligan and Strickland were $5,250 each. In
addition, for 2000, Messrs. Smith, Bromage, Mulligan and Strickland were
allocated 133 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 $3,765. In 2000, Messrs. Smith, Bromage,
Mulligan and Strickland received cash dividends on restricted stock of
$34,321, $4,649, $2,726 and $9,681 respectively. In 2000, Webster Bank
also allocated $12,494, $4,448, $1,628 and $1,200 to the supplemental
matching contributions accounts of Messrs. Smith, Bromage, Mulligan and
Strickland, respectively, pursuant to the Webster Bank nonqualified
supplemental retirement plan.

(d) Includes a bonus paid under Webster's 1996-1998 Performance Incentive
Plan. At December 31, 2000, Mr. Smith held 53,338 shares of restricted
stock, 20,850 shares of which were granted under Webster's 1996-1998
Performance Incentive Plan that were not vested as of that date and 788
shares of which were granted under Webster's 1994-1996 Performance
Incentive Plan. At December 31, 2000, Mr. Strickland held 16,728 shares
of restricted stock, 11,728 of which were granted under Webster's
1996-1998 Performance Incentive Plan that were not vested as of that
date. For Messrs. Smith and Strickland, these bonus amounts under
Webster's 1996-1998 Performance Incentive Plan include the value of
shares of restricted stock awarded in lieu of a cash payment. Additional
shares of restricted stock held as of December 31, 2000 are listed in the
Summary Compensation Table under Restricted Stock Awards.

(e) Restated to reflect the two-for-one split of Webster's Common Stock in
April 1998.

(f) 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.

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 2000, none of the
executive officers elected to defer the bonus portion of his annual
compensation.

OPTION GRANTS

The following table contains information with respect to grants of stock
options to each of the named executive officers during the year ended December
31, 2000.

OPTION GRANTS DURING 2000

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 ($/SH) DATE PRESENT VALUE ($) (d)
- ---- --------------- -------------- ------------ ---- ---------------------

James C. Smith................. 61,975 7.85% $22.81 10/23/10 $ 565,212
............................... 185,950 (c) 23.55 22.81 10/23/10 1,695,864

William T. Bromage............. 10,000 1.27% $21.88 4/27/10 $ 87,500
............................... 29,950 3.79 22.81 10/23/10 273,144
............................... 89,850 (c) 11.38 22.81 10/23/10 819,432

Peter K. Mulligan.............. 17,350 2.20% $22.81 10/23/10 $158,232
............................... 52,100 (c) 6.60 22.81 10/23/10 475,152

Ross M. Strickland............ 7,500 0.95% $22.81 10/23/10 $ 68,400
...............................

- ---------------------------
(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 in full after three years following the
date of grant.

(c) The special stock option grant was recommended by the Personnel Resources
Committee to recognize increased responsibilities due to Webster's
reorganization and to strengthen long-term ties to the Corporation.

(d) 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 2000
and the value of all unexercised options held by each of such individuals at
December 31, 2000.

AGGREGATED OPTION EXERCISES IN 2000
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, 2000 (#) DECEMBER 31, 2000 ($)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (a)
- ---- --------------- ------------- ------------------------- -----------------------------

James C. Smith.......... -- -- 707,500/292,625 $4,412,686/ $1,528,307
William T. Bromage...... -- -- 37,000/162,100 $ 250,562/ $ 817,119
Peter K. Mulligan....... -- -- 46,200/85,950 $ 454,008/ $ 427,121
Ross M. Strickland...... -- -- 88,240/24,000 $1,381,019/ $ 86,396

- -------------------------------

(a) Based on the closing sales price of Webster Common Stock on the Nasdaq
National Market on December 29, 2000 of $28.31, less the exercise price,
of all unexercised stock options having an exercise price less than such
market value.

RETIREMENT PLANS

Webster Bank maintains a defined benefit pension plan (the "Pension
Plan") for eligible employees of Webster Bank. The Pension Plan is a qualified
plan under the Internal Revenue Code of 1986, as amended (the "Code"), and
complies with the requirements of the Employee Retirement Income Security Act of
1974, as amended. All employees of Webster Bank are eligible to participate in
the Pension Plan upon attaining age 21 and completing one year of service.

Benefits under the Pension Plan are funded solely by contributions made
by Webster Bank. Under the Pension Plan's benefit formula, a participant's
monthly normal retirement benefit will equal the sum of: (a) his or her accrued
benefit as of December 31, 1986 (adjusted through August 31, 1996 to reflect
certain future increases in compensation), plus (b) the sum of 2% of the
participant's monthly compensation for each year of credited service beginning
on or after January 1, 1987. 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") for certain management
and other highly compensated employees who are also participants in the Pension
Plan to provide supplemental retirement income benefits which are not currently
available because annual compensation in excess of $160,000 (subject to cost of
living increases) may not be used in the calculation of retirement benefits
under the Code and because pension benefits are currently subject to a maximum
of $130,000 (subject to cost of living increases). Benefits under the
Supplemental Plan are payable in monthly installments. The Supplemental Plan
also provides certain management and other highly compensated employees who are
participants in the 401(k) Plan with supplemental matching contributions. See
"Executive Compensation -- Summary Compensation Table" above.

The estimated annual benefits payable from the Pension Plan upon
retirement at normal retirement age for Messrs. Smith, Bromage, Mulligan and
Strickland are $101,090, $49,930, $48,510 and $77,500, respectively. In
addition, the estimated annual supplemental retirement income benefits payable
to Messrs. Smith, Bromage, Mulligan and Strickland under the Supplemental Plan
are $241,840, $56,040, $30,070 and $40,580 respectively.

COMPENSATION OF DIRECTORS

During 2000, each non-employee director of Webster received an annual
retainer of 605 shares of Webster Common Stock with an aggregate value of
$15,000 at the date of grant pursuant to the Directors Retainer Fees Plan, as
amended, adopted by shareholders at the 1996 Annual Meeting (the "Fees Plan").
Under the Fees Plan, each non-employee director is granted shares of Common
Stock equal to the annual retainer (currently $15,000) divided by the average
quarterly value as of the grant date, on an annual basis. The average quarterly
value is based on the average of the closing prices of Common Stock of the four
calendar quarters preceding the grant date, which is the date of each annual
meeting of shareholders. Shares of Common Stock granted under the Fees Plan are
subject to vesting requirements and other substantial risks of forfeiture. There
are no more shares of Common Stock available under the current Directors
Retainer Fees Plan. At the Annual Meeting, shareholders will consider approving
Webster's 2001 Directors Retainer Fees Plan, which provides for the payment of
annual retainer fees to non-employee directors in shares of Common Stock. See
"Approval of Webster's 2001 Directors Retainer Fees Plan".

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 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. Chairpersons of the Audit Committee and the Personnel Resources
Committee also received an annual retainer of $2,000. Non-employee directors of
Webster receive no additional compensation for serving as directors or committee
members of Webster Bank. Employee directors of Webster receive no additional
compensation for serving as directors or committee members of Webster or its
subsidiaries.

Directors are eligible to participate in Webster Bank's nonqualified
deferred compensation plan. Under the terms of the plan, director participants
may elect to defer all or any portion of their directors' fees. Deferred amounts
are credited by Webster Bank to bookkeeping reserve accounts for each
participant. Such accounts, plus accrued interest, are payable upon termination
of service, disability or death of the participant, in a lump sum or in ten
annual installments at the participant's election.

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. At the Annual Meeting, shareholders will
consider amending the 1992 Stock Option Plan to increase the number of shares of
Common Stock available for issuance under the plan, to provide for discretionary
grants of options to non-employee directors and to discontinue automatic grants
of

options to non-employee directors. See "Amendment to the 1992 Stock Option
Plan." If shareholders approve this proposal, Mr. Becker will not be granted an
option to purchase 4,000 shares upon election by the shareholders at the Annual
Meeting for a three-year term, but he will receive a discretionary option grant
under the 1992 Stock Option Plan of 2,000 shares. If the amendment is not
approved, he will receive an option for 4,000 shares upon election at the Annual
Meeting.

EMPLOYMENT AGREEMENTS

Webster and Webster Bank entered into employment agreements with Messrs.
Smith, Bromage, Mulligan and Strickland effective January 1, 1998. Webster also
entered into change of control employment agreements with those officers
effective December 15, 1997. Mr. Smith serves as Chairman and Chief Executive
Officer of both Webster and Webster Bank; Mr. Bromage serves as President of
Webster and President, Vice Chairman and a director of Webster Bank; Mr.
Mulligan serves as Senior Executive Vice President -- Retail Banking of both
Webster and Webster Bank; and Mr. Strickland serves as Executive Vice President
- -- Consumer Finance of both Webster and Webster Bank.

Under their respective employment agreements, each executive officer may
receive annual cost of living increases and may also receive a merit increase as
determined by the Boards of Directors of Webster and Webster Bank. Each
executive officer is eligible to receive discretionary bonuses as may be
authorized by the Boards of Directors of Webster and Webster Bank and shall be
eligible to participate in any plan of Webster or Webster Bank relating to stock
options, stock purchases, pension, thrift, employee stock ownership, group life
insurance and medical coverage or other retirement or employee benefits that
Webster or Webster Bank has adopted or may adopt for the benefit of its
executive employees. In addition, each executive officer is provided with an
automobile allowance for business use. The employment agreements provide for
initial terms of three years ending December 31, 2000 with renewals for one
additional year following each anniversary date with the approval of the Board
of Directors, unless the executive officer gives written notice to the contrary.
The employment agreements of Messrs. Smith, Bromage and Mulligan were renewed
for one additional year. Those agreements will terminate upon the "Effective
Date" of their respective change of control employment agreements, which are
discussed below. The 2001 base salaries for Messrs. Smith, Bromage, Mulligan and
Strickland are $595,000, $345,000, $250,000 and $216,300 respectively, and
remain unchanged from 2000. 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, Mulligan and Strickland, respectively, agreed that the
employment of each executive officer would continue for a period of two years
following the "Effective Date" under such 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 as the
two-year period ending on December 15, 2000, except that on December 15, 1999
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 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 EVA Incentive Plan or any
comparable bonus under any predecessor or successor plan for the last three full
fiscal years before the Effective Date. Each executive officer will be entitled
to participate in all incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer executives of Webster
and affiliated companies and the incentive, savings and retirement benefit
opportunities afforded to the executive officer shall not be less favorable than
those provided to him during the 120-day period before the Effective Date (or,
if more favorable to the executive officer, those provided generally to other
peer executives of Webster and affiliated companies). Each executive officer and
his family 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.

For purposes of the change of control employment agreements, a "change of
control" means: (1) the acquisition by any individual, entity or group (a
"Person") of beneficial ownership of 20% or more of either (i) the outstanding
shares of the Common Stock of Webster or (ii) the combined voting power of the
then outstanding voting securities of Webster entitled to vote generally in the
election of directors ("Voting Securities"), except that any such acquisition
(a) directly from Webster, (b) by Webster, (c) by any employee benefit plan or
trust of Webster or any controlled corporation, or (d) pursuant to a transaction
that complies with clauses (3)(i), (ii) and (iii) below will not constitute a
change of control; (2) individuals who, as of December 15, 1997, constituted the
Board of Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors, except that any individual becoming
a director after such date whose election, or nomination for election by the
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board of Directors; or (3)
consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of Webster or the
acquisition of assets of another entity (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the outstanding Common Stock and Voting Securities immediately before the
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock (the "Resulting Common
Stock") and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors (the "Resulting Voting
Securities"), as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns Webster or all or substantially all of Webster's
assets either directly or through one or more subsidiaries) (the "Resulting
Corporation") in substantially the same proportions as their ownership,
immediately before the Business Combination, of the outstanding Common Stock and
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan or trust of Webster or the Resulting Corporation) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then outstanding
Resulting Common Stock or the combined voting power of the Resulting Voting
Securities, except to the extent that such ownership existed before the Business
Combination and (iii) at least a majority of the members of the Board of
Directors of the Resulting Corporation were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board of Directors, providing for such

Business Combination; or (4) approval by the shareholders of Webster of a
complete liquidation or dissolution of Webster.

PERSONNEL RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Personnel Resources Committee of the Board of Directors comprises
five non-employee directors. The Committee recommends to the full Board of
Directors, which has ultimate responsibility over such matters, executive
officer salaries, bonuses and certain other forms of compensation, and
recommends to the Stock Option Committee, consisting of all disinterested
non-employee directors, long-term incentive awards. All recommendations of the
Personnel Resources Committee regarding executive officer compensation for the
2000 fiscal year were approved by the Board of Directors or the Stock Option
Committee, as the case may be.

Set forth below is a report addressing Webster's compensation policies
for fiscal year 2000 as they affected Webster's executive officers.

Compensation Policies for Executive Officers. Webster's executive
compensation policies are designed to provide competitive levels of
compensation, to assist Webster in attracting and retaining qualified executives
and to encourage superior performance. In determining levels of executive
officers' overall compensation, the Personnel Resources Committee considers the
qualifications and experience of the persons concerned, the size of the
institution and the complexity of its 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 Personnel
Resources Committee employs outside consultants and refers to published survey
data in establishing compensation.

Relationship of Performance to Executive Compensation. Compensation paid
to Webster's executive officers in 2000 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 other goals. The ultimate value of long-term incentive
compensation such as stock options and restricted stock is dependent primarily
on the performance of Webster's Common Stock. Webster's executive officers may
earn lower than average total compensation than for similar positions at
comparable financial institutions should Webster not meet its goals, and they
may earn higher than average total compensation than for similar positions when
Webster meets or exceeds its goals.

For 2000, the Personnel Resources Committee intended that total
compensation for executive officers other than the Chief Executive Officer,
excluding the special option grants, (which are discussed under "Long-Term
Incentive Compensation") be at the average for comparable financial institutions
based on their past practices, recognizing that Webster has grown responsibly
and has made significant progress in pursuit of its strategic and financial
objectives. The Corporation's total shareholder return over 5, 7 and 10 year
periods ended December 31, 2000 exceeded its peer group's performance.

Base Salary. The Personnel Resources Committee reviews executive base
salaries annually in January. Base salary is intended to signal the internal
value of the position and to track with the external marketplace. All executive
officers serve 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 2000 salary for each executive officer, the Personnel Resources
Committee considered the officer's responsibilities, qualifications and
experience, the size of the

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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
increased in 2000 due in large part to the record operating earnings for 1999,
and to the increased size and complexity of the institution. The Committee also
considered the successful acquisition and integration of Maritime Bank & Trust
Co., Village Bancorp, Inc., New England Community Bancorp, Inc. and the signing
of a definitive agreement to acquire MECH Financial, Inc.

The Economic Value Added Incentive Plan. In 1997, Webster adopted an
Economic Value Added ("EVA"(R)1) Incentive Plan ("Incentive Plan"), - the
purpose of which is to provide incentive compensation to certain key employees,
including all executive officers, in a form which relates the financial reward
to improvement in Webster's economic value. The Incentive Plan was developed
based upon the recommendations and advice of Webster's consultant, Stern Stewart
& Co., a nationally recognized financial advisory firm. In general, EVA is the
net operating profit of Webster after taxes, less a capital charge. The capital
charge is intended to represent the return expected by the providers of
Webster's capital, and is determined in consultation with Webster's financial
consultant on the basis of a formula that takes into account the risk and cost
of providing such capital. The Committee shares Stern Stewart's view that EVA
improvement is the financial performance measure most closely correlated over
time with an increase in shareholder value.

The Incentive Plan for Webster comprises senior officers, other than the
Chief Executive Officer, approved for participation by the Personnel Resources
Committee. The Personnel Resources Committee makes recommendations to the Board
of Directors for awards under the Plan.

The Incentive Plan formula calls for the bonuses of executive officers to
be determined on the basis of EVA performance for the Corporation and/or lines
of business versus previously agreed to targets. 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 EVA improvement exceeds or falls short of the
target, through the application of a bonus multiple which equals 1 when the EVA
target is met and which increases or decreases to the extent that EVA
improvement exceeds or falls short of the target. This bonus multiple is then
applied to the target bonus set in January each year, and results in a "declared
bonus" award. The declared bonus award is placed into an individual's "bonus
bank" from which that year's target bonus and one third of the remaining bonus
bank balances are paid each year. Awards to the executive officers are based 20%
to 50% on corporate EVA improvement and 50% to 80% on line of business EVA
improvement depending on the executive officer's responsibilities, except in the
case of the Chief Executive Officer, whose award is based entirely on corporate
EVA improvement. Awards for 2000 amounted to 82% of target for corporate EVA
improvement and ranged from 47% to 139% of target for the line of business EVA
improvement.

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. The Plan is designed to further the growth and profitability of
Webster by providing the Chief Executive Officer and other selected executive
officers with the opportunity to earn additional cash compensation based on
business results, thereby enabling Webster to motivate key employees to achieve
high profitability for the Corporation. The Plan is intended to satisfy the
requirements of Section 162(m) of the Code with respect to the deduction of
qualified performance-based compensation. The Chief Executive Officer was the
only participant in the Plan for 2000, and his bonus was determined based on
attainment of the designated performance objective under the Plan and corporate
EVA improvement for 2000.

- --------
1 EVA(R)is a registered trademark of Stern Stewart & Co.

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. Webster uses stock options and restricted stock
awards to provide long-term incentive compensation. The Personnel Resources
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% of the recipient's base
salary depending upon the executive officer's responsibilities. For 2000,
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 2000, 206,750 stock options were granted to Webster's
executive officers other than the Chief Executive Officer. In addition to the
annual stock option grant, two executive officers other than the Chief Executive
Officer received a special stock option grant. The special stock option grant
was recommended by the Personnel Resources Committee to recognize increased
responsibilities of the two executive officers due to Webster's reorganization
and to strengthen long-term ties to the company. The special option grants were
intended to provide a strong incentive for further attainment of above average
shareholder return.

The purpose of Webster's restricted stock awards is to attract and retain
executive officers whose actions will impact Webster's long-term operating
results and to motivate such executives by providing them with an immediate
ownership stake in the business. Recipients are paid dividends on the shares and
have voting rights. All restricted stock awards have vesting requirements of 50%
after three years and the remaining 50% after 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 2000, 10,925 shares of restricted stock were awarded to
executive officers other than the Chief Executive Officer.

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 Personnel Resources Committee, in determining the
compensation for the Chief Executive Officer, considers Webster's size and
complexity, financial condition and results and progress in meeting strategic
objectives. The Chief Executive Officer's 2000 base salary was increased by 4%
to $595,000 based on the Corporation's increase in size and complexity of
operations, its 1999 financial results and its progress in meeting strategic
objectives. Base salary for the Chief Executive Officer was at the average for
comparable financial institutions. The CEO's bonus was determined under the
Qualified Performance-Based Compensation Plan, the material terms of which were
approved by shareholders at the 1998 annual meeting. The Committee determined
that for 2000, in addition to attainment of the performance objectives under the
Plan, it would require that the corporate EVA improvement target be attained in
order for the CEO to receive a target bonus (90% of base salary) under the Plan,
subject to an overall limitation based on

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income before taxes as specified in the Plan. The CEO's bonus payment of
$660,400 for 2000 consisted of an earned bonus of $436,500 (which amounted to
82% of base salary) plus $223,900 from the bonus bank. Regarding long-term
incentive compensation, the CEO received an annual grant of 61,975 stock options
and an award of 12,400 shares of restricted stock which were made in accordance
with the Corporation's 1992 Stock Option Plan. In addition to the annual stock
option grants, the CEO received a special stock option grant of 185,950 shares.
The special stock option grant was recommended by the Personnel Resources
Committee to recognize the CEO's leadership in the growth and diversification of
the institution, in the management of its more complex operations and in the
investment of its financial and human resources. The special stock option grant
was intended to strengthen long-term ties to the company and to provide a strong
incentive for further attainment of above average shareholder return. The
Corporation's total shareholder return over 5, 7 and 10 year periods ended
December 31, 2000 exceeded its peer group's performance.

For 2000, the Personnel Resources Committee intended that total
compensation for the Chief Executive Officer, excluding the special option
grant, be at the average for comparable financial institutions based on their
past practices, recognizing that Webster has grown responsibly and has made
significant progress in pursuit of its strategic and financial 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.

Personnel Resources Committee
John J. Crawford (Chairman)
Joel S. Becker
O. Joseph Bizzozero, Jr.
George T. Carpenter
Michael G. Morris

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.

AUDIT COMMITTEE REPORT

The Corporation's Audit Committee currently has four members, Messrs.
Jacobi (Chairman), Apicella, Giorgio and McCarthy. As of the date of this Proxy
Statement, each of the Committee members is an "independent director" under the
Nasdaq Stock Market 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.

The Audit Committee has reviewed and discussed the Corporation's audited
financial statements for the fiscal year ended December 31, 2000 with Webster's
management. The Audit

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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, 2000 be included in the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 for filing with the Securities and Exchange
Commission.

Audit Committee
C. Michael Jacobi (Chairman)
Achille A. Apicella
P. Anthony Giorgio
John F. McCarthy

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."

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 $12,604. In addition, in
fiscal 2000 Webster paid Carpenter Construction management fees of $248,657 for
work which was competitively bid for renovations to other Webster properties,
$199,057 of which was paid by Carpenter Construction to subcontracting vendors.

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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, 1995 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 50 bank and thrift companies with reported market
capitalizations between $750 million and $2 billion at December 31, 2000, 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 $1.4 billion at
December 31, 2000.

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

[LINE GRAPH]

PERIOD ENDING
------------------------------------------------------------------------------------
INDEX 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- -------------------------------------------------------------------------------------------------------------------------

Webster Financial Corporation 100.00 127.44 234.76 196.55 171.58 211.72
S&P 500 100.00 122.86 163.86 210.64 254.97 231.74
SNL All Bank & Thrift Index 100.00 138.61 212.78 225.86 216.08 261.03
Peer Group 100.00 126.87 205.94 186.17 162.79 210.97

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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% 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, 2000, 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. Smith reporting
one transaction and one report for Mr. Giorgio reporting one transaction.

STOCK OWNED BY MANAGEMENT

The following table sets forth information as of February
28, 2001 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
------------ ------------------------ -----------

Richard H. Alden
Director ......................................... 67,934 *

Achille A. Apicella
Director.......................................... 32,173 *

Joel S. Becker
Director (and Director Nominee)................... 30,502 *

O. Joseph Bizzozero, Jr.
Director.......................................... 21,779 *

William T. Bromage
President (and Director Nominee).................. 57,549 *

George T. Carpenter
Director.......................................... 110,128 *

John J. Crawford
Director.......................................... 19,961 *

Robert A. Finkenzeller
Director.......................................... 17,589 *

Edgar C. Gerwig
Director.......................................... 138,106 *

P. Anthony Giorgio
Director.......................................... 8,424 *

C. Michael Jacobi
Director.......................................... 21,647 *

John F. McCarthy
Director.......................................... 78,717 *

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NUMBER OF SHARES PERCENT OF
NAME AND POSITION(s) AND NATURE OF COMMON STOCK
WITH WEBSTER BENEFICIAL OWNERSHIP (a) OUTSTANDING
------------ ------------------------ -----------

Michael G. Morris
Director ........................................ 4,605 *

Peter K. Mulligan
Senior Executive Vice President --
Retail Banking.................................... 69,088 *

James C. Smith
Chairman, Chief Executive Officer,
Director (and Director Nominee)................... 1,063,304 2.13%

Ross M. Strickland
Executive Vice President --
Consumer Finance.................................. 135,181 *

Sister Marguerite Waite, C.S.J.
Director.......................................... 12,623 *

All Directors and executive
officers as a group (17 persons).................. 1,889,310 3.77%

- ---------------

(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
February 28, 2001. 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. Alden, 273
shares; Mr. Becker, 2,016 shares; Dr. Bizzozero, 1,644 shares; Mr.
Carpenter, 3,750 shares; Mr. Gerwig, 2,246 shares; Dr. Giorgio, 1,094
shares; Mr. McCarthy, 8,851 shares; Mr. Smith, 78,778 shares; Sister
Marguerite Waite, 220 shares; and all directors and executive officers as
a group, 98,872 shares. The table also includes the following: 1,046,928
shares subject to outstanding options which are exercisable within 60
days from February 28, 2001; 133,318 shares held in the 401(k) Plan by
executive officers and one director; 2,510 shares purchased by executive
officers through the Employee Stock Purchase Plan that are held by
American Stock Transfer & Trust Company; 95,463 shares of restricted
stock that was not vested as of February 28, 2001; and 34,675 shares held
in the ESOP that have been allocated to the accounts of executive
officers and one director. 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.
Alden, 23,318 shares; Mr. Apicella, 15,322 shares; Mr. Becker, 8,400
shares; Dr. Bizzozero, 10,200 shares; Mr. Bromage, 37,000 shares; Mr.
Carpenter, 27,318 shares; Mr. Crawford, 9,334 shares; Mr. Finkenzeller,
10,200 shares; Mr. Gerwig, 3,778 shares; Dr. Giorgio, 4,000 shares; Mr.
Jacobi, 14,600 shares; Mr. McCarthy, 27,318 shares; Mr. Morris, 4,000
shares; Mr. Mulligan, 46,200 shares; Mr. Smith, 707,500 shares; Mr.
Strickland, 88,240 shares; and Sister Marguerite Waite, 10,200 shares.

- ---------------
* Less than 1% of Common Stock outstanding.

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PRINCIPAL HOLDERS OF VOTING SECURITIES OF WEBSTER

At February 28, 2001 management believed that there were no beneficial
owners of more than 5% of the outstanding Webster Common Stock.

AMENDMENT TO THE 1992 STOCK OPTION PLAN
(PROPOSAL 2)

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 available for issuance under the plan by
1,500,000 shares, from 2,961,000 to 4,461,000 shares, (ii) to provide for
discretionary grants of options to non-employee directors and (iii) to
discontinue automatic grants of options to non-employee directors. The number of
shares reserved for issuance is subject to adjustment under certain
circumstances as described below. See "Description of the Plan."

The 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 amended by the shareholders in 1994, 1996, 1998 and
2000. An amendment to the 1992 Stock Option Plan which did not require
shareholder approval were adopted in 1999. As of February 28, 2001, there were
approximately 1,884 full-time employees of the Corporation and its subsidiaries,
13 non-employee directors of the Corporation and two 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 of the Corporation believes that stock awards are
important to attract and to encourage the continued service of directors,
officers and other key employees by facilitating their acquisition and increase
of a stock interest in the Corporation. This objective is served by amending the
1992 Stock Option Plan to increase the number of shares of Common Stock
available for issuance and to provide for discretionary option grants to
non-employee directors.

DESCRIPTION OF THE PLAN

The 1992 Stock Option Plan provides for the grant of options that are
intended to qualify as "incentive stock options" under Section 422 of the Code
and the regulations promulgated thereunder to full-time employees as well as the
grant of non-qualifying options and restricted stock to directors and employees
of the Corporation and its subsidiaries. We use the term "incentive awards" to
refer to options and restricted stock. The term "non-employee directors" refers
to directors of the Corporation who are not officers or other salaried employees
of the Corporation or any subsidiary corporation. The term "subsidiary
directors" refers to directors of a subsidiary who are not non-employee
directors of the Corporation or officers or employees of the Corporation or any
of its subsidiaries.

The number of shares of Common Stock that may be issued in incentive
awards under the 1992 Stock Option Plan presently is 2,961,000 shares. As of
February 28, 2001, no shares remain available for future grants of incentive
awards under the plan. If the proposed amendment is approved, 1,500,000
additional shares will be available for issuance under the plan.

The 1992 Stock Option Plan is administered by the Personnel Resources
Committee, which consists of at least three outside directors appointed by the
Board of Directors. The Personnel Resources Committee makes recommendations to
the Stock Option Committee concerning the granting of incentive awards. The
Stock Option Committee makes all final determinations concerning the employees
of the Corporation and its subsidiaries to whom incentive awards will be
granted. The committee that administers the 1992 Stock Option Plan consists of
individuals who are

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both "outside directors" for purposes of qualified performance-based
compensation under the Code and "non-employee directors" for purposes of Rule
16b-3 of the Securities Exchange Commission.

If the proposed amendment is approved, non-employee directors will be
eligible to receive grants of non-qualifying options under the 1992 Stock Option
Plan on the same terms as are applicable to employees of the Corporation.
Currently, a non-qualifying option for 4,000 shares is granted to each
non-employee director upon election or reelection to Webster's Board of
Directors, except that, if a non-employee director is elected to the Board for
less than a three-year term, the director is entitled to receive 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. If the amendment is approved, the one non-employee
director nominee for a three-year term, Mr. Becker, will not receive
automatically an option for 4,000 shares upon his election at the Annual
Meeting, but will receive a discretionary option grant of 2,000 shares. If the
amendment is not approved, Mr. Becker will receive an option for 4,000 shares
upon election at the Annual Meeting.

The per share option exercise price under the 1992 Stock Option Plan may
not be less than 100% of the fair market value of a share 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 maximum number of shares of Common Stock that may be subject to
options granted to any employee under the 1992 Stock Option Plan in any calendar
year is 500,000 shares, subject to adjustment as described below. 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 under the 1992 Stock Option Plan after
February 23, 2008. Incentive stock options are non-transferable other than by
reason of the death of the optionee. Unless otherwise provided in the option
agreement with respect to a non-qualifying option, a non-qualifying option may
be transferred by gift to a member of the optionee's family, to a trust for the
exclusive benefit of the optionee or one or more members of his or her family or
to a combination of one or more family members and trusts. For this purpose,
family means the spouse, siblings and lineal ancestors and descendants of the
optionee.

Payment for shares purchased under the 1992 Stock Option Plan may be made
either in cash or cash equivalents or by exchanging shares of Common Stock of
the Corporation with a fair market value equal to the total option exercise
price and paying cash for any difference. Options may, if permitted by the
particular option agreement, be exercised by directing that certificates for the
shares purchased be delivered to a licensed broker as agent for the optionee,
provided that the broker tenders to the Corporation cash or cash equivalents
equal to the option exercise price plus the amount of any taxes that the
Corporation may be required to withhold in connection with the exercise of the
option.

If an employee's or subsidiary director's employment or service 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 an employee's or subsidiary
director's employment or service terminates for any reason other than death or
disability, his or her options will terminate in three months unless a different
date is provided in the option agreement. An option granted to a non-employee
director will not terminate until the expiration of the term of the option
regardless of whether the non-employee director continues to serve as a
director, except, if the proposed amendment is approved, as provided otherwise
in the option agreement with respect to that option.

Employees and subsidiary directors of the Corporation may also receive
restricted stock awards under the 1992 Stock Option Plan. The granting of
restricted stock gives the recipient

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the right to receive a specified number of shares of the Common Stock of the
Corporation contingent on payment of not less than the par value of the stock
and attainment of specified performance objectives, if any, and completion of
service requirements, if any, as the committee that administers the 1992 Stock
Option Plan shall determine and specify as a condition to making the grant. The
performance objectives under the 1992 Stock Option Plan are based on one or more
of the following performance standards: the Corporation's Common Stock price,
income, operating profit, assets and liabilities, stockholders' equity, market
share, operating revenue, operating expenses, financial ratings by outside
agencies, earnings per share, return on assets, equity or investments or EVA
improvement (as defined for purposes of the Corporation's Economic Value Added
Incentive Plan). The performance objectives are established by the committee not
later than 90 days after the beginning of the award period (or, if less, before
one-fourth of the award period has expired) and at a time when the outcome is
substantially uncertain. With respect to restricted stock that is made subject
to attainment of performance objectives, no shares may be issued unless the
committee certifies in writing that the performance objectives have been
achieved.

Unless provided otherwise in an award agreement with respect to a grant
of restricted stock, if an employee or subsidiary director becomes totally and
permanently disabled or dies while employed by or serving with the Corporation
or its subsidiaries, any shares of restricted stock granted to the employee will
vest fully, and the shares of stock represented by the grants of restricted
stock to a deceased employee will be delivered to the employee's estate. Upon
termination of employment or service of a holder of restricted stock for any
other reason, shares of restricted stock that have not vested or that remain
subject to applicable conditions and restrictions will be forfeited, unless the
committee that administers the 1992 Stock Option Plan determines otherwise.

In the case of a reorganization, merger or consolidation in which the
Corporation is the surviving corporation or a recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable in capital stock, or other increase
or decrease in such shares without receipt of consideration by the Corporation,
an adjustment will be made in the number and kinds of shares subject to the 1992
Stock Option Plan, the annual limitation on the number and kinds of shares that
may be granted under options to any employee, 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. An 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.

In the event of the dissolution or liquidation of the Corporation, upon a
merger, consolidation or reorganization in which the Corporation is not the
surviving corporation, a sale of all or substantially all of the assets of the
Corporation to another corporation, or approval by the Board of Directors of a
transaction which results in any person or entity owning 80% or more of the
total combined voting power of all classes of stock of the Corporation, the 1992
Stock Option Plan and the options issued thereunder will terminate, unless
provision is made for the continuation of the Plan and/or the assumption of the
options or for the substitution for such options of new options covering the
stock of a successor corporation or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and the per share
exercise price. If the 1992 Stock Option Plan is terminated, all outstanding
options will be exercisable in full immediately prior to the 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 Common Stock as to which incentive awards have not been granted.
However, the Corporation's shareholders must approve any amendment that would:

- materially change the requirements as to eligibility to
receive incentive awards;

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- increase the maximum number of shares in the aggregate for
which incentive awards may be granted (except for
adjustments upon changes in capitalization);
- change the minimum option price (except for adjustments
upon changes in capitalization);
- increase the maximum period during which options may be
exercised;
- extend the term of the Plan; or
- materially increase the benefits accruing to eligible
individuals under the Plan.

The Board of Directors may terminate or suspend the 1992 Stock Option
Plan at any time and the Plan will terminate automatically on February 23, 2008.
No amendment, suspension or termination of the Plan may, without the consent of
the holder, adversely affect the rights of the holder of the incentive award.

GRANTS UNDER THE PLAN

As of February 28, 2001, options to purchase 3,078,345 shares of Common
Stock (1,084,199 of which were incentive stock options and 1,994,155 of which
were non-qualifying options) and 92,717 shares of restricted stock have been
granted under the 1992 Stock Option Plan, of which 2,622,701 options and 87,217
shares of restricted stock remain outstanding. 101,785 of the outstanding
options to purchase shares of Common Stock were granted subject to shareholder
approval of the amendment to the 1992 Stock Option Plan. If this proposal is not
approved, these options will be void. The option exercise price under the 1992
Stock Option Plan may not be less than 100% of the fair market value of the
Common Stock on the date of grant of the option, or 110% in the case of an
incentive stock option granted to an optionee beneficially owning more than 10%
of the outstanding Common Stock. The table below provides information regarding
stock options and restricted stock granted as of February 28, 2001 under the
1992 Stock Option Plan to the named executive officers and to each director
nominee, to all executive officers of the Corporation as a group, to all
non-employee directors of the Corporation as a group and to all non-executive
officer employees of the Corporation and its subsidiaries as a group (including
officers who are not executive officers). The number of shares subject to the
option and the exercise price of options granted prior to the two-for-one split
of Webster's common stock in April 1998 have been adjusted to reflect the stock
split.

PLAN BENEFITS

OPTIONS
---------------------------------------------

NUMBER OF
OPTION EXERCISE SHARES OF RESTRICTED
NAME AND POSITION PRICE NUMBER OF OPTIONS (a) STOCK
----- ----------------- --------------------

James C. Smith
Chairman, Chief Executive $ 8.81 22,000 19,300 (3)
Officer and Director 10.38 32,700 12,400 (4)
(and Director Nominee) 9.25 67,300
9.94 68,800
14.06 31,200
14.00 4,600
19.09 36,900
31.75 44,000
33.75 200,000
33.88 200,000
24.63 44,700 (1)
22.81 61,975 (2)
22.81 185,950 (2)

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OPTIONS
-------------------------------------------

NUMBER OF
OPTION EXERCISE SHARES OF RESTRICTED
NAME AND POSITION PRICE NUMBER OF OPTIONS (a) STOCK
----- ----------------- --------------------

William T. Bromage
President (and Director Nominee) $ 17.75 15,000 5,950 (3)
19.10 10,000 6,000 (4)
31.75 12,000
26.50 8,750 (5)
25.50 10,000 (6)
24.63 13,550 (1)
21.88 10,000 (7)
22.81 29,950 (2)
22.81 89,850 (2)

Peter K. Mulligan
Senior Executive Vice President $ 11.25 10,000 3,500 (3)
-- Retail Banking 14.06 12,000 3,475 (4)
19.09 12,200
31.75 12,000
26.50 8,350 (5)
24.63 8,150 (1)
22.81 17,350 (2)
22.81 52,100 (2)
Ross M. Strickland
Executive Vice President $ 8.81 9,240 3,500 (3)
--Consumer Finance 10.38 10,000 1,500 (4)
9.94 11,000
14.06 12,000
19.09 12,000
31.75 12,000
26.50 8,350 (1)
24.63 8,150 (1)
22.81 7,500 (2)

Joel S. Becker $12.31 2,200 --
Director (and Director Nominee) 35.38 4,000

Executive Officer Group comprised of
the four executive officers named above
(4 persons) $23.8480 (8) 1,421,615 55,625

Non-employee Director Group $20.8404 (9) 84,512 --
(13 persons)

Non-executive Officer Employee Group $20.7487 (10) 1,416,437 31,592
(202 persons)

- ------------------------

(a) Option currently exercisable in full, unless otherwise noted.

(1) Option will become exercisable in full on December 7, 2002.

(2) Option will become exercisable in full on October 23, 2003.

(3) Restricted stock vests on December 20, 2002.

(4) Restricted stock vests 50% on October 23, 2003 and the remaining 50% on
October 23, 2005.

(5) Option will become exercisable in full on December 17, 2001.

(6) Option will become exercisable in full on September 23, 2002.

(7) Option will be exercisable in full on April 27, 2003.

(8) Weighted average exercise price of options granted to executive officers.

(9) Weighted average exercise price of options granted to non-employee
directors.

(10) Weighted average exercise price of options granted to non-executive
officer employees.

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The closing sales price of Webster's Common Stock on February 28, 2001 on
the Nasdaq National Market was $28.44.

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 exercise of an incentive option, and any gain
realized upon a disposition of shares received pursuant to the exercise of an
incentive option will be taxed as long term capital gain if the optionee holds
the shares for at least two years after the date of grant and for one year after
the date of exercise. However, the excess of the fair market value of the shares
subject to an incentive option on the exercise date over the option exercise
price will be included in the optionee's alternative minimum taxable income in
the year of exercise (except that, if the optionee is subject to certain
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. 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. The Corporation
and its subsidiaries will not be entitled to any business expense deduction with
respect to the grant or exercise of an incentive option, except as discussed
below.

For the exercise of an incentive option to qualify for the foregoing tax
treatment, the optionee generally must be an employee of the Corporation or a
subsidiary from the date the option is granted through a date within three
months before the date of exercise. In the case of an optionee who is disabled,
this three-month period is extended to one year. In the case of an employee who
dies, the three-month period and the holding period for shares received pursuant
to the exercise of the option are waived.

If all of the requirements for incentive option treatment are met except
for the special holding period rules set forth above, the optionee will
recognize ordinary income upon the disposition of the shares in an amount equal
to the excess of the fair market value of the shares at the time the option is
exercised over the option exercise price or, if less, the gain realized upon
such disposition. However if the optionee is subject to certain restrictions 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 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 and
requirements with respect to "qualified performance-based compensation."

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
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, the exchange would be treated as a
taxable disqualifying disposition of the exchanged shares, under the rules
discussed above.

Upon exercising a non-qualifying option, an optionee will recognize
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of the Common Stock on the date of exercise (except
that, if the optionee is subject to certain restrictions, 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

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complies with applicable reporting requirements and requirements with respect to
"qualified performance-based compensation," 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
non-qualifying 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.

No federal income tax consequences are incurred by the Corporation or the
participating employee at the time restricted stock is granted, so long as such
stock is subject to a substantial risk of forfeiture (generally, a requirement
that the participant perform or refrain from performing substantial services in
order to receive the stock), except that the employee may make a special tax
election within 30 days after the date of grant to report as ordinary income for
tax purposes the value of the restricted stock at the time of grant, without
regard to any service or performance objective requirement. Absent such an
election, if the specified service requirement and performance objectives, if
any, are met, the individual will realize ordinary income at the time such
requirements are satisfied equal to the fair market value at that time of the
stock received by him or her, the individual's basis in the shares will equal
the amount included in income plus any amount he or she paid for the shares and
any additional gain or loss he or she realizes upon a subsequent disposition of
the shares will be capital gain or loss. If the stock is not subject to a
substantial risk of forfeiture when it is granted to the employee, the employee
will realize ordinary income equal to the value of the shares of stock awarded
to him or her at the time he or she receives them. If an employee makes the
special tax election and subsequently forfeits the shares because of failure to
achieve the performance objectives or termination of employment, the employee
will not be entitled to a deduction or other tax benefit for the amount reported
as income with respect to the grant. If an employee who has made the special tax
election satisfies the performance objectives and subsequently sells the shares,
any gain or loss on such sale will be capital gain or loss. The Corporation
intends that restricted stock grants under the 1992 Stock Option Plan to
officers whose compensation is subject to the $1 million deduction limitation
under the Code will satisfy the rules pertaining to "qualified performance-based
compensation." Therefore, the Corporation should be entitled to a deduction for
income tax purposes for the amount that is includable in the employee's taxable
income, generally for the year in which the amount is taxable to the employee.

REQUIRED VOTE

Approval by a majority of the votes of Common Stock cast at the Annual
Meeting at which a quorum representing a majority of all outstanding voting
stock is, either in person or by proxy, present and voting on the amendment is
required to approve the amendment to the 1992 Stock Option Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE AMENDMENT TO THE 1992 STOCK OPTION PLAN.

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APPROVAL OF WEBSTER'S 2001 DIRECTORS RETAINER FEES PLAN
(PROPOSAL 3)

INTRODUCTION

The Board of Directors has voted, subject to shareholder approval at the
Annual Meeting, to adopt the 2001 Directors Retainer Fees Plan of Webster
Financial Corporation (the "2001 Fees Plan), to enhance Webster's ability to
attract and retain highly qualified individuals to serve as non-employee
directors of Webster and Webster Bank and to provide additional incentives to
non-employees directors to promote the success of Webster and Webster Bank. The
2001 Fees Plan provides for non-employee directors of Webster and Webster Bank
to continue to receive shares of Common Stock, subject to certain restrictions
described below, instead of a cash, as an annual retainer for their services as
directors, as has been the case since the adoption of the Fees Plan in 1996.

DESCRIPTION OF THE PLAN

The following summary of the material terms of the 2001 Fees Plan is
qualified in its entirety by reference to the terms of the 2001 Fees Plan, a
copy of which is attached to this Proxy Statement as Exhibit A.

Non-employee directors of Webster receive an annual retainer of $15,000
that is payable in shares of Common Stock pursuant to the Fees Plan for service
as directors of both Webster and Webster Bank. There are no more shares of
Common Stock available under the Fees Plan. Subject to shareholder approval at
the Annual Meeting, Webster has adopted the 2001 Fees Plan to replace the Fees
Plan.

Up to 75,000 shares of Common Stock will be available under the 2001 Fees
Plan. Under the 2001 Fees Plan, as under the Fees Plan, Webster will grant on
each annual meeting date to each non-employee director of Webster a number of
whole shares of restricted stock equal to the director's annual retainer
(currently $15,000) divided by the "Average Quarterly Value" as of the grant
date (rounded down to the next whole share). The Average Quarterly Value will be
the average of the closing prices of the Common Stock on the last trading day of
each of the four calendar quarters preceding each annual meeting. The grant date
will be the date of each annual meeting. Webster will grant restricted stock
based on a pro-rated annual retainer to any non-employee director who is first
elected to the Board on other than an annual meeting date. Webster will grant
shares of restricted stock to any non-employee director of Webster Bank who
receives an annual retainer and who does not also serve as a director of Webster
instead of a cash annual retainer (which may be in a different amount than the
annual retainer payable to directors of Webster), subject to shareholder
approval of the 2001 Fees Plan at the Annual Meeting. The Board can increase or
decrease the amount of the annual retainer to be paid in the future by a
majority vote, which would affect the number of shares of restricted stock that
Webster will grant to directors after such change.

If a non-employee director ceases to be a director of Webster or Webster
Bank before the first annual meeting of Webster's shareholders (or within 12
months, if less) after the grant date of such restricted stock, the director
will forfeit the restricted stock unless the director's termination of service
is due to Total Disability (as defined in the 2001 Fees Plan) or death, is with
the prior consent of the Board of Directors or is in connection with a change in
control (as defined in the 2001 Fees Plan) (a "Vesting Event"). If termination
of a director's service involves a Vesting Event and occurs before the first
annual meeting after the grant date (or within 12 months after the grant date,
if less), the director would be vested in the number of shares of restricted
stock granted to the director on the grant date multiplied by a fraction (not
more than one), the numerator of which will

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be the number of months of service completed by the director after the grant
date (rounded to the nearest whole month), and the denominator of which will be
the number of months elapsed between the grant date and the annual meeting date
next following the grant date, but not in excess of 12. Shares of restricted
stock granted under the 2001 Fees Plan will not be transferable by a director
voluntarily, by operation of law or otherwise before vesting occurs. Shares
granted under the 2001 Fees Plan cannot be pledged or hypothecated (by operation
of law or otherwise) or subjected to execution, attachment or similar processes
before vesting occurs. All shares of restricted stock issued under the 2001 Fees
Plan will bear a legend reflecting such restrictions and limitations on
transfer. Following vesting of the shares (in whole or part), a director will be
entitled to have such legend removed from the vested shares.

The 2001 Fees Plan will be administered by Webster's Board, which will be
responsible for taking all legal actions necessary to document the grants of
restricted stock, to maintain appropriate records and reports regarding those
grants, and to take all acts authorized by the 2001 Fees Plan. All non-employee
directors of Webster and Webster Bank who receive fees will be participants
under the 2001 Fees Plan.

The maximum number of shares of Common Stock that may be issued under the
2001 Fees Plan is 75,000, subject to certain adjustments 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 other securities of Webster by
reason of recapitalization, reclassification, stock split-up, combination of
shares, exchange of shares, stock dividend or other distribution payable on
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by Webster, occurring after the Annual Meeting. If a
grant of restricted stock is forfeited, terminates or is canceled for any
reason, the shares of Common Stock that were forfeited will be available for
future grants under the 2001 Fees Plan.

Webster will not be required to issue any shares of Common Stock under
the 2001 Fees Plan if the issuance would constitute a violation by the director
or by Webster of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Any determination by the Board on such matters will be final,
binding, and conclusive. Webster will not be obligated to take any affirmative
action in order to cause the issuance of shares pursuant to the 2001 Fees Plan
to comply with any law or regulation of any governmental authority. As to any
jurisdiction that expressly imposes the requirement that shares of Common Stock
will not be issued hereunder unless and until the shares of Common Stock are
registered or are subject to an available exemption from registration, the grant
of restricted stock (under circumstances in which the laws of such jurisdiction
apply) will be deemed conditioned upon the effectiveness of such registration or
the availability of such an exemption.

Directors receiving shares of restricted stock under the 2001 Fees Plan
will be entitled to receive any cash dividends, and a number of shares of Common
Stock equal to any stock dividends, declared and paid with respect to each share
of Common Stock. Directors also will be entitled to vote all shares received
under the 2001 Fees Plan.

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PLAN BENEFITS

2001 DIRECTORS RETAINER FEES PLAN
---------------------------------
RETAINER FEES NUMBER OF SHARES
------------- ----------------

Non-employee Director Group (11 persons) (a) $15,000 (b)
- ----------------------------------------------------------------------------------------------------------------------------------

(a) The 2001 Fees Plan will apply only to non-employee directors of Webster
and to any non-employee directors of Webster Bank who receive an annual
retainer and who are not also directors of Webster.

(b) The number of shares will be calculated as of March 31, 2001, as
described below. Assuming shareholder approval of Proposal 3, the number
of shares to be awarded to the 11 participants under the 2001 Fees Plan
will be based upon the annual retainer, divided by the Average Quarterly
Value as of the grant date, rounded down to the next whole share. The
current annual retainer for non-employee directors of Webster is $15,000
and for non-employee directors of Webster Bank who are not also directors
of Webster is $15,000, and the Average Quarterly Value for grants at the
2001 Annual Meeting will be the average of the closing prices of the
Common Stock at March 31, 2001; at June 30, 2000 of $22.0625; at
September 30, 2000 of $26.9375; and at December 31, 2000 of $28.3125.

REQUIRED VOTE

Assuming the presence of a quorum at the Annual Meeting, the approval by
a majority of the votes cast at the Annual Meeting is required to approve the
2001 Fees Plan. The Board of Directors recommends that shareholders vote FOR
approval of 2001 Fees Plan. If not otherwise specified, proxies will be voted
FOR approval.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
WEBSTER'S 2001 DIRECTORS RETAINER FEES PLAN.

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, 2001, 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 2000, and
has similarly performed audits for Webster for the years ended December 31, 1986
through 2000. 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, 2001. 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,
2001.

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, 2001.

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AUDITOR FEE INFORMATION

AGGREGATE FEES BILLED BY KPMG LLP
FOR THE 2000 FISCAL YEAR

FINANCIAL INFORMATION
AUDIT FEES (1) SYSTEMS DESIGN AND IMPLEMENTATION FEES (2) ALL OTHER FEES (3)
---------- -------------------------------------- --------------

$363,000 -- $354,017

(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, 2000 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, 2000.

(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, 2000. All other fees include consultation on accounting
issues, income tax consultation, review of SEC registration statements
and due diligence/acquisition audit assistance.

The Audit Committee of the Board of Directors has considered whether the
provision of the services covered by "All Other Fees" is compatible with
maintaining the independence of KPMG LLP.

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 2002 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, 2001. 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 2002 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, 2001

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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 judgement, serves as the Audit Committee of the Corporation,
Webster Bank (the "Bank"), 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; and the Corporation's auditing, accounting and
financial reporting processes generally. 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 independent auditors are ultimately accountable to the Board of
Directors and the Audit Committee.

COMPOSITION

The Audit Committee shall comprise three or more 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 Corporation follows the guidelines contained in 12
USC Sec. 1831m, Part 363 of the rules and regulations of the Federal Deposit
Insurance Corporation and Rules 4200(a)(14) and 4350 of The Nasdaq Stock Market,
Inc., 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 enhance their familiarity with finance, accounting and risk
management by participating in educational programs conducted by the 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,
and shall serve until their successors are duly elected and qualified.

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40

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 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.

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 General Auditor.

2. 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, 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.

3. Review and approve the range and cost of audit and
non-audit services performed by the independent
accountants.

4. Review the qualifications and evaluate the performance of
the independent accountants and make recommendations to the
Board of Directors regarding the selection, appointment 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.

5. Confer with the independent accountants and the internal
auditors concerning the scope of their examinations of the
Corporation, the Bank and its subsidiaries, and review and
approve the independent accountants' annual engagement
letter.

6. Review the appointment and replacement of the General
Auditor.

7. 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.

8. Obtain from the independent accountants assurance that
Section 10A of the Private Securities Litigation Reform Act
of 1995 has not been implicated.

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9. Retain independent counsel, independent accountants, or
others where appropriate, for any matters related to the
discharge of the duties and responsibilities assigned to
the Audit Committee.

10. Review and reassess the adequacy of the Audit Committee
Charter annually, and recommend any proposed changes to the
Board of Directors for approval.

11. 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.

12. Discuss with the independent accountants SAS 61 matters.

13. 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.

14. Approve the report of Audit Committee to be included in the
Corporation's Proxy Statement for its Annual Meeting of
Shareholders.

15. 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.

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 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, management's discussion and analysis and
accounting estimates, and disagreements with management.

3. Review with financial management or the independent
accountants the Corporation's quarterly financials.

4. 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.

5. Meet at least annually with the chief financial officer,
the 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, General Auditor and
independent accountants is provided.

6. Oversee the Corporation's Policies on business ethics and
conduct.

7. Review activities, organizational structure, and
qualifications of the internal audit department.

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8. Review regulatory examination findings.

LOAN REVIEW ACTIVITIES

On an annual basis, review and approve the Loan Review Policy and
Procedures.

1. Review activities, organizational structure, and
qualifications of the independent loan review department.

2. Receive written reports from the Loan Review Manager on
control deficiencies and the correction of same.

3. 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 auditors 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 General Auditor to
represent it at meetings of the Board of Directors of the
Trust Company.

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 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 General Auditor to
represent it at meetings of the Board of Directors of the
Broker/Dealer.

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Exhibit A

2001 DIRECTORS RETAINER FEES PLAN
OF
WEBSTER FINANCIAL CORPORATION

1. NAME AND PURPOSE.

1.1 This plan is the 2001 Directors Retainer Fees Plan of
Webster Financial Corporation (the "Plan").

1.2 The purposes of the Plan are to enhance Webster's
ability to attract and retain highly qualified individuals to serve as
non-employee directors of Webster and its banking subsidiaries and to provide
additional incentives to such Directors to promote the success of Webster and
such subsidiaries. The Plan provides Directors (as defined below) with shares of
Restricted Stock (as defined below) in lieu of an annual cash retainer for their
services as Directors.

2. DEFINITIONS.

For purposes of interpreting the Plan and related documents, the
following definitions shall apply:

2.1 "Annual Retainer" means the annual director fee
payable to a Director for service on the Board or a Banking Subsidiary Board, as
applicable ($15,000 as of the Effective Date).

2.2 "Annual Meeting Date" means the date of each annual
meeting of the shareholders of Webster held on and after the Effective Date.

2.3 "Average Quarterly Value" means the average value of
a share of Stock on the last trading day of each of the four consecutive
calendar quarters preceding a Grant Date or other date on which Restricted Stock
is issued pursuant to Section 6 of this Plan.

2.4 "Board" means the Board of Directors of Webster.

2.5 "Banking Subsidiary Board" means the Board of
Directors of any banking subsidiary of Webster.

2.6 "Change in Control" means:

(a) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of common
stock of Webster (the "OUTSTANDING WEBSTER COMMON STOCK") or (ii) the combined
voting power of the then outstanding voting securities of Webster entitled to
vote generally in the election of directors (the "OUTSTANDING WEBSTER VOTING
SECURITIES"); provided however, that for purposes of this subsection 2.6(a), the
following acquisitions shall not constitute a Change in Control: (w) any
acquisition directly from Webster, (x) any acquisition by Webster, (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by Webster or any corporation controlled by Webster or (z) any
acquisition pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection 2.6(c) hereof; or

A-1
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(b) Individuals who, as of April 26, 2001,
constituted the Board (the "INCUMBENT BOARD") cease for any reason to constitute
at least a majority of the Board, provided however, that any individual becoming
a director subsequent to such date whose election, or nomination for election by
Webster's 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 a Person other than the Board; or

(c) 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 Webster Common Stock and Outstanding
Webster Voting Securities immediately before such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, 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) in substantially the same
proportions as their ownership, immediately before such Business Combination of
the Outstanding Webster Common Stock and Outstanding Webster Voting Securities,
as the case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) of Webster or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation 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 corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or

(d) Approval by the shareholders of Webster of a
complete liquidation or dissolution of Webster.

2.7 "Director" means a non-employee member of
Webster's Board or of a Banking Subsidiary Board.

2.8 "Effective Date" means April 26, 2001 the date
of the 2001 annual meeting of shareholders of Webster.

2.9 "Expiration Date" means April 26, 2011.

2.10 "Grant Date" means the date on which a grant
of Restricted Stock takes effect pursuant to Section 6 of this Plan, which shall
be the Effective Date and each subsequent Annual Meeting Date before the
Expiration Date (or, in the case of a Director who is first elected other than
on an Annual Meeting Date, the date of such election, as specified in Section 6
below).

2.11 "Holder" means a person who holds Restricted
Stock under this Plan.

2.12 "Partial Vesting Date" with respect to a grant
of Restricted Stock means the date of the Holder's termination of service with
the Board or the Bank Subsidiary Board, as applicable, before the Annual Meeting
Date next following the Grant Date with respect to such Stock (or, if earlier,
before 12 months after such Grant Date) (i) due to the Total Disability or death
of the Holder, (ii) in connection with a Change in Control, or (iii) with the
prior written consent of the Board.

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2.13 "Pro-Rated Retainer" means the Annual Retainer in effect at
the time a Director is first elected to the Board or a Subsidiary Board other
than on an Annual Meeting Date multiplied by a fraction, the numerator of which
is the number of months after such election and before the next Annual Meeting
Date (rounded to the nearest full month) and the denominator of which is 12,
provided, however, that such fraction shall not be in excess of 1.0.

2.14 "Restricted Stock" means shares of Stock that are subject
to a substantial risk of forfeiture if the Holder ceases to be a member of the
Board and of any Banking Subsidiary Board before the Vesting Date or Partial
Vesting Date with respect to such Stock.

2.15 "Stock" means the Common Stock, par value $.01, of Webster.

2.16 "Total Disability" means the inability of a Holder to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period of
not less than 12 months.

2.17 "Vesting Date" with respect to a grant of Restricted Stock
means the date of the first Annual Meeting Date next following such Grant Date
(or, if earlier, the first anniversary of the Grant Date).

2.18 "Webster" means Webster Financial Corporation, a Delaware
corporation.

3. ADMINISTRATION OF THE PLAN.

The Plan shall be administered by the Board. The Board's
responsibilities under the Plan shall be limited to taking all legal actions
necessary to document the grants of Restricted Stock provided herein, to
maintain appropriate records and reports regarding those grants, and to take all
acts authorized by this Plan.

4. STOCK SUBJECT TO THE PLAN.

4.1 Subject to adjustments made pursuant to Section 4.2, the
maximum number of shares of Stock that may be issued pursuant to the Plan shall
not exceed 75,000. If any grant of Restricted Stock is forfeited, terminates or
is canceled for any reason, the shares of Stock that were forfeited, or that
were subject to such terminated or canceled grant, shall be available for future
grants under the Plan.

4.2 (a) If the outstanding shares of Stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of Webster by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable on capital stock, or other increase
or decrease in such shares effected without receipt of consideration by Webster,
occurring after the Effective Date, the number and kinds of shares for
Restricted Stock may be granted under the Plan shall be adjusted proportionately
and accordingly by Webster.

(b) Adjustments under this Section 4.2 related to
stock or securities of Webster shall be made by the Board, whose determination
in that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.

(c) The grant of a Restricted Stock pursuant to the
Plan shall not affect or limit in any way the right or power of Webster to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve or liquidate, or to sell
or transfer all of any part of its business or assets.

A-3
46

5. ELIGIBILITY.

Eligibility under this Plan is limited to Directors who are not employees
of Webster or any of its subsidiaries.

6. NUMBER OF SHARES AND GRANT DATE.

Subject to approval of the Plan by the shareholders of Webster as
provided in Section 12.1 below and to the availability of shares of Stock under
Section 4.1 hereof, on each Annual Meeting Date beginning with the 2001 annual
meeting, each Director whose term of office begins with or continues after such
Annual Meeting Date shall be issued a number of whole shares of Restricted Stock
equal to the Annual Retainer divided by the Average Quarterly Value as of such
Grant Date (rounded down to the next whole share), reduced by any shares granted
to such Director on such Annual Meeting Date pursuant to the First Amended and
Restated Directors Retainer Fees Plan of Webster Financial Corporation (the
"1996 PLAN"). Subject to approval of the Plan by the shareholders of Webster as
provided in Section 12.1 below and to the availability of shares of Stock under
Section 4.1 hereof, each Director who is first elected after the Effective Date
to the Board or a Banking Subsidiary Board (and who was not then a member of the
Board or a Banking Subsidiary Board) other than on an Annual Meeting Date shall
be granted a number of whole shares of Restricted Stock equal to the Pro-Rated
Retainer divided by the Average Quarterly Value as of the date of such election
(rounded down to the next whole share), reduced by any shares granted under the
1996 Plan to such Director as of the date of such election.

7. VESTING.

Restricted Stock shall become fully vested upon the Vesting Date with
respect to the grant of such Restricted Stock, but not before approval of the
Plan by shareholders in accordance with Section 12.1 hereof. Restricted Stock
shall become partially vested on the Partial Vesting Date with respect to such
grant (but not before approval of the Plan by shareholders in accordance with
Section 12.1 hereof), as follows: on such Partial Vesting Date, the Holder shall
be vested in a number of shares equal to the number of shares of Restricted
Stock granted to the Holder on the applicable Grant Date multiplied by a
fraction (not in excess of one), the numerator of which shall be the number of
months of service completed by the Holder (rounded to the nearest whole month)
after such Grant Date and before the Partial Vesting Date, and the denominator
of which shall be the number of months (rounded to the nearest whole month)
between such Grant Date and the next Annual Meeting Date (but not in excess of
12), rounded to the nearest whole number of shares. In the event that a Holder's
service as a Director terminates before the Vesting Date with respect to shares
of Restricted Stock, nonvested shares shall be forfeited. The Holder irrevocably
appoints Webster as his or her agent for the purpose of transferring such
forfeited shares of Restricted Stock from the Holder to Webster. Notwithstanding
any other provision of the Plan, Restricted Stock shall not become vested
following a Change in Control to the extent that such vesting would cause the
Holder to incur liability for the excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended.

8. SHAREHOLDER RIGHTS.

Except as provided in Section 11 hereof, the Holder shall have all of the
rights of a shareholder with respect to shares of Restricted Stock, including
the right to vote such shares and the right to receive dividends thereon.

9. CONTINUATION OF SERVICE.

Nothing in the Plan shall confer upon any person any right to continue to
serve as a Director.

A-4
47

10. WITHHOLDING.

Webster shall have the right to withhold, or require a Holder to remit to
Webster, an amount sufficient to satisfy any applicable federal, state, local or
foreign withholding tax requirements imposed with respect to the grant or
vesting of Restricted Stock or the payment of dividends thereon.

11. NONTRANSFERABILITY; LEGEND.

No shares of Restricted Stock granted pursuant to this Plan shall be
transferable by the Holder voluntarily, by operation of law or otherwise before
the Vesting Date or Partial Vesting Date with respect to such shares, and no
such shares shall be pledged or hypothecated (by operation of law or otherwise)
or subject to execution, attachment or similar processes before such Vesting
Date or Partial Vesting Date. All share certificates issued hereunder shall bear
an appropriate legend reflecting the foregoing restrictions and limitations on
transfer. Following the Vesting Date or Partial Vesting Date with respect to
such shares, the Holder shall be entitled to have such legend removed from
shares that have become vested hereunder.

12. ADOPTION, AMENDMENT, SUSPENSION AND TERMINATION
OF THE PLAN.

12.1 The Plan shall be effective as of the Effective Date,
subject to approval of the Plan within one year of its adoption by the Board by
a majority of the total votes cast on the proposal in person or by proxy at a
meeting duly held in accordance with applicable law; provided, however, that
upon approval of the Plan by the shareholders of Webster, all Restricted Stock
granted 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.

12.2 Subject to the limitations of this Section 12.2, the Board
may at any time suspend or terminate the Plan, and may amend it from time to
time in such respects as the Board may deem advisable; provided, however, the
Board shall not amend the Plan in the following respects without the approval of
shareholders then sufficient to approve the Plan in the first instance:

(a) To materially increase the benefits accruing to
participants under the Plan (for example, to increase the number of shares of
Restricted Stock that may be granted to any Director).

(b) To materially increase the maximum number of
shares of Stock that may be issued under the Plan;

12.3 No Restricted Stock may be granted during any suspension
or after the termination of the Plan, and no amendment, suspension or
termination of the Plan shall, without the Holder's consent, alter or impair any
rights or obligations under any Restricted Stock previously issued under the
Plan. This Plan shall terminate upon the earlier of the expiration or vesting of
all of the Restricted Stock granted hereunder or the Expiration Date, unless
previously terminated by the Board pursuant to Section 12.2.

13. REQUIREMENTS OF LAW.

Webster shall not be required to issue any shares of Stock hereunder if
the issuance of such shares would constitute a violation by the Holder or
Webster of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Any determination in this connection by the Board shall be final,
binding, and conclusive. Webster shall not be obligated to take any affirmative
action in order to cause the

A-5
48

issuance of shares pursuant to the Plan to comply with any law or regulation of
any governmental authority. As to any jurisdiction that expressly imposes the
requirement that shares of Stock shall not be issued hereunder unless and until
the shares of Stock are registered or are subject to an available exemption from
registration, the grant of Restricted Stock (under circumstances in which the
laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.

14. 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.

A-6
49

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 O. Joseph Bizzozero, Jr., John J. Crawford
and Sister Marguerite Waite, 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 26, 2001, 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 AMENDMENT TO THE 1992 STOCK OPTION
PLAN (PROPOSAL 2); FOR APPROVAL OF WEBSTER'S 2001 DIRECTORS RETAINER FEES PLAN
(PROPOSAL 3); FOR THE RATIFICATION OF WEBSTER'S APPOINTMENT OF INDEPENDENT
AUDITORS (PROPOSAL 4); AND IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF
THE BOARD OF DIRECTORS AS TO ANY OTHER MATTERS. The undersigned shareholder may
revoke this proxy at any time before it is voted by delivering 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 26, 2001

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.

YOUR 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: JOEL S. BECKER
all nominees listed to vote for all nominees WILLIAM T. BROMAGE
listed at right JAMES C. SMITH

WITHHOLD AUTHORITY to vote for the following nominees only: (write the name of the
nominee(s) in the space below).

---------------------------------------------------------------------------------

2. To amend Webster's 1992 Stock Option Plan to increase the
number of shares of common stock available for issuance
under the plan, to provide for discretionary grants of
options to non-employee directors and to discontinue
automatic grants of options to non-employee directors
(Proposal 2).

FOR AGAINST ABSTAIN

2. To approve and adopt Webster's 2001 Directors Retainer Fees Plan (Proposal 3).

FOR AGAINST ABSTAIN

3. 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, 2001 (Proposal 4).

FOR AGAINST ABSTAIN

4. 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.

Date: , 2001
- ------------------------------------------------------------------------------- ---------------------
SIGNATURE(S) OF SHAREHOLDER(S) OR AUTHORIZED REPRESENTATIVE(S)

NOTE: Please date and sign exactly as name(s) appear(s) hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary
should sign and indicate his or her full title. When stock has been
issued in the name of two or more persons, all should sign.